
We Just Witnessed the Fastest Stock Market Correction on Record - JumpCrisscross
https://www.bloomberg.com/news/articles/2020-02-27/we-just-witnessed-the-fastest-stock-market-correction-on-record
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orev
No matter what the official criteria for “correction” is, that word just
doesn’t feel right. “Correction” implies it’s a fix for some insignificant
thing, like over exuberance/a bubble. But that’s not what’s going on here.

One of the biggest manufacturing economies has essentially shut down.
Companies are already warning about significant impacts on quarterly earnings.
Those are actual, real things — not people just realizing they got a little
too excited.

~~~
asdfasgasdgasdg
Something that's never totally clear to me, either on the upside or the
downside: say the largest economy in the world is shut down. Even say it stays
that way for three or four months. Does that actually mean that the US' public
capital has dropped ten percent in value? It's my very strong suspicion that
in two years we will be chugging along again as if this never happened. Why is
10% the right number to contract in that situation?

(In case you can't guess, I'm still 100% long.)

~~~
AnimalMuppet
Has the US' public capital dropped 10%? No. But prices are the discounted
expectations of future profits, and future profits are suddenly less than we
expect them to be.

But it could be worse than that. How long did it take the economy to recover
from the Black Death? At least 100 years. If too many people die, then yes,
the public capital has actually been significantly damaged.

~~~
asdfasgasdgasdg
Ok, so I guess it makes sense that the price would drop a lot since near term
profits should be weighted more heavily than long term. 10% still seems like a
lot with exponential discounting unless this is going to hit a lot harder and
longer than I expect.

~~~
AnimalMuppet
Well... What I said is kind of the ideal world. The reasonable value of the
stock is the time-discounted expectation of future profits. The _actual_ value
is heavily influenced by what each person thinks everyone else thinks. So for
the price to drop, people don't have to think it will affect future profits at
all. They just have to think that other people will think that the price
should drop.

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_bxg1
My go-to perspective whenever these kinds of headlines come up:

\------------------

"Suppose you’re just starting out as an egg farmer, and your goal is to build
up a nice, profitable business. You want to build up a flock of hens so big
that they are eventually producing thousands of eggs per month.

You buy your first 100 hens, and they get right to work. You allow those eggs
to hatch so more hens can be born, and you also continue to buy hens from the
farm supply store. Suddenly your phone rings and it’s Farmer Joe down the
road. “The price of hens has just dropped by 50%! You’ve just lost five grand
on those hundred hens you bought last summer!”

Is this a sensible way to think about it?

No, of course not. You’re happy that hens are cheaper, because now you can
build your egg business even faster.

Stocks are just like hens. They lay eggs called “dividends”, which are real
money that can either flow automatically into your checking account, or
automatically reinvest itself to buy still more stocks. Some younger companies
don’t pay dividends, but that doesn’t mean they aren’t making you money – they
are just reinvesting their profits to grow even faster – and eventually become
a Super Hen.

There’s only one time you care if one of your shares is down: on the day you
sell it."

[https://www.mrmoneymustache.com/2016/02/29/what-to-do-
about-...](https://www.mrmoneymustache.com/2016/02/29/what-to-do-about-this-
scary-stock-market/)

\------------------

Unless you're actively playing the markets, or close to retirement, there's
nothing really to worry about.

~~~
bfieidhbrjr
I'm a big fan of MMM however a better analogy would be a disease comes through
that makes all the eggs 50% smaller, or leads to 50% infertility.

MMMs analogies tend to assume you're independently financially secure, which
is his whole schtick. I love it. But there are people who'll lose their jobs
and house in a recession and need to draw down their stock at the worst
possible time, not leave it sitting there as the analogy implies.

~~~
chii
> need to draw down their stock at the worst possible time

then they're over invested! If they don't have spare money to invest, they
shouldn't be. If you lose your job and have to sell stocks to pay rent, then
that money shouldn't have been in stocks in the first place. The stock market
isn't a place to park emergency money. It's a place you put money _after_
you've paid for necessities and topped up emergency reserves, in the hopes of
getting a greater return.

~~~
_bxg1
I do think there's still something to be said against the "there's nothing to
worry about", which is that people do lose jobs and experience other
repercussions during a recession. It's only in the case of investing - and
prudent investing, at that - where there's nothing to worry about.

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dntbnmpls
We've had single day market "corrections". So not the fastest stock market
correction on record. But then again, it depends on how one defines
"correction".

1987-10-19 −22.61%

1929-10-28 −12.82%

1929-10-29 −11.73%

[https://en.wikipedia.org/wiki/List_of_largest_daily_changes_...](https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average)

Wish news just stated facts instead of looking for every angle to spice things
up for clicks. But then again, bloomberg and most "news" companies aren't in
the news business, they are in the ad business. What's wrong with "X index has
entered correction territory with Y percentage decline"? Or something like
that?

~~~
solveit
What's up with October? It looks incredibly overrepresented on the top 20 list
as well.

~~~
sk5t
October is historically a scary trading month, but I've never read anything
arguing there's a good reason for it.

~~~
timmbo
In general there isn't really a good reason for any of it. Most of the markets
are based on feelings.

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t-writescode
I’m not sure a run to the banks caused by a virus panic counts as a
‘correction’. More like another wild, speculative swing.

~~~
MR4D
A correction is defined as a drop of 10% (and for reference, a bear market is
a drop of 20 or more).

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fourstar
I always tell people: zoom out. The reaction to this dump is quite hilarious
when you realize how long this bull has been going.

~~~
vidanay
Literally only a six month retracement.

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new_realist
The article presumes the correction is over. It isn’t.

~~~
jessriedel
How many puts have you bought?

~~~
Ambele
I put a small portion of my short-term portfolio into shorts on a basket of
high-valued, money-losing, non-dividend paying, declining companies last
friday. I can't predict how this will pan out but at least it will be a hedge.
A full 80% of my non-retirement portfolio was in a short term treasury bond
ETF (SHY) after I blanket-sold everything in January to try to make a down
payment on real estate. I figured I could handle the extra volatility of SHY
over SHV.

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thrill
We're just as likely to have the fastest correction in the other direction any
day now.

~~~
ogre_codes
The operative phrase here is "Never try to catch a falling knife".
[https://www.investopedia.com/terms/f/fallingknife.asp](https://www.investopedia.com/terms/f/fallingknife.asp)

You're right, it's likely we'll get a reversal before too long, but how deep
this goes and how long it lasts is up in the air.

~~~
AnimalMuppet
> ... up in the air.

After the "falling knife" analogy, that phrase took on a whole new meaning...

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Ambele
Now's one of the best times to start evaluating long-term mutual fund managers
based on performance. It's hard to tell who's swimming naked until the tide
rolls out. Does anyone have any funds they personally use that they recommend
I look at?

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joejerryronnie
This may turn out to be the greatest get rich quick scheme since the great
recession.

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mrpigeonpants
Almost as fast as a car correcting into a telephone pole!

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m3kw9
The more machine trading is in play the faster it will fall

~~~
ajross
FWIW: the relative obsession with investment strategies as explanations for
things like this is IMHO one of the clearest signs we're past the peak of an
expansion and "due" for a correction. This happened in 2000 and 2008 too --
everyone online became an expert about this stuff. Then a year later no one
wanted to be seen talking about money.

~~~
biggestdecision
The same with Bitcoin. It was massive, everyone had an opinion, articles on
hn/reddit every single day, now I never see crypto news unless I seek it out.

