Anybody want to guess the bottom of this "dip"?

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pharmermummles
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Re: Anybody want to guess the bottom of this "dip"?

Post by pharmermummles »

I had to transfer my HSA to a new bank, so my investments were liquidated at the end of the day Friday. I'm assuming that means the bottom was Friday, and I will be buying in much higher after the transfer (via snail mail) completes in a few weeks. :oops:
Caduceus
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Re: Anybody want to guess the bottom of this "dip"?

Post by Caduceus »

Ornery Old Guy wrote: Sat Feb 29, 2020 11:26 pm
-25% only BARELY gets you into a bear market. How often does a bear market occur? Every two or three years? Five years? They're really common. -25% isn't a big deal. -50% is a big deal. But probably much of the market drop is a panic based on Corona (I would guess) and so either a) Corona ends up being horrible, much worse than what we've seen so far, and the market sees it's right and stays down, or b) Corona ends up being not that bad - like a bad flu season - and the market realizes it screwed up when it sold and it comes back up with a vengeance. My bet is b) but I don't know nothing, same as everyone.
I was also curious about this, and I found a table created by Ed Yardeni. According to his research, over the last 70 years, there have been 13 times the markets have dropped by around 20% or more, and only 5 times it has dropped by more than 30%. But of the 5 times it shot past 30%, two of those times it dropped by about 50%, and one of those times it dropped nearly 60%.

I don't think it's possible to extrapolate from historical research, but what I found interesting from his research at least, is that true bear markets have historically been quite rare - Warren Buffett over his entire investing lifetime would have experienced only 5 such buying opportunities so far, although perhaps he'll get a sixth soon.

Another interesting observation: Apart from in 1987, market drops exceeding 30% have tended to be long in duration (so lasting something like 1.5 - 2 years), whereas corrections of 20% or less have tended to prove quite temporary, usually a few months.

You take all the observations above and it shows why successful market-timing would have been so hard, even if you had the good fortune of being 100% in cash at the moment the decline began. If the correction was milder (20% or so), you would have done better simply by investing more quickly since the markets recovered fairly quickly. If the correction was severe (30% - 60%), historically you'd have done better by waiting to deploy your cash as there were many opportunities to buy at a lower price point.

Another thing I found striking is that looking at the history of financial crashes actually has helped me understand better what people mean when they say that markets are incredibly resilient. So, over an investing lifetime of, say, something like 50 years, you'd actually only get 10 opportunities to buy at significant discounts.
Ornery Old Guy
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Re: Anybody want to guess the bottom of this "dip"?

Post by Ornery Old Guy »

Caduceus wrote: Sat Feb 29, 2020 11:53 pm
Ornery Old Guy wrote: Sat Feb 29, 2020 11:26 pm
-25% only BARELY gets you into a bear market. How often does a bear market occur? Every two or three years? Five years? They're really common. -25% isn't a big deal. -50% is a big deal. But probably much of the market drop is a panic based on Corona (I would guess) and so either a) Corona ends up being horrible, much worse than what we've seen so far, and the market sees it's right and stays down, or b) Corona ends up being not that bad - like a bad flu season - and the market realizes it screwed up when it sold and it comes back up with a vengeance. My bet is b) but I don't know nothing, same as everyone.
I was also curious about this, and I found a table created by Ed Yardeni. According to his research, over the last 70 years, there have been 13 times the markets have dropped by around 20% or more, and only 5 times it has dropped by more than 30%. But of the 5 times it shot past 30%, two of those times it dropped by about 50%, and one of those times it dropped nearly 60%.

I don't think it's possible to extrapolate from historical research, but what I found interesting from his research at least, is that true bear markets have historically been quite rare - Warren Buffett over his entire investing lifetime would have experienced only 5 such buying opportunities so far, although perhaps he'll get a sixth soon.

Another interesting observation: Apart from in 1987, market drops exceeding 30% have tended to be long in duration (so lasting something like 1.5 - 2 years), whereas corrections of 20% or less have tended to prove quite temporary, usually a few months.

You take all the observations above and it shows why successful market-timing would have been so hard, even if you had the good fortune of being 100% in cash at the moment the decline began. If the correction was milder (20% or so), you would have done better simply by investing more quickly since the markets recovered fairly quickly. If the correction was severe (30% - 60%), historically you'd have done better by waiting to deploy your cash as there were many opportunities to buy at a lower price point.

Another thing I found striking is that looking at the history of financial crashes actually has helped me understand better what people mean when they say that markets are incredibly resilient. So, over an investing lifetime of, say, something like 50 years, you'd actually only get 10 opportunities to buy at significant discounts.
13 times in 70 years ... is a little less than every 5 years. That seems pretty often to me.
Northern Flicker
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Re: Anybody want to guess the bottom of this "dip"?

Post by Northern Flicker »

guyinlaw wrote: Common cold, Flu, COVID19, SARS and MERS are all types of coronavirus.. mortality is 0 Cold < 0.05 FLU < 2% COVID19 < 7% SARS < 30% MERS
The traditional common cold is caused by a rhinovirus. In more recent time, other viruses, including corona viruses have been implicated. It appears that about 15% of common colds are caused by corona viruses:

https://en.m.wikipedia.org/wiki/Common_cold
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firebirdparts
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Re: Anybody want to guess the bottom of this "dip"?

Post by firebirdparts »

lostdog wrote: Sat Feb 29, 2020 7:12 pm If we hit a bear territory for a bit will people and the media finally stop saying we're still in a 10 year bull market?
I don't think so. If there is a recognizable business cycle (and it sure looks like there might be one) then I think that'll do it. I don't think you will see a real reset of the bull market without also a reset of the business cycle.
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razorbacker
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Re: Anybody want to guess the bottom of this "dip"?

Post by razorbacker »

I'll play, 20% or a little less. I tend to think there is a little too much overaction in the market. If it drops closer to 20%, I'll be be buying back in on S&P 500.
Caduceus
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Re: Anybody want to guess the bottom of this "dip"?

Post by Caduceus »

razorbacker wrote: Sun Mar 01, 2020 12:10 am I'll play, 20% or a little less. I tend to think there is a little too much overaction in the market. If it drops closer to 20%, I'll be be buying back in on S&P 500.
Take a look at my summary of historical crashes over the last five decades upthread. Most 10% or 20% drops throughout history simply haven't turned into something larger. So you are probably going to be right, even if personally I hope we get another 50% crash.

The 60% crash we got in 2008-2009 was as much psychological - the product of a contagion of fear - as it was due to any rational analysis or pricing in of macroeconomic variables. So I think the only chance we get for another mother of all crashes is if people start panicking. And there's a better chance than in the past because of the media and the nature of news (fake or otherwise) going viral. It feels a bit morbid - like an undertaker waiting for someone to die - to fervently hope for a 50% market crash but that really would be awesome.
mroe800
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Re: Anybody want to guess the bottom of this "dip"?

Post by mroe800 »

It would only be really awesome if the market recovers.
WildCat48
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Re: Anybody want to guess the bottom of this "dip"?

Post by WildCat48 »

I'm going to say 50%, especially after watching my colleagues flip out this week.
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Re: Anybody want to guess the bottom of this "dip"?

Post by expat »

it's irrelevant. Stay the course.
langlands
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Re: Anybody want to guess the bottom of this "dip"?

Post by langlands »

mroe800 wrote: Sun Mar 01, 2020 12:29 am It would only be really awesome if the market recovers.
Not necessarily. Caduceus could simply have OOM puts that will pay off massively in the event of a crash.
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Re: Anybody want to guess the bottom of this "dip"?

Post by CurlyDave »

koryg75 wrote: Fri Feb 28, 2020 6:35 pm
The Diamond Princess is certainly not a good sample. I guarantee it skews older than the general population. They also didn’t receive immediate treatment.
Don't forget that you must include the crew with the passengers.

I still think it will end up being older, wealthier and more female than the US population in general. Not trying to be sexist -- females live longer than males, so an older population would tend to skew female.
Ornery Old Guy
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Re: Anybody want to guess the bottom of this "dip"?

Post by Ornery Old Guy »

Caduceus wrote: Sun Mar 01, 2020 12:25 am
razorbacker wrote: Sun Mar 01, 2020 12:10 am I'll play, 20% or a little less. I tend to think there is a little too much overaction in the market. If it drops closer to 20%, I'll be be buying back in on S&P 500.
Take a look at my summary of historical crashes over the last five decades upthread. Most 10% or 20% drops throughout history simply haven't turned into something larger. So you are probably going to be right, even if personally I hope we get another 50% crash.

The 60% crash we got in 2008-2009 was as much psychological - the product of a contagion of fear - as it was due to any rational analysis or pricing in of macroeconomic variables. So I think the only chance we get for another mother of all crashes is if people start panicking. And there's a better chance than in the past because of the media and the nature of news (fake or otherwise) going viral. It feels a bit morbid - like an undertaker waiting for someone to die - to fervently hope for a 50% market crash but that really would be awesome.
I MIGHT disagree there. 2001 or whenever the dot com was ... people were throwing as much money as they could in the market, but one dollar put in the market was one dollar in the market. 2008 people were borrowing to buy houses they couldn't afford. They were borrowing probably the most leveraged anyone in the history of the world ever has been, and on margin with no income verification loans. I have no idea how much money disappeared in bad loans but I'd guess many billions. And all the financial institutions were on the hook for it. So 2008 in retrospect sounds like a once in a generation catastrophe - all the regular people who could borrowed money at many many times their annual salary with no ability to pay it back. Many billions of dollars evaporated and the institutions that facilitate our economy were on the hook and about to go out of business. It really was a catastrophe (I think).

In contrast, if anything this market is a little frothy at worst, with employment going up up up and profits the same. PE ratio is a little high. Nothing fundamentally bad. Then a virus comes into town and while it may be really, really bad, so far it's not by any means clear that is the case, and it may be the market totally panicked and sold completely irrationally. If that's the case - and I'm thinking it is - I'd expect the market to bounce back up to two weeks ago then go even higher as everyone realized they sold in panic and are now buying in panic.

On some thread or other here I guessed we'd have some idea of how bad it is in six weeks and over the course of March we'll probably see the market overreact and either really tank or really rocket up.
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Re: Anybody want to guess the bottom of this "dip"?

Post by Northern Flicker »

Ornery Old Guy wrote: -25% only BARELY gets you into a bear market.
There is no measure of past performance that gets you into a bear market. If you take a 20% drop as the definition of a bear market, then a 20% drop from the previous market top means that you were in a bear market that started at the past market top.

When the bear market ends depends on what happens after the point at which it hits -20%. The moment it hits at or near -20% could well be the bottom of the bear and the start of a bull market. That was the case in 2018. From 9/21/2018 to 12/24/2018, the US market was in a bear market, down 20.15%. It hit the “milestone” on 12/24/2018.

http://quotes.morningstar.com/chart/fun ... 2%3A955%7D

The next bull market started at the next market open on 12/26/2018.

http://quotes.morningstar.com/chart/fun ... 2%3A955%7D
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Ornery Old Guy
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Re: Anybody want to guess the bottom of this "dip"?

Post by Ornery Old Guy »

Northern Flicker wrote: Sun Mar 01, 2020 1:47 am
Ornery Old Guy wrote: -25% only BARELY gets you into a bear market.
There is no measure of past performance that gets you into a bear market. If you take a 20% drop as the definition of a bear market, then a 20% drop from the previous market top means that you were in a bear market that started at the past market top.

When the bear market ends depends on what happens after the point at which it hits -20%. The moment it hits at or near -20% could well be the bottom of the bear and the start of a bull market. That was the case in 2018. From 9/21/2018 to 12/24/2018, the US market was in a bear market, down 20.15%. It hit the “milestone” on 12/24/2018.

http://quotes.morningstar.com/chart/fun ... 2%3A955%7D

The next bull market started at the next market open on 12/26/2018.

http://quotes.morningstar.com/chart/fun ... 2%3A955%7D
Hi. My point being that if people are talking how sorely this is testing the market and they predict it goes down 25% ... well that barely hits the qualification for a bear market. That's not super bearish. And as I misremembered but someone else posted ... a bear or drop in 20% happens about every 5 years or so.
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Gray
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Re: Anybody want to guess the bottom of this "dip"?

Post by Gray »

-16% to -20%

Covid19 is a mild flu-like illness in the vast majority of cases. Like the flu, it is only dangerous to those with weakened immune systems. I don’t care if I get Covid19. Drink plenty of fluids, take it easy, etc. I just came down with something near identical in symptoms to Covid19–same playbook. I’m fine now.

Protections need to be focused on two groups: those treating the infected and those with weakened immune systems. Anti-virals and other medical treatments can help mitigate the effects for people who need it. At some point, it becomes more harmful to contain than to manage with effective communications with the public.

Anyway, the market’s reaction is overwrought. Stocks were overvalued in my opinion and this was the catalyst to force a correction. If it goes down further, I will buy more.

If the market goes sideways for the next year, I don’t much care. If it goes down, even better.
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Re: Anybody want to guess the bottom of this "dip"?

Post by restingonmylaurels »

DonCamillo wrote: Fri Feb 28, 2020 7:05 pm If the cruises I have purchased in May and October get canceled for the coronavirus, I will be putting the money from them back into the market. Before I retired, I would have already been in maximum bargain hunting mode.

Research the 1918 Flu epidemic. There is a good hour long video on You Tube. Particularly contrast what happened in Philadelphia, with poor epidemic discipline, and what happened in San Francisco, with appropriate measures. I trust that we have learned something in a hundred years, and we will be like San Francisco. It looks like China and Iran are following the Philadelphia precedent. Note that it only took one day, a War Bond Parade, to put Philadelphia out of control resulting in over 3,000 deaths. China and Iran both tried to suppress information in the early days of their epidemics, which hindered control.

There were 3 waves of the 1918 flu, massively energized by the World War, and it lasted a full year. So I think it will be a while yet before the coronavirus is under control. It is particularly worrisome if Covid 19 takes hold in a poverty region with limited medical care. India had 20 million deaths from the 1918 flu.

Even the Black Plague in the 14th Century did not stop the economy. It killed about 1/3rd of Europe, including many of the most educated persons of the time, the doctors and clergy who tried to help the sick. Yet it resulted in economic growth due to an increased demand for labor. Note that while the 1918 flu struck hardest at the most productive members of society, workers between age 20 and 40, the coronavirus is mostly killing people 70 and over. Even in that (my) age bracket, the great majority of those stricken recover.

The bottom line is that eventually the virus will be controlled, and economic growth will resume. So the stock market will bottom when prices drop enough that long term investors spot bargains at the expense of those looking at short term results. After years of low interest rates, dividend yields will put a floor under the price of dividend stocks, and growth stocks will have a floor set by comparable values.

My guess is that 30% would be irresistible, so we will not get that far. There are a lot of people investing for retirement, and retirements are lasting many years, so the is plenty of money available to invest.
This is really an excellent analysis, based on historical fact.

The reminders about the different measures taken in different cities and what happened in India during the Spanish flu pandemic is worth remembering. And what happens to countries that try to surpress information.
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Re: Anybody want to guess the bottom of this "dip"?

Post by grayfox »

bluquark wrote: Sat Feb 29, 2020 11:01 pm
The market usually does something very different than the consensus, so we can pretty much exclude this outcome of about -25%. It will either be a lot better (i.e. we had the bottom already or are close), or a lot worse (i.e. -50%).
Strictly speaking, market prices are set by the consensus and do exactly that. But it's a very curious sort of consensus we have here, with everybody idly predicting further drops, largely without making any trades that would communicate their belief to the market.

This seems like a nice illustration of Taleb's point that the weakly held beliefs of the majority have no impact on the market, whereas the consensus of the highly motivated minority determines market prices. And in turn this explains why the market swings so emotionally even though the majority of its participants are cool and calculating.
That sounds about right to me. Most people will do nothing and have no impact on stock prices. The stock prices will be determined by buy and sell orders placed by the price setters who are control large amounts of money. That's probably traders at investment banks like Goldman Sachs and big hedge funds. With a lot of money on the line, they will have stock analysts adjusting their earnings forecasts for every company to take into account the latest information on COVID-19, plus everything else that is happening in the world. Then they could use discounted cashflow to calculate the net present value and put a price on every stock.

Some industries, like airlines and hotels, will probably be big losers. Other companies may prosper. E.g. if more people shop online at Amazon and sign up for Netflicks.

Just to give an numerical example, suppose a stock had $1 in earnings in 2019 and was expected to grow earnings at 3% per year forever: 1, 1.03, 1.06, 1.09, 1.13... With a discount rate of 10%, the price would be about $14.70, i.e. P/E=14.7
Now suppose that because of COVID-19 earnings are zero in 2020, but then go back onto the original track.
Then the price would be $13.76, down -6.37%.
If the next two years of earnings were zero, the price would be $12.88, down -12.34%.
Three years of zero earnings, price would be $12.06, down -17.93%.

Even if S&P500 earnings were zero in 2020 due to the virus, maybe the NPR at some discount rate goes down 5%. I didn't calculate any actual numbers, but you can be sure that Wall Street stock analysts are making detailed estimates of how much they are willing pay for a stock. I will also mention that every analyst will have a different price, otherwise there would be no trades. They will all have different earnings estimates and use different discount rates. This will all show up in the BIDS and ASKS at the stock auction on Monday. I look forward to seeing what the opening cross is on Monday morning. Fun times.

BTW, the Shiller P/E has gone down from 31.23 at the end of January to 28.05 at the end of February.
Last edited by grayfox on Sun Mar 01, 2020 7:55 am, edited 1 time in total.
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BenfromToronto
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Re: Anybody want to guess the bottom of this "dip"?

Post by BenfromToronto »

willthrill81 wrote: Sat Feb 29, 2020 9:21 pm By my count, there have been 54 predictions so far. I counted all of them, and in the case of a range being provided, I used the smaller value of the range (i.e. if someone predicted -20% to -25%, I used -20%).

So far, the mean predicted drop from the S&P 500's high of 3,386 is -29.2%, and the median predicted drop is -24.25%.

We'll see how much wisdom there is in this crowd.
Excellent! :sharebeer
Thank you.

If you have the numbers on a spreadsheet can you also provide the range, SD, and IQR?
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Re: Anybody want to guess the bottom of this "dip"?

Post by thelateinvestor43 »

-94% in 3 months.
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BenfromToronto
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Re: Anybody want to guess the bottom of this "dip"?

Post by BenfromToronto »

Scooter57 wrote: Sat Feb 29, 2020 10:25 pm Most of these announcements of supposed vaccines are probably attempts to boost stocks, or like the one cited, attempts to get more research funding for labs. Don't be misled by the hype. We just don't know how this will play out. It might be no worse than flu (which can be really awful and killed a healthy young Jim Henson) or it could be really really bad. It is that uncertainty that will keep the market gyrating, along with the possibility of widespread closures of workplaces and events.
Jim Henson died of a bacterial infection:

"On May 16, 1990, Henson died at New York Hospital, aged 53 at 1:21 am. Dr. David Gelmont announced that Henson had died from Streptococcus pneumoniae, an infection that causes bacterial pneumonia. However, on May 29, Gelmot reclassified it as organ dysfunction resulting from streptococcal toxic shock syndrome caused by Streptococcus pyogenes."

https://en.wikipedia.org/wiki/Jim_Henso ... _and_death
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Re: Anybody want to guess the bottom of this "dip"?

Post by veggivet »

Point taken, but the doctor in China who first warned of this virus succumbed to it at the age of 42.
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Re: Anybody want to guess the bottom of this "dip"?

Post by LawProf »

Prediction: 40%.

I think it could easily go lower, but I think the government will step in to buttress the market at some point. We live in a flat world now, and this virus threatens to seriously disrupt that. Centralization and interconnectivity provide great efficiencies and benefits, but they also make the risks bigger. We're about to experience some of those risks. There are a lot of chain reaction, political risks in play, too. People who are saying that the virus is no big deal/flu kills more people every year have their heads in the sands.

The U.S. hasn't even really started to panic yet. It's coming.
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Re: Anybody want to guess the bottom of this "dip"?

Post by Dottie57 »

Prediction 60% loss.

Yes, this has hit me hard. I really hope I will be able to look at this and call myself stupid a year from now.
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Re: Anybody want to guess the bottom of this "dip"?

Post by averagedude »

My guess is -22.5%. I remain optimistic, but I believe right now their is uncertainity, which the market doesn't like. I also believe that the market was a little ahead of itself, thus the reason for this large decline. I think we will see more clarity in this situation soon, and the shakeup of these markets will cause all the nervous nellie's to sell off once again, while the institution and long term investors will benefit from buying the dip.
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Re: Anybody want to guess the bottom of this "dip"?

Post by MikeG62 »

Instead of just giving a number I'll offer the math behind it too.

Assume Coronavirus causes disruption to US economic activity in 2020 resulting in S&P500 earnings being flat to 2019 ($165). Using lower end of historical PE ratio (14) results in S&P 500 at around 2,300. That's down 20% from here. So I would say could reasonably be as low as 2,300. If Coronavirus impact in the US is contained (as it has been so far) then we should not trade down anywhere near this level. So like most things in life, it depends...
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Re: Anybody want to guess the bottom of this "dip"?

Post by Top99% »

31.4159265359% +/- 50%

On a more serious note it will be interesting to see how folks who started investing after the financial crisis weather this.
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Re: Anybody want to guess the bottom of this "dip"?

Post by Crushtheturtle »

Top99% wrote: Sun Mar 01, 2020 9:20 am 31.4159265359 +/- 50%

On a more serious note it will be interesting to see how folks who started investing after the financial crisis weather this.
We've had plenty of 10 or 20% pullbacks since then. I suppose it matters how much the investor was paying attention to any of them- this one is certainly in the news.
I read somewhere that every year on average sees a 14% drawdown.
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Re: Anybody want to guess the bottom of this "dip"?

Post by Jags4186 »

Top99% wrote: Sun Mar 01, 2020 9:20 am 31.4159265359% +/- 50%

On a more serious note it will be interesting to see how folks who started investing after the financial crisis weather this.
If they have 3x leveraged extended duration treasuries they will be fine. Up 7.4% last week :wink:
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Re: Anybody want to guess the bottom of this "dip"?

Post by Jags4186 »

I'd just like to remind folks that while we are living in the now and seeing a 10%+ pullback in a week objectively stinks, this event (and it's a continuation/conclusion) may be erased into the history of looking at annual returns.

1987, which featured a -22.6% day, was an up year in the market. When looking back upon your returns you forget about sporadic ups and downs--even the big ones. This year may still end as an up year...it's only March 1 after all.
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Re: Anybody want to guess the bottom of this "dip"?

Post by lostdog »

I will guess -20%. As Spring comes along and times moves on, it will be fizzle out.

Interesting to see how people are cool and calm and other are in constant fear. For me I would say cool and calm. If I get, oh well, just another flu.
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Covid19 market slide: Who can guess?

Post by Stanczyk »

[Thread merged into here, see below. --admin LadyGeek]

Hello everyone,

It has been a wild week or so. Between 2/20 and 2/28 the S&P 500 declined by about 14%. How much down do you think it will go before things start improving. My guess is -25% from market highs.

Of course, we cannot predict the future, but we can play a guessing game. The winner gets the title of Grand Poobah of Bogleheads.
Wash your hands and stay safe. :D
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Re: Covid19 market slide: Who can guess?

Post by Flobes »

Topic already has an active thread, with hundreds of responses:

Anybody want to guess the bottom of this dip?
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Stanczyk
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Re: Covid19 market slide: Who can guess?

Post by Stanczyk »

:oops:
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Re: Anybody want to guess the bottom of this "dip"?

Post by willthrill81 »

BenfromToronto wrote: Sun Mar 01, 2020 7:53 am
willthrill81 wrote: Sat Feb 29, 2020 9:21 pm By my count, there have been 54 predictions so far. I counted all of them, and in the case of a range being provided, I used the smaller value of the range (i.e. if someone predicted -20% to -25%, I used -20%).

So far, the mean predicted drop from the S&P 500's high of 3,386 is -29.2%, and the median predicted drop is -24.25%.

We'll see how much wisdom there is in this crowd.
Excellent! :sharebeer
Thank you.

If you have the numbers on a spreadsheet can you also provide the range, SD, and IQR?
I didn't save the spreadsheet. But to be honest, I wouldn't try to cut something like this too finely.
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Re: Anybody want to guess the bottom of this "dip"?

Post by LadyGeek »

I merged milosz19's thread into the on-going discussion.
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Re: Covid19 market slide: Who can guess?

Post by DesertDiva »

milosz19 wrote: Sun Mar 01, 2020 10:50 am:oops:
I agree! #StayingTheCourse
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Re: Anybody want to guess the bottom of this "dip"?

Post by Patzer »

grayfox wrote: Sun Mar 01, 2020 7:33 am Just to give an numerical example, suppose a stock had $1 in earnings in 2019 and was expected to grow earnings at 3% per year forever: 1, 1.03, 1.06, 1.09, 1.13... With a discount rate of 10%, the price would be about $14.70, i.e. P/E=14.7
Now suppose that because of COVID-19 earnings are zero in 2020, but then go back onto the original track.
Then the price would be $13.76, down -6.37%.
Pretty good analysis, but we shouldn't pretend zero is the lowest earnings can go to. Companies can have negative earnings, and some will.
There also can be long-term consequences, i.e. 2 people have said to me that they will never go on a cruise again.
Companies that have been struggling to keep going, may fail due to a period of negative earnings, and lose all future earnings, for a loss of 90-100%.
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Re: Anybody want to guess the bottom of this "dip"?

Post by 02nz »

AlphaLess wrote: Sat Feb 29, 2020 12:18 am I agree. Oregon and NorCal cases the canary in the gold mine.
I think the saying is "canaries in the coal mine," although I suppose if your are in a gold mine that changes the perspective! :moneybag
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Re: Anybody want to guess the bottom of this "dip"?

Post by Valuethinker »

LawProf wrote: Sun Mar 01, 2020 8:17 am Prediction: 40%.

I think it could easily go lower, but I think the government will step in to buttress the market at some point.
I don't know of any way they can? Do you? Central bank to buy stock in the stock market? (that is a step some places have taken, but it's hard to imagine the Fed going that far).
We live in a flat world now, and this virus threatens to seriously disrupt that. Centralization and interconnectivity provide great efficiencies and benefits, but they also make the risks bigger. We're about to experience some of those risks. There are a lot of chain reaction, political risks in play, too. People who are saying that the virus is no big deal/flu kills more people every year have their heads in the sands.

The U.S. hasn't even really started to panic yet. It's coming.
If we recall various waves of panic about Zika, or Ebola (lethal, but quite hard to catch) then... yes. Remembering this is a world where a significant number of people doubt the measles vaccine (measles is one of the most infectious diseases known, so the herd immunity principle is really important - if it falls below c 95% we have danger of an epidemic).

These sorts of things tend to uncover gaps in national healthcare systems and public health systems. For my own (England & Wales NHS) that would be the absolute lack of any spare capacity, spare beds, spare care, particularly during the winter flu season. We are wide open to a crisis.

It depends how bad this gets. The scale of Chinese action may have blunted the spread - it must be unprecedented in human history, to lock down that many people. Essentially order them off the streets.

I don't have a good read on mortality. If it is say 0.5% then 5x a normal flu season. Not too bad unless you are directly affected. If it is genuinely 2% then things are pretty tricky - damned thing is too easy to catch and to spread.

Thank whatever powers that rule the disease universe that, so far, it does not seem to kill the young and the very young. This is not a 1919 so far (which killed disproportionately the able bodied young adults).
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Re: Anybody want to guess the bottom of this "dip"?

Post by AlphaLess »

02nz wrote: Sun Mar 01, 2020 11:57 am
AlphaLess wrote: Sat Feb 29, 2020 12:18 am I agree. Oregon and NorCal cases the canary in the gold mine.
I think the saying is "canaries in the coal mine," although I suppose if your are in a gold mine that changes the perspective! :moneybag
Thanks for the correction.

You are absolutely right.

But I love Bushisms.

So, from now on, it is going to be "canaries in the gold mine".
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Re: Anybody want to guess the bottom of this "dip"?

Post by Valuethinker »

restingonmylaurels wrote: Sun Mar 01, 2020 6:25 am
DonCamillo wrote: Fri Feb 28, 2020 7:05 pm
Even the Black Plague in the 14th Century did not stop the economy. It killed about 1/3rd of Europe, including many of the most educated persons of the time, the doctors and clergy who tried to help the sick. Yet it resulted in economic growth due to an increased demand for labor.
I don't agree with that characterisation of the Black Death.

Killing one third (even up to one half in places like England) of the population did not create economic growth. It created an absolute collapse in demand and production of just about everything, abandonment of dwellings, etc. As an example we have track of Alpine lead deposits (in the ice strata) from around 1000 BC - the product of silver/ lead mining & smelting in those times. In that entire period, embracing the Dark Ages of 400-900 AD and running to the 19th century, lead smelting never ceased. It did so, however, in 1346 & 1347.

This was a labour dependent economy, so to increase output you needed more labour. Labour was scarce so therefore its relative price went up. Landlords tried to prevent tenants and serfs from exploiting this and you had phenomena like The Peasants' Revolt (1381).

So I would term it "GDP shrank by at least 1/3rd and perhaps by 1/2. However labour became relatively scarce, and that speeded up the marketisation of the late medieval economy - an increased reliance on cash and cash payments, as well as flight of peasant labour from the land".
Note that while the 1918 flu struck hardest at the most productive members of society, workers between age 20 and 40, the coronavirus is mostly killing people 70 and over. Even in that (my) age bracket, the great majority of those stricken recover.

The bottom line is that eventually the virus will be controlled, and economic growth will resume. So the stock market will bottom when prices drop enough that long term investors spot bargains at the expense of those looking at short term results. After years of low interest rates, dividend yields will put a floor under the price of dividend stocks, and growth stocks will have a floor set by comparable values.

My guess is that 30% would be irresistible, so we will not get that far. There are a lot of people investing for retirement, and retirements are lasting many years, so the is plenty of money available to invest.
This is really an excellent analysis, based on historical fact.

The reminders about the different measures taken in different cities and what happened in India during the Spanish flu pandemic is worth remembering. And what happens to countries that try to surpress information.
[/quote]

It was as much as anything what resources countries had in 1919. Did they have sanitorium beds to care for the sick? Were public health measures rapidly adopted - closing of public baths, theatres etc?

India was ruled by colonial masters (the British) with limited interest in the wellbeing of the masses of their subjects. That cannot have helped.
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Re: Anybody want to guess the bottom of this "dip"?

Post by AlphaLess »

firebirdparts wrote: Sun Mar 01, 2020 12:06 am
lostdog wrote: Sat Feb 29, 2020 7:12 pm If we hit a bear territory for a bit will people and the media finally stop saying we're still in a 10 year bull market?
I don't think so. If there is a recognizable business cycle (and it sure looks like there might be one) then I think that'll do it. I don't think you will see a real reset of the bull market without also a reset of the business cycle.
Stocks are generally way ahead of the business cycle.

If stocks hit -30%, I think it will be because the signs / indicators for recession are available to those who are selling.
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Re: Anybody want to guess the bottom of this "dip"?

Post by RayKeynes »

Some scenarios:

Virus can be contained in the US and China and will not spread any further: 2'800 points

Virus will spread further in Europe and in the USA, as well as in China and all growth forecasts worldwide will be adjusted: 2'400 - 2'600 points

Virus will spread further worldwide including Africa and cause death of a lot of small and medium sized companies and disruption of economic activity for 2 quarters at least: 2'000 - 2'400 points

Collapse of financial system (banks incl. Deutsche Bank) with severe recession lasting 2-3 Quarters: 1'700 points
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Re: Anybody want to guess the bottom of this "dip"?

Post by anoop »

AlphaLess wrote: Sun Mar 01, 2020 12:15 pm
firebirdparts wrote: Sun Mar 01, 2020 12:06 am
lostdog wrote: Sat Feb 29, 2020 7:12 pm If we hit a bear territory for a bit will people and the media finally stop saying we're still in a 10 year bull market?
I don't think so. If there is a recognizable business cycle (and it sure looks like there might be one) then I think that'll do it. I don't think you will see a real reset of the bull market without also a reset of the business cycle.
Stocks are generally way ahead of the business cycle.

If stocks hit -30%, I think it will be because the signs / indicators for recession are available to those who are selling.
We are so far from that place where stocks or asset prices are reflective of anything happening with the economy. This is purely a panic sell and easily reversed by the fed. And it will be, hence the statements by Powell and others after which the market reversed most of its losses on Friday. Monday is virtually guaranteed to be an up day.
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Re: Anybody want to guess the bottom of this "dip"?

Post by RayKeynes »

I expect at least a drop to 2'400-2'500 points. But what do I know? Same as all other investors - nothing.
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Re: Anybody want to guess the bottom of this "dip"?

Post by AlphaLess »

Valuethinker wrote: Sun Mar 01, 2020 12:03 pm
LawProf wrote: Sun Mar 01, 2020 8:17 am Prediction: 40%.

I think it could easily go lower, but I think the government will step in to buttress the market at some point.
I don't know of any way they can? Do you? Central bank to buy stock in the stock market? (that is a step some places have taken, but it's hard to imagine the Fed going that far).
We live in a flat world now, and this virus threatens to seriously disrupt that. Centralization and interconnectivity provide great efficiencies and benefits, but they also make the risks bigger. We're about to experience some of those risks. There are a lot of chain reaction, political risks in play, too. People who are saying that the virus is no big deal/flu kills more people every year have their heads in the sands.

The U.S. hasn't even really started to panic yet. It's coming.
If we recall various waves of panic about Zika, or Ebola (lethal, but quite hard to catch) then... yes. Remembering this is a world where a significant number of people doubt the measles vaccine (measles is one of the most infectious diseases known, so the herd immunity principle is really important - if it falls below c 95% we have danger of an epidemic).

These sorts of things tend to uncover gaps in national healthcare systems and public health systems. For my own (England & Wales NHS) that would be the absolute lack of any spare capacity, spare beds, spare care, particularly during the winter flu season. We are wide open to a crisis.

It depends how bad this gets. The scale of Chinese action may have blunted the spread - it must be unprecedented in human history, to lock down that many people. Essentially order them off the streets.

I don't have a good read on mortality. If it is say 0.5% then 5x a normal flu season. Not too bad unless you are directly affected. If it is genuinely 2% then things are pretty tricky - damned thing is too easy to catch and to spread.

Thank whatever powers that rule the disease universe that, so far, it does not seem to kill the young and the very young. This is not a 1919 so far (which killed disproportionately the able bodied young adults).
Spot on comments, for the most part.

I think preparedness is key.

Having the ability to contain, and slow down the growth of the virus in the population is key.

Even if eventually 30, 50, or 70% of the population is going to get it, it does matter whether it happens in 4 weeks, or 24 months.

As you mention: capacities are limited. Beds, ICUs, ventilators, health care staff, etc.

Also, large number of people getting sick fast will result in economic capacity shrinkage.

I think the fatality rate is NOT some constant number.

Fatality rate could be 2x, or 4x more if you don't have access to an ICU and ventilator.
It could be 3x worse if you don't seek medical care soon enough.

Fatality rates are not absolute, and determined by human genetic make-up.

Medicine is quite advanced, and it is possible to reduce the fatality rate dramatically.

Unfortunately, the majority of the world has been caught slow-footed in this case.

South Korea is one bright example where the fatality rate is only 0.5%.

It appears that they have good tracability, lots of test kits, exercise good controls.
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Re: Anybody want to guess the bottom of this "dip"?

Post by Cousin Eddie »

I like the quote that Homer J uses in his posts from time to time:

"The only function of economic forecasting is to make astrology look respectable."

-John Kenneth Galbraith.

Multiply by 10 when it comes to forecasting the stock market. Whatever the market does, I will stay with my AA.
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Re: Anybody want to guess the bottom of this "dip"?

Post by hoops777 »

mikeyzito22 wrote: Sat Feb 29, 2020 10:19 pm
guyinlaw wrote: Sat Feb 29, 2020 10:17 pm
mikeyzito22 wrote: Sat Feb 29, 2020 9:05 pm
guyinlaw wrote: Sat Feb 29, 2020 12:24 pm ....
Common cold, Flu, COVID19, SARS and MERS are all types of coronavirus.. mortality is 0 Cold < 0.05 FLU < 2% COVID19 < 7% SARS < 30% MERS

....

Bill Gates has said this is once in a century virus.
Fatality rate is not 2% because its to new to actually make that number stick at this point. It is most likely lower.
Hopefully it is lower.. much lower. Flu mortality is between 0.02% to 0.1%, so there is a range. Depends on the strain.

For COVID19 we will have to wait for studies. In China the effect seems to different for age groups, smokers, sex (large % of Chinese men are smokers) and people suffering hypertension/diabetes..

https://www.worldometers.info/coronavir ... graphics/

Here is the Bill Gates article.
In the past week, COVID-19 has started to behave a lot like the once-in-a-century pathogen we’ve been worried about. I hope it’s not that bad, but we should assume that it will be until we know otherwise.

There are two reasons that COVID-19 is such a threat. First, it can kill healthy adults in addition to elderly people with existing health problems. The data so far suggests that the virus has a case fatality risk around 1%; this rate would make it several times more severe than typical seasonal influenza and would put it somewhere between the 1957 influenza pandemic (0.6%) and the 1918 influenza pandemic (2%).

Second, COVID-19 is transmitted quite efficiently. The average infected person spreads the disease to two or three others. That’s an exponential rate of increase. There is also strong evidence that it can be transmitted by people who are just mildly ill or not even showing symptoms yet. This means COVID-19 will be much harder to contain than Middle East Respiratory Syndrome or Severe Acute Respiratory Syndrome (SARS), which were only spread by those showing symptoms and were much less efficiently transmitted. In fact, COVID-19 has already caused 10 times as many cases as SARS in just a quarter of the time.
https://www.gatesnotes.com/Health/How-t ... -COVID-19
Bill Gates isn't a scientist.
True but he is an extremely intelligent and rich guy who talks to the best scientists.
K.I.S.S........so easy to say so difficult to do.
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Re: Anybody want to guess the bottom of this "dip"?

Post by hoops777 »

anoop wrote: Sun Mar 01, 2020 12:22 pm
AlphaLess wrote: Sun Mar 01, 2020 12:15 pm
firebirdparts wrote: Sun Mar 01, 2020 12:06 am
lostdog wrote: Sat Feb 29, 2020 7:12 pm If we hit a bear territory for a bit will people and the media finally stop saying we're still in a 10 year bull market?
I don't think so. If there is a recognizable business cycle (and it sure looks like there might be one) then I think that'll do it. I don't think you will see a real reset of the bull market without also a reset of the business cycle.
Stocks are generally way ahead of the business cycle.

If stocks hit -30%, I think it will be because the signs / indicators for recession are available to those who are selling.
We are so far from that place where stocks or asset prices are reflective of anything happening with the economy. This is purely a panic sell and easily reversed by the fed. And it will be, hence the statements by Powell and others after which the market reversed most of its losses on Friday. Monday is virtually guaranteed to be an up day.
We will see about Monday and how easily reversed this is if cases start really multiplying in the USA. I believe it takes a bit more time for economic effects to fully kick in.
Also,retired people really need savings accounts,CD’s and annuity rates going down even more. Everything is always about the stock market and people who do not like to play are always penalized.
K.I.S.S........so easy to say so difficult to do.
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