Do you think Dow 18,000 was the bottom?

Interesting tidbit caught my ear while eating lunch and watching the Halftime Report on CNBC today when Josh Brown was asked about the apparent disconnect between the stock market which is allegedly forward looking and what is going on economically, the high level of unemployment, a potential second wave of COVID and the 2020 election.... Josh responded that a lot of what we see in daily trading activity is just "software programs trading with other software programs".
 
Last edited:
pb4uski said:
Interesting tidbit caught my eat while eating lunch and watching the Halftime Report on CNBC today when Josh Brown was asked about the apparent disconnect between the stock market which is allegedly forward looking and what is going on economically, the high level of unemployment, a potential second wave of COVID and the 2020 election.... Josh responded that a lot of what we see in daily trading activity is just "software programs trading with other software programs".
Click to expand...

And just wait until quantum computers get in the game.

Coming technological advancements in AI, quantum computing and the like are one of several reasons why I'm so bullish. Those advancements may portend societal disruptions related to jobs and such, with uncertain outcomes. But as a matter of sheer technological innovation and improvements, I suspect that if we could teleport ahead only a decade -- to 2030 -- we'd be astonished at the then state of computing and penetration of machine learning in vast stretches of society, and well beyond our wildest imaginations today.
 
pb4uski said:
Interesting tidbit caught my eat while eating lunch and watching the Halftime Report on CNBC today when Josh Brown was asked about the apparent disconnect between the stock market which is allegedly forward looking and what is going on economically, the high level of unemployment, a potential second wave of COVID and the 2020 election.... Josh responded that a lot of what we see in daily trading activity is just "software programs trading with other software programs".
Click to expand...

I've been wanting to ask you your thesis/theory for this disconnect. Josh Brown gave his thesis/theory as program trading. Do you think he's essentially right, or are there other things that you think are going on? Do you think it's the Fed and FedGovt put? The masses exhibiting irrational exuberance? I'm throwing out examples of the kind of answer I'm looking for in order to be clear about what I'm interested in - I'm not trying to put words in anyone's mouth (including yours) or take any disparaging view of anyone's opinion or theory.

It seems I am in the minority who thinks that the market has things approximately right currently, and I'd like to understand from someone I respect and someone who is of a different opinion (I think that's safe to say) so I can learn.

I'm not asking why anyone thinks the market will go down - there are plenty of reasons to think it might. I'm also not asking why anyone thinks the market will go up - there are reasons for that as well. What I'm wondering about is why people here - several on this thread I think - think the market currently has it wrong. One can sort of generically say, "Well, the market isn't accounting for awful fact X" - OK, but why hasn't the market accounted for awful fact X? Is the market or its participants not smart or not well informed or being manipulated or ...?

I'm genuinely interested in everyone's opinion on this question.

Please and thank you.
 
Last edited:
SecondCor521 said:
It seems I am in the minority who thinks that the market has things approximately right currently, and I'd like to understand from someone I respect and someone who is of a different opinion (I think that's safe to say) so I can learn.

I'm genuinely interested in everyone's opinion on this question.

Please and thank you.
Click to expand...

I’m in. And happy to join you in believing the markets have it right. Am I right? Who knows. This is my argument, however:

1. A largely free market, even if wrong, is the best we have.

2. Even if the U.S. stock market isn’t “largely free,” it is what we have and I will happily support it. How many millionaires and billionaires has it created? And in saying that, I don’t believe wealth is a measure of fulfillment or success. As I age, I have come to question the pursuit of wealth beyond that which is necessary to live. I know a lot of miserable wealthy people. I know a lot of carpenters that I admire.

3. I have no problem with machines trading with machines. My iPhone is smarter than I am. The line between Homo sapiens and machines is blurring daily, and has been for decades (see, e.g., biomedical engineering).

4. At the end of the day, this is a statistical issue. The market is a convoluted mess of countless individuals and machines taking a view of the future. The market is a statistically valid sample under all scenarios of which I am aware. Those arguing that the market is missing something have an uphill climb arguing the contrary.

5: It is hard for me to imagine a future that is bleak. I hope I am alive in 2050. Folks alive then will be better off than us, same as we are better off than those alive half a century ago.

Having said all of the above, I am likely wrong.
 
WyomingLife said:
You are certainly right. Or not. I am comfortable in my uncertainty.

In the meantime people like me are buying as people like you sell.

Please continue.
Click to expand...

Because uncertainty is such a great buying signal. Interesting.
 
A massive bubble has formed in the market among the top weighted stocks of the S&P 500 Microsoft, Apple, Amazon, Google, Facebook. The weighting of those stocks combined is higher than the combined weighting of the bottom 350 stocks in the S&P 500. This is why it appears that the equity markets are disconnected from reality. Funds, which number more than stocks, are crowding into a small group of stocks to drive up the markets. Like all bubbles, this one will pop. It's just a matter of time.
 
SecondCor521 - IMHO a lot of the disconnect is perspective and lack of forecasing.

On one hand, I tell my 20ish children to DCA and buy low cost USA index with a small dash of international and stay 100% stocks for the next 25 years. Don't peak at the balance. Ignore what is happening today and don't time the market.

(On the other hand, DW and I are retired and not going back to work. So our risk tolerance is less and timeline shorter. My current actions would not apply to the next generation at their age. Previously, I was uber risky and 100% equity during my working career until 2 years ago.)

So a lot of 'automatic' stock market buying is going on with the younger set each paycheck. After all, it was not the laid off hourly workers who were stuffing money into 401ks. And for all age groups, more automatic buying from pension fund managers and from lifecycle funds that have target bands rebalanced. That's a lot of moolah coming in, particularly when those funds have a retriggering of bands to balance. The automatic buying is a steadying effect.

Credit crunch effects have a downdraft. Corporations raising cash will not do stock buybacks if they think dividends are going to be cut. And corporations will definitely not buyback if they are on the hook for a Treasury or Fed loan. But this is the big unknown. The Fed supporting paper for the 'fallen angels' was a very good thing - otherwise there may have been a sharp decline for equity of those companies not able to raise enough cash. Additionally, corporations starved for cash will start to cut matching 401k contributions - typically a company stock match.

Forecasting blindspots. Major corporations have withdrawn earnings forecast leaving analysts (and computer programs) stuck with the 4rth quarter forecast until earnings are announced or projected. And new projections will likely be less than a year out. 2nd quarter earnings will be worse than what is coming out now.

Bankruptcies. Remember in 2008 how long the financial market spinout took? Loan defaults, bankruptcies, foreclosures, liquidity issues, sorting out the mess of collateralized loan obligations pulsing through the legal, corporate and accounting systems? No one can accurately predict how that is going to turn out. For example - Oil war. 10% of the worlds oil tanker fleet sitting aside as storage tanks? Wells shutting in, loan and bond defaults, steel demand down expected 5%, housing foreclosures in the oil patches, bad loans on the books of credit unions and regional banks. That alone will take a year to understand the effects. What computer program can untie that knot today with any accuracy in forecast?

So IMHO a lot of what we see today is just automatic buying propped up by some who 'bought on the dip' and will soon have no reserves left for additional buying. Prompt backstop by the Fed to prevent a meltdown. Lack of earnings forecast leaves us (and the trading programs) flying in the dark without instruments in mountainous terrain. The broader indices more probably reflect what is going on since smaller companies may have less access to credit and smaller war chests than the big boys. When the PE numbers reflect what is happening, and more bankruptcies start rolling, look out below.

But what the hell do I know.
 
Last edited:
WyomingLife said:
You are certainly right. Or not. I am comfortable in my uncertainty.

In the meantime people like me are buying as people like you sell.

Please continue.
Click to expand...
And some of us are standing pat.
If I was a betting man I'd sell now thinking I'll be able to buy in later much lower.
But I'm not gambling. I'm investing with infrequent rebalancing.
I am waiting for another dip to convert to Roth some this year. Got to imagine we're going to see higher taxes soon.
 
I respect and admire Brewer12345. I'm a newbie in comparison, and not very smart.

I'm just trying to bring science and math into this.

Quantum mechanics, cosmology, physics: all based on statistical probabilities of where the photon is. Nobody knows where the photon is. The best that physics can do is a wave function of probability. And in that sentence is the current understanding of life.

Same for markets. And the machines influencing market trading are running statistical equations.

So for all of you that think the market "hasn't taken into account X", read some statistics. That's all I'm saying.

And if anybody knows where the photon is, you will win the Nobel Prize in Physics in some future year.
 
Last edited:
atmsmshr said:
When the PE numbers reflect what is happening, and more bankruptcies start rolling, look out below.
Click to expand...

+1. We are still in the early stages of this economic disaster. Unless the stock market is completely detached from reality, I see no chance for a sustained upswing anytime soon.
 
atmsmshr said:
SecondCor521 - IMHO a lot of the disconnect is perspective and lack of forecasing.
Click to expand...

Thanks for the thoughtful answer, atmsmshr. I appreciate it. Anyone else have other explanations for why the market is not properly setting price levels for all the upcoming bad stuff?

Another couple of categories for possible explanations as to why the market is "too high" that I thought of: the market is broken, the market is being rigged by someone(s) for some reason, or the people here are smarter than the rest of the market (I think this last one my son refers to as the exceptionalism hypothesis, but he may be referring to the reverse/inverse/converse).
 
I think it is a bunch of things that disconnect the stock market from the economy in the short-term. I seem to recall hearing that over 70% of daily trading activity is just traders and computers doing their trader thing... trying to catch a small profit here and there from stock movements. Easy money and low interest rates have been a large factor too as by pushing interest rates so low fixed income is relatively less attractive. And the concentration of the large caps as Freedom56 describes above.

I don't think it is retail investors thinking that they really want to be in stocks right now other than perhaps just following their AA.

To me the 15% or so that the market is down YTD does not adequately reflect the impact to the economy of the loss of 26 million jobs in the last month, business closures, etc. I think the economy is in a world of hurt and we just aren't seeing it yet... IMO worse than the Great Recession circa 2008 but hopefully not as bad as the Great Recession.

BTW, I hope that I am wrong and when the smoke clears we bounce back with a V recovery, but my reading of the tea leaves isn't that so I've gone defensive for now until the path out of this public health and economic mess is clearer.
 
Last edited:
I do understand why the market fell so fast, I don't understand reason for the bounce, but I did appreciate the opportunity to bail. In the tech bubble (00) I was caught flat footed, dumbfounded, failed to act and lost something like 65%. My current ira is only down 3% ytd, and is all cash.
 
^ Thanks, pb4uski.

I guess it didn't click until reading your reply that everyone has an opinion of the market, and we all get to decide if it's "too high" or "too low" from our own point of view. And it's that variation of opinion that results in trades and the ebb and flow of opinion that raises and lowers markets.

I guess I think that there's a lot of smart people here, and if the smart people here collectively think the market isn't pricing in all the upcoming bad stuff enough, then why is the market currently stupid. Because if we're the smart ones and we think it is too high, then who are all the dumb ones who are buying stock right now and keeping the market from dropping more than it has (i.e., down to what we smart folks would deem a fairly valued market)? And how did they get so much money if they're dumb? It would take a lot of money to buy up all the supply of stock from the smart people who are selling now, I think? Maybe everyone who wants to sell has already had a decent enough chance to do so over the past month or so.

(And to atmsmshr, I'm not calling our young investor kids who are just starting out and putting money in their 401(k)s and such "dumb". What they're doing makes sense; I'm just not sure that there are that many young people who are brave enough and secure enough not to stop their 401(k) contributions in the current level of uncertainty. I'm also not sure there's enough inflows there to prop up the supply of stock from those who think bad stuff is coming, but then again I have no way of measuring or even estimating those numbers in any reasonable way, so it's plausible.)

P.S. - I didn't get much sleep last night due to stress over a family member, so if I'm not my usual sharp-brained self, I claim fatigue. Also battling a sinus infection, so there's that.

P.P.S. - The other thing I forgot until just now is that I'm sort of an EMH LTBH low-cost broad-based index fund person, so I generally don't have to form an opinion on the current price level of the market. I just rebalance to my AA when my IPS says to, sell when I need to, and monitor my WR%. So I don't really need to know or think about if it's "too high" or "too low". Not bragging or being superior, I just am explaining why I was briefly perplexed - it's because I'm a valuation newbie or ignoramus, take your pick of terminology.
 
Last edited:
As I posted earlier, very reputable London's Imperial College gave reports to GB and US Governments on their study of current pandemic with prediction that workable vaccine could be developed in 12 to 18 month. You can bet on Market recovery at hand or diving back to 18,000 but until the vaccine is here there is no recovery. Meanwhile most Governments do everything possible to pump fiat money into financial systems of their countries to prevent collapse while economic shut down or huge slow down what makes people feel less confidence in those currencies and force investors to look for various assets in order to preserve their savings and one of most popular assets are equities.
 
Last edited:
I don't think the market reflects the extent of the damage that is happening to the global economy. Restarting the economy in the US (much less the global economy) is going to be difficult because different states will be doing different things. Totally out of sync.

As the pressure to re-open the economy builds there are several factors that are important. Even if a business opens that doesn't mean that customers will respond accordingly - if fact until more is known I would bet that caution will be the norm.

Can we count on the FED continuing to rescue the market even as we see them delve into junk bonds? Can Congress continue to subsidize workers and even more so businesses until things stabilize? Bankruptcies, cuts in capital spending, earnings that aren't reflective of current events....everyone suspending guidance, and so far not even a mention of the oil situation. I think for the foreseeable future.........CASH IS KING :popcorn:
 
Have we seen this level of low interest rates before? One of the questions that struggle with is this- Where do you put your money that is not invested in equities? Most of my invest-able amount is tied up in a 401k or roth, so I don't know if I can put it into a CD somewhere. And those interest rates are very low. I have not been a fan of bonds, because I never saw the rationale in putting your money into a lower performing vehicle. Especially here in recent times when bonds also decreased in value. So if you think equities are going to drop, where do you stash the cash? Perhaps that is what is holding up the market, for the time being. Every payday we see new funds coming in that are allocated to a certain buying pattern, but I find it hard to believe that those inflows can be propping up the market in perpetuity.

Rewind the clock 50 years and I saw my father sell a business, at the absolute peak. Put the money into CDs and S&Ls because they were paying too much interest. Got uncomfortable with that, and pulled out just before that went pop, and put it into the market. I don't know where he hid the crystal ball, but the timing was good. Moved a bunch into Florida real estate and built houses for awhile, Mom got out of those the year before a whole bunch of hurricanes tore up the Florida market.

Right now- where do you stash the cash? This ZIRP stuff has me buffaloed.
 
WyomingLife said:
Lots of fortune tellers here.

Can I meet you all in Vegas this weekend? I need your insights.
Click to expand...
My crystal ball tells be to stay away from Vegas! But you are correct. If we knew the future we might totally freak out! :dance:
 
You must log in or register to reply here.

Similar threads

Y
How to decide if you can live off investments or need to draw them down
2 3 4
Replies
93
Views
8K
pb4uski
pb4uski
N
New to the 4% rule and how to make adjustments
Replies
18
Views
2K
LateToFIRE
LateToFIRE
T
2022 Tax Error, and IRS Rant
Replies
8
Views
536
Sunset
Sunset
O
Net worth calculator
3 4 5
Replies
111
Views
5K
mathjak107
M
sheldon cornped
WF Bonus offer scenario- Opinions needed
Replies
3
Views
313
calmloki
calmloki

Latest posts

Back
Top Bottom