elusive 5% drop

[Montecfo]

Looks like we will be off pretty sharply here at the open.

 

[target2019]

There is a sale going on - international VXUS. Call it a price roll back of 2.5%.

 

[38Chevy454]

Looks like we will be off pretty sharply here at the open.

Down 1.5-2% across the various market indexes about 1 hour in. Not doing anything myself, just watching with a little interest. Mainly my engineering background and wanting to figure out the reasons behind the market moves, which goes for both directions. But today looks like a down day for sure.

 

[PageTwo]

Agreed - nice 2% drop in the Nasdaq to jump in on some broad tech index or somethin'. What are you guys buying?

 

[NW-Bound]

My stock AA is still too high at 78%. I am not buying anything, until the drop is deeper and I cannot resist. Something like more than 10% drop.

 

[Dtail]

Looking like it.

Perhaps need a little shakeout to the tune of 5 to 10%.

 

[OldShooter]

... The market goes down, then up, then down, then up again. Over the medium and long term, the market goes up. Who cares if it drops 5%?

Exactly. There has never been a drop that has not been followed by a recovery.

Here is a chart I show the students in my Adult-Ed investment class:

​

To be fair, the semilog scale somewhat masks the effects of drops, but even at a drop, we are far ahead of where we'd be if we held only bonds.

Here is another chart, a hypothetical I show when we talk about market action for long-term investors:

​

 

[MRG]

Agreed - nice 2% drop in the Nasdaq to jump in on some broad tech index or somethin'. What are you guys buying?

Selling puts.

 

[NW-Bound]

Down 1.5-2% across the various market indexes about 1 hour in. Not doing anything myself, just watching with a little interest. Mainly my engineering background and wanting to figure out the reasons behind the market moves, which goes for both directions. But today looks like a down day for sure.

I think it is the contagion from the collapse of Chinese real estate developer Evergrande. There was a lot of media coverage on this last week. It's the Chinese version of the US subprime fiasco in 2007-2009, but it's nothing of the same magnitude.

What happens is that Evergrande sold a lot of condos to the Chinese populace, who buy real estate as an investment, in contrast with buying stocks. I understand that the Chinese can only buy their domestic stocks, and are not allowed to buy foreign stocks. Lots of money, and no place to put it other than to housing. A sure formula for a real estate bubble.

Evergrande is facing default on the interest due. I don't think foreign investors hold much of its bonds, so this panic is an overreaction. Perhaps I am wrong.

Still, the market bull run has been overextended, and when someone says "Boo", people jump.

 

[GravitySucks]

I didn't get around to rebalancing as I told myself to do the last 3 weeks and now it looks like it took care of itself.
Not buying as im still about above my AA in stocks.

 

[NW-Bound]

Selling puts.

Too early yet, I think. And I have to count my existing puts first. Stock AA still too high, as I mentioned.


About Evergrande collapse, the news showed Chinese people crowding outside the company offices, wanting their money back. One elderly Chinese woman said she sold both of her condos to buy a nice new one, which may never get built. She threatened to jump off a building. A lot of panicky people.

People were waiting to see if Xi Jinping, the PRC chairman, is going to bail out Evergrande.

Here's one of the several videos one can find on YouTube.

 

[NW-Bound]

OK, just counted the puts I already sold last week. The liability on them is 3.5% of my portfolio.

I am not going to sell any more puts, unless the market crashes so hard people are crying "Uncle", and banging their head against their pillow, and threatening to jump off their front porch.

 

[Steeler75]

Now down 2.6 %.

Starting to get interesting….

 

[aja8888]

Only $300 Billion US in default....heck Xi can cover that with spare change. But he won't bail out the foreign holders. That will be done by the "J Team" and other Central Banks!

Plus, the properties in default (when that happens) will be sold to recoup the losses.

 

[Dtail]

Now down 2.6 %.

Starting to get interesting….

Yup, the 5% drop is not elusive anymore. Over 400 days since the last one.

 

[target2019]

They clapped at the closing bell. It's all good!

 

[Car-Guy]

There was a lot of money to be made today.... Great day for a swing trader but it didn't materialize until the last 15 mins.... What a ride...

 

[target2019]

In an after the bell show a commentator said, "I don't know exactly what we're looking at here, but..."
And then he went on and on. Lol!

 

[ER2B]

I have CDs maturing next week. Yay

 

[NW-Bound]

Only $300 Billion US in default....heck Xi can cover that with spare change. But he won't bail out the foreign holders. That will be done by the "J Team" and other Central Banks!

Plus, the properties in default (when that happens) will be sold to recoup the losses.

I heard that only $30B, or 10% of the loan, is owned by foreign investors. And then, there are creditors other than US banks.

But is this just the tip of the iceberg? Evergrande is only the 2nd-ranked Chinese real-estate developer. As Buffett famously said during the US subprime crisis, "only when the tide is out that we know who has been swimming nekkid".

About selling unfinished properties to raise money, China already has a huge stockpile of finished and unfinished properties, actually entire ghost cities, sitting there rotting away for years with no takers. Who wants these recent skeletons of high-rise buildings?

This will crimp China economic growth. They will need less steel, copper, etc... A US steel maker that I hold was pummeled down nearly 10% today. Not that it exports to China, but the steel price gets hammered, and whole industries become collateral damages. Will the Chinese consumers be buying EVs soon? The pain is going to spread.

Aye, aye, aye... Buy, buy, buy?

 

[NW-Bound]

By the way, the interest not getting paid by Evergrande is on an 8.25% bond.

Even banks could not help chasing yield. Heh heh heh...

 

[street]

I heard that only $30B, or 10% of the loan, is owned by foreign investors. And then, there are creditors other than US banks.

But is this just the tip of the iceberg? Evergrande is only the 2nd-ranked Chinese real-estate developer. As Buffett famously said during the US subprime crisis, "only when the tide is out that we know who has been swimming nekkid".

About selling unfinished properties to raise money, China already has a huge stockpile of finished and unfinished properties, actually entire ghost cities, sitting there rotting away for years with no takers. Who wants these recent skeletons of high-rise buildings?

This will crimp China economic growth. They will need less steel, copper, etc... A US steel maker that I hold was pummeled down nearly 10% today. Not that it exports to China, but the steel price gets hammered, and whole industries become collateral damages. Will the Chinese consumers be buying EVs soon? The pain is going to spread.

Aye, aye, aye... Buy, buy, buy?

I been selling scrap steel for 200$ a ton. You telling me those days are ovah?

 

[MuirWannabe]

Classic problem with me. Like others, I’m holding a good chunk of cash waiting for a drop to invest it. Then a drop (mild so far) comes, and I sit wondering if it’ll go a lot further. So, I wait rather than deploying some of that cash into equities. Tomorrow it will probably rocket back up and I’ve missed my opportunity. Market timing is so easy. So rewarding. So annoying.

 

[NW-Bound]

I been selling scrap steel for 200$ a ton. You telling me those days are ovah?

You should sell what you still have left quick. Strike that iron while it's still hot.

 

[street]

I might have to get a load tomorrow. lol I'll call to see what the price is at.