Stock Market Approaches Two Sigma Thresholds

[JohnyMac]

Just sharing an article from Wall Street on Parade.

Yesterday, an agency of the Federal government, the U.S. Treasury’s Office of Financial Research (OFR), released a study warning that by three separate measures the U.S. stock market is approaching dangerous “two-sigma thresholds” which can lead to “quicksilver markets.” Translation: we could be heading for a big crash.

A two-sigma threshold is when market valuation metrics move at least two standard deviations above the historical mean. The study notes that “valuations approached or surpassed two-sigma in each major stock market bubble of the past century.” Think 1929, 2000 and 2007. A quicksilver market, as defined by the study, is when stable markets turn on a dime and “change rapidly and unpredictably.”...

...And...

...When the bubble finally burst, the S&P 500 index lost almost 50 percent while the Nasdaq, home to Grubman’s tech picks, lost almost 80 percent. As investors learned then, and again in 2008, there is a hefty price to pay for ignoring flashing alarm bells. And yet, according to the study, “today’s high stock valuations imply that investors underestimate the potential for uncertain events to occur.” To put it in layman’s terms, investors are ignoring that this market can make unpredictable, large gyrations at warp speed, potentially wiping out trillions of dollars of life savings.

The study next looked at the ramifications to financial stability in the U.S. should another major bubble burst. It found that today’s vulnerabilities that could amplify a market shock include “leverage, compressed pricing of risk, interconnectedness, and complexity.” On the subject of leverage, Berg noted the following:...

[Nemo]

I saw a headline on this somewhere.  June 17 is a critical day.  Something in the stock, futures, pork bellies and some other or some such thing converge and something or other could easily happen and boom, there goes everything.  Other than the date, I know nothing more.

Might research into that and see what it is.  If it looks like it may be a reasonable risk, now would likely be a good time to get cash out of stocks and get into precious metals.

Seems like profits on stocks are up and gold it at a real good price to buy.

But pay no attention to me, I have not the first clue what any of that means.  Please pay no attention to me, I do no sarcasm there, honest and for true, dumber than a brick under water on the whole idea.

Nemo

[APX808]

You are heading for the presidential elections, stock markets usually continue going up until the new president gets elected, then the speculation stops and markets correct, I think it will hang in there for a while.

Also probably in June the Fed will increase the rates, that could affect negatively the markets, yesterday when it said it would keep the rates the S&P skyrocketed.
Let's see what happens in june

[JohnyMac]

Yes I agree APX, in June there will be a interest hike.

No national election here till Nov 2016 so there is plenty of time for the market to correct before that date. But we will see.

I think that war is coming in Europe though which will have a adverse effect on the market. Stay tuned....

[JohnyMac]

Just ran across this...

http://video.foxnews.com/v/4121781965001/russia-militarizing-its-westernmost-territories/?#sp=show-clips

and then this...

https://www.facebook.com/video.php?v=971154119562984&fref=nf