Author Topic: Anyone Else Terrified of Stock Market Right Now?  (Read 10092 times)

John Galt incarnate!

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #50 on: November 27, 2020, 09:59:38 AM »
Quote from: habanero link=topic=119289.msg2741636#msg2741636

If anyone told me that we in 2020 would have a raving pandemic with international travel grounding to a standstill, truckloads of unemployed and large population centers in lockdown with lots of bisinesses shut down and despite all this markets would be at ATH towards the end of the year I would say that anyone making that claim was bat-shit-crazy but that's what actually has happened. Just as an indication of how difficult it is to predict the market.



When the pandemic's economic shock caused the unemployment rate to skyrocket and an unprecedented drop in quarterly GDP I posted a few times about the ~90% decline of the S&P 500  during the early years of the Great Depression.

The pandemic's blow to the economy was so severe I thought such an enormous decline could happen again.

I also posted that I thought the American economy was  a runaway freight train headed straight for a severe and protracted economic depression.

Now we all know just how misplaced my apprehensions were.



« Last Edit: November 27, 2020, 10:02:18 AM by John Galt incarnate! »

SwordGuy

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #51 on: November 27, 2020, 01:42:11 PM »
The S&P has rallied 65% since it's March bottom. That's an annulised growth rate of very nearly 100%.. in an asset class whose long term growth rate is around 9-10%pa.

You ignore how far the market fell in March, and only measure how far it recovered?  And then call it a bubble when the S&P 500 returns 3% year to date?
S&P 500 is up 12.62% Year to date as I write this.   That's a tad above the historical average, inflation-included return.

What is this crazy growth rate you speak of? 

PDXTabs

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #52 on: November 27, 2020, 02:01:22 PM »
S&P 500 is up 12.62% Year to date as I write this.   That's a tad above the historical average, inflation-included return.

What is this crazy growth rate you speak of?

Given the largest single quarter drop in GDP ever? That is slightly crazy. I think that the markets have priced in an ideal-case recovery which we might not get.

But I'm still all in as I don't see anywhere better to put my money.

chevy1956

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #53 on: November 27, 2020, 04:06:04 PM »
Somewhat. Mainly for my folks who are at retirement age; I am unsure if they have reduced their AA appropriately over the years. Also for myself but anxious is almost my baseline.

Well I'm still at 90% stocks and I will probably at some point be 100% stocks. Rode it down and rode it back up without any stress, I see no reason to change my allocation now. I think it's irrational.

chevy1956

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #54 on: November 27, 2020, 04:12:10 PM »
I just said that future returns are likely to be worse the more expensive the market gets

Maybe. You are right from a risk point of view over a shorter time period. The problem is that markets don't play out the way you are stating. They go up and up and up and down and down and down. You and me don't know when the next crash will hit.

Stocks offer the best long term return and are the safest asset class especially when you use index funds over the long term. It's also really hard to time the market which is actually what you are implying with your soothsaying. I reckon your ability to foresee the future is really really poor. This isn't a personal comment towards you. Most people are terrible at predicting market returns consistently over time.

I bet rationally. A large stock percentage index fund based approach. This gives me the best chance for long term success. People like yourself who think they can predict market returns will in all likelihood massively under perform my returns which are really just index returns,

chevy1956

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #55 on: November 27, 2020, 04:15:20 PM »
Quote from: habanero link=topic=119289.msg2741636#msg2741636

If anyone told me that we in 2020 would have a raving pandemic with international travel grounding to a standstill, truckloads of unemployed and large population centers in lockdown with lots of bisinesses shut down and despite all this markets would be at ATH towards the end of the year I would say that anyone making that claim was bat-shit-crazy but that's what actually has happened. Just as an indication of how difficult it is to predict the market.



When the pandemic's economic shock caused the unemployment rate to skyrocket and an unprecedented drop in quarterly GDP I posted a few times about the ~90% decline of the S&P 500  during the early years of the Great Depression.

The pandemic's blow to the economy was so severe I thought such an enormous decline could happen again.

I also posted that I thought the American economy was  a runaway freight train headed straight for a severe and protracted economic depression.

Now we all know just how misplaced my apprehensions were.

I tell you what I did wrong. I thought in all likelihood it's another great buying opportunity. I wanted to buy more. My wife is too risk averse and she said just don't sell anything. I should have gone all in and been 100% stocks. To be fair it could have gone down more.

People need to realize that you can't predict market returns consistently to make money. I don't think anyone does this. You can invest in a structured way and ignore market noise and people that think they can predict the future.

ChpBstrd

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #56 on: November 27, 2020, 07:50:49 PM »
The pandemic has been a wild learning experience. The worst case scenario happened. Worldwide pandemic. Millions infected. Deaths by the hundreds of thousands. Daily losses on the scale of the 9/11 attacks. Political leadership chose to spread misinformation and obstruct the CDC for political benefit. Morons burning their masks and storming state legislatures with guns. US dollar drops 10% against a basket of international currencies as we do worse than any other country in the world.

Stock market skyrockets.

Apparently, there is nothing that can stop the stock market. A nuclear war or imminent asteroid strike would be a "buying opportunity".

MustacheAndaHalf

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #57 on: November 27, 2020, 08:13:42 PM »
What about U.S. government stimulus?  People in lockdown have fewer expenses than when they can travel, and some of that extra money wound up in the stock market.  I saw this new money repeatedly, like after Hertz went bankrupt... and these new investors kept buying.  I don't consider that wise, but that's new money in the stock market (briefly!), and Hertz wasn't the only one to benefit.

Why do people know what "Zoom" means?  Because during the pandemic's lockdowns, people were forced to adopt new technology, with Zoom (+593% YTD) and Netflix (+52% YTD) benefitting from the influx of new customers.  Malls were closed, but Amazon (+73% YTD) was not.

The big question for tech stocks, is what happens as vaccination becomes widespread?  If people return to malls, doesn't Amazon take a hit from that loss of business?  Do people need Zoom if they're at work together?

I think there's a lot of churning in the stock market ahead, and the best place to be is companies like Macy's.  I bought Macy's stock back on March 23 for $5.11/share, and later switched to call options.  Macy's closed at $10.85/share on Nov 27, up +112%.  It has beat Amazon and Netflix so far, and it's still down by 1/3rd.  I expect tech stocks to give up some of their gains, and beaten up retail/airlines/restaurants to benefit.  So I'm a bit afraid of tech stocks, but not of the majority of the market.

ChpBstrd

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #58 on: November 27, 2020, 08:48:55 PM »
The big question for tech stocks, is what happens as vaccination becomes widespread?  If people return to malls, doesn't Amazon take a hit from that loss of business?  Do people need Zoom if they're at work together?

I see a remote chance that activities such as shopping at malls or working from a desk in a real office become something of a premium or nostalgic experience, or maybe a status symbol (conspicuous consumption - I drive my SUV to go shop for shit, or I've reached the "have an office" class of management status). Some companies like Harley Davidson and many fashion companies sell a product that is technically inferior to their competitors, but nonetheless a premium product simply due to the cultural significance of the behavior. At many chain restaurants, the food is no better than you could cook and the time required to drive, order, sit and wait, eat, and drive again is more than it would take to cook and do dishes at home, and yet people go and pay for that experience because we think of it as a nice experience or the proper way to go on a date.

However, I think the chance is remote. Office space, furniture, utilities, and liability is too expensive not to have most office employees work from home. The luxury of one-click shopping on Amazon so far outweighs driving from store to store to find something that the old business model is no longer plausible for anything but the basics, like toilet paper or fresh shrimp.

If there is a financial crisis in 2021 or 2022, it will be triggered by mortgages for commercial office and retail space. These property types are far too overbuilt for a future that involves Zoom, Microsoft Teams, and Amazon same-day-delivery. Young children born today will never see a skyscraper or an old-fashioned mall being constructed.

Bloop Bloop Reloaded

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #59 on: November 28, 2020, 01:15:51 AM »
The pandemic has been a wild learning experience. The worst case scenario happened. Worldwide pandemic. Millions infected. Deaths by the hundreds of thousands. Daily losses on the scale of the 9/11 attacks. Political leadership chose to spread misinformation and obstruct the CDC for political benefit. Morons burning their masks and storming state legislatures with guns. US dollar drops 10% against a basket of international currencies as we do worse than any other country in the world.

Stock market skyrockets.

Apparently, there is nothing that can stop the stock market. A nuclear war or imminent asteroid strike would be a "buying opportunity".

It only skyrocketed because countries everywhere resorted to stimulus on a scale that could never be imagined.


khizr

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #60 on: November 28, 2020, 10:03:26 AM »
Just want to chime in with a few thoughts to help you feel better :)

1. E-commerce sales have jumped massively, so valuations are adjusting to reflect the faster growth. This was already happening but the size of this bump is HUGE. Even in places like Italy ecommerce sales has jumped 3 to 4 year estimates. Just look at how many people Amazon has hired to get an idea of how big this is.

Graphs here:
http://www.oecd.org/coronavirus/policy-responses/e-commerce-in-the-time-of-covid-19-3a2b78e8/#:~:text=The%20COVID%2D19%20crisis%20also,to%2038.5%25%20in%20June%202020.

Are those valuations justified? Yes, until the market decides otherwise. Like for example, eCommerce might get x ratio to sales right now, but in 2 years that drops in half. Who knows :).

2. Tech and work from home trends also accelerated, so you see a massive bump in spending and projects to support. And, thus they all go way up because even when things get back to normal those habits are going to stay the same. Plus all the companies that power the internet and all that complexity that support ecommerce etc are getting tons more money.

3. Buying trends changed overnight, retail got hammered, travel got hammered, and the money from those fled and looked for safe harbors.

Interesting year.


SwordGuy

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #61 on: November 28, 2020, 11:50:33 AM »
I've come to terms with knowing that, no matter how smart I may be on some topics, I have no idea what the market will do next.   So I'm equally afraid and excited about it at all times.

MustacheAndaHalf

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #62 on: November 30, 2020, 08:11:18 AM »
However, I think the chance is remote. Office space, furniture, utilities, and liability is too expensive not to have most office employees work from home. The luxury of one-click shopping on Amazon so far outweighs driving from store to store to find something that the old business model is no longer plausible for anything but the basics, like toilet paper or fresh shrimp.
If there's such a huge competitive advantage to working from home, why didn't it determine the winners in each industry long before 2020?  Why is it obvious now, but wasn't in 2019?


3. Buying trends changed overnight, retail got hammered, travel got hammered, and the money from those fled and looked for safe harbors.
I'd agree "retail got hammered", but only back in March.  Since then, the most beaten up stocks have done extremely well.  Macy's stock doubled (retail), Alaska Airlines doubled (I used own shares, but currently don't).  November was extremely good for Covid-sensitive stocks.


I've come to terms with knowing that, no matter how smart I may be on some topics, I have no idea what the market will do next.   So I'm equally afraid and excited about it at all times.
I felt that way before 2020.  I should probably collect all my Covid predictions from the forum, like when I predicted 10,000 cases in China days in advance.. and that became breaking news.  Same thing later in the U.S.  It was like I was the only one making estimates of exponential growth... in the land of the blind, the one eyed man is king.  So I guess I was investor-king for a month.  :)

In an earlier reply I mentioned Macy's (M) and Alaska Airlines (ALK), both of which are still down year to date.  Macy's dropped -38% year to date, and so a naive view might be it has +38% more to a recovery.  But a $100 stock that is down to $62, actually gains 61% on the way back up:
0.62 x 1.6129 = 0.999998, aka recovery.

ChpBstrd

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #63 on: November 30, 2020, 09:44:24 AM »
However, I think the chance is remote. Office space, furniture, utilities, and liability is too expensive not to have most office employees work from home. The luxury of one-click shopping on Amazon so far outweighs driving from store to store to find something that the old business model is no longer plausible for anything but the basics, like toilet paper or fresh shrimp.
If there's such a huge competitive advantage to working from home, why didn't it determine the winners in each industry long before 2020?  Why is it obvious now, but wasn't in 2019?


That’s a question I asked myself between 2015 and 2020. Here are the answers I found during that time:

1) Management was convinced it was nearly impossible and highly risky to manage people remotely. My company’s field staff were required to drive sometimes a couple of hours to the office for a weekly meeting because it was the belief that doing so was a critical management function.

2) Services like GoToMeeting and WebEx kinda sucked 4-5 years ago, with frequent technical issues like freeze-ups and dropped calls - like every other meeting. We would put IT staff on standby for any critical call using these technologies, and they couldn’t always help. Microsoft Teams was not a thing. FaceTime only worked on Apple equipment. This was all in addition to all the mute and background noise issues we still have today.

3) Many companies had secure local networks that could not be accessed remotely or could only be accessed by a few executives with VPN. Since the pandemic started, companies have lowered their security stance to allow more (or all) employees to access sensitive information on relatively unsecured home networks that are shared with personal equipment and uses. This represents a security risk so severe they would only take such a chance if going out of business was the alternative.

So now #1 has proven to be a false concern and the long-entrenched culture is shifting, #2 has improved to the point the tech can be relied upon, and #3 is becoming something companies are learning to manage.

vand

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #64 on: November 30, 2020, 10:35:11 AM »
I just said that future returns are likely to be worse the more expensive the market gets

Maybe. You are right from a risk point of view over a shorter time period. The problem is that markets don't play out the way you are stating. They go up and up and up and down and down and down. You and me don't know when the next crash will hit.

Stocks offer the best long term return and are the safest asset class especially when you use index funds over the long term. It's also really hard to time the market which is actually what you are implying with your soothsaying. I reckon your ability to foresee the future is really really poor. This isn't a personal comment towards you. Most people are terrible at predicting market returns consistently over time.

I bet rationally. A large stock percentage index fund based approach. This gives me the best chance for long term success. People like yourself who think they can predict market returns will in all likelihood massively under perform my returns which are really just index returns,

I never claimed that I know when the next crash is going to hit, and my strategy is not dependent on successfully doing so.

Good investing is about balancing risk with reward; all your argument boils down to is "long term average", so it becomes a pretty dull conversation pretty quickly.

I have nothing against passive investing. Passive investing is good.. for those who ARE hopeless at reading market sentiment, which is most people.. you included..
« Last Edit: November 30, 2020, 10:39:58 AM by vand »

mistymoney

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #65 on: November 30, 2020, 11:15:21 AM »
S&P 500 is up 12.62% Year to date as I write this.   That's a tad above the historical average, inflation-included return.

What is this crazy growth rate you speak of?

Given the largest single quarter drop in GDP ever? That is slightly crazy. I think that the markets have priced in an ideal-case recovery which we might not get.

But I'm still all in as I don't see anywhere better to put my money.

how does GDP influence the sp500 when many are multinational/global entities?

I don't really understand what the US stock market is anymore - how to splice that out of the global market. Not that the globe isn't also experiencing the pandemic, but just not sure how the GDP informs insight into the sp500 anymore.

joleran

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #66 on: November 30, 2020, 11:49:04 AM »
I dumped a ton of equities to cash and gold today.  I did not properly manage for sequence risk in FIRE and was sweating pretty hard on what turned out to be a lightning fast recovery from March.  Now that I see the effect it has on me when it's not just "oh well, you're working a few more years anyway so it's just on sale", it's easy to see my asset allocation was not right for my new circumstances.  I can't buy things on sale if I don't have money to do so with, but more importantly, a glide path to give equities more time to pull ahead if sequence risk rears up is a really, really nice thing to have.

Now a major crash should be more like "I bet that comes back before I have to sell a dime of it" compared to "oh shit am I going to have to sell low to pay for expenses".

I got a major gift with this recovery allowing me to shift my asset allocation more conservatively like the crash never happened.

Retire-Canada

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #67 on: November 30, 2020, 11:58:49 AM »
Ya I appreciate COVID for testing my FIRE AA and having me feel pretty good about it. It's whole lot different thinking about things in theory vs. watching those portfolio values drop fast and not knowing what the recovery is going to look like.

vand

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #68 on: November 30, 2020, 12:32:59 PM »
S&P 500 is up 12.62% Year to date as I write this.   That's a tad above the historical average, inflation-included return.

What is this crazy growth rate you speak of?

Given the largest single quarter drop in GDP ever? That is slightly crazy. I think that the markets have priced in an ideal-case recovery which we might not get.

But I'm still all in as I don't see anywhere better to put my money.

how does GDP influence the sp500 when many are multinational/global entities?

I don't really understand what the US stock market is anymore - how to splice that out of the global market. Not that the globe isn't also experiencing the pandemic, but just not sure how the GDP informs insight into the sp500 anymore.

What the economy is doing today has virtually zero predictive power in where stocks will be tomorrow. Zero.

To understand what the stock market is, you also have to understand what it is not, and it is not a representation of the economy.

The stock market and the economy are entirely different things. That is one of the first truisms to accept if you ever want to understand the stock market.

That is why you should not give a shit about covid, lockdown, GDP numbers, or any other macroeconomic indicators.


https://www.fool.com/investing/general/2012/03/23/it-makes-no-difference-what-the-economy-does-.aspx

“The correlation between current GDP growth and five-year subsequent stock returns is -0.06. About zero, in other words. For three-year forward-looking market returns, the correlation is -0.09 -- still about zero! For one-year returns, it's -0.21"
« Last Edit: November 30, 2020, 12:35:21 PM by vand »

theoverlook

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #69 on: November 30, 2020, 12:49:41 PM »
They make a physical car... not really a tech company. Not a ground breaking invention. Many competitors. I really don't get it! My husband says SpaceX helps to sell cars... it's still the same product with expensive marketing.

I actually agree with everything you said until you mentioned Tesla.
While I think Tesla current valuations are way too high, they will be no doubt be one of the biggest company in the world.
It's their battery technology that's far better than everyone else.
The are using their battery technology to move into home solar and that market is limitless. Here in the US and everywhere else in the world.
$564 is way too high for their stock right now but in 10 yrs, everyone will look back and say man I wish I bought some at that price. Just like when I looked back a month ago and I wish I bough them at $388.

So they're basically a utility company then :D
They're a roofing company, solar company, power storage company, battery manufacturer, auto manufacturer, and soon heavy duty truck manufacturer. I suppose also a utility in some ways since they do power distribution with their own charger network. I wonder if eventually they'll be more like a peak GE or Mitsubishi Corp in that they make things in so many different industries.

joleran

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #70 on: November 30, 2020, 03:44:53 PM »
https://www.fool.com/investing/general/2012/03/23/it-makes-no-difference-what-the-economy-does-.aspx

“The correlation between current GDP growth and five-year subsequent stock returns is -0.06. About zero, in other words. For three-year forward-looking market returns, the correlation is -0.09 -- still about zero! For one-year returns, it's -0.21"

If we could make GDP growth into a low-cost product seems like a good diversifier.

chevy1956

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #71 on: December 01, 2020, 01:50:47 AM »
I never claimed that I know when the next crash is going to hit, and my strategy is not dependent on successfully doing so.

Good investing is about balancing risk with reward; all your argument boils down to is "long term average", so it becomes a pretty dull conversation pretty quickly.

I have nothing against passive investing. Passive investing is good.. for those who ARE hopeless at reading market sentiment, which is most people.. you included..

Interesting post. I think you are basically agreeing with the rational approach of investing in index funds with a high stock percentage. It's the smart play. I got that market call wrong but I did pretty good. That is the advantage of not letting the noise get to you.

My argument is dull but it's also the best way to be profitable over the long term. Isn't that what counts ?

Retire-Canada

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #72 on: December 01, 2020, 06:26:39 AM »
My argument is dull but it's also the best way to be profitable over the long term. Isn't that what counts ?

I don't look to my investments for excitement or entertainment. Dull, boring, no action required for decades....sounds just fine to me.

vand

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #73 on: December 01, 2020, 07:44:05 AM »
I never claimed that I know when the next crash is going to hit, and my strategy is not dependent on successfully doing so.

Good investing is about balancing risk with reward; all your argument boils down to is "long term average", so it becomes a pretty dull conversation pretty quickly.

I have nothing against passive investing. Passive investing is good.. for those who ARE hopeless at reading market sentiment, which is most people.. you included..

Interesting post. I think you are basically agreeing with the rational approach of investing in index funds with a high stock percentage. It's the smart play. I got that market call wrong but I did pretty good. That is the advantage of not letting the noise get to you.

My argument is dull but it's also the best way to be profitable over the long term. Isn't that what counts ?

Here is another point for you to ponder. You say that:

- EMH makes it nigh-impossible to time the market successfully on any sort of a consistent basis
- EMH makes passive investing in index funds fundamentally "safe" over a long enough time period
- stocks provide the best long term returns


Yet those claims are incongruent with one another. If markets were efficient, then why would stocks provide better returns than other asset classes for the same level of risk? Surely an efficient market would arbitrage that excess away so that risk-adjusted returns were equalized across all asset classes.  After all, EMH states that once you have reached the efficient frontier, any excess return is only attainable through taking more on risk.

If you think that stocks are just as safe as other assets while providing better return then you are basically disagreeing with EMH, by which implication you are also accepting that there are those who are able to use skill to do what EMH says shouldn't be possible.

Now, I do not claim that I am one such who can or does beat the market consistently, I merely claim that it is not futile to try to do so, and if like me, you look at investing as a puzzle to be constantly solved then a more active hands-on approach is likely to be a better approach for you, rather than a boring hands-off approach.

As I say, I have nothing at all against passive investing, but I hope that I give a little bit of insight through deduction of reasoning why some of us will choose to more actively manage our investments... it's not always to try to beat the S&P. The S&P is a poor benchmark for most people. Sometimes managing your risk is just as important as managing your upside.

reeshau

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #74 on: December 01, 2020, 07:49:59 AM »
“I’d be a bum on the street with a tin cup if the markets were always efficient.”

--Warren Buffett

theoverlook

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #75 on: December 01, 2020, 07:59:52 AM »

Here is another point for you to ponder. You say that:

- EMH makes it nigh-impossible to time the market successfully on any sort of a consistent basis
- EMH makes passive investing in index funds fundamentally "safe" over a long enough time period
- stocks provide the best long term returns

Sorry man, that's a total straw man. Nobody here made those claims.

shinn497

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #76 on: December 01, 2020, 11:37:50 AM »
@vand

You should learn about the difference between a priced risk and an idiosynchratic risk.

A priced risk is a risk taken on something that will provide some kind of benefit, such as starting a new company. An idiosynchratic risk gives no benefit such as the risk of an individual piece of real estate. Idiosynchratic risks go away when you diversify. With real estate, you have only the priced risk when you have 10000 houses...same thing with stocks and mutual funds and bonds with bond funds.

Insofar as I can tell there is no diversified asset greater than stocks. REITs are close, but oten have fees and taxes associated with them. And to some extend a REIT is a type of stock, as you are still investing in a company. Furthermore, within categories of stocks, the level of risk tends to be associated with returns. It is for this reason that small cap, value, profitable, in aggressively invested stocks provide a higher level of return. they have independant exposure to risk.


MustacheAndaHalf

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #77 on: December 01, 2020, 01:19:26 PM »
The S&P has rallied 65% since it's March bottom.

We are entering bubble territory, imo most similar to the 1998-2000 blowoff top after the Asian panic late in that decade. Sure, there may be some juice still left, which is fine as I still have considerable exposure, but it's time to be start being fearful when everyone else is getting very greedy imo.


As I say, I have nothing at all against passive investing, but I hope that I give a little bit of insight through deduction of reasoning why some of us will choose to more actively manage our investments... it's not always to try to beat the S&P.
You claim the markets "rallied 65% since March" is the reason "We are entering bubble territory".  But you're ignoring the drop in March, and only counting the gains.

How is selectively ignoring information deductive reasoning?

You said you've been buying stocks since March.  Are you now selling all those stocks because "We are entering bubble territory"?

QueenAlice

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #78 on: December 01, 2020, 03:25:33 PM »
I don't remember the last time I actually posted and I didn't read past the first few posts of this particular thread, but I wanted to pop in and give @RWD this chart as a gift for his post compiling efforts.


RWD

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #79 on: December 01, 2020, 08:42:38 PM »
I don't remember the last time I actually posted and I didn't read past the first few posts of this particular thread, but I wanted to pop in and give @RWD this chart as a gift for his post compiling efforts.



Any day now that chart will reverse directions and make a nice Christmas tree... right?

chevy1956

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #80 on: December 01, 2020, 09:27:15 PM »
I merely claim that it is not futile to try to do so, and if like me, you look at investing as a puzzle to be constantly solved then a more active hands-on approach is likely to be a better approach for you, rather than a boring hands-off approach.

As I say, I have nothing at all against passive investing, but I hope that I give a little bit of insight through deduction of reasoning why some of us will choose to more actively manage our investments... it's not always to try to beat the S&P. The S&P is a poor benchmark for most people. Sometimes managing your risk is just as important as managing your upside.

Just to clarify a point I'm not using the EMH as the crux of my investment decisions. I'm using the available data that we have observed over the past 100 odd years in tandem with modern portfolio management theory. These are very different ideas compared to the EMH.

I agree that there are multiple ways to invest. I also believe in managing your risk. Managing your risk is definitely something that I consider when utilizing passive investment strategies. My impression is that you like to be more hands on or whatever. I choose the more boring approach and I focus on other stuff but it's your call. I know wealthy people who only invest in property and keep working forever just because that is who they are.



I'm doing what you state is boring but effective. I like the fact that I don't really spend much time at all thinking about my investment portfolio. I don't have too because I've taken a rational approach based on historical data.
« Last Edit: December 02, 2020, 05:54:31 PM by chevy1956 »

FrugalFukuoka

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #81 on: December 02, 2020, 01:20:45 AM »
Another point I would consider is the productivity paradox. Despite our advances in technological development, a lot of efficiencies have never materialized 100%. The fact that most companies thought 100% WFH was unrealistic has illustrated how behind we were. Overnight across the globe everyone learned this is no problem at all. A one way commute of an hour was a daily reality for how many people? These people suddenly received an extra 2 hours a day to work or recuperate; either way that's added productivity.
Other factors are paper-based to paperless processes, moving away from email towards solutions such as MS Teams/Slack (chat groups), online meetings (and recordings).

And just to make that switch, practically overnight, every office-based company has probably gone through a lot of process reviews identifying duplicate or obsolete processes that have been there for years.

Not denying the negative impact it also had, but all things considering I don't find it unrealistic that the stock market is higher than a year ago when we were still relying on very outdated work methods.

I am optimistic about 2021 when we have both the vaccine addressing the brick and mortar sectors, the unemployment, and we get the continued windfall from this increased productivity.

vand

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #82 on: December 02, 2020, 05:00:17 AM »
The Investors Intelligence Bull Bear reading is currently at 71%. 

The last time it hit this level was Jan 2018.  Over the following 12 months the market suffered drawdowns of up to -18% while only ekeing out maximum upside of 3-4%.

So this is why I see quite a lot of short term risk in the market right now over the next 6-12 months compared to reward, given sentiment levels. I think the chances are very good that there will be better opportunities to deploy money over that timeframe.

I still have enough still invested to benefit and keep me on course for my ultimate financial goals if stocks continue to defy historic precedence and keep going up, but also enough on the sides to be able to take meaningful advantage if we get another selloff.  As I say, balancing risk and reward.

https://www.investorsintelligence.com/x/free_chart.html?r=101l

Travis

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #83 on: December 02, 2020, 05:20:45 AM »
End of the month bookkeeping is done. What the hell happened in November? The market liked the election that damn much?

Not terrified or market timing because I'm just plodding along as usual, but if I'm reading the numbers right, I got a year's worth of growth in the last 4 weeks.

Paper Chaser

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #84 on: December 02, 2020, 05:54:07 AM »
The Investors Intelligence Bull Bear reading is currently at 71%. 

The last time it hit this level was Jan 2018.  Over the following 12 months the market suffered drawdowns of up to -18% while only ekeing out maximum upside of 3-4%.

So this is why I see quite a lot of short term risk in the market right now over the next 6-12 months compared to reward, given sentiment levels. I think the chances are very good that there will be better opportunities to deploy money over that timeframe.

I still have enough still invested to benefit and keep me on course for my ultimate financial goals if stocks continue to defy historic precedence and keep going up, but also enough on the sides to be able to take meaningful advantage if we get another selloff.  As I say, balancing risk and reward.

https://www.investorsintelligence.com/x/free_chart.html?r=101l

Do you have a defined plan for when you might buy back in? If that Bull/Bear reading is a useful metric, do you plan on buying back in when it reaches a predetermined lower value? Do you do it if the market drops to a certain point? How have you determined when it might feel like a good enough deal to deploy your reserves?

vand

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #85 on: December 02, 2020, 06:09:14 AM »
The Investors Intelligence Bull Bear reading is currently at 71%. 

The last time it hit this level was Jan 2018.  Over the following 12 months the market suffered drawdowns of up to -18% while only ekeing out maximum upside of 3-4%.

So this is why I see quite a lot of short term risk in the market right now over the next 6-12 months compared to reward, given sentiment levels. I think the chances are very good that there will be better opportunities to deploy money over that timeframe.

I still have enough still invested to benefit and keep me on course for my ultimate financial goals if stocks continue to defy historic precedence and keep going up, but also enough on the sides to be able to take meaningful advantage if we get another selloff.  As I say, balancing risk and reward.

https://www.investorsintelligence.com/x/free_chart.html?r=101l

Do you have a defined plan for when you might buy back in? If that Bull/Bear reading is a useful metric, do you plan on buying back in when it reaches a predetermined lower value? Do you do it if the market drops to a certain point? How have you determined when it might feel like a good enough deal to deploy your reserves?

Yes, I pay more attention to sentiment that actual level of the index, so I am biding my time waiting for a fairly extreme negative sentiment reading before I go more aggressive. That could be the S&P at 2500, or it could be 3300, after having zoomed up another 15% from here.. that is a possibility that I don't rule out. 

In the latter scenario people will say "what's the point, you might as well have stayed fully invested" but that is missing the point; in sidestepping the peak sentiment and buying back in the correction at the very least I'll have smoothed out my returns and managed my risk. It's not always about return.




reeshau

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #86 on: December 02, 2020, 07:25:47 AM »
End of the month bookkeeping is done. What the hell happened in November? The market liked the election that damn much?

Not terrified or market timing because I'm just plodding along as usual, but if I'm reading the numbers right, I got a year's worth of growth in the last 4 weeks.

Um...3 effective Covid vaccines?  And maybe some election, too.

hodedofome

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #87 on: December 02, 2020, 09:29:29 AM »
This market has a long way to go before it tops out for a good long while. Stay the course. Wait for your grandparents to say they are buying tech stocks.

vand

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #88 on: December 04, 2020, 01:03:33 AM »
Jared Dillion is a great writer. I agree with his latest piece:

https://www.mauldineconomics.com/the-10th-man/5-investments-to-volatility-proof-your-portfolio
Now is the time to focus on your risk management, not chase gains.
(sorry that he tries to upsell his Awesome Portfolio.. FYI it's just a multi-asset portfolio with trend rules).
« Last Edit: December 04, 2020, 01:06:54 AM by vand »

ice_beard

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #89 on: December 04, 2020, 11:02:49 AM »
I found this video helped explain the juicy equity valuations we are seeing right now. 

https://www.youtube.com/watch?v=1nRf8CyumR8

At 2:20 he starts to talk about the historic mismatch between bond and stock investments right now.  In short, if you want to make any profit on your money, at all, you have to be buying stocks, so everyone is buying stocks. 
Makes sense. 

I wonder when interest rates will begin to rise?  It honestly doesn't seem like a bad idea.  It could tap the brakes on the US housing market and help drive some investment back into bonds.  I would absolutely buy some bonds if I knew I was going to at least break even compared to inflation.  But currently, you have to buy riskier bonds if you want to do that. 


habanero

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #90 on: December 04, 2020, 11:24:30 AM »
I wonder when interest rates will begin to rise? 

You had a window of a few days in march, that's how long the last credit cycle lasted (IG corporate bonds, that is). Investment-grade bond spreads blew out from around 1% to 4%.

There is no law stating interest rates eventually will have to rise. They haven't in Japan for an awful long time, for example. In nominal terms US yields are still among the highest out there, 10y US govvies yield just south of 1% compared to say 0% in Japan and -0.50% or so in Germany. 10y US TIPS yield around -1% at mom 2%.

The central banks have also showed their hand imo, they will do pretty much anything to prevent asset prices from crashing. If they will succeed is another story.

ChpBstrd

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #91 on: December 04, 2020, 01:48:35 PM »
I wonder when interest rates will begin to rise? 

You had a window of a few days in march, that's how long the last credit cycle lasted (IG corporate bonds, that is). Investment-grade bond spreads blew out from around 1% to 4%.

There is no law stating interest rates eventually will have to rise. They haven't in Japan for an awful long time, for example. In nominal terms US yields are still among the highest out there, 10y US govvies yield just south of 1% compared to say 0% in Japan and -0.50% or so in Germany. 10y US TIPS yield around -1% at mom 2%.

The central banks have also showed their hand imo, they will do pretty much anything to prevent asset prices from crashing. If they will succeed is another story.

To ask the question a different way, how long can the USD remain the world's reserve currency, propped up by demand from foreign countries and industries who transact in dollars. The US has been funding itself in large part through borrowing because there was such insatiable demand for USD from China, worldwide commodity traders, criminals, debtor nations, and wealthy investors across the world. To be clear, without foreign demand for dollars constantly sucking cash out of the US economy, inflation would be double-digit and the American standard of living would be closer to Mexico's or Russia's. Or, if American taxes, rather than money-printing, had to cover the entire cost of government, US potential GDP growth would be zero or below. The US is in a sweet spot where the rest of the world partially funds it.

The stated goal of the fed is to control inflation while maximizing employment, but to accomplish this the fed must incentivize funds to flow into investments instead of consumption. At a discount rate near zero, the math says any investment yield is worth buying, and so we have the everything bubble covering bonds, stocks, real estate, and more.

Trillions of dollars worth of assets on the fed's balance sheet could be sold at the first whiff of inflation, so there is little risk of persistent inflation and little need for the fed to raise interest rates even if it does happen. The low risk of inflation for at least the next several years further supports the value of the dollar compared to other currencies where purchasing power could erode faster. The US' ability to print money instead of charging taxes also makes the US an attractive investment destination in a virtuous cycle. Additionally, the risk of deflation is low because the fed can just again do what they did in 2009 and 2020 - create billions of dollars and buy up investment assets to distribute those dollars.

However, the fed put on inflation DOES NOT prevent the bursting of asset bubbles. It also does not set the price of the dollar versus other currencies, where interest rates are the more important factor. The stock market could still melt down 40+% as it did in 2000, another time of exuberance and unprecedented valuations. Similarly, the dollar could lose another 10% against a basket of international currencies, as it did in 2020.

But the bigger threat comes from cryptocurrencies. Foreign investors, merchants, and governments know they are subsidizing Americans by propping up the dollar, and a stable crypto platform, or a national digital currency like China is about to launch, could break their dependency on the US as the world's monopolistic reserve currency supplier. From the perspective of American investors, the USD is the only asset that matters.


waltworks

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #92 on: December 04, 2020, 02:02:12 PM »
....blah blah blah.... in 30 years, will you be glad you invested (or worked out, or called your mom)?

My answer has always been and currently is still yes, so I just dump my $2k a week in and forget about it.

-W

habanero

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #93 on: December 04, 2020, 02:32:26 PM »
To ask the question a different way, how long can the USD remain the world's reserve currency, propped up by demand from foreign countries and industries who transact in dollars.

Don't know, don't care. No opinion on the matter. Whatever happens happens. I don't try to time markets and I don't try to time to world order. If i were to really time something, I'd rather time markets than the world order.

joleran

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #94 on: December 04, 2020, 06:39:53 PM »
But the bigger threat comes from cryptocurrencies. Foreign investors, merchants, and governments know they are subsidizing Americans by propping up the dollar, and a stable crypto platform, or a national digital currency like China is about to launch, could break their dependency on the US as the world's monopolistic reserve currency supplier. From the perspective of American investors, the USD is the only asset that matters.

That's certainly one way to find out the real state of quantum computing in military applications, very curious how it plays out if a major nation state is against the wall and revealing the breaking of existing crypto is the only way out.

vand

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #95 on: December 07, 2020, 03:19:25 AM »
Good video this, from Pensioncraft:
https://www.youtube.com/watch?v=bO_JqQzn1lU

summarizes that, on a discounted cashflow model, fair price for the S&P is likely around 3100.


I think this fairer than just looking at historic ratios like the Buffett indicator does.
« Last Edit: December 07, 2020, 03:40:52 AM by vand »

dividendman

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #96 on: December 07, 2020, 10:00:43 AM »
S&P 500 will be 4500 by the end of next year.

vand

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #97 on: December 07, 2020, 10:09:43 AM »
S&P 500 will be 4500 by the end of next year.

Predictions like this make me Terrified of the Stock Market Right Now (tm).

RWD

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #98 on: December 07, 2020, 10:12:25 AM »
S&P 500 will be 4500 by the end of next year.

Predictions like this make me Terrified of the Stock Market Right Now (tm).

About 1 in 5 years the S&P 500 sees returns like that. Certainly not implausible. Only a little less likely than losing money in a given year (~30%).

ender

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #99 on: December 08, 2020, 04:03:55 PM »
I'd certainly be surprised by it going to 4500.

But it'd be nice, nonetheless.