[largolagrande]

Doesn't this crash highlight a fundamental problem with stock markets ?

NASDAQ: -25% in one month. CAC40 (french stock market index) : -33% over the same period.

These stock markets collapsing is just stupid, it just shows that it's pure speculation...

The world economy takes a break during let's say 2 months (everything will resume as before afterwards) and hundreds of billions of euros/dollars disappear.

In fact, the question is: If everyone stops working because of the covid19, if the whole economy is paused (which is basically what is happening) why doesn't the stock exchange do not simply stop too? When a company presents quaterly financial results, it's over a period of _activity_. But then at the moment it's a period of total inactivity... ?!

[edanm]

I believe you're fundamentally misunderstanding what the stock market is and does.

At its base, the stock market is just "you" owning a company. The economy isn't paused for two weeks - many companies will have to continue paying people money, paying their suppliers, paying rent on their offices, etc.

Let's say you own a company that usually has say 100k in earnings and 90k in spending, making you 10k profit every month. That company now has, because of the virus, say 50k in earnings instead, and 80k in spending (it reduces some salaries where it can, but still has to keep the offices around etc.) That company is now going to be losing money for a few months.

Now you own a chunk of this company. Yesterday you assumed it was worth 10 million dollars. Today, do you agree that it's worth less? After all, it's going to be losing money for a few months at least.

Notice that it's only worth less on paper - if you don't sell your ownership stake, then you haven't really seen a loss.

But a lot of people are selling their ownership stake. And that makes sense! If you're 60 years old and need cash right now, and you own a company that, instead of earning 10k a month, will now be losing 40k a month, you might want to sell your share to not lose money, because you need cash. Maybe some other investor that can stomach losing a few months' of profit can take it off your hands.

[berryjerry]

This is exactly the opposite of speculation causing the crisis. If everyone stops working things stop getting produced and thus companies don't have any value to own. Problem is, people and companies still need necessities like food, water, power, rent, or loans. Some things may be able to be delayed but necessities can't. Now this causes a recession because even if the government printed money people still don't want to spend it on most ofthe companies that make up the stock market. If the stock market was made up of all farmers and hand sanitizer companies then the stock market would go up but it isn't.

[Balgair]

The markets are assumed to be trying to factor in the losses that they think these companies will suffer in the long term. There is real damage occurring in real time. Everything is still in flux, which is why it is ringing around trying to find a position. Calling off the markets may not be outside of our future yet, but it is not likely at this point. People want to get out of companies they think are going under and put their money in other areas like bonds or mattresses. This should be considered rational.