Stock Markets Crashing Overnight !

[selfemployed]

Looks like the feeding frenzy of share and asset buying using cheap finance has finally caught up with stock markets. While I dont think we will see a fully fledged stock market crash, this correction is well overdue in my book.

Any views?

 

[Businessman]

I've a feeling they'll get to kick the can a bit further down the road this time; but basically the markets have long-since become like a monopoly set where the weans have used up all the money that came with the set, and started drawing their own notes in crayon on post-it notes! It'll soon be time for bed!

 

[selfemployed]

Fooling the punters back in thinking it is all over:-

http://www.abc.net.au/news/2018-02-07/us-stocks-swing-wildly-as-volatility-persists/9403410

It aint over until the fat lady sings and she hasnt even started warming up yet

 

[Businessman]

My main take-away from that piece is she's quite cute, but doesn't suit that yellow dress...

The fat lady's just getting out of her taxi. She definitely hasn't even started warming up yet!

 

[selfemployed]

As I said earlier, while we will see further downside in the short term, in a perverse way the falls on Friday and Monday will postpone interest rates rises, maintaining the flow of cheap finance which will prop up the markets to an extent for a little longer yet - possibly until the forecast economic growth actually arrives. Those who believe that the markets actually reflect the real value and real prospects of companies need to look at what the market is really based on at the moment - cheap finance and hope value.

 

[Businessman]

Rhetorical question... What does this so-called "growth" actually represent? The 'market' is irretrievably corrupted by dint of the fact it's become about number-shuffling, and is disconnected from real things in the real world.

 

[selfemployed]

Growth in stock market terms revolves purely and simply around short term profit (or jam tomorrow!) - there are companies out there close to cures for various cancers who cant raise funds because they will not be profitable in the short term but potential lifesavers in the long term. Yet a company, such as Snap Chat, which sells a service offering 5 second videos to share with your friends is nowhere near making a profit but was valued at $30b on float (now halved in price). How perverse is that?

 

[Businessman]

...The key point being that there is now't but an entry in a virtual ledger behind their 'value'. No food grows, nothing gets made, nothing gets fixed or mined or sheltered. Imagine the bomb went up tomorrow; and a few of us survive. Who will build our brave new world? the makers and the doers? Or the fantasy football players that currently inhabit 'the markets'?

 

[MarkB]

It is not all virtual money and power - markets do play a vital role in raising finance for companies and a lot more. However, price manipulation is a real problem in some areas as is insider dealing.

 

[Businessman]

I'm afraid that, as far as I can see, the markets have been drifting in relevance away from reality since the late 80s... And that drift has become exponential in the past decade. They play a vital role in manipulating the money supply certainly. But that in itself is no longer a reflection of the value of anything. Rather, it's just the score in a numbers game. Heck! The whole game is even automated to a greater extent! - what is it? something like 60% of trades are automated/algorithmic? - Ultimately, there will be another crash.

 

[MarkB]

I think we might need to agree to disagree on this one Matt lol

The markets are still very relevant even though they are nowhere near as perfect/efficient as some experts might have you believe. I tend to describe markets as information exchanges - where publically and privately available information is available which comes together to create a "fair value". This is why many shares show marked movements up and down ahead of major announcements which often go against what is known in public.