On May 6, 2010, U.S. stock markets opened and the Dow was down, and trended that way for most of the day on worries about the debt crisis in Greece. At 2:42 p.m., with the Dow down more than 300 points for the day, the equity market began to fall rapidly, dropping an additional 600 points in 5 minutes for a loss of nearly 1,000 points for the day by 2:47 p.m. Twenty minutes later, by 3:07 p.m., the market had regained most of the 600-point drop.:1
As you can see from the numbers Dennis has on the housing market, things are much better than they were before the last crash. Lending guidelines are much tougher no matter what you hear. I see posts on Facebook all the time about how people can get low-money-down loans now, and that means the housing crash is coming. Low-money-down loans have been available for decades, and that is not what caused the housing crash. Really bad loans to people who should not buy houses is what caused the housing crisis. Those loans do not exist anymore, as you can see by the data Dennis provided. Yes, it is possible to get a loan with less than a 600 credit score, but very few people are actually getting those loans. When you look at the housing market, you need to look at the real numbers of how many houses are being built, what kind of loans people are getting, and how much house people can afford. Houses are not being built like they were before. The loans people are getting are much higher quality, and the market is much more stable than it was before.
What you can do is prepare for the next crash. In fact, regardless of how the stock market is doing today, you should be prepared for a crash – because unexpected events (black swans) can trigger one at any time. You don’t need to wait for the next stock market crash prediction to come along to learn about bear markets, how they occur, why they occur, and what you can do to avoid being wiped out. We prepared this guide for that very reason.
Mati Greenspan, an analyst with the trading platform eToro, told Business Insider on Tuesday that volumes from Japan and South Korea had been tailing off in recent days. Traders in these markets are usually buyers, and a large-scale exit could have created an imbalance in the market, with more sellers than buyers driving down prices and sparking a panic.
It's true that higher interest rates preceded the housing collapse in 2006. But that's because of the many borrowers who had interest-only loans and adjustable-rate mortgages. Unlike a conventional loan, the interest rates rise along with the fed funds rate. Many also had introductory teaser rates that reset after three years. When the Federal Reserve raised rates at the same time they reset, borrowers found they could no longer afford the payments. Home prices fell at the same time, so these mortgage-holders couldn't make the payments or sell the house.
Another thing you can do if you're anticipating a market crash is to include a bunch of defensive stocks in your portfolio, as they tend to get less punished during a market downturn. Defensive stocks belong to companies whose fortunes aren't very tied to the economy's movements. For example, people might put off buying refrigerators or cars during a recession, but they'll still buy groceries, socks, soaps, gas, medicine, electricity and diapers. Thus, food, tobacco, energy, and pharmaceuticals are some defensive industries, seen as more stable than their "cyclical" counterparts, such as the homebuilding, steel, automobile, and airline industries. You don't have to avoid cyclical industries in your investing, but know that they can move sharply in relationship to the economy.
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:
The stock market crash of 1929 – considered the worst economic event in world history – began on Thursday, October 24, 1929, with skittish investors trading a record 12.9 million shares. On October 28, dubbed “Black Monday,” the Dow Jones Industrial Average plunged nearly 13 percent. The market fell another 12 percent the next day, “Black Tuesday.” While the crisis send shock waves across the financial world, there were numerous signs that a stock market crash was coming. What exactly caused the crash – and could it have been prevented?
The 1973–74 stock market crash caused a bear market between January 1973 and December 1974. Affecting all the major stock markets in the world, particularly the United Kingdom, it was one of the worst stock market downturns in modern history. The crash came after the collapse of the Bretton Woods system over the previous two years, with the associated 'Nixon Shock' and United States dollar devaluation under the Smithsonian Agreement. It was compounded by the outbreak of the 1973 oil crisis in October of that year. It was a major event of the 1970s recession.
While the note's warnings are ominous and contradict many other more rosy outlooks for the current bull market, the London-based fund was on point in calling February's market correction weeks before it happened. Filia told CNBC in late January that stock valuations were in "bitcoin territory," "totally disconnected from fundamentals," and that markets were on the "edge of chaos."
Everyone seems to have an explanation for why stock prices rise and fall. People are happy about the economy. People are worried about the economy. People want interest rates to rise. People want interest rates to fall. Europe looks good. Europe looks bad. Canada's raising tariffs. Canada reported extraordinary growth. Company A met its earnings goals. Company B didn't. Inflation numbers looked bad. Inflation numbers looked good. Gold is hot. Silver prices fell. Oil supplies are running low—or high. Unemployment numbers changed too much or too little. Euros went up against the dollar. Who knows?
The major factors that drive housing demand growth to Toronto: immigrant investors, better economy, low interest rates, increasing numbers of buyers in their home home buying years (millennials), and optimism all look on the upswing. As mentioned in the Los Angeles Real Estate and US housing crash post, orecast post, here are the key factors that affect home prices:
The New York Times then noted, "Automatic computerized traders on the stock market shut down as they detected the sharp rise in buying and selling". As computerized high-frequency traders exited the stock market, the resulting lack of liquidity "caused shares of some prominent companies like Procter & Gamble and Accenture to trade down as low as a penny or as high as $100,000". These extreme prices also resulted from "market internalizers", firms that usually trade with customer orders from their own inventory instead of sending those orders to exchanges, "routing 'most, if not all,' retail orders to the public markets—a flood of unusual selling pressure that sucked up more dwindling liquidity".
Stock prices began to decline in September and early October 1929, and on October 18 the fall began. Panic set in, and on October 24, Black Thursday, a record 12,894,650 shares were traded. Investment companies and leading bankers attempted to stabilize the market by buying up great blocks of stock, producing a moderate rally on Friday. On Monday, however, the storm broke anew, and the market went into free fall. Black Monday was followed by Black Tuesday (October 29), in which stock prices collapsed completely and 16,410,030 shares were traded on the New York Stock Exchange in a single day. Billions of dollars were lost, wiping out thousands of investors, and stock tickers ran hours behind because the machinery could not handle the tremendous volume of trading.
The 2000 stock market crash resulted in a loss of almost $8 trillion of wealth. So what must be the reason for the crash? As has been deduced by market experts, the corporate corruption is believed to be a major reason for the crash to occur. Lots of multinational companies had been drawing profits by engaging in illegal means and frauds. The accounts that they maintained had serious loopholes and the debts were not shown. The stock options that the officers took worked towards diluting the companies. Another probable reason for the 2000 stock market crash was the overvaluation of the stocks and the dot-com bubble burst. Even the companies that had absolutely no hope of earning profits and were consistently losing money had a market capitalization of more than a billion dollar. The stock trading was going on the P/E basis.
Stock markets dropped today as trading closed with the DOW down 500 points more. The NASDAQ fell a further 70 points and and S&P about 30 points. There’s a lot of guessing as to what’s happening such as pessimistic earnings season reports, China trade worries, and multinational corporate performance (cheap labor market access) in doubt going forward as 2019 nears.
The rising dollar has already caused "an emerging market slowdown aggravated by U.S. tariffs, which already contributed to a bear market in China and Turkish lira crash. Dollar upside risk remains as the U.S. Federal Reserve intends to hike despite risks abroad, including a contentious Brazilian Presidential election, Italian budget, Brexit planning," he added.
However, there are a few qualifications to this: there is some risk that the migrant intake may be cut; while accelerating population growth in Queensland will support Brisbane property prices, population growth is slowing in NSW and Victoria so it’s becoming a bit less supportive of property prices in those states; and the supply of new dwellings has been catching up to strong population growth so undersupply is giving way to oversupply in some areas. The risk of the latter is highlighted by the continuing very high residential crane count which is still dominated by Sydney and Melbourne, indicating that there is still of lot of supply to hit the market ahead. Out of interest, Australia’s total residential crane count alone of 528 cranes is way above the total crane count (ie residential and non-residential) in the US of 300 and Canada of 123!
Some point to the Ontario government’s Places to Grow intensification plan as the major culprit in skyrocketing single detached home prices. Toronto condo prices haven’t risen like house prices have, yet condo demand is usually not spoken much about. It does look like a growing population want house to live in. A growing millennial family would certainly find it tough to live in highrise condos designed for adult living.
Housing has typically been a hedge against inflation. This time it will be inflation that kills the housing market. President Bush recently spent 800 Billion in 2 days. Federal spending is up over 30%. The Medicare bill will cost the US between 2 and 3 TRILLION dollars in the next 20 years. Only through devaluing the dollar (which has already begun) and massive tax increases, can the government hope to pay its bills. This means inflation, and lots of it. The people that are investing in real estate have a chronic myopia when it comes to economic history.
Watched CNN and CNBC for first time in years today. Then went over to Fox for a bit.. Very little info on world market crash today.. It is stunning how information is being skewed to the masses. All they were really talking about was Trump and HilLary, and oh yes those brave American terrorist beaters. The depth of denial in our country is breathtaking. I feel like I am living in an alternate reality, the world is crashing around our ears and very few seem to give a rats ass, unbelievable. Went and had two of my rifles bore sighted , zeroing them agian at range tomorrow. Bought 500.00 of emergency food, and ordered a good solar watch I have been looking at.Picking up extra 1000 rounds of Ar, and 250 rounds for my 308. Feel like I have very little time to finish preps. I also ordered a cast iron wood stove and am picking up 4 cords of wood this weekend. I hate feeling this paranoid but damn how can one take a sane look at our world and not be. God bless and protect you all in the coming weeks.
The heads of the SEC and CFTC often point out that they are running an IT museum. They have photographic evidence to prove it—the highest-tech background that The New York Times (on September 21, 2010) could find for a photo of Gregg Berman, the SEC’s point man on the Flash, was a corner with five PCs, a Bloomberg, a printer, a fax, and three TVs on the wall with several large clocks.
Hi Sadaf, Thanks and as you saw, the economy is fairly strong so towns well outside the GTA might be the best bet for a 2 year time frame. Check out Orillia. This is a town that never took off which is a shame because it’s right on the highway and Lake Couchiching, close to cottage country, and prices are low. They’ve remodeled the town park waterfront and it still has a nice small town feel. Here’s an example:https://www.royallepage.ca/en/property/ontario/orillia/120-dunlop-street/7142115/mls30615008/ of a house near the town. $300k is about as low as you’ll get. The Orillia housing market could take off as “stress tested out” homebuyers get desperate for an affordable home to buy further out from the GTA.
In the long term, this may reflect that the Great Recession of 2008 is finally over—especially given that the US economy has been at full employment for a while. Time will tell what a new Federal Reserve chairman will implement in terms of policy, but giving the Fed options to reduce rates again as necessary is a positive sign for global economic outlook.
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So, the way to prepare for a market crash is not necessarily to artfully predict in advance, and step aside when the crash comes. That's virtually impossible. Rather, it can be useful to consider your overall investment strategy ahead of time, so that you know you could stomach the next inevitable crash when it comes. Ideally, through proper diversification and forethought you'll have an investment approach that will enable you to ride out a crash, rather than turning you into another panicked seller. If you only act on these issues when the crash comes, it will likely be too late.