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

Re: Dow Falls 2997 points worst drop since 1987 crash

#461

Post by raincom » Tue, Mar 17, 2020, 5:37 AM UTC

dev-ns8 wrote: post #334

Reedx wrote: post #118

Earlier quoted context omitted.

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.

I look at it this way. Your essentially buying a companies future earnings by buying their stock. For some time here, corporate earnings are going to take a hit. B2C probably the hardest, but B2B will also feel the effects, ripple effect if you will. The strain these quarantines are putting on Small business owners will also ripple into the larger corporate companies that the market is composed off because these SBO…

repo markets don't help corporate debt at all, as long as the federal reserve don't accept the commercial paper (corporate debt, in other words). The moment the fed accepts commercial paper as collateral, yes, it does. However, this will lead to a bigger problem.

If S&P drops ratings for many companies, many banks will end up holding bags; in which case, the fed will come to rescue these banks.

Re: Dow Falls 2997 points worst drop since 1987 crash

#462

Post by raincom » Tue, Mar 17, 2020, 5:45 AM 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.

One has to account for 1929 gold standard. Since the world has confidence in the US dollar, Uncle Sam can dole out dollars, unlike gold. Just as bull markets are irrational, so are crashes; both are manifestations of herd mentality, as money ebbs and flows.

Today, Vanguard and Fidelity wanted to sell 6M shares of $ROKU after hours through Morgan Stanley. That's how things will go.

Re: Dow Falls 2997 points worst drop since 1987 crash

#463

Post by StanislavPetrov » Tue, Mar 17, 2020, 5:46 AM UTC

anonu wrote: post #429

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…

> well overdue fo a crash. Not sure why a crash has to be expected or should be the norm.

For the last decade many of the largest corporations have been taking on massive debt loads in order to buy back stock and inflate their stock price. This is a result of extended low interest rate policies. The corporate "logic" is, "we are growing at 3%, we can borrow money 1% now and take that cash immediately, and since we are growing faster than the interest we'll have no problem paying it back". So they buy their own stock back, and their stock price rises. And when many corporations do this, all of their stocks rise and the market rises, and rises, and rises - like its been doing for the last 10 years. At the same time, debt grows, and grows as the FED scrambles to keep cutting rates so that companies can keep borrowing and allowing for cheap money so that this stock market rise can continue. Then, eventually, there is a period of time when they dont grow at 3% - worse yet they shrink (like during a pandemic). Then, all of a sudden, they are left with trillions in debt that they cannot service (debt that has been collateralized into bonds and sold off to other investors, which will also default). That results in a cascade of asset selling to raise cash, which tanks the market, which results in more selling and you have a crash.

Re: Dow Falls 2997 points worst drop since 1987 crash

#464

Post by zone411 » Tue, Mar 17, 2020, 6:07 AM UTC

rolltiide wrote: post #358

zone411 wrote: post #342

Earlier quoted context omitted.

That's true but what's also true is that we found out in 2008 that there is much more correlation between asset classes than you might think.

2008 was a liquidity crisis and credit crunch so everything got margin called across asset classes, what’s great about 2020 is that hasn’t happened, yet. Great meaning the fireworks have yet to go off.

Regardless of whether it happened or not, my point is still true. I made a chart for you with domestic stocks, emerging market stocks, gold, bonds, Bitcoin, treasuries and real estate: https://ibb.co/1LnG5Dv.

They all fell.

Re: Dow Falls 2997 points worst drop since 1987 crash

#465

Post by sershe » Tue, Mar 17, 2020, 6:08 AM 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…

I personally only have hope for incompetence at this point. If the virus can get totally out of control, perhaps it will become obvious that shutting down the economy and plunging the world into a recession/depression is misguided. I think it will do far more harm in life-years wasted as it is, but if it's also shown to be useless perhaps the current approach would be stopped.

Re: Dow Falls 2997 points worst drop since 1987 crash

#466

Post by zone411 » Tue, Mar 17, 2020, 6:14 AM UTC

che_shirecat wrote: post #408

zone411 wrote: post #338

Earlier quoted context omitted.

No. Being in cash is always less risky than being in the market. "Missing a chance" is not what "risky" means.

obvious, bordering on pedantic, point. OP is saying that trying to time the gap up is less likely to pay off P/L-wise than just holding the course

Not in this thread it is not. Stock market threads on Hacker News are about the same level as your doctor uncle trying to explain monads to your artist sister, I'm sorry to say. Words have specific meanings, and this just serves to confuse your average Robinhood or E-trade investor.

Re: Dow Falls 2997 points worst drop since 1987 crash

#467

Post by zone411 » Tue, Mar 17, 2020, 6:16 AM UTC

engineeringwoke wrote: post #370

zone411 wrote: post #360

Earlier quoted context omitted.

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…

You should really check your tone as well. This is good advice.

And you know this because?

Re: Dow Falls 2997 points worst drop since 1987 crash

#468

Post by raincom » Tue, Mar 17, 2020, 6:16 AM UTC

jcranmer wrote: post #28

By percentage, this isn't just the worst drop since the 1987 crash--the 1987 drop is the only worse drop. This is worse than any day in the Great Depression.

If there were no circuit breakers, we would have witnessed drops worse than the 1987 drop. The 1987 crash brought forth circuit breakers, limit up/down in the futures markets.

Re: Dow Falls 2997 points worst drop since 1987 crash

#469

Post by sershe » Tue, Mar 17, 2020, 6:18 AM UTC

quadrangle wrote: post #48

nostromo wrote: post #31

Earlier quoted context omitted.

This is similar to 9/11 where politicians would act without thinking just to appear like they were doing something. Security theater was the norm for many years.

I hope you're not saying that measures which actually achieve more social distancing is somehow theater.

Omitting the rest of my argument (so that this can be hopefully kept more specific), arguing about this with people on HN actually made me think it's also part theater, just like airport security et al.

Consider this merits aside, even if quarantine saves everyone and lack thereof kills everyone; we don't know that yet.

If you are a mayor of Podunk, Nebrahoma, you have two choices. You can join in the quarantining with everyone else, and whatever damage that causes is not your fault. If someone literally comes to a town hall 2 years later to tell you they lost their job for 2 months, were evicted, got addicted to drugs and their life is ruined now, it will still be blamed on the virus and global economy and whatnot.

Now, if you don't join, not only you won't achieve much due to the others' actions - if anything goes wrong you will be blamed for every dead grandma and your political career is over.

There's really no incentive to not max out the quarantine theater, regardless of the relative merits of the measures taken.

Re: Dow Falls 2997 points worst drop since 1987 crash

#470

Post by raincom » Tue, Mar 17, 2020, 6:22 AM UTC

usaar333 wrote: post #40

anonu wrote: post #7

Worst drop ever for the Nasdaq Index today: -12%. These aren't 1, 2 or 3 standard-deviation events... these are more like 6 or 7 standard-deviations from the mean...

Vix is currently at 82%, rather than a more typical 15%. You should expect daily fluctuations of 5 to 6x what is ordinary for the next month. In fact today's drop is only about 1 standard deviation.

VIX was suppressed so long through shorting VIX futures via ETNs like $XIV, $SVXY up until Feb 5, 2018. Then the latter ETNs blew up. Lots of people made money just buying these ETNs. This was one way VIX was suppressed.