The Federal Reserve Fails To Calm Markets (Radio Interview)

March 16, 2020

On the Trey Ware Show, Karl Eggerss discussed the big drop for the stock market to open the week. Plus, the Federal Reserve made a large announcement Sunday night, but it failed to calm investors.

Trey Ware:                         All right, 6:20 now at KTSA. Trey Ware, the very latest on corona, COVID-19 is the technical term for it, and we’ve had an issue that has come up overnight now as the fed has cut the interest rate to near zero trying to deal with the economic fallout from all of this now. And overnight, the numbers just went straight down. US stock futures dropped 5% last night, hitting the limit down levels, which means prices cannot trade any lower. And it opens up at 9:30 Eastern time, 8:30 our time this morning, the stock market does and doesn’t look like it’s going to be in a very good shape. So let’s see what’s going on. Karl Eggerss, creatingricherlives.com, joining me now on KTSA. Okay, Karl, take it away.

Karl Eggerss:                      Well, Trey, we can see that some of the exchange-traded funds are trading and they’re actually indicated to open down 10%, so it’s going to be very, very similar to last Thursday, at least at the open. And we really just need to see … A, we need to see if the markets are functioning properly, people can sell if they want or buy if they want. There’s talk about would they close the market, and most agree that they should not do that unless there was a health issue or the 9/11 situation was the last time we did that. So markets are probably not going to close. Right now, we had a supply shock the last few weeks and now we’re having a demand shock with stores voluntarily closing down. And so just very hard to predict what a company’s going to earn. Therefore, how do you value a company? And that’s really what’s leading to a lot of the selling and the panic right now.

Trey Ware:                         What about the floor of the New York Stock Exchange? You got a lot of guys down there. They’re certainly not doing the social distancing thing. So when you say they’re not going to close the market, would that force a close there?

Karl Eggerss:                      You know, fortunately, this is where technology is helping us, is that a lot of the trading is done electronically now. I think the Chicago Mercantile Exchange did shut down for a few days. And we’re seeing it with not only us ordering food, we’re seeing it with us ordering supplies online and working from home. Technology is making a huge difference right now. But in terms of the market, I don’t see them doing that right now. That may be an excuse they use at some point because they want to stop the bleeding. But markets do have to flush this out, unfortunately. And it’s a very sharp drop.

Karl Eggerss:                      And you can see what happened Friday too. You’re going to have sharp increases as well. And again, what we saw last night was the Federal Reserve cutting interest rates to zero trying to number one, make sure that the banks have enough money because people are obviously nervous, companies are tapping their credit lines. But it’s not exuding any confidence right now because cutting interest rates isn’t really maybe the fiscal stimulus that we need. Fiscal stimulus seems to be what the market really wants, which we may … There’s been talk about helicopter money, $3,000 per adult being given to every American. That is something that is being considered, from what I understand.

Trey Ware:                         Let’s talk a little bit about industry in and of itself. Because as they talk about these shutdowns and what have you, in a broad spectrum, let me just go through some of the headlines. United airlines are warning employees that the ripple effect the new coronavirus has had on the airline industry will only get worse for United Airlines, their CEO saying that revenue this March is expected to be about $1.5 billion lower. They are cutting their corporate officer’s salaries by 50%. Delta Airlines on Friday is cutting their passenger carrying capacity by 40%. that’s the most they have ever done in the history of Delta Airlines. Starbucks and many other restaurant chains across the country are going to drive through only at this point. And some of the restaurants too, like Chick-fil-A and Taco Bell are doing the same thing. Nike and Apple are closing all of their retail outlets in much of the world because of all this going on. So if people aren’t working, they’re not making money.

Karl Eggerss:                      Well, that’s right. And I think the airlines in particular, they’re being forced to not fly certain areas. And so that’s an area where there’s a lot of debate whether companies should get government bailouts. Of course, we saw that in ’08. That was a little different situation because a lot of these companies brought it on themselves. With the airlines in particular, I think they’re going to get some help. We may hear that today. And again, they probably should, given the fact that they’re being told, “You can’t fly here. You can’t fly there.”

Karl Eggerss:                      But you’re right. One real positive thing we’ve seen, Trey, is a lot of individuals, athletes stepping up, paying some of the arena workers and some of these executives at the airlines cutting their pay by 50%. This does bring the good out in people too. Just as we’ve seen some of the hoarding and the bad in people, the good part is that we see the kindness of people as well and starting to help their fellow man. I know people that have paid their housekeepers and said, “You know what? Don’t come over but I’m still going to pay you.”

Trey Ware:                         Yeah, yeah. There’s a certain amount of that going on. But as businesses continue to close or shut down certain operations, that means people aren’t getting paid. And if they’re not getting paid, they can’t spend the money. Or said better, they won’t spend money when they are not getting an income. And a lot of people are going to reel in their horns. So I think this is going to have a devastating effect on the economy for quite some time to come. And Karl, we’ll be talking about that more and more as time rolls forward. Thank you again for your time. Creatingricherlives.com is where you can find Karl Eggerss. Coming up at 6:35 we’re going to be visiting with HEB about the changes that they have made.