Global finance markets declining
- Thread starter Roosh
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RE: Global finance markets declining (August 2015)
To use some of your phrasing, a private/equity bubble has/will turn into a public/debt bubble precisely because central bankers believe they are bigger than market forces. In bailing out the former, they've created the latter. They've explicitly taken the position that falling asset prices are bad and therefore must never be allowed to happen, and by doing so they are positioned in perpetual opposition to market forces.
These forces will keep trying to correct as per the post Fast Eddie made on the last page, and the CBs will continue to fight that. They only have one real tool, increasing the money supply and more debt. As they have declared market forces their enemy, they will have to perpetually increase the money supply and debt.
The dollar doom case is merely an acknowledgement that 1. The chosen central bank strategy ultimately leads to infinite money printing and 2. You cannot print money in infinite quantities without destroying the currency. It is the ultimate endgame, the granular path we take along the way is open to debate. The USD has already rallied heavily over the last few years, mostly for the reason you state. It could keep going, but the US having comparative success engaging in destructive actions isn't anything to be cheerful about.
It's like trying to long jump across the Grand Canyon. The US might be Lebron James compared to the inferior athlete that is rest of the world, and thus will make it a bit further. However, even Lebron James is subject to the laws of gravity, and it will act accordingly. With respect to the markets, the only thing that will prevent that dollar end game is the central bankers fundamentally changing their stance of 'our job is to prevent asset prices from falling.'
Peregrine said:
To use some of your phrasing, a private/equity bubble has/will turn into a public/debt bubble precisely because central bankers believe they are bigger than market forces. In bailing out the former, they've created the latter. They've explicitly taken the position that falling asset prices are bad and therefore must never be allowed to happen, and by doing so they are positioned in perpetual opposition to market forces.
These forces will keep trying to correct as per the post Fast Eddie made on the last page, and the CBs will continue to fight that. They only have one real tool, increasing the money supply and more debt. As they have declared market forces their enemy, they will have to perpetually increase the money supply and debt.
The dollar doom case is merely an acknowledgement that 1. The chosen central bank strategy ultimately leads to infinite money printing and 2. You cannot print money in infinite quantities without destroying the currency. It is the ultimate endgame, the granular path we take along the way is open to debate. The USD has already rallied heavily over the last few years, mostly for the reason you state. It could keep going, but the US having comparative success engaging in destructive actions isn't anything to be cheerful about.
It's like trying to long jump across the Grand Canyon. The US might be Lebron James compared to the inferior athlete that is rest of the world, and thus will make it a bit further. However, even Lebron James is subject to the laws of gravity, and it will act accordingly. With respect to the markets, the only thing that will prevent that dollar end game is the central bankers fundamentally changing their stance of 'our job is to prevent asset prices from falling.'
RE: Global finance markets declining (August 2015)
^ In your late 20s, if history is any guide ( and history always has repeated itself in the stock market) You'll be just fine staying invested. In fact, you'll be better off.
I assume you're dollar cost averaging? That is, investing a bit of every paycheck into your 401k. If you are, you'll be buying mutual fund shares at lower, possibly much lower prices, during a correction and/or bear market.
Your goal, at this point in your life, is to accumulate as many shares as possible of quality mutual funds.
accumulate, accumulate, accumulate.
It isn't so much to make positive returns every year, though that would be nice. When you're young, acquire as many shares as possible so when the market inevitably turns back up, you'll be leveraged to grow your wealth.
As far as mutual funds go, I have a motto which has served me well;
"short term unknowable, long term inevitable" Meaning, in the short term, you may be down big or up big, but in the long term, you should be up HUGE.
In 30 years, you won't even be 60 yet, yet if you continue to buy funds, you'll own a lot of mutual fund shares at higher prices than today. And, as mentioned before if history is any guide, significantly higher prices.
If you like , maybe you could go from aggressive growth funds (if that's what you're in) into more moderate 'balanced' funds ( blend of stocks and bonds), but the bottom line is continue to accumulate.
I wouldn't try to time the market with your 401k mutual fund money by jumping to cash and back in....you'll get locked out of the next great advance in prices. Look at fully funding/maxing out ( or nearly maxing out ) your 401k and investing in stock growth funds as long term insurance that will all but guarantee you have a good nest egg and potentially a lot of wealth at retirement age.
Get that insurance out of the way before investing in other more speculative things.
Any extra money you have to speculate on individual stocks, stock tips, real estate, etc.....go for it. But get the 'sure thing' out of the way which is long term, consistent investing in mutual funds. By long term, I mean 20 + years. No one who has ever consistently invested in growth stock funds or the general market indices (index funds) and added every month, through up and down markets and stuck to the plan come hell or high water and done it 20 years or longer, regretted doing it.
Throughout the history of the US stock market and as long as mutual funds have been around since the 1930s, this has been a solid, reliable way to build long term wealth.
Now, for a person speculating in individual stocks and not mutual funds, it's a different story and I would stand clear until the dust settles here. But assuming your 401k is your long term nest egg "serious" retirement money, you can hold and ride out this time and any other correction/bear market probably until your mid 40s or so until you start to make your investments a bit more conservative, perhaps going from 100% stock funds to funds that own a blend of stocks, bonds and cash.
Don't worry about the volatility now. In fact, for the young, long term investor who is putting money in mutual funds and who is systematically buying every month, volatility is your friend.
Why? Because you're putting the same dollar amount in each month, but when prices fall, you're buying more shares with the same dollar units. Hence, you're accumulating more for future growth.
Just concern yourself with owning as much as possible for the long haul. Try to max out your 401k and/or IRAs and if possible, build up 3 - 6 months living expenses in a savings or cash account. Some 'fuck you' funds in case you need to look for another job, need some time off, need to buy some things, etc. Having this savings in cash won't earn much, but it will give you confidence and peace of mind. It will also allow you to buy things you need from time to time without having to disturb your 'serious' long term wealth plan.
kaotic said:
^ In your late 20s, if history is any guide ( and history always has repeated itself in the stock market) You'll be just fine staying invested. In fact, you'll be better off.
I assume you're dollar cost averaging? That is, investing a bit of every paycheck into your 401k. If you are, you'll be buying mutual fund shares at lower, possibly much lower prices, during a correction and/or bear market.
Your goal, at this point in your life, is to accumulate as many shares as possible of quality mutual funds.
accumulate, accumulate, accumulate.
It isn't so much to make positive returns every year, though that would be nice. When you're young, acquire as many shares as possible so when the market inevitably turns back up, you'll be leveraged to grow your wealth.
As far as mutual funds go, I have a motto which has served me well;
"short term unknowable, long term inevitable" Meaning, in the short term, you may be down big or up big, but in the long term, you should be up HUGE.
In 30 years, you won't even be 60 yet, yet if you continue to buy funds, you'll own a lot of mutual fund shares at higher prices than today. And, as mentioned before if history is any guide, significantly higher prices.
If you like , maybe you could go from aggressive growth funds (if that's what you're in) into more moderate 'balanced' funds ( blend of stocks and bonds), but the bottom line is continue to accumulate.
I wouldn't try to time the market with your 401k mutual fund money by jumping to cash and back in....you'll get locked out of the next great advance in prices. Look at fully funding/maxing out ( or nearly maxing out ) your 401k and investing in stock growth funds as long term insurance that will all but guarantee you have a good nest egg and potentially a lot of wealth at retirement age.
Get that insurance out of the way before investing in other more speculative things.
Any extra money you have to speculate on individual stocks, stock tips, real estate, etc.....go for it. But get the 'sure thing' out of the way which is long term, consistent investing in mutual funds. By long term, I mean 20 + years. No one who has ever consistently invested in growth stock funds or the general market indices (index funds) and added every month, through up and down markets and stuck to the plan come hell or high water and done it 20 years or longer, regretted doing it.
Throughout the history of the US stock market and as long as mutual funds have been around since the 1930s, this has been a solid, reliable way to build long term wealth.
Now, for a person speculating in individual stocks and not mutual funds, it's a different story and I would stand clear until the dust settles here. But assuming your 401k is your long term nest egg "serious" retirement money, you can hold and ride out this time and any other correction/bear market probably until your mid 40s or so until you start to make your investments a bit more conservative, perhaps going from 100% stock funds to funds that own a blend of stocks, bonds and cash.
Don't worry about the volatility now. In fact, for the young, long term investor who is putting money in mutual funds and who is systematically buying every month, volatility is your friend.
Why? Because you're putting the same dollar amount in each month, but when prices fall, you're buying more shares with the same dollar units. Hence, you're accumulating more for future growth.
Just concern yourself with owning as much as possible for the long haul. Try to max out your 401k and/or IRAs and if possible, build up 3 - 6 months living expenses in a savings or cash account. Some 'fuck you' funds in case you need to look for another job, need some time off, need to buy some things, etc. Having this savings in cash won't earn much, but it will give you confidence and peace of mind. It will also allow you to buy things you need from time to time without having to disturb your 'serious' long term wealth plan.
RE: Global finance markets declining (August 2015)
Agree, but they'll throw in the towel at some point. I do believe the Fed will be the first of the CBs to hike. Could even happen in Sept, market reactions be damned. I don't care if Dalio and El-Erian say otherwise.
And remember that CBs are not omnipotent. The Fed eased all the way through the 08 - 09 crash, and they tightened as the market rose leading up to the crash. Greenspan, Bernanke, and Yellen are not gods.
Dismal Operator said:
Agree, but they'll throw in the towel at some point. I do believe the Fed will be the first of the CBs to hike. Could even happen in Sept, market reactions be damned. I don't care if Dalio and El-Erian say otherwise.
And remember that CBs are not omnipotent. The Fed eased all the way through the 08 - 09 crash, and they tightened as the market rose leading up to the crash. Greenspan, Bernanke, and Yellen are not gods.
ElConquistador
Pigeon
RE: Global finance markets declining (August 2015)
The Federal Reserve is buying up U.S. Treasury Bonds, because no one else will. As Stefan Molyneux pointed out, "that's like paying people to date your cousin." With inflation and a practically 0% interest rate, companies are being paid to take out loans and there still has been no real growth. Look at a comparison between the major indices and the Federal Reserve QE1, QE2, QE3... The stock market is being injected every time it starts to fall, and that cannot be done much longer. The bubbles of 2001 and 2007 never actually popped, they were just blown even bigger. Soon, we won't be able to keep on blowing these bubbles and a "market correction" won't even begin to describe what will happen.
The economy is a paper airplane that has lost all forward momentum and is being held up by occasional blasts of hot air... and the hot air is running low.
In regards to Jim Cramer... As much as I dislike the Daily Show, Jon Stewart did a great job exposing Jim Cramer on his malicious financial advice in the video below.
Travesty said:
The Federal Reserve is buying up U.S. Treasury Bonds, because no one else will. As Stefan Molyneux pointed out, "that's like paying people to date your cousin." With inflation and a practically 0% interest rate, companies are being paid to take out loans and there still has been no real growth. Look at a comparison between the major indices and the Federal Reserve QE1, QE2, QE3... The stock market is being injected every time it starts to fall, and that cannot be done much longer. The bubbles of 2001 and 2007 never actually popped, they were just blown even bigger. Soon, we won't be able to keep on blowing these bubbles and a "market correction" won't even begin to describe what will happen.
The economy is a paper airplane that has lost all forward momentum and is being held up by occasional blasts of hot air... and the hot air is running low.
In regards to Jim Cramer... As much as I dislike the Daily Show, Jon Stewart did a great job exposing Jim Cramer on his malicious financial advice in the video below.
RE: Global finance markets declining (August 2015)
A lot of people are very quick to blame any sort of economic/ financial shit storm on the government intervening in the marketplace ,that is the so called ''left wing'' . This is simply foolish. Reagan's watering down of our anti trust laws have caused a huge portion of our nations woes. For us travelers it's why airlines in North America are shit compared to most of the world. I keep finding deals to travel from NY to London or other European cities that are cheaper for the same flights to Detroit or Chicago from NY. Smaller firms are more competitive and create a much more consumer friendly environment. It's important to remember our current world financial crises started in the US. The EU ,despite the same qe and bank bailout policies ,now seem much more willing to enforce better competitive behaviors which in return allows a somewhat more moral crowd to run the game. I know someone very well who is well known in the finance world ,he's told me that much of the ''moral hazard'' ,that is shitty people taking stupid risks are a result of watering down these policies. Also lots of people on the right look only to growth as a source of well paying jobs and prosperity,especially the Reagan/Tory apologist crowd . This is just illogical,resources are finite and interstellar travel is yet to exist. A world economy based on perpetual growth is one that will fail. In terms of investing buying selling ect, international real estate is a very good deal,maybe not exactly an ''investment'' but someone who wants a house in Bogota, better act sooner rather than later if prices go up.
A lot of people are very quick to blame any sort of economic/ financial shit storm on the government intervening in the marketplace ,that is the so called ''left wing'' . This is simply foolish. Reagan's watering down of our anti trust laws have caused a huge portion of our nations woes. For us travelers it's why airlines in North America are shit compared to most of the world. I keep finding deals to travel from NY to London or other European cities that are cheaper for the same flights to Detroit or Chicago from NY. Smaller firms are more competitive and create a much more consumer friendly environment. It's important to remember our current world financial crises started in the US. The EU ,despite the same qe and bank bailout policies ,now seem much more willing to enforce better competitive behaviors which in return allows a somewhat more moral crowd to run the game. I know someone very well who is well known in the finance world ,he's told me that much of the ''moral hazard'' ,that is shitty people taking stupid risks are a result of watering down these policies. Also lots of people on the right look only to growth as a source of well paying jobs and prosperity,especially the Reagan/Tory apologist crowd . This is just illogical,resources are finite and interstellar travel is yet to exist. A world economy based on perpetual growth is one that will fail. In terms of investing buying selling ect, international real estate is a very good deal,maybe not exactly an ''investment'' but someone who wants a house in Bogota, better act sooner rather than later if prices go up.
RE: Global finance markets declining (August 2015)
All I know is this: somewhere in the previous 48 hours or so, someone made a shitload of money out of all this.
All I know is this: somewhere in the previous 48 hours or so, someone made a shitload of money out of all this.
RE: Global finance markets declining (August 2015)
If you don't base your economy on growth, then what do you base it on? Population grows, if the economy does not grow with it, then everyone becomes poorer, except the very few on top.
Nowak said:
If you don't base your economy on growth, then what do you base it on? Population grows, if the economy does not grow with it, then everyone becomes poorer, except the very few on top.
RE: Global finance markets declining (August 2015)
This is quite a confused opinion. The conclusion is that if the economy is always based on growth, it will "fail"? That's like saying a car design based on speed will "fail".
Yes, it's now predominantly caused by Leftist government intervention, which is deep, almost comprehensive, and enormous. The corporate trusts of old have been replaced by modern day corporate-government crony partnerships, which are far worse. Corporate trusts were always unstable. If you attempt to construct a monopoly in a market, there are a variety of ways it can fail, including: your trust partners cheat (due to game theory and a profit motive to do so), non-trust competitors keep popping up and eating away at it, and people find ways around the trust such as substituting other products (rail trust means more people drive etc). Trusts are not sustainable long term. However, corporations protected by government laws and regulations, are indefeasible by anyone except the government.
Nowak said:
This is quite a confused opinion. The conclusion is that if the economy is always based on growth, it will "fail"? That's like saying a car design based on speed will "fail".
Yes, it's now predominantly caused by Leftist government intervention, which is deep, almost comprehensive, and enormous. The corporate trusts of old have been replaced by modern day corporate-government crony partnerships, which are far worse. Corporate trusts were always unstable. If you attempt to construct a monopoly in a market, there are a variety of ways it can fail, including: your trust partners cheat (due to game theory and a profit motive to do so), non-trust competitors keep popping up and eating away at it, and people find ways around the trust such as substituting other products (rail trust means more people drive etc). Trusts are not sustainable long term. However, corporations protected by government laws and regulations, are indefeasible by anyone except the government.
CJ_W
Pelican
RE: Global finance markets declining (August 2015)
I take your Aaron Clarey and Raise you a Max Keiser, I ve been listening to these guys for years way before they were on RT. They used to do really good podcasts years ago:
If I have time I may try to explain what they're talking about. might not happen though, been really busy.
I take your Aaron Clarey and Raise you a Max Keiser, I ve been listening to these guys for years way before they were on RT. They used to do really good podcasts years ago:
If I have time I may try to explain what they're talking about. might not happen though, been really busy.
RE: Global finance markets declining (August 2015)
I post this as an amateur investor (I have no formal training, education and this isn't a suggestion or advice etc etc) and I was contemplating whether it was irresponsible for me to do so, but it might give some people some ideas to research if they want to get into self investing.
With the disclaimers out of the way, I think the recent drops definitely offer opportunities to buy.
This is a price graph of Sun corp the Australian stock exchange. I created this graph on portfoliosharing.com, using the on balance volume, RSI and slow stochastic graphs. Relying on any one indicator is a bad idea, but if they all line up, then the suggestion is stronger.
I am using SUN as an example only and I do not own any shares in this.
I have recently been getting into technical analysis (used for short term trading) to decide when to buy into a stock which I intend to hold for long term (5 years +).
The green arrows represent when several of the indicators suggest a "buy" and the red arrows suggest when to "sell" (if you were indeed inclined to trade and get in and out of positions to preserve your capital).
The way the graph is going, it looks like the dip will be over soon (for the mean time only!)
As other posters have said, it is a fools game to try to time the market as even professionals don't get it right all the time. So rather than trying to time the market, it is time -in- the market that will help you.
But by timing your entry for a long term buy and hold, you can at least maximise the amount of profit somewhat and minimise the losses and reduce the chances you bought at the peak and sold at the low when it does come time to sell - in this example, on the order of about 10%
I'm still learning a bit about it and put my money where my mouth is. I bought one stock about two weeks ago and am down 17% because I didn't follow these 'rules' for fear of missing out. Another one I bought yesterday has been quite volatile but closed the same price I bought it at. But as this is an extraordinary event, if you have been watching a share to buy for long term, now would be an opportunity to buy at an artificially distressed price (assuming it is a good company etc etc). I have been following them for about 6 months and have been waiting for a good time to enter (after kicking myself for missing out in May this year).
I've recently discovered stock screeners (such as the one at google.com/finance) and depending on your criteria, in the past year, 5 and 10 years, MNF is the top performing stock. The PE ratio is a bit too high for what I'm used to (but maybe it is because there is a lot more steam left in it!)
If I've said anything wrong please correct me as I don't want to lead another member down the wrong path as well as correcting anything I don't understand properly.
I post this as an amateur investor (I have no formal training, education and this isn't a suggestion or advice etc etc) and I was contemplating whether it was irresponsible for me to do so, but it might give some people some ideas to research if they want to get into self investing.
With the disclaimers out of the way, I think the recent drops definitely offer opportunities to buy.
This is a price graph of Sun corp the Australian stock exchange. I created this graph on portfoliosharing.com, using the on balance volume, RSI and slow stochastic graphs. Relying on any one indicator is a bad idea, but if they all line up, then the suggestion is stronger.
I am using SUN as an example only and I do not own any shares in this.
I have recently been getting into technical analysis (used for short term trading) to decide when to buy into a stock which I intend to hold for long term (5 years +).
The green arrows represent when several of the indicators suggest a "buy" and the red arrows suggest when to "sell" (if you were indeed inclined to trade and get in and out of positions to preserve your capital).
The way the graph is going, it looks like the dip will be over soon (for the mean time only!)
As other posters have said, it is a fools game to try to time the market as even professionals don't get it right all the time. So rather than trying to time the market, it is time -in- the market that will help you.
But by timing your entry for a long term buy and hold, you can at least maximise the amount of profit somewhat and minimise the losses and reduce the chances you bought at the peak and sold at the low when it does come time to sell - in this example, on the order of about 10%
I'm still learning a bit about it and put my money where my mouth is. I bought one stock about two weeks ago and am down 17% because I didn't follow these 'rules' for fear of missing out. Another one I bought yesterday has been quite volatile but closed the same price I bought it at. But as this is an extraordinary event, if you have been watching a share to buy for long term, now would be an opportunity to buy at an artificially distressed price (assuming it is a good company etc etc). I have been following them for about 6 months and have been waiting for a good time to enter (after kicking myself for missing out in May this year).
Que enspastic said:
I've recently discovered stock screeners (such as the one at google.com/finance) and depending on your criteria, in the past year, 5 and 10 years, MNF is the top performing stock. The PE ratio is a bit too high for what I'm used to (but maybe it is because there is a lot more steam left in it!)
If I've said anything wrong please correct me as I don't want to lead another member down the wrong path as well as correcting anything I don't understand properly.
RE: Global finance markets declining (August 2015)
Trying to buy stocks now for trading purposes is going to get you creamed in this market.
Buying them for long term investing purposes could work out if you buy the right stock, but I think it's a terrible time to do so. I'd let this wash out and eventually new leadership will emerge.
You mention you're down 17% on a stock you own that you bought a week ago. That right there tells me you're making some mistakes, which if you don't stop doing, are going to cost you a lot of money.
1. Someone who is 'trading' stocks, should never let themselves get down 17%. When I buy an individual stock, I will set a stop loss anywhere from 3% to at most about 7%. I refuse to lose more than this on a stock. Despite some mantras out there, all individual stocks (individual names) don't always "come back". Many get creamed in a bear market and will languish in a sideways fashion near their lows for years and years. Dead money if you will.
2. I'm speaking from my own trading philosophy, but now, with this violent whipsaw activity is a bad time to be going long stocks. The market is in a downtrend it seems. Why not be patient and wait for stocks and the market to form uptrend? You don't always have to be "doing something". Sometimes, the best thing to do in your trading account is let it sit in cash.
3. The market was up 600 points today. If another big up day occurs soon, I'll wager you could just go short the indices ( with an ETF) or most any stock ( since 95% of stocks follow the direction of the market) because the market has a downward bias now.
Today was a dead cat bounce. I think we're going lower. By the way, what I just wrote isn't a recommendation to go short the market, I was just making a point that it's probably a better bet to now be short than be long.
I like to be surgical when buying a stock that I am hopeful will go up. You can only be surgical when a stock "breaks out" of a properly formed consolidation or base.
Such bases are not formed in these kind of volatile markets. They are formed after this volatility works itself out and the market, eventually, starts to move back up in a defined uptrend.
Recommended reading:
* How to Make Money in Stocks by O'Neill
* How to Trade like a Stock Market Wizard by Minervini ( dude won the US. Investment Championship)
* Reminiscences of a Stock Operator - Leferve
spi said:I post this as an amateur investor (I have no formal training, education and this isn't a suggestion or advice etc etc) and I was contemplating whether it was irresponsible for me to do so, but it might give some people some ideas to research if they want to get into self investing.
With the disclaimers out of the way, I think the recent drops definitely offer opportunities to buy.
This is a price graph of Sun corp the Australian stock exchange. I created this graph on portfoliosharing.com, using the on balance volume, RSI and slow stochastic graphs. Relying on any one indicator is a bad idea, but if they all line up, then the suggestion is stronger.
I am using SUN as an example only and I do not own any shares in this.
I have recently been getting into technical analysis (used for short term trading) to decide when to buy into a stock which I intend to hold for long term (5 years +).
The green arrows represent when several of the indicators suggest a "buy" and the red arrows suggest when to "sell" (if you were indeed inclined to trade and get in and out of positions to preserve your capital).
The way the graph is going, it looks like the dip will be over soon (for the mean time only!)
As other posters have said, it is a fools game to try to time the market as even professionals don't get it right all the time. So rather than trying to time the market, it is time -in- the market that will help you.
But by timing your entry for a long term buy and hold, you can at least maximise the amount of profit somewhat and minimise the losses and reduce the chances you bought at the peak and sold at the low when it does come time to sell - in this example, on the order of about 10%
I'm still learning a bit about it and put my money where my mouth is. I bought one stock about two weeks ago and am down 17% because I didn't follow these 'rules' for fear of missing out. Another one I bought yesterday has been quite volatile but closed the same price I bought it at. But as this is an extraordinary event, if you have been watching a share to buy for long term, now would be an opportunity to buy at an artificially distressed price (assuming it is a good company etc etc). I have been following them for about 6 months and have been waiting for a good time to enter (after kicking myself for missing out in May this year).
Que enspastic said:
I've recently discovered stock screeners (such as the one at google.com/finance) and depending on your criteria, in the past year, 5 and 10 years, MNF is the top performing stock. The PE ratio is a bit too high for what I'm used to (but maybe it is because there is a lot more steam left in it!)
If I've said anything wrong please correct me as I don't want to lead another member down the wrong path as well as correcting anything I don't understand properly.
Trying to buy stocks now for trading purposes is going to get you creamed in this market.
Buying them for long term investing purposes could work out if you buy the right stock, but I think it's a terrible time to do so. I'd let this wash out and eventually new leadership will emerge.
You mention you're down 17% on a stock you own that you bought a week ago. That right there tells me you're making some mistakes, which if you don't stop doing, are going to cost you a lot of money.
1. Someone who is 'trading' stocks, should never let themselves get down 17%. When I buy an individual stock, I will set a stop loss anywhere from 3% to at most about 7%. I refuse to lose more than this on a stock. Despite some mantras out there, all individual stocks (individual names) don't always "come back". Many get creamed in a bear market and will languish in a sideways fashion near their lows for years and years. Dead money if you will.
2. I'm speaking from my own trading philosophy, but now, with this violent whipsaw activity is a bad time to be going long stocks. The market is in a downtrend it seems. Why not be patient and wait for stocks and the market to form uptrend? You don't always have to be "doing something". Sometimes, the best thing to do in your trading account is let it sit in cash.
3. The market was up 600 points today. If another big up day occurs soon, I'll wager you could just go short the indices ( with an ETF) or most any stock ( since 95% of stocks follow the direction of the market) because the market has a downward bias now.
Today was a dead cat bounce. I think we're going lower. By the way, what I just wrote isn't a recommendation to go short the market, I was just making a point that it's probably a better bet to now be short than be long.
I like to be surgical when buying a stock that I am hopeful will go up. You can only be surgical when a stock "breaks out" of a properly formed consolidation or base.
Such bases are not formed in these kind of volatile markets. They are formed after this volatility works itself out and the market, eventually, starts to move back up in a defined uptrend.
Recommended reading:
* How to Make Money in Stocks by O'Neill
* How to Trade like a Stock Market Wizard by Minervini ( dude won the US. Investment Championship)
* Reminiscences of a Stock Operator - Leferve
Easy_C
Peacock
RE: Global finance markets declining (August 2015)
There's a reason he's one of the (very, very few) forecasters who I trust to provide accurate analysis. It may or may not involve him having been correct multiple times where I was wrong and lost money.
Peregrine said:
MrLemon said:
There's a reason he's one of the (very, very few) forecasters who I trust to provide accurate analysis. It may or may not involve him having been correct multiple times where I was wrong and lost money.
Easy_C
Peacock
RE: Global finance markets declining (August 2015)
Also watching China's central bank has been interesting. Unlike Western central banks which tend to be extremely reactive to market events, the Chinese have been extremely proactive. Notice the timing of when they devalued their currency and their nick to interest rates.
Peregrine said:
Also watching China's central bank has been interesting. Unlike Western central banks which tend to be extremely reactive to market events, the Chinese have been extremely proactive. Notice the timing of when they devalued their currency and their nick to interest rates.
RE: Global finance markets declining (August 2015)
Here's a very interesting article that was just posted to Zero Hedge about China's massive liquidation of United States Treasuries over the past two weeks (to the tune of $102 billion dollars, plus another $100 billion YTD.) It makes the argument that this dynamic is operating as a sort of reverse-QE:
Here's a very interesting article that was just posted to Zero Hedge about China's massive liquidation of United States Treasuries over the past two weeks (to the tune of $102 billion dollars, plus another $100 billion YTD.) It makes the argument that this dynamic is operating as a sort of reverse-QE:
The Reason China's Crash Will Unleash A Global Bond Shockwave
One narrative we’ve pushed quite hard this week is the idea that China’s persistent FX interventions in support of the yuan are costing the PBoC dearly in terms of reserves. Of course this week's posts hardly represent the first time we've touched on the issue. Here, for those curious, are links to previous discussions:
China Dumps Record $143 Billion In US Treasurys In Three Months Via Belgium
China's Record Dumping Of US Treasuries Leaves Goldman Speechless
How The Petrodollar Quietly Died And Nobody Noticed
Why It Really All Comes Down To The Death Of The Petrodollar
What China's Treasury Liquidation Means: $1 Trillion QE In Reverse
It's Official: China Confirms It Has Begun Liquidating Treasuries, Warns Washington
Devaluation Stunner: China Has Dumped $100 Billion In Treasurys In The Past Two Weeks
And so on and so forth.
In short, stabilizing the currency in the wake of the August 11 devaluation has precipitated the liquidation of more than $100 billion in USTs in the space of just two weeks, doubling the total sold during the first half of the year.
In the end, the estimated size of the RMB carry trade could mean that before it’s all over, China will liquidate as much as $1 trillion in US paper, which, as we noted on Thursday evening, would effectively negate 60% of QE3 and put somewhere in the neighborhood of 200bps worth of upward pressure on 10Y yields.
And don't forget, this is just China. Should EMs continue to face pressure on their currencies (and there's every reason to believe that they will), you could see substantial drawdowns there too. Meanwhile, all of this mirrors the petrodollar unwind. That is, it all comes back to the notion of recycling USDs into USD assets by the trillions and for decades. Now, between crude's slump, the commodities bust, and China's deval, it's all coming apart at the seams.
Needless to say, this "reverse QE" as we call it (or "quantitative tightening" as Deutsche Bank calls it) has serious implications for Fed policy, for the timing of the elusive "liftoff", and for the US economy more generally. Of course we began detailing the implications of China’s Treasury liquidation months ago and now, it’s become quite apparent that analyzing the consequences of China’s massive FX interventions is perhaps the most important consideration when attempting to determine the future course of global monetary policy.
On that note, we present the following from Deutsche Bank’s George Saravelos.
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Beware China’s Quantitative Tightening
Why have global markets reacted so violently to Chinese developments over the last two weeks? There is a strong case to be made that it is neither the sell-off in Chinese stocks nor weakness in the currency that matters the most. Instead, it is what is happening to China’s FX reserves and what this means for global liquidity. Starting in 2003, China engaged in an unprecedented reserve-accumulation exercise buying almost 4trio of foreign assets, or more than all of the Fed’s QE program’s combined (chart 1). The global impact was indeed equivalent to QE: the PBoC printed domestic money and used the liquidity to buy foreign bonds. Treasury yields stayed low, curves were flat, and people called it the “bond conundrum”.
Fast forward to today and the market is re-assessing the outlook for China’s “QE”. The sudden shift in currency policy has prompted a big shift in RMB expectations towards further weakness and correspondingly a huge rise in China capital outflows, estimated by some to be as much as 200bn USD this month alone. In response, the PBoC has been defending the renminbi, selling FX reserves and reducing its ownership of global fixed income assets. The PBoC’s actions are equivalent to an unwind of QE, or in other words Quantitative Tightening (QT).
What are the implications? For global risk assets, they are clearly negative –global liquidity is falling. For fixed income, the impact on nominal yields is ambivalent because private safe-haven demand for bonds may offset central bank selling. But real yields should move higher, inflation expectations lower, and there should be steepening pressure on curves. This is indeed how markets have responded over the last two weeks: as if the Fed has announced it is unwinding its balance sheet!
The potential for more China outflows is huge: set against 3.6trio of reserves (recorded as an “asset” in the international investment position data), China has around 2trillion of “non-sticky” liabilities including speculative carry trades, debt and equity inflows, deposits by and loans from foreigners that could be a source of outflows (chart 2). The bottom line is that markets may fear that QT has much more to go.
What could turn sentiment more positive? The first is other central banks coming in to fill the gap that the PBoC is leaving. China’s QT would need to be replaced by higher QE elsewhere, with the ECB and BoJ being the most notable candidates. The alternative would be for China’s capital outflows to stop or at least slow down. Perhaps a combination of aggressive PBoC easing and more confidence in the domestic economy would be sufficient, absent a sharp devaluation of the currency to a new stable. Either way, it is hard to become very optimistic on global risk appetite until a solution is found to China’s evolving QT.
* * *
RE: Global finance markets declining (August 2015)
Probably nothing, until the grocery store down the street can't meet its payroll or use credit to pay for incoming shipments. Shelves go bare.
Or your local doctor can't treat you with antibiotics because the shipment is stuck in a port because lazy customs workers are striking because the government started giving them IOUs or their pensions were revoked.
Greece is a perfect "lite" example of what to expect when the financial gears stop turning.
Dan Woolf said:
Probably nothing, until the grocery store down the street can't meet its payroll or use credit to pay for incoming shipments. Shelves go bare.
Or your local doctor can't treat you with antibiotics because the shipment is stuck in a port because lazy customs workers are striking because the government started giving them IOUs or their pensions were revoked.
Greece is a perfect "lite" example of what to expect when the financial gears stop turning.
RE: Global finance markets declining (August 2015)
Dan Woolf,
Question, do you own the place you live in or do you rent?
There are some real pros on the forum who work in finance and have a solid grasp of it, so I am curious to what they say.
However, should the world go to shit, you could see the purchasing power of the cash under your mattress go down and if you do not own, maybe your rents will go up (not sure if rent control applies to where you live). Or it could go down. I know, not a real good answer there.
I do not think you would not notice it.
Hopefully, you won't need a wheelbarrow of cash to buy a loaf of bread.
Dan Woolf,
Question, do you own the place you live in or do you rent?
There are some real pros on the forum who work in finance and have a solid grasp of it, so I am curious to what they say.
However, should the world go to shit, you could see the purchasing power of the cash under your mattress go down and if you do not own, maybe your rents will go up (not sure if rent control applies to where you live). Or it could go down. I know, not a real good answer there.
I do not think you would not notice it.
Hopefully, you won't need a wheelbarrow of cash to buy a loaf of bread.
RE: Global finance markets declining (August 2015)
Last week was great for anyone with cash. Unfortunately for me I had the misfortune of not having enough cash to buy as much as I wanted. I did buy a little bit though, just not as much as I wanted, and I'm up already. Sure, it all can come crashing down again tomorrow but a year, two years from now we'll be ok.
Last week was great for anyone with cash. Unfortunately for me I had the misfortune of not having enough cash to buy as much as I wanted. I did buy a little bit though, just not as much as I wanted, and I'm up already. Sure, it all can come crashing down again tomorrow but a year, two years from now we'll be ok.
- Status