Coronavirus - Financial, Health and Other impacts II

[Fermion]

I’m so glad that I don’t sit staring at tickers trying to figure out what to do. Different strokes.........

You have more money that I do.

 

[Another Reader]

I’m so glad that I don’t sit staring at tickers trying to figure out what to do. Different strokes.........

I will look near the end of the year to see if I want to replenish the cash for the RMD's in 2023. If the SHTF, maybe not. Otherwise, business as usual. I wish I had the talent to trade successfully, but I don't.

 

[LRDave]

I’m so glad that I don’t sit staring at tickers trying to figure out what to do. Different strokes.........

Well at least ticker watching has become more entertaining recently, as compared to that boring "up-up-up" we had to endure for the last ten years.

 

[jazz4cash]

I’m so glad that I don’t sit staring at tickers trying to figure out what to do. Different strokes.........

+1
I’m so glad I can stare as I choose and feel no need to act.

 

[dvalley]

I am just sitting here staring at the tickers trying to figure out if the best move is to do nothing with cash or pick individual stocks, go long spy, go short spy.

Option premiums are so high right now, you could pick the right direction and still not make money if you are not careful.

OTOH, that is usually a great time to sell cash secured puts or covered calls...

+1

I had my VTI buy set to $145 a couple of weeks ago, it came close ($145.30) but didn't trigger the purchase. I then lowered it even more to $141 thinking we'll see another big dip but today I'm undecided if I wait or just go in now and be done with it.

 

[NW-Bound]

I am just sitting here staring at the tickers trying to figure out if the best move is to do nothing with cash or pick individual stocks, go long spy, go short spy.

Option premiums are so high right now, you could pick the right direction and still not make money if you are not careful.

OTOH, that is usually a great time to sell cash secured puts or covered calls...

I have been busy selling out-of-the-money covered calls to squeeze some returns out of the stocks I own. Made $32K YTD on options, which is peanuts compared to the YTD loss on the stocks. However, the $32K cash from the premium is real, while the YTD loss on the stocks is still on paper. That cash income is more than what I spend, and that's my consolation prize. And I still have my stocks to do it again and again.

Been tempted to sell below-market-price puts, but I already have plenty of stock. It's at 58% as I write this. Could have been lower, except that a couple of puts I sold got exercised, and I had to buy. These purchases added about 1.2% of stock AA.

Still have lots of cash, but gotta preserve my ammo. The day is still young.

 

[Jeffman52]

Yes it’s been a week. I’d be interested in those who do 100% self investing if they’ve held tight or radically changed AA this week or gone cash.

Self invested but 2 years from ER and could go longer if needed. I have held tight and moved some money from a 'cash' position, to invest as the market goes down. I am not even going to try to time the market lows. Also since I am working I can funnel some money that I would otherwise save into the market. Of course all of that trying to benefit on the move up that the market will do in short order (IMHO)

 

[sirsavesalot]

I took two 401k's out of target retirement funds (2035) early last week. I also sold around $80k in company ESPP stocks and took my Roth IRA out of a 2035 target fund as well. So, about $350k of my near $500k retirement portfolio (I'm 39) I shifted into money market or stable bond funds. This was when we had a close right at 27,000.

So, the market has dropped about 6% since I pulled out. I've always "stayed the course", but this time feels different. I figure worst case, it trends back up and I jump back in. Best case, it drops another 10, 20 etc. % and I dollar cost average back in and make a little money.

Wish me luck!

 

[ziggy29]

This is a bad day for Vanguard to be doing its once-a-year selling of my inherited IRA investments to take an RMD. Maybe I should have thought about changing my RMD service before today.

 

[Brat]

Because we were not subject to RMDs at the time I was unaware that they had been suspended during the financial crisis. It is early enough in the calendar year that they could be suspended this year and next. That would keep some $ invested in the market, take the pressure of those whose balances have significantly decreased, and the income taxes would be collected when withdrawn. They also could suspend the inherited IRA rules they just enacted.

 

[Finance Dave]

Just some info on cruises...

We had booked a Caribbean cruise back in November to sail in May. Refund policy was 50% when the COVID hit...we had a short time before it went to 25%, so we called and cancelled on March 1st. They refunded all "ancillaries" such as drink packages and excursions at 100%, and 50% of the cruise sailing cost per their policy. The remainder was about $1,100...they called this a "penalty".

Fast forward to today...they came out with a "Cruise Confidence" policy whereby any cruise can be cancelled with 48 hours notice (not sure of what sailing dates are included, but it is to ALL destinations).

So I called in and was able to get the remaining $1,100 as a credit towards a future cruise, which must be booked within a year and have a sailing date no later than 12/31/21.

We lucked out, as they made the policy retroactive to March 1st....the very day we called to cancel.

We were able to get a portion of our plane fare refunded, as the departure time had changed recently by more than 90 minutes.

So in total we are only out $318 so long as we book another cruise within a year.

I'm not too worried about the virus itself, but more the "fear" factor and logistics issues...lots of stories about ships being denied port entry, quarantines, and so on...what a mess!

We live in Indiana and just had the first COVID case confirmed here today.

 

[USGrant1962]

Because we were not subject to RMDs at the time I was unaware that they had been suspended during the financial crisis. It is early enough in the calendar year that they could be suspended this year and next. That would keep some $ invested in the market, take the pressure of those whose balances have significantly decreased, and the income taxes would be collected when withdrawn. They also could suspend the inherited IRA rules they just enacted.

Why would the government mess with RMDs in response to a -13% stock market correction? Portfolio balances went back to where they were about 5 months ago. Should they have suspended RMDs in October 2019?

The 2008 bear market was -56%. Apple meet orange. And there is zero logic in suspending the new inherited IRA rules, which now have a 10-year window to withdraw any time the beneficiary wants to.

FWIW, stocks and bonds were UP this week.

 

[Running_Man]

+1

I had my VTI buy set to $145 a couple of weeks ago, it came close ($145.30) but didn't trigger the purchase. I then lowered it even more to $141 thinking we'll see another big dip but today I'm undecided if I wait or just go in now and be done with it.

Lower it to 88, you'll get it soon enough..............

 

[Another Reader]

Why would the government mess with RMDs in response to a -13% stock market correction? Portfolio balances went back to where they were about 5 months ago. Should they have suspended RMDs in October 2019?

The 2008 bear market was -56%. Apple meet orange. And there is zero logic in suspending the new inherited IRA rules, which now have a 10-year window to withdraw any time the beneficiary wants to.

FWIW, stocks and bonds were UP this week.

"If things worsen substantially..."

If we have a severe bear market similar to 2008, the same response would be reasonable. Most withdrawals are from your own IRA, not an inherited IRA. Current inherited IRA's are almost all under the old rules. I don't see your point.

 

[Brat]

"If things worsen substantially..."

If we have a severe bear market similar to 2008, the same response would be reasonable. Most withdrawals are from your own IRA, not an inherited IRA. Current inherited IRA's are almost all under the old rules. I don't see your point.

Yes, but there may be a bunch of 'inherited IRA's' if older frail adults bite the dust.

 

[ziggy29]

Because we were not subject to RMDs at the time I was unaware that they had been suspended during the financial crisis. It is early enough in the calendar year that they could be suspended this year and next. That would keep some $ invested in the market, take the pressure of those whose balances have significantly decreased, and the income taxes would be collected when withdrawn. They also could suspend the inherited IRA rules they just enacted.

Maybe. At least in my inherited IRA that just had a sell take place for an RMD, it is only about $2,300 in an account worth about $68K. It's not really something that will bust our retirement in any way. In reality, we are looking at this inherited IRA as our annual vacation fund.

 

[Brat]

Setting aside the financial impact keep in mind the fact that 'we are doing something to mitigate' has a psychological impact. The fact that investors wouldn't be forced to convert in the short term may be comforting.

 

[USGrant1962]

"If things worsen substantially..."

If we have a severe bear market similar to 2008, the same response would be reasonable. Most withdrawals are from your own IRA, not an inherited IRA. Current inherited IRA's are almost all under the old rules. I don't see your point.

I was responding to Brat. Brat did not say "if things worsen substantially", and Brat said they should suspend the just enacted inherited IRA rules. I don't see your point.

 

[dvalley]

Lower it to 88, you'll get it soon enough..............

I take it you're not serious but if you are I'm curious what makes you say it'll go that low soon? that's 51% of its recent peak of $172. The market despite all the fresh bad news seems to be bouncing around 10% lower. Even if we enter the bear market that's about 20%. It could dip even lower of course but it seems as the coronavirus becomes yesterday's news the market will pick up again. Sure the corporate profits would suffer this year, some sectors more than others but the investors (and the govts) will keep the market going. There's nothing else to put the money into. Of course, this is just my very uneducated opinion

 

[brewer12345]

I take it you're not serious but if you are I'm curious what makes you say it'll go that low soon? that's 51% of its recent peak of $172. The market despite all the fresh bad news seems to be bouncing around 10% lower. Even if we enter the bear market that's about 20%. It could dip even lower of course but it seems as the coronavirus becomes yesterday's news the market will pick up again. Sure the corporate profits would suffer this year, some sectors more than others but the investors (and the govts) will keep the market going. There's nothing else to put the money into. Of course, this is just my very uneducated opinion

Maybe. I have read that a bear market will average something like a 36% decline from the peak. So if we do end up in a bear, it is wise to expect a significant further decline. Not that it will happen, just that is what the historical average suggests.

I would also suggest you pay attention to the various flavors of bond market. Treasury yields have plunged to record lows. Investment grade and junk spreads have spiked like crazy, and these markets are either frozen or have very reduced issuance. Credit crunches can get ugly fast and suggest this is not just a minor equity fluctuation. If these markets do not free up soon, expect more declines in equities.

 

[tulak]

^^^^ I had a longer post, but I don’t want to be accused of fear-mongering.

I suspect this will lead to a global recession. This will cause at least a couple of quarters of economic contraction. Maybe even more?

I don’t see how that can’t affect the markets in a big way. I also think we’re just starting to see some of how this will play out in the US. Take Seattle as an example. There’s a noticeable slowdown and big companies are asking their employees to work remotely. What about hourly employees or small businesses? Tech companies are covering the hourly employees/contractors, but I’m sure this won’t cover everybody. I feel for people living paycheck to paycheck, especially in a HCOL area.

Coronavirus in of itself is probably not that bad, especially if you’re younger. It’s the containment/self-quarantine that is going hurt the economy. And yeah, the world will not end. Plenty of TP, even in Seattle.

 

[ziggy29]

Coronavirus in of itself is probably not that bad, especially if you’re younger. It’s the containment/self-quarantine that is going hurt the economy. And yeah, the world will not end. Plenty of TP, even in Seattle.

That's the thing. If you are relatively young and healthy, it might as well be the common cold or maybe the typical flu -- at least that is what it seems as of now. But for the sake of those who are not, we need to take precautions. And in reality this would be a recession not due to lack of demand, but rather lack of supply.

 

[Running_Man]

I take it you're not serious but if you are I'm curious what makes you say it'll go that low soon? that's 51% of its recent peak of $172. The market despite all the fresh bad news seems to be bouncing around 10% lower. Even if we enter the bear market that's about 20%. It could dip even lower of course but it seems as the coronavirus becomes yesterday's news the market will pick up again. Sure the corporate profits would suffer this year, some sectors more than others but the investors (and the govts) will keep the market going. There's nothing else to put the money into. Of course, this is just my very uneducated opinion

Your answer provides the very real problem the market has, no one believes it will sink, despite a historic new low in long term interest rates at a speed 3X faster than rates declined in financial crisis and the fastest correction in history for a top in the market, and no profits. I was very pro market at the start of the year but Brewers predictions have been almost spot on, and this is a worst case for markets. A collapse in confidence is coming in officials and an end that let us invest all our money with only one decision buy…. The poster child will be the Iranian Health official coughing saying there is nothing to worry about. Look at Milan and the economic activity, Luftansa is cancelling 50% of all flights. Southwest says it is worse than 9/11 and this is just starting in US. 88 will come.

 

[ERD50]

For me, the coronavirus' affect on my portfolio makes me revisit "when to take ss". I'm not happy with cashing in equities for living expenses in a down market. .....

What is your AA? Unless you are near 100/0, why would you need to sell equities in a down market?

You should be getting ~ 2%-3% in divs anyhow, so you should only need to sell off 1 or 2% to get to a 4% WR. less if your WR is more conservative.

And stocks are still up ~ 8% over the past year, is this really a "down market"? If we were up 6%, but didn't have a 10% drop along the way, would you be better off? No.

-ERD50

 

[NW-Bound]

... in reality this would be a recession not due to lack of demand, but rather lack of supply.

I beg to differ. Both supply and demand have been axed. People both cannot work and do not want to go out to spend.