5 ms·

The S&P 500 fell 3.8 percent in afternoon trading

13 points by margotli 4y ago

incomingpain 4y ago
Nasdaq is -27% YTD. S&P500 is -17% YTD. The actual problem seems to be isolated to the USA. Tons of confidence in Canada and Europe. There's still exposure of companies who are involved in the USA while being listed in not-usa. So Canada and Europe will be dropping. I see probably another -20% drop for S&P500 still coming. This is already worse than financial crisis and dotcom combined in terms of wealth lost.
- nus07 4y ago
  I still think it’s a correction if you factor that since 2020 the S&P500 has had astronomical growth . If we see pre-pandemic levels it’s still a correction. If it drops below that then we are in for a rough ride.
- paulpauper 4y ago
  * This is already worse than financial crisis and dotcom combined in terms of wealth lost* the economy is much bigger
- register 4y ago
  I don't believe that there is a lot of confidence in Europe now. In fact shortly after the war I have been advised to sell all European stocks because European company will be impacted by an energy shortage. At the same time I was advised against purchasing USA stocks since they were over evaluated but now instead the Down Jones ( but not the Nasdaq ) has changed evaluation to interesting. And yes Canada is interesting as well.
  - incomingpain 4y ago
    >I don't believe that there is a lot of confidence in Europe now. More than the USA. Let that sink in. > In fact shortly after the war I have been advised to sell all European stocks because European company will be impacted by an energy shortage. At the same time I was advised against purchasing USA stocks since they were over evaluated but now instead the Down Jones ( but not the Nasdaq ) has changed evaluation to interesting. And yes Canada is interesting as well. Certainly a common and obvious assessment, so don't get me wrong, but this is shallow investing advice in my opinion. Europe might be having blackouts of nowhere near enough power and shedding load isn't even effective at getting people online. Your utility company is going to shifts where you only get so much power between these hours. At least people do have power sometimes. If you're say Michelin and you're having the worst energy problems and maybe aren't prioritized or anything. You put to your team to get us up and running. Buying from stores might be an option, but you may have to go to literal raw resources. Process silicon, make your own really low yield solar panels. Thousands of employees working on this and they can solve the problem of no power. Just because you're doing X right now doesn't mean you can't do Y tommorrow. If your business can shift this well and become a solar panel producer from scratch could make you very wealthy. Europe's energy problems aren't unsolvable. It's actually just a matter of time someone mass produces enough solar panels in a size enough to power the continent with batteries. In fact, that's the point of business. Your mission is say 'deliver tires' and you solve the problems in front of you. If energy scarcity is the problem, there's multiple ways to solve this problem. Whereas the overpriced US market? That's not fixable by work or money.
paulpauper 4y ago
it wasn't down that much until starting in early April. then things entered freefall. something changed. it wasn't inflation. Inflation was already in the news since early 2021.
- credit_guy 4y ago
  The financial markets and the real economy have all sorts of feedback effects. Up to a certain threshold, shocks in the financial markets can be localized, but beyond that, they propagate to the real economy, and result in death spirals. Back in 2007, I was chatting with a hedge fund person and said "all these things are just technicals". And she replied: "yes, but technicals sometimes become fundamentals". Of course, she turned out to be absolutely right in the end. It's because financial markets are about money, which is a different word for credit, which is a different word for trust. As long as people trust the economy is strong, the economy is strong. But when the trust diminishes, then various nasty things appear: banks tend to be more cautious with firms that want to renew their annual loan (sometimes they offer a lower balance, sometimes they don't renew it at all). Some companies put hiring freezes. Some even start laying off people. A very stealthy form of unemployment kicks in quite quickly: people in the gig economy don't get as many gigs as before. Here's an example: in your own building, how many Fresh Direct deliveries do you see nowadays, and how many did you use to see one year ago? All those missing Fresh Direct deliveries and gigs that some people didn't get. The Fed may monitor this type of unemployment, or they may not. They are certainly not talking about it that much. Chair Powell keeps telling us there are 50% more job vacancies than available workers, and keeps reassuring us that the economy fires on all cylinders. But that's not quite the whole story. So, when people start to feel a bit nervous, they obviously first cut the more risky investments. That's why you are hearing the VC funding has dried up. Because VC funding is highly risky. This is the first to go. But little by little, not only companies will start being more cautious with their money, but people too. Of course it starts with those people in the gig economy who just don't see the cashflows they used to see half a year ago. But then it will continue with lots and lots of people who have good jobs, but see a sharp decline in their investment portfolios. I personally reduced my equity exposure significantly, and I bet I'm not the only one. Well, all those people who reduced their exposure, did that by selling. And lots of sales means price declines. But some people don't sell because they are a bit more cautious, some sell because they are highly leveraged, and they need to sell, because they get a margin call. These are the hedge funds. Hedge funds have trillion of dollars in investments. They make money by levereging up as much as they can. Of course, after 2008, the insane leverage ratios seen up to that point don't exist anymore, but still. Whenever you are leveraged, and your investments go down in price, you are liable to get a margin call. If you don't come up with more cash (and where do you get the cash from?), then you need to sell. And you sell in a falling market. What happens is a "run on the economy". Right now we are at the stage of a "brisk walk on the economy". It's difficult to predict the crowd sentiment just as it is difficult to predict the market (well, duh, these 2 things are one of and the same). So, maybe the crowds will change their minds, and say "now's a good time to buy". But maybe not. In my mind the pace of the "brisk walk" will just get more alert. We may get to full blown panic quite soon. But again, we might not. Bottom line: there's no such thing as a "fundamentally strong economy". Because the economy is just as strong as the confidence of the participants in it. And that confidence can turn to panic very quickly.
streetcat1 4y ago
Its looks like the FED lost control of the long term (10-30) years interest rate. I think that the market is concerned that this is designed. Usually the Gov balance the FED, but it looks like nobody care from the gov side. I.e. the gov actually encourage the wealth destruction.
- thoughtstheseus 4y ago
  The Fed does not control the 10 or 30 today. They implement policy primarily through the ST money markets. They could and likely will do more under yield curve control though. See Japan.
  - streetcat1 4y ago
    The fed buy MBS. How do you think 30 years fixed was under 3% in 2021?

13 points by margotli 4y ago

Nasdaq is -27% YTD. S&P500 is -17% YTD. The actual problem seems to be isolated to the USA. Tons of confidence in Canada and Europe. There's still exposure of companies who are involved in the USA while being listed in not-usa. So Canada and Europe will be dropping. I see probably another -20% drop for S&P500 still coming. This is already worse than financial crisis and dotcom combined in terms of wealth lost.

nus07 4y ago
I still think it’s a correction if you factor that since 2020 the S&P500 has had astronomical growth . If we see pre-pandemic levels it’s still a correction. If it drops below that then we are in for a rough ride.
paulpauper 4y ago
* This is already worse than financial crisis and dotcom combined in terms of wealth lost* the economy is much bigger
register 4y ago
I don't believe that there is a lot of confidence in Europe now. In fact shortly after the war I have been advised to sell all European stocks because European company will be impacted by an energy shortage. At the same time I was advised against purchasing USA stocks since they were over evaluated but now instead the Down Jones ( but not the Nasdaq ) has changed evaluation to interesting. And yes Canada is interesting as well.
- incomingpain 4y ago
  >I don't believe that there is a lot of confidence in Europe now. More than the USA. Let that sink in. > In fact shortly after the war I have been advised to sell all European stocks because European company will be impacted by an energy shortage. At the same time I was advised against purchasing USA stocks since they were over evaluated but now instead the Down Jones ( but not the Nasdaq ) has changed evaluation to interesting. And yes Canada is interesting as well. Certainly a common and obvious assessment, so don't get me wrong, but this is shallow investing advice in my opinion. Europe might be having blackouts of nowhere near enough power and shedding load isn't even effective at getting people online. Your utility company is going to shifts where you only get so much power between these hours. At least people do have power sometimes. If you're say Michelin and you're having the worst energy problems and maybe aren't prioritized or anything. You put to your team to get us up and running. Buying from stores might be an option, but you may have to go to literal raw resources. Process silicon, make your own really low yield solar panels. Thousands of employees working on this and they can solve the problem of no power. Just because you're doing X right now doesn't mean you can't do Y tommorrow. If your business can shift this well and become a solar panel producer from scratch could make you very wealthy. Europe's energy problems aren't unsolvable. It's actually just a matter of time someone mass produces enough solar panels in a size enough to power the continent with batteries. In fact, that's the point of business. Your mission is say 'deliver tires' and you solve the problems in front of you. If energy scarcity is the problem, there's multiple ways to solve this problem. Whereas the overpriced US market? That's not fixable by work or money.

paulpauper 4y ago

it wasn't down that much until starting in early April. then things entered freefall. something changed. it wasn't inflation. Inflation was already in the news since early 2021.

credit_guy 4y ago
The financial markets and the real economy have all sorts of feedback effects. Up to a certain threshold, shocks in the financial markets can be localized, but beyond that, they propagate to the real economy, and result in death spirals. Back in 2007, I was chatting with a hedge fund person and said "all these things are just technicals". And she replied: "yes, but technicals sometimes become fundamentals". Of course, she turned out to be absolutely right in the end. It's because financial markets are about money, which is a different word for credit, which is a different word for trust. As long as people trust the economy is strong, the economy is strong. But when the trust diminishes, then various nasty things appear: banks tend to be more cautious with firms that want to renew their annual loan (sometimes they offer a lower balance, sometimes they don't renew it at all). Some companies put hiring freezes. Some even start laying off people. A very stealthy form of unemployment kicks in quite quickly: people in the gig economy don't get as many gigs as before. Here's an example: in your own building, how many Fresh Direct deliveries do you see nowadays, and how many did you use to see one year ago? All those missing Fresh Direct deliveries and gigs that some people didn't get. The Fed may monitor this type of unemployment, or they may not. They are certainly not talking about it that much. Chair Powell keeps telling us there are 50% more job vacancies than available workers, and keeps reassuring us that the economy fires on all cylinders. But that's not quite the whole story. So, when people start to feel a bit nervous, they obviously first cut the more risky investments. That's why you are hearing the VC funding has dried up. Because VC funding is highly risky. This is the first to go. But little by little, not only companies will start being more cautious with their money, but people too. Of course it starts with those people in the gig economy who just don't see the cashflows they used to see half a year ago. But then it will continue with lots and lots of people who have good jobs, but see a sharp decline in their investment portfolios. I personally reduced my equity exposure significantly, and I bet I'm not the only one. Well, all those people who reduced their exposure, did that by selling. And lots of sales means price declines. But some people don't sell because they are a bit more cautious, some sell because they are highly leveraged, and they need to sell, because they get a margin call. These are the hedge funds. Hedge funds have trillion of dollars in investments. They make money by levereging up as much as they can. Of course, after 2008, the insane leverage ratios seen up to that point don't exist anymore, but still. Whenever you are leveraged, and your investments go down in price, you are liable to get a margin call. If you don't come up with more cash (and where do you get the cash from?), then you need to sell. And you sell in a falling market. What happens is a "run on the economy". Right now we are at the stage of a "brisk walk on the economy". It's difficult to predict the crowd sentiment just as it is difficult to predict the market (well, duh, these 2 things are one of and the same). So, maybe the crowds will change their minds, and say "now's a good time to buy". But maybe not. In my mind the pace of the "brisk walk" will just get more alert. We may get to full blown panic quite soon. But again, we might not. Bottom line: there's no such thing as a "fundamentally strong economy". Because the economy is just as strong as the confidence of the participants in it. And that confidence can turn to panic very quickly.

streetcat1 4y ago

Its looks like the FED lost control of the long term (10-30) years interest rate. I think that the market is concerned that this is designed. Usually the Gov balance the FED, but it looks like nobody care from the gov side. I.e. the gov actually encourage the wealth destruction.

thoughtstheseus 4y ago
The Fed does not control the 10 or 30 today. They implement policy primarily through the ST money markets. They could and likely will do more under yield curve control though. See Japan.
- streetcat1 4y ago
  The fed buy MBS. How do you think 30 years fixed was under 3% in 2021?