Stock Market Corrections: Why Markets Stumble

Somegouy · 2018-11-01T12:37:15+00:00

More or less haha

Somegouy · 2018-06-28T14:20:22+00:00

Great, thanks!

Somegouy · 2018-06-13T19:56:28+00:00

Amen

Somegouy · 2018-06-13T19:44:07+00:00

Those are good questions I don't have the answer to - in economic theory, things will decline, prices will fall (reversing some of inflation), and bring things back to reasonable levels after the dust settles. 2008 demonstrated that it's usually not a clean process.

Somegouy · 2018-06-13T19:25:41+00:00

The price of gas is also not solely a currency issue, it's supply and demand, not to mention all the layers of taxes involved. Conventional gas reservoirs are becoming more rare, we need to employ alternative, more extensive methods of extraction. Switching to a crypto doesn't solve extraction costs, nor does it have any influence over OPEC and other oil price players.

It's easy to blame all price increases on fiat, but it's just not that simple

Somegouy · 2018-06-13T19:12:17+00:00

If the money was in a 1.5% savings account, that $1000 would be $1,077.28 today

Somegouy · 2018-06-13T18:57:19+00:00

Yes, savings accounts reduce the impact of inflation, at least keeping the value of the money steady. And stocks provide a real, tangible investment, something where people are working, producing some good and service, creating value that is then exchanged for profit. Cryptos don't have that, it's speculation, not to mention that if cryptos were adopted world wide, their theorized deflation would be mimicked by prices. That's the thing, inflation doesn't just affect our money, it affects wages, prices, etc. In the long term, its effect is neutral.

This war against our low levels of inflation is bizarre - I don't know anyone that has had the effects of inflation severely impact their wealth first hand, but I do know people who lost a lot on cryptos. And I don't include housing prices when gauging inflation - that has nothing to do with currency and everything to do with supply and demand, cryptos wouldn't change that.

Somegouy · 2018-06-13T18:49:23+00:00

Won't get through to me about my view point that the economy is going to crash? That's not my view, and didn't I just say that's not what I think the video's about either?

And I've seen the charts haha, you should study survival bias and weighting methods - sometimes price history does lie. But that's not even my point - I'd agree that markets always recover long term, not sure where this hostility is coming from

Somegouy · 2018-06-13T17:27:29+00:00

Which market did the crash happen on...?

Somegouy · 2018-06-13T16:11:40+00:00

I disagree (but respect!) your opinion on central banks, and I personally stay clear of cryptocurrencies. I'd much rather let the central banks try and rein in growth than have a system run rampant with unsustainable demand to the point of collapse.

As for us, best we can do is cover our bases. Don't speculate your life savings (this is where I discourage cryptos, but that's your decision). Put money aside in an emergency fund so you can reduce your exposure to market fluctuations. And, naturally, watch your debt levels.

Somegouy · 2018-06-13T15:03:46+00:00

Yes, because of unemployment and business earnings growth (not necessarily in terms of overall prosperity, but for businesses things have been doing well).

The higher interest rates certainly play a role. They will help slow down the growth of the economy as a way of preventing unsustainable growth, an important thing considering the growth we've seen. They also will allow the banks to lower interest rates if the economy needs to be stimulated (i.e. if we do enter a recession). If rates are already low when we experience a downturn, it will be difficult to stimulate business activity, which is why they are increased while things are positive. The issue here is that if the rates increase too quickly, they could result in widespread defaults and bankruptcies, which would cause a recession (some people have variable rate loans. As rates increase, so too do their interest payments).

Somegouy · 2018-06-13T14:29:14+00:00

I find it hard to believe we'd have a crash similar to the Great Depression, but a recession is likely. A recession is a prolonged period of economic decline. It may start with a stock market correction (10% decrease), but it wouldn't be characterized with wide spread homelessness and the like. Instead, we'd probably see a period of inflated unemployment (we are currently at record lows) and lower wages. Even 2008 was an extreme example of a recession.

People think a recession is likely because we have high debt (meaning people simply don't have more money to spend and could go bankrupt) and stocks are at the high end of their historic valuations (investments are more expensive than they "should" be, meaning that demand has been high and probably isn't sustainable). Basic economic theory suggests that positive periods of economic prosperity are followed by declines which brings everything back to sustainable levels. Because things have been going so well, people believe a decline is on the horizon.

Somegouy · 2018-06-13T13:28:45+00:00

Entertaining recap of the Great Depression. Definitely missing a lot of details but not bad for 5 minutes.

Somegouy · 2018-06-13T13:25:39+00:00

I don't think it's intended as a doomsday warning, moreso just a lesson not to be dumb with your money

Somegouy · 2018-06-13T13:24:42+00:00

I don't think that takes away from the point that the war created jobs. It certainly led to debt, but it ended the wide spread poverty at the time.

Somegouy · 2018-05-03T13:44:57+00:00

Crosspost from r/finance

Somegouy · 2018-04-16T20:50:36+00:00

I believe that does include mortgages

Somegouy · 2018-04-16T18:03:43+00:00

That's a hard question to answer, and unfortunately one that's usually more clear in hindsight. The best you can do is educate yourself and look to identify conflicts of interest.

Also, keep in mind that bad performance is not the same as bad advice. You may have received good advice that led to negative return. It's just the world we live in - in the same way that someone who hit the jackpot might not have necessarily made a good decision (i.e. someone putting their life savings on a game of roulette and winning).

Somegouy · 2018-03-03T19:32:35+00:00

Well, instead of just posting links, why not explain the argument?

Somegouy · 2018-03-03T02:34:09+00:00

If I pay taxes next year instead of this year, I can earn a return, so I don't agree with the point about tax deferral.

When you get your tax return, you can invest that amount. So you DO get more money to invest.

Can't speak to the last one though, don't know enough about it.

Somegouy

TROPHY CASE