Dow still tanking daily.
March 23rd, 2020 at 10:40 PM ^
There actually have been over the recent years people in both political parties recognizing the QE created a bubble.
Many libertarians recognize that QE created a bubble before the crash.
Many liberals recognize that QE created a bubble before the crash.
Many conservatives recognize that QE created a bubble before the crash.
This isn't really along straight partisan lines. Either you think that the Fed buying up $3.5 Trillion in assets helped increase asset prices or somehow you don't.
From September 2008 to December 2014 the Fed bought over $3,500,000,000,000 in assets. I don't see how anyone can argue that that didn't impact the price of assets. Low interest rates helped bid up the prices of homes. The Fed buying mortgage back assets helped free up more money for banks. The fed helped lower bond interest rates making stocks with dividends more attractive. Easy money, bigger debts, buying stocks on margin (with debt) was up.
I doubt it will go down anywhere near as much from this level as it already has from the record high. Selling anything now is a fool's game and will assure you never recover.
I think we'll see a V shaped recovery and those who choose to be on the sidelines are going to miss the best part of it, as they almost always do.
Missing the best days of a recovery will cost you much more than getting out before the last of the drop.
Moving cash into an S&P index fund now might be your best move. i added some USO and SSO to my Roth today.
It was different when the tech bubble burst, it was different when the financial crisis happened, its different now. The reasons it happens are different everytime, but the fact that corrections and bear markets happen and recoveries follow is the same every time. I've been doing this for a few decades now and I feel like a broken record over the past two weeks. I felt the same way in 2001-2002, 2008-2009.
GO BLUE
I right there with you but I think you are a week or two too early. The markets are going to continue to take a beating while the virus hits the peak. I would not be surprised to see another 10-20% drop over the next 5-10 days of trading. The markets will surge when congress finally passes an incentive package but that will only last until unemployment and GDP numbers are released. Late next week might be the best time to move cash back into the market.
Logged in for this. You put money in a 2x levered instrument and an oil fund? Both have decay. This is what it says for SSO:
"As a levered product, SSO is not a buy-and-hold ETF; it’s a short-term tactical instrument. Like many levered funds, it delivers its 2x exposure only over a one-day holding period. Over longer periods, returns can vary significantly from its headline 2x target returns."
SSO is not a good instrument for buy and hold. Neither is USO but I'm out of my depth trying to explain that one. I believe USO has futures rollover risk as its biggest drawback.
100% that 2x and 3x levered instruments are not buy and hold securities. The 3x levered oil ETF UWT I heard was accelerated. Going to just fold up shop this week. Same with its inverse, I believe.
A good article on why not that I enjoyed:
https://www.etf.com/sections/features-and-news/dont-buy-and-hold-leveraged-etfs?nopaging=1
The decay will likely only occur on quick, downside type moves. Go look at the return of that instrument over the last decade when the market was just trickling upwards. Greater than 2x returns. So yes, you just have to understand what you are getting into.
March 24th, 2020 at 10:37 AM ^
correct, i put some ( a portion ) of my Roth in two investments that have a high likelihood of an upside move in a short time frame. 25% of my roth is speculative. I was a little early on a couple energy stocks, it might take a year or so, but they'll do fine.
I manage $250 million in assets for clients, It was over $300 at the beginning of the year. Managing assets for most clients is asset allocation and buy & hold. Some do have accounts that are for trading and that's where short term market speculating is appropriate.
This market has plenty of opportunity for strong returns. Had a client put 100,000 into a trading account on Thursday, 75,000 was put into individual stocks and 25,000 is in cash, should one or more of those positions see a sizeable drop and we need to add shares to lower cost basis. He's currently at 107,000.
Work with an advisor that you trust, and let them do their job.
70% * 70% = 49%. The market lost 56% in 2008-09. So I don't think another 30% decline is some kind of crazy unlikely scenario.
If you are trying to time the bottom, don't. It's dropped a lot and may drop more, but it's also likely to recover in less than 24 months.
That said, I wouldn't be surprised to see a bottom around ~$15K.
It took 4 years after 2008. And that crisis was not as significant as this one, in my opinion. We're talking about months without normal economic activity, 20%+ job losses, huge increases in national debts, and massive defaults on mortgages and loans.
And JPC is right; the market probably has been inflated relative to its normal growth. I don't think 24 months is realistic at all.
I'd be glad to be wrong.
March 24th, 2020 at 12:47 AM ^
Oh, I’m not predicting this will be a quick recovery. Lots of businesses will go under and sorting this out will take some time. It’s an event with no modern precedence, though, and we really don’t know how it will play out.
But I am absolutely cautioning against the temptation of trying to time the market bottom or “wait out” the crash. That is, historically, a very common way individual investors destroy wealth.
And it’s worth pointing out that there some very significant differences between these circumstances and 2008. While QE did artificially inflate markets, the reality is that current economic conditions are going to force investors back into the market pretty quickly.
It’s also worth noting that the government will spend far more on this stimulus than the 2008 version, which largely ended up being cash reserves. This money will go to people and they will spend it. There isn’t a villain here or rampant, irresponsible speculation. This is a global, natural crisis.
While I’m not predicting an immediate bounce back, I do believe it’s very possible that we will recover faster than on 2008 and I strongly believe that many investors will see huge amounts of wealth destroyed by trying to time the market.
I think some of this is still TBD depending on how this virus situation plays out. An extended shutdown will be devastating. However I could see a potential scenario where the country gets back to work relatively quick. Perhaps the high risk individuals remain inside and the younger folks get back to working. I got no clue man I just hope it works out for all of us
Who the hell knows? Trying to predict the market is a complete exercise in futility. Until we see a peak in sight or better yet, get past that peak, you should expect to continue seeing plummets.
I think it drops to 11k-12k. April 3 is going to be a brutal day, when March job numbers come out and May 8, when the April job numbers come out, is going to be even worse.
May Day--it's not just for commies anymore!
We have no idea where we’ll be in may. We could have 100,000 dead with whole states still flailing and on lockdown.
Or we could see things start to re-emerge, with business cautiously getting closer to normal in less affected areas (or areas like Washington that are through the worst). And the report might not make much of a dent if there is some optimism, and if the job numbers are already priced in.
Keep in mind that a big factor in the numbers now are investors “pricing in” various bad news that the expect to hear in the future.
March 23rd, 2020 at 10:44 PM ^
They always say that the market “prices in” the future events, but it always seems like the are reacting to the days News even when everyone saw it coming.
How certain are you that we’ll see those actual numbers and if we do, how accurate they will be? I’m usually not a tinfoil hat kinda guy, but thought I recall some discussions that to try and calm fears, the info would be relayed in subjective/descriptive terms.
I think we'll see 13k or so. The worst of the virus hasn't even happened yet, so we will continue to go down due to the maintained panic.
The gubberment is replacing snow with chemicals
Invest now in Zim dollars and Vietnamese Dong, the global financial reset is coming and soon all currencies will be valued equally!
/s
No no no, it’s time for the Iraqi Dinar to shine! If you listen to the snake oil salesmen that pedal Dinars to the chud crowd it’s gonna happen!
March 23rd, 2020 at 10:54 PM ^
It's nice to know I can get the latest Qanon conspiracy without having to leave my neighborhood sports blog.
It’s hard but I’m trusting in the government to pull us right out of this as soon as we beat this damn virus. We learned some valuable lessons since the Great Recession.
We should return to the days where corporate stock by-backs are illegal while the market is low to help with long term growth and stability.
also, employees should have a say regarding executive pay for public companies with more that 1000 employees.
also pass a VAT and cut income taxes
I'm with you. And we should add a financial transaction tax for high frequency trading.
And remove the cap on payroll taxes.
I disagree with you on the FTT. I trade for a living, for myself with my own money. I work for no investment bank and never have. I'm a self taught, work from home trader. If they pass a FTT, it would put retail traders like me out of business. The tax/commissions would essentially wipe out my profits. In most instances, a profitable trade would result in a net loss due to the FTT.
I understand reinging in the financial industry, but it's getting a bit insane. If the FTT is passed, I'll be required to pay income taxes, the net investment income tax that Obama passed and the financial transaction tax. I find it ironic and very disheartening, that in America I'm penalized for being successful at trading. With the implement of the FTT, I'll be required to pay 3 separate taxes. There is not any other industry that I know of that is required to do this?
I think the command economy you've been pining for may be right around the corner.
Not really a command economy, just put the US in line with what most other counties have found works.
but yeah, there are no atheists in foxholes and everyone’s a socialist when the economy crashes. Especially bankers, they love getting government bailouts. Every decade we seem to need to bail out bankers
Americans misuse the term socialism a lot. Socialism is a system where the government or collectives own the means of production (think factories and farms) and also owns the means of distribution (think stores and restaurants).
What you are describing is techinically neither socialist nor true capitalism, which allows for private businesses to fail - something our government is unwilling for large companies to do.
As a banker, I'd like to state for the record that I was against the 08 financial bailouts. We should have let all the big banks fail and spent that 800 billion dollars helping to keep people in their homes.
I understand what your point is but with 6+ million people working in the financial industry, being unemployed and all, how would they afford to keep their homes after the 800 billion dollars runs out?
Just a thought on the stock market. It's merely a snapshot in time of what some buyers paid some sellers to purchase a portion of the shares in circulation. It is an imperfect measure of what all the shares in circulation are "worth." If you don't need your assets in cash for a while, what your assets will be worth when you do need them in cash is a separate question from what they are worth today.
Some folks like MGrowOld are sophisticated enough to be able to anticipate the market, and move their money in and out of equities. Good for them. Since I'm an unsophisticated schmoe, I pay attention to the studies of your average investors and their behavior. Even if someone brilliantly/luckily times the sale of their equities before a crash, and avoids the loss. They are still not good at knowing when to buy back into equities. Hence, they miss a lot of appreciation when the market recovers. (Source: most of the books by Ric Edelman)
As a confessed schmoe, I prefer to leave my money where it is based on when I expect to want it. I choose to view today's values of equities as not all that relevant. It helps me sleep at night. As we often say on this blog, your mileage may vary.
It's almost back to where it was when Trump took over. It will reverse back once this thing is done.
so why aren't you flat or short?
A strong uptick will require good news about the virus. We're at least a few weeks away. The Italian Borsa is down 40%, floundering up the last week or so as the virus supposedly begins peaking in Italy.
Our markets began dropping the next day, but we're a solid two weeks behind Italy in the infection game.
If the dufus in the WH gets his way and doesn't listen to the health experts and tries to ramp up the economy to early, we'll have a short burst upward in early April then a steep drop when the death toll rises from his foolishness.
I know only one person that will bring it back asap. Give the economy a kick with a package to help families small business etc.and get out of the way.
However, we should not approve a package with a political message. This is about a virus and helping people impacted by the virus. Lots of irresponsible "leaders" out there seeking an agenda. Blow it up otherwise.
In God, we trust. Most families I know are sick of this fraud and are tempered by the daily lies and values that are not ours
Buy low sell high
now is your chance
I think we have some solid support right here for a bit. If you have a number in mind of what your throwing into this recession, maybe this is where you start to throw 10-20% in? It’s hard to tell what’s being priced in right now. There’s some good bargains out there and some traps as well. Definitely some companies that aren’t going to be the same for a long time after this.
(redacted)
That little spat is going to fuck our domestic energy sector, shale oil and fracking in particular. SA has decided to keep the prices low enough to kill the industry, so that they can be the #1 oil producer again.
Then in 4 years they'll turn off the tap and we'll be paying $5 per gallon of gas.
March 24th, 2020 at 12:11 AM ^
I see all the blips upward from the 1929 crash, that were quickly followed by more selling before finally bottoming at more than 80% down.
Think of the incredibly massive amounts of debt some corporations have issued and how many of them will not be able to meet debt obligations if this lasts a long time and we have a deep recession or near depression.
Bailouts excluded
Well, it has been a long time since Alden Dow invented the cinder block..
March 24th, 2020 at 12:30 AM ^
The value when the last capitulating retail investor pukes up their shares and vows never to buy another stock in their lifetime. Based on past market crashes this could easily be a year from now, or longer.
It's hard to believe that we're anywhere near a bottom when so many in the media are talking about being near a bottom. This is not how people normally act at market bottoms.
Understand that this crash is not just about coronavirus. This was an ultimate bubble that the Fed kindly built for us and we have some ways to go before reaching something resembling normal valuations and debt levels. The virus is really just the catalyst to get things started--after the world beats this virus, standard bubble deflation activities will likely keep things pointed downward for awhile.
At the same time, there are tremendous opportunities now to make money in certain sectors. Gold is an obvious choice in an environment like this with a country (world) debasing its currency to such a large degree. You have gold juniors down 50% in a month due to the coronavirus panic, yet their investment thesis is superior now to when they were 100% higher than today. Thank you Jay Powell.
I was hoping that uranium stocks would wait until after gold was done, but with the Cigar Lake mine closing down, they might be getting ready to launch too.
Bottom line is that mining resource stocks (precious metals, uranium, and base metals) have been beaten up for so long that it makes sense to look here for value now.
March 24th, 2020 at 12:46 AM ^
This reminds me of the same period from 9/15/08 to 10/6/08, a big market drop and then we stabilized with some good up days and down days through December, then we took another hit in late January of '09 with true bottom occurring in early March '09. You will see the GNP slip negative in the 2nd and 3rd qtrs, so we will be in a recession. My guess is we will see the true market bottom will occur August-September (S&P about 1800), then we should see a recovery through the end of the year. We were over due for a recession and they are necessary. Luckily they do not last long! I think it is a good time to slowly buy some good stocks through the summer.
I have a feeling the Dukes are trying to corner the entire frozen concentrated orange juice market!
My thinking is more in line with that of Building_7_Free_for_all.
I think that the world's financial system is completely FUBAR, with bizarro-world valuations in stocks, bonds, and real estate, with stupefying levels of debt, and with $trillions in three-letter derivative products that are the financial world's equivalent of virtual particles.
On top of that, we have the financial equivalent of a neutron bomb that just went off.
Absent the Fed and central banks printing infinite monopoly dollars, I would be confident in a gigantic crash in stocks, bonds, and real estate and a depression.
Since the Fed and central banks are embarking on QE infinity, who knows where an index will end up?
Printing monopoly dollars isn't a magic elixir. I think that it's going to end badly. But I've felt that way for 5 or more years.
I'm mostly in cash (more specifically T-bills via BIL), with a goodly amount in gold (I like SGOL as far as ETF's go, better than GLD in its counterparty risk). I'm not particularly happy with that allocation, but I don't like stocks, bonds, or real estate currently.
This is why I did something yesterday that I never considered in 2000/2001 or 2006-2010. I liquidated our entire portfolio, including our IRAs. I'd rather lock in a 30% loss than risk wiping out 50-75% of our wealth...which I think is the most likely scenario over the next 3-6 months.
What really alarmed me was that my investment advisor made absolutely no effort to talk me out of my decision.
We were long overdue for a market correction anyway. The entire economy has been juiced by low interest rates, tax cuts, etc. It's been an unsustainable ten-year bull market.
Anyone who thinks that things will just get back to normal in May or June or July is deluding themselves. Any business that is reliant on entertainment, hospitality or travel is likely to be decimated for a long time. I wouldn't want to be a major holder of office or retail real estate.
This is not going to be a V-shaped recovery. There will be a new "normal" in our world and our economy.
SPX is coming back, baby. I'm rich!