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Dow Falls 2997 points worst drop since 1987 crash

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Re: Dow Falls 2997 points worst drop since 1987 crash

#411

Post by whycombagator »

dictatorsunion wrote: post #290

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 experien…

> and distribution is over with accumulation channels being formed, which is when multiple supports are being built.

Noob here. I've worked out what the rest of your post meant. What does the quoted mean?

Re: Dow Falls 2997 points worst drop since 1987 crash

#412

Post by whymauri »

hogFeast wrote: post #186
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…

The only depression you named was 1929. 2000 was barely a recession. 2008 was more severe but...still not really. The US unemployment rate hit 10% which is high...but most countries Europe have had rates at this level for decades. For reference, the current rate in France has an 8 handle. In terms of depression vs recession, to put it simply, the risk is that we move into a situation from which escape is difficult. F…

>For reference, the current rate in France has an 8 handle.

I'm no expert here, but weren't the French literally rioting a few months ago..? And beyond the markets: you keep downplaying this and 2008 as not "being serious." I mean sure, maybe for your portfolio - but can we avoid trivializing the gravity these economic movements can and will have on the lives of millions of people?

Re: Dow Falls 2997 points worst drop since 1987 crash

#413

Post by wltprgm »

adrr wrote: post #225
nouveaux wrote: post #127

Earlier quoted context omitted.

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.

As somebody else has said, put options are available. You must be really confident to short at all

Re: Dow Falls 2997 points worst drop since 1987 crash

#414

Post by pdonis »

AnimalMuppet wrote: post #330
pdonis wrote: post #279

Earlier quoted context omitted.

> when a bank collapses, some money disappears (because of fractional reserve banking) The money doesn't disappear when the bank collapses. It disappears if the loans that defaulted and caused the bank to collapse are written off instead of being assumed by some other party. If the borrower's inability to pay is only temporary, the loan probably won't be written off; it will just be restructured, and the money won't…

OK. But those loan defaults are what lettergram feared would cause the banks to collapse. So they're not independent. The bank can collapse from other reasons, and loans can default without the bank collapsing, but in the scenario lettergram was talking about, loan defaults cause the bank failures. So, you're right, but I think my overall point still stands.

> those loan defaults are what lettergram feared would cause the banks to collapse. So they're not independent.

You're missing my point. I'm not arguing that the loan defaults are independent of the bank failures; obviously they're not.

I'm arguing that the loan defaults, and the consequent bank failures, by themselves don't cause money to disappear. For money to disappear, the defaulted loans have to be written off, instead of restructured. If they're only restructured--i.e., the borrower negotiates a new payment plan with the new lender (whoever takes over the bank's assets when the bank fails)--then the money doesn't disappear. And, as I said, since the borrower's inability to pay is only temporary, caused by an external event, I expect most of the loans to be restructured, not written off.

Re: Dow Falls 2997 points worst drop since 1987 crash

#415

Post by bogomipz »

_bxg1 wrote: post #291
lancewiggs wrote: post #239

Earlier quoted context omitted.

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, w…

The thing with dotcom and GFC is that they both revealed fundamental problems in the marketplace. Dotcom was over-hype around internet startups, GFC was the financial house of cards around subprime mortgages. There was no "going back to the way things were" in those cases. In this case, on the other hand, the primary mechanism is "people can't work/aren't going out and buying things". That's absolutely going to "go b…

Are you aware of the the corporate debt binge that's been going on for years now and stands at nearly $10 trillion dollars? People have been ringing the alarm about this for quite some time:

https://www.washingtonpost.com/business/economy/corporate-de...

Re: Dow Falls 2997 points worst drop since 1987 crash

#416

Post by indemnity »

hn_throwaway_99 wrote: post #405
_bxg1 wrote: post #291

Earlier quoted context omitted.

The thing with dotcom and GFC is that they both revealed fundamental problems in the marketplace. Dotcom was over-hype around internet startups, GFC was the financial house of cards around subprime mortgages. There was no "going back to the way things were" in those cases. In this case, on the other hand, the primary mechanism is "people can't work/aren't going out and buying things". That's absolutely going to "go b…

One counterpoint: the crest of baby boomers is going through retirement. This severe market downturn and recession will absolutely destroy many pensions in the US that were already woefully underfunded. This will be extremely brutal.

Time for them to toughen up and pull themselves up by their bootstraps.

Re: Dow Falls 2997 points worst drop since 1987 crash

#417

Post by pathseeker »

AznHisoka wrote: post #68
tomerbd wrote: post #57

Earlier quoted context omitted.

It's not so shallow, the stock market is still bubbly, these are the prices of mid 2017, when everyone said that the stock market is a bubble...

To add further perspective: The S&P is just below where it was in December of 2018. Do you still have the same optimism about the US (and even the world) economy now than you did then? For me, the answer is a resounding No.

But companies have expanded since then. It doesn't take the same optimism to invest at the same price points as 2018 as it did in 2018 (even ignoring inflation).

Re: Dow Falls 2997 points worst drop since 1987 crash

#418

Post by pathseeker »

wltprgm wrote: post #413
adrr wrote: post #225

Earlier quoted context omitted.

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.

As somebody else has said, put options are available. You must be really confident to short at all

Puts are insanely expensive now with the current IV. If you're just protecting a portfolio without selling, shorting SPY is fine if you have offsets in your stocks.

Re: Dow Falls 2997 points worst drop since 1987 crash

#419

Post by dictatorsunion »

whycombagator wrote: post #411
dictatorsunion wrote: post #290

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 experien…

> and distribution is over with accumulation channels being formed, which is when multiple supports are being built. Noob here. I've worked out what the rest of your post meant. What does the quoted mean?

It means when the market is sideways and bouncing within a channel. It is when bulls and bears are still indecisive. Depending on fundamentals as well, this is when smart money starts to accumulate. Big funds usually accumulate in these channels because they need time to accumulate. They act as the bulls here. The bears will usually be those day-trading euphoric shorters trying to scalp every bounce, or just some random capitulation. This is the time when money fears to go in and those who have held already gave up on going out. The volume will be quite low.

Re: Dow Falls 2997 points worst drop since 1987 crash

#420

Post by dictatorsunion »

zone411 wrote: post #360
dictatorsunion wrote: post #290

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 experien…

Do you have any research showing that waiting for VIX below 30 after it was high is a correct strategy? You can just test it in around 20 lines of Python or just in Excel. Or that buying in a situation like now is a bad idea? Did you run a historical backtest? Did you test the trend following and the 200-day SMA? Please share. Of course, to show that any of them are promising models, you need to do much more than jus…

I don't test. I just trade with real money. VIX going below 30 just signifies the start of bear exhaustion. You don't go in now, it just means to prepare to go in. 200 SMA is usually used by technical traders to gauge when to start changing their strategies to trading an upward trend instead, which after awhile becomes self-reinforcing. It just experience here. You can plot the 200 SMA on the 2008-2009 graphs on your favourite stocks and you can see that usually that's a good time to buy in.
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