Sell

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Submitted by davelj on June 2, 2020 - 5:27pm

In my view...

You should pretty much sell every risk asset that you can - pretty much. This recent rally is a gift from the market gods to de-risk in the face of financial armageddon.

Amazingly, incredibly, beyond all reason... the S&P500 is down just 10% from it's (significantly overvalued) February all-time high. Despite what's likely to be 15%+ peak-to-trough decline in GDP, 15%+ unemployment, profit decimation, overwhelming corporate and personal bankruptcies, myriad bank failures... and no bullets left in the Fed's gun where rates are concerned... stocks levitate. I would argue that this stock market is the most overvalued US market I've ever seen - possibly including 1999/2000.

And it's all a trade - just like all of the classic sucker rallies. Only the big liquid names are moving and driving the indices higher. No one wants to actually "hold" anything. Everyone thinks they'll be the first ones out the door.

The good news is that the banks are *much* better capitalized than they were going into the Financial Crisis. The bad news is that they're going to need every dime of that capital to stave off a crushing wave of bad commercial and CRE loans. Drive down whatever street near you has a lot of strip malls. I live in Mexico now but I drove down Broadway in Chula Vista the other day and just looked on either side of the street - restaurants, nail/hair salons, small hotels, miscellaneous services and retail... at least 1/3 of these businesses will fail by year-end. They simply do not have the wherewithall to survive. And the others will limp along for years afterward. Virtually all restaurants are fvcked. Even if they can seat using social distancing guidelines, only a small percentage can break even. It could be 18 months before there's a "normal" restaurant business. Hospitality (resorts, hotels, vacation rentals)... fvcked. Total wipeout. Airlines and other human transportation... fvcked. Energy... fvcked. I could go on and on and on. And then think about the employees of all of these businesses... there could be 10 million jobs that simply don't return to the US economy for several years - even after there's a vaccine.

Yeah, there will be a bump in economic activity after we hit bottom and then followed by the vaccine (whenever that becomes available). But that bump will ultimately leave the economy (still) in a pretty big hole and, to add insult to injury, there will be a certain, albeit modest, percentage of folks whose behavior is going to semi-permanently change even after things normalize. They're going out less, traveling less, spending less, saving more. When you have a highly-leveraged tanker like the US economy that grows 2-3% in a good year and all of a sudden you have a modest percentage of folks that change behavior like that... you have a long-term disaster on your hands. As the saying goes, "everything important happens at the margin"... and at the margin, things are going to he11 in a handbasket.

Another piece of good news is that the bank regulators are trying to get ahead of things and using forebearance tools - as opposed to capital tools - to try to right the ship. I think that's smart - they should've done more of that during the Financial Crisis (as opposed to cramming capital down everyone's throat) - but... it's still going to get very, very ugly. There are so many permanently damaged businesses out there - eg, think about all of the commercial real estate and how these owners are going to deal with massive waves of bankrupt leasees. Yes, there are regulatory tools that can help but when you see these being pulled out, you'll know the Powers That Be are panicking. This freight train is going to level pretty much everything in its path - I'll be very surprised if it's not worse than the Financial Crisis.

Drive around your town or city. Look around. Think about the businesses that aren't coming back. Think about the folks whose jobs aren't coming back for a long time. Think about how behavior is going to change even after things begin to normalize. Think about the leverage and how the banks are going to cope with all of this. Think about what this means for corporate profitability - short-term and long-term and then what that means for nosebleed-level stock valuations.

Meanwhile, our fair-haired Nero fiddles while Rome burns.

Discretion is the better part of valor. Sell.

I could be wrong. But I doubt it.

Submitted by The-Shoveler on June 4, 2020 - 8:14am.

Millennials are piling into stock trading to beat the market.

https://www.cnbc.com/2020/04/28/investin...

There are several articles for this, the Boomer part is just a sampling of friends (weird most of my older colleagues were completely out last Feb) and it is just what people do as they hit 60, they go 60-70% or more bonds etc...

Submitted by davelj on June 4, 2020 - 10:33am.

scaredyclassic wrote:

I do not believe that any stock price bears any relation to any economic reality.

Perhaps not right now. But they do, occasionally. Your job as an investor is to figure out - roughly - when and where the opportunities lie with the understanding that you're going to be approximately wrong a lot.

Submitted by davelj on June 4, 2020 - 10:38am.

Coronita wrote:
Welcome back, old timer!

Completely unrelated to the question of the economy... I have much more important question to ask you davelj.

Did you ever settle down with a woman and get married or are you still on self-pilot? Sorry if it sounds a bit rude but life is just so full of twists and turns and after decades of being MIA, I'm just curious how things are. Each of the old timer had a unique personality that I remeber and if memory serves me correctly, a long time ago, both you and NeetaT both were pretty adament about marriage... that's why I was completely floored when NeetaT showed up again after being months MIA and said "if it wasn't for my wife I would have long moved out of California" or something like that. I know, I was completely floored because this wasn't the NeetaT that I remember that posted about his Porsche 911 and women dates. I'm totally happy he found the right person and is such a keeper that he would actually remain in CA for her, clearly not the NeetaT that I remember! And if I remember, you had similar viewpoints and shared a few conversations that were interesting and amusing with a few folks. So I'm curious how you've been. I hope you are doing well, happy, and healthy.

Man, it's good to see some of you old timers coming back. I've been lonely here holding the fort. You can or believe some of the new freshman piggs. They are just nuts in what they say....

Now, if only Allan from Fallbrook would come back , I would be pretty content. If by chance you're still in touch with him , hopefully you can convince him to come back, if at most just briefly. I'm dying here.

Stay healthy and happy old friend.

I remain legally unencumbered. My views on marriage haven't changed. But everyone's wiring is different - different strokes and all.

Thanks for the good wishes - likewise. I don't know who anyone is anymore - I don't recognize any of the names. I guess folks changed them?

Submitted by davelj on June 4, 2020 - 11:03am.

Rich Toscano wrote:

Whoa, hold on. Since I wrote that passage, markets (both US and intl) are up 36%. That changes the situation considerably in terms of what the market is pricing in, and in terms of prospective returns.

To put it in perspective, if we use the historical return of global stocks (5.2% real) -- we just got over 6 years' worth of return in less than 2 months. If you assume, as I do, that markets mean revert over time to deliver something close to the historical average return over the long haul, then the prospects for future returns just got a whole lot worse.

So, my opinion on the markets now is not the same as it was then... I would love to hear Dave's take on my take, of course, but it's important to adjust for the fact that my take was written 36% ago. (And for the record, I know and like Dave and he's a great investor, so I always like hearing his take!).

A second thing I want to note is that Dave is really focused here on the S&P500. There I agree completely. In my view, it came into this very overvalued to begin with, and it is pricing in virtually no uncertainty about the cv19 outcome. I am completely on board with his assessment of the S&P500.

Where we might part ways is in other risk assets. There are areas of the global stock market that -- even after this huge rally -- are still priced for positive long-term returns. In specific, developed intl value stocks are priced for returns that are slightly under the average stock returns -- not great but ok. Emerging value stocks are priced for substantially higher than normal returns.

I know it makes things more complex but I think it's important not to lump all stocks together. At times, you can, but this is not one of those times. The valuation spread between the S&P500 and value anywhere (including US), and between the S&P500 and international, has literally never been higher. So the prospective returns of those things are very different.

One last note. In the other thread, zk made a very good point, which I will paraphrase here: "ok maybe the underlying value of that long term income stream has not changed, but still, in recessions and other crises, markets tend to drop." That's a great point and I totally agree. The thing is, though... you are now in the realm of market timing. When will it drop? How much? When will it stop dropping? When do you buy back in? I don't know. I don't think anyone does, really, and I know for sure I don't. This past 2+ months should show how hard that is... who was expecting a 36% rally from the day I posted that last thing? Not me, that's for sure.

So I largely focus on fair value and the assumption that markets will get back there at some point. Because that's what I think I have a handle on, and I have absolutely no handle on timing. (Subnote: with that said, I do think it's fair to adjust for very heightened medium-term uncertainty as we have now. But the valuation/expected return thing is the main thing for me, and that's what I have been addressing).

Yeah, valuations matter... a lot. When things hit their (first?) bottom a few weeks back I actually thought prices looked pretty reasonable for the first time in several years. I even bought some bank stocks - public stocks! Me! So, very different conversation in April. I got about 25% of my allocation done and... boom... market rocketed away from me and I just thought, That's it - I'm outta here; this is as nutso as it gets. And I sold (almost) everything. One of the few times in my life I've made short-term trades in public stocks. But I feel like it was forced upon me, so... such is life.

Also, in full disclosure, I bought two Asia-Pacific dividend ETFs right as the virus panic was getting started and I'm underwater in those - but I don't plan on selling those until Asia has a silly bubble, which may or may not ever happen. I also have a few VC investments that have done much better than I thought they would fundamentally (I generally assume I'm flushing the money down the toilet), but... they're going to need more financing in the next 12-18 months, so, who knows what's going to happen with that. Sometimes, Great Company + Needs Cash = Toiletville.

So, I'm not 100% bearish on Everything. But I'm 90%+ bearish on pretty much all developed market stocks - especially the big, liquid ones. And very bearish on commercial and SFR real estate. And that comprises the vast majority of the risk assets in the average person's portfolio.

This is going to be an interesting investment cycle because of the nature of the vaccine and the news, etc. This is an outlier position but it wouldn't shock me if we didn't see the real bottom until after the vaccine is available, as that's when there will be no more excuses for what I think is coming. Similar to the tech bubble, until the vaccine comes out, folks can hope and dream about what the post-covid world will look like - fantasies can run wild. Post-vaccine, the truth will be revealed... a GDP hole and massive, massive leverage accompanied by impaired long-term demand. We're not Japan, but we're not *that* far off - it's not completely different.

But, hey, who knows.

Submitted by Coronita on June 4, 2020 - 11:29am.

davelj wrote:
Coronita wrote:
Welcome back, old timer!

Completely unrelated to the question of the economy... I have much more important question to ask you davelj.

Did you ever settle down with a woman and get married or are you still on self-pilot? Sorry if it sounds a bit rude but life is just so full of twists and turns and after decades of being MIA, I'm just curious how things are. Each of the old timer had a unique personality that I remeber and if memory serves me correctly, a long time ago, both you and NeetaT both were pretty adament about marriage... that's why I was completely floored when NeetaT showed up again after being months MIA and said "if it wasn't for my wife I would have long moved out of California" or something like that. I know, I was completely floored because this wasn't the NeetaT that I remember that posted about his Porsche 911 and women dates. I'm totally happy he found the right person and is such a keeper that he would actually remain in CA for her, clearly not the NeetaT that I remember! And if I remember, you had similar viewpoints and shared a few conversations that were interesting and amusing with a few folks. So I'm curious how you've been. I hope you are doing well, happy, and healthy.

Man, it's good to see some of you old timers coming back. I've been lonely here holding the fort. You can or believe some of the new freshman piggs. They are just nuts in what they say....

Now, if only Allan from Fallbrook would come back , I would be pretty content. If by chance you're still in touch with him , hopefully you can convince him to come back, if at most just briefly. I'm dying here.

Stay healthy and happy old friend.

I remain legally unencumbered. My views on marriage haven't changed. But everyone's wiring is different - different strokes and all.

Thanks for the good wishes - likewise. I don't know who anyone is anymore - I don't recognize any of the names. I guess folks changed them?

Good for you! Glad things are working out well for you.

yup, times changed, handles change. maybe I'll change mine back now that you old timers are coming back.

-FLU

Submitted by Coronita on June 4, 2020 - 11:51am.

The-Shoveler wrote:
Millennials are piling into stock trading to beat the market.

https://www.cnbc.com/2020/04/28/investin...

There are several articles for this, the Boomer part is just a sampling of friends (weird most of my older colleagues were completely out last Feb) and it is just what people do as they hit 60, they go 60-70% or more bonds etc...

Ok, thanks. I was just curious. My dad, is even older than the boomer generation, and against my advice, he's still buying and selling stocks when he should be only doing fixed income. i guess he has money to burn. Worked out for him for the past 50+years. I guess some people are luckier than others. I can't believe he piled into Facebook not long after the IPO and hasn't sold a single share of microsoft, qualcomm, or intel since 80ies and 90ies. I guess the joke was on me, being more risk adverse. Still, I agree a little caution is probably needed moving forward.

edit..... Maybe you're on to something here. Check out this from Schwab... Seems like Schwab trading is way up.

https://www.cnbc.com/2020/03/13/reuters-...

Submitted by scaredyclassic on June 4, 2020 - 11:27am.

davelj wrote:
scaredyclassic wrote:

I do not believe that any stock price bears any relation to any economic reality.

Perhaps not right now. But they do, occasionally. Your job as an investor is to figure out - roughly - when and where the opportunities lie with the understanding that you're going to be approximately wrong a lot.

But isn't that just hubris. Basically you are saying, be smarter than the marketplace, find the opportunity everyone else missed, in a marketplace that adjusts prices by the nanosecond, and which sets prices based on all possible knowable information, including everyone in the world, the smartest, most informed, best capitalized people. There is realistically no way to be smarter than them, is there?

auto investing in an index fund is far more humble and realistic, isnt it?

Submitted by Rich Toscano on June 4, 2020 - 12:38pm.

davelj wrote:

This is an outlier position but it wouldn't shock me if we didn't see the real bottom until after the vaccine is available, as that's when there will be no more excuses for what I think is coming. Similar to the tech bubble, until the vaccine comes out, folks can hope and dream about what the post-covid world will look like - fantasies can run wild. Post-vaccine, the truth will be revealed... a GDP hole and massive, massive leverage accompanied by impaired long-term demand.

That actually sounds pretty plausible to me. I have had similar, if less well-articulated, thoughts (when I allow myself to indulge in thinking about the timing of things).

Submitted by svelte on June 4, 2020 - 12:40pm.

Rich Toscano wrote:

Where we might part ways is in other risk assets. There are areas of the global stock market that -- even after this huge rally -- are still priced for positive long-term returns. In specific, developed intl value stocks are priced for returns that are slightly under the average stock returns -- not great but ok. Emerging value stocks are priced for substantially higher than normal returns.

So here is where I get confused.

I'm pretty sure I've heard you say, Rich, that one shouldn't try and time the market but should invest for the long term as in decades.

But the above sounds like you're advocating investing in those areas that, at the present time, give the best chance for above average returns.

Is that not timing the market?

Submitted by Rich Toscano on June 4, 2020 - 2:16pm.

svelte wrote:
Rich Toscano wrote:

Where we might part ways is in other risk assets. There are areas of the global stock market that -- even after this huge rally -- are still priced for positive long-term returns. In specific, developed intl value stocks are priced for returns that are slightly under the average stock returns -- not great but ok. Emerging value stocks are priced for substantially higher than normal returns.

So here is where I get confused.

I'm pretty sure I've heard you say, Rich, that one shouldn't try and time the market but should invest for the long term as in decades.

But the above sounds like you're advocating investing in those areas that, at the present time, give the best chance for above average returns.

Is that not timing the market?

No, that is not timing the market!

And also no, the thing above that is not what I am saying. I'll start with that one. I'm not saying you have to invest for decades. I'm saying that you have to consider that the price for stocks is based on decades' worth of their expected earnings. So, shorter term changes to that earnings stream should not, in theory, change their fair value all that much. (In practice, of course, it often does, but that's a whole separate topic). But that's not the same as saying that an investor necessarily needs to hold them for decades.

OK, onto the fun question. This is one that I have strong opinions on, so apologies in advance for what will probably be a surfeit of exclamation points.

Anyway no, a thousand times no -- value investing is NOT market timing!

Let me illustrate with an example to start. Let's say there is a modest condo that, if you bought it, you could rent out for $1,000/month. It's for sale for $5 million.

Would you buy it? No, of course not. Why would you buy something for $5 mil when it only rents out for $1k/month? It's way too expensive.

Is this market timing? Again -- of course not. You simply evaluated what the investment is worth, and compared that to the actual price (the key point here being that those 2 things can be different).

It's no different with stocks or anything else.

Market timing entails making guesses about what the market will do over the short term. It's path dependent.

The thing I'm talking about here (which I describe as value investing as shorthand) entails having an estimate of likely longer term returns, and investing accordingly. It is not path dependent.

Let's take US stocks as an example. I mentioned that I'm bearish on the S&P500. Is this because of a necessarily dismal economic outlook? No! It's due to valuation. The S&P500 is very expensive. It is pricing in an unusually great outcome. If you merely get an average or even above-average outcome... it is likely to do poorly.

So my "claim" here is that the S&P500 is likely to generate poor returns over the coming 7-10 years.

But how will that look? Will there be a crash? Will it just waffle along sideways, without going much of anywhere for many years? Something in between?

I have no idea. To answer that question would be market timing.

But what I'm saying here is: I don't know the path it will take, but I think it's likely that when we look back a decade from now, this thing will have done pretty poorly. That's not market timing. It's simply having an awareness of what something is worth, and thus the likely returns, before you invest in it.

Does this distinction make sense?

Submitted by scaredyclassic on June 4, 2020 - 2:59pm.

Rich Toscano wrote:
svelte wrote:
Rich Toscano wrote:

Where we might part ways is in other risk assets. There are areas of the global stock market that -- even after this huge rally -- are still priced for positive long-term returns. In specific, developed intl value stocks are priced for returns that are slightly under the average stock returns -- not great but ok. Emerging value stocks are priced for substantially higher than normal returns.

So here is where I get confused.

I'm pretty sure I've heard you say, Rich, that one shouldn't try and time the market but should invest for the long term as in decades.

But the above sounds like you're advocating investing in those areas that, at the present time, give the best chance for above average returns.

Is that not timing the market?

No, that is not timing the market!

And also no, the thing above that is not what I am saying. I'll start with that one. I'm not saying you have to invest for decades. I'm saying that you have to consider that the price for stocks is based on decades' worth of their expected earnings. So, shorter term changes to that earnings stream should not, in theory, change their fair value all that much. (In practice, of course, it often does, but that's a whole separate topic). But that's not the same as saying that an investor necessarily needs to hold them for decades.

OK, onto the fun question. This is one that I have strong opinions on, so apologies in advance for what will probably be a surfeit of exclamation points.

Anyway no, a thousand times no -- value investing is NOT market timing!

Let me illustrate with an example to start. Let's say there is a modest condo that, if you bought it, you could rent out for $1,000/month. It's for sale for $5 million.

Would you buy it? No, of course not. Why would you buy something for $5 mil when it only rents out for $1k/month? It's way too expensive.

Is this market timing? Again -- of course not. You simply evaluated what the investment is worth, and compared that to the actual price (the key point here being that those 2 things can be different).

It's no different with stocks or anything else.

Market timing entails making guesses about what the market will do over the short term. It's path dependent.

The thing I'm talking about here (which I describe as value investing as shorthand) entails having an estimate of likely longer term returns, and investing accordingly. It is not path dependent.

Let's take US stocks as an example. I mentioned that I'm bearish on the S&P500. Is this because of a necessarily dismal economic outlook? No! It's due to valuation. The S&P500 is very expensive. It is pricing in an unusually great outcome. If you merely get an average or even above-average outcome... it is likely to do poorly.

So my "claim" here is that the S&P500 is likely to generate poor returns over the coming 7-10 years.

But how will that look? Will there be a crash? Will it just waffle along sideways, without going much of anywhere for many years? Something in between?

I have no idea. To answer that question would be market timing.

But what I'm saying here is: I don't know the path it will take, but I think it's likely that when we look back a decade from now, this thing will have done pretty poorly. That's not market timing. It's simply having an awareness of what something is worth, and thus the likely returns, before you invest in it.

Does this distinction make sense?

kind of.

But it really doesn't matter what you think it's worth.

Or even what it is "really" worth.

All that matters is what other potential buyers will think it's worth. And I guess what you're saying is that eventually, once we all sober up, we have to come around to good old common sense.

but others are crazy. from the top down, every aspect of government, finance and law is crazy. we never really fully sober up. So isn't it still timing in the sense that you ahve to say prices are relatively sober right now, as opposed to stupid drunk pricing? How is that not a form of timing.

I might very well buy the 5 million condo if i thought others were going to think it's worth 10 million in 5 years, regardless of the rent. but even if we assume people are goign to come to their senses, that happens ona timeline, a downward slope,a nd one has to pick a moment of relative soberliness to put money in.

even though you analyze for value, the investment has to be made at a specific time. which is...timing.?

Submitted by Coronita on June 4, 2020 - 3:03pm.

Rich Toscano wrote:
svelte wrote:
Rich Toscano wrote:

Where we might part ways is in other risk assets. There are areas of the global stock market that -- even after this huge rally -- are still priced for positive long-term returns. In specific, developed intl value stocks are priced for returns that are slightly under the average stock returns -- not great but ok. Emerging value stocks are priced for substantially higher than normal returns.

So here is where I get confused.

I'm pretty sure I've heard you say, Rich, that one shouldn't try and time the market but should invest for the long term as in decades.

But the above sounds like you're advocating investing in those areas that, at the present time, give the best chance for above average returns.

Is that not timing the market?

No, that is not timing the market!

And also no, the thing above that is not what I am saying. I'll start with that one. I'm not saying you have to invest for decades. I'm saying that you have to consider that the price for stocks is based on decades' worth of their expected earnings. So, shorter term changes to that earnings stream should not, in theory, change their fair value all that much. (In practice, of course, it often does, but that's a whole separate topic). But that's not the same as saying that an investor necessarily needs to hold them for decades.

OK, onto the fun question. This is one that I have strong opinions on, so apologies in advance for what will probably be a surfeit of exclamation points.

Anyway no, a thousand times no -- value investing is NOT market timing!

Let me illustrate with an example to start. Let's say there is a modest condo that, if you bought it, you could rent out for $1,000/month. It's for sale for $5 million.

Would you buy it? No, of course not. Why would you buy something for $5 mil when it only rents out for $1k/month? It's way too expensive.

Is this market timing? Again -- of course not. You simply evaluated what the investment is worth, and compared that to the actual price (the key point here being that those 2 things can be different).

It's no different with stocks or anything else.

Market timing entails making guesses about what the market will do over the short term. It's path dependent.

The thing I'm talking about here (which I describe as value investing as shorthand) entails having an estimate of likely longer term returns, and investing accordingly. It is not path dependent.

Let's take US stocks as an example. I mentioned that I'm bearish on the S&P500. Is this because of a necessarily dismal economic outlook? No! It's due to valuation. The S&P500 is very expensive. It is pricing in an unusually great outcome. If you merely get an average or even above-average outcome... it is likely to do poorly.

So my "claim" here is that the S&P500 is likely to generate poor returns over the coming 7-10 years.

But how will that look? Will there be a crash? Will it just waffle along sideways, without going much of anywhere for many years? Something in between?

I have no idea. To answer that question would be market timing.

But what I'm saying here is: I don't know the path it will take, but I think it's likely that when we look back a decade from now, this thing will have done pretty poorly. That's not market timing. It's simply having an awareness of what something is worth, and thus the likely returns, before you invest in it.

Does this distinction make sense?

Yes, make sense. Thank you.

Submitted by Rich Toscano on June 4, 2020 - 3:59pm.

scaredyclassic wrote:

kind of.

But it really doesn't matter what you think it's worth.

Or even what it is "really" worth.

All that matters is what other potential buyers will think it's worth. And I guess what you're saying is that eventually, once we all sober up, we have to come around to good old common sense.

but others are crazy. from the top down, every aspect of government, finance and law is crazy. we never really fully sober up. So isn't it still timing in the sense that you ahve to say prices are relatively sober right now, as opposed to stupid drunk pricing? How is that not a form of timing.

I might very well buy the 5 million condo if i thought others were going to think it's worth 10 million in 5 years, regardless of the rent. but even if we assume people are goign to come to their senses, that happens ona timeline, a downward slope,a nd one has to pick a moment of relative soberliness to put money in.

even though you analyze for value, the investment has to be made at a specific time. which is...timing.?

I don't agree with your basic premise. This is a nihilistic view: valuation doesn't matter, nothings matters, etc. But it does matter, or at least it always has. Historically, there has been a strong tendency, on average, for asset classes to revert to historically middle-of-the-road values. If you want to make the case that that won't happen any more, fine -- but then you're doing the "this time is different" thing.

Maybe it is different, but I think that this is the less likely case. Every time valuations are wacky, in either directions, there are always lots of rationalizations for why it will always be thus. You just did it with "everyone's crazy, and will always be crazy". That's no more compelling to me than what we heard during the housing bubble, they're not making any more land, etc. (And btw, the rationale you described for buying the condo for $5 mil is exactly what people said in that bubble). It's just a narrative, and those come and go, following the market around the whole way.

It's human nature to think that there must be a good reason why the situation will endure. But if you look back, it hasn't been like that. To use your metaphor, people have always sobered up in the past. (And in the case of too-cheap assets, I guess they've gotten over their hangovers). I have yet to hear a good reason why this should have changed. In the other thread, I linked to an article specifically talking about why it's unlikely to have changed: https://www.pcasd.com/content/will-value...

(And scaredy, you might appreciate this irony... the reason I think value investing will continue to work is that everyone is crazy and will always be crazy... or at least will overreact. With the requisite moments of clarity).

"So isn't it still timing in the sense that you ahve to say prices are relatively sober right now, as opposed to stupid drunk pricing? How is that not a form of timing."

This is not market timing because you're making the decision based on valuations and long-term (say 7-10 year) prospective returns. Market timing involves much shorter timeframes, and also involves the prediction of a specific path (as opposed to just a distant, and approximate, endpoint). So no, I don't see that as "market timing" based on the conventional understanding of what market timing is.

"even though you analyze for value, the investment has to be made at a specific time. which is...timing.?"

Every investment has to be made at a specific time! If that's your definition, then everyone on earth is a market timer.

Submitted by scaredyclassic on June 4, 2020 - 4:45pm.

ah, you're right. i do in my heart believe there is some reality that things have to come back to.

i think my statements are just evidence that i've finally capitulated to the bulls, which is an extremely bearish sign.

here's what i find difficult personally, and why i think it's important to automatic invest. sometimes good things happen to you, repeatedly, and you pile up much more cash than you might have expected. it's very difficult to put it anywhere and to wait for "value". where if you're just on a robot invest situation,a nd everything is set every month, there's no more thinking.

it feels like when you are stuck with a lot of cash, you by default become kind of market timer, even if it's a relatively long term investment because you sit there waiting to pull a trigger. but that's not really market timing, that's just being afraid to commit to the buy portion of buy a nd hold on a given day with a large amount of money.

Submitted by The-Shoveler on June 4, 2020 - 7:10pm.

Seems Asia countries etc.. are starting to see second waves of the virus.

Submitted by svelte on June 4, 2020 - 7:42pm.

Rich Toscano wrote:
svelte wrote:
Rich Toscano wrote:

Where we might part ways is in other risk assets. There are areas of the global stock market that -- even after this huge rally -- are still priced for positive long-term returns. In specific, developed intl value stocks are priced for returns that are slightly under the average stock returns -- not great but ok. Emerging value stocks are priced for substantially higher than normal returns.

So here is where I get confused.

I'm pretty sure I've heard you say, Rich, that one shouldn't try and time the market but should invest for the long term as in decades.

But the above sounds like you're advocating investing in those areas that, at the present time, give the best chance for above average returns.

Is that not timing the market?

No, that is not timing the market!

And also no, the thing above that is not what I am saying. I'll start with that one. I'm not saying you have to invest for decades. I'm saying that you have to consider that the price for stocks is based on decades' worth of their expected earnings. So, shorter term changes to that earnings stream should not, in theory, change their fair value all that much. (In practice, of course, it often does, but that's a whole separate topic). But that's not the same as saying that an investor necessarily needs to hold them for decades.

OK. I guess I misinterpreted this statement you made in the Coronavirus / Economy / Stock Market thread:

Rich Toscano wrote:

Anyway back to the OP: when you buy stocks, you are buying a VERY long-term stream of earnings. Like, decades. This recession looks to be very severe, but it is short term by its very nature (at some point we contain the virus, or everyone has gotten it... this can't go on for all that long).

So as bad as this recession may be, it's hard to see it moving the dial all that much on the DECADES worth of earnings that determine what stocks are actually worth.

Submitted by svelte on June 4, 2020 - 7:49pm.

. dupe .

Submitted by Rich Toscano on June 4, 2020 - 8:16pm.

scaredyclassic wrote:
ah, you're right. i do in my heart believe there is some reality that things have to come back to.

i think my statements are just evidence that i've finally capitulated to the bulls, which is an extremely bearish sign.

here's what i find difficult personally, and why i think it's important to automatic invest. sometimes good things happen to you, repeatedly, and you pile up much more cash than you might have expected. it's very difficult to put it anywhere and to wait for "value". where if you're just on a robot invest situation,a nd everything is set every month, there's no more thinking.

it feels like when you are stuck with a lot of cash, you by default become kind of market timer, even if it's a relatively long term investment because you sit there waiting to pull a trigger. but that's not really market timing, that's just being afraid to commit to the buy portion of buy a nd hold on a given day with a large amount of money.

I think systematic investing is good and it's smart that you've found a way to automate it... that reduces the chance of making emotional decisions.

But I do want to clarify one thing. I'm not thinking in terms of "investing" vs "not investing" as a binary thing. There's a world of investments out there and at any given time, some are probably priced for decent returns. So it's more a question of "investing in what?" I'm hoping that having made that distinction, some of the things I said will make more sense.

Submitted by The-Shoveler on June 5, 2020 - 5:54am.

Another day another up day on wall street LOL

I don't have FOMO (OK maybe a little) but I am actually much better off if the real economy takes off like a rocket even if I miss the rally.

Submitted by The-Shoveler on June 5, 2020 - 5:54am.

duplicate

Submitted by ltsddd on June 5, 2020 - 6:09am.

sheesh...that's good timing on me...looks like small caps is up another 3-4% today. That's almost +10% since I got out.

Submitted by Coronita on June 5, 2020 - 7:16am.

ltsddd wrote:
sheesh...that's good timing on me...looks like small caps is up another 3-4% today. That's almost +10% since I got out.

You know I use to feel bad about it when things like this happen... But a wise friend keeps reminding me... You cannot lose money by always taking your profit early .

The unexpected job hiring definitely caught people by surprise. I sold some not all S&P yesterday. it's ok. you made some money, who cares if you got that last leg or not.

You bought when things were discounted during the covid scare, you sold after booking a profit. Keep in mind some people took no action. I'm sure you are doing well, Good job.

Happy Furlow Friday!

Submitted by ltsddd on June 5, 2020 - 7:22am.

I am surprised that the jobs number would move the market that much. But like I said in another thread, the market is biased towards good news. I was thinking of selling into the rally today, but decided against it. I sleep well with the current 75/25 (bonds vs stocks) allocation.

Submitted by The-Shoveler on June 5, 2020 - 7:24am.

I keep having to remind myself, I just missed out on the bonus rally, ( I was out last Feb) + I did manage to get about 10% of rally off bottom before chickening out.

Submitted by Coronita on June 5, 2020 - 7:34am.

Dont feel bad. I bought carnival cruises a few weeks ago at $12-13 I think, I forget exactly, but it was the low teens. Then sold it at $16... It's $22 today.

Yup, can't win them all.

I think that is why my dad makes a killing. Never sold a share Intel, Qualcomm, Microsoft since 80ies and 90ies. Lucky dude

Good news is that Moderna is at $57, heh heh

Please don't get a crazy idea to short Tesla

Submitted by zk on June 5, 2020 - 9:11am.

Coronita wrote:

Yup, can't win them all.

I considered buying a SFR rental in 2012. I did some other stuff instead and didn't end up buying until 2014. Sold it in 2018. I made about 70k less than I would have if I'd bought in 2012. I was kicking myself, and my agent said, "you don't have a crystal ball."

Yeah. I don't. If I did I'd be a billionaire.

Can't win 'em all.

Submitted by ltsddd on June 5, 2020 - 9:23am.

Coronita wrote:
Please don't get a crazy idea to short Tesla

No. But I did short 4k of OXY around 19.6. Sweating bullets for a while when it poked through 20. Went out cut a couple floor tiles, checked again and it was down to 19.1x. Bought to cover. Good last couple days day-shorting SMAR and OXY. I am done for the day.

Submitted by davelj on June 5, 2020 - 11:38am.

scaredyclassic wrote:

But isn't that just hubris. Basically you are saying, be smarter than the marketplace, find the opportunity everyone else missed, in a marketplace that adjusts prices by the nanosecond, and which sets prices based on all possible knowable information, including everyone in the world, the smartest, most informed, best capitalized people. There is realistically no way to be smarter than them, is there?

auto investing in an index fund is far more humble and realistic, isnt it?

I don't think there's a great deal of hubris in dramatically de-risking when valuations are over 2 standard deviations from the historical mean. We have plenty of historical data to back up what happens from these levels.

Arguably... isn't there just as much hubris in owning stocks at nosebleed valuations and simply assuming that your future return is going to be good because... stocks?

But, yes, most folks should just index and deal with the volatility. Unfortunately, most of these folks can... until they can't.

Submitted by scaredyclassic on June 5, 2020 - 12:16pm.

davelj wrote:
scaredyclassic wrote:

But isn't that just hubris. Basically you are saying, be smarter than the marketplace, find the opportunity everyone else missed, in a marketplace that adjusts prices by the nanosecond, and which sets prices based on all possible knowable information, including everyone in the world, the smartest, most informed, best capitalized people. There is realistically no way to be smarter than them, is there?

auto investing in an index fund is far more humble and realistic, isnt it?

I don't think there's a great deal of hubris in dramatically de-risking when valuations are over 2 standard deviations from the historical mean. We have plenty of historical data to back up what happens from these levels.

Arguably... isn't there just as much hubris in owning stocks at nosebleed valuations and simply assuming that your future return is going to be good because... stocks?

But, yes, most folks should just index and deal with the volatility. Unfortunately, most of these folks can... until they can't.

True. Very true.

Pretty much anything we do we do because we think we know a bit more.

Submitted by gzz on June 5, 2020 - 3:52pm.

"Please don't get a crazy idea to short Tesla"

Too late for me :-(

I think it will be a very profitable short in the end and I am very liquid and patient. But so far... :-(

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