Is this a buying opportunity? Poll

[ratiman]

Please participate in the poll.

[Ross812]

The news on this is not going to get better in the next few days. I have spent about 5% of cash on hand. I am waiting until S&P 2000 or when cases stop increasing exponentially. It is going to look really bad once they start getting more test kits. In my city, you cannot get a test even if you have flu like symptoms and a negative flu test. I have three friends in this camp right now. 

[ratiman]

I don't want to bias the voting (please vote) but I see a lot of people talking about buying. I just visited the BiggerPockets real estate investment forums and people are still looking to buy new, negative cash flow properties at the current prices, which haven't moved at all. All I see on here and on Twitter is BUY BUY BUY. Remember when TPG invested in WaMu right before it went under? That's what it feels like right now.

[ERICOPOLY]

My wife is in HR at a very large healthcare company.  She was almost in tears at the end of the day yesterday because she had conversations all day long with panicked employees who were asking how they can get their cash out of their 401ks.  They want to not only liquidate their holdings, they want to pull it from their 401ks.  They need cash, they are taking out loans against their 401ks and she had to counsel them that doing so would result in a huge tax hit if they lose their jobs (because if you do not immediately repay the loan at that point, it becomes a taxable withdrawal).

 

[Guest]

Yes, it is a buying opportunity for certain companies. That's always the case.

[Santayana]

With the kind of moves we've been seeing, saying another 10% down could just mean waiting until tomorrow.

[LC]

I raised cash, converting my entire V position into ITM LEAPS. I'll be holding the cash and trying my darnedest not to buy too early.

[ratiman]

My wife is in HR at a very large healthcare company.  She was almost in tears at the end of the day yesterday because she had conversations all day long with panicked employees who were asking how they can get their cash out of their 401ks.  They want to not only liquidate their holdings, they want to pull it from their 401ks.  They need cash, they are taking out loans against their 401ks and she had to counsel them that doing so would result in a huge tax hit if they lose their jobs (because if you do not immediately repay the loan at that point, it becomes a taxable withdrawal).

 

 

Interesting. That sounds like they have cash flow problems, which might be the case if their spouse just lost a job. How many people will miss their April rent payment? We don't know yet.

[Castanza]

Out of curiosity is anyone buying gold?

[ERICOPOLY]

My wife is in HR at a very large healthcare company.  She was almost in tears at the end of the day yesterday because she had conversations all day long with panicked employees who were asking how they can get their cash out of their 401ks.  They want to not only liquidate their holdings, they want to pull it from their 401ks.  They need cash, they are taking out loans against their 401ks and she had to counsel them that doing so would result in a huge tax hit if they lose their jobs (because if you do not immediately repay the loan at that point, it becomes a taxable withdrawal).

 

 

Interesting. That sounds like they have cash flow problems, which might be the case if their spouse just lost a job. How many people will miss their April rent payment? We don't know yet.

 

I agree.

[chrispy]

I agree with Ross - based on how the virus works it is very high probability that news is more dire in the upcoming days and the only good news could be a vaccine which sounds to have a very low probability

[buffetteer1984]

When Berkshire was headed to 200 everyone said it was a buy and now it's dipped into 170s and people say it could get worse.  What if it doesn't? And who really knows.  If you wanted to buy a house and it drops 50% and you wait for that potential 10% further drop you're just trying to time the markets.  How many times in our history has the markets drawn down 30% from the peaks?

[rogermunibond]

Still way too much uncertainty about Covid CFR and hospitalization numbers.

[Guest]

There is always uncertainty in markets. I'm buying - and hoping for it to get cheaper.

[Guest Schwab711]

I dont think many have reasonable expectations for how big of a hit this will be to the actual economy. It will likely feel like a depression to many businesses. It's hard to understand because for many other businesses, life is more or less normal.

 

 

Either way, small business bankruptcies and UE will jump quite a bit. Savings rate is probably up. I'm not sure demand returns immediately. This may be quite a scarring event combined with 2nd order effects hitting different industries in waves over the next several months (banks with credit losses, bankruptcies where demand doesn't rebound, huge earnings #'s where inventories need to be replenished, ect).

[SharperDingaan]

No reason to buy until we see 1) either a curve flattening, or 2) an oil deal. The news hasn't started reporting yet on the thousands unable to cope, the suicides, the domestic violence, collapsing medical staff, or those losing their businesses. It will really go ballistic when the military medics/field hospitals, and the body removals start being reported on.

 

SD

 

[ERICOPOLY]

I dont think many have reasonable expectations for how big of a hit this will be to the actual economy. It will likely feel like a depression to many businesses. It's hard to understand because for many other businesses, life is more or less normal.

 

 

Either way, small business bankruptcies and UE will jump quite a bit. Savings rate is probably up. I'm not sure demand returns immediately. This may be quite a scarring event combined with 2nd order effects hitting different industries in waves over the next several months (banks with credit losses, bankruptcies where demand doesn't rebound, huge earnings #'s where inventories need to be replenished, ect).

 

I am expecting all of those things and the news has been forecasting this the past few days.  For example, 20% unemployment warning to Congress.

[Guest Schwab711]

S&P 500 is trading at 15x 2019 earnings. I don't think 20% UE is priced in

[TwoCitiesCapital]

S&P 500 is trading at 15x 2019 earnings. I don't think 20% UE is priced in

 

+1

 

I still think 2000 on SPY is base case, but am slowly leaning more towards 1700 as being a more probable outcome.

[ERICOPOLY]

S&P 500 is trading at 15x 2019 earnings. I don't think 20% UE is priced in

 

IMO, the market is still expecting the government to step in with cash.  If the headline today were "Trump and McConnell are listening to the Austrian economists and won't do a fucking thing", then I think the market would drop by a lot.

[thowed]

It still feels to me like the US is a week or two behind Europe. 

 

The UK and certainly London is becoming more weird by the day exponentially e.g. in how people have disappeared from the streets, restrictions being brought in, stories of people losing jobs, empty shelves in food shops etc.

 

I have often been overly-pessimistic about the markets and lost out over the last 10 years.  So I don't want to be too gloomy and miss the bottom, hoping for even lower prices. 

 

So given I feel unable to market time, I am currently dripping in, especially with closed-end funds on wider than usual discounts (and where intelligent directors are buying), and sticking to portfolios of companies with very strong balance sheets.

 

For the stability of our societies, and people's financial securities, I hope our governments get it right soon.  But it is very hard to know what they can do, other than helicopter money all over us, which in any other circumstance I would be horrified by the idea of, and obviously has its own problems it sets up for later on.

[TwoCitiesCapital]

S&P 500 is trading at 15x 2019 earnings. I don't think 20% UE is priced in

 

IMO, the market is still expecting the government to step in with cash.  If the headline today were "Trump and McConnell are listening to the Austrian economists and won't do a fucking thing", then I think the market would drop by a lot.

 

They're going to. But just like the first two bailouts didn't stop the banks from going down, the cash isn't going to stop earnings from plummeting.

 

Will just provide some liquidity to help with the insolvency issue many individuals and small businesses will be facing.

[Guest Schwab711]

S&P 500 is trading at 15x 2019 earnings. I don't think 20% UE is priced in

 

The market is still expecting government to step in with cash.  If the headline today were "Trump and McConnell are listening to the Austrian economists and won't do a fucking thing", then I think the market would drop by a lot.

 

A large % of $1.2T is loan guarantees.

 

US nominal GDP is $21.7T. That's $1.8T per month and doesn't include the full impact to intermediate goods or asset prices. It doesn't factor in the wealth re-distribution from this event, where many employees in certain sectors are slightly better off with government money and many others are much, much worse off.

 

I go back to my original statement. I really don't think current expectations for the impact are near-reasonable, even assuming the stimulus bazooka.

 

This all ignores a potential hit to CRE prices and the potential for inflation to further contract bank equity, bond prices, and equity multiples.

 

I'm not saying these absolutely will happen. I may even change my mind in 24 hours, who knows what new info will come. Right now, I think the market thinks this is a 1-2 quarter problem and then the economy immediately rebounds to where it was. Not certain that's guaranteed.

[chrispy]

Maybe we should be following the actions of the medical community.  They are ramping up for tomorrow, next week, and the week after.

 

Just heard from nurse family members that hospitals are calling in retirees if they would like and are considering allowing those without licenses to work (not sure how that last one works and what the person would do).  Clearly, they are worried about future events. 

 

Physical retail will not all of a sudden be busy in 2 weeks.

[coc]

I'm with the crowd that says the news will get worse.

 

But the market will bottom -- wherever that may be -- when everyone thinks there is further worse news ahead. That is just how it works. It's impossible to know that point. Market timing won't work this time any more the prior times.

 

I recall quite well the discussions portfolios managers were having in 08, 09, 10 about waiting for certain things to happen before they bought, how much worse it was going to get, etc. And they missed the opportunities. Of course, it also could have gotten worse - history only gets run once but didn't have to happen that way.

 

FWIW, I don't know where the bottom is any better than a man on the street. It's a hard game. But I think at the very least, it's helpful to accept that you won't be the smartest person in a room full of millions trying to outguess each other.