Investments Trade Log

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thedollar
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Re: Investments Trade Log

Post by thedollar »

I predict the market will take a large hit on Monday.

Investors will have a few days to get anxious as number of new daily cases as well as US cases too has a few days to continue exponential growth.

Jin+Guice
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Re: Investments Trade Log

Post by Jin+Guice »

Seppia wrote:
Thu Mar 19, 2020 11:08 am
Interesting article on the passive investor behavior.
Turns out I was wrong?
https://ritholtz.com/2020/03/wasnt-pass ... um=twitter
This makes me think we still have a long way down. Buying into the crash is part of the passive index strategy and we've only been down for a few weeks. I'd be surprised if passive retail investors weren't buying right now, but can they hold out another 1-2 years?

This is my first rodeo, so this is all pure speculation, but I really don't think we're near the bottom. The coronavirus numbers will keep getting worse, it's almost impossible that at least one European nations or U.S. cities hospital system won't collapse, we're going to be in lockdown for at least another month and the numbers haven't even started coming out yet for the weeks we've been locked down. And now you're telling me retail investors are still buying the dip? Unless we miraculously get a vaccine or some miracle out of one of the drugs they're testing I can't imagine this is near the bottom. Are financial institutions not in danger of blowing up from this next month when no one can pay their bills? What I've seen so far looks like a scramble for cash.

classical_Liberal
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Re: Investments Trade Log

Post by classical_Liberal »

Jin+Guice wrote:
Fri Mar 20, 2020 10:26 pm
And now you're telling me retail investors are still buying the dip?
I am! Not because I expect a rebound, but because I believe, at this price level, my best chance for the best real returns over the next decade are with equities. Not cash, or bonds, or gold, or anything else i'm willing to invest in. I could be wrong. DCA'ing in from a large cash position, as long as they stay at or below a price level I believe the above to be true, only means I'm not sure where and when the bottom will hit. It only makes sense.

Edit: @J+G you're what, early 30's right. How many years of your life do you think US equities have been cheaper by the the most popular metric of CAPE? or even market cap to GDP? Once you determine that, tell if you think you'll have a better time to start buying the equity portions of your GB.

Edit # 2: My point is you have to pick a price point that, in your opinion, is a good deal compared to other potential investments with the information you have. Also be OK if it never reaches that point and you miss what may have been a good potential buying opportunity. Trying to guess bottom is a fools errand, IMO.

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Seppia
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Re: Investments Trade Log

Post by Seppia »

Bankai wrote:
Fri Mar 20, 2020 3:47 pm
@ToFI: why buy on the way down?
*cut
I'd wait until bottom is established and recovery starts.
Because you don’t know when they will stop going down and start going back up.
How do you know when the bottom is established?

ertyu
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Re: Investments Trade Log

Post by ertyu »

but you can make an educated guess. right now, not in order of importance,

1. all negative info hasn't come out (e.g. unemployment numbers, pmis, earnings, etc)
2. Deaths are still accelerating throughout most of the developed world - thus the trajectory is for quarantines to get stricter not looser at this point. Thus numbers in (1) are likely on a trend to get worse
3. It hasn't hit NYC properly - I've seen it theorized that this is needed before the implications get through to the coked up stuffed shirts that were born in 1995 and have never experienced anything but a bull mkt as traders
4. the economic impact hasn't worked itself out through the system - no major bankruptcies/restructurings yet
5. Retail hasn't capitulated - mood is, "can we buy the dip yet, can we buy the dip yet"

I'm sure you can find other arguments too but imo chances are we're going down rather than up

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Seppia
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Re: Investments Trade Log

Post by Seppia »

Depending on how sure one is about it, he/she should cash out of the relevant amount of equities.
Ie if you’re 100% sure you should go all cash
If you’re 50% sure it would make sense to sell 50% of your equities now.

How many have done so?

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Bankai
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Re: Investments Trade Log

Post by Bankai »

You can never be 'sure' what the market will do.

What makes you think the market will quickly recover from this level?

The world - at lest the West - is heading for a pretty bad recession, possibly one of the worst in a century. The West is killing its' economies to 'save lives' (to me it looks more and more likely that the suffering caused by 'saving lives' > the suffering from 'lives lost to the virus'). Some experts already claim that 'social distancing' i.e. killing economies would need to last for up to 18 months or until the vaccine is found for it to be effective. This will leave scars for years/decades and hit the poorest the most (as always). Look how bad things look now and it's just starting - two months from now deaths will be in hundreds of thousands or even millions (hopefully not but this is how it looks now) - do you really expect the market to go up while the news is all about mega-recession and millions dying? The market is news driven for a couple of months now and unless good news > bad news, this will not change. I don't see any good news on the horizon but there's plenty more bad to come.

I guess where we differ is that you seem to think that buying 'bargains' is a way to make money, which I consider to be catching a falling knife/bottom fishing, while for me being long during a bull market is a way to make money. That's not to say I don't think your way can't work, it just seems way too optimistic and risky to me.

IlliniDave
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Re: Investments Trade Log

Post by IlliniDave »

Seppia wrote:
Thu Mar 19, 2020 11:08 am
Interesting article on the passive investor behavior.
Turns out I was wrong?
https://ritholtz.com/2020/03/wasnt-pass ... um=twitter
After the financial crisis Vanguard published an analysis of their retirement plan clients. I don't remember their metric but they essentially showed that the turnover in their client's accounts was lower than that of the stock market overall (or maybe it was compared to mutual funds/ETFs overall). The difference wasn't eye-popping, but significant enough to conclude that they behaved differently in the aggregate, and not in a destabalizing way.

We're still pretty early into this fiasco making it well within the realm of possibility that we'll get to a spot where more indexers start to crack. I think the net effect would be to move the overall average systematic selling pressure closer to the systematic selling pressure of the non-index cohort.

The net buying Riholtz reports is a surprise to me. I wouldn't expect it to persist though the say, -40% point and beyond. Some of it is probably due to people like me who are misdemeanor market timers (we keep an eye out and are "aggressively proactive about rebalancing after significant declines"*). Then there are the orthodox "guard band" rebalancers who rebalance religiously if their asset allocation strays a certain distance from it's set point (I think most robo-advisory services do the same). They would have been buying too. Many indexers do automatic investing straight from their paychecks into funds, and they also would be buyers.**,***

I think in the worst-case indexer behavior in the aggregate would converge with overall behavior. People are people once they shed their ideological cloaks and run naked through the streets.

*But drag our feet during periods of chunky gains.

ETA

**There are also periodic rebalancers who will only rebalance at certain times of the year, and probably don't affect the reported information much.
***It's also tax season meaning refunds are being received and possibly invested, and last-minute 2019 IRA contributions are being made.

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Seppia
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Re: Investments Trade Log

Post by Seppia »

Bankai wrote:
Sat Mar 21, 2020 4:51 am
You can never be 'sure' what the market will do.
What makes you think the market will quickly recover from this level?
I have no idea what the market will do in the coming weeks/months. Same as when the market was raging higher.
The only things I know for sure are:

1- starting late 2018/2019 I had a feeling the market was too high.
2- short term movements are totally unpredictable
3- long term, my prospects weren't great

so I decided to slowly increase my cash % (because 1 and 3) but also not sell anything (because 2).
I made a judgement call and acted accordingly.
I put myself in a situation where, mentally*, I was comfortable.

*the mind is ALWAYS teh most underrated aspect of investing
Bankai wrote:
Sat Mar 21, 2020 4:51 am
I guess where we differ is that you seem to think that buying 'bargains' is a way to make money
No sorry.
One has to consider also the situations.
I save 75% of my (relatively high) salary, and I am 39.
The consequence is that I must allocate a relatively important amount of funds every month.
So when the market is (in my consideration) overvalued, I look for individual stocks.
Another consequence is that when the market plunges 20-30% I can buy relatively aggressively with my builtup cash reserve, because
a) I did not go all-in yet (i'll do so if the plunge gets to 50% approx)
b) if it falls further i will have new cash to invest every single month

If I were ERE'd, with little/no income coming in and a good margin of safety, I would act completely different. If you have way more than you need (think 50y of expenses or more) then it makes more sense to play not to lose.
I would also act completely different if I were making minimum wage: maybe it would be worth swinging for the fences with some small, high upside investments (ie bitcoin)

What I do makes sense for me

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Bankai
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Re: Investments Trade Log

Post by Bankai »

I agree with most of what you wrote, however, I'm not convinced about these 2 points:
Seppia wrote:
Sat Mar 21, 2020 5:46 am
I must allocate a relatively important amount of funds every month.
Unless you consider doing nothing to be allocating into cash, then no, you don't have to allocate every month. Doing nothing is a valid option and should always be considered.
Seppia wrote:
Sat Mar 21, 2020 5:46 am
I did not go all-in yet (i'll do so if the plunge gets to 50% approx)
If you go all-in at -50% and the market goes down to -90% then you'll be 80% down on your 'all-in' amount. Now, a 90% decline is once in a century event, but who knows how the current situation develops, it certainly has potential for once in a century event.

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Seppia
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Re: Investments Trade Log

Post by Seppia »

Allocating to cash is certainly an option. It's what I did in part since late 2018/9.
If it goes to 90% down, yes I will have lost a lot of money. But what if it goes down 35% and then goes back up? or what if it goes down 70% and you hold all cash waiting for it to drop 90%?

In my view, the best way to think about future returns is in probabilistic terms. Since we're making predictions, my assumed probabilities may be different than yours, and that's ok.

Again remember my goal is not "to be right", because otherwise I would be picking outcome over process. My goal is to position myself in what I consider to be the best way to deal with the future.

My assumption is that the probability of the stock market tanking 90% is much lower than it tanking 50%. I also think US markets have more downside VS rest of the world because they start from higher valuations.

The consequence of the above assumptions is that I am very much underweight USA, and I will go all in* equities at 50% drop, because I also know that should it keep falling, I will (most likely) have fresh money coming in every month.

*except fr a cash cushion of two years barebone expenses, that I ALWAYS keep under any circumstance. I pretend that money doesn't exist.

Again this:
Seppia wrote:
Sat Mar 21, 2020 4:08 am
Depending on how sure one is about it, he/she should cash out of the relevant amount of equities.
Ie if you’re 100% sure you should go all cash
If you’re 50% sure it would make sense to sell 50% of your equities now.
What are you doing with your money?

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Bankai
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Re: Investments Trade Log

Post by Bankai »

Seppia wrote:
Sat Mar 21, 2020 7:43 am
What are you doing with your money?
20% in equity in our flat, 25% in pension (index tracker) and 55% in cash. Every month 15% of the paycheck goes into the pension and the rest goes to cash. My plan for the 55% is to gradually deploy it into stocks but now is not the time yet.

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Bankai
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Re: Investments Trade Log

Post by Bankai »

How low can it go? If this guy is right, very low indeed, maybe half of the current levels?
Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product.
https://www.bloomberg.com/news/articles ... o-30-in-2q

EDIT: Also:
The world will take years to recover from the coronavirus pandemic, the Organisation for Economic Co-operation and Development (OECD) has warned.

Angel Gurría, OECD secretary general, said the economic shock was already bigger than the financial crisis. He told the BBC it was "wishful thinking" to believe that countries would bounce back quickly.
https://www.bbc.co.uk/news/live/world-52000039

Lucky C
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Re: Investments Trade Log

Post by Lucky C »

Of course it can go half of current levels, or lower.. CAPE is now around 21.5 with years of abnormally high profit margins and currently no recessions in the lookback! Depressions bring CAPE into single digits. People who called CAPE nonsense up through 2018 were complaining that it captured the abnormal 08-09 poor earnings, so a high CAPE is justified. Now nobody is complaining that CAPE is actually too optimistic because it captures the longest and most profitable expansion in US history.

This morning's news:
Fed: We will do unlimited QE.
Investors: Hard pass.

ertyu
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Re: Investments Trade Log

Post by ertyu »

I had the sense the hard pass is because the stimulus bill didn't go through

Lucky C
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Re: Investments Trade Log

Post by Lucky C »

Futures were limit down overnight - reported as due to stimulus bill not passing.
The immediate Fed reaction was futures turning positive, but apparently that was an overreaction with the negative morning.
Maybe the Fed kept it from being another -7% circuit breaker in the first 15 minutes day.

Gold prices seem to have bottomed out last week as "sell everything" slowed down, and is now heading back up today. Holding IAU and bought more GOLD.

Gilberto de Piento
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Re: Investments Trade Log

Post by Gilberto de Piento »

ertyu wrote:
Mon Mar 23, 2020 9:05 am
I had the sense the hard pass is because the stimulus bill didn't go through
I suppose the focus is on the short term because this thread is about trading but I think some bill will go through soon. The legislators are just "negotiating" the only way they seem to know how anymore.

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Lemur
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Re: Investments Trade Log

Post by Lemur »

1.) Open Money.txt
2.) File
3.) Open
4.) Select Printer [Fed]
5.) Print

ertyu
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Re: Investments Trade Log

Post by ertyu »

to stop being a chicken, bought 100 shares each in EGLN, VEUR, U. QE bazooka seems to be working, lots of green all around today.

Edit: there are two wolves inside me. one of them wants to sell a ratio put spread on the SPX to commemorate today's 7% bounce; the other one's not a wolf he's a chicken

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Lemur
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Re: Investments Trade Log

Post by Lemur »

@ertyu

Going the chicken route myself. Fear my dumb luck streak would end. With IV being as high as it is and with so much money being pumped in now, the risk/reward ratio is not there anymore. Selling cash covered puts on some long positions you don't mind getting assigned is where it is at because you can collect a fatter premium and "buy the dip" for the long haul. After further drops in the market, I may consider getting into some LEAP calls for the rebound. That rebound may not begin this year IMO. We still haven't seen the job reports or the full effect of the virus just yet.

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