2018/2019 Bear Market
- Thread starter The Beast1
- Start date
Johnnyvee said:
The Fed is supposed to engineer a smooth landing, but looking at their actions they're trying to tank the economy to fuck with Trump.
I'm not a conspiracy theorist, but I don't see any other way of interpreting it.
The hedge funds/bankers/elites will profit from the volatility and regular citizens will get fucked.
edlefou said:
If Trump can`t convince (or get rid of in some way) Powell to change the Fed policy, I really don`t see much upside in the US market. If the Fed increases the rate to 2.5, I think we could see an escalation where it starts to look like a serious crash.
My best guess is that they won`t do that. I`d be surprised if the Fed doesn`t cave and lower rates again, otherwise it`s adios Trump 2020.
DamienCasanova said:
Does that imply that capital markets downturns are time-based, rather than linked to economic fundamentals? If so, what is the exact "time" in which a recession is indicated? Did you know Australia has gone over 25 years without a recession? If not, why mention it?
DamienCasanova said:
What """Tricks""" are those? Are you sure these are "tricks", and not people simply behaving in their own economic self-interest, which is the fundament of capitalism, and which happens pretty much every day, in every arena of the natural world?
The shortest of the short term rates, the fed funds rate, is presently 2.25-2.50%...which corporation borrows at < 1% currently?DamienCasanova said:
DamienCasanova said:
Which reads to normal people, "Manufacturing has recently made a big comeback".
DamienCasanova said:
So you should be happy that it's been over for some time, no?
DamienCasanova said:
Guess not :/
DamienCasanova said:
What "bill", exactly, "comes due" when a company buys back its own stock?
Also: You do realize that the Fed only sets the short end of the curve, the market sets the long end of the curve, and that the 10 yr is all the way up to....2.74%, right? Historically among the lowest its ever been in an expansion. Liquidity is strong and few companies have had trouble rolling their debt, unless they have had fundamental issues that should prevent them from doing so (i.e., exactly how the system was intended to work).
DamienCasanova said:
I read: "There are two types of people in the U.S. - people with some combination of smarts, work ethic, guts, ambition and/or entrepreneurship that allows them to make more than the average income, and those with few or none of the above which results in them making less than the average. The latter group also make an other thing: Incoherent and uninformed posts on economics that wreak of jealousy.
Mr. Accuride said:
Lemme guess...you were also very long on bitcoin with a substantial allocation of your portfolio once, weren't you? And you smoke/gamble/take pills or show other indicators of an addictive personality, don't you? The reason i say the latter is that what you're doing is extremely dangerous/aggressive gambling. Usually people who do that exhibit addictive behavior in other aspects of their lives.
Days of Broken Arrows said:
THANK YOU FOR POSTING THIS!! If there is anything this thread needs, its a well-researched bible of investing history to use as a lens through which to view the current volatility.
Days of Broken Arrows said:
I have read this book several times, and such demonstrative claims ("when x happens, y always follows") strike me as the exact antithesis of Malkiel's research. Just to be sure, i pulled out my copy (2015 version) and looked for any language on interest rates, federal reserve actions - anything close to what you said.
Here is Malkiel's actual language on the topic of Federal Reserve hikes:
"The [1929] crash itself, in [Bierman's] view, was precipitated by the Federal Reserve Board' policy of raising interest rates to punish speculators".
That's all I saw, but feel free to quote the book directly is you saw something I missed.
Days of Broken Arrows said:
It's like you read this wonderful book, and didn't internalize any of it! The THEME of the book is: Capital markets are random. Don't jump in and out. Have a diversified portfolio of stocks and bonds and add to it consistently over time.
And that's the last thing I hope to say on this thread: All the nay-saying, know-nothing posts, conspiracy theory posts, etc - it's maddening.
Malkiel's book is indeed one of the best (some say the best) investment book ever written. Or read "The Intelligent Investor" by Benjamin Graham (Warren Buffet's mentor). Or pretty much anything written by Buffet. They all say what most of you (the smart ones) know intuitively: Timing the market is a sucker's bet, for gambling addicts. Invest over the long term, and DIVERSIFY: Stock index funds, bond index funds, etc. Don't over-invest in any one stock, or sector, and don't jump in and out of the market.
redpillage said:
RP - good points I was in a hurry and just copied and pasted the current calls on my watch list to show they had dropped significantly with the impulsing major wave three down... with a likely subsequent Major Wave 4 Rebound...
In practice I never buy less than 90 day Puts or Calls and that is after confirming market top and bottom wave turns... if the time premium is not too expensive I prefer 6 month options - My June 2019 SPY 200 Puts I was holding for fliers for the MW5 Down leg were up about 105% briefly on Friday and after I fat fingered my Limit Sell I managed to capture 93% in about 4 days money at risk - always take profits when they come as they always erode when things come back to balance - so the discipline is to confirm turns and direction of trend - giving up some % and trade options with a 3 to 6 month expiration that can benefit from both the intrinsic value and longer-term time decay - the rate of acceleration also has a rather dramatic effect on price - idea to capture acceleration is to buy out of the money with target near or at the money for max return. Of course, you pay extra for that time premium but in markets with 50+ Daily and 90+ Weekly Average True Range (20 Day SMA) volatility you can justify longer time premiums and they tend to spike more with up or down acceleration.
Is the once great GE Going to be flushed down the toilet - NO, is it going to be sold to China for pennies HELL NO - WHY you Ask? Because GE is approx #39 on the Federal Top 100 Prime DoD Contractors list...
New CEO Culp used TSP Toyota Supply Program basically the new ISO/Deming Stats Quality Control/JIT to create 400% returns for Danaher Stakeholders and he is doing same now to Turn Around GE...
One of the tried and true two to 10 bagger+ strategies is to invest in previously great companies now on hard times but ripe for a turnaround. GE was $33.00 in July 2016 - trading today 26Dec2018 at 6.81 and 52 week low was several days ago at 6.66.
The VPVR POC on the 3 year daily chart from the above swing high to current swing low is in fact 30.34 and the 12 month POC is 13.81, therefore, the $15.00 calls had quite a bit of open interest outstanding holds of 228,158 on this option.
Therefore these 12 month in the future GE $15 Call options have a low time premium for the potential returns...
10 Call Options allows you to control 1,000 GE shares for only $155.00 and when it rebounds with some improving news over the next 4 quarters the returns on these options could be in the 5X to 10X range.
Date Order Type Order type Quantity Symbol Price type Term Price Price
12/26/18 630 Option
Buy Open
10
GE Jan 17 '20 $15 Call
Mkt Day Mkt
0.15
Total price $159.95 including commission on 10 GE Call Options
New CEO Culp used TSP Toyota Supply Program basically the new ISO/Deming Stats Quality Control/JIT to create 400% returns for Danaher Stakeholders and he is doing same now to Turn Around GE...
One of the tried and true two to 10 bagger+ strategies is to invest in previously great companies now on hard times but ripe for a turnaround. GE was $33.00 in July 2016 - trading today 26Dec2018 at 6.81 and 52 week low was several days ago at 6.66.
The VPVR POC on the 3 year daily chart from the above swing high to current swing low is in fact 30.34 and the 12 month POC is 13.81, therefore, the $15.00 calls had quite a bit of open interest outstanding holds of 228,158 on this option.
Therefore these 12 month in the future GE $15 Call options have a low time premium for the potential returns...
10 Call Options allows you to control 1,000 GE shares for only $155.00 and when it rebounds with some improving news over the next 4 quarters the returns on these options could be in the 5X to 10X range.
Date Order Type Order type Quantity Symbol Price type Term Price Price
12/26/18 630 Option
Buy Open
10
GE Jan 17 '20 $15 Call
Mkt Day Mkt
0.15
Total price $159.95 including commission on 10 GE Call Options
The Father said:
"The case for tightening credit before a major rise in the general inflation rate rather than afterward is that the longer the delay, the greater the eventual pain is likely to be in terms of lost economic output and rising unemployment. And so the central bank restricted credit and engineered a rise in interest rates. The hope was that further rises in property prices would be choked off and the stock market might be eased downward.
Interest rates, which had already been going up during 1989, rose sharply in 1990. The stock market was not eased down: Instead, it collapsed. "
"Again in 1987, interest rates rose substantially, preceding the great stock market crash of October 19. "
"On the other hand, when interest rates are very low, fixed-interest securities provide very little competition for the stock market and stock prices tend to be relatively high. During the 1990s, when bank rates on certificates of
deposit fell to 4 percent or less and long-term rates on U.S. Treasury securities fell to less than 6 percent, money poured out of the banks and the bond markets and into the stock market. This pushed up stock prices and, thus, provided justification for the last rule of the firm-foundation theory:
Rule 4: A rational investor should be willing to pay a higher price for a share, other things being equal, the lower are interest rates."
"Higher risk and higher interest rates tend to pull them down. There is a logic to the stock market, just as the firm foundationists assert."
"Changes in interest rates also systematically affect the returns from individual stocks and are important nondiversifiable risk elements. To the extent that stocks tend to suffer as interest rates go up, equities are a risky investment, and those stocks that are particularly vulnerable to increases in the general level of interest rates are especially risky".
"will be sensitive to the tendency of certain stocks to be particularly affected by changes in interest rates."
"First, an increase in the rate of inflation tends to "increase interest rates and thus tends to lower the prices of some equities, as just discussed."
"The volatility of interest rates constitutes a prime economic influence on share
prices".
"Specifically, when interest rates go up, share prices should fall, other things being the same, so as to provide larger expected stock returns in the future. Only if this happens will stocks be competitive with higher-yielding bonds. Similarly, when interest rates fall, stocks should tend to rise, because they can promise a lower total return and still becompetitive with lower-yielding bond"
"Obviously, in any given period there are many influences on stock prices apart from interest rates, so one should not expect to find a perfect correspondence between movements of interest rates and stock prices. Nevertheless, the tendency of interest rates to influence stock prices could account for the sorts of return reversals that have been found historically, and such a relationship is perfectly consistent with
the existence of highly efficient markets."
"An economic shock that raises general market interest rates will be associated with a decline in stock prices, which will lower realized returns. "
There´s more.
http://site.iugaza.edu.ps/wdaya/files/2013/03/A-Random-Walk-Down-Wall-Street.pdf
I never read this book. Just googled it and made search for interest rates. Was keen to know who could argue interest rates don´t affect stock prices. It´s somehow true true interest rates don´t affect stock prices directly. Interest rates affect the law of demand. And the law of demand will consequently affect stock prices.
You know why beach hotels are cheaper in winter? Or why umbrellas can´t be sold in summer? Law of demand. Interest rates makes the demand more expensive. And reduces the demand. Making general prices lower. You don´t need to have a PHD to know this simple fact of life.
If I want to sell a house and have 15 buyers maybe I will raise the price of the house. They will probably pay more. If there´s no buyer will have to lower the price. Buyers if interest rate goes up can´t buy the house. Because the effort to pay the monthly installment will be bigger. So your price cannot reach you buyer because the rate increase ate the space where your price and the buyer could connect. Everytime there´s a rate increase you are eating a chunk of an asset price. And because credit is transversal to all economy you take from the entire economy.
A recession is an economy without credit.
All prices are subject to interest rates. Also QE, fractional and all others. But interest rates can make the tide go up and down. (buffett)
Conspirational I would say it´s a way of calling back home the dollars from the world. Harvesting and fuck.. up China.
Back to topic. Trump saying BUY THE DIP!
Was never too huge a fan of "A random walk down wall street". For one thing, anybody who followed it during Bitcoin lost their shirt...
That said, the random walk hypothesis is a bridge too far for me. Markets aren't random, they're just the product of a LOT of inputs, and it's very difficult to separate signal from noise, even in hindsight.
The book's central point, which is that as an amateur you're better off playing with index funds and long-term Dollar Cost Averaging than trying to do a bunch of research to "beat the market" is a very sound one, and it's good advice. But lots of people saw the 2008 crash coming, and lots of people saw this one coming, too. Hell, I did. I noticed in Jan that a lot of money was going into the FAANG stocks not because there was a lot of growth potential there, but simply because people needed to stash their cash somewhere and the FAANGs had delivered good returns in the past. Noticing that saved me a lot of cash I would've lost if I'd blindly DCA'd into a vanguard fund.
Random Walk Down Wall Street is very right though, when it says that if you overreact to every drop and try to micromanage your funds you're going to lose a ton of cash.
Another thing I'll say is that people who try to construct narratives from charts (To use an example from this thread, something like "This drop is proof that the fed is out to get trump! They're going to send the economy to 2008 levels in order to help the deep state win!") tend to lose a LOT of money. I've done this before with BTC and always regretted it.
Another note I'll make is that I've never seen a significant inverse correlation between bitcoin price and the dow, so people who are hoping that a dow drop is likely to trigger sustained price rises in bitcoin are very likely to be disappointed. This recent price rise in bitcoin was triggered by reaching a critical support area and very likely might just be a dead cat bounce.
That said, the random walk hypothesis is a bridge too far for me. Markets aren't random, they're just the product of a LOT of inputs, and it's very difficult to separate signal from noise, even in hindsight.
The book's central point, which is that as an amateur you're better off playing with index funds and long-term Dollar Cost Averaging than trying to do a bunch of research to "beat the market" is a very sound one, and it's good advice. But lots of people saw the 2008 crash coming, and lots of people saw this one coming, too. Hell, I did. I noticed in Jan that a lot of money was going into the FAANG stocks not because there was a lot of growth potential there, but simply because people needed to stash their cash somewhere and the FAANGs had delivered good returns in the past. Noticing that saved me a lot of cash I would've lost if I'd blindly DCA'd into a vanguard fund.
Random Walk Down Wall Street is very right though, when it says that if you overreact to every drop and try to micromanage your funds you're going to lose a ton of cash.
Another thing I'll say is that people who try to construct narratives from charts (To use an example from this thread, something like "This drop is proof that the fed is out to get trump! They're going to send the economy to 2008 levels in order to help the deep state win!") tend to lose a LOT of money. I've done this before with BTC and always regretted it.
Another note I'll make is that I've never seen a significant inverse correlation between bitcoin price and the dow, so people who are hoping that a dow drop is likely to trigger sustained price rises in bitcoin are very likely to be disappointed. This recent price rise in bitcoin was triggered by reaching a critical support area and very likely might just be a dead cat bounce.
Troller said:
You've quoted the 1999 version. Your own link says so. Over the years, the author has removed the references you cite. Not sure why, but obviously he no longer felt they merited being in the book. In any event, one citation you make says interest rate hikes "tend to" reduce stock prices - no one would argue with that, and anyone who's done basic math understands that if you increase a discount rate applied to future cash flows, all else equal, you get a lower PV. But what i did (and still do) object to was using this masterpiece of investment advice - who's central theme is "we don't know what will happen next, so never time the market" to imply the opposite, by (falsely) asserting that it said, and i quote,"the market always heads into a tailspin when interest rates are raised." That's the actual quote the OP said. I object to it because it implies that, if there are fixed rules, one can game them. To repeat, the central theme of the book (which i encourage you to read) is: Market timers always lose. Buy-and-hold investing in a diversified portfolio is the empirically-proven highest return. But please - by all means, treat the markets like a casino. Over 85% of stock market buying and selling is algorithmic trading by institutional investors. The only way to make any real money exploiting stupidity would be with inexperienced or stupid retail investors. I.e., i will personally do better if you ignore the author's advice.
SamuelBRoberts said:
Not sure I follow. Anyone who followed the book invested no more than maybe 5-10% of their portfolio in crypto, an unproven asset class at best, and one with a small sample size of historical returns.
Why do you think anyone who followed Malkiel lost their shirt on shitcoin?
The Father said:
Wasn't anybody who followed Malkiel, just those in the bitcoin sphere who did.
They failed to pull out when things turned sour, because pulling out meant trying to "time the market". The smart money pulled out with huge returns while the guys who continually DCA'd in even during the nasty bear market just got destroyed. How much of their portfolio they put into crypto I don't know, but I did know some people like that and they did get hurt very badly. In some cases they saw 3-4 digit percentage returns turn into losses because they were too slow to pull the trigger on selling. Pretty sad sight.
Troller said:
There's just one problem: Housing prices have gone up when interest rates have risen. And crashed when interest rates have risen. They've gone up when interest rates have declined. And crashed when interest rates have declined. In an academic, all-else-held-constant environment, rising discount rates will decrease asset present values in a predictable manner. The problem is, highly liquid capital markets are not predictable over short periods of time. They have been, historically, very predictable over long periods of time: They go up, and they are mean-reverting.
Making no changes whatsoever. Continuing to max out all retirement accounts into funds with an aggressive mix of stocks vs. bonds. I'm relatively young with good cash flow so I'm ignoring the waves.
SamuelBRoberts said:
This is also the reason too many men pay child support...
Neo said:
Young, and buying bonds. :huh: