The Stock Market - A daily diary

Yeah the SPY went from 2400 to 2365 to 2410 to 2380 and close at 2398, so inside 2.5 minutes the S&P moved 130 points back and forth which is about the same 7 percent...in 150 seconds.

So that moronic shumuck Kudlow now opening his trap about the Treasury might buy stocks??????

Larry is such a hypocrite, such a lying piece of crap hypocrite. Buying stocks at this level is right along with what the moron in chief wants and is disgusting, it is bailing out corps yet again.

I hope these idiots sink Trump, its time to get the business focused putz out of office.

Let's hope it doesn't come to that.  I don't think it's ever happened here where the govt. buys stock in companies.  China has done it plenty.. Let's keep it there and other banana republics that do this sort of thing..

It would be a very bad sign for the government to bailout the market like this. What bugs me as you can tell is I've been around Kudlow for probably 20 plus years and he tries to come off as a conservative follow the rules capitalist always criticizing government involvement and hands off blah blah blah and now that he has reversed rolls what the crap happened to his soap box yapping?

Now that he is on the other side its all good? Now that he is doing the bidding for King Debt its great to have the government trample on the markets and bail out the leveraged risk takers?

This is another example of repeated over and over protecting business and screwing the consumer and saver. Shame on that joker Kudlow and his two faced reversal.

I understand where you're coming from Wall.. It is a complete 180 for sure w Kudlow.   I think there's a genuine fear he has that many companies may go belly up as a result ; he's doing what he can to stem the tide.  But I'm with you , many of these companies contributed to their demise w these stupid buybacks .  What happens if a bunch of companies draw down their credit line,  like Boeing did, whether a company immediately needs it or not.  This crisis didn't start w the financial sector,  but it's plausible we could see stresses in the system similar to the financial crisis if too many companies fail all at once , and/or access their full credit lines.   

There was an article in yesterday's WSJ that talked about how the extreme volatility isn't due just to the pandemic .  It mentioned too many investment houses and hedge funds are using algorithms tied to volatility to trigger selling, and it stated this behavior has escalated quite a bit since the financial crisis..  I'm not a fan of this at all.  This only works to amplify the gains and losses seen in a normal trading session.   When instead of keying in on a company's fundamentals and value, you pay more attention to their volatility,   that is a problem  IMHO.   This stuff is akin to trading derivatives ; the same stuff Warren Buffett has earlier called  weapons of mass destruction.   I tend to agree w him here... 

I agree Rush51 but will pass in a few months !!!

Not to be a Debbie Downer, but I just don't see how this will pass "in just a few months" in either the markets or the virus. Right now we are all hunkered down, which will allow cases to peak and decline.

What do we all think is going to happen when the government inevitably ends the shutdown? There will still be people unknowingly carrying the virus right? So what will happen is a fresh cycle where virus cases will increase as people return to their normal lives. I see the effects of the virus being like skipping rocks on a still pond. The first skip sends the largest waves, the second skip a little smaller and so on and so on. 

If I were to venture a guess, the markets will react similarly with gradually decreasing volatility. The average recovery time for a 30% bear market is in the neighborhood of 380 days from bottom to top. Rush, you know I'm a chart guy but this time I do believe the "ripples" from the skipping rock extend the market bear past the 380 days. I just don't see how everything passes in "just a few months" as the cycles of the virus await a vaccine. 

Sorry to be such a downer, but this ride might be longer than we all anticipated. 

I am going to have my head explode I tell you...these companies crying to politicians for a handout are making me so mad. Cinema and airlines and likely some QSR's, Boeing and who the crap knows what else...I am sure GE would LOVE to get another freebie as they are to the gills in debt thanks to Jack the Clown and their buying spree of the early 2000's.

What is most sickening is to me ANY company who bought back stock needs to sell it back to the market, every single share before they hit up the government for some sad sack bailout. If you bought stock to make yourself rich and it didnt pan out then take your lumps and reverse the trade and then come ask me for money.

Politicians will not hold corps accountable especially the biggest moron of them all. It is disgusting and maddening. Live by leverage, die by leverage.

Boeing’s free cash flow for the last 10 years was $58 billion and they spent $44 billion of that on stock buybacks 

I like Mark Cuban's idea.  Any company that gets a lifeline is never permitted to buy back their own stock again .  Ever !  

And that alone doesn't go far enough IMHO.  How about clawing back executive pay for CEOs and boards who get bailouts, who are the main beneficiaries of this buyback nonsense.   Good interview w Chamath Palihapitiya on CNBC today.   

Gamble, I'm with you as far as how quickly this will pass.. a new cycle would inevitably seem to repeat itself if we can ever get a handle on this first cycle.  We've been beating this into the ground; it's why a vaccine can't come soon enough.   Inoculate those most susceptible, and anybody else that wants it,  and greatly reduce the chances of overwhelming the medical system. 

Detox...that's an alarming statistic for Boeing. I had no idea that 76% of Boeing's free cash went into buybacks.

Rush...Mark Cuban is on the money with his bailout philosophy. PERIOD.

Wall...Every day that passes I inch closer to your side of the fence on these issues with politicians and corporations. It's appalling and disgusting as you say.  

What ever happened to the world where you buy what you can AFFORD? I have lived that way my entire life. I pay cash for cars and pay my cards off every month. It should be rule to live by, but in our twisted world the opposite is mostly true. The bottom 20% live with significant credit card debt that cements them into a life of living in quicksand financially speaking. The middle class and upper middle classes buy 100k cars and boats on credit just to be the king of the "Keeping up with the Jones's". Our corporations look at all the behaviors of the nation and say "hold my beer".

I came across a stat that was just astonishing...  It took 720 trading days for the Dow to go from 20k to 30k (our thereabouts).   It took 42 trading days to go from 30k to 20k !  Talk about taking the stairs up and the elevator down !  

BA borrowed a TON of cash and the total buyback was over 100 BILLION dollars, so if you need some cash hit up the market and bring down your company price to where it belongs.

gamble, in 2009 or whenever it was the banks hit up congress for cash and Warren was head of the banking/finance committee and was a toothless tiger, she did ZERO to punish or hold the banks CEOs accountable...when that happened she was done in my book. All politicians talk big but when the fire is under their feet and you might have to take action against a campaign contributor they NEVER will do it.

The more I start thinking about all this volatility in the market, the more upset I get, because of the "Bets" people are making on this volatility.  This goes back to my post yesterday on how these "bets" contribute to the crisis.  I don't care what you call it, quant strategies, algo trading, it's no news to anyone that computers run our daily lives, including decisions made on stocks.   The problem is when these computers use algos that have volatility as an "input", or variable as to whether to buy or sell a stock.  

A few us here were posting earlier in the year how the market seemed to just go up, up, up, and up, .. on little news at all.  Well, the algos are hard at work here, too.  When volatility gets further depressed, buying will continue at these trading houses and hedge funds.  And what happens when the Sh*t hits the fan ?  These houses , some of which are ridiculously leveraged , using borrowed money, must unwind their positions..  As the volatility increases, what do you think these algos are doing ?  Of course, they accelerate the selling.  Then , you have novice investors that panic, creating another wave of selling on top of the algos that precipitated the crisis with their volatility bets.

This is not new.  If you guys remember in early 2018, we had a quick -10% decline in Jan-Feb that mirrored the decline here in 2020.  (The WSJ earlier in the week had a great graph that outlined all of the corrections since the financial crisis).  The drop in 2018 was at the same "velocity" as this one here in 2020.  The important difference ?   The one in 2018 stopped at -10% and quickly recovered.   You guys will remember that that drop was attributed to bets against volatility that blew up.  I remember one of the inverse volatility ETFs blew up, and contributed heavily to the decline.  

So, what's the takeaway ?  Algo trading tied to volatility has a huge impact in the function (or dysfunction) of the markets.   They unnecessarily take the rest of us investors for a ride, pulling us by our hair as we get swung around.. 

Yeah I was reading some stuff today about that...which I will go into here in a second.

It was vogue for YEARS and a never lose trading tactic that people would buy puts or short VOL or go long the inverse and just think they were going to retire...vol was sold and sold and sold and sold and sold...nobody thought it could lose and I sat there for years thinking "what the crap" as you guys know...this market action for a decade went outside all that I ever learned and knew and experienced for several decades before this and it made no sense. The reason for the fake market move to almost 30k was the FED and algo/quant trading.

Computers as you mentioned using algos which trade based on the sentiment and feed into that sentiment have ruined this market...no longer are there buyers and sellers and people research which companies are under or over valued, now its all about front running and scalping a BILLION times a day for .0005 cents to make profits and the computers are running the show. All this works until something breaks and in this case the virus slowed down corporate WORLD (not just America) and this has damaged corporate bloated credit and now there is a dollar shortage since foreign debt and corporate obligations abroad are denominated in USD...so when margin calls come for corporate debt which is already highly leveraged and hedge funds who are mega leveraged well the cash required is USD....so that is why you saw today the Indian Rupee go from 74 to 77 and to 74 and why the pound is scraping near decade lows, why the Euro is looking to break the buck and why currencies are getting killed vs the dollar...companies are going to default on debt covenants, hedge funds are going to be busted unless they can get the USD converted from their local currency. All this is due to leverage...and that is why the FED cannot stop the dollar move. 

Until local economies start improving the margin calls are going to continue and banks are not going to gamble right now, they need USD to keep their books from evaporating and their leverage ratios getting smoked.

So how are those idiotic FED stress tests looking now?

A bit of a side note here,...

On a day that we should be enjoying the opening day of March Madness , our governor here in CA just issued a statewide lockdown.   Our lives have truly been turned upside down.   The only thing in common is that this truly  is Madness..

Wall, to your last point, the Banks do seem to be  better capitalized since the financial crisis,  and have much less capacity to make bets on the market,  no ?   That was a lesson from the crisis.    IMHO, they are not the culprit here, but the businesses community at large .. and I'm talking the Big companies that had capacity to borrow and buy back stock. 

I saw that Nikki Haley resigned from the Boeing board for taking government money ( or considering it ).   Good for her  ; I applaud that decision..

There are some important similarities and differences IMHO, between this crisis and the previous one in 2008.  This current one  is due almost "Entirely " , if not 100%, due to corporate irresponsibility.   The consumer had almost no involvement at all in this crisis.  I contrast this w 2008 when the consumer played a large part in the crisis.   No one put a gun to anyone's head and forced them to take out a mortgage 5hey couldn't afford.  And predatory lending practices  ?  Please.  At the end of the day , the buck stops w you.  Accept responsibility for your actions.   This one reason why I'm really frustrated w the businesses community this time around.   The consumer had absolutely no involvement here...

Let me tell you about the years leading up to 2008. Somewhere around 2004-2005 some friends of mine approached me about a real estate deal where you collect $20,000 cash for buying a house and walk away clean and easy. A Real Estate company was rounding up people for an "investment" opportunity they said.

I'll keep it short because most everyone here knows about straw buyers, inflated appraisals, and crooked real estate companies. Anyway, this guy I have known for 30 years took the bait (20K) and now has a house that he never lived in that he pays a monthly mortgage on for the rest of his life. The real estate guy disappeared with all the proceeds from the falsified loans and I'm not sure if he was ever caught....but the straw buyers all got nailed and were held liable to pay off the mortgages on homes they never lived in for not even for a day.

Anyway, to say that the banks were not involved in these crimes might be a true statement. But boy were the banks STUPID. 

gambleholic63 - I was talking about virus - stocks are years away to get back - your better off gambling on sports.

Years to get back are OK....it's the cost of doing business. Meanwhile, I will collect my dividends along the way and wait this out. It's the part of "long term" investing that most people can't handle and end up selling at or near lows. 

If you really think you are better off gambling on sports, I say good luck to you and your financial future.

And.....to further elaborate.

This virus will not pass in a few months. It will pass when everyone gets a dose of the vaccine in their yearly flu shots. It's delusional to think this will pass in a few months. 

Domino's pizza is up 3.8% on the week (so far).  I should've taken my own advice.  Lol...