I congratulate the forum

[Zaphod]

Toe Cheeze wrote:

Wow, with stocks cratering why is the 10Y not dropping in yield? Why is the USDX down? And oh baby, what happening this Sunday night?

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Yeah this week has been more traditional risk off type of day which was not great for banks, which were needed to control the damage.

[FIREshrink]

I can't even get excited about a 10% decline. My reward pathways are all screwed up.

Call me when we're down 30%.

[FIREshrink]

I was much more excited at Dow 6600.

[The White Coat Investor]

FIREshrink wrote:

I was much more excited at Dow 6600.

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The problem with a drop like that is that it effects the economy. It's not "just a buying opportunity," future returns actually get hurt.

[Zaphod]

The White Coat Investor wrote:

FIREshrink wrote:

I was much more excited at Dow 6600.

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The problem with a drop like that is that it effects the economy. It’s not “just a buying opportunity,” future returns actually get hurt.

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Yes. A correction or buying opportunity is nice if you happen to have timed cash flow available. Anything more than that has the possibility of affecting (or reflecting) the greater economy and means things are not great overall and harm is done. You cant get back lost production, and those events are largely negative and we dont want that ever. We just know they will likely occur unfortunately.

[Zaphod]

Its important to see whats implied or thought of as the range in the market. VIX is 25 right now, but thats elevated due to basically closing out on the lows two days in a row. It has been around 15-18 steadily in the good times since volmageddon. Lets say good times mean an SP at around 2700. What does that VIX level imply (not that its true, just what does it mean)?

The VIX is the monthly view of the annual volatility of the market with a 1SD (68%) range. For ease of example, lets use 2700 and a VIX of 15. The VIX of 15 means the market "implies" or thinks is possible within a 1 SD probability that the SP moves +/-15% on the year. That means the expected range would be roughly 2300-3100, which is a massive range but is what it is. This is of course neither perfect nor predictive (in fact the usual case is implied volatility>realized volatility) but helps to color scenarios and whats happening. All it really shows is where/how much people are willing to pay for protection in the options/futures market.

So to put it in context our current trading range of which neither the high or low have been retested (high was breached in NDX) is 2532-2872. This is well within the ranges of even the low but stable VIX we've seen recently. While the speed of the whipping has been a little crazy, the % moves are well within normal bull market years with positive returns. I'll say personally this does not appear to be a healthy market and theres a lot of piling on with geopolitical issues as well, which again is normal unfortunately.

I am not a fan of the what looks like move exacerbating nature or algos and MMs just pulling liquidity every time the market makes a down move. Lots of algo on algo violence lately. Am a little concerned how these exaggerated moves will influence things come the next recession. Starting to think that bigger, scarier moves are almost a given unless something is done to beef up the underlying infrastructure of the market and reign in how powerful some of the derivatives and systematic funds affect the market.

[FIREshrink]

I don't think that's right. The stock market drops in anticipation of the economic pain. By the time it bottoms, future returns are actually better.

[Dr.V. Investor]

Where do you think are we now?  I'm hoping return to normal. People are not anticipating a recession but by the time we get there, it is too late.  DOW 6600 is too much but certainly possible. I would be impressed if people can really "buy and hold forever or stay the course".

[Antares]

Dr.V. Investor wrote:

Where do you think are we now?  I’m hoping return to normal. People are not anticipating a recession but by the time we get there, it is too late.  DOW 6600 is too much but certainly possible. I would be impressed if people can really “buy and hold forever or stay the course”.

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Which people are you referring to? I’m sure some people, as always, will act impulsively or irrationally. But I will not change course at all, because I don’t see any better option.

[janettebournes]

Antares wrote:

Dr.V. Investor wrote:

Where do you think are we now?  I’m hoping return to normal. People are not anticipating a recession but by the time we get there, it is too late.  DOW 6600 is too much but certainly possible. I would be impressed if people can really “buy and hold forever or stay the course”.

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Which people are you referring to? I’m sure some people, as always, will act impulsively or irrationally. But I will not change course at all, because I don’t see any better option.

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I'll be buying and holding forever because I'm not smart enough to know the alternatives. (Some of these permabear posts don't even read like English to me)

Fortunately / unfortunately, buying and holding low cost passive index funds is all I've known in terms of investing.

Luckily for me, I make enough and spend so little that I'm fairly certain I'll be fine no matter what the market provides.

[Zaphod]

FIREshrink wrote:

I don’t think that’s right. The stock market drops in anticipation of the economic pain. By the time it bottoms, future returns are actually better.

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Sometimes gets toppy and can drop prior, but its usually in the midst of a recession and sometimes afterward where its still coming to grips with the fear. At the bottom, by definition returns are better, but to the degree it harms the real economy its not good and depending on the actions of the CBs and policy choices by admin, you're usually pulling future returns forward or some other measure to put people at ease.

The other part to my post above on volatility and how its high this year. That is perfectly normal after a year like last year, where we had volatility at a 50+year low. Low vol years are usually followed by higher vol, everything cycles. It intensifies the discomfort, but its normal.

[BladeRunner]

"Nobody Knows Nuthin"

 

There are simply far too many variables in the equations.