(03-04-2020, 04:54 PM)NilesMike Wrote:(03-04-2020, 10:37 AM)fenders53 Wrote: I'm pretty sure I'll hedge a little more in the future. It's as tricky as any part of investing though. You can spend a lot of money for insurance over time waiting to be right. The whole thesis for my covered put selling income strategy is taking premiums from those buying "insurance". I agree that the risk was most obvious last month Otter.
We have mostly been at all time highs since May 2013.
The risk was no greater in february 2020 than it was when SPX was at 2100, 2400, 2700, 2900 or 3,000. I do not fight the tape.
Unless last week's volume and volatility spike, coupled with an initial large drop are indicators of a phase transition in the stock market. Bear markets aren't a straight line down. There is usually a fair amount of choppiness.
Below is a link to a recent academic paper investigating phase transitions during market crashes and corrections:
https://papers.ssrn.com/sol3/papers.cfm?...id=3512362
Full PDF of the paper is available at that abstract page. TL;DR The underlying cause of the transition is often revealed in an initial volume/volatility spike, and ultimate consequences correlated with that initial information input to the market lags somewhat during a chaotic period (or, even shorter TL;DR "volatile price discovery").
I haven't seen anything that changes the epidemiological outlook for SARS-CoV-2. Pretty much any credible epidemiologist has pointed out that this is now a pandemic (Germany's health minister conceded this point yesterday, as well). Absent some completely unforeseen White Swan event (hope springs eternal), the situation on the ground in Seattle is going to look like Wuhan did in late January by the end of this month. That's where they are in the timeline, which has begun playing out in more than one location outside of China. Based on detected/reported cases, South Korea and Italy are about a week ahead of us, and Spain is a bit out in front of our numbers. There are already shortages of hospital beds in South Korea. Italy is close to having a shortage in the most heavily affected regions. Markets will catch up to the information.