I pulled everything out of the market, into cash today

[jdhpa]

Originally Posted by ohio_peasant

It was sufficiently painful to us neurotics. The common element was fear of the unknown, the abyss. Everything was falling (except for maybe gold), and there was nowhere to hide. In both cases, markets were correlated... domestic and international, small cap and large (well, maybe not growth and value?). The big and glaring difference was that prior to 2008, there were rumblings of instability and potential problems. Prior to Feb/Mar 2020, there was no such thing... it was a felicitous and untroubled time. That makes the 2020 crash more of a quintessential "black swan".

Now it is easy to feel smug, congratulating ourselves for having hung-on, steeling ourselves against emotional crisis. Well, what of the future?

I don't think there's a firm definition of "crash", unlike "bear market" (20%) or "correction" (10%). The drop in 2020 was ~34% (SPY), which is certainly bad, but I don't consider it to be a "crash" unless it gets to about a 50% drop. Which I'm sure it would have this year, had the Fed not turned on the printing presses.

[ohio_peasant]

Originally Posted by jdhpa

I don't think there's a firm definition of "crash", unlike "bear market" (20%) or "correction" (10%). The drop in 2020 was ~34% (SPY), which is certainly bad, but I don't consider it to be a "crash" unless it gets to about a 50% drop. Which I'm sure it would have this year, had the Fed not turned on the printing presses.

It's a common refrain, that were it not for the Fed, we'd all be standing in the soup-kitchen line. And yes, there's ample reason to fret over balance-sheet and public-sector debt.

But as the world becomes inexorably more complex, the public-private division blurs. What is government intrusion, and what's a self-supporting market? What is hapless and harmful meddling, and what is necessary medicine? Can any of this be quantified? Is there a threshold of unambiguous passage from good to bad?

If economists disagree, it could of course mean that they're all charlatans.... but it could also mean, that neither precision nor even a good understanding is possible. We fall back instead on our various biases, our pre-conceived notions and the stuff that we absorbed at an impressionable age (which for some of us, is the present!). I view the Fed as actually being a part of the market, rather than as a cheater with its thumb on the market's scales. For the Fed not to have acted, means that the market itself would have failed.