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Trading halted as U.S. stocks plummet

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Re: Trading halted as U.S. stocks plummet

#731

Post by manigandham »

santoriv wrote: post #704
totalZero wrote: post #667

Earlier quoted context omitted.

> As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. Sure you can. You develop a system, learn how to find information, and make good predictions of future human behavior. You should learn the ins and outs of the product you're trading.

Very few active fund managers can consistently beat their indexes. Why do you believe you would be better over a long period of time? Vanguard Study of Actively Managed Funds vs Index Performance: https://personal.vanguard.com/pdf/ISGIDX.pdf

Note that report is Vanguard marketing material and most managed funds have specific mandates (like maintaining a certain volatility or investing in certain securities) other than maximizing gains.

This is why hedge funds underperform indexes in bull markets but beat them in turbulent times.

Re: Trading halted as U.S. stocks plummet

#732

Post by arbuge »

aazaa wrote: post #531
cletus wrote: post #315

So, children of summer (there are many here who have only known the longest bull market in the last century), let me give you some free advice. If you're looking at this and wondering when to get in, to bargain hunt essentially, and you're asking yourself questions like "today? next week?", you need to step back and think again. Some points to consider: - If your time horizon is 10+ years out probably none of this ma…

Don't forget the part where the Fed swoops in, making a murky situation even murkier with market manipulation. Expect a massive rally when the Fed announces QE4. Buy the rally at your own risk. The largest DJIA rally in history (15.34%) occurred in the middle of the Great Depression in 1933. Second place was yet another Depression-era rally of double digits. https://en.wikipedia.org/wiki/List_of_largest_daily_changes…

> Only consider buying stocks when nobody but nobody thinks it's a good idea. When "buy the dip" has utterly left the popular vocabulary. When dividends + valuations are at bargain-basement levels.

I would say the above is definitely true for certain sectors of the market now. Energy (oil & gas) comes to mind. Perhaps banks and emerging markets too.

The broad market, on the other hand, isn't even down 20% yet.

Re: Trading halted as U.S. stocks plummet

#733

Post by jfengel »

phreeza wrote: post #720
evanpw wrote: post #707

Earlier quoted context omitted.

Gold is a single concentrated bet, not really comparable to a stock-market index, and the Nikkei shows why it's important to diversify outside of your home country. For almost everyone, "buy the global market portfolio and forget about it" is the right advice.

While I agree that this advice is better than picking stocks, something always rubs me the wrong way when it is repeated like it is an absolute fact. Like they say in the commercials, Past Performance Is No Guarantee of Future Results. I can't say what form it will take, but I can definitely see a future where the pendulum swings back from ever more indexification.

I agree with you. I believe the biggest problem with indexification is that it encourages a generic flow of money into the market, regardless of whether the market can handle it or not. Although the market isn't just gambling, and there is real underlying value, it's not an infinite source of value to give returns to anybody buying into it. Eventually there can be too much money chasing too little corporate earnings, and the market gets overpriced.

I don't think it's unreasonable for a person with spare cash to expect to get a reliable 5% or so long term just from the inevitable progress of technology. That may not continue forever, but if it ends, the problems will be bigger than just what index fund to purchase. The world will be a very different place.

(Or the market could be, if people stop seeking to raise capital there, but that's also a very different future and hard to predict.)

Re: Trading halted as U.S. stocks plummet

#734

Post by phreeza »

jfengel wrote: post #700
phreeza wrote: post #677

Earlier quoted context omitted.

The counterexamples that have been brought up elsewhere on this post are Gold (still below 40 year high) and the Nikkei (still below 30 year high).

The Nikkei high was wildly artificial; its price-to-earnings ratio indicated that there was an enormous bubble. The US stock market is (probably) currently inflated, but by a factor closer to 2 (or less) than 10. (I've looked less into the price of gold, which has a weird place in people's minds and would require a lot more research than I've put into it.) It's entirely possible, of course, that the US is entering a…

Could it be that the E part of the P/E Ratio is currently also significantly inflated? For the tech sector I could definitely see that happening due to the influx of VC money, causing unsustainable b2b spend on cloud&ads, which currently show up as earnings for FAANG but may quickly subside when VCs pull out?

Re: Trading halted as U.S. stocks plummet

#735

Post by darawk »

lukewrites wrote: post #717
leakybit wrote: post #710

Earlier quoted context omitted.

Unless you use robinhood which has no transactions fees.

There are still costs to your transactions, not least of which is the information gulf between you and an institutional investor with a Bloomberg terminal.

Not really. The only cost to your transaction is the bid-ask spread, which is extremely tight in liquid US equities.

Re: Trading halted as U.S. stocks plummet

#736

Post by edraferi »

tunesmith wrote: post #676
arcticbull wrote: post #454

Earlier quoted context omitted.

2% of humanity is absolutely, in no way, shape or form about to die. The Korean numbers are approaching 0.5% case fatality rate, and those numbers continue to fall. It's about the same as the flu, and no, the flu isn't killing 2% of humanity either. Y'all need to settle down and get back to work.

South Korea's fatality rate will be somewhere between "deaths / confirmed cases" (currently around 0.7%) and "deaths / (deaths + recoveries)" (currently around 28.5%) - those numbers will eventually converge. What really matters though is to keep the raw number of confirmed cases low enough so that hospitals don't get overwhelmed. If hospitals get overwhelmed, fatality rates go up. So containment is key.

> What really matters though is to keep the raw number of confirmed cases low

Sure, as long as you mean "actually slow the spread of infections through responsible personal and social choices" and not "sandbag the numbers because it looks bad for you politically."

Re: Trading halted as U.S. stocks plummet

#737

Post by jay_kyburz »

tdfx wrote: post #679
badfrog wrote: post #492

Earlier quoted context omitted.

For reference, there have been 3,000 deaths out of 11,000,000 people in Wuhan. That's 0.03% of the population dead and the number of new deaths per day is declining. If the rest of the world comes even close to being as good at quarantine as Wuhan, we'll be way under 2%. Source: https://en.wikipedia.org/wiki/2019%E2%80%9320_coronavirus_ou...

Based on the US and Iranian responses, it seems a substantial portion of the world will not come remotely close to being as effective at quarantining as Wuhan. Wuhan appears to be the maximum effectiveness, not the average.

Yeah, there is no way Police will drag people off the street or weld people into their homes in the US or here in Australia.

I think a lot of people would rather just let the virus spread.

Re: Trading halted as U.S. stocks plummet

#738

Post by evanpw »

phreeza wrote: post #720
evanpw wrote: post #707

Earlier quoted context omitted.

Gold is a single concentrated bet, not really comparable to a stock-market index, and the Nikkei shows why it's important to diversify outside of your home country. For almost everyone, "buy the global market portfolio and forget about it" is the right advice.

While I agree that this advice is better than picking stocks, something always rubs me the wrong way when it is repeated like it is an absolute fact. Like they say in the commercials, Past Performance Is No Guarantee of Future Results. I can't say what form it will take, but I can definitely see a future where the pendulum swings back from ever more indexification.

I agree with your first part, but not the second. Even if there's a future where the total market has zero (or negative) return on average in the long term, it doesn't mean that it's any easier to find the temporary exceptions. And lower volatility is still good even if everything has zero expected return, so diversification still helps.

Re: Trading halted as U.S. stocks plummet

#739

Post by allovernow »

the_gastropod wrote: post #326
allovernow wrote: post #279

Earlier quoted context omitted.

What? That's how you minimize risk because there's a good chance the markets will continue to slide. It's literally why the markets are down - because investors are pulling out and parking their cash in safer havens.

I think you're missing the point "Nobody can time this" and "If you haven't already, put your retirement into bonds and hold on" are completely at odds. Pulling out of equities to buy bonds is timing this. People should have an asset allocation, and stick to it. Right now, people should be re-balancing by selling off their now overweight bond allocation to buy equities. What you're suggesting is counter-productive.

Look, until two weeks ago my 401k was tracking 14% gains. By gradually moving it over the last week and last night, I've locked in 10% gains. The alternative would have been 0% gains as of today (market is back about where it was when Trump was elected) and losses in the likely case that the market continues to slide this week.

At this point we have likely entered recession or depression territory. The rebound is unlikely to be instantaneous (unless a convenient cure is found) and when things calm down I can put my money back into the market starting from a 10% locked in gain.

Re: Trading halted as U.S. stocks plummet

#740

Post by _7fvc »

ttul wrote: post #625

I notice that there are many commenters here offering opinions on the future price of equities. Note that nobody has any idea where equity prices will be in one day, never mind one year or ten years' time. As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. So relax. There's nothing to do here. If you're contributing to a retirement fund,…

I used to subscribe to these investment talking points and believed in the US equity market. I adopted these attitudes from reading Warren Buffett, index fund, financial advice. These are sound principles. I occasionally revisit value investing, dollar-cost averaging.

But times are changing. The US equity market will unlikely to deliver exceptional returns. Buffett may have a strong bias since he started his investing career post WW2. Buffett may experience only the correlation between the US equity market growth and global growth. Investment return is likely non-ergodic. We're entering new terrority where exceptional returns may come from other assets.

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