Author Topic: More jobs means stocks lose value? Say what?  (Read 5991 times)

MoneyCat

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More jobs means stocks lose value? Say what?
« on: March 06, 2015, 09:15:37 AM »
I was all excited to hear that we were going to have a better jobs report this month from the government than was anticipated, because, obviously, more jobs means more income means more purchasing power means more goods sold means more money to be made.  At least, that's the obvious meaning to me.  Instead, the markets are down sharply today.  Um, what?  Are investors stupid or something?

intellectsucks

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Re: More jobs means stocks lose value? Say what?
« Reply #1 on: March 06, 2015, 09:56:45 AM »
This one of the reasons why government intervention in the market has caused such a disconnect between wall st and main st. More jobs means the economy is recovering, which means the government will put less stimulus,  which means companies get less access to cheap/free money, which means lower stock prices.

tat96

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Re: More jobs means stocks lose value? Say what?
« Reply #2 on: March 06, 2015, 09:57:00 AM »
I believe the current story is that because the jobs report was so good the Federal Reserve may be faster to raise interest rates so investors are worried.  Higher borrowing costs could slow down the economy considerably.  I wouldn't worry too much.  All it takes is Janet Yellen 30 seconds in front of a camera to say she will ease rates back up and the market will be back up 2%.

skyrefuge

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Re: More jobs means stocks lose value? Say what?
« Reply #3 on: March 06, 2015, 09:58:49 AM »
The standard explanation is that healthy employment will inspire the Federal Reserve to raise interest rates sooner/faster than they otherwise would, and that decline in free money will in turn slow the economy. So two points to be learned from this:

1) Markets and economics are far more complex than they initially appear, so the naive course is often the wrong course.

2) "Explanations" for daily market movement are pretty much bullshit anyway. They're just narratives that are attempts to explain the unexplainable that talking heads like to make because they need to fill airtime. There are about a bajillion factors that go into trading decisions, so attempting to distill those bajillion factors made by a bajilliion people into a single narrative is dumb. All we can say concretely is that the market is down today because more money wants to sell stocks than wants to buy stocks.

Left

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Re: More jobs means stocks lose value? Say what?
« Reply #4 on: March 06, 2015, 10:02:56 AM »
why worry about it? It'll go up, might as well use today as a day to buy some more

Kaspian

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Re: More jobs means stocks lose value? Say what?
« Reply #5 on: March 06, 2015, 10:10:21 AM »
Don't worry about that--the writers have no idea at all what's going on.  I've seen Reuters use the exact same article twice within hours only changing "Markets rise in response to ___", to "Markets decline in response to ___."  They didn't even rewrite the aticle, just did a search and replace for the words "rise/rose" to "decline/dropped".

GGNoob

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Re: More jobs means stocks lose value? Say what?
« Reply #6 on: March 06, 2015, 10:26:51 AM »
All it takes is Janet Yellen 30 seconds in front of a camera to say she will ease rates back up and the market will be back up 2%.

That's what I'm hoping for. Just added as much money as I could to my investments today.

RapmasterD

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Re: More jobs means stocks lose value? Say what?
« Reply #7 on: March 06, 2015, 10:55:59 AM »
Pay more attention to SIGNAL and less attention to NOISE.

Left

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Re: More jobs means stocks lose value? Say what?
« Reply #8 on: March 06, 2015, 11:25:24 AM »
All it takes is Janet Yellen 30 seconds in front of a camera to say she will ease rates back up and the market will be back up 2%.

That's what I'm hoping for. Just added as much money as I could to my investments today.
I can't tell if you hope it drops more or goes up tomorrow? Besides, what does the jobs/interest rate have to do with it dropping today vs yesterday? I mean, it looks most of the world's indexes are down so far today, how are they affected by US jobs/interest?

rocketpj

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Re: More jobs means stocks lose value? Say what?
« Reply #9 on: March 06, 2015, 11:32:52 AM »
Even more bizarre is when a company has a great earnings report and their stock goes down.  It happens (and is a good opportunity to buy).

Don't sweat it.

waltworks

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Re: More jobs means stocks lose value? Say what?
« Reply #10 on: March 06, 2015, 11:47:25 AM »
The stock market is uncorrelated with daily news unless the news is war, or civilization-ending asteroid, or something along those lines.

-W

Left

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Re: More jobs means stocks lose value? Say what?
« Reply #11 on: March 06, 2015, 11:50:39 AM »
The stock market is uncorrelated with daily news unless the news is war, or civilization-ending asteroid, or something along those lines.

-W
It went up during the government shut down.... I don't know what else people want to point at that the government news doesn't really matter

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JetBlast

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Re: More jobs means stocks lose value? Say what?
« Reply #13 on: March 06, 2015, 01:48:25 PM »
The standard explanation is that healthy employment will inspire the Federal Reserve to raise interest rates sooner/faster than they otherwise would, and that decline in free money will in turn slow the economy.

Another reason is that if interest rates rise, bond yields follow, making bonds relatively more attractive compared to stocks than they were before. Some investors may have sold stocks to raise cash for purchasing bonds once yields rise.

Personally I think long bonds are a poor bet at this point or even anywhere near current yields. I don't think it's likely you'll keep your purchasing power long term, even after today's sharp rise. 2.84% fixed payments for 30 years...no thanks.

GGNoob

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Re: More jobs means stocks lose value? Say what?
« Reply #14 on: March 06, 2015, 02:00:57 PM »

All it takes is Janet Yellen 30 seconds in front of a camera to say she will ease rates back up and the market will be back up 2%.

That's what I'm hoping for. Just added as much money as I could to my investments today.
I can't tell if you hope it drops more or goes up tomorrow? Besides, what does the jobs/interest rate have to do with it dropping today vs yesterday? I mean, it looks most of the world's indexes are down so far today, how are they affected by US jobs/interest?
Actually hoping it remains down next week while I invest more and then it can shoot back up after Janet Yellen says something reassuring.


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PeachFuzzInVA

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Re: More jobs means stocks lose value? Say what?
« Reply #15 on: March 06, 2015, 02:37:55 PM »
Back during the crash, I learned a valuable lesson:

The market can remain irrational longer than you can remain solvent.

In other words, just keep buying your index funds and don't worry about what irrational reactions wall street has on a day-to-day basis.

Kriegsspiel

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Re: More jobs means stocks lose value? Say what?
« Reply #16 on: March 06, 2015, 03:49:33 PM »
Back during the crash, I learned a valuable lesson:

The market can remain irrational longer than you can remain solvent.

In other words, just keep buying your index funds and don't worry about what irrational reactions wall street has on a day-to-day basis.

Even if it remains irrational until you become insolvent?

phillyvalue

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Re: More jobs means stocks lose value? Say what?
« Reply #17 on: March 07, 2015, 09:53:43 AM »
The quote about the market being irrational longer than you can remain solvent is very relevant for investors using leverage and/or short selling. As an example, in the late 90s it was very obvious that many dot-com stocks were overvalued, and that eventually the bubble would burst. But shorting a dotcom business was incredibly dangerous, because it could double or triple or go up 10X for no good reason, and your short position that was 3% of your portfolio becomes 30% of your portfolio. Even if you ended up being right, you could end up getting margin called and forced to liquidate your position. Similarly, anyone investing with leverage can get in trouble easily if stocks go down 50%. The perfect example of all of this is the hedge fund Long Term Capital Management in the late 90s, which blew up because, although they were correct in their arbitrage bets, they were highly levered, and the market moved against them in the short term and they got screwed.

As an individual investor not using leverage and investing for the long-term, the quote really doesn't apply. The "long-term" part is obviously key, however, because we've had periods where stocks have been flat or negative for a decade or two (i.e. ~1929-1950, or 2000-2010, etc).


retireatbirth

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Re: More jobs means stocks lose value? Say what?
« Reply #18 on: March 07, 2015, 09:57:10 AM »
Yeah, as others said, it has to do with the Fed raising rates pretty soon (allegedly).

I'm kinda glad the market dropped a bit since I've got a rollover in progress so I'm 25% out of the market and get to buy back in cheap. An all-out crash on Monday before my index fund orders go through would be fantastic.
« Last Edit: March 07, 2015, 09:58:43 AM by retireatbirth »

hodedofome

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Re: More jobs means stocks lose value? Say what?
« Reply #19 on: March 07, 2015, 01:52:06 PM »
If you watch the market every day, and see what happens before, during and after news hits, you can easily become confused and disillusioned. Some news comes out, and the market moves how you 'predicted' it might. You thought the news would be good for stocks and stocks moved up 1% immediately after. All is well and you feel good about how well your economic model works in the real world. Perhaps you buy up more shares. 

Then the next day stocks begin to sell off by 2%. You get a little confused. Then they sell off again the next day, and again, and again. You are wondering why the market seems so irrational. By the time you get yourself together, the market is down 10% when you thought it should be up another 5. You finally throw up your hands in disgust and sell all those shares you just bought. The next day the market is up 3% and goes on a tear, taking out the previous highs in a week or two.

At this point you either:

1) continue the insanity of buying and selling like this until you've lost all your money
2) realize your view of how markets work is all wrong, and you get to work figuring out how markets and economics really work
3) give up, decide that markets are totally random and buy and hold index funds
4) give up and get out of the markets all together