To put it into perspective, the last time the market behaved like (multiple drops of this magnitude) this was 90 years ago, in 1929, and it was at the start of the Great Depression. Today was the second largest percentage drop for US Markets in history.<p>Now is not a good time to sell your stock holdings (at least not anymore). This smells of a panic right now.<p>I think a severe recession is all but guaranteed at this point. Let's hope we get through this with no more than that.
I’m buying S&P index every day at this point, trying to drive my average down without trying to find the bottom.<p>...with that being said, I feel really worried about American economic stability long term now. Governors are closing restaurants and businesses leaving tons of folks out of work while providing minimal safety net coverage. Even liberal states like New York are ignoring the downstream economic effects these closures will cause. If most Americans truly cannot afford a $500 surprise bill, we’re in for a very, very rough ride.
I don't understand why people are catching a falling knife. It is as though they have never been in bear markets before. Understand the market psychology and don't waste your money. I have friends who DCA-ed and regret because it took them years just to breakeven.<p>In a standard fear cycle (Google it), we are only at the middle stage between denial and fear. There is an acceleration downwards that we have not experienced yet (Crypto 2018 and China 2015 are good examples if you want to look back at recent history). Wait for that to happen first. You also can feel the time to buy when people are very distraught and demoralized by the endless drops. Twitter activity will change a lot, trust me.<p>A good way to read when to buy is, aside from seeing that everyone is completely mentally exhausted and demoralized, is that the VIX is around 30% and dropping, and distribution is over with accumulation channels being formed, which is when multiple supports are being built. This is when bulls and bears are in equilibrium, with bears quite exhausted but still exuberant. If you want better certainty, at least wait for the stock you want to buy to cross the 200 SMA, because it is a good indicator that the stock is being rationally valued once again.<p>My point is that DCA is only good if the trend favours it. It is central limit theorem where you reduce the variance by multiple sampling. Good shorters DCA downwards as well, so you are fighting these people too if you are DCA-ing now.
PSA: The Dow Jones industrial average is a terrible measure of the stock market. It tracks just 30 stocks, some which have an outsized influence on the measure.<p>This is not to say the stock market is not in freefall, but there are much better indexes to track general market movement.
I am not well versed in the economics of depressions, but almost all the ones I know of were preceded by some monetary imbalance or the explosion of a bubble based on falsely propped up ownings.<p>1929 was stock being leveraged off mortgaged homes and loans, that was clearly no sustainable.<p>2000 was the dot com burst.<p>2008 was mass defaults on home loans.<p>Is there any reason why apart from slow business for 2 months due to corona and the oil war (that resulted from corona causing a loss in demand), the economy can't juts go back to being business as usual once this all passes over ?<p>Is there a particular kind of asset, the collapse of which will seal this drop as a proper depression ?
I'm a bit more optimistic about this crash - a significant portion is due to the (important) constraints on society - closing schools and restaurants. Meaning we can look forward to some pent up demand on the other side when those constraints are loosened.<p>On the other hand, if the US goes into lockdown for a month or more, there's a significant chance that we could be returning to a world very unlike today. The market does not like this kind of uncertainty, and an house of prevention would have been worth $10 trillion dollars of cure.
Just my 2 cents - Take your assets out of the market.<p>Until we (in the US) see a few senators, a justice or two and / or the VP/president/etc succumb to the disease we haven’t hit peak panic.<p>~50% of the workforce is about to be out of a job for a few weeks. A large portion of Restaurants are about to go bankrupt, daycares are about to go bankrupt. Houses are about to drop in price (no money, and elderly dying).<p>The reality is, this could be worse than the Great Depression. At least if we keep this up for any length of time. What we are doing right now is seizing the economy and if we close down everything, it’s going to be hard to start back up.<p>Governments are going to crumble because of this.<p>Long term (a year out) things should be improving. But IMO we have a long way to fall. I wouldn’t be surprised if banks start folding.
> Our Advise: It is time to carefully pick up some stocks based on crushed valuations, but the market is not likely bottoming. It’s hard to say are we two weeks away or months away from market bottoming.<p>You'll know it's time to buy when the advice you get from permabulls like the mortgage industry is to sell.<p>What will happen in between? Failed rally after failed rally. Bear market rallies are extremely effective destroyers of capital. The suck the gullible in and spit out the bones.<p>By the time it's really time to "pick up some stocks based on crushed valuations," nobody will care about stocks. And nobody will care about or believe the rally.
The current S&P P/E ratio is still higher than it was at any other time except the 1920s bubble, the .com boom, and the top of the 1960s bull market.<p><a href="https://www.multpl.com/shiller-pe" rel="nofollow">https://www.multpl.com/shiller-pe</a><p>There are problems comparing the P/E over time periods this long, but it is a cautionary datapoint.
By percentage, this isn't just the worst drop since the 1987 crash--the 1987 drop is the <i>only</i> worse drop. This is worse than any day in the Great Depression.
The S&P 500 is down 30% since Coronavirus started [1], back to April 2017 levels [2], about three years worth of gains erased.<p>But this comes after a decade-long record bull run that's been begging for a 15% correction. Treasury yields were inverted a few months ago, last week bond prices got disjointed from their underlying assets, QE has been incessant since 2008, rates are at literal zero - the bull market was fake, propped-up and political; there is nasty sausage festering in the belly of our financial system and it's set to explode. Get ready for at least another 30% drop.<p>Or:<p>The internet is truly the greatest invention of all time. There is nothing more valuable than the exchange of ideas. We have only begun reaping its rewards. It will be responsible for another 100 year bull run of greater magnitude than the industrial revolution. Not only is innovation at record levels, but the pace of increase of innovation is at record levels. The bull run was not fake, P/E levels of the S&P are in line with historical averages [3]. We are taking Coronavirus very seriously and China has shown that you can "flatten the curve" when you do [4]. This will blow over in a few months and the economy will be right back to where it was. But the stock market is forward-looking and can recover in an instant, the buying opportunities are now.<p>[1] <a href="https://imgur.com/a/aq2yw70" rel="nofollow">https://imgur.com/a/aq2yw70</a> (chart)<p>[2] <a href="https://imgur.com/a/EOWR4Kf" rel="nofollow">https://imgur.com/a/EOWR4Kf</a> (chart)<p>[3] <a href="https://imgur.com/R0zpJiP" rel="nofollow">https://imgur.com/R0zpJiP</a> (chart)<p>[4] <a href="https://imgur.com/VTMOeh9" rel="nofollow">https://imgur.com/VTMOeh9</a> (chart)
This is only the first round.<p>The second round will be over-leveraged investments being uncovered, as any leverage they had in stocks evaporates.<p>Given that the over-leveraged loan situation was out of control during the 2008 GFC, and nothing structural was done to change behavior, it's extremely likely we're going to see some secondary changes.
Worst drop ever for the Nasdaq Index today: -12%. These aren't 1, 2 or 3 standard-deviation events... these are more like 6 or 7 standard-deviations from the mean...
Something to consider for people thinking of jumping into the market via an index fund; in 2008, corporations were in OK shape to weather a downturn. In 2020, a lot of corps are very highly levreged. I think it's likely we'll see a lot of shareholder wipeouts. This will have an interesting effect if you buy an ETF. If 50% of your stocks get wiped out... that big bounce you might expect won't be in your portfolio. Yes, the index will recover it's value... but the composition of pre-post shareholders will be different.<p>I don't think the country is in the mood for shareholders to get bailed out unless individuals get bailed out first... and I don't see that happening.
So I know it's almost impossible to predict the stock market, but... a lot of this crash seems to be based on panic and human psychology concerning the virus (I know there is some effect due to the oil price war though).<p>My question is: if we assume 20-40% of people in the U.S. are drastically underestimating how bad the virus is going to be, then they are more likely to hold their stock until there is finally "proof" that the virus is as bad as everyone with some amount of scientific understanding knows it is going to be, at which point we would expect some portion of these people to panic sell. Wouldn't that indicate that in an event like this, we're not betting on essentially random fluctuations of an emergent economic system, but rather on many people not understanding the trajectory of the virus?<p>In other words, it's almost like a prediction market at this point — you're betting against other people about how damaging the virus is going to end up being. Am I off base here?
This is the moment that management cuts staff and pushes survivors to work harder than ever with no more than the threat of the axe. Realizing productivity gains from job insecurity is unethical, so it only gets used under the illusion that it is the only way for the employer to survive. The reality is that the employer could have operated like this all along but couldn't drop the axe without looking like a butcher until now.<p>Getting laid off is sometimes better than surviving the shit show that is now to come. Quitting for new work, even better.<p>Seize the moment, people. Do not be a victim. You can rebuild your careers. Do not stay with a butcher.
All of the return-seeking money that pushed up asset prices in the first place is still out there, because stock market crashes don't destroy money (they just redistribute it). I wonder who has it now, and I also wonder when it will end up back in the market.
To those that think the market response is likely to become predictable anytime soon — a thought experiment ... how do you think the markets will respond if Warren buffet dies of corona virus? Personally I think this kind of event could trigger a large change in the market (who knows why) and am curious what others think.
I manage a fund for a living and have been doing this stuff for a while. I'm generally an optimist...and I've never been more terrified in my life than now. This makes 2008 look like a keg party. We have a health crisis and the prescription from government has been to induce an economic crisis, one that's possibly (and increasingly more likely) orders of magnitude worse than anything we've ever seen, including the great depression. We are committing suicide. This is a battlefield triage situation, you save the soldiers you can and read the others their last rights. It makes me utterly sick to say that, but that's the grim reality. We need to <i>immediately</i> change our approach and adopt what the UK is doing. AMA
I think as soon as there is some clarity around fiscal policy, we will see markets stabilize. Fiscal policy is coming, we just don't know the extent. So 2 or 3 months from now the virus will have burned out and we will have massive amounts of fiscal stimulus in the economy and the boom ensues. This is the way our Economy and stock market function. As soon as the stock market begins to see this, it will explode to the upside. That maybe in a week or a month or 2.
I have a "balanced" index fund with my retirement savings. I'm 33. I'm simply not touching a thing. I hope this is the correct move.<p>It's amazing. I think I'm a pretty smart guy and I'm finding it very difficult not to second guess these choices. And the worst time to make choices like this is during financial crisis.
I've got some saving and am considering looking into trading if the market gets any worse than this. Do any of you have advice? I was doing some research into ETFs and was considering putting some money in that direction since it seems safer than buying individual stocks.
Also the worst % drop since 1987[0]<p>[0] <a href="https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average#Largest_percentage_changes" rel="nofollow">https://en.wikipedia.org/wiki/List_of_largest_daily_changes_...</a>
Maybe people won't like this question. Is there a point at which does "social distancing" do more economic damage than it does health good?<p>(Not saying we're there yet, just asking if such a point exists, and when.)
Trump threatened Powell's job in order to force him to reduce interest rate and start printing money [1]. Our economy is being micromanaged by Trump who is not an expert in monetory policy and only has disdain for experts of all kinds (virus/economy/climate). Trump says he is qualified to do that because his uncle went to MIT [2].<p>[1] <a href="https://www.nytimes.com/2020/03/14/business/economy/trump-powell-fed-chair.html" rel="nofollow">https://www.nytimes.com/2020/03/14/business/economy/trump-po...</a><p>[2] <a href="https://www.washingtonpost.com/outlook/2020/03/12/truth-about-trumps-uncle-what-it-means-his-presidency/" rel="nofollow">https://www.washingtonpost.com/outlook/2020/03/12/truth-abou...</a>
SPY puts printed today. Up 110%, sold before Trump had his press conference.<p>I think there's going to be a little bit of a bounce tomorrow and then resume drilling.
Super beginner question - as somebody holding some Swiss cash on top of some basic reserve, I understand now it would be too risky to enter any stock/other market. I am a pessimist in expectations what will happen - rather gloomy state of affairs for next year or so, no fancy vaccine/quick tests etc.<p>Here is the question - what investment vehicle, if any, would you consider for looking into when wanting to presumably enter this situation in say 4-5 months? Ideally say some medium term returns, not benefit after 30 years.<p>Sorry for possibly annoying question to the experts, just looking into some guidance
I'd say keep a close eye on the Coronavirus situation. If a vaccine is found and is effective, likely the market will calm down and hit the bottom. After that its about keeping the companies afloat until they can get their revenue back up again. Most likely the quantitative easing programs from the Fed will help in this regard.
I'm quite surprised by this because it was my understanding that companies were doing us a favor by employing most people. That they were forestalling replacing us with robots by paying us near subsistence wages.<p>I'm very confused. On the one hand I have all the things I've been reading in the papers about workers being superfluous.<p>But yet on the other hand when I just look at the evidence, it seems like companies really, really need workers.<p>I wonder what will happen when this is over...