Stock Market Resiliency

[Back2Buff]

This will be a long decline, with small upticks but a general downturn.

 

The true cost of this pandemic is nowhere near calculated yet.   Most Q1 reports are not even out yet, and Q2 will probably end up being worse.  The average American has completely changed their habits.  Companies will have way less money to work with.

 

Not to mention, who knows what will happen with this election.  I can't wait to see my future tax rates.

[K-9]

2 minutes ago, GoBills808 said:

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.

Fair enough. I get that we have to resist the urge to delve deep into a very heady subject. But in the absence of a more nuanced discussion I’m just asking what gives a better snapshot? It has to be GDP simply because of its dependence on Main Street metrics like unemployment rate, etc. Whereas we’ve seen time and again how Wall Street can be propped up with liquidity and fed reserve machinations, regardless of the employment numbers. Like what we’ve seen since the stimulus package. 

[ICanSleepWhenI'mDead]

On 4/27/2020 at 10:24 PM, Buffalo716 said:

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

If you consider hiring a financial advisor rather than doing your own stock market research, be sure to ask him/her where they keep the customer's yachts.

[Greybeard]

15 hours ago, K-9 said:

Fair enough. I get that we have to resist the urge to delve deep into a very heady subject. But in the absence of a more nuanced discussion I’m just asking what gives a better snapshot? It has to be GDP simply because of its dependence on Main Street metrics like unemployment rate, etc. Whereas we’ve seen time and again how Wall Street can be propped up with liquidity and fed reserve machinations, regardless of the employment numbers. Like what we’ve seen since the stimulus package. 

 

                 Since this is in part a GDP discussion, I thought I would introduce data from ShadowStats.  The link below is for their inflation numbers.  Quite different than the government.  The are plenty of reasons to understate inflation.  The Chinese aren't the only ones who fudge data.  There are things counted in the GDP that I find hard to believe have anything to do with real GDP but they do make the number look better.

             Take a look at the inflation data at the link below.  Note that under the "alternate data" tab are other indicators which they track versus government numbers.  It is very interesting.

 

           http://www.shadowstats.com/alternate_data/inflation-charts

[plenzmd1]

Dow up close to 500 in futures

[Niagara Bill]

22 hours ago, Jauronimo said:

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. 

being over cooked is an example of the baby MBA algorithms that controll the market. Nobody invests based on long term strategy and success, these nerds have short term vision like a video game.

The need for correction is true. In the end inverters have been trained to follow the algorithm not sage advise on companies.

Your position is well thought out.

 

[JohnC]

On 4/28/2020 at 12:24 AM, Buffalo716 said:

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

The best way for a novice (or any market investor) to get involved in the market is to take a long term view. The best approach is to monthly invest a set amount so when the market price is up you get so many shares and when it is down you get even more shares for the dollar. What I did is that I invested in an index fund (a conservative approach) and stayed consistent with it for years. The advantage of an index fund is that you are diversified which gives you more cushion if a sector or particular stock takes an unexpected fall. This conservative and unglamorous approach has worked out well for me. 

 

There are people who try to time the market. It doesn't always work because there are so many unpredictable factors. If you are a consistent investor and stick with it for the long haul it should work out. 

[bbb]

What is a good way to diversify OUT of the stock market.  I have way too much tied up in the stock market for somebody who would hope to retire in the next 5 years, give or take.

 

But, I don't know what else to put it into to balance things out.  CDs and savings bonds seem have to horrible rates.............I don't know crap about real estate.  But, wondering if REITs are a way to get into that?  

[BringBackFergy]

Question of the day (given the S&P and DJIA right now): Am I a pig or a hog?

[Augie]

5 minutes ago, BringBackFergy said:

Question of the day (given the S&P and DJIA right now): Am I a pig or a hog?

 

Don’t sell yourself short. YOU, sir, can be some of both! 

 

Great.........now I want bacon. 

[Jauronimo]

1 hour ago, Niagara Bill said:

being over cooked is an example of the baby MBA algorithms that controll the market. Nobody invests based on long term strategy and success, these nerds have short term vision like a video game.

The need for correction is true. In the end inverters have been trained to follow the algorithm not sage advise on companies.

Your position is well thought out.

 

Markets have gotten over heated well before MBAs and algo trading.  Most institutional investors are getting judged on performance quarterly and annually so the incentive is there to hit your numbers short term.  Longer term strategies are more common in the VC, PE, and hedge fund space which is off limits for the average investor since you need to have considerable net worth.

  

I think the market cycles are only going to get more dramatic since more than half of the money in the game is now passively traded by way of ETFs.  Much of the trading activity is not informed investors setting the price of an equity but ETFs re-balancing to mimic the performance of another asset, commodity, or index. Also, we have central banks propping up equity markets.  Many investors have felt the market has been overheated and growing despite suspect fundamentals for years but sitting on the sidelines you would have missed out on a 30% run.  So I guess you just keep playing, see how far the market can run, and have your plan for when the music stops.

[Bill from NYC]

4 minutes ago, bbb said:

What is a good way to diversify OUT of the stock market.  I have way too much tied up in the stock market for somebody who would hope to retire in the next 5 years, give or take.

 

But, I don't know what else to put it into to balance things out.  CDs and savings bonds seem have to horrible rates.............I don't know crap about real estate.  But, wondering if REITs are a way to get into that?  

Real estate confuses me now. We have been looking in NC for a while now. I called our broker and she said that she does NOT expect a sharp decrease, and I was very surprised to hear this. If people have no jobs, how will they buy houses? She even thinks that the market will hold steady, and I cannot see how.

I would love to know how others view the real estate market for now and the next few years.

[GoBills808]

9 minutes ago, Jauronimo said:

Markets have gotten over heated well before MBAs and algo trading.  Most institutional investors are getting judged on performance quarterly and annually so the incentive is there to hit your numbers short term.  Longer term strategies are more common in the VC, PE, and hedge fund space which is off limits for the average investor since you need to have considerable net worth.

  

I think the market cycles are only going to get more dramatic since more than half of the money in the game is now passively traded by way of ETFs.  Much of the trading activity is not informed investors setting the price of an equity but ETFs re-balancing to mimic the performance of another asset, commodity, or index. Also, we have central banks propping up equity markets.  Many investors have felt the market has been overheated and growing despite suspect fundamentals for years but sitting on the sidelines you would have missed out on a 30% run.  So I guess you just keep playing, see how far the market can run, and have your plan for when the music stops.

Re: your last sentence- is there any worry that this type of investing mindset simply compresses the natural boom/bust cycle and that such a yo-yo economy can only really inure to the benefit of the finance industry?

[Jauronimo]

19 minutes ago, Bill from NYC said:

Real estate confuses me now. We have been looking in NC for a while now. I called our broker and she said that she does NOT expect a sharp decrease, and I was very surprised to hear this. If people have no jobs, how will they buy houses? She even thinks that the market will hold steady, and I cannot see how.

I would love to know how others view the real estate market for now and the next few years.

In bigger cities and more developed areas, housing is less of a basic necessity and more of an asset class.  Real estate trends do not follow the domestic economy as closely anymore thanks to Chinese investment and Blackstone buying single family houses.  Nothing would surprise me depending on the market. 

 

I am in Houston and while I would think the layoffs and the plummet in oil prices would lead to a soft housing market everything I have heard is that fairly priced homes in attractive markets are being scooped up by those with deep pockets. I have no clue either.

 

(Unrelated rant)  I never get tired of getting lectured by older generations who bought houses in cash on 3 months savings from an unskilled labor position despite having a family of 10 and being the sole bread winner.  Maybe if the youngins stopped eating avocado toast they could all afford an $800k starter home?

Edited April 29, 2020 by Jauronimo

[bbb]

20 minutes ago, Bill from NYC said:

Real estate confuses me now. We have been looking in NC for a while now. I called our broker and she said that she does NOT expect a sharp decrease, and I was very surprised to hear this. If people have no jobs, how will they buy houses? She even thinks that the market will hold steady, and I cannot see how.

I would love to know how others view the real estate market for now and the next few years.

 

I would think the exact same thing as you.  I would think the broker always wants to paint as rosy a picture as possible.

 

Does anybody know how real estate prices have done in the last few months?  

[Bill from NYC]

Four years ago I was looking at a townhouse in a beautiful suburban community in NC. They were asking 249K. Recently there was a similar one (but not as nice) on the same block and they were asking 289K. I don't know how much they got but it sold instantly. This was before Covid19.

 

I really like my agent. She sold townhomes to 2 of my friends. I even trust her to a large degree but it seems as if agents want to keep the prices higher for bigger commissions.  She said that people still want to retire down there which makes sense but like you; I can't see the prices not getting lower. I guess we will know soon enough.

 

PS: VERY bad time in NY for rental property.

 

 

 

[Bill from NYC]

16 minutes ago, Jauronimo said:

In bigger cities and more developed areas, housing is less of a basic necessity and more of an asset class.  Real estate trends do not follow the domestic economy as closely anymore thanks to Chinese investment and Blackstone buying single family houses.  Nothing would surprise me depending on the market. 

 

My son in-law is a prominent attorney and a very, very smart guy. He told me that Russian multi-millionaires bought up the Manhattan apartments for millions and were virtually unconcerned about prices. He say it is their way of hiding money from the Russian government.

 

I don't know at all if this is true but he swears by it.

[Jauronimo]

2 minutes ago, Bill from NYC said:

My son in-law is a prominent attorney and a very, very smart guy. He told me that Russian multi-millionaires bought up the Manhattan apartments for millions and were virtually unconcerned about prices. He say it is their way of hiding money from the Russian government.

 

I don't know at all if this is true but he swears by it.

The Chinese have been heavily investing in U.S. property for a long time.  They do not trust their own government.  The U.S. and UK have strong property laws making our markets attractive for foreign investors. 

 

I am sure this applies to wealthy people everywhere who fear their government.

 

https://www.cnbc.com/2019/07/17/foreign-purchases-of-american-homes-plunge-36percent-as-chinese-buyers-flee.html

 

https://www.forbes.com/sites/forbesrealestatecouncil/2020/03/17/slowdown-in-foreign-investment-in-u-s-real-estate-is-cause-for-concern/#1d35f99155dc

[BringBackFergy]

40 minutes ago, bbb said:

 

I would think the exact same thing as you.  I would think the broker always wants to paint as rosy a picture as possible.

 

Does anybody know how real estate prices have done in the last few months?  

Real estate has remained pretty stable in my area (rural). No clue how things are looking in Boston or San Fran (two of the biggest over-inflated real estate markets in the last ten years).

[KD in CA]

5 minutes ago, BringBackFergy said:

Real estate has remained pretty stable in my area (rural). No clue how things are looking in Boston or San Fran (two of the biggest over-inflated real estate markets in the last ten years).

 

The people who are losing their jobs are not the ones buying RE in Boston and SF so I don't see a huge market change, but the uncertainty and overall weirdness of the situation is definitely slowing deal flow right now.   Plus, mundane stuff like booking a moving van, plumber, home inspector, etc. is probably making things more difficult these days.