Largest one day drop in U.S. stock market - in history

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Largest one day drop in U.S. stock market - in history

Post by DNS » Mon Feb 05, 2018 9:17 pm

The U.S. DJIA dropped 1,175 points today after dropping 665 last Friday. It is the largest single day drop in U.S. history, however, in terms of percentage drop, it was -4.6% which is still very far from the -22.6% on 10-19-1987.

The pundits say it is because the jobs market is looking good, the economy is doing well, so the stock investors fear interest rates will be going up several times this year. That just makes me glad not to be part of that group, that wishes ill for the common workers, so that the Fed will keep interest rates low. Of course, I am sure there are some investors who don't think like that, but that was the general consensus among the pundits.

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Re: Largest one day drop in U.S. stock market - in history

Post by paul » Mon Feb 05, 2018 9:29 pm

There is going to be more volatility (in the US stock market) in the year of the Dog, for that animal is often involved in fighting:
http://www.bbc.com/news/business-42942921
Last edited by paul on Mon Feb 05, 2018 10:33 pm, edited 1 time in total.

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Re: Largest one day drop in U.S. stock market - in history

Post by retrofuturist » Mon Feb 05, 2018 10:03 pm

Image
"Do not force others, including children, by any means whatsoever, to adopt your views, whether by authority, threat, money, propaganda, or even education." - Ven. Thich Nhat Hanh

"The uprooting of identity is seen by the noble ones as pleasurable; but this contradicts what the whole world sees." (Snp 3.12)

"One discerns wrong view as wrong view, and right view as right view. This is one's right view." (MN 117)

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Re: Largest one day drop in U.S. stock market - in history

Post by retrofuturist » Mon Feb 05, 2018 10:17 pm

Greetings DNS,
DNS wrote:
Mon Feb 05, 2018 9:17 pm
The pundits say it is because the jobs market is looking good, the economy is doing well, so the stock investors fear interest rates will be going up several times this year.
Other than the fact Trump never went ahead with his proposed tariffs, a certain pundit called this scenario on December 21, 2016, and more recently, precisely one year later on December 21st 2017.

If the pundit in question can foresee this scenario as far back as 2016, I personally think it's unlikely that the investment community have just suddenly awoken to this reality, one day in February 2018. But hey, you never know...

:popcorn:

Metta,
Paul. :)
"Do not force others, including children, by any means whatsoever, to adopt your views, whether by authority, threat, money, propaganda, or even education." - Ven. Thich Nhat Hanh

"The uprooting of identity is seen by the noble ones as pleasurable; but this contradicts what the whole world sees." (Snp 3.12)

"One discerns wrong view as wrong view, and right view as right view. This is one's right view." (MN 117)

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Re: Largest one day drop in U.S. stock market - in history

Post by dharmacorps » Mon Feb 05, 2018 11:31 pm

If anyone is interested in reading about the stock market I recommend the book "A Random Walk Down Wall Street" by Burton Malkiel. He reviews academic scientific research done over the last several decades that shows that the stock market "experts" know nothing about what will happen with the stock market, and are also bad at understanding why things happen (meaning interpreting why the stock market is falling or rising). So, who knows if this is the beginning of a recession or a correction. Fact remains it is a big pullback, and usually when we have a recession or crash people largely don't expect it.

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Re: Largest one day drop in U.S. stock market - in history

Post by perkele » Mon Feb 05, 2018 11:36 pm

retrofuturist wrote:
Mon Feb 05, 2018 10:03 pm
Image
Rumors have it that George Soros is in the process of funding a revolution among the enslaved dwarves on the moon to overturn the reign of Mel Gibson.

http://rathergood.com/blode7/ (requires Adobe Flash to view)

Expect meat prices to skyrocket, and MeatCoin and other coming carno-currencies to overrule all existing financial systems soon.

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Re: Largest one day drop in U.S. stock market - in history

Post by No_Mind » Tue Feb 06, 2018 1:11 am

An 8% correction would be normal after such a steep run up. Long term bull market remains. With full employment and tax cuts the economy is now over incentivized.

In one year (20 Jan - 20 Jan) Dow rose from 19,700 to 26,000 or 31.5% .. so 8% - 10% correction of 2100 - 2500 points is entirely healthy and within expectations.

This had been factored in by Oct at latest.

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Re: Largest one day drop in U.S. stock market - in history

Post by retrofuturist » Tue Feb 06, 2018 1:37 am

Greetings,
No_Mind wrote:
Tue Feb 06, 2018 1:11 am
With full employment and tax cuts the economy is now over incentivized.
Agreed, which is why I'm baffled that anyone anywhere is talking about a recession in the short-term...

Annualized US GDP is currently 3% + and rising.... certainly higher than at any point during the Obama administration. Given that a recession is <0% GDP for 2 consecutive quarters, talk of recession seems like senseless doom mongering. Upcoming interest rate rises will take the steam out of the economy... but unless they're mismanaged and rise too sharply, too quickly, there's no reason for "negative growth" to be considered in the short/medium term.

Metta,
Paul. :)
"Do not force others, including children, by any means whatsoever, to adopt your views, whether by authority, threat, money, propaganda, or even education." - Ven. Thich Nhat Hanh

"The uprooting of identity is seen by the noble ones as pleasurable; but this contradicts what the whole world sees." (Snp 3.12)

"One discerns wrong view as wrong view, and right view as right view. This is one's right view." (MN 117)

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Re: Largest one day drop in U.S. stock market - in history

Post by DooDoot » Tue Feb 06, 2018 3:06 am

This drop has been flagged for the last month, due to the rising bond yields. About a month ago, while I did not understand it, the short-term & long-term yields converged, which was said to be a deadly signal. It appears Trump tax cuts mean less tax revenue for the US govt to fund its 100% debt to GDP debt. How to attract funding apart from raising interest rates? This reduces company profits & plus higher bond yields makes stock dividends less attractive. Rising interest rates also increase the govt debt. DOW futures are currently 650 point down after being 250 points up. Low interest rates, seducing borrowing, is not the way to create real economy. Buddha said you can't live on debt.




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Re: Largest one day drop in U.S. stock market - in history

Post by No_Mind » Tue Feb 06, 2018 3:51 am

dharmacorps wrote:
Mon Feb 05, 2018 11:31 pm
If anyone is interested in reading about the stock market I recommend the book "A Random Walk Down Wall Street" by Burton Malkiel. He reviews academic scientific research done over the last several decades that shows that the stock market "experts" know nothing about what will happen with the stock market, and are also bad at understanding why things happen (meaning interpreting why the stock market is falling or rising). So, who knows if this is the beginning of a recession or a correction. Fact remains it is a big pullback, and usually when we have a recession or crash people largely don't expect it.
That is an overstatement .. best piece of advice I ever heard was by Dr Marc Faber

I paraphrase what he said in a tv show.
At any time there are 100 factors affecting the stock market. We might analyze and be correct about ninety-nine of them but the remaining one blindsides the market once a decade and there is no knowing which one of the hundred is more important than the other ninety-nine combined
Case in point is "The Big Short" and Dr Michael Burry who detected subprime crises way before others and shorted the market to personally make $100 million and his fund made 490% between 2000 - 08.

So indicators are always there .. just that no one has seen it.

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Re: Largest one day drop in U.S. stock market - in history

Post by DNS » Tue Feb 06, 2018 4:04 am

Trump has said he wanted higher interest rates and now it looks like that will finally be happening. Keeping interest rates too low is dangerous in the long term and was one of the biggest contributors to the past GFC. The rates were so low and real estate appreciation was so high, the banks swooped in and made many bad loans. And then the reality set in and millions were underwater on their mortgages. We don't want a repeat of that, so it might be a nice change to have some higher Fed interest rates.

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Re: Largest one day drop in U.S. stock market - in history

Post by DooDoot » Tue Feb 06, 2018 4:13 am

No_Mind wrote:
Tue Feb 06, 2018 3:51 am
Case in point is "The Big Short" and Dr Michael Burry who detected subprime crises way before others and shorted the market to personally make $100 million and his fund made 490% between 2000 - 08. So indicators are always there .. just that no one has seen it.
Dr Michael Burry saw the Economic Law of Cause & Effect. The few see the Economic Truth, similar to how the few Arahants easily see the Dhamma Truth. Its mere Science, once there is enough data.
DNS wrote:
Tue Feb 06, 2018 4:04 am
Trump has said he wanted higher interest rates...
How will the US govt service its $21 Trillion debt with higher interest rates?

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Re: Largest one day drop in U.S. stock market - in history

Post by DNS » Tue Feb 06, 2018 4:27 am

DooDoot wrote:
Tue Feb 06, 2018 4:13 am
How will the US govt service its $21 Trillion debt with higher interest rates?
In theory, the economy will continue to grow, there will be some inflation, people will make much more money, they will pay more taxes and then eventually $21 trillion in terms of buying power will not be as significant a number as it is today (results of inflation) and eventually the debt will be paid off.

That's the theory. The reality is that the debt will continue to rise, now especially with the tax cuts to large corporations and the deficit and debt will continue to climb, regardless of who is president.*

Unless the Americans elected a fiscally responsible president and Congress; in other words, that's not happening.

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Re: Largest one day drop in U.S. stock market - in history

Post by Pseudobabble » Tue Feb 06, 2018 6:20 am

DooDoot wrote:
Tue Feb 06, 2018 4:13 am
The few see the Economic Truth, similar to how the few Arahants easily see the Dhamma Truth. Its mere Science, once there is enough data.
No, it isn't science. There is no control experiment, so nobody really has any idea of which variable is causing which effect.

Or if you prefer it Popperian, there can be conjecture, but no refutation, and thus no actual gain in knowledge. Economics is art, very technical art, but certainly not science.
"Does Master Gotama have any position at all?"

"A 'position,' Vaccha, is something that a Tathagata has done away with. What a Tathagata sees is this: 'Such is form, such its origination, such its disappearance; such is feeling, such its origination, such its disappearance; such is perception...such are fabrications...such is consciousness, such its origination, such its disappearance.'" - Aggi-Vacchagotta Sutta


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Re: Largest one day drop in U.S. stock market - in history

Post by No_Mind » Tue Feb 06, 2018 6:29 am

DooDoot wrote:
Tue Feb 06, 2018 4:13 am
DNS wrote:
Tue Feb 06, 2018 4:04 am
Trump has said he wanted higher interest rates...
How will the US govt service its $21 Trillion debt with higher interest rates?

USA is not me, you or Greece. A growing US economy will be able to borrow more. We have been hearing about US debt being crippling for last decade and half at least but nothing has happened (2008 crisis was not due to US sovereign debt).

After its recovery post 2008 .. any lender will lend US money .. it has proved that it has an enormously resilient economy. To be honest I never thought US was going to pull through between mid 2008 - mid 2009 period. But it did. Hyperinflation did not follow the huge government borrowing and growth has been robust ..

Now of course .. tomorrow a virulent flu may strike India (like SARS epidemic but worse) .. due to jam packed transit system and hot humid weather spread rapidly through the country .. the back office to the world stops .. travel, hotel bookings across the world grinds to a halt .. software stacks that are maintained from Bangalore fail leading to catastrophic global banking system log jam and US along with the rest of the world is pushed back to 1950 while realignment of work happens over next two years ..

As I said 1 sub-optimal analysis out of 100 factors may have more power than other 99 combined.

But are you really going to stop lending to USA because flu may break out in India? I guess not.

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