Stocks Off Sharply as Market Upheaval Grows

http://www.nytimes.com/2015/08/25/business/dealbook/stocks-in-asia-fall-as-china-and-emerging-economies-lose-favor.html?module=Notification&version=BreakingNews&region=FixedTop&action=Click&contentCollection=BreakingNews&contentID=45821187&pgtype=Homepage&_r=0

by superfx • 11 years ago

322 413 11 years ago

nytimes.com

geff82• 11 years ago

Nothing to be surprised here.

Anyway, finally this might be the perfect time to consider a market entry again after a lost year so far. Lost if you were refusing to buy at much too high prices. Let it go down some more days and invest then.

ceejayoz3• 11 years ago

https://en.wikipedia.org/wiki/Market_timing#Evidence_for_mar...

Studies find that the average investor's return in stocks is much less than the amount that would have been obtained by simply holding an index fund consisting of all stocks contained in the S&P 500 index.

jonknee3• 11 years ago

Yes, you can enter into the S&P 500...

adventured• 11 years ago

Which completely falls apart if you are 'unlucky' and buy at the wrong time. So by its very nature, buying that index fund requires good timing as well.

Just ask Japanese investors.

Or Chinese investors from 2007. They went sideways for eight years, and after their bubble deflates will likely see 20 total sideways years.

Or the Nasdaq from 1999 to 2012.

Point being, even the premise of index buying requires some smart timing or your returns - if any - will be extremely poor.

code4tee5• 11 years ago

The biggest "secret" on Wall Street is that active money management is often worthless. The ability of someone to 'beat the market' on a long term basis is extremely limited. Most investors are better off just buying a few index ETFs and letting it ride for 30 years.

Given that many banks have gotten out of prop trading and are now shifting into "wealth management" shops (hey we lost all our money when we tried that game... why don't we try it with your money!) there's clearly a lot of effort to convince people otherwise... but the numbers don't lie.

ceejayoz3• 11 years ago

Seesawing pretty heavily at this point. It was back up to -500ish a few minutes ago, then back to -800ish.

Cshelton3• 11 years ago

I think it's a bad sign when they can write an article and get it out in under 25 minutes...but by the time they release the article, the market has gone up by half the amount it fell on opening. This market is severely flawed.

melling• 11 years ago

The article was probably written after China closed. Someone simply filled in the numbers at the open.

jebblue3• 11 years ago

I'm not rich enough to be an investor but I agree, some kind of cool down system should be required.

des429• 11 years ago

There is a cool down system if things become too volatile. They halt trading for 15 minutes or shut it down for a day. They mentioned that if S&P500 were to drop 7% they would halt trading for 15 minutes today.

jebblue3• 11 years ago

Why was this down voted?

randyrand• 11 years ago

I'm not rich enough to be an investor

It doesn't take much money to invest in the stock market. Do you consider yourself thrifty? That's the major criteria for becoming an investor. Living below your means and saving. I have been in the working world for ~8 weeks now and already have some investments lol.

logicchains3• 11 years ago

Would you consider it less flawed if it hadn't rebounded after the drop? I thought being able to recover quickly from market shocks was considered a good thing.

mikeash5• 11 years ago

I don't understand your critique. It's a good thing that the market rebounded but how does that make the article better? It's like writing an article about a guy falling out of a plane and how he's going to go splat when he hits the ground, and by the time you hit "publish" the guy has already opened his parachute and landed safely. It's great that he survived but the article is bad!

Cshelton3• 11 years ago

I am considering it flawed in that we shouldn't have these drops, or gains,...this volatility, like we have today. The high frequency trading, the quarterly outlook, the amount of emotion, etc in the market is flawed.

The average person should not have to worry about the market... ever. It shouldn't be the massive, speculative thing that it is today. Short term trading, as it is, needs to stop. Business does not work like that and their stock prices should not either.

This is a very surface level explanation, I could write a paper and go on forever. To sum it up, we shouldn't have huge corrections because we shouldn't have 'cheer-leader'ed it up in the first place.

PublicEnemy1112• 11 years ago

Futures were off bad before the market opened. People look at futures, think the sky is falling, flood the market with sell orders that cannot be filled until market opens, price temporarily crashes, then quants and smart money bring them back.

code4tee5• 11 years ago

Broadly speaking the US economy is quite healthy and people were expecting a correction in the stock market for some time. Within tech, it will have some negative impact on the plans of some companies as it will be harder to get lofty valuations based on 'fluff'... during such times investors want to see hard facts and real results to back-up value--but that's a broader trend thats been slowly developing for some time.

Internationally, China is clearly having a hard time dealing with the realities of 'the market.' People have long since suspected a lot of the figures coming out of China were not accurate and everyone knows the place is rampant with corruption and such. Things are going to get a lot uglier there before it gets better.

roymurdock4• 11 years ago

Interested to know which statistics you based this opinion of the US economy being "quite healthy" on. Anything deeper than top level unemployment rate?

cryoshon13• 11 years ago

I am also interested in seeing the data which claims that the US economy is quite healthy right now.

The unemployment rate is a juked stat; check out the labor force participation rates if you want the full story. A primer: labor force participation got smashed in the Great Financial Crisis, and still hasn't recovered.

code4tee5• 11 years ago

Debt to income ratios, capitalization of companies, worker productivity, oil prices, savings rates, more healthy housing prices (in most areas), foreclosure rates, industrial orders, housing starts, .... This isn't 2007-08.

code4tee5• 11 years ago

PS... I don't deny that a subset of the US economy/workforce got hit really hard in 2008 and never recovered. But when you look at the US economy as a whole things are doing quite well.

topkai22• 11 years ago

Corporate profits have been good, GDP has been rising at a decent rate, consumer confidence has been looking OK. Statistically, the economy has been looking alright, although the distribution of benefits continues to be unequal.

sillygeese6• 11 years ago

Broadly speaking the US economy is quite healthy

In reality, it's the exact opposite of "quite healthy". Here's a good overview of what's up: http://www.oftwominds.com/blogaug15/bear8-15.html

rogerthis• 11 years ago

You cannot offer a different view. Go home. Sorry.

(And they won't even perceive the sarcasm).

dragontamer• 11 years ago

If a 2008-style credit crunch takes out the likes of AGI in the next few weeks, causing rippling effects to spread throughout the economy in ways that no one understands... then we've reached a 2008 level crisis.

We don't have record numbers of people flocking to mobile homes as their subprime mortages jack up the rest of the economy.

Your article is crap because it ignores everything that was bad about 2008. Record layoffs, hundreds of thousands of people losing their homes and jobs. Major manufacturers (the _entirety_ of the "big three" car companies) almost went bankrupt.

Financial controls are arguably in a worse state than they were in 2008. But beyond that, the core economy is doing much better than back then. Furthermore, financial controls in 2007 prevented us from seeing any issues. The subprime mortgages getting wrapped up in CDOs and all that stuff was occurring in a non-regulated "shadow economy" manner.

Is there a shadow economy that is about to crash today? I don't think so. But that was the conditions of 2007/2008 financial crisis.

kevando• 11 years ago

Bubble? http://i.imgur.com/lQt3Ylr.jpg

7Figures2Commas• 11 years ago

Central bank bubble.

savanaly• 11 years ago

Now extend the timeline 100 years into the past, it will look a lot more encouraging. Or a 1000 years, it will look positively sunny.

forgetsusername14• 11 years ago

Utterly useless to show a growth graph spanning decades without a log scale.

forgetsusername14• 11 years ago

people were expecting a correction in the stock market for some time

"People" are expecting a correction 100% of the time, so the forecast is pretty much useless. If it was truly anticipated, it wouldn't happen. Action, like that which occurred at opening this morning, is sheer panic.

gmarx2• 11 years ago

That isn't true. People expect a correction when there has been a long run up in prices and when those prices are high relative to, for example, earnings. This has been the case for quite some time. On the other hand when the S&P hit the 600s in 2008 (or was it 2007?) I doubt anyone was anticipating a correction

alyx• 11 years ago

I'm interested to hear other people's experiences. I have a 100k trading portfolio and I have sold/bought nothing in the last week.

Thoughts on who's doing all this downward trading?

kachnuv_ocasek• 11 years ago

Can't wait till we link to this comment 5 years from now, laughing at how gullible we were – again.

forgetsusername14• 11 years ago

laughing at how gullible we were – again.

What exactly are we "falling for"? The economy ebbs and flows, as it has for centuries.

The real gullibility is thinking that these cycles somehow represent the end of the world.

dataker3• 11 years ago

Regardless of your ideological background, you cannot possibly assert the U.S economy is healthy.

0% interest rate for several years is not healthy.

QE is not healthy.

100+ % debt:GDP ration is not healthy.

Inflating assets is not healthy.

A vanishing middle-class is not healthy.

forgetsusername14• 11 years ago

QE is not healthy

QE is over (though, I wouldn't be shocked to see more).

0% interest rate for several years is not healthy.

Why not?

100+ % debt:GDP ration is not healthy.

Why not?

I mean, I wouldn't call the US economy "flourishing" or anything. But it's not sick, and relative to the rest of the world it's looking pretty good (as the strong dollar and low rates imply).

cryoshon13• 11 years ago

I keep trying to tell people, but they've drank the koolaid from the mainstream media, unfortunately... the facts as you have listed them are there for anyone to think about, but the rabid "EVERYTHING IS FINE, SHUT UP AND BUY MORE" crowd won't have the thought of weak fundamentals in their head.

Many of the problems are "easy" to fix with government action, but the consequences of the easy fixes are problematic.

czbond• 11 years ago

You're on such a roll with truth, I'll add too it. Wholesale orders are falling off a cliff, huge backlogs of oil, railroad shipments down sharply, container shipments down sharply, chinese currency re-set, etc.

notNow4• 11 years ago

Cherry picking much?

pvnick2• 11 years ago

Agreed. The stock market has been propped up by the FED for the past 6 years with free money from near-0% interest rates. Great for the folks close to the money supply (bankers, rich folks with lots of investments, etc), not so great for the middle/lower class. The best thing that can happen is to bite the bullet and raise interest rates.

walod• 11 years ago

If the economy picked up there wouldn't be a problem. It's apparently better than a total crash, because the economy has to go on either way. The problem is what products and services can we make to make the economy grow again and to employ people. Also you may get malinvestments, but that is what risk is all about. No risk, no gain, you know. You just need a few homeruns to cushion the bad ones and the big homeruns are the ones that create whole new markets and longer employment. How to function and survive in the economy is difficult for everyone and it's a big clusterfuck of complexity and short term thinking, so it's all related in many ways. I think QE and 0% interest rate is the smallest of our problems as far as long term goes

fweespeech5• 11 years ago

Honestly, I don't think you have a clue what you are talking about. You aren't wrong, per-say, you just list all things that have literally 0 to do with the actual problems. Its a very common political trick for an ideologue like yourself to grab a bunch of things they think are bad and argue they are the cause of all your ills. You are approaching things from a "this is good for people, it must be good for the country" point of view. A national economy is not a person and doesn't function on the same economic rules as a person does.

The real problem in this country, frankly, is the Federal Government has been badly mismanaging economic & tax policy for 30+ years. They've repeatedly used short term solutions and short-changed everything from highways to R&D in the name of military, taxes, & social spending. Many long term investments in physical goods [e.g. buildings] are really only rated for a 30ish year timeline for depreciation for a reason.

That combined with the demographic shifts, labor market arbitrage, massive private debt load are the actual problems. Did you bitch when the private debt to gdp was over 120%? Did you even think about it, honestly?

I'd list sources but I honestly think you wouldn't believe me.

----

A vanishing middle-class is not healthy.

By that logic, the US economy has in the shitter since the 1980s.

Inflating assets is not healthy.

Actually, inflating prices is the definition of healthy and has been for a long time in economic theory. No economist argues we should have deflation.

QE is not healthy. & 0% interest rate for several years is not healthy.

Having deflation would be less healthy than 0% interest and QE.

QE is also over.

100+ % debt:GDP ration is not healthy.

That isn't a serious issue as long as the US is considered the reserve currency. National debt doesn't have a direct correlation with economic growth.

http://www.theatlantic.com/business/archive/2014/09/governme...

Government Debt Isn't the Problem—Private Debt Is
What was the big problem? Look at the line representing private debt. It clearly is not parallel to the GDP line and, indeed, reflects a rapid growth of private debt relative to GDP.
Look familiar? Time and again, that’s the story we found: A major financial crisis is preceded by a runup in private debt relative to GDP. In fact, there seems to be only one other ingredient required for a crisis: that the absolute level of private debt is high to begin with. We found that almost all instances of rapid debt growth coupled with high overall levels of private debt have led to crises.

brianclements• 11 years ago

100+ % debt:GDP ration is not healthy

By itself, there's no reason it's unhealthy if it's spent on solid investments in the country. After WWII when it was last way above 100%, the composition of that spending had a much better effect on the country. Now? What's the nature of the current debt? I'd agree that it's not so wisely spent.

dragonwriter5• 11 years ago

Regardless of your ideological background, you cannot possibly assert the U.S economy is healthy.

Sure you can (note, I wouldn't, but that's a different issue); standards for "health" of an economy are deeply ideological.

CWuestefeld3• 11 years ago

A vanishing middle-class is not healthy.

Everyone's been picking at all your claims except this one, so let me jump in on this part.

You've been drinking too much of the kool-aid. It's certainly fashionable for talking heads to spout platitudes about the middle class, but it doesn't match the real world. The picture that's being painted is that the vast majority of us will be living lives as serfs, while a group of oligarchs (the arbitrarily mythical 1%) determine our fates while eating grapes and being fanned. That's not what's happening.

In fact, the VAST majority of Americans are better off than they ever have been. Check out this [1], for example, based on US census data.

Yes, the middle class has been disappearing, but they haven’t fallen into the lower class, they’ve risen into the upper class

Further, in the demographics where we have seen increases in inequality, the lion's share of the change has been the result of lifestyle choices made by the individual. Imagine a social order - call it "A" - in which most people are paired off and raising a family. In that world, a large portion of the families have two incomes, which are going to pay for a single rent or mortgage bill, a single set of utility expenses, etc. Imagine another society, "B", in which many of the folks corresponding to those paired adults have instead decided to go it alone, either by way of divorce, or even deciding to have a family with no mate.

Isn't it obvious that in society "B", the un-paired "families" are going to have far less aggregate income ('cause there's not a second breadwinner earning that income), and are going to have much greater expenses at the same time ('cause there's not a mate to share housing and utilities, and in fact other things like dining may need to be outsourced, that being the result of not having a mate to cooperate with)? And compared to those families that are following the "A" model, it'll appear that the "B"s have a disadvantage?

It doesn't apply for every case, but for most "B"s, a decline in purchasing power for the family is directly explainable by their own choices. We might wish that our choices had fewer side effects, but we can't blame it on others who made different choices.

[1] http://www.aei.org/publication/yes-the-middle-class-has-been...

ArkyBeagle5• 11 years ago

It's nearly unknowable what the optimum debt/GDP ratio is. This being said, GDP isn't growing fast enough.

And what inflation? Outside VC money and the stock market ( and the peripheral real estate markets to those ) there isn't any.

jusben13693• 11 years ago

0% interest rate for several years is not healthy

That's not healthy or unhealthy. It's just a thing.

QE is not healthy

Ask Europe that didn't do quantitative easing (or did too little too late) which economy they'd rather have right now. And it's no longer a thing - because it ran its course and largely worked.

Inflating assets is not healthy

Some classes of assets are inflating. Some are deflating. Again it's a little vague.

100+ % debt:GDP ration is not healthy.

It was never higher than right before the boom of the 50's and 60's so...

Agree with you on the impact on the middle class.

But I think you can assert on the balance of things that the economy is healthy vs not. You've obviously ignored a lot of positive stats around employment growth and economic growth.

wahsd• 11 years ago

But at least home prices are back to bubble levels ... so there's that, right?

jes2• 11 years ago

Unfunded liabilities (money that is owed, but not currently on-hand) in the United States are said to be greater than $127T:

http://www.forbes.com/sites/realspin/2014/01/17/you-think-th...

This does not account for unfunded liabilities owed by the states. The situation there is very difficult as well.

You also mention that China is rampant with corruption. In my view, with respect to politics and cronyism, I think the United States government is also highly corrupt.

I would like to share your optimistic outlook, but unfortunately, I'm not able to do so given all that I see going on around me.

PublicEnemy1112• 11 years ago

The US government does not lie about growth, nor does it threaten money managers with prison time for selling stocks.

cromwellian• 11 years ago

This is all pretty obvious and a long time coming. There are a lot of forces at play: aging of the population, greater returns to capital vs labor due to increasing productivity.

As an absurd conclusion, birthrates drop to ~1 per couple, 2/3rds of the population retired, and robots put most people out of work.

Is it really so surprising that taxes would have to go up massively on the owners of the robots and other capital to provide all of the retirees a basic income?

Hans Moravec, who ran the CMU robotics department, pointed out these trends in his 1988 book _Mind Children_ and what the end game would be.

My fear about the unfunded liabilities argument is that it appears to be the new talking point of Trump and Fox News, and rather than see the writing on the wall with respect to the long term trends in the labor market and demographics, it'll just be more arguments about slashing federal social programs, pensions, and the liabilities themselves, which will make us all the less prepared when the real devil comes knocking.

forgetsusername14• 11 years ago

Unfunded liabilities (money that is owed, but not currently on-hand) in the United States are said to be greater than $127T:

This is classic one-sided accounting. That money is not vaporized, never to be seen again when it's paid out. It is paid to US citizens as income. Out one pocket, into another.

pnut2• 11 years ago

I've got maybe 70 more years to live, my unfunded liabilities spiral into the millions!!! And that's before children! I must be bankrupt!

kailuowang• 11 years ago

The global panic might have a good reason, this is probably the first time China goes through a true financial crisis. Their ability to deal with such situation is by and large unknown to anyone.

myth_buster• 11 years ago

This quite true although they have case studies to follow from the west and Asia. This statement from the '97 Asian Crisis [0]

  Unlike investments of many of the Southeast Asian nations, almost all 
  of China's foreign investment took the form of factories on the 
  ground rather than securities, which insulated the country from rapid 
  capital flight.

shows the contrast with current realities.

[0] https://en.wikipedia.org/wiki/1997_Asian_financial_crisis#Ch...

valarauca13• 11 years ago

China (as we know it) can't suffering economic down turn.

The Communists largely maintain power though the threat of Its us or chaos. Which before and during the communist rise China was pretty bad off. This is more or less the social contract we make your life better, you give up your rights.

If it becomes clear the central government can't control the economy. We'll likely see a rise in anti-government protests.

th0waway• 11 years ago

more like "obey or die"

rorykoehler6• 11 years ago

"Communists"

ultramancool• 11 years ago

How about a more useful index than the Dow, which fails to account for basic stuff like market cap? S&P 500 % drop or something would be more meaningful.

EDIT: The page in question lists it actually, S&P 500 down 4.1%.

Cshelton3• 11 years ago

The correlation between the indexes is pretty strong. Despite the DOW not being a statistically great thing, it's very rare it's doing something significantly different than the S&P 500.

joezydeco• 11 years ago

How do oil prices factor into this? The price has already been diving in this last quarter. Oil stocks also make up a huge portion of the Dow formula.

jonknee3• 11 years ago

All sectors are diving today. Energy, tech, healthcare, financials, telecom, even utilities.

MCRed5• 11 years ago

It's a sympathetic response.

Some of it is going to be people selling assets to cover margin calls if they are overly leveraged.

Some of it is people selling because everything's declining and the want to wait it out.

debacle2• 11 years ago

Oil prices are low both because demand is waning (relatively) but also because there is a glut of supply.

Excess supply of oil is great for most of the economy. Waning demand is a bad indicator, though.

dataker3• 11 years ago

I'm assuming the Fed will not raise interest rates now.

rubiquity• 11 years ago

It's beginning to sound like Frank Underwood is behind all of this.

roymurdock4• 11 years ago

I'm struggling to think of what the Fed can even do in this situation.

I guess they can either 1) dig themselves deeper into a hole and issue another round of QE to inject liquidity into the markets or 2) do absolutely nothing. Though they are probably loathe to do nothing as then it would seem like they don't have a solution.

Whatever happens, it will be an interesting/exciting time in non-traditional monetary policy that will generate a ton of academic papers going forward.

rquantz• 11 years ago

Well, at this point everyone is expecting them to raise rates, so not raising would, in effect, be doing something.

jayess2• 11 years ago

About all they have left is more QE. My guess is that the next step in this bubble they've blown (along with the rest of the world's central banks) is massive deflation.

knowaveragejoe2• 11 years ago

I think they can safely do nothing and go along with the correction narrative, whether or not that's true.

skylan_q• 11 years ago

The fed is paying interest to the banks for excess reserves they have parked at the fed. If they lower the interest rate they're paying out on the excess reserves, banks might move some of that money out of the fed and into other investments.

AnimalMuppet12• 11 years ago

At the moment, there's nothing that they need to do. A one-week drop of 15% in the stock market is not actually something that the Fed needs to fix.

dataminer• 11 years ago

No one is going to raise interest rate right now, even if interest rate is raised in future it will be very minimal. This is the new normal, there is hardly any inflation and price of important commodities are falling off the cliff.

gmarx2• 11 years ago

The answer (pains me to say it) is, if anything, government spending. This was actually the answer after the financial crisis too. We have come to depend far too much on monetary stimulus relative to fiscal stimulus.

dragonwriter5• 11 years ago

The answer (pains me to say it) is, if anything, government spending.

That's not something the Fed can do.

That's something Congress can (in theory) do, but hasn't shown much interest in doing.

We have come to depend far too much on monetary stimulus relative to fiscal stimulus.

I don't think anyone has a preference for monetary stimulus so much as the fact that the only place where there are sufficient people with interest in stimulus to effect anything is at the Fed, where the only lever they have is monetary stimulus.

cryoshon13• 11 years ago

It's hard for me to tell whether this is just a "correction" (massive deflation after exuberance) or an actual meltdown. I had predicted the actual meltdown for September of 2015, but I guess this is pretty close. I wonder how this will affect my life, if at all.

"The New York Stock Exchange said it will halt trading for 15 minutes if the Standard & Poor’s 500 Index drops 7 percent." [0]

How is it fair that the markets get put on pause if they're failing? I really don't understand.

[0] http://www.bloomberg.com/news/articles/2015-08-24/nyse-will-...

kasey_junk4• 11 years ago

It's not "fair", but it is a legal requirement.

You should definitely remove the idea that markets are "fair" from your mind. If they were "fair" that would be a lottery not a market.

andrelaszlo• 11 years ago

"I had predicted the actual meltdown for September of 2015, but I guess this is pretty close. I wonder how this will affect my life, if at all."

If you predicted it, then it should at least make you rich? :)

ramblerman• 11 years ago

Thank you.

This cognitive fallacy of "I knew" and "I was saying it long ago" etc... really irks me.

Especially in something like stocks you are 100% right, put your money where your mouth is and spare us the story of your grand predictive prowesses.

cryoshon13• 11 years ago

I don't gamble and I don't have enough money to gamble, and, even if I did, I'd have been wrong by a few weeks anyway.

It's more of a morbid curiosity for me.

FilterSweep2• 11 years ago

I'm guessing most HN commenters don't have the liquidity to become rich off a crash, unless they had knowledge in specific industries and companies that were set to get hit hardest. Not all Chinese sectors of industry are equally hurt by this collapse.

Besides, it wasn't just this commenter who predicted it. Many have before. In fact, even the laypress TV news like 60-Minutes have pointed out issues that will cause major growing pains to China. Run a Google search, click "Search Tools", and query the date range from the beginning of last year to end of Spring this year.

photosinensis4• 11 years ago

Yeah, it should. He should have known to short-sell pretty much everything if he really predicted it. I remind everybody that it takes no money to short sell. If you really think everything is gonna tank, do it. Put your skin in the game.

sillygeese6• 11 years ago

How is it fair that the markets get put on pause if they're failing? I really don't understand.

That just means the ruling class is in panic mode, trying to prevent the inevitable from happening, just like their peers in China recently.

In China they managed to temporarily stem the tide, but the real crash is still coming, of course, just like it is all over the West.

pvnick2• 11 years ago

Why did you predict a meltdown?

branchless6• 11 years ago

Sorry but how do you know enough to "predict" a September 2015 meltdown and then um and ah about whether this might be a correction? It's 6 days short of September and you are not sure? Pardon my skepticism.

cryoshon13• 11 years ago

Hey man, I have an amateur's knowledge of the market, but I keep up with geopolitics.

I didn't make this call based off of technical knowledge, more of an unscientific gut feeling based off a ton of factors I probably can't even name in detail.

rcavezza• 11 years ago

Can you elaborate on your prediction? I'm interested in the details.

cryoshon13• 11 years ago

A few factors that were extremely evident from 6+ months ago:

1. US stock market is massively overvalued due to being propped up by QE for years

2. China's growth rate is largely fabricated

3. Russia's oil economy is finished as a result of sanctions

4. European troubles with Greece are undermining confidence in the EU

5. Japan's economy is weak due to demographic slide

6. Nigeria's growth is weakened due to instability

7. Consumer demand in the US and much of Europe is weak due to poor wages and high real unemployment

8. US stocks are being pumped as much as possible by hollowing out companies for short term gains, handicapping their long term capacity to keep providing gains

The actual date was picked "7 years-ish after the last financial meltdown" because sometimes these things follow roughly 7 year cycles.

joeyspn2• 11 years ago

It's hard for me to tell whether this is just a "correction" or an actual meltdown.

You can't really anticipate the exact timing of plunges, but feels like the start of the financial crash that many people has been expecting for this September. This has been talked during months in non-mainstream financial websites like ZH. So it shouldn't really come as a surprise to anyone that follows the markets closely...

How is it fair that the markets get put on pause if they're failing? I really don't understand.

Deutsche Bank said this morning:

"The fragility of this artificially manipulated financial system was exposed over the last couple of days of last week. It all ended with the S&P 500 falling -3.19% on Friday - its worst day since November 9th 2011."

abritinthebay• 11 years ago

It's fair in the same way banks closing when there's a run on them is fair; for the same reasons.

Basically to let cooler heads prevail and prevent worse consequences.

Retric2• 11 years ago

-markets get put on pause

The day to day stock market has limited liquidity. Most of the time people have enough buy and sell limit orders to keep the price reasonably stable. (Sell if price reaches X, or buy if it falls to Y.) But, if the price falls say 10% more people not actively looking at stock prices are going to get in on the action.

at-fates-hands• 11 years ago

> I wonder how this will affect my life, if at all.

Depends on where you invested your money. A lot of 401K's lost close to 40% of their value after the 2008 crash. A lot of people near retirement had high exposure since most of their investments were in equities (90% or more) and lost even more.

I'm pretty sure this is just a correction. You should get concerned when the market goes down and stays down. As pointed out earlier, the market has already gained back most of the losses already.

swalsh2• 11 years ago

A pause makes sense, if you study this history of sell off's, they're often emotional... and sometimes technological. A pause gives the market time to recollect itself.

csixty4• 11 years ago

How is it fair that the markets get put on pause if they're failing? I really don't understand.

The "circuit breaker" was put in place in response to the 1987 "Black Friday" event. It was the early days of automated trading, and computers got the lion's share of the blame. The "circuit breaker" is intended to shut down machines that can drive the market downward faster than people can react. It also shuts out people making panic decisions without thinking at all.

Basically, everyone gets a "time out".

jayess2• 11 years ago

Maybe the failure of central banking bubble-blowing will finally be realized... I'm guessing not though.

kchoudhu3• 11 years ago

Oh look, an opportunity to buy.

MCRed5• 11 years ago

Warren Buffett says "If you're buying hamburger your whole life, do you want the price to be low or high?"

For me, the situation is such a mess that I don't think we're close yet to what I would consider a buying opportunity.

One saying is "buy when there's blood in the streets"... but I don't think we're there yet.

Downvoted and slow banned. Why do I even contribute to this site?

FilterSweep2• 11 years ago

When I saw the articles in my local newspaper over the weekend of this happening, I figured its almost time for me, a fresh college graduate, to jump into the markets.

But considering how profound the issues of Chinese Real Estate bubble are - they were paying people to make it look like empty, recently-built, luxury apartment complexes had people actually living in them - I think the worst is yet to come and I'm still waiting.[0] [1]

[0] RE Homes: http://www.wsj.com/articles/more-than-1-in-5-homes-in-chines...

[1] RE Apartments: http://www.economywatch.com/economy-business-and-finance-new...

carsongross2• 11 years ago

I know, anything even remotely non-permabull is nuked for bad feels about The Strongest Economy In Years.

Alright, as a fellow traveller, let me help you. I'm going to make some observations and then give you my magic key to dealing with this market:

- Picking individual stocks is very difficult unless you are Buffett-tier

- The low-cost index funders have a very strong argument

- That being said, there are obvious long term momentum trends in the broad market, the efficient market guys are a joke

- Daily and even weekly movements have too much noise to be worth looking at

- Monthly is actually pretty good though

- Sitting in cash for any extended period is almost impossible for most investors and flat out impossible for funds (competitive advantage alert!)

So, putting that all together, you have the following thought:

"What if do index investing and I use momentum measurements of the broad market on a monthly basis to try to avoid the shit-show pullbacks."

I use the monthly MACD of the S&P 500, and it has worked very well: invest when MACD is positive, get more conservative as it goes to zero, start selling when it goes negative, sit in cash and wait for the faster moving average to reverse on a monthly basis.

No one believes me, and you shouldn't either. But there it is.

chmaynard• 11 years ago

Long-term investors who bought stocks after the 1987 crash did very well. It took a few years, but the market fully recovered.

kchoudhu3• 11 years ago

I thank my lucky stars every day that I started saving right around/before the crash in 2008.

meapix• 11 years ago

yeah, scratch your head, that's the best you could do.

swalsh2• 11 years ago

Best time to buy is when there's blood in the streets :D

xur17• 11 years ago

I just can't decide if there will be more blood, or if this is just the start...

hwstar• 11 years ago

There's old traders saying: Don't catch falling knives.

prewett• 11 years ago

In 2008 I watched the market drop 5% every day for a week. That's blood in the streets. (And by Thur, it pretty much didn't matter what you bought, it was going to do great)

As of right now, the S&P 500 is down a little over 2%, that's pretty normal. I'm not even sure this is a paper cut.

rdudek2• 11 years ago

Stocks are rebounding. Someone made it off like a bandit this morning.

knowaveragejoe2• 11 years ago

Could be a dead cat bounce:

https://en.wikipedia.org/wiki/Dead_cat_bounce

drcode2• 11 years ago

Disney stock was down almost 10% this morning. HOW POSSIBLY can it be rational for Disney stock to drop 10% because of a single day of rough trading in the Shanghai market, especially given how much Disney has dropped already in the last few months? I considered that the buying opportunity of the year. (knock on wood...)

rdudek2• 11 years ago

Well, it will really depend on how well Star Wars does.

JabavuAdams2• 11 years ago

Investors are not rational.

EDIT> Why would you choose Disney over Google, given the choice? FYI I own both.

czinck2• 11 years ago

If you're gonna look at crazy swings, I have an S&P smallcap 600 index tracking ETF that was down 40% at open. The index itself was only down a few percent, just buy that, wait for liquidity to return, and bam 30% ROI in a few minutes. Just had to be quick enough to get in before the halt.

forgetsusername14• 11 years ago

HOW POSSIBLY can it be rational for Disney stock to drop 10%

People being forced to liquidate positions (margin calls, panic) and no buyers.

pcurve• 11 years ago

Plunge Protection Team doing its thing.

https://en.wikipedia.org/wiki/Working_Group_on_Financial_Mar...

kazinator• 11 years ago

It's only 10:21 Eastern Time on a Monday as I read this at 7:21 a.m. in the Pacific time zone. Like, wait for the trading to close, then tally up the damage.

jacobwcarlson• 11 years ago

A 1000 point drop at the open is a newsworthy event.

jebblue3• 11 years ago

I wonder if any of this could be related to recent tensions in Korea?

http://www.cnn.com/2015/08/21/asia/koreas-tensions/

photosinensis4• 11 years ago

No. This is mostly about a bubble in China popping. Potemkin buildings have been a thing there for a very long time due to a series of perverse effects of policies by the Chinese government.

The Korea business is pretty much business as usual there.

The good news for the US is that we're a Chinese consumer, and they're not a major customer for our goods. Additionally, they're a competing consumer for resources. Basically, this means that the prices for American imports will drop, making the USD stronger internationally and encouraging international investment in the US economy.

The one thing to worry about is that the drop in import prices will likely cause a drop in the prices of domestic goods.

sbt• 11 years ago

I would recommend an article by George Magnus called "The Chinese model is nearing its end", which was printed in the FT on Friday. You can bypass the paywall if you Google for it.

piratebroadcast• 11 years ago

I'm a Web Developer with a few years of experience on the East Coast. I do OK, salary wise. I missed the first bubble and am not on the East Coast. What should I expect from this? Layoffs mean more developer supply? Just trying to be cautious and prepared for worst case.

forgetsusername14• 11 years ago

What should I expect from this?

As of right now? Nothing. This is mostly paper being moved around. Economic tides are shifting and there are always people caught with their pants down.

In the long run? Who knows? We just finished a massive bull-market run, now there's been a commodity crash and global growth prospects look bad. It could be business-as-usual or completely uncharted territory. Don't fret over what you can't control.

rwhitman• 11 years ago

Basically if this is truly something ugly for the US economy and not just a temporary correction, which it doesn't seem to be.. yet.. based on my personal experience circa 2008 as a web developer, here's what I saw from my perspective -

First, older businesses, who have survived other crashes, start tightening their budgets ASAP, pulling back on expensive tech investments. So there's a contraction in big outsourced tech projects with bigger businesses that can start within weeks. If you have big things planned with these guys, close the deal right.now.

Then, many startups who have been too reliant on investor capital for survival get into a pickle when investors stop being as generous dishing out venture and angel rounds. Any company dependent on raising a round of financing in the next 6 months is in a tough place. If you work for any of these guys, polish your resume.

So you start to see layoffs at big consulting firms, then startups start to fail when funds get antsy. This puts a lot of engineering talent on the market, first at job interviews and later for freelance after they've been on the market for a few months. Increased supply means lower salaries and freelance rates. Last time around the big tech cos like Google and Facebook went on a feeding frenzy and drove the supply down, and the mobile thing happened. So salaries bounced back and then went bezerk

I have a feeling if this is another big one, this time around there will be less feeding frenzy and more pruning - the tech giants can use this as an excuse to lay off engineers hired on inflated salaries and not performing. The mobile bubble popped already, and the current bubble is in AI and big data which needs more more specialized brainpower and probably won't pick up a lot of the supply

We also have tons of very junior developers swamping the market with training from coding bootcamps right now. So at the low end of the developer spectrum there's potentially a huge surplus. If things get sour in the market this will be a very tough time for an entry level developer, a pay cut for a mid level developer, and a minor worry for a good developer. For companies with healthy cash reserves, it's a big win though..

acjohnson552• 11 years ago

A whole lot of aphorisms in this commentary about falling knives and dead cats, but very little actual information.

If you're trying to time the bottom you may as well take your money to the blackjack table. The quants are probably going to make a bunch of money, but if you're just a regular person, you should probably just continue making your regularly scheduled 401k contributions and diversified investments. Historically speaking, all the movement is going to average out in the long run to modest gains.

rsmckinney5• 11 years ago

"Historically speaking"

Historically speaking, when has the Fed kept interest rates at ZERO for 7 years? After pumping QE full throttle at $80B/mo? The economy has been in continuous "recovery" mode since '08, but not much has actually recovered. The market is going to collapse my friend because, historically speaking, we are in dark, uncharted territory and have lost our way back.

cynicalkane5• 11 years ago

Interest rates are nominal; they only matter relative to some equilibrium. The equilibrium interest rate is somewhere close to zero.

bunderbunder3• 11 years ago

Historically we've always been in dark, uncharted territory.

There are only two things you can guarantee about the market: First, it will fluctuate. Second, those fluctuations will be unwittingly used as a Rorschach test by everyone with a political axe to grind.

acconrad• 11 years ago

We were also in uncharted territory when the stock market collapsed in 1929. The market had never crashed like that before.

The market had also never crashed like 2000 because the internet tech sector had never existed like that before.

The market had also never crashed like in 2008 because home loans had never been so lax in terms of lending such highly-leveraged loans to such low quality lenders.

Every new crash lies within dark, uncharted territory because no one can predict the future and a crash could only come about from a set of new circumstances we couldn't have predicted before (or else it wouldn't have crashed).

AnimalMuppet12• 11 years ago

After pumping QE full throttle at $80B/mo?

They did for a while. That part's over, though.

busyant• 11 years ago

The market is going to collapse my friend ....

Put your $ where your mouth is.

dave_sullivan• 11 years ago

Ah, but those quants are going to make a bunch of money...

There's a cottage industry forming around finding market distortions caused by bad algos. You'd think that there wouldn't be a bunch of bots running around making stupid decisions, but there are a lot of bots that haven't been updated in some time and were put in place according to some idealized rule-based model in some esoteric area of finance that one guy came up with.

It's kind of like asking yourself seriously how many computers out there are running outdated software. The less fundamentals matter, the more computers handle various activities that have a more or less direct impact on prices of marketable securities, the more this is a valid strategy. It's basically anomaly detection on very messy data.

If transaction costs keep coming down and data becomes cheaper (both of which seem likely), trading as an independent might become less ludicrous than it is. And to be clear, it is currently ludicrous. Transaction costs will eat up any potential gains on the retail side unless you're operating with very large amounts of money.

anonu3• 11 years ago

Someone really bit the dust this morning in ETF land. Lots of US ETFs were down 10,20,30% and were halted due to circuit breakers. There is some quant/market-making firm out there that is really paying for this today.

btilly• 11 years ago

You'd think that there wouldn't be a bunch of bots running around making stupid decisions, but there are a lot of bots that haven't been updated in some time and were put in place according to some idealized rule-based model in some esoteric area of finance that one guy came up with.

There are other reasons why stupid decisions are being made by bots.

For example, response times matter. Often you have a tradeoff between making a bad decision quickly, or a good decision more slowly. It isn't clear that being smart is worthwhile...

pyrrhotech• 11 years ago

The only way quants can make money is from active traders on the other side. It's impossible for quants to make money off buy and hold index investors. If everyone took your advice (and I do), there'd be no such thing as quants

rm999• 11 years ago

The typical self-described "buy and hold investor" I know is actually a "buy and hold then panic and sell" investor. Take a look at r/investing to see what I'm talking about. I'm not criticizing them per se; it's unnerving to imagine half your life savings or retirement being gone in a flash.

cryoshon13• 11 years ago

So the assumption is that stock prices increase on an infinite time scale?

Seems a bit naive...

duderific2• 11 years ago

Probably as measured with fiat currency, which can be created out of thin air, yes, stock prices will "increase" infinitely.

Measured against an actual real-world asset such as gold, oil etc., probably not. http://www.macrotrends.net/1378/dow-to-gold-ratio-100-year-h...

acjohnson552• 11 years ago

Not necessarily, assuming there's still a whole lot of economic development, growth, and innovation left before we achieve stasis. I think we've got generations left to go before we shift into a new paradigm.

lotharbot• 11 years ago

If you're just a regular person, you shouldn't be trying to make millisecond-timing decisions. But you can absolutely say "thus-and-such appears to be systematically underpriced" and make a decision to transition some funds toward bargains.

I recognized there were bargains to be had in March of 2009. I didn't hit the exact bottom (March 6), but I got some pretty nice deals on March 12.

Right now, I wouldn't go out of my way to make excess contributions. The signal isn't strong enough. But sometimes it is.

carsongross2• 11 years ago

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

https://mises.org/library/human-action-0/html/pp/818

duderific2• 11 years ago

There is absolutely zero political will for the voluntary abandonment of credit expansion. So, only the final catastrophe, the collapse of the dollar as the world's reserve currency, is the final outcome. It could be decades away however; there is just too much invested (literally and figuratively) in keeping the dollar afloat.

ChuckMcM2• 11 years ago

I find it fascinating how this discussion goes, Do we differentiate between "healthy" and "strong" ?

The US economy is, as far as I can tell, tethered in a macroeconomic sense, to the bill of the very expensive land wars it recently fought. The cost to the economy both in terms of government spending and workforce depletion as national guard troops were mobilized for duty in Iraq and Afghanistan.

American worker productivity has remained high, which has kept real wage growth low, as employers leverage they "be thankful you even have a job" meme over the heads of employees who perhaps just scraped by in the great recession or spent months or even years unemployed.

America's largest trading partner, China, is running a partially managed economy with a fiat currency that is priced more on government policy than market realities. That pricing has lead to some unsustainable conditions in the Chinese economy which are being "addressed" by some pretty big moves (currency devaluation is not something you do lightly in the worlds second largest economy).

So the interesting question is how does the world see it? And how will it play out? Everyone has their bets, but and you can read about some of them in Barron's or the Economist or the WSJ.

The current disaster is Chinese. By devaluing their currency they are effectively "taking value" from people who were trading with them relative to the partner's home currency. So lets say someone like Apple contracts to buy 10 million iPhone 6 baseboards, in Rmb at an exchange rate of $100 per board, and now when it comes time to actually take delivery and buy the boards they cost Apple the equivalent of $150 each. Apple needs to pony up an additional half billion dollars for their phones. This then will hit their bottom line in terms of revenue, which means their stock price will go down (they won't be as profitable a company) and so funds holding Apple will lose their value in proportion to their Apple stock. And China has done this by devaluing its currency.

It doesn't change how strong Apple's market presence is, or that they can sell a phone for a ton of money, but it changes the cost/value equation faster than Apple can respond and so there is a disruption in their earnings. That will ripple across a lot of companies.

But is that a 'health' issue for the American economy? Not really. Rather it puts pressure to restructure the costs of the economy into a different place. People still buy iPhones and will for the forseeable future. So the economy is still strong, but if the price of those iPhones doubles their volume will likely fall and so Apple's earnings might be 'weak'.

The stock market is responding to the adjustments in China, internalizing the lack of fiscal oversight in that economy, and pricing it into the value of companies that do a lot of business there. I expect a hell of a correction and some interesting new markets opening up (like India, Vietnam or Thailand if the Thai can get their governance under control) as the cost of doing business in China begins to more accurately reflect the real costs of doing business there.

EDIT: As folks have pointed out the currency hit is reversed, Apple would get its parts for less if they priced them in RMB vs Dollars. Any RMB they were holding in their cash pile would have lost value, so to the extent that their sales in China have not been moved into Euros (we know they aren't repatriated into Dollars for tax reasons) are going to buy less than they did before.

eloff• 11 years ago

Doesn't it go the other way? If your currency decreases in value, exports go up because your goods priced in local currency can be had for less foreign currency.

It makes Apple happy, theoretically. But it also means Chinese goods and services are more competitive globally, which will, of course, hurt the competition.

tome• 11 years ago

So lets say someone like Apple contracts to buy 10 million iPhone 6 baseboards, in Rmb at an exchange rate of $100 per board, and now when it comes time to actually take delivery and buy the boards they cost Apple the equivalent of $150 each.

That sounds like it's the wrong way round.

ChuckMcM2• 11 years ago

You are absolutely correct, complete brain fart on my part. If their pricing in RMB they take the currency hit.

kragen• 11 years ago

So let's follow up on the conclusion, now that you've gotten unreversed. Apple pays less for the phones and becomes more profitable. Foxconn or whoever sees a rise in demand due to their effectively-lower prices and has to raise the prices for the next contracts they sign with Apple and whoever else, but not enough to completely compensate for the lower RMB price, so Apple still wins. Foxconn wins too, since their volume and profit margin is higher than before. Who loses?

Well, Chinese consumers lose, because the phones Foxconn is assembling now cost more renminbi. Samsung (in Korea), TSMC (in Taiwan), and Intel (in the US and Israel) lose, because their competition in Mainland China was just able to lower their prices. In the long run, possibly Apple loses because Foxconn is in a better position to stop being a mere OEM and start competing with Apple directly, just as Microsoft did in the 1980s.

And that's why people have been worried about the RMB devaluation sparking a wave of currency devaluations as governments and central banks attempt to stay competitive with China by applying whatever leverage they have.

ojbyrne• 11 years ago

That graph has become significantly less panic-inducing.

alistproducer2• 11 years ago

It's easy to get out, hard to get back in. I moved 401k money out June 30th. Planned to get back in at SP 1900. If we close down < 2% I'll call bottom and get back in at close prices today. > 2% loss and it signals real fear that is probably not over yet. Either way we'll get a bounce tomorrow.

grellas• 11 years ago

People's investment philosophy will vary and tolerance for risk will play a major role in it all.

My own view is this, and it is based on a lifetime of having made all the typical mistakes.

Steady is the best way to go for your investable funds. That means, go with stocks for a decent segment of your investments but temper this with investments that will help preserve capital when things get rocky. Keep a ratio between the two that is age-appropriate. There is a rule of thumb floating about among advisors that your stock percentage should be 110 minus your age. This may or may not be a good ratio for you but some method that helps discipline you in these decisions will help you and this is not a bad one for many people. The other major factor is to avoid impulse buying or selling and to keep transaction costs at a very low level - and this usually means going with broad-based no-load index funds for much of the ride.

Doing the above will not make anyone rich. It will, however, ensure that you have the best chances of getting decent, normal returns on average over time while helping to preserve your capital as you go. If you want extraordinary returns, get them through your startup or by doing extraordinary things in your work. For your investments, the rule is different. You do not "underperform" by hitting averages with your investments. You simply meet the goal that should be the defining goal for most people in that area.

pbreit• 11 years ago

Better: make a core position in Vanguard LifeStrategy.

PaulHoule• 11 years ago

best: buy $XIV today

branchless6• 11 years ago

The FTSE is where it was 17 years ago. Since this time everything has gotten way more expensive.

Anyone in the UK following this advice from age 20 to 35 is staring down the barrel of working forever.

The problem is they have a share in growth in the UK over the past 15 years and that growth is next to nothing.

IMHO the old advice needs to be taken with caution. This is not your dad's market.

tonyedgecombe• 11 years ago

Yes, there was a bubble so if you invested all in one hit, all in equities, your timing was unlucky and you ignored the return from dividends then it doesn't look good.

batterseapower• 11 years ago

The FTSE 100 total return index is at 5,898.87 i.e. the levels of November 2012: https://www.google.com/finance?cid=15424700

n72• 11 years ago

Selective end points. Dollar cost averaging is a simple way of solving this particular problem.

patdennis• 11 years ago

1) If you put all of your money in exactly 17 years ago, then, yes. You would be at the same place.

2) It still would've been paying you dividends that entire time

3) If you, rather than investing an imaginary lump sum at the top of the market 17 years ago, invested slowly as your savings accumulated over time, you would be ahead.

The FTSE hasn't exactly been sitting still all those 17 years.

cma2• 11 years ago

You have to adjust for dividends.

georgiecasey• 11 years ago

i don't know much about stocks but agree with your last line in general, encapsulated by patio11's tweet

    I occasionally get asked for advice by students. Biggest one: resist following scripts which evolved to serve a world which no longer exists

slg2• 11 years ago

Beyond the slow and steady recommendation, I also think this is a reminder that most people really shouldn't be paying attention to the day to day movement of the stock market. Even after all the panic, standard total market ETFs are currently down between 1-2%. It would look like a perfectly normal day on the market if you ignore the intraday prices. It is amazing how much of the market volatility disappears when you lower the number of data points you are recording. Just keep investing that X% of your paycheck and rebalance a few times a year if needed.

blakecaldwell2• 11 years ago

Yep. If you invest broadly enough, then shrug this off and consider that the market is on sale today. Your existing holdings will return to their yesterday prices at some point, and everything you buy in the meantime will have gone up.

rancur2• 11 years ago

most people really shouldn't be paying attention

eh, IDK about that. I was cooping at a company that bottomed to $2.50 ~February 2008. I had been reading everything I could get my hands on regarding the Fed, their history, and general fiscal policy. I had about $7k in cash I was planning to dump into the company's ticker.

But in February, when it was $2.50, I wasn't quite confident of my analysis.

In May or so I had completed my replica-painting of the full picture, I was sure enough to make a jump. Unfortunately the stock had rebounded to ~$9 by then. I'd missed my chance, Fed had already moved, markets were assured, life was continuing on as normal. They later got bought out (4 years later) for $22/share. Would have wiped out my student debt.

Note, this was not trading on any special insider information I had, it was simply my personal analysis of the stability of the company's business model in a rough economic environment, combined with confidence in Bernanke's unwillingness to permit much of any form of market turmoil (he received his PhD for his analysis of what the Fed did wrong that lead to the great depression-- conclusion: not nearly enough).

off topic: my next BUY recommendation was ARMH in 2010 ~$12.50. I figured nobody could be so much dumber than me and my expertise to not also see the imminent growth of the smartphone market at a time when half of everyone I knew were still on flipphones. So then I checked later and they'd made it all the way to $30-something.

so then I said to myself 'no more' and bought NVDA at $16, but had to sell at $12 for other reasons. Lol.

jsf666• 11 years ago

Just fuck my shit up fam, jesus... and I was thinking about shorting it friday. Oh well, gotta wait it out. Just hope it won't take 5 years not counting inflation

mylons• 11 years ago

and now this headline isn't relevant. stocks are UNCH or ^. white knuckling it

vasilipupkin2• 11 years ago

I just want to offer everyone a professional piece of advice. Large down moves in equity markets is exactly when you should buy equities because that's when expected returns are at their highest.

swagswag2• 11 years ago

Large down moves Thursday, Friday, and now (early) today.

debacle2• 11 years ago

I'll counter with some amateur advice - things still seem historically overpriced.

vasilipupkin2• 11 years ago

stocks are not obviously cheap, I'll give you that. But you have to compare them to other investment alternatives. Cash, Real Estate, Govt Bonds.

adt2bt2• 11 years ago

This got me thinking - is it possible to develop a profitable long-term investment strategy that takes advantage of stock market dips?

For example, say I have $1000 to invest every month. I'll take that $1000 and put $500 into an index fund and $500 into a savings account. Then, once the market dips 10% from its previous high, all the accumulated money in the savings accounts is invested over 4 weeks.

I made a simple google doc to back-test the strategy 5 years on the DJIA. It's very rudimentary, but I'd love to see if anyone tries a different approach.

https://docs.google.com/spreadsheets/d/18-2rBonJPPlg8n6YkpAj...

001sky• 11 years ago

testing (a) trading strategy in a short window ... why?

williesleg• 11 years ago

Usually happens before a big political shift. Buy the viix.

tzm• 11 years ago

From what I've heard from locals.. the recent chemical explosion triggered general fear of wide-spread corruption and an impending economic coup d'état from nationalists who want to disrupt the current power.

plg• 11 years ago

Unless you need to take your money out in the next couple of months (or unless you are facing a margin call) why not consider this as a fire sale? Your favourite stocks and mutual funds, ON SALE!

wutbrodo7• 11 years ago

Exactly, I feel like this hits a good balance of prudence and pragmatism. It's kind of a double-edged sword for me since I happen to be heavily into liquid cash at the moment...but I also have higher cash needs because I quit my job a month ago and am planning on taking 6 mos to a year off.

Either way, beyond a bit of an "emergency fund" on steroids, this is actually how I'm taking it: a good starting point for some conservative DCA.

ap22213• 11 years ago

Interestingly, the people I know who have had the most success in the markets (and who have been around for a while) have told me this, each independently.

I have taken their advice and have done quite well.

icedchai• 11 years ago

In the grand scheme (meaning, 5+ years), this is a small blip. Buy more.

randomname2• 11 years ago

Markets are green again thanks in part to move in AAPL worth over 80B in market cap.

This happened after Tim Cook's email to Jim Cramer, which may have violated Fair Disclosure regulations: https://mobile.twitter.com/carlquintanilla/status/6357996299...

notNow4• 11 years ago

There's a share buyback program ongoing for Apple. So, I am not really surprised that they are defending their stock in the market and bidding it up. Note also that APPL's cash reserves are YUGE and they can play this game for some time.

IceColdCoder2• 11 years ago

I'm just injecting some alternative thought here but I think one major question that needs to be asked about the health of the economy is:

"How much of the weighted average person's day is that person spending on survival".

I don't see how slow shift to a 60-hour instead of a 40-hour work week is indicative of a healthy economy but I could be wrong. To me it seems that survival is taking more and more time when it should be taking less and less if the economy were actually growing. This is probably just a "correction" but I think we will be seeing more and more of these here soon. I've been looking at the robotics industry and I can see them going into full public view within the next decade. The results will be interesting.

theseatoms• 11 years ago

Weighted by what?

IceColdCoder2• 11 years ago

I was thinking of clustering. If you have a large group of people in a general income sub-group then it would weigh more than fewer people in another income subgroup. The point of weighing is that margin-based models depend heavily upon a large consumer base and only certain consumer bases are of any significant size.

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