Stock market enters the correction territory | Hacker News Reader

Stock market enters the correction territory

bloomberg.com

49 pointsmudil37 comments

Totally unrelated to the topic, but it is weird how news agencies have basically abandoned the idea of a finished and published article in favor of having an ever evolving page with whatever is the latest on the subject. For example, this page was first published on Wednesday and yet the lede says "The dread that gripped equity markets earlier in the week re-emerged Thursday..." I can't decide if this is a good or bad thing. There are certainly pluses and minuses.

There has always been demand for dailys, weeklies and quarterlies, and perhaps we’re seeing “hourlies” enter the realm of feasibility.

CNBC.com did such a switch for their Monday article predicting a 1000-point drop on Tuesday. They actually changed the title and contents to match Tuesday's actual result.

This is likely a healthy correction. Equities have clearly been overvalued, and this may be a helpful correction during an otherwise healthy time in the economy in terms of unemployment, wages, etc.

Better than an over-inflated equity market in addition to major overvaluations in other areas of the market.

I only started investing at the end of last year too. Oh well, time in market and all that.

If you need something to convince you of the value of just betting on the long term trend and not caring about market timing:

http://awealthofcommonsense.com/2014/02/worlds-worst-market-...

Completely agree with that. Anyone who invests into equities (stocks) and hopes to make money in less than a few years either has to be really lucky or have some insider information.

My brain knows this. I am unlikely to panic sell.

Still - everyday I check how much my investments have made. I'm not used to having enough money to invest, and it goes against my instincts a little bit.

It just takes some getting used to.

That's why I like this article. It helps train the non-rational part of the brain to relax and not panic sell even after the rational part is well settled on an investment process.

You should be very happy that the majority of your contributions (assuming you're planning to contribute on an ongoing basis) are going to be made on a discount.

Do you think we will see a bottom tomorrow? Or could this be the beginning of a bear market?

Since there is no natural business cycle, no one knows what will happen. And If someone says he knows, it is because he sets the interests rates.

Why do you say there is no natural business cycle?

Because arrogant people think they can steer entire global economy with a single parameter - money supply.

> Because arrogant people think they can steer entire global economy with a single parameter - money supply.

Which arrogant people? Usually, central bankers I've heard seem to think that monetary policy is useful for smoothing around the edges, but more than that requires fiscal policy, and that monetary policy can't make up for next neglect of fiscal policy (or unwarranted active fiscal interventions.)

Fiscal policy depends mostly on monetary policy I think. The amount of money government can borrow is bound by central banks. But, central bankers don't respond to voters, so basically they can do whatever servers the financial system and it stability.

Of course I am joking, they simply have no idea what they are doing, since it is virtually impossible. I grew up in post communism country and I have cold sweat when I hear about price control. And somehow price of the money is centrally managed.

> Fiscal policy depends mostly on monetary policy I think. The amount of money government can borrow is bound by central banks.

I'm not sure that either of those statements is true. It could be, in some situations in some countries. As a general statement? No, because most government borrowing is not borrowing from the central bank.

> And somehow price of the money is centrally managed.

Empirically, that has worked out rather well - far better than "centrally managed" would lead you to expect. In particular, it has dramatically cut the number of severe downturns (which used to occur whenever the price of money became too high).

> No, because most government borrowing is not borrowing from the central bank.

To be precise, it almost always against the constitution. The problem is, the amount of money the government can borrow is tied to the money supply. If FED raised rates a couple percent, US would bankrupt in a few days after.

> Empirically, that has worked out rather well .

That's arguable, since we don't know what would happen if we didn't intervene with artificial interest rates.

I'm reading your comment to mean that you think federal debt is unconstitutional.

Is that your position?

If so, do you have any support for that position?

https://www.investopedia.com/articles/bonds/09/bond-market-i...

Sorry to leave you with a link, bed time ;)

> If FED raised rates a couple percent, US would bankrupt in a few days after.

Setting aside the fact that the fed funds rate can only wag the short end of the yield curve, I'd like to point something out.

If the coupon on ALL issued Treasury debt suddenly went to 10% overnight, then yes, we would be looking at possible solvency issues.

But that's not how it works. The coupon the US pays to creditors is fixed until the maturity date of the bond. The average maturity on issued bonds and bills is 69 months. Meaning that open market yields would need to remain at (2*(10-current average yield))% for nearly six years in order to get to that point.

That's true. But Treasury issues bonds quite often, partially to cover interest on existing bonds. So, the day rates raise to high, treasury is insolvent.

> Fiscal policy depends mostly on monetary policy I think.

Monetary policy might arguably set (and certainly effects) the outer bounds of fiscal policy, but it doesn't control fiscal policy.

In addition to what dragonwriter said: Even if arrogant people think that, in what way does that mean that there is no natural business cycle?

I could try answering to that in detail, but others (smarter than me) did that already.

https://link.springer.com/article/10.1007/BF00843932

As much as I could read of that without a login sure didn't say that there was no business cycle. And, for that matter, observation of the last century or two certainly leads on to think that there is a business cycle.

Maybe, instead of a login-required paper, you could just state a position, and state what evidence you think makes that position reasonable?

I don't deny, there is no business cycle. My point is, that a handful of people decide when the cycle should have it peeks and bottoms. To me it is like: "We don't like winter, so let's warm up the entire planet. And if there is a problem we can always cool it down a bit".

There are 7 billions participants in the global economy and somehow FED pretends it has this magic ball that predicts what will happen in upcoming months. And even if it had, they have no proper tools to react on it properly.

So there's a business cycle, but it's not "natural". Or at least the one we have now is not natural. I can agree with that, actually. The difference is, I think that what we have now is an improvement on the natural business cycle. That thing was vicious.

Buying at a Shiller P/E of 31.2 after nine years of risk asset appreciation in an environment of rising yields requires the firm conviction that the business cycle has suddenly been abolished.

No, it requires belief that 3% real return implied by Shiller PE of 31 is going to be hard to beat by investing in any other asset class.

It may bounce tomorrow, but over the next few 12 month, it will be a rough grind down to 18,000.

Good lord, what is it with HN downvoting. It's my opinion. I'm putting money where my mouth is based on my equity:cash position.

https://finance.yahoo.com/quote/%5EDJI?p=%5EDJI

It's easy to fall into the trap of short-term view. Go to the above chart and click 1 day, 5 day, month, YTD, 1 year, 5 year, Max in sequence.

Lesson learned for me is, don't bet against the market, but when cycle turns, it can take months or years to play out.

Why 18,000? Why 12 months?

The double bounce that the stock market has just done, a high run up, then a dip, then a bounce up, then it goes down, is classic and it signals a bigger drop. I'm not a pro, that's what my guy at Morgan Stanley says. So I think pcurve may be right.

I'm about 75% in cash right now.

Click on the 6 month view to see the double bounce.

WTF HN? A downvote for passing on information?

http://www.mcvoy.com/lm/boom-bust.jpg

Not sure we are there yet, nobody knows for sure because if they knew they'd own the market.

But that was what I was talking about.

> Both are headed toward their average price for the past 200 days, a level that technical analysts say may act as a magnet and a floor.

Technical analysts are the financial equivalent of diviners, and it amazes me that anyone takes them seriously.

Because so many people do use them, I think they sometimes look like they work because of a self fulfilling prophecy.

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