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Dow plunges 1000 points

cnbc.com

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Re: Dow plunges 1000 points

#61

Post by Normal_gaussian »

optimuspaul wrote: post #51
lorenzq wrote: post #21

Earlier quoted context omitted.

You don't want to buy your groceries when they're not on sale.

because that would be stealing? :p Seriously though, I think this is a bad analogy. I buy groceries when I need groceries, sales have little bearing on that. A car however, that is something that wait for a deal before I buy.

My car costs me about the same as my groceries over the same period of time; they are very comparable in price. As for sales - buying in season and buying in bulk saves huge amounts of money, a larger %age than I expect to get off a special deal on a car.

Re: Dow plunges 1000 points

#62

Post by dereg »

dawhizkid wrote: post #59

Surprised no one has made the cryptocurrency equivalent of VIX that moves in the opposite direction of a basket of cryptocurrencies.

VIX is based off of the S&P 500 options premiums. There’s not an options market on crypto baskets that I know of (yet).

Re: Dow plunges 1000 points

#63

Post by quotha »

valuearb wrote: post #14

I hate to be nitpicking about good news, but the S&P 500 is down less than 7% from it's peak, that's hardly a crash. Especially after gaining 26% over the previous year. And, after increasing over 90% the last 5 years. Obviously, either way a decline in the stock market indexes is good news for almost everyone. I'm hoping for a real crash as I need to save lots more money, not just for my retirement but also for my k…

Nikkei 225 Hit All-Time High of 38,957.00 on December 29th, 1989.

Re: Dow plunges 1000 points

#64

Post by poke111 »

enoch_r wrote: post #49
hsitz wrote: post #33

Earlier quoted context omitted.

Another way of thinking about it is: on average, stock value over the long term (20+ years) is very likely to be in range of, say, 5%/year, plus or minus (actual number is not that important for our purpose here), after adjusting for inflation. If stocks have been on a recent runup, gaining, say, 50% or 100% over a period of a few years, then they are very likely to grow more slowly than average (i.e., revert to the…

> they are very likely to grow more slowly than average (i.e., revert to the mean) I mostly agree with you, but this is basically the gambler's fallacy. If I'm flipping a coin every second for days, and I hit a run of 10 heads in a row, "reversion to the mean" just means that the next 10 flips are likely to be less extreme than the previous 10. It does not mean that I should expect "more tails than usual" for the nex…

No. The gambler's fallacy is when we ascribe dependency to independent events. Stock performance tomorrow is very much NOT independent of stock performance today, e.g. "market correction"

Re: Dow plunges 1000 points

#65

Post by buttcoinslol »

psyc wrote: post #31
cpncrunch wrote: post #11

Earlier quoted context omitted.

It's certainly a good idea to buy when stocks are undervalued. However at the moment they are likely still overvalued, and it's also quite early days in this current sell-off. I just sold my entire portfolio (apart from retirement funds) earlier this morning, as we want to buy a house later in the year and don't want to get trapped if the stock market completely crashes.

I’ve been watching for a sell signal for about 6 months, and I also got (mostly) out this morning.

There are other strategies to protect long positions if you have cash or an appetite for risk, this allows you to realize the gains from holding during the entire runup.

It does require a good exit strategy for whatever hedge you choose.

Re: Dow plunges 1000 points

#66

Post by macmccann »

enoch_r wrote: post #49
hsitz wrote: post #33

Earlier quoted context omitted.

Another way of thinking about it is: on average, stock value over the long term (20+ years) is very likely to be in range of, say, 5%/year, plus or minus (actual number is not that important for our purpose here), after adjusting for inflation. If stocks have been on a recent runup, gaining, say, 50% or 100% over a period of a few years, then they are very likely to grow more slowly than average (i.e., revert to the…

> they are very likely to grow more slowly than average (i.e., revert to the mean) I mostly agree with you, but this is basically the gambler's fallacy. If I'm flipping a coin every second for days, and I hit a run of 10 heads in a row, "reversion to the mean" just means that the next 10 flips are likely to be less extreme than the previous 10. It does not mean that I should expect "more tails than usual" for the nex…

This is the definition of the gambler's fallacy. However, if you look at a chart of the stock market vs. a chart of a coin being flipped many times, they will look very different. While a coin being flipped will either asymptotically trend towards zero or a positive slope of .5 depending upon how it is charted, the stock market will have large peaks and valleys, meaning that after a period of high growth (overvaluation), the market will not continue to value these stocks at a steady growth of 10% per year. Instead, the market will correct the value of these stocks, which looks like a short term undervaluation and so we should expect "more tails than usual".

Re: Dow plunges 1000 points

#67

Post by keebEz »

abakker wrote: post #57
an4rchy wrote: post #56

Interesting to see the volatility in all these market these days. I wonder how much the spread of information/social media plays a role in this. it does seem like most of these swings seem to be from retail investors.

Interesting that VIX has been at an all time low for the last year or more. So volatility has been at an all time low. These last few days have been rough, though.

VIX attempts to measure volatility but it is not volatility itself. The lowness of VIX has been driven by the relative increase of the denominator (total asset value, which has surged in the last few years) not by a decrease of the numerator.

In general, it's usefulness as an indicator of volatility has decreased lately.

Re: Dow plunges 1000 points

#68

Post by bottled_poe »

enoch_r wrote: post #49
hsitz wrote: post #33

Earlier quoted context omitted.

Another way of thinking about it is: on average, stock value over the long term (20+ years) is very likely to be in range of, say, 5%/year, plus or minus (actual number is not that important for our purpose here), after adjusting for inflation. If stocks have been on a recent runup, gaining, say, 50% or 100% over a period of a few years, then they are very likely to grow more slowly than average (i.e., revert to the…

> they are very likely to grow more slowly than average (i.e., revert to the mean) I mostly agree with you, but this is basically the gambler's fallacy. If I'm flipping a coin every second for days, and I hit a run of 10 heads in a row, "reversion to the mean" just means that the next 10 flips are likely to be less extreme than the previous 10. It does not mean that I should expect "more tails than usual" for the nex…

It might appear that way but stock prices are actually tied to economic performance, not coin flips.

Re: Dow plunges 1000 points

#69

Post by konschubert »

enoch_r wrote: post #49
hsitz wrote: post #33

Earlier quoted context omitted.

Another way of thinking about it is: on average, stock value over the long term (20+ years) is very likely to be in range of, say, 5%/year, plus or minus (actual number is not that important for our purpose here), after adjusting for inflation. If stocks have been on a recent runup, gaining, say, 50% or 100% over a period of a few years, then they are very likely to grow more slowly than average (i.e., revert to the…

> they are very likely to grow more slowly than average (i.e., revert to the mean) I mostly agree with you, but this is basically the gambler's fallacy. If I'm flipping a coin every second for days, and I hit a run of 10 heads in a row, "reversion to the mean" just means that the next 10 flips are likely to be less extreme than the previous 10. It does not mean that I should expect "more tails than usual" for the nex…

No, it's not like gambling.

Unlike in a casino, the returns and value of stocks are loosely coupled to the real economy.

If stock values grow quicker than the economy, then we should expect a correction, because of that loose coupling.

Of course, markets can stay irrational longer than we can stay solvent, so I wouldn't try to time it.

Re: Dow plunges 1000 points

#70

Post by wirelessest »

enoch_r wrote: post #49
hsitz wrote: post #33

Earlier quoted context omitted.

Another way of thinking about it is: on average, stock value over the long term (20+ years) is very likely to be in range of, say, 5%/year, plus or minus (actual number is not that important for our purpose here), after adjusting for inflation. If stocks have been on a recent runup, gaining, say, 50% or 100% over a period of a few years, then they are very likely to grow more slowly than average (i.e., revert to the…

> they are very likely to grow more slowly than average (i.e., revert to the mean) I mostly agree with you, but this is basically the gambler's fallacy. If I'm flipping a coin every second for days, and I hit a run of 10 heads in a row, "reversion to the mean" just means that the next 10 flips are likely to be less extreme than the previous 10. It does not mean that I should expect "more tails than usual" for the nex…

But shifts in the market aren't independent random events. You can definitely find examples of dramatic, real shifts in valuation but in the vast majority of cases business value is created over time. That rate of growth might be slightly faster or slightly slower, but you can be certain it's within reasonable bounds. So when speculation or scare drives the price higher or lower, you can be sure it will find its way back.
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