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

Re: Dow Falls 2997 points worst drop since 1987 crash

#281

Post by throwaway713 » Mon, Mar 16, 2020, 10:09 PM UTC

So I know it's almost impossible to predict the stock market, but... a lot of this crash seems to be based on panic and human psychology concerning the virus (I know there is some effect due to the oil price war though).

My question is: if we assume 20-40% of people in the U.S. are drastically underestimating how bad the virus is going to be, then they are more likely to hold their stock until there is finally "proof" that the virus is as bad as everyone with some amount of scientific understanding knows it is going to be, at which point we would expect some portion of these people to panic sell. Wouldn't that indicate that in an event like this, we're not betting on essentially random fluctuations of an emergent economic system, but rather on many people not understanding the trajectory of the virus?

In other words, it's almost like a prediction market at this point — you're betting against other people about how damaging the virus is going to end up being. Am I off base here?

Re: Dow Falls 2997 points worst drop since 1987 crash

#282

Post by pathseeker » Mon, Mar 16, 2020, 10:09 PM UTC

pyrrhotech wrote: post #66

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…

Your first two paragraphs are severe contradictions. If this is anything like 1929, the bottom will be around 340, after retesting highs from 1987. In that case, 2400 SPX is a bargain sell and still getting out near the top in the scheme of things. Even if this is only a relatively mild recession like 2000 or 1973, we'll be seeing 1600 - 1700 SPX or at least 30% below today's close.

It's not a contradiction if it was meant to point how how ridiculous the market is behaving for something so relatively tame compared to the over-leverage that led to the great depression.

Re: Dow Falls 2997 points worst drop since 1987 crash

#283

Post by kilroy123 » Mon, Mar 16, 2020, 10:11 PM UTC

visualstudio wrote: post #44

Dumb question. Why can't they just turn off all stock markets for a month?

I think that's a fair question. We have actually done this before when World War 1 started.

https://en.wikipedia.org/wiki/New_York_Stock_Exchange#20th_c...

I think doing so now would be a massive disaster as it would cause extreme panic.

Re: Dow Falls 2997 points worst drop since 1987 crash

#284

Post by JohnJamesRambo » Mon, Mar 16, 2020, 10:12 PM UTC

Reedx wrote: post #118

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…

Maybe, but why don't you think the markets will bounce back once we're on the other side of this? Have underlying fundamentals changed longer term? South Korea, China, Singapore are encouraging and seeing a return back to (almost) normal life. Granted, we're not dealing with this nearly as effectively and there may be a 2nd wave to come. But at this point they seem to make the case for optimism.

A crash of this magnitude was overdue without coronavirus. The market can't just go up and up forever, that's not how markets work. Super long 11-year irrational raging bull market with blowoff top had to unwind and still does after coronavirus is a memory. The underlying financial factors will still be the same and probably even worse because we (mostly the president) keep trying to prop up the stock market like the guys in Weekend at Bernie's. Best to just tell the truth that Bernie is a dead guy, so the adults can put the pieces back together to the economy.

Re: Dow Falls 2997 points worst drop since 1987 crash

#285

Post by sgillen » Mon, Mar 16, 2020, 10:13 PM UTC

throwaway713 wrote: post #281

So I know it's almost impossible to predict the stock market, but... a lot of this crash seems to be based on panic and human psychology concerning the virus (I know there is some effect due to the oil price war though). My question is: if we assume 20-40% of people in the U.S. are drastically underestimating how bad the virus is going to be, then they are more likely to hold their stock until there is finally "proof…

I would argue that to some extent that’s how the stock market works all the time. You’re betting about how other people will react to information.

Re: Dow Falls 2997 points worst drop since 1987 crash

#286

Post by coliveira » Mon, Mar 16, 2020, 10:14 PM UTC

akvadrako wrote: post #278

coliveira wrote: post #266

Earlier quoted context omitted.

The issue is not prediction, is expectation. The market moves on expected outcomes, not on reality. The reality may change down the road, but the expectation is to go down a lot more.

Sorry but that's completely wrong; the marketing moving is a reality. The issue is prediction - will the market move and in which way??

Incorrect, the market moves on expectation, anyone that has traded the market knows this. If expectations are terrible, the market will tumble, it doesn't matter what is happening right now.

Re: Dow Falls 2997 points worst drop since 1987 crash

#287

Post by quantgenius » Mon, Mar 16, 2020, 10:15 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.

Actually right now the DJIA might be a _better_ measure of the large cap market than the S&P 500. The problem with price weighted indices is that at the top of bubbles they wildly overweight the recent winners. The performance of the S&P in recent times is mostly just the performance of the trillionaire companies. The same thing happened in 2000 when approx 40% of S&P returns was the returns of the Internet (as opposed to the larger tech) sector and in 2007 when financials had an outsized effect.

I wonder how much of the performance of GOOG/FB/AMZN is VCs funnelling cash to overvalued startups building a brandname who then funnel said cash to GOOG/FB/AMZN for advertising and overpriced AWS services? Not that I think the trillionaire companies are going anywhere but I suspect they may be hit harder than people think they will be.

Re: Dow Falls 2997 points worst drop since 1987 crash

#288

Post by VBprogrammer » Mon, Mar 16, 2020, 10:15 PM UTC

01100011 wrote: post #39

ghastmaster wrote: post #18

Housing needs to follow. For people looking to get into the market like me, these prices are a barrier.

Are you really sure this is a good time to get into the market? I mean, property is usually a good long-term bet and rates are low, but you'd have to be pretty liquid to want to move now. Then again, if you think inflation is going to come in a big way, todays prices are reasonable.

Some people be crazy. Here I am wondering if I should start holding some of my emergency funds as actual real life cash and other people are looking to make a few bucks by investing in stocks.

You can't feed your family on AAPL.

Re: Dow Falls 2997 points worst drop since 1987 crash

#289

Post by wnmurphy » Mon, Mar 16, 2020, 10:15 PM UTC

gotoeleven wrote: post #185

cshenoy wrote: post #170

Earlier quoted context omitted.

Not OP but I don't think we'll bounce back as quickly due to the lack of urgency coming from the Federal government. I suspect we'll fall into a vicious cycle of business layoffs, corresponding dip in consumer spending, reduction in r&d/business investment as we are now and after cases taper off which now seems even further away than what it could've been had the CDC/FDA/WH been on top of this earlier. Some countries…

What lack of urgency are you talking about?

Not doing any actual airport screening, rejecting the WHO tests so we could develop our own (for some reason), denying that there was even a problem for 4 critical weeks, telling people as recently as a week ago that they should be out going to restaurants and bars... all the failures of leadership that caused us to blow well past containment.

In contrast, Japan, Taiwan, Singapore, Thailand, and Hong Kong got right on top of it, and early. They're also the only countries seeing a flat rather than exponential trend right now. Which means their hospitals are not at threat of being overwhelmed.

Re: Dow Falls 2997 points worst drop since 1987 crash

#290

Post by dictatorsunion » Mon, Mar 16, 2020, 10:17 PM UTC

I don't understand why people are catching a falling knife. It is as though they have never been in bear markets before. Understand the market psychology and don't waste your money. I have friends who DCA-ed and regret because it took them years just to breakeven.

In a standard fear cycle (Google it), we are only at the middle stage between denial and fear. There is an acceleration downwards that we have not experienced yet (Crypto 2018 and China 2015 are good examples if you want to look back at recent history). Wait for that to happen first. You also can feel the time to buy when people are very distraught and demoralized by the endless drops. Twitter activity will change a lot, trust me.

A good way to read when to buy is, aside from seeing that everyone is completely mentally exhausted and demoralized, is that the VIX is around 30% and dropping, and distribution is over with accumulation channels being formed, which is when multiple supports are being built. This is when bulls and bears are in equilibrium, with bears quite exhausted but still exuberant. If you want better certainty, at least wait for the stock you want to buy to cross the 200 SMA, because it is a good indicator that the stock is being rationally valued once again.

My point is that DCA is only good if the trend favours it. It is central limit theorem where you reduce the variance by multiple sampling. Good shorters DCA downwards as well, so you are fighting these people too if you are DCA-ing now.