Current stock market ups and downs, downs, downs, downs

Floating Doc said:

alfadriver said:

Fueled by Caffeine said:

Floating Doc said:

The traditional stimulus is tax cuts, cuts in interest rates, and big deficits. There really isn't much else. Those bullets have, for the most part, already been fired.

Nailed it. We could go negative with interest rates if needed I guess. How'd that work out for Japan?

I don't think that the government has reached its limit- now is the time that we can do some major investment into infrastructure.  That will feed many mouths directly.  And that path has worked in the past, as well- as distasteful as it is for many.

Sure, infrastructure spending is badly needed and could make a big difference. The big question though, is whether all of this spending just gets used to reward political allies. 

I'm quite sure if they did, every single politician out there would want to take credit for it- and if we pulled out of whatever ailed the country, pretty much everyone would get re-elected anyway.

But the goal of spending on infrustrure would be to keep money moving first, and then benefit by better roads, bridges, interent, etc.  It's worked before, and it will be somewhat effective again.

The "crash" brought us to about where stocks were in October of 2019. Just a few short months ago. We just had such an enormous gain last year and over the last 10 years that people are shocked to see any negatives. Theoretically the market is already pricing in the projected productivity losses from the Corona virus. The only way it will cause more losses is if those projections get worse.

If you weren't chomping at the bit to buy stocks last October, you shouldn't be chomping to buy now. I'm, as always, buying at all times. I do admit to having done a little market timing in that I emptied out my Paypal balance (from eBay sales) and invested that. I'm also a passive buy and hold investor like RX.

Buy high, sell low. That's my philosophy...At least when it comes to an opportunity for tax loss harvesting.

alfadriver said:

Just like every other recession it will go down some more.  I would say that in 6 or 7 months from now, be ready to buy back in.  

If one has not sold off, DON'T DO IT.  It will come back, just like every other loss.  You don't actually lose money until you sell.

For things to recover, the #1 thing required are consumers.  Once the population starts buying stuff, then corporations will expand to sell more stuff, creating more jobs, making more consumers to buy stuff.

That is why tax cuts generally never work, the difference to the consumer is too low to get markets moving.

Up 1200 points at the end of the day.  This last week has been a perfect example of why you don't want to watch the day to day numbers too closely...

Wall Street - the only place that can make a Hezbollah funeral seem like a calm rational response to events.

There is a lot of issues we still have to overcome in the 1H of this year. It's not going away any time soon and the tourist industries are taking a beating. My recent flight to Japan was rather empty. Good for me but bad for the airlines and hotels. This will probably carry over to the summer travel season. HLA which owns a lot of the brands you may know went into administration in China over the weekend due to the crisis already.

This bounce back was driven by analytics and not confidence. The ride has just started considering they announced overnight that almost all Asian manufacturing output in in retraction. 

Time to buy low won't probably be till late summer.

The stock market is quite literally a roller coaster.

It goes up, it goes down, and the only ones that get hurt are the ones that jump off.

Dow Jones started high today then went down to about a 1% loss.  Then apparently the Fed announced a 50 point cut to current interest rates and markets went up.  Markets are struggling to stay positive.  

BoostedBrandon, I agree 100%!

Clorox (CLX) is currently trading at $175 which gives it a P/E ratio of 27.52 and Disney (DIS) is currently trading at $115 which gives it a P/E ratio of 18.3. That’s right, bleach is now trading at a multiple that’s 50.38% higher than that of the world’s most loved and respected entertainment brand.

I expect it to fall further but long term, this will almost certainly be seen as an attractive entry point.

I’ll let DIS get beat up for a few more trading days and then pull the trigger and put half into each of my two daughter’s (15 and 12) accounts in the hope that they start paying attention to the market.

In reply to RX Reven' :

A cup of bleach a day keeps corona virus away. 

In reply to Fueled by Caffeine :

Is bleach 50% happier than the happiest place on earth because that’s what their relative valuations are claiming.

In reply to RX Reven' :

I don't know.. but I went to Walmart the other day to buy tissues and the bleach aisle is bare

infinitenexus said:

Dow Jones started high today then went down to about a 1% loss.  Then apparently the Fed announced a 50 point cut to current interest rates and markets went up.  Markets are struggling to stay positive.  

 

BoostedBrandon, I agree 100%!

Nobody gives a thought to the reality that the interest rate reduction is actually money out of the pockets of responsible people who do not gamble.  ( that would be about half of of the US population who do nt play the market) The current market is like a casino where, should you be losing money or just not making enough on your bets, you can nip outside and legally steal money from people passing by.

Somehow this makes economic sense, just not to me ¯\_(ツ)_/¯

The markets started their drop on Feb 19. Between Feb 19 and Feb 28 it lost 12.76%, erasing the gains from the 4 previous months. Basically restoring things to the levels they were at in early Oct 2019.

In the 4 trading days since Feb 28, the market has regained 6% and we're back to where we were in early December 2019.

You can look at that and be fearful that 4 months of gains were erased in just 8 trading days, or you can look at it and be hopeful because we've gained as much in the last 4 days as we did in two months from Early Oct-Dec of last year.

NOHOME,

In my view, day traders gamble, buy and hold people like me invest.

Day traders provide no value, they just try to direct some of the flow of money to themselves (fortunately, they usually fail), buy and hold people like me provide the capital that is essential for businesses to grow which creates jobs, drives innovation, and continuously improves quality while reducing costs.

Having said that, I agree, ultra-low interest rates force people into a risk-on position…people should have the option to go low risk / low reward and right now, they don’t. The ten year treasury note just hit an all-time low of 0.93%. The core inflation rate is 1.76% so the reward for being “responsible” is a 0.83% annual penalty.

STM327,

As they say, the market takes the stairs up and the elevator down.

In reply to RX Reven' :

Isn't the slope of that line pretty much the same though for the recent drop and gain? The drop was 12% over 8 days, and the gain has been 6% over 4 days. Or if you want to look at it from a time perspective, we lost 4 months in 8 days and gained 2 months back in 4 days.

Seems like the recent gain has been just as steep, but not yet as lengthy as the drop. In that sense, they've both been elevators, but the drop went from the 10th floor to the 6th, and the gain has been from the 6th floor to the 8th. The drop felt scary, because it was a drop, but the rise has been equally abrupt.

In reply to NOHOME :

The low interest rates could actually help somebody out too if they were comfortable with risk. They obviously make financing cheaper, which saves money on interest for a buyer. However, an intrepid individual could likely do a cash out refi right now to capitalize on the recent housing pricing gains for very little interest (I'm seeing a few 3.00% 30 year mortgages right now) . They could then invest that money into the market and likely far surpass the cash, bonds, or mortgage interest rates.

Granted, the typical bond buyer that's looking for a safe play probably isn't going to be comfortable with that approach (I'm not sure I would be either to be honest), but that just comes down to risk tolerance. Everything has some level of risk here. Even if you're 100% in cash, you risk losing significant value to inflation over time.

In reply to STM317 :

Hi STM317,

Agreed, market movements from Feb. 19^th to today have followed a “V” pattern meaning abrupt gains and losses. The stairs / elevator comment is in reference to long time horizon tendencies.

In reply to STM317 :

My investment guy tried to tell me how that was an excellent idea just before the dotcom crash.  Go ahead now and tell me how much more money I would have now had I leveraged my house, but it wouldn't have mattered because I'd be in jail for murdering my investment guy.

In reply to Streetwiseguy :

As one economist has famously said “not all dollars are created equal”.

Let’s say your goal is to retire at 62 with a net worth of 3 million. Your financial advisor informs you that you currently have a 95% chance of accomplishing that goal but if you invest more aggressively, you could have a 90% chance of retiring at 60 with 3.5 million or an 85% chance of retiring at 58 with 4 million, etc.

At some point, additional money isn’t very useful to you (3 is good, 3.5 is really good, 4 is .5 more than you have a real use for) and retiring earlier follows the same diminishing return pattern (62 is good, 60 is really good, 58 is 2 years of pointless sitting around). Rational people tend to go risk off once they’re in the “really good” zone of age and net worth.

So, your financial advisor was technically correct but still needed to be murdered because he failed to realize that not all dollars are created equal.

BTW, the 10 year treasury note just dropped to 0.75%....yesterday’s 0.93% was a historic low so we’re now 20% below Oh…My…Gauuude territory.

RX Reven' said:

BTW, the 10 year treasury note just dropped to 0.75%....yesterday’s 0.93% was a historic low so we’re now 20% below Oh…My…Gauuude territory.

Could you go into more detail about this? Like the "what it means" and what I should read to understand more?

All I know is I don't want to look at my 401k or IRAs anytime soon.

In reply to GIRTHQUAKE :

It means interest rates have never been lower (for better or worse). Bonds are often considered a "low risk" investment that many people buy when the stock market shows uncertainty. But if bonds no longer pay anything in return because of a record low interest rate, then those chasing safety realistically have one less option. They might leave the money in equities and ride it out, or they might pull out of the market all together and stash cash in something else that doesn't really help the economy overall.

Simultaneously, Interest rates are often cut to try to stoke the economy. People are more likely to finance large purchases when the interest rate is lower. Having record low rates, in a time of great economic prosperity as we do now, could mean that the strong economy keeps rolling if people take advantage of the lower rates but it also means that the government has one less lever to pull if the economy sours. It could all work out if people don't panic, but that's not usually how humans roll.

GIRTHQUAKE said:

RX Reven' said:

BTW, the 10 year treasury note just dropped to 0.75%....yesterday’s 0.93% was a historic low so we’re now 20% below Oh…My…Gauuude territory.

Could you go into more detail about this? Like the "what it means" and what I should read to understand more?

Hi GIRTHQUAKE,

First, I’m no expert on bonds.

I see no reason to hold bonds until you are 100% debt free…why in the hell would anyone borrow money and pay 3.5% interest on it for instance and at the same time lend money in the form of a bond and receive 2.5% interest on it for instance? People do it all the time yet I’ve never heard a coherent explanation as to why.

That said, low yield rates indicate a flight to safety. Basically, investors are pulling money out of the stock market in mass and moving it into the bond market. Assuming the demand for money is held constant, increased supply causes the yield to go down. Additionally, the demand for money can go down if it’s thought that economic activity will be lessened in the future.

Example…

In the past, you and one of your neighbors liked to pay the two kids on your block to mow your lawn and the price was $10.

Now, two new kids move in on your block and are competing for the lawn business (investors rushing into bonds) and rumors that you and your neighbor are considering putting in fake lawns are circulating (slowed economic activity in the future). The predictable result is that the going price for mowing your lawn will go down (reduced bond yields).

Added later…

Financial people keep a close eye out for what is known as a yield inversion which is fancy talk for long term yields being lower than short term yields. This indicates that investor consensus is that the longer term future will be worse than the shorter term future (your going to put in a fake lawn causing less economic activity on your block in the future).

Admittedly, some of my analogies could be incorrect, somebody please chime in if I’m mistaken.