global markets shudder as COVID-19 adds to oil price war between Russia and Saudi Arabia

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Trump’s incompetence is making the COVID19 response worse with some lack of confidence in financial demand. Recession looms. Invest in Chicken Nuggets.

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— Derek Wallbank (@dwallbank) March 9, 2020

  • Folks are very used to dealing with liquidity issues, or supply issues. This isn't that.
  • This is a crash in *demand* 
  • Usual tools for dealing with supply side crashes, or liquidity crashes, are somewhat obvious. If liquidity, inject more. If supply, inject more.
  • You can't *inject demand* in the same ways. This should be obvious, but let me give you an example: 
  • Suppose you sell private jets, and you want to sell that jet to me. Well, I don't want a private jet. I'm not a pilot, I don't have time, I certainly don't have the money, and where would I put the damn thing?
  • So you cut costs. I still don't want it. I wouldn't if it was free. 
  • Literally, there is no conceivable way you could sell me a private jet right now, at any price, unless I could somehow make money by reselling it. I ain't gonna buy one.
  • That's a demand problem. There is no demand (from me) and thus you (the jet co.) can't sell me one. 
  • Now imagine you're selling something a lot of folks use — airline tickets — and no one buys. Cut prices? Sure. Free bags? Lounge access? Maybe upgrade to more legroom seats? Sure, why not.
  • But what if the issue isn't cost? What if it's that people don't want to fly *at all*? 
  • That's the difference between normal crashes and *demand crashes*.
  • Your supply-side solutions don't solve demand problems. Not if demand is zero. 

And yet those Trumpublicans want more tax cuts now.

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— Reuters (@Reuters) March 9, 2020



TOKYO (Reuters) – Oil fell by the most since 1991 on Monday after Saudi Arabia started a price war with Russia by slashing its selling prices and pledging to unleash its pent-up supply onto a market reeling from falling demand because of the coronavirus outbreak.

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Brent crude futures fell by as much as $14.25, or 31.5%, to $31.02 a barrel. That was the biggest percentage drop since Jan. 17, 1991, at the start of the first Gulf War and the lowest since Feb. 12, 2016. It was trading at $35.75 at 0114 GMT.

U.S. West Texas Intermediate (WTI) crude fell by as much as $11.28, or 27.4%, to $30 a barrel. That was also the biggest percentage drop since the first Gulf War in January 1991 and the lowest since Feb. 22, 2016. It was trading at $32.61.

Saudi Arabia, the world’s biggest oil exporter, is attempting to punish Russia, the world’s second-largest producer, for balking on Friday at production cuts proposed by the Organization of the Petroleum Exporting Countries (OPEC).

in.reuters.com/…

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— Jennifer Taub (@jentaub) March 9, 2020

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— Coronavirus (COVID-19) Alerts (@coronaviruscare) March 9, 2020

Amid the market chaos in Tokyo on Monday, there was just one Nikkei 225 stock that eked out a gain: maker of frozen chicken nuggets and fried rice Nichirei Corp.

Nichirei rose as much as 3.5%, the only stock in the Nikkei 225 that was in positive territory as of 10:18 a.m. local time, with the broader index plunging 4.5%. Frozen foods are one of the few sectors in Japan to benefit from the coronavirus outbreak, as parents struggle to keep children fed with schools across the country ordered shut in an attempt to prevent the spread of the outbreak.

www.bloomberg.com/…