I've got some saving and am considering looking into trading if the market gets any worse than this. Do any of you have advice? I was doing some research into ETFs and was considering putting some money in that direction since it seems safer than buying individual stocks.
Dow Falls 2997 points worst drop since 1987 crash
451–460 of 499 posts
Re: Dow Falls 2997 points worst drop since 1987 crash
#452Earlier quoted context omitted.
I'm curious, why short the 3x long/bull etfs instead of going long on the 3x bear ETFs?
Two reasons: leverage costs will drag the performance of the 3x to worse than 3x over time, and in big drops there's a chance that the 3x ETF may actually implode like the XIV ETN did a while back. Those work in your favor if you're short but may or may not be worth the cost of borrowing for your situation.
> in big drops there's a chance that the 3x ETF may actually implode
Huh, I didn't consider this possibility because I can't imagine the underlying index (this one's related to the S&P 500) going up enough for that to happen. But then again, I suppose those speculating in XIV didn't expect those volatility spikes either.
For me, though, I figure the downside is capped for the relatively small amount of money I put into this 3x inverse ETF: if the fund goes all the way to $0, then I've only lost the original investment. (But also, if it goes to $0, that's probably a good thing for the rest of my portfolio.)
Re: Dow Falls 2997 points worst drop since 1987 crash
#453Earlier quoted context omitted.
The US lags just about every developed country on testing for Covid-19 disease.[0] ‘It’s Just Everywhere Already’: How Delays in Testing Set Back the U.S. Coronavirus Response[1] [0]: https://www.vox.com/science-and-health/2020/3/12/21175034/co... [1]: https://www.nytimes.com/2020/03/10/us/coronavirus-testing-de...
The person described in that Vox article - upper respiratory symptoms, no direct contact with someone with confirmed Covid-19 - wouldn't meet the criteria for testing anywhere that I know of off-hand. Certainly not in the UK or Australia, probably not in South Korea (though they allow people who don't qualify to buy testing out of pocket), not in a whole bunch of EU states, and Italy has much bigger things to worry a…
For what it is worth, I've got checked for COVID-19 in Hong Kong with just cough and nothing else - no fever, no sore throat, no travel history and no contacts. The test was fully covered by my healthcare plan and I've paid zero money out of pocket.
Re: Dow Falls 2997 points worst drop since 1987 crash
#454To put it into perspective, the last time the market behaved like (multiple drops of this magnitude) this was 90 years ago, in 1929, and it was at the start of the Great Depression. Today was the second largest percentage drop for US Markets in history. Now is not a good time to sell your stock holdings (at least not anymore). This smells of a panic right now. I think a severe recession is all but guaranteed at this…
One edge case to consider. If you have stocks in a pre-tax retirement account like a traditional IRA in the US (or RRSP in Canada?), now could be a good time to sell them, move the money into a post-tax account like a ROTH IRA (or TFSA?), then buy the equivalent number of stocks there. You will pay reduced taxes because the value of the stocks is relatively low, then pay no tax when you finally withdraw from the ROTH…
Like you rightly said, this is a gamble. You're playing against volatility we haven't seen in almost 40 years. Look at VIX. You would likely burn yourself, especially as an amateur. If you want to play this game, there is room for put options in your portfolio to counter some of the bleeding.
Re: Dow Falls 2997 points worst drop since 1987 crash
#455Earlier quoted context omitted.
One counterpoint: the crest of baby boomers is going through retirement. This severe market downturn and recession will absolutely destroy many pensions in the US that were already woefully underfunded. This will be extremely brutal.
Time for them to toughen up and pull themselves up by their bootstraps.
At ~65 years old, there isn’t much in the way of bootstraps for them to pull up on.
Re: Dow Falls 2997 points worst drop since 1987 crash
#456Earlier quoted context omitted.
Serious question: what tools do they have left to try and shore things up? They've reduced interest rates to 0. They've injected 1.5T of liquidity. Mitt Romney today just announced they're giving $1000 of helicopter money to every American. If all of this doesn't work, whats left?
Quantitative easing.
Do we know what assets increase with quantitative easing?
Re: Dow Falls 2997 points worst drop since 1987 crash
#457To put it into perspective, the last time the market behaved like (multiple drops of this magnitude) this was 90 years ago, in 1929, and it was at the start of the Great Depression. Today was the second largest percentage drop for US Markets in history. Now is not a good time to sell your stock holdings (at least not anymore). This smells of a panic right now. I think a severe recession is all but guaranteed at this…
I have never thought about all-out selling during this. In fact I'm buying more with each dip. I feel that securities are a bargain right now. With select selling I'll also be taking advantage of tax loss harvesting for years to come.
Can you explain like I'm five how you plan to perform this tax loss harvesting for years to come?
Re: Dow Falls 2997 points worst drop since 1987 crash
#458Earlier quoted context omitted.
Are you sure COVID-19 didn't partially prick a systemic issue that was hard to see on the rise (as many also missed the housing crisis before the fall)? For example, the amount the stock rise was attributed to stock buybacks in an unsustainable manner caused by late stage government policies (tax cuts, low rates). There has been some pretty extreme levels of corporate debt that correlates with this.
It probably did prick a bubble. But all the economic recovery measures for the pandemic may, ironically, push further out the point at which the systemic issues break the market and force resolution. Especially in the U.S., economic aid invariably ends up contributing far more to corporate balance sheets than it does citizens' wallets. I mean, what was the first response of the GOP to prospective economic issues? Cut…
'inflationary' effects are manifested elsewhere: inflated financial assets (say, stocks); inflated real estate wherever top earners live.
Re: Dow Falls 2997 points worst drop since 1987 crash
#459This is the moment that management cuts staff and pushes survivors to work harder than ever with no more than the threat of the axe. Realizing productivity gains from job insecurity is unethical, so it only gets used under the illusion that it is the only way for the employer to survive. The reality is that the employer could have operated like this all along but couldn't drop the axe without looking like a butcher u…
Certainly most will be better off being laid off (and eligible to collect unemployment in the US) vs quitting.
Re: Dow Falls 2997 points worst drop since 1987 crash
#460Earlier quoted context omitted.
Why catch a falling knife? I am actively shorting S&P to protect my other holdings. SPY is the largest ETF is now hard to borrow which is just crazy to think about.
While you're not outright advocating a trading strategy here, what you're suggesting is dangerous if you're not talking about the downsides to shorting. Do not, I repeat, do not attempt a short without understanding all the risks. When you buy a stock for $10, the most you can lose when that stock goes to zero is $10. In theory, when you short a stock at $10, your loss is infinite as the stock goes up higher and high…
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