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Dow plunges 1000 points

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Re: Dow plunges 1000 points

#201

Post by FLUX-YOU »

propman wrote: post #106
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 s…

>There is no way we enter a recession this year unless something comes out of left field.

This is more likely because Trump won the presidency. It's why I'm staying cash until Mueller is done unless we see a few more pints of blood on Wall Street in the next few weeks.

Re: Dow plunges 1000 points

#202

Post by wahern »

gbacon wrote: post #112
TheAdamAndChe wrote: post #82

Earlier quoted context omitted.

It's also has a single Board of Directors, meaning there is still a single point of failure. It's not like putting all of your money on Tesla, but it's still riskier than a mutual fund.

As a BRK.B owner, the elephant in the room is the advanced age of Warren Buffett. No matter how much he and Munger talk soothingly about continuity and succession plans, the unknown is how the company’s stock will fare after Mr. Buffett heads for the great Dairy Queen in the sky.

I think upon his passing there'd be plenty of time to exit without missing a beat.

The value of BRK stock is the net present value of Berkshire's existing holdings, plus perhaps a small and diminishing premium for the convenience of holding stock at the moment of Buffett's future sale and acquisition choices. Because Berkshire is fairly hands-off in terms of managing their holdings, and because its investments have fairly low volatility, in the short-term the stock price should hold steady upon Buffett's exit.

Thus, if owning BRK made sense 10 years ago, then it makes sense to own it until the very last day that Buffett[1] controls the company, and even afterward to the extent the pipeline is filled with his choices.

But maybe I'm misunderstanding something about market dynamics related to how end games play out.

[1] Presuming that Buffett remains Buffet, in control of his faculties and in particular his prescience.

Re: Dow plunges 1000 points

#203

Post by daxorid »

cm2187 wrote: post #200
daxorid wrote: post #126

Earlier quoted context omitted.

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.

Actually the intraday indicative value, i.e. the value of the underlying VIX strategy has to go down by 80%, not the market price of the ETN. Though right now I think we are close. The ticker is XIVIV. I just closed my bbg but I think we were pretty much there. I don't know if non standard trading hours matter though. The trade was too crowded. Too many people shorting the VIX without looking at the risks. This ETN l…

Yes, well, they just posted a CIV/NAV of $4.22, so that's probably the end :)

http://www.velocitysharesetns.com/xiv

Re: Dow plunges 1000 points

#204

Post by thansz »

longerthoughts wrote: post #186

To put things in perspective: https://en.wikipedia.org/wiki/List_of_largest_daily_changes_... Saying "Biggest Point Drop in History" is a deliberate attention-grabber and incites more fear than it probably should. We should be more concerned with percentage changes and at -4.6% this doesn't even make the top 20 daily percentage drops, which cuts off at -6.98% for number 20 (see above link).

This.

You have to take a look at percentage market moves. The markets have been moving up for a long time. A 1000 point drop when the market is at 26,000 is not the same as a 1000 point drop when the market is at 16,000.

Re: Dow plunges 1000 points

#205

Post by totalZero »

craftyguy wrote: post #196
longerthoughts wrote: post #186

To put things in perspective: https://en.wikipedia.org/wiki/List_of_largest_daily_changes_... Saying "Biggest Point Drop in History" is a deliberate attention-grabber and incites more fear than it probably should. We should be more concerned with percentage changes and at -4.6% this doesn't even make the top 20 daily percentage drops, which cuts off at -6.98% for number 20 (see above link).

You're silly if you just look at one day point/percentage drops. I'm not saying we're in for another recession, but many of the other events in the table you linked are actually part of a cluster of big drops, spread over several days. There was a ~600pt drop last Friday. It'll be fun to see what the rest of the week is like!

Do you not agree that relative moves (%) are more useful in characterizing the significance of a selloff?

Re: Dow plunges 1000 points

#206

Post by schoen »

thansz wrote: post #204
longerthoughts wrote: post #186

To put things in perspective: https://en.wikipedia.org/wiki/List_of_largest_daily_changes_... Saying "Biggest Point Drop in History" is a deliberate attention-grabber and incites more fear than it probably should. We should be more concerned with percentage changes and at -4.6% this doesn't even make the top 20 daily percentage drops, which cuts off at -6.98% for number 20 (see above link).

This. You have to take a look at percentage market moves. The markets have been moving up for a long time. A 1000 point drop when the market is at 26,000 is not the same as a 1000 point drop when the market is at 16,000.

The Dow 10K (let alone 20K) still takes getting used to for me -- I remember figures around 4000 in my childhood. ... at which point a 1000-point drop would have been seen as much more significant.

Edit: although apparently I'm remembering a slightly later era than I thought.

Re: Dow plunges 1000 points

#207

Post by cm2187 »

marshray wrote: post #165
Hasz wrote: post #137

Earlier quoted context omitted.

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

Even if it's all by the contract, one would suppose an issuer would think very hard before doing that. It could taint their brand, their other leveraged ETFs, or even bring down more regulations.

Barclays did that I think in 2011. Their ETN was badly designed, the termination event was based on an absolute $ price, not a % movement.

Re: Dow plunges 1000 points

#208

Post by cs702 »

The specter of rising interest rates in the US (driven by higher inflation expectations) appears to be a factor.[a]

Fast-growing companies that are investing aggressively today and whose profits lie far in the future, in particular, are exposed to rising interest rates, due to the higher duration of such companies' cash flows.

Duration, for those here who don't know, is a measure of the sensitivity of present value to interest rates.[b] Duration rises with the amount of time an investor must wait for cash flows, and vice versa.

For example, the present value of $100 of cash flow in 10 years, if the 10-year rate is 2%, is equal to $100/(1.02^10) = $82; if the 10-year rate rises, say, from 2% to 3%, the present value declines to $100/(1.03^10) = $74, or a -10% decline. However, if the $100 in cash flow is in 30 years, and the 30-year rate rises from 2% to 3%, the present value declines from $100/(1.02^30) = $55 to $100/(1.03^30) = $41, or a -25% decline.

In this example, an increase in duration from 10 to 30 years caused the sensitivity of present value to a 1% rise in interest rates to change from a -10% decline to a -25% decline. The longer an investor has to wait for cash flows, the greater the sensitivity of present value to changes in interest rates.

The same ruthless logic applies to companies. The present value of companies whose profitability is in a distant future declines much faster when interest rates rise than the present value of companies certain to generate cash flows in the near future.

Until recently, due to historically low interest rates and no prospects for inflation, the stock market has been rewarding high-investment companies that are sacrificing current profits for growth.

If interest rates continue to rise (along with expected inflation), I'd expect this abruptly to change -- in which case, strap on your seat belts!

[a] https://www.ft.com/content/af1f8e4a-0a23-11e8-8eb7-42f857ea9...

[b] https://www.investopedia.com/terms/d/duration.asp

Re: Dow plunges 1000 points

#209

Post by [deleted] »

hsitz wrote: post #33
valuearb wrote: post #25

Earlier 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…

[deleted]

Re: Dow plunges 1000 points

#210

Post by alex_young »

adsfasdfsad111 wrote: post #169
alex_young wrote: post #136

Earlier quoted context omitted.

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.

It's really not that hard to beat a broad market ETF... for example, the SP500 could easily outperform a total market index.

For instance: SPY
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