U.S. stocks in freefall

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
VictoriaF
Posts: 16468
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: U.S. stocks in freefall

Postby VictoriaF » Thu Jan 07, 2016 4:28 pm

Freefall is so Newtonian. And the modern trading is so Einsteinian.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

Day9
Posts: 579
Joined: Mon Jun 11, 2012 6:22 pm

Re: U.S. stocks in freefall

Postby Day9 » Thu Jan 07, 2016 4:30 pm

"U.S. stocks fall approaching speed of light and distorting space-time" doesn't have quite the same ring to it.
I'm just a fan of the person I got my user name from

surfstar
Posts: 1377
Joined: Fri Sep 13, 2013 12:17 pm
Location: Santa Barbara, CA

Re: U.S. stocks in freefall

Postby surfstar » Thu Jan 07, 2016 4:31 pm

Don't invest/bet on "beliefs"! Take the emotion out of investing! The facts state "stay the course".

Will be another interesting revisit in 30 days...

User avatar
VictoriaF
Posts: 16468
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: U.S. stocks in freefall

Postby VictoriaF » Thu Jan 07, 2016 4:34 pm

Day9 wrote:
VictoriaF wrote:Freefall is so Newtonian. And the modern trading is so Einsteinian.

"U.S. stocks fall approaching speed of light and distorting space-time" doesn't have quite the same ring to it.


Sample headline: "The Wall Street is bending light, distorting space, and reversing time to retirement."

Victoria
Last edited by VictoriaF on Thu Jan 07, 2016 4:38 pm, edited 1 time in total.
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

User avatar
neurosphere
Posts: 2296
Joined: Sun Jan 17, 2010 1:55 pm
Location: NYC
Contact:

Re: U.S. stocks in freefall

Postby neurosphere » Thu Jan 07, 2016 4:38 pm

tj218 wrote:
If in 30 days, when my fears of a systemic shock don't pan out or look likely, I am going back into stocks.

I know this defies wisdom and the philosophy. But I don't see myself getting substantially hurt by this move this one time. You buy homeowner's insurance in the event of a fire. It costs you a premium, but you still do it. In my mind, I feel like a wildfire is right next door, I am paying the premium to protect my home. Worst case, I lose potential gains over the next 30 days. Okay, that's my premium for safety that I am prepared to pay.


Suppose the market doesn't do much in the next 30 days. No big drop happens. What will have changed about the world and the world's economy by the 31st day, that will make you more comfortable with market risk?

NS

User avatar
HomerJ
Posts: 9860
Joined: Fri Jun 06, 2008 12:50 pm

Re: U.S. stocks in freefall

Postby HomerJ » Thu Jan 07, 2016 5:29 pm

tj218 wrote:If in 30 days, when my fears of a systemic shock don't pan out or look likely, I am going back into stocks.


What if it still looks likely in 30 days? How in the world do you determine "likely"?

Ungoliant
Posts: 61
Joined: Sat May 22, 2010 9:23 pm

Re: U.S. stocks in freefall

Postby Ungoliant » Thu Jan 07, 2016 6:03 pm

tj218 wrote:
HomerJ wrote:Seriously, we just had a 10% drop in August/September, right? Then it bounced back. What's different 4 months later that THIS time, you need to go all bonds?


Like I said, I overreacted, went very heavy on bonds. Maybe that's mistake #2 (#1 would be deviating). If so I am prepared to deal with those consequences. I'm not afraid of a slight downturn, I am afraid of a deep, rapid downturn.

If in 30 days, when my fears of a systemic shock don't pan out or look likely, I am going back into stocks.

I know this defies wisdom and the philosophy. But I don't see myself getting substantially hurt by this move this one time. You buy homeowner's insurance in the event of a fire. It costs you a premium, but you still do it. In my mind, I feel like a wildfire is right next door, I am paying the premium to protect my home. Worst case, I lose potential gains over the next 30 days. Okay, that's my premium for safety that I am prepared to pay.

IF you knew the market was going to drop like a rock, do you stay the course for the sake of staying the course or do you try to minimize your risk? The flaw in this is I am not clairvoyant. I can't possibly know what the market will do. I have a beliefabout the state of the global economy and equity markets and I have staked a position to minimize my risks.

I do appreciate the discussion/interventions you are all probably right. At the very least this can be a tale used for future Bogleheads who "get a feeling".


You're falling into the trap of thinking that you can accurately gauge when risks are at their greatest and just avoid being in the market at those times, but I'm pretty sure you're overestimating your ability in that regard. If it were that easy, everyone would do it and buy-and-hold would show a clear history of below average returns, but that's not the case. It's very easy to convince yourself that the global economy is extraordinarily risky for this reason or that, but that doesn't necessarily make it true.

The thing is, it doesn't sound like you're really expecting to beat the market, but just that you're content to accept the likelihood of lower total returns in exchange for avoiding risk (where you perceive it to be). That's a perfectly reasonable position to take, but the much easier way to achieve that is by just finding a stock/bond ratio that you're comfortable with keeping at all times. That achieves the exact same goal of trading returns for lower risk, but without the requirement that you constantly monitor and correctly interpret the state of the global economy, and without the stress that comes from trying to time everything correctly.

User avatar
Christine_NM
Posts: 2492
Joined: Tue Feb 20, 2007 1:13 am
Location: New Mexico

Re: U.S. stocks in freefall

Postby Christine_NM » Thu Jan 07, 2016 6:12 pm

VictoriaF wrote:
Day9 wrote:
VictoriaF wrote:Freefall is so Newtonian. And the modern trading is so Einsteinian.

"U.S. stocks fall approaching speed of light and distorting space-time" doesn't have quite the same ring to it.


Sample headline: "The Wall Street is bending light, distorting space, and reversing time to retirement."

Victoria


"China's black hole sucks in US stocks"
10% cash 45% stock 45% bond. Retired, w/d rate 1.5%

Grogs
Posts: 340
Joined: Tue Mar 24, 2015 4:55 pm

Re: U.S. stocks in freefall

Postby Grogs » Thu Jan 07, 2016 6:14 pm

Last year was pretty good for me. I fired my high-priced (2% AUM) investment manager, transferred my Roth to Vanguard, moved my EF from my 0% checking to Ally, got the Roth and 401k funded, and was able to save some money to open a taxable account. I opened the taxable Tuesday night and bought 10k of VTSAX (total stock market) Wednesday. I was rather happy to get it after the 3% drop M-W, and a bit less happy to immediately lose 2.5% today, but that's the stock market. Stocks go up, stocks go down.

On the positive side, buying VTSAX in the taxable (for tax efficiency) put me too heavy on the stock side of things. I was going to put in a post on the Personal Investing forum about the best way to correct my AA, but if we have a few more steep declines the problem may take care of itself. :)

User avatar
burt
Posts: 532
Joined: Sun Feb 17, 2008 7:47 am

Re: U.S. stocks in freefall

Postby burt » Thu Jan 07, 2016 6:28 pm

Recently re-watched Margin Call with Kevin Spacey.
A reenactment of the collapse of Lehman Brother in 2008-2009.
One of my favorite movies.

"Its just money; its made up. Pieces of paper with pictures on it so we don't have to kill each other just to get something to eat."

burt

bayview
Posts: 1025
Joined: Thu Aug 02, 2012 7:05 pm
Location: WNC

Re: U.S. stocks in freefall

Postby bayview » Thu Jan 07, 2016 6:40 pm

At one point in 2008-09 when I became particularly frazzled, I changed all my new TSP contributions to G fund, because I just wasn't comfortable with the equity-heavy AA I had at the time. But I never sold my existing funds, especially at a loss.

This helped calm me down, in that I was addressing my AA but without hurting myself. I had already been doing a lot of buying of cheap equity funds, so I didn't completely miss out on the bargain hunting.

Those who are still employed have more than one trick up our sleeves to change our AA. OP, the next time this happens (and it will), consider this angle, although you'll probably have a more comfortable AA at that point. It's not the cold-bloodedly correct thing to do, I guess, but it will make you feel like you're doing something without destroying your savings while you're at it.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

kenner
Posts: 3129
Joined: Sat Mar 01, 2008 8:45 am

Re: U.S. stocks in freefall

Postby kenner » Thu Jan 07, 2016 7:05 pm

Much of the current financial crisis is driven by the fact that China's economic rise is rather sudden in terms of real-world experience - and largely engineered by a communist/hybrid system that few people really understand. Uncertainty is anathema to financial markets and there seems to be almost no track record to judge whether China has appropriate tools to get back on track in a responsible manner.

User avatar
dougger5
Posts: 179
Joined: Fri Nov 27, 2015 11:58 am
Location: Not far from Malvern

Re: U.S. stocks in freefall

Postby dougger5 » Thu Jan 07, 2016 7:08 pm

Oh, JOY! Pending orders just popped up for funds in my SIMPLE IRA account. Since they probably won't execute until closing tomorrow, here's hoping the rally holds off until Monday :beer

And a good hunk of that is headed for the 2035 fund. I didn't dump anything in 2008, and I ain't about to start now :)
"I've been ionized, but I'm okay now." -Buckaroo Banzai

sawhorse
Posts: 2703
Joined: Sun Mar 01, 2015 7:05 pm

Re: U.S. stocks in freefall

Postby sawhorse » Thu Jan 07, 2016 8:22 pm

kenner wrote:Much of the current financial crisis is driven by the fact that China's economic rise is rather sudden in terms of real-world experience - and largely engineered by a communist/hybrid system that few people really understand. Uncertainty is anathema to financial markets and there seems to be almost no track record to judge whether China has appropriate tools to get back on track in a responsible manner.

China's stock market is going through puberty. Every stock market has to go through this unpleasant phase. Quick impulsive decisions, learning from mistakes rather than already having the experience to reduce those mistakes, unpredictable changes, growth spurts, confusion about self.

The difference is that, compared to the past, world markets are so connected that China's puberty woes - any country's woes actually - affect the rest of the world's markets to an unprecedented degree.

ArbitraryGuy
Posts: 16
Joined: Fri Jun 27, 2008 1:26 am

Re: U.S. stocks in freefall

Postby ArbitraryGuy » Thu Jan 07, 2016 9:14 pm

Now that my portfolio has grown, a 5% drop, such as the past few days, now means real money. Feeling a bit little nervous, I logged on to Vanguard and clicked around, contemplating action. I found a (new to me) section where Vanguard calculates one's "personal rate of return" and calculated mine. This number made me quite happy (I started in October of 2007, so there were plenty of gnarly bumps between then and now) and reminded me that I'm doing the right thing.

There is nowhere else (that I know of) where I could put my money for the rate of return I've had with buy-and-hold for the past 9 years. To ignore the "noise" and stay the course seems to me to be wise counsel.

ETA: I fully expect some reversion to the mean in my rate of return over the next few years. I'll still be happy with that.

jschmitz28
Posts: 7
Joined: Sun Jun 29, 2014 8:12 pm

Re: U.S. stocks in freefall

Postby jschmitz28 » Thu Jan 07, 2016 9:51 pm

ArbitraryGuy wrote:Now that my portfolio has grown, a 5% drop, such as the past few days, now means real money. Feeling a bit little nervous, I logged on to Vanguard and clicked around, contemplating action. I found a (new to me) section where Vanguard calculates one's "personal rate of return" and calculated mine. This number made me quite happy (I started in October of 2007, so there were plenty of gnarly bumps between then and now) and reminded me that I'm doing the right thing.

There is nowhere else (that I know of) where I could put my money for the rate of return I've had with buy-and-hold for the past 9 years. To ignore the "noise" and stay the course seems to me to be wise counsel.

ETA: I fully expect some reversion to the mean in my rate of return over the next few years. I'll still be happy with that.


Thanks for sharing! I looked the same thing today, but it says my rate of return is "as of 12/31/2015" - sadly, my rate of return is much closer to zero than it was then. In fact, I've made almost no money since I started investing in vanguard index funds in 2011 (and was actually in the red a few months ago):

Image

The graph is a bit misleading since most of my contributions have been in the past year.

User avatar
nisiprius
Advisory Board
Posts: 33201
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: U.S. stocks in freefall

Postby nisiprius » Thu Jan 07, 2016 9:59 pm

IT'S OFFICIAL!
Image

2011:
Image
2013:
Image
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.

ogrehead
Posts: 133
Joined: Tue Dec 08, 2015 9:32 am

Re: U.S. stocks in freefall

Postby ogrehead » Thu Jan 07, 2016 10:02 pm

jschmitz28 wrote:The graph is a bit misleading since most of my contributions have been in the past year.

That's pretty key though, isn't it? You should feel better if you look at the return of the dollars you invested back in 2011. It's not fair to look at your total portfolio returns as if they are 5 year returns when it's mostly losses from dollars that have been in the market less than a year. Returns of less than a year are noise. If you didn't lose much in the past 12 months then you are doing better than most investors including me; the market ended where it started, but it was up most of the year so dollar-cost averaging would put you in the red, along with the sad 5% losses YTD.

Keep buying, time is your friend, and you shouldn't invest in stocks if you don't have time.

tj218
Posts: 351
Joined: Thu Dec 20, 2007 6:27 pm

Re: U.S. stocks in freefall

Postby tj218 » Thu Jan 07, 2016 10:06 pm

nisiprius wrote:IT'S OFFICIAL!
Image

2011:
Image
2013:
Image



Great screenshots. LOL. As someone who did make a move today, I am not above laughing at this. They do say even a broken clock is right twice a day...but chances are I am wrong and did the wrong thing. Oh well. I will report back either way. I don't think this lesson will cost me too much, but we'll see.

jschmitz28
Posts: 7
Joined: Sun Jun 29, 2014 8:12 pm

Re: U.S. stocks in freefall

Postby jschmitz28 » Thu Jan 07, 2016 10:19 pm

ogrehead wrote:
jschmitz28 wrote:The graph is a bit misleading since most of my contributions have been in the past year.

That's pretty key though, isn't it? You should feel better if you look at the return of the dollars you invested back in 2011. It's not fair to look at your total portfolio returns as if they are 5 year returns when it's mostly losses from dollars that have been in the market less than a year. Returns of less than a year are noise. If you didn't lose much in the past 12 months then you are doing better than most investors including me; the market ended where it started, but it was up most of the year so dollar-cost averaging would put you in the red, along with the sad 5% losses YTD.

Keep buying, time is your friend, and you shouldn't invest in stocks if you don't have time.


Totally agree! Just thought it was a funny graph - I still have a couple decades before I need to worry :happy

hnzw rui
Posts: 578
Joined: Tue Sep 22, 2015 2:26 pm

Re: U.S. stocks in freefall

Postby hnzw rui » Thu Jan 07, 2016 10:46 pm

carofe wrote:I think tj218 should take the money out of the Target Date 2045 and do his own AA according to his risk tolerance (80/20 or even 70/30).

Alternately, Vanguard also has a number of balanced funds with a more conservative allocation so a person only sees, for example, a 10-35% drop in the total portfolio instead of 50% in just the stock portion.

Passive
Balanced VBIAX 60/40
LifeStrategy Income VASIX 20/80
LifeStrategy Conservative Growth VSCGX 40/60
LifeStrategy Moderate Growth VSMGX 60/40
Target Retirement Income VTINX 30/70
Target Retirement 2010 VTENX 35/65
Target Retirement 2015 VTXVX 50/50
Target Retirement 2020 VTWNX 60/40

Active
Wellesley Income VWIAX 35/65
Wellington VWENX 65/35

Not as familiar with other fund companies but I know Fidelity has the Fidelity Freedom Index funds (lifecycle) and some index-based target risk funds.

Disclosure: I'm full auto on Target Retirement 2040 VFORX and my investment policy is pretty much Don't look.

User avatar
avenger
Posts: 723
Joined: Mon Dec 02, 2013 12:11 pm

Re: U.S. stocks in freefall

Postby avenger » Fri Jan 08, 2016 5:18 am

jschmitz28 wrote:
ogrehead wrote:
jschmitz28 wrote:The graph is a bit misleading since most of my contributions have been in the past year.

That's pretty key though, isn't it? You should feel better if you look at the return of the dollars you invested back in 2011. It's not fair to look at your total portfolio returns as if they are 5 year returns when it's mostly losses from dollars that have been in the market less than a year. Returns of less than a year are noise. If you didn't lose much in the past 12 months then you are doing better than most investors including me; the market ended where it started, but it was up most of the year so dollar-cost averaging would put you in the red, along with the sad 5% losses YTD.

Keep buying, time is your friend, and you shouldn't invest in stocks if you don't have time.


Totally agree! Just thought it was a funny graph - I still have a couple decades before I need to worry :happy


My vanguard account looks the same. Started investing in early 2012 in my vanguard account and I would have made more money sitting in a 0% savings account. Also investing for the long run here. Good luck!
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [Four fund portfolio + Stable Value fund]

User avatar
VictoriaF
Posts: 16468
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: U.S. stocks in freefall

Postby VictoriaF » Fri Jan 08, 2016 8:49 am

Christine_NM wrote:
VictoriaF wrote:
Day9 wrote:
VictoriaF wrote:Freefall is so Newtonian. And the modern trading is so Einsteinian.

"U.S. stocks fall approaching speed of light and distorting space-time" doesn't have quite the same ring to it.


Sample headline: "The Wall Street is bending light, distorting space, and reversing time to retirement."

Victoria


"China's black hole sucks in US stocks"


"The trading event horizon envelops Shanghai and moves westward"

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

User avatar
nisiprius
Advisory Board
Posts: 33201
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: U.S. stocks in freefall

Postby nisiprius » Fri Jan 08, 2016 9:15 am

Burton Malkiel: Permabull in a China shop?

Now, in a sense Malkiel issued a warning of sorts in 2015: (Google on phrase "China’s Market-Intervention Folly" to read WSJ article), but it took the form of nagging China to quit interfering with free-market economics. He didn't issue any kind of caution to U.S. investors, unless we were expected to read between the lines.

2007:
Image
2014:
Ignore China at your own peril
Image

What he says is more or less measured and sane, though.
There’s no question about the fact that there is a necessary structural change in the Chinese economy.... what is, for me, very positive, and I think, not appreciated to the extent that it should be, is that consumption is only about a third of GDP. And there’s no reason in the world why consumption couldn’t be 50 percent of GDP, or even more than that. It’s 70 percent of GDP in the United States....

I think that there’s far too much pessimism about China than there should be. And growth may slow down to 7 percent or even 6 percent, but China is not going to crash and burn. Quite the contrary: It’s going to continue to be, among the large economies of the world, the one that has the highest growth rate....

the other reason that I’m optimistic—you asked what investors ought to do—is that valuations matter. And China is about as cheap in terms of valuations as I’ve seen it in the years I’ve been following it...


2015:
Image
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.

carofe
Posts: 253
Joined: Thu Mar 20, 2014 7:21 pm

Re: U.S. stocks in freefall

Postby carofe » Fri Jan 08, 2016 9:32 am

I hope the US market pulls the China one up a little bit to smooth their recession. That would be the best scenario for this year. Instead of China messing the US market, the US helping the China one.

User avatar
Rx 4 investing
Posts: 735
Joined: Sat Apr 25, 2015 11:03 am

Re: U.S. stocks in freefall

Postby Rx 4 investing » Fri Jan 08, 2016 10:20 am

"Investors have to understand that anything can happen in the economy, and anything can happen in the market in the course of the year."

Jack Bogle, from 12-29-15 Interview with Bloomberg TV.
“Everyone is a disciplined, long-term investor until the market goes down.” – Steve Forbes

User avatar
Maynard F. Speer
Posts: 2139
Joined: Wed Mar 18, 2015 10:31 am

Re: U.S. stocks in freefall

Postby Maynard F. Speer » Fri Jan 08, 2016 10:50 am

nisiprius wrote:Burton Malkiel: Permabull in a China shop?

Now, in a sense Malkiel issued a warning of sorts in 2015: (Google on phrase "China’s Market-Intervention Folly" to read WSJ article), but it took the form of nagging China to quit interfering with free-market economics. He didn't issue any kind of caution to U.S. investors, unless we were expected to read between the lines.

2007:
Image
2014:
Ignore China at your own peril
Image

What he says is more or less measured and sane, though.
There’s no question about the fact that there is a necessary structural change in the Chinese economy.... what is, for me, very positive, and I think, not appreciated to the extent that it should be, is that consumption is only about a third of GDP. And there’s no reason in the world why consumption couldn’t be 50 percent of GDP, or even more than that. It’s 70 percent of GDP in the United States....

I think that there’s far too much pessimism about China than there should be. And growth may slow down to 7 percent or even 6 percent, but China is not going to crash and burn. Quite the contrary: It’s going to continue to be, among the large economies of the world, the one that has the highest growth rate....

the other reason that I’m optimistic—you asked what investors ought to do—is that valuations matter. And China is about as cheap in terms of valuations as I’ve seen it in the years I’ve been following it...


2015:
Image


I'm inclined to agree with Malkiel - I think there's a good case the Chinese market is about where the US was around the 1920s ... And currently it's 80% retail investors, who have no real experience, and aren't looking at fundamentals or macro data

An investment in the mainland stock market in recent years hasn't actually looked so bad - and I'm sure Malkiel would've taken profits at some point on the way up ... Having said that I luckily had both my Chinese funds in the 'trend following' part of my portfolio, so managed to sell between May and June

Image
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes

User avatar
HomerJ
Posts: 9860
Joined: Fri Jun 06, 2008 12:50 pm

Re: U.S. stocks in freefall

Postby HomerJ » Fri Jan 08, 2016 11:13 am

Maynard F. Speer wrote:Image


Isn't this chart extremely misleading since foreigners can't directly buy stocks in the Chinese market?

Most of the mutual funds trading Chinese proxy stocks made nowhere near 150% gains last year at the peak, but more like 20%-30% at the peak (and are now down or even going from Jan 2014 - Jan 2016, instead of what your graph above suggests).

Here's Fidelity Advisor China Region Fund. This comparison to Vanguard Total Stock Market Index looks nothing like your chart above.

Image

Here's a list of funds that invest in China and Hong Kong

http://money.usnews.com/funds/mutual-funds/rankings/china-region

None of them have done anywhere near what your chart suggests.

tj218
Posts: 351
Joined: Thu Dec 20, 2007 6:27 pm

Re: U.S. stocks in freefall

Postby tj218 » Fri Jan 08, 2016 11:27 am

I'd like to point out that my move to bonds wasn't initiated because of the movement of the Chinese market, it was a trigger. My movement was based far more on geopolitical concerns. The Chinese market move only served as confirmation (bias) of some larger trends. I'll sum it up briefly so we can all get a good laugh from how wrong it was 6 months from now. Maybe other deluded people can learn from it in the future. But here it is for full rebuke:
--------------------------------------------------
The price of oil is at record lows. An excess of supply (Saudi Arabia, fracking, etc.) or decreased demand or some combination have caused this situation. Now the Mid-East is actually getting more unstable by the day with the proxy war between Saudi Arabia and Iran. Pre 2014, if a news headline mentioned that Saudi's and Iran were in crisis or tension existed it would be enough cause the price of a barrel of oil to increase, usually significantly. We know that Saudi Arabia, Iran and Russia all have weakened economies due to the price oil. While the Saudi's are keeping the pumps flowing to drive out U.S. frackers (some want to stem the flow to increase prices but they are losing out in the kingdom), the Iranians (due to the nuke deal are going to be able to start selling oil in more markets) and Russians need the price of oil to go up. But it's not happening despite rising tensions.

Which now brings me to China, IF the price of oil is continuing to plunge despite parties that want the price to go up and threats of war in the Mid-East to me that means that means demand for oil has dropped pretty significantly. Why? Well it's not because there is a lot of green energy and electric cars. The global economy is far weaker than it is perceived. The Chinese economy is probably the toughest to pin down, but if investors are fleeing it could indicate either overproduction,a big slow down, or herd mentality (it could be this, but I don't think it is). Add that plus stock markets at or near peaks to me means a correction is coming. And I believe that Western governments have very little ammo to stimulate the economy with interest rates at near 0.

I am sure the intelligent readers of this forum will find holes in my reasoning. It's probably why I am wrong. But I do enjoy the discussions and the mental exercise.

User avatar
HomerJ
Posts: 9860
Joined: Fri Jun 06, 2008 12:50 pm

Re: U.S. stocks in freefall

Postby HomerJ » Fri Jan 08, 2016 12:14 pm

tj218 wrote:I'd like to point out that my move to bonds wasn't initiated because of the movement of the Chinese market, it was a trigger. My movement was based far more on geopolitical concerns. The Chinese market move only served as confirmation (bias) of some larger trends. I'll sum it up briefly so we can all get a good laugh from how wrong it was 6 months from now. Maybe other deluded people can learn from it in the future. But here it is for full rebuke:
--------------------------------------------------
The price of oil is at record lows. An excess of supply (Saudi Arabia, fracking, etc.) or decreased demand or some combination have caused this situation. Now the Mid-East is actually getting more unstable by the day with the proxy war between Saudi Arabia and Iran. Pre 2014, if a news headline mentioned that Saudi's and Iran were in crisis or tension existed it would be enough cause the price of a barrel of oil to increase, usually significantly. We know that Saudi Arabia, Iran and Russia all have weakened economies due to the price oil. While the Saudi's are keeping the pumps flowing to drive out U.S. frackers (some want to stem the flow to increase prices but they are losing out in the kingdom), the Iranians (due to the nuke deal are going to be able to start selling oil in more markets) and Russians need the price of oil to go up. But it's not happening despite rising tensions.

Which now brings me to China, IF the price of oil is continuing to plunge despite parties that want the price to go up and threats of war in the Mid-East to me that means that means demand for oil has dropped pretty significantly. Why? Well it's not because there is a lot of green energy and electric cars. The global economy is far weaker than it is perceived. The Chinese economy is probably the toughest to pin down, but if investors are fleeing it could indicate either overproduction,a big slow down, or herd mentality (it could be this, but I don't think it is). Add that plus stock markets at or near peaks to me means a correction is coming. And I believe that Western governments have very little ammo to stimulate the economy with interest rates at near 0.

I am sure the intelligent readers of this forum will find holes in my reasoning. It's probably why I am wrong. But I do enjoy the discussions and the mental exercise.


Oh, it's good reasoning. But people have come up with very good reasons just like this in the past (ALL of the past - every year, there's always good reasons to expect a global crash). And most of the time, the crash didn't happen. But sometimes it did.

The REAL question I have to ask you though is, what is going to change in a month? When you start making market timing decisions based on global geopolitical factors, it's pretty hard to get the timing right.

Some new poster last summer went 100% to cash claiming that he did it because of the vast amount of U.S. debt. I couldn't figure out why hadn't gone to 100% cash in the spring or the year before. What changed last summer that suddenly the U.S. debt was a problem in August, but not in June?

Kudos by the way for posting your reasoning. I appreciate that you did that. I do think it's solid good reasoning. You may indeed be right. But will it matter 10-20 years from now?

But I don't think it's possible to avoid the market down-swings. So instead I'm 50/50 stocks/bonds (so I can handle the down-swings), and I'll just take what the market gives me over the long-term and not worry about the short-term.

MrVargas
Posts: 68
Joined: Sat Sep 11, 2010 4:35 pm

Re: U.S. stocks in freefall

Postby MrVargas » Fri Jan 08, 2016 12:19 pm

tj218 wrote:I'd like to point out that my move to bonds wasn't initiated because of the movement of the Chinese market, it was a trigger. My movement was based far more on geopolitical concerns. The Chinese market move only served as confirmation (bias) of some larger trends. I'll sum it up briefly so we can all get a good laugh from how wrong it was 6 months from now. Maybe other deluded people can learn from it in the future. But here it is for full rebuke:
--------------------------------------------------
The price of oil is at record lows. An excess of supply (Saudi Arabia, fracking, etc.) or decreased demand or some combination have caused this situation. Now the Mid-East is actually getting more unstable by the day with the proxy war between Saudi Arabia and Iran. Pre 2014, if a news headline mentioned that Saudi's and Iran were in crisis or tension existed it would be enough cause the price of a barrel of oil to increase, usually significantly. We know that Saudi Arabia, Iran and Russia all have weakened economies due to the price oil. While the Saudi's are keeping the pumps flowing to drive out U.S. frackers (some want to stem the flow to increase prices but they are losing out in the kingdom), the Iranians (due to the nuke deal are going to be able to start selling oil in more markets) and Russians need the price of oil to go up. But it's not happening despite rising tensions.

Which now brings me to China, IF the price of oil is continuing to plunge despite parties that want the price to go up and threats of war in the Mid-East to me that means that means demand for oil has dropped pretty significantly. Why? Well it's not because there is a lot of green energy and electric cars. The global economy is far weaker than it is perceived. The Chinese economy is probably the toughest to pin down, but if investors are fleeing it could indicate either overproduction,a big slow down, or herd mentality (it could be this, but I don't think it is). Add that plus stock markets at or near peaks to me means a correction is coming. And I believe that Western governments have very little ammo to stimulate the economy with interest rates at near 0.

I am sure the intelligent readers of this forum will find holes in my reasoning. It's probably why I am wrong. But I do enjoy the discussions and the mental exercise.


I don't know anything about anything and I can find a flaw in your arguments. Every single one. IT'S ALREADY PRICED IN! The thousands of investors, many with high iq's, ivy league degrees, decades of experience and look at these numbers daily have spoken and about half the money thinks prices are too high and about half think the prices are just right or too low. Why do you believe that you are smarter than their collective wisdom?

Leeraar
Posts: 4109
Joined: Tue Dec 10, 2013 8:41 pm
Location: Nowhere

Re: U.S. stocks in freefall

Postby Leeraar » Fri Jan 08, 2016 12:26 pm

OPEC blinked. They did not cut production because the US would just take up the slack. Also, Iran is now coming back online.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

lack_ey
Posts: 5320
Joined: Wed Nov 19, 2014 11:55 pm

Re: U.S. stocks in freefall

Postby lack_ey » Fri Jan 08, 2016 12:41 pm

HomerJ wrote:
Maynard F. Speer wrote:http://ruthkrishnan.com/wp-content/uploads/2015/11/SP_vs_Shanghai-Composite_Jul14-Nov15.jpg


Isn't this chart extremely misleading since foreigners can't directly buy stocks in the Chinese market?

Most of the mutual funds trading Chinese proxy stocks made nowhere near 150% gains last year at the peak, but more like 20%-30% at the peak (and are now down or even going from Jan 2014 - Jan 2016, instead of what your graph above suggests).

Here's Fidelity Advisor China Region Fund. This comparison to Vanguard Total Stock Market Index looks nothing like your chart above.

Image

Here's a list of funds that invest in China and Hong Kong

http://money.usnews.com/funds/mutual-funds/rankings/china-region

None of them have done anywhere near what your chart suggests.

That's for mainland China, as you say.

Maybe misleading, and most don't get direct mainland China access, but it's there if you really want and actually has been for over two years. Through a fund, at least. I mean, you can't buy individual shares yourself but most of us are at least primarily fund investors.

Image
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

And a lot of the small caps are wilder than that, so you don't really get completely representative coverage. But certainly a lot closer than a regular non-A shares fund.

Vanguard's emerging markets index fund is adding mainland China A shares as we speak.

User avatar
Maynard F. Speer
Posts: 2139
Joined: Wed Mar 18, 2015 10:31 am

Re: U.S. stocks in freefall

Postby Maynard F. Speer » Fri Jan 08, 2016 1:20 pm

Absolutely - and we know Malkiel invests in a Templeton China fund

Would it be Templeton's A Shares fund? I know Malkiel was predominantly interested in A Shares in his Investment Opportunities in China talk

Image
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes

User avatar
Maynard F. Speer
Posts: 2139
Joined: Wed Mar 18, 2015 10:31 am

Re: U.S. stocks in freefall

Postby Maynard F. Speer » Fri Jan 08, 2016 1:21 pm

Incidentally, funny chart here

What if you'd invested every time CNBC pulled out the 'Markets in Turmoil' card?

Maybe a better buying opportunity at the moment after all

Image
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes

cusetownusa
Posts: 197
Joined: Thu Mar 27, 2014 9:54 am

Re: U.S. stocks in freefall

Postby cusetownusa » Fri Jan 08, 2016 1:30 pm

haha...i think we are on too something here.

User avatar
Taylor Larimore
Advisory Board
Posts: 25427
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: U.S. stocks in freefall

Postby Taylor Larimore » Fri Jan 08, 2016 1:46 pm

Maynard:

What are the red dots in the chart you posted?

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

User avatar
LadyGeek
Site Admin
Posts: 37598
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: U.S. stocks in freefall

Postby LadyGeek » Fri Jan 08, 2016 1:47 pm

In reference to some previous comments, please stay focused on the investment aspects. Speculation on economic / political causes is off-topic.
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

User avatar
goodenyou
Posts: 1009
Joined: Sun Jan 31, 2010 11:57 pm
Location: Skating to Where the Puck is Going to Be..or on the golf course

Re: U.S. stocks in freefall

Postby goodenyou » Fri Jan 08, 2016 1:59 pm

Taylor Larimore wrote:Maynard:

What are the red dots in the chart you posted?

Thank you and best wishes.
Taylor



The airing of "Markets in Turmoil", I believe. To show the S & P 500 went UP soon after CNBC announced "turmoil". If the past is prologue, we should buy now.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

User avatar
oldzey
Posts: 615
Joined: Sun Apr 13, 2014 8:38 pm
Location: Land of Lincoln

Re: U.S. stocks in freefall

Postby oldzey » Fri Jan 08, 2016 4:05 pm

TGIF! :twisted: :beer
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

User avatar
VictoriaF
Posts: 16468
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: U.S. stocks in freefall

Postby VictoriaF » Fri Jan 08, 2016 4:07 pm

OK, I get it: Dow means Down. But why can't we keep S&P up?!

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

ge1
Posts: 226
Joined: Sat Apr 28, 2012 8:15 pm

Re: U.S. stocks in freefall

Postby ge1 » Fri Jan 08, 2016 4:12 pm

Sad & Painful

User avatar
cfs
Posts: 3371
Joined: Fri Feb 23, 2007 1:22 am

Re: U.S. stocks in freefall

Postby cfs » Fri Jan 08, 2016 4:24 pm

C A U T I O N

Do not adjust your computer screen.

Do not adjust the screen, there is nothing wrong with your computer. The markets had a bad week in China, a bad week in Japan, a bad week in Germany, and a bad week in USA.

Do not adjust your computer screen.

snarlyjack
Posts: 194
Joined: Fri Aug 28, 2015 12:44 pm

Re: U.S. stocks in freefall

Postby snarlyjack » Fri Jan 08, 2016 5:04 pm

I bought into Wellington yesterday & today.
More shares...better price...
My plan is to dollar cost average all the way down.
I'll probably buy more next week if the markets tank.
That's my plan...dollar cost average into a down market!

User avatar
LadyGeek
Site Admin
Posts: 37598
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: U.S. stocks in freefall

Postby LadyGeek » Fri Jan 08, 2016 8:35 pm

I removed a few off-topic comments.
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

User avatar
HomerJ
Posts: 9860
Joined: Fri Jun 06, 2008 12:50 pm

Re: U.S. stocks in freefall

Postby HomerJ » Fri Jan 08, 2016 9:28 pm

lack_ey wrote:Maybe misleading, and most don't get direct mainland China access, but it's there if you really want and actually has been for over two years. Through a fund, at least. I mean, you can't buy individual shares yourself but most of us are at least primarily fund investors.


Okay, so now I need to research which China funds actually have China access?

(Luckily I never cared).

Is this normal? Why does that fund have special access and other China funds do not?

Vanguard's emerging markets index fund is adding mainland China A shares as we speak.


A little late, perhaps. Why now? Something change?

User avatar
Maynard F. Speer
Posts: 2139
Joined: Wed Mar 18, 2015 10:31 am

Re: U.S. stocks in freefall

Postby Maynard F. Speer » Fri Jan 08, 2016 9:53 pm

HomerJ wrote:Is this normal? Why does that fund have special access and other China funds do not?


H Shares are traded on the Hong Kong stock exchange (and open to foreigners), and A Shares are traded on the Shanghai and Shenzhen exchanges ... So presumably funds which trade A Shares needed offices in mainland China (at least up until China started opening the market up)

You can get the same Chinese companies listed as A and H Shares, with different prices .. It's quite an unusual market .. A lot of potential inefficiency, which is why Malkiel advocated active investment in China .. I'd imagine most active funds these days would have a mixture of A and H Shares
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes

User avatar
HomerJ
Posts: 9860
Joined: Fri Jun 06, 2008 12:50 pm

Re: U.S. stocks in freefall

Postby HomerJ » Sat Jan 09, 2016 10:38 am

Maynard F. Speer wrote:
HomerJ wrote:Is this normal? Why does that fund have special access and other China funds do not?


H Shares are traded on the Hong Kong stock exchange (and open to foreigners), and A Shares are traded on the Shanghai and Shenzhen exchanges ... So presumably funds which trade A Shares needed offices in mainland China (at least up until China started opening the market up)

You can get the same Chinese companies listed as A and H Shares, with different prices .. It's quite an unusual market .. A lot of potential inefficiency, which is why Malkiel advocated active investment in China .. I'd imagine most active funds these days would have a mixture of A and H Shares


I don't know if you can say "most". I've seen Matthews China Fund touted on this board (I think even you have used it), and it certainly didn't see a 150% rise in the last year, like your chart suggested. It went up about 30% at the peak and then gave ALL of that back and is now down 12% over the past 2 years.

So much for professionals taking advantage of the in-efficiencies of the Chinese market. They did collect their large fees though. I'm not sure how your chart has any relevance at all, when the real world funds we use are negative after the last 2 years.

Bushido1
Posts: 38
Joined: Mon Jan 05, 2015 2:02 pm

Re: U.S. stocks in freefall

Postby Bushido1 » Sat Jan 09, 2016 12:17 pm

Interesting discussion the ones you guys have here.

I love seeing all of you guys sticking to the buy-hold strategy even when bad times "seem" to come. I am a newbie investor, but I am sure that ones the money goes in it won't leave the investment accounts in less than 20 years :)

I was wondering, what are your thoughts on this argument below?

http://seekingalpha.com/article/3796226 ... ter-widget

Leeraar
Posts: 4109
Joined: Tue Dec 10, 2013 8:41 pm
Location: Nowhere

Re: U.S. stocks in freefall

Postby Leeraar » Sat Jan 09, 2016 1:28 pm

Bushido1 wrote:I was wondering, what are your thoughts on this argument below?

It's garbage, classic investment porn. Tomorrow he'll write that there will not be a recession because it's an election year.

You should stop reading this stuff. Tune out the noise.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")


Return to “Investing - Theory, News & General”

Who is online

Users browsing this forum: Benton Bair, bi0hazard, Kosmo, ktd, MJM, nedsaid, packer16, qwertyjazz and 71 guests