By all accounts, Monday was one of the worst days ever seen in the stock market. CNBC’s “Mad Money” host Jim Cramer expounded at length about the calamitous sell-off in the markets and his views on how it happened–blaming both an oil price war and the spread of the coronavirus.
In summary, the Dow Jones plummeted more than 2000 points–7.79% on the day. The S&P 500 was down 7.6%. NASDAQ dropped 7.29%. The Russell 2000 cratered, losing 9.37%.
Many pointed at oil prices that crashed as much as 34% between Sunday and Monday before recovering to a “mere” 20% decline in later trading, due to a fast-escalating oil-price war between Saudi Arabia and Russia.
But clearly, oil was not the only thing on investors’ minds. The burgeoning global coronavirus spread is threatening to bring about a serious economic recession.
“It’s a day where you probably lost a lot of money. It’s probably what happened to you,” said Cramer, as he launched into his explanation of how the stunning day on Wall Street played out.
“That’s because, of course, the Dow plummeted 2,014 points, its worst point drop ever,” he said.
“So OK, it happened. Don’t like it. It happened. What the heck got us here? Where do we go next?” the investment guru continued. “First, today’s sellers fear we are going into a coronavirus-induced recession and they’re trying to get out of other people who want to sell, just trying to get ahead of them. Now that may sound fanciful given that we’ve had less than 600 cases in this country and only 22 deaths.”
Cramer went on to wonder about how the market may be overreacting to the situation.
“As the president tweeted earlier, ‘37,000 Americans died from the flu last year … yet, quote, nothing is shut down, life and the economy go on, end quote. But the markets were not reassured by that or anything else they heard today. Not the bond market, where treasuries spiked with their yields sinking to frightening record lows, not the stock market with its breathtaking breakdown. Not the oil market, that market down 24% and … that came out of nowhere.”
The host talked about the risks in the much lower oil prices. “So, who’s right the president or the markets?” Cramer asked. “Was Trump [right] telling us that this oil price war between Saudi Arabia and Russia will be good for the consumer because it means lower gasoline prices so we should be more bullish? Here’s the thing, cheaper oil would’ve been great for us a decade ago,” he pointed out.
“But these days,” he continued, “the United States is the world’s largest oil producer and an exporter. If prices stay down here, some of our producers will default on their debts, and end up laying off an awful lot of workers in the oil and gas companies in the service companies, and the pipeline companies. Therefore, oil price may actually be more a negative than positive and ripple right through the stock market and right down to the banks.”
Moving on to the coronavirus scare, Cramer said: “As for the number of people with COVID-19, sure, we’ve diagnosed less than 600 of them, but some of that is because we don’t have enough test kits. In some areas, they don’t want to test you until you are very sick, not just running a 100 degree fever, for example, very sick further along. I find that ridiculous.”
The host pointed out that the fear, confusion, and even cynicism on Main Street USA is not going away until there are firm facts and authoritative controls in place to throttle the spread of COVID-19. “Americans won’t take the positive aggregate number seriously until we get a better handle on this pandemic. Until then, they’re not going to feel confident about going out, or traveling, congregating anywhere,” he added before talking about the sinking travel industry.
“Who wants to take a vacation when you see all these people on Carnival cruise ships getting sick? … These ships made it crystal clear that it’s way too easy to catch the coronavirus, and the infected nursing home in Seattle proves that it’s way too easy to die from it if you’re elderly, if you’re sick ahead of time.”
Watch the snippet of Cramer’s take on the historically bad day for investments …
Video by CNBC
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