[Aurornis]

> my first thought is "my favorite store is having a sale."

This gets repeated a lot, but unless you already had most of your portfolio in cash it’s not actually a net win to see a drawdown like this.

The course of the global economy was just altered. The best case scenario would be if the proposed tariffs go away completely, but even then the markets will be cautious for the next 4 years at minimum.

The market is down because the future prospects for those businesses just got much worse. Yeah you can buy them at a cheaper price, but their corresponding future output remains down as well.

It’s like seeing a thing you wanted to buy go on sale, but upon closer inspection it’s on sale because it became damaged and you’re buying damaged goods.

The best case scenario is that the administration pulls the “just kidding” card, reverses course, and claims some sort of victory while returning to the previous status quo. If that happens, stocks were briefly on sale even though they’re not rebounding back right away. However, if the administration digs their heels in and tries to push forward then the market is going to continue downward.

This isn’t a normal drawdown. This is a crisis with the leadership of the United States.

[motorest]

> The market is down because the future prospects for those businesses just got much worse. Yeah you can buy them at a cheaper price, but their corresponding future output remains down as well.

It should be noted that these moronic "buy the dip" claims are happening when Dow Jones is in a freefall, so the poor people who bought the dip on Friday will today wake up with a portfolio loss of >5% without the market even reopening.

It's funny when these chants take place when prices start to plummet. It's like investors are screaming for unwitting people to buy the bag off their hands.

[liendolucas]

> will today wake up with a portfolio loss of >5% without the market even reopening.

That's pretty much irrelevant unless you opt out next reopening. If you have your portfolio down 15%, 20% or 30% it does not matter. That's the short term picture. If you're investing and looking at how those numbers fluctuate to make decisions and panic you will lose money for sure. No different like going to the casino. You're supposed to buy and hold forever, regardless the market crashes or rises. That's Bogle's advice and I believe is sound advice. So, there could be an opportunity to buy lower now if you are playing the long game.

[motorest]

> That's pretty much irrelevant unless you opt out next reopening.

Not really. If your goal as an investor is to maximize your returns. Obviously, buying a security when it's value is cratering is the worst time to buy simply due to the fact that, in a scenario of an unavoidable bounce back, waiting out while doing nothing is more profitable. Buying earlier in the crash simply means the profitability of your hypothetical scenario is lowered.

> If you have your portfolio down 15%, 20% or 30% it does not matter. That's the short term picture.

I don't think you fully grasp the implications. Even assuming a simplistic interpretation of an unavoidable bounce back, if you postpone buying after the price craters 30% then you're guaranteeing your investment will be more profitable. Remember, the trick is to buy low and sell high, not buy high and hope it will somehow get higher.

[liendolucas]

Problem is that no-one knows when that's going to happen and it can bounce back as fast as it went down, meaning in that situation you would be missing the opportunity too. The investor strategy as per Bogle is simple: buy regularly, regardless the market and hold it forever (until you retire). I don't want to speculate, because that is known to be a losers game. I read some time ago "The Little Book of Common Sense Investing" and to me that seems to be good enough advice to stick with. It's simple and as for what I read from other sources it works.

> Remember, the trick is to buy low and sell high, not buy high and hope it will somehow get higher.

If you take a look at the historical S&P500 (1926-2016) trend even taking into account market crashes the curve always goes up in the long term. That's why Bogle's strategy works.

[seanmcdirmid]

We can fall a lot more, and people who are buying the dip on credit aren't necessarily taking a long term view of the market. Who is keeping a few hundred K in their bank account just in case the market crashes so they can take advantage of it?

Also, 2008 you needed 5 years to recover if you bought at peak (buying as it was lower of course means less time to recover). In 1930, you were looking at 20 years. You could also lose your job if the market really tanks, and buying the dip just means you are less liquid at a time when you need money for living expenses.

[liendolucas]

You're assuming something like all or nothing. As I mentioned I do investing regularly, just as if you were saving money after you paid your bills and you have spare money that otherwise would be sitting in your bank account. Even if I had the amount you mentioned it would be at least for me too risky to do that move. I would do it regularly. If people are taking credits to do that, well they are making an extremely risky move as well. Just because the market could go down doesn't mean that you have to make an all-in move.

[seanmcdirmid]

> You're assuming something like all or nothing.

I'm assuming worst case, which is what you have to prepare to survive through.

> As I mentioned I do investing regularly, just as if you were saving money after you paid your bills and you have spare money that otherwise would be sitting in your bank account.

You are supposed to have 3-6 months of living expenses in your savings account just in case you lose your job. Is that what you are talking about using to invest in a dip?

> Even if I had the amount you mentioned it would be at least for me too risky to do that move. I would do it regularly.

Yes, but you are also saving money for events where you need liquidity right?

If the tariffs go on for awhile and consumption becomes expensive, we can always just cut back on consumption and invest that money instead (Americans consume a lot anyways), that is what the Chinese have been doing all along at least (although they wished their consumers would start consuming more). We are basically going to swap places with the Chinese, the writing on the wall is clear.

[Aurornis]

To be honest, “buy the dip” is generally cope that people tell themselves.

The average investor isn’t sitting on a pile of cash just waiting to move it into the market. People investing periodically over decades have far more in the market than out. The “buy the dip” stuff ends up being a little bit here or there so they can convince themselves not to worry, not an appreciable swing in their portfolio.

[pton_xd]

"Buy the dip" is just code for "stay invested." Obviously most people aren't sitting on piles of cash.

[motorest]

> "Buy the dip" is just code for "stay invested." Obviously most people aren't sitting on piles of cash.

Not really. It's literally a call to action to counter what the market is doing, in hopes that it can prevent and recover trends. They are literally telling others to buy when everyone around them is selling.

[wombatpm]

My two favorite trading terms: “catching a falling knife” and “dead cat bounce”. You don’t want to buy until you’re sure it’s reached bottom. So you look for signs of rebound, but you can be fooled by a dead cat bounce. Because if dropped from high enough, even a dead cat will bounce before coming to rest.

[timr]

Being able to do the opposite of what others do is a useful quality to have as an investor.

I don't tell random people to "buy the dip" because I don't want to be responsible for the myriad dumb ways people interpret that advice, but it's not at all an unreasonable thing to say to someone who knows what they're doing.

[motorest]

> Being able to do the opposite of what others do is a useful quality to have as an investor.

Textbook example of survivorship bias.

[motorest]

> To be honest, “buy the dip” is generally cope that people tell themselves.

I don't think so. "Buy the dip" is a call to action to third parties to irrationally invest their resources in a way that benefits you personally. It's a call to not believe what they are seeing, and that doing the opposite of what would be prudent or reasonable is somehow something that is in their best interests.

You already hear fantastic claims like "buying the dip is what rich people do to get rich". Yeah, buy low-sell high is good business. But that only works when you actually buy low. If you buy in when the freefall starts, aren't you buying high? How is that good business?

[e40]

Buy the dip is what rich people do to get richer.

[Aurornis]

Rich people already had their money invested.

To buy the dip you need liquid cash sitting around earning very little, hoping the market goes down.

Reallocate portfolios if that makes sense, but much of the “buy the dip” stuff implies good market timing: To do it in meaningful amounts you’d have to pick the right times to not invest, accumulating cash at a lower rate, then you’d have to know precisely when to invest it again, switching it back into the stock market.

[arcastroe]

> Reallocate portfolios if that makes sense

Yes. This is one of the reasons 80 stocks / 20 bonds is a common strategy. The rebalancing "forces" you to buy low and sell high.

When stocks dip, your portfolio might become unbalanced at 70/30, so you reallocate funds to buy stock bringing you back to 80/20. Conversely, if stock market soars, you might get to 90/10, and selling stocks would bring you back to 80/20. Performing this balancing is, in effect, "buying the dip"

[hmcq6]

Survivorship bias

[exabrial]

This opinion is even worse ^; Literally nobody can predict what the bottom is (except magically the group with strong political opinions /s), but what amazes me is people are willing to give out bad advice in an attempt to create a realization of the ideology.

[mjamesaustin]

Statistics say sitting members of Congress and their families are pretty good at knowing when the best time is to buy and sell. I wonder why...

[exabrial]

Also true, hah. Guess they’re also just lucky

[kortilla]

>This isn’t a normal drawdown. This is a crisis with the leadership of the United States.

The same thing happened just 4 short years ago when covid hit. Mass panic and then intervention kicked in. The intervention could have been taken away at any time but the market went extremely risk-on anyway and you would have gotten left behind if you sold out.

>but even then the markets will be cautious for the next 4 years at minimum.

You are overestimating the cautiousness of the market. Unless there are better returns offered in some other investment, the capital is going to pile back in if something like tariff deals start getting announced.

[danmaz74]

>>This isn’t a normal drawdown. This is a crisis with the leadership of the United States.

>The same thing happened just 4 short years ago when covid hit.

If by "same thing" you mean the market crashing, then yes, it's similar. But the cause of this isn't the "same thing" at all. For the next 4 years, the USA will have a president who wants to annex Greenland and Canada, who hates most (all?) US traditional allies and trading partners, who doesn't believe in free trade. The effects on the world economy are going to be slower to take effect compared to COVID, but they're going to be much deeper and long lasting.

[kortilla]

The effects of covid were literally being talked about as the entire world economy grinding to a halt overnight. It was mass panic beyond high tariffs for a foreseeable future.

The market was in straight free-fall until all of the major govts stepped in to print trillions. It was like a light switch made the “end of capitalism” disappear in a day.

[kortilla]

The rally back today on just a pause illustrates my point. No permanent fixes at all, just a pause and the market went up 10% in a day.

[j4coh]

Who intervenes if it’s the leadership manufacturing the crisis?

[JohnnyMarcone]

Pressure from the electorate, business leaders and foreign governments could spur Congress to act.

[Aurornis]

> The same thing happened just 4 short years ago when covid hit.

COVID was a natural disaster. Leadership responded to it.

This is the opposite. Markets were going well. Leadership intervened to crash them.

Do you see the difference? It’s not the same.

> You are overestimating the cautiousness of the market.

You are underestimating the impacts of risk premia.

This administration just showed that they don’t know what they’re doing, but they’re willing to go all-in on disastrous economic policy. They’ve already waffled on previous policy and then came back and doubled down. They’re still talking about more tariffs.

This isn’t a little “oopsie” any more. It’s a pattern. It’s going to be a long 4 years until we can get back to stability.

> Unless there are better returns offered in some other investment

You are so close. It’s not just returns, it’s risk. Trump just made the market hyper risky.

[redserk]

Yeah, I think it’s worth emphasizing: we are in Month 4 and there’s already been an enormous amount of chaos.

We haven’t even seen the effects of the agencies getting cut. Sure they’re running for now, but burnout can set in quick for the remaining employees and some YC investor-clown’s delusional dream of an “AI” workforce isn’t going to save us.

I’m just one fish in the sea of retail investors but I won’t be in any rush to convert cash savings into investments with this current trajectory.

Besides, cash is infinitely more useful for my mortgage payments — especially if layoffs in the private sector start.

[ModernMech]

> we are in Month 4

I know this is shocking, but it hasn't even been 3 months yet. 2 months and 18 days.

[kortilla]

The market returns today should make you re-evaluate your position on this. Anyone following your thesis would have sold out at the bottom.

[kortilla]

>but they’re willing to go all-in on disastrous economic policy.

They did it to stem the covid bleeding too.

>It’s not just returns, it’s risk. Trump just made the market hyper risky.

What market do you think Trump didn’t make risky that this capital will flight to? All kinds of bond default risk shot up across the board as well.

[graeme]

The covid crisis was an actual event in physical reality not caused by admin policies.

This crisis is the admin taking a sledgehammer to international capitalism. No obvious intervention other than "stop doing that".

I'm sure at some point the fed would have some kind of response but inflation of tariffs is a huge risk and that limits what the fed can do unless they have co-ordination with the admin.

[disgruntledphd2]

> The covid crisis was an actual event in physical reality not caused by admin policies.

Sortof yeah, but also sortof not. Basically any non-Trump president would have been briefed about Covid in January 2020, and most of the previous ones invested a bunch of resources into making sure that the disease was contained far away from US shores.

Even Bush II would have done that (and did, I believe for SARS).

[graeme]

It's a possibility. SARS II was much harder to contain though. The first SARS actually made it to North American hospitals, but was contained. It didn't spread in the populace.

Once SARS II made it out of China, only globally coordinated net 0 case policies could have stopped it. I think it would have been worth trying for but there was no appetite for it.

[disgruntledphd2]

> It's a possibility. SARS II was much harder to contain though. The first SARS actually made it to North American hospitals, but was contained. It didn't spread in the populace.

Totally fair, but as I recall he didn't even try to keep it away from US soil (which had always been the CDC approach).

[ZeroGravitas]

COVID keeps getting brought up.

Let's remember that it was much worse than it had to be, because the same President actively causing this current catastrophe thought he could just ignore the problem and it would go away.

[motorest]

> (...) the capital is going to pile back in if something like tariff deals start getting announced.

What leads you to believe that scenario is realistic?

I mean, the list of US trading partners is dominated by less than a dozen trading blocks: EU, Mexico, Canada, ASEAN, China. That's it. Trade with India is as significant as trade with Italy alone, and a massive deal with them would barely move the needle in this trade war.

Unless the US somehow makes it's own trade war go away with the likes of Canada and the EU, there is no bright outlook for the market and economy. Trump's administration is repeatedly threatening both with annexation.

To make matters worse, do you really believe any trading block will move back to preserve economic ties with the US after this mess? Not a chance in hell.

The EU, which thanks to the Trump administration is already scrambling to prepare for a war with Russia, is excluding the US from supplying them arms. This is the extent to which these trading blocks are going to shed ties with the US.

Do you think things will just go back to how things were 6 months ago? The Trump administration ensured this is impossible.

[kortilla]

> What leads you to believe that scenario is realistic

It literally just happened today.

[thebigjewbowski]

> the list of US trading partners is dominated by less than a dozen trading blocks: EU, Mexico, Canada, ASEAN, China. That's it.

ASEAN countries are eager to make a deal. The USMCA deal is still in tact with Mexico and Canada.

> The EU, which thanks to the Trump administration is already scrambling to prepare for a war with Russia, is excluding the US from supplying them arms. This is the extent to which these trading blocks are going to shed ties with the US.

Germany is in an energy crisis and a few other members are close to a sovereign debt crisis. Domestic production of weapons will be tough and expensive. The EU’s plan to sell bonds to pursue war with Russia looks horrid. They’re in no position to be in a trade war. In a few months time when this reality sinks in, they will have to make a trade deal and remove US tariffs.

[disgruntledphd2]

> Germany is in an energy crisis and a few other members are close to a sovereign debt crisis. Domestic production of weapons will be tough and expensive. The EU’s plan to sell bonds to pursue war with Russia looks horrid. They’re in no position to be in a trade war. In a few months time when this reality sinks in, they will have to make a trade deal and remove US tariffs.

This really, really depends on how things evolve this week. Like, the EU will 100% tarriff the US (and probably China to prevent dumping) this week.

The big question is whether or not they use the Anti-Coercion Instrument, and hit US tech and financial services. Selfishly, I hope they don't (as I work for a US fintech while I am based in the EU), but this will probably happen if Trump retaliates to this week's sanctions (which he probably will).

This is gonna get a lot worse before it gets better, unless there's a unilateral pullback on the part of the US (which seems very unlikely).

[thebigjewbowski]

> (and probably China to prevent dumping)

But why does the EU even want a manufacturing sector, don’t you all realize that no sane person wants those jobs? I kid, of course.

It’s truly a sad state of affairs and I hope that we all come to an understanding this week.

[motorest]

> But why does the EU even want a manufacturing sector, don’t you all realize that no sane person wants those jobs?

Why do you equate responding to Trump's tariffs with "want a manufacturing sector"? Trump is pushing the US to isolate itself from the world, not the EU. A few years ago the likes of Volkswagen were investing in auto factories in Morocco.

[Timber-6539]

Makes no sense whatsoever. I bet you did not think the course of the global economy was also altered in the many rallies before this crash.