Global Crash: Stocks Battered Across All Markets; Central Banks, Governments Prepare to Die

It's likely that March 12, 2020 will go down in history as the day global markets were dealt a fatal blow.

After weeks of volatility, with stocks moving radically up and down - but mostly down - capitulation had arrived as equity indices around the world suffered historic losses. In the United States, stocks started the day badly, down seven percent within minutes, triggering a market circuit-breaker, shutting down the exchanges for 15 minutes.

Upon reopening, stocks languished in the red, major indices down more than eight percent, the Dow Industrials falling nearly 10%. At 1:00 pm ET, the Federal Reserve announced that it would inject $500 billion in a three-month repo operation at 1:30 PM ET. It also announced a further $500 billion in a three-month repo operation on Friday and another $500 billion in one-month repo operation for same-day settlement.

The promise of $1.5 trillion in ready liquidity quickly sent stocks higher, but, just as an attempt to sooth markets with a 50 basis point rate cut last week had failed to quell the selling, this exercise in money printing ended up in tatters as well, stocks plummeting shortly thereafter back to session lows and beyond.

By day's end, the carnage was widespread, with the Dow, S&P, NASDAQ, and NYSE Composite indices all suffering the largest point losses in history, and the greatest percentage declines since the 1987 crash.

While the focus was clearly on effects that the spread of COVID-19 will have on the business community and corporations in particular, it was also evident that efforts by central bankers were not going to solve the market's problems this time around.

As has been the case for the duration of the 11-year bull market, which ended abruptly on Wednesday, Thursday's trading was about as grim and gloomy as had ever been seen, even worse than the fateful days of October, 2008, when Lehman Brothers failed and markets seized up in a paroxysm of distress, anguish, and fear.

While the Fed's largesse at this juncture may ease some of the immediate pain, it is unlikely to solve the underlying issues in the global economy, which are, in the main, disastrous levels of debt in corporate circles, households and governments. As the Fed believes every crisis to be a call for more credit, the world is drowning in what has become an avalanche of debt that will never be repaid. They system is readily drawing itself into a vicious death spiral. Every new dollar that the Federal Reserve, European Central Bank, Bank of Japan, People's Bank of China or other central bank entity will be washed down the tubes as quickly as it is put to use.The world's banking entities and governments are about to find out that they cannot bail out every corporation, every household, every state, city, or county that suffers from unwieldy debt overburden.

The market meltdown of March 12 is the beginning of the end for the global fiat money system. Backed by nothing but faith, all currencies are about to suffer the same fate: being expunged forever into the trash heap of failed economic ideas. Central bank intervention can only offer temporary relief, but it cannot continue on this course of action each time there comes a crisis. In the end, all central banks will fail, many governments will be overthrown by its own people or the sheer weight of indebtedness upon them.

The world is about to change in dramatic fashion. Money will vanish. Corporations, which have binged on stock buybacks for the better part of a decade, are bout to suffer a powerful hangover and have possibly poisoned themselves to death. All the time corporations had been loading up on cheap money, financing massive stock buybacks, no thought was ever given to how the balance sheet would look when the stock would be reissued to the public. Companies which bought back their own stock at, say, $90 per share, are looking at offering fresh issuance at $40 or $30 per share. Worse yet, when they issue new stock, there may not be ready buyers, as investors have been put off by the fragility of the market, massive losses in portfolios, gross wealth inequalities, and an evolving liquidity crunch.

Corporations will be caught upside-down and many will be earn the moniker of "zombies," wherein their present income is not enough to service ongoing debt. There will be massive numbers of bankruptcies, first by small businesses, then by major, publicly-held corporations. The economy, in major developed nations, will cease to exist in any reliable fashion.

Prior to all of this unfolding over upcoming months and years, the world has first to combat the nemesis that is COVID-19. As the day wore on, the news flow became worse and more terrifying with each announcement. During the day, the NBA suspended all games, as did the NHL. The NCAA cancelled the annual college basketball tournaments, and with that, "March Madness" became "March Numbness" for college hoops fans. Late in the day, Major League Baseball (MLB) announced that is was suspending Spring Training at various facilities in Florida and Arizona, and announced the the opening of the regular season would be delayed by at least two weeks. Originaly scheduled for March 26, the timetable was pushed forward to April 9th, at the earliest.

The states of California and New York, where outbreaks of coronavirus have been spreading rapidly, announced bans on large gatherings, California limiting the size to 250 people, while New York will allow only crowds of 500 or fewer. Other states have closed public schools, issued various warnings, and are preparing for large-scale outbreaks. Literally, there are too many stories of cancellations, bans, and preparedness responses to cover in this article.

Overnight, Disney (DIS) announced that it was closing all of its theme park operations, including Disney France, and the massive Disney World park in Orlando, Florida.

The news is unlikely to be cheerful as the week draws to a close. Millions of Americans will spend the weekend doing something other than watching sports on TV. People around the world are frightened, many already infected (in excess of 135,000 worldwide), and over 5,000 have died. With the virus nearing what should be its peak stage, almost all economic activity has ground to a halt. Congress continues to work toward a plan for assistance to hospitals, states and localities, but, as usual, they're doing more arguing for political gain than providing actual service to the American people.

It's become all too real, all of a sudden. It's not about to end any time soon. Brace for economic and societal impact.

Here is a glimpse of the carnage done to markets on March 12:

World Indices, March 12, 2020

^GSPC	S&P 500	2,480.64	-260.74	-9.51%
^DJI	Dow 30	21,200.62	-2,352.60	-9.99%
^IXIC	Nasdaq	7,201.80	-750.25	-9.43%
^NYA	NYSE COMPOSITE (DJ)	10,060.76	-1,116.52	-9.99%
^XAX	NYSE AMEX COMPOSITE INDEX	1,564.90	-210.79	-11.87%
^BUK100P	Cboe UK 100	8,969.78	-960.32	-9.67%
^RUT	Russell 2000	1,122.93	-141.37	-11.18%
^VIX	Vix	75.47	+21.57	+40.02%
^FTSE	FTSE 100	5,237.48	-639.04	-10.87%
^GDAXI	DAX PERFORMANCE-INDEX	9,161.13	-1,277.55	-12.24%
^FCHI	CAC 40	4,044.26	-565.98	-12.28%
^STOXX50E	ESTX 50 PR.EUR	2,545.23	-360.33	-12.40%
^N100	EURONEXT 100	788.87	-107.28	-11.97%
^BFX	BEL 20	2,701.00	-447.40	-14.21%
IMOEX.ME	MOEX Russia Index	2,286.40	-206.48	-8.28%
^N225	Nikkei 225	18,559.63	-856.43	-4.41%
^HSI	HANG SENG INDEX	24,309.07	-922.54	-3.66%
000001.SS	SSE Composite Index	2,923.49	-45.03	-1.52%
^STI	STI Index	2,678.64	-105.08	-3.77%
^AXJO	S&P/ASX 200	5,304.60	-421.30	-7.36%
^AORD	ALL ORDINARIES	5,370.90	-418.40	-7.23%
^BSESN	S&P BSE SENSEX	32,778.14	-2,919.26	-8.18%
^JKSE	Jakarta Composite Index	4,895.75	-258.36	-5.01%
^KLSE	FTSE Bursa Malaysia KLCI	1,419.43	-24.40	-1.69%
^NZ50	S&P/NZX 50 INDEX GROSS	10,333.27	-540.33	-4.97%
^KS11	KOSPI Composite Index	1,834.33	-73.94	-3.87%
^TWII	TSEC weighted index	10,422.32	-471.43	-4.33%
^GSPTSE	S&P/TSX Composite index	12,508.45	-1,761.64	-12.34%
^BVSP	IBOVESPA	72,582.53	-12,588.60	-14.78%
^MXX	IPC MEXICO	36,636.70	-2,041.85	-5.28%
^MERV	MERVAL	38,390.84	+233.89	+0.61%
^TA125.TA	TA-125	1,194.69	-79.46	-6.24%

At the Close, Thursday, March 12, 2020:
Dow Jones Industrial Average: 21,200.62, -2,352.60 (-9.99%)
NASDAQ: 7,201.80, -750.25 (-9.43%)
S&P 500: 2,480.64, -260.74 (-9.51%)
NYSE: 10,060.76, -1,116.52 (-9.99%)

Dow Reaches Bear Territory, Down 20% From Record Highs

Wednesday, at 2:18 pm Eastern Time, the Dow Jones Industrial Average sank into bear market territory on an intraday basis when it broke below 23,654.72, officially marking the end of the 11-year bull run since the Great Financial Crisis of 2008-09.

By the close of trading, the Dow also fell into bear market territory on a closing basis, finishing below 23,641.14.

Falling as low as 23,338.96 shortly after 3:00 pm, a brief attempt at a rally was undertaken, but eventually failed, leaving the market in tatters, and the future uncertain.

Wednesday night, President Trump made a brief televised appearance, outlining the government's steps to curb the global pandemic that is COVID-19, banning all travel from Europe to the United States for 30 days, beginning at midnight, Friday, the 13th of March. The president also instructed the Small Business Administration to extend loans to small businesses and to increase funding for the program by $50 billion.

These measures are being implemented to help slow the spread of COVID-19, the coronavirus that has spread globally to 115 countries, sickening more than 127,000 people and killing 4,717. There have been 1323 cases of COVID-19 in the United States and 38 deaths. The numbers have jumped dramatically over the past week, both in the US and around the world, especially in Italy, Spain, France, and Germany.

With markets opening in minutes, and stock futures at distressed levels, this evolving story will be updated.

At the Close, Wednesday, March 11, 2020:
Dow Jones Industrial Average: 23,553.22, -1,464.94 (-5.86%)
NASDAQ: 7,952.05, -392.20 (-4.70%)
S&P 500: 2,741.38, -140.85 (-4.89%)
NYSE: 11,177.29 -615.99 (-5.22%)

Record Rise on NASDAQ; Big Gains on Dow, S&P Relieve Bear Market Fears... for Now

(Simultaneously published at Downtown Magazine)

In case anybody is growing weary of the recent volatility that has sent stocks soaring and diving over the past three to four weeks, prepare for more of the same. There will be no respite in daily swings of two percent, three percent or more, as yesterday proved, as stocks staged a monumental rally in the latter part of the the session, the Dow rising more than 1000 points in the final two hours.

At the end of the day, all major indices were approaching gains of five percent. Keeping with the trend of record-breaking sessions, the Dow's rise was the third largest point gain in market history. The other two occurred earlier this month. On March 2nd, the Industrials set the mark with a gain of 1,293.96 points. Tow days later, it came close to breaking that, up by 1,173.45 points.

With an eye toward the VIX - the market's preferred measure of volatility - this kind of roller coaster ride should continue until there's resolution to the downside. The VIX has recently hovered in the 40-50 range, ripping as high as 55. Normal volatility is usually measured in the teens.

The NASDAQ and S&P also experienced massive upside Tuesday afternoon, resulting in a record point gain on the NASDAQ, up 393.58 points, surpassing the record set just over a week ago, on March 2nd (+384.80). The S&P's gain of 135.67 points fell just shy of the record mark, also recorded on March 2nd, at +136.01.

In this regime of wild swings, it's probable that some traders are going to make massive profits while others fail miserably. It's all about timing and nerves. Anybody with poor timing and a thin appetite for risk is likely to be wiped out in short order. Those who relish the thrill of the hunt and have money to burn should come out ahead in the end, varying trades between long and short, at least until the market overseers ban short sales or profiting on put options.

It may not be obvious to the general public, but where this is head seems pretty clear. The coronavirus, COVID-19, has wreaked havoc on human society, thus disrupting the normal flow of business, a trend that's only just begun. Businesses are only beginning to feel the effects of breaks in the supply chain from China, and soon enough the entire planet's trade will be paralyzed by delays, outages, work stoppages, quarantines, deaths, and all the assorted maladies that accompany global pandemics, the likes of which have not presented themselves in the lifetimes of anybody alive today.

Estimates from medical experts are frightening, which is why the numbers being released by the CDC in the United States are nothing short of a bad joke. Over the past week, the CDC has "officially" recorded anywhere between 2 and 19 new cases of COVID-19 daily, this in a country with a projected population of 333,546,000.

Actual incidence of infection is orders of magnitude higher; that can be safely assumed. With the aid of the CDC, the US government has chosen to protect the economy rather than the people, a strategy doomed to fail. Without effective measures for controlling and containing the spread of the disease - as has been accomplished to a relatively high degree in places like Hong Kong, Singapore, and South Korea - via testing, contact tracking, and quarantine - it will spread virtually unchecked through a population. The evidence from the epicenter in Wuhan, China is compelling in this regard. Akin to what happened there, the US approach is dangerously close to causing a widespread outbreak in any number of cities by ignoring simple precautions and putting money ahead of human health.

What would an economy look like with 200 deaths per day, hospitals overwhelmed and people forced to stay indoors and away from others for weeks at a time? We, and some European nations are about to find out. With a population spoiled by the luxuries of freedom, it's not going to be much fun watching entitled populations melt down under the imposition of travel bans, quarantines, and other draconian measures.

As for stocks, well, their pathway will be all but assured. The Dow Jones Industrials bounced off a mark of declination on Tuesday when it bottomed out at 23,690.34. It was down 19.88% from the intraday high of 29,568.57, recorded on February 12 of this year. It was about to fall into bear market territory. The day's gains may have staved off capitulation for now, but it's coming, and soon. The end of the 11-year bull market and the beginning of what could be a prolonged bear market is at hand.

At the Close, Tuesday, March 10, 2020:
Dow Jones Industrial Average: 25,018.16, +1,167.14 (+4.89%)
NASDAQ: 8,344.25, +393.58 (+4.95%)
S&P 500: 2,882.23, +135.67 (+4.94%)
NYSE: 11,793.27, +494.84 (+4.38%)

Stocks Lose Record Amounts, Treasury Bond Yields Smashed As COVID-19 Begins Taking Its Toll

All of the major US indices posted record losses as coronavirus (COVID-19) continues to rage through 115 countries, with 114,595 confirmed cases and a death toll now over 4,000 (4,028).

Adding to market grief, Saudi Arabia, in an effort to harm other oil producers sent crude futures plunging as it unilaterally slashed prices and raised production output. WTI crude fell below $30 a barrel, recovering slightly to above $34.00 a barrel prior to Tuesday's opening bell. Still, the price cut was mammoth, on the order of a 24.6% decline. WTI closed at $41.28 Friday, finishing at $31.13 on Monday.

The Dow, S&P, NASDAQ, and NYSE all recorded record point losses, blowing away earlier marks. The Dow's 2,013.76 loss nearly doubled the previous record from February 27 of this year (−1,190.95). On The NASDAQ, the 624.94-point loss topped the list, easily surpassing the February 9 drop of −414.30.

Losing 225,81, the S&P vaulted over its previous mark of −137.63, also on February 27 of this year, less than two weeks ago.

The treasury bond complex was not spared, with yields falling across the entire curve by enormous amounts. The 30-year bond finished at 0.99% yield, the first time ever it has been below one percent. The day's decline was an unprecedented 26 basis points. At the other end, one-month bills dropped 22 basis points, from 0.79 to 0.57%.

Offering the lowest yield is the six-month bill, at 0.27%. The 10-year note was absolutely shattered, down 20 basis points, from 0.74 to 0.54%. In terms of curve, the complex is exceedingly flat, with just 72 basis points between the top and bottom yields.

Gold and silver both were higher initially, but were beaten down over the course of the day.

In the United States, the number of new, confirmed cases are rising rapidly as tests from the CDC begin arriving in massive quantities to state and local hospitals and labs. There are now 755 cases of coronavirus in the US, and 26 deaths.

After China, the US ranks 8th overall. Italy has reported 9,172 cases with 463 deaths. Italy's death figures are the highest outside mainland China, as are the number of cases. The Italian government closed its borders completely on Monday after efforts to contain the virus to the northern provinces failed.

The other countries topping the list of most infected are, in order, South Korea, Iran, France, Spain, and Germany, after which comes the United States. All of the aforementioned countries are reporting more than 1,000 cases. Confirmed cases outside China has exceeded those inside China for nearly the past week and are doubling every three to four days.

In addition to the human tragedy, large events are being canceled worldwide. Ireland has canceled all St. Patrick's Day parades, and around the world sporting events, concerts and other large-crowd gatherings are being put on hold or canceled, including the huge South-by-Southwest (SXSW) conference in Austin, Texas. The NCAA basketball tournament, commonly known as March Madness, which begins in a week, NBA basketball, and Major League Baseball, which opens its regular season on March 26, are all mulling the idea of playing games with no fans in the stands.

Businesses are gearing down due to the crisis, with many major firms instructing employees to work from home. School cancelations are on the rise globally, and will be widespread in the US in coming days and weeks.

The after-effects of the virus on the business community and the economy are just beginning to be felt according to many in finance, including hedge fund manager Kyle Bass, who believes the crisi will peak in about a month.

Even though the World Health Organization (WHO) is reluctant to call the worldwide spread of the pathogen a pandemic, it is surely one. The WHO does not want to use the world pandemic as it would trigger the default of "pandemic bonds," designed to provide $500 million to the organization should a pandemic be declared.

With less than an hour before the opening bell in the US, stocks seem to have caught a bid. Japan's NIKKEI was lower for most of the day but finished marginally higher on Tuesday. Other Pacific Rim bourses finished with gains of one to one-and-a-half percent, while European indices are currently sporting gains of around 2.5%.

US stock futures point to a higher open, as traders prepare for another stressful session. The so-called "dead cat bounce" applies, as the markets don't seem to have actually bottomed out. When all is said and done, many countries are going to report GDP losses for the first and likely, second quarters, plunging the world into what may be a prolonged recession.

At the Close, Monday, March 9, 2020:
Dow Jones Industrial Average: 23,851.02, -2,013.76 (-7.79%)
NASDAQ: 7,950.68, -624.94 (-7.29%)
S&P 500: 2,746.56, -225.81 (-7.60%)
NYSE: 11,298.43, -1,053.60 (-8.53%)

Weekend Wrap: This Is Bad; Oil Crashes; Stock Futures Limit Down; Global Market Panic in Progress

Thanks to a late-day ramp on Friday afternoon, the week turned out to be mostly positive for the investor class, though it certainly didn't seem to be that way most as the days wore onward.

With a 600-point buying spree on the Dow Jones Industrial Average - which pulled all the other indices higher as well - stocks finished with gains instead of substantial losses. After a week of wild swings, the mood had turned ugly, accentuated by cascading drops on Thursday and Friday at the opening bells both days and concerted selling in airline stocks, banks, and hospitality.

As pronounced as the near-panic over the prior five trading sessions was, what's ahead on Monday will be worse by orders of magnitude.

Beginning with the coronavirus (COVID-19) decimating economies and social structure from China to Italy to South Korea, Iran, and beyond, slumping demand and forecasting of a bleak near-term future prompted extreme action from Saudi Arabia over the weekend. On Friday, when Russia refused to go along with a planned 1.5 million barrels a day reduction in crude production by OPEC+ nations, the Saudis decided to put the screws to everyone in the oil business by slashing their rates and ramping up production.

The impact of this momentous decision on Saturday was immediately felt across not just the oil futures markets but equity and credit markets around the world. With all major indices closed as usual on Sunday, focus was attuned to futures, which were being hammered lower by as much as seven percent in some cases. In the US, futures trading was halted when the Dow, S&P, and NASDAQ futures fell by five percent, otherwise known as limit down.

Crude futures were down by extreme amounts. WTI crude was last seen at $32.07 per barrel, a 22% loss from Friday, when it was selling in the low 40s per barrel.

Bonds were being battered as well, with reports that the benchmark 10-year note was trading with a yield below 0.48% (at one point yielding an all-time low of 0.31%) and other bond yields were being destroyed in markets that began to open, first in Japan, China and the Far East, then to Europe. If fear of COVID-19 contagion was palpable, the contagion from the economic fallout had become all to real.

With US markets set to open in an hour, the condition is dire.

A quick rundown of the carnage on major indices around the world:

• NIKKEI (Japan) -5.07%
• 
  
• Straits Times Index (Taiwan, Pacific Rim) -6.03%
• 
  
• SSE Composite (China) -3.01%
• 
  
• Hang Seng (Hong Kong) -4.23%
• 
  
• BSE Sensex (India) -5.17%
• 
  
• All Ordinaries (Australia) -7.40%
• 
  
• KOSPI (South Korea) -4.19%
• 
  
• MOEX (Russia) -3.45
• 
  
• Jakarta Composite (Indonesia) -6.58%
• 
  
• FTSE Bursa (Malaysia) -3.97%
• 
  
• DAX (Germany) -7.00%
• 
  
• CAC-40 (France) -7.14%
• 
  
• FTSE 100 (England) -6.93%
• 
  
• EuroNext 100 (Europe composite) -7.50%

Suppression of the precious metals, the only remaining asset class that may hold some value, continues unabated as global economies come under severe pressure. Gold gained marginally, to $1678.00 per ounce, following a banner performance last week. Silver is under even more pressure, trading at $16.83 on futures markets, making a mockery of the gold/silver ratio, which is nearly 100:1. In more measured times - as in all centuries prior to this one - the gold silver ratio was pretty steady at 12:1 to 16:1. The current measure is a bad joke on a bad day, told by bad people with nothing but evil intentions (central banks).

Silver would have to rise to $100 per ounce for the gold/silver ratio to be anywhere near historical norms. With gold on the verge of a major breakout above $2000 per ounce, silver should - some day, maybe - be worth over $150 per ounce or similar equivalent in some other currency.

Monday's open should be epic. The aftermath, and the expected coordinated response by central banks figures to be a complete clown show, highlighted by massive injections of cash, POMO, TOMO, market-neutral rates, negative rates, and eventually, some collapsing banks. Couldn't happen to a more deserving crowd.

Money Daily will provide updates as time allows. Panic is a mild term for what's about to occur.

At the Close, Friday, March 6, 2020:
Dow Jones Industrial Average: 25,864.78, -256.52 (-0.98%)
NASDAQ: 8,575.62, -162.97 (-1.86%)
S&P 500: 2,972.37, -51.57 (-1.71%)
NYSE: 12,352.03, -240.97 (-1.91%)

For the Week:
Dow: +455.42 (+1.79%)
NASDAQ: +8.25 (+0.10%)
S&P 500: +18.15 (+0.61%)
NYSE: -28.94 (-0.23%)