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

[Benny B]

Be fearful when others are greedy and greedy when others are fearful.

[Silkk the Shaka]

I'm buying tomorrow.

Missed it.

[ChicosBailBonds]

Missed it.

Not at all, one of the stocks I bought is up...the other flat, the other down.  Besides, it's for the long haul. 

[Tugg Speedman]

Be fearful when others are greedy and greedy when others are fearful.

Interesting in that I think most are greedy right now ... so what do you do?

[GooooMarquette]

Interesting in that I think most are greedy right now ... so what do you do?

You seem to be an outlier in thinking "most" are greedy right now:

http://money.cnn.com/data/fear-and-greed/

[Tugg Speedman]

You seem to be an outlier in thinking "most" are greedy right now:

http://money.cnn.com/data/fear-and-greed/

That is a volume measure (not a psychology measure) that has not worked for very for years.  For instance it has been screaming buy for a few weeks.  How has that worked out?

[ChicosBailBonds]

Right now, all three stocks I bought....up, but again....long term is the key.   

[ChitownSpaceForRent]

Already back up to almost 100 points to where it started. Nothing to see here folks.

[Tugg Speedman]

Just pushed all in when the DOW hit -713, this is summer volatility and we will see markets stabilize in the next couple of weeks.  Market is high but it isn't overpriced such that a correction is indicated.

Lemmings panic right now, which will create chaos and within chaos there is profit and opportunity.

So what did you buy?

Curious because down 1100 (the low of the day) to down 600 only occurred in the first 5 minutes, most stocks were still not open and those that were open hardly traded.

Almost nothing happened at those levels.

[GooooMarquette]

That is a volume measure (not a psychology measure) that has not worked for very for years.  For instance it has been screaming buy for a few weeks.  How has that worked out?

It is a psychological interpretation of volume measures.

Just curious - how did you come to your conclusion that most are greedy right now?  Gettin' lots of folks on the couch?

[Tugg Speedman]

It is a psychological interpretation of volume measures.

Just curious - how did you come to your conclusion that most are greedy right now?  Gettin' lots of folks on the couch?

Measures of newsletters and total flows (out of open-ended mutual funds and into ETFs).  In total they are not showing any signs of panic.

Also Treasury yields, they should be plunging if anyone was panicking.  They are not.

[Tugg Speedman]

Cannot look at the stock market in isolation:

•   World markets have been going down for months
•   Credit markets (Corporate bonds) have been weak for over a year
•   Commodities are collapsing, some indices are at a 15 years low
•   Within commodities, the collapse in crude oil continues.
•   China’s economy has been slowing.  Chinese officials have been acting in what looks like panic to reverse their slide.  It is not working.
•   Remember Greece, it is still out there acting as a drag on Europe
•   US corporate earnings were growing at -2% from year ago levels
•   S&P 500 companies have total sales of $11 trillion (lead by Walmart at $500 billion/year) and total sales is 4% LOWER than a year ago
•   The Federal Reserve keeps threatening to raise interest rates


Given all this the real question is why the stock market was performing so well until a few weeks ago. 

But this is not new.  In 2000 and again 2008 the stock market was the “last to turn.”  Interest rates, credit markets, commodities and world stocks markets are turned lower consistent with a downturn in economic activity in 2000 and 2008.  In both cases the stock market defied these moves and kept marching higher.  Eventually the stock market "got it" and turned lower.

Today we have all the bullet points above and the stock market has defied these moves and kept marching higher.  Again, what was it thinking?

What next?  I’ve been of the opinion that the stock market finishes the year with a zero return.  Right now it is down about 5% YTD.  So I it think it ends the year marginally higher.  HOWEVER, I do not think this morning was the low of the year.  We will most likely retest and might go lower.  And the risk is that markets end of the worse than I think, not better,

[GooooMarquette]

What next?  I’ve been of the opinion that the stock market finishes the year with a zero return.  Right now it is down about 5% YTD.  So I it think it ends the year marginally higher.  HOWEVER, I do not think this morning was the low of the year.  We will most likely retest and might go lower.  And the risk is that markets end of the worse than I think, not better,

I think those are reasonable predictions, and frankly wouldn't consider a flat (or even slightly negative) year a bad thing. 

[Tugg Speedman]

Already back up to almost 100 points to where it started. Nothing to see here folks.

I'm giving you a chance to re-think this ... care to revise?

[rocket surgeon]

i remember when mutation was always beaching about how much money he lost in the market when "sonny" was in.   wonder where his blame will be now ??

[brandx]

i remember when mutation was always beaching about how much money he lost in the market when "sonny" was in.   wonder where his blame will be now ??

Um..... the market is almost twice what Sonny left us. Muta (and I) have made lots of money with BO as Prez.

[Tugg Speedman]

Um..... the market is almost twice what Sonny left us. Muta (and I) have made lots of money with BO as Prez.

18 months before Bush 43 left, the market was all-time highs and looking good.  Then came the global financial crisis.

About 18 month remain in Obama's reign.  I would not be spending those gains just yet.

and consider this ...

The 22nd amendment was ratified on February 27, 1951.  It limits the President to two terms.  Since this

1956, Eisenhower elected to a 2nd (and last) term.  1958, a bond market driven financial crisis.

1972, Nixon elected to a 2nd (and last) term.  1974 was a full blown financial crisis (no doubt accelerated by Nixon resigning.)

1984, Reagan elected to a 2nd (and last) term.  1987 the stock market crash (largest plunge in American history).

1996, Clinton elected to a 2nd (and last) term.  1998 a financial crisis thanks to the failure of the hedge fund LTCM and 2000 was the popping of the tech bubble.

2004, Bush elected to a 2nd (and last) term.  2007/2008 what is now called the "global financial crisis."

-----

Since the 22ns amendment, every term limited 2nd term president saw a financial crisis.  Why?  My theory is the 2nd term President becomes a lame duck the moment he gives his acceptance speech.  So, he is surrounded by "second stringers" and old guys that should be retired (Kerry).  The financial crisis is born out a lack of confidence because the adults of the first term left..

Finally, note I said FINANCIAL crisis, not ECONOMIC crisis. 

So, when the market has the week it just had (down 10% in a week, worst day in four years today), and given this history, I would be very leery of jumping in ... unless you want to work into your 70s.

[Dr. Blackheart]

Um..... the market is almost twice what Sonny left us. Muta (and I) have made lots of money with BO as Prez.

So is your tax rate.  Poof

[Dr. Blackheart]

Everyone has their own system.  This is what I track to: A lagged composite index from the Chicago Fed.  To Heise's point, market speculation has been way ahead of the legs of the economy.  Personal Consumption and Housing has lagged in this recovery, unlike previous recoveries.  The U.S. economy is driven on consumer buying power, as a reminder.  The market assumed consumer confidence and spending will follow. It hasn't.

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

Why not?  Even though the economy has approached historical full employment, wages have lagged significantly behind (and falling) meaning Full Employment is in the high 4s. Two, while real estate has shown life, it is just burning off excess, very low priced inventory.  The Fed sees Full Employment at 5.1 and thinks inflation (aka, raise interest rates), but then sees consumer buying power lagging, and is confused.

The index has been negative since February, meaning the economy is/has been faltering.  Historically, the stock market sags every 3-4 years into a negative trend (now), with a year or two of negative (correction). Heise's call is right on, which should be respected as that is his expertise.

The way out?  The Keynesian bailout was right on.  It saved the economy from a depression.   In recovery, instead of extending taxes and not cutting the unmanageable bailout deficit, the reverse was decided by Washington, (status quo), however, as they see one size fits their agenda.  Consumers need higher disposable income (higher wages, less under employment, lower gas and food prices, less taxes) to get the U.S. out of this cycle.  The reality, though, is that the manufacturing economy of the 70's which transitioned into the service economy of the 90's-00's, is now transitioning into the automation economy. This will be a five-ten year sideways cycle.  The mind is willing, but the body is not. 

[jesmu84]

Everyone has their own system.  This is what I track to: A lagged composite index from the Chicago Fed.  To Heise's point, market speculation has been way ahead of the legs of the economy.  Personal Consumption and Housing has lagged in this recovery, unlike previous recoveries. The U.S. economy is driven on consumer buying power, as a reminder. The market assumed consumer confidence and spending will follow. It hasn't.

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

Why not?  Even though the economy has approached historical full employment, wages have lagged significantly behind (and falling) meaning Full Employment is in the high 4s. Two, while real estate has shown life, it is just burning off excess, very low priced inventory.  The Fed sees Full Employment at 5.1 and thinks inflation (aka, raise interest rates), but then sees consumer buying power lagging, and is confused.

The index has been negative since February, meaning the economy is/has been faltering.  Historically, the stock market sags every 3-4 years into a negative trend (now), with a year or two of negative (correction). Heise's call is right on, which should be respected as that is his expertise.

The way out?  The Keynesian bailout was right on.  It saved the economy from a depression.   In recovery, instead of extending taxes and not cutting the unmanageable bailout deficit, the reverse was decided by Washington, (status quo), however, as they see one size fits their agenda.  Consumers need higher disposable income (higher wages, less under employment, lower gas and food prices, less taxes) to get the U.S. out of this cycle.  The reality, though, is that the manufacturing economy of the 70's which transitioned into the service economy of the 90's-00's, is now transitioning into the automation economy. This will be a five-ten year sideways cycle.  The mind is willing, but the body is not.

100% agree. But it seems the corporate well-to-dos have other ideas for the middle and lower class workers. I get it, "the market decides what a job is worth". Is the market rigged by those in charge though?

[Dr. Blackheart]

100% agree. But it seems the corporate well-to-dos have other ideas for the middle and lower class workers. I get it, "the market decides what a job is worth". Is the market rigged by those in charge though?

No. The market wants to reward optimism (speculation).  It does not recognize broader shifts very well (generational).  In the 2007-08 downturn, China gained with the declining $US. Germany gained in the EU with the PIGS bailout (Portugal, Ireland, Greece and Spain).  The recovering (and low interest rate $) killed China (an economy built on copying/stealing US jobs and technology...throw in India).  Greece stymied Germany/EU recovery.  Oil has killed Russia, Mideast, SA.  Baby Boomers (the most educated generation on Earth) transitions to Millenials (more diverse, less educated, more under employed, more connected and more in debt)=Automation.  The market needs the transition to adapt.  The government and World will follow well behind.  The U.S. will lead.

[MUsoxfan]

Everyone has their own system.  This is what I track to: A lagged composite index from the Chicago Fed.  To Heise's point, market speculation has been way ahead of the legs of the economy.  Personal Consumption and Housing has lagged in this recovery, unlike previous recoveries.  The U.S. economy is driven on consumer buying power, as a reminder.  The market assumed consumer confidence and spending will follow. It hasn't.

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

Why not?  Even though the economy has approached historical full employment, wages have lagged significantly behind (and falling) meaning Full Employment is in the high 4s. Two, while real estate has shown life, it is just burning off excess, very low priced inventory.  The Fed sees Full Employment at 5.1 and thinks inflation (aka, raise interest rates), but then sees consumer buying power lagging, and is confused.

The index has been negative since February, meaning the economy is/has been faltering.  Historically, the stock market sags every 3-4 years into a negative trend (now), with a year or two of negative (correction). Heise's call is right on, which should be respected as that is his expertise.

The way out?  The Keynesian bailout was right on.  It saved the economy from a depression.   In recovery, instead of extending taxes and not cutting the unmanageable bailout deficit, the reverse was decided by Washington, (status quo), however, as they see one size fits their agenda.  Consumers need higher disposable income (higher wages, less under employment, lower gas and food prices, less taxes) to get the U.S. out of this cycle.  The reality, though, is that the manufacturing economy of the 70's which transitioned into the service economy of the 90's-00's, is now transitioning into the automation economy. This will be a five-ten year sideways cycle.  The mind is willing, but the body is not.

Excellent post

[ChicosBailBonds]

18 months before Bush 43 left, the market was all-time highs and looking good.  Then came the global financial crisis.

About 18 month remain in Obama's reign.  I would not be spending those gains just yet.

and consider this ...

The 22nd amendment was ratified on February 27, 1951.  It limits the President to two terms.  Since this

1956, Eisenhower elected to a 2nd (and last) term.  1958, a bond market driven financial crisis.

1972, Nixon elected to a 2nd (and last) term.  1974 was a full blown financial crisis (no doubt accelerated by Nixon resigning.)

1984, Reagan elected to a 2nd (and last) term.  1987 the stock market crash (largest plunge in American history).

1996, Clinton elected to a 2nd (and last) term.  1998 a financial crisis thanks to the failure of the hedge fund LTCM and 2000 was the popping of the tech bubble.

2004, Bush elected to a 2nd (and last) term.  2007/2008 what is now called the "global financial crisis."

-----

Since the 22ns amendment, every term limited 2nd term president saw a financial crisis.  Why?  My theory is the 2nd term President becomes a lame duck the moment he gives his acceptance speech.  So, he is surrounded by "second stringers" and old guys that should be retired (Kerry).  The financial crisis is born out a lack of confidence because the adults of the first term left..

Finally, note I said FINANCIAL crisis, not ECONOMIC crisis. 

So, when the market has the week it just had (down 10% in a week, worst day in four years today), and given this history, I would be very leery of jumping in ... unless you want to work into your 70s.

Why am I not surprised that Brandx thinks presidents control the markets or are responsible for them.  Another example of someone who never took an econ, business course or has an ounce of common sense.

[ChicosBailBonds]

Love oil stocks in the $30's for the long haul.  Love, love, love them.

That is because most people don't realize that oil companies actually make a crap ton of money through other energy resources of which they are investing heavily in.

[jesmu84]

No. The market wants to reward optimism (speculation).  It does not recognize broader shifts very well (generational).  In the 2007-08 downturn, China gained with the declining $US. Germany gained in the EU with the PIGS bailout (Portugal, Ireland, Greece and Spain).  The recovering (and low interest rate $) killed China (an economy built on copying/stealing US jobs and technology...throw in India).  Greece stymied Germany/EU recovery.  Oil has killed Russia, Mideast, SA.  Baby Boomers (the most educated generation on Earth) transitions to Millenials (more diverse, less educated, more under employed, more connected and more in debt)=Automation.  The market needs the transition to adapt.  The government and World will follow well behind.  The U.S. will lead.

So you're saying that lower and middle class wages in the US will increase? Really?

*Admittedly, I'm not great with economics/finance as I've repeatedly stated before.