U.S. stocks in free fall
Re: U.S. stocks in freefall
Heh, we're still 1000 points higher than when this thread started or about 8.5% up.
Really shouldn't add to this thread until we drop below 10800 again.
Really shouldn't add to this thread until we drop below 10800 again.
Re: U.S. stocks in freefall
or maybe 2 coins or a die.... unless you count one option as the coin landing on the edgeMunir wrote:Oi Oi !!! Yesterday it was Greece, today it's Italy, tomorrow Spain?
Seriously, we need another coin flip by Rick. :roll:
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Re: U.S. stocks in freefall
I guess it's official, according to MSN Money:
TOP NEWS
New worries in Europe send stocks into free fall
TOP NEWS
New worries in Europe send stocks into free fall
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard |
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"You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs
Re: U.S. stocks in freefall
Greece's GDP is $300 billion. (Italy's is $2 trillion, the US is $15 trillion.)
http://www.google.com/publicdata/explor ... greece+gdp
Walmart's annual revenues are $421 billion.
The downside of a bad outcome of the Greek crisis is what? $100 billion? (1/3 of their GDP?) 1 trillion over the next ten years?
I don't know what is driving the US market's direction and volatility, but I doubt it is the reality of the situation in Greece (or Italy).
Keith
http://www.google.com/publicdata/explor ... greece+gdp
Walmart's annual revenues are $421 billion.
The downside of a bad outcome of the Greek crisis is what? $100 billion? (1/3 of their GDP?) 1 trillion over the next ten years?
I don't know what is driving the US market's direction and volatility, but I doubt it is the reality of the situation in Greece (or Italy).
Keith
Déjà Vu is not a prediction
Re: U.S. stocks in freefall
rrosenkoetter wrote:Heh, we're still 1000 points higher than when this thread started or about 8.5% up.
Really shouldn't add to this thread until we drop below 10800 again.
Or maybe a max drop in one day of, I dont know 2%-4%.
Maybe we can get LBill to change the title and ground rules a little
I just keep adding to this when all the doom and gloom is around to keep from another thread starting.
Just doing my part to keep the thread count down
"Out of clutter, find simplicity” Albert Einstein
Re: U.S. stocks in freefall
The European situation is far more serious than you make it out to be. What you are not considering is that a Greek and Italian default would cause French banks to implode. French bonds are already reacting violently to this possibility. That would easily trigger a French downgrade and then all hell breaks loose, to the tune of trillions of Euros as banks begin to fail across the Eurozone — which could feasibly spread to other continents.umfundi wrote:The downside of a bad outcome of the Greek crisis is what? $100 billion? (1/3 of their GDP?) 1 trillion over the next ten years?
I don't know what is driving the US market's direction and volatility, but I doubt it is the reality of the situation in Greece (or Italy).
How US Banks Are Lying About Their European Exposure; Or How Bilateral Netting Ends With A Bang, Not A Whimper
We are likely on the verge of a world wide banking crisis. The only thing that can stop it is a printing spree by central banks. The only problem is that Germany will be the last planet on earth to agree to printing, since Weimar hyperinflation is still fresh in their minds.
And if that weren't enough, back here in the US, half of all mortgages are underwater.
CNBC: Half of US Mortgages Are Effectively Underwater
...and because of this, many hedge funds are heavily shorting PrimeX — the index that tracks the price of bonds backed by pools of adjustable-rate prime mortgages.
WSJ: Prime Mortgage-Bond Index Drops, Stirring Worries
These aren't the crappy sub-prime mortgages that brought us down in 2008. These are the highest quality mortgages that are being shorted.
As more and more managers short PrimeX, and more Prime mortgages go underwater, the risk of a prime mortgage crisis rises significantly, until it becomes self-fulfilling.
So, get ready for a banking crisis, and a Prime mortgage crisis in the months ahead...
Re: U.S. stocks in freefall
SECONDED!!rrosenkoetter wrote:Heh, we're still 1000 points higher than when this thread started or about 8.5% up.
Really shouldn't add to this thread until we drop below 10800 again.
Re: U.S. stocks in freefall
It depends on whether you are measuring from the start of the freefall on Aug 8 or the end. The market dropped 635 points that day. We're up 336 points from the start of the freefall or 2.9%. That's about one day's loss nowadays.Heh, we're still 1000 points higher than when this thread started or about 8.5% up.
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard |
|
"You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs
Re: U.S. stocks in freefall
Gumby,Gumby wrote:The European situation is far more serious than you make it out to be. What you are not considering is that a Greek and Italian default would cause French banks to implode. French bonds are already reacting violently to this possibility. That would easily trigger a French downgrade and then all hell breaks loose, to the tune of trillions of Euros as banks begin to fail across the Eurozone — which could feasibly spread to other continents.umfundi wrote:The downside of a bad outcome of the Greek crisis is what? $100 billion? (1/3 of their GDP?) 1 trillion over the next ten years?
I don't know what is driving the US market's direction and volatility, but I doubt it is the reality of the situation in Greece (or Italy).
How US Banks Are Lying About Their European Exposure; Or How Bilateral Netting Ends With A Bang, Not A Whimper
We are likely on the verge of a world wide banking crisis. The only thing that can stop it is a printing spree by central banks. The only problem is that Germany will be the last planet on earth to agree to printing, since Weimar hyperinflation is still fresh in their minds.
And if that weren't enough, back here in the US, half of all mortgages are underwater.
CNBC: Half of US Mortgages Are Effectively Underwater
...and because of this, many hedge funds are heavily shorting PrimeX — the index that tracks the price of bonds backed by pools of adjustable-rate prime mortgages.
WSJ: Prime Mortgage-Bond Index Drops, Stirring Worries
These aren't the crappy sub-prime mortgages that brought us down in 2008. These are the highest quality mortgages that are being shorted.
As more and more managers short PrimeX, and more Prime mortgages go underwater, the risk of a prime mortgage crisis rises significantly, until it becomes self-fulfilling.
So, get ready for a a banking crisis, and a Prime mortgage crisis in the months ahead...
I do not at all disagree with what you say, but,
1) To postdict the day to day market movements by referencing daily (mostly political) events re Greece (and now Italy) is in my opinion, horse puckey.
2) All the evidence you cite is known. In an efficient market, that knowledge must be reflected in the current price. So, what is the optimal thing to do? As a Boglehead, I see no need to do anything special to prepare for
In other words, my asset allocation is based on my needs and my risk tolerance. It is not based on anticipated future events.a banking crisis, and a Prime mortgage crisis in the months ahead...
I follow the news with interest, but I rarely find anything to act on.
Keith
Déjà Vu is not a prediction
Re: U.S. stocks in freefall
If the market goes up 1% for ten days straight, then why is it bad it if drops 3%? Why do we need posts of doom and gloom if we're all effectively 7% up? (Just an example)Jay69 wrote:rrosenkoetter wrote:Heh, we're still 1000 points higher than when this thread started or about 8.5% up.
Really shouldn't add to this thread until we drop below 10800 again.
Or maybe a max drop in one day of, I dont know 2%-4%.
Re: U.S. stocks in freefall
Today was not even a ReallyBadDay. Call me when it gets worse.
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Re: U.S. stocks in freefall
???livesoft wrote:Today was not even a ReallyBadDay. Call me when it gets worse.
Today was the 2nd worst drop in the last 12 months for: VGK, VEU, VWO, VSS
3rd worst drop for VTI, VOO, VNQI, VEA
4th for DGS, VPL, VXF, VNQ
Re: U.S. stocks in freefall
It will rise again. Fluctuation happens.
Chaz |
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Re: U.S. stocks in freefall
It might not have been a "really bad day", but it was "bad enough" for me to scoop up 50 shares of SPY at $123.
I tried to get VTI at $63, but my bid didn't fill. Oh, well.
I'm in the "very-low-stakes" poker room. I move to the quarter slots in extended trading hours.
Where can I buy one of those Italian CDs? Bunga-Bunga.
I tried to get VTI at $63, but my bid didn't fill. Oh, well.
I'm in the "very-low-stakes" poker room. I move to the quarter slots in extended trading hours.
Where can I buy one of those Italian CDs? Bunga-Bunga.
Re: U.S. stocks in freefall
??? Let's take VWO for instance. What percentage did it drop on August 8th? September 22nd? August 4th?hsv_climber wrote:???livesoft wrote:Today was not even a ReallyBadDay. Call me when it gets worse.
Today was the 2nd worst drop in the last 12 months for: VGK, VEU, VWO, VSS
3rd worst drop for VTI, VOO, VNQI, VEA
4th for DGS, VPL, VXF, VNQ
Did not VEA drop more on October 31st than it did today? Today is probably the 5th worst day for VEA in the last 120 trading days or so.
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Re: U.S. stocks in freefall
~5-10 min. before the closing, VWO was 40.35 for a drop of 5.73%. That is probably what I've got with google delayed quotes at the time of my post.livesoft wrote: ??? Let's take VWO for instance. What percentage did it drop on August 8th? September 22nd? August 4th?
Did not VEA drop more on October 31st than it did today? Today is probably the 5th worst day for VEA in the last 120 trading days or so.
On Aug. 4th, 46.66 -> 43.99 ... Drop of 5.72%.
On Oct. 31, VEA dropped from 34.88 to 33.07 -> 5.18% drop. Today's (end of day) drop was 5.17%, but price was slightly lower during the day with a bigger drop. So, it is probably another case where 1E-3 precision and delayed quotes could be the difference.
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Re: U.S. stocks in freefall
The question is "Why all this volatility?" A healthy market shouldn't be this way.
But putting that aside, I just keep invested and rebalance. Trying to outsmart the market, trying to get out and back in at the "right time" is a bad thing to try, especially when volatile like this.
But putting that aside, I just keep invested and rebalance. Trying to outsmart the market, trying to get out and back in at the "right time" is a bad thing to try, especially when volatile like this.
Re: U.S. stocks in freefall
Remember the story of Nero fiddling while Rome burned?
Current version will be the Italian govt bickering, but the inevitable austerity measures will surely trigger some incendiarism in Rome and beyond. This reaction of course really helps to solve the problem....
Current version will be the Italian govt bickering, but the inevitable austerity measures will surely trigger some incendiarism in Rome and beyond. This reaction of course really helps to solve the problem....
Re: U.S. stocks in freefall
I don't believe the market is as efficient as you imagine it to be. If it was, it would have seen this coming weeks ago. Many people figured out that the latest Euro plan couldn't possibly work — over three weeks ago — using some very straightforward math...umfundi wrote:All the evidence you cite is known. In an efficient market, that knowledge must be reflected in the current price.
There Is No Bailout Spoon: The Math Behind The €2 Trillion EFSF Reveals A "Pea Shooter" Not A "Bazooka" (10/18/2011)
So, three weeks ago, the math revealed that the EFSF needed to be able to backstop about €3 Trillion to stop a full-blown crisis from unfolding — rather than the €440 billion unworkable plan that the market rallied on. The HFT algos rallied the market every time an unsubstantiated rumor surfaced.
The market ignored the obvious math. Bogleheads actually made jokes and dismissed the math. Not very efficient if you ask me.
You must either have an awesome portfolio, or have a lot of risk tolerance... or believe in miracles.umfundi wrote:So, what is the optimal thing to do? As a Boglehead, I see no need to do anything special to prepare forIn other words, my asset allocation is based on my needs and my risk tolerance. It is not based on anticipated future events.a banking crisis, and a Prime mortgage crisis in the months ahead...
I follow the news with interest, but I rarely find anything to act on.
Last edited by Gumby on Wed Nov 09, 2011 8:07 pm, edited 9 times in total.
Re: U.S. stocks in freefall
So what? By definition, some day out of this year's 365 has to be the 2nd worst drop for VGK, VEU, yadda yadda. Why not this one?hsv_climber wrote:???livesoft wrote:Today was not even a ReallyBadDay. Call me when it gets worse.
Today was the 2nd worst drop in the last 12 months for: VGK, VEU, VWO, VSS
3rd worst drop for VTI, VOO, VNQI, VEA
4th for DGS, VPL, VXF, VNQ
Re: U.S. stocks in freefall
I would think that one's ability to shrug off market volatility has much to do with whether one is in the accumulation phase or the withdrawal phase. I'm in the former, adding fresh blood every two weeks, so I'm happy to get more shares for my money.Gumby wrote: You must either have an awesome portfolio, or have a lot of risk tolerance... or believe in miracles.
Re: U.S. stocks in freefall
I simply believe that the market is efficient enough that I am too stupid and too slow to take advantage of its inefficiencies. Yes, I do have an awesome portfolio. 75% stocks, (1/3 of those global non-US), 25% bonds, all diversified in low-cost index funds. 12 months cash equivalents outside of that portfolio. I don't think that involves a lot of risk. It involves a lot of noise tolerance.Gumby wrote:I don't believe the market is as efficient as you imagine it to be. If it was, it would have seen this coming weeks ago. Many people figured out that the latest Euro plan couldn't possibly work — over three weeks ago — using some very straightforward math...umfundi wrote:All the evidence you cite is known. In an efficient market, that knowledge must be reflected in the current price.
There Is No Bailout Spoon: The Math Behind The €2 Trillion EFSF Reveals A "Pea Shooter" Not A "Bazooka" (10/18/2011)
So, three weeks ago, the math revealed that the EFSF needed to be able to backstop about €3 Trillion to stop a full-blown crisis from unfolding — rather than the €440 billion unworkable plan that the market rallied on. The HFT algos rallied the market every time an unsubstantiated rumor surfaced.
The market ignored the obvious math. Bogleheads actually made jokes and dismissed the math. Not very efficient if you ask me.
You must either have an awesome portfolio, or have a lot of risk tolerance... or believe in miracles.umfundi wrote:So, what is the optimal thing to do? As a Boglehead, I see no need to do anything special to prepare forIn other words, my asset allocation is based on my needs and my risk tolerance. It is not based on anticipated future events.a banking crisis, and a Prime mortgage crisis in the months ahead...
I follow the news with interest, but I rarely find anything to act on.
For the life of me, given the "news" out of Italy today, I see nothing that I should change.
I don't believe in miracles. But, when your ship does go down, I plan not to be on it. If I am, I believe I will be among the last to drown.
And so, can you show us the people who became very rich by not ignoring the obvious math? In the last three weeks? What investments did they buy or sell mid-October?The market ignored the obvious math.
Is there a post for that? What did you do about the link you quote?
http://www.zerohedge.com/news/why-doing ... ka-pea-sho
Best wishes,
Keith
(edited for typos)
Last edited by umfundi on Wed Nov 09, 2011 9:51 pm, edited 2 times in total.
Déjà Vu is not a prediction
Re: U.S. stocks in freefall
Bungo,Bungo wrote:I would think that one's ability to shrug off market volatility has much to do with whether one is in the accumulation phase or the withdrawal phase. I'm in the former, adding fresh blood every two weeks, so I'm happy to get more shares for my money.Gumby wrote: You must either have an awesome portfolio, or have a lot of risk tolerance... or believe in miracles.
For what it's worth, I am a "tweener": I am retired, so I am not in the accumulation phase. But, we have enough income from my pension and various part-time activities to cover our cash flow, so I am not yet in the withdrawal phase. A good place to be.
The interesting thing (to me) is that, as I have become more experienced and battle-scarred, my risk tolerance has gone up. Maybe, as I said in my previous post, it's my noise tolerance. Don't jump just because people are shouting in your ear.
Keith
Déjà Vu is not a prediction
Re: U.S. stocks in freefall
Einhorn sure looks like he did the correct math by shorting GMCR in mid-October. Based on the AH price he just made a few hundred million. The market ignored the inflated price of this stock as they did with Netflix for awhile and as they are still doing with Salesforce and to a lesser extent Amazon. Netflix went from $300 to $80 in a matter of weeks...Green Mountain Coffee Roasters went from $115 to $50 in the same amount of time. The data was out there and was just ignored. The data is out there for Salesforce, but investors are ignoring it as well. Efficient market my a$$umfundi wrote:And so, can you show us the people who became very rich by not ignoring the obvious math? In the last three weeks? What investments did they buy or sell mid-October?The market ignored the obvious math.
Is there a post for that? What did you do about the link you quote?
http://www.zerohedge.com/news/why-doing ... ka-pea-sho
Best wishes,
Keith
(edited for typos)
Re: U.S. stocks in freefall
Yep...umfundi wrote:And so, can you show us the people who became very rich by not ignoring the obvious math? In the last three weeks? What investments did they buy or sell mid-October?
http://www.zerohedge.com/news/timberx
And, of course, anyone who shorted French or Italian bonds has done very well.
http://www.zerohedge.com/news/ecb-buyin ... ginot-line
I read it. Understood it. And realized that most investors with stock-heavy portfolios are delusional that Europe will resolve itself without a €2 or €3 Trillion EFSF — which it doesn't have and won't be able to raise through external funding.umfundi wrote:What did you do about the link you quote?
Last edited by Gumby on Wed Nov 09, 2011 10:50 pm, edited 4 times in total.
Re: U.S. stocks in freefall
Jfet, what did you do? I am sure you must have made a lot of money.Jfet wrote:Einhorn sure looks like he did the correct math by shorting GMCR in mid-October. Based on the AH price he just made a few hundred million. The market ignored the inflated price of this stock as they did with Netflix for awhile and as they are still doing with Salesforce and to a lesser extent Amazon. Netflix went from $300 to $80 in a matter of weeks...Green Mountain Coffee Roasters went from $115 to $50 in the same amount of time. The data was out there and was just ignored. The data is out there for Salesforce, but investors are ignoring it as well. Efficient market my a$$umfundi wrote:And so, can you show us the people who became very rich by not ignoring the obvious math? In the last three weeks? What investments did they buy or sell mid-October?The market ignored the obvious math.
Is there a post for that? What did you do about the link you quote?
http://www.zerohedge.com/news/why-doing ... ka-pea-sho
Best wishes,
Keith
(edited for typos)
I thought the "obvious math" of the current thread had to do with predicting responses to the the European crisis. I am pleased to see that it also predicted the events at Green Mountain Coffee Roasters and Netflix.
So: What of the next three weeks?
I predict that Thanksgiving will occur, and that Black Friday will be more black, or more gray, or even whiter, than some other past Fridays.
Since mid-October, GMCR has gone from about $90 to about $70. YTD, GMCR has more than doubled, $34.45 to $70.30.Green Mountain Coffee Roasters went from $115 to $50 in the same amount of time.
Keith
Déjà Vu is not a prediction
Re: U.S. stocks in freefall
So you did not personally profit from this opportunity?Gumby wrote:Yep...umfundi wrote:And so, can you show us the people who became very rich by not ignoring the obvious math? In the last three weeks? What investments did they buy or sell mid-October?
http://www.zerohedge.com/news/timberx
And, of course, anyone who shorted French or Italian bonds has done very well.
http://www.zerohedge.com/news/ecb-buyin ... ginot-line
I read it. Understood it. And realized that most investors with stock-heavy portfolios are delusional that Europe will resolve itself without a €2 or €3 Trillion EFSF — which it doesn't have and can't raise through external funding.umfundi wrote:What did you do about the link you quote?
Even though you are one of only about five people in the entire universe who knows how to post the Euro symbol € ? (I am assuming you are using an American keyboard.)
:lol: Keith
Déjà Vu is not a prediction
Re: U.S. stocks in freefall
You should probably check GMCR this morning...$70 was so yesterday.umfundi wrote:Jfet, what did you do? I am sure you must have made a lot of money.Jfet wrote:Einhorn sure looks like he did the correct math by shorting GMCR in mid-October. Based on the AH price he just made a few hundred million. The market ignored the inflated price of this stock as they did with Netflix for awhile and as they are still doing with Salesforce and to a lesser extent Amazon. Netflix went from $300 to $80 in a matter of weeks...Green Mountain Coffee Roasters went from $115 to $50 in the same amount of time. The data was out there and was just ignored. The data is out there for Salesforce, but investors are ignoring it as well. Efficient market my a$$umfundi wrote:And so, can you show us the people who became very rich by not ignoring the obvious math? In the last three weeks? What investments did they buy or sell mid-October?The market ignored the obvious math.
Is there a post for that? What did you do about the link you quote?
http://www.zerohedge.com/news/why-doing ... ka-pea-sho
Best wishes,
Keith
(edited for typos)
I thought the "obvious math" of the current thread had to do with predicting responses to the the European crisis. I am pleased to see that it also predicted the events at Green Mountain Coffee Roasters and Netflix.
So: What of the next three weeks?
I predict that Thanksgiving will occur, and that Black Friday will be more black, or more gray, or even whiter, than some other past Fridays.
Since mid-October, GMCR has gone from about $90 to about $70. YTD, GMCR has more than doubled, $34.45 to $70.30.Green Mountain Coffee Roasters went from $115 to $50 in the same amount of time.
Keith
What did I do? I bought a $270 put on Netflix early this year and sold it for a small loss before the drop, and I bought a $110 put on GMCR and sold it when GMCR dropped to $100 for a small profit. I am never able to convince the general market they are holding doo doo in a reasonable amount of time before I get nervous the put is going to expire worthless. I am holding 5 Jan 2012 $140 puts on CRM (salesforce) that are in the money right now but this will probably be the one overvalued stock that doesn't drop...
Re: U.S. stocks in freefall
O Boy this has a been a busy thread from yesterday when I put it back to the top
Well be intresting to see what the market gods come up with today.
For myself I will stay in my little boat with the big waves, no changes to the plan.
Well be intresting to see what the market gods come up with today.
For myself I will stay in my little boat with the big waves, no changes to the plan.
"Out of clutter, find simplicity” Albert Einstein
Re: U.S. stocks in freefall
Me? I just read about the €uro zone to stay informed, mostly for entertainment. My 4x25 Permanent Portfolio tends to have steady profits, with very low volatility, regardless of what good or bad things are happening in the world. I don't check it very often, but let's see... Yep. I'm doing just fine. +13.5% YTD.umfundi wrote:So you did not personally profit from this opportunity?
Last edited by Gumby on Thu Nov 10, 2011 8:29 am, edited 1 time in total.
Re: U.S. stocks in freefall
Yesterday was a really good day to pick up some Vanguard MSCI Europe ETF (VGK). It went from $46.11 on 11/08 to $43.01 on 11/09, which is -7.2%. Not as low a price as 9.22 ($39.25) or 10.03 ($39.43), but still pretty good price. It was $48.88 on 10.27. Crazy volatility.
According to Yahoo, the last 6 years dividends were:
2010 2.306
2009 1.912
2008 2.901
2007 2.356
2006 1.809
2005 1.380
Average is 2.11, At 43.31, that is 4.9% dividend yield.
http://finance.yahoo.com/q/hp?s=VGK+Historical+Prices
According to Yahoo, the last 6 years dividends were:
2010 2.306
2009 1.912
2008 2.901
2007 2.356
2006 1.809
2005 1.380
Average is 2.11, At 43.31, that is 4.9% dividend yield.
http://finance.yahoo.com/q/hp?s=VGK+Historical+Prices
Re: U.S. stocks in freefall
The Greek etc bonds held by Euro banks have been leveraged from 30:1 up to 50:1. Lots more money involved than just the "principle" amount.umfundi wrote:Greece's GDP is $300 billion. (Italy's is $2 trillion, the US is $15 trillion.)
http://www.google.com/publicdata/explor ... greece+gdp
Walmart's annual revenues are $421 billion.
The downside of a bad outcome of the Greek crisis is what? $100 billion? (1/3 of their GDP?) 1 trillion over the next ten years?
I don't know what is driving the US market's direction and volatility, but I doubt it is the reality of the situation in Greece (or Italy).
Keith
And the US giant banks have loaned money to the Euro banks... again, leveraged.
So there is 1 domino set up, and it falls against 2 dominos, which each fall against 2 more...how many get knocked over when its all done? And the _rate_ at which they fall over might overwhelm the ability of the financial system to deal with it, even if the domino could be stood up again quite soon. Liquidity crisis.
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Re: U.S. stocks in freefall
Too big to fail?Bongleur wrote: The Greek etc bonds held by Euro banks have been leveraged from 30:1 up to 50:1. Lots more money involved than just the "principle" amount.
And the US giant banks have loaned money to the Euro banks... again, leveraged.
So there is 1 domino set up, and it falls against 2 dominos, which each fall against 2 more...how many get knocked over when its all done? And the _rate_ at which they fall over might overwhelm the ability of the financial system to deal with it, even if the domino could be stood up again quite soon. Liquidity crisis.
In the good old days, The Greeks would have devalued their currency, added a dose of inflation, and have been done with it.
With the Euro, they cannot do that. They have to reduce real wages by austerity, and they have to convince the banks to write down their "investments". The end result is the same, there's just a lot more noise in the process.
I stand by my opinion, that the size of the Greek problem does not justify the noise.
Best wishes,
Keith
(On the bright side, Beaujolais Noveau will be released on Thursday. My frivolous thing for Thanksgiving.)
Déjà Vu is not a prediction
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Re: U.S. stocks in freefall
1. it is other European financial institutions that hold the Greek government bonds. The recipe for another post Lehman Crash has the right ingredientsumfundi wrote: I stand by my opinion, that the size of the Greek problem does not justify the noise.
Best wishes,
Keith
(On the bright side, Beaujolais Noveau will be released on Thursday. My frivolous thing for Thanksgiving.)
2. when Greece goes, then what about Portugal, Ireland, Spain and Italy? Italy is the big cahuna.
And of course if Italy goes, it takes the French banking system with it, as they are loaded to the gills with Italian government bonds.
Contagion. Lehman was a relatively small financial institution. Yet its shock waves still echo.
Re: U.S. stocks in freefall
wrt leverage, this week's commentary is helpful:
http://www.hussman.net/wmc/wmc111114.htm
SNIP
...So Italy's debt is not just huge relative to its own economy - it is just plain huge, at about $2.5 trillion in dollar terms. This is a terrible problem for France, whose banks are the largest single creditor to Italy, holding Italian debt worth about one-fifth of Italian GDP.
With Italian yields pushing past 6% and briefly passing 7% last week, Italy is actually very much in the situation that Greece was in about 18 months ago, when it was hoped that new "austerity" measures would shrink the deficit by forcing painful cuts in government spending. They didn't. The effect of austerity policies in weak economies is generally to damage the economy even more, causing a significant shortfall in tax revenues, so deficits don't materially improve despite the reduced spending.
As I noted more than a year ago in Violating the No-Ponzi Condition :
"The basic problem is that Greece has insufficient economic growth, enormous deficits (nearly 14% of GDP), a heavy existing debt burden as a proportion of GDP (over 120%), accruing at high interest rates (about 8%), payable in a currency that it is unable to devalue. This creates a violation of what economists call the "transversality" or "no-Ponzi" condition. In order to credibly pay debt off, the debt has to have a well-defined present value (technically, the present value of the future debt should vanish if you look far enough into the future). Unless Greece implements enormous fiscal austerity, its debt will grow faster than the rate that investors use to discount it back to present value.
SNIP
end quote of previous commentary
SNIP
If the problem broadens to Italy (and mathematically, we suspect it will because Italy's debt now also violates the no-Ponzi condition), the implications are very unpleasant. Given leverage ratios of more than 40-to-1 for most European banks, there is no way to meaningfully restructure Italian debt without wiping out the capital base of Europe's banks, and forcing the nationalization of the entire European banking system.
This is not just a technical issue, and not one that some appropriately "technocratic" government can solve (despite heroic expectations for the Super Mario Brothers heading Italy and the ECB). It is an algebraic issue that cannot be solved without making 2 and 2 something other than 4. Austerity plans will not help, particularly in the context of a likely global recession, which is already clearly evident in peripheral Europe and is showing up now in the coincident indicators of even the presumably "stronger" European economies (Germany had already reported unexpected weakness in factory orders; last week, it reported "surprising" job losses for October). Europe's problems are simply beyond the point where greater "austerity" will be sufficient.
SNIP
http://www.hussman.net/wmc/wmc111114.htm
SNIP
...So Italy's debt is not just huge relative to its own economy - it is just plain huge, at about $2.5 trillion in dollar terms. This is a terrible problem for France, whose banks are the largest single creditor to Italy, holding Italian debt worth about one-fifth of Italian GDP.
With Italian yields pushing past 6% and briefly passing 7% last week, Italy is actually very much in the situation that Greece was in about 18 months ago, when it was hoped that new "austerity" measures would shrink the deficit by forcing painful cuts in government spending. They didn't. The effect of austerity policies in weak economies is generally to damage the economy even more, causing a significant shortfall in tax revenues, so deficits don't materially improve despite the reduced spending.
As I noted more than a year ago in Violating the No-Ponzi Condition :
"The basic problem is that Greece has insufficient economic growth, enormous deficits (nearly 14% of GDP), a heavy existing debt burden as a proportion of GDP (over 120%), accruing at high interest rates (about 8%), payable in a currency that it is unable to devalue. This creates a violation of what economists call the "transversality" or "no-Ponzi" condition. In order to credibly pay debt off, the debt has to have a well-defined present value (technically, the present value of the future debt should vanish if you look far enough into the future). Unless Greece implements enormous fiscal austerity, its debt will grow faster than the rate that investors use to discount it back to present value.
SNIP
end quote of previous commentary
SNIP
If the problem broadens to Italy (and mathematically, we suspect it will because Italy's debt now also violates the no-Ponzi condition), the implications are very unpleasant. Given leverage ratios of more than 40-to-1 for most European banks, there is no way to meaningfully restructure Italian debt without wiping out the capital base of Europe's banks, and forcing the nationalization of the entire European banking system.
This is not just a technical issue, and not one that some appropriately "technocratic" government can solve (despite heroic expectations for the Super Mario Brothers heading Italy and the ECB). It is an algebraic issue that cannot be solved without making 2 and 2 something other than 4. Austerity plans will not help, particularly in the context of a likely global recession, which is already clearly evident in peripheral Europe and is showing up now in the coincident indicators of even the presumably "stronger" European economies (Germany had already reported unexpected weakness in factory orders; last week, it reported "surprising" job losses for October). Europe's problems are simply beyond the point where greater "austerity" will be sufficient.
SNIP
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Re: U.S. stocks in freefall
The epic saga continues...
Last edited by Gumby on Mon Nov 21, 2011 10:49 am, edited 2 times in total.
Re: U.S. stocks in freefall
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard |
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"You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs
Re: U.S. stocks in freefall
I have set up buy triggers for SPY below 1100 . you think that can happen this year ?
Thanks!
- Taylor Larimore
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What can happen this year?
Anything can happen in the short-term. Long-term, it is a reasonable guess that the stock market will probably be higher.manuvns wrote:I have set up buy triggers for SPY below 1100 . you think that can happen this year ?
Stay-the-course.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: What can happen this year?
stock market have remained at the same level last 13 years .Taylor Larimore wrote: Anything can happen in the short-term. Long-term, it is a reasonable guess that the stock market will probably be higher.
Stay-the-course.
Best wishes.
Taylor
http://www.google.com//finance?chdnp=1& ... INX&ntsp=0
Thanks!
Re: What can happen this year?
Umm...let's see...where do I start?manuvns wrote: stock market have remained at the same level last 13 years .
http://www.google.com//finance?chdnp=1& ... INX&ntsp=0
First, the chart you cited is a price chart, so it does not reflect the total return of the S&P500.
Second, the S&P 500 index is an index that reflects the price of 500 stocks, not the whole U.S. stock market, which I think is over 7,000 stocks.
Third, the U.S. stock market is less than half of the world stock market.
Fourth, a wise investor is diversified among different asset classes other than the 500 stocks in the S&P 500, including bonds and cash.
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Re: U.S. stocks in freefall
How many folks do you know are invested in 25% domestic diversified equity 25% cash 25% Fixed Income 25% Intl diversified equity?
Theoretically speaking from a doomsday scenario only, if diversified equity were wiped out or depressed for a longer than normal time frame (think 20 years), chances are some portion of diversified fixed income would be affected negatively, leaving you with about 40 cents on the dollar. Sounds like Mr. Potter was offering a better deal buying up George Bailey's shares at 50 cents on the dollar, cash!!
Today's action is just a small pothole, the large one down the highway awaits.
Theoretically speaking from a doomsday scenario only, if diversified equity were wiped out or depressed for a longer than normal time frame (think 20 years), chances are some portion of diversified fixed income would be affected negatively, leaving you with about 40 cents on the dollar. Sounds like Mr. Potter was offering a better deal buying up George Bailey's shares at 50 cents on the dollar, cash!!
Today's action is just a small pothole, the large one down the highway awaits.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Re: What can happen this year?
mptfan wrote:Umm...let's see...where do I start?manuvns wrote: stock market have remained at the same level last 13 years .
http://www.google.com//finance?chdnp=1& ... INX&ntsp=0
First, the chart you cited is a price chart, so it does not reflect the total return of the S&P500.
Second, the S&P 500 index is an index that reflects the price of 500 stocks, not the whole U.S. stock market, which I think is over 7,000 stocks.
Third, the U.S. stock market is less than half of the world stock market.
Fourth, a wise investor is diversified among different asset classes other than the 500 stocks in the S&P 500, including bonds and cash.
look at annual returns here http://en.wikipedia.org/wiki/S%26P_500
form the end of 1998 the till today the returns/CAGR are close to 1.8% . you can do better with a CD .
Thanks!
Re: What can happen this year?
Pretty good deal if you're in the accumulation phase.manuvns wrote: look at annual returns here http://en.wikipedia.org/wiki/S%26P_500
form the end of 1998 the till today the returns/CAGR are close to 1.8% . you can do better with a CD .
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Re: What can happen this year?
manuvns wrote:stock market have remained at the same level last 13 years .
But you said "the same level," implying though not saying no growth.manuvns wrote:form the end of 1998 the till today the returns/CAGR are close to 1.8%. You can do better with a CD.
What's your point? Everybody ought to know that stock market returns are highly variable even over periods as long as a decade. That's why there's a risk premium. You get it because you actually are taking risk. Invest in stocks, and sometimes you won't do any better than a CD over a whole decade.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: U.S. stocks in freefall
And, as far as I know it's not written in stone tablets anywhere that you'll ever earn anything in stocks, or that you'll earn enough to justify all the worry and uncertainty you have to endure. Nobody knows nothin'.What's your point? Everybody ought to know that stock market returns are highly variable even over periods as long as a decade. That's why there's a risk premium. You get it because you actually are taking risk. Invest in stocks, and sometimes you won't do any better than a CD over a whole decade.
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard |
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"You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs
Re: What can happen this year?
Actually, it's worse than that. Fully reinvesting dividends and adjusting for inflation on yields about a 0.28% return over the same 13 year period. And that's before taxes.manuvns wrote:form the end of 1998 the till today the returns/CAGR are close to 1.8% . you can do better with a CD .
See: Investing Through Time Calculator
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Re: What can happen this year?
It's not fair to adjust one investment for inflation and not adjust the other. Adjust CDs for inflation, too, please. And if you're assuming taxable investing, allow for the fact that stocks get favored tax treatment over CDs.Gumby wrote:Actually, it's worse than that. Fully reinvesting dividends and adjusting for inflation on yields about a 0.28% return over the same 13 year period. And that's before taxes.manuvns wrote:form the end of 1998 the till today the returns/CAGR are close to 1.8% . you can do better with a CD .
See: Investing Through Time Calculator
Neither of them did as well as plain old boring Series I Savings Bonds, of course.
Also, of course, being stocks, the answer you get will vary wildly depending on the choice of starting point, and I think it's sort of incumbent on someone to explain why they chose the starting point they did. "10 years" isn't totally arbitrary, because it's the longest time period that is customarily reported for mutual funds. "Start of available data" isn't totally arbitrary. "Start of a decade" isn't totally arbitrary. "End of 1998" isn't an obvious attempt to measure from the peak, but I don't quite know why you'd choose that particular epoch.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.