Mainstream media likes to assign a reason for every squiggle in the stock market, bond market, or commodities.
Today provides an amusing example.
Reuters says Washington’s Mounting Woes Push S&P to Biggest Loss in Three Months.
U.S. stocks sold off on Thursday, with the S&P 500 recording its biggest daily percentage drop in three months as escalating worries about the Trump administration’s ability to push through its economic agenda rattled investors.
Investors appeared to be losing faith in the Trump administration’s ability to move forward with tax cuts and the rest of its domestic economic agenda, some strategists said. The latest cause for concern was speculation over the possible departure of National Economic Council Director Gary Cohn.
Real Reason Investors are Fearful
CNBC’s Art Cashin believes he knows the Real Reason Investors are Fearful.
The rumor that President Donald Trump’s chief economic advisor, Gary Cohn, would leave the administration, widely circulated before being denied by the White House, is not the only reason why stocks dropped as much as they did Thursday, Wall Street veteran Art Cashin told CNBC.
A cloud over the Trump administration’s image and ability to enact its agenda drove the Dow Jones industrial average to close down 1.2 percent, or 274.14 points to 21,750.73 on Thursday. The S&P 500 index declined 1.5 percent to 2.430.01 and the Nasdaq composite dropped 1.9 percent to 6,221.91.
“No disrespect to Mr. Cohn, but what’s really affecting the market is not the fear that only he would leave,” Cashin, UBS director of floor operations at the New York Stock Exchange, said Thursday on “Closing Bell.”
An unverified Twitter account, which has since been debunked by reporters and the administration itself, claimed on Thursday that Cohn was set to resign, Reuters reported. The White House released a statement later assuring that Cohn “intends to remain in his position.”
Cashin said Cohn’s departure could catalyze a “mass exodus” that would hurt many investors’ confidence in the Trump administration.
Hundreds of Reasons Stocks May Decline
There are hundreds of reasons stocks may have declined today, most of which we may only find about later.
Stocks may have declined for the simple reason valuations are insane or out of fear of Fed balance sheet normalization.
What about Unexpectedly Poor Industrial Production Numbers today, accidentally released a half houry early?
Literally, anything (or nothing at all), may be behind today’s decline.
Fear? What Fear?
Art Cahsin says investors are “fearful”. Let’s take a look.
Fear? It’s ridiculous to talk of this pissy selloff as an indication of fear.
Mike “Mish” Shedlock
BUT….The Sky WILL FALL………will fall……will fall…….will fall…….sooner or later, for sure. Absolutely. Will do it. Gonna’ happen. Has to. Been up too long. Way overdue. Any day now. We are warning you. Can’t miss. Trust us. This time is for real.
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Seen news blaming Tokyo on Barcelona .
Not in msm but perps blew up their house filling gas bottles with explosive yesterday, according to police source local media.
Public were told to now it was a gas leak.
If true Barcelona missed a bigger event.
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Lots of folks on this site have been calling for a market and/or economic collapse for years. Eventually they will be correct, but it might take many more years before it happens. In the meantime, if they have been in cash, they have missed out on a lot of gains.
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Unless, in the interim, they were turning their cash into an asset that will soar in value at the same time as the bubble market pops.
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Realist, you got me.
I have not stopped living and still run my business and am even starting another, but I have no illusions that this mess we call an economy is sustainable, but as you suggest, there is no way to determine WHEN. But what I can say is that they will NEVER have my money to gamble with again. It may not make one damned difference and I will readily admit that getting out at 10,000 has cost me, but then again, not buying bitcoin has cost me even more. But you know what? I DON’T CARE. I could have also sold drugs, robbed banks, defrauded my customers, many things that would have possibly profited me greatly, but I will stand by MY PRINCIPLES. I’m not equating any of these actions but I will say that those who make their living from speculation have taken over our economy and they have the capacity to destroy our nation, even our civilization by making destructive bets that the entire society will suffer from. 08 was in no way due to my participation as I carry no debt and place no bets, but I did have an IRA in a mutual fund….a financial institution that was fully engaged in this casino industry. I simply refuse to participate on principle, which may seem self destructive but is far less so that AntiFa beating people with clubs and tearing down monuments for THEIR principles.
No matter what anyone says at this point I will contend our financial fragility is putting our world at risk and I this fragility comes from the hands of our financial system that rewards gamblers and is sustained and protected by government which forces nonparticipating citizens to cover those bets.
When this corrupt ponzi of wealth redistribution to an extremely small group finally does fail, there will be nowhere to run, no place to hide and no hedge beyond personal survival skills to save us.
They WILL destroy our world. It has all been staged, economic, social unrest and a world on the verge of war. All we need is a very little “bump”.
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+1100
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Hey Madashellohwell. I applaud you. I appreciate someone who is willing to start a business, employ people and help the economy grow. The world (not just America) needs people who are willing to risk their time and money starting new businesses.
Many years ago (almost 40 years!) I thought the world economy would crash and end up in a terrible depression. I felt this way for around two decades. As a result I missed out on quite a few opportunities to start businesses and make other investments. It took me a long time to realize that things are rarely as bad as what is portrayed by pundits, experts, media etc. Sensationalism sells, but it is rarely correct. I believe I have now come to a more realistic view of the world than when I was much younger. This view has served me well. But, like you, I don’t look back and regret my past choices because that is a waste of my time. Today, I look forward to the future with a positive outlook, and an eye open for opportunities.
You and I have different outlooks in some ways, but we should be able to agree on others, and I believe we can do that without resorting to the language of hate that some on this site like to use.
For the record, I am not a big believer in conspiracy theories. I do not believe that a small group of people are attempting to accumulate all the world’s wealth and destroy 99.9% of the world’s population. And I do not believe that they are deliberately trying to cause a depression.
I believe that the world is an incredibly complex place, full of complex problems. People who think that there are simple solutions (especially solutions requiring hatred and violence as a few on this site promote) are part of the problem, not part of the solution.
I don’t think that I have ever heard you mention violence, so please don’t think I am referring to you.
Respectfully,
Realist
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“I felt this way for around two decades.”
That would be 1997/98. Around the time of”irrational exuberance”. We have had 2 crashes, and are on the cusp of another that might well drawf the previous two, with one almost bringing the whole financial system down. You would have been right except for the intervention by the central banksters and politicians on an unimaginable scale. Also it has scarred them to an extent that they do not believe their own system and hence the money spigot is still wide open to ensure the system is propped up.
“It took me a long time to realize that things are rarely as bad as what is portrayed by pundits, experts, media etc.”
You could say you were wrong in understanding how far the central banksters and politicians could go in trying to keep the system propped up. Due to this miscalculation while you were right you still ended up on the wrong side.
But the point is this: YOU CANNOT PROP UP A DEFUNCT SYSTEM FOR EVER. At some time it will break. Look no further than the erstwhile USSR.
Just watch how this movie plays out. You might find that you were right after all and you may not have to wait for another decade too.
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Hey KPL. I was talking 70’s and 80’s (40 years ago). I was almost all cash before the corrections in 80-81 and Oct 87. I got that part right. However my timing on getting back in sucked. And because of my conservative approach, I continuously have too much cash (even today).
I’m not saying that significant corrections cannot occur. I’m just saying from personal experience that you are fooling yourself if you think you can get the timing right.
I candidly admit I am wrong on a lot of things. I’m not God. There are a lot of people on this site who appear to think that they are God, because they are so positive that they can accurately predict the future. If that were possible, then they must indeed be billionaires. I say nonsense.
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“I am not a big believer in conspiracy theories. I do not believe that a small group of people are attempting to accumulate all the world’s wealth and destroy 99.9% of the world’s population.”
Neither, as there is no theory to it. A very few people control (some would imply owning means they can actually claim it as is , which is not possible without war and large scale destruction of societies, but does give excuse) a majority of the world’s wealth. Look up who has final ownership on paper, it is well covered… you can use US percentile stats or something like
https://www.economist.com/news/finance-and-economics/21715043-oxfams-headline-grabbing-comparison-has-some-flaws-are-eight-men-wealthy-half
Which bothers to try to understand what wealth ownership is a bit.
And neither, because you set an aim of 99.9%.
But there are those that will ‘let’ societies be destroyed, encourage that even, through to sponsoring wars, that may become global. The wrong is based on having society not able to survive without their structure, threatening a return to chaos if not followed, destruction if you do not participate, even if that is by denial of opportunities ( gotta take a mortgage to afford a house ya know nowdays).
Here are a different set of arguments, comments are interesting too there
https://mises.org/blog/how-welfare-states-make-us-less-civilized
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I know that people like Bill Gates and Warren Buffet have a lot of wealth.They are giving most of it away to charitable causes and encouraging other billionaires to do the same. In fact it has been my experience that the truly wealthy tend to want to give back to society. They aren’t part of some secret conspiracy.
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“In fact it has been my experience that the truly wealthy tend to want to give back to society”
…
Maybe I’m a bit cynical. But “giving most away to charitable causes” is not exactly what they are doing. They put it into a foundation that they control. The foundation employs 1400 people and 2016 expenses > $200 million. How many friends / family members are employed? How many swanky resorts does The Board go to discuss business? How much influence do they wield in both who they give to and what trust invests in?
Tax avoidance and a lot of expensed off trips is what I see.
https://www.gatesfoundation.org/Who-We-Are/General-Information/Foundation-Factsheet
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Hey Tony. It’s nice to see the foundation employs so many. Since you say you are cynical, why would you think that it employs friends and family. Bill has so much money he could simply “give” everyone the money rather than employ them.
Also, I’m sure that Bill Gates’ accountants will make certain he pays the legal minimum of taxes, but I’m guessing that Bill himself doesn’t care much. It is not possible for people like Bill Gates to spend their wealth on themselves. At some point the ultra rich get more satisfaction out of helping others than spending on themselves. Warren Buffett spends very little on himself.
One of my favourite quotes is from Warren Buffett: When asked how much he was going to leave his children, he replied “Enough that they can do anything, but not so much that they can do nothing.” Warren plans to give most of his wealth away. As do many of the ultra wealthy.
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Delusion before the fall.
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I’m long sometimes, short other times. I happened to be 100% short today as of two days ago, so this “pissy selloff” does not concern me. Now if this takes the form of a classic crash, i.e. starting on a “Black Thursday”, and running through a “black Tuesday”, it could become more than a “pissy selloff”. It’s the right time of the month for a crash, but the wrong month, (since crashes are usually only in September or October), so I don’t expect that. With or without that, I’ll likely be back on the long side in a week or so.
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I wish you luck with your strategies Carl. I’m not a gambler, so I would never take those kinds of risks, based on variables such as what month it is, or what time of the month it is. I prefer the “relative” safety of diversification.
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When I started trading, long ago, I went in as a believer in the efficient market hypothesis, that the best you could do consistently was to match the market. For it to be possible for some traders to consistently beat the market, you have to believe that there is a vast pool of other traders that actively trade, and consistently underperform the market. I expected to underperform slightly, i.e, match the market, less extra commissions. Since I’ve regularly exceeded market returns, I have continued to actively trade, but I don’t recommend it for the reason that it seems clear almost everyone who attempts to actively trade will consistently underperform. Your strategy is exactly what I recommend. Remain diversified, and invest for the long term, and you will match the market, which will beat almost everyone.
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curious. what exactly does 100% short mean? 66% of account equity, or futures – which makes even less sense.
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I never buy options, and I never do 2x or 3x funds. Those are guaranteed losing strategies. The simple ETFs/funds that are 1x short do underperform the inverse because of costs, but only by a few percent a year. For example, over the last year the SPX was up 12%, and BEARX was down 15%. RUT was up 10%, while RWM was down 12%. Since, when I’m short, it’s usually only for a few days, that’s an insignificant amount of expected costs, well under 1% a year. In this case, I’m long RWM from 47.1682. I don’t recommend others do this, but if they do want to go short, this is the only sane way, in my opinion, because the risk is small and manageable.
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Hilarious, I’m so old school that “buying” short ETF’s didn’t even cross my mind. Shame on me.
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With Options, Futures, and 2x/3x funds, you get extra volatility, but at a very high price; you get a large expected loss. Most people who try these go broke very quickly. In my life I’ve known exactly 2 people who were such good traders they could make a living trading stock futures, and many, many more who tried it and lost. I’m not that good, so I don’t even try. I content myself with making a percent here and there. My expected loss on ETFs is small enough that if I’m right more often than I’m wrong, I manage to do OK. As aside note, if I believed that the market itself was undervalued, I’d just go long and stay there, but I’m with Mish in thinking that valuations are very high, so instead I use this strategy.
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People missed out on a lot of gains going into 1929. The DOW then took 90% of it back. It took 25 years to get back to the 1929 high.
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You are correct.
The folks who have reaped all the recent gains will be the same ones who’ll take the coming devastating losses. I’ve talked to a few. ALL will ride it wherever the market goes. For the usual reasons.
No one thinks a correction will be more than 30%.
They’ve accumulated substantial capital gains. Selling will result in large tax bill (the tax bill + trading costs could easily be close to their 30% mark … so why sell?)
No one rings a bell at the top. Sell off will be mixed with large upswings (a few might remember the Dow had an almost +1000 DAY in October 2008). Every upswing will have all the experts screaming “The Bottom is IN”.
TINA
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“ALL will ride it wherever the market goes.”
Assuming they can. As I have seen it stated , “Life doesn’t always issue its margin calls when ones investments are doing well.”
Then there are the BTFDers, who won’t realize the environment has changed. If they don’t average themselves out of existence many will at least experience Bill Miller’s fate : http://thereformedbroker.com/2014/06/30/everything-wrong-with-investor-behavior-in-one-article/
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They can … and will.
But my universe may be quite different from others. The folks I’m referring too are top 20%ers with typical white collar jobs. They don’t day trade. Most use local financial advisors. They invest for the long haul (diversity – of sorts – and dollar cost averaging their mantra) using no leverage.
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yeah, strictly from a mathematical- statistical perspective, selling is a shite trade cause of those cap gains… oh well.
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Hey Ron. No one should have 100% of their assets in the stock market, for precisely the reason you state. As I always say, the future is difficult to predict, which means we shouldn’t make take big risks with any asset class. We should be very diversified in as many asset classes as possible.
Being 100% cash is not a good strategy either, because cash can become worthless too, as history shows.
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Hi Realist,
I am replying to you post here as there was no reply link at the end of your post.
1987 is when this party got started thanks to Greenspan and going on ever since. That is when the intervention got started and led to the rise of the biggest jackass of all time, Greenspan and we have been living with consequences ever since. People noticed he is an idiot only when the system almost came down 20 years later in 2008. You can expect people to realize that Bernnake is a jackass in another decade, making it 20 in all. After all right now it appears that Bernanke is a genius as did Greenspan at one point.
But you would have noticed that the CBs are all in now. My personal take is 2008 has scarred them forever. They just do not seem to allow the market to work on its own. IMO it is akin to not allowing your child to walk on its own because you are afraid the child will fall. Can you do it forever? What happens the day you take your hand away? This is not healthy in the long run. This constant intervention – verbal, policy and CBs in coordination – seems to be doing the trick for now but it makes the system fragile and prone to a crash at some point in time. Backstopping the system in 2008/09 made sense as the whole system would have collapsed but after that it was all about goosing asset prices to get growth, which has not materialised. Now what happens when you find the growth does not meet the goosed up asset prices? Again more goosing up but at what cost? My guess is this game is in its last innings as the disease of goosing up asset prices is now global with no real growth to back it and IMO has now reached epic proportions. All growth is due to debt and this has mathematical limits when debts have to be repaid. In India, banks are grappling with NPAs of immense magnitude. I am sure other countries are in the same boat. China will not let you know.
I am actually okay with a wrong call of being in cash because you do not lose capital but imagine the people who have been lulled into this propped up system due to propaganda (or other reasons, in this case yield) and then the market crashes. I would say the actions of the CBs today is akin to a butcher leading an animal to a slaughter house. That is one of the reasons I am in the Mish’s camp of getting rid of the Fed (will not happen I know but that need not stop me from wishing) as I feel they are destroying society.
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“Literally, anything (or nothing at all), may be behind today’s decline.”
“Fear? It’s ridiculous to talk of this pissy selloff as an indication of fear.”
Mish, you nailed it. They forgot to mention the possibility of running the stops before the next run-up. Oh wait, the UBS director of floor operations would NEVER suggest that. I am beginning to think the mafia has taken over the NY stock markets. More money and less risk for the guys on the floor.
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So the markets go up for the last 7 months and Trump gets no credit.
The DOW drop 200 one day and it’s all his fault. ha.
Investors should be fearful. We’re in a market bubble. We have been for a long time. But that’s not Trump’s fault. That’s the Fed’s fault and the fault of the Obama administration from 2009 though 2016.
Would everybody stop blaming Trump for every damn thing that happens?
It’s getting old.
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+1000
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The best interest of voting Trump supporter are opposed to investors Cashin speaks of.
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I’m not fearful of Trump ,only the stooges in his party. Forget the democrats as they are useless.
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+1
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An incompetent Fed has been saying the economy is improving for ten years, and people believed them. Now most people know the Fed doesn’t even know what a healthy economy looks like, but they will keep rates low so stock buybacks can create the illusion of “wealth.” Someday stock prices will plunge, and the financial media will blame it on grandma’s cat being grumpy, but there are so many crises waiting to happen around the world, all that’s needed is a trigger to set them all off at once.
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The economy HAS been improving for close to ten years. The majority of businesses are doing just fine. However, the distribution of wealth related to the economic improvement has primarily migrated to the top 10-20% of the population.
“Some day” always comes eventually. However, barring some black Swan event, I expect the economy to continue to grow slowly. And I don’t expect a stock market “crash” any time soon. And there is nothing unusual about corrections of up to 20% which the market is long overdue for.
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Here is a different fear indicator showing EXTREME FEAR:
http://money.cnn.com/data/fear-and-greed/
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How dare they imply that all citizens aren’t inspired by our Dear leader!! SAD!
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Come on, get with the status quo protecting Deep State agenda! Trump is responsible for EVERYTHING that happens as long as it’s BAD.
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http://gatesofvienna.net/2017/08/were-being-played/#more-43677
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Here is detailed evidence that the Gary Cohn resignation rumor really did hurt the market:
https://seekingalpha.com/article/4099797-gary-cohn-rumor
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Is fear just getting started? There was a spike in fear on 1/22/16. Subsequent peaks were lower and a trend line can be drawn across them.
8/10/17, that declining trend line was broken. On a weekly basis, VIX opened this week above the trend line then fell below it, but is back above it today, Friday, thus far.
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People ask me to predict the future, when all I want to do is prevent it
Ray Bradbury
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