4 ms·

We have no idea who the bagholders are and who got out in time.

• commandlinefan 4y ago
  The bagholders are the ones who weren't naive enough to cash out as soon as this became national news.
  • Ekaros 4y ago
    Now big question is where the smart cash is going? Real estate? Seems to be kinda in bubble too? Or might it make sense to be on the market?
    • testfoobar 4y ago
      Check out energy YTD.
      • short_sells_poo 4y ago
        Hint, smart money is buying puts on energy...
        • paulmd 4y ago
          makes sense, if you think the bottom's gonna fall out of the economy, energy usage usually goes with it.
          • short_sells_poo 4y ago
            Yes this is exactly the point. In march, energy prices shot to demand destroying levels and at that point even if the prices would continue to increase near term, it was obvious that consumers (ie industry, production) will start scaling back as their profit margins are eaten by energy costs.
        • slig 4y ago
          Are they buying anything at this moment?
          • short_sells_poo 4y ago
            Tricky to say unfortunately as there's no single asset class that is looking rosy. If I were to say a very coarse average is that sophisticated institutional investors have de-leveraged their portfolios across all assets and are likely to be trading only higher frequency (that is intraday, but not necessarily microsecond) risk and few people hold anything long term. Furthermore, I believe it helps to think of instruments in two terms: linear and convex. Linear instruments are like vanilla equities, index futures, bonds etc. Convex are various options, variance swaps etc. E.g. you may be still hanging on to some bets on energy going up by holding the futures, but you'd have bought some deep out of the money puts in April with the expectation that the current energy prices are what is termed "demand destroying". E.g. near term prices can further rise indefinitely on supply shock problems, but at some point the actual consumption will be destroyed and this can cause prices to crash down even if supply doesn't return. So you'd end up with a complex portfolio that has both linear and convex sensitivities and is difficult to characterize simply as "long energy, short equities" or similar. Currently, there's a fair bit of convex exposure. This results in second and third order effects and feedback loops: if people hold too much convex exposure, then significant moves in the underlying price will trigger exponential moves in the convex instrument prices, which require people to do exponentially larger rebalances in the underlying - as counterparties need to hedge. All these things currently combine into very unstable market conditions. What is different from the market instabilities between 2008 and 2020 is that now there are no policy tools to buttress this. Central banks have but two options: do nothing, or tighten conditions. Most of the outlook is thus a mixture between recession or stagflation. My personal view is that things will eventually recover. That's what always happens. From a sufficiently long term perspective, the 1920s recession is just a blip. For my personal retirement savings, I'm just continuing with buying regular smaller amounts of equities across the globe. In this sense, I'm bullish on humankind (we'll prevail).
            • slig 4y ago
              Thank you for your very in deep explanation!
      • bagels 4y ago
        Oil, or others?
    • dmead 4y ago
      The bond market no?
    • jdmoreira 4y ago
      "When It's Raining Gold, Reach For a Bucket" Now it's the time to be buying great businesses at good prices
    • pvarangot 4y ago
      If it's going to be anything like the last two recessions it's going to cash and (if it dips) real estate, and soon after that it'll be back on the tech stocks that survive. There's really not that much alternatives barring a huge shift in the economy as to where you want to park your wealth if you don't want to trust how much dollars the Fed will print.