The Stock/Investment Thread

[Dreadnaught]

Indeedy. Though I was pleased to read a New Yorker profile about the origins of Etherium that seemed to indicate they were at least somewhat thinking beyond the short-term hustle and visions of post-government lolbertarianism to long-term applications of this stuff.

Meanwhile, I'm getting nervous about the municipal debt market again. Everyone freaked out about municipal borrowing after the financial crisis, but the sky didn't fall because rates were so damn low. As rates go up, I suspect this problem will surface again. Either way, rates going up promises broad-based asset class declines.

[GGT]

Why the hell didn't we pass a broad, national infrastructure bill when interest rates were below zero?

[wiggin]

So, it's been awhile since we've had baseless speculation on markets. I've been mildly entertained by the market's current meltdown - clearly no one was pricing in pandemic risks to global trade and they decided to freak out all at once. The news (and my inbox) has been full of 'don't sell all of your stocks right now!' stories but I'm more wondering when I should buy. I've been sitting on a growing pile of cash I've been saving for a downpayment (think low six figures) that I haven't been investing because I thought valuations were inflated and we were due for a big correction, if not an actual recession. I've been broadly pessimistic on the economy for some time given general malaise in other parts of the world and Trump's shenanigans with trade.

And yet, valuations are starting to get a bit more manageable now and I've been debating when to invest a smallish sum ($20k?). The big risk, of course, is that this whole thing tips the economy into a recession and valuations go into freefall. I'm getting tired of 2% yield on money that I'm frankly not going to be able to use for a couple years at least.

So, what do you all think? Are we headed to a complete meltdown, or is the correction nearly over and stocks will continue their stroll upwards until the business cycle ends naturally?

[Wraith]

The stock market loves to overreact, and this looks like a panic. While I'm expecting a bounce, there's a good chance this an early indicator of a shift in trends - I won't be surprised if we start seeing a gradual contraction even after this blows over. Whatever happens, now's probably a good time to start to DCA - make small buys regularly until you have reason to either pause it or accelerate it.

[Ominous Gamer]

clearly no one was pricing in pandemic risks to global trade and they decided to freak out all at once.

Imagine making a soup that was so bad you fucked over the global economy.

[GGT]

I'm old enough to remember the time when a savings account had a 6% yield. No "investment decision" required. Just park your money in the bank and watch it grow. Mortgage loans were more expensive, but homes were also more affordable. hmmm

[RandBlade]

I'm old enough to remember the time when a savings account had a 6% yield. No "investment decision" required. Just park your money in the bank and watch it grow. Mortgage loans were more expensive, but homes were also more affordable. hmmm

And what was the inflation rate?

[GGT]

If you like graphs about home prices and inflation: https://dqydj.com/historical-home-prices/

I haven't found a source that compiles all the data in a comprehensive and contextual way (costs of living, average wages, median home prices, healthcare or education costs, plus tax liabilities, etc.)

I was just remembering the time when parking money in a savings account could accrue compounded interest, and that was just as good as "investing" in stocks, bonds, mutual funds, or flipping real estate...but without the associated risks. Now we value spending and borrowing more than saving, and I think that's a bad new normal. /ok boomer

[RandBlade]

We're due a global recession, its been thirteen years already since the last one was triggered and this certainly could be the trigger.

But then it could be a good opportunity to buy. Best time to buy is after a crash and I think the market is overreacting to this - but then I think the American healthcare system is underreacting as I posted on the thread on the other forum - so I think this infection will before long cease to be a Chinese problem and will be a global one.

If it wasn't probably already valued to high already I think a big winner/opportunity from this could be Tesla. Tesla has fallen much more than the market due to it having invested heavily in China - but Shanghai is nowhere near Wuhan and the Chinese are uniquely draconian and authoritarian enough to implement successful quarantines. The WHO seem to be confirming that the Chinese quarantine is working and that the risks outside of China are now greater than the risks in China ex-Hubei province. I think Tesla's production capabilities will be back up and running before long, plus if there's a big market disruption then Tesla have two big advantages. Firstly they've got invested heavily in their own technology and supply chain so a disruption could affect them less - plus a big market disruption will help prevent other competitors from catching up with their superior technology. If they can continue to ramp up production they could get a substantial advantage here in the market.

[Loki]

The market was overpriced, so a correction was inevitable. This just happened to be the proximate cause. Having said that, we're all but certain to face two events that could spook the market further: the virus hitting the US (even if it's only a few hundred cases), especially if some of the cases can't be traced to China, S. Korea, or N. Italy, and Sanders winning a number of primaries. I was tempted to buy this week, but I think I'm going to hold off at least until next Wednesday (due to Super Tuesday).

[Aimless]

I have started an occult ritual that will ensure the imminent devaluation of Wraithy's portfolio, in revenge.

[Dreadnaught]

I did a little buying this week in my IRA (mainly because I had a lot of cash in my IRA from a past rollover). Beyond that, not changing my strategy too much because I think the truth is somewhere between all of you: prices were high, a correction was due and my big question is how does this impact actual economic growth.

I think there's a chance this will be mostly old news in 60-90 days, but could be the opposite. Certainly my project in Asia is on pause, but there's plenty of other trees to water.

Speaking of which, gotta hoard non-perishable foods, toiletpaper, pepper spray and other weapons.

[wiggin]

The more I think about this, the more I figure people are going to drive prices down more for a while. The reality is that there's going to be bad covid-19 news for a very long time, and it's going to be awhile before markets learn to shrug it off. Coupled with other secular headwinds I'm not sure I see a sustained recovery for a while, except for the occasional 'buying the dip' rally. I'm going to wait a bit but might do a bit of DCA as Wraithy suggested. In reality, my timeframe for this money isn't all that long - probably only 2-3 years - so I'm less concerned about cyclical factors than I am about idiosyncratic ones. We'll have to see.

[wiggin]

The stock market loves to overreact, and this looks like a panic. While I'm expecting a bounce, there's a good chance this an early indicator of a shift in trends - I won't be surprised if we start seeing a gradual contraction even after this blows over. Whatever happens, now's probably a good time to start to DCA - make small buys regularly until you have reason to either pause it or accelerate it.

The more I think about this, the more I figure people are going to drive prices down more for a while. The reality is that there's going to be bad covid-19 news for a very long time, and it's going to be awhile before markets learn to shrug it off. Coupled with other secular headwinds I'm not sure I see a sustained recovery for a while, except for the occasional 'buying the dip' rally. I'm going to wait a bit but might do a bit of DCA as Wraithy suggested. In reality, my timeframe for this money isn't all that long - probably only 2-3 years - so I'm less concerned about cyclical factors than I am about idiosyncratic ones. We'll have to see.

I've gotten a lot more bearish since two weeks ago. I think the panic over covid-19 is probably a bit exaggerated, but I'm starting to agree with Loki's contention in the other thread that this is going to tip the economy into a recession. I've been looking at my own industry and I'm starting to see real strain on supply chains and timelines are completely going out the window with various semi-mandatory shutdowns. My specific company is relatively insulated from things because we're still in R&D stage, but even we are probably going to lose a few months of productivity out of this. A big company is going to lose a hell of a lot more.

It's also very clear from more 'soft' metrics that economic activity is plummeting. Traffic in Boston has suddenly become bearable, and ridership is down on various forms of public transit. Retail and entertainment demand has more or less disappeared overnight except for purchases of staples (not sure yet what's going to happen with online shopping but I'm not convinced it will compensate for bricks and mortar losses). Intercity travel has ground to a halt; pretty much everyone I know has put off travel plans in the next quarter, with all of the attendant knock-on effects.

And we're just getting started with community spread in the US.

The reality is that a lot of people are going to be unpaid/unemployed soon, school/etc. closings are going to have knock on effects for workers even if they can WFH, and a whole bunch of consumer spending is essentially being put on hold. I think a recession is now quite likely (though perhaps a smallish one if spring/summer slows the disease spread) and a period of sustained weakness given other issues with fundamentals that were already causing strain.

I might still toss a couple of bucks into the market but I'm not convinced we've found anything like a bottom. Even with all of the recent drops, it's still only trading around a level that was last seen a bit over 2 years ago. With next to no earnings growth forecast for this year, I would be surprised if the valuations look all that good right now.

[Wraith]

Yeah, the weekend usually cools heads, but the bounce I was expecting on Monday might not be as big or as real as I thought at the time of my last post. The covid-19 thing is progressing a bit faster than I expected, and anecdotal evidence is that people are starting to panic. I don't get a lot of chances to see circumstances like these, so there's a lot more unknowns here than I'm used to.

[GGT]

https://www.usinflationcalculator.co...flation-rates/

[RandBlade]

https://www.usinflationcalculator.co...flation-rates/

That's not so meaningful when you aren't saying when the account had a 6% yield. If you're talking eg 1990 when inflation was 6% then that doesn't mean very much.

[GGT]

I was remembering the 70's and 80's. Yes we had high inflation during that time, and a home mortgage could have an interest rate as high as 18%, depending on the location and RE market. But the credit market was totally different then: *before debt was securitized and monetized with "newly created financial tools": college students weren't going broke paying their student loans, and sick people weren't filing medical bankruptcy claims *and home foreclosures weren't routinely destroying entire communities*. Savers could still stash cash in the bank and not feel like they were "losing" money.

Also, new monetary policy (going off the gold standard) and Volcker as fed chair, raising interest rates to curb inflation. Granted, I didn't follow it then like I do now, because I was still in HS and college. But it's still true that SAVERS are the biggest losers in the new economy. Whether it's from monetary or fiscal policy, or both.

[RandBlade]

I was remembering the 70's and 80's. Yes we had high inflation during that time, and a home mortgage could have an interest rate as high as 18%, depending on the location and RE market. But the credit market was totally different then: *before debt was securitized and monetized with "newly created financial tools": college students weren't going broke paying their student loans, and sick people weren't filing medical bankruptcy claims *and home foreclosures weren't routinely destroying entire communities*. Savers could still stash cash in the bank and not feel like they were "losing" money.

Also, new monetary policy (going off the gold standard) and Volcker as fed chair, raising interest rates to curb inflation. Granted, I didn't follow it then like I do now, because I was still in HS and college. But it's still true that SAVERS are the biggest losers in the new economy. Whether it's from monetary or fiscal policy, or both.

6% savings rate and 10% inflation rate is not a good way to make money.

[GGT]

6% savings rate and 10% inflation rate is not a good way to make money.

Doesn't that depend on what you mean by "inflation" and how it's calculated? Here's an example:

We have low inflation now...but my (PA) property taxes more than doubled b/w 2002 and 2017; in some areas that rate was even higher because "value assessments" hadn't been done in decades/generations, and/or the new tax rate algorithms changed to higher RE market valuations (not the price paid when the property last changed hands). That was a real problem during the housing bubble and bust.

Most of our funding for public schools comes from local property taxes, so the quality of a K-12 education depends on home values, aka Education by Zip Code.

PA in-state tuition at a state college runs around $22,000/yr. Median PA household income was just shy of $60,000/yr in 2018. As a percentage of income that's too expensive for most families to "save for", and since grants and scholarships have also been cut, they get student loans. Loans they struggle to pay, with fines and penalties that compound over time, with eventual defaults that ruin their credit score. Now they're considered and "employment risk", and might even have a hard time renting an apartment, because Credit Scores are used for everything now.

That's just education, don't forget about the "inflation" in US healthcare and prescription drug costs that eat up another 25-30% of average wages/income....and lead to medical bankruptcies.

[GGT]

This might look like a tangent, but if we're talking about wealth and asset allocation....I think a big, structural mistake was made when we decided "home ownership" was a cornerstone of American prosperity, and put more emphasis on that before Education, Healthcare, or even wages.

It's crazy that we continue to let lobbyists and corporate bankers dictate policy to legislators (the political class that relies on lobbyists and bankers). It puts the cart before the horse AND lets the fox guard the hen house. WTF will it take to break this vicious cycle?

[Hazir]

First and foremost; it takes the chicken to admit they are poultry.

[Loki]

Testing a short-term strategy: if the US markets start a day down for coronavirus-related reasons, I look at Asian markets. There's no reason why the US markets should fall more. Working today at least.

Edit: well so much for that.

Edit2: worked out in the end.

[RandBlade]

Market's suspended in America as soon as they opened so dramatic was the fall.

[GGT]

[GGT]

Single biggest drop in the Dow in history.

"Fundamentals" are shit. This isn't like the financial crisis of '08, but it's still shitty. The irony is that institutional investors and day traders are selling stock and moving to cash because it's "safe".

[Aimless]

Which index funds to buy, and when?

[Dreadnaught]

I find the bond market liquidity issues sorta concerning. Almost like there's been a multi-year a bubble in bond prices, which could collapse as people realize government finances are impacted by this stuff and funds are forced to sell to make cash.

Overall, my intention is to stick with the automatic investing plan and thank Allah for my emergency fund. But I do have a renovation that I'm questioning; though I could potentially finance it at very low rates if needed.

[Wraith]

I was buying for a little while, but I sold off on the bounce at the end of last week. With several states now doing state-wide bans of a bunch of businesses, the economic damage of this virus is likely to be pretty severe, especially as it continues to spread (we doubled the number of US cases over the weekend) and it's likely that more states will follow suit. I'm not optimistic about the economy at this point, and we're going to be dealing with the repercussions of this for a while. On the plus side, Trumps re-election just got less likely.

[Aimless]

Keep cash on hand for investments, spend 90% on index funds by the end of the year or before next spring if you still have the money and things look to be stabilizing.