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Dow plunges 1000 points

cnbc.com

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Re: Dow plunges 1000 points

#131

Post by carbocation »

jedberg wrote: post #127

Let's say you're a smart investor, and you think a big crash is coming. Right now everything you have is in stocks. What do you move it to to hedge your risk?\\ Edit: To clarify, I don't have everything in stocks. I'm just looking for good advice on how to further diversify. I'm aware that timing the market is a fool's errand. :)

If your time horizon is long enough, Bogle would suggest that you don't try to time the market. Buffet obviously held some amount of cash so he could deploy it during extraordinary opportunities (such as the 2008/2009 crash).

Re: Dow plunges 1000 points

#132

Post by outside1234 »

jedberg wrote: post #127

Let's say you're a smart investor, and you think a big crash is coming. Right now everything you have is in stocks. What do you move it to to hedge your risk?\\ Edit: To clarify, I don't have everything in stocks. I'm just looking for good advice on how to further diversify. I'm aware that timing the market is a fool's errand. :)

A smart investor will always have a set of numbers in mind - say 60% stocks and 40% bonds - and every 6 months will rebalance the portfolio to that.

Over decades this will return better returns at dramatically less stress than any other approach.

Re: Dow plunges 1000 points

#133

Post by cgb223 »

adventured wrote: post #110
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.

I haven't heard this side of the argument, do you have a source on that data?

Re: Dow plunges 1000 points

#134

Post by dragonwriter »

bduerst wrote: post #122
workthrowaway27 wrote: post #37

Earlier quoted context omitted.

I'd be interested to see the value of the stock market compared to interest rates. My bet is the market is only a little bit high if you account for how low interest rates have been for the past ~10 years.

Did you mean inflation rates? Because the interest rates control the cost of new money, while inflation reflects the change in value.

Well, interest rates are the yield an on alternative investment to stocks, so they make sense as a comparator, too.

Re: Dow plunges 1000 points

#135

Post by noir_lord »

jedberg wrote: post #127

Let's say you're a smart investor, and you think a big crash is coming. Right now everything you have is in stocks. What do you move it to to hedge your risk?\\ Edit: To clarify, I don't have everything in stocks. I'm just looking for good advice on how to further diversify. I'm aware that timing the market is a fool's errand. :)

Canned goods and shotgun shells?

Commodities possibly I guess.

It's a hard one when the stock market has been the only game in town for about a decade.

Re: Dow plunges 1000 points

#136

Post by alex_young »

jedberg wrote: post #127

Let's say you're a smart investor, and you think a big crash is coming. Right now everything you have is in stocks. What do you move it to to hedge your risk?\\ Edit: To clarify, I don't have everything in stocks. I'm just looking for good advice on how to further diversify. I'm aware that timing the market is a fool's errand. :)

A broad market ETF.

Over time, it's nearly impossible to beat a diversified index fund with any other strategy.

Market timing is bad for your money and your sanity.

Re: Dow plunges 1000 points

#137

Post by Hasz »

daxorid wrote: post #126
drchiu wrote: post #39

Earlier quoted context omitted.

Was 35 I think. They temporary halted inverse derivatives like SVXY.

I highly doubt the halt will be very temporary. SVXY and XIV are undergoing forced unwinds after-hours and will very likely be terminated. XIV in particular terminates at an 80% position loss, per its prospectus.

Credit Suisse is not obligated too, but it's likely they will.

Re: Dow plunges 1000 points

#138

Post by bduerst »

matwood wrote: post #105
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 i…

>If you think a recession is coming, what will be the trigger(s)?

Not in the immediate timeframe, but there are some potential breakers looming out there that have potential to hit in the next year or three.

The first is inflation, and the fact that we just pulled a massive tax cut. This will probably lead to stock buybacks, throwing gasoline onto the already booming economy. Usually it's best to save the cuts for busts, to stimulate growth. Now it's like throwing that third fuel pack into the train engine on Back to the Future III.

The second is the education bubble. The wealth gap is slowly but steadily growing for the current generation, and student loans are a strong cause. This is more insidious because you're turning out a generation with decreased buying power that they won't recover from without intervention. Depending on the method of the intervention, it could lead to debt disappearing which will cause another recession.

Lastly is the housing bubble. It busted in some areas but is still booming in others, thanks to no financial reform to prevent it from happening again. This alone won't be a large enough factor to trigger another recession, but could when combined with another smaller cause, like inflation. The fed has moved up the interest rate increase schedule because it's becoming obvious that we're looking at signals pointing to increases in inflation.

Re: Dow plunges 1000 points

#140

Post by marcosdumay »

Normal_gaussian wrote: post #61
optimuspaul wrote: post #51

Earlier quoted context omitted.

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.

Closely controlling all of your grocery prices costs way more labor than closely controlling all of your car prices.

That said, I do adjust the amount I buy from groceries based on the current price. It's a cheap (in labor) way to save on them, but has lower gains than actively searching for deals.

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