Market makes no sense

[brokrken]

I will never advocate for market timing and have argued against those that have sold everything during these trying times. However, the market has gotten to a point now where all rational thought is ignored. We are nearly back to pre-COVID levels even though the economy lost nearly 3 full months of productivity.

Anyway, in order to try and capitalize on this, this morning I bought some out of the money SPY puts that expire in late October with the thinking that once Q2 earnings are realized, there will be a retest. We shall see.

Interested to hear everyone's opinion.

 

[njhowie]

I think you would have been better off buying them a little further out - expiring in January or February as there is likely to be volatility around the election results (just after your expiration), and then again in December with tax related selling.

 

[easysurfer]

Ah ... another I don't market time but ... thread .

I'm sitting tight taking no action until I rebalance on my regular time which is at start of year.

The way I figure, if you were looking for a down in the dumps market is based on sentiment (unpredictable) and not on outside events. Plus, there is the propped up factor.

Plus, W2R hasn't officially given the #$@ word yet. At least not for a while.

 

[brokrken]

Ah ... another I don't market time but ... thread .

EasySurfer, haha, I hear ya. However, I'm not selling anything and really just see this as a good short term investment with a decent entry point. Same as I'd do if I was going long. And, it was a relatively small investment. So, we'll see.

 

[njhowie]

EasySurfer, haha, I hear ya. However, I'm not selling anything and really just see this as a good short term investment with a decent entry point. Same as I'd do if I was going long. And, it was a relatively small investment. So, we'll see.

No need to justify what you're doing to anyone. Stones will always be thrown from the peanut gallery if you are not on-board with the cult/group-think approach every step of the way.

It was two years ago, when someone popped up at the beginning of September and said he was buying SPY puts. The peanut gallery threw stones. Guess what happened between September and January.

 

[UnrealizedPotential]

I am not saying I believe it. Heck, I don't even understand it, but there is something called eliott wave theory that explains the market action IF you believe in it. I have no opinion on it, because as I said, I don't understand it. It's complicated.

 

[Dash man]

No need to justify what you're doing to anyone. Stones will always be thrown from the peanut gallery if you are not on-board with the cult/group-think approach every step of the way.



It was two years ago, when someone popped up at the beginning of September and said he was buying SPY puts. The peanut gallery threw stones. Guess what happened between September and January.

For every buyer there is a seller. Only time will tell who’s right in the long run. I don’t time the “market.” But I do time specific stock picks when the market has it’s volatile days. I admit I have no understanding of why the market is behaving the way it does. But I’ve been fortunate with most of my individual sell and buy orders to have fully recovered from mid March. Definitely no expert though.

 

[pb4uski]

I like the OP's idea and have been thinking the same thing... but out to December 2020 or January 2021 so it is after the presidential election.

 

[easysurfer]

No need to justify what you're doing to anyone. Stones will always be thrown from the peanut gallery if you are not on-board with the cult/group-think approach every step of the way.
....

I have this same sentiment as I get the auto deposits placed into my checking account from a couple of immediate annuities .

 

[W2R]

As for the market making sense - - we'd all love to know exactly why the market moves as it does, because if we knew that, we'd be able to reliably predict market movements and we'd all be billionaires. Well maybe you are! I'm not.

Lots of people who earn a living writing financial articles, make their money by explaining (usually after the fact) why they think the market did what it did. But really, they don't have a clue, any more than the rest of us. They just make their money writing these articles.

Once I truly, truly accepted that I can't explain or control what the market does, I started doing a lot better with my investments and feeling more at peace as an investor. My suggestion would to not base your decisions on what the market is doing or what you expect it might do.

Personally I don't try to market time, but just stick to broad indices, buy-and-hold. I also rebalance but not frivolously - - only according to criteria that I have written down in my financial planning.

I have found that (much to my surprise) this approach to investing works pretty well. When the market is up, I let myself be very happy about it! Hence the happy threads I tend to start at those times. When the market is down, I hang on and know that I have always gotten through similar events and ended up on top by just hanging on and doing nothing. The only thing my approach to investing doesn't do for me, is feed my ego.

 

[dixonge]

You have to stop treating the market as if it is directly tied to some financial measurement, like Schiller or anything else measuring value. That's not what it indicates. The market indicates investor sentiment, period. When investors are scared or nervous or unconfident, they get out. When they are confident and more sure, they get in.

That's all you can deduce from it.

 

[brokrken]

You have to stop treating the market as if it is directly tied to some financial measurement, like Schiller or anything else measuring value. That's not what it indicates. The market indicates investor sentiment, period. When investors are scared or nervous or unconfident, they get out. When they are confident and more sure, they get in.

That's all you can deduce from it.

I agree. I think they are too confident at the moment.

 

[11522914]

I like the OP's idea and have been thinking the same thing... but out to December 2020 or January 2021 so it is after the presidential election.

+1

I'm actually looking at June 2021.

 

[Montecfo]

I will never advocate for market timing and have argued against those that have sold everything during these trying times. However, the market has gotten to a point now where all rational thought is ignored. We are nearly back to pre-COVID levels even though the economy lost nearly 3 full months of productivity.

Anyway, in order to try and capitalize on this, this morning I bought some out of the money SPY puts that expire in late October with the thinking that once Q2 earnings are realized, there will be a retest. We shall see.

Interested to hear everyone's opinion.

Seems like a reasonable move. Can't have too much more upside in ST I don't think. I disagree that Q2 earnings will be a catalyst. The market expects terrible earnings.

What will be a catalyst is negative Covid news that challenges the view that economy has bottomed and strong growth is ahead.

 

[Montecfo]

I did lighten today, about 10 pct of equities. I will reposition over the next few months. Stocks I was buying in March have performed spectacularly. I am letting those run.

 

[jollystomper]

The market appears to have survived (or at least "looked past") 2 blows:

1. COVID-19 (though not ruling out this becomes a concern again if shutdowns occur again).
2. Social unrest related protests/violence

I believe there is a 3rd blow is coming, related to the fall elections (I am trying not to be political here, just stating a potential occurrence without drawing conclusions, and apologize if I failed). I think that blow be driven by whatever the perception of required state-wide mail-in voting becomes, as some states may choose to do so due to COVID-19 concerns. The markets reaction to that could be interesting.

 

[DawgMan]

As for the market making sense - - we'd all love to know exactly why the market moves as it does, because if we knew that, we'd be able to reliably predict market movements and we'd all be billionaires. Well maybe you are! I'm not.

Lots of people who earn a living writing financial articles, make their money by explaining (usually after the fact) why they think the market did what it did. But really, they don't have a clue, any more than the rest of us. They just make their money writing these articles.

Once I truly, truly accepted that I can't explain or control what the market does, I started doing a lot better with my investments and feeling more at peace as an investor. My suggestion would to not base your decisions on what the market is doing or what you expect it might do.

Personally I don't try to market time, but just stick to broad indices, buy-and-hold. I also rebalance but not frivolously - - only according to criteria that I have written down in my financial planning.

I have found that (much to my surprise) this approach to investing works pretty well. When the market is up, I let myself be very happy about it! Hence the happy threads I tend to start at those times. When the market is down, I hang on and know that I have always gotten through similar events and ended up on top by just hanging on and doing nothing. The only thing my approach to investing doesn't do for me, is feed my ego.

Provided my greed gland doesn't pump too hard, this is where I have settled. I agree it makes no logical sense. How/why continuous riots/looting/unrest and a movement to defund the police doesn't throw gas on a Covid-19 fire world... go figure! I like to play a little game every morning before the markets crank up... read thru the news and predict the daily market. SOB, I am probably wrong 75% of the time! So right now, my greed gland says sell all those equities and wait for the next big dip to buy back back in... but that's the problem, isn't it? Perhaps we should all follow the almighty Buffet, but I suppose I will just stay with the KISS method as I don't seem to get into too much trouble when I just stay with the plan.

But don't taunt me into selling all my equities tomorrow... I might have a week moment!

 

[Dtail]

Seems like a reasonable move. Can't have too much more upside in ST I don't think. I disagree that Q2 earnings will be a catalyst. The market expects terrible earnings.

What will be a catalyst is negative Covid news that challenges the view that economy has bottomed and strong growth is ahead.

Agree about the Covid news, plus if the 3rd qtr expectations change lower after the 2nd is mostly completed.

 

[copyright1997reloaded]

In the short run, the market is a voting machine but in the long run, it is a weighing machine.

Benjamin Graham

One of my favorite quotes. Humans are emotional things, quite often making non-rational decisions. This also helps to explain how stocks can get over bought or over sold, and as many famous investors have found over the years that the irrationality can last longer than their ability to go against it. (A good fairly recent example is from the "Big Short" where the MBS shorts kept on going against them even as housing deteriorated.}

Right now, for better or worse, the Treasury, government and the Federal Reserve have made the system awash in liquidity. That has to go SOMEWHERE, and that somewhere is in financial assets. Combine that with some surprises in terms of re-openings, and up we go.

I too think we have come very far, very fast. And I thought a while back that we would need to retest. But it is quite clear I was wrong.

The thesis that says that the liquidity party will continue until post-election seems to a good one. On the other hand (again not to get political), I believe there are those who really want to see the economy suffering before the election. Which is a bigger factor - beats me. So I continue to ride (for the most part), my existing asset allocation (now about 50/50.

All I can do from a personal perspective is to continue to have a lot of dry powder, and I've also been picking up non-equity non-debt assets (e.g. precious metals) as a hedge. Oh yes, making sure I have a good supply of wood for heat, food to eat, and other things of that nature.

 

[RetireAge50]

Market makes perfect sense to me. I started investing in 1989 and the stock market has averaged 9.5%. This is a little bit under the long-term average of about 10%. What is the problem again?

 

[Dtail]

The market appears to have survived (or at least "looked past") 2 blows:

1. COVID-19 (though not ruling out this becomes a concern again if shutdowns occur again).
2. Social unrest related protests/violence

I believe there is a 3rd blow is coming, related to the fall elections (I am trying not to be political here, just stating a potential occurrence without drawing conclusions, and apologize if I failed). I think that blow be driven by whatever the perception of required state-wide mail-in voting becomes, as some states may choose to do so due to COVID-19 concerns. The markets reaction to that could be interesting.

The market might react at election time depending who wins irrespective of mail in voting.

 

[Toocold]

The market appears to have survived (or at least "looked past") 2 blows:

1. COVID-19 (though not ruling out this becomes a concern again if shutdowns occur again).
2. Social unrest related protests/violence

I believe there is a 3rd blow is coming, related to the fall elections (I am trying not to be political here, just stating a potential occurrence without drawing conclusions, and apologize if I failed). I think that blow be driven by whatever the perception of required state-wide mail-in voting becomes, as some states may choose to do so due to COVID-19 concerns. The markets reaction to that could be interesting.

1.5 was the shock to oil and how that was going to bankrupt the entire US oil production.

.5 was the war with China

.4 was the significant drop that was caused by robo trading.

.45 was the overtilting to passive investing.

.75 was a socialist potentially becoming the president

2.5 impact of financial crisis from foreclosures.

....

 

[Beststash]

Unemployment increases - the market goes up
We are in a recession - the market goes up


I increase my equity exposure and the market goes down


It is a conspiracy by the deep state....

 

[gerntz]

I don't see the virus being a market issue going forward. Medical profession already much better knows how to manage its effects & that will only improve. Pretty remarkable I think.

 

[MichaelB]

The discussion has drifted into politics. See community rules https://www.early-retirement.org/forums/misc.php?do=sknetwork&page=rules