Why I believe we are about to embark on a historic bull market run

[Lsbcal]

Option prices will fluctuate throughout the time period, however far out of the money options fall quickly with time as the rise becomes more unlikely. Moves up can frequently double an out of the money call option.

The most likely outcome by far is to lose 100% of my money - probably based on market pricing 199 out of 200. Based on stock market history less than that,

Thanks Running_Man and bmcgonig for your explanations. I kind of got the picture now.

 

[pc95]

Well this guess nosedived last week.

 

[copyright1997reloaded]

Well this guess nosedived last week.

Yes, but perhaps by less that you realize. OP's post was on 12/19. On 12/18 SPY closed at 318.59. It is 309.09 as of today's close, or down 2.98%. (This doesn't count the 1.57 dividend on 12/20/19, which would reduce the loss to 2.81%).

I have no idea what the options have done (too lazy to look them up) but there is plenty of time left on the one year (now 10 months?) call options.

OTOH, s*it happens. The virus is an external shock to the system and likely to have negative effects (at least for awhile).

 

[pc95]

Yes, but perhaps by less that you realize. OP's post was on 12/19. On 12/18 SPY closed at 318.59. It is 309.09 as of today's close, or down 2.98%. (This doesn't count the 1.57 dividend on 12/20/19, which would reduce the loss to 2.81%).

I have no idea what the options have done (too lazy to look them up) but there is plenty of time left on the one year (now 10 months?) call options.

OTOH, s*it happens. The virus is an external shock to the system and likely to have negative effects (at least for awhile).

Its not just the negative effects - its the unknowns involved which are plenty.

 

[Totoro]

If the S&P drops 30%, you have to pay a higher price than market value, and you lose.

I use cash covered puts to basically force myself to avoid market timing: calling the bottom (or top) is impossible, but automatically buying when a discount is there can be done.

It's an alternative to fixed time buying (e.g. rebalancing every half year), and I get paid for doing basically nothing in the interim.

I do wonder if this approach can outperform time based rebalancing, any references or analysis you've seen there?

 

[NW-Bound]

Option prices are extremely volatile, particularly in turbulent times like right now. The intraday price swing is large, and a lot depends on the timing and execution. There's really no way I can see how anyone can back test any strategy.

I can be quite certain that my current covered call options with expiry of 3/20 will be all worthless, and I can sell more options for April to get more cash to partially make up for the loss on the stocks.

Regarding selling cash-covered puts, I will not be doing this until I can be sure that all the bad news stop coming. At some point, I will be doing that, or I can also buy more stock outright.

 

[Fermion]

Are you still holding the CCL puts? I bet those will be up tmrw. I think now CCL is going to drop below $20.

 

[NW-Bound]

Still have 1/2 of the contracts I bought. Expiry July.

I also got some MAR puts. Also expiry July.

Not a lot of money here. Even if the stocks go to 0, it's still peanuts compared to my loss on the long positions.

 

[brewer12345]

I had GTC limit orders of $5 a share on my small outright short positions on NCLH and CCL. Cancelled them tonight. Tomorrow may be messy.

 

[Fermion]

I don't think CCL will go to $5 anytime soon, is that what you were thinking? They will likely cut the dividend fairly soon and maybe drop below $20 in the next few days (or hours?) but there would be speculative buyers way before $5. Heck I would probably dip my toe in at $10 or $15.

They have a rich large owner so they might do what LVS did in the financial crisis. Remember it went to $1 a share then recovered to $40.

 

[brewer12345]

I don't think CCL will go to $5 anytime soon, is that what you were thinking? They will likely cut the dividend fairly soon and maybe drop below $20 in the next few days (or hours?) but there would be speculative buyers way before $5. Heck I would probably dip my toe in at $10 or $15.

They have a rich large owner so they might do what LVS did in the financial crisis. Remember it went to $1 a share then recovered to $40.

Covering at 1 would suit me fine.

Realistically, CCL is the one most likely to survive of the three public companies. I am not so sure the stock price will stay in the double digits, though.

 

[Fermion]

I would just worry that their beneficial rich owner, who has something like 25% stake? might arrange a $2B emergency loan which could keep them going easily until next year when this virus is old news.

Of course JF tried this with Seadrill and it failed miserably.

It will be interesting to watch from the sidelines.

 

[brewer12345]

Could be. Or it could be that he lets the share price do whatever for a while until he restructures the company to benefit himself. CCL is the one I will look to cover promptly. NCLH, OTOH, I think is a realistic bankruptcy case.

 

[Dogpeace]

Could be. Or it could be that he lets the share price do whatever for a while until he restructures the company to benefit himself. CCL is the one I will look to cover promptly. NCLH, OTOH, I think is a realistic bankruptcy case.

I've taken many cruises and absolutely love the business, but the model may not be sustainable in my opinion. Here's why:

1) Viruses - this is nothing new. Norovirus was already extremely common. It's spread by feces, and with the latest model of unlimited alcohol packages, I have personally seen a lot of incontinent people drunk out on deck. It happens to the best of us.

2) Labor - the model depends on paying low wages to support low prices to consumers. However, wages for the staff have been and will continue to rise. This means the cruise lines need to charge more and more to consumers, and they get really sneaky about how they do it, but trust me, it is happening.

3) Size - ships are getting larger and larger to support go karts, zip lines, and other nonsense that does not belong on a ship. This gives economy of scale but turns a cruise vacation into something like a cross between a NASCAR race and standing in line at the DMV. Works for some but not so much for others.

4) Crisis - this coronavirus is a good example, and could idle entire fleets for some time. This will impact employees who will be let go (contracts cancelled) and the ships mothballed for some time. The costs will be devastating. Thankfully it has not happened yet but another big risk is a terrorist attack. If that ever did happen and thousands were killed, few people would ever choose to get on a mega ship again.

 

[dixonge]

Yes, but perhaps by less that you realize. OP's post was on 12/19. On 12/18 SPY closed at 318.59. It is 309.09 as of today's close, or down 2.98%.

Now sitting at 280. Not sure what that means percent-wise...

 

[Running_Man]

Now sitting at 280. Not sure what that means percent-wise...

It means this thread didn't age well, a 1% portfolio hit for me on the options.

 

[2177V]

The market has fallen 1900 points today! Sounds like you jinked the stock market for your prediction! Next time you make a prediction, I will do the exact opposite.

In fact, I actually did.

I re-allocated from 60/40 to 100% treasuries in the Summer of 2019. For me...this is my best bear market ever.

 

[bmcgonig]

The market has fallen 1900 points today! Sounds like you jinked the stock market for your prediction! Next time you make a prediction, I will do the exact opposite.

In fact, I actually did.

I re-allocated from 60/40 to 100% treasuries in the Summer of 2019. For me...this is my best bear market ever.

RM just said that he's predicting he's not going to jump off any cliffs anytime soon.

 

[Markola]

I have come to believe that the stock market is set to soar to unbelievable heights over the coming 2-5 years, ending with the S&P 500 somewhere around the 12,000 range. This has come to me after ruminating and watching multiple times a Mike Green one hour video...

Somewhere, Jack Bogle sheds a tear.

 

[ERD50]

Somewhere, Jack Bogle sheds a tear.

Yep. RM should put a link to that post in his sig. I see other people lavishing him with praise for his market forecast insights! Make enough predictions, some are bound to turn out!

Then again, 2-5 years is a long way out yet. But I saw nothing in his post about this kind of volatility along the way.

-ERD50

 

[Running_Man]

Yep. RM should put a link to that post in his sig. I see other people lavishing him with praise for his market forecast insights! Make enough predictions, some are bound to turn out!

Then again, 2-5 years is a long way out yet. But I saw nothing in his post about this kind of volatility along the way.

-ERD50

I did make clear I was only taking 1 percent of my portfolio and buy stock options, not increasing my stock allocation and I did think a big move up was a possibility, and actualy this year we have had the largest one day move up in the history of the stock market. But I sold all my stocks on March 5 as I realized we were in the alternative view, I take it you did not watch the Mike Green interview nor note this in my initial post:

IF this occurs the truly difficult thing to do is to sell before the end of the bull market, because once the selling begins there is no value hunters to absorb the supply but that is a discussion for the future. The alternative view that the passive investing tipping point causes an immediate decline seems incredibly unlikely as the Federal Reserve seems clearly interested in maintaining stock market increases in fixing the problem with pension funding and hoping to proved some inflation to offset other debt problems.

While I did not think it likely it is clear this is wear we are and there are not enough value buyers to absorb supply, which is why the atock market had the fastest drop from a top in the history of the United States. It has been truly historic with massive swings up and down.

 

[almost there]

How else can they justify zero% interest rates
(next week?) with unemployment at 50 year lows?

 

[2177V]

People can watch Mike Green.

I watch Jeffrey Gunlach (aka Bond King). Jeffrey's net worth is now $2 Billion from $0 as a former drummer in a band. IMO...Jeffrey is doing something right.

What is Mike Green's net worth? Is Mike a billionaire?

Here is the video that caused me to re-allocate from 60/40 to 100% treasuries in 2019.

Thanks to Jeffrey Gundlach my portfolio was in an a capital preservation mode when the crash occurred. I intend to buy equities at Rock Bottom prices so this is my best bear market ever. Thank you Jeffrey! No thank you Mike!

 

[Markola]

People can watch Mike Green.

I watch Jeffrey Gunlach (aka Bond King). Jeffrey's net worth is now $2 Billion from $0 as a former drummer in a band. IMO...Jeffrey is doing something right.

What is Mike Green's net worth? Is Mike a billionaire?

Here is the video that caused me to re-allocate from 60/40 to 100% treasuries in 2019.

Thanks to Jeffrey Gundlach my portfolio was in an a capital preservation mode when the crash occurred. I intend to buy equities at Rock Bottom prices so this is my best bear market ever. Thank you Jeffrey! No thank you Mike!

When will you place your next big bet?

 

[2177V]

When will you place your next big bet?

In about 7 to 10 years after the next bull market. My entire investment strategy is to avoid the bear market because I was aware that a single decision can make a HUGE difference in your portfolio. Otherwise, I am like most investors who makes money during the bull market. Going into a capital preservation portfolio of treasuries after the yield curve inverted made sense to me. When was the last time you heard people losing money with treasuries? They may under-perform but rarely lose money. I was looking for signs to pull out and found them from Jeffrey Gundlach. Most inexperienced investors do not look for those signs and tend to miss them or ignore them. Granted the coronavirus was a black swan but black swans occurs all the time.

I intend to rotate back to equities as follows: 10% drop means 10% equities/90% treasuries, 20% drop means 20% equities/80% treasuries, etc. No guessing where the bottom will be. Just a systematic reallocation to catch the recovery spikes. Since I am buying equities at dirt cheap prices, I will be making money during both a bull market and a bear market. This separates me from the average investor.