STOCKS GET CRUSHED (-470): Here's What You Need To Know

BI ^ | 9-1-2015 | Myles Udland

[blam]

Myles Udland
September 1, 2015

It was an ugly day for the markets, as each of the major US indexes dropped nearly 3% to start September, which is traditionally the weakest month of the year for the stock market.

Oil got slammed on Tuesday, falling 8% with West Texas Intermdiate crude prices falling back near $45 a barrel after a 30% run-up in just 3 days saw WTI erase most all of its August losses.

Stocks started the day deep in the red and the selling pressure hardly relented at all into the closing, sending stocks out on their lows for the second straight Tuesday.

First, the scoreboard:

• Dow: 16,058, -470, (-2.8%)
• S&P 500: 1,913, -58, (-2.9%)
• Nasdaq: 4,636, -140-, (-2.9%)

And now, the top stories on Tuesday:

(snip)

[Cold Heat]

That’s true....But markets as wealth creation models, have always had a rather fake façade.

But given time, they return to stability...

In this case, as you said, the Fed Bank has manipulated and undergirded the market for the past 7 years. They have now exhausted their ability to continue to do this in any effective way, (assuming you might think they have been effective at all)

In any case, this cannot continue and the Piper has to be paid at some point. The long delayed market clearing will occur in a huge rush without any way to control outcomes this time.

[Kartographer]

But what if this is just the lip of the dip?

[jwalsh07]

Yes. Buying low and selling high is only for hedge funds. Joe Sixpack has to buy perpetually so he can get clipped by Harry Hedge periodically but it does not matter so long as Mr Sixpack holds until he passes. No affect at all on his net worth.

[Cold Heat]

I’ve been reading zerohedge since his first article and tweets...

Not always on the mark, but he’s often early..

[MarchonDC09122009]

I agree, and should’ve indicated I was being sarcastic.
This country’s economy is so out of whack.
Our currency and markets will eventually reflect reality.

[jwalsh07]

Oh, undoubtedly. The irrational exuberance exhibited by the fed in propping up markets for political purposes is gonna leave a mark.

[Cold Heat]

Reality always wins in the end....

That is what 1929 was about, the 2000 tech bust, the 2008 real-estate bust, and now the 20?? government bullshite inspired mother of all corrections..

[DiogenesLamp]

But given time, they return to stability...

That was before they became run by the "Borg Collective." Big monied players have hired very brilliant minds to devise algorithms which buy and sell the churn, and therefore make money pretty fast and regularly.

It is my understanding that we now have numerous versions of these warring computer systems screwing with the market, and very much outside the confines of normal economic based market activity.

The Computers are causing in the market what they are predicting for Global Warming.

Back before the advent of powerful and interconnected computers, this sort of crap wasn't possible.

We are in uncharted waters now, and there is no guarantee that actual market forces work any longer.

Skynet is running this simulation.

[DiogenesLamp]

I’ve been reading zerohedge since his first article and tweets...

Not always on the mark, but he’s often early..

I have a friend with which I was discussing this stuff over lunch. He was chastising me for my perpetual gloomy predictions. He says he's been hearing "doom and gloom" for years, and it hasn't happened yet.

I told him that a Man might not be able to tell you exactly when an avalanche is going to let loose, but he can sure watch the ice and snow packing up on the mountain.

I said my current understanding of the Nation's finances, and financial underpinnings does not conform to my understanding of a stable reality.

I said the only reason our money still has any value is because most of the public is unaware of just how precarious is it's value currently. It continues to exist only because of much misplaced faith in it as a stable currency.

It isn't. Neither are most of the others. Everything is over leveraged and inflated because people always want the easy solution to their problems.

H3ll, this debasement of Currency is one of the things that felled Rome. Now the entire World is doing it.

[Leaning Right]

After wading through the sarcasm, I was able to see your point. But I think the key is holding time. If you're holding a good index fund for 10+ years, the odds are in your favor. Add to that annually rebalancing, rotating out of stocks and into bonds as you get older, and you should be OK, OK meaning you'll probably do better there than those in bank CD’s.

But I do note the “probably” in the above. For some folks, that's not good enough, and I respect that.

[wrench]

“But what if this is just the lip of the dip?”

Or that last little rally was a dead cat bounce?

[Cold Heat]

Yeah....you have that and dark pools, algos etc, but these I think we can deal with and the markets are dealing with it by way of stronger regulation and trading halts which totally screw the algo operator....lol

I am less concerned about that then I am the notion that currency has been digitized, and actual currency in the form of paper money (unbacked except by a promise) is very, very short supply. Any increase in demand for greenbacks, will cause the banking system to go into a coma!

[Cold Heat]

Yup....at age 65, ten years is a very long time..

[Cold Heat]

Now the entire World is doing it.

Eggsactly so....

[Leaning Right]

at age 65, ten years is a very long time

There is an old investing rule that said your percentage in stocks should be your 100 - your age. Most modern financial planners discount that rule, but it always made some sense to me.

[21twelve]

“Skynet is running this simulation.”

I watched one of those internet science things - I forget the name but always has interesting stuff on it. The guy was talking about how computers, and algorithms are doing so much more now. With the stock market he said they are taking old buildings on the west side of Manhattan and turning them into giant servers - the entire building! They are on the west side so the information they receive gets there a half a nanosecond before their competition on Wall Street.

And the computers make the trades based on the algorithms and information. That type of thing was probably responsible for the huge swings over a few minute periods we have observed in the past.

[Cold Heat]

Well, I am 70% in cash and the rest in a short play (VIX) that I play everyday...

I cannot afford to lose more than 30%, so that’s my limit.

There was a time when I could afford to lose it all because I could earn it back.

So that’s the rule I use.....I ask myself what I can afford to lose.

[Cold Heat]

yeah, they can add to large swings in the market but they also, at the same time, add liquidity that is absolutely essential.

It’s only when they get spooked and withdraw from the market that liquidity issues arise and the huge swings occur..

[SoFloFreeper]

[wiggen]

Yes. When people have this conversation with me i always ask why not start in the 1830’s when the DJIA dipped to 30 something. Yes. That’s the full price. Two digits.