Wall Street Crash

Otto Maddox wrote: One thing that does bother me...all financial information was available to everyone before S&P dropped their rating. With an efficient market hypothesis, the market should not have changed much. But it did.

I'm beginning to think that there's more of a coincidence than a correlation here - don't forget that roughly at the same time, the AIG/BAC lawsuit was announced, plus the debt crisis in Europe (which is much more real IMHO than the Washington theatre one) has intensified considerably.

There are also rumours that a bunch of investment companies/funds/whatever are getting margin calls on illiquid investments, so they have to sell the liquid ones in order to not go broke, which triggers additional sell-offs in those liquid investments because automated trading systems are seeing prices hit their 'sell levels', too. Rinse, lather, repeat - something like this creates the perfect condition for market correlations to basically go to 1, which in layman's terms mean that supposedly unrelated stocks/assets suddenly exhibiting the same price moves even if they normally don't. This has actually been made worse with the increased reliance on computer models that somehow all work the same (not a surprise, given how incestuous investment banking is as an industry), so the software everywhere is picking up the same sell signals.

There's also an additional issue that a lot of the QE2 funds and other money printed by Helicopter Ben that was supposed to get the economy going again by increasing lending seems to have gone into trading activities (not a big secret, this), which pushed stock and commodity prices higher than you'd expect given the underlying economic fundamentals, so another argument is that we're seeing a correction to the more appropriate levels at the moment.

We can pretty much discount the efficient market hypothesis in the financial arena, otherwise we wouldn't have the TBTF banks, remnants of AIG and other black holes, plus the assorted financial zombies that are being kept alive by central bank interventions in the hope that this blows over. They're trying the same playbook they used with (amongst others) the Mexican peso crisis and Latin American debt crisis, basically "extent & pretend" that the banks aren't insolvent and hope that they get back on their feet before anybody notices.

914Driver wrote: A girl I work with took everything out of the market and put it into some low yield savings type account. At that rate, how long before you get back the money you just lost? You only lose money if you actually take it out, right?

Yes, until you sell the investments that are showing paper losses, that's all they are - paper losses. When you sell them, you lock in the loss. Panic early, panic often as an investment style basically guarantees you'll walk away with maximum losses.

914Driver wrote: My 401k dropped ~$12k but I'm guessing things are low, cheap and when it goes up everything I bought low will be worth more. ...or am I missing something?

That's the way I look at it - I'll probably have to look at my minuscule 401k with an eye on a little rebalancing but I'm actually considering to bump up the contributions a little on this slide down for the exact reason you mention. Then again I have quite a while until retirement anyway.

The way I'm looking at it is that if you're investing, you'll do it for the long term and you almost have to shut out the noise from the news or take negative signals to buy.

If you're selling on the rumour that a sack of rice keeled over in China, you're not investing, you're trading. And then you're up against big financial institutions and hedge funds with a PhD density that puts Harvard to shame. Given that even these guys get it wrong on a regular basis, Joe Schmoe Daytrader is a small fish that gets filleted.

(Disclaimer - I worked on trading software for quite a while and have worked, but not traded on more than one trading floor. There's a reason I don't "day trade" ).

What the smurf did they do to the Dow? The smurfing smurfs in Washington have gone done smurfed things up the the last smurfing time. Smurfing smurfs...

RossD wrote: What the smurf did they do to the Dow? The smurfing smurfs in Washington have gone done smurfed things up the the last smurfing time. Smurfing smurfs...

I am getting really tired of those smug smurfin' smurfholes on Wall Street and the smurftards in Washington that worship them.

BoxheadTim wrote: If you're selling on the rumour that a sack of rice keeled over in China, you're not investing, you're trading. And then you're up against big financial institutions and hedge funds with a PhD density that puts Harvard to shame. Given that even these guys get it wrong on a regular basis, Joe Schmoe Daytrader is a small fish that gets filleted.

I work with a guy who's nearing retirement (actually did retire and then went back to work) who does a lot of day-trading with his wife doing the actual trading at home... We usually don't have to watch the market... we can tell how it's doing based on his mood.

Ian F wrote: Yup. Were I a lot closer to retirement, I might be concerned... but even then, were I closer to retirement, I wouldn't have so much money in volatile investments...

This is the thing I can't fathom - when I read in the news about retired people taking big hits in their 401k's, I wonder why they're still invested in volatile funds.

Bigger risks = bigger dividends (and hits).

I'm in a system where as you get closer to retirement they back off on the risk and put your money in something less risky but lower returns. I want to make more so I keep it in the ligher risk/dividend pile, I'm guessing other old people are doing the same.

Dan

In reply to stuart in mn:

What isn't volatile these days? Cash doesn't seem like a great option.

cwh wrote: Reading all the gloom and doom in the papers, I'm beginning to wonder if we might be in the early stages of a real crash. Global economy in the trash, US credit rating dropped, shaky economy here getting worse, dollar value sinking, race riots in England and Europe, generally a lot of crap happening. Anybody else concerned?

This is not the early stages....the crash started in 2008. The folks running the show have been desperately trying to maintain the status quo since then, but the impossible math of debt-based money is catching up with them.

The big drop yesterday I too think had more to do with AIG suit against BoA than any of the mess with the Euro.

stuart in mn wrote:

cwh wrote: Reading all the gloom and doom in the papers

That's your problem right there... The mass media is not the best source of investment advice.

Its not good for specifics, but as far as a general mood...

Do you ever wonder if the stock market has just become a place that we all put our money so people like George Soros or even Warren Buffet can use inside info, manipulate the market with huge trades, etc. and make a billion dollars when the mood strikes them?

Otto Maddox wrote: has just become

Where have you been? This has always been the case. The rich get richer, it's hard to lose money when you have it all

914Driver wrote: I'm in a system where as you get closer to retirement they back off on the risk and put your money in something less risky but lower returns. I want to make more so I keep it in the ligher risk/dividend pile, I'm guessing other old people are doing the same.

That's fine as long as you acknowledge that it is a gamble to do so...the whole idea is as you get older there's less time to make up for drops in the market. Young people starting out can afford to roll the dice, since they have another 30 years or so to make up for losses along the way. I only have five or ten years to go myself, and since I'm not the gambling type I'm starting to ramp down.

therein lies my problem... I've finally overcome the huge losses of '08 just to see this happen .... had plans to retire within the next 3 yrs... hope the market makes a huge upward adjustment so I can.... really don't want to be still working well into my 70's

wbjones wrote: hope the market makes a huge upward adjustment so I can.... really don't want to be still working well into my 70's

Well, it did. Huge? Dunno. But big, for sure.

HiTempguy wrote:

Otto Maddox wrote: has just become

Where have you been? This has always been the case. The rich get richer, it's hard to lose money when you have it all

If you are not one of the insiders with a HFT computer then you are a sucker playing the market. It is so manipulated that it really isn't much of a market at all. BTW, I have money in it through my 401k so I count myself as one of the suckers.

T.J. wrote: If you are not one of the insiders with a HFT computer then you are a sucker playing the market. It is so manipulated that it really isn't much of a market at all. BTW, I have money in it through my 401k so I count myself as one of the suckers.

This isn't really true.

Lack of knowledge might qualify you as a sucker (like me), but there are a LOT of people who make money with no connection whatsoever to a HFT.

High frequency traders have limits on how much they can move at one time. So the advantage they gain with instantaneous info is partially negated because they can't go "all in".

Small traders have no such limit. It means that the HFT's get in slightly earlier, but they have to buy (or sell) at multiple price points which eats into their gains. Small traders can get in later but make as much (or more) money because they buy at the one favorable price.

I'm pretty sure it's all joe bush's fault. Him and the terrorists, and by terrorists, I mean old people who like sarah palin.

wbjones wrote: therein lies my problem... I've finally overcome the huge losses of '08 just to see this happen .... had plans to retire within the next 3 yrs... hope the market makes a huge upward adjustment so I can.... really don't want to be still working well into my 70's

statistically you will live longer if you do.

SVreX wrote:

T.J. wrote: If you are not one of the insiders with a HFT computer then you are a sucker playing the market. It is so manipulated that it really isn't much of a market at all. BTW, I have money in it through my 401k so I count myself as one of the suckers.

This isn't really true. Lack of knowledge might qualify you as a sucker (like me), but there are a LOT of people who make money with no connection whatsoever to a HFT. High frequency traders have limits on how much they can move at one time. So the advantage they gain with instantaneous info is partially negated because they can't go "all in". Small traders have no such limit. It means that the HFT's get in slightly earlier, but they have to buy (or sell) at multiple price points which eats into their gains. Small traders can get in later but make as much (or more) money because they buy at the one favorable price.

Look at Goldman's or JP Morgan's trading records. They go entire quarters without a loosing day. They make billions at it. Do you not think that they control the market. I think anyone who thinks they can win at a rigged game is only fooling themselves. Sure it can work for a while, but in the end the little guy is not going to win. The market is captured and controlled.

T.J. wrote:

SVreX wrote:

T.J. wrote: If you are not one of the insiders with a HFT computer then you are a sucker playing the market. It is so manipulated that it really isn't much of a market at all. BTW, I have money in it through my 401k so I count myself as one of the suckers.

This isn't really true. Lack of knowledge might qualify you as a sucker (like me), but there are a LOT of people who make money with no connection whatsoever to a HFT. High frequency traders have limits on how much they can move at one time. So the advantage they gain with instantaneous info is partially negated because they can't go "all in". Small traders have no such limit. It means that the HFT's get in slightly earlier, but they have to buy (or sell) at multiple price points which eats into their gains. Small traders can get in later but make as much (or more) money because they buy at the one favorable price.

Look at Goldman's or JP Morgan's trading records. They go entire quarters without a loosing day. They make billions at it. Do you not think that they control the market. I think anyone who thinks they can win at a rigged game is only fooling themselves. Sure it can work for a while, but in the end the little guy is not going to win. The market is captured and controlled. That's my opinion and that's why I try to stay as far away from it as possible.

fast_eddie_72 wrote:

wbjones wrote: hope the market makes a huge upward adjustment so I can.... really don't want to be still working well into my 70's

Well, it did. Huge? Dunno. But big, for sure.

Aaaaand, right back down. This is crazy. I sure would have looked smart if I'd moved the other half of my 401k out of the market yesterday. But I may today.

poopshovel wrote: I'm pretty sure it's all joe bush's fault. Him and the terrorists, and by terrorists, I mean old people who like sarah palin.

I think it's George Clinton's fault.

I knew it.

Stupid P Funk.

Let's not be rash.