Never fails in a down market: people fled in droves

[audreyh1]

9 years of bull market without a real correction. Churning accounts is how the brokerages make the money. You never go broke taking a profit. Its in the brokerages to churn baby churn. Or as Sarah would say drill baby drill.

Where do you get that? July 2015 through Feb 2016 saw not one but two 12% drops. Those were real, and certainly counted as corrections which are defined as at least a 10% drop. So it’s been 2 years, not 9.

 

[donheff]

I wonder how many people bailed on Monday's drop only to jump back in on Tuesday's rise? What to do after yesterday's closing bell plummet?

 

[MichaelB]

Where do you get that? July 2015 through Feb 2016 saw not one but two 12% drops. Those were real, and certainly counted as corrections which are defined as at least a 10% drop. So it’s been 2 years, not 9.

There you go again ruining a good story with those facts and stuff. Facts vs truthiness ..

I wonder how many people bailed on Monday's drop only to jump back in on Tuesday's rise? What to do after yesterday's closing bell plummet?

+1
Why does something need to be done? Why not sit on the sideline, watch the scrum, and avoid being trampled?

 

[donheff]

Why does something need to be done? Why not sit on the sideline, watch the scrum, and avoid being trampled?

That is what I was espousing, albeit in code. I would have added sarcasm quotes if there were such a thing.

 

[MichaelB]

That is what I was espousing, albeit in code. I would have added sarcasm quotes if there were such a thing.

Sorry, I missed the intent. Probably need more coffee. A minor edit to acknowledge my agreement.

One thing I haven't seen reported are "flash crash" type situations where some ETFs fall more than the value of their underlying basket of equities. I was looking for some the other day - no luck. I guess that is a sign that this is no real panic in the markets.

 

[redduck]

I wonder how many people bailed on Monday's drop only to jump back in on Tuesday's rise?

23

 

[NW-Bound]

Any poster here that we know of?

Sorry, I missed the intent. Probably need more coffee. A minor edit to acknowledge my agreement.

One thing I haven't seen reported are "flash crash" type situations where some ETFs fall more than the value of their underlying basket of equities. I was looking for some the other day - no luck. I guess that is a sign that this is no real panic in the markets.

I did not know about that inverse VIX until recently. Could I call its implosion a flash? It was gone in one. XIV went from 150 to 99, then the trading stopped. When it reopened, it was down to a few bucks, and stayed down.

How could anyone bet that volatility would be low after the big stock run-up we had in the last few years?

 

[MRG]

Any poster here that we know of?



I did not know about that inverse VIX until recently. Could I call its implosion a flash? It was gone in one. XIV went from 150 to 99, then the trading stopped. When it reopened, it was down to a few bucks, and stayed down.

How could anyone bet that volatility would be low after the big stock run-up we had in the last few years?

Years ago I came across a father/son investment team. Dad had some money and the kid was a recent RIFF from IT. WCGW? They wrote code to predict and buy VIX options.

Daddy ran outa money before junior had debugged his code.

There's a sucker born every minute. Some folks work their whole lives to perfect it!

 

[RobLJ]

Supposedly XIV was a favorite of many of the hedge funds and was a trade that worked fabulously. . . . until it didn't. In their "defense" there wasn't much hint of increasingly volatility, but a 100% increase in VIX would also trigger a unfurling of the fund to the value of its derivatives.

Any poster here that we know of?



I did not know about that inverse VIX until recently. Could I call its implosion a flash? It was gone in one. XIV went from 150 to 99, then the trading stopped. When it reopened, it was down to a few bucks, and stayed down.

How could anyone bet that volatility would be low after the big stock run-up we had in the last few years?

 

[NW-Bound]

Supposedly XIV was a favorite of many of the hedge funds and was a trade that worked fabulously. . . . until it didn't. In their "defense" there wasn't much hint of increasingly volatility, but a 100% increase in VIX would also trigger a unfurling of the fund to the value of its derivatives.

Even if the fund goes to zero, how does your portfolio go to zero unless you are 100% in it? I read that some individual investors had a lot in the fund, and they were wiped out.

A single-position portfolio based on that XIV? That's what they get for playing Russian roulette, and with 3 cylinders loaded at that.

 

[RobLJ]

I'm not sure how an individual investor could convince themselves that a single position in a double leveraged ETN or even a nonleveraged ETN was a good idea.

Now, using the credit card to buy bitcoin is different. . . . . .

 

[HadEnuff]

I'm not sure how an individual investor could convince themselves that a single position in a double leveraged ETN or even a nonleveraged ETN was a good idea.

Now, using the credit card to buy bitcoin is different. . . . . .

well, i just figured that if it was so sophisticated that I couldn't understand it, it just had to be a good investment.

 

[haha]

Any poster here that we know of?



I did not know about that inverse VIX until recently. Could I call its implosion a flash?

Hey, on ER.org you can call anything whatever you want. What counts is that we are all good people, not that our words slavishly adhere top some old fogy meaning.

 

[haha]

Even if the fund goes to zero, how does your portfolio go to zero unless you are 100% in it? I read that some individual investors had a lot in the fund, and they were wiped out.

Margin!

 

[NW-Bound]

Margin!

Yes, indeed! I forgot.

Imagine doing margin on something as scary as that! Now, they are playing Russian roulette with 5 rounds loaded. Aye, aye, aye.

This just gets me thinking. If the recent bull market drives people to take such risk because it seems so easy to make money, and with bitcoins and stuff, even the more traditional stuff that you and I hold is also overbought by less audacious investors. Aye, aye, aye...

My stance is going to be a lot more defensive now.

 

[MRG]

Yes, indeed! I forgot.

Imagine doing margin on something as scary as that! Now, they are playing Russian roulette with 5 rounds loaded. Aye, aye, aye.

Five rounds in a "J frame" revolver or a semi-auto? I guess the end result is the same.

 

[NW-Bound]

Yes. In the long run, even with one loaded bullet the odds will catch up with them. I was thinking of taking the chance just once, which is not the case with these guys.

About winning big with just taking one shot, I was describing how my brother-in-law took a gamble with McDonnellDouglas stock in the early 90s and got lucky. He did not push his luck and it worked out OK for him.

My neighbor across the street took a gamble with Intel stock in the late 90s. He bought 100K's worth of options at the right time, multiplied it by a factor of 10, then took early retirement at a young age. He moved to a fancy neighborhood shortly after. He told me he invested more conservatively after that. He was still doing OK last I heard.

I have always been too chicken to do anything like the above.

PS. Forgot I did something similar. I quit my cushy megacorp job to help found a startup. Crashed and burnt after 3 years. I would be doing a lot better staying at megacorp. Bored like heck, but would be richer with pension and fat 401k.

PPS. I was taking a chance with Russian roulette too, and definitely with more than 1 round loaded. However, I made sure the rounds were blank. Still suffered a hell of a concussion, and had bad wound on the temple, and blown out ear drum.

 

[Amethyst]

Day-trading...on margin!

Margin!

 

[Nightcap]

"What! what! men, dodging this way for single bullets! What will you do when they open fire along the whole line? I am ashamed of you. They couldn't hit an elephant at this dist---."

-- Last words of Major General John Sedgwick, Battle of Spotsylvania, 1864

 

[Andre1969]

Where do you get that? July 2015 through Feb 2016 saw not one but two 12% drops. Those were real, and certainly counted as corrections which are defined as at least a 10% drop. So it’s been 2 years, not 9.

I can still remember a drop back in 2011, where I lost about 15% in less than a month (July-August timeframe). At the time, I was a bit scared because the Great Recession was so fresh in my mind, and I was thinking crap, here we go again. I think by January or February, of 2012, I had recovered my losses.

For some reason, I want to say there was a correction in late 2014, but it happened so quickly it was forgotten? Or, if you only look at month-end data, it doesn't show up because it bottomed in the middle of a month? I was in Aruba for two weeks in late November that year, and I tried not to pay too much attention to the stock market while I was away.

 

[Breedlove]

Do you wonder , we went several years where the regional banks were flush with cash and more cash . We heard about how hard it was to get a business loan . You wonder if the banks could have been slowly investing in the market like a few years ago on derivitives Then the banks could invest on the VIX . Then boom the fed raises interest , still low but banks sell off and now they have money to loan at a higher rate. All over the world .

 

[NW-Bound]

"What! what! men, dodging this way for single bullets! What will you do when they open fire along the whole line? I am ashamed of you. They couldn't hit an elephant at this dist---."

-- Last words of Major General John Sedgwick, Battle of Spotsylvania, 1864

Oh man!

In 2008, when we were collectively licking our wounds, and watched in amazement when the Dow dropped and gained 900 points in a day but generally headed lower and lower, and people were talking about the Great Depression, the saying "there are no atheists in foxholes" was so apt.

People generally have short memory, but I remember those scary times. We survived and prospered too, looking back. Well, most of us that is.

 

[adrift]

Even if the fund goes to zero, how does your portfolio go to zero unless you are 100% in it? I read that some individual investors had a lot in the fund, and they were wiped out.

A single-position portfolio based on that XIV? That's what they get for playing Russian roulette, and with 3 cylinders loaded at that.

It was designed to blow up. If you made it past page 196 of the prospectus, you got to this:

The Credit Suisse XIV prospectus says on page 197: "The long term expected value of your ETNs is zero. If you hold your ETNs as a long-term investment, it is likely you will lose all or a substantial portion of your investment."

 

[NW-Bound]

The truth is people do not read the prospectus when they invest. I will admit that I used to, but then stopped some time ago.

But then, I stay with simpler stuff. And I stay diversified. I lost a lot of money in past recessions like everybody. But I did not get wiped out.

 

[kcowan]

Brokerages make a good bit of money on churn, this is true. But it's not anything they have to work that hard at. It's built into the system. Investor psychology. They just keep up a steady flow of 'news' articles aimed at their clients. That's all it takes. Otherwise, how did they make any money over the last 9 years?

One of the biggest lies that brokers use is "profit-taking". Maybe it worked last week but it has not worked since 2007/8. It is a pseudonym for churn!