Stock Market Resiliency

[Jauronimo]

2 hours ago, Niagara Bill said:

There was no reason for the fall across the board to start with. The vast majority of companies would show bad quarters or 2 but there strength was still there. The Dow is controlled by nerd MBA with computer degrees who use algorithms not business sense to judge success. The stock markets have become computer games. 

Nothing has changed since the derivative driven crash of 08. 

The market was completely over cooked.  Any negative event was poised to cause a correction.  Two generational type events like a pandemic and oil price war among two of the world's largest producers, AT THE SAME TIME, certainly meets the criteria.  

 

When the entire market trades at 30x earnings, a miss is significant.  Several consecutive misses is a big deal.  

 

The rise of the stock market which has been primarily driven by a handful of companies (AMZN, GOOG, FB, TSLA, MSFT) has masked fragility elsewhere.  Lowering the statutory corporate tax rate raised the value of every dollar of cash flow 10% - 15%.  The S&P and Dow were kicking ass but earnings were not growing anywhere near in line with overall indices.  Also, there are no yields so you have equity buying action because there is nowhere else to make a return on your money. 

 

In summary, we were due for a correction.  It happened and the government responded with a trillion dollar stimulus package which means maybe theres enough cheap money available to hit new highs before we realize an even bigger correction. 

[PromoTheRobot]

50 minutes ago, Bill from NYC said:

Has it ever been?

 

Really, no. So why is it held up as a barometer of economic health?

[GoBills808]

17 minutes ago, PromoTheRobot said:

 

Really, no. So why is it held up as a barometer of economic health?

It shouldn’t be.

[K-9]

11 minutes ago, PromoTheRobot said:

 

Really, no. So why is it held up as a barometer of economic health?

It is by some, but anyone with even a casual understanding knows that’s just not true. Especially when you consider factors as outlined by @Jauronimo above. 

I think GDP is the best indicator for how the economy is doing overall. The Bureau of Economic Analysis will be releasing their first quarter info tomorrow. But what really caught my ear was what Kevin Hassett, senior economic advisor to the White House, said yesterday; that we will see a 20-30 percent contraction in the second quarter. That will reflect the impact on Main Street more than anything else, imo. 
 

 

[Bill from NYC]

Imo, people view the current market by the way their politics lean. Are there exceptions? For sure, but most Trump supporters would look back at the last 3 years and see reason for optimism, and have a basis for doing so. Most anti-Trumpers see disaster ahead, and I am convinced that some powerful dems in congress are trying to help it along. NOT all but some.

As for me, I'm not sure what to expect. I am at the age where most of my money is very safe. I saw what happened in 08 and knew that if it happened again, I would not have time to by low and recover.

I happen to think that the economy is best when unemployment is low. Jmo

I did however pick a stock called Church & Dwight. I was hoping it would tank and I planned to invest just a few thousand. They own Trojan Condoms, and I figured that many women would be telling us to get our corona asses off of and away from them. Then, when the smoke clears I figured it would be wild times again and everyone would buy condoms. It turns out that they also own Arm & Hammer Detergent, Oxy Clean, and other cleaning products. They even pay a dividend. The stock didn't go down with the rest of them so I stayed home.

Good luck to all and don't panic.

 

 

[Mark80]

I am of the belief that the market was too high before the outbreak.  It should have been around 25k-27k DJI, not 30k.  The market just needed an excuse to correct itself, and it did so with this virus.  Luckily, I had a suspicion there was an inevitable drop coming so I had been saving cash instead of investing for over a year.  I bought back in at 25k and then again at around 23.  Didn't quite get bottom, but I was pretty pleased to get that cash in when I did.  Unfortunately I had just put $6k in for my 2019 RIRA at around 29k or 30k DJI.  Ooooffffff. 

 

I don't believe we will get back to 30k for at least another year.  35k next year seems aggressive to me.

 

 

[K-9]

11 minutes ago, Bill from NYC said:

Imo, people view the current market by the way their politics lean. Are there exceptions? For sure, but most Trump supporters would look back at the last 3 years and see reason for optimism, and have a basis for doing so. Most anti-Trumpers see disaster ahead, and I am convinced that some powerful dems in congress are trying to help it along. NOT all but some.

As for me, I'm not sure what to expect. I am at the age where most of my money is very safe. I saw what happened in 08 and knew that if it happened again, I would not have time to by low and recover.

I happen to think that the economy is best when unemployment is low. Jmo

I did however pick a stock called Church & Dwight. I was hoping it would tank and I planned to invest just a few thousand. They own Trojan Condoms, and I figured that many women would be telling us to get our corona asses off of and away from them. Then, when the smoke clears I figured it would be wild times again and everyone would buy condoms. It turns out that they also own Arm & Hammer Detergent, Oxy Clean, and other cleaning products. They even pay a dividend. The stock didn't go down with the rest of them so I stayed home.

Good luck to all and don't panic.

 

 

Per the bold, this! Demand side is and always has been the key to the economic engine and that demand is driven by employed people with paychecks to spend on on the goods and services produced. 
 

As to the aspect of some on the left wanting to see failure, that would go against their own self interests as well. Nobody wants failure. But pragmatism is called for and that means honest assessment so that people can make plans accordingly. Kevin Hassett is the most conservative economist I can think of as well as senior adviser to the administration, and when guys like him forecast a 20-30 percent contraction in GDP in the 2nd quarter, it speaks volumes. 

[Bill from NYC]

8 minutes ago, K-9 said:

Per the bold, this! Demand side is and always has been the key to the economic engine and that demand is driven by employed people with paychecks to spend on on the goods and services produced. 
 

As to the aspect of some on the left wanting to see failure, that would go against their own self interests as well. Nobody wants failure. But pragmatism is called for and that means honest assessment so that people can make plans accordingly. Kevin Hassett is the most conservative economist I can think of as well as senior adviser to the administration, and when guys like him forecast a 20-30 percent contraction in GDP in the 2nd quarter, it speaks volumes. 

I think that some would crave a total collapse if it meant them gaining, or staying in power. And sincere thanks for recognizing the fact that I said "SOME." I don't want this to get ridiculous.

[bbb]

53 minutes ago, Bill from NYC said:

I did however pick a stock called Church & Dwight. I was hoping it would tank and I planned to invest just a few thousand. They own Trojan Condoms, and I figured that many women would be telling us to get our corona asses off of and away from them.

 

Ah, the famous Trojan investment method.  Taught in all your top level MBA programs.  

[Jauronimo]

2 hours ago, PromoTheRobot said:

 

Really, no. So why is it held up as a barometer of economic health?

Its one indicator, although I would say not a great one due to the effects of the FANG stocks on overall market performance. 

 

The reason its so often pointed to as a proxy for economic health is because its easy and its relevant to nearly everyone.  Data is updated about 253 times a year and about 55% to 60% of Americans own stocks directly or indirectly.  GDP data comes out annually, semi-annually or quarterly (and is always subject to significant revisions months later) and most American's do not follow GDP trends.

 

"The stock market went up 25% over my first term in office" sounds a lot better than "GDP growth in 2019 was 2.1% and just shy of our initial estimate of 2.3%".

[plenzmd1]

1 hour ago, bbb said:

 

Ah, the famous Trojan investment method.  Taught in all your top level MBA programs.  

well, i heard this ad on PMT..prolly  not many single guys in this particular thread..but at Trojan has our well being at heart

 

https://www.campaignlive.com/article/ad-week-trojan-condoms-showers-us-love-toys-so-dont-text-ex/1679664

Edited April 28, 2020 by plenzmd1

[Just Joshin']

13 hours ago, Buffalo716 said:

Any recommendations for a rookie? I know football not the stock market

IMO opinion there is no magic bullet - people will talk up their winners and ignore their losers.  Football and investing have many parallels - find them and you can enjoy both.

 

Assuming your runway is more than a few years the time tested strategies are:

1.  Maintain a low personal debt.  if making payments, not saving/investing.

2.  Have a raining day fund to hand emergencies so you do not need to cash in investments and potentially take a loss.

3.  Understand why you are investing and the time frame your $ would be required.  Is it college for kids, retirement, etc?

4.  Set aside a % to invest on a continual basis.  This is dollar cost averaging.  This may be with a work 401k or outside work but set a plan and execute.  In short, spend less than you make.

5.  Max out your 401k to the amount matched - free money.

6.  Max out your 401k to the yearly max if able.  This is 26k if over 50, 19.5k(I think - verify) if under 50.  This reduces your taxable income and the hit feels less.

7.  If you get a bonus, tax refund, etc invest it (spread it out to dollar cost average unless small) vs spending it.  This will boost your savings engine.

8.  Don't time the market.  You rarely win.  A person I work with took it all out when it was low recently and missed the increase.  A losers bet.  Yes a few will win, most will lose.

9.  Invest in individual stocks only if you are familiar with the company.  But always look at the financials - the internet has made it easy to see the key metrics of a company.

10.  Do not buy because family, friends, co-workers suggest.  They are most likely wrong and it will create hard feelings.

11.  Invest in low cost index funds that track the market or a specific index.  Most funds will not consistently beat the market so why try.  Low fees will let you keep more of your money.  Always understand the cost structure and commissions.

12.  Be diverse to manage risk.  Depending on your age you will have a mix of equities (stocks) and securities (bonds).  Within these areas also be diverse.  Within stocks have large, mid and small caps.  Have growth and value stock.  Have international and domestic.  Within bonds have short, medium and long term.  Have high quality and even a few junk bonds.  Have international and domestic

13.  Buy and hold.  If you churn you will pays commissions and have a taxable event potentially.  Time sales to take advantage of capital gains rules.

12.  You don't go broke making a profit.  Don't try to ring every penny put of an investment - take your wins.

14.  Check your balances once/twice a year.  More you check, the more you will want to make changes.

15.  You do not need expensive people to help you.  With a bit of reading, you will know most of what they know.  In essence, pay yourself.

 

A few books on investing will get you the basics.  I suggest starting with John Bogle then expanding.  Websites may be a resource but what are their agendas.

 

So the above is one person's opinion and these strategies have worked for me.  They may or may not work for you based on your time frames, risk tolerance and investment goals. This is a multiyear journey so start as soon and as young as possible to enjoy the benefits of compounding.

 

Good luck @Buffalo716.

[K-9]

1 hour ago, Jauronimo said:

Its one indicator, although I would say not a great one due to the effects of the FANG stocks on overall market performance. 

 

The reason its so often pointed to as a proxy for economic health is because its easy and its relevant to nearly everyone.  Data is updated about 253 times a year and about 55% to 60% of Americans own stocks directly or indirectly.  GDP data comes out annually, semi-annually or quarterly (and is always subject to significant revisions months later) and most American's do not follow GDP trends.

 

"The stock market went up 25% over my first term in office" sounds a lot better than "GDP growth in 2019 was 2.1% and just shy of our initial estimate of 2.3%".

What sounds better and what is a better indicator of how the economy is doing are two vastly different things. Right now, Wall Street is not a a very good indicator as it’s current performance is largely predicated on the huge influx of liquidity to their banks, hundreds of billions more to industries, and certain maneuvers by the Fed to keep propped up. Meanwhile, the economy is kicking Main Street in the teeth. Two vastly different stories. 

[GoBills808]

31 minutes ago, K-9 said:

What sounds better and what is a better indicator of how the economy is doing are two vastly different things. Right now, Wall Street is not a a very good indicator as it’s current performance is largely predicated on the huge influx of liquidity to their banks, hundreds of billions more to industries, and certain maneuvers by the Fed to keep propped up. Meanwhile, the economy is kicking Main Street in the teeth. Two vastly different stories. 

Low unemployment plus flat nominal wage growth is not good for the middle class no matter what corporate America says.

[bbb]

Just now, GoBills808 said:

Low unemployment plus flat nominal wage growth is not good for the middle class no matter what corporate America says.

 

Why would low unemployment be bad?  

[GoBills808]

Just now, bbb said:

 

Why would low unemployment be bad?  

Read again- low unemployment PLUS flat nominal wages are bad. 3.5% unemployment would usually trigger raising the interest rate to compensate for wage inflation: the Fed hasn't come close to matching. It's simply more cheap fuel for an already inefficient economy as shown by the crash.

 

Healthy economies don't lose 33% of their value in four days.

[K-9]

5 minutes ago, GoBills808 said:

Low unemployment plus flat nominal wage growth is not good for the middle class no matter what corporate America says.

I’m just confining the discussion to what best indicates the health of our economy, the stock market or GDP. 

[GoBills808]

2 minutes ago, K-9 said:

I’m just confining the discussion to what best indicates the health of our economy, the stock market or GDP. 

I don't think you can discuss the economy without touching on labor statistics. 

[K-9]

2 minutes ago, GoBills808 said:

I don't think you can discuss the economy without touching on labor statistics. 

You can when you deliberately want to confine the discussion to one basic question: what is a better indicator of how the economy is doing: the stock market or GDP? 
 

I’m not downplaying the importance of labor statistics as they certainly are part and parcel to the discussion, especially as those stats relate to GDP. My question includes them on a macro basis. I’m just keeping the question deliberately simple. 

[GoBills808]

8 minutes ago, K-9 said:

You can when you deliberately want to confine the discussion to one basic question: what is a better indicator of how the economy is doing: the stock market or GDP? 
 

I’m not downplaying the importance of labor statistics as they certainly are part and parcel to the discussion, especially as those stats relate to GDP. My question includes them on a macro basis. I’m just keeping the question deliberately simple. 

Then I guess I would say that I think 'the economy' is too broad a subject to be represented fairly by either securities exchange ratios or total good and services/year.