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Thread: World’s wealthiest lose nearly US$1 trillion in stock market rout that shows no sign of ending

  1. #21
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    Re: World’s wealthiest lose nearly US$1 trillion in stock market rout that shows no sign of ending

    Quote Originally Posted by Buck naked View Post
    I completely understand this logic and it makes sense. Yes, Coca Cola may do better than treasuries in the long run, as I haven’t tracked the complete long term trend of Coca Cola. US Steel in 1929 was selling at $260 a share with a dividend of $8.00 a share and considered a sound investment. The 1929-1932 crash reduced the price to $22 a share, and the company did not pay a dividend four four years. I understand Coca Cola’s success, and it’s difficult to imagine it won’t continue doing well, but who’s to say something better won’t come along, whose to say it won’t break up. Whose to say it won’t enter a severe bear market of its own over the next 3-5 years. Nothing lasts forever, companies all fall in terms of price action and dividend payments over time, the difficulty is tracking the degrees of waves of an individual trend within a collective trend. I have tracked gold, treasuries and other century-plus long term metric history, so I can’t say which will perform better between treasuries and Coca Cola with any certainty, but the collective trend of stock markets looks bad, so Coca Cola looks risky, but could be an exception individually within the collective. What I do forecast is that gold will perform better than the stock markets and treasuries for the next roughly 3-5 term. Yes, there will be a few individual stocks that outperform gold, but picking those few stocks will be difficult. Treasuries look to remain generally flat from the perspective of the long term view as a whole, but will be a safe haven for institutional money to be parked while the stock market loses value over the next 2-3 years and they decide where to reinvest it.


    As to your question on which I would prefer to invest between Coca Cola and Treasuries over the next twenty years would be neither, but if had to choose today for a twenty year investment, I would choose Treasuries as Coca Cola carries much higher risk in the 3-5 term where the losses in principle and dividends over that 2-5 year period might not be recovered for the fifteen year period after. Preferably, I would buy short term(3 month - 1 year and keep reevaluating whether to continue or not)Treasuries and watch what happens with Coca Cola in 2-5 years, and remove the risk of Coca Cola falling dramatically so I don’t loose principle and can start near the bottom. Number one rule in investing, protect your principle.
    Who's to say anything? No one has a crystal ball. I, for one, never would have guessed that General Motors would go from being the largest U.S. industrial corporation with a AAA bond rating to bankruptcy within a relatively short time or that the U.S. would go from having five major independent investment banks to none within a matter of months. So the only thing someone can do is make his best guess and place his bets accordingly. A person who had bet on the ability of the U.S. economy to grow and U.S. corporations to make money over the long term would have had pretty good odds.

    Right now, we have Bill Ackman saying if we don't shut down the U.S. economy for thirty days the entire U.S. lodging industry is going belly up. Ackman mentioned the hotel REIT Park Hotels and Resorts by name and the fact that it's dropped from 33 to four bucks per share. If some old folks who were looking for this company to supplement their Social Security or pension income haven't already sold their shares in a panic, I'm sure Ackman telling them their investment would go to zero likely scared the bejesus out of them and they finally surrendered yesterday. But I looked at their hotel portfolio, and it's a who's who of upscale and luxury brands: Waldorf Astoria, Hilton, Hyatt Regency, W, etc. The company has a strong balance sheet and about $1.3 billion in liquidity, with a tangible book value of $24.41 per share. Last year the company closed on its purchase of Chesapeake Lodging Trust for $2.5 billion, and yet today the entire company has a market cap of $1.2 billion. So what's going to happen to this thing? I don't know, and I'm not advising anyone to buy it, only to make a point. But if you think that we'll get beyond this coronavirus epidemic in a reasonable amount of time and that Americans will once again travel and stay in upscale and luxury hotels, at four bucks and change it looks like a decent bet. There are plenty of other decent bets in this market right now.
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  2. #22
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    Re: World’s wealthiest lose nearly US$1 trillion in stock market rout that shows no sign of ending

    Quote Originally Posted by Ahlevah View Post
    I think technical analysis can give us some useful insight, but, honestly, I'm not convinced any form of technical analysis, whether it's Dow Theory or Elliott Wave analysis or whatever, is really that useful in predicting market movements. I'm more of a Graham and Dodd fundamentalist, seeking value by taking stakes in a businesses with sound business models while tuning out as much as possible all of the geopolitical crap which would otherwise have sent me to a figurative foxhole had I focused on it. This has been a lonely place to be the last fifteen years or so, but even before this latest market swoon it was evident that we had a bifurcated market, with some sectors and companies at reasonable values while others, especially in the e-commerce/tech arena, were grossly overvalued.

    But, yeah, it's difficult to predict how this coronavirus is going to impact the U.S. and world economies, so people are making their best guesses and doing what they normally do when faced with uncertainty by fleeing to cash. They seem to be selling everything, even Treasuries and gold, in a flight to liquidity. No doubt some of this is forced selling due to redemptions and margin calls, but when market indexes drop twelve, thirteen, or fourteen percent in one day that starts to have the appearance of fear and panic. Therein, I believe, lies the opportunity.
    I understand most think of EW as TA, but they are all incorrect and specifically misunderstand it as a tool for use on individual stocks. Mr Elliott never envisioned it for use on individual stocks, he used it as a means to track and forecast market behavior as a whole or as simply, the human experience. He even stated that in his book, Natures Law. Frost and Prechter confirmed it in Elliott wave Principles. Mr Elliotts greatest discovery is how market behavioral movement aligns to Fibonaccis sequence.


    Having said that, I too apply Graham and Dodds ideas of value investing and use many other forms, principles and tools to forecast individual stocks over the long term, but, and this is a big but, all these tools including value investing fail when market behavior hits extremes, which occur rarely over long periods of time, minimum 50 years. Graham and Dodd and Buffetts ideas worked because the stock markets have been in a long term (Cycle degree) bull market since 1932 with relatively lessor degree or manageable bear markets. The difference now is that were entering a bear market similar to when Graham lost about everything he invested, so one should be extremely cautious towards value investing when entering an extreme wave degree in market behavior. Human behaviors propensity for irrationality in the extreme must not be underestimated. It will take too long to recover using value investing principles this time unless one buys at the bottom. Im not even going to think about buying stocks until the Dow reaches 10000 and even then I will just evaluate the situation.


    But your correct, there is panic and correctly so, but only short lived opportunity is coming this year. Panic can last longer than many would care to believe. We still have more short term down, but it will bounce which Im not even considering to attempt to profit on since its too risky. The problem I fear is the move after this upcoming bottom will just be a bull trap. Then the real devastation to markets begin. Once that is completed in a few years, then the real opportunity begins. From my viewpoint, this is all forecastable on the 100 year scale, or to probably confuse you, this 300 year EW supercycle degree.


    I take no pleasure with what I said and beg to be wrong.

  3. #23
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    Re: World’s wealthiest lose nearly US$1 trillion in stock market rout that shows no sign of ending

    Quote Originally Posted by Ahlevah View Post
    Who's to say anything? No one has a crystal ball. I, for one, never would have guessed that General Motors would go from being the largest U.S. industrial corporation with a AAA bond rating to bankruptcy within a relatively short time or that the U.S. would go from having five major independent investment banks to none within a matter of months. So the only thing someone can do is make his best guess and place his bets accordingly. A person who had bet on the ability of the U.S. economy to grow and U.S. corporations to make money over the long term would have had pretty good odds.
    No one has a crystal ball is a truism, but taking risk by trying to catch a falling knife is not for me. Like I warned in another thread, I got completely out of the stock market last November/December. I will not buy stocks even if they begin to rise. Maybe begin buying if crazy levels are reached such as 5000 on the Dow.


    Quote Originally Posted by Ahlevah View Post
    Right now, we have Bill Ackman saying if we don't shut down the U.S. economy for thirty days the entire U.S. lodging industry is going belly up. Ackman mentioned the hotel REIT Park Hotels and Resorts by name and the fact that it's dropped from 33 to four bucks per share. If some old folks who were looking for this company to supplement their Social Security or pension income haven't already sold their shares in a panic, I'm sure Ackman telling them their investment would go to zero likely scared the bejesus out of them and they finally surrendered yesterday. But I looked at their hotel portfolio, and it's a who's who of upscale and luxury brands: Waldorf Astoria, Hilton, Hyatt Regency, W, etc. The company has a strong balance sheet and about $1.3 billion in liquidity, with a tangible book value of $24.41 per share. Last year the company closed on its purchase of Chesapeake Lodging Trust for $2.5 billion, and yet today the entire company has a market cap of $1.2 billion. So what's going to happen to this thing? I don't know, and I'm not advising anyone to buy it, only to make a point. But if you think that we'll get beyond this coronavirus epidemic in a reasonable amount of time and that Americans will once again travel and stay in upscale and luxury hotels, at four bucks and change it looks like a decent bet. There are plenty of other decent bets in this market right now.
    Your logic makes sense, but these times are unchartered from any economic principles, value investing, technical analysis, etc point of view, except Nature’s law and Elliott Wave Principles. Investment banks and the Fed, ECB, etc are warning of crazy numbers such as a 20-30% rise in unemployment, 30-50% drop in GDP. I don’t put any action into what they say anyway, but tell me a time you’ve heard or even read of ****e like that. Governments and states are warning of possible stay at home measures and social distancing for three months. Large swaths of companies large and small will restart in debt, will be forced to make cuts, etc. People won’t just put it behind them and continue like normal if all that ****e happens. They’ll be a hole and it will take time to recover from a mental, confidence, emotional, etc outlook. Look at the DJI on the monthly linear scale from 1900- today and tell me that’s not a bubble. Nothing keeps going up like that, it’s bound to correct drastically, two steps forward, one step back.
    DJI Linear 1900-Today.jpg
    I placed the 1929- 1950 market price action(in red) to scale as a comparative model of a possible outcome to expect. The 1838-1860 market price action is amazingly similar as well as further back in time crash price action.


    But opportunity will arise some day, and timing it will be the key only a few will take and only a few will have the opportunity to take. Most will be left holding the bag for a decade or so.

    The only way I can envision a relatively quick 1-2 year beginning of a recovery is a vaccine within 4 months which isn’t realistic. Cash may be king, but there is no historical precedence for a fiat currency that has succeeded in holding its value. The British pound Sterling is the oldest fiat currency in existence, which is worth less than 1/200th of its original value, so I’m not going to put all my marbles in that basket for the long term. Gold must be considered as part of one’s holdings during uncertainty.

    Maybe I sound paranoid, overreactive, crazy, panicky, etc, but I have known this time(wave) might come in my lifetime for decades and have put countless hours into studying it from a mathematical and historical viewpoint over decades as well. Now I’m begging to be wrong even as I have prepared for it, as money should not have such an importance and have such an effect on peoples lives.
    Last edited by Buck naked; 03-23-20 at 08:23 AM.

  4. #24
    Educator TheEconomist's Avatar
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    Re: World’s wealthiest lose nearly US$1 trillion in stock market rout that shows no sign of ending

    Quote Originally Posted by Buck naked View Post
    No one has a crystal ball is a truism, but taking risk by trying to catch a falling knife is not for me. Like I warned in another thread, I got completely out of the stock market last November/December. I will not buy stocks even if they begin to rise. Maybe begin buying if crazy levels are reached such as 5000 on the Dow.
    I have encountered many people are the university and in coffee shops getting involved in trading. The near totality of them were young business school students or graduate students. For some reason, they almost always seemed supremely confident that they knew how markets work and that they actually could reliably forecast what will happen. I never knew if it is because they enjoy the thrill of taking risks or if it is because they weren't even aware of how much risk they were taking in the first place.

    Quote Originally Posted by Buck naked View Post
    Investment banks and the Fed, ECB, etc are warning of crazy numbers such as a 20-30% rise in unemployment, 30-50% drop in GDP. I don’t put any action into what they say anyway, but tell me a time you’ve heard or even read of ****e like that. Governments and states are warning of possible stay at home measures and social distancing for three months. Large swaths of companies large and small will restart in debt, will be forced to make cuts, etc. People won’t just put it behind them and continue like normal if all that ****e happens. They’ll be a hole and it will take time to recover from a mental, confidence, emotional, etc outlook. Look at the DJI on the monthly linear scale from 1900- today and tell me that’s not a bubble. Nothing keeps going up like that, it’s bound to correct drastically, two steps forward, one step back.
    The economic outlook isn't very good for the rest of the year. We're talking about lost production over multiple weeks, as well as increases in household, business and government debt on a worldwide scale, not to mention the emotional and social consequences of those events. As you point out, this is likely going to have quite a bit of intertia behind it unfortunately. We don't know how much time or effort it will take for this to blow over. Governments might start imposing even more restrictive measure, probably very rapidly in the near future (I suspect that as soon as few do it, the political cost of doing it too is less important)... If the world almost stops turning for another 2 or perhaps 3 months, that's pretty bad.

    For your figure, you should perhaps think about using logarithmic scales. You're looking at something that clearly compounds over time, albeit with a lot of uncertainty, and our brains aren't good at dealing with nonlinear patterns.
    All people who oppose free speech are trying to sell you snake oil. There is absolutely no exception to this rule.

  5. #25
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    Re: World’s wealthiest lose nearly US$1 trillion in stock market rout that shows no sign of ending

    Quote Originally Posted by TheEconomist View Post
    I have encountered many people are the university and in coffee shops getting involved in trading. The near totality of them were young business school students or graduate students. For some reason, they almost always seemed supremely confident that they knew how markets work and that they actually could reliably forecast what will happen. I never knew if it is because they enjoy the thrill of taking risks or if it is because they weren't even aware of how much risk they were taking in the first place.
    Probably both with overconfidence and ignorance mixed in. Studies have shown people, especially the younger, tend to trade because they have an aspiration to become rich, sensation seek or simply just for entertainment and recreation. +/-95% will learn a harsh lesson.



    Quote Originally Posted by TheEconomist View Post
    The economic outlook isn't very good for the rest of the year. We're talking about lost production over multiple weeks, as well as increases in household, business and government debt on a worldwide scale, not to mention the emotional and social consequences of those events. As you point out, this is likely going to have quite a bit of intertia behind it unfortunately. We don't know how much time or effort it will take for this to blow over. Governments might start imposing even more restrictive measure, probably very rapidly in the near future (I suspect that as soon as few do it, the political cost of doing it too is less important)... If the world almost stops turning for another 2 or perhaps 3 months, that's pretty bad.
    It sure is a frightening possibility.

    Quote Originally Posted by TheEconomist View Post
    For your figure, you should perhaps think about using logarithmic scales. You're looking at something that clearly compounds over time, albeit with a lot of uncertainty, and our brains aren't good at dealing with nonlinear patterns.
    I agree. I use logarithmic to count long term degree waves, but for what its worth, I used linear scale for demonstration effect as it shows the bubble clearly.

    Here's the
    logarithmic,
    Dow Log 1900-Today.jpg

  6. #26
    Educator TheEconomist's Avatar
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    Re: World’s wealthiest lose nearly US$1 trillion in stock market rout that shows no sign of ending

    Quote Originally Posted by Buck naked View Post
    Probably both with overconfidence and ignorance mixed in. Studies have shown people, especially the younger, tend to trade because they have an aspiration to become rich, sensation seek or simply just for entertainment and recreation. +/-95% will learn a harsh lesson.
    It seems to corroborate the annecdotal evidence provided by my personal experience, although to be entirely fair, I didn't mention some people who do it for recreational purposes. I am finishing a PhD course on derivative pricing in incomplete market and the professor is a pure finance geek. He double majored in mathematics and computer science, did his master's thesis on applying deep neural networks to financial problems under the supervision of Bengio before going to work in the private sector. He felt a little out of place, so he got a PhD in finance under the supervision late Peter Christoffersen and Kris Jacobs. It's hard to find someone who would be more aware of the limits of our knowledge and he's trading options for fun. I also had a lecturer way back during the early days of my bachelor's degree who trades currencies as a source of income. That guy also is a well paid private consultant who routinely is called by investment firms and banks to discuss macro-financial linkages.

    But, of course, those are the exceptions, not the rule. Most people I have seen trading are trying to hack their way using weird tools they never bothered testing and with possibly just enough knowledge of statistics to make it dangerous.

    Quote Originally Posted by Buck naked View Post
    It sure is a frightening possibility.
    Hopefully, the damages will be contained at all levels. Still, the scenario you painted earlier doesn't seem far-fetched at all.
    All people who oppose free speech are trying to sell you snake oil. There is absolutely no exception to this rule.

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