The market was up over 30% last year, but GDP growth was certainly not 30%.
The stock market must break records week after week. This is a direct order from the president to the Fed.
Trading halted as U.S. stocks plummet
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Re: Trading halted as U.S. stocks plummet
#322Earlier quoted context omitted.
Also because of algorithmic trading. You don't want to get into an accelerated get-out-now spiral.
This sounds like something we should teach the algorithms.
"We" (the group of people represented by the government) do not control the algorithms, so we can't easily and without many other side effects force that to happen. We do (indirectly) control the stock exchange rules, so we can put systems like this in place that limit the damage done to us when it does happen.
Re: Trading halted as U.S. stocks plummet
#323Earlier quoted context omitted.
Why was or is the market in need of a correction? What is your evidence for that statement?
Take this with a train of salt because I’m not an economist, but one of the most often touted general points of the need for a correction is the cyclically adjusted price to earnings ratio being elevated [1]. In other words, stocks are more “expensive” and thus ripe for a correction https://www.multpl.com/shiller-pe
Definitely, especially in light of a probable recession.
One possible enhancement to the PE ratio I've read about that seems really helpful is to make it after tax, since the tax rate on companies can vary depending on locality and time.
Re: Trading halted as U.S. stocks plummet
#324The market was up over 30% last year, but GDP growth was certainly not 30%.
This can be explained by market consolidation. GDP and market returns are not supposed to be perfectly correlated.
Re: Trading halted as U.S. stocks plummet
#325So, children of summer (there are many here who have only known the longest bull market in the last century), let me give you some free advice. If you're looking at this and wondering when to get in, to bargain hunt essentially, and you're asking yourself questions like "today? next week?", you need to step back and think again. Some points to consider: - If your time horizon is 10+ years out probably none of this ma…
as usual, the financial advice is "who knows what to do good luck"
Re: Trading halted as U.S. stocks plummet
#326Earlier quoted context omitted.
"No one will be able to time this" "put your retirement into bonds and hold on" facepalm
What? That's how you minimize risk because there's a good chance the markets will continue to slide. It's literally why the markets are down - because investors are pulling out and parking their cash in safer havens.
I think you're missing the point "Nobody can time this" and "If you haven't already, put your retirement into bonds and hold on" are completely at odds. Pulling out of equities to buy bonds is timing this.
People should have an asset allocation, and stick to it. Right now, people should be re-balancing by selling off their now overweight bond allocation to buy equities. What you're suggesting is counter-productive.
Re: Trading halted as U.S. stocks plummet
#327Serious question, is anyone watching this carefully and trying to determine when things will bottom out (perhaps in a week or two), to buy stocks, ETFs, and such at the bottom of the dip? Hindsight is 20:20 of course, but there's a number of equities that one could have purchased shortly after the 2008 financial crisis that proceeded to make significant gains between 2009 and 2019.
Yes, it's Wall Street's job to watch this carefully and determine when things will bottom out. Financial services account for 20% the US GDP.[0]
I don't think it's well understood by the general public how many people work in finance or the scale of their endeavors.
[0] https://www.washingtonpost.com/news/monkey-cage/wp/2016/03/2...
Re: Trading halted as U.S. stocks plummet
#328Earlier quoted context omitted.
"They" don't do anything - this is called a circuit breaker, and is automatically triggered. There are three breakers: L1 - 7% down before 3:25pm - 15 minute halt L2 - 13% down before 3:25pm - 15 minute halt L3 - 20% down - halted for the remainder of the day Only a single L1 and a single L2 breaker can occur in a single day, e.g. the market falling below 7%, rising, then falling again will not trigger a second L1 br…
Do they have circuit breakers in the other direction?
No. This is just one of several places where the laws systematically favor the bulls.
Re: Trading halted as U.S. stocks plummet
#329Earlier quoted context omitted.
Would you care to elaborate? I would argue that guard rails and controlled falls are in opposition to actual free market. The qualifier 'completely' seems misplaced.
These rules are chosen by the participants. By the owners of the property. They are not government imposed. Consider an analogy. Suppose you were a stamp collector and you wanted to run a weekly stamp exchange. You and your fellow collectors may establish rules about how the trading should happen and the agreed upon behaviors. By-laws if you will. You could of course have no rules. Or you could choose some that promo…
Sure, but I think it makes sense to say that one market is more free than another, even when neither is controlled by a government. In many cases the reasons why it's good for governments to allow free markets are also reasons why its good for private entities to allow free markets.
Re: Trading halted as U.S. stocks plummet
#330Earlier quoted context omitted.
"They" don't do anything - this is called a circuit breaker, and is automatically triggered. There are three breakers: L1 - 7% down before 3:25pm - 15 minute halt L2 - 13% down before 3:25pm - 15 minute halt L3 - 20% down - halted for the remainder of the day Only a single L1 and a single L2 breaker can occur in a single day, e.g. the market falling below 7%, rising, then falling again will not trigger a second L1 br…
I thought these circuit breakers actually existed to stop algo's from going haywire?
They have existed since the crash of 1929. There were no algorithms in place then. The goal was just to force human traders caught up in the moment to take a break and stop panicking.
I assume they have been tweaked since 1929, but they started with the crash back then.
Edit: someone else is claiming 1987 as the start. My memory says 1929. If this matters do your own research.