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Old 01-27-2020, 11:29 AM
Dr_Paprika is offline
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Coronavirides and the Market


Today’s papers show the markets are down. Coronavirus is being blamed. Quoting traders saying things like “this is the ultimate uncertainty” and “sell first; ask questions later”.

No one can predict the markets or the consumer sentiment which fuels it. The markets are already at an exuberant peak hard to justify given Trump’s diplomacy, Brexit and cyber hype.
SARS had a sizeable economic effect - but was covered up for months, was poorly understood. It took months for experts to gather and figure out the mode of transmission... This just won’t be as bad. The world is substantially better prepared. But given earlier issues, it could be a catalyst.

If the markets were more reasonable, I’d say time to buy soon. Instead, maybe better to go to cash in the short term awaiting opportunities.

Your thoughts?
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Last edited by Dr_Paprika; 01-27-2020 at 11:30 AM.
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Old 01-27-2020, 11:36 AM
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I kind of think that financial markets are fickle and flighty- all sorts of stupid stuff will cause temporary downturns in those markets, whether or not they have fuck-all to do with the performance of a particular company, or even general economic conditions.

Basically what I'm saying is that right now, this virus hasn't caused very much actual economic disruption thus far, and any market downturns are just nervous reactions by skittish traders, not an indication of any actual economic changes. I plan to stick it out until there's some proof that this is the start of some kind of longer-term downward trend.
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Old 01-27-2020, 12:18 PM
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Aren't these types of sharp moves more often attributed to trading algorithms that are coded to react to market and world news? So no actual humans are directly involved. Rather the brokerage house trading algorithms try to predict/react and fire off thousands of automatic trades in seconds.
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Old 01-27-2020, 12:34 PM
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The markets basically price themselves at expectations. The recent news on the Chronovirus is worse than expected so the markets are going down. The news may be overblown in which case the markets will go up as this is confirmed, or it may get worse in which case the markets will go down further. If you calculate all of those probabilities and work out at what price cut-point is the place you should buy rather than sell given all the information available, the answer is probably the current stock price, if it wasn't other investors who do this for a living and are probably far better at it than you are would have already bought or sold and moved the stock price to that level.

In order to make money by timing the market, you have to have one of three things
1) A better understanding of market dynamics than the professionals who manage the portfolios of large investment companies (you don't)
2) Better information than the professionals who manage the portfolios of large investment companies (do you have insider information? Some of them probably do)
3) Luck (you can also make money playing craps at the casino)

For that reason its probably better not to try to time the market. By the time you get the morning paper, any information that can be used to decide how to invest based on that information has already been figured into the stock price.

However there is one area where you have better information than the best wall street stock investor. You know your own personal financial situation. You have the best information about who much money you have to invest, the likelihood that you will need money soon, how long before you retire, and how much risk you are willing to take on. So invest based on your personal financial situation, not on what the newspaper says.

Last edited by Buck Godot; 01-27-2020 at 12:35 PM.
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Old 01-27-2020, 09:44 PM
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Might some players be manipulating markets and using coronavirus as a cover an excuse?
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Old 01-27-2020, 10:58 PM
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Quote:
Originally Posted by RioRico View Post
Might some players be manipulating markets and using coronavirus as a cover an excuse?
Nah, it's more the same short-term fluctuations you see when just about any international news happens that *might* eventually affect trade.

China and the US start griping at each other? Stock markets will see short-term fluctuations. Disease in China? Same thing. Storm in Europe? Yep.

It doesn't necessarily signify anything when the market does this. It may be the start of something bigger, if the event does go on to affect trade in some fashion, or it may just fade away if the event is contained or resolved in a timely fashion.
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Old 01-29-2020, 10:49 AM
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Might some players be manipulating markets and using coronavirus as a cover an excuse?
Oooh, or short sellers spreading coronavirus so they can make lots of $$$!!!

I think there should be a government agency that sends agents to Wall St. and similar places to administer a kick in the pants to traders whenever they begin stupidly panicking, so they can't drive down the value of my retirement accounts.
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Old 01-29-2020, 12:33 PM
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Originally Posted by QuickSilver View Post
Aren't these types of sharp moves more often attributed to trading algorithms that are coded to react to market and world news?
Well, it has to start with some human activity, then the algorithms try to detect movement and ride the wave.
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Old 01-29-2020, 10:05 PM
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I think it helps to keep repeating to oneself, buyer for every seller, seller for every buyer (not in number of people necessarily but in shares). If the market didn't move at all on potentially significant bad news until everyone was sure it was 'serious', who do you suppose the people would be buying at the peak price to allow other people to reduce their positions 'just in case' it got 'serious' when it's already obvious it might. Would you do that?

So of course it's going to move on only potentially important news to the fundamental economy, not just 100% surely significant news. It doesn't seem much of a stretch to imagine how a disease like this *could* become significant to the operations of big US companies in a worst case. It probably won't...which is why the S&P is like 1.5% off its recent high not 15 or 30%. Chinese stocks are off much more, ~9% in USD terms for the FXI China ETF, but this *has* had a real economy impact on China already. Just not a huge one or again the stock market impact would be much more.
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