The 2020 Stock Market Crash Thread

Sherman said:
I have been 100% in cash for several years. I am now looking for an entry point. A trader I follow says when the market bottoms out it is going to enter into a trading range for the next 10 years. In other words, it isn’t going to just bounce back like it did from the 2007 crisis. Once there is a trading range, then you buy at the bottom of the range.

Sounds good. If the Dow ranges between say 13,000 and 18,000 for 10 years, I would still have time after those 10 years to recover and make a decent amount before I get old.

I often remember though that the 1929 market crash didn't full recover until 1946. So it has happened in the past. I may have jumped the gun today, but I thought moving a little over was worth the risk.
 

Ember

Ostrich
Gold Member
The Fed is 'printing' between 1.5 and 3 trillion dollars before the end of next month. It still may not be enough.

Bazooka Fired: Fed Unleashes $1.5 Trillion Repo Bailout, Expands "Not QE" To QE5

After increases in its repo facility twice already this week, from $100billion to $150billion to $175billion per day, and adding added a new 1-month term repo facility, the New York Fed just stunned the market and fired its biggest bazooka since Lehman (not coincidentally, just moments before today's 30Y Treasury auction, as a failed auction would mean, well, game over), by announcing a total of $1 trillion in 3-month repos over two days ($500BN today, $500BN tomorrow), as well as an additional $500BN in one-month repos offered weekly, which means up to $3 trillion in cumulative repos (if fully allotted) may be online by the end of the month.

But wait, there's more, because the fed also finally threw in the towel on the semantics bullshit it was pulling since Sept 2019 by pretending that "QE" is "NOT QE", when it officially expanded not-QE/QE4 to Q5, when it announced it would start purchasing coupon Treasuries as part of its POMO operations, which as a reminder, was the official trigger transforming Not QE into QE .

For some context of how that compares to what they have been doing, assuming full allotment on the 2 $500BN repos...

bfmB203_0.jpg



Some parting thoughts following this historic announcement: this was by far the biggest bazooka the Fed has fired since the financial crisis, and... it may not be enough. In fact, stocks are still deep in the red, which means one of two things:

i) The Fed's credibility is now shattered
ii)The market expects a fiscal bailout, or some MMT-esque combination of both.

Until and unless the markets gets what it needs, the Fed is now a sideshow and in fact, if this bazooka fails, Powell may consider submitting his resignation this week.
 

Sherman

Ostrich
It_is_my_time said:
Sherman said:
I have been 100% in cash for several years. I am now looking for an entry point. A trader I follow says when the market bottoms out it is going to enter into a trading range for the next 10 years. In other words, it isn’t going to just bounce back like it did from the 2007 crisis. Once there is a trading range, then you buy at the bottom of the range.

Sounds good. If the Dow ranges between say 13,000 and 18,000 for 10 years, I would still have time after those 10 years to recover and make a decent amount before I get old.

I often remember though that the 1929 market crash didn't full recover until 1946. So it has happened in the past. I may have jumped the gun today, but I thought moving a little over was worth the risk.

You can still get out with a profit if there is a short covering rally.
 
Sherman you also sound very informed. I'm not using you or Tail Gunner for investment advice, I am just trying to gather a consensus. If you had to guess, what range do you think the Dow bottoms out. My personal guess is 12k to 15k.
 

balybary

Pelican
Coronavirus: European market index sees worst day in history

https://www.eveningexpress.co.uk/ne...opean-market-index-sees-worst-day-in-history/

The European stocks index has ended the day with its biggest loss on record.

The Stoxx Europe 600 index, which measures major stocks across the region, fell 11.5% on Thursday, its worst day on record.

It eclipsed the 8.5% drop during the 1987 stock market crash.

Britain’s FTSE 100 fell 10.9%, its worst loss since 1987.

Germany’s DAX plunged 12.2%, which is more than it lost after the attacks of September 11 2001, France’s CAC 40 12.3% and Italy’s FTSE MIB a massive 16.9%.
 

Tail Gunner

Hummingbird
Gold Member
It_is_my_time said:
Tail Gunner, you seem very well informed. I haven't followed stocks as much as the forex markets. I have a plan to start buying Dow below 22k, then 20k and 2k increments on the way down. When it stops going down I stop buying in. I have a decent amount of cash I can't touch anyway. If the Dow gets below 15k, I will take cash in my savings account that I can touch and start buying in with it.

Does this sound legit or am I jumping the gun too much and we might be heading for a Dow of sub 10k?

There is no way to tell. This could still be a severe correction (say 30%) with a gradual recovery, a recession with a bear market, or a 2008 type financial panic. It is way too early for anyone to tell. IMO, look for a basing pattern to form first. If that is what Sherman meant by "Once there is a trading range, then you buy at the bottom of the range," then I agree with that sentiment.

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Sherman said:
I have been 100% in cash for several years. I am now looking for an entry point. A trader I follow says when the market bottoms out it is going to enter into a trading range for the next 10 years. In other words, it isn’t going to just bounce back like it did from the 2007 crisis. Once there is a trading range, then you buy at the bottom of the range.

The markets did not bounce right back after the 2008 financial crisis. It took the S&P five years to break even.

https://www.rooshvforum.com/thread-60358-post-2008169.html?highlight=exit+plan#pid2008169


The same five year-period for the DJIA:

https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart


It took the NASDAQ about 17 years to break even after its 2000 high.

https://www.macrotrends.net/1320/nasdaq-historical-chart
 

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Sherman

Ostrich
It_is_my_time said:
Sherman you also sound very informed. I'm not using you or Tail Gunner for investment advice, I am just trying to gather a consensus. If you had to guess, what range do you think the Dow bottoms out. My personal guess is 12k to 15k.

This is the most overbought market in history. Prior pullbacks were between 40-60%. You would have to do a fundamental analysis to see where price comes back to fundamental value. Also, once a vaccine is developed the coronavirus scare is over (could be in a year).
 

Coja Petrus Uscan

Crow
Orthodox Inquirer
Gold Member
Not surprisingly, as gold fell around 10% Peter Schiff is out trashing crypto:


These asset hawks are best to avoid.

It is difficult to tell what will happen here. In other circumstances stocks and particularly crypto would be a buy.

I think the best lead we have to look at is the Shanghai Comp Index, which has recovered most of it's losses.

On crypto. It's now obvious it's not a safe haven for recession. Though I think ETH can't go much below $100. The hands for ETH have been tested for about 18 months and I doubt they will shake much below that price.
 

Roosh

Cardinal
Orthodox
Incredible reversal of fortune for Trump and his reelection campaign:

[attachment=43192]
 

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Foolsgo1d

Peacock
The central banks are doing what they've always wanted to do and the debt they are loading people with will never be paid back. More control for them.

We knew this was coming when the Wall St bankers met Trump with the Fed at the whitehouse the other day. "Please sir, can we have more?"

Most people see it as Trump coming to save the day by making sure industry's dont go belly up but in fact they should be saying no to this debt load. They should be allowed to fail.
 

Lampwick

Woodpecker
Gold Member
gework said:
Not surprisingly, as gold fell around 10% Peter Schiff is out trashing crypto:


These asset hawks are best to avoid.

It is difficult to tell what will happen here. In other circumstances stocks and particularly crypto would be a buy.

I think the best lead we have to look at is the Shanghai Comp Index, which has recovered most of it's losses.

On crypto. It's now obvious it's not a safe haven for recession. Though I think ETH can't go much below $100. The hands for ETH have been tested for about 18 months and I doubt they will shake much below that price.

Gold price is down about 4% today from what I see.

Year to date, Schiff's recommendations to sell US stocks, bonds and crypto to buy gold look pretty good so far:

GLD: +2.5%
SPY: -23.6%
GDX: -24.0%
BND: -4.3%
BTC: -18.5%
ETH: -0.8%

Obviously time periods are arbitrary, and I just selected YTD as means of comparison for this latest market turmoil.

Gold stocks (GDX) have gone down in correlation with the rest of the stock market, so that part of his recommendation hasn't come to fruition, at least not yet. But he has recommended gold stocks as a higher risk/reward play, and always recommends a strong gold position.

I think crypto has added vulnerability in this environment due to its dependency on a bunch of shady undercapitalized, interconnected exchanges. Also to Schiff's point, if crypto isn't a medium of exchange, and it isn't a store of value, what good is it exactly? The whole narrative has fallen apart.
 

Sooth

Pelican
Gold Member
I don't have any investment in the stock market, but I'm a little annoyed at the bitcoin thing. I have a small sum in BTC, and as you mention the narrative has been that it's not connected to the "fake money".

Luckily I only invested what I could afford to lose, and I got in quite early so I still have a long way to go before I actually lose any money, but...

Drives home the fact that worldly riches can be taken no matter what it is.
 

Foolsgo1d

Peacock
Its a free for all because people are realising the good times were where they leveraged themselves and need to get out. BTC, silver and gold take hits.

BTC will go up, as will gold but between then and now you're going to see a lot of bad stuff happening and free money given to the To Big To Fails.
 

Tail Gunner

Hummingbird
Gold Member
For at least the past year, Jared Dillion called for a portfolio of 65% bonds and 35% stocks. Everyone thought he was crazy, but he was just proven right. Everyone who held stocks over the past year has had more than a year's worth of paper profits wiped out, while bonds are way up in value.

I read his articles because I believed that most stocks are way over-valued, especially tech stocks with little cash flow. As we approach zero interest rates, he now believes that bonds have more limited utility. FWIW, he is now recommending this portfolio:

So we want a portfolio with less stocks, less bonds, some cash, some gold, and some real estate. What does that look like?

The 20/20/20/20/20 portfolio.

20% stocks

20% bonds

20% cash

20% gold

20% real estate

This is the benchmark we should be using for the next ten years and beyond.

Food for thought. You can read the full article here:

https://www.mauldineconomics.com/the-10th-man/asset-allocation-in-a-low-interest-rate-environment#
 

Dallas Winston

Ostrich
Gold Member
Oh great! the Fed pumped more liquidity into the system. Now, I can start going to bars again, and take a Caribbean cruise.

On another note, this isn't (wasn't even at highs) the "most overbought" market ever. The PE ratio on the S&P was a little high, but nowhere near as high as it was in 2000 nor 2008.

This year before the pullback started, the valuations (PE ) was slightly high, above long term averages, but not exceedingly.

From a technical standpoint , and as mentioned above, slightly fundamental standpoint, it was due for a pullback after that amazing run since Trump's election, if nothing else then just to let some steam out of that upward going chart.

However, the fundamentals were still pretty good, earnings were good, and the fed was supplying easy money. What needed to become a "normal" correction was pricked by a Black Swan event out of left field, the corona virus. The severity of which, is causing this correction to be much worse (a current (cyclical?) bear market) than it would have been.

Everyone thinking this is finally the popping of the "Everything Bubble!" and will drive us into a recession or worse may well be right. I'm still putting 50/50 odds on this being a cyclical bear within a secular bull market that started in 2009 and is still in place. In the event the secular bull market is still in tact, we are definitely at the late stages of it.
 

Foolsgo1d

Peacock
They dont want it to correct though? The big banks met with the Fed (which is owned by them) and POTUS. What do you think they were talking about? How to fund Corona medical bills for poor Americans or how to print to infinity?

The repo went ballistic this week and today they injected 1.5 trillion dollars - which was just good enough of a pump to last an hour and then it was all but gone. I wonder where that money went.

If the biggest bubble of them all, the debt bubble, starts popping nothing will save the system. Hope you have cash on hand incase the system locks up.
 

Tail Gunner

Hummingbird
Gold Member
robreke said:
Everyone thinking this is finally the popping of the "Everything Bubble!" and will drive us into a recession or worse may well be right. I'm still putting 50/50 odds on this being a cyclical bear within a secular bull market that started in 2009 and is still in place. In the event the secular bull market is still in tact, we are definitely at the late stages of it.

A bear market, which we just entered today, is typically a harbinger of a recession:

Thirteen times the S&P 500 has completed the requisite 20% plunge in the last 93 years. In just two of those episodes did the American economy not shrink within a year: 1987 and 1966. It works the other way around, too. Among 14 recessions over the span, only three weren’t accompanied by a bear market.

https://www.newsmax.com/finance/streettalk/bear-market-recession-chance/2020/03/12/id/958106/
 

Deepdiver

Crow
Gold Member
Bill Bonner's Dow Gold ratio perspective... Paywall Newsletter so copied recent email newsletter:

Federal Reserve Rate Cuts, Stimulus Prepare Economy for Recession
By Bill Bonner
March 4, 2020

The fall of the dollar is not the fall of the dollar… It’s the fall of the American empire.

– Hugo Chávez

RANCHO SANTANA, NICARAGUA – Bad action yesterday. But a big bounce is again in the cards for this morning. Bernie? C virus? Who cares? We’ve got Joe Biden and an even lower Federal Reserve rate!

We still don’t know which way the markets are going. But the confusion… absurdity… and volatility bespeak not merely a routine market correction, but a 21st-century nervous breakdown.

This giant Humpty of an empire – debt-drenched, bent by age and debauchery, befuddled by decades of wacky monetary policy – is slipping off the wall. And the Fed can’t do anything about it.

Clear Signal
Note what happened in our favorite indicator – the Dow-to-Gold ratio. As colleague Tom Dyson wrote here, its 200-day moving average crossed over to the downside. In other words, it gave us a “buy” signal. Buy gold that is. Dump stocks.

We didn’t really need the signal. Sticking with our core timing program, we buy stocks when we can get the Dow for five ounces of gold… or less. We stick with the position until the Dow stocks are worth more than 15 ounces of gold, then we trade our stocks for gold. Easy peasy.

The Dow-to-Gold ratio went over 15 in 1996. So the bulk of our money has been out of stocks ever since. (The exception is that our old friend Chris Mayer still manages a nearly permanent portfolio of deep-value stocks for us. We stick with it no matter what the stock market does.)

So we missed the fireworks from ’96 to 2000, when the Dow hit its all-time high in terms of gold. But we also missed the crash that followed… and the crisis of ’08-’09, too.

And now, stocks are nominally four times higher. Did we miss a 300% run-up? Nope. Because gold ran up, too. Measured in gold – the only true money – stocks are almost exactly where they were 24 years ago. And during those 24 years, we believe the empire peaked out.

In other words, with the gold we got when we turned in our stocks in 1996, we can now buy back into the market on the exact same terms.

But we’re sticking with our plan. We’ll hold gold until we can buy the Dow for five ounces.

But the Dow-to-Gold ratio isn’t the only thing cautioning us out of the stock market. There are two other warning signs…

Recession Ahead
First, take a look at the transports. According to classic Dow Theory, it’s the transports that tell you what is really going on.

The Fed might jive up stock prices generally… but the transports tell you if the goods are moving.

Trucks, trains, ships – all products have to get where they are going somehow. So, if there is no upward trend in the transports, a boom in stocks will be false… tentative… and short-lived.

And yesterday, while the whole market sold off, transports sold off even more. A midday report from MarketWatch:

The Dow Jones Transportation Average is falling 195 points, or 2.1%, and has given back everything it gained in the previous session’s big stock market bounce, and then some. All 20 index components were losing ground. […]

The Dow transports, on track for the lowest close since Jan. 7, 2019, had gained 0.9% on Monday after plummeting 14.9% over the previous six sessions. In comparison, the sister Dow Jones Industrial Average fell 2.5% on Tuesday, after soaring 5.1% on Monday, which followed a 13.0% drop the previous six sessions.

The Dow transports has now lost 18% since Jan. 16, when it closed at the highest level since Oct. 3, 2018.

And there’s one further straw in a strong wind: The yield on 10-year Treasury bonds – the common brick upon which rests the whole U.S. financial world – fell below 1% for the first time ever. Since consumer price inflation is running over 2%, the net real return for lending money to the feds is MINUS 1%.

This means three things: First, people are running scared. They want what they see as the safest refuge in the financial world – U.S. bonds. Second, the economy is softening. The falling T-bond forecasts recession ahead. Third, speculators expect the Fed to buy more T-bonds at higher prices.

Fully Addicted
Of course, it is not our place to advise the august Fed governors on how to do their job. But in the spirit of civic mischief we offer this little hint about how an Inflate-or-Die economy works.

Once you begin inflating… you have a period in which, by decisive and steadfast action, you can undo the damage and return to a more-or-less healthy and honest economy. That is what Paul Volcker did in 1980.

It’s too late for that now. When an economy becomes fully addicted to your funny-money stimulus, you can’t take it away. The withdrawal pains are so severe that, politically, it is impossible to do.

Businesses, larded up with debt, will fail. Rich campaign contributors will close their wallets. The voters will howl for more giveaways just as tax revenues decline and deficits soar.

And economists at Harvard and the International Monetary Fund will tell you that you are a fool for “withdrawing stimulus” when the economy needs it most.

So, you have to keep adding stimulus (inflation… liquidity… etc.). But it’s not enough to add what the market expects. That is the error the Fed made yesterday. A 50% rate cut had already been fully priced in.

“Buy the rumor, sell the news,” say the old timers. Speculators know as well as we do that the Fed is in an Inflate-or-Die trap. Then, when the Fed only cut the expected 50 basis points, they sold.

An economy that depends on inflation (more money and credit from the central bank) is inherently unstable. It can’t stand still. The feds have to up the ante all the time or it collapses in on itself.

So heads up, Jerome Powell. If you want to join Alan Greenspan on the “Committee to Save the World”… or join Ben Bernanke as The Atlantic magazine’s “Hero,” you’ll have to do better than a measly 50 basis points.

Regards,

signature
Bill
 

Coja Petrus Uscan

Crow
Orthodox Inquirer
Gold Member
Lampwick said:
Gold price is down about 4% today from what I see.

Year to date, Schiff's recommendations to sell US stocks, bonds and crypto to buy gold look pretty good so far:

GLD: +2.5%...

I think crypto has added vulnerability in this environment due to its dependency on a bunch of shady undercapitalized, interconnected exchanges. Also to Schiff's point, if crypto isn't a medium of exchange, and it isn't a store of value, what good is it exactly? The whole narrative has fallen apart.

The 10% is down from it's recent high at about $1,725.

I ended up loosing about 50% following Peter's endless calls to buy gold. This was back in about 2011 or 2012. I eventually cashed out for extra fuel in the 2017 crypto bubble that Peter said to avoid.

I am a customer of Peter's EuroPacific Bank. He has a number of mutual funds that have been loosing for years, up until last year when they, particularly the gold one, started having gains. He's also been hammering his investors to buy gold and his other underperforming products for years. While telling them to stay out of the US, which has performed much better.

He is now a broken clock that is right about once per decade.

Peter is one of the best on economic fundamentals there is. You'll avoid all the bubbles with Peter - the bubbles you can make very large gains out of. The market is not driven by people like Peter who are battened down to the fundamentals. They are driven by exuberance and now central bank funded bubbles.

The irony is that Peter is obsessed with blowing a bubble out of gold. He expects gold to cycle up into the thousands, selling at many times its commercial market price. And that the price should be artificially inflated by central banks using it as a reserve. No one will be doing anything with all this gold the will pay to have lying and vaults. The same kind of thing he criticises people for holding crypto for.

His bank is also great, because they have a direct account with The Federal Reserve and they keep 100% of deposits.

He is right about everything he says about crypto. It's unfeasible for BTC to be a medium of exchange on a large-scale to to it's deflationary nature. Anything is a store of value if you can sell it for more than you bought it for. Gold generally hasn't fared well in that sphere for the last ten years. Crypto has turned beans into retirements. Both have a bubble element to them, crypto being 99% bubble and thus the best to make gains in. In the long term I think crypto+ will spawn widely used products. Right now it't at about the stage the internet was when it had BBS.
 
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