I'm not one to wear a tin foil hat but

[ExFlyBoy5]

Seeing what the stock market is doing, I'm becoming increasingly disenchanted with the stock market.... the disconnect between the market and economy is concerning as is the Feds propping up the market and the percentage of trading that is "software programs trading with other software programs". At some point I'll probably buy some long-dated SPY LEAP calls to quell my FOMO, but my appetite for direct investment in stocks is negligible at this point.

+1. I was perusing CNBC a little while ago and the economic figures and the news (of which all is bad except the Gilead story) sure don't seem to matter when it comes to what the market is doing today. There really seems to be absolutely no rhyme or reason to what the market is doing. I am doing my best to sit on my hands, but it's not very easy some days.

 

[OldShooter]

... I am doing my best to sit on my hands, but it's not very easy some days.

Stop watching.

 

[Winemaker]

If you expect the market to be higher in 5 or 10 years out, why wouldn't you be buying at these prices? Yes,there are going to be ups,downs, peaks, valleys, cliffs, mountains along the way, but aren't those risks always there?

 

[statsman]

Funny enough, the results for remdesivir were not that great. The big news is that they reached the end point in one of their studies. I agree that this is being pumped to try to "restore" business and consumer confidence that a treatment is soon available. I for one hope it works because we need a treatment and soon. But their paper, although positive, has some gaps.

From their own release:
Remdesivir is not yet licensed or approved anywhere globally and has not yet been demonstrated to be safe or effective for the treatment of COVID-19. This study sought to determine whether a shorter, 5-day course of remdesivir would achieve similar efficacy results as the 10-day treatment regimen used in multiple ongoing studies of remdesivir.

The reason for the 5 day test is that the drug is hard to manufacture and they could double the amount for dosage by using a 5 day regime rather than the 10 day.

Looking further, there is still no placebo group study completed yet and those put on the drug were in the "mild" catagory and may have gotten better on their own. Without a placebo study this is anecdotal.

Hearing that the source materials for remdesivir are sourced exclusively from China (trying to find a link to the article), I don't have a warm fuzzy about this, given how the whole pandemic started in the first place. Next up?

 

[ExFlyBoy5]

Stop watching.

I rarely watch CNBC (or look online). I have been limiting myself to 30 minutes of news in the morning and that's worked well for my sanity. However, when I see a 3% (or greater) move in the market in a matter of hours, I can't help but look at what *might* be driving it. And yet again, there doesn't seem to be a good reason. Also, I am quite fortunate in the my pension covers all our expenses, so I am not extremely concerned about my holdings..just not a very big fan of the uncertainty.

 

[ER Eddie]

It does seem pretty random. I retired 9 months ago, not too long before the crash, and my portfolio is up; I've "made" something like 70K. One of the worst economic catastrophes in the past few decades, or so I hear, and I'm making money? It doesn't seem right. I'm not complaining, just scratching my head.

 

[COcheesehead]

The trend is your friend.

Don't fight the Fed.

 

[Dtail]

The trend is your friend.

Don't fight the Fed.

And that's it in a nutshell. Plus probably some well placed conversations with Wall Street that we won't let the market drop again in any severe way.
However if Main St is still in a funk 3-4 months from now, perhaps the Fed will then take the foot off the accelerator.

 

[atmsmshr]

The trend is your friend.

Don't fight the Fed.

There is certainly some trend momentum going on right now; it won't last.

The Fed is only loaning money to worthy businesses and that has to be paid back. The more they borrow - the more to pay later. Anytime they loan the enterprise has to appear fiscally sound - by law, but still subjective. The Fed has promised some asset backed purchases if needed - but no one has bit on the offer because the credit markets resumed functioning after Powell put up a wall of money for everyone to see.

The Treasury - Steve Munchkin with congressional authority can choose to grant money to those business that appear will survive. The Fed can't do grants.

Both the Fed and Treasury are picking supposed winners and losers, but the alternative is to look into the pit of despair.

At some point, the businesses that are destined to fail will enter bankruptcy and hopefully reorganize in a slimmer version after giving creditors, suppliers, bondholders a haircut - and wiping out shareholders.

Those that survive and took loans from the Fed, or raised capital on the markets - will eventually have to future reduce earnings to pay back the money.

Example - Scared people and laid off hourly workers don't fly on vacation and less fuel is used. Results: Saudi Prince won't turn off the oil spigot and more layoffs in Houston. Delta suspends flying and sells airplanes to raise capital and signs lease back agreement. GE aviation buys the planes at a discount, but because Delta is not flying they are not buying new jets by Boeing with GE engines. A smaller Delta won't renew leases and GE aviation is now stuck with non-flying planes and no customer orders from Boeing. Urk for GE, stockholders and bondholders because the music stopped and they don't have a seat.

 

[Montecfo]

+1. I was perusing CNBC a little while ago and the economic figures and the news (of which all is bad except the Gilead story) sure don't seem to matter when it comes to what the market is doing today. There really seems to be absolutely no rhyme or reason to what the market is doing. I am doing my best to sit on my hands, but it's not very easy some days.

Again, the market is trading on sentiment and covid news. GILD news is huge, hence we are up big.

Bad news about the economy now or in the past is baked in the cake.

 

[Scratchy]

the disconnect between the market and economy is concerning

It seems the worse the news is, the higher the market goes. I have switched to bonds as far as I can go without incurring capital gains on sales, now about 45:55. Plan to stay there for the rest of my life. Admittedly that's what I said when I was 65:35......

 

[BeachOrCity]

Speculating on this is probably not helpful but I think I understand what a big part of the market recovery to date is..........

the obvious one is the FED. The not so obvious one is the withdrawal of earnings guidance from just about every company (except the few who will benefit from this such as AMD etc).

Since there is no earnings guidance, all the "modeled" trades don't happen based on future guidance. All they have to use is past earnings, and what analysts say which (IMHO) for 2020 is still pretty optimistic. So given no guidance, it will be until sometime in 2H20 that the market (starts to) understands the actual earnings impact, and even then if no guidance, the market may continue to trade like 2019 like EPS is just around the corner.

I still think the downside risk is much more than upside potential at the current S&P level. And I thought this at 2500 much less 2900.

Even with CARES and FED support, the new debt is still debt, and will hobble the companies who needed it for years.

IMHO the only white swan that can save this mess (economically) is some miracle treatment in 2020 (thats not the Gilead drug IMHO), or if widespread testing somehow demonstrates that mortality / major illness is much lower % of people than we think / thought it was.

As for me, the people with balanced portfolios who didn't touch a thing are a bit ahead of me at this point in time......oh well

 

[11522914]

Tin foil hat back on again

Over 30 million unemployed. What news will come out today to counteract this horrible news.

I'm sure the market agrees that all these workers will be back at work within the next 6-12 months and companies earnings will skyrocket. Should be a nice strong upward move later today after the fed announces another 10 trillion bailout.

Sorry if my frustration shows. End of sarcasm rant.

Tin foil hat off.

Don't get me wrong. I don't wish this economic calamity on any country and hope everything gets back to normal asap. Just don't see it though.

 

[targatom2019]

^^^^^*you got it, DOW 30k by December 2020. Markets already looked pass next two quarters.

 

[Montecfo]

Tin foil hat back on again

Over 30 million unemployed. What news will come out today to counteract this horrible news.

I'm sure the market agrees that all these workers will be back at work within the next 6-12 months and companies earnings will skyrocket. Should be a nice strong upward move later today after the fed announces another 10 trillion bailout.

Sorry if my frustration shows. End of sarcasm rant.

Tin foil hat off.

Don't get me wrong. I don't wish this economic calamity on any country and hope everything gets back to normal asap. Just don't see it though.

This news was no surprise. It is baked in.

 

[RetireAge50]

Sweet! 30 Million deadbeats off the payroll. Profits should rise. [emoji51]

 

[11522914]

This news was no surprise. It is baked in.

Thanks for the reply Montecfo.

At what point would you say the unemployment figures are not "baked in".

35 million, 40 million, 50 million??

 

[Gumby]

I read threads like this and wonder if there is some purity test for making money in the market that I just don't know about. If the market has moved up over the past month for what someone deems to have been the incorrect reasons, have I actually not made any money in the market this month? To my simple mind, if I have more money than I had a month ago, that is a good thing. Doesn't really matter to me how it happened.

Oh, but you say this is all a fake sugar high and the market will crash and burn at some unspecified point in the future. Maybe it will. Probably it will. Markets go both ways. But don't you think we should cross that bridge when we come to it? If you are so concerned and so prescient, then go to cash and stay there. You'll be rich. Why the need to tell the rest of us that this is a big fake out and we're really not making money? I have never understood the need to do that.

 

[OldShooter]

Thanks for the reply Montecfo.

At what point would you say the unemployment figures are not "baked in".

35 million, 40 million, 50 million??

Not @Montecfo but I'll give you a view on that question. I believe that the Efficient Market Hypothesis underlies all market pricing. That is, the EMH price is a market consensus that reflects all available information, public and insider. So the EMH price would continuously reflect whatever information was available on unemployment and everything else that is relevant.

Game not over yet, though. There is also a behavioral finance component to pricing. I think the tech bubble, "irrational exuberance," etc. are kind of like the frosting on an EMH cupcake, except they can push the price above or below the EMH price. Here is a worthwhile video of the two key guys, both Nobel winners, discussing the question: https://famafrench.dimensional.com/videos/are-markets-efficient.aspx

IMO in times like this, the amount of gloom or frosting that human behavior puts on the cupcake is so uncertain that I'm not interested in playing the game. I prefer Bogle's suggested tactic: "Don't just do something. Sit there." That said, some people will get lucky betting on volatile prices. They will post here. The people who don't get lucky probably won't post.

 

[brewer12345]

I read threads like this and wonder if there is some purity test for making money in the market that I just don't know about. If the market has moved up over the past month for what someone deems to have been the incorrect reasons, have I actually not made any money in the market this month? To my simple mind, if I have more money than I had a month ago, that is a good thing. Doesn't really matter to me how it happened.

Oh, but you say this is all a fake sugar high and the market will crash and burn at some unspecified point in the future. Maybe it will. Probably it will. Markets go both ways. But don't you think we should cross that bridge when we come to it? If you are so concerned and so prescient, then go to cash and stay there. You'll be rich. Why the need to tell the rest of us that this is a big fake out and we're really not making money? I have never understood the need to do that.

I think what you are seeing is those of us who can't square market prices with economic reality trying to figure out what they might be missing and expressing frustration. Simple as that.

On the other side of the table you have a chorus of true believers telling us the market is always right and everyone else is always wrong. Clearly this does not jibe with reality, but the tape loop continues to repeat the comforting falsehood.

 

[11522914]

I think what you are seeing is those of us who can't square market prices with economic reality trying to figure out what they might be missing and expressing frustration. Simple as that.

Thank you Brewer. That is exactly what I'm experiencing.

 

[steady saver]

Stop watching.

ha
I've actually done just that. While I'd decided to move in and "do something" after fretting so much, I instead determined that I was tired of the drama. So I've not been following the news nearly as much as I was, not been checking my accounts but maybe once a week if that, and have even been on this forum less. Not because i don't like you all, but because I've been doing other things. And you know, the news keeps going on, the market keeps changing its mind and I am getting a bit more sleep and some projects done.

Thanks Old Shooter...

 

[Gumby]

I think what you are seeing is those of us who can't square market prices with economic reality trying to figure out what they might be missing and expressing frustration. Simple as that.

On the other side of the table you have a chorus of true believers telling us the market is always right and everyone else is always wrong. Clearly this does not jibe with reality, but the tape loop continues to repeat the comforting falsehood.

That is as good an explanation as I have heard.

This is not a recent phenomenon. At least once or twice a week from March 2009 until January 2020, I heard one talking head after another on CNBC telling me why the market gain was all a farce, entirely due to the Fed juicing the economy and not to be trusted. Often, those reports would be posted here. And the whole time I was making a boatload of money. The guys appearing on CNBC have businesses to run and their own book to talk, so I understand their motivations, but I never understood what was in it for the ordinary guy.

I also agree that the market is most certainly not always right. If we believe that the value of a stock generally represents the discounted value of a future stream of income, at some point the market has to be tethered to health of the underlying economy. And it doesn't appear that is the case right now. But I can't make money directly from the underlying economy, only from the market, so I'll take my gains how and when I can get them.

 

[Dtail]

Thanks for the reply Montecfo.

At what point would you say the unemployment figures are not "baked in".

35 million, 40 million, 50 million??

What were there around 150 million jobs.
So if the estimate is 140 million are out of work, but the actual number comes in at 137 million, boom markets go up. That's all.........

 

[11522914]

IMO in times like this, the amount of gloom or frosting that human behavior puts on the cupcake is so uncertain that I'm not interested in playing the game.

Thanks OldShooter. I just watched the video and now more confused than ever.

I like what you said quoted above. I'll just sit this one out for now. I'm only at 8% equities right now, looking to increase that to 35%.

I even have a plan to increase my holdings through purchasing the SPY and certain stocks I like. I like to sell puts at certain levels. If I get put the shares then my average cost is reduced. If not I keep the premium. I honestly feel more comfortable buying equities this way. I sold some SPY puts fully expecting to get the shares but the market turned and went up quickly. Kept the premium but missed buying shares. The inherent problem with my system.

Oh well, thanks to everyone that responded.