Today markets closed with relative strength as it was able to handle a few draw downs. The Dow ended at 21,237 for a rise of 1,048 points. Prior to this day, Monday, stocks saw its worse ever point drops total in a day, nearly 3,000 points. Yet now in extended market hours the rise for the day have all but vanished! It has not even started trading and prices are going to open lower than where we ended at on Monday and may get worse.
Boeing is pleading for a bailout, but it had prior spend it's cash on stock buy backs. Now the cheap credit is gone and they have to rely on the government to bail them out. This is the first glimpse of what is to come in the very next few weeks if not months. Corporations who over extended their credit for the sake of increasing share prices to earn big fat paychecks and bonuses have now come home to roast. The most frustrating part of this is if the government do not save these corporations millions upon millions of people will be out of work.
Unprecedented market action has caused the government to do unprecedented actions. The government has postpone filing tax deadlines of 2020 for 90 days. That way citizens can have some leeway as to how they can use their funds while the country is on lock down from the Coronavirus. This benefits to those who owe taxes as they now have 90 days longer to pay the government back without incurring any penalties.
Mnuchin has put fear upon Congress to act upon writing and passing a stimulus package worth over $1 trillion. Where have we heard this type of money printing before? Oh 2008 was when the Great Financial Crisis occurred. A stimulus package of over $800 billion was passed to push the US economy over a difficult few years, and here we are again. What has the government learned? If we first don't succeed, try and try again. Oh ignore the defecate and dollar deprecation. Oh if this stimulus bill don't get pass US will shoot up in unemployment and job loss. Reminding readers these politicians are highly educated and speak well enough to represent their constituents. Yet not smart enough to avoid the same pitfall as their previous handling of stimulus bill. With the stock market crashing this swiftly I am doubtful commonsense will be used and instead fear upon these politicians will make them sign anything that say more money!
There is an additional initiative by the FED to start purchasing stocks thru banks by calling them collateral securities. To top off their drop in interest rates to 0.25%, $500 billion in repo markets, and $700 billion QE program. This buying of collateral securities will start on March 20, 2020. It is a Friday where stock expiration take place. May likely become a very interesting trading session.
It should be obvious now that the last 12 years we had since the Great Financial Crisis was never really fixed. Boom and Bust cycle was never finished. There are those who say it should have been some sort of recessions every 7-10 years and this one is the same. I would buy it only if the same mistakes that happened in 2008 was not repeated here. Yet it was. Unemployment is currently at all time lows. Credit is vast throughout all markets. Stocks were at all time highs and breaking record after record. Yet within less than one month the whole thing falls apart and government and FED are doing what they can to starve off massive losses in asset prices. The reality is 2008 where excessive use of capital in unprofitable ventures such as mortgage back securities and collateral derivatives were reinflated with government stimulus and FED intervention has come back with a vengeance.
Notice I have not even point blame at the recent Coronavirus, and it may likely have some fault to it, but the economy had always been living on the edge every since the government and the FED intervened. The virus only accelerated the damage done by wasteful spending and lack of care in balance sheets. This is now a breaking point for the economy. Either the government and FED can print their way out of this mess or the greatest country on earth reset with asset prices crumbing and the dollar becoming worthless. I hope it is the former but I care about the future generations too much to see them going through this and then some. It is time to stop kicking the can and face reality, even though the government and the FED have yet to accept it.
Posted via Steemleo