The 2020 Stock Market Crash Thread
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I always turn to the Stock Gumshoe:
Travis does his research well.What’s this “Apple-Fi” Business from Ray Blanco? | Stock Gumshoe
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This review was quite informative... Special thanks to Tail Gunner for the StockGumshoe site.
What’s this “Apple-Fi” Business from Ray Blanco? | Stock Gumshoe
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I still think I'd take MSFT over all the rest. If I had to. I feel much more confident, though, in commodities that will steadily increase in value over time with absolutely no roller coaster aspect to worry about.
The first Q2 GDP estimate for the US came out Thursday:
Down 33%.
Down 33%.
What are people's thought's about withdrawling part of one's 401-K at this time of economic crisis this summer to payoff one's house? My house is in a very desirable rural (wooded/no neighbors) yet only a 15 min. drive from all of the suburban amenities. so its a very desirable spot and I cant envision it is in a high risk area for a big drop in value. I currently only have about 3 years worth of my current income levels stashed in 401K however so my retirement might not be traveling the world but basket bingos and Sr. coffee at McD's instead. I have 8 years to go to payoff my house. I have ~17-23 years I'm estimating to still have to work before retiring (depending on where my 401-K is at).
If I pay off the house now I was considering drastically increase % from paychecks into 401-K to try and recover before I got used to any surplus of income that would be squandered away in consumables (so I'd but probably would put it mostly into bonds/cash until the next big drop in market comes along)
Thoughts/strategies?
If I pay off the house now I was considering drastically increase % from paychecks into 401-K to try and recover before I got used to any surplus of income that would be squandered away in consumables (so I'd but probably would put it mostly into bonds/cash until the next big drop in market comes along)
Thoughts/strategies?
Paying down your house is always a safe bet, and not having to have that mortgage payment in the future economy could be a big help. Consider what your interest rate is, and how much you would save in interest over the next few years.
Since you were talking about the desirable location of the house, perhaps you're thinking of selling it? In which case I would consider putting money into it.
The Stock Market seems in a really erratic place right now, and I would think riskier than real estate in terms of securing your capital. We've had a good bounce back, but with the 33% decline in GDP shown above, how long can it hold out I don't know.
I think that 33% in annualised. Maybe @Deepdiver knows. So for 2020 so far that is about 10% decline in total; and you have to remember the government has borrowed about 15% of GDP for stimulus.
The numbers out of Europe are about 10% for this quarter. I assume that is not annualised and so Europe is probably more like 12.5% so far this year. We could be looking at 15-20% overall.
I don't know about US retirement funds, but as per the GDP number above, we are looking at a double recession, or depression. The 2008 crash took about 7% off GDP. This time we are looking at 15%. I saw economists predicting roughly that figure earlier in the year.
If it was not for stimulus, I think stocks would be down over 50% right now. The powers that be have held them at close to record highs with 15% of GDP in borrowed stimulus and more to come. I thought The US would hit about 150% debt to GDP in the window 2027-2030, but it looks like that could be hit next year, especially when you consider GDP is going to be down about 15% this year.
My take is that their propping this up can only last so long? They can't borrow 30% of GDP every year. And as such I have and would sell all stocks. I have only kept hold of gold/silver mining stocks. Right now the market is near all-time highs, with the most insane EPS ratios ever, against a backdrop of the worst economic numbers in living memory.
As for the mortgage. My guess is that the market will take a huge hit, even outside of the cities and I don't think it will recover to these bubblish levels.
With that said you've got the mortgage at a fixed price, so it ain't moving. My take is your stocks will be worth a lot less this time next year, while your mortgage principle would be the same. So if I was you I'd be looking at one of two routes:
1) take it out of stocks and pay off the mortgage
2) take it out of stocks and sit in it in cash, and maybe some genuinely HQ bonds, then reinvest it when markets are down at least 50%
The caveat to this is it is likely The Fed and other central banks are going to start buying stocks to prop them up. Japan has been doing this for about ten years and their central bank now owns 8% of equities and half of government debt. The UK central bank also holds a large amount of UK gilts. I assume The Fed already has a hand in that pie.
As a result it is debatable how much markets will crash when the debt avalanche inevitably begins.
Personally, I am losing interest in developed markets because we are looking at so much manipulation holding prices way above where the market would set them.
Another possibility is that after the crash there could be several years of decline/stagnation in stocks.
Of the three options:
1) hold your stocks <- I feel this is the most risky
2) pay off your mortgage <- I feel this is the safest bet
3) sell now and try and buy back, moderate risk, highest return
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We mostly agree (especially about the coming meltdown) but I'll add one more piece of information. Japan has been buying their stock market for... more than a decade now? Look at the price. They can't even get it back to all time highs with all that buying. I don't have any faith in the govt or Fed to keep it going, not in global depression.
However, like yourself, I've lost interest in our market. I made a good sum in March and am waiting on the sidelines for other investment opportunities.
That is one of my worries too. You could buy into the S&P, or whatever at a big discount and wait for 10-20 year and never see it come back. I don't think it will happen, but it is a considerable possibility. I think the difference is that The US is still going to be the center of global inovation for the foreseeable future. Japan didn't manage to get a strong enough foothold in that position, since like other Asians they mainly just reproduce Western innovation more efficiently.
I'm meaning to set up brokerages for Vietnam and Malaysia, which are not easily accessible. But it is that inaccessibility that makes them more interesting.
I'm also considering pulling most of my money out of banks and putting it into crypto, as the legacy banking system is too slow and overbearing. You don't really own what you hold there and are subject to never ending paper work.
You have to remember though that this is the annualized rate, in special circumstances like now not a good way to describe what is going on. The quarter to quarter figure is -10.2%.The first Q2 GDP estimate for the US came out Thursday:
Down 33%.
I'm thinking step 1: Move all my 401-k funds out of stocks/mutual funds and into money market/bonds. Right now, I'm 25% cash/ 75% stocks, so basically I'm moving over remaining 75% of the portfolio into cash/bonds. This should protect me from the next big market drop (assuming the market doesn't crash on Monday 3rd of August when I plan to do my moves).
Step 2 (take 30% penalty/loss on early withdrawl and payoff house), I should have a little more time to consider the best options prior to this action. My house is on a 3.5% fixed rate, and will be paid off in 8 years (from a 15year fixed rate loan). So right now, I'm getting more heavy into principal than paying interest each month.
Step 2 (take 30% penalty/loss on early withdrawl and payoff house), I should have a little more time to consider the best options prior to this action. My house is on a 3.5% fixed rate, and will be paid off in 8 years (from a 15year fixed rate loan). So right now, I'm getting more heavy into principal than paying interest each month.
Step 1 is just a quck/safe fix to buy a little more time to make a decision on paying off the house. So my 30% penalty for withdrawl would be loss of ~$65K
I figured I have ~$21K in remaining interest to pay into my mortgage if continue with current monthly payments .so the net loss is reduced to ~$44K.
I realize the interest rate is low, for for $44K I would have all of the anxiety/stress of being out of work for a long period of time, and not being able to pay my mortgage and lose the house. Never had much fear of that over last 25+ years until this recent economic situation we're in right now, which has me concerned that alot of people may be in for potential for long-term unemployent situations.
That makes your idea even worse then. If your concern is being out of work, you should want to keep as much cash as possible. There are even emergency clauses where you can remove funds from a 401k in the event of an emergency for a lesser penalty. So sure, move your investments to cash (even though your about 6 months late) and hold onto that cash until an event actually happens. If it does, you still have the option to pay off the house later.
There is no need to take a permanent penalty until necessary, especially if the funds are already cash. You may need that 44k later in life. Wait till an event actually happens, and there may be better options like an emergency withdraw or 401k loan that are better than a straight withdraw and 30% penalty.
Very good points. I think I'm leaning the way you are thinking (just moving from stocks to cash and not paying off the house with the -$44k penalty).
There is way too much fear mongering in some of these recent posts. Yes the market may (or may not) decline in the next few months but there's no need to touch your tax advantaged accounts unless there's a drastic circumstance that warrants such a move.
Bubs, if you actually have a 3.5% fixed rate mortage, that is very attractive long term rate and you should NOT pay off the principal if you can find a solid income stream to support the mortgage payment. Obviously desperate times will warrant different circumstances but most people just don't pay their mortgage if it comes to that (worst case) or they negotiate with the lender and figure out a plan. Taking out money from your savings is a poor idea unless there's no other option.
Bubs, if you actually have a 3.5% fixed rate mortage, that is very attractive long term rate and you should NOT pay off the principal if you can find a solid income stream to support the mortgage payment. Obviously desperate times will warrant different circumstances but most people just don't pay their mortgage if it comes to that (worst case) or they negotiate with the lender and figure out a plan. Taking out money from your savings is a poor idea unless there's no other option.
Yep. Just read the last few months. You would’ve thought stocks would be floor level right now, and whoever followed the board’s general advice would have a lot less to show for it.
A lot of us have strong stock portfolios that just aren’t going anywhere, and it seems the advice is always detrimental to that