Author Topic: The bear market can't end until there are no more bulls left.  (Read 7081 times)

bwall

  • Handlebar Stache
  • *****
  • Posts: 1061
Bear markets generally last a year or two (I think)--does anyone know how long the past bear markets have been? That's about the length of time it takes to remove all hope from every bull. As Stalin said 'Hope is the last to die."

So, what have you done to eliminate the bulls from the market? To drive a stake through their optimistic, hope-springs-eternal heart?

I've sold out of the money covered calls on up days (like yesterday). If today is an up day (and it looks like it will be), then I'll probably sell some more. If the covered calls close in the money I'll have plenty of opportunity in the future to buy them back cheaper.

What bearish strategies are you employing?

trytrying

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: The bear market can't end until there are no more bulls left.
« Reply #1 on: April 07, 2020, 06:39:16 AM »
You didn't get the memo?  Bear market is canceled, Powell has those printing presses going 24/7.

brrrrrrtttt

vand

  • Handlebar Stache
  • *****
  • Posts: 1462
  • Location: UK
Re: The bear market can't end until there are no more bulls left.
« Reply #2 on: April 07, 2020, 06:41:16 AM »
https://www.collaborativefund.com/blog/the-shock-cycle/

I think OP is at the "Then you don’t see good news" stage of the cycle

LWYRUP

  • Handlebar Stache
  • *****
  • Posts: 1065
Re: The bear market can't end until there are no more bulls left.
« Reply #3 on: April 07, 2020, 07:28:37 AM »
"The father of value investing, Benjamin Graham, explained this concept by saying that in the short run, the market is like a voting machine--tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine--assessing the substance of a company. The message is clear: What matters in the long run is a company's actual underlying business performance and not the investing public's fickle opinion about its prospects in the short run."  (https://news.morningstar.com/classroom2/course.asp?docId=142901&page=7).

The bear market will end when enough investors believe the underlying business climate has improved.  There may be swings of joy and despair on the day-to-day, but when we look back we will see how little they mattered in the end. 
« Last Edit: April 07, 2020, 09:35:36 AM by LWYRUP »

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 3846
Re: The bear market can't end until there are no more bulls left.
« Reply #4 on: April 07, 2020, 08:33:08 AM »
I believe a common definition of a bear market is that "prices fall 20% or more from recent highs".
https://www.investopedia.com/terms/b/bearmarket.asp

The recent high for VTI was 171.32 , making $137.06 the -20% marker for a bear market.  Under that price, it's a bear market.  Once VTI rises above that line, the bear market ends - using the definition.  The bear market ends when stocks are no longer -20% or more below the recent, highest price.

VTI is trading at $134.49 right now.  If VTI goes up +2%, that ends the bear market.
https://finance.yahoo.com/quote/VTI/history?p=VTI

I think you might be overlooking the despair felt on March 23, with markets down -35%, which is an average bottom for a bear market.  China is starting to end it's lock down - Europe could follow, then the U.S.  The data supports it: declining COVID-19 deaths in Europe, and declining cases in the U.S.  To me the question is simply when that data becomes convincing, and a +2% rise in prices ends the bear market.

bwall

  • Handlebar Stache
  • *****
  • Posts: 1061
Re: The bear market can't end until there are no more bulls left.
« Reply #5 on: April 08, 2020, 06:58:45 AM »
Thanks to everyone for weighing in.

Interpreting the feedback below, I see three bulls and one 'noncommittal'--if I got the feedback right.

I guess I'm still more bearish than most.

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 2121
Re: The bear market can't end until there are no more bulls left.
« Reply #6 on: April 08, 2020, 02:56:03 PM »
Add a bear or perhaps a non participant. The SP500 valuations when when looking at forward PEs are cray-cray. Something like 19x. The trailing PE is 20.69.

No thanks.

MaaS

  • Stubble
  • **
  • Posts: 240
Re: The bear market can't end until there are no more bulls left.
« Reply #7 on: April 08, 2020, 04:43:01 PM »
Add a bear or perhaps a non participant. The SP500 valuations when when looking at forward PEs are cray-cray. Something like 19x. The trailing PE is 20.69.

No thanks.

If the hit to GDP is as significant as many are forecasting, stocks are actually quite a bit more expensive (based on 2020 earnings) than they were at the all-time highs in February.

Of course, markets are probably going to trade on next year's earnings expectations. So I guess the question is, will 2021 be better than 2019?

My personal view is 2021 is going to be a struggle. With that said, I've been a net buyer through this downturn.

Taran Wanderer

  • Pencil Stache
  • ****
  • Posts: 946
Re: The bear market can't end until there are no more bulls left.
« Reply #8 on: April 08, 2020, 07:30:30 PM »
Just because we've headed off the worst of the sickness and death impacts with these lockdowns, there's no way we can bounce right back up to the level of activity we were at in February.  If we start gathering huge groups of people together again, the virus will spread, two weeks later people will be getting sick, and a two weeks after that, we will see a surge in deaths.  India, South America, and Africa haven't even really heated up yet, so the big surge in cases and deaths in those places hasn't even started.

If we can't gather in crows, then a whole lot of economic activity doesn't happen.  Shopping malls, restaurants, sports, casinos, airplanes, cruise ships - really, can you imagine getting on a cruise ship anytime in the next two years?  (Technically, I can't ever imagine getting on a cruise ship, but I digress...)  If you can't go anywhere where there are lots of people, then the oil industry stays down, no need to buy a car if you aren't driving anywhere, etc.

The more I write, the more that the market is starting to look really attractive to convert everything to cash and look for a buying opportunity when prices really drop.

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 2121
Re: The bear market can't end until there are no more bulls left.
« Reply #9 on: April 08, 2020, 07:53:38 PM »
Just because we've headed off the worst of the sickness and death impacts with these lockdowns, there's no way we can bounce right back up to the level of activity we were at in February.  If we start gathering huge groups of people together again, the virus will spread, two weeks later people will be getting sick, and a two weeks after that, we will see a surge in deaths.  India, South America, and Africa haven't even really heated up yet, so the big surge in cases and deaths in those places hasn't even started.

If we can't gather in crows, then a whole lot of economic activity doesn't happen.  Shopping malls, restaurants, sports, casinos, airplanes, cruise ships - really, can you imagine getting on a cruise ship anytime in the next two years?  (Technically, I can't ever imagine getting on a cruise ship, but I digress...)  If you can't go anywhere where there are lots of people, then the oil industry stays down, no need to buy a car if you aren't driving anywhere, etc.

The more I write, the more that the market is starting to look really attractive to convert everything to cash and look for a buying opportunity when prices really drop.

Yup.  Seeing what's happening and the prices stocks are fetching, it's difficult to persuade myself to continue on even with my relatively low exposure.  Amazing what a couple of trillion from the Fed will do.   

Jack0Life

  • Bristles
  • ***
  • Posts: 411
Re: The bear market can't end until there are no more bulls left.
« Reply #10 on: April 08, 2020, 10:41:58 PM »
I will admit the week surprised me.
Our economy is in a shamble right now yet so much optimism in the market.
It will be a long long time before this country will be back to speed. I don't see us being back to normal until we get a vaccine. People are just to scare to go out in public.
I got lucky that I pulled out near the top so I have much more room to speculate. I'm waiting it out.
This is a good example of previous bear markets.
https://www.cnbc.com/2020/04/08/data-from-investor-howard-marks-shows-why-there-may-be-another-drop-in-stocks.html

dougules

  • Handlebar Stache
  • *****
  • Posts: 2362
Re: The bear market can't end until there are no more bulls left.
« Reply #11 on: April 09, 2020, 12:58:19 AM »
I'm apparently a big enough bull to keep on trucking with a stake accupuncture needle through the heart.  I'm not sure why you think that 10 years from now the economic side of this crisis will be seen as any worse than the previous two crises of the 21st century.  If the market having some bad years would drive a stake through the heart of your investment, you shouldn't be in equities, good market or bad. 

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 2121
Re: The bear market can't end until there are no more bulls left.
« Reply #12 on: April 09, 2020, 04:58:43 AM »
I'm apparently a big enough bull to keep on trucking with a stake accupuncture needle through the heart.  I'm not sure why you think that 10 years from now the economic side of this crisis will be seen as any worse than the previous two crises of the 21st century.  If the market having some bad years would drive a stake through the heart of your investment, you shouldn't be in equities, good market or bad.

Wow. I’d hate to see what a stake is.

This is a consumer driven economy and we’ll find out this morning how many more millions of those consumers are now filing unemployment claims.   The GFC has had lingering impacts a decade out and the Great Depression did as well.

magnet18

  • Bristles
  • ***
  • Posts: 321
Re: The bear market can't end until there are no more bulls left.
« Reply #13 on: April 09, 2020, 10:13:44 AM »
Some people are forgetting just how stupidly fast people get bored and adapt to a new normal/stop being scared.  Heck, the vast majority of people I know don't really have much fear, but then most people I know are in my 20s


And the externality will eventually lift, even if it's the worst case of Q1 2021 there is still a horizon at which things will eventually go back to normal

Compare to the 1918 pandemic, which had basically no impact on markets, which indicates all market impact here is due to the temporary "stay at home" policies.

Compared to the depression, where 1 in 3 banks shut down and FDIC didn't exist so millions of people just watched every dollar they had literally evaporate leaving them penniless.  That had repercussions.  But they're certainly not apples to apples.


My concerns are much more about the fact that we just committed to spending an estimated $6T in magically printed money, which makes me want to increase my international exposure.

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 3846
Re: The bear market can't end until there are no more bulls left.
« Reply #14 on: April 09, 2020, 10:36:06 AM »
I believe a common definition of a bear market is that "prices fall 20% or more from recent highs".
https://www.investopedia.com/terms/b/bearmarket.asp

The recent high for VTI was 171.32 , making $137.06 the -20% marker for a bear market.  Under that price, it's a bear market.  Once VTI rises above that line, the bear market ends - using the definition.  The bear market ends when stocks are no longer -20% or more below the recent, highest price.

VTI is trading at $134.49 right now.  If VTI goes up +2%, that ends the bear market.
https://finance.yahoo.com/quote/VTI/history?p=VTI

VTI is now trading at $139.92, which is higher than $137.06.

I think this is where people start to invent new definitions for "bear market", so they don't have to admit the bear market just ended.

dougules

  • Handlebar Stache
  • *****
  • Posts: 2362
Re: The bear market can't end until there are no more bulls left.
« Reply #15 on: April 09, 2020, 10:39:19 AM »
I'm apparently a big enough bull to keep on trucking with a stake accupuncture needle through the heart.  I'm not sure why you think that 10 years from now the economic side of this crisis will be seen as any worse than the previous two crises of the 21st century.  If the market having some bad years would drive a stake through the heart of your investment, you shouldn't be in equities, good market or bad.

Wow. I’d hate to see what a stake is.

This is a consumer driven economy and we’ll find out this morning how many more millions of those consumers are now filing unemployment claims.   The GFC has had lingering impacts a decade out and the Great Depression did as well.

Yes, both crises had very long-term effects but neither stopped most publicly-traded corporations from eventually recovering and doing better than ever. 

An actual stake through the heart would be some kind of fundamental existential threat to the modern economy.  This is not that.

bwall

  • Handlebar Stache
  • *****
  • Posts: 1061
Re: The bear market can't end until there are no more bulls left.
« Reply #16 on: April 09, 2020, 02:19:06 PM »
The market has been on a tear for the past two days. I think that tomorrow it's closed b/c of ..... something, but not COVID-19.

Thanks to the other bears for weighing in--and bulls too. I like to read others' opinions--it helps me square my thought process.

I'm long-term bullish, of course. No doubt that we'll pick ourselves up, dust ourselves off and be back better than ever. But, until that happens, it hasn't happened.

I still think that we'll be re-testing the lows of March 23rd sooner rather than later. I think the stock market is running on adrenaline and doesn't even register the damage done to the economy, like an animal that has been shot keeps running and doesn't feel pain, even though its mortally wounded. Once the pain begins to register as the adrenaline wears off, the selling will begin again, I believe.

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 2121
Re: The bear market can't end until there are no more bulls left.
« Reply #17 on: April 09, 2020, 02:39:43 PM »
The market has been on a tear for the past two days. I think that tomorrow it's closed b/c of ..... something, but not COVID-19.

Thanks to the other bears for weighing in--and bulls too. I like to read others' opinions--it helps me square my thought process.

I'm long-term bullish, of course. No doubt that we'll pick ourselves up, dust ourselves off and be back better than ever. But, until that happens, it hasn't happened.

I still think that we'll be re-testing the lows of March 23rd sooner rather than later. I think the stock market is running on adrenaline and doesn't even register the damage done to the economy, like an animal that has been shot keeps running and doesn't feel pain, even though its mortally wounded. Once the pain begins to register as the adrenaline wears off, the selling will begin again, I believe.

I hope for a great run up tomorrow! Buy! Buy! Buy!

Normalcy bias and a few trillion of Fed dollars are behind this. The new normal includes probably 20%+ of the workforce being unemployed at least short term. That’s going to leave a mark long term. We’ve been curious as to what a Mustachian society looks like. We’re about to find out. While I think there will be good amount of reversion to old habits, saving will become very fashionable. Out of necessity.  That’ll slow velocity. Deflation here we come! Kinda cool from my perspective. I like low prices and sales. Kinda sucks for the overall economy though.

talltexan

  • Magnum Stache
  • ******
  • Posts: 4400
Re: The bear market can't end until there are no more bulls left.
« Reply #18 on: April 16, 2020, 12:30:06 PM »
I'm missing a step: how does the 20% unemployment lead to deflation?

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 2121
Re: The bear market can't end until there are no more bulls left.
« Reply #19 on: April 16, 2020, 03:22:44 PM »
I'm missing a step: how does the 20% unemployment lead to deflation?

Indirectly. Remember that 20% unemployed means 80% employed looking at that 20% and saying “oh shoot! That could be me!!” They start saving and stashing money like mad.  They're not spending. At the same time people and companies who have to offload assets to remain solvent do so at the worst possible time which means an increased supply with demand dropping because of folks not spending money for anything more than absolutely necessary. That higher supply with lower demand equals lower prices (deflation). If that continues for too long, people start to notice that if they wait to purchase something, that prices will be lower. So they do wait which further reduces demand which further reduces prices which means more deflation and the cycle feeds on itself. And you end up in a deflationary spiral.

Deflationary spirals scare the hell out of economists.

(Edited for clarity.) 
« Last Edit: April 16, 2020, 04:27:57 PM by Buffaloski Boris »

magnet18

  • Bristles
  • ***
  • Posts: 321
Re: The bear market can't end until there are no more bulls left.
« Reply #20 on: April 16, 2020, 05:17:38 PM »
The contrary outcome is that what directly causes inflation is printing more money.  We had total deflation of 25% during the depression, and 20% unemployment indirectly played into that, but directly playing into it was the federal reserve allowing the total supply of US dollars to fall by 33% when banks went under.  What eventually ended the deflation cycle was mandating citizens sell the govt all non-jewlery gold, putting a massive amount of gold in Knox and redefining of the dollar, inflating it substantially.

Total dollars in circulation in February was $1.75T, and our money printer is now on overdrive (or they may literally mint a $1,000,000,000,000 coin), which inflates currency combating deflation.  I can't find a number for what percentage of the 2T is going directly into cash like the stimulus checks, but the answer is certainly *many*.

In times of such great uncertainty, only history will tell the outcome, things could stay steady or swing wildly either way before this is over.

bwall

  • Handlebar Stache
  • *****
  • Posts: 1061
Re: The bear market can't end until there are no more bulls left.
« Reply #21 on: April 16, 2020, 05:30:50 PM »
The contrary outcome is that what directly causes inflation is printing more money. 

This is a common misconception. Printing more money does not directly cause inflation. Inflation is directly caused by increasing the velocity of money through the economy. This is generally done via the mechanism of printing money.

To prove my point: How much inflation did we have between 2008 and 2019? I hazard to say +/- 2% per year. Now how much money was printed during that time? I think our money supply doubled or tripled. Which means that, according to the above statement, that prices across the economy should double or triple (i.e. inflation should have lead to a concomitant doubling or tripling of prices). Yet, that did not happen because the velocity of money throughout the economy dropped significantly even though enormous amounts of money were printed.

There are competing theories on why the velocity of money dropped post-2008, but that's a topic for another thread.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1444
  • Age: 41
  • Location: Texas
Re: The bear market can't end until there are no more bulls left.
« Reply #22 on: April 16, 2020, 06:56:36 PM »
Trump just opened this economy back up. Clear skies ahead all you bears. Start buying or get run over.

Long and strong rest of 2020 my friends. I’ll be covering my shorts tomorrow.

bwall

  • Handlebar Stache
  • *****
  • Posts: 1061
Re: The bear market can't end until there are no more bulls left.
« Reply #23 on: April 16, 2020, 07:01:58 PM »
I'm missing a step: how does the 20% unemployment lead to deflation?

Indirectly. Remember that 20% unemployed means 80% employed looking at that 20% and saying “oh shoot! That could be me!!” They start saving and stashing money like mad.  They're not spending. At the same time people and companies who have to offload assets to remain solvent do so at the worst possible time which means an increased supply with demand dropping because of folks not spending money for anything more than absolutely necessary. That higher supply with lower demand equals lower prices (deflation). If that continues for too long, people start to notice that if they wait to purchase something, that prices will be lower. So they do wait which further reduces demand which further reduces prices which means more deflation and the cycle feeds on itself. And you end up in a deflationary spiral.

Deflationary spirals scare the hell out of economists.

(Edited for clarity.)

Another way to say the same thing: 20% unemployment will lead to decreased demand across the economy. People without work will not have money to spend. In order to entice people to spend money, businesses will lower prices. Thus, deflation appears.
 

magnet18

  • Bristles
  • ***
  • Posts: 321
Re: The bear market can't end until there are no more bulls left.
« Reply #24 on: April 16, 2020, 08:28:29 PM »
The contrary outcome is that what directly causes inflation is printing more money. 

This is a common misconception. Printing more money does not directly cause inflation. Inflation is directly caused by increasing the velocity of money through the economy. This is generally done via the mechanism of printing money.

To prove my point: How much inflation did we have between 2008 and 2019? I hazard to say +/- 2% per year. Now how much money was printed during that time? I think our money supply doubled or tripled. Which means that, according to the above statement, that prices across the economy should double or triple (i.e. inflation should have lead to a concomitant doubling or tripling of prices). Yet, that did not happen because the velocity of money throughout the economy dropped significantly even though enormous amounts of money were printed.

There are competing theories on why the velocity of money dropped post-2008, but that's a topic for another thread.

Wikipedia
Quote
Economists generally believe that very high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.[8] Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities.[9] However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.[10][11]

I'll admit I've reached my depth, and I grant that you are correct in that it's not a perfect linear relationship like it was in the 1930s on a gold standard.  But to go to the extreme if we print 100Trillion this year I'd wager it causes some inflation.

I think there is also a difference between putting cash straight into circulation vs. issuing securities, but again I admit I'm now out of my depth

I'll have to do more research on the velocity of money concept you just introduced me to.  From what I see of the basics, I don't think we've reached the zero demand point that buffaloborski assumes.  Anecdotally, I know a lot of people drooling over various toys to buy with their checks.  Entirely possible I'm in a bubble, and that that point may be coming. 


Amazing how the entire global economy grinding to an abrupt halt can spark renewed interest in economics

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1444
  • Age: 41
  • Location: Texas
Re: The bear market can't end until there are no more bulls left.
« Reply #25 on: April 16, 2020, 09:34:47 PM »
The contrary outcome is that what directly causes inflation is printing more money. 

This is a common misconception. Printing more money does not directly cause inflation. Inflation is directly caused by increasing the velocity of money through the economy. This is generally done via the mechanism of printing money.

To prove my point: How much inflation did we have between 2008 and 2019? I hazard to say +/- 2% per year. Now how much money was printed during that time? I think our money supply doubled or tripled. Which means that, according to the above statement, that prices across the economy should double or triple (i.e. inflation should have lead to a concomitant doubling or tripling of prices). Yet, that did not happen because the velocity of money throughout the economy dropped significantly even though enormous amounts of money were printed.

There are competing theories on why the velocity of money dropped post-2008, but that's a topic for another thread.

Wikipedia
Quote
Economists generally believe that very high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.[8] Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities.[9] However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.[10][11]

I'll admit I've reached my depth, and I grant that you are correct in that it's not a perfect linear relationship like it was in the 1930s on a gold standard.  But to go to the extreme if we print 100Trillion this year I'd wager it causes some inflation.

I think there is also a difference between putting cash straight into circulation vs. issuing securities, but again I admit I'm now out of my depth

I'll have to do more research on the velocity of money concept you just introduced me to.  From what I see of the basics, I don't think we've reached the zero demand point that buffaloborski assumes.  Anecdotally, I know a lot of people drooling over various toys to buy with their checks.  Entirely possible I'm in a bubble, and that that point may be coming. 


Amazing how the entire global economy grinding to an abrupt halt can spark renewed interest in economics

Take a look at Japan. They’ve been TRYING to create inflation for years and cannot do it. They’ve increased the money supply like crazy and interest rates are negative. And still they cannot get the inflation at 2% consistently like they want.

Their biggest problem is the population is decreasing, causing deflation from shrinking demand. They need to get busy getting married and making babies in the bedroom.

Inflation is not perfectly correlated to the money supply, no matter what some economist tells you. Just look at Japan and Europe to see for yourself. This is real time, hard data that you don’t need a theory to figure out.

Most of the developed world is fighting deflation, not inflation. Therefore, there’s a lot of wiggle room with interest rates and the money supply that central banks can take advantage of during times like these. 

PDXTabs

  • Magnum Stache
  • ******
  • Posts: 2654
  • Age: 38
  • Location: Portland, OR, USA
Re: The bear market can't end until there are no more bulls left.
« Reply #26 on: April 17, 2020, 12:49:57 PM »
Another way to say the same thing: 20% unemployment will lead to decreased demand across the economy. People without work will not have money to spend. In order to entice people to spend money, businesses will lower prices. Thus, deflation appears.

I would add that those 20% who are suddenly unemployed can't keep spending the way that they have been. I just took a 20% pay cut, I can't keep spending the way that I had been. It's a mathematical impossibility.

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 3846
Re: The bear market can't end until there are no more bulls left.
« Reply #27 on: April 17, 2020, 02:34:39 PM »
Forget normal unemployment, think about it in terms of COVID-19.  Very common jobs like retail or restaurant worker have no hours.  Their hourly wage doesn't matter with zero hours - the business is closed down by COVID-19.  They aren't getting 100% of their old salary, they're getting 0%.  From that situation, getting 80% of their old salary is welcome news.

Some might claim unemployment will change their spending - I claim those same people already changed their spending.  Lots of optional activities become impossible under lock down.  Travel is 1/10th or less of former levels... malls are closed... there's lots of places locked down, making it impossible to spend money there.  So whether people get 80% or 100% of their salary in the time of COVID-19 lock downs, it doesn't have much impact on their spending.

talltexan

  • Magnum Stache
  • ******
  • Posts: 4400
Re: The bear market can't end until there are no more bulls left.
« Reply #28 on: April 22, 2020, 11:36:13 AM »
The contrary outcome is that what directly causes inflation is printing more money. 

This is a common misconception. Printing more money does not directly cause inflation. Inflation is directly caused by increasing the velocity of money through the economy. This is generally done via the mechanism of printing money.

To prove my point: How much inflation did we have between 2008 and 2019? I hazard to say +/- 2% per year. Now how much money was printed during that time? I think our money supply doubled or tripled. Which means that, according to the above statement, that prices across the economy should double or triple (i.e. inflation should have lead to a concomitant doubling or tripling of prices). Yet, that did not happen because the velocity of money throughout the economy dropped significantly even though enormous amounts of money were printed.

There are competing theories on why the velocity of money dropped post-2008, but that's a topic for another thread.

Wikipedia
Quote
Economists generally believe that very high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.[8] Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities.[9] However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.[10][11]

I'll admit I've reached my depth, and I grant that you are correct in that it's not a perfect linear relationship like it was in the 1930s on a gold standard.  But to go to the extreme if we print 100Trillion this year I'd wager it causes some inflation.

I think there is also a difference between putting cash straight into circulation vs. issuing securities, but again I admit I'm now out of my depth

I'll have to do more research on the velocity of money concept you just introduced me to.  From what I see of the basics, I don't think we've reached the zero demand point that buffaloborski assumes.  Anecdotally, I know a lot of people drooling over various toys to buy with their checks.  Entirely possible I'm in a bubble, and that that point may be coming. 


Amazing how the entire global economy grinding to an abrupt halt can spark renewed interest in economics

Take a look at Japan. They’ve been TRYING to create inflation for years and cannot do it. They’ve increased the money supply like crazy and interest rates are negative. And still they cannot get the inflation at 2% consistently like they want.

Their biggest problem is the population is decreasing, causing deflation from shrinking demand. They need to get busy getting married and making babies in the bedroom.

Inflation is not perfectly correlated to the money supply, no matter what some economist tells you. Just look at Japan and Europe to see for yourself. This is real time, hard data that you don’t need a theory to figure out.

Most of the developed world is fighting deflation, not inflation. Therefore, there’s a lot of wiggle room with interest rates and the money supply that central banks can take advantage of during times like these.

I've appreciated the great and sincere engagement with my deflation question. In the example in this post, though, one important economy is not mentioned, another economy in which it seemed like no matter what people were doing, they couldn't get inflation over 2%...I of course refer to the United States since 2008.

I don't know whether this will continue, but I'd like to think that the PPP as well as the expanded unemployment benefit are cutting into the contraction that might otherwise cause deflation...a lot of people whose incomes are interrupted in the short term will still be able to continue spending such that deflation will not touch most essential sectors (although it will probably hit a lot of luxury sectors, like durable goods)

vand

  • Handlebar Stache
  • *****
  • Posts: 1462
  • Location: UK
Re: The bear market can't end until there are no more bulls left.
« Reply #29 on: April 29, 2020, 03:48:44 AM »
The bull market can't end until bwall turns bullish.

bwall

  • Handlebar Stache
  • *****
  • Posts: 1061
Re: The bear market can't end until there are no more bulls left.
« Reply #30 on: April 29, 2020, 09:24:35 AM »
The bull market can't end until bwall turns bullish.

In that case, it's going to be a Great Bull Run, then.

I'm by nature an optimist. Long term I know the market will be higher than it is today. But, I'm still keeping my bearish slant.

I'm just want to see if the facts will catch up with the market before the market catches up with the facts.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1444
  • Age: 41
  • Location: Texas
Re: The bear market can't end until there are no more bulls left.
« Reply #31 on: April 29, 2020, 12:10:08 PM »
The bull market can't end until bwall turns bullish.

In that case, it's going to be a Great Bull Run, then.

I'm by nature an optimist. Long term I know the market will be higher than it is today. But, I'm still keeping my bearish slant.

I'm just want to see if the facts will catch up with the market before the market catches up with the facts.

By the time the facts catch up with the market, you've been left behind. It was months before unemployment hit the bottom in 2009, while the market rallied like 30% during that timeframe.

dresden

  • Stubble
  • **
  • Posts: 114
Re: The bear market can't end until there are no more bulls left.
« Reply #32 on: April 29, 2020, 06:20:04 PM »
Stocks bounced back recently but it seems like a sugar rush to me so I sold all my equity positions today.   The main thing the stock market has going for it is there is really nowhere else to to put money right now, but this is one of those rare times where 0% doesn't seem so bad and at some point if fear>greed people won't worry about returns they will worry about preserving what they have.

While I don't want to in any way compare the current situation to the great depression, it took nearly decades not years for the stock market to match the high of 1928 so there is precedent for a very lengthy recovery period from a major catastrophic event.

When to buy is a much tougher decision than when to sell since this second chance was given.

dougules

  • Handlebar Stache
  • *****
  • Posts: 2362
Re: The bear market can't end until there are no more bulls left.
« Reply #33 on: April 29, 2020, 10:53:45 PM »
When to buy and when to sell are easy.  Buy when you have cash; sell when you need cash.  FTFY

What makes you think you are smarter than everyone else trying to second guess what every other player in the market is going to do?  COVID-19 has minted so many experts on short-term market predictions.  It's definetely skill not luck.

Taran Wanderer

  • Pencil Stache
  • ****
  • Posts: 946
Re: The bear market can't end until there are no more bulls left.
« Reply #34 on: April 29, 2020, 11:04:20 PM »
Stocks bounced back recently but it seems like a sugar rush to me so I sold all my equity positions today.   The main thing the stock market has going for it is there is really nowhere else to to put money right now, but this is one of those rare times where 0% doesn't seem so bad and at some point if fear>greed people won't worry about returns they will worry about preserving what they have.

While I don't want to in any way compare the current situation to the great depression, it took nearly decades not years for the stock market to match the high of 1928 so there is precedent for a very lengthy recovery period from a major catastrophic event.

When to buy is a much tougher decision than when to sell since this second chance was given.

I sold a chunk of equities before the initial crash, and I moved another couple big chunks to cash today.  The rebound and valuations make no sense.  Now I need to define my strategy for buying back in, but I have time to think about that as the market will be exposed to the full brutal awfulness of the pandemic's impacts over the next few months.

the_gastropod

  • Bristles
  • ***
  • Posts: 298
  • Age: 34
  • Location: Brooklyn, NY
Re: The bear market can't end until there are no more bulls left.
« Reply #35 on: April 30, 2020, 06:54:59 AM »
While I don't want to in any way compare the current situation to the great depression, it took nearly decades not years for the stock market to match the high of 1928 so there is precedent for a very lengthy recovery period from a major catastrophic event.

I guess we’ll see what happens in the coming years, but I have a hunch there’ll be a major difference between a real economic recession, driven by real economic calamities, and a deliberate brake tapping to save potentially millions of lives.

waltworks

  • Magnum Stache
  • ******
  • Posts: 4929
Re: The bear market can't end until there are no more bulls left.
« Reply #36 on: April 30, 2020, 08:07:54 AM »
I sold a chunk of equities before the initial crash, and I moved another couple big chunks to cash today.  The rebound and valuations make no sense.  Now I need to define my strategy for buying back in, but I have time to think about that as the market will be exposed to the full brutal awfulness of the pandemic's impacts over the next few months.

No offense, but if you didn't already have a defined and specific strategy for buying back in, then you're just letting your emotions drive your decisions like lots of other terrible "investors", and you're almost certainly going to do yourself more harm than good.

Market timing is next to impossible to pull off - we have lots of good data on that. But if you market time *without even making a plan on how to do it*, what do you really expect? In what other areas of your life do *not planning ahead* tend to pay off?

The market timing threads are like whack-a-mole these days. Maybe MMM got too popular...

-W

LoanShark

  • Stubble
  • **
  • Posts: 107
Re: The bear market can't end until there are no more bulls left.
« Reply #37 on: April 30, 2020, 08:39:26 AM »
When to buy and when to sell are easy.  Buy when you have cash; sell when you need cash.  FTFY

What makes you think you are smarter than everyone else trying to second guess what every other player in the market is going to do?  COVID-19 has minted so many experts on short-term market predictions.  It's definetely skill not luck.

Bingo. We have a winnah!

dresden

  • Stubble
  • **
  • Posts: 114
Re: The bear market can't end until there are no more bulls left.
« Reply #38 on: April 30, 2020, 10:14:29 AM »
When to buy and when to sell are easy.  Buy when you have cash; sell when you need cash.  FTFY

What makes you think you are smarter than everyone else trying to second guess what every other player in the market is going to do?  COVID-19 has minted so many experts on short-term market predictions.  It's definetely skill not luck.

I've never tried to time the market and am not doing so now.   To me this is just a common sense call that record unemployment, record negative growth, the need for additional debt to cover the short term, potential litigations, etc. represents a real and significant dent on value, but prices haven't really been hit hard yet.    Obviously there are some companies doing better but the unemployment seems like a good indicator most companies are not doing better.  If I miss a run-up this year I am fine with that - this was a risk/reward decision not based on timing or emotion.  There are real negative indicators that should make people think about risk.

waltworks

  • Magnum Stache
  • ******
  • Posts: 4929
Re: The bear market can't end until there are no more bulls left.
« Reply #39 on: April 30, 2020, 11:04:23 AM »
So... you're timing the market, then?

I mean, just own it. If you don't like the prices of stocks and think things are going to get worse and stocks are going to go down, you're market timing. It's simple. You might get lucky and be right, too!

But don't sit there and kid yourself that you're not market timing, because what you're talking about is the *definition* of market timing.

-W

dresden

  • Stubble
  • **
  • Posts: 114
Re: The bear market can't end until there are no more bulls left.
« Reply #40 on: April 30, 2020, 11:37:43 AM »
So... you're timing the market, then?

I mean, just own it. If you don't like the prices of stocks and think things are going to get worse and stocks are going to go down, you're market timing. It's simple. You might get lucky and be right, too!

But don't sit there and kid yourself that you're not market timing, because what you're talking about is the *definition* of market timing.

-W
There is a difference between timing the market (predicting market reaction) and reacting to real data/facts that impact values and dividends - seems at minimum a significant short-term disruption to our economy is happening.   I am looking at the impact on value/dividends - stock market prices are influenced by value/dividends but not driven entirely by it.  So certainly you can get lucky and the stock market can rise even with massive unemployment, negative growth and other really bad economic news.  I am comfortable with my decision to get out yesterday regardless of the outcome.    This is my last response to internet armchair critics that think the are always right.  I explained my reasons and am comfortable with the outcomes. Lets see where we are at in a few months - that will determine whether my concerns and economic data were unfounded.

waltworks

  • Magnum Stache
  • ******
  • Posts: 4929
Re: The bear market can't end until there are no more bulls left.
« Reply #41 on: April 30, 2020, 11:42:03 AM »
LOL. What's your definition of market timing, then? Please tell me how it differs *at all* from what you're doing.

For most folks, it means a belief (for whatever reason) that the market is going to go down, and that they can sell high and buy low.

No matter how much financial news you read or CNN you watch, history has shown that basically nobody can do that.

If you're super into investing and spend a lot of time on it, there's some chance you can pick stocks/find value in the market. But broad based buying/selling based on index values pretty much never works. It's hard to be right once (the market will go down) and even harder to be right again (the market will go up now).

That's not to mention the tax drag and time/effort wasted, of course.

I have no problem with you doing whatever you want, but call it what it is - market timing. It's fine with me if you market time, but don't lie to yourself and say you're not.

-W

trollwithamustache

  • Pencil Stache
  • ****
  • Posts: 931
Re: The bear market can't end until there are no more bulls left.
« Reply #42 on: April 30, 2020, 12:34:00 PM »
I'm thinking about some bear spreads if SPY goes above 300-305. duration would have to be well past the Q2 announcements/economic data.  I might do the same on XLE if its gets above the low 40s.

Sizing would have to be small, since one would be fighting the Fed with this trade. An Options probably aren't mustachian! :)

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 2121
Re: The bear market can't end until there are no more bulls left.
« Reply #43 on: April 30, 2020, 02:29:09 PM »
LOL. What's your definition of market timing, then? Please tell me how it differs *at all* from what you're doing.

For most folks, it means a belief (for whatever reason) that the market is going to go down, and that they can sell high and buy low.

No matter how much financial news you read or CNN you watch, history has shown that basically nobody can do that.

If you're super into investing and spend a lot of time on it, there's some chance you can pick stocks/find value in the market. But broad based buying/selling based on index values pretty much never works. It's hard to be right once (the market will go down) and even harder to be right again (the market will go up now).

That's not to mention the tax drag and time/effort wasted, of course.

I have no problem with you doing whatever you want, but call it what it is - market timing. It's fine with me if you market time, but don't lie to yourself and say you're not.

-W

I kind of like the label "market timer." I'm also happy with Russian bot, miscreant, heretic, unorthodox, pain in the ass, intransigent, apolitical, contrarian, non-voter, subverter of paradigms, and shameless remover of mattress tags. 
   

waltworks

  • Magnum Stache
  • ******
  • Posts: 4929
Re: The bear market can't end until there are no more bulls left.
« Reply #44 on: April 30, 2020, 07:05:25 PM »
EXACTLY! If you're gonna do it, freaking own it!

I mean, it takes guts to throw caution to the wind and do something that almost nobody ever pulls off except by accident. You should stick your chest out and say "I'm timing the goddamn market" and let the chips fall where they may. Lots of people here will mock you. F 'em!

Don't weasel out and say nonsensical stuff about how you aren't a market timer, but man values look high and I just heard some really bad news, so this one time I'm going to freak out and sell everything oh and also I don't actually know when/why I would buy back in.

-W

Taran Wanderer

  • Pencil Stache
  • ****
  • Posts: 946
Re: The bear market can't end until there are no more bulls left.
« Reply #45 on: April 30, 2020, 07:31:31 PM »
@waltworks, I'll own up to the market timing.  I've been a buy-and-hold investor for 21 years.  I tried market timing early on in my investing, and it was a failure.  Every time.  Dollar cost averaging, buy and hold, when the market is up I'm richer, when the market is down everything is on sale... these have been my go-to methods for 21 years, and they have served me well.

This time, for me, it's different.  I'm not sitting here with $50k or $100k in the bank with another $25k or $50k going into 401k and Roth IRA accounts this year.  I'm not looking at losing half of what I have in the volatility, but making it up with the new contributions.  I have a lot more to lose, and my new contributions won't make a lot of difference in the long run for my overall portfolio.  With the pandemic still ramping up, with the writing clearly on the wall that equities are objectively over-valued, I can't sit idle and just lose 40 or 50 or 60%, even if it's temporary in a 25-year time horizon.

You could argue, then, that my asset allocation doesn't match my current risk tolerance.  You'd have a point.  But even if my asset allocation was different, I'd still cash out.  It's just too plain obvious that financial assets are over-valued.

Now, I could be wrong.  We could see the market bounce around, up and down, and end up roughly where it is now over the next several months.  Then maybe I'll miss out on some small gains, or maybe I'll be even money by buying back in about where things are today.  On the other hand, maybe the market will drop 25 or 50%, and I'll dollar-cost average back in on the way down and up, and I'll make a bundle on this.  Who knows?  DW and I are willing to risk missing some slight upward opportunity for a chance to double our money.

The funny thing, as I was telling DW last night, is that the arguments in the this and a couple of other threads are basically one of these two:
1.  OMG, the market valuations don't make any sense.  I should sell!  I'm selling!
-or-
2.  Stay the course!  Dollar-cost-average!  Think long term!  No market timing!

I don't see anyone arguing the hypothetical third option which is:
3.  Market valuations are fantastic right now.  Buy!  Buy!  Buy!

Personally, on it's own, I think option 3 is crazy.  In the context of an overall strategy, I think option 2 is reasonable.  For me, I think the best opportunities are in option 1.

waltworks

  • Magnum Stache
  • ******
  • Posts: 4929
Re: The bear market can't end until there are no more bulls left.
« Reply #46 on: April 30, 2020, 07:43:22 PM »
Well, I mean, I'm buying. Every week. For cheaper than a few months ago. I'm fine with that.

And yes, your AA does not match your goals at all. Best of luck.

-W

Taran Wanderer

  • Pencil Stache
  • ****
  • Posts: 946
Re: The bear market can't end until there are no more bulls left.
« Reply #47 on: April 30, 2020, 08:18:24 PM »
I’m curious, what’s your time horizon?  How far out is FIRE, or whatever goal you’re shooting for?

waltworks

  • Magnum Stache
  • ******
  • Posts: 4929
Re: The bear market can't end until there are no more bulls left.
« Reply #48 on: April 30, 2020, 08:38:52 PM »
I’m curious, what’s your time horizon?  How far out is FIRE, or whatever goal you’re shooting for?

Time horizon is generational wealth, so essentially infinite.

You could have a long argument about whether I'm FIRE but I can work when I want and don't have to work so I'd argue I am. Our goal as a family is to help as many kids have an awesome life as possible via foster/adopt and volunteering/charity though, so more money is always useful for that. I like my work and have no plans to stop (~20 hours/week). So FI, but not RE by sit-on-the-beach standards. RE by my "do what I care most about/want to" standard.

It sounds like you are FI or close to it. I'd look hard at your AA and more importantly life goals before selling everything.

-W

marty998

  • Walrus Stache
  • *******
  • Posts: 7252
  • Location: Sydney, Oz
Re: The bear market can't end until there are no more bulls left.
« Reply #49 on: April 30, 2020, 08:45:14 PM »
I’m curious, what’s your time horizon?  How far out is FIRE, or whatever goal you’re shooting for?

Time horizon is generational wealth, so essentially infinite.


It's very difficult to control kids from beyond the grave. Forget trying to control grandkids.

Good luck though.