Is the market dead

[Argus]

I've been watching the market a lot the last year, and what's kind of struck me is not that it's been largely a bear market, but that it's been largely a senseless market. Stocks rocket up and down day after day for no discernible reason, almost completely unpredictable. Value? Worth? Not important. It seems like it's nothing but a big gamble as to which stocks will rise and which will fall. Oh sure, people still gamely talk up the fundamentals like earnings per share, profits, sales, etc. etc., but does any of that actually matter now in an era with massive computers making billions of trades a minute? Some of these computers will buy and then sell and then buy back the same stock a dozen times in a minute - and do it to hundreds of other stocks at the same time. They're all designed to sense the mood of the market direction and jump that way. They don't care what companies have good leadership and which ones have dividends with high yield. A stock can race up one day and plunge the next, then rise again the following day. So how do you invest unless you love gambling? And what is all this computer buying going do do, ultimately, to the idea of the stock market as a measure of a company's actual value?

The New Norm for stocks

High Speed Computers Killing the Market?

Edited November 18, 2011 by Argus

[bush_cheney2004]

....A stock can race up one day and plunge the next, then rise again the following day. So how do you invest unless you love gambling? And what is all this computer buying going do do, ultimately, to the idea of the stock market as a measure of a company's actual value?

But some of us do love gambling. I made about $5,000 across four accounts in one week just on those jerky up and down price moves. Can lose that much too if you fall in love with a stock. Buy on bad news...sell on good. Rinse and repeat. Volatility is the gambler's friend. Gambling is for money one can afford to lose.

[Bonam]

I trade daily on the market and have been doing well so far. Don't try to compete with the HFT programs on their domain, which is ultra short term trading. Long term trends in the market are still driven largely by macroeconomics. Recent day to day chop has been caused by news out of europe... plan negotiated one day, put in peril the next, solidified the day after, shot down the next day, and replaced by a better plan the day after that, only to repeat the cycle. Anyway, the volatile range-bound market we've had has been great for day trading.

Anyway, in regards to your remark about gambling... any investment in the market, no matter how long term, is a gamble. Some strategies result in less volatility than others, but if one is completely unwilling to put their capital at ris, they'd better stay away from the market, even in the best of times.

As for stock fundamentals, they still matter, in the long term. But short-medium term, almost all high volume stocks in the major markets are now very strongly correlated, which is a result of etfs. If markets sell off a given day, people are selling their etfs, which are baskets of many different stocks, so they'll all go down, even if some of the individual companies are doing well. However, strong enough news for a specific company stil can move that stock contrary to broader market movement, as we've seen last few weeks with the quarterly reports.

Anyway, my answer would be no, the market isn't dead.

[August1991]

I've been watching the market a lot the last year, and what's kind of struck me is not that it's been largely a bear market, but that it's been largely a senseless market. Stocks rocket up and down day after day for no discernible reason, almost completely unpredictable. Value? Worth? Not important. It seems like it's nothing but a big gamble as to which stocks will rise and which will fall.

Ultimately, the rise and fall of a stock market price is a sophisticated but subjective debate about the value of future earnings.

IOW, a share price in a market is similar to a thread in this forum, except for one major difference.

In this forum (and OWS), it costs only your own time.

In a market, the cost includes your own time, and the cost of other people's time.

Go figure.

Edited November 18, 2011 by August1991

[jbg]

I've been watching the market a lot the last year, and what's kind of struck me is not that it's been largely a bear market, but that it's been largely a senseless market. Stocks rocket up and down day after day for no discernible reason, almost completely unpredictable.

I think that given the number of macro events that have been in play, such as the "Arab Spring" and the slow-motion implosion of the Euro, the volatility has been sensible, not senseless. The market is a land of opportunity for people with nerves of steel.

[PhilosopherKing]

I don't like market volatility! I don't like seeing that I've lost $2000 in one day! I put a lot of money into bond funds and bond ETFs to try to counter balance stock losses, but the last few days they've been useless. I thought bonds went up when the stocks went down? Last few days every single bond fund and ETF has been down along with most stocks. WTH? You can't even rely on gold to counter balance a bad day anymore as it's always down too.

[August1991]

I think that given the number of macro events that have been in play, such as the "Arab Spring" and the slow-motion implosion of the Euro, the volatility has been sensible, not senseless. The market is a land of opportunity for people with nerves of steel.

Indeed. These are more variables having an effect on future earnings. Who knows the future?

I don't like market volatility! I don't like seeing that I've lost $2000 in one day! I put a lot of money into bond funds and bond ETFs to try to counter balance stock losses, but the last few days they've been useless. I thought bonds went up when the stocks went down? Last few days every single bond fund and ETF has been down along with most stocks. WTH? You can't even rely on gold to counter balance a bad day anymore as it's always down too.

If you don't like volatility, buy a good municipal/utility bond with a 5/10 year maturity. You know that you'll get your money. Buy one bond to keep your transaction costs down. Think about taxes.

In this forum (and OWS), it costs only your own time.

In a market, the cost includes your own time, and the cost of other people's time.

This point deserves elaboration.

If I post something foolish here, I waste only my own time. (Similarly, kids at an OWS site are only using their own life.)

But if my order is filled and I buy a few shares, I make the share price go up and make many observors (Google/Yahoo finance users) feel richer.

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Is the market dead? God no.

[Bonam]

But if my order is filled and I buy a few shares, I make the share price go up and make many observors (Google/Yahoo finance users) feel richer.

Trust me, you buying a "few" shares isn't going to affect the price of a stock in any meaningful way, at all. Well, there are exceptions, illiquid stocks and stocks of very small cap companies, but stocks of major companies take flipping millions of dollars before you begin to notice an effect.

[August1991]

Trust me, you buying a "few" shares isn't going to affect the price of a stock in any meaningful way, at all. Well, there are exceptions, illiquid stocks and stocks of very small cap companies, but stocks of major companies take flipping millions of dollars before you begin to notice an effect.

Uh, how often do you trade?

[Bonam]

Uh, how often do you trade?

Almost every day.