When to buyback?

[brewer12345]

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).

I use Schwab, so SNSXX. Look on your broker's website for a treasury only fund.

 

[SeattleRocks]

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

I totally get what you are saying. It is a paradox. And its extremely hard. I just honestly don't believe what anybody says anymore and I do not think the models, the algorithms, or the market anticipation has this particular issue nailed down. Maybe they do. But seeing 1000pt drops every other day, followed by a few upticks tells me they are also trying to get a handle on it.

For me, I am done. I am going to wait until the market drops so far that I think the risk of falling even farther is narrowed. 3 months? 6 months? who knows. I firmly don't believe we are going to see a major run up any time soon and the world governments infusions are like spitting in the wind.

This as the "D" word written all over it and the Government cannot bail out every company. When Boeing of all companies needs a $60B bailout, then we have real issues. And wait until the unemployment numbers really start coming out. This is going to snowball on itself and I am not reacting to fear. Just common sense.

Capitulation is what I am waiting for and I think we are going to see that in spades. I am fine sitting in cash in FDIC insured positions to wait this out.

 

[DWright]

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

The odd thing is the virus is predictable, unlike previous financial crises. We pretty much know every day for the next month is going to have worse news than the day before. But how can the market anticipate all that? It takes time to unwind positions. I think that’s why we have had so many circuit breaker days in a short period, the market is trying to catch up to the accelerating bad news.

 

[Sunset]

Ok before you jump to some bad conclusions we too took it on the chin in our taxable accounts. Earlier in the year I looked at my non taxable retirement accounts after a years retirement and they had actually grown. I was afraid I’d get burnt being greedy. So I sold all equities in my non taxable accounts (410ks) and then the wife’s last. 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.

High 2/12/2020. 29,552.
Yesterday 19,152.
Drop. 10,400. 35%

So we are not there.. will we ever get there? I sure don’t know but if I were to guess I’d say sure based on the news from Spain and Italy.
Thoughts? Please be kind.

hunkered down and nervous.

I've only read this first post.
You have done what I wish I had done.
If you buy in now, no matter what you are 35% ahead of where you were.

 

[BeachOrCity]

Took equities off at the start of the month when Dow was around 25,600. My equities was at 24%. Yesterday, at 19,100, I started nibbling a little. Talk is Dow will hit 15K-17K and S&P at 2,000 by Goldman at bottom, and this is a black swan event and we don't know if Dow could go down even further to 12K-14K - so just assess your risk-aversion. I will keep on nibbling for the next 8 weeks. They say China and Taiwan and South Korea are getting better with less covid cases, so there are some signs. It depends also on how the current govt. admin manages these crisis in the next 2-3 weeks to stabilize the situation. Congress need to put $$$ directly into people's hands - because this is a 'demand side' problem. People need money and have them spend it. The oil market is collapsing, which is not good for the market - again, no demand. Once the consumer demand side goes up, we'll be better.

I disagree with this. There is no getting consumer spend up as long as the virus is both unknown and out of control.
Once it is known (ie easy for anyone to get tested) and in control (ie medical care available for number of folks who have it and people can reasonably isolate as needed to avoid)....then people will spend money on restaurants travel etc. until then, folks are hunkered down

 

[BeachOrCity]

I encourage you to explore the https://www.multpl.com/shiller-pe site and click on the FAQ for various metrics. They explain a lot.

2q earnings this year will be so completely awful, that regular PE won’t work. CAPE 10 will be a good measure for valuations. Thanks for the reminder.

 

[atmsmshr]

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).

DW and I have had bulk of assets in Fidelity FUAMX.

 

[audreyh1]

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).

In a bank you have a MM account insurance limit. Your brokerage should offer a treasury only MM mutual fund. That is what Brewer is talking about.

 

[audreyh1]

I disagree with this. There is no getting consumer spend up as long as the virus is both unknown and out of control.
Once it is known (ie easy for anyone to get tested) and in control (ie medical care available for number of folks who have it and people can reasonably isolate as needed to avoid)....then people will spend money on restaurants travel etc. until then, folks are hunkered down

I absolutely agree. You can’t tell people to stay home except for essentials like food and medicine and expect demand to increase. It won’t. And the $$$ is to provide relief and help cover bills already incurred by people who have suddenly lost jobs/income.

Agreed that until we know what we’re dealing with, with the virus, there won’t be a resumption of demand.

Figuring out what needs to be created to help ease the crisis and hiring more folks and maintaining safer work conditions would help a lot. Amazon is hiring. Grocery stores are hiring. Don’t we need ventilators? More delivery people?

 

[audreyh1]

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.

Why are you walking around the neighborhood and talking to people today unless it’s on the phone?

 

[audreyh1]

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.

That is definitely what we’ve been experiencing, and VIX exceeding 80 indicates that it has been mostly panic, not to mention drops in safe havens like gold.

It will take a while for markets to evaluate future prospects and there are way too many unknowns right now anyway.

 

[audreyh1]

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.

Just to be clear - I don’t think there is a limit in your Vanguard Federal MMF unless Vanguard imposes a limit. We’re not talking about FDIC insurance in this case.

 

[target2019]

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

Nothing. I won’t cry in my beer

Fair enough response. I was thinking of a graphic similar to below (Great Recession and recovery) when I asked the question. I should have expanded the question to explain myself better. After exit and re-entry, there could be a protracted period with additional large movements to think about.

I don't know how low this current recession will go, and I don't know the duration.

If I used a timing strategy (and I don't) and sold out at the top, I might watch a long signal such as 200 dMA to fine tune my re-entry. If I had sold out at my 50% Asset Allocation (talking me now), I might ratchet down my target AA to 35%.

 

[pb4uski]

Why are you walking around the neighborhood and talking to people today unless it’s on the phone?

We're walking around the neighborhood talking with neighbors too... they're just 6' away... nothing wrong with that that I know of as long as you don't touch anything.

 

[NoiseBoy]

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.

My megacorp's 4th quarter results missed expectations last year, and our business is strongly influenced by commodity prices. Combine that with ~$25/BBL oil and I expect them to announce layoffs pretty soon.

On the other hand, at the start of the financial crisis, I recall driving past the lot of a local medium sized trucking company and seeing every single one of their semis parked. Something like 75 - 100 tractor trailers just sitting because nothing was moving in the economy. I think the Fed and other world banks learned from that liquidity crisis and are working hard to avoid a repeat of that particular issue.

Working from home does not prevent consumers from consuming these days. Afterall, nobody goes to the mall anymore! None of the major employers in my community have closed up shop, so the impact, so far, is on small businesses and their employees. Hopefully job loss benefits will help many of them ride out this storm.

 

[statsman]

In a bank you have a MM account insurance limit. Your brokerage should offer a treasury only MM mutual fund. That is what Brewer is talking about.

I understand the part about the MM insurance limit. But I must be missing something. For the MM mutual funds people have suggested (VMFXX, SPAXX, SNSXX), I don't see anything on the websites indicating these funds are insured. I only see the "you could lose money" statement.

 

[brewer12345]

I understand the part about the MM insurance limit. But I must be missing something. For the MM mutual funds people have suggested (VMFXX, SPAXX, SNSXX), I don't see anything on the websites indicating these funds are insured. I only see the "you could lose money" statement.

They are not insured. In the case of SNSXX, the fund only holds US Treasury direct obligations (T bills and the like). So you can either go buy an insured deposit issued by some random bank and guaranteed by the US treasury, or you can cut out the middleman and buy a direct obligation of the US Treasury. If you do the latter, you don't care about insurance limits because you are holding an unlimited direct obligation and not a limited guarantee.

 

[RetireBy90]

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.

Just one more view on original question of when to get back in, pb4uski brings one important point, invest what ever you plan to invest over a period of time, not out one day and all in another. I have been humbled several times over the years with thinking an investment cant go any lower, remember Pan Am Airlines ? MCI ? If I get tempted to jump all in, I consider Boeing recently. Bought in at $245 and $235 only to see it continue to drop to $90.
Picking a bottom is not in my toolkit, so I’ll wait till we start seeing virus news decline and then invest in 20-25% tranches. Still hard to know if I should invest it once a week, once a month or once a quarter ??

Perhaps pb4uski can offer advice on frequency ?

 

[brewer12345]

RetireBy90, I am not at all comfy thinking I will correctly pick a bottom and I know I cannot pick a top. So when I think it is time to start deploying cash into equities I will invest in chunks, perhaps 10% at a time. I will start with accounts that will be tapped last (Roth IRA, etc.) and finish with the stuff that will be used the soonest. I also will likely be buying other, less volatile assets before I touch equities. So if investment grade corporates appear to have found a bottom before equities and offer sufficiently attractive returns, I have no problem buying them. If junk goes to 2000BP spreads like in the 08-09 crash I will probably buy some. And so on.

 

[COcheesehead]

Why are you walking around the neighborhood and talking to people today unless it’s on the phone?

I can talk and stand 6 feet apart. In most cases we were probably 20 feet apart. Why do you have to pick on people’s posts?

 

[BeachOrCity]

Fair enough response. I was thinking of a graphic similar to below (Great Recession and recovery) when I asked the question. I should have expanded the question to explain myself better. After exit and re-entry, there could be a protracted period with additional large movements to think about.

I don't know how low this current recession will go, and I don't know the duration.

If I used a timing strategy (and I don't) and sold out at the top, I might watch a long signal such as 200 dMA to fine tune my re-entry. If I had sold out at my 50% Asset Allocation (talking me now), I might ratchet down my target AA to 35%.

No one can call the bottom (or the top), but if one has gotten out and wants to get back in, the best way in this kind of volatility is to DCA over a fixed period of time (not too long, i am thinking months).
Normally the math works out NOT to DCA, but because of the kind of decline we have had (and IMHO will have more of), DCA will provide both mental and downside protection.
For me, I will be looking at the S&P valuation based on 2019 profits. Right now it is in the high teens. Not cheap, but not expensive either. Given the current 2020 forecast, I think it will drop to something that people would consider cheap based on 2019 earnings (to me this is <15; others may differ).

 

[intent]

Just curious, does anyone else feel oddly encouraged when reading posts from veteran members who are saying, 'this time it's different' and 'I'm selling everything and moving to cash.'?

Makes me feel like maybe we're actually getting close to a bottom.

 

[brewer12345]

Just curious, does anyone else feel oddly encouraged when reading posts from veteran members who are saying, 'this time it's different' and 'I'm selling everything and moving to cash.'?

Makes me feel like maybe we're actually getting close to a bottom.

Not really. For one thing, you have no way of knowing when someone went to cash. You will know we are near a bottom when it is in the rear view mirror.

 

[COcheesehead]

Just curious, does anyone else feel oddly encouraged when reading posts from veteran members who are saying, 'this time it's different' and 'I'm selling everything and moving to cash.'?

Makes me feel like maybe we're actually getting close to a bottom.

It is different this time.

 

[RetireBy90]

Just curious, does anyone else feel oddly encouraged when reading posts from veteran members who are saying, 'this time it's different' and 'I'm selling everything and moving to cash.'?

Makes me feel like maybe we're actually getting close to a bottom.

Could be we are seeing a bottoming but I’m looking for an end to 24X7 coverage or less coverage. I am well aware of lives being lost and economic problems many are experiencing but I just watched news this morning, read couple papers and I believe there is still fear in the streets with no end in next couple weeks. Watched one well known reporter talk about reports that hospitals are out of medical supplies only to have another doctor from Mt Sanai report they were working hard, but had supplies and beds needed. Both reports were probably based on facts but seen through fear or optimism. Lots of people are not believing any good news that is reported, so why would they stop the fear? IMO the market is more about people than finance. People will pay high prices for over priced stocks when optimistic and refuse to buy solid companies at low valuations when fearful.