Coronavirus and the market

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
halfnine
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Re: Coronavirus and the market

Post by halfnine » Thu Mar 12, 2020 3:06 am

Noobvestor wrote:
Wed Mar 11, 2020 11:08 pm
sambb wrote:
Wed Mar 11, 2020 9:10 pm
this was one of the rare times when the data was obvious and NOT factored into the market for weeks. Some people read the situation and knew we were going down. good for them.
Everything's obvious in hindsight. Clearly, a lot of people didn't think this was obvious, and thus didn't react to it. This path only looks clear because we have walked it. I feel kind of bad for people who think they 'called it' and will now be emboldened to market time going forward.
I've predicted 4 of the last 2 major market crashes. And that is why I don't try to market time sell-offs.

craimund
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Re: Coronavirus and the market

Post by craimund » Thu Mar 12, 2020 3:12 am

Stef wrote:
Thu Mar 12, 2020 2:49 am
craimund wrote:
Thu Mar 12, 2020 2:36 am
Not sure whether it's fully priced in but sentiment is pretty negative which usually occurs near a bottom. Historically, markets have recovered quickly from virus related selloffs.

https://www.marketwatch.com/story/heres ... 2020-01-22
I'm too young to remember these. Which of them caused whole countries to go into lockdown mode and which caused travel bans for whole continents?

Are there any similarities to todays case?
There were some minor travel restrictions imposed for the H1N1 outbreak in 2009. None for Ebola that I recall. No countrywide lockdowns to my knowledge. The government response both here and overseas is unprecedented.
"When you ain't got nothing, you got nothing to lose"-Bob Dylan 1965. "When you think that you've lost everything, you find out you can always lose a little more"-Dylan 1997

fortyofforty
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Re: Coronavirus and the market

Post by fortyofforty » Thu Mar 12, 2020 4:42 am

I think we keep falling until we hear people lamenting that it will never rebound, the market won't recover, that they are swearing off stocks forever. At least I'm not seeing as many advertisements propagating the idea of easy money to be made through stock trading. In fact, it's been about a week, or so.

For what it's worth, China seems to be turning the corner, at least based on the behavior of the government.

Pseybert
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Re: Coronavirus and the market

Post by Pseybert » Thu Mar 12, 2020 6:18 am

fortyofforty wrote:
Thu Mar 12, 2020 4:36 am

And I haven't read or heard anyone claim "it's just the flu".
You must not have been on here 2 weeks ago.

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ofcmetz
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Re: Coronavirus and the market

Post by ofcmetz » Thu Mar 12, 2020 6:20 am

Stef wrote:
Thu Mar 12, 2020 2:25 am
I just don't get it. Isn't the further spread and possible shutdown of whole industries already priced in? I mean what's expectation from the market? That the amount of infected people will suddenly drop and we're back to the usual by May 2020?
Market seems to have priced in a best case scenario initially. Now it's gravitating towards a worst case one. Which is correct?

I'd be surprised and delighted if things were back to normal in two months by May. I'm guessing it will take a bit longer than that.
Never underestimate the power of the force of low cost index funds.

bearcub
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Re: Coronavirus and the market

Post by bearcub » Thu Mar 12, 2020 6:27 am

Where is Black Swan Nassim Taleb when you need him. :oops:

BoggledHead2
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Re: Coronavirus and the market

Post by BoggledHead2 » Thu Mar 12, 2020 7:13 am

Stef wrote:
Thu Mar 12, 2020 2:25 am
I just don't get it. Isn't the further spread and possible shutdown of whole industries already priced in? I mean what's expectation from the market? That the amount of infected people will suddenly drop and we're back to the usual by May 2020?
Hysterical people reading more hysterical headlines

The seasonal flu has killed approximately 30,000+ more people than coronavirus so far THIS YEAR

My new “buy signal” has officially become when robots have to shut down trading

Lots of people that have overinflated returns from last year and beyond are just freaking out and trying to hold on for dear life to what they have ... while the accumulators should be pouncing (especially INT markets)

nigel_ht
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Re: Coronavirus and the market

Post by nigel_ht » Thu Mar 12, 2020 7:18 am

Mactheriverrat wrote:
Wed Mar 11, 2020 9:01 pm
One thing about Tom Hanks and his wife getting the Coronavirus is now people will see what happens to then could happen to all of us. Given say 14 to 21 days if they a cured then there is hope for everyone watching them.

Praying and Godspeed for their recovery.
I hope for the best for them. With luck they have mild cases.

RubyTuesday
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Re: Coronavirus and the market

Post by RubyTuesday » Thu Mar 12, 2020 7:22 am

BoggledHead2 wrote:
Thu Mar 12, 2020 7:13 am
Stef wrote:
Thu Mar 12, 2020 2:25 am
I just don't get it. Isn't the further spread and possible shutdown of whole industries already priced in? I mean what's expectation from the market? That the amount of infected people will suddenly drop and we're back to the usual by May 2020?
Hysterical people reading more hysterical headlines

The seasonal flu has killed approximately 30,000+ more people than coronavirus so far THIS YEAR

My new “buy signal” has officially become when robots have to shut down trading

Lots of people that have overinflated returns from last year and beyond are just freaking out and trying to hold on for dear life to what they have ... while the accumulators should be pouncing (especially INT markets)
Seasonal flu has case fatality rate of 0.1%. Covid-19 is at least 10x worse (not my estimate, this is from Fauci). And it could be as high as 3-4% depending on how much the healthcare system gets overtaxed.

If it isn’t contained or at least effects mitigated, it could be much worse than seasonal flu. That’s why epidemiologists and public health officials are so concerned concerned.

At it’s wrecking supply chains. We have supply and demand shocks. This isn’t panic, just reality.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu

MnD
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Re: Coronavirus and the market

Post by MnD » Thu Mar 12, 2020 7:51 am

Back to the market - at least Costco is going to have a nice quarter.
Zero parking spaces at the one near me yesterday according to a level-headed neighbor. Mid-day on a nothing special workday.
Even on the worst days like Saturdays before major holidays this Costco has hundreds of available parking spots as long as you don't mind parking on the moon. And today is our regular shopping day and after "wedding week" with tons of company and house guests we need to do a big shop. :(
Wish me luck........
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.

billyt
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Re: Coronavirus and the market

Post by billyt » Thu Mar 12, 2020 8:05 am

Bloomberg is reporting liquidity issues with treasuries this morning. That seems pretty serious, no?

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NearlyRetired
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Re: Coronavirus and the market

Post by NearlyRetired » Thu Mar 12, 2020 8:10 am

fortyofforty wrote:
Thu Mar 12, 2020 4:42 am
I think we keep falling until we hear people lamenting that it will never rebound, the market won't recover, that they are swearing off stocks forever. At least I'm not seeing as many advertisements propagating the idea of easy money to be made through stock trading. In fact, it's been about a week, or so.

For what it's worth, China seems to be turning the corner, at least based on the behavior of the government.
My highlight - However, it is too early to know whether that is the end of the outbreak in China - once the population is allowed to move with less restrictions, there could be an uptick. I would think the markets would react negatively to that
To err is to be human, to really mess up, use a computer

veggivet
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Re: Coronavirus and the market

Post by veggivet » Thu Mar 12, 2020 8:11 am

I wonder how many times the circuit breakers will kick in today...watch out below!
If you watch your pennies, your dollars will take care of themselves.

over45
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Re: Coronavirus and the market

Post by over45 » Thu Mar 12, 2020 8:18 am

Market seems to have priced in a best case scenario initially. Now it's gravitating towards a worst case one. Which is correct?
Pull up a 30 year chart of the Dow and take a look. The coronavirus is not the cause of this - it is the underlying debt crisis which is being brought to light by the virus.

Seasonal
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Re: Coronavirus and the market

Post by Seasonal » Thu Mar 12, 2020 8:20 am

billyt wrote:
Thu Mar 12, 2020 8:05 am
Bloomberg is reporting liquidity issues with treasuries this morning. That seems pretty serious, no?
$50 Trillion in Question as U.S. Treasury Liquidity Dries Up
https://www.bloomberg.com/news/articles ... y-dries-up

If that's what it seems to be, it's really bad. I'd expect the Fed to do something quickly. The other alternative is more supply, but that raises a host of issues.

Seasonal
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Re: Coronavirus and the market

Post by Seasonal » Thu Mar 12, 2020 8:22 am

over45 wrote:
Thu Mar 12, 2020 8:18 am
Market seems to have priced in a best case scenario initially. Now it's gravitating towards a worst case one. Which is correct?
Pull up a 30 year chart of the Dow and take a look. The coronavirus is not the cause of this - it is the underlying debt crisis which is being brought to light by the virus.
Based on the treasury liquidity issue and real interest rates compared to growth, we are suffering from a shortage of safe assets (aka government debt).

Flashes1
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Re: Coronavirus and the market

Post by Flashes1 » Thu Mar 12, 2020 8:37 am

I know someone who loans money to some of the largest food companies in the world - think beef processing, supermarket chains, and food distributors to restaurants/hotels. There are concerns amongst the money changers. They're not worried about food sales (people still need to eat) but for the first time in their career questions were asked what would happen to our borrowers if they couldn't get food supplies?

Example: what happens if huge food processing plants in Nebby and Iowa close or Kraft closes their large plants? They laughed it off at first but then they hear how the government has shut down traffic from Europe and closed sporting events? Very important people who control the flow of funds are watching this very carefully - trust me on this. Witnessed irregular borrowing yesterday by a very high profile transportation company so they can show their investors they have the liquidity to weather the downturn ---this was very attention grabbing. This was a company that already had over $1 billion in cash before the large draw.

over45
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Re: Coronavirus and the market

Post by over45 » Thu Mar 12, 2020 9:04 am

I read an article that said that a leading German bank has a huge amount of derivatives that are at risk if it's stock drops and holds below $6.40. It did that this morning...

nigel_ht
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Re: Coronavirus and the market

Post by nigel_ht » Thu Mar 12, 2020 9:29 am

Noobvestor wrote:
Wed Mar 11, 2020 3:05 pm
nigel_ht wrote:
Wed Mar 11, 2020 2:46 pm
DCA beats Lump Sum into a declining market and reduces the odds of a 50% haircut in that first year. After that first year you're in the market at the allocation you prefer.
I see your points, but am not sure I see how DCA solves them. If the market goes down slightly more but recovers quickly, your DCA could result in buying in mostly after the recovery. But sure, whatever floats your boat. If you think a DCA plan is superior, go for it, but really write down a plan and then implement it. This case you see as unique, well, it could be 08/09, or it could be 18 - as in: it might be the beginning, or short-lived. You want to avoid the downside of it being prolonged, which sets you up for further market timing in the future. When the next thing like this rolls around (something that looks and feels as serious as COVID), what will your plan be then? I assume based on your current plan that you'll pull all of your money out of stocks and bonds, put it into cash, then DCA again. If that plan works now, why not later? You mentioned sequence of return risks around retirement, so I assume your plan will call for you to again pull all your money from the market, then DCA back in. When does it end?
I wrote a long response that my phone decided...nah. So the short version (for which there was much rejoicing) is that it was unique because all of that money was out of the market in early Feb and a new lump sum.

Could I someday I pull out of stocks to DCA back in? Yes, if PE goes above 70-80 I'll get more and more cautious and edge toward a 20/80 allocation. That covers bubbles. Scenarios like 1929 or 2008 are harder to write into a IPS since PE wasn't super high...just that the economic support for earnings fell away. It's all rather vague as in "if the clouds of total economic doom appear on the horizon".

These aren't always obvious. Covid19 was obvious because I was paying attention so I probably would have gone from 60/40 to 40/60 or 30/70 in Jan depending on the tax impact. 2008 I wasn't paying attention because hey, still in accumulation mode.

In Jan 2020 I was deciding between early retirement or on time retirement which would have told me when to start moving to a more conservative allocation. I was looking for any signs of trouble because kicking off a retirement at the end of a bull is a bad idea and by mid Jan I knew it was going to be bad when they cancelled Chinese New Year celebrations and locked down Wuhan.

marky2kk
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Re: Coronavirus and the market

Post by marky2kk » Thu Mar 12, 2020 9:33 am

craimund wrote:
Thu Mar 12, 2020 2:36 am
Stef wrote:
Thu Mar 12, 2020 2:25 am
I just don't get it. Isn't the further spread and possible shutdown of whole industries already priced in? I mean what's expectation from the market? That the amount of infected people will suddenly drop and we're back to the usual by May 2020?
Not sure whether it's fully priced in but sentiment is pretty negative which usually occurs near a bottom. Historically, markets have recovered quickly from virus related selloffs.

https://www.marketwatch.com/story/heres ... 2020-01-22
It would be priced in.. but all the bogleheads following their mechanical rebalancing strategies inflate prices :D :D

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willthrill81
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Re: Coronavirus and the market

Post by willthrill81 » Thu Mar 12, 2020 9:34 am

Flashes1 wrote:
Thu Mar 12, 2020 8:37 am
I know someone who loans money to some of the largest food companies in the world - think beef processing, supermarket chains, and food distributors to restaurants/hotels. There are concerns amongst the money changers. They're not worried about food sales (people still need to eat) but for the first time in their career questions were asked what would happen to our borrowers if they couldn't get food supplies?

Example: what happens if huge food processing plants in Nebby and Iowa close or Kraft closes their large plants? They laughed it off at first but then they hear how the government has shut down traffic from Europe and closed sporting events? Very important people who control the flow of funds are watching this very carefully - trust me on this. Witnessed irregular borrowing yesterday by a very high profile transportation company so they can show their investors they have the liquidity to weather the downturn ---this was very attention grabbing. This was a company that already had over $1 billion in cash before the large draw.
Thanks for the insight. The rippling effects of this are hard to forecast, but it's looking increasingly clear that a recession is very likely, and a depression is not off the table. I'd say that a 50% market decline from the peak is quite possible as well.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

nigel_ht
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Re: Coronavirus and the market

Post by nigel_ht » Thu Mar 12, 2020 9:34 am

over45 wrote:
Thu Mar 12, 2020 8:18 am
Market seems to have priced in a best case scenario initially. Now it's gravitating towards a worst case one. Which is correct?
Pull up a 30 year chart of the Dow and take a look. The coronavirus is not the cause of this - it is the underlying debt crisis which is being brought to light by the virus.
Yah, but it's fine as long as growth and earnings remain good.

Oh wait.

Coato
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Re: Coronavirus and the market

Post by Coato » Thu Mar 12, 2020 9:46 am

hoops777 wrote:
Wed Mar 11, 2020 9:30 pm
NBA suspends play. NCAA says March madness will be played in empty arenas,but that will probably be cancelled as well.
Tom Hanks has it.The US has tested in total under 5000. S Korea tests 10,000 a day. The US response has been brutal in terms of testing. Schools closing everywhere.
The market will very interesting tomorrow if open. What happens if they shut down the market for a month?
Europe travel ban but not U.K.? Excuse me but how does that make any sense?
The worst is that I work at a school that isn't closing (California). Despite ample evidence that a massive amount of kids are sick, and that we had kids on a weeklong field trip to Japan a month ago, if the elected school board are fans of a certain news source they are obstinately not closing. Item number 1 on last night's board meeting agenda was the performance review of the Superintendent and his raise. We aren't even talking about it because it is viewed as an idealogical weakness. So a lot of things make no sense right now. Some of the fear is due to obvious inaction.

Edit: to make this market actionable, I am sure it is going to get worse for the market because unless everyone tries to work on the problem it will spread.

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NearlyRetired
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Re: Coronavirus and the market

Post by NearlyRetired » Thu Mar 12, 2020 9:47 am

nigel_ht wrote:
Thu Mar 12, 2020 9:29 am
Noobvestor wrote:
Wed Mar 11, 2020 3:05 pm
nigel_ht wrote:
Wed Mar 11, 2020 2:46 pm
DCA beats Lump Sum into a declining market and reduces the odds of a 50% haircut in that first year. After that first year you're in the market at the allocation you prefer.
I see your points, but am not sure I see how DCA solves them. If the market goes down slightly more but recovers quickly, your DCA could result in buying in mostly after the recovery. But sure, whatever floats your boat. If you think a DCA plan is superior, go for it, but really write down a plan and then implement it. This case you see as unique, well, it could be 08/09, or it could be 18 - as in: it might be the beginning, or short-lived. You want to avoid the downside of it being prolonged, which sets you up for further market timing in the future. When the next thing like this rolls around (something that looks and feels as serious as COVID), what will your plan be then? I assume based on your current plan that you'll pull all of your money out of stocks and bonds, put it into cash, then DCA again. If that plan works now, why not later? You mentioned sequence of return risks around retirement, so I assume your plan will call for you to again pull all your money from the market, then DCA back in. When does it end?
I wrote a long response that my phone decided...nah. So the short version (for which there was much rejoicing) is that it was unique because all of that money was out of the market in early Feb and a new lump sum.

Could I someday I pull out of stocks to DCA back in? Yes, if PE goes above 70-80 I'll get more and more cautious and edge toward a 20/80 allocation. That covers bubbles. Scenarios like 1929 or 2008 are harder to write into a IPS since PE wasn't super high...just that the economic support for earnings fell away. It's all rather vague as in "if the clouds of total economic doom appear on the horizon".

These aren't always obvious. Covid19 was obvious because I was paying attention so I probably would have gone from 60/40 to 40/60 or 30/70 in Jan depending on the tax impact. 2008 I wasn't paying attention because hey, still in accumulation mode.

In Jan 2020 I was deciding between early retirement or on time retirement which would have told me when to start moving to a more conservative allocation. I was looking for any signs of trouble because kicking off a retirement at the end of a bull is a bad idea and by mid Jan I knew it was going to be bad when they cancelled Chinese New Year celebrations and locked down Wuhan.
Nuts - that's me :oops:
To err is to be human, to really mess up, use a computer

hoops777
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Re: Coronavirus and the market

Post by hoops777 » Thu Mar 12, 2020 10:50 am

Stef wrote:
Thu Mar 12, 2020 2:25 am
I just don't get it. Isn't the further spread and possible shutdown of whole industries already priced in? I mean what's expectation from the market? That the amount of infected people will suddenly drop and we're back to the usual by May 2020?
Back to usual by May? No.
K.I.S.S........so easy to say so difficult to do.

columbia
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Re: Coronavirus and the market

Post by columbia » Thu Mar 12, 2020 10:52 am

There was a study linked yesterday about sell offs escalating after 25%?

I think we are there (percentage wise).
If you leave your head in the sand for too long, you might get run over by a Jeep.

CT-Scott
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Re: Coronavirus and the market

Post by CT-Scott » Thu Mar 12, 2020 10:53 am

Rosencrantz1 wrote:
Wed Mar 11, 2020 8:43 pm
ballons wrote:
Wed Mar 11, 2020 8:24 pm
The theory of an index fund bubble would be tested:

https://www.cnbc.com/2019/09/04/the-big ... ubble.html

If true, then a "mass running to the exits" would cause way more than a 50% drop.
Thank you. I did read your linked article - it's interesting. I'm not sure I understand why index investing would be different than, say, taking a million dollar portfolio and simply buying all the stocks in the SP500 individually. :confused In other words, I'm wondering if the article is simply implying the equity market (generally) is over valued? But, again, thanks for the link.
I think the idea is that there are so many people blindly pumping dollars into index funds (because of automatic contributions in 401k plans) compared to the past, that the market has been pumped up. People have been in "set it and forget it" mode for a long time.
justsomeguy2018 wrote:
Wed Mar 11, 2020 10:23 pm
I am curious, the people that moved to cash/timed the market etc, was this only in a sizable taxable account or did you adjust your 401k as well? That would be gutsy in my opinion to liquidate your entire 401k to cash on an unknown virus.
My moves were done within my 401k and Roth IRA accounts. In my 401k, I moved to the one stable value fund they offered. In my Roth IRA, I just moved it into their money market fund. I doubt there are many people who *literally* cashed out the funds from their 401k accounts, as that's not easy to do, unless you're over 59.

hoops777
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Re: Coronavirus and the market

Post by hoops777 » Thu Mar 12, 2020 10:53 am

Coato wrote:
Thu Mar 12, 2020 9:46 am
hoops777 wrote:
Wed Mar 11, 2020 9:30 pm
NBA suspends play. NCAA says March madness will be played in empty arenas,but that will probably be cancelled as well.
Tom Hanks has it.The US has tested in total under 5000. S Korea tests 10,000 a day. The US response has been brutal in terms of testing. Schools closing everywhere.
The market will very interesting tomorrow if open. What happens if they shut down the market for a month?
Europe travel ban but not U.K.? Excuse me but how does that make any sense?
The worst is that I work at a school that isn't closing (California). Despite ample evidence that a massive amount of kids are sick, and that we had kids on a weeklong field trip to Japan a month ago, if the elected school board are fans of a certain news source they are obstinately not closing. Item number 1 on last night's board meeting agenda was the performance review of the Superintendent and his raise. We aren't even talking about it because it is viewed as an idealogical weakness. So a lot of things make no sense right now. Some of the fear is due to obvious inaction.

Edit: to make this market actionable, I am sure it is going to get worse for the market because unless everyone tries to work on the problem it will spread.
I am serious in saying that you should report this to local health officials. That is insane. Or call a local reporter and that will force them to close down if their insanity become public.
Last edited by hoops777 on Thu Mar 12, 2020 11:12 am, edited 1 time in total.
K.I.S.S........so easy to say so difficult to do.

quantAndHold
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Re: Coronavirus and the market

Post by quantAndHold » Thu Mar 12, 2020 11:01 am

fortyofforty wrote:
Thu Mar 12, 2020 7:01 am
Pseybert wrote:
Thu Mar 12, 2020 6:18 am
fortyofforty wrote:
Thu Mar 12, 2020 4:36 am

And I haven't read or heard anyone claim "it's just the flu".
You must not have been on here 2 weeks ago.
I was. I don't remember anyone using that phrase.
You haven’t been reading the general coronavirus thread, then. I just spent the last couple of weeks arguing with the “it’s just the flu” folks. Plenty of willful denial over there.
Yes, I’m really that pedantic.

veggivet
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Re: Coronavirus and the market

Post by veggivet » Thu Mar 12, 2020 11:15 am

63% of S&P stocks are at 52 week lows, a level not seen since the days of the financial crisis of 2008.
If you watch your pennies, your dollars will take care of themselves.

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ray.james
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Re: Coronavirus and the market

Post by ray.james » Thu Mar 12, 2020 12:26 pm

I feel this round of downturn- USA is more impacted than china. We are very consumer dependent and a lot of it depends on retail/outside work-home spending. Restaurants, sporting events, entertainment, retail are bigger sectors of the economy compared to country like China. Same with Italy (add in the biggest one- tourism). I also think folks are slowly coming to terms with what an actual recession might look like. Posts of job losses on reddit are starting now. Things I predict with my 8 ball - I think china will sell a lot of items to the world(medical and others) in coming months and close the gap on USA at the big table.

Things I am worried about

My job. There is nothing I can do though. Keep my head down and work.
I have emergency fund that does stop me from thinking about it.

Obesity is in the list of top 5 factors that this virus makes it lethal. The fear of me dying never felt this 'possible'. I am mid 30's. I have exercised the last 3 days. I hope to overcome food and emotional eating aspect this time.

Upcoming inflation if this prolongs beyond 3 months. With worldwide supply chains down - farming and food inflation will pick up at some point. USA might be unscathed in this.

Return of normalcy may take atleast couple of months after the end of new cases. Combined, we are looking at at least 2 quarters.

I think about them but I am not worrying. It sounds like I am the voice of calm among family, friends. My spouse was just surprised at how casually I mentioned that one of our bedrooms has like small private porch and bathroom is the best place for quarantine; if only one of us needs it.
Last edited by ray.james on Thu Mar 12, 2020 10:53 pm, edited 1 time in total.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

KyleAAA
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Re: Coronavirus and the market

Post by KyleAAA » Thu Mar 12, 2020 12:36 pm

Stef wrote:
Thu Mar 12, 2020 2:49 am
craimund wrote:
Thu Mar 12, 2020 2:36 am
Not sure whether it's fully priced in but sentiment is pretty negative which usually occurs near a bottom. Historically, markets have recovered quickly from virus related selloffs.

https://www.marketwatch.com/story/heres ... 2020-01-22
I'm too young to remember these. Which of them caused whole countries to go into lockdown mode and which caused travel bans for whole continents?

Are there any similarities to todays case?
No, none of those are comparable. We are in truly uncharted waters.

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HomerJ
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Re: Coronavirus and the market

Post by HomerJ » Thu Mar 12, 2020 12:43 pm

sambb wrote:
Thu Mar 12, 2020 1:50 am
I think some people were really blinded here. There were so many threads in january. Why wouldnt people rebalance to account for the risk? To each his or her own.
There were many threads on Greek debt crisis, and Brexit, and the government shut-down, and the trade war, and the swine flu, and the avian flu, etc. etc. etc.

If people changed their allocation (that's not rebalancing - you continually confuse things by using the wrong terminology) every time there were a lot of threads about potential risk, they would have a lot less money.

Markets return 9%, average investor gets 2%. Partly because of adviser and fund fees, and partly because they do EXACTLY what you think people should do... Change their allocation every time a risk shows up.

That's a bad plan.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

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HomerJ
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Re: Coronavirus and the market

Post by HomerJ » Thu Mar 12, 2020 12:44 pm

ofcmetz wrote:
Thu Mar 12, 2020 2:11 am
I always assume stocks can drop 50% or more in a moments notice. This risk is why they offer outsized returns vs fixed income. Right now we are feeling these risks. Everyone should remember how this feels right now. The desperation and despair in these markets is palpable. These are those moments when our investments plans are put to the test.
This. Especially the bolded part.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

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oldcomputerguy
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Re: Coronavirus and the market

Post by oldcomputerguy » Thu Mar 12, 2020 12:54 pm

Indeed. It's probably a good time to refresh everyone's recall of nisiprius' excellent post A time to EVALUATE your jitters.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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Re: Coronavirus and the market

Post by oldcomputerguy » Thu Mar 12, 2020 12:57 pm

Some off-topic comments were removed. As a reminder, political comments and posts are prohibited by forum policy. See Politics and Religion:
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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Re: Coronavirus and the market

Post by MnD » Thu Mar 12, 2020 12:58 pm

I'm sitting in the dentists office listening to people calling in cancelling appointments due to coronafear and interestingly not resheduling a firm date. Last one was a nurse whose employer instructed them to cancel discretionary medical visits. So nonurgent providers of person to person services including but not limited to medical dental and their suppliers will be taking a hit.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.

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Re: Coronavirus and the market

Post by Unladen_Swallow » Thu Mar 12, 2020 1:01 pm

HomerJ wrote:
Thu Mar 12, 2020 12:44 pm
ofcmetz wrote:
Thu Mar 12, 2020 2:11 am
I always assume stocks can drop 50% or more in a moments notice. This risk is why they offer outsized returns vs fixed income. Right now we are feeling these risks. Everyone should remember how this feels right now. The desperation and despair in these markets is palpable. These are those moments when our investments plans are put to the test.
This. Especially the bolded part.
+1
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

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TinyElvis
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Re: Coronavirus and the market

Post by TinyElvis » Thu Mar 12, 2020 1:04 pm

So... should we just plan on being at Dow 0 in a few weeks? Something is fishy about this whole drop. This goes beyond being about the ability to handle risk.

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Re: Coronavirus and the market

Post by hoops777 » Thu Mar 12, 2020 1:14 pm

TinyElvis wrote:
Thu Mar 12, 2020 1:04 pm
So... should we just plan on being at Dow 0 in a few weeks? Something is fishy about this whole drop. This goes beyond being about the ability to handle risk.
What is “fishy”? Care to explain ?
K.I.S.S........so easy to say so difficult to do.

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TinyElvis
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Re: Coronavirus and the market

Post by TinyElvis » Thu Mar 12, 2020 1:21 pm

hoops777 wrote:
Thu Mar 12, 2020 1:14 pm
TinyElvis wrote:
Thu Mar 12, 2020 1:04 pm
So... should we just plan on being at Dow 0 in a few weeks? Something is fishy about this whole drop. This goes beyond being about the ability to handle risk.
What is “fishy”? Care to explain ?
3 years gone in 3 weeks. Investors around the world selling equities in droves. Non-stop television coverage. Seems odd to me.

zzzquil
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Re: Coronavirus and the market

Post by zzzquil » Thu Mar 12, 2020 1:21 pm

Can anyone imagine what the market response will be if this begins happening in the US? Unable to have someone take away a family member's dead body who passed from the infection for days? Medical system overwhelmed...

https://www.washingtonpost.com/nation/2 ... uarantine/

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Re: Coronavirus and the market

Post by Lee_WSP » Thu Mar 12, 2020 1:22 pm

TinyElvis wrote:
Thu Mar 12, 2020 1:21 pm
hoops777 wrote:
Thu Mar 12, 2020 1:14 pm
TinyElvis wrote:
Thu Mar 12, 2020 1:04 pm
So... should we just plan on being at Dow 0 in a few weeks? Something is fishy about this whole drop. This goes beyond being about the ability to handle risk.
What is “fishy”? Care to explain ?
3 years gone in 3 weeks. Investors around the world selling equities in droves. Non-stop television coverage. Seems odd to me.
We're only down to January 2019 levels. It's really not that bad. Yet.

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Re: Coronavirus and the market

Post by TinyElvis » Thu Mar 12, 2020 1:26 pm

Lee_WSP wrote:
Thu Mar 12, 2020 1:22 pm
We're only down to January 2019 levels. It's really not that bad. Yet.
Looks June 2017 levels to me.

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Re: Coronavirus and the market

Post by Seasonal » Thu Mar 12, 2020 1:32 pm

TinyElvis wrote:
Thu Mar 12, 2020 1:21 pm
hoops777 wrote:
Thu Mar 12, 2020 1:14 pm
TinyElvis wrote:
Thu Mar 12, 2020 1:04 pm
So... should we just plan on being at Dow 0 in a few weeks? Something is fishy about this whole drop. This goes beyond being about the ability to handle risk.
What is “fishy”? Care to explain ?
3 years gone in 3 weeks. Investors around the world selling equities in droves. Non-stop television coverage. Seems odd to me.
What reaction would you expect to a pandemic that is causing many deaths and that appears to be causing great damage to the global economy? One that was unheard of a couple of months ago and is accelerating at a rapid rate.

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Noobvestor
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Re: Coronavirus and the market

Post by Noobvestor » Thu Mar 12, 2020 2:14 pm

nigel_ht wrote:
Thu Mar 12, 2020 9:29 am
Noobvestor wrote:
Wed Mar 11, 2020 3:05 pm
nigel_ht wrote:
Wed Mar 11, 2020 2:46 pm
DCA beats Lump Sum into a declining market and reduces the odds of a 50% haircut in that first year. After that first year you're in the market at the allocation you prefer.
I see your points, but am not sure I see how DCA solves them. If the market goes down slightly more but recovers quickly, your DCA could result in buying in mostly after the recovery. But sure, whatever floats your boat. If you think a DCA plan is superior, go for it, but really write down a plan and then implement it. This case you see as unique, well, it could be 08/09, or it could be 18 - as in: it might be the beginning, or short-lived. You want to avoid the downside of it being prolonged, which sets you up for further market timing in the future. When the next thing like this rolls around (something that looks and feels as serious as COVID), what will your plan be then? I assume based on your current plan that you'll pull all of your money out of stocks and bonds, put it into cash, then DCA again. If that plan works now, why not later? You mentioned sequence of return risks around retirement, so I assume your plan will call for you to again pull all your money from the market, then DCA back in. When does it end?
I wrote a long response that my phone decided...nah. So the short version (for which there was much rejoicing) is that it was unique because all of that money was out of the market in early Feb and a new lump sum.

Could I someday I pull out of stocks to DCA back in? Yes, if PE goes above 70-80 I'll get more and more cautious and edge toward a 20/80 allocation. That covers bubbles. Scenarios like 1929 or 2008 are harder to write into a IPS since PE wasn't super high...just that the economic support for earnings fell away. It's all rather vague as in "if the clouds of total economic doom appear on the horizon".

These aren't always obvious. Covid19 was obvious because I was paying attention so I probably would have gone from 60/40 to 40/60 or 30/70 in Jan depending on the tax impact. 2008 I wasn't paying attention because hey, still in accumulation mode.

In Jan 2020 I was deciding between early retirement or on time retirement which would have told me when to start moving to a more conservative allocation. I was looking for any signs of trouble because kicking off a retirement at the end of a bull is a bad idea and by mid Jan I knew it was going to be bad when they cancelled Chinese New Year celebrations and locked down Wuhan.
Thanks for being honest about what you would have done. I personally find it inconsistent with what you actually did - a form of mental accounting - but either way it illustrates the differences in our opinions well. To me, and this is just my opinion, money not invested in the plan is money intentionally put on the sidelines (sold out of the plan). If that money is large enough that it impacts my AA, then I change the AA and invest. If DCAing is what works for you, that's fine, but functionally it's the same as selling out of your target AA and buying slowly back in. The fact that you wouldn't have done exactly that had you happened to invest earlier is inexplicable to me, but whatever floats your Vanguard ship!

Regardless, good luck to you and I hope it works out. :sharebeer
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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TinyElvis
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Re: Coronavirus and the market

Post by TinyElvis » Thu Mar 12, 2020 2:27 pm

Seasonal wrote:
Thu Mar 12, 2020 1:32 pm
What reaction would you expect to a pandemic that is causing many deaths and that appears to be causing great damage to the global economy? One that was unheard of a couple of months ago and is accelerating at a rapid rate.
My first thought definitely wasn't to liquidate my accounts, but that's just me.. :)

Seasonal
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Re: Coronavirus and the market

Post by Seasonal » Thu Mar 12, 2020 2:39 pm

TinyElvis wrote:
Thu Mar 12, 2020 2:27 pm
Seasonal wrote:
Thu Mar 12, 2020 1:32 pm
What reaction would you expect to a pandemic that is causing many deaths and that appears to be causing great damage to the global economy? One that was unheard of a couple of months ago and is accelerating at a rapid rate.
My first thought definitely wasn't to liquidate my accounts, but that's just me.. :)
That's not the issue. For every share sold there's a share that's bought. Price is going down because the market rationally expects a slower economy. Whether it's overreacting is another question.

As one commentator put it, "The crash is happening with unprecedented speed for a simple reason, which is that we’ve just never seen anything like a complete simultaneous shutdown of so many parts of the economy like this before."

drk
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Re: Coronavirus and the market

Post by drk » Thu Mar 12, 2020 2:44 pm

TinyElvis wrote:
Thu Mar 12, 2020 1:21 pm
3 years gone in 3 weeks. Investors around the world selling equities in droves. Non-stop television coverage. Seems odd to me.
Markets are forward-looking. Gains over the last three years don't mean that businesses will show similar performance this year this year.

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Re: Coronavirus and the market

Post by Lee_WSP » Thu Mar 12, 2020 2:56 pm

drk wrote:
Thu Mar 12, 2020 2:44 pm
TinyElvis wrote:
Thu Mar 12, 2020 1:21 pm
3 years gone in 3 weeks. Investors around the world selling equities in droves. Non-stop television coverage. Seems odd to me.
Markets are forward-looking. Gains over the last three years don't mean that businesses will show similar performance this year this year.
The only rule markets follow is supply and demand. Right now there’s no demand.

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