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Trading halted as U.S. stocks plummet

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Re: Trading halted as U.S. stocks plummet

#891

Post by vl »

cletus wrote: post #315

So, 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…

But does it just mean that the best current strategy to buy is do either time-based or price-based spread out buying?

I.e. invest a bit every month or invest a bit when market drops another 15%.

Re: Trading halted as U.S. stocks plummet

#892

Post by joncrane »

pedalpete wrote: post #824

It was not that long ago that the "experts" were saying the Boom-Bust Cycle had ended. https://www.bloomberg.com/news/articles/2020-01-22/bridgewat... Buffett, Dalio and others have been preparing for this time for a while. This is when money is made or lost. If you have the ability and the stomach for it. I'm not suggesting you buy today, I personally don't believe the worst is behind us. But an opportunity is comin…

As recovery approaches full employment ... soothsayers will proclaim that the business cycle has been banished [and] debts can be taken on ... But in truth neither the boom, nor the debt deflation ... and certainly not a recovery can go on forever.

Hyman Minsky

(From the wikipedia article posted last week "Minsky Moment: https://en.wikipedia.org/wiki/Minsky_moment"

Re: Trading halted as U.S. stocks plummet

#893

Post by hoten »

anm89 wrote: post #872
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,…

>Note that nobody has any idea where equity prices will be in one day, never mind one year or ten years' time This is more or less true. > As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. This is patently absurd. It's an easily falsifiable statement which is a rare feat in economics. On average, the the average retail investor will not…

What does it mean for a market to have inefficiencies?

Re: Trading halted as U.S. stocks plummet

#895

Post by kpommerenke »

totalZero wrote: post #760
greenshackle2 wrote: post #746

Earlier quoted context omitted.

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 m…

Well, there are (small) inefficiencies for everyone to exploit. For example, a stock is mispriced and you expect it to return an additional 1% when the mispricing disappears. The difference between an institutional investor and a retail investor is that the institutional investor can invest $100 million in the stock and make $1 million of profit, while a retail investor with $100,000 will make only $1,000. As a result, institutional investors can afford to spend a lot more money on research, hardware, data, etc. It's very hard to compete with that as a retail investor.

Re: Trading halted as U.S. stocks plummet

#896

Post by MR4D »

bytematic wrote: post #646
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,…

Most people don't seem to understand that you don't pull all your retirement out at once, so the market going up or down doesn't really affect that

Actually it does, and in a big way.

Let me give a simple example using some round numbers just to show the concept. Plug and play any numbers you want to see how the outcome changes...

Let’s say you have a million dollars in March of 2000, you just retired, and you need to pull out $100,000 to live on. So, in April, you take out $100,000 and now you have $900,000. So you ended up taking out 10% of your principal.

However, the market is falling, and will drop 10% over the next year. So you now have $810,000, and you take out this year’s $100,000 which leaves you with $710,000. Effectively, you took out over 12% of your principal.

2002 is no better, and the market falls a further 13%, and is now down to $618,000. You take out $100,000 for this year’s expenses, leaving you with $518,000.

The next year is even worse in the market, and your nest egg falls 23%, which means you now only have $399,000 left. You still take out your $100,000 and are left with only $299,000.

Thankfully, the next year the market rises 26%. Hallelujah, your nest egg grew to $376,000. However, you still need to take out your $100,000, leaving you with only $276,000. You think your luck has turned around...

The next year the market rises, but only 9%, so your nest egg grows, but only to $301,000. You take out your $100,000, leaving you with only $201,000. Hmmmmm...

The next year the market rises again, but barely - only 3%, so your nest egg is now $207,000. You take out your $100,000 again, and only have $107,000 left. Uhhhh...

Thankfully, the market moves up 14%, and your $107,000 grows to $122,000. You take out your $100,000, leaving you with only $22,000 left.

Finally, in the last year, the market rises 4%, so your nest egg grows to $23,000. You withdraw all of it, and are now broke.

This effect is based on real numbers (rounded) from [0], and represent the S&P 500 market returns starting in the year 2000 (aka, the dot com bust). What happened to this poor retiree is called “sequence of returns”, and it is something that any good financial planner uses to test the durability of his or her projections.

[0] - https://www.macrotrends.net/2526/sp-500-historical-annual-re...

Re: Trading halted as U.S. stocks plummet

#897

Post by kpommerenke »

thoughtstheseus wrote: post #726
martinpw wrote: post #719

Earlier quoted context omitted.

I'm not clear why you mention insider trading here? Insiders have access to information that is not present public information, and so is not priced into the current value of the stock.

The the strong form of the EMH includes inside info, all info in existence.

Yes, but no one claims that the market is strong form efficient. The question is rather whether the U.S. stock and bond markets are weak form (prices include all past trading data) or semi-strong form efficient (prices include all publicly available information).

Re: Trading halted as U.S. stocks plummet

#898

Post by verbify »

dntbnmpls wrote: post #825
bytematic wrote: post #646

Earlier quoted context omitted.

Most people don't seem to understand that you don't pull all your retirement out at once, so the market going up or down doesn't really affect that

The problem is that nothing says markets will go up forever. Take japan's nikkei index. Dropped in the early 90s and is still down 50% 30 years later. Choose the "all" to see the entire chart. https://tradingeconomics.com/japan/stock-market It isn't a law of nature that the S&P or Dow has to regain its losses in X number of years. S&P can drop and stay down for decades which can absolutely affect retirees.

If you reinvested your dividends you'd be up 25% without taking into account inflation, or down a total of 1.5% if you took into account inflation. Not ideal, but not much different than when you started.

I personally buy an all-world tracker, the Nikkei is an outlier. There could be issues that affect the global economy long term, but if that were the case, I'd have other things to worry about in addition to my investments.

Re: Trading halted as U.S. stocks plummet

#899

Post by nayuki »

mmhsieh wrote: post #875
dntbnmpls wrote: post #825

Earlier quoted context omitted.

The problem is that nothing says markets will go up forever. Take japan's nikkei index. Dropped in the early 90s and is still down 50% 30 years later. Choose the "all" to see the entire chart. https://tradingeconomics.com/japan/stock-market It isn't a law of nature that the S&P or Dow has to regain its losses in X number of years. S&P can drop and stay down for decades which can absolutely affect retirees.

+1. it took about 3.5 decades to return to the levels of the pre-'29 crash. bear markets can indeed drag for decades. stockbroker happy-talk tends to gloss over these facts.

Did you exclude or include dividends in that assessment?

Re: Trading halted as U.S. stocks plummet

#900

Post by DarmokJalad1701 »

MR4D wrote: post #896
bytematic wrote: post #646

Earlier quoted context omitted.

Most people don't seem to understand that you don't pull all your retirement out at once, so the market going up or down doesn't really affect that

Actually it does, and in a big way. Let me give a simple example using some round numbers just to show the concept. Plug and play any numbers you want to see how the outcome changes... Let’s say you have a million dollars in March of 2000, you just retired, and you need to pull out $100,000 to live on. So, in April, you take out $100,000 and now you have $900,000. So you ended up taking out 10% of your principal. How…

10% is not really a safe withdrawal rate though.
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