31 ms·

China Stock Market Drops 8.5%

373 points by electic 11y ago

obayesshelton 11y ago
funny story, I was shorting some ETF's and Chinese indexes and I had to close all my positions due to a personal issue. Could of been drinks on me.
eddd 11y ago
China is at the "fear" level [1], prepare for more :) [1] https://steveblank.files.wordpress.com/2011/06/bubble-phases.jpg https://steveblank.files.wordpress.com/2011/06/bubble-phases...
- tspiteri 11y ago
  > prepare for more :) What's funny about that?
jamesblonde 11y ago
For China to regain some measure of competitiveness, the easiest and most probable solution is to devalue the Yuan around 20% against the dollar: http://www.barrons.com/articles/why-chinas-currency-could-fall-20-1440143855 http://www.barrons.com/articles/why-chinas-currency-could-fa... This will lead to massive drops in global equities due to fears of deflation.
- jpatokal 11y ago
  They're already doing that: http://www.wsj.com/articles/china-moves-to-devalue-the-yuan-1439258401 http://www.wsj.com/articles/china-moves-to-devalue-the-yuan-... Despite the misleading subtitle, this is a change to the way the yuan is managed and will allow continual (slow) devaluation.
  - jamesblonde 11y ago
    Agreed, this is just the first act.
    - nodata 11y ago
      What's the second act?
      - jamesblonde 11y ago
        The first devaluation is just a political move. Just to test the waters - will the Americans go crazy about them devaluing. In the second act, they will say - hey, this 1.5% didn't work. Look our industrial production is still falling. We have to adjust to market forces and devalue more. Then comes the 20% or so devaluation. But look, the Yuan has appreciated around 8% the last 5 years, so it will only be a relatively small devaluation. That will be the argument.
        dpc_pw 11y ago
        And the strengthening dollar will force more QE or/and negative interests rate and basically a currency war...
  - deleted 11y ago
    [deleted]
- danieltillett 11y ago
  A currency war is not going to be good for speculative investments - say like the tech industry. Lets hope it does not come to this.
  - jamesblonde 11y ago
    It won't be good for emerging markets or any high-beta investment. So yes, VC money could dry up in the next few months.
    - danieltillett 11y ago
      My expectation is VC money is less likely to be affected than the private equity funds. VC funds are pretty long-term and the the limited partners are locked in tight. It is the unicorns looking to raise money out of the private equity market or IPO who will really struggle if the market turns.
- seanmcdirmid 11y ago
  Stop. Most of my life savings are still in yuan. I really need to convert the rest. We converted a bit when the first devaluation happened (my wife can do that since she is a citizen), but to do the rest, I have to wait a month for tax receipts from work....the joy of earning money in an inconvertible currency!
  - toyg 11y ago
    At least you live in a country with significant internal production, so overall things shouldn't get too bad for you even after devaluation (as long as you stay in the country and buy Chinese). I grew up in Italy during the last few devaluation waves and then the Euro switchover (when prices basically doubled overnight) -- prices of everything except food and shoes skyrocketed, it was really ugly for us little people.
    - antientropic 11y ago
      The claim that prices "basically doubled" during the Euro switchover seems rather exaggerated: http://www.inflation.eu/inflation-rates/italy/historic-inflation/cpi-inflation-italy.aspx http://www.inflation.eu/inflation-rates/italy/historic-infla... (i.e. inflation was about 2-3%).
      - toyg 11y ago
        In Italy there is a wide (and ongoing) debate on this topic, because there is a clear disconnect between official statistics from those years and widespread public perception (which, tbh, includes mine). Unfortunately very little is translated, but a couple of Italian studies on the phenomenon are at http://www.treccani.it/enciclopedia/inflazione-e-inflazione-percepita-euro_%28XXI_Secolo%29/ http://www.treccani.it/enciclopedia/inflazione-e-inflazione-... and http://www.mi.camcom.it/l-euro-tra-inflazione-percepita-e-politiche-di-pricing http://www.mi.camcom.it/l-euro-tra-inflazione-percepita-e-po... In short, some specific sectors did increase prices dramatically in those years, and probably were the ones felt the most by everyday consumers (food, restaurants, retail etc). I would personally add that Italian statistics on economic elements are historically lacking, due to widespread tax evasion and unreported activity, and suffer from the huge economic disconnect between North and South.
jakozaur 11y ago
Meanwhile S&P 500 is also failing: https://www.google.com/finance?q=INDEXSP:.INX https://www.google.com/finance?q=INDEXSP:.INX 46 days ago, I suggested that China slowdown may have global impact: https://news.ycombinator.com/item?id=9851214 https://news.ycombinator.com/item?id=9851214 I'm glad that I sold my stock ETFs.
- reddytowns 11y ago
  The S&P 500 is poised to drop another 2%. Check out the futures market: http://www.sgxniftydowfutureslive.com/index_files/DOWFUTURES.htm http://www.sgxniftydowfutureslive.com/index_files/DOWFUTURES...
- ctolsen 11y ago
  Not suggesting that you're wrong, only that you're lucky: there is always a risk that things go in any direction. If you're in it for the long haul, selling your ETFs a month ago isn't necessarily the best thing to do – at least by virtue of allowing yourself to sell your stocks when you feel it's the right time, which is mostly going to be dead wrong. And selling them today is certainly a terrible idea.
  - ThomPete 11y ago
    There are no prodigies in trading, only bull and bear markets :)
- joshuahedlund 11y ago
  Don't be too glad unless you also manage to buy back in before it recovers past the level you sold.
crorella 11y ago
A good time to buy more!
- pmalynin 11y ago
  Time to short everything!
  - sama 11y ago
    One of those two things.
    - big_co 11y ago
      The former.
    - static_noise 11y ago
      One of them will be a rich master trader.
      - smegel 11y ago
        The other will have his hand cut by a falling knife. Oops, did I just take sides?
        UK-AL 11y ago
        Over a long enough timeline, the stocks will probably recover. Buying stocks will probably lose short term. Probably gain long term. Over a long enough timeline shares have always gained.
        rihegher 11y ago
        "Over a long enough timeout shares have always gained" Not so sure if you take inflation and Survival bias into consideration https://en.wikipedia.org/wiki/Survivorship_bias#In_finance_and_economics https://en.wikipedia.org/wiki/Survivorship_bias#In_finance_a...
codecamper 11y ago
Good! Down down down stock market! Get all this damn VC out of the market.
- c1sc0 11y ago
  How does that work? My understanding was that money was flowing towards VC exactly because of poor market performance since the 2008 crash.
  - dluan 11y ago
    The Chinese bubble has partially been driven by lots of IPOs (http://www.wsj.com/articles/chinas-ipo-market-leaves-u-s-in-the-dust-1433446985 http://www.wsj.com/articles/chinas-ipo-market-leaves-u-s-in-...).
    - spacecowboy_lon 11y ago
      And by new investors borrowing money to invest - latest bad idea to use pension funds to prop up the stock market.
w1ntermute 11y ago
Dow, S&P, and NASDAQ futures have tanked: http://money.cnn.com/data/premarket/ http://money.cnn.com/data/premarket/ This week is going to be ugly.
nagaiah 11y ago
Buy low; Sell high;
timr 11y ago
Fun bedtime story: the systemic shock of this downturn causes investors to do what they are naturally prone to do, which is become fearful. Money dries up for the most speculative investments first, which removes the flow of dumb money from late-stage unicorn rounds. Unable to raise further "growth capital" at attractive valuations, and burning money like there's no tomorrow, we see the first unicorn layoffs within 3 months. This spooks investors further, which dries up whatever funding was left for early stage deals. Within 6 months, the weakest startups are beginning to fail outright, which pulls back the tide a bit, and reveals the ponzi scheme of startup-servicing-startup revenue cycles for what they are. Suddenly, a number of heretofore assumed "safe" investments with "strong" revenues are revealed to be precarious, as 95% of their revenue streams were correlated. Companies go from healthy revenue to practically nothing overnight, as dozens of companies all cut back on burn simultaneously. This only exacerbates the cash flow problems, and startups that were flying high are now flying into the ground at remarkable speed. Market gurus are revealed to be wearing no pants. Within a year, the valley is in full recession, and people are clamoring for U-Hauls out of San Francisco, which are in short supply... (In case you were wondering, this is essentially what happened in 1999, minus a few wild-cards like companies with totally fictional revenue, and companies that had no revenue at all.)
- cm2187 11y ago
  I wonder what jet.com is worth now
  - adventured 11y ago
    Well if you want a prediction for a company that's going to take a huge hit in this downturn: Tesla They're going to deploy the Model X into a temporarily contracting electric car market, with China upside down, and with the US upper class pulling back spending due to a big drop in asset values. The gigafactory will cost vast sums yet to finish and get functional, and then it'll hit the market with weak demand for several years at least. Meanwhile Tesla's growth on the Model S, which has already stalled out, will get hammered further, pushing their already high quarterly losses even higher - all at time when raising more capital is going to be painful. Any company that needs a lot of financing to do what they do, is going to get hurt bad through this storm.
alkonaut 11y ago
Brent is now $44. Russia produces 10 million barrels per day. Their budget was amended earlier to account for the massive drop from $100 -> $50, leaving a huge hole in the revenues and a massive expected deficit. With a price more than 10% lower than that level, things are about to become really interesting (in the worse sense of the word).
- jmnicolas 11y ago
  Why specifically Russia and not Norway, Saudi Arabia or ... the US ?
  - guard-of-terra 11y ago
    Russia walks the thin line - large population, huge social spendings, military spendings also, restrictions on borrowing cheap capital. Might be first to fall. Makes me really want to move my savings (which are already in dollar mostly) out of Russian banks, but I'm not entirely sure where to. Or just burn those on something?
    - rosege 11y ago
      If I were you I would def move it - can you get to london and setup an account there? Just look at Argentina - when they went broke they converted all foreign currency accounts to pesos (at terrible rates) - effectively stealing large amounts from the people
  - alkonaut 11y ago
    The US produces almost as much oil as Russia, but is a net importer. Saudi Arabia runs a large deficit at current prices, but has a pretty large pile: http://www.eia.gov/todayinenergy/detail.cfm?id=19971 http://www.eia.gov/todayinenergy/detail.cfm?id=19971 The story is similar in Norway. In Russia it's not as rosy: http://www.bloomberg.com/news/articles/2014-12-26/russia-may-burn-wealth-funds-in-3-years-without-budget-revision http://www.bloomberg.com/news/articles/2014-12-26/russia-may... On top of the dwindeling reserve, Russia has been given some stiff fines from international courts for unlawful actions, for example $50bn to Yukos shareholders. Edit: there certainly are also nations that are in at least as deep problems as Russia, Venezuela for example.
rndn 11y ago
Is that surprising at all? If we take a look at the Shanghai Composite index in the past 5 years the bubble is pretty obvious [1]. That makes me wonder whether a simple averaging/smoothing law could mitigate such crazyness without limiting sensible business traffic significantly. I don't know enough about the stock market to say how and whether this could work, but the fact that a monstrous apparatus like this is allowed to develop such abnormalities seems absurd. [1] http://i.imgur.com/gpHe1gc.png http://i.imgur.com/gpHe1gc.png
- pjc50 11y ago
  Averaging of what? Prices are what they are, despite limits on daily movements (closing "limit down"). Price controls can work on commodities in some limited circumstances but not on a pure abstraction like a stockmarket.
- icebraining 11y ago
  It's not exactly simply "being allowed", China has been implementing a lot of new measures regarding this crisis (e.g. banning short selling, limiting price drops). Some people argue those have been making it worse - though for a layman like myself, it's hard to distinguish honest from biased opinion.
sidcool 11y ago
A communist nation trying to reap benefits of capitalism.
- Hytosys 11y ago
  Because of their embracing of the free market, it's often accepted that China is not a communist nation (despite being led by a communist party). Actually, this situation is pretty much just capitalism at work. It really has nothing to do with communism; every free market is susceptible to this sort of failure.
  - le_clochard 11y ago
    It's anything but "capitalism at work" if "capitalism" has anything to with "free markets". The Chinese Government has been graying out, if not altogether fudging, their economic indicators and propping up domestic investors. Now it has moved to outright rigging of the market through selective bans and directives (no short selling, no selling if you hold >5%, no trading at all on certain stocks, and so on). This current rout is simply a continuation of the previous one in July when similar curbs were placed to halt the plunge. Once again, even if their tactics work they'll only help bring about yet another plunge. All in all, the western demand is dying out since most countries are trying to in-source materials and goods (instead of importing from China) and domestic asset bubble has nowhere to pop and the lies invested in that bubble have nowhere to hide.
    - bottled_poe 11y ago
      > The Chinese Government has been graying out, if not altogether fudging, their economic indicators and propping up domestic investors. Oh, is that specific to China?
  - sidcool 11y ago
    That was not my point. I am being critical of China for staunchly supporting Communism (and hence to some extent being anti-capitalism and anti-democracy) and at the same time reaping benefits from democracies and capitalist states. I guess HN didn't like my earlier comment, but I do believe that. China has several times castigated India (where I belong) for being a shoddy nation of scared people due to its democracy. I find it a double standard.
riaqn 11y ago
"It's neither bear market nor bull market, it's monkey market".
- seanmcdirmid 11y ago
  It is a heavily gamed market where only the inside traders usually win. It really is a reflection of how corruption is bad for china.
dpacmittal 11y ago
India's Sensex and Nifty is also 6% down wiping almost $120B from the market.
deleted 11y ago
[deleted]
kriro 11y ago
Does anyone have a good link to a quick refresher on fundamental analysis and/or a reading list besides Graham and Buffet? Seems like just about the right time to look over some financial statements/balance sheets in depth.
- drunkpotato 11y ago
  The Bogleheads Guide to Investing is quite good and short. I read it before Graham and it helped my understanding quite a bit.
loso 11y ago
A good thing to look at right now is the "Asian Contagion" in 1997. While we have different spark there is a good chance that the pattern could be similar. https://en.wikipedia.org/wiki/1997_Asian_financial_crisis https://en.wikipedia.org/wiki/1997_Asian_financial_crisis. I'm hoping that we don't have a LTCM https://en.wikipedia.org/wiki/Long-Term_Capital_Management https://en.wikipedia.org/wiki/Long-Term_Capital_Management hidden with this drop but there is a good chance we have several.
netcan 11y ago
...1,968 stocks fell by the maximum 10% allowed by regulators…, or 68% of all stocks in China… I don't really understand the way a price regulated stock market would normally work. Anyone understand this? Normally the problem with price regulation is that the market doesn't clear. If the 10% limit was hit, there are sellers out there that tried to get out at the lowest allowable price but failed. Doesn't this mean they are probably going to be shares for sale at a lower price tomorrow? Any time you hit the floor price you are accumulating a backlog of sellers. I don't think getting a call from a broker that he was unable to sell your shares is likely to cause calm tomorrow morning. Basically, how's China's regulatory stuff going, now that it's getting tested in rough conditions.
- icebraining 11y ago
  Normally the problem with price regulation is that the market doesn't clear. If the 10% limit was hit, there are sellers out there that tried to get out at the lowest allowable price but failed. Doesn't this mean they are probably going to be shares for sale at a lower price tomorrow? I think that's exactly what's been happening for weeks by now. It's like falling down the stairs - a step each day.
- branchless 11y ago
  It's an attempt to put a break on sentiment. Many exchanges world-wide have "circuit breakers".
- adventured 11y ago
  It doesn't work particularly well. A lot of people thought China's management of the economy was brilliant while the growth was easy. The same was true of Putin's Russia while they were riding the temporary oil price boom. Now the tide is going out on all of these easy growth scenarios that were riding the cheap dollar (including the $9 trillion in foreign debt issued in dollars that provided a lot of the growth fuel). The dollar has turned and is crushing emerging markets and pulling trillions in capital away from them. When the tide goes out like it is now, you quickly discover that the bureaucrats in command economies are almost always incompetent and that incompetence was being temporarily masked. China was propping up their markets to give the elites time to get out.[1] The stock market bubble was designed to be a wealth transfer, from household savings, to their extremely debt-laden corporations. That transfer is complete, and didn't work particularly well, so now China is prepared to allow the ceiling to cave in on the average investors holding the bag. That's why they've stopped supporting the market. http://www.bloomberg.com/news/articles/2015-08-18/china-s-richest-traders-are-fleeing-stocks-as-the-masses-pile-in http://www.bloomberg.com/news/articles/2015-08-18/china-s-ri...
thewarrior 11y ago
Allow me to barge in with my armchar financial analysis ... If you check the Baltic Dry Index , it's started dropping in the past few weeks indicating a slowdown in global shipping. Similar for crude prices. There was a similar pattern in 2008 (though the reasons this time are a bit different) with crude and the Baltic index starting to tumble in August before the market nosedived in September. Not that we will repeat 2008 but we definitely have a leading indicator for renewed weakness in the global economy.
- branchless 11y ago
  And this won't be 2008. For starters they can't cut to "emergency" rates.
- jcfrei 11y ago
  yeah, in my opinion the decline in shipping is far more worrying than the recent stock market crashes.
- adventured 11y ago
  It's far worse than even the baltic is indicating: "Shipping freight rates for transporting containers from ports in Asia to Northern Europe fell by 26.7 percent to $469 per 20-foot container (TEU) in the week ended on Friday" "It was the third consecutive week of falling freight rates on the world’s busiest route and rates are now nearly 60 percent lower than three weeks ago." http://gcaptain.com/asia-europe-container-freight-rates-have-fallen-off-a-cliff/ http://gcaptain.com/asia-europe-container-freight-rates-have...
- noja 11y ago
  Here is the chart: http://www.bloomberg.com/quote/BDIY:IND http://www.bloomberg.com/quote/BDIY:IND Can you explain why it worries you in a bit more detail? The drop doesn't look so bad.
  - thewarrior 11y ago
    The drop doesn't look so bad.. But (And I don't think it is) if this is 2008 redux then it has only started dropping .. :)
jackgavigan 11y ago
European markets are down ~3%. EDIT: Make that ~4.5%. This is getting interesting! Index futures markets suggest that the S&P500 will drop by ~3%, and the NASDAQ will drop by 4% when the market opens. Tech stocks get hit harder in circumstances like this: http://www.ft.com/cms/s/0/8a62642e-49b9-11e5-9b5d-89a026fda5c9.html http://www.ft.com/cms/s/0/8a62642e-49b9-11e5-9b5d-89a026fda5... (Google "Market turmoil leaves tech sector exposed" to bypass the paywall). Bill Gurley is being bearish: https://twitter.com/bgurley/status/634573025329807360 https://twitter.com/bgurley/status/634573025329807360 It's worth remembering how markets really work: https://pbs.twimg.com/media/CNKLWDOW8AAgUBv.jpg:large https://pbs.twimg.com/media/CNKLWDOW8AAgUBv.jpg:large
- joeyspn 11y ago
  > It's worth remembering how markets really work The panic button has been pressed... https://www.youtube.com/watch?v=Bbv5B71KmkA https://www.youtube.com/watch?v=Bbv5B71KmkA
- jackgavigan 11y ago
  Well, after a big dip when the US markets opened (the NASDAQ was down by more than 8% at one point, and the DOW dropped 1,000 points at the open), they've recovered and stabilised down between 2% and 3%. European stock markets have recovered from their lows too. Move along, nothing to see here...
a3voices 11y ago
Good thing I sold nearly all my stocks last week! Too many bad experiences with bitcoin taught me things.
- stephenitis 11y ago
  That sounds like a terrible move to base all your investment strategy on your experiences from bitcoin.
acd 11y ago
Google Schiller P/E "Shiller P/E is 50% higher than the historical mean of 16.6"
joshuahedlund 11y ago
Looks like it's time for the first real-world test (for most of us younger folks who didn't have anything invested in 2008 and have enjoyed a bull market since then) of all the theories I've read from financial independence gurus about index funds, i.e. how the market always recovers and goes up and if it doesn't none of this will matter anyway, the financial heads will always say it's different, the investors will always panic and oversell, just stay tough, hold on, maybe buy more, and come out ahead...
- jeffreyrogers 11y ago
  China's market is very different than the markets in the developed world for a number of reasons (more isolated, less mature investor base, more direct government involvement, to name a few). So it probably isn't the best barometer for how other markets work.
  - roymurdock 11y ago
    The stock market operates differently, but China's economy, which is an integral part of the world economy, is still tied directly to the market. Chinese economic fundamentals (export, import, saving, consuming, government spending) will all be impacted by a failing stock market, which will translate into economic concerns across the globe.
deleted 11y ago
[deleted]
known 11y ago
https://en.wikipedia.org/wiki/Chiemgauer https://en.wikipedia.org/wiki/Chiemgauer can create millions of new jobs in the economy;
curiousjorge 11y ago
in b4 "oh but if you bought back in 2003 you'd still be up 1000%" shadow banking > gdp debts > gdp real estate over supply infrastructural problems political strife pissed off middle class

373 points by electic 11y ago

funny story, I was shorting some ETF's and Chinese indexes and I had to close all my positions due to a personal issue. Could of been drinks on me.

eddd 11y ago

China is at the "fear" level [1], prepare for more :) [1] https://steveblank.files.wordpress.com/2011/06/bubble-phases.jpg https://steveblank.files.wordpress.com/2011/06/bubble-phases...

tspiteri 11y ago
> prepare for more :) What's funny about that?

jamesblonde 11y ago

For China to regain some measure of competitiveness, the easiest and most probable solution is to devalue the Yuan around 20% against the dollar: http://www.barrons.com/articles/why-chinas-currency-could-fall-20-1440143855 http://www.barrons.com/articles/why-chinas-currency-could-fa... This will lead to massive drops in global equities due to fears of deflation.

jpatokal 11y ago
They're already doing that: http://www.wsj.com/articles/china-moves-to-devalue-the-yuan-1439258401 http://www.wsj.com/articles/china-moves-to-devalue-the-yuan-... Despite the misleading subtitle, this is a change to the way the yuan is managed and will allow continual (slow) devaluation.
- jamesblonde 11y ago
  Agreed, this is just the first act.
  - nodata 11y ago
    What's the second act?
    - jamesblonde 11y ago
      The first devaluation is just a political move. Just to test the waters - will the Americans go crazy about them devaluing. In the second act, they will say - hey, this 1.5% didn't work. Look our industrial production is still falling. We have to adjust to market forces and devalue more. Then comes the 20% or so devaluation. But look, the Yuan has appreciated around 8% the last 5 years, so it will only be a relatively small devaluation. That will be the argument.
      - dpc_pw 11y ago
        And the strengthening dollar will force more QE or/and negative interests rate and basically a currency war...
- deleted 11y ago
  [deleted]
danieltillett 11y ago
A currency war is not going to be good for speculative investments - say like the tech industry. Lets hope it does not come to this.
- jamesblonde 11y ago
  It won't be good for emerging markets or any high-beta investment. So yes, VC money could dry up in the next few months.
  - danieltillett 11y ago
    My expectation is VC money is less likely to be affected than the private equity funds. VC funds are pretty long-term and the the limited partners are locked in tight. It is the unicorns looking to raise money out of the private equity market or IPO who will really struggle if the market turns.
seanmcdirmid 11y ago
Stop. Most of my life savings are still in yuan. I really need to convert the rest. We converted a bit when the first devaluation happened (my wife can do that since she is a citizen), but to do the rest, I have to wait a month for tax receipts from work....the joy of earning money in an inconvertible currency!
- toyg 11y ago
  At least you live in a country with significant internal production, so overall things shouldn't get too bad for you even after devaluation (as long as you stay in the country and buy Chinese). I grew up in Italy during the last few devaluation waves and then the Euro switchover (when prices basically doubled overnight) -- prices of everything except food and shoes skyrocketed, it was really ugly for us little people.
  - antientropic 11y ago
    The claim that prices "basically doubled" during the Euro switchover seems rather exaggerated: http://www.inflation.eu/inflation-rates/italy/historic-inflation/cpi-inflation-italy.aspx http://www.inflation.eu/inflation-rates/italy/historic-infla... (i.e. inflation was about 2-3%).
    - toyg 11y ago
      In Italy there is a wide (and ongoing) debate on this topic, because there is a clear disconnect between official statistics from those years and widespread public perception (which, tbh, includes mine). Unfortunately very little is translated, but a couple of Italian studies on the phenomenon are at http://www.treccani.it/enciclopedia/inflazione-e-inflazione-percepita-euro_%28XXI_Secolo%29/ http://www.treccani.it/enciclopedia/inflazione-e-inflazione-... and http://www.mi.camcom.it/l-euro-tra-inflazione-percepita-e-politiche-di-pricing http://www.mi.camcom.it/l-euro-tra-inflazione-percepita-e-po... In short, some specific sectors did increase prices dramatically in those years, and probably were the ones felt the most by everyday consumers (food, restaurants, retail etc). I would personally add that Italian statistics on economic elements are historically lacking, due to widespread tax evasion and unreported activity, and suffer from the huge economic disconnect between North and South.

jakozaur 11y ago

Meanwhile S&P 500 is also failing: https://www.google.com/finance?q=INDEXSP:.INX https://www.google.com/finance?q=INDEXSP:.INX 46 days ago, I suggested that China slowdown may have global impact: https://news.ycombinator.com/item?id=9851214 https://news.ycombinator.com/item?id=9851214 I'm glad that I sold my stock ETFs.

reddytowns 11y ago
The S&P 500 is poised to drop another 2%. Check out the futures market: http://www.sgxniftydowfutureslive.com/index_files/DOWFUTURES.htm http://www.sgxniftydowfutureslive.com/index_files/DOWFUTURES...
ctolsen 11y ago
Not suggesting that you're wrong, only that you're lucky: there is always a risk that things go in any direction. If you're in it for the long haul, selling your ETFs a month ago isn't necessarily the best thing to do – at least by virtue of allowing yourself to sell your stocks when you feel it's the right time, which is mostly going to be dead wrong. And selling them today is certainly a terrible idea.
- ThomPete 11y ago
  There are no prodigies in trading, only bull and bear markets :)
joshuahedlund 11y ago
Don't be too glad unless you also manage to buy back in before it recovers past the level you sold.

crorella 11y ago

A good time to buy more!

pmalynin 11y ago
Time to short everything!
- sama 11y ago
  One of those two things.
  - big_co 11y ago
    The former.
  - static_noise 11y ago
    One of them will be a rich master trader.
    - smegel 11y ago
      The other will have his hand cut by a falling knife. Oops, did I just take sides?
      - UK-AL 11y ago
        Over a long enough timeline, the stocks will probably recover. Buying stocks will probably lose short term. Probably gain long term. Over a long enough timeline shares have always gained.
        rihegher 11y ago
        "Over a long enough timeout shares have always gained" Not so sure if you take inflation and Survival bias into consideration https://en.wikipedia.org/wiki/Survivorship_bias#In_finance_and_economics https://en.wikipedia.org/wiki/Survivorship_bias#In_finance_a...

codecamper 11y ago

Good! Down down down stock market! Get all this damn VC out of the market.

c1sc0 11y ago
How does that work? My understanding was that money was flowing towards VC exactly because of poor market performance since the 2008 crash.
- dluan 11y ago
  The Chinese bubble has partially been driven by lots of IPOs (http://www.wsj.com/articles/chinas-ipo-market-leaves-u-s-in-the-dust-1433446985 http://www.wsj.com/articles/chinas-ipo-market-leaves-u-s-in-...).
  - spacecowboy_lon 11y ago
    And by new investors borrowing money to invest - latest bad idea to use pension funds to prop up the stock market.

w1ntermute 11y ago

Dow, S&P, and NASDAQ futures have tanked: http://money.cnn.com/data/premarket/ http://money.cnn.com/data/premarket/ This week is going to be ugly.

nagaiah 11y ago

Buy low; Sell high;

timr 11y ago

Fun bedtime story: the systemic shock of this downturn causes investors to do what they are naturally prone to do, which is become fearful. Money dries up for the most speculative investments first, which removes the flow of dumb money from late-stage unicorn rounds. Unable to raise further "growth capital" at attractive valuations, and burning money like there's no tomorrow, we see the first unicorn layoffs within 3 months. This spooks investors further, which dries up whatever funding was left for early stage deals. Within 6 months, the weakest startups are beginning to fail outright, which pulls back the tide a bit, and reveals the ponzi scheme of startup-servicing-startup revenue cycles for what they are. Suddenly, a number of heretofore assumed "safe" investments with "strong" revenues are revealed to be precarious, as 95% of their revenue streams were correlated. Companies go from healthy revenue to practically nothing overnight, as dozens of companies all cut back on burn simultaneously. This only exacerbates the cash flow problems, and startups that were flying high are now flying into the ground at remarkable speed. Market gurus are revealed to be wearing no pants. Within a year, the valley is in full recession, and people are clamoring for U-Hauls out of San Francisco, which are in short supply... (In case you were wondering, this is essentially what happened in 1999, minus a few wild-cards like companies with totally fictional revenue, and companies that had no revenue at all.)

cm2187 11y ago
I wonder what jet.com is worth now
- adventured 11y ago
  Well if you want a prediction for a company that's going to take a huge hit in this downturn: Tesla They're going to deploy the Model X into a temporarily contracting electric car market, with China upside down, and with the US upper class pulling back spending due to a big drop in asset values. The gigafactory will cost vast sums yet to finish and get functional, and then it'll hit the market with weak demand for several years at least. Meanwhile Tesla's growth on the Model S, which has already stalled out, will get hammered further, pushing their already high quarterly losses even higher - all at time when raising more capital is going to be painful. Any company that needs a lot of financing to do what they do, is going to get hurt bad through this storm.

alkonaut 11y ago

Brent is now $44. Russia produces 10 million barrels per day. Their budget was amended earlier to account for the massive drop from $100 -> $50, leaving a huge hole in the revenues and a massive expected deficit. With a price more than 10% lower than that level, things are about to become really interesting (in the worse sense of the word).

jmnicolas 11y ago
Why specifically Russia and not Norway, Saudi Arabia or ... the US ?
- guard-of-terra 11y ago
  Russia walks the thin line - large population, huge social spendings, military spendings also, restrictions on borrowing cheap capital. Might be first to fall. Makes me really want to move my savings (which are already in dollar mostly) out of Russian banks, but I'm not entirely sure where to. Or just burn those on something?
  - rosege 11y ago
    If I were you I would def move it - can you get to london and setup an account there? Just look at Argentina - when they went broke they converted all foreign currency accounts to pesos (at terrible rates) - effectively stealing large amounts from the people
- alkonaut 11y ago
  The US produces almost as much oil as Russia, but is a net importer. Saudi Arabia runs a large deficit at current prices, but has a pretty large pile: http://www.eia.gov/todayinenergy/detail.cfm?id=19971 http://www.eia.gov/todayinenergy/detail.cfm?id=19971 The story is similar in Norway. In Russia it's not as rosy: http://www.bloomberg.com/news/articles/2014-12-26/russia-may-burn-wealth-funds-in-3-years-without-budget-revision http://www.bloomberg.com/news/articles/2014-12-26/russia-may... On top of the dwindeling reserve, Russia has been given some stiff fines from international courts for unlawful actions, for example $50bn to Yukos shareholders. Edit: there certainly are also nations that are in at least as deep problems as Russia, Venezuela for example.

rndn 11y ago

Is that surprising at all? If we take a look at the Shanghai Composite index in the past 5 years the bubble is pretty obvious [1]. That makes me wonder whether a simple averaging/smoothing law could mitigate such crazyness without limiting sensible business traffic significantly. I don't know enough about the stock market to say how and whether this could work, but the fact that a monstrous apparatus like this is allowed to develop such abnormalities seems absurd. [1] http://i.imgur.com/gpHe1gc.png http://i.imgur.com/gpHe1gc.png

pjc50 11y ago
Averaging of what? Prices are what they are, despite limits on daily movements (closing "limit down"). Price controls can work on commodities in some limited circumstances but not on a pure abstraction like a stockmarket.
icebraining 11y ago
It's not exactly simply "being allowed", China has been implementing a lot of new measures regarding this crisis (e.g. banning short selling, limiting price drops). Some people argue those have been making it worse - though for a layman like myself, it's hard to distinguish honest from biased opinion.

sidcool 11y ago

A communist nation trying to reap benefits of capitalism.

Hytosys 11y ago
Because of their embracing of the free market, it's often accepted that China is not a communist nation (despite being led by a communist party). Actually, this situation is pretty much just capitalism at work. It really has nothing to do with communism; every free market is susceptible to this sort of failure.
- le_clochard 11y ago
  It's anything but "capitalism at work" if "capitalism" has anything to with "free markets". The Chinese Government has been graying out, if not altogether fudging, their economic indicators and propping up domestic investors. Now it has moved to outright rigging of the market through selective bans and directives (no short selling, no selling if you hold >5%, no trading at all on certain stocks, and so on). This current rout is simply a continuation of the previous one in July when similar curbs were placed to halt the plunge. Once again, even if their tactics work they'll only help bring about yet another plunge. All in all, the western demand is dying out since most countries are trying to in-source materials and goods (instead of importing from China) and domestic asset bubble has nowhere to pop and the lies invested in that bubble have nowhere to hide.
  - bottled_poe 11y ago
    > The Chinese Government has been graying out, if not altogether fudging, their economic indicators and propping up domestic investors. Oh, is that specific to China?
- sidcool 11y ago
  That was not my point. I am being critical of China for staunchly supporting Communism (and hence to some extent being anti-capitalism and anti-democracy) and at the same time reaping benefits from democracies and capitalist states. I guess HN didn't like my earlier comment, but I do believe that. China has several times castigated India (where I belong) for being a shoddy nation of scared people due to its democracy. I find it a double standard.

riaqn 11y ago

"It's neither bear market nor bull market, it's monkey market".

seanmcdirmid 11y ago
It is a heavily gamed market where only the inside traders usually win. It really is a reflection of how corruption is bad for china.

dpacmittal 11y ago

India's Sensex and Nifty is also 6% down wiping almost $120B from the market.

deleted 11y ago

[deleted]

kriro 11y ago

Does anyone have a good link to a quick refresher on fundamental analysis and/or a reading list besides Graham and Buffet? Seems like just about the right time to look over some financial statements/balance sheets in depth.

drunkpotato 11y ago
The Bogleheads Guide to Investing is quite good and short. I read it before Graham and it helped my understanding quite a bit.

loso 11y ago

A good thing to look at right now is the "Asian Contagion" in 1997. While we have different spark there is a good chance that the pattern could be similar. https://en.wikipedia.org/wiki/1997_Asian_financial_crisis https://en.wikipedia.org/wiki/1997_Asian_financial_crisis. I'm hoping that we don't have a LTCM https://en.wikipedia.org/wiki/Long-Term_Capital_Management https://en.wikipedia.org/wiki/Long-Term_Capital_Management hidden with this drop but there is a good chance we have several.

netcan 11y ago

...1,968 stocks fell by the maximum 10% allowed by regulators…, or 68% of all stocks in China… I don't really understand the way a price regulated stock market would normally work. Anyone understand this? Normally the problem with price regulation is that the market doesn't clear. If the 10% limit was hit, there are sellers out there that tried to get out at the lowest allowable price but failed. Doesn't this mean they are probably going to be shares for sale at a lower price tomorrow? Any time you hit the floor price you are accumulating a backlog of sellers. I don't think getting a call from a broker that he was unable to sell your shares is likely to cause calm tomorrow morning. Basically, how's China's regulatory stuff going, now that it's getting tested in rough conditions.

icebraining 11y ago
Normally the problem with price regulation is that the market doesn't clear. If the 10% limit was hit, there are sellers out there that tried to get out at the lowest allowable price but failed. Doesn't this mean they are probably going to be shares for sale at a lower price tomorrow? I think that's exactly what's been happening for weeks by now. It's like falling down the stairs - a step each day.
branchless 11y ago
It's an attempt to put a break on sentiment. Many exchanges world-wide have "circuit breakers".
adventured 11y ago
It doesn't work particularly well. A lot of people thought China's management of the economy was brilliant while the growth was easy. The same was true of Putin's Russia while they were riding the temporary oil price boom. Now the tide is going out on all of these easy growth scenarios that were riding the cheap dollar (including the $9 trillion in foreign debt issued in dollars that provided a lot of the growth fuel). The dollar has turned and is crushing emerging markets and pulling trillions in capital away from them. When the tide goes out like it is now, you quickly discover that the bureaucrats in command economies are almost always incompetent and that incompetence was being temporarily masked. China was propping up their markets to give the elites time to get out.[1] The stock market bubble was designed to be a wealth transfer, from household savings, to their extremely debt-laden corporations. That transfer is complete, and didn't work particularly well, so now China is prepared to allow the ceiling to cave in on the average investors holding the bag. That's why they've stopped supporting the market. http://www.bloomberg.com/news/articles/2015-08-18/china-s-richest-traders-are-fleeing-stocks-as-the-masses-pile-in http://www.bloomberg.com/news/articles/2015-08-18/china-s-ri...

thewarrior 11y ago

Allow me to barge in with my armchar financial analysis ... If you check the Baltic Dry Index , it's started dropping in the past few weeks indicating a slowdown in global shipping. Similar for crude prices. There was a similar pattern in 2008 (though the reasons this time are a bit different) with crude and the Baltic index starting to tumble in August before the market nosedived in September. Not that we will repeat 2008 but we definitely have a leading indicator for renewed weakness in the global economy.

branchless 11y ago
And this won't be 2008. For starters they can't cut to "emergency" rates.
jcfrei 11y ago
yeah, in my opinion the decline in shipping is far more worrying than the recent stock market crashes.
adventured 11y ago
It's far worse than even the baltic is indicating: "Shipping freight rates for transporting containers from ports in Asia to Northern Europe fell by 26.7 percent to $469 per 20-foot container (TEU) in the week ended on Friday" "It was the third consecutive week of falling freight rates on the world’s busiest route and rates are now nearly 60 percent lower than three weeks ago." http://gcaptain.com/asia-europe-container-freight-rates-have-fallen-off-a-cliff/ http://gcaptain.com/asia-europe-container-freight-rates-have...
noja 11y ago
Here is the chart: http://www.bloomberg.com/quote/BDIY:IND http://www.bloomberg.com/quote/BDIY:IND Can you explain why it worries you in a bit more detail? The drop doesn't look so bad.
- thewarrior 11y ago
  The drop doesn't look so bad.. But (And I don't think it is) if this is 2008 redux then it has only started dropping .. :)

jackgavigan 11y ago

European markets are down ~3%. EDIT: Make that ~4.5%. This is getting interesting! Index futures markets suggest that the S&P500 will drop by ~3%, and the NASDAQ will drop by 4% when the market opens. Tech stocks get hit harder in circumstances like this: http://www.ft.com/cms/s/0/8a62642e-49b9-11e5-9b5d-89a026fda5c9.html http://www.ft.com/cms/s/0/8a62642e-49b9-11e5-9b5d-89a026fda5... (Google "Market turmoil leaves tech sector exposed" to bypass the paywall). Bill Gurley is being bearish: https://twitter.com/bgurley/status/634573025329807360 https://twitter.com/bgurley/status/634573025329807360 It's worth remembering how markets really work: https://pbs.twimg.com/media/CNKLWDOW8AAgUBv.jpg:large https://pbs.twimg.com/media/CNKLWDOW8AAgUBv.jpg:large

joeyspn 11y ago
> It's worth remembering how markets really work The panic button has been pressed... https://www.youtube.com/watch?v=Bbv5B71KmkA https://www.youtube.com/watch?v=Bbv5B71KmkA
jackgavigan 11y ago
Well, after a big dip when the US markets opened (the NASDAQ was down by more than 8% at one point, and the DOW dropped 1,000 points at the open), they've recovered and stabilised down between 2% and 3%. European stock markets have recovered from their lows too. Move along, nothing to see here...

a3voices 11y ago

Good thing I sold nearly all my stocks last week! Too many bad experiences with bitcoin taught me things.

stephenitis 11y ago
That sounds like a terrible move to base all your investment strategy on your experiences from bitcoin.

acd 11y ago

Google Schiller P/E "Shiller P/E is 50% higher than the historical mean of 16.6"

joshuahedlund 11y ago

Looks like it's time for the first real-world test (for most of us younger folks who didn't have anything invested in 2008 and have enjoyed a bull market since then) of all the theories I've read from financial independence gurus about index funds, i.e. how the market always recovers and goes up and if it doesn't none of this will matter anyway, the financial heads will always say it's different, the investors will always panic and oversell, just stay tough, hold on, maybe buy more, and come out ahead...

jeffreyrogers 11y ago
China's market is very different than the markets in the developed world for a number of reasons (more isolated, less mature investor base, more direct government involvement, to name a few). So it probably isn't the best barometer for how other markets work.
- roymurdock 11y ago
  The stock market operates differently, but China's economy, which is an integral part of the world economy, is still tied directly to the market. Chinese economic fundamentals (export, import, saving, consuming, government spending) will all be impacted by a failing stock market, which will translate into economic concerns across the globe.

deleted 11y ago

[deleted]

known 11y ago

https://en.wikipedia.org/wiki/Chiemgauer https://en.wikipedia.org/wiki/Chiemgauer can create millions of new jobs in the economy;

curiousjorge 11y ago

in b4 "oh but if you bought back in 2003 you'd still be up 1000%" shadow banking > gdp debts > gdp real estate over supply infrastructural problems political strife pissed off middle class