Posts: 1,024
Threads: 8
Joined: Aug 2018
Reputation:
16
03-04-2020, 05:36 PM
(This post was last modified: 03-04-2020, 05:55 PM by Otter.)
(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.
Posts: 6,404
Threads: 47
Joined: Aug 2018
Reputation:
64
03-04-2020, 06:18 PM
(This post was last modified: 03-04-2020, 06:22 PM by fenders53.)
First of all I appreciate how this thread is proceeding. Some obvious differences of opinion, and it's been nothing but respectful. Folks would be telling others how stupid they are on a lot of forums.
I'm pretty open minded, and I know there is 100+ years of market experience conversing on this thread. We should have seen it all by now lol, but the reality is we haven't. If I was certain my views are right, you'd be reading about the 1000 shares of stock and all the calls I bought this week. Instead, I'm buying 5 or 25 shares since this got rough, and spreading it out among beaten down stocks with good divs. Trying to make a little income here and there, and peeling a few extra shares off the top and bottom of whatever I think might be the trading range for now. I have an end game though. The market is not going to force me to panic or get FOMO.
This market might drop 40% or make a new ATH next week, or more likely trade sideways and choppy for a while. I've seen a lot of scared markets, and I've seen a lot of greedy markets. It seems to me we have both going on here right now. The flu thesis says we are almost surely going to see something catastrophic, and the other side of the trade seems to be scared they'll miss out on the next run higher. My opinion evolves some with the daily news. The market knows half the companies are going to pre-announce an earnings miss. I'm left wondering if that will even matter because the market will look ahead a couple quarters to the better times with renewed earnings growth and the flu receding. The market moves aren't about politics IMO. I'll continue to trade around this some, and stay a little cautious, but mostly invested for the long-term.
Posts: 1,173
Threads: 2
Joined: Jul 2018
Reputation:
1
It's escalating in europe. Sharing Ray Dalio's recent post, he makes some good points.
https://www.linkedin.com/pulse/my-though...-ray-dalio
Posts: 6,404
Threads: 47
Joined: Aug 2018
Reputation:
64
(03-05-2020, 10:03 AM)vbin Wrote: It's escalating in europe. Sharing Ray Dalio's recent post, he makes some good points.
https://www.linkedin.com/pulse/my-though...-ray-dalio
I enjoy Dalio's contributions, he is very intelligent, but he has been a perma-bear for a decade. My port would be missing $200K the past few years had I taken his advice and missed the last half of the bull run. He always make good points, then the market runs higher anyway. He'll be right again someday, but he has been worse than a fortune cookie for 4 years. He always fights the tape.
Posts: 1,173
Threads: 2
Joined: Jul 2018
Reputation:
1
(03-05-2020, 11:50 AM)fenders53 Wrote: (03-05-2020, 10:03 AM)vbin Wrote: It's escalating in europe. Sharing Ray Dalio's recent post, he makes some good points.
https://www.linkedin.com/pulse/my-though...-ray-dalio
I enjoy Dalio's contributions, he is very intelligent, but he has been a perma-bear for a decade. My port would be missing $200K the past few years had I taken his advice and missed the last half of the bull run. He always make good points, then the market runs higher anyway. He'll be right again someday, but he has been worse than a fortune cookie for 4 years. He always fights the tape.
If you read his book, he has admitted that he predicted it right multiple times but too early
Posts: 1,899
Threads: 48
Joined: May 2013
Reputation:
10
Even a broken clock is right twice a day
Posts: 1,024
Threads: 8
Joined: Aug 2018
Reputation:
16
I've said it before in this thread, but I don't think models predicated on prior business cycles are of much help here. Absent WWII, and perhaps the oil shocks of the 1970s (which were politically driven, rather than supply driven), I cannot think of any time in the modern era of markets where such widespread supply chain disruptions occurred, or where severe (even if temporary) demand shocks are global.
Pandemic is underway. The peak is not yet here. Once it gets underway, the peak period should last about three months.
Posts: 1,899
Threads: 48
Joined: May 2013
Reputation:
10
(03-05-2020, 01:02 PM)Otter Wrote: I've said it before in this thread, but I don't think models predicated on prior business cycles are of much help here. Absent WWII, and perhaps the oil shocks of the 1970s (which were politically driven, rather than supply driven), I cannot think of any time in the modern era of markets where such widespread supply chain disruptions occurred, or where severe (even if temporary) demand shocks are global.
Pandemic is underway. The peak is not yet here. Once it gets underway, the peak period should last about three months.
This time it's different?
Posts: 1,024
Threads: 8
Joined: Aug 2018
Reputation:
16
Italy just reported its latest numbers.
3,858 cases (increase of 769 in one day). Cases doubling approximately every 3 days (exponential).
148 dead (increase of 41 in one day)
1,790 hospitalized (+446) - Nearly half of all detected cases require hospitalization
351 in ICU (+56) - 9.1% of all detected cases requiring ICU treatment
If this continues at this rate even a few more days, Italy's healthcare system will be overwhelmed.
Posts: 6,404
Threads: 47
Joined: Aug 2018
Reputation:
64
03-05-2020, 01:47 PM
(This post was last modified: 03-05-2020, 01:48 PM by fenders53.)
(03-05-2020, 12:49 PM)vbin Wrote: (03-05-2020, 11:50 AM)fenders53 Wrote: (03-05-2020, 10:03 AM)vbin Wrote: It's escalating in europe. Sharing Ray Dalio's recent post, he makes some good points.
https://www.linkedin.com/pulse/my-though...-ray-dalio
I enjoy Dalio's contributions, he is very intelligent, but he has been a perma-bear for a decade. My port would be missing $200K the past few years had I taken his advice and missed the last half of the bull run. He always make good points, then the market runs higher anyway. He'll be right again someday, but he has been worse than a fortune cookie for 4 years. He always fights the tape.
If you read his book, he has admitted that he predicted it right multiple times but too early
Years ahead is much worse than a useless prediction. It's advice that costs you LOTs of money. You get it right once and then you sit on your hands for 5+ years. You can't possibly justify following his advice was profitable. He'll be right again someday.
Posts: 1,173
Threads: 2
Joined: Jul 2018
Reputation:
1
(03-05-2020, 01:47 PM)fenders53 Wrote: (03-05-2020, 12:49 PM)vbin Wrote: (03-05-2020, 11:50 AM)fenders53 Wrote: (03-05-2020, 10:03 AM)vbin Wrote: It's escalating in europe. Sharing Ray Dalio's recent post, he makes some good points.
https://www.linkedin.com/pulse/my-though...-ray-dalio
I enjoy Dalio's contributions, he is very intelligent, but he has been a perma-bear for a decade. My port would be missing $200K the past few years had I taken his advice and missed the last half of the bull run. He always make good points, then the market runs higher anyway. He'll be right again someday, but he has been worse than a fortune cookie for 4 years. He always fights the tape.
If you read his book, he has admitted that he predicted it right multiple times but too early
Years ahead is much worse than a useless prediction. It's advice that costs you LOTs of money. You get it right once and then you sit on your hands for 5+ years. You can't possibly justify following his advice was profitable. He'll be right again someday.
Not entirely. If markets were to correct 30-40% a year doesn't mean much.
Posts: 6,404
Threads: 47
Joined: Aug 2018
Reputation:
64
(03-05-2020, 02:03 PM)vbin Wrote: (03-05-2020, 01:47 PM)fenders53 Wrote: (03-05-2020, 12:49 PM)vbin Wrote: (03-05-2020, 11:50 AM)fenders53 Wrote: (03-05-2020, 10:03 AM)vbin Wrote: It's escalating in europe. Sharing Ray Dalio's recent post, he makes some good points.
https://www.linkedin.com/pulse/my-though...-ray-dalio
I enjoy Dalio's contributions, he is very intelligent, but he has been a perma-bear for a decade. My port would be missing $200K the past few years had I taken his advice and missed the last half of the bull run. He always make good points, then the market runs higher anyway. He'll be right again someday, but he has been worse than a fortune cookie for 4 years. He always fights the tape.
If you read his book, he has admitted that he predicted it right multiple times but too early
Years ahead is much worse than a useless prediction. It's advice that costs you LOTs of money. You get it right once and then you sit on your hands for 5+ years. You can't possibly justify following his advice was profitable. He'll be right again someday.
Not entirely. If markets were to correct 30-40% a year doesn't mean much.
That will happen someday, and if you react to his predictions five years early you will still lose. Like I said, a very intelligent guy and if you heeded his advice you would now need a 50%+ market correction to be back to even. He'll be right someday, maybe soon, and and it won't change the fact you left huge money on the table waiting for him to be right.
|
