Dow plunges 1000 points • Hacker News Board

Re: Dow plunges 1000 points

#361

Post by indubitable » Wed, Feb 07, 2018, 7:12 AM UTC

vkou wrote: post #308

sokoloff wrote: post #260

Earlier quoted context omitted.

[Some] Workers can individually win by forcing themselves to spend less than they earn and investing the surplus. In other words, another way that workers can win is by becoming investors/owners.

That's a great idea. Let's all quit our day jobs, and buy into the S&P 500. At the end of the day, someone has to 'waste' money, in order for companies to earn money. A quarter saved is a quarter that doesn't end up on a revenue sheet.

> At the end of the day, someone has to 'waste' money, in order for companies to earn money

I also used to feel this way, but I no longer think its accurate. This is most obvious in digital business-consumer goods today. Imagine I make a game. And it cost me about $100 to make this game. And you really want this game and would pay $5 just to get to play it. But I'm nice and sell it to you for $1. You certainly haven't wasted any money. And the fact I then sell it to 10,000 other people also doesn't mean you've wasted any money, nor they. Yet I've somehow made an immense amount of profit.

Even in the more difficult scenario of business to business material goods trades, it doesn't hold true. Imagine I sell iron and you need iron to make your widgets. It costs me $4 to produce a single unit of iron, but that's largely because I have an extensively refined and stream lined operation, and am able to benefit from an immense economy of scale. I sell it to you for $10. Well it seems that you must be wasting money, but the reality is that even if you bought the iron mine yourself and started producing your own iron you'd end up spending far more than $10 to create the volume of iron you need. So even though I'm again making immense profit, you're also not 'wasting' money in buying my iron.

This is why even huge companies are not entirely vertically integrated or producing their own supplies in other words. It's because buying from somebody else, even when that person is profiting immensely from the exchange, is not going to be inherently more expensive than if you did it yourself. And this is even true for simple no-skill goods like semi-raw materials. Get into skilled products, like semiconductors, and this all becomes even more true.

Re: Dow plunges 1000 points

#362

Post by blackrock » Wed, Feb 07, 2018, 9:57 AM UTC

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…

Many Americans have a 401k.

These 401k plans buy a mutual fund, which buys stocks. So indirectly, these people own the stock.

Re: Dow plunges 1000 points

#363

Post by badpun » Wed, Feb 07, 2018, 4:49 PM UTC

dahart wrote: post #324

state_less wrote: post #302

Earlier quoted context omitted.

As the tax rate increases, the value you get for increasing your income goes down proportionally. I think if you take it to the limit, you can see the effect more clearly. As the tax rate approaches 100%, say 99%, then even if I make $100,000 before taxes, I'd only keep $1,000. If I push myself hard to earn $200,000, I'd get to keep $2,000. Yes it is still double, and I am doing better, but not much of interest chang…

Ah yes for the working class, I can see a 99% tax rate would very likely have this effect. I'm still wondering if we stayed in more realistic ranges, is a 40% tax rate, or even a very high 60% tax rate by US standards, a real disincentive to earning more money? I feel like it would take a pretty high tax rate before I stopped caring about my income. Does it actually have that effect in Norway, for example? I realized…

> Ah yes for the working class, I can see a 99% tax rate would very likely have this effect. I'm still wondering if we stayed in more realistic ranges, is a 40% tax rate, or even a very high 60% tax rate by US standards, a real disincentive to earning more money?

For me, and for people like me, it would be. I work high-paying shit jobs precisely because they pay a lot. The amount of saving I'm able to do in these jobs is life-changing (i.e. FU money after 5-8 years). If most of that money went to taxes, there'd be little point in doing them and I might as well induldge in doing something more satisfying instead.

Re: Dow plunges 1000 points

#364

Post by totalZero » Wed, Feb 07, 2018, 8:37 PM UTC

roenxi wrote: post #212

totalZero wrote: post #205

Earlier quoted context omitted.

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

Percentages are important, but one day movements are not. I think GPs point went to this logic: comparing one-day moves is irrelevant once we have, say, weekly or annual data. I think this movement is very interesting, but only because I expect more of the same and/or a distinct lack of recovery. If a 5% one-day move is really it then I don't care. I've never paid any special interest when the market rises by 5%. Mar…

Perhaps it would alter your perception to know that many large derivatives are valued using end-of-day prices, or even intraday prices (as is the case with one-touch options), and that the volume of trading is generally highest (and thus allows the most liquidity for hedging) at the opening and closing moments of the trading day.

Not to mention that the significance of a variance injection is usually a function of its timescale.

I want to point out that market mechanics are vastly different when individual daily moves are higher, even if weekly moves are identical. In other words, there is a path dependency. Stop orders get triggered as a result of price action. The price of option products tends to increase in high-volatility moments. Day traders and market makers have intraday losses that alter the way they trade, both psychologically and according to the rules of their firms. Price discovery becomes more difficult, which makes market access more expensive.

The fundamentals of companies may not change directly, but the cost of doing business changes for financial companies, and that can affect other companies on a larger timescale. For example, a media company that does stock buybacks via accelerated share repurchase agreements will have a fundamentally different deal profile if it expects volatility to be higher, because these agreements often include terms for cancellation if the stock dips beyond a particular price.

Highly volatile markets can also affect companies' ability to access money by borrowing from banks or selling financial assets. So, even on a longer-term horizon, higher daily volatility makes the financial regime inherently different, even if weekly volatility remains unchanged.

If you relegate big daily moves to the realm of "I don't care," you prevent yourself from perceiving some of those differences, and ultimately only harm yourself -- the rest of the market, by and large, understands that big daily moves have an impact on the market even if they are reversed shortly thereafter.

Re: Dow plunges 1000 points

#365

Post by ec109685 » Thu, Feb 08, 2018, 5:15 AM UTC

dragonwriter wrote: post #335

ec109685 wrote: post #334

Earlier quoted context omitted.

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.

Couldn’t you have said the same thing 20 years ago?