Market Madness on 930in716 February 7, 2018

Wednesday, February 7th

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

Her it's 930. In 716. The markets and the madness. So a lot of the trading that's taking place. Is being done by computers we look on that TV we see the images of those traders on Wall Street with that. With the pants and a colorful jackets are very little of that trading is actually done by them anymore. We knew we'd better cut. Smooth sailing and a longer term bull market China last year psychic everybody has known. That something was going to happen. I'm Tim Wenger on the podcast powered by the Brothers of mercy a five star rated skilled nursing residents offering affordable living in a country setting. Well Wall Street is making a good case for all of us buying stock in Maalox and Tom's perhaps. In another stomach churning day Tuesday stocks plunged in the morning then pulled off a late afternoon rally. Ending the day in positive territory by the hundreds and recouping some of the losses from the markets are nerve racking to date plunge. We're always looking for some perspective on the wacky markets. Well I think at it as a natural reaction cute people. Overreacting to what happened on on Monday it was toward the you know 800 point drop in the. Two recent media of key private bank talks it out with Tom Puckett. Well I think and it's just a natural reaction cute people. Overreacting to what happened on on Monday which went DB you know 800 point drop in the Dow. I think people are realizing that the car knee injury really at risk we have some very good unit and the economy. Combat trauma the reaction of the market. Was triggered by a lot of things. I had no relation to what's probably going to happen in the future at least in the near term. It with with what we've seen the last a couple of days drove up in their own. How likely that the market is trying to correct itself after the surge in gains. Well it's certainly trying to correct itself we all community at what we knew we expect. Smooth sailing and a longer term bull market China last year psychic everybody has now. That something was going to happen and I just think that this is the bomb and that its natural. On her reaction for people to realize and read the news that inspected isn't as bad as they tanked at. You know wage growth that accident. In Portland has been an all time low. You know. The people are spending more people are making more. I think the real thing is it just term risk of inflation or fear of our. Higher than expected inflation. And I think once people realize that that's really the underpinning of get. They I think they're more rational mind will prevail. And I know that you can't really do a lot of predicting is what we'll see in the next few days but. Why have you world witnessed in situations in the past as far as Marcus having a big drop points wise observed wise and then rebounding. Well technically you know corrections can be pretty short limbs you know they can they can last for months there and and then reposition themselves market. Will you add. You know periodically about the precursor to a major. Downturn would be you know a serious correction technical correction which is actually over 10%. Drop in the market. To a full blown you know bear market or recession and we we just don't think that word area. While I think you know in the end of the stock market is not the economy and I think sometimes people. Almost half posttraumatic stress about what happened in the and truly. It's time to. Recognize that it's a reminder really control the market control interest rates well we can't control his campaign. Our own individual plan that we develop whether it sort Geithner. Which reflects you know what we're trying to accomplish and what we can really stop and knowing are now saying. Knowing that we have a map to get to where we want to beat that it's it's really a good reminder. To go and speak prettier right there. And town and readers or your partner. Now some schooling some real schooling here from a real professor and a guy who worked in the financial markets. For decades we turned to Ed Hutton at Niagara University we look at a lot of things. Computers do right now and how quickly they can do it. We had a chance to watch the landing of these basics rockets yesterday the boosters now computers controlling when we drive our car. We have stability control we have self driving cars computers reacting to different. Inputs and being able to steer the car and and drive a car. But what I think what a lot of people don't realize is that to a large extent in trading right now on the stock market. A lot of the computers right now are doing the same thing so a lot of the trading that's taking place. Is being done by computers we look gotten that TV and we see the images of those traders on Wall Street with that. With the pads and colorful jackets are very little of that trading is actually done by them anymore now it's computers and those computers can react very very quickly and they can make decisions but a lot of times those decisions. Lead to what we saw on Friday and again on Monday and possibly even today a great deal of volatility because huge amounts of trades. Millions of shares of stock can be traded in milliseconds but what. Half the Monday that was pretty jarring you know seeing that dip. Unlike anything we've seen I mean you go back to 2008 and you see that dip to bear. Yeah what is the difference between. That big drop Monday. And what happened in 2000 well a couple of couple things right now it in 2018. So much more that is being done by computers. I know we've seen a couple of instances like this of what we might call flash crash is. And that's where there is a huge shift. And a lot of time tickets. Taking care of up pretty quickly so we saw that yesterday some of the markets coming back. But. I don't think that Indy in 2008 we were in a situation where there was a lot of really bad news that was causing those dips. We haven't really seen that there wasn't a big difference I watched that markets on Monday pretty closely. I saw it within about fifteen minutes stocks drop of that 600 points on the Dow. There was no no no news it was making that that was basically what was happening was trades were being placed by computers. And that's what led to that. And volatility the economy though is far different today than it was in 2008 right yet we we are actually in a really good economy right now that's good for a couple of things 01 of the things that ironically it is not his good for. Would be stock market investing because. What we saw on Friday and where we saw the roots of what happened. Later on in the day on Friday was in the morning on Friday when the jobs report was released so we had a really good job report we have a lot of new jobs being created. But we also had wage pressure so we saw that wages were moving up and what that's leading to and what's its telling everybody is that. Interest rates are going to be moving up and interest rates moving up is what's going to put a damper on a lot of the stock market activities and. How about that roller coaster on Wall Street continued yesterday after dropping a thousand points on Monday dropped 500 points at the opening bell on Tuesday went right back up. The up and downs lead us to bring and Hutton live in studio he's the director of the financial markets laboratory. In Niagara University ads you see this up and down a lot of people wondering just what is going on. When you look at Monday that big drop. The UC that is kind of media of leveling off of after you know our whole year of the market going up and up and up or was it just a blip in the radar. Well I think it this is really the last eighteen months have really been something that we haven't seen in a long time. Volatility is the up and down in the market and there's a certain amount of volatility that's expected in the market. But over the last eighteen months at least until Friday. What we saw were the markets were just about the calmness they've banned in decades so. Yet yes we did have some that we did have some opens ups and downs well mostly it was going up but what was really amazing about it was how little volatility there was. That came roaring back on Friday we saw that on Friday we sought again yesterday. I think we're gonna see it again today and it there is really a lot of this is pent up. Volatility so. There's a lot of trading that's taking place around the volatility that hasn't been there so I think we're gonna go sits through a situation where. Those very calm steadily rising markets that I think people got used to. I think David they're gone at least for the of one. The numbers are so high now I mean it seemed like a few years at north 300 point trap was a lot. Yes 300 points today is nothing. Well late it is and I mean yeah we've been talking about some snow today. You know is so we're talking about we haven't had done. Some snow down a little while and so talking about five or six inches of snow at least to me it seems like a lot but if I think back to other winners where we have an awful lot. Of snow going on. It at I think it's the scale. It's the scale that here where at a market its trading over 25000. And so when we talk about the swings that we had a thousand point swing when we are at a Dallas 101000. That was very very significant it's still significant now but it's not as significant because of the scale we're just at such a higher level than we work yet talking about that scale you know we're at a higher level it keeps hitting record record record is that's sustainable. In the long term I should we not come to expect that. Well I. If we look at all the things that are happening there's a lot of really good things that are happening in the economy right now. The markets are reacting to expected corporate profits during 2018. And there's a lot of good things that are happening. With tax reform companies are getting lower taxes. They're going to be using that to willow reinvest they're going to be using that to buy other companies. They're gonna using that. Give back dividends and share buybacks in all of those things are very very positive for the market. What's not positive is this increased volatility so those two things are going to be working at odds with each other. I was wondering issuing nappy concentrating so much on the number. But nor on the percentage of seats the rise in the fall yeah that's rights if we have gone through a situation where the markets have just gone up and up and up over the last eighteen months. What we need to have been black people were probably in the midst of right now is a correction this kind of overdue. So. Yes that was a recovery yes I'm not sure that that's. Going to be continuing today of looking at the markets and futures markets. They're down today and and this may just be a normal. Correction the kind of thing that normally has to happen in the markets for them to continue to go up. Joining us live in studio is and Hutton of the financial markets laboratory at Niagara university and we're of course talking about. What do wild few days it's been over on Wall Street but Ed talking a little bit during the break. You know a lot of people focused on the markets but interest rates that might be something that impacts everybody just a little bit more. Yeah I think I think that's going to be the big story. What's happening right now and I think what most important for people in terms of their own personal finances. We've been in a situation right now for the last ten years really since 2008 to 2008. Where interest rates have been historically low and a lot of that has been because. The difference central banks in Europe and the United States and others have been really pushing rates down to let the economy recover well. What we're seeing right now is that the economy has recovered it's not recovered not only United States but all across the world. And so those central banks have been pulling away that support. And when that happens. Interest rates now are starting to rise and that's going to be I think one of the big stories it's gonna affect people. It's gonna affect people a lot of different ways if you get a mortgage and we're used a very very low mortgage rates. They're going to be heading up car loans are going to be heading up at the same time. The historically low rates as you might have gotten from a savings account well may. I think. Hopefully will be a thing of the past I think we're gonna start moving back. To more normal savings rates and assist us the talk of rising interest rates sounds like it's bad news but. Actually is goodness well it is in some ways it does it all depends on where you are sort of in your life and that's what I think but remember that a lot of people. Rely on the income that they get from bonds and other type of fixed income investments and those yields have been very very low. There are starting to increase right now and so I think that's going to be a good thing for some people who. Are less risk averse and and who are may be used to living out of fixed income now we major risk there I think a lot of people are going to look at the last week both from Wall Street and city maybe now is not the time to jump in and start investing in the market so what is your message. To people might be scared off by a lot of this volatility well Lee the one thing that I would time out it's the same thing that I tell my students is that. Being able to just put money into an investment on a regular basis. Whatever whatever it is that you can afford and you can do that with the do with through. He 401K. Or an IRA or anything else. Doing that the school called dollar cost averaging that is. Putting us an amount of money away every month at a every paycheck no matter what the market cycles car. That turns out to be the most important thing for. Long term on its success and then you don't have to worry about the risky aggressive yeah you don't have to worry about you're not competing with any trade or any computer trading algorithm on Wall Street or anything. The way that you can succeed is that very simple put money away on a regular basis whether the market is up or down. It is it turns out that that makes all the difference. On to the next ride whatever that may be we're back to mark. That's 930 in 716. We're back tomorrow with a net irritation from the studios of WD EA and buffalo well.