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Trading halted as U.S. stocks plummet

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Re: Trading halted as U.S. stocks plummet

#871

Post by aeternum »

pram wrote: post #856
pbourke wrote: post #755

Earlier quoted context omitted.

> The US equity market will unlikely to deliver exceptional returns. With each passing day in this crisis, I think you can make the opposite case. Long-term risk in equities is going down, not up, as the market falls and stocks move toward relatively underpriced from relatively overpriced. Or am I missing something? The expected long-term return from investing $1 in the stock market now vs beginning of Feb is higher,…

The stock market was moving irrationally higher since November, and were not even at 52 week lows right now. So not necessarily.

The expected long-term return may still be lower than the historic average. However stocks are now significantly cheaper than now than they were in the beginning of Feb so it follows that yes, the expected long-term return from investing $1 is higher than it was in Feb.

Re: Trading halted as U.S. stocks plummet

#872

Post by anm89 »

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,…

>Note that nobody has any idea where equity prices will be in one day, never mind one year or ten years' time

This is more or less true.

> As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs.

This is patently absurd. It's an easily falsifiable statement which is a rare feat in economics. On average, the the average retail investor will not beat the market. That does not mean they can't. All you need to have is literally any correct thesis and the ability to execute on it and you will have an advantage over "the market". I'm not trivializing this, it's not an easy feat, but markets are absolutely full of inefficiencies, and it's obviously not impossible to do better than the average case. This is a complete misunderstanding of the efficient markets hypothesis.

BTW, I'm not recommending that anyone try to time markets.

Re: Trading halted as U.S. stocks plummet

#873

Post by mmhsieh »

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,…

Buying a low cost index will already cause you to beat most retail and most professional money managers. Knowing that fact will gain you an advantage over almost everyone that moves stock for a living.

Also, not too late. Getting out now is like getting out too early in Jan 2018.

Re: Trading halted as U.S. stocks plummet

#874

Post by aeternum »

_7fvc wrote: post #782
dnadler wrote: post #748

Earlier quoted context omitted.

What led you to the conclusion that the market will not behave as it has historically over the long-term?

I think the dynamic of the US equity market has changed. In the old days, you can balance your portfolio between stock and bond. This is portfolio advice from Benjamin Graham's The Intelligent Investor. We can no longer do this because interest rates are heading to 0. Bond investors don't make money from interest rates. Bond traders benefit from rate drop. Bond was an investment. It's now destroyed. We end up with ca…

The counter-argument to this is that even with the money being pumped into the market by the central banks, we are not seeing significant inflation in consumer goods.

This implies that the money is being put to work efficiently and resulting in productivity and QoL improvements for society as a whole.

Re: Trading halted as U.S. stocks plummet

#875

Post by mmhsieh »

dntbnmpls wrote: post #825
bytematic wrote: post #646

Earlier quoted context omitted.

Most people don't seem to understand that you don't pull all your retirement out at once, so the market going up or down doesn't really affect that

The problem is that nothing says markets will go up forever. Take japan's nikkei index. Dropped in the early 90s and is still down 50% 30 years later. Choose the "all" to see the entire chart. https://tradingeconomics.com/japan/stock-market It isn't a law of nature that the S&P or Dow has to regain its losses in X number of years. S&P can drop and stay down for decades which can absolutely affect retirees.

+1. it took about 3.5 decades to return to the levels of the pre-'29 crash. bear markets can indeed drag for decades. stockbroker happy-talk tends to gloss over these facts.

Re: Trading halted as U.S. stocks plummet

#876

Post by mmhsieh »

btrettel wrote: post #862
dntbnmpls wrote: post #825

Earlier quoted context omitted.

The problem is that nothing says markets will go up forever. Take japan's nikkei index. Dropped in the early 90s and is still down 50% 30 years later. Choose the "all" to see the entire chart. https://tradingeconomics.com/japan/stock-market It isn't a law of nature that the S&P or Dow has to regain its losses in X number of years. S&P can drop and stay down for decades which can absolutely affect retirees.

I took a graduate level measure-theoretic probability theory class. The professor had this rant about how "buy low, sell high" was a bad idea, it's all about how long you stay in the market. He had a mathematical proof that, if I recall correctly, only held if the random process is monotonically increasing in expectation, which of course is not guaranteed.

trading, frictional costs, and the asymmetric psychology of selling winners and riding losers are a better explanation for why buy low, sell high is a bad heuristic to aspire to.

Re: Trading halted as U.S. stocks plummet

#877

Post by kelnos »

throwaway34241 wrote: post #616
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…

> 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. > Bear markets are paved with the blood of optimists. I agree with exercising caution in the sense that trying to time the market is difficult and probably inadvisable in general, but I don't agree that people should be careful spe…

If someone is cash-heavy right now and is wondering if they should buy in, I would probably suggest dollar-cost averaging, perhaps with monthly buy-ins while the current craziness is going on (assuming someone is buying into things where there are no transaction fees).

So if someone has $100k to invest, maybe they buy $10k every month of their favorite index fund over the course of the next 10 months. If prices continue to drop, some of that money will buy at lower prices, but if they rebound over the next month or two, at least some of the money will buy at the (current) low price.

Then there's also the possibility of a dead-cat bounce somewhere in all this later on. Even if it looks like prices are going back up, they could drop again, and -- again -- there's still more cash to put in at various prices.

Re: Trading halted as U.S. stocks plummet

#878

Post by ltbarcly3 »

Der_Einzige wrote: post #828
FabHK wrote: post #757

Earlier quoted context omitted.

Buying lottery tickets totally works, someone can claim every week. https://xkcd.com/1827/

It's a lottery ticket except when an event happens that you know more about than most investors. In this case, investors are dealing with something they know nothing about - Epidemology. When black swans happen, you can EASILY beat the market. We've known that Coronavirus was going to get this bad for months. We know the R0 rate. We know the CFR. Markets completely failed to "price coronavirus in" Sometimes, you real…

I have no idea why you are getting downvoted.

Rollback to mid Feb. The stock market keeps hitting new highs. Tesla stock is trading for around 5x what it was trading for just weeks before. Meanwhile China is basically shut down and dealing with a deadly illness. The country where everything is made these days is in deadlock, and there's no reason to think it won't spread everywhere. Cases are popping up all over the world. The stock market keeps going up. I start telling people to get out of the market, and everyone acts like I'm a crazy person.

Stop and think about it, is Tesla worth 4x what it was 3 months earlier, when there was no covid as far as anyone knew? A company that loses money every year and can barely make as many cars in a year as VW makes every 2 weeks worth 5x more than VW? A company which makes less than 1% margin on it's best selling car? A company that could go bankrupt in less than a year in an economic downturn? A company that the market thought was worth 1/5 as much 4 months ago? People were saying it was going to $7000 a share. To be worth that it would have to sell every car made in the entire world every year, and people would have to buy 100x as many cars as they do now, by the year 2021. It's a story told by absolute lunatics.

I'm not saying I thought the market was going to crash today, there's no way to predict that. However, anyone who thought the market was not a bubble waiting to pop should not be investing. There are the people who knew it was overvalued and were trying to ride the bubble, the people who were waiting to short it, and people who are acting confused now and saying 'nobody could see it coming'.

Fastforward to now and my put options are up 300%+, and I'm going to hold them until they are over 1,000% up or they expire in the money. I guess it's just like the lottery, except where they tell you the numbers every day all day for weeks in advance.

It's now the evening of 9-March. I'm watching the US market index futures, which are up by almost 3%, and I'm just shaking my head. People think the market will start going up again? Italy just announced it is restricting every person in the country to their houses and only allowing essential travel. The US does not have a better medical system or a less elderly population than Italy, and we have not put in place any precautions or restrictions, other than strongly encouraging people to not get on cruise ships, which they just announced last night, weeks after the 2nd plague ship was sailing around with no port willing to accept them. In 3 weeks the US will be where Italy is today, and the stock futures are going up? The S&P 500 is the same value it was last October, and given all that we know about how disruptive this virus will be, people with lots of money are still betting the economy is better now than it was 5 months ago when everything was going great, and will be worth more tomorrow.

There are a lot of people with a lot of money, and a lot of them are complete idiots. You can beat the market, at least from time to time.

Feb 4th: https://www.cnn.com/2020/02/04/business/tesla-stock-soars/in...

Also Feb 4th: https://www.cnn.com/asia/live-news/coronavirus-outbreak-02-0...

Re: Trading halted as U.S. stocks plummet

#879

Post by [deleted] »

coliveira wrote: post #833
Reedx wrote: post #778

Earlier quoted context omitted.

To help adopt a sober approach, it's worth watching this interview with Warren Buffett who shares his thinking re: market and Coronavirus. https://www.youtube.com/watch?v=JvEas_zZ4fM&t=21s One of the points he makes is that you should think about stocks as businesses. Instead of "I bought a stock" think "I bought a business". That puts you in a better frame of mind and perspective for the long term. i.e., You don't b…

Two things make Warren different: (1) he is a professional money manager, which means that he is investing other peoples money. (2) because of (1), he never needed the money he is investing. It is much easier to have long time frames when you're investing money that is not yours.

[deleted]

Re: Trading halted as U.S. stocks plummet

#880

Post by [deleted] »

ganeshkrishnan wrote: post #820
Reedx wrote: post #778

Earlier quoted context omitted.

To help adopt a sober approach, it's worth watching this interview with Warren Buffett who shares his thinking re: market and Coronavirus. https://www.youtube.com/watch?v=JvEas_zZ4fM&t=21s One of the points he makes is that you should think about stocks as businesses. Instead of "I bought a stock" think "I bought a business". That puts you in a better frame of mind and perspective for the long term. i.e., You don't b…

This makes sense if you have huge quantity of cash where leverage is not an issue. With limited cash, you have to think very different from Warren.

[deleted]
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