With a massive gap up at the open, equities were riding the crest of Monday's monstrous wave of buying, on the false hope that the worst of the coronavirus pandemic was behind them. At 11:25 am ET, when New York City announced its death toll for the prior day as the highest one-day total to date with 731 fresh corpses, bringing the state total number of coronavirus fatalities to 5,489, surpassing those lost on 9/11, a wave of gloom descended on Wall Street and in trading offices worldwide. Once the news circulated, stocks embarked upon an afternoon of desperate selling.
Whatever it is that fuels the animal spirits of the investor class, it is misplaced and widely mis-pricing stocks presently, and has been for much of the past 11 years. Now that stock buybacks are no longer going to spike the punch in lower Manhattan, the Fed has stepped in with a variety show of programs and debt options, none of which will eventually be proven sufficient to stem the coming tide of lowered expectations, defaults, earnings misses and downright deplorable economic data.
All the Fed is doing is throwing more bad money atop a raging fire. They cannot print enough money globally to stop the coming self-inflicted Greater Depression, though they will surely blame everything on COVID-19, the convenient scapegoat.
Now that stocks have briefly recovered from the March selloff, all of the programs brought to light by the Federal Reserve will be viewed skeptically, as real values make their return to the former fantasy world of finance. Instead of the Dow resting comfortably above 22,000, the true value, when all is said and done will be much closer to 12,000 and likely far lower.
At current levels, the major indices are still higher than they were in 2007, before the Great Financial Crisis nearly wiped out the global economy. The ongoing crisis will assure that everybody loses, particularly the Baby Boomer generation, which was forced into stocks by the Fed's insistence on interest rates near zero for almost all of the current century.
Portfolios which were valued as retirement savings are going up in smoke and they will continue to do so as the crisis and antecedent solutions tear to shreds the dreams and aspirations of the enormous, aging generation. Unless one has already departed the stock market, anticipated losses will be catastrophic.
Elsewhere, bond yields ticked slightly higher on Tuesday. Gold and silver remain in a nascent bull market, as a global scramble for precious metals has left major dealers with dwindling or already depleted stock. Spot and futures prices are diverging in gold, but that's not even the real story, as premiums are going through the roof for gold and silver bars and coins. If one is fortunate enough to find a dealer with goods for sale, wait times for delivery are now averaging a month for silver in quantity, and five to 10 days for gold.
In times of panic, precious metals are desirous as a hedge against catastrophic circumstance, but, already, many have arrived at the decision to acquire such stock too late as prices have become unaffordable and physical delivery unobtainable.
On the oil front, the spasm of price hikes from last week has faded badly, with WTI crude down again, backing into a $24 handle per barrel. As they say in the trade, it's a fluid situation.
Finally, and this is not to be taken lightly, an astute commentator on a popular financial website posted the following cryptic message:
I don't think any bankers will go to jail, but I assure you they will meet with other, more horrible circumstances as this all plays out.
Citi, BofA, JPM Chase, Wells, Goldman Sachs, and others are all underwater, have already been bailed out (for the past 11 years), and will soon be insolvent when millions of Americans (and a host of foreigners) default on credit cards, car loans and leases, commercial leases, student loans, personal loans, business loans, and more.
There are a lot of biblical posters around here who quote Revelations and such, but they are off the mark. Judgement Day for the major commercial banks was delayed in 2008-09, but, when the full temper of anger from the American public is released - and that is not far off - their branches will be firebombed, their insurance cancelled, their stocks worth less than zero.
They've had it coming and whether they've calculated the enormity of unintended consequences or not, they're going to get skewered for good.
It will be a feast like no other, and a jubilee.
At the Close, Tuesday, April 7, 2020:
Dow Jones Industrial Average: 22,653.86, -26.13 (-0.12%)
NASDAQ: 7,887.26, -25.98 (-0.33%)
S&P 500: 2,659.41, -4.27 (-0.16%)
NYSE: 10,537.04, +21.80 (+0.21%)
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