What is the evidence that a stock market crash

[Ferrets are Cool]

or major downward correction is imminent?

[doc03]

1. We may need one to get Trump out of DC nt

[MineralMan]

2. I don't think there is any such evidence at the moment.

This morning, the DJIA is oscillating above and just below Friday's close. There's some uneasiness over the breakdown of the G7 talks, and additional unease over the current Singapore meetings.

It's all anyone's guess, really, at this point.

[mnhtnbb]

3. There is a market story circulating that tariffs will be great for US economy.

Bring back jobs. Expansion. All the expected BS.

https://www.marketwatch.com/story/why-the-sp-500-may-be-headed-for-5000-plus-thanks-to-trump-2018-06-11

OTOH, there is an opinion piece that says Trump's tariffs fail all three requirements for benefits of good trade policy.

https://www.marketwatch.com/story/trumps-trade-threats-are-becoming-counterproductive-2018-06-11


You pay your money and take your chances. If you can't afford to lose capital, or expect to need funds in the short term, it might be prudent to reduce exposure to the market. But history is on the side of staying in the game, long term.

[workinclasszero]

6. Sure tariffs worked great right up to the Great Depression in 1932

There are already many businesses and people being hammered by Dump's trade war and it's not even fully in effect till July I believe.

There will be a few winners and many losers like the 800 Harley Davidson factory workers that will be out of work at the end of this summer.

This is all on orders direct from the Kremlin to Trump to destroy the western alliance/NATO countries. And Putin's lapdog Trump is carrying out his orders to perfection!

[PoindexterOglethorpe]

9. The Great Depression is considered to have started with the Crash in October, 1929.

In reality it was underway a year or so before. The farmers, who'd prospered mightily during WWI, in an attempt to maintain the record profits they'd gotten then, continued to overplant land, using practices that led directly to the Dust Bowl of the 1930's. I do not know anything about the tariffs of that era, my ignorance.

For at least the first three years after the stock market crash, Republicans refused to do anything to help those out of work. They kept on saying that it wasn't so bad, and would get better soon. People just had to pick themselves up and work. Despite the disappearance of so many jobs.

Roosevelt was elected in 1932, and that year Democrats swept Congress.

[workinclasszero]

10. Yep got my dates wrong

Senior moment lol

[PoindexterOglethorpe]

11. There is a very simplistic notion that the Depression

started with the Crash and that the Crash was the sole cause of it. About twenty-five years ago I started asking people old enough to have been adults in 1929 about it, and to a person they said that it was obvious things were going downhill well before the stock market debacle.

[workinclasszero]

13. I don't doubt that

There are already adverse effects from Trump's trade threats.

I think he will bring the western democracies to their knees on orders from Putin but of course we will not go unscathed either.

[PoindexterOglethorpe]

16. Right now the adverse affects

are not yet noticeable. Whereas the United States economy (as well as the rest of the world) was already circling the drain by 1928.

I think people here are far too eager to predict a horrible stock market crash than most evidence would ever warrant.

[workinclasszero]

17. There is damage being done already though

Wisconsin reeling from tariffs coming from Mexico, Canada, Europe
Rick Barrett and Craig Gilbert, Milwaukee Published 10:13 a.m. CT June 8, 2018

At a recent town hall meeting held by U.S. Rep. Jim Sensenbrenner in Hartford, a local manufacturer complained vehemently about the new steel and aluminum tariffs imposed by President Donald Trump.

“We ship our products all over the world — 65 percent of our revenue comes from outside the United States … and the tariffs are hitting us especially hard,” said Reigle, who said his firm has already spent about $150,000 this year to cover the tariffs.

All of Regal Ware’s aluminum comes from Canada.

“We can’t even buy it in the United States,” Reigle said. “Our competitors, which come from all over the world, aren’t subject to these tariffs. … So I’m now at a 25 percent disadvantage immediately on all those products.”

https://www.democraticunderground.com/108422375
https://www.jsonline.com/story/money/business/2018/06/08/tariffs-take-toll-wisconsin-manufacturers/682029002/

CEO: Trump's TPP is the reason Harley is headed to Thailand
By James Dornbrook – Reporter, Kansas City Business Journal Apr 24, 2018

Harley-Davidson Inc. CEO Matt Levatich said if President Donald Trump hadn't removed the U.S. from the Trans-Pacific Partnership (TPP), he wouldn't have to build a plant in Thailand.

The statement was made in a telephone interview with Bloomberg that published Tuesday. Levatich said the decision to build in Thailand was "Plan B" after the U.S. abandoned TPP.

https://www.bizjournals.com/kansascity/news/2018/04/24/new-explanation-harley-davidson-kc-plant-closing.html

Iowa's Hog Farmers Are Facing Losses Thanks to Trump's Trade War
By Shruti Singh April 3, 2018, 11:45 AM CDT

The U.S.-China trade war President Donald Trump unleashed may punish the Midwest heartland that helped put him in office.

Hog producers in Iowa have seen their returns plunge in the last month and losses are expected for the full year as China’s retaliatory tariffs on U.S. pork take effect. On average, the farmers will probably see a loss of $4.34 per hog, based on futures prices as of April 2, according to Lee Schulz, an assistant professor who specializes in agricultural economics at Iowa State University.

https://www.bloomberg.com/news/articles/2018-04-03/iowa-s-hog-farmers-are-facing-losses-thanks-to-trump-s-trade-war


They voted for Donald Trump. Now soybean farmers could get slammed by the trade war he started.
By Caitlin Dewey April 5

Like most large-scale soybean farms in the United States, Davis's business relies heavily on foreign markets. China buys 60 percent of all U.S. soybean exports to feed a growing fleet of hogs, fish and chicken.

The high demand has made soybeans a bright spot of profitability for farmers at a time when many other crop prices are down. But Trump’s aggressive tariffs against Chinese goods, meant to protect U.S. intellectual property and manufacturing interests, have incited retaliatory actions that farmers say threaten their profits.

https://www.washingtonpost.com/news/wonk/wp/2018/04/05/they-voted-for-president-trump-now-soybean-farmers-could-get-slammed-by-the-trade-war-he-started/?utm_term=.56e226f402b7

[MichMan]

26. Unfortunately, I think some here are hoping for a crash

"I think people here are far too eager to predict a horrible stock market crash than most evidence would ever warrant."

I remember some here posting after the election, that people should sell everything and get out as it was going to crash immediately. Wonder if they followed their own advice?

I think there are some here that are hoping for a crash so Trump gets blamed. I disagree because that would mean that millions of people on both sides lose their retirement savings, houses, & jobs. I for one don't want to see that happen just to say "I told you so."

[Turbineguy]

27. There were many glee-full posts

about the last one. Securities are widely held in retirement funds. That includes members of DU.

[PoindexterOglethorpe]

32. Periodically someone here will proudly post

that they have gotten out of stocks entirely because they're convinced a huge crash is coming. I don't ever bother to bookmark those posts, although I should, because invariably stocks climb significantly after a while. Which means they miss out on a lot.

Basically, a diverse investment portfolio is a good thing.

The all time high of the dow was something like 26,616 back in January. It's been see-sawing around ever since, and despite some hysterical posts, the lowest this year was 23,533. Not that huge a drop.

Anyone who sold everything after Trump was elected has lost out on a lot of gains.

[kurtcagle]

28. Recession of 2001-2003

Same behavior as we've seen lately - the market peaked in late 1999, then traded in a bound range for about eight or nine months, getting increasingly volatile, before the floor dropped out in early 2002. Before then, you begin seeing significant layoffs in the tech sector. Labor market composition is different today, but you see the same process happening already with several chains closing their doors and going into permanent bankruptcy.

By November, we should start seeing definite signs that the economy is not even remotely healthy, though sadly probably not until after the elections. On the other hand, we may be in for another October collapse. Regardless, a stock market crash is usually not the harbinger of a slow down, but rather is a signal that people are realizing that it's underway.

[MichMan]

33. I think 9-11 played a big role as well

[workinclasszero]

12. Smoot-Hawley Tariff Act

Smoot–Hawley Tariff Act

The Tariff Act of 1930 (codified at 19 U.S.C. ch. 4), commonly known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff, was an act implementing protectionist trade policies sponsored by Senator Reed Smoot and Representative Willis C. Hawley and was signed into law on June 17, 1930. The act raised U.S. tariffs on over 20,000 imported goods.

The tariffs under the act were the second-highest in the U.S. in 100 years, exceeded by a small margin by the Tariff of 1828. The Act and following retaliatory tariffs by America's trading partners were major factors of the reduction of American exports and imports by more than half during the Depression.

Although economists disagree by how much, the consensus view among economists and economic historians is that "The passage of the Smoot–Hawley Tariff exacerbated the Great Depression."

https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act

[mahatmakanejeeves]

4. Repost this three days after it has happened, and I'll let you know. NT

[BeyondGeography]

5. Runaway debt leading to soaring interest rates

because the federal government (stupid tax cut) and the consumer (cc debt) is getting overextended, while the fed has shifted from QE (easing) to QT (tightening/higher rates):

https://m.

[Brother Buzz]

7. All the Fat Cats got the hell out of Dodge

[TimeSnowDemos]

8. The evidence is legion

For one thing the markets have completely decoupled themselves from outside stimulus, which means they're being manipulated. Any time a market is manipulated it is only a matter of time until a correction.

Another thing is Valuations, which are also completely detached from meaningful metrics.

People love to pretend that all of these bubbles are sustainable, but there's no reason to believe that.

Finally, banks have been given the power to start all their risky practices again, but in an environment where people are both expecting corruption AND where the only metric for Bank success is 'growth'. So that'll all unwind pretty quickly compared to the last subprime collapse.

[CK_John]

14. If they get the 1 state needed for a constitutional convention everything goes out the window.

[ProfessorGAC]

15. There Is None

Markets do not act in a completely rational fashion and are not wholly subject to data driven circumstances.

That said, there are a series of technical underpinnings to market size and stability. There are no technical indicators that suggest a crash only some corrections, like the one we just had.

[Ferrets are Cool]

18. Thank you for all the replies...

I still have no idea of what's what.

Even the experts probably do not.

[cbdo2007]

19. I usually post that it will happen every day...then on the day I am right I can say...

"See, told you so!"

[Amishman]

20. Stock prices are too high relative to profits and book value (compared to historical levels)

This is something I posted before, so it might look familiar

Look at the increase in the average P/E ratio of traded companies

This is a measure of stock price vs earnings. The higher the ratio the more a stock is being valued in excess of what the company actually earns.

The historic average of the S&P 500 in this measure over the past 130 years or so is 15.66. median is pretty close at 14.66 so fairly uniform data.

Currently the S&P 500 P/E ratio is 24.59.

Stocks prices have risen much more than the growth of the actual companies.

Price to book value is doing this as well.

S&P mean and median: 2.74 and 2.75. again uniform historical data

Current level: 3.23 .

Stock price increasing faster than the basic value of company assets.

If the book value isn't there and the earnings aren't there, what is there to justify the price increase? IMO, nothing, making it a bubble and due for correction.

To be fair, I expected that nosedive to have happened by now.

[Blue_true]

25. People are going to jump me for this.

But, there are companies like Teslar that have not earned a cent of profit, but have enormous valuations. There are a lot more than just Teslar. Valuations are no longer pinned to fundamental prospects and have not been for the last 16 months. When the set of circumstances listed above occur, historically the market drops sharply within 6 months and a recession or depression happens (the conditions for both are already in place, job quality sucks and there are still pockets of unemployed people that want work).

[onenote]

21. Eventually some predictions about the market on DU will come true.

But not because DU is a good place to get market advice. It's actually a terrible place to get market advice.

For example, lots of folks were predicting the imminent demise of Facebook a few months ago. Last week it's stock hit an all-time high. So those people were dumping FB stock, possibly at a loss, in late March, don't look so smart compared to those who bought FB stock back then and are now looking at a 25 percent gain in less than 3 months.

DU is great for many things. Investment forecasting is not one of them.

[panader0]

22. 90% of stocks are owned by the top 10%----

It's a rich person's game.

[Ferrets are Cool]

23. No doubt about that Pander0....

however, when you have $25K and its ALL you have, it doesn't matter whether you are rich or not. It matters more to me to lose 50% than it does to a millionaire. That is just my opinion...nothing more. Hell, they might jump out of a skyscraper. I won't.

[Blue_true]

24. Extreme P/E ratios. While jobs are growing, the quality of jobs is not.

Historically, when those conditions have existed, the stock market plunged within 3-6 months.

[kurtcagle]

29. Jobs aren't growing

We're seeing the movement of Boomers into retirement. Lots of high end jobs that exist as ghost jobs, because companies never bother to post when a position fills. Lots of 3 month contracts with extension to a year that never move beyond 3 months. If the economy was growing dramatically, you'd see wage pressures on the low end. That's not happening.

[Blue_true]

30. I mentioned "job quality".

That catchphrase was to capture the things you pointed out, jobs that pay a good wage are shrinking, temp jobs and minimum wage jobs are what are driving jobs numbers. The situation is not sustainable.

[Cicada]

31. a Nobel prize winning economist had a funny thing to say about that

He had strong evidence the market was way too high. But it stayed high for years. He was smart, he was right (it finally did fallnto levels he expected) so he said during the inflated price times in a talk to investors “If you’re so smart how come you’re rich.” Because smart people per his strong logic would have avoided the market.