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Dow plunges 1000 points

cnbc.com

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Re: Dow plunges 1000 points

#331

Post by carlmr »

eli_gottlieb wrote: post #299
sokoloff wrote: post #252

Earlier quoted context omitted.

I think of money as a claim check on labor (and to a lesser extent, other resources). If everyone's income rises by 5% (and most of most people's income is spent rather than saved), I would expect prices to rise by about 5% and find that entirely logical.

>If everyone's income rises by 5% (and most of most people's income is spent rather than saved), I would expect prices to rise by about 5% and find that entirely logical. Generally everyone's income would be rising 5% either from inflation, which amounts to a transfer from creditors to debtors, or from growth, in which case the total basket of goods and services available has grown 5% and there's no need for prices t…

You always have a mix. There will be growth in some markets, and inflation in others.

Humans tend to eat always roughly the same amount of food (except if they can't afford it). So food prices generally inflate with wage increases. Growth leads to bigger televisions, safer cars, faster internet being available at roughly the same price.

Re: Dow plunges 1000 points

#332

Post by pvdebbe »

arbuge wrote: post #279
jimmytucson wrote: post #257

Earlier quoted context omitted.

Right. Better yet, wait for the end of this correction, then buy more stock. Better still, sell any stock you own, and at the end of this correction, buy it all back and more at a cheaper price. Yeah, that’s the ticket! Guys, all we need to do is find out when this correction is going to end. I feel like we can narrow it down to between one day and one year from now.

>> wait for the end of this correction How exactly do you decide the end of it has been reached?

Whatever money I'd put in right now, I'd diversify the time component. Instead of buying 1x at once today, tomorrow, buy 0.2x every two/three days.

Re: Dow plunges 1000 points

#333

Post by tarsinge »

macmccann wrote: post #66
enoch_r wrote: post #49

Earlier quoted context omitted.

> they are very likely to grow more slowly than average (i.e., revert to the mean) I mostly agree with you, but this is basically the gambler's fallacy. If I'm flipping a coin every second for days, and I hit a run of 10 heads in a row, "reversion to the mean" just means that the next 10 flips are likely to be less extreme than the previous 10. It does not mean that I should expect "more tails than usual" for the nex…

This is the definition of the gambler's fallacy. However, if you look at a chart of the stock market vs. a chart of a coin being flipped many times, they will look very different. While a coin being flipped will either asymptotically trend towards zero or a positive slope of .5 depending upon how it is charted, the stock market will have large peaks and valleys, meaning that after a period of high growth (overvaluati…

I recommend you look at the random walk hypothesis, the chart (not the average) of a coin flipped does not trend towards 0 and looks surprisingly similar to stock charts

Re: Dow plunges 1000 points

#334

Post by ec109685 »

purplezooey wrote: post #264
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…

Future generations will have to pay for the deficit in SS and Medicare shortfalls, so voters today don't care.

What happens if they don’t pay? Will the federal government go bankrupt? How much debt is too much and why?

Re: Dow plunges 1000 points

#335

Post by dragonwriter »

ec109685 wrote: post #334
purplezooey wrote: post #264

Earlier quoted context omitted.

Future generations will have to pay for the deficit in SS and Medicare shortfalls, so voters today don't care.

What happens if they don’t pay? Will the federal government go bankrupt? How much debt is too much and why?

> What happens if they don’t pay?

Workers today relying on those programs in retirement will find them reduced or eliminated.

Re: Dow plunges 1000 points

#336

Post by imtringued »

prepend wrote: post #181
graeme wrote: post #121

Earlier quoted context omitted.

You can't eat an asset. You can only eat what someone else produces, and then only if you can convince them to give you food in exchange for your asset. This is counterintuitive, but globally saving is not possible, in a financial sense. IIRC from economic models it nets out to investment. Which makes sense. Real world saving is amassing a grain store, or an oil stockpile in a strategic reserve, etc And we can't do v…

You can definitely eat stuff bought with the earnings of assets. Retirement is non-ponzi like because the assets appreciate in value due to increased predicted future earnings. This is totally different from paying out what others pay in. Assets can appreciate in value and income even without new investment.

>You can definitely eat stuff bought with the earnings of assets.

Saving money is an illusion. The government can't just put your pension contributions into a savings account and withdraw it decades in the future. It must use the contributions of current workers to pay the pensions of current retirees.

Food doesn't last forever. If you buy food in your 40s the food is no longer edible in your 60s. If you don't buy food and instead choose to save your money the food is still going to rot away. You now have money but no food. As a retiree you are dependent on the current working generation to work for your food.

Re: Dow plunges 1000 points

#337

Post by gaius »

pfarnsworth wrote: post #269
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).

The only ones that matter are the ones that occur after roughly 1995. Most people weren't in mutual funds or stocks the way they are today. When the stock market dropped 50% in 2008/2009, so many people in retirement age were ruined because their retirement money was in the markets. A greater number of people's financial health is based on the stock market in 2018 than it ever did in the 1930s or 40s. In 1987, when t…

One of the great feats of social engineering that Wall Street has done in the several decades is convincing regular people that they should have their money in the stock market.

Ironically you could call this “owning the means of production”

Re: Dow plunges 1000 points

#338

Post by draw_down »

gaius wrote: post #337
pfarnsworth wrote: post #269

Earlier quoted context omitted.

The only ones that matter are the ones that occur after roughly 1995. Most people weren't in mutual funds or stocks the way they are today. When the stock market dropped 50% in 2008/2009, so many people in retirement age were ruined because their retirement money was in the markets. A greater number of people's financial health is based on the stock market in 2018 than it ever did in the 1930s or 40s. In 1987, when t…

One of the great feats of social engineering that Wall Street has done in the several decades is convincing regular people that they should have their money in the stock market. Ironically you could call this “owning the means of production”

Nope.

Re: Dow plunges 1000 points

#339

Post by fallingfrog »

Market crashes don't necessarily have to result in economic pain. But when they did, both in 2008 and 1929, it was because the rise in stock prices was financed by debt. I'm worried that that might be the case today in the form of leveraged buybacks and the like, but I can't find any statistics on how much of the current asset bubble was debt financed. I suppose we'll know soon enough.

Re: Dow plunges 1000 points

#340

Post by prepend »

mcguire wrote: post #285
prepend wrote: post #175

Earlier quoted context omitted.

Cool. I’d like to see that chart because there will need to be some interesting assumptions about taxes. The 20th century was particularly good and I think the average return was closer to 6 than 3.

https://www.crestmontresearch.com/stock-matrix-options/ The assumptions should be documented there.

Thanks this is really helpful. 4% for the 20th century is definitely closer to 3 than 6.

However, the assumptions have only 80% in capital gains while this should be much higher for long term investors.

If you’re investing in a 401k then you add about 1-3% because you won’t be taxed each year and those gains are compounded.

And it’s assuming 1% admin fees from 2000+. This is way too high and is closer to .1% starting in the 80s with vanguard index funds.

So if you invest in tax deferred index funds you are looking at 5-6% after taxes and inflation.

But I like the way this matrix displays info and I want to find a version with assumptions for efficient 401k investors.

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