Down goes the Dow

Likes, not like's. My allergies are kicking my a$$.

what is the basic theory for why the SP500 is down only around 10%?

I suppose some people don't really believe a recession is coming, and others think that even if there is one, it will be short and shallow.

Some think that when the trade war resolves things will flip back to normal quicklike

Sometimes markets just take time to grind lower.

Maybe when negative numbers start appearing in the hard data more people will believe.

But I'm very bearish - with our mad king and a mushrooming trade war...how exactly does this end with just a 10% drop in the Sp500? I'm thinking 25%-35% given the huge valuations in the market.

I agree, as much because of the inflated valuations as because of President Trump's damage to the structure of our economy.

I'd love to be wrong, though.

There is a lot of uncertainty. A lot of entities bought the dip but were reluctant to buy more than enough to bring it back up to levels that are 90% of all time highs. The market isn't lower because recession, ww3, etc are not certain things at the moment. Even if a bad recession does hit, drops of >25% are quite rare. They seem less rare because it's happened in the not very distant past, but in general, they are not probable. The more time passes, the less likely they are also because theoretically we should be gaining roughly 1% each month, so the market staying put for 3 months is actually a net drop of 3% from its usual course. If a recession hits in another couple months, we will see further drops, but it probably won't be more than 25% from all time highs, probably more like 18-22%.

All that being said, part of me would love to see a big drop of 30% down from all time highs.

You sound disappointed that the S &P is only down 10%.

yeah the reason the market has so few 25% declines is that there are so few recessions. It takes a mighty blow to knock down this economy. I mean it's not even clear that ending all trade with China is enough to do it - that shows how resilient this economy is. But when we do get a recession the average stock market drop is 25-35% so lots more to lose if we do get a recession.

I think the deal is that coming into the trade war, the economy was roaring, and it is carrying that momentum. And still, companies are hoping to get the good stuff - lower taxes and lower regulation and that will help balance the drag of a trade war. Maybe the good stuff will outweigh the bad.

Just imagine if trump had played this better - built on the momentum of the economy with tax cuts and deregulation, and dropped the trade war. Those things are why business got behind him so strongly. But they are finding out now that all that was just a tease to get the trade war started. And that is not good. Word is that business is shouting at the WH pretty openly right now.

So far China is letting the US stew in its juices. No negotiations, no talks, no progress. they think trump will fold under pressure from business and voters. And I think China is correct.

I think there is a belief that if much of this downturn is "self-inflicted"and can be moderated or reversed, and quickly. Such a strategy seems very consistent with the new administrations's way of doing things.

The old administration’s way of doing things was flood the system with liquidity, open the border to millions of illegal immigrants, pass out government handouts like Halloween candy. I am sure that was a better way to do things, at least for markets.

So we might get a negative 1Q GDP print tomorrow...that could make some big headlines, which would probably be bad for the market. Since it seems that retail buying is what is keeping the market up and a headline implying recession might break through the noise, scaring mom and pop away from the market.

But who knows with this crazy market..a negative 1Q GDP .could make the market rise 2% because that would imply lower interest rates.

The market had some very bad months - but look now ... it is quickly rebounding. Before we know it - the NASDAQ will be at 18,000 (or higher), the Dow will be at 45,000 (or higher) and the S & P will be at 5,900 (or higher). The market ALWAYS bounces back.

No worries, the QE3 is a very big boat.

Early on, I wondered, "Why is Trump doing tariffs? Then later, I wondered, "Why is he stopping and starting tariffs?" I went back and read The Art of the Deal again.

The answer is that tariffs aren't about "tariffs." They're a tool to accomplish something else. Moving manufacturing back to the US isn't practical for many goods when labor is ten times more expensive than the US. So what are the goals?

1) Move the production of imports from China to the US and to a much greater extent, other SE Asian nations with whom we have a friendly relationship.

2) Especially move the production of strategic goods out of China, which has a long term goal of world dominion.

3) Do this FAST, before our POS Republicans and Democrats turn their full attention to mid-term elections, which means NOTHING will be done.

Watch for the US to make a deal with Vietnam. SE Asia nations are wringing their hands in public, but in private they are greedy to get that market share of production from China. Once these deals are negotiated, the market should rebound. A few companies will get hit worse than others, but that's a buying opportunity. I've already repositioned about $100k into stocks that have been hit hard with the talk of tariffs but are well positioned to move rebound over the next few months.

agreed that one of the main goals of the tariffs is to isolate and harm China.

but will the tariffs actually come off? There's a built-in contradiction in the trump position- the WH says deals are coming, which implies lower tariffs...but they are also counting on the tariffs to stay on the books to provide billions of dollars of revenue to 'pay for' the income tax cuts and business tax cuts that Trump thinks he needs, in order to hold the House next year.

so they are trying to take tariffs off but need to keep them on. tariffs are being used as a removable point of pressure to get countries to bend over...but at the same time as a needed source of income.

Hard to see how this resolves.

My going view is that they'll settle in on a global 10% tariff, and then China will get an extra 15% punitive tariff, and probably Europe too, because Trump irrationally hates Europe.

Unemployment is still low and until main street (and not just scam tech companies) start laying people off it's nothing more than a bad vibe. Yeah, blah blah blah trailing indicator, but people still have sh!t tons of money and a lot of consumer habits aren't changing much (at least among consumers that matter). We need actual bad numbers first. And at this point, I am begging anyone who thinks this "trade war" is anything other than the dumbest farce of the 21st century (perhaps only second to the first stupid "trade war" from 2018) to please reconsider. It means nothing, Trump is/will continue to reverse course rapidly.

I remember in 2008 I think it was Caterpillar that announced a massive layoff in March or something and that's when everyone knew we were about to be completely and utterly F'd.

You see, here we have a faulty line of reasoning that, despite all evidence to the contrary, and despite an entire 4 years proving otherwise, still persists to this day.

"Why is Trump doing tariffs?" we wonder to ourselves. "There surely must be some bigger picture or motive!" we desperately try to reason. "Yes! I bet this is a game of 8-dimensional Yahtzee! Trump has them right where he wants them!"

But the answer is, of course, far simpler: Donald Trump, and the people he surrounds himself with, especially now in his second term, are actually just that straight up fvcking retarded.

They all have a huge rage hard on for the EU and the concept of it as a whole, as if that somehow negatively affects the US.

Most the "nEw WoRlD oRdEr" bs fear mongering is basically predicated on "Brussels could come for us next!!!" You can thank Steve Bannon for that

this might have been my wittiest post ever on this website. Just a little self promotion.

QE3? That ship sailed long ago.