Hey, thanks so much for the reply, Gord. I appreciate it. Yes, I’ve built one property and it’s a top vacation rental in its area. I’ll just have to be smart with the next one, and with looming fears of a recession (whether or not it happens) and stock market volitility, sellers appear to be spooked and dropped the price, so I’ll be able to buy the property for less. Timing might be good.
Some of these motivations come from people all following each other, trying to predict the exact economic actions of other people all engaged in the same activity. (People who bought a stock at too high a price are looking for greater fools to unload it on.) While the market's open, everyone's trying to figure out the optimal value for the price of every stock everywhere. It's exhausting to think about the trillion or so variables that go into that immense labor of capitalism. It's crazy to consider how complicated the chains of cause and effect and overthinking are.
Even though the financial crisis was resolved by the start of 2009 the housing market continued to decline throughout 2009. There were over 3 million foreclosure filings for 2009. Unemployment rose to over 10% and the housing market crash created the worst recession since the early 1980’s. By the 4th quarter of 2009, the U.S. has experienced significant GDP growth and corporate earnings had increased by over 100%. The Unemployment Rate had stabilized towards the end of 2009. By 2010 housing prices still haven’t gone up and we are still working on a surplus of housing inventory.
The joint 2010 report "portrayed a market so fragmented and fragile that a single large trade could send stocks into a sudden spiral", and detailed how a large mutual fund firm selling an unusually large number of E-Mini S&P contracts first exhausted available buyers, and then how high-frequency traders (HFT) started aggressively selling, accelerating the effect of the mutual fund's selling and contributing to the sharp price declines that day.
One of the big drivers of the stock market since 2008 has been monetary policy: in specific, the Quantitative Easing program of the Federal Reserve and the low interest rates. While the former put a lot of new money into bonds (keeping those interest rates low), the latter kept the world's least risky investment paying out very little. As a result, a lot of money chased better returns in the stock market.
A stock market anomaly, the major market indexes dropped by over 9% (including a roughly 7% decline in a roughly 15-minute span at approximately 2:45 p.m., on May 6, 2010) before a partial rebound. Temporarily, $1 trillion in market value disappeared. While stock markets do crash, immediate rebounds are unprecedented. The stocks of eight major companies in the S&P 500 fell to one cent per share for a short time, including Accenture, CenterPoint Energy and Exelon; while other stocks, including Sotheby's, Apple Inc. and Hewlett-Packard, increased in value to over $100,000 in price. Procter & Gamble in particular dropped nearly 37% before rebounding, within minutes, back to near its original levels. The drop in P&G was broadcast live on CNBC at the time, with commentator Jim Cramer commenting:
Stock markets witnessed a sudden sell-off in the afternoon dealings on Friday with Sensex crashing 1,128 points and Nifty falling well below 11,000-mark while DHFL nosedived 60% following the rout in NBFCs and housing finance companies. DHFL share price saw the biggest intraday plunge in its stock market trading history on Friday. Most of the housing finance companies bottomed to their respective multi-year lows in the trades. Shares of Yes Bank, Maruti Suzuki, HDFC, Infosys and Sun Pharma were the biggest negative point contributors to the headline indices.
Preparation is key. The best time to react to any potential market crash is before it occurs. Not after. Reacting in the moment can lead to expensive and costly mistakes. For example, if you saw that socks were on sale, you'd be more interested in buying socks. However, when it comes to stocks, people take a different view. When stocks are on sale, as can occur in a market crash, then often investors' instincts are to run away. Thinking about your strategy ahead of time and writing it down, just in a couple of paragraphs, can be key. Then if the markets do crash, make sure to look at that document before you act.