Dow Be Down, Do Be Do Dow Down

Dow Be Limit Down, Do Be Do Dow Down.

C’mon, that’s punny.

Just to repeat the mechanics, Futures are limited to a 5% loss. If there are no bids above -5% Trading halts until there is one. In the Market there are Breakers at 7%, 13%, and 20%. 15 Minute Halts at -7% and -13%, Trading Closes for the Day at 20%.

The Limit Down Futures imply an Opening of -600 Points or so which would send the Dow below 19,000 (Friday Close 19,173.98) to the 18,000 level. I’ve said before that there is no technical bottom and if we were at historic Price/Earnings Ratios I think it should be 10,000.

Dow futures drop 500 points, briefly hit ‘limit down’ as investors await a stimulus deal
by Fred Imbert, CNBC
Sun, Mar 22 2020

U.S. stock futures dropped again as Wall Street waits on Washington to agree to an economic stimulus and rescue plan to cushion blow from the coronavirus outbreak.

As of 6:28 a.m. ET, Dow Jones Industrial Average futures dropped more than 500 points. S&P 500 futures were off by nearly 3%. Nasdaq 100 futures declined by 2.6%. The SPDR S&P 500 ETF was off by 3% in premarket trading.

Futures were well off their worst levels of the overnight session. Earlier, futures hit their “limit down” levels, falling 5%. Downside limits to futures contracts are implemented to ensure orderly market behavior once trading hits a certain threshold. No trades below that level are allowed.

A fiscal stimulus bill failed a key procedural Senate vote Sunday as Democrats warned the measure did not do enough to help workers and too much to bail out companies. Earlier, House Speaker Nancy Pelosi had signaled she was not on board with the Republican-version of the stimulus plan, saying: “From my standpoint, we’re apart.”
…
In the U.S., more than 30,000 cases have now been confirmed. New York Gov. Andrew Cuomo said Sunday cases in the state soared to 15,168 over the weekend. That’s more than in France or South Korea.

The outbreak has led the New York Stock Exchange to close its trading floor and temporarily move to all-electronic trading beginning Monday. NYSE expects trading to proceed as normal.

Trump announced Sunday he activated the National Guard in California, New York and Washington state — the three states with the highest reported coroavirus deaths — to curtail the virus’ outbreak.

“Things will get worse before they get better and the markets will continue to reflect that reality,” said Marc Chaikin, CEO of Chaikin Analytics, in a note. “This means that a bottoming process will take more time and probably inflict more damage to equities.”

Stocks suffered their biggest one-week decline since the financial crisis in 2008, with the S&P 500 dropping more than 13%. Those losses put the broad market average more than 32% below its record set on Feb. 19.

Last week ended with all 11 S&P 500 sectors closing more than 20% below their respective 52-week highs. The S&P 500 was also on pace for its worst monthly performance since 1940.
…
Investors have also been rattled by a sharp decline in crude prices. West Texas Intermediate futures fell 29.3% last week, their biggest weekly fall since January 1991. U.S. crude is also more than 66% below its most-recent 52-week high.

One argument you’re going to hear today is that we have to do Something, ANYTHING RIGHT NOW!

As our experience during the 2008 Financial Crash should have taught us it’s important to get these things right.

The McConnell Republican Senate Bill is not that. In addition to other horrifying features it creates a $500 Billion Slush Fund for Mnuchin to spend on anything he wants with no accountability whatsoever. In case you’re confused about the magnitude of that, it’s about 10 Bloombergs or 5 Bezos (post divorce).

Treasury’s power over $500 billion loan program becomes key sticking point in coronavirus aid bill
By Jeff Stein, Washington Post
March 22, 2020

Congressional lawmakers are feuding over a central component of the massive economic relief package being debated by the Senate, a battle that may threaten the enormous emergency aid package while reprising one of the most bitter political fights of the last decade.

The Trump administration and Senate Republicans have called for giving the Treasury Department the authority to disburse hundreds of billions of dollars in emergency federal loans to firms hurt by the economic impact of the coronavirus.

Their initial proposals called for the fund to be worth $208 billion. But after a flurry of lobbying over the weekend, Senate Republicans’ legislation now calls for a $500 billion program that would award loans to states and cities as well as businesses, according to a copy of the most recent GOP proposal.

The provision has become one of the principal logjams in urgent congressional negotiations over emergency help for an American economy facing its worst calamity since the Great Recession, in part because the Treasury Department would have broad discretion over where the money would go. President Trump already has said he wants the money to be used to rescue the cruise ship and hotel industries, making his preferences clear, but at a press conference on Sunday refused to say whether his own hotel properties would apply for the funding.

No conflicts of interest or emoluments there.

“There’s too much money with no oversight,” Sen. Jon Tester (D-Mont.) told reporters Sunday.

Congressional Democrats have demanded the legislation include guardrails to prevent firms that receive the emergency aid from firing their workers or stripping them of their health care, among other asks by labor groups. They also are balking at giving Treasury Secretary Steven Mnuchin so much authority to determine which firms receive the assistance.

Section 4003 of the legislation accounts for $500 billion for “emergency relief and taxpayer protections.” Of that money, $50 billion would go to passenger airlines, $8 billion to cargo airlines, $17 billion for companies deemed important to national security, and $425 billion for businesses, cities and states. The bill doesn’t give much more information than that in terms of who would qualify for loans and loan guarantees, leaving much of it up to Mnuchin.

Congressional aides in both parties say they will not budge on the issue, although top party leaders huddled in emergency meetings Sunday to resolve this impasse and others, and talks remained fluid. Senate Majority Leader Mitch McConnell (R-Ky.) said the Senate would move to vote Monday on the legislation, calling it “pretty solidly bipartisan” despite Democratic anger over the bailout provisions and others.

I dunno Mitch, if you can’t get Tester who can you get? Manchin?

The heated fight over the emergency aid for large businesses revives the long-standing debate over the Wall Street bailouts during the 2008 financial crisis that reshaped American politics. Republicans are forging ahead with a plan they say is necessary to save large parts of the economy from collapse but has garnered fierce criticisms, including from within their own ranks.

When Congress created the $700 billion Troubled Asset Relief Program in 2008, they installed several levels of scrutiny to ensure the money wasn’t abused or misappropriated. For example, it created a group of regulators as well as a group of congressionally appointed experts to examine the funds. Lawmakers also created a special inspector general to investigate wrongdoing, and numerous instances of abuse eventually were uncovered.

“The arguments over attaching strings to government aid to business now reflect the persistent public backlash over the rescues and bailouts of the global financial crisis,” said David Wessel, a senior fellow at the Brookings Institution. “The underlying problem here is the lack of trust, both by the public and among some members of Congress in each other and in the administration.”

The Republican proposal would create limitations on the loans. It would prohibit companies receiving aid from issuing new stock buybacks as long as the loans remain in effect, a provision supported by both Democrats and President Trump. It would limit salary increases for employees who earn more than $425,000 annually for two years. The plan also says firms receiving the federal aid should maintain “existing employment levels as of March 13, 2020 to the extent practicable” before the loans have been paid back.

“Extent Practicable”? That sure didn’t work out for Bobbie Lee (the most overrated General ever) when he told Ewell that on Day 2 at Gettysburg.

Oh, and they lost. Get over it you Racists.

“We are not bailing out the airlines or other industries — period,” Sen. Richard C. Shelby (R-Ala.), chair of the appropriations committee, said in a statement last week. “We are allowing the Treasury Secretary to make or guarantee collateralized loans to industries whose operations the coronavirus outbreak has jeopardized. … This approach strikes an appropriate balance between providing assistance and protecting taxpayers.”

The Senate is advancing a separate, $350 billion measure for smaller firms hit hard by the coronavirus, while Republicans also have agreed to some Democratic demands to shore up safety net programs such as unemployment insurance.

Democratic lawmakers and labor groups say the GOP plan amounts to a “corporate bailout” that could reward business recklessness and hurt workers. Democratic leadership has demanded funding for corporations include protections related to workers, such as ensuring their job security and health care, pensions, and 401(k) contributions, as well as prohibitions on discharging their collective bargaining agreements.

Democratic lawmakers have pushed for forgiveness of the loans if more than 90 percent of company employees are retained. They want provisions mandating employee retention to have legal teeth, complaining the Senate GOP bill has too much wiggle room for companies to cut workers loose. The Treasury Department would have to publish the application criteria for firms within 10 days of passage of the law.

Critics also have expressed alarm over the transparency provisions in the GOP legislation.

Because there is none.

“There is great unhappiness with how they’re trying to advance a proposal that would be great for giant corporations but leave everyone else behind,” Sen. Elizabeth Warren (D-Mass.) told reporters Sunday. “We’re not here to create a slush fund for Donald Trump and his family, or a slush fund for the Treasury Department to be able to hand out to their friends.”

The bill also would require disclosure of the loan recipients within only six months of enactment. Trump administration officials have said they are interested in providing federal assistance to help the cruise, hospitality and oil and gas industries, among others severely hurt by the downturn since the beginning of the outbreak.

Here, let me fix that for you. Where you say “within only”? You mean only after.

Other experts downplayed the risk for malfeasance in a potential Treasury program. The Treasury Department has an inspector general who could probe the administration’s handling of the loans, and companies have a legitimate interest in keeping from their competitors immediate information on whether they have received the aid, said Tony Fratto, a former Treasury and White House official during the George W. Bush administration. Fratto also said there’s an important distinction between the Wall Street banks receiving bailout money after having a role in creating the economic crisis and businesses shuttered by the coronavirus through no fault of their own.

“All of this is going to be public; there is nothing to hide here, and no public interest served in reporting it immediately,” Fratto said. “We are not talking about companies that did something wrong. We are dealing with companies with orders to shut down their business.”

So, if there’s a public order for a company to suspend business, by definition known to everybody, exactly what “legitimate interest in keeping from their competitors immediate information on whether they have received the aid” does it serve?

They already know your doors are shut.

A final note on sheer idiocy. I hear some people are looking to close the Markets, there are many reasons this is a bad idea but one of the main ones is it doesn’t work.

Ever.

All you do is create pent up demand (in this case to Sell) that has to be resolved when you reopen.

If you think that is going to be pretty I think you are sadly mistaken.