My colleague speculates that some big player is liquidating. (Edit, lol useless answer sorry. Idk why they’re liquidating.)
The problem with this whole post is that it’s really based on returns created by stocks at a peak point that is an absolutely massive bubble.
Let’s revisit this conversation in six months. I suspect things will look pretty different then. A lot more equities will have gone to zero and returns over the last 20 years won’t look nearly so good.
The current prices have a self fulfilling prophecy aspect to them that makes it very hard to argue with people trying to take a macro view of things of something that is actually pretty mechanical IMO.
You’re definitely right today at 1:20PM on 4/20/2020. I strongly suspect that earnings for most industries are going to be hard to come by for quite a while and valuations are going to plummet. There’s just a huge amount of risk that physically can’t be baked into a yield of 5% when the risk free rate is 1.5%… and the tide has been lifting every boat in the ocean since the last big drop. We’re going to see who is essential and who isn’t over the next six months, and no matter who wins and who loses the index will contain a ton of losers.
“This time is different.”
Oil is always liquid 
5 Likes
Yeah exactly. It isn’t. Just because the fed has been able to keep pumping everything up to this point doesn’t mean that will always work. This house of cards will eventually fold up and the people who bet everything on it will be just as busto as the people who bet everything all the other times.
What happened today was anyone holding May delivery at COB has to actually take possession of the crude. The speculators must sell at literally any cost and the actual industrial customers don’t want it.
2 Likes
I missed screenshoting your worthless pony by 3 seconds.
1 Like
Old and busted: PEAK OIL
The new hotness: FREE OIL
6 Likes
Is -$40 a barrel bad? Asking for a friend.
Technically, it’s better than free, they’re paying you to take it
The wild part is anyone with actual storage could get paid $40 to take it, sell June delivery for 20 and arbitage $60 today.
There are 2 issues that are getting blended, so let’s try this a different way:
We’ll pretend there’s a single stock that represents the US market. That “stock” currently has a P/E ratio of X/Y.
There are two ways that this “stock” can be overvalued:
- Investors’ expectations of earnings (X) are too high.
- Investors are irrational in how they’re pricing those earnings (Y is too low).
My interpretation of this conversation is that it’s been entirely about whether Y is too low; that is, whether investors are willing to accept too low a price for bearing risk, conditional on an expected level of uncertain future cash flows.
But now you’re shifting to the second item, whether investors are correctly estimating future earnings/cash flows. I agree that it’s possible that investors are insufficiently estimating the drop in earnings that will likely occur. But that’s a separate matter.
Stock prices could fall over the next year for either reason:
- Investors downwardly their beliefs about future earnings
- Investors realize they actually need a higher return to bear risk
My view is that investors’ pricing of risk is fine, and that if there’s a large decline in stock prices, it will be due to a drop in expected future earnings. If there’s a drop in stock prices without a corresponding decrease in earnings expectations, my prediction will be wrong.
In general, I think it’s unhelpful to blend together the idea of irrational earnings expectations and inappropriate risk pricing.
I understand a lot of cruise ships and casinos are empty right now.
2 Likes
Ya but there is no physical storage left. Or you wouldn’t see something like this happen.
yeah so nothing of consequence is happening except some idiot commodity traders are losing their shits. Fuck em. Good.
Just spent 45 seconds looking for the video of Phillip Rivers screaming “THAT’S WHAT YOU GET!” at an injured Ravens defender and can’t find it.
1 Like
Funny how the assholes who supply my home heating oil haven’t rushed out to top me off today like they do every time oil spikes.
1 Like
Just flipped on CNBC for the lolz.
I mean I disagree that nothing of consequence is happening. This pretty definitively shows that there is no more storage capacity in the US. That matters because it means a lot of bankrupt oil companies inbound very shortly and that will have secondary ramifications for all of the banks who have exposure to these companies.
The bankrupting of oil companies is because of 20 dollar oil. Would more oil storage forestall bankruptcy for these companies? I don’t see how.