Economy crash =/= stock market crash?

Audaxer

Linton said:

sevenhills said:

A small bounce back today, after yesterday's minor blip. Investors could have taken the hint for a major crash yesterday, but no, a bounce-back today.

Maybe a crash is not coming in the short term?

But if a major crash does occur is it a serious problem for you?  If not why spend time worrying about it? If it is a serious problem that could indiciate that you are invested imprudently or beyond your risk tolerance - major crashes could occur at any time.

I agree its not something you should spend time worrying about, but for those people just about to retire and start drawdown, a major crash now could be the start of a poor Sequence of Returns?

lozzy1965

[Deleted User] said:

Wednesday the Chinese market is opening............

And it's closed for the first week of October.  Is that going to be a boom week in the rest of the world? 

Prism

Audaxer said:

Linton said:

sevenhills said:

A small bounce back today, after yesterday's minor blip. Investors could have taken the hint for a major crash yesterday, but no, a bounce-back today.

Maybe a crash is not coming in the short term?

But if a major crash does occur is it a serious problem for you?  If not why spend time worrying about it? If it is a serious problem that could indiciate that you are invested imprudently or beyond your risk tolerance - major crashes could occur at any time.

I agree its not something you should spend time worrying about, but for those people just about to retire and start drawdown, a major crash now could be the start of a poor Sequence of Returns?

True but still the best approach is to have a diversified asset allocation, rather than all in equities, and then a variable withdrawal rate and even with an awful start to retirement people should be able to cope fine. 

MK62

sevenhills said:

A small bounce back today, after yesterday's minor blip. Investors could have taken the hint for a major crash yesterday, but no, a bounce-back today.

Maybe a crash is not coming in the short term?

No way to know.......when one does arrive you'll get no real prior warning anyway......although after the fact, there'll be the usual gaggle of "experts" in the press saying how they predicted it all along......

sevenhills

MK62 said:

No way to know.......when one does arrive you'll get no real prior warning anyway......although after the fact, there'll be the usual gaggle of "experts" in the press saying how they predicted it all along......

Where would the millions invested in the stock market go, if we knew there was a crash coming?

Audaxer

Prism said:

Audaxer said:

Linton said:

sevenhills said:

A small bounce back today, after yesterday's minor blip. Investors could have taken the hint for a major crash yesterday, but no, a bounce-back today.

Maybe a crash is not coming in the short term?

But if a major crash does occur is it a serious problem for you?  If not why spend time worrying about it? If it is a serious problem that could indiciate that you are invested imprudently or beyond your risk tolerance - major crashes could occur at any time.

I agree its not something you should spend time worrying about, but for those people just about to retire and start drawdown, a major crash now could be the start of a poor Sequence of Returns?

True but still the best approach is to have a diversified asset allocation, rather than all in equities, and then a variable withdrawal rate and even with an awful start to retirement people should be able to cope fine. 

I would agree, especially if they have a healthy cash buffer as well. However I'm sure there will be people on a tight budget, who may delay retirement for "just another year" if they see markets crashing.

Linton

sevenhills said:

MK62 said:

No way to know.......when one does arrive you'll get no real prior warning anyway......although after the fact, there'll be the usual gaggle of "experts" in the press saying how they predicted it all along......

Where would the millions invested in the stock market go, if we knew there was a crash coming?

It wouldnt go anywhere, it's not actually there in the first place in any physical sense.  A share is created by a company X and sold to you  for £1.  Company X gains £1, you cash drops by £1 and you hold a share.  Today it's valued at £10, which means that if you were to sell it you would expect to get £10.  But you dont sell it.  Tomorrow the price drops to £5..  You still own the share and company X still has £1 so nothing has changed except your expectations.  You sell the share for £5 to Joe.  You gain £5 and Joe loses £5.  Now the share is owned by Joe. The only people affected are you and Joe.  Company X still has its £1.

But if this philosophical point doesnt address your question how about....
If everyone knew that a crash was coming tomorrow they would try and sell today.  But no-one would want to buy and so the crash would happen today, probably to a worse extent than if no-one knew.  And all the people who knew that a crash will happen tomorrow would be proved wrong.

The only other aspect I can think of is how would investors react.  Some would want to buy at what appears to be a low price.  Some will want to keep their cash safe until conditions were quieter.  And some people who already owned shares would panic wanting to sell before prices drop further. And then there are always people who have to sell to raise cash. Prices would rise or fall depending on the numbers of people in each category.  If potential buyers outnumber sellers prices will rise, otherwise otherwise. 

Some people wanting to invest may decide to invest elsewhere so there will be knock-on effects in other markets.

Thrugelmir

sevenhills said:

A small bounce back today, after yesterday's minor blip. Investors could have taken the hint for a major crash yesterday, but no, a bounce-back today.

Maybe a crash is not coming in the short term?

Evergrande is sitting there like a holed supertanker leaking oil.  Asking Alexa isn't going to help. There's going to be repercussions.  Be a few investment banks sweating behind closed doors. $300 billion of debts is no small sum. Having it's fingers in many pies besides property. Makes one wonder what else it may bring down. 

Thrugelmir

Linton said:

sevenhills said:

A small bounce back today, after yesterday's minor blip. Investors could have taken the hint for a major crash yesterday, but no, a bounce-back today.

Maybe a crash is not coming in the short term?

But if a major crash does occur is it a serious problem for you?  If not why spend time worrying about it? If it is a serious problem that could indiciate that you are invested imprudently or beyond your risk tolerance - major crashes could occur at any time.

Back to the fundamentals of investing. If you are DIY. Understanding what you are investing in is key. Even just at a macro level. Libraries are back open. There's a wealth of reading material to educate oneself.  While not providing the answers may help reduce the number of potholes you drive full speed at. 

Audaxer

Linton said:

sevenhills said:

MK62 said:

No way to know.......when one does arrive you'll get no real prior warning anyway......although after the fact, there'll be the usual gaggle of "experts" in the press saying how they predicted it all along......

Where would the millions invested in the stock market go, if we knew there was a crash coming?

It wouldnt go anywhere, it's not actually there in the first place in any physical sense.  A share is created by a company X and sold to you  for £1.  Company X gains £1, you cash drops by £1 and you hold a share.  Today it's valued at £10, which means that if you were to sell it you would expect to get £10.  But you dont sell it.  Tomorrow the price drops to £5..  You still own the share and company X still has £1 so nothing has changed except your expectations.  You sell the share for £5 to Joe.  You gain £5 and Joe loses £5.  Now the share is owned by Joe. The only people affected are you and Joe.  Company X still has its £1.

But in that example surely the company is affected as it's value has reduced by 50% when the share price dropped from £10 to £5?