I’m doing what I always do every month. “Buy buy buy!” (Jim Cramer’s voice). I have no ability to time the market, so why bother? The only question is, do I buy more stocks, or more bitcoin? Do I use leverage, and how much?
Just out of curiosity, how many of your market timing models correctly predicted this downturn? None of mine did. We don’t exactly have a coronavirus indicator here.
My models where hedged 60-70% gold and bonds and just by dumb luck I liquidated yesterday because the vix was over 50 and gold and bond volatility was extremely high. Basically broke even YTD. When the vix drops below 20 I will get back in slowly. I will probably miss the big recovery but I am sleeping well. I think a good market timer will be the number of new cases reported starts to decrease. Right now they are growing exponentially world wide and there is no chance of volatility getting lower when countries are locking down. I’m happy to sit on the sidelines.
Already 2595 on the S&P futures. Down 5+%.
I think we’re now officially in a bear market, right? The S&P 500 made a high of 3,393.52 on February 19. Today it made a low of 2,707.22. That’s more than 20% from the high. The Dow Jones Industrials are down 20% too. Well, some news writers are only using closing prices, so maybe we have to wait for tomorrow’s close . . .
Yep bear market, classic bear pattern. I’m thinking this turns around when the US gets control of Coronavirus case growth meaning that exponential growth abates. Right now cases are going up 33% each day. My wife and I actually try to guess what it will be the next day. Sounds macabre, but we need to lighten the mood. Tomorrow she guessed 1768 in US and I calculated 1800. I do think this bear market will be shorter than expected just as the fall was quicker than expected. I think when it turns around you won’t have much time to get back in before recovery is priced back in.
Watch this site:
https://www.worldometers.info/coronavirus/country/us/
I think when the cases stop being log linear by rounding off then a good bull case can be made. That will demonstrate that he US is containing and that no more economically choking measures are needed. It’s not to say the economy will be at full steam but it will tell you that the worst is behind.
Jeff
If you’re looking at microcaps the drawdown is now over 30%. IWC is now at 69% of its high (which was in September 2018).
I use as my benchmark an equal-weighted collection of all the stocks above a certain liquidity level which is my personal minimum. The drawdown there is 27.33%. My own portfolio isn’t quite in bear-market territory yet: my drawdown is only 18.67%. Which is no reason to celebrate . . .
It’s pretty clear that the stock market is not moving in inverse proportion to coronavirus cases in the US, which don’t fluctuate nearly as much as the market does. If this does go from correction to bear, then the strongest bull case is the moment when the large majority of investors give up hope. And that could coincide with a spike in coronavirus cases. Remember March 2009? Was anyone saying, “Oh, now it’s over”? No–precisely the opposite was happening. Everyone had given up.
I tend to agree that the turnaround, or at least a Schrodinger Cat Bounce (is it alive or dead???) will happen as soon as traders who capitulated believe that the next six months or so will be better for the market. That doesn’t have to wait for business to resume. It could come as pharma announces effective countermeasures that would allow most movement and business to resume in the near future, at a time when our financial modeling factors would still be clueless. Seems obvious to me that the U.S. has a long way to go before the worst is over, unless a White Swan event (unexpected good event) happens. I’m playing everything by ear now, shooting from the hip.
Today’s thrashing of all assets tempts me to dip a toe into the flood but …
It sounds mean but the dip buyers need to be burned. There are too many dip buyers are there still thinking this will bounce back 2018 style. Only when Mr. Market reminds the dip buyers that there are no free lunches will the bear market subside
Jeff
Expect another circuit breaker tommorrow. Not getting out of the market in my retirement accounts that In not going to need for another 15 years. I liquidated some if my taxable accounts into cash based on moving averages, but still mostly long there too. I have cash on hand to ride things out for a while and I intend to use it preciously.
The virus will run its course and blow through (though I dont mean to minimize the effects on the victims). As an investor, Im more concerned about secondary effects. Are retiring or near retiring baby boomers just going to lose their stomach for risk from this? What becomes of all the public pension plans thatvhave been banking on 7% annual returns? As Buffett says, when the tide pulls out you see who has been swimming naked.
Exactly. I think the advice for people to move out of low yielding bonds into dividend stocks was ill-informed. At least when bonds go down in price yield goes up. The same can’t be said for dividend stocks which go down in yield and value generally at the same time. I’m an advocate for stock investing but when you are close to retirement and need that income even low yielding fixed income is still better than stocks. I suspect many older investors became complacent in the 10+ year bull market.
Just a few weeks ago there were several articles written about how big market drops were a thing of the past with how much the fed managed the markets. I thought that was BS and the market proved them idiots.
Let’s see if value investing is dead as well as the academics have proclaimed…
S&P down 8.5% within the first 30 minutes. Dow broke below Christmas Eve 2018 lows. Certainly qualifies as big early losses.
So far, it’s trying to rally. We may have put in the low for the day.
If the rally fails and we break to new lows, there is a gap at 2448 that I am watching. That would be almost 11% down for the day. Wouldn’t surprise me.
Down 11% might spur the Fed to act today, which would spark a rally. However, if the low is already in and we go up from here, then the Fed will keep their powder dry. We’ll see.
What powder? The bottle is empty. The Fed can do no more than fake it to shut POTUS up (as if!).
We need fiscal policy, now, not the hopelessly beaten dead horse that is monetary policy. That’s a big reason why the markets have been acting so badly. Mr. Market knows that monetary policy is exhausted. We need fiscal policy, fiscal policy, fiscal policy. And after this is all done, we’ll worry about the deficits and inflation and all the other things we haven’t seen in the last 35 years.
From whom, I ask.
In 1971, Kudlow attended Princeton University’s Woodrow Wilson School of Public and International Affairs, where he studied politics and economics. He left before completing his master’s degree.
So the Director of the National Economic Council has not even got an economics degree. He has only got a BA from the University of Rochester. That is all. Not very encouraging.
Lol. The fed is now impotent. We already saw that last week. The markets didn’t bounce from fed rate drop. The went down. The only reason the market bounced last week because the Bernie Sanders concern was eliminated.
The fed can’t save this. Recessions historically take 5 percent of cuts. There’s only 1.25 percent and then we start running some very interesting fiscal experiments which will probably cause people to bury cash under mattresses and destroy banks. Who wants to keep money in a negative interest account?
Kudlow has been wrong on just about everything. He knows no more than you or I. He’s just a highly paid cheerleader.
Fiscal policy is more about Congress, so . . . Aw sh**, this keeps getting better by the minute, doesn’t it.
It’s be a good time for popcorn if your stomach isn’t in knots.
If you believe that the market ultimately is synch’d to projected earnings, then this is a head scratcher…
The P123 supplied SP500 EPS Blend Y (weekly), based on the time weighted analysts estimates of CurrY and NextY, has not been rolling off in any significant fashion over the last 10 weeks.
is this just a flash crash?
Earnings and sales take time to adjust downward and analysts are ‘pack creatures.’ Earnings will fall significantly for the economy. Sales will also fall – there’s no way to contain the virus without restricting social interaction – so, a company like Netflix could actually seem short-term revenue increase (at home entertainment), but most companies in many sectors will face sales declines and also supply chain disruption (so, lack of inventory as china and world supply chain is limited).
So, that’s a double whammy. No way we don’t see sales fall at least 10% globally on this – possibly up to 30-40%. Financial sector will also be hit – fewer loans and lower interest on those loans (given likely Fed / global banking response of trying lower interest rates – when really cash to lower wage earners and to health care based investments is more likely needed).
So… this is not likely a ‘flash crash’. The governments will try and inject a lot – the market will do whatever it’s gonna do – but we’re going to see sales and earnings fall and some multiple compression. However, hard to say where bottom is… but, as to ‘when it is’ – it’s likely at least 30-60 days away still – and maybe many months – once 1 country has gotten back to business as usually, we may see a turn. Maybe, but local markets will still have kids at home, parents working from home, people we know sick – etc. That’s a big deal.
