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)

[KYGrandma]

Yep, sold off a bunch in July.

[wiggen]

Wealth is spent, wealth is taxed, those taxes are used to make the lives of illegals better here. Don’t tell me those tax dollars aren’t lost and wasted.

[DiogenesLamp]

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!

I am concerned about that too. One can go neurotic just contemplating all the possible avenues of potential trouble. Bit Coins? Heaven help us.

[wiggen]

Not even 2008 because its not a threat to the system. No banks in trouble. Thats where we start defining problems.

[DiogenesLamp]

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.

That is exactly the phenomena to which I am referring. If anything can precipitate a "black swan" event, it is stuff like this.

That getting there a half nanosecond before the other orders is a deliberate effort to game the system. In fact, I believe this stuff is how Bloomberg made his money.

[sparklite2]

Agreed. I think we’re one election
away from boom times.

[jdsteel]

Here’s what is interesting to me; China has purchased $1.5 Trillion of US debt, most all at higher interest rates than now. I hear they’ve been selling, which under normal circumstances would put upward pressure on mid and long term US interest rates and the dollar. They are selling at a premium since their holding better paying bonds than what we are currently selling, and I thin they see it as a good time to do so. BUT, due to global fear and lack of a debt alternative in the global markets US rates are going down. It helps that, due to the sequester, we are only issuing half the debt we did a few years ago. Bottom line? IMHO the Fed sees this as well, will increase short term rates and things may start to normalize. The ChiComs will have a bit less reason to sell, people will pay attention to the slightly positive economic news, and the slowest weakest recovery since the Great Depression will slog on.

[al baby]

Bu Bu But Friday they said we are now in a recovery and up market

[al baby]

Lighten up Francis

[al baby]

Someone said a trillion per 700 points on the dow last week beats me

[CincyRichieRich]

If you know you have quality stocks then don’t sell. Doubting oneself if how weak hands are shaken out. Some cash and some gold and ssilvr as a fall-back.

Also could be gearing up for Shimetah.

[zek157]

Keeping things in perspective, what is behind the volatility? Value??

[CincyRichieRich]

If you know you have quality stocks then don’t sell. Doubting oneself if how weak hands are shaken out. Some cash and some gold and ssilvr as a fall-back.

Also could be gearing up for Shimetah.

[aMorePerfectUnion]

“If you’re in for the very long term, don’t sell.”

During the depression, it took 25 years to get back to even. I hope you’re in it for the very long term.

[Georgia Girl 2]

China is on the meltdown. The BDI is in the toilet of course the stock market is going to “correct”. This is just part of the slow downward spiral into total depression.

[fwdude]

So, taking a loss is better than getting back to even?

[jdsteel]

Sorry; “their” = “they’re” Being my own spellcheck after the fact!!!!

[aMorePerfectUnion]

“So, taking a loss is better than getting back to even?”

No. Preserving your gains is better than spending decades trying to get back to even.

[wiggen]

coal is terminal.thats a lot of jobs slowly disappearing. Oil will bounce back but not sure how many jobs that replaces as tech is working its magic there. I truly don’t see the real unemployment number which includes discouraged workers ever going below 8%. Not sure theres ever a real roots up recovery especially as politicians seem intent on bringing in more people and to put it bluntly dilute our standard of living. Doesn’t mean stocks won’t rally but fewer will be able to take advantage of that.

[entropy12]

keeping things in perspective, average returns on SPX 500 (which is most of the stock market value) has averaged 6-7% over many decades. From the 2008-2009 bottom market has advanced 215% in 7 years. That is 4 times faster than average. While economy has grown less than 3% per year.

So this market is way overvalued. All it takes is a hiccup somewhere for market to tumble. Right now it is China slowing down. To get back to historical average valuations, this market needs to drop another 25%. Overvalued market are prone to higher volatility.