Free markets and the "invisible hand" made great sense a couple of centuries ago. Perhaps the same logic can be applied to the the small cap market now. But with global markets, nation-state influencers, hedge funds, micro-second deep data anxiety driven greed and ability to execute instantaneously ...... well, I'll pass on market timing, especially for the individual investor and stick to a long term, low cost, index driven investment plan and live with the ups and downs. For that "animal spirit" I might add a higher small cap portion to that portfolio.....
The market will really start rising after Trump puts his stupendous tax plan in place very soon.
Believe me.
Believe me.
1
Impossible to generalize and it depends on what you call a political event. The entire US market melt down of 2008/9 was dripping with politics. The failure to pass TARP first time around caused the markets to swoon and was instrumental in the political "conversion" of many Republicans who were running for the hills. As a general principle the case made here may be correct but there are plenty of exceptions that prove the rule.
1
Paulson is not a macro hedge fund and classifying it as such is incorrect. They are an event-driven hedge fund. Their 2016 losses were largely due to concentrated bets in specialty pharma, not global macro trades. Unfortunately, NYT often makes mistakes when writing about hedge funds.
The New York Times, like all popular media, often makes mistakes on every topic. You only notice when you have personal experience that contradicts its reporter's narrative and selected facts.
@Ross - If journalists had expertise in some other field, they wouldn't be journalists. Usually the commenters with professional expertise can run rings around them.
What could go wrong with Trump, one of the few in the history of the world to bankrupt a casino, in charge?
3
Janet and Co. are exponentially the largest drivers of these frothy markets as the Fed and foreign central banks have driven all market forces from the bond market and hence the stock and real estate markets. Common Sense tells me that a Fed balance sheet of 4.5 Trillion dollars and US Debt levels at all time highs in conjunction with completely fabricated bond and mortgage rates. NYT there are bigger fish to fry than Trump. Try an article on the complete backstopping of the economy by our FED. Free markets? HAH
2
Around the time of the election I "rebalanced" my IRA mutual fund portfolio from 90% stocks/10% bonds to a more conservative and age-appropriate (I'm 70) mix closer to 50/50. Trump having won, I planned to pretty much bail out and put 90 % of everything into cash (money market funds) by the first of the year. Procrastination (buy and hold in investment-speak) now has me with more money after taking more than my minimum distribution requirements, than I had prior.
How long will this last? I'm waiting to find out.
How long will this last? I'm waiting to find out.
2
Has political turmoil in the last year caused you to change your investing decisions?---- No. I invested in improving my Resume.
3
A 8 year market run up & a new government run by lunatics, lead me to move my money out of the market. Common sense, not politics.
7
This only considers downturns in response to negative geopolitical events. How lasting is the market's reaction to positive (or business-friendly) geopolitical events?
1
When real wages haven't grown in thirty years; when levels of consumer debt are at record highs; when income disparities are so great; when low interest rates send pension funds into a tenuous, record high market, nothing could really go wrong unless, of course, one listens to those who say- ' stay in the market; it'll only continue to go higher and our fees for investing your hard-earned dollars will not significantly impact your returns' - I mean, what could possibly go wrong?
8
It always amuses me when 'professionals' talk about whether or not to get out of the market because of some possible dips, corrections, or even bear market to come. The old saying is that you can't time the market. Good investing does not have $ which will be needed in less than 5 years in the stock market. To 'get out' because the market might drop is always a dangerous game mainly because no one knows when it is time to get back in. Folks who pull out and wait for the market to boom again almost always miss the best days of a recovery.
Reasons for selling stock, like those for buying it in the first place, ought properly to have to do with one's investment goals, resources, and life stage. The other shibboleth, to keep a diversified portfolio, should both offer some protection from market swings and provide places from which to take needed money during a stock market downturn.
Reasons for selling stock, like those for buying it in the first place, ought properly to have to do with one's investment goals, resources, and life stage. The other shibboleth, to keep a diversified portfolio, should both offer some protection from market swings and provide places from which to take needed money during a stock market downturn.
6
Politics certainly matter on investments mostly based on how much politicians get out of the way and let capitalism proceed with regulatory guardrails.
When you combine lower intelligence and hubris like we have in the current White House, then the economy and the stock market will get pummeled.
Current equity markets are a complete fool's rally. The naive and blind will be caught off guard when it collapses and they will panic. Those that can control their emotions will wait patiently for their buying opportunity to come. May be 3 months from now, 13 months from now or 36 month from now; but the market will crash back to reality the way it always does.
Like the ocean, economic cycles ebb and flow and unwise politicians like Trump and his Republican underlings just make the waves bigger.
When you combine lower intelligence and hubris like we have in the current White House, then the economy and the stock market will get pummeled.
Current equity markets are a complete fool's rally. The naive and blind will be caught off guard when it collapses and they will panic. Those that can control their emotions will wait patiently for their buying opportunity to come. May be 3 months from now, 13 months from now or 36 month from now; but the market will crash back to reality the way it always does.
Like the ocean, economic cycles ebb and flow and unwise politicians like Trump and his Republican underlings just make the waves bigger.
3
With minimal expertise, with a a passion for investing I have gleaned little bits of date that have curbed my enthusiasm. Papers and info offered from the FED website have indicated the following: The velocity of circulation(PV=MV) gleaned from Eco. 101, since the beginning of the year has declined. That means whatever the Fed finally does with the money supply becomes scarcely relevant except in matters of perception. falling Velocity occurs in times leading to recession and singularly important in analyzing THE GREAT DEPRESSION. Simply: BOMBS,(defense) BITCOIN AND ART, all at their peak prices are examples of DEAD MONEY, which has no multiplier effect. Health care spending has vast multiplier effects(cuts) and without massive infrastructure spending the economy might soon be in jeopardy.
2
Tell that to Portland.
It's not too hard to go long general dynamics in a gop admin.
How can it be the case that politics and the economic 'picture' are not somehow intertwined? As for the case of Brazil, all one has to do is to know that China, itself, surfaces time and time again with the rest of Asia--Korea, especially--to induce Brazil to be dependent on Asia because China engages in mineral extraction activities in Brazil and elsewhere in the Americas to ensure that in the Americas, mineral rights are not vested in anything even remotely American. Rather, they are absolutely Asian and in Asia. What does that mean? If your computer or your television or your radio or your car engine or your cell phone and its component parts rely on mineral products--titanium, tin, copper, iron ore, selenium and so forth--then guess what? It means that if you--the U.S.A., that is-haven't cornered the market on those minerals and have to, instead, rely on some place like Brazil or Asia for the minerals or for the products themselves, then you are in more than a bind or in a pickle: You could be left without a communications apparatus in no time. You could wake up and find that whoever did not like you politically simply refused to sell or to give you the minerals, the rights to the minerals or the products themselves.
4
I've been on the planet long enough to have lived through four recessions and that makes me old enough to know when things aren't right. The Republicans have a terrible track record when it comes to the economy and this trickle down nonsense has led us to a place where the 1% reap all the privileges of a capitalist society and all the losses are absorbed by the middle and lower classes. The stock market has risen on promises to leave unbridled greed alone for awhile but that can't meet the solid growth of the last 8 years, when the stock market doubled. That's not gonna happen again. The time to have invested was 8 years ago, not the next 4. Oh, and did I mention that anyone with a pulse should know that this level of ignorance and mental illness in the White House is a Black Swan trumpeting 24/7. I took my money out on Nov 9th. The stock market has done great since then. I'm still glad I did, because I haven't had to spend a day worrying about when the bottom is gonna drop out. Did I mention I'm old enough to not need this noise.
25
...because capitalism is a cold, soulless machine that steamrolls any ethics that stand in its way.
2
I have a very simple investment strategy. ( which has worked for me )
When republicans are in power, I invest in sectors that will be deregulated, companies that pollute and companies that might want to aggressively expand with very high leverage.
When Democrats are in power, I invest in management companies, green technologies and areas of the world that have newly created peace.
Basically the kids on one end and the parents on the other.
When republicans are in power, I invest in sectors that will be deregulated, companies that pollute and companies that might want to aggressively expand with very high leverage.
When Democrats are in power, I invest in management companies, green technologies and areas of the world that have newly created peace.
Basically the kids on one end and the parents on the other.
7
Speaking as a older person, I do not resemble your remarks. 3 million more voters for Hillary and many of them were older.
Free Markets; Efficient Markets; Private Market, what about a honest market?
How many of us remember Bear Stearns, AIG, or Lehman Brothers of 2008 headlines. Don't forget the Savings and Loan scandals of the 80's.
Markets only work if they are honest. The Security ad Exchange Commission is the number one watchdog the public has. It sends chills up my spine when I hear conservative politicians talking about doing away with the SEC.
Without the SEC is like telling brokerage firms and banks to go play in the front yard and don't play in the street. Without supervision, where do the kids end up? In the street, playing with your money.
How many of us remember Bear Stearns, AIG, or Lehman Brothers of 2008 headlines. Don't forget the Savings and Loan scandals of the 80's.
Markets only work if they are honest. The Security ad Exchange Commission is the number one watchdog the public has. It sends chills up my spine when I hear conservative politicians talking about doing away with the SEC.
Without the SEC is like telling brokerage firms and banks to go play in the front yard and don't play in the street. Without supervision, where do the kids end up? In the street, playing with your money.
14
I'm close to finishing Michael Lewis' book "Panic! The Story of Modern Financial Insanity." Interesting reading about four recent panics. Each section reproduces exuberant articles published by people beforehand, items published during the panic, and postmortem articles after.
I had not previously fully recognized the perfidy of bond rating agencies in contributing to our last one based on bad mortgages packaged up and blessed with Aaa ratings. Some, but not all the investment banks that invented devil-spawns like CDOs, etc. went under.
We're in the run-up to another one, since banksters are still mostly free to run amok. My advisor says to be prepared for a market "correction" (at least 10% drop in markets) at any time now. OK by me, I've been through them before and recovered every time.
Patience, grasshopper.
I had not previously fully recognized the perfidy of bond rating agencies in contributing to our last one based on bad mortgages packaged up and blessed with Aaa ratings. Some, but not all the investment banks that invented devil-spawns like CDOs, etc. went under.
We're in the run-up to another one, since banksters are still mostly free to run amok. My advisor says to be prepared for a market "correction" (at least 10% drop in markets) at any time now. OK by me, I've been through them before and recovered every time.
Patience, grasshopper.
3
"Investment" is just a euphemism for speculation. Your average speculator, er, investor doesn't have the power to influence state policy, so in their case, I'd agree that it wouldn't be worth it to care too much about the political environment, but for those who possess the ability to influence state policy, it's another story.
I would agree with the author that political events generally have a short term effect of the markets. However one should consider politics as a long term impact, just as you would monetary policy, job growth or not, GDP, etc. Example. Assume the ACA were repealed, and then a very large reduction in the tax rate for the wealthy. And couple that with a 10% increase in military spending, a $1 trillion infrastructure budget, a stupid border wall and etc. All these have been discussed and many will be proposed and some will pass. So what’s the impact on the economy?
ACA goes away. More sickness, hospitals and emergency can’t handle it. Healthcare revenue and profits topple. Biggest tax cut in history takes place, wealthy make out like bandits. Wealthy horde the cash, no stimulus to create more jobs. Low and middle income get peanuts. Can’t pay the bills, tighten their belts, GDP slides. Companies start the layoffs again. Low and middle income tighten belts more. GDP sinks further, and on, and on, and on until. Recession!
I exited the markets six weeks ago. Volatility is a wee bit too much for me.
ACA goes away. More sickness, hospitals and emergency can’t handle it. Healthcare revenue and profits topple. Biggest tax cut in history takes place, wealthy make out like bandits. Wealthy horde the cash, no stimulus to create more jobs. Low and middle income get peanuts. Can’t pay the bills, tighten their belts, GDP slides. Companies start the layoffs again. Low and middle income tighten belts more. GDP sinks further, and on, and on, and on until. Recession!
I exited the markets six weeks ago. Volatility is a wee bit too much for me.
22
How can it be the case that politics and the economic 'picture' are not somehow intertwined? As for the case of Brazil, all one has to do is to know that China, itself, surfaces time and time again with the rest of Asia--Korea, especially--to induce Brazil to be dependent on Asia because China engages in mineral extraction activities in Brazil and elsewhere in the Americas to ensure that in the Americas, mineral rights are not vested in anything even remotely American. Rather, they are absolutely Asian and in Asia. What does that mean? If your computer or your television or your radio or your car engine or your cell phone and its component parts rely on mineral products--titanium, tin, copper, iron ore, selenium and so forth--then guess what? It means that if you--the U.S.A., that is-haven't cornered the market on those minerals and have to, instead, rely on some place like Brazil or Asia for the minerals or for the products themselves, then you are in more than a bind or in a pickle: You could be left without a communications apparatus in no time. You could wake up and find that whoever did not like you politically simply refused to sell or to give you the minerals, the rights to the minerals or the products themselves.
1
Love your name and location (that is... unless you're the real Ponzi schemer himself).
2
There’s every reason for confidence.
1
But we don't have anything resembling free markets. We have a simulacrum of a free market. We have trillions in bad debt hidden away at the Federal Reserve. We have destroyed the concept of risk. We have entire nations (eg: Greece) who are not "allowed" to default on debt -- because to do so would collapse European banks (eg: Deutche). We have markets which are propped up by government cronies, and entire industries which are on life support because they mean "jobs". We bail out bankers because they are systemically important, and we even bailout bank stocks because 'why not'? We slap currency manipulators on the wrist, look the other way when LIBOR is manipulated for years, and we reward bank fraud with absurd fines that represent a fraction of ill gotten gains. Our politicians negotiate business deals like multibillion dollar arms deals and concoct protectionist policies masquerading as "free trade" deals. We craft social aid policies which are in reality, blatantly obvious "corporate aid" policies. We selectively enforce our laws against monopoly and undue influence. We reward political supporters with business advantages and penalize opponents. If we had free markets, we wouldn't have *any* of our current pantheon of banking giants. We wouldn't have GM. We wouldn't have the most absurdly expensive healthcare system in the world. We live in one of history's most extreme plutocracies. And we're not supposed to talk about it.
28
Roven-- I don't think it is plutocracy that is to blame. The wealthy/wealth is not what you describe. It is actually the upper middle class, or perhaps just middle class. Perhaps, if the grouping is either Upper Class or Lower Class, then it is the Lower Class that is to blame. People become wealthy because they do not do the things you list. They are not caught-up with such poor investments.
This gets into the argument as to whether the markets are "efficient." I would argue that markets are efficient, in that no one can consistently beat the market. That does not, however, say that markets are always rational. There are routinely panics and bubbles, but it is impossible to predict when one will occur or end.
1
Hi Jim Waddell, and Hello Columbus Ohio! I miss my Massey's Pepperoni Pizza! As for this article, you probably already heard this: a person "beats" Wall Street, by not investing there. I don't recommend this type of investing. As you highlighted, panics and bubbles are routine. Probably some other very unstable stuff too.
1
Well, if there are panics and bubbles, then you can consistently beat the market by buying during the panic and selling during the bubble. While bubbles may be a little hard to detect sometimes, at least the panics are obvious.
I would not even call them panics, however, as the chief cause is usually the unwinding of over-leveraged positions due to a liquidity crisis. They don't sell because they're panicking, they sell to meet margin calls. That is the time when those who do have the liquidity should be buying.
I would not even call them panics, however, as the chief cause is usually the unwinding of over-leveraged positions due to a liquidity crisis. They don't sell because they're panicking, they sell to meet margin calls. That is the time when those who do have the liquidity should be buying.
1
From Columbus too, but prefer (and miss) Donatos pizza.
Studying at the University of Chicago Booth School of Business, birthplace of the EMH. Panics and bubbles have been studied and now represent "liquidity premium" (bubbles may be partially related to the momentum factor).
If you buy during a panic, you are adding liquidity to the market. The liquidity beta (reward for this service) can be found from the regression of returns against liquidity measures and all the Fama Factors.
Rational market holds up even with panics, since the returns earned from buying during these times can be explained as a rational reward for providing liquidity services during downmarket conditions.
Studying at the University of Chicago Booth School of Business, birthplace of the EMH. Panics and bubbles have been studied and now represent "liquidity premium" (bubbles may be partially related to the momentum factor).
If you buy during a panic, you are adding liquidity to the market. The liquidity beta (reward for this service) can be found from the regression of returns against liquidity measures and all the Fama Factors.
Rational market holds up even with panics, since the returns earned from buying during these times can be explained as a rational reward for providing liquidity services during downmarket conditions.
3
Politics do move the Market long-term. But, it is the Private Market. Investments by Private Firms may not be made today in the USA, because of USA Politics. These investments are meant to appreciate over 100 years-out! To me, that is a long time.