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Global financial system implosion begins

The individual hardship of the employees is certainly something I can fully sympathise with, however we do need to radically cut back on air travel.

If the climate was covid, we are, metaphorically, sometime last December when it was just something far away that a few scientists were telling us to take action. In a decade we are going to right in the middle of significant effects unless we maintain this lower energy way of life.
 
Has there ever been such an extreme negative correlation between GDP and the stock market as we're seeing today? They've announced that GDP has shrunk by almost 5%... but the markets are up. But just wishing an economic recovery into being by force of spending won't work. this is all speculation based on the idea that a vaccine will be available sooner than expected, or that countries which are soon to reopen will "return to normal". but we all know both of those things are not true. and the billions of lost jobs will not be coming back by the end of the year even if there were to be a free and universally available vaccine.
 
Well, the rise isn’t context-free. The all share is still about 20% down on its year-end peak, even after the recent, actually relatively small, recovery. Is the long-term ability to make profit about 20% down as a result of economic trauma? Doesn’t sound too out of line to me. Some industries are devastated whilst others are barely touched (remember AstraZeneca, who I mentioned as an example of a company that wouldn’t be unduly affected back when all this kicked off? Well they’ve recently hit an all time peak valuation, ever so slightly up from their pre-virus price). Many other industries are licking their wounds. An overall average reduction of 20% doesn’t sound like the market traders have lost their minds about any immediate economic recovery.

As for the 100, do remember that it is dominated by oil, banks, pharmaceuticals and the value of the USD. These have had very different paths recently. Looking at it as an overall average misses the underlying trends.
 
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hot air baboon said:
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It's froth or rather Fed stimulus plus flight to safety. Japan's Palace Grounds Once More Valuable than California August 27, 2007

Covid-19 has blown apart the myth of Silicon Valley innovation
MIT technology review. April 25, 2020
The pandemic shows that the US is no longer much good at coming up with technologies relevant to our most basic needs.
The frustration in Marc Andreessen’s post on our failure to prepare and respond competently to the coronavirus pandemic is palpable, and his diagnosis is adamant: “a failure of action, and specifically our widespread inability to ‘build.’” Why don’t we have vaccines and medicines, or even masks and ventilators? He writes: “We could have these things but we chose not to—specifically we chose not to have the mechanisms, the factories, the systems to make these things. We chose not to ‘build.’”

Forgetting for a moment that this is coming from the same guy who famously explained in 2011 “why software is eating the world,” Andreessen, an icon of Silicon Valley, does have a point. As George Packer has written in the Atlantic, the coronavirus pandemic has revealed much of what is broken and decayed in politics and society in America. Our inability to make the medicines and stuff that we desperately need, like personal protective gear and critical care supplies, is a deadly example.
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Silicon Valley and big tech in general have been lame in responding to the crisis. Sure, they have given us Zoom to keep the fortunate among us working and Netflix to keep us sane; Amazon is a savior these days for those avoiding stores; iPads are in hot demand and Instacart is helping to keep many self-isolating people fed. But the pandemic has also revealed the limitations and impotence of the world’s richest companies (and, we have been told, the most innovative place on earth) in the face of the public health crisis.

Big tech doesn’t build anything. It’s not likely to give us vaccines or diagnostic tests. We don’t even seem to know how to make a cotton swab. Those hoping the US could turn its dominant tech industry into a dynamo of innovation against the pandemic will be disappointed.
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It’s not a new complaint. A decade ago, in the aftermath of what we once called “the” great recession, Andrew Grove, a Silicon Valley giant from earlier era, wrote a piece in Bloomberg BusinessWeek decrying the loss of America’s manufacturing prowess. He described how Silicon Valley was built by engineers intent on scaling up their inventions; “the mythical moment of creation in the garage, as technology goes from prototype to mass production.” Grove said those who argued that we should let “tired old companies that do commodity manufacturing die” were wrong: scaling up and mass-producing products means building factories and hiring thousands of workers.

But Grove wasn’t just worried about the lost jobs as production of iPhones and microchips went overseas. He wrote: “Losing the ability to scale will ultimately damage our capacity to innovate.”
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The pandemic has made clear this festering problem: the US is no longer very good at coming up with new ideas and technologies relevant to our most basic needs. We’re great at devising shiny, mainly software-driven bling that makes our lives more convenient in many ways. But we’re far less accomplished at reinventing health care, rethinking education, making food production and distribution more efficient, and, in general, turning our technical know-how loose on the largest sectors of the economy.

Economists like to measure technological innovation as productivity growth—the impact of new stuff and new ideas on expanding the economy and making us richer. Over the last two decades, those numbers for the US have been dismal. Even as Silicon Valley and the high-tech industries boomed, productivity growth slowed.
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The last decade has been particularly disappointing, says John Van Reenen, an MIT economist who has recently written about the problem (pdf). He argues that innovation is the only way for an advanced country like the US to grow over the long run. There’s plenty of debate over the reasons behind sluggish productivity growth—but, Van Reenen says, there’s also ample evidence that a lack of business- and government-funded R&D is a big factor.

His analysis is particularly relevant because as the US begins to recover from the covid-19 pandemic and restart businesses, we will be desperate for ways to create high-wage jobs and fuel economic growth. Even before the pandemic, Van Reenen proposed “a massive pool of R&D resources that are invested in areas where market failures are the most substantial, such as climate change.” Already, many are renewing calls for a green stimulus and greater investments in badly needed infrastructure.

So yes, let’s build! But as we do, let’s keep in mind one of the most important failures revealed by covid-19: our diminished ability to innovate in areas that truly count, like health care and climate change. The pandemic could be the wake-up call the country needs to begin to address those problems.
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yield said:
It's froth or rather Fed stimulus plus flight to safety. Japan's Palace Grounds Once More Valuable than California August 27, 2007

Covid-19 has blown apart the myth of Silicon Valley innovation
MIT technology review. April 25, 2020
The pandemic shows that the US is no longer much good at coming up with technologies relevant to our most basic needs.
Click to expand...
The truth of it is that clever ideas are actually much easier than delivery/production/implementation. Armchair enthusiasts always greatly overvalue ideas (probably because they are able to come up with them) and have a great deal of snobbery regarding actually producing and selling widgets/bin lids/crisps (probably because they have no clue what's actually involved).

People with these kinds of misconceptions tend to be impressed with novelty, being first to market and secrecy of their concepts. They are likely to be scathing of a company that comes along later, takes an existing idea and does it better. The iPhone is a good example of this latter phenomenon.
 
Yeah Boeing and Airbus are in a funny position though as essentially a duopoly of airplane manufacturers for pretty much everyone. Even Aeroflot are mostly Boeing and Airbus. So while airplane travel may have it's all time peak and never recover (incredible as this may sound)... airplane travel will still definitely be a major thing. And the airlines can't just continue to run on their current stock forever: though the imagine of the entire world civilian air fleet resembling Cuba still running with 1950s cars is sort of funny. Hence although Boeing will fire tens of thousands of people now without batting an eyelid, they are 100% nailed on to get a sizeable bailout from the Fed if it comes close to bankruptcy. The USA can't afford for Boeing not to be operational. And likewise, if the EU can't bail out Airbus, it will be another nail in the coffin of the project. As for the airlines themselves, what with their being more of an oligarchy and not a duopoly, I think some of the big names may very well have flown their last flights before Christmas. Virgin Atlantic, United Airlines, maybe even Easyjet. All the smaller budget airlines are completely fucked, as we've seen already with Flybe
 
Flavour said:
Yeah Boeing and Airbus are in a funny position though as essentially a duopoly of airplane manufacturers for pretty much everyone. Even Aeroflot are mostly Boeing and Airbus. So while airplane travel may have it's all time peak and never recover (incredible as this may sound)... airplane travel will still definitely be a major thing. And the airlines can't just continue to run on their current stock forever: though the imagine of the entire world civilian air fleet resembling Cuba still running with 1950s cars is sort of funny. Hence although Boeing will fire tens of thousands of people now without batting an eyelid, they are 100% nailed on to get a sizeable bailout from the Fed if it comes close to bankruptcy. The USA can't afford for Boeing not to be operational. And likewise, if the EU can't bail out Airbus, it will be another nail in the coffin of the project. As for the airlines themselves, what with their being more of an oligarchy and not a duopoly, I think some of the big names may very well have flown their last flights before Christmas. Virgin Atlantic, United Airlines, maybe even Easyjet. All the smaller budget airlines are completely fucked, as we've seen already with Flybe
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Boeing is the US's largest exporter, Airbus is, I think the EU's 7th. You also haven't figured in China
 
Wall St. caps best month in decades with broad sell-off
April 30, 2020
NEW YORK (Reuters) - U.S. stocks lost ground on Thursday as grim economic data and mixed earnings prompted investors to take profits at the close of the S&P 500’s best month in 33 years, a remarkable run driven by expectations the economy will soon start recovering from crushing restrictions enacted to curb the coronavirus pandemic.

While risk-off selling pulled all three major U.S. stock averages into the red, the S&P 500 and the Dow posted their largest monthly percentage gains since January 1987, with the Nasdaq having its best month since June 2000.
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The three indexes remain well within 20% of record highs reached in February, having quickly rebounded since shutdown efforts to curb the spread of the coronavirus pandemic brought the economy to a grinding halt.

The five-week tally of unemployment claims topped 30 million and consumer spending has plummeted, according to the latest round of dismal indicators providing another snapshot of the crushing economic effects of the widespread shutdown.
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kabbes said:
The US market seems wildly optimistic to me but then, I’ve been saying that for most of the last 20 years.
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Equities, even though they are semi meaningless bits of paper, are much scarcer than dollars, which are semi meaningless bits of paper.
 
U.S. Fed won't take rates negative, say fund managers, economists
May 8, 2020
(Reuters) - There is little chance the U.S. Federal Reserve will take interest rates into negative territory even as financial markets have begun pricing in such a move for the first time, fund managers and economists said on the Reuters Global Markets Forum.
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Pandemic sets Japan on course for deep recession as spending, services plunge.
May 8, 2020
TOKYO (Reuters) - Japan’s household spending plunged in March and service-sector activity shrank at a record pace in April, reinforcing expectations that the coronavirus pandemic is tipping the world’s third-largest economy into deep recession.
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Incredibly, the Nasdaq is now in the black for the year to date. It’s like US tech is seen as divorced from everything else in society. (By comparison, the S&P500 is just over 10% down for 2020 YTD and the FTSE all-share is over 20% down.). Like it just generates value on its own rather than being part of the wider network.
 
it's madness and I think the US Federal Reserve are determined to pump as much QE as it takes into nasdaq/s&p/dow to keep them from crashing again. another crash seems inevitable at some point between now and election day but i think that's the underlying logic for trump: just pump and pump so he can present a rather different economic picture than the "real" one, and thus help his re-election chances. another crash like the one in march (or much, much worse, as would seem inevitable) means the end of trump and indeed perhaps the USA's claim to world number one economic power
 
A dangerous gap (paywalled so Outline - Read & annotate without distractions)
The market v the real economy
Economist. May 7th 2020
Financial markets have got out of whack with the economy. Something has to give

STOCKMARKET HISTORY is packed with drama: the 1929 crash; Black Monday in 1987, when share prices lost 20% in a day; the dotcom mania in 1999. With such precedents, nothing should come as a surprise, but the past eight weeks have been remarkable, nonetheless. A gut-wrenching sell-off in shares has been followed by a delirious rally in America. Between February 19th and March 23rd, the S&P 500 index lost a third of its value. With barely a pause it has since rocketed, recovering more than half its loss. The catalyst was news that the Federal Reserve would buy corporate bonds, helping big firms finance their debts. Investors shifted from panic to optimism without missing a beat.

This rosy view from Wall Street should make you uneasy (see article). It contrasts with markets elsewhere. Shares in Britain and continental Europe, for example, have recovered more sluggishly. And it is a world away from life on Main Street. Even as the lockdown eases in America, the blow to jobs has been savage, with unemployment rising from 4% to about 16%, the highest rate since records began in 1948. While big firms’ shares soar and they get help from the Fed, small businesses are struggling to get cash from Uncle Sam.

Wounds from the financial crisis of 2007-09 are being reopened. “This is the second time we’ve bailed their asses out,” grumbled Joe Biden, the Democratic presidential candidate, last month. The battle over who pays for the fiscal burdens of the pandemic is just beginning. On the present trajectory, a backlash against big business is likely.
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I think the "plunge protection team" are doing a pretty good job of pumping the market during closing hours, but the question is how long can they keep doing that? as soon as they stop, the bubble pops, there's very low volume of "real" trade nowadays.
 
Flavour said:
I think the "plunge protection team" are doing a pretty good job of pumping the market during closing hours, but the question is how long can they keep doing that? as soon as they stop, the bubble pops, there's very low volume of "real" trade nowadays.
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They'll do "whatever it takes" to protect the wealth of the wealthy and (more understandably) the pension funds. Sod everyone else.
 
Japan c.bank, govt signal more steps to ease funding strains
May 12, 2020
TOKYO (Reuters) - The Bank of Japan will do “whatever it can” to mitigate the growing fallout from the coronavirus pandemic, Governor Haruhiko Kuroda said on Tuesday, warning that a collapse in global activity has had severe consequences on the economy.
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The remarks came as earnings announcements underscored the damage the pandemic has inflicted on Japan’s big automakers including Toyota Motor Corp (7203.T), which expects profit to drop 80% to its lowest in nine years.

A key indicator gauging the state of the economy fell at the fastest pace in 9 years, data showed on Tuesday, forcing the government to warn of a deep recession as the virus takes a heavy toll on business activity and consumption.

In a semi-annual testimony to parliament, Kuroda said Japan’s economy was in an “increasingly severe state” as the pandemic paralyses global activity.
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TUI (Travel agent) cutting 8k jobs

The company's posted losses of more than 750 million pounds for the first half of the year.
 
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