The panic began again on Black Monday (October 28), with the market closing down 12.8 percent. On Black Tuesday (October 29) more than 16 million shares were traded. The Dow Jones Industrial Average lost another 12 percent and closed at 198—a drop of 183 points in less than two months. Prime securities tumbled like the issues of bogus gold mines. General Electric fell from 396 on September 3 to 210 on October 29. American Telephone and Telegraph dropped 100 points. DuPont fell from a summer high of 217 to 80, United States Steel from 261 to 166, Delaware and Hudson from 224 to 141, and Radio Corporation of America (RCA) common stock from 505 to 26. Political and financial leaders at first affected to treat the matter as a mere spasm in the market, vying with one another in reassuring statements. President Hoover and Treasury Secretary Andrew W. Mellon led the way with optimistic predictions that business was “fundamentally sound” and that a great revival of prosperity was “just around the corner.” Although the Dow Jones Industrial Average nearly reached the 300 mark again in 1930, it sank rapidly in May 1930. Another 20 years would pass before the Dow average regained enough momentum to surpass the 200-point level.
Free movement of people was only one aspect of why people voted to leave the eu. There is another even more pressing, that of regaining sovereignty given away by those who thought nothing of betraying it in the first place. Yes the Gov. could be brought down by the latest betrayal of sovereignty, not only the Gov but the Tory Party itself, with no chance of a come back for decades to come, if ever.
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.
These countries are full of boastful bravado about their ability to stand on their own two feet without the US, the reality is the abruptness of the protectism wave might be too much. If these economies collapse, including a China housing market collapse would a Tsunamai be sent toward US shores that would send into recession. Right now, this could be the number one threat.
We are humbled by the overwhelming response we received for the "Invest Like a Pro" Virtual Stock Contest. We hope the last three months were as exciting for you as they were for us. Our goal was to take you on an eventful journey where you could mimic a real trading experience without any risk but at the same time win real cash prizes. In the process we hope you were able to brush up on your stock picking skills.
Though the Trump administration has looked to tariffs to help balance out a huge trade deficit with China, these added costs on aluminum, steel, and potentially other Chinese goods, could come back to haunt businesses and U.S. consumers. As material costs rise as a result of tariffs, businesses have little choice but to pass along these higher costs to consumers. That will likely result in less consumption, and an eventual pullback in spending from businesses, which may lead to a borderline recession.
A market collapse can wipe out what economists call "paper wealth." Paper wealth is money tied up in investments like the stock market or the real estate market that could be sold for a gain, but hasn't yet. In contrast, "real wealth" refers to actual, physical assets, like the money in your bank account, or a vehicle you own that is fully paid off and can be sold for a definite financial gain.
The increase in internet trading also led to the crash of 2000. The internet served an easy access to trading for a lot of traders who lacked the required experience. Their trial and error methods of trading lead to losses in the stock trading market. Another supposed reason is that the research firms had a conflict of interest. The investment bankers had the research firms put not so honest ratings on the stocks, thus leading to an overall loss of wealth in the market.
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Using a simple options calculator (like that available at options-price.com) we can calculate how our put options purchased in the example above would perform after a 20% decline in the span of just a month. In this hypothetical example, SPY drops to 175 and implied volatility rises to 55 (for this example I took the VIX level of 45 in October 2002, as suggested by Spitznagel, and added 10 points for 10% out-of-the-money put options). Our puts have gone from $9 each in value to $328.10. We own 55 of them so they are now worth just over $18,000 in total.
Selling intensified in mid-October. On October 24 ("Black Thursday"), the market lost 11 percent of its value at the opening bell on very heavy trading. The huge volume meant that the report of prices on the ticker tape in brokerage offices around the nation was hours late, so investors had no idea what most stocks were actually trading for at that moment, increasing panic. Several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor. The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank of New York. They chose Richard Whitney, vice president of the Exchange, to act on their behalf.
Also, be sure you're focused on percentages, not points, when thinking about stock market movements. This is something the media doesn't sufficiently understand, often reporting market drops in points instead of percentages. As an example, the Dow Jones Industrial Average dropped by a whopping 1,175 points in a single day in February 2018, which sure sounds like a lot -- especially compared with 1987's "Black Monday," when the Dow fell 508 points. But in percentage points, it was a meaningful yet not catastrophic 4.6% decline -- while 1987's drop wiped out 22.6% of the market's value at the time. The Dow was near 26,000 at the time of this writing, and the S&P 500 was around 2,800. At those levels, if the Dow "plunges" by 260 points, remember that it would be just a 1% move. Even a 1,000-point drop would be just a 3.85% decline.
The level of panic that we witnessed on Wall Street on Wednesday was breathtaking. After a promising start to the day, the Dow Jones Industrial Average started plunging, and at the close it was down another 608 points. Since peaking at 26,951.81 on October 3rd, the Dow has now fallen 2,368 points, and all of the gains for 2018 have been completely wiped out. But things are even worse when we look at the Nasdaq. The percentage decline for the Nasdaq almost doubled the Dow’s stunning plunge on Wednesday, and it has now officially entered correction territory. To say that it was a “bloodbath” for tech stocks on Wednesday would be a major understatement. Several big name tech stocks were in free fall mode as panic swept through the marketplace like wildfire. As I noted the other day, October 2018 looks a whole lot like October 2008, and many believe that the worst is yet to come.
The loopholes in the accounts of the companies are believed to be a major reason for the crash. The companies weren’t honest about their dealings in the company accounts and hid debts which affected the market. Therefore the rule of CEO and CFO accountability was laid. Under these regulations, all the statements needed to be duly signed by the CEOs or CFOs of the respective companies. That way frauds and loopholes could easily be made out. Also, the prosecution was made stricter. The penalties that would result from frauds or any illegal activity in trading were increased. This was meant to control the losses that the market was suffering.
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The new companies reduced Atari's share of the cartridge-game market from 75% in 1981 to less than 40% in 1982. David Crane, one of the founders of Activision after leaving Atari, recalled that during the six months between two consecutive Consumer Electronic Shows, the number of third-party developers jumped from 3 to 30. Attempting to imitate Activision, the new companies attempted to use programmers unfamiliar with game development to produce, Crane said, "the worst games you can imagine". Companies lured away each other's programmers or used reverse engineering to learn how to make games for proprietary systems. Atari even hired several programmers from Mattel's Intellivision development studio, prompting a lawsuit by Mattel against Atari that included charges of industrial espionage.
1st, sorry you lost your home. That said, had you read your loan documents you’d have seen the language advising you that loans are bought and sold on the secondary market all the time and the originator did not NEED your permission to do so. The sale of your loan to another bank, investor, Fannie, etc., had no effect on your payment, interest rate, term, etc. So the sale of your loan, regardless of how many times it was repackaged and sold, did not cause you to lose your house. If along the way the new holder of your “note” did not have an auto pay option, that was up to you follow up on and find out exactly HOW/WHERE they wanted you to make your payment. Again, sorry you lost your home, but the sale of mortgage backed securities (your loan) has no effect on the Payor (you) as terms cannot be altered (now THATS something they would need your approval on). The only way an eventual noteholder could foreclose on you is if you failed to make your payments as required…Did you stop making payments for some reason? A lot of good people got hurt in the crisis but there seems to be more to this than a repeated sale of the original note…I’ve been in my present home 26 years, have had several mortgages sold and sold again with no issues…most important thing is to confirm with your present lender that they had, in fact sold your note and the party telling you they now own your note are, in fact, who they say they are. Best of luck.
Thank you, Gord, for the insightful article. We bought our SoCal (South Bay) home two years ago and our neighborhood’s prices have soared since. We are currently looking at a potential profit of more than $350k given recent comps.. Definitely not a bad thing, but it’s creating a dilemma in our home since my husband is all about cashing out while the market is hot and renting until prices go down again. I on the other hand, am more in favor of doubling down on our home and area by converting our garage to a liveable (and rentable) unit. We really like our area and home, but the potential profit is incredibly enticing. What do you think would be the smartest move in this circumstance?
If you break up the components of the correction, the entire fall was concentrated in financials and other sectors where there are valuation concerns. Even within the large cap space, the correction was sharpest in stocks like Kotak Bank, Adani Ports, Bajaj Finserv, Bajaj Finance etc where there already are valuation concerns. The basket selling was largely restricted to stocks like Yes Bank, Indiabulls and DHFL, which were in the news as well as stocks where valuation concerns have been around for quite some time.
“My view is that the markets are extremely overvalued, and can fall even 2,000 points from here. (Sensex). The Nifty can correct by about 1,000 points. Nothing has changed fundamentally, I mean we have the same macro-economic situation, etc, but when a sell-off happens, nobody can predict. Financials, especially NBFCs are overvalued,” Rajat Sharma, founder, Sana Securities told FE Online.
Impact of high frequency traders: Regulators found that high frequency traders exacerbated price declines. Regulators determined that high frequency traders sold aggressively to eliminate their positions and withdrew from the markets in the face of uncertainty. A July 2011 report by the International Organization of Securities Commissions (IOSCO), an international body of securities regulators, concluded that while "algorithms and HFT technology have been used by market participants to manage their trading and risk, their usage was also clearly a contributing factor". Other theories postulate that the actions of high frequency traders (HFTs) were the underlying cause of the flash crash. One hypothesis, based on the analysis of bid-ask data by Nanex, LLC, is that HFTs send non-executable orders (orders that are outside the bid-ask spread) to exchanges in batches. Though the purpose of these orders is unknown, some experts speculate that their purpose is to increase noise, clog exchanges, and outwit competitors. However, other experts believe that deliberate market manipulation is unlikely because there is no practical way in which the HFTs can profit from these orders, and it is more likely that these orders are designed to test latency times and to detect early price trends. Whatever the reasons behind the possible existence of these orders, this theory postulates that they exacerbated the crash by overloading the exchanges on May 6. On September 3, 2010, the regulators probing the crash concluded: "that quote-stuffing—placing and then almost immediately cancelling large numbers of rapid-fire orders to buy or sell stocks—was not a 'major factor' in the turmoil". Some have put forth the theory that high-frequency trading was actually a major factor in minimizing and reversing the flash crash.
Ultimately, if there is a going to be a full-blown collapse of the stock market right now, we would need some sort of “kick off event” in order to make that happen. It would have to be something on the scale of another 9/11, the collapse of Lehman Brothers, an unprecedented natural disaster, the start of a major war or something else along those lines.
Mass censorship of conservatives and libertarians is exploding. You’ve already seen this with the demonetization and ultimate purge of Infowars and other alternative media outlets by mega-corporations working in tangent to stifle competition. But you are important in this fight. Your voice is important. Your free thought is important. Make no mistake, you are just as important as anyone in the Anti-American establishment.
While some areas such as the 905 have seen big drops, (houses are sitting and have to be rented now) areas in Toronto have maintained prices. These neighbourhoods offer a more reliable bet for sustainable property investment value. Many property investors have discovered the hard way, what the word sustainable means in bottom line dollar terms. Because of demand, two hot areas right now are rental property investment and student housing investment.
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".
Not only has subprime lending seen a major decline, but mortgages have also become much harder to attain due to stringent lending standards. According to CoreLogic’s Housing Credit Index, loans originated in 2016 were among the highest quality originated in the last 15 years. This is greatly due to the type of borrowers able to qualify for loans. The current average credit score for borrowers being granted mortgages is 739. In October 2009, the average FICO score was 686, according to Fair Isaac. The lowest one percent of mortgages issued have credit scores averaging 622-624. Compared to the average range in 2001 of 490-510, the standard to get financing has risen substantially, and as a result, the likelihood of default has dropped. Lenders have done this to ensure the economy doesn’t again become propped on bad loans like it was leading up to the Great Recession.
Efforts to renegotiate the North American Free Trade Agreement have proved more problematic than many in markets had hoped. Instead of ending Friday, talks with Canada will continue with expectations a deal could be reached within 90 days. Talks with Mexico had proceeded but the U.S. and Canada, as of Friday, appeared to have reached a sticking point.
It is impossible to know for sure what the housing market will do. It will eventually go down, as it cannot go up forever, but the question is when will that happen and by how much? I feel that this market is driven by solid demand, solid lending guidelines. Couple that with low inventory and we will continue to see prices increase. If the builders start building like crazy, I would start to worry about another decline.
Be prepared for the potential of civil unrest. If the banks put a limit on withdrawals (or close like they did in Greece) you can look for some panic to occur. If the stores dramatically increase prices or close..more panic. Be armed and be prepared to stay safely at home. (Although this article was written during the Ferguson race riots, civil unrest follows a similar pattern regardless of the cause.)
Adding to the problem is that much of the Chinese private debt is pledged with collateral from the stock market, which has been in free-fall this year. According to Reuters, more than 637 billion shares valued at $4.44 trillion yuan ($639.86 billion) were pledged for loans as of Oct. 12. As the air continues to pour out of the stock market, it will put additional pressure on the debt market.
hcks, we’ve been looking all over Houston for you. We have reserved a seat for you on Niburu when it gets close enough to board via the secret mind control surf boards we’ve stashed away for those of us in the ” know.” We’re making sure you’ll be sitting next to Dave Hodges and your scientist friend, you know, the one whose name can never be mentioned lest the Earth be ravaged by brain eating dreadlock zombies, you know, THAT scientist friend. By the way, we have been able to confirm that Ted Turner is indeed and has been a cannibal for years now, so he’s looking forward to some fine dinning once the shtf next April. Stay on your normal frequency as we may need to transmit additional instructions to you without delay.
There are some good reasons for high valuations, such as the new, lower corporate tax rate, the generally business-friendly administration, a prolonged period of historically low interest rates, low unemployment, high consumer confidence, and soaring corporate earnings, just to name a few. I'd even go so far as to say that the fact that the Buffett Indicator doesn't take some of these things into account is perhaps its biggest flaw. For example, if you look at the stock market during a high-interest period and a low-interest period, examining stock valuations isn't exactly an apples-to-apples comparison.
The housing market experienced modest but steady growth from the period of 1995 to 1999. When the stock market crashed in 2000, there was a shift in dollars going away from the stock market into housing. To further fuel the housing bubble there was plenty of cheap money available for new loans in the wake of the economic recession. The federal reserve and banks praised the housing market for helping to create wealth and provide a secured asset that people could borrow money to help the economy grow. There was a lot of financial innovation at the time which included all sorts of new lending types such as interest adjustable loans, interest-only loans and zero down loans. As people saw housing prices going up, they were stepping over each other to buy to get in on the action. Some were flipping homes in an effort to take advantage of market conditions. If you understand fractional banking, you would know that with a 10% reserve requirement, in theory, it would mean that 10 times that money can be created for each dollar. With 0% down needed to buy new homes, an unlimited supply of money could be created. With each loan, banks would quickly securitize the loan and pass the risk off to someone else. Rating agencies put AAA ratings on these loans that made them highly desirable to foreign investors and pension funds. The total amount of derivatives held by the financial institutions exploded and the total % cash reserves grew smaller and smaller. In large areas of CA and FL, there were multiple years of prices going up 20% per year. Some markets like Las Vegas saw the housing market climb up 40% in just one year. In California, over ½ of the new loans were interest only or negative-amortization. From 2003 to 2007 the number of subprime loans had increased a whopping 292% from 332 billion to 1.3 trillion.