Down goes the Dow

agip,

Here is how I would address your comment. Investor risk preferences will determine whether a market becomes more over-valued or more under-valued. So the trigger or catalyst becomes the reason that investors make an assessment of risk-on or risk-off. For the last five years it was a fairly easy decision to buy the trend, and when a dip appeared it was bought and the market moved even higher. Now, risk has entered the psyche of investors, where it has been absent for sometime. The rally is now sold and will continue to be sold in my opinion. Valuation becomes important in giving one the sense of how far this can go. Quite a bit lower in my view. Enough to win my bet with POTO.

Igy

There is a catalyst, at least for what has happened since the FED decision, and remember that there was a sizable reversal on announcement day. I'm surprised that people who either are or want to act like they are professional investors haven't discussed this much, but at the same time the FED announced their no hike decision, they also reduced their target ranges for:

(1) GDP

(2) inflation

(3) Fed Funds rate.

http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20150917.pdf

There was initially a move up, but that reversed quickly when traders had time to digest EVERYTHING, and I think this is all short term thinking, but they are thinking what else is the FED not telling us? The changes by the FED weren't massive, but I think there is some suspicion that the FED isn't totally sanguine about the US economy. Yes, the World Bank and the IMF asked them to not hike rates, but there may be more to the issue.

This may be nothing more than some initial selling that triggered the retest, but it is interesting that the recent GDP revision has not changed anything.

As for the commodity collapse, what is not being discussed generally is that in the 2009-2012 (and later in North America for oil) period, there was significant increased capacity added--particularly South America copper mines--at the very time that industrial production was topping. So, the present situation is not JUST a demand issue, and demand hasn't fallen as much as prices would imply, but a supply/demand issue the same as with oil. Yoe saw an example of the supply issue with CAT announcing significant layoffs for mining/drilling equipment jobs last week.

Yes.

We broke thru the 16,000 Dow floor.

There are things to worry about. If things were so good that they couldn't possibly get better, well, they won't. The question is whether it's a wall of worry.....or a wall collapsing.

coach d,

I will make one addition to your comments. That is, the market is beginning to understand that all the QE has done little to grow the real economy. I suspect a growing fear the Federal Reserve is unprepared and powerless to affect the next downturn. It is the flipside of "the Fed has your back." Perhaps "the Fed has a knife in your back."

Igy

Ghost of Igloi wrote:

coach d,

I will make one addition to your comments. That is, the market is beginning to understand that all the QE has done little to grow the real economy.

Igy

this sort of thing always confuses me. What does it mean? If we were all paper pushers like myself I'd agree to some extent, but we aren't - there are a million more americans working in construction now than in 2011. 750,000 more in manufacturing.

what exactly do you mean there, Igy?

What are we building? Apartments? Sure looks that way where I'm at. What is the return, long term? Expanded credit to build sh-t... Sounds like China.

What are we manufacturing?

agip,

I live in Boise, Idaho and since the financial crisis there have been three major downtown construction projects. One is complete, and the other two are in various stages of construction. There are also three hotel projects planned plus a renovation of a hospital. At the same time major contributors to the Boise economy are reducing their footprint in the town. So, where is the demand for these projects?

In regards to manufacturing auto sales are nearing record levels. Automobile loans represent one trillion dollars of debt. Where is the future demand going to come from?

Demand is being pulled from the future. QE and other Federal Reserve policies have fueled the next boom-bust cycle. We really have learned absolutely nothing in the aftermath of the Great Recession.

Igy

Just,

I left out the apartment complexes in Boise and surrounding towns. These complexes are huge four story multiple building projects. Investors read there was demand for apartments and went absolutely crazy. I bet rents will be down in our town within the next two years.

Igy

Some stats on a not so booming economy: http://bloomberg.econoday.com/byshoweventfull.asp?fid=467354&cust=bloomberg-us&year=2015&lid=0&prev=/byweek.asp#top

Ghost of Igloi wrote:

Some stats on a not so booming economy:

http://bloomberg.econoday.com/byshoweventfull.asp?fid=467354&cust=bloomberg-us&year=2015&lid=0&prev=/byweek.asp#top

double meh - real capital goods orders have been above average since 2011. that means companies are investing real money for the future - it's not just paper.

page 20 of the guide to the markets.

Thank you for the responses. Credit, might as well call it magic... gotta love it! ;)

Just asking... wrote:

What are we building? Apartments? Sure looks that way where I'm at. What is the return, long term? Expanded credit to build sh-t... Sounds like China.

What are we manufacturing?

Weapons. Lots and lots of weapons. Although for all I know, much of that may also be outsourced to other countries.

There sure is a lot of angst here over a little 2% drop. Take a step back and a deep breath. We'll probably get it all back tomorrow. It's the market for crying out loud.

also, investment in non residential fixed assets has been accelerating 5 years straight - that sounds like long term investment - not paper pushing. It's only back to "normal" levels but climbing.

page 22 of that same guide to the markets.

agip,

I bet you Shake Shack burger a large part of those capital goods orders were in energy, mining, construction equipment, airline and automobile manufacturing.

Igy

Ghost of Igloi wrote:

agip,

I bet you Shake Shack burger a large part of those capital goods orders were in energy, mining, construction equipment, airline and automobile manufacturing.

Igy

oh now you want to separate out industries?

#hypocrisyisacrime

Big Dog Investments wrote:

There sure is a lot of angst here over a little 2% drop. Take a step back and a deep breath. We'll probably get it all back tomorrow. It's the market for crying out loud.

1. A little unclear to me what your response has to do with my comment (shown below):

What are we manufacturing?

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

Weapons. Lots and lots of weapons. Although for all I know, much of that may also be outsourced to other countries.

2. The drop from the peak is @ 12% to 14%, not 2%. Someone who is approaching retirement and who has been saving and investing his entire career who has $2 million invested has lost maybe $250k in the past few months. Not immaterial.

sorry that was too aggressive.