My thinking has evolved since my posts of a year ago, although I’d add that just because we can’t decide what temperature cool switches to warm and vice versa doesn’t mean that the words “cool” and “warm” are useless words. It just means that people who scream “cool” and “warm” at each other without acknowledging that there is a place where they potentially overlap or blur are silly.
My thinking lately is that “Correction” means that there is a (usually downwards) adjustment that is markedly larger than ordinary day-to-day noise but which has few if any spillover effects onto the real economy… i.e. it’s medium and long-term effects are limited to asset markets. “Crash” is something where it becomes pretty reasonable to expect to feel economy-wide impacts from things like lost wealth affecting aggregate demand, default rates rising markedly, major decreases in capex spending and future growth because capital just got a lot more expensive, etc…
Where that number as a percentage figure lies is not an exact science, nor should we expect it to be, but “correction” basically means that you don’t think the real economy will be affected noticeably, and “crash” means you think that a reasonably informed layperson who doesn’t have investments (so isn’t directly affected) but does have a job or business in the real economy will notice the effects.
Another way to cut it is to think about it is whether a passive investor will remember the event in 3-5 years. Passive investors who are dollar cost averaging into index funds probably won’t remember corrections, because their effects will not be obvious to the portfolio after 3-5 years. However, they will remember a crash, because it will force them to re-evaluate whether they should sell everything and curl up into a ball…
It doesn’t matter what’s in the link. Anytime you post a YouTube link Never Gonna Give You Up immediately starts playing in my mind. Talk about Pavolvian.
^ I agree. It’s a competitive business, and more sensationalism earns more viewers. It’s just unfortunate that the public doesn’t have the attention span to process nuanced information. This is the same issue I have with political news, and why, even though it may not be popular to say, I favor a technocratic system. People that don’t want to invest the time in understanding things just shouldn’t participate in those things.