Covid19 and the Stock Markets

33 comments on “Covid19 and the Stock Markets ”

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1. Ad 1

   12 May 2020 at 8:56 am

   No one screwed up their courage and sank it all into Fisher and Paykel Healthcare?

   Almost a pity there isn't a sharemarket that lists countries.
   • mickysavage 1.1

     12 May 2020 at 11:37 am

     F&P are doing pretty well, Amazing what a medical crisis does to a company producing medical equipment …
   • Phil 1.2

     12 May 2020 at 1:05 pm

     Almost a pity there isn't a sharemarket that lists countries.

     That's kinda what government bond markets are. Index funds basically do that for each nations sharemarket, too.
2. Dennis Frank 2

   12 May 2020 at 9:27 am

   equity values simply no longer depend on the functioning of society

   So what do they now depend on? Herding (reef fish). Perception. Sell incoming bad news, buy the bounce-back – just make sure you get there first!

   And remember the market has been driven by high-speed computers (not people) for quite a while now. May the best algorithm win.
   • Incognito 2.1

     12 May 2020 at 11:07 am

     May the best algorithm win.

     And the shortest ping.
     • Phil 2.1.1

       12 May 2020 at 5:39 pm

       If you two are talking about the trading algorithms that arbitrage between buyers and sellers, they don't 'drive' the market anywhere in the conventional sense of the use of that word.

       All they do is find situations where people want to buy and sell at inefficient prices (e.g. I want to sell a stock for $1.49, you want to buy it for $1.51… the computer hits both trades, the market price ends up at something like $1.50) until the market settles efficiently.
       • Incognito 2.1.1.1

         12 May 2020 at 6:37 pm

         https://en.wikipedia.org/wiki/Low_latency_(capital_markets)
3. Richard Ellis 3

   12 May 2020 at 10:00 am

   Looks like a classic bull trap to me
4. Tricledrown 4

   12 May 2020 at 10:26 am

   The 1929 Crash didn't hit home for 2 yrs fully.

   Because of conservative politics no bailout of mainstreet or Wall st.

   The big problem is whether the US can pump money into mainstreet and wall st. Otherwise this is going to be a long u shaped recovery. Trump has pumped 1 weeks wages in.NZ 6 weeks(12× 1/2 a weekly wage.Australia has pumped in $130 billion already doubling the UB.Thats 2 1/2 times the NZ subsidy per head .

   Commentators economists and the Narional Party are saying there is some magical cut of point where debt is to high.Australian Conservative govt with a much higher level seems to be doing the right thing.while National claim being fiscally conservative is the right approach.History shows that Australia is on the right track save as much of the economy as you can now rather than take 10 to 30 to rebuild from scratch.
5. Adrian Thornton 5

   12 May 2020 at 10:28 am

   Wall Street’s War

   Congress looked serious about finance reform – until America’s biggest banks unleashed an army of 2,000 paid lobbyists

   https://www.rollingstone.com/politics/politics-news/wall-streets-war-193451/
6. AB 6

   12 May 2020 at 10:37 am

   "So what gives?"

   In the USA at least: A belief that the Federal Reserve will never turn off the money tap? Several trillion dollars in bailouts going without scrutiny into corporate coffers and the potential for stock buybacks? Multiple opportunities for the consolidation and extension of monopoly capitalism as 'main street' falls over? The political defeat of any alternative economic vision represented by the Sanders campaign? Lots of money sloshing round at the top of the economic pile with nowhere else to go?
   • bill 6.1

     12 May 2020 at 11:49 am

     Drawn to Mark Blyth's analogy of the American economy being like a 6 litre Mustang GT with no safety features. (Apparently Europe's a Volvo 🙂 )

     His take's worth a deek.

     https://www.youtube.com/watch?v=7e9KNbAhErI
   • Incognito 6.2

     12 May 2020 at 8:38 pm

     Exactly my thoughts. Those trillion-dollar bail outs and dirt-cheap credit for some need to find a place to land and take hold. It seems the only point of wealth is to increase it, for the sake of it. It has no purpose in reality and no real meaning beyond human psychology. Post-modern madness.
7. barry 7

   12 May 2020 at 10:40 am

   The only way the Fed and governments know to support the economy is to throw money at it. But people are not spending and have nothing to spend the money on so they buy shares (or property, or …). They have run out of ideas.

   QE helped to recover from the GFC, but we have just seen bubble after bubble and they (the fed, reserve bank etc) don't know how to undo the QE without bursting the bubbles and causing business failures.

   In some respects the bubbles have artificially extended the recovery and the world was overdue for a recession, but got stagnation (low wage growth, part time work, increasing inequality) instead. Now the economic malaise has been whacked by covid. It is unreasonable to expect that many companies won't collapse. Many were unsustainable anyway and Covid has just hastened the demise. Unfortunately economic concentration in a few big tech companies will probably accelerate.

   How to encourage the sustainable small well paying industries and discourage the exploitative companies? Part of that will be through the share market, but it will be risky for some time.
   • Phil 7.1

     12 May 2020 at 5:45 pm

     The only way the Fed and governments know to support the economy is to throw money at it.

     To be fair to the Fed, the *only* way central banks can support an economy is to throw money at it. Whether that be through QE, negative rates, bond buybacks, helicopter money, operation twist etc, they're all designed with the same outcome in mind: increasing the volume and flow of liquidity in the financial system.

     Which is why central banks across the world since the GFC have been at pains to point out that recoveries cannot be sustained with monetary-policy stimulus alone. There needs to be sound fiscal-policy stimulus from governments that are awake to the prevailing economic conditions as well.
     • Pat 7.1.1

       12 May 2020 at 6:09 pm

       govs and central banks need to work out (and desperately) how to unwind those bubbles (disconnect) without collapsing the real economy…that is the challenge.

       At this stage they dont appear to have any ideas
8. bwaghorn 8

   12 May 2020 at 11:58 am

   Would the rise of online platforms like shearsies opening up the nzx to uneducated boobs (me being one of them ) be putting a the markets at risk of just being a big ponzu scheme?

   They published there increase in subscribers the other day and its huge in the last year
9. bill 9

   12 May 2020 at 12:03 pm

   From May 9th (Warren Gunnels is Bernie Sanders' Budget Committee's Staff Director)
   https://twitter.com/GunnelsWarren/status/1258800333410590720

   In the past DAY, the 8 richest men increased their wealth by $6.2B
   Mark Zuckerberg:$1.08B
   Larry Page:$956M
   Bill Gates:$931M
   Sergey Brin:919M
   Jeff Bezos:$907M
   Larry Ellison:$634M
   Warren Buffett:$429M
   Steve Ballmer:$353M

   Combined wealth: $653.8B

   While 33M+ lost jobs
   • Sabine 9.1

     13 May 2020 at 9:51 am

     does the Stockmarket not always do well when people loose their jobs?
10. bill 10

    12 May 2020 at 12:17 pm

    Sorry for dropping yet another vid on your thread Micky, but this breakdown from Kulinski speaks directly to your post and reeks of that rarest of things – common sense.

    https://www.youtube.com/watch?v=w3FU8Cx3JnQ
11. gsays 11

    12 May 2020 at 12:49 pm

    For me it shows how removed from reality the 'markets' are and the fiction that the financial system is.
12. Lara Iriarte 12

    12 May 2020 at 12:52 pm

    Gidday everybody from Panama, where I landed when the music stopped and everybody had to sit down in the nearest chair (just to be clear, I'm here to find warm water surf).

    My profession is as a technical market analyst. I have been doing this now for over a decade. I'm a CMT

    This bounce is not unexpected in technical terms. It's quite normal for the first bounce within a bear market to last several weeks and be quite high, getting fairly close to where the last high in price was seen.

    Often called a Dead Cat Bounce.

    It doesn't mean that a bull market is going to continue. Only a new all time high in price is going to give confidence to that view. While that hasn't happened, it'd probs be best to assume that a bear market is in it's early stages.

    This bounce so far has weak volume and momentum.

    But more concerning, the prior bull market from March 2009 to Feb 2020 also had declining volume. There is weak support below, which means that when price falls there is not alot of support below to stop it.

    Weak volume means that there was not a lot of trades made at those price points, so not so many people bought or sold at those price points. When people buy at a specific price point, and price moves up and away, they think "yay! I'm making money!" but if price turns and falls back to where they bought then they may choose to sell before they face a loss. Hence prior price points with larger volume tend to be "sticky". Hope that makes sense to readers here.

    Anyway, I did a macro economic analysis of the US market, hope it's okay to leave a link <a href="https://elliottwavegold.com/2020/05/us-macro-economic-analysis-08-2020/"here</a>.

    [lprent: Reads a bit like comment spam, but looks like being written by a human, and is relevant to the post. Just don’t trying to astroturf the site. Our site policy is here. ]
    • Lara Iriarte 12.1

      12 May 2020 at 1:38 pm

      not intended as spam at all, but if you don't want professional input from a Kiwi overseas who has nothing to sell in NZ (my analysis is of US markets, not useful at all for NZ) and no axe to grind, then by all means delete it and I'll fuck off

      [I let the comment through and I agree lprent the comment was on point and coherent. Happy for your comments Lara but be careful about use of links – MS]
      • Lara Iriarte 12.1.1

        13 May 2020 at 1:44 am

        I totally understand the hesitation re links

        I put that one in because it's so very relevant and recent
    • Ad 12.2

      12 May 2020 at 2:13 pm

      Nice link there.

      I agree with the bounce; it's looking very similar to the 1897-88 crash in just that respect.
      • SPC 12.2.1

        12 May 2020 at 7:23 pm

        More likely the 2008-2010 period. But in the short term like our 1986 peak and crash and 1987 revive and recrash.

        But because of the QE slosh – stocks will eventually recover as they did after the GFC (and the pre GFC high was influenced by the cheap credit/loose money in the US from 2002).

        It's been largely good news for baby boomers – savings multiplied by booming stocks and those in the Wall Street bubble paid fat bonuses.

        It's a lot like a pyramid scheme in a lot of ways – the number of 1%ers on top and the unsustainable nature of it.

        But while old people rule and old people benefit I do not see change coming.

        Another factor was the rise of the company that did not pay dividends and the fall in the rate of the CGT. So much so companies reinvested their profit into buying up their own stock.
        • Ad 12.2.1.1

          12 May 2020 at 10:24 pm

          Sorry my typo I meant 1987-88
13. woodart 13

    12 May 2020 at 1:40 pm

    maybe its simpler than most think. where else would you put your money. interest rates at your freindly bank are next to nothing, as they were prior covis. real estate (residental) prices have held up.
14. Tricledrown 14

    12 May 2020 at 2:16 pm

    Lara most indicators pointed to the US heading towards a recession before the pandemic.

    As you say bounces occur speculators are quick to jump on the up cycle but quicker to dump on the downward cycle.

    Trump will try to QE his way to victory

    Republicans claim to be fiscally conservative when history shows the opposite Bushes and Reagan ran up huge debts.
15. SPC 15

    12 May 2020 at 6:59 pm

    Fund managers – all that retirement saving to invest. And with all that QE money about post GFC, interest rates were so low.

    Those who diversified (bonds) got lower returns and those who went all in for stocks were glorified.

    Is this a case of rinse and repeat?
    • Pat 15.1

      12 May 2020 at 7:21 pm

      everything is relative….even when the market crashes you still (hopefully) have an asset
16. Gabby 16

    13 May 2020 at 5:16 pm

    Bill Ackman knows what to do when share prices fall. He's so keen he gives them a wee push in the right direction.
17. Jum 17

    13 May 2020 at 6:16 pm

    I just look at the stock market as a place for rich people to stick the cash they don't need to live on. The conclusion is that they're still rich; it's only the unemployed that are tanking, so no change there.

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