Stock scream room

Discussion of the Stock portion of the Permanent Portfolio

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Vil
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Re: Stock scream room

Post by Vil » Fri Feb 28, 2020 7:05 am

pmward wrote:
Thu Feb 27, 2020 5:42 pm
This is a dip to buy in my opinion.
It might be that I am jumping like the roman cavalry in your discussion here .. :o For Europe I fear the moment to buy has not yet arrived. With a substantial part of my VP I did 2x short on Stoxx 50 (yeah I know its ugly..), you can imagine my gains just in the course of several days (I've locked it now, so back in cash). Its just that in Europe still the fear is all over and I do not feel anything can calm it down for the time being as more and more countries report COVID cases. Hope you do not get that feeling in US.

On the other hand, my PP does not feel extremely happy, with Gold struggling and the ST/LT bond part being bullet with WA approx. 8 years...
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Re: Stock scream room

Post by sophie » Fri Feb 28, 2020 8:20 am

I took a peek at my Fidelity accounts, and it looks like it's time for some tax loss harvesting. So happy about the abolishing of commissions! If I'm lucky, I can do it while the market's headed down, and rebuy the stocks at a lower price. Y'all might want to do the same! I assume there will be no problem doing it again on the way down if the correction continues.

Probably too early to think about rebalancing yet though.
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Re: Stock scream room

Post by pmward » Fri Feb 28, 2020 8:28 am

To be clear... I'm not saying today is the bottom. This is not a market timing call. I'm simply saying this is a dip to be bought. The governments across the world are hell bent on trying to avoid another major recession, and they will do whatever it takes. Could stocks drop another 10% from here (20% total)? Absolutely, I think a 20% correction given the extended nature of the market prior to the virus would be healthy. Could it drop another 20% from here (30% total)? If the worst fears of the global pandemic come true, yes. However, something temporary like a virus will not warrant a 40-50% correction. This will not be another 2008. Moreover, the governments will stimulate like mad to prevent that. I'm talking rate cuts, QE, helicopter money... you name it. Especially in the U.S. with Trump's re-election bid. If Powell doesn't want to play his game, in the wake of the virus Trump could use his favorite excuse to do what he wants, ie "national emergency", to fire Powell and put in someone willing to be a puppet. I don't think it will come to that though. I fully expect that in the worst case scenario Powell will take rates to 0 and unleash a massive wave of QE, including but not limited to rolling the terms in the short term liquidity we've provided since Oct to the long end of the curve. I also would not be surprised to see Trump unleash emergency tax breaks aka helicopter money if the worst fears materialize. They will juice the market in any way possible. It's no secret that I'm not a fan of Trump. But let's be real, Trump is not the kind to sit on his hands. He is the type to do whatever it takes. He is the type to act quickly and act decisively, and that's exactly what will happen should things really start to get out of hand. So we in the U.S. have a massive Fed PUT and Trump PUT under us.

The EU is obviously a bit trickier since Germany has been stubborn... but I would be willing to bet that they undo their fiscal belts as well in the wake of the virus. I'm fully expecting a big fiscal stimulus package of some kind out of the EU. China and Hong Kong are already stimulating. Japan will follow suit. That would have a global synchronized stimulus... something we didn't even have back in the financial crisis. I don't know about you, but I'm personally not going to bet against that. We are talking stimulus the likes of which we have never seen before.

I have a bonus from work that hit today and that's going into my GB as was already planned, and obviously that will all be going into stocks. I'm also going to harvest some losses today in shuffling IJS into VBR. I'm going to hold out a bit on harvesting my ITOT losses in case we get another leg down. Either way, I'm not going to get caught off sides. I have 0 fear that this is the big one. The odds are highly probable that this is just a short term correction. I'm personally putting my money where my mouth is on that one.
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Cortopassi
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Re: Stock scream room

Post by Cortopassi » Fri Feb 28, 2020 8:47 am

pmward wrote:
Fri Feb 28, 2020 8:28 am
However, something temporary like a virus will not warrant a 40-50% correction. This will not be another 2008.
The market went up nearly 30% last year. Why do you think it can't fall 40-50%?

If this gets out of control in the US, and everything right now points to that, I don't care what kind of stimulus is out there, if people are staying home, schools are closed, travel is limited, etc, isn't going to make one bit of difference to me if interest rates are at 0% or if Trump gives me $1000 to spend. I'm not leaving my house!
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Re: Stock scream room

Post by flyingpylon » Fri Feb 28, 2020 9:04 am

Cortopassi wrote:
Fri Feb 28, 2020 8:47 am
If this gets out of control in the US, and everything right now points to that...
Where did you read that?
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Cortopassi
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Re: Stock scream room

Post by Cortopassi » Fri Feb 28, 2020 9:10 am

flyingpylon wrote:
Fri Feb 28, 2020 9:04 am
Cortopassi wrote:
Fri Feb 28, 2020 8:47 am
If this gets out of control in the US, and everything right now points to that...
Where did you read that?
I just figured that was obvious. I could be wrong. No way draconian travel restrictions like China is able to do will fly here, until it's too late to stop the spread.
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Re: Stock scream room

Post by pmward » Fri Feb 28, 2020 9:14 am

Cortopassi wrote:
Fri Feb 28, 2020 8:47 am
pmward wrote:
Fri Feb 28, 2020 8:28 am
However, something temporary like a virus will not warrant a 40-50% correction. This will not be another 2008.
The market went up nearly 30% last year. Why do you think it can't fall 40-50%?

If this gets out of control in the US, and everything right now points to that, I don't care what kind of stimulus is out there, if people are staying home, schools are closed, travel is limited, etc, isn't going to make one bit of difference to me if interest rates are at 0% or if Trump gives me $1000 to spend. I'm not leaving my house!
If they could out stimulate the financial crisis, without even having the global synchronized stimulus, they can out stimulate the virus with global synchronized stimulus. Especially since they are going to stimulate much quicker and more aggressively now than they did in 08 when it was still an untested strategy. Your point about last year just places an exclamation point on this. Why was the market up 30% last year? Because the Fed cut rates and started providing liquidity to the Repo markets (let's not also forget that the year started down almost 20%). There is no other reason. They have the power to out stimulate this easily.

By the way I have now officially put my money where my mouth is. My full bonus (10% of my yearly salary) was just put into the market since it was my lowest asset in my GB. This feels panicky and overdone in the short term (and from a dark arts perspective, we are bouncing off an important support line so far this morning), and while things could get uglier in the medium term, in the long term I know this will be a blip on the radar. I fully believe we will be back at all time highs by the election.
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Cortopassi
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Re: Stock scream room

Post by Cortopassi » Fri Feb 28, 2020 9:48 am

flyingpylon wrote:
Fri Feb 28, 2020 9:04 am
Cortopassi wrote:
Fri Feb 28, 2020 8:47 am
If this gets out of control in the US, and everything right now points to that...
Where did you read that?
Mick Mulvaney, a little while ago:

"Are you going to see some schools shut down? Probably. Maybe see impacts on public transportation? Sure, but we do this. We know how to handle this," Mulvaley said while speaking at the Conservative Political Action Conference (CPAC) outside of Washington on Friday.

Mulvaney also slammed the media for painting a narrative that the Trump administration is "scrambling" to contain the virus, noting that he briefed Congress along with top health officials six weeks ago. He accused the media of ignoring coronavirus until now, according to The Hill.

"Why didn’t you hear about it?" Mulvaney asked the audience while sitting down with Heritage Foundation economist Stephen Moore. "The press was covering their hoax of the day because they thought it would bring down the president."

"Is it real? It absolutely is real," Mulvaney said. "But you saw the president the other day — the flu is real."

Mulvaney then downplayed the risk of the new coronavirus, saying that people should be focusing on the mortality rate which is currently, officially, between 2 and 3%.
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Re: Stock scream room

Post by dualstow » Fri Feb 28, 2020 9:51 am

• A lot of professionals have to sell stock this week, while long-term individual investors don't. (WSJ)

• Some trading machines are also mindlessly selling per limit orders.

Perhaps the market is not just correcting, but oversold. I look forward to buying more stock shares this season.
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Strange times are here
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Re: Stock scream room

Post by Ad Orientem » Fri Feb 28, 2020 10:12 am

The late great Jack Bogle's advice when the markets look scary...

"A lot of folks who find themselves in a crisis shout 'don't just stand there, do something!.' My advice in a financial panic is don't do anything. Just stand there."
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Re: Stock scream room

Post by pmward » Fri Feb 28, 2020 10:15 am

FWIW, VIX just hit 48. For comparison, in December 2018 it peaked at 38. In Jan 2018 it peaked at 50. It was above our current level of 48 from October 08-March 09.
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Re: Stock scream room

Post by Cortopassi » Fri Feb 28, 2020 10:23 am

After this current drop, the market is back to where it was.... in October, 4 months ago.

Maybe the performance up and to the right that started right around there is clearing itself out? It was a bit crazy.

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