U.S. stocks in freefall

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HomerJ
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Re: U.S. stocks in freefall

Post by HomerJ » Mon Aug 24, 2015 7:21 pm

UADM wrote:As I have now said many times in many threads over the past months, people learned the wrong thing from 2008. Look at what you wrote. "And then the market continued upwards." This is what people have learned to expect. That every drop will be followed with a bounce soon after.


I agree that's a problem... I certainly know that the next bear market could be a prolonged one. I don't think any of us really expected everything to bounce back so fast, and it's funny (scary) how many people NOW think that last recovery was normal.

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Re: U.S. stocks in freefall

Post by jadd806 » Mon Aug 24, 2015 7:27 pm

HomerJ wrote:I agree that's a problem... I certainly know that the next bear market could be a prolonged one. I don't think any of us really expected everything to bounce back so fast, and it's funny (scary) how many people NOW think that last recovery was normal.


As a young investor, I would love a prolonged bear market. I'm buying in slowly and steadily with every paycheck.

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InvestorNewb
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Re: U.S. stocks in freefall

Post by InvestorNewb » Mon Aug 24, 2015 7:27 pm

Futures are up 1.5%+. Let's hope it stays that way tomorrow.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

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Re: U.S. stocks in freefall

Post by livesoft » Mon Aug 24, 2015 7:41 pm

InvestorNewb wrote:Futures are up 1.5%+. Let's hope it stays that way tomorrow.

No-o-o-o! It takes 3 days for an exchange order in my spouse's 401(k) to get executed. We want the market to stay down until that happens.
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Uncle Pennybags
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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Mon Aug 24, 2015 7:44 pm

HomerJ wrote: it's funny (scary) how many people NOW think that last recovery was normal.
It wasn't normal nor was the crash. The money changers ran the market up then took the money and ran.

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Re: U.S. stocks in freefall

Post by UHCOP » Mon Aug 24, 2015 7:49 pm

If I place an order in my vanguard taxable for VLCAX now will it gets executed at opening tomorr or end of day tomor?

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Re: U.S. stocks in freefall

Post by core4portfolio » Mon Aug 24, 2015 7:51 pm

UHCOP wrote:If I place an order in my vanguard taxable for VLCAX now will it gets executed at opening tomorr or end of day tomor?


All mutual funds are end of the business hours once you placed the order
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Re: U.S. stocks in freefall

Post by triceratop » Mon Aug 24, 2015 7:51 pm

UHCOP wrote:If I place an order in my vanguard taxable for VLCAX now will it gets executed at opening tomorr or end of day tomor?


It will be priced at tomorrow's close; as to when it gets 'executed' is hard to say since the funds may only be taken out of your bank account 2 days later.
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Re: U.S. stocks in freefall

Post by UHCOP » Mon Aug 24, 2015 7:58 pm

triceratop wrote:
UHCOP wrote:If I place an order in my vanguard taxable for VLCAX now will it gets executed at opening tomorr or end of day tomor?


It will be priced at tomorrow's close; as to when it gets 'executed' is hard to say since the funds may only be taken out of your bank account 2 days later.


Thanks what I meant to ask was at what price.

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Uncle Pennybags
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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Mon Aug 24, 2015 8:03 pm

triceratop wrote:It will be priced at tomorrow's close; as to when it gets 'executed' is hard to say since the funds may only be taken out of your bank account 2 days later.
It is "executed" that day, Vanguard doesn't wait for funds to clear. Vanguard will hold your money until it clears though.

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Re: U.S. stocks in freefall

Post by LadyGeek » Mon Aug 24, 2015 10:33 pm

It's easy to tell the market took a huge dip today. Take a look at the statistics on this forum's Board Index page.

Near the bottom, "Who is Online"

"Most users ever online was 1009 on Mon Aug 24, 2015 11:07 am" (Eastern time, what I see.) *

That's about an hour after the big dip.

I also see quite a number of threads with "Tax Loss Harvesting" in the title...

* The old record was 771 users online in Sun Mar 01, 2015. I have no idea why.
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Re: U.S. stocks in freefall

Post by Leeraar » Tue Aug 25, 2015 12:08 am

Let's also note that the dip of 2011 is almost forgotten, since it does not appear in the yearly return statistics. This one may turn out to be be similar.

What gets my goat is the $10k I have to to withdraw to make payment for fall tuition, this week.

L.
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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Tue Aug 25, 2015 12:30 am

Leeraar wrote:What gets my goat is the $10k I have to to withdraw to make payment for fall tuition, this week.
You wild and crazy guy living on the edge; putting short term money in a long term investment.

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Re: U.S. stocks in freefall

Post by autonomy » Tue Aug 25, 2015 8:02 am

Uncle Pennybags wrote:
Leeraar wrote:What gets my goat is the $10k I have to to withdraw to make payment for fall tuition, this week.
You wild and crazy guy living on the edge; putting short term money in a long term investment.


Indeed. If 6% loss of 10K gets one's goat, one shouldn't be putting that money in the market.

FWIW, pre-market numbers are up like crazy (netflix +8%, apple +5%)

This article has a hilarious presumption: http://fortune.com/2015/08/25/apple-cook-cramer-sec/
Thanks, Tim Cook!

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Re: U.S. stocks in freefall

Post by Tom_T » Tue Aug 25, 2015 8:15 am

InvestorNewb wrote:Futures are up 1.5%+. Let's hope it stays that way tomorrow.

Sure, there could be a bounce today, given that China has done something to try and stem the tide... and it could go right back down tomorrow or the next. Go look at the Dow action in the fall of 2008. We had some big down days, but we also had some big UP days. Anyone who saw an up day and concluded "the worst is over" was very, very wrong: the bottom was months away.

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Re: U.S. stocks in freefall

Post by Tigermoose » Tue Aug 25, 2015 8:19 am

Tom_T wrote:
InvestorNewb wrote:Futures are up 1.5%+. Let's hope it stays that way tomorrow.

Sure, there could be a bounce today, given that China has done something to try and stem the tide... and it could go right back down tomorrow or the next. Go look at the Dow action in the fall of 2008. We had some big down days, but we also had some big UP days. Anyone who saw an up day and concluded "the worst is over" was very, very wrong: the bottom was months away.


I'd give is a 50% chance that it will keep going down. :sharebeer
Institutions matter

autonomy
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Re: U.S. stocks in freefall

Post by autonomy » Tue Aug 25, 2015 8:22 am

Tom_T wrote:
InvestorNewb wrote:Futures are up 1.5%+. Let's hope it stays that way tomorrow.

Sure, there could be a bounce today, given that China has done something to try and stem the tide... and it could go right back down tomorrow or the next. Go look at the Dow action in the fall of 2008. We had some big down days, but we also had some big UP days. Anyone who saw an up day and concluded "the worst is over" was very, very wrong: the bottom was months away.


http://www.investopedia.com/terms/d/deadcatbounce.asp
Hindsight is 20/20.

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Re: U.S. stocks in freefall

Post by Tom_T » Tue Aug 25, 2015 8:30 am

autonomy wrote:
Tom_T wrote:
InvestorNewb wrote:Futures are up 1.5%+. Let's hope it stays that way tomorrow.

Sure, there could be a bounce today, given that China has done something to try and stem the tide... and it could go right back down tomorrow or the next. Go look at the Dow action in the fall of 2008. We had some big down days, but we also had some big UP days. Anyone who saw an up day and concluded "the worst is over" was very, very wrong: the bottom was months away.


http://www.investopedia.com/terms/d/deadcatbounce.asp
Hindsight is 20/20.

No argument here. My point is that it's fruitless to look at the market on any given day to determine the future. "Up today" doesn't mean up tomorrow, or down tomorrow.

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Re: U.S. stocks in freefall

Post by dbCooperAir » Tue Aug 25, 2015 8:32 am

new2bogle wrote:I'm always so tempted to buy individual stocks at times like these. Like C or AAPL or something! But I never know what.


I have as well, have not caved yet but.......CNP, CenterPoint Energy, Inc. with a 5% dividend. Toss in $2,000 and the dividend could support a case of beer every quarter :beer
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Uncle Pennybags
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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Tue Aug 25, 2015 9:47 am

Where is everybody? Is the panic over?

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Re: U.S. stocks in freefall

Post by TheRightKost87 » Tue Aug 25, 2015 9:52 am

Uncle Pennybags wrote:Where is everybody? Is the panic over?


Everybody must be over posting in the "U.S. Stocks Skyrocketing" thread today ... :wink:
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Re: U.S. stocks in freefall

Post by Maverick3320 » Tue Aug 25, 2015 10:03 am

UADM wrote:
toto238 wrote:
UADM wrote:
ofcmetz wrote:
tennisplyr wrote:It's kinda sad that this post produced one of the longest threads I've seen. The way I look at it is that i haven't lost a nickel......I haven't executed a sale.


I don't see it this way, but if it helps you to think of it this way then that's fine. I see my equities as being worth their quoted values each day, but since I expect them to be worth many times this by the time I plan on selling then then a drop today doesn't bother me as much. There are scenarios where I might need to sell equities much sooner than expected, so their value today does mean something to me.


Agreed. As I said in another thread, if you kept your lucent stock from 2000, that went from 100 to near nothing, you could still claim you haven't lost anything because you haven't sold. You are only worth what the stocks are worth at that very moment. You could have hope about making it back, but that doesn't mean you haven't lost.


I feel like talking about an individual stock and talking about a stock market are a little different. Investing in an individual stock, when it goes down 99% it's basically gone and never coming back. It very well could go completely to zero, and you could still claim you hadn't lost anything since you still have 1,000 worthless shares.

But when investing in the "market portfolio" you're investing the stock market as a whole. Not one individual stock. Especially if you're diversified across different countries, your portfolio doesn't really go to zero. A scenario in which the stock market as a whole goes to zero is a scenario so dire that there likely is no investment option that would survive that. In case of apocalypse, no stock, bond or commodity is likely to retain value.

The Market Portfolio has these special characteristics that make it different from simply investing in a stock or even small group of stocks.

Basically someone hoping for Lucent to go back to its previous value is betting on something that's extremely unlikely. Someone hoping for the stock market to recover is betting on something that's extremely likely to happen. And it will likely happen well within a reasonable time period, assuming you balanced your stocks with bonds in a reasonable allocation.



You are absolutely correct. I didn't even think of that. I am so used to my own methods that I projected. Then yes, as long as the market goes up, you can make it back. My only comment then is that we went from 6.6k to 18.4k. We are at 15.8 or so. Previous high(as I just learned it seems!) was 13.8 or so. We started at 6.6k. Is a retest of the high and breaking up above more likely or is it more likely to retrace our last steps? At 17.5k, I'd say(and di think) down. Here it is more difficult to predict. I still think down might be more likely, but as everyone keeps saying, this market always seems to bounce back after any correction. I'm still a bit timid right now.


UADM,

I sense a little hostility in your replies to people who question your judgment and ability. Why not just kill two birds with one stone and release your trading records for the past 5-10 years? After all, sunlight makes the best disinfectant. If it turns out you are the modest brilliant stock picker that you claim, the critics can all eat crow. If it turns out that you may have embellished a little bit, the great unwashed masses will be that much wiser. It's really a win/win.

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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Tue Aug 25, 2015 10:11 am

Maverick3320 wrote:UADM,
UADM, is busy market timing. Volatility like this is a traders dream, this is when 1/2 make and 1/2 lose money.

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Re: U.S. stocks in freefall

Post by small_index » Tue Aug 25, 2015 10:30 am

UDAM - There's clearly enough interest, and you're interested in defending your views. How about creating a new topic?
You can post the title of the new topic here, for others to follow up.

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Re: U.S. stocks in freefall

Post by Thebigc » Tue Aug 25, 2015 10:34 am

Still following oil for market indicators. Some are saying oil in the teens which will drive down EM's and that will hurt everyone else. Dow tends to follow oil as well, OPEC is still going crazy with suppression, probably get more buying opportunities in the near future. If we can get a bottom in oil and China the markets should normalize.

HFT's had a big day yesterday, and some the companies that use them are running around today with the whole "what us, manipulate the market? Never." game face on. Been debating transfering some money to Vanguard for another buying opportunity, but I am getting close to messing with my Emergeny fund. Granted it's a 2 year emergency fund, but I don't like touching it. Europe is up big today, they are getting some good news.

You know given the stagnation in the market this year the last three trade days made sense, all that outside pressure coiled the spring. But it is not going to fix oil, there is no reason for oil to get better right now, more downside should be coming.

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Re: U.S. stocks in freefall

Post by Thebigc » Tue Aug 25, 2015 12:10 pm

Anyone got any idea of how some of yesterdays ETF's are going to be priced in? Several ETF's dropped yesterday in 20 to 30% range in the first 5 minutes of trading. This occured because ETF's have no pricing rules, and market makers widden the price spread with higher volatility. However the underying assets never came close to dropping in that kind of value. Not only did this practice generate more panic, many investors attempted to buy in on those dips, but the ETF's don't have the ability to sell those assets at there own special discount, especially not 20 - 30%. So will this be adjusted in the buys which may mean some people who purchased can't cover, will the orders be cancelled, did be people who sold get their money returned?

I don't own any ETF's but that is really messed up, those are huge discounts and it seems they created a mess yesterday. Why are they even allowed to create their own price that does not reflect the value of the assets?

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Re: U.S. stocks in freefall

Post by Tanelorn » Tue Aug 25, 2015 2:02 pm

toto238 wrote:There is one of two possibilities:

1. You actually are beating the market, in which case you are a fool for revealing to everyone what you're doing
2. You aren't, as I suspect, and that's why you don't want to post your trading history

You don't have to pick on him. You can read the study Larry posted about a while back where they found that the top 1% of day traders in Taiwan were making 50%+/year or something.

viewtopic.php?t=141076

It's clear that there are some people out there who make good returns trading in the market. You might not be one of them, and UADM might or might not be, but to claim that it's impossible when there's good evidence of persistent skill, not just luck, is to ignore the evidence. You end up sounding like one of those people who claim the dinosaur bones were planted to test their religious faith.

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Re: U.S. stocks in freefall

Post by EyeYield » Tue Aug 25, 2015 2:09 pm

Just take a look around the internet. There are thousands upon thousands of traders boasting that they are beating the market everyday. All with a variation of the same story and no proof. What's so hard to believe?
"The stock market is a giant distraction from the business of investing." - Jack Bogle

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Re: U.S. stocks in freefall

Post by toto238 » Tue Aug 25, 2015 2:13 pm

Tanelorn wrote:
toto238 wrote:There is one of two possibilities:

1. You actually are beating the market, in which case you are a fool for revealing to everyone what you're doing
2. You aren't, as I suspect, and that's why you don't want to post your trading history

You don't have to pick on him. You can read the study Larry posted about a while back where they found that the top 1% of day traders in Taiwan were making 50%+/year or something.

viewtopic.php?t=141076

It's clear that there are some people out there who make good returns trading in the market. You might not be one of them, and UADM might or might not be, but to claim that it's impossible when there's good evidence of persistent skill, not just luck, is to ignore the evidence. You end up sounding like one of those people who claim the dinosaur bones were planted to test their religious faith.


I would simply like to clarify that nowhere in what I wrote did I say it was impossible. What I said is that it IS possible and if UADM is telling the truth he's a fool for talking about it. If he is telling the truth, he's undermining his own strategy.

What is more likely is that he is actually underperforming the market overall, but by remembering every "win" he's had and conveniently forgetting every "loss" he's convinced himself that he has beat the market. That is what's likely.

But never did I ever say it was impossible to beat the market or that it was impossible that UADM could. I would never say that.

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Re: U.S. stocks in freefall

Post by nisiprius » Tue Aug 25, 2015 2:16 pm

(Deleted by poster because it had too much snark and not enough substance).
Last edited by nisiprius on Tue Aug 25, 2015 2:25 pm, edited 2 times in total.
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.

toto238
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Re: U.S. stocks in freefall

Post by toto238 » Tue Aug 25, 2015 2:20 pm

UADM wrote:You are assuming that I am doing something special that, if copied, would ruin what I do. This is incorrect.

If you are ever in south florida...

To quote kramer.. I will be stopping... now!

https://www.youtube.com/watch?v=XQHGsUdG68U


Reminds me of this:

http://dilbert.com/strip/2015-02-24

So what you're saying is that EVERYONE could do this trick and it would still work. So EVERYONE can beat the market. Which is a logical fallacy. Everyone can't beat the market. By definition. Everyone as a whole EQUALS the market.

One more for fun:

http://dilbert.com/strip/2015-02-25

autonomy
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Re: U.S. stocks in freefall

Post by autonomy » Tue Aug 25, 2015 2:28 pm

UADM wrote:Asking someone to post personal info and data for 5-10 years of their financial life to win an argument(An internet argument nonetheless!) is both offensive and absurd on its face. Believe or don't believe. The sad thing is that yesterday I considered(for a split second) to post the last year's returns. I even went onto Fidelity's website to see how much info I'd have to wipe. Then I realized just how insane and pathetic that was. To win an argument on the internet? I don't think so : ). You guys can believe whatever you want. It is probably better that you continue believing what you've always thought. Healthier that way.

See, that's the thing. I didn't gloat at all. I posted to correct someone's absurd and obviously incorrect assertion. People like you TAKE it as gloating because you are jealous. We aren't talking about insane returns. 14%, 8%, and 7% are not exactly gloating territory. Unfortunately, due to the nature of why people generally can't discuss finances with others, people choose to get jealous and then project that onto the other person so they don't need to deal with their insecurities.

See this thread- viewtopic.php?t=142111 or viewtopic.php?t=142039

Most of the people who don't like to hear about other peoples' good fortunes probably do the same thing. "It was probably all luck." "They are probably lying." Whatever you need to tell yourselves. I'm sorry I brought it up! Hell, if I posted it, then people would accuse me of having $100 in the account, so that making $10 is 10%! : P

It is funny that you ACTUALLY think that it is "typical" not to defend yourself on the internet by posting 5-10 years of financial history just to win an internet argument. WOW! All that anyone needs to do is accept the possibility that some professional traders know what they are doing well enough to keep on doing what they are doing. All you need is ONE to disprove the "it is impossible" derp that is going on. And that is the last I have to say on the topic : ).


Oh, good, now you went with the 'you're jealous' attack. 8-)

Reminds me of this joke:

A senior citizen was driving down the freeway when his wife called his cell phone.
"Herman, I just heard on the news that there's a car going the wrong way on Route 280. Please be careful!"
"It's not just one car," said Herman, "It's hundreds of them!"


That joke actually captures everyone who comes on this board to preach single-stock, momentum investing, or other such things.

P.S. To stay on topic, looks like the market is about to erase today's gains.

autonomy
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Re: U.S. stocks in freefall

Post by autonomy » Tue Aug 25, 2015 2:30 pm



That's one's really good at demonstrating hubris. "Yeah, my investments are up 20%, I'm a genius!" Well, the S&P is up 23% and the whole market is up! Rising tide!

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Re: U.S. stocks in freefall

Post by toto238 » Tue Aug 25, 2015 2:32 pm

nisiprius wrote:(Deleted by poster because it had too much snark and not enough substance).


Awww... Snarky Nisiprius is my favorite Nisiprius though!

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Re: U.S. stocks in freefall

Post by toto238 » Tue Aug 25, 2015 2:34 pm

autonomy wrote:


That's one's really good at demonstrating hubris. "Yeah, my investments are up 20%, I'm a genius!" Well, the S&P is up 23% and the whole market is up! Rising tide!


Can't resist. Gotta do one more:

http://dilbert.com/strip/2015-02-23

Technical Analysis. Love it. Even in the CFA Handbook they tell you that although you need to know about Technical Analysis you don't have to believe it works or can ever gain value. Huge disclaimer among professional financiers.

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Re: U.S. stocks in freefall

Post by Thebigc » Tue Aug 25, 2015 3:01 pm

And rally off, 600 point negative swing.

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InvestorNewb
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Re: U.S. stocks in freefall

Post by InvestorNewb » Tue Aug 25, 2015 3:03 pm

And down we go.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

toto238
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Re: U.S. stocks in freefall

Post by toto238 » Tue Aug 25, 2015 3:14 pm

InvestorNewb wrote:And down we go.


Weeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee!

Finally this drop is starting to look real and like it could stick. The market has looked overbought and bloated for 2-3 years now and was overdue for a healthy correction or bear market. I'm hoping for a drop of around 20-30% total. That would make me feel a lot better going forward.

Of course I'm just going to keep DCAing in every Friday. Steady as she goes.

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Re: U.S. stocks in freefall

Post by Castanea_d. » Tue Aug 25, 2015 3:28 pm

Thebigc wrote:Anyone got any idea of how some of yesterdays ETF's are going to be priced in? Several ETF's dropped yesterday in 20 to 30% range in the first 5 minutes of trading. This occured because ETF's have no pricing rules, and market makers widen the price spread with higher volatility. However the underying assets never came close to dropping in that kind of value. Not only did this practice generate more panic, many investors attempted to buy in on those dips, but the ETF's don't have the ability to sell those assets at there own special discount, especially not 20 - 30%. So will this be adjusted in the buys which may mean some people who purchased can't cover, will the orders be cancelled, did be people who sold get their money returned?

I don't own any ETF's but that is really messed up, those are huge discounts and it seems they created a mess yesterday. Why are they even allowed to create their own price that does not reflect the value of the assets?


ThebigC's question kind of got lost in the shuffle today. I would be interested in people's thoughts on this, too.

Some of you may read the British financial blogger David Malone who writes as "Golem XIV" - a year or two back he wrote a couple of essays cautioning people to stay away from ETFs for reasons along these lines. Here's the link to his June 2013 essay, which includes links to two earlier essays where he goes into a lot more detail.
http://www.golemxiv.co.uk/2013/06/etfs-a-warning/
He is most concerned about fixed-income ETFs, where he (and I) believe that the risks for discontinuity are highest, but I think these concerns apply more broadly.
ETF’s claim to make the exotic available locally, the volatile stable and safe and the institutional sized, available in bite sizes. And people have been buying into the promise of return without the risk – again....

Just like [mortgage-backed] securities and CDOs before them, ETFs and those who make the market in them, provide liquidity when all is well but when everyone really needs it, when large losses are being made – the liquidity disappears and instead we are told of ‘rare occurrences’ and ‘risk limits’....

As ETFs invade a market they essentially reduce the ‘free float’ in the underlying, which increases volatility; enables ‘macro’ manipulation over time (eg Hamanaka in copper, and current antics by the Saudis and the US in oil); and creates a disconnect with the reality of the underlying flows of value which leads inevitably – via the madness of crowds, the concentration of risk in single points of failure aka clearing houses and clearing banks and the wonders of technology eg HFT – to market discontinuities and meltdowns.


Yesterday might be a useful data point in considering the above, and I don't know any details as to what was going on (and we might be getting more data points in the last little while - that collapse into the close was something of a surprise, at least to me.)

Any one have any insights?

BahamaMan
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Re: U.S. stocks in freefall

Post by BahamaMan » Tue Aug 25, 2015 3:31 pm

InvestorNewb wrote:And down we go.


Now I remember why my Asset Allocation is 70% Bonds/ 30% Stocks. :mrgreen:

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Re: U.S. stocks in freefall

Post by LadyGeek » Tue Aug 25, 2015 4:09 pm

I removed a number of posts which degraded into an on-going disagreement on market timing. Continuity is lost. As a reminder, see: General Etiquette

Attacks on individuals, insults, name calling, trolling, baiting or other attempts to sow dissension are not acceptable.
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Re: U.S. stocks in freefall

Post by Thebigc » Tue Aug 25, 2015 4:16 pm

Castanea_d. wrote:
Thebigc wrote:Anyone got any idea of how some of yesterdays ETF's are going to be priced in? Several ETF's dropped yesterday in 20 to 30% range in the first 5 minutes of trading. This occured because ETF's have no pricing rules, and market makers widen the price spread with higher volatility. However the underying assets never came close to dropping in that kind of value. Not only did this practice generate more panic, many investors attempted to buy in on those dips, but the ETF's don't have the ability to sell those assets at there own special discount, especially not 20 - 30%. So will this be adjusted in the buys which may mean some people who purchased can't cover, will the orders be cancelled, did be people who sold get their money returned?

I don't own any ETF's but that is really messed up, those are huge discounts and it seems they created a mess yesterday. Why are they even allowed to create their own price that does not reflect the value of the assets?


ThebigC's question kind of got lost in the shuffle today. I would be interested in people's thoughts on this, too.

Some of you may read the British financial blogger David Malone who writes as "Golem XIV" - a year or two back he wrote a couple of essays cautioning people to stay away from ETFs for reasons along these lines. Here's the link to his June 2013 essay, which includes links to two earlier essays where he goes into a lot more detail.
http://www.golemxiv.co.uk/2013/06/etfs-a-warning/
He is most concerned about fixed-income ETFs, where he (and I) believe that the risks for discontinuity are highest, but I think these concerns apply more broadly.
ETF’s claim to make the exotic available locally, the volatile stable and safe and the institutional sized, available in bite sizes. And people have been buying into the promise of return without the risk – again....

Just like [mortgage-backed] securities and CDOs before them, ETFs and those who make the market in them, provide liquidity when all is well but when everyone really needs it, when large losses are being made – the liquidity disappears and instead we are told of ‘rare occurrences’ and ‘risk limits’....

As ETFs invade a market they essentially reduce the ‘free float’ in the underlying, which increases volatility; enables ‘macro’ manipulation over time (eg Hamanaka in copper, and current antics by the Saudis and the US in oil); and creates a disconnect with the reality of the underlying flows of value which leads inevitably – via the madness of crowds, the concentration of risk in single points of failure aka clearing houses and clearing banks and the wonders of technology eg HFT – to market discontinuities and meltdowns.


Yesterday might be a useful data point in considering the above, and I don't know any details as to what was going on (and we might be getting more data points in the last little while - that collapse into the close was something of a surprise, at least to me.)

Any one have any insights?


Thanks for that quote, that is exactly what happened yesterday with the HFT's and they made a killing yesterday. They create a lot of technical damage, it takes weeks to absorb what happened and the damage they caused, and the market does not know how to react or what to do.

InvestorNewb wrote:And down we go.


Yep, could be another 10% or so coming in the next month or two. Could be more, but I hope it is not like that 3 day sell off, but slow and steady declines with some pops up and down. That would actually be healthy and take some of the air out of this market. Just going to keep nibbling as it goes down.

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Re: U.S. stocks in freefall

Post by broadstone » Tue Aug 25, 2015 5:08 pm

I went 100% cash several weeks ago as I have friends who work the financial markets in Hong Kong who had warned me about the China signs. I thought the worse that happens is I hop out and hop back in if it turned out to be noise about nothing. Well, I haven't bought back in yet. Turns out these financial guys do know things us common folks don't. I think this landslide has some legs.

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Re: U.S. stocks in freefall

Post by grap0013 » Tue Aug 25, 2015 5:11 pm

broadstone wrote:I went 100% cash several weeks ago as I have friends who work the financial markets in Hong Kong who had warned me about the China signs. I thought the worse that happens is I hop out and hop back in if it turned out to be noise about nothing. Well, I haven't bought back in yet. Turns out these financial guys do know things us common folks don't. I think this landslide has some legs.


You cannot make these claims retrospectively. They hold no water. One needs to state they went 100% cash before the market declines and state 100% equities while they are taken a beating.
There are no guarantees, only probabilities.

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Re: U.S. stocks in freefall

Post by BahamaMan » Tue Aug 25, 2015 5:31 pm

broadstone wrote:Turns out these financial guys do know things us common folks don't.


No, they don't or they would be retired like me ! Nobody Knows.

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Uncle Pennybags
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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Tue Aug 25, 2015 5:40 pm

Thebigc wrote:And rally off, 600 point negative swing.
That shown traders don't have a clue. Not a one lost money though.
broadstone wrote:I went 100% cash several weeks ago as I have friends who work the financial markets in Hong Kong who had warned me about the China signs.
OK, I agree those with inside information can market time. I'm not an insider so I'll stick with indexing.

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Re: U.S. stocks in freefall

Post by Browser » Tue Aug 25, 2015 5:46 pm

The Dip Buyers must have whiplash.
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oneleaf
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Re: U.S. stocks in freefall

Post by oneleaf » Tue Aug 25, 2015 5:48 pm

grap0013 wrote:
broadstone wrote:I went 100% cash several weeks ago as I have friends who work the financial markets in Hong Kong who had warned me about the China signs. I thought the worse that happens is I hop out and hop back in if it turned out to be noise about nothing. Well, I haven't bought back in yet. Turns out these financial guys do know things us common folks don't. I think this landslide has some legs.


You cannot make these claims retrospectively. They hold no water. One needs to state they went 100% cash before the market declines and state 100% equities while they are taken a beating.


We really need a thread dedicated to market timers' predictions made at the time the decision was made. These after-the-fact claims are getting old.

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Re: U.S. stocks in freefall

Post by DaftInvestor » Tue Aug 25, 2015 5:51 pm

My question is why are all the market timers landing here in the bogleheads forum? There are countless stock picking message boards where folks spend all day discussing their market timing speculations....

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Re: U.S. stocks in freefall

Post by Browser » Tue Aug 25, 2015 5:59 pm

DaftInvestor wrote:My question is why are all the market timers landing here in the bogleheads forum? There are countless stock picking message boards where folks spend all day discussing their market timing speculations....

Because they think they are hedgehogs...
We don't know where we are, or where we're going -- but we're making good time.

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