Is a recession coming? Sell stocks? (1 Viewer)

[BNM]

“suitability”, that's the word I couldn't recall!

 

[Eloe2000]

“suitability”, that's the word I couldn't recall!

Yeah, and as a former regulator I can tell you that is an incredibly low bar and only pursued from a regulatory standpoint in large scale cases. What doesn’t sit well with a lot of people is the nature of that side of the business because the securities being sold are typically underwriten/created/packaged in house from a related entity. Incentives are not aligned appropriately IMO.

 

[Darson]

Where would you diversify to get a 10% return that wasn't correlated with the market, though?

Rental property is one place good for long term investments and stable returns but location, location, location. Much like anything, it's not something to jump in to without educating yourself properly. It also takes some effort - the more you leave it to others to do for you, the lower your return. And if you pick the wrong place, you can get royally screwed. The bottom end of the market tends to have better returns and is more accessible.

 

[DrStrange]

its been several months. Let's check in with the markets at the end of May.

Currently the S&P 500 is 3,044. All time high was 3,380 on feb 19 2020. low this year was 2,237. On Jan 1, 2020 it was 3,258.

The S&P has fallen 10% below its all time high in the last three months. It has risen 36% from its March low.

The Nasdaq is 9,490. All time high was 9,817 on feb 19th, 2020. Low this year was 6,631. On Jan 1, 2020 it was 9,092.

The Nasdaq has fallen 3% below its all time high in the last three months. It has risen 70% from its March low.

While the current economic news sounds like a disaster - the worst conditions since the 1930's, perhaps worst ever in USA history - the stock market is pricing it as a 'nothing burger'. It is quite remarkable to me. We are one good week or one great day from records in the US equity markets in the middle of this century's version of the great depression.

Something has to give. Either the market is way ahead of its self or the economy is about to boom like nothing seen in modern history or perhaps a bit of both. The next month or two will be remarkable some how, some way. it will be fascinating to watch.

As for me, I remain sitting on a pile of cash. Could be a major mistake. As could putting the money back into the market. We shall see.

DrStrange

 

[Eloe2000]

its been several months. Let's check in with the markets at the end of May.

Currently the S&P 500 is 3,044. All time high was 3,380 on feb 19 2020. low this year was 2,237. On Jan 1, 2020 it was 3,258.

The S&P has fallen 10% below its all time high in the last three months. It has risen 36% from its March low.

The Nasdaq is 9,490. All time high was 9,817 on feb 19th, 2020. Low this year was 6,631. On Jan 1, 2020 it was 9,092.

The Nasdaq has fallen 3% below its all time high in the last three months. It has risen 70% from its March low.

While the current economic news sounds like a disaster - the worst conditions since the 1930's, perhaps worst ever in USA history - the stock market is pricing it as a 'nothing burger'. It is quite remarkable to me. We are one good week or one great day from records in the US equity markets in the middle of this century's version of the great depression.

Something has to give. Either the market is way ahead of its self or the economy is about to boom like nothing seen in modern history or perhaps a bit of both. The next month or two will be remarkable some how, some way. it will be fascinating to watch.

As for me, I remain sitting on a pile of cash. Could be a major mistake. As could putting the money back into the market. We shall see.

DrStrange

I no longer work in the financial services industry but I have been speaking with friends from the industry in the last two weeks and no one seems to have any firm sense on what is going on. Sentiments range from “we get paid to buy, so we are buying” to “the Fed is going to do anything to rescue the market so we just want to be ahead of it” to “momentum” to “I have no idea”. Sure the big indicies are weighted to some of the tech companies it’s that are in the minority of businesses that have done well in these time but no one I have been speaking to has a strong belief that the current market valuations reflect economic realities.

Hell, I was speaking to a buddy yesterday who is long a small casino conglomeration that fell about 40% from the high in Feb to March, but now is trading at something like a 40% premium over the last time it was actually in operation with its doors open and it’s last dollar earned. It literally makes no sense.

At this point I could either see some type of catalyst to an inflection point and a downturn that would sustain or continued growth fueled by naked positive hope and feeling.

 

[MrCatPants]

I no longer work in the financial services industry but I have been speaking with friends from the industry in the last two weeks and no one seems to have any firm sense on what is going on. Sentiments range from “we get paid to buy, so we are buying” to “the Fed is going to do anything to rescue the market so we just want to be ahead of it” to “momentum” to “I have no idea”. Sure the big indicies are weighted to some of the tech companies it’s that are in the minority of businesses that have done well in these time but no one I have been speaking to has a strong belief that the current market valuations reflect economic realities.

Hell, I was speaking to a buddy yesterday who is long a small casino conglomeration that fell about 40% from the high in Feb to March, but now is trading at something like a 40% premium over the last time it was actually in operation with its doors open and it’s last dollar earned. It literally makes no sense.

It hasn't for a few years now I feel like. Too much cheap money I guess.

 

[Taghkanic]

Thoughts from an amateur investor who is the son of an economist (so I picked up by osmosis just a little knowledge of economics, which of course is a dangerous thing)...

1) I thought stocks were tremendously overvalued before COVID hit, with many companies propping up their perceived earnings-per-share with buybacks (and thus depleting the cash reserves they would need to ride this out).​

​

2) The virus took direct aim at our a service- and shopping based economy (with far less heavy industry and manufacturing than in the days when market conventional wisdom was set).​

​

3) We are only really beginning to see the effects of the three-month shutdown, which not only suppressed service industries and consumerism, but also decimated many peoples’ savings, and deferred massive amounts of rent/mortgage and other loan payments. With many out of work, that also means many have lost their healthcare, meaning yet another financial hit the markets are yet to fully price in.​

​

4) The markets have seemed untethered from economic reality for a long time, at least as 95% of Americans know it. Even moreso today. What Wall Street now seems to think is good or bad news has little to do with how people actually work, live, budget and spend. Demand (consumer spending) seems likely to continue to fall (see point #2).​

​

5) The staggeringly huge stimulus packages passed have mostly aided those who needed help least (major corporations and financial institutions) and given only token aid to the people who drive our economy (workers, consumers).​

​

6) There seems like a strong chance of a second wave of infections as bad or worse than the first, with the likelihood that cures or vaccines are still 1-5 years out. This seems especially true with many Americans disregarding basic safety measures either for ideological reasons, or just out of impatience/restlessness.​

As a result, I am glad that I moved a lot of equities to cash back in December-January before this hit (because of point #1). I also did the thing you’re not supposed to do, and sold off a bunch more on the first rebound, so that I’m now at about 60% cash, 40% investments, which is not where I normally want to be.

Yes, I could have made some big short-term gains by using that cash to buy at the bottom (if any of us had known where the bottom was.) I also suspect we are going to find some new lows sometime in the next 7-10 months as the factors above play out. So I intend to continue to hoard cash and wait to start laddering back into the markets. The potential downside of getting back in quickly seems much worse than the potential missed upside.

So even if things go back to “normal,” I wasn’t too high on what “normal” was back in January. We seemed due for a correction. The crash we had in March isn’t that correction—that is a separate event. Wall Street wants to get back to a bull market prematurely, but even if a vaccine comes out tomorrow, I think the economy still has not had its non-viral fall to earth yet. This coronavirus episode (which may not be anywhere close to over) just weakened and already-weak system.

 

[Eloe2000]

Thoughts from an amateur investor who is the son of an economist (so I picked up by osmosis a little knowledge of economics, which of course is dangerous)...

1) I thought stocks were tremendously overvalued before COVID hit, with many companies propping up their perceived earnings-per-share with buybacks (and thus depleting the cash reserves they would need to ride this out). So even if things go back to “normal,” I wasn’t too high on what normal was back in January.​

​

2) The virus took direct aim at our a service- and shopping based economy (with far less heavy industry and manufacturing than in the days when market conventional wisdom was set).​

​

3) We are only really beginning to see the effects of the three-month shutdown, which not only suppressed service industries and consumerism, but also decimated many peoples’ savings, and deferred massive amounts of rent/mortgage and other loan payments. With many out of work, that also means many have lost their healthcare, meaning yet another financial hit the markets are yet to fully price in.​

​

4) The markets have seemed untethered from economic reality for a long time, at least as 95% of Americans know it. Even moreso today. What Wall Street now seems to think is good or bad news has little to do with how people actually work, live, budget and spend. Demand (consumer spending) seems likely to continue to fall (see point #2).​

​

5) The staggeringly huge stimulus packages passed have mostly aided those who needed help least (major corporations and financial institutions) and given only token aid to the people who drive our economy (workers, consumers).​

​

6) There seems like a strong chance of a second wave of infections as bad or worse than the first, with the likelihood that cures or vaccines are still 1-5 years out. This seems especially true with many Americans disregarding basic safety measures either for ideological reasons, or just out of impatience/restlessness.​

As a result, I am glad that I moved a lot of equities to cash back in December-January before this hit (because of point #1). I also did the thing you’re not supposed to do, and sold off a bunch more on the first rebound, so that I’m now at about 60% cash, 40% investments, which is not where I normally want to be.

Yes, I could have made some big short-term gains by using that cash to buy at the bottom (if any of us had known where the bottom was.) I also suspect we are going to find some new lows sometime in the next 7-10 months as the factors above play out. So I intend to continue to hoard cash and wait to start laddering back into the markets. The potential downside of getting back in quickly seems much worse than the potential missed upside.

These are great thoughts and on point with my mindset as well.

I wanted to add to my previous thoughts and to your thoughts here to mention that this current situation is rather unique in that it has created significant simultaneous demand and supply side shocks. That in addition to the partially artificial, controlled, and temporary nature of some of the elements directly contributing to those shocks make this situation exceptional. So it is difficult to draw many conclusions and insight on the current situation from studying past modern recessions.

 

[johnnycnote]

 

[Darson]

I'm now about 65% cash and 35% equities. A big reason for this is that in the event I lose my job and need the cash I didn't want to be forced to sell at a low as these two events are likely to coincide.

Incidentally, my buddy is still moonlighting for his hedge fund and they've been buying. Mainly because they see bargains out there.

 

[PokerShark]

Now I know nothing about anything to do with investing and I don’t pretend otherwise.

But I’m convinced we are in a bubble that’s about to pop. Coronavirus coupled with Brexit (where I’m from) is going to equal hard times ahead.

Am I crazy for wanting to buy gold at a time like this? At various points since 2016 I’ve considered it and looking at the charts the value seems to trend upwards.

 

[Perthmike]

Now I know nothing about anything to do with investing and I don’t pretend otherwise.

But I’m convinced we are in a bubble that’s about to pop. Coronavirus coupled with Brexit (where I’m from) is going to equal hard times ahead.

Am I crazy for wanting to buy gold at a time like this? At various points since 2016 I’ve considered it and looking at the charts the value seems to trend upwards.

I don't follow it much but gold is already up massively from where it was 18 months ago.

I know this because as usual I bought a $750 bar of silver which is now worth $880 instead of a $1750 Oz of gold which was about $2650 last week.

Happens everytime to me lol

 

[DrStrange]

An ounce of gold was worth $1,709 on June first, 2020. The all time high for gold was $1,921 in September 2011. Gold was not worth $2,650 / oz last week.

It is almost never the case that gold works out to be a better investment over equities for long periods of time. Bluntly, gold is a terrible choice. Gold mining stocks are better, but also tend to underperform the market.

gold is an inflation hedge. One might note we haven't seen rampant inflation in the USA for 35 years. You might hear inflation talk because of government spending, but such inflation has not emerged. We heard the same thing in 2008 - 2011 which turned out to be flatly wrong. I suspect deflation is a bigger risk - - - an environment where gold will be under severe pressure.

Want to buy a coin or two, hang it on a chain and let the Ms. sparkle? Fine! Buying more that you can use as decoration is likely a long term mistake. It is really hard to outperform the S&P 500 with a bar of gold over a long holding period.

DrStrange

 

[BarrieJ3]

Just wanted to say Mike was probably doing Aussie dollars. $1709 of our great, beautiful American dollars is worth $25-2600 dollars of their crappy doll hairs.

 

[Perthmike]

Yep my bad, I was talking aud.

 

[JRReynolds6181]

This kind of talk always reminds me of that scene in Meet the Parents:
“How’s your portfolio?”

“I would say... strong.... to ‘quite strong’...”

XD

Edited to correct an imperfect memory

 

[mummel]

I think buffet said it best. If you buy a stadium full of gold, in 100 years, you’ll still just have a stadium of gold. If you buy a productive asset however, that can make stuff and grow, then in a 100 years you’ll have a lot more to show for it.

 

[Eloe2000]

This is the greatest 50-day rally in the history of the S&P 500

The S&P 500 has returned 37.7% over the last 50 trading days, making it the benchmark index’s largest 50-day rally in history, according to LPL Financial.

Because the market completely oversold initially over-appreciating the damage to come? Because the economy really is as sound and productive as it was 9 months ago? Because unemployment on the order of 20% isn’t that bad? Because we realized the Fed has absolutely no self imposed limit on their willingness to print and completely moved pass concerns for the national debt? Who the hell knows... but the pros on the Street sure f’n love momentum.

 

[mummel]

Suck out market. I don’t buy it.

 

[hdgeno]

I have never invested until mid-April of this year. I started small but kept buying. By Monday I'll have approximately 50% of our cash savings invested, a mix of individual stocks and index ETF's. Now I don't play with nearly as big an amount as some of you guys do I'm sure, but I've been quite impressed with the short term results, up 20% since April 15.

This is all new to me so I don't really know what to expect, and there are so many varying opinions out there that it's hard to get a read on anything. I figured if I was ever going to get into some stocks that the Covid crash would be as good a time as any. My wife is fairly risk averse so I better not make any massive mistakes.

Thanks for all the free advice in this thread, it has certainly helped to read it and learn!

 

[mummel]

I have never invested until mid-April of this year. I started small but kept buying. By Monday I'll have approximately 50% of our cash savings invested, a mix of individual stocks and index ETF's. Now I don't play with nearly as big an amount as some of you guys do I'm sure, but I've been quite impressed with the short term results, up 20% since April 15.

This is all new to me so I don't really know what to expect, and there are so many varying opinions out there that it's hard to get a read on anything. I figured if I was ever going to get into some stocks that the Covid crash would be as good a time as any. My wife is fairly risk averse so I better not make any massive mistakes.

Thanks for all the free advice in this thread, it has certainly helped to read it and learn!

20% return in 2 months? SELL and bank your profits.

 

[Eloe2000]

Job numbers today will fuel the market for a little while until people realize it was a “PPP employment bump” (which will end in July) unless we get some other catalyst for sustained optimism.

 

[timinater]

Thanks for all the free advice in this thread, it has certainly helped to read it and learn!

Congrats on jumping in. Remember, with free advice you get what you pay for

This is a good read. https://www.amazon.ca/Simple-Path-Wealth-financial-independence/dp/1533667926

 

[hdgeno]

20% return in 2 months? SELL and bank your profits.

This is a serious post correct? I’ve literally been thinking that as the money is absolutely pouring in this week, with today’s numbers I’m closing in on 30%.

I bought really low on a lot of stuff in mid April, which wasn’t even the lowest point after the crash. I don’t want to be greedy, but there’s still room on most of the stocks to grow significantly if they would return to pre-covid levels.

 

[mummel]

This is a serious post correct? I’ve literally been thinking that as the money is absolutely pouring in this week, with today’s numbers I’m closing in on 30%.

I bought really low on a lot of stuff in mid April, which wasn’t even the lowest point after the crash. I don’t want to be greedy, but there’s still room on most of the stocks to grow significantly if they would return to pre-covid levels.

The market averages what, 7% a year. You just banked a few years worth of gains and congrats. Trick is, no one knows for sure if it will go up or retest the previous lows. If you have a 20 year time horizon, leave it in. If you need the money next year for a house payment or whatever, take it out.

 

[hdgeno]

The market averages what, 7% a year. You just banked a few years worth of gains and congrats. Trick is, no one knows for sure if it will go up or retest the previous lows. If you have a 20 year time horizon, leave it in. If you need the money next year for a house payment or whatever, take it out.

I am new at this, so I do appreciate any and all advice. Watching what’s happening this week certainly makes me realize how hard the market is to read, it literally makes no sense to me at times.

The money I currently have in stocks is money I shouldn’t need in the near future, so in that sense I could leave it in and be ok. That said, I do realize that the gains I’m seeing this week are not anywhere close to normal, but that’s the reward for buying low. It is tempting to pull some out to protect some of the profits.

 

[Darson]

You have already mentioned that you don't really know what you're doing. I certainly don't and most professionals don't seem to either. I would sell, take your gains and be happy. Depending on what you bought they may plummet again or may rise. If you know the answer to which case will happen, please tell me!

Investing in individual stocks is a huge punt, even if they're "blue chip". Remember, companies like Xerox, Kodak, Polaroid, Revlon & GE were all darlings 30-40 years ago and thought lifetime investments.

 

[hdgeno]

You have already mentioned that you don't really know what you're doing. I certainly don't and most professionals don't seem to either. I would sell, take your gains and be happy. Depending on what you bought they may plummet again or may rise. If you know the answer to which case will happen, please tell me!

Investing in individual stocks is a huge punt, even if they're "blue chip". Remember, companies like Xerox, Kodak, Polaroid, Revlon & GE were all darlings 30-40 years ago and thought lifetime investments.

I have some sell orders up for some of the individual stocks I currently own (Boeing & Delta Airlines). I initially invested in all individual stocks, but as I’ve learned I’ve been slowly buying index ETF’s instead.

This venture started as a gamble, but the more I learn the more I’m realizing that there is a way to make slow and steady earnings with smart investing.

Though it may sound like it, I’m actually not trying to be foolish with our money. We worked hard for it so I really don’t want to piss it away!

 

[grantc54]

I have some sell orders up for some of the individual stocks I currently own (Boeing & Delta Airlines). I initially invested in all individual stocks, but as I’ve learned I’ve been slowly buying index ETF’s instead.

This venture started as a gamble, but the more I learn the more I’m realizing that there is a way to make slow and steady earnings with smart investing.

Though it may sound like it, I’m actually not trying to be foolish with our money. We worked hard for it so I really don’t want to piss it away!

I hope you have that in a TFSA (or at least a large portion of it), that way you don't need to worry about any taxes.

 

[justsomedude]

I bought really low on a lot of stuff in mid April, which wasn’t even the lowest point after the crash. I don’t want to be greedy, but there’s still room on most of the stocks to grow significantly if they would return to pre-covid levels.

Similar moves here.

I made most of my plays in the last week of March. It has paid of mightily thus far. Looks like we got in around the same time frame... and the last few days have seen some unreal returns.