Tackle Today: Why do markets crash?
November 21, 2019
« The four reasons. »
“Why do we assume that simple is good? Because with physical products, we have to feel we can dominate them. As you bring order to complexity, you find a way to make the product defer to you. Simplicity isn’t just a visual style. […] It involves digging through the depth of the complexity. To be truly simple, you have to go really deep.”Jonathan Ive on “Steve Jobs” by Walter Isaacson —
Simplifying things is almost always the best way to understand them very well. Although the reasons why markets crash are too many to be listed on a daily email, let’s try to group them into four major categories.
- The obvious
- The hidden
- The technical
- The undetermined
1. The obvious
Let’s say any of the POTUS gets caught in a major corruption scheme, the biggest in the history of this planet, surpassing the Brazilian one from a couple of years ago, with about $2.5 billion misappropriated. We can’t predict the future but we can imagine the size of the sell-off.
2. The hidden
This is when something weird, gross and horrifying is already happening but only insiders know. Think about the 2007 housing market crash, the LTCM collapse or the 9/11 terrorist attacks.
3. The technical
A major support level is broken. Robos, algos and us, mortal traders, start the sell-off with stop losses getting triggered, spreading like wildfire.
This is the hardest one and we have to ask the specialized media WHY. They have answers for everything.
Regardless of the reasons, the same techniques apply to all of them:
- Invest in Financial Education
- Master portfolio design
- Master position sizing
- Master risk/reward
- Buy portfolio insurance
- Buy a vault
- Buy gold
Chart of the Day
After the earnings announcement, Target (NYSE: TGT) just took off. From the close of the previous day to yesterday’s close a +14.05% difference. From the open of 2019 a +94.32% increase in price. Holy Target!
Video of the day
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