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Trading halted as U.S. stocks plummet

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Re: Trading halted as U.S. stocks plummet

#751

Post by candiodari »

allovernow wrote: post #395
mumblemumble wrote: post #305

Earlier quoted context omitted.

Having worked for one of the (smaller) big firms, and had a chance to watch from the sidelines and seen how days like this work: No, these circuit breakers don't screw the regular guys. They discourage the regular guys from screwing themselves. There are a lot of firms whose core business strategy is to keep a level head and take advantage of people who panic and (over)react on days like this. They get damn rich doin…

> They discourage the regular guys from screwing themselves. If you're a little guy who believes that, say, 2019ncov is about to tear the world a new asshole, that's probably a decision you'd like to make for yourself. I don't doubt what you're saying, but it's a matter of perspective. Sometimes the "panic" is the correct reaction. We're sitting on top of a perfect storm which is shaping up to be a massive potential…

But that exactly is one of those fallacies. If 2019ncov "tears the world a new ..." then your shares are going to be worth about the same as bills in your hand: nothing. Nobody will seriously risk their health for money.

And what's the rational thing to do in such a case? Let's say you're at a poker game. And you have a deal: you lose, you get shot, you win, you get your winnings. What is the rational thing to do?

You should go all-in. It is one of the very few cases it is actually rational to do that.

Re: Trading halted as U.S. stocks plummet

#752

Post by FabHK »

manigandham wrote: post #731
santoriv wrote: post #704

Earlier quoted context omitted.

Very few active fund managers can consistently beat their indexes. Why do you believe you would be better over a long period of time? Vanguard Study of Actively Managed Funds vs Index Performance: https://personal.vanguard.com/pdf/ISGIDX.pdf

Note that report is Vanguard marketing material and most managed funds have specific mandates (like maintaining a certain volatility or investing in certain securities) other than maximizing gains. This is why hedge funds underperform indexes in bull markets but beat them in turbulent times.

> This is why hedge funds underperform indexes in bull markets but beat them in turbulent times.

Agreed on the first part; I’d want to see hard statistics (after fees) on the second part (and, no, citing the 3 or so famous exceptions that are closed to outside investors and might have used illegally obtained insider information doesn’t invalidate the larger point).

Re: Trading halted as U.S. stocks plummet

#753

Post by evanpw »

jfengel wrote: post #733
phreeza wrote: post #720

Earlier quoted context omitted.

While I agree that this advice is better than picking stocks, something always rubs me the wrong way when it is repeated like it is an absolute fact. Like they say in the commercials, Past Performance Is No Guarantee of Future Results. I can't say what form it will take, but I can definitely see a future where the pendulum swings back from ever more indexification.

I agree with you. I believe the biggest problem with indexification is that it encourages a generic flow of money into the market, regardless of whether the market can handle it or not. Although the market isn't just gambling, and there is real underlying value, it's not an infinite source of value to give returns to anybody buying into it. Eventually there can be too much money chasing too little corporate earnings,…

Every time you buy a stock, someone sold it to you, so flow of money into the market isn't something that's easy to define in a meaningful way. And even if a lot of the invested capital is passive (maybe half of the US stock market), almost none of the trading is, and that's what determines prices.

Re: Trading halted as U.S. stocks plummet

#754

Post by synaesthesisx »

_7fvc wrote: post #740
ttul wrote: post #625

I notice that there are many commenters here offering opinions on the future price of equities. Note that nobody has any idea where equity prices will be in one day, never mind one year or ten years' time. As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. So relax. There's nothing to do here. If you're contributing to a retirement fund,…

I used to subscribe to these investment talking points and believed in the US equity market. I adopted these attitudes from reading Warren Buffett, index fund, financial advice. These are sound principles. I occasionally revisit value investing, dollar-cost averaging. But times are changing. The US equity market will unlikely to deliver exceptional returns. Buffett may have a strong bias since he started his investin…

Realistically stocks can only go up long-term. It's easy to forget during times of chaos, but in the long run there's no way but up.

Re: Trading halted as U.S. stocks plummet

#755

Post by pbourke »

_7fvc wrote: post #740
ttul wrote: post #625

I notice that there are many commenters here offering opinions on the future price of equities. Note that nobody has any idea where equity prices will be in one day, never mind one year or ten years' time. As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. So relax. There's nothing to do here. If you're contributing to a retirement fund,…

I used to subscribe to these investment talking points and believed in the US equity market. I adopted these attitudes from reading Warren Buffett, index fund, financial advice. These are sound principles. I occasionally revisit value investing, dollar-cost averaging. But times are changing. The US equity market will unlikely to deliver exceptional returns. Buffett may have a strong bias since he started his investin…

> The US equity market will unlikely to deliver exceptional returns.

With each passing day in this crisis, I think you can make the opposite case. Long-term risk in equities is going down, not up, as the market falls and stocks move toward relatively underpriced from relatively overpriced. Or am I missing something?

The expected long-term return from investing $1 in the stock market now vs beginning of Feb is higher, is it not?

Re: Trading halted as U.S. stocks plummet

#756

Post by azernik »

marcrosoft wrote: post #745

US stock trade (artificial) limits might have existed before but I don’t remember them. You see these in other countries and commodity markets. Limit down. IMO they cause a faster drop in a down market because you don’t know when you’ll be able to exit. The market can open limit down within seconds. This can continue for weeks.

IIRC there were limits in 2008.

Re: Trading halted as U.S. stocks plummet

#757

Post by FabHK »

Der_Einzige wrote: post #678
ttul wrote: post #625

I notice that there are many commenters here offering opinions on the future price of equities. Note that nobody has any idea where equity prices will be in one day, never mind one year or ten years' time. As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. So relax. There's nothing to do here. If you're contributing to a retirement fund,…

Than why do I keep getting richer on my puts? Maybe it's because there are actually ways to make money during a crisis...

Buying lottery tickets totally works, someone can claim every week.

https://xkcd.com/1827/

Re: Trading halted as U.S. stocks plummet

#758

Post by neural_thing »

hardtke wrote: post #684
cletus wrote: post #376

Earlier quoted context omitted.

I didn't think this could still be true but apparently you are correct [1]. Wow. That being said, there are factors to contribute to this: - Essentially zero population growth [2] - A government and a system that propped up an insolvent banking system that likely extended the downturn significantly [3] - A massive asset bubble that we really haven't seen the likes of, not even in the subprime era. [1]: https://www.ma…

Aren't all of these factors true for China today?

China's credit bubble is worse than Japan's was. And now they are hit with a supply/demand shock. Worst crisis in history

Re: Trading halted as U.S. stocks plummet

#759

Post by azernik »

sandov wrote: post #665
pureagave wrote: post #33

Earlier quoted context omitted.

Correct. 7% decline is a pause. If it drops 13% it will pause for another 15 minutes. If it drops 20% it will end trading for the day.

Wouldn't that incentivize people to sell before the pause/end of the trading day, creating a snowball effect?

It would indeed, but if it's an irrational panic or an algorithmic mess-up it also allows people to stop and think for a bit. It's a tradeoff, and the main goal is to reduce the extreme failures.

Re: Trading halted as U.S. stocks plummet

#760

Post by totalZero »

greenshackle2 wrote: post #746
totalZero wrote: post #680

Earlier quoted context omitted.

The efficient market hypothesis is that markets are efficient to present public information. If markets were efficient to the present value of the future price at all times, then there would be no such thing as insider trading and hedge funds would all lose money. You can make money by making inferences about present facts, or taking views on future occurrences.

Exploiting inefficiencies for gains is the mechanism by which EMH is supposed to work, so you're right that some people must be making money by trading intelligently. But professionals have advantages that are difficult to match for small-time investors like: single-digit millisecond latency with exchanges, specialized hardware, sophisticated back-testing systems, proprietary data sources (market data, weather, retai…

You can't say there are inefficiencies for institutions to exploit, but no inefficiencies for anyone else. Choose a consistent framework for how you view markets.

There are fast alphas, and there are slow alphas.

If you're an institution making markets on index ETFs, you can make money by having more accurate spot prices for the basket. Fast alpha.

If you're a vol trader, you are more worried about convexity of gap moves and the shape of the vol surface. For me, this means following the story of the name and thinking about where the vol surface doesn't properly reflect tail risk. Slow alpha.

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