why monday may be known as Black Monday
kcl...@my-deja.com
catastrophic stock plunge.
The Dow Jones stock market lost 617 points on Friday while the
high tech
market, NASDAQ, lost 355. While the 617 point drop of the Dow Jones is
an
impressive number, the Dow Jones is still at a substantial 10,306 point
at
the close Friday. The real story this week has been the NASDAQ market.
NASDAQ was lingering at about 1000 points for much of 1996. One
year
ago, NASDAQ had climbed up to 2,500. By March of this year, NASDAQ had
reach
5,000 points. Over the last few weeks, a battle was being waged between
people, who felt NASDAQ would continue to climb, and people, who wanted
to
take their profits and get out. Well, the bears ate almost everyone
during
the last week.
The NASDAQ opened last Monday at 4475. Many people were thinking
that
the market was only 10% off its high, and that it could easily climb
back to
5,000. Monday, however, was the first of five days of steady declines.
Predicted support levels were demolished one by one as the NASDAQ
plunged
through every predicted number. By Friday, NASDAQ had crashed a total of
1,154 points for its worst one week loss ever. 26% of the NASDAQ's
value had
disappeared in one week. Over the last month, over 34% of the NASDAQ's
value
has gone.
For a while it was apparent that money was being shifted from the
NASDAQ to the Dow Jones. During the last two trading days of this week,
however, both the NASDAQ and the Dow Jones were declining. The large
double
decline on Thursday apparently set nerves on edge for the start of
trading
on Friday. An otherwise unimportant story, suggesting a rise in
inflation,
had the effect of someone shouting "Fire" in a crowded theater. Both
the Dow
Jones and NASDAQ went into an increasingly sharp decline bottoming out
about
an hour before closing.
A suckers' rally occurred during the last hour for the Dow Jones in
which a small percentage of the loss was recovered, but the old proverb
"never catch a falling knife" (or, more appropriately, never jump in
front
of a Mac Truck with no brakes), proved true. The NASDAQ maintained a
bumpy
downward course all day while the Dow Jones plunged, sucked in some more
money, and then plunged again.
The disastrous direction of both markets at the end of trading on
Friday is bound to cause an increasing panic over the weekend. The last
minute massacre of the suckers' rally for the Dow Jones will discourage
further suckers from diving in ...at least until the Mac Truck slows
down a
little bit.
Monday morning will likely start with sharp losses in both markets.
Then one of the following will happen:
1) The markets will stop dropping once they hit "support levels" where
investors start buying again,
or
2) A wholesale panic occurs. Almost no one steps in to buy stocks, and
the
bottom drops out of the whole market.
Can another "Great Depression" occur in the year 2000? Absolutely.
A few
patches were slapped on the stock market after the 1929 crash, but
overall
conditions are even more likely for
a crash. Consider the following:
1) The average yuppie is more strung out on credit today than the
investor
of 1929. In 1929, houses and cars were very reasonably priced. Today, a
quarter million dollars is a common price for a fairly modest home in
the
suburbs, and millions of yuppies have signed five year purchase plans
to buy
those $60,000 SUVs.
2) The belief that "buying on margin" is no longer a problem is only
half
true. Investors can no longer control huge amounts of stocks with small
deposits as they did in the 1920s. In 1929, when the market turned
against
these investors, they could not cover the massive losses with their
available cash. They not only lost all their money in the market, they
went
into debt or bankruptcy.
Today, millions of people invest in the futures market. The stock
brokerage
firm closely watches the direction of the market and the net worth of
the
trader's account. A margin call occurs once losses approaching the
current
worth of a trader's account occur. The brokerage firm then liquidates
all of
the future trader's stocks (regardless of how bad a time it is to sell
off
stock). The futures trader of the year 2000 can be financially wiped out
almost as badly as his counterpart in the year 1929. When you consider
that
some extreme cases involve people, who open trading accounts on maxed
out
credit cards, it is still possible for some people to lose more than
they
have.
3) Most jobs in America today are paper pushing jobs that can easily
disappear overnight. Back in 1929, most Americans worked in production
jobs,
which actually had some value to society.
4) The stock market is still a pyramid scheme. The entire basis of the
stock
market is deeply flawed. Instead of having the entire American economy
based
on frenzied buying and panicked selling, it would make more sense for
investors to actually lend money to major corporations. Eventually, the
investor would ask for his money back, and the major corporation would
pay
him back his original amount plus interest that was linked to the
profitability of the company or the company could offer a high interest
rate
if it needed a lot of cash in a particular year to expand operations.
Instead of people making 500% or (much more often) losing 100% in a
stock
market that was actually a giant Ponzi scheme, most people would make
5% to
15% profits every year. A business that wanted to greatly expand and
needed
a lot of cash could offer people a 20% interest rate. This would
eliminate
the insane run ups that are inevitably followed by the disastrous
crashes
that the current stock market often produces. There would be more risk
involved for investors lending money to small start up businesses or old
companies that were badly managed, but the instability would be
negligible
compared to the current market.
In 1929, the stock market crash caused a lingering depression that
threw 30%
of Americans out of work, and which continued into the 1940s. In the
year
2000, the stock market is still a pyramid scheme. The stock market is
vulnerable to a mass panic of investors. The stock market can wipe out
millions of investors due to margin calls, and the average American in a
paper pushing job or a service industry job is a much more disposable
worker
in the eyes of corporate management once things start to go bad.
Will the stock market stay at a high enough level so that the economy
holds
together or will it plunge below the worst nightmares of all the Wall
Street
gurus? Right now, it looks like a 50-50 chance that Monday will be a
Black
Monday, and the beginning of the end of life as we have known it for the
last two decades.
-Kcloudd
Sent via Deja.com http://www.deja.com/
Before you buy.
solos
before this is all over, I may start swearing.
There are safe guards now, or suppose to be. OR, Maybe the IMF will be
bailing us out.
But I'll tell you what, I don't like the fact that people overextended their
credit, that worries me.
<kcl...@my-deja.com> wrote in message news:8dbjv1$vaj$1...@nnrp1.deja.com...
kcl...@my-deja.com
me "beautify" my posting.)
kcl...@my-deja.com
In article <%xcK4.1779$O2.25875@harpo>,
"solos" <so...@uninets.net> wrote:
> I am so sick of seeing that damn 1929 reference, I could almost
swear, and
> before this is all over, I may start swearing.
>
> There are safe guards now, or suppose to be. OR, Maybe the IMF will be
> bailing us out.
>
> But I'll tell you what, I don't like the fact that people
overextended their
> credit, that worries me.
>
kcl...@my-deja.com
offense.
In article <8dbm9g$1m5$1...@nnrp1.deja.com>,
Kenton H. Reich
have air in your lungs.
Kyle
kcl...@my-deja.com wrote:
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http://www.newsfeeds.com - The #1 Newsgroup Service in the World!
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His serene and invincible majesty, po
> catastrophic stock plunge.
>
> The Dow Jones stock market lost 617 points on Friday while the
> high tech
> market, NASDAQ, lost 355. While the 617 point drop of the Dow Jones is
> an
> impressive number, the Dow Jones is still at a substantial 10,306 point
> at
> the close Friday. The real story this week has been the NASDAQ market.
More than 6% in one day off the high. Not significant in itself, but when
you consider the panic is spreading from the speculative areas, that's not
good. Add to that the fact that so many people who'd lost money in the last
week on the Nasdaq fled to the safer dow only to see that fall. eeech
I don't think you're talking about your typical person here. I think you're
talking about yuppies. At least where I am, the market isn't that big. I
don't know anybody playing with futures or margin. This may not be the case
in metropolitan areas. I think a lot of market money is retirement money and
it's in mutual funds not options. I'm a little more optomistic here.
I'd agree with you on loaning money to corporations instead of this bullshit
own a piece of the corporation system we have. It's nothing but BS. How can
you be a part owner and not be able to look into what's going on except 4
times a year or when they feel like telling you. The current system
encourages bubbles and greed and as usual the people who win this kind of
game are the people who run the game. People aren't as docile and agreeable
as they were in the 20's. If the baby boom generation gets ripped off,
they're going to start rioting. We're not going to sit around feeling bad
about ourselves.
His serene and invincible majesty, po
The blame for all this goes to, among others, technical analysts.-- Based on
past performance alone technical analysis tries to tell you where a line on
a piece of paper will go next based on where it was in the past. People
following technical analysis have every reason to believe a stock price will
continue to rise infinitely as long as the chart looks good. It amounts to
nothing more than witchcraft and as we all know, witchcraft is punishable by
death.
When I take over, the sidewalks of New York will be decorated with the
impaled bodies of technical analysts, some of them deliciously, still alive.
Kinda like in UNREAL. New laws will be written and essentially, if you can't
prove something to be factual, you won't be allowed to promote the idea.
There will still be freedom of religion, but you have to scientifically
prove anything you claim.
Our new natonal religion will be fundamental anlaysis. -- Fundamentalists
base their predictions on facts like company earnings and outlooks. Forget
what Greenspan tells you. (No one knows what he's talking about anyway). Our
problems are caused by losing sight of the fundamentals and the existence
of technical analysts who's only reason for being is to provide brokers with
confusing bullshit to dupe the masses. All this is done in the name of
commissions. Once TA is outlawed and regulated sales speech is enacted,
speculative bubbles will disappear. Instead of boom and bust, the market
will proceed at a far steadier pace. Contrary to what many of you think,
growth will proceed faster. Market safety will encourage more of the timid
and uninformed, the layman, to invest. The big banks won't be able to play
the masses for the suckers they are. No bubble, no shakeout. No suckers.
The following will be outlawed, Margin, options. Financial reporters will be
licensed. No longer will the hard working citizen turn on the radio to hear
IBM got slammed today and then have to wait thru a commercial to find out
that IBM dropped 20 points and that doesn't add up to much of anything
because it was selling at 400. This is just a cheap tactic used by the media
who pretends not to understand percentages and what a significant loss is.
Once regulated, this tactic will result in a severe beating by our new
national NASDAQ police force (NAZIES) for all involved in the stations
operations. That should insure the incident does not reoccur. Future
irresponsible speculation and rumor mongering will be limited to celebrities
and other non persons.
Guru's will be restricted in what they can say. Because gurus have special
powers over the masses, they will be regulated. Fiascos, (purposely
caused?), like the recent one caused by Abby Cohen (nothing to do with her
religion) will not recurr. This will all be covered under the responsible
free speech laws. (see radio station beatings)
Price targets, earnings projections, perhaps even the stock prices
themselves will be regulated. Rather than allow a free market*, stock prices
will be controled by rational fundamentalists our society's new high
priests. Limits will be set on how high a stock price can go. Stocks prices
will be tied to actual earnings and growth potential. This will be based on
PE, PS, and other factors. When limits are reached, investors will be shut
out and further increases in price will not be allowed until fundamentals
change. Owners of stocks will be chosen by lottery, for instance, I want a
growth technology stock. I put in my number and I will be allowed to
purchase a small number of shares of many different, but always reasonably
priced stocks, but I will not be able to buy as many as I want. No one will
be allowed to corner the market on any business.
Rational fundamentalist, our new high priests, will be specially selected
and trained in the financial arts. Psychological screening will eliminate
crackpots and scammers. A code of conduct will regulate their projections.
As always, punishments will be severe to ensure compliance and the public
good.
You may ask, "How will new companies in growth fields raise cash? Won't all
these restrictions discourage entrepreneurs?"
No. As an example, dotcoms will be given favorable treatment by the high
priests. Higher, but more reasonable prices for their stocks will be
allowed, but not unreasonably higher! Proven techniques will be used to
regulate these industries. This will discourage scammers, who run
unprofitable companies and pay their bills by selling unrealistically priced
stocks.
The new government will be devoted to a stable, reasonably, ever rising
market with little or no downtrends. Securities will live up to their name.
Investing in the markets will be more like buying savings bonds, but much
more profitable.
Irrelevant, annoying over hyped shit like the Elian Gonzalez story will be
purged from the news.
Long live the horde!
*(which is actually regulated by greedy banks),
<kcl...@my-deja.com> wrote in message news:8dbjv1$vaj$1...@nnrp1.deja.com...
solos
As for the IMF, who do you think pays into it?
The US taxpayer! If the US goes bust, the IMF dies
too.
======
Yes, I know, that was just meanness on my part,(I have been in civilization
today and worst for wear). We bail everyone out, and get hated in return,
so I thought for a change someone could bail us out. It might give them an
opportunity for them feel better
<Fra...@supernet.net> wrote in message
news:9XdK4.3$vq5...@weber.videotron.net...
> >I am so sick of seeing that damn 1929 reference, I could almost swear,
and
> >before this is all over, I may start swearing.
> >
> >There are safe guards now, or suppose to be. OR, Maybe the IMF will be
> >bailing us out.
>
> Safeguards are useless when a market crashes. All they
> do is slow down the fall, but they can't stop it.
>
> As for the IMF, who do you think pays into it?
> The US taxpayer! If the US goes bust, the IMF dies
> too.
>
>
> >But I'll tell you what, I don't like the fact that people
> >overextended their credit, that worries me.
>
>
> Unimportant: Most people who are going to
> get margin calls have already gotten them. The rest
> who had margins and didn't get a call yet wet their
> pants and sold pre-emptively. Don't expect that
> to be a factor.
>
>
> As for the 1929 comparaison: Big BIG *H U G E*
> difference: in 1929 the economy was going to hell.
> (no, the crash did not cause the depression, it
> was only the last straw.) In 2000, the economy
> is OVERHEATING. And the economies of the rest
> of the world are picking up, dragged along by
> the US economy. And the price of oil has dropped
> 33% in the last month. So the little surge in the
> CPI you saw will disappear in a few more months.
>
>
> That's why there will NOT be a huge crash.
> (Though for people who will not be able to wether
> a short term steep decline, it will not matter since
> they will be wiped out)
solos
Don't you know shock jockeys are entertaining us with the stock news. I
noticed even when the Naz was going up the Bloomberg people would announce
it but in the same breath, gleefully, bring in the negativity of the recent
crash, every time. Had to keep that negative focus even when there was
something positive. Got to keep that crises excitement going, it grasp our
attention. "It's entertainment!"
His serene and invincible majesty, po <p...@borg.com> wrote in message
news:38f97...@nntp2.borg.com...
millstox
> As for the IMF, who do you think pays into it?
>The US taxpayer! If the US goes bust, the IMF dies
>too.
>======
>Yes, I know, that was just meanness on my part,(I have been in civilization
>today and worst for wear). We bail everyone out, and get hated in return,
>so I thought for a change someone could bail us out. It might give them an
>opportunity for them feel better
it would give our enemies a chance to strike when we are weakest.
i wouldn't buy a Japanese car for love or money. their philosophy is
that business is war. ever considered the concept of economic war?
how many of those seller-shares are foreign-owned? i love my Chevy.
at this point i'm hoping the market will rally hugely to the upside on
Monday. that would ruin me financially in the short term since my
Call positions are so far down as to remove any hope of profit and my
Put positions are far enough up to give me some hope of survival and
they all expire next Saturday, but i'd rather go broke short-term and
have to go back to cubicle city than make a wad of money short-term
and watch my country flushed down the shitter because its population
consisted solely of grasshoppers with not enough ants to keep things
going.
and i'm really not in that bad a shape financially. i have a mortgage
payment larger than i prefer, and a visa bill that gets paid off
monthly, but no other debt. minimal savings unfortunately, but
nonzero. two late-model vehicles that have been paid off for several
years, a house full of nice toys. plenty of skills for high-tech or
low-tech, i've done everything from operating system design to writing
books to welding to fixing cars and sharpening saws.
i remember when i was in debt up to my ass, getting about $100/mo
deeper because of all the interest i was paying. anything resembling
a depression would have destroyed me then, and i'm hearing that's
where Joe Average is right now.
my Dad was in his mid-20s in 1929 and i heard enough stories to have a
feel for how things were. not fun. no jobs, no money. i really
don't want to go there.
the thing that pisses me off the most right now is not being able to
think of more positive things to say. never sell at a loss. you
worked at a real job and made real money to buy stocks with, if you
sell at a loss your real money disappears from the economy and just
goes into the ether. that makes your country weaker, your job less
secure, your future less secure. don't go there.
everybody is coming out and saying the economy is strong, and it has
been. the crucial factor at this point is investor confidence. have
some. even if you're scared shitless; that's called courage, and it's
necessary right now. buck up, folks, if you don't your back really
may be against the wall. never give anything away, make them pay you
a profit for having taken the risk. the risk is not trivial so
neither should the profits be.
solos
millstox <mill...@switchboardmail.com> wrote in message
news:sutjfs8c2877itc00...@4ax.com...
> "solos" <so...@uninets.net> wrote:
>
> > As for the IMF, who do you think pays into it?
> >The US taxpayer! If the US goes bust, the IMF dies
> >too.
> >======
> >Yes, I know, that was just meanness on my part,(I have been in
civilization
> >today and worst for wear). We bail everyone out, and get hated in
return,
> >so I thought for a change someone could bail us out. It might give them
an
> >opportunity for them feel better
>
> it would give our enemies a chance to strike when we are weakest.
---
That post was tongue in cheek and probably about 3am while I listening to
Art Bell. The program,coast to coast, couldn't hold a candle to this
newsgroup on the fear scale
Matt D
> the thing that pisses me off the most right now is not being able to
> think of more positive things to say.
The nasdaq is at the same level it was a few months ago - the Dow is the
same as it was a few weeks ago. Both are up a long way since a couple of
years ago. Anyone who has been investing for the last few years has made
more money than almost any other generation in the USA. I'd say that was
pretty positive.
> never sell at a loss.
Purchase price should have almost nothing to do with the decision to sell or
not (the exception is when you need to consider tax implications). Sell if
the price is higher than what you estimate the value of the business to be,
or if you need the cash. But if the underlying reasons why you invested
(e.g. good products, management, etc) have deteriorated a lot, then having a
loss shouldn't stop you selling.
> you
> worked at a real job and made real money to buy stocks with, if you
> sell at a loss your real money disappears from the economy and just
> goes into the ether.
But if the underlying business starts falling apart, and you sell at a loss,
you will lose far less than you would by holding on and then selling at a
giant loss.
> that makes your country weaker, your job less secure, your future less
> secure. don't go there.
This is just scaremongering! Plenty of people sold at a loss in 1992 - I
didn't notice it having any negative impact on their jobs, futures, or their
country.
--
Matt D
Grant W. Petty
>On just one day, Friday, April 14th, one trillion dollars vanished in a
>catastrophic stock plunge.
>
Pardon the newbie question, but I don't understand the common
assertion (also made in the media) that 'one trillion dollars of
wealth *vanished*'. Let me illustrate my puzzlement with a crude
analogy, which I just made up as I write this:
Let's say that 100 people each buy a Van Gogh painting for $1000. 99
of those people hang their Van Goghs on the wall in their living room
and forget about them. But one Van Gogh painting goes back on the market
and a bidding war ensues. Person X sells it for $2000 to Person Y.
Person Y sells it for $4000 to Person Z. Person Z sells it to Person
W for $10000.
At this point in time, X has made $1000 profit. Y has made $2000. Z
has made $6000. All are happy.
If we assume that they are identical in market appeal, the 100 Van
Gogh paintings now have a collective market value of $1,000,000, or
ten times the original market value of $100,000.
Now, say one of the 99 owners decides to unload his Van Gogh that has
been hanging on the wall, and because he paid only $1000 for it, he is
content to let it go for $2000, making $1000 profit. He is happy.
The person who bought it is probably happy. Only Person W is not.
The new market value of a painting is now $2000, so the total market
valuation of the 100 paintings is suddenly just $200,000, rather than
$1,000,000. According to the logic applied to the stock market,
$800,000 in "wealth" just "vanished".
But who actually "lost" that supposed wealth? Even if every one of the
original buyers subsequently sold their paintings for $2000 each, they
still made a total of $99,000 profit. They may be disappointed that
they no longer can sell their paintings for a profit of $9000 each,
but they still profited handsomely and they should be happy.
The only one who has any real right to be pissed is Person W, because
he paid $10,000 for a painting that others are now selling for $2,000
and therefore stands to lose $8,000 (if he sells it now), unless the
price magically goes back up again to $10,000 again (not likely if the
other 99 decide to sell). (Or unless the painting has an intrinsic
worth to him of $10,000 or more, regardless of what other people would
pay for it.)
Summary: 99 reasonably happy people. 1 possibly unhappy person. Yet
supposedly $800,000 in wealth "evaporated." Where did it go? Who
cares? Only W lost real money (if he sold), to the tune of only
$8000.
To me, what this crude analogy illustrates is that paper wealth is
absolutely meaningless unless it is backed by value that goes beyond
the blind anticipation that the price will continue to get bid up.
Person W screwed himself by failing to recognize that there was no
lasting support for the price he paid, given that 99 similar paintings
were being held in reserve and could go on the market at any time.
Ultimately, the large fluctuations in net market 'value' of the 100
paintings were driven by actual sales of only 1 of those paintings at
any given time. I just can't see how anybody can cry about "lost
wealth" unless you happen to be Person W.
I don't really see any compelling difference between the price of the
above hypothetical paintings and, say, the price of a share in a
profitless dot-com company being traded in NASDAQ.
I fully invested a small cash windfall in tech back on July 16 and
happened (unluckily) to hit the exact price peak for the surrounding
couple of months. Yet today, having held those investments, even
after the big tumble of last week, I'm still ahead (on paper) by 65%.
Maybe *someone* lost a trillion dollars in wealth, but it wasn't me!
Just my naive take on the events of last week.
- Grant
--
**** Reply to: gpe...@purdue.edu, NOT address in header! *****
Grant W. Petty |Assoc. Prof., Atmospheric Science
Dept. of Earth & Atmospheric Sciences |Voice: (765)-494-2544
Purdue University, West Lafayette IN |Fax: (765)-496-1210
d...@noospam.com
correct, the wealth that vanished is indeed a type of paper wealth,
the value of stock. Nobody went out in the back of a bank and burned
a trillion dollar bills as someone suggested earlier in another
analogy. However, if one person wanted to withdraw all his money
from his account, he might get about 70% of the amount he would have
gotten a month ago. He might consider that he had lost that amount
(30%) of his wealth. (We won't even consider what he put in
initially, it's immaterial, I'm assuming his account value is his
wealth at any point in time.). The trillion dollars is just the total
amount of wealth that disappeared for all investors. Obviously now,
everyone couldn't get their money out at the top, but that is
basically the assumption that is made.
Some real things did disappear with that paper wealth though. The
capacity of investors to borrow money has been reduced. The capacity
for companies to access money from the capital markets has been
reduced. Bank covenants based on market value of a company may have
been breached. And I'm pretty sure there are many other real effects
of this loss of what at first glance might seem to be mostly imaginary
wealth.
jmho.
d.