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

[fa63]

If anyone needed proof that the stock market is not the economy, well here it is :-)

[Tony T]

Originally Posted by fa63

If anyone needed proof that the stock market is not the economy, well here it is :-)

With the market dropping over 10% on the possibility of 0% US growth and a recession, I would say the market is the economy.

[fa63]

Exactly. The market is speculation on what the economy MIGHT do, not what it actually is doing. By all conventional indicators, the US economy is doing just fine. As has been mentioned before, I think the investors found the excuse they were looking for to do some profit-taking...

[tomato coupe]

Originally Posted by fa63

Exactly. The market is speculation on what the economy MIGHT do, not what it actually is doing. By all conventional indicators, the US economy is doing just fine. As has been mentioned before, I think the investors found the excuse they were looking for to do some profit-taking...

What's happening this week is not profit-taking.

[Elefantino]

Do we need to rename this thread?

[echappist]

Originally Posted by Tony T

With the market dropping over 10% on the possibility of 0% US growth and a recession, I would say the market is the economy.

It really isn't, and your posts re: what the Fed should do and the post above shows that you are way too focused on the stock market (in particular, the DJIX, which isn't even representative of expected future earnings of large caps, much less that of publicly listed companies as a whole, and the economy at large)

In the past five years, there were at least two occasions on which the S&P 500 (much more representative of large caps) dropped more than 10%, yet there was no onset of a concomitant recession. That alone should show you how valid your sentiment is

[verticaldoug]

Originally Posted by fa63

Exactly. The market is speculation on what the economy MIGHT do, not what it actually is doing. By all conventional indicators, the US economy is doing just fine. As has been mentioned before, I think the investors found the excuse they were looking for to do some profit-taking...

It's not an excuse, its a change in expectations. The Q4 of last year, the market rallied on expectations the economy will remain sounds and earnings will grow this year. There was no earnings growth last year, so the entire rally was just P/E expansion. Now, the market thinks the earnings will not grow this year with companies like Apple, MSFT , Airlines, reducing or eliminating forecasts. So the market just corrected to levels of last October before the expansion began.

Very rational if you ask me. The rational question now is how long will the virus linger.

[sitzmark]

Originally Posted by fa63

Exactly. The market is speculation on what the economy MIGHT do, not what it actually is doing. By all conventional indicators, the US economy is doing just fine. As has been mentioned before, I think the investors found the excuse they were looking for to do some profit-taking...

Except one ... debt. The economy is as tenuous as the market because both have been driven in (large) part by stimulated access to capital. The market (S&P) is running at ~18x growth adjusted earnings and 23x current. A cumulative reflection of the stocks underpinning the index. Individual stocks are trading at 30-40x earnings - trading being the key word. As an investor you're paying for performance 20-30 years out. If the stocks/market was fairly valued, the potential for an 18mo "disruption caused by virus" might be expected to have less than 10% impact on long term expectations.

Debt is growing in almost all areas of the economy - some key. Not as key and systemic as 2007, yet. For the US ... $23 trillion and 100%+ of GDP (20019) and growing. Not sustainable. Just a matter of time before the economy's correction occurs as well. And then we have real problems.

[oldpotatoe]

Originally Posted by Jeff N.

Prediction: One month from today it'll all come back...with a vengeance. Next year a vaccine will be readily available and that'll be that.

First, the 'experts', even those that trump disagrees with, say after NEXT Christmas at the soonest for a vaccine. 'Maybe' early 2021.

Uncertainty is powerful. It's interesting that the 'thing' that is going to be around with a vengeance, is the election cycle..What the various 'politicians' do and say(how many people follow whom on twitter?) NOW will either help them or hurt them in a mere 8 months or so. This 'issue isn't going to go away in the next couple of weeks..gonna get bumpy. Appointing a bunch of politicians with no medical training, who are afraid to say anything that might be 'controversial', or they'll be fired, to a 'commission' means exactly zero..

Spoke with our FA yesterday and he said our decision to go ultra conservative/liquid last year is paying off

We did the same thing last stock market 'shake-up'...

If the virus spreads in the United States, the Federal Reserve might have to cut rates

This makes no sense..what it produces, IMHO, will be rising inflation. A Long term, political, election year 'solution' for a short term 'problem'...I'm sure Powell's phone is ringing off the hook.."Save me, save me"...

[Elefantino]

It's going to be a fun Friday. Spoke with our FA yesterday and he said our decision to go ultra conservative/liquid last year is paying off. We missed out on a lot of the up but we're weathering the down.

[Tony T]

Originally Posted by FlashUNC

What would a cut do? And what's left to cut when the rate is set where it is now?

This is the danger of a Fed using all it's dry powder to keep an economy ticking along at 2 percent growth, when the real crisis starts, there's no lever left to pull that'll kickstart the economy.

https://www.nytimes.com/2020/02/27/b...p-economy.html

If the virus spreads in the United States, the Federal Reserve might have to cut rates. But how fiscal policymakers respond is likely to be even more important

[mjb266]

Tides going out...

[MattTuck]

Originally Posted by mjb266

Tides going out...

Condolences to the folks who bought the dip.

[Tony T]

Originally Posted by rallizes

it's got a ways to go still

Down another 1K (4,000 DOW points down in one week)

[fa63]

Originally Posted by MattTuck

Condolences to the folks who bought the dip.

Been buying a little bit at a time since the second day of the current downfall. Will put in an order for a little more today. Not retiring anytime soon though, so time is on our side.