Worth remembering that the FTSE (UK stock index) crashed briefly after Brexit, and is now up.
The markets priced in a Clinton win, and now that isn't happening. What we're seeing is uncertainty and volatility getting priced into the market, not any referendum on Trump. We'll see what happens in a week.
It's also worth remembering that no one has any idea what the long-term consequences are either. Brexit might never happen, it might happen and be a disaster, or it might happen and not really affect much.
Similarly with Trump we have no idea what might happen if he does win. He could end up starting WW3, or call for the end of US Democracy and install himself as dictator (and now we know 50% of the country is stupid enough to go along with that).... or he might just end up a do-nothing president bounced out after 4 years. For that matter maybe he's crazy like a fox and fed the Rs bullshit so they'd get behind him, then turn around and push for a hugely progressive agenda. You never know what Trump might do.
So yes, I predict a short-term crash, a recovery, but after that all bets are off. We're also due for a recession at some point. In fact Trump could be a blessing in disguise as he presides over a recession, bungles the response, and gets him and the rest of the Rs tossed out in 2018 or 2020.
I'm torn about the whole thing because I will personally benefit from Republican control. I've finally made it into the tax bracket where their constant tax breaks for the rich personally benefit me. Long-term their rich-get-richer strategy will lead to anemic growth.
Whoever said "may you live in interesting times" as a curse was right.
> and now we know 50% of the country is stupid enough to go along with that
this kind of superiority isolationism leads to the problem. it lead to brexit and to the election of many right-wing politicians in european countries.
when a large mass of people is isolated and unrepresented, they will strike.
There's no other explanation I can accept at this point. You can break down how he appealed to voter sentiment better than liberals because he obviously did, but you'll never convince me his policies won't go in the completely wrong direction for everyone.
You're more right than you think. You reached such a tax bracket but for many of us who are much more powerless (like me), for many of us we can't wait 2 or 4 years.
It's pretty easy to see this as a referendum on Trump. Trade and immigration are generally good for an economy. Trump wants to sharply reduce both and has promised to deport millions of immigrants.
The FTSE 100 recovered, mostly because GBP lost out against the dollar. There was a bloomberg chart a few weeks back, comparing the FTSE in USD versus the FTSE in GBP and the difference was striking.
I think this is an emotional reaction, I have 60k of liquid cash ready to invest tomorrow, where would be the best place to put it? My first thought is a leveraged ETF... which I think for a short term trade is okay, but the leveraged nature might magnify my losses more than I can tolerate if I'm wrong. What are you guys looking at?
Don't use a leveraged ETF. You really get screwed on the leverage. You lose much more when it goes against you win when it goes in your favor.
If you think the markets will recover just buy an index following ETF. If you want high leverage, find an index following ETF that trades in very high volumes (e.g. -- voo) and buy options deriving from it.
If you are trading futures, you'll pay premium (though you can play the market sometimes and earn premium if you open/close early). However, for a long term position, and assuming efficient market the premium loss will be equal to the interest rate.
A large difference will mean a SWAP arbitrage opportunity.
So no, there is no loan shark. You are getting a privilege (margin liquidity) and it has some real risks (default on the base loan, and the loan shark kissing his money good bye)
You're right, I misread the question. Leveraged ETFs are better than options. However (and this is really the point I was hoping to convey) they only help you if you guess right. If you don't, they hurt more than they help. This is because, win or lose, you have to pay the interest on the leverage, and that can cost you a point or two in alpha. So you have to be able to guess right >50% of the time just to break even, and very few people are able to do that consistently.
The problem with options and futures is that they tend to be thinly traded and so you lose on the spread. The net result is the same: unless you guess right with odds better than chance, your net alpha will be negative.
Not really. Depends on what you are looking for. Remember, on a leveraged trade you can 1. lose all of your capital and 2. be forced out of your position.
If you are using options, you are guaranteed to lose if you are not right. But you don't lose more than that. It's like a "bet".
> So you have to be able to guess right >50% of the time just to break even
I see this line dropped a lot on trading forums. No, you don't need to guess right most of the times. The outcome is not binary and fixed. You can guess wrong 10 positions and lose $500 on each, and then guess right one position and make $20k on it.
> The problem with options and futures is that they tend to be thinly traded and so you lose on the spread.
Spread works out both ways. If you are the taker, you pay. If you are not in a hurry, then you can be a maker and actually make the difference. So you win on spread.
Warning: I am not an expert, do your own research.
I would sell around 32 delta out of the money put on SPY. You have around a 68% chance to make a profit. This is a naked position so you need to understand that it has undefined risk.
You could cover yourself by buying a further out the money put. My investment philosophy pretty much coincides with the tastytrade.com guys.
If you want to learn more, I would checkout dough.com and do the free course on there.
If you're looking for something leveraged, your risk tolerance is higher than mine. Nothing wrong with that.
I dumped a bunch of cash into the market right after the Brexit vote. Wasn't planned, the timing just worked out. Not bad getting a 3-4% return in the matter of a couple weeks.
Will that happen this time? Not sure! But the market probably did over react.
Don't and dollar cost average. If you have to ask this question here, you are not investing, you are gambling. Well, actually you're gambling period if you try to time the market.
I've posted this elsewhere but about a year ago I was invited to a private wealth management (PWM) round table luncheon with a bunch of the principals from UBS PWM.
I asked them what they thought would happen if Trump was elected and they said that because of his unpredictability, the markets would likely take a huge hit. They went further, and said that when they spoke with leaders in politics and business in other countries around the world, those leaders indicated their biggest fears were if Trump won and they would have to reevaluate their strategies with the US.
I've been working at a major American financial institution and they're looking to expand in the UK mid-Brexit. There's a ton of uncertainty right now, but business isn't going to stop unless it hits a drop in demand.
I'm not buying the dip tomorrow. This isn't a temporary issue. It's going to cause a global power realignment in the ME, eastern Europe, and all countries on the South China Sea. It's a huge victory for Russia on the heels of the Brexit, and by extension China. If China close ended funds take a hit, buy them. Hard to think of a floor on US equities that makes sense, but I don't see why a 25% fall over the next year isn't possible.
Under Trump there is little chance that the US wouldn't enter a trade war with China since Trump has already publically declared that he will leave China as a currency manipulator. China is already struggling with massive over capacity in about every industry and needs the export market to export the resulting deflation. It is unlikely that China is going to see another market as large or as willing to absorb imports as the US market has been.
China is struggling with massive amounts of bad debt and a sharp downturn in trade could set China down the path of a deflationary depression. The end result may be beneficial if China is able to rebalance its economy but no economy that has grown debt as fast as China has recently has ever been able to do it without massive deflationary disruption (including the US).
Generally the world seems to move toward greater integration and trade and then step back in a two steps forward one step back pattern. Trade is generally collapsing globally and this may be another shot across the bow.
This has the definite possibility of trying to catch a falling knife.
The world is literally starving for high quality assets with yield right now. Ten year bonds in Japan have zero yield and a lot of bonds are trading with negative yield. If China were to convert all those bonds into cash in a fire sale there would be investors literally lining up to purchase them.
Then all that China has done is traded one form of USD debt (bonds) for another form (cash). To get out of the USD it would need to exchange that for something else of value. What? Bonds denominated in Euro? Ten?
How do you think the ECB or JCB would react if their currencies started to soar relative to the USD as a result? Do you think Germany would sit idly by as their manufacturing was decimated due to the strong currency? Would Japan?
So what if instead they went on a shopping spree and bought US produced goods. Would the US be aghast as demand soared and factories were expanded and wages rise and imports from China sank?
There are certainly people that would get hurt in that scenario. Retirees would be crushed; retail would be crushed; real estate would be crushed; US government spending would be crushed; Wall Street banks would be crushed; US advertising would be crushed.
But at the same time farmers would soar; manufacturing would soar; oil producers would soar; miners would soar;
Look at the US electoral map and see if how many Trump states would be on the wrong side of that outcome.
> Retirees would be crushed; retail would be crushed; real estate would be crushed; US government spending would be crushed; Wall Street banks would be crushed; US advertising would be crushed.
> But at the same time farmers would soar; manufacturing would soar; oil producers would soar; miners would soar;
Interestingly, the industries you are suggesting would crash employ most of the people in all states and the ones you suggest would soar are not large employers (with the exception of oil/mining that might come back online).
Oil and mining actually might get wrecked as well if the US/China relationship gets worse as Chinese demand is so important to those industries globally. Its hard to tell what the equilibrium point in those markets would look like.
All the Chinese have to do is let their UST holdings run off as they mature over time, use the proceeds to buy whatever they want outside the US, and insist that new US contracts be priced in RMB. If China stops rolling its short term UST, interest rates will soar.
No, it doesn't traditionally drop -- it only drops when the "wrong" candidate wins (as determined by who the markets would prefer). It dropped because Trump's stated economic, trade, and diplomatic policies are anti-globalization and would be bad for business. The markets were riding lower for weeks on fears of Trump winning, then recovered yesterday when Hillary had that final uptick. Now they've lost all that and then some.
I'll be very interested to see whether this interpretation comes to bear. The more likely explanation, I think, is that something unexpected is happening, and markets don't like uncertainty. A little reductionist? Maybe. But maybe not.
Yes. "Dow Jones’s data team says the average change on the day after Election Day is negative 0.9%, with the top 5 declines arriving in the wake victories by Democratic presidents." Although, the drop we're currently seeing is pretty hefty.
No. This is thoroughly uncharted territory. I guess a lot of ignorant, complacent people will see how important being a global reserve currency is to a national economy.
Being a global reserve currency is a boon during periods of inflation and a drag during periods of deflation. Given the economic environment since 2008 countries central banks have been fairly aggressively trying to weaken their currencies to stoke inflation and the "benefit" is more a "burden".
The loss of our reserve status and the gradual divestiture of USD assets by foreign central banks would have the impact (if gradual) of raising long term borrowing costs, lowering asset prices and increasing wage pressures. Those effects would be uneven across the economy and benefit some people at the expense of others. Generally helping the factory working I Ohio and hurting those who own highly leveraged assets (like US stocks).
Most of the benefits of the USD simply accrue because of the size of the US economy which tends to make it less volatile and less prone to "runs" on the currency. Even if the world were to panic about the direction of the US political system there simply isn't anything else big enoug to run to that would seriously tank the dollar. The same cannot be said for the political developments in a counrty the size of Venezuela.
These benefits are independent of the reserve status and accrue to the Euro just as much as the USD.
Believe what you want. Bad times are coming, prepare accordingly.
edit: and let me clarify, because you misunderstand me. The size of the US economy is one thing, but the stability of an ally's political system and leadership is another. The UK and the US have taken hits that will play out over a long term and are not easily reversible, at a time when the alliance has serious challenges and very capable adversaries.
Completely understand the benefits of greater global integration including the reduced likelihood of WWIII breaking out but the USD acting as one reserved currency isn't one of them in a deflationary environment isn't one of them.
No. The unproductive, rent-seeking portion of the economy is threatened by the prospect of an administration that promises to promote production and punish rent-seeking.
No, it's not. It's a big jump for one day but it is election day so hardly a regular day. It was lower than this at the start of the year. How was life back then?
But this absurd fetishism over drops has to stop. Look at the last year. People who baulk at these kind clearly haven't been watching the markets over the past few years. This stuff happens.
Nobody posts about the jumps. And they add up. Well, here's a drop and it's left everyone in the black over 12 months.
Long term if it tanks it tanks and then we can post about it. Markets are computerised now and big swings are common.
Edit: last comment as I've hit the hacker news "you're submitting too fast on a banking thread" thing. Directed to the child comment (not pejorative):
Last one according to the guy above was 2011. We have elections every 4 years and the banks crash the system now and again.
5 years back it was nearly half this. I fail to understand how a 5% dip is shocking, except for people feeling the sky is falling because Trump got in and want to scrawl supporting evidence.
What was life like for all the HN downvoters when it was 1200?
The markets priced in a Clinton win, and now that isn't happening. What we're seeing is uncertainty and volatility getting priced into the market, not any referendum on Trump. We'll see what happens in a week.