The crash followed an asset bubble. Since 1922, the stock market had gone up by almost 20 percent a year. Everyone invested, thanks to a financial invention called buying "on margin." It allowed people to borrow money from their broker to buy stocks. They only needed to put down 10-20 percent. Investing this way contributed to the irrational exuberance of the Roaring Twenties.
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.
What triggered the sudden fall in indian market ? From July to September 2018, 2 of IL& FS 256 subsidiaries reported having trouble paying back loans and intercorporate deposits to other banks and lenders , resulting in RBI requesting its major shareholders to rescue it . In July 2018 , Hindu Business line reported that the road arm of IL & FS was having difficulty making payments due on its bonds . In the same month , Business standard reported that it's founder Ravi Parthsarathy would be leaving the firm . In September Economic Times reported that one of the IL & FS group of companies called IL& FS Financial services limited had default on its commercial paper payments .This led to an audit by RBI . IL& FS Financial services limited had defaulted on repaying about 450 Cr worth of intercorporate deposits to Small industrial development bank of India ( SIDBI ) . This created panic in investors and they also doubted other arms of the IL&FS . This resulted in sudden fall in stocks related to financial institutions such as DHFL, Indiabulls housing finance , Canfin homes etc . Not only financial services stocks got butchered but other sectors such as infrastructure stocks also got plummeted as IL& FS deals with funding of many sectors .
Thanks Ben. If I knew I’d be rich! Yes, everyone’s looking ahead to 2019 and I’m developing a post on the topic right now. We likely won’t see a crash anytime soon, unless the G7 get carried away by all the tariff talk. Which could happen. The rest of the world has become addicted to US spending, although they describe that as “beneficial interdependent trade.” They’re actually getting surly about it, (G7 meeting) so we can’t say this won’t escalate into something bad. It looks like they’re going to threaten Trump with Tariffs and numbers and see if he bites. He hasn’t even dealt with China yet, so this does look scary. As you said, prices are rising and the demand is there. As long as Millennials are able to buy, this boom could go on a long time. However, how many of the G7 would enjoy seeing the US economy plummet?
Admittedly, getting to the right mix can be tricky. The percentage of stocks you're perfectly comfortable with when the market is going gangbusters may leave you frightened and anxious when stock prices plummet. One way to arrive at a portfolio mix that jibes with your risk tolerance and financial needs is to go to a tool like Vanguard's risk tolerance-asset allocation questionnaire. The tool suggests a percentage of stocks and bonds that should make sense for you. It will also show you how various mixes of stocks and bonds have fared over the long term and in up and down markets.
Even better than not selling stocks during a recession is to actually go on the offense. In bull markets, investors can occasionally find reasonably priced, wonderful businesses. But they can rarely find wonderful businesses trading at a significant discount to their fair value. Stock market crashes are the rare times when high-quality businesses can be found in the clearance aisle. Go shopping!
Predicting housing prices is famously difficult. And forecasting housing meltdowns like the one that nearly brought down the global financial system in 2008 may be downright impossible. For now, though, the way experts cautiously paint the future for next year is closer to the picture of a landing plane than that of a rocket ship plummeting earthward.
Since the Great Recession, the financial system of the country has somewhat matured, thanks to the introduction of tight regulations including Dodd Frank and Basel III with the sole agenda of preventing bundling of mortgages, and in turn another crisis. While there still are plenty of risky loans today, these are not big enough to cause an economic meltdown.
Obviously, some prediction of the market's downfall is going to turn out to be right. The market will go into a major slump again at some point. After all, since 1929 we've suffered through 20 bear markets where stock prices have fallen 20% or more, and even before the current turbulence, we've endured 26 corrections of at least 10% but less than 20%. But it's impossible to know in advance whether heightened volatility or even a decline that appears to gathering momentum will turn out to be The Next Big One.

The equity market actually peaked in late 2007, and appeared to be undergoing a correction in early 2008. However, after a brief recovery in April 2008 failed to reach the all-time highs, the market fell for the following 11 months. By March 2009 the S&P 500 index had fallen more than 55%. Unprecedented action by the Federal Reserve to stimulate the economy and market led to the beginning of the bull market that has continued until today.
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Consider hiring a fee-only financial advisor to kick the tires on your portfolio and provide an independent perspective on your financial plan. In fact, it’s not uncommon for financial planners to have their own financial planner on their personal payroll for the same reason. An added bonus is knowing there’s someone to call to talk you through the tough times.
As the large seller's trades were executed in the futures market, buyers included high-frequency trading firms—trading firms that specialize in high-speed trading and rarely hold on to any given position for very long—and within minutes these high-frequency trading firms started trying to sell the long futures contracts they had just picked up from the mutual fund.[23] The Wall Street Journal quoted the joint report, "'HFTs [then] began to quickly buy and then resell contracts to each other—generating a 'hot-potato' volume effect as the same positions were passed rapidly back and forth.'"[23] The combined sales by the large seller and high-frequency firms quickly drove "the E-Mini price down 3% in just four minutes".[23]
Evan of My Journey to Millions took the conversation back to the bigger picture with your investing goals and, “I honestly do not think you can protect against a stock market crash, and that’s okay! Make sure your risk tolerance matches your asset allocation and ride it out knowing that you should have time to let it all work itself out.  It is unlikely that the next crash is going to be the one that destroys our market system.”
Shortly after the crash, the Federal Reserve decided to intervene to prevent an even greater crisis. Short-term interest rates were instantly lowered to prevent a recession and banking crisis. Remarkably, the markets recovered fairly quickly from the worst one day stock market crash. Unlike after the stock market crash of 1929, the stock market quickly embarked on a bull run after the October crash. The post-crash bull market was driven by companies that bought back their stocks that that the considered to be undervalued after the market meltdown. Another reason why stocks continued to rise after the crash was that the Japanese economy and stock market was embarking on its own massive bull market, which helped to pull the U.S. stock market to previously-unforeseen heights. After the 1987 stock market crash, as system of circuit breakers were put into place to electronically halt stocks from trading if they plummet too quickly.

As of July 2011, only one theory on the causes of the flash crash was published by a Journal Citation Reports indexed, peer-reviewed scientific journal.[50] It was reported in 2011 that one hour before its collapse in 2010, the stock market registered the highest reading of "toxic order imbalance" in previous history.[50] The authors of this 2011 paper apply widely accepted market microstructure models to understand the behavior of prices in the minutes and hours prior to the crash. According to this paper, "order flow toxicity" can be measured as the probability that informed traders (e.g., hedge funds) adversely select uninformed traders (e.g., market makers). For that purpose, they developed the Volume-Synchronized Probability of Informed Trading (VPIN) Flow Toxicity metric, which delivered a real-time estimate of the conditions under which liquidity is being provided. If the order imbalance becomes too toxic, market makers are forced out of the market. As they withdraw, liquidity disappears, which increases even more the concentration of toxic flow in the overall volume, which triggers a feedback mechanism that forces even more market makers out. This cascading effect has caused hundreds of liquidity-induced crashes in the past, the flash crash being one (major) example of it. One hour before the flash crash, order flow toxicity was the highest in recent history.
September is also when the Fed is next expected to raise interest rates, and its post-meeting statement Sept. 26 and comments from Fed Chairman Jerome Powell could signal how strongly the Fed views its forecast for a December hike. David Ader, chief macro strategist at Informa Financial Intelligence, said Powell was not as dovish at Jackson Hole last week as some may have thought.

The 10-year Treasury note – whose key rate impacts the pricing on things ranging from fixed-rate mortgages to stocks to virtually every financial asset on the planet – recently climbed above 3.25 percent for the first time since May 2011. And when you add the threat of higher borrowing costs on things such as houses and cars and corporate debt to the economic obstacles caused by the U.S. trade war with China, all it takes is a whiff of weakness to set a major sell-off in motion.
Benjamin Graham once observed that in the short term, the stock market is a voting machine. That's what it did today. It went up or went down based mostly on popular opinion, blown by the wind. In the long term, it's a weighing machine, which reflects the true value of businesses in their stock prices. That's why it's so important to think like an owner, and not just a trader.
The release of so many new games in 1982 flooded the market. Most stores had insufficient space to carry new games and consoles. As stores tried to return the surplus games to the new publishers, the publishers had neither new products nor cash to issue refunds to the retailers. Many publishers, including Games by Apollo and US Games, quickly folded.[citation needed] Unable to return the unsold games to defunct publishers, stores marked down the titles and placed them in discount bins and sale tables. Recently released games which initially sold for US $35 (equivalent to $92 in 2018) were in bins for $5 ($13 in 2018).[30][31] Crane said that "those awful games flooded the market at huge discounts, and ruined the video game business".[27] By June 1983, the market for the more expensive games had shrunk dramatically and was replaced by a new market of rushed-to-market, low-budget games.
It is not just the uber rish who lose the most. It is the middle class workers. Those of us who have worked hard and survied years of down sizing in larger corporations who will lose a great deal…along with all those who also benifit from our generosity over the years. All the school supply drives, blood drives, holliday food drives to name a few. We try to contribute the amount to our 401’s to earn the companies matching benifits. We are pentalized for taking out our money until we reach the age of 59. Those of us who are to close to retiring don’t have the opportunity to recoup our money. So we will be faced with working to a much older age then we planned. So in reality…while we may be middle income…we don’t have the ability to just put out our money. If we lose a great portion of our 401’s and there is another housing market crash they have managed to chip away yet another chuck of middle imcome households. Sooner or later it will only be the very poor and the very rich! We need a solution to bring back the middle income and a solution for more and more folks to have the opportunity to move beyond lower income! We have done our best to prepare for what life might throw at us short term and long time, but I do believe it is going to be a bummpy ride, so buckle up my prepper friends.
The difficulty in getting a mortgage combined with extremely high student debt strapping down the millennial generation continues to nudge people toward renting. Americans don’t have the savings they used to have that allowed them to put a down payment on a home. Historically, the average savings rate of a person’s income was 8.3 percent, but today that number is 5.5 percent. Rising education and housing costs continue to burden the new generation of potential home buyers, driving down home ownership rates in the U.S.
In Southern California, the pacific rim money has driven the market to a dark place. Dark in the sense that to afford an “average” home you need a household income of $170k annually and that has increased the number of people living in newly purchased homes. Chinese millionaires are dominating the market and the middle class citizens are living paycheck to paycheck or leaving California for better quality of life.
“Hedging” simply means protecting your portfolio from just this sort of “fat tail” event. Taleb is an advisor to a hedge fund which specializes in “tail hedging.” The fund is run by Mark Spitznagel who wrote a book a few years ago called “The Dao of Capital” in which he argues there are times when stocks present very poor potential returns along with very high risk. His preferred gauge for this is Tobin’s Q (see: Why ‘Tobin’s Q’ Should Make You More Cautious Towards The Stock Market Today).
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.
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