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

Re: Dow Falls 2997 points worst drop since 1987 crash

#231

Post by Zenst » Mon, Mar 16, 2020, 9:38 PM UTC

koheripbal wrote: post #104

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…

Bankruptcies can be pretty damaging. If we see a lot of loan defaults, we might see a banking crisis. ...but probably not. Banks are very well capitalized these days - much much better than 2008.

Banks can cover some things going wrong, sometimes, not everything going wrong at once.

Just takes one queue at a bank, few social media posts and next thing, all those branches have queues due to panic and end up with a self fulfilling prophecy so to speak.

Heck, if people can panic buy toilet roll, nothing is out of the reach of stupidity.

Re: Dow Falls 2997 points worst drop since 1987 crash

#232

Post by kolbe » Mon, Mar 16, 2020, 9:39 PM UTC

jedberg wrote: post #97

nabla9 wrote: post #78

Earlier quoted context omitted.

Most of the SP500 movements come from small number of companies too. Dow Jones is bad index but the narrow number of companies is not the worst part. DJIA is price-weighted index which is completely arbitrary and there is no reason for that. They can't add Berkshire Hathaway into the index without completely changing the rules. BRK-A price is so high. Index would track only BRK-A after that.

I'm not sure why they don't add BRK-B though.

In my opinion, BRK shouldn't really be in the S&P 500 anyway. I don't get why a company that owns AAPL should be in an index that already owns AAPL.

Re: Dow Falls 2997 points worst drop since 1987 crash

#233

Post by rupert1234 » Mon, Mar 16, 2020, 9:39 PM UTC

zizee wrote: post #20

PSA: The Dow Jones industrial average is a terrible measure of the stock market. It tracks just 30 stocks, some which have an outsized influence on the measure. This is not to say the stock market is not in freefall, but there are much better indexes to track general market movement.

PSA: No, wrong. It might not be the very best but it is absolutely not terrible. A cursory look at the correlation over time could have told you this.

Re: Dow Falls 2997 points worst drop since 1987 crash

#234

Post by thinkloop » Mon, Mar 16, 2020, 9:39 PM UTC

The S&P 500 is down 30% since Coronavirus started [1], back to April 2017 levels [2], about three years worth of gains erased.

But this comes after a decade-long record bull run that's been begging for a 15% correction. Treasury yields were inverted a few months ago, last week bond prices got disjointed from their underlying assets, QE has been incessant since 2008, rates are at literal zero - the bull market was fake, propped-up and political; there is nasty sausage festering in the belly of our financial system and it's set to explode. Get ready for at least another 30% drop.

Or:

The internet is truly the greatest invention of all time. There is nothing more valuable than the exchange of ideas. We have only begun reaping its rewards. It will be responsible for another 100 year bull run of greater magnitude than the industrial revolution. Not only is innovation at record levels, but the pace of increase of innovation is at record levels. The bull run was not fake, P/E levels of the S&P are in line with historical averages [3]. We are taking Coronavirus very seriously and China has shown that you can "flatten the curve" when you do [4]. This will blow over in a few months and the economy will be right back to where it was. But the stock market is forward-looking and can recover in an instant, the buying opportunities are now.

[1] https://imgur.com/a/aq2yw70 (chart)

[2] https://imgur.com/a/EOWR4Kf (chart)

[3] https://imgur.com/R0zpJiP (chart)

[4] https://imgur.com/VTMOeh9 (chart)

Re: Dow Falls 2997 points worst drop since 1987 crash

#235

Post by jug » Mon, Mar 16, 2020, 9:39 PM UTC

tinyhouse wrote: post #125

mgolawala wrote: post #11

To put it into perspective, the last time the market behaved like (multiple drops of this magnitude) this was 90 years ago, in 1929, and it was at the start of the Great Depression. Today was the second largest percentage drop for US Markets in history. Now is not a good time to sell your stock holdings (at least not anymore). This smells of a panic right now. I think a severe recession is all but guaranteed at this…

No one knows. You have the entire world working (mostly together) on ending this. I'm optimistic things will get much better in a month or so.

I expect far WORSE in a month or so which is the scary part here because it is questionable how many companies will survive this long period of salaries with zero demand even with emergency aid packages. By next month the infection rate is calculated to barely having plateaued yet, with exponential rate until then.

I worry this will go so far that it’ll take a very long time for worldwide business to heal due to layoffs and wrecked personal finances killing demand even when we’re past the corona spike, and by then weapons like Fed’s lowered rates will have already been used.

I wouldn’t be surprised if we’re leaving this year with a -50% stock market value and 5-10 years for everything to get back to speed and valuation like it were.

It’s not even uncommon advice to not be heavily into the stock market if you have less than a >7 year savings horizon for these reasons.

Re: Dow Falls 2997 points worst drop since 1987 crash

#236

Post by trophycase » Mon, Mar 16, 2020, 9:39 PM UTC

SheinhardtWigCo wrote: post #124

bobbylarrybobby wrote: post #100

Earlier quoted context omitted.

If you think prices will fall, sell now and then buy back in after they’ve fallen

Or hold and hedge by buying UVXY et al

Do not buy and hold leveraged ETFs interday. Buy puts if you want.

Re: Dow Falls 2997 points worst drop since 1987 crash

#237

Post by akvadrako » Mon, Mar 16, 2020, 9:40 PM UTC

xwdv wrote: post #149

coliveira wrote: post #119

Earlier quoted context omitted.

Goldman Sachs already said they expect a further drop of 20%. Of course, this is just the beginning.

Others have already forecast a drop of at least 60%. 20% is definitely only the beginning.

If anyone could predict the stock market they wouldn’t be telling you.

Re: Dow Falls 2997 points worst drop since 1987 crash

#238

Post by orbifold » Mon, Mar 16, 2020, 9:40 PM UTC

Hasz wrote: post #47

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…

Absolutely. I'm 21 -- I have 30 to 40 years to weather this storm. For people of similar age, you could not ask for a shallower entry into the market, albeit a tumultuous one.

I have puts on a bunch of stocks that target the 52 week low or 10-15% below that in ~3 months. So far that strategy has been wildly profitable. There have been tons of stocks that doubled or tripled in value in 2019, no way that is a realistic price in the next 2-3 years.

Re: Dow Falls 2997 points worst drop since 1987 crash

#239

Post by lancewiggs » Mon, Mar 16, 2020, 9:40 PM UTC

mgolawala wrote: post #11

To put it into perspective, the last time the market behaved like (multiple drops of this magnitude) this was 90 years ago, in 1929, and it was at the start of the Great Depression. Today was the second largest percentage drop for US Markets in history. Now is not a good time to sell your stock holdings (at least not anymore). This smells of a panic right now. I think a severe recession is all but guaranteed at this…

The S&P500, the best general index, closed at 2386 today. It's risen over 300% since the last crash, the GFC in 2007. It's been an extraordinarily lengthy bull run, and well overdue fo a crash.

Before the GFC the index was 1550, and after it was ~760 (~50% drop)

At the peak of the dotcom boom it was generally under 1500. In 2002 after that crash it was 800. (45% drop)

The recent peak was ~3380. A 50% drop is ~1700, which is almost 30% below where we ended today.

The question to ask yourself is how does this collapse compare to the dotcom collapse and the GFC?

The dotcom collapse affected internet businesses and was contagious (sorry) from there.

The GFC start with banks and finance and was contagious from there.

This starts with pretty much every industry, and has immediate impacts on supply and demand. It's going to be very ugly.

Re: Dow Falls 2997 points worst drop since 1987 crash

#240

Post by rupert1234 » Mon, Mar 16, 2020, 9:41 PM UTC

underbluewaters wrote: post #189

legitster wrote: post #37

I'm a bit more optimistic about this crash - a significant portion is due to the (important) constraints on society - closing schools and restaurants. Meaning we can look forward to some pent up demand on the other side when those constraints are loosened. On the other hand, if the US goes into lockdown for a month or more, there's a significant chance that we could be returning to a world very unlike today. The mark…

Sorry to single you out, but the fact that people still don't understand that a 1 month+ long lockdown is a certainty means we are nowhere near the bottom. By April the US is going to look a lot like where Italy is at now.

Sorry to single you out, but the stock market usually trades in anticipation of recessions. It's not a proxy for the current GDP, it's an expectations market. The stock market could start a slow rise tomorrow and go until the end of the year and the entire year could be in a recession.