Puke Down, go ahead and give it to me, puke down, it's all right.
Ah my favorite Tom Petty song from my youth.
This is obviously a big panicked reaction. It could last for days or be over by tomorrow but recognize it for what it is, a panic.
We have been through them before and you will go through them again.
The S&P 500 will be at 1200 again even if it gets there by way of 900.
This is exactly what I am talking about when I say to pre-plan for this sort of thing both emotionally and tactically if the latter is appropriate.
An emotional response is completely unnecessary.
27 comments:
Roger,
Thanks for being a calm voice of reason here when my hormones are shrieking "SELL" one minute and "BUY" the next minute.
I was ready to "BUY" at 900 points down but by the time I went through my rationalization, the Dow had gained back 400 points.
What a decade this has been!!!
Gotta stay calm "serenitynow" and stick to the plan...
sadly serenity now didn't work out so well for Lloyd Braun--hearty knee slap
This is precisely why we loyal readers love you, RR! Only you could connect Tom Petty with the heartbreak of...whatever the heck is going on right now. (Since every financial site seems to have crashed, too.)
So it goes.
thank god no one reads this site so it can't crash LOL
That spike down wreaked havoc on my stop loss orders. Shares get triggered to sell and are up 5% off the lows within minutes. Crazy stuff.
Eric, that is a great point, thank you for sharing your experience.
Geez - I took my wife out to lunch and to stroll along the intercoastal and missed the chaos.
So much for a quiet, peaceful day.
I was a bit surprised that my preferred shares downdrafted significantly. Yikes.
On the other hand, I did receive a batch of rent checks, so I can find some solice.
What collapses next -- and what securities should be purchased on gross weakness, if any?
T
Roger,
Today I have added a US bank on my portfolio. So now I am long only 7% on my portfolio. I have gotton this bank very cheep. So, I did not short the market. Now, I am looking to build my portfolio.
RW, MikeC, Seg
Hope things are OK
Jeff from Milan, Italy
I do not know why everyone was so long. In this blog, I had stated that the high would come at 1229-1330. We only got to 1220.
Karen Hayes and Pimm Fox on Bloomberg Radio are interviewing a guy right now who heard rumors that the big move down was caused by a trading desk accidentally entering a trade for "14 billion" instead of "14 million." NYSE said it wasn't a technical glitch, but maybe it was a human flub.
Tom Keane just said Bloomberg has 2 sources that suggest Citibank was the source of an "error."
So I guess that's where I should send my bill for today's losses.
But seriously, if Citibank (or whoever) was behind a screw-up that caused the market to briefly plunge, I wonder what kind of liability would be involved.
I'm in the process of moving and come back to see the world panicing sheesh.
In 2008 I was frustrated and confused at not knowing what to do.
Now on a day like today I think "well that's a bummer" and take comfort that I have a plan and was ready.
Thank you indeed Roger for your blog.
Roger,
so you don't look at the 200-day MA for your individual holdings, just for the S&P 500 -- and then institute 200% short on that?
cause there are a lot of 200-day breaches here in the past week on these international/global ETFs EWA, MOO etc
A little more on the possibility of errant trades.
Which makes me wonder if the hardware Goldman Sachs put in the datacenter is there making money on every big move. Wait for their next quarterly results to see if they are huge.
Bear markets do not start like this. This is an event in an on going bull market.
SEG
Hey Roger, you were picked up by Investment News! A calm voice of reason as they sweep off piles of sell paper on the floor of the NYSE (do they still do that?)
I've been a rep/investor for over 28 years and every time there's a huge sell off like today, someone suggests it was some kind of error, program trading, HF. I'll trading, etc.
I'll try and sell a B's worth of something in my Scottrade account tomorrow just to test the system:)
As always, appreciate your reasoned approach. Now back to watching the 200 m/a
Phil May, CLU, ChFC
SEG,
my system was giving me signal that a big correction was coming. However one index that has been going up without correcting even in june/2009 and Jan/2010. So it tells me that this bull is intact and that we will be in a severe correction within this cycle. However, I have only 14 months exp. with this index and have not done any backtesting since I do not have any additional back data. I have not figured out how much of a correction this will be. Roger was talking about a big down leg. Is this it? I cannot work on it since I will be very busy with some other work. I will spend some time after the 13 may.
Best,
Jeff from Milan, Italy
A profitable day all told: Got blown out of some positions where I had set stops but got back in at a lower price on a few I still want to work and banked the difference.
Was going to add a couple more trades since the odds of more snap-back tomorrow looked pretty good but scanning the news it appears a number of folks couldn't access their brokerage acct when the heat was high and realizing you can't get out has a tendency to dampen enthusiasm. No point in getting greedy.
Long duration govt bonds were fantastic as expected: Hedges aside I've been swing trading EDV (whee!). Gold also recovered some which was nice even though the Yen did even better: A suspect Euro is causing a lot of money to look for a more secure home but many Europeans won't mind; their export markets which were being placed at an increasing disadvantage by a lower $USD (given the number of export countries who peg to the $USD the trade imbalances were destabilizing never mind Greece).
Addendum to my rather oblique reference to "can't get out" above. In normal day-to-day interaction it's easy to forget that markets are complex, technical systems and can not only belch or slow down under heavy load but can break.
This happened during the 1987 panic when spreads detonated (a lot of other things happened too including brokers and market makers refusing to pick up their phones) and it looks to me like it may have happened today; e.g., Calculated Risk at http://tinyurl.com/32orrm7 points to a Reuters article reporting that Nasdaq will cancel all trades between 2:40 & 3:00pm if the asset price deviated more than 60% from that at 2:40 or close thereto.
As a practical matter I'm unlikely to leave many trades open this weekend.
I may be naive, but I can't help but feel screwed by what happened today. I was triggered out of positions at artificially low prices. If it was a market panic (as was assumed initially), I would have been cool with it. Them's the rules, after all. But the more I read about today's action, the more frustrated I get.
It's not as though Wall Street needs another thing to worry about, but I hope the cause of today's glitch is investigated and addressed with procedural or policy changes.
Eric would you feel the same, that you got screwed, if it did not recover most of its loss yet still caused by a glitch?
For whatever reason it started computer glitch, human error, or other; the fact remains that lots of people panicked and freaked afterwards.
And if it was a human error with a mistype then how do you ban mistakes?
I think the rich money guys of Wall Street, Michael Milken (Drexel Burnham Lambert), Bernie Madoof, Hank Greenburg (AIG), Lloyd Blankfein (Goldman Sacks)and their ilk have rigged the markets for their own avarice. The little retail investor is screwed.
Eric,
Buy, hold, and rebalance. Do more productive things with your time.
RW,
I could not do several trades in Italy, that is, get blown out and get back in. The Italian banks close at 1pm New york time. But, that gives me discipline, on my orders and must be firm with such orders.
Best, Jeff from Milan, Italy
Rhianni- I'm with you that it's not possible to rid the world of mistakes. I'm just saying that if it's possible for a mistake by one or two individuals to send the world into financial turmoil, then the market has an integrity problem. We should at least try to plug that leak.
Anon 9:48 - That is a good plan, and normally I'm pretty good about that. If you read today's (7 May) post, you'll see why I've been actively maneuvering my portfolio lately.
True Eric.
I wonder how long it will be until someones automated computer program "accidently" causes a big down day then coincidently buys it back at a better price.
I would have to think there are rules against that but still.
Eric,
I read your reasoning for your manuevering. Ask yourself, "what if I'm wrong and the market moves higher?" Treating stocks as short term investments is a fool's errand. BTW, I am ex military (USN) and know what it is like to be on extended deployments. Thank you for your service to our great country.
All the stuff posted here should be for entertainment purposes only. Do yourself a favor and read Bernstein's "The Four Pillars of Investing" while on deployment. Then read Ben Graham's "The Intelligent Investor."
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