Dow Falls 2997 points worst drop since 1987 crash • Hacker News Board

Re: Dow Falls 2997 points worst drop since 1987 crash

#221

Post by spamizbad » Mon, Mar 16, 2020, 9:33 PM UTC

SirensOfTitan wrote: post #25

I’m buying S&P index every day at this point, trying to drive my average down without trying to find the bottom. ...with that being said, I feel really worried about American economic stability long term now. Governors are closing restaurants and businesses leaving tons of folks out of work while providing minimal safety net coverage. Even liberal states like New York are ignoring the downstream economic effects thes…

Americans hate social welfare. A very reasonable recommendation of giving every adult household a fixed chunk of cash is being shot down because "But what about Bill gates!" -- There aren't that many rich people and also they pay plenty of taxes so... who cares if they get $1000 or whatever back from the government?

Re: Dow Falls 2997 points worst drop since 1987 crash

#222

Post by gruez » Mon, Mar 16, 2020, 9:34 PM UTC

koheripbal wrote: post #200

mcphilip wrote: post #90

Earlier quoted context omitted.

I think there will be some pent up demand, but some parts of the economy don’t benefit from that —e.g. I’m not going to buy more lattes when things return to normal, I will just go back to my daily fix.

...but you might buy a coffee machine at home to satisfy that fix over the next 3 months.

A coffee machine's contribution to the economy is a fraction of one or two months of take-out coffee at a cafe/restaurant. If you factor in how much value is being generated in the US vs elsewhere (eg. China), the difference is even more pronounced.

Re: Dow Falls 2997 points worst drop since 1987 crash

#223

Post by Zenst » Mon, Mar 16, 2020, 9:34 PM UTC

reverend_gonzo wrote: post #106

screye wrote: post #52

I am not well versed in the economics of depressions, but almost all the ones I know of were preceded by some monetary imbalance or the explosion of a bubble based on falsely propped up ownings. 1929 was stock being leveraged off mortgaged homes and loans, that was clearly no sustainable. 2000 was the dot com burst. 2008 was mass defaults on home loans. Is there any reason why apart from slow business for 2 months du…

Many believe the economy has been propped up by the Fed (by lowering interest rates) because they've been afraid of a recession. The Fed also doesn't really have any more ammo left to prop things up. So, the cause is that the Fed has been propping an economy that is ripe for a recession and a reset. The coronavirus is the trigger that will force the hand.

Many currencies have been propped up and artificially kept competitive via QE as the new tool to augment interest rates as having driven them so low, they had to use something else. The next tool in the box is negative interest rates.

Kinda all leads into a perfect storm, and now have whole generations having grown up with no saving mentality and a have today, pay tomorrow expectation that if things ever go back to normal, real interest rates that encourage responsible spending instead of artificially stimulating an economy. Well, it will be a huge education for many and as always, the people end up paying for it.

Re: Dow Falls 2997 points worst drop since 1987 crash

#224

Post by refurb » Mon, Mar 16, 2020, 9:34 PM UTC

adam_fallon_ wrote: post #152

rconti wrote: post #95

Earlier quoted context omitted.

Every time I see this, I fail to grasp the logic. So you had money sitting on the sidelines for safety during boom times, and you elect to put it in a riskier asset class during a panic? I'm not saying this isn't likely the most profitable action, I just don't see how the principles are consistent with each other. The former is conservative; the latter is wildly speculative and risky.

You're forgetting the fundamental rule of the stock market. Buy low, Sell high.

Exactly.

The people that got in in 2008 made out like bandits. The people that wait until 2010 or later missed out on a lot of the gains.

Re: Dow Falls 2997 points worst drop since 1987 crash

#225

Post by adrr » Mon, Mar 16, 2020, 9:35 PM UTC

nouveaux wrote: post #127

adrr wrote: post #56

Earlier quoted context omitted.

Why catch a falling knife? I am actively shorting S&P to protect my other holdings. SPY is the largest ETF is now hard to borrow which is just crazy to think about.

While you're not outright advocating a trading strategy here, what you're suggesting is dangerous if you're not talking about the downsides to shorting. Do not, I repeat, do not attempt a short without understanding all the risks. When you buy a stock for $10, the most you can lose when that stock goes to zero is $10. In theory, when you short a stock at $10, your loss is infinite as the stock goes up higher and high…

I am not advocating or suggesting anything, just stating what I am doing. My theoretical downside risk is that spy goes up 100x, my 401ks also go up 100x. I am trying minimize my risk at the expense I may give up some gains if there is bounce up.

Index funds aren’t necessarily safe. Nikkei index has never recovered from its 90s high. NASDAQ took 15 years to recover. Know the risks.

Re: Dow Falls 2997 points worst drop since 1987 crash

#226

Post by steveklabnik » Mon, Mar 16, 2020, 9:35 PM UTC

rconti wrote: post #95

SirensOfTitan wrote: post #25

I’m buying S&P index every day at this point, trying to drive my average down without trying to find the bottom. ...with that being said, I feel really worried about American economic stability long term now. Governors are closing restaurants and businesses leaving tons of folks out of work while providing minimal safety net coverage. Even liberal states like New York are ignoring the downstream economic effects thes…

Every time I see this, I fail to grasp the logic. So you had money sitting on the sidelines for safety during boom times, and you elect to put it in a riskier asset class during a panic? I'm not saying this isn't likely the most profitable action, I just don't see how the principles are consistent with each other. The former is conservative; the latter is wildly speculative and risky.

A related idea that might interest you: https://www.investopedia.com/terms/d/dollarcostaveraging.asp

Re: Dow Falls 2997 points worst drop since 1987 crash

#227

Post by whatshisface » Mon, Mar 16, 2020, 9:36 PM UTC

dougmwne wrote: post #65

whatshisface wrote: post #10

All of the return-seeking money that pushed up asset prices in the first place is still out there, because stock market crashes don't destroy money (they just redistribute it). I wonder who has it now, and I also wonder when it will end up back in the market.

I was under the impression that the money supply can contract since most of it is in the form of debts and asset valuations and not in cash. If my house is worth $1 million but then because of a recession, less people are interested in buying houses and its price goes down to $500k, where did that money go?

>most of it is in the form of debts and asset valuations and not in cash

There are several definitions of money supply, but I don't think asset valuations are included in most of them.

Re: Dow Falls 2997 points worst drop since 1987 crash

#228

Post by rupert1234 » Mon, Mar 16, 2020, 9:37 PM UTC

rconti wrote: post #95

SirensOfTitan wrote: post #25

I’m buying S&P index every day at this point, trying to drive my average down without trying to find the bottom. ...with that being said, I feel really worried about American economic stability long term now. Governors are closing restaurants and businesses leaving tons of folks out of work while providing minimal safety net coverage. Even liberal states like New York are ignoring the downstream economic effects thes…

Every time I see this, I fail to grasp the logic. So you had money sitting on the sidelines for safety during boom times, and you elect to put it in a riskier asset class during a panic? I'm not saying this isn't likely the most profitable action, I just don't see how the principles are consistent with each other. The former is conservative; the latter is wildly speculative and risky.

Prices is the answer. That's why you are failing to grasp the situation. If you can buy a house for 100 in boom times but 50 in panic times, it's often better to get it for 50.

Same asset, lower price = less risk. The only thing which is up for debate during a panic is "is it the same asset now? How similar?"

Re: Dow Falls 2997 points worst drop since 1987 crash

#229

Post by jasondclinton » Mon, Mar 16, 2020, 9:37 PM UTC

screye wrote: post #52

I am not well versed in the economics of depressions, but almost all the ones I know of were preceded by some monetary imbalance or the explosion of a bubble based on falsely propped up ownings. 1929 was stock being leveraged off mortgaged homes and loans, that was clearly no sustainable. 2000 was the dot com burst. 2008 was mass defaults on home loans. Is there any reason why apart from slow business for 2 months du…

> Is there a particular kind of asset, the collapse of which will seal this drop as a proper depression ?

That's a good question. Right now the market is reacting to on-the-ground realities. The follow-on question you are asking gets to: what will be the aftershocks?

The thing that I'm concerned about is the amount of risky business loans[1] that have been handed out in the past decade because rates were so low and mutual funds were looking for high returns. If a lot of businesses go bankrupt and that, in turn, puts the banking system at risk, then things would be ... bad.

[1] including businesses taking "no covenant" loans to—in some cases—pay their earlier investors dividends!

Re: Dow Falls 2997 points worst drop since 1987 crash

#230

Post by pcj-github » Mon, Mar 16, 2020, 9:37 PM UTC

screye wrote: post #52

I am not well versed in the economics of depressions, but almost all the ones I know of were preceded by some monetary imbalance or the explosion of a bubble based on falsely propped up ownings. 1929 was stock being leveraged off mortgaged homes and loans, that was clearly no sustainable. 2000 was the dot com burst. 2008 was mass defaults on home loans. Is there any reason why apart from slow business for 2 months du…

Consumer habits and psychology are going to be affected for years. We're going to see jobless rate skyrocket, small and large businesses defaulting left and right. Your tech job is definitely not safe either.