Head Fakes and Dead Cats .. your thoughts on the rally?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
Topic Author
midareff
Posts: 6946
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Head Fakes and Dead Cats .. your thoughts on the rally?

Post by midareff » Wed Apr 08, 2020 2:37 pm

My opinion.. I just don't see anything meriting the climb from the bottom we have seen so far. I don't think we have a glimpse of the carnage to the economy as of now, and the down draft shock and awe is yet to be replaced by a steady grind down based on to be reported earnings going forward.

What's your take on this?

livesoft
Posts: 72099
Joined: Thu Mar 01, 2007 8:00 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by livesoft » Wed Apr 08, 2020 2:38 pm

Use opportunistic rebalancing to sell and buy as needed. My 401(k) is down less than 5% YTD, but I have moved more than 20% of its value back and forth twice because of the head fakes and dead cats.

"Stay the course" does not mean "Be a deer in the headlights."
Last edited by livesoft on Wed Apr 08, 2020 2:41 pm, edited 1 time in total.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
iceport
Posts: 4655
Joined: Sat Apr 07, 2007 4:29 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by iceport » Wed Apr 08, 2020 2:39 pm

midareff wrote:
Wed Apr 08, 2020 2:37 pm
What's your take on this?
I agree. Just wishful thinking... :|
"Discipline matters more than allocation.” ─William Bernstein

User avatar
David Jay
Posts: 8675
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by David Jay » Wed Apr 08, 2020 2:41 pm

The stock market is forward-looking. If the country is going back to work then I expect the market will be reasonably lenient with Q1 earnings, etc.

And where are they going to go? T-Bills?
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

surfstar
Posts: 2131
Joined: Fri Sep 13, 2013 12:17 pm
Location: Santa Barbara, CA

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by surfstar » Wed Apr 08, 2020 2:42 pm

My thoughts on the rally - I'm not buying it*

*except for routine 457 and TSP biweekly contributions ;)

I do expect the markets to go down again, though. Sometime soon-ish? I just can't be assured that all is well and good.
Unfortunately I'm not 100% sure on the dates and amounts. We are a bit overweight FI right now, but I won't rebalance yet. Our FI is a 4% guaranteed general account in my 457 and I'm just fine with over-weighting that by a few % right now.

User avatar
tvubpwcisla
Posts: 517
Joined: Sat Nov 09, 2019 10:09 am

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by tvubpwcisla » Wed Apr 08, 2020 2:42 pm

Nothing the market does will surprise me. In fact, I don't even care what it does today, next week, month, or even next year. All I know is it will go up over the long run and to keep buying low cost index funds and don't look back.

:moneybag
Stay invested my friends.

Triple digit golfer
Posts: 5334
Joined: Mon May 18, 2009 5:57 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by Triple digit golfer » Wed Apr 08, 2020 2:44 pm

I have no idea. I don't care. I am just investing like normal.

As Jack Bogle said, "The stock market is a giant distraction from the business of investing.”

frand
Posts: 36
Joined: Fri Jan 03, 2020 1:27 am

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by frand » Wed Apr 08, 2020 2:46 pm

livesoft wrote:
Wed Apr 08, 2020 2:38 pm
Use opportunistic rebalancing to sell and buy as needed. My 401(k) is down less than 5% YTD, but I have moved more than 20% of its value back and forth twice because of the head fakes and dead cats.

"Stay the course" does not mean "Be a deer in the headlights."
So you are saying you are good at market timing because simple rebalancing to a fixed percentage won't do as well.

User avatar
HomerJ
Posts: 14774
Joined: Fri Jun 06, 2008 12:50 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by HomerJ » Wed Apr 08, 2020 2:50 pm

livesoft wrote:
Wed Apr 08, 2020 2:38 pm
Use opportunistic rebalancing to sell and buy as needed. My 401(k) is down less than 5% YTD, but I have moved more than 20% of its value back and forth twice because of the head fakes and dead cats.

"Stay the course" does not mean "Be a deer in the headlights."
For the number one poster on Bogleheads, you really don't get the philosophy at all...

You realize you just posted "Market-timing is the way to go, and stay the course is a dumb move", right?

Perhaps you should start a newsletter telling us exactly when to move money in and out. Either teach us all how to accurately spot head fakes and dead cats, or post every time you spot them.

Otherwise you are hurting real people with real lives, who may not have the same skill as you, but will try to emulate you because you posted this.
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.”

livesoft
Posts: 72099
Joined: Thu Mar 01, 2007 8:00 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by livesoft » Wed Apr 08, 2020 2:50 pm

frand wrote:
Wed Apr 08, 2020 2:46 pm
So you are saying you are good at market timing because simple rebalancing to a fixed percentage won't do as well.
I did not say that. Simple rebalancing based on a calendar date has not done as well for me.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
HomerJ
Posts: 14774
Joined: Fri Jun 06, 2008 12:50 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by HomerJ » Wed Apr 08, 2020 2:51 pm

tvubpwcisla wrote:
Wed Apr 08, 2020 2:42 pm
Nothing the market does will surprise me. In fact, I don't even care what it does today, next week, month, or even next year. All I know is it will go up over the long run and to keep buying low cost index funds and don't look back.

:moneybag
This. Thoughts on the rally are pointless, because none of us can predict the future (except maybe livesoft).

Stocks are long-term investments. You don't have to care if the market goes up from here or crashes again first, because the short-term shouldn't matter for your stock investments.
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.”

User avatar
willthrill81
Posts: 19233
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by willthrill81 » Wed Apr 08, 2020 2:52 pm

midareff wrote:
Wed Apr 08, 2020 2:37 pm
What's your take on this?
Rampant and possibly reckless hope.
Last edited by willthrill81 on Wed Apr 08, 2020 2:53 pm, edited 1 time in total.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
HomerJ
Posts: 14774
Joined: Fri Jun 06, 2008 12:50 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by HomerJ » Wed Apr 08, 2020 2:53 pm

livesoft wrote:
Wed Apr 08, 2020 2:50 pm
frand wrote:
Wed Apr 08, 2020 2:46 pm
So you are saying you are good at market timing because simple rebalancing to a fixed percentage won't do as well.
I did not say that. Simple rebalancing based on a calendar date has not done as well for me.
What exactly did you say then? My apologies if I misread your point.

What exactly is "opportunistic rebalancing"?
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.”

livesoft
Posts: 72099
Joined: Thu Mar 01, 2007 8:00 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by livesoft » Wed Apr 08, 2020 2:54 pm

HomerJ wrote:
Wed Apr 08, 2020 2:50 pm
Either teach us all how to accurately spot head fakes and dead cats, or post every time you spot them.
I have never made any predictions. I can look at my asset allocation now because I use ETFs and tell if I am overweigh in equities or in bonds. I can see now if I have hit any trigger bands right now. This is not the market timing you think it is because I am not predicting at all what will happen in the next 5 minutes nor beyond. I am only looking at the present and the past.

The Bogleheads wiki has a link to opportunistic rebalancing paper, but I don't do it in exactly the same way.

Furthermore, I never go to cash unless I might be moving money between financial institutions.
Last edited by livesoft on Wed Apr 08, 2020 2:58 pm, edited 2 times in total.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
HomerJ
Posts: 14774
Joined: Fri Jun 06, 2008 12:50 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by HomerJ » Wed Apr 08, 2020 2:56 pm

Triple digit golfer wrote:
Wed Apr 08, 2020 2:44 pm
I have no idea. I don't care. I am just investing like normal.

As Jack Bogle said, "The stock market is a giant distraction from the business of investing.”
Whoa... I've never read that quote... That's a GREAT quote.
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.”

LaMotte
Posts: 5
Joined: Wed Mar 25, 2020 7:04 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by LaMotte » Wed Apr 08, 2020 2:57 pm

The movement of markets is an emotional reaction. Markets seem to move more on rumor than fact.
Remembering back to “normal times” when the markets would move back and forth on the most insignificantly news.
Now, we have one giant hurdle after another facing the markets and still the blind sentiment moves the markets drastically up and down. As Bill Bernstein said recently....even when the markets move drastically up, that is still volatility.

User avatar
HomerJ
Posts: 14774
Joined: Fri Jun 06, 2008 12:50 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by HomerJ » Wed Apr 08, 2020 2:58 pm

livesoft wrote:
Wed Apr 08, 2020 2:54 pm
HomerJ wrote:
Wed Apr 08, 2020 2:50 pm
Either teach us all how to accurately spot head fakes and dead cats, or post every time you spot them.
I have never made any predictions. I can look at my asset allocation now because I use ETFs and tell if I am overweigh in equities or in bonds. I can see now if I have hit any trigger bands right now. This is not the market timing you think it is because I am not predicting at all what will happen in the next 5 minutes nor beyond. I am only looking that the present and the past.

The Bogleheads wiki has a link to opportunistic rebalancing paper, but I don't do it in exactly the same way.
That's just normal rebalancing based on trigger bands then... Nothing special about that, like you say, and it's part and parcel with "stay the course".

Thank you for the clarification, but I still don't understand why you thought "stay the course" is like standing in the road and getting hit by a car because you're too stupid to move.

"Stay the course" means keeping your target Asset Allocation. Normal rebalancing based on trigger bands is part of "stay the course".

You just have tight trigger bands, and do it even intra-day with ETFs.. That's still "staying the course".
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.”

Triple digit golfer
Posts: 5334
Joined: Mon May 18, 2009 5:57 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by Triple digit golfer » Wed Apr 08, 2020 3:01 pm

HomerJ wrote:
Wed Apr 08, 2020 2:56 pm
Triple digit golfer wrote:
Wed Apr 08, 2020 2:44 pm
I have no idea. I don't care. I am just investing like normal.

As Jack Bogle said, "The stock market is a giant distraction from the business of investing.”
Whoa... I've never read that quote... That's a GREAT quote.
It is one of my favorites of his. Had I been in a coma for a year and woke up today, I'd see the S&P at 2,750 and think, "yep, seems about right."

It really is a giant distraction.

User avatar
iceport
Posts: 4655
Joined: Sat Apr 07, 2007 4:29 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by iceport » Wed Apr 08, 2020 3:03 pm

HomerJ wrote:
Wed Apr 08, 2020 2:50 pm
Otherwise you are hurting real people with real lives, who may not have the same skill as you, but will try to emulate you because you posted this.
How in the world do we know if livesoft has any skill whatsoever at his market timing?

I suspect even he doesn't know.

But yes, I agree it encourages behavioral errors. And this from one of the forum members possibly most aware of behavioral errors... :oops:
"Discipline matters more than allocation.” ─William Bernstein

User avatar
Kenkat
Posts: 6339
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by Kenkat » Wed Apr 08, 2020 3:07 pm

I must be really lazy because I’ve done nothing in response to the market drop or the recent run up. I did nothing when stocks had a nice run in 2017 and 2019 and nothing when the market fell in 2018. We’re talking real sloth here, folks. I guess the one thing I have done is switch my new money allocation around to try to fill up the most empty bucket, but my contributions are a really small part of the overall number at this point in my life. I’ve yet to hit any rebalance bands when I check, which isn’t often. I do check after significant market changes however.

So, my thoughts on the rally? Well, it’s been kinda nice. Good to see some signs of life. What it all means? I haven’t the slightest clue.

DJP1944
Posts: 70
Joined: Tue Jan 02, 2018 9:12 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by DJP1944 » Wed Apr 08, 2020 3:09 pm

midareff wrote:
Wed Apr 08, 2020 2:37 pm
My opinion.. I just don't see anything meriting the climb from the bottom we have seen so far. I don't think we have a glimpse of the carnage to the economy as of now, and the down draft shock and awe is yet to be replaced by a steady grind down based on to be reported earnings going forward.

What's your take on this?
I have no opinion on the volatility. I have no clue if there is pain to come, or straight up to all time highs, or something else.

What I have learned though is that my AA feels right. At times I've been thankful to be fairly conservative and wished to be more conservative. Other times, I've felt like I need to become more aggressive. It's like the saying that says a good negotiation occurs when both sides feel like they got a little screwed (or something to that effect). My AA feels right because during any given week of this crisis I've wanted to be more conservative or more aggressive.

livesoft
Posts: 72099
Joined: Thu Mar 01, 2007 8:00 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by livesoft » Wed Apr 08, 2020 3:10 pm

HomerJ wrote:
Wed Apr 08, 2020 2:58 pm
That's just normal rebalancing based on trigger bands then... Nothing special about that, like you say, and it's part and parcel with "stay the course".
Look through all the posts in this forum. There are tons of people who are not rebalancing. Many proudly claim they are not even looking at their portfolios. Many state they would not buy here. Others state they would not sell here. Yet many others have sold to go to cash. Many don't even know what the asset allocation of their current portfolio actually is.

Willful ignorance is not necessarily "Stay the course" unless one has no course.
Wiki This signature message sponsored by sscritic: Learn to fish.

KyleAAA
Posts: 8353
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by KyleAAA » Wed Apr 08, 2020 3:17 pm

I think the modelers have had enough data and time to make a pretty decent stab at the resulting carnage with a few supporting assumptions. if those assumptions turn out to be wrong, the market will react swiftly. I don't see any reason to doubt the market on this one.

balbrec2
Posts: 280
Joined: Mon Nov 13, 2017 3:03 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by balbrec2 » Wed Apr 08, 2020 3:18 pm

No idea where this is going. Have a reactionary plan for whatever happens.
Making changes based on what might or should happen is often counter productive.
Remember, the market can stay irrational longer than you can stay solvent.

User avatar
Sandtrap
Posts: 11033
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by Sandtrap » Wed Apr 08, 2020 3:19 pm

Thoughts on the Rally:
I can't help but think:

If only I'd have gotten out of a large equity position before 2/20/2020

If only I'd have bought in at the 30% drop

If only . . . . . I'd had the courage to kiss 8-) Ann Corbyn at that 8th grade school dance in the Winter of '64. . . . . :shock: :shock:


There are a lot of "If Only. . s . .. ." in life. . .. .

j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

User avatar
sperry8
Posts: 2124
Joined: Sat Mar 29, 2008 9:25 pm
Location: Miami FL

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by sperry8 » Wed Apr 08, 2020 3:22 pm

A fellow on CNBC (don't crucify me... it seemed to make sense) said~: When P/E's are at 15 then you are buying the future 15 years of earnings at today's price. If we have 3 quarters of 0 earnings that's 5% of the earnings wiped away.

Assuming this is true, then it would appear to me that a 34% drop (March 23rd bottom) would be a dramatic overreaction. I understand that past 3 quarters, we may see muted earnings for perhaps another 5 quarters (until vaccine is in and distributed). but still that's only 13% of the total earnings you were paying for. And of course there is another lever (the one that perhaps people are willing to pay more than 15 P/E) because, hey - where else you going to go? Cash earning bupkus? T-Bonds earning at almost record lows? So, based on all this it has me thinking Mar 23rd was the low (and the bounce is not hopeful/wishful at all) but rather a measured response to these sorts of estimates.
BH contest results: 2019: #233 of 645 | 18: #150 of 493 | 17: #516 of 647 | 16: #121 of 610 | 15: #18 of 552 | 14: #225 of 503 | 13: #383 of 433 | 12: #366 of 410 | 11: #113 of 369 | 10: #53 of 282

User avatar
Artsdoctor
Posts: 4238
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by Artsdoctor » Wed Apr 08, 2020 3:25 pm

You call it a "market rally." I call it "market volatility." I don't think that a daily gain of 5% is any more calming than a daily decline of 5%. Even in the worst of bear markets, there are days and sometimes weeks of upswings. Extraordinary volatility is a bad indicator in either direction.

DJP1944
Posts: 70
Joined: Tue Jan 02, 2018 9:12 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by DJP1944 » Wed Apr 08, 2020 3:27 pm

sperry8 wrote:
Wed Apr 08, 2020 3:22 pm
A fellow on CNBC (don't crucify me... it seemed to make sense) said~: When P/E's are at 15 then you are buying the future 15 years of earnings at today's price. If we have 3 quarters of 0 earnings that's 5% of the earnings wiped away.

Assuming this is true, then it would appear to me that a 34% drop (March 23rd bottom) would be a dramatic overreaction. I understand that past 3 quarters, we may see muted earnings for perhaps another 5 quarters (until vaccine is in and distributed). but still that's only 13% of the total earnings you were paying for. And of course there is another lever (the one that perhaps people are willing to pay more than 15 P/E) because, hey - where else you going to go? Cash earning bupkus? T-Bonds earning at almost record lows? So, based on all this it has me thinking Mar 23rd was the low (and the bounce is not hopeful/wishful at all) but rather a measured response to these sorts of estimates.
I'd like to hear other comments on this explanation. To this novice's ears it sure sound sensible.

frand
Posts: 36
Joined: Fri Jan 03, 2020 1:27 am

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by frand » Wed Apr 08, 2020 3:31 pm

I take it back.

It IS possible to down only 5% with 50% in SPY and 50% in BND, as long as you rebalanced when SPY at the lowest point.
Last edited by frand on Thu Apr 09, 2020 12:22 pm, edited 1 time in total.

adave
Posts: 256
Joined: Thu Sep 13, 2007 7:17 pm
Location: Houston

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by adave » Wed Apr 08, 2020 3:31 pm

I wonder how much of the economy is really “shut down” per se. Certain industries absolutely are getting crushed but just based on my own household much of the pre-Covid activity continues. Most of my kids activities have moved online and I continue to pay them, we still do plenty of shopping but have things delivered, same with food from restaurants delivered by grub hub etc. I’m even investigating buying a new car off the lot completely online soon at a nice discount..... ultimately people and businesses adapt and life goes on. Either it’s really the end of the world or not, and this seem to be in the not category.
Last edited by adave on Wed Apr 08, 2020 3:34 pm, edited 1 time in total.

rascott
Posts: 2112
Joined: Wed Apr 15, 2015 10:53 am

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by rascott » Wed Apr 08, 2020 3:33 pm

sperry8 wrote:
Wed Apr 08, 2020 3:22 pm
A fellow on CNBC (don't crucify me... it seemed to make sense) said~: When P/E's are at 15 then you are buying the future 15 years of earnings at today's price. If we have 3 quarters of 0 earnings that's 5% of the earnings wiped away.

Assuming this is true, then it would appear to me that a 34% drop (March 23rd bottom) would be a dramatic overreaction. I understand that past 3 quarters, we may see muted earnings for perhaps another 5 quarters (until vaccine is in and distributed). but still that's only 13% of the total earnings you were paying for. And of course there is another lever (the one that perhaps people are willing to pay more than 15 P/E) because, hey - where else you going to go? Cash earning bupkus? T-Bonds earning at almost record lows? So, based on all this it has me thinking Mar 23rd was the low (and the bounce is not hopeful/wishful at all) but rather a measured response to these sorts of estimates.

Yes that's actually very accurate. .... Bernstein discussed this in the (great) interview that was posted here this past week. Stock prices are a discount of future years earnings. And even taking this years earnings to zero (or even negative) doesn't impact current values that much.

And a 15 PE equates to to a 6.7% earnings yield.
Considering T bills are 0%.... that's a 6.7% equity risk premium.... something very high historically. And why PEs should revert back to the low 20s if everything flipped back to normal tomorrow.

The bear case is that the "E" is totally trashed, useless and unknowable. This situation is hammering main street businesses like no other..... and we don't have a clue what the longer term implications will be on corporate earnings in future years.

There were several rallies of this size during 2008.... and we know what happened there.

Lee_WSP
Posts: 2693
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by Lee_WSP » Wed Apr 08, 2020 3:37 pm

I think the market is just as expensive as it was before the virus hit, but there is no better alternative place to put my 401k money either.

User avatar
HomerJ
Posts: 14774
Joined: Fri Jun 06, 2008 12:50 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by HomerJ » Wed Apr 08, 2020 3:38 pm

livesoft wrote:
Wed Apr 08, 2020 3:10 pm
HomerJ wrote:
Wed Apr 08, 2020 2:58 pm
That's just normal rebalancing based on trigger bands then... Nothing special about that, like you say, and it's part and parcel with "stay the course".
Look through all the posts in this forum. There are tons of people who are not rebalancing. Many proudly claim they are not even looking at their portfolios. Many state they would not buy here. Others state they would not sell here. Yet many others have sold to go to cash. Many don't even know what the asset allocation of their current portfolio actually is.

Willful ignorance is not necessarily "Stay the course" unless one has no course.
I'm still confused what you are saying...

Ignoring the market completely also can be "stay the course".

My apologies for misunderstanding your original post, but it very much looked like you said that the smart move is to move in and out of the market during these times to increase gains, and "staying the course" is a stupid stupid move (Deer in the headlights is a very stupid animal and ends up DEAD).

Did you really mean to say that ignoring the market completely is a stupid stupid move that could ruin one financially?

Because "stay the course" is about the long-run. Going right into a market crash with no changes has worked in the past and is likely to work in the future.

The 9%-10% long-term nominal annual gain of the stock market INCLUDES the crashes... Willful ignorance in the past made one RICH, not dead as a deer or financially ruined.

I don't have a problem with your RBD moves... I just didn't understand your negative "stay the course" comment.

"Staying the course" in the stock market isn't like driving a ship into an iceberg or getting hit by a car or a train.

So far, it's like riding a roller-coaster where they give you a giant sack of money at the end if you stay on through the whole ride.
Last edited by HomerJ on Wed Apr 08, 2020 3:41 pm, edited 3 times in total.
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.”

rascott
Posts: 2112
Joined: Wed Apr 15, 2015 10:53 am

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by rascott » Wed Apr 08, 2020 3:39 pm

My personal opinion is that there will be another heavy downdraft sometime in the next few weeks.

What am I doing about it? Not much at all. Building up cash balances a little higher than normal, but that's about it.

User avatar
firebirdparts
Posts: 1584
Joined: Thu Jun 13, 2019 4:21 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by firebirdparts » Wed Apr 08, 2020 3:39 pm

sperry8 wrote:
Wed Apr 08, 2020 3:22 pm
A fellow on CNBC (don't crucify me... it seemed to make sense) said~: When P/E's are at 15 then you are buying the future 15 years of earnings at today's price. If we have 3 quarters of 0 earnings that's 5% of the earnings wiped away.
So let's say today's prices reflect this reality.

I think that is totally rational, but I also think it's out of line with business cycle experience (in the past). So maybe things have changed, I don't know. In the past, stocks have been much more volatile than they should be if we are to base prices on fundamentals.
A fool and your money are soon partners

1130Super
Posts: 504
Joined: Thu Nov 07, 2019 8:59 am
Location: Minnesota

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by 1130Super » Wed Apr 08, 2020 3:40 pm

sperry8 wrote:
Wed Apr 08, 2020 3:22 pm
A fellow on CNBC (don't crucify me... it seemed to make sense) said~: When P/E's are at 15 then you are buying the future 15 years of earnings at today's price. If we have 3 quarters of 0 earnings that's 5% of the earnings wiped away.

Assuming this is true, then it would appear to me that a 34% drop (March 23rd bottom) would be a dramatic overreaction. I understand that past 3 quarters, we may see muted earnings for perhaps another 5 quarters (until vaccine is in and distributed). but still that's only 13% of the total earnings you were paying for. And of course there is another lever (the one that perhaps people are willing to pay more than 15 P/E) because, hey - where else you going to go? Cash earning bupkus? T-Bonds earning at almost record lows? So, based on all this it has me thinking Mar 23rd was the low (and the bounce is not hopeful/wishful at all) but rather a measured response to these sorts of estimates.
But what if we not only has no earnings for 3 quarters but losses for 3 quarters.

User avatar
Bluce
Posts: 962
Joined: Tue May 10, 2011 11:01 pm
Location: Finger Lakes, NYS

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by Bluce » Wed Apr 08, 2020 3:43 pm

I've been thinking of doing a little re-balancing, taking from Treasuries and putting it in the TSM.

But I haven't done it yet, maybe in the next week or so. I only have to move about 2% to get back to my desired AA, so not a big deal either way.
"There are no new ideas, only forgotten ones." -- Amity Shlaes

livesoft
Posts: 72099
Joined: Thu Mar 01, 2007 8:00 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by livesoft » Wed Apr 08, 2020 3:43 pm

HomerJ wrote:
Wed Apr 08, 2020 3:38 pm
Did you really mean to say that ignoring the market completely is a stupid stupid move that could ruin one financially?
Folks who do nothing would likely be better off using a Vanguard Target Retirement or LifeStrategy fund if they could. The fund managers of those funds are not sitting on their hands doing nothing.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
sperry8
Posts: 2124
Joined: Sat Mar 29, 2008 9:25 pm
Location: Miami FL

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by sperry8 » Wed Apr 08, 2020 3:46 pm

rascott wrote:
Wed Apr 08, 2020 3:33 pm
sperry8 wrote:
Wed Apr 08, 2020 3:22 pm
A fellow on CNBC (don't crucify me... it seemed to make sense) said~: When P/E's are at 15 then you are buying the future 15 years of earnings at today's price. If we have 3 quarters of 0 earnings that's 5% of the earnings wiped away.

Assuming this is true, then it would appear to me that a 34% drop (March 23rd bottom) would be a dramatic overreaction. I understand that past 3 quarters, we may see muted earnings for perhaps another 5 quarters (until vaccine is in and distributed). but still that's only 13% of the total earnings you were paying for. And of course there is another lever (the one that perhaps people are willing to pay more than 15 P/E) because, hey - where else you going to go? Cash earning bupkus? T-Bonds earning at almost record lows? So, based on all this it has me thinking Mar 23rd was the low (and the bounce is not hopeful/wishful at all) but rather a measured response to these sorts of estimates.

Yes that's actually very accurate. .... Bernstein discussed this in the (great) interview that was posted here this past week. Stock prices are a discount of future years earnings. And even taking this years earnings to zero (or even negative) doesn't impact current values that much.

And a 15 PE equates to to a 6.7% earnings yield.
Considering T bills are 0%.... that's a 6.7% equity risk premium.... something very high historically. And why PEs should revert back to the low 20s if everything flipped back to normal tomorrow.

The bear case is that the "E" is totally trashed, useless and unknowable. This situation is hammering main street businesses like no other..... and we don't have a clue what the longer term implications will be on corporate earnings in future years.

There were several rallies of this size during 2008.... and we know what happened there.
Thanks for confirming. So knowing this is accurate (it's very helpful to hear Bernstein corroborate), then it doesn't matter to me whether this is a short-term head fake or not. I firmly believe that the world goes back to "normal" in a few years. Post vaccine and distribution, there is no longer term implication on corporate earnings (with perhaps few exceptions). One could see a shift - that is some companies/sectors like cruises have lower earnings for longer, but that discretionary money will be spent elsewhere (drive holidays, etc.). But net net - corporate earnings as a whole are ~equal.

As to whether we retest lows or get another new low - has more to do with psychology and fear than anything else. I'm no mind reader of the masses but surely they could be scared again. But knowing in ~2 years it's over, I'm proceeding as though Mar 23? (18?) was the low. If that changes, I'll buy even more at whatever new low is achieved.
1130Super wrote:
Wed Apr 08, 2020 3:40 pm
sperry8 wrote:
Wed Apr 08, 2020 3:22 pm
A fellow on CNBC (don't crucify me... it seemed to make sense) said~: When P/E's are at 15 then you are buying the future 15 years of earnings at today's price. If we have 3 quarters of 0 earnings that's 5% of the earnings wiped away.

Assuming this is true, then it would appear to me that a 34% drop (March 23rd bottom) would be a dramatic overreaction. I understand that past 3 quarters, we may see muted earnings for perhaps another 5 quarters (until vaccine is in and distributed). but still that's only 13% of the total earnings you were paying for. And of course there is another lever (the one that perhaps people are willing to pay more than 15 P/E) because, hey - where else you going to go? Cash earning bupkus? T-Bonds earning at almost record lows? So, based on all this it has me thinking Mar 23rd was the low (and the bounce is not hopeful/wishful at all) but rather a measured response to these sorts of estimates.
But what if we not only has no earnings for 3 quarters but losses for 3 quarters.
Interesting. So you're positing that all US businesses as a whole have losses for 3 quarters? Not just sectors... but all? It'd have to be some pretty deep losses not backstopped by gov't to make up the difference between the 34% drop and the 5%-13% at $0.
BH contest results: 2019: #233 of 645 | 18: #150 of 493 | 17: #516 of 647 | 16: #121 of 610 | 15: #18 of 552 | 14: #225 of 503 | 13: #383 of 433 | 12: #366 of 410 | 11: #113 of 369 | 10: #53 of 282

minimalistmarc
Posts: 949
Joined: Fri Jul 24, 2015 4:38 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by minimalistmarc » Wed Apr 08, 2020 3:49 pm

willthrill81 wrote:
Wed Apr 08, 2020 2:52 pm
midareff wrote:
Wed Apr 08, 2020 2:37 pm
What's your take on this?
Rampant and possibly reckless hope.
Nope. Just realistic. Human race is progressive. Victory against COVID19 is inevitable, then it’s onwards and upwards with an additional inflationary tailwind

User avatar
watchnerd
Posts: 5981
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by watchnerd » Wed Apr 08, 2020 3:49 pm

midareff wrote:
Wed Apr 08, 2020 2:37 pm
My opinion.. I just don't see anything meriting the climb from the bottom we have seen so far. I don't think we have a glimpse of the carnage to the economy as of now, and the down draft shock and awe is yet to be replaced by a steady grind down based on to be reported earnings going forward.

What's your take on this?
I think stock valuations became disconnected from EPS and economic reality long before the pandemic.

It's all about the speculative return now.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

rascott
Posts: 2112
Joined: Wed Apr 15, 2015 10:53 am

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by rascott » Wed Apr 08, 2020 3:52 pm

adave wrote:
Wed Apr 08, 2020 3:31 pm
I wonder how much of the economy is really “shut down” per se. Certain industries absolutely are getting crushed but just based on my own household much of the pre-Covid activity continues. Most of my kids activities have moved online and I continue to pay them, we still do plenty of shopping but have things delivered, same with food from restaurants delivered by grub hub etc. I’m even investigating buying a new car off the lot completely online soon at a nice discount..... ultimately people and businesses adapt and life goes on. Either it’s really the end of the world or not, and this seem to be in the not category.

Those running a business that in any manner requires in person interaction is being destroyed... like apocalypse destroyed. 1/4th are on the brink of permanent closure.

Huge swaths of the country aren't making mortgage or rent payments.

End of the world? Certainly not. Neither was 1930.

livesoft
Posts: 72099
Joined: Thu Mar 01, 2007 8:00 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by livesoft » Wed Apr 08, 2020 3:58 pm

rascott wrote:
Wed Apr 08, 2020 3:52 pm
Those running a business that in any manner requires in person interaction is being destroyed... like apocalypse destroyed. 1/4th are on the brink of permanent closure.
I agree, but doesn't that mean that they declare bankruptcy and move on with their lives and start new businesses? In the end. And if enough people declare bankruptcy, the lenders may fold whereupon the Federal government prints money for new lending institutions to lend out.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
watchnerd
Posts: 5981
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by watchnerd » Wed Apr 08, 2020 3:59 pm

rascott wrote:
Wed Apr 08, 2020 3:52 pm
adave wrote:
Wed Apr 08, 2020 3:31 pm
I wonder how much of the economy is really “shut down” per se. Certain industries absolutely are getting crushed but just based on my own household much of the pre-Covid activity continues. Most of my kids activities have moved online and I continue to pay them, we still do plenty of shopping but have things delivered, same with food from restaurants delivered by grub hub etc. I’m even investigating buying a new car off the lot completely online soon at a nice discount..... ultimately people and businesses adapt and life goes on. Either it’s really the end of the world or not, and this seem to be in the not category.

Those running a business that in any manner requires in person interaction is being destroyed... like apocalypse destroyed. 1/4th are on the brink of permanent closure.

Huge swaths of the country aren't making mortgage or rent payments.

End of the world? Certainly not. Neither was 1930.
How much of that pain flows to publicly traded companies will be part of what the market discovers.

Mall-owning REITS are probably going to get clobbered. Netflix, perhaps not at all.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

Swivelguy
Posts: 406
Joined: Sun Jan 18, 2009 11:37 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by Swivelguy » Wed Apr 08, 2020 4:06 pm

My thoughts on the rally: I'm afraid that the stocks my 401k will automatically buy at the end of this week will look pretty expensive in a month or two, but I'll buy them all the same.

Carol88888
Posts: 263
Joined: Wed Jan 24, 2018 2:24 am

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by Carol88888 » Wed Apr 08, 2020 4:11 pm

Too many people are predicting a retest of the lows; therefore I predict we don't we don't get one. The market will do whatever it takes to disappoint the most people.

I have been a buyer throughout this decline.

Presintense
Posts: 381
Joined: Thu Nov 06, 2014 1:58 pm
Location: "Somewhere in the middle of America"

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by Presintense » Wed Apr 08, 2020 4:14 pm

midareff wrote:
Wed Apr 08, 2020 2:37 pm
My opinion.. I just don't see anything meriting the climb from the bottom we have seen so far. I don't think we have a glimpse of the carnage to the economy as of now, and the down draft shock and awe is yet to be replaced by a steady grind down based on to be reported earnings going forward.

What's your take on this?
I wish this were titled dead cat head fakes but oh well.

I didn’t see merit in the drop. I don’t see merit in the climb. I prefer not to look for evidence supporting either. One might say I’m not looking for perceived merit, but actual results which won’t be foretold.
Performance = Potential - Distraction

mancich
Posts: 843
Joined: Fri Sep 05, 2014 2:05 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by mancich » Wed Apr 08, 2020 4:16 pm

David Jay wrote:
Wed Apr 08, 2020 2:41 pm
The stock market is forward-looking. If the country is going back to work then I expect the market will be reasonably lenient with Q1 earnings, etc.

And where are they going to go? T-Bills?
This. Psychology aside, it is a leading indicator. The market already knows that Q2 numbers will be ugly. Now, if they are uglier than expected, that is a different story :shock:

alfaspider
Posts: 2792
Joined: Wed Sep 09, 2015 4:44 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by alfaspider » Wed Apr 08, 2020 4:16 pm

I've thought it to be a dead cat bounce for the last week, but it's had a lot more momentum than I thought. The next leg down will occur if this precipitates a debt crisis. If it doesn't, and things reopen within the next 6 weeks or so, we could very well could end the year neutral to up. If it does precipitate a financial crisis and/or rolling shutdowns persist over the next year, the recovery is going to be more like it was after 2008 (or worse).

Either way, nobody knows nothin. The nice thing about the BH strategy is we aren't called to do anything about it.

User avatar
KEotSK66
Posts: 343
Joined: Wed Mar 11, 2020 7:03 pm

Re: Head Fakes and Dead Cats .. your thoughts on the rally?

Post by KEotSK66 » Wed Apr 08, 2020 4:26 pm

initially the model predicted 2.5 million deaths, now 60k, and it might go lower
"i just got fluctuated out of $1,500", jerry

Post Reply