Get Ready

We’re about to collectively lose a shit-ton of money in our retirement accounts. The stock market is going to hemorrhage value today and there aren’t too many safe places to hide. Bonds will go down, too. Gold will go up. The dollar will lose value. And an outright panic is not out of the question. The bill rings now.

11 Comments

wvng on July 29, 2011 at 9:34 am

I know. There is no place to hide. And then interest rates will start to climb. And the weak world economy will crumble. I have difficulty seeing any resolution to this that doesn’t result in economic calamity.

MassCommons on July 29, 2011 at 9:41 am

I’m terrible at market predictions, but I just clicked over to Yahoo’s finance homepage. It’s kind of fascinating (in a macabre sort of way) to watch what’s happening—market indexes (indices?) dropping by the minute, sometimes by the second.

TarheelDem on July 29, 2011 at 9:45 am

Don’t think so, BooMan. Asian and European markets aren’t panicking. So far a 1% drop on opening.

It’s time for the human beings to step back and let the program trading algorithms thrash around before making any hasty moves. Don’t think you can time the market.

It will be interesting to see whether the algorithms and the circuit breakers work against a panic in the market.

nonynony on July 29, 2011 at 10:03 am

This.

So much of the trading process these days is automated – it’s AIs trading stocks with other AIs. This can lead to weird behavior on the market, but it ALSO means that an unknown event – like the current debt ceiling crisis – isn’t something that the AIs know how to handle. In fact, they’ll ignore it. They don’t even know about it. Nobody who’s written one of these AIs has even thought to include a variable labelled “what if the US government decides to default on its obligations”? And even if they did the AI still wouldn’t know what to do because, well, no previous empirical data about the event to learn from.

So until the human beings start to panic, the AIs are going to chug right along. And if the AIs are stabilizing the market, there’s less reason for human beings to panic.

There will be a drop, but I don’t think the market is going to panic until AFTER Obama makes his announcement on what the Executive branch’s backup plan is if the Congress can’t get anything out the door. I suspect that’s why they floated out the idea that Obama would make an announcement today about what the plans are if no deal could be reached tonight.
- TarheelDem on July 29, 2011 at 10:10 am
  
  I think it’s still a mater of the conventional (not contrarian) wisdom being hedge on the rumor, act on the news.
  - Brendan Skwire on July 29, 2011 at 10:37 am
    
    you mean news like this?
    
    Global markets recoiled on Friday after U.S. lawmakers failed to break their debt-ceiling deadlock, raising concerns that the world’s largest economy could heading for a default, and both Canada and U.S. posted disappointing economic data.
    
    In Toronto, the benchmark S&P/TSX composite index plunged 153.64, or 1.18 per cent, to 12,894.14.
    
    In the U.S., the Dow Jones industrial average sank 141.52 points, or 1.16 per cent, to 12,098.59 while the Nasdaq composite index dropped 40.54 points, or 1.47 per cent, to 2,725.71.
    […]
    Overseas markets were also lower on Friday. London’s FTSE 100 index was down 89.52 points, or 1.52 per cent, to 5,783 at midday. Frankfurt’s DAX had lost 107.71 points, or 1.50 per cent, to 7,082 and the Paris CAC was down 76.38 points, or 2.06 per cent, to 3,636/28.
    
    In Asia, Tokyo’s Nikkei stock average finished down 68.32 points, or 0.69 per cent, to 9,833.03 and Hong Kong’s Hang Seng index fell 130.49 points, or 0.58 per cent, to 22,440.25.
    - TarheelDem on July 29, 2011 at 10:51 am
      
      One percent, two percent — that’s a normal daily swing that not even volatile.
      
      When it drops by 10%, then you know the market is freaking. And I think that at 25%, the circuit breakers kick in and trading stops. On a 12,0000 point Dow, 25% is 3000 points.
    - nonynony on July 29, 2011 at 1:08 pm
      
      Stock market reporting is so breathless that I can’t fault people for thinking a couple of percentage points are big swings.
      
      Ignore the reporting and just look at graphs for the indices – zoom them out to a multi-year view. It becomes obvious that a lot of stock-market reporting is made-up bullshit to fill space.
      
      Here’s a view of the DOW from Google – take it out to a 10 year window (top of the graph has a link) and see if the drops we had even overnight look all that panic-worthy yet.
    - TarheelDem on July 29, 2011 at 10:56 am
      
      Oh, and acting would be to sell to the rubes who are panicking an buy back at the bottom to cover their position. On the Dow, a 3000-point bottom would be 9000, about where it was when Dubya left office.
      
      The markets have been essentially flat since Clinton left office. Money is being made on swapping stuff back and forth.