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Stocks Off Sharply as Market Upheaval Grows

322 points by superfx 11y ago

geff82 11y ago
Nothing to be surprised here. Anyway, finally this might be the perfect time to consider a market entry again after a lost year so far. Lost if you were refusing to buy at much too high prices. Let it go down some more days and invest then.
- ceejayoz 11y ago
  https://en.wikipedia.org/wiki/Market_timing#Evidence_for_market_timing https://en.wikipedia.org/wiki/Market_timing#Evidence_for_mar... > Studies find that the average investor's return in stocks is much less than the amount that would have been obtained by simply holding an index fund consisting of all stocks contained in the S&P 500 index.
  - jonknee 11y ago
    Yes, you can enter into the S&P 500...
    - ceejayoz 11y ago
      Trying to time the overall market is just as ineffectual as trying to time individual stocks. A consistent investment schedule beats hanging on to money hoping for a drop.
      - jonknee 11y ago
        Well you don't need to hope for a drop, there's one going on right now! I bought more SPY today, not sure about the OP.
  - adventured 11y ago
    Which completely falls apart if you are 'unlucky' and buy at the wrong time. So by its very nature, buying that index fund requires good timing as well. Just ask Japanese investors. Or Chinese investors from 2007. They went sideways for eight years, and after their bubble deflates will likely see 20 total sideways years. Or the Nasdaq from 1999 to 2012. Point being, even the premise of index buying requires some smart timing or your returns - if any - will be extremely poor.
    - zrail 11y ago
      > even the premise of index buying requires some smart timing Or just investing a regular amount of new money on a regular schedule, which will even out the timing issues.
      - kasey_junk 11y ago
        This is only true if your investment horizon is sufficiently long (I expect you know this, but it's important to point out for correctness).
        saryant 11y ago
        (Not writing this for your benefit but for passer-by who may not be familiar) The unwritten context of "buy and hold an index fund" is that it's for retirement—people with 20, 30 or 40 years before they actually need the money. That's enough time to ride out swings in the market. If you need the money to buy a house or start a company in a few years, keep it in cash.
        iaskwhy 11y ago
        Disclaimer: I don't know much about this. Let's say I'm 30 and want to save for retirement and let's imagine these crashes keep happening at around the same frequency (every 8 years or so?). This means when I reach my retirement age I might have to wait around 8 years for the market to rebound if I'm not lucky enough to buy my shares on the bottom of the charts, right? The reason I'm asking is because I keep reading about how an index fund will eventually, given time, be worth it, even with these frequent crashes of late, but when I'm 60 it might not be possible for me to wait for a better time to cash out, in particular given my country's (men) life expectancy of around 75. In my view, this doesn't seem as safe as it sounds but I might be missing something. Let's pretend I have my own retirement fund as a savings acount at around 1%, a very slow but pretty much safe growth. This way I might end up having with a more stable outcome when actually retiring which I believe is what most people would be looking like. I hate reading a market crash could wipe out poor and middle class retirement funds and have a hard time understanding the point besides greed or lack of knowledge. Again, I'm most probably the one with lack of knowledge on this, just sharing my doubt as a very very conservative investor, if at all.
  - code4tee 11y ago
    The biggest "secret" on Wall Street is that active money management is often worthless. The ability of someone to 'beat the market' on a long term basis is extremely limited. Most investors are better off just buying a few index ETFs and letting it ride for 30 years. Given that many banks have gotten out of prop trading and are now shifting into "wealth management" shops (hey we lost all our money when we tried that game... why don't we try it with your money!) there's clearly a lot of effort to convince people otherwise... but the numbers don't lie.
    - mikeash 11y ago
      We see a lot of stories on HN about how so many medical studies are false positives, because when you set up your analysis to yield 95% confidence, and most of your studies are on things that have no effect, the 5% false positive chance translates to a much higher false positive rate. Active management is subject to the same thing. Everyone hammers on the idea that "past results do not guarantee future returns" but that's all anyone ever looks at, what with it being very difficult to observe the future. Some active managers will be successful simply by luck. They'll tout their results and get more customers from it. And then eventually their luck stops and they'll revert to the mean, minus their fees. Because of the proportions involved, lucky managers will heavily outnumber those who are actually good at it (if there are any).
antocv 11y ago
Animals, herded.
ceejayoz 11y ago
Seesawing pretty heavily at this point. It was back up to -500ish a few minutes ago, then back to -800ish.
Cshelton 11y ago
I think it's a bad sign when they can write an article and get it out in under 25 minutes...but by the time they release the article, the market has gone up by half the amount it fell on opening. This market is severely flawed.
- deleted 11y ago
  [deleted]
  - bunderbunder 11y ago
    I think they're the only ones who should really feel much need for anyone to save the day. These kinds of daily and hourly aerobatics are high-frequency noise that should only be interesting to people who make money by speculating or placing advertisements next to the articles they write.
    - bunderbunder 11y ago
      To the downvoters, there is empirical data to back up my point. Individual investors who pay attention to daily (or worse, real time) stock quotes tend to get significantly poorer returns than those who ignore this kind of stuff. This is even borne out in lab studies where some participants' access to market data is restricted.
- melling 11y ago
  The article was probably written after China closed. Someone simply filled in the numbers at the open.
- jebblue 11y ago
  I'm not rich enough to be an investor but I agree, some kind of cool down system should be required.
  - des429 11y ago
    There is a cool down system if things become too volatile. They halt trading for 15 minutes or shut it down for a day. They mentioned that if S&P500 were to drop 7% they would halt trading for 15 minutes today.
code4tee 11y ago
Broadly speaking the US economy is quite healthy and people were expecting a correction in the stock market for some time. Within tech, it will have some negative impact on the plans of some companies as it will be harder to get lofty valuations based on 'fluff'... during such times investors want to see hard facts and real results to back-up value--but that's a broader trend thats been slowly developing for some time. Internationally, China is clearly having a hard time dealing with the realities of 'the market.' People have long since suspected a lot of the figures coming out of China were not accurate and everyone knows the place is rampant with corruption and such. Things are going to get a lot uglier there before it gets better.
- roymurdock 11y ago
  Interested to know which statistics you based this opinion of the US economy being "quite healthy" on. Anything deeper than top level unemployment rate?
  - cryoshon 11y ago
    I am also interested in seeing the data which claims that the US economy is quite healthy right now. The unemployment rate is a juked stat; check out the labor force participation rates if you want the full story. A primer: labor force participation got smashed in the Great Financial Crisis, and still hasn't recovered.
    - wiremine 11y ago
      The participation rate is down 3.3% from 2005 [1]. Given the huge shift in demographics over the last 10 years [2], I don't think that's a data point that screams "smashed." [1] http://data.bls.gov/timeseries/LNS11300000 http://data.bls.gov/timeseries/LNS11300000 [2] Lost of baby boomers retiring and Gen X being such a small demo compared to the boomers and the millennials.
      - cryoshon 11y ago
        The demographic shift angle doesn't make sense. The boomers are slowly exiting the workforce, sure-- on an individual basis, as they can choose to retire at different times. Many are having to defer retirement or not retire. This isn't an orderly mass exit, it's a trickle. Millenials are a far larger generation than the boomers, and are rapidly leaving college and attempting to enter the workforce-- 100% of them are trying to enter the workforce at the same time, immediately after graduation day. The fact that labor participation rates haven't stabilized or even increased in response to their population level attempts to enter the workforce shows that there really are not enough jobs to go around. Jobs lost in the early depression haven't returned, and there are many more people out and about looking for them now than there were before. Boomers are retiring, but their children are desperate to take their place, which isn't actually possible.
kailuowang 11y ago
The global panic might have a good reason, this is probably the first time China goes through a true financial crisis. Their ability to deal with such situation is by and large unknown to anyone.
- myth_buster 11y ago
  This quite true although they have case studies to follow from the west and Asia. This statement from the '97 Asian Crisis [0] Unlike investments of many of the Southeast Asian nations, almost all of China's foreign investment took the form of factories on the ground rather than securities, which insulated the country from rapid capital flight. shows the contrast with current realities. [0] https://en.wikipedia.org/wiki/1997_Asian_financial_crisis#China https://en.wikipedia.org/wiki/1997_Asian_financial_crisis#Ch...
- valarauca1 11y ago
  China (as we know it) can't suffering economic down turn. The Communists largely maintain power though the threat of Its us or chaos. Which before and during the communist rise China was pretty bad off. This is more or less the social contract we make your life better, you give up your rights. If it becomes clear the central government can't control the economy. We'll likely see a rise in anti-government protests.
  - th0waway 11y ago
    more like "obey or die"
    - valarauca1 11y ago
      That's more or less US anti-communist propaganda. I've been to china once, lived with Chinese Nationals for several years, and currently telecommute with partners in China. There is wide spread support for the party. People do understand that the chinese system is unique, and not necessarily the only government system. They simply believe it is better. Which from a socio-economic outlook it kind of has been for the past ~30 years in terms of industrialization and infrastructure construction. People have lived their entire lives where the idea of questioning the party seemed stupid simply because the party was, and has been right for their whole life. Not because of life or death punishment. Simply looking around and seeing the cities and lights were the only proof needed. The party ties its sucess to the sucess of the nation. Which is really what all political parties do, lest we forget Bill Clinton's, Its the Economy Stupid. Economic downturn is a crack in that armor. Proof the Party isn't by itself responsible for the economy, proof the party doesn't have absolute control of the up turn. If the party is wrong on the economy, what else could they be wrong on?
ultramancool 11y ago
How about a more useful index than the Dow, which fails to account for basic stuff like market cap? S&P 500 % drop or something would be more meaningful. EDIT: The page in question lists it actually, S&P 500 down 4.1%.
- Cshelton 11y ago
  The correlation between the indexes is pretty strong. Despite the DOW not being a statistically great thing, it's very rare it's doing something significantly different than the S&P 500.
joezydeco 11y ago
How do oil prices factor into this? The price has already been diving in this last quarter. Oil stocks also make up a huge portion of the Dow formula.
- MCRed 11y ago
  It's a sympathetic response. Some of it is going to be people selling assets to cover margin calls if they are overly leveraged. Some of it is people selling because everything's declining and the want to wait it out.
- jonknee 11y ago
  All sectors are diving today. Energy, tech, healthcare, financials, telecom, even utilities.
- debacle 11y ago
  Oil prices are low both because demand is waning (relatively) but also because there is a glut of supply. Excess supply of oil is great for most of the economy. Waning demand is a bad indicator, though.
dataker 11y ago
I'm assuming the Fed will not raise interest rates now.
- rubiquity 11y ago
  It's beginning to sound like Frank Underwood is behind all of this.
- roymurdock 11y ago
  I'm struggling to think of what the Fed can even do in this situation. I guess they can either 1) dig themselves deeper into a hole and issue another round of QE to inject liquidity into the markets or 2) do absolutely nothing. Though they are probably loathe to do nothing as then it would seem like they don't have a solution. Whatever happens, it will be an interesting/exciting time in non-traditional monetary policy that will generate a ton of academic papers going forward.
  - rquantz 11y ago
    Well, at this point everyone is expecting them to raise rates, so not raising would, in effect, be doing something.
  - jayess 11y ago
    About all they have left is more QE. My guess is that the next step in this bubble they've blown (along with the rest of the world's central banks) is massive deflation.
    - meatysnapper 11y ago
      Honestly, I expected inflation for the last 6 years, but we haven't seen it. However, prices are creeping up nicely, in all the desirable places. Is that really that different?
  - knowaveragejoe 11y ago
    I think they can safely do nothing and go along with the correction narrative, whether or not that's true.
cryoshon 11y ago
It's hard for me to tell whether this is just a "correction" (massive deflation after exuberance) or an actual meltdown. I had predicted the actual meltdown for September of 2015, but I guess this is pretty close. I wonder how this will affect my life, if at all. "The New York Stock Exchange said it will halt trading for 15 minutes if the Standard & Poor’s 500 Index drops 7 percent." [0] How is it fair that the markets get put on pause if they're failing? I really don't understand. [0]:http://www.bloomberg.com/news/articles/2015-08-24/nyse-will-suspend-stock-trading-if-s-p-500-index-plunges-7- http://www.bloomberg.com/news/articles/2015-08-24/nyse-will-...
- kasey_junk 11y ago
  It's not "fair", but it is a legal requirement. You should definitely remove the idea that markets are "fair" from your mind. If they were "fair" that would be a lottery not a market.
- andrelaszlo 11y ago
  "I had predicted the actual meltdown for September of 2015, but I guess this is pretty close. I wonder how this will affect my life, if at all." If you predicted it, then it should at least make you rich? :)
  - ramblerman 11y ago
    Thank you. This cognitive fallacy of "I knew" and "I was saying it long ago" etc... really irks me. Especially in something like stocks you are 100% right, put your money where your mouth is and spare us the story of your grand predictive prowesses.
    - MCRed 11y ago
      I predicted the 2008 crisis in 2001. (Well an article on http://mises.org http://mises.org made it clear it would happen.) This was before the housing bubble started to inflate, and was easy to expect due to the changes in the CRA and the artificially low interest rates. I profited from the bubble quite well, decided the top had been hit when things got really wonky and got out of the market in 2007. I was a year early, but I'm not complaining. It's not a fallacy, you can do it, if you understand economics. The problem is, most people involved in stocks are more interested in technical analysis and tea reading than fundamentals of economics. It's the fundamentals of economics that drive "black swan" events. From 2001-2007 I constantly saw people claim there was no bubble, I constantly saw people say things like the economy is good and healthy. I constantly saw people pretend like the fed wasn't blowing up a balloon. Article after article was published spinning tales to pretend like up was down and down was up. And then in 2008 when it popped, I constantly saw people claim there was no way to see it coming. I saw it blamed on Wall Street. And since then I've seen article after article published to misdirect and mislead about what was going on, saying up was down and down was up, to service the narrative. The key indicator of a science is the ability to make predictions... yet the "dismal science" of economics is portrayed by politicians as incapable of saying anything, because they use it to pitch self serving narratives. But the reality is, good economics has predicted every major crash, and its reasons. You can't necessarily know the timing-- I was off by a year, and I have no clue when the next one is coming. ------- I see I've been slow banned and am getting brigade downvoted across all of my comments. This harassment is typical on hacker news when you think for yourself and don't tow the party line. Jesus, what draconian filter bubble. That's fine, my time here was largely wasted anyway. Here's the comment I was going to make below, but now am not allowed to: I've been slow banned so I expect a hell ban is coming, I don't know why, but I guess its because I'm not on the praising obama bandwagon. So this may be my last post, if I'm ever able to post it. Yes, if I'd just stayed in with everything for 6 months or a year I would have been worse off. I was pretty close to the top, in what I was investing in. I did sense that the market got weird- the response was not what it should have been based on the macro events. When things stopped making sense, I got out... If I hadn't gotten out at all I would have lost a lot of money - whether you measure to 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015. Those investments were plays on the bubble... not investments that make sense after the bubble. It's difficult to do long horizon investing when the market is so manipulated- by the government and by the messed up regulation-inhibited outdated exchanges. But you can know the fundamentals. The problem is, a lot of people emotionally don't want to face reality, and a lot more people get rich selling them fantasy. No, the US economy is not doing well. Hell, the US government can't even sell bonds, it's selling them to itself with the Fed fabricating money to buy them.
jayess 11y ago
Maybe the failure of central banking bubble-blowing will finally be realized... I'm guessing not though.
kchoudhu 11y ago
Oh look, an opportunity to buy.
- MCRed 11y ago
  Warren Buffett says "If you're buying hamburger your whole life, do you want the price to be low or high?" For me, the situation is such a mess that I don't think we're close yet to what I would consider a buying opportunity. One saying is "buy when there's blood in the streets"... but I don't think we're there yet. Downvoted and slow banned. Why do I even contribute to this site?
  - FilterSweep 11y ago
    When I saw the articles in my local newspaper over the weekend of this happening, I figured its almost time for me, a fresh college graduate, to jump into the markets. But considering how profound the issues of Chinese Real Estate bubble are - they were paying people to make it look like empty, recently-built, luxury apartment complexes had people actually living in them - I think the worst is yet to come and I'm still waiting.[0] [1] [0] RE Homes: http://www.wsj.com/articles/more-than-1-in-5-homes-in-chinese-cities-are-empty-survey-says-1402484499 http://www.wsj.com/articles/more-than-1-in-5-homes-in-chines... [1] RE Apartments: http://www.economywatch.com/economy-business-and-finance-news/200-million-empty-apartments-chinas-complex-property-market-21-12.html http://www.economywatch.com/economy-business-and-finance-new...
    - kchoudhu 11y ago
      I'll tell you what I told my little sister (who is in your shoes, i.e. just starting to save after graduating from college): you won't be using the money you're investing for 30+ years. Just invest, stop trying to time markets. It's going to be okay.
    - distances 11y ago
      Just start monthly investments into index funds / ETFs. Start with small sums if that makes it better, but do start with monthly (automated?) investments. I kind of hope someone would have pointed me to the right direction years earlier. In case you're worrying of buying at the top: it's still a good idea. There's a very nice article [0] of what would have happened to an imaginary investor if he always bought at market peaks only, and held between the peaks. [0] http://awealthofcommonsense.com/worlds-worst-market-timer/ http://awealthofcommonsense.com/worlds-worst-market-timer/
deleted 11y ago
[deleted]
meapix 11y ago
yeah, scratch your head, that's the best you could do.
swalsh 11y ago
Best time to buy is when there's blood in the streets :D
- xur17 11y ago
  I just can't decide if there will be more blood, or if this is just the start...
  - hwstar 11y ago
    There's old traders saying: Don't catch falling knives.
    - VMG 11y ago
      For every action or inaction, you can find some trader's saying.
    - harmegido 11y ago
      That's because traders are generally flat at the end of the day. They don't have 30 years to wait for that knife to land on a rocketship and end up at the moon.
  - prewett 11y ago
    In 2008 I watched the market drop 5% every day for a week. That's blood in the streets. (And by Thur, it pretty much didn't matter what you bought, it was going to do great) As of right now, the S&P 500 is down a little over 2%, that's pretty normal. I'm not even sure this is a paper cut.
rdudek 11y ago
Stocks are rebounding. Someone made it off like a bandit this morning.
- knowaveragejoe 11y ago
  Could be a dead cat bounce: https://en.wikipedia.org/wiki/Dead_cat_bounce https://en.wikipedia.org/wiki/Dead_cat_bounce
- drcode 11y ago
  Disney stock was down almost 10% this morning. HOW POSSIBLY can it be rational for Disney stock to drop 10% because of a single day of rough trading in the Shanghai market, especially given how much Disney has dropped already in the last few months? I considered that the buying opportunity of the year. (knock on wood...)
  - Throwaway1224 11y ago
    "extra" personal cash dries up disney customers have a high income elasticity proportionally larger revenue drop for disney
  - rdudek 11y ago
    Well, it will really depend on how well Star Wars does.
  - JabavuAdams 11y ago
    Investors are not rational. EDIT> Why would you choose Disney over Google, given the choice? FYI I own both.
    - drcode 11y ago
      I'm actually prone to believe in EMH, so I agree there's very few "bargains" to be had. That said, bargain hunting has worked for me statistically in the past, and even if it's hard to justify rationally I will continue to attempt it, since EMH just argues that I'll likely break even if I'm wrong. > Why would you choose Disney over Google, given the choice? My three big buys early this morning were Disney, Google, and Sony... I certainly think this is a good time to own Google. (Caveat emptor)
kazinator 11y ago
It's only 10:21 Eastern Time on a Monday as I read this at 7:21 a.m. in the Pacific time zone. Like, wait for the trading to close, then tally up the damage.
- jacobwcarlson 11y ago
  A 1000 point drop at the open is a newsworthy event.
  - deleted 11y ago
    [deleted]
jebblue 11y ago
I wonder if any of this could be related to recent tensions in Korea? http://www.cnn.com/2015/08/21/asia/koreas-tensions/ http://www.cnn.com/2015/08/21/asia/koreas-tensions/
- jebblue 11y ago
  Why was this down voted?
- photosinensis 11y ago
  No. This is mostly about a bubble in China popping. Potemkin buildings have been a thing there for a very long time due to a series of perverse effects of policies by the Chinese government. The Korea business is pretty much business as usual there. The good news for the US is that we're a Chinese consumer, and they're not a major customer for our goods. Additionally, they're a competing consumer for resources. Basically, this means that the prices for American imports will drop, making the USD stronger internationally and encouraging international investment in the US economy. The one thing to worry about is that the drop in import prices will likely cause a drop in the prices of domestic goods.
sbt 11y ago
I would recommend an article by George Magnus called "The Chinese model is nearing its end", which was printed in the FT on Friday. You can bypass the paywall if you Google for it.
piratebroadcast 11y ago
I'm a Web Developer with a few years of experience on the East Coast. I do OK, salary wise. I missed the first bubble and am not on the East Coast. What should I expect from this? Layoffs mean more developer supply? Just trying to be cautious and prepared for worst case.
- forgetsusername 11y ago
  >What should I expect from this? As of right now? Nothing. This is mostly paper being moved around. Economic tides are shifting and there are always people caught with their pants down. In the long run? Who knows? We just finished a massive bull-market run, now there's been a commodity crash and global growth prospects look bad. It could be business-as-usual or completely uncharted territory. Don't fret over what you can't control.
- rwhitman 11y ago
  Basically if this is truly something ugly for the US economy and not just a temporary correction, which it doesn't seem to be.. yet.. based on my personal experience circa 2008 as a web developer, here's what I saw from my perspective - First, older businesses, who have survived other crashes, start tightening their budgets ASAP, pulling back on expensive tech investments. So there's a contraction in big outsourced tech projects with bigger businesses that can start within weeks. If you have big things planned with these guys, close the deal right.now. Then, many startups who have been too reliant on investor capital for survival get into a pickle when investors stop being as generous dishing out venture and angel rounds. Any company dependent on raising a round of financing in the next 6 months is in a tough place. If you work for any of these guys, polish your resume. So you start to see layoffs at big consulting firms, then startups start to fail when funds get antsy. This puts a lot of engineering talent on the market, first at job interviews and later for freelance after they've been on the market for a few months. Increased supply means lower salaries and freelance rates. Last time around the big tech cos like Google and Facebook went on a feeding frenzy and drove the supply down, and the mobile thing happened. So salaries bounced back and then went bezerk I have a feeling if this is another big one, this time around there will be less feeding frenzy and more pruning - the tech giants can use this as an excuse to lay off engineers hired on inflated salaries and not performing. The mobile bubble popped already, and the current bubble is in AI and big data which needs more more specialized brainpower and probably won't pick up a lot of the supply We also have tons of very junior developers swamping the market with training from coding bootcamps right now. So at the low end of the developer spectrum there's potentially a huge surplus. If things get sour in the market this will be a very tough time for an entry level developer, a pay cut for a mid level developer, and a minor worry for a good developer. For companies with healthy cash reserves, it's a big win though..
acjohnson55 11y ago
A whole lot of aphorisms in this commentary about falling knives and dead cats, but very little actual information. If you're trying to time the bottom you may as well take your money to the blackjack table. The quants are probably going to make a bunch of money, but if you're just a regular person, you should probably just continue making your regularly scheduled 401k contributions and diversified investments. Historically speaking, all the movement is going to average out in the long run to modest gains.
- lotharbot 11y ago
  If you're just a regular person, you shouldn't be trying to make millisecond-timing decisions. But you can absolutely say "thus-and-such appears to be systematically underpriced" and make a decision to transition some funds toward bargains. I recognized there were bargains to be had in March of 2009. I didn't hit the exact bottom (March 6), but I got some pretty nice deals on March 12. Right now, I wouldn't go out of my way to make excess contributions. The signal isn't strong enough. But sometimes it is.
- rsmckinney 11y ago
  "Historically speaking" Historically speaking, when has the Fed kept interest rates at ZERO for 7 years? After pumping QE full throttle at $80B/mo? The economy has been in continuous "recovery" mode since '08, but not much has actually recovered. The market is going to collapse my friend because, historically speaking, we are in dark, uncharted territory and have lost our way back.
  - cynicalkane 11y ago
    Interest rates are nominal; they only matter relative to some equilibrium. The equilibrium interest rate is somewhere close to zero.
    - rsmckinney 11y ago
      On earth, a zero interest rate indicates a sick or at least stalled economy. The rate cannot be held at zero for much longer without risking a deeper debt via evermore unhealthy credit expansion, yet the consequences of raising it, even a little, will likely crush global markets as investors react etc. There is no question this economy is quite sick and has been breathing with aid of the Fed's iron lung so long that it probably can no longer sustain itself without resetting (hard).
carsongross 11y ago
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." https://mises.org/library/human-action-0/html/pp/818 https://mises.org/library/human-action-0/html/pp/818
- duderific 11y ago
  There is absolutely zero political will for the voluntary abandonment of credit expansion. So, only the final catastrophe, the collapse of the dollar as the world's reserve currency, is the final outcome. It could be decades away however; there is just too much invested (literally and figuratively) in keeping the dollar afloat.
ChuckMcM 11y ago
I find it fascinating how this discussion goes, Do we differentiate between "healthy" and "strong" ? The US economy is, as far as I can tell, tethered in a macroeconomic sense, to the bill of the very expensive land wars it recently fought. The cost to the economy both in terms of government spending and workforce depletion as national guard troops were mobilized for duty in Iraq and Afghanistan. American worker productivity has remained high, which has kept real wage growth low, as employers leverage they "be thankful you even have a job" meme over the heads of employees who perhaps just scraped by in the great recession or spent months or even years unemployed. America's largest trading partner, China, is running a partially managed economy with a fiat currency that is priced more on government policy than market realities. That pricing has lead to some unsustainable conditions in the Chinese economy which are being "addressed" by some pretty big moves (currency devaluation is not something you do lightly in the worlds second largest economy). So the interesting question is how does the world see it? And how will it play out? Everyone has their bets, but and you can read about some of them in Barron's or the Economist or the WSJ. The current disaster is Chinese. By devaluing their currency they are effectively "taking value" from people who were trading with them relative to the partner's home currency. So lets say someone like Apple contracts to buy 10 million iPhone 6 baseboards, in Rmb at an exchange rate of $100 per board, and now when it comes time to actually take delivery and buy the boards they cost Apple the equivalent of $150 each. Apple needs to pony up an additional half billion dollars for their phones. This then will hit their bottom line in terms of revenue, which means their stock price will go down (they won't be as profitable a company) and so funds holding Apple will lose their value in proportion to their Apple stock. And China has done this by devaluing its currency. It doesn't change how strong Apple's market presence is, or that they can sell a phone for a ton of money, but it changes the cost/value equation faster than Apple can respond and so there is a disruption in their earnings. That will ripple across a lot of companies. But is that a 'health' issue for the American economy? Not really. Rather it puts pressure to restructure the costs of the economy into a different place. People still buy iPhones and will for the forseeable future. So the economy is still strong, but if the price of those iPhones doubles their volume will likely fall and so Apple's earnings might be 'weak'. The stock market is responding to the adjustments in China, internalizing the lack of fiscal oversight in that economy, and pricing it into the value of companies that do a lot of business there. I expect a hell of a correction and some interesting new markets opening up (like India, Vietnam or Thailand if the Thai can get their governance under control) as the cost of doing business in China begins to more accurately reflect the real costs of doing business there. EDIT: As folks have pointed out the currency hit is reversed, Apple would get its parts for less if they priced them in RMB vs Dollars. Any RMB they were holding in their cash pile would have lost value, so to the extent that their sales in China have not been moved into Euros (we know they aren't repatriated into Dollars for tax reasons) are going to buy less than they did before.
ojbyrne 11y ago
That graph has become significantly less panic-inducing.
alistproducer2 11y ago
It's easy to get out, hard to get back in. I moved 401k money out June 30th. Planned to get back in at SP 1900. If we close down < 2% I'll call bottom and get back in at close prices today. > 2% loss and it signals real fear that is probably not over yet. Either way we'll get a bounce tomorrow.
grellas 11y ago
People's investment philosophy will vary and tolerance for risk will play a major role in it all. My own view is this, and it is based on a lifetime of having made all the typical mistakes. Steady is the best way to go for your investable funds. That means, go with stocks for a decent segment of your investments but temper this with investments that will help preserve capital when things get rocky. Keep a ratio between the two that is age-appropriate. There is a rule of thumb floating about among advisors that your stock percentage should be 110 minus your age. This may or may not be a good ratio for you but some method that helps discipline you in these decisions will help you and this is not a bad one for many people. The other major factor is to avoid impulse buying or selling and to keep transaction costs at a very low level - and this usually means going with broad-based no-load index funds for much of the ride. Doing the above will not make anyone rich. It will, however, ensure that you have the best chances of getting decent, normal returns on average over time while helping to preserve your capital as you go. If you want extraordinary returns, get them through your startup or by doing extraordinary things in your work. For your investments, the rule is different. You do not "underperform" by hitting averages with your investments. You simply meet the goal that should be the defining goal for most people in that area.
- pbreit 11y ago
  Better: make a core position in Vanguard LifeStrategy.
  - PaulHoule 11y ago
    best: buy $XIV today
    - Omnipresent 11y ago
      Any particular reason?
      - herge 11y ago
        It's cheap today, maybe not tomorrow when the panic will have worn off.
jsf666 11y ago
Just fuck my shit up fam, jesus... and I was thinking about shorting it friday. Oh well, gotta wait it out. Just hope it won't take 5 years not counting inflation
mylons 11y ago
and now this headline isn't relevant. stocks are UNCH or ^. white knuckling it
vasilipupkin 11y ago
I just want to offer everyone a professional piece of advice. Large down moves in equity markets is exactly when you should buy equities because that's when expected returns are at their highest.
- swagswag 11y ago
  Large down moves Thursday, Friday, and now (early) today.
- debacle 11y ago
  I'll counter with some amateur advice - things still seem historically overpriced.
  - vasilipupkin 11y ago
    stocks are not obviously cheap, I'll give you that. But you have to compare them to other investment alternatives. Cash, Real Estate, Govt Bonds.
- adt2bt 11y ago
  This got me thinking - is it possible to develop a profitable long-term investment strategy that takes advantage of stock market dips? For example, say I have $1000 to invest every month. I'll take that $1000 and put $500 into an index fund and $500 into a savings account. Then, once the market dips 10% from its previous high, all the accumulated money in the savings accounts is invested over 4 weeks. I made a simple google doc to back-test the strategy 5 years on the DJIA. It's very rudimentary, but I'd love to see if anyone tries a different approach. https://docs.google.com/spreadsheets/d/18-2rBonJPPlg8n6YkpAjAXBKX-Arf5_bByO1ETZf8bY/edit?usp=sharing https://docs.google.com/spreadsheets/d/18-2rBonJPPlg8n6YkpAj...
  - 001sky 11y ago
    testing (a) trading strategy in a short window ... why?
williesleg 11y ago
Usually happens before a big political shift. Buy the viix.
tzm 11y ago
From what I've heard from locals.. the recent chemical explosion triggered general fear of wide-spread corruption and an impending economic coup d'état from nationalists who want to disrupt the current power.
plg 11y ago
Unless you need to take your money out in the next couple of months (or unless you are facing a margin call) why not consider this as a fire sale? Your favourite stocks and mutual funds, ON SALE!
- wutbrodo 11y ago
  Exactly, I feel like this hits a good balance of prudence and pragmatism. It's kind of a double-edged sword for me since I happen to be heavily into liquid cash at the moment...but I also have higher cash needs because I quit my job a month ago and am planning on taking 6 mos to a year off. Either way, beyond a bit of an "emergency fund" on steroids, this is actually how I'm taking it: a good starting point for some conservative DCA.
- ap22213 11y ago
  Interestingly, the people I know who have had the most success in the markets (and who have been around for a while) have told me this, each independently. I have taken their advice and have done quite well.
icedchai 11y ago
In the grand scheme (meaning, 5+ years), this is a small blip. Buy more.
randomname2 11y ago
Markets are green again thanks in part to move in AAPL worth over 80B in market cap. This happened after Tim Cook's email to Jim Cramer, which may have violated Fair Disclosure regulations: https://mobile.twitter.com/carlquintanilla/status/635799629947404288 https://mobile.twitter.com/carlquintanilla/status/6357996299...
- notNow 11y ago
  There's a share buyback program ongoing for Apple. So, I am not really surprised that they are defending their stock in the market and bidding it up. Note also that APPL's cash reserves are YUGE and they can play this game for some time.
IceColdCoder 11y ago
I'm just injecting some alternative thought here but I think one major question that needs to be asked about the health of the economy is: "How much of the weighted average person's day is that person spending on survival". I don't see how slow shift to a 60-hour instead of a 40-hour work week is indicative of a healthy economy but I could be wrong. To me it seems that survival is taking more and more time when it should be taking less and less if the economy were actually growing. This is probably just a "correction" but I think we will be seeing more and more of these here soon. I've been looking at the robotics industry and I can see them going into full public view within the next decade. The results will be interesting.
- theseatoms 11y ago
  Weighted by what?
  - IceColdCoder 11y ago
    I was thinking of clustering. If you have a large group of people in a general income sub-group then it would weigh more than fewer people in another income subgroup. The point of weighing is that margin-based models depend heavily upon a large consumer base and only certain consumer bases are of any significant size.
    - sokoloff 11y ago
      So, in other words, just the average across the population?

322 points by superfx 11y ago

Nothing to be surprised here. Anyway, finally this might be the perfect time to consider a market entry again after a lost year so far. Lost if you were refusing to buy at much too high prices. Let it go down some more days and invest then.

ceejayoz 11y ago
https://en.wikipedia.org/wiki/Market_timing#Evidence_for_market_timing https://en.wikipedia.org/wiki/Market_timing#Evidence_for_mar... > Studies find that the average investor's return in stocks is much less than the amount that would have been obtained by simply holding an index fund consisting of all stocks contained in the S&P 500 index.
- jonknee 11y ago
  Yes, you can enter into the S&P 500...
  - ceejayoz 11y ago
    Trying to time the overall market is just as ineffectual as trying to time individual stocks. A consistent investment schedule beats hanging on to money hoping for a drop.
    - jonknee 11y ago
      Well you don't need to hope for a drop, there's one going on right now! I bought more SPY today, not sure about the OP.
- adventured 11y ago
  Which completely falls apart if you are 'unlucky' and buy at the wrong time. So by its very nature, buying that index fund requires good timing as well. Just ask Japanese investors. Or Chinese investors from 2007. They went sideways for eight years, and after their bubble deflates will likely see 20 total sideways years. Or the Nasdaq from 1999 to 2012. Point being, even the premise of index buying requires some smart timing or your returns - if any - will be extremely poor.
  - zrail 11y ago
    > even the premise of index buying requires some smart timing Or just investing a regular amount of new money on a regular schedule, which will even out the timing issues.
    - kasey_junk 11y ago
      This is only true if your investment horizon is sufficiently long (I expect you know this, but it's important to point out for correctness).
      - saryant 11y ago
        (Not writing this for your benefit but for passer-by who may not be familiar) The unwritten context of "buy and hold an index fund" is that it's for retirement—people with 20, 30 or 40 years before they actually need the money. That's enough time to ride out swings in the market. If you need the money to buy a house or start a company in a few years, keep it in cash.
        iaskwhy 11y ago
        Disclaimer: I don't know much about this. Let's say I'm 30 and want to save for retirement and let's imagine these crashes keep happening at around the same frequency (every 8 years or so?). This means when I reach my retirement age I might have to wait around 8 years for the market to rebound if I'm not lucky enough to buy my shares on the bottom of the charts, right? The reason I'm asking is because I keep reading about how an index fund will eventually, given time, be worth it, even with these frequent crashes of late, but when I'm 60 it might not be possible for me to wait for a better time to cash out, in particular given my country's (men) life expectancy of around 75. In my view, this doesn't seem as safe as it sounds but I might be missing something. Let's pretend I have my own retirement fund as a savings acount at around 1%, a very slow but pretty much safe growth. This way I might end up having with a more stable outcome when actually retiring which I believe is what most people would be looking like. I hate reading a market crash could wipe out poor and middle class retirement funds and have a hard time understanding the point besides greed or lack of knowledge. Again, I'm most probably the one with lack of knowledge on this, just sharing my doubt as a very very conservative investor, if at all.
- code4tee 11y ago
  The biggest "secret" on Wall Street is that active money management is often worthless. The ability of someone to 'beat the market' on a long term basis is extremely limited. Most investors are better off just buying a few index ETFs and letting it ride for 30 years. Given that many banks have gotten out of prop trading and are now shifting into "wealth management" shops (hey we lost all our money when we tried that game... why don't we try it with your money!) there's clearly a lot of effort to convince people otherwise... but the numbers don't lie.
  - mikeash 11y ago
    We see a lot of stories on HN about how so many medical studies are false positives, because when you set up your analysis to yield 95% confidence, and most of your studies are on things that have no effect, the 5% false positive chance translates to a much higher false positive rate. Active management is subject to the same thing. Everyone hammers on the idea that "past results do not guarantee future returns" but that's all anyone ever looks at, what with it being very difficult to observe the future. Some active managers will be successful simply by luck. They'll tout their results and get more customers from it. And then eventually their luck stops and they'll revert to the mean, minus their fees. Because of the proportions involved, lucky managers will heavily outnumber those who are actually good at it (if there are any).

antocv 11y ago

Animals, herded.

ceejayoz 11y ago

Seesawing pretty heavily at this point. It was back up to -500ish a few minutes ago, then back to -800ish.

Cshelton 11y ago

I think it's a bad sign when they can write an article and get it out in under 25 minutes...but by the time they release the article, the market has gone up by half the amount it fell on opening. This market is severely flawed.

deleted 11y ago
[deleted]
- bunderbunder 11y ago
  I think they're the only ones who should really feel much need for anyone to save the day. These kinds of daily and hourly aerobatics are high-frequency noise that should only be interesting to people who make money by speculating or placing advertisements next to the articles they write.
  - bunderbunder 11y ago
    To the downvoters, there is empirical data to back up my point. Individual investors who pay attention to daily (or worse, real time) stock quotes tend to get significantly poorer returns than those who ignore this kind of stuff. This is even borne out in lab studies where some participants' access to market data is restricted.
melling 11y ago
The article was probably written after China closed. Someone simply filled in the numbers at the open.
jebblue 11y ago
I'm not rich enough to be an investor but I agree, some kind of cool down system should be required.
- des429 11y ago
  There is a cool down system if things become too volatile. They halt trading for 15 minutes or shut it down for a day. They mentioned that if S&P500 were to drop 7% they would halt trading for 15 minutes today.

code4tee 11y ago

Broadly speaking the US economy is quite healthy and people were expecting a correction in the stock market for some time. Within tech, it will have some negative impact on the plans of some companies as it will be harder to get lofty valuations based on 'fluff'... during such times investors want to see hard facts and real results to back-up value--but that's a broader trend thats been slowly developing for some time. Internationally, China is clearly having a hard time dealing with the realities of 'the market.' People have long since suspected a lot of the figures coming out of China were not accurate and everyone knows the place is rampant with corruption and such. Things are going to get a lot uglier there before it gets better.

roymurdock 11y ago
Interested to know which statistics you based this opinion of the US economy being "quite healthy" on. Anything deeper than top level unemployment rate?
- cryoshon 11y ago
  I am also interested in seeing the data which claims that the US economy is quite healthy right now. The unemployment rate is a juked stat; check out the labor force participation rates if you want the full story. A primer: labor force participation got smashed in the Great Financial Crisis, and still hasn't recovered.
  - wiremine 11y ago
    The participation rate is down 3.3% from 2005 [1]. Given the huge shift in demographics over the last 10 years [2], I don't think that's a data point that screams "smashed." [1] http://data.bls.gov/timeseries/LNS11300000 http://data.bls.gov/timeseries/LNS11300000 [2] Lost of baby boomers retiring and Gen X being such a small demo compared to the boomers and the millennials.
    - cryoshon 11y ago
      The demographic shift angle doesn't make sense. The boomers are slowly exiting the workforce, sure-- on an individual basis, as they can choose to retire at different times. Many are having to defer retirement or not retire. This isn't an orderly mass exit, it's a trickle. Millenials are a far larger generation than the boomers, and are rapidly leaving college and attempting to enter the workforce-- 100% of them are trying to enter the workforce at the same time, immediately after graduation day. The fact that labor participation rates haven't stabilized or even increased in response to their population level attempts to enter the workforce shows that there really are not enough jobs to go around. Jobs lost in the early depression haven't returned, and there are many more people out and about looking for them now than there were before. Boomers are retiring, but their children are desperate to take their place, which isn't actually possible.

kailuowang 11y ago

The global panic might have a good reason, this is probably the first time China goes through a true financial crisis. Their ability to deal with such situation is by and large unknown to anyone.

myth_buster 11y ago
This quite true although they have case studies to follow from the west and Asia. This statement from the '97 Asian Crisis [0] Unlike investments of many of the Southeast Asian nations, almost all of China's foreign investment took the form of factories on the ground rather than securities, which insulated the country from rapid capital flight. shows the contrast with current realities. [0] https://en.wikipedia.org/wiki/1997_Asian_financial_crisis#China https://en.wikipedia.org/wiki/1997_Asian_financial_crisis#Ch...
valarauca1 11y ago
China (as we know it) can't suffering economic down turn. The Communists largely maintain power though the threat of Its us or chaos. Which before and during the communist rise China was pretty bad off. This is more or less the social contract we make your life better, you give up your rights. If it becomes clear the central government can't control the economy. We'll likely see a rise in anti-government protests.
- th0waway 11y ago
  more like "obey or die"
  - valarauca1 11y ago
    That's more or less US anti-communist propaganda. I've been to china once, lived with Chinese Nationals for several years, and currently telecommute with partners in China. There is wide spread support for the party. People do understand that the chinese system is unique, and not necessarily the only government system. They simply believe it is better. Which from a socio-economic outlook it kind of has been for the past ~30 years in terms of industrialization and infrastructure construction. People have lived their entire lives where the idea of questioning the party seemed stupid simply because the party was, and has been right for their whole life. Not because of life or death punishment. Simply looking around and seeing the cities and lights were the only proof needed. The party ties its sucess to the sucess of the nation. Which is really what all political parties do, lest we forget Bill Clinton's, Its the Economy Stupid. Economic downturn is a crack in that armor. Proof the Party isn't by itself responsible for the economy, proof the party doesn't have absolute control of the up turn. If the party is wrong on the economy, what else could they be wrong on?

ultramancool 11y ago

How about a more useful index than the Dow, which fails to account for basic stuff like market cap? S&P 500 % drop or something would be more meaningful. EDIT: The page in question lists it actually, S&P 500 down 4.1%.

Cshelton 11y ago
The correlation between the indexes is pretty strong. Despite the DOW not being a statistically great thing, it's very rare it's doing something significantly different than the S&P 500.

joezydeco 11y ago

How do oil prices factor into this? The price has already been diving in this last quarter. Oil stocks also make up a huge portion of the Dow formula.

MCRed 11y ago
It's a sympathetic response. Some of it is going to be people selling assets to cover margin calls if they are overly leveraged. Some of it is people selling because everything's declining and the want to wait it out.
jonknee 11y ago
All sectors are diving today. Energy, tech, healthcare, financials, telecom, even utilities.
debacle 11y ago
Oil prices are low both because demand is waning (relatively) but also because there is a glut of supply. Excess supply of oil is great for most of the economy. Waning demand is a bad indicator, though.

dataker 11y ago

I'm assuming the Fed will not raise interest rates now.

rubiquity 11y ago
It's beginning to sound like Frank Underwood is behind all of this.
roymurdock 11y ago
I'm struggling to think of what the Fed can even do in this situation. I guess they can either 1) dig themselves deeper into a hole and issue another round of QE to inject liquidity into the markets or 2) do absolutely nothing. Though they are probably loathe to do nothing as then it would seem like they don't have a solution. Whatever happens, it will be an interesting/exciting time in non-traditional monetary policy that will generate a ton of academic papers going forward.
- rquantz 11y ago
  Well, at this point everyone is expecting them to raise rates, so not raising would, in effect, be doing something.
- jayess 11y ago
  About all they have left is more QE. My guess is that the next step in this bubble they've blown (along with the rest of the world's central banks) is massive deflation.
  - meatysnapper 11y ago
    Honestly, I expected inflation for the last 6 years, but we haven't seen it. However, prices are creeping up nicely, in all the desirable places. Is that really that different?
- knowaveragejoe 11y ago
  I think they can safely do nothing and go along with the correction narrative, whether or not that's true.

cryoshon 11y ago

It's hard for me to tell whether this is just a "correction" (massive deflation after exuberance) or an actual meltdown. I had predicted the actual meltdown for September of 2015, but I guess this is pretty close. I wonder how this will affect my life, if at all. "The New York Stock Exchange said it will halt trading for 15 minutes if the Standard & Poor’s 500 Index drops 7 percent." [0] How is it fair that the markets get put on pause if they're failing? I really don't understand. [0]:http://www.bloomberg.com/news/articles/2015-08-24/nyse-will-suspend-stock-trading-if-s-p-500-index-plunges-7- http://www.bloomberg.com/news/articles/2015-08-24/nyse-will-...

kasey_junk 11y ago
It's not "fair", but it is a legal requirement. You should definitely remove the idea that markets are "fair" from your mind. If they were "fair" that would be a lottery not a market.
andrelaszlo 11y ago
"I had predicted the actual meltdown for September of 2015, but I guess this is pretty close. I wonder how this will affect my life, if at all." If you predicted it, then it should at least make you rich? :)
- ramblerman 11y ago
  Thank you. This cognitive fallacy of "I knew" and "I was saying it long ago" etc... really irks me. Especially in something like stocks you are 100% right, put your money where your mouth is and spare us the story of your grand predictive prowesses.
  - MCRed 11y ago
    I predicted the 2008 crisis in 2001. (Well an article on http://mises.org http://mises.org made it clear it would happen.) This was before the housing bubble started to inflate, and was easy to expect due to the changes in the CRA and the artificially low interest rates. I profited from the bubble quite well, decided the top had been hit when things got really wonky and got out of the market in 2007. I was a year early, but I'm not complaining. It's not a fallacy, you can do it, if you understand economics. The problem is, most people involved in stocks are more interested in technical analysis and tea reading than fundamentals of economics. It's the fundamentals of economics that drive "black swan" events. From 2001-2007 I constantly saw people claim there was no bubble, I constantly saw people say things like the economy is good and healthy. I constantly saw people pretend like the fed wasn't blowing up a balloon. Article after article was published spinning tales to pretend like up was down and down was up. And then in 2008 when it popped, I constantly saw people claim there was no way to see it coming. I saw it blamed on Wall Street. And since then I've seen article after article published to misdirect and mislead about what was going on, saying up was down and down was up, to service the narrative. The key indicator of a science is the ability to make predictions... yet the "dismal science" of economics is portrayed by politicians as incapable of saying anything, because they use it to pitch self serving narratives. But the reality is, good economics has predicted every major crash, and its reasons. You can't necessarily know the timing-- I was off by a year, and I have no clue when the next one is coming. ------- I see I've been slow banned and am getting brigade downvoted across all of my comments. This harassment is typical on hacker news when you think for yourself and don't tow the party line. Jesus, what draconian filter bubble. That's fine, my time here was largely wasted anyway. Here's the comment I was going to make below, but now am not allowed to: I've been slow banned so I expect a hell ban is coming, I don't know why, but I guess its because I'm not on the praising obama bandwagon. So this may be my last post, if I'm ever able to post it. Yes, if I'd just stayed in with everything for 6 months or a year I would have been worse off. I was pretty close to the top, in what I was investing in. I did sense that the market got weird- the response was not what it should have been based on the macro events. When things stopped making sense, I got out... If I hadn't gotten out at all I would have lost a lot of money - whether you measure to 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015. Those investments were plays on the bubble... not investments that make sense after the bubble. It's difficult to do long horizon investing when the market is so manipulated- by the government and by the messed up regulation-inhibited outdated exchanges. But you can know the fundamentals. The problem is, a lot of people emotionally don't want to face reality, and a lot more people get rich selling them fantasy. No, the US economy is not doing well. Hell, the US government can't even sell bonds, it's selling them to itself with the Fed fabricating money to buy them.

jayess 11y ago

Maybe the failure of central banking bubble-blowing will finally be realized... I'm guessing not though.

kchoudhu 11y ago

Oh look, an opportunity to buy.

MCRed 11y ago
Warren Buffett says "If you're buying hamburger your whole life, do you want the price to be low or high?" For me, the situation is such a mess that I don't think we're close yet to what I would consider a buying opportunity. One saying is "buy when there's blood in the streets"... but I don't think we're there yet. Downvoted and slow banned. Why do I even contribute to this site?
- FilterSweep 11y ago
  When I saw the articles in my local newspaper over the weekend of this happening, I figured its almost time for me, a fresh college graduate, to jump into the markets. But considering how profound the issues of Chinese Real Estate bubble are - they were paying people to make it look like empty, recently-built, luxury apartment complexes had people actually living in them - I think the worst is yet to come and I'm still waiting.[0] [1] [0] RE Homes: http://www.wsj.com/articles/more-than-1-in-5-homes-in-chinese-cities-are-empty-survey-says-1402484499 http://www.wsj.com/articles/more-than-1-in-5-homes-in-chines... [1] RE Apartments: http://www.economywatch.com/economy-business-and-finance-news/200-million-empty-apartments-chinas-complex-property-market-21-12.html http://www.economywatch.com/economy-business-and-finance-new...
  - kchoudhu 11y ago
    I'll tell you what I told my little sister (who is in your shoes, i.e. just starting to save after graduating from college): you won't be using the money you're investing for 30+ years. Just invest, stop trying to time markets. It's going to be okay.
  - distances 11y ago
    Just start monthly investments into index funds / ETFs. Start with small sums if that makes it better, but do start with monthly (automated?) investments. I kind of hope someone would have pointed me to the right direction years earlier. In case you're worrying of buying at the top: it's still a good idea. There's a very nice article [0] of what would have happened to an imaginary investor if he always bought at market peaks only, and held between the peaks. [0] http://awealthofcommonsense.com/worlds-worst-market-timer/ http://awealthofcommonsense.com/worlds-worst-market-timer/

deleted 11y ago

[deleted]

meapix 11y ago

yeah, scratch your head, that's the best you could do.

swalsh 11y ago

Best time to buy is when there's blood in the streets :D

xur17 11y ago
I just can't decide if there will be more blood, or if this is just the start...
- hwstar 11y ago
  There's old traders saying: Don't catch falling knives.
  - VMG 11y ago
    For every action or inaction, you can find some trader's saying.
  - harmegido 11y ago
    That's because traders are generally flat at the end of the day. They don't have 30 years to wait for that knife to land on a rocketship and end up at the moon.
- prewett 11y ago
  In 2008 I watched the market drop 5% every day for a week. That's blood in the streets. (And by Thur, it pretty much didn't matter what you bought, it was going to do great) As of right now, the S&P 500 is down a little over 2%, that's pretty normal. I'm not even sure this is a paper cut.

rdudek 11y ago

Stocks are rebounding. Someone made it off like a bandit this morning.

knowaveragejoe 11y ago
Could be a dead cat bounce: https://en.wikipedia.org/wiki/Dead_cat_bounce https://en.wikipedia.org/wiki/Dead_cat_bounce
drcode 11y ago
Disney stock was down almost 10% this morning. HOW POSSIBLY can it be rational for Disney stock to drop 10% because of a single day of rough trading in the Shanghai market, especially given how much Disney has dropped already in the last few months? I considered that the buying opportunity of the year. (knock on wood...)
- Throwaway1224 11y ago
  "extra" personal cash dries up disney customers have a high income elasticity proportionally larger revenue drop for disney
- rdudek 11y ago
  Well, it will really depend on how well Star Wars does.
- JabavuAdams 11y ago
  Investors are not rational. EDIT> Why would you choose Disney over Google, given the choice? FYI I own both.
  - drcode 11y ago
    I'm actually prone to believe in EMH, so I agree there's very few "bargains" to be had. That said, bargain hunting has worked for me statistically in the past, and even if it's hard to justify rationally I will continue to attempt it, since EMH just argues that I'll likely break even if I'm wrong. > Why would you choose Disney over Google, given the choice? My three big buys early this morning were Disney, Google, and Sony... I certainly think this is a good time to own Google. (Caveat emptor)

kazinator 11y ago

It's only 10:21 Eastern Time on a Monday as I read this at 7:21 a.m. in the Pacific time zone. Like, wait for the trading to close, then tally up the damage.

jacobwcarlson 11y ago
A 1000 point drop at the open is a newsworthy event.
- deleted 11y ago
  [deleted]

jebblue 11y ago

I wonder if any of this could be related to recent tensions in Korea? http://www.cnn.com/2015/08/21/asia/koreas-tensions/ http://www.cnn.com/2015/08/21/asia/koreas-tensions/

jebblue 11y ago
Why was this down voted?
photosinensis 11y ago
No. This is mostly about a bubble in China popping. Potemkin buildings have been a thing there for a very long time due to a series of perverse effects of policies by the Chinese government. The Korea business is pretty much business as usual there. The good news for the US is that we're a Chinese consumer, and they're not a major customer for our goods. Additionally, they're a competing consumer for resources. Basically, this means that the prices for American imports will drop, making the USD stronger internationally and encouraging international investment in the US economy. The one thing to worry about is that the drop in import prices will likely cause a drop in the prices of domestic goods.

sbt 11y ago

I would recommend an article by George Magnus called "The Chinese model is nearing its end", which was printed in the FT on Friday. You can bypass the paywall if you Google for it.

piratebroadcast 11y ago

I'm a Web Developer with a few years of experience on the East Coast. I do OK, salary wise. I missed the first bubble and am not on the East Coast. What should I expect from this? Layoffs mean more developer supply? Just trying to be cautious and prepared for worst case.

forgetsusername 11y ago
>What should I expect from this? As of right now? Nothing. This is mostly paper being moved around. Economic tides are shifting and there are always people caught with their pants down. In the long run? Who knows? We just finished a massive bull-market run, now there's been a commodity crash and global growth prospects look bad. It could be business-as-usual or completely uncharted territory. Don't fret over what you can't control.
rwhitman 11y ago
Basically if this is truly something ugly for the US economy and not just a temporary correction, which it doesn't seem to be.. yet.. based on my personal experience circa 2008 as a web developer, here's what I saw from my perspective - First, older businesses, who have survived other crashes, start tightening their budgets ASAP, pulling back on expensive tech investments. So there's a contraction in big outsourced tech projects with bigger businesses that can start within weeks. If you have big things planned with these guys, close the deal right.now. Then, many startups who have been too reliant on investor capital for survival get into a pickle when investors stop being as generous dishing out venture and angel rounds. Any company dependent on raising a round of financing in the next 6 months is in a tough place. If you work for any of these guys, polish your resume. So you start to see layoffs at big consulting firms, then startups start to fail when funds get antsy. This puts a lot of engineering talent on the market, first at job interviews and later for freelance after they've been on the market for a few months. Increased supply means lower salaries and freelance rates. Last time around the big tech cos like Google and Facebook went on a feeding frenzy and drove the supply down, and the mobile thing happened. So salaries bounced back and then went bezerk I have a feeling if this is another big one, this time around there will be less feeding frenzy and more pruning - the tech giants can use this as an excuse to lay off engineers hired on inflated salaries and not performing. The mobile bubble popped already, and the current bubble is in AI and big data which needs more more specialized brainpower and probably won't pick up a lot of the supply We also have tons of very junior developers swamping the market with training from coding bootcamps right now. So at the low end of the developer spectrum there's potentially a huge surplus. If things get sour in the market this will be a very tough time for an entry level developer, a pay cut for a mid level developer, and a minor worry for a good developer. For companies with healthy cash reserves, it's a big win though..

acjohnson55 11y ago

A whole lot of aphorisms in this commentary about falling knives and dead cats, but very little actual information. If you're trying to time the bottom you may as well take your money to the blackjack table. The quants are probably going to make a bunch of money, but if you're just a regular person, you should probably just continue making your regularly scheduled 401k contributions and diversified investments. Historically speaking, all the movement is going to average out in the long run to modest gains.

lotharbot 11y ago
If you're just a regular person, you shouldn't be trying to make millisecond-timing decisions. But you can absolutely say "thus-and-such appears to be systematically underpriced" and make a decision to transition some funds toward bargains. I recognized there were bargains to be had in March of 2009. I didn't hit the exact bottom (March 6), but I got some pretty nice deals on March 12. Right now, I wouldn't go out of my way to make excess contributions. The signal isn't strong enough. But sometimes it is.
rsmckinney 11y ago
"Historically speaking" Historically speaking, when has the Fed kept interest rates at ZERO for 7 years? After pumping QE full throttle at $80B/mo? The economy has been in continuous "recovery" mode since '08, but not much has actually recovered. The market is going to collapse my friend because, historically speaking, we are in dark, uncharted territory and have lost our way back.
- cynicalkane 11y ago
  Interest rates are nominal; they only matter relative to some equilibrium. The equilibrium interest rate is somewhere close to zero.
  - rsmckinney 11y ago
    On earth, a zero interest rate indicates a sick or at least stalled economy. The rate cannot be held at zero for much longer without risking a deeper debt via evermore unhealthy credit expansion, yet the consequences of raising it, even a little, will likely crush global markets as investors react etc. There is no question this economy is quite sick and has been breathing with aid of the Fed's iron lung so long that it probably can no longer sustain itself without resetting (hard).

carsongross 11y ago

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." https://mises.org/library/human-action-0/html/pp/818 https://mises.org/library/human-action-0/html/pp/818

duderific 11y ago
There is absolutely zero political will for the voluntary abandonment of credit expansion. So, only the final catastrophe, the collapse of the dollar as the world's reserve currency, is the final outcome. It could be decades away however; there is just too much invested (literally and figuratively) in keeping the dollar afloat.

ChuckMcM 11y ago

I find it fascinating how this discussion goes, Do we differentiate between "healthy" and "strong" ? The US economy is, as far as I can tell, tethered in a macroeconomic sense, to the bill of the very expensive land wars it recently fought. The cost to the economy both in terms of government spending and workforce depletion as national guard troops were mobilized for duty in Iraq and Afghanistan. American worker productivity has remained high, which has kept real wage growth low, as employers leverage they "be thankful you even have a job" meme over the heads of employees who perhaps just scraped by in the great recession or spent months or even years unemployed. America's largest trading partner, China, is running a partially managed economy with a fiat currency that is priced more on government policy than market realities. That pricing has lead to some unsustainable conditions in the Chinese economy which are being "addressed" by some pretty big moves (currency devaluation is not something you do lightly in the worlds second largest economy). So the interesting question is how does the world see it? And how will it play out? Everyone has their bets, but and you can read about some of them in Barron's or the Economist or the WSJ. The current disaster is Chinese. By devaluing their currency they are effectively "taking value" from people who were trading with them relative to the partner's home currency. So lets say someone like Apple contracts to buy 10 million iPhone 6 baseboards, in Rmb at an exchange rate of $100 per board, and now when it comes time to actually take delivery and buy the boards they cost Apple the equivalent of $150 each. Apple needs to pony up an additional half billion dollars for their phones. This then will hit their bottom line in terms of revenue, which means their stock price will go down (they won't be as profitable a company) and so funds holding Apple will lose their value in proportion to their Apple stock. And China has done this by devaluing its currency. It doesn't change how strong Apple's market presence is, or that they can sell a phone for a ton of money, but it changes the cost/value equation faster than Apple can respond and so there is a disruption in their earnings. That will ripple across a lot of companies. But is that a 'health' issue for the American economy? Not really. Rather it puts pressure to restructure the costs of the economy into a different place. People still buy iPhones and will for the forseeable future. So the economy is still strong, but if the price of those iPhones doubles their volume will likely fall and so Apple's earnings might be 'weak'. The stock market is responding to the adjustments in China, internalizing the lack of fiscal oversight in that economy, and pricing it into the value of companies that do a lot of business there. I expect a hell of a correction and some interesting new markets opening up (like India, Vietnam or Thailand if the Thai can get their governance under control) as the cost of doing business in China begins to more accurately reflect the real costs of doing business there. EDIT: As folks have pointed out the currency hit is reversed, Apple would get its parts for less if they priced them in RMB vs Dollars. Any RMB they were holding in their cash pile would have lost value, so to the extent that their sales in China have not been moved into Euros (we know they aren't repatriated into Dollars for tax reasons) are going to buy less than they did before.

ojbyrne 11y ago

That graph has become significantly less panic-inducing.

alistproducer2 11y ago

It's easy to get out, hard to get back in. I moved 401k money out June 30th. Planned to get back in at SP 1900. If we close down < 2% I'll call bottom and get back in at close prices today. > 2% loss and it signals real fear that is probably not over yet. Either way we'll get a bounce tomorrow.

grellas 11y ago

People's investment philosophy will vary and tolerance for risk will play a major role in it all. My own view is this, and it is based on a lifetime of having made all the typical mistakes. Steady is the best way to go for your investable funds. That means, go with stocks for a decent segment of your investments but temper this with investments that will help preserve capital when things get rocky. Keep a ratio between the two that is age-appropriate. There is a rule of thumb floating about among advisors that your stock percentage should be 110 minus your age. This may or may not be a good ratio for you but some method that helps discipline you in these decisions will help you and this is not a bad one for many people. The other major factor is to avoid impulse buying or selling and to keep transaction costs at a very low level - and this usually means going with broad-based no-load index funds for much of the ride. Doing the above will not make anyone rich. It will, however, ensure that you have the best chances of getting decent, normal returns on average over time while helping to preserve your capital as you go. If you want extraordinary returns, get them through your startup or by doing extraordinary things in your work. For your investments, the rule is different. You do not "underperform" by hitting averages with your investments. You simply meet the goal that should be the defining goal for most people in that area.

pbreit 11y ago
Better: make a core position in Vanguard LifeStrategy.
- PaulHoule 11y ago
  best: buy $XIV today
  - Omnipresent 11y ago
    Any particular reason?
    - herge 11y ago
      It's cheap today, maybe not tomorrow when the panic will have worn off.

jsf666 11y ago

Just fuck my shit up fam, jesus... and I was thinking about shorting it friday. Oh well, gotta wait it out. Just hope it won't take 5 years not counting inflation

mylons 11y ago

and now this headline isn't relevant. stocks are UNCH or ^. white knuckling it

vasilipupkin 11y ago

I just want to offer everyone a professional piece of advice. Large down moves in equity markets is exactly when you should buy equities because that's when expected returns are at their highest.

swagswag 11y ago
Large down moves Thursday, Friday, and now (early) today.
debacle 11y ago
I'll counter with some amateur advice - things still seem historically overpriced.
- vasilipupkin 11y ago
  stocks are not obviously cheap, I'll give you that. But you have to compare them to other investment alternatives. Cash, Real Estate, Govt Bonds.
adt2bt 11y ago
This got me thinking - is it possible to develop a profitable long-term investment strategy that takes advantage of stock market dips? For example, say I have $1000 to invest every month. I'll take that $1000 and put $500 into an index fund and $500 into a savings account. Then, once the market dips 10% from its previous high, all the accumulated money in the savings accounts is invested over 4 weeks. I made a simple google doc to back-test the strategy 5 years on the DJIA. It's very rudimentary, but I'd love to see if anyone tries a different approach. https://docs.google.com/spreadsheets/d/18-2rBonJPPlg8n6YkpAjAXBKX-Arf5_bByO1ETZf8bY/edit?usp=sharing https://docs.google.com/spreadsheets/d/18-2rBonJPPlg8n6YkpAj...
- 001sky 11y ago
  testing (a) trading strategy in a short window ... why?

williesleg 11y ago

Usually happens before a big political shift. Buy the viix.

tzm 11y ago

From what I've heard from locals.. the recent chemical explosion triggered general fear of wide-spread corruption and an impending economic coup d'état from nationalists who want to disrupt the current power.

plg 11y ago

Unless you need to take your money out in the next couple of months (or unless you are facing a margin call) why not consider this as a fire sale? Your favourite stocks and mutual funds, ON SALE!

wutbrodo 11y ago
Exactly, I feel like this hits a good balance of prudence and pragmatism. It's kind of a double-edged sword for me since I happen to be heavily into liquid cash at the moment...but I also have higher cash needs because I quit my job a month ago and am planning on taking 6 mos to a year off. Either way, beyond a bit of an "emergency fund" on steroids, this is actually how I'm taking it: a good starting point for some conservative DCA.
ap22213 11y ago
Interestingly, the people I know who have had the most success in the markets (and who have been around for a while) have told me this, each independently. I have taken their advice and have done quite well.

icedchai 11y ago

In the grand scheme (meaning, 5+ years), this is a small blip. Buy more.

randomname2 11y ago

Markets are green again thanks in part to move in AAPL worth over 80B in market cap. This happened after Tim Cook's email to Jim Cramer, which may have violated Fair Disclosure regulations: https://mobile.twitter.com/carlquintanilla/status/635799629947404288 https://mobile.twitter.com/carlquintanilla/status/6357996299...

notNow 11y ago
There's a share buyback program ongoing for Apple. So, I am not really surprised that they are defending their stock in the market and bidding it up. Note also that APPL's cash reserves are YUGE and they can play this game for some time.

IceColdCoder 11y ago

I'm just injecting some alternative thought here but I think one major question that needs to be asked about the health of the economy is: "How much of the weighted average person's day is that person spending on survival". I don't see how slow shift to a 60-hour instead of a 40-hour work week is indicative of a healthy economy but I could be wrong. To me it seems that survival is taking more and more time when it should be taking less and less if the economy were actually growing. This is probably just a "correction" but I think we will be seeing more and more of these here soon. I've been looking at the robotics industry and I can see them going into full public view within the next decade. The results will be interesting.

theseatoms 11y ago
Weighted by what?
- IceColdCoder 11y ago
  I was thinking of clustering. If you have a large group of people in a general income sub-group then it would weigh more than fewer people in another income subgroup. The point of weighing is that margin-based models depend heavily upon a large consumer base and only certain consumer bases are of any significant size.
  - sokoloff 11y ago
    So, in other words, just the average across the population?