Buffet on the impending market crash

[Smash Allen]

SH is an inverse sp500 etf which means it’s daily return is (or is targeted to be) the inverse of the sp500. So if the market goes down 10%, SH goes up 10%. There are 2x and 4x inverse stocks if you feel lucky.

 

[Ducky_Fresh]

Does it have theta decay?

 

[clutchslip]

How's everyone doing so far this month? I screwed up on the Amazon move and didn't buy because, well, $1600 stocks scare the piss out of me. Twitter just never gets any kind of trade support, like other techies. My little advice about CVX has worked out okay. I didn't liquidate any because it missed my first sell level by 78 cents. 28% return in under a month is okay, I suppose.

The market is acting rationally in a weird way. Traders are just trying to stay ahead of the next guy before the prices rise, so they rise. Money can't get any cheaper, and there is tons of it because the current Fed Reserve supports the equity markets. It feeds on itself. It's logical.

Meanwhile, most corona-19 investments seem to be betting on the short term treatment stocks rather than the longer term virus vaccine stocks. Any thoughts on these groups?

 

[Archimedes]

I bought a bunch more Amazon about three weeks ago. It's the only individual equity that I've kept in my portfolio. Done quite well, but I expect that it's going to have some volatility.

 

[Climber]

I bought a bunch more Amazon about three weeks ago. It's the only individual equity that I've kept in my portfolio. Done quite well, but I expect that it's going to have some volatility.

Do you think that they are at risk for class action lawsuits for suspending the 2 day delivery for prime members and going to 2 week delivery guarantees?

 

[Archimedes]

Do you think that they are at risk for class action lawsuits for suspending the 2 day delivery for prime members and going to 2 week delivery guarantees?

Who cares. A class action lawsuit for a trillion dollar company is like shooting a bb at an asteroid. Amazon's two biggest threats on the retail side, IMO, are Walmart and Donald Trump. And one of them will likely be gone come January.

 

[The Smokester]

Would someone just tell me whether it's going up or down? Then I can make my decision.

 

[Climber]

Yes.

 

[clutchslip]

Politics is always here, isn't it?

I am not a believer in the current short term treatment investments. The hydroxychloroquine solution has better ancidotal evidence than anything else, but is getting slammed because the President mentioned it. People would rather that we die than give him any credit. Obnoxious behavior.

Pfizer, J&J, and others are pursuing a vaccine. Governments, including Trump's administration are throwing support behind these private enterprises. I have some bets down. My hunch is that there will be more than one before we are through. Thus, I have bought a couple of pharmaceuticals, including PFE.

 

[Ducky_Fresh]

I might be an idiot but I converted 90% of my 401k to a “cash” position. Left the rest in FZAHX.

I think markets have re-peaked (or damn near it) and Q2 is going to be an absolute bloodbath with the effects finally being felt by the economy itself.

40+ million people out of business. State and local level cratering of tax revenues. Small business evaporating. Oil tanking, ripples to airline industry, auto industry, other misc. Retail comforts will evaporate. People will hold money tighter.

Not to mention schools and other impending defaults.

The impact to sports and entertainment.

New normal will be social distancing for everything for about a year. No one can operate profitably at 50% occupancy. Planes, restaurants, etc.

I can’t imagine this is all “built in”. That’s too convenient.

I may get in to some gold, bonds, commodities, “essentials”, telco, etc., and while
I don’t intend to sit on my cash long I do think it’s an OK place to be for 3-4 months.

Oh, and I did do the short of USO. For fun.

Guess time will tell.

 

[clutchslip]

Nothing wrong with cash. My only fear about cash is that at some point we are going to have to make-up for the TRILLIONS flooding the virus market. Either there will be some massive tax increases or massive inflation to pay for all this monetary panic.

Anyway, I have decided to hang it, this time, no matter what. The U.S. economy, OBJECTIVELY, was doing very well before this nightmare. It will rebound much quicker than anything we have seen before, because the damage is not from economic basics like the last recession.

 

[Climber]

Nothing wrong with cash. My only fear about cash is that at some point we are going to have to make-up for the TRILLIONS flooding the virus market. Either there will be some massive tax increases or massive inflation to pay for all this monetary panic.

Anyway, I have decided to hang it, this time, no matter what. The U.S. economy, OBJECTIVELY, was doing very well before this nightmare. It will rebound much quicker than anything we have seen before, because the damage is not from economic basics like the last recession.

By 'recover' are you referring to an economy that can support jobs almost to the extent that it did before the virus, or are you referring to the level of the stock market?

For the latter, I (and I know I'm not alone in this) think that the stock market was elevated due to perception more than reality.

 

[clutchslip]

If I was referring to stock markets, I would have said so. The market was/is rational. I have not liked earnings ratios for years. Tech stocks always make me crazy with ridiculous P/Es. However, as stated previously, there is NO YIELD in anything but equities. Only governments and humongous multinationals can afford to sit on zero interest bonds for years. You might as well put your money in a mattress and pray there is no inflation.

 

[Blankpage]

The economy was so good yet the persistent pressure on the fed to continuously lower rates. Possible it was an illusion or a "false economy" maybe.

 

[Climber]

The economy was so good yet the persistent pressure on the fed to continuously lower rates. Possible it was an illusion or a "false economy" maybe.

Most likely. If you dump an extra $1 Trillion into the market each year when it's not necessary, it's going to have an impact and that will be an artificial high. Add to that, artificially keeping the interest rates super low, and you have a recipe for an economy that appears to be humming but in reality it's a house of cards that isn't sustainable because eventually ya got's tah pay for it.

 

[Archimedes]

Nothing wrong with cash. My only fear about cash is that at some point we are going to have to make-up for the TRILLIONS flooding the virus market. Either there will be some massive tax increases or massive inflation to pay for all this monetary panic.

And that would impact all asset classes, not just cash.

 

[Archimedes]

If I was referring to stock markets, I would have said so. The market was/is rational. I have not liked earnings ratios for years. Tech stocks always make me crazy with ridiculous P/Es. However, as stated previously, there is NO YIELD in anything but equities.

This market isn't rational at all. Valuations are not reasonable, because people aren't being reasonable or realistic right now. And there is no 'yield' in equities, there are only paper gains and losses that only become real when you actually convert them to buying power. In good times this detachment from reality can continue, much like a Ponzi scheme that continues to attract new marks. But when reality sets in and true cashflow and earning power starts to matter again, and it always does, it all falls apart. The only way to win this game is to successfully market time the folly, which we all know is mostly just luck.

 

[Archimedes]

The economy was so good yet the persistent pressure on the fed to continuously lower rates. Possible it was an illusion or a "false economy" maybe.

Ya think?! :laughing

 

[Kalvin00]

Anyway, I have decided to hang it, this time, no matter what. The U.S. economy, OBJECTIVELY, was doing very well before this nightmare. It will rebound much quicker than anything we have seen before, because the damage is not from economic basics like the last recession.

It really wasn't, though.

The economy and markets were only being held up by ongoing liquidity and QE from the fed. They cannot exit from this strategy, and every $2 trillion they throw at it will do less and less.

Listen to this podcast from macrovoices.com. Keep an open mind and draw your own conclusions.

https://www.youtube.com/watch?v=kJEvuaHyPlQ Starts at around 23 minutes.

 

[Ducky_Fresh]

Most likely. If you dump an extra $1 Trillion into the market each year when it's not necessary, it's going to have an impact and that will be an artificial high. Add to that, artificially keeping the interest rates super low, and you have a recipe for an economy that appears to be humming but in reality it's a house of cards that isn't sustainable because eventually ya got's tah pay for it.

Yep. Apparently it will artificially create GDP increase in short term, then wane over long term. Likely resulting in inflation and other effects/outcomes.

And that would impact all asset classes, not just cash.

Right, all tides rise and fall together. Gold, treasuries, etc. Bonds in theory would not - which is why SOME people want to be in 2-3% bonds, cause that is better than -2%. There are some municipal bonds that had great ratings and yielded 7-8% I guess, though I dont know SHIT about the bond market. :laughing

This market isn't rational at all. Valuations are not reasonable, because people aren't being reasonable or realistic right now. And there is no 'yield' in equities, there are only paper gains and losses that only become real when you actually convert them to buying power. In good times this detachment from reality can continue, much like a Ponzi scheme that continues to attract new marks. But when reality sets in and true cashflow and earning power starts to matter again, and it always does, it all falls apart. The only way to win this game is to successfully market time the folly, which we all know is mostly just luck.

Yeah, and basically the whole market even without COVID had mega financing/debt structuring behind the scenes. All of that is just exasperated by COVID and the additional stimulus and decrease in interest rates. BAD RECIPE.

It really wasn't, though.

I'm listening to the same thing. Black swan episode actually got me to buy some PUTS on the USO. I'm drinking that koolaid bro!

The rest, I am not sure what happens in short term here. Pick resistant/resilient stocks in recessionary times is the way I am looking at it.

I do think we go back down to 19,000 again, too. Hence my bet to CASH - which could work short term, but terrible place to be long term of course.