For the first time ever I sold all my stocks

[stephenson]

I see a volatile stock market - but mainly well run, profitable businesses working as effectively as possible.

I see some lag effect, and some uncertainty related to the “great experiment” of reopening without certain treatment, and known timeline for vaccine.

I see a time, two years hence, with a solid market, known risks to market and person, and worldwide vaccination.

I’m cautious ... and try to be thoughtful.

 

[Dtail]

We have unemployment in the same magnitude right now, 25% Great Depression vs. estimate of up to 32% now. It is not hard for me to imagine.

In other countries people are getting up to 90% of their salaries or at least $1 to $2K a month to pay their bills and keep the economy going. In the U.S. average workers might be getting a $1.2K one time payment, and some get unemployment, but many either do not qualify for unemployment or even if they qualify are not getting through the application process. I just don't see this ending well in the U.S. any time soon.

Here is how other countries compare:
https://www.newsweek.com/heres-how-...compares-other-countries-around-world-1497360

Yeah might not end well, but unfortunately that is more for the masses, not necessarily the stock market.

 

[daylatedollarshort]

Yeah might not end well, but unfortunately that is more for the masses, not necessarily the stock market.

Do you think the stock market will stay propped up beyond next November?

 

[Dtail]

Do you think the stock market will stay propped up beyond next November?

To be blunt, under current Admin then yes although much slower increase depending if the economy is doing well "naturally", otherwise no, but not necessarily right at that moment.

 

[Katsmeow]

But, this still seems like the OP made an emotion based decision. I reach this conclusion by removing C19 from the discussion. If the OP had sold all equities without C19, then it would not be emotion based.

What?! Of course, you should consider Covid-19 in making decisions. This is a global pandemic that will likely have significant economic effect on the world (not to mention all of the non-economic effects).

From Forbes (https://www.forbes.com/sites/janetn...mer-retirements/?ss=retirement#4abf93ad3474):

"3. Panic Will Doom Some Boomers’ Wealth

"The current market dive is scary, for sure. The stomach churning volatility that’s typical of a bear market has been so severe this time that the drops have triggered multiple automatic trading halts. Eventually, the bear market will end, but not all Boomers will be there to ride the recovery. During the 2008 market crash, about 5% of those 55 or older dumped all the stock in their 401(k)s and then missed the 2009 rebound, a 2011 study of 425,000 workers’ 401(ks) showed.

"The problem with 'going to cash' in a crash is that you lock in your losses. Maybe your plan is to jump right back in after the market bottoms? Good luck with that. When markets do turn back up, they do so quickly. As financial planner Kristin McKenna explains here, six of the 10 best daily gains in the S&P 500 between January 2000 and December 2019 occurred within two weeks of the worst 10 days. Had you missed all of those 10 best days, your average annualized total return on the S&P 500 for those two decades would have been 2.44% compared to 6.06% had you stayed fully invested and ridden the roller coaster down and back up."

The problem here for investing is not the "crash" but the potential effect of Covid-19 on the world. I didn't sell out in 2008 and haven't sold out now (I am 66). I was at 50/50 allocation and it has all drifted down to 45/55. I do feel that the OP has a good point about the market not seeming to match up with economic reality. I am not likely to sell all my equity funds but I have thought of potentially reducing my allocation because of the mismatch that I see right now (I can't imagine going below about 40% though).

 

[njhowie]

To be blunt, under current Admin then yes although much slower increase depending if the economy is doing well "naturally", otherwise no, but not necessarily right at that moment.

If you believe the Federal Reserve is in control and it is independent as has been continually stated (though questionable), they have indicated they are now at "QE Infinity" doing whatever is necessary. With this as the situation, if you subscribe to "Don't fight the Fed", the Fed is going to be there to prevent the stock market from falling "very much", regardless of the administration in place.

 

[njhowie]

What?! Of course, you should consider Covid-19 in making decisions. This is a global pandemic that will likely have significant economic effect on the world (not to mention all of the non-economic effects).

Though I don't disagree with your points, the key is if you believe C19 is a bump in the road or a game changer from here on out?

In the bigger picture, C19 is likely simply a bump in the road. Granted, a big bump in the road. However, a bump nonetheless and the world will get past it. If we agree on this, the significant economic effect on the world will be contained and mitigated in the long term. From an investment perspective, it means that buy and hold investors should simply stay put, continuing to invest as they normally would, taking advantage of low prices of equities at this time.

 

[bmcgonig]

Yeah. I’m pretty sure Buffett also believes that valuations matter. Definitely not the message you get here, but hey, quote away!

He does indeed. And he said that even though he was buying back his own stock in January, that at that time it was a better deal than buying back his own stock now.

Buffett is actually a net seller. He's not buying his own stock. Make of it what we will but it's not exactly blood in the streets time as far as he's concerned.

 

[bmcgonig]

Though I don't disagree with your points, the key is if you believe C19 is a bump in the road or a game changer from here on out?

In the bigger picture, C19 is likely simply a bump in the road. Granted, a big bump in the road. However, a bump nonetheless and the world will get past it. If we agree on this, the significant economic effect on the world will be contained and mitigated in the long term. From an investment perspective, it means that buy and hold investors should simply stay put, continuing to invest as they normally would, taking advantage of low prices of equities at this time.

I think a lot has to do with whether we're in decumulation stage or accumulation stage. Whether a bad sequence of returns would kill our retirement. Whether SS and other stuff covers our fixed costs etc. In that, we are all different.

If I was 20 years younger I wouldn't give a damn. Just keep accumulating. Being already retired the whole situation gives me lots of pause.

Some of us are 75/25 and make a point that they don't even look at their portfolios and drone on about staying invested. Their investments are probably for the next generation. Others are just retired, have been reading about sequence of returns for years, and are 95% in FireCalc. Apples and oranges.

 

[tdv2]

Though I don't disagree with your points, the key is if you believe C19 is a bump in the road or a game changer from here on out?

In the bigger picture, C19 is likely simply a bump in the road. Granted, a big bump in the road. However, a bump nonetheless and the world will get past it. If we agree on this, the significant economic effect on the world will be contained and mitigated in the long term. From an investment perspective, it means that buy and hold investors should simply stay put, continuing to invest as they normally would, taking advantage of low prices of equities at this time.

+1

 

[clobber]

Though I don't disagree with your points, the key is if you believe C19 is a bump in the road or a game changer from here on out?

In the bigger picture, C19 is likely simply a bump in the road. Granted, a big bump in the road. However, a bump nonetheless and the world will get past it. If we agree on this, the significant economic effect on the world will be contained and mitigated in the long term. From an investment perspective, it means that buy and hold investors should simply stay put, continuing to invest as they normally would, taking advantage of low prices of equities at this time.

+1, BUT depending on timeline.

 

[Ready]

During the Spanish flu pandemic the second wave was much worse than the first. If history repeats itself a move to all cash will look like a very wise decision.

 

[WyomingLife]

During the Spanish flu pandemic the second wave was much worse than the first. If history repeats itself a move to all cash will look like a very wise decision.

Medically, you are correct

Financially, you may not be (actually, you aren't, based on data): https://www.marketwatch.com/story/m...f-not-for-the-coronavirus-pandemic-2020-03-19

The future is uncertain. I have no idea what will happen five seconds after I hit "submit reply" on this post, let alone next Thursday, next December or in May 2026. So you may end up being right. Who knows? The term "will" in your comment above bothers me, that's all.

 

[Doribe]

During the Spanish flu pandemic the second wave was much worse than the first. If history repeats itself a move to all cash will look like a very wise decision.

I was under the impression the fall second wave of the 1918 epidemic was due to the return of the WWI soldiers and parades to welcome them home.

I don't expect a second wave in the fall. There may be second, third and fourth waves due to the shut down/recovery cycles. It may be more predictable in rural areas. In my large metro area, I don't see us opening for a long time because large groups of people can't follow the rules and we don't have enough tests.

 

[ExFlyBoy5]

Oh, I don't particularly revere him as an investor. I think his and Ben Graham's glory days have passed, to be replaced by the random market behavior we have seen for a few decades now. But he is a wonderful source of quotations. So I just cherry-pick them. A couple of others I like:

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two."

“The only value of stock forecasters is to make fortune-tellers look good."

Definitely. He is a smart man and can afford pricey mistakes. I appreciate that he is humble about it...most talking heads of wall street only make excuses when the screw up. Random market behavior? I haven't seen any of that...

 

[gwraigty]

I was under the impression the fall second wave of the 1918 epidemic was due to the return of the WWI soldiers and parades to welcome them home.

Good point. I also read that aspirin poisoning was a factor. Doctors were telling people to take what are now known as lethal doses. Some of the symptoms of aspirin poisoning are bleeding out and fluid in the lungs.

 

[Sunset]

I think a lot has to do with whether we're in decumulation stage or accumulation stage. Whether a bad sequence of returns would kill our retirement. Whether SS and other stuff covers our fixed costs etc. In that, we are all different.

If I was 20 years younger I wouldn't give a damn. Just keep accumulating. Being already retired the whole situation gives me lots of pause.

......

Exactly,

Plus personally I've been though 1987, 2000, 2008, in all those cases it all dropped a bunch, and EVENTUALLY came back..

But, the DMT, that sold before/early, and bought back in at 20,30,40,50 percent below selling price came back faster and bigger.

I missed 1929, but was told about it from personal point of views, like papering the bathroom with stock certificates to get some value out of them . Riding that train took a very LONG time in years to come back to original previous values (some say 29 yrs.).

 

[Starsky]

I bailed out after dipping a toe in for a quick 25% on the bounce. No need to be greedy on a more-or-less fixed income. It seems prudent to let the smoke clear for a month or two.

And clouds are on the horizon: https://www.mckinsey.com/industries...jobs-at-small-businesses-in-the-united-states

 

[pb4uski]

If you believe the Federal Reserve is in control and it is independent as has been continually stated (though questionable), they have indicated they are now at "QE Infinity" doing whatever is necessary. With this as the situation, if you subscribe to "Don't fight the Fed", the Fed is going to be there to prevent the stock market from falling "very much", regardless of the administration in place.

I believe the Fed is in control... I just think they are doing too much and arguably exceeding their mandate when they pull the sleight of hand they have been doing to buy corporate bonds.

IMO their should be supporting banks and bank lending, but not making direct investments in corporate bonds in the surreptitious way they are doing.

The Federal Reserve has made clear its intent: It’s willing to do essentially anything to support markets and the economy. And it really, really means it.

Interest rates have been taken to zero, and unlimited quantitative easing, or QE, is in effect. The central bank then raised the ante with daily trillion-dollar engagements in repo markets, and its QE program is growing its balance sheet by about $625 billion per week. For context: one bout of QE post-2008 financial crisis was $600 billion over the course of eight months.

This is profound involvement. However, it’s all activity the Fed is allowed to partake in - it can transact in any asset that carries a government guarantee.

The Fed also has now begun purchasing “risk assets” or securities that carry no such federal guarantees. The Secondary Market Corporate Credit Facility has it buying corporate bond ETFs in the open market; its Commercial Paper Funding Facility and Primary Market Corporate Credit Facility has it transacting in commercial paper and corporate debt directly from businesses. The Fed also is about to begin acting like an actual bank for small business via the Main Street Lending Program.

“By any means necessary” probably deserves to be added right after “In God We Trust” on dollars at this point.

The Fed isn't legally able to do this by itself, and it’s making it happen through some creative financial engineering. The Treasury is officially the one making the purchases with the help of BlackRock (BLK) - Get Report via special purpose vehicles (SPV) that are financed by the Fed. So the Fed is essentially acting as banker to the Treasury, which is employing BlackRock as its broker to carry out the effective nationalization of parts of markets.

 

[audreyh1]

I believe the Fed is in control... I just think they are doing too much and arguably exceeding their mandate when they pull the sleight of hand they have been doing to buy corporate bonds.

IMO their should be supporting banks and bank lending, but not making direct investments in corporate bonds in the surreptitious way they are doing.

Yeah, I just have a bad feeling about this and it’s reducing my confidence in US equity markets.

 

[pb4uski]

Bingo!

 

[harllee]

OP here, my withdrawal from the stock market is complete and I am sleeping better and feeling less anxious in general so I think it was the right thing for me. Now I just get to sit back and watch for a while.

 

[tmm99]

OP here, my withdrawal from the stock market is complete and I am sleeping better and feeling less anxious in general so I think it was the right thing for me. Now I just get to sit back and watch for a while.

Hey, good for you! That's what matters - whether you feel good about your decision and can sleep soundly at night. Everyone has a different tolerance level and there's no one cookie-cutter answer here.

 

[LOL!]

Time to buy back in. You already avoided a 2% loss!

 

[PatrickA5]

Time to buy back in. You already avoided a 2% loss!

I think I need to hire Harlee as my investment advisor! I'm pretty sure when I sold my last lot of stocks it went up 1,000 points the next day