Looks like market forces are taking things into own hands

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
jack1719
Posts: 361
Joined: Tue Mar 23, 2010 6:43 pm

Looks like market forces are taking things into own hands

Post by jack1719 » Thu Jun 20, 2013 11:40 am

lots of red Ink all over the place in bonds..weird too cause on a pretty bad day for equities,no one is running to bonds for safe cover..

Stonebr
Posts: 1467
Joined: Wed Jan 21, 2009 11:19 am
Location: Maine

Re: Looks like market forces are taking things into own hand

Post by Stonebr » Thu Jun 20, 2013 12:01 pm

Cash is comforting on days like today.
"have more than thou showest, | speak less than thou knowest" -- The Fool in King Lear

User avatar
CaliJim
Posts: 2982
Joined: Sun Feb 28, 2010 8:47 pm
Location: California, near the beach

Re: Looks like market forces are taking things into own hand

Post by CaliJim » Thu Jun 20, 2013 12:21 pm

Did something happen today? I wasn't watching. The day to day market gyrations no longer interest me. I don't think they are actionable. I only look every once in a while to see if it is time to rebalance.
-calijim- | | For more info, click this Wiki

heyyou
Posts: 3132
Joined: Tue Feb 20, 2007 4:58 pm

Re: Looks like market forces are taking things into own hand

Post by heyyou » Thu Jun 20, 2013 1:26 pm

Did something happen today? I wasn't watching. The day to day market gyrations no longer interest me. I don't think they are actionable. I only look every once in a while to see if it is time to rebalance.
+1 with emphasis on the lack of actionable info

"Don't know, and don't care." Jason Zweig's response to someone at a dinner party asking for a comment about that day's closing prices.

About a hundred years ago, when John Jacob Astor was asked about future market prices, his reply was "They will fluctuate."

I quit checking when I discovered that I could have a good day at work but a less pleasant evening, when I found that my portfolio had shrunk during that day. In retirement, my portfolio can fluctuate by a multiple of my annual spending--all the more reason to not look often.

garlandwhizzer
Posts: 1979
Joined: Fri Aug 06, 2010 3:42 pm

Re: Looks like market forces are taking things into own hand

Post by garlandwhizzer » Thu Jun 20, 2013 4:23 pm

It is interesting that today stocks, bonds, gold, commodities, EM, DM, REITs, basically everything dropped significantly, unlike 2008 when stocks tanked and bonds gained. No place other than cash offered any relief today. Why? It is likely that we're 2 years away from the time when the Fed actually raises interest rates. All they've indicated now is that they will at some point in the not too distant future, if data demonstrates that the economy and labor markets continue to strengthen, they might reduce bond purchases from the current 85 billion a month. Not stop bond purchases, mind you, merely reduce the amount, probably down to 65 billion or 75 billion which still exerts a very significant downward pressure on interest rates. This tempest in a teapot has been anticipated for a long time, and yet, when announced, all asset classes tanked as if the panic button had been pressed. What to make it? Perhaps a very nervous Mr. Market anticipating the worst and cashing out after a good run. Who knows? Should the last few days alter our investment strategy and asset allocation? Clearly not in my opinion. If equities drop significantly from here to a point where their valuations become quite compelling (which is not the case now as they are fairly valued in my judgement ) I'll consider buying more of them. And if long term high quality bonds continue to get slaughtered, driving up their yields, at some point, certainly not now, I, being a bit of a contrarian at heart, might consider climbing on board what many see as a sinking ship.

User avatar
stevewolfe
Posts: 1529
Joined: Fri Oct 10, 2008 7:07 pm

Re: Looks like market forces are taking things into own hand

Post by stevewolfe » Thu Jun 20, 2013 4:57 pm

garlandwhizzer wrote:It is interesting that today stocks, bonds, gold, commodities, EM, DM, REITs, basically everything dropped significantly, unlike 2008 when stocks tanked and bonds gained. No place other than cash offered any relief today.
Hey, my savings bonds held up fine today! :) :beer

User avatar
Rainier
Posts: 1357
Joined: Thu Jun 14, 2012 5:59 am

Re: Looks like market forces are taking things into own hand

Post by Rainier » Thu Jun 20, 2013 4:58 pm

Just curious, if money comes out of stocks, bonds and gold where does it go? You and I can hold cash but institutions do not.

User avatar
grabiner
Advisory Board
Posts: 22692
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Looks like market forces are taking things into own hand

Post by grabiner » Thu Jun 20, 2013 10:22 pm

Rainier wrote:Just curious, if money comes out of stocks, bonds and gold where does it go? You and I can hold cash but institutions do not.
Money doesn't come out of the market as a whole, as every transaction has a buyer and a seller. Rather, investments which are already held change in value, because the value is based on the market price. If a stock last traded yesterday at $100, and someone buys it today at $99, the old stockholder lost $1 because he has $99 in cash rather than a share worth $100, but every existing stockholder also lost 1% of his investment value without selling any stock.
Wiki David Grabiner

jack1719
Posts: 361
Joined: Tue Mar 23, 2010 6:43 pm

Re: Looks like market forces are taking things into own hand

Post by jack1719 » Tue Jun 25, 2013 9:15 am

30 year Mortgage rates up to 4.50% today. that's quite a 1 month jump!

User avatar
Sheepdog
Posts: 5158
Joined: Tue Feb 27, 2007 3:05 pm
Location: Indiana, retired 1998 at age 65

Re: Looks like market forces are taking things into own hand

Post by Sheepdog » Tue Jun 25, 2013 9:17 am

jack1719 wrote:30 year Mortgage rates up to 4.50% today. that's quite a 1 month jump!
Still low when compared to the time my mortgage was 11.5%.
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

Valuethinker
Posts: 35997
Joined: Fri May 11, 2007 11:07 am

Re: Looks like market forces are taking things into own hand

Post by Valuethinker » Tue Jun 25, 2013 9:18 am

This is 1994 all over again.

Fed is warning of future tightening, just as Greenspan surprised the market by raising rates in 1994.

All risk assets go down: bonds because of increased interest rate risk, stocks because of economic/ profits risk and also increased attractiveness of bond yields.

Leveraged positions start to get liquidated, turning a rush for the exits into a crush. 'Crowded trades' become impossible to get out of. Knock on effects multiply.

Yes this all feels so very much like 1994. I believe the 30 year US Treasury dropped -20% in 1994, let's hope a little less violent this time.

Markets always overshoot though. If the 'right' interest rate for the 10 year Treasury is 3.0 or 3.5%, then we could see it go to 3.5% or 4.0%.

Given the bank funding curve, if MBS yields rise, then so do mortgage rates, very quickly.

Here is hoping it is all knee jerk.

Valuethinker
Posts: 35997
Joined: Fri May 11, 2007 11:07 am

Re: Looks like market forces are taking things into own hand

Post by Valuethinker » Tue Jun 25, 2013 9:19 am

Sheepdog wrote:
jack1719 wrote:30 year Mortgage rates up to 4.50% today. that's quite a 1 month jump!
Still low when compared to the time my mortgage was 11.5%.
Nominal not real. If inflation was 8% at that point you were paying 3.5% real.

If inflation is c. 2% and mortgages are 4.5%, then 2.5% real-- not so very far off.

Valuethinker
Posts: 35997
Joined: Fri May 11, 2007 11:07 am

Re: Looks like market forces are taking things into own hand

Post by Valuethinker » Tue Jun 25, 2013 9:20 am

Rainier wrote:Just curious, if money comes out of stocks, bonds and gold where does it go? You and I can hold cash but institutions do not.
Investors do hold cash or cash like. Banks hold ST money market instruments and have deposits with the Fed. Institutions hold money market assets like Treasury Bills and Commercial Paper.

jwa
Posts: 202
Joined: Sat Aug 04, 2012 3:53 pm

Re: Looks like market forces are taking things into own hand

Post by jwa » Tue Jun 25, 2013 9:21 am

Sheepdog wrote:
jack1719 wrote:30 year Mortgage rates up to 4.50% today. that's quite a 1 month jump!
Still low when compared to the time my mortgage was 11.5%.
Ah yes... the good old days. I remember them so well.

Post Reply