7 ms·

Idk if this belongs at HN but if it does, then isn't this the greatest opportunity post 2008 crash to invest in to the markets?

cocoa19 7y ago
Meh, the price now is what it was in October of last year. Not really the greatest. I did rebalance my portfolio a bit, but I'm sitting tight waiting for better opportunities.
techdevangelist 7y ago
Assuming we’re at the bottom, with the virus concerns, plus the much earlier bond yield inversions we could be always from bottom.
leptoniscool 7y ago
The recent drop is not very significant (a little over 10%). The Great Financial Crisis caused a 60% drop around 2008/2009. https://www.nytimes.com/2020/02/27/business/what-is-a-stock-market-correction.html https://www.nytimes.com/2020/02/27/business/what-is-a-stock-...
- mkagenius 7y ago
  I see, there was a similar drop in 2018. So not really that great of a fall.
  - serpix 7y ago
    yet. Nobody knows where the bottom is. The virus is only at the beginning of its conquest of the Western world.
- mabbo 7y ago
  The question is whether we're at the bottom or just at the beginning of the roller coaster. Bonds are indicators of expectations and risks in the near-to-long future. When their rates get strange, people worry.
- exogan 7y ago
  The recent drop happened in only one week, it was really abrupt and breaking records. GFC didn't happen over 1 week, the bear market from GFC was from October 9/10, 2007 to March 9, 2009.
  - thinkloop 7y ago
    I don't think it broke any real records, the only one is the absolute point drop in the indexes, but that's a meaningless stat that will constantly be broken in the future as the economy grows - proportion is what's interesting.
    - exogan 7y ago
      My bad, it did not break records outside the 1987, dot-com and GCF crises, made a mistake there. However, I don't agree with the theory of infinite economy growth (as you said "constantly be broken in the future").
      - whatshisface 7y ago
        Future economy growth =/= infinite economy growth.
- nostromo 7y ago
  Financial crises tend to be much worse for securities than a regular recession.
tinza123 7y ago
That's assuming you know when the drop will stop, otherwise it is the worst opportunity.
JMTQp8lwXL 7y ago
Yields have been declining since the 80s [0]. It could be the greatest opportunity, but a trade like that might take a lifetime to pan out. [0]: https://fred.stlouisfed.org/series/IRLTLT01USM156N https://fred.stlouisfed.org/series/IRLTLT01USM156N
- tryptophan 7y ago
  Try 700 years. https://www.visualcapitalist.com/700-year-decline-of-interest-rates/ https://www.visualcapitalist.com/700-year-decline-of-interes... Betting against rate decreases in the long term is likely a terrible financial decision.
  - toomuchtodo 7y ago
    I love this comment and link! All asset class yields will eventually arrive at zero, it's just when.
kypro 7y ago
The 2008 GFC was a good opportunity invest in hindsight because for a period of time stock prices were low and the economy recovered within a few years. However today stock prices only 12%~ off all time highs and some are predicting prolonged stagflation.
- selectodude 7y ago
  Lowering interest rates during a supply shock is shockingly irresponsible.
exogan 7y ago
It's hard to objectively calculate how large the impact from corona virus will be and how it has affected the supply chain. Additionally, this could be a black swan event that could become a catalyst, this is not an isolated event and it will send a shockwave across the markets. The losses in earnings as well as the reduction of consumption are hard to estimate, they need to be priced in into the stock's price which might be currently undervalued or overvalued. The idea is that no one knows exactly what the prices should look like. You might go for the S&P yield and end up losing 20% in the short term because of the price tanking. The point is that investors like certainty, that's why some are holding cash or even a mix of bonds, cash and gold. They might prefer lower yields than S&P and more certainty.
mabbo 7y ago
I'm in an interesting position related to this. In Canada, most people lock into their mortgage rate for 3-5 years. After that, you've got to renegotiate a rate but you're also free to switch banks. It's like starting over again at whatever you currently owe. I locked into mine 4 and a half years ago, so renewal is coming up this summer. Meanwhile, my home's value has skyrocketed (thanks to an insane Toronto housing market). What this all means is that in a few months, at my renewal date, the mortgage interests rates may be incredibly low (they're already at 2.7% today), my home's value is much higher than what I owe, and the stock market looks like it's going to be hitting the bottom around that time too. So the question is... do I gamble on this? I could easily access hundreds of thousands of dollars in a low interest mortgage and drop it all on index funds. If it worked, 10 years later I could retire early. If it doesn't, I'm another god-knows-how-many years away from paying off the mortgage. Mind you, my (sane, rational, smart-than-me) wife would never agree to any of this so it's only nice to think about.
- Proziam 7y ago
  I know someone who did this. It didn't work out and it's their single biggest financial regret in life.
  - glouwbug 7y ago
    I've seen 6 people in the last 2 weeks on wallstreetbets gamble away their student loans. The sad part is one guy will post their success of doubling their student loan, and it will just cause a bunch of younger inexperienced 19 year olds to lose tens of thousands to their own gambles. It's really sad. It's an addiction
    - Proziam 7y ago
      For some, it is addiction. For others, they simply cannot fathom the risk they expose themselves to. They have no concept of the time, effort, and stress they will cost themselves over the course of their lives as a result of their error. Try explaining to a teenager that the 50k bet that costs them their chance at an education is actually them putting 1m+ at risk if you compound the effect over the course of their life.
robjan 7y ago
It's best to avoid timing the market. It could do up x% on Monday or down y%. The people driving the real volume know way more than you or I.
- vikramkr 7y ago
  The performance of actively managed hedge funds would disagree with that. Doesn't seem like anyone can manage it consistently https://www.cnbc.com/2019/03/15/active-fund-managers-trail-the-sp-500-for-the-ninth-year-in-a-row-in-triumph-for-indexing.html https://www.cnbc.com/2019/03/15/active-fund-managers-trail-t...
  - AznHisoka 7y ago
    Yep people like to distinguish between “dumb money” and “smart money” but the truth is there is no such thing as smart money.
    - deleted 7y ago
      [deleted]
    - vikramkr 7y ago
      I agree theres nonsuch thing as smart money, but there probably is a distinction between dumb and not dumb money - like someone putting a part of their savings in an index fund versus someone putting their entire net worth on far out of the money AMD calls
vikramkr 7y ago
That's a question of market timing, and of you try and time the market, you'll either be broke or lucky. Maybe stocks are insanely undervalued and we're on the cusp of a bull run. Or, maybe the markets are going to crash and the dividend rate isn't going to hold as we move into future as companies go bankrupt and stop paying dividends. Unlike treasury bonds, dividends aren't certain, so this one data point alone isn't enough to really conclude either way
lordnacho 7y ago
As an ex fund manager, albeit with little macro experience, here's some thoughts. The time since the GFC is a sort of strange era. Again and again, we're told that central banks (and governments) are going to do whatever the heck keeps the market up. Buying the dip has more or less worked the whole time. A lot of asset classes look expensive if you take a longer-back view of things, but then again that longer view tended to not include "we'll do anything". This virus thing could be quite a different thing to what traders and fund managers are used to. The kinds of things I used to look at were things like what do the brokers say about rates, or what do economists think about oil. Or more specifially for me what does the market think about the supply and demand of volatility risk. Even the GFC itself was something that many people in my circles had thought about. It was definitely in the financial arena; either you thought subprime was gonna be a mess, or you thought it would stay localized and not burst its banks. Also keep in mind traders tend to be young, and there has been a trend towards juniorization particularly in the investment banks. I'm in the UK at the moment, and the number of cases doubled in the last couple of days. It did the same a couple of days earlier. So then the question is whether this is an exponential process. And if it is, what's going to stop it being exponential? Public awareness isn't going to be it, because everyone in the whole world already knows they're supposed to wash their hands and stay away from old people. Certainly we can't just pretend the virus is not here. An expert on the radio last night mentioned that if Twickenham was full for the match today, and the 80k people there all had flu, 8 of them would be expected to die. According to him with Coronavirus at 2-3% it would be in the ballpark of 2000. Chances are people who would be ill but recover would also be a fair chunk. So something has to be done, governments aren't going to get away with just playing it down as the numbers double every other day. And this is where fragility comes into play. We're used to the economy being coated in a thick layer of cheap money. Business models that were previously tenuous now seem solid, because there's always someone who will finance it. I'm sure you've heard of a few such businesses in the recent news. What this translates into is that you can motivate people to work in a certain way because you can borrow (and this is in the larger sense, not just loans) the firepower to pay them. But what if a bunch of people suddenly cannot work? If you're properly ill, there's no amount of money that will make you able to work. And you will have to live with not earning money, and your boss will have to live with work not getting done. It doesn't seem like something that handing more money out for will help. At most you can help to make sure that peripheral issues are solved, like cash crises in people's private finances don't cause them to have to sell their house or business. But people not being able to work on a large scale will cause some kind of collapse somewhere in the system, and supply and demand isn't going to generate more supply, it will just raise the price of work. This is kinda like how historians write that peasants had a great time after the plague killed a third of Europe. And of course companies are negotiating with labor over the spoils of production, so profits would seem to go down. But this is all pretty sensitive to the size of the actual outbreak. If the top is today the death toll is similar to 9/11, and the economy will be fine. If it grows to shut down schools and workplaces all over the world, it's gonna be really interesting.
skybrian 7y ago
One way to look at is, when did we last see prices like this? If this is a good opportunity then it's only slightly better than October of last year when the prices were about the same. (Slightly better because in theory, you could have done something else with the money in the meantime.) It's not better than any time before that, when prices were lower. Stocks are on sale, but it's hard to beat time in the market, which is still better for most timespans.
rb808 7y ago
No, this isn't a crash, the main US indices are just back to where they were 6 months ago. That isn't a great buying opportunity, they weren't cheap 6 months ago either.
imtringued 7y ago
The problem with this type of thinking is that it could always go even lower and by selling now you end up missing a lot of potential profit. The window of the global optimum is often only a few days wide.

cocoa19 7y ago

Meh, the price now is what it was in October of last year. Not really the greatest. I did rebalance my portfolio a bit, but I'm sitting tight waiting for better opportunities.

techdevangelist 7y ago

Assuming we’re at the bottom, with the virus concerns, plus the much earlier bond yield inversions we could be always from bottom.

leptoniscool 7y ago

The recent drop is not very significant (a little over 10%). The Great Financial Crisis caused a 60% drop around 2008/2009. https://www.nytimes.com/2020/02/27/business/what-is-a-stock-market-correction.html https://www.nytimes.com/2020/02/27/business/what-is-a-stock-...

mkagenius 7y ago
I see, there was a similar drop in 2018. So not really that great of a fall.
- serpix 7y ago
  yet. Nobody knows where the bottom is. The virus is only at the beginning of its conquest of the Western world.
mabbo 7y ago
The question is whether we're at the bottom or just at the beginning of the roller coaster. Bonds are indicators of expectations and risks in the near-to-long future. When their rates get strange, people worry.
exogan 7y ago
The recent drop happened in only one week, it was really abrupt and breaking records. GFC didn't happen over 1 week, the bear market from GFC was from October 9/10, 2007 to March 9, 2009.
- thinkloop 7y ago
  I don't think it broke any real records, the only one is the absolute point drop in the indexes, but that's a meaningless stat that will constantly be broken in the future as the economy grows - proportion is what's interesting.
  - exogan 7y ago
    My bad, it did not break records outside the 1987, dot-com and GCF crises, made a mistake there. However, I don't agree with the theory of infinite economy growth (as you said "constantly be broken in the future").
    - whatshisface 7y ago
      Future economy growth =/= infinite economy growth.
nostromo 7y ago
Financial crises tend to be much worse for securities than a regular recession.

tinza123 7y ago

That's assuming you know when the drop will stop, otherwise it is the worst opportunity.

JMTQp8lwXL 7y ago

Yields have been declining since the 80s [0]. It could be the greatest opportunity, but a trade like that might take a lifetime to pan out. [0]: https://fred.stlouisfed.org/series/IRLTLT01USM156N https://fred.stlouisfed.org/series/IRLTLT01USM156N

tryptophan 7y ago
Try 700 years. https://www.visualcapitalist.com/700-year-decline-of-interest-rates/ https://www.visualcapitalist.com/700-year-decline-of-interes... Betting against rate decreases in the long term is likely a terrible financial decision.
- toomuchtodo 7y ago
  I love this comment and link! All asset class yields will eventually arrive at zero, it's just when.

kypro 7y ago

The 2008 GFC was a good opportunity invest in hindsight because for a period of time stock prices were low and the economy recovered within a few years. However today stock prices only 12%~ off all time highs and some are predicting prolonged stagflation.

selectodude 7y ago
Lowering interest rates during a supply shock is shockingly irresponsible.

exogan 7y ago

It's hard to objectively calculate how large the impact from corona virus will be and how it has affected the supply chain. Additionally, this could be a black swan event that could become a catalyst, this is not an isolated event and it will send a shockwave across the markets. The losses in earnings as well as the reduction of consumption are hard to estimate, they need to be priced in into the stock's price which might be currently undervalued or overvalued. The idea is that no one knows exactly what the prices should look like. You might go for the S&P yield and end up losing 20% in the short term because of the price tanking. The point is that investors like certainty, that's why some are holding cash or even a mix of bonds, cash and gold. They might prefer lower yields than S&P and more certainty.

mabbo 7y ago

I'm in an interesting position related to this. In Canada, most people lock into their mortgage rate for 3-5 years. After that, you've got to renegotiate a rate but you're also free to switch banks. It's like starting over again at whatever you currently owe. I locked into mine 4 and a half years ago, so renewal is coming up this summer. Meanwhile, my home's value has skyrocketed (thanks to an insane Toronto housing market). What this all means is that in a few months, at my renewal date, the mortgage interests rates may be incredibly low (they're already at 2.7% today), my home's value is much higher than what I owe, and the stock market looks like it's going to be hitting the bottom around that time too. So the question is... do I gamble on this? I could easily access hundreds of thousands of dollars in a low interest mortgage and drop it all on index funds. If it worked, 10 years later I could retire early. If it doesn't, I'm another god-knows-how-many years away from paying off the mortgage. Mind you, my (sane, rational, smart-than-me) wife would never agree to any of this so it's only nice to think about.

Proziam 7y ago
I know someone who did this. It didn't work out and it's their single biggest financial regret in life.
- glouwbug 7y ago
  I've seen 6 people in the last 2 weeks on wallstreetbets gamble away their student loans. The sad part is one guy will post their success of doubling their student loan, and it will just cause a bunch of younger inexperienced 19 year olds to lose tens of thousands to their own gambles. It's really sad. It's an addiction
  - Proziam 7y ago
    For some, it is addiction. For others, they simply cannot fathom the risk they expose themselves to. They have no concept of the time, effort, and stress they will cost themselves over the course of their lives as a result of their error. Try explaining to a teenager that the 50k bet that costs them their chance at an education is actually them putting 1m+ at risk if you compound the effect over the course of their life.

robjan 7y ago

It's best to avoid timing the market. It could do up x% on Monday or down y%. The people driving the real volume know way more than you or I.

vikramkr 7y ago
The performance of actively managed hedge funds would disagree with that. Doesn't seem like anyone can manage it consistently https://www.cnbc.com/2019/03/15/active-fund-managers-trail-the-sp-500-for-the-ninth-year-in-a-row-in-triumph-for-indexing.html https://www.cnbc.com/2019/03/15/active-fund-managers-trail-t...
- AznHisoka 7y ago
  Yep people like to distinguish between “dumb money” and “smart money” but the truth is there is no such thing as smart money.
  - deleted 7y ago
    [deleted]
  - vikramkr 7y ago
    I agree theres nonsuch thing as smart money, but there probably is a distinction between dumb and not dumb money - like someone putting a part of their savings in an index fund versus someone putting their entire net worth on far out of the money AMD calls

vikramkr 7y ago

That's a question of market timing, and of you try and time the market, you'll either be broke or lucky. Maybe stocks are insanely undervalued and we're on the cusp of a bull run. Or, maybe the markets are going to crash and the dividend rate isn't going to hold as we move into future as companies go bankrupt and stop paying dividends. Unlike treasury bonds, dividends aren't certain, so this one data point alone isn't enough to really conclude either way

lordnacho 7y ago

As an ex fund manager, albeit with little macro experience, here's some thoughts. The time since the GFC is a sort of strange era. Again and again, we're told that central banks (and governments) are going to do whatever the heck keeps the market up. Buying the dip has more or less worked the whole time. A lot of asset classes look expensive if you take a longer-back view of things, but then again that longer view tended to not include "we'll do anything". This virus thing could be quite a different thing to what traders and fund managers are used to. The kinds of things I used to look at were things like what do the brokers say about rates, or what do economists think about oil. Or more specifially for me what does the market think about the supply and demand of volatility risk. Even the GFC itself was something that many people in my circles had thought about. It was definitely in the financial arena; either you thought subprime was gonna be a mess, or you thought it would stay localized and not burst its banks. Also keep in mind traders tend to be young, and there has been a trend towards juniorization particularly in the investment banks. I'm in the UK at the moment, and the number of cases doubled in the last couple of days. It did the same a couple of days earlier. So then the question is whether this is an exponential process. And if it is, what's going to stop it being exponential? Public awareness isn't going to be it, because everyone in the whole world already knows they're supposed to wash their hands and stay away from old people. Certainly we can't just pretend the virus is not here. An expert on the radio last night mentioned that if Twickenham was full for the match today, and the 80k people there all had flu, 8 of them would be expected to die. According to him with Coronavirus at 2-3% it would be in the ballpark of 2000. Chances are people who would be ill but recover would also be a fair chunk. So something has to be done, governments aren't going to get away with just playing it down as the numbers double every other day. And this is where fragility comes into play. We're used to the economy being coated in a thick layer of cheap money. Business models that were previously tenuous now seem solid, because there's always someone who will finance it. I'm sure you've heard of a few such businesses in the recent news. What this translates into is that you can motivate people to work in a certain way because you can borrow (and this is in the larger sense, not just loans) the firepower to pay them. But what if a bunch of people suddenly cannot work? If you're properly ill, there's no amount of money that will make you able to work. And you will have to live with not earning money, and your boss will have to live with work not getting done. It doesn't seem like something that handing more money out for will help. At most you can help to make sure that peripheral issues are solved, like cash crises in people's private finances don't cause them to have to sell their house or business. But people not being able to work on a large scale will cause some kind of collapse somewhere in the system, and supply and demand isn't going to generate more supply, it will just raise the price of work. This is kinda like how historians write that peasants had a great time after the plague killed a third of Europe. And of course companies are negotiating with labor over the spoils of production, so profits would seem to go down. But this is all pretty sensitive to the size of the actual outbreak. If the top is today the death toll is similar to 9/11, and the economy will be fine. If it grows to shut down schools and workplaces all over the world, it's gonna be really interesting.

skybrian 7y ago

One way to look at is, when did we last see prices like this? If this is a good opportunity then it's only slightly better than October of last year when the prices were about the same. (Slightly better because in theory, you could have done something else with the money in the meantime.) It's not better than any time before that, when prices were lower. Stocks are on sale, but it's hard to beat time in the market, which is still better for most timespans.

rb808 7y ago

No, this isn't a crash, the main US indices are just back to where they were 6 months ago. That isn't a great buying opportunity, they weren't cheap 6 months ago either.

imtringued 7y ago

The problem with this type of thinking is that it could always go even lower and by selling now you end up missing a lot of potential profit. The window of the global optimum is often only a few days wide.