Coronavirus and the market

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OpenMinded1
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Re: Coronavirus and the market

Post by OpenMinded1 »

COVID-19 is of course the elephant in the room in terms of what the market is doing, but my impression is that the market downturn was made significantly worse by the oil war going on between Russia and Saudi Arabia. Noticed that during the few years leading up to this, the market seemed to react negatively when oil went below $50 a barrel. Also, noticed that the oil pricing war was brought up during the administration's press conference today, and President Trump said he would get involved when he thought it was appropriate. Any thoughts on the price war's effect on the market.
nigel_ht
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Re: Coronavirus and the market

Post by nigel_ht »

frugaltigris wrote: Thu Mar 19, 2020 11:02 am I have a confusion. If I have some money to invest for the time period of 20 years in a taxable account, is it more beneficial to DCA in this climate or shall I do lump sum and tax loss harvest. Thanks.
nigel_ht wrote: Thu Mar 19, 2020 7:35 am
Thesaints wrote: Wed Mar 18, 2020 1:18 pm If we can find a silver lining in all this, it will be finally sufficient to refer to the first page of this thread anyone daring to express doubts on the benefits of cost averaging.
Lol, now that’s optimistic.

Re-reading the first page I hope the person asking whether to lump sum or dca did a dca. Likewise on the second page someone wanted to pull out and reinvest later. For their own peace of mind I hope they followed their own analysis of the situation and got out.

Hindsight is hindsight but while a some posters caught on early on the economic and market impact of China’s action the general boglehead consensus was wrong.

You’ll never get the loudest voices here to accept that moving to a conservative AA is no more and no less market timing than “buying the dip” that they cheer on.

Or that doing a DCA for a large sum isn’t prudent in some cases.
DCA wins 30% of the time.
Lump Sum wins 70% of the time.

When DCA wins is when the market is in decline. When Lump sum wins is when the market is rising.

https://personal.vanguard.com/pdf/ISGDCA.pdf

Look at table 2. Where in that chart do you believe we are today?

And in the worst decile DCA underperformed lump sum by "only" 8.3%.

"Figure 2 displays the return differences between both strategies in each of our global markets. For example, in the worst decile of portfolio performance in each country, an immediate investment underperformed investment over a 12-month period by an average of 8.3% in the United States,"

8.3% possible underperformance vs the current downside risks...I'm thinking it's a no brainer to DCA if the amount is more than say 5% of your total portfolio. Anything less than that isn't worth the trouble to DCA. Just jump in.
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prudent
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Re: Coronavirus and the market

Post by prudent »

Posts not discussing the market are off-topic and have been removed. Please use this thread for market impacts.

There are 3 threads:

- Market impacts: Coronavirus and the market (this one)

- Preparations: Coronavirus (Consumer Issues) How you are preparing?

- Everything else: Bogleheads community discussion - Coronavirus
MnD
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Re: Coronavirus and the market

Post by MnD »

This dataset seems useful for tracking job loss/regain in the small biz restaurant, food & beverage, retail and services sector.
-39% as of yesterday. :shock:

https://docs.google.com/spreadsheets/d/ ... gmail_link#

This data set is prepared by Homebase, a free scheduling and time tracking tool used by 100,000+ local businesses and their hourly employees. Homebase's customers in the US primarily consist of restaurant, food & beverage, retail and services and are largely individual owned/operator managed businesses.
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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ReformedSpender
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Re: Coronavirus and the market

Post by ReformedSpender »

MnD wrote: Thu Mar 19, 2020 1:31 pm This dataset seems useful for tracking job loss/regain in the small biz restaurant, food & beverage, retail and services sector.
-39% as of yesterday. :shock:

https://docs.google.com/spreadsheets/d/ ... gmail_link#

This data set is prepared by Homebase, a free scheduling and time tracking tool used by 100,000+ local businesses and their hourly employees. Homebase's customers in the US primarily consist of restaurant, food & beverage, retail and services and are largely individual owned/operator managed businesses.
...WOW :(
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.
peskypesky
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Re: Coronavirus and the market

Post by peskypesky »

Looks like the chloroquine rally fizzled....
frugaltigris
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Re: Coronavirus and the market

Post by frugaltigris »

That study does not mention impact of tax loss harvesting.

nigel_ht wrote: Thu Mar 19, 2020 12:34 pm
frugaltigris wrote: Thu Mar 19, 2020 11:02 am I have a confusion. If I have some money to invest for the time period of 20 years in a taxable account, is it more beneficial to DCA in this climate or shall I do lump sum and tax loss harvest. Thanks.
nigel_ht wrote: Thu Mar 19, 2020 7:35 am
Thesaints wrote: Wed Mar 18, 2020 1:18 pm If we can find a silver lining in all this, it will be finally sufficient to refer to the first page of this thread anyone daring to express doubts on the benefits of cost averaging.
Lol, now that’s optimistic.

Re-reading the first page I hope the person asking whether to lump sum or dca did a dca. Likewise on the second page someone wanted to pull out and reinvest later. For their own peace of mind I hope they followed their own analysis of the situation and got out.

Hindsight is hindsight but while a some posters caught on early on the economic and market impact of China’s action the general boglehead consensus was wrong.

You’ll never get the loudest voices here to accept that moving to a conservative AA is no more and no less market timing than “buying the dip” that they cheer on.

Or that doing a DCA for a large sum isn’t prudent in some cases.
DCA wins 30% of the time.
Lump Sum wins 70% of the time.

When DCA wins is when the market is in decline. When Lump sum wins is when the market is rising.

https://personal.vanguard.com/pdf/ISGDCA.pdf

Look at table 2. Where in that chart do you believe we are today?

And in the worst decile DCA underperformed lump sum by "only" 8.3%.

"Figure 2 displays the return differences between both strategies in each of our global markets. For example, in the worst decile of portfolio performance in each country, an immediate investment underperformed investment over a 12-month period by an average of 8.3% in the United States,"

8.3% possible underperformance vs the current downside risks...I'm thinking it's a no brainer to DCA if the amount is more than say 5% of your total portfolio. Anything less than that isn't worth the trouble to DCA. Just jump in.
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LadyGeek
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Re: Coronavirus and the market

Post by LadyGeek »

I removed a post related to the coronavirus only (duplicated in Bogleheads community discussion - Coronavirus).

Please use this thread for market discussions.
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willthrill81
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Re: Coronavirus and the market

Post by willthrill81 »

The Italian stock market may have already reached bottom. It peaked on 2/19 and quickly went into a 43% drawdown by 3/12. Since then, it is up 4% and seems to be trending upward.

I wonder if we will see a similar pattern in the U.S.
“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
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canadianbacon
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Re: Coronavirus and the market

Post by canadianbacon »

willthrill81 wrote: Thu Mar 19, 2020 6:53 pm The Italian stock market may have already reached bottom. It peaked on 2/19 and quickly went into a 43% drawdown by 3/12. Since then, it is up 4% and seems to be trending upward.

I wonder if we will see a similar pattern in the U.S.
I wonder to what degree the ban on short selling is helping. Can't sell what you don't have.
Bulls make money, bears make money, pigs get slaughtered.
Rosencrantz1
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Re: Coronavirus and the market

Post by Rosencrantz1 »

willthrill81 wrote: Thu Mar 19, 2020 6:53 pm The Italian stock market may have already reached bottom. It peaked on 2/19 and quickly went into a 43% drawdown by 3/12. Since then, it is up 4% and seems to be trending upward.

I wonder if we will see a similar pattern in the U.S.
Do you know whether the trending upward you've noticed is correlated to (new) coronavirus cases in Italy?
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ray.james
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Re: Coronavirus and the market

Post by ray.james »

Rosencrantz1 wrote: Thu Mar 19, 2020 7:11 pm
willthrill81 wrote: Thu Mar 19, 2020 6:53 pm The Italian stock market may have already reached bottom. It peaked on 2/19 and quickly went into a 43% drawdown by 3/12. Since then, it is up 4% and seems to be trending upward.

I wonder if we will see a similar pattern in the U.S.
Do you know whether the trending upward you've noticed is correlated to (new) coronavirus cases in Italy?
In 2008, we had that in USA. On both naked shorts and shorts.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
CT-Scott
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Re: Coronavirus and the market

Post by CT-Scott »

Senate Republicans release massive economic stimulus bill for coronavirus response
https://www.washingtonpost.com/business ... -stimulus/

According to that article, the stimulus checks will have a phase-out based on your 2018 AMT. So, I guess, like 2008, the plan is for the proletariat to give a boost to the economy via consumer spending. The middle-class will just have to eat their 401k losses, patiently "stay the course", and push out their planned retirement dates an extra 5+ years.

But what do the rest of you think these new details on this stimulus bill will have on the stock market tomorrow? I'm looking for specific actionable items as to how I should plan accordingly tomorrow with the stock market? Should I adjust my AA to more/less stock/bonds?
tigers174
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Re: Coronavirus and the market

Post by tigers174 »

CT-Scott wrote: Thu Mar 19, 2020 7:26 pm Senate Republicans release massive economic stimulus bill for coronavirus response
https://www.washingtonpost.com/business ... -stimulus/

According to that article, the stimulus checks will have a phase-out based on your 2018 AMT. So, I guess, like 2008, the plan is for the proletariat to give a boost to the economy via consumer spending. The middle-class will just have to eat their 401k losses, patiently "stay the course", and push out their planned retirement dates an extra 5+ years.

But what do the rest of you think these new details on this stimulus bill will have on the stock market tomorrow? I'm looking for specific actionable items as to how I should plan accordingly tomorrow with the stock market? Should I adjust my AA to more/less stock/bonds?
S&P down 1.8% in Futures. I don't think any checks would be out before early April, if it passes at all.
ImUrHuckleberry
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Re: [Possible Covid 19 treatment] - chloroquine - how to invest

Post by ImUrHuckleberry »

willthrill81 wrote: Thu Mar 19, 2020 10:48 am I don't know where it's produced, but China and India have been producing about 80% of our meds, and India has banned the exportation of all meds, and the last I heard was that China was considering doing the same.
Once we get through this, I have to believe that India's decision to ban exports of API during this crisis will lead to major pharma companies abandoning all operations there. Same for China if they do the same.
7eight9
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Re: Coronavirus and the market

Post by 7eight9 »

Coronavirus Live Updates: California Governor Orders All Residents to Stay Home

The Trump administration asked states to hold off on releasing grim data on unemployment claims, and Italy’s death toll surpassed China’s.

RIGHT NOW
Gov. Gavin Newsom ordered all Californians to stay at home as much as possible beginning tonight, except for essential trips. Many businesses will be closed.

https://www.nytimes.com/2020/03/19/worl ... e=Homepage

This might make for some interesting futures action tonight.
I guess it all could be much worse. | They could be warming up my hearse.
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willthrill81
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Re: Coronavirus and the market

Post by willthrill81 »

7eight9 wrote: Thu Mar 19, 2020 8:53 pm Coronavirus Live Updates: California Governor Orders All Residents to Stay Home

The Trump administration asked states to hold off on releasing grim data on unemployment claims, and Italy’s death toll surpassed China’s.

RIGHT NOW
Gov. Gavin Newsom ordered all Californians to stay at home as much as possible beginning tonight, except for essential trips. Many businesses will be closed.

https://www.nytimes.com/2020/03/19/worl ... e=Homepage

This might make for some interesting futures action tonight.
So much for two positive days in a row. Futures are down -1.5%.
Last edited by willthrill81 on Thu Mar 19, 2020 9:06 pm, edited 1 time in total.
“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
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willthrill81
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Re: Coronavirus and the market

Post by willthrill81 »

Rosencrantz1 wrote: Thu Mar 19, 2020 7:11 pm
willthrill81 wrote: Thu Mar 19, 2020 6:53 pm The Italian stock market may have already reached bottom. It peaked on 2/19 and quickly went into a 43% drawdown by 3/12. Since then, it is up 4% and seems to be trending upward.

I wonder if we will see a similar pattern in the U.S.
Do you know whether the trending upward you've noticed is correlated to (new) coronavirus cases in Italy?
Not sure. You can look at the graph in the link and tell me what you think.
“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
Rosencrantz1
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Re: Coronavirus and the market

Post by Rosencrantz1 »

willthrill81 wrote: Thu Mar 19, 2020 9:01 pm
Rosencrantz1 wrote: Thu Mar 19, 2020 7:11 pm
willthrill81 wrote: Thu Mar 19, 2020 6:53 pm The Italian stock market may have already reached bottom. It peaked on 2/19 and quickly went into a 43% drawdown by 3/12. Since then, it is up 4% and seems to be trending upward.

I wonder if we will see a similar pattern in the U.S.
Do you know whether the trending upward you've noticed is correlated to (new) coronavirus cases in Italy?
Not sure. You can look at the graph in the link and tell me what you think.
Agree that Italian market appears to be trending up a bit. If I look at the daily new cases in Italy (Worldometers), it doesn't appear, at least to me, that new cases are peaking quite yet. They seem to have a few days where new cases have fallen... only to spike back up. I did see a headline, though, where analysts implied markets might 'bottom' prior to coronavirus cases peaking. Maybe that's happening in Italy? If one could trust the data coming out of China, that might make a good case study (Chinese equity market performance and new Chinese corona cases).
mrwalken
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Re: Coronavirus and the market

Post by mrwalken »

Italy market is flat because they just started using chloroquine a few days ago. Everybody is watching the death rate. If it peaks and starts rapidly dropping, all markets will shoot through the roof.

We know China and S Korea have been using chloroquine for a while. We know what Trump said today. Italy is using it now. So everybody is watching the numbers.
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willthrill81
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Re: Coronavirus and the market

Post by willthrill81 »

mrwalken wrote: Thu Mar 19, 2020 10:16 pm Italy market is flat because they just started using chloroquine a few days ago. Everybody is watching the death rate. If it peaks and starts rapidly dropping, all markets will shoot through the roof.
Can enough be produced to treat everyone who may contract the virus globally? If not, how long would it take to do so?
“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
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physixfan
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Re: Coronavirus and the market

Post by physixfan »

MnD wrote: Thu Mar 19, 2020 1:31 pm This dataset seems useful for tracking job loss/regain in the small biz restaurant, food & beverage, retail and services sector.
-39% as of yesterday. :shock:

https://docs.google.com/spreadsheets/d/ ... gmail_link#

This data set is prepared by Homebase, a free scheduling and time tracking tool used by 100,000+ local businesses and their hourly employees. Homebase's customers in the US primarily consist of restaurant, food & beverage, retail and services and are largely individual owned/operator managed businesses.
Wow, nice data!
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LadyGeek
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Re: Coronavirus and the market

Post by LadyGeek »

Please see this forum announcement: Please read before posting on coronavirus/COVID-19

If there are any questions, please PM a moderator or myself. Don't post in the thread, thanks.
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vested1
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Re: Coronavirus and the market

Post by vested1 »

CT-Scott wrote: Fri Mar 20, 2020 8:16 am
Stef wrote: Fri Mar 20, 2020 7:32 am https://youtu.be/9PYsVkPtcXk

Video from Ben Felix.
No offense intended to you, but I just watched it and there wasn't anything new there...it's basically the standard boglehead advice which, for anyone who's been following this thread, or who has spent any amount of time in this forum, has already heard a million times.

I have no major disagreement with his (or boglehead) advice, except for what I've previously stated, which is that he (and many bogleheads) make the *assumption* that everyone listening has already previously made a well-reasoned AA strategy appropriate to their age and circumstance, and that everyone has "enough" of an emergency fund. I would posit that the *majority* of people investing in index funds via their 401k and automatic paycheck contributions have neither.

And if you self-reflect and determine that you fall into the category of the "majority" that I mention, then I think it's perfectly reasonable for you to calmly make adjustments, even significant ones, and even in the midst of the panic.
Thank you.

I don't consider myself to be in the majority, far from it, and don't feel compelled to follow any trend. I am not now, nor ever have been a victim of panic. I have benefited tremendously from the wisdom dispensed here, for which I am eternally grateful. However, I did something recently that completely contradicts BH philosophy, and in my estimation would do the same again in a similar circumstance. "Similar circumstance" is the key term here, as I personally don't feel that there has been anything similar to this in the past, at least not in my experience, or in anything I've read.

After careful consideration I liquidated all of my positions in stocks and bonds and converted entirely to cash at the point where the cumulative loss conflicted with my long term plan. (Gasps from the crowd). :shock:

My belief, right or wrong is that, regardless of the tired cliche, this time is different. Never in my long lifetime has the consumer economy shut down indefinitely. Consumerism drives the markets, or at least largely so. Fear and greed drive the rest. I am not fearful, and I try to recognize my greed when it raises it's ugly head.

I track the progress of our portfolio religiously and have been adhering to a 60/40 AA for many years, holding fast through the fluctuations in the markets and using rebalancing bands of 5% to keep things balanced appropriately. I have accomplished this mostly through proportions of withdrawals when needed, bringing the AA back into line. I accept the fact that I have locked in my losses, but did not calculate those losses from the high point in mid January, but by year end statements ending December 31st 2019. This calculation helps keep things in perspective, as measuring from a temporary high is never a good method to determine a course of action.

I also review my plan periodically to assess whether my projections of portfolio balance have been accurate. Needless to say, the market has been kind and we are far ahead of what I considered acceptable when I formulated the plan. My goal was never to die with the biggest pile of cash, but to be able to delay full SS, which will cover all expenses and discretionary spending, while leaving a reasonable legacy in the long term.

I am not sharing this in an attempt to undermine BH philosophy, and neither am I am member of some secret society to do so. I just want to provide some insight into why taking such a drastic step at this time can be reasonable, but only under strict circumstances. I fully intend to return to my previous AA once a verified vaccine has been created. As I mentioned in previous threads throughout the years, I still intend to increase stock allocation gradually at the onset of full SS when I file in two years at age 70 to a target AA of 70/30.

Our current portfolio balance, if left in cash, would sustain projected withdrawals for 34.5 years until my age 102. If I did this I would become a victim of inflation, which would reduce that number and portfolio balance significantly, so of course I won't do that. I have stayed the course with larger losses. Barring unforeseen circumstances there will be no need to withdraw anything from the portfolio this year, or any time until RMD's begin in 4 years due to fixed income from a pension and current SS, plus cash savings in the bank not included in the portfolio. We have no bills other than taxes and utilities.

At the point of sale our portfolio was down about 16%, with both stocks and bonds below the 2019 year end level. We had only three VG index fund positions. Using the sale price of each position as a comparison the portfolio would currently be down 24% had I not sold when I did. I would be just as committed if it had been up an additional 8% rather than down 8% further.

My motivation for the sale is as follows:
- Both my wife and I are in the elevated risk group of dying from the virus.
- My wife has the additional risk factors of immunodeficiency, COPD, and asthma.
- Two of our three adult children could really use our help in the form of an inheritance whenever that occurs. Until then I will continue to encourage them to improve their situation on their own by making good decisions concerning their finances. We will split their inheritance equally in three parts to avoid the appearance of favoritism.
- If I were to allow our losses to decline to 50%, and we were suddenly gone, I don't trust that they would be able to thrive as much as we'd like them to once they receive the remaining amount through inheritance. This might seem unreasonably alarmist, but I consider it simply practical. Neither my wife nor I are afraid of dying.

I council our daughter (the only one of three) who has established a retirement account to not only stay the course, but to increase contributions whenever possible. Then again, she's 37, may work another 30 years, and is at 100% stocks.

Hopefully this doesn't mean I will be tarred and feathered and carried out of town on a rail. If I am I will miss you all but will continue to lurk.
CT-Scott
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Re: Coronavirus and the market

Post by CT-Scott »

vested1 wrote: Fri Mar 20, 2020 9:39 amI track the progress of our portfolio religiously and have been adhering to a 60/40 AA for many years, holding fast through the fluctuations in the markets and using rebalancing bands of 5% to keep things balanced appropriately.

...

As I mentioned in previous threads throughout the years, I still intend to increase stock allocation gradually at the onset of full SS when I file in two years at age 70 to a target AA of 70/30.
Just to clarify...are you saying that you were at 60% stocks and intend to move later to 70% stocks? I believe that the first number is most often listed as the percentage of stocks.
vested1
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Re: Coronavirus and the market

Post by vested1 »

CT-Scott wrote: Fri Mar 20, 2020 9:55 am
vested1 wrote: Fri Mar 20, 2020 9:39 amI track the progress of our portfolio religiously and have been adhering to a 60/40 AA for many years, holding fast through the fluctuations in the markets and using rebalancing bands of 5% to keep things balanced appropriately.

...

As I mentioned in previous threads throughout the years, I still intend to increase stock allocation gradually at the onset of full SS when I file in two years at age 70 to a target AA of 70/30.
Just to clarify...are you saying that you were at 60% stocks and intend to move later to 70% stocks? I believe that the first number is most often listed as the percentage of stocks.
Yes, I was at 60% stocks and will be again after I get back in. I plan to go to 70% stocks starting at age 70, about 1% a year for ten years after full SS kicks in. This may seem contradictory to pulling out of the market when I did, but a complete closure of non-essential business , especially if it lasts 12 to 18 months may decimate the markets, and maybe for a sustained period. If any of the factors I described as my motivation were missing I wouldn't have done it.

To be clear, my main focus is on ensuring a legacy for our children should something happen to us in the near future, not as a long term strategy. I don't imagine there are many that would agree with me, especially not in this forum. That's OK. Not many are in my same situation.
nigel_ht
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Re: Coronavirus and the market

Post by nigel_ht »

vested1 wrote: Fri Mar 20, 2020 9:39 am
I am not sharing this in an attempt to undermine BH philosophy, and neither am I am member of some secret society to do so.
...
My motivation for the sale is as follows:
- Both my wife and I are in the elevated risk group of dying from the virus.
- My wife has the additional risk factors of immunodeficiency, COPD, and asthma.
- Two of our three adult children could really use our help in the form of an inheritance whenever that occurs. Until then I will continue to encourage them to improve their situation on their own by making good decisions concerning their finances. We will split their inheritance equally in three parts to avoid the appearance of favoritism.
- If I were to allow our losses to decline to 50%, and we were suddenly gone, I don't trust that they would be able to thrive as much as we'd like them to once they receive the remaining amount through inheritance. This might seem unreasonably alarmist, but I consider it simply practical. Neither my wife nor I are afraid of dying.

I council our daughter (the only one of three) who has established a retirement account to not only stay the course, but to increase contributions whenever possible. Then again, she's 37, may work another 30 years, and is at 100% stocks.

Hopefully this doesn't mean I will be tarred and feathered and carried out of town on a rail. If I am I will miss you all but will continue to lurk.
First, you forget the first rule of you never talk about the secret society. Especially not to deny there is one or that you are not a member.

Second, whatever other flack you get from here, to me it makes sense to quit playing the game after you've won. Maybe not cash out entirely but yeah, there's no real reason for you to stay in and risk losses that you may never recover from in your lifetime. There is a thread somewhere about the joy of not being in the game during this current crisis.

My recommendation to you is to put all the money in a trust, given them each 20% when you both pass away and the remaining 40% be managed to provide them with an annual distribution and maybe fund 529s for any current and future grandkids.

Whether 20% is enough or not enough to get them out of this current predicament almost doesn't matter...they can always dig themselves back in even if you sole their problem and 20% seems like enough to give a helping push if they really are trying to dig themselves out.

An annual distribution of gains from a principal they can't touch seems to be a moderately more secure safety net if that is your intention.
Ruger23
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Re: Coronavirus and the market

Post by Ruger23 »

With CA and now NY on lockdown, I'm shocked the market isn't reacting
CT-Scott
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Re: Coronavirus and the market

Post by CT-Scott »

vested1 wrote: Fri Mar 20, 2020 10:42 amYes, I was at 60% stocks and will be again after I get back in. I plan to go to 70% stocks starting at age 70, about 1% a year for ten years after full SS kicks in.

...

To be clear, my main focus is on ensuring a legacy for our children should something happen to us in the near future, not as a long term strategy.
Gotcha, and I thought that might be the case (i.e., You aren't really investing for your own retirement, so your age is not a factor in deciding on your AA. Rather, it's for your children, who have a much longer time forecast for needing the money).
michaelingp
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Re: Coronavirus and the market

Post by michaelingp »

vested1 wrote: Fri Mar 20, 2020 9:39 am I fully intend to return to my previous AA once a verified vaccine has been created.
Ah, therein lies the rub. Like you, I liquidated a lot of stock before the market declined much. And I fully intend to get back into stocks. But waiting for the vaccine doesn't seem like a useful marker for me. A lot of people with more time and brains than me would be watching the pharmaceutical business like hawks, and before the mass media caught on that the vaccine was near, the market would probably have already shot up, maybe to the point where we sold. I need a better marker of when to get back in. Plus I don't like my new obsession with the news, and staying up nights trying to figure out the right time.
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Re: Coronavirus and the market

Post by vested1 »

nigel_ht wrote: Fri Mar 20, 2020 10:44 am
vested1 wrote: Fri Mar 20, 2020 9:39 am
I am not sharing this in an attempt to undermine BH philosophy, and neither am I am member of some secret society to do so.
...
My motivation for the sale is as follows:
- Both my wife and I are in the elevated risk group of dying from the virus.
- My wife has the additional risk factors of immunodeficiency, COPD, and asthma.
- Two of our three adult children could really use our help in the form of an inheritance whenever that occurs. Until then I will continue to encourage them to improve their situation on their own by making good decisions concerning their finances. We will split their inheritance equally in three parts to avoid the appearance of favoritism.
- If I were to allow our losses to decline to 50%, and we were suddenly gone, I don't trust that they would be able to thrive as much as we'd like them to once they receive the remaining amount through inheritance. This might seem unreasonably alarmist, but I consider it simply practical. Neither my wife nor I are afraid of dying.

I council our daughter (the only one of three) who has established a retirement account to not only stay the course, but to increase contributions whenever possible. Then again, she's 37, may work another 30 years, and is at 100% stocks.

Hopefully this doesn't mean I will be tarred and feathered and carried out of town on a rail. If I am I will miss you all but will continue to lurk.
First, you forget the first rule of you never talk about the secret society. Especially not to deny there is one or that you are not a member.

Second, whatever other flack you get from here, to me it makes sense to quit playing the game after you've won. Maybe not cash out entirely but yeah, there's no real reason for you to stay in and risk losses that you may never recover from in your lifetime. There is a thread somewhere about the joy of not being in the game during this current crisis.

My recommendation to you is to put all the money in a trust, given them each 20% when you both pass away and the remaining 40% be managed to provide them with an annual distribution and maybe fund 529s for any current and future grandkids.

Whether 20% is enough or not enough to get them out of this current predicament almost doesn't matter...they can always dig themselves back in even if you sole their problem and 20% seems like enough to give a helping push if they really are trying to dig themselves out.

An annual distribution of gains from a principal they can't touch seems to be a moderately more secure safety net if that is your intention.
The house is in our trust at about 500k resale value, and is paid off. Step up in value should serve them well if something happens. Our beneficiaries for the IRA's are set, as three equal parts, and even though two of our daughters have ignored retirement planning, we also wish to express that we trust them (there's that word again) to make good decisions going forward. If one of them dies before we do, their portion is split between their children in trust until they come of age.

I have asked the daughter who has the retirement savings, a CPA by profession, to help the other two with advice in the case of our death. I also talked to her within the last year about the direction of her investments, making clear that I was only stating principles, not giving advice. As a result she transferred everything to index funds at VG and her gain immediately increased thereafter. I spoke with her yesterday on the phone and she is committed to staying the course.
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Re: Coronavirus and the market

Post by LadyGeek »

An off-topic post has been removed. The main intent of the post must be related to the market (financial in nature).

Posts related to the coronoavirus in a general sense should be made here: Bogleheads community discussion - Coronavirus, feel free to mention market impacts if needed.
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Re: Coronavirus and the market

Post by vested1 »

michaelingp wrote: Fri Mar 20, 2020 10:55 am
vested1 wrote: Fri Mar 20, 2020 9:39 am I fully intend to return to my previous AA once a verified vaccine has been created.
Ah, therein lies the rub. Like you, I liquidated a lot of stock before the market declined much. And I fully intend to get back into stocks. But waiting for the vaccine doesn't seem like a useful marker for me. A lot of people with more time and brains than me would be watching the pharmaceutical business like hawks, and before the mass media caught on that the vaccine was near, the market would probably have already shot up, maybe to the point where we sold. I need a better marker of when to get back in. Plus I don't like my new obsession with the news, and staying up nights trying to figure out the right time.
Barring some miracle cure I would say no time soon.
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Re: Coronavirus and the market

Post by jminv »

OpenMinded1 wrote: Thu Mar 19, 2020 12:08 pm COVID-19 is of course the elephant in the room in terms of what the market is doing, but my impression is that the market downturn was made significantly worse by the oil war going on between Russia and Saudi Arabia. Noticed that during the few years leading up to this, the market seemed to react negatively when oil went below $50 a barrel. Also, noticed that the oil pricing war was brought up during the administration's press conference today, and President Trump said he would get involved when he thought it was appropriate. Any thoughts on the price war's effect on the market.
'Oil war' of the last week probably had something to do with a global slowdown. Preceeding this 'war' was a 30% drop in prices this year since demand is decreasing due to covid induced recession plus slowdown earlier in the year that wasn't covid related. Wanting to decrease prices in a recession is what OPEC used to do anyway since it keeps consumers from substituting and is a form of stimulus so they can get back to a period of higher prices sooner. Price decreases were inevitable, Russia recognized it and Saudi didn't apparently. OPEC will eventually go the way of the dinosaur as oil becomes less important to the economy and the cartel becomes more difficult to keep together. Lowering prices in a recession is a way to prolong that day.

Stock prices react negatively at the same time oil gets cheap because it means demand is down which is why oil prices drop in the first place. Less demand means economy is not doing so hot. Before the 'war' prices had already dropped 30% this year.

Trump wants to get involved because it will lead to job losses in the oil and gas industry in the United States. But lower oil prices are a good thing for the broader economy but of course not those who are going to lose their jobs. Oil and gas is a cyclical industry so it's not like this is unexpected and it's also why salaries in oil and gas are high - you have to be compensated for this risk. Kind of hard to ignore that the world is entering a recession, though, and demand for oil is down.
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Re: Coronavirus and the market

Post by Stinky »

Ruger23 wrote: Fri Mar 20, 2020 10:45 am With CA and now NY on lockdown, I'm shocked the market isn't reacting
I think that the current level of the market already factors in the lockdowns. “Reaction” has already happened.
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Re: Coronavirus and the market

Post by Seasonal »

Stinky wrote: Fri Mar 20, 2020 11:41 am
Ruger23 wrote: Fri Mar 20, 2020 10:45 am With CA and now NY on lockdown, I'm shocked the market isn't reacting
I think that the current level of the market already factors in the lockdowns. “Reaction” has already happened.
Agreed. Perhaps down a bit because lockdown has gone from very probable to actually happening. No doubt more states will follow.
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Re: Coronavirus and the market

Post by Seasonal »

vested1 wrote: Fri Mar 20, 2020 9:39 am My belief, right or wrong is that, regardless of the tired cliche, this time is different. Never in my long lifetime has the consumer economy shut down indefinitely. Consumerism drives the markets, or at least largely so. Fear and greed drive the rest. I am not fearful, and I try to recognize my greed when it raises it's ugly head.
I agree that this time it's different. This is much different from previous down markets, economic slowdowns, etc. Those have been amenable to time and fiscal and monetary policy. Perhaps the Spanish Flu is comparable, but that's one data point over 100 years ago.

The real question for investors is how much of a difference it is and how much it will matter. We are in the unknown and the unknown is bad for markets (and humanity, for that matter).
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Re: Coronavirus and the market

Post by Mr.Wu »

Rosencrantz1 wrote: Thu Mar 19, 2020 10:00 pm
willthrill81 wrote: Thu Mar 19, 2020 9:01 pm
Rosencrantz1 wrote: Thu Mar 19, 2020 7:11 pm
willthrill81 wrote: Thu Mar 19, 2020 6:53 pm The Italian stock market may have already reached bottom. It peaked on 2/19 and quickly went into a 43% drawdown by 3/12. Since then, it is up 4% and seems to be trending upward.

I wonder if we will see a similar pattern in the U.S.
Do you know whether the trending upward you've noticed is correlated to (new) coronavirus cases in Italy?
Not sure. You can look at the graph in the link and tell me what you think.
Agree that Italian market appears to be trending up a bit. If I look at the daily new cases in Italy (Worldometers), it doesn't appear, at least to me, that new cases are peaking quite yet. They seem to have a few days where new cases have fallen... only to spike back up. I did see a headline, though, where analysts implied markets might 'bottom' prior to coronavirus cases peaking. Maybe that's happening in Italy? If one could trust the data coming out of China, that might make a good case study (Chinese equity market performance and new Chinese corona cases).
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viewtopic.php?f=10&t=306271&p=5074897#p5074897
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Re: Coronavirus and the market

Post by NearlyRetired »

vested1 wrote: Fri Mar 20, 2020 9:39 am
CT-Scott wrote: Fri Mar 20, 2020 8:16 am
Stef wrote: Fri Mar 20, 2020 7:32 am https://youtu.be/9PYsVkPtcXk

Video from Ben Felix.
No offense intended to you, but I just watched it and there wasn't anything new there...it's basically the standard boglehead advice which, for anyone who's been following this thread, or who has spent any amount of time in this forum, has already heard a million times.

I have no major disagreement with his (or boglehead) advice, except for what I've previously stated, which is that he (and many bogleheads) make the *assumption* that everyone listening has already previously made a well-reasoned AA strategy appropriate to their age and circumstance, and that everyone has "enough" of an emergency fund. I would posit that the *majority* of people investing in index funds via their 401k and automatic paycheck contributions have neither.

And if you self-reflect and determine that you fall into the category of the "majority" that I mention, then I think it's perfectly reasonable for you to calmly make adjustments, even significant ones, and even in the midst of the panic.
Thank you.

I don't consider myself to be in the majority, far from it, and don't feel compelled to follow any trend. I am not now, nor ever have been a victim of panic. I have benefited tremendously from the wisdom dispensed here, for which I am eternally grateful. However, I did something recently that completely contradicts BH philosophy, and in my estimation would do the same again in a similar circumstance. "Similar circumstance" is the key term here, as I personally don't feel that there has been anything similar to this in the past, at least not in my experience, or in anything I've read.

After careful consideration I liquidated all of my positions in stocks and bonds and converted entirely to cash at the point where the cumulative loss conflicted with my long term plan. (Gasps from the crowd). :shock:

My belief, right or wrong is that, regardless of the tired cliche, this time is different. Never in my long lifetime has the consumer economy shut down indefinitely. Consumerism drives the markets, or at least largely so. Fear and greed drive the rest. I am not fearful, and I try to recognize my greed when it raises it's ugly head.

I track the progress of our portfolio religiously and have been adhering to a 60/40 AA for many years, holding fast through the fluctuations in the markets and using rebalancing bands of 5% to keep things balanced appropriately. I have accomplished this mostly through proportions of withdrawals when needed, bringing the AA back into line. I accept the fact that I have locked in my losses, but did not calculate those losses from the high point in mid January, but by year end statements ending December 31st 2019. This calculation helps keep things in perspective, as measuring from a temporary high is never a good method to determine a course of action.

I also review my plan periodically to assess whether my projections of portfolio balance have been accurate. Needless to say, the market has been kind and we are far ahead of what I considered acceptable when I formulated the plan. My goal was never to die with the biggest pile of cash, but to be able to delay full SS, which will cover all expenses and discretionary spending, while leaving a reasonable legacy in the long term.

I am not sharing this in an attempt to undermine BH philosophy, and neither am I am member of some secret society to do so. I just want to provide some insight into why taking such a drastic step at this time can be reasonable, but only under strict circumstances. I fully intend to return to my previous AA once a verified vaccine has been created. As I mentioned in previous threads throughout the years, I still intend to increase stock allocation gradually at the onset of full SS when I file in two years at age 70 to a target AA of 70/30.

Our current portfolio balance, if left in cash, would sustain projected withdrawals for 34.5 years until my age 102. If I did this I would become a victim of inflation, which would reduce that number and portfolio balance significantly, so of course I won't do that. I have stayed the course with larger losses. Barring unforeseen circumstances there will be no need to withdraw anything from the portfolio this year, or any time until RMD's begin in 4 years due to fixed income from a pension and current SS, plus cash savings in the bank not included in the portfolio. We have no bills other than taxes and utilities.

At the point of sale our portfolio was down about 16%, with both stocks and bonds below the 2019 year end level. We had only three VG index fund positions. Using the sale price of each position as a comparison the portfolio would currently be down 24% had I not sold when I did. I would be just as committed if it had been up an additional 8% rather than down 8% further.

My motivation for the sale is as follows:
- Both my wife and I are in the elevated risk group of dying from the virus.
- My wife has the additional risk factors of immunodeficiency, COPD, and asthma.
- Two of our three adult children could really use our help in the form of an inheritance whenever that occurs. Until then I will continue to encourage them to improve their situation on their own by making good decisions concerning their finances. We will split their inheritance equally in three parts to avoid the appearance of favoritism.
- If I were to allow our losses to decline to 50%, and we were suddenly gone, I don't trust that they would be able to thrive as much as we'd like them to once they receive the remaining amount through inheritance. This might seem unreasonably alarmist, but I consider it simply practical. Neither my wife nor I are afraid of dying.

I council our daughter (the only one of three) who has established a retirement account to not only stay the course, but to increase contributions whenever possible. Then again, she's 37, may work another 30 years, and is at 100% stocks.

Hopefully this doesn't mean I will be tarred and feathered and carried out of town on a rail. If I am I will miss you all but will continue to lurk.
I think you have made an eminently sensible decision tbh. If I could afford do the same I am sure I possibly would've.
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Re: Coronavirus and the market

Post by Mr.Wu »

Not sure if someone has posted this. If he is right, this rapid sell-off is mainly due to unregulated high leverage of the banks, COVID-19 was just the trigger. It could have been a mild correction, instead of bear market.

https://www.cnbc.com/video/2020/03/19/w ... rm=chamath
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Re: Coronavirus and the market

Post by gmaynardkrebs »

vested1 wrote: Fri Mar 20, 2020 9:39 am Our current portfolio balance, if left in cash, would sustain projected withdrawals for 34.5 years until my age 102. If I did this I would become a victim of inflation, which would reduce that number and portfolio balance significantly, so of course I won't do that.
Have you looked into TIPS to protect from inflation?
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Re: Coronavirus and the market

Post by JonnyDVM »

Seasonal wrote: Fri Mar 20, 2020 11:47 am
Stinky wrote: Fri Mar 20, 2020 11:41 am
Ruger23 wrote: Fri Mar 20, 2020 10:45 am With CA and now NY on lockdown, I'm shocked the market isn't reacting
I think that the current level of the market already factors in the lockdowns. “Reaction” has already happened.
Agreed. Perhaps down a bit because lockdown has gone from very probable to actually happening. No doubt more states will follow.

I think a lockdown ordered from the federal level is already assumed at this point. I’m expecting the order to come down sometime next week. I am also puzzled by the relative market calmness but “it was already assumed” makes sense.
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Re: Coronavirus and the market

Post by Ruger23 »

Will anything happen to those in congress with a heads up while downplaying the risks and selling, one even investing in telework?

Seems at least 3-4, i lost count, are likely guilty of this.
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Re: Coronavirus and the market

Post by vested1 »

gmaynardkrebs wrote: Fri Mar 20, 2020 12:12 pm
vested1 wrote: Fri Mar 20, 2020 9:39 am Our current portfolio balance, if left in cash, would sustain projected withdrawals for 34.5 years until my age 102. If I did this I would become a victim of inflation, which would reduce that number and portfolio balance significantly, so of course I won't do that.
Have you looked into TIPS to protect from inflation?
Not yet. Just letting it sink in and watching. I had 3 ETF's so I was able to capture the price immediately. By the end of the day the S&P had dropped another 4% points and the bonds were about 1% down. Not that short term really matters with the current volatility. I had a friend who held mutual funds and decided to sell also. He put in his order then watched the price drop until the market closed.

Pretty sad to see 5-6% fluctuation and see it as a normal day.
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Re: Coronavirus and the market

Post by Rosencrantz1 »

Mr.Wu wrote: Fri Mar 20, 2020 11:58 am
Rosencrantz1 wrote: Thu Mar 19, 2020 10:00 pm
willthrill81 wrote: Thu Mar 19, 2020 9:01 pm
Rosencrantz1 wrote: Thu Mar 19, 2020 7:11 pm
willthrill81 wrote: Thu Mar 19, 2020 6:53 pm The Italian stock market may have already reached bottom. It peaked on 2/19 and quickly went into a 43% drawdown by 3/12. Since then, it is up 4% and seems to be trending upward.

I wonder if we will see a similar pattern in the U.S.
Do you know whether the trending upward you've noticed is correlated to (new) coronavirus cases in Italy?
Not sure. You can look at the graph in the link and tell me what you think.
Agree that Italian market appears to be trending up a bit. If I look at the daily new cases in Italy (Worldometers), it doesn't appear, at least to me, that new cases are peaking quite yet. They seem to have a few days where new cases have fallen... only to spike back up. I did see a headline, though, where analysts implied markets might 'bottom' prior to coronavirus cases peaking. Maybe that's happening in Italy? If one could trust the data coming out of China, that might make a good case study (Chinese equity market performance and new Chinese corona cases).
SimpleGift has done us a favor.

viewtopic.php?f=10&t=306271&p=5074897#p5074897

Thank you, Mr Wu. I had missed that.
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Re: Coronavirus and the market

Post by OpenMinded1 »

jminv wrote: Fri Mar 20, 2020 11:37 am
OpenMinded1 wrote: Thu Mar 19, 2020 12:08 pm COVID-19 is of course the elephant in the room in terms of what the market is doing, but my impression is that the market downturn was made significantly worse by the oil war going on between Russia and Saudi Arabia. Noticed that during the few years leading up to this, the market seemed to react negatively when oil went below $50 a barrel. Also, noticed that the oil pricing war was brought up during the administration's press conference today, and President Trump said he would get involved when he thought it was appropriate. Any thoughts on the price war's effect on the market.
'Oil war' of the last week probably had something to do with a global slowdown. Preceeding this 'war' was a 30% drop in prices this year since demand is decreasing due to covid induced recession plus slowdown earlier in the year that wasn't covid related. Wanting to decrease prices in a recession is what OPEC used to do anyway since it keeps consumers from substituting and is a form of stimulus so they can get back to a period of higher prices sooner. Price decreases were inevitable, Russia recognized it and Saudi didn't apparently. OPEC will eventually go the way of the dinosaur as oil becomes less important to the economy and the cartel becomes more difficult to keep together. Lowering prices in a recession is a way to prolong that day.

Stock prices react negatively at the same time oil gets cheap because it means demand is down which is why oil prices drop in the first place. Less demand means economy is not doing so hot. Before the 'war' prices had already dropped 30% this year.

Trump wants to get involved because it will lead to job losses in the oil and gas industry in the United States. But lower oil prices are a good thing for the broader economy but of course not those who are going to lose their jobs. Oil and gas is a cyclical industry so it's not like this is unexpected and it's also why salaries in oil and gas are high - you have to be compensated for this risk. Kind of hard to ignore that the world is entering a recession, though, and demand for oil is down.
Thanks for the response.
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Re: Coronavirus and the market

Post by Seasonal »

GOLDMAN SACHS: "We now forecast quarter-on-quarter annualized growth rates of -6% in Q1, -24% in Q2, +12% in Q3, and +10% in Q4 ... full-year growth at -3.8% on an annual average basis... we estimate a 5.5pp increase in the U3 unemployment rate to a 9% peak in coming quarters"
https://twitter.com/JimPethokoukis/stat ... 9709250560

Seems optimistic, but, as the say goes, nobody knows nothing.
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Re: Coronavirus and the market

Post by Scooter57 »

Goldman Sachs and the rest of the analysts always provide rosey estimates and revise them only when it is obvious they are wrong. Their job is to sell stocks.

The most optimistic estimates are that a vaccine is a year away. As there is currently no effective vaccine for any human corona virus that seems like a stretch. But the damage done by just a few months of shutdown, worldwide has no equivalent historically.

It seems very rational to preserve significant gains in such unusual circumstances.

As far as inflation goes, it is the least of the problems ahead of us. Massive job losses lead to deflation as people can't buy. All you have to do to avoid surprise inflation is stay out of bonds, use credit union and non-brokered bank high rate CDs with reasonable early withdrawal penalties, and move to money market funds if rates start accelerating upward.

I took profits in December 2018 and now the large cap indexes I sold are below where I sold them. I put that money into 3.55% CDs, didn't get greedy, and am very glad I did.
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Re: Coronavirus and the market

Post by ofcmetz »

Ruger23 wrote: Fri Mar 20, 2020 10:45 am With CA and now NY on lockdown, I'm shocked the market isn't reacting
5% down today. Looks like the market reacted again in the last hour or so. I do have this feeling that people want to sell more on Fridays rather than risk the weekend's news. One weekend at some point these sellers may get burned. I only hope that is the case since I'm long in the market.

I just read the post about the 60/40 older couple deciding to capitulate and sell at this point. You didn't do much harm in my opinion because you really are only down about 20% total which is just a few years gains. I understand your reasons and wonder if my dad will come to this same conclusion.

That being said, I'm 40 and am doing kind of the opposite. I'm tiptoeing in more during this ride down. I'm slowly going from a 70/30 to an 80/20 allocation in 1% moves until I hit the minimum amount of fixed income that I want to keep. It appears that our jobs will be stable through this and I see the efficient market hypothesis not being able to explain moves like we are having. There will be a lot of pain and loss, but the economy will roar back again at some point and I want to own a bunch of equity when it does.
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Re: Coronavirus and the market

Post by Prahasaurus »

ofcmetz wrote: Sat Mar 21, 2020 12:39 am That being said, I'm 40 and am doing kind of the opposite. I'm tiptoeing in more during this ride down. I'm slowly going from a 70/30 to an 80/20 allocation in 1% moves until I hit the minimum amount of fixed income that I want to keep. It appears that our jobs will be stable through this and I see the efficient market hypothesis not being able to explain moves like we are having. There will be a lot of pain and loss, but the economy will roar back again at some point and I want to own a bunch of equity when it does.
I'm glad your job is stable. I think for a lot of people, that is just not true. I've seen 20% unemployment forecasts and that seems optimistic to me. Global business is at a complete standstill, and most of us are shut in for many, many weeks, likely months. So many people in today's economy are freelancers, consultants, part-time help, independent contractors, etc., and for many of us, business is just completely gone right now. Thank goodness I booked enough revenue in Q1 before this hit to help me and my family survive this year, because otherwise, it would be very difficult.

I agree the market will come roaring back one day. It really depends on when. And how much more this market will continue to fall...

I hate to sound like a broken record here, but two things seem almost certain to me:

1 - The US response to the virus was inept and slow (little mobilization until just recently, little or no testing, very conflicting signals on the severity of this virus, etc.). The impact of that will be felt in about 7-10 days, when New York City hospitals begin to resemble northern Italy. It's going to be incredibly ugly, with indescribable scenes of death and mayhem. The math is clear. It's just a question of when. We'll see this spread to other cities, as well.

2 - Once this finally hits home, once the scenes from New York are shown all over the country, the entire mood of this pandemic will change in very negative and also completely unpredictable ways. Americans will immediately feel betrayed, abandoned, and frightened, much more so than now. We will see extreme panic manifest itself in unpredictable ways.

I do not believe my two points above are even remotely priced into US equity markets, which still likely believe we will be saved the fate of northern Italy by some miracle. Most people see what happened in China or South Korea - bad, but manageable, with a few thousand deaths, and then life getting slowly back to normal - and assume it will happen in the USA. And this is just not the case, at least for the cities that will be hit first. China took draconian measures to stop this virus, South Korea, as well. We have not, and perhaps cannot. What we are doing will help, but for some cities, it's too late.

I admire your bravery in buying equities now. I really hope you are proven right. But another 20-30% drop does not seem farfetched to me, based on what I believe is almost certainly coming.
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