# Last week's "crash" - Ben Stein explains.



## jargey3000 (Jan 25, 2011)

I think Ben got it right!

http://www.cbsnews.com/news/ben-stein-dont-blame-china-for-stock-market-woes/


----------



## tygrus (Mar 13, 2012)

jargey3000 said:


> I think Ben got it right!
> 
> http://www.cbsnews.com/news/ben-stein-dont-blame-china-for-stock-market-woes/


You take advice from a guy who denies science and evolution? Maybe his economics is more sound that his science education.


----------



## andrewf (Mar 1, 2010)

Ben Stein is a joke.


----------



## Eder (Feb 16, 2011)

Any one from the cast of Ferris Buellers Day Off is #1 in my book. Also anyone that questions science (and religion) shows above average intelligence in my opinion.


----------



## jargey3000 (Jan 25, 2011)

what he says about the markets sounds plausible enough to me...


----------



## fatcat (Nov 11, 2009)

jargey3000 said:


> I think Ben got it right!
> 
> http://www.cbsnews.com/news/ben-stein-dont-blame-china-for-stock-market-woes/


his interpretation of last weeks events strikes me as impeccable and spot on

he gives good counsel about being patient but i think he is either unaware or underestimating the damage that events like last week will do to retail investors psyche and even more important, to potential retail investors psyche

not good


----------



## Synergy (Mar 18, 2013)

fatcat said:


> his interpretation of last weeks events strikes me as impeccable and spot on
> 
> he gives good counsel about being patient but i think he is either unaware or underestimating the damage that events like last week will do to retail investors psyche and even more important, to potential retail investors psyche
> 
> not good


Perhaps it's not such a bad thing - weed out the weak?


----------



## Moneytoo (Mar 26, 2014)

fatcat said:


> the damage that events like last week will do to retail investors psyche and even more important, to potential retail investors psyche
> 
> not good


Sorry, what damage? We've been waiting for 10% or more correction since spring, lots of analysts have been advising to keep some cash on a side for summer months. Just updated our balancing spreadsheet - out total portfolio (with ~77% in equities) is down less than 6% from its high in mid-July. Didn't deploy all the cash, waiting for another leg down - but plan to be fully invested again by end of October, regardless of the prices. 

If I didn't read forums and headlines, wouldn't even have noticed what happened. Last time I checked, equities come with a big red warning: they fluctuate. Those who lose their sleep over a 10% "unexpected" swing and need an explanation why it happened - should decrease their equity exposure (yes, I read it on this forum )

But, you're a smart guy, so seriously - what damage?


----------



## fatcat (Nov 11, 2009)

Moneytoo said:


> Sorry, what damage? We've been waiting for 10% or more correction since spring, lots of analysts have been advising to keep some cash on a side for summer months. Just updated our balancing spreadsheet - out total portfolio (with ~77% in equities) is down less than 6% from its high in mid-July. Didn't deploy all the cash, waiting for another leg down - but plan to be fully invested again by end of October, regardless of the prices.
> 
> If I didn't read forums and headlines, wouldn't even have noticed what happened. Last time I checked, equities come with a big red warning: they fluctuate. Those who lose their sleep over a 10% "unexpected" swing and need an explanation why it happened - should decrease their equity exposure (yes, I read it on this forum )
> 
> But, you're a smart guy, so seriously - what damage?


a 1000 point drop and then recovery ? ... you don't think that affects investors psyche's ? ... 

we want to encourage as many people to participate in the market as possible both from a self-interested standpoint (they will buy the stuff we want to sell) and especially from an efficient market standpoint whereby the more investors we have the more honest and stable the market will be

if we end up with a small pool of hardcore retail investors like us on cmf and we are then playing with the big-money boys who stein references in his column and we (the little guys) will all be the losers

we need to encourage as much faith in the market as possible to make it work (not to mention the moral imperative) most efficiently


----------



## gibor365 (Apr 1, 2011)

jargey3000 said:


> what he says about the markets sounds plausible enough to me...


He says it in simple form, but he's 100% right! All those huge moves, it's "big guys" manipulations.... or do you really believe in fair stockmarket?!


----------



## lonewolf (Jun 12, 2012)

Statistics, numbers & math indicated the top was in, it is still in with last week being a little preview of the decline that is just starting.


----------



## donald (Apr 18, 2011)

Fatcat i love reading quotes from famed investors and a lot of advice is good to take in during a 10% correction
'I didn't succeed in life by intelligence.I succeeded because i have a long attention span'-munger
and to the point of emergency funds(maybe i came to a different conclusion than what he means)
"nobody survives open heart surgery better than the guy who didnt need the procedure in the first place"
I think it was a healthy sign last week
means the market is behaving as it should.
cant have the market only go one way if us retailers can't handle that than put money into different assets
has nothing to do with 'faith' or public opinion imo


----------



## Moneytoo (Mar 26, 2014)

fatcat said:


> a 1000 point drop and then recovery ? ... you don't think that affects investors psyche's ? ...
> 
> we want to encourage as many people to participate in the market as possible both from a self-interested standpoint (they will buy the stuff we want to sell)


One of the first articles I stumbled upon last year (after questioning some of Garth Turner's advices and before becoming semi-active investor): http://garthturnergreaterfraud.blogspot.ca/2013/01/the-smart-money-idiots-fools.html

"To start with, understand that you cannot "be" smart money, without having smart money. You need to have almost infinite resources available, the financial power to trend markets, and to design develop and deploy terminators."

I don't have any illusions about "fairness", be that in the stock market or in life. The best I can do is become an idiot who buys from fools at the bottom and sells near tops (the definitions are from the article, but I agree with them )

Otherwise let's just have a fair market where stock prices are fixed based on the set formula (EPS * 15 for example) and not call it a market.


----------



## Pluto (Sep 12, 2013)

The explanation I heard that was plausible was Art Cashin's. 
1. Mutual funds had low cash levels. 
2. Over seas clients wanted cash, so demanded redemptions from mutual funds.
3. Mutual funds didn't have enough cash on hand to cover redemptions so they had to sell stock. Being forced to sell a lot of stock lowered prices. 

No way to verify the story, but Cashin is a smart guy.


----------



## GPM (Jan 23, 2015)

fatcat said:


> a 1000 point drop and then recovery ? ... you don't think that affects investors psyche's ? ...
> 
> Well...In my opinion, investment advisors shouldn't be talking to clients about risk. Risk has absolutely no meaning to the average joe investmenting. It's purposely benign. Now, how much the value of their investments can drop or go up in a day or year -30% for example, would mean something. At least it would have to me 25 years a go. I don't think a lot of equities or equity mutual funds would sell. I didn't even see the huge drop. I was still in bed in BC. I just saw a few percent drop for the day. Would have loved to have bought, but just proves I can't market time. My money was in my accounts in savings accounts that take time to settle, so couldn't have bought anyway. Just shows I certainly can't market time unless we have big correction, people panic, and prices stay low for awhile like in 08.


----------



## jargey3000 (Jan 25, 2011)

Just wait'll NEXT TIME! I'll be ready to POUNCE!!!


----------



## fatcat (Nov 11, 2009)

GPM said:


> fatcat said:
> 
> 
> > a 1000 point drop and then recovery ? ... you don't think that affects investors psyche's ? ...
> ...


----------



## GPM (Jan 23, 2015)

fatcat said:


> GPM said:
> 
> 
> > that 1000-point drop was all over the media and even on the evening news in the states
> ...


----------



## CPA Candidate (Dec 15, 2013)

I do agree with Ben's assertion that the China issue is blown way out of proportion. I've increasing come across the idea in articles lately that China is the key to everything and all future prosperity. The trade data doesn't seem to back that up. Outside of resources I don't think China matters much to investors.

Sometimes I think investors just look for a reason to sell something down. Any little nugget of info or data point sets it off.

Anyway, all this nervousness and volatility tells me the market is anything but complacent and exuberant. The market is nowhere near a top and I feel good about adding money.


----------



## fatcat (Nov 11, 2009)

i don't think we are near a top either ..

china has been getting a huge amount of press and legitimately is responsible for a staggering amount of commodities so even though as stein says, the trade number is small, china has the potential to really spook investors


----------



## Rusty O'Toole (Feb 1, 2012)

Uh guys, Stein was PAID to appear in that anti evolution movie, just like he was PAID to play the teacher in Ferris Buehler and PAID to make the above infomercial for stocks.

I'm pretty sure he is not a real school teacher, a real fundamentalist Christian or a real stock market expert.


----------



## DayTek (Sep 26, 2013)

Rusty O'Toole said:


> Uh guys, Stein was PAID to appear in that anti evolution movie, just like he was PAID to play the teacher in Ferris Buehler and PAID to make the above infomercial for stocks.
> 
> I'm pretty sure he is not a real school teacher, a real fundamentalist Christian or a real stock market expert.


I thought it was a good write up. Really dumbed it down for people like me who are just learning about the market.

BTW, he is a real school teacher. And a Jew. In regards to being an ‘expert’ in the stock market…Well he’s written a lot of books about investing and wrote for the New York Times about economics. 

He may be a celebrity and a Creationist, but the guy is well enough educated to write about this stuff with a valid opinion.

http://www.mrbenstein.com/About-Us.html

https://en.wikipedia.org/wiki/Ben_Stein


----------



## londoncalling (Sep 17, 2011)

He also is willing to put his own real $ up against Rusty in a battle of intellect. :stupid:

http://www.imdb.com/title/tt0118515/


----------



## kcowan (Jul 1, 2010)

Ben Stein is a writer and an actor. He also had a successful quiz show called Win Ben Stein's Money and it was successful because Jimmy Kimmel was the moderator.


----------



## james4beach (Nov 15, 2012)

From what I've seen of Ben Stein's financial writing over the years, he's a total shill. In August 2007, Stein argued that subprime mortgages cannot cause a problem because they are just a small part of the economy.

http://www.ritholtz.com/blog/2008/01/farewell-to-ben-stein/

He wrote speeches for Richard Nixon, by the way.


----------



## fatcat (Nov 11, 2009)

why all the fuss about the the man behind the comments ... the comments strike me as right on



> When the stock markets move 1,000 points in a few minutes, it's not because you and I are selling 1,000 shares of GE from our home computer. It is because immense hedge funds, high frequency trading funds, endowments and pension funds sell billions of dollars' worth at the push of a button.


this will continue to be huge problem for small investors

i was listening to a guy on the floor of one of the exchanges talking about how this recent turbulence wasn't related to the underlying fundamentals but is just generalized panic

this panic is induced by very large institutions who can, exactly as stein says, push trading in both directions at once

we on this forum are a subset ... a group of self-directed traders who understand the volatility (well maybe we understand it)

this is not the case with the majority of investors who use advisers and just look at their statements, online or on paper, this stuff can scare the daylights out of them ... it's not good for the market


----------



## james4beach (Nov 15, 2012)

That individual comment seems right. However, in other writings he has a history of bending the truth to specifically keep investors calm and confident.

That's not what a "journalist" should be writing. The goal shouldn't be to keep investors calm, but rather to keep them informed. If we want people to just keep us all calm & confident, we should do what the Chinese government does and have a whole government propaganda agency that tells us everything is ok, there is no problem, it's just the fault of individual traders & journalists. That's exactly what the Chinese government does, and what Ben Stein does in his writings.

In other words, Ben Stein's goal is to manipulate public opinion, not to inform investors of information.

And I call him a shill, because there's money to be made in manipulating stock investors into keeping calm. He's probably paid to do it, as it helps the mutual fund business, stock brokerage business, 401(k) business, and all financial services who hold assets under management.


----------



## fatcat (Nov 11, 2009)

james4beach said:


> That individual comment seems right. However, in other writings he has a history of bending the truth to specifically keep investors calm and confident.
> 
> That's not what a "journalist" should be writing. The goal shouldn't be to keep investors calm, but rather to keep them informed. If we want people to just keep us all calm & confident, we should do what the Chinese government does and have a whole government propaganda agency that tells us everything is ok, there is no problem, it's just the fault of individual traders & journalists. That's exactly what the Chinese government does, and what Ben Stein does in his writings.
> 
> ...


but he isn't a journalist nor is he pretending to be one ... he is just a columnist which equals: another guy with an opinion

it isn't his job to manipulate public opinion, he is just using his little soapbox to say what's on his mind ... why gin up a conspiracy james ?


----------



## Rusty O'Toole (Feb 1, 2012)

So what are you going to do, ride them all the way back down?


----------



## MrMatt (Dec 21, 2011)

jargey3000 said:


> I think Ben got it right!
> 
> http://www.cbsnews.com/news/ben-stein-dont-blame-china-for-stock-market-woes/


There was no crash, just a bit of a jump. Completely reasonable and expected volatility. Why is anyone making a big deal out of it?


----------



## fatcat (Nov 11, 2009)

MrMatt said:


> There was no crash, just a bit of a jump. Completely reasonable and expected volatility. Why is anyone making a big deal out of it?


huh ?


> Within minutes after the opening bell, the Dow plummeted 1,089 points. That is the largest point loss *ever* during a trading day, surpassing the Flash Crash of 2010.


http://money.cnn.com/2015/08/24/investing/stocks-markets-selloff-china-crash-dow/


----------



## james4beach (Nov 15, 2012)

Several large and highly liquid ETFs plummeted. Notable among them was iShares IVV which is a core ETF used by individuals and institutions worldwide.

At one point, IVV was down -25% in the morning. This illustrates a huge failure in market mechanisms surrounding ETFs and arbitrage. The theory has always been that institutions will arbitrage the price of an index ETF so that it tracks the underlying. But now we've seen that this can fail... the market makers abandoned the market and did not do the task we all rely on them to do.

An additional major problem, independent of the stock indices, is that junk bonds are plummeting in price.

The stories that make the headlines ("Dow falls blah points") are not the big story IMHO. For me, it's the sudden sharp spike in volatility, failure of ETF arbitrage, and crashing junk bonds. If I had to pick one to really draw attention to, it's the sharp decline in junk bond prices. It means that credit is being withdrawn from corporations.

Problems in the *credit* market precede all serious financial crises. What has me worried is that we're seeing the same scenario here. Chinese credit markets and western junk bonds are two areas of global credit showing serious problems. Junk bonds have been distressed since December, and now I think we're seeing it play out more broadly.


----------



## andrewf (Mar 1, 2010)

james, my understanding is that the liquidity problems in some ETFs was related to the SEC circuit breakers.

For Joe Investor, I don't see any issue. It's just another reminder to not use stop orders, and always use limit orders.


----------



## james4beach (Nov 15, 2012)

The circuit breakers are new after 2008, so perhaps this was an unintended consequence of the new breakers.

Yes absolutely... never use market orders, or stop orders. Every order you place should be a limit order!


----------



## kcowan (Jul 1, 2010)

How wrong? Ben Stein Wrong!

Yes those of us have followed him and his crappy advice, now use him as an adjective!


----------



## sags (May 15, 2010)

Peter Schiff making Ben Stein and others look like idiots just before the housing crash and recession.

https://www.youtube.com/watch?v=1G0tfb8ZefA


----------



## fatcat (Nov 11, 2009)

from robert shiller on the effect of the crash last week and in the 5 day period: http://www.nytimes.com/2015/08/30/u...l?smid=nytcore-ipad-share&smprod=nytcore-ipad



> Ten percent drops in the S.&P. 500 in just five trading days — such as what we just experienced — have not been common. Out of the 29 corrections since 1950, only nine happened in five days or less. Most of those happened since 2000, possibly because of the Internet and faster communications. *Such rare sharp drops are psychologically significant; an extreme one-day collapse seems to create anxiety that imprints on people’s memories and could contribute to a downward momentum.*





> When prices make a sudden drop, as they did in recent days, people tend to become fearful, even if there is a subsequent rebound. *With the drop they suddenly realize that their views might be shared by other people, and start looking for information that might confirm their belief. Some are driven to sell immediately. Others are slower, but they are all similarly motivated.* The result is an irregular but large stock market decline over a year or more.





> It is entirely plausible that the shaking of investor complacency in recent days will, despite intermittent rebounds, *take the market down significantly and within a year or two restore CAPE ratios to historical averages*. This would put the S.&P. closer to 1,300 from around 1,900 on Wednesday, and the Dow at 11,000 from around 16,000. They could also fall further; the historical average is not a floor.
> 
> Or maybe this could be another 1998. We have no statistical proof. We are in a rare and anxious “just don’t know” situation, where the stock market is inherently risky because of unstable investor psychology.


if as he says, we are in a rare, anxious "just don't know" situation then these sharp drops must be having negative effects on investor sentiment

what he doesn't talk about is alternatives especially versus the historical periods he references, today there is simply nowhere to go but the market or cash, neither option is very good

i wonder if that will support prolonged elevated cape p/e ratios for some time to come ?

it certainly behooves us all to have a safety net if indeed we find that one day there is no ground under our feet


----------

