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Comment by jdminhbg | Hacker News Reader

> The stock market is largely collapsing because:

I'm gonna go with:

0) A pandemic has caused the government to shut down a double-digit percentage of the economy.

People are completely underestimating how much leverage and pumping there was on those companies, and how thats effecting us now. Companies dropping 75% because they might lose 3 months of revenue is not an expected outcome.

It really doesn't matter. If 20% of the economy is zeroed out because it's not safe under current conditions, the stock market will crash. Nothing you could have done beforehand, and no hobby-horse you've ridden for no matter how long, can fix that.

I disagree that nothing one could have done beforehand could fix that. The argument is not that there would not be a decline in share prices at all but the magnitude of it.

You need to have enough saved to survive 6 months w/o income is preached a lot in personal finance and somehow this is not practiced for businesses.It is understandable that cash-strapped startups can't afford to do this but the companies buying back shares to increase their stock price certainly could.

This is an article about small businesses, which make up the backbone of the economy. It makes 0 financial sense to save up 6 months of savings for any company, big or small. This is literally a once-a-century event.

Doesn't mean it will be a century until the next one. There are other reasons to require business to have emergency funds... Weather comes to mind

Massive publicly traded companies are not the companies that are collapsing. It's mostly small business that aren't publicly traded let alone doing buybacks.

But somehow, when all is said and done, companies like Boeing will not even face any consequence for their bad decisions.

When times are good, these companies divvy up the profits to give large bonuses.

When times are bad, they divvy up the bailout money to give smaller bonuses.

It certainly seems like there is no connection between compensation and performance once you are too big to fail.

And there is a very convenient "heads I win, tails you lose" structure in favor of the large companies.

Nope. It does matter. The credit markets which deal with corporate debt could fail as a result. This will drag down the rest of the economy. The main issue is most people dont understand the contagion and risks taken on by the practices I laid out in my main post.

The fed discount window is wide open for business. But seriously, aggressive monetary policy should keep the credit markets working even if mostly by adding to fed's balance sheet.

The collapsing started before the lockdown, and while the federal government was stating things were under control and this would never be necessary.

Uncertainty and desire to cash out alone was enough. The stock market is based on opinions and emotion.

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