The Big Con!!!

The Big Con!

If you remember on Friday when we were deluged by reports of analysts for major houses warning that:
this was the end of the world,
the sky was falling
this was the “big one” ,
the market would fall forever,
bigger than the Great Recession,
sell stocks, ALL stocks,
buy gold
etc

Let me propose a possible explanation of what was going on:
It was just business as usual! The major houses that these analysts were writing for had shorted the market indexes and were looking for a big payday. They were trying to scare everyone into selling stocks. It was just an attempt to make money at our expense.

I posted the following on Friday morning:
Brexit - a 3-day wonder for markets. Sure the markets will be down for a day, because they think they are supposed to be. But in three weeks, who will care? Everyone will be thinking earnings season. Nothing will actually happen (with Brexit) for two years until they work out the details. And besides: Will LGIH sell fewer houses in Texas (to renters who want to upgrade to home ownership), because Britain leaves the EU?..”

It turned out that reasonable analysts like the ones at Zacks (like Mitch Zacks), and at Motley Fool, and others who weren’t shorting the market, agreed with me. They pointed out, as I did, that by 2018 or 2019 when Britain would be leaving the EU, all the transition would likely be worked out.

Well the big crash lasted two days, not three. My portfolio is now UP 2.5% from Friday’s close, and UP 7.2% from Monday’s close.

The world didn’t come to an end! That doesn’t mean we won’t have market swings coming up, but the world didn’t come to an end, and it won’t. I hope you didn’t get taken in by the big con, that you didn’t get scared into selling all your stocks and going into cash, and that you will remember this “crash”, and the Feb 11th crash, which also didn’t happen, the next time all the “sell all stocks” guys come around.

Saul

For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.

A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board

59 Likes

The old sayig goes that the economists have predicted 90 out of the last 10 stock market crashes.

I’m afraid with “analysts” and “pundits” the number of (mis-)predicted disasters is magnitudes higher.

7 Likes

The world didn’t come to an end!

If you can write about it, it didn’t! LOL

There are two reasons for not listening to the experts:

1.- They can’t predict the future any better than the rest of us because the future is not predictable.

2.- Many have an ax to grid.

It is really important to trust oneself and not go off half cocked at every bit of nonsense spouted in the media.

On Monday my open order to sell a covered call on ROST kicked in, my second Brexit trade.

Denny Schlesinger

2 Likes

Britain’s decision to leave the EU has “unleashed” a crisis in the markets similar to the global financial crisis of 2007 and 2008, George Soros told the European Parliament in Brussels.

http://seekingalpha.com/news/3191184-soros-brexit-unleashed-…

Of course, George Soros has said that he has shorted the markets, and bought gold. What a coincidence! I guess he prepared his speech about the “unleashed crisis” before the “unleashed crisis” reversed two days ago, after lasting all of two days. Oh, well!

Saul

I’m sensing some irony here.

1 Like

Just adding another less cynical possibility here, hopefully I’m not too naive.

Let’s say I was George Soros. I believe the market is going to fall a lot in the next year so obviously I am short on stocks. However, me being the generous person I am, I try to warn everybody I know that I believe stocks are doomed. In this case I’m not necessarily trying to take advantage of others for my own selfish gain, I’m just trying to give free advice and help others out. How dare he say what he believes!?

I personally believe the market will be higher in 10 years than it is today. If somebody asks me my opinion, I’m not going to lie to them, I’m going to tell them what I honestly believe.

The Big Con!

If you remember on Friday when we were deluged by reports of analysts for major houses warning that:
this was the end of the world,
the sky was falling
this was the “big one” ,
the market would fall forever,
bigger than the Great Recession,
sell stocks, ALL stocks,
buy gold
etc

Let me propose a possible explanation of what was going on:
It was just business as usual! The major houses that these analysts were writing for had shorted the market indexes and were looking for a big payday. They were trying to scare everyone into selling stocks. It was just an attempt to make money at our expense.

Meh. I don’t see any conspiracy here.

First, I don’t think I saw anyone saying “the market will fall forever”.

Second, any more importantly, the talking heads on CNBC are there to drive ratings. All of the hype is to just make it sound interesting. Make it sound like they are delivering value.

But, in the end, the results are the same. I’ve found that even for big things, and Brexit probably counts as a big thing, there isn’t a big reward for responding immediately. It will take a while to figure out who the winners and losers are, and the market will be making wild guesses in the meantime.

–CH

1 Like

The world is obviously not going to end due to Brexit. But there is a real possibility of a UK and European recession that will then contaminate the rest of the world.
This sort of market movement has happened before - initial sell-off in a panic, recovery as investors notice no short-term impact, then another big sell-off when the implications become clear. I won’t say it’s smooth sailing yet.
I mean it never is smooth sailing for stock markets which climb on the wall of worry and all that, but I feel that the Brexit will eventually increase the volatility noticeably above the current lull.

To paraphrase Benjamin Graham, Mr. Market was being a wee bit manic depressive again.

I think the long-term effect of “Brexit” will be that Europe renegotiates what the EU means. They’ll hash over the EU bureaucracy, immigration policy, trade, labor rights, etc., etc. This is the real stuff, and there will be many effects on the stock market, but they will be “normal” and often gradual effects that shouldn’t cause bubbles or crashes.

The short-term effect will be other countries having similar referenda to Britain, some turmoil with the parts of Britain that didn’t want to leave the EU, and market turmoil in reaction. There will be lots of pseudo-pundits selling their “How to Profit from EU Turmoil” kits. The Motley Fool, Saul, Warren Buffett, and others will advise not worrying too much. George Soros will make some more gloomy predictions, some of which may come true. The Motley Fool will issue at least one “teaser” ad about buying some stock connected with the EU turmoil, and stockgumshoe.com will probably figure out the stock they’re teasing.

James Cramer will get too many opportunities to talk rapidly and loudly on TV about all sorts of new sub-topics, suggest all sorts of stock trades, and make many predictions, many of which will contradict earlier recommendations and predictions.

2 Likes

Another take on “talking their own book” -
“When someone who seems to share your interest tells you something you want to hear, you’re being played.” -numerous

" let’s say I was George Soros "

OK so you’re George Soros and you want to help people out by telling them what you honestly think is going happen over the next 12 months.

Then tell us the truth. i.e. You have no idea what is going to happen over the next twelve months let alone the next 3 days…nor does anybody else.

One thing for sure though, just as Saul stated, some people did make the Brexis thing into a BIG CON.

I have enjoyed the last 4 days :slight_smile:

Frank

1 Like

Well the big crash lasted two days

I guess your bigger point is don’t let these short-term noises impact your decision and take longer approach. Assuming that is correct, don’t you think it is too early to declare victory? We don’t know whether this will plunge Britain in Recession or will take Europe with it. It is too early to see whether saner heads will prevail or after seeing the market reaction some more countries want to exit EU and ensure the crisis happen.

While my individual belief was Britain’s share of world trade is small and its impact cannot be that big. Perhaps the investment banks know all off-balance-sheet bets and was predicting one of them could blow-up?

We don’t know whether this will plunge Britain in Recession or will take Europe with it. It is too early to see whether saner heads will prevail or after seeing the market reaction some more countries want to exit EU and ensure the crisis happen. While my individual belief was Britain’s share of world trade is small and its impact cannot be that big. Perhaps the investment banks know all off-balance-sheet bets and was predicting one of them could blow-up.

It’s true that the world may go into a recession sometime in the next few years, but if it does, I doubt it will be because one out of twenty-eight countries in the EU decides to leave, which won’t even occur probably until 2019, and even then, after lots and lots of advance planning and working out details. But that’s JMO.

Saul

1 Like

I have been busy and have only just seen the posts on Brexit. People here seem to be under the misapprehension that the market fears (justified or not) are based on the UK’s exit from the EU. That is not the case.

What has alarmed the markets is the EU political scene. There is widespread dissatisfaction with the EU on the continent, not least in the big players, France, Germany, Italy and Spain. In particular, the pressures of the ‘one size fits all’ eurozone cannot be contained.

The inference is that the parties rooting for independence in those countries, already large, could, with the encouragement of the result of the referendum outcome in the UK, actually succeed and the whole EU edifice collapse.

So it’s not about a country (% of world GDP 5%?) but a continent’s (I’m guessing it’s about the same as the US).

There is widespread dissatisfaction with the EU on the continent, not least in the big players, France

I certainly can vouch for France. And for lots of good reasons! On the other hand, perhaps the results of the Brexit vote may tamp down some of the other voices clamoring to leave the EU. With all these people in England saying “Oh! Sorry! We didn’t mean it! We just wanted to vent! We don’t really want to be OUT of the EU!” perhaps someone in Holland, Sweden, etc will hesitate on voting to leave.

Saul

And another thing that may come out of this whole mess is the EU softening their stance on how the “rule” their member countries. If there is a growing degree of anti-EU sentiment that could cause other countries to Brexit, some change may take place within the EU.

For instance, is it really necessary the EU governs over immigration policy? From what I’ve read, the biggest concern UK citizens have is over their sovereignty or identity as a nation. The EU was a great idea for commerce and, hopefully, they can keep the economic aspects together and separate those aspects that each country should be able to decide for themselves.

I, for one, would be right there with the “Brexiters” if decisions that should be made within my country were being made elsewhere and with no political process to oust those making potentially poor decisions.

Since the 4th of July just came and went a certain phrase from American history rings a bell…No taxation without representation.

Take care,
A.J.