Financial Markets Meltdown

[smitty9]

...and you don't even have to short stocks.

You could buy put options (insurance), though volatility has inflated their prices.

You could also buy/sell volatility itself.

Lots of opportunities for derivatives traders. Call and Put options can be your best friend.

[Scott h]

Originally Posted by Justfishin73

Well, you must have a tiny portfolio or nads of steel. 40% loss would not make me happy.

Neither, but I don't require the money I've invested for years. Don't get me wrong, I'd rather the market kept going up but I do think that this is going to be what pushes the market into a major "correction". Thankfully I have zero debt.

[bdub]

Originally Posted by LJalberta

Of course he also says that almost no professional fund manager will beat the indexes in the long run, and that it's not a matter of not doing the 'hard work' of making investment decisions. It's the fact that to actually beat the markets you'll be a statistical anomaly. It's rare professional fund managers do it, and even more rare the average joe will do it. Of course someone's gotta be exception.

No, not really. The message is that individual investors using portfolio managers will not beat the market on average due to the high fees charged by those active managers to make your decisions. Think mutual fund managers, the smoo's at the bank and the hedge fund guys. Fees matter. He recommends Etf's for individual investors due to the low costs and diversification.

The stock market is a "zero sum game", there are as many winners as losers, it's the costs that make the difference. Trading costs, research costs, etc, etc.

[bdub]

Originally Posted by LJalberta

Of course he also says that almost no professional fund manager will beat the indexes in the long run, and that it's not a matter of not doing the 'hard work' of making investment decisions. It's the fact that to actually beat the markets you'll be a statistical anomaly. It's rare professional fund managers do it, and even more rare the average joe will do it. Of course someone's gotta be exception.

Here's a famous study on mutual fund performance.

The problem that Jock Bogle solved for individual investors was to reduce those high fees. That was his gift to humanity.

https://papers.ssrn.com/sol3/papers....ract_id=244153

[LJalberta]

Originally Posted by bdub

No, not really. The message is that individual investors using portfolio managers will not beat the market on average due to the high fees charged by those active managers to make your decisions. Think mutual fund managers, the smoo's at the bank and the hedge fund guys. Fees matter. He recommends Etf's for individual investors due to the low costs and diversification.

The stock market is a "zero sum game", there are as many winners as losers, it's the costs that make the difference. Trading costs, research costs, etc, etc.

Warren Buffet, "Basically any attempts to pick the times to buy or sell, I think, are a mistake for 99% of the population. And I think that even attempts to pick individual securities is a mistake for people.”

"They don’t need to do anything but (invest in a low-cost S&P 500 index fund). Then they’ll get a decent result over time. To some extent, the smarter you try to be, the worse you do in investments. Now, there’s a few professional investors that will do better than the S&P over time. But the average individual isn’t going to be able to find them. And they don’t need them. That’s the beauty of it."

Yes, fees are a part of it, but he's not simply talking about mutual funds. I bet if people who are doing individual stock selection did an honest and accurate comparison of their position over a 15 year period had they simply placed their investment money into an index fund and left it, they would be shocked at the results.

95% of mutual funds underperform the S&P 500 Index accounting for fees. The present average fees ranges between .5-1%.

As an individual investor, selecting individual stocks and allocations, again over the long term that is an incredible accomplishment to beat the markets, and to any who truly do. Congratulations, that's impressive.

[bdub]

Originally Posted by LJalberta

Warren Buffet, "Basically any attempts to pick the times to buy or sell, I think, are a mistake for 99% of the population. And I think that even attempts to pick individual securities is a mistake for people.”

"They don’t need to do anything but (invest in a low-cost S&P 500 index fund). Then they’ll get a decent result over time. To some extent, the smarter you try to be, the worse you do in investments. Now, there’s a few professional investors that will do better than the S&P over time. But the average individual isn’t going to be able to find them. And they don’t need them. That’s the beauty of it."

Yes, fees are a part of it, but he's not simply talking about mutual funds. I bet if people who are doing individual stock selection did an honest and accurate comparison of their position over a 15 year period had they simply placed their investment money into an index fund and left it, they would be shocked at the results.

95% of mutual funds underperform the S&P 500 Index accounting for fees. The present average fees ranges between .5-1%.

As an individual investor, selecting individual stocks and allocations, again over the long term that is an incredible accomplishment to beat the markets, and to any who truly do. Congratulations, that's impressive.

I agree 100%.

https://papers.ssrn.com/sol3/papers....ract_id=244153

[elkhunter11]

Interesting watching the markets this morning, up and down like a yoyo. People can't seem to decide if the feds can stabilize this by cutting rates.

[KinAlberta]

They’ve kept rates so low that there’s not much room for rate cuts to do very much.

Anything by or about Robert Rodriquez (FPA capital) I’ve always considered to be a “Must Read” (nite the links within the articles to his earlier speeches etc)

Bob Rodriguez: “The Fed is Clueless” - Articles - Advisor Perspectives
09/0919

https://www.advisorperspectives.com/...ed-is-clueless

From 2017:

Bob Rodriguez – We are Witnessing the Development of a “Perfect Storm” - Articles - Advisor Perspectives
6/27/17
“ When the markets finally do break, as they always have historically, ETFs and index funds will be destabilizing influences, because fear will enter the marketplace. A higher percentage of assets will be in indexed funds and ETFs. Investors will hit the “sell” button. All you have to ask is two words, “To whom?” To whom do I sell? Index funds and ETFs don’t carry any cash reserves. The active managers have been diminished in size, and most of them aren’t carrying high levels of liquidity for fear of business risk.

We are witnessing the development of a “perfect storm.”



https://www.advisorperspectives.com/...-perfect-storm

Bob Rodriguez Disses Trump’s Tax Cuts, Sees ‘Dark Times’ Ahead
The legendary money manager tells ThinkAdvisor why he dislikes the tax overhaul and what he sees as the biggest threat to the market.

By Jane Wollman Rusoff | January 30, 2018

“... During the past six years, Rodriguez — for 25 years CEO of First Pacific Advisors, from which he retired in December 2016 — has warned of another looming dreadful financial crisis. The man hasn’t changed his tune. In fact, he has moved most of his personal assets out of the market and into other types of investments.

...

“ What’s the greatest threat to the stock market?

It has always been and continues to be excessive leverage. Whether it’s in the consumer sector or the government sector, we’re on a leveraged basis in this country and the same worldwide. Along with that, valuations are only exceeded by those of late 1999 during the tech bubble. How much more can you keep leveraging up the financial system both here and abroad before it’s in trouble?

What do you see happening in the future?

This is a dark time for our economy longer term. Nearly 75% of the U.S. is on cruise control. ...”

https://www.thinkadvisor.com/2018/01...20200202112542

[Deer Hunter]

Common sense is starting to come back to the market.

[raab]

Originally Posted by Deer Hunter

Common sense is starting to come back to the market.

Got to wonder if its the dead cat bounce or if they'll stabilize. Either way people should put themselves in a good financial position. Start stockpiling cash and paying down debt.

[Scott h]

Originally Posted by KinAlberta

They’ve kept rates so low that there’s not much room for rate cuts to do very much.

That really is the issue. There had been room the last few years to start raising rates but due to politics that never happened. Now this. Dropping interest rates from a historically low level to a little bit lower isn't going to do a whole hell of lot. The fact is a good chunk of the world is quarantined in some way and spending money is the last thing on their mind. People have to go out to get groceries, but they aren't going out any more than they need to. The number of people traveling is dropping like a rock; same with people eating out in restaurants. Every week/month this continues is going to add to the number of people involved.

[Scott h]

Originally Posted by raab

Got to wonder if its the dead cat bounce or if they'll stabilize. Either way people should put themselves in a good financial position. Start stockpiling cash and paying down debt.

If people haven't already gotten on that band wagon already it might be a little late to do it now......slide is already here.......

[elkhunter11]

Originally Posted by Deer Hunter

Common sense is starting to come back to the market.

More like some people are listening to the feds that are talking about dropping interest rates. The question is whether this can be sustained or not.

[Deer Hunter]

Originally Posted by raab

Got to wonder if its the dead cat bounce or if they'll stabilize. Either way people should put themselves in a good financial position. Start stockpiling cash and paying down debt.

Being greedy while others are scared usually makes money.

[KinAlberta]

I tend to be a buy and holder. I’ve owned and still own Berkshire Hathaway since the early 1990s. Until 2008 had TD shares for a couple decades. However, in 2008 I took my accounts and family accounts up to 85% cash. It was another 6 months before things bottomed out. I picked up more BRK a day off it’s low as everyone panicked. Bought cash rich Apple and some others near their lows. The point is, markets bounce on their way up and they bounce in their way down. Mild fear can become irrational fear.

Knowing how fall markets can fall also tempers ones overly optimistic views of investing. As a teenager one of the first books I read was the Great Crash by Galbraith (the economist). It took the market several years to fall to its about 80% drop from the peak (or whatever it was by 1933). Years later in the 1980s I bought Nikkei Put Warrants against Japan’s bubble not long before the Japanese peak and sold them a after a year or two later as their market declined. However I left a lot of money on the table because I couldn’t believe that such a massive market (2nd largest in the world) could fall 75% (and stay down for decades). There’s no guarantees in business. Investing in businesses carry risks.

[Deer Hunter]

Originally Posted by elkhunter11

More like some people are listening to the feds that are talking about dropping interest rates. The question is whether this can be sustained or not.

Yep. And some are listening to you...

[raab]

Originally Posted by Deer Hunter

Being greedy while others are scared usually makes money.

Yep, but you don't want to catch a falling knife. Learned that lesson the hard way. Good thing is I keep my debt level low, and dont borrow for stocks. A lot of guys borrow and get caught and it wrecks them financially. Warren Buffett gave the secret to being a good investor and no one listened. Buy good businesses, at a good price. Pretty simple.

[Scott h]

Originally Posted by raab

Yep, but you don't want to catch a falling knife. Learned that lesson the hard way. Good thing is I keep my debt level low, and dont borrow for stocks. A lot of guys borrow and get caught and it wrecks them financially. Warren Buffett gave the secret to being a good investor and no one listened. Buy good businesses, at a good price. Pretty simple.

You got it! Why anyone thinks that things are better this week than last has me scratching my head???? I don't believe that there will be any meaningful turn around until they have Covid 19 somewhat under control. I'm not heading out and selling anything, but I would be if I had borrowed to buy it in the first place. I'm thinking this epidemic will wipe out a lot of businesses as well as individuals that are in debt...especially if that debt is for something like investing in the stock market.

[58thecat]

Originally Posted by elkhunter11

No, I am not about to listen to you, or any other fool, when it comes to investing my money.

Then listen to the voices between your ears...

[bloopbloob]

Originally Posted by Scott h

You got it! Why anyone thinks that things are better this week than last has me scratching my head???? I don't believe that there will be any meaningful turn around until they have Covid 19 somewhat under control. I'm not heading out and selling anything, but I would be if I had borrowed to buy it in the first place. I'm thinking this epidemic will wipe out a lot of businesses as well as individuals that are in debt...especially if that debt is for something like investing in the stock market.

I'd be investing in KenO7AOVette..... methinks he might be quite busy in the future......

[Scott h]

Originally Posted by bloopbloob

I'd be investing in KenO7AOVette..... methinks he might be quite busy in the future......

He does repo's doesn't he ? If so he's well on his way to being very, very busy in the foreseeable future.

[Deer Hunter]

Originally Posted by elkhunter11

No, I am not about to listen to you, or any other fool, when it comes to investing my money..

Of course you shouldn't. But we should listen to you? Why?

[elkhunter11]

Originally Posted by Deer Hunter

Of course you shouldn't. But we should listen to you? Why?

I don't recall telling anyone how to invest in the markets.

[HunterDave]

I haven't followed the thread but major stock market corrections (ie. 9-11) only come around so often and should be taken advantage of IMO. I've seriously been thinking about getting back into the market once it somewhat stabilizes.

[fishnguy]

Reuters: U.S. stock short-sellers notch $105 billion week in coronavirus sell-off

Investors targeting declines in U.S. stocks saw sizeable gains during last week’s sell-off, as markets plunged on concerns that the spread of the coronavirus was accelerating beyond China.

Short sellers - who hope to profit by selling borrowed shares and buying them back later at a lower price - logged a one-week paper profit of $104.77 billion in the last week of February, according to data from financial technology and analytics firm S3 Partners measuring bets against U.S.-listed stocks and American Depositary Receipts. That compares with $3.25 billion in paper profits in the prior week.

That upside came during a week marked by furious selling of everything from stocks to a broad range of currencies and eventually, some popular safe-haven assets like gold. All three major U.S. indexes registered their largest weekly declines since 2008, with the S&P 500 .SPX falling 11.5%.

The tumble in stocks has marked a long-awaited reversal for bearish investors, many of whom had seen their portfolios bruised by the market’ relentless march higher last year, when the S&P gained 29%. The S&P was up 2.7% on Monday.

Though few, if any, could have named the coronavirus as a major threat to markets going into 2020, short sellers have long railed against stock valuations they perceived as being out of line with fundamentals and other excesses that have cropped up during the more than decade-long bull market.

...

[Pathfinder76]

Who reinvested this morning?

[bdub]

Originally Posted by chuck

Who reinvested this morning?

Or used today as a chance to lighten up?

[pikeman06]

Originally Posted by chuck

Who reinvested this morning?

No way jose. I bet by Friday we are negative on the week. Just my predictions tho.

[Mistagin]

Well, I'm back up 4 K since Friday .

Just heard from my financial adviser; he pointed out that my diversification strategy I enacted a couple of years ago has largely sheltered us from the worst of thew past 2 weeks, but lots of people are panicky. He advised to just ride it out.

[LJalberta]

Who knows what tomorrow holds, but the Dow just had it's biggest point gain day ever. Wouldn't surprise me either way if the market gains or drops 10%+ over the next weeks.