Market Timing Covid-19 (A Cautionary Tale)

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Sockpuppet
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Market Timing Covid-19 (A Cautionary Tale)

Post by Sockpuppet » Wed Mar 25, 2020 3:53 am

I’ve got a relative who months ago predicted the Coronavirus would destroy the world economy and place much of the world under lockdown. EVERYTHING he said turned out to happen. I thought he was absolutely nuts in January to say international travel would come to an end as we know it and Americans would largely be confined to his homes.

But he was right.

Now he also decided cash out all his 401K money, paid penalties, will be paying taxes, and invested all that money on shorts against oil.

I told him he was crazy.

And then I watched him make hundreds of thousands of dollars in the days ahead as oil prices plummeted, easily recouping the losses he paid in early withdrawal penalties.

Unfortunately, for my relative you have to time the market twice.

And he timed wrong the second time.

Figuring oil prices couldn’t drop anymore, he switched from shorting to buying oil. Sadly for him, oil prices kept plummeting wiping out all of his massive gains.

Panicked that he would lose his entire retirement, he sold his holdings and is now down $100,000 from where he started.

So anyway, thought this would be comforting for those of you questioning whether our way really is the way. In this story, someone who nearly 100% predicted the situation we’re in tried to time the market and STILL ended up losing.

Note: I posted about what my relative was doing at the beginning of the month in the “U.S. stocks in free fall” thread:

viewtopic.php?f=10&t=80065&p=5068916#p5068916
Last edited by Sockpuppet on Wed Mar 25, 2020 4:02 am, edited 1 time in total.

manatee2005
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by manatee2005 » Wed Mar 25, 2020 4:01 am

He’s basically gambling.

shess
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by shess » Wed Mar 25, 2020 4:07 am

Sockpuppet wrote:
Wed Mar 25, 2020 3:53 am
Unfortunately, for my relative you have to time the market twice.
This has kept me from acting on my fears in 5 of the last two recessions. I had fear, and I wanted to do something, but I couldn't square the circle on it. Going 100% on my gut has obvious dangers, so that's not good. But prudently risking 10% on my gut is ... unsatisfying. So 10% of your portfolio is up 300%, while 90% of your portfolio is down 35%? I mean, great but not great?

So, I stayed pat, and so far it's worked out. This time feels different, but 2008 felt different at the time, too, but now 2008 doesn't feel that bad.

xxd091
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Location: UK

Re: Market Timing Covid-19 (A Cautionary Tale)

Post by xxd091 » Wed Mar 25, 2020 4:08 am

Staying the course is easily said but very difficult to do!
Human (animal)nature is programmed for constant change from our ancestral genes
Those who stood still got eaten!
Investing is counterintuitive
I too sat out 2001 and 2008 and will do the same for this one-seems to work
xxd091

manatee2005
Posts: 552
Joined: Wed Dec 18, 2019 9:17 pm

Re: Market Timing Covid-19 (A Cautionary Tale)

Post by manatee2005 » Wed Mar 25, 2020 4:10 am

xxd091 wrote:
Wed Mar 25, 2020 4:08 am
Staying the course is easily said but very difficult to do!
Human (animal)nature is programmed for constant change from our ancestral genes
Those who stood still got eaten!
Investing is counterintuitive
I too sat out 2001 and 2008 and will do the same for this one-seems to work
xxd091

Investing is counterintuitive, that’s why most people are poor

manatee2005
Posts: 552
Joined: Wed Dec 18, 2019 9:17 pm

Re: Market Timing Covid-19 (A Cautionary Tale)

Post by manatee2005 » Wed Mar 25, 2020 4:11 am

Sockpuppet wrote:
Wed Mar 25, 2020 3:53 am
I’ve got a relative who months ago predicted the Coronavirus would destroy the world economy and place much of the world under lockdown. EVERYTHING he said turned out to happen. I thought he was absolutely nuts in January to say international travel would come to an end as we know it and Americans would largely be confined to his homes.

But he was right.

Now he also decided cash out all his 401K money, paid penalties, will be paying taxes, and invested all that money on shorts against oil.

I told him he was crazy.

And then I watched him make hundreds of thousands of dollars in the days ahead as oil prices plummeted, easily recouping the losses he paid in early withdrawal penalties.

Unfortunately, for my relative you have to time the market twice.

And he timed wrong the second time.

Figuring oil prices couldn’t drop anymore, he switched from shorting to buying oil. Sadly for him, oil prices kept plummeting wiping out all of his massive gains.

Panicked that he would lose his entire retirement, he sold his holdings and is now down $100,000 from where he started.

So anyway, thought this would be comforting for those of you questioning whether our way really is the way. In this story, someone who nearly 100% predicted the situation we’re in tried to time the market and STILL ended up losing.

Note: I posted about what my relative was doing at the beginning of the month in the “U.S. stocks in free fall” thread:

viewtopic.php?f=10&t=80065&p=5068916#p5068916
I’m impressed your relative told you about his loses. When I lose money I get angry and bite people’s heads off if they ask me about it lol

is50xenough
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by is50xenough » Wed Mar 25, 2020 7:01 am

It is a cautionary tale and hope things work out, however, he did time correctly, it was the last sale that did him in. I would think if he ride out would be sitting pretty some time in the future.

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bottlecap
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by bottlecap » Wed Mar 25, 2020 7:09 am

Ouch. And now the money can’t go back in the 401k. Or can it? If it hasn’t been 60 days, can he transfer it back in and avoid the taxes and penalties?

Perhaps your relative should look into this.

Thanks for sharing in any event.

JT

MotoTrojan
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by MotoTrojan » Wed Mar 25, 2020 7:16 am

bottlecap wrote:
Wed Mar 25, 2020 7:09 am
Ouch. And now the money can’t go back in the 401k. Or can it? If it hasn’t been 60 days, can he transfer it back in and avoid the taxes and penalties?

Perhaps your relative should look into this.

Thanks for sharing in any event.

JT
Good point. I wonder if the $100K loss even included the fees/taxes.

I remember the original free fall post, very wild to see what came of it. Just proves how being right once can give you irrational confidence. If only he’d have taken the profits and simply reinvested it in the original allocation, at even better equity prices.

rascott
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by rascott » Wed Mar 25, 2020 7:17 am

I wouldn't call this market timing...... he's day trading commodities. That's a recipe for almost certain disaster. Pls the disaster of cashing out the 401k.
Last edited by rascott on Wed Mar 25, 2020 7:19 am, edited 1 time in total.

MotoTrojan
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by MotoTrojan » Wed Mar 25, 2020 7:18 am

On second thought, is the $100K loss more or less than he’d have gotten I’d he’d not timed at all :twisted:.

bugleheadd
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by bugleheadd » Wed Mar 25, 2020 7:18 am

im never touching oil after i got burned in 2015 when oil prices crashed and stayed low. oil is too rigged by the oil cartels. oil can stay low for a while or go lower. and the future trend is moving away from fossil fuel transportation.

keelerjr12
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by keelerjr12 » Wed Mar 25, 2020 8:16 am

rascott wrote:
Wed Mar 25, 2020 7:17 am
I wouldn't call this market timing...... he's day trading commodities. That's a recipe for almost certain disaster. Pls the disaster of cashing out the 401k.

Exactly. He’s day trading by emotion.

lgs88
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by lgs88 » Wed Mar 25, 2020 8:19 am

Thanks for posting. All I read around here is triumphant tales of folks who pulled out at the top and made a killing. It makes me feel better to know I’m not the only dolt who didn’t see everything coming from 50 miles away!
merely an interested amateur

rascott
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by rascott » Wed Mar 25, 2020 8:58 am

lgs88 wrote:
Wed Mar 25, 2020 8:19 am
Thanks for posting. All I read around here is triumphant tales of folks who pulled out at the top and made a killing. It makes me feel better to know I’m not the only dolt who didn’t see everything coming from 50 miles away!

If it makes you feel better I've lost a killing. :D

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windaar
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by windaar » Wed Mar 25, 2020 9:30 am

Far easier to just go to a casino, straight to the roulette wheel, and put everything you have on black. If it comes up black, you double your money and trumpet to everyone how smart you are, if it comes up red or green, you are never heard from again.
Nobody knows nothing.

BalancedJCB19
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by BalancedJCB19 » Wed Mar 25, 2020 9:32 am

Thanks for posting!! I'm staying the course and have no intentions of trying to time the market, but this will likely help a lot of people (especially the younger ones without investing experience).

Keenobserver
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by Keenobserver » Wed Mar 25, 2020 9:36 am

Timely post. I feel better abiut standing on the sidelines for thr most part. Did buy some ETf stocks. However, was feeling crappy with this recent rebound for not going in super heavy. Feel better now. I do want to go.in, but gut tells me.bottom is ahead not.behind.

snowman
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by snowman » Wed Mar 25, 2020 9:49 am

Got burned 20 years ago. I saw everything coming too, it went well at first (1997-2000), until it didn't. Fortunately, it wasn't very expensive lesson dollar-wise as I just started investing. Percentage-wise you don't want to know.

Wised up after that, indexes only, staying the course. Great recession was a breeze compared to tech crash. This will pass too. Hopefully new guys that never went through stock market crash will learn from their mistakes in this one.

Just to add another anecdote to OP's story, my good friend is doing cash out refi right now. His plan is to use the cash and invest it, because the market is way undervalued and he will come out way ahead. Maybe, maybe not. Even smart people have really hard time to not do anything during the crash.

Goal33
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by Goal33 » Wed Mar 25, 2020 9:54 am

Why did he have to pay penalties? He can do these maneuvers from his 401k.

He is crazy.

I have a relative that is savvy and sold all his equity positions in Feb. Not sure when he buys back in but he must be happy right now.
A man with one watch always knows what time it is; a man with two watches is never sure.

Chuck
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by Chuck » Wed Mar 25, 2020 10:13 am

Goal33 wrote:
Wed Mar 25, 2020 9:54 am
Why did he have to pay penalties? He can do these maneuvers from his 401k.
My 401k doesn't offer oil futures. Does yours?

Goal33
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by Goal33 » Wed Mar 25, 2020 2:02 pm

Chuck wrote:
Wed Mar 25, 2020 10:13 am
Goal33 wrote:
Wed Mar 25, 2020 9:54 am
Why did he have to pay penalties? He can do these maneuvers from his 401k.
My 401k doesn't offer oil futures. Does yours?
I believe so, with fidelity brokerage link
A man with one watch always knows what time it is; a man with two watches is never sure.

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firebirdparts
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Re: Market Timing Covid-19 (A Cautionary Tale)

Post by firebirdparts » Wed Mar 25, 2020 2:40 pm

I can't imagine anybody offering futures in brokeragelink, but it may just be my imagination is weak. I think you'd get sued.

I am still reeling that he thought oil would go up after all that profit. How on earth, what force could possibly increase the price now?
A fool and your money are soon partners

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