U.S. stocks in freefall

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oldzey
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Re: U.S. stocks in freefall

Post by oldzey » Mon Feb 05, 2018 11:17 pm

100 pages of freefalling - woo hoo! :sharebeer

https://www.youtube.com/watch?v=1lWJXDG2i0A
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

zeugmite
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Re: U.S. stocks in freefall

Post by zeugmite » Mon Feb 05, 2018 11:21 pm

chicagoan23 wrote:
Mon Feb 05, 2018 11:02 pm
I won’t guess about what kind of leaking into returns occurred but according to this last round of earnings reports, underlying businesses are strong and are expected to continue to be strong. Banks are also much stronger than they were last time and despite high debt levels there does not appear to be much risk of a credit crisis or a wave of defaults. If there is little prospect of a recession and there is little risk of a credit crisis, then the risk of big crash is remote. You would not expect it if we are going through a reset due to increasing rates or inflation expectations. 5% broad market drops in a matter of hours appear to be driven by traders and after such a big run up the buyers have paused.....at least that’s my hope of what’s happening.
Just to be the devil's advocate, we know the underlying businesses are strong when borrowing and discounting at a 10-year risk-free rate of 2.0% (and whatever they borrowed at in prior years in the 2.2%-2.4% range). Today we found out the market doesn't think they can handle 2.85% risk-free on the 10-year. Although we found this out through algorithms or whatever, that's where bids and asks are, apparently, when pricing equities and bonds, relatively. That's pretty fragile.

You're right that there is probably less credit risk than in 2008, on the surface at least. There is more interest rate risk though, so it's just one vs. the other. If rates rise, and companies have to roll over debts it'll easily turn back into credit risk or depress earnings as profits go into interest payments and less into share buyback. Also, maybe banks have less risk now (don't know, honestly haven't looked but will take your word for it), but companies, except the largest ones with cash reserves, are actually more indebted. Not sure about in the US but overseas some companies have even pledged their shares as collateral for loans, and have already been experiencing stress before the recent rise in yields.

Lots could go wrong. I don't know what I don't know, and without combing through the books I'm not sure how anyone could know.
Last edited by zeugmite on Mon Feb 05, 2018 11:24 pm, edited 2 times in total.

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jainn
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Re: U.S. stocks in freefall

Post by jainn » Mon Feb 05, 2018 11:22 pm

fanmail wrote:
Mon Feb 05, 2018 9:53 pm
oldcomputerguy wrote:
Mon Feb 05, 2018 9:38 pm
Aaaaand, the beat goes on... as of 9:35 PM Eastern, Australia is down almost 3%, Japan is down over 5%, and U.S. S&P 500 e-mini is down a percent and a half. Looks like tuck and roll tomorrow.
:shock:
SP futures closed this afternoon 1.5 below the index so that 1.5% move down, which is now 2% btw, is implying a larger drop in the index,~3.5% now.

Similarly, Dow futures are 1000 points lower than the index close today.

Our IPS has us moving 5% of our total assets from bonds to equities tomorrow, if SP500 is @ 2550 (this is 11% pullback from all time highs). We always place our Exchange/Sell order with Vanguard a few minutes before the close...we will be watching. :beer

According to CNBC at 11:37pm EST, https://www.cnbc.com/pre-markets/ - DOW futures are down 1200 points and SP500 is at 2533 right now, past our line in the sand to make the exchange tomorrow. A lot can change though over the next 17 hours...the more teeth gritting decision, relatively speaking, will be to move another 5% from bonds to equities if it drops further (20% from all time highs) to bear market territory at 2300. It will be more emotional, but will focus on being objective, and not subjective...I continue to remind myself of the fact that all we want to live on is the equity dividends plus selling 1% of our equity shares per year, and to look at the long-term as it relates to having the portfolio last many decades, and not be fearful of the short-term share price fluctuations.

Jainn
Last edited by jainn on Mon Feb 05, 2018 11:37 pm, edited 5 times in total.

CyberGuy
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Re: U.S. stocks in freefall

Post by CyberGuy » Mon Feb 05, 2018 11:23 pm

Houe wrote:
Mon Feb 05, 2018 10:58 pm
I logged in to my 401k portfolio to see the damage and saw some good news (maybe). My company posted our profit sharing today which is close to 6% of salary. On the down side I see futures are pointing to another ugly day tomorrow. But I guess posting today is better than a few trading days ago...
You are incorrect. The stock market is still rising if you measure its true value in bitcoin rather than artificial fiat currency.

;-)

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Re: U.S. stocks in freefall

Post by MotoTrojan » Mon Feb 05, 2018 11:23 pm

CULater wrote:
Mon Feb 05, 2018 11:17 pm
Hey, guess what? It's still a little more likely that Mr. Market is UP tomorrow and not DOWN. According to Crestmont, over the last 50 years the market has been up about 54% of the days and down 46%. Even in bear market periods, it has been up 51% of the days and down 49%. It's not the number of UPs and the DOWNs that get you -- it's just how B I G they are.

https://www.crestmontresearch.com/docs/Stock-Yo-Yo.pdf
Nothing is set in stone but I give more weight to futures, and the absolute slaughter Japan took today.

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whodidntante
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Re: U.S. stocks in freefall

Post by whodidntante » Mon Feb 05, 2018 11:24 pm

oldzey wrote:
Mon Feb 05, 2018 11:17 pm
100 pages of freefalling - woo hoo! :sharebeer

https://www.youtube.com/watch?v=1lWJXDG2i0A
Official theme music of the thread.

fanmail
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Re: U.S. stocks in freefall

Post by fanmail » Mon Feb 05, 2018 11:27 pm

CULater wrote:
Mon Feb 05, 2018 11:17 pm
Hey, guess what? It's still a little more likely that Mr. Market is UP tomorrow and not DOWN. According to Crestmont, over the last 50 years the market has been up about 54% of the days and down 46%. Even in bear market periods, it has been up 51% of the days and down 49%. It's not the number of UPs and the DOWNs that get you -- it's just how B I G they are.

https://www.crestmontresearch.com/docs/Stock-Yo-Yo.pdf
Up? That’d be pretty crazy considering the Dow and S&P futures are indicating the market is down more now than it was on Monday during regular trading hours.

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Re: U.S. stocks in freefall

Post by zeugmite » Mon Feb 05, 2018 11:29 pm

fanmail wrote:
Mon Feb 05, 2018 11:27 pm
Up? That’d be pretty crazy considering the Dow and S&P futures are indicating the market is down more now than it was on Monday during regular trading hours.
Although granted, that doesn't mean very much. It's just continuous trading, which may or may not find a bottom even when the US market isn't open. At the moment though, the expectation is what the futures say, but the variance is so large it could be anything at the open, down 8%, up 2%, who knows.

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Re: U.S. stocks in freefall

Post by CULater » Mon Feb 05, 2018 11:40 pm

Here's the Good News -- J. Siegel says the market is cha-ching. What a difference a couple days makes, eh?
Jeremy Siegel almost never gives a one-year forecast for stocks, but last week he predicted that U.S. equities will end the year with gains of as much as 10%.

Siegel has been unabashedly bullish on stocks during the post-crisis period and, unlike those analysts who have warned of overvaluation, his predictions have been vindicated. Indeed, he said that his 2018 forecast was the most bullish of those recently appearing on CNBC. Despite losses last week, stocks have gained approximately 5.6% this year, so he is poised to continue that record.
https://www.advisorperspectives.com/art ... s-for-2018
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

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Re: U.S. stocks in freefall

Post by squirm » Mon Feb 05, 2018 11:55 pm

This was so very much overdo. Markets don't go up forever.
I'll watch CNBC tonight for fun and watch all the clowns lie and say they told everyone to sell last week.

This is a pretty broad sell off, I wonder if the market will ever recover to the highs in January 2018 in the next several years. I think given the volatility, the multiples will compress, so I would bet a "no".

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Re: U.S. stocks in freefall

Post by zeugmite » Mon Feb 05, 2018 11:57 pm

CULater wrote:
Mon Feb 05, 2018 11:40 pm
Here's the Good News -- J. Siegel says the market is cha-ching. What a difference a couple days makes, eh?
Jeremy Siegel almost never gives a one-year forecast for stocks, but last week he predicted that U.S. equities will end the year with gains of as much as 10%.
So now does he believe US equities will end the year up 20% from here, since we're 10% down from last week?

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Re: U.S. stocks in freefall

Post by willthrill81 » Mon Feb 05, 2018 11:59 pm

zeugmite wrote:
Mon Feb 05, 2018 11:57 pm
CULater wrote:
Mon Feb 05, 2018 11:40 pm
Here's the Good News -- J. Siegel says the market is cha-ching. What a difference a couple days makes, eh?
Jeremy Siegel almost never gives a one-year forecast for stocks, but last week he predicted that U.S. equities will end the year with gains of as much as 10%.
So now does he believe US equities will end the year up 20% from here, since we're 10% down from last week?
Presumably, yes. But Siegel is a perma-bull.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: U.S. stocks in freefall

Post by Noobvestor » Tue Feb 06, 2018 12:07 am

Japanese stocks down 7% overnight so far - is there a thread for that?!
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

squirm
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Re: U.S. stocks in freefall

Post by squirm » Tue Feb 06, 2018 12:09 am

With all the gains of the S&P I doubt anyone feels much pain in the recent declines. Because of that, i would expect the market to continue to fall.

I wonder if a economy can enter into a recession just due to fall in market valuation? If the market falls 20% for the year, that will make a lot of people feel less rich, but the reality is it isn't even that much of a fall given the rise. The wealth effect is real.
Last edited by squirm on Tue Feb 06, 2018 12:11 am, edited 1 time in total.

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Re: U.S. stocks in freefall

Post by squirm » Tue Feb 06, 2018 12:10 am

Noobvestor wrote:
Tue Feb 06, 2018 12:07 am
Japanese stocks down 7% overnight so far - is there a thread for that?!
Cramer is blaming the algo machines now. Figures.

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Re: U.S. stocks in freefall

Post by willthrill81 » Tue Feb 06, 2018 12:21 am

squirm wrote:
Tue Feb 06, 2018 12:09 am
With all the gains of the S&P I doubt anyone feels much pain in the recent declines. Because of that, i would expect the market to continue to fall.

I wonder if a economy can enter into a recession just due to fall in market valuation? If the market falls 20% for the year, that will make a lot of people feel less rich, but the reality is it isn't even that much of a fall given the rise. The wealth effect is real.
The market dropped more than 20% in a single day in October, 1987, but it didn't phase the economy at all. The losses were quickly recovered.

At this point, I think many are making too big of a deal about this downturn. Way back in the old days, the S&P 500 dropped nearly 13% between Nov., 2015, and Feb., 2016. There was almost a 12% decline from July to August in 2015 as well.

When it comes to stocks, volatility is the norm. The almost straight up days of 2017 were far from the norm.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: U.S. stocks in freefall

Post by squirm » Tue Feb 06, 2018 12:31 am

willthrill81 wrote:
Tue Feb 06, 2018 12:21 am
squirm wrote:
Tue Feb 06, 2018 12:09 am
With all the gains of the S&P I doubt anyone feels much pain in the recent declines. Because of that, i would expect the market to continue to fall.

I wonder if a economy can enter into a recession just due to fall in market valuation? If the market falls 20% for the year, that will make a lot of people feel less rich, but the reality is it isn't even that much of a fall given the rise. The wealth effect is real.
The market dropped more than 20% in a single day in October, 1987, but it didn't phase the economy at all. The losses were quickly recovered.

At this point, I think many are making too big of a deal about this downturn. Way back in the old days, the S&P 500 dropped nearly 13% between Nov., 2015, and Feb., 2016. There was almost a 12% decline from July to August in 2015 as well.

When it comes to stocks, volatility is the norm. The almost straight up days of 2017 were far from the norm.
But my point is the wealth effect is real. I don't remember the 87 crash, I was too young to care, but I have a feeling that back then there wasn't much in retail participants like today where everyone can trade on a smartphone. I still think this is nothing and there isn't nearly enough pain to warrant anytype of major bottom.

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Re: U.S. stocks in freefall

Post by whodidntante » Tue Feb 06, 2018 12:31 am

squirm wrote:
Tue Feb 06, 2018 12:10 am
Noobvestor wrote:
Tue Feb 06, 2018 12:07 am
Japanese stocks down 7% overnight so far - is there a thread for that?!
Cramer is blaming the algo machines now. Figures.
I can guess, too. But I won't yell when I do it, and I don't have a soundboard.

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Re: U.S. stocks in freefall

Post by zeugmite » Tue Feb 06, 2018 12:40 am

willthrill81 wrote:
Tue Feb 06, 2018 12:21 am
At this point, I think many are making too big of a deal about this downturn. Way back in the old days, the S&P 500 dropped nearly 13% between Nov., 2015, and Feb., 2016. There was almost a 12% decline from July to August in 2015 as well.

When it comes to stocks, volatility is the norm. The almost straight up days of 2017 were far from the norm.
In 2015 the move wasn't of this speed. Plus the Fed/ECB/BOJ strongly indicated their intention to support the market at any cost back then. The market is looking for a Powell put and may not get one. We'll see.

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Re: U.S. stocks in freefall

Post by letsgobobby » Tue Feb 06, 2018 12:44 am

squirm wrote:
Mon Feb 05, 2018 11:55 pm
This was so very much overdo. Markets don't go up forever.
I'll watch CNBC tonight for fun and watch all the clowns lie and say they told everyone to sell last week.

This is a pretty broad sell off, I wonder if the market will ever recover to the highs in January 2018 in the next several years. I think given the volatility, the multiples will compress, so I would bet a "no".
you're predicting that the market will stay below its recent high for the next several years?

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Re: U.S. stocks in freefall

Post by letsgobobby » Tue Feb 06, 2018 1:00 am

RetireBy55 wrote:
Mon Feb 05, 2018 5:21 pm
MrNewEngland wrote:
Mon Feb 05, 2018 4:53 pm
HomerJ wrote:
Mon Feb 05, 2018 4:38 pm


People need to stop wishing for a crash. At least out loud. Even if YOU don't get hurt, many people will.
I've been thinking the exact same thing when I've been reading this thread for the past week.
EXACTLY. Some of us are literally on the verge of retirement. Others are IN retirement. People like us don't have 20+ year horizons and watch what's essentially an entire year's worth of living expenses vaporized in one day's trading.
Your asset allocation should reflect your ability to handle the risk inherent in the market. Hopefully you are prepared for a possible 50% decline - the market has done that twice in less than 20 years so it's always a possibility.

Those of us 'wishing' for a crash aren't exactly wishing for a crash. I'm wishing for more reasonable prices so I can accumulate more shares during the accumulation stage. In fact most accumulators should be cheering for lower prices, not higher. We want prices to stay low for 20, 30, or 40 years, until the day we retire. Then we'd like the stock market to go up 1000%, thank you very much.

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WoodSpinner
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Re: U.S. stocks in freefall

Post by WoodSpinner » Tue Feb 06, 2018 1:04 am

robertmcd wrote:
Mon Feb 05, 2018 6:34 pm
Looks like XIV is busted and will have to liquidate. There is also a large imbalance between the long vol and short vol products. I hate to mention Cramer but he is talking about this. We could be in store for a historic flash crash at the open quickly capitalized on by the algos.
What are you all talking about?

Seriously, I don’t have a clue what XIV is and am not following...

WoodSpinner :idea: :?: :?:

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Re: U.S. stocks in freefall

Post by MysticalMoose » Tue Feb 06, 2018 1:04 am

One of the reasons for the drop is that wages rose. It could be a good buying opportunity for people who have money saved, but many people struggle to save money because cost of living has outpaced wage growth. If the stock market punishes wage growth, is there hope for those people to ever enter the market?

Especially with regard to the rise of the "gig economy" and many jobs being part-time work, does that translate to a barrier to entry that will spell trouble for the stock market down the road?

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Re: U.S. stocks in freefall

Post by LorieBH » Tue Feb 06, 2018 1:07 am

Hi all,

Long time lurker, first time poster.

The Bogleheads.org site is such a wealth of information, I learned how to set up an IPS, how to decide upon my asset allocation, the reason for having Bonds (that took me quite a while I'll admit...) and how to set comfortable rebalancing bands and intervals.

That being said - in reviewing my asset allocations (per my IPS) I noticed I had made a mathematical error on my AA spreadsheet that had me a bit heavier in International stocks than I intended. Upon correcting my AA spreadsheet it triggered a rebalancing band and so today I rebalanced to my intended asset allocation.

Part of me wanted to wait to see how the market does tomorrow - but I know that is "market timing" and I've learned (again from this wonderful forum) that that is NOT what I want to do. So I'm following my IPS and rebalancing per my bands. If the market goes down further, ok. If it goes back up, ok. Either way I'm sticking to my AA and if the market swings enough to trigger another band (it would have to swing pretty hard to do that) then I'll rebalance again.

I'd like to thank everyone here who has posted and shared their knowledge, you have all helped me so much.
Lorie
:happy

fennewaldaj
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Re: U.S. stocks in freefall

Post by fennewaldaj » Tue Feb 06, 2018 1:10 am

Noobvestor wrote:
Tue Feb 06, 2018 12:07 am
Japanese stocks down 7% overnight so far - is there a thread for that?!
Maybe that will be enough to help trigger my limit orders on VSS (FTSE all world ex US small cap) for 110 and 100 (current price is 117.14 as of the end of trading 2/5)

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Re: U.S. stocks in freefall

Post by inbox788 » Tue Feb 06, 2018 1:34 am

squirm wrote:
Tue Feb 06, 2018 12:10 am
Noobvestor wrote:
Tue Feb 06, 2018 12:07 am
Japanese stocks down 7% overnight so far - is there a thread for that?!
Cramer is blaming the algo machines now. Figures.
He might be right.
https://www.bloomberg.com/news/articles ... r-the-ages

We won't know immediately, but in a month, I expect to hear about a quant firm going bankrupt or needing a bailout. Someone took a bad beating today and will have to face the consequences. These days, it's all about the machines trading against each other, and we're just along for the ride.

When self driving cars are perceived as safer than humans, there's always the stars aligning and a single point of failure that will cause a 100 self-driving car accident, and it will feel a lot like today where we ask if we should let the machines loose. Unfortunately, there's no putting the genie back in the bottle.

fakin' the funk
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Re: U.S. stocks in freefall

Post by fakin' the funk » Tue Feb 06, 2018 2:07 am

Newbie here. First big dip.

This is when we stay the course, right?

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walletless
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Re: U.S. stocks in freefall

Post by walletless » Tue Feb 06, 2018 2:31 am

fakin' the funk wrote:
Tue Feb 06, 2018 2:07 am
Newbie here. First big dip.

This is when we stay the course, right?
No you bail out at the bottom, then reenter at the top
Just kidding ;-)

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Re: U.S. stocks in freefall

Post by Crushtheturtle » Tue Feb 06, 2018 4:09 am

Looks like I picked the wrong week to stop drinking.

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Re: U.S. stocks in freefall

Post by oldcomputerguy » Tue Feb 06, 2018 6:11 am

CULater wrote:
Mon Feb 05, 2018 11:17 pm
Hey, guess what? It's still a little more likely that Mr. Market is UP tomorrow and not DOWN. According to Crestmont, over the last 50 years the market has been up about 54% of the days and down 46%. Even in bear market periods, it has been up 51% of the days and down 49%. It's not the number of UPs and the DOWNs that get you -- it's just how B I G they are.

https://www.crestmontresearch.com/docs/Stock-Yo-Yo.pdf
And, interestingly, looking at Fidelity this morning, although Europe continued the sell-off overnight (down around 2%), S&P500 e-mini is showing a 1/2% gain. So who knows? Certainly not me.
:?
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: U.S. stocks in freefall

Post by oldcomputerguy » Tue Feb 06, 2018 6:19 am

fakin' the funk wrote:
Tue Feb 06, 2018 2:07 am
Newbie here. First big dip.

This is when we stay the course, right?
Yep. Come back later (maybe in summer, maybe at the end of the year) and look again. If your holdings have drifted away from your asset allocation (say, 50% stocks instead of 60%), then sell the gainers and buy the losers to get back where your plan says you should be. Then go away and do something else.

I'd also suggest you read this post by Boglehead member nisiprius.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: U.S. stocks in freefall

Post by 10YearPlan » Tue Feb 06, 2018 6:22 am

fakin' the funk wrote:
Tue Feb 06, 2018 2:07 am
Newbie here. First big dip.

This is when we stay the course, right?
Yep! In order to do that, I plan to stop or at least dramatically reduce looking at statements (online or otherwise) as long as it continues. That's what I did in the last crash and plan to do again this time. It helps to create a little bit of emotional distance to the situation.

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Re: U.S. stocks in freefall

Post by Psyayeayeduck » Tue Feb 06, 2018 7:21 am

I think these drops is a great example of "Put up or shut up" when it comes to investing. Coming off a year of 20% return, I think a lot of people were on a sugar high expecting the unusually high returns of 2017 to continue into 2018. Looking at futures and how the international stocks are doing, it seems that today is another day of triple-digit drops (maybe another four-digit!) where panic and worry will plague among amateur investors and media talking heads alike. Will this continue for another day, week, month, or year? No clue. That is why one prepares for this stuff when things are going great. It's why one has an emergency fund, eliminate high interest debt, and understand that risky portfolios are subject to the volatility of the markets like today. It's all part of the grand master plan of being a great Boglehead follower. It's not for the faint of heart.

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Re: U.S. stocks in freefall

Post by runner540 » Tue Feb 06, 2018 7:31 am

MysticalMoose wrote:
Tue Feb 06, 2018 1:04 am
One of the reasons for the drop is that wages rose. It could be a good buying opportunity for people who have money saved, but many people struggle to save money because cost of living has outpaced wage growth. If the stock market punishes wage growth, is there hope for those people to ever enter the market?

Especially with regard to the rise of the "gig economy" and many jobs being part-time work, does that translate to a barrier to entry that will spell trouble for the stock market down the road?
Old school economics: Maybe it's a tiny shift of reallocating rewards to labor instead of capital. For decades, most of the gains have gone to capital.

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AtlasShrugged?
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Re: U.S. stocks in freefall

Post by AtlasShrugged? » Tue Feb 06, 2018 7:52 am

Bogleheads.....It worked!

Like others, I have greatly expanded my knowledge here. This morning, I noted that I was correctly allocated (executed a small rebalance), and now increased my contributions to FXSIX big-time (much earlier this morning) just to maintain the allocation specified in my ISP. Talk about fortuitous timing. I was not even trying. I just followed my ISP and 'BAM!' - everything fell into place. Amazing how that all works out, isn't it?

I have had a number of coworkers come to me and ask....so what are you doing? What do you think? Are you worried? Here is what I have told them. "When you go shopping for a car, or food, or clothing, or anything for that matter....do you want to pay full price, or buy at a discount? The market has just handed you a wonderful opportunity to buy at a discount. So I am just going to keep buying. And I think you should too. The sun will rise in the east tomorrow, we all have pretty decent jobs, we live in a great country, and life is unbelievably good. Don't stress on it."

Pre-Bogleheads, I would have been in 'the sky is falling' crowd. No longer. For this, I thank the Bogleheads. Because this forum, and many of the people in it have given me the confidence to persevere. It is a wonderful feeling.
“If you don't know, the thing to do is not to get scared, but to learn.”

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Re: U.S. stocks in freefall

Post by ruralavalon » Tue Feb 06, 2018 7:53 am

ofcmetz wrote:
Mon Feb 05, 2018 8:26 pm
I remember when this thread kicked off in 2011. I had a lot less invested then, but was moved a lot more emotionally with the ups and downs of the markets. Now I appreciate even more the value of following a plan. At the end of last year we were basically putting new savings into fixed income and even rebalanced towards the end of January towards fixed income. Now two bad weeks have erased 2018's gains plus a little more.

Look at where we are now from when this thread started in 2011. Where this goes is anyone's best guess. My advice is to follow a well thought out plan and not to panic. Markets don't always go up contrary to what last year taught us. I don't think it's ever good to make any drastic changes in the midst of either a raging bull market or star crash. Your plan should already say what to do when each happens.
This thread started August 11, 2011. Since then according to Morningstar total return of Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) is up 168%, and $10,000 invested has grown to be $26,766.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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ruralavalon
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Re: U.S. stocks in freefall

Post by ruralavalon » Tue Feb 06, 2018 8:07 am

CULater wrote:
Mon Feb 05, 2018 9:23 pm
Noobvestor wrote:
Mon Feb 05, 2018 8:13 pm
RRAAYY3 wrote:
Mon Feb 05, 2018 7:59 pm
willthrill81 wrote:
Mon Feb 05, 2018 7:53 pm
RRAAYY3 wrote:
Mon Feb 05, 2018 7:50 pm
are we expecting another dumpster fire mañana as well ?
International didn't save the day in 2000-2002 nor in 2008-2009 either. Many argue that international markets are becoming increasingly interdependent, leading to returns being more strongly correlated now than in the past.
i'm quite disappointed in my INT'L fund myself ... not really seeing that "diversification" perk at the moment !

https://www.cnbc.com/2017/04/17/a-stubb ... ffett.html
In a stock crash, I expect all of my stocks to go down - bonds are the diversifier. In a 'lost decade' like 2000-2010, international can help.
Actually, I'd argue that bonds are not a "diversifier". As Cliff Asness states, bonds merely dilute or dampen stock returns. Unless you hold a whole lot of them and/or they have long durations, your portfolio returns are still driven by the stock returns in it. For example, the return of a portfolio that is 60% stocks, 40% intermediate bonds is correlated 0.97 with the returns of stocks. Because the bonds have lower volatility, they reduce the likely range of portfolio returns both the upside and the downside, but they do not reduce the equity risk of the portfolio in the sense that most of the volatility of your portfolio returns is still attributable to stocks.
Diluting or dampening stock volatility is the primary purpose of a bond allocation. Bonds do add diversification.

Vanguard Intermediate-term Bond Index Fund (VBILX) was up 0.63% yesterday while Vanguard Total Stock Market Index Fund (VTSAX) was down 2.75%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: U.S. stocks in freefall

Post by CyclingDuo » Tue Feb 06, 2018 8:18 am

Here are the past 10 corrections in the S&P 500 index:

Span of the correction ---------Decline in Percent
May 21, 2015-Feb. 11, 2016------14.2
April 29, 2011-Oct. 3, 2011------19.4
April 23, 2010-July 2, 2010-------16
Nov. 27, 2002-March 11, 2003----14.7
July 16, 1999-Oct. 15, 1999------12.1
July 17, 1998-Aug. 31, 1998------19.3
Oct. 7, 1997-Oct. 27, 1997-------10.8
Oct. 9, 1989-Jan. 20, 1990-------10.2
Oct. 10, 1983-July 24, 1984------14.4
Feb. 13, 1980-March 27, 1980----17.1
Oct. 5, 1979-Nov. 7, 1979--------10.2

Before this morning's open, we are only down 7.8% from recent highs for the S&P.
Last edited by CyclingDuo on Tue Feb 06, 2018 8:20 am, edited 1 time in total.

22twain
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Re: U.S. stocks in freefall

Post by 22twain » Tue Feb 06, 2018 8:20 am

What freefall?

This graph shows the CREF Stock accumulation in my TIAA 403(b) plan. To reduce noise, data points are at the end of each quarter except for the last one which is Monday's value. Therefore it ignores the run-up during January.

On a quarter-by-quarter basis, we're (so far) nowhere near the "China Syndrome" of 2015 (or was that the "Brexit Bust"?) or the "Debt Ceiling Circus" of 2011, let alone the Great Recession of 2008-09.

Image

My contributions stopped when I retired at the end of 2016. I haven't taken any money out yet.
Last edited by 22twain on Tue Feb 06, 2018 8:23 am, edited 1 time in total.
My investing princiPLEs do not include absolutely preserving princiPAL.

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Re: U.S. stocks in freefall

Post by nisiprius » Tue Feb 06, 2018 8:22 am

Something to pay attention to, and I mean seriously, is the relationship between the size of the drop and one's emotional reaction to it. Be careful, because it is nonlinear--it is like a rubber band reaching its breaking point--and it's different for everyone. So far (before opening today) this is a something like an 8% drop. There hasn't been a big correction since 2011, and there hasn't been a single-day percentage drop like this in... oh, however long.

The question you need to ask yourself is this: on paper, an 8% drop isn't much. It doesn't even count as a "correction."

As best you can judge, do you find an 8% drop more alarming, less alarming, or just about as alarming as you expected it to be?

That's not an invitation to post saying "I am a rock, I am an island" or "I whistle a happy tune." It is an invitation to check now and assess your personal risk tolerance to see whether it is really what you thought it was.
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.

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Re: U.S. stocks in freefall

Post by ruralavalon » Tue Feb 06, 2018 8:24 am

Welcome to the forum :) .
LorieBH wrote:
Tue Feb 06, 2018 1:07 am
Hi all,

Long time lurker, first time poster.

The Bogleheads.org site is such a wealth of information, I learned how to set up an IPS, how to decide upon my asset allocation, the reason for having Bonds (that took me quite a while I'll admit...) and how to set comfortable rebalancing bands and intervals.

That being said - in reviewing my asset allocations (per my IPS) I noticed I had made a mathematical error on my AA spreadsheet that had me a bit heavier in International stocks than I intended. Upon correcting my AA spreadsheet it triggered a rebalancing band and so today I rebalanced to my intended asset allocation.

Part of me wanted to wait to see how the market does tomorrow - but I know that is "market timing" and I've learned (again from this wonderful forum) that that is NOT what I want to do. So I'm following my IPS and rebalancing per my bands. If the market goes down further, ok. If it goes back up, ok. Either way I'm sticking to my AA and if the market swings enough to trigger another band (it would have to swing pretty hard to do that) then I'll rebalance again.

I'd like to thank everyone here who has posted and shared their knowledge, you have all helped me so much.
Lorie
:happy
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: U.S. stocks in freefall

Post by blackcat allie » Tue Feb 06, 2018 8:29 am

First it's great that this thread has been running since 2011... Hope to check back in a year or 10 on it.
I'm feeling like current horror sequel is "International Stocks in Freefall Too*

I was thinking along the lines of @parsi1 's post, about the arguable value of international. As of late, there have been recommendations for 30-50 % international on the vanguard website. While I realize this is only a few days, and very limited sample, I was hoping that the diversification would help. Now I'm slightly more skeptical of International Bonds as well. :confused
Last edited by blackcat allie on Tue Feb 06, 2018 8:32 am, edited 2 times in total.

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Re: U.S. stocks in freefall

Post by alfaspider » Tue Feb 06, 2018 8:31 am

CyclingDuo wrote:
Tue Feb 06, 2018 8:18 am
Here are the past 10 corrections in the S&P 500 index:

Span of the correction ---------Decline in Percent
May 21, 2015-Feb. 11, 2016------14.2
April 29, 2011-Oct. 3, 2011------19.4
April 23, 2010-July 2, 2010-------16
Nov. 27, 2002-March 11, 2003----14.7
July 16, 1999-Oct. 15, 1999------12.1
July 17, 1998-Aug. 31, 1998------19.3
Oct. 7, 1997-Oct. 27, 1997-------10.8
Oct. 9, 1989-Jan. 20, 1990-------10.2
Oct. 10, 1983-July 24, 1984------14.4
Feb. 13, 1980-March 27, 1980----17.1
Oct. 5, 1979-Nov. 7, 1979--------10.2

Before this morning's open, we are only down 7.8% from recent highs for the S&P.
It occurred to me that I don't even remember the 2011 dip- even though it was almost 20%. Just goes to show how much of a blip such things can be in the long run.

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Re: U.S. stocks in freefall

Post by Bacchus01 » Tue Feb 06, 2018 8:32 am

CyclingDuo wrote:
Tue Feb 06, 2018 8:18 am
Here are the past 10 corrections in the S&P 500 index:

Span of the correction ---------Decline in Percent
May 21, 2015-Feb. 11, 2016------14.2
April 29, 2011-Oct. 3, 2011------19.4
April 23, 2010-July 2, 2010-------16
Nov. 27, 2002-March 11, 2003----14.7
July 16, 1999-Oct. 15, 1999------12.1
July 17, 1998-Aug. 31, 1998------19.3
Oct. 7, 1997-Oct. 27, 1997-------10.8
Oct. 9, 1989-Jan. 20, 1990-------10.2
Oct. 10, 1983-July 24, 1984------14.4
Feb. 13, 1980-March 27, 1980----17.1
Oct. 5, 1979-Nov. 7, 1979--------10.2

Before this morning's open, we are only down 7.8% from recent highs for the S&P.

2008-2009?

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Re: U.S. stocks in freefall

Post by Bacchus01 » Tue Feb 06, 2018 8:33 am

alfaspider wrote:
Tue Feb 06, 2018 8:31 am
CyclingDuo wrote:
Tue Feb 06, 2018 8:18 am
Here are the past 10 corrections in the S&P 500 index:

Span of the correction ---------Decline in Percent
May 21, 2015-Feb. 11, 2016------14.2
April 29, 2011-Oct. 3, 2011------19.4
April 23, 2010-July 2, 2010-------16
Nov. 27, 2002-March 11, 2003----14.7
July 16, 1999-Oct. 15, 1999------12.1
July 17, 1998-Aug. 31, 1998------19.3
Oct. 7, 1997-Oct. 27, 1997-------10.8
Oct. 9, 1989-Jan. 20, 1990-------10.2
Oct. 10, 1983-July 24, 1984------14.4
Feb. 13, 1980-March 27, 1980----17.1
Oct. 5, 1979-Nov. 7, 1979--------10.2

Before this morning's open, we are only down 7.8% from recent highs for the S&P.
It occurred to me that I don't even remember the 2011 dip- even though it was almost 20%. Just goes to show how much of a blip such things can be in the long run.
I remember the 15-16 one well. Our net worth only grew 13% and 15% respectively those years :)

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Re: U.S. stocks in freefall

Post by oldcomputerguy » Tue Feb 06, 2018 8:36 am

JCE66 wrote:
Tue Feb 06, 2018 7:52 am
Pre-Bogleheads, I would have been in 'the sky is falling' crowd. No longer. For this, I thank the Bogleheads. Because this forum, and many of the people in it have given me the confidence to persevere. It is a wonderful feeling.
I'm with you. I had just sunk about $50k into sector funds (100% equity) a few years ago (never having heard of John Bogle and not knowing what an index fund was). Then a month or two later, China devalued the yuan, and markets took a stumble. I was freaking.

Today, I'm retired, my portfolio is 50/50, and I find myself laughing at all the noise from the media about a "major market crash". I don't care. I'm allocated for my comfort level, and I find I'm, well, comfortable.

:sharebeer
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: U.S. stocks in freefall

Post by oldcomputerguy » Tue Feb 06, 2018 8:37 am

Bacchus01 wrote:
Tue Feb 06, 2018 8:32 am
CyclingDuo wrote:
Tue Feb 06, 2018 8:18 am
Here are the past 10 corrections in the S&P 500 index:

Span of the correction ---------Decline in Percent
May 21, 2015-Feb. 11, 2016------14.2
April 29, 2011-Oct. 3, 2011------19.4
April 23, 2010-July 2, 2010-------16
Nov. 27, 2002-March 11, 2003----14.7
July 16, 1999-Oct. 15, 1999------12.1
July 17, 1998-Aug. 31, 1998------19.3
Oct. 7, 1997-Oct. 27, 1997-------10.8
Oct. 9, 1989-Jan. 20, 1990-------10.2
Oct. 10, 1983-July 24, 1984------14.4
Feb. 13, 1980-March 27, 1980----17.1
Oct. 5, 1979-Nov. 7, 1979--------10.2

Before this morning's open, we are only down 7.8% from recent highs for the S&P.

2008-2009?
2008-2009 was not a correction. It was a fullblown bear market.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: U.S. stocks in freefall

Post by DanMahowny » Tue Feb 06, 2018 8:39 am

Bacchus01 wrote:
Tue Feb 06, 2018 8:32 am
2008-2009?
Yes, where's that?

Also, I see no declines over 20%? We've been thru much worse than 20%.

Am I looking at this wrong?

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Re: U.S. stocks in freefall

Post by SocalLiving » Tue Feb 06, 2018 8:42 am

nisiprius wrote:
Tue Feb 06, 2018 8:22 am
That's not an invitation to post saying "I am a rock, I am an island" or "I whistle a happy tune." It is an invitation to check now and assess your personal risk tolerance to see whether it is really what you thought it was.
I am definitely using this as an opportunity for self reflection and taking stock of the range of emotions on this forum as we enter this period of volatility. There are calm voices on this forum that are invaluable to us all.

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Re: U.S. stocks in freefall

Post by Da5id » Tue Feb 06, 2018 8:48 am

Don't be like Denethor, stick with Gandalf: https://www.youtube.com/watch?v=Pv_8YP3L38E

Today looks like more of the same, but assuming your plan is good and your risk level appropriate, this is a good time to "stay the course".

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