Down Day in the Market !

[W2R]

True, but at the time that thread was posted the market had been declining for more than a year. Might be interesting to check on this thread a year from now and see how things look.

I completely agree - - it's a bit early to be asking about capitulation. If someone is going to capitulate after a bad week, well gosh. Things could be a lot worse, and have been.

 

[Running_Man]

I just saw a segment on CNBC they went outside and asked random people on the street what they thought, not differnt passerbys said
1) It always goes up in the long term so I am not worried
2) It was a bubble everyone knows the stock market was in a bubble so it will go down but it will come back it always does.
3) you must think of the long term it’s what Warren Buffet always says
4) the majority of people don’t think long term, I do and will not sell

The level of complacency is so high this is going to be a bad downfall, I change my forecast to at least a 50% decline based on the antedotical evidence I see

 

[NW-Bound]

Sept 2017 for me too. I guess we must all have the standard issue early-retirement.org portfolio

No, I do not think so. I own mostly individual stocks. I am not an indexer, nor have much Wellington or Wellesley (about 2 % total).

Although I have some concentrations in a few sectors (semiconductor, EM, material, biotech, industrial, etc...), I am reasonably diversified. The sell-off has been broad across the entire market. So no matter what one owns, there is equal opportunity for pain.

If you own just one stock, then everything is possible. For example, Tesla is down nearly 9% today. Twitter is up 12% today. I own neither.

 

[copyright1997reloaded]

I thought I would post to a great post (from 2011) from Boggleheads. The poster does a much better job than I ever would in terms of market downturns, risk, and the personal evaluation of how one deals with uncertainty: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&newpost=3771802

 

[NW-Bound]

That word always brings to mind this thread, from 11/19/2008:

http://www.early-retirement.org/for...n-or-how-much-more-can-you-stomach-40692.html

Many forum members were frightened. My subjective evaluation of it is that forum members today are considerably calmer today than they were back then.

IIRC the market bottom for that recession was almost four months later on 3/9/2009. So, my conclusion is that IF we are on the verge of the market tanking, we still have quite a long way to go.

The next day after the thread started, on 11/20/2008, the Dow dropped 445 from 7997 to 7552 (-5.6%). From the top of 14,164 on 10/9/2007, that's a loss of 47%.

Yet, true bottom was not found a few months later, at 6547 on 03/09/3009. The total loss was 54%.

Yes, we have nothing like that now after just a few days of decline. But the current economic conditions are not the same as in those days.

 

[NW-Bound]

I thought I would post to a great post (from 2001) from Boggleheads. The poster does a much better job than I ever would in terms of market downturns, risk, and the personal evaluation of how one deals with uncertainty: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&newpost=3771802

You meant 2011. The market and economy were in recovery. People were worrying about a double dip, and we know now it did not happen.

 

[Dash man]

Well, while the market was tanking today I was working on my taxes. At least the government will be paying us a nice refund this year, but not as much as my accounts tanked. But staying the course and not panicking. Enough cash to last awhile without any forced sales...I hope long enough.

 

[copyright1997reloaded]

You meant 2011. The market and economy were in recovery. People were worrying about a double dip, and we know now it did not happen.

Yes, fixed it. Thank you. The strange thing is I caught it before I did the first submission, but must have undid the correction somehow (control z anyone ) before I did the submission.

 

[FIREmenow]

Well, while the market was tanking today I was working on my taxes. At least the government will be paying us a nice refund this year, but not as much as my accounts tanked. But staying the course and not panicking. Enough cash to last awhile without any forced sales...I hope long enough.

You mean the government is returning (some of) YOUR money to YOU.

 

[street]

I would like to see how many Honda Accords I could of bought with what I lost so far but my numbers aren't all in yet. I don't expect everything tonight yet.

On an earlier post I did on this thread, I meant to say February 1st, 2018 was the date I went from. I believe I said Jan. 2018 for the high but I meant February 1st, 2018. I'm not sure Feb. 1st was actually the high for this year so far but that was the date I compared my losses from to the present time.

 

[Dash man]

You mean the government is returning (some of) YOUR money to YOU.

Yes! It’s an amazing feeling I haven’t experienced in years! Of course, with Grandtwins due in July, it won’t last long.

 

[limeyx]

Sept 2017 for me too. I guess we must all have the standard issue early-retirement.org portfolio

I'm still on December 11
Odd that I'm not doing worse than everyone else (which is usually the case where investing is concerned)

 

[Another Reader]

I'm guessing some real estate deals that were predicated on selling at the January highs are going to fall apart now. Also, some wallets will snap shut. People are feeling less wealthy and fewer new deals will be struck. Ten percent is sobering to a lot of people, especially those that are not on this forum.

 

[NW-Bound]

It is hard to read capitulation when you go 9 years without a 20% decline. We are just at 10%, the speed at which we reached this from a point of a year long plus straight up move indicates a strong likelihood most buying has dried up, so this is very likely to be at least a 30% move down before it is over.

Corporations have been buying 500 billion + in the S&P 500 for the past several years, a significant contributor to market demand increasing the market cap of the S&P 500 from the 13 trillion top in 2007 to the 20 trillion top in 2018 outperforming the GDP growth by 18% with the growth in US GDP from 14 to 19 trillion.

A 12% drop gets the S&P 500 back to the same relative value to US GDP as existed at the top of 2007 and world growth has been slower than US growth over that time frame. An additional 10-20% decline on top of the 12% to get to 2007 would not be that large of a move considering the one way nature we arrived here.

I just saw a segment on CNBC they went outside and asked random people on the street what they thought, not differnt passerbys said
1) It always goes up in the long term so I am not worried
2) It was a bubble everyone knows the stock market was in a bubble so it will go down but it will come back it always does.
3) you must think of the long term it’s what Warren Buffet always says
4) the majority of people don’t think long term, I do and will not sell

The level of complacency is so high this is going to be a bad downfall, I change my forecast to at least a 50% decline based on the antedotical evidence I see

In the near term, specifically in 2018, things look good all around the world. Europe and Asia are doing well. Here in the US, we know that unemployment is low and consumer sentiment is quite favorable. North Korea is changing its tune and appears less hostile.

Longer term, in 2 to 5 years, who knows, so I could not venture a guess.

The market is overvalued, and everyone knows it. Shiller has been ringing his alarm bell for a few years now, and people got tired of it. Maybe they are awakening to it now. Bogle said market return should have been lower, and he was laughed at.

What I am getting at is that it is more likely that the P/E contraction that the pundits talk about will finally happen, particularly with the return of higher interest rate and inflation. There is no reason for the market to crash, but plenty for it to be re-valued.

In the days ahead, if I buy more shares, it will be for short-term gain, meaning selling quickly when possible for smaller profits. When I write covered call options, it will be for strike prices closer to the current value. No more expectations for outsize gain. Hello 5% market gain per year.

 

[USGrant1962]

It is hard to read capitulation when you go 9 years without a 20% decline. We are just at 10%, the speed at which we reached this from a point of a year long plus straight up move indicates a strong likelihood most buying has dried up, so this is very likely to be at least a 30% move down before it is over.

Corporations have been buying 500 billion + in the S&P 500 for the past several years, a significant contributor to market demand increasing the market cap of the S&P 500 from the 13 trillion top in 2007 to the 20 trillion top in 2018 outperforming the GDP growth by 18% with the growth in US GDP from 14 to 19 trillion.

A 12% drop gets the S&P 500 back to the same relative value to US GDP as existed at the top of 2007 and world growth has been slower than US growth over that time frame. An additional 10-20% decline on top of the 12% to get to 2007 would not be that large of a move considering the one way nature we arrived here.

All true, but to add to your comment about corporations buying - what does everyone think corporations will do with both repatriated cash and retained cash from the corporate tax rate cut? Some will go to employees, some to stockholders, and a lot [two words] of it will go to share buy-backs. So while the retail investor may capitulate, the wholesale rebuyers of their own equities are about to show up.

 

[ejman]

No, I do not think so. I own mostly individual stocks. I am not an indexer, nor have much Wellington or Wellesley (about 2 % total).

Although I have some concentrations in a few sectors (semiconductor, EM, material, biotech, industrial, etc...), I am reasonably diversified. The sell-off has been broad across the entire market. So no matter what one owns, there is equal opportunity for pain.

If you own just one stock, then everything is possible. For example, Tesla is down nearly 9% today. Twitter is up 12% today. I own neither.

Ah, but maybe, if you are in fact reasonably well diversified you have in fact created an index clone?

 

[Moemg]

I thought I would post to a great post (from 2011) from Boggleheads. The poster does a much better job than I ever would in terms of market downturns, risk, and the personal evaluation of how one deals with uncertainty: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&newpost=3771802

That is an excellent post and something we all should be thinking about .

 

[NW-Bound]

I would like to see how many Honda Accords I could of bought with what I lost so far but my numbers aren't all in yet. I don't expect everything tonight yet.

On an earlier post I did on this thread, I meant to say February 1st, 2018 was the date I went from. I believe I said Jan. 2018 for the high but I meant February 1st, 2018. I'm not sure Feb. 1st was actually the high for this year so far but that was the date I compared my losses from to the present time.

All three market indices, Dow, S&P, and Nasdaq topped out on Jan 26, 2017. The same with my own stash.

By Feb 1st, the market was already down nearly 2% (a mid-range Audi gone for me already).

I keep a diary of the market and the value of my investable accounts going back to Dec 13, 1999. That was the day I decided to keep a closer watch on my money, though I am not a day trader.

 

[Dash man]

Don’t worry, be happy. Those who are well diversified and LBYM will be fine. Those who panic will lose.

 

[Dash man]

All three market indices, Dow, S&P, and Nasdaq topped out on Jan 26, 2017. The same with my own stash.

By Feb 1st, the market was already down nearly 2% (a mid-range Audi gone for me already).

I keep a diary of the market and the value of my investable accounts going back to Dec 13, 1999. That was the day I decided to keep a closer watch on my money, though I am not a day trader.

Sounds like OCD.

 

[NW-Bound]

Ah, but maybe, if you are in fact reasonably well diversified you have in fact created an index clone?

No, my stash does not go up and down the same percentage as the S&P. Of course I hope that long-term I do better (why else pick stock?). In reality, I may trail the S&P for a year or so, then beat it the next year. For example, in 2017, my return was 20.2% despite being 70% in stock and 25% cash. That was a good year.

Day to day, if the market goes up, I am usually up. If it is down, I am usually down. Because I hold many stocks, the diversion from the S&P happens in the longer term, not in the short term.

 

[Moemg]

I think this will shake out a lot of the retire on a shoe stringers from Mr.money mustache .

 

[NW-Bound]

Sounds like OCD.

I do not care what people call it.

Up until that point, I was so engrossed in my work I neglected my investments. One day, I sat down and went though years of MF and 401k statements, still unopened. I swore never again would I not know how much money I had, or what my investments were doing.

Once the diary becomes a habit, entering a few numbers into it everyday is no different than teeth brushing. I just do it.

 

[NW-Bound]

Another reason for keeping a diary is so that I can look back at my own reaction and my own investing decision and the market history.

I learn from my own experience. I do not need people to point out to me what the past was. I lived through it. I just need something to refresh my memory.

 

[Running_Man]

In the near term, specifically in 2018, things look good all around the world. Europe and Asia are doing well. Here in the US, we know that unemployment is low and consumer sentiment is quite favorable. North Korea is changing its tune and appears less hostile.

Longer term, in 2 to 5 years, who knows, so I could not venture a guess.

The market is overvalued, and everyone knows it. Shiller has been ringing his alarm bell for a few years now, and people got tired of it. Maybe they are awakening to it now. Bogle said market return should have been lower, and he was laughed at.

What I am getting at is that it is more likely that the P/E contraction that the pundits talk about will finally happen, particularly with the return of higher interest rate and inflation. There is no reason for the market to crash, but plenty for it to be re-valued.

In the days ahead, if I buy more shares, it will be for short-term gain, meaning selling quickly when possible for smaller profits. When I write covered call options, it will be for strike prices closer to the current value. No more expectations for outsize gain. Hello 5% market gain per year.

The highest consumer confidence in last 35 years occurred in January 2000 @114, the lowest was in August 2011 @ 55. Major tops occur when everyone has money, it is the destruction from market declines that lead economic declines. I am not selling but I do keep my eyes open to risks and there are large risks from stock market complacency and if EVERYONE knew stocks were overvalued and still invested then everyone is obviously not investing based on any value. Therefore there is no fear right now because the thought of what the add on can do is assumed to be none and I can tell from this forum and other people I talk to this is absolutely the same. But there is a great deal of incredulous talk due to the violent nature of this decline. The decline itself takes perfectly functioning companies, even if they are in mild trouble and turns them worthless.


For all the joy of Tesla, if they are unable to borrow if money becomes scarce, how do they stay in business? In a downturn they stay alive if BRK decides to take over the business for cash…. maybe. Another - GE has used 50 Billion dollars buying their own stock back from 2015-2018, they now have cash flow from operations having dropped to 5 billion from former 12 billion dollar levels and 16 billion in pension shortfall at the market high and 67% stocks as their pension funding fell GE raised greatly the stock allocation in an attempt to chatch up as investments in the pension and 12 billion in medical premium money shortfall. GE employs 131,000 in 2007, they have NOTHING to show for the stock buyback but increased debt, they will be unable to move forward if the market declines 30% - the impact on the collapsed pension fund alone is crushing.

Any stock market fall of 30% will bankrupt GE from outstanding liabilities from a practical point as they ignored reality and the effects fall to their pension plan participants, anyone needing medical care they guaranteed and their employees. This is merely one company, that was assumed to be the model for all companies not that long ago and it is going to zero with a large market decline. 600,000 people have a claim on GE’s pension plan. By the time the reality of this hits the general population is going to become very ticked off. At that point buying stocks will probably be a good idea.

Against these negative backdrops you have the tax cut which will bring money back to corporations but also greatly increase the federal debt and require fundings, until I had a look at how the reactions are going to this market decline I was of the mind that this was a positive for the stock market but the stock market has shown I was wrong about that.