8 days [From new S&P 500 high to 12% correction]

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garlandwhizzer
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8 days [From new S&P 500 high to 12% correction]

Post by garlandwhizzer »

That's how long it took in trading days to go from a new high for the S&P 500 (3386) to a 12% correction (2979). The market mood went from powerful optimism to panic in a little more than a week. Many Wall Street estimates in Dec. 2019 for corporate profit growth for the first half of 2020 were about 5% - 7% increase over 2019. Now those estimates are about zero profit growth relative to 2019, perhaps lower. The whole thing turned 180 degrees almost instantly and the precipitating event, a new virus infection, was anticipated by no one. Unpredictable and unanticipated market action like this can happen at any time. It makes a good case for keeping a balanced portfolio with sufficient amounts of quality fixed income to see you through the tough times without panic selling equity.

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SimpleGift
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Re: 8 days

Post by SimpleGift »

Even if we do get a recessionary drawdown in the U.S. stock market of, say, 25%-30% during this coronavirus pandemic, it should be kept in mind that prior to the coronavirus scare, we weren't seeing the kind of excesses in the U.S. financial markets and economy that we saw in the run-up to the 2000 Tech Crash or to the 2008 Great Recession. So hopefully any potential U.S. recession will turn out be short and mild — though there are WAY too many unknowns at present.
Chicken Little
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Re: 8 days

Post by Chicken Little »

SimpleGift wrote: Thu Feb 27, 2020 9:41 pm Even if we do get a recessionary drawdown in the U.S. stock market of, say, 25%-30% during this coronavirus pandemic, it should be kept in mind that prior to the coronavirus scare, we weren't seeing the kind of excesses in the U.S. financial markets and economy that we saw in the run-up to the 2000 Tech Crash or to the 2008 Great Recession. So hopefully any U.S. recession will turn out be short and mild — though there are WAY too many unknowns at present.
It was Fed-fueled.

Where else was money supposed to go with these bond yields?

They tried to tighten and got their hat handed to them.

So it's a virus. Would have been something else if it wasn't.

As far as excesses, how about all the 100% equity, FIRE, and risk parity?
stocknoob4111
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by stocknoob4111 »

This is typical which is why they say the stock market takes the stairs UP and the elevator DOWN.
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JoMoney
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Re: 8 days

Post by JoMoney »

Chicken Little wrote: Thu Feb 27, 2020 9:55 pm...
Where else was money supposed to go with these bond yields?...
... and where is it going with bond yields now even lower?

Is it the end of the world? People decided to stop saving for an uncertain future when they can spend it today?
That would be good for stock returns for those who survive :mrgreen:
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by whodidntante »

That's why it is dangerous to invest in the total US stock market index fund. :twisted:
am
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by am »

Risk showing up very fast after such a nice stretch. Stocks are real risky. Bonds yields are anemic and stocks are tanking. Would hate to be a retiree right now. No where to hide.

Are we just getting started into a terrible bear or will this blow over by summer as if nothing happened? In either case, this will give us accumulators some shares on sale.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by lessismore22 »

am wrote: Thu Feb 27, 2020 10:57 pm Risk showing up very fast after such a nice stretch. Stocks are real risky. Bonds yields are anemic and stocks are tanking. Would hate to be a retiree right now. No where to hide.

Are we just getting started into a terrible bear or will this blow over by summer as if nothing happened? In either case, this will give us accumulators some shares on sale.
'Be greedy when others are fearful' - The Oracle.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Mactheriverrat »

The Coronavirus hype is being over blown by the media with their non-stop fear . I'm not saying there shouldn't be concern but really the bunker mentally is getting overplayed. I would guess that the whole Coronavirus FEAR hype bunker mentally will get played for another couple of weeks and when all these massive deaths don't materialize then people will realize they been played. The people will see how far oversold the markets are and will come back like a Bull.

If I'm wrong it won't matter as we will be all dead.

Coronavirus
VS
2019-2020 U.S. Flu Season: Preliminary Burden Estimates
https://www.cdc.gov/flu/about/burden/pr ... imates.htm
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frugalmama
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by frugalmama »

I'm 100% equity. I'm not concerned and see this as a buy opportunity so I'm investing as normal. For me, this type of event makes the case for why the amount you save compared to your expenses is critical to the equation - the more you save and the lower your expenses, the less you are concerned about the ROR. I do not wish that I held bonds at this point. However, I do find having a plan in case of job loss, etc. important (and yes, I had to carry out my plan in the last recession due to job loss).
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Re: 8 days

Post by corp_sharecropper »

SimpleGift wrote: Thu Feb 27, 2020 9:41 pm Even if we do get a recessionary drawdown in the U.S. stock market of, say, 25%-30% during this coronavirus pandemic, it should be kept in mind that prior to the coronavirus scare, we weren't seeing the kind of excesses in the U.S. financial markets and economy that we saw in the run-up to the 2000 Tech Crash or to the 2008 Great Recession. So hopefully any potential U.S. recession will turn out be short and mild — though there are WAY too many unknowns at present.
Honestly, I find it very comforting. In my opinion we're paying for irrational fear as opposed to something fundamentally wrong. Irrational fear can do damage, don't get me wrong, but to me that is far more preferable to (and mentally more acceptable to) me than something fundamental to our economic system, corruption, cronyism, greed, conspiracy, illuminati, whatever else (not saying there isn't a good bit of some, just saying it's not all controlling and ruinous right now). I'm quite optimistic about the present day and immediate future, and I consider myself a pretty rigorous sceptic (my wife can attest to this), to me this is absolutely nothing, about as meaningless as Q4 2018.
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Re: 8 days

Post by Forester »

SimpleGift wrote: Thu Feb 27, 2020 9:41 pm Even if we do get a recessionary drawdown in the U.S. stock market of, say, 25%-30% during this coronavirus pandemic, it should be kept in mind that prior to the coronavirus scare, we weren't seeing the kind of excesses in the U.S. financial markets and economy that we saw in the run-up to the 2000 Tech Crash or to the 2008 Great Recession. So hopefully any potential U.S. recession will turn out be short and mild — though there are WAY too many unknowns at present.
I agree that there isn't the bullishness of 2000 or the complacency of 2008; but don't you think US large was over-done relative to US small + everything else? A 20% haircut feels fair.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Forester »

Mactheriverrat wrote: Thu Feb 27, 2020 11:13 pm The Coronavirus hype is being over blown by the media with their non-stop fear . I'm not saying there shouldn't be concern but really the bunker mentally is getting overplayed. I would guess that the whole Coronavirus FEAR hype bunker mentally will get played for another couple of weeks and when all these massive deaths don't materialize then people will realize they been played. The people will see how far oversold the markets are and will come back like a Bull.

If I'm wrong it won't matter as we will be all dead.

Coronavirus
VS
2019-2020 U.S. Flu Season: Preliminary Burden Estimates
https://www.cdc.gov/flu/about/burden/pr ... imates.htm
Yes, and under 0.3% mortality rate in South Korea. In China, a developing country, 1% mortality rate among the under-50s.

Stocks should snap back especially since they're even cheaper now relative to bonds. Ex-US absent dividends back to 2014 levels.
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tvubpwcisla
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by tvubpwcisla »

I have a feeling there are large institutions profiting from the panic selling. :oops:
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by RobLyons »

frugalmama wrote: Thu Feb 27, 2020 11:28 pm I'm 100% equity. I'm not concerned and see this as a buy opportunity so I'm investing as normal. For me, this type of event makes the case for why the amount you save compared to your expenses is critical to the equation - the more you save and the lower your expenses, the less you are concerned about the ROR. I do not wish that I held bonds at this point. However, I do find having a plan in case of job loss, etc. important (and yes, I had to carry out my plan in the last recession due to job loss).
First, I'm a huge fan of OPs name Garland Whizzer!
2nd, why 100% vs 80/20 or 70/30? Asking because I was planning on going 100% from current 80/20 and another member (KlangFool) pointed out there's little difference over the long run.. Thanks!

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Chicken Little
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Chicken Little »

JoMoney wrote: Thu Feb 27, 2020 10:08 pm
Chicken Little wrote: Thu Feb 27, 2020 9:55 pm...
Where else was money supposed to go with these bond yields?...
... and where is it going with bond yields now even lower?

Is it the end of the world? People decided to stop saving for an uncertain future when they can spend it today?
That would be good for stock returns for those who survive :mrgreen:
This is my entire thesis...a worldwide, central-bank, debt-driven expansion that commenced in the 1980s with Japan going low and ballooning deficits here.

Of course I wouldn't contend that nothing good has happened, or that there hasn't been innovation that has imparted value in the middle of all this.

But I am clearly stating that since the 1980's, it fits-and-starts, this has largely been a synthetic move up primarily engineered by worldwide central banks. I don't view this as any kind of conspiracy. In fact, if I was Fed chair right now, I'd be looking to lower rates, because there is no alternative.

However, for all you free-marketers, the market still has a voice, and that is inflation. When the fed, or any central bank, is confronted with significant inflation, they move from an active to passive role. They reluctantly raise, always a step late.

I don't spend a second trying to discern how this is going to transpire. The story will be neat enough after-the-fact, and we can all post things to try and make ourselves look smart.

When inflation arrives in force, you will have your free-market back (incidentally, there's already a foothold in Hungary).

Or we just go low forever, right? -1, -5, -10? Why not just jump right to -10? Free money: free college, free healthcare, free wages? I bring this up as the counterpoint. If the Fed lowers significantly from here, Europe and Japan will lower further. It is all interconnected. Rates are relative in the global economy. These aren't policy discussions, this is the official plan. Unlimited debt...what's the yield on that?

"Inflation is dead."

It's hilarious.

Inflation is the only force that can restore normalcy (it'll get here one way or another, doesn't really matter how).

So that's it for me, nothing left to say. I'll go back to being just a reader now.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Caduceus »

Chicken Little wrote: Fri Feb 28, 2020 6:02 am
JoMoney wrote: Thu Feb 27, 2020 10:08 pm
Chicken Little wrote: Thu Feb 27, 2020 9:55 pm...
Where else was money supposed to go with these bond yields?...
... and where is it going with bond yields now even lower?

Is it the end of the world? People decided to stop saving for an uncertain future when they can spend it today?
That would be good for stock returns for those who survive :mrgreen:
This is my entire thesis...a worldwide, central-bank, debt-driven expansion that commenced in the 1980s with Japan going low and ballooning deficits here.

However, for all you free-marketers, the market still has a voice, and that is inflation. When the fed, or any central bank, is confronted with significant inflation, they move from an active to passive role. They reluctantly raise, always a step late.

I don't spend a second trying to discern how this is going to transpire. The story will be neat enough after-the-fact, and we can all post things to try and make ourselves look smart

Inflation is the only force that can restore normalcy (it'll get here one way or another, doesn't really matter how).
This is interesting, because a few years back, Warren Buffett expressed surprise that there hadn't yet been significant inflation, given US and global monetary policy. He had been completely wrong (so far) and still is, regarding the prospects of inflation. I've been wondering if perhaps there has been inflation already - asset inflation - rather than in everyday essentials like bread or wine or cars, etc. If all the easy money pours into stocks, all it takes is a market correction to wipe out the money that's gone into it - problem solved.
Think
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Think »

Looks like a classic black swan.

To the true investors out there, paradoxically, you need this volatility in the system to get paid for equity risk overtime. I’ll spare you the quant backtesting, algos, etc., that our firm is goes through.

It all boils down to - you can’t taste the sweet (long term cagrs on risk on) without the bitter (vol).

I take a bit of a contrarian (Nietsche-Esqe) view on Coronavirus. It’s a challenge that a lot of smart minds around the world will probably mitigate the impacts over time. Instead of blaming the Chinese (prima facie I wanted to as they eat creepy things), I’m seeing this as another opportunity for mankind (geez can I say that in ESG world) to solve problems.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by F150HD »

I'm buying today.
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JoeRetire
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Re: 8 days

Post by JoeRetire »

JoMoney wrote: Thu Feb 27, 2020 10:08 pm Is it the end of the world?
It's the end of the world as we know it.
People decided to stop saving for an uncertain future when they can spend it today?
That's not how it works. People stop spending due to an uncertain future. And the consumer-driven economy grinds to a halt.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by JoeRetire »

F150HD wrote: Fri Feb 28, 2020 6:33 am I'm buying today.
Because... ?
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by JoeRetire »

Think wrote: Fri Feb 28, 2020 6:13 am Looks like a classic black swan.
Right. Nobody here knew a correction was going to come. Ever.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by fredflinstone »

garlandwhizzer wrote: Thu Feb 27, 2020 8:56 pm That's how long it took in trading days to go from a new high for the S&P 500 (3386) to a 12% correction (2979). The market mood went from powerful optimism to panic in a little more than a week. Many Wall Street estimates in Dec. 2019 for corporate profit growth for the first half of 2020 were about 5% - 7% increase over 2019. Now those estimates are about zero profit growth relative to 2019, perhaps lower. The whole thing turned 180 degrees almost instantly and the precipitating event, a new virus infection, was anticipated by no one. Unpredictable and unanticipated market action like this can happen at any time. It makes a good case for keeping a balanced portfolio with sufficient amounts of quality fixed income to see you through the tough times without panic selling equity.

Garland Whizzer
I agree. How quickly the mood has changed. A few weeks ago I was hesitant to reveal my asset allocation (35% equities, 12.5% gold, 12.5% gold miners, 40% bonds) but now I'm feeling pretty happy with myself. I am rebalancing into stocks at the close today, not because I am optimistic but because I am sticking to my asset allocation come hell or high water. Stay the course.
Stocks 28 / Gold 23 / Long-term US treasuries 19 / Cash (mainly CDs) 22 / TIPS 8
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Third Son »

am wrote: Thu Feb 27, 2020 10:57 pm Risk showing up very fast after such a nice stretch. Stocks are real risky. Bonds yields are anemic and stocks are tanking. Would hate to be a retiree right now. No where to hide.

Are we just getting started into a terrible bear or will this blow over by summer as if nothing happened? In either case, this will give us accumulators some shares on sale.
Hopefully retirees are smarter than that. Having cash available to ride out the storm is the preferred strategy.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Third Son »

Mactheriverrat wrote: Thu Feb 27, 2020 11:13 pm The Coronavirus hype is being over blown by the media with their non-stop fear . I'm not saying there shouldn't be concern but really the bunker mentally is getting overplayed. I would guess that the whole Coronavirus FEAR hype bunker mentally will get played for another couple of weeks and when all these massive deaths don't materialize then people will realize they been played. The people will see how far oversold the markets are and will come back like a Bull.

If I'm wrong it won't matter as we will be all dead.

Coronavirus
VS
2019-2020 U.S. Flu Season: Preliminary Burden Estimates
https://www.cdc.gov/flu/about/burden/pr ... imates.htm
Mac:It is also interesting if one navigates to the h1n1pdm historical data and how that parallels somewhat with what is going on now. Granted Covid-19 is a different beast but the reactions to it are quite similar as in 2009.
"A part of all you earn is yours to keep" | | -The Richest Man in Babylon
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Post by grayfox »

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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Starfox »

I’m retired and live on investments only, with a 50 year time horizon, and moved to 78/22 one minute before the close yesterday. I was 68/32. Now instead of 12 years in bonds, I have 8 years worth. I hope the bottom is near, because I know I won’t be able to stop myself from buying more if we reach 20pct bear market.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by nedsaid »

The stock market is in an irrational panic mode. About all we can do is wait out the madness. There is reason to be concerned about the coronavirus but this is just too much. This is what happens with a 24/7 news cycle and a need to fill the air time. No time to reflect. The market was probably ripe for a correction, always something that causes corrections and bear markets. It seems the market participants want a good panic and a correction and will keep selling until they get their way. This too will pass.
A fool and his money are good for business.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Pikel »

I was talking to our tax advisor about an obscure topic, eventually AA came up.

I told him we are 60/40 and he said "oh so you guys are really conservative," and then suggested we look into moving some of our bond allocation into an S&P shield annuity.

:oops:
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Starfox »

nedsaid wrote: Fri Feb 28, 2020 8:28 am The stock market is in an irrational panic mode. About all we can do is wait out the madness. There is reason to be concerned about the coronavirus but this is just too much. This is what happens with a 24/7 news cycle and a need to fill the air time. No time to reflect. The market was probably ripe for a correction, always something that causes corrections and bear markets. It seems the market participants want a good panic and a correction and will keep selling until they get their way. This too will pass.
My wife said to me last night she is concerned this could be another Spanish Flu where out of 50 friends or neighbors, one will die, etc.. She listens to the podcast The Daily on NYT (They just had an episode yesterday about the virus), I think the unknowns of the viruses potential to harm is causing fear, and it may actually happen, but I truly hope not.

My 68/32 -> 78/22, was part of what I have in my spreadsheet plan, if markets fall 10%, move 10% of portfolio to equities, and repeat every 10% further fall, until 100% invested, then I go back to bonds with same 10% increments as it rises 12%. Idea is to make extra 1% per 10% during corrections/bear markets. If it continues to fall to 40% then I'm stuck, or stays down, I'm stuck..but honestly after a 40% fall, I still would have 26 years of expenses sitting entirely in Total US Stock and Total International. The dividends alone if 100% in stocks would cover all our expenses and vacations.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by frugalmama »

RobLyons wrote: Fri Feb 28, 2020 6:01 am
frugalmama wrote: Thu Feb 27, 2020 11:28 pm I'm 100% equity. I'm not concerned and see this as a buy opportunity so I'm investing as normal. For me, this type of event makes the case for why the amount you save compared to your expenses is critical to the equation - the more you save and the lower your expenses, the less you are concerned about the ROR. I do not wish that I held bonds at this point. However, I do find having a plan in case of job loss, etc. important (and yes, I had to carry out my plan in the last recession due to job loss).
First, I'm a huge fan of OPs name Garland Whizzer!
2nd, why 100% vs 80/20 or 70/30? Asking because I was planning on going 100% from current 80/20 and another member (KlangFool) pointed out there's little difference over the long run.. Thanks!

https://personal.vanguard.com/us/insigh ... llocations
Good question. Part of it is that It has always been my allocation percentage? I started investing when I was 16 and that is what I was comfortable with and I've gone through the ups and downs of the market (even with a job loss in the Great Recession and felt good with where I came out...I just sold a little taxable). I enjoy investing and getting the most out of my dollar and I feel like that isn't in bonds. Also past ROR is no indication of the future and it depends on what period of time you are looking at as to whether it is less than 1% or a much larger % in the difference between bonds and stocks.

My husband has a very secure job, we have a lot of side hustles we enjoy (so diversification of income), and DH will receive a pension. I think those 3 things are the differences for us as well as the fact that we live way below our means and we have a rather large nest egg as we have always saved a pretty large percentage of what we earn. We are very happy with our frugal lives and could cut things if needed. That said, I do have specific goals like paying for 10+ college educations with it and am on track to be able to do that. Part of it is my personality (and DH's)...In general we both tend to be risk-takers (although calculated risk takers as we always make sure we have some sort of plan). So far in life we've been fortunate for things to work out for us.

I realize that answer may not work for everyone, but I had no trouble sleeping last night. :)
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by nedsaid »

Starfox wrote: Fri Feb 28, 2020 8:39 am
nedsaid wrote: Fri Feb 28, 2020 8:28 am The stock market is in an irrational panic mode. About all we can do is wait out the madness. There is reason to be concerned about the coronavirus but this is just too much. This is what happens with a 24/7 news cycle and a need to fill the air time. No time to reflect. The market was probably ripe for a correction, always something that causes corrections and bear markets. It seems the market participants want a good panic and a correction and will keep selling until they get their way. This too will pass.
My wife said to me last night she is concerned this could be another Spanish Flu where out of 50 friends or neighbors, one will die, etc.. She listens to the podcast The Daily on NYT (They just had an episode yesterday about the virus), I think the unknowns of the viruses potential to harm is causing fear, and it may actually happen, but I truly hope not.

My 68/32 -> 78/22, was part of what I have in my spreadsheet plan, if markets fall 10%, move 10% of portfolio to equities, and repeat every 10% further fall, until 100% invested, then I go back to bonds with same 10% increments as it rises 12%. Idea is to make extra 1% per 10% during corrections/bear markets. If it continues to fall to 40% then I'm stuck, or stays down, I'm stuck..but honestly after a 40% fall, I still would have 26 years of expenses sitting entirely in Total US Stock and Total International. The dividends alone if 100% in stocks would cover all our expenses and vacations.
Don't go overboard on the rebalancing. Bonds are held in a portfolio for a reason. Stocks can drop a lot when they are expensive and stocks can drop a lot when they are cheap. Stocks are down 12% so far, a swift but still a rather ordinary correction. Bear markets can be 30% down and we haven't seen one in quite a while. These things can last a while.
A fool and his money are good for business.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Starfox »

nedsaid wrote: Fri Feb 28, 2020 9:00 am
Don't go overboard on the rebalancing. Bonds are held in a portfolio for a reason. Stocks can drop a lot when they are expensive and stocks can drop a lot when they are cheap. Stocks are down 12% so far, a swift but still a rather ordinary correction. Bear markets can be 30% down and we haven't seen one in quite a while. These things can last a while.
Thank you - yes I understand the purpose of bonds as a ballast when markets fall. It is a nice feeling this week with my 32% in bonds after the 10% correction. I have always liked Buffett's 90/10 all the time strategy, but did not like having only 3.5 years of expenses in bonds, so I feel my 70/30 allocation all the time, except for the above mentioned tactical rebalancing, is as close as I can get to the idea of 90/10 without being 90/10.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by sperry8 »

Chicken Little wrote: Fri Feb 28, 2020 6:02 am
JoMoney wrote: Thu Feb 27, 2020 10:08 pm
Chicken Little wrote: Thu Feb 27, 2020 9:55 pm...
Where else was money supposed to go with these bond yields?...
... and where is it going with bond yields now even lower?

Is it the end of the world? People decided to stop saving for an uncertain future when they can spend it today?
That would be good for stock returns for those who survive :mrgreen:
This is my entire thesis...a worldwide, central-bank, debt-driven expansion that commenced in the 1980s with Japan going low and ballooning deficits here.

Of course I wouldn't contend that nothing good has happened, or that there hasn't been innovation that has imparted value in the middle of all this.

But I am clearly stating that since the 1980's, it fits-and-starts, this has largely been a synthetic move up primarily engineered by worldwide central banks. I don't view this as any kind of conspiracy. In fact, if I was Fed chair right now, I'd be looking to lower rates, because there is no alternative.

However, for all you free-marketers, the market still has a voice, and that is inflation. When the fed, or any central bank, is confronted with significant inflation, they move from an active to passive role. They reluctantly raise, always a step late.

I don't spend a second trying to discern how this is going to transpire. The story will be neat enough after-the-fact, and we can all post things to try and make ourselves look smart.

When inflation arrives in force, you will have your free-market back (incidentally, there's already a foothold in Hungary).

Or we just go low forever, right? -1, -5, -10? Why not just jump right to -10? Free money: free college, free healthcare, free wages? I bring this up as the counterpoint. If the Fed lowers significantly from here, Europe and Japan will lower further. It is all interconnected. Rates are relative in the global economy. These aren't policy discussions, this is the official plan. Unlimited debt...what's the yield on that?

"Inflation is dead."

It's hilarious.

Inflation is the only force that can restore normalcy (it'll get here one way or another, doesn't really matter how).

So that's it for me, nothing left to say. I'll go back to being just a reader now.
I don't agree with your thesis (as a whole). But let's say it's true... and you knew it back in the 1980s. 40 years later (almost an adult investing lifetime) stocks hit all time highs last month. This sort of thesis would have kept you out of markets since then. Even if your thesis is true - it doesn't mean the engineered game doesn't work for your whole life. And, this is as true today as it was in 1980. You have no idea how long the engineering can go on. And that assumes it is even the reason behind the growth.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by SimpleGift »

Forester wrote: Fri Feb 28, 2020 5:45 am
SimpleGift wrote: Thu Feb 27, 2020 9:41 pm Even if we do get a recessionary drawdown in the U.S. stock market of, say, 25%-30% during this coronavirus pandemic, it should be kept in mind that prior to the coronavirus scare, we weren't seeing the kind of excesses in the U.S. financial markets and economy that we saw in the run-up to the 2000 Tech Crash or to the 2008 Great Recession. So hopefully any potential U.S. recession will turn out be short and mild — though there are WAY too many unknowns at present.
I agree that there isn't the bullishness of 2000 or the complacency of 2008; but don't you think US large was over-done relative to US small + everything else? A 20% haircut feels fair.
Perhaps. But unlike the 2000 Tech Crash or the 2008 Great Recession, my sense is that in 6 months or 1 year, after the world better understands the coronavirus and how to mitigate its impacts, the same global market forces that propelled U.S. large-cap growth stocks to their former lofty heights will still be in place, mostly unchanged.

In other words, unlike the previous recessionary episodes that led to deep structural changes in the world markets and economy to correct previous excesses, this just doesn't feel that same way. Of course, I could be wrong, as it's too soon to truly understand the longer-term impacts.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Dottie57 »

nedsaid wrote: Fri Feb 28, 2020 9:00 am
Starfox wrote: Fri Feb 28, 2020 8:39 am
nedsaid wrote: Fri Feb 28, 2020 8:28 am The stock market is in an irrational panic mode. About all we can do is wait out the madness. There is reason to be concerned about the coronavirus but this is just too much. This is what happens with a 24/7 news cycle and a need to fill the air time. No time to reflect. The market was probably ripe for a correction, always something that causes corrections and bear markets. It seems the market participants want a good panic and a correction and will keep selling until they get their way. This too will pass.
My wife said to me last night she is concerned this could be another Spanish Flu where out of 50 friends or neighbors, one will die, etc.. She listens to the podcast The Daily on NYT (They just had an episode yesterday about the virus), I think the unknowns of the viruses potential to harm is causing fear, and it may actually happen, but I truly hope not.

My 68/32 -> 78/22, was part of what I have in my spreadsheet plan, if markets fall 10%, move 10% of portfolio to equities, and repeat every 10% further fall, until 100% invested, then I go back to bonds with same 10% increments as it rises 12%. Idea is to make extra 1% per 10% during corrections/bear markets. If it continues to fall to 40% then I'm stuck, or stays down, I'm stuck..but honestly after a 40% fall, I still would have 26 years of expenses sitting entirely in Total US Stock and Total International. The dividends alone if 100% in stocks would cover all our expenses and vacations.
Don't go overboard on the rebalancing. Bonds are held in a portfolio for a reason. Stocks can drop a lot when they are expensive and stocks can drop a lot when they are cheap. Stocks are down 12% so far, a swift but still a rather ordinary correction. Bear markets can be 30% down and we haven't seen one in quite a while. These things can last a while.
Retired and see the importance of not rebalancing as if I were still working. Holding on tight. If we hit 40% + down I will start feeling queasy.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by WoodSpinner »

frugalmama wrote: Fri Feb 28, 2020 8:44 am
RobLyons wrote: Fri Feb 28, 2020 6:01 am
frugalmama wrote: Thu Feb 27, 2020 11:28 pm I'm 100% equity. I'm not concerned and see this as a buy opportunity so I'm investing as normal. For me, this type of event makes the case for why the amount you save compared to your expenses is critical to the equation - the more you save and the lower your expenses, the less you are concerned about the ROR. I do not wish that I held bonds at this point. However, I do find having a plan in case of job loss, etc. important (and yes, I had to carry out my plan in the last recession due to job loss).
First, I'm a huge fan of OPs name Garland Whizzer!
2nd, why 100% vs 80/20 or 70/30? Asking because I was planning on going 100% from current 80/20 and another member (KlangFool) pointed out there's little difference over the long run.. Thanks!

https://personal.vanguard.com/us/insigh ... llocations
Good question. Part of it is that It has always been my allocation percentage? I started investing when I was 16 and that is what I was comfortable with and I've gone through the ups and downs of the market (even with a job loss in the Great Recession and felt good with where I came out...I just sold a little taxable). I enjoy investing and getting the most out of my dollar and I feel like that isn't in bonds. Also past ROR is no indication of the future and it depends on what period of time you are looking at as to whether it is less than 1% or a much larger % in the difference between bonds and stocks.

My husband has a very secure job, we have a lot of side hustles we enjoy (so diversification of income), and DH will receive a pension. I think those 3 things are the differences for us as well as the fact that we live way below our means and we have a rather large nest egg as we have always saved a pretty large percentage of what we earn. We are very happy with our frugal lives and could cut things if needed. That said, I do have specific goals like paying for 10+ college educations with it and am on track to be able to do that. Part of it is my personality (and DH's)...In general we both tend to be risk-takers (although calculated risk takers as we always make sure we have some sort of plan). So far in life we've been fortunate for things to work out for us.

I realize that answer may not work for everyone, but I had no trouble sleeping last night. :)
Frugalmama,

Wondering about your 10+ College Educations goal? That’s a lot by any standards. Is this for your family? Or as part of a charity?

One of the reasons for my interest is that I am looking to selectively use some of our Retirement funds to help the next generation get educated and succeed. So far one is completed and another underway.

WoodSpinner
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by unclescrooge »

Starfox wrote: Fri Feb 28, 2020 8:39 am
nedsaid wrote: Fri Feb 28, 2020 8:28 am The stock market is in an irrational panic mode. About all we can do is wait out the madness. There is reason to be concerned about the coronavirus but this is just too much. This is what happens with a 24/7 news cycle and a need to fill the air time. No time to reflect. The market was probably ripe for a correction, always something that causes corrections and bear markets. It seems the market participants want a good panic and a correction and will keep selling until they get their way. This too will pass.
My wife said to me last night she is concerned this could be another Spanish Flu where out of 50 friends or neighbors, one will die, etc.. She listens to the podcast The Daily on NYT (They just had an episode yesterday about the virus), I think the unknowns of the viruses potential to harm is causing fear, and it may actually happen, but I truly hope not.

My 68/32 -> 78/22, was part of what I have in my spreadsheet plan, if markets fall 10%, move 10% of portfolio to equities, and repeat every 10% further fall, until 100% invested, then I go back to bonds with same 10% increments as it rises 12%. Idea is to make extra 1% per 10% during corrections/bear markets. If it continues to fall to 40% then I'm stuck, or stays down, I'm stuck..but honestly after a 40% fall, I still would have 26 years of expenses sitting entirely in Total US Stock and Total International. The dividends alone if 100% in stocks would cover all our expenses and vacations.
If it's like the Spanish flu, she can expect 10-15 of her friends to die, not one. Luckily this is not like Spanish flu.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by firebirdparts »

tvubpwcisla wrote: Fri Feb 28, 2020 5:50 am I have a feeling there are large institutions profiting from the panic selling. :oops:
Let's hope so. They need the money.
A fool and your money are soon partners
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by watchnerd »

garlandwhizzer wrote: Thu Feb 27, 2020 8:56 pm That's how long it took in trading days to go from a new high for the S&P 500 (3386) to a 12% correction (2979). The market mood went from powerful optimism to panic in a little more than a week. Many Wall Street estimates in Dec. 2019 for corporate profit growth for the first half of 2020 were about 5% - 7% increase over 2019. Now those estimates are about zero profit growth relative to 2019, perhaps lower. The whole thing turned 180 degrees almost instantly and the precipitating event, a new virus infection, was anticipated by no one. Unpredictable and unanticipated market action like this can happen at any time. It makes a good case for keeping a balanced portfolio with sufficient amounts of quality fixed income to see you through the tough times without panic selling equity.

Garland Whizzer
ex-US developed and emerging markets have gone down less in the same time.

I find that interesting.

One could hypothesize that the ex-US market decline is the "real" virus-induced market damage, and the additional decline the US TSM showing is valuation haircutting.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by frugalmama »

WoodSpinner wrote: Fri Feb 28, 2020 10:09 am
frugalmama wrote: Fri Feb 28, 2020 8:44 am
RobLyons wrote: Fri Feb 28, 2020 6:01 am
frugalmama wrote: Thu Feb 27, 2020 11:28 pm I'm 100% equity. I'm not concerned and see this as a buy opportunity so I'm investing as normal. For me, this type of event makes the case for why the amount you save compared to your expenses is critical to the equation - the more you save and the lower your expenses, the less you are concerned about the ROR. I do not wish that I held bonds at this point. However, I do find having a plan in case of job loss, etc. important (and yes, I had to carry out my plan in the last recession due to job loss).
First, I'm a huge fan of OPs name Garland Whizzer!
2nd, why 100% vs 80/20 or 70/30? Asking because I was planning on going 100% from current 80/20 and another member (KlangFool) pointed out there's little difference over the long run.. Thanks!

https://personal.vanguard.com/us/insigh ... llocations
Good question. Part of it is that It has always been my allocation percentage? I started investing when I was 16 and that is what I was comfortable with and I've gone through the ups and downs of the market (even with a job loss in the Great Recession and felt good with where I came out...I just sold a little taxable). I enjoy investing and getting the most out of my dollar and I feel like that isn't in bonds. Also past ROR is no indication of the future and it depends on what period of time you are looking at as to whether it is less than 1% or a much larger % in the difference between bonds and stocks.

My husband has a very secure job, we have a lot of side hustles we enjoy (so diversification of income), and DH will receive a pension. I think those 3 things are the differences for us as well as the fact that we live way below our means and we have a rather large nest egg as we have always saved a pretty large percentage of what we earn. We are very happy with our frugal lives and could cut things if needed. That said, I do have specific goals like paying for 10+ college educations with it and am on track to be able to do that. Part of it is my personality (and DH's)...In general we both tend to be risk-takers (although calculated risk takers as we always make sure we have some sort of plan). So far in life we've been fortunate for things to work out for us.

I realize that answer may not work for everyone, but I had no trouble sleeping last night. :)
Frugalmama,

Wondering about your 10+ College Educations goal? That’s a lot by any standards. Is this for your family? Or as part of a charity?

One of the reasons for my interest is that I am looking to selectively use some of our Retirement funds to help the next generation get educated and succeed. So far one is completed and another underway.

WoodSpinner
Hi WoodSpinner, Yes, I have 11 kids so it is for my own family. My plan is to pay for all of their colleges (we have stipulation on what they have to do so I don't plan to write a blank check, etc.) and then I hope that I am still in a position to help my grandchildren and potentially create a scholarship fund for others (through a charity that I plan to set up at a later date when I've got my own kids through). Both my husband and I are educators, so promoting education is very important to me.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Chicken Little »

sperry8 wrote: Fri Feb 28, 2020 9:36 amI don't agree with your thesis (as a whole). But let's say it's true... and you knew it back in the 1980s. 40 years later (almost an adult investing lifetime) stocks hit all time highs last month. This sort of thesis would have kept you out of markets since then. Even if your thesis is true - it doesn't mean the engineered game doesn't work for your whole life. And, this is as true today as it was in 1980. You have no idea how long the engineering can go on. And that assumes it is even the reason behind the growth.
Would not have been knowable at the time, but if somehow you did know it wouldn't keep you out of the market, it would've put you "all in". Knowing the Fed had your back. Not only in making the market, but also there to clean up the mess in 2000 and 2008 (Richard Fisher was latest to address this the other day, questioning whether it was time to end the fed put every time the markets tank).

Obviously what's on people's minds would be what does it mean going forward? To that I'd say;

1. We're nearing the end. If you look at SimpleGifts charting of interest rates, it's been a march to zero. If you look at the slope and see -1, -5, -10 for the indefinite future, I can't sit here and say it won't happen, but I'm not banking on that.

2. We know the Fed will lower rates if markets continue to decline. We know they can't really raise rates because of the cost to service debt (they tried to raise and failed well before that even became an issue). No human has any interest in reversing course, so our old forgotten friend, inflation, will do the heavy lifting for us. Ironically, if inflation takes off, would the bond side become more risky than the stock side?

It's either inflation or free money for all, but I don't think we can hover in a Goldilocks zone forever.

Pick your poison.

What's actionable? I don't know. How about this...if you've concluded that inflation is impossible, maybe double-check that?
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by asif408 »

watchnerd wrote: Fri Feb 28, 2020 11:43 amex-US developed and emerging markets have gone down less in the same time.

I find that interesting.

One could hypothesize that the ex-US market decline is the "real" virus-induced market damage, and the additional decline the US TSM showing is valuation haircutting.
It doesn't hurt that developed ex-US and emerging were already down 20% since Jan 2018 and still down 25-30% from their 2007 highs. Seems more like a sympathy decline to me, since pretty much every equity asset class is falling.

It doesn't matter what you own right now, unless it's a bond of some kind. During these times it's hard to know what is "real" and what isn't.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by watchnerd »

asif408 wrote: Fri Feb 28, 2020 1:29 pm It doesn't hurt that developed ex-US and emerging were already down 20% since Jan 2018 and still down 25-30% from their 2007 highs. Seems more like a sympathy decline to me, since pretty much every equity asset class is falling.

It doesn't matter what you own right now, unless it's a bond of some kind. During these times it's hard to know what is "real" and what isn't.
Valuations matter, even in declines.

Loving my long Treasuries.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by sailaway »

What I don't get about calling this an over reaction to the coronavirus is, what about manufacturing being down in 2019 while the stock market was soaring?
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Seasonal »

sailaway wrote: Fri Feb 28, 2020 2:31 pm What I don't get about calling this an over reaction to the coronavirus is, what about manufacturing being down in 2019 while the stock market was soaring?
There's a lot more to the economy than manufacturing.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by WoodSpinner »

frugalmama wrote: Fri Feb 28, 2020 12:01 pm
WoodSpinner wrote: Fri Feb 28, 2020 10:09 am
frugalmama wrote: Fri Feb 28, 2020 8:44 am
RobLyons wrote: Fri Feb 28, 2020 6:01 am
frugalmama wrote: Thu Feb 27, 2020 11:28 pm I'm 100% equity. I'm not concerned and see this as a buy opportunity so I'm investing as normal. For me, this type of event makes the case for why the amount you save compared to your expenses is critical to the equation - the more you save and the lower your expenses, the less you are concerned about the ROR. I do not wish that I held bonds at this point. However, I do find having a plan in case of job loss, etc. important (and yes, I had to carry out my plan in the last recession due to job loss).
First, I'm a huge fan of OPs name Garland Whizzer!
2nd, why 100% vs 80/20 or 70/30? Asking because I was planning on going 100% from current 80/20 and another member (KlangFool) pointed out there's little difference over the long run.. Thanks!

https://personal.vanguard.com/us/insigh ... llocations
Good question. Part of it is that It has always been my allocation percentage? I started investing when I was 16 and that is what I was comfortable with and I've gone through the ups and downs of the market (even with a job loss in the Great Recession and felt good with where I came out...I just sold a little taxable). I enjoy investing and getting the most out of my dollar and I feel like that isn't in bonds. Also past ROR is no indication of the future and it depends on what period of time you are looking at as to whether it is less than 1% or a much larger % in the difference between bonds and stocks.

My husband has a very secure job, we have a lot of side hustles we enjoy (so diversification of income), and DH will receive a pension. I think those 3 things are the differences for us as well as the fact that we live way below our means and we have a rather large nest egg as we have always saved a pretty large percentage of what we earn. We are very happy with our frugal lives and could cut things if needed. That said, I do have specific goals like paying for 10+ college educations with it and am on track to be able to do that. Part of it is my personality (and DH's)...In general we both tend to be risk-takers (although calculated risk takers as we always make sure we have some sort of plan). So far in life we've been fortunate for things to work out for us.

I realize that answer may not work for everyone, but I had no trouble sleeping last night. :)
Frugalmama,

Wondering about your 10+ College Educations goal? That’s a lot by any standards. Is this for your family? Or as part of a charity?

One of the reasons for my interest is that I am looking to selectively use some of our Retirement funds to help the next generation get educated and succeed. So far one is completed and another underway.

WoodSpinner
Hi WoodSpinner, Yes, I have 11 kids so it is for my own family. My plan is to pay for all of their colleges (we have stipulation on what they have to do so I don't plan to write a blank check, etc.) and then I hope that I am still in a position to help my grandchildren and potentially create a scholarship fund for others (through a charity that I plan to set up at a later date when I've got my own kids through). Both my husband and I are educators, so promoting education is very important to me.
That’s pretty amazing and unusual! Adding you t9 the Bogleheads list I would love to enjoy a lunch and conversation with! . :D

I am still struggling on how to set things up — so far it’s been nieces and nephews who need a boost but I would like to expand the pool. Looking to provide some lubrication to,reduce the friction rather than pay the entire bill.

Any suggestions?

WoodSpinner
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by F150HD »

Starfox wrote: Fri Feb 28, 2020 8:39 am ..but honestly after a 40% fall, I still would have 26 years of expenses sitting entirely in Total US Stock and Total International. The dividends alone if 100% in stocks would cover all our expenses and vacations.
only 26 years, thats it? :D
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by sailaway »

Seasonal wrote: Fri Feb 28, 2020 2:52 pm
sailaway wrote: Fri Feb 28, 2020 2:31 pm What I don't get about calling this an over reaction to the coronavirus is, what about manufacturing being down in 2019 while the stock market was soaring?
There's a lot more to the economy than manufacturing.
Sure, but at a little over 1/3 of the economy, it isn't exactly irrelevant, either.
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Re: 8 days [From new S&P 500 high to 12% correction]

Post by Mactheriverrat »

Third Son wrote: Fri Feb 28, 2020 6:53 am
Mactheriverrat wrote: Thu Feb 27, 2020 11:13 pm The Coronavirus hype is being over blown by the media with their non-stop fear . I'm not saying there shouldn't be concern but really the bunker mentally is getting overplayed. I would guess that the whole Coronavirus FEAR hype bunker mentally will get played for another couple of weeks and when all these massive deaths don't materialize then people will realize they been played. The people will see how far oversold the markets are and will come back like a Bull.

If I'm wrong it won't matter as we will be all dead.

Coronavirus
VS
2019-2020 U.S. Flu Season: Preliminary Burden Estimates
https://www.cdc.gov/flu/about/burden/pr ... imates.htm
Mac:It is also interesting if one navigates to the h1n1pdm historical data and how that parallels somewhat with what is going on now. Granted Covid-19 is a different beast but the reactions to it are quite similar as in 2009.
Isn't it funny or should I say sad that the Media feeds on itself.
Everything evolves. | May Every Sunrise Bring You Hope. May Every Sunset Bring you Peace.
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