Dow plunges 1000 points • Hacker News Board

Re: Dow plunges 1000 points

#101

Post by gibybo » Mon, Feb 05, 2018, 10:07 PM UTC

tnorthcutt wrote: post #73

makomk wrote: post #47

Earlier quoted context omitted.

There's also apparently something interesting happening with the bond market. A fairly standard retirement strategy is to gradually move your investments into more stable bonds as your retirement date approaches. Except that because of boomer retirement, there's quite a lot of people doing this - mix in some quantitative easing, and suddenly a lot of money is chasing a limited pool of bonds, causing low yields and ot…

On some level, though, all of retirement is a little ponzi-like; ultimately you're always relying on the current working population to pay for your retirement, no matter what investments you put into your pension fund. Well, no, not really. You're relying on the fact that you own some assets, which you can sell to someone else who wants to own those assets. That's very much not "ponzi-like".

Those assets only produce income because of the current working population. This isn't strictly required of course, but it has been the case for a long time and is likely to remain mostly true for the foreseeable future.

Re: Dow plunges 1000 points

#102

Post by propman » Mon, Feb 05, 2018, 10:07 PM UTC

Inflation finally is going up after years and we can get out of this stagnating economy. Wage growth up 3% in new January report and so we can finally expect interest rates to rise faster like they did in the past. Many investors, especially institutional ones have for years thought the stock market has been over priced but where else to park money because interest rates are too low?

Overall the 3% wage growth is huge for the economy especially because unemployment is so low. Other economic indicators also show a very healthy economy so when the next recession hits we'll have the tools to stop it. Inflation not rising has like stated baffled everyone so glad we are now dealing with what we know rather than wading into the unknown. The normal rules seem to apply again.

This is also why presidents shouldn't make their number one accomplishment the market because often times market crashes don't correlate with recessions or a poor economy. Trump did have a huge effect on the market, but not 10% which he thinks he did. That said the market is still higher than it was 5 weeks ago.

Risk averse savers will finally be rewarded. My biggest fear is the huge deficit, and the huge spending. I think the tax cut is great long term but could have been made significantly better, and could have scored under $100B deficit over 10 years under dynamic scoring (currently at 500B) if they decreased the top rate but still made it significantly higher than what it is today, and made the global min tax per individual countries but payable over time rather than all combined.

Re: Dow plunges 1000 points

#103

Post by adventured » Mon, Feb 05, 2018, 10:08 PM UTC

fujipadam wrote: post #85

Unprecedented 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

Have you looked at the extreme bubble valuations that are essentially everywhere in the market? The fundamentals are horrific.

2.x% GDP growth stacked against peak PE ratios like ~40 by Coca Cola (KO), with zero (or negative) growth for years.

Who are the crazy investors paying that? The US and global economy can't expand fast enough to pull down these multiples in a reasonable amount of time.

50 times earnings for PayPal, for astounding 15% style growth. And similar for Netflix, except at 200 times earnings. Or Activision up at 50x for similarly uninspiring growth. Could always buy Amazon on the moon at 150-200 times earnings, and wait a decade until their earnings catch up. There's always the exciting Microsoft, almost zero inflation adjusted growth for a decade ($17.6b in net income for 2008), in exchange I get to pay 30x earnings.

I guess there's always Walmart. I can pay 23-26 times earnings, for a company that has had falling earnings for years. Or 28-30 times for 3M, where I can get years of zero growth for that nice fat multiple.

And so on and so forth it goes, across the entire spectrum.

Investors were begging to get crushed up at Dow 26k. The recent surge into the market by retail investors is one of the more classic indicators that a bull run is done. They universally arrive late to the party.

Re: Dow plunges 1000 points

#104

Post by davrosthedalek » Mon, Feb 05, 2018, 10:10 PM UTC

tnorthcutt wrote: post #73

makomk wrote: post #47

Earlier quoted context omitted.

There's also apparently something interesting happening with the bond market. A fairly standard retirement strategy is to gradually move your investments into more stable bonds as your retirement date approaches. Except that because of boomer retirement, there's quite a lot of people doing this - mix in some quantitative easing, and suddenly a lot of money is chasing a limited pool of bonds, causing low yields and ot…

On some level, though, all of retirement is a little ponzi-like; ultimately you're always relying on the current working population to pay for your retirement, no matter what investments you put into your pension fund. Well, no, not really. You're relying on the fact that you own some assets, which you can sell to someone else who wants to own those assets. That's very much not "ponzi-like".

It is, in the limited sense, that you need to find somebody to sell it to. That must be the current working populations in the end. Exception is if you just save money on account without interest.

Re: Dow plunges 1000 points

#105

Post by matwood » Mon, Feb 05, 2018, 10:10 PM UTC

bhouston wrote: post #3

I 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.

Stock market corrections do not always lead to or cause a recession (or vice versa). Many Americans do not even own stocks, so something like today will be a passing news item barely noticed.

If you think a recession is coming, what will be the trigger(s)? Right now companies are making money, wages are finally growing, and jobless claims are near what some would say is full employment. The only real euphoria I see is in crypto, and I just don't see a problem there being able to spread economy wide like what happened in housing.

Re: Dow plunges 1000 points

#106

Post by propman » Mon, Feb 05, 2018, 10:11 PM UTC

bhouston wrote: post #3

I 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.

There is no way we enter a recession this year unless something comes out of left field. Interviews with hundreds of economists and they think this is the least likely year to have a recession in history. Gdp is not going to drop due to the tax cuts. The cuts might cause problems in a few years but you have to realize marker doesn't correlate with the economy. In fact it's dropping because the economy is picking up steam causing interest rates to rise.

Re: Dow plunges 1000 points

#107

Post by buttcoinslol » Mon, Feb 05, 2018, 10:12 PM UTC

krrrh wrote: post #90

buttcoinslol wrote: post #65

Earlier quoted context omitted.

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.

Do you want to list some of the ones you’re thinking of? I’m trying to level up on hedging strategies for retail investors. I was thinking of buying VIX on Friday, and am kicking myself for missing out now.

There are a range of ETFs that aim to have inverse daily returns to different things. I bought some SPXU, which aims to offer 3x the inverse daily return of the S&P 500. It works for this use case, betting that the S&P will fall. There are risks to using leverage, and inverse ETFs are meant for short term bets (a few days at most).

Re: Dow plunges 1000 points

#108

Post by bduerst » Mon, Feb 05, 2018, 10:13 PM UTC

gibybo wrote: post #101

tnorthcutt wrote: post #73

Earlier quoted context omitted.

On some level, though, all of retirement is a little ponzi-like; ultimately you're always relying on the current working population to pay for your retirement, no matter what investments you put into your pension fund. Well, no, not really. You're relying on the fact that you own some assets, which you can sell to someone else who wants to own those assets. That's very much not "ponzi-like".

Those assets only produce income because of the current working population. This isn't strictly required of course, but it has been the case for a long time and is likely to remain mostly true for the foreseeable future.

This is some strange, broad descriptive logic that makes me think you just want to give credit to the working population for retirees. You could make similar claims about consumers or infrastructure being required for assets to make income, or any other facet of an economy.

It doesn't make any of it like a ponzi scheme.

Re: Dow plunges 1000 points

#109

Post by nodesocket » Mon, Feb 05, 2018, 10:13 PM UTC

krrrh wrote: post #90

buttcoinslol wrote: post #65

Earlier quoted context omitted.

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.

Do you want to list some of the ones you’re thinking of? I’m trying to level up on hedging strategies for retail investors. I was thinking of buying VIX on Friday, and am kicking myself for missing out now.

Curious what instrument you were going to buy the VIX through? $VXX? $VXX was only up (coughing) 33% while the CBOE VIX was/is up nearly 100+ %.

Re: Dow plunges 1000 points

#110

Post by adventured » Mon, Feb 05, 2018, 10:13 PM UTC

propman wrote: post #102

Inflation finally is going up after years and we can get out of this stagnating economy. Wage growth up 3% in new January report and so we can finally expect interest rates to rise faster like they did in the past. Many investors, especially institutional ones have for years thought the stock market has been over priced but where else to park money because interest rates are too low? Overall the 3% wage growth is hug…

The wage growth would be nice, except actual wage growth isn't anywhere near 3%. That's the nominal figure.

For production and non-managerial positions, which is nearly the entire economy, inflation adjusted annual wage growth is under 1%. We'll need to see 4% or 5% nominal wage growth, with inflation holding at 2% or lower, to generate meaningful wage gains at the median.