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

[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]

Originally Posted by Ken Robb

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]

Originally Posted by oldpotatoe

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]

Originally Posted by 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

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

[oldpotatoe]

Originally Posted by MikeD

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]

Originally Posted by oldpotatoe

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

Yet the government says inflation is about 2%.

[oldpotatoe]

Originally Posted by MikeD

Yet the government says inflation is about 2%.

In 2015 it was .7%...all I'm saying is prices are going up, wages for mainstream are stagnant. Stock holders/big biz owners getting wealthy. Health care getting more expensive along with just about everything else.

[Ozz]

Originally Posted by MikeD

Yet the government says inflation is about 2%.

Is that "excluding the volatile food and energy" sectors?

Cuz you know, regular people don't buy food or energy.....

[veloduffer]

One needs to assess their financial situation in context of their life cycle - in retirement, near retirement, etc.

Recent market volatility is a good reminder that equities are the most volatile investments - the S&P 500 lost 39% in 2008. Many folks never recovered from that and had much less in savings upon retirement. It's a primary reason that many folks must have some kind of job when they "retire" as social security and their savings are still insufficient to meet their basic needs.

Valuations, markets and business models change, so stocks don't always bounce back. With every industry currently undergoing disruption, it's not as easy to just buy & hold -- today's blue chip may be tomorrow's goner.

Markets and economy are currently in classic late cycle conditions.
- Fed tightening
- Debt leverage (corporate, govt, consumer) are at record highs; easy credit and lots of LBO activity; valuations very high (debt/EBITDA multiples, P/E)
- Earnings near or past peak
- Savings are extremely low (little or no rainy day funds or retirement funds)
- Fiscal deficit is extremely high and climbing

Given the bubble in the debt market (leveraged loans, BBB bonds), the next recession is likely to be corporate-led, which hasn't happened since 1989-90. The Financial Crisis was led by housing and financial sector; even then corporate defaults peaked at 14% and unemployment was about 10%. This next recession could be much worse, plus longer and deeper.

There are concerns on what can lead the US out of the next recession - given the limited ability to provide fiscal and monetary stimulus. If China were also to go into recession, the world's two largest economies would bring the global economy down. Deflation could be a serious issue.

GDP growth (in real terms) is expected to decline over the next couple of years until about 1.8% in 2021 and is their expected long term average. This is caused for one simple reason - labor productivity which will decline simply because the large amount of boomers retiring and leaving the labor force. The low retirement savings and many will only have Social Security as their sole retirement income, there will be a substantial drag on the economy.

GDP is also constrained as Millenials and Gen Z have student debt and are forming families and buying houses much later in life. And those without college degrees will be stuck in low-paying, low skill jobs.

As a strategist for institutional asset management, we are de-risking our portfolios. Since most of my friends and family are near retirement and focusing on capital preservation, I advise them to move out of equities and into short-term bonds (while interest rates are rising). Winter is coming...

[seanile]

^thanks for your valuable perspective.
i'm still young, 28, so i'm keeping my various index funds and ETFs in-place for the most part, but am moving toward a 10% cash and 10% bond mix with the idea that i will use that to doubledown on my already automated contributions as things get bad next time around, or use them as an auxiliary emergency fund.

[chunkylover53]

Nice, understandable overview. I'm just about 50, have a decent enough retirement plan that I think I will be able to retire at about 65 in some comfort (I'm in Canada). But the long term picture (esp. with debt) is worrisome; I have real concerns that my retirement years are going to be put under tremendous stress with the increasing costs of government, combined with less and less revenue.

Originally Posted by veloduffer

One needs to assess their financial situation in context of their life cycle - in retirement, near retirement, etc.

Recent market volatility is a good reminder that equities are the most volatile investments - the S&P 500 lost 39% in 2008. Many folks never recovered from that and had much less in savings.

Valuations, markets and business models change, so stocks don't always bounce back. With every industry currently undergoing disruption, it's not as easy to just buy & hold -- today's blue chip may be tomorrow's goner.

Markets and economy are currently in classic late cycle conditions.
- Fed tightening
- Debt leverage (corporate, govt, consumer) are at record highs; easy credit and lots of LBO activity; valuations very high (debt/EBITDA multiples, P/E)
- Earnings near or past peak
- Savings are extremely low (little or no rainy day funds or retirement funds)
- Fiscal deficit is extremely high and climbing

Given the bubble in the debt market (leveraged loans, BBB bonds), the next recession is likely to be corporate-led, which hasn't happened since 1989-90. The Financial Crisis was led by housing and financial sector; even then corporate defaults peaked at 14% and unemployment was about 10%. This next recession could be much worse, plus longer and deeper.

There are concerns on what can lead the US out of the next recession - given the limited ability to provide fiscal and monetary stimulus. If China were also to go into recession, the world's two largest economies would bring the global economy down. Deflation could be a serious issue.

GDP growth (in real terms) is expected to decline over the next couple of years until about 1.8% in 2021 and is their expected long term average. This is caused for one simple reason - labor productivity which will decline simply because the large amount of boomers retiring and leaving the labor force. The low retirement savings and many will only have Social Security as their sole retirement income, there will be a substantial drag on the economy.

GDP is also constrained as Millenials and Gen Z have student debt and are forming families and buying houses much later in life. And those without college degrees will be stuck in low-paying, low skill jobs.

As a strategist for institutional asset management, we are de-risking our portfolios. Since most of my friends and family are near retirement and focusing on capital preservation, I advise them to move out of equities and into short-term bonds (while interest rates are rising). Winter is coming...