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How to interpret a market plunge

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mullah_assassin

So the banksters have decided to pull the plug on the rigged stock market JUST as Trump's new Fed chair Powell gets into the job.

Nice timing, hardly a coincidence. The cabal are going to blame the crash on Trump, watch the shitshow unfold.

Joe Marlowe

America has been leaderless (in fact, worse than leaderless) for a year.
Today is the baptism of fire for a new fed chair.
The clown fired the previous one.
.
This might be a real emergency, or it might just be a bad scare.
Either way, it highlights the insanity of the United States having a leadership vacuum in a financial crisis.
It cannot go on like this.
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The Republican members of the House and Senate have had a year to stand up for their country and do the plainly necessary thing. Instead, they have played every possible kind of game to shut down the Russia inquiry, and it is difficult to see (at least to my eyes) why the chairmen of the respective House and Senate committees, and perhaps others, are not also up to their necks in obstruction of justice.
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This clown show cannot continue.
It endangers America.
It endangers the World.
The circus has got to leave town.
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If the Republicans have any love of country, at all, they will pass Articles of Impeachment tomorrow.
If they can't do that, then they should resign from public office.

Joe Marlowe

" Or butterly wings"
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Thinking about something that is "finger licking good"?
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Or lepidoptery meets typography and loses the toss?

WT Economist in reply to sikko6

Trump is only to blame for a possible return to reality if he previously took credit for unreal prices. OK, so he is to blame.
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Those high asset prices are a disaster for everyone seeking to accumulate assets -- young people trying to save fore retirement or buy homes. They were being ripped off, and are being ripped off. Asset prices need to reflect that the are poorer.

sikko6

If DOW plunges 50%, still overvalued!
So it's time to have deep breath and think.
Trump is to blame for the fall.

Houshu

The trigger is plain there for all to see: top-left corner of the big board --- ICE raid.

WT Economist

The problem is the PTB want to keep stock prices soaring, to vest those stock options and justify executive pay, but they also want to keep wages from rising, to "prevent inflation." And they need to keep the workers spending the money they don't have.
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People who are used to having everything may find that once they have taken everything the whole thing collapses.

roddalitz

"Recessions are an outbreak of collective madness." No, they an outbreak of sanity, following the frenzy of irrational growth.
As a private person, I live within my means, excepting the mortgage I once had, without which I could never have owned a house.
That once-in-a-lifetime exception does not justify monthly credit card debt mounting to over a years income, which is what governments do.

roddalitz in reply to guest-aaawwwmj

You neglect the necessary and effective response to the threat of massive recession. Obama inherited a mess, whereas Trump inherited a good economy.
Look at the history of the National Debt, for example:
https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-maj...
Debt was doing fine until Reagan grew it, Bush grew it some more, W grew it again. Obama was the first modern president to grow national debt but he had a good reason.

k. r. gardner

Folk-wisdom: The Dow was overdue for a correction. We are nowhere near the point where governments and central banks should interfere.

EZTejas

Only Wall Street would consider mildly increasing wages and a growing economy be bad thing. Sooner or later governments have to look to others besides the big banks and with rates hopefully moving to sane levels providing some return for savers, stocks may no longer be the only game in own

As we saw once again in '08, Wall Street is prone to collective panics, temper tantrums, and bed-wetting fits. Like experienced addicts, they're scared, as they know coming off their TARP and QE highs will be tough, and getting weaned off cheap money and guaranteed profits, painful.

Etienne Douaze

"Recessions are an outbreak of collective madness." Really? In a world drowning in debt, I would argue that recessions look more like brief moments of collective sanity...

and the FED just took the punch bowl away indefinitely
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I wouldn't say that.
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The Fed has slightly reduced the Assets it holds.
http://www.clevelandfed.org/our-research/indicators-and-data/credit-easi...
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I has been fluctuating slightly below $4.5 Trillion for over 2 years.
.
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"The SOMA’s holdings of agency debt declined between July 26, 2017, and October 25, 2017,
because of bond maturities. Holdings of agency MBS increased because of the timing difference
between agency MBS principal paydowns and settlement of the reinvestment of principal payments
from agency debt and agency MBS into agency MBS under the FOMC’s reinvestment program
announced in September 2011. Holdings of agency MBS will begin to decline in mid-
November as a result of the change in reinvestment." page 8
.
"Initially, for October 2017 to December 2017, the decline in SOMA securities holdings will be capped
at $6 billion per month for Treasury securities and $4 billion per month for agency debt and agency
MBS. These caps are anticipated to gradually rise at three-month intervals to maximums of $30 billion
per month for Treasury securities and $20 billion per month for agency debt and agency MBS policy announced on September 20, 2017." page 9
.
Source: Quarterly Report on Federal Reserve Balance Sheet Developments November 2017 http://www.federalreserve.gov/monetarypolicy/files/quarterly_balance_she...
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I highly doubt that a $150 Billion per quarter reduction of $4.5 Trillion is market moving.
The markets knew this was going to happen after the September 2017 announcement.
.
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I've heard plenty of people were on the wrong side of the VIX trade
(short), so
we may see some funds take a powder.
The VIX went from 14 to 37, and pre-market it's 49.
http://quotes.wsj.com/index/VIX
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Also toss in "traderless accounts" computer funds that buy/sell based on
algorithms.
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Can't wait for the fun with "driverless vehicles" in the future.
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NSFTL
Regards

Big bets on stock market bliss go bad
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So-called "short volatility" funds, such as the Velocity Shares Daily Inverse VIX Short Term (XIV), melted down roughly 90 percent in after-hours trading on Monday in what looked like panicked liquidation. The fear is that the underwriters -- Credit Suisse (CS) in this case -- will have to liquidate the fund in which it's a major investor. If so, the hit would be worth about two quarters of profits for the institution. Credit Suisse said Tuesday morning it didn't suffer losses stemming from XIV.
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The ferocity of the decline, according to Morgan Stanley analysts, was a drop in market liquidity as computer trading algorithms fed on each other heading into the close of cash trading on Monday. Liquidity was down 50 percent in some places from Friday, pulling down the average order size. That left a $3.4 billion sell-side imbalance heading into the close and drove the after-hours decline, which has eased as morning approached in the U.S., with Dow industrials futures down by around 300 points.
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http://www.cbsnews.com/news/stock-market-wall-street-volatility-strategi...
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Don't forget that many investors have stop-loss orders in place, which also adds to the
decline when those orders are tripped and filled.
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NSFTL
Regards

guest-seealmn

Even good fundamental numbers can hardly justify the gain the DOW and other indices made in the last one or two years. A lot of assets are overvalued, even based on fundamentals, and this might be the correction. Further, and more worrying, there has been talk about a lack of new and promising ideas in the the tech world that was worrying venture capital investors (a long the lines "an IOT toaster is still a toaster").

guest-aaawwwmj in reply to k. r. gardner

Many CBs don't have any firepower in order to interfere.
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If the Fed were to reverse course - lower short-term interest rates or a round of QE -
it would be seen by the stock and bond market as a panic.
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Many gov'ts have high Debt/GPD ratios and can't do much.
Selling more Gov't bonds would increase supply, driving prices
lower and the effective yields up.
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NSFTL
Regards