A house built on debt cannot stand.
It's time for the FED to give us ALL the deal banks get, which is to borrow at 0% and charge 5% up to 29%. The FED has tried to force all savers into the "market" (casino) and as usual, took even that money. Explain to me again how giving the banks 0% loans helps out those of us on fixed income with definative savings amounts. And all the while the banks crow about how much they are making.
1
A buying opportunity is staring everybody in the face. The stock market, over the long term, has been the best place to invest for maximum returns and it still is. What's the downside from here...another 5% + or -- ? Be selective, do your research and get in and history shows you'll be rewarded for it, not next week or next quarter or maybe not next year but within 2 or 3 or 5 years you'll be kicking yourself for having missed a tremendous buying opportunity. History DOES repeat itself. The market goes up, the market corrects, the market goes up again. Be smart.
1
If you are an investor and not a trader its just another day. If you're a saver who decided to save in the stock market you might have a problem.
I was saying pretty much the same thing when the Dow made its climb from 500 to 1000...way back in the day. I couldn't see that corporate earnings or GDP, or any other measure supported this climb. Or, decades later the climb to 10,000. So really, what is the market? I asked someone why I should be in the market. The response, "Because that's where everyone is."
The real thing to remember is that you are only losing this money on paper! Keep it in there and keep on trucking. That's what I did in 2008 & I'm doing it again in 2015.
I had heard a rule of thumb that stocks appreciate 10% a year and bonds appreciate 5%. I checked my own historical returns, and they were right on that benchmark.
If you have been getting returns of 10% a year for a decade or decades, you can't complain about a 4% decline. It still adds up to big profits in the long term. Much bigger than bond returns, and don't even talk about the next to zero returns on cash. So the article is totally correct.
Another saying is buy low, sell high. People do poorly because they do the opposite, buying when the market soars, and ready to sell all this Monday at a low after one bad week. Unless you are a sophisticated professional investor, you can't guess highs or lows, and the only way is to decide your allocation between stocks, bonds, and cash, and just stick with it. And frankly, I don't think the professional investors do well at guessing highs or lows, either.
If you have been getting returns of 10% a year for a decade or decades, you can't complain about a 4% decline. It still adds up to big profits in the long term. Much bigger than bond returns, and don't even talk about the next to zero returns on cash. So the article is totally correct.
Another saying is buy low, sell high. People do poorly because they do the opposite, buying when the market soars, and ready to sell all this Monday at a low after one bad week. Unless you are a sophisticated professional investor, you can't guess highs or lows, and the only way is to decide your allocation between stocks, bonds, and cash, and just stick with it. And frankly, I don't think the professional investors do well at guessing highs or lows, either.
1
When Ben Bernanke decided to proceed with below zero interest rates, and QE1, QE2 and QE3, he said many times what his purpose was, and that was to drive ALL investments into housing and stocks. By making money market interest rates near zero, it forced all investors into these risky assets. The author of the article acts like everyone had a choice. When you force all the money into one or two assets, a bubble occurs. Duh. This is not a correction, but the slow leak starting of the bubble popping, completely predicted by people who were against the easy money policies from the start.
2
This was not a classic bubble caused by blind overenthusiasm. Given the very low returns on other types of investments, the stock market was the only place to be if you wanted to see your money grow over the past few years. This fundamental is not going to change soon, and lots of money will return to the stock market.
1
Seems to me that one of the last bubbles have popped. We have had in the past 20 years a bubble in: tech stocks, the real estate market, financial derivatives, commodities. The only thing left is sovereign debt.
The past generation has built its entire wealth on financial paper and cyberspace vapor. It is apparent that that is not sustainable. The REAL WEALTH comes from actually producing something, personal savings and being able to live your life offline.
The WWII Generation built an entire country AFTER winning a global war against REAL evil. What can the past generation claim as its great accomplishment?
Time to get back to basics. The game of stupid is over.
The past generation has built its entire wealth on financial paper and cyberspace vapor. It is apparent that that is not sustainable. The REAL WEALTH comes from actually producing something, personal savings and being able to live your life offline.
The WWII Generation built an entire country AFTER winning a global war against REAL evil. What can the past generation claim as its great accomplishment?
Time to get back to basics. The game of stupid is over.
3
"Whether the market goes up, or the market goes down, Duke and Duke always gets the commission".
To all the nervous nellies who think one bad week makes privatization of social security or investing in the stock market is a bad thing, look at the long term averages. Your attitude is like people on the other side of the political spectrum who think a blizzard means there isn't global warming. Get a grip.
2
Next week's sell off could trigger panic selling. Watch the gold.
I guess it's easy to see the 6% drop on a portfolio only invested in some S&P index, but when you extrapolate out certain data
Disney $122 August 4th - $98.87 August 21 (23% drop)
Apple $132 July 20 - $105.76 August 21 (24% drop)
Disney $122 August 4th - $98.87 August 21 (23% drop)
Apple $132 July 20 - $105.76 August 21 (24% drop)
Money in 401k, IRA are long term money-Doesn't matter what the market does in the short term, unless you have to take it out... Great time to buy some blue chip stocks though...
2
In the short run this doesn't look great but the S&P has in the past been great in delivering in the long run. Is this just a low and the S&P will go lower? Whatever it might be a good time to buy in while it is down.
A lot depends on the Fed, as China devalues it's currency will the Fed raise interest rates to prevent deflation? Raising interest rates would very likely also raise stock market indicators like the S&P.
In the end if you are investing like a day trader these probably aren't the best of days. If you are in for the long run and you are somewhat conservative investing things should work out fine.
A lot depends on the Fed, as China devalues it's currency will the Fed raise interest rates to prevent deflation? Raising interest rates would very likely also raise stock market indicators like the S&P.
In the end if you are investing like a day trader these probably aren't the best of days. If you are in for the long run and you are somewhat conservative investing things should work out fine.
You have to love the wall street con game. The financial mafia cry buy, buy, buy to any lemming who will listen. Once the market starts to drop, the hypocrites say it is only a brief correction while they short shares to the lemming clients.
1
The one good thing about the so-called correction: buy now.
1
Okay everybody, repeat after me: "Sell in May and go away." Maybe next year I will actually remember to do that.
Time for the Fed to lower interest rates.
1
THE BUSINESS CYCLE Whatever happened to its being a natural part of the free market? If the marketplace does truly work upon the evolutionary principle of survival of the fittest, then the passing of less successful species of economic endeavors will make way for more successful species to succeed. But to take that position is viewed by many so-called "free marketeers" to forsake their beloved ideology for the fundamentalist belief that virtue will carry the day. No doubt, some of the corporations that lose will have been conducted scrupulously and, will have earned their just rewards in the world to come. But, alas, Wall Street is not the Temple of Capitalism, nor the captains of industry the High Priesthood. Like it or not, the stock market is a secular institution. So, at least where finance is concerned, the separation between church and state is absolute. Except, of course, for those true believers who, with their magical thinking, engage in risky practices, treating the resources of stockholders as their private gambling parlor. But stealing from others is forbidden both in secular and religious law. Bringing us back to the fact that there is nothing sacred about the free market, which is equally free to fail as it is to prosper. That's closer to life in the jungle. But there you have it!
3
Nature is amoral, but what makes humanity special is not only our cognitive ability, but our capacity for refined empathy, sympathy, compassion, and ethical institutions, secular or not.
3
Basic common sense economics tells us that for any system to work well, we need producers and consumers. If only a few consumers have money to spend, prices drop (deflation) and the system crumbles. Billionaires can't possibly consume enough to keep an economy going, and they have a tendency to protect themselves by hoarding cash in off shore accounts or to enrich each other by buying things like fine art and antiques at higher and higher prices. If too many people have too much money, inflation may result as more people chase fewer goods. But right now, the majority of people have less to spend on those things that keep an economy, and therefore a society, functioning and healthy.
5
With taxes at record highs, it's government that has all the money. Government greed is out of control
Understand market dynamics and price fluctuations by analyzing companies' fundamentals is one way of understanding the inherent volatility of stock price fluctuations.
The other way--a better way I think--is to try to understand the dynamics of the market from the market itself through analyzing charts and the markets' technical activity over short and long periods of time: net advancing volume and declining volume traded, new highs and lows, investor sentiment, the flow of money into and out of stock, and volume, among other things.
What should have been evident to anyone looking at market activity in the "technical" way is that the market averages (which comprise some of the more actively traded stocks) began building what is now recognized as a top around September 2014. No one was ready to call this broad, expansive formation a "top" until this week when the averages' prices sliced through the bottom end of that formation, except for those who tracked the technical market information, which very clearly showed fewer and fewer stocks participating in each rally, and investor optimism reaching historic highs until the last couple of weeks.
When "corrections"--a euphemistic way of referring to declines that everyone recognizes--occur, the first thought of the average trader is, when will it end. Just as soon as the first prediction is made, you can be certain that it will be proved wrong, so if you're not short already, find a good seat and settle in for a wild rodeo.
The other way--a better way I think--is to try to understand the dynamics of the market from the market itself through analyzing charts and the markets' technical activity over short and long periods of time: net advancing volume and declining volume traded, new highs and lows, investor sentiment, the flow of money into and out of stock, and volume, among other things.
What should have been evident to anyone looking at market activity in the "technical" way is that the market averages (which comprise some of the more actively traded stocks) began building what is now recognized as a top around September 2014. No one was ready to call this broad, expansive formation a "top" until this week when the averages' prices sliced through the bottom end of that formation, except for those who tracked the technical market information, which very clearly showed fewer and fewer stocks participating in each rally, and investor optimism reaching historic highs until the last couple of weeks.
When "corrections"--a euphemistic way of referring to declines that everyone recognizes--occur, the first thought of the average trader is, when will it end. Just as soon as the first prediction is made, you can be certain that it will be proved wrong, so if you're not short already, find a good seat and settle in for a wild rodeo.
2
I still remember Jeremy Grantham talking to Charlie Rose back in March, 2013.
Grantham made a name for himself by calling the last two bubbles before they burst. He predicted the Japanese equities crisis the '80's, the internet bubble in 2000, and the housing bubble that crashed in 2008.
Now he predicts that the bubble to watch is due to the undervaluation of key resources due to a fundamental lack of sustainability of the global economy given overpopulation and a development model based on American-style materialistic consumerism.
He is concerned about our collective inability to address climate change effectively.
http://www.charlierose.com/watch/60191122
Grantham made a name for himself by calling the last two bubbles before they burst. He predicted the Japanese equities crisis the '80's, the internet bubble in 2000, and the housing bubble that crashed in 2008.
Now he predicts that the bubble to watch is due to the undervaluation of key resources due to a fundamental lack of sustainability of the global economy given overpopulation and a development model based on American-style materialistic consumerism.
He is concerned about our collective inability to address climate change effectively.
http://www.charlierose.com/watch/60191122
3
"It turned out that 1999 was a blockbuster year for United States economic growth and corporate earnings anyway." It may be helpful for the author to point out that this blockbuster year was the last gasp of a profound bubble. And that we later discovered that much of those remarkable 1999 corporate earnings were fraudulent.
Just a few months ago market commentators were describing declining oil prices as "just like a tax cut" and this windfall would propel the economy and the market upward. Now that the market has made a small decline the ex post explanation for this drop is "an oil glut". My head hurts.
Just a few months ago market commentators were describing declining oil prices as "just like a tax cut" and this windfall would propel the economy and the market upward. Now that the market has made a small decline the ex post explanation for this drop is "an oil glut". My head hurts.
8
@ former student
Actually the dot com bust wasn't a very profound bubble. It was largely a Wall Street phenomenon which had little impact on main street and the overall economy recovered exceptionally quickly. Neither were there a lot of fraudulent earnings outside that specific sector and even there it wasn't that big a problem. The fraud problem was the puffing of stocks by analysts like Blodget exacerbated by margin trading and hence over buying of corporations with no earnings and iffy business models. There's still a bit of this around in some sectors (bio tech for example) but it's not a systemic problem as it was then and the Nasdaq is now a much fairer representation of value. 2007/8 was a profound bubble in the real economy not the dot com bust.
And the fall in gas and heating oil prices is real tax cut which HAS contributed to economic improvement. Household debt has climbed again but credit scores (see NYT today) are in good shape and most US data points are positive. And no the explanation for the fall isn't all an oil glut. It's a slowdown in china, with a bit of offstage noise from Greece, which has pulled down not just energy prices but ALL commodity prices and this has an impact on extraction company shares and those economies like Canada or Australia who are heavily dependent on commodities. All this affects wider corporate profitability which is the main driver of stock prices. We're certainly not in a general or specific sector bubble at present.
Actually the dot com bust wasn't a very profound bubble. It was largely a Wall Street phenomenon which had little impact on main street and the overall economy recovered exceptionally quickly. Neither were there a lot of fraudulent earnings outside that specific sector and even there it wasn't that big a problem. The fraud problem was the puffing of stocks by analysts like Blodget exacerbated by margin trading and hence over buying of corporations with no earnings and iffy business models. There's still a bit of this around in some sectors (bio tech for example) but it's not a systemic problem as it was then and the Nasdaq is now a much fairer representation of value. 2007/8 was a profound bubble in the real economy not the dot com bust.
And the fall in gas and heating oil prices is real tax cut which HAS contributed to economic improvement. Household debt has climbed again but credit scores (see NYT today) are in good shape and most US data points are positive. And no the explanation for the fall isn't all an oil glut. It's a slowdown in china, with a bit of offstage noise from Greece, which has pulled down not just energy prices but ALL commodity prices and this has an impact on extraction company shares and those economies like Canada or Australia who are heavily dependent on commodities. All this affects wider corporate profitability which is the main driver of stock prices. We're certainly not in a general or specific sector bubble at present.
7
US fundamentals haven't really altered all that much, if anything they're turning ever more positive. Existing home sales, housing starts and auto sales for example. I'd also say Irwin is wrong about corporate earnings which are the basic driver of stock prices because they've been on tear for the last four years and while showing some signs of fatigue it's by no means universal. Then there's energy prices which are clearly going to remain at a new low level for the forseeable future which is an enormous benefit to middle America as winter approaches. And a lot of this sell off has been driven by miners and energy companies. So what to make of it. Irwin is probably right that removing a bit of the fizz is probably no bad thing but there may be some over shooting because of HFT which accounts for about half of volume on all public and private exchanges and of course HFT loves volatility. There certainly doesn't seem any occasion for panic.
2
This is an impressive piece of analysis by the Upshot. But do you know what would have been more impressive? Publishing it BEFORE the market tanked.
7
All the facts and insights discussed in this article have been known for a long time.
Let's see now, where shall I put my money, instead of my 401(k)? How about a savings account? Well, it just so happens I checked my bank's interest rate this morning. They are paying a whopping 0.25% on savings accounts. I guess that's not a viable alternative, is it. No need to be so gleeful about downturn.
8
I can recall when savings banks paid 5.5% interest. ( I almost cannot believe my memory.)
Quite a remarkable 'recovery' it seems.
Quite a remarkable 'recovery' it seems.
If you are close to retirement, the majority of your 401(k) should be in bonds and such. If you are not close to retirement, there is no reason to fret. Sometimes equities lose value, that's just how it works.
I can recall when savings banks paid 5.5% interest.
( I almost cannot believe my memory.)
Quite a remarkable 'recovery' it seems.
( I almost cannot believe my memory.)
Quite a remarkable 'recovery' it seems.
Are GOP candidates still calling for privatizing social security, putting that money into stocks? They need to be asked about this recommendation.
46
$100 invested in the SP500 in 1928 is with $290,000 today.
Does that answer your question?
Does that answer your question?
$100 invested in the SP500 in 1928 is worth $290,000 today. The democrats need to be asked about that.
Are you seriously suggesting to abandon stocks-the greatest wealth generator in history- because of 2 down days??? Sticks are a far far better investment gat bankrupt Social Security
Are you seriously suggesting to abandon stocks-the greatest wealth generator in history- because of 2 down days??? Sticks are a far far better investment gat bankrupt Social Security
About the same degree of logic as questioning global warming after a particularly cold February morning.
Someone posted that the market peaked right after the end of QE3 and suggests that this nation needs a steady diet of QEs. Not true. The market was at an all time high this summer and QE3 ended in October 2014. Virtually a year passed. I fail to see the correlation.
4
On the way up corrections are opportunities for large profits, however market tops are difficult. The most worrisome thing about this downturn is that it is world wide. If the DAX goes below 10,000 then even Germany will participate. Emerging markets and advanced economies are in trouble. The trend lines that are being broken are often 5/7/10 years long. Arguing we may face great pain. With quantitative easing bring interest rates close to zero, the U.S. may face the grim prospect of depending on Congressional to prime the pump. This could turn into a crisis.
6
Don't panic. We don't know what' s going to happen to the economy, which never progresses in a straight line. If the market goes down continually for the next six months to a year, then panic.
I decided to manage my own finances (retirement funds) here in Canada - Big Mistake!
I've down heavily! As the expression about the lawyer who uses himself goes, but substituting -"a day trader who trades on his own has a fool for a broker".
The "Markets" as I have become to realize in Canada are not such open markets. The banks and brokerage houses trade heavily during the day. They also can sell directly to you if they can match any offer that you place , either by setting a limit or buying in the market.
So many times, my own bank broker is selling directly to me - acting as "the principal" (written as Principal). I used to ask lots of questions queries, but was eventually told by someone next to the president in charge of day trading of my bank "that the advisors were not paid to answer my questions, when I was being charged $ 6.95 per trade). My questions to IIROC and CSA (2 Canadian Regulatory Agencies), and the TSX (one of the major exchanges in Canada) would all be redirected to another agency or replied to that I should speak to my bank.
Basically, if I had simply left my funds alone, the dividends would come quarterly and I would probably have been better off. It's like the question about the clocks - which clock keeps better time - the one that is stopped, or the one that is always 1 minute late.
The answer is the clock that is stopped- it tells the time accurately at 2 times of the day.
Remember the collapse of the Tulip Bulb market in Holland?
I've down heavily! As the expression about the lawyer who uses himself goes, but substituting -"a day trader who trades on his own has a fool for a broker".
The "Markets" as I have become to realize in Canada are not such open markets. The banks and brokerage houses trade heavily during the day. They also can sell directly to you if they can match any offer that you place , either by setting a limit or buying in the market.
So many times, my own bank broker is selling directly to me - acting as "the principal" (written as Principal). I used to ask lots of questions queries, but was eventually told by someone next to the president in charge of day trading of my bank "that the advisors were not paid to answer my questions, when I was being charged $ 6.95 per trade). My questions to IIROC and CSA (2 Canadian Regulatory Agencies), and the TSX (one of the major exchanges in Canada) would all be redirected to another agency or replied to that I should speak to my bank.
Basically, if I had simply left my funds alone, the dividends would come quarterly and I would probably have been better off. It's like the question about the clocks - which clock keeps better time - the one that is stopped, or the one that is always 1 minute late.
The answer is the clock that is stopped- it tells the time accurately at 2 times of the day.
Remember the collapse of the Tulip Bulb market in Holland?
4
Buy index funds.
You talk about Wall Street and other financial "centers" around the world but those days are long gone. The NYSE is on Wall St. but has only about 10% of U.S. trading (it is owned by a company in Atlanta). The biggest U.S. market is the BATS Exchange, which is in Kansas, outside of Kansas City. NASDAQ's data center is in Carteret, N.J. and its traders are everywhere. The NYSE's Arca Exchange is in Chicago.
There is no "center" anymore. The closest thing to a stock trading center the U.S. has, I suppose, is Lenexa, Kansas, home of the BATS Exchange.
There is no "center" anymore. The closest thing to a stock trading center the U.S. has, I suppose, is Lenexa, Kansas, home of the BATS Exchange.
3
@Scott L
Not really. The markets are only the tip of the financial iceberg but even when focused on them you're not seeing the real picture. It's certainly true that there has been a multiplication of exchanges. There are now in the US 11 public exchanges and probably at least 30 private ones run by the major banks and other financial institutions. In many cases the servers for these exchanges are not in Manhattan (most in fact are in NJ I believe) but the money, the trading platforms whether electronic at HFT's or human, and the entire legal and management structure need to run all this remains very much centered on the island. Ditto London and HK the other two major centers.
Not really. The markets are only the tip of the financial iceberg but even when focused on them you're not seeing the real picture. It's certainly true that there has been a multiplication of exchanges. There are now in the US 11 public exchanges and probably at least 30 private ones run by the major banks and other financial institutions. In many cases the servers for these exchanges are not in Manhattan (most in fact are in NJ I believe) but the money, the trading platforms whether electronic at HFT's or human, and the entire legal and management structure need to run all this remains very much centered on the island. Ditto London and HK the other two major centers.
3
Things better change or the country will be, “… demanding the government provide Americans with a new irresponsible and largely illusory economic bubble in which to invest.” It’s time to dust off the 7-14-08 classic piece by the Onion.
http://www.theonion.com/article/recession-plagued-nation-demands-new-bub...
http://www.theonion.com/article/recession-plagued-nation-demands-new-bub...
4
The real value of companies listed on the Dow is only about 3000 to 5000 points.
The rest is froth.
So lots of room for downward corrections.
The rest is froth.
So lots of room for downward corrections.
5
"It's about time"?!!
What a breathtaking glossing over of the destruction of the resources of tens (hundreds?) of millions of us who have no control over this madness and no hope of making gains for our future with simple savings. Get a grip on reality, Mr. Percentage of the One Percent.
What a breathtaking glossing over of the destruction of the resources of tens (hundreds?) of millions of us who have no control over this madness and no hope of making gains for our future with simple savings. Get a grip on reality, Mr. Percentage of the One Percent.
11
He's not wrong or out of touch. You should do a little research on how market economics works. You could just Google the term "market bubble" and you'll understand where he's coming from. Markets go up and they go down. When they keep going up with no retrenchment, that's when you have to worry. It's the same with the housing market or tech investment. In both cases, prices went up to fast, creating a bubble. When there's a bubble, it pops. Like every time.
"remember that if you panic at the thought of losing 4 percent of your money in four days, that money really shouldn’t be invested in the stock market to begin with."
Where do those of us who plan to retire put our money as an alternative, smart guy?
Where do those of us who plan to retire put our money as an alternative, smart guy?
41
If you plan to retire anytime soon a majority in cash or in strong credit bonds.
2
The only alternative is that your Government must encourage small savings in and pay interest of at least 6 % on Government bonds. Further your government should convince Banks and the Post Office to pay interest as in case of India.
We get 8.7 % interest in fixed deposits for senior citizens and somewhat less for others whereas saving accounts roughly fetch 4 % interest. In addition there are other schemes such as recurring deposits in Banks, which also fetch interest higher than that given for saving accounts.
We get 8.7 % interest in fixed deposits for senior citizens and somewhat less for others whereas saving accounts roughly fetch 4 % interest. In addition there are other schemes such as recurring deposits in Banks, which also fetch interest higher than that given for saving accounts.
11
In short, the Indian government has devised a wealth transfer system through the banking industry where senior citizens get regulated higher interest rates than everyone else.
Over here the wealth transfer takes place via social security and Medicare, and in some states. various smaller programs of tax abatement and the like.
Second inflation rate in India is 3.8% according to Wikipedia. So the real interest rate of a senior citizen Indian saver is 3.9%, not bad, but that of the "normal" saver at 0.3%, no different from over here for everybody.
but in India senior citizens will not get virtually free healthcare and government retirement monthly payouts (I am sure there are some programs in India, but their quality and quantity will be deminimus compared to what older Americans enjoy). So it would take a real econometric guy like Irwin to do this comparison too many moving parts. But qualitatively, most people who scan the world know that American seniors have it quite good relatively speaking.
Over here the wealth transfer takes place via social security and Medicare, and in some states. various smaller programs of tax abatement and the like.
Second inflation rate in India is 3.8% according to Wikipedia. So the real interest rate of a senior citizen Indian saver is 3.9%, not bad, but that of the "normal" saver at 0.3%, no different from over here for everybody.
but in India senior citizens will not get virtually free healthcare and government retirement monthly payouts (I am sure there are some programs in India, but their quality and quantity will be deminimus compared to what older Americans enjoy). So it would take a real econometric guy like Irwin to do this comparison too many moving parts. But qualitatively, most people who scan the world know that American seniors have it quite good relatively speaking.
1
Yes, I am so old that I recall the hoopla when the Dow hit 1000. I also remember one earlier evening on the NBC News when David Brinkley--who today remembers him?--reported Wall Street's numbers at the end of the show, solemnly intoning with both amazement and bemusement, "The Dow Jones Industrial average was up 25 points, and trading volume was a record 5 million shares!" Oh for the days when the markets weren't front page news and a 25 point move in the Dow was truly amazing.
14
Stock market reports are prevalent in today's media, compared to the old days, because the performance of most workers' private defined-contribution retirement accounts is dependent on the securities markets. In the old days, many more workers than today had secure defined-benefit retirement plans and thus no concerns at all about the stock market. Investing in the stock market was considered to be a gamble, and it was mainly wealthy people who bought stocks and read the Wall Street Journal.
5
If memory serves, the national "news hour" was a merciful 15 minutes, and its importance was announced by the Scherzo from Beethoven's Symphony Nr. 9. I need a Way Back Machine.
Buy on red, sell on green. Rinse and repeat.
11
"....remember that if you panic at the thought of losing 4 percent of your money in four days, that money really shouldn’t be invested in the stock market to begin with." Since that describes 99.9 % of the people who have retirement accounts in the market I guess we should all be in cash under the mattress accounts?
27
Sadly the people are awakening to the insanity of endless growth. The line of greater fools is shorting. The Wall Street rigged casino is nearing it's end. Where to prepare for retirement. We need Single Payer Medicare for all. We need to change S.S. from what it was in the 30's a method to avoid hunger to a true pension system that has higher worker contributions and a living wage pension. The casino is rigged.
20
And what ever happened to holding those on Wall Street accountable for the Great Recession?
1
I still think the market is manipulated. Still, the little guy can make money riding out, or playing, the market "cycles." We are setting up now for a clasic 4th quarter rally. I hope the Fed raises in September to get that behind.
7
Every day, even miniscule movements in the market are attributed by the media to specific economic causes. Today, when the market moves drastically, we are told that there is no economic cause. This inconsistency is simply absurd. In my opinion, the daily explanations for stock movement are nonsense. As often as not, moves in the market cannot be attributed to economic factors, so that the media's daily explanations are a bunch of baloney.
14
I am more intrigued by the comments than the article. It tells me that a whole lot of people do not have any conception of the market, investments, risk and return. I realize that many people are compelled to contribute to 401k and 403b plans but they do have alternatives. If they have a responsible employer, that employer will have provided education opportunities so they can learn about their alternatives. Nothing has stopped them from converting those investments to annuities once they approach retirement age or investing the assets in other vehicles. I am in the same position as they are and find that there are many ways to limit or eliminate their exposure. It is their own greed that drives the complaints. You don't hear complaints when the market is going up.
6
Mr. Bernstein,
you are aware that annuities have many problems too. One of the most important involves liquidity (i.e., actually receiving a payout from them). This, in turn to a large degree, depends on how their investments in stocks perform. If the stock market decreases by, say 80%, it is very unlikely that the owner of the reciepant of the annuity will receive what he/she has been promised. For this reason, annuities too are a risk.
you are aware that annuities have many problems too. One of the most important involves liquidity (i.e., actually receiving a payout from them). This, in turn to a large degree, depends on how their investments in stocks perform. If the stock market decreases by, say 80%, it is very unlikely that the owner of the reciepant of the annuity will receive what he/she has been promised. For this reason, annuities too are a risk.
18
Everything in life has risk. Yoda, existence is nothing more than an assemblage of probabilities. You make the best informed decisions that you can with the information available.
8
Annuities?? Are you insane? Annuities are for those who want to pay outrageous fees and surrender charges
11
Clearly it is time for massive bonuses and raises throughout corporate board rooms across the world.
38
And everyone else to live by the austerity mantra. Cut pay, benefits, pensions, etc.
9
A 2.7% drop is not "essentially flat." It is essentially down.
15
100% correct. A loss is not flat...it's a loss. Essentially an entire year's worth of growth and investment just evaporated. But hey, let's break out the champaign. The little guys lose ground. The high rollers just keep rollin' along.
10
I'm optimistic that the fear mongers are wrong.
3
Now is a great time to buy stock!
11
Great article, but unfortunate to see a statistics based blog quoting Josh Brown, talking head extraordinaire.
2
The only factors that really govern large market swings are greed and panic. All the rest of what pundits and analysts say is after-the-fact justification. If Mr. Irwin had come up with this analysis BEFORE the market drop, it would have been impressive.
Just watch: if the market recovers next week, the analysts will have reach into their bag of tricks as to why a bounceback was also inevitable ("bargain hunters moving in...").
Just watch: if the market recovers next week, the analysts will have reach into their bag of tricks as to why a bounceback was also inevitable ("bargain hunters moving in...").
18
Greg, clearly, you should be in the financial reporting business. The experienced traders of the world know what you know. And at the moment, they are counting their available cash, licking their chops, and beginning to build sizeable new stock and option positions. That's how it's done. That's how it's always been done.
3
Nothing was learned from the last bubble.
Instability, "massive" liquidity & economic volatility -- this is business as usual. It's good for the professional, wealthy traders; it's bad for families, and retirees. The bipartisan economic ideology in charge, caters to benefit the interests of the former group.
Even Democrats in Washington are now followers of the religion of "trickle-down economics" because of their support of policies that have increased liquidity for investment. This investment isn't being focused on brick and mortar in the US, it's focusing on speculative activities which has created more billionaires on Wall Street. While Democrats aren't loud proponents of tax-cuts on the rich, they don't have a problem with slipping under the table, huge wads of money for gambling on a bull market to the richest of the rich. Who care's about tax cuts when this is a far better giveaway, and profits from speculation are already taxed at low rates.
Instability, "massive" liquidity & economic volatility -- this is business as usual. It's good for the professional, wealthy traders; it's bad for families, and retirees. The bipartisan economic ideology in charge, caters to benefit the interests of the former group.
Even Democrats in Washington are now followers of the religion of "trickle-down economics" because of their support of policies that have increased liquidity for investment. This investment isn't being focused on brick and mortar in the US, it's focusing on speculative activities which has created more billionaires on Wall Street. While Democrats aren't loud proponents of tax-cuts on the rich, they don't have a problem with slipping under the table, huge wads of money for gambling on a bull market to the richest of the rich. Who care's about tax cuts when this is a far better giveaway, and profits from speculation are already taxed at low rates.
7
Reagan's trickle down economics were a complete success in creating the largest economic expansion in history and getti America out of the depression Reagan inherited from Carter. Obama wishes he had 1/1000 of the economic growth Reagan had
4
Interesting, but where's the evidence to back this up? The article implies (but doesn't state explicitly) that a low annual earnings yield relative to 10 year bond yields is correlated with poor market performance, but if you run the numbers there's virtually no correlation at all between earnings yield - 10 year bond yields and annual stock returns. Might be worthwhile to explore that in a future article.
2
I had 50% cash - I am starting to buy - dips are good.
16
dips are good, as long as you buy at the bottom.
2
Funny how most people claim to be 50% in cash when the market turns down.
Funny how many folks announce that they were 50% in cash after a downturn.
Amen......and thank you for speaking plainly and clearly. There's been precious little of that lately. Besides, over time much lower oil prices will exert at least some buoyancy on the global economy. And anyone who really believed all the Chinese numbers must still be working with an abacus.....
4
Ah, there was a tiny improvement in the housing market, (reported yesterday), with home starts up for the first time in seven years. Time to pull the rug out again!
The business that employees the most people by far in the U.S. is housing related business, and it's been almost a decade of flat or no profits. Sure, there are low interest rates, but if you don't have a well paying job no one will give you a loan. Banks have no incentive to loan to regular people because they can borrow from the U.S Treasury at zero, buy bonds at two or three, and make money that way, with no risk at all. Why sell a mortgage?
If you are in construction, furniture, construction supplies, when will it be our turn again? The recession will not end until people are employed vigorously in housing.
The business that employees the most people by far in the U.S. is housing related business, and it's been almost a decade of flat or no profits. Sure, there are low interest rates, but if you don't have a well paying job no one will give you a loan. Banks have no incentive to loan to regular people because they can borrow from the U.S Treasury at zero, buy bonds at two or three, and make money that way, with no risk at all. Why sell a mortgage?
If you are in construction, furniture, construction supplies, when will it be our turn again? The recession will not end until people are employed vigorously in housing.
3
And significant wage growth!
2
"The Upshot" is becoming the best part of the NYT for me. And that's saying something, because the NYT has alot of parts I look forward to reading every day. But when I see a new "Upshot" I immediately go to that.
When the revolution comes, we'll all eat strawberries and cream, and all newspapers will be full of The Upshot.
When the revolution comes, we'll all eat strawberries and cream, and all newspapers will be full of The Upshot.
2
"When the revolution comes..."
Me thinks it has started, a few months back, on the day Bernie Sanders announced his candidacy.
Me thinks it has started, a few months back, on the day Bernie Sanders announced his candidacy.
3
The revolution is here! We productive members of society are sick and tired of supporting the other half. By the way- All Lives Matter!!
1
We all remember Jeb's brother Great Recession which cost this country $10 trillion in assets. We are in the Black now.
7
It was the Democratic Party that passed the laws to allow non-qualified people to get mortgages. That is what busted us.
2
Yes....we all remember the gun point mortgages. Where unqualified home buyers put guns to the heads of mortgage brokers throughout the country. The youtube videos are too numerous to county.
12
Wrong - it was the banks and companies like Countryside. I recall refinancing my home in Florida in 2004. All I wanted was a lower interest rate. I had bought the home in 2000 for $ 150,000.00 and four years later they were telling me they could refinance the same home for $ 300,000.00.
I could take the extra 150K in cash and they said my home would double again in four years, so do worry about the bigger mortgage. I passed, I wouldn't have paid 300K for the home as it was and never in the world would the home be worth twice as much again in four more years.
As it was I was lucky, I refinanced the home for my current balance and sold the home in 2008 in March for 295K and dodged the bullet and laughed my way to the bank.
I could take the extra 150K in cash and they said my home would double again in four years, so do worry about the bigger mortgage. I passed, I wouldn't have paid 300K for the home as it was and never in the world would the home be worth twice as much again in four more years.
As it was I was lucky, I refinanced the home for my current balance and sold the home in 2008 in March for 295K and dodged the bullet and laughed my way to the bank.
2
While it won't be a vertical line, in my view the markets are presaging a global recession that will become apparent next year, and has likely already begun. After half a decade of anemic growth despite unprecedented central bank actions, with most of the benefits flowing to the top, we will experience more of the same until we adopt policies that foster broader participation in economic gains, and that result in more money in the pockets of the people. You cannot concentrate wealth to this extent and expect sustainable prosperity. Most middle class Americans haven't seen their income increase in over a decade - those so fortunate as to have jobs offering a living wage that is. Minimum wage earners cannot drive growth.
24
We'll start by redistributing your wealth. You can start a business and then hand 100% of your profits over to the government
It's pretty alarming to see a drop of 1000+ points over a 7-day period. No amount of "it's time," or "its frothy" can quell fear.
That said, I wonder if all this will make decision makers take a deep breath about other major programs that would best be postponed for awhile. I'm thinking TPP specifically, now that one of the not yet but soon players has been responsible, through currency manipulation, for this jolt to world markets.
I don't know about other posters, but I don't trust China, which is a closed society and conducts its business without transparency. I will never forget that 60 minutes segment last winter (repeated often!) on all the condo developments being thrown up in fake cities all over the country, designed to lure peasant farmers into new urban areas once industrialization hit another milestone. I'd love to know how much of the speculative Chinese development bubble was due to things like those fake cities.
The US has to get its own house in order before it goes making yet more mistakes in trade markets that have rarely, if ever, benefited the American worker.
That said, I wonder if all this will make decision makers take a deep breath about other major programs that would best be postponed for awhile. I'm thinking TPP specifically, now that one of the not yet but soon players has been responsible, through currency manipulation, for this jolt to world markets.
I don't know about other posters, but I don't trust China, which is a closed society and conducts its business without transparency. I will never forget that 60 minutes segment last winter (repeated often!) on all the condo developments being thrown up in fake cities all over the country, designed to lure peasant farmers into new urban areas once industrialization hit another milestone. I'd love to know how much of the speculative Chinese development bubble was due to things like those fake cities.
The US has to get its own house in order before it goes making yet more mistakes in trade markets that have rarely, if ever, benefited the American worker.
12
Everyone does not know what "TPP" means.
1
but there also was massive technical trading as the market fell below certain "support" numbers.
Technical trading is more an "investment" in a ticker than in a company.
For that reason the proposals by Clinton (longer holding periods to be eligible for the lower capital gains rate) and Sanders (transaction tax) would help to protect people who invest long-term in actual companies from the wild market swings caused by speculators and automated trading programs, neither of which benefit the companies or the economy
Technical trading is more an "investment" in a ticker than in a company.
For that reason the proposals by Clinton (longer holding periods to be eligible for the lower capital gains rate) and Sanders (transaction tax) would help to protect people who invest long-term in actual companies from the wild market swings caused by speculators and automated trading programs, neither of which benefit the companies or the economy
21
Every Democrat running is economically illiterate, and the election of any of them is guaranteed to create a global depression
Funny how the economy (and the market) consistently do better under Democratic Presidents than under Republicans.
Good article. Appreciate the thoughtful analysis.
1
Ride it out, if you can. What if you can't, then what? Thank God for socialist security.
3
The world has awakened to the insane belief in endless growth. More import the "greater fools" are shrinking in number.
2
It's easy for the Times to say "it's about time" or "it may not be a such a bad thing" but some of us rely on that money to live on. Why don't you get off your high horse and talk to some real people with real skin in the game.
15
Stock market is just that - a game - nobody forced you to play and you can get out whenever you want.
If you contribute to a 401K plan and aren't pulling the money out for some time, you get more for your money each paycheck when the market is down. That is a good thing.
9
I'm looking forward to the burst of the real estate market bubble in places like NYC, DC and SF to name a few.
6
Long over due.
1
Schadenfreude is a word that easily comes to mind. Even the Swedes have a word for it Skadegladje. Why do I feel this way? The FED and Wall st have been pillaging our bank accounts of earned interest now since 2008. even at its worst, there are still making more per hundred than I am but A LOT. I get about 2.5 cents, along with millions of other savers across the nation.
There may be a loss for some investors but I want to actually see the paper on it. I'm still paying 4$ for a gallon of gas .
There may be a loss for some investors but I want to actually see the paper on it. I'm still paying 4$ for a gallon of gas .
5
Come on now folks it is not hard to realize the ZIRP policy has failed America big time and the FED is now out of ammo and control of the markets. America is in trouble and so is the world. We are headed for a Great Depression again. In 2008 America should have let the economy crash and burn then rebuild it from the ground up again instead we bailed out the bankers which was the biggest mistake in US history.
7
Corrections/sell-offs/profit taking -- whatever they are called are a natural market event. In the long run, stocks offer the best returns. Tough to swallow in the short-run, however.
6
" ...and remember that if you panic at the thought of losing 4 percent of your money in four days, that money really shouldn’t be invested in the stock market to begin with." This statement undermines the reality that many families receive stock as a big part of their actual salary. In my family we wait for our stock pay outs every few months holding our breathes over China and whatever else is going on not because of the second yacht we want to buy, but because we depend on that money to survive in day to day life. What an ignorant statement.
14
"There are two times in a man's life when he should not speculate: when he can't afford it and when he can" - Mark Twain
3
Gee, I've been having bad days since the mid 90's. In fact, the middle and working classes in America have been having bad days since the 80s when Saint Ronald the Reagan gave us trickle down economics, George H. Bush decided that being VP was better than voodoo economics, and greed became the way to pay CEOs, and our politicians decided that getting re-elected mattered more than serving their constituents.
In fact, I think I've been living through an extended depression as I've watched our country's infrastructure crumble, our public places fall apart, and our futures sacrificed so that big businesses could continue to outsource jobs to make more on their bottom line while we couldn't find or keep good jobs, lost money on our 401Ks because of the fraudsters, and realized, along with everyone born after 1955, that our futures are not bright. What's one more stock sell off when you've don't have a pension, you're unable to save, and your salary doesn't keep pace with the increase in the cost of living in the real world?
In fact, I think I've been living through an extended depression as I've watched our country's infrastructure crumble, our public places fall apart, and our futures sacrificed so that big businesses could continue to outsource jobs to make more on their bottom line while we couldn't find or keep good jobs, lost money on our 401Ks because of the fraudsters, and realized, along with everyone born after 1955, that our futures are not bright. What's one more stock sell off when you've don't have a pension, you're unable to save, and your salary doesn't keep pace with the increase in the cost of living in the real world?
22
It's not as good as it could be, but also not as bad as it seems.
1
You are in a fantasy world.
If you are in your 50s, single, and female, it's as bad as it seems. If you've lived through prolonged unemployment, it's as bad as it seems. America and Americans don't have a safety net. The rich have money, the corporations have Congress and Congress has both. We, the citizens, have nothing.
2
As others have noted, China had to slow down. Had to. But its "up until now" growth was a fig leaf over the declining economies of the developed world caused by the politicians' love of austerity. Despite the facts and all historical evidence to the contrary, US and European politicians stared in the face of a global recession caused by deleveraging and inadequate demand and prescribed even more debt reduction and even less spending. Someone buying something is someone else's income. Now we have the spectre of deflation and years ahead of a stagnant worldwide economy. So it stands to reason the equity markets are re-evaluating what companies might be worth in a future of no growth or worse. Soon the bond market will begin to re-evaluate how creditworthy these companies are in a no growth world.
5
I see many woe is me comments for a downturn in the markets. What about 1987, 2000, 2008? Perhaps too many don't remember that far back. Your investments and finances should be predicated by time. If you were all in stocks in 2000 or 2008, that is plain foolish. If your time frame is 40 years out or 5 years out, you should plan accordingly (and differently). As to this recent downdraft, I personally took some of the "winnings" from 2009 to 2014 gradually off the table this year and rebalanced my portfolio twice this year instead of once and still have the same amount of money in stocks that I had at the end of 2013.
3
Good for you. I put more money in IBM, the worst
performing stock last two years, and hope for turnaround
which doesn't seem to happen. With the big mistake
and the consequent loss, compelled to pinch on
spending. .Austerity may be the side effect of stock
market debacle. It could effect economy.
performing stock last two years, and hope for turnaround
which doesn't seem to happen. With the big mistake
and the consequent loss, compelled to pinch on
spending. .Austerity may be the side effect of stock
market debacle. It could effect economy.
1
I felt that this would happen, but it's not fun now that it is here. Many people will suffer from this. As an artist, the markets have already been difficult. Now even more discretionary spending will atrophy. I am hoping that we can get on a somehow more reasonable basis in this country, of some stability for most people. That would mean a decent home, food on the table, transportation, education and healthcare as a basis for well being. It seems if we had not spent trillions on war for oil and bailed out international banks with more trillions, we might have been able to rebuild ourselves from the ground up. I like Michael Hudson's discussions on how the world's older civilizations used to forgive debt every so often, just to give everyone a fresh start. Might be a good idea to revisit that notion, only on a world wide scale.
4
Maybe the homeless on welfare can buy your art. That would save you from selling to the evil 1%, who you are so filled with hate and envy for
Envy is definitely not in my range of feelings! And certainly hate isn't either. It is just a recognition of what is! We have spent our money in the wrong places for the whole economy to survive. The way things are now, fewer and fewer have more and more. I don't begrudge people's success. I celebrate it! If we had spent much more money on our infrastructure, there would have been far less welfare and much more taxable income. I was used to getting my income mostly from the up and coming..the mover shakers that rise up from the bottom. They are mostly gone, with the biggest gobbling everything else up. I've also had a number of A list types too. The rest of the art market is controlled to a great extent by a few, who don't want to be embarrassed or lose value, so they hire professional art advisors..which in my mind is totally not a good reason to buy art! Art is for the soul. As far as I can see value is a frame of mind. It is not an absolute. We have placed too much value on being alone and independent of one another. Love, not money, makes the world go around. Even money is just a symbol of trust in its highest definition.
2
Stock market fall a top headline? Sure.
Stock market fall "The Upshot" story pandering to fears of the investor class with quasi-advice included? Not a top headline -- an opinion feature in the financial pages.
Stock market fall "The Upshot" story pandering to fears of the investor class with quasi-advice included? Not a top headline -- an opinion feature in the financial pages.
4
In July, the PE ratio (26.75 or so) of the S&P 500 was about 80th percentile relative to the last 30 years, 90th percentile measured over its entire history. So we're still way, way up. You can see the ratio and data on Yale professor Shiller's page.
http://www.econ.yale.edu/~shiller/data.htm
http://www.econ.yale.edu/~shiller/data.htm
3
The one thing we can be certain about is that people will write authoritatively about what *may* happen.
1
Mr. Irwin seems to be one of the believers in "happy words" punditry who always finds something upbeat to say about the stock market. His latest article finds one market on a "swoon" and another "bubbly" even as it drops. And there is always the standard hype that some statistic is "better than predicted" no matter which direction it is going and at what speed it is on its way. Like the Supreme Court Mr. Irwin apparently sees corporate financial activity in personal terms where it has all the emotional feelings and political rights of any paper citizen.
1
If you check out the PDF below, scrolling down to the earnings yield by sector, you can see that every other sector has remained constant over the past two years while energy sector has collapsed, which basically accounts for all of the drop in the earnings yield in the article chart.
www.yardeni.com › pub › peacockfeval
www.yardeni.com › pub › peacockfeval
6
We needed a solid correction and it looks like we're getting it. Energy stocks have been a big drag on the S&P 500, sector weighting fell by half or more in the last year. Energy investors still appear overly optimistic about the future to me.
But that is actually good news that benefits the other 92% of the sectors in varying degrees, as well as consumer disposable income. Once the summer driving season is over, gas prices will fall. Declines in other commodities are also positive, unless you own them.
Strong housing, auto, health care, financial and consumer goods markets, falling energy prices and favorable compensation costs as young workers replace retiring ones, all offset the drag of higher export prices.
China imports half of what Mexico imports from the US, so problems there aren't a huge economic issue here.
Take energy companies out of the picture and everything looks a lot brighter.
But that is actually good news that benefits the other 92% of the sectors in varying degrees, as well as consumer disposable income. Once the summer driving season is over, gas prices will fall. Declines in other commodities are also positive, unless you own them.
Strong housing, auto, health care, financial and consumer goods markets, falling energy prices and favorable compensation costs as young workers replace retiring ones, all offset the drag of higher export prices.
China imports half of what Mexico imports from the US, so problems there aren't a huge economic issue here.
Take energy companies out of the picture and everything looks a lot brighter.
4
" Once the summer driving season is over, gas prices will fall."
I guess I must be on the bottom of the earth, because here in California prices keep falling UP. $4 + at most pumps for high octane, and regular is just a tad lower.
I guess I must be on the bottom of the earth, because here in California prices keep falling UP. $4 + at most pumps for high octane, and regular is just a tad lower.
3
I'm no Paul Krugman, so maybe someone can help me out here.
This fellow is comparing earnings (a $100/shr stock earning $7) to an interest payment (T bill paying 1.55%).
I am garaunteed 1.55% with the T Bill. What assurance do I have that I will get a 7% return on the stock earning $7 a share? A company cannot pay out all of its earnings as dividends.
How is this a valid comparison of anything, other than apples and oranges?
This fellow is comparing earnings (a $100/shr stock earning $7) to an interest payment (T bill paying 1.55%).
I am garaunteed 1.55% with the T Bill. What assurance do I have that I will get a 7% return on the stock earning $7 a share? A company cannot pay out all of its earnings as dividends.
How is this a valid comparison of anything, other than apples and oranges?
4
You have a good point. The $7 earnings on the $100 stock is not a yield of 7% in the same sense as the 1.55% is the yield on the T-bill. As a stockholder, your total return is the sum of the dividend paid plus the share appreciation. If the stock pays no dividend and its earnings per share remain at $7 year after year, you will most likely have a total return of zero. The author's broader point is that stock prices have been bid up and their prices are no longer tied to any fundamentals. People look at low yields on T-bills and appreciating stock prices and think "wow - much better returns in the stock market" without completely taking into account that those returns come with significantly more risk.
2
Apples & oranges is exactly it: an attempt to compare the value of two completely different, usually negatively correlated asset classes. The investor actually receives the T yield; it's the corporation that receives the earnings "yield" (which is routinely doctored by the corporation, of course).
Really gross comparisons over time, like Neil Irwin does here, may have a little bit of validity - but it's extremely relative, nothing you could quantify to, say, a conclusion like "stocks are 24.5% more attractively priced than T-bonds."
Really gross comparisons over time, like Neil Irwin does here, may have a little bit of validity - but it's extremely relative, nothing you could quantify to, say, a conclusion like "stocks are 24.5% more attractively priced than T-bonds."
Coming at it from another angle, when did China become a threat? They have their masters of economics trying to sustain the impossible when it comes to University economics on a blackboard with chalk.
Maybe we should all take a breather and stop making a port in China look like the Halifax Harbour in 1917.
Maybe we should all take a breather and stop making a port in China look like the Halifax Harbour in 1917.
1
Just keep buying great companies and reinvest dividends, when the market is up down or side ways. After 20 years you will have a lot of money.
10
You eat all your sugar-coated bromides & you'll wind up with Type II diabetes
1
But what if this is not a "much-needed breather"? Because the low interest rates used to bail out Wall Street in 2008 have lasted so low so long, more retired people have taken on more risky market investments. They may not be at all comfortable with the risk, knowing that sometimes recoveries take years, even a decade or more. So they will hold til they get hammered even more, then dump, but will have nowhere to go for returns--the Fed being unwilling to raise rates for fear of precipitating a greater market decline. The toobigtofails have long been flush and happy thanks to the bailout. The toooldtofails are the footballs being kicked again up and down the field.
8
Buy, buy, buy...unless it is international stocks, which all but the most optimistic sold years ago.
4
Ever hear of the "vast right wing conspiracy". I sure believe in it!
4
"Finally" is right. I've been waiting for a good sale all year! Keep panic selling, folks. That's my bread and butter!
9
The S&P 500 is top-weighted by bio-tech firms, whose stocks have, until now, seen big gains year-to-date. Not so for most of the industrials, energy producers, communications and other sectors. So a 2% loss overall in the S&P may not be as accurate an indicator of the stock market's more general 2015 performance as the Dow 30, which has fared worse. But this week's drop portends the correction so many anticipated for months. If the market sinks another 4% or so, that will clinch it. M. E. Zuller, New York City
1
As I neared retirement I asked my financial planner whether I should invest in risky (high return) or stable (lower return) products. He told me what I've heard before. When you go to bed at night if your sleep is interrupted by the stock market you're in the wrong segment. If you go through the day, and night, without it bothering you you're where you should be.
6
Looks like Obama may be leaving the market the way he he found it 8 years ago. Only this time we are trillions more in debt.
2
If you took Econ 101, you would understand that President's have very little to nothing to do with the effects of stock market swings.
Nice try though, you can go back to your tea now.
Nice try though, you can go back to your tea now.
33
When Obama took office in January 2009, the SP500 was at about 820. Today, after the drop, it is still at 1990, having grown by 142% from the start of Obama's term. Let's adjust it down to 120% to account for inflation.
3
When Obama was sworn in the DJIA was less than half what it is today
7,949.09
7,949.09
4
Like most Americans, my wealth (and it's nothing to sneeze at) is tied up in a 401k with Fidelity. Yet I am unable to actively manage my funds.
Fidelity, Schwab, and other large providers of 401k services have instituted prohibitions against "excessive trading" of mutual funds.
The "upshot" of this mandate is that I would incur penalties and sanctions if I were to take my funds to a money market fund a month ago, seeing what was going to happen, and then go back in at a bottom say, next week.
So I am forced to ride it down or wait an unrealistic 90 days or more to get back in if I had been able to follow my nose and miss the move up.
I think Congress, perhaps Senator Warren, should look into this practice. We 401'ers are forced to be the "dumb money" that imparts some stability to the markets while the killers roam free. And we get devoured.
Fidelity, Schwab, and other large providers of 401k services have instituted prohibitions against "excessive trading" of mutual funds.
The "upshot" of this mandate is that I would incur penalties and sanctions if I were to take my funds to a money market fund a month ago, seeing what was going to happen, and then go back in at a bottom say, next week.
So I am forced to ride it down or wait an unrealistic 90 days or more to get back in if I had been able to follow my nose and miss the move up.
I think Congress, perhaps Senator Warren, should look into this practice. We 401'ers are forced to be the "dumb money" that imparts some stability to the markets while the killers roam free. And we get devoured.
65
Attempting to time the stock market is widely considered and produce a huge number of loosers and a very small segment of one-time lucky winners. Warren Buffet and most smart investors can attest to this and agree that dancing in and out of the stock market is why people on average always do worse than the index. Even most of the pro traders that have won for a period of time on a particular strategy will revert back to the mean after their luck runs out.
This isn't some government conspiracy, and you wont be better off in the long run because you can frequently trade your mutual funds. There are vast volumes of literature to support this. In fact, the people who's accounts do the very best in the mutual fund market to be deceased, or have forgotten their account existed.
Investing in good low fee funds or stocks for the long run (5+) years and riding out the low points without selling is the wisest way to go.
This isn't some government conspiracy, and you wont be better off in the long run because you can frequently trade your mutual funds. There are vast volumes of literature to support this. In fact, the people who's accounts do the very best in the mutual fund market to be deceased, or have forgotten their account existed.
Investing in good low fee funds or stocks for the long run (5+) years and riding out the low points without selling is the wisest way to go.
4
Thanks for the boilerplate investing 101. I'm 61. There is no "long run" for me.
I'm not talking about high-frequency. I also trade in stocks and etf's, and believe me, timing is everything. Buy and hold is what the industry wants you to do (obviously). Dollar cost averaging just got your portfolio zeroed for the year.
I should be able to buy and sell funds as I see fit. I lost this week when I could have won.
I'm not talking about high-frequency. I also trade in stocks and etf's, and believe me, timing is everything. Buy and hold is what the industry wants you to do (obviously). Dollar cost averaging just got your portfolio zeroed for the year.
I should be able to buy and sell funds as I see fit. I lost this week when I could have won.
1
You are patently wrong. Wrong, wrong, wrong. Trading once/month does not constitute excessive trading
The two biggest threats to the USA, China and the Arab world are taking a huge hit this week. Somehow, this is bad for our economy. I know absolutely nothing about the stock market, despite years of studying. I think we should be celebrating.
3
I guess all of the experts who knew this was coming were on vacation last month, week and earlier this week
3
The problem is that this correction tests whether the "recovery" is real. If it is, then this is a normal occurrence. However, and this is probably why stocks are falling in the first place, there is the suspicion that the American "recovery" is in fact weak, with the US economy still very close to deflation (signaling a chronic lack of demand), with no upward pressure in salaries (which signals a bad labor market), and with extremely low, by historical terms, participation in the labor market --numbers which signals that unemployment workers are simply giving up, versus being reintegrated in the workforce .
This adjustment can, if the recovery is a mirage, easily tip the US into recession.
This adjustment can, if the recovery is a mirage, easily tip the US into recession.
6
The global economy is entering a deflationary spiral, mainly due to a collapse in demand from China. Things in China seem to be much worse than the headlines.
Good thing for the Fed that deflation has appeared before they raised interest rates. Now there is absolutely no chance that they'll go ahead with the planned tightening, and then have to sheepishly withdraw it. Or is there?
Whatever. Like a previous poster said, there is no such dichotomy as a real economy and a financial economy. There is only a real economy. The financial system is a part of its infrastructure. And the real economy has recovered about all it can from the shock it suffered when its financial infrastructure collapsed in 2008. So here we are.
Good thing for the Fed that deflation has appeared before they raised interest rates. Now there is absolutely no chance that they'll go ahead with the planned tightening, and then have to sheepishly withdraw it. Or is there?
Whatever. Like a previous poster said, there is no such dichotomy as a real economy and a financial economy. There is only a real economy. The financial system is a part of its infrastructure. And the real economy has recovered about all it can from the shock it suffered when its financial infrastructure collapsed in 2008. So here we are.
8
Although the expectation of the majority continues to be that the Fed will start tightening on September 17, it looks that the smart money will be on postponing the first increase in rates for later this year if not 2016. What has happened since the Fed's last meeting? The devaluation of the Chinese Yuan and a further reduction the price of oil (both developments which put a downward pressure on prices in the US), the worst sale-off in markets in the year, disappointing goth performance in many US trading partners. The Fed will blink: No increase in rates next month. And that is the correct course of action.
8
I remember an old broker, years ago, telling me that stocks go up in order to go down and they go down in order top go up. The key is 'in order to'
2
Your old broker sounds like a fool.
I took a deep breath and nothing happened.
I agree. I've been more worried about the 'tired' 5+ year bull market than any downturn. A correction is healthy for the market and has been a long time coming. I've been a long term investor in the stock market for over 35 years, and its returns helped allow me to retire at 50. If you feel panic and too much stress then you shouldn't be invested in the market in the first place.
41
Oh please. All this hand wringing doom and gloom. Have a cup of coffee, people.
The Dow has averaged about a 6 percent annual return over the past decade. That's slightly below the historical average, since 1900, of 8.5 percent. Not exaclty time to throw in the towel or jump out a window.
The Dow has averaged about a 6 percent annual return over the past decade. That's slightly below the historical average, since 1900, of 8.5 percent. Not exaclty time to throw in the towel or jump out a window.
33
So the long-term rate of return is down almost 30% from its historical average.
Yeah, nothing to see there.
Do they teach math up there in New Hampshire?
Yeah, nothing to see there.
Do they teach math up there in New Hampshire?
Tons of prognosticators here! I'm not smart enough to understand what's happening, all I know is, I've been waiting for a buying opportunity!
6
A side note: I told friends years ago that the Chinese economy could not maintain its high rate of growth for more than a few years. In order for them to have a one-car-in-every-garage economy, they would consume the entire output of the world's refineries of gasoline--not gonna happen. In order for them to develop a throw away economy like ours, they would consume the entire world's output of paper--not gonna happen. But before those resources ran out, they were already at the end of potable water. Industry cannot grow without water and that is why they have built dams everywhere. The Chinese have now reached the end of the rope and their economy will follow a much slower growth rate or even decline if their water resources are not being replenished at the rate of depletion. There is little that the ruling technocrats can do about it.
7
Long Term Capital Management was in a time where $5 Billion in losses could bring entire countries down.
Today, $100B in losses is mice nuts.
As long as Central Banks around the world can print money and buy common stock and move electrons around and purchase their own debt instruments, the party goes on.
Or maybe not.
Today, $100B in losses is mice nuts.
As long as Central Banks around the world can print money and buy common stock and move electrons around and purchase their own debt instruments, the party goes on.
Or maybe not.
3
Can the FED buy common stock? I think not.
Well, it has been a surely not for China, where its Central Bank has simply been unable to prop their stock market --and the rate they are going, their yuan.
The march of globalism continues to conflate economic borders. Chinese economic leaders continue to engage in high-risk fiscal policies: stimulate exports and investment at the expense of consumption and savings. The result is global market volatility. It is the price paid by the majority of voters in western advanced economies that allowed their misinformed leaders to engage in voodoo economics that theorizes that "global trade and commerce" offers optimization of scarce resources. Were that true in the long-run we would be seeing signs of recovery instead of Financial Crisis. Instead we, in the 'advanced west', export jobs and standards of living from to islands of justice, liberty and equality of opportunity for all like Mexico and China. But who benefits? Is it the folks from Mexico who find living as illegals in the US better than working in the maquila or the Chinese industrial campuses of humanoids that are cheaper than robots and can muster to the lines of assembly from barracks' slumber upon orders from above. Eventually the injured heal and the next generation marches in the streets for better working conditions and benefits. A new culture rises to change the status quo which leads to a conundrum - let's call it the American Dream global trade theory. Bottom line: the world has become more volatile financially, environmentally and militarily since globalization became the emphasis of western governments in the late 20th century.
9
"As Josh Brown of Ritholtz Capital Management tweeted on Friday, '2015 is the first year since the recovery began where the real economy is outperforming the financial economy.'"
The 'real' economy is the only real economy. The 'financial economy' is a fancy phrase for a casino.
The 'real' economy is the only real economy. The 'financial economy' is a fancy phrase for a casino.
30
American stock exchanges are the world's most popular casinos.
No sounder sleep than from sensible investing in American real estate.
Markets in the same weight class cannot be relied upon. See above.
Strong USD is the love letter that hurts.
Raising interest rates worse than the disease?
No matter what happens keep flying the plane.
No sounder sleep than from sensible investing in American real estate.
Markets in the same weight class cannot be relied upon. See above.
Strong USD is the love letter that hurts.
Raising interest rates worse than the disease?
No matter what happens keep flying the plane.
Saying that we should feel good about a "correction" in 2015 because 2013 and 2014 were so good is like saying people should have felt good about the 1929 :correction" because 1928 was so good. We all know the markets don't reflect the state of the economy. They're manipulated by oligarchs who make money whether they go up or down, yet people have no place else to put their savings except under the mattress. Public policy has been silent on the need to close the casino. When will that change?
73
Bad analogy. Go back and actually look at the numbers for those years.
The lower a stock goes the higher the yield. Think dividends - T is paying over 5%, ConEd over 4%.
Buying opportunity?
Buying opportunity?
2
"Remember that if you panic at the thought of losing 4 percent of your money in four days, that money really shouldn’t be invested in the stock market to begin with."
Easy to say if you're not 55+ and relying on a 401(k) because your pension plan was frozen or terminated. I'm still a way from retirement, but it's painful to watch.
Easy to say if you're not 55+ and relying on a 401(k) because your pension plan was frozen or terminated. I'm still a way from retirement, but it's painful to watch.
33
It is painful to watch, so don't watch it too much, lest you succumb to panic-induced bailing at the worst time. Look at your 401(k) quarterly, in the context of multi-year data trends, and make any needed reallocation decisions accordingly. A big part of the "deal" you make with yourself when participating in the equity markets, through a 401(k) or otherwise, is not to panic when the roller coaster is heading down for a while. Hang on, and scream if it helps, then wait for the inevitable upturn. Look at the gains subsequently enjoyed by investors who did that during the 2007-08 downturn for inspiration.
2
Everything's down now----good time to buy.
2
Warren Buffet wrote in these pages, in 2008, that when other's get scared, he gets greedy and when others get greedy he gets scared. This article seems to suggest this is a natural and acceptable drop. If so, it might not be time to buy just yet. But if everyone keeps panicking, I will be looking to buy soon. I just wish I had more cash to do so...
4
The tone of this article is quite interesting in that it is based on the notion that what we're seeing is "less like a catastrophe in the making and more like a much-needed breather..." My question is: How do you know that? Why are you so sure?
3
what we need to do is replace social security with privatized retirement accounts filled with financial instruments, especially stocks. George Bush Jr understood this, why do most liberals not?
So true. Let's start with your retirement money and see how it works out. You don't mind being a guinea pig, do you? After all, when has Wall Street done anything to indicate that we shouldn't trust them with even more of our capital?
6
There is a reason why rapidly rising stocks are referred to as "hot stocks," but I've always had the feeling that most people think that is a favorable thing. I suppose it is a psychologically more aggressive and challenging phrase, the type of words most people prefer, since most people seem to also take as truth "the bigger the risk, the bigger the reward."
So, a nation of gunslingers (both real and imaginatively) has forever tended to misinterpret phrases of wisdom and caution as having a meaning supporting what we really want to do. Ah, yes, "want"... the child within us all. It's true! We never do grow up.
So, a nation of gunslingers (both real and imaginatively) has forever tended to misinterpret phrases of wisdom and caution as having a meaning supporting what we really want to do. Ah, yes, "want"... the child within us all. It's true! We never do grow up.
3
Global market collapse!? Not to worry, we can just print more money, keep rates artificially low, borrow another 10-20 trillion from the next 4 generations, and everything will be fine. As Obama says, the economy is in like the best recovery ever. In fact, I think we need to just spend more on some programs that study stuff. The fact is, we are in make-believe land, where anything can and will happen.
2
Wonder if the impact of the Fed's smoke and mirrors low/no interest rates is no longer going to boost the market.
2
The needle is approaching the bubble, Wall Street fans.
6
This drop will not concern you on ebit if you have followed basic investing rules.
If you are close to retirement, most of your investments will be in bonds. So no worries.
If you are 25-30 years away from retirement like me, this is simply a buying opportunity and I couldn't care less.
I'm going to invest on the 1st of the month like I do every month whether the market is up or down.
If you are close to retirement, most of your investments will be in bonds. So no worries.
If you are 25-30 years away from retirement like me, this is simply a buying opportunity and I couldn't care less.
I'm going to invest on the 1st of the month like I do every month whether the market is up or down.
5
Ronnie, that would make sense in an economy with historically "normal"--or anywhere close to normal--returns on bonds and other fixed income investments. But over the past several years, with returns on most fixed income near or at about 0%, many people close to retirement have felt compelled to take more risk via equities to eke out enough returns to live on during retirement. It's what you get in a perceived TINA economy (T.here I.s N.o A.lternative) and has contributed, with many other factors, to the run-up in equity valuations. One can make the argument that seniors on the cusp of retirement have no business being in equities even in a zero-return fixed income market, and should just scale back their anticipated standard of living accordingly, but for the many people who have modest assets due to modest incomes, that argument can only go so far.
9
At times like these, it is nice to have some extra cash on hand to begin ramping up the sums regularly invested. I put aside the same amount twice per month, putting 80% of it in my usual ETFs, and set aside 20% cash to trickle feed extra in when there is a correction.
1
Yes the market correction makes sense...but this is exactly why we need DEFINED BENEFIT pensions. Your ability to retire should not depend on your age relative to market movements.
96
Except for one little problem: defined benefit plans do not work. They are unsustainable. As long as 1+1=2, no defined benefit plan will ever work
The big players (i.e., worldwide hedgefunds and Big Institutions [think Goldman]) are shuffling the deck to their liking. Most of this is decided in the "after hours trading" literally and figuratively. Until Big Money stops re-positioning itself, the rest of us will be just be wasting our breath and exhausting our brains trying to guess every nuance of the reasons why. I am going to ride it out.
The talk among the village idiots, patronizing every-day brokers and politicians and their pundits is, of course, that the Fed's indecisiveness is causing this which is total pablum talk.
The talk among the village idiots, patronizing every-day brokers and politicians and their pundits is, of course, that the Fed's indecisiveness is causing this which is total pablum talk.
5
The "Markets" are not exactly what they appear to be.
Up here in Canada, the banks though their own investments and through their mutual funds that they have for their clients, have vast shares in their portfolios. The banks are even buying and selling on a daily basis in the "markets".
So the "Markets" on a day-to-day basis are not so free. Long term, you can make money if you buy low and sell high.
In Canada, companies listed on the TSX are allowed to issue 10% new shares every year, as well as buying back 10% shares each year. Since the banks are the major brokerage houses in Canada, it's not hard to figure that stocks
will be sold high, and bought back low, to apply to the 10% allowable buy and sell terms of the exchanges. Also, when a company buys back 10% of its' own shares, it saves on the dividend.
I'm sure the same case applies in the USA, but less controlled than up here.
Up here in Canada, the banks though their own investments and through their mutual funds that they have for their clients, have vast shares in their portfolios. The banks are even buying and selling on a daily basis in the "markets".
So the "Markets" on a day-to-day basis are not so free. Long term, you can make money if you buy low and sell high.
In Canada, companies listed on the TSX are allowed to issue 10% new shares every year, as well as buying back 10% shares each year. Since the banks are the major brokerage houses in Canada, it's not hard to figure that stocks
will be sold high, and bought back low, to apply to the 10% allowable buy and sell terms of the exchanges. Also, when a company buys back 10% of its' own shares, it saves on the dividend.
I'm sure the same case applies in the USA, but less controlled than up here.
1
An interesting correlation is that stock market highs and oil price high peaked right at the very end of QE3 and both have been slowly declining since. Seems the economy needs that 'wonder drug' to grow. I cannot believe that the Fed would ever raise interest rates, as that would be like pulling that bottom piece out of the Jenga puzzle.
The bottom line though, is that economists have it in their head that exponential growth can go on forever, and on a finite planet that cannot happen. Think about 7 percent growth in China for instance. Pretty doable, right? Until you realize that it calculates to doubling a billion-person economy every 7 years. You get diminishing returns- more and more debt creates less and less real growth. The math where everyone getting paid back with interest just doesn't add up.
The bottom line though, is that economists have it in their head that exponential growth can go on forever, and on a finite planet that cannot happen. Think about 7 percent growth in China for instance. Pretty doable, right? Until you realize that it calculates to doubling a billion-person economy every 7 years. You get diminishing returns- more and more debt creates less and less real growth. The math where everyone getting paid back with interest just doesn't add up.
18
'...Think about 7 percent growth in China for instance. Pretty doable, right?...'
No.
They were overheated for years.
No.
They were overheated for years.
1
The QE3 ended in October of 2014 and we had significant upward movement this entire 2015. So much for your theory.
A Compound growth rate of 7% per year will double the asset (economy) in 10.5 years, not 7 years as stated. The point may be valid, the math is not.
"And it’s about time." Well, no. Unlike the 2001 bubble where there was little but hype behind stock prices, or when the culprit market leaders had triple-digit P:Es, there is actual earnings growth, business expansion and tangible products and services. This "correction" was due to (1) an additional bad decision in China following decades of other bad decisions (2) people who trade equities and think they are somehow smarter than the Federal Reserve Board and (3) people who don't know what energy is actually worth, all looking for an excuse to do some profit-taking.
7
For the past 15 to 20 years we seem to have lurched from one market bubble to another. We had the dot com bubble then the real estate bubble and now perhaps another bubble. Asset price inflation seems to have become the norm. The Fed and Congress wring their hands about CPI/PPI inflation, but largely look past asset price inflation which in the end has much more damaging effects on the economy.
10
Not sure who would feels compelled to express glee at market declines. Surely the market is playground for the rich & savvy, but many middle-class families have substantial savings tied up in IRAs, 401Ks, 529s, and mutual funds. With 3 year CD rates below 1%, average folks put there modest savings in relatively stable stock & bond funds. True, if you don't need the money right now, you won't take a hit. But many retirees or parents about to pay fall tuition will need to sell now. Yes, market corrections are necessary & part of the game. The unfortunate fact is that even people of modest means are forced (by sub-inflation rates) into a such a volatile arena. We can only be grateful that W & Co.'s SSI privatization scam died on the stomp.
115
Ah, Yes, privatization!
A person who retired in 2000 or 2008 could make an argument against it.
A person who retired in 2000 or 2008 could make an argument against it.
3
No one is "forced into" stock investments. Careful planning avoids short term market fluctuations. Prudent investment means putting funds that are either needed in the near future or emergency funds into nonvolatile accounts.
At least the US economy is actually doing something now - I see "help wanted" signs everywhere - and people aren't using their home equity like ATMs. It's about time for a correction. It'll hit pension and other retirement funds, but overall shouldn't hit the average guy because the average guy (the 99%) isn't heavily invested in markets. Savvy investors should have already pulled out some so there will always be cash around. Main thing, investors hate it, is that oil is down so the 99% won't be getting stuck every time they fill their tanks - this helps keep money circulating in the economy.
21
Actually it's great for investors that oil is down...energy producer stocks are a great buy right now.
7
So basically it's just fine with you that retirees are being hit? That view seems to mirror the government's view.
No. Since 401K are exempt from taxes, it'll be a good time to take profits or cash in. I'm close to retirement age too, so made some moves a few weeks back. Bad is unscrupulous investment agents - times like now is when they start showing up. Worst is if derivatives start a domino effect - there's not enough money in the world to cover a major fall. Most corporations are actually in pretty good shape now, sitting on mountains of cash, with a lot held overseas to avoid paying corp tax on profits. Will see how it goes. We're in MUCH better shape than when bogus house values were supporting the economy.
2
Our market economy is failing and there are ample signs of it. China cannot throw enough money at it to stop the bleed and we are too broke to carry the burden of derivatives and swaps when they crash again. By October we should be seeing another crash. We are are heading for a virtual free-fall but no one wants to admit it. Welcome to the second part of the crash of 2008 and 2009.
6
We are the largest economy in the world. We are not broke. We are just selfish cheapskates.
15
All well and good to be blithe about this, but as I'm watching my retirement funds plummet, I can't be quite as philosophical about this "breather" the market is taking.
I suspect this breather is as irrational as the run-up that preceded it.
I suspect this breather is as irrational as the run-up that preceded it.
56
Tosia, the writer isn't being blithe--he's trying to encourage people to avoid panic selling, especially in their retirement accounts. People who held on during the severe downturn in 2007-08 have been very amply rewarded for their fortitude. Unless you have no choice but to liquidate depressed assets, don't! It's the deal you made with yourself when you invested in those retirement funds in the first place.
19
the Casino, oops, the stock market and their croupiers, the 'brokers' and the hedge fund 'geniuses' win with the Vig; the fees they get for steering you into placing it on red. when double zero inevitably comes up, well, all bets are off. but the house always wins. meanwhile, good companies go bankrupt in leveraged buyouts, mom's pension is wiped out, and grand dad can't get his medicine. unfortunately, the croupiers will have to dispense with the Chateau Haut Brion, and suffer with some plain old California pinot noir. the horror!
30
Time to privatize Social Security and Medicare.
5
Exactly wrong. They should NEVER be put at risk.
6
You can't take a little sarcasm?
3
Ah. As a sarcastic comment, I like it. As an un-ironic (GOP) comment I hate it. The tone was hard to read into the comment.
2
We'll see how the takers who are probably gloating over losses to the 1% take it when the Government handout trough dries up. Perhaps then ilk like Bernie Sanders will realize that in order to provide all these freebies and not end up like Greece you actually need to have people who are successful.
2
What we really need to do is stop being the worlds cop. We pay the bulk of the cost of NATO. Why? The other members have money for infrastructure and such that benefits their people. We get stuck with lousy roads,rail,airports etc. We have bases all over the world. For what?
3
By "people who are successful" I gather you mean the 1% who are parking their money offshore, shipping jobs overseas, getting huge tax breaks for such and making 400 times the average taker — er, uh, worker — at their companies.
7
And in order to be successful, people need decent jobs which only Bernie seems to realize.
15
Healthy markets decline too.
20
It's 40+ years past time to reinstate company pension plans and true savings and loan companies with reasonable interest rates for consumers. WE must get OUR 401K, taxpayer and consumer money off the craps table "financial markets" have become until they are seriously regulated and taxed.
135
But aren't company pension plans just invested in the stock markets?
8
YOU can get your money off the "craps" table. I've done very well by it over the long term.
What goes up must come down and then rise again.
9
stocks are priced fairly. Some are overvalued and some are undervalued but the PE is in a good place relative to the fact that the American economy (and Europe, for that matter) still has room to grow. For some reason it is so easy for people to forget that the "runup" since 2009 is still largely recovery from the worst bear market since WWII. We are a long way from irrational exhuberance -- not that a good healthy correction wasn't overdue.
Hard to know how much potential there is for full scale crash in China, but remember most of China's factories are busy fulfilling foreign orders, so the underlying Chinese economy will be stable as long as Americans keep buying iPhones.
Hard to know how much potential there is for full scale crash in China, but remember most of China's factories are busy fulfilling foreign orders, so the underlying Chinese economy will be stable as long as Americans keep buying iPhones.
7
Thanks for the sober and realistic analysis. No one knows what will happen next, but there are more grounded and less grounded perspectives. The people with grand theories, especially conspiratorial ones, who claim that the sky is falling seem to me just out of touch with the underlying reality. I agree that this looks like a correction--and a good one, one that will lay the ground for future earnings at some more or less reasonable level.
But panic is panic, and there is irrational panic just like there is irrational exuberance. There is no calculating or predicting its course. Most ordinary investors should have a portfolio planned for corrections as well as growth in a balanced way. Hold it and don't panic. Shrewder investors will take the money they have set aside for such purposes and will start buying now, buy all the way down, buy at bottom, and buy on the way back up, and then take profits before becoming greedy. Fearful and irrational investors will panic and sell now and when/if things get worse. They will lose the most.
But panic is panic, and there is irrational panic just like there is irrational exuberance. There is no calculating or predicting its course. Most ordinary investors should have a portfolio planned for corrections as well as growth in a balanced way. Hold it and don't panic. Shrewder investors will take the money they have set aside for such purposes and will start buying now, buy all the way down, buy at bottom, and buy on the way back up, and then take profits before becoming greedy. Fearful and irrational investors will panic and sell now and when/if things get worse. They will lose the most.
11
And for retirees who depend on their investments in mutual funds to supplement meager pensions (should they be lucky enough to have a pension), a drop in the stock market is not a "correction." It's a disaster. The Upshot should investigate and analyze the effects on the little people, not just on how the downtown in the stock market will affect countries.
101
Why are retirees significantly exposed to the stock market? Surely they have already shifted most of that to safer investments?
If you need the money in less than 10 years, it shouldn't be in the stock market.
If you need the money in less than 10 years, it shouldn't be in the stock market.
This in nothing more than a long overdue correction, mostly due to Europe's failure to get its economies moving and China being largely a fantasy economy over the last 5 years. It will lead to more sustained growth, but only if the austerity nut cases get off their Ouija Boards and start practicing logic, mixed with some common sense, and maybe refer to some evidence, which will prove their disastrous economic policies.
31
This drawdown of the stock markets is the direct result of the impending collapse of the Chinese economy. The corporate and investor assumptions about the Chinese economy have now been effectively thrown out the window and when and how it will return to a credible status remains to be seen.
The Chinese Humpty Dumpty has fallen off the wall, broken into hundreds of pieces and the Chinese elites are unsure what to do at this point.
The corporate and investor classes are unsure what is going to happen at this point. Stability, reliability, integrity has left the Chinese market, and to a greater degree the entire Chinese economy, which is poison for any economic future. The foreign corporate partners have no tools to pressure the Chinese government to do what is necessary to right the Chinese economy, which is to allow their capitalist economy behave like one.
The Chinese government has shown that it is only capable of ham fisted, amateur-like reactions to the shocks that have hit China's economy.
Whatever happened to the prediction that oil was going to sell for $300 because this is what the Chinese would pay to fuel their roaring economy? Whatever happened to the prediction that China would surpass America's economy? And now oil is the lowest price in many years and the Chinese cannot take advantage of the bargain as other countries, like Japan, who has benefitted from the lower cost of energy.
Almost all this mess is China driven. Uncoupling will be difficult.
The Chinese Humpty Dumpty has fallen off the wall, broken into hundreds of pieces and the Chinese elites are unsure what to do at this point.
The corporate and investor classes are unsure what is going to happen at this point. Stability, reliability, integrity has left the Chinese market, and to a greater degree the entire Chinese economy, which is poison for any economic future. The foreign corporate partners have no tools to pressure the Chinese government to do what is necessary to right the Chinese economy, which is to allow their capitalist economy behave like one.
The Chinese government has shown that it is only capable of ham fisted, amateur-like reactions to the shocks that have hit China's economy.
Whatever happened to the prediction that oil was going to sell for $300 because this is what the Chinese would pay to fuel their roaring economy? Whatever happened to the prediction that China would surpass America's economy? And now oil is the lowest price in many years and the Chinese cannot take advantage of the bargain as other countries, like Japan, who has benefitted from the lower cost of energy.
Almost all this mess is China driven. Uncoupling will be difficult.
22
A "little bubbly"? Are you kidding? There is no realism in stock prices around the world - it's all speculation and the fairy tale of "value added" stock and merchandise is about to die. Every stock market in the world is down because the top 1% global financial elite can't keep the paper moving fast enough. But don't cry for them - they'll be just fine. It's the other 99% of us who will take the fall - as usual.
109
If the 99% doesn't have their savings invested in the market, then they are ignorant and uninformed. It's easy to open an account with Fidelity and pick a Vanguard mutual fund. It's not rocket science. So while promoting the fall of the 1%, you're promoting the downfall of the 99%'s savings.
2
This article speaks to savvy investors, but to many the drop is more like 10% than 4% and this can inhibit discretionary consumption, with significant economic consequences.
The psychology of both market panics and investor behavior makes for a rough ride, even if the bubble needed bursting.
The psychology of both market panics and investor behavior makes for a rough ride, even if the bubble needed bursting.
43
Who bases "discretionary consumption" on the short-term performance of the stock market? It is at variance with 200 years of history and everything we are taught.
4
Granden: I assume that this means the retirees who have been pushed in to the stock market because bond yields are so low and interest on CDs is nonexistent. They depend on the dividend yield from their modest investments in the markets.
9
@Todd - stock prices are down, but only a handful of dividends have been cut so far. FCX is the only major one I can think of.
1
Perhaps its because I grew up in the 1970's but while I know the oil related companies will be impacted, it's hard for me to believe that falling oil prices won't benefit the US overall as consumers get a break on energy prices and - as it moves through an economy that still largely moves on oil - everything else too!
Even the Chines devaluation has its upside; maybe its bad for companies like Apple and Boeing (though Apple's suppliers will become cheaper) but for all the goods from shoes to furniture that come in from China - these will all be getting cheaper!
Even the Chines devaluation has its upside; maybe its bad for companies like Apple and Boeing (though Apple's suppliers will become cheaper) but for all the goods from shoes to furniture that come in from China - these will all be getting cheaper!
30
Correction , hardly my dear NYT's readers but a long, long slide that is so over due and just beginning. Call me when Amazon is profitable.
35
Amazon profitable? None of us will live that long.
Amazon is Scientology with public stock offerings. The investors may think that profit is the motive; but Jeff Bezos knows that it's really about reshaping the world in his image.
Amazon is Scientology with public stock offerings. The investors may think that profit is the motive; but Jeff Bezos knows that it's really about reshaping the world in his image.
18
Amazon posted a profit last quarter of $92 million.
1
Guys,
Hate to burst your pessimistic bubble.
Amazon was profitable last quarter.
"The Seattle, Washington-based company reported quarterly net income of $92 million, or $0.19 per share, versus a year-ago loss of $126 million, or $0.27 per share."
But then again, I am sure that one of you is just Buffett incognito.
Hate to burst your pessimistic bubble.
Amazon was profitable last quarter.
"The Seattle, Washington-based company reported quarterly net income of $92 million, or $0.19 per share, versus a year-ago loss of $126 million, or $0.27 per share."
But then again, I am sure that one of you is just Buffett incognito.
2
What goes up must come down. Buy low, sell high. No need to panic because the market is behaving as it always has. That is, unless you have money in stocks that you need next year. But then, your money in stocks should be money you won't need for 10 years or more. The magic of compounding.
59
And what happens in ten years when you need the money and there is another "correction?" As many have stated here and elsewhere we need to strengthen Social Security and return to defined benefit plans.
But, of course, the low interest rates have made stocks attractive at lower rates of return.
There is a price for artificially low interest rates.
There is a price for artificially low interest rates.
We are in a dangerous bubble. Corps are rich, buying back their stock so that their CEO's can continue to earn outrageous incomes. There is no real value against these absurd prices. It is happening again. Boomers retiring are still paying into their 401k's like (automatic) clockwork. There is no where to go. There are not enough mattresses to house the money that should be parked there. And Wall Street knows it.
105
“2015 is the first year since the recovery began where the real economy is outperforming the financial economy.”
THAT is a GOOD sign - for eventual reality. The market has been on prolonged life support for nearly 7 years, and too little tethered to reality.
THAT is a GOOD sign - for eventual reality. The market has been on prolonged life support for nearly 7 years, and too little tethered to reality.
54
"THAT is a GOOD sign"
On a different level of reality, I suppose. However, the stock market is one of the factors making up "the index of leading economic indicators." From that perspective, investors had already received their cake. Unfortunately, in the 7th year, they've started trying to eat it, too.
On a different level of reality, I suppose. However, the stock market is one of the factors making up "the index of leading economic indicators." From that perspective, investors had already received their cake. Unfortunately, in the 7th year, they've started trying to eat it, too.