Do you think Dow 18,000 was the bottom?

[Closet_Gamer]

Among a handful of other drivers, I think a lot comes down to Italy.

If they can really get the lid on it and restart their economy, then yes, I think we've put in a bottom. Its a leading indicator.

If they can't get it under control in the next 10 days, then we may take another down leg as there isn't a viable model for other western economies to follow.

I don't often quote myself, but its been on my mind since I wrote it....along with any number of other opinions I've hung out there since!

Italy has continued a steady downtrend since I wrote this but certainly didn't resolve it in 10 days. They're demonstrating the decline is much slower than the ramp. Still, just 16 days after I wrote this, most of Europe shows the virus rapidly coming under control.

Hence, we haven't returned to a big down leg.

We also have glimmers of encouraging news:

Germany has jumped to the front of the train and announced a partial re-opening plan. I believe we'll see similar moves in other European countries in the next week. Plus a few US states are taking off the parking break. China's economy is spinning back up.

There is more anecdotal evidence to suggest the virus is far more wide spread than thought implying lower mortality and higher immunity. Stanford just published a study where they went deep on testing in a single CA county. Result was the virus was 50x more prevalent than had already been diagnosed. (https://spectator.us/stanford-study-suggests-coronavirus-more-widespread-realized/)

The report on remdesivir is encouraging as well. Not only for its own potential utility but because it reminds us that the entire medical and pharmaceutical world has bent its will on this thing.

And, of course, governments continue to prop up businesses and families in an unprecedented way and healthcare systems the world over are ramping capacity to better manage future surges.

If some combination of these factors come true (less lethal, way closer to herd immunity, expanded healthcare capacity and an effective treatment), this thing fades far more quickly and into a backdrop of damaged but stabilized businesses. We'll all be wondering about how to clean up the wreckage, but the crisis will recede much sooner than if we have to wait for a vaccine.

The flip side:
-China closed two cities and is starting to admit they had a much bigger problem.
- Data coming out of nursing homes suggests we've been badly undercounting deaths among the elderly.
- Outbreaks continue to ramp in various US cities
- Russia & Japan are ramping
- No one knows what will happen in Africa, India, etc. but the living conditions and healthcare infrastructure point to something horrifying. Ecuador looks to be the leading indicator of what happens in a less developed country


Bottom line:

I think the market is spring loaded to the downside right now, but I don't think we will retest the lows in the next 6 weeks. (There, I said it!)

Too much good news is going to contend with the bad news.

A month from now we'll have a lot more real information to assess again, with the single most important piece of information being any level of scaled antibody testing among the general population. That's the missing puzzle piece.

(To ensure that we don't retest 18000, when the market was at 20K, I put in some buy orders for 10% down. My below market buy orders never trigger...so everyone is safe! )

 

[audreyh1]

I don't know anything either. What I think I do know is stocks do not appear cheap to me right now. I found some bargains in March that seems to have dried up. Earnings don't look good going forward. We have not retested the lows yet either. But the big thing that stands out to me is the market seems to be going up faster than what would seem reasonable to me.

The market is going up fast because it’s wishing for a miracle and hoping that this all suddenly goes away magically.

 

[MichaelB]

The market is going up fast because it’s wishing for a miracle and hoping that this all suddenly goes away magically.

That sums it up pretty well.

 

[tdv2]

Love this quote “In a bear market, money returns to its rightful owners.”

here is a good read: "Here We Go Again"
http://www.oncoursefp.com/files/Vectors March 2020 final.pdf

Never heard that one before about money. The quote famously attributed to J.P. Morgan is "In a bear market, stocks return to their rightful owners"

 

[BeachOrCity]

Still, just 16 days after I wrote this, most of Europe shows the virus rapidly coming under control.

A month from now we'll have a lot more real information to assess again, with the single most important piece of information being any level of scaled antibody testing among the general population. That's the missing puzzle piece.

The best information we have (to date) on the potential spread of the virus among asymptotic people is from iceland. They have antibody tested 10% of their population and 1/2 of the tests came back positive from people who never had symptoms.
https://www.cnn.com/2020/04/01/europe/iceland-testing-coronavirus-intl/index.html
The Stanford test was not broad enough to rely on.

I have said this all along though. People need to separate how bad the virus really is from how people react to it. Regardless of what governments say you can or cannot do people will be avoiding anything with a crowd for some time. This is restaurants, airplanes, mass transportation, sports, etc.
Consumer spending IS the economy (70%). This means recession for this time period no matter what until consumers have the confidence to SPEND.

I have questioned the numbers since the beginning of this pandemic. Without testing everyone (to generate a reasonably accurate denominator (amount infected)), how can they possibly generate a rate of mortality?

There will always be negative news, especially with the ridiculous spin our wonderful media puts on everything.

We have had much greater tragedies;

Agree we NEED a huge increase in testing in the USA.

The consensus sentiment is that this is not just "negative news", but rather the biggest crises the country / world has faced since WWII. So yes, we have had greater tragedies, they were WWII and the great depression. Not exactly a comforting benchmark.

The big caveat in all of this is if there is a medical miracle, and either a safe and effective treatment or vaccine becomes suddenly widely available. With that, everyone would get it and return to normal.

I have no idea where the lows will be, but would gladly take an even odds bet that the lows of March will be retested before there is widespread vaccination or effective treatment.

 

[eytonxav]

The virus is one thing, but the damage to the economy concerns me even more at this point and I imagine the later will drive where the market goes even if the virus is squelched.

 

[Markola]

While I like the quote, that news letter was worthless. Just regurgitation of “choose an AA and always stick to it regardless”, stating well worn borrowed factoids. Nothing wrong with that, but what does anyone need that kind of newsletter for? Reassurance?

I rather liked it. Even though an investor, like me, has adopted exactly this (classic Bogleheads) investment approach, it doesn’t mean we are built of cast iron and immune to the news cycle. I further liked this perspective for those of us who are globally diversified. Of course, YMMV:

“It might help if you broaden your investment philosophy. Rather than looking at your portfolio as an investment in individual securities or various funds, think of it as your investment in the global growth of the free enterprise system. Current woes aside, the worldwide expansion of the free enterprise system will continue. Around the globe, millions have been unchained from the bondage of poverty in the last two decades. This expansion in global prosperity will continue, even if interrupted at points along the way.”

 

[pb4uski]

The market is going up fast because it’s wishing for a miracle and hoping that this all suddenly goes away magically.

+1 The stock market currently seems to be anchored into wishful thinking for the future and overfocused on the virus and its paths/slopes rather than on the damage to the economy caused by the mitigation actions that we needed to take to avoid a public health disaster.

In the last month, 20 million jobs went "poof" and that is probably significantly underreported due to problems processing unemployment claims, not counting the self-employed or furloughed, etc. It will take a while for those jobs to come back and for consumers to have the confidence to start spending again.

 

[UnrealizedPotential]

Here is another way to look at this market. No, I am not saying that this is accurate , but here it goes:

The bear market really started in late 2018. Then we bounced off those lows big time in 2019 and early 2020. Then, while still in the bear market, we bottomed at 2191 this year and the new bull market started in March 2020.

That's a theory I recently read. I have a hard time buying it. My biggest problem with it, are stocks seem just too darned expensive to start a new bull market. But with rates at zero, maybe the old order has changed. I don't think it has, but maybe. I am still expecting we go lower to retest the low of 2191.

 

[pb4uski]

Here is another way to look at this market. No, I am not saying that this is accurate , but here it goes:

The bear market really started in late 2018. Then we bounced off those lows big time in 2019 and early 2020. Then, while still in the bear market, we bottomed at 2191 this year and the new bull market started in March 2020. ...

Sounds like poppycock to me.

 

[Dtail]

Sounds like poppycock to me.

Agree - a 14 month upward dash - nah.

 

[UnrealizedPotential]

Sounds like poppycock to me.

I agree with you. Like I said, I don't buy it. I question it big time. It's possible yes, I admit it's possible, but extremely unlikely.

 

[targatom2019]

+1 The stock market currently seems to be anchored into wishful thinking for the future and overfocused on the virus and its paths/slopes rather than on the damage to the economy caused by the mitigation actions that we needed to take to avoid a public health disaster.

In the last month, 20 million jobs went "poof" and that is probably significantly underreported due to problems processing unemployment claims, not counting the self-employed or furloughed, etc. It will take a while for those jobs to come back and for consumers to have the confidence to start spending again.

I am curious how did you react to the markets in 2008-2009.

 

[RetireAge50]

Maybe this storm wipes us out for awhile and the stocks go to to 18,000 or whatever. But 10 years from now I bet stocks will be double the lows or better so that is where my money is. Reacting to short-term events is a great money maker but I don’t want to spend the brain power to study it.

 

[brewer12345]

I am curious how did you react to the markets in 2008-2009.

I bought equities and junk bonds. I even borrowed money on a HELOC to buy bonds and preferreds I could tell were money good and trading at double digit yields. We are nowhere near that.

 

[targatom2019]

I bought equities and junk bonds. I even borrowed money on a HELOC to buy bonds and preferreds I could tell were money good and trading at double digit yields. We are nowhere near that.

LOL, use HELOC to buy equities

 

[PatrickA5]

LOL, use HELOC to buy equities

Why do you laugh? You've stated that you've NEVER lost a penny in the market for decades. Seems to me you would want to get as much cash into the market as possible?

Now, I would never borrow to invest in the market, but I've lost money before.

 

[brewer12345]

LOL, use HELOC to buy equities

At 20 or more time earnings? No thank you.

 

[targatom2019]

Why do you laugh? You've stated that you've NEVER lost a penny in the market for decades. Seems to me you would want to get as much cash into the market as possible?

Now, I would never borrow to invest in the market, but I've lost money before.

I am still up over 350% since 1995 even with the 30% drop March 23rd. I already bought close to 580K when the DOW was dropping from 24,000-18,500 and currently break even YTD. You need to focus on long term, ignore the noises and control your emotion because we invest based on having the best economy, best technology, best science and human ingenuity or else why even invest at all and just stay on cash. Do you really think the markets will not hit new high 10 years from now ?

 

[pb4uski]

I am curious how did you react to the markets in 2008-2009.

It was a bit different because I was working then and had a steady job that paid very well. Other people who I knew were bailing, but I stayed the course... I didn't sell and just kept with whatever retirement contributions that I had in place. At the same time, my AA was literally screaming at me to sell bonds and buy stocks but I couldn't quite summon up the courage to do that and in retrospect it cost me a lot.

 

[pb4uski]

LOL, use HELOC to buy equities

Check your glasses. He said bonds and preferreds, not equities:

...I even borrowed money on a HELOC to buy bonds and preferreds I could tell were money good and trading at double digit yields. ...

 

[pb4uski]

I am still up over 350% since 1995 even with the 30% drop March 23rd. I already bought close to 580K when the DOW was dropping from 24,000-18,500 and currently break even YTD. You need to focus on long term, ignore the noises and control your emotion because we invest based on having the best economy, best technology, best science and human ingenuity or else why even invest at all and just stay on cash.

WADR, you probably need to check your numbers because up over 350% since 1995 isn't all that impressive for 100% equities.

The S&P 500, with dividends reinvested, is up 792% since 1995 and is up 455% without dividends reinvested.

 

[targatom2019]

WADR, you probably need to check your numbers because up over 350% since 1995 isn't all that impressive for 100% equities.

The S&P 500, with dividends reinvested, is up 792% since 1995 and is up 455% without dividends reinvested.

I DCA over the last 25 years, I think you based on 1 lump sum amount and I remember I started out with just $2,000 in 1995. Might not be impressive to you but I am pretty happy to build a NW of 3.2M in equities and 3.4M in real estate based on average salary of 87K per year last 25 years is not bad either don't you think. One thing for sure is I did fold and run for the hills based on short term noises.

 

[targatom2019]

Check your glasses. He said bonds and preferreds, not equities:

does not matter, using HELOC to buy bonds is still not a wise investment strategy and it's a stupid way to take risk.

 

[Markola]

The market is going up fast because it’s wishing for a miracle and hoping that this all suddenly goes away magically.

+1. Stocks are still historically expensive and the odds for a reversion to mean, or at least probing the vicinity of it, seem a lot higher than the odds of staying at current prices for the next “while,” unless we’ve all turned into riverboat gamblers and high CAPE 10 ratios don’t matter anymore.