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Scary 1929 market chart gains traction

marketwatch.com

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Re: Scary 1929 market chart gains traction

#11
Someone told me that part of the reason for the great returns of the stock market in 2013 was because of the fed's quantitative easing program. They said that the easing was increasing the money supply, and that money has no where else to go except into the stock market, because all other investments haven't had great returns.

Is there any merit to that? I was planning to keep investing in stocks because of that. But, really I know nothing.

Re: Scary 1929 market chart gains traction

#13
post #2

FYI, with charts like this it's kind of important to do some quantitative work, not just take a look. Check out this taxonomy of charts: http://blogs.cfainstitute.org/investor/2013/05/15/an-r-squar...

Apparently as of a couple weeks ago the R-squared value was ~90%.

http://www.marketwatch.com/story/ghost-of-1929-haunts-as-199...

Re: Scary 1929 market chart gains traction

#14
post #11

Someone told me that part of the reason for the great returns of the stock market in 2013 was because of the fed's quantitative easing program. They said that the easing was increasing the money supply, and that money has no where else to go except into the stock market, because all other investments haven't had great returns. Is there any merit to that? I was planning to keep investing in stocks because of that. But…

Yes that's largely the reason

Re: Scary 1929 market chart gains traction

#15
post #11

Someone told me that part of the reason for the great returns of the stock market in 2013 was because of the fed's quantitative easing program. They said that the easing was increasing the money supply, and that money has no where else to go except into the stock market, because all other investments haven't had great returns. Is there any merit to that? I was planning to keep investing in stocks because of that. But…

Warren Buffet has only a few basic rules. Amongst them is only invest in things you understand. I think as a general rule, its a pretty good one.

Re: Scary 1929 market chart gains traction

#16
This sort of scare tactic means nothing without an effort to explain the correlation. Without a testable theory, it's meaningless data mining.

My guess is someone on the inside has already shorted the market just before press time, anticipating the effect the article will have among unsophisticated investors. And guess what, boys and girls? That kind of "insider trading" is legal -- you can say anything you want in the press, and you can position yourself to benefit from your own article in advance. It's all perfectly legal.

Re: Scary 1929 market chart gains traction

#17
post #15
post #11

Someone told me that part of the reason for the great returns of the stock market in 2013 was because of the fed's quantitative easing program. They said that the easing was increasing the money supply, and that money has no where else to go except into the stock market, because all other investments haven't had great returns. Is there any merit to that? I was planning to keep investing in stocks because of that. But…

Warren Buffet has only a few basic rules. Amongst them is only invest in things you understand. I think as a general rule, its a pretty good one.

Unfortunately, I don't understand much. So, I just invest in S&P500.

Re: Scary 1929 market chart gains traction

#20
I'm pretty skeptical of charts like this. On the y axis, the scales aren't relative. The gain on the black line before the drop is about 187% (200 - 375). The gain on the red line is 132% (12400 - 16400). On the x axis, there isn't even a label for red so it impossible to tell how the different time periods compare.
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