When to buyback?

[DWright]

I had a buy back number in mind 40% loss in the Dow from it’s high. I understand if you don’t like the sound of that but let’s keep feeling out of it for this.

Some quick math for you. If we are headed for a 65% drop and you buy in after it is down 40% you will lose another 40% by the bottom. Who knows if it will go that low, but it isn’t impossible.

 

[ERD50]

....
Thoughts? Please be kind. ....

Here are my thoughts, and they are kind (at least IMO).

While I don't believe in market timing, what's done is done. You did the first step. It wasn't exactly clear when you got out, but if you sidestepped ~ 35% of the loss, well in my view, you hit the jackpot already.

Why be greedy? Get back in, take the 35% 'gain' (relative gain), and don't look back. The old "bird in the hand" approach.

No one knows if it is going lower, it's where it is based on expectations. So things may get terribly bad, but if "terribly bad" is built into the current price, it may not drop at all from here. I don't know, you don't know. You may never find a better re-entry point.

Take your winnings while you can, and be happy. That is my kind advice.

-ERD50

 

[timbervest]

At yesterday’s close the market was at 100% of expected GDP. It’s not cheap yet.

I suspect that GDP will be considerably lower next quarter so the market probably has a way to go.

 

[Fermion]

Some individual stocks sure seem cheap.

Take BMY for example. Closed Friday at $48.40, down from Feb highs in the $60s.

Fwd PE is 9.64. Broad, diverse pipeline and consumers are dying for their products, even in a recession.

Now Exxon doesn't look cheap.


I think now is the time for stock picking. Index fund investing is dead.

 

[OldShooter]

Here are my thoughts, and they are kind (at least IMO).

While I don't believe in market timing, what's done is done. You did the first step. It wasn't exactly clear when you got out, but if you sidestepped ~ 35% of the loss, well in my view, you hit the jackpot already.

Why be greedy? Get back in, take the 35% 'gain' (relative gain), and don't look back. The old "bird in the hand" approach.

No one knows if it is going lower, it's where it is based on expectations. So things may get terribly bad, but if "terribly bad" is built into the current price, it may not drop at all from here. I don't know, you don't know. You may never find a better re-entry point.

Take your winnings while you can, and be happy. That is my kind advice.

-ERD50

+1

 

[OldShooter]

Some quick math for you. If we are headed for a 65% drop and you buy in after it is down 40% you will lose another 40% by the bottom.

Quite funny actually. And if we are headed for a 40% drop and you buy in after it is down 40% you will not have missed the bottom.

Somewhere in the middle is probably how this will turn out. We'll know in a few years. These things are always clear in the rear-view mirror but never clear through the windshield.

 

[rayinpenn]

If you buy back at - 40% what will you do when the market drops another 10%...

Nothing. I won’t cry in my beer

 

[ripper1]

Once/if the smoke clears, I'll probably look at some length of moving average to signal the bottom and then value average in over a period of time.... still need to think about it, but it will be a gradual and methodical getting back in and not all at once.

+1

 

[Markola]

Quite funny actually. And if we are headed for a 40% drop and you buy in after it is down 40% you will not have missed the bottom.

Somewhere in the middle is probably how this will turn out. We'll know in a few years. These things are always clear in the rear-view mirror but never clear through the windshield.

I’ve been doing some modeling on Portfolio Visualizer, trying to see the effect of getting more aggressive during the troughs of the last two recessions.

In those two cases, it took 3-5 YEARS or more to begin to see any benefit of going 90% stock at the bottom vs. hanging with my current slow-as-she-goes 50/50 allocation.

Once the 90% AA finally caught up with and exceeded the 50/50 one, you had to stick with that 90% aa for years more during the stock bull, only to suffer the next recession.

So, even if I could somehow find and time the bottom of this one and go all in, what is the point if it takes several years more to benefit? This one doesn’t feel like a flash crash to ride back up quickly.

 

[brewer12345]

I’ve been doing some modeling on Portfolio Visualizer, trying to see the effect of getting more aggressive during the troughs of the last two recessions. In those two cases, it took 3-5 YEARS or more to begin to see any benefit of going 90% stock at the bottom vs. hanging with my current slow-as-she-goes 50/50 allocation. I don’t see the point in trying to find the bottom now.

Those of us sitting in cash do, for sure. For a 50/50 thick and thin allocation, I would just rebalance as necessary.

 

[calmloki]

Nothing. I won’t cry in my beer

Don't worry, be happy. I didn't take money off the table (as you did, at a brilliant time). Looks to me like you are way ahead of the game right now. I bought at 5,10, and 20% down. After making those purchases we are still down over a $100k from the time before we bought! We do have more shares though.. I am instructed that we are not buying more at the present time

 

[OldShooter]

No interest in finding the bottom. Actually, we now look at our fixed income tranche more as a bucket than as an AA. We have about five years of generous spending sitting there right now. Our plan is to spend it down as we watch this excitement evolve. If the bounce is fairly fast we may start to replenish the bucket in 2-4 years. If slower, we'll move more slowly too. Our only issue this year is a small Roth that is 100% equities, so we'll wait to pull the RMD there.

In contrast, we are on the investment committee of a nonprofit/DW is the chair. There we're expecting to move around $2M DCA into equities. The original plan, pre-virus, was to finish by late June. Not sure we will move that aggressively now. Our 1Q20 meeting with the FA will determine.

 

[Running_Man]

From an earlier thread on Feb 29th:

I took the orderly speed of the decline to indicate there is not a large amount of funds available on the bid curve of most stocks to take the small amount of sales, as you indicated that was not panic selling. As a point the TRIN never got above 1 on any day despite the fastest decline from a stock market top in the history of investing. World record low interest rates and world record declines without any panic is not the type of market I like.

Central banks have spent the last 10 years driving the finances low in order to stimulate demand, but this is a shock that is suppressing demand and is going to put pressure on many marginal companies, which could have a cascading effect. TESLA going parabolic is I think the definitive marker of the top of this market. The FED was already having trouble keeping the party going with last years liquidity squeeze in September. This inflection will hurt far worse than that so I think it will be at least an equal 18 months to 2 years in order for the pain to be cleared out, now that the pain has begun.

But if you feel there will be a V recovery I would like to understand why that would be, in a environment of reduction of physical demand of goods. Oil has already been presaging this move.

Small example, there are literally thousand more, the airlines are all going to take a big financial hit on air travel, resulting in deferred capital and cancelled aircraft orders. Boeing is already borrowing to pay it's dividend, an incredibly stupid decision, airplane cancellations will drastically reduce it's orders and result in a multitude of smaller supplier companies, which have debt financed themselves in the Boeing boom also cutting back. I do not see this issue as a V bounce back but a 18 months to 3 years wait to return to previous production levels.

I am also expect precious metals to decline as Central banks, which have been buying record amounts of gold, will probably need to sell in order to shore up their financial deficits, especially China which has been the largest purchaser of gold over the last 10 years, in anticipation of a world move to SDR's.

Nothing has changed to make me want to change a thing (since this post Boeing has dropped 67%, United Airlines 60% and Gold has dropped 7%), though there are those that would claim a monkey could have easily typed that, in Connecticut last week nearly 2 percent of the state’s workers declared that they were newly jobless on a single day. While there is a risk that the US Government will announce a program so massive that inflation fears will drive up all the prices, I would still wait for the 1300 or so or else 3100 as a timing exercise that failed or one year on the S&P500. 1300-1400 will bring the dividend yield of the S&P500 to a 4% yield which would provide the income necessary to adequately fund a retirement and provide a historical level of value that endured for many years before these past few.

In 2009 the S&P500 fell to a 4.45% dividend yield and everything indicates at this point this is a worse crisis than that, at 4.45% dividend yield the S&P500 will be around 1235. At 3100 you admit you missed your chance and this whole episode was overblown and you can continue on with your retirement, you son's college and your new roof and knees.

 

[SeattleRocks]

I am going to 100% cash (my last trade out of the market is this Monday) to wait this out and am taking the proceeds and spreading it around to several banks to make sure I am FDIC ensured in all directions. I am keeping my powder dry and very liquid.

I will start dollar cost averaging when the Dow hits 15,000 which I personally believe we will hit (ie. approx. 50% decline). If I see momentum selling beyond 15,000 I will just slow down my dollar cost averaging and would LOVE to get in as 13,000 or 14,000 even less if I can.

I have 5 years living expenses set aside beyond what I will dollar cost average into the market when that time comes. And once back in the market, if it stalls out for years, I can just live with the dividends. While it could keep going down which is entirely possible, I think buying in at 15,000 or lower gives me a nice base to bounce back up over time. In 5 years, I think I will be very happy.

But I do also believe that this virus condition is short lived. It will do ALOT of damage but I think once we see a treatment or God willing, a cure the market is going to turn around fast and since I was very conservative (30/70) before this downturn, going back in at levels I feel good about, I will probably flip that to 70/30 and make up my losses pretty quickly.

I know, I know. I have seen all of the data on market timing. I get it. But I think everyone can see the carnage coming down and I just don't want to take even more hits. I see absolutely nothing in the economy right now that is going to lift stocks in the near term and I am not a great individual stock picker. Some of you are great at that and will do very well with some beaten down stocks, but that is not my strength...

 

[brewer12345]

I am going to 100% cash (my last trade out of the market is this Monday) to wait this out and am taking the proceeds and spreading it around to several banks to make sure I am FDIC ensured in all directions. I am keeping my powder dry and very liquid.

Rather than deal with several banks, why not just buy T bills or a treasury only MMF? Much less hassle and the same credit quality for what will be a temporary position.

 

[SeattleRocks]

Rather than deal with several banks, why not just buy T bills or a treasury only MMF? Much less hassle and the same credit quality for what will be a temporary position.

I already have $500K in my Vanguard Federal MMF so that box is already checked. I have never bought T-Bills before so I will look into that, that could also be a good option. Thanks for the tip.

 

[DallasGuy]

I am going to 100% cash (my last trade out of the market is this Monday) to wait this out and am taking the proceeds and spreading it around to several banks to make sure I am FDIC ensured in all directions. I am keeping my powder dry and very liquid.

I will start dollar cost averaging when the Dow hits 15,000 which I personally believe we will hit (ie. approx. 50% decline). If I see momentum selling beyond 15,000 I will just slow down my dollar cost averaging and would LOVE to get in as 13,000 or 14,000 even less if I can.

I have 5 years living expenses set aside beyond what I will dollar cost average into the market when that time comes. And once back in the market, if it stalls out for years, I can just live with the dividends. While it could keep going down which is entirely possible, I think buying in at 15,000 or lower gives me a nice base to bounce back up over time. In 5 years, I think I will be very happy.

But I do also believe that this virus condition is short lived. It will do ALOT of damage but I think once we see a treatment or God willing, a cure the market is going to turn around fast and since I was very conservative (30/70) before this downturn, going back in at levels I feel good about, I will probably flip that to 70/30 and make up my losses pretty quickly.

I know, I know. I have seen all of the data on market timing. I get it. But I think everyone can see the carnage coming down and I just don't want to take even more hits. I see absolutely nothing in the economy right now that is going to lift stocks in the near term and I am not a great individual stock picker. Some of you are great at that and will do very well with some beaten down stocks, but that is not my strength...

This is NOT a normal market crash and recession/possible depression. There has never been another time in our history where so many people have lost their jobs in such a short period of time AND many small companies and corporations are getting hit hard. No amount of government spending is going to make up for that. Even if this ended tomorrow (which it won't) there will have been a lot of damage to our economy. There will NOT be a quick turnaround because much of the lost consumer spending is not recoverable. Some is, but not enough. I don't see the logic in buying at this time on the hopes we are hitting a bottom because there will be many more down days before this is over. My 2 cents worth.

 

[ERD50]

This is NOT a normal market crash and recession/possible depression. There has never been another time in our history where so many people have lost their jobs in such a short period of time AND many small companies and corporations are getting hit hard. No amount of government spending is going to make up for that. Even if this ended tomorrow (which it won't) there will have been a lot of damage to our economy. There will NOT be a quick turnaround because much of the lost consumer spending is not recoverable. Some is, but not enough. I don't see the logic in buying at this time on the hopes we are hitting a bottom because there will be many more down days before this is over. My 2 cents worth.

As I tried to explain to a friend - it's not about whether it (the economy) gets worse or not, it probably will. The question for investors is, will it get worse than expected? A slight twist of words, but a very important distinction.

The market anticipates. It may be right, it may be wrong. But we can't know if it is right or wrong. The current price reflects expectations. So do you expect it to be different from expectations? That seems like a strange thing to expect, it's a paradox.

-ERD50

 

[Moemg]

I sold a bunch before it got really bad . I will buy back when someone says corona and the answer is "You want lime with that ".

 

[brewer12345]

The market anticipates. It may be right, it may be wrong. But we can't know if it is right or wrong. The current price reflects expectations. So do you expect it to be different from expectations? That seems like a strange thing to expect, it's a paradox.

-ERD50

Under normal market conditions, I would agree with you. We have just been through a relentless liquidation of equities and just about every other asset class. There has been no calm estimation of prices vs. future prospects. I do not know if the liquidation is over yet. Once it is over, I think everything you are saying will hold. I just don't know if we are there yet.

 

[aja8888]

It's not all about the virus stuff.

Phase two of this spiral down may be from the global overproduction of crude oil. Expect U.S. production and service company bankruptcies, lots of layoffs, Big Oil dividend cuts or eliminations, etc.

 

[Looking4Ward]

I've been living off my investments for almost six years now and they were the highest they've ever been last month. I had actually thought of selling several hundred thousand worth of Wellington and moving it to cash in preparation for buying a house.

But I didn't.

Now that money is gone (on paper). I'm going to continue to make my monthly withdrawals and hope that those managing my funds, who I've always hoped are smarter than me when it comes to investing, will show their worth and make smart decisions now so when the market rebounds my returns are amplified.

Luckily we've had many good years before today. Hopefully, we'll have many more after tomorrow.

 

[pb4uski]

This situation is so unique that it is difficult to assess the depth and length of the recession.. but I think it is going to be real bad... worse than 2008 is my guess. I've got more cash than I have ever had in my lifetime and am awaiting more information to assess the impact on business and the economy before jumping back in. I think this time is different... or at least different from anything I have ever seen in my lifetime.

 

[statsman]

Rather than deal with several banks, why not just buy T bills or a treasury only MMF?

Any recommendation(s) for a treasury only MMF? We've exceeded the insurance limit of our MM account by quite a bit, so we should move money out (although my wife, who has been in banking for 40+ years, has zero worries about the institution where our MM account is).

 

[COcheesehead]

Walking the neighborhood and talking to people today. Hearing things unique to everyone’s situation. We are teetering on the brink. I think this may be the worst market ever. Protect yourself.