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On April 17 2020 01:50 Bagration wrote:Show nested quote +On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very...  At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. I'm curious to get the thread's opinion on this, but IMO, stocks are overvalued over the <5 year time horizon, but still probably undervalued over a longer period (>10 years). I agree with you that the overall economy is gonna be in some pain for a while, and my impression is that the market is being propped up through govt. fiscal / monetary policy. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make?
Wilshire to GDP is a good indicator for the valuation, I think you can find it on the FRED site if you know how to overlap the charts. Bottom isn't here yet imo, but markets going to get suspended if it looks like we're headed there.
Bit of a rant:
Imo most banks are moving towards a major crisis yet again with gov. bonds going ever lower while getting goods on the street is going to become increasingly harder. Even here there's shipments of basic goods delayed. Countries should strive to move towards autarky in key industries quickly or face some serious troubles.
This is US related but probably applies to the rest of the world too.
+ Show Spoiler +
Was complaining earlier that actual work holds value, not the cheap money old TBTF corporations get. If you found your system upon capitalism you need to leave room for some creative destruction. Mismanaged capital that goes bust is an opportunity to fill a niche for someone else. But we're on the path of more debt at every cost to keep old patterns and elites in place, while it keeps brands alive it doesn't help those laid off.
It seems harmless for an individual when a central institution adds digits to a screen, but I'd have yet to see an example in history where economic policies were a free lunch.
Another example I could think of is housing. It's a matter of survival for banks that housing prices stay afloat, and they're going to get aided, but for a consumer who saved, the prospect of getting a house at a cheaper price goes up in smoke.
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On April 17 2020 01:50 Bagration wrote:Show nested quote +On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very... At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make?
I posted a paper earlier but the tldr is that yes, investing today statistically leads to the best results.
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On April 17 2020 02:53 CorsairHero wrote:Show nested quote +On April 17 2020 01:50 Bagration wrote:On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very... At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make? I posted a paper earlier but the tldr is that yes, investing today statistically leads to the best results.
Statistically you also need on avg. 20 years to recoup losses if you buy at a top.
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United Kingdom13775 Posts
On April 17 2020 01:50 Bagration wrote:Show nested quote +On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very... At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. I'm curious to get the thread's opinion on this, but IMO, stocks are overvalued over the <5 year time horizon, but still probably undervalued over a longer period (>10 years). I agree with you that the overall economy is gonna be in some pain for a while, and my impression is that the market is being propped up through govt. fiscal / monetary policy. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make?
Don't think anyone really knows. Maybe we'll just get to a situation like in housing where due to loose monetary policy, inflation will just get buried in asset prices and companies will just be worth more relative to their earnings than history would suggest. Or maybe there's a severe bubble that will significantly reduce prices rather than just providing a short-term correction.
But perhaps more valuable than just giving a hedged-bets statement, it's more interesting to discuss what I actually did. Personally, I reduced my stock holdings at the end of February and took a small (~10%) loss relative to where they were a month before. Stock prices are down since then, so I'd say it was a good idea. I still have quite a bit in stocks, as ultimately they'll probably be worth more in the future than they are now. Having cash at the moment seems like a good idea though, as:
1. Job security is not something to be taken for granted right now no matter what your job is, so some increased liquidity is a good idea.
2. Some companies which are almost certainly on death's door, financially, are still doing well on the stock market, which won't last and suggests we're probably going to see more downward pressure on that front.
3. Other investment approaches, such as the money market or real estate, don't really look particularly lucrative at the moment.
4. I'm not really into commodities or big leveraged trades (short sells, puts, etc).
The good long term strategy for people with lots of money seems to be "have holdings in each major class of asset" - which seems like a good approach, but I'm not myself inclined to increase my holding in stocks. A moderate sell-off seemed prudent a month and a half ago.
On April 17 2020 02:09 Blitzkrieg0 wrote:Show nested quote +On April 17 2020 01:50 Bagration wrote:On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very... At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. I'm curious to get the thread's opinion on this, but IMO, stocks are overvalued over the <5 year time horizon, but still probably undervalued over a longer period (>10 years). I agree with you that the overall economy is gonna be in some pain for a while, and my impression is that the market is being propped up through govt. fiscal / monetary policy. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make? Does anyone think the government will allow the economy to collapse? If we hit another rut there will be another stimulus to save all these companies. The market is being propped up by the fed/treasury, but that is priced in at this point and will continue.
You can't bailout everything forever; sooner or later you just run out of options that don't lead to one of the big disasters (deflation, hyperinflation, sovereign default, etc). And with 0% interest, QE Infinity, and $2T of stimulus, it still looks like the economy is in free-fall.
The financial situation is just as unstable as 2008 if not worse, and the traditional tools to address it will not be as effective as they were then. While more bailout will definitely be in the cards, eating a significant widespread economic hit is now inevitable.
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United States42004 Posts
On April 17 2020 02:56 Vivax wrote:Show nested quote +On April 17 2020 02:53 CorsairHero wrote:On April 17 2020 01:50 Bagration wrote:On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very... At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make? I posted a paper earlier but the tldr is that yes, investing today statistically leads to the best results. Statistically you also need on avg. 20 years to recoup losses if you buy at a top.
This is wrong. The market spends most of its time at the top. All time highs are extremely common. I think what you’re trying to say is that buying on the day before a crash is bad which is a different thing entirely to buying at the top. You could have bought at the top any day between 2013-2018 and be extremely up right now.
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United Kingdom13775 Posts
On April 17 2020 03:24 KwarK wrote:Show nested quote +On April 17 2020 02:56 Vivax wrote:On April 17 2020 02:53 CorsairHero wrote:On April 17 2020 01:50 Bagration wrote:On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very... At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make? I posted a paper earlier but the tldr is that yes, investing today statistically leads to the best results. Statistically you also need on avg. 20 years to recoup losses if you buy at a top. This is wrong. The market spends most of its time at the top. All time highs are extremely common. I think what you’re trying to say is that buying on the day before a crash is bad which is a different thing entirely to buying at the top. You could have bought at the top any day between 2013-2018 and be extremely up right now.
Buying at "the top" before a significant downturn absolutely has that effect, though. Buy in 1929 right before the Great Depression, you'll be waiting until the 1950s for stock values to reach the same highs. Buy in 2008, you'll wait until 2013 to get good returns. Buy in 1969, you'll trade sideways until about 1980. Buying in January 2020 will have been a terrible investment, and I suspect April 2020 isn't going to be fantastic either.
If you have 25 years to spare, you'll likely get your money's worth in the end, but doubling down on stocks right now seems like a fool's errand. A downturn right now will kill several years of earnings for sure on those investments.
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On April 17 2020 03:02 LegalLord wrote:Show nested quote +On April 17 2020 01:50 Bagration wrote:On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very... At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. I'm curious to get the thread's opinion on this, but IMO, stocks are overvalued over the <5 year time horizon, but still probably undervalued over a longer period (>10 years). I agree with you that the overall economy is gonna be in some pain for a while, and my impression is that the market is being propped up through govt. fiscal / monetary policy. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make? Don't think anyone really knows. Maybe we'll just get to a situation like in housing where due to loose monetary policy, inflation will just get buried in asset prices and companies will just be worth more relative to their earnings than history would suggest. Or maybe there's a severe bubble that will significantly reduce prices rather than just providing a short-term correction. But perhaps more valuable than just giving a hedged-bets statement, it's more interesting to discuss what I actually did. Personally, I reduced my stock holdings at the end of February and took a small (~10%) loss relative to where they were a month before. Stock prices are down since then, so I'd say it was a good idea. I still have quite a bit in stocks, as ultimately they'll probably be worth more in the future than they are now. Having cash at the moment seems like a good idea though, as: 1. Job security is not something to be taken for granted right now no matter what your job is, so some increased liquidity is a good idea. 2. Some companies which are almost certainly on death's door, financially, are still doing well on the stock market, which won't last and suggests we're probably going to see more downward pressure on that front. 3. Other investment approaches, such as the money market or real estate, don't really look particularly lucrative at the moment. 4. I'm not really into commodities or big leveraged trades (short sells, puts, etc). The good long term strategy for people with lots of money seems to be "have holdings in each major class of asset" - which seems like a good approach, but I'm not myself inclined to increase my holding in stocks. A moderate sell-off seemed prudent a month and a half ago. Show nested quote +On April 17 2020 02:09 Blitzkrieg0 wrote:On April 17 2020 01:50 Bagration wrote:On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very... At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. I'm curious to get the thread's opinion on this, but IMO, stocks are overvalued over the <5 year time horizon, but still probably undervalued over a longer period (>10 years). I agree with you that the overall economy is gonna be in some pain for a while, and my impression is that the market is being propped up through govt. fiscal / monetary policy. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make? Does anyone think the government will allow the economy to collapse? If we hit another rut there will be another stimulus to save all these companies. The market is being propped up by the fed/treasury, but that is priced in at this point and will continue. You can't bailout everything forever; sooner or later you just run out of options that don't lead to one of the big disasters (deflation, hyperinflation, sovereign default, etc). And with 0% interest, QE Infinity, and $2T of stimulus, it still looks like the economy is in free-fall. The financial situation is just as unstable as 2008 if not worse, and the traditional tools to address it will not be as effective as they were then. While more bailout will definitely be in the cards, eating a significant widespread economic hit is now inevitable.
I'd say the stocks holding where they are is faith that the government can and will step in and prevent total collapse. You can argue that isn't true, but if there is hyperinflation it doesn't really matter if you own stocks or have cash.
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On April 17 2020 02:56 Vivax wrote:Show nested quote +On April 17 2020 02:53 CorsairHero wrote:On April 17 2020 01:50 Bagration wrote:On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very... At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make? I posted a paper earlier but the tldr is that yes, investing today statistically leads to the best results. Statistically you also need on avg. 20 years to recoup losses if you buy at a top.
Proof? How long does that take with dividend reinvestment in the index which is what you should always be doing.
That is exactly why you lump sum what you have and do bi weekly, monthly, quarterly contributions.
No one just lump sums at the very top and never contributes again with 0 dividend reinvestment.
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United Kingdom13775 Posts
On April 17 2020 04:08 Blitzkrieg0 wrote:
I'd say the stocks holding where they are is faith that the government can and will step in and prevent total collapse. You can argue that isn't true, but if there is hyperinflation it doesn't really matter if you own stocks or have cash.
The current levels imply something a fair bit more than faith in merely preventing a total collapse; where they are now, it's basically assuming that, in Trump's words, the coronavirus will disappear one day like a miracle. The amount of optimism baked into the assumptions that suggest it won't get much worse are suspect enough that I'm not really inclined to acknowledge it as a viable possibility.
Hyperinflation is very bad, that much is true. It's also one of the possible roads to disaster that come from too much stimulus.
Basic argument is that it isn't as bad as looking at the S&P 500 because dividends and deflation.
I'll give them dividends, but saying deflation means you're not losing money is a bad argument. It means your stocks are doing poorly compared to holding cash.
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On April 17 2020 05:03 CorsairHero wrote:Show nested quote +On April 17 2020 02:56 Vivax wrote:On April 17 2020 02:53 CorsairHero wrote:On April 17 2020 01:50 Bagration wrote:On April 17 2020 01:13 LegalLord wrote:Stock-watching over the past month and a half has been very... At this point it'd take some very aggressive denial to say the economy isn't going to go downhill pretty hard after this lockdown situation is over. Stocks are still reflecting a highly optimistic view, though, which means some very interesting flux in prices. The one that is most interesting to me is airline stocks - seems like almost every morning, they're up in price a double-digit percentage. Whether or not they end the day with the same value is always an open question. Nevertheless, my thinking is that if I'm doing some long-term buy-and-hold (e.g., retirement), it's still a decent time to get in. Is this a reasonable take to make? I posted a paper earlier but the tldr is that yes, investing today statistically leads to the best results. Statistically you also need on avg. 20 years to recoup losses if you buy at a top. Proof? How long does that take with dividend reinvestment in the index which is what you should always be doing. That is exactly why you lump sum what you have and do bi weekly, monthly, quarterly contributions. No one just lump sums at the very top and never contributes again with 0 dividend reinvestment.
That was to say, IF you bought at the top before a crash + bear market, on average you needed 20 years to reach the same levels.
Of course the majority doesn't lump it all in at that point. Bringing dividends and other yields also makes the discussion more complex. I mean, you'd have to consider the purchasing power of a unit of currency too if you want to go down that road. And it's an almost linear way down, if the metric is credible.
https://fred.stlouisfed.org/series/CUUR0000SA0R
If you think everything is fairly valued, then just carry on buying I guess? I don't think we're done yet, but that's just me. And best case with the current policies wealth inequality is going to spike again, because if mismanaged corporations aren't forced to liquidate, savers can't get a piece of the cake at lower prices.
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20 years? what are you talking about? Not a single bear market lasted 20 years.
![[image loading]](https://awealthofcommonsense.com/wp-content/uploads/2020/03/Annotation-2020-03-13-132421.jpg)
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On April 17 2020 06:16 CorsairHero wrote:20 years? what are you talking about? Not a single bear market lasted 20 years.
I haven't checked every value there, but the 1929 value is wrong. It didn't take 13 years, it took 27 according to this chart. (Don't forget the boxes to uncheck to have different looks at it)
https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
I think I can tell though that those aren't the inflation-adjusted metrics. If you think the average of 20 years is wrong, then let's agree on it to be wrong, and move on from what feels like arguing semantics. It seems like there's cognitive dissonance at work here somewhere.
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Buying and holding now isn't such a bad idea. It's not like S&P is at 3300. DCA in, slowly buying in is probably pretty safe bet. Don't just yolo a huge position all at once. Probably not smart.
Doubt there will be hyper inflation. Reverse happening right now. CPI gained just 1.5% since March 2019, leaving inflation far under the target of Fed's target of 2% YoY. Maybe stagflation Japan 90's style if economy shits itself even with all liquidity and Federal Reserve backing. If economy recovers quickly, might have some inflation due to all the liquidity pumped into the system. Would be interesting to see how much, and how Fed will deal with it, considering reaction of the market in 2018 when Fed tried to lighten up the balance sheet and increase interest rates.
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On April 17 2020 06:35 Vivax wrote:Show nested quote +On April 17 2020 06:16 CorsairHero wrote:20 years? what are you talking about? Not a single bear market lasted 20 years. I haven't checked every value there, but the 1929 value is wrong. It didn't take 13 years, it took 27 according to this chart.
Na, we talk total return here because some of us hold assets long enough for a dividend payout and compounding
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On April 17 2020 12:36 CorsairHero wrote:Show nested quote +On April 17 2020 06:35 Vivax wrote:On April 17 2020 06:16 CorsairHero wrote:20 years? what are you talking about? Not a single bear market lasted 20 years. I haven't checked every value there, but the 1929 value is wrong. It didn't take 13 years, it took 27 according to this chart. Na, we talk total return here because some of us hold assets long enough for a dividend payout and compounding
From a time when index funds didn't even exist, but the calculation is done under the assumption they did and you held the overall market.
What's the source for that list anyway, stocks and bonds or just stocks? How's the calculation done?
Btw does someone financially savvy know what it implies when a stock price has an almost 1:1 correlation with the bond price? Isn't that like being valuated based on how much money you can borrow?
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what it implies when a stock price has an almost 1:1 correlation with the bond price? Isn't that like being valuated based on how much money you can borrow?
The bond price of the same company? I dont know but i can see a strong correlation making sense for certain sectors. Real estate funds for example.
In general you would expect some correlation for most sectors,a higher bond price reflects a higher confidence which then also goes for the shares. I wouldnt read to much into this but i am not an expert.
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I have a question, maybe you guys can help me out.
I am only invested in ETFs and single stock right now. Investing in oil looks interesting right now, basically buy at the current oil price and sell... at a future oil price.
But how do you even do that? Is there maybe an ETF that does that or what do I have to do. Some help would be much appreciated.
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United States24579 Posts
You could buy oil futures but speculating like this is certainly not for everyone.
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United States42004 Posts
On April 18 2020 05:21 Malinor wrote:
I have a question, maybe you guys can help me out.
I am only invested in ETFs and single stock right now. Investing in oil looks interesting right now, basically buy at the current oil price and sell... at a future oil price.
But how do you even do that? Is there maybe an ETF that does that or what do I have to do. Some help would be much appreciated.
USO is an example of an ETF you’re talking about. But get rich quick tricks don’t exist, it’s priced around future demand picking up. Also rolling futures will slowly erode your capital due to oil in the future being more expensive to buy than oil today due to storage costs.
Let’s say oil is bought and sold for $20 today. If I try to buy some and have it delivered in a month I may need to pay $21 because I’m effectively paying for someone else to buy oil at $20 plus store it for me. If oil goes up to $25 in a month then my contract to buy it at $21 has yielded a $4 profit. But if it remains at $20 then I’m going to lose money.
Oil in the future is more expensive and gets closer to the current price as the future date approaches.
You’ll need to get lucky for your plan to work. Just being willing to wait isn’t enough.
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EPT![[image loading]](https://pbs.twimg.com/media/EVp-aU0XYAAszDs?format=jpg&name=large)
