Will the stock market crash (June 24 2016 Update)?

[JWags85]

This is absolutely bonkers.  Today's outrageous strength makes no sense.  The market still needs to go lower and some window dressing by China shouldn't convince everyone that everything is great again.

[warriorchick]

Cancel the meltdown, the maniac depressive market is now up on the week!

This is one of the craziest weeks ever in the market.

It's a win-win then.

All the working stiffs with 401(k)s benefit.

People who panicked and bailed on Tuesday, not so much.

[GooooMarquette]

This is absolutely bonkers.  Today's outrageous strength makes no sense.  The market still needs to go lower and some window dressing by China shouldn't convince everyone that everything is great again.

That's the funny thing.  Most of the buy and hold investors - we common people who don't know nuthin' - have virtually nothing to do with these wild, illogical swings.  They're primarily caused by institutional investors and day traders who supposedly "know better"...yet regularly overreact to "good" or "bad" news.

Over the long haul, the market will climb...and buy and hold will prove the best long-term strategy.

[Tortuga94]

This is absolutely bonkers.  Today's outrageous strength makes no sense.  The market still needs to go lower and some window dressing by China shouldn't convince everyone that everything is great again.

Today's strong move has very little to do with China. It is about the 3.7% GDP number for Q2. General consensus estimate was for 2.3% GDP. This was a very big surprise to the upside indicating the US economy is still in pretty good shape and actually getting stronger despite the rest of the world's problems. Add to that, the talk that the fed may no longer raise rates in September and you get a nice rally.

[MU82]

Today's strong move has very little to do with China. It is about the 3.7% GDP number for Q2. General consensus estimate was for 2.3% GDP. This was a very big surprise to the upside indicating the US economy is still in pretty good shape and actually getting stronger despite the rest of the world's problems. Add to that, the talk that the fed may no longer raise rates in September and you get a nice rally.

I'd agree with this except for one thing:

For most of the last year or so, when the government has released a report that the economy's getting stronger, Mr. Market market has reacted by selling off some.

Why? Because Mr. Market knows that if the economy is strong enough, the Fed will raise the discount rate, and Mr. Market likes the near-zero lending rate we've had.

Yep, good news is often bad, and bad news is often good. Mr. Market's a crazy MF!!

[Benny B]

[Tugg Speedman]

I'd agree with this except for one thing:

For most of the last year or so, when the government has released a report that the economy's getting stronger, Mr. Market market has reacted by selling off some.

Why? Because Mr. Market knows that if the economy is strong enough, the Fed will raise the discount rate, and Mr. Market likes the near-zero lending rate we've had.

Yep, good news is often bad, and bad news is often good. Mr. Market's a crazy MF!!

I agree with this and let me add that the consensus for today's GDP was 3.2% (up from 2.3%)  So the consensus was expecting a big rebound.  It was even bigger than they expected. 

And yes, normally this would be bad news as it would move the Fed closer to hiking rates, which the stock market acts like it is cryptonite.  This is how the market has traded all year.

Finally the DJIA was up 369 points.  Using 24 hour Dow Jones futures as a proxy and you'll find 2/3s of this rally happened last night/early this morning before the GDP release.  So that was not it.

What is going on here?  Humans do not trade stocks anymore.  Computers do and they are dominated by very short-term algorithms and High Frequency Traders (HFT).  They are all playing a version of "beat the dealer."  Anything can happen in the next few days, several hunrds more points higher or give it all back.

[brandx]

I agree with this and let me add that the consensus for today's GDP was 3.2% (up from 2.3%)  So the consensus was expecting a big rebound.  It was even bigger than they expected. 

And yes, normally this would be bad news as it would move the Fed closer to hiking rates, which the stock market acts like it is cryptonite.  This is how the market has traded all year.

Finally the DJIA was up 369 points.  Using 24 hour Dow Jones futures as a proxy and you'll find 2/3s of this rally happened last night/early this morning before the GDP release.  So that was not it.

What is going on here?  Humans do not trade stocks anymore.  Computers do and they are dominated by very short-term algorithms and High Frequency Traders (HFT).  They are all playing a version of "beat the dealer."  Anything can happen in the next few days, several hunrds more points higher or give it all back.

Kinda like the banks in '08. The difference being that there is some risk management in place in the Stock market.

[jesmu84]

I agree with this and let me add that the consensus for today's GDP was 3.2% (up from 2.3%)  So the consensus was expecting a big rebound.  It was even bigger than they expected. 

And yes, normally this would be bad news as it would move the Fed closer to hiking rates, which the stock market acts like it is cryptonite.  This is how the market has traded all year.

Finally the DJIA was up 369 points.  Using 24 hour Dow Jones futures as a proxy and you'll find 2/3s of this rally happened last night/early this morning before the GDP release.  So that was not it.

What is going on here?  Humans do not trade stocks anymore.  Computers do and they are dominated by very short-term algorithms and High Frequency Traders (HFT). They are all playing a version of "beat the dealer."  Anything can happen in the next few days, several hunrds more points higher or give it all back.

And that seems screwed up. We should tax the hell out of those trades.

[ATL MU Warrior]

I agree with this and let me add that the consensus for today's GDP was 3.2% (up from 2.3%)  So the consensus was expecting a big rebound.  It was even bigger than they expected. 

And yes, normally this would be bad news as it would move the Fed closer to hiking rates, which the stock market acts like it is cryptonite.  This is how the market has traded all year.

Finally the DJIA was up 369 points.  Using 24 hour Dow Jones futures as a proxy and you'll find 2/3s of this rally happened last night/early this morning before the GDP release.  So that was not it.

What is going on here?  Humans do not trade stocks anymore.  Computers do and they are dominated by very short-term algorithms and High Frequency Traders (HFT).  They are all playing a version of "beat the dealer."  Anything can happen in the next few days, several hunrds more points higher or give it all back.

Are you saying that the big trading firms are intentionally manipulating the market in order to make money for themselves and their wealthy clients while totally screwing over the regular investor?

[brandx]

Are you saying that the big trading firms are intentionally manipulating the market in order to make money for themselves and their wealthy clients while totally screwing over the regular investor?

That would never happen, ATL.

[tower912]

Are you saying that the big trading firms are intentionally manipulating the market in order to make money for themselves and their wealthy clients while totally screwing over the regular investor?

I'm shocked, shocked, I tell you. 

[MU82]

Are you saying that the big trading firms are intentionally manipulating the market in order to make money for themselves and their wealthy clients while totally screwing over the regular investor?

Funny.

So why am I weeping?

[Tugg Speedman]

Are you saying that the big trading firms are intentionally manipulating the market in order to make money for themselves and their wealthy clients while totally screwing over the regular investor?

Yes!  This type of trading is a problem.

And, I can tell you right now, it is NEVER going away.  Because whatever reasonable argument that make, they will bury Washington in money and promises of cushy consulting jobs to leave the system as is.

The only way to fix it is to let other sharks compete with the current sharks and hopefully arbitrage away all the profits.

[Tugg Speedman]

Jack Bogle is the founder of Vanguard, now the largest mutual fund company in the world with almost $4 trillion in assets.

The stock market's wild ride over the past week has been "the biggest exercise in sheer unadulterated speculation" Jack Bogle has ever seen in his more than 60 years in the business, the index mutual fund pioneer said Friday.

His advice to investors—don't do anything right now.

"It's just speculators not speculating on what they think is going to happen but what they think other speculators think is going to happen," the founder of the Vanguard Group said in an interview with CNBC's "Power Lunch."

http://www.cnbc.com/2015/08/28/jack-bogle-how-to-handle-the-markets-wild-ride.html

--------------------------------------------

I point this out as this week was so unlike anything anyone has EVER seen that it is hard to attach a bigger meaning to it.

That said, I will say this ... here is a picture of the top speculators and traders in 2015 freaking out.  Can you see the panic in them?  ....

[ChicosBailBonds]

And therein lies the problem.
The existing compensation structure incentivizes executives to maximize stock value and little else, much to the benefit of themselves and perhaps short-term investors, but often to the detriment of long-term/institutional investors, as well as the company (and economy) as a whole.
See: Enron
See: WorldCom
See: HealthSouth
See: AIG

We could list 100's of counter examples that show the opposite.  When stock values are maximized, employees benefit, investors benefit, etc.  The examples you gave above failed for a number of reasons including breaking the law, cooking the books, etc.  When stock values are driven properly, legally, ethically, etc, the benefits are profound.

[Tugg Speedman]

We could list 100's of counter examples that show the opposite.  When stock values are maximized, employees benefit, investors benefit, etc.  The examples you gave above failed for a number of reasons including breaking the law, cooking the books, etc.  When stock values are driven properly, legally, ethically, etc, the benefits are profound.

+1

Actually you can name hundreds of thousands of examples of executives and key employees that have been incentized by stock options.  If you want to summarize it in just two words' "silicon valley" and how that are changing the face of humanity and getting rich by owning stock options of the companies they work for.

So, hundreds of thousands of success stories.  4 negative stories.  Sounds like a very good deal for all.

[Jay Bee]

What's interesting is that chicos didn't share any of his/her stock picks

Also interesting are those who 'stay long' and don't trade based on market movements here and there.. LOVELY WEEK for those of us who did it correctly.

[ChicosBailBonds]

What's interesting is that chicos didn't share any of his/her stock picks

Also interesting are those who 'stay long' and don't trade based on market movements here and there.. LOVELY WEEK for those of us who did it correctly.

To each their own, in my view there is no "correctly" because it depends on what pertains to your tolerance, your time horizon, etc.  For one person that buys and another person that shorts on that same stock, the "correct" answer depends on timing, horizon, etc.  If I have 20 years to play with, or 2 years...different "correct" way of playing it.

No, I didn't share the three stocks I bought this week, no one's business. 

If you would like to know what stocks I've been in from the past, sure.  Most of these I got in very low.  Some I'm still in, some I sold.  For example, with the collapse of the markets in 2006 I was convinced there was no way the gov't would let Citibank fail.  So I went into C.  Proved beneficial.  For T, it's all about the dividends and the yield. 

C
T
NFLX
FB   (I'm up 376% since I bought)
APPL
DIS
DISH
Sony   (I bought during the hack when it was tanking.    )
Sirius XM  (bought below $1)
Visa
Sempra
Costco

etc, etc   Health Care stocks have been a beautiful thing for most of the last decade.     Energy sector down the last two years, which is why I am buying buying buying.

I have a few shat burgers, but typically buy on solid companies that people under value.  Netflix is the one that I still kind of laugh at.  They make almost no money, relatively speaking to their revenues.  It is such an irrational stock, but I bought it so low that is could bomb massively and still do ok. 

Plenty of index funds,  Bonds as well.

[GooooMarquette]

Also interesting are those who 'stay long' and don't trade based on market movements here and there.. LOVELY WEEK for those of us who did it correctly.

You've had a lovely week…I've had a lovely seven+ years and counting...and I haven't had to lift a finger.  Sure pays well to do it incorrectly. 

[Tugg Speedman]

You carbon based investors are really old school.

Rage against the Machine!

The Financial Times - Gillian Tett: Welcome to a wild world of robot investing
Automated computer programs have changed how markets function

http://www.ft.com/intl/cms/s/0/3c4afe68-4b17-11e5-b558-8a9722977189.html#axzz3kFrFANrE

While it may take weeks before regulators understand why the plunges occurred, one reason for the swing is that automated computer programs have changed how markets function. The use of similar programs — such as high-frequency trading strategies — has expanded so rapidly that these are now estimated by the Securities and Exchange Commission to represent more than half of all US stock trades, and a big chunk of other asset markets.   Orders are being executed at lightning speeds in huge volumes. But there is another, often overlooked implication: these machines are being programmed to link numerous market segments together into trading strategies. So when computer programs cannot buy or sell assets in one segment of the market, they will rush into another, hunting for liquidity.  Since their algorithms are often similar (or created by computer scientists with the same training) this pattern tends to create a “herding” effect. If a circuit breaks in one market segment, it can ripple across the system faster than the human mind can process. This is a world prone to computer stampedes.

[jesmu84]

You carbon based investors are really old school.

Rage against the Machine!

The Financial Times - Gillian Tett: Welcome to a wild world of robot investing
Automated computer programs have changed how markets function

http://www.ft.com/intl/cms/s/0/3c4afe68-4b17-11e5-b558-8a9722977189.html#axzz3kFrFANrE

While it may take weeks before regulators understand why the plunges occurred, one reason for the swing is that automated computer programs have changed how markets function. The use of similar programs — such as high-frequency trading strategies — has expanded so rapidly that these are now estimated by the Securities and Exchange Commission to represent more than half of all US stock trades, and a big chunk of other asset markets.   Orders are being executed at lightning speeds in huge volumes. But there is another, often overlooked implication: these machines are being programmed to link numerous market segments together into trading strategies. So when computer programs cannot buy or sell assets in one segment of the market, they will rush into another, hunting for liquidity.  Since their algorithms are often similar (or created by computer scientists with the same training) this pattern tends to create a “herding” effect. If a circuit breaks in one market segment, it can ripple across the system faster than the human mind can process. This is a world prone to computer stampedes.

Tax the hell out of those trades

[Tugg Speedman]

Tax the hell out of those trades

That will never ever ever happen ... they are more powerful than even Washington.  They have all the money and own all the politicians.

[Jay Bee]

No, I didn't share the three stocks I bought this week, no one's business. 

If you would like to know what stocks I've been in from the past, sure.  Most of these I got in very low. 

lol

[jesmu84]

That will never ever ever happen ... they are more powerful than even Washington.  They have all the money and own all the politicians.

And that's the problem. I can't tell with you, but maybe you're the type that wants it to remain that way.