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Tuesday, March 10, 2020
Chan Kung on the Plunge in U.S. stocks
ANBOUND

Question: Is the plunge in U.S. stocks caused by oil prices or the epidemic?

Chan Kung: I would like to share a few observations:

1. The American capital market continues to fall, and now the talk shows on TV are in chaos. Regardless the guests are gentle professors or TV celebrities, now they have to find a way to justify themselves.

2. U.S. President Donald Trump is very anxious, but he still believes that it was mainly caused by the virus. He purposely asked Mike Pence to talk about the current situation and calm the market. The problem is that the Wall Street is not just reflecting the United States’ situation. Even if the United States is fine, what about situations in Europe, Italy, Japan and South Korea? That's where the problem lies.

3. 3. Big banks in the U.S. were doing very badly. Bank shares plunged on the market's view that they may be the hardest hit in the future.

4. We can’t pin hopes on the Fed. Powell's capabilities are nowhere near those of Ben Bernanke, Janet Yellen and Alan Greenspan. Although the Fed's policy tools are still available, their effectiveness is doubtful. Judging from the fact that the entire U.S. Treasury yield fell below 1% in a few days, the Fed's role is limited.

5. Covid-19 remains a major concern, but countries around the world have yet to find the key to a solution. Experts and scholars have not really experienced such serious disaster, and they haven't figured out the key points, so it was messy. Things continue to get worse, the market lost confidence, and that's one of the reasons why Wall Street crashed.

6. Several major nongovernmental funds, such as the Bill & Melinda Gates Foundation, soon became the main force in overcoming the epidemic. So, it is better to rely on the foundation than the government to overcome the epidemic.

7. The World Health Organization, which has finally made itself a joke, is still working on the concept of the epidemic. Now, no one in the western countries, especially in the capital markets, takes it seriously anymore.

8. The chaos in the oil market will continue, and the effects of introducing force majeure clauses will be widespread. The markets need to be restructured, especially the markets in previously suffered countries such as China.

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