U.S. stocks in free fall

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Victor Eremita
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Re: U.S. stocks in free fall

Post by Victor Eremita »

gas_balloon wrote: Tue Jan 18, 2022 12:49 pm I still feel fundamentally big-tech companies are doing well. PE ratios are not crazy high, they are sitting on a TON of cash, and have been consistently improving their margins.
Big tech are cash cows and have lower labor costs compared to other sectors. They should be able to weather the storm.

I think investors are overreacting about the Fed hiking rates from 0 to 1% which is still incredibly accommodative. Now all of a sudden investors care only about cash flow and not at all about long-term potential? :confused
Marseille07
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Re: U.S. stocks in free fall

Post by Marseille07 »

Victor Eremita wrote: Tue Jan 18, 2022 1:17 pm I think investors are overreacting about the Fed hiking rates from 0 to 1% which is still incredibly accommodative. Now all of a sudden investors care only about cash flow and not at all about long-term potential? :confused
Are they even overreacting? The S&P not even -5% from ATH...
atdharris
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Re: U.S. stocks in free fall

Post by atdharris »

Marseille07 wrote: Tue Jan 18, 2022 1:20 pm
Victor Eremita wrote: Tue Jan 18, 2022 1:17 pm I think investors are overreacting about the Fed hiking rates from 0 to 1% which is still incredibly accommodative. Now all of a sudden investors care only about cash flow and not at all about long-term potential? :confused
Are they even overreacting? The S&P not even -5% from ATH...
Only time will tell, but the Nasdaq is off ~7% YTD and we're only 18 days into the year (and less than that in trading days). I don't necessarily understand the selling of big tech considering most are in fine position to weather any rate hikes, but the market will sort itself out eventually.
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JoinTheLocalizer
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Re: U.S. stocks in free fall

Post by JoinTheLocalizer »

Victor Eremita wrote: Tue Jan 18, 2022 1:17 pm
gas_balloon wrote: Tue Jan 18, 2022 12:49 pm I still feel fundamentally big-tech companies are doing well. PE ratios are not crazy high, they are sitting on a TON of cash, and have been consistently improving their margins.
Big tech are cash cows and have lower labor costs compared to other sectors. They should be able to weather the storm.

I think investors are overreacting about the Fed hiking rates from 0 to 1% which is still incredibly accommodative. Now all of a sudden investors care only about cash flow and not at all about long-term potential? :confused
As margin costs increase, margin calls are made on retail investors, massively leveraged calls expire worthless, and the network effect ie social media works in the opposite way (FUD), couldn't this produce a domino effect on selling? Leverage works both ways.
Last edited by JoinTheLocalizer on Tue Jan 18, 2022 1:25 pm, edited 1 time in total.
Apathizer
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Re: U.S. stocks in free fall

Post by Apathizer »

JoinTheLocalizer wrote: Tue Jan 18, 2022 1:10 pmBurry gets a lot of hate over his bet against housing. I get it. It could be seen as a schadenfreude play, and he profited massively off the backs of fiscally insolvent Americans.

Most important to consider: When Burry achieved his $100M in personal winnings, he did so during a highly deflationary environment. That created a multiplier effect for when he wanted to buy depressed stocks and real assets, as Americans were simultaneously losing their homes/cars/boats/planes and liquidating whatever stocks they could out of panic or just to make ends meet.
alfaspider wrote: Tue Jan 18, 2022 1:17 pmI'm not hating on Burry for betting against housing. I'm just saying that even if, like Burry, you correctly predict that a segment is over/undervalued, your gamble may not pay off unless the timing is dead-on correct as well.
Exactly. Burry had no part in creating the situation he eventually reaped massive profits from, so I can't blame him at all. Most people don't seem to like to admit this, but much of success is luck, and Burry was also at least somewhat lucky. As your said, had his timing been a little different it wouldn't have worked out nearly so well for him. We tend to remember the few successful people while forgetting the multitude of unsuccessful people.

Reality is complex and unpredictable, and financial markets react quickly to new information; that's why diversification makes sense.
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Marseille07
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Re: U.S. stocks in free fall

Post by Marseille07 »

atdharris wrote: Tue Jan 18, 2022 1:23 pm Only time will tell, but the Nasdaq is off ~7% YTD and we're only 18 days into the year (and less than that in trading days). I don't necessarily understand the selling of big tech considering most are in fine position to weather any rate hikes, but the market will sort itself out eventually.
Yeah, NASDAQ is hit somewhat hard here.

There's this strange notion that 10Y rising = selling tech. I don't quite agree with this move but that's what the investors seem to be doing.
gougou
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Re: U.S. stocks in free fall

Post by gougou »

Marseille07 wrote: Tue Jan 18, 2022 1:28 pm
atdharris wrote: Tue Jan 18, 2022 1:23 pm Only time will tell, but the Nasdaq is off ~7% YTD and we're only 18 days into the year (and less than that in trading days). I don't necessarily understand the selling of big tech considering most are in fine position to weather any rate hikes, but the market will sort itself out eventually.
Yeah, NASDAQ is hit somewhat hard here.

There's this strange notion that 10Y rising = selling tech. I don't quite agree with this move but that's what the investors seem to be doing.
Increase in interest rate means money today is worth about the same but money 10 years into the future is worth a lot less. This hits growth companies much harder than value companies who have current cashflow.

Increase in rates and taper also makes money scarce so there’s less speculation.
Last edited by gougou on Tue Jan 18, 2022 1:32 pm, edited 1 time in total.
The sillier the market’s behavior, the greater the opportunity for the business like investor.
Victor Eremita
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Re: U.S. stocks in free fall

Post by Victor Eremita »

Marseille07 wrote: Tue Jan 18, 2022 1:20 pm
Victor Eremita wrote: Tue Jan 18, 2022 1:17 pm I think investors are overreacting about the Fed hiking rates from 0 to 1% which is still incredibly accommodative. Now all of a sudden investors care only about cash flow and not at all about long-term potential? :confused
Are they even overreacting? The S&P not even -5% from ATH...
I was thinking more about the Nasdaq which has been flat for the past several months. Small "disruptive" tech firms have taken a pretty huge beating especially. I imagine there will be some M&A action in this space this year.
Marseille07
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Re: U.S. stocks in free fall

Post by Marseille07 »

gougou wrote: Tue Jan 18, 2022 1:31 pm
Marseille07 wrote: Tue Jan 18, 2022 1:28 pm
atdharris wrote: Tue Jan 18, 2022 1:23 pm Only time will tell, but the Nasdaq is off ~7% YTD and we're only 18 days into the year (and less than that in trading days). I don't necessarily understand the selling of big tech considering most are in fine position to weather any rate hikes, but the market will sort itself out eventually.
Yeah, NASDAQ is hit somewhat hard here.

There's this strange notion that 10Y rising = selling tech. I don't quite agree with this move but that's what the investors seem to be doing.
Increase in interest rate means money today is worth about the same but money 10 years into the future is worth a lot less. This hits growth companies much harder than value companies who have current cashflow.

Increase in rates and taper also makes money scarce so there’s less speculation.
I get the storyline, but the thing is they're selling Apple, Microsoft, you name them. I don't think 10Y impacts those tech companies. For smaller shops, certainly.
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peskypesky
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Re: U.S. stocks in free fall

Post by peskypesky »

Marseille07 wrote: Tue Jan 18, 2022 1:28 pm Yeah, NASDAQ is hit somewhat hard here.

There's this strange notion that 10Y rising = selling tech. I don't quite agree with this move but that's what the investors seem to be doing.
well, I can only speak for myself, but as the talk of the Fed raising rates/tapering ramped up in December, many "experts" were predicting that this would be bad for stocks, especially growth and tech stocks.
So, I moved some money from VOOG (growth index) to IVE (value index)...and I trimmed my positions in some tech stocks and crypto...and I'm glad I did. The predictions were correct so far.

So...did I WANT to sell my tech? No. But I was advised to sell it. And I did. Reduced my losses a bit so far this year.
Marseille07
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Re: U.S. stocks in free fall

Post by Marseille07 »

peskypesky wrote: Tue Jan 18, 2022 1:39 pm
Marseille07 wrote: Tue Jan 18, 2022 1:28 pm Yeah, NASDAQ is hit somewhat hard here.

There's this strange notion that 10Y rising = selling tech. I don't quite agree with this move but that's what the investors seem to be doing.
well, I can only speak for myself, but as the talk of the Fed raising rates/tapering ramped up in December, many "experts" were predicting that this would be bad for stocks, especially growth and tech stocks.
So, I moved some money from VOOG (growth index) to IVE (value index)...and I trimmed my positions in some tech stocks and crypto...and I'm glad I did. The predictions were correct so far.

So...did I WANT to sell my tech? No. But I was advised to sell it. And I did. Reduced my losses a bit so far this year.
That's a good point. Some of this is certainly a self-fulfilling prophecy where some people think 10Y = bad for tech and it trickles down and becomes the reality.
gougou
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Re: U.S. stocks in free fall

Post by gougou »

Marseille07 wrote: Tue Jan 18, 2022 1:35 pm
gougou wrote: Tue Jan 18, 2022 1:31 pm
Marseille07 wrote: Tue Jan 18, 2022 1:28 pm
atdharris wrote: Tue Jan 18, 2022 1:23 pm Only time will tell, but the Nasdaq is off ~7% YTD and we're only 18 days into the year (and less than that in trading days). I don't necessarily understand the selling of big tech considering most are in fine position to weather any rate hikes, but the market will sort itself out eventually.
Yeah, NASDAQ is hit somewhat hard here.

There's this strange notion that 10Y rising = selling tech. I don't quite agree with this move but that's what the investors seem to be doing.
Increase in interest rate means money today is worth about the same but money 10 years into the future is worth a lot less. This hits growth companies much harder than value companies who have current cashflow.

Increase in rates and taper also makes money scarce so there’s less speculation.
I get the storyline, but the thing is they're selling Apple, Microsoft, you name them. I don't think 10Y impacts those tech companies. For smaller shops, certainly.
Apple is 30x P/E so there’s a lot of growth and future cashflow baked into its valuation.

Also I wouldn’t be surprised there’s a lot of speculative/trend-following money chasing Apple and they decided to take some profits off the table.
The sillier the market’s behavior, the greater the opportunity for the business like investor.
Tom_T
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Re: U.S. stocks in free fall

Post by Tom_T »

I'm sure the market is starting to wonder about the number and size of the rate hikes. Could the Fed hike the rate a half-point instead of a quarter-point? Could they do something in January instead of February? Could there be more than four hikes? Don't want to (and can't) speculate, but the bottom line is that uncertainty makes people nervous.
Victor Eremita
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Re: U.S. stocks in free fall

Post by Victor Eremita »

Marseille07 wrote: Tue Jan 18, 2022 1:35 pm
gougou wrote: Tue Jan 18, 2022 1:31 pm
Marseille07 wrote: Tue Jan 18, 2022 1:28 pm
atdharris wrote: Tue Jan 18, 2022 1:23 pm Only time will tell, but the Nasdaq is off ~7% YTD and we're only 18 days into the year (and less than that in trading days). I don't necessarily understand the selling of big tech considering most are in fine position to weather any rate hikes, but the market will sort itself out eventually.
Yeah, NASDAQ is hit somewhat hard here.

There's this strange notion that 10Y rising = selling tech. I don't quite agree with this move but that's what the investors seem to be doing.
Increase in interest rate means money today is worth about the same but money 10 years into the future is worth a lot less. This hits growth companies much harder than value companies who have current cashflow.

Increase in rates and taper also makes money scarce so there’s less speculation.
I get the storyline, but the thing is they're selling Apple, Microsoft, you name them. I don't think 10Y impacts those tech companies. For smaller shops, certainly.
Yep :) I wouldn't be surprised if big tech beats the other sectors in profit margins this year. Then everyone will go piling into them.
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HomerJ
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Re: U.S. stocks in free fall

Post by HomerJ »

peskypesky wrote: Tue Jan 18, 2022 1:39 pm
Marseille07 wrote: Tue Jan 18, 2022 1:28 pm Yeah, NASDAQ is hit somewhat hard here.

There's this strange notion that 10Y rising = selling tech. I don't quite agree with this move but that's what the investors seem to be doing.
well, I can only speak for myself, but as the talk of the Fed raising rates/tapering ramped up in December, many "experts" were predicting that this would be bad for stocks, especially growth and tech stocks.
So, I moved some money from VOOG (growth index) to IVE (value index)...and I trimmed my positions in some tech stocks and crypto...and I'm glad I did. The predictions were correct so far.

So...did I WANT to sell my tech? No. But I was advised to sell it. And I did. Reduced my losses a bit so far this year.
Following "experts" (even you put that in quotes) is a loser's game. This is not a path for long-term success. Glad it worked out for you so far in the very short-term (5-6 weeks?)
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
newyorker
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Re: U.S. stocks in free fall

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H
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atdharris
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Re: U.S. stocks in free fall

Post by atdharris »

Marseille07 wrote: Tue Jan 18, 2022 1:35 pm
gougou wrote: Tue Jan 18, 2022 1:31 pm
Marseille07 wrote: Tue Jan 18, 2022 1:28 pm
atdharris wrote: Tue Jan 18, 2022 1:23 pm Only time will tell, but the Nasdaq is off ~7% YTD and we're only 18 days into the year (and less than that in trading days). I don't necessarily understand the selling of big tech considering most are in fine position to weather any rate hikes, but the market will sort itself out eventually.
Yeah, NASDAQ is hit somewhat hard here.

There's this strange notion that 10Y rising = selling tech. I don't quite agree with this move but that's what the investors seem to be doing.
Increase in interest rate means money today is worth about the same but money 10 years into the future is worth a lot less. This hits growth companies much harder than value companies who have current cashflow.

Increase in rates and taper also makes money scarce so there’s less speculation.
I get the storyline, but the thing is they're selling Apple, Microsoft, you name them. I don't think 10Y impacts those tech companies. For smaller shops, certainly.
The smaller shops have already been slaughtered beginning mid-2021. You look at a lot of the names in ARKK and other smaller tech stocks, and you're seeing declines of 50-75% or more in 6 months.

I have a small position in Pinterest I have watched decline 53% in 6 months, and that is a profitable company with position cash flow and cash on hand. Watching its price action the last 6 months makes it look like it's a company on the verge of bankruptcy.
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TheTimeLord
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Re: U.S. stocks in free fall

Post by TheTimeLord »

JoinTheLocalizer wrote: Tue Jan 18, 2022 12:26 pm
willthrill81 wrote: Tue Jan 18, 2022 12:20 pm
tvubpwcisla wrote: Tue Jan 18, 2022 9:24 am Is everything okay with the stock market? Not sure if it is just me; however, I feel like the tone of the market has changed this year. Still hoping for good and positive returns!
I'm more than a bit befuddled by the recent sharp decline of U.S. large-caps (SCV is up so far this year). The only meaningful change in the waters I'm aware of is the Fed's statement of their intention to raise rates this year, which is very likely to increase the cost of new capital for stocks, but everyone should have been expecting that when inflation topped 7%. Maybe the market was expecting fewer rate increases than the Fed announced.

Considering that the average intra-year decline in stocks has been around -14%, this shouldn't have caught anyone off-guard, especially after the ridiculously big runup last year.
I think it's plausible to assume that retail bullish investors are attempting to call the Fed's bluff. I fear that action may cost them dearly.

Dr Burry may be 3 for 3 on his long-term predictions. Dot com bust, housing bust and perhaps a passive investing bust.
Could you help me with providing documentation to Dr. Burry calling the Dot com bust. I don't seem to be able to find it and I had not heard that before.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
Marseille07
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Re: U.S. stocks in free fall

Post by Marseille07 »

atdharris wrote: Tue Jan 18, 2022 2:27 pm The smaller shops have already been slaughtered beginning mid-2021. You look at a lot of the names in ARKK and other smaller tech stocks, and you're seeing declines of 50-75% or more in 6 months.

I have a small position in Pinterest I have watched decline 53% in 6 months, and that is a profitable company with position cash flow and cash on hand. Watching its price action the last 6 months makes it look like it's a company on the verge of bankruptcy.
I think the problem is valuations got really high. 50% sounds massive (and it is), but they've risen a lot beforehand as well.
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TheTimeLord
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Re: U.S. stocks in free fall

Post by TheTimeLord »

Marseille07 wrote: Tue Jan 18, 2022 1:20 pm
Victor Eremita wrote: Tue Jan 18, 2022 1:17 pm I think investors are overreacting about the Fed hiking rates from 0 to 1% which is still incredibly accommodative. Now all of a sudden investors care only about cash flow and not at all about long-term potential? :confused
Are they even overreacting? The S&P not even -5% from ATH...
Given we are human beings it would be a possibility.
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drk
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Re: U.S. stocks in free fall

Post by drk »

gougou wrote: Tue Jan 18, 2022 1:01 pm Sure, but most of these companies pay dividends and buy back stocks when they think their stocks are cheap. Index fund diverts the dividend and buyback moneys from these high-yield companies.

And when you have a massive company like TSLA joining the SP500 and XOM removed from Dow 30, I’m sure the energy companies get diluted/sold off by index funds.
I don't really follow. Buybacks mean that remaining shareholders (including index funds) own more of the company, and dividends are reinvested internally by most index funds (unit investment trusts like SPY and QQQ are exceptions). The examples you note are decent reasons for using a total market index fund rather than a large-cap one, not an argument against indexing. This idea that index funds sell off companies because they've declined in value is a common misconception.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
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Re: U.S. stocks in free fall

Post by drk »

TheTimeLord wrote: Tue Jan 18, 2022 2:31 pm Could you help me with providing documentation to Dr. Burry calling the Dot com bust. I don't seem to be able to find it and I had not heard that before.
Maybe also helpful to pull up all of his incorrect predictions over the last decade-plus, rather than just counting the wins (documented or otherwise).
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
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AnalogKid22
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Re: U.S. stocks in free fall

Post by AnalogKid22 »

The "experts" have been forecasting a 10%-20% correction for 2022 since last year - maybe this is it. Assuming a quick recovery, I'm all for starting the year with a gradual decline, buying on the way down and on the way up.
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JoinTheLocalizer
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Re: U.S. stocks in free fall

Post by JoinTheLocalizer »

TheTimeLord wrote: Tue Jan 18, 2022 2:31 pm
JoinTheLocalizer wrote: Tue Jan 18, 2022 12:26 pm
willthrill81 wrote: Tue Jan 18, 2022 12:20 pm
tvubpwcisla wrote: Tue Jan 18, 2022 9:24 am Is everything okay with the stock market? Not sure if it is just me; however, I feel like the tone of the market has changed this year. Still hoping for good and positive returns!
I'm more than a bit befuddled by the recent sharp decline of U.S. large-caps (SCV is up so far this year). The only meaningful change in the waters I'm aware of is the Fed's statement of their intention to raise rates this year, which is very likely to increase the cost of new capital for stocks, but everyone should have been expecting that when inflation topped 7%. Maybe the market was expecting fewer rate increases than the Fed announced.

Considering that the average intra-year decline in stocks has been around -14%, this shouldn't have caught anyone off-guard, especially after the ridiculously big runup last year.
I think it's plausible to assume that retail bullish investors are attempting to call the Fed's bluff. I fear that action may cost them dearly.

Dr Burry may be 3 for 3 on his long-term predictions. Dot com bust, housing bust and perhaps a passive investing bust.
Could you help me with providing documentation to Dr. Burry calling the Dot com bust. I don't seem to be able to find it and I had not heard that before.
https://en.m.wikipedia.org/wiki/Michael_Burry

S&P was down 11% but Scion was up 50% due to shorting tech stocks. Also kept beating the market the next 3 years.
gougou
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Re: U.S. stocks in free fall

Post by gougou »

drk wrote: Tue Jan 18, 2022 2:37 pm
gougou wrote: Tue Jan 18, 2022 1:01 pm Sure, but most of these companies pay dividends and buy back stocks when they think their stocks are cheap. Index fund diverts the dividend and buyback moneys from these high-yield companies.

And when you have a massive company like TSLA joining the SP500 and XOM removed from Dow 30, I’m sure the energy companies get diluted/sold off by index funds.
I don't really follow. Buybacks mean that remaining shareholders (including index funds) own more of the company, and dividends are reinvested internally by most index funds (unit investment trusts like SPY and QQQ are exceptions). The examples you note are decent reasons for using a total market index fund rather than a large-cap one, not an argument against indexing. This idea that index funds sell off companies because they've declined in value is a common misconception.
When a $100B company pays a $10B dividend, it becomes a $90B company and the $10B dividend gets invested into the whole index, not to the dividend payer.

When a $100B company buys back $10B of stocks, it becomes a $90B company. The index fund will sell about 10% of its holdings in this company to reinvest into the whole index.

So when you have a high dividend payer like XOM getting depressed over several years, the index fund is redirecting all those dividends to other stocks. It will not get the total return of the sector if this sector comes back.
The sillier the market’s behavior, the greater the opportunity for the business like investor.
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TheTimeLord
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Re: U.S. stocks in free fall

Post by TheTimeLord »

JoinTheLocalizer wrote: Tue Jan 18, 2022 2:53 pm
TheTimeLord wrote: Tue Jan 18, 2022 2:31 pm
JoinTheLocalizer wrote: Tue Jan 18, 2022 12:26 pm
willthrill81 wrote: Tue Jan 18, 2022 12:20 pm
tvubpwcisla wrote: Tue Jan 18, 2022 9:24 am Is everything okay with the stock market? Not sure if it is just me; however, I feel like the tone of the market has changed this year. Still hoping for good and positive returns!
I'm more than a bit befuddled by the recent sharp decline of U.S. large-caps (SCV is up so far this year). The only meaningful change in the waters I'm aware of is the Fed's statement of their intention to raise rates this year, which is very likely to increase the cost of new capital for stocks, but everyone should have been expecting that when inflation topped 7%. Maybe the market was expecting fewer rate increases than the Fed announced.

Considering that the average intra-year decline in stocks has been around -14%, this shouldn't have caught anyone off-guard, especially after the ridiculously big runup last year.
I think it's plausible to assume that retail bullish investors are attempting to call the Fed's bluff. I fear that action may cost them dearly.

Dr Burry may be 3 for 3 on his long-term predictions. Dot com bust, housing bust and perhaps a passive investing bust.
Could you help me with providing documentation to Dr. Burry calling the Dot com bust. I don't seem to be able to find it and I had not heard that before.
https://en.m.wikipedia.org/wiki/Michael_Burry

S&P was down 11% but Scion was up 50% due to shorting tech stocks. Also kept beating the market the next 3 years.
That was 2001, he didn't call the Dot com crash.
According to author Michael Lewis, "in his first full year, 2001, the S&P 500 fell 11.88%. Scion was up 55%. ..."
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peskypesky
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Re: U.S. stocks in free fall

Post by peskypesky »

HomerJ wrote: Tue Jan 18, 2022 1:48 pm Following "experts" (even you put that in quotes) is a loser's game. This is not a path for long-term success. Glad it worked out for you so far in the very short-term (5-6 weeks?)
We shall see! :sharebeer
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Yesterdaysnews
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Re: U.S. stocks in free fall

Post by Yesterdaysnews »

Does the Fed basically control the market now? When they tighten is tanks and when they print it goes up…. Is this the future from now on? If so why not just ignore everything but what the Fed says and position accordingly?
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peskypesky
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Re: U.S. stocks in free fall

Post by peskypesky »

atdharris wrote: Tue Jan 18, 2022 2:27 pm I have a small position in Pinterest I have watched decline 53% in 6 months, and that is a profitable company with position cash flow and cash on hand. Watching its price action the last 6 months makes it look like it's a company on the verge of bankruptcy.
Pinterest has a PE Ratio of 61.76 even after 11 months of decline in stock price. Isn't that a pretty high P/E?
Last edited by peskypesky on Tue Jan 18, 2022 3:15 pm, edited 1 time in total.
Tamalak
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Re: U.S. stocks in free fall

Post by Tamalak »

Yesterdaysnews wrote: Tue Jan 18, 2022 3:08 pm Does the Fed basically control the market now? When they tighten is tanks and when they print it goes up…. Is this the future from now on? If so why not just ignore everything but what the Fed says and position accordingly?
The fed has a strong influence over the valuations of stocks (i.e. the P side of P/E), but not the earnings side. Also, protecting the stock market isn't one of their two mandates, so even if they "can" control it doesn't make that a priority (I'm still annoyed they backed off in the taper tantrum at the end of 2018 though..)
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Re: U.S. stocks in free fall

Post by gougou »

Yesterdaysnews wrote: Tue Jan 18, 2022 3:08 pm Does the Fed basically control the market now? When they tighten is tanks and when they print it goes up…. Is this the future from now on? If so why not just ignore everything but what the Fed says and position accordingly?
They are tightening because of inflation. They don’t have control over inflation. I’m sure the current administration (Fed is a part of) wants inflation to go down but obviously they have little control over it.
The sillier the market’s behavior, the greater the opportunity for the business like investor.
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peskypesky
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Re: U.S. stocks in free fall

Post by peskypesky »

gougou wrote: Tue Jan 18, 2022 3:11 pm
Yesterdaysnews wrote: Tue Jan 18, 2022 3:08 pm Does the Fed basically control the market now? When they tighten is tanks and when they print it goes up…. Is this the future from now on? If so why not just ignore everything but what the Fed says and position accordingly?
They are tightening because of inflation. They don’t have control over inflation. I’m sure the current administration (Fed is a part of) wants inflation to go down but obviously they have little control over it.
Huh? Inflation is a direct result of dollar "printing" by the Fed. When more fiat money is created, the value of the existing fiat money declines. This means you need more fiat money to buy things. And this...is inflation.

Expansionary fiscal and monetary policies is a major cause of inflation.
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Re: U.S. stocks in free fall

Post by atdharris »

peskypesky wrote: Tue Jan 18, 2022 3:10 pm
atdharris wrote: Tue Jan 18, 2022 2:27 pm I have a small position in Pinterest I have watched decline 53% in 6 months, and that is a profitable company with position cash flow and cash on hand. Watching its price action the last 6 months makes it look like it's a company on the verge of bankruptcy.
Pinterest has a PE Ratio of 61.76 even after 11 months of decline in stock price. Isn't that a pretty high P/E?
Sure, but I am looking at forward PE, which is ~30. I still have a 40% gain, but it was obviously much higher 11 months ago. Oh well.
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Re: U.S. stocks in free fall

Post by gougou »

peskypesky wrote: Tue Jan 18, 2022 3:20 pm
gougou wrote: Tue Jan 18, 2022 3:11 pm
Yesterdaysnews wrote: Tue Jan 18, 2022 3:08 pm Does the Fed basically control the market now? When they tighten is tanks and when they print it goes up…. Is this the future from now on? If so why not just ignore everything but what the Fed says and position accordingly?
They are tightening because of inflation. They don’t have control over inflation. I’m sure the current administration (Fed is a part of) wants inflation to go down but obviously they have little control over it.
Huh? Inflation is a direct result of dollar "printing" by the Fed. When more fiat money is created, the value of the existing fiat money declines. This means you need more fiat money to buy things. And this...is inflation.

Expansionary fiscal and monetary policies is a major cause of inflation.
Inflation is a lot more complicated than that. There’s supply chain issues, green investing, Chinese Covid policy etc. The Fed responds to inflation by tightening money supply, so it’s pretty obvious they don’t have much control over inflation.
The sillier the market’s behavior, the greater the opportunity for the business like investor.
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Re: U.S. stocks in free fall

Post by HomerJ »

AnalogKid22 wrote: Tue Jan 18, 2022 2:49 pm The "experts" have been forecasting a 10%-20% correction for 2022 since last year - maybe this is it. Assuming a quick recovery, I'm all for starting the year with a gradual decline, buying on the way down and on the way up.
The "experts" forecast corrections in EVERY year.

This may indeed be the start of one. That is ALWAYS true. The possibility is always there. The risk is never zero.

But you should NEVER assume a quick recovery.

Always plan around a 50%+ crash that takes years to recover. And then you no longer have to worry about it, once it's part of your plan.
Last edited by HomerJ on Tue Jan 18, 2022 3:40 pm, edited 2 times in total.
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Re: U.S. stocks in free fall

Post by deltaneutral83 »

Glad my old 401k roll to my new 401k processed the buy on Friday 1/14. Cost me 1.82% given today's close on the S&P, ah the roulette wheel of rollovers, you win some, but you mostly lose some! Maybe one day they will be over to rollover and transfer all accounts in kind for 401k's.
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Re: U.S. stocks in free fall

Post by willthrill81 »

gougou wrote: Tue Jan 18, 2022 3:34 pm
peskypesky wrote: Tue Jan 18, 2022 3:20 pm
gougou wrote: Tue Jan 18, 2022 3:11 pm
Yesterdaysnews wrote: Tue Jan 18, 2022 3:08 pm Does the Fed basically control the market now? When they tighten is tanks and when they print it goes up…. Is this the future from now on? If so why not just ignore everything but what the Fed says and position accordingly?
They are tightening because of inflation. They don’t have control over inflation. I’m sure the current administration (Fed is a part of) wants inflation to go down but obviously they have little control over it.
Huh? Inflation is a direct result of dollar "printing" by the Fed. When more fiat money is created, the value of the existing fiat money declines. This means you need more fiat money to buy things. And this...is inflation.

Expansionary fiscal and monetary policies is a major cause of inflation.
Inflation is a lot more complicated than that. There’s supply chain issues, green investing, Chinese Covid policy etc. The Fed responds to inflation by tightening money supply, so it’s pretty obvious they don’t have much control over inflation.
I don't think that many would say that the Fed's tools are precise at all. After all, the U.S. economy is one of the most complex systems the world has ever seen.

That said, Volcker demonstrated that the Fed's tools were at least effective back then in reining in inflation when used appropriately. But I'm not sure that the current Fed has the gumption (or even the political ability) to do anything remotely as severe as Volcker did back then.
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Re: U.S. stocks in free fall

Post by willthrill81 »

peskypesky wrote: Tue Jan 18, 2022 3:20 pm
gougou wrote: Tue Jan 18, 2022 3:11 pm
Yesterdaysnews wrote: Tue Jan 18, 2022 3:08 pm Does the Fed basically control the market now? When they tighten is tanks and when they print it goes up…. Is this the future from now on? If so why not just ignore everything but what the Fed says and position accordingly?
They are tightening because of inflation. They don’t have control over inflation. I’m sure the current administration (Fed is a part of) wants inflation to go down but obviously they have little control over it.
Huh? Inflation is a direct result of dollar "printing" by the Fed. When more fiat money is created, the value of the existing fiat money declines. This means you need more fiat money to buy things. And this...is inflation.
The money supply is one factor, but it's far from the only one. The money supply increased substantially from 2010-2019, and inflation remained very low, as discussed here. Evidence seems to indicate that the additional money was basically hoarded and not spent, therefore not resulting in inflation. But now the recently added money is being spent.
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Re: U.S. stocks in free fall

Post by HomerJ »

peskypesky wrote: Tue Jan 18, 2022 3:06 pm
HomerJ wrote: Tue Jan 18, 2022 1:48 pm Following "experts" (even you put that in quotes) is a loser's game. This is not a path for long-term success. Glad it worked out for you so far in the very short-term (5-6 weeks?)
We shall see! :sharebeer
Yes, I suppose that is correct... I should have said that following "experts" for the past 30 years (100 years?) HAS BEEN a loser's game.

It is true that maybe, starting in December 2021, that following the "experts" advice on which sectors to invest in will pay off handsomely over the long run.

Maybe predicting the future is easy now, even though it never was in the past. It's certainly possible.
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Re: U.S. stocks in free fall

Post by peskypesky »

HomerJ wrote: Tue Jan 18, 2022 3:47 pm
Yes, I suppose that is correct... I should have said that following "experts" for the past 30 years (100 years?) HAS BEEN a loser's game.

It is true that maybe, starting in December 2021, that following the "experts" advice on which sectors to invest in will pay off handsomely over the long run.

Maybe predicting the future is easy now, even though it never was in the past. It's certainly possible.
We shall see!! :sharebeer
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Re: U.S. stocks in free fall

Post by JoinTheLocalizer »

TheTimeLord wrote: Tue Jan 18, 2022 3:02 pm
JoinTheLocalizer wrote: Tue Jan 18, 2022 2:53 pm
TheTimeLord wrote: Tue Jan 18, 2022 2:31 pm
JoinTheLocalizer wrote: Tue Jan 18, 2022 12:26 pm
willthrill81 wrote: Tue Jan 18, 2022 12:20 pm

I'm more than a bit befuddled by the recent sharp decline of U.S. large-caps (SCV is up so far this year). The only meaningful change in the waters I'm aware of is the Fed's statement of their intention to raise rates this year, which is very likely to increase the cost of new capital for stocks, but everyone should have been expecting that when inflation topped 7%. Maybe the market was expecting fewer rate increases than the Fed announced.

Considering that the average intra-year decline in stocks has been around -14%, this shouldn't have caught anyone off-guard, especially after the ridiculously big runup last year.
I think it's plausible to assume that retail bullish investors are attempting to call the Fed's bluff. I fear that action may cost them dearly.

Dr Burry may be 3 for 3 on his long-term predictions. Dot com bust, housing bust and perhaps a passive investing bust.
Could you help me with providing documentation to Dr. Burry calling the Dot com bust. I don't seem to be able to find it and I had not heard that before.
https://en.m.wikipedia.org/wiki/Michael_Burry

S&P was down 11% but Scion was up 50% due to shorting tech stocks. Also kept beating the market the next 3 years.
That was 2001, he didn't call the Dot com crash.
According to author Michael Lewis, "in his first full year, 2001, the S&P 500 fell 11.88%. Scion was up 55%. ..."
Granted, he didn't indicate it on social media (mostly because it didn't exist at the time and he was heads down making money for his clients).

What platform would he have called it out on in 2001? What kind of companies do you suppose he profited 55% by shorting? Just Cisco? Perhaps some dot com companies like pets.com, webvan, etc.?

Even if it wasn't calling the bust, he shorted companies that derived their revenue heavily from dot coms. This is partly why Cisco never came back from their 2000 peak: There weren't customers around to buy their routers because the dot com fad was over.
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Re: U.S. stocks in free fall

Post by JoinTheLocalizer »

peskypesky wrote: Tue Jan 18, 2022 4:03 pm
HomerJ wrote: Tue Jan 18, 2022 3:47 pm
Yes, I suppose that is correct... I should have said that following "experts" for the past 30 years (100 years?) HAS BEEN a loser's game.

It is true that maybe, starting in December 2021, that following the "experts" advice on which sectors to invest in will pay off handsomely over the long run.

Maybe predicting the future is easy now, even though it never was in the past. It's certainly possible.
We shall see!! :sharebeer
I think predicting the future got a lot easier since Bernanke revamped the Fed rule book in 2008. Since then, it was clear the Fed would begin piling on the assets onto its balance sheet and that unraveling them would bring upon a tremendous amount of pain in the equities market. This seems to be even more the case nowadays with debt levels and misallocation being the norm rather than the exception. The FRED total assets chart seems to correlate well to market performance.

The signal seems to mimic an out of control physical system where the ebb and flow of oscillations get worse and worse during each business cycle.
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Re: U.S. stocks in free fall

Post by km91 »

peskypesky wrote: Tue Jan 18, 2022 3:20 pm
gougou wrote: Tue Jan 18, 2022 3:11 pm
Yesterdaysnews wrote: Tue Jan 18, 2022 3:08 pm Does the Fed basically control the market now? When they tighten is tanks and when they print it goes up…. Is this the future from now on? If so why not just ignore everything but what the Fed says and position accordingly?
They are tightening because of inflation. They don’t have control over inflation. I’m sure the current administration (Fed is a part of) wants inflation to go down but obviously they have little control over it.
Huh? Inflation is a direct result of dollar "printing" by the Fed. When more fiat money is created, the value of the existing fiat money declines. This means you need more fiat money to buy things. And this...is inflation.

Expansionary fiscal and monetary policies is a major cause of inflation.
The Fed does not conduct monetary policy by influencing the "money supply." It targets a policy Fed funds rate which it achieves through a number of mechanisms. 1) It pays an interest rate on reserves held at the Fed by institutions which acts as a floor on short term interest rates, 2) it charges an interest rate on it's lender of last resort "discount window" which acts as an upper bound on short term interest, and 3) when the Fed funds rate strays from this target range, it buys or sells securities in overnight money markets to maintain its target policy rate. When the Fed performs asset purchases like QE it does not "print" USD, it creates bank reserves and bank reserves can't be used to purchase groceries or new cars so it's hard to claim that asset purchases, which are the closest thing the Fed does to "controlling the money supply", are inflationary. The Fed's asset purchases are simply an asset swap, where one form of US Government liability, Treasuries, are exchanged for another form, reserves. The Fed is not creating new money and providing it into the real economy when it conducts monetary policy, its just performing a financial transaction with offsetting assets and liabilities. We've seen central banks across the world try to spur on inflation for the better part of two decades with no success. Europe has had QE and negative policy rates for 10 years now and inflation has been anemic. Now we're finally seeing inflation after a global pandemic disrupted supply chains and governments provided stimulus directly into the real economy.
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Re: U.S. stocks in free fall

Post by HomerJ »

JoinTheLocalizer wrote: Tue Jan 18, 2022 4:59 pmI think predicting the future got a lot easier since Bernanke revamped the Fed rule book in 2008. Since then, it was clear the Fed would begin piling on the assets onto its balance sheet and that unraveling them would bring upon a tremendous amount of pain in the equities market.
Nothing was clear since 2008. Show us a consensus of "experts" posting in 2009 or 2011 or 2014 or 2018 that equities had nowhere to go but up because of the Fed.

Likewise, nothing is clear today.

You are stating, looking backwards, that how things worked out seems clear.

I want to welcome you to this forum. You should note that this thread (and the soaring thread) are not typical of Boglehead philosophy.

We are mostly a long-term buy and hold crowd (not all, but mostly). This thread is kind of a pressure relief valve for people to talk about daily movements, but very few of us actually act on anything posted in this thread.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: U.S. stocks in free fall

Post by carminered2019 »

Got 30K into FSKAX today. More drop=more purchases.
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Re: U.S. stocks in free fall

Post by marcopolo »

JoinTheLocalizer wrote: Tue Jan 18, 2022 4:05 pm
TheTimeLord wrote: Tue Jan 18, 2022 3:02 pm
JoinTheLocalizer wrote: Tue Jan 18, 2022 2:53 pm
TheTimeLord wrote: Tue Jan 18, 2022 2:31 pm
JoinTheLocalizer wrote: Tue Jan 18, 2022 12:26 pm

I think it's plausible to assume that retail bullish investors are attempting to call the Fed's bluff. I fear that action may cost them dearly.

Dr Burry may be 3 for 3 on his long-term predictions. Dot com bust, housing bust and perhaps a passive investing bust.
Could you help me with providing documentation to Dr. Burry calling the Dot com bust. I don't seem to be able to find it and I had not heard that before.
https://en.m.wikipedia.org/wiki/Michael_Burry

S&P was down 11% but Scion was up 50% due to shorting tech stocks. Also kept beating the market the next 3 years.
That was 2001, he didn't call the Dot com crash.
According to author Michael Lewis, "in his first full year, 2001, the S&P 500 fell 11.88%. Scion was up 55%. ..."
Granted, he didn't indicate it on social media (mostly because it didn't exist at the time and he was heads down making money for his clients).

What platform would he have called it out on in 2001? What kind of companies do you suppose he profited 55% by shorting? Just Cisco? Perhaps some dot com companies like pets.com, webvan, etc.?

Even if it wasn't calling the bust, he shorted companies that derived their revenue heavily from dot coms. This is partly why Cisco never came back from their 2000 peak: There weren't customers around to buy their routers because the dot com fad was over.
Pets.com went out of business in Nov 2000. Not sure how they could have profited from shorting them in 2001.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: U.S. stocks in free fall

Post by am »

Are these institutional managers mostly dumping and buying stocks after every piece of news and worry? Don’t they know about index funds and how it’s impossible to beat them? :)
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Re: U.S. stocks in free fall

Post by km91 »

JoinTheLocalizer wrote: Tue Jan 18, 2022 4:59 pm The signal seems to mimic an out of control physical system where the ebb and flow of oscillations get worse and worse during each business cycle.
Could you explain this conclusion? The US economy has experienced one recession since 2008, which it recovered from in two months, and the US stock market hasn't experienced a single "bear market" in that time. How are the oscillations getting worse and worse?
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Re: U.S. stocks in free fall

Post by frugalecon »

I guess “free fall” means S&P 500 is back at the level of 4 weeks ago. I guess something that is actionable would be for people to think about how they would react to a decline of a further 750 points…which would take the index to the levels of last March.
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Re: U.S. stocks in free fall

Post by JoinTheLocalizer »

km91 wrote: Tue Jan 18, 2022 5:32 pm
JoinTheLocalizer wrote: Tue Jan 18, 2022 4:59 pm The signal seems to mimic an out of control physical system where the ebb and flow of oscillations get worse and worse during each business cycle.
Could you explain this conclusion? The US economy has experienced one recession since 2008, which it recovered from in two months, and the US stock market hasn't experienced a single "bear market" in that time. How are the oscillations getting worse and worse?
The balance sheet was forced to grow in a parabolic manner after 2008, after the repo market crisis, and especially during COVID, to the point where tapering doesn't seem possible, yet the Fed will likely be forced to actually implementing tightening simply due to the increasing CPI. Maybe I'm not articulating it well which is "ebb" and which is "flow" but every time there is an attempt to even slightly reduce the Fed's balance sheet, we see the repercussions. The physical system must unwind. There seems to be no other logical outcome.

I don't want to get mired into Fed policy to avoid getting called out being "off-topic" (even though the two phenomena are inextricably linked)
Last edited by JoinTheLocalizer on Tue Jan 18, 2022 5:46 pm, edited 1 time in total.
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