Coronavirus - Financial, Health and Other impacts II

[Bongleur]

What is happening with short term Treasuries and Money Markets?
If there is any profit to be had by selling. Given the 0.5% rate drop the "next weeks" purchase price in Treasuries might still be so low, that a future stock crash won't really yield a lot of value from a rise in price.

 

[ripper1]

I said earlier I could handle a 60% drop. Did so in 08-09. Only difference now is I had 2 years before I retired to pound money into stocks. Now all I can do is rebalance.....c'est la vie

 

[foxfirev5]

I have no idea where this going so I'm going to quasi hide behind the rebalancing ideology. Simply placing limit orders 60 days GTC for VTI gets the job done for me in these wild times.

 

[24601NoMore]

After 2008, I went to a "bucket" strategy approach with the specific intent that market investments were there for the long haul. With over 20 years in cash, CD's, etc. I am sleeping at night. Yes, I know most here would think that too conservative.

Right there with you..I also hold 20+ years in cash expenses and think that's a prudent approach.

 

[24601NoMore]

I said earlier I could handle a 60% drop. Did so in 08-09. Only difference now is I had 2 years before I retired to pound money into stocks. Now all I can do is rebalance.....c'est la vie

Being ER'd (in 2019), I'd throw up if we hit a -60% drop in equity values.

I did an analysis earlier this year of how long each fund I hold took in the PAST to recover..4 -6 years was not unheard of. Add in the dynamics of COVID-19 and it's not inconceivable we could have a 10+ year "underwater" period.

Once you hit your 50s (me) or 60s (DW), a 10+ year underwater period becomes extraordinarily unattractive..of course, there's virtually nowhere else to put $$ than equities..but still..this truly sucks!

 

[24601NoMore]

Actually with the frequency it is doing it, and in the environment in which it is doing it, it is in fact something to "sweat" about. (commands One's attention & concern) Just because it's not as bad as the worst as it could be or as bad as some point in the past doesn't mean it is not discernibly bad. Bad, by definition means: Bad enough to "sweat," which would also be subjective anyway.

The frequency of the 1,000+ point drops on the Dow (and roughly 3+% on the S&P 500) is something I don't think ANYONE has ever seen previously.

And for that reason, and that reason alone, this recent market action has me VERY concerned - to the point I'm considering selling out out of equities entirely..

I told DW earlier today that we could be looking at "1929 - 2.0"..and that may indeed be where we're headed.

 

[Fermion]

Selling out of equities doesn't really protect you against a "1929 2.0" as you say because of the unpredictability of the government response to such a calamity. If we can repeat 1929, then we could repeat Germany during the inflation years, where a wheelbarrow of cash would not even buy you a wheelbarrow.

 

[Sunset]

I have 30 of the May puts but are holding them most likely til atleast mid April.

This in one way to make money off the volitility. I wish I was an experienced enough trader to understand how to make more. .

I sold most of my few puts, DW got $166 profit, and I reduced my risk to $200 (told you I wouldn't bet the farm), leaving some in for the fall Friday.

Now, I'm thinking I should have considered CCL, sort of missed the boat there

I do want to buy CCL, so I can sell after 30 days my other 100 shares of it and harvest the loss, just not sure how yet, as in shares, or call or sell a put ?

 

[Fermion]

As I mentioned, I bought into CCL but didn't feel real good about it so I hedged my stock purchase with Oct puts.

If I were a really low risk type person I would wait and see if CCL cuts the dividend.

On the other hand, either this virus is the end of the world or it isn't. If it isn't the end of the world, people will still want to travel and knock things off their bucket list. Something is going to kill you in your 80s or 90s most likely, so might as well enjoy Hawaii or the Caribbean first.

 

[BeachOrCity]

Maybe investors need more than stocks and bonds?

As people try to hedge themselves against the decline and potential future decline of equities; I think it is a good time to remind people that "Stocks and Bonds" are not the only things one can invest in. We all have heard "diversification is the only free lunch".

I am a big subscriber to the school that says your retirement portfolio should be a "stool". If your stool only has two legs it is very unstable. Three legs are better and w/ 4-5 legs one can break and you might wobble, but you are still ok.

Potential Categories:
Stocks
Bonds
Annuities & Pensions non COLA'ed
Cola Pensions / Social Security
Real Estate
Income producing businesses
?Any thing else I missed?

I have 5 of these in my portfolio.

Think about how many you have. Can one leg of your stool get completely chopped off and will you be ok financially?

If you want to insure yourself against black swan type things, having multiple legs to your portfolio stool is a great way to do it.

 

[Fermion]

I already hedged against my stool on my last trip to Costco.

 

[Gumby]

I already hedged against my stool on my last trip to Costco.

You should probably consult a physician if it has multiple legs.

 

[Sunset]

I already hedged against my stool on my last trip to Costco.

I'm feeling behind on my hedging.

 

[Sunset]

As people try to hedge themselves against the decline and potential future decline of equities; I think it is a good time to remind people that "Stocks and Bonds" are not the only things one can invest in. We all have heard "diversification is the only free lunch".

I am a big subscriber to the school that says your retirement portfolio should be a "stool". If your stool only has two legs it is very unstable. Three legs are better and w/ 4-5 legs one can break and you might wobble, but you are still ok.

Potential Categories:
Stocks
Bonds
Annuities & Pensions non COLA'ed
Cola Pensions / Social Security
Real Estate
Income producing businesses
?Any thing else I missed?

I have 5 of these in my portfolio.

Think about how many you have. Can one leg of your stool get completely chopped off and will you be ok financially?

If you want to insure yourself against black swan type things, having multiple legs to your portfolio stool is a great way to do it.

CD's are nice.

Sure I have other legs.
It's just the opportunity to dance across the waves of the tsunami, that is enticing.
Really trying to look on the bright side of life, find the silver lining in the situation.

 

[jazz4cash]

What is happening with short term Treasuries and Money Markets?

If there is any profit to be had by selling. Given the 0.5% rate drop the "next weeks" purchase price in Treasuries might still be so low, that a future stock crash won't really yield a lot of value from a rise in price.

The 10 yr treasury rate is the real news IMO. The stock index movements are <irrational>. In ‘08 Lehman brothers collapsed and the Fed forced banks to accept loans even if they didn’t want or need them. There were articles and documentaries, infomercials and foreclosure auction sale signs everywhere. No one knows how much the virus effects will impair economies.

 

[jazz4cash]

With the VIX (CBOE volatility index) 40 or higher you see these crazy wild swings, and it is very unsettling to most people.



Such a high VIX can indicate “blood in the streets”, but IMO way too early for bottoms or capitulation. Things like this with a sudden black swan type disruption take a while to play out.

Capitulation. There’s a word you don’t hear often. Trying to remember how long it’s been. I think the VIX was 80 in ‘08 so this it seems way to early to understand what’s going on to me.

 

[NW-Bound]

The frequency of the 1,000+ point drops on the Dow (and roughly 3+% on the S&P 500) is something I don't think ANYONE has ever seen previously.

And for that reason, and that reason alone, this recent market action has me VERY concerned - to the point I'm considering selling out out of equities entirely..

I told DW earlier today that we could be looking at "1929 - 2.0"..and that may indeed be where we're headed.

A 1,000-point movement on the Dow is unprecedented, but a 3% move on the S&P is nothing to write home about. Inflation you know?

I have seen plenty of much larger movements of the market. Why, it was only a bit more than 10 years ago. People's memory is truly very short.

As mentioned, I kept a financial diary going back to 1999. And for y'all, I have extracted the value of the S&P during two terrible months in 2008, and built a simple spreadsheet to show you the daily fluctuations.

Note that I highlighted only the days with a movement of more than 4% up/down. Note a couple of up days of more than 10%. However, the trend is down, and the S&P went from 1565 to 677 before it set off on a new bull market.

Are we having fun yet?

 

[LRDave]

A 1,000-point movement on the Dow is unprecedented, but a 3% move on the S&P is nothing to write home about. Inflation you know?

I have seen plenty of much larger movements of the market. Why, it was only a bit more than 10 years ago. People's memory is truly very short.

As mentioned, I kept a financial diary going back to 1999. And for y'all, I have extracted the value of the S&P during two terrible months in 2008, and built a simple spreadsheet to show you the daily fluctuations.

Note that I highlighted only the days with a movement of more than 4% up/down. Note a couple of up days of more than 10%. However, the trend is down, and the S&P went from 1565 to 677 before it set off on a new bull market.

Are we having fun yet?

Yuck. I am glad I wasn't paying that close of attention at the time.

 

[Bongleur]

I already hedged against my stool on my last trip to Costco.

Does Cologuard count?

 

[Bongleur]

If you have 20 years cash expenses -- what inflation rate are you using to discount your pile? Even at a straight 2% - you can't get that with no risk investments anymore.

 

[jazz4cash]

If you have 20 years cash expenses -- what inflation rate are you using to discount your pile? Even at a straight 2% - you can't get that with no risk investments anymore.

I think you’re talking about real return? How about TIPS? I don’t know. I’m asking.

 

[brewer12345]

As I mentioned, I bought into CCL but didn't feel real good about it so I hedged my stock purchase with Oct puts.

If I were a really low risk type person I would wait and see if CCL cuts the dividend.

On the other hand, either this virus is the end of the world or it isn't. If it isn't the end of the world, people will still want to travel and knock things off their bucket list. Something is going to kill you in your 80s or 90s most likely, so might as well enjoy Hawaii or the Caribbean first.

I am a lot more pessimistic about the cruise industry, so I think the puts are wise (but they must have been expensive).

I looked at the CCL and RCL bonds and was astonished to see they are still trading at a hefty premium to par. The bond investors are probably in for a rude surprise.

 

[brewer12345]

I think you’re talking about real return? How about TIPS? I don’t know. I’m asking.

He is suggesting that unless you are getting at least 2% you are not really holding 20 years of expenses after you take into account inflation.

 

[jazz4cash]

He is suggesting that unless you are getting at least 2% you are not really holding 20 years of expenses after you take into account inflation.

That’s the way I read it initially but then I thought no, that’s not right. I can get 2% easily from bonds or CDs but if inflation runs 2.5% I’m losing ground. I’m not counting on FI to keep up w inflation except I need to learn more about TIPS.

 

[mickj]

The virus made it to our state, hopefully panic won’t ensue. Toilet paper is already scarce in the stores.