Down goes the Dow

Rod,

Generally that would be correct. Keep in mind there have been other indices that have been in bear market territory for some time. As you can imagine there are never distinct lines and perhaps others would define a bear market differently.

Igy

K5 defector wrote:

Pointing Out the Obvious wrote:

Igy,

I do have much to learn and I am not afraid to admit it. Those who believe they know it all are fools.

My God, How delusional. Or just dishonest? When have you ever admitted you are wrong on this board? You have in fact been demonstrably wrong on occasion -- but have fervently denied you were when called on it.

Hilarious.

How is it delusional or dishonest to admit I have much to learn?

Regarding being wrong, I certainly make more than my share of mistakes. (Engaging you right now is probably my latest.) It's funny that Igy accuses me of being critical without offering anything constructive, but you accuse me of clearly being wrong on occasion. Since I've been "demonstrably wrong" perhaps you can find a few of my errors so that I can own up to them and you can show Igy that he's wrong about me. Don't worry, I won't hold my breath.

POTO,

I will come to your defense and stand by my earlier criticism. Of course I only started posting in April 2015. I must admit I look forward to your presence here and consider you my friendly foil.

Igy

Pointing Out the Obvious wrote:

Regarding being wrong, I certainly make more than my share of mistakes. (Engaging you right now is probably my latest.) It's funny that Igy accuses me of being critical without offering anything constructive, but you accuse me of clearly being wrong on occasion. Since I've been "demonstrably wrong" perhaps you can find a few of my errors so that I can own up to them and you can show Igy that he's wrong about me. Don't worry, I won't hold my breath.

Hmmm. You repeat your assertion that you make "more than my share of mistakes".

Yet you then go on to question my comment that you have been demonstrably wrong on occasion.

And you see no contradiction in this?

This market has nothing to do with the financial outlook for this country's economy (or the global economy). It has nothing to do with the profitability or valuation of companies. It has nothing to do with the price of oil. It has nothingn to do with the pace of manufacturing in China.

This market has EVERYTHING to do with the unintended consequences of Index-Related investment products (Index Mutual Funds and ETF's).

The proliferation of these products, and the proliferation of rationales for advice to investors to use these products has made Financial Services companies who create the indexes, package the products, and sell the advice to investors VERY RICH.

Modern Portfolio Theory? It is an elaborate concept used to sell investors on the idea of the need to diversify broadly among sectors and non-correlated investments in order to hedge against risk, and increase returns. And, since it is so costly and such a hassle to diversify retail clients among individual companies and securities in all these sectors; creating indexes to represent each sector was supposed to simplify it (and make it cheaper) for dummies.

So the Financial Companies make the products, and then their expert analysis tells clients when to rebalance among these products.

Each instruction to rebalance triggers transactions... which profit the Financial Services companies who run the products. It doesn't make any difference to them what the value of the product is... they make money when people buy the product and when they sell the product.

The unintended consequence is this:

Each index product is backed by shares of the companies which comprise the index.

When the signal goes "change the weighting" of the various indexes... some indexes get sold, and others get bought. Regardless of the profitability or value of the underlying companies, they ALL take a hit when the index to which they belong is sold, because some Financial analyst says it is time to underweight (name index here). Of 500 companies in the S&P; it is ridiculous to think that they ALL suck and need to be sold, just because Goldman Sachs analysts think it is time to underweight US Equity.

The consequences hit on the upside, as well. Companies that actually DO suck within an index have become OVER-valued as a result of advice to add weight to a particular index. When the genius analysts reading their MPT tea leaves say it's time to load up on US Equity; all of the stocks in the S&P rise from purchases of ETF's and Index Funds that track that index. Even if some of those companies should be bankrupt.

Furthermore, it makes the reliability of Capital from the Capital Markets too unreliable.

Companies who need investors to buy their stock, so that they can expand their businesses according to rational economic and financial practices, can no longer rely on the good name and good management of thier company to get this money. They end up awash in money when they don't need it... and suddenly starved of cash when they need it the most. So they turn to irrational behaviors (like hoarding cash, borrowing money when they don't need it just because rates are low, buying back stock, limiting dividend increases, etc.).

Too much money is being speculatively applied to these indexes by big trading firms and Hedge Funds.

These people are not INVESTING. They are speculating on the intra-day movement of the indexes... and trading billions of dollars multiple times per day trying to capitalize on inefficiencies in the execution of the trades of small retail investors. They can front-run the action, with computers able to see what trades are coming in; and quickly execute profitable trades ahead of those with less clout.

But even with all this advantage; these geniuses still screw up.

Hedgies have bet billions of dollars on Oil futures... seeing the price headed down six months ago; they bought options to capitalize on the inevitable rebound in price. Alas, the Saudi's confounded everyone by raising production even more, and extending the rout in oil prices indefinitely.

With the need to close out these positions; the Hedgies had to turn to their hedge investments and sell them for liquidity... even though the underlying fundamentals of these investments are strong. The selling pressure is an outgoing tide which is putting ALL boats on the bottom.

Furthermore, the same Hedge geniuses offered their clients access to the hot exotic Chinese market that they couldn't get from their retail brokers.

And as the Hedge clients see their Chinese investments get clobbered in the Chinese Government Manipulated Markets; they started clamoring for redemptions.

In order to meet redemptions; the Managers had to sell what was most liquid: US Equities in the form of these Index investments.

So, now, Pa Kettle who retired with his money in his 401k or IRA is seeing his balance come unglued. And his advisors are no-doubt telling him to re-balance (which will entail sellling some indexes low, and buying other indexes high... not exactly the formula for success).

It is well-past time for regulation of the industry.

Capital markets need to be a place where investors get value from providing capital to well managed companies that make money... and where they run the risk of losing money by investing in companies that aren't well run.

Speculators... people who want to gamble on the daily spread, or make a fast buck by jumping in and out of the markets... they deserve a place to engage in this activity. We already HAVE Las Vegas.

It should be illegal to engage in short-term speculation in the Capital Markets.

It should be illegal for Financial Services companies to profit from investing in same products (but on the opposite side) as their investors.

It should be illegal for Banks to use their reserves as collateral for speculative investing. In fact, It should be illegal for retail banks to engage in Investment Banking, period.

K5 defector wrote:

Pointing Out the Obvious wrote:

Regarding being wrong, I certainly make more than my share of mistakes. (Engaging you right now is probably my latest.) It's funny that Igy accuses me of being critical without offering anything constructive, but you accuse me of clearly being wrong on occasion. Since I've been "demonstrably wrong" perhaps you can find a few of my errors so that I can own up to them and you can show Igy that he's wrong about me. Don't worry, I won't hold my breath.

Hmmm. You repeat your assertion that you make "more than my share of mistakes".

Yet you then go on to question my comment that you have been demonstrably wrong on occasion.

And you see no contradiction in this?

I see no contradiction as I was not talking about being wrong here, but in other aspects of my life. You were obviously talking about this thread since you claimed you could demonstrate my error.

So how about it...

Igy,

You da man.

Pointing Out the Obvious wrote:

K5 defector wrote:

Hmmm. You repeat your assertion that you make "more than my share of mistakes".

Yet you then go on to question my comment that you have been demonstrably wrong on occasion.

And you see no contradiction in this?

I see no contradiction as I was not talking about being wrong here, but in other aspects of my life. You were obviously talking about this thread since you claimed you could demonstrate my error.

So how about it...

I see. So you are saying that you have made more than your share of mistakes in life, but have made no mistakes in any posts on this thread?

I just want to be clear on this before I spend time digging out some of your comments that were wrong.

coach d I went to Waterloo in Canada, and had some friends who went on to do grad work at MIT. A few of them ended up being quants on WS, who told me that they would never publish anything financial for 2 reasons: 1) confidentiality and proprietariness; and 2) embarrassment. Apparently, the way propositions are formulated, it is rare indeed that anything should do well on any of the significance tests.

I guess my point is that only general consumers would take anything from that paper, not anybody who actually knew anything.

The VFINX we still have is classed as a "large blend" by Morningstar, and is made up of mostly giant market caps. Look at the performance of major components so far this year:

http://portfolios.morningstar.com/fund/holdings?t=VFINX&region=usa&culture=en-US

lol, good thing AT&T are in there! The 20% VBMFX is essentially treasuries.

If this were more than a tiny amount of our portfolio, I would be pulling my hair out. As is, I'm always tempted to play with it. There is enough in it that good money could be made on it, if it was managed well. Or I should say, if it was ABLE to be managed well. Even at this time, of course I'm tempted to move it to cash and just wait.

I haven't cashed it out because it is my barometer of everyman performance. If I relied on it, as the everyman could be said to do, I would play with it. Yes agip, I would assume the risk of managing my own portfolio. In fact, I would cash it out immediately, and set up a brokerage account. Or, I might avail myself of the option of using a bunch of it to buy real property. I know, I know, the usual disaster. I haven't done so because there is no experience like actual experience, to gain understanding. Watching it drop lately, and not really perform at all in 2015, has been cause for consternation.

Market Guru:

"It is well-past time for regulation of the industry.

Capital markets need to be a place where investors get value from providing capital to well managed companies that make money... and where they run the risk of losing money by investing in companies that aren't well run.

Speculators... people who want to gamble on the daily spread, or make a fast buck by jumping in and out of the markets... they deserve a place to engage in this activity. We already HAVE Las Vegas.

It should be illegal to engage in short-term speculation in the Capital Markets.

It is well-past time for regulation of the industry.

Capital markets need to be a place where investors get value from providing capital to well managed companies that make money... and where they run the risk of losing money by investing in companies that aren't well run.

Speculators... people who want to gamble on the daily spread, or make a fast buck by jumping in and out of the markets... they deserve a place to engage in this activity. We already HAVE Las Vegas.

It should be illegal to engage in short-term speculation in the Capital Markets.

It should be illegal for Financial Services companies to profit from investing in same products (but on the opposite side) as their investors.

It should be illegal for Banks to use their reserves as collateral for speculative investing. In fact, It should be illegal for retail banks to engage in Investment Banking, period."

I agree with many of these things. I have heard criticism similar to yours of index products, and it has always reminded me of the existing situation where businesses hire out their HR to headhunter and HR firms, who are the ones actually in control, and who respond to, and work with, poolings of resources and personnel other than in a particular business that they serve.

Regarding your last point, I have never believed that repeal of Glass Steagall was a good thing. Repeal was the end of a process of creep, during which creep, potential repeal was well-criticized.

"It should be illegal for Financial Services companies to profit from investing in same products (but on the opposite side) as their investors."

Absolutely. The conflict of interest is obscene. It should not be the case that such businesses need be able to offer everything to everyone--they should pick a niche and direction in which there are no conflicts, and restrict themselves to it. Effectively pitting the interests of one group of investors against that of another and charging for all transactions is IMO a breach of fiduciary duty to BOTH groups.

But, again, indexes do not tell the whole story. There are other issues, like indebtedness.

K5 defector wrote:

Pointing Out the Obvious wrote:

I see no contradiction as I was not talking about being wrong here, but in other aspects of my life. You were obviously talking about this thread since you claimed you could demonstrate my error.

So how about it...

I see. So you are saying that you have made more than your share of mistakes in life, but have made no mistakes in any posts on this thread?

I just want to be clear on this before I spend time digging out some of your comments that were wrong.

Go for it. As they say, put up or shut up. Otherwise I'm done with you.

I didn't really think the markets would go below 16k this year unless something unfavorable happened in the election.

Today's close: 15,766.

We will see if it continues down, or if it settles oscillating at 16k, the lower bound of what I thought it would do.

Ghost of Igloi wrote:

Bogel,

Hey who do you work for? How is my employer any less relevant than yours?

Perhaps you don't even work and I am paying your taxes.

I don't work. You don't pay my taxes.

Judging by the slowdown in posting, it seems that everybody is trying to digest what the heck just happened.

The question that folks should be asking is... who bought mid-day?

For the folks who believe in 'fundamentals' and that the US economy is the "Oooo, Ahhh, Owww" of the world... you're dreaming.

The markets are surviving off of propaganda, QE "capital", and foreign in-flows. Essentially, smoke and mirrors, and a little bit of foreign desperation sprinkled on top.

Market confidence has long been gone. It is a very dumb-downed labor/consumer base that has no idea how to maneuver their money, and it is all being stolen right before their eyes... as always.

Marty,

I believe some the rebound was short covering and institutions trying to churn the market for a trade. You can see the action in the FANG stocks performing worse on the downside and better on the upside. I see the general trend down with retail investors lured in on the rallies only to be sold down by the institutions.

Igy

I'm sorry, what?

Say what?

I just did. Are you making fun of me?

No, no, just hard of hearing.