Biggest by absolute value or by percent?
[deleted]
Dow plunges 1000 points
91–100 of 365 posts
Re: Dow plunges 1000 points
#92Biggest by absolute value or by percent?
It's a great question, because point drops are not a very useful metric.
Re: Dow plunges 1000 points
#93Unprecedented growth leads to unprecedented correction. This is profit booking but huge players. The market will stabilize and start rising again. The fundamentals are still strong
When interest rates rise, stocks become less attractive relative to risk free assets. Even if fundamentals are strong, equity prices drop in response to higher than expected rates. Interest rates are a key input into asset prices and are somewhat independent from fundamentals
Re: Dow plunges 1000 points
#94Earlier quoted context omitted.
> 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 kids college. Could you elaborate?
Buffett had a good quote about it once that I can't find now, but essentially during most of your life you will be a net buyer of stocks. Only at the end, during your retirement, will you be a net seller and only then will you want high prices. Until then, the less you pay for your stock purchases, the better your long term gains will be.
The dip is good timing for Canadians, whose RRSP contribution deadline is coming up March 1st. If you're going to make a big 2017 RRSP contribution and buy ETFs, now is a good time.
Re: Dow plunges 1000 points
#95Earlier quoted context omitted.
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.
VIX measures the risk premium on options on the S&P 500 index. I don't see how total asset value ends up in the denominator?
Another explanation is that VIX is being actively dampened by the growing popularity of the 'short volatility' trade. E.g., the SVXY ETF among others. We're seeing today just how volatile volatility can be!
Re: Dow plunges 1000 points
#96What's with the 600 pt 3pm sell-off and recovery within 5 minutes? Algorithms? I thought massive swing effects are supposed to be under control now?
> are supposed to be under control now Why would you think that? Massive swing effects are often caused or exacerbated by algorithms trading on momentum. They do that because trading on momentum usually pays, and doing the hard work of fundamental value investing is difficult and also hard to scale. Momentum trading is fine if only a few people are doing it, but if enough of the market transitions to having 'no opini…
Unlikely. Momentum works terribly for equities, doubt there are many people doing it.
Re: Dow plunges 1000 points
#97Earlier quoted context omitted.
Buffett had a good quote about it once that I can't find now, but essentially during most of your life you will be a net buyer of stocks. Only at the end, during your retirement, will you be a net seller and only then will you want high prices. Until then, the less you pay for your stock purchases, the better your long term gains will be.
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…
> 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.
Why should it be that way?
Re: Dow plunges 1000 points
#98I 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.
So are you making the case the US is going through a systemic change away from growth, and will start a multi-decade economic contraction?
Re: Dow plunges 1000 points
#99I do worry that this is the end of the current bull market and we'll be entered into a recession in the next half year or so.
Recessions are technically at the minimum 9 months, three quarters of negative growth Edit: it's two quarters as pointed out below
I said enter into. You only find out when the recession started 6 months after it has begun. So what I said is completely feasible.
Re: Dow plunges 1000 points
#100Earlier quoted context omitted.
> 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 kids college. Could you elaborate?
Buffett had a good quote about it once that I can't find now, but essentially during most of your life you will be a net buyer of stocks. Only at the end, during your retirement, will you be a net seller and only then will you want high prices. Until then, the less you pay for your stock purchases, the better your long term gains will be.
Buffett also went all in on Wells Fargo, so nobody's perfect.