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When buying the dip doesn’t work: An analysis of the dot-com crash

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Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#11

Post by kmonsen »

300bps wrote: post #4

The Federal Reserve has taken on $9 trillion onto their balance sheet to flood the economy with money. https://www.federalreserve.gov/monetarypolicy/bst_recenttren... They’ve lowered short-term interest rates to effectively 0 and kept them there for quite a number of years. Federal and State governments have flooded the economy with stimulus. There is so much money that has been injected into the economy that it is n…

I honestly think that’s not the main reason we have inflation now. Since every country in the world is seeing similar inflation I would think it’s supply side and not something any central bank can fight.

I’ve always been Keynesian, but it faces the same problem as everything else, you need to be able to predict the future to do it well.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#12

Post by [deleted] »

fny wrote: post #10

Look at a chart of the S&P 500 from 1920 to 2008 and you'll notice something rather curious: the stock market has gone parabolic ever since the financial crisis. What made this period so unique? Tremendously low interest rates coupled with quantitative easing dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns. At ever dip, it was an op…

[deleted]

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#13

Post by 300bps »

kmonsen wrote: post #11
300bps wrote: post #4

The Federal Reserve has taken on $9 trillion onto their balance sheet to flood the economy with money. https://www.federalreserve.gov/monetarypolicy/bst_recenttren... They’ve lowered short-term interest rates to effectively 0 and kept them there for quite a number of years. Federal and State governments have flooded the economy with stimulus. There is so much money that has been injected into the economy that it is n…

I honestly think that’s not the main reason we have inflation now. Since every country in the world is seeing similar inflation I would think it’s supply side and not something any central bank can fight. I’ve always been Keynesian, but it faces the same problem as everything else, you need to be able to predict the future to do it well.

Fed balance sheet is about $9 trillion.

This article gives details on $5 trillion in government stimulus.

https://www.nytimes.com/interactive/2022/03/11/us/how-covid-...

To put those numbers in perspective, the market cap of the entire S&P 500 is about $40 trillion.

I hear what you’re saying about supply-side inflation but you don’t think flooding the economy with so much unearned money might be driving up demand a bit?

A beach town near me, I paid $4,000 for a week to stay there two years ago. This year, an equivalent house is $15,000 per week. So now I’m driving six hours away to get a house for $10,000 per week.

When people make $20,000 per month in stock market/cryptocurrency gains, it starts driving up demand for everything dramatically.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#14

Post by [deleted] »

300bps wrote: post #4

The Federal Reserve has taken on $9 trillion onto their balance sheet to flood the economy with money. https://www.federalreserve.gov/monetarypolicy/bst_recenttren... They’ve lowered short-term interest rates to effectively 0 and kept them there for quite a number of years. Federal and State governments have flooded the economy with stimulus. There is so much money that has been injected into the economy that it is n…

[deleted]

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#15

Post by vmception »

kmonsen wrote: post #11
300bps wrote: post #4

The Federal Reserve has taken on $9 trillion onto their balance sheet to flood the economy with money. https://www.federalreserve.gov/monetarypolicy/bst_recenttren... They’ve lowered short-term interest rates to effectively 0 and kept them there for quite a number of years. Federal and State governments have flooded the economy with stimulus. There is so much money that has been injected into the economy that it is n…

I honestly think that’s not the main reason we have inflation now. Since every country in the world is seeing similar inflation I would think it’s supply side and not something any central bank can fight. I’ve always been Keynesian, but it faces the same problem as everything else, you need to be able to predict the future to do it well.

The US fed is the biggest whale in the whole market

And every major economic union is duplicating what the fed does

Even if the second part wasn’t true, the first part would cause inflation in those economic unions

It buys bonds from ANY bondholder indiscriminantly. It didn’t matter where they are, they get new dollars, and dilute the value of their area.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#16

Post by tyre »

fny wrote: post #10

Look at a chart of the S&P 500 from 1920 to 2008 and you'll notice something rather curious: the stock market has gone parabolic ever since the financial crisis. What made this period so unique? Tremendously low interest rates coupled with quantitative easing dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns. At ever dip, it was an op…

> The COVID fiscal canon blew growth and inflation skyward.

This is not true and has wrongly given credit to people who have said, since 2020, that COVID relief would cause inflation.

Our current inflation is driven by supply chain issues (unrelated to COVID relief) and rising oil (unrelated to COVID relief.)

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#17

Post by PragmaticPulp »

daenz wrote: post #5

>Why has this strategy been so profitable and painless? Well, because stocks have been in a bull market for thirteen years. If "buy the dip" works for a bull market, does "short the peak" work for a bear market?

Shorting the peak always works, just as buying the dip always works.

The challenge is identifying the peaks and dips. They’re only obvious in retrospect.

Buying perceived dips is easier than shorting perceived peaks because the stock market tends to go up over time.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#18

Post by nathanvanfleet »

Sad to think that investing in the stock market, which I have only been able to financially over the last 5 years might have been much riskier than I might have previously thought. What I previously thought as "okay I just leave it in the stock market for a bit of time to recoup" is something I am now realizing would likely have to be 10+ years.

It's kind of funny because I was getting shaky about having money in the stock market back in December, and I held onto investing some of my money there. But I ultimately relented 4 months later to lose 10% within about two weeks (and after just index funds). Now it's much worse, and I guess I'll just leave it all there.

And in 15 years I'll be back to where I was when I originally invested it.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#19

Post by __john »

daenz wrote: post #5

>Why has this strategy been so profitable and painless? Well, because stocks have been in a bull market for thirteen years. If "buy the dip" works for a bull market, does "short the peak" work for a bear market?

The technical expression is "buy the dip, short the rip".
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