4 ms·

It feels like a huge wave just crashed, and many people standing waist-deep in the water think things are on the upswing now -- when really they're about to get

by jawns 6y ago

It feels like a huge wave just crashed, and many people standing waist-deep in the water think things are on the upswing now -- when really they're about to get sucked into a powerful undertow. Judging by the state of the stock market, many investors seem oblivious to the magnitude of the effects of the pandemic. The S&P 500 lost more than a third of its value in the pandemic crash. Yet the index is now two-thirds of the way back to its high point: https://www.npr.org/2020/06/04/865117170/the-economy-is-in-trouble-try-telling-the-stock-market https://www.npr.org/2020/06/04/865117170/the-economy-is-in-t... But look at the levels of initial jobless claims still coming in at multiples above where they should be. Look at how many businesses are still shuttered, with an uncertain H2 ahead. Given the harsh economic reality, I'm very bearish right now. I think we're going to see another significant drop as the full effects sink in, which is what has happened in other crashes. Investors call it a dead-cat bounce. But in this case, I'm picturing a bigger animal. Hippo maybe.

serf 6y ago
>Given the harsh economic reality, I'm very bearish right now. as am I. I've more-or-less frozen my trading until a) a recovery plan is clear and being executed or b) until it is more clear we've hit a real bottom. All these hopeful spikes that do not correlate to the economic reality are probably going to throw a lot of people through hoops until any real roof or floor is hit. It sucks because I keep having these "buy the dip" moments, but then I have to hand-wave the opportunity away knowing that whatever dip i'm looking at is likely one of many upcoming movements.
- satvikpendem 6y ago
  Time in the market beats timing the market. If you continue to invest regularly even in a down market you will eventually make more than those who target peaks and dips.
  - mycall 6y ago
    Dollar-cost averaging is theoretically sub-optimal to lump sum investing in terms of expected return. This was shown to be the case in a mean-variance framework in 1979 by George Constantinides [0] [0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=148754 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=148754
    - satvikpendem 6y ago
      Correct, however most people don't have the discipline or money to put in all their money in the beginning of the year, or whenever they get it. It's better to automate the habit of deposits rather than not doing so.
  - prewett 6y ago
    > Time in the market beats timing the market. This has merits in a bull market regime. However, we may not in a bull market: history suggests that we will have a deeper bottom within 3 - 12 months. So if you buy stock now, when the market is within 10% of it's peak, and you have to wait for two years for the market to recover to that peak, there's plenty of time for someone to wait for the trough and substantially outperform you. Hopefully you are at least collecting dividends, but 2% is a small solace for spending 30% more than you would need if you were patient for a few months.
    - agilebyte 6y ago
      Time in the market applies to all the market, there's no qualifier for just a bull market - that would be timing the market. Vast majority of people cannot time the market. Bear Markets: This Time is Different (Every Time) - https://www.youtube.com/watch?v=Jh9Gn58r9Fw https://www.youtube.com/watch?v=Jh9Gn58r9Fw
    - devalgo 6y ago
      IF you're so confident then why don't you plug your life savings into shorting the market? You'll make millions. There's been countless examples of projecting returns for an investor who tries to time the market and one who keeps buying and almost universally the timer loses.
      - leetcrew 6y ago
        being pretty sure that the market will crash at some point in the next year isn't really actionable information for an investor. a temporary rally at any point could trigger a devastating margin call. you could just sell all your long positions and buy back in whenever you think the market is at its lowest point, but you're probably not gonna make millions this way. FWIW, I haven't sold anything, but I haven't bought any shares either since the beginning of the crisis. I would be wealthier today if I had kept buying on my normal schedule.
    - IAmGraydon 6y ago
      History suggests that? The only time in modern history that this has happened (1918), the stock market never had the slightest reaction. It just carried on its merry way...with 50 million dead.
  - ipnon 6y ago
    Compare this to the (once upon a time) conventional wisdom that buying a house with a mortgage is a sure bet because housing prices must go up. I'm not saying you're wrong, I'm saying I don't know. Unprecedented times can result in unprecedented outcomes.
    - devalgo 6y ago
      Doesn't this really only apply to variable rates that people thought they could consistently refinance as their homes value went up? If you have a set rate you'll just pay the same monthly payment for 30 years, I don't see how your homes value would really affect you unless you had to move and sell at a loss.
      - ipnon 6y ago
        My point is that financial assets are practically always more complicated than conventional wisdom belies.
  - vagab0nd 6y ago
    Does this apply to once in a life time events though?
Nasrudith 6y ago
I suspect part of the reason why the prices are staying higher is lack of alternative places to put the money and with no pull out the drop is somewhat limited. And I am of the opinion that it feels like prices should have dropped more and feeling a bit guiltily disappointed at the lack of a crash for investing opportunities. That and a confused "Why does my portfolio keep on rising now of all times?"
IAmGraydon 6y ago
Think about it. Everyone you talk to is saying exactly what you’re saying. Do you really believe that you have insight that a hedge fund worth billions of dollars does not? Do you think they didn’t already think about this before the rebound even happened? Chances are very good that they understand this situation on a level that most do not. They are driving this rebound, not unsophisticated retail investors. Bearish investors will sit on the sidelines and miss out on potential gains or will go short and lose their money. The rich will get richer. Rinse and repeat. I can tell you when the market will crash. It’s when you and everyone you know are convinced that your bearish intuition is wrong. That wont happen for some time.

by jawns 6y ago

serf 6y ago

>Given the harsh economic reality, I'm very bearish right now. as am I. I've more-or-less frozen my trading until a) a recovery plan is clear and being executed or b) until it is more clear we've hit a real bottom. All these hopeful spikes that do not correlate to the economic reality are probably going to throw a lot of people through hoops until any real roof or floor is hit. It sucks because I keep having these "buy the dip" moments, but then I have to hand-wave the opportunity away knowing that whatever dip i'm looking at is likely one of many upcoming movements.

satvikpendem 6y ago
Time in the market beats timing the market. If you continue to invest regularly even in a down market you will eventually make more than those who target peaks and dips.
- mycall 6y ago
  Dollar-cost averaging is theoretically sub-optimal to lump sum investing in terms of expected return. This was shown to be the case in a mean-variance framework in 1979 by George Constantinides [0] [0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=148754 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=148754
  - satvikpendem 6y ago
    Correct, however most people don't have the discipline or money to put in all their money in the beginning of the year, or whenever they get it. It's better to automate the habit of deposits rather than not doing so.
- prewett 6y ago
  > Time in the market beats timing the market. This has merits in a bull market regime. However, we may not in a bull market: history suggests that we will have a deeper bottom within 3 - 12 months. So if you buy stock now, when the market is within 10% of it's peak, and you have to wait for two years for the market to recover to that peak, there's plenty of time for someone to wait for the trough and substantially outperform you. Hopefully you are at least collecting dividends, but 2% is a small solace for spending 30% more than you would need if you were patient for a few months.
  - agilebyte 6y ago
    Time in the market applies to all the market, there's no qualifier for just a bull market - that would be timing the market. Vast majority of people cannot time the market. Bear Markets: This Time is Different (Every Time) - https://www.youtube.com/watch?v=Jh9Gn58r9Fw https://www.youtube.com/watch?v=Jh9Gn58r9Fw
  - devalgo 6y ago
    IF you're so confident then why don't you plug your life savings into shorting the market? You'll make millions. There's been countless examples of projecting returns for an investor who tries to time the market and one who keeps buying and almost universally the timer loses.
    - leetcrew 6y ago
      being pretty sure that the market will crash at some point in the next year isn't really actionable information for an investor. a temporary rally at any point could trigger a devastating margin call. you could just sell all your long positions and buy back in whenever you think the market is at its lowest point, but you're probably not gonna make millions this way. FWIW, I haven't sold anything, but I haven't bought any shares either since the beginning of the crisis. I would be wealthier today if I had kept buying on my normal schedule.
  - IAmGraydon 6y ago
    History suggests that? The only time in modern history that this has happened (1918), the stock market never had the slightest reaction. It just carried on its merry way...with 50 million dead.
- ipnon 6y ago
  Compare this to the (once upon a time) conventional wisdom that buying a house with a mortgage is a sure bet because housing prices must go up. I'm not saying you're wrong, I'm saying I don't know. Unprecedented times can result in unprecedented outcomes.
  - devalgo 6y ago
    Doesn't this really only apply to variable rates that people thought they could consistently refinance as their homes value went up? If you have a set rate you'll just pay the same monthly payment for 30 years, I don't see how your homes value would really affect you unless you had to move and sell at a loss.
    - ipnon 6y ago
      My point is that financial assets are practically always more complicated than conventional wisdom belies.
- vagab0nd 6y ago
  Does this apply to once in a life time events though?

Nasrudith 6y ago

I suspect part of the reason why the prices are staying higher is lack of alternative places to put the money and with no pull out the drop is somewhat limited. And I am of the opinion that it feels like prices should have dropped more and feeling a bit guiltily disappointed at the lack of a crash for investing opportunities. That and a confused "Why does my portfolio keep on rising now of all times?"

IAmGraydon 6y ago

Think about it. Everyone you talk to is saying exactly what you’re saying. Do you really believe that you have insight that a hedge fund worth billions of dollars does not? Do you think they didn’t already think about this before the rebound even happened? Chances are very good that they understand this situation on a level that most do not. They are driving this rebound, not unsophisticated retail investors. Bearish investors will sit on the sidelines and miss out on potential gains or will go short and lose their money. The rich will get richer. Rinse and repeat. I can tell you when the market will crash. It’s when you and everyone you know are convinced that your bearish intuition is wrong. That wont happen for some time.