Investments Trade Log

[Toska2]

Could anyone give some insight why Icahn Enterprises LP pays a hefty dividend? Even before the slide its been +7%.

[thedollar]

I'll bite - buying USD 15,000 worth of global index tracking.

For the log: Did a similar thing today.

[Lucky C]

@classical_Liberal

Could bottom at CAPE = 20 since that is the "new normal".
Could go down to CAPE = 16 since that's the historical average as far back as the Shiller data goes
Could go down to CAPE = 13.3 since that's the average CAPE at the end of an S&P bear market and coincidentally the lowest CAPE at the 2009 bottom on a monthly basis*
Could go to CAPE = 7.6 since that's the average secular bear market low, counting 2009 as a secular low (1921, 1932, 1982, 2009)
Could go to CAPE = 5.7 since that's the average secular bear market low / typical depression low, not counting 2009 (1921, 1932, 1982)

* CAPE values at bear market bottoms (S&P Composite / S&P 500 price drop of -20% or lower):
1929-32: 5.57
1957: 13.67
1962: 16.83
1966: 18.83
1970: 13.80
1973-74: 8.68
1982: 6.64
1987: 13.39
2001-02: 21.96
2008-09: 13.32
Average: 13.3, Median: 13.5

I'm sure you would think landing at CAPE = 5.7 (75% loss from current 23.5) would be overly pessimistic, but I would say hoping to stop at CAPE = 20 (only 15% additional drop) and rebound to a new bull market is just as overly optimistic. Yes there are differences in today's economy that could push expected CAPE higher, but there could be differences in the near future that push it lower too (e.g. mass boomer retirements). Since we have no idea and it's dangerous to think "this time is different," I would argue the best estimate would be the middle one above since it is based on the historical average of 13.3, which would be a drop of 43% from today's CAPE.

I make no predictions. Only sharing historical data as it can serve as a good way to set expectations and reduce potential psychological biases when the future is so unpredictable.

[thedollar]

@Lucky C

Once again thanks for providing insightful data.

Would you count December 2018 as a bear market?

Also, if you do not mind sharing, what are you aiming for in terms of cape/price before going long in equities again?

[wolf]

bought two German infrastructure&materials stocks today (Hochtief and HeidelbergCement) and one German real estate stock (DIC Asset)

[suomalainen]

@LuckyC - do you know what the 10yr US treasury was at each of those bottoms? I'm guessing it's never been this low. So...that's what's different.

See here: https://tradingeconomics.com/united-sta ... bond-yield

[Lucky C]

September to December 2018 was not a bear market but very close, around -19.8%. If it dipped a tad lower into bear territory then that would push the average CAPE at the end of a bear up to somewhere in the 14.5 - 15 range.

I have around 10% of net worth in "buy and hold" passive equities funds currently, but they are emerging markets / developed markets ex-US. I have been tweaking equities exposure by small amounts as short term trades based on market conditions. For example I bought between 1-2% of net worth additional yesterday since we were at such a historically oversold extreme, and based on how good today's bounce is I might just sell that same amount today so I don't have to hold it over the weekend.

When I will invest the other 90% in equities depends on factors other than CAPE or pre-determined price level. CAPE is bad for timing but useful to set realistic expectations for the range of possible max drawdowns and long term returns.

@suomalainen Yes all higher treasury rates since we are at record lows, though low record low treasury rates being a good thing for SWR survival is questionable. The Shiller data has 10Y treasury rate info, and he also has a column for Real CAPE which could be useful if you want to see how inflation plays a role.
http://www.econ.yale.edu/~shiller/data.htm

[suomalainen]

I was thinking about it more from a valuation perspective. Meaning that a higher "new normal" CAPE in this interest rate environment could be expected. Indeed, one could argue that the Fed's monkeying with rates is not really intended to control inflation but rather to inflate asset prices. See, e.g., the surprise rate drop in response to coronavirus. They really couldn't wait until their next meeting? Anyway. Carry on.

[Lemur]

Working on building a sizable position in INDA Puts for Mid-April: $26 Strike.

Why?

-- India index up 12% for no good reason.
-- They're reporting far lower coronavirus cases then what is probably reality.

This is a bet I'm willing to make....will update with more specific expiry dates and price points later.


Edit: INDA 04/17/2020 P $26.00. Got 5 contracts at $1.60.

[Lucky C]

Sold yesterday's emerging markets purchases for +6.5%. In a more normal market I would have held on for longer than a day but with this market moving at lightspeed and the weekend coming up... I'll pass.

[thedollar]

Speaking about perspective - this comparison of S&P500 during 2008/2009 crisis and recent developments is pretty interesting:

https://i.redd.it/7k57pzvzvam41.png

Seems to be a lot more volatile this time around.

[jacob]

Index funds are definitely playing a larger role this time. The selling is driving everything down more or less equally, even solid businesses. This is different than 2008/09 where fundamentals played a bigger role. It's really annoying to lose market value due to price-insensitive sellers, but on the other hand the index pressure is creating much better prices in the good stuff than was the case during the credit crunch.

Also, we're now seeing a live demonstration of the kind of risk of so many piling into index funds creates. We've discussed this on and off on the forums over the years.

[George the original one]

Seems to be a lot more volatile this time around.

There is more uncertainty as to the outcome. Much easier to estimate loan troubles than to estimate pandemic effects on economy.

[George the original one]

Elder healthcare REITs are being pounded without mercy. Like OHI is down over 50% compared to mid-February, LTC is down 40% (share repurchase announced), & UHT is down 40%. I'm not sure what to make of it... are investors thinking all the residents will die and the operators will go bankrupt, thus no one will pay rent to the REITs?

[George the original one]

On the other hand, a retail store REIT, ADC, has only dropped 10%. Aren't the retailers going to be closing stores or have troubles paying their rent during the upcoming year if customers switch to online purchases rather than go to a store?

[jacob]

@GTOO - Just guessing on the retirement homes ...

• Simple liability issues
• Those facilities will eventually have to change their way of doing business and will be unable to pass the cost along.
• People will avoid them because of recent history. Some might pull gramps home to live in the extra bedroom.
• Monkey see, monkey do selling, similar to resorts, airlines, ...

[George the original one]

@GTOO - Just guessing on the retirement homes ...

Yes, some of that makes sense. There's also Trump's "I will cut entitlements" refrain.

[Seppia]

Index funds are definitely playing a larger role this time. The selling is driving everything down more or less equally, even solid businesses. This is different than 2008/09 where fundamentals played a bigger role. It's really annoying to lose market value due to price-insensitive sellers, but on the other hand the index pressure is creating much better prices in the good stuff than was the case during the credit crunch.

Also, we're now seeing a live demonstration of the kind of risk of so many piling into index funds creates. We've discussed this on and off on the forums over the years.

Unsurprisingly, a lot of "passive" investors quickly become very active when the stock market stops going up slowly and steadily
without volatility.
I would be curious to see what's happening in the MMM forum. Is it still populated only by index ajatollahs who "will never sell", or is someone caving?

[Lucky C]

Since we did not stay at the opening +5% level today, but also bounced before hitting 0% this morning, and volatility is starting to fall, I bought back into some emerging market equities again. If there is a rally, it might be a strong 5 - 15% one. High dividend yielders & low valuation so I would be comfortable holding them long term even if we have more of a crash before rallying again.

[Lemur]

@Jacob

I'm not sure where my source is but I've heard the argument that actively-managed portfolios do better in a bear market then index investors. I come to believe this to be true because active investors can take advantage of great opportunities that indexers will simply miss. The recent down-turn in the market is what prompted me to turn my brokerage into an active portfolio...I don't want to auto-pilot my way through a storm.