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Thread: October Surprise

  1. #1

    October Surprise

    So the DJIA dropped ~1000 points net last week, including a one day drop of 830.

    This occurred after the yield on the 10YUST hit new highs (i.e. just like February 2018).

    So what happens next?

    Do yields back off as the market recovers (as occurred in Feb), or is the bubble finally bursting?

    ...

    Currently, the DJIA is down 270 on the lows.
    Last edited by r3volution 3.0; 10-17-2018 at 08:38 AM.



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  3. #2
    Quote Originally Posted by r3volution 3.0 View Post
    So the DJIA dropped ~1000 points net last week, including a one day drop of 830.

    This occurred after the yield on the 10YUST hit new highs (i.e. just like February 2018).
    So what happens next?
    Do yields back off as the market recovers (as occurred in Feb), or is the bubble finally bursting?

    Currently, the DJIA is down 270 on the lows.
    So many people have retirement and investment funds auto investing weekly, the money has to go somewhere...

  4. #3
    Quote Originally Posted by specsaregood View Post
    So many people have retirement and investment funds auto investing weekly, the money has to go somewhere...
    ...but not into US stocks and bonds.

    ...

    Anyway, the DJIA hit about -300 before recovering; bond yields dropped then rose again to unchanged.

    Yields are still at about 3.15. My guess is stock needs to tank enough to bring them back to about 3.00 before this correction is over.

    ...assuming we don't start seeing bonds selling off with stocks.

    There were glimmers of this back in February, and last week.

    If that movement becomes sustained, the end is nigh.

  5. #4
    Quote Originally Posted by r3volution 3.0 View Post
    ...but not into US stocks and bonds.
    A lot of those people are not managing that money directly. Where will it go then if not US stocks and bonds?

  6. #5
    Quote Originally Posted by specsaregood View Post
    A lot of those people are not managing that money directly. Where will it go then if not US stocks and bonds?
    Foreign stocks and bonds, commodities.

  7. #6
    Quote Originally Posted by r3volution 3.0 View Post
    Foreign stocks and bonds, commodities.
    That would require people changing the funds they are set to auto invest in, changing their profiles, etc. I don't see it happening.

  8. #7
    Quote Originally Posted by specsaregood View Post
    That would require people changing the funds they are set to auto invest in, changing their profiles, etc. I don't see it happening.
    Things change.

    And anyway, you seem to be talking about small time investors, 401(k)s and so forth.

    The big money is much more flexible.

  9. #8
    Quote Originally Posted by r3volution 3.0 View Post
    Things change.
    And anyway, you seem to be talking about small time investors, 401(k)s and so forth.
    The big money is much more flexible.
    Yes, I am talking about the millions of workers with 401ks and IRAs. Contributing a portion of their income every month to these funds. Which are setup with set allotments of where the money is supposed to be invested. It is not chump change. It will keep inflating the bubble.



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  11. #9
    Quote Originally Posted by specsaregood View Post
    Yes, I am talking about the millions of workers with 401ks and IRAs. Contributing a portion of their income every month to these funds. Which are setup with set allotments of where the money is supposed to be invested. It is not chump change. It will keep inflating the bubble.
    So basically, you're saying that US markets can't decline...?

  12. #10
    Quote Originally Posted by specsaregood View Post
    Yes, I am talking about the millions of workers with 401ks and IRAs. Contributing a portion of their income every month to these funds. Which are setup with set allotments of where the money is supposed to be invested. It is not chump change. It will keep inflating the bubble.
    Especially with all the new jobs.
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  13. #11
    Quote Originally Posted by r3volution 3.0 View Post
    So basically, you're saying that US markets can't decline...?
    I don't see how until we hit a major depression/recession. And the more dollars printed, the more that goes into inflating it...
    I mean look at it, nearly everything in the stock market is overvalued already. And that money will keep getting contributed to these funds. and people want to see a return, not money sitting idle.

  14. #12
    Quote Originally Posted by specsaregood View Post
    I don't see how until we hit a major depression/recession. And the more dollars printed, the more that goes into inflating it...
    I mean look at it, nearly everything in the stock market is overvalued already. And that money will keep getting contributed to these funds. and people want to see a return, not money sitting idle.
    Well of course, there wouldn't be capital flight for no reason.

    Eventually, whether in the next recession or not, there's going to be a stock market crash, and the money isn't go to go into UST as per usual.

    It's going to leave USD denominated assets altogether.

    Consider what's been happening in Italy over the last year: capital flight, stocks and bonds down.

    If they were still on the lira, that'd be down too.

  15. #13
    Five really really really bad WALL STREET days almost but not quite in a row
    where it plunges each time between 500 to 1500 points tilts the battleground
    states away from Trump's candidates towards any political neophytes or (D)s

  16. #14
    The market declines have not been of any significant amounts. 1000 points when the index is 26,000 isn't much.


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  17. #15
    All market investment comes with risk. It’s a fact.
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  18. #16
    So stocks closed down, but well off the lows.

    More interestingly, bond yields are well above where they started today, and very close to the highs which triggered last week's sell-off.



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  20. #17
    Quote Originally Posted by r3volution 3.0 View Post
    So the DJIA dropped ~1000 points net last week, including a one day drop of 830.

    This occurred after the yield on the 10YUST hit new highs (i.e. just like February 2018).

    So what happens next?

    Do yields back off as the market recovers (as occurred in Feb), or is the bubble finally bursting?

    ...

    Currently, the DJIA is down 270 on the lows.
    It's not unusual for bonds to rise when markets fall.
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  21. #18
    Quote Originally Posted by angelatc View Post
    It's not unusual for bonds to rise when markets fall.
    I didn't say it was.

    In the post you quoted, I'm saying that stocks fell in response to yields rising.

  22. #19
    The 10YUST yield is still ~3.19% (only a few points off the high).

    This correction (assuming that's all it is) isn't over yet.

    Asia down ~1%.

  23. #20
    Quote Originally Posted by r3volution 3.0 View Post
    The 10YUST yield is still ~3.19% (only a few points off the high).

    This correction (assuming that's all it is) isn't over yet.

    Asia down ~1%.
    A stock market correction is a ten percent (or more) drop from a recent high. Recent high was 26,800 for the Dow Jones. As of today, it is 25,293 or 5.6% down. Same as the Dow was in August. Compared to a year ago, stocks are up about ten percent. Market hasn't really been moving around that much either way.
    Last edited by Zippyjuan; 10-22-2018 at 11:58 AM.


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  24. #21
    ... and the Value of my money went DOWN by about ten percent.
    1776 > 1984

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    Honest Money System , which frees the ordinary man from the clutches of the money manipulators, is the single largest contributing factor to the World's current Economic Crisis.

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  25. #22
    Quote Originally Posted by DamianTV View Post
    ... and the Value of my money went DOWN by about ten percent.

    The 2017 inflation rate was 2.13%. http://www.in2013dollars.com/2017-do...ture_pct=0.025

  26. #23
    Quote Originally Posted by Zippyjuan View Post
    A stock market correction is a ten percent (or more) drop from a recent high.
    Or it's -4.97586321%, and not one penny more..

    The definition of a "correction" as 10% is arbitrary.

    It's also premature to assume that it won't reach -10% or beyond.

    The story of the year is rising interest rates, which is why stocks are more or less flat on the year.

    The extraordinary money-printing binge that began in 2008 is coming to an end.

    Couple that with massive structural deficits around the world, and you have some exciting times.

  27. #24
    Quote Originally Posted by r3volution 3.0 View Post
    Or it's -4.97586321%, and not one penny more..

    The definition of a "correction" as 10% is arbitrary.

    It's also premature to assume that it won't reach -10% or beyond.

    The story of the year is rising interest rates, which is why stocks are more or less flat on the year.

    The extraordinary money-printing binge that began in 2008 is coming to an end.

    Couple that with massive structural deficits around the world, and you have some exciting times.
    I agree. Like I've said many times, since 2008 we borrowed 12T, printed 4T, had 10 years of ZIRP, and 10 years of .5T trade deficits. That's probably the all time record amount of artificial stimulus in the entire history of the world. There has to be bubbles everywhere.

    Either the market is going to come crashing down or main street prices are going to skyrocket or some combination. It's basic physics. Who knows what will trigger it or when it will happen? My guess is it's going to happen soon since it's been so long since the last crash. I think the reason it's taking longer than the normal time lapse between recessions is because the Fed monetary policy is still extremely loose.



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  29. #25
    Quote Originally Posted by Madison320 View Post
    I agree. Like I've said many times, since 2008 we borrowed 12T, printed 4T, had 10 years of ZIRP, and 10 years of .5T trade deficits. That's probably the all time record amount of artificial stimulus in the entire history of the world. There has to be bubbles everywhere.

    Either the market is going to come crashing down or main street prices are going to skyrocket or some combination. It's basic physics. Who knows what will trigger it or when it will happen? My guess is it's going to happen soon since it's been so long since the last crash. I think the reason it's taking longer than the normal time lapse between recessions is because the Fed monetary policy is still extremely loose.
    Hence Trump's bitching about the fed.

    Anyway, US stocks got beaten like a red-headed step-child yesterday: and it's not over (the 10Y yield is still too high).

    See you @22k (look out below)

  30. #26
    Futures back in the red again. -155 so far.
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  31. #27
    Great GDP and low inflation numbers and the market is still gapping much lower. Kind of an ominous sign. Today is a big day. The market should recover to green on that news. If not, would not want to be long over the weekend.

  32. #28
    Quote Originally Posted by r3volution 3.0 View Post
    Hence Trump's bitching about the fed.

    Anyway, US stocks got beaten like a red-headed step-child yesterday: and it's not over (the 10Y yield is still too high).

    See you @22k (look out below)
    I'm assuming you mean the 10 yr is too high for the economy to function with this much debt.

    If you use private standards to calculate the credit worthiness of the US government and the potential for future price inflation, I would think the 10 year should be much higher. Maybe even double digits. The only thing keeping it down is government and central bank intervention.

  33. #29
    Quote Originally Posted by Madison320 View Post
    I'm assuming you mean the 10 yr is too high for the economy to function with this much debt.

    If you use private standards to calculate the credit worthiness of the US government and the potential for future price inflation, I would think the 10 year should be much higher. Maybe even double digits. The only thing keeping it down is government and central bank intervention.
    Precisely, yes

  34. #30
    Quote Originally Posted by Madison320 View Post
    I'm assuming you mean the 10 yr is too high for the economy to function with this much debt.

    If you use private standards to calculate the credit worthiness of the US government and the potential for future price inflation, I would think the 10 year should be much higher. Maybe even double digits. The only thing keeping it down is government and central bank intervention.
    Why should US Treasury rates be double digits? Do you think there is a good risk they may be defaulted?

    Interest rates generally have three components. One is the expected rate of inflation. That is currently very low. Most estimate 2- 2.5% a year.

    The second component is the desired return for the investor. People who buy bonds are looking for security- not high rates of return- for that they look to stocks or other investments. So that too is very low.

    Thus it must be the third- concern of the lender paying back the loan. A "risk premium". US Treasuries have never defaulted and are considered to be one of the safest investments in the world so this too tends to be very low.

    Treasury Rates are determined by auctions- what buyers are willing and able to pay to purchase them for. The government does not set the price.


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    "Truth isn't truth"- Rudy Giuliani

    "China has total respect for Donald Trump and for Donald Trump's very, very large brain," - Donald Trump.

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