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Re: Who believes DOW's 2,112.98 rally today will hold?


@VA-Tech wrote:

@bilperk wrote:

Why would this rally hold?  We are in or going into recession.  GDP will be negative in 2nd and 3rd quarters according to economists, possibly even slightly negative this quarter.  The national debt has taken a huge hit with this stimulus package and more will likely happen and the FED has used up almost all its dry powder to change anything.  "Up like a rocket"?  Not soon.

I am 100% cash.  If I was a gambler, I would try some day trading, but not actual investing at this point.  I got out at about 3% down YTD.  I have no idea when I'll get back in.   But all that counts to me is that it will be at lower prices than when I got out.


It won't necessarily return quickly to pre-COVID19 highs, but it also was extremely oversold. Remember, we are facing an event-driven recession not a garden-variety business cycle downturn. IMO, a 1-2 quarter event-driven recession doesn't warrant a 35% global market pullback. I'd wager that in 1-2 years, anyone who didn't jump on this opportunity will be regretful (even if they don't say it).


I don't disagree at all.  The question each of us must answer is when will we be comfortable getting back in, or how long to stay in, or to just hold.  I waiting until I things outside the market get much better.  Clearly, one can get back in now and in two years perhaps be in a much better position.  Even a buy and holder who didn't sell anything at all may be ahead.  But I'm betting that two down quarters at least are not baked into the cake.  And if we have 1,000,000 deaths, and all the other countries have similar counts based on population, then a global recession is not out of the picture for some time.  Just my opinion, but too many people are trying to uncouple the COVID-19 pandemic with the economy and the stock market.  Too many people are acting like we have been through this before.  We haven't.

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Re: Who believes DOW's 2,112.98 rally today will hold?

@bilperk 

200,000 Americans died in 1918 from Spanish Flu, another 45,000 American troops died of the same while fighting a war in Europe. What followed was The Roaring 20s.

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Re: Who believes DOW's 2,112.98 rally today will hold?


@DJANG0 wrote:

@bilperk 

200,000 Americans died in 1918 from Spanish Flu, another 45,000 American troops died of the same while fighting a war in Europe. What followed was The Roaring 20s.


Which had more to do with the end of the war and was two years later.  In two years we may well be ahead of where we were or not.  I have no way of knowing.  We are all just guessing.  

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Re: Who believes DOW's 2,112.98 rally today will hold?


@bilperk wrote:

@VA-Tech wrote:

@bilperk wrote:

Why would this rally hold?  We are in or going into recession.  GDP will be negative in 2nd and 3rd quarters according to economists, possibly even slightly negative this quarter.  The national debt has taken a huge hit with this stimulus package and more will likely happen and the FED has used up almost all its dry powder to change anything.  "Up like a rocket"?  Not soon.

I am 100% cash.  If I was a gambler, I would try some day trading, but not actual investing at this point.  I got out at about 3% down YTD.  I have no idea when I'll get back in.   But all that counts to me is that it will be at lower prices than when I got out.


It won't necessarily return quickly to pre-COVID19 highs, but it also was extremely oversold. Remember, we are facing an event-driven recession not a garden-variety business cycle downturn. IMO, a 1-2 quarter event-driven recession doesn't warrant a 35% global market pullback. I'd wager that in 1-2 years, anyone who didn't jump on this opportunity will be regretful (even if they don't say it).


I don't disagree at all.  The question each of us must answer is when will we be comfortable getting back in, or how long to stay in, or to just hold.  I waiting until I things outside the market get much better.  Clearly, one can get back in now and in two years perhaps be in a much better position.  Even a buy and holder who didn't sell anything at all may be ahead.  But I'm betting that two down quarters at least are not baked into the cake.  And if we have 1,000,000 deaths, and all the other countries have similar counts based on population, then a global recession is not out of the picture for some time.  Just my opinion, but too many people are trying to uncouple the COVID-19 pandemic with the economy and the stock market.  Too many people are acting like we have been through this before.  We haven't.


Seems like you are insinuating that the typical market timer has a better chance of being ahead in two years than the buy and hold investor.  What do base this on?

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Re: Who believes DOW's 2,112.98 rally today will hold?


@OpenMind wrote:

@bilperk wrote:

@VA-Tech wrote:

@bilperk wrote:

Why would this rally hold?  We are in or going into recession.  GDP will be negative in 2nd and 3rd quarters according to economists, possibly even slightly negative this quarter.  The national debt has taken a huge hit with this stimulus package and more will likely happen and the FED has used up almost all its dry powder to change anything.  "Up like a rocket"?  Not soon.

I am 100% cash.  If I was a gambler, I would try some day trading, but not actual investing at this point.  I got out at about 3% down YTD.  I have no idea when I'll get back in.   But all that counts to me is that it will be at lower prices than when I got out.


It won't necessarily return quickly to pre-COVID19 highs, but it also was extremely oversold. Remember, we are facing an event-driven recession not a garden-variety business cycle downturn. IMO, a 1-2 quarter event-driven recession doesn't warrant a 35% global market pullback. I'd wager that in 1-2 years, anyone who didn't jump on this opportunity will be regretful (even if they don't say it).


I don't disagree at all.  The question each of us must answer is when will we be comfortable getting back in, or how long to stay in, or to just hold.  I waiting until I things outside the market get much better.  Clearly, one can get back in now and in two years perhaps be in a much better position.  Even a buy and holder who didn't sell anything at all may be ahead.  But I'm betting that two down quarters at least are not baked into the cake.  And if we have 1,000,000 deaths, and all the other countries have similar counts based on population, then a global recession is not out of the picture for some time.  Just my opinion, but too many people are trying to uncouple the COVID-19 pandemic with the economy and the stock market.  Too many people are acting like we have been through this before.  We haven't.


Seems like you are insinuating that the typical market timer has a better chance of being ahead in two years than the buy and hold investor.  What do base this on.


 I didn't insinuate anything.  It is obvious, however, if one got out of the market while less than 5% down, one is now in a better position, all things being equal, to be ahead in two years than someone who is down 30+% or more.  Buy and hold is a strategy to get the average return of whatever assets one holds, nothing more.  As long as one gets back in lower than the price they got out, they will be ahead.  It is simple math.

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Re: Who believes DOW's 2,112.98 rally today will hold?


@CherylBoca wrote:

The market is just loving that we injected  $2T of money into it - twice the size of the budget for the U.S. military. I am not a gold bug, but I'd say in a year or two, we will have an interesting test on how the velocity of money may tip us from deflation into an inflationary period. (the only reason I bought $10K worth of I-bonds yesterday in an LLC that I use for rental properties. Not normally where I make investments - but TreasuryDirect has a 10K cap per buyer in any single year, and I and my husband and an irrevocable trust had already made their annual purchase!) Of course, we've been waiting on inflation for a LONG time and it hasn't happened. But, you gotta' wonder about $2T.

$2T will likely keep the market happy for a bit, and this uptick is telling us (I believe) that investors already believe it will counterbalance unemployment surges, since those numbers were released today.  I guess we'll find out how well the market prices (or has priced) the hospital strain coming up on us. Atlanta, Detroit, and New Orleans announced today they are at (or just approaching) ICU capacity. I also saw a news special that rural hospitals are at risk of going bankrupt since they've had to defer elective procedures as they prepare for COVID-19 (takes  a bit of time to reconfigure their facilities). I realize that the market may have already discounted this, and the market is largely decoupled from the loss of human life (to a point). I'm in nearly all cash, no equities, so I erred on the side of being late to the party. But, I am still betting that retail investors will push stocks down during the re-adjustment period ahead particularly if the government doesn't get those checks out til May. (Retail investors are 52% of retirement assets, and 37% of equity owners. ) https://www.sifma.org/resources/research/who-owns-stocks-in-america/


Well if inflation goes up because of the $2T recovery law the fed will be very pleased because it has been trying unsuccessfully to get inflation above 2% for the last 8 years without success. However I think inflation above 2% is highly improbable because the GDP is being forecast to drop between 24-40% beginning with Q 2 Because many business sectors such as airlines, travel and leisure, autos, hospitality will will be an anchor on the economy. Last week new unemployment claims jumped by 3.2 million highest in history which is why I am buying stocks which are paying above average dividends with strong balance sheets as well as FAANG stocks which will be fully engaged in the recovery.

Just what rate of inflation are you expecting? 3%?

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Re: Who believes DOW's 2,112.98 rally today will hold?

I agree that FAANG stocks, which I own, will be at the head of the class.  

Gabe

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Re: Who believes DOW's 2,112.98 rally today will hold?


@bilperk wrote:

@OpenMind wrote:

@bilperk wrote:

@VA-Tech wrote:

@bilperk wrote:

Why would this rally hold?  We are in or going into recession.  GDP will be negative in 2nd and 3rd quarters according to economists, possibly even slightly negative this quarter.  The national debt has taken a huge hit with this stimulus package and more will likely happen and the FED has used up almost all its dry powder to change anything.  "Up like a rocket"?  Not soon.

I am 100% cash.  If I was a gambler, I would try some day trading, but not actual investing at this point.  I got out at about 3% down YTD.  I have no idea when I'll get back in.   But all that counts to me is that it will be at lower prices than when I got out.


It won't necessarily return quickly to pre-COVID19 highs, but it also was extremely oversold. Remember, we are facing an event-driven recession not a garden-variety business cycle downturn. IMO, a 1-2 quarter event-driven recession doesn't warrant a 35% global market pullback. I'd wager that in 1-2 years, anyone who didn't jump on this opportunity will be regretful (even if they don't say it).


I don't disagree at all.  The question each of us must answer is when will we be comfortable getting back in, or how long to stay in, or to just hold.  I waiting until I things outside the market get much better.  Clearly, one can get back in now and in two years perhaps be in a much better position.  Even a buy and holder who didn't sell anything at all may be ahead.  But I'm betting that two down quarters at least are not baked into the cake.  And if we have 1,000,000 deaths, and all the other countries have similar counts based on population, then a global recession is not out of the picture for some time.  Just my opinion, but too many people are trying to uncouple the COVID-19 pandemic with the economy and the stock market.  Too many people are acting like we have been through this before.  We haven't.


Seems like you are insinuating that the typical market timer has a better chance of being ahead in two years than the buy and hold investor.  What do base this on.


 I didn't insinuate anything.  It is obvious, however, if one got out of the market while less than 5% down, one is now in a better position, all things being equal, to be ahead in two years than someone who is down 30+% or more.  Buy and hold is a strategy to get the average return of whatever assets one holds, nothing more.  As long as one gets back in lower than the price they got out, they will be ahead.  It is simple math.


OK.  I didn't realize you were talking about those exceptionally lucky market timers that got out while less than 5% down.

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Re: Who believes DOW's 2,112.98 rally today will hold?

@Intruder I think I specifically noted inflation has been expected but certainly has not occurred. And, as is ALWAYS the case, the rise in inflation doesn't occur during a recession/depression but occurs (give or take) with a rise in demand after the shock to the system, and after the "U" or "V" bottom.

We have done something here without any recent precedent, to test our inflation theories. The government has created stimulus this time - specifically - with a huge portion to the consumer. And, on top of that, it exceeds twice the size of the military budget. There is NOTHING similar to compare this to in recent decades.

In the past, money went more towards corporate America which spent a lot on buy backs, and hopefully more on capital improvements and R&D, etc, or it went to bailouts... but this is unprecedented, this huge volume of money, going directly to the consumer. Also, remember the supply chain may need to get rejiggered, which will also create temporary shortages with price increases.

I buy I-bonds not because I expect inflation, but as a hedge. It is a much better hedge than gold, my opinion. I should have made that clearer.  I've met my retirement goals. If I stay ahead of inflation at all, I win. ( I bonds are guaranteed by the U.S. Govt to ALWAYS exceed inflation by some small fixed rate, no matter what inflation goes to, 0 or 20%+). 

Of course, stocks are generally the much better hedge against inflation - and I look forward to loading up the truck.

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Re: Who believes DOW's 2,112.98 rally today will hold?

@DrVenture 

Here I am, browsing comments and I hit a Jethro Tull reference! I am impressed. And certainly one of their best albums ever.

Though if we don't watch out, we might be feeling like Locomotive Breath. 

Thanks for the memories. 

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Re: Who believes DOW's 2,112.98 rally today will hold?


@bilperk wrote:

Why would this rally hold?  We are in or going into recession.  GDP will be negative in 2nd and 3rd quarters according to economists, possibly even slightly negative this quarter.  The national debt has taken a huge hit with this stimulus package and more will likely happen and the FED has used up almost all its dry powder to change anything.  "Up like a rocket"?  Not soon.

I am 100% cash.  If I was a gambler, I would try some day trading, but not actual investing at this point.  I got out at about 3% down YTD.  I have no idea when I'll get back in.   But all that counts to me is that it will be at lower prices than when I got out.


Your point is not lost on me, but is the economic damage priced in? Certainly not thinking that "up like a rocket" is the scenario. Maybe two baby steps forward and one back though. Making each day longer a little less opportunity for anyone looking to buy in. I should clarify that by "all in" I do not mean my entire portfolio. Just the funds that I would like to see committed to equities. And then over a period of weeks. While I am still at 31% cash (the rest equity), I doubt that I will go to more than 75% equities at any point. I appreciate your input.

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Re: Who believes DOW's 2,112.98 rally today will hold?


@VA-Tech wrote:

@bilperk wrote:

Why would this rally hold?  We are in or going into recession.  GDP will be negative in 2nd and 3rd quarters according to economists, possibly even slightly negative this quarter.  The national debt has taken a huge hit with this stimulus package and more will likely happen and the FED has used up almost all its dry powder to change anything.  "Up like a rocket"?  Not soon.

I am 100% cash.  If I was a gambler, I would try some day trading, but not actual investing at this point.  I got out at about 3% down YTD.  I have no idea when I'll get back in.   But all that counts to me is that it will be at lower prices than when I got out.


It won't necessarily return quickly to pre-COVID19 highs, but it also was extremely oversold. Remember, we are facing an event-driven recession not a garden-variety business cycle downturn. IMO, a 1-2 quarter event-driven recession doesn't warrant a 35% global market pullback. I'd wager that in 1-2 years, anyone who didn't jump on this opportunity will be regretful (even if they don't say it).


Well, I can tell you the market is not currently oversold. It seems that everyone agrees prices were overly high to start with, and the market is only down -22.5% from the all time high. That isn't oversold given all the uncertainly and destruction in the system currently. I guess you are claiming -35% is over sold, which it might be if you consider only your vision of long term, but are you really pricing in a global recession, or are you pricing in another possible virus pandemic 6 months from now that you don't know about? No, but some might be afraid. Also, you assume all the pieces remain the same and can just be put back together with glue. Did you consider this event may actually traumatize a whole generation of people & demand for goods / services may change as a result, at least of several years?

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Re: Who believes DOW's 2,112.98 rally today will hold?


@VA-Tech wrote:

@bilperk wrote:

Why would this rally hold?  We are in or going into recession.  GDP will be negative in 2nd and 3rd quarters according to economists, possibly even slightly negative this quarter.  The national debt has taken a huge hit with this stimulus package and more will likely happen and the FED has used up almost all its dry powder to change anything.  "Up like a rocket"?  Not soon.

I am 100% cash.  If I was a gambler, I would try some day trading, but not actual investing at this point.  I got out at about 3% down YTD.  I have no idea when I'll get back in.   But all that counts to me is that it will be at lower prices than when I got out.


It won't necessarily return quickly to pre-COVID19 highs, but it also was extremely oversold. Remember, we are facing an event-driven recession not a garden-variety business cycle downturn. IMO, a 1-2 quarter event-driven recession doesn't warrant a 35% global market pullback. I'd wager that in 1-2 years, anyone who didn't jump on this opportunity will be regretful (even if they don't say it).


This mirrors my thinking at this point in time. But, I am also appreciative of the opinions of those who help keep us all grounded.

Cheryl's link and opinion regarding re-balancing is useful info indeed. I may just buy a position or two with the thought of ST trading in mind, hours or even days. I will choose positions that I do not mind holding, should the worst happen, that the market keeps advancing upwards (lol). Positions that will pay a nice dividend, while I wait, if the market pulls back again for an extended interval. 

Trying to not get too locked into one way of thinking.

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Re: Who believes DOW's 2,112.98 rally today will hold?


@DrVenture wrote:

Positive numbers at open today suggest to me that the dismal unemployment numbers are well priced in. This I take as a good sign!


Tells me there are funds doing quarterly rebalancing and were just waiting to hear the unemployment number were not  wildly more than expected. No one is going to be shorting the market with all this forced buying in funds. Once it's over the shorts will come back in and the market will tumble. It's almost guaranteed since the market is only down <23% from all time highs, which is out of the zone for people who wanted to buy cheap. Many who wanted to buy already bought, and now there will be less demand for stocks when this thing tumbles again. Now after the good news of the bailout bill has come and gone, we will be left with bad news day after day.

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Re: Who believes DOW's 2,112.98 rally today will hold?

This article, may provide some insight. Worst case scenario for deaths is half a million. But, there is also the impact on health care, re: hospitalization. Potentially 150 million infected, a potential for 12% hospitalization and $20,000 per incident in hospital costs. Again, worst case.

How does that play out? Can we flatten the curve significantly and limit the spread? It is certainly a great question, "What exactly is really priced in?" Since the market sell off started about 2/20 and projections are that the virus peaks April/May, can we assume the worst is priced in well before then, given the markets propensity to front bad news? Are we 30 or 40% there? I have decided to be patient and wait until we retest the lows before any more buying.

Additional info:

https://www.reuters.com/article/us-health-coronavirus-usa-forecast/coronavirus-could-kill-81000-in-u...

https://www.usnews.com/news/best-states/articles/2020-03-26/us-coronavirus-deaths-hospital-demands-l...

https://www.latimes.com/science/newsletter/2020-03-26/coronavirus-today-ventilators-unemployment-ren...

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Re: Who believes DOW's 2,112.98 rally today will hold?


@DrVenture wrote:

@bilperk wrote:

Why would this rally hold?  We are in or going into recession.  GDP will be negative in 2nd and 3rd quarters according to economists, possibly even slightly negative this quarter.  The national debt has taken a huge hit with this stimulus package and more will likely happen and the FED has used up almost all its dry powder to change anything.  "Up like a rocket"?  Not soon.

I am 100% cash.  If I was a gambler, I would try some day trading, but not actual investing at this point.  I got out at about 3% down YTD.  I have no idea when I'll get back in.   But all that counts to me is that it will be at lower prices than when I got out.


Your point is not lost on me, but is the economic damage priced in? Certainly not thinking that "up like a rocket" is the scenario. Maybe two baby steps forward and one back though. Making each day longer a little less opportunity for anyone looking to buy in. I should clarify that by "all in" I do not mean my entire portfolio. Just the funds that I would like to see committed to equities. And then over a period of weeks. While I am still at 31% cash (the rest equity), I doubt that I will go to more than 75% equities at any point. I appreciate your input.


Is the economic damage priced in?  As I said above, we are all just guessing.  My particular view is no.  First, before this, was the economy doing well?  We were averaging about 2.5 GDP growth when the average is around 3.  To get the 2.5, we have used every tool we have; lower taxes, trashing regulations, lower FED rates, and so on.  So in my mind, we were on our way to a correction or likely a recession even before this virus hit.  I do not believe, either, that the virus will be resolved in weeks.  It appears that we are on the path to do all the things necessary to make it linger; reduction of social distancing, and reopening of businesses.  Will we then see another spike, and reclosures and lockdowns?  What will that do to the market?  How many more quarters of negative GDP would that produce?  Certainly IMO the market will not go up even if none of that happens as long as we have low or negative GDP, which is baked in for a couple of quarters at best.  So in my mind, I don't see how getting in today would be much better than getting in in August or September even if we are over the virus.  I do see how getting in now could be much worse than in Aug however.  Point being, I just don't know, but I feel the odds favor staying out right now.

Like you, I have met my goals.  I have no need to be aggressive in the uncertain situation we are in.  I don't need to make more.  If the market goes up from here, I won't consider myself to have been wrong, because I know what I don't know, so I can't feel that I'm wrong no matter what happens, as I won't be hurt either way. 

 Basically, my thinking is like Pascal's wager.  But these are only my thoughts in my situation.  

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Re: Who believes DOW's 2,112.98 rally today will hold?


@DrVenture wrote:

Since the market sell off started about 2/20 and projections are that the virus peaks April/May, can we assume the worst is priced in well before then, given the markets propensity to front bad news? Are we 30 or 40% there? I have decided to be patient and wait until we retest the lows before any more buying.

 @DrVenture  Our decision to take some earnings in cash this week may start to look pretty smart in 10 days. It also adds some credence to @CherylBoca  and your idea of trading by buying some holdings we’d like to own and trimming on what seems like an unwarranted rise. I did that with UTX. I just trimmed it too much...or maybe not. This may not prove to continue, but my small purchases of PCI, PDI, PTY  came back faster than even the market, also fell faster than the general market due to the CEF levered package. I don’t really trade those things but I might start, around the edges.

 


 

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Re: Who believes DOW's 2,112.98 rally today will hold?


@CherylBoca wrote:

@Intruder I think I specifically noted inflation has been expected but certainly has not occurred. And, as is ALWAYS the case, the rise in inflation doesn't occur during a recession/depression but occurs (give or take) with a rise in demand after the shock to the system, and after the "U" or "V" bottom.

We have done something here without any recent precedent, to test our inflation theories. The government has created stimulus this time - specifically - with a huge portion to the consumer. And, on top of that, it exceeds twice the size of the military budget. There is NOTHING similar to compare this to in recent decades.

In the past, money went more towards corporate America which spent a lot on buy backs, and hopefully more on capital improvements and R&D, etc, or it went to bailouts... but this is unprecedented, this huge volume of money, going directly to the consumer. Also, remember the supply chain may need to get rejiggered, which will also create temporary shortages with price increases.

I buy I-bonds not because I expect inflation, but as a hedge. It is a much better hedge than gold, my opinion. I should have made that clearer.  I've met my retirement goals. If I stay ahead of inflation at all, I win. ( I bonds are guaranteed by the U.S. Govt to ALWAYS exceed inflation by some small fixed rate, no matter what inflation goes to, 0 or 20%+). 

Of course, stocks are generally the much better hedge against inflation - and I look forward to loading up the truck.


You are ignoring the obvious. inflation has  been below 2% for 8 years because global interest rates have declined to rates never thought possible. 30 year treasury is 1.3%. Back in the 80s 30 year treasury had a 14% coupon. 30 yr mortgage rate was 15% 35 years ago.  Today its 4%. Interest rates are low because there is a lot of global savings looking for a place to be invested in the in a world of $11+T in negative rate bonds which will keep inflation lower forever. Another reason inflation will remain lower is because the price of oil has declined from over $100 a barrel in 2014 to $21 today. Lower oil price means lower inflation which means lower interest rates.

Only reason to buy I bonds is if there is going to be a big up tick in future inflation which is not going to happen in this economy. If you want to stay ahead of inflation its better to buy T @ 30 with a 7.5% dividend taxed at cap gains rates. 

 

 

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Re: Who believes DOW's 2,112.98 rally today will hold?

"I buy I-bonds not because I expect inflation, but as a hedge. It is a much better hedge than gold, my opinion. I should have made that clearer.  I've met my retirement goals. If I stay ahead of inflation at all, I win. ( I bonds are guaranteed by the U.S. Govt to ALWAYS exceed inflation by some small fixed rate, no matter what inflation goes to, 0 or 20%+)."

Not to nitpick, but if we get deflation, I bonds can go to 0% return, but not below.  I have 12 more years on my 2% I bonds, but it is possible even those could return 0% in the right scenario.

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Re: Who believes DOW's 2,112.98 rally today will hold?

Market reactions to news over the last 6 weeks have been largely irrational. I'm not talking about the overall big move down, which probably is rationally justified, but the big swings up on down on shorter time scales. For instance there is no way the market is worth 20% more on one day than it was three days before. Sure there was news of the stimulus, but everyone knew something like that was coming. Bills that pass 96-0 in the Senate are not events about which there was much uncertainty going in. And before this recent big uptick, it doesn't make sense that the market was up 10% one day, down 8% the next, then back up again, etc. 

So while I agree the market is worth quite a bit less than it was before the Covid-19 outbreak, I don't think the pattern of huge ups and downs is in anyway rationally justified.

I don't know if this week's rally will hold. But in this environment, I'm sticking with a plan not to buy anything that at a minimum has failed to move above its 20 day moving average. I picked 20 days because it's short enough to roughly match the overall downward movement in the market, but long enough not to register a buy or sell based on just a couple of days of price change. If this big move down lasts much longer I might increase the averaging time, but for now I'm sticking with 20 days. 

 

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