FED to inject 1.5 Trillion

[Running_Man]

In a market full of historic actions the Federal Reserve today announced they are injecting 1.5 trillion into their operations by the end of the day tomorrow. In addition they are now going to switch the 60 billion per month or treasury buying from short term to long term across the spectrum of treasury offerings.

This will take the FED balance sheet to 5.5 trillion and be about 30% of GDP. They also stated they will do as much as needed to maintain effective operation of the financial system.

While these are called "temporary" I think it can be seen from the original Temporary TARP program of 700 billion, that this is a permanent increase in the FED balance sheet. In 1981 the entire US debt was 31% of GDP. Now the Federal Reserve holds that much to all financial markets to "operate effectively"

This is the FED telling everyone that there are serious financial issues with the recent virus and please don't sell your index funds, we'll keep everything going for you. I am still not buying yet................

 

[kgtest]

I am still not buying yet................

tracking. I dipped my toes in, but your signal calling has been way more accurate. Where is the bottom Sir Running_Man?

 

[Fermion]

At the end of the day though you won't be able to fight the fed. There is not really a limit on what they can do. If it is a question of saving the nation, they could inject 15 trillion if it needed to be done.

 

[neihn]

tracking. I dipped my toes in, but your signal calling has been way more accurate. Where is the bottom Sir Running_Man?

+1

 

[cbo111]

The DOW responds with "meh."

 

[Running_Man]

tracking. I dipped my toes in, but your signal calling has been way more accurate. Where is the bottom Sir Running_Man?

For me I am waiting for one year minimum to give time for all the implications happening to show themselves. Beyond that however if the S&P500 were to fall to 1300 about 60% off the high then I would begin buying. If the market were to hit 3100 on the S&P500 which is where I got out, then I know I was wrong about this whole thing and then just get back in and be no worse for wear but having missed my buying opportunity. I think that is extremely unlikely though, I think 1300 is as least 3X more likely to be hit than 3100 myself. And the FED injecting so much money only makes me realize the problem is every bit as historic as I think it may be or else the FED would not be taking historic actions

 

[HF63]

At the end of the day though you won't be able to fight the fed. There is not really a limit on what they can do. If it is a question of saving the nation, they could inject 15 trillion if it needed to be done.

This might some what help in some parts of the market but does little in
fighting the real problem, the virus.
The social structure is in trouble if we do not come up with a way to fight this virus.

 

[Fermion]

This might some what help in some parts of the market but does little in
fighting the real problem, the virus.
The social structure is in trouble if we do not come up with a way to fight this virus.

We need to put $500 billion right now into building temporary hospitals and ramping up production of masks and respirators. We did it in WWII, going from a nothing burger to a major force VERY rapidly.

First we have to get rid of red tape and laws. There is no reason a drug needs to take 18 months before it can be released during a nation emergency, even if there are moderate side effects.

 

[Lakewood90712]

The pandemic is only the straws breaking the camels back of a weak economy. Weak businesses need to be allowd to fail. A strong system would emerge, if allowd to. Look at the last boom 03 - 08 fueled by cheap money , then a long ressesion , with massive gov . debt after, then" rinse and repeat "

 

[Fermion]

The weak businesses were already doing a fine job of failing. Ford, Sears, energy companies were all falling before this virus.

 

[Lakewood90712]

We need to put $500 billion right now into building temporary hospitals and ramping up production of masks and respirators. We did it in WWII, going from a nothing burger to a major force VERY rapidly.

First we have to get rid of red tape and laws. There is no reason a drug needs to take 18 months before it can be released during a nation emergency, even if there are moderate side effects.

On the immediate urgent infastructure and supply issues, the Army corp. of engineers and USN seabees can move quickly, using local contractors, when funded and directed to proceed, hope it happens.

 

[Running_Man]

The weak businesses were already doing a fine job of failing. Ford, Sears, energy companies were all falling before this virus.

I think that is his point, through easy debt companies allowed to limp along. A record 37% of companies listed on US stock exchanges have net negative earnings over the 3 years ending 12/31/2019 borrowing at 2-3 % keeps them alive.

 

[ivinsfan]

We need to put $500 billion right now into building temporary hospitals and ramping up production of masks and respirators. We did it in WWII, going from a nothing burger to a major force VERY rapidly.

First we have to get rid of red tape and laws. There is no reason a drug needs to take 18 months before it can be released during a nation emergency, even if there are moderate side effects.

Man that's a lot of money..what made you come up with this number...so when you get all these hospitals how will you staff them.

 

[Fermion]

Man that's a lot of money..what made you come up with this number...so when you get all these hospitals how will you staff them.

Half a trillion is a lot? Hasn't the market lost something like 10 trillion in value over the past few weeks?

I would use the army reserves and start training programs asap for some of the less demanding staffing tasks. Obviously you can't train doctors in a few months, but you can train people to check on bedpans.

 

[Clone]

We need to put $500 billion right now into building temporary hospitals

You already have the facilities at least 90% ready- College Dorms. They have their fingers on the red button to send all the students home.

What is more of a challenge is the equipment and the staff.

 

[Aerides]

You already have the facilities at least 90% ready- College Dorms. They have their fingers on the red button to send all the students home.

What is more of a challenge is the equipment and the staff.

Before dorms, there are many non-emergency outpatient facilities (and staff) that could be modified and re-purposed a lot more quickly. I mean, who wants to go into hospital for electives and non-mandatory procedures right now anyway...

 

[Fermion]

I guess I am saying that we have the chance right now in the USA to prevent a hospital crisis by rapidly opening some emergency hospitals in several areas in each state. A good chunk of money would do it. Staff with military reserves and also do some rapid training for menial tasks.

Seems a lot better than just helicopter dumping money over the market.

 

[Spock]

Sebelius was on the tube suggesting that retired Drs and Nurses should be "invited" back to work. NY is "
...further measures that would require hospitals to cancel all elective surgeries to free up hospital beds, Cuomo said. The state Department of Health also is asking retired healthcare professionals to contact former employers to be part of a reserve staffing capacity if need be. Medical schools are also being tapped for resources. Certifications could be accelerated for this preparation.

Meanwhile some in the healthcare profession have stated they will quit before they pull shifts related to the epidemic.

 

[Freedom56]

A more useful measure would be to tell everyone to get enough food for a month and stay at home and avoid contact with others for the next three weeks except for emergency personnel and issue curfew. That would help stop the spread allow the virus to die out.

 

[RenoJay]

For me I am waiting for one year minimum to give time for all the implications happening to show themselves. Beyond that however if the S&P500 were to fall to 1300 about 60% off the high then I would begin buying. If the market were to hit 3100 on the S&P500 which is where I got out, then I know I was wrong about this whole thing and then just get back in and be no worse for wear but having missed my buying opportunity. I think that is extremely unlikely though, I think 1300 is as least 3X more likely to be hit than 3100 myself. And the FED injecting so much money only makes me realize the problem is every bit as historic as I think it may be or else the FED would not be taking historic actions

This more of less summarizes how I feel. And congrats at getting out at S&P 3,100. One day your grandkids will thank you for the family fortune!

 

[ivinsfan]

Half a trillion is a lot? Hasn't the market lost something like 10 trillion in value over the past few weeks?

I would use the army reserves and start training programs asap for some of the less demanding staffing tasks. Obviously you can't train doctors in a few months, but you can train people to check on bedpans.

It's a slippery slope pull together reserves from different areas and you might start spreading the virus rapidly. Same for groups of people pulled together for training. My DH says he spent almost his entire basic training sick as a dog. In fact he said everyone got sick and it just spread back and forth from one guy to another.

People on bedpans would most likely be better off at home and not taking up a bed.

And yes even a half trillion is a bunch of money...In NY they are using NG to provide groceries and essentials to people in the locked down quarantine area that makes sense too.

 

[Running_Man]

Fed in another panic move now is also going to immediately purchase 750 billion in bonds and lower the discount rate by 1 percent. There is no historical comparison for what the Federal Reserve is doing. Would seem likely QE will end up being in the 8 trillion to 10 trillion in holdings as government deficit grows to unfathomable amounts.

 

[Markola]

Optimistically, they are showing bold action to maintain confidence. Pessimistically, they have the most comprehensive economic data available and are rushing to get ahead of something big that they see and we don’t.

 

[Running_Man]

I believe they are moving in advance of a lockdown of the US. Want this announced before that comes out, which must be why it couldn't wait until Tuesday

 

[tulak]

What else can they do?

I wonder how this will play out. A period deflation, followed by inflation after things get back to normal?

I started looking at the BLS data to see if I could get a better idea of the labor force and how many will be affected, but that quickly became too much work and I don’t have time right now.

But I did find that the labor market in 2017 had 58.3% hourly workers. Assuming we can get through this without massive layoffs of salaried employees and half (maybe more?) of hourly workers maintain employment, we still have 70% of the labor market unaffected.

Lots of holes in this number. It’d be interesting to know how many of these are directly affected, such as hospitality/travel workers.