Correction in progress!

jamei305

Thrugelmir wrote: »

In no one's previous lifetime has there been such a decade of financial stimulus. Simply to allow banks globally to maintain normality and provide the liquidity to unwind their balance sheets. In this sense "this time is different". As the impact of cold turkey has never been witnessed before. There's a generation that only have every seen stocks go up, never down. Perhaps investors chased the markets too high. Although interest rates were already rising. Bonds will become more attractive. Reducing the appeal of equities.

Speed of change is much quicker than people expected. Which has created nervousness. Confidence waning impacts sentiment. People are herd animals by nature. Once the stampede starts then money head for the exits. Taking profits and looking for a safer home.

Every time is different. The financial crisis was the end of capitalism. In 2010 Greece was going to crash out of the Euro and lead to the currency falling apart. The dotcom bubble wasn't a bubble because the internet heralded a new order of things. The Asian financial crisis was the end of emerging markets. There was consensus among top economists that the brief 1987 crash now known as black Monday would lead to the worst depression since the 1930s.

Sea_Shell

The main problem in times like these is that you MAY have been investing in the long term...but time waits for no man and now what was your long term, is now your short term, as you need the money sooner.

Glen_Clark

Thrugelmir wrote: »

Speed of change is much quicker than people expected.

Nothing much has changed yet except sentiment - they haven't unwound QE.
They may never unwind QE in our lifetime because they have massive debts they won't want to pay more interest on. They would rather see their masive debts reduced by inflation first. So this could be just another 'Taper Tantrum' (false alarm.)
But they might do so, and its this possibility that has spooked markets again.:eek:

Thrugelmir

jamei305 wrote: »

Every time is different.

Nothing new in financial mismanagement. Eight centuries of history provides the backdrop.

k6chris

aroominyork wrote: »

Then I'll buy at -4.5% in case I'm having a cup of tea when it touches -5%.

There is an intersting psychology about buying pullbacks, namely that the price the S&P500 closed at on Friday is the same level you could have bought it less that 3 months ago on Dec 1st 2017. Then the price level was 'toppy' yet now people perceive it as 'value' because it was at higher price in between. It's the same thing as buying stuff at 20% off in the sales because your are 'saving'. The question should be, does the current price represent good value to meet my needs? Looking at Shiler PE ratio, which for the S&P500 is around 32 at the moment, the expected real returns over the next 10-15 years look to be somewhere between +/- 2%?

https://static.seekingalpha.com/uploads/2016/7/7/47560766-14678846689217908_origin.jpg

So not sure the current levels make a good buying opportunity based on this view of the world? Maybe a correction of 30-40% would make valuations look interesting for the long term?? I still think that with people seeing a 5-10% pull back as a buying opportunity is a sign that we still have a lot of market complacency? But, yes, if was that easy we would all be millionaires!!

Audaxer

k6chris wrote: »

So not sure the current levels make a good buying opportunity based on this view of the world? Maybe a correction of 30-40% would make valuations look interesting for the long term?? I still think that with people seeing a 5-10% pull back as a buying opportunity is a sign that we still have a lot of market complacency?

It may be not a great buying opportunity, but it is still a better buying opportunity than it was just a few weeks ago.

Cash-Cows

My equity property tracker was hit hard although the drops started before this weeks general falls. They dropped to the point where I might need to consider a rebalance.

Thrugelmir

k6chris wrote: »

Then the price level was 'toppy' yet now people perceive it as 'value' because it was at higher price in between. It's the same thing as buying stuff at 20% off in the sales because your are 'saving'.

When looking at markets in a broad sense. Then one is buying is buying the bad as well as the good. Without rhyme or reason. At least in the sales it's possible to find value in a single item. Once gone , the bargain no longer exists. Same applies to individual stocks. Buy it while it offers good value. Or somebody else will get there first.

Glen_Clark

k6chris wrote: »

There is an intersting psychology about buying pullbacks, namely that the price the S&P500 closed at on Friday is the same level you could have bought it less that 3 months ago on Dec 1st 2017. Then the price level was 'toppy' yet now people perceive it as 'value' because it was at higher price in between. It's the same thing as buying stuff at 20% off in the sales because your are 'saving'. The question should be, does the current price represent good value to meet my needs? Looking at Shiler PE ratio, which for the S&P500 is around 32 at the moment, the expected real returns over the next 10-15 years look to be somewhere between +/- 2%?

https://static.seekingalpha.com/uploads/2016/7/7/47560766-14678846689217908_origin.jpg

So not sure the current levels make a good buying opportunity based on this view of the world? Maybe a correction of 30-40% would make valuations look interesting for the long term?? I still think that with people seeing a 5-10% pull back as a buying opportunity is a sign that we still have a lot of market complacency? But, yes, if was that easy we would all be millionaires!!

In value terms, stocks are probably worth more than they were at their peak because they have since posted good results.
The price has only fallen because investors have got the wind up about withdrawing QE - again.
Rightly or wrongly most of my money is on them not withdrawing much QE anytime soon, because the major players are in too much debt to want a rise in interest rates. Its in their interest to keep interest rates below inflation, which is stopping me holding much cash.
But who really knows?
So of course I could be wrong

2010

If/when the support level goes at 7000, then the tend could be downwards for some time.

Why didn`t people sell at 7700, because they never seen a correction coming. (you never do)

Why aren`t they selling at 7093, because they are in it for the long term and anyway "it`ll bounce back".

Well in Dec 1999 the Ftse 100 hit 7000 and then fell and it then took around sixteen years to hit 7000 again.

Some people haven`t got time to be in it for the long term.