The Stock/Investment Thread

But wiggin has been wrong in his predictions. Just as others in the financial world relying on "conventional wisdom" were quite wrong. This wasn't supposed to be a big deal, it was just a temporary blip, markets wouldn't be effected because banks were well capitalized and money/credit was still flowing etc, but now it's a big fucking global mess.

IMO it's a mistake to focus on deaths, or compare it to a 1918 pandemic. That's apples to oranges. The real problem is that no healthcare system can deal with a *novel* virus in the era of modern medicine, AND that healthcare is a leading for-profit industry led by the US.

Imagine what the world would look like if Salk had trademarked and monetized the Polio vaccine, with help from Big Pharma, benefiting investors and shareholders. Be careful what you take for granted....

The market is truly ridiculous now. The ETF I usually go for is only 11% from its all-time high. I decided to short it. I've never done that before, but these are lunatic prices.

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Originally Posted by Loki

The market is truly ridiculous now. The ETF I usually go for is only 11% from its all-time high. I decided to short it. I've never done that before, but these are lunatic prices.

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"FREE" money arranged by the FED means businesses don't need to borrow from us anymore. Wall Street either. CDs at 0.25% kind of force anyone looking for a return to the stock market. Of course that is the FED's intent. I'm not going for it though. If it isn't FDIC insured I won't touch it until S&P is around 1800. I don't need big returns (or even moderate returns), I need no loss. Any return is a bonus for me.

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Originally Posted by Loki

The market is truly ridiculous now. The ETF I usually go for is only 11% from its all-time high. I decided to short it. I've never done that before, but these are lunatic prices.

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I'd been worried I hadn't sold enough before, but I've been happy to have the option to correct that. I think it's just that it's starting to look like we're turning the corner on Covid-19, and as always, the market is overreacting. This is not actually going to be a smooth recovery though.

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Originally Posted by Wraith

I'd been worried I hadn't sold enough before, but I've been happy to have the option to correct that. I think it's just that it's starting to look like we're turning the corner on Covid-19, and as always, the market is overreacting. This is not actually going to be a smooth recovery though.

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We have depression-level unemployment. Sure, it won't stay at this level, but it won't be 3.5% either. The market should be down a solid 30% (normal recession levels). The fact it's not is mind-boggling. It completely shrugs off all economic news. None of the jobless claims reports had any impact. It went up when Q1 GDP fell more than projected. I wonder if there are a lot of white collar workers sitting at home right now with nothing better to do than to day trade. At some point, they'll go back to work, and with them goes the demand for stocks.

I made 4% in one day on that short by the way. Got rid of the position. Holding anything long-term right now is lunacy.

I share your concerns about valuations right now, they seem dramatically out of step with reality. I think the real risk to the economy is not a few weeks more or less of economic shutdown now, but the potential for long term periodic shutdowns and restrictions on social gatherings. I think that it's more than likely to happen for at least a year, and that means that there are a bunch of jobs that won't come back any time soon. The knock on effects are likely to be substantial.

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Originally Posted by wiggin

I share your concerns about valuations right now, they seem dramatically out of step with reality. I think the real risk to the economy is not a few weeks more or less of economic shutdown now, but the potential for long term periodic shutdowns and restrictions on social gatherings. I think that it's more than likely to happen for at least a year, and that means that there are a bunch of jobs that won't come back any time soon. The knock on effects are likely to be substantial.

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I just don't get how the market could be doing this well when entire sectors of the economy are going to be in crisis mode for years (airlines, entertainment venues, restaurants, oil companies, even hospitals who'll constantly have to cut back on elective procedures). I understand market overreactions and underreactions. What I don't understand is no reaction in the face of remarkably bad news. If the coronavirus magically disappeared tomorrow, it would still take a year or longer for things go to back to normal economy-wise.

I think there's a lot of factors, some psychological, some technical. Part of it is wishful thinking based on the very scanty data available. Part is people buying a transient dip. I'm actually kinda partial to the idea that price discovery is fundamentally broken for most of the market because we're in completely uncharted waters and no one really has an answer for how much, say, an airline should be worth today. There's so many unknowns that people are paralyzed, and instead reacting to the daily news cycle rather than an analysis of fundamentals.

I frankly don't know what equities will do, and I don't think anyone else really does until we start to see how employment and certain sectors start to respond after things start to open up. This is going to be a long and complex process with a lot of ups and downs, and for now the data and models are inadequate to provide meaningful direction for markets.

My default expectation is a 30% fall due to a recession. You can add or subtract from that based on how quickly you think we'll recover from the coronavirus, but the current market valuation is based on the premise that unemployment will be 4-5% and GDP will be back to normal by Q4.

The market almost always over-corrects. It went down farther and faster than it should have with the virus, and now that there's some good news and economic stimulus, it's gone up farther and faster than it should have with the help of some FOMO. Give it time, reality will sink in, and it'll get to where it should be after oscillating around it a bit more.

That said, I think "where it should be" is going to be riding a downward slope for a while.

I'm curious to see my day trader hypothesis confirmed (or not). Should be interesting what happens the most populous states end their lockdowns.

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Originally Posted by Loki

I'm curious to see my day trader hypothesis confirmed (or not). Should be interesting what happens the most populous states end their lockdowns.

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I'm not convinced. Most of the money is institutional; it's possible that they're just sitting on their hands and all of the volume we're seeing is mom-and-pop, but I doubt it. Also, the investors who have the most money are probably still working, albeit often from home.

It's entirely believable that smarter money isn't appropriately valuing things. It's happened quite frequently.

It doesn't matter where most money comes from. A spike in quantity demanded should lead to a spike in price. And I keep reading stories about billions of new money being recently added to major ETFs.

I recall reading that small-time investors were responsible for much of the sharp fall in March.

P.S. Could have doubled profit on the short sale if I held on to it until today :o
PPS. Tripled. :(

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Originally Posted by Loki

I just don't get how the market could be doing this well when entire sectors of the economy are going to be in crisis mode for years (airlines, entertainment venues, restaurants, oil companies, even hospitals who'll constantly have to cut back on elective procedures). I understand market overreactions and underreactions. What I don't understand is no reaction in the face of remarkably bad news. If the coronavirus magically disappeared tomorrow, it would still take a year or longer for things go to back to normal economy-wise.

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The stock market is not a reflection of the real economy!

It's basically legalized gambling, with the Big Money players influencing the Treasury, the Federal Reserve, and policy makers. Everyone is "all in" since state and union pensions got in the game. Since no one wants to lose, the "risk analysis" is skewed toward the biggest players -- Big Banks, Investment firms, Institutional investors, even HFT and hedge funds who can literally make "the market" go up or down.

It's not really about being risk-averse, or finding value, or preserving money for the future -- that Old School investing died when savings accounts became obsolete. Now it's about manipulating, extracting, and exploiting money. Using money to make money with CDO's and derivatives. When the tide goes out....and it always will....only the Big Boys are still wearing their swim trunks. :bored:

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Originally Posted by Loki

P.S. Could have doubled profit on the short sale if I held on to it until today :o

PPS. Tripled. :(

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Don't try to "time" the market or act like a Day Trader. And remember you'll have to pay the capital gains tax, so deduct that from your profits, too. :(

Warren Buffett says Berkshire Hathaway sold its entire position in airlines because of the coronavirus.

Warren Buffett vows that US will recover from coronavirus.

:weird:

How do company valuations increase in this current environment. Stock Market is broken. Deaf, dumb and blind.

Oh yeah, don't forget that the Fed giving free loans to Wall Street means they don't need to borrow from savers anymore. Might as well stuff my mattress some more.

FAKE!!

S&P Up Again for no Apparent Good Reason

I ended up selling most of the ETFs that I purchased earlier this year when the market was bottoming out. I made a fair profit on them, but I don't have the confidence in the economy for the near future that others seem to have.

The unwarranted economic optimism seems to be linked to the reopenings that are gradually happening. I think there's probably going to be a sharp plunge at some point in the next few months when the economy fails to magically recover completely.

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Originally Posted by Wraith

The unwarranted economic optimism seems to be linked to the reopenings that are gradually happening. I think there's probably going to be a sharp plunge at some point in the next few months when the economy fails to magically recover completely.

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The market right now looks more and more like the pre-collapse bitcoin stock. People are buying on the assumption they can make a few bucks before selling.

Go long on guillotine futures.

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Originally Posted by Loki

The market right now looks more and more like the pre-collapse bitcoin stock. People are buying on the assumption they can make a few bucks before selling.

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Honestly I don't know what to make of things. I still think normal price discovery mechanisms are broken so people are reacting to rumors, the latest news cycle, and wishful thinking. That being said, I'm not convinced that even extended periods of high unemployment and limited economic activity after most states reopen will cause markets to reassess things. As long as price discovery is up in the air, we're hostage to the wisdom of the street.

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Originally Posted by wiggin

Honestly I don't know what to make of things. I still think normal price discovery mechanisms are broken so people are reacting to rumors, the latest news cycle, and wishful thinking. That being said, I'm not convinced that even extended periods of high unemployment and limited economic activity after most states reopen will cause markets to reassess things. As long as price discovery is up in the air, we're hostage to the wisdom of the street.

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There was a day when some company claimed it was close to getting a vaccine. The market surged upward. A few days later, it turned out it wasn't very far along. Nothing happened. Some mildly positive economic news today. The market goes up. Terrible economic news every Thursday. The market goes up. Usually speculation overshoots price, but does go in the right direction. We have speculation going in the wrong direction. It really makes no sense.

More economic bad news, the market starts slightly down, so of course a ton of idiots are buying.

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Originally Posted by wiggin

... we're hostage to the wisdom of the street.

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Wisdom is a bitch calling out in the street.

edit: forgot to supply a reference, Proverbs

BLS makes a major error, suggesting the unemployment rate went down when it actually went up. Stocks go up. BLS admits to the error. Stock futures go up. What is wrong with people?

Loki, if you're talking about the misclassification error, it was a known problem for several months. The April report, corrected, still looks worse than the May report with corrections.

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Originally Posted by Wraith

The unwarranted economic optimism seems to be linked to the reopenings that are gradually happening. I think there's probably going to be a sharp plunge at some point in the next few months when the economy fails to magically recover completely.

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Probably. Though I'm more prepared for things just going sideways for a while -- as they probably should. Did a lot of scheduled buying from February to March. Mostly paused and will just sit for a while, as this is all long-term investments.