OT - Dow soars 567 - 4th best point increase in history

[Tony T]

4th best point increase (https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Ind ustrial_Average#Largest_point_changes) in history.

[smontanaro]

Given the huge price differences between Dow, NASDAQ and S&P at the bottom (2009-ish?) and today, I'm pretty sure market moves are best expressed as percentages, not raw points. In that case, neither Monday's nosedive nor today's recovery are all that much to write home about. It is quite possible that we are going to see more volatility for the time being. That's different than a single rush to the exit or a rush back in, however.

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[NYCfixie]

I reviewed our holdings before the market opened today.

From 12/1/2017 to 2/5/2018 we are still down by 1%. We will see if today fixed that.

[Big Dan]

Desperate....... but not serious.

[abguff]

If it keeps dropping i cant wait to hear who the orange man blams it on.

[Cicli]

If it keeps dropping i cant wait to hear who the orange man blams it on.

This is how threads get locked. There are plenty of other places for this.

[Tony T]

The Hawaiian Punch Guy?

[Tony T]

Given the huge price differences between Dow, NASDAQ and S&P at the bottom (2009-ish?) and today, I'm pretty sure market moves are best expressed as percentages, not raw points.

You are correct, and my OP was a tongue-in-cheek to the Media's reaction to the 1st 1,000 point decline this week.
Since yesterday's 1,000 point decline put the DOW at 10% off the high, the Media is now reporting with "Correction" Headlines.

[oldpotatoe]

This is how threads get locked. There are plenty of other places for this.

he's new...:)

[fignon's barber]

he's new...:)

....and not a good speller.

[oldpotatoe]

....and not a good speller.

blam!!:)

[fignon's barber]

The only thing that bugs me is that I went bargain shopping when Dow was at -600 yesterday afternoon. I was undecided between Amazon and NVDA, but in the back of my mind I heard Jim Cramer saying " If you have a chance to get Amazon, do it!" It promptly dropped $40/share, while NVDA jumped $40/share.

[saab2000]

The only thing that bugs me is that I went bargain shopping when Dow was at -600 yesterday afternoon. I was undecided between Amazon and NVDA, but in the back of my mind I heard Jim Cramer saying " If you have a chance to get Amazon, do it!" It promptly dropped $40/share, while NVDA jumped $40/share.

Based on what I've seen, Jim Cramer is a joke. He's an entertainer and I would never make a stock decision based on anything he says.

On the rare times I try to buy a dip, I always buy shares in a dividend paying ETF. And frankly, I almost never buy dips though the morning after last week's I did buy 6 shares of my favorite ETF.

[oldpotatoe]

The only thing that bugs me is that I went bargain shopping when Dow was at -600 yesterday afternoon. I was undecided between Amazon and NVDA, but in the back of my mind I heard Jim Cramer saying " If you have a chance to get Amazon, do it!" It promptly dropped $40/share, while NVDA jumped $40/share.

Cuz of this...:)

https://www.youtube.com/watch?v=J6-8DQALGt4

[fignon's barber]

Based on what I've seen, Jim Cramer is a joke. He's an entertainer and I would never make a stock decision based on anything he says.

On the rare times I try to buy a dip, I always buy shares in a dividend paying ETF. And frankly, I almost never buy dips though the morning after last week's I did buy 6 shares of my favorite ETF.


Was joking about Cramer. And I was talking about individual stocks, not etf or mutual funds.

[kramnnim]

The only thing that bugs me is that I went bargain shopping when Dow was at -600 yesterday afternoon. I was undecided between Amazon and NVDA, but in the back of my mind I heard Jim Cramer saying " If you have a chance to get Amazon, do it!" It promptly dropped $40/share, while NVDA jumped $40/share.

$40/share for Amazon is a tiny % of $1300+ though...lol

Nvidia announced their earnings, thus the jump

[Tony T]

Swings (including 2 declines) of 1,000 points, or 4%, 4 days last week.
This is significant as there were only about 8 days in 2017 with over 1% swings.
What I find troubling is the speed that this is occurring due to the algorithmic trading.

[NYCfixie]

Swings (including 2 declines) of 1,000 points, or 4%, 4 days last week.
This is significant as there were only about 8 days in 2017 with over 1% swings.
What I find troubling is the speed that this is occurring due to the algorithmic trading.

Ding, Ding, we have a winner....or winner, winner, chicken dinner.

This is the world we live in. Computers are taking over and we have lost control over any rational choice in the markets (not that humans make rational choices in the market).

The joke of it all is that the banks make money no matter what so they could care less about all this automated buying and selling whether by computer or people trying to stop loss their accounts.

[1centaur]

This is the world we live in. Computers are taking over and we have lost control over any rational choice in the markets (not that humans make rational choices in the market).

I just wrote a DM to one of my analysts on this topic, so I'll repeat some of it here.

The algo/risk-parity guys are LOUDLY indignant on Twitter and elsewhere that they are not driving this volatility. Their narrative is that fundamental investors suddenly and collectively decided that global growth/inflation/rates made stocks too expensive.

My view: Global growth/inflation/rates have been looking good (strong) for months as stocks went up, and stocks have been at stupid EBITDA multiples for years, so what changed? Not enough. And big institutions don't collectively make the same decision on the big picture on about the same day (which is why momentum investing works - people make decisions gradually and the earliest deciders are confident and not consistently wrong; other fundamentalists follow and technicians follow everybody, collectively creating trends).

I don't disagree that risk-parity strategies could not have been responsible for the recent volatility - they would react to it to some degree and at some lag but not cause it, from what I can tell. But worriers about fundamental value did not get some amazing new piece of news, they got a continuation of news that they would have been fading all along if that was the rationale for selling.

Low volatility, a 2017 strategy and reality, was not kind to fundamental worriers about rates/inflation and therefore valuation. It has become easier and easier to let the trend be your friend, and there is no doubt that ETFs (which do not care about value by their nature) and trend-following strategies have been gathering a lot of equity assets in recent years in part to be ready to sell when the market started down. Watching the action, I saw signs of automatic selling, not people making thoughtful decisions. Sure, the rates narrative could have been a catalyst to some degree (as it probably has been all along), but automatic, rule-based strategies jumped on the down move and accentuated it. IMO, rules-based investing accentuated the low momentum 2017, the bigger moves YTD in 2018, and will do the same up and down for years to come. Computers are not making all the decisions, there is still room for human decisions (trust me, plenty of humans are making these decisions around me every day), but computers that are trend-followers, either by design or implications, will be volatility increasers both by their nature and because humans trained to think the market knows will overreact to volatility and add to it. I read RIAs are selling options; we talk to RIAs all the time, and they talk to nervous wealthy clients all the time. That pool of assets will not sit and cross their fingers, they will worry and do something.

Now that the low vol trade appears over, expect bigger swings in both directions, learn to be nonreactive to volatility if you are an investor rather than a trader, have a plan, and execute it. The market doesn't know what it used to, and it has NEVER been efficient (that's an academic delusion couched in sophistry).

[NYCfixie]

The post above (and quoted below) is very thoughtful and detailed response.

I will not compare myself to others but will say that my wife and I are long term investors guided by a relative whose job is private wealth management. In our 20+ years of investing both in retirement and non-retirement accounts, we have experienced some of the worst bull markets, best bear markets, sell-offs, and run-ups. Our strategy is simple: buy at good prices/valuations and hold. Keep enough cash on hand for rainy days and buying opportunities but not too much that should otherwise be invested in the market.

Nobody can time the market so don't try. For us, this sell-off is viewed as an amazing buying opportunity; nothing more, nothing less.

I just wrote a DM to one of my analysts on this topic, so I'll repeat some of it here.

The algo/risk-parity guys are LOUDLY indignant on Twitter and elsewhere that they are not driving this volatility. Their narrative is that fundamental investors suddenly and collectively decided that global growth/inflation/rates made stocks too expensive.

My view: Global growth/inflation/rates have been looking good (strong) for months as stocks went up, and stocks have been at stupid EBITDA multiples for years, so what changed? Not enough. And big institutions don't collectively make the same decision on the big picture on about the same day (which is why momentum investing works - people make decisions gradually and the earliest deciders are confident and not consistently wrong; other fundamentalists follow and technicians follow everybody, collectively creating trends).

I don't disagree that risk-parity strategies could not have been responsible for the recent volatility - they would react to it to some degree and at some lag but not cause it, from what I can tell. But worriers about fundamental value did not get some amazing new piece of news, they got a continuation of news that they would have been fading all along if that was the rationale for selling.

Low volatility, a 2017 strategy and reality, was not kind to fundamental worriers about rates/inflation and therefore valuation. It has become easier and easier to let the trend be your friend, and there is no doubt that ETFs (which do not care about value by their nature) and trend-following strategies have been gathering a lot of equity assets in recent years in part to be ready to sell when the market started down. Watching the action, I saw signs of automatic selling, not people making thoughtful decisions. Sure, the rates narrative could have been a catalyst to some degree (as it probably has been all along), but automatic, rule-based strategies jumped on the down move and accentuated it. IMO, rules-based investing accentuated the low momentum 2017, the bigger moves YTD in 2018, and will do the same up and down for years to come. Computers are not making all the decisions, there is still room for human decisions (trust me, plenty of humans are making these decisions around me every day), but computers that are trend-followers, either by design or implications, will be volatility increasers both by their nature and because humans trained to think the market knows will overreact to volatility and add to it. I read RIAs are selling options; we talk to RIAs all the time, and they talk to nervous wealthy clients all the time. That pool of assets will not sit and cross their fingers, they will worry and do something.

Now that the low vol trade appears over, expect bigger swings in both directions, learn to be nonreactive to volatility if you are an investor rather than a trader, have a plan, and execute it. The market doesn't know what it used to, and it has NEVER been efficient (that's an academic delusion couched in sophistry).

[Tony T]

….
Now that the low vol trade appears over, expect bigger swings in both directions, learn to be nonreactive to volatility if you are an investor rather than a trader, have a plan, and execute it. The market doesn't know what it used to, and it has NEVER been efficient (that's an academic delusion couched in sophistry).

It's not the volatility that concerns me, but the amount and intensity (from 8 days in all of 2017 with 1% to 4 days in the last 5 days with 4%) as well as how quickly the drop and rebound occur. Dropping 2% and then rising 3% (or vice versa) in a period of less than 60 minutes is troubling.

Reminds me of The Far Side: Trouble Brewing
http://farm6.staticflickr.com/5001/5214376913_f0102ca308_z.jpg

[happycampyer]

<snip>

Watching the action, I saw signs of automatic selling, not people making thoughtful decisions. Sure, the rates narrative could have been a catalyst to some degree (as it probably has been all along), but automatic, rule-based strategies jumped on the down move and accentuated it. IMO, rules-based investing accentuated the low momentum 2017, the bigger moves YTD in 2018, and will do the same up and down for years to come. Computers are not making all the decisions, there is still room for human decisions (trust me, plenty of humans are making these decisions around me every day), but computers that are trend-followers, either by design or implications, will be volatility increasers both by their nature and because humans trained to think the market knows will overreact to volatility and add to it.Not sure if you were around for it but I’m sure you’re familiar with it—the recent trading is reminiscent of the CPPI-driven trading in 1987. The trading behind instruments like the XIV may or may not be executed by computers, but even if the traders are humans, they are bound to follow their pre-defined strategies.

[1centaur]

One of the professors where I went to grad school was a father of portfolio insurance. I started professionally in 1988 and one of the guys there had started on Black Monday. Welcome to the profession!

As to whether this is a great buying opportunity, my view is that it's cheaper than it could have been but down 10% from a toppy-kind of high might not be a great opportunity. I don't sense the systemic factors that caused the 2007/8 problems (the stock market was VERY slow to react to serious problems then, BTW), but I can come up with plenty of scenarios that would justify a larger stock plunge and we don't have cheap valuations to buffer psychology. That said, one can spend a lifetime theorizing about where the stock market should be, and that life is better spent finding good investments/funds for the general environment of the next 5 years and kind of ignoring the gyrations of those people and machines that are in the gyration game, not the investing game. Beating inflation is fairly easy these days, and for that I am grateful.

[ripvanrando]

Will Powell continue with the Yellen/Fed Put?

Will they really raise 4 times in 18?

yes/no = the party continues

no/yes = hold on tight

[Tony T]

Lot of headlines in the NYT when the DOW tanked last week, but now that this week is the best 10 years barely a mention.

[drewellison]

These wild swings is all the more reason to have a long term, sound investment strategy. Something like this.
* start while you're young
* put a percentage away from EVERY paycheck
* max out your 401(k) at work, at least up the to company matching amount.
* decide on an appropriately diversified portfolio depending on your age and risk adversity
* if you don't understand investments, find someone to advise you on what an appropriate portfolio is.
* don't blow all your savings on vacations, cars.
* invest in things that appreciate in value over time, like homes, understanding wives, and NOS 3Rensho and Cali-Masi frames.

Following a plan like this (and with a little bit of luck in life), you can retire at 59 like I'm doing next month.

:banana: