Down Day in the Market !

[RAE]

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

I guessed a 30% decline earlier in the poll, but you could be right. Tomorrow (fri) will be quite interesting, I think. If it's another down day, then I think monday could see a really big decline, as a lot of people find out how bad things are over the weekend, and scramble to get out on monday.

 

[USGrant1962]

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.

That's a bit of a myth. The tax law will increase the federal debt from ~20.5T to ~23T per CBO, but that is only a 7.3% increase over 10 years, or 0.73%/year. Hardly enough to effect the macroeconomic climate.

 

[NW-Bound]

Yes, there are competing factors. What will win out?

We will see a bit clearer, once this market craziness stops. Right now, the collapse of the inverse VIX is blamed for the turmoil, but it is not really that big compared to the entire market. The crowd was spooked. And perhaps they were complacent and deserved to be.

I may sit on my cash a bit longer, and not throw it in the market. In the past, I was always conservative with my cash, and later wished I had been more aggressive. This time may be another repeat.

 

[Running_Man]

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.

Corporations are already buying at record rates, as they borrow to support their stock options. It is the debt and rising interest rates which will sink corporations as time goes by. In 2009 when prices were very low, corporations had little money to buy their stock and instead were selling for the most part. In 2016 they used 66% of their earnings to buy back their stock at record prices.

https://www.cnbc.com/2018/02/07/companies-have-doubled-purchases-of-their-own-stock-since-trump-signed-tax-bill.html

 

[NW-Bound]

Regarding the market movement, capitulation is not the right word in this case. However, as mentioned earlier I saw that every company was down today. It's wholesale selling, including companies not in debt and in fact have loads of cash like Berkshire.

The day before, it was said that the mother of all ETFs, the S&P 500 SPDR, had huge outflow. People, stock pickers as well as indexers, are throwing in the towel indiscriminately. Hopefully, that means the end is near.

Of course, tomorrow is another day. I say that this is definitely more interesting than the Superbowl.

 

[mamadogmamacat]

In normal times, I only visit thestreet.com as a free resource for financial reports. Just now, I checked to see what Cramer's thoughts are regarding the cause of this volatility. He put it all (except for a bit of hedging that if it is really about interest rate fears, in which case who the heck knows how low it may go) on the in his word "idiotic traders" of volatility instruments, of which he says there are about 17 (instruments that is). So we really will have to wait for those to liquidate for this to end. it sounded like a matter of weeks, possibly even days for that to happen. For what it's worth, i found it interesting, as i had no idea traders were betting on volatility until recently.

 

[gayl]

Trying to figure out an entry point

 

[NW-Bound]

Had a heavier lunch than normal. Fell asleep. Woke up and saw market just close with the Dow down -1033 points. Felt like back in 2008.

I wanted to see some excitement. This is a bit too much. More fun like this tomorrow?

Bye bye an Audi S6 today.

PS. Quicken stock quotes run 20 minutes behind. Make it an S7.

Who else blowing dough?

Darn! Just now checked with the MF results in addition to my stocks (I have a lot more stocks than MFs).

Argh! Much more than an S7 now.

This is more "fun" than I asked for.

Now down a Porcshe and a Lamborghini with all 4 wheels. I didn't need them anyways, as there is no where close around here to drive any of them.

From the top or just today?

I looked for a car as a benchmark for the loss from the top. There's the Lamborghini Aventador, and Lamborghini Huracan. My loss is way more than the Huracan, but still less than the Aventador.

Hope things get reversed tomorrow. Not caring anything about cars, I now know too much about car prices already. Argh!

 

[HadEnuff]

I am pretty sure, that measured from the top, I am "down" more than the most expensive car I would ever by, multiplied by some whole number factor I am not interested in figuring out precisely.

However...it is times like this that test our risk aversion level, our AA, and our resolve to not attempt to be market timers.

 

[NW-Bound]

Instead of thinking that you could have bought a fleet of the everyday Japanese car that you drive, it is more fanciful to think of an exotic car you would never dream of buying, even if you were prescient to get out at the exact top, and locked in that cash. I don't salivate to own any of these.

If it were not for the market, I would not have that money anyway. And even if the market takes away even more, I still have a lot more than I did in 2008. It's the way the market works. As they say, if one cannot stand the heat... I complain about the heat, but I like to cook.

 

[NW-Bound]

By the way, here's the Lamborghini Huracan.

And this is the Lamborghini Aventador.

If I see them on the street, I will not remember to recognize them. I just do not care about cars. The pictures are for the benefit of people who do.

 

[gayl]

I had 80k in 2008 plus pension. I still have pension but have 'lost' 150k this month. Who posted "goes up like an escalator, down like an elevator" ?

FWIW: I did return to work for 3 yrs & invest 6k a yr

 

[HadEnuff]

Instead of thinking that you could have bought a fleet of the everyday Japanese car that you drive, it is more fanciful to think of an exotic car you would never dream of buying, even if you were prescient to get out at the exact top, and locked in that cash. I don't salivate to own any of these.

If it were not for the market, I would not have that money anyway. And even if the market takes away even more, I still have a lot more than I did in 2008. It's the way the market works. As they say, if one cannot stand the heat... I complain about the heat, but I like to cook.

my situation (or condition) precisely!

 

[Christine]

I had to check my "car index". And found that I'm down an Alfa Romeo Giulia.

I have a good chunk of cash set aside for buying a home. I wonder how far down we must go before using some of that to buy in and get a partial mortage would pay off? Definately not in a hurry...

 

[gayl]

2017 BMW M760i Xdrive .... but the week's not over.

If the average bear is 30% drop with 22 months to recover then entry point around 2200. Cash still on sideline, not selling anything as I don't hit RMD for 4+ more years

 

[DEC-1982]

I think capitulation will occur when S&P 500 goes down to 1500 or less. Days, weeks and months of grinding lower and lower. We are a very long way from that point right now.

 

[target2019]

Yes, a large drop while I was at the Eagles parade.

My next 401(k) contribution will get pulled Monday, so I'll follow the next few days to see what discount I get on my next paycheck contribution after Feb 10th.

 

[flintnational]

Years ago I read about a successful investor that stated there were only two times he knew where the market was going. I am paraphrasing:

Near a bottom - everyone says the market is awful and will never be great again.

Near a top - everyone says the market is great and it will never be awful again.

We are down a coupe of Porsche's. Or, one with a lot of engine.

P. S. FWIW, the above statement is rather strange for an individual that owns two cars with a total value of about $15K.

 

[marko]

400+ Posts!
Let me just say this:
If I hadn't found this forum 12 years ago I'd be "***** bricks" right now.
I would have sold everything in 2008, just gotten up the nerve to get back in last year and by now I'd be out looking for a job! Or at least ordering a case of Pepto and buying CDs

I've learned so much from you folks and hope that (despite some idiotic posts from time to time on my part) I've helped others here too.

Everyone here --myself included--is rightfully calm during this recent downdraft thanks to what I've learned here.

Just wanted to once again, recognize the "wisdom of the crowd".

 

[Perryinva]

I am down to my portfolio level of Nov 2, 2017. Not too horrible, and listening to you guys, far less..about 4% overall. Ok, it can stop now...

 

[NW-Bound]

2017 BMW M760i Xdrive .... but the week's not over.

If the average bear is 30% drop with 22 months to recover then entry point around 2200. Cash still on sideline, not selling anything as I don't hit RMD for 4+ more years

In 1978, I visited a BMW showroom. The 7-series was about $40K then. I thought when I got out of graduate school, I might get one. And when I started my real job, that first year I made less than $23K. So, of course it was just a pipe dream.

Then, I got married, bought a home, had kids. Instead of fancy cars, I bought new a Chrysler Voyager, the first ever minivan, to haul my first born. My interest in cars waned with responsibility of a family man. It never came back, even in my middle-age crisis.

Just now checked. The price of a 7-series is still about the same ratio to the starting salary of a professional job with a graduate degree.

Here's a photo of the car.

 

[NW-Bound]

Back on the market, I saw that the Shenzhen index is in bear country (20% down).

Yet, it has not been doing well at all compared to the US market. I checked. In 2015, it was at 18,000. It is at 10,000 now. The Chinese New Year is coming soon. They cannot be very happy.

 

[njhowie]

That's a bit of a myth. The tax law will increase the federal debt from ~20.5T to ~23T per CBO, but that is only a 7.3% increase over 10 years, or 0.73%/year. Hardly enough to effect the macroeconomic climate.

However, interest rates are rising at the same time...0.75% in 2017, and forecast another 0.75% in 2018. The debt may "only" go up 0.73%/year (just from the tax law - it will go up more than that with the budget being proposed), but the annual debt service will be going up even more than that.

https://www.cnbc.com/2016/12/19/int...-of-the-federal-govts-biggest-line-items.html

You cannot borrow your way out of this. What happens when an individual decides that his solution to his financial problems is to borrow even more ... as interest rates are rising? Can't pay off or pay down the credit card? No problem, just charge even more and continue making the minimum payment.

 

[Winemaker]

In 1978, I visited a BMW showroom. The 7-series was about $40K then. I thought when I got out of graduate school, I might get one. And when I started my real job, that first year I made less than $23K. So, of course it was just a pipe dream.

Then, I got married, bought a home, had kids. Instead of fancy cars, I bought new a Chrysler Voyager, the first ever minivan, to haul my first born. My interest in cars waned with responsibility of a family man. It never came back, even in my middle-age crisis.

Just now checked. The price of a 7-series is still about the same ratio to the starting salary of a professional job with a graduate degree.

Here's a photo of the car.

In 1983, DW and talked about buying a Mercedes 450SEL once I had $100,000 saved in my investment plan at Megacorp. Never did.

We have 3 vehicles now, and you couldn't get $30,000 for the lot of them. s the millionaires next door, we like driving under the radar.

 

[NW-Bound]

...Kudos to all who rebalanced and super kud's to those who "won the game" and adopted a more conservative AA

Come to think of it, rebalancing is something one does to feel good, but does it make much difference?

Take my case. In mid-January, due to option call assignment, I lowered my stock AA from 75% down to 60%. At this point, the market is down 10% from the top. That 15% in cash saves me 1.5% of loss. Surely, it helps, but it is small compared to the total drop.

Now, I do not say one should get all out. Nobody is that smart to do that right consistently.

So, I will continue to do what I do, but it is more for my psychology than anything. One has to take the bad with the good when investing, and there's no way around it.