Hmmm… we were on such a beautiful track, too…
Remember Monday morning I was telling you how the Dow was scheduled to zoom skyward? Well, I was right….sort of.
The Dow had opened at 17,010 and then sipped up to 17,099 and change, which is close enough I’d say to call it an 89-point gain. Call me a liar over 18 points come the close, but what about mid-session?
It was then cold feet set in. The market was tossed for an 18-point lost (less a stick of chewing gum if you want to argue the decimal points) maybe because of the Spanish Ebola case. That’s not a bad working theory…since markets in Europe are mostly down this morning…and the US futures are back pointing to another quick flush with Charmin due in about mid-session.
Besides the broadening top, we have to go back to some longwave economic theory.
Remember what happened on September 19th of this year? Answer (you look too sleepy to figure this kind of thing out without prompting…) That’s when the S&P hit a 52-week intraday high of 2019.26.
We also know from working with the data for what…17 years is it?. The big collapse risk zones come around 27 days and 55 days after major peaks.
Look at 1929, for an example. Back then the market peak came on September 3rd and by the end of October the country was reeling in the rubble from the Wall Street Crash.
Can it happen again? Why sure…
Putting the math to it, we could expect the major decline for the year to come either around 10/23/2014 or 11/10/2014. Just based on past performances.
Historical market action is always interesting stuff. The market collapse in 1929 is no exception because it actual focused on two dates: Black Thursday was October 24, 1929 (51 days past the peak) and Black Monday was October 28th – our 55 calendar days past peak..
October 29th (Black Tuesday) was the 56th-day.
Students of “When to panic about the market” should be advised to carefully read upo on what was going on in the markets back then: For one, there was a lot of “trading on margin.” Basically, you’re gambling with borrowed money when that happens.
Margin is still around (and widely used) today. But much of the gambler’s penchant for risk has been laid-off onto options which is a whole separate discussion.
Look what happened though as the SHTF back then:
Over the weekend, (following the prequel Black Thursday on the 24th) the events were covered by the newspapers across the United States. On October 28, “Black Monday”, more investors facing margin calls decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 38.33 points, or 13%.
It was asymmetry of information at work: Once the momentum of margin calls passed a certain point, the collapse was bound to happen. These things take on a life of their own.
The current “modern” thinking is that such a thing could not happen again. But I beg to disagree.
The reason is social media.
Imagine what would happen if all of a sudden, a credible meme began over in social media and a rumor was set up that a “huge crash is coming and the only way to survive will be to move everything in your retirement account into bonds…”
As prices began to fall, this hypothetical warning would be sent to more and more people – who upon seeing prices collapsing, would pile-on and the modern collapse would be on.
“You can be safe with just one telephone transfer…” would go our hypothesized market-panicker. “If you don’t move your money right now, half your retirement could go down the drain…?
Of course, lots of events could trigger such an event. Someone might, for example, set up a fake “doctor” who would announce some quite saleable doom-porn onto Facebook and the rush would be on. “I’ can tell you with certainty that the government is behind Ebola and it’s all part of a worldwide conspiracy of the very wealthy to massively reduce world population. If you don’t get out of markets before they are collapsed, you will have no hope for a bright future. You will die like everyone else…”
People are dumb. They eat doom-porn.
Social media has been a lot of fun. Like CB Radio and Hoola Hoops. And Beanie Babies. And collecting Coca Cola memorobilia.
But there’s been little (if any) serious discussion that I’ve been able to find in economic papers.
Secular cases? Non-financial? OMG, they are all over the place.
“Hoax London terror attack message causes panic” (Spread by social media…)
The problem with panics – when they do arrive – is that they cause real damage. To be sure, the country might have continues a more subtle slide into the Great Depression, but panic speeded things along their natural course. But if you didn’t go along with the panic and get what little money you might have had left in the market, you would have gotten creamed.
So when panic comes, being first out really matters. Last one out of the pool gets out poor.
So as we get closer to “the window” for the market decline – and as it becomes more idealized around the 11/10 date – we’ll just keep a suspect eye on social media and ask an intriguing question: What would it take on social to overwhelm government control of a market-moving meme?”
We may not want the answer in real life, but wishing and hoping doesn’t make money. Taking early action does.
Set the timer.
If you actually try to do this, I will tell you I advised against it. But please send us the first copy of your manifesto from jail.
You ever wonder if Twitter and FB don’t have online trading operations to capitalize on their information advantage?
Here, put this on your reading list…
A quote off the Amazon site, BTW: “I fear the worst. Right now Americans are angrier and more divided than I’ve seen them since the 1960’s. What fires this rage is that we’ve become a post-Constitutional society.”
Back To Our Sept. 22 Headline
Which was “When Will Ebola “Infect” the Markets?”
The clock is still ticking. A little faster in Europe this morning.
Meantime, if the story in the UK Daily Mail is correct (“Dallas Ebola victim’s stepdaughter – who took him to hospital as he was ‘vomiting wildly’ – is given all clear to return to work as a NURSING ASSISTANT”) the case becomes more solid that CDC is mishandling events in a preposterous way.
Or, was this some “hidden hand” telling her this in order to ensure that the disease will take root here in America?
Not that it matters (but it does), but since the timeline of that hospital trip was the one of September 28 when Thomas Duncan was vomiting, so that means 10/20 before a total rule-out for those exposed to him on that day can be inferred.
Pardon my paranoia, who WTF is CDC thinking if they indeed made the call? Remember the “First do no harm” rule? Or, if they didn’t make the call where is Homeland Security and NSA and all this high tech surveillance crap when we need it? WHO MADE THE CALL?
Body Counts are Back
I haven’t seen them for a while, but the public desensitization that accompanies them will be informative to observe.
This latter one isn’t going to make many headlines, but it did pop out of one of our overnight data runs as I included “were killed” as a search term.
India Pakistan is worth watching because a) both sides have nuclear weapons and b) neither side seems particularly trustworthy-thoughtful and c) This is more proof of how British Empire wrecked the world.
Speaking of Nukes
Tell Me She Ain’t So!
Real Clear Politics headline: “Clinton: “Nobody believes” Economy is coming Back “Because You Don’t Feel It.”
Wait…this all lays at the feet of the democorps, does it not? Like the ones in the (ahem) Obama inner circle?
Who’d believe her as a “changeling” now? Vice-Grips! I feel a pinch coming on.
Weed’s Bad For You (?)
Got to wonder how much of the study would be true if weed were legalized? PLUS we wonder how it would read if there wasn’t a whole anti-weed industry… All of what he says about de ganj can be said with even greater emphasis on booze. Where’s the WHO outrage at the blown up livers and carnage from that, hmmm? Oops another industry to defend….
Fresh Stat Just Out
From Gallup: “Gallup’s U.S. Economic Confidence Index was steady in September, averaging minus 15 for the month. This is consistent with monthly scores throughout 2014, which have ranged from -14 to -17.+