Yeah, I mean the argument on the other side is that if you account for typical returns since the last peak plus the Fed, we’re still about 15% off where we might have been. But, the Fed and the stimulus didn’t make covid just go away.
I know a similar guy. And he’s a poker player too which makes it even weirder imo. Says he’d never invest while trump is in charge so he’s sitting with mid six figures earning sub inflationary interest for three years while also owning no property. Truly bizarre.
The market loves fascism, until it doesn’t. And I always figured there would be a boom in stock prices after the Trump tax cuts. As has been discussed ad nauseum on here - where else are rich people going to put their windfall? I wish the tax cuts didn’t happen. But I’m not going to stay out of the market over it.
Without covid I was just waiting until signs of super-frothiness. Like whatever the 2021 equivalent of the mailman asking you for stock tips. In 1999 it was my tech-illiterate uncles putting all their savings in a dotcom fund called MunderNetNet. In 2006 it was liars loans, $0 down payments and everyone you know is a mortgage broker or house flipper. I wondered if the Trump bubble would be something like Trumpfans all in. But who knows if they even have enough money to cause a bubble.
It just seems like huge crashes don’t happen until after a period of extreme frothiness that has all the bears pulling their hair out for years. You just don’t seem to see huge crashes after a long slow rise - there always seem to have to be that final orgasm before the crash. Or maybe the orgasm is only obvious in retrospect.
But covid of course makes its own rules. Just trying to pretend things are normal right now might count as extreme frothiness.
I am all cash/paying off my mortgage, fuck it.
I would do that if I could - but most of my money is in an IRA.
Grantham was talking about this, although he didn’t use quite the same… imagery.
But he said the growth speeds up at the end of the bubble, and it can be extremely painful to have exited the market too soon and you have to be strong and willing to withstand that and trust that the bottom is going to fall out… and the longer it takes for that to happen, the bigger the crash will end up being.
Hertz going from .56 to $5.53 a share while worth ~nothing in bankruptcy? Robinhood?
I just bailed on almost all of it, I have about 10% of my investments in an S&P mutual fund that executes at close price no matter when I sell it in a given day, so no point in pulling the trigger before like 3:55 pm anyway.
The Fed announced additional stress tests for the banks, which means there’s at least a chance they didn’t do great on the normal stress test. Today’s gains started being given back and I decided that was good enough for me.
So essentially all I’m in now is BSET, my work from home stocks, Moderna, and a few other covid/medical stocks. They account for about 13% of my portfolio.
One point that I’ve been thinking about is that lower interest rates may make it more important to understand the “term structure” of discount rates. For simple math purposes, you can discount a cash flow in year N by multiplying it by (1 - r)^N. In reality though, you really should be multiplying it by the product, as n goes from 1 to N of (1 - r_n), which only reduces to (1 - r) ^ N if r_n = r for every period. If people expect bad times for ten years, then a return to normalcy, then it would be reasonable for discount rates to be low for the bad years (no attractive alternatives), then to be higher afterwards. If that hypothesis is true, then you will be somewhat misled by using the 10-year rate as a discount rate for all time. And the lower interest rates are for the initial 10-year period, the more important properly weighting those outyears becomes to the current valuation.
This issue is discussed a bit here.
Punchline:
Given that the difference between the 10-year and 30-year bond rates is small
and that it is much easier estimating equity risk premiums and default spreads against the
former rather than the latter, we believe that using the 10-year bond rate as the riskfree
rate on all cash flows is a good practice in valuation, at least in mature markets. In
exceptional circumstances, where year-specific rates vary widely across time, we should
consider using riskfree rates that vary across time.
In a footnote to this paragraph, the paper notes that the difference between 10-year and 30-year rates has been less than 0.5% for the last 40 years (written in 2008). Even now, the difference is only around 0.75%.
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Just bought one contract of DIS puts at $105 strike, 7/2 expiry, $101.65 for the contract. If they have to cancel their reopening plans by 7/2, which I think we’re drawing very live to, and/or if the NBA cancels there, I think this could pay off nicely.
I’m looking for more international plays - like maybe BP, that somehow aren’t dragged down by lack of US demand but will still go up with the price of oil.
Basically how can we play Europe, Oceania and Asia economies continuing to recover while the Western Hemisphere economies go in the toilet?
If you guys are having fun with bond math, consider all the joy I experienced as a pension actuary trying to provide coherent advice on the cost of pensions that are basically huge bundles of bonds except you don’t know when the bond payments start, you don’t know when they’ll end, and you don’t know how much they will be.
I think Asia is the play - I’ve mentioned that ITT before, I think, and some of those really smart guys I mentioned before think there’s value in Asia. I don’t like BP, because WFH and less travel → oil prices down. Plus BP has lots of US exposure.
One thing, though, is if the US markets lose 20-30% you’re still going to lose a decent chunk in all of the global markets even if they outperform us. So expecting a crash, I’m in the research phase to find diversified options around the world when I start re-entering the US and abroad. I’ll probably be looking to be overweight toward the rest of the world versus typical recommended allocation, and possibly overweight toward companies that project to gain advantages in the post-covid world looking 3-5 years out.
Obviously US drags everyone down. I’m ok with that.
I’m in about half cash (or will be after market close). I kept all my INTL funds, DGX, XOM, MSFT and AMZN. I think I’m willing to just ride those out.
Exxon because it’s already down so much. I can live with it halving again from here because it could also double. My timeline is really 10 years in the IRA and there’s no way the price of oil doesn’t go crazy again at some point. Once the world gets back on its feet, S.A. is probably going to start holding back supply to regain lost ground.
The other the individual stocks I kept because they seem to be where everyone flees to. I’ve pared back all of them though to about 1/3rd what I had.
That sounds pretty reasonable. I thought about staying in QQQ to keep exposure to AMZN, MSFT, AAPL, etc, or buying more ZM and buying them individually or something, but I’m concerned that they’re just going to bubble too because they’re already up so much YTD. But if you put a gun to my head and made me pick five US stocks to stay in right now and gave me 30 seconds, I think AMZN, MSFT, ZM, FB, WMT would be my five.
Your logic makes sense on XOM for a 10-year timeline, and I know you’re a big fan of DGX and there is a case to be made for them doing well the next 12 months.
I don’t know if DGX has much upside from 109 where it’s at - it’s bounced off 115 for like a decade until hitting 122 a few weeks ago.
But if it ever hits 70 again, jump all over it. DGX been very very good to me since March - I had like 40% of my portfolio in it at one point.
They are vulnerable to lack of elective medical care. But I feel like we’re mostly past that at this point - even if restaurants and bars have to shut back down.
We are absolutely not past that - anytime we hit hospital capacity or threaten it, those states will shut down elective procedures. You’re going to see it in AZ for sure, and likely in FL and SC soon.
I’m not sure about that. AZ is at hospital capacity. I feel like 3-4 months later hospitals have a better idea what they’re dealing with and how to protect against the virus. People are going back to the dentist. Etc.
Just about, not quite statewide they’re at probably 85-90% capacity, they’ll tip over capacity next week is my guess. Some hospitals are over capacity, and it sounds like Phoenix and Tucson are at the brink, but they haven’t quite gone over yet.
I can’t imagine them keeping elective procedures going and letting COVID patients die in the lobby. If it happens, it’s almost certainly only going to happen in the reddest states with the Trumpiest governors.
I think shutting down elective procedures is really about freeing up beds at this point, not protecting people in one wing of the hospital from the people in the other wing.
Maybe - but iirc there were plenty of extra non-ICU beds empty last time, and facilities, and doctors and nurses sitting idle - getting laid off, etc. I don’t think the problem was physical space or lack of capacity. It was people being scared to go near a hospital or doctor.
I would predict there are probably plans in place this time to try to keep that stuff open no matter how bad the ICU ward gets - since it’s their big moneymaker.
Maybe @Will1530 can chime in?