October Is Just Around The Corner

36 Replies to “October Is Just Around The Corner”

1. Since no one really knows where the contagion tunnels in China or HK lead to, the knee jerk reaction trading by RoboAdvisor* software will be overdone, and only as good as the traders the programmers asked, and IF they asked. The first law of software is GIGO, after all.

   *Not shocking anybody, “The Street” was “offered” the Aladdin Software suite from BlackRock, for free, for all of their RoboAdvising needs. Just so everyone understands how “similar” results will be so widespread. No matter the firm, they’ll all be doing the same damned thing. Again.

2. I’ve been an investor for nearly 35 years, so I’ve gone through a lot of turbulence, starting with Black Monday 1987.

   1. There’s nothing you can do about it. If you didn’t buy on margin, the best thing is to hold your nose and ride it out. Panic selling now will only make things worse for you.

   2. September and October are well-known for being unstable. Black Monday was October 19, 1987. The 2008 fun and games took place in September. The markets were shaken, but they endured.

   3. Consider the influence of sentiment, particularly when it’s driven by political and economic events. The implosion of Evergrande plus the inepitude of the “saviour” of America (sometimes known as Joe Biden) likely has investors and traders who haven’t gone through the aforementioned events.

   1. My youngest son was born Oct. 19, 1987. I can still remember driving to work that morning … expecting to be called back home for my son’s birth (it was any minute now) … thinking this would be a foreboding day to be born … and who in their right mind wants to bring a child into the world of a crashing economy?

      Well … he ended up being our ‘Golden Child’ … near perfect in every way. The foreboding was meaningless. And the economy recovered too. Deep breaths, and calm.

      However, the only difference between then and now? $28.5 Trillion National Debt today … $2 Trillion in 1987. National Debt as a percentage of GDP was … 40% in 1987. It is 140% in 2021. Our National Debt is 140% of a BOOMING economy … just wait till that economy crashes due to inflation …

      1. Most of my stocks in my portfolio recovered after Black Monday, though it may have taken a while for that to happen. Two of them became attractive take-over targets. For one of them, I doubled my money and for the second one, I made 60% profit on the deal.

      2. “…Our National Debt is 140% of a BOOMING economy … just wait till that economy crashes due to inflation ……”

         Because of the debt, kiting, rolling over, paying off one creditor, with anothers creditors money….we’re, well some, are living large.

   2. Other factors to consider with the current market situation are that it’s near the end of another quarter plus it’s close to the end of the month.

      That often means that certain investments, particularly those which are short-term, can come due or expire. There will be market activity associated with last-minute sales and the associated handling of the proceeds.

      In addition, dividends are often paid out near the end of a month. Take a look at this (roughly halfway down the page) for an explanation of the significance of various dates when it comes to a stock’s activity:

      https://www.investopedia.com/ask/answers/090415/who-actually-declares-dividend.asp

3. Don’t be concerned over current prices. Be concerned about the underlying value of the securities that you own. Over the long run, that’s what counts. If you’re comfortable that the stocks you own are worth their market value then sleep well.

   1. It’s not the market value that’s important but the underlying financial foundation. That’s one reason that, when I’m considering a stock, I read through its financial statements, looking for things such as debt to equity.

      If I don’t like the numbers, and I don’t even have to complete my analysis in order to do that, I don’t give it any further thought. I may have given up future profits, but I also reduced the possibility of kissing my money good-bye.

      1. I do something similar. Learning to read and analyze financial reports is invaluable, particularly when assessing risk.

         1. I started doing that about 15 years ago. There were no guarantees that I’d make money but I definitely lost a lot less.

4. I’ve been short the S&P500 for the last week and a bit. The chart showed that it was already rolling over. It Might drop another 50 to 100 points before resuming the Bull.

   1. As the saying goes, bulls make money, bears make money, but pigs get slaughtered.

   2. 100 pts? That’s nothing. Give that the CAPE ratio is 38 right now, which is close to the highest in history (just below what it was at the peak of the dot-com bubble in 2000), a 50% drop would only return that level to the long-term average, so that would be 2000 points.

5. The property implosion in China affects mainly those who live in China.
   I don’t see any ripples to Chinese property ownership in North America…

   The leveraged investors of China will be sucking this one up… 🙂
   They are going to find out what risk really means.
   Risk management doesn’t mean 10:1 leverage, which is the equivalent of a financial shot to the head.

   Having gone through Lehman Brothers, Enron, Worldcom, the Asian currency crisis, the 2008 banking crisis…what shitstorm haven’t seasoned investors gone through?

   Now the mainland communist Chinese get to have a crisis, looks good on them.

   If your portfolio is properly constructed with quality names of reasonably well managed companies, you’re going to do just fine.

   I don’t think Evergrande even came through a computer algorithm screen of so called “well managed companies”.

   Cheers

   Hans Rupprecht, Commander in Chief

   1st Saint Nicolaas Army
   Army Group “True North”

   1. Having gone through Lehman Brothers, Enron, Worldcom, the Asian currency crisis, the 2008 banking crisis…what shitstorm haven’t seasoned investors gone through?

      Yup. While I’m not worried, I’d be foolish to completely ignore what’s going on. But, I survived all of what you described, as well as the Third World debt situation of the early 1990s, as well as the aforementioned Black Monday.

      Anybody who’s thin-skinned or panics easily shouldn’t be investing in the stock market.

      One good thing with the drop in stock prices is for those who own shares that re-invest their dividends. I’ve got two such accounts, one of which will be making an acquisition at the end of the month. That means that one can buy more shares for the dividend that’s paid out and that, in turn, increases the next payment, assuming, of course, that the board of directors doesn’t lower the dividend rate for the next quarter.

6. Top 10 Dow drops…
   #10 : Aug-04-2011 : -513
   #09 : Oct-22-2008 : -514
   #08 : Oct-27-1997 : -554
   #07 : Apr-14-2000 : -618
   #06 : Aug-08-2011 : -618
   #05 : Oct-09-2008 : -697
   #04 : Dec-01-2008 : -680
   #03 : Sep-17-2001 : -685
   #02 : Oct-15-2008 : -733
   #01 : Sep-29-2008 : -778

   Right now the Dow is down -675 or 2%. The bigger issue is the grouping of these drops. Note that in 2008 the Dow drops ranked #9, #5, #4, #2 and #1 (half of the top 10). I need to get into a taxi cab to find out what’s happening today.

   1. But what are the percentage drops in all of those drops?

      1. Each drop is only a few percent. This is why a one-day drop doesn’t mean much.

      2. Exactly. One reason that Black Monday ’87 is remembered is because the Dow lost around a quarter of its value in a single day. Back then, the DJI was round 2500. Now it’s well over 30,000, so a drop of several hundred points may not be something to worry about, but, still, it shouldn’t be ignored.

         Besides, we’ve been due for a market correction. Often it drops up to 20% before settling.

7. Just a pump and dump so Blackrock, Blackstone, Blackxxxx, et al., can buy up more while there’s blood in the streets. Same game they’ve been playing since 87 and the Fed’s “put”. At some point, and they will let you know when that point is reached, they will own everything. And you won’t.

   But you’ll be happy. We’ve got a shot for that!

   1. Correction – that would be “dump and pump”:)

      1. @John: correction accepted with thanks. I’ve lost track.

8. Bummer.
   I just bought some shares last week. Snagged ’em on a brief dip, then they went up some more. Darn things are back down to a penny above what I got them for….

   Oh the drama, the stress. The whipsawing of the rollercoaster as I see my $2.05 stock shoot up to $2.15 and then plummet almost 10% down to 2.06.

   I think I have 25 shares. I can’t take the stress. I’ll defenestrate now. (drat, I’m on the ground floor! And there’s shrubbery. Oh the inhumanity of it all.)

   1. That, unfortunately, is how most investors react.

9. The worst stock market crash by far was in 1929 where the Dow ended losing 80% of its value, unemployment reached 25% and US GDP dropped 30%. Every crash since the early 1980s is just a run-up to the next big (1929-like) crash that will happen in 3-5 years. By that time the stock market will have started to lose 50% of its value.

   The simple reason for the upcoming crash is demographics. The number of births peaked in 1960 and this peak drops off rapidly in both directions. There were more people born in 1960 than at any other time in Canada’s history. If you want to know what will happen in the stock market ask a 60 year old what they are doing with their money – investing heavily in the stock market in preparation for retirement. These “boomers” will “peak-retire” in 2025. After that the market will drift down for years as the savers begin a long steady withdraw of their wealth to pay for their retirement. When everyone starts cashing in there will be downward pressure in the value of stocks. This will force a greater drawdown as people attempt to maintain their standard of living. This was predicted as early as 1982 and so far, everything has come true.

   If you are in the banking industry, insurance, financial planning etc. – enjoy the next 3-5 years. Then move to a career where people actually do things – grow food, repair infrastructure etc.

   If you think immigration will offset this problem then you probably haven’t noticed that the immigrants of today (as a group) are not the same as those of the past. They are coming to a country that is paying to have them, not a country that is using them to grow.

   1. Not everyone will be selling off their shares to pay for retirement. My portfolio provides a comfortable income from the dividends alone and I don’t even need to draw on my CPP or OAS. If, however, I want to splurge on, say, a fancy car, then I might have to sell off some of my investments.

      Most of what I have is of good quality. I’ve often seen lists of stocks which investors are recommended to own and I have many of them already.

      1. I think they call that whistling past the graveyard.

      2. Also, BADR, you are not the one setting the price of the stock or the amount of the dividend. When these values change – and they will – a lot of older people will be wiped out permanently because they are no longer investing new money and cannot cost adjust their portfolio (by purchasing stocks with new money at lower prices).

         1. That’s why my portfolio, including 2 retirement plans, are self-directed. I know what I own, I keep track of the performance of my investments, and I’m the one who makes all the decisions. After all, it’s my responsibility to make sure that it’s handled properly.

            After I quit Armpit College, I transferred my retirement account there and transferred it over to my brokerage at the time. My broker and I discussed what to invest the money in and, it turns out, I did better than the government flunkies who managed it while I was still teaching.

   2. The stock market “Crash” of 1929, which took several months, as opposed to the May 10th “Flash Crash” which took minutes, was precipitated by a real estate and credit collapse which took from 1926 to 1928 to play out. Then the margin levels (20% only!) kicked in on the stock market and the last of light rules of credit creation collapsed and the margin call covering began in earnest. I seem to recall David Rosenberg mentioning that the market recovered and lost all of its value some fifteen times in the bounces that echoed afterwards. We’ve only experienced some of that because of Central Bank reinflating the bubbles to make the banks, and no one else, whole.

      [After the 2006-08 credit collapse, the EU banks never covered one cent of losses. They’re alllll still there. Ask Monte Dei Pasche. (Waves at Mario)]

10. My gut tells me that this is not a minor sell-off but a harbinger of an economic cataclysm. As the chart illustrated (down the page) … hockeystick inflation and crashing economic activity (as a direct result) … warns of a severe economic crash.

    Yes, elections and supermajority Leftist Control has SEVERE consequences. SEVERE.

    1. My gut tells me that this is not a minor sell-off but a harbinger of an economic cataclysm.

       Like I said elsewhere, we’re due for a major correction. The current rise in the market started several months ago and I noted that with suspicion as there didn’t seem to be anything really supporting it.

       A cataclysm? It might be possible, but, after what I went through over the years, I’m not about to panic just yet. The drop in the market last year when the phony plague started was of more concern to me.

11. Given that current P/E of the S&P is about 34, that leaves lots of room on the downside to be nearer historical average. That being said, it was much higher in 2000 and 2008 – but those are the only two occasions that it was higher than now.

    1. Generally a P/E ratio for a stock should be at the maximum 20. A value of 15 would be even better. Unless I already own it, I wouldn’t touch anything that’s higher than that.

12. Wonder if some of the CPP billions in China is in Evergrande Group stock or bonds?

    1. It’s likely that most of us have a financial interest in that. Many RRSPs are managed in such a way that the holders of the plans generally don’t know how and where the money is invested, nor do they make any of the decisions. (Many employer plans don’t provide or allow the holders any of that information.) Also, many mutual funds are run the same way.

       That’s one reason I opted for self-directed plans. I know what’s in them, I know what’s going on, and I can decide what to do with the investments.