20 Mar WORDS CAN NOT EXPRESS THE CARNAGE
Words cannot express the carnage, the volatility, the fear of today’s market implosion. All markets have been decimated anywhere between 25% and 75% in 30 days. Many times, I have commented about the velocity of change but never had I envisioned the massive wreckage that has occurred in every sector. There is absolutely no place to hide.
What is perhaps most surprising is the lack of any rumors of a major firm experiencing difficulties. This in itself is disconcerting but some think ‘issues” will arise once there is the return of some market stability. The regulatory entities may be fearful of pushing the markets into the total abyss.
European regulatory entities took this path last year when several high-profile money management firms were experiencing liquidity issues and delayed any action until the environment settled.
Radically changing topics, can I remotely suggest the Administration is experimenting with MMT light? The proposed $1.2 trillion stimulus will be financed by printing money to pay for the bonds that will be issued to finance the stimulus. Wow! What a Ponzi scheme.
At some juncture there will be a breaking point. Unfortunately, we will only know when it occurs.
Commenting further about the debt market, Bloomberg writes the distressed debt market more than doubled to $500 billion in two weeks. March 6 data suggested the total amount of distressed debt was $214 billion. Today it is $533 billion, the largest increase occurring in the oil, airline and hotel industries.
Late yesterday the Administration stated that it will get involved in the oil price war, searching for “medium ground” in the impasse. This was a major reason for the 26% surge in oil prices, the most since trading commenced in 1983. Prices are still down about 50% from two weeks ago, an unprecedented collapse that is also threatening the existence of many Middle Eastern theocracies.
The Administration views the oil and shale industry as a “core interest.” Will the President attempt to offer loans to this embattled industry in exchange for an equity interest, something that is being discussed for the airline industry? Wow! This will change the proverbial global oil calculus.
Politically can this be accomplished given that the Democratic Party wants to ban fracking on federal lands? I will argue jobs are electorally more important than environmental issues.
I think it is significant there are large fracking operations (and jobs) in electoral vote rich states such as Pennsylvania, Texas and Ohio as well as several Great Lake states. These states have about 100 electoral votes.
What will happen today? Andrew Yang light may occur as the Administration is proposing a tax rebate to individuals of $1,200 and $2,400 for married couples whose income is below $99,000 and $198,000 respectively. This is stimulus from the bottom up, unlike previous stimulus which was top down, primarily directed to government entities.
Last night the foreign markets were up. London was up 1.14%, Paris up 5.86% and Frankfurt up 4.87%. China was up 1.61%, Japan down 1.04% and Hang Sang up 5.05%.
The Dow should open moderately higher. Oil is continuing its rebound. The 10-year is up 1 ½ points to yield 1%.