Feb 25th, 2020 | Money Podcast

WOW! THE DOW DROPS OVER 1,000 POINTS What do we do now? Find out what Tom did as a result, and what YOU should do. Also, find out what you SHOULDN'T do now!<--break->

See why the Dow Jones Industrial Average and the S&P 500 dropped so much in one day.

Got money questions? Send them here and Tom will be happy to answer them on an upcoming episode: tom@blowmeuptom.com.



Submitted by TallTim on

China effectively being shut down is going to slam any company that relies on parts/supplies from China. Proctor and Gamble have already put out a warning for a lot of their product lines, and that is just the beginning.

I'd look at any stock you have and make sure that their suppliers aren't going to get frozen out -- its rippling through the supply chains as we speak. Even if your company previous reported glowing guidance, that could all disappear in an emergency revision, which has happened with some companies.

Watch out, the globalization push is about to bite a lot of companies in the ass.

Submitted by matt120 on

Warren Buffet was on CNBC Squawk Box yesterday for his annual 3 hour interview. I would highly suggest everyone watch it if it is available online. He had some good comments on the market downturn.

Submitted by Faithful LIstener on

institutional investors, who actually invest in the market, like pension funds. Most people are really gamblers, and not investors. Most "investors" do not know how to hedge the stock, fewer still properly evaluate and box options (where the real money is, but they kill you on fees!)

The stock market is essentially run by computer algorithms, responding in fractions of a sections without fear. The average person with his copy of Graham and Dodd is going up someone with a Bloomberg terminal, and the knowledge to use it.THEY are going up against the algorithms. No competition. As well, the Zero Interest Rate Regime (ZIRP) of the Fed makes classical valuation models meaningless. It's reduced to riverboat gambling. I do live in fear of the day Deep Thought is turned on to the stock market. True artificial intelligence will make fools of people who operate at the speed of biology, with their very limited awareness. Fear and greed rule the day, which is why banks are making a killing. Indeed, for banks, under the new system, worse is better. People who can't get a new car loan from a bank will have to get a title loan. MUCH more rewarding.

Only in a market powered by massive amounts of fast money (Europeans, fleeing the collapse of the Euro, and Chinese, fearing getting on the wrong side of the authorities), does the idea of Tesla selling for 800, and Ford selling for 8 (EIGHT!), begin to make sense.

Frankly, we have not begun to see the effect of the coronavirus on the stock market, or, much worse, the real economy. Everyone is still working off inventories, Wait until the supply chain is pulling on string, and see what happens to the market.

On the other hand, Trump will be able to blame the bad stock market and the bad economy on the Chinese, and the global pandemic they started!

It will be fun to hear Tom talk about that!

To be honest, people that buy coffee from Starbucks, and refuse to make a loaf of bread - damn good bread!- for a quarter, really have a long way to go before they get within fifty miles of he stock market.

Submitted by Kevinckelley on

Tom - as a finance major and astute investor there’s no reason to think that the S&P 500 is a dangerous place to be. If the average retail investor got out when you suggested would they be better off? Absolutely. But does the simple premise of dollar cost averaging work apply with regard to S&P 500? Empirical evidence suggests that it does. In fact, I learned early on that if you can increase the number of shares you buy in ETFs within the S&P 500 realm on months that are down, personally speaking, you’re very much better off. That being said, a socialist being in office could signifigantly alter what we think of as empirical evidence. When Bernie suggests locking up captains of industry in oil, and demonizes pharmaceuticals, health insurance and private prisons this could impact the status quo and challenge the somewhat reasonable assertion that past results will somewhat guarantee future outcomes with regard to the S&P 500 as experts do the heavy lifting and kick out the losers (companies) actively throughout the year. While I understand that diversifying within certain industries and other ETFs is certainly smart but as a millennial like myself who works within in orporate finance but only has $20 k to invest This won’t help me reach the minimum to all the sectors and ETFs you seem to evangelize. The S&P 500 is a simple way to capture the natural gains of the economy and if you take a long term approach there’s no reason to think you’ll lose your shirt. In fact, slightly increasing the investment on down months or even just staying steady as you suggest is a fairly safe and conservative move on the whole if you’re taking a 10-20 year approach which many millennials do. You yourself are older and closer to the end of your life so I think your approach makes sense for yourself but it’s not a one size fits all take. Additionally, I hate Trump. Can’t stand him, but I’ll never vote for a socialist. I will vote blue no matter who unless it’s Bernie. Can’t do it as I think the overall impact on the market would be overwhelmingly terrible. Curious to hear your case on why Bernie would be better than Trump as you seem to suggest. I don’t like Trump but I hate the overall damage that Bernie could cause. Have no idea how you can reconcile voting for Bernie and lampoon against staying steady within the S&P 500 for the average guy or someone who doesn’t have as large of a purse as yourself OR someone who has a longer outlook or approach. That is, unless you fear Bernie being president in which I’ll go to cash or bonds until I see the overall effect of a situation over a year. We simply don’t know the damage it could because we’ve never had a socialist who demonizes capitalism as the President of our country. Hope that you’d take the time to expand on the case of Bernie over Trump objectively because I just can’t seem to see why you’d think that as I certainly cannot. Love your show and admire you but I can’t reconcile you’re posiion here. I’m looking forward to hearing your take on this. Thanks Tom.

Submitted by TallTim on

I'd love to hear what you think about passive investment vehicles.

Especially when the indexes have been having their worst performance in years. Sticking with indexes expecting over 7% returns (Just like CALPERs does) is insane. Not to mention HFT sniping retail and even "buy side" orders from family offices and the like.

As for Bernie, if that guy gets elected -- holy shit, you haven't seen a crash until he slams everyone making over 100k a year with his progressive tax ideas.

Submitted by Kevinckelley on

Warren Buffet has suggested to the average joe to just stay long on the S&P 500 and you yourself say that it’s hard to to time the market. So why not just stay long on S&P 500 with a gradual increase on investment on down months? Seems to have worked great for me. I’m sure beat the market but what’s wrong with just staying long? History doesn’t suggest you’ll be losing you’re shirt if you just stay long in fact I’ve read money books that suggest it’s a safe assumption that you’ll capture 6.9% year over year on the whole.