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 Coronita on September 3, 2020 - 8:40am.

I'm curious what's going to eventually happen with Barstool founder and his minions....

https://finance.yahoo.com/news/barstool-...

Particular when days become "six figure loss days" lol

Submitted by an on September 3, 2020 - 9:32am.

Coronita wrote:
Crash and burn. Dow down 600pts. heh heh.

So, who's buying more today?

Submitted by Coronita on September 3, 2020 - 9:39am.

an wrote:
Coronita wrote:
Crash and burn. Dow down 600pts. heh heh.

So, who's buying more today?

I'm waiting and will buy a little here and there after a day or so. Edit, my buy order for Verizon executed.

Mainly buying it for the 4% dividend and imho better than ATT.

Submitted by The-Shoveler on September 3, 2020 - 10:06am.

I may buy some more SPYD (yield is about 6% currently), if it goes down some over the next few days.

I think a rotation into value could start soon.

Submitted by ltsddd on September 3, 2020 - 10:15am.

svelte wrote:
Probably not who you're talking about, but there was that kid (early 20s?) from Sacramento who drank the kool aid and bought rentals all over the country. I don't think he owned more than 10 but it ended very poorly...if I'm not mistaken he used no-doc loans to get them. He started the website "iamfacingforeclosure" and when all the properties were gone he changed his name and went into real estate. His original name was Casey Serin.

https://en.wikipedia.org/wiki/Casey_Serin

That's not it. The kid I am talking about is Japanese-American. He was around 15-16. On the cover of his book he's looking smart in a dark suit.

The reason I brought him up is I remember I got a good chuckle when I read an article about him and his book. You didn't have to be a genius to make money with semi-conductors and then with the telecoms and .com that followed. I was trying to draw the parallel between the stock picking "geniuses" during the tech-boom/dotcom to today's robinhood crowd. It won't end well for them.

Submitted by ltsddd on September 3, 2020 - 10:27am.

an wrote:
Coronita wrote:
Crash and burn. Dow down 600pts. heh heh.

So, who's buying more today?

Not me. Nasdaq is back down to the level of about two weeks ago (Aug 25). I am going to sit tight.

Submitted by scaredyclassic on September 3, 2020 - 11:17am.

the decline is a hoax perpetrated by antifa shortsellers; once they are taken into custody, the market will resume its normal trump-caused march ever higher.

Submitted by The-Shoveler on September 3, 2020 - 11:28am.

I think the current Robinhood crowd ect... does have an advantage boomers did not during the 1999-2003 boom/bust as really big bubbles/crashes were not in recent memory as much as they are now.

So maybe they are better prepared than most think.

Submitted by Coronita on September 3, 2020 - 12:25pm.

The-Shoveler wrote:
I think the current Robinhood crowd ect... does have an advantage boomers did not during the 1999-2003 boom/bust as really big bubbles/crashes were not in recent memory as much as they are now.

So maybe they are better prepared than most think.

Ha ha ha. Unlikely.... Number one reason people get burned? Greed and denial.

I think though this isn't the big correction. I was checking some bay area companies that friends started or work at... out of 6 companies, 4 of them have filed to go public... So I think we are only in the second inning. All these companies will try to IPO over the next few months, and that in itself will drive another round of craziness.

Submitted by ltsddd on September 3, 2020 - 12:40pm.

Coronita wrote:
The-Shoveler wrote:
I think the current Robinhood crowd ect... does have an advantage boomers did not during the 1999-2003 boom/bust as really big bubbles/crashes were not in recent memory as much as they are now.

So maybe they are better prepared than most think.

Ha ha ha. Unlikely.... Number one reason people get burned? Greed and denial.

I think though this isn't the big correction. I was checking some bay area companies that friends started or work at... out of 6 companies, 4 of them have filed to go public... So I think we are only in the second inning. All these companies will try to IPO over the next few months, and that in itself will drive another round of craziness.

Or your friends' companies are today's version of pets dot com. Opportunists that took advantage of the feeding frenzy to cash in. That in itself may indicate the bust is around the corner.

Pets went from IPO at $11 to self liquidation in about 10 months.

Submitted by Coronita on September 3, 2020 - 1:12pm.

ltsddd wrote:
Coronita wrote:
The-Shoveler wrote:
I think the current Robinhood crowd ect... does have an advantage boomers did not during the 1999-2003 boom/bust as really big bubbles/crashes were not in recent memory as much as they are now.

So maybe they are better prepared than most think.

Ha ha ha. Unlikely.... Number one reason people get burned? Greed and denial.

I think though this isn't the big correction. I was checking some bay area companies that friends started or work at... out of 6 companies, 4 of them have filed to go public... So I think we are only in the second inning. All these companies will try to IPO over the next few months, and that in itself will drive another round of craziness.

Or your friends' companies are today's version of pets dot com. Opportunists that took advantage of the feeding frenzy to cash in. That in itself may indicate the bust is around the corner.

Pets went from IPO at $11 to self liquidation in about 10 months.

My dot.com company went from $300ish/share IPO to $450-500/share to $5-10/share in a year. It was a fun ride. Feel sorry for the retail speculators....
But you can't fix stupid.

The new stupid is the Robinhood day traders...

You guys remember Peregrine Systems here locally in SD? Lololol

Submitted by sdrealtor on October 12, 2020 - 12:45pm.

sdrealtor wrote:
Dow up about 10% since this post. Nasdaq up closer to 20%. Like the say. Don't drink the water in Mexico. Glad I didn't

YTD trading portfolio not as good as Coronita. Up 30%.
YTD long term conservative dividend/total return portfolio. Up 8%

Per Rich's request Im updating. Its been a steady climb since last update in late August. I sold a bunch of things today in the trading account with goal to get to 30 to 40% cash by election. I think I may be catching up to Coronita a bit who sold last week.

YTD trading portfolio up 37%.
YTD long term conservative dividend/total return portfolio. Up 11%.
YTD combined up 16%

Submitted by Rich Toscano on October 12, 2020 - 1:33pm.

I definitely did not request that you post your personal investment returns here, just to be clear on that.

People kept posting their returns during a market meltup, so I asked if they'd keep doing that if OP was right and the market tanked. It was meant as friendly teasing, not a request. Also note: the market has not tanked.

Submitted by sdrealtor on October 12, 2020 - 2:42pm.

Understood. Im just updating and knew you were being tongue in check. Im starting to thin my positions to my core long term holdings so Im ready for the next buying opportunity so I'll be ready if and when it tanks. Just documenting the path so I can back up claims or get roasted as time permits

Submitted by svelte on October 12, 2020 - 6:37pm.

Rich Toscano wrote:
Also note: the market has not tanked.

Don't jinx us!

October isn't over yet!

Although usually election year Octobers are OK.

Submitted by sdrealtor on October 12, 2020 - 7:37pm.

The Dow was 25582 when he made the original post. It's 28837 today.
The s&p 500 was 3080 when this post was made. It's 3534 today.

Say what you will about the future, his sell everything now call was way too early if not dead wrong. I think that's fair to say

Submitted by davelj on October 26, 2020 - 7:21pm.

Sorry, I literally haven't read anything on this thread since I first posted. Market's up a bit but don't be fooled... bubble insanity almost always lasts longer than anyone thinks it will - that's its very nature. You're here so you know this.

Anyhow, great recent interview with Jeremy Grantham. He covers a lot of ground, including the current bubble, environment, Covid, and VC, among other things. Grantham is probably the foremost expert on financial bubbles and hasn't gotten one wrong in his career. Just something to keep in mind if you watch and think, "This guy's got it all wrong."

The current bubble and implications are from roughly 06:00 to 20:00.

https://www.youtube.com/watch?time_conti...

Be careful out there.

Submitted by phaster on October 27, 2020 - 10:27am.

interesting comments by grantham

WRT the pandemic agree that americans by in large do not have much discipline (and the number of deaths in the USA is a reflection)

WRT his thoughts on "debt" disagree

@53:10 yet from a u.s point of view looking at internal debt it's totally irrelevant

this is because I wonder about the economic drag and social disruption caused by pension debt obligations owed public union workers,... to illustrate an example consider prop 15 (risk vs reward) by the numbers,...

[quote]
A record number of companies are leaving California for states with a better business climate, and a new report shows that Texas remains their No. 1 destination.

The study estimates that 1,800 relocation or “disinvestment events” occurred in 2016, the most recent year available, setting a record yearly high going back to 2008. About 13,000 companies left the state during that nine-year period.

During the study period, 275,000 jobs and $76.7 billion in capital funds were diverted out of California.

https://www.bizjournals.com/dallas/news/...

If voters approve Proposition 15 in November, a state analyst says it will generate between $8 billion and $12.5 billion in new tax revenues for the state each year.

According to the measure, 60% of the money would go to local governments and 40% would go to schools, including K through 12 and community colleges.

https://kesq.com/news/top-stories/2020/0...

Since 2017 The California Assessors' Association (CAA), has monitored and analyzed the administrative complexities and estimated costs of implementing two proposed initiatives commonly referred to as "split-roll initiatives." These initiatives generally would require regular reassessment of Commercial and Industrial property at current market value, and would eliminate Proposition 13 protections for significant numbers of those properties. "TheCaliforniaSchoolsandLocalCommunitiesFundingActof 2020", the most recent version of "Split-Roll" has now qualified for the November 3, 2020 ballot.

• Cost to implement is projected at $1.01 Billion during the three-year phase in period

• Implementation would require a trained workforce that is not available today and would not be available for many years.

...given the immense anticipated Statewide implementation costs and complexities, as well as the disparate impacts to the various California counties we are compelled to oppose this initiative. The California Assessors' Association advises a no vote on The California Schools and Local Communities Funding Act of 2020 (initiative No. 19-0008-Amendment 1) on the November 3, 2020 ballot.

Submitted by phaster on October 27, 2020 - 10:32am.

continued

looking at the worst case numbers prop 15 will raise $8 billion minus $1 billion in set-up costs (according to CA assessors) leaving 7 billion net

now .6 x 7 billion = 4.2 billion "admin" fees

bottom line what remains is 2.8 billion for education

looking at the population of this state

https://censusreporter.org/profiles/0400...

an estimated number of those in the school age is bracket is approximately 39512223*(.12+.13)= 9,878,055

so 2800000000/(9878055*(.12+.13)) is,... about a ballpark of just over a thousand dollars more per student (during the initial 5 year period after prop 15 passage) AND in the meantime there will be accelerated job loses perhaps much greater than what has already happened (which most likely will really hurt those on the low end of the income ladder,... i.e. women and black owned business) which is basically why the NAACP has said prop 15 isn't a good idea (BUT has lots of teacher union backing)

http://www.eiaonline.com/2020/08/26/cali...

NOTE FDR a democratic "hero" recognized public employee unions are a bad idea,...

Quote:

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress. Accordingly, administrative officials and employees alike are governed and guided, and in many instances restricted, by laws which establish policies, procedures, or rules in personnel matters.

Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees. Upon employees in the Federal service rests the obligation to serve the whole people, whose interests and welfare require orderliness and continuity in the conduct of Government activities. This obligation is paramount. Since their own services have to do with the functioning of the Government, a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied.

https://www.presidency.ucsb.edu/document...

Submitted by gzz on October 27, 2020 - 4:00pm.

Dave you were wrong!

I was too, in a way. My assets are $10 in RE for every $1 in stocks and bonds. Given that ratio, I felt it was prudent to hedge my extreme RE long with a net short in stocks. As a result, my stocks are -15% or so as a whole YTD. Winners are short SPG and LYFT and long Hanes, iRobot, Kraft, really almost all my longs. Big losses in Tesla and MGI shorts, which I am holding long term. I suggest shorting both at current prices, but I’m perhaps a bad example!

I agree with David Einhorn:

https://www.valuewalk.com/wp-content/upl...

Submitted by davelj on October 28, 2020 - 11:09am.

I don't short. Ever. My bet against overvaluation in the stock market is just to own safer and/or cheaper assets. Although, truth be told, I don't invest much in stocks anyhow, so there's that. I generally find the major indices to be useful only as signals - I don't give them much thought outside of the extremes (eg, now). Right now, I have a lot of cash, some outstanding RE loans in Texas (1st trust deeds), some foreign RE, a few private bank investments, some emerging markets equity funds (hey, there are some stocks!), and some venture capital. It's just a hodgepodge of stuff I like and am comfortable with.

I'm generally early (re: wrong) regarding bubbles... but my bet is this one pops sooner (say, within the next year) rather than later. But, alas, the exact timing is always precarious and rather pointless in trying to predict...

Submitted by sdrealtor on October 28, 2020 - 1:17pm.

But timing is everything. There will always be cycles and making your timing bets correctly is what determines winners and losers. In 2003 it was obvious we were in a housing bubble but the biggest gains came after in 04/05.If you sold a year or two early you missed out big time

Submitted by Rich Toscano on October 28, 2020 - 2:03pm.

sdrealtor wrote:
But timing is everything. There will always be cycles and making your timing bets correctly is what determines winners and losers. In 2003 it was obvious we were in a housing bubble but the biggest gains came after in 04/05.If you sold a year or two early you missed out big time

Catching the tops and bottoms of bubbles/crashes would be great if it were possible, but it's not. All you can do, in my opinion, is to buy stuff that's reasonable/cheap, and sell when it's expensive.

To use your example, if you sold RE in 2003 and then bought back when it was cheap post crash, you did great. So what that you missed out on a couple years of illusory, temporary gains.

Anyone who happened to hold on until the peak simply got lucky -- they held a grossly overpriced asset, and it got even more overpriced. Nobody could have known just how far it would go, or exactly when it would top out.

Again, it would be great to catch the tops and bottoms on the nose but it's not possible in the real world. What is possible is to buy cheap and sell expensive. I am fine to let the heroes try to catch the turn... imo that's a good way to wipe yourself out.

On a kind of related note, it's too early to declare Dave wrong or right. If you re-read the original thread, it seemed pretty clear that it was a longer-term forecast. Not just 5 months. I am not endorsing the opinion, just saying that it's too soon to say if it's right or wrong.

Submitted by sdrealtor on October 28, 2020 - 4:03pm.

So you know Im gonna disagree. If you sold in 2003 you missed the biggest part of the gains and you dont have to be lucky with RE like stocks. RE doesnt turn quickly. You could have sold anytime from Feb 2004 through July 2007 and done significantly better than selling in 2003. You probably could have sold for a lot more in 08 or 09 than 03 also but would have given up significant parts of the incremenetal gain. With RE you have plenty of time to sell near the top if you sell once things start turning down.

Buying is another matter as leverage works against you not for you as it will owning/selling RE. I will agree you dont have to catch exact tops or bottoms in RE to be successful.

But a sell now imperative with RE is a fools folly IMO.

Also he said sell because things (equities) are already way over stretched. the implication was the bounce back from March decline was illusory as was the run up to March. It was a sell now call not in 6 months

example: house next to me sold in Nov 2003. Even at the absolute bottom it at best matched that price between 2009 and 2011.

Submitted by Rich Toscano on October 28, 2020 - 4:35pm.

Like I said, whether his call to sell in June was good or bad will only be known in hindsight. Given that he was talking about after the pandemic is over and all the economic impacts have percolated through, that is the appropriate time to look back on whether he was right. Not now.

SD Case-Shiller in Nov 03 was 182. Post-crash, it didn't get back to that level until June 2013, and that's without accounting for inflation. (Which would actually be the correct comparison, and would push the rebound date even further, but I don't have it handy).

Submitted by sdrealtor on October 28, 2020 - 5:12pm.

You dont buy SD Case-Shiller to live in or rent out you buy a home. Its an index. I think we all know its flawed with limitations. Its best use is directionality rather than real magnitude. My example was real actual example not some derived mathematical calculation.

Real example: A model match to my neighbors house with far inferior lot sold across the street from us in June 2013. We have a perfect example! It sold for 10% more than the neighbors Nov 2003 price. The lot premium would add another 5 to 10%. Had my neighbor sold his house in June 2013 (and I wish he did as he's not my favorite) the price wouldve been close to 20% above the Nov 2003. Indexes dont tell the real story. The real story tells the real story

One more real story. I have a bunch of folks trying to buy homes now some of whom are regular readers/lurkers here. We routinely run into 10 plus offers on homes priced at comps with negotiated prices typically 5% and in many cases more above asking prices. That leaves a pile of unfilled orders. I wouldnt expect a decline in Spring as even a remote possibility around here

Submitted by Rich Toscano on October 28, 2020 - 5:38pm.

Disagree; the index is the best way to measure the magnitude of the change in aggregate. The CS index (which is very well constructed) tells the real story of San Diego as a whole much better than a couple examples from a single neighborhood.

Submitted by sdrealtor on October 28, 2020 - 7:22pm.

While you like that as an analyst there are no case shiller homes for sale. No one buys an index home, they buy an actual home. Their risk asset is a property and the accompanying mortgage not some index construct. It tells a nice story but it does not tell the story of an actual homeowner or investor. It's just a story like Go Dog Go is

And for the record there were lots of predictions here but only one person was actually spot on regarding what happened during the bubble and subsequent burst. everyone else was left making excuses as to why they were off because things changed but I alone had no excuses to make. Of course past performance there’s no guarantee of future performance;)

Submitted by Coronita on November 5, 2020 - 7:05am.

I don't know but it seems like the markets have more room to run...

Wasn't one concern was an all blue congress and presidency would mean massive capital gains tax hikes?

It seems like that is going to be unlikely for the next 4 years. The blue wave didn't happen.

GOP will still hold on to senate

Democrats hold onto House, and lost a few seats so there is more of a balance

Even if Biden/Harris wins, which personally I'm hopeful for versus the Asshole Crybaby In Chief, it appears there's a limit on what tax increases he can do with a stalemated federal government. That should be good news for us, right?

Submitted by The-Shoveler on November 5, 2020 - 8:53am.

May be this is one of the sell the news moments.
Just when everything seems resolved POW!! LOL.
Who knows stock market seems overpriced to me but what do I know.

What amazes me is how evenly divided between the two extremes the country is.
The difference in the popular vote for prez is only a few percent.
House Majority control is likely going to come down to maybe 5 or 10 seats.
IMO One party or the other tries to pass some extreme law or something I feel the country could truly tear itself apart.
Anyway just IMO.

Even California is a lot more evenly divided than you would think it is.

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