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Everything Is Crazy and the Markets Aren’t Freaking Out
- ryanackley 9y agoPurely anecdotal but in my experience of the two big recessions I've lived through, it's not the predictions of imminent doom you should worry about. It's the slew of articles that predict "no end in sight" that seem to come right at the peak. It's likely a coincidental observation on my part but maybe, just maybe it's the heavy hitters seeing a slow down trying to pump confidence back into the markets.
- thisisit 9y agoI guess what has changed is the amount of news and media people can have access to nowadays. In good old days, dissenting opinions were pushed into the inner folds of a magazine and all "no end in sight" news on the front page, because everything was about delivering good news and optimism. Nowadays articles exist as a website link ie there is not really a frontpage of sorts and then being negative sells a lot. Though it will be interesting to put together what the print edition of newspapers are predicting - boom or bust?
- ch4s3 9y agoOut of curiosity, if you don't mind sharing, roughly how old are you? Or rather when do you mean "old days"? I'm in my early 30's and my earliest memories of the news were Bush Sr. breaking his no tax pledge, which was covered negatively, even though it was sensible, and the shit mess in Iraq.
- thisisit 9y agoI am also in my early 30s ;) I used to read print edition newspapers everyday till 2008/10. Let me clarify what I mean by negativity. Newspapers were (are?) about popular opinion. So, when the markets were doing great, you get all caps, huge typeset about the new highs markets were making. Anyone who questioned that was relegated to inside pages. Same was true when market tanked. All caps, huge typeset words about "blood in the street" or "Black x day". Anyone who disagreed and said - time to buy stocks was relegated to inside pages. They were about reflecting or shaping popular opinion. Same was true for Bush Sr and his tax pledge. Nowadays, I can link to a some blog which says this is a high and market will crash soon. In which case, the metric of waiting for "to the moon" article might no longer hold true.
- pmorici 9y agoDo you read this article as "no end in sight" or "eminent doom"? It certainly seems like there are record levels of complacency in some respects and at ~9 years this bull market is long in the tooth.
- qaq 9y agoYep was just thinking the same thing when reading the article
- hellofunk 9y agoWhat you are talking about is sentiment analysis, and you are right that tops often form when everyone is raving about the unstoppable force of the market. I know many traders whose careers are based on mainly on sentiment study; it's not just mere anecdotes.
- deleted 9y ago[deleted]
- crabasa 9y agoThere's no single reason that can explain the march up, but it's worth noting the meteoric rise of index funds, which now account for over $4T under management [1]. There's just a massive amount of money looking for returns that exceed the almost 0% interest rates that exist today. [1] http://www.businessinsider.com/index-fund-assets-under-management-2016-1 http://www.businessinsider.com/index-fund-assets-under-manag...
- kaputsmack 9y agoIt is inexistent money. The world financial system is printing money, they are moving trillions around several nations to hide the fact that this money does not exist. How would you know how much value in U$ is hidden in Brazil by international banks? How would you know how much U$ is hidden in Singapore, South Africa, Mexico? You don't know. The US reserves are audited, the European economies are regulated, but the capital movement around the world is impossible to track. This money does not exist in reality, there is no record of it anywhere. But does anyone care? Has anyone read the Panama papers? Billionaires and world leaders are hiding trillions in bank accounts that you can open remotely, without hassle. This money is unaccounted for. Banks are free to move as much money as they please around the world, they just print money and move it. The trillions in funds around the world do not exist. The markets are rigged.
- JumpCrisscross 9y ago> How would you know how much value in U$ is hidden in Brazil by international banks? What on earth are you talking about? Are you saying the U.S. Treasury doesn't know how many dollars it has printed? Or the Federal Reserve doesn't know many dollars banks hold with it in reserve? Or how many dollars the banks it has under its jurisdiction have created? Note that apart from cash, the latter two categories are digital and intensely tracked. > You don't know Are you presuming or asking? $1.58 trillion of which $1.53 trillion are Federal Reserve notes and the rest coinage [1]. While estimating the exact amounts in any given country is not easy [2], just as estimating the exact number of dollars any person knows is far from definitive, the aggregates are tightly controlled. [1] https://www.federalreserve.gov/faqs/currency_12773.htm https://www.federalreserve.gov/faqs/currency_12773.htm [2] https://www.federalreserve.gov/pubs/bulletin/1996/1096lead.pdf https://www.federalreserve.gov/pubs/bulletin/1996/1096lead.p...
- kaputsmack 9y agoBecause markets are rigged. Money is being printed by banks and it is being moved around the world so no one notices in national audits. China is printing money, US banks are printing money. World debt is bigger than world economies, the US owes more than it produces, banks are free to simply borrow and speculate more and more. Only the average citizens keep adding and subtracting money. Banks do not worry about money, they can print as much as they need, either by borrowing or by moving vapor money around the world to mask the true origin. The world financial system is rigged. Money does not matter higher up, they are simply inventing value out of ether. 99,99% of the world works day in and out to support this rigged system.
- crabasa 9y agoIf markets are rigged, why do they crash?
- kaputsmack 9y agoThey crash at the convenience of banks. Everyone except banks hurt in 2008. Banks then went in buying everything cheap. The people could not buy at all, since everyone was robbed. But banks were bailed out, so they had the money to buy cheap stocks around the world after the crisis they themselves created. Is it not obvious? The crashes and the pumps are architected by banks. The people who lost homes got hurt, but banks didn't. Banks made trillions of $ from the 2008 crisis.
- pmorici 9y ago69% of Americans have less than $1,000 in savings. If you are in debt inflation is a benefit to you so long as your wages keep pace with inflation.
- dropit_sphere 9y ago>so long as your wages keep pace with inflation. That's a big if, though, depending on your (or "you" in aggregate) market power. And if you've got less than $1K in savings, you probably don't have a lot.
- castratikron 9y agoFor Vanguard Group Inc., whose trillions of dollars in low-cost and index-tracking funds are both credited and blamed for the current market mood—because so many retail investors have decided just to buy a diversified fund and forget about it—the new mindset is a sign of a job well done. I had wondered if they would bring this up. It's my understanding that an unprecedented percent of the market is plain old passive index funds.
- Clubber 9y agoMost of the time, it's the best way to invest. Fund managers are so wealthy, often not because they make great picks, but they use manipulative tactics to get people to invest with them. Most of them can't beat the market.
- jryan49 9y agoWhat happens when everyone is in an index fund though? The efficient market hypothesis goes right out the window in that case. I can imagine a crash happening because of that maybe. It feels the same with the last thing that caused the crash. Everything thought house flipping was "easy money" so everyone did it. The second everyone does it, it's not valuable anymore.
- surfmike 9y agoPrices happen at the margin though. You only need a small percentage of traders to be active investors to create an efficient market. https://amp.businessinsider.com/passive-investing-makes-markets-more-efficient-2016-5 https://amp.businessinsider.com/passive-investing-makes-mark...
- mabbo 9y agoYou may be right, but I think we aren't there yet. We've got too many active trading firms delivering little value. As more money moves into index funds and ETFs, only the best active traders will survive. As well, I've also been lead to believe that many hedge funds aren't simply trying to make the most money, but are trying to ensure a safety net. They are promising they won't lose more than X% no matter how crazy things get. There's value in that.
- minikites 9y ago>“Is the risk priced into the market appropriate to what the real risk is?” says Winer, the firm’s director of equities. “To me, it isn’t. People have grown more complacent and certainly more speculative, and it’s a little bit frightening.” I think this is it. We're collectively ignoring a lot of risk (remember "No one defaults on their mortgage!") and it's going to bite us eventually.
- RyanShook 9y agoThis bull market, like all those before it will end. However, timing the market is impossible and a fools errand. Unless you’re close to retiring you’re better off riding it out. Here’s to hoping the market let’s us down easy this time...
- hellofunk 9y agoIs it possible the Fed is buying into the market to keep it up?
- chrismealy 9y agoWhat else are rich people going to do with their money? Buy bonds at 1%?
- s_m_t 9y agoIgnore the professional LARPers, paid trolls, political party propaganda outlets, and social media junkies and everything seems pretty normal.
- melling 9y agoNormal is cycles of bull and bear markets. They all come to an end: https://www.youtube.com/watch?v=PHe0bXAIuk0 https://www.youtube.com/watch?v=PHe0bXAIuk0 I’m not sure if every bull has to end with a crash. Perhaps it just peters out?
- MichaelDickens 9y agohttp://www.macrotrends.net/1319/dow-jones-100-year-historical-chart http://www.macrotrends.net/1319/dow-jones-100-year-historica... From about 1965 to 1982, the market had basically 0% return. There were no big crashes (except for 1973), but the market simply "petered out" for about 20 years. On an inflation-adjusted basis, someone who started investing in 1965 wouldn't have broken even until 1995.
- csours 9y agoSee also Stagflation: https://en.wikipedia.org/wiki/Stagflation https://en.wikipedia.org/wiki/Stagflation
- dogruck 9y agoYes, it's far too easy to get caught up in the hysteria of media, internet comments and tweet storms. Not to say the market won't revert. But it feels hysterical to declare that "everything is crazy." For comparison, we had hurricanes, presidential scandals, yada yada in the late 1990s.
- dfabulich 9y ago> For comparison, we had hurricanes, presidential scandals, yada yada in the late 1990s. Well, yes, and then we had a recession right after the late 90s. Is your comparison supposed to be reassuring?
- genzoman 9y agoi told a friend the other day, if the US really is at the precipice of nuclear war with Best Korera and i can get gas for 2.25, maybe the world isn't is such bad shape after all.
- deleted 9y ago[deleted]
- Abishek_Muthian 9y agoI'm more worried about the lack of incentive for the 1% to maintain global stability if the markets doesn't react proportionally to the geopolitical issues.
- QAPereo 9y agoGlobal stability is just a localized illusion enjoyed by nuclear powers and their allies.
- emerged 9y agoWhen everyone is screaming how much Trump is literally making the sky fall 24/7 on all media and water coolers, none of the legitimate problems pack any sort of punch. Nothing causes panic because panic is the new baseline.
- make3 9y agoto be fair, trump is fucking up a lot of you guys' institutions, like foreign policy, immigrant policy, ecological policy, gender & racial (civil) policy, etc.
- michaelchisari 9y agoMore importantly, pointing out the damage being done to America's democratic institutions and civil society should not be dismissed as hysterics or simply "panic." The consequences will be greatest in the long term. That we aren't feeling them yet does not absolve the situation.
- lxcid 9y agoI guess this is the calm before the storm.
- averagewall 9y agoCan you give specifics? As far as I know, nothing's changed. They still have democracy in America, and it still works in exactly the same way it used to, doesn't it? They still have civil society don't they? There are occasional riots and ongoing violent crime but that's been the norm for decades at least. Do you predict a transition to a single party system or more crime in the long term because of Trump's actions? Without specifics and concrete problems, it's just more hysteria like the OP was talking about.
- michaelchisari 9y ago> As far as I know, nothing's changed. As a single example to start, I would recommend looking into the staffing problems at the the state department. A lot of people don't think about the state department, but they are the first line of diplomacy on the world stage. There are hundreds of positions left unfilled, a severe lack of focus, the requirement of keeping up with major foreign policy pronouncements through twitter by the POTUS and a disengaged secretary of state with very little experience. World diplomacy is the kind of thing that does not blow up overnight, but has a ripple effect for years and possibly even decades to come, as we've seen with our middle east policies. All of American democracy shouldn't have to crumble into ashes before we express concern.
- ThrustVectoring 9y agoTo be completely fair, the risk of nuclear war shouldn't be priced into the US equity markets. If a catastrophic nuclear war happens, the only way selling stocks can help you is by excessive short-term spending on frivolous luxuries. The risk/reward profile simply doesn't make sense for even a significant risk to substantially alter investor behavior.
- Boothroid 9y agoAre you assuming the market is rational?
- ThrustVectoring 9y agoNope. The market is adaptive, though. Every time someone sells on a piece of news that "should" be ignored, it trains the rest of the market to "buy the dip".
- mempko 9y agoThe crash will come when the federal deficit is reduced. Trump and his right hand man Paul Ryan are working on that now... While the tax cuts would help increase the deficit, they are taking it away by cutting spending.
- uoaei 9y agoWhen you have an economy whose volume is 99% speculation, its function becomes a self-fulfilling prophecy up until the point where real resources that feed and house people start drying up. Further, the US government can literally inject money at will into the market. That is what is happening when you have interest rates less than or equal to 0. They're saying "we don't really need money back until it starts helping you make money from the various levels of abstraction (options, futures, etc.) that enable literal money creation."
- throwawaythrow1 9y agoI think this is likely due to some kind of skewed market internally and probably that many countries hold US assets and debts that are being engineered in to a position of a new normal (or baseline). Real growth in the US is falling over time has been falling at least since the mid 80s. What irks me, is that with increased TSA, border, immigration, political, weather and gun control problems is why the US attracts anyone at all, or even foreign money. I have a hunch that by painting a positive picture in the media and misreporting or under reporting real situations leads to a perception that the US is a great place when looked at externally
- stolk 9y agoAnd why wouldn't the stock market go up? Companies are growing their revenues, and are making healthy profits. A good chunk of those profits are paid out as dividends. If dividend yield is much higher than those tiny interest rates, why wouldn't you borrow money, invest, and enjoy dividends? It's the rational thing to do, and hence, demand for stock is up, stock price is up. But as long as the corporations keep distributing, it makes sense.