Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

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H-Town
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by H-Town » Thu May 28, 2020 12:06 am

scintillator wrote:
Wed May 27, 2020 7:06 am
scintillator wrote:
Sun Mar 29, 2020 8:49 pm
So I don't really see any hot takes here on predictions of inflation versus deflation in a scenario of protracted recession with several injections of stimulus. I guess I'll just keep the money in my settlement fund until I start redeploying into stocks in the next 2–18 months.

As for people saying I should buy inverse ETFs or puts, or short the market some other way, I'm not doing that because I'm of course not sure I'm right. And I would get wiped out if there were a cure or some other bullish development. Taking my stock exposure down from 90% to 20% is a form of shorting the market. I considered buying puts instead of selling the underlying, but it didn't make a whole lot of sense because of tax considerations (and now volatility is super high, so puts are very expensive). So the way I'm betting on this decline is by dramatically reducing my AA. And it seems stupid to buy an inverse ETF and have to pay short-term cap gains and high fees and suffer beta slippage when I'm long the underlying index. If I wanted that more exposure I would just sell more of the underlying index.

ValuationsMatter wrote:
Sun Mar 29, 2020 8:50 am
Your hypothetical is one of extreme pessimism. At a mortality rate of 1%, which is a fair estimate for the disease, your estimate of 100k dead would require 10M infections. At present, there are only 680k infections worldwide. There are ~120k confirmed cases in the US. Unabated, the virus doubles every 4 days. It would have to double 6-7 times to get to that total count. That's almost another full month of unabated exponential growth. That will not happen.
I don't think the mortality rate is 1%. Korea has handled this better than any country with high infection rates and they're well over 1%. I think the death rate in the US should be over 2% even if hospitals don't get totally overwhelmed. Without adequate medical treatment, death rates should be well higher than 2%. I was only saying that we'll get to 100k dead in May if the lock-down is taken off at Easter like Trump announced last week. Even still, I think there's a good chance we get to 100k dead by the end of May even with an extended lock-down. I'll be sure to bump this in May if that happens. I think pretty much everyone in this thread fails to appreciate how virulent and deadly this virus is. Maybe we'll find an effective treatment; maybe the virus will mutate to something more benign; maybe I'm just wrong. But stating that 100k dead by the end of May "will not happen" could prove regrettable for you, and others in the market that share your certainty.
Just goes to show you that even when you get the core thesis right, you can still lose to people who get the core thesis wrong.

I'm still on the sidelines for the most post. Obviously I wish I'd been in on the ride up to 3000, but I'm not giving up hope that what I think is the economic reality from this virus will manifest in the stock market in the short to medium term. If SPX never gets near where it was when I started this thread, and I get totally punished for this move, and all the Pollyanna retail permabulls win and I lose, [political comment removed by admin LadyGeek].
That last comment that got removed..... Life is tough for market timers.

Just pretend you're really good at everything, except for actively investing.
Just pretend that you set up automatic investing, and then regularly move your saving surplus to investment accounts.
Just pretend that you don't really care what market is doing.

Now, when you come back and check your accounts in 20-30 years, you will be very happy.

Life happens outside of your portfolio. Quote me on that.

stocknoob4111
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by stocknoob4111 » Thu May 28, 2020 3:02 am

This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again

KyleAAA
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by KyleAAA » Thu May 28, 2020 10:06 am

stocknoob4111 wrote:
Thu May 28, 2020 3:02 am
This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again
It doesn't necessarily not mean anything, either.

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TheTimeLord
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by TheTimeLord » Thu May 28, 2020 10:10 am

tvubpwcisla wrote:
Sun Mar 29, 2020 6:17 am
I would go back and look at your financial plan. What does your plan say to do whenever you believe you can predict the future?

Who cares what happens in the next hour, day, week, month, or year? They could announce a cure tomorrow and the SPX could shoot right back up to over 3,000 very quickly. I would advise that you stick to your financial plan.

:beer
Or they could not announce a cure and it could shoot up to 3,000 anyway.
Last edited by TheTimeLord on Thu May 28, 2020 10:12 am, edited 1 time in total.
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tvubpwcisla
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by tvubpwcisla » Thu May 28, 2020 10:11 am

TheTimeLord wrote:
Thu May 28, 2020 10:10 am
tvubpwcisla wrote:
Sun Mar 29, 2020 6:17 am
I would go back and look at your financial plan. What does your plan say to do whenever you believe you can predict the future?

Who cares what happens in the next hour, day, week, month, or year? They could announce a cure tomorrow and the SPX could shoot right back up to over 3,000 very quickly. I would advise that you stick to your financial plan.

:beer
Or they could not announce a cure and it could shoot up to 3,000 anyway.
Funny! :)
Stay invested my friends.

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HomerJ
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by HomerJ » Thu May 28, 2020 10:17 am

stocknoob4111 wrote:
Thu May 28, 2020 3:02 am
This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again
Of course... It absolutely could happen again.

None of us here was saying the OP is WRONG.... We're saying he doesn't KNOW.

We're not taking the opposite position.

When someone says "I'm sure the market is going down to 1800 from here", we're NOT saying "No way, the market is going to go up!"

Instead, we're saying "You can't be sure, because no one knows... It MIGHT go down, but it could also go up, so making a huge bet on it going down is a bad idea"
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

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TheTimeLord
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by TheTimeLord » Thu May 28, 2020 10:23 am

stocknoob4111 wrote:
Thu May 28, 2020 3:02 am
This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again
It's not about if it does or does not happen, it is about being set up to handle the risk whether it happens of not. And since I can only prepare for a finite set of outcomes I choose to focus my efforts and planning on those that are the most likely.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by firebirdparts » Thu May 28, 2020 10:26 am

Taking pity on the market timer, I think if I was sitting on a bunch of cash, I would set a target date and I'd DCA it back in. I know, time in the market and all that, I am just saying what i would do if I was the unfortunate person who started this thread. My target date would be a year, I think. Investing is a slow process, you all know how it is.

If I wanted to get fancy, I would make one of those tables that has dollar-chunk-size vs. the amount the market goes down, in case it goes down.
A fool and your money are soon partners

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TheTimeLord
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by TheTimeLord » Thu May 28, 2020 10:33 am

firebirdparts wrote:
Thu May 28, 2020 10:26 am
Taking pity on the market timer, I think if I was sitting on a bunch of cash, I would set a target date and I'd DCA it back in. I know, time in the market and all that, I am just saying what i would do if I was the unfortunate person who started this thread. My target date would be a year, I think. Investing is a slow process, you all know how it is.

If I wanted to get fancy, I would make one of those tables that has dollar-chunk-size vs. the amount the market goes down, in case it goes down.
First, I always like the concept of DCAing back in, especially if you use things like GTC Buy orders to catch dips. That said I would not call anyone who sold in late March a market timer. Market timers likely were out in February with the first 10% and either buying back in or waiting for the turn to buy back in by late March. That to me is what differentiates market timing from panic selling or panic buying for that matter.
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by mrspock » Thu May 28, 2020 10:37 am

TheTimeLord wrote:
Thu May 28, 2020 10:23 am
stocknoob4111 wrote:
Thu May 28, 2020 3:02 am
This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again
It's not about if it does or does not happen, it is about being set up to handle the risk whether it happens of not. And since I can only prepare for a finite set of outcomes I choose to focus my efforts and planning on those that are the most likely.
+1 , history and probability matters.

PolarInvest
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by PolarInvest » Thu May 28, 2020 11:00 am

scintillator wrote:
Wed May 27, 2020 7:06 am

Just goes to show you that even when you get the core thesis right, you can still lose to people who get the core thesis wrong.
Your problem isn't that you got your core thesis wrong, its that the 100,000 deaths statistic shouldn't be part of a core thesis at all.

Obviously every death is terrible, but at a population-level, 2,800,000 people died in the USA in 2018. Not sure if there are large seasonal variations, but that comes out to about 700,000 deaths between March-May 2018.

Based on a similar background fatality rate and adding in 100,000 deaths from COVID, that means about 800,000 people died between March-May 2020 out of 330,000,000 Americans instead of 700,000. And probably less since COVID targets older, sicker people in nursing homes, some of whom might have died during this period anyway.

So instead of 329,300,000 Americans surviving until the end of May 2020 in a world without COVID, there are only 329,200,000. I'm not sure why you think that deserves a 30-40% haircut in the markets.

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by FrankTheViking » Thu May 28, 2020 11:02 am

scintillator I think you are mostly right. 1800 seems a little extreme but maybe. The deaths statistically wont make much of a dent in population but I don't see good GDP progress in the short term. If you follow through with this best of luck, could win big. I'm not as confident in my opinion and will stay the course. Perhaps invest today with a very conservative AA until this blows over.
No EF. 80% Total U.S. / 20% Total International. 100% equity. Is there a gun to your head? Is there a tiger in the room? No? What's the problem?

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TheTimeLord
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by TheTimeLord » Thu May 28, 2020 11:08 am

mrspock wrote:
Thu May 28, 2020 10:37 am
TheTimeLord wrote:
Thu May 28, 2020 10:23 am
stocknoob4111 wrote:
Thu May 28, 2020 3:02 am
This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again
It's not about if it does or does not happen, it is about being set up to handle the risk whether it happens of not. And since I can only prepare for a finite set of outcomes I choose to focus my efforts and planning on those that are the most likely.
+1 , history and probability matters.
You might appreciate this. I have noticed in many endeavors people are coached not to confuse process and result. Having a good result does not mean you have a good process but having a good process should lead to more consistent good results. But this is very hard when dealing with something that stirs emotions like money. But isn't that exactly what the BH advocate, follow this time tested buy and hold process and you are more likely to see consistent good returns, as opposed to thinking just because something worked for you once you have found the silver bullet?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by nigel_ht » Thu May 28, 2020 11:19 am

PolarInvest wrote:
Thu May 28, 2020 11:00 am
scintillator wrote:
Wed May 27, 2020 7:06 am

Just goes to show you that even when you get the core thesis right, you can still lose to people who get the core thesis wrong.
Your problem isn't that you got your core thesis wrong, its that the 100,000 deaths statistic shouldn't be part of a core thesis at all.

Obviously every death is terrible, but at a population-level, 2,800,000 people died in the USA in 2018. Not sure if there are large seasonal variations, but that comes out to about 700,000 deaths between March-May 2018.

Based on a similar background fatality rate and adding in 100,000 deaths from COVID, that means about 800,000 people died between March-May 2020 out of 330,000,000 Americans instead of 700,000. And probably less since COVID targets older, sicker people in nursing homes, some of whom might have died during this period anyway.

So instead of 329,300,000 Americans surviving until the end of May 2020 in a world without COVID, there are only 329,200,000. I'm not sure why you think that deserves a 30-40% haircut in the markets.
It's not the deaths...it's the shutdowns and job losses.

dvvader
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by dvvader » Thu May 28, 2020 11:24 am

scintillator wrote:
Wed May 27, 2020 7:06 am

Just goes to show you that even when you get the core thesis right, you can still lose to people who get the core thesis wrong.

I'm still on the sidelines for the most post. Obviously I wish I'd been in on the ride up to 3000, but I'm not giving up hope that what I think is the economic reality from this virus will manifest in the stock market in the short to medium term. If SPX never gets near where it was when I started this thread, and I get totally punished for this move, and all the Pollyanna retail permabulls win and I lose, [political comment removed by admin LadyGeek].
You hit a lot on a lot of your predictions in the OP: lockdown extended past Easter, 2nd round of stimulus, 100,000 dead in May, etc. But, and not to rub it in, you can be "right" and also be wrong. Your move has cost you a lot of money, and now you get to fret about when to re-enter to avoid losing even more money. That sucks and I'm sorry.

I want to address your comment about some getting their "core-thesis" "wrong" while you got yours "right". In actuality, both you and the others were wrong! In both cases, the thought process that led to the decision to buy or sell was wrong, despite the results! Citing "doom-and-gloom" or a "V-shaped recovery" (and other nonsense) to justify altering one's plan is nothing more than gambling and a violation of basic "Boglehead-ism". Straight from the Wiki, "Bogleheads® emphasize regular saving, broad diversification, and sticking to one's investment plan regardless of market conditions." For many here, our "core-thesis" is to stay invested at a pre-determined allocation no matter what. By doing so, we guarantee ourselves market returns, which have historically been pretty good. We believe the market will be higher in the future when we retire (30ish years away for me) than it now. I guess this makes us "perma-bulls". I would argue this "core-thesis" is neither right nor wrong, but it is passive ("it is what it is") and has proven to work over the long haul and consistently beat folks who try to beat the market.

All this said, I would encourage to re-enter the market as soon as possible, at an allocation that you are comfortable with (how much are you willing to lose?), and stick to it. At the end of your time-horizon, I doubt you will regret it.

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by nigel_ht » Thu May 28, 2020 11:34 am

mrspock wrote:
Thu May 28, 2020 10:37 am
TheTimeLord wrote:
Thu May 28, 2020 10:23 am
stocknoob4111 wrote:
Thu May 28, 2020 3:02 am
This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again
It's not about if it does or does not happen, it is about being set up to handle the risk whether it happens of not. And since I can only prepare for a finite set of outcomes I choose to focus my efforts and planning on those that are the most likely.
+1 , history and probability matters.
History indicates that many bears have bull traps and few last only 19 trading days peak to trough...the shortest since 1929 that was 15 days.

Probability says...it's not 1929 but also that a very short bear is an anomaly.

H-Town
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by H-Town » Thu May 28, 2020 11:40 am

dvvader wrote:
Thu May 28, 2020 11:24 am
scintillator wrote:
Wed May 27, 2020 7:06 am

Just goes to show you that even when you get the core thesis right, you can still lose to people who get the core thesis wrong.

I'm still on the sidelines for the most post. Obviously I wish I'd been in on the ride up to 3000, but I'm not giving up hope that what I think is the economic reality from this virus will manifest in the stock market in the short to medium term. If SPX never gets near where it was when I started this thread, and I get totally punished for this move, and all the Pollyanna retail permabulls win and I lose, [political comment removed by admin LadyGeek].
You hit a lot on a lot of your predictions in the OP: lockdown extended past Easter, 2nd round of stimulus, 100,000 dead in May, etc. But, and not to rub it in, you can be "right" and also be wrong. Your move has cost you a lot of money, and now you get to fret about when to re-enter to avoid losing even more money. That sucks and I'm sorry.

I want to address your comment about some getting their "core-thesis" "wrong" while you got yours "right". In actuality, both you and the others were wrong! In both cases, the thought process that led to the decision to buy or sell was wrong, despite the results! Citing "doom-and-gloom" or a "V-shaped recovery" (and other nonsense) to justify altering one's plan is nothing more than gambling and a violation of basic "Boglehead-ism". Straight from the Wiki, "Bogleheads® emphasize regular saving, broad diversification, and sticking to one's investment plan regardless of market conditions." For many here, our "core-thesis" is to stay invested at a pre-determined allocation no matter what. By doing so, we guarantee ourselves market returns, which have historically been pretty good. We believe the market will be higher in the future when we retire (30ish years away for me) than it now. I guess this makes us "perma-bulls". I would argue this "core-thesis" is neither right nor wrong, but it is passive ("it is what it is") and has proven to work over the long haul and consistently beat folks who try to beat the market.

All this said, I would encourage to re-enter the market as soon as possible, at an allocation that you are comfortable with (how much are you willing to lose?), and stick to it. At the end of your time-horizon, I doubt you will regret it.
Very well said.

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by dvvader » Thu May 28, 2020 11:50 am

nigel_ht wrote:
Thu May 28, 2020 11:34 am
mrspock wrote:
Thu May 28, 2020 10:37 am
TheTimeLord wrote:
Thu May 28, 2020 10:23 am
stocknoob4111 wrote:
Thu May 28, 2020 3:02 am
This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again
It's not about if it does or does not happen, it is about being set up to handle the risk whether it happens of not. And since I can only prepare for a finite set of outcomes I choose to focus my efforts and planning on those that are the most likely.
+1 , history and probability matters.
History indicates that many bears have bull traps and few last only 19 trading days peak to trough...the shortest since 1929 that was 15 days.

Probability says...it's not 1929 but also that a very short bear is an anomaly.
This is akin to drawing a flush in poker. You can be getting all the right odds and making all the right bets, but no guarantees the turn or river deliver. The issue isn't that you are making the right or wrong bets given the (incomplete) information you have; the issue is sitting at the poker table with your life savings to begin with.

Yes, by investing the stock market I am in the casino, but I sure as hell ain't playing any games!

PolarInvest
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by PolarInvest » Thu May 28, 2020 11:55 am

nigel_ht wrote:
Thu May 28, 2020 11:19 am
PolarInvest wrote:
Thu May 28, 2020 11:00 am
scintillator wrote:
Wed May 27, 2020 7:06 am

Just goes to show you that even when you get the core thesis right, you can still lose to people who get the core thesis wrong.
Your problem isn't that you got your core thesis wrong, its that the 100,000 deaths statistic shouldn't be part of a core thesis at all.

Obviously every death is terrible, but at a population-level, 2,800,000 people died in the USA in 2018. Not sure if there are large seasonal variations, but that comes out to about 700,000 deaths between March-May 2018.

Based on a similar background fatality rate and adding in 100,000 deaths from COVID, that means about 800,000 people died between March-May 2020 out of 330,000,000 Americans instead of 700,000. And probably less since COVID targets older, sicker people in nursing homes, some of whom might have died during this period anyway.

So instead of 329,300,000 Americans surviving until the end of May 2020 in a world without COVID, there are only 329,200,000. I'm not sure why you think that deserves a 30-40% haircut in the markets.
It's not the deaths...it's the shutdowns and job losses.

Sure, the shutdowns and job losses are way more important for the economy and stock market than the excess deaths. The point is that maybe OP should have a core thesis about shutdowns and job losses rather than excess deaths.

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mrspock
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by mrspock » Thu May 28, 2020 12:01 pm

TheTimeLord wrote:
Thu May 28, 2020 11:08 am
mrspock wrote:
Thu May 28, 2020 10:37 am
TheTimeLord wrote:
Thu May 28, 2020 10:23 am
stocknoob4111 wrote:
Thu May 28, 2020 3:02 am
This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again
It's not about if it does or does not happen, it is about being set up to handle the risk whether it happens of not. And since I can only prepare for a finite set of outcomes I choose to focus my efforts and planning on those that are the most likely.
+1 , history and probability matters.
You might appreciate this. I have noticed in many endeavors people are coached not to confuse process and result. Having a good result does not mean you have a good process but having a good process should lead to more consistent good results. But this is very hard when dealing with something that stirs emotions like money. But isn't that exactly what the BH advocate, follow this time tested buy and hold process and you are more likely to see consistent good returns, as opposed to thinking just because something worked for you once you have found the silver bullet?
Annie Duke: Thinking in Bets — is exactly this. The converse is true as well, market timers who got it right this time, are akin to a poker player who bet and won. Good outcome, terrible play, and in the long run they go broke if they confuse luck with skill.

And of course, the hard part about timing is getting back in, as many have found out. As the saying goes: more money is lost sitting on sidelines than has ever been “lost” in a crash.

dvvader
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by dvvader » Thu May 28, 2020 12:07 pm

PolarInvest wrote:
Thu May 28, 2020 11:55 am
nigel_ht wrote:
Thu May 28, 2020 11:19 am
PolarInvest wrote:
Thu May 28, 2020 11:00 am
scintillator wrote:
Wed May 27, 2020 7:06 am

Just goes to show you that even when you get the core thesis right, you can still lose to people who get the core thesis wrong.
Your problem isn't that you got your core thesis wrong, its that the 100,000 deaths statistic shouldn't be part of a core thesis at all.

Obviously every death is terrible, but at a population-level, 2,800,000 people died in the USA in 2018. Not sure if there are large seasonal variations, but that comes out to about 700,000 deaths between March-May 2018.

Based on a similar background fatality rate and adding in 100,000 deaths from COVID, that means about 800,000 people died between March-May 2020 out of 330,000,000 Americans instead of 700,000. And probably less since COVID targets older, sicker people in nursing homes, some of whom might have died during this period anyway.

So instead of 329,300,000 Americans surviving until the end of May 2020 in a world without COVID, there are only 329,200,000. I'm not sure why you think that deserves a 30-40% haircut in the markets.
It's not the deaths...it's the shutdowns and job losses.

Sure, the shutdowns and job losses are way more important for the economy and stock market than the excess deaths. The point is that maybe OP should have a core thesis about shutdowns and job losses rather than excess deaths.
Or better yet, the OP's "core thesis" shouldn't consider these factors at all and they should invest yesterday at an allocation they are comfortable with. Given the OP was at 90/10, it seems likely they are young and still accumulating, meaning their portfolio is relatively small compared to what it will be and they have time to recover from any losses incurred during this particular crisis (self-imposed or otherwise).

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by mrspock » Thu May 28, 2020 12:08 pm

nigel_ht wrote:
Thu May 28, 2020 11:34 am
mrspock wrote:
Thu May 28, 2020 10:37 am
TheTimeLord wrote:
Thu May 28, 2020 10:23 am
stocknoob4111 wrote:
Thu May 28, 2020 3:02 am
This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again
It's not about if it does or does not happen, it is about being set up to handle the risk whether it happens of not. And since I can only prepare for a finite set of outcomes I choose to focus my efforts and planning on those that are the most likely.
+1 , history and probability matters.
History indicates that many bears have bull traps and few last only 19 trading days peak to trough...the shortest since 1929 that was 15 days.

Probability says...it's not 1929 but also that a very short bear is an anomaly.
Care to point out how many lows have been retraced after coming back this much? Let me save you some time: exactly zero* .

*Note: Some claim 2007 retraced the 2000 lows, but this is really reaching as it was clearly a fresh bull (7 year gap). If you are going to sit on the sidelines for almost a decade to see if we retest... good luck with that.

nigel_ht
Posts: 890
Joined: Tue Jan 01, 2019 10:14 am

Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by nigel_ht » Thu May 28, 2020 12:12 pm

mrspock wrote:
Thu May 28, 2020 12:08 pm
nigel_ht wrote:
Thu May 28, 2020 11:34 am
mrspock wrote:
Thu May 28, 2020 10:37 am
TheTimeLord wrote:
Thu May 28, 2020 10:23 am
stocknoob4111 wrote:
Thu May 28, 2020 3:02 am
This rally does not necessarily mean anything... we went from 3386 to 2237 in few weeks.. that could happen again
It's not about if it does or does not happen, it is about being set up to handle the risk whether it happens of not. And since I can only prepare for a finite set of outcomes I choose to focus my efforts and planning on those that are the most likely.
+1 , history and probability matters.
History indicates that many bears have bull traps and few last only 19 trading days peak to trough...the shortest since 1929 that was 15 days.

Probability says...it's not 1929 but also that a very short bear is an anomaly.
Care to point out how many lows have been retraced after coming back this much? Let me save you some time: exactly zero* .

*Note: Some claim 2007 retraced the 2000 lows, but this is really reaching as it was clearly a fresh bull (7 year gap). If you are going to sit on the sidelines for almost a decade to see if we retest... good luck with that.
It'll be interesting to see who is correct.

I notice that there are reports of China preparing for a second wave. That's simply prudent but it does mean fewer PPE exports for the rest of the world. It also implies that if a second wave happens China may respond aggressively leading to a 2nd wave of supply chain disruptions.

LeslieSmiley
Posts: 111
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by LeslieSmiley » Thu May 28, 2020 1:42 pm

nigel_ht wrote:
Thu May 28, 2020 12:12 pm
mrspock wrote:
Thu May 28, 2020 12:08 pm
nigel_ht wrote:
Thu May 28, 2020 11:34 am
mrspock wrote:
Thu May 28, 2020 10:37 am
TheTimeLord wrote:
Thu May 28, 2020 10:23 am


It's not about if it does or does not happen, it is about being set up to handle the risk whether it happens of not. And since I can only prepare for a finite set of outcomes I choose to focus my efforts and planning on those that are the most likely.
+1 , history and probability matters.
History indicates that many bears have bull traps and few last only 19 trading days peak to trough...the shortest since 1929 that was 15 days.

Probability says...it's not 1929 but also that a very short bear is an anomaly.
Care to point out how many lows have been retraced after coming back this much? Let me save you some time: exactly zero* .

*Note: Some claim 2007 retraced the 2000 lows, but this is really reaching as it was clearly a fresh bull (7 year gap). If you are going to sit on the sidelines for almost a decade to see if we retest... good luck with that.
It'll be interesting to see who is correct.

I notice that there are reports of China preparing for a second wave. That's simply prudent but it does mean fewer PPE exports for the rest of the world. It also implies that if a second wave happens China may respond aggressively leading to a 2nd wave of supply chain disruptions.
first of all, the PPE that many countries bought from china were reported to be defective and/or not up to standard. so, the fewer PPE export factor is mostly moot as i think most countries learned their lessons after they got burnt. secondly, i would think by the time if/when a second wave hits which is likely to be around the fall, countries that experienced shortage of PPE should be in a better position by then in terms of stock pile as they have been playing catch-up in producing PPE by either nationalizing companies/factories or private companies voluntarily ramping up production to meet the demand. in other words, most countries have already begun shifting their essential supply chain out of china in the recent months.

marcopolo
Posts: 3062
Joined: Sat Dec 03, 2016 10:22 am

Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by marcopolo » Thu May 28, 2020 2:07 pm

nigel_ht wrote:
Thu May 28, 2020 12:12 pm
mrspock wrote:
Thu May 28, 2020 12:08 pm
nigel_ht wrote:
Thu May 28, 2020 11:34 am
mrspock wrote:
Thu May 28, 2020 10:37 am
TheTimeLord wrote:
Thu May 28, 2020 10:23 am


It's not about if it does or does not happen, it is about being set up to handle the risk whether it happens of not. And since I can only prepare for a finite set of outcomes I choose to focus my efforts and planning on those that are the most likely.
+1 , history and probability matters.
History indicates that many bears have bull traps and few last only 19 trading days peak to trough...the shortest since 1929 that was 15 days.

Probability says...it's not 1929 but also that a very short bear is an anomaly.
Care to point out how many lows have been retraced after coming back this much? Let me save you some time: exactly zero* .

*Note: Some claim 2007 retraced the 2000 lows, but this is really reaching as it was clearly a fresh bull (7 year gap). If you are going to sit on the sidelines for almost a decade to see if we retest... good luck with that.
It'll be interesting to see who is correct.

I notice that there are reports of China preparing for a second wave. That's simply prudent but it does mean fewer PPE exports for the rest of the world. It also implies that if a second wave happens China may respond aggressively leading to a 2nd wave of supply chain disruptions.
I have no idea how Covid 19 will play out, or how the market will react to it.

But, I am sure glad that by simply staying with my investment plan I am not put in a position to be cheering for the deaths of many thousands of people and the resulting economic devastation.
Once in a while you get shown the light, in the strangest of places if you look at it right.

nigel_ht
Posts: 890
Joined: Tue Jan 01, 2019 10:14 am

Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by nigel_ht » Thu May 28, 2020 2:53 pm

marcopolo wrote:
Thu May 28, 2020 2:07 pm
nigel_ht wrote:
Thu May 28, 2020 12:12 pm
mrspock wrote:
Thu May 28, 2020 12:08 pm
nigel_ht wrote:
Thu May 28, 2020 11:34 am
mrspock wrote:
Thu May 28, 2020 10:37 am


+1 , history and probability matters.
History indicates that many bears have bull traps and few last only 19 trading days peak to trough...the shortest since 1929 that was 15 days.

Probability says...it's not 1929 but also that a very short bear is an anomaly.
Care to point out how many lows have been retraced after coming back this much? Let me save you some time: exactly zero* .

*Note: Some claim 2007 retraced the 2000 lows, but this is really reaching as it was clearly a fresh bull (7 year gap). If you are going to sit on the sidelines for almost a decade to see if we retest... good luck with that.
It'll be interesting to see who is correct.

I notice that there are reports of China preparing for a second wave. That's simply prudent but it does mean fewer PPE exports for the rest of the world. It also implies that if a second wave happens China may respond aggressively leading to a 2nd wave of supply chain disruptions.
I have no idea how Covid 19 will play out, or how the market will react to it.

But, I am sure glad that by simply staying with my investment plan I am not put in a position to be cheering for the deaths of many thousands of people and the resulting economic devastation.
Thinking that the market is overbought and the US being a tad too optimistic doesn't mean cheering for more Covid. But if putting it that way makes you feel superior go for it.

marcopolo
Posts: 3062
Joined: Sat Dec 03, 2016 10:22 am

Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by marcopolo » Thu May 28, 2020 3:08 pm

nigel_ht wrote:
Thu May 28, 2020 2:53 pm
marcopolo wrote:
Thu May 28, 2020 2:07 pm
nigel_ht wrote:
Thu May 28, 2020 12:12 pm
mrspock wrote:
Thu May 28, 2020 12:08 pm
nigel_ht wrote:
Thu May 28, 2020 11:34 am


History indicates that many bears have bull traps and few last only 19 trading days peak to trough...the shortest since 1929 that was 15 days.

Probability says...it's not 1929 but also that a very short bear is an anomaly.
Care to point out how many lows have been retraced after coming back this much? Let me save you some time: exactly zero* .

*Note: Some claim 2007 retraced the 2000 lows, but this is really reaching as it was clearly a fresh bull (7 year gap). If you are going to sit on the sidelines for almost a decade to see if we retest... good luck with that.
It'll be interesting to see who is correct.

I notice that there are reports of China preparing for a second wave. That's simply prudent but it does mean fewer PPE exports for the rest of the world. It also implies that if a second wave happens China may respond aggressively leading to a 2nd wave of supply chain disruptions.
I have no idea how Covid 19 will play out, or how the market will react to it.

But, I am sure glad that by simply staying with my investment plan I am not put in a position to be cheering for the deaths of many thousands of people and the resulting economic devastation.
Thinking that the market is overbought and the US being a tad too optimistic doesn't mean cheering for more Covid. But if putting it that way makes you feel superior go for it.
Nothing about feeling superior.

But, if you are making bets (changing allocation, etc.), don't you then naturally hope (at least a little bit) that you are right?
All i am saying is that I am glad i don't have to be in that position.
Once in a while you get shown the light, in the strangest of places if you look at it right.

nigel_ht
Posts: 890
Joined: Tue Jan 01, 2019 10:14 am

Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by nigel_ht » Thu May 28, 2020 3:28 pm

marcopolo wrote:
Thu May 28, 2020 3:08 pm
nigel_ht wrote:
Thu May 28, 2020 2:53 pm
marcopolo wrote:
Thu May 28, 2020 2:07 pm
nigel_ht wrote:
Thu May 28, 2020 12:12 pm
mrspock wrote:
Thu May 28, 2020 12:08 pm


Care to point out how many lows have been retraced after coming back this much? Let me save you some time: exactly zero* .

*Note: Some claim 2007 retraced the 2000 lows, but this is really reaching as it was clearly a fresh bull (7 year gap). If you are going to sit on the sidelines for almost a decade to see if we retest... good luck with that.
It'll be interesting to see who is correct.

I notice that there are reports of China preparing for a second wave. That's simply prudent but it does mean fewer PPE exports for the rest of the world. It also implies that if a second wave happens China may respond aggressively leading to a 2nd wave of supply chain disruptions.
I have no idea how Covid 19 will play out, or how the market will react to it.

But, I am sure glad that by simply staying with my investment plan I am not put in a position to be cheering for the deaths of many thousands of people and the resulting economic devastation.
Thinking that the market is overbought and the US being a tad too optimistic doesn't mean cheering for more Covid. But if putting it that way makes you feel superior go for it.
Nothing about feeling superior.

But, if you are making bets (changing allocation, etc.), don't you then naturally hope (at least a little bit) that you are right?
All i am saying is that I am glad i don't have to be in that position.
Given that most are hedging to avoid steep losses rather than make gains your question is like asking whether buying car insurance naturally means you hope to get in an accident. Most defensive moves (like more bonds) hurts performance.

That said, I do have a lot of dry powder that could be used to take advantage of a down market but I also still have a lot remaining in the market.

thx1138
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by thx1138 » Thu May 28, 2020 5:24 pm

marcopolo wrote:
Thu May 28, 2020 3:08 pm
nigel_ht wrote:
Thu May 28, 2020 2:53 pm
marcopolo wrote:
Thu May 28, 2020 2:07 pm
nigel_ht wrote:
Thu May 28, 2020 12:12 pm
mrspock wrote:
Thu May 28, 2020 12:08 pm


Care to point out how many lows have been retraced after coming back this much? Let me save you some time: exactly zero* .

*Note: Some claim 2007 retraced the 2000 lows, but this is really reaching as it was clearly a fresh bull (7 year gap). If you are going to sit on the sidelines for almost a decade to see if we retest... good luck with that.
It'll be interesting to see who is correct.

I notice that there are reports of China preparing for a second wave. That's simply prudent but it does mean fewer PPE exports for the rest of the world. It also implies that if a second wave happens China may respond aggressively leading to a 2nd wave of supply chain disruptions.
I have no idea how Covid 19 will play out, or how the market will react to it.

But, I am sure glad that by simply staying with my investment plan I am not put in a position to be cheering for the deaths of many thousands of people and the resulting economic devastation.
Thinking that the market is overbought and the US being a tad too optimistic doesn't mean cheering for more Covid. But if putting it that way makes you feel superior go for it.
Nothing about feeling superior.

But, if you are making bets (changing allocation, etc.), don't you then naturally hope (at least a little bit) that you are right?
All i am saying is that I am glad i don't have to be in that position.
Do you hope your house burns down because you “bet” on it by purchasing insurance?

marcopolo
Posts: 3062
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by marcopolo » Thu May 28, 2020 6:15 pm

thx1138 wrote:
Thu May 28, 2020 5:24 pm
marcopolo wrote:
Thu May 28, 2020 3:08 pm
nigel_ht wrote:
Thu May 28, 2020 2:53 pm
marcopolo wrote:
Thu May 28, 2020 2:07 pm
nigel_ht wrote:
Thu May 28, 2020 12:12 pm


It'll be interesting to see who is correct.

I notice that there are reports of China preparing for a second wave. That's simply prudent but it does mean fewer PPE exports for the rest of the world. It also implies that if a second wave happens China may respond aggressively leading to a 2nd wave of supply chain disruptions.
I have no idea how Covid 19 will play out, or how the market will react to it.

But, I am sure glad that by simply staying with my investment plan I am not put in a position to be cheering for the deaths of many thousands of people and the resulting economic devastation.
Thinking that the market is overbought and the US being a tad too optimistic doesn't mean cheering for more Covid. But if putting it that way makes you feel superior go for it.
Nothing about feeling superior.

But, if you are making bets (changing allocation, etc.), don't you then naturally hope (at least a little bit) that you are right?
All i am saying is that I am glad i don't have to be in that position.
Do you hope your house burns down because you “bet” on it by purchasing insurance?

In my view having a steady 40% (or whatever you choose)
in fixed income allocation is the insurance you are describing.

I don't go out and buy a bunch more every time there is a storm in the forecast.

The title of the post talks about waiting for 1800 to get back in, same as many of the proponents of that argument. So, presumably there is indeed a desire to profit from the move down to that level. You don't think those doing that hope they are right?
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by whodidntante » Thu May 28, 2020 6:31 pm

What if this is as good as it gets?

TravelforFun
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by TravelforFun » Thu May 28, 2020 6:50 pm

PolarInvest wrote:
Thu May 28, 2020 11:00 am
scintillator wrote:
Wed May 27, 2020 7:06 am

Just goes to show you that even when you get the core thesis right, you can still lose to people who get the core thesis wrong.
Your problem isn't that you got your core thesis wrong, its that the 100,000 deaths statistic shouldn't be part of a core thesis at all.

Obviously every death is terrible, but at a population-level, 2,800,000 people died in the USA in 2018. Not sure if there are large seasonal variations, but that comes out to about 700,000 deaths between March-May 2018.

Based on a similar background fatality rate and adding in 100,000 deaths from COVID, that means about 800,000 people died between March-May 2020 out of 330,000,000 Americans instead of 700,000. And probably less since COVID targets older, sicker people in nursing homes, some of whom might have died during this period anyway.

So instead of 329,300,000 Americans surviving until the end of May 2020 in a world without COVID, there are only 329,200,000. I'm not sure why you think that deserves a 30-40% haircut in the markets.
Sure COVID-19 deaths make up a small percentage of total deaths but other deaths like car crashes, heart attacks, diabetes, etc. don't pass from one person to another. COVID-19 is contagious and we have no vaccines nor drugs to combat it. This is why people are afraid to go out even places have begun to reopen.

TravelforFun

RAchip
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by RAchip » Thu May 28, 2020 6:58 pm

The problem with “fixed income” allocation is that it does not produce any income.

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HomerJ
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by HomerJ » Thu May 28, 2020 7:54 pm

thx1138 wrote:
Thu May 28, 2020 5:24 pm
Do you hope your house burns down because you “bet” on it by purchasing insurance?
Insurance in the stock market is having some of your money in bonds, all the time, just in case a crash happens.

Going mostly cash because you think a crash is going to happen soon isn't insurance, that's a bet.

If one could MAKE money from fire insurance, spending a ton more than usual on fire insurance absolutely does mean a part of you is kind of hoping your house burns down.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

thx1138
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by thx1138 » Thu May 28, 2020 8:04 pm

HomerJ wrote:
Thu May 28, 2020 7:54 pm
thx1138 wrote: Do you hope your house burns down because you “bet” on it by purchasing insurance?
Insurance in the stock market is having some of your money in bonds, all the time, just in case a crash happens.

Going mostly cash because you think a crash is going to happen soon isn't insurance, that's a bet.

If one could MAKE money from fire insurance, spending a ton more than usual on fire insurance absolutely does mean a part of you is kind of hoping your house burns down.
marcopolo wrote:
Thu May 28, 2020 6:15 pm
thx1138 wrote:
Thu May 28, 2020 5:24 pm
marcopolo wrote:
Thu May 28, 2020 3:08 pm
nigel_ht wrote:
Thu May 28, 2020 2:53 pm
marcopolo wrote:
Thu May 28, 2020 2:07 pm


I have no idea how Covid 19 will play out, or how the market will react to it.

But, I am sure glad that by simply staying with my investment plan I am not put in a position to be cheering for the deaths of many thousands of people and the resulting economic devastation.
Thinking that the market is overbought and the US being a tad too optimistic doesn't mean cheering for more Covid. But if putting it that way makes you feel superior go for it.
Nothing about feeling superior.

But, if you are making bets (changing allocation, etc.), don't you then naturally hope (at least a little bit) that you are right?
All i am saying is that I am glad i don't have to be in that position.
Do you hope your house burns down because you “bet” on it by purchasing insurance?

In my view having a steady 40% (or whatever you choose)
in fixed income allocation is the insurance you are describing.

I don't go out and buy a bunch more every time there is a storm in the forecast.

The title of the post talks about waiting for 1800 to get back in, same as many of the proponents of that argument. So, presumably there is indeed a desire to profit from the move down to that level. You don't think those doing that hope they are right?
Fair point(s)!

LFKB
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by LFKB » Thu May 28, 2020 8:13 pm

scintillator wrote:
Sun Mar 29, 2020 8:49 pm
So I don't really see any hot takes here on predictions of inflation versus deflation in a scenario of protracted recession with several injections of stimulus. I guess I'll just keep the money in my settlement fund until I start redeploying into stocks in the next 2–18 months.

As for people saying I should buy inverse ETFs or puts, or short the market some other way, I'm not doing that because I'm of course not sure I'm right. And I would get wiped out if there were a cure or some other bullish development. Taking my stock exposure down from 90% to 20% is a form of shorting the market. I considered buying puts instead of selling the underlying, but it didn't make a whole lot of sense because of tax considerations (and now volatility is super high, so puts are very expensive). So the way I'm betting on this decline is by dramatically reducing my AA. And it seems stupid to buy an inverse ETF and have to pay short-term cap gains and high fees and suffer beta slippage when I'm long the underlying index. If I wanted that more exposure I would just sell more of the underlying index.

ValuationsMatter wrote:
Sun Mar 29, 2020 8:50 am
Your hypothetical is one of extreme pessimism. At a mortality rate of 1%, which is a fair estimate for the disease, your estimate of 100k dead would require 10M infections. At present, there are only 680k infections worldwide. There are ~120k confirmed cases in the US. Unabated, the virus doubles every 4 days. It would have to double 6-7 times to get to that total count. That's almost another full month of unabated exponential growth. That will not happen.
I don't think the mortality rate is 1%. Korea has handled this better than any country with high infection rates and they're well over 1%. I think the death rate in the US should be over 2% even if hospitals don't get totally overwhelmed. Without adequate medical treatment, death rates should be well higher than 2%. I was only saying that we'll get to 100k dead in May if the lock-down is taken off at Easter like Trump announced last week. Even still, I think there's a good chance we get to 100k dead by the end of May even with an extended lock-down. I'll be sure to bump this in May if that happens. I think pretty much everyone in this thread fails to appreciate how virulent and deadly this virus is. Maybe we'll find an effective treatment; maybe the virus will mutate to something more benign; maybe I'm just wrong. But stating that 100k dead by the end of May "will not happen" could prove regrettable for you, and others in the market that share your certainty.


It’s the end of May and 100k are dead, you nailed the projection just not the result. S&P is up 25% since your post and 40% since the trough.

Case # 1,843,750 of why you should not try to time the market.

averagedude
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by averagedude » Thu May 28, 2020 8:41 pm

You do know that their is a possibility that the market may never see 1800 again. This means that this strategy may cause you to never invest in stocks again in your lifetime. Hopefullly you will have no problem meeting your goals by investing in cash that will undoubtedly give you a negative real return for your entire investment time horizon. You definitely don't want to be all in or all out of the stock market, Don't play poker with your financial future. Any honest person who has followed the markets for decades, will tell you that the stock market doesn't behave according to your belief system.

chicagoan23
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by chicagoan23 » Mon Jun 08, 2020 11:18 am

scintillator wrote:
Wed May 27, 2020 7:06 am
Just goes to show you that even when you get the core thesis right, you can still lose to people who get the core thesis wrong.

I'm still on the sidelines for the most post. Obviously I wish I'd been in on the ride up to 3000, but I'm not giving up hope that what I think is the economic reality from this virus will manifest in the stock market in the short to medium term. If SPX never gets near where it was when I started this thread, and I get totally punished for this move, and all the Pollyanna retail permabulls win and I lose .....
You didn't lose to people who got the core thesis wrong, or at least you didn't lose ONLY to those people. Your thesis on the number of deaths was accepted by me and by several others at the time:
Do you think this is the only time in history that we’ve seen 100,000 dead in three months due to an unexpected event? Maybe you’re young and are not a student of history.

No matter which bad things have happened, there is still a need for goods and services for the survivors. There will be output. Even if restaurants and concerts and airlines disappear for months or even years—there will still be output. Life will change drastically but there will be exchanges of goods and services, and by owning the producers of those goods and services you will share in the profits they generate.

And why do you think 1,800 is a magic number? That’s not that far off and we were there not that long ago....if this is a catastrophic event that is truly “different this time” then perhaps you should set your target lower? If it’s not different this time then you should be at your target allocation.
Your thesis on the number of deaths led to your action that things were different this time.

That action has cost you nearly 20% of your life savings (70% change in allocation * 25% return in stocks since the date of your post). In dollar terms, it will be a difference in the millions of dollars over the course of your lifetime, due to compounding. Those are facts, not theories.

I understand the urge. Very smart people and very smart money managers also think that we haven't really seen the fallout yet. Warren Buffett sold all his airline stocks at probably the worst possible time to do so. Many others are talking about how irrational the market is, how unsustainable things are, how this is a classic bear market rally, how bad things are going to get. I am aware of those positions and they may be right. But I don't know and neither do they.

I implore you to not think about the permabulls, not think about pollyannas, not think about how irrational the market is, not think about your hopes about economic reality, not think about how the dummies were wrong and you were right, but it just didn't work out for you.

Humble yourself.

If you really need to prove to yourself that you can take information about the world and profit from it, then use a tiny portion of your portfolio and trade on it. Think of it as fun money.

But please, learn from your past mistakes. Set an allocation and stick to it. You'll be happy that you did.
"The Basic Choices for Investors and the One We Strongly Prefer" | | https://www.berkshirehathaway.com/letters/2011ltr.pdf

Robot Monster
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by Robot Monster » Mon Jun 08, 2020 12:21 pm

chicagoan23 wrote:
Mon Jun 08, 2020 11:18 am
But please, learn from your past mistakes. Set an allocation and stick to it. You'll be happy that you did.
...and if you can't bring yourself to do that all at once, whole hog style, you can dollar-cost average your way back in.
We are in a permanent and anxious "just don't know" situation, where the stock market is inherently risky because of unstable investor psychology.

rascott
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by rascott » Mon Jun 08, 2020 3:08 pm

When you see another of those endless studies about how the average investor so woefully underperforms the market over long periods..... you can think back to this perfect example as to how that happens

Carol88888
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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by Carol88888 » Mon Jun 08, 2020 3:21 pm

I just skimmed many of the answers and I didn't see any from the person who poised the question on what they decided to do. Maybe he/she hasn't decided yet in which case a great buying opportunity was missed.

I should talk. I am sitting on about 2 million more in cash than I would like. Not because I market timed ( well, maybe a little ) but because I sold out of individual stock positions with the intention of adding to my portfolio of index funds. Only I didn't.

It's devilish hard to pull the trigger when the market keeps going up and up and you are on the side. I hope the questioner has had a better experience than I have.

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by Independent George » Mon Jun 08, 2020 3:50 pm

Carol88888 wrote:
Mon Jun 08, 2020 3:21 pm
I just skimmed many of the answers and I didn't see any from the person who poised the question on what they decided to do. Maybe he/she hasn't decided yet in which case a great buying opportunity was missed.

I should talk. I am sitting on about 2 million more in cash than I would like. Not because I market timed ( well, maybe a little ) but because I sold out of individual stock positions with the intention of adding to my portfolio of index funds. Only I didn't.

It's devilish hard to pull the trigger when the market keeps going up and up and you are on the side. I hope the questioner has had a better experience than I have.
With $2M in cash, there's really no need to invest in stocks anymore. You could comfortably stick it in a TIPS ladder and be happy. Alternatively, you could also go 100% stocks on the assumption that a 50% crash still leaves you a millionaire. Possessing that level of assets buys you an awful lot of freedom to manage your money however you wish and still be fine no matter what happens.

For everyone else, risk is something you have to live with, and it turns out that a great many people really didn't know what their true risk tolerance was. It's why on the rare occasions someone asks me what their AA should be, I typically recommend 60/40 even though I personally plan to remain at 90/10 for some time yet. I know through experience that I can tolerate such risks, but most people can't.

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by jrbdmb » Mon Jun 08, 2020 4:21 pm

I also made some mistakes during this market turbulence. I did rebalance into stocks in late February, but I delayed rebalancing into stocks again at the very bottom (and ignored my rebalancing bands) because I didn't want to try to "catch a falling knife." Then as the market started to recover, I delayed rebalancing again because I was *absolutely sure* this was a bear market rally and I would wait for the lows to be retested before rebalancing.

After about a month of the rally I caught myself, rebalanced as I should have earlier, and have now seen the market rise even further. I'm glad I didn't do anything reckless like panic and sell at the bottom, but apparently I needed yet another lesson on how I "don't know nuthin" about the future gyrations of the stock market. And AFAIK nobody else does either.

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by Elysium » Mon Jun 08, 2020 4:47 pm

Oh boy, how many more of these threads are out there :shock:

I do not recall ever so many market timing threads on Bogleheads through all these years, not even in the depths of GFC. Perhaps the pandemic part tripped people up into believing this time is different?

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by geerhardusvos » Mon Jun 08, 2020 5:10 pm

Elysium wrote:
Mon Jun 08, 2020 4:47 pm
Oh boy, how many more of these threads are out there :shock:

I do not recall ever so many market timing threads on Bogleheads through all these years, not even in the depths of GFC. Perhaps the pandemic part tripped people up into believing this time is different?
It’s the millennials... :wink:
VTSAX and chill

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by Scott S » Mon Jun 08, 2020 8:14 pm

jrbdmb wrote:
Mon Jun 08, 2020 4:21 pm
I also made some mistakes during this market turbulence. I did rebalance into stocks in late February, but I delayed rebalancing into stocks again at the very bottom (and ignored my rebalancing bands) because I didn't want to try to "catch a falling knife." Then as the market started to recover, I delayed rebalancing again because I was *absolutely sure* this was a bear market rally and I would wait for the lows to be retested before rebalancing.

After about a month of the rally I caught myself, rebalanced as I should have earlier, and have now seen the market rise even further. I'm glad I didn't do anything reckless like panic and sell at the bottom, but apparently I needed yet another lesson on how I "don't know nuthin" about the future gyrations of the stock market. And AFAIK nobody else does either.
There's a lot of hand-wringing about it on these forums, but catching falling knives has done wonders for my portfolio... :wink:

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by firebirdparts » Tue Jun 09, 2020 7:52 am

I always found knife-catching to be the easy part of market timing. I am also not sure why people fuss about that. The hard part is selling out while the bubble is still inflating. You can't fight the bubble and you can't pop it. That's the hard part.
A fool and your money are soon partners

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by SouthernFIRE » Tue Jun 09, 2020 8:04 am

:D
firebirdparts wrote:
Tue Jun 09, 2020 7:52 am
I always found knife-catching to be the easy part of market timing. I am also not sure why people fuss about that. The hard part is selling out while the bubble is still inflating. You can't fight the bubble and you can't pop it. That's the hard part.
Co-sign. The last few months have driven this home for me. I over-rebalanced heavily from bonds through early March (a little early but turned out fine). I don’t see this so much as market timing since the decline already happened. No predicting involved. Now I face the difficulty of when to sell some stocks in taxable to get back to my long term allocation. I have done some selling the past two weeks only to watch the market continue to rise. Definitely drives home the difficulty of anticipating future moves to the downside. If anything, I think tactical buy low and hold makes much more sense.

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by rascott » Tue Jun 09, 2020 8:20 am

Independent George wrote:
Mon Jun 08, 2020 3:50 pm
Carol88888 wrote:
Mon Jun 08, 2020 3:21 pm
I just skimmed many of the answers and I didn't see any from the person who poised the question on what they decided to do. Maybe he/she hasn't decided yet in which case a great buying opportunity was missed.

I should talk. I am sitting on about 2 million more in cash than I would like. Not because I market timed ( well, maybe a little ) but because I sold out of individual stock positions with the intention of adding to my portfolio of index funds. Only I didn't.

It's devilish hard to pull the trigger when the market keeps going up and up and you are on the side. I hope the questioner has had a better experience than I have.
With $2M in cash, there's really no need to invest in stocks anymore. You could comfortably stick it in a TIPS ladder and be happy. Alternatively, you could also go 100% stocks on the assumption that a 50% crash still leaves you a millionaire. Possessing that level of assets buys you an awful lot of freedom to manage your money however you wish and still be fine no matter what happens.

For everyone else, risk is something you have to live with, and it turns out that a great many people really didn't know what their true risk tolerance was. It's why on the rare occasions someone asks me what their AA should be, I typically recommend 60/40 even though I personally plan to remain at 90/10 for some time yet. I know through experience that I can tolerate such risks, but most people can't.
$2m is a $60-80k/ yr withdrawal rate. That may be more than enough..... or may be nowhere near the individual's goal.

We have no idea the individual's circumstance..... that would be nowhere near my end goal to where I'd stuff it in negative yielding TIPS

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Re: Sitting on a bunch of cash; what to do with it if I believe we're headed for SPX 1800 and protracted recession?

Post by ValuationsMatter » Tue Jun 09, 2020 8:46 am

scintillator wrote:
Wed May 27, 2020 7:06 am
Just goes to show you that even when you get the core thesis right, you can still lose to people who get the core thesis wrong.

I'm still on the sidelines for the most post. Obviously I wish I'd been in on the ride up to 3000, but I'm not giving up hope that what I think is the economic reality from this virus will manifest in the stock market in the short to medium term. If SPX never gets near where it was when I started this thread, and I get totally punished for this move, and all the Pollyanna retail permabulls win and I lose, [political comment removed by admin LadyGeek].
I thought about coming back to this post and crediting you with that call and acknowledging my mistake. I'd forgotten who & which thread it was in, and so I appreciate that you brought it back up. I commend you on the accurate call regarding the number of virus deaths by the end of May. I appreciate being corrected as being held to account keeps me on my toes. I would also appreciate it if you represent my 'core thesis,' as you put it, accurately. I was wrong about this fact, but this was not my core thesis at all. My 'core thesis' was surprisingly accurate, even to me. The impact of the virus in pure numbers on the population was never my core thesis. Look at my name.
ValuationsMatter wrote:
Thu Apr 02, 2020 9:36 am
...but I remain open-minded/beholden to the data.
The data showed that we crossed the 100k death mark in the US on May 25th. You were right. I was wrong. I'm glad we did not enter into a wager over it. We've had over 2M reported cases and over 100k deaths. Either mortality was much higher than I expected, or the true number of cases did indeed exceed 10M. I'm not sure which, but at a current case fatality rate of over 5% in the US (much higher than back then), I suspect the former..

Now, let me re-represent my core thesis and reasoning that led to the ability to take advantage of the market:
My 'crystal ball' says that you are right to some degree. We will not reopen by Easter and as active cases and deaths double a couple more times, we'll see more unexpectedly bad news. The markets are likely to retest or even break through the recent lows. However, they will not go to the extent that others have suggested. Our factories haven't been bombed. Our laborers aren't off fighting a war against the axis. Our economy just needs the word to get back to business, and everything will resume. The market was extremely overvalued before, and it may be close to fair value now. It's certainly closer to fair value than it has been in a very long time. In the next 10 years, it may be very hard to get your money in again below the valuation opportunities that this crisis has and still will present. Don't miss out.
Also...
By May, unless there are more major unexpected events/financial market collapses, the market is likely to be in recovery.
Also...
The financial question has very little to do with the absolute number of cases or deaths. It has a much more to do with the proportion of them in the next month or two. It has almost everything to do with our decisions about whether we will work through them or not.
This quote clearly showed that the direct impact of the virus on cases & deaths was not the significant part of my financial outlook. I was concerned about it only insofar as it affected economic reopening policy. We've reopened even as we have over 1.1M active cases.

At the time of our disagreement over expectations for the virus, I'd moved from a 3/97 AA to a 50/50, if I recall correctly. By 1 April, I was at 70/30. I believe the rise since then has been too much, too fast, though that was indeed fortunate for me. Only the fiscal stimulus & irrational optimism makes sense as an explanation to me. So, I've pulled back twice and now sit at ~45/55.

Going forward, I actually agree with your hypothesis that future downside is still of higher probability & magnitude than of the upside potential, but not by enough to pull completely from the market as I did in 2018 & late 2019. Valuations have returned to extremes, despite the damage to the economy. Perhaps, if they look as bad as I expect, the Q2 earnings reports in late July/August will bring the general markets back to reason. Or, perhaps they will turn out to be not as bad as I expect and they'll bring me back in line with the market. I've been fighting the urge to pull back even further to 30/70. While everything is trending upwards so heavily, I want to take a moment and examine trend following as a market timing method before I actually do pull back that far.
Last edited by ValuationsMatter on Tue Jun 09, 2020 9:39 am, edited 7 times in total.

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