The “Unsinkable” Financial Markets Just Slammed Into A Massive “Iceberg” Called The Coronavirus

We just witnessed the third largest single day point drop in U.S. stock market history, and experts are warning that things will only get worse if this coronavirus pandemic continues to escalate.  On Monday, the Dow Jones Industrial Average was down a whopping 1,031 points, and it looks like there could be more volatility on Tuesday.  In fact, the Nikkei is already down 787 points as I write this article.  Of course this sudden decline is being mostly driven by fear of the coronavirus.  The rapid spread of the virus in South Korea, Italy and Iran over the weekend really rattled investors, and there was a rush to sell stocks when the markets opened on Monday morning.  And the worse this pandemic becomes, the lower stock prices are going to go.

You see, the truth is that stock prices are primarily based on what investors believe the future is going to look like.

For a long time, investors have assumed that the future would be exceedingly bright, and stock prices have steadily trended upwards.

But a coronavirus pandemic changes everything.  If worldwide economic activity comes to a standstill like we are already seeing happen in China, it is inevitable that there will be a very serious global economic downturn.

And this outbreak comes at a time when stock prices have been more overvalued than they have ever been before in American history.  Most stocks have been priced “beyond perfection”, and so it was just a matter of time before those prices started to fall.

As I have explained many times before, stock prices tend to fall much faster than they rise, and the rapid decline on Monday was quite breathtaking

The Dow Jones Industrial Average closed 1,031.61 points lower, or 3.56%, at 27,960.80. The S&P 500 slid 3.35% to 3,225.89 while the Nasdaq Composite closed 3.71% lower at 9,221.28. It was the Dow’s biggest point and percentage-point drop since February 2018. The Dow also gave up its gain for 2020 and is now down 2% for the year. The S&P 500 also had its worst day in two years and wiped out its year-to-date gain as well.

Tech stocks got hit particularly hard.

If you can believe it, the stocks of the big tech companies “lost more than $250 billion in value” on Monday…

Apple, Facebook, Amazon, Microsoft and Google-parent Alphabet collectively lost more than $250 billion in value as part of a broader market plunge. The tech companies make up nearly one-fifth of the value of the S&P 500, which itself is down more than 3.6%. Apple has the largest exposure to China, as it relies heavily on Chinese manufacturing plants for its top products and on Chinese consumers to buy iPhones.

And overall, global stocks lost more than a trillion dollars in value to start the week.

Of course stock prices were so ridiculously inflated that the markets can easily absorb what happened on Monday.

What really matters is what happens next.

If U.S. authorities can keep this virus from spreading widely here in the United States, the impact on our economy won’t be that dramatic.

But if there is a widespread outbreak, all bets are off.  More than a decade ago, the CBO conducted a study which examined this sort of a scenario, and what they discovered is definitely alarming

CBO did a study in 2005 and 2006, modeling the impact of a 1918-sized flu pandemic on the economy. They found that a pandemic “could produce a short-run impact on the worldwide economy similar in depth and duration to that of an average postwar recession in the United States.” Specifically, a severe pandemic could reduce U.S. gross domestic product by about 4.5%, followed by a sharp rebound.

The CBO assumed that 90 million people in the U.S. would get sick, and 2 million would die. There would also be demand-side effects, with an 80% decline in the arts and entertainment industries and a 67% decline in transportation. Retail and manufacturing would drop 10%.

Personally, I think that those numbers are probably too optimistic.

In China, people are deathly afraid to leave their homes right now, and that has caused economic activity to come to a crashing halt.

In fact, during the first portion of this month vehicle sales in China were down 92 percent

As The Epoch Times reported late last week, for example, sales of Chinese passenger vehicles has tanked a whopping 92 percent “on an annual basis the first 16 days of February,” according to the China Passenger Car Association.

Sales of passenger vehicles only amounted to 4,909 units during the first 16 days of the month, the organization reported, which fell from 59,930 vehicles sold over the same period a year ago. These are the first figures to demonstrate just how hard the Wuhan coronavirus is hitting the world’s largest auto market.

And at this point even Chinese President Xi Jinping is admitting that this outbreak will “have a relatively big impact on the economy and society”.

Up until now, the financial markets have been mostly overlooking the fact that the second biggest economy on the entire planet has been imploding because of this virus.

I think that many investors were assuming that this outbreak was just a temporary phenomenon, but now reality is starting to set in

“The second-largest economy in the world is completely shut down. People aren’t totally pricing that in,” said Larry Benedict, CEO of The Opportunistic Trader, adding a 10% to 15% correction in stocks may be starting. He also said some parts of the market, particularly large-cap tech stocks, appear to be over-owned. “It seems like there’s much more to come.”

Hopefully U.S. stocks will bounce back on Tuesday.  Following a decline of the magnitude that we just witnessed, that is often what happens.

And President Trump is certainly doing his best to keep everyone feeling optimistic.  The following is what he tweeted on Monday

The Coronavirus is very much under control in the USA. We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me!

Hopefully President Trump is correct.

And hopefully he is also correct when he claims that this pandemic will start to subside once warmer weather arrives.

But so far this mysterious new coronavirus is winning the battle, and investors all over the globe are really starting to freak out.

About the Author: I am a voice crying out for change in a society that generally seems content to stay asleep. My name is Michael Snyder and I am the publisher of The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I have written four books that are available on Amazon.com including The Beginning Of The End, Get Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned) By purchasing those books you help to support my work. I always freely and happily allow others to republish my articles on their own websites, but due to government regulations I need those that republish my articles to include this “About the Author” section with each article. In order to comply with those government regulations, I need to tell you that the controversial opinions in this article are mine alone and do not necessarily reflect the views of the websites where my work is republished. This article may contain opinions on political matters, but it is not intended to promote the candidacy of any particular political candidate. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions. Those responding to this article by making comments are solely responsible for their viewpoints, and those viewpoints do not necessarily represent the viewpoints of Michael Snyder or the operators of the websites where my work is republished. I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is a great help.

This Coronavirus Outbreak Just Took Some Bizarre New Turns

Many were hoping that this coronavirus outbreak would begin to subside, but instead we witnessed an explosion of newly confirmed cases over the weekend.  In fact, the number of confirmed cases outside of China has doubled over the past five days.  If that number continues to double very rapidly, authorities will be talking about a full-blown “global pandemic” in no time.  When I watched a victim suddenly collapse and start to twitch on a subway in Hong Kong, I thought about the sort of panic that would set off if that happened in New York.  When I saw a video of Chinese authorities using butterfly nets to capture sick people, it made me wonder what U.S. authorities might do to round up those that are ill.  The level of fear that a full-blown pandemic would cause would transform our society overnight.  Even now, Chinese restaurants in Canada are completely empty due to concerns about catching this virus.  But once this virus is being spread in virtually every city in North America, many of us won’t want to go anywhere at all, and that would bring economic activity to a complete and utter standstill.

For a while, it seemed like this outbreak was almost entirely a Chinese problem, and most Americans were not too alarmed about it.  But over the weekend the rapid spread of the virus in South Korea, Italy and Iran spooked financial markets and mainstream news outlets in the U.S. started publishing stories about this outbreak with very alarming headlines.

And those alarming headlines are justified, because experts are telling us that we could very well be on the verge of a horrifying global pandemic

“We are at a turning point in the Covid-19 epidemic,” said Lawrence Gostin, a global health law professor at Georgetown University. “We must prepare for the foreseeable possibility, even probability, that Covid-19 may soon become a pandemic affecting countries on virtually all continents.”

Once this virus starts to spread in a community, the number of cases can explode within hours.  For example, the number of confirmed cases in South Korea went from 30 to 602 in just 96 hours

Confirmed infections in South Korea have exploded over the last 96 hours from just 30 cases to 602 confirmed cases. Local residents there are scrambling to purchase preparedness supplies, stripping shelves bare and leading to a sense of urgency. Some cities in South Korea have already taken on a “ghost town” vibe, with streets emptied and nearly all community functions shut down.

And as I write this article, the number of confirmed cases in South Korea has now shot up to 763.  By the time you read this article, it will probably be even higher.

In Italy, the number of confirmed cases went from 3 to more than 150 in just a couple of days

In Italy, officials said a third person infected with the flu-like virus had died, while the number of cases jumped to above 150 from just three before Friday.

Authorities sealed off the worst affected towns and banned public gatherings in much of the north, including halting the carnival in Venice, where there were two cases, to try to contain the biggest outbreak in Europe.

Alarmingly, Italian officials can’t even figure out how the virus got to Italy in the first place, and then have now placed “almost a dozen towns” under quarantine…

Italian health authorities were struggling to find out how the virus started. “If we cannot find ‘patient zero’ then it means the virus is even more ubiquitous than we thought,” said Luca Zaia, the regional governor of the wealthy Veneto region.

Almost a dozen towns in Lombardy and Veneto with a combined population of some 50,000 have effectively been placed under quarantine.

This morning I went to take a look at the Serie A results from over the weekend, and I was particularly interested in seeing how Atalanta had done after their stirring Champions League victory last week.  Unfortunately, their game was among three matches that were called off due to the virus

On orders from the government, the Italian league games that were set to be played today – Inter Milan v Sampdoria, Atalanta v Sassuolo and Hellas Verona v Cagliari – were called off.

However three other matches in Genoa, Turin and Rome on Sunday were allowed to go ahead as scheduled with many fans wearing facemasks while sitting in the stands.

This is basically the equivalent of cancelling NFL games in the United States.  It is something that simply does not happen under normal circumstances.

But these are not normal times.

There has also been an eruption of cases in Iran, and five of their confirmed cases have already died

As of Sunday, Iran reported 28 cases, including 5 deathsdays after authorities there said they had no Covid-19 within their borders. Cases with links to Iran have already turned up in Canada and Lebanon.

Very quickly, the country’s narrative about the virus has changed. Schools and universities across the country are being shuttered as a “preventive measure,” along with some cinemas and restaurants, according to Al Jazeera.

So now we can’t just try to isolate ourselves from China and assume that everything is going to be okay.

This virus has already spread all over the world, and that means that it could come into the United States from almost any direction.

Of course China continues to be the epicenter of this outbreak.  According to Epoch Times reporter Jennifer Zeng, there are tens of thousands of people in the hospitals in Wuhan, and crematoriums continue to burn bodies 24 hours a day…

50-60 K people in hospitals in #Wuhan, out of 18 cremators at a crematorium, 3 were burned out due to overuse. Other 15 in operation 24/7. Many families died out.

Here in the United States, we only have 35 confirmed cases so far, and many have been wondering why that number has stayed so low.

Well, perhaps it is because the CDC has only tested 414 people so far…

Given the tens of thousands of Chinese nationals entering the United States of America every month, the thousands of Chinese students and the many thousands of residents who are under “observation” by state health authorities in places like Washington and California, a reasonable person might expect that the CDC has so far tested at least 10,000 people for the CoVid-19 coronavirus. But guess how many the CDC has actually tested?

To the great shock of anyone paying attention, the CDC’s own website admits the agency has tested only 414 people in the entire country.

As I discussed the other day, there are thousands upon thousands of people currently under “self-quarantine” in the United States.

Why have the vast majority of them not been tested?

And it looks like the quarantine period being used in the U.S. and in much of the rest of the world may be way too short.

In fact, Chinese officials are telling us that one Chinese man “took 27 days to show coronavirus symptoms”

A Chinese pensioner who took 27 days to show coronavirus symptoms has sparked fears that a 14-day quarantine is two weeks too short.

The 70-year-old man was infected with the killer virus in China’s Hubei Province and showed symptoms nearly four weeks later, the local government said on Saturday.

So we may be releasing countless numbers of potentially sick people back into the general population way too early.

This is a nightmare that is getting worse with each passing day, and if this turns into a true global pandemic the impact on the global economy is going to be off the charts.

We can get an idea of where things could be heading by taking a look at what is already happening inside China.  Small businesses all over the nation are rapidly running out of cash, and in just a matter of weeks virtually all of them will be out of cash.  The following comes from Zero Hedge

Let’s start with Chinese businesses: while China’s giant state-owned SOEs will likely have enough of a liquidity lifeblood to last them for 2-3 quarters, it is the country’s small businesses that are facing a head on collision with an iceberg, because according to the Nikkei, over 85% of small businesses – which employ 80% of China’s population – expect to run out of cash within three months, and a third expect the cash to be all gone within a month.

Should this happen, not only will China’s economy collapse, but China’s $40 trillion financial system will disintegrate, as it is suddenly flooded with trillions in bad loans.

Now try to imagine what that might look like on a global scale.

We have never dealt with something like this in the post-World War II era, and there is still so much about this virus that is not known.

Personally, I am still hoping that this outbreak will start to fizzle out once warmer weather arrives.  But so far nothing seems to be able to slow this virus down, and it appears that a “tipping point” has now arrived.

About the Author: I am a voice crying out for change in a society that generally seems content to stay asleep. My name is Michael Snyder and I am the publisher of The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I have written four books that are available on Amazon.com including The Beginning Of The End, Get Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned) By purchasing those books you help to support my work. I always freely and happily allow others to republish my articles on their own websites, but due to government regulations I need those that republish my articles to include this “About the Author” section with each article. In order to comply with those government regulations, I need to tell you that the controversial opinions in this article are mine alone and do not necessarily reflect the views of the websites where my work is republished. This article may contain opinions on political matters, but it is not intended to promote the candidacy of any particular political candidate. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions. Those responding to this article by making comments are solely responsible for their viewpoints, and those viewpoints do not necessarily represent the viewpoints of Michael Snyder or the operators of the websites where my work is republished. I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is a great help.

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