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Participant ○

Re: What to do now

Cash is the mother of all hedges, but for many not possible due to fixed income requirements etc. I also don't think it's too late to go into cash. The last two crashes (2000, 2008) lasted 1-2 years from peak to trough. Protective puts are already expensive, but inverse funds have made healthy gains so far and might continue. Sector rotation might be worth looking at. The beginning of a contraction usually favors pharmaceuticals, food, necessities. The trough favors equipment, transportation and construction. Coming out of a recession favors financials. Non-cyclicals (low growth/wide moat) may offer some safety, funeral, oil drum retrieval, or large old comps eg Coca-cola, Colgate etc. but those are probably all long plays and won't help much now. Value investing is the way to go (buy low/sell high). For now sit tight, wait and don't let emotions cloud judgement.

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Re: What to do now


@archer wrote:

@retiredat48 wrote:

@archer wrote:

@retiredat48 @FD1001 

R-48 recommends hunkering down at this point. I agree with this for my stock funds, but and not sure for bond funds. I still have sold none of my bond funds so far, PCI, PDI, IOFIX, PIMIX, JMUTX, JGIAX, VCFAX, and a little TLT. While they have helped compared to all stocks, they are dropping too. So, does hunker down at this point make sense for bond funds as well? I just hate selling anything in down times, but there is also maybe a case for dodging falling knives rather than catching. :-) BTW I do take some comfort in reinvested divs, but go back and forth with whether or not that is sound thinking.


I was referring to stock funds...stock funds in a bear market...hunker down.  OK to do same day switches, however, to upgrade holdings.  Confession:  I sold the last remaining vestiges of energy funds during the bear, ending a five year project.

I agree re bonds (which are just off of a 40 year bull market high).  I have been far more active transitioning out of bond funds in last two to four weeks.

The irony is in dealing with a stock bear market at the same time as a the  likely end of the 40 year bond bull market/lowest rates ever.  And by ever, a guy did a study that real return rates are lowest in 3000 years!

R48


In thinking more about it, my guess is that bond funds will have a recovery just as stocks will. Long term perhaps the bond bull is over but the current has bonds funds going for less than than they are worth. Typical overreaction to current events. The true value of both stocks and bond funds will stop the recovery before returning to recent highs anytime in the near future. True in one sense that the value is what people are willing to pay, but I am referring to value based on their underlying fundamentals. Would you agree?


I respectively see it different.  Corona virus now about the sixth, but powerful, reason bonds will decline.  I posted the following today on another forum:

Couple generic observations:

--I have been shouting from the rooftops the last month that bonds of many types have peaked, and that one should consider revising allocations to reduce bonds, increasing cash for now into Money Market Funds.  Now with effects of corona, we have a "perfect storm" re bonds, and each day that passes confirms this shouting was spot-on.  I have spent considerable time exiting from bond funds.  And hardly a day goes by that bonds of various types keep declining in price.  I don't think the end is close at all.  there is still time to make moves.

--I consider the impact on the financial plumbing, how money flows, the lifeblood of the economy, is going to be hugely negative and a considerable challenge to gvt, fed, treasury and business leaders to mitigate or manage it...regardless of corona outcome.  Small businesses to even mom-n-pop landlord situations to be tested.

--I have been using a hedge, PIMCO's PSTIX, a fund that moves opposite the S&P500.  So far working well.  While a one million minimum, it can be had in an IRA at Vang'd for $25,000 min.  The flaw, that you only get the closing price, turns out to be an asset in this market, when buying it during an up-day, about two minutes before closing, and being sure you get it.

------------------------------------------------------------------------------------

Good luck all...Enough for now...

R48

 

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Re: What to do now

As I said in my OP, markets are in a turmoil, I'm staying in cash.  The FED is pumping a lot of money and buying bonds. Things have to stabilize first such as credit/bonds/rates and when you see a trend, it's the time to buy.  Sure, you can try to find the bottom and maybe it's close but you will have time.  

Of course, stocks are on sale but we will have good opportunities in bondland too. 

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Re: What to do now

re: whether it's too late to go to cash.

Most trend models have gone to cash by now. However, very slow models may still be hanging in. There's a quant guy that created a trend following index that is the average of a bunch different models that vary by type (2 moving average crossover, plus/minus return over past X days, below/above single moving average) and by the length of the period.

See here:

https://www.thinknewfound.com/newfound-research-us-trend-equity-index

He also shows the percentage of models that are in/out of the market and breaks it down by period length & type. As of yesterday, only 7% of the models were still in the S&P500 – these would be the slowest signaling models. I would guess by today, they are all showing to move to treasuries.

 

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Re: What to do now

whether it's too late to go to cash.

The two major preferred stock ETFs, PFF and PGX, each tanked 25% this month, seeming to reach a sharp 'V' shaped bottom on Wednesday.  Given that the common stock indices also tanked 25% and, by definition, are much riskier than preferred stocks, I'm expecting a preferred stock turnaround before a common stock turnaround, and much more dramatic.

Preferred stocks are considered more bond like than stock like.   Look at the performance history of these two since the 2008 meltdown.  Both yield 5.55%.  This performance this week seems to be consistent with a deleveraging view of all markets, in general, and margin/hedging action.  It certainly looks like an anomaly at any rate, not consistent with any characteristics of stocks and bonds that I am aware of!  8-)

Rather than going to cash, what about going to preferred stock ETFs?  Not a recommendation, just an observation.  These two are ETFs, not ETNs.  As such, I don't think they trade at a discount or premium.

ElLobo, de la casa de la toro caca grande
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Frequent Contributor

Re: What to do now

I'm not in a hurry to buy any stocks because 1) we are in a bear market 2) VIX > 60 is still very high 3) We got the bounce we expected 4) usually, bear markets don't end with a V shape recovery and why I expect stocks to fall back.  5) My charts (100 days MA) don't signal a buy.

But, I'm a trader too :-)   I think that Munis represent the best risk/reward option and why I'm back invested at a very high % (bought in mid last week) mainly in HY MUNIS.  Why Munis?  you can find my explanation last Wednesday on this (thread)

Reminder: the above isn't a recommendation. I can be in/out any time without further notice.

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Re: What to do now

Observations:

1) US stocks were down about 33-34%, it will take about 50% to get to even.

2) SPY is still down about 22%(still bear market) from the top, it will take 28%up to get to even.

3) The end of the quarter is used for rebalancing. This means more stocks buying in the next a few days but maybe not so good by the end of this week ;-) 

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Re: What to do now

I’ve read a lot of books on Warren Buffett and don’t recall him ever saying his number one rule is to not lose money and his second rule is to refer back to rule number 1.   That makes no sense because he, better than others, understands stock prices fluctuate and he invests long term.  I think that quote was incorrectly attributed to him by R48.  

Spoiler
 

on these forums.  

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Re: What to do now

There is indeed a literal & cryptic saying by WB but it doesn't mean the obvious.  https://novelinvestor.com/seth-klarman-buffetts-never-lose-money-rule/

YBB
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Explorer ○○○

Re: What to do now

Adding to what Yogi wrote, Buffett is credited with that quote BUT it's not to be taken so literally. From Investopedia: 

"Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1."

Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA ratings. So how can he tell us to never lose money?

 

He's referring to the mindset of a sensible investor. Don't be frivolous. Don't gamble. Don't go into an investment with a cavalier attitude that it's OK to lose. Be informed. Do your homework. Buffett invests only in companies he thoroughly researches and understands. He doesn't go into an investment prepared to lose, and neither should you.

Buffett believes the most important quality for an investor is temperament, not intellect. A successful investor doesn't focus on being with or against the crowd. The stock market will experience swings. But in good times and bad, Buffett stays focused on his goals, and so should we. This esteemed investor rarely changes his long-term investing strategy no matter what the market does.

 

IMO, if you are hyper-concerned about taking a loss, you will likely be so risk-averse as to be a bad investor, at least relative to an investor with a more even-keeled temperament.

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Re: What to do now

VA Tech - great handle and university.  Beautiful part of the country.


I agree.  My sense is the quote may be wrongfully attributed to him or taken out of context.  Have never seen it written in:  any Berkshire Hathaway annual report; book where he is was actually quoted; or stated by him in an interview.  Buffett doesn’t believe in taking crazy risks and he is thoughtful and diligent when buying stocks.  And unless someone has sold during the downturn they haven’t lost any money.  His rule is buy good businesses at reasonable prices and think long term.  That’s (most) all any investor needs to know.

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Re: What to do now

At Buffets level, he buys companies not so much invests in stocks.


@cegibbs wrote:

I’ve read a lot of books on Warren Buffett and don’t recall him ever saying his number one rule is to not lose money and his second rule is to refer back to rule number 1.   That makes no sense because he, better than others, understands stock prices fluctuate and he invests long term.  I think that quote was incorrectly attributed to him by R48.  

Spoiler
 

on these forums.  


 

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Re: What to do now

This thread has gone a bit quiet.

still continue to be out of the market . I have been 100% in Taxable and Non Taxable accounts in Vanguard Muni Money Market. I have ridden the 7 day yield from 3.2%Last week  down to today’s figure of 1.57%. Still better than prime money market and federal money market . I have opened an account at Ally Banking and Ally Invest . Ally Savings pays 1.5% on balances and Ally Invest has the best promotion available paying up to a 3500 incentive for new money coming in . Also Mutual Fund Trades are only 9.95 and the reps have waived that for me when I asked. They have access to all my favorite funds in institutional class too . 

Going  forward the following article (See link at end of post) is influencing my re entry into the Market . It shows that for previous pandemics going back to Spanish flu the market rises as the daily deaths moves into its peak but then takes a dip downwards post peak in deaths . In the case of Spanish Flu a 10 percent drop once daily peak in deaths was reached. So I think what we are seeing Now is the same phenomena of the market peaking as we move closer to daily peak in deaths and the market will move lower from there. That is my re entry point. My re entry investments will be the best risk adjusted stock fund (Akrix) and Balanced (Vlaix, Jbalx), Vwiax) funds. 

https://www.tradersmagazine.com/news/just-how-badly-can-the-coronavirus-mess-up-the-stock-market/

 

 

 

 

 

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Re: What to do now


@Sortatino2 wrote:

This thread has gone a bit quiet.That is my re entry point. My re entry investments will be the best risk adjusted stock fund (Akrix) and Balanced (Vlaix, Jbalx), Vwiax) funds. 
https://www.tradersmagazine.com/news/just-how-badly-can-the-coronavirus-mess-up-the-stock-market/

Thanks @Sortatino2

 This aligns with my thinking as well. I'm 63+% cash and have been participating in the market upswing, albeit at a lower %. The thing that confuses me so much is valuations. How can they still be so high? Forget the CV19. How can the country shut down, with unemployment we can't even guess what really is, and the markets are down a run of the mill 10%? That’s about where I am now but with lots of cash. I'm going to be in no hurry to spend it. Take care. Good luck and thanks for the perspective. 

 


 

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Re: What to do now


@rhythmmethod wrote:

@Sortatino2 wrote:

 So I think what we are seeing Now is the same phenomena of the market peaking as we move closer to daily peak in deaths and the market will move lower from there. That is my re entry point. My re entry investments will be the best risk adjusted stock fund (Akrix) and Balanced (Vlaix, Jbalx), Vwiax) funds. 

https://www.tradersmagazine.com/news/just-how-badly-can-the-coronavirus-mess-up-the-stock-market/

 

Thanks @Sortatino2

The thing that confuses me so much is valuations. How can they still be so high? Forget the CV19. How can the country shut down, with unemployment we can't even guess what really is, and the markets are down a run of the mill 10%? That’s about where I am now but with lots of cash. I'm going to be in no hurry to spend it. 

 


 Well said, @rhythmmethod.

I have exactly the same concern as you about current equity valuations, and as highly regarded as some of the equity/balanced funds are that @Sortatino2 mentions in his post, I will probably re-enter the market at some point by first investing in some conservative, high quality bond funds like FSTGX, GIBLX, TGLMX, VFIIX, etc., that survived the March massacre reasonably well.

As a retired investor, my first obligation is to protect the value of my portfolio. My assets are currently all in a TREASURY ONLY MM fund. Missing some of the upside once the market has hit bottom does not really concern me at this stage of my life.

Good luck,

Fred

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Re: What to do now

If you bought some things in the March selloff, consider putting trailing-stops on some trading positions. Some like to put wide trailing-stops of 7-10% but I prefer tighter 2-3% trailing stops if at all. It has been quite an up move from March 23 low. This will let you ride the up-wave but protect trades if the market falters. FWIW, I am never totally in or out but do make trades around positions.   https://stockcharts.com/h-perf/ui?s=$SPX&compare=$COMPQ,$INDU,$TRAN,IWM&id=p82377272754

YBB
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Participant ○

Re: What to do now

New data. I look at the IHME data (link below) which includes projected peak death day . Every day this week it has been moving forward . peak Death Day now stands at Saturday April 11 being the peak . That will likely move up a day or two based on that happening each day this week - so basically this week Thursday or Friday should be the peak Death Day. 

Bottom line- I am raising cash tomorrow from Vanguard Muni Money Market Fund to deploy in increments of 5-10% as market adjusts downwards by at least 2%. 

https://covid19.healthdata.org/united-states-of-america

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Participant ○

Re: What to do now

I think bond funds could be more risky as interests rates begin to rise after the adjustment post peak death days. I definitely want to err on the stick side as a result . 

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Re: What to do now

Sortatino2,

About 1-2 weeks ago I commented on the Muni market and why it's not worth the risk/reward.  If you look at one month chart of VMMXX vs VMSXX (chart), you made 0.1% extra, it's not worth for me the risk my money for such a small number.

Most of the charists/T/A are looking at around SP500=2700 for a ceiling and going down, this has nothing to do with death count numbers.

The Fed have been throwing a lot of money, but, unemployment and earnings are terrible already, sure, they will get better but even 6 months from now they will still be terrible.  Maybe all the traders will disregard everything and start buying anyway.

I don't see why I need to rush and buy anything when I don't see even the SP500 price cutting the 100-200 days MA which is at least at 3000+ (chart).  In a normal market, I would buy when MACD was in a big negative and turned positive but in this black swan, I only dare hourly trading.

For bonds, I need to see a lot more stabilization where rates don't rise + a clear trend and if I had to buy something it would be VFIIX which will not do much anyway.

Look how long it took PIMIX to recover, more than a year with a fake rally in the middle 11/2008 then lose and only after that to recover.  Actually, PIMIX lost about 13% in 2008 from peak to trough and in 2020 about the same, so maybe it's a good time to buy but I'm waiting.

pimix.PNG

If I have to guess, I think the rebound may be quicker because the Fed money + the economy was better before.

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Re: What to do now

Good points FD . We are a long way off on moving average . I recall you and R48 like the 100 day MA. Not even close to 50 day. That worries me . Easy to say this time is different but things are never really that different . The other thing is with the market moves upwards today the VIX is still over 40. That worries me too. Like you I have been  100 percent in cash from market top. Hurts watching the market go up but I think we have another downward leg . Spanish flu Example indicates 10%. I have been saying on this Board that 2050 was the floor based on next tech level down . 

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