Do you think Dow 18,000 was the bottom?

[sheehs1]

From a source with a demonstrated history of successful economic predictions? I doubt it. That room is empty.

They were spot on with their writings, predictions and journalism before, during and after the 2008/2009 Financial Crisis.

What is your source then?

 

[VFK57]

The response to the financial crisis added $8T (or +80%) to the debt and we didn't get far greater inflation. Why would adding $3T (or +15%) do so now?

My reasoning, what may not be correct, is: If you have a pool of money (including cash and virtual/electronic) what is backed by the economy or GDP of every kind of services and goods produced and the pool of money is greatly increased at same time while goods and services remain same or shrank (in this case by pandemic) what do you think will happen with the cost of those available goods and services?

 

[targatom2019]

nothing wrong to sell to store up for emergency but to sell and try to time the market to get back in is a fool's errand.

 

[dvalley]

About an hour ago, I sold about 35% of the bounce up from the bottom a couple weeks ago. I'm now sitting at about a 1.5% "loss" from this date last year, largely since in Jan and mid Feb I scraped about 60% of last year's gains to cash or short-term bonds.

It will be interesting to see if we go back down to test those "bottom levels" over the next few weeks (if so I'll put 1/2 of this additional cash to work to keep at the 40% stock level), or if the Fed/Congress actions will continue to move the market up. If it continues to recover, I'll probably sell 1/2 of those gains every 5% up.

This will put me a couple percent above my "lower band" of 40% for stock allocation. Normally, I would just watch, but my part-time online gig runs out in September, with 3.5 years until I qualify for full SS. At that point, I'll increase my stock allocation back up to the 50-55% range.

I suspect the market will continue to be hugely volatile, with large gaps up with news of Fed/Congress and NY hopefully plateauing, and large moves downward as the seriously ill/hospitalization numbers begin peaking in the South and MidWest. I'm hoping not for an "all-clear" in early May, since I suspect that will just set us up for another round of exponential infection increases, but we will see. The news that the Feds are closing down their testing I see as really bad news for how the US is "handling" the infection (in my view, ubiquitous testing and probably a serological test to identify recovered with immunity are going to be needed before much easing of the stay at home orders). The good news is that the current measures are working to control the spread to half tolerable rates (although this is unclear without ubiquitous tests, so we have to go on deaths). Basically, we don't know a lot.

I'm also skeptical of the rate of small business recovery and consumer demand due to unemployment, but I'm hoping I'm wrong on these two points.

I don't advocate others to do this, since I'm right now entering the high risk period of no income and before my and DW (who is younger) SS age and I view the risks of a continued plunge this year and next as the key sequence of return factor. At worst, I'll file a few years early for SS and we have a lot of slack--no travel this year, so that big part of the budget can go towards next year's expenses. We just finished replacing the floors downstairs, so hopefully the house spending is largely over (after the solar panels and EV car last year).

x2 on everything you said.

My AA had been 90/0/10 for a few years so I sold a little today to boost my cash allocation. This will incur a small LTCG tax which will negate any small gains on the purchases I made last month when the market first dropped lol. However, I'd feel better I have a little extra cash in case I lose my job etc.

 

[Clone]

I can't figure out if I should sell the equities that I have, figuring that we are going to drop off a cliff when the reality of the economic damage kicks in -or- if I should jump back in with the rest of my holdings to re-establish my typical high equity AA because- you know, FOMO. Maybe I just need to get comfortable with one of these middle of the road asset allocations for awhile.

 

[ShokWaveRider]

Don't the wild daily swings remind you of the old (maybe still current) "Day Traders" buying in the morning, selling in the afternoon?

 

[Freedom56]

Don't the wild daily swings remind you of the old (maybe still current) "Day Traders" buying in the morning, selling in the afternoon?

The day traders have been replaced by algorithm trading bots.

 

[brewer12345]

I agree and you have a good rep on this site.
So (I don't remember), when there were 2 false starts of an upwards market in 2008 before finally settling to the lowest point, was the feeling the same as now?

I was busy trying to find a job and save capitalism for future generations, so I do not recall.

 

[brewer12345]

Don't the wild daily swings remind you of the old (maybe still current) "Day Traders" buying in the morning, selling in the afternoon?

Looks like short covering to me.

 

[kjpliny]

Well, as of today I'm officially all cash. Still buying stocks via paycheck deductions every two weeks, but I no longer trust this market at all. I never liked casinos and can't make any sense of the investing landscape these days. Bonds seem as risky as stocks at this point. I don't see any form of fair market capitalism anywhere, so for now, I'm out. Will be losing to inflation, but I'm OK with that. No FOMO for me. Good luck all.

 

[targatom2019]

Well, as of today I'm officially all cash. Still buying stocks via paycheck deductions every two weeks, but I no longer trust this market at all. I never liked casinos and can't make any sense of the investing landscape these days. Bonds seem as risky as stocks at this point. I don't see any form of fair market capitalism anywhere, so for now, I'm out. Will be losing to inflation, but I'm OK with that. No FOMO for me. Good luck all.

did you invest inequities thinking it would only go up ?

 

[kjpliny]

did you invest inequities thinking it would only go up ?

No, I have been very conservatively invested for almost 3 decades, where bonds paid decent returns and stocks rose and fell due to earnings, "normal" speculation, and future business potential.

Since TGR and the Fed's manipulation of interest rates and the unfair bailing out of banks, I have been somewhat suspect of this type of interference, but it appeared as though corporations were still valued properly and risk seemed reasonable. Over the past few years, valuations have become unreasonable, and prices have largely been based on manipulation via buybacks. When the Fed tried getting rates slowly back to normal in 2018, the market reacted violently which made them stop tightening and start easing again, juicing the market once again. Artificially low rates, money printing, enabling the bad actors with bailouts, and stock prices near record highs when real earnings can't be known strikes me as a recipe for disaster.

I will gladly hold onto my two commas until I feel that things begin to make more sense. That may never happen, so I'll still be buying in with very little risk for huge losses over the near term. I just don't trust the current system...it looks wrong, it feels wrong and I need to sleep at night.

 

[k-man]

Well, as of today I'm officially all cash. Still buying stocks via paycheck deductions every two weeks, but I no longer trust this market at all. I never liked casinos and can't make any sense of the investing landscape these days. Bonds seem as risky as stocks at this point. I don't see any form of fair market capitalism anywhere, so for now, I'm out. Will be losing to inflation, but I'm OK with that. No FOMO for me. Good luck all.

I think it's a smart move to get out with this rally to where we are now. This is a trader's market, not a market for investors. The Pre-Pandemic market was 10-20% overvalued. Now we're back to about 20% down from the highs....with everything that has happened. In no world does that make any sense to me. I understand that the virus is peaking in NYC. I understand that the Treasury and Fed is doing things so unprecedented, not just firing bazookas, but tomahawk misses.....that it makes what they did during the Great Recession look like kids with water guns.

There is just no way that this market stays where it is, or that we don't revisit the bottom when the truth of the economic wreckage is revealed. We're just getting started. Keep your powder dry. That's what we're doing.

 

[pb4uski]

....the unfair bailing out of banks....

I hate to let facts get in the way of a good argument, but the "bailout" did not cost taxpayers anything.... the receiving banks paid a total of $226.7 billion vs $204.9 billion lent. The $21.8 billion of profit to the government far exceeded what the government paid in interest on any government bonds issued to fund the program.

To claim that the bank bailout was unfair is sheer ignorance of the facts.

Additionally, some of the stronger banks at the time didn't want the money but Hank Paulson strong-armed them into taking it anyway as he didn't want the banks who wanted and needed it to be perceived as weak-sisters.

https://www.gao.gov/assets/680/676954.pdf

On the rest of the post, I pretty much agree... the actions of the Fed to prop up the stock market bother me and are part of the reason that I'm not keen on equities.

 

[kjpliny]

I hate to let facts get in the way of a good argument, but the "bailout" did not cost taxpayers anything.... the receiving banks paid a total of $226.7 billion vs $204.9 billion lent. The $21.8 billion of profit to the government far exceeded what the government paid in interest on any government bonds issued to fund the program.

To claim that the bank bailout was unfair is sheer ignorance of the facts.

Additionally, some of the stronger banks at the time didn't want the money but Hank Paulson strong-armed them into taking it anyway as he didn't want the banks who wanted and needed it to be perceived as weak-sisters.

https://www.gao.gov/assets/680/676954.pdf

On the rest of the post, I pretty much agree... the actions of the Fed to prop up the stock market bother me and are part of the reason that I'm not keen on equities.

I don't believe in bailouts for anyone, at any time. Risk should be managed by the free market, and pain is sometimes needed to correct a badly designed system of perpetual debt.

 

[pb4uski]

I don't believe in bailouts for anyone, at any time. Risk should be managed by the free market, and pain is sometimes needed to correct a badly designed system of perpetual debt.

Fine that you believe that... but it doesn't make it unfair. What is unfair is to mischaracterize something as unfair just because you don't like it.

And by the way... if there were no intervention and the free market was allowed to work then it's pretty clear to me that we, including "Main Street", would have been much worse off.

 

[audreyh1]

If it's priced in massive unemployment and system-wide large scale reduction in business operation the market should be going downer and downer. Those things don't make markets go up.


This notion of pricing-in is as ephemeral and variable as a feather in the wind. There's always a by-the-way and a Yeah, but... in there to make it seem plausible.

Agreed. The market has not yet priced in major economic downturn, it’s still hoping for a quick and easy exit.

I only ever see the market pricing in speculative BS and constantly changing its mind. Total emotion.

Except for our panic week of crazy hedge covering, this market seems to remain stubbornly optimistic.

 

[kjpliny]

And by the way... if there were no intervention and the free market was allowed to work then it's pretty clear to me that we, including "Main Street", would have been much worse off.

I agree...and interest rates would be higher, and people with savings might be getting a normal return.

 

[RobLJ]

At one point in HS, I thought libertarianism had an interesting point, and then I read Galbraith's history of the Great Depression.

That said, the Fed's interventions generally don't trickle all the way down, and curiously most of the water seems to stay near the top.

Just read this article, serendipitously after seeing a tweet (don't agree with it all, but he makes a series of good points):

https://awealthofcommonsense.com/2020/02/market-have-always-been-rigged-broken-manipulated/

Fine that you believe that... but it doesn't make it unfair. What is unfair is to mischaracterize something as unfair just because you don't like it.

And by the way... if there were no intervention and the free market was allowed to work then it's pretty clear to me that we, including "Main Street", would have been much worse off.

 

[k-man]

At one point in HS, I thought libertarianism had an interesting point, and then I read Galbraith's history of the Great Depression.

That said, the Fed's interventions generally don't trickle all the way down, and curiously most of the water seems to stay near the top.

Just read this article, serendipitously after seeing a tweet (don't agree with it all, but he makes a series of good points):

https://awealthofcommonsense.com/2020/02/market-have-always-been-rigged-broken-manipulated/

Exactly right. We can see now, in real time, how hard it is to get the Fed and even the Treasury to effectively get money to Main Street. It's too slow, and will be too late for many.

This new 2.3 trillion today...sure, 600 Billion of that is for those businesses that fall between the Boeings of the world...and the little Italian pizza joint you love around the block. So..for those companies with 10K employees or less, with gross revs less than 2.5 billion...I suppose it's something. But that 600 Billion....is loans. I'm not saying it shouldn't be...but the Fed is opening another giant "window" for banks to come to...and borrow....in order to lend to "mid-size" corporations. Banks are going to have assess those loan applications to determine the risk to their balance sheets. And a lot of those loans won't be made. If banks start adding risky loans to their balance sheets, the incentives that the Fed is offering them...won't be enough to off-set their risk.

 

[targatom2019]

I think it's a smart move to get out with this rally to where we are now. This is a trader's market, not a market for investors. The Pre-Pandemic market was 10-20% overvalued. Now we're back to about 20% down from the highs....with everything that has happened. In no world does that make any sense to me. I understand that the virus is peaking in NYC. I understand that the Treasury and Fed is doing things so unprecedented, not just firing bazookas, but tomahawk misses.....that it makes what they did during the Great Recession look like kids with water guns.

There is just no way that this market stays where it is, or that we don't revisit the bottom when the truth of the economic wreckage is revealed. We're just getting started. Keep your powder dry. That's what we're doing.

so when did you sell and when are you planning to get back in ?

 

[k-man]

so when did you sell and when are you planning to get back in ?

We moved out of VBIAX on February 25th....right around 27K on the Dow at the close. Moved all of it to VMFXX. We only just moved everything to VBIAX in mid January because we felt like the market was 10-20% overvalued (pre-pandemic). Prior to that our allocation was very aggressive...85 US Index funds/11 international funds and 4% bonds. We're 52 AND 51...So with the run the market has had, the move to VBIAX felt like the right move.

Then the pandemic hit...and we got out on the 25th....we're down 3-4% from our portfolio high when we got out. When will we get back in? Honestly, we're reading and studying as much as we can. But I can tell you that 37% down as fast as we got there did not feel like the bottom to us. There's no precent for this on a global scale in our lifetimes. But to us, it "feels" like it's somewhere between the Great Recession and the Great Depression. And the Great Recession took 16-17 months to play out. We are just not going to bounce out of this thing.

It just makes absolutely no sense to me, that after what we've all experienced, just from the pandemic itself, justifies that we're now down just 20%...and that everything is priced in (even factoring in Fed/Treasury moves). Much of what the Fed is doing is simply "backstopping' to keep markets trading in a functional manner....straight up QE. The only "helicopter money" is the stimulus checks, but it's slow in arriving. The small business "helicopter money" is the PPP....and that's off to a terrible-slow start. That money will not arrive in time to save many small businesses.

And all of the rest of the Fed/Treasury moves....are loans. And sure, banks can go to one of nine million fed windows to borrow money from them at an incredibly low rate, with tons of additional incentives to do so. But that loan still sits on the bank's balance sheet...and ultimately, if they write a bad loan...they're on the hook.

So...ultimately, we (me and the wife) feel like this could be a long wait on the sidelines. We're not biting now. We talked about starting to DCA back in at 40-50% down, but we never got that low with the first shock/drop. We know we can't guess the bottom...and we could be completely wrong, but we'd rather protect what we have and understand that we possibly may have already missed the bottom, then to jump back in now to see a 30-50% drop from where we are now.

Does anyone....anyone...legit think this market should be trading 20% below the highs right now? We haven't even begun to understand the wreckage that our economy has already endured. The market will turn before we get the full grasp of that...it always will. But I truly don't think we're close to that.

 

[brewer12345]

k-man, the market is ignoring the labor market nuclear winter we find ourselves in. Given how much we relay on consumer spending and the fact that the rest of the world is in the ****ter with us, today's valuations make no sense to me.

 

[k-man]

k-man, the market is ignoring the labor market nuclear winter we find ourselves in. Given how much we relay on consumer spending and the fact that the rest of the world is in the ****ter with us, today's valuations make no sense to me.

Same. We're in this weird phase with the market, so very similar to the sub-prime/housing bubble shock....where we had that first leg down in the late fall of 2007. Between then and a full year later....sooooo many huge shocks occurred in the market, but it wasn't until October of 2008 when the SHTF. And even with that drop, it wasn't until after the election and into March of 2009 that we had the final "whoosh"...to the bottom.

This is just much worse than that. Think about it. Most Americans really didn't understand what happened to them in the Great Recession. But they did understand the fear after 9/11. This event combines the fear of a 9/11 event, and the Great Recession...but kind of in a dislocated way Many of us understand the gravity of this virus and, if we have the resources, will alter our behavior to avoid getting infected. 9/11 had much more of a patriotic feel to the aftermath. It was a...."I'm getting on that flight...and going to Disneyworld...." as a way of "fighting back". Now, many of us with resources...will just hunker down for awhile.

In our current situation, we have 30-40% of our population that believes that this whole ordeal is BS. I'm not judging those folks in the slightest. We all get to believe, what we believe. But we have politicized a Pandemic in our country. And so it almost doesn't matter how this virus behaves at this point in our society from an investing standpoint. From a public health standpoint...it's obviously devastating.

What matters is how our society behaves coming out of the "lockdown" phase of this. And while there is a large percentage of folks who just think we all need to go back to work....do the herd immunity thing....and come out the other side. There is another group that doesn't subscribe to that way of thinking at all.

Therein lies the problem with this whole mess....because we don't have a Federal response that will deploy a "Manhattan project" COVID testing roll-out, there's a big percentage of Americans who will simply not go about "business as usual". Not until we know for sure that we've tested negative, have immunity...etc. Until then, we're left to therapeutic meds (but not a cure) and a vaccine (which is also not guaranteed to completely wipe this thing out).

We just can't BS our way through a pandemic. And we're already way too late in understanding that. The fear is baked in.

 

[BeachOrCity]

Back to the original question......

No I do not.