General Investing and Economics Discussion - No Politics

[LibertyTurns]

@bwelbo The median gain from the point of departure after a rapid 10+% drop is 4.5% 90 days out. History is not on your side.

Now regarding your personal risk giving emerging expenses and loss of assets being catastrophic, yes doing what you’re doing is completely logical.

I’m in a different boat and have a higher risk tolerance. It’s why understanding your true personal philosophy is so important. Not a Dalio fan, but that part he nails solid as sure as I’m standing here. Too many people say they’re more risk tolerant than they really are and when they incur that risk they’re screaming bloody murder.

 

[Deleted member 2897]

@bwelbo The median gain from the point of departure after a rapid 10+% drop is 4.5% 90 days out. History is not on your side.

Now regarding your personal risk giving emerging expenses and loss of assets being catastrophic, yes doing what you’re doing is completely logical.

I’m in a different boat and have a higher risk tolerance. It’s why understanding your true personal philosophy is so important. Not a Dalio fan, but that part he nails solid as sure as I’m standing here. Too many people say they’re more risk tolerant than they really are and when they incur that risk they’re screaming bloody murder.

Yep, that's why I gave those caveats - I don't recommend anybody else do what we are doing. We have specific things going on where we'd rather make 0 and miss a 10%-15% run than risk a chance of a much bigger decline. Making 10%-15% right now wouldn't move the needle, but losing a third would. If anybody needs money in the next couple years, it probably doesn't need to be heavily in the stock market. But beyond that everything I've read says you shouldn't try and outguess the market.

 

[Techster]

 

[Deleted member 2897]

Southwest Airlines reports losing several hundred million dollars in 1 week.

https://theweek.com/speedreads/900284/southwest-airlines-ceo-warns-dropoff-domestic-travel-over-coronavirus-911like-feel

 

[LibertyTurns]

Oil prices are plummeting increasing market risk. 2817 is the next major support limit for S&P 500. If it pierces that tomorrow and holds, whoa Nellie we may be in for a ride.

 

[LibertyTurns]

Didn’t consider a massive sell off but 2720 is next support level down & 2350 below that. This could be a historic money maker.

 

[Deleted member 2897]

Didn’t consider a massive sell off but 2720 is next support level down & 2350 below that. This could be a historic money maker.

That’s what I’m expecting. I’ve never seen a recession without a market correction. I think in the end, this will be a bad Flu and will pass. But in the meantime, I have no idea where this will go.

 

[Deleted member 2897]

Stocks were tanking pre-market, so they shut trading down and its been down for quite a while now. How long can they do that for?

 

[CuseJacket]

Stocks were tanking pre-market, so they shut trading down and its been down for quite a while now. How long can they do that for?

Futures is different than stocks. Once futures hit a >5% swing, I think by rule it is shut down. The market will open today as it always does. Right now we're staring at a ~7% drop at open.

 

[LibertyTurns]

This is just amazing we got so many people panicking. I thought the days of market hysteria were over but I guess it’s just human nature.

 

[Deleted member 2897]

This is just amazing we got so many people panicking. I thought the days of market hysteria were over but I guess it’s just human nature.

When we largely got out, we saw the writing on the wall that we were in a recession but the market wasn’t reflecting it. I have no idea where the market will go. I could see anywhere from 15,000 to 30,000. Depends on how bad the recession is and how long it sticks.

Take a look at refinancing mortgages and any other debt. 2.5% on a mortgage? LOL.

 

[CuseJacket]

This is just amazing we got so many people panicking. I thought the days of market hysteria were over but I guess it’s just human nature.

This is another interesting experiment on human psychology. There is data staring people in the face and they still act emotionally the other direction. Repeating headlines that exacerbate fear has caused business "leaders" to take CYA measures. It is a great financial opportunity. Just wish I hadn't had confidence in society and had shorted some positions. I'm tempted to start upping my 401(k) and front-loading contributions this year.

 

[CuseJacket]

When we largely got out, we saw the writing on the wall that we were in a recession but the market wasn’t reflecting it. I have no idea where the market will go. I could see anywhere from 15,000 to 30,000. Depends on how bad the recession is and how long it sticks.

Take a look at refinancing mortgages and any other debt. 2.5% on a mortgage? LOL.

I think there is some of what you say but I perceive today's market is responding to actions of late i.e., hysteria of decisions to cancel conferences, concerts, travel, etc. In other words, the economic risk profile has changed. There really wasn't much to justify it weeks ago, nor is there much reason to justify those decisions now, yet enough people have decided that it is worth it. China and South Korea have stabilized if the data is to be believed. The long game is in front of anyone willing to consider it. Just my ignorant 2 cents.

 

[Deleted member 2897]

I think there is some of what you say but I perceive today's market is responding to actions of late i.e., hysteria of decisions to cancel conferences, concerts, travel, etc. In other words, the economic risk profile has changed. There really wasn't much to justify it weeks ago, nor is there much reason to justify those decisions now, yet enough people have decided that it is worth it. China and South Korea have stabilized if the data is to be believed. The long game is in front of anyone willing to consider it. Just my ignorant 2 cents.

Well correct, but you could see all those cancelations were coming. Right now we know we’ll have a couple thousand cases here by next weekend - because of more testing largely. And more strict changes will be made. When all that happens, we’ll be here again next Monday having known exactly what had been coming.

 

[CuseJacket]

Well correct, but you could see all those cancelations were coming. Right now we know we’ll have a couple thousand cases here by next weekend - because of more testing largely. And more strict changes will be made. When all that happens, we’ll be here again next Monday having known exactly what had been coming.

Of course. And I think where philosophies differ is whether institutional investors have priced that in already or not. They're the ones who move and shake, not mom and pop investors like us. They have troves of data/research on consumer sentiment, business sentiment and they profile risk/likeliest of paths forward. They are balancing to-be-expected hysteria against data that shows South Korea has stabilized. In theory the same can be said for China.

If I recall correctly, the first market correction was following Italy's announcement of no fans attending soccer games, or thereabouts. Until then there was no announcement like it, and that spooked everyone. I might be mistaken, but there were no guarantees of the spread of coronavirus to all parts of the world based.

There is a normal and to be expected domino effect, and the institutional investors who control the market weren't dumb when the market went down 12% over the 1-2 weeks that it did. They understand supply chain cause and effect but don't always anticipate extraordinary actions.

 

[Deleted member 2897]

10 year bond is down 40% LOL. Time to unthaw my credit and start the re-fi process soon. Free money.

 

[CuseJacket]

What's your strategy with regards to taxes on capital gains versus holding and letting the market catch back up? I put together a spreadsheet with multiple scenarios where:

1. Pay taxes on capital gains on assets sold to realize gains before a selloff...then reinvesting to ride the wave back up. Depending on timing, the capital gains can put a dent in realized gains.
2. Depending on how much my assets have appreciated over time, ride the selloff and let the market work its way back up. I've always hated timing the market on assets where I already have a high appreciation rate.

Personally, the market has only had a negative 7% affect on my entire portfolio the last month, and most of my core assets (stocks I plan on keeping for 10+ years) have a net positive return multiple times that in the last year. I just don't see giving up 15-30+% in capital gains taxes on core assets to get ahead of the grim reaper, then trying to make it back up once the market has stabilized.

I've enjoyed thinking about this question, and today moreso than most days. Only with today's downswing does this scenario start to approach break-even, and that's only if you had timed your sale perfectly at the top of the market and are in a lower tax bracket. But, depending on your tax situation and investments, it still may not make sense to have sold if you believe we're at or near the bottom.

Separately, if you have any short-term losses that you can lock in, now is a great time to do it. Get that 30-40% discount on losses. Even if you want to stay in market, just buy a comparable equity and, voila, you still made 30-40% back today.

 

[Deleted member 2897]

This is another interesting experiment on human psychology. There is data staring people in the face and they still act emotionally the other direction. Repeating headlines that exacerbate fear has caused business "leaders" to take CYA measures. It is a great financial opportunity. Just wish I hadn't had confidence in society and had shorted some positions. I'm tempted to start upping my 401(k) and front-loading contributions this year.

If we think back to the Great Recession, at the peak we were losing several hundred thousand jobs a month. 1 quarter especially of a big negative GDP number. But what people forget is that there are only so many people you can lay off, and with every bad number, the comparisons get more and more easier the next quarter and year. Typically if you just hang tight and relax, you'll find the bottom without even having to do any stimulus. Indeed, many people argue when we do these stimulative measures (all the way back to the Great Depression), it only tends to draw out the misery. If you let it crater quick and hit bottom, the faster you can see the positive comparisons quarter over quarter and year over year. And without adding trillions in debt for no benefit. Back then as well, the media was totally obsessed with making everybody think the world was ending.

 

[CuseJacket]

If we think back to the Great Recession, at the peak we were losing several hundred thousand jobs a month. 1 quarter especially of a big negative GDP number. But what people forget is that there are only so many people you can lay off, and with every bad number, the comparisons get more and more easier the next quarter and year. Typically if you just hang tight and relax, you'll find the bottom without even having to do any stimulus. Indeed, many people argue when we do these stimulative measures (all the way back to the Great Depression), it only tends to draw out the misery. If you let hit crater quick and hit bottom, the faster you can see the positive comparisons quarter over quarter and year over year. Back then as well, the media was totally obsessed with making everybody think the world was ending.

Yea, I subscribe to the "let it play out" theory as well, even if it creates greater short-term pain. Selfishly that philosophy works well for me given I'm playing the long-game with a decent runway to retirement and no college age kids yet. My retirement portfolio is simply buying things cheaper now.

Even with where the market is today, I suspect I speak for everyone in that my main regret is not having bought more 10-12 years ago. Wouldn't have mattered whether we bought on the downswing of the recession, upswing or at the bottom. I suspect we'll say the same 10-12 years from now.

 

[LibertyTurns]

If we think back to the Great Recession, at the peak we were losing several hundred thousand jobs a month.

We lost 700k a month for 6 months.

FYI in the hugest ever recession of all time GDP contracted 2%. GDP was $14.712T in 2008 and contracted to $14.448T in 2009. By 2010, GDP expanded 4% to $14.912T completely eliminating the “Great Recession”. The reason it felt so bad for so long was horrendously poor economic policies. Instead of giving the drowning man a life preserver and give him a hand so he could get out of the pool, we handed him a diving belt and a gallon of water, then repeatedly kicked him in the head when he started to climb out.