DOW Rebounds Today Because... The Fuck We Know

[Jimmy Higgins]

NEW YORK, NY -- The Dow rebounded today over 300 points after it fell over 700 points yesterday after it became apparent that no trade deal was remotely possible between the Trump Administration and China. The rebound was most likely caused because... the fuck we know. The market dropped over 700 points because the US-China trade deal appeared dead, which was about as shocking as the end of a Michael Bay film. It was clearly apparent that President Trump doesn't know how to bargain or how to wage a trade war and his continued inconsistencies and untrustworthiness regarding other agreements by him of previous Administrations would give China absolutely no reason to go too far in negotiating with Trump. So yeah, the trade deal has been dead for a while, in fact it was buried six months ago. So why the market reacted to that escapes us.

So the shock 700 plus point drop seems to make about as much sense as the 300 plus point rebound today. Shares of Caterpillar rose less than a percentage point today, despite China's actions look to quell sales for Caterpillar. And that is a big deal. Why? Do you have any idea how much construction China does these days?! Apple shares rose nearly 2%, despite the announced tariffs likely impacting their product sales, and President Trump didn't indicate lifting that tariff, so why those shares went up, the fuck we know.

Some analysts believe the increases were due to bargain hunting, which is possible as President Trump's idiotic maneuvering has seen Apple shares drop 10% over a period of just one week. Of course, Apple shares have been on a yo-yo ever since President Trump took office... and it isn't because of anything Apple is doing. But you'd think at some point, Trump's inane decisions would have been "priced into the market". Granted, with interest rates dropping again, where the fuck else are people going to invest?

 

[southernhybrid]

I think the rebound might have been due to the hope that the Fed is planning two more interest rate cuts. At least that's the impression I got while listening to some of the idiots on CNBC for my amusement. The market is irrational. You can make yourself nuts trying to make sense out of it.

Trump keeps bragging that he's made the market higher than ever, but the fact is that the market tripled while Obama was president. It's gone up a much smaller percentage under the orange idiot. Not that the president has that much control over it, but Trump hasn't done anything, other than the stupid tax cut to contribute to the growth of the market. And, the tax cuts was primarily used for stock buy backs by the largest companies. Tell me again how that helps the economy over the long run! It's crazy.

 

[Patooka]

Saying the economy is going well because the market is higher than ever is like saying I'm a millionaire because I have $10 AUS and $999,990 NZ. The reality is I only have 12 bucks. Trump just has the moronic mentality that big numbers = good = winning.

 

[southernhybrid]

So, what do you think of today's volatility? I heard it was the second most volatile day for the VIX. Almost down 600, but now down 30, wait, I mean 42, wait, I mean 66... It's being blamed on the widening inverse curve. Lawrence Summers said it hasn't been this severe since just prior to last recession. He said Trump's trade war with China has a lot to do with it. Anyway, it looks like we may be in for a very bumpy ride.

 

[TSwizzle]

I've read a few articles this week, written by experts and they seem confused. They start off saying all indicators point to a coming recession/correction then finish off with but it probably won't happen. I don't trust what they say, I think they talk a lot of crap. They don't have an explanation for they way the markets behave. If I remember correctly, the market took a pretty big dump in September last year. I think I will get out very soon and stay out for a couple of months at least.

 

[Derec]

Underdamped oscillation? You have something triggering the Dow going down, but it overshoots so it corrects which overshoots too but less so and so on. Like a car with shot shocks (which would properly be called dampers - the spring absorbs the actual shock, the damper absorbs the resulting vibration).

 

[Derec]

Saying the economy is going well because the market is higher than ever is like saying I'm a millionaire because I have $10 AUS and $999,990 NZ. The reality is I only have 12 bucks. Trump just has the moronic mentality that big numbers = good = winning.

A million kiwi dollars would still be ~$650,000 American or ~950,000 Australian. Not too shabby.

But hey, I'd but it from you for $2 AUS if you insist.

 

[DBT]

Operating largely fear and greed, the stock market is hardly rational at the best of times.

 

[RVonse]

NEW YORK, NY -- The Dow rebounded today over 300 points after it fell over 700 points yesterday after it became apparent that no trade deal was remotely possible between the Trump Administration and China. The rebound was most likely caused because... the fuck we know. The market dropped over 700 points because the US-China trade deal appeared dead, which was about as shocking as the end of a Michael Bay film. It was clearly apparent that President Trump doesn't know how to bargain or how to wage a trade war and his continued inconsistencies and untrustworthiness regarding other agreements by him of previous Administrations would give China absolutely no reason to go too far in negotiating with Trump. So yeah, the trade deal has been dead for a while, in fact it was buried six months ago. So why the market reacted to that escapes us.

So the shock 700 plus point drop seems to make about as much sense as the 300 plus point rebound today. Shares of Caterpillar rose less than a percentage point today, despite China's actions look to quell sales for Caterpillar. And that is a big deal. Why? Do you have any idea how much construction China does these days?! Apple shares rose nearly 2%, despite the announced tariffs likely impacting their product sales, and President Trump didn't indicate lifting that tariff, so why those shares went up, the fuck we know.

Some analysts believe the increases were due to bargain hunting, which is possible as President Trump's idiotic maneuvering has seen Apple shares drop 10% over a period of just one week. Of course, Apple shares have been on a yo-yo ever since President Trump took office... and it isn't because of anything Apple is doing. But you'd think at some point, Trump's inane decisions would have been "priced into the market". Granted, with interest rates dropping again, where the fuck else are people going to invest?

In my opinion, much of the problem is due to actions of the government in particular the fed. Besides the fact they directly control interest rates on savings, they indirectly control inflation, unemployment, and whether the economy contracts or expands. Also a fiat currency based on nothing except faith and paper does not help either.

So when you see $1 million housing on the coasts that should be meant for middle class people who earn on average a $60k/year wage, there is something extremely wrong with a mis-allocation of capital in the economy. Middle class people no longer can afford to live in middle class housing. And at a certain point low interest can no longer stimulate an economy when aggregate demand is the limiting factor. All it can do is cause other harms such as low income for retirees depending on savings, corporate buy backs, and middle class not wanting to save anything.

All that has much more to do with the stock market reactions IMO. And the trade dispute with China is simply an easy target for the drive by media to hammer Trump with.

 

[Loren Pechtel]

In my opinion, much of the problem is due to actions of the government in particular the fed. Besides the fact they directly control interest rates on savings, they indirectly control inflation, unemployment, and whether the economy contracts or expands. Also a fiat currency based on nothing except faith and paper does not help either.

The Fed does seem to do a pretty good job of keeping the economy on track. The track record of Fed + fiat currency is far better than the track record of the gold standard.

So when you see $1 million housing on the coasts that should be meant for middle class people who earn on average a $60k/year wage, there is something extremely wrong with a mis-allocation of capital in the economy. Middle class people no longer can afford to live in middle class housing.

The problem here has nothing to do with the Fed. Rather, high value jobs have made for massive competition for the space, driving out anyone not in those types of jobs. The people who live there either need to travel further for those services or pay more for them.

And at a certain point low interest can no longer stimulate an economy when aggregate demand is the limiting factor. All it can do is cause other harms such as low income for retirees depending on savings, corporate buy backs, and middle class not wanting to save anything.

Retirees are a red herring. If the interest rate were higher the inflation rate would be higher and they would be hurt even worse.

Corporate buybacks are an issue, I would not be one bit adverse to a law prohibiting issuing bonds and using the money to buy stock. I'm not sure it would be possible to avoid having loopholes in such a law, though.

The middle class should be investing in stock, low interest rates aren't a problem for savings levels. The middle class not saving isn't anything new. It's just in the old days we had pensions which were in effect forced savings.

 

[Jimmy Higgins]

The problem here has nothing to do with the Fed. Rather, high value jobs have made for massive competition for the space, driving out anyone not in those types of jobs. The people who live there either need to travel further for those services or pay more for them.

Housing is finite. People commute 1 to 3 hours to NYC or DC.

 

[Toni]

When the market dips, imvestors looking for bargains buy more stocks, and the prices rebound.

I had lunch yesterday with a couple of economists. This is exactly what they said would happen. And in the time frame they predicted.

 

[RVonse]

The Fed does seem to do a pretty good job of keeping the economy on track. The track record of Fed + fiat currency is far better than the track record of the gold standard.

What does keeping the economy on track mean to you? Does it mean never having to go through a recession? If that is the case, I submit to you that is an unworthy goal. Because recessions are actually very necessary in order to weed out marginal producers. Continue bubbling of the economy does indeed help everyone maintain employment, which I do agree is good. But it also allows mis-allocation of capital to occur resulting in equity being spent on the wrong things.

And when you consider the extreme mis-allocations of capital, the manufacturing and industry that has left the country because of it...the track record of the fed proves to be an utter failure compared to the gold standard days.

The problem here has nothing to do with the Fed. Rather, high value jobs have made for massive competition for the space, driving out anyone not in those types of jobs. The people who live there either need to travel further for those services or pay more for them.

Then why don't you see this same trend in North Dakota where shale and oil commands high wages? The jobs vs housing is a significant influence, but the investor class wanting to park money in real assets is really the key. It also explains why old Mopar autos that used to be considered shoddy quality from Chrysler when they were brand new are now selling for a quarter million dollars. https://www.ebay.com/itm/1970-Dodge-Charger-R-T/163775266195?hash=item2621c43d93:g:SPsAAOSwAS5dKpHT People who do have money want to park it in real assets. Because they know that banks will screw them and they also know stocks are no better when corporations are actually not making good money now.

Retirees are a red herring.

Retirees are the baby boomer generation and huge segment of the net worth of the population. They are also not dead yet.

The middle class should be investing in stock, low interest rates aren't a problem for savings levels. The middle class not saving isn't anything new. It's just in the old days we had pensions which were in effect forced savings.

The practices of the fed make it complete stupidity to save money. Only a moron would save money when the interest rate earned is less than the value of real inflation. (current situation in the US today)

 

[Derec]

When the market dips, imvestors looking for bargains buy more stocks, and the prices rebound.

I had lunch yesterday with a couple of economists. This is exactly what they said would happen. And in the time frame they predicted.

Just what I said. Underdamped oscillator.

 

[Derec]

Then why don't you see this same trend in North Dakota where shale and oil commands high wages?

Probably because it's a single industry with limited manpower needs in a sprawling countryside with low existing population density and not a mature city with many industries and already high population density, and in case of NYC, natural barriers to expansion (Manhattan is literally a smallish island).

The jobs vs housing is a significant influence, but the investor class wanting to park money in real assets is really the key.

But they can park that in real assets anywhere. That does not explain high housing cost in certain places.

It also explains why old Mopar autos that used to be considered shoddy quality from Chrysler when they were brand new are now selling for a quarter million dollars. https://www.ebay.com/itm/1970-Dodge-Charger-R-T/163775266195?hash=item2621c43d93:g:SPsAAOSwAS5dKpHT

Not many were produced in the first place. The entire 2nd gen Dodge Charger production was less than 100,000 units over 3 years. Compare that with 570,000 VW Beetles sold in the US for the 1970 model year alone. Furthermore, the 528 is top of the line Charger and That low production helps keeping supply low. Lastly, most of these will have been driven over the decades, suffered rust, maybe were in crashes, and were ultimately sent to the crusher long before the cars attained a classic car status. If you'd read the description, this is a full rebuild, it's not really an "old Mopar auto" but that may be a "Ship of Theseus" level philosophical puzzle at this point. 2nd gen Charger was also in movies/TV shows (think General Lee of Dukes of Hazzard) which increases demand for it. As everything though, it's supply vs. demand in the end.

People who do have money want to park it in real assets.

I'd bet you anything that whoever ends up buying this vehicle will be a Dodge muscle car enthusiast and not somebody who is hoping to make a profit on their investment or simply to "park" money.

Because they know that banks will screw them and they also know stocks are no better when corporations are actually not making good money now.

I think the prospects for the stock market are better than those of 1970s muscle cars. The US stock market will probably double in 10 years, but I doubt anybody will be paying half a million for a 1970 Charger in 2030.

Retirees are a red herring.

Retirees are the baby boomer generation and huge segment of the net worth of the population. They are also not dead yet.

The practices of the fed make it complete stupidity to save money. Only a moron would save money when the interest rate earned is less than the value of real inflation. (current situation in the US today)

If by savings you mean just the savings account, yes. But for example most people's retirement funds (IRAs, 401ks) are invested in mutual funds.

 

[RVonse]

But they can park that in real assets anywhere. That does not explain high housing cost in certain places.

Yes, I think it does though. If the investor class deems a certain area as a premium location they can and do start buying up property. There are youtube videos showing Chinese executives flying into Cupertino, California for no reason other than to buy property. They call them ghost houses because the Chinese owners do not even want to bother with renting them out. They aren't flying into California because they need a house to live in for a job. They are simply parking funds for speculation.

I think the prospects for the stock market are better than those of 1970s muscle cars. The US stock market will probably double in 10 years, but I doubt anybody will be paying half a million for a 1970 Charger in 2030.

We will see. One thing we both can probably agree is the stock market will be a LOT more volatile than a Charger. I'm guessing the Charger will pretty much keep the same value inflation adjusted and the stock market historically goes up 5+% over the long haul. 10 years is not a long haul though and the fed has targets for higher and higher inflation. I could see the Charger actually outdoing some of the blue chip stocks.

But for example most people's retirement funds (IRAs, 401ks) are invested in mutual funds.

Inflation adjusted, just how great are these really doing? I keep seeing stories on the internet that people are going to have to work longer and longer before they can afford to retire.

 

[Loren Pechtel]

The problem here has nothing to do with the Fed. Rather, high value jobs have made for massive competition for the space, driving out anyone not in those types of jobs. The people who live there either need to travel further for those services or pay more for them.

Housing is finite. People commute 1 to 3 hours to NYC or DC.

Which doesn't change the fundamental problem. If there is anything the government can do about it it's good mass transit options.

 

[J842P]

Yes, I think it does though. If the investor class deems a certain area as a premium location they can and do start buying up property. There are youtube videos showing Chinese executives flying into Cupertino, California for no reason other than to buy property. They call them ghost houses because the Chinese owners do not even want to bother with renting them out. They aren't flying into California because they need a house to live in for a job. They are simply parking funds for speculation.

We will see. One thing we both can probably agree is the stock market will be a LOT more volatile than a Charger. I'm guessing the Charger will pretty much keep the same value inflation adjusted and the stock market historically goes up 5+% over the long haul. 10 years is not a long haul though and the fed has targets for higher and higher inflation. I could see the Charger actually outdoing some of the blue chip stocks.

But for example most people's retirement funds (IRAs, 401ks) are invested in mutual funds.

Inflation adjusted, just how great are these really doing? I keep seeing stories on the internet that people are going to have to work longer and longer before they can afford to retire.

Those retirement instruments do fine. Especially over the long term, and if you take care of moving from high-risk assets to low-risk (low-yield) assets as you age.

Also, the stock market has returned between 7-8% adjusted for inflation, not 5%. My own personal rate of return on my very modest retirement account is currently at 9.5%, although as you say, there's a lot of volatility, at one point it was like 14-15%. I have unfortunately I only really starting saving since 2016, a time of very steep inclines, so I expect a regression towards the mean moving forward.


The reason people are going to have to work longer and longer is because no one is really saving, because people, especially young people, have shit job prospects. I just happen to work in the booming tech sector.

 

[Loren Pechtel]

What does keeping the economy on track mean to you? Does it mean never having to go through a recession? If that is the case, I submit to you that is an unworthy goal. Because recessions are actually very necessary in order to weed out marginal producers. Continue bubbling of the economy does indeed help everyone maintain employment, which I do agree is good. But it also allows mis-allocation of capital to occur resulting in equity being spent on the wrong things.

There will be ups and downs. The goal is to keep them from being too extreme. And note that marginal producers will be weeded out anyway, recessions just do it faster.

And when you consider the extreme mis-allocations of capital, the manufacturing and industry that has left the country because of it...the track record of the fed proves to be an utter failure compared to the gold standard days.

The biggest drain is on manufacturing jobs, not manufacturing. It's being killed by automation far more than by outsourcing.

Then why don't you see this same trend in North Dakota where shale and oil commands high wages? The jobs vs housing is a significant influence, but the investor class wanting to park money in real assets is really the key.

It's not just a matter of high wages but how many such jobs exist.

It also explains why old Mopar autos that used to be considered shoddy quality from Chrysler when they were brand new are now selling for a quarter million dollars. https://www.ebay.com/itm/1970-Dodge-Charger-R-T/163775266195?hash=item2621c43d93:g:SPsAAOSwAS5dKpHT People who do have money want to park it in real assets. Because they know that banks will screw them and they also know stocks are no better when corporations are actually not making good money now.

Paying a lot for rare things has always been a thing. It's not a good hedge against the economy, such things crash worse when things go south.

Retirees are a red herring.

Retirees are the baby boomer generation and huge segment of the net worth of the population. They are also not dead yet.

You failed to quote the why.

The middle class should be investing in stock, low interest rates aren't a problem for savings levels. The middle class not saving isn't anything new. It's just in the old days we had pensions which were in effect forced savings.

The practices of the fed make it complete stupidity to save money. Only a moron would save money when the interest rate earned is less than the value of real inflation. (current situation in the US today)

Please note what I said about stock. Is your only concept of savings a bank account??

 

[Derec]

Yes, I think it does though. If the investor class deems a certain area as a premium location they can and do start buying up property. There are youtube videos showing Chinese executives flying into Cupertino, California for no reason other than to buy property. They call them ghost houses because the Chinese owners do not even want to bother with renting them out. They aren't flying into California because they need a house to live in for a job. They are simply parking funds for speculation.

Yes, speculation is a thing that happens. And China has a hugely positive trade balance.
I do not see what your point is with that example though, but speculation is a risky venture at best, and letting a working asset lie fallow like that is foolish.

We will see. One thing we both can probably agree is the stock market will be a LOT more volatile than a Charger.

I would say the stock market will have much more day-to-day and week-to-week volatility, but the lofty value of the Charger is propped by mostly by nostalgia, and that's a fickle mistress. Note that if you buy the Charger for speculation, you have to store it. Cars are heavy and bulky and thus not an ideal store of value. And you are not allowed to enjoy it, of course, as that brings the value down. But you still must do some maintenance to ensure it remains in pristine condition you bought it in.
But the main thing is that it is basically a passive thing. You are hoping that it will become more desirable than quarter million in the future, and not lose value if collectors lose interest in pre-oil crisis muscle cars. But it performs no function that earns money. Whereas if you invest in the stock market, you own tiny pieces of corporations who sell goods and services in order to make profits. In the long run, and unless you really luck out, that is better.

I'm guessing the Charger will pretty much keep the same value inflation adjusted and the stock market historically goes up 5+% over the long haul. 10 years is not a long haul though and the fed has targets for higher and higher inflation. I could see the Charger actually outdoing some of the blue chip stocks.

It could probably outdo "some" poorly performing stocks, but it will fall behind say the S&P index, which did about 13% annual average over the last 10 years. But it could also lose a bunch of value if collectors lose interest.
As far as fed inflation target, that is 2%, not "higher and higher".

Inflation adjusted, just how great are these really doing?

Actually quite well depending on the investment mix and your time horizons etc. Certainly better than classic cars, and you don't have to park your car on the driveway because your nest egg is taking up the entire garage.

I keep seeing stories on the internet that people are going to have to work longer and longer before they can afford to retire.

Well that has too reasons - people are not saving enough for retirement and people expect a retirement lifestyle that requires a bigger nest egg, so they need to work longer.