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Dow plunges 1000 points

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Re: Dow plunges 1000 points

#241

Post by longerthoughts »

dkhenry wrote: post #195
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).

But I think it clearly shows the standard of journalism we live with. This is a headline about numbers so we can easily debunk it by looking at the numbers, but almost every headline you read has been sensationalized in a similar fashion. This is the kind of reporting you expect from tabloids.

>This is the kind of reporting you expect from tabloids.

Unfortunately this is the kind of reporting I've come to expect from everyone. I can't necessarily blame them - their job is getting more views than the other guy and "Dow Has Bad Day" doesn't attract as many viewers as "DOW HAS WORST DAY EVER". At the end of the day it wasn't a lie, it was just going with the more interesting stat without regard for whether or not it was the most informative for readers. I wish it wasn't so, but we can't expect better without changing the incentives.

Re: Dow plunges 1000 points

#242

Post by Obi_Juan_Kenobi »

starpilot wrote: post #216
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).

It looks like it might be in the top 100 though. Considering these are changes per day , and the chart covers around 100 years or 25,000 trading days, this puts it in the top 0.4% of largest percentage daily losses. So, it does appear to be a significant losing day if 99.6% of such days are smaller in magnitude.

It's also significant given the overall state of the market.

http://www.macrotrends.net/1319/dow-jones-100-year-historica...

http://www.multpl.com/inflation-adjusted-s-p-500

Even accounting for an overall growth trend (e.g. real GDP) the market is looking quite overbought and prepared for a major crash. Signs of weakness like this are significant. It certainly doesn't guarantee a crash, but it's newsworthy IMO. Especially in the context of a decade of QE and the fed raising rates.

Re: Dow plunges 1000 points

#243

Post by astrodust »

matwood wrote: post #98
quotha wrote: post #63

Earlier quoted context omitted.

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?

Even during the darkest days of the "lost decade" in Japan their companies never gave up on manufacturing and innovating. There were struggles, failures, but also successes. In that time Sony managed to dominate televisions and, later on, game consoles.

The level of utter destruction the US economy will face if it continues to double down on hedge-fund style acquisition/mergering of every one plus dog is hard to fathom, but it will be considerable. The remaining manufacturers are being managed into the ground, everything they do is being out-sourced, "streamlined", and systematically destroyed.

I wouldn't be surprised if the handful of companies that still make things in the US, like Ford, Boeing, and General Electric, are bought up, "reorganized" and sold off piecemeal, squeezing some juicy shareholder value out of them before throwing out the husk.

You have to do more than "invest" in things in order to have a functional economy. Shares don't employ people, sales of product and services do, and if people can't afford those products or services because you laid them all off as a cost-saving measure then you're doomed.

Re: Dow plunges 1000 points

#244

Post by ajmurmann »

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…

Trying to find a correlation between how the actual economy is doing and the current president is in my opinion a foolish endeavor. It takes way too long for a policy change to actually impact the economy and on top of that it's pretty much impossible to isolate the cause of the economic change. How the market reacts in the short term is even less relevant since it really only says how a certain group of people likes the change and isn't necessarily related at all to how the economy will nee impacted by the change.

Every time a president claims economic growth to be because of them they reveal themselves to either be a liar or a fool.

Re: Dow plunges 1000 points

#245

Post by vkou »

mtanski wrote: post #218
leggomylibro wrote: post #197

Earlier quoted context omitted.

I dunno, I thought the BBC's coverage laid out some possible rationales without being too over-the-top. And while it isn't a tabloid, they aren't exactly a finance-focused paper: http://www.bbc.com/news/business-42942921 >...It is the largest fall in percentage terms since August 2011, when markets dropped in the aftermath of "Black Monday" when Standard & Poor's downgraded its credit rating of the US. >US investors…

>If salaries rise, the expectation is that people will spend more and push inflation higher. Sure sucks to be a worker. When your salary rises your real gains will be inflated away.

If salaries aren't coming out of investor profits, they have to come out of the cost of goods.

The only way workers can win is:

1. Productivity gains make goods easier to make.

2. A bigger share of investor profits get redistributed to workers, be it through taxes, pension fund investments, co-ops.

#2 will not be happening anytime soon.

Re: Dow plunges 1000 points

#246

Post by stevenwoo »

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.

I did a quick check and compared VOO (SP500) versus VTI (total market) and they have an equivalent performance over the past five years (within 0.20% gain), VOO didn't exist ten years ago and missed the last big crash. Both hold the same top ten holdings with the slight less weighting for VTI that one would expect. This may be harder than you think.

Re: Dow plunges 1000 points

#248

Post by Retric »

starpilot wrote: post #216
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).

It looks like it might be in the top 100 though. Considering these are changes per day , and the chart covers around 100 years or 25,000 trading days, this puts it in the top 0.4% of largest percentage daily losses. So, it does appear to be a significant losing day if 99.6% of such days are smaller in magnitude.

Dow has more up days than down. So among down days this is closer to 1% than 0.4%.

Re: Dow plunges 1000 points

#249

Post by vkou »

PoachedSausage wrote: post #174
hsitz wrote: post #141

Earlier quoted context omitted.

William Bernstein has argued pretty well that the growth of economies over the long term has held pretty stable over (surprisingly) the last several hundred years. See his book, "The Birth of Plenty": https://www.amazon.com/Birth-Plenty-Prosperity-Modern-Create... The keys to economic growth he identifies are (1) property rights, (2) scientific rationalism, (3) capital markets, and (4) adequate transportation/communi…

He missed out (5) Abundant fossil fuels.

This is the real cause of economic growth. The Soviet Union and the People's Republic of China industrialized at only a slightly slower rate then the West, despite not having much in the way of property rights or capital markets.

Without two hundred years of unsustainable consumption of fossil fuels, property rights or capital markets wouldn't have given us a fraction of the economic growth that we got. Stock exchanges don't do much for you when 97% of your population are either subsistance peasants, or make hand-crafted tools used by subsistance peasants, and you have to spend 8 hours a day banging rocks together to stay warm and to scare away mountain lions.

#4 is also only possible because of #5.

Re: Dow plunges 1000 points

#250

Post by wrs »

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).

As an index bizarrely weighted by price per share and a somewhat arbitrary divisor, the DJIA isn't what you'd choose to report on in the first place if you cared about anything but sentiment.
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