The Stock Market correction thread

Well, it's way too early to call it a crash and it's still technically a correction; but certainly the stock market isn't out of the woods yet. Besides, it took to the financial experts more than a year to recognize the 2007 crisis as such (much longer than to the rest of the American citizens, that's for sure), so I'm creating the thread just in case.

Anyways, here is the chart. The blue line is the stock market index, the orange is the previous 50 days average (ignore the later). Notice the climbing trend since 2016 suddenly cut off in February.

image

This doesn't look like much, but the drop in the past few days has been pretty harsh, with Monday near 5% drop being record-breaking (highest one-day percentage drop since 2011). This has investors nervous as all gains for this year's stock investments have been wiped out.

http://www.foxnews.com/us/2018/02/06/investors-hope-for-reversal-after-biggest-stock-market-dip-all-time.html

Hopefully this thread will die here. But if it doesn't, we'll have some pretty interesting news ahead of us...

It's a definite rout... but way too early to call it s crash. There's a number of factors to consider including the average div yield no longer outpacing safer gambles on bonds that might explain people pulling money out of the share market.

That being said, there are worrying and more esoteric factors to consider. One is that conventional economic theory that market cycles happen on average in 8-12 year cycles. Not only that but whispers of raising interest rates tend to have reciprocal whispers in other markets seeking normative exchange rates also actively considering interest rate rises themselves lest their currency faces a sudden depreciation in value.

And that sort of thing sends ripples throughout world economies in terms of, principally, their own share markets and real estate. Raising interestrates makes their share markets less enticing, particularly to mom and pop investors. I know there are significant qualms in Australia given the sheer volume of interest only loans. Move too aggressively on curtailing them, and you create self-fulfilling prophecies of massive sell-offs and bursting land prices which is thething youact on principally to avoid.

But this might be the straw that breaks the camel's back in terms of our economic performance. A bare minimum of 27 years without a recessionary crisis is already a fairytale economic golden age. Asking for anything more than that is greedy. Just, you know... sucks for anybody with a mortgage or a job in construction.

Once again... way too early to tell if a rout means a crash, but what we can say is that 'this is about the right time to have another one' ...

Having all our funds in the hands of.. Thousands of people who get skittish and can cause global economic collapse has never made sense to me. Those handful of people compared to the Billions they control the fate of... and especially when they aren't elected really strikes me as the biggest failing we as a global community ever allowed to happen.

That being said... news that that the US government seeks to borrow nearly a trillion dollars for 2018 and another trillion next year to cover governmental cost (Seems taxes go to pay for governmental needs... funny that).

This is what Donald Trump is taking a victory lap over. Dependency on other markets to fund and run our government. Certainly a proud moment.

ObsidianJones:
Having all our funds in the hands of.. Thousands of people who get skittish and can cause global economic collapse has never made sense to me. Those handful of people compared to the Billions they control the fate of... and especially when they aren't elected really strikes me as the biggest failing we as a global community ever allowed to happen.

That being said... news that that the US government seeks to borrow nearly a trillion dollars for 2018 and another trillion next year to cover governmental cost (Seems taxes go to pay for governmental needs... funny that).

This is what Donald Trump is taking a victory lap over. Dependency on other markets to fund and run our government. Certainly a proud moment.

Allowed to happen? That has been happening long before the concept of global community was created. That's why each big economic bubble is pretty much the same unlearned lesson repeating itself again.

Reporting indicates that this kind of dip in the stock market was expected and normal. The US stock exchange is in a tenuous place at the moment, but if interest rates are managed properly, there's no need for concern.

Of course, Trump tying the barometer of his success so closely to the stock market was a dumb move from the start. Stocks go up and down. That's normal. For Trump to take responsibility for stocks going up means that he's making it harder for him to deny responsibility when the stocks inevitably go back down.

Then again, he's Trump, so he'll probably just blame traitors or Muslims or Mexicans or Elon Musk or Sadiq Khan or someone.

And this ethereal edifice that panics at rumours and speculation and can cause mass suffering and poverty over abstract values is the basis of our civilisation. Fucking ridiculous.
Nothing better demonstrates the parasitic nature and hostility of the elites to the ability of a working population to thrive, when this is the reaction to them having an extra dollar a week.
Two steps back for every tiny step forward, to feed their growth.

CaitSeith:
Allowed to happen? That has been happening long before the concept of global community was created. That's why each big economic bubble is pretty much the same unlearned lesson repeating itself again.

Yes, allowed to happen. People didn't have to decide that the principle of democracy, that everyone who is affected by a decision should have some say in it, must be pushed aside whenever it might encroach on a rich person's personal fiefdom and his authoritarian control over it.

bastardofmelbourne:
For Trump to take responsibility for stocks going up means that he's making it harder for him to deny responsibility when the stocks inevitably go back down.

Yes, but media, especially social media, is so ephemeral.

Trump touts the stock market when it goes well. It dives, he'll seamlessly shift to championing rising wages, or low unemployment, or whatever else is going well. The memories and attention spans aren't there to catch out the endless moving goalposts amongst most of the population.

What will happen is that after a few years, people will progressively develop an idea about whether they really think their lives, finances and country have improved by the new administration. It'll be that assessment that matters.

Seanchaidh:

CaitSeith:
Allowed to happen? That has been happening long before the concept of global community was created. That's why each big economic bubble is pretty much the same unlearned lesson repeating itself again.

Yes, allowed to happen. People didn't have to decide that the principle of democracy, that everyone who is affected by a decision should have some say in it, must be pushed aside whenever it might encroach on a rich person's personal fiefdom and his authoritarian control over it.

About the principle of democracy, if most people decided not to care about decisions that affect them, the few who do will take the decisions for them. How isn't that democratic? Democracy works only when most people care.

However, rich people influence on everyone's else life pre-dates modern democracy. There is a reason most people don't care about global economics (or even personal economics) until it affects them directly: they aren't taught to care.

The stock market keeps going down. Now it's officially a correction, which means it's expected to keep falling for some months (historically, corrections last 4 months in average). For the sake of the workers, let's hope this doesn't last long (downsizing isn't fun for anyone).

CaitSeith:
For the sake of the workers, let?s hope this doesn?t last long (downsizing isn?t fun for anyone).

It potentially means f*** all for workers.

In practice, a lot of what's going on in the stock market is quite disconnected from employment. Companies can see large changes in share value despite relatively little changing in their operations, revenues and activities and potential; the share price fluctuations are due to irrational optimism or pessimism, fashions, and share trading that effectively amounts to gambling. Companies know about this, and very few are likely to have rashly overreached from the last year or two's rise.

CaitSeith:

Seanchaidh:

CaitSeith:
Allowed to happen? That has been happening long before the concept of global community was created. That's why each big economic bubble is pretty much the same unlearned lesson repeating itself again.

Yes, allowed to happen. People didn't have to decide that the principle of democracy, that everyone who is affected by a decision should have some say in it, must be pushed aside whenever it might encroach on a rich person's personal fiefdom and his authoritarian control over it.

About the principle of democracy, if most people decided not to care about decisions that affect them, the few who do will take the decisions for them. How isn't that democratic? Democracy works only when most people care.

However, rich people influence on everyone's else life pre-dates modern democracy. There is a reason most people don't care about global economics (or even personal economics) until it affects them directly: they aren't taught to care.

The capitalist's authoritarian control over the workplace affects every worker directly, and every non-worker indirectly. Private property and capitalist accumulation affects everyone.

Talking with my finance guy yesterday, apparently all those people still think this is just a correction. Apparently we have been on a hell of a bull-run over the past year, and this is the natural end of that.

Agema:

It potentially means f*** all for workers.

In practice, a lot of what's going on in the stock market is quite disconnected from employment. Companies can see large changes in share value despite relatively little changing in their operations, revenues and activities and potential; the share price fluctuations are due to irrational optimism or pessimism, fashions, and share trading that effectively amounts to gambling. Companies know about this, and very few are likely to have rashly overreached from the last year or two's rise.

Depends ... usually long term corrections, high volatility, and money draining out of the market as other assets prove a greater safe haven tends to have flow on effects. Bad market performance or high volatility also influences new IPOs looking for indirect investment opportunities rather than relying on the banking sector and excess liquidity to fund their expansion. Basically the biggest reasons companies go public is simply that. To pay off the debts incurred n growingtheir enterprise to consolidate greater potential market share so they can negotiate a better deal or simply less debt with a bank, or to finance growing operations and investment into the firm ...

It usually provides useful tax-offsetting means, that have the dual effect of spurring on greater investment in the form of div yields. But the problem therein remains, what happens when div yield returns are no longer worth the risk compared to simple rumours of interest rate hikes and all those middling investors who cannot afford to lose their wealth on the market and want something safer?

Of course if you have a protracted situation where money is leaving the market that will have flow on effects for what would be greater business growth.

Which is problematic, because the value of labour is dependent on demand for labour. So even if you don't see mass lay-offs, that's only half the picture ... what you will see is things like wage stagnation as well as diminishing confidence or a direct reduction of financing for expanding existing operations which is what stimulates new labour demands.

And if companies are getting less money from investors and have to start looking to the banking sector more and more, that comes with a lot shackles to cover labour costs. You can start to see a pattern here. As in less new job openings, and finding ways to cut back on just how they need to pay their labour. Hoping for that overtime? Is it time to renegotiate a contract? Gunning for that internal job-opening promotion and better pay grade? Looking at the jobs market for a new employer? Looking for a job full stop?

Quintessentially even if a worker keeps their job, in a long enough downturn it simply becomes harder to keep it as an ever larger potential talent pool usually means wage stagnation, if not total depreciation of expected negotiating power when it comes to contracted employees putting forward a new workplace agreement to whoever handles their employment.

And investors are not stupid ... this was a long time coming as for the simply fact that bond yields are just simply better market performers when coupled by the safety they offer than a share market that has let their aggregate div yield decline over 3 years to become uncompetitive with far safer options available to all those fund managers and mom and pop investors looking for a place to put their retirement money into.

Corporate debt is somewhat unmanageable ontop of a correction and money leaving the market, AS WELL AS rumours of an interest rate hike that guarantee all those people looking for safety have even greater incentives moving their money elsewhere.

Just taking the ASX 200 on Friday there has been as much as a 2.2% shift over trading hours, normalizing at only .9% down at the close of trade. Which ... you know ... is exciting. There's money to be made somewhere in that mix of chaos.

Agema:

CaitSeith:
For the sake of the workers, let?s hope this doesn?t last long (downsizing isn?t fun for anyone).

It potentially means f*** all for workers.

In practice, a lot of what's going on in the stock market is quite disconnected from employment. Companies can see large changes in share value despite relatively little changing in their operations, revenues and activities and potential; the share price fluctuations are due to irrational optimism or pessimism, fashions, and share trading that effectively amounts to gambling. Companies know about this, and very few are likely to have rashly overreached from the last year or two's rise.

Well, while it shouldn't mean redundancies, it could well prevent creation of jobs. Since increasing the number of shares is often a way of borrowing the money to expand. Or arguably, raising the funds to keep a struggling company afloat (although that tends to just be delaying the inevitable).

But yeah, the turnover of a company is not affected by this in the slightest.

bastardofmelbourne:
Reporting indicates that this kind of dip in the stock market was expected and normal. The US stock exchange is in a tenuous place at the moment, but if interest rates are managed properly, there's no need for concern.

Of course, Trump tying the barometer of his success so closely to the stock market was a dumb move from the start. Stocks go up and down. That's normal. For Trump to take responsibility for stocks going up means that he's making it harder for him to deny responsibility when the stocks inevitably go back down.

Then again, he's Trump, so he'll probably just blame traitors or Muslims or Mexicans or Elon Musk or Sadiq Khan or someone.

Well according to Hannity it's Obama's fault because of course it fucking is. Spineless chucklefuck.

CheetoDust:
Well according to Hannity it's Obama's fault because of course it fucking is. Spineless chucklefuck.

The dumb thing about it is that one thing that US economists generally agree on is that the sitting president usually has a minuscule impact on the health of the economy, if it has any impact at all. The groups with the most influence over the US economy are the Federal Reserve (which sets interest rates and US monetary policy) and major investment banks such as Goldman Sachs, Wells Fargo, or the late Lehman Brothers.

Naturally, neither of those two groups gets that much attention from the news media, because one of the important tasks of a president is to be both a figurehead and a scapegoat. Therefore, you will see intense partisan criticism of any given administration's economic policy irrespective of the actual merit of those policies. Most of those administrations would have shared the same Federal Reserve chairperson as their predecessor. Alan Greenspan was chair for thirty goddamn years, but no-one credits or blames him for the performance of the US economy during that time; they talk about Reagan and Clinton and Bush as if cutting taxes and raising taxes were like deterministic levers - cut taxes = more growth, raise taxes = less growth. It's not that simple, and the president just does not have that much control over the process.

Which is why it was so dumb to see Trump take credit for the stock market's slow and steady rise. Firstly, it was dishonest - the stock market had increased at the same rate under Obama, and had been increasing ever since 2008 because there was literally nowhere to go but up from that point. Secondly, it was amazingly foolish, because as we see, the stock market will always correct itself. But thirdly and most importantly, none of that shit matters because Donald Trump lives and speaks in an alternate universe where he is always right and everything bad is someone else's fault, and people like Hannity are craven enough to prop him up at every opportunity. Even and especially if what he's saying is grade-A bullshit.

I saw an interview with Tucker Carlson somewhere where he defended the amount of airtime his show gives to certain topics - covering anything critical of Obama or Clinton and now anything critical of the FBI, and glossing over anything critical of Trump or the Republican policy agenda - by saying that he was filling a void in coverage that the mainstream media ignored; essentially, he said he saw his job as about evening the scales, and not necessarily about reporting on things in proportion to their importance and/or credibility.

What I wanted to ask Tucker Carlson was whether he thought there were a lot of people out there who watched Fox News and also read the New York Times and the Washington Post and watched CNN all the other media outlets whose liberal bias Carlson claimed to counteract. Because people don't do that. People do not consume media on a bipartisan basis and then filter the information by credibility, no matter how logical that sounds. People watch Fox News because Fox News is on and they like what Hannity and Carlson and (formerly) O'Reilly were saying, and they don't watch any other news shows. Carlson isn't remedying an imbalance in media coverage, he's exacerbating it; because he sees his role as "report on whatever the mainstream media isn't reporting" and not just to do good, solid reporting, he provides an unacceptably skewed set of facts to his audience, who then accept it - because it's on the news, and Carlson is a relatively respectable conservative figure, and they trust him to tell the truth. And he does not tell the truth; in the absence of an actual side-by-side comparison of his coverage with something like CNN, everything he says is a lie by omission. He determines his coverage by thinking "what stories do liberals not report on," not on what stories are actually important.

And that's how you get things like Sean Hannity giving the then-breaking news of Democratic victories in the Virginia and New Jersey statehouses about six spare seconds of airtime. They're thinking, "we don't need to report on this, CNN will report on it," and that makes them feel better. But their viewers don't watch CNN. They watch Fox.

 

Reply to Thread

Log in or Register to Comment
Have an account? Login below:
With Facebook:Login With Facebook
or
Username:  
Password:  
  
Not registered? To sign up for an account with The Escapist:
Register With Facebook
Register With Facebook
or
Register for a free account here