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I find the soothing talk a little scary


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I find it a little disturbing that the vast majority of speakers on CNBC keep on reassuring investors. I would have expected to see more panic, and doom and gloom talk yesterday.

 

Many try to give you the impression that the U.S. is insulated from everything that is going on around the world but, does that make any sense? Where is the growth coming from at most multinationals? We also keep hearing that the U.S. doesn't export much to China except agricultural commodities and some planes. So what are GE, GM, AAPL, PG and others doing over there?

 

I have also been watching since late last year the large surge in the USD and its potential impact on S&P earnings. It has been a headwind but, so far earnings are slowing but, not declining. Now, we have emerging markets and commodity exporting countries in what looks like major retreat which one would think will impact consumption.

 

So I guess, I am a bit cautious at this time and I have a hard time understanding why the world was so interconnected since 2008 and now all of a sudden, the U.S. is becoming the only place in the world totally insulated from the outside. Anyone else?

 

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CNBC is such horseshit. I've been fairly bearish the last year, but that felt like some real panic selling yesterday. By far the largest volume on SPY.

 

Yea...down 5% at the open was incredibly weird and reminiscent of days of trading in 2008/2009. I'm certainly saying we're in for another run like that, but that's what I've been concerned of with high multiples in a deflationary environment. As long as inflation stays near 0%, we can probably maintain these asset price levels. The moment it starts moving higher, or lower than that, watch out below!

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When I head a lot of soothing I hold on tight to my wallet.

 

It reminds me of a scene in Liar's Poker. They were in the training class and a Salomon partner was going around the class asking trainees if they bullish or bearish and they were all spouting all sorts of ideas all over the place. Then the partner gets to this Japanese guy who's sleeping. The guy wakes up and goes like "I'm always bullish!" and the partner is like "That's the right fucking answer!"

 

They're just trying to keep the party going as long as they can.

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When the 'experts' say everything is fine its time to cut down on expenses and raise cash.  When 'experts' say the end of the world or they are just speechless for a long period of time is here it's time to spend like crazy.

 

Does this rule apply to the 'experts' on CoBF?

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ss, I am a bit cautious at this time and I have a hard time understanding why the world was so interconnected since 2008 and now all of a sudden, the U.S. is becoming the only place in the world totally insulated from the outside. Anyone else?

 

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It's one of the relatively most insulated, with exports being a small percentage of GDP (at about 13%).

 

The rest of the world feels relatively more pain when the US stops buying their goods, than vice-versa.

 

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ss, I am a bit cautious at this time and I have a hard time understanding why the world was so interconnected since 2008 and now all of a sudden, the U.S. is becoming the only place in the world totally insulated from the outside. Anyone else?

 

Cardboard

 

 

It's one of the relatively most insulated, with exports being a small percentage of GDP (at about 13%).

 

The rest of the world feels relatively more pain when the US stops buying their goods, than vice-versa.

 

Eric, are the S&P 500's overseas earnings part of "exports". My line of questioning relates to if they aren't, then with emerging and Asian economies slowing, this could impact Europe's economy (which may be more reliant on exports than the US). If this is the case, the rest of the world may be slowing dramatically reducing the S&P 500's overseas earnings (which I hear is half their earnings).

 

Does this make sense?

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In the short-term no one knows what the market will do (especially the morons on CNBC); in the long run it will go up. Whether the market is booming or crashing has no effect on your job as an investor: search for cheap companies. Focus on that and ignore the noise.

 

+1

 

That just about sums up the answer to this thread.

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ss, I am a bit cautious at this time and I have a hard time understanding why the world was so interconnected since 2008 and now all of a sudden, the U.S. is becoming the only place in the world totally insulated from the outside. Anyone else?

 

Cardboard

 

 

It's one of the relatively most insulated, with exports being a small percentage of GDP (at about 13%).

 

The rest of the world feels relatively more pain when the US stops buying their goods, than vice-versa.

 

Eric, are the S&P 500's overseas earnings part of "exports". My line of questioning relates to if they aren't, then with emerging and Asian economies slowing, this could impact Europe's economy (which may be more reliant on exports than the US). If this is the case, the rest of the world may be slowing dramatically reducing the S&P 500's overseas earnings (which I hear is half their earnings).

 

Does this make sense?

 

I thought the overseas earnings were what we derive from the exports.  Happy to be proven wrong though so I can keep learning.

 

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ss, I am a bit cautious at this time and I have a hard time understanding why the world was so interconnected since 2008 and now all of a sudden, the U.S. is becoming the only place in the world totally insulated from the outside. Anyone else?

 

Cardboard

 

 

It's one of the relatively most insulated, with exports being a small percentage of GDP (at about 13%).

 

The rest of the world feels relatively more pain when the US stops buying their goods, than vice-versa.

 

From a stock market standpoint, think of the banks as hubs and investors as spokes. The interconnection was between hubs. When a hub goes down because of funding concerns and/or general insolvency, you get massive forced liquidations.

 

Add that to the fact that global housing prices were the instigating factor (+ the U.S. being a huge importer) and you get the type of economic recession that we experienced.

 

Right now, I don't see what causes significant forced liquidations like we saw in '08. Moreover, as Eric pointed out, we are not a huge exporter. As a huge importer, I suspect we will come out alright.

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Large export or not, there are certain sectors that have more pronounced China exposure.  Some of them may not seem obvious at first.  NYC real estate is propped higher by Mainland buyers who are eager to pay all cash. Luxury brands such as LVMH have been hit hard.  Obviously commodities is experiencing some of the toughest times ever. 

 

CNBC is full of idiots.  I watch clips of it on Roku on large down days to amuse myself. 

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the world is interconnected. even the first order effects are hard to predict. then there are second order effects..+ more

Maybe Europeans are affected more than US by china problems. US also exports to europe, a fairly large chunk, what are the effects of that on US?

 

To continue with the GFC bank analogy, GS wasn't exposed to housing, they were short, they thought they were going to make a killing, until they realized their insurer AIG might go kaput. So it suddenly became an existential threat to them.

 

It is safe to assume that issues in China will affect us in someway. We are not insulated, not partially also.

 

If they deflate their currency in response, imports into US become cheaper, chinese goods will flood the market and then US producers are not competitive. there could be job losses and impact on housing etc.

 

more than CNBC, I enjoy when CNN, MSNBC and O'Reilly give investment advice....it happened this week. They all said hold and sit tight. That scares the shit out of me.

 

 

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ss, I am a bit cautious at this time and I have a hard time understanding why the world was so interconnected since 2008 and now all of a sudden, the U.S. is becoming the only place in the world totally insulated from the outside. Anyone else?

 

Cardboard

 

 

It's one of the relatively most insulated, with exports being a small percentage of GDP (at about 13%).

 

The rest of the world feels relatively more pain when the US stops buying their goods, than vice-versa.

 

Eric, are the S&P 500's overseas earnings part of "exports". My line of questioning relates to if they aren't, then with emerging and Asian economies slowing, this could impact Europe's economy (which may be more reliant on exports than the US). If this is the case, the rest of the world may be slowing dramatically reducing the S&P 500's overseas earnings (which I hear is half their earnings).

 

Does this make sense?

 

I thought the overseas earnings were what we derive from the exports.  Happy to be proven wrong though so I can keep learning.

 

No, I don't think so. If a S&P 500 company has a subsidiary in Europe selling stuff which was manufactured in China, I don't think that is a US export. Same for say Apple Canada selling hardware here, that would not fully be a US export unless the hardware was manufactured, sold and shipped from the US to Canada.

 

I am not saying I am sure, I am just trying to relay that the 50% of earnings of the S&P 500 which are international might take a hit because of a slowing global economy. This doesn't mean the US economy will falter immediately given as you say it is 13% comprised of exports.

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Shit, this market can even get a decent bounce here on Tuesday. Its looking like everything is getting erased into the close...

 

I personally think this one is a big one..at least 20% correction here if not more. Problems in China are not to be ignored. It is not contained just like Housing problem here wasn't contained to subprime.

 

I don't think it is 2008 here but it is similar to the last Asian currency crisis 1997 i think.

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Shit, this market can even get a decent bounce here on Tuesday. Its looking like everything is getting erased into the close...

 

I personally think this one is a big one..at least 20% correction here if not more. Problems in China are not to be ignored. It is not contained just like Housing problem here wasn't contained to subprime.

 

I don't think it is 2008 here but it is similar to the last Asian currency crisis 1997 i think.

 

Comparing it to 1997 currency crisis makes sense -- that took our market down by 20% or so.

 

I actually added to my SPY short today.

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This "bounce" is not looking very "healthy" - whatever those two words mean to the short-term guys.

 

It just means the viewers and short term guys are about to get sick. that feeling in their stomachs starts just about now...

Down 1% on the day. That will get people thinking.

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I'm not timing things when I can focus on individual stocks. But my wife's employer has forced their employees to choose between different products of a financial institution. So I can't buy individual stocks and the stock funds are not very interesting...so I'm forced to go macro with her account.

 

The macro things are not my speciality, but since I'm forced to focus on these things for her account, since 6 months or so, her funds are 100% in very short term government bonds and cash.

 

 

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I'm not timing things when I can focus on individual stocks. But my wife's employer has forced their employees to choose between different products of a financial institution. So I can't buy individual stocks and the stock funds are not very interesting...so I'm forced to go macro with her account.

 

The macro things are not my speciality, but since I'm forced to focus on these things for her account, since 6 months or so, her funds are 100% in very short term government bonds and cash.

 

Exactly what I did with my mother-in-law's.

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