Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why I'm Thrilled Stocks Are Crashing

Stock-Markets / Stock Markets 2015 Sep 27, 2015 - 11:51 AM GMT

By: DailyWealth

Stock-Markets

Dan Ferris writes: I'm praying for another couple of months like August in the stock market.

 
The S&P 500 fell 6% from August 17 to August 31 – dropping as much as 11% at the bottom. August 24 was the best day for rational investors, with all the big stock indexes down 4% in a single trading session.

One colleague forwarded me a news article saying that the culprits on August 24 were big, computerized stock-trading firms all selling at once.
 
When markets fall a little, those big computers are programmed to sell a lot. Every now and then, all the computer-driven traders find themselves doing the same thing. And the mass selling creates days like August 24.
 
Or so they tell me. Who knows what those money-managing computer geniuses are really up to. But if the article is right, I pray they don't change what they're doing...
 
According to Dominique Dassault of GlobalSlant, all these computer models will blow up one day.
 
In her June 19 blog post, Dassault wrote (emphasis added)...
 
While in Greenwich Ct. one afternoon, I will never forget a conversation I had with a leading quantitative portfolio manager... The real challenge, for him, was to "sniff out" the degrading model prior to its inevitable "BLOW UP". And I quote his humble, resolute observation: "because, you know, eventually they ALL blow up"...

The "degrading model" refers to the computer models used by sophisticated (but blow-up-able) trading firms. With any luck, those firms will do business as usual for another couple months, and stocks will fall even more.
 
You see, when know-nothings – sophisticated and otherwise – blow themselves up, it's great for you and me. Forced selling unrelated to fundamental value is one of the all-time great setups for big returns in publicly traded securities. That's what happened on August 24 (or so we're told).
 
Remember, no matter how much trading is done by computers, stocks aren't lottery tickets. They're fractional ownership interests in real businesses, run by real people.
 
As far as I'm concerned... cry havoc, and let slip the blowups!
 
Falling markets are good because they make stocks cheap enough to recommend buying.
 
If the computer models (or whoever) keep selling and the S&P 500 falls 20% from its May 20 high (2,132), the words "bear market" and "volatility" will be published online dozens of times per hour and repeated 100 times a day by every talking head on CNBC and Fox Business News.
 
This will make many great businesses trade for cheaper prices – which, as regular readers know, is the strategy we use in Extreme Value.
 
Bottom line: Don't be afraid of the stock market. Be ready to exploit it when everyone else is acting irrationally.
 
Good investing,
 
Dan Ferris

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2013 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in