Goldman predicts the whole market could crash - I think it's an opportunity

[tenant13]

https://talkmarkets.com/content/opt...ues-the-entire-market-could-crash?post=295851

They are being concerned with the recent WallStreetBets driven short squeeze and predict that that if that continues, we're about to see the markets crashing.
Obviously nobody knows the future but unlike most Goldman's predictions (Their continuing push to sell Apple comes to mind: 1, 2) this one seems pretty sound to me so I'm getting ready to buy on the dip .

The really interesting part in this whole staring match between WSB and hedge funds is its unpredictability. We really don't have historical data pointing to the most probable outcome. Individual investors have never been the power that anyone had to reckon with. Now they are and not in a way anyone could have predicted: driven by collective determination to make a stand rather than individual greed.

I don't necessarily worry about the long term outcome: whatever is happening may shake the current system a bit and move some money around between the market players but in the long run it's probably a good thing. I'd love to end up trading stocks because of the companies underlying valuations and not worry about "innovative financial instruments" designed to disregard that.

 

[kjpliny]

Don't worry, the Fed will print a quadrillion dollar digits and bail everyone out. It's the American way. Logarithmic debt is the way to true economic prosperity.

 

[Markola]

If it crashes, it crashes. Capitalism at work. Meanwhile, Goldman Sachs’ economics shop is anticipating 6% GDP growth in 2021, per the recent Exchanges at Goldman Sachs podcast.

 

[NW-Bound]

If the market stays down, due to my put options I will already have several hundred $K of cash converted to stock. I don't know yet how high my stock AA will rise from its 60% point prior to this event.

If the market goes even lower, what cash do I still have, and how much do I want to throw into the market? I will have to wait and see after all the puts expire.

In the past, I often told myself that if a stock debacle occurred, I should deploy all my reserve to buy, buy, buy. But then, I never really did it. My stock AA was never higher than 80%.

Do I dare do it this time? Liquidating my I bonds to go all in?

 

[OldShooter]

How have Goldman's predictions worked out for, say, the last ten years of predictions?

 

[MRG]

Yawn.

I'll refer back to an "expert" who was running DF's money before he passed. Q. Where do you think interest rates are going? A. Well everyone knows they have to go up from these historic lows. That conversation happened in 2013.

 

[tenant13]

How have Goldman's predictions worked out for, say, the last ten years of predictions?

It's a good question but it doesn't warrant the time it would take to research: I bet they are 50% right As to this particular prediction - it just seems like something designed to induce selling which the big guys would love to see. I'm not that inclined to obsess about financial forecasts but I would love to convert some of my treasuries that just bleed money into well priced equities. So I'll be paying attention.

 

[NW-Bound]

It's a good question but it doesn't warrant the time it would take to research: I bet they are 50% right As to this particular prediction - it just seems like something designed to induce selling which the big guys would love to see. I'm not that inclined to obsess about financial forecasts but I would love to convert some of my treasuries that just bleed money into well priced equities. So I'll be paying attention.

+1

GS may be right, or may be wrong.

If wrong, I do nothing which is the default.

If right, do I dare be bold?

 

[OldShooter]

It's a good question but it doesn't warrant the time it would take to research: I bet they are 50% right As to this particular prediction - it just seems like something designed to induce selling which the big guys would love to see. I'm not that inclined to obsess about financial forecasts but I would love to convert some of my treasuries that just bleed money into well priced equities. So I'll be paying attention.

I'm not a conspiracy guy, preferring Hanlon's razor: "Never attribute to malice that which is adequately explained by stupidity".

Here's a slide I use in my Adult-Ed investing class; three major banks making an interest rate forecast just four months into the future;

 

[W2R]

+1

GS may be right, or may be wrong.

If wrong, I do nothing which is the default.

If right, do I dare be bold?

In my case:

- - - If wrong I do nothing.

- - - If right I do nothing.

- - - Either way, enjoy life, refuse to waste my precious time worrying, and let things happen as they may.

Pretty simple; it's so easy to be a buy-and-hold broad index fund investor. If things fall apart for my portfolio, I'll have plenty of company.

 

[ls99]

Looking at the "greater fool theory", the hard part is figuring out who are the greater fools. And when willl they show up. I am letting vanguard sort them out.

 

[Markola]

In my case:

- - - If wrong I do nothing.

- - - If right I do nothing.

- - - Either way, enjoy life, refuse to waste my precious time worrying, and let things happen as they may.

Pretty simple; it's so easy to be a buy-and-hold broad index fund investor. If things fall apart for my portfolio, I'll have plenty of company.

Lovely. You might have just written the Serenity Prayer for Bogleheads. [emoji41]

 

[bada bing]

Wasn't GS known for positioning on the opposite side of the trade they've recommended to the "little guys" - or whatever derogatory term they had for retail clients ?

 

[Car-Guy]

This time the next recovery from the upcoming crash will be different.

 

[NW-Bound]

In contrast to most people who outsource their investment to a balanced MF, I am a DIY'er, and pay more attention to my portfolio, even if just to rebalance it.

Same as growing my vegetable garden, or building my DIY solar storage system, I do these DIY activities for fun, and to see what I can learn. I enjoy doing it. It's not for everybody.

 

[gauss]

I think one thing that we will likely see happen is that the regulations regarding this type of nontraditional behavior, will change in order to stamp it out in the future.

If GS needs to fan fears of a market crash to make these changes politically palatable, than that is what they will do.

-gauss

 

[DrRoy]

In my case:

- - - If wrong I do nothing.

- - - If right I do nothing.

- - - Either way, enjoy life, refuse to waste my precious time worrying, and let things happen as they may.

Pretty simple; it's so easy to be a buy-and-hold broad index fund investor. If things fall apart for my portfolio, I'll have plenty of company.

+2

I don't think it's a good sign of a top when lots of people are saying Bubble! and Crash! Market tops come as a surprise to most.

 

[The Cosmic Avenger]

In my case:

- - - If wrong I do nothing.

- - - If right I do nothing.

- - - Either way, enjoy life, refuse to waste my precious time worrying, and let things happen as they may.

Pretty simple; it's so easy to be a buy-and-hold broad index fund investor. If things fall apart for my portfolio, I'll have plenty of company.

To that last part, when I explain index funds or the two-fund portfolio to people for the first time, sometimes they ask how I can be sure I won't lose everything, I say the only way that would happen would be for the United States economy to completely implode/stop functioning, in which case I won't be any worse off than anyone else, and we'll have much bigger things to worry about than retirement accounts!

 

[Fermion]

To get any more than a yawn from me the market would have to crash 30% and I don't see that in the cards with all of the stimulus.

These times really are different than the old days.

I won't rule out hyper inflation one day in the future though...

 

[Midpack]

Yawn.

I'll refer back to an "expert" who was running DF's money before he passed. Q. Where do you think interest rates are going? A. Well everyone knows they have to go up from these historic lows. That conversation happened in 2013.

And a lot of smart money has been saying dump bonds since 2009...

 

[marko]

Buffett: "The stock market is the only market where, when the prices go down, everyone runs for the door".

Personally, I moved some money around during the March 'crash' and have made 47% on that sum so far.

 

[NW-Bound]

To get any more than a yawn from me the market would have to crash 30% and I don't see that in the cards with all of the stimulus.

These times really are different than the old days.

I won't rule out hyper inflation one day in the future though...

One cannot make extra money when the market goes down a mere 20%?

Does it have to be 30% before one starts buying?

PS. I often sell puts with strike prices of less than 10% out-of-the-money, albeit the expiration is usually shorter than 1 month, and as short as 1 week. They mostly expire worthless.

But just last Friday, a bunch got exercised, and I have bought myself more stocks worth a 6-figure sum. I have not computed my stock AA to see how high it has risen above the 60% when I calculated it last. But I still have a lot of cash left (had a 7-figure sum in cash).

 

[NW-Bound]

Ugh, just looked at my accounts at Merrill Edge. They show a total of $198.1K worth of purchase transactions pending due to the puts.

I had to pay attention, because of a quirk with Merrill Edge. The puts have to be covered with some money funds, and not others. So, I have to park my cash in the Black Rock Liquidity Fund to guarantee the puts, and this fund cannot be set up as the cash sweep fund. I have to deliberately move cash between the cash sweep fund and the Black Rock fund when I sell put options, and from the Black Rock fund back to the cash sweep when the puts get exercised and the delivered shares need to be paid.

And I still have more puts outstanding. If the market drops more, I will be proud owner of even more stocks. Gotta slow down to preserve my ammo.

 

[audreyh1]

So, are retail investors ganging up together coordinating their movements via Reddit etc., pushing up volatility and this has the hedge funds freaking out and going more risk off and also pushing up volatility?

 

[GravitySucks]

How have Goldman's predictions worked out for, say, the last ten years of predictions?

I imagine there is a difference in the predictions the PR department puts out and the predictions Goldman actually acts on.

I'm willing to bet the ones they act on are usually either correct or so large they become correct. Now if I could only get a notice about what they're going to do tomorrow.