OT - Dow plunges 1,175 - worst point decline in history

[KarlC]

Dow plunges 1,175 - worst point decline in history

http://money.cnn.com/2018/02/05/investing/stock-market-today-dow-jones/index.html


This is why the Dow is plunging

http://money.cnn.com/2018/02/02/investing/why-dow-dropping/index.html?iid=EL

[BdaGhisallo]

Point drop is not important - percentage drop is what you should track.

The 1929 crash that spawned the Great Depression was only about 180 points.

[kppolich]

Point drop is not important - percentage drop is what you should track.

The 1929 crash that spawned the Great Depression was only about 180 points.

agreed, % drop is where it's at. Not a whole lot to see here except the first "big" losing streak in a long long long time.

[adub]

CNN has been announcing all afternoon "Largest Single Day Point Decline Ever"

I guess just calling it what it is in actual terms does not have such a captivating (AKA; Trump bashing) headline..

[KarlC]

Point drop is not important - percentage drop is what you should track.

The 1929 crash that spawned the Great Depression was only about 180 points.

Yep, they just focus on the Point drop to make headlines

[makoti]

CNN has been announcing all afternoon "Largest Single Day Point Decline Ever"

I guess just calling it what it is in actual terms does not have such a captivating (AKA; Trump bashing) headline..

Because it IS the largest point drop. That's fact. Is it as bad as prior drops? Maybe not, but it SOUNDS worse. Can't see stating facts T-bashing.

[Seramount]

so, will all the weak-kneed types rush to their fainting couches and dump holdings tomorrow to add a little gasoline to the fire...?

seems like that's the usual scenario on big drops...

[adub]

Because it IS the largest point drop. That's fact. Is it as bad as prior drops? Maybe not, but it SOUNDS worse. Can't see stating facts T-bashing.

Ya and during the hurricanes CNN was reporting the total rainfall in Millimeters rather than inches..

The "news" is all about making things seem worse than they are, the CNN headline is a prime example.

[djdj]

so, will all the weak-kneed types rush to their fainting couches and dump holdings tomorrow to add a little gasoline to the fire...?

seems like that's the usual scenario on big drops...

No, we strong-kneed types will stay off the couch and ride the market all the way to the bottom! Who's with me!?!

[Ken Robb]

no, we strong-kneed types will stay off the couch and ride the market all the way to the bottom! Who's with me!?!
geronimo!

[Big Dan]

Who was pimping the market?
I forget.....
help


:eek:

[echappist]

No, we strong-kneed types will stay off the couch and ride the market all the way to the bottom! Who's with me!?!

nah, i'm about to rebalance in favor of equities when the S&P dips 10% beneath its high

but really, I have the luxury of time when i make this statement. Doubtful i'd be as bullish if i were nearing retirement.

Also, the Dow is a pretty meaningless index. Doesn't really capture the whole effect of the market and isn't even weighted by capitalization. Always use the S&P as a guide; in which case, top 20 in terms of single-day percentage loss

[ptourkin]

And Kai Ryssdal is off today. I feel cheated.

[cnighbor1]

Yes that is why all my IRA and in with Merriman LLC Seattle are in a timed account they go out in 25% increments Use only Mutual fund and EFTS
http://www.merriman.com/
Yes many articles state market timing doesn't work but it is all in the details of how it is used

[dbnm]

bitcoin!

[echappist]

And Kai Ryssdal is off today. I feel cheated.

here, hope this cheers you up :p

https://www.youtube.com/watch?v=ezGHapF8-lY

unfortunately, I can't find the mandolin version of the song

[oldpotatoe]

CNN has been announcing all afternoon "Largest Single Day Point Decline Ever"

I guess just calling it what it is in actual terms does not have such a captivating (AKA; Trump bashing) headline..

Well if trump is responsible for Dow records, so he’s also responsible for this drop...neither of which is true, of course.

[soulspinner]

geronimo!

Ya. it will be fine :eek: When the pres took office I knew it would take off despite my feelings about pres. Money has been free for a long time but cant be forever.

[Jaybee]

And Kai Ryssdal is off today. I feel cheated.

"The economy is not the market, and the market is not the economy."


Amy Scott is pretty good too, though.

[Mzilliox]

well, that will affect nearly 5 percent of the population or so...

[OtayBW]

Ya and during the hurricanes CNN was reporting the total rainfall in Millimeters rather than inches..

The "news" is all about making things seem worse than they are, the CNN headline is a prime example.I dont really care if they reported it in furlongs per fortnight; it's a darn sight better to me than some of the other options that I could think of...

Sent from my SM-G935V using Tapatalk

[Louis]

Well if trump is responsible for Dow records, so he’s also responsible for this drop...neither of which is true, of course.

It's the Dems fault because they didn't clap for him during the State of the Union address.

[joosttx]

so, will all the weak-kneed types rush to their fainting couches and dump holdings tomorrow to add a little gasoline to the fire...?

seems like that's the usual scenario on big drops...

I hope so, I have been 20% out of the market for a month now while transitioning my portfolio to "interest rate proof*" securities ever since the tax bill was passed. Cannot wait til Trump starts a twitter war with the fed.

* obviously nothing is "proof" just less affected.

[Mzilliox]

I hope so, I have been 20% out of the market for a month now while transitioning my portfolio to "interest rate proof" securities ever since the tax bill was passed. Cannot wait til Trump starts a twitter war with the fed.

we did pretty much exactly this in late november/december. I just had this feeling a mouth or fingers would say something odd with no regard for normal people

[joosttx]

we did pretty much exactly this in late november/december. I just had this feeling a mouth or fingers would say something odd with no regard for normal people

Solo gravel riders get it. :banana:

[AngryScientist]

Fortunately the SRbIF* is holding rock steady; and i'm heavily invested. Actually, every tweet from Washington DC makes it raise 1 point in value.











*(Steel Rim brake Index Fund)

[fa63]

Took advantage and bought some ETFs today. We are all about dollar cost averaging, but happened to have some cash lying around so why not.

[soulspinner]

It's the Dems fault because they didn't clap for him during the State of the Union address.

:)

[Tony T]

The breaking of the 50 day MA was not a good sign.

[likebikes]

i think it's related to the super bowl yesterday rather than anything else.

we used to have a dedicated "stock market watch" thread, but too many OT posts and troll posts in it got it shut down, shame.

[Tony T]

NYT: Context Matters. The Stock Market Drop Is Less Scary Than It Seems (https://www.nytimes.com/2018/02/05/upshot/context-matters-the-stock-market-drop-is-less-scary-than-it-seems.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=a-lede-package-region&region=top-news&WT.nav=top-news)

If measured by news headlines, you might assume these are dire times in the financial markets.
—-
This market decline so far has returned the market roughly to its level in mid-December, less than two months ago. The 7.8 percent drop in the Standard & Poor’s 500 over the last six trading days is similar in scale and speed to drops in January 2016 and August 2015, neither of which left lasting scars, and is short of the 10 percent drop that would qualify as a market correction.
—-
The Dow fell by 1,175 points Monday, which represents a quite large 4.6 percent decline. But while it was the biggest single-day point decline, there were steeper percentage declines on several occasions during the global financial crisis and its aftermath, not to mention the 508- point drop in the Dow in 1987 that represented a 22.6 percent market crash.
—-
The S.&P. 500 did not decline by more than 2 percent on a single trading day in all of 2017, which helps explain why Friday’s 2.1 percent drop seemed so startling. (The percentage drop on Monday was a much rarer event, one that last occurred in 2011.)
—-
But regardless of which it becomes, it’s good for everyone’s mental health to look beyond the day’s headlines and focus instead on percentage changes instead of point changes — and on historical patterns and the “why” behind the day’s drop in the markets.

[Tony T]

….but so far tomorrow looking like the decline will continue:
FUTURES FAIR VALUE (377.75)
Fair Val Close Cur Future Change
24315.75 23468.0 -847.75
Last Updated: Mon, 5 Feb '18 | 9:05 PM ET

[54ny77]

Damn I hate it when program traders use algorithms that feed off each other and create an endless negative feedback loop.

Kinda like Shimano vs. Campy vs. SRAM thread.

:D

[Louis]

Damn I hate it when program traders use algorithms that feed off each other and create an endless negative feedback loop.

Kinda like Shimano vs. Campy vs. SRAM thread.

:D

What about Simplex and Suntour?

[54ny77]

Those are the equities in Dallas of bike parts.

What about Simplex and Suntour?

[rounder]

We need someone like 1Centaur to explain all this stuff, at a time like this.

[Tickdoc]

Everybody calm down. I’m about to finish my Florida vacation and then everything will go back to normal.

[Louis]

Everybody calm down. I’m about to finish my Florida vacation and then everything will go back to normal.

While on vacation you stopped buying, so the market came crashing down? ;)

[1centaur]

We need someone like 1Centaur to explain all this stuff, at a time like this.

Common sense says that not a lot of people have decided that the world is a much worse place today than it was a week ago. The numbers that suggest economic strength are pretty good globally at this point. So why does the market drop like this?

There is a lot of automatic trading in this world, trades that happen because of patterns or because ETFs just don't care what something is worth. Momentum begot momentum on the way up so it had to happen on the way down. Trading without human judgment begs for greater volatility than was true historically, and the historically low volatility of the last year was ALSO because a lot of trading was trend-following a good trend.

Anecdotally, actual people seem to think this is a buying opportunity. That probably means they'll start buying as soon as the out-tide looks weak. And then the automatic trading will pick up on that momentum. There will come a day when machines/ETFs/people all want to sell, and that will feel really bad, but it does not seem likely that this pattern is setting up that way today. The market used to "know" because it was the consensus of people making judgments (wisdom of crowds). We're not exactly in that world anymore.

I'm not a stock guy, professionally, so take this for what it's worth.

[joosttx]

Common sense says that not a lot of people have decided that the world is a much worse place today than it was a week ago. The numbers that suggest economic strength are pretty good globally at this point. So why does the market drop like this?

There is a lot of automatic trading in this world, trades that happen because of patterns or because ETFs just don't care what something is worth. Momentum begot momentum on the way up so it had to happen on the way down. Trading without human judgment begs for greater volatility than was true historically, and the historically low volatility of the last year was ALSO because a lot of trading was trend-following a good trend.

Anecdotally, actual people seem to think this is a buying opportunity. That probably means they'll start buying as soon as the out-tide looks weak. And then the automatic trading will pick up on that momentum. There will come a day when machines/ETFs/people all want to sell, and that will feel really bad, but it does not seem likely that this pattern is setting up that way today. The market used to "know" because it was the consensus of people making judgments (wisdom of crowds). We're not exactly in that world anymore.

I'm not a stock guy, professionally, so take this for what it's worth.

Completely disagree. The world has decided that the world is healed from 2008-9 and those policies that caused it to heal plus a few news ones have made it too hot. Therefore, the market needs to cool down and policies will be put in place to slow it which lessens the $$$ in the future.

I still believe in the efficient market hypothesis

[Gummee]

No, we strong-kneed types will stay off the couch and ride the market all the way to the bottom! Who's with me!?!

Stocks are on sale. Buy em if you can

M

[Louis]

Stocks are on sale. Buy em if you can

Doesn't appear to be much of a discount to me.

[Tony T]

Stocks are on sale. Buy em if you can

M

If you liked today's Sale, you'll love tomorrow's.
DOW Futures indicate a 1,200 point drop at the open.

[Louis]

If you liked today's Sale, you'll love tomorrow's.
DOW Futures indicate a 1,200 point drop at the open.

If that does happen, it will certainly be irrational negativity (to invert Alan Greenspan's famous phrase).

[Tony T]

Bitcoin just fell below 6,000

[54ny77]

Just turn the chart upside down. Winning!

[sitzmark]

If that does happen, it will certainly be irrational negativity (to invert Alan Greenspan's famous phrase).

Maybe. 9 long years of irrational growth due to QE2 and US markets being the "safe" place to park $$. Long range P/E's have looked way overvalued to me for a long time. Have been sitting on cash waiting for this. ... of course missed a lot of run up too, but haven't lost any principal. So we wait patiently to see where a "floor" is, then start dollar costing in.

"Average people debt" is rising again and home equity ads are more prominently hitting the ad-waves. Bad sign. There has been a crisis in bad debt auto loans for the past few years. Nothing on the scale of the home mortgage crisis, but it is a drag on the system hovering below the surface. Tax relief dollars need to be spent to keep economy from slowing. National debt is scary and growing beyond GDP.

Return on "safer" investments than stock market are beginning to have a breakeven/actual return compared with inflation. For a long time, there has been zero return without risk. Low interest rates have forced older Americans to dump treasuries and other insured investment in favor of risk to get any return on retirement savings. If/as rates rise, a good share of those reserves will happily seek some modicum of "safety" outside of the stock market. There's a lot of near-term retirement savings in this mix.

[Louis]

So we wait patiently to see where a "floor" is, then start dollar costing in.

How will you know when this happens? When it falls back down to zero? (jk)

[sitzmark]

How will you know when this happens? When it falls back down to zero? (jk)

LOL. A "floor", not the floor. If 2008 replays itself (doesn't appear likely at this point), that might be a good buying point. :)

[Louis]

LOL. A "floor", not the floor. If 2008 replays itself (doesn't appear likely at this point), that might be a good buying point. :)

Good luck. (I'm not a Chartist)

https://2us9vjrl2kf1np7bx397xl07-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/sp-500-stock-market-pullback-january-30-chart_price-support-680x496_c.png

[cloudguy]

We need someone like 1Centaur to explain all this stuff, at a time like this.
no thanks

[unterhausen]

the drop is because investors found out about paypal's 1099k policy.

It's been a long time since I paid any attention to the market, but it seems like the futures can drop like this and be wiped out in the first hour of trading.

[sitzmark]

Good luck. (I'm not a Chartist)

https://2us9vjrl2kf1np7bx397xl07-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/sp-500-stock-market-pullback-january-30-chart_price-support-680x496_c.png

Agreed - charts are charts and who really knows the forecast. I'm more interested in tracking value than price and 30+ CAPE (even 20+) is cautionary for me. That's 30+ years of inflation adjusted earnings to equal share price. It's a new era post-dot com, but still...

https://www.lynalden.com/wp-content/uploads/CAPE-Jan2018.jpg

[oldpotatoe]

It's the Dems fault because they didn't clap for him during the State of the Union address.

:):)

[Nooch]

i'm just upset I had a buy order in for aapl at a point where I thought it wouldn't get down to, and was sure hoping if it did, it would bounce right back. eh, losing money sucks, but that's the game. long term I'm sure it'll be just fine.

[huck*this]

Buy Buy Buy or do nothing and ride it out. In the grand scheme of things 1200pts loss is nothing relative to market of 26k. I wouldn't base your portfolio on a a "day" loss.

[unterhausen]

It's been a long time since I paid any attention to the market, but it seems like the futures can drop like this and be wiped out in the first hour of trading.
guess this still happens. U.S. markets are up right now. Not sure what is going to happen the rest of the day though.

[oldpotatoe]

guess this still happens. U.S. markets are up right now. Not sure what is going to happen the rest of the day though.

buckle yer seat belts...!!

[Tony T]

guess this still happens. U.S. markets are up right now. Not sure what is going to happen the rest of the day though.

…and down, and up, and down again.

First hour today:

[rounder]

Common sense says that not a lot of people have decided that the world is a much worse place today than it was a week ago. The numbers that suggest economic strength are pretty good globally at this point. So why does the market drop like this?

There is a lot of automatic trading in this world, trades that happen because of patterns or because ETFs just don't care what something is worth. Momentum begot momentum on the way up so it had to happen on the way down. Trading without human judgment begs for greater volatility than was true historically, and the historically low volatility of the last year was ALSO because a lot of trading was trend-following a good trend.

Anecdotally, actual people seem to think this is a buying opportunity. That probably means they'll start buying as soon as the out-tide looks weak. And then the automatic trading will pick up on that momentum. There will come a day when machines/ETFs/people all want to sell, and that will feel really bad, but it does not seem likely that this pattern is setting up that way today. The market used to "know" because it was the consensus of people making judgments (wisdom of crowds). We're not exactly in that world anymore.

I'm not a stock guy, professionally, so take this for what it's worth.


Thanks!

I was listening to Bloomberg on the way in this morning and they were saying something similar. The economic signs look good and a lot of the decline was due to indexed trading. They viewed it as a market correction, and that there did not seem to be much turmoil in the other investment markets.

But they said that if the time comes where the economic signs do not look good and something like this happens, then look out.

[Tony T]

Today we had the 2nd worst point decline in history: -1,033

Ugly 5 day chart:

[soulspinner]

Another correction. Hang in. Its way up over the last year.

[NYCfixie]

Long term it does not matter.

As of Monday, all upside since 12/1/17 was wiped out. Now it appears we are going farther back. Buy in now - for the long term - peeps while the gettin is good.

[Tony T]

NYT: Don't worry:
Few Americans Own Stocks, So Few Are Affected by Slump (https://www.nytimes.com/2018/02/08/business/economy/stocks-economy.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news)

The riotous market swings that have whipped up frothy peaks of anxiety over the last week have virtually no impact on the income or wealth of most families. The reason: They own little or no stock.

“For the vast majority of Americans, fluctuations in the stock market have relatively little effect on their wealth, or well-being, for that matter,” said Edward N. Wolff, an economist at New York University


Fake News! (really, this can't be true)

[kppolich]

again, bought a little more today

[saab2000]

Long term it does not matter.

As of Monday, all upside since 12/1/17 was wiped out. Now it appears we are going farther back. Buy in now - for the long term - peeps while the gettin is good.

I agree that it doesn't matter in the long term. There's no way the market's rises over the past year or even five were sustainable.

I'm making no changes to my long-term financial planning. Continual monthly contributions to low-cost index funds is what I plan to keep doing.

[unterhausen]

makes me wonder if next week is the big drop. Oh, well, at least my ophthalmologist is not going to bleat about the rise in his portfolio supporting his politics like he did the last appointment.

I'm a little worried that people are going to be buying the kinds of investments that I have. Although I'm not putting any more in right now, so it doesn't really matter.

[joosttx]

Long term it does not matter.

As of Monday, all upside since 12/1/17 was wiped out. Now it appears we are going farther back. Buy in now - for the long term - peeps while the gettin is good.

Not mine. Good luck

[echappist]

again, bought a little more today

as i have a pension, i'm buying on the dip now. Somewhat more palatable when the "security" I sell is the appreciating one (TSP G-Fund).

Harder to do is to sell bond index fund on the decline to buy more in my Roth account

[likebikes]

I'm a little worried that people are going to be buying the kinds of investments that I have. Although I'm not putting any more in right now, so it doesn't really matter.

what type of investments do you have?

[Louis]

what type of investments do you have?


Campy Delta brakes:

http://sscycleworks.com/images/components-sale/brakes/campagnolo/campy-delta-brakes-1.jpg

[tuscanyswe]

Campy Delta brakes:

http://sscycleworks.com/images/components-sale/brakes/campagnolo/campy-delta-brakes-1.jpg

Aha the risk free investment.

[oldpotatoe]

NYT: Don't worry:
Few Americans Own Stocks, So Few Are Affected by Slump (https://www.nytimes.com/2018/02/08/business/economy/stocks-economy.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news)

The riotous market swings that have whipped up frothy peaks of anxiety over the last week have virtually no impact on the income or wealth of most families. The reason: They own little or no stock.

“For the vast majority of Americans, fluctuations in the stock market have relatively little effect on their wealth, or well-being, for that matter,” said Edward N. Wolff, an economist at New York University


Fake News! (really, this can't be true)

LOTSA 401ks and other pension plans are effected by this..

[sitzmark]

Campy Delta brakes:

http://sscycleworks.com/images/components-sale/brakes/campagnolo/campy-delta-brakes-1.jpg

Very well played ...

fitting analogy for the markets - value based on functional performance/return or collectability/trade value. :)

[verticaldoug]

NYT: Don't worry:
Few Americans Own Stocks, So Few Are Affected by Slump (https://www.nytimes.com/2018/02/08/business/economy/stocks-economy.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news)

The riotous market swings that have whipped up frothy peaks of anxiety over the last week have virtually no impact on the income or wealth of most families. The reason: They own little or no stock.

“For the vast majority of Americans, fluctuations in the stock market have relatively little effect on their wealth, or well-being, for that matter,” said Edward N. Wolff, an economist at New York University


Fake News! (really, this can't be true)

Actually it is true, but what it implies is far worse than you realize. It is not that Americans haven't invested in the market, it is most American have no savings (wealth) to invest in the markets. 5% of Americans control more than 50% of the wealth. 60% of the American population holds 4.2% of the wealth. So yes, vast majority of Americans are not affected by the markets since that is primarily a wealth effect. Income is a different matter.....

[saab2000]

LOTSA 401ks and other pension plans are effected by this..

That's the overwhelming majority of who is affected by this. The statement about most Americans not owning stock is borne out by the fact that many Americans have no 401k or retirement savings of any sort. And many who do don't understand basics about them, like not cashing them out when they change jobs.

What people seem to forget in these situations is that they still have the same number of shares. That doesn't change unless they are withdrawing from their accounts. These are just expansions or contractions of a balloon that isn't letting gas escape.

It's a correction that was to be expected and there's probably more to come.

[oldpotatoe]

That's the overwhelming majority of who is affected by this. The statement about most Americans not owning stock is borne out by the fact that many Americans have no 401k or retirement savings of any sort. And many who do don't understand basics about them, like not cashing them out when they change jobs.

What people seem to forget in these situations is that they still have the same number of shares. That doesn't change unless they are withdrawing from their accounts. These are just expansions or contractions of a balloon that isn't letting gas escape.

It's a correction that was to be expected and there's probably more to come.

Agree but those that may be 'hurt', are those, because of their circumstances, HAVE to use their 401k to survive..I feel for anybody who's retirment date is Monday(assuming today is going to be another blood letting)...

[saab2000]

Agree but those that may be 'hurt', are those, because of their circumstances, HAVE to use their 401k to survive..I feel for anybody who's retirment date is Monday(assuming today is going to be another blood letting)...

Well, even if their retirement is Monday, they don't have to take all their money out at once. And even if they did, it's still way up over the past few years.

We'll see what happens. As mentioned, I'm changing nothing in my long-term strategy but I have a long ways until retirement.

[zap]

Agree but those that may be 'hurt', are those, because of their circumstances, HAVE to use their 401k to survive..I feel for anybody who's retirment date is Monday(assuming today is going to be another blood letting)...

Typically one moves investments to the conservative side of the risk scale as retirement date approaches.

[summilux]

The cryptocurrency people have great advice for people encountering a dip/correction. First: Zoom The F***k Out, meaning put your graph on the 1 year setting. This correction brings us back to when? Last December? Were you happy then? You should've been and you should be happy now.

Second: Buy the dip

Third: HODL

[Tony T]

..
Second: Buy the dip
…

Which one? There were at least 5 this week :(

[unterhausen]

when I traded, I never really aimed to hit the very bottom or the very top, it's just not possible. Of course, if you are only in funds, that makes it really hard to hit the very bottom or top. My method was to watch CNBC and do the opposite of what they were saying. I forget which one of the financial papers was famous for being a negative predictor, Barrons maybe?

I feel sorry for the people that thought the recent runup meant that they could retire. Oops.

[joosttx]

Today was the day to buy a little. I believe we are corrected now.

[Tony T]

…I forget which one of the financial papers was famous for being a negative predictor, Barrons maybe?

…If only I bought and held AMZN when Barron's ran their "Amazon.bomb" page 1 story in 1999:
http://dev.philpearlman.com/wp-content/uploads/2011/09/amazondotbomb.jpg

AMZN was about $8 then!

[unterhausen]

I got nothin' to buy with now and I sure am not going to sell anything, so it's just entertainment.

[ripvanrando]

I have limit orders in for T, PFE, XOM and others at the like at $31, $65, and $32 ish but might lower those just a touch. I did buy some Southern Company on a big drop. I'm just an orphans and widows dividend boring guy. Waiting to add to positions. Last night's vote is the reason.

[kppolich]

Today was the day to buy a little. I believe we are corrected now.

also buying a little more today at EOD

[Tony T]

I don't think last night's vote is a reason to buy.

[joosttx]

I have limit orders in for T, PFE, XOM and others at the like at $31, $65, and $32 ish but might lower those just a touch. I did buy some Southern Company on a big drop. I'm just an orphans and widows dividend boring guy. Waiting to add to positions. Last night's vote is the reason.

I bought some T today

[joosttx]

I don't think last night's vote is a reason to buy.

Me neither. That’s not the reason to buy

[Tony T]

With the S&P breaking the 50 Day Moving Average, then the 100, and today the 200 day MA, is this really a time to buy?

[Jeff N.]

10/10/18...bad plunge today...

[godfrey1112000]

No screaming on the way up📈 no screaming on the way down 📉

[R3awak3n]

I mean, what did everyone expect, I am up 92% this year on my portfolio.... I am an amateur investor.... it will come down and come down again

well, was up 92%... that was last week ahah

[RC.]

No screaming on the way up📈 no screaming on the way down 📉

Yup. Time in the market will always be better than trying to time the market.

[echappist]

time to rebalance toward equities

[godfrey1112000]

Yup. Time in the market will always be better than trying to time the market.

Thanks Mr Buffet

[makoti]

Please don't revive threads with 1K+ Dow drops in the title...
:no:

[Tony T]

Please don't revive threads with 1K+ Dow drops in the title...
:no:

Might be………….
…………..not, DOW Down 831

[saab2000]

Just bought shares for about 4-5% less than they were a week ago. Stocks are on sale today.

[unterhausen]

Please don't revive threads with 1K+ Dow drops in the title...
:no:

okay, I laughed.

I think anyone that can't afford a few 1k drops doesn't really belong in the stock market. I went from heavily weighted towards cash to a lot of securities. But the nature of those investments are such that as long as the economy is doing okay, I will do okay. Never been one to put money in a company I didn't understand.

[Louis]

Stocks are on sale today.

Might be an even better sale tomorrow.

[MattTuck]

Might be an even better sale tomorrow.

We're going back below 1500 on the S&P500 (not today, or tomorrow though). This is the economic equivalent of a guy going on a solo break away at Roubaix, using all his reserves, pushing past his limits to gain a temporary advantage. He will hit a wall with 50K still left to race.

[fignon's barber]

It's unpleasant, but if you own good companies just be patient.

[echappist]

Thanks Mr Buffet

actually, more like Mr. Jack Bogle



We're going back below 1500 on the S&P500 (not today, or tomorrow though). This is the economic equivalent of a guy going on a solo break away at Roubaix, using all his reserves, pushing past his limits to gain a temporary advantage. He will hit a wall with 50K still left to race.

last time the S&P was at that level was in early 2013... 2500 or even 2000, i could see; but 1500 (unless temporary)? then again, the S&P does generally take a 30-40% hit on bad bear markets, so...

---------------------------------------------

otoh, treasury yields haven't budged yet (i'd expect at least the long term to go down, as people flock to "safety", thus driving up prices and lowering yield). any more astute followers of the market have an explanation for that?

[Gummee]

there's 2 thoughts:

1. stocks are on sale, buy more (see also: dollar cost averaging)

2. it's only a loss if you sell when you're low. Otherwise, it's all paper losses

M

[Tony T]

there's 2 thoughts:

1. stocks are on sale, buy more (see also: dollar cost averaging)

2. it's only a loss if you sell when you're low. Otherwise, it's all paper losses

M

So no one who's holding from 2009 has a gain?

[RC.]

actually, more like Mr. Jack Bogle





I've learned an immense amount from both of them!

[saab2000]

So no one who's holding from 2009 has a gain?

Everyone who has held since 2008-2009 time period is way, way ahead.

[oldpotatoe]

CNN has been announcing all afternoon "Largest Single Day Point Decline Ever"

I guess just calling it what it is in actual terms does not have such a captivating (AKA; Trump bashing) headline..

Trump said it was Fed ‘acting crazy’, right before Sec of Treasury said it wasn’t. Right hand, say hello to left hand....:eek:

[Mr. Pink]

there's 2 thoughts:

1. stocks are on sale, buy more (see also: dollar cost averaging)

2. it's only a loss if you sell when you're low. Otherwise, it's all paper losses

M

Over the past ten years I have heard so many times about so many people who were "wiped out" by '08, they lost everything, they'll never retire, and all that has been used as a poor excuse by writers with an agenda to go after Wall Street (not that they don't deserve criticism) and, especially, the entire 401k and IRA industry. I think, wait, what, how did that happen? Of course, we're listening to people whine that, as usual for most, made awful financial decisions, the top of the list was to sell low after buying high. Happens all the time. Probably today.

[echappist]

Over the past ten years I have heard so many times about so many people who were "wiped out" by '08, they lost everything, they'll never retire, and all that has been used as a poor excuse by writers with an agenda to go after Wall Street (not that they don't deserve criticism) and, especially, the entire 401k and IRA industry. I think, wait, what, how did that happen? Of course, we're listening to people whine that, as usual for most, made awful financial decisions, the top of the list was to sell low after buying high. Happens all the time. Probably today.

mostly agree. I know someone who screamed and yelled to make her husband sell shares in 2008, only to regret it later.

That said, if you are in the withdrawing phase, then a 50% dip in equities is going to hurt a bit (though still shouldn't wipe out one's nest egg). assume a 700k bond 300k stock portfolio, with a drawing rate of 4%, one is now at 850k (or possibly 800k, if the bond market takes a tumble as well). The safe withdrawing rate of 4% used to mean 40k/year; now it's 32k/year.

[Mr. Pink]

mostly agree. I know someone who screamed and yelled to make her husband sell shares in 2008, only to regret it later.

That said, if you are in the withdrawing phase, then a 50% dip in equities is going to hurt a bit (though still shouldn't wipe out one's nest egg). assume a 700k bond 300k stock portfolio, with a drawing rate of 4%, one is now at 850k (or possibly 800k, if the bond market takes a tumble as well). The safe withdrawing rate of 4% used to mean 40k/year; now it's 32k/year.

Well, thank the lord for points on the card and AirB&B.

[MattTuck]

We're going back below 1500 on the S&P500 (not today, or tomorrow though). This is the economic equivalent of a guy going on a solo break away at Roubaix, using all his reserves, pushing past his limits to gain a temporary advantage. He will hit a wall with 50K still left to race.



last time the S&P was at that level was in early 2013... 2500 or even 2000, i could see; but 1500 (unless temporary)? then again, the S&P does generally take a 30-40% hit on bad bear markets, so...

---------------------------------------------

otoh, treasury yields haven't budged yet (i'd expect at least the long term to go down, as people flock to "safety", thus driving up prices and lowering yield). any more astute followers of the market have an explanation for that?

I'll revise my prediction. We're going down to 1500 for S&P500 in 2008 dollars, which is about 1800 today. :)

As for treasury yields, I'm not sure why anyone would buy those bonds. We are borrowing so much money, there is no way that you're going to get paid back. Yes, I can see in the short term, flight to safety... but god, just look at the numbers around the debt, deficit, interest payments, and rising rates... it is not good.

[NewDFWrider]

mostly agree. I know someone who screamed and yelled to make her husband sell shares in 2008, only to regret it later.

That said, if you are in the withdrawing phase, then a 50% dip in equities is going to hurt a bit (though still shouldn't wipe out one's nest egg). assume a 700k bond 300k stock portfolio, with a drawing rate of 4%, one is now at 850k (or possibly 800k, if the bond market takes a tumble as well). The safe withdrawing rate of 4% used to mean 40k/year; now it's 32k/year.

Perhaps the better way to line things up is to budget out, say, 5 years of expenses and then keep that money in cash (or CD's) while remaining more invested in equities. That way, you aren't forced to withdraw annually when your portfolio is down, as you can wait it out for a year or two. (I think another Paceliner does this, as he referenced it in another thread about paying off a mortgage early).

[93KgBike]

https://imgs.xkcd.com/comics/marketwatch.png

[echappist]

I'll revise my prediction. We're going down to 1500 for S&P500 in 2008 dollars, which is about 1800 today. :)

As for treasury yields, I'm not sure why anyone would buy those bonds. We are borrowing so much money, there is no way that you're going to get paid back. Yes, I can see in the short term, flight to safety... but god, just look at the numbers around the debt, deficit, interest payments, and rising rates... it is not good.

but that would imply you would believe the Federal Gov't to default on those bonds?

would be a scary prospect:eek::eek:

i mean, if this were any other debt-issuing country, I'd believe it, but we are currently the scarred (but good apple) amongst a barrel of rotten apples. where else is that money going to go? Responsible countries like Singapore doesn't issue nearly as much debt...

[PoppaWheelie]

Well if trump is responsible for Dow records, so he’s also responsible for this drop...neither of which is true, of course.

Well, sure, except that part of the mix here is likely due to uncertainty around US/China trade and heavy borrowing to pay for the corporate tax cut. Not the only factors, clearly, but those two are linked to the current administration for sure.

[MattTuck]

but that would imply you would believe the Federal Gov't to default on those bonds?

would be a scary prospect:eek::eek:

i mean, if this were any other debt-issuing country, I'd believe it, but we are currently the scarred (but good apple) amongst a barrel of rotten apples. where else is that money going to go? Responsible countries like Singapore doesn't issue nearly as much debt...

Governments have ways of defaulting without actually defaulting. Inflation being the obvious one. If you buy a 30 year US bond, the payments in 2048 will be denominated in 2048 dollars, not 2018 dollars.

I mean, looking at the trends and sizes of these imbalances, I just don't see how we make good on all the checks our government has written.

[GregL]

I mean, looking at the trends and sizes of these imbalances, I just don't see how we make good on all the checks our government has written.
Statistically, many of our current elected officials (off BOTH major political parties) won't be alive when these checks are cashed. They're just concerned with today's battles and don't care about the future. A sad state of affairs for our country and our future.

Greg

[54ny77]

ask two economists a question on directional trends/predictions and you'll get at least 4 answers! :banana:

meanwhile, in the real world, what would are you willing to commit your own $ to? inverse treasury etf's? any that you like? on a related note, a buddy made a large amount of $ during the crisis on levered inverse financial etf's, once it became clear that once a layer or two was peeled off the systemic onion, things weren't going to play out very well.



I mean, looking at the trends and sizes of these imbalances, I just don't see how we make good on all the checks our government has written.

[PoppaWheelie]

Well, sure, except that part of the mix here is likely due to uncertainty around US/China trade and heavy borrowing to pay for the corporate tax cut. Not the only factors, clearly, but those two are linked to the current administration for sure.

Ha, sorry Mr Potato...didn’t realize I was responding to your comment from Feb!

[MattTuck]

ask two economists a question on directional trends/predictions and you'll get at least 4 answers! :banana:

meanwhile, in the real world, what would are you willing to commit your own $ to? inverse treasury etf's? any that you like? on a related note, a buddy made a large amount of $ during the crisis on levered inverse financial etf's, once it became clear that once a layer or two was peeled off the systemic onion, things weren't going to play out very well.

The issue with any of those engineered ETFs is the decay over time. I've made a little money over the years by getting the timing right on a couple of big moves using options, but in general I am pretty bad at it. It becomes even harder with those types of ETFs because holding them for even a few weeks or a month can see significant decay of your investment, if the underlying index doesn't do what you think it is going to. So I would be aware of that risk with those products.

In the long term, I think we're going to see interest rates go up, and inflation go up. In fact, I'm not so sure that a portion of the stock market (and pretty much all asset classes) gains of the last decade aren't just due to inflation expectations about the future. Gold is sort of an odd ball in this regard, and I don't have a good explanation for that.

If I had any advice beyond investing in a globally diversified, market weighted portfolio, I'd think really hard about the sustainability of various sectors of the economy. In the words of someone, "unsustainable trends eventually end".

I might stay in cash and wait until prices come down (in other words, rates go up), and focus on buying stuff that produces good cash flow yield.

[Mr. Pink]

ask two economists a question on directional trends/predictions and you'll get at least 4 answers! :banana:

meanwhile, in the real world, what would are you willing to commit your own $ to? inverse treasury etf's? any that you like? on a related note, a buddy made a large amount of $ during the crisis on levered inverse financial etf's, once it became clear that once a layer or two was peeled off the systemic onion, things weren't going to play out very well.

Unfortunately, we have a very powerful person who can effect the entire world's economy taking advice from a person who plays an economist on TV.

[joosttx]

Unfortunately, we have a very powerful person who can effect the entire world's economy taking advice from a person who plays an economist on TV.

Irrational fear of rising interest rates and an over blown technology sector. That’s my one sentence reason. Please debate.

[jambee]

Houston nailed it.

It is simply insane to evaluate a company that never made a dime at billions and see their stock raise as it has.

The market has been too hot for too long. Sucks to see my company stock loose 12% in a week, but as long as everyone else is also going down, this is a correction and to be honest, it is entirely artificial.

[oldpotatoe]

Unfortunately, we have a very powerful person who can effect the entire world's economy taking advice from a person who plays an economist on TV.

Ask Kan_____.........never mind, I’d get a time out for that one....:)

[echappist]

primer on the rising interest rate, in the context of inflation, etc

https://www.nytimes.com/2018/10/11/upshot/interest-rates-are-rising-thats-great-news-for-most.html?action=click&module=Top+Stories&pgtype=Homepage

[ptourkin]

Ask Kan_____.........never mind, I’d get a time out for that one....:)
I'll take the heat.

Satire from Borowitz.
A visibly chastened Obama said that, at first, he thought that he had gotten away with making the stock market crash, but when he saw Hannity blame him on Fox, “I knew I had been busted.”

[MattTuck]

Irrational fear of rising interest rates and an over blown technology sector. That’s my one sentence reason. Please debate.

You may be right, but it is kind of dismissive of the fact that we're still in the midst of the biggest experiment monetary policy experiment in history, and we're now in the "unwinding" phase, with no real precedent for what happens next.

And if we find ourselves in a new crisis, even a small one, the Fed's ability to respond is compromised, and our elected representatives seem hardly up to the task.

http://media.whattheythink.com.s3.amazonaws.com/images/2017-04-13-feds-balance-sheet.png

[93KgBike]

agreed, % drop is where it's at. Not a whole lot to see here except the first "big" losing streak in a long long long time.
That's too many "long"s just going back to 2008.

[93KgBike]

I feel like the rational and empirical descriptions of the current economy are becoming more distant.

Total US trading volume increased by a factor >10 since 1985, peaking in 2008. That represents the movement of cash previously not in the markets, into the markets. Where did this concentration of capital arrive from?

Since 2008, total trading volume has decreased. But also, since 2008 the total dollar value of trading has increased. This represents the concentration of capital within the markets, and additional cash not previously in the markets dovetailing. I don't know if trading volume decreased because share prices have almost doubled since 2005, or if share volumes have doubled because trading volumes have decreased. Have trading volumes decreased because US markets are now 90% algorithmic and share based compensation strategies are less crucial? Is that just reduction of the work-force through automation? Or are corporations achieving scales of inertia that cannot be easily driven?

Markets are achieving the concentration of capital. But why, even how, are becoming more obscure.

[prototoast]

I feel like the rational and empirical descriptions of the current economy are becoming more distant.

Total US trading volume increased by a factor >10 since 1985, peaking in 2008. That represents the movement of cash previously not in the markets, into the markets. Where did this concentration of capital arrive from?

Since 2008, total trading volume has decreased. But also, since 2008 the total dollar value of trading has increased. This represents the concentration of capital within the markets, and additional cash not previously in the markets dovetailing. I don't know if trading volume decreased because share prices have almost doubled since 2005, or if share volumes have doubled because trading volumes have decreased. Have trading volumes decreased because US markets are now 90% algorithmic and share based compensation strategies are less crucial? Is that just reduction of the work-force through automation? Or are corporations achieving scales of inertia that cannot be easily driven?

Markets are achieving the concentration of capital. But why, even how, are becoming more obscure.

You've got a lot of stuff going on in that post, but most of what you're describing is driven by the growth in passive investing.

[54ny77]

that's all you got?

man, i could've gotten that from a cab driver.



I might stay in cash and wait until prices come down (in other words, rates go up), and focus on buying stuff that produces good cash flow yield.

[Scuzzer]

Markets are achieving the concentration of capital. But why, even how, are becoming more obscure.

I only quoted this part since it seemed pointless to quote the whole mess. Any chance you can give it go in American English or am I just too stupid to understand contemporary academise even though I have a degree in Aero Engineering from Purdue.

[oldpotatoe]

I only quoted this part since it seemed pointless to quote the whole mess. Any chance you can give it go in American English or am I just too stupid to understand contemporary academise even though I have a degree in Aero Engineering from Purdue.

Don’t think yer stupid, I had no idea what he said either...:confused:

[Mr. Pink]

I only quoted this part since it seemed pointless to quote the whole mess. Any chance you can give it go in American English or am I just too stupid to understand contemporary academise even though I have a degree in Aero Engineering from Purdue.

isn't some of that the most amazing stuff? Where do people learn how to talk like that? I encounter it a lot when reading about finance. Buisiness schools? Are they to blame? Certainly not humanities departments. I hope. My old English professors spin in their graves.

[Ozz]

I only quoted this part since it seemed pointless to quote the whole mess. Any chance you can give it go in American English or am I just too stupid to understand contemporary academise even though I have a degree in Aero Engineering from Purdue.

Doing my best Keegan-Michael Key translation....

There are fewer investors trading larger dollar amounts in the market. The causes are uncertain...

Possible reasons are more institutional investors, automated trading programs, fewer workers due to being displaced by machines, or are investment dollars just being thrown at companies without regard to financial performance. (my comment: everyone has an index fund in their 401(k) which means every payday dollars need to be invested in those 500+ companies regardless of their financial performance).


But I could have mistranslated as well.....:cool:

[1centaur]

Passive investing is like technical analysis; both rely on fundamental investors doing what they usually do, which is seek value and shun problems. Call that a parasitic approach to investing. But if the host were to have less mass than the parasites, the system (and rationale) would fail. I don't think we're at that point (no statistic I have read suggests we are) but on the margin the next bid or ask on a stock, for example, may be more passive parasite than thoughtful host. That can drive stocks up, as even fundamental investors won't get in front of a freight train, and it can drive stocks down. The implication is that volatility should be higher in an era of passive and momentum investing. Expect volatility in your portfolios and invest accordingly. Out-trading the thoughtless hordes (computers among them) is unlikely to be successful in the long run. No FOMO for overvalued stocks and rational appreciation of cash flows for undervalued stocks will work in the long run, I suspect, but it may take longer than usual for the truth to emerge. Most people will not be that rational because they'll think "the market knows," so be prepared to wait a while for your superior thought process to be rewarded.

[93KgBike]

seemed pointless to quote the whole mess.where do people learn how to talk like that?

I'm no expert; I read the newspaper like anybody else. I stated some facts that the WSJ has published this year, and asked some questions that occur to me.

You don't want bother with those question? Fine.

But don't insult me.

[choke]

ask two economists a question on directional trends/predictions and you'll get at least 4 answers! :banana:I can't resist....


"If all the economists were laid end to end, they would not reach a conclusion." - usually attributed to George Bernard Shaw but unverified

"The only function of economic forecasting is to make astrology look respectable." - Ezra Solomon

[cachagua]

"If all the economists were laid end to end, they would not reach a conclusion." - usually attributed to George Bernard Shaw but unverified

"The only function of economic forecasting is to make astrology look respectable." - Ezra Solomon


And,

"Islam is often called the youngest of the world's major religions, but in fact that distinction belongs to economics." - Ewan Housarmi

[MattTuck]

that's all you got?

man, i could've gotten that from a cab driver.

:) Better to be approximately right than precisely wrong. If cab drivers are giving you investment tips, all the more reason to view this market with great skepticism.... what was that old adage about shoe shine boys?

[joosttx]

I can't resist....


"If all the economists were laid end to end, they would not reach a conclusion." - usually attributed to George Bernard Shaw but unverified

"The only function of economic forecasting is to make astrology look respectable." - Ezra Solomon

Its better to create the future than to predict it....

[Mikej]

I only quoted this part since it seemed pointless to quote the whole mess. Any chance you can give it go in American English or am I just too stupid to understand contemporary academise even though I have a degree in Aero Engineering from Purdue.

I think it means companies are keeping their money and not rehiring more people as others leave and as the workload increases. On top of bringing back their overseas cash and using it to buy back company stock. In other words, the regular person gets nothing as everything gets expensive and companies increase profits. Just my guess-

And remember, economists predicted 12 of the past 3 recessions.

[prototoast]

And,

"Islam is often called the youngest of the world's major religions, but in fact that distinction belongs to economics." - Ewan Housarmi

If I may speak in defense of economists (which I am), I this quote speaks more to what people project on economists than how economists actually think. Sure, there are a few "big name public intellectual" economists who preach like they are omniscient, but most economists I interact with professionally understand that economics and economies are complicated and must be approached with a great deal of nuance and respect for the uncertain. But such nuanced understanding is not what cable news wants, it's not what politicians want, and it's not what most people want to hear.

A lot of questions economists are posed by non-experts often come across like "what's the best bike to buy?" You can either give an unqualified answer and maybe you'll get lucky, or you can get into more detail than the questioner is ready to hear. It's often a no-win proposition, but since myself and many fellow economists like to educate people, we'll often go for the latter no matter how well it's received.

[CunegoFan]

:) Better to be approximately right than precisely wrong. If cab drivers are giving you investment tips, all the more reason to view this market with great skepticism.... what was that old adage about shoe shine boys?

Forget cab drivers and shoe shine boys. Head over to Reddit and it is filled with posts like, "I'm 16 and have $500. How can start trading?"

[verticaldoug]

Passive investing is like technical analysis; both rely on fundamental investors doing what they usually do, which is seek value and shun problems. Call that a parasitic approach to investing. But if the host were to have less mass than the parasites, the system (and rationale) would fail. I don't think we're at that point (no statistic I have read suggests we are) but on the margin the next bid or ask on a stock, for example, may be more passive parasite than thoughtful host. That can drive stocks up, as even fundamental investors won't get in front of a freight train, and it can drive stocks down. The implication is that volatility should be higher in an era of passive and momentum investing. Expect volatility in your portfolios and invest accordingly. Out-trading the thoughtless hordes (computers among them) is unlikely to be successful in the long run. No FOMO for overvalued stocks and rational appreciation of cash flows for undervalued stocks will work in the long run, I suspect, but it may take longer than usual for the truth to emerge. Most people will not be that rational because they'll think "the market knows," so be prepared to wait a while for your superior thought process to be rewarded.

Low volatility and raising market values was a specific target of Fed QE. If credit default is the ultimate volatility event for a company, then the FED's plan to crush rates has lowered volatility. Bernanke said as much when his purpose was to make risk assets more attractive.

Now with a normalizing economy, if Powell has to try to unwind the QE Bubble, all the FED needs is a policy mistake and volatility will come back with a vengeance.

[Tony T]

No one posts on a good day.
DOW up 400, Nazdaq 155, S&P 43

[Big Dan]

No one posts on a good day.
DOW up 400, Nazdaq 155, S&P 43

Tony, please tell us when the "trickle down" is supposed to hit.

[godfrey1112000]

No one posts on a good day.
DOW up 400, Nazdaq 155, S&P 43
No screaming up no screaming down📈📉

[oldpotatoe]

Tony, please tell us when the "trickle down" is supposed to hit.

No kidding...stock holders, owners getting wealthy, workers seeing stagnation and rising inflation(even with a 'loco' FED:eek:, raising interest rates)...when the DOW/NASDAQ/S&P go up..."DC/WH's hard work"...when it corrects, 'normal correction'...it's a game played by expensive suits..

[MattTuck]

So, let's look at just one single stock to understand the run up in the market.

Netflix released subscriber numbers that said they added 7 million subscribers.

Here's what they had to say about their free cash flow (in other words, the actual cash flows that the business can use to reinvest in itself or pay dividends to shareholders.)

Free cash flow in Q3 was -$859 million vs. -$465 million in the year ago quarter. As a reminder, our growing mix of self-produced content, which requires us to fund content during the production phase prior to its release on Netflix, is the primary driver of our working capital needs that creates the gap between our positive net income and our free cash flow deficit.

So, how much did they spend on new content, you can check it out here (https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2018/q3/FINAL-Q3-18-Shareholder-Letter.pdf), about $7 billion this past quarter.

They also spent about 1.4 billion on marketing, which we can use as a proxy for "customer acquisition". Ok, so they spent 1.4B, gained 7M customers, which each pay, let's say they all get the premium plan at 13.99 per month, which is 167 per year, which means net revenue from new customers is 1.1B. So, they didn't even cover their customer acquisition costs.

So that still leaves the big question about the $7B in content costs (just in this past quarter!)... how do they expect to make money if your business model requires you to spend more money than you bring in?

Yet, the markets rewarded them with an increase in their share price. Think about this when you are trying to decide if the market makes sense.

[echappist]

Of course it doesnt. I get it re: Amazon, Apple, Facebook, and Alphabet, but it’s sheer madness to throw that much money on a company that hasn’t shown it could make any sort of profit (any as in pre-tax, post-tax, whatever).

Some will tell you that the price is reflecting the future, when they would have turned a profit, but that’s built on a song and a prayer when there’s been no track record to date showing that...

Ditto for Uber, which is just burning through venture capital investment, without having anything to show for actual profit. Granted, it’s a privately held company and all that, but you’d bet people would be buying its stock if it were available.

For some reason, steady profit (aka source of dividends) has become a dirty word, and people would much rather buy based on growth per se, whether the books are in the black be damned...

[Ozz]

...For some reason, steady profit (aka source of dividends) has become a dirty word, and people would much rather buy based on growth per se, whether the books are in the black be damned...
blue-chip dividend stocks don't feel like Las Vegas.....steady growth over 20 yrs is boring, ;)

[saab2000]

blue-chip dividend stocks don't feel like Las Vegas.....steady growth over 20 yrs is boring, ;)

Exactly. My savings strategy is based on dividend reinvestment over the years. I do pay attention to those quarterly reports and dividends.

[johnmdesigner]

In the land of the blind...

The one eyed man is king.

[fiamme red]

Ditto for Uber, which is just burning through venture capital investment, without having anything to show for actual profit. Granted, it’s a privately held company and all that, but you’d bet people would be buying its stock if it were available.https://www.nytimes.com/2018/10/16/technology/uber-lyft-ipo.html

Uber has received proposals from the investment banks Morgan Stanley and Goldman Sachs that say the technology giant could be worth as much as $120 billion in an I.P.O., two people briefed on the matter who were not allowed to discuss it publicly said on Tuesday.

At $120 billion, Uber’s debut on Wall Street would be the biggest since the Alibaba Group of China began trading on the New York Stock Exchange in 2014.

The market for tech I.P.O.s has surged in 2018. Nearly 200 companies have raised more than $53 billion in initial public offerings in American markets, making it the busiest year for tech newcomers to Wall Street since 2014, according to data from Dealogic.

But a blockbuster public offering for Uber, which has burned through billions of dollars since it was founded in 2009 and does not appear to be close to sustained profitability, would mark a significant increase in risk-taking for investors in publicly traded companies...

[tuscanyswe]

So, let's look at just one single stock to understand the run up in the market.

Netflix released subscriber numbers that said they added 7 million subscribers.

Here's what they had to say about their free cash flow (in other words, the actual cash flows that the business can use to reinvest in itself or pay dividends to shareholders.)

Free cash flow in Q3 was -$859 million vs. -$465 million in the year ago quarter. As a reminder, our growing mix of self-produced content, which requires us to fund content during the production phase prior to its release on Netflix, is the primary driver of our working capital needs that creates the gap between our positive net income and our free cash flow deficit.

So, how much did they spend on new content, you can check it out here (https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2018/q3/FINAL-Q3-18-Shareholder-Letter.pdf), about $7 billion this past quarter.

They also spent about 1.4 billion on marketing, which we can use as a proxy for "customer acquisition". Ok, so they spent 1.4B, gained 7M customers, which each pay, let's say they all get the premium plan at 13.99 per month, which is 167 per year, which means net revenue from new customers is 1.1B. So, they didn't even cover their customer acquisition costs.

So that still leaves the big question about the $7B in content costs (just in this past quarter!)... how do they expect to make money if your business model requires you to spend more money than you bring in?

Yet, the markets rewarded them with an increase in their share price. Think about this when you are trying to decide if the market makes sense.

hmm but that doesent take into account that those new customers will likely still pay the annual fee for quite a few years on average with no additional marketing cost to keep them doing so, no?

[Tony T]

Tony, please tell us when the "trickle down" is supposed to hit.

I don't recall that being used as a 'theory' recently.
Last time I heard it being used seriously was with Reagan.

[echappist]

deleted

[Big Dan]

I don't recall that being used as a 'theory' recently.
Last time I heard it being used seriously was with Reagan.

Trickle down is a basic Republican idea.

[ColonelJLloyd]

Trickle down is a basic Republican idea.

And was most certainly used to justify the TCJA of late 2017 whether or not the specific word "trickle" was employed.

hmm but that doesent take into account that those new customers will likely still pay the annual fee for quite a few years on average with no additional marketing cost to keep them doing so, no?

Agreed. I'm on board with the general sentiment that that many/most tech stocks are overvalued, but Netflix doesn't seem like a great example with which to make that point.

[echappist]

Exactly. My savings strategy is based on dividend reinvestment over the years. I do pay attention to those quarterly reports and dividends.

which companies actually give out decent dividends these days? any that yields 2.5%?

also, if you the companies are invested via a fund, is there one that you'd recommend (preferably on Schwab, Vanguard, or Fidelity)?

hmm but that doesent take into account that those new customers will likely still pay the annual fee for quite a few years on average with no additional marketing cost to keep them doing so, no?

That’s assuming their expenditures on content acquisition would decrease

What you say would apply to the viewership acquisition charges, assuming low cancellation %

Tony, please tell us when the "trickle down" is supposed to hit.

around the same time that the Laffert Curve is proved to be correct

[oldpotatoe]

I don't recall that being used as a 'theory' recently.
Last time I heard it being used seriously was with Reagan.

Being ‘used’ today with the phony tax cuts for Main Street and YUGE benefits to corporate America.....’cept not trickling anywhere but into investor’s and owner’s pockets..plus anybody that takes this administration seriously is nutz...

[MattTuck]

hmm but that doesent take into account that those new customers will likely still pay the annual fee for quite a few years on average with no additional marketing cost to keep them doing so, no?

Interesting that you bring that up. Yes, this was a simplistic example to show that even some back of the envelope math can show causes for concern. First off, netflix doesn't provide information on churn. So we don't know how many actual "new" customers they got, just how many customers they added on a net basis. They could have lost 3M, and gained 10M to arrive at that 7M net subscriber add. So, without that information, it is hard to know how long those customers will stay.

However, it is safe to say that their expenses can be view broadly under two categories. Customer acquisition and customer retention. I'd say that once they acquire a customer, they still need to keep that customer happy (above some threshold level) or else they will cancel their subscription.

Let's say that 80% of their content spend in the quarter is for customer retention, and 20% for customer acquisition. So that is 1.4B spent (in addition to the marketing) to acquire customers, and those customers will take more than 1 year to pay off the marketing costs mentioned above, plus another year to pay off the customer acquisition piece of the content costs. So, it will take 2 years to pay off that piece of the costs that have been front loaded. And possibly more, because there are other costs (like technology) that they still create on top of the customer acquisition.

So, to answer your question, yes, of course the hope is that new customers eventually become recurring customers. But there is also a requirement, in the case of recurring customers, that the firm must spend to create new content and new technology and some continued marketing to keep them engaged.

Otherwise, existing subscribers would be stuck watching house of cards and old seasons of orange is the new black.

[tuscanyswe]

Interesting that you bring that up. Yes, this was a simplistic example to show that even some back of the envelope math can show causes for concern. First off, netflix doesn't provide information on churn. So we don't know how many actual "new" customers they got, just how many customers they added on a net basis. They could have lost 3M, and gained 10M to arrive at that 7M net subscriber add. So, without that information, it is hard to know how long those customers will stay.

However, it is safe to say that their expenses can be view broadly under two categories. Customer acquisition and customer retention. I'd say that once they acquire a customer, they still need to keep that customer happy (above some threshold level) or else they will cancel their subscription.

Let's say that 80% of their content spend in the quarter is for customer retention, and 20% for customer acquisition. So that is 1.4B spent (in addition to the marketing) to acquire customers, and those customers will take more than 1 year to pay off the marketing costs mentioned above, plus another year to pay off the customer acquisition piece of the content costs. So, it will take 2 years to pay off that piece of the costs that have been front loaded. And possibly more, because there are other costs (like technology) that they still create on top of the customer acquisition.

So, to answer your question, yes, of course the hope is that new customers eventually become recurring customers. But there is also a requirement, in the case of recurring customers, that the firm must spend to create new content and new technology and some continued marketing to keep them engaged.

Otherwise, existing subscribers would be stuck watching house of cards and old seasons of orange is the new black.


Yes it becomes very hard to calculate these servicecompanies that relies heavily on subscriptions as its also very determined by current competition and or future competition. To many unknowns hence i feel like they likely have ppl who are far better at this then me (duh) yet they still want to push forward so there there must be good chance of reward down the line (obviously even ppl with the best intentions and skills makes misstakes tho)..

[fiamme red]

Yes it becomes very hard to calculate these servicecompanies that relies heavily on subscriptions as its also very determined by current competition and or future competition. To many unknowns hence i feel like they likely have ppl who are far better at this then me (duh) yet they still want to push forward so there there must be good chance of reward down the line (obviously even ppl with the best intentions and skills makes misstakes tho)..Did anyone really think that MoviePass would ever make money with its unlimited plan? :confused:

[tuscanyswe]

Did anyone really think that MoviePass would ever make money with its unlimited plan? :confused:

Made me think of
https://www.youtube.com/watch?v=qM79_itR0Nc&t=8s

[Ozz]

Yes it becomes very hard to calculate these servicecompanies that relies heavily on subscriptions as its also very determined by current competition and or future competition. To many unknowns hence i feel like they likely have ppl who are far better at this then me (duh) yet they still want to push forward so there there must be good chance of reward down the line (obviously even ppl with the best intentions and skills makes misstakes tho)..

I believe both Netflix and Amazon rivaling the other media companies / movie studios for their budgets for new content, and dwarfing them in regard to number of offerings, along with a "better" distribution channel.

The main question for me is how many subscribers do they expect to have when they peak? From that you can extrapolate revenues.

Netflix has about 130MM subscribers worldwide, and about half of those are in the United States. My guess is that they are shooting for around 500MM+ evenutually...at ~$15 per month = $7.5B in revenues just from subscriptions

[ColonelJLloyd]

Netflix has about 130MM subscribers worldwide, and about half of those are in the United States. My guess is that they are shooting for around 500MM+ evenutually...at ~$15 per month = $7.5B in revenues just from subscriptions

I'm pretty sure that the monthly subscription rate is and will be dependent on where the service is offered. i.e. It will be what the market will bear in that country/region. At some level the content is a sunk cost and $3/mo from a subscriber in a country where the median household income is $12,000 is better than the $0 Netflix would get from that household if the price were $15/mo.

[seanile]

which companies actually give out decent dividends these days? any that yields 2.5%?

also, if you the companies are invested via a fund, is there one that you'd recommend (preferably on Schwab, Vanguard, or Fidelity)?vanguard high yield dividend fund / vym

specific stock examples that i pay attention to personally:
amgn 2.6%
bud 5%
codi 8.2%
csco 2.9%
gild 3%
ibm 4.3%
jnj 2.6%
jpm 2.9%
mrk 2.7%
pg 3.5%
vz 4.5%
xom 4%

[jet sanchez]

I think I read somewhere that Amazon Prime members number at over a hundred million.

[Ozz]

I'm pretty sure that the monthly subscription rate is and will be dependent on where the service is offered. i.e. It will be what the market will bear in that country/region. At some level the content is a sunk cost and $3/mo from a subscriber in a country where the median household income is $12,000 is better than the $0 Netflix would get from that household if the price were $15/mo.

oh, for sure...

personally, I have both streaming and still have the DVD delivery and am paying about $20 per month for Netflix

plus we have Amazon Prime.

I figure by the time they get to 500MM subscribers I will be paying $30+ per month....while someone in rural Peru will be paying about $5 :cool:

(no disrespect to Peru intended....)

[ColonelJLloyd]

I figure by the time they get to 500MM subscribers I will be paying $30+ per month....while someone in rural Peru will be paying about $5 :cool:

(no disrespect to Peru intended....)

Jinx. I'm not really sure why, but the specific country I was thinking of when I typed my response was Peru. All hail the purple potato.

I was honestly surprised to learn recently that Netflix still offers the DVD service. I became a customer back when that was the service, but I thought they had discontinued that.

[Ozz]

Jinx. I'm not really sure why, but the specific country I was thinking of when I typed my response was Peru. All hail the purple potato.

I was honestly surprised to learn recently that Netflix still offers the DVD service. I became a customer back when that was the service, but I thought they had discontinued that.
Hah! too funny....

Yeah, the DVD service is a separate website now (single sign-on) and they make it a little hard to find, but it is still there. It just has more content of older movies that I like, so I keep it around.....

[echappist]

vanguard high yield dividend fund / vym

specific stock examples that i pay attention to personally:
amgn 2.6%
bud 5%
codi 8.2%
csco 2.9%
gild 3%
ibm 4.3%
jnj 2.6%
jpm 2.9%
mrk 2.7%
pg 3.5%
vz 4.5%
xom 4%

thanks :)

[MattTuck]

I'm pretty sure that the monthly subscription rate is and will be dependent on where the service is offered. i.e. It will be what the market will bear in that country/region. At some level the content is a sunk cost and $3/mo from a subscriber in a country where the median household income is $12,000 is better than the $0 Netflix would get from that household if the price were $15/mo.

Yes, but there are real costs (even if they do no advertising, and simply repackage their existing content for that market) in delivering their product to people's homes and phones. To say the $3/mo is better than $0, assumes that the marginal cost is zero. Colonel, I think you know this, and were simply making a larger point about the potential addressable market with their existing content base. But for those who are reading this thread to learn, figured I'd be more clear.

And I'd say that existing content is a sunk cost, but netflix is currently producing lots of non-English programming for their different global markets. So going forward, it is not clear to me that consumers will be satisfied with a static library of content. Netflix (as opposed to being a technology platform, essentially a business that takes a cut of the action for matching paying viewers with content producers) has now gotten on the treadmill of producing content. I don't think it is obvious yet what the end game is for that strategic shift. (They made that shift because the content producers wanted a bigger percent of the action, and netflix wanted more negotiating leverage, and to not be at the whim of studios.)

[Ozz]

....I don't think it is obvious yet what the end game is for that strategic shift. ...

Vertically integrated multinational media/entertainment company....trying to be the Amazon of entertainment...our course, Amazon is also trying to be the Amazon of entertainment.

If I were MGM, Disney, Warner, Universal, HBO, NBC, CBS, ABC, et al, I would be worried....

[ColonelJLloyd]

So going forward, it is not clear to me that consumers will be satisfied with a static library of content.

I'm not suggesting that Netflix will not need to produce content and at some point rely on a static catalog.

You seem to be asserting that they are pursuing a business model that perpetually calls for costs that exceed revenues based on the results of some recent period. What I'm saying is it's possible. . just maybe that that is not the case. I'm not investing in Netflix (that I'm aware of), but I'm not going to assume they don't have a clearly defined path to profitability that is achievable.

More broadly, my point was that I don't think it's apt to lump Netflix in with social media companies.

[Tony T]

Trickle down is a basic Republican idea.

I was curious as to whether Reagan was the first to use the term (it was when I first heard it). Interesting that it goes back to the 1896:

In 1896, Democratic presidential candidate William Jennings Bryan described the concept using the metaphor of a "leak" in his famous Cross of Gold speech:

There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it

[cnighbor1]

Merriman and their market timing system
It has worked thru all market crashes and saved me a lot of money

http://www.merriman.com/

[joosttx]

vanguard high yield dividend fund / vym

specific stock examples that i pay attention to personally:
amgn 2.6%
bud 5%
codi 8.2%
csco 2.9%
gild 3%
ibm 4.3%
jnj 2.6%
jpm 2.9%
mrk 2.7%
pg 3.5%
vz 4.5%
xom 4%

Ill throw in (you can see where I am going)

NGG 5.67%
PPL 5.31%

[MattTuck]

I'm not suggesting that Netflix will not need to produce content and at some point rely on a static catalog.

You seem to be asserting that they are pursuing a business model that perpetually calls for costs that exceed revenues based on the results of some recent period. What I'm saying is it's possible. . just maybe that that is not the case. I'm not investing in Netflix (that I'm aware of), but I'm not going to assume they don't have a clearly defined path to profitability that is achievable.

More broadly, my point was that I don't think it's apt to lump Netflix in with social media companies.

Ok, that's fair. I'm not sure that I'm asserting that they are doomed to never make money. I'm asserting that thus far, the market has accepted the Netflix narrative and rewarded them with a high valuation. Whether that narrative is reasonable, I don't know. I just shared some numbers that raise some red flags, not red alert. Definitely something to keep an eye on.


I was curious as to whether Reagan was the first to use the term (it was when I first heard it). Interesting that it goes back to the 1896:

In 1896, Democratic presidential candidate William Jennings Bryan described the concept using the metaphor of a "leak" in his famous Cross of Gold speech:

There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it

Ray Dalio did a very interesting interview a few weeks ago (on Bloomberg, I think) on a pretty good idea, IMO. Rather than focus on GDP, change the focus to a broader measure of how the bottom X% are doing. He didn't give details in the interview, but I could imagine something like, looking at the 40th income percentile, and figuring out stuff related to that particular group's income trends, social mobility, discretionary income, access to education and opportunity, etc. The idea (based on the "Manage what you measure" concept) is that policy makers would then be more explicitly judged on how well they do at improving people's lives. It's an interesting idea.

[Big Dan]

I was curious as to whether Reagan was the first to use the term (it was when I first heard it). Interesting that it goes back to the 1896:

In 1896, Democratic presidential candidate William Jennings Bryan described the concept using the metaphor of a "leak" in his famous Cross of Gold speech:

There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it

Anyways, let me know when the masses are getting a piece.

[oldpotatoe]

Anyways, let me know when the masses are getting a piece.

I'd say Jan 2021...:)

[echappist]

I'd say Jan 2021...:)

you are way more optimistic than I...

probably need increased union participation before that will happen

[cfox]

Ok, that's fair. I'm not sure that I'm asserting that they are doomed to never make money. I'm asserting that thus far, the market has accepted the Netflix narrative and rewarded them with a high valuation. Whether that narrative is reasonable, I don't know. I just shared some numbers that raise some red flags, not red alert. Definitely something to keep an eye on.




Ray Dalio did a very interesting interview a few weeks ago (on Bloomberg, I think) on a pretty good idea, IMO. Rather than focus on GDP, change the focus to a broader measure of how the bottom X% are doing. He didn't give details in the interview, but I could imagine something like, looking at the 40th income percentile, and figuring out stuff related to that particular group's income trends, social mobility, discretionary income, access to education and opportunity, etc. The idea (based on the "Manage what you measure" concept) is that policy makers would then be more explicitly judged on how well they do at improving people's lives. It's an interesting idea.
Well, I'm sure Dalio will take credit for coming up with that idea, but a lot of economists already do that in a simpler way. You can look at household consumption as a much more reliable indicator of "how well" members of a society are doing rather than raw income statistics. And consumption of the median household has gone up A LOT in the last 30 or 40 years. Income numbers are unreliable due to a number of factors, not the least of which is they ignore the tax credits paid back to those that fall in the lower income distribution.

[echappist]

Well, I'm sure Dalio will take credit for coming up with that idea, but a lot of economists already do that in a simpler way. You can look at household consumption as a much more reliable indicator of "how well" members of a society are doing rather than raw income statistics. And consumption of the median household has gone up A LOT in the last 30 or 40 years. Income numbers are unreliable due to a number of factors, not the least of which is they ignore the tax credits paid back to those that fall in the lower income distribution.

consumption per se is meaningless, as consumption can be financed in the short term by debt, and often at loan-shark rates

what you really want is the 40th %tile's portion of the pie relative to society as a whole

[cfox]

consumption per se is meaningless, as consumption can be financed in the short term by debt, and often at loan-shark rates

what you really want is the 40th %tile's portion of the pie relative to society as a whole

Household debt-to-income is the lowest it's been since 2002. The unemployment rate is at multi-decade lows. Of course the wealth gap is growing, it always will as long as it's legal to earn interest, but to assert that a rising stock market and growing economy don't in any way benefit "the masses", is absurd. It is a talking point for politicians, not actual analysis. I'm not saying you have asserted that, but others here have.

[Ozz]

...what you really want is the 40th %tile's portion of the pie relative to society as a whole

I agree with this....

I always that that the employment numbers that touted the number of new jobs created were meaningless without know what the total payroll/compensation that resulted from those new jobs.

Creating 1000 jobs that pay $30,000 per year don't offset losing 500 jobs that pay $100,000 per year.

[MattTuck]

Household debt-to-income is the lowest it's been since 2002. The unemployment rate is at multi-decade lows. Of course the wealth gap is growing, it always will as long as it's legal to earn interest, but to assert that a rising stock market and growing economy don't in any way benefit "the masses", is absurd. It is a talking point for politicians, not actual analysis. I'm not saying you have asserted that, but others here have.

Charles, I find your opinions almost always insightful and useful, however, on this one, I think you are wrong on the facts.

The median person in the US doesn't own any stocks, so 50% of the country does not benefit from price appreciation in the stock market. Also, from this chart, you can see that the median person's REAL wages have only increased 6% since the early 80's. Because this measures real wages, it doesn't look at things like unearned income that would be influenced by interest or capital gains.

PS. You can read the whole study on Real Wage Trends here: https://fas.org/sgp/crs/misc/R45090.pdf

[Mzilliox]

Household debt-to-income is the lowest it's been since 2002. The unemployment rate is at multi-decade lows. Of course the wealth gap is growing, it always will as long as it's legal to earn interest, but to assert that a rising stock market and growing economy don't in any way benefit "the masses", is absurd. It is a talking point for politicians, not actual analysis. I'm not saying you have asserted that, but others here have.

but is the employment rate truely that low? is the gig economy skewing that? are people who have simply decided to opt out being counted? less than half the capable men here in S. Oregon are employed. Most by choice, not circumstance. It has been decided that until a job that pays low skill workers as much as logging used to eons ago, nobody here is willing to work. Weed has pulled some back into the employment pile, but you think those cats are documented? i simply dont trust the numbers being generated. how many people do you personally know reducing their debt? I can't think of a one in my circle other than my wife and i. we state this fact plainly when folks ask how we invest. I tell them we are currently paying down home and school debt and i find not owing money to be better than owing money. i know one day that take will pay off.

anyway, you really think debt ratios have lowered significantly and employment numbers have gone up in any real way? I simply dont see it on the ground in real world life. i see the same folks jumping around retail job to retail job (which wont even exist in 10 years time). retail jobs are always hiring, food service too, turnover is the nature of the beast.
.
meanwhile robots are literally taking these jobs, its only a matter of time. then what does that stupid unemployment number mean? nothing at all

So yeah, im not into this economy, its a silly one being artificially pushed to squeeze out every last bit of possible momentum. when all the tricks are played, whats left? a new system is what's left. soon Capitalism will no longer favor humanity, it will favor machines, and capitalism doesn't care about humans at all, it only cares about profits. and our leaders are not preparing us for this at all.

this was a rant, often nonsensical, not always on topic.

[Mzilliox]

I agree with this....

I always that that the employment numbers that touted the number of new jobs created were meaningless without know what the total payroll/compensation that resulted from those new jobs.

Creating 1000 jobs that pay $30,000 per year don't offset losing 500 jobs that pay $100,000 per year.

exactly, people losing a real job and joining Uber with no healthcare and no guarantee of work is not a meaningful or good trade. Folks w/ college degrees working in coffee shops is not a sign of healthy economic prospects. and lastly, having less opportunity than every generation before you, while having a statistically shorter life span, yeah, winning.

oh, and lets not even mention stress level and suicide rates here. sure, this economy is "Healthy"

[Ozz]

..less than half the capable men here in S. Oregon are employed. Most by choice, not circumstance. It has been decided that until a job that pays low skill workers as much as logging used to eons ago, nobody here is willing to work. ...this was a rant, often nonsensical, not always on topic.
I hear you...same thing happened up here in Washington....I had friends in elementary school and high school whose parents were in the logging/lumber/paper industry. The '70's and '80's were tough...

But I am having a hard time generating sympathy....the writing was on the wall for those jobs 40 yrs ago...not to have prepared yourself or your kids for that change is absurd.

The economy was changing....it was pretty clear what skills were going to be needed....they even made a movie about it (Revenge of the Nerds)!

Had the seen this and got some skills coding they would have pretty decent jobs now. Maybe not what daddy or grandpa did, and maybe not as macho, but they would be employed. Change is hard.

BTW - it was a good rant.

;)

[echappist]

Household debt-to-income is the lowest it's been since 2002. The unemployment rate is at multi-decade lows. Of course the wealth gap is growing, it always will as long as it's legal to earn interest, but to assert that a rising stock market and growing economy don't in any way benefit "the masses", is absurd. It is a talking point for politicians, not actual analysis. I'm not saying you have asserted that, but others here have.

your first point is irrelevant, as it does not address specifically debt-to-income dissected by quintile/decile

as for your latter point (and i'm addressing rising stock market per se), people cannot receive any first order benefits (viz. capital gains or dividends) if they don't own stocks directly or indirectly (via index funds). And for those at the 50th tile, it's a pittance. Median net-worth excluding home equity is barely 100k for those 60-64. Assuming 60% investment in stocks going by the rule-of-thumb that %stock = (100- age)%, that's an exposure of $40k.

Even assuming all 100k is invested in stocks, how large is that number? Well, let's just say that i earn a civil servant's salary and sock away the maximal amount, with 5% employer match. It would take me about 6 years to hit 100k in equities, from contributions alone. That the median (much less 40th tile) individual at 60-64 (when s/he has accrued the most asset) has total asset of ~100k after 30-35 years of working would suggest that the notion that the "masses" would receives any significant benefit from the stock market is absurd, purely based on how little that person owns in equities...

[cfox]

your first point is irrelevant, as it does not address specifically debt-to-income dissected by quintile/decile

as for your latter point (and i'm addressing rising stock market per se), people cannot receive any first order benefits (viz. capital gains or dividends) if they don't own stocks directly or indirectly (via index funds). And for those at the 50th tile, it's a pittance. Median net-worth excluding home equity is barely 100k for those 60-64. Assuming 60% investment in stocks going by the rule-of-thumb that %stock = (100- age)%, that's an exposure of $40k.

Even assuming all 100k is invested in stocks, how large is that number? Well, let's just say that i earn a civil servant's salary and sock away the maximal amount, with 5% employer match. It would take me about 6 years to hit 100k in equities, from contributions alone. That the median (much less 40th tile) individual at 60-64 (when s/he has accrued the most asset) has total asset of ~100k after 30-35 years of working would suggest that the notion that the "masses" would receives any significant benefit from the stock market is absurd, purely based on how little that person owns in equities...
Much larger than it would be if the market were falling. Talk about irrelevant. I get the sense that actual adults here have the notion that if everyone can't benefit equally, then no one should benefit at all. Life is not kindegarten. Being poor sucks in a lot of ways, I know because that's how I grew up.

[jlwdm]

Anyways, let me know when the masses are getting a piece.

I am a believer that you make your own breaks and success. There are good jobs available in good times and bad if you look hard enough for them. If someone wants to stay more in the masses that is fine. They might be in a job with fewer hours worked and less stress coupled with more family time or time to do other things like biking. Money should not be the only consideration of a job. But you can't normally have regular hours and a job with lower stress and make a lot of money.

Personally I want a job where I am compensated for my performance.

Unfortunately, I am a spender. I made decent money for most of my life, but when I hit a retirement age I did not have near enough money to retire. I started working for myself and worked a ridiculous number of hours, but I saved enough to never worry about money for retirement. I still work though. A lot of people would not have wanted to commit the time to working that I did, and probably would have lived better lives in many ways during those years.

Life has many trade offs. Everyone needs to figure out the things that are most important in life to them. The problem is we are such a country of consumers that it is harder for people to save. We buy so many things that are not needed I am as bad as anyone in this regard.

We need to gravitate towards the more traditional European lifestyle of buying fewer things, but quality items that are passed down from generation to generation. I don't see it happening though. Probably not happening as much anymore in Europe either.

Jeff

[Big Dan]

I am a believer that you make your own breaks and success. There are good jobs available in good times and bad if you look hard enough for them. If someone wants to stay more in the masses that is fine. They might be in a job with fewer hours worked and less stress coupled with more family time or time to do other things like biking. Money should not be the only consideration of a job. But you can't normally have regular hours and a job with lower stress and make a lot of money.

Personally I want a job where I am compensated for my performance.

Unfortunately, I am a spender. I made decent money for most of my life, but when I hit a retirement age I did not have near enough money to retire. I started working for myself and worked a ridiculous number of hours, but I saved enough to never worry about money for retirement. I still work though. A lot of people would not have wanted to commit the time to working that I did, and probably would have lived better lives in many ways during those years.

Life has many trade offs. Everyone needs to figure out the things that are most important in life to them. The problem is we are such a country of consumers that it is harder for people to save. We buy so many things that are not needed I am as bad as anyone in this regard.

We need to gravitate towards the more traditional European lifestyle of buying fewer things, but quality items that are passed down from generation to generation. I don't see it happening though. Probably not happening as much anymore in Europe either.

Jeff

Yeah buddy.
I'm talking about the trickle down effect.
Supply side economics, whatever you want to call it.
Make it fair for everybody.
I'm not talking about handouts.

[saab2000]

Yeah buddy.
I'm talking about the trickle down effect.
Supply side economics, whatever you want to call it.
Make it fair for everybody.
I'm not talking about handouts.

To improve prosperity we need to improve education; all kinds of education. And we need to teach basic finance in high school. It should be mandatory.

I'm not a member of any political movement or party so take what I'm going to say at face value and don't ascribe it to any leanings I may or may not have.

People need to make better choices. I've been out of college since 1990 and have never been without work. Why? Because I'll do any work. There are jobs, in good times and bad. Some of it requires odd hours. Most of requires passing a drug test. Some of it is crappy work. But it is there and allowed me to always pay my rent and save. I haven't always worked for a major airline making good money. Far from it.

I don't waste it on video games and cable TV and cruises and other stuff I can't afford when I don't have the money. I'll spend it when I have it. But my basic needs have always been met because I made the choices to make that happen and avoided the choices that would destroy opportunities.

We, as a society, will make better decisions about our lives if we have better education and financial education is a part of that. People do need to take some responsibility for their own situations. My nephew is working hard in high school and plans his college education in such a way that he'll finish with very little or zero debt. It can be done. It just takes discipline and good decision making skills. Yes, I understand that millions of Americans have no guidance from parents or elders who care. They are at a true disadvantage.

[earlfoss]

To improve prosperity we need to improve education; all kinds of education. And we need to teach basic finance in high school. It should be mandatory.

I'm not a member of any political movement or party so take what I'm going to say at face value and don't ascribe it to any leanings I may or may not have.

People need to make better choices. I've been out of college since 1990 and have never been without work. Why? Because I'll do any work. There are jobs, in good times and bad. Some of it requires odd hours. Most of requires passing a drug test. Some of it is crappy work. But it is there and allowed me to always pay my rent and save. I haven't always worked for a major airline making good money. Far from it.

I don't waste it on video games and cable TV and cruises and other stuff I can't afford when I don't have the money. I'll spend it when I have it. But my basic needs have always been met because I made the choices to make that happen and avoided the choices that would destroy opportunities.

We, as a society, will make better decisions about our lives if we have better education and financial education is a part of that. People do need to take some responsibility for their own situations. My nephew is working hard in high school and plans his college education in such a way that he'll finish with very little or zero debt. It can be done. It just takes discipline and good decision making skills. Yes, I understand that millions of Americans have no guidance from parents or elders who care. They are at a true disadvantage.

There are entire industries that would collapse if people became financially aware and responsible!

I'm all for it though. I wish I had some education like this when I was young. Took me until I was in college to truly learn on my own.

[saab2000]

There are entire industries that would collapse if people became financially aware and responsible!

I'm all for it though. I wish I had some education like this when I was young. Took me until I was in college to truly learn on my own.

And the world would be a better place if those industries collapsed. And speaking of learning this stuff, I've been trying to enlighten people on just basics of saving (like automating it each month, even if it's 1%) and the value of time WRT compounding interest.

I got religion on this way after college and I've been extremely aggressive over the past 12 years or so. I probably first got clarity on this as I approached 40 years of age. Catching up has been a struggle, but I am on track at the moment after reading hundreds of articles on retirement savings and the financial world and acting on that informal education.

[cachagua]

We need to gravitate towards [a] lifestyle of buying fewer things, but quality items that are passed down from generation to generation...


There are entire industries that would collapse if we did this, too.

Not that I'm saying it's a bad idea; I tend to make my purchasing choices on this basis. But if everybody began to, all of a sudden, the consequences would make 2008 look like nothing.

Microelectronics, just to start with: it's foundational to that entire industry that everything it produces gets thrown away within a year. A great business strategy, but the greatness ends there.

But maybe, once the newness wore off, the world would be a better place...

[jlwdm]

...

We, as a society, will make better decisions about our lives if we have better education and financial education is a part of that...

My parents grew up in the depression and were very frugal. One house for over 50 years, the most basic cars and few possessions. It was important to them that my sisters and I went to college because they did not have that opportunity.

I majored in accounting but still was not very financially responsible. Maybe a reaction to how frugal my parents were.

Jeff

[echappist]

To improve prosperity we need to improve education; all kinds of education. And we need to teach basic finance in high school. It should be mandatory.

I'm not a member of any political movement or party so take what I'm going to say at face value and don't ascribe it to any leanings I may or may not have.

People need to make better choices. I've been out of college since 1990 and have never been without work. Why? Because I'll do any work. There are jobs, in good times and bad. Some of it requires odd hours. Most of requires passing a drug test. Some of it is crappy work. But it is there and allowed me to always pay my rent and save. I haven't always worked for a major airline making good money. Far from it.

I don't waste it on video games and cable TV and cruises and other stuff I can't afford when I don't have the money. I'll spend it when I have it. But my basic needs have always been met because I made the choices to make that happen and avoided the choices that would destroy opportunities.

We, as a society, will make better decisions about our lives if we have better education and financial education is a part of that. People do need to take some responsibility for their own situations. My nephew is working hard in high school and plans his college education in such a way that he'll finish with very little or zero debt. It can be done. It just takes discipline and good decision making skills. Yes, I understand that millions of Americans have no guidance from parents or elders who care. They are at a true disadvantage.

agreed on all of this. we should look toward Germany on how a capitalistic society should be run. Technical education is not frowned upon there, and skilled labor jobs are plentiful. Laborers are looked upon as assets: people to be trained in order to produce value-added products. Unlike the U.S., where "shareholder" value has become the predominant focus of how a company operates, labor actually gets seats in the board room.

As another poster wrote, no one wants handouts, but we should also not settle for a 90:10 split between profits going toward shareholders: profit to employees and call it good. Things are rarely tenable on the extremes, a more fair distribution of profits (viz. increase in wages, cf. share buybacks and increased dividends) may have greater social good in the long term.

as an aside and anecdote, it was said that the Aldi brothers are some of the most miserly German industrialists; however, even Aldi treat their employees better than most American companies do

There are entire industries that would collapse if people became financially aware and responsible!

I'm all for it though. I wish I had some education like this when I was young. Took me until I was in college to truly learn on my own.

yep, cough cough, Edward Jones, cough cough, taking 1% fees under management...

that whole tranche of companies basically fit the Upton Sinclair quote that [i]t is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

[echappist]

Household debt-to-income is the lowest it's been since 2002. The unemployment rate is at multi-decade lows. Of course the wealth gap is growing, it always will as long as it's legal to earn interest, but to assert that a rising stock market and growing economy don't in any way benefit "the masses", is absurd. It is a talking point for politicians, not actual analysis. I'm not saying you have asserted that, but others here have.


Much larger than it would be if the market were falling. Talk about irrelevant. I get the sense that actual adults here have the notion that if everyone can't benefit equally, then no one should benefit at all. Life is not kindegarten. Being poor sucks in a lot of ways, I know because that's how I grew up.


Your original post states "but to assert that a rising stock market and growing economy don't in any way benefit "the masses", is absurd"; emphases added. In your response to my post, you wrote "I get the sense that actual adults here have the notion that if everyone can't benefit equally, then no one should benefit at all"; emphases added.

It doesn't take a debate champ or a future jurist to realize that you made your own points hard to defend, because a) your statements are based on absolutes, with no room for any secondary considerations, and because b) your characterization of what others said/posted are exaggerations of what others have written (as in, strawman arguments).

Re: your original post (the one re: absurdity that the masses don't benefit from rise in the stock market), I doubt anyone (at least not I) is making that statement. It's always a matter of degree, rather than a matter of binary yes/no. I acknowledged in my response that the median person (which is as close to definition of average joe as possible, thus representative of "the masses") near retirement has probably $100k in his/her portfolio, and based on the common assumption that portfolio at that age should be 40% equity, I stated that this person has ~$40k worth of exposure to stocks. To further give you the benefit of the doubt, I made the assumption that the entire $100k is in equity, and showed just how little that is, as it's the equivalent of 5 years of maximum 401k contribution. Difference here being the median person took 35 years to accumulate that much exposure to the equity market (with the help of capital gain).

Furthermore, and here's the kicker, the amount of exposure goes up quite a bit for the upper middle class. Again, looking at age 60-65, where wealth does not include home equity. Asset for the 80th tile is ~7x that at median, and asset for the 90th tile is ~15x that at median. Of course the median person still benefits from gains in the stock market, but the amount of gain is minimal, by an order of magnitude, when compared to the 90th tile (see chart below). Once again, remember that wealth at 60-64 is the highest amongst all populations, and median person at a younger age would have even less in stock.

As for what you wrote in your response to my post, if you want to put words in my mouth, you should at least be honest about it and say that you are distorting my position. No one here (and certainly not I) have argued that if things can't be equal, then it shouldn't be done. Such a notion is so laughably extreme as not to deserve any consideration on its merits. Again, no one is saying that people shouldn't benefit from capital gains and dividends, but there should be considerations as to whether the whole mantra of "maximizing shareholder value" should be held as unquestioned truth. For that matter, that attitude was adopted in the U.S. only since the late 70's, so there's a perspective as to how both geographically and temporally restricted adherence to this practice is. And don't worry, those with two commas worth in stock exposure will still receive ~10x the gains when the stock go up in price, even if capital gain/dividends are reduced in favor of increased salary.

https://n4yhzq.by.files.1drv.com/y4mS9fpq_ijfi6Zogg-I8chYz7OwT45-a0Q4BWv2MG4dCBAjEC68adxzwNOTWBICvj-aY_jbItNwdefgkbj4tIDDCGu9CGCK9-Gguc8gd1wuy1SJ5_uOzAEneWoOXZtrGXGNuhKukkHeSPZM_aMT PWA6GePeO7F3uxKRgrvJsQdZQkHx_00rzSLbiAfhbAH4FLoGBy Prwkh_NnHL-7M0tk-Yg?width=1024&height=576&cropmode=none

[oldpotatoe]

To improve prosperity we need to improve education; all kinds of education. And we need to teach basic finance in high school. It should be mandatory.

NO doubt about it...instead of $70BILLION MORE to an already bloated military or $80million and counting for golf outings..PLUS, 2019 is on tap for $1TRILLION added to the national debt..damn little for education..The Sec of Education..somebody 'new' that cares about this, understands the problem, isn't interested in filing the bank accounts of her special interest buddies(read-charter school lobby), should be seated NEXT to POTUS, not in the cheap seats...the priorities in the US is AFU. :help:

[cfox]

Your original post states "but to assert that a rising stock market and growing economy don't in any way benefit "the masses", is absurd"; emphases added. In your response to my post, you wrote "I get the sense that actual adults here have the notion that if everyone can't benefit equally, then no one should benefit at all"; emphases added.

It doesn't take a debate champ or a future jurist to realize that you made your own points hard to defend, because a) your statements are based on absolutes, with no room for any secondary considerations, and because b) your characterization of what others said/posted are exaggerations of what others have written (as in, strawman arguments).

Re: your original post (the one re: absurdity that the masses don't benefit from rise in the stock market), I doubt anyone (at least not I) is making that statement. It's always a matter of degree, rather than a matter of binary yes/no. I acknowledged in my response that the median person (which is as close to definition of average joe as possible, thus representative of "the masses") near retirement has probably $100k in his/her portfolio, and based on the common assumption that portfolio at that age should be 40% equity, I stated that this person has ~$40k worth of exposure to stocks. To further give you the benefit of the doubt, I made the assumption that the entire $100k is in equity, and showed just how little that is, as it's the equivalent of 5 years of maximum 401k contribution. Difference here being the median person took 35 years to accumulate that much exposure to the equity market (with the help of capital gain).

Furthermore, and here's the kicker, the amount of exposure goes up quite a bit for the upper middle class. Again, looking at age 60-65, where wealth does not include home equity. Asset for the 80th tile is ~7x that at median, and asset for the 90th tile is ~15x that at median. Of course the median person still benefits from gains in the stock market, but the amount of gain is minimal, by an order of magnitude, when compared to the 90th tile (see chart below). Once again, remember that wealth at 60-64 is the highest amongst all populations, and median person at a younger age would have even less in stock.

As for what you wrote in your response to my post, if you want to put words in my mouth, you should at least be honest about it and say that you are distorting my position. No one here (and certainly not I) have argued that if things can't be equal, then it shouldn't be done. Such a notion is so laughably extreme as not to deserve any consideration on its merits. Again, no one is saying that people shouldn't benefit from capital gains and dividends, but there should be considerations as to whether the whole mantra of "maximizing shareholder value" should be held as unquestioned truth. For that matter, that attitude was adopted in the U.S. only since the late 70's, so there's a perspective as to how both geographically and temporally restricted adherence to this practice is. And don't worry, those with two commas worth in stock exposure will still receive ~10x the gains when the stock go up in price, even if capital gain/dividends are reduced in favor of increased salary.

https://n4yhzq.by.files.1drv.com/y4mS9fpq_ijfi6Zogg-I8chYz7OwT45-a0Q4BWv2MG4dCBAjEC68adxzwNOTWBICvj-aY_jbItNwdefgkbj4tIDDCGu9CGCK9-Gguc8gd1wuy1SJ5_uOzAEneWoOXZtrGXGNuhKukkHeSPZM_aMT PWA6GePeO7F3uxKRgrvJsQdZQkHx_00rzSLbiAfhbAH4FLoGBy Prwkh_NnHL-7M0tk-Yg?width=1024&height=576&cropmode=none
Hey, jeez, apologies, the highlighted (intentionally offhand) comment wasn't directed at you, more towards some of the more offhand comments made by others. You clearly have a more educated, nuanced view on this stuff. I should have been more clear.

[SPOKE]

To improve prosperity we need to improve education; all kinds of education. And we need to teach basic finance in high school. It should be mandatory.

I'm not a member of any political movement or party so take what I'm going to say at face value and don't ascribe it to any leanings I may or may not have.

People need to make better choices. I've been out of college since 1990 and have never been without work. Why? Because I'll do any work. There are jobs, in good times and bad. Some of it requires odd hours. Most of requires passing a drug test. Some of it is crappy work. But it is there and allowed me to always pay my rent and save. I haven't always worked for a major airline making good money. Far from it.

I don't waste it on video games and cable TV and cruises and other stuff I can't afford when I don't have the money. I'll spend it when I have it. But my basic needs have always been met because I made the choices to make that happen and avoided the choices that would destroy opportunities.

We, as a society, will make better decisions about our lives if we have better education and financial education is a part of that. People do need to take some responsibility for their own situations. My nephew is working hard in high school and plans his college education in such a way that he'll finish with very little or zero debt. It can be done. It just takes discipline and good decision making skills. Yes, I understand that millions of Americans have no guidance from parents or elders who care. They are at a true disadvantage.

👍.......personal responsibility. I’d really like to see much more financial education taught starting in junior high school even if it’s nothing more than beating the compounding formula into the kids heads.

[echappist]

👍.......personal responsibility. I’d really like to see much more financial education taught starting in junior high school even if it’s nothing more than beating the compounding formula into the kids heads.

well, compounding and save at least 15% of one's paycheck

and as a continuation of @saab2000's point, we should stop telling kids at commencements to chase their dreams and follow their interests, worse, having people who survived the odds to tell kids to chase their dreams and follow their interest. While doing so in one's 20's is fine, one's gotta be realistic in one's 30s and 40s. I have a colleague in her 50s who took an almost 40% pay cut to work somewhere that pays lower, b/c the new job suits her interest better. Sure, do that if you are financially set, but i doubt she'll ever be able to retire

that said, while I begrudgingly would advocate for personal responsibility, let's not pretend that there aren't numerous hucksters out there hustling the gullible of their money...

[Burnette]

I agree on the personal responsibility and education fronts. Yes, even the masses can benefit from the market. If you start saving when you start working, at the end the results can be quite amazing.

The fact that the average 401k balance is low isn't because the program is faulty or that the market is infair, it's because people started late and/or didn't put in enough. Sans life events that can bring anyone of us down we all make choices. I maxed out with my 401k contributions early on in life, even when it hurt, even recently when my wife was out of work for over a year. She's working now but no vacation this year as we recover, sacrifices, choices made.

During our marriage there were a few times she made more but I have more saved for the pair by far even outside of our 401k accounts. Given the same resources people will make choices and have to live with the results.

Some people are fat for genetic reasons, health issues, poor food source opportunities and such and some just eat too much. If you're not blighted with health or environmental setbacks and do things to stay healthy through grit and sacrifice you can be fit. And so it is with money. I work with people who have been in employ as long as me and yet have next to nothing set aside for retirement. It has nothing to do with trickle down or market fairness. I'll make twice as much in retirement as I make today by going with all stock in index funds since I started(that allocation ratio will change in a few years).

Personal responsibility and education. But even with that people will get fat, not save, do drugs, drink too much, etc... we all make choices. My heart goes out to those befallen to illness, nasty divorce and accidents. Anything can happen to any of us but you put the work in and the money in first and foremost.

[echappist]

Bump:eek:

[kppolich]

Yet another classic overreaction that will cause some folks to panic and sell when nothing has actually changed in the world in the past month.

Those wise enough to have some money set aside for times like these will profit in the long run. Others who overreacted and knee-jerked will lose long-term once again.

Big earnings week coming up, sit tight and enjoy the ride.

FB looks like a prime-time buy ahead of 10/30 earnings at Market Close.

[Big Dan]

No surprises.

[seanile]

for added perspective. the one year history of the Dow.
https://i.imgur.com/tunzqQx.png

[MattTuck]

Yet another classic overreaction that will cause some folks to panic and sell when nothing has actually changed in the world in the past month.



I'm not sure what you mean when you say nothing has actually changed in the world in the past month? The market's value has much more to do with people's expectations about what will happen in the future, than what has happened in the past. Namely, their expectations about future cash flows and the riskiness of those cash flows.

[kppolich]

No new elected officials, no major trade laws or changes, no new wars, no change in employment rates, no major changes in fed rates present or future,

People are still watching TV, using their cell phones, buying groceries, paying mortgages, borrowing money and going to work.

[likebikes]

no major trade laws or changes, no new wars

trade war?

[kppolich]

trade war?

Negotiations, yes. War? hardly. Let me know when the masses stop buying things because of this "trade war."

[oldpotatoe]

Negotiations, yes. War? hardly. Let me know when the masses stop buying things because of this "trade war."

They won’t but they will and are paying more for those ‘things, now, today. You are too but whether or not to eat or buy toilet paper ‘may’ not be an issue for you, it is for a lot of Americans. Throw in some inflation that that ‘loco’ Fed is trying to control and the end of month ‘net’ for mainstreet is more negative than ever.

[MattTuck]

They won’t but they will and are paying more for those ‘things, now, today. You are too but whether or not to eat or buy toilet paper ‘may’ not be an issue for you, it is for a lot of Americans. Throw in some inflation that that ‘loco’ Fed is trying to control and the end of month ‘net’ for mainstreet is more negative than ever.

Ray.... is that you?

[oldpotatoe]

Ray.... is that you?

You forgot the :) and I haven’t yet called greenbacks, ‘frns’.

[Tony T]

Yet another classic overreaction….

DOW dn 15 points, S&P dn 2 pts, Naz dn 1 point. Overreaction?? :confused:

[kppolich]

DOW dn 15 points, S&P dn 2 pts, Naz dn 1 point. Overreaction?? :confused:

Yes, the original :eek: BUMP post today was an overreaction, just like every headline you read on MSN, CNN, Yahoo Finance today about 'Global Stocks Tumbling'. They want your clicks, and they probably got them.

[echappist]

Yes, the original :eek: BUMP post today was an overreaction, just like every headline you read on MSN, CNN, Yahoo Finance today about 'Global Stocks Tumbling'. They want your clicks, and they probably got them.

it was more a bump of the thread than anything else

i have not rebalanced or sold, and when the time comes, I'll "buy the dip"

[paredown]

I do think there are things to worry about though. If I had anything to protect I would be moving into a cash/Tbill/liquidity position,--I think the crash is just around the corner:

1) Estimated $6 Trillion dollar unfunded government pension liabilities, or roughly $18k for every person in the US--this despite the relative good performance of the economy. At some point the bill will be paid out of raised taxes, or state and local governments will have to declare bankruptcy:
https://www.heritage.org/budget-and-spending/commentary/how-big-your-states-share-6-trillion-unfunded-pension-liabilities;

2) Spiraling student debt, especially since the recession as more marginal households have been unable to fund tuition by borrowing against home equity. Estimates are in the $1.5 to 1.6 trillion dollars--more than credit cards and auto loans. The knock on effects are millennial are delaying marriage/starting families/making babies and will not be stepping into the housing market any time soon:
https://www.cnbc.com/2018/06/07/peoples-student-loan-balances-are-spiraling-out-of-control.html

3) The sputtering Chinese economy, Trump's jawboning (and actual action) on tariffs on Chinese goods (and others)--have already having an effect on world trade volumes;

4) Stagnant wages/lack of full time employment for the bottom third of the economy, who have already been unable to make back what they lost in the "Great Recession". Especially the older cohort who simply have been unable to find employment and who dropped out of the labor market.

Here's a cautionary tale about what this looks like:

https://www.nytimes.com/2018/10/23/nyregion/man-found-dead-in-car-new-york.html

5)BREXIT is going to be catastrophic for the UK economy and will have untold effects on the Euro block.

[echappist]

I do think there are things to worry about though. If I had anything to protect I would be moving into a cash/Tbill/liquidity position,--I think the crash is just around the corner:

1) Estimated $6 Trillion dollar unfunded government pension liabilities, or roughly $18k for every person in the US--this despite the relative good performance of the economy. At some point the bill will be paid out of raised taxes, or state and local governments will have to declare bankruptcy:
https://www.heritage.org/budget-and-spending/commentary/how-big-your-states-share-6-trillion-unfunded-pension-liabilities;

2) Spiraling student debt, especially since the recession as more marginal households have been unable to fund tuition by borrowing against home equity. Estimates are in the $1.5 to 1.6 trillion dollars--more than credit cards and auto loans. The knock on effects are millennial are delaying marriage/starting families/making babies and will not be stepping into the housing market any time soon:
https://www.cnbc.com/2018/06/07/peoples-student-loan-balances-are-spiraling-out-of-control.html

3) The sputtering Chinese economy, Trump's jawboning (and actual action) on tariffs on Chinese goods (and others)--have already having an effect on world trade volumes;

4) Stagnant wages/lack of full time employment for the bottom third of the economy, who have already been unable to make back what they lost in the "Great Recession". Especially the older cohort who simply have been unable to find employment and who dropped out of the labor market.

Here's a cautionary tale about what this looks like:

https://www.nytimes.com/2018/10/23/nyregion/man-found-dead-in-car-new-york.html

5)BREXIT is going to be catastrophic for the UK economy and will have untold effects on the Euro block.

thanks for sharing that. I have been staying away from the NYT for quite a while (though i'm still a subscriber), not b/c of "liberal bias", but b/c I felt it was doing a few too many fluff pieces, especially those in the real estate section. We need stories like this to be told, in the seemingly vain hopes that some would listen and pay attention.

Years ago, I remember a Simpsons episode in which a widow lost most of her assets after passing of her spouse, and that particular segment went, "and she went to Harvard Medical School, as a cadaver..." Dark humor at the time, but quite a bit closer to reality now...

[GregL]

4) Stagnant wages/lack of full time employment for the bottom third of the economy, who have already been unable to make back what they lost in the "Great Recession". Especially the older cohort who simply have been unable to find employment and who dropped out of the labor market.

Here's a cautionary tale about what this looks like:

https://www.nytimes.com/2018/10/23/nyregion/man-found-dead-in-car-new-york.html
A truly sad tale, but a close read reveals the subject left two jobs. He left Oracle because he "...viewed (it) as a lateral move at best" and Dell because the required travel "...proved a burden." In a bad economy, you can't be too choosey. Shortly after my wife and I got married, my company imploded due to mismanagement. I had to take a step back in my career, taking a position that paid less and had less opportunities. My wife had already committed to completing her college degree. Our income dropped 60% and we took on the debt from her student loans. At the end of some months, we had to decide between groceries and rent. It took four painful years to get out of that situation and into a better path forward. My point? When faced with economic difficulties, you can't be picky. You have to accept a change in lifestyle and deal with the hand life gives you. While I feel very badly for the subject of the story and his family, his choices were part of his downward spiral.

Greg

[echappist]

A truly sad tale, but a close read reveals the subject left two jobs. He left Oracle because he "...viewed (it) as a lateral move at best" and Dell because the required travel "...proved a burden." In a bad economy, you can't be too choosey. Shortly after my wife and I got married, my company imploded due to mismanagement. I had to take a step back in my career, taking a position that paid less and had less opportunities. My wife had already committed to completing her college degree. Our income dropped 60% and we took on the debt from her student loans. At the end of some months, we had to decide between groceries and rent. It took four painful years to get out of that situation and into a better path forward. My point? When faced with economic difficulties, you can't be picky. You have to accept a change in lifestyle and deal with the hand life gives you. While I feel very badly for the subject of the story and his family, his choices were part of his downward spiral.

Greg

none of us knows enough to make a statement. he's also been through a divorce; perhaps his wife took him to the cleaners

one thing that is deeply alarming is how job opportunities may leave one behind. Have a friend making a good salary in an East Coast city; his company got acquired, and then the parent company laid off a bunch of people. That was quite a few years ago, and he's very experienced (and was in his early 40s), but he's been having trouble finding a position giving him similar level of remuneration...

Life in the U.S. can be so brutish

[gasman]

Life in the U.S. can be so brutish

It’s all relative. Compared to much of the world we have it pretty dang good here.

[echappist]

It’s all relative. Compared to much of the world we have it pretty dang good here.

but amongst industrialized nations, the U.S. is sub-par for its lack of a safety net. Even when compared to countries with a similar ethos (viz. Australia, Canada, and New Zealand), the U.S. is a worse place to live for those without means.

[zap]

but amongst industrialized nations, the U.S. is sub-par for its lack of a safety net. Even when compared to countries with a similar ethos (viz. Australia, Canada, and New Zealand), the U.S. is a worse place to live for those without means.

True, but what better place than the USA to make a go of it.

Trust me, I know.

[Jeff N.]

DOW down over 600 10/24.

[sfo1]

Another less than encouraging day. I still have to park my '17 SEP $. I guess a cash account is not so bad after all (for the time being).

[Ken Robb]

Another less than encouraging day. I still have to park my '17 SEP $. I guess a cash account is not so bad after all (for the time being).
I see CDs paying 2-2.75% for 10-14 months which may be a good place to put some $$ at least for the time being.

[Tony T]

DOW down over 600 10/24.

…and all indexes at a loss for 2018

[sfo1]

A good suggestion. I was thinking 3% is not far off.

I see CDs paying 2-2.75% for 10-14 months which may be a good place to put some $$ at least for the time being.

[Louis]

A good suggestion. I was thinking 3% is not far off.

Not too bad, as long as inflation doesn't ramp up again. (And with all this talk of trade wars, I wouldn't count on that not happening.)

[mtechnica]

DOW down over 600 10/24.

Are we tired of winning yet?

[Louis]

Are we tired of winning yet?

The country gets what it votes for...

[Llewellyn]

Nothing more than the usual ups and downs of the market. Focus on the long-term and there's nothing to worry about.

[echappist]

I see CDs paying 2-2.75% for 10-14 months which may be a good place to put some $$ at least for the time being.

or brokered CDs, if the SEP account is held at a brokerage

[pbarry]

Should I hold my Amazon stock through tomorrow? Bought at 1707 when it dipped 2 weeks ago. The earnings report tomorrow, (and the trouncing other firms have taken recently when they don't beat expectations solidly), has me second guessing things..

[seanile]

Are you long or short? If youre long, hold for a year minimum

[pbarry]

Good point. Short, but I know AMZ has long legs, so might be in for the long haul. Recent volatility has me second guessing what would normally be a sound buy.

[seanile]

Just sit and hold, and keep buying as things dip. Understand your goals, and if you’re short, do your due diligence and know you may lose.
If youre long, you should really only be buying or holding, and only selling after youve done a deep dive on the company, and not be selling as a reaction the the market’s overall movements.
Id analyze why youre short, because a company that size will always rebound.
I sold AAPL at 110, and JPM at 50...did myself no favors long term

[MikeD]

They won’t but they will and are paying more for those ‘things, now, today. You are too but whether or not to eat or buy toilet paper ‘may’ not be an issue for you, it is for a lot of Americans. Throw in some inflation that that ‘loco’ Fed is trying to control and the end of month ‘net’ for mainstreet is more negative than ever.


Meh... The ridiculously high cost of housing/rent is the biggest worry, at least in my neck of the woods. Then there's the increases in state taxes and fees, insurance, utility costs, and gasoline.

[echappist]

Just sit and hold, and keep buying as things dip. Understand your goals, and if you’re short, do your due diligence and know you may lose.
If youre long, you should really only be buying or holding, and only selling after youve done a deep dive on the company, and not be selling as a reaction the the market’s overall movements.
Id analyze why youre short, because a company that size will always rebound.
I sold AAPL at 110, and JPM at 50...did myself no favors long term

this is good advice for vast majority of us (i.e. those without the clairvoyance needed to pick stocks successfully)

[oldpotatoe]

Meh... The ridiculously high cost of housing/rent is the biggest worry, at least in my neck of the woods. Then there's the increases in state taxes and fees, insurance, utility costs, and gasoline.

=inflation.....an expected result of a hot economy, made hotter by YUGE, unfunded government spending....

[MikeD]

=inflation.....an expected result of a hot economy, made hotter by YUGE, unfunded government spending....


Yet the government says inflation is about 2%.