Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Interpreting a market plunge

economist.com

Post reply on HN
Print view View original

61–70 of 157 posts

Re: Interpreting a market plunge

#61

Post by isolli »

f_allwein wrote: post #37
EliRivers wrote: post #29

HODL, right! I am, anyway. The standard advice ("Buy low-cost index funds with dividends reinvested, keep buying on a regular basis, let it ride and don't worry about the plunges and the peaks") told us this would happen, and here we are. How to interpret it? I'd go so far as to ask should we interpret it? They get paid for coming up with reasons why things happened (after the fact, I note, although the Economist has…

Had to Google HODL and learned it means 'hold', in the context of crypto currencies losing value. Can't comment on that, but for stocks, definitely yes. Historically, the market has always recovered from slumps. I know this does not mean it always will, but lots of people dropped out of the stock market after the crashes in 2001 or 2008 - for them, it would have been wiser to hodl.

Regarding the very long run, people forget survivor bias. For instance, in the early 20th century, you would have had the choice to invest in three equally promising emerging markets: Argentina, Russia, and the USA. One of those went on to grow for over a century, the other two not so much.

Re: Interpreting a market plunge

#63

Post by nurettin »

Sales of stocks means that the main market movers want to liquidate their assets. Escaping a possible crash or fear of overvaluation are not the only reasons you want cash. You could also be preparing for a huge investment. Considering how privatized USA is, they could be preparing to invest in some government related action or venue. This could even mean an impending war.

Re: Interpreting a market plunge

#64

Post by maaaats »

TekMol wrote: post #62

I hold 50% of my assets in shares and 50% in money. I cannot decide if I should hope for the stock market to go up or down. What do the wise people of HN think?

Up. If you hope for a crash so that you can invest your other money in a dip, you are foolish to try to time the market and would probably be better of to invest it earlier and just spend more time in the market.

Re: Interpreting a market plunge

#65

Post by crucialfelix »

fwdpropaganda wrote: post #24
imron wrote: post #22

Earlier quoted context omitted.

> The things you describe explain why people keep their finger hovering over the "sell" button, they don't explain why precisely today they decided to press it. How much was fingers on buttons, and how much was just automated trading algorithms?

Why is it that everything these days gets blamed on algorithms? Seems like intelectual laziness to me. "Algorithms did it, there's no sense to it, lets not think too hard."

Traders use mental algorithms. Portfolio managers write up trading plans with expectations, theories and the actions they intend to take. Computers are programmed to execute some of those algorithms. There isn't a dividing line between what algorithms in the heads of humans are doing and what the computers are doing, except that the computers are doing it several orders of magnitude faster.

Re: Interpreting a market plunge

#66

Post by dustinmoris »

TekMol wrote: post #60
dustinmoris wrote: post #54

I think we will see a bigger correction very soon. Markets crash periodically and we haven't had a crash for a while now. A periodic crash is not uncommon and actually makes a lot of sense when you think about the high level picture of what really goes on in stock markets. Stock markets are essentially dominated by greed (to get a higher ROI from stocks than through more traditional ways) and this greed leads to an i…

stock markets are dominated by greed Greed is "an inordinate or insatiable longing for unneeded excess". I doubt one can show that this is what drives the stock market. What we probably can agree on is that the stock market is driven by the actions of many actors who try to maximise the utility value of the assets under their control. an increasing over valuation of assets We cannot show that assets are overvalued at…

I never said that we can show that an asset is overvalued, I simply described what actually has happened in the past multiple times and what seems to be happening again.

The truth is that investors will always pump as much money into a stock as long as there is still a logical explanation for a positive ROI. However at some point the stock becomes so hot that the general public will also start pumping money into it (with the simple hope of making some quick and easy $), at which point the value will skyrocket even further until there is no logic explanation anymore and it becomes very difficult to justify the value in any logical way... and that's when it bursts.

Just look at Bitcoin and tell me I'm wrong...

Re: Interpreting a market plunge

#67

Post by rtpg »

Apocryphon wrote: post #42

Here's a question - people often refer to the 2008 recession as a once in a lifetime event. On what basis do they make that statement- because mortgages can't possibly pop as massively twice? What's to prevent another industry (in recent years often rumored to be student loans) from doing the same? Who's to say not another sector is as rotten as real estate was?

I haven't heard that claim too often.

In fact I've heard a hell of a lot of "CDOs are back and as interwoven as ever!" things. Though in theory we've learned a lot, who knows what will happen

From my understanding, American student loans can't be defaulted upon? They might be a bit too particular to hit the issues that happened with mortgages

Re: Interpreting a market plunge

#68

Post by tonyedgecombe »

tome wrote: post #55
tonyedgecombe wrote: post #31

Earlier quoted context omitted.

US companies now have record amount of debt. Yes, and the economy is at record size, nothing surprising here.

They key figure is debt to market cap ratio. So what's that figure?

So what's that figure?

Go and look it up yourself if you are so excited about it, that has nothing to do with the vagueness of the original statement which was what I was highlighting.

Re: Interpreting a market plunge

#69

Post by TekMol »

maaaats wrote: post #64
TekMol wrote: post #62

I hold 50% of my assets in shares and 50% in money. I cannot decide if I should hope for the stock market to go up or down. What do the wise people of HN think?

Up. If you hope for a crash so that you can invest your other money in a dip, you are foolish to try to time the market and would probably be better of to invest it earlier and just spend more time in the market.

Would you argue the same way if I was holding 99.9% of my assets in money and 0.1% in shares? Would you still say I should hope for the stock market to go up? Or is it related to the percentages? If so, where is the threshold?

Re: Interpreting a market plunge

#70

Post by lr4444lr »

RhysU wrote: post #53
mcintyre1994 wrote: post #51

Earlier quoted context omitted.

The idea of an index fund is you're invested in the market as a whole, not a selection of a small number of stocks. So a good index fund will crash when the market as a whole crashes, and recover in line with the market. The entire point is you avoid tying your performance to any selection of say 10 stocks, and typically an index fund will outperform most professional stock pickers.

I like to think that it's being long on Capitalism.

That's exactly what it is, if not going long on human society itself. So far I've found, without fail, that everyone with a strong distrust of the stock market as something "rigged" or a belief that it's somehow an "expendable" part of investing that doesn't affect them has an objectively very poor to non-existent understanding of even basic facts of economic and business activity. Much poorer than I do, at any rate, and I don't really know that much.
Post reply on HN