What in the world is propping up this market?

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LMK5
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What in the world is propping up this market?

Post by LMK5 » Mon Apr 13, 2020 4:09 pm

I know we Bogleheads aren't supposed to pay attention to market movements but I really am fascinated by the resiliency of this market. I mean, the economy is all but shut down folks. The market is supposed to price companies based on book value and projected earnings, so what does the market see in the future that doesn't seem apparent to most people? Can companies be worth only 20% less than their recent highs? On the face of it it seems preposterous. Does it see some near term light at the end of the tunnel, along with a federal government that is committed to goosing the economy no matter the cost?

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baconavocado
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Re: What in the world is propping up this market?

Post by baconavocado » Mon Apr 13, 2020 4:11 pm

Cheaper and more available testing? An effective treatment? A vaccine?

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greg24
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Re: What in the world is propping up this market?

Post by greg24 » Mon Apr 13, 2020 4:11 pm

Hope/belief that we'll bounce back quickly.

Interest rates near zero mean few other investing options.

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Re: What in the world is propping up this market?

Post by Pomegranate » Mon Apr 13, 2020 4:12 pm

LMK5 wrote:
Mon Apr 13, 2020 4:09 pm
I know we Bogleheads aren't supposed to pay attention to market movements but I really am fascinated by the resiliency of this market. I mean, the economy is all but shut down folks. The market is supposed to price companies based on book value and projected earnings, so what does the market see in the future that doesn't seem apparent to most people? Can companies be worth only 20% less than their recent highs? On the face of it it seems preposterous. Does it see some near term light at the end of the tunnel, along with a federal government that is committed to goosing the economy no matter the cost?
2 trillion bucks and desire to print and ingest as many as needed to support it. Is that enough :sharebeer ?

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Kenkat
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Re: What in the world is propping up this market?

Post by Kenkat » Mon Apr 13, 2020 4:24 pm

The market is looking out over several years, not several months. This will be a blip on the long term unless we get much worse from here.

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JoMoney
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Re: What in the world is propping up this market?

Post by JoMoney » Mon Apr 13, 2020 4:26 pm

What in the world is propping up the value of cash or bonds ?
... How can people keep money in cash that pays nothing (or less) in interest, while the government shows they're committed to supplying whatever amounts of cash liquidity the market desires. Who in the world is selling their long-term investments to exchange it for paper earning nothing, over these short few weeks that will certainly come to end (sooner or later) ? Were all those investments really short-term money that needs to be spent over these few weeks? Are the government guarantees, stimulus, and bailouts not enough? Do people they think they're going to buy back into those same long-term assets cheaper, despite there being a lot more money in the system all vying for those same assets ?
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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raven15
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Re: What in the world is propping up this market?

Post by raven15 » Mon Apr 13, 2020 4:28 pm

I am!
It's Time. Adding Interest.

jjface
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Re: What in the world is propping up this market?

Post by jjface » Mon Apr 13, 2020 4:39 pm

I notice all the market timers have mostly disappeared.

Elysium
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Re: What in the world is propping up this market?

Post by Elysium » Mon Apr 13, 2020 4:40 pm

OP,

Why do you think the market is propped up by something? In March the market decided to shake out everything fast instead of a low and slow grind to death, bad news is priced in for the moment, from here unless there is more bad news already not priced in then nothing to make it go down further.

Next step is waiting for actual earnings reports, when that comes market will compare them with expectations, if earnings news is worse than expected then more down, if better more up, neutral then whoever is more excited will win (bulls vs bears).

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Re: What in the world is propping up this market?

Post by MotoTrojan » Mon Apr 13, 2020 4:43 pm

The decline from all-time highs could price in quite a number of $0 earning quarters (total wipe-outs) assuming a swift rebound to the norm afterwards. Of course we aren't going to have any $0 quarters (or a step-change rebound), so a 20% decline is pricing in quite a bit of near-term pain as-is.
Last edited by MotoTrojan on Mon Apr 13, 2020 4:44 pm, edited 1 time in total.

mptfan
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Re: What in the world is propping up this market?

Post by mptfan » Mon Apr 13, 2020 4:44 pm

LMK5 wrote:
Mon Apr 13, 2020 4:09 pm
I mean, the economy is all but shut down folks.
This is hyperbole and your argument is based upon a false premise. The Wall Street Journal estimates that 29% of the U.S. economy is shut down, so if 71% of the economy is still going on then the economy is not "all but shut down."

https://www.thedailybeast.com/coronavir ... conomy-wsj
Last edited by mptfan on Mon Apr 13, 2020 4:46 pm, edited 2 times in total.

rossington
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Re: What in the world is propping up this market?

Post by rossington » Mon Apr 13, 2020 4:44 pm

JoMoney wrote:
Mon Apr 13, 2020 4:26 pm
What in the world is propping up the value of cash or bonds ?
... How can people keep money in cash that pays nothing (or less) in interest, while the government shows they're committed to supplying whatever amounts of cash liquidity the market desires. Who in the world is selling their long-term investments to exchange it for paper earning nothing, over these short few weeks that will certainly come to end (sooner or later) ? Were all those investments really short-term money that needs to be spent over these few weeks? Are the government guarantees, stimulus, and bailouts not enough? Do people they think they're going to buy back into those same long-term assets cheaper, despite there being a lot more money in the system all vying for those same assets ?
I would add that there are those investors who feel this situation has been grossly exaggerated and that the economic insanity will end soon.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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Re: What in the world is propping up this market?

Post by whodidntante » Mon Apr 13, 2020 4:49 pm

rossington wrote:
Mon Apr 13, 2020 4:44 pm
JoMoney wrote:
Mon Apr 13, 2020 4:26 pm
What in the world is propping up the value of cash or bonds ?
... How can people keep money in cash that pays nothing (or less) in interest, while the government shows they're committed to supplying whatever amounts of cash liquidity the market desires. Who in the world is selling their long-term investments to exchange it for paper earning nothing, over these short few weeks that will certainly come to end (sooner or later) ? Were all those investments really short-term money that needs to be spent over these few weeks? Are the government guarantees, stimulus, and bailouts not enough? Do people they think they're going to buy back into those same long-term assets cheaper, despite there being a lot more money in the system all vying for those same assets ?
I would add that there are those investors who feel this situation has been grossly exaggerated and that the economic insanity will end soon.
You can kind of see their point. There are only 1.9 million cases and only 119 thousand deaths. At some point, it goes from a tragedy to a statistic. :twisted:

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watchnerd
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Re: What in the world is propping up this market?

Post by watchnerd » Mon Apr 13, 2020 4:55 pm

LMK5 wrote:
Mon Apr 13, 2020 4:09 pm
I know we Bogleheads aren't supposed to pay attention to market movements but I really am fascinated by the resiliency of this market. I mean, the economy is all but shut down folks. The market is supposed to price companies based on book value and projected earnings, so what does the market see in the future that doesn't seem apparent to most people? Can companies be worth only 20% less than their recent highs? On the face of it it seems preposterous. Does it see some near term light at the end of the tunnel, along with a federal government that is committed to goosing the economy no matter the cost?
It is possible it's entirely rational in a cap-weighted index.

The big tech stocks, finance, and pharma that dominate the top of the S&P500 may actually come out stronger at the end of it, even if the small / value companies get crushed.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

redfan11
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Re: What in the world is propping up this market?

Post by redfan11 » Mon Apr 13, 2020 4:56 pm

Hope and the efficient market hypothesis that has now figured out the corona virus and its effects on the market..which is bonkers to me..I expect a fall..but will be continuing to make my biweekly contributions as usual.

Xrayman69
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Re: What in the world is propping up this market?

Post by Xrayman69 » Mon Apr 13, 2020 4:58 pm

TINA, there is no alternative.

Equity prices bin early March were valued at about 22x forward earnings for the S&P at around $160. We no longer know or can easily get estimates on what earnings will be for Q2-4 as most companies are no longer willing to provide projections. If the earnings goes down the n the valuations likely will go down. However, the amount it goes down is likely offset by the downward pressure from interest rates.

That’s the big question, what are buyers of equity willing to pay for forward projections which is unknown against an interest rate that is low. Interest rates have 3 potential, increase, decrease, or stay the same.

In summary, currently maintained by low interest rates. How long???

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watchnerd
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Re: What in the world is propping up this market?

Post by watchnerd » Mon Apr 13, 2020 4:59 pm

Today:

Down down
NASDAQ up

That doesn't seem totally irrational to me.
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CardioMD
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Re: What in the world is propping up this market?

Post by CardioMD » Mon Apr 13, 2020 5:03 pm

Kenkat wrote:
Mon Apr 13, 2020 4:24 pm
The market is looking out over several years, not several months. This will be a blip on the long term unless we get much worse from here.
My thoughts exactly. That’s why I stay the course.
“The stock market is a giant distraction from the business of investing.” -Jack Bogle

rich126
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Re: What in the world is propping up this market?

Post by rich126 » Mon Apr 13, 2020 5:03 pm

Maybe people can't wrap their minds over how bad things actually are? Or as others said "hope"?

Tourism and travel is likely dead until a cure/treatment/vaccine is found and that isn't likely for a good year or two.
How many people want to go into a packed restaurant/bar/event and deal with people coughing/sneezing/etc. and wonder if that person has the virus?

I'm fairly risk tolerant, was still going to restaurants about 3 weeks ago but if someone would be coughing around me, I'd be sitting elsewhere or leaving. And of course there are people who have the virus but no symptoms. I still go to the grocery store and a few other stores a couple of times a week without doing too much except keeping my hands from my face, washing my hands frequently and keeping a good distance from people. Fortunately no one at our location (a decent size number, a few thousand) has tested positive except for one person who was in self isolation after an international trip. So he never entered the facility with the virus. About 75%+ are working from home, which I can't do (or not for very long).

As risk tolerant I am, I can't imagine getting on a plane anytime soon. You are stuck in an enclosed place that, despite what the say, is unlikely to be well cleaned, with people who may have been all over the states coming into contact with many other people. I really would like to visit family and my 83 yr old father but I sure don't want to risk getting something myself much less transmitting it to him.

Obviously no one knows the future. If you got 20+ years I probably wouldn't worry about it. If you are looking at 5 years then I'd be concerned.

I largely got out so any major drops won't hurt me and I don't mind missing some rise in the market since I don't think it is sustainable. The fed can only do so much. I'm also hoping to retire in a few years so my risk level is lower.

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Re: What in the world is propping up this market?

Post by Trader Joe » Mon Apr 13, 2020 5:10 pm

LMK5 wrote:
Mon Apr 13, 2020 4:09 pm
I know we Bogleheads aren't supposed to pay attention to market movements but I really am fascinated by the resiliency of this market. I mean, the economy is all but shut down folks. The market is supposed to price companies based on book value and projected earnings, so what does the market see in the future that doesn't seem apparent to most people? Can companies be worth only 20% less than their recent highs? On the face of it it seems preposterous. Does it see some near term light at the end of the tunnel, along with a federal government that is committed to goosing the economy no matter the cost?
A quick return to business as usual very shortly. The market is always right.

fwellimort
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Re: What in the world is propping up this market?

Post by fwellimort » Mon Apr 13, 2020 5:13 pm

Because indexes are market capped.

And currently, our broad market index is literally mostly on companies like Microsoft.
Almost all the 'money' currently is getting funneled to the 'winners' of current epidemic: tech companies.

Sectors like oil and gas is a sub 2% on your market cap index currently. It can literally go to zero and you will only see a drop of 2%.
Hotel/restaurant sector is like 1.6% on your market cap index currently. It can literally go to zero and you will see only a drop of 1.6%.
Sectors such as transportation infrastructure is 0.1% of your market cap index currently. Again, it can literally go to zero and you will see a drop of 0.1%.

You see, unlike previous recessions, there's currently some sectors flourishing/booming in the market. Those sectors are currently a significant portion of your index.

And of course:
+ FED QE infinity (real value of stocks can be crashing currently but is being adjusted in future potential hyper-inflation sense. Who knows.)
+ Speculation with lots of 'hope' that stock markets only go up. Maybe the bubble will burst soon. Maybe it isn't a bubble. No one knows.
+ Pathetic interest rates making stocks the only viable investment option.

But mostly.. no one here knows.
The only significant industries in the market cap currently I am seeing vulnerable to this recession are:
Banks: 4.38%
Real Estate: 4%
Entertainment: 1.8%
Hotels/Restaurant/Retail: 1.6%

It's absolutely astounding how tech heavy our US Total Stock market is. The market cap dictated tech as the future of growth with this epidemic.
The US stock market today is essentially a tech + health care index.
Current evaluations are stating that the future of America is in tech/health care. And that many of today's companies in the more 'traditional' sectors are no longer necessary. It's absolutely amazing how fast investors are willing to adapt with this coming epidemic: even the most stubborn investors in Wall Street are admitting future growth is in tech/health care.

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Re: What in the world is propping up this market?

Post by livesoft » Mon Apr 13, 2020 5:27 pm

Nobody wants to sell their shares at a low or lower price.
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tk1978
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Re: What in the world is propping up this market?

Post by tk1978 » Mon Apr 13, 2020 5:32 pm

The Fed, but what else is new.

The earnings season is here and it will be ugly, and even uglier after Q2. We will see if that is “priced in”.

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JoMoney
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Re: What in the world is propping up this market?

Post by JoMoney » Mon Apr 13, 2020 5:33 pm

Why would someone who isn't looking to invest in it, care about prices of the stock market?
There's some kind of irony when someone who is looking to invest, is perplexed as to why it's not cheaper.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

Lee_WSP
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Re: What in the world is propping up this market?

Post by Lee_WSP » Mon Apr 13, 2020 5:38 pm

If you ask it from the opposite perspective, you may get better insight.

"Why isn't the stock market tanking?"

Unemployment is bad, but the gov't is riding in to the rescue.

Covid 19 is bad, but the curve is flattening.

That's really about all the bad news that is confirmed so far. Not a lot of bankruptcies yet. No mass defaults. No short selling of homes. Etc, etc.

But to answer your OP, it could be a short squeeze or series thereof. I really have no idea other than demand/supply.

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tvubpwcisla
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Re: What in the world is propping up this market?

Post by tvubpwcisla » Mon Apr 13, 2020 5:47 pm

When things are on sale, investors buy. Even with the recent run up in prices there are still huge discounts out there. I expect the S&P to be back over 3,000 real quick!

:moneybag
Stay invested my friends.

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Re: What in the world is propping up this market?

Post by am » Mon Apr 13, 2020 5:53 pm

Can someone explain how we will get back to our previous lives without quarantine or lockdown when the virus is still circulating in the community and there is no vaccine or effective therapeutics? Curve is flattened because of quarantine, social distancing, etc, What happens when everyone goes back to normal life and the virus is still there? People will still be scared and limit travel and spending.

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Re: What in the world is propping up this market?

Post by Lee_WSP » Mon Apr 13, 2020 5:56 pm

am wrote:
Mon Apr 13, 2020 5:53 pm
Can someone explain how we will get back to our previous lives without quarantine or lockdown when the virus is still circulating in the community and there is no vaccine or effective therapeutics? Curve is flattened because of quarantine, social distancing, etc, What happens when everyone goes back to normal life and the virus is still there? People will still be scared and limit travel and spending.
Well, we won't. But the people bidding on stocks think we will.

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Re: What in the world is propping up this market?

Post by mrspock » Mon Apr 13, 2020 6:08 pm

Wild unsubstantiated theory: Could it be...maybe....just maybe, mom 'n pop investors as a group are acting more like long-term investors instead of short-term, myopic, emotionally driven, "dumb money" investors? What you are seeing is exactly the kind of behavior I'd expect if more people invested via indexing vs. stock picking, i.e. bias to long-term thinking since they are betting on the entire US or World economy.

Since more folks are indexing than ever before, maybe this is a side-effect?

am
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Re: What in the world is propping up this market?

Post by am » Mon Apr 13, 2020 6:11 pm

mrspock wrote:
Mon Apr 13, 2020 6:08 pm
Wild unsubstantiated theory: Could it be...maybe....just maybe, mom 'n pop investors as a group are acting more like long-term investors instead of short-term, myopic, emotionally driven, "dumb money" investors? What you are seeing is exactly the kind of behavior I'd expect if more people invested via indexing vs. stock picking, i.e. bias to long-term thinking since they are betting on the entire US or World economy.

Since more folks are indexing than ever before, maybe this is a side-effect?
Most trading is institutional so don’t think so. I’ve looked at portfolios of some pensions and they are full of assets outside of indexing,
Last edited by am on Mon Apr 13, 2020 6:12 pm, edited 1 time in total.

Lee_WSP
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Re: What in the world is propping up this market?

Post by Lee_WSP » Mon Apr 13, 2020 6:11 pm

mrspock wrote:
Mon Apr 13, 2020 6:08 pm
Wild unsubstantiated theory: Could it be...maybe....just maybe, mom 'n pop investors as a group are acting more like long-term investors instead of short-term, myopic, emotionally driven, "dumb money" investors? What you are seeing is exactly the kind of behavior I'd expect if more people invested via indexing vs. stock picking, i.e. bias to long-term thinking since they are betting on the entire US or World economy.

Since more folks are indexing than ever before, maybe this is a side-effect?
But unless we're net buyers and putting in significant chunks of change, just holding our equities isn't going to move the needle one way or the other.

ChiKid24
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Re: What in the world is propping up this market?

Post by ChiKid24 » Mon Apr 13, 2020 6:26 pm

It's probably anecdotal, but last year there were countless people saying they were sitting on cash because the market was "overvalued". They wanted to invest, but the run-up got away from them and then they couldn't stomach putting it in at prices that kept being higher than when they came to their original position. Now the market has fallen 20-30%, so perhaps that idle cash is finally being put to work? Wasn't my strategy, but maybe these people now think they're brilliant for waiting and don't want to miss out on the next run-up.

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TechGuy365
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Re: What in the world is propping up this market?

Post by TechGuy365 » Mon Apr 13, 2020 6:34 pm

fwellimort wrote:
Mon Apr 13, 2020 5:13 pm
Because indexes are market capped.

And currently, our broad market index is literally mostly on companies like Microsoft.
Almost all the 'money' currently is getting funneled to the 'winners' of current epidemic: tech companies.

Sectors like oil and gas is a sub 2% on your market cap index currently. It can literally go to zero and you will only see a drop of 2%.
Hotel/restaurant sector is like 1.6% on your market cap index currently. It can literally go to zero and you will see only a drop of 1.6%.
Sectors such as transportation infrastructure is 0.1% of your market cap index currently. Again, it can literally go to zero and you will see a drop of 0.1%.

You see, unlike previous recessions, there's currently some sectors flourishing/booming in the market. Those sectors are currently a significant portion of your index.

And of course:
+ FED QE infinity (real value of stocks can be crashing currently but is being adjusted in future potential hyper-inflation sense. Who knows.)
+ Speculation with lots of 'hope' that stock markets only go up. Maybe the bubble will burst soon. Maybe it isn't a bubble. No one knows.
+ Pathetic interest rates making stocks the only viable investment option.

But mostly.. no one here knows.
The only significant industries in the market cap currently I am seeing vulnerable to this recession are:
Banks: 4.38%
Real Estate: 4%
Entertainment: 1.8%
Hotels/Restaurant/Retail: 1.6%

It's absolutely astounding how tech heavy our US Total Stock market is. The market cap dictated tech as the future of growth with this epidemic.
The US stock market today is essentially a tech + health care index.
Current evaluations are stating that the future of America is in tech/health care. And that many of today's companies in the more 'traditional' sectors are no longer necessary. It's absolutely amazing how fast investors are willing to adapt with this coming epidemic: even the most stubborn investors in Wall Street are admitting future growth is in tech/health care.
This is exactly right - tech and healthcare companies are carrying the market positively. If the % you listed is correct, the drop in less significant sectors is just not going to impact S&P much. Thus I feel as safe with my 100/0 AA as I have been in the past 30 years.

I had previously tried to find out the % per sector but you listed it here clearly. Thanks.

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2pedals
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Re: What in the world is propping up this market?

Post by 2pedals » Mon Apr 13, 2020 6:35 pm

Sometimes I sleep well at night propped up. :wink:

Valuethinker
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Re: What in the world is propping up this market?

Post by Valuethinker » Mon Apr 13, 2020 6:40 pm

am wrote:
Mon Apr 13, 2020 5:53 pm
Can someone explain how we will get back to our previous lives without quarantine or lockdown when the virus is still circulating in the community and there is no vaccine or effective therapeutics? Curve is flattened because of quarantine, social distancing, etc, What happens when everyone goes back to normal life and the virus is still there? People will still be scared and limit travel and spending.
Other countries in Asia have been able to cautiously re open was high levels of testing plus rigorous contact tracing.

If our countries can push the number of new infections back towards zero that is the direction we will move in.

My sense in the UK we might be talking about such a world in June or later. 6 to 8 weeks where we are from now with nearly 1000 dead a day.

USA went into lockdown later in most jurisdictions. So perhaps August or September?

In the absence of a working anti viral therapy the alternatives are too horrible to contemplate. In the UK 100k to 500k deaths. Multiply by 4.5 to get US equivalents.

tk1978
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Re: What in the world is propping up this market?

Post by tk1978 » Mon Apr 13, 2020 6:42 pm

tvubpwcisla wrote:
Mon Apr 13, 2020 5:47 pm
When things are on sale, investors buy. Even with the recent run up in prices there are still huge discounts out there. I expect the S&P to be back over 3,000 real quick!

:moneybag
Why do you think things are “on sale”?

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Re: What in the world is propping up this market?

Post by AlphaLess » Mon Apr 13, 2020 6:50 pm

LMK5 wrote:
Mon Apr 13, 2020 4:09 pm
I know we Bogleheads aren't supposed to pay attention to market movements but I really am fascinated by the resiliency of this market. I mean, the economy is all but shut down folks. The market is supposed to price companies based on book value and projected earnings, so what does the market see in the future that doesn't seem apparent to most people? Can companies be worth only 20% less than their recent highs? On the face of it it seems preposterous. Does it see some near term light at the end of the tunnel, along with a federal government that is committed to goosing the economy no matter the cost?
Here is my opinion, and my opinion only.

1. Significant number of traders (CTAs, macro hedge funds) that have access to better information than the general public, decided sometime in early / mid-February to hedge or sell,

2. The sell-off created a chain reaction. The said traders also made sure to show up on TV and advocate for their positions. Large part of their positions was to advocate for shelter-at-home, etc,

3. By around mid-March, they were happy with their gains, and they needed to cover their hedges, flip their positions,

4. Sell-side analysts / economists started making projections for unemployment and GDP. These projections were very very steep on the downside (and probably accurate),

4. The said traders started looking for ways to justify their closed short positions, or additional long positions. So they looked for evidence / information that they can use to convince that opening up is coming up,

5. A large part of that evidence was based on the hypothesis that the actual infection rate in the population is perhaps 40x more than the case rate. That would imply that in places like NYC, the infection has mostly run up its course. I personally believe that 40x is too much, and it is perhaps more like 3-6x,

6. Those same traders were pushing very heavily the narrative that based on #5, economy will open up soon.

Currently, we are in uncertainty given:
- lack of a comprehensive plan for how to open up,
- lack of information on the resources required to carry out the above plan.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.

am
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Re: What in the world is propping up this market?

Post by am » Mon Apr 13, 2020 6:50 pm

Valuethinker wrote:
Mon Apr 13, 2020 6:40 pm
am wrote:
Mon Apr 13, 2020 5:53 pm
Can someone explain how we will get back to our previous lives without quarantine or lockdown when the virus is still circulating in the community and there is no vaccine or effective therapeutics? Curve is flattened because of quarantine, social distancing, etc, What happens when everyone goes back to normal life and the virus is still there? People will still be scared and limit travel and spending.
Other countries in Asia have been able to cautiously re open was high levels of testing plus rigorous contact tracing.

If our countries can push the number of new infections back towards zero that is the direction we will move in.

My sense in the UK we might be talking about such a world in June or later. 6 to 8 weeks where we are from now with nearly 1000 dead a day.

USA went into lockdown later in most jurisdictions. So perhaps August or September?

In the absence of a working anti viral therapy the alternatives are too horrible to contemplate. In the UK 100k to 500k deaths. Multiply by 4.5 to get US equivalents.
I agree that without anti virals we are doomed.

I don’t understand how the fed gov is contemplating opening the country on May 1st? There is zero probability that there will not be new cases, deaths, or continued spread in the community especially without measures like social distancing,

Is this just an acceptance by the gov. that many will have to die to save our economy? But even if we open, people will still be fearful to travel, congregate and spend like they used to,

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mrspock
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Re: What in the world is propping up this market?

Post by mrspock » Mon Apr 13, 2020 6:53 pm

Lee_WSP wrote:
Mon Apr 13, 2020 6:11 pm
mrspock wrote:
Mon Apr 13, 2020 6:08 pm
Wild unsubstantiated theory: Could it be...maybe....just maybe, mom 'n pop investors as a group are acting more like long-term investors instead of short-term, myopic, emotionally driven, "dumb money" investors? What you are seeing is exactly the kind of behavior I'd expect if more people invested via indexing vs. stock picking, i.e. bias to long-term thinking since they are betting on the entire US or World economy.

Since more folks are indexing than ever before, maybe this is a side-effect?
But unless we're net buyers and putting in significant chunks of change, just holding our equities isn't going to move the needle one way or the other.
Like I said... wild theory. I kind of think of it as less raw fuel for the bear market "fire". Ultimately the prices are what they are based on people's willingness to sell at a given price, having fewer market participants might reduce the odds somebody is willing to sell at a lower price. Pure speculation though.

JHU ALmuni
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Re: What in the world is propping up this market?

Post by JHU ALmuni » Mon Apr 13, 2020 6:59 pm

Greed in my opinion is what driving the market. Big money ready to be dumped into the market to make more money. No one wants millions setting in a checking account making basically nothing. People wants the market to recover so they can continue to invest. That's what driving the market in my uneducated opinion.

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watchnerd
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Re: What in the world is propping up this market?

Post by watchnerd » Mon Apr 13, 2020 7:10 pm

JHU ALmuni wrote:
Mon Apr 13, 2020 6:59 pm
Greed in my opinion is what driving the market. Big money ready to be dumped into the market to make more money. No one wants millions setting in a checking account making basically nothing. People wants the market to recover so they can continue to invest. That's what driving the market in my uneducated opinion.
Errr...isn't the desire to make money what drives all market action except selling?

And even some selling is driven by "locking in gains".
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

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F150HD
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Re: What in the world is propping up this market?

Post by F150HD » Mon Apr 13, 2020 7:15 pm

LMK5 wrote:
Mon Apr 13, 2020 4:09 pm
I know we Bogleheads aren't supposed to pay attention to market movements but I really am fascinated by the resiliency of this market. I mean, the economy is all but shut down folks. The market is supposed to price companies based on book value and projected earnings, so what does the market see in the future that doesn't seem apparent to most people? Can companies be worth only 20% less than their recent highs? On the face of it it seems preposterous. Does it see some near term light at the end of the tunnel, along with a federal government that is committed to goosing the economy no matter the cost?
Goldman Sachs abandons its bearish near-term view on stocks, says the bottom is in

LFKB
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Re: What in the world is propping up this market?

Post by LFKB » Mon Apr 13, 2020 7:21 pm

Fiscal stimulus
0% interest rates
Investors looking at normalized earnings levels for 2021 and throwing out 2020

I think there will probably be a pullback from here, but I would still way rather own stocks over bonds for the next 5 years.

brcarls
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Re: What in the world is propping up this market?

Post by brcarls » Mon Apr 13, 2020 7:23 pm

Remember all those market timers who went to all cash in 2016? They finally got the dip they have been waiting on and are flooding back in so they don't get left behind again and are swearing off market timing for good this time. :oops:

averagedude
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Re: What in the world is propping up this market?

Post by averagedude » Mon Apr 13, 2020 7:25 pm

The market is forward looking. Also 2.3 trillion dollars, with more coming if necessary. People don't understand the magnitude of this amount of money, but smart people on Wall Street do.

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mrspock
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Re: What in the world is propping up this market?

Post by mrspock » Mon Apr 13, 2020 7:26 pm

F150HD wrote:
Mon Apr 13, 2020 7:15 pm
LMK5 wrote:
Mon Apr 13, 2020 4:09 pm
I know we Bogleheads aren't supposed to pay attention to market movements but I really am fascinated by the resiliency of this market. I mean, the economy is all but shut down folks. The market is supposed to price companies based on book value and projected earnings, so what does the market see in the future that doesn't seem apparent to most people? Can companies be worth only 20% less than their recent highs? On the face of it it seems preposterous. Does it see some near term light at the end of the tunnel, along with a federal government that is committed to goosing the economy no matter the cost?
Goldman Sachs abandons its bearish near-term view on stocks, says the bottom is in
And a prediction of 3000 by EOY no less. Frankly I think they might be too bearish still, I think we make 3000 by labour day. At least we can all get back to those threads moaning and groaning about how overvalued the market is and when the next crash will happen...

Does anyone else find it amusing that they wait until the market has recovered ~half the losses before they give their clients the "All clear, you can get back in now!" signal? :D

phantom0308
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Re: What in the world is propping up this market?

Post by phantom0308 » Mon Apr 13, 2020 7:49 pm

Investors like metrics, less uncertainty. An alliance of governors said they're going to use testing metrics to decide when to reopen the economy. I'm pretty pessimistic and even I'm a little less concerned about reopening the economy without a plan and seeing a second wave.

3funder
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Re: What in the world is propping up this market?

Post by 3funder » Mon Apr 13, 2020 7:54 pm

Those whose idea of fashion involves wearing rose-colored glasses each and every day.

Jess Saying
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Re: What in the world is propping up this market?

Post by Jess Saying » Mon Apr 13, 2020 8:04 pm

I'd really like someone who works in fixed income to elaborate, but it appears that there was a run on bonds in March 2020 that the Fed successfully short circuited. The market was pricing in some % likelihood of a financial crisis in response to the run. Looks like by March 23rd yields on AAA were already on the way down.

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Re: What in the world is propping up this market?

Post by Wanderingwheelz » Mon Apr 13, 2020 8:14 pm

mptfan wrote:
Mon Apr 13, 2020 4:44 pm
LMK5 wrote:
Mon Apr 13, 2020 4:09 pm
I mean, the economy is all but shut down folks.
This is hyperbole and your argument is based upon a false premise. The Wall Street Journal estimates that 29% of the U.S. economy is shut down, so if 71% of the economy is still going on then the economy is not "all but shut down."

https://www.thedailybeast.com/coronavir ... conomy-wsj
It depends what was measured. Did it include mortgages and rents?

I agree that a person can still find a burger and fries, and if he has to wait to buy a skateboard for a couple more months that’s far from catastrophic to the economy, but that person is very likely not paying his rent and probably not his car note either. That’s where things begin to get real.

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