U.S. stocks in free fall

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peskypesky
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Re: U.S. stocks in free fall

Post by peskypesky »

km91 wrote: Tue Jan 18, 2022 5:02 pm 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.
“… inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output,” according to Milton Friedman. The part about inflation being a monetary phenomenon has been quoted often, but the part about money growth relative to output is equally important.

In the simplest case, if the Federal Reserve (or another country’s central bank) prints money and distributes it somehow to its populace, the results will be inflationary. In today’s economy, the printing is virtual through electronic transactions, but the result remains that consumers and businesses and governments have more dollars in their bank accounts.

One key issue that inflation forecasters must wrestle with is the magnitude of money growth versus the change in productive capacity. Although definitions of money are not as clearcut as they once were, the raw figures are stark. Money (M2 definition) increased by 13% in the past 12 months. The Congressional Budget Office’s projections of real potential GDP, or output capacity, run just under two percent. Whether the figures are perfect is irrelevant when money growth is so much greater than output growth. That has to be inflationary.


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gougou
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Re: U.S. stocks in free fall

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JoinTheLocalizer wrote: Tue Jan 18, 2022 4:05 pm
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.
History is eerily similar. Now we have a bunch of cloud companies deriving revenue from the new dot-coms, and they all get lofty valuations as if they are going to grow a lot and become some infrastructure companies. Will be interesting to see how it plays out.
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 JoinTheLocalizer »

gougou wrote: Tue Jan 18, 2022 5:47 pm
JoinTheLocalizer wrote: Tue Jan 18, 2022 4:05 pm
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.
History is eerily similar. Now we have a bunch of cloud companies deriving revenue from the new dot-coms, and they all get lofty valuations as if they are going to grow a lot and become some infrastructure companies. Will be interesting to see how it plays out.
Cloud computing to me seems much more transformative and disruptive of an industry than shipping customers 50# bags of dog food and losing money on the transaction, and taking out super bowl ads using a sock puppet as a mascot. That being said, some cloud companies, perhaps Snowflake just to name an example, has exceedingly lofty expectations of adoption and revenue growth.
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Re: U.S. stocks in free fall

Post by rockstar »

QQQ is so close to it's 200 day moving average. If I end up selling, I'm going to 3-6 month t-bills held to maturity. Looks like rates are only going up through the rest of the year. I don't want to be in anything long term.
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Re: U.S. stocks in free fall

Post by AnnetteLouisan »

FSKAX is at 127, very tempting. I told myself I would buy at 115-119. I have $15500 to invest this month in my IRA and taxable. I know it’s market timing but until I get my sea legs and can lump sum huge amounts of US currency (and I expect I’ll get there) I’ll continue my family’s tradition of waiting for good deals. Otherwise of course I am doing my regular 401k investing.
Last edited by AnnetteLouisan on Tue Jan 18, 2022 6:13 pm, edited 2 times in total.
km91
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Re: U.S. stocks in free fall

Post by km91 »

peskypesky wrote: Tue Jan 18, 2022 5:45 pm
km91 wrote: Tue Jan 18, 2022 5:02 pm 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.

In the simplest case, if the Federal Reserve (or another country’s central bank) prints money (central bank doesn't print money, it creates reserves.) and distributes it somehow to its populace (It distributes it to the populace? Did I not get my QE check?. It is not distributing anything. It purchases asset, the institutions sell it assets, on net the affect is 0), the results will be inflationary. In today’s economy, the printing is virtual through electronic transactions, but the result remains that consumers and businesses (again, did I not receive my QE check? When did the Fed print money and provide it to consumers and businesses?) and governments have more dollars in their bank accounts (Yes, if you sell a Treasury to the Fed you will get cash in your bank account in return. The Fed takes $100 assets out of the economy and puts $100 in. No new money.


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JoinTheLocalizer
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Re: U.S. stocks in free fall

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km91 wrote: Tue Jan 18, 2022 6:02 pm
peskypesky wrote: Tue Jan 18, 2022 5:45 pm
km91 wrote: Tue Jan 18, 2022 5:02 pm 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.

In the simplest case, if the Federal Reserve (or another country’s central bank) prints money (central bank doesn't print money, it creates reserves.) and distributes it somehow to its populace (It distributes it to the populace? Did I not get my QE check?. It is not distributing anything. It purchases asset, the institutions sell it assets, on net the affect is 0), the results will be inflationary. In today’s economy, the printing is virtual through electronic transactions, but the result remains that consumers and businesses (again, did I not receive my QE check? When did the Fed print money and provide it to consumers and businesses?) and governments have more dollars in their bank accounts (Yes, if you sell a Treasury to the Fed you will get cash in your bank account in return. The Fed takes $100 assets out of the economy and puts $100 in. No new money.


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Thank you! I'm glad someone said it!!!

Until there is a CBDC where credit is expanded DIRECTLY by the Fed and put into the economy: "this is the way" as the Mandalorian would utter.

Truth be told, I used to believe the Fed printed money back in the day. I had to research the subject further since 2008 when I saw that QE-1-2-3-infinity wasn't producing appreciable inflation and wondered "why?".
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Re: U.S. stocks in free fall

Post by Tinyz »

The SPX held on to 200 MA with 4hr chart with its dear life and I bought too early. The only year it broke...was 2014,2016,2018,2020. Guess those years were what? I should stop my monthly entertainment. :oops:
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Re: U.S. stocks in free fall

Post by fetch5482 »

This was a fun day. We need a few more fundays.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
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Re: U.S. stocks in free fall

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gas_balloon wrote: Tue Jan 18, 2022 6:21 pm This was a fun day. We need a few more fundays.
It was funtastic!
Last edited by JoinTheLocalizer on Tue Jan 18, 2022 6:29 pm, edited 1 time in total.
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Re: U.S. stocks in free fall

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Marseille07
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Re: U.S. stocks in free fall

Post by Marseille07 »

Tinyz wrote: Tue Jan 18, 2022 6:18 pm The SPX held on to 200 MA with 4hr chart with its dear life and I bought too early. The only year it broke...was 2014,2016,2018,2020. Guess those years were what? I should stop my monthly entertainment. :oops:
? Based on my data, I have 4420 as 200D MA as of last Friday. Doesn't seem that close to breaching the level just yet.

"4hr chart" sounds odd when we're talking about 200 days worth of moving average. It's quite possible you're looking at something else.
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Re: U.S. stocks in free fall

Post by rockstar »

Marseille07 wrote: Tue Jan 18, 2022 6:25 pm
Tinyz wrote: Tue Jan 18, 2022 6:18 pm The SPX held on to 200 MA with 4hr chart with its dear life and I bought too early. The only year it broke...was 2014,2016,2018,2020. Guess those years were what? I should stop my monthly entertainment. :oops:
? Based on my data, I have 4420 as 200D MA as of last Friday. Doesn't seem that close to breaching the level just yet.

"4hr chart" sounds odd when we're talking about 200 days worth of moving average. It's quite possible you're looking at something else.
The S&P 500 has much more room to fall before getting close to its 200 day. QQQ is a whole lot closer.

This is the first time I have really experienced inflation this high as an adult with the Fed planning to increase rates. I can't really compare it to anything from the past. And when this did happen in the 70s, the composition of the S&P 500 was so different.
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Re: U.S. stocks in free fall

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rockstar wrote: Tue Jan 18, 2022 6:29 pm
Marseille07 wrote: Tue Jan 18, 2022 6:25 pm
Tinyz wrote: Tue Jan 18, 2022 6:18 pm The SPX held on to 200 MA with 4hr chart with its dear life and I bought too early. The only year it broke...was 2014,2016,2018,2020. Guess those years were what? I should stop my monthly entertainment. :oops:
? Based on my data, I have 4420 as 200D MA as of last Friday. Doesn't seem that close to breaching the level just yet.

"4hr chart" sounds odd when we're talking about 200 days worth of moving average. It's quite possible you're looking at something else.
The S&P 500 has much more room to fall before getting close to its 200 day. QQQ is a whole lot closer.

This is the first time I have really experienced inflation this high as an adult with the Fed planning to increase rates. I can't really compare it to anything from the past. And when this did happen in the 70s, the composition of the S&P 500 was so different.
Another thing that was different was access to the S&P relative to the 1970s. Index funds, ETFs, etc making the process much more economical and transparent to entry level investors and the network effect. That network effect, similar to leverage, cuts both ways. It amplifies gains and at the same time, amplifies losses.
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Re: U.S. stocks in free fall

Post by Marseille07 »

rockstar wrote: Tue Jan 18, 2022 6:29 pm
Marseille07 wrote: Tue Jan 18, 2022 6:25 pm
Tinyz wrote: Tue Jan 18, 2022 6:18 pm The SPX held on to 200 MA with 4hr chart with its dear life and I bought too early. The only year it broke...was 2014,2016,2018,2020. Guess those years were what? I should stop my monthly entertainment. :oops:
? Based on my data, I have 4420 as 200D MA as of last Friday. Doesn't seem that close to breaching the level just yet.

"4hr chart" sounds odd when we're talking about 200 days worth of moving average. It's quite possible you're looking at something else.
The S&P 500 has much more room to fall before getting close to its 200 day. QQQ is a whole lot closer.

This is the first time I have really experienced inflation this high as an adult with the Fed planning to increase rates. I can't really compare it to anything from the past. And when this did happen in the 70s, the composition of the S&P 500 was so different.
I highly recommend to just hold US TSM or S&P500. I was doing the QQQ quest myself but I got out last year, and I'm glad I did.

That said, the 200D MA strategy isn't a terrible one; while your CAGR will be lower, it's safer in terms of dodging the downturns.
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peskypesky
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Re: U.S. stocks in free fall

Post by peskypesky »

JoinTheLocalizer wrote: Tue Jan 18, 2022 6:10 pm Truth be told, I used to believe the Fed printed money back in the day. I had to research the subject further since 2008 when I saw that QE-1-2-3-infinity wasn't producing appreciable inflation and wondered "why?".
I guess you missed this inflation:
Image
rockstar
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Re: U.S. stocks in free fall

Post by rockstar »

Marseille07 wrote: Tue Jan 18, 2022 6:36 pm
rockstar wrote: Tue Jan 18, 2022 6:29 pm
Marseille07 wrote: Tue Jan 18, 2022 6:25 pm
Tinyz wrote: Tue Jan 18, 2022 6:18 pm The SPX held on to 200 MA with 4hr chart with its dear life and I bought too early. The only year it broke...was 2014,2016,2018,2020. Guess those years were what? I should stop my monthly entertainment. :oops:
? Based on my data, I have 4420 as 200D MA as of last Friday. Doesn't seem that close to breaching the level just yet.

"4hr chart" sounds odd when we're talking about 200 days worth of moving average. It's quite possible you're looking at something else.
The S&P 500 has much more room to fall before getting close to its 200 day. QQQ is a whole lot closer.

This is the first time I have really experienced inflation this high as an adult with the Fed planning to increase rates. I can't really compare it to anything from the past. And when this did happen in the 70s, the composition of the S&P 500 was so different.
I highly recommend to just hold US TSM or S&P500. I was doing the QQQ quest myself but I got out last year, and I'm glad I did.

That said, the 200D MA strategy isn't a terrible one; while your CAGR will be lower, it's safer in terms of dodging the downturns.
My CAGR will be higher than holding VOO over the same period including the draw down to the 200 day moving average. It's likely that both bonds and stocks do bad this year. I would move into t-bills and hold to maturity unless I could get really good PEs to buy back into the market.

Let's see what happens. I wouldn't be surprised if we're up again tomorrow.
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Re: U.S. stocks in free fall

Post by km91 »

peskypesky wrote: Tue Jan 18, 2022 7:09 pm
JoinTheLocalizer wrote: Tue Jan 18, 2022 6:10 pm Truth be told, I used to believe the Fed printed money back in the day. I had to research the subject further since 2008 when I saw that QE-1-2-3-infinity wasn't producing appreciable inflation and wondered "why?".
I guess you missed this inflation:
Image
Image

I'll do you even better. 100 years of asset price inflation. Thanks Fed
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Re: U.S. stocks in free fall

Post by JoinTheLocalizer »

peskypesky wrote: Tue Jan 18, 2022 7:09 pm
JoinTheLocalizer wrote: Tue Jan 18, 2022 6:10 pm Truth be told, I used to believe the Fed printed money back in the day. I had to research the subject further since 2008 when I saw that QE-1-2-3-infinity wasn't producing appreciable inflation and wondered "why?".
I guess you missed this inflation:
Image
https://en.wikipedia.org/wiki/Richard_C ... ary_theory

Not money printing and not inflation as J6P realizes it. It takes broad money supply ie stimmys, UE kickers, EBT hikes, and child tax credit boosts to accomplish this goal.
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Re: U.S. stocks in free fall

Post by Tinyz »

Marseille07 wrote: Tue Jan 18, 2022 6:25 pm
? Based on my data, I have 4420 as 200D MA as of last Friday. Doesn't seem that close to breaching the level just yet.

"4hr chart" sounds odd when we're talking about 200 days worth of moving average. It's quite possible you're looking at something else.
:D 4hr timeframe chart because anything below or anything above is either too much rubbish or too slow for a monthly purchase.
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Re: U.S. stocks in free fall

Post by Marseille07 »

Tinyz wrote: Tue Jan 18, 2022 7:34 pm
Marseille07 wrote: Tue Jan 18, 2022 6:25 pm
? Based on my data, I have 4420 as 200D MA as of last Friday. Doesn't seem that close to breaching the level just yet.

"4hr chart" sounds odd when we're talking about 200 days worth of moving average. It's quite possible you're looking at something else.
:D 4hr timeframe chart because anything below or anything above is either too much rubbish or too slow for a monthly purchase.
Nothing wrong with that, just saying what you thought as 200D MA on the SPX probably wasn't. It might be the MA of 200 4-hour bars on your chart actually.
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Re: U.S. stocks in free fall

Post by Tinyz »

Marseille07 wrote: Tue Jan 18, 2022 7:37 pm Nothing wrong with that, just saying what you thought as 200D MA on the SPX probably wasn't. It might be the MA of 200 4-hour bars on your chart actually.
:D You are right! I used to do individual stock plus trading until I come across boglehead. I still like to use moving averages to see the current market trend for the time and day to buy but I would force myself to purchase at the end of every month anyway. Just some small entertainment of mine. I never succeed in buying the lowest :(
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Re: U.S. stocks in free fall

Post by Marseille07 »

NASDAQ futures already -0.6%, Nikkei -1.8%. Might be another ugly day...
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Re: U.S. stocks in free fall

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Marseille07 wrote: Tue Jan 18, 2022 9:14 pm NASDAQ futures already -0.6%, Nikkei -1.8%. Might be another ugly day...
Great news for us accumulators! :D
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Re: U.S. stocks in free fall

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willthrill81 wrote: Tue Jan 18, 2022 9:19 pm
Marseille07 wrote: Tue Jan 18, 2022 9:14 pm NASDAQ futures already -0.6%, Nikkei -1.8%. Might be another ugly day...
Great news for us accumulators! :D
Yeah, though imo we need a bigger drop. Based on my notes, correction level (-10%) is at 4316.90; not quite there yet, let alone a bear market (-20%).
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Re: U.S. stocks in free fall

Post by JoMoney »

Hate to say it, but I'd feel better about the market if let off a lot of the steam it pumped in recent times.
+80% in 3 years just doesn't feel justified, especially on top of the decade prior...
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Re: U.S. stocks in free fall

Post by Victor Eremita »

Marseille07 wrote: Tue Jan 18, 2022 9:23 pm
willthrill81 wrote: Tue Jan 18, 2022 9:19 pm
Marseille07 wrote: Tue Jan 18, 2022 9:14 pm NASDAQ futures already -0.6%, Nikkei -1.8%. Might be another ugly day...
Great news for us accumulators! :D
Yeah, though imo we need a bigger drop. Based on my notes, correction level (-10%) is at 4316.90; not quite there yet, let alone a bear market (-20%).
But for every one person saying this, 10 others are buying the dip.. It's quite possible, although unlikely, that we go through the year without a correction (says someone who maxed out their 401K contributions on 1/1/22 DOH!). Good thing I have some dry powder for my taxable account.
Last edited by Victor Eremita on Tue Jan 18, 2022 9:41 pm, edited 2 times in total.
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Re: U.S. stocks in free fall

Post by peskypesky »

km91 wrote: Tue Jan 18, 2022 5:02 pm The Fed does not conduct monetary policy by influencing the "money supply."
"Historically, in efforts to ensure that central banks managed financial conditions in a way consistent with achieving low and stable inflation over time, various nominal anchors have been adopted or proposed in the United States and other countries. A nominal anchor is a variable--such as the price of a particular commodity, an exchange rate, or the money supply--that is thought to bear a stable relationship to the price level or the rate of inflation over some period of time. The adoption of a nominal anchor is intended to help households and businesses form expectations about the conduct of monetary policy and future inflation; stable inflation expectations can, in turn, help stabilize actual inflation.
...

Another example of a nominal anchor is money supply targeting. Under this approach, the central bank expands the money supply at a pre-specified, and typically fixed, rate over time. By controlling the expansion of the money supply, the central bank expects, in turn, to limit changes in the inflation rate. To help reduce the inflation rate from the elevated levels experienced in the 1970s, many central banks, including the Fed, incorporated such targets into their policy frameworks."

https://www.federalreserve.gov/monetary ... policy.htm

"The Fed controls the supply of money by increasing or decreasing the monetary base. The monetary base is related to the size of the Fed's balance sheet; specifically, it is currency in circulation plus the deposit balances that depository institutions hold with the Federal Reserve. The Fed has essentially complete control over the size of the monetary base.

The primary way the Fed controls the monetary base is through open market operations: buying or selling securities. To increase the monetary base, the Fed buys securities from any party and pays with a check. That check, written on the Fed, is deposited by a bank in its account with the Fed, thereby adding to its reserves and increasing the monetary base. The same process works for decreasing the monetary base: The Fed sells securities, getting a check from a bank in exchange. When the check is deposited, the bank's balance at the Fed decreases.

The total supply of money (M1) consists of currency held by the public and checkable deposit balances of banks and other depository institutions. The money supply and the monetary base are linked by reserves, i.e., vault cash and deposit balances held at Federal Reserve banks. While the Fed's control over the size of the monetary base is complete, its control over the money supply is not. One major reason for this is banks can choose to hold the additional base money (i.e., deposit balances with the Federal Reserve banks) supplied by the Fed as excess reserves."

https://www.stlouisfed.org/on-the-econo ... pply-money
Last edited by peskypesky on Tue Jan 18, 2022 9:49 pm, edited 2 times in total.
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Re: U.S. stocks in free fall

Post by Marseille07 »

Victor Eremita wrote: Tue Jan 18, 2022 9:35 pm But for every one person saying this, 10 others are buying the dip.. It's quite possible, although unlikely, that we go through the year without a correction (says someone who maxed out their 401K contributions on 1/1/21 DOH!). Good thing I have some dry powder for my taxable account.
Don't worry, my contributions went in and my account balance is down despite the added money :sob:
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Re: U.S. stocks in free fall

Post by willthrill81 »

Victor Eremita wrote: Tue Jan 18, 2022 9:35 pm
Marseille07 wrote: Tue Jan 18, 2022 9:23 pm
willthrill81 wrote: Tue Jan 18, 2022 9:19 pm
Marseille07 wrote: Tue Jan 18, 2022 9:14 pm NASDAQ futures already -0.6%, Nikkei -1.8%. Might be another ugly day...
Great news for us accumulators! :D
Yeah, though imo we need a bigger drop. Based on my notes, correction level (-10%) is at 4316.90; not quite there yet, let alone a bear market (-20%).
But for every one person saying this, 10 others are buying the dip.. It's quite possible, although unlikely, that we go through the year without a correction (says someone who maxed out their 401K contributions on 1/1/22 DOH!). Good thing I have some dry powder for my taxable account.
How many retail investors are willing to sacrifice their non-volatile funds to buy stocks that are clearly trending downwards? Maybe some are, but I really doubt that they outnumber the bears by 10 to 1.
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Re: U.S. stocks in free fall

Post by willthrill81 »

Marseille07 wrote: Tue Jan 18, 2022 9:23 pm
willthrill81 wrote: Tue Jan 18, 2022 9:19 pm
Marseille07 wrote: Tue Jan 18, 2022 9:14 pm NASDAQ futures already -0.6%, Nikkei -1.8%. Might be another ugly day...
Great news for us accumulators! :D
Yeah, though imo we need a bigger drop. Based on my notes, correction level (-10%) is at 4316.90; not quite there yet, let alone a bear market (-20%).
I'll take what I can get. :mrgreen:
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Re: U.S. stocks in free fall

Post by stocknoob4111 »

A 10% correction is healthy... we haven't had one in ages, I think if we have a SOLID correction then it will quiet people who keep screaming BUBBLE all the time so I welcome it.
quattro73
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Re: U.S. stocks in free fall

Post by quattro73 »

km91 wrote: Tue Jan 18, 2022 5:02 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.
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.
The created bank reserves allow the money center banks to lend more, and potentially lend more aggressively especially when lower rates are layered on top. The theory has always been that the influx of reserves (effectively cash) on turn banks balance sheet will cause them to lend. That will spur economic activity, which will build and multiple on itself cascading through the economy.
Victor Eremita
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Re: U.S. stocks in free fall

Post by Victor Eremita »

willthrill81 wrote: Tue Jan 18, 2022 9:43 pm
Victor Eremita wrote: Tue Jan 18, 2022 9:35 pm
Marseille07 wrote: Tue Jan 18, 2022 9:23 pm
willthrill81 wrote: Tue Jan 18, 2022 9:19 pm
Marseille07 wrote: Tue Jan 18, 2022 9:14 pm NASDAQ futures already -0.6%, Nikkei -1.8%. Might be another ugly day...
Great news for us accumulators! :D
Yeah, though imo we need a bigger drop. Based on my notes, correction level (-10%) is at 4316.90; not quite there yet, let alone a bear market (-20%).
But for every one person saying this, 10 others are buying the dip.. It's quite possible, although unlikely, that we go through the year without a correction (says someone who maxed out their 401K contributions on 1/1/22 DOH!). Good thing I have some dry powder for my taxable account.
How many retail investors are willing to sacrifice their non-volatile funds to buy stocks that are clearly trending downwards? Maybe some are, but I really doubt that they outnumber the bears by 10 to 1.
https://www.cnbc.com/2021/12/16/big-wea ... -cash.html

There's supposedly lots of cash on the sidelines. On the other hand, I don't know how many people are thinking "well gee, it's been a nice couple of years, maybe I should cash out now." That would be very bad.
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Re: U.S. stocks in free fall

Post by willthrill81 »

Victor Eremita wrote: Tue Jan 18, 2022 10:01 pm
willthrill81 wrote: Tue Jan 18, 2022 9:43 pm
Victor Eremita wrote: Tue Jan 18, 2022 9:35 pm
Marseille07 wrote: Tue Jan 18, 2022 9:23 pm
willthrill81 wrote: Tue Jan 18, 2022 9:19 pm

Great news for us accumulators! :D
Yeah, though imo we need a bigger drop. Based on my notes, correction level (-10%) is at 4316.90; not quite there yet, let alone a bear market (-20%).
But for every one person saying this, 10 others are buying the dip.. It's quite possible, although unlikely, that we go through the year without a correction (says someone who maxed out their 401K contributions on 1/1/22 DOH!). Good thing I have some dry powder for my taxable account.
How many retail investors are willing to sacrifice their non-volatile funds to buy stocks that are clearly trending downwards? Maybe some are, but I really doubt that they outnumber the bears by 10 to 1.
https://www.cnbc.com/2021/12/16/big-wea ... -cash.html

There's supposedly lots of cash on the sidelines. On the other hand, I don't know how many people are thinking "well gee, it's been a nice couple of years, maybe I should cash out now." That would be very bad.
I'm far more inclined to believe the latter. With four Fed hikes on the near-term horizon, many with cash will seemingly be happy to see those hikes coming soon and would seem doubtful to me to want to buy stocks with it.

This feels more like 'sell near the peak' than 'buy the dip'.

Again, lower stock prices are truly good news for accumulators.
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Victor Eremita
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Re: U.S. stocks in free fall

Post by Victor Eremita »

willthrill81 wrote: Tue Jan 18, 2022 10:03 pm
Victor Eremita wrote: Tue Jan 18, 2022 10:01 pm
willthrill81 wrote: Tue Jan 18, 2022 9:43 pm
Victor Eremita wrote: Tue Jan 18, 2022 9:35 pm
Marseille07 wrote: Tue Jan 18, 2022 9:23 pm

Yeah, though imo we need a bigger drop. Based on my notes, correction level (-10%) is at 4316.90; not quite there yet, let alone a bear market (-20%).
But for every one person saying this, 10 others are buying the dip.. It's quite possible, although unlikely, that we go through the year without a correction (says someone who maxed out their 401K contributions on 1/1/22 DOH!). Good thing I have some dry powder for my taxable account.
How many retail investors are willing to sacrifice their non-volatile funds to buy stocks that are clearly trending downwards? Maybe some are, but I really doubt that they outnumber the bears by 10 to 1.
https://www.cnbc.com/2021/12/16/big-wea ... -cash.html

There's supposedly lots of cash on the sidelines. On the other hand, I don't know how many people are thinking "well gee, it's been a nice couple of years, maybe I should cash out now." That would be very bad.
I'm far more inclined to believe the latter. With four Fed hikes on the near-term horizon, many with cash will seemingly be happy to see those hikes coming soon and would seem doubtful to me to want to buy stocks with it.

This feels more like 'sell near the peak' than 'buy the dip'.

Again, lower stock prices are truly good news for accumulators.
Agreed. I welcome the rate hikes. It'll be good time to put some money away in our kids' 529s which will have a portion in bonds.
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Re: U.S. stocks in free fall

Post by stocknoob4111 »

futures deep red.. brace, this baby is goin down....
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Re: U.S. stocks in free fall

Post by Marseille07 »

stocknoob4111 wrote: Tue Jan 18, 2022 11:26 pm futures deep red.. brace, this baby is goin down....
Unless that FOMC report...God help us!
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Re: U.S. stocks in free fall

Post by lostdog »

Hmm a correction or bear market incoming?
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fetch5482
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Re: U.S. stocks in free fall

Post by fetch5482 »

Marseille07 wrote: Tue Jan 18, 2022 11:35 pm
stocknoob4111 wrote: Tue Jan 18, 2022 11:26 pm futures deep red.. brace, this baby is goin down....
Unless that FOMC report...God help us!
S&P500 is only 5% below all time highs. Let this baby fall!
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Re: U.S. stocks in free fall

Post by btq96r »

I agree assets got too high too fast. Funny how we never call that inflation, since it's not milk or bacon or something.

And while I'm not panicking at recent drops, I'm not celebrating either. I'd of been just fine with some suspended animation, but markets tend to extremes I suppose.
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Re: U.S. stocks in free fall

Post by Hyperchicken »

gas_balloon wrote: Tue Jan 18, 2022 11:43 pm S&P500 is only 5% below all time highs. Let this baby fall!
So far.
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peskypesky
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Re: U.S. stocks in free fall

Post by peskypesky »

btq96r wrote: Tue Jan 18, 2022 11:49 pm I agree assets got too high too fast. Funny how we never call that inflation, since it's not milk or bacon or something.
It's absolutely inflation.
"The first 3 rounds of Quantitative Easing (QE) pumped $5 trillion into stock and bond markets. Security prices are inflated with newly printed QE money."
https://www.nasdaq.com/articles/we-have ... 2020-05-19
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Re: U.S. stocks in free fall

Post by mrspock »

Is this the part where everyone hyperventilates over what is by historical records, completely normal volatility, only for the market to hit ATH’s again in 4 weeks?

Ya… that’s what I thought. Back to my book.
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Re: U.S. stocks in free fall

Post by Jimsad »

gas_balloon wrote: Tue Jan 18, 2022 11:43 pm
Marseille07 wrote: Tue Jan 18, 2022 11:35 pm
stocknoob4111 wrote: Tue Jan 18, 2022 11:26 pm futures deep red.. brace, this baby is goin down....
Unless that FOMC report...God help us!
S&P500 is only 5% below all time highs. Let this baby fall!
Be careful what you wish for!
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Re: U.S. stocks in free fall

Post by Tom_T »

mrspock wrote: Wed Jan 19, 2022 3:14 am Is this the part where everyone hyperventilates over what is by historical records, completely normal volatility, only for the market to hit ATH’s again in 4 weeks?

Ya… that’s what I thought. Back to my book.
Sometimes that's the case. Sometimes it isn't; that's in historical records, too. We'll find out.
Faisal
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Re: U.S. stocks in free fall

Post by Faisal »

A market correction is in order just because everything so super inflated. Housing, cars, commodity prices and then the market itself. I have a small amount of dry powder waiting for a 10 to 15% correction. Like others I would feel a lot better for the long term if we had a dip or two this year to put a speed break on this run away train.
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JoinTheLocalizer
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Re: U.S. stocks in free fall

Post by JoinTheLocalizer »

Jimsad wrote: Wed Jan 19, 2022 4:40 am
gas_balloon wrote: Tue Jan 18, 2022 11:43 pm
Marseille07 wrote: Tue Jan 18, 2022 11:35 pm
stocknoob4111 wrote: Tue Jan 18, 2022 11:26 pm futures deep red.. brace, this baby is goin down....
Unless that FOMC report...God help us!
S&P500 is only 5% below all time highs. Let this baby fall!
Be careful what you wish for!
Recessions are good and healthy to purge misallocations. Therefore, I'm wishing for it.
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Re: U.S. stocks in free fall

Post by Stinky »

stocknoob4111 wrote: Tue Jan 18, 2022 11:26 pm futures deep red.. brace, this baby is goin down....
They're green now. :moneybag

Time to change threads.
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6NDone
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Re: U.S. stocks in free fall

Post by 6NDone »

JoinTheLocalizer wrote: Wed Jan 19, 2022 6:44 am
Jimsad wrote: Wed Jan 19, 2022 4:40 am
gas_balloon wrote: Tue Jan 18, 2022 11:43 pm
Marseille07 wrote: Tue Jan 18, 2022 11:35 pm
stocknoob4111 wrote: Tue Jan 18, 2022 11:26 pm futures deep red.. brace, this baby is goin down....
Unless that FOMC report...God help us!
S&P500 is only 5% below all time highs. Let this baby fall!
Be careful what you wish for!
Recessions are good and healthy to purge misallocations. Therefore, I'm wishing for it.
Just curious, where you around during the 2008-9 recession? When there was significant loss of jobs, homes, and life savings? When the the market plunged so deep and swift that "stay the course" sounded a lot easier said than done when you are losing significant wealth every day and the entire financial system on the edge of abyss? When you didn't know if your portfolio would recover in 2 years or 20, or at all in your lifetime?

Recessions are a normal part of the business cycle, true. But let's not forget they can bring real, tangible loss and suffering to a lot of people.
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