23 votes

Oil prices just fell 31% (and counting) with single biggest drop since Gulf War

How are we feeling about all this? There is going to be anxiety over the next few days (weeks..months....years?) so let's talk about it.

10yr Treasury Bonds are at their lowest ever, futures market are down ~10%, and cryptocurrencies have lost billions.

How are you feeling?

37 comments

  1. [7]
    skybrian
    Link
    Nobody knows the future, but it reminds me of 2008. I don't normally time the market, but I made a couple good buys then, and somewhat regret chickening out about buying Ford at $2. (It seemed...

    Nobody knows the future, but it reminds me of 2008. I don't normally time the market, but I made a couple good buys then, and somewhat regret chickening out about buying Ford at $2. (It seemed extremely cheap, but I talked myself out of it by saying, "What do I really know about the automobile industry anyway?")

    I don't have as much money invested in index funds as I probably should. But I will wait some more for the sale to get going. The trick is not missing out on the recovery.

    But maybe it will be different this time?

    10 votes
    1. [5]
      grahamiam
      Link Parent
      While buying during this downturn will probably do well in the future, historical analysis shows that if you had invested that money as early as possible, you'd do better. The maxim time in the...

      While buying during this downturn will probably do well in the future, historical analysis shows that if you had invested that money as early as possible, you'd do better.

      The maxim time in the market > timing the market holds true pretty well.

      More info : https://www.reddit.com/r/financialindependence/comments/ff6dah/dollar_cost_averaging_vs_10_drop_eg_coronaviral/

      9 votes
      1. skybrian
        Link Parent
        Yep, I agree with the conventional wisdom, and I've had lots of time in the market. But I also procrastinated after doing a same-day sale with some expiring employee stock options, and here we...

        Yep, I agree with the conventional wisdom, and I've had lots of time in the market. But I also procrastinated after doing a same-day sale with some expiring employee stock options, and here we are.

        One way to look at is that on Friday, we were at last October's price. All the prices before that were better for buying. This may be a chance to make up for a previous mistake, not getting in then.

        4 votes
      2. [3]
        VoidOutput
        Link Parent
        I understand that I'm the exception to the rule here, but anecdotally, the earliest I could have invested heavily was back in October last year. Had I done that I'd already be down and who knows...

        I understand that I'm the exception to the rule here, but anecdotally, the earliest I could have invested heavily was back in October last year. Had I done that I'd already be down and who knows when the slide will stop now.

        1 vote
        1. [2]
          stu2b50
          Link Parent
          You're not the exception to the rule. That's just not nearly long enough of a time frame.

          You're not the exception to the rule. That's just not nearly long enough of a time frame.

          11 votes
          1. VoidOutput
            Link Parent
            I was about to be skeptical but when doing a simulation using the 2008 financial crisis and using a best case timing (somehow knowing when the worst was behind us) you absolutely do not see a...

            I was about to be skeptical but when doing a simulation using the 2008 financial crisis and using a best case timing (somehow knowing when the worst was behind us) you absolutely do not see a difference using DCA.

            2 votes
    2. bleem
      Link Parent
      this reminds me right after 9/11. things were very chaotic. i was just about to graduate high school but still remember the pandemonium

      this reminds me right after 9/11. things were very chaotic. i was just about to graduate high school but still remember the pandemonium

      1 vote
  2. [12]
    Algernon_Asimov
    Link
    I'm happy that petrol costs less! I don't care about cryptocurrencies. I care that bank interest rates are too low. I care that the stock market is falling: my superannuation funds are mostly...

    I'm happy that petrol costs less!

    I don't care about cryptocurrencies.

    I care that bank interest rates are too low.

    I care that the stock market is falling: my superannuation funds are mostly invested in the stock market. However, I'm aware that I don't retire for many years, so there's plenty of time for the market to bounce back (as it has done many times before), and take my superannuation up with it.

    My job is fairly secure. I'm not expecting to end up unemployed. I know the financial circumstances of my employer, and they can ride this out. (Also, I'm their cheapest employee - sacking me isn't going to cut expenditure very much.)

    There's going to be a lot of financial disruptions around me, but I think it'll mostly pass me by.

    I'm more worried about my body getting sick than my finances getting sick. I'm much more worried about empty shelves in the supermarket. What's the point of having money if I can't use it to buy necessities like toilet paper?

    7 votes
    1. [2]
      skybrian
      Link Parent
      Low gas prices are popular but they're bad for efforts to stop global warming. It would be a good time to start a carbon tax and have the windfall go to the government while keeping retail prices...

      Low gas prices are popular but they're bad for efforts to stop global warming. It would be a good time to start a carbon tax and have the windfall go to the government while keeping retail prices about where they were.

      14 votes
      1. Algernon_Asimov
        Link Parent
        That's good thinking. It'll never happen here in Australia under our current government, but it's a good idea.

        That's good thinking. It'll never happen here in Australia under our current government, but it's a good idea.

        4 votes
    2. [3]
      ThatFanficGuy
      Link Parent
      If things continue in the same fashion, you may be better off investing all that cash in basic materials and some books on crafting. :P

      What's the point of having money if I can't use it to buy necessities like toilet paper?

      If things continue in the same fashion, you may be better off investing all that cash in basic materials and some books on crafting. :P

      1 vote
      1. [2]
        Algernon_Asimov
        Link Parent
        I'm not sure I want to start hand-crafting my own toilet paper!

        I'm not sure I want to start hand-crafting my own toilet paper!

        6 votes
        1. ThatFanficGuy
          Link Parent
          If shit really does hit the fan, might as well prepare your own toilet paper.

          If shit really does hit the fan, might as well prepare your own toilet paper.

          2 votes
    3. [6]
      Contentus
      Link Parent
      Why do you care if bank interest rates are low? I'm going to guess that its because you make less on bank deposits. The thing is, banks deposits are probably never profitable when inflation is...

      Why do you care if bank interest rates are low?

      I'm going to guess that its because you make less on bank deposits. The thing is, banks deposits are probably never profitable when inflation is taken into consideration.

      1 vote
      1. joplin
        Link Parent
        I care because I might be able to refinance my mortgage at a lower rate and save myself a few hundred dollars a month!

        I care because I might be able to refinance my mortgage at a lower rate and save myself a few hundred dollars a month!

        4 votes
      2. [4]
        Algernon_Asimov
        Link Parent
        I don't have much savings or investments in the bank. I'm not so rich that I have thousands of dollars sitting in bank accounts. I'm worried about the threat of possible negative interest rates in...

        Why do you care if bank interest rates are low?

        I don't have much savings or investments in the bank. I'm not so rich that I have thousands of dollars sitting in bank accounts.

        I'm worried about the threat of possible negative interest rates in the future. It's happening in other countries, and might possibly happen here (our cash rate is down to 0.5%).

        That means my money will decrease in value if I leave it in the bank. That changes things. All my finances are arranged automatically through my bank: my salary gets deposited into my bank account and my bills get paid out of my bank account. Those arrangements currently don't cost me anything. If & when interest rates turn negative, I'll have to start doing a lot of manual work to juggle my incoming and outgoing money while minimising my losses.

        3 votes
        1. [3]
          Contentus
          Link Parent
          Your money is probably already decreasing in value if deposit interest rate < inflation, which I think is the norm. Why would a bank offer you a risk-free investment that pays more than inflation?...

          Your money is probably already decreasing in value if deposit interest rate < inflation, which I think is the norm.

          Why would a bank offer you a risk-free investment that pays more than inflation? Yes in the EU and I think USA, there is no risk in a deposit because it is covered by insurance.

          1 vote
          1. [2]
            Algernon_Asimov
            Link Parent
            Like I said, I don't have enough money that this decrease in value is significant for me. At most, this decrease might be worth about $10 per year for me.

            Like I said, I don't have enough money that this decrease in value is significant for me. At most, this decrease might be worth about $10 per year for me.

            1 vote
            1. Contentus
              Link Parent
              I understood that. I was just pointing out that people forget inflation.

              I understood that. I was just pointing out that people forget inflation.

  3. [3]
    Loire
    (edited )
    Link
    From inside the oilfield the rank and file are fairly freaked out. This means layoffs, likely in the thousands. We havent seen 27$ oil since.... 2008? But that's exactly what Russia is aiming for....

    From inside the oilfield the rank and file are fairly freaked out. This means layoffs, likely in the thousands. We havent seen 27$ oil since.... 2008?

    But that's exactly what Russia is aiming for. The shale game has ruined their dominance in gas and they see this as an opportunity to destroy a bunch of American shale operators. It didn't work for Saudi in 2016, lets see how it goes this time.

    Personally I am liquid into 6 digits so as long as I don't get layed off this will be my first chance to foray into investment.

    With that said the dynamics of this downturn are worse for oil than 2014, so I'm not going to place any bets on keeping my job.

    7 votes
    1. [2]
      JakeTheDog
      Link Parent
      What are your predictions for how the Alberta UCP government is going to deal with this? Aren't they doubling down on the oil and gas industry and betting on solid prices to make up the budget?...

      What are your predictions for how the Alberta UCP government is going to deal with this? Aren't they doubling down on the oil and gas industry and betting on solid prices to make up the budget? (IIRC you work in Alberta) Not that I expect the electorate to really lose support of them.

      1 vote
      1. Loire
        Link Parent
        I'm Albertan but I work in Texas. The budget will collapse. There will be more cuts. Hopefully they see the folly of the corporate tax cut and toll it back. The deficit will explode. Albertans...

        I'm Albertan but I work in Texas.

        The budget will collapse. There will be more cuts. Hopefully they see the folly of the corporate tax cut and toll it back. The deficit will explode. Albertans will go out of their way to blame it on uncontrollable global pressures while forgetting they blamed the last deficit on the NDP.

        3 votes
  4. nacho
    Link
    What's interesting to me this time around is how low interest rates are already, and how this will all combine with lower trade due to covid-19. I'd guess that things are still going to go down...

    What's interesting to me this time around is how low interest rates are already, and how this will all combine with lower trade due to covid-19.

    I'd guess that things are still going to go down because both the virus spread and the helplessness of governments in the face of this OPEC-Russia conflict haven't fully manifested.

    This will surely be a defining issue in elections and politics for the next several months at the very least.

    4 votes
  5. envy
    Link
    I'm worried about a deflationary spiral.

    I'm worried about a deflationary spiral.

    2 votes
  6. [2]
    ainar-g
    Link
    *giggles* I'm in danger!
    Russian Rouble jumping from 72 ₽/€ to 85 ₽/€.

    *giggles*

    I'm in danger!

    4 votes
    1. ThatFanficGuy
      Link Parent
      Them European clients look all the more appealing later, huh. :D

      Them European clients look all the more appealing later, huh. :D

      2 votes
  7. [2]
    babypuncher
    Link
    As someone who won't be retiring for decades, I'm having fun watching the chaos. Rich people freaking the fuck out like it's the end of the world never gets old. I feel bad for anyone retiring...

    As someone who won't be retiring for decades, I'm having fun watching the chaos. Rich people freaking the fuck out like it's the end of the world never gets old.

    I feel bad for anyone retiring soon though.

    1 vote
    1. no_exit
      Link Parent
      Rich people made billions off of the last recession, these events always hurt proles far more.

      Rich people made billions off of the last recession, these events always hurt proles far more.

      6 votes
  8. [8]
    Kuromantis
    Link
    If a recession (somehow because of this, how does any of this work) actually happens soon then: At least there will be a few years for the economy to rebound before I enter the job market....

    If a recession (somehow because of this, how does any of this work) actually happens soon then:

    At least there will be a few years for the economy to rebound before I enter the job market. (Granted the 'job market' and general adult existence probably don't work like that.)

    Maybe 'but the economy' becomes a weapon against instead of trump, although I have no idea what could change anyone's minds about anything.

    More disstressingly for me though, my father is a mechanic so if this does happen, he will really be affected since stocks keep oil prices artifially low and oil companies artificially wealthy, so this presumably means high oil prices, meaning people will drive less and my father will have less business.

    1. [4]
      Loire
      Link Parent
      That's ... Not how this works. Most of the big guys are down 40%. OXY was down 45% last I checked. Thats half their valuation gone in an day. Billions of dollars wiped out in a flash. The only...

      More disstressingly for me though, my father is a mechanic so if this does happen, he will really be affected since stocks keep oil prices artifially low and oil companies artificially wealthy, so this presumably means high oil prices, meaning people will drive less and my father will have less business.

      That's ...

      Not how this works.

      Most of the big guys are down 40%. OXY was down 45% last I checked. Thats half their valuation gone in an day. Billions of dollars wiped out in a flash. The only survivors I see so far are Chevron and Exxon. And there's no guarantee of a recovery because investors have been incredibly wary of oil companies lately.

      Oil is currently at 32$ a barrel and set to go into the 20$ range for the first time since the 90's. There is no western oil company in the world that can profit at these levels. There are going to be numerous bankruptcies as over leveraged oil companies collapse under the strain of no profit and no investment.

      Consumption is at critically low levels due to COVID-19 and both Russia and Saudi Arabia are increasing production in order to out duel eachother. That means the oil glut is going to explode collapsing prices even further. Supply and demand. And even if the economy recovers it could take months to years to rebalance the supply.

      Nobody in oil is making money of this. This combination is a literal apocalypse in the industry.

      9 votes
      1. [3]
        Kuromantis
        Link Parent
        And because of this oil companies will make their oil more expensive to stay profitable, right? (Again, how does any of this work? They can do that, right?)

        Most of the big guys are down 40%. OXY was down 45% last I checked. Thats half their valuation gone in an day. Billions of dollars wiped out in a flash. The only survivors I see so far are Chevron and Exxon. And there's no guarantee of a recovery because investors have been incredibly wary of oil companies lately.

        And because of this oil companies will make their oil more expensive to stay profitable, right? (Again, how does any of this work? They can do that, right?)

        1. Loire
          Link Parent
          No they can't. Oil trades at a market determined value. They can not sell their oil if they don't like the price but if they want to sell they do it at whatever the market price is for that...

          No they can't.

          Oil trades at a market determined value. They can not sell their oil if they don't like the price but if they want to sell they do it at whatever the market price is for that particular type of oil.

          8 votes
        2. pallas
          Link Parent
          In some sense, they can raise or maintain oil prices, if they all agree to cut production enough to keep prices high, but that won't necessarily let them stay profitable, as they'll be selling...

          In some sense, they can raise or maintain oil prices, if they all agree to cut production enough to keep prices high, but that won't necessarily let them stay profitable, as they'll be selling less: it will help with per-unit costs, but not fixed costs.

          But right now, they can't even agree to cut production. Some of them tried to get everyone to agree, but it didn't work, and so instead Arabia, which tried to craft an agreement, and Russia, which rejected it, have decided they are going to go into an economic battle by increasing production, flooding the market and crashing prices until one of them falters.

          But this means that North American producers are doomed, as their per-unit costs are high enough that they can't sell at a profit at all in this market. The only reason they were viable at all was from high oil prices caused by producers with lower costs (but smaller overall reserves remaining) not producing as much.

          2 votes
    2. Litmus2336
      Link Parent
      Considering that you sound on the younger side I encourage you to not worry. This sort of thing happens, you probably don't remember 2008 but it was like this too and life kept on moving. I doubt...

      Considering that you sound on the younger side I encourage you to not worry. This sort of thing happens, you probably don't remember 2008 but it was like this too and life kept on moving. I doubt mechanics will be affected by this - in the short term there might be an uptick if gas goes down in price, but more likely than not this will smooth out after Russia and Saudi Arabia come to agreements.

      I'll admit my memory of 2008 is hazy - I was still young as well, but this is just one of those things that happens once in a while.

      5 votes
    3. [2]
      skybrian
      Link Parent
      There is an argument that a recession should be good for mechanics and auto parts because people will be cautious and keep their old cars running longer. It's probably not good for new car sales.

      There is an argument that a recession should be good for mechanics and auto parts because people will be cautious and keep their old cars running longer.

      It's probably not good for new car sales.

      3 votes
      1. Loire
        Link Parent
        Autozone was up 53% today...

        Autozone was up 53% today...

        1 vote
  9. bleem
    Link
    makes me glad im poor and almost never leave my apt

    makes me glad im poor and almost never leave my apt

    1 vote