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This is your brain on a crashing stock market
- systemvoltage 7y agoTake it with a grain of salt but I am hearing (through finance podcasts) that a lot of hedge fund managers and investment bankers are working alone from home and without physical proximity with their teams, the panic levels are setting in. I think it makes sense to me - when we are not physically banded together, we have a lost sense of safety and security.
- 1123581321 7y agoWhat were their sources? My experience in finance is that physical groups of traders, advisors and analysts are prone to groupthink, a liability right now. A calm leader should still be able to enforce policy remotely.
- throwaway_pdp09 7y agoLet's suppose: what you say is true and they're like sheep. A guy in a group panicking has the rest of them to, kind of, validate his emotion. He might be panicking but he knows where he stands. By himself he doesn't even have that reassurance. He doesn't have anything to measure his emotions against. Does that make sense?
- 1123581321 7y agoI understand the theory, but since I haven’t found traders to make better decisions in groups, I was wondering what the source was for the increased rates of bad decisions due to remote work.
- munk-a 7y agoThat says something really interesting about traders - that more of them essentially add no value - but I am also wondering why you think Leadership would have increased presence when folks are remote. People in companies tend to clique up, it's just how humans do, normally, in an office setting, these cliques are rather limited in terms of exclusive discussion to private messaging, lunch & coffee. Part of this is due to the fact that in an office setting cliques tend to be eroded by shared company and leadership is always quite visible (or it's doing it wrong). To contrast, when folks are remoting these cliques will instead turn into echo chambers where the members are constantly primarily exposed to one another and leadership will become less visible as it is limited to interacting with smaller segments of the team at any given time.
- 1123581321 7y agoI don’t think leadership would have increased presence overall. It would certainly not be good, either, for leadership to be remote while everyone else worked together in-person—I’m assuming most employees are remote in these situations. The benefit of more traders/analysts/customer-facing staff is that they can do more work. Part of the groupthink problem is that the work becomes commingled into a few big decisions in which case the value of the additional employees does temporarily become reduced, but the workload is still available the rest of the time. Again, this is in my anecdotal experience, hence the source request.
- starpilot 7y agoApparently HFT funds are printing money with all this volatility.
- munk-a 7y agoSigh, they aren't printing money[1], nobody in the stock market prints money - it all comes from somewhere. And in this time of crisis the last thing we need is for a huge amount of value to be siphoned off by HFT managers. 1. I know it's just a saying, but it's a bad one that implies some very wrong understandings of the world.
- rmrfstar 7y agoSuper confused that anyone would down-vote this. It is empirical reality [1]. [1] https://faculty.fuqua.duke.edu/~charvey/Teaching/BA453_2004/Muller_Proprietary_trading.pdf https://faculty.fuqua.duke.edu/~charvey/Teaching/BA453_2004/...
- dustingetz 7y agowhich finance podcasts do you like? i just know Macro Voices
- systemvoltage 7y agoYeah that’s where I heard it. There was a question about remote work.
- davidw 7y agoI'm a lot more concerned about people's health and well-being. Once the health crisis passes, the rest will probably take care of itself.
- thephyber 7y agoHealth includes some component of hope and perception of security. It’s not clear to me that a person living check-to-check in a rented property with no stable income can remain healthy without economic stability. For better or worse, Wall Street news pervades our perception of whether times are good or bad.
- davidw 7y agoI'd focus on the immediate needs like food and rent and let stocks take care of themselves once things are better. Food and rent are a much more real and present anxiety than stock prices, even if the latter certainly does affect the 'mood'.
- azinman2 7y agoExcept if you’re unemployed, you might have to sell stock to focus on food and rent.
- munk-a 7y agoI'd be concerned for your financial stability if you need to liquidate assets as soon as you might miss out on two weeks' pay. There are a lot of people that will really struggle in the coming weeks or months, but the venn diagram of those folks and people with a significant presence in the stock market is really quite small.
- azinman2 7y agoNot sure where you're getting 2 weeks pay from. Many in the professional class will lose their jobs in a contracting market (there will be losers), and finding a new job will take much more than 2 weeks. In the mean time, there's still rent/mortgage to pay amongst other expenses. Not everyone keeps a lot of cash liquid. There's also a difference between selling some stocks and liquidating your portfolio. It's not all one or the other.
- vkou 7y agoAnd yet, if every investment (including cash, because there is a near-certainty of the government turning to inflation to solve all these problems) is crashing, then isn't it the case that nothing is crashing?
- somebodythere 7y agoBut if financial assets are crashing in cash-terms, and cash itself is crashing in purchasing-power terms, financial assets are extra crashing.
- cdiddy2 7y agoIts hard to say that the USD is crashing, it seems to actually be too strong at the moment with everyone running towards it from other currencies https://www.tradingview.com/x/seCzFWI8/ https://www.tradingview.com/x/seCzFWI8/
- seanmcdirmid 7y agoIt’s strength relative to other currencies is one thing, but if everyone is QEing at the same time, the dollar could still be weakening in absolute terms.
- qntty 7y agoMy investment in 100 pallets of toilet paper isn't crashing
- spking 7y agoLately I've been thinking about all of the "F.I.R.E." and "Boglehead" blogs and forums that have proliferated over the past 5-10 years. What percentage of those people are panicking over their plunging index funds vs. those who are ignoring the day-to-day chaos?
- servercobra 7y agoThe reddit FIRE subreddit has been surprisingly calm. But I also expect the people really panicking aren't posting.
- twiceaday 7y agoI bet you its calm because only the calm investors frequent that site. It's too boring for everybody else.
- dmoy 7y agoEven before this thing, there were a number of fire blogs that weren't super honest about the realism of their numbers. I can only imagine that there's more who are facing a ride awakening right now. For someone just following a boglehead index whatever, it should just be business as usual. Treat it as any other crash. That is, do nothing except maybe rebalance stock/bond ratio to match once or twice a year.
- aazaa 7y agoNo access to article, but an entire generation of money managers have grown up with the Everything Bubble starting in 2009, fueled by Fed largesse. They've never even seen a bear market, let alone a financial panic. Most have completely ignored the alarming rise in valuations and market distortions, engaging in extremely risky behavior for years on end.
- Retric 7y agoYea, looking at P/E ratios based before COVID most companies only fell to a reasonable level. I’m looking at the market and thinking it’s still a little high. A rising or falling stock market is not inherently good or bad thing. It’s only really relevant as a prediction of future trends.
- dwater 7y agoYes, I heard a "market analyst" on the radio this morning talking about how the market is probably near the bottom now that COVID19 has been priced in, and it's time to start thinking about economic recovery. Meanwhile, a reasonable analysis of the medical situation in the US leads one to expect there's a lot more downside to be exposed. What will happen to the market when people who thought they had good health coverage are turned away from hospitals, not in Brooklyn but in Kansas City and Peoria? Some forecasts put us 2-4 weeks from that.
- OJFord 7y ago> near the bottom now that COVID19 has been priced in, [...] Meanwhile, a reasonable analysis of the medical situation in the US leads one to expect there's a lot more downside to be exposed. That's exactly what they mean that's been 'priced in'. I don't happen to agree, but you can't say 'the situation hasn't been priced in, because the situation is going to get worse', because the whole point of 'pricing in' is that it's taking into account whatever thing we're pricing in, wherever we're going.
- munk-a 7y agoIt's my estimation that farming and food manufacturing sectors will be able to ride out this issue without feeling much hurt, but I think it's too early to definitively say. Right now tech stocks aren't doing terrible but if service companies start actually shuttering their doors then we're in for a lot more market dropping.
- Sam_Harris 7y agoPlease stop posting links to paywalls!
- marban 7y agoMight wanna add the extreme volatility as another multipler when it comes to short-term stress bursts.
- throwaway_Bees 7y agoClearly not the brains of those certain congressmen and women that sold off before the crash...not to mention their constituents they likely gave the tip to while maintaining a different political posture publicly. Curious what kinds of bucket loads of cash they made and continue to make shorting with continued access to inside info including classified intelligence.
- stuff4ben 7y agoWas it classified? Did we all not see what happened in China and think it couldn't happen here? People like to knock Burr and all, but I don't think there was anything special he saw that the rest of us didn't see coming. I didn't act, but I'm not going to fault those that did. And what if he did say something to everyone? That would have caused a panic then and there, people would make a run on the banks, and the market still would be down.
- throwaway_Bees 7y agoCertainly it goes without saying the head of the Senate intelligence committee has access to classified and top secret information. He sold nearly 100% of his net worth in stocks and his public political position is inconsistent with the sale of the stock which he has at least admitted was influenced by public news reporting. It leaves one to wonder why the public news would guide his financial decisions, when as a Senator he had a different political position. Not to mention its is established he dropped the market crash tip at a $10,000/plate campaign fundraiser dinner.
- pellucide 7y agoCan we watch his buying activity to predict the market bottom?
- throwaway_Bees 7y agoNo, but you could purchase a $10,000 plate at his next fundraiser and he may just tell you, like he told the donors at the last fundraiser before the crash.
- majormajor 7y agoWhat would our political policy look like if the news ignored stock prices and focused on wage percentiles and employment numbers? We'd still need to do something ASAP, but why not focus on that side of the numbers instead of this stock market fixation?
- neonate 7y agohttps://archive.md/Gluq8 https://archive.md/Gluq8
- Der_Einzige 7y agoBuy puts and shorts and instead of fear and panic you'll have the opposite problem: You'll watch shit burn and be "happy" about it.
- OJFord 7y agoAs in a memorable scene from the film The Big Short, (nsfw/expletives): https://www.youtube.com/watch?v=7eYcWpgCb7o https://www.youtube.com/watch?v=7eYcWpgCb7o