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

[rocket surgeon]

That's how I approach it, because I'm not smart enough to figure out where bottom is.  I just go for what I think is below value, and if the price drops and continues to be even further below value, I grab more.

Yellen's comments will be interesting.  So many pushing for rate increases (I'm one of them), but so many politics involved as well.  We have to get off the teat of QE and essentially 0% interest at some point.  It is going to mean a little pain, but that pain has got to start.

i agree and it's going to sting a little, but this administration has been using the QE all along to try to say we are recovering and doing well.  no one wants to acknowledge the man behind the curtain. 

[Dr. Blackheart]

On a 10% gain? Umm...

Plus Cheeks' stock grant gains for total profit (estimated to 120k).  Figuring he got those at $60?  Trying to reinforce the concept of profit raking.  That said, I cannot disagree with Chicios's long term play. Just trying to reinforce the concept that there is a lot more to be made in an "up and down and then up" market.  But, in a few weeks, if Chicos sold on the way down versus bought, he would have had about 33% more stock in the short term to convert for the same cash in.  Still don't get the strategy to buy on the way down versus profit taking.  $$$$

More so, in the thread, vets like Heise predicted the bottom. 

[Dr. Blackheart]

Here was a long term buy i got in on three years ago. Still a lot of upside. Over 130 today before some profit taking pre-holiday.

http://finance.yahoo.com/echarts?s=STZ+Interactive#{"range":"5y","allowChartStacking":true}

Now up over $150 in a volatile market.

[Tugg Speedman]

DJIA lost 1,079 points or 6.19%.  Its worst start to a new year ever (data back to 1897). 

Below is the S&P version.  All similar years were bad

https://pbs.twimg.com/media/CYOiFhNUsAAfxBb.png:large




Note 1991 was an exception because we started the Kuwait war on January 17, 1991.  Markets were having a nervous breakdown in the weeks leading into this over the prospects of a shooting war with Iraq.  January 10 still remains the single wildest day in crude oil trading history because of this (I lost a crap-load of money this day, and almost my career)....
http://articles.philly.com/1991-01-10/business/25817877_1_pegasus-econometric-group-brian-tagler-peter-beutel
Given this unique story, I don't think it fits with the rest examples above.  It is an outlier.

[Dr. Blackheart]

Again, this is the Federal Reserve CFNAI, a composite of key economic and related inflationary pressure.  Above zero is above average historical growth in the economy. Negative is below average growth. Over +.7 over an extended period of months, means inflation. Under -.7 means recession.

While recent job growth has been strong, other factors have been in decline recently, bringing the overall composite tracking down. The Fed raised the interest rates based on the strong job growth, while anticipating a stronger US$ for its members with concern about keeping inflation in check. As the market has shown in the past six months, the economy is headed south as are the markets.

That said, this economy is fueled still by consumer spending, and the Consumer & Housing Index has not had a positive growth month (vs. historical averages) since December 2006. When you hear about disparity in incomes, no wage growth, under employment, blue vs. white collar wages, you see that in this index.

This is the continued long-term, transition from the Computer Economy to the Automation Economy. From building of technology, infrastructure and networks to automating ordering, production and delivery (Amazon, Google Cars).  Workers skilled in the trades (installing cell towers, building houses and cars) of yesterday are being replaced by workers building robots and designing apps to automate and support these processes. Training is critical as well as to the adjustment of wages and incomes due to automation versus historical.

Not to get political, but a generation of pensioners retiring at full wages, with the assumption that the next generation of high earners will support them in their retirement, as they did the generation before them (The American Dream), is flawed. Their jobs are and will be replaced by machines, and the Millenials will moving to jobs that support Automation. The next generation behind the the Millenials will be largely minority, and likely less educated. Wages will be lower. Thus, a government and a tax system based upon progressive incomes and personal consumption taxes needs to adapt as well (i.e., drones fighting our wars, on-line education, transits apps to replace conductors, etc.).

Automation will lead to productivity. Productivity is always a sign of prosperity. An economy in transition will be a sideways economy, however. That is where we are. Thus, there will be money to be made in this market in the ups and downs. NASDAQ was up about 6% in 2015, the DJI was negative.



https://www.chicagofed.org/research/data/cfnai/current-data

[Tugg Speedman]

The S&P is down 7.5% in the first 8 trading days this year.  Worst start ever.

At this rate the S&P will hit zero (100%) decline on or around May 7th?

[Coleman]

At this rate the S&P will hit zero (100%) decline on or around May 7th?

LOL

Its a correction. This is normal. Time to buy.

[Tugg Speedman]

*RUSSELL 2000 CAPS 22% DROP FROM JUNE RECORD, ENTERS BEAR MARKET

Almost a quarter of the value of small stocks now gone.  This is normal? 

Only happened 4 times in the last 25 years.

[Coleman]

*RUSSELL 2000 CAPS 22% DROP FROM JUNE RECORD, ENTERS BEAR MARKET

Almost a quarter of the value of small stocks now gone.  This is normal? 

Only happened 4 times in the last 25 years.

Ok maybe not normal. I don't know....what is normal?

Unprecedented...absolutely not. Time to buy.

[jesmu84]

Again, this is the Federal Reserve CFNAI, a composite of key economic and related inflationary pressure.  Above zero is above average historical growth in the economy. Negative is below average growth. Over +.7 over an extended period of months, means inflation. Under -.7 means recession.

While recent job growth has been strong, other factors have been in decline recently, bringing the overall composite tracking down. The Fed raised the interest rates based on the strong job growth, while anticipating a stronger US$ for its members with concern about keeping inflation in check. As the market has shown in the past six months, the economy is headed south as are the markets.

That said, this economy is fueled still by consumer spending, and the Consumer & Housing Index has not had a positive growth month (vs. historical averages) since December 2006. When you hear about disparity in incomes, no wage growth, under employment, blue vs. white collar wages, you see that in this index.

This is the continued long-term, transition from the Computer Economy to the Automation Economy. From building of technology, infrastructure and networks to automating ordering, production and delivery (Amazon, Google Cars).  Workers skilled in the trades (installing cell towers, building houses and cars) of yesterday are being replaced by workers building robots and designing apps to automate and support these processes. Training is critical as well as to the adjustment of wages and incomes due to automation versus historical.

Not to get political, but a generation of pensioners retiring at full wages, with the assumption that the next generation of high earners will support them in their retirement, as they did the generation before them (The American Dream), is flawed. Their jobs are and will be replaced by machines, and the Millenials will moving to jobs that support Automation. The next generation behind the the Millenials will be largely minority, and likely less educated. Wages will be lower. Thus, a government and a tax system based upon progressive incomes and personal consumption taxes needs to adapt as well (i.e., drones fighting our wars, on-line education, transits apps to replace conductors, etc.).

Automation will lead to productivity. Productivity is always a sign of prosperity. An economy in transition will be a sideways economy, however. That is where we are. Thus, there will be money to be made in this market in the ups and downs. NASDAQ was up about 6% in 2015, the DJI was negative.



https://www.chicagofed.org/research/data/cfnai/current-data

A lot of good data, along with your interpretation and thoughts here, Dr. There is going to be a huge conflict in policy and philosophy of our country as we make the transition you speak of. Many of the older populations can't relate and don't understand. Many of the younger want the "new era" to be ushered in quickly so we don't get screwed. Tough times ahead.

[JWags85]

Ok maybe not normal. I don't know....what is normal?

Unprecedented...absolutely not. Time to buy.

If you want to get sharp, wait till the S&P gets down into the 1800-1810 range.  And I agree, this is very nasty, but its an overdue correction that is being fueled quite helpfully by fantastically low oil prices that seem to have no bottom.  Oil has been way down and even still, inventories today revealed a growing supply vs last month.

I personally think 2016 is going to be kind of a nasty year but I don't think its some doomsday melt down.

[MU82]

We are doomed!

Doomed, I say!

Sell everything. Put all of your cash in a mayonaisse jar and drop it off at my place for "safe keeping." I'll take real good care of it!

[Tugg Speedman]

We are doomed!

Doomed, I say!

Sell everything. Put all of your cash in a mayonnaise jar and drop it off at my place for "safe keeping." I'll take real good care of it!

If one did that two years ago, and you only dipped into that jar "once in a while" most investors would have been better off.

[Tugg Speedman]

DJIA down 475 points as I write this (late Morning, Jan 20, 2016).

Essentially no one has made money in the broad stock market in the last 2 to 3 years.

Small cap stocks, the Russell 2000 Index, is down 25% since its all-time peak on June 23, 2015.  One-quarter of its value is gone, making it one of the 5 largest "bear markets" since the 1980s!  It's at the same level as May 2013.

Large cap stocks, the S&P 500 index, is down 14% since its all-time peak on May 21, 2015.  It's at levels last seen in October 2014.

So what is going to happen next?

* irrational move and time to buy
* Figure your next worth on December 31 and if you don't get out now, it will be the same in 5 to 7 years (meaning you not getting "richer" for several more years.)

[MU82]

That's why I don't invest in the broad stock market.

My portfolio is up nicely the last two years. Sorry if yours isn't.

I'm curious what moves you have made or are making now? Instead of dooming and glooming us, tell us what you are doing to recession-proof your portfolio.

[Tugg Speedman]

That's why I don't invest in the broad stock market.

My portfolio is up nicely the last two years. Sorry if yours isn't.

I'm curious what moves you have made or are making now? Instead of dooming and glooming us, tell us what you are doing to recession-proof your portfolio.

I've been short since late 2014.  Been very short oil since last spring.

I think we have a down 1000 point day coming and I will start to cover.  That might be today. 

(and cover means I'll get another chance to put my shorts out at higher levels).

The energy sector is like the financial sector in 2008.  Continental, Pioneer are collapsing, they might not make it to the end of the week before filing for bankruptcy.  I cannot borrow anymore otherwise I would short more.

I'm long Long-term Treasuries  10-year and 30-year.  Thinking about getting long gold again but have not pulled the trigger on that.

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Yes I have a poor view of things and I think it is getting worse.

[Tortuga94]

As recently as 2010 and 2013, both strong years for the stock market(13% gains), we had intra-year declines of 16% and 10%, respectively. In 2011 the market had an intra-year decline of 19%, yet finished flat for the year.

Yes market corrections happen and sell-offs can be very painful, but we need to remember that they do happen often and even in the good years. In fact if you look back to 1981 the S&P 500 index has experienced at least a 5% intra-year decline in every year but one(1995). The average intra-year decline has been 14.4%. Sell-offs like we've experienced so far this year happen about every 2 and a half years, granted this one has been very quick and maybe that is why it feels different than in previous years.

As far as what we're doing is concerned, we are and have been overweight US large cap, with a recent tactical shift to large cap value and in particular dividend paying stocks. We like international developed markets and I agree on the 10-yr space. Towards the end of Q3 2015 we positioned our fixed income allocation to the intermediate space. US treasuries, corporates and munis. We do also like preferreds.

Stay invested, rebalance periodically and you should be OK in the long run.

[Tugg Speedman]

As recently as 2010 and 2013, both strong years for the stock market(13% gains), we had intra-year declines of 16% and 10%, respectively. In 2011 the market had an intra-year decline of 19%, yet finished flat for the year.

Yes market corrections happen and sell-offs can be very painful, but we need to remember that they do happen often and even in the good years. In fact if you look back to 1981 the S&P 500 index has experienced at least a 5% intra-year decline in every year but one(1995). The average intra-year decline has been 14.4%. Sell-offs like we've experienced so far this year happen about every 2 and a half years, granted this one has been very quick and maybe that is why it feels different than in previous years.

As far as what we're doing is concerned, we are and have been overweight US large cap, with a recent tactical shift to large cap value and in particular dividend paying stocks. We like international developed markets and I agree on the 10-yr space. Towards the end of Q3 2015 we positioned our fixed income allocation to the intermediate space. US treasuries, corporates and munis. We do also like preferreds.

Stay invested, rebalance periodically and you should be OK in the long run.

2010 saw a peak-to trough correction of 17% (you said 16%, close enough).  That ended with the Fed promising QE2

2011 saw a peak-to trough correction of 19% (in the middle was the downgrade of the US by S&P freak out).  That ended with the Fed promising more QE (in this case operation twist).

2012 saw a 10% correction, that ended with the Fed promising QE3

2016, 14% correction to date (25% for the Russell 2000), but the Fed is hiking rates now.

The post crisis (post-2008) market was all about easy money and central bank manipulation of stock prices (higher).  That is why I shorted it in late 2014.  Ending QE and promising hiking was going to open the third level of hell.  Took longer than I thought but that is now happening.

If the Fed caves and says they will not hike anymore, or even hints at more easing, I would change my mind.  As of now they are not.

Don't fight the Fed

[jesmu84]

Well, I sure hope if there is another recession, that the bounce-back that happens after we bottom out almost all goes to the top 1% again. That's always fun.

[Coleman]

Just keep dollar cost averaging. If was 60 and still heavily invested in stocks right now I'd be worried. I'm half that age. Time to buy at a discount.

[jficke13]

Well, I sure hope if there is another recession, that the bounce-back that happens after we bottom out almost all goes to the top 1% again. That's always fun.

Why not aspire to join them? If you can foresee the bounce-back, then you ought to be able to profit from it, eh?

Corrections, recessions, depressions, they're all just opportunities.

[jesmu84]

Why not aspire to join them? If you can foresee the bounce-back, then you ought to be able to profit from it, eh?

Corrections, recessions, depressions, they're all just opportunities.

1. That's not really the point.

2. No, I can't. As a grad student with tons of debt, I have near-zero disposable income to put toward investments

[MU82]

I've been short since late 2014.  Been very short oil since last spring.

I think we have a down 1000 point day coming and I will start to cover.  That might be today. 

(and cover means I'll get another chance to put my shorts out at higher levels).

The energy sector is like the financial sector in 2008.  Continental, Pioneer are collapsing, they might not make it to the end of the week before filing for bankruptcy.  I cannot borrow anymore otherwise I would short more.

I'm long Long-term Treasuries  10-year and 30-year.  Thinking about getting long gold again but have not pulled the trigger on that.

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Yes I have a poor view of things and I think it is getting worse.

Thanks for sharing this.

Congrats on shorting oil - it was a great move.

I wish you good fortune.

[rocket surgeon]

I've been short since late 2014.  Been very short oil since last spring.

I think we have a down 1000 point day coming and I will start to cover.  That might be today. 

(and cover means I'll get another chance to put my shorts out at higher levels).

The energy sector is like the financial sector in 2008.  Continental, Pioneer are collapsing, they might not make it to the end of the week before filing for bankruptcy.  I cannot borrow anymore otherwise I would short more.

I'm long Long-term Treasuries  10-year and 30-year.  Thinking about getting long gold again but have not pulled the trigger on that.

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

Yes I have a poor view of things and I think it is getting worse.

hey, don't forget your long-lost uncle rocket over here  we're kinda like paisan heyna?  good job!  i thought $48 was pretty low

[GooooMarquette]

Just keep dollar cost averaging. If was 60 and still heavily invested in stocks right now I'd be worried. I'm half that age. Time to buy at a discount.

Yep.  Even at 53, I know that this slide will someday look like the housing bubble or the dot-com bubble.  And the stocks I'm buying now are on sale.  The worst possible strategy would be to sell right now.

And anyone who is 60+ should already have a decent enough portion of their portfolio in bonds and fixed income products that they can ride out your first few years of retirement from assets that haven't been temporarily devalued.