So....1100 Point Drop Today

26 Replies

Kind of a big deal, no?  Anyone care to share their thoughts on this?  Start of major blood letting or just a blip before stabilization and the bull run continues?  And let's say there is a sizable correction over the coming weeks and months -- what do you think happens to real estate prices and consumer confidence?

I believe it is just a blip, an overreaction to the stronger jobs report and tax cuts and the inflation that those point towards.  The good news, if you are about to refinance: flight from equities/stocks is usually to bonds, which will push the 10-year rates down and get you a better rate, at least in the short term.

I would say that for most people making decisions based on one-day-results, regardless how impactful, is dangerous.

the day was brutal, but it was one day. My strategy allows for swings, and unless you started investing in the last 3 weeks, it's a pretty much universally agreed on that we are due for a significant correction. While this might not be it, preparing for it both financially and mentally should have already been done.

Once that's complete - let it burn, I want to buy cheap assets ;)

I think it’s mainly just a blip. Just be glad you didn’t invest in bitcoin in the last two months or so

@Aaron Pfeffer

I specifically looked in this evening to see if the forum was buzzing due to the big downturn that could mark the top in real estate retail prices. At least one person is smartly concerned. Anyone who says it is meaningless is ignoring both history and mass psychology. Rising rates and negative news stories could put Buyers on the sidelines. Stay tuned. Nothing goes up forever.

No it is different THIS time, real estate is only going to go up, because trump..:-)

Originally posted by @Rich Baer :

@Aaron Pfeffer

I specifically looked in this evening to see if the forum was buzzing due to the big downturn that could mark the top in real estate retail prices. At least one person is smartly concerned. Anyone who says it is meaningless is ignoring both history and mass psychology. Rising rates and negative news stories could put Buyers on the sidelines. Stay tuned. Nothing goes up forever.

 It all goes up on a long enough timeline. (All asset classes, not nessecarily individual properties or individual stocks). Invest for the long term and ignore short term ups and downs.

I just put $2000 into my wife’s and my Roth IRA.

I guess it all depends if you think that the market telling the FED lay off that God Damn interest rate is a big deal or not lol

There's one certainty...no one has a clue what it means for the future.

Originally posted by @Rich Baer :

@Aaron Pfeffer

I specifically looked in this evening to see if the forum was buzzing due to the big downturn that could mark the top in real estate retail prices. At least one person is smartly concerned. Anyone who says it is meaningless is ignoring both history and mass psychology. Rising rates and negative news stories could put Buyers on the sidelines. Stay tuned. Nothing goes up forever.

 Not only as an investor, but also as a home buyer. My wife and I have been looking for a house passively for a few months. Not really in a hurry to buy but wanting to take advantage of low mortgage rates. Unfortunately though with the increases in interest rates, changes to the tax code which limit my write offs on my stupidly expensive property taxes here in NJ, and a super hot market...I just can't justify going and buying another property right now that will run me an extra $800-1000 a month. Can't convince my wife to do a live in flip or 203k loan, so I'll be hanging tight and going the old school way of saving up a monster down payment over the next few years in order to buy the mortgage down to a level I think is reasonable. 

Originally posted by @Marcus Johnson :

I just put $2000 into my wife's and my Roth IRA.

Nice - but be wary of a falling knife!

You won't see the Dow rising 1150 in a day ever. Falling? You bet. The sheeple traders are nervous and ba-ah! there is a massive herd psychology here.  Fundamentals are still strong, but bond yields are rising... profits haven't been taken for what, 15 months?

My crystal ball says a buying opportunity will present itself soon. Buying best in sectors at specific price targets while they are on sale. Put some idle opportinuty fund capital to work!

Smart money just letting us know what it is capable of.  It would take several monster scary days over the next several months to cause real concern. Just a reminder shake down.

My prediction is that it is a sign. It will be followed by rise and fall repeated several times before the final drop takes place. Large drop shows weakness, recovery may not reach pre drop before it drops again. At some point will not correct and the cycle continues. A major news event will likely precipitate the final drop (I believe we can guess the source). Predictions however are rarely worth much.

Rise, fall...rise, fall...rise...........................................falllllllllllllllllllll.

Three possible causes outlined in this article:  Here are 3 theories about why stocks are puking, and what they mean for the economy

  1. The jobs report on Friday Feb 2 was the catalyst.  The economy is doing well, business will expand, wages will rise because of low unemployment hurting business profits.
  2. The economy is doing well which will lead the feds to raise interest rates.  
  3. The new tax law is a deficit financed stimulus.  The increased government borrowing will increase competition for investments, driving up interest rates in general, not just the ones the fed controls.  

The third possibility also raises the specter of inflation.  We've lived in a low inflation world so long, since the early 80's, that I suspect many folks here don't remember the double digit inflation rates of the 70's and early 80's.  Along with even higher double digit mortgage rates.  

@Jon Holdman , do you recall what happened to cap rates on commercial r.e. in the early 80's when mortgage rates were 15%?

@Will G. I have no idea. I was young and just out of college in the early 80's and wasn't paying attention to real estate investing. I was looking at buying a house, which thankfully we did not. Interest rates on OO loans were 15% and negative amortization loans were common. Five years later folks were mailing there keys to the lenders. I did buy a house in 1987. With owner financing at 9% on a 15 year, fully amortized term. And was glad to get that.

I do remember inflation was so bad that common wisdom was to get as many credit cards as possible and buy as much stuff as possible as quick as possible.

This has to happen QE cannot last forever. The market is strong and so is the economy, people just have to understand that non existent interest rates will not continue.  

Algorithms taking over and causing mayhem. 

The stock market may be down, Bitcoin may be down, but I'm still pulling in the same rents from my properties.

I have a lot of my retirement plans in cash now. I sold half my stock shares and am holding the money is a nearly all cash fund. So I am hoping for a real strong downturn. Buy low and sell decades from now. 

I also have actual cash, not tied up into a retirement. I was hoping to find the right deal to put that into real estate.  But if there is a large enough drop in the stock market, real estate can wait. 

I agree with @Jimmy Dudley rates have to go up and its a good thing, because now the Fed has a major tool of monetary policy back in its toolbag. 

Quantitative Easing, while needed, also had some second and third order effects, like obscuring the national debt, that don't help the nation in the long run. I don't think a lot of people realized how close we came and what the implications would have been for negative rates. Look at the impacts from Europe and Japan in 2014-2016

@Matt M. is right, a portion of this decline is due to large institutional investors, think pensions funds, insurance companies..., having to make sub optimal decisions based on their bylaws. 

However I disagree with @Jon Holdman about the high rates and inflation of the 1970's-1980's. Stagflation a totally different beast than we have now.

Also, how much talk of a bubble and correction have you heard recently? This could be a bit of a self fulfilling prophecy. Lots of nervous people just itching for the first sign of something bad to happen.

Originally posted by @Dawn Anastasi :

The stock market may be down, Bitcoin may be down, but I'm still pulling in the same rents from my properties.

Dividends remain the same, valuations change. 

E.g. Coke didn't change its dividend (i.e. rental income remained the same), only price changed. 

If we get another big drop soon I'll start upping my monthly contributions to the IRA/529/401k.

I think there is too much emotion in the market at the moment from everyone basing their trading decisions off of news events. Monday was a great play if you are a day trader focused on capitulation and news based market trends. Everything may change but human emotion will remain the same. Between the DOW and the Crytopocalypse, expect people to be trading purely out of fear and emotion for the next month IMHO as a former trader. 

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