Talking Stocks 2.0

[herefortheattachment]

Originally Posted by Duey

The hardest part for people to except is the FACT that the market at 29,500 was not real. It was probably only worth 25% to 30% less in real value. It is really hard for people to rap their heads around this.

Now add a pandemic to it and it's probably worth 25% less at the bottom of the V (just my view)

I haven’t seen many analysts talking about this point since the outbreak happened, but I’d love to see some musings on it. I can remember people saying as far back as 2014 that the (stock, real estate, tech, etc.) market is overvalued, a bubble, not structurally sound, etc.

If a market sector - or the overall market itself - was not structurally sound, then certainly it will become apparent from the Coronavirus’s strain in the coming weeks. Perhaps the biggest global wildcard in all of this is the health of the Chinese banks, which has been a contentious topic for quite some time.

[beshannon]

Originally Posted by Duey

The hardest part for people to except is the FACT that the market at 29,500 was not real. It was probably only worth 25% to 30% less in real value. It is really hard for people to rap their heads around this.

Now add a pandemic to it and it's probably worth 25% less at the bottom of the V (just my view)

Based on what research and analysis? P/E ratios at the peak were ~17 on the S&P and not really over valued. Please provide your "facts".

This seems to agree with your post

https://www.marketwatch.com/story/th...ure-2020-01-08

However:

One caveat to these analyses is that they don’t take into account the effects of interest rates. The average effective Fed funds rate since 1964 is about 5.2%, versus 1.6% today, and one might expect equity valuations to be significantly higher when fixed income investments are yielding so little.

As we've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for many years. But they can play a role in framing longer-term expectations of investment returns. At present, market overvaluation continues to suggest a cautious long-term outlook and guarded expectations. However, at today's low annualized inflation rate and the extremely poor return on fixed income investments (Treasuries, CDs, etc.) the appeal of equities, despite overvaluation risk, is not surprising.

https://www.advisorperspectives.com/...ins-overvalued

Were the markets over valued? Perhaps but that was not the reason for the decline and the forward looking economy should allow stock to rise once this crisis is over. With interest back at zero what is alternative?

Thanks

[Navarino]

Originally Posted by RyanO

I am thinking the same. I try to avoid margin these days, as I have enjoyed some interesting margin calls in the past myself. Once got a Fed call while on a cruise with no cell service and "cruise" internet. That was not great.

Having said that, if we do retest the lows, I am considering adding to long positions in quality companies that have been oversold. I also think that a few years from now, we'll be looking back at this as a huge buying opportunity. My greatest regret from the 08/09 crisis is that I day traded stocks during that time, instead of buying and holding. I could be retired in my 30s if I had held some of those positions. (Half joking, but while I made money then it was all new to me, and the volatility scared me from taking a longer term approach).

Do you have a target for the SPY to reach before you start buying? I think if we reach the 2100 area, I will likely add and not look at my account for 2 years.

I figure my margin interest rate is 2.78 percent APY, and the returns I'd likely generate will be considerably better.

Now I need to decide whether to close long positions now and wait for a better entry or possibly hedge.

I bought some when it fell below $220 last week. I did that knowing that we likely haven't seen the true bottom yet but thought it was still an attractive enough entry point to put some capital to work. I'll start keeping a close eye on intra-day trend if we fall below that level again. I think I'll start buying more if we are in the $200-$210 neighborhood.

General strategy for me the past few week has been a mix of short selling, selling puts, and short term buys on equity (had a nice ride up on MAR and ZG in particular from our initial "trough" through the rally last week, got into each of those for around ~$49 and ~$24 respectively). I missed out on the airlines because 1) wasn't expecting this level of a rally this past week and 2) prior to that, I thought we had not hit the bottom yet for the big three airlines.

I sold most of my short term equity plays near market close on Thursday anticipating a bigger sell off was coming on Friday. Made some good cash that's back in the war chest now to be put to work again next week.

[snoware]

I loaded up some near (current period) bottom which did good to my overall portfolio average.

With the markets being this unruly I’m waiting on further value plays which I’ve been waiting on for the past 5 years.

I’ve convinced my business partners to free up 80% of our cash assets so that we can invest that into the market.


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[meloncap78]

BTC down 3k in the past 30 days. Who is optimistic that it will come back up to previous value after this is over? Thinking of buying a few shares with some savings. A 12k profit after a few months would be A OK in my book. IF it goes back up that is. Who feels like it’s a bad risk?

[logo]

I think the April 30 delay gives the impression that the COVID situation is worse than many Americans previously thought (or not as controlled as some thought). I suspect a new bottom to be seen soon.

[healer]

tom will see a new high:) like big time high;)

[superdog]

Originally Posted by healer

tom will see a new high:) like big time high;)

I like your attitude.

[beshannon]

Flat futures this morning, China active in the repo markets, no real nw news. Should be some buying as rebalancing occurs before COB tomorrow.

[m j b]

I was going to link to an article in Yahoo Finance but those things are typically clickbait and I have no idea who the author is. He made some interesting points though - basically, it's gonna be a while folks.

OK, I changed my mind and here's the link.

Since my wife and I are now both working from home; I'm in the formal living room (which has always been my office) and she's set up in the formal dining room and so to help block the noise I went to Lowe's this Saturday to buy some doors and paint. This is something that I've wanted to do ever since we bought this house 5 years ago, and the WFH has motivated me. Traffic was very light as you'd expect. But by the time we finished getting the doors, picking out the door handles, getting the paint mixed and everything else, the store was about as crowded as it is on any other Saturday morning. And the county I'm in has been shelter-in-place since last Thursday (statewide starts today, I think). So people are still going out and shopping, probably like me doing a lot of Spring preparation (I bought 10 yards of mulch last week) maybe also like me, stuck at home and wanting to do projects.

So, I'm going to be buying HD and LOW today. Well, looking at the price performance and PE, maybe just LOW right now.

Food for thought.

[healer]

Good morning everyone. It’s official fda approved the combo drugs. Wow.. now all our hospital will be acquiring this medications. We’re in the right direction. give it a few weeks there are more positive news that gonna come.we will see!;)

[m j b]

Originally Posted by meloncap78

BTC down 3k in the past 30 days. Who is optimistic that it will come back up to previous value after this is over?. . . Who feels like it’s a bad risk?

Me, to the last question. Bitcoin is a cool idea that hasn't seemed to really catch on with most people, and so the "currency" itself, unlike something issued by a country, is not backed by anything and has no intrinsic value. Therefore it is nothing more than a speculative play, and I don't understand why it is worth more than a fraction of a penny.

Originally Posted by beshannon

... before COB tomorrow.

COB?

[Tha Baron]

Originally Posted by meloncap78

BTC down 3k in the past 30 days. Who is optimistic that it will come back up to previous value after this is over? Thinking of buying a few shares with some savings. A 12k profit after a few months would be A OK in my book. IF it goes back up that is. Who feels like it’s a bad risk?

I’d rather have gold and silver... the real stuff, not some ETF or string of digits that let me buy weed from canada

[Tha Baron]

Originally Posted by m j b

COB?

Close of Business

[makak]

Originally Posted by m j b

COB?

Close Of Business

[jltait]

Why are the markets even open during this event? Rhetorical question I know. All these once storied companies now trading with zero revenues while this is going on. Doesn’t make too much sense.

[m j b]

Originally Posted by makak

Close Of Business

Doh! I knew that... I was trying to read in some kind of govt. report, like consumer sentiment or commodities or something like that that starts with an "C".

Sometimes the obvious escapes me.

[Tha Baron]

Originally Posted by jltait

Why are the markets even open during this event? Rhetorical question I know. All these once storied companies now trading with zero revenues while this is going on. Doesn’t make too much sense.

Closing the markets now is the dumbest thing we could do... you must be a “head in the sand” kinda guy?

The markets close every weekend if you need a breather to figure out what you want to do.

[Gaijin]

Originally Posted by jltait

Why are the markets even open during this event? Rhetorical question I know. All these once storied companies now trading with zero revenues while this is going on. Doesn’t make too much sense.

Agree. Close them.



But people, corporations and algorithms gotta short. Then pump. Rinse. Repeat.

Nothing like making money off of other's misery.

[m j b]

Originally Posted by Tha Baron

- edited -

Hey, let's be nice.

Closing the markets would cause a panic.

And remember, most non-manufacturing companies are still open for business, banking, investments, financial firms. Close the markets and you guarantee a slide into a depression.

Plus, as long as the international markets are open, you can still trade US stocks and so we're losing all of that business and revenue, why?

[m j b]

I'm still torn, aside from half the pundits saying that we've hit bottom (last week) and the other half saying that it was a dead cat bounce and then the other half (yes, there are three) saying that there is nothing to worry about.

Mostly because we all know that the economy is going to take a really hard hit from all of this, and we ain't seen nothing yet (GDP, unemployment, etc.) as a lot of this won't show up for months as business and people stop paying rent, stop buying crap including cars, trucks, clothes and other things that they need to use to go to work, and everyone stops traveling, etc. and buying anything besides food and electricity. And you can't buy utilities because if businesses stop, that's 60% of their sales in many parts of the country.

So we all know that the market anticipates future actions, so has it already accounted for all of this, or are we in for more hurt?

Speaking of hurt, my head hurts from thinking about all of this.

[JParm]

Originally Posted by m j b

I'm still torn, aside from half the pundits saying that we've hit bottom (last week) and the other half saying that it was a dead cat bounce and then the other half (yes, there are three) saying that there is nothing to worry about.

Mostly because we all know that the economy is going to take a really hard hit from all of this, and we ain't seen nothing yet (GDP, unemployment, etc.) as a lot of this won't show up for months as business and people stop paying rent, stop buying crap including cars, trucks, clothes and other things that they need to use to go to work, and everyone stops traveling, etc. and buying anything besides food and electricity. And you can't buy utilities because if businesses stop, that's 60% of their sales in many parts of the country.

So we all know that the market anticipates future actions, so has it already accounted for all of this, or are we in for more hurt?

Speaking of hurt, my head hurts from thinking about all of this.

We've deployed about 40-45% of our cash, which we luckily did before last week's shot of momentum. So, we have about 55-60% left to spend.

I'm in no rush to go on a spending spree at the moment, as there is too much uncertainty to say "we've made it". History says that this is a dead cat bounce, as there will be more ups and downs. I'm on that side of thinking - I don't think that we're on the up and up.

Having said that, I don't see today's prices as a bad place to jump in for those that cannot wait. There's definitely value there now, assuming we get back up near our old highs (whether that's in a year's time or 5 is the real question).

For us, because we bought at such a great time, I'm willing to wait. If we hadn't jumped in when we did, I would probably go in a bit now. We're still nibbling a bit here and there, but definitely keeping the majority of the cash left for when this truly sinks.

[EEpro]

The market hit all time highs just before the world ended so it isn't that future looking. People without work will remain that way for 4 months based on making $18-25 / hr to stay home under newly passed law. Waiting for quarterly earnings and guidance revisions to decide. Mnuchin says July recovery which is far enough out to make me think they too have no idea.

[Tha Baron]

Originally Posted by Gaijin

Agree. Close them.



But people, corporations and algorithms gotta short. Then pump. Rinse. Repeat.

Nothing like making money off of other's misery.

Transparency and liquidity are far more important than to shield paper losses from investors that can't deal with a market that (god forbid) goes down...

If you don't like the current market system, why not just park your money in CDs? Bank guaranteed, always goes up in nominal value, etc.

[77T]

Originally Posted by jpeezy14@hotmail.com

We've deployed about 40-45% of our cash, which we luckily did before last week's shot of momentum. So, we have about 55-60% left to spend.

I'm in no rush to go on a spending spree at the moment, as there is too much uncertainty to say "we've made it". History says that this is a dead cat bounce, as there will be more ups and downs. I'm on that side of thinking - I don't think that we're on the up and up.

Having said that, I don't see today's prices as a bad place to jump in for those that cannot wait. There's definitely value there now, assuming we get back up near our old highs (whether that's in a year's time or 5 is the real question).

For us, because we bought at such a great time, I'm willing to wait. If we hadn't jumped in when we did, I would probably go in a bit now. We're still nibbling a bit here and there, but definitely keeping the majority of the cash left for when this truly sinks.

I eased out & into cash for those funds which were at risk due to commercial paper they held.

But I tend to agree with your direction to move cautiously into the right ones now.

The old highs are at least a full market cycle or two away - after the bankruptcies we can’t foretell.

Sent from my iPhone using Tapatalk Pro

[Bearxj86]

I think a lot of high level investment strategist and hedge fund managers and those in this thread are looking at things technically and the every day person might be looking at things too emotionally.

The real way to do this is as follows. Take a Discounted Cash Flow model of the company you are looking at. Take down April/May/June revenues/earnings SIGNIFICANTLY - you can model $0 in April, 25% in May and 50% in June etc.

Forecast a lower recessionary growth rate/tail afterwards.


1) Look at their cash flow for the next 6-12 months. Can they "live"? Are they highly leveraged? How much debt do they have? Will layoffs help?

2) Evaluate enterprise value (future cash flow discounted at a hurdle rate) if #1 is ok.

3) Compare enterprise value to stock price. Only pick up a stock that is undervalued significantly. Also understand why.

THIS is what you should be doing, not jumping up and down on some technical bandwagon and predicting market sentiment.

This thread is moving from true fundamental analysis into predictive analytics based on FOMO. Isn't that what everyone else (FOMO buy or FOMO sell) is doing right now? In this case, no one has a clue since people will continue to act irrationally until this is over.

Opinion supported by facts: Over the past 12 years since the great recession, any Monkey could have made 200%-300%. It's only in bear markets that the hard work is NEEDED to generate even reasonable returns.

[Duey]

Originally Posted by bearxj86

Opinion supported by facts: Over the past 12 years since the great recession, any Monkey could have made 200%-300%. It's only in bear markets that the hard work is NEEDED to generate even reasonable returns.

Well Said and Thank You

[beshannon]

Originally Posted by Tha Baron

Transparency and liquidity are far more important than to shield paper losses from investors that can't deal with a market that (god forbid) goes down...

Exactly

Denying people, companies and international entities access to money in the US would cause a panic. No reason to close a market that is operating just fine.

Solid day so far, my guess is covering shorts from Friday and end of quarter rebalancing.

I agree with the HD and LOW as good recession stocks. Many things on watchlists from analysts I already own so I am picking at others. I already own JPM, HD, MSFT, AAPL.

I am still watching BA and CVX on pullbacks and would like to add V, NVDA and ADBE as well

[77T]

Originally Posted by bearxj86

I think a lot of high level investment strategist and hedge fund managers and those in this thread are looking at things technically and the every day person might be looking at things too emotionally.

The real way to do this is as follows. Take a Discounted Cash Flow model of the company you are looking at. Take down April/May/June revenues/earnings SIGNIFICANTLY - you can model $0 in April, 25% in May and 50% in June etc.

Forecast a lower recessionary growth rate/tail afterwards.


1) Look at their cash flow for the next 6-12 months. Can they "live"? Are they highly leveraged? How much debt do they have? Will layoffs help?

2) Evaluate enterprise value (future cash flow discounted at a hurdle rate) if #1 is ok.

3) Compare enterprise value to stock price. Only pick up a stock that is undervalued significantly. Also understand why.

THIS is what you should be doing, not jumping up and down on some technical bandwagon and predicting market sentiment.

This thread is moving from true fundamental analysis into predictive analytics based on FOMO. Isn't that what everyone else (FOMO buy or FOMO sell) is doing right now? In this case, no one has a clue since people will continue to act irrationally until this is over.

Opinion supported by facts: Over the past 12 years since the great recession, any Monkey could have made 200%-300%. It's only in bear markets that the hard work is NEEDED to generate even reasonable returns.

Not challenging any maths - solvency is king (or queen).

Maybe mention rule#1 before the math:
Will the company exhibit favorable long-term prospects based upon the consumption rate of its product or service?
A consumer cyclical company is going to have a very different future methinks - the past cash flows may not return for more than a year for some.

Lastly, does the company have a consistent operating history of expense control.

[beshannon]

From a recent poll on Twitter



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