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For The Average American, A Modest 10% Correction Is Now A "Market Crash"
To most Wall Street pundits and strategists, the recent 10% correction in all three US key indices can be summarized with one word, or rather, acronym: BTFD. After all, someone has to pay those year-end bonuses, and that becomes problematic if the S&P is down on the year. Nevermind that none of these pundits actually predicted the correction, even though as we warned repeatedly, with the vol of all other products screaming, equity VIX was in its own little world for most of 2015 until two weeks ago, when reality finally caught up with it.
But what about the average American: how does Joe Sixpack feel about the recent 10% drop in the S&P? For the answer we went straight to the source - google trends. What it revealed was disturbing.
As the chart below shows, in the age of artificially supressed volatility, even a plain vanilla market correction now generates the type of emotional shock comparable to the biggest market collapse since the Great Depression, and judging by the Google Trends chart, searches for "market crash" are on par with those recorded during late 2008!
Worse, due to SEO optimizing algos which seek to give readers precisely what they are looking for, many websites which have algo-written headlines and news, have been perpetuating the shock from the market drop, by blasting headlines that while seeking to be click bait, merely encourage the fear witnessed in the recent two weeks, thus exacerbating the impact of the market drop.
One wonders what would happen if there is a bear market, or worse: a real crash, comparable to the 60% plunge witnessed when Lehman failed?
Source: google trends
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The reason is that the MSM is all over the move as a crash (when it's NOT). Most people watch or read the MSM and believe it (why wouldn't they?).
My close friends, who are all very intelligent people (and no, I'm not trying flatter myself by association!) are quite often gobsmacked when I tell them of the stuff that goes on - they were amazed when I told them of The Fed now having $4 1/2 trillion plus from $800bn in 2008 on its books - this a PRIVATE institution which is unaudited and controls the money supply!
DavidC
how does Joe Sixpack
Should it not be down graded to Joe fourpack..............to be followed by twopack etc?
folgers downsized my coffee can from 27.8oz to 24oz. price is the same. fuckers.
The average American thinks it is a crash because sites like ZH continually overuse words like plunge, crashes, and hypes the market craziness.
Who in the heck drinks Folgers?????
I do agree with Muddy that "plunge, crash and the like get overused here for small moves (<5%.)
To me, "screaming higher" happens in 10% territory, otherwise it's nothing but the norm for a trading day.
http://www.zerohedge.com/news/2015-09-03/silver-stocks-crude-all-screami...
4% intraday moves? Meh.
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Try doing that with an 8-ball and see how long that lasts.
The search trend for all things Survialism is up 35% from June. I guess beans, bullets, Band-Aids, and bibles will rise in price again.
https://www.google.com/trends/explore#q=%2Fm%2F019sl2
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The turth is that the "average" american is a fucking moron. Most don't understand money, captial, collateral, or what a "market" really is. Eventually they will, especially once SNAP can't deliver.
The point being, don't be average.
Wait until the women have to ‘do favors’ for a couple of slices of bread… and some bacon grease. LOL
Wait until the MEN have to "do favors." Then it gets either interesting or downright awful.
You should go a step further and say "don't be anything but a finance/wall street guy. If you have money and are in this market you need the inside track.
Joe the plumber, Alice the housewife, Tommy the roofer, you have no business in the market.
Some Joe Sixpacks are pissed off because wall street "experts" can buy and sell stocks back and forth 1000X per second with no tax, and it takes forever for muppets to sell IRA's that get wacked with giant taxes.
As with all things America, the anger is misplaced. They should be pissed at only themselves for not having studied and worked to be their best and become a banker if they wanted the edge on that scale. The muppets would know if they read the print that they would get hit with giant taxes if they wanted the money...not to mention that they shouldn't play with money they couldn't AFFORD to lose or might need to say pay the mortgage, the boat, the 60K pick-up, the vacation in the red neck riviera, and so on. Why do they all want an RV for example? What possible joy is there in having to clean as you go, cook all your meals, and empty your feces when you get back? The only difference than the average day is that you have to clean the crapper when you get back from vacation. Yet EVERYONE does it.
No doubt! Some of my favorite beers now come in four packs, but I don't drink that flouridated shit MSB (Main Stream Brewers) make, so I've been 'paying' up anyway.
Yep, big fucking difference between intelligence and wisdom.
Even those in "the club" seem unaware. I know two VC guys, one with his own plantation in Aruba. They both claim to "love the Fed" and "easy money". So I asked them if they worried about the consequences of capital and resource misallocation, nothing but crickets...
very strange for a Harvard business school grad, Stanford undergrad...
The only answer I got from one of them was "everyone benefitted from QE and everyone benefits from ZIRP". At that point I just smiled knowing full well that this fucker just sealed his fate.
fuck em.
Interesting, sounds like alot of these really smart guys may get one hell of a T-bone as this nonsense gets unwound.
Not at all, I was thinking quite the opposite. These guys operate on a global level. They have taken their pounds of flesh, have properties and revenue generating assets all over the world, speak multiple languages etc. They squeeze what they can from where they can then move on. Neither are really doing much as far as risk in the American market goes right now, with the exception of telcom, because people "like their phones and social media bullshit"...
One told me that he fully expects another war between states with an outcome more similar to what happened in the Soviet Union. At the end of the day, he is probably right as that which cannot be sustained, won't be.
Most big money does operate globally (no surprise there) and I suspect he's right on rising violence in the US but this upcoming collapse (were are not just talking stock markets here) will likely hit on a global scale as well so it will be interesting to see how they adapt to deflation on a massive scale. Most of us have blinders due to living in one country or another but a situation like this is really a different game altogether.
"They" will adapt by owning a large farm where they sell their wares to everyone who needs to eat. Same as it ever was when normalcy to run away printing is restored. Most will be hungry.
I am definitely rooting for those guys to be captured and raped by a 3rd world mob
You are correct. I've grown up watching several close family friends and some people I would call 'close associates' over the past 40 years and they don't operate like we do. Sure - they may have multiple millions in the markets, but they also have homes in colorado, south carolina and on an island somewhere. They have their main retreat, which has a hidden room with investment quality weapons, they have safety deposit boxes full of physical and they have bank accounts with hundreds of thousands in cash. The correction will have to unusually severe to affect them, as they have managed to insulate themselves through tons of material. All of which could be sold or bartered at some point. It's those idiot leveraged assholes on wallstreet that will splat when they jump from the buildings. Most of the multimillionaires I know are pretty good at diversification - and I'm talking everything from gun collections, car collections, farms and hunting property, rental units in multiple states, jewelry, you name it. They have so much crap I don't really know how they manage it all. I would have to assume that they have a person to just deal with the real estate, insurance and property tax bills etc. - their accountant I guess or a personal bookkeeper.
One can only hope. And nonsense is a very apt word for it.
DavidC
I don't see a stock market crash any time soon. Zimbawe's stock market went to 70x its original value during its printing spree.
the CBs will continue to levitate stocks and meet obligations with printed money until hyperinflation ends the party. they simply have no other choice at this point. it's either go all in or else allow deflation to win the day. in a way, it will anyway, but this is the crux of the inflation/deflation arguement.
Can you please repost this on Sprott's article? Thanks.
DILLIGAF
That was but a tremor in comparison to what is coming by the end of this year or early next.
Just get out of shorts, and go into cash.
I see some articles saying no one is buying bonds, but are waiting in cash, which means without 'bad news' there will be plenty of melt-up days in September 2015.
And see articles about 'overreaction' to China...so now everyone back in to the markets.
At least many went to cash recently so have some protection if there are market drops.
"Don't fight the fed" is still in effect until Europe, Japan, US change trends.
I'd expect flat to melt-up going forward, until something new erupts.
When you are trying to maintain power and control perception is everything...
same as it ever was...
Eh, a 9% drop at the open on the NASDAQ is pretty crashy Tyler. Just sayin...
Within the next few weeks tho, we're gonna find out if this thing is going into the tank or not. If it does, it'll make Monday look like profit taking.
It'll be over in NANO SECONDS.
Oh it's coming alright. Manipulated 'markets' do not determine future economic events. They should be reflective of such, but are currently exploited by TPTB to influence popular opinion on financial in/stability. Tail wags dog. The 'markets' today are a shiny veneer, no different than any other Western MSM outlet designed entirely for the manipulation of a hopelessly dependant population. A real market would be a warning mechanism that the ponzi scheme has reached it's end. They will never see it coming.
Google trend "economic collapse"
To their credit, those dips are getting bigger in absolute nominal terms and their sensitivies have been heighted by the "recent unpleasantness" as they say in the South.
maybe a noteable megaphone pattern will develop.
ZH is compllicit in this as well, sorry to say.
At least ZH is honest about it.
Big fucking difference.
Hmmm... not sure if honesty is the right word. The word "crash" seems to occur quite often on this blog for things that don't seem like crashes to me. It could be third-party writers that they publish here, or it could be the Tyler consortium itself, I don't know. But I do see a lot of bias toward gloom and doom in this blog (I think the purpose being to balance the giddiness of the MSM and CNBC in particular).
That life and markets are risky and that everyone is talking their own bullshit/book around here is pretty damn obvious, well, to me anyway...
Pretty damn obvious??? Every time the indexes close green, 95% of the commenters here are filled with rage.
...close green, 95% of the commenters here are filled with rage...
So ZH's Algo driven headlines and commenters will be held responsible for fear mongering and will be duly castigated when the fed's blatant theft and destruction of what was at least a somewhat coherent market based on sound fundamental valuations and earnings existed. Surely you remember, or were at least told about the time when savings in cash accounts were rewarded and grandma wasn’t forced to bet on red or black every single day.
Rage? You haven’t seen rage yet.
Jmo.
I get your point, man. Grandma doesn't like having to bet. However, she's glad when she wins.
10%?
I "20% corrected" some old bastard out of his price on a cherry 98 Z3 Monday...less than 60k miles!...He's selling out and heading for a nursing home...
Today I'm doing brakes, next week, I'll put on a new top...the more I look around at it, looks like that old bastard got me! Oh well, I handed him a pile of paper, and just might get a handjob out of the deal!
Since most volatility has been squeezed out of the "markets" by continuous Fed intervention, can you blame the average American for not being able to tolerate a 10% correction?
yes. After too many melt-up days, and 1%, or 2% up days in-a-row...the herd is all going 'up' the hill and so any drop is a crisis. Probably leverage has something to do with it too as were 'all in'. ... and the HFT modern meme which keeps it all on-edge.
The internet has inter-connected everything so much, the economy today is vastly different from 2008. Much more vulnerable to shocks. Its a world where psychology and money travel at the speed of light.
Failure in complex systems is usually catastrophic.
Volatility is here to stay. Get used to it. The best advice is to get ahead of the pack before they are left holding the bag.
i'm guessing there's a lot of muppets out their being taught to use 100x leverage where a 10% drop with 100x leverage has a -1000% effect on them... so yeah, 10% is a bigtime crash to the leveraged tools out there. how are leveraged tulip futures doing right now by the way?
Most people sholdn't be in the market, EVER. Consider how many people jump into 401K's with matching and allow their greed and stupidity to hold them from the cash out and pay the penalties and ten still be ahead a they watch it vaporize...and cry about the bankers greed. At the same time they have a 250K mortgage costing them as much or more than what they can get for a ROI at risk. Everybody wants what others have and don't even know why, and usually don't even like it... Pick-up trucks for example, or land they have to tend to on their time off to keep it green and manicured, and on and on.
People can't even remodel their homes for their personal likes, they buy what is trendy, even though most don't like it either. I hate stainless steel appliances, for example, but everyone seems to like them because they show status...if everyone has it, how is that better?
I drive an older lexus because i hate almost all new cars now. They gave me a loaner while mine was in for the oil change and cleaning, a 2015 LEXUS that had all kinds of blue teeth and crap but didn't have a locking fuel cap let alone a button to open it from inside. Black and brushed metal everything and a fuel cap that doesn't lock. How is that luxury?
The point to this TMI rant is that trendiness is a bad human condition. Those that follow it deserve what is at the end of it...an inferior product and a smaller bank account. That applies to all trends of all sectors.
Wait until they start pressing on the inward swinging exit doors.
It'll be Coconut Grove Fire-Part Deux.
The smart ones will see these flames as NOT part of the entertainment and leave.
George Carlin: How language is used to mask truth and Israeli terrorism
https://www.youtube.com/watch?v=vAj6cXHrWdQ
i used to be a joe sixpack(eigth with my big belly),then the writing on on the wall woke me up ...ZH is my hero.
It may well not be the "modest" 10% correction people are referring to on Google as much as they are looking for information on the potential for an even bigger decline.
Risk Averse and Unrealistic? Where do you think Joe Sixpack learned it from? Let's start with the Fed and the other central bankers, which have been hosing the economy down with liquidity for a decade and a half in a desperate game of whack-a-mole to keep the ever-riskier, over-leveraged asset class of the moment from tanking. By ZIRPing the hell out of things they allow folks to take on ever more leverage, into ever more tenuous asset classes, in pursuit of the fabled 8% or 12% or 15% returns on pensions/retirement. Deep down, Joe knows the dominos are teetering, as certainly do the readers of ZH. He knows he is screwed if the markets crash, and he knows they will. Anxiety making, that.
We're all watching for the first domino. In a hundred years, that may well be seen as the 2008 bust, or the 2000 bust, or something else, with the current interregnum being that Wiley-Coyote-hanging-in-mid-air moment.
Don't look down. You really don't want to know how deep that canyon is.
Conflating price with value can be dangerous.
I would shock that rhythm.
Some ZH headlines from 8/23 amd 8/24. Seems understandable that the average person may consider a 10% correction a crash.
US Equity Futures Are Crashing
"Black Monday" - Shanghai Composite Goes Red For The Year, Wiping Out 60% In Gains, 2000 Stocks Limit Down
Carnage Continues Across European Stocks; EURUSD Surges Above 1.1500 As WTI Crude Tumbles To $38 Handle
Summarizing The "Black Monday" Carnage So Far
Futures Just Crashed To New Overnight Lows, S&P Down 3%
Gartman: "We Should All Be In Survival Mode Today, This Is Not The Time For Courage"
Dow Futures Down 2500 From Highs, Crashing To 2013 Levels
Panic!! All Major US Equity Indices Halted
Blood On The Streets: Down Dumps 1000 Points At Open, Biggest Drop Since Lehman
#BlackMonday Now Trending On Twitter
Bloodbath: Emerging Market Assets Collapse As China Selloff Triggers Panic
Is This Black Monday Crash The BIG ONE? It Doesn't MatterAt a compounding annual interest rate of 0%, how long does it take for an alternative investment to make up for a 10% loss in the stock markets?
LOL - that's what I told one of my brokers on August 8th when I finally committed to selling everything. Now I've got a '20%' 'non-loss' - so that would count as a return because the rest of the chumbait that DIDN'T sell got FKD.