Stock Market
The stock market has been cycling up and down the last few days after the last dramatic drop off and has dropped below 20k on the DJIA index (global indexes are also off today).
Will we continue cycling up and down or we will continue to crater riding down down down to an unknown bottom?
March 18th, 2020 at 11:58 AM ^
While this is a pretty extraordinary case generally you are better off not trying to predict when the market will actually crash. There is a reason the market beats any individual investor over any long term period and its because nobody can consistently time the market effectively. You may have gotten it right this time but over the next 30 years you'll get it wrong more often than not
While I almost always agree I thought this time was different and 100% cashed out in February. The reason it was different is because the virus spread could be predicted with decent accuracy and the panic was predictable too. This movement could be predicted and you even knew when it would hit based on how quickly the virus spreads. I plan on getting back in once the US cases start to peak and it looks like people will start going back to work soon. Even if it hasn’t hit the bottom by then, I have already missed a 30% drop so I’m willing to live with it.
I don’t think it will pop up all the way quickly as some unemployment and supply chain issues will all need to be worked through before we are back to a status quo.
March 18th, 2020 at 11:36 AM ^
Speaking for mortgage refinancing...what is the best way to go about that? I don't have any experience with it, so any suggestions from the board would be greatly appreciated.
March 18th, 2020 at 11:51 AM ^
Call any mortgage company. They are super busy.
Get you current mortgage information together. Rate, amount due, current payment, term date.
Provide that information to the broker and they will tell you what you can save and if it’s worth going through the application process and getting what you need together
You may be able to go from 20 or 30 years to 15 which could save you a ton be payed off early. It just depends on your cash situation. Don’t bite off more than you can chew in this environment.
March 18th, 2020 at 12:03 PM ^
In general you want to shop around for the best rates.
if you have a downpayment of 20% or more (from what I remember) it will save you from having to buy PMI insurance.
I like 15-year mortgages vs 30-year as it builds equity faster at the price of having a bigger payment. You can use online calculators to figure out what the difference would be. If you're disciplined you can get the 30-year and just add an extra amount each month to reduce principle.
Shorter term mortgages typically have better rates than longer term.
Credit unions and mortgage companies, traditionally, have lower closing costs / fees than regular banks. Interest rates are dependent on your credit score, location & possible employment history
I would pick the 2 or 3 best rates then contact each of them asking them for a good faith estimate of the total closing costs. Sometimes they have good rates but they get you on BS fees at closing.
Things you will want to have:
*Purchase price of the house
*Your down payment / amount you will be financing
*The term you'd like to finance for
*The annual taxes..summer and winter. Make sure to call the township to get an estimate of what taxes would look like for a new buyer. People who've been in their homes a while have their rates capped and new buyers could see dramatic increases.
*Get a cost for annual homeowner's insurance...shop 2 or 3 places. You can get a discount usually if you combine auto & homeowner with the same company.
What you can expect to pay at closing (some may be able to be rolled into the loan)
-property taxes back to the current owner (you are refunding the taxes they've already paid for the amount of time left they won't be owning the property)
-Cost of insuring the home
-Any other property taxes
-Title check & insurance
-Various mandatory fees like registering the deed, etc
-Possible PMI insurance .. not sure how this works now been a bit since I bought a home
-Your down payment
That's about all I can remember good luck buying your first home is a big day!
March 18th, 2020 at 12:24 PM ^
Annoyingly, mortgage rates are up compared to last week and are likely to continue to rise since the 10 year treasury yield is somehow spiking.
The rate has actually started tumbling again yesterday and today. There hasn't been a 1-to-1 relationship with the 10-y treasury yield for whatever reason recently....lots of factors at play. I'm biding my time to refinance because I think they're due to fall a bit more. There's just so much volatility right now.
Edit: Note that the rise last week coincided with a fall of 10-y treasury yields. It was due to the sheer number of refinance requests increasing because everyone wanted to take advantage of the low rates.
Mortgage lenders raised rates in the last two weeks because they are over capacity on refis with a 400% increase Y/Y in many cases so they needed to stem the tide of new apps. That's in theory a temporary disconnect but ramping up staffing is a problem with COVID and so is appraisals since that also requires an appraiser/customer to interact in a home which neither party is thrilled about currently. It may be a while before the mortgage market returns to equilibrium vis a vis the 10 year.
March 18th, 2020 at 11:44 AM ^
If you are youngish however, its good to buy stock and invest in the 401K when the stock market is down as that will lead to the biggest gains over time.
To put the current drop in perspective, measure the time it took the market to return to pre-crisis levels after similar declines.
In the history of the S&P 500 in all instances when the market fell more than 20% below a prior all-time high (which is the agreed definition of a bear market), the median time until recovery was 645 days. The shortest time was 212 days, and the longest 2,423 days. If taken at face value, these numbers suggest that investors may not recover their losses before October 2020 at the earliest, or as late as sometime in 2026.
And if sleepy Joe is elected it will be 2024 for sure
Especially if taxes are increased exponentially, to pay for alternative energy sources, medicare for all, student loan forgiveness. The only way I could see paying for everything proposed is to seize everyone 401Ks and make us all work til we die. No retirement for you!
March 19th, 2020 at 12:45 AM ^
What exactly are you basing that on? The market has traditionally done better under Democratic presidents than Republican ones.
Or are you just talking shit that you know nothing about?
But the key thing is that the stock market did return to normal eventually. Thats why you should buy stock when things have bottomed out because eventually, you will reap the interest.
Now if you are close to retirement or you are close to a huge expense such as paying for your kids college, and don't have time to wait for the rebound, then that could be a problem. But if you are in your twenties or thirties, you will get a chance to experience that rebound.
I would argue that this stock market over the last 8-10 years has been anything but normal. It has been fed by zero interest rates from the fed, as well as quantitative easing. There is no way in heck it should have climbed to 29,000 points. Insanity.
March 18th, 2020 at 11:28 AM ^
If anybody knew the answer to that question, they wouldn't be posting it on a Michigan sports message board; they'd be making a killing on SPDR / VIX / etc., depending upon what their specific vision told them.
March 18th, 2020 at 11:30 AM ^
I just bought into a broad equity index ETF this morning hoping for a short term bounce!
March 18th, 2020 at 11:28 AM ^
I'm getting killed like everyone else and have no special knowledge. That said, the markets were over-valued before all of this and we are just at the beginning. I took some money out and put it in money markets at 23,000ish (Friday), but my wife made me keep most of it in. They say don't touch your face or your 401k....
SWAG is that it goes down to 17 or 18k over the next 2-4 months. I think 14,500 will be a psychological barrier that it won't fall below (half the peak). Average my guest with a few thousand others and you'll get a good estimate. ; )
If Trump can STFU and let Mnuchin be the face of the economy we'll fare better.
March 18th, 2020 at 11:37 AM ^
Mnuchin should not be the face of anything.
He's one ugly dude.
It looks like he has night crawlers for lips.
Obviously Mr. Putingrad you have no ability to evaluate male looks. Mnuchin has a very pretty wife. How can that possibly be explained unless he, also, is a handsome man? Ergo, Mnuchin is handsome and you don't know what you're talking about!
Marvin just made you his bitch!
Didn't you pick him?
March 18th, 2020 at 11:40 AM ^
I mostly agree. Demand is absolutely going to collapse in the short to medium term; I just saw gas for 1.75.
Pretty much the entire service industry is going to be unemployed for at least several months and whatever the government send them won't be enough.
Finally, we lowered interest rates for no reason last year to try to keep the party going. Now the fed has no where left to cut.
This has the potential to be worse than 08 if not properly managed.
March 18th, 2020 at 11:44 AM ^
1.69 at Costco yesterday...man when has gas been this cheap?
March 18th, 2020 at 11:59 AM ^
I bought this huge gas storage tank I found on line. I have been burying it in my back yard. Clay is tough going.
I am stocking up on gas while it’s so cheap and plan to triple my money in about 6-12 months.
My neighbors btw are such a pain in the ass.
March 18th, 2020 at 12:12 PM ^
Pretty sure you are joking, but if not, you probably want to make sure you are meeting federal, state and local requirements on that.
March 18th, 2020 at 12:21 PM ^
I think I saw this in an episode of Its Alway Sunny, and it didn't end well for the gang.
Now I have to buy a tall fence. Great ideas. Hidden costs.
WILD CARD!!!!!!!!!
March 18th, 2020 at 12:19 PM ^
It's been a while, but that used to be the norm. When I first moved to Texas in 1999, gas was under 80 cents a gallon locally.
I'm an old guy. I remember seeing it on the East side of Detroit for 19.9 cents per gallon in the late 60's.
27 cents in 1967 is $2.09 in today's money.
This Dow 15,000 article appeared on one of my sites just now. This totally f#@$@#ing blows.
March 18th, 2020 at 11:29 AM ^
I'm no market expert by any stretch of the imagination, but it'll come back eventually. We are not living in the end times. The question is just how far the market will continue to plummet, and until we see any kind of peak or consistent reduction with the virus infection rate, I don't think you're going to see anything other than consistent drops.
All I'd tell you is don't look at your 401K or stock portfolio for a while, and then more importantly, don't panic and start selling off everything. Have to remember that in all of this there is a HUGE buying opportunity (if you have the cash to invest, of course). Buy low now and bank on the eventual market surge once we get out from under this. Do you want to position yourself well for when this all gets turned around? I can't tell you when it will turn around, but eventually, it will.
March 18th, 2020 at 11:29 AM ^
Going to crater to a low in June sometime is my guess.
March 18th, 2020 at 11:34 AM ^
I think the crisis may end within 8-10 weeks in each geographic area of the US similar to what China saw...not really sure it was China's provincial quarantine or perhaps the virus just burned itself out by people becoming immune who had the virus without knowing it, beat it, then were no longer able to be carriers.
March 18th, 2020 at 12:04 PM ^
Sooner than later the healthy and the strong need to get back to living life and supporting this country. That may mean the at risk patients need to self quarantine. Right now is about keeping the curve down.
The market will come back. Don’t mess with long term plans. If you have cash there is opportunity.
March 18th, 2020 at 12:04 PM ^
It was definitely the quarantine, less than 1% of Wuhan's population got it in the end. The big question will be if it flares back up as restrictions are lifted.
We should start seeing peaks in new countries 10-14 days after extreme social distancing went into effect (Italy has leveled off over the last few days in a great sign if that holds) and then will likely have to keep measures in place for 2-3 weeks post that period. So you are talking late April early May as a best case scenario to things going back to normal. What the market does is a giant question mark in my opinion. I think it could trigger a sustained recession or we could see a sharp v if spending goes back up pretty quickly.
March 18th, 2020 at 12:40 PM ^
I think longer. Seems cases of Covid are on the rise again in Asia, meaning their reduction was simply because of the unsustainable measures they put in place. Now that they are opening things back up, boom, more cases. So, the supply chains will once again get strained. We are at the beginning of this.
March 18th, 2020 at 12:58 PM ^
Where are you seeing a rise in Asia? Singapore had 22 new cases but 17 of them were imported from european infected areas, not local transmission. Same with China importing more new cases than for local transmission and SK is trucking along at the same rate they have been.
The problem is that it is just going to continue to circulate around the world until we develop a vaccine.
I read it today. I believe USA Today.
Edit:
https://www.thedailybeast.com/coronavirus-cases-resurge-in-asia-crushin…
March 18th, 2020 at 11:32 AM ^
The last crash took about 9 months to hit rock bottom (40-50 percent off from the peak). This one has taken less than a month to lose 30 percent or so.
I suspect there are no historical precedents for what is happening now, so just about anything anybody says is pure guesswork. There are logical tops and bottoms for each stock (often the logical bottom is 0, of course) but prices don't always follow logic.
Here's the best chart I could find of the 2008 crash. Notice how it was really 3 crashes and 2 failed rallies.
March 18th, 2020 at 11:48 AM ^
The decline pre-Feb 2009 looks alot like the current charts with step ups & downs by a continuous drift down.
It's all about finding a treatment or a vaccine. We have vaccines for other coronaviruses and there is little reason why we won't have one for COVID-19. It just takes time. Financial markets will reflect the impact of this disease until we get a handle on how to deal with it. Quarantine is only a partial solution because of the likelihood of reintroduction of infection. Shutting borders may be a necessary step to control the disease but the financial impact long term is still heavy.
If nothing else, it's time to realize that disease is not much different than a war, it is an invasion that society must fight and we should spend the resources to do serious development on vaccines that fight whole classes of disease. Some money is being spent on such research but after COVID-19, it is time to spend the billions necessary to find new treatments and cures.
Very good info; no guess work here. That event still had a V-shape to it. Being a financial crisis event, the recovery was slower. That was due to the policy of lots of red tape and several other restrictions and over regulations that limited growth after the bottom was hit.
Another V-shape is store this time around but with a likely more rapid recovery due to lack or regulations and red tape that will spur the economy.
What are you talking about? It was the lack of regulation and red tape that caused the '08 financial crisis. You believe that there should have been further reductions to regulations or status quo? It was the lack of credit and market confidence that kept growth low after the recession.
March 18th, 2020 at 11:32 AM ^
i am simply stepping on the gas and upping my 401 k contribution/setting aside weekly allocation to buy into the market and will continue to scale/cost average in over the coming months
Another good thing to do is to convert partially your traditional IRA to Roth.
Also, change your 401K contributions from traditional to Roth if your employer has that option.
The market's rebound will produce an exponential increase in the Roth balance available tax free at retirement.
That's brilliant! Never thought I'd get that kind of advice on this board, let alone from someone that used to live in that Quad (me too)!
You will pay taxes on whatever money you covert to the Roth. I'm not a financial expert at all, but it is a bit of a shell game.
If you invest $1,000 tax deferred & get a 10% return compounded for say 3 years ($1,000 x 1.1 x 1.1 x 1.1) you will have $1,331. If you withdraw it without penalty (after 59 1/2 years of age) & are in a 30% tax bracket, ($1,331 x .7) you will end up with $931.70.
If you pay the taxes up front for a Roth & you invest $700 after tax ($700 x 1.1 x 1.1 x 1.1) you will end up with $931.70.
If you work it out just right, you can withdraw it after you retire when you're in a lower tax bracket, furthering the case for deferring the taxes.