Author Topic: worst day ever or was it?  (Read 2861 times)

bluebelle

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worst day ever or was it?
« on: February 06, 2018, 07:30:12 AM »
how the media can incite panic, by cherry picking the way data is presented


https://boomerandecho.com/worst-day-ever/


PS - this was one of the best lessons I learned from a former boss - how to manipulate the message depending on which numbers you present....it's made me very jaded about numbers I see in the media.....they never give me enough detail for an educated analysis.

caracarn

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Re: worst day ever or was it?
« Reply #1 on: February 06, 2018, 07:34:05 AM »
Best result I ever got from a college class.  Too Statistics and we spent a whole section on "How to lie with statistics".  Many of the examples were USA today front page graphs they place there every day.  Scale is the biggest manipulator.  Make the y axis small enough and a minuscule change can look like the world is ending, or the opposite way that glory days are here never to leave again.  Start a graph from 0 and suddenly the perspective is very different. 

ETA:  I'd also encourage people to learn to analyze the data they are seeing.

The biggest drop and the 8th biggest were in 1987 BUT, take a close look.  One was on 10/19 the other was a week later on 10/26.  Notice the closing value of 10/26.  Less than one week later, on 10/25 the market had closed at 1950.76, which would have been 212 point up from the close on 10/19, or nearly gaining back 42% from the worst drop ever just 6 days earlier.  And yes them it fell again, but was still up 3% in total from that earlier time. 

This is the example time and again that people who do not understand why you need to be in, and stay in, the market miss things.  In many cases right after a huge drop, you get a modest or big recovery and if you panic and sell you miss the ride up after locking in your losses and then getting in when the market already gained 3% or more.  How many of us would complain about a 3%+ gain in one day? 
« Last Edit: February 06, 2018, 07:43:16 AM by caracarn »

apricity22

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Re: worst day ever or was it?
« Reply #2 on: February 06, 2018, 07:45:34 AM »
how the media can incite panic, by cherry picking the way data is presented

Can you post some specific examples of panic you have seen incited? A lot of people are talking to me about the market yesterday but we haven't seen any panic selling yet.

GuitarStv

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Re: worst day ever or was it?
« Reply #3 on: February 06, 2018, 07:50:07 AM »
Meh.  This is why you keep bonds in your portfolio, so you can re-balance after drops and dips.

hadabeardonce

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Re: worst day ever or was it?
« Reply #4 on: February 06, 2018, 08:57:37 AM »
All media outlets sensationalize any type of data. It's how they sell papers, advertising space and keep you tuned in. Even keel mild reporting wouldn't make headlines. "Stuff happened today, but you weren't directly affected - find out why you should ignore it all."

I wouldn't call them liars, they are utilizing data to support an argument or story - making news bigger than it is... or they just don't understand what they are seeing when the market drops a little.

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caracarn

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Re: worst day ever or was it?
« Reply #5 on: February 06, 2018, 09:27:41 AM »
Favorite quote of the morning:  Peter Kenny from Kenny's Commentary -  "Nearly 1,000 points on the Dow is mind-bending."

So mind bending, I could not care less.  Total sensationalism.

facepalm

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Re: worst day ever or was it?
« Reply #6 on: February 08, 2018, 05:48:47 PM »
Meh.  This is why you keep bonds in your portfolio, so you can re-balance after drops and dips.
Why are you rebalancing after a drop in the market?

fmzip

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Re: worst day ever or was it?
« Reply #7 on: February 08, 2018, 07:04:16 PM »
Meh.  This is why you keep bonds in your portfolio, so you can re-balance after drops and dips.
Why are you rebalancing after a drop in the market?

You re-balance when your asset allocation is not where it should be. With the 10% drop in stock value, your asset allocation may now be too heavy in bonds. If so, you sell the bonds to buy stocks. Vice versa, with the run up in stocks your asset allocation may become too light in bonds....you sell stocks to buy bonds.

Sticking to an asset allocation is the key to successful investing

Heckler

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Re: worst day ever or was it?
« Reply #8 on: February 08, 2018, 08:04:12 PM »
Yeah, Ive learned a rebalancing lesson. I was supposed to sell 20k VTI a month ago to buy bonds but didnt. Its naturally rebalanced itself now by doing nothing.

What I don't get is why bonds are also going down (as they should when interest rates rise) when theres a rush from equity to fixed income.  Are bond funds not affected by supply/demand like equity?  Or are all the equity sellers just going into cash?

Arbitrage

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Re: worst day ever or was it?
« Reply #9 on: February 08, 2018, 08:11:39 PM »
High-quality bond funds don't have negative correlation to equities; the correlation is near-zero (varies somewhat over time, possibly slightly positive).  Price drops in equities don't necessarily mean bonds will increase in price.  They might increase; they might decrease; they might do nothing. 

In general, bonds would be affected by supply/demand - additional demand could cause yields to drop.  However, there are a lot of things at work here - and the market is of the opinion lately that yields are going to rise...thus they're rising.