Guest News Brief by Kip Hansen — 6 August 2020
Stock markets took an initial heavy hit back in March when the governments of the world issued edicts shutting down the economies of entire nations. Investors were scared silly. On March 9, 2020, this headline appeared in The New York Times Business section:
Wall Street Plunges in Worst Drop Since 2008
Oil prices crashed and bond yields tumbled. The S&P 500 had its worst day in more than a decade.
[ link ]
The United States has weathered almost six months of Covid [madness] since then. How have investors fared?
Here I speak of investors as specifically opposed to stock market gamblers and speculators. Investors buy shares – partial ownership — in existing companies in order to take advantage of their future prosperity. By being partial owners, they normally receive a share of the company’s profits as dividends and as the company expands and grows, their personal share of the company grows in value. The value of a company is subjective and depends on myriad factors often turning on the concept of public confidence not only the specific company but in its industry and in the economy in general.
Market gamblers and speculators do something quite different. They buy shares in companies in hopes of making a profit on the small, short-term fluctuations in the daily prices of those stocks. The old adage: Buy Low, Sell High – but do it quick. In modern stock markets, there are all kinds of speculative moves that produce profits for these people, but the most salient fact is that they are gambling that a stock or the markets will move in the direction of their bet. When they have guessed right, they profit. If they guess wrong, they lose. These gamblers are often called Day Traders and, as knowledgeable and savvy as many are, like professional poker players, it is a mistake to consider them as anything else.
It is pertinent to point out the “The Stock Markets” are not “The Economy” – while they are generally related and inter-connected, it is a mistake to conflate the two. The U.S. economy, by many measures, in in rough shape, with government-mandated unemployment running very high and many of our smallest businesses having been forced to be closed by government orders related to Covid.
However, the aging U.S. population – its retirees – depend on pension funds and private investments as their main sources of income, along with whatever Social Security income for which they have qualified. Pension funds depend heavily on investments in the stock markets. So, our retired citizens, such as myself, are somewhat at the mercy of the markets.
How have the markets fared for investors?
Have investors been driven to penury by the reaction of the markets to Covid? by the downturn in the economy brought about by government Covid-mandates?
Investors are doing very well, thank you for asking.
Let’s look at the numbers:
Note: All of these charts are for the last 5 years, with the monthly values – the last value is close of market 5 August 2020. Remember: Investors are not bothered by the tiny (or big) day-to-day jitters – they have invested for the mid- and long-term.
The Dow Jones Industrial Average
The Dow is not at an all-time high – but very near. Despite Covid [Madness] investors are up even on a one-year basis – the Dow is higher than this time last year. Over a five-year period, from August 2015, the market as a whole is up from 16,500 to 27,200 – up 65%. That is a net gain of 13% per year which is a very good return on investment.
The S&P 500 is at an all-time high. In August 2015, it was 1,972, today it finished at 3,327. Over this last five years it has gained 69%, about 13.8% per year, a bit better than the Dow Jones.
The NASDAQ is the big winner. It has risen from 4,776 to 10,998 — a whopping 130% over five years. That’s a gain of 26% per year.
The idea that the Worldwide Covid Lockdown has crashed U.S. stock markets is simply not true. There has been no stockmarket crash in response to the pandemic which has barely affected U.S. stock markets, after the initial shock. Quite to the contrary, two out of three are at all-time highs, and all three major U.S. stock markets have been supplying terrific return-on-investment on price-value alone (even without considering dividends). Your well-diversified pension fund and your well-diversified personal portfolio is safe, healthy and doing well at the moment.
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Author’s Comment:
It never hurts to have a little good news. Good financial news is particularly nice when so many depend on their savings and investments.
Reader’s who wish to insist that things are worse-than-we-thought are free to do so, and I won’t argue. The crimes that have been committed against small and family-owned businesses by our political leaders who have been consummed by Covid-Madness are simply beyond anything I would have ever imagined, even as a young 1960s university antiwar revolutionary. I would have been less shocked to see concentration camps for radical dissidents.
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We need to drain the swamp in state, county, and city governments too. Kick the idiots out and replace them with wise, non-reactionary leaders; in other words, not leftists.
I was going for that quote also.
My anger would only be held in check if those folks were stripped of 85% of their wealth and their income dropped also by 85% or 90%.
That said, being retired with Social Security and retirement funds and no mortgage or car payments has been a good place to be. I will admit to “selling high” (for years) into safer funds as a planning tool. Younger friends and relatives have and are being seriously hurt.
Agreeing with Kip, I think Panic2020 is “beyond the pale.”
The Feds need to create a stimulus package that helps Democrat refugees relocate to places that aren’t controlled by the Chicken Little dipsh!ts.
In the past, the problem has been that whereever these Democrat refugees land, the immediately start voting for the same Chicken Little dipsh!ts that ruined wherever it was that they came from.
Silver lining; SLV.
I always say that every silver lining has a gray cloud around it. (That’s my Eeyore nature.)
It was obvious ever since Diamond Princess and my first guest post on the Wuhan virus that this was not going to be as bad as initially made out. Climate analogies abound. It was also obvious by late March that a couple of sectors—hospitality (hotels, restaurants, cruise ships, Disney) and travel (airlines) were going to be hit VERY hard thanks to near ‘Universal’ government mandates. (Sweden exception.)
Personal portfolio adjusted accordingly, and then bottom buying at peak gloom and doom has turned out nicely. Would have liked to have done more bottomfeeding, but instead made what will be a very satisfactory major construction loan to my daughter and her family to rebuild their new house in Colorado after it became a much bigger project than originally planned thanks to concealed structural water damage—turning a renovation into a half tear down, when banks would NOT lend for that because of Covid uncertainty. They just moved in last week.
And my ex bought the place next door to their new house with part of her half of our money, that they were renting when the owner unexpectedly put it up for sale because of Covid. So now we have a two house 12 acre ‘resort’ compound on a trout stream with elk browsing thru in Evergreen, just 20 minutes from Winter Park winter skiing and summer hiking and mountain biking. Covid has been good to us.
I grew up in Evergreen. Beautiful place. I hope I can get back there some day.
Touch wood…I have fared fairly well as well. I live fairly remote, and if not for the occasional military jet flying northwest to Alaska, (or TV/Internet wonked out) I would never know there was any Covid going on. I do live on a major international flyway, but there is almost no commercial traffic. But there is an uptick on military flights flying to Asia I presume, similar to after 911. Something is going on.
I too picked up some stocks on deep discounts in March, some of which I sold today for a tidy capital gain. If I had waited 3-4 days in March to pick the actual bottom, I would really be up, but am not a fortune teller. I don’t know that I have much faith in the stock markets any more, and from my perspective, buy and hold is a recipe for losing a lot of money, unless you happen to be in the right blue chip stocks. And even then…But those will turn some day, and other sectors will shine like a nova briefly. The additional liquidity from ‘monetary easing’ is driving the markets up, since there is no where else to get a return.
I wouldn’t be surprised to see this be a sucker rally, with everyone buying in, and then someone pulls the plug and it is musical chair time again. The Russian/Saudi oil fix in March greatly contributed to that IMHO, and some people made a whole lot of money, probably the Russians and Saudi insiders. So now I am taking profits, sitting on cash and waiting for another down turn and/or a sector rotation. My gold and silver acquisitions have now doubled in the last 7 years, which I will keep, since it is buried somewhere out in the forest. Better leave a note…now where did I dig those holes.
does the science matter?
http://www.alexberenson.com/an-excerpt-from-part-2-of-unreported-truths-a-brief-history-of-lockdowns/
Plan on more like an hour to Winter Park. Sometimes it takes an hour to get to Idaho Springs from Evergreen.
Rud,
Your Colorado property taxes may also drop in 2021. Colorado State government is about to get slapped hard by the Gallagher Amendment to the state constitution. Due precisely to the decline in the oil and gas industry there from this economic shutdown. The Colorado residential assessment rate may fall from 7.15% to 5.88% during the next reassessment cycle. The reassessment cycle affects property taxes paid in the fiscal year that starts July 1, 2021 so it won’t be immediate. But the irony for the Green Liberals like Governor Polis having to close whopping budget hole due to the decline of the hated oil and gas commercial values from this COVID economic collapse is pure irony.
https://coloradosun.com/2020/05/12/coronavirus-gallagher-amendment-property-taxes-colorado/
But Polis is good at plugging holes.
From what I’ve seen here, there have been two kinds of “The sky is falling.” One is by those who believe(d) that covid would kill millions; the other is by those who believe(d) that the lock-down would kill the economy. I think both have been shown to be wrong, although the economy is a nuanced thing: the stock market is up, but there are lots of people out of jobs.
The effects on the economy are in the early stages. This just started in late March. We’re less than 5 months in. The Stock Market Crash of 1929 and the real start of the depression were about 12-18 months separated. COVID-19 will be history in 18 months, but the economic malaise will be at least a decade or more.
“COVID-19 will be history in 18 months” – oh it will be history long before that.
Nobel-laureate Dr. Michael Levitt (Chemistry and structural biology at Stanford) has made another prediction.
July 25, 2020: “US COVID19 will be done in 4 weeks [Aug 25] with total reported deaths below 170,000. How will we know it is over? Like for Europe, when all cause excess deaths are at normal level for week. Reported COVID19 deaths may continue after 25 Aug. & reported cases will, but it will be over.”
Now past performance doesn’t guarantee future results but at least he was correct on his predictions unlike the “experts” the governments are mindlessly following.
The CDC is now showing “total/excess” deaths so we can all track it here. Scroll down to the chart:
TRM ==> If you meant to have a link there, it didn’t show.
Try again — I’d like to be able to refer to the chart at the CDC.
I think Kip should stick to his area of expertise.
Over broad sweeps of time (10-20 years or more), much of the ups and downs are controlled by the FED. When they lower interest rates, all investments adjust to the new (artificial) reality.
Net present value of the assets providing yield go up when yields go down. Bond prices go up as rates go down. Stock prices go up as dividend yields, etc go down. Home prices go up as rates for mortgages go down.
With rates now near zero (how insane is a 10-year yield around 1/2%!), stocks are insanely overpriced. PE Ratios, calculated in various ways range today from 30+ to 50+. The high stock valuations will persist only as long as the FED continues to intervene in the market by creating more and more (legally) counterfeit Dollars.
Once the FED changes course, either because price inflation picks up or some other reason, and lets rates move toward what would be more rational in the Economy, then valuations will move toward long term averages (roughly PE of 15 for fair value and 7 to be cheap). Going to fair value means a cut to 1/3 of current prices, so please don’t think all is well in the stock markets today.
But that won’t be the end of the world (except for quite a few zombie companies). Eventually the markets will be cheaply priced, with rates on the high side. Then the FED will rinse and repeat. These “cycles” tend to take 20 years or so, but if you investigate market history, you’ll see them.
BTW, COVID and more particularly the stupid response of governors around the US who imposed lockdowns, didn’t cause the current malaise, but only exacerbated it. The most recent monetary panic started a year ago in the REPO market.
Bob ==> I read the news and comment on it in these little essays on the markets. I offer no opinions on the forces that move them.
The only point in this and the previous essay is that the markets have not crashed or collapsed as the media portrayed, and that, at the moment, investors (pensioners and people like our readers) are doing fine.
No expertise is needed for these observations.
The economy in 1929 cannot be compared to the economy today.
Before the Wuhan virus came on the scene, the U.S. economy was booming, as good as I’ve ever seen it do. The U.S. economy is very sound compared to the 1929 economy.
If we got an effective vaccine tomorrow, everyone would go back to work and school and the good economy we had would be good again.
No doubt this shutdown has caused a lot of economic damage, but if the U.S. gets up and running soon enough, and it looks to me like we are, especially if the kids go back to school, then in a year our economy will be booming like it was in January 2020.
If President Trump is re-elected, that is.
If Joe China is elected, all bets are off. It will be a completely different world.
“there are lots of people out of jobs”
Not just out of jobs. Many have had their businesses destroyed and their wealth tanked. The cascade of destruction continues as their purchases and payments to run a business go to zero, rent and taxes go to zero, contributions to the community and charities go to zero, . . .
As others have already noted, the effect of the shutdowns on the economy will be delayed and sometimes unexpected. Disruptions to long supply chains will continue to cause problems for years. Many cities and states will be facing bankruptcy next year since tax receipts are down, so they will have to raise taxes to make up for the shortfall. This will have a depressing effect on business. The long term effects of the Federal stimulus spending (borrowing) are unknown but will likely take decades to completely ripple out. All of this is NOT due to COVID-19, but to the overreaction, nay, panic by local, state, and even federal government and their accomplices in the lamestream media.
“ but instead made what will be a very satisfactory major ”
… remodel of our own 40 year old house (us, 31 years here).
We also considered this as pumping a bit of money into the local economy as workers and most materials are sold at local stores.
I’m just up the interstate in Idaho Springs Colorado, it’s a small world. Thank you for your posts on virology I learned a lot from them.
The S&P 500 is not quite at an all-time high as of today (8/6). Today it closed at 3349. The ATH is 3386 (2/19/20).
On 3/23/20 the S&P 500 bottomed out at 2237, a 34% drop in one month. Since then it has climbed almost all the way back and is up 3% YTD from 3258 on 1/2/20.
That’s a huge relief to me, also retired and living off SS and my long term investments.
The economy and the stock market are not the same. The value of the market is basically the expected future profitability of the companies traded. In the case of the S&P 500, it’s the expectation for the (weighted index) of the 500 largest U.S. publicly traded companies.
The big boys. They are doing okay. Massive unemployment lowers the cost of labor and increases profitability. The market has no soul.
But it is what it is. Investing in the Index covers all sectors. If one company falters, its market share is gobbled up by its competitors, and the Index remains the same, more or less. The bet is on the future profitability of the whole shebang represented by the 500 largest. That outlook is rosy, especially if DJT is re-elected. The market thinks he will be.
There are some unusual circumstances today with money creation and platforms like Robinhood. High schoolers, especially boys, are trading small sums individually that in congregate add up to billions in stocks and currencies. Inflation of assets is rearing its head in stocks, cryptocurrencies and precious metals of late.
Except for the economic headwinds of COVID in hospitality and travel sectors, this bubble has some ways to go. Something will prick it at some point.
Actually, the S&P 500 is not doing so well. It is only the top 5 stops – the high tech megacaps like Apple & Microsoft. The other 495 stocks are barely making it, with some doing OK (the “Stay At Home stocks like Home Depot) and some falling out of bed.
Whole industries have been gutted by the lockdowns, and they won’t be back to normal in just a year.
You are talking about investors. Yes we are coming back very well. We who invested in 401k for years have recovered if investing regularly and in accounts following S&P500. The V recovery not exactly as fast as a V!. But yet we are back to more money in our accounts now. Long term investment: invest every month, select good mutual funds, forget Cramer.
I haven’t personally invested in the stock market until this year and was quite surprised by the amount of speculation over investment. So many companies out there that have 0 dividend, have very little or never made a profit, and have high debt to capital ratios yet are the darlings of the young and speculators. If you do the research and plan carefully you can beat the S&P500 (I’m beating S&P 2:1 since April) and still invest in safe companies paying a dividend while throwing a few bones to speculation in companies that could potentially boom. Nikola has my attention now that they are actually breaking ground on what they have been promising for years.
Yes, I think if you have the time to do this research on individual company.
Robinhood users are buying these stocks:
Tesla (TSLA)
Amazon.com (AMZN)
Apple (AAPL)
Moderna (MRNA)
Pfizer (PFE)
Eastman Kodak Co. (KODK)
Nio (NIO)
Microsoft Corp. (MSFT)
Netflix (NFLX)
Spartan Energy Acquisition Corp. (SPAQ)
“,,It never hurts to have a little good news. Good financial news is particularly nice when so many depend on their savings and investments…”
Kip, it isn’t just the stock market that has recovered well since the coronavirus correction. Precious metals have also been taking off since March. Silver was at about USD$12.00 back in March, and is now at $29 as I write this. Gold was at about $1,480.00 in March and is now at about $2,070.00 as I write this.
Yes, I know. What goes up can come tumbling back down again. Gold and silver rose to these heights back in the 2011-2013 time period but dropped back down again and stayed there for quite a few years until recently.
I won’t make any predictions here about the future of precious metal prices, but the gold coins in my coin collection sure have appreciated very nicely since I bought them 15-16 years ago. I do not plan on selling them anytime soon.
CD ==> A family memeber got excited about gold last week — we looked at the loner term 20 year gold price and that changed their mind. Buying at a HIGH is just too chancy.
Kip:
This is not the time to buy precious metals. It is the time to sell unless you are thinking very long term.
CD … in my view gold should not be looked at an as an investment, it should be looked at as insurance against the currency rapidly losing value. Which is exactly what fiat currencies like ours do every 40 years on average. You can expect a big or complete devaluation once or twice a lifetime (age 80 US citizens have experienced 2, 1934 dollar devaluation and late 70s inflation following Nixon suspending gold standard) so to me it seems reasonable to have something as insurance to “rebuild” from should it happen. These things tend to happen fast or overnight. The gold price wouldn’t enter in this decision. Amount of assets (if you have little, who cares), time from the last big devaluation, current economic conditions, your age (if you are 80 probably wouldnt care), or other asset holdings such as productive land would enter in to the decision.
If you have 100% complete trust in central banks or government then you wouldn’t need gold either lol.
“You can expect a big or complete devaluation once or twice a lifetime (age 80 US citizens have experienced 2, 1934 dollar devaluation and late 70s inflation following Nixon suspending gold standard)”
The inflation in the 1970’s came from Nixon’s freezing of prices on everything. When these restrictions were lifted, prices on everything soared.
ScottyP:
I agree with you that precious metals are insurance (or a hedge) against the depreciating value of our fiat currency that circulates today. But I also believe that precious metals can be seen as an investment as well. I think you can look at them both ways.
If my recollection of history is correct, FDR first took us off the gold standard in 1933 during the Great Depression. So now, with fiat currency, the value of the dollar is always going downhill.
When I was a kid growing in the 1960’s, I could buy a chocolate bar for a nickel and two of them for a Roosevelt 90% silver dime. The U.S. Mint took the silver out of the dime and quarter in 1965 but kept some of it in the Kennedy half dollar until 1971. Today, with the bullion value of a silver dime (1964 and back), I believe that I still can two nice-sized candy bars. I don’t know for sure, but I will hazard a guess and suggest that you can buy a new car today for the same amount of gold as you could back in the 1960’s.
So yes ScottyP, precious metals definitely are a hedge or insurance policy against the inflation of our fiat monetary system. But I have to say that I like the way the gold coins (and many of the silver ones) in my coin collection have appreciated as well, and I cannot help but see them as a good investment when I bought them back in the early 2000’s.
CD ==> Yes, that’s what we concluded after looking at twenty years of data.
The most common investor error is buying HIGH “because it has been going up”. Too often, that leads to Buying High and Selling Low.
Over the long term stocks be be dialed to whatever number the central planners want imo. They can either drive down interest rates, or buy stocks directly, among other things. The only way to look at it objectively is to cancel out the monetary trickery and look at stock performance as a stock price to gold price ratio. Dow/gold ratio is relatively well known.
If it wasn’t for the Federal Reserve artificially forcing Interest rates lower by buying US Debt (and stocks), then investors would have nowhere else to turn then the the market for a better return.
There is no place else to keep up with inflation, except PM’s…
Watta rat race!
The stock market does not necessarily reflect reality. For example Tesla (TSLA) has a higher market valuation than Toyota (not clear if this is just Toyota US; probably is).
However:
[This is from July 1; Tesla is now at $1,489.98 ]
I believe it is barking at the moon crazy to believe Tesla has anywhere near the market value of Toyota, but obviously there are a lot of deep-pocket investors who think otherwise.
The problem is that Toyota makes money on every car.
Tesla makes money by selling indulgences to pickup truck and suv makers.
LOL. That is a funny and accurate way to put it. I’m going to use it. I owe you drinks.
Addendum:
There are strictly technical aspects which impact the stock market. Basically investors have a choice between fixed-rate instruments (Treasury & municipal bonds) and equities (stocks). Investors with a low risk tolerance (i.e., they expect to need the principal back in one year or less) will tend to invest in fixed-rate instruments. Investors with a higher risk tolerance will go to equities. But this is a shifting calculation based on interest rates. When rates go lower it pushes more investors to equities; when they go higher investment goes to bonds instead. When interest rates go to essentially zero, where they are now in the US, investors who don’t absolutely need to get their money out in a year or less will tend to prefer the likely increase in equity value over the absolute certainty of zero appreciation in bonds. Especially if stock values are depressed.
In the current circumstances the aggregate stock market indexes are not so much an indication of investors believing things are great as they are an indication that investors believe things can’t get much worse over the next year or two.
Meanwhile, people who depend on a regular paycheck are really hurting, especially in the hospitality and travel industries. Your 401K is probably solid, but your barber might be out of business next time you want a haircut.
The market is not the economy.
Alan ==> Quite right. There are odd parts of the economy doing “very well, thank you”. For instance, our local home repair big box store reported having a hard time keeping items in stock — building and home repair/upgrade stuff. One location doing 2 million dollars in a month! and hiring staff like mad. WalMart parking lots are overflowing day and night. Grocers can ‘t keep baking supplies on th3 shelves, they fly right off.
It is the details of government interference that are killing small businesses.
Business is also booming at liquor stores (the bars are closed).
Alan ==> In my state, bars liquor stores are “essential” but libraries and book stores not…..
Liberals don’t want the masses to waste their time reading.
This is very bad news for the Democrats because they need things with which to hammer President Trump. So, don’t expect this to be big news in the mainstream media.
“Your comment is awaiting moderation.” ???
““Your comment is awaiting moderation.” ???”
Probably the phrase with the initials “hPT”.
I’m cheesed. A company I’m invested in was ready to IPO right when this hit. Now it’s cancelled.
“If you don’t know who you are, the stock market is an expensive place to find out.”
-Adam Smith (nom de plume of George Goodman
The Money Game, 1968
I’d like to give a shout out to SMI (Sound Mind Investing) for their fee-based financial services. Year-to-date I’m up a modest %6 (%10 annualized) with a diverse and balanced portfolio of bonds, stock, commodities, and cash. Been a paying subscriber since before the housing crisis.
If the Progressives come to power, Kip, you may very well see concentration camps for radical dissidents, except “radical dissident” will mean “climate denier” and they’ll include Anthony and Charles, and you and me, and most of the other posters here.
No doubt. They better send bachelors though for me.
I have thought since the beginning that this virus had nothing to do with our health and everything to do with the upcoming election. Consider the following:
As goes the US, so goes the world. The UN’s climate change cabal depends on US funds to finance it. Without the United States financial backing, none of the globalist Marxists dreams will become reality.
Remember that Donald Trump is a nationalist, not a globalist. The Democrats are now, essentially, globalist communists. Many other Republicans are globalists, not necessarily communists. Trump prevents their dreams from becoming reality. So they do everything in their power to stop him, not realizing that people can see the blatant hypocrisy.
Donald Trump also is playing hardball with China. Four more years of Trump will really really hurt China, a lot. They know this. Which is why they already imposed tariffs on products that affected Trump voters. And where did the virus come from? It is China’s financial and political interests to hurt Trump any way they can.
Hydroxychloroquine and zinc are dirt cheap drugs. That is not good for people who own stock in drug companies. People like the directors of the National Institute of Health who have a financial stake in Gilead Sciences, the drug company that makes the patented, expensive remdesivir. (Source: https://pbs.twimg.com/media/EXD3rL5XQAAtCHY?format=jpg&name=small) In addition, if panic dies there would be no reason for anyone to take an expensive vaccine or expensive medication. Therefore, these greedy people need to discredit any cheap treatment and keep panic alive to fatten their own wallets.
Then you have politicians with a power trip. Fear was the perfect way to bring about their dictatorship dreams. People gladly surrendered their rights over a disease which over 99.5% of people make a complete and full recovery. You better believe that once this is over, you will not have as many rights as you did before this started.
Then you have the brownshirts in Portland, Oregon in which the Democrats refuse to condemn, if they even acknowledge it at all.
Taken all together, it is clear the lock and facemask requirements have nothing to do with your health. Since many newspapers around the world love and worship the New York Times — and since the New York Times are rabid anti-Trumpers — you will see this hysteria die down after the election. If Biden wins (unlikely), the media will cover up everything. If Trump wins, they will switch to something else to get rid of him, since this latest trick didn’t work.
“Democrats are globalist communists!” Hilarious!
Obviously you’re a Murican, as you have not the faintest clue what a communist is! American politics = one party with two right wings. Not agreeing with One-Term Trump is NOT the same as being a Communist!
And I think you’ll find that the rest of the world are mostly anti-Trumpers, not because they’re also Communists, but mostly because he’s a really, really, hideously appalling, ignorant, selfish, self-absorbed cretin, surrounded by toadying, lickspittle acolytes. He’s going to lose the election, but that doesn’t mean he’ll willingly give up the presidency. And then we’ll see how much you really understand freedom and democracy and your beloved Constitution.
Most of the rest of the world has not gone through the Enlightenment, Adrian. Their view of Trump is ethically vacant. Enlightenment ethics are apparently not your strong suit either.
The US Constitution presents the only country explicitly founded on Enlightenment Humanism. Evidently, you’re contemptuous of that, too.
And please don’t raise that truly idiotic historical canard about founded on slavery. It’s wrong. And no country has done more to eliminate slavery than the US, except the UK.
Considering Trump’s accomplishments, you’re wrong about his personal qualities, too.
As to toadying, lick-spittle acolytes, let’s just note the refutation that he has no one near him like you.
It really is amazing how much communists hate anyone who disagrees with them.
That’s sort of true. The Democrat establishment has been as bad for working people as the Republican establishment. Biden’s cognitive decline is screamingly obvious but the establishment still wants to run him. They didn’t learn their lesson from the first Trump win. You seem confident he won’t win again. Dream on little broomstick cowboy.
The right/left Republican/Democrat rural/urban schism in America is horrible. 95% of American geography voted for Trump. Folks can’t even have a civil conversation any more. The majority of Americans now fear to talk about their political opinions. link Having the wrong politics is now a firing offense. That’s a problem for the pollsters because folks (especially on the right) are starting to lie like crazy about their voting intentions.
Your analysis isn’t just missing the nuances, it’s missing the big picture. It’s not about the party establishments any more. The snowflake social justice warriors are taking over and they make the Red Guard look like Boy Scouts.
Republicans have been bad for labor unions, however, despite the lies of the left, unions have only been bad news for workers.
Republicans are good for the economy, and that is always good for workers.
I’d like to see you support your claim that Republicans are bad for workers.
Republicans and Democrats both allowed China to steal millions of American jobs using unfair trading practices. link Some of President Trump’s best policies are those aimed at making China quit cheating.
There is nothing unfair about having cheap labor. Unless the government is using slave labor to keep it cheap. (Which China has done, but that hasn’t been the bulk of their labor.)
The so called currency manipulation was nothing more than China buying US bonds.
China’s unfair trade practices go far beyond cheap labor and currency manipulation. (If they keep the RMB artificially low it doesn’t matter if the means are legal or not by themselves.)
China insists on developing country status. link That’s in spite of the fact that China’s middle class outnumbers the combined populations of the United States and Canada. Just making them obey the same rules as everyone else at the WTO would be a good start.
Can China buy American companies and take all the jobs to China? Can China set up branch plants in America without hindrance? Can China set up a plant in Canada, import all the workers from China, operate completely in Mandarin and pretty much ignore Canadian labor and safety laws? Yep. Could we do the same in China? Nope, not a chance.
China isn’t interested in a level playing field or any other kind of fair play. They’re a lousy trade partner and President Trump is calling them to account.
Speaking as a Canadian observing from the sidelines, Adrian apparently has not heard the platforms of of AOC or Bernie Sanders. The Trump derangement syndrome is strong in Adrian. I suggest Adrian seek psychological help.
A few decades ago, a particular French President actually bragged about having multiple mistresses.
A well reasoned article about the stock market and Adrian Mann has a TDS nervous breakdown.
Adrian either go back on your meds or soon the men in the white jackets will come to take you away.
I see that Adrian is another one of those people who actually believes that socialists are conservative.
Adrian, pushing communist solutions to every problem under the sun is what makes the Democrats like communists.
Your fixation on Trump is cute.
BTW, I notice that you actually seem to believe the lies the communists have been telling each other.
“BTW, I notice that you actually seem to believe the lies the communists have been telling each other.”
Adrian’s not the only one unfortunately, there are lots and lots more like him
Gee, do you think the Fed giving 3 trillion dollars in taxpayer money to the biggest companies, including having Blackrock bail itself out with some of that public money, had anything to do with this? Sure, the corporations are doing great,benefiting from the largest heist of public money in history. Free enterprise at its best!
Did someone say “BlackRock”?
Many people have suggested that USA will default on “bad debt’. That includes all the fake carbon credits created by Green energy schemes.
We don’t have the full story, but here is reporting of Canada Pension Fund using BlackRock to purchase Ontario’s Industrial Wind Turbines. The obvious question is why did Canada use a “shadow bank” to do a domestic (within country) transaction? My guess is this is intentional, to avoid oversight required by the regular banks.
These are fraudulent transactions. Who knows how they will be “unwound”, but expect the USA to come on top at the expense of other nations.
https://blackrocktransparencyproject.org/2018/08/27/how-canadas-infrastructure-bank-was-created-by-and-set-up-to-benefit-blackrock/
Technically that’s the beauty of a fiat currency. The Federal Reserve would get pushed into Fiscal Dominance scenario, where fiscal concerns override traditional Fed monetary policy. A Fiscal Dominance scenario is where the Fed and Treasury simply crank up the printing presses to pay outstanding bonds, notes, and bills to those who held them outside of the government (public part of the debt) with ever cheaper dollars. This of course ignites inflation and destroys savings held in banks, including the average folks IRAs and 401Ks. It is a way for the government to steal IRAs and 401K without actually seizing them. Then once those assets held in banks are worthless, the real hyper-inflation kicks in a la Venezuela. Traditionally the only assets that hold value are real estate, foregin currencies, and precious metals. Would they then? Who knows. Gold would probably hold up real value. Some land holdings though would likely go down, like pricey real estate in the Big Cities that have to tax the bejeezers out of owners to stay afloat.
Just an investor/trader comment. I have done both since HBS a long time ago, Just different signal to noise ratios. And do not forget, you can also sell high then buy low (a short). That was my best trade ever, when they could not certify EU expansion finances.shorted that day at 36, closed out the short at 6five months later. Should have waited—it went to 2. But thought $30/share sufficed.
As you and all good traders know, you make your plan and execute it taking the profits as planned. You move on to the next opportunity. Never look back and say “should have”, you only drive yourself crazy and may even end up taking greater risks later on. It is a disease that eventually kills less disciplined traders.
“eventually kills less disciplined traders.”
Discipline is the key to successful trading. If you have discipline, you can make money. If you don’t, you might lose it all.
It is psychologically difficult for traders to sell when the price limit has been busted on the downside but you better sell then, instead of hanging on to the hope that the stock price will reverse and go higher. If you don’t follow your plan, then you have no plan, and you can lose lots of money if you don’t have a plan.
Some very rich and famous people have said they always sell too soon. Rothschild for instance but also Bernard Baruch.
In April I put all my investment funds into S&P 500s combined with an additional twenty thousand. I’ve seen healthy returns. I purchased my house in a similar way. After spending a year in Afghanistan (’03 – ’04) I intended to purchase the home I had been renting. However, upon return I found it had doubled in value in the previous year. I told my wife we’d have to wait until the market corrected.
The housing market crashed in 2007 (due to a trifecta that is a discussion for another day) but didn’t hit bottom until about 2011. The house I purchased in 2011 for $125,000 had sold in 2007 for $535,000. I immediately walked into hundreds of thousands of dollars of positive equity.
The phrase “buy low, sell high” is prudent advice, which means one has to keep their options open and sometimes wait for years to see opportunities like these examples.
Bernie Sanders and his ilk want to tax the stock market gains earned since March.
They don’t seem to realize that they are not taxable until stocks are sold. They also don’t realize that many people are just seeing a recovery to the stock prices they had before the COVID-related collapse. They seem to think everyone in the market currently got in at the March low.
There are proposals in California’s legislature to attempt to tax “unrealized” Capital gains on their residents. How that would even work with them dependent on the IRS reported filings I d=can’t even imagine. The unintended consequences of fleeing Californians though would be immense.
That is how desperate things are about to get in some of those Blue States facing massive budget shortfalls.
Joel ==> It is unlikely that anyone will be able to change federal tax law to tax unrealized gains — unrealized gains are a fiction- they are not gains at all.
Kip==> Oregon’s Senator Wyden apparently think s otherwise at the Federal level:
https://www.wsj.com/articles/top-democrat-proposes-annual-tax-on-unrealized-capital-gains-11554217383
Depending on your age, keep your stocks in a traditional IRA. Don’t pay taxes on the gain of a sale until the time when your taxable income is lower or you are retired.
Investing in the stock market is the same as playing in a casino.
The game is rigged.
Never forget that basic fact.
Pretty much everything is rigged and everything is timing.
Yirgach ==> Can’t agree — Day Trading is a casino game. Investing is something quite different.
Yirgch,
Many people, but not all, want to stop working before they die and have enough money to live on. I haven’t thought of how to do this without investing, other than becoming a politician and using other people’s money. That’s not for me.
Perhaps you can offer other suggestions.
It’s not rigged, nor is it the same as gambling.
Just look at the millions of people who make money doing it.
Don’t let paranoia rule your life.
The USA stock market of today is not what I recognize as reflecting accurately a buying opportunity. The leaders currently have outrageous prices when looked at in the context of what they can actually earn doing business.
If the next USA president is not the current White House occupant then it would not surprise me an avalanche will occur in USA stock prices. For now non-institutional investors are riding with momentum & many assume their sector of stocks/index won’t go down “too much” before they could get out.
The US population do not know the alternative candidate has brain damage. Two strokes, the last, this year, on camera.
That kind of thing is bound to affect the stock market. No sane company in the world would select a CEO with brain damage.
What is the point? Who is pulling the strings? And the alternative party’s plans appear to be madness. Certain failure, only question is how soon.
Evidence of Brain damage is the candidate forgets what they were talking about mid-sentence and asks what the question was…
mixes up concepts, cannot pronounce common words they knew before, and the person’s emotions do not match the situation.
It is easy to see evidence of brain damage if interchanges are viewed as text.
“Well, if he can’t figure out the difference between an elephant and a lion, I don’t know what the hell he’s talking about. ”
https://news.yahoo.com/biden-asks-reporter-hes-junkie-155458897.html
At an event for black and Hispanic journalists, the presumptive Democratic presidential nominee compared the question …
William: Would the candidate take a cognitive test? The President took a real cognitive test, passed no problems, no cheating.
…to asking CBS News correspondent Errol Barnett if he was using cocaine during the interview.
“No, I haven’t taken a test. Why the hell would I take a test?”
Come on, man.
That’s like saying you, before you got on this program, you take a test…
… where you’re taking cocaine or not. What do you think?
Huh? Are you a junkie?,” Mr Biden said.
When asked for a response to Donald Trump, who has bragged about passing a cognitive test and made Mr Biden’s mental state an issue for voters, the former vice president dismissed the question as trying to provoke a reaction.
“Well, if he can’t figure out the difference between an elephant and a lion, I don’t know what the hell he’s talking about.
Joe Biden’s dementia is glaringly obvious. The question is will the DNC step in now and replace him?
I thought they would have replace Dementia Joe by now. In April-May, I had predicted they’d replace Biden in July before the convention. Obviously I was wrong. I misjudged how insane and power hungry the DNC is. I mistook the DNC as a rational actor. Clearly it is not. So with Joe Biden’s dementia and the DNC’s insanity and lust for power anything is possible and we are in for a wild ride through to the inauguration in January.
One thing is certain Joe has clear signs of age-releated ementia and is unfit to serve in any capacity of public trust.
In most normal cases, it is the wife and family that have to step-in for a mentally declining grandparent or parent. They have to take Grandpa’s or Dad’s (or mother) car keys away from him (her) and get the driver’s license revoked so he(she) knows he (she) can’t drive anymore. No one is doing that for Joe Biden, they are using him like a ventriloquist dummy.
I blame his wife Jill. She is responsible for the embarrassment that is about to befall her husband, a man who served in the US government, like his politics or not, for 44 years. His time has passed.
Joe Biden is clearly suffering for dementia that will not get better and will certainly continue to worsen in the coming months to November.
If they replace Biden with anyone other than Bernie Sanders, the far left will skip this election.
They may be only 3 to 5% of the population, but they vote Democrat reliably. If they sit out, Biden’s vote total goes from 50+/-% to 45+/-%, and he loses bigger than Hillary lost.
You have made a mistake by writing this, it will bring this fact to their attention and they will double down to make sure this aspect of your economic life is smashed utterly too.
Because that’s what this all seems to be about, in my opinion.
Again, “cherry-picking” the data only reveals how dishonest those who do so are.
The investor class is accruing wealth at a time when millions of North Americans are falling out of the middle class. What might just happen in response is a dramatic shift to socialism, as that will be the only way to mitigate the colossal unfairness of all of this.
Some believe the “love” of money is a root of all kinds of evil, and by craving it, some have . . . pierced themselves with many griefs. Equal money does not automatically produce equal fairness or happiness imo. Sometimes those seeking money can do much harm to others (banks denying loans for affordable energy to impoverished countries in the name of climate change while at the same time, funding economies that rely heavily on imports from coal-powered not-so-free countries.) True socialism w/o accountability does not provide justice for anyone but rather amplifies cronyism at the top and pain at the bottom imo.
Ian ==> It is possible that you misunderstand. “The Investor Class” includes almost all of the burgeoning number of retirees and pensioners in the United States. Over 1/3 of the U.S. population is over 50 — either already retired or facing retirement in the next two decades. These people, which includes myself, have 401Ks, corporate retirement plans, pensions funds (active or being built up) and personal investments (if they have been wise and been saving).
WE are the Investor Class — and are mostly middle class.
Wrong Hansen
Almost all stocks are owned
By people in the top 10 percent
By income or peopke who were in the
Top 10 percent when they retired.
Few Americans have much
Capital invested in stocks
And up to half have little or no
Savings at all
Richard ==> So that makes you a 10%er? Me too, I guess, and all the folks commenting here?
Wrong Richard
Almost all stocks are owned by 401Ks and pension funds.
You’ve been taken in by the lies of the left and actually seem to believe that the rich own everything.
Mark
About half the people
in the US have no savings
other than equity in a home
if they own one.
Of those who have savings,
those savings
are generally small relative
to their annual income,
except for the top 10% by income,
and those who were
in the top 10% before retiring.
Even some of them have little
savings other than the equity
in their home (which can be
large).
My point is the strong stock
market, for the moment,
is not enough to make
most Americans happy,
not with 32 million
collecting unemployment
compensation and most
Democrats seeming to want
the economy to tank before
election day.
I don’t apologize for being
in the top 10% when
I retired at age 51
in January 2005,
because my health
was more important
than money.
And I’m happier being out
of the Top 10% than I ever was
in it while I was working.
Don’t brag about your stock market
returns because the next thing
that happens is usually a correction !
Happened to me more than once
so I sell when I feel like an
investment genius (near
a top) — I sell or at least place
close stop loss orders
to sell with the next decline.
Confidence tends to peak
with the stock market peaks.
https://en.wikipedia.org/wiki/List_of_largest_sports_contracts
#1 Patrick Mahomes, $503,000,000 over 12 years; about $42 M/year
I wonder if most sports fans object to this as they fall out of the middle class?
If he gives me a couple of million I’d speak to his fairness.
John ==> As someone who thinks Professional Sports are a total waste of time — even as entertainment, I find such contracts to be an abomination — a fraud on the general public.
I wouldn’t object if professional athletes made professional salaries — like engineers or nurses. They work hard and have a particular skill honed over years and years. Maybe their unions should have special retirement plans, as their working life is rather short, and insurance against career-ending injury .
Modern Circuses (of the roman Bread and Circuses meme).
The owners make millions, why shouldn’t the athletes who make that wealth possible share in it? No fraud involved.
Do the fans willingly buy the tickets? Then no fraud.
Do the fans willingly sit through the commercials? Then no fraud.
Another revenue stream is the over priced merchandise. Yet once again, the fans are willing to pay twice as much for a jersey with someone else’s name on it. Makes no sense to me, but once again, no fraud involved.
MarkW ==> As a results of the outrageous salaries, what does a ticket to a game cost these days? Not just a couple of bucks….not ten bucks like a movie….
As long as customers are willing to pay it, there is nothing fraudulent about it.
I don’t believe it is the government’s responsibility to tell companies what they are permitted to charge for their services.
BTW, if big named actors weren’t getting 10’s of millions to act in movies, how much could ticket prices fall by?
The investor class includes anyone who has a pension or a 401K.
It’s not a rich vs everyone else thing as most leftists want you to believe.
“On March 9, 2020, this headline…..”
.
“The United States has weathered almost six months of Covid [madness] since then. ”
…
August 9th is FIVE months……seems Kip can’t count.
William ==> You apparently can .. well done sir!
People would be very surprised at simple short term trading strategies that make huge amounts of money. I have seen these strategies first hand as I program computers for a successful hedge fund. It is quite amazing and I never would have believed it unless I saw it first hand.
Stevek ==> Do these “simple short term trading strategies” ALWAYS result in huge gains ? always gains?
I have a very dear friend that is a consummate Day Trader — for over 40 years. He is just now recovering from the March hit.
Kip – no not every day, ( though some funds do make small profit pretty much each day with arbitrage ). What I have seen is say 60 pct of days make money with some days doing very well. Drawdown would be low, not many big losing days. I thought about forming my own small company with just a few people. Honestly the biggest hurdles is getting good quality historical data and doing the programming.
SteveK ==> As I’ve mentioned, I have a dear friend that does Day Trading exclusively and has done so for 40 years — he has used every possible programmatic assistant over the years — he is wealthy now — but always harried by the risks he takes.
SteveK ==> PS: It is easier when you are risking other people’s money.
“I have a very dear friend that is a consummate Day Trader — for over 40 years. He is just now recovering from the March hit.”
Well, a daytrader is just that. They do a trade when the market opens in the morning and close that trade out before the day ends. That way they don’t get surprised overnight with a market sell off. They wake up in the morning, note the sell off, and wait for the economic situation to clarify itself before investing again. Meanwhile, all their money is sitting safely in cash. That’s the main point of being a daytrader.
So your daytrader friend must have also had some more long-term investments on which he lost money. It wasn’t because of daytrading.
Tom ==> Not necessarily = if he bought Carnival Cruise Line or airlines in late February, he would still be far underwater. The market recovery doesn’t raise all boats.
Hansen
I do not understand the purpose of this article unless you want to brag about your investments.
There was a stock market crash we now know was a very steep correction in the ongoing 2009 bull market.
Stock valuations are now extremely high even without the poor 2Q 2020 earnings.
With 2Q earnings I expect valuations to be the highest in stock market history.
Based on history, stocks bought today should be expected to have little or no return over the next decade.
Stock investors feel like investment gurus near market tops and like to brag about their returns.
Personal confidence in ones investment skills peaks at or near bull market peaks.
I am suggesting those who want to buy low and sell high should realize today is HIGH.
I have moved to 100 percent cash due to the extreme valuations.
While the one short term timing indicator I follow has been bullish since March 18, long term valuation indicators are bearish now, just as they were in February 2020.
But now we have 20 percent of the workforce getting unemployment compensation and many Democrats seem to want that to continue until election day.
Investors should thank the Fed for 24 percent M2 money supply growth in the past 12 months but that will not be permanent.
Biden is hiden’ and his mind is sliden’, yet he is
still doing well in the polls = the country is crazy this year.
My finance blog, since 2008
http://www.EL2017.Blogspot.com
I would trust the polls anymore than a Facebook stock valuation at this point. No one is telling the truth to strangers.
not trust.
Richard ==> You can thank Charles the Moderator for allowing your personal advertisement to appear here.
As Larry The Cable Guy says: “I don’t care what anyone says, that there is funny.”
+1
Thank you Charles the Moderat for allowing me to have a long post here that concluded with my free finance blog address, for furthet reading, where there are no ads and no money for me.
Thank you Hansen for completely ignoring every point made in my comment. My only qualifications are a finance MBA and 43 years of editing a financial newsletter called
ECONOMIC LOGIC.
Congratulations on your investing success.
Does this qualify as an example of “Those who can’t, teach”?
I took a few thousand and put it into a trading account. I had never purchased an option in my life. In this account I purchased only options. I’m up over 100% in less than 6 months. I’ve moved more than the original sum back into my checking account. I researched options before I started my strategy, but not a lot. I considered paying for an online course, but did not.
So have I been lucky? Shooting fish in a barrel? Or is my strategy sound? I do take gains when they meet targets and try and to not get greedy.
It just can’t be this easy. I think timing has been the key. We’ll see how well I fare in a long term downturn when that occurs.
Jim ==> See the graphs — if you started the second week of March, you have ridden the roller coaster up the high hill. What happens next we don’t know.
You are not investing, of course, but have had good luck with the gambling. I hope it keeps working for you.
Yep. You are correct.
Excellent comment, Kip. I searched for “options” since you did not mention them in your discussion of gamblers and speculators. Options are legitimate, as they provide insurance for those who hold investments, but they are pure speculative moves.
Jim – be careful. A friend of mine spent months studying options. last year he made over a $million – bring his portfolio to a value of $1.5 million. He’s a good guy, and gave two of his friends 30k a piece to cover medical bills.
Then COVID hit. Wasn’t watching quite close enough, didn’t understand completely how stop orders worked, and by early March, he had only $2k in the bank. It will take him a wile to recover. Be very careful. You can lose a lot buying stocks, but if you have some diversity, you can usually weather even a COVID downturn.
You are on the right track. I invest in long term call options. They are called LEAPS – options with a year or more time expiration on them – I like to go out as far as possible and buy in the money options. You can buy a stock at a fraction of the cost of owning it, and you have all that time frame for it to move in your favor. To me a wonderful investment strategy.
The correction is equal and opposite to the deception that preceded it.
In other words, sort of like one of Newton’s laws, except economic. In the final analysis, all this must balance at some point, and is not looking good long term. Generally throughout history, these types of black swan events lead to some type of war which can take on a whole new direction with unintended consequences. Sort of scary times.
This phrase I read somewhere makes a lot of sense, especially with what has been happening the last 5-6 months, but also the last 11-12 years since the Great Recession of 2008, if not since 1971 when Nixon abandoned the gold standard. The Nixon shock was a series of economic measures undertaken in 1971, in response to increasing inflation, the most significant of which were wage and price freezes, surcharges on imports, and the unilateral cancellation of the direct international convertibility of the USA dollar to gold at $35 an ounce. This was in part, a hangover from the debt incurred for the Second World War, which followed from WW1 and long before that.
The only thing that could save things now, is to have massive growth in the economy with new economic activity such as massive nuclear energy development and infrastructure development and repair, and getting back to full employment with a healthy made at home robust economy. And pick our trade partners carefully, and reject countries like China that are a pariah fascist state who rip us off and cause all kinds of global troubles just as we have seen since the New Year, 2020. Only the Republicans and President Trump can pull all this off, so this is one of the most important elections in modern times. The stock market thinks so, but if the Democrats sweep the country, then expect a major downturn for a very long time.
My portfolio gained about 14% gross over the lockdown period.
The people who are in trouble are small businesses. They don’t show on the stock market rankings, and those selling in high street shops to consumers with more money than sense (or taste) .
The onward march towards turning highs street malls into residential and café cultures continues, with real commerce moving to warehouses online and parked in industrial parks.
The raison d’être for the market town was to provide access to what the internet now provides access to – a wide range of goods and services in a single place.
Only food is still preferable to obtain in a supermarket, or specialised shop.
COVID 19 has simply accelerated a trend.
As far as production of real goods and services go, it hasn’t really affected that. People still need houses and plumbers and electricity. It has just taken the froth out of consumerism. People have realised they don’t need to commute, got to a gym for exercise, to always eat out in restaurants, to take planes to far flung parts of the world so they can share the company of the people they thought they were leaving behind…in short if it marks anything it may just mark the end of consumerism as a way of making ‘work’ and redistributing wealth.
Well about time too. Consumerism was wasteful, polluting, and, after the initial thrill of Spending Money, wore off, utterly soul destroying. It created unnecessary jobs purely for the social objectives of lowering unemployment and making people feel that they were contributing to society. It made everybody feel useless and unfulfilled unless they were spending money.
Frankly they might just as well have been given money to spend for no reason at all. It would have saved a lot of unnecessary activity.
Lockdown has and will continue to highlight some very salient issues: Just how little most people actually contribute to society, and who are the ones we can’t do without.
They are not politicians, or celebrities, they are not solely health workers either. They are the people who keep the power stations running, the internet going, who drive the delivery trucks, and who keep electricity on the wires and gas in the pipes and deal with the sewage and detritus of humanity. They are the supermarket staff who stack the shelves, and the barber who cuts your hair. And the personnel who man the warehouses that ship your online goods.
And lockdown has also highlighted another couple of issues – firstly how little we need to do to at least survive without many of the toys and trappings of civilisation, and secondly how bereft we are when shorn of the business that used to fill our lives, and how narrow selfish isolated and depressed many people are when they only have their own company and that of their families…
The world has changed, not smoothly, but with a point of discontinuity. I consider that trends which were extant before, have accelerated . Those with money invested in the need-to-haves will prosper: those with money invested in the nice-to-haves will not.
For me one salient question is how far the West will realise that its flirtation with renewable energy is not only not a need-to-have, but not even nice-to-have.
And I suspect that a LOT of media companies will go down, as they rely on people (a) actually consuming their product and (b) actually consuming the products of those that sponsor them.
Glory to be, people have perhaps for the first time in history, and certainly since WWII, had time to think. Only to discover that they were never taught how to do it…
Nope. The times they are a changin’, rather faster than usual, and this will be a catalyst for a lot more change beyond ‘harm to the economy’ .
I’ve always been fascinated by the need of someone people, to tell other people, that spending money is bad for them.
Optimism may be a bit premature.
Look up iukd, or iukp. You will see that investors in dividend paying, value shares have in fact lost heavily, and the recovery, if you look at the charts, seems rather shaky.
The US averages have recovered. But they are dominated by a few large capital tech outfits. And the PE ratios remain very high, historically.
I do not know what will happen. But I would not take the movements in either the Nasdaq or the S&P as evidence of safety. If I held an index fund in either one, I’d be getting out.
The wild card is of course inflation, perhaps co-existing with recession. I don’t know if that will be a real thing. I guess its possible that tech could be an insurance against it, though I am not seeing quite why that should be.
Anyway, walking on eggshells at the moment. Yes, the first wave passed, and yes, we are still here. But what is coming next is another matter.
Michel ==> I am not making any investment advice of any sort here. The purpose of this essay is to counter the doom and gloom portrayed in the Media (for political reasons).
Very few of the general public see the longer term stock indices graphs, they only hear the nightly news say “the Dow was up x percent today” of the S&P lost 2 percent”.
My purpose was to show the data in an easily understood form monthly values for five years the kind of time period of concern to investors.
michel: “<em<If I held an index fund in either one, I’d be getting out.
The wild card is of course inflation, . . .”
Prompts me to ask where you would put the money from the “getting out” part?
Kip
Unusual article for this forum.
With some interesting comments.
I’ll add to everyone’s data on the financial markets.
Financial history, while very exciting at time but when looked at over a long time it is unusually methodical.
Particularly when it comes to financial manias.
One of the features of a great financial bubble has been that the economy turns down with the stock market.
In “normal” rather than “bubble” conditions the stock market leads at tops by 10 to 12 months.
In 1929 the market peaked in September and according to the NBER the recession started in that fateful August.
Typically, post-bubble contractions last for around twenty years.
The previous great bubble completed in NY in September 1873.
And according to the NBER the fateful recession started in that October.
Another great bubble may have completed with the January peak.
The NBER determined that the economy peaked in February, marking the start of the recession.
Made very dramatic by the socialists shutting down the global economy.
As to the action in gold, it has been practical to use its price deflated by the CPI in the senior currency. Now the dollar, formerly the British pound.
On all five of the great bubbles back to the first in 1720, gold’s real price declined during the financial mania and gold stocks under performed.
Which happened to 2018.
And one of the features of post-bubble contractions has been gold’s real price rising, which has been the case since 2018.
With gold stocks outperforming. Take a look at a gold stock index divided by the S&P.
GDXJ/S&P.
It has been outstanding.
And if the past continues to guide will continue to outperform.
The action in precious metals are extremely overbought now.
Bob ==> On gold == gold bought at the 2011 high left one dragging low for seven years or so. Serendipitously, I bought a lot of 18K gold jewlery in 1975-1976 shopping at Florida flea markets, paying only 50% of spot gold price at the time. After having a lot re-made into custom jewelry for my wife, I had “leftover” 18K melted and cast into a mini-ingot that my wife wears on a chain — now worth over $500. It was meant to be her “get away” stash.
From the article: “Market gamblers and speculators do something quite different. They buy shares in companies in hopes of making a profit on the small, short-term fluctuations in the daily prices of those stocks. The old adage: Buy Low, Sell High – but do it quick. In modern stock markets, there are all kinds of speculative moves that produce profits for these people, but the most salient fact is that they are gambling that a stock or the markets will move in the direction of their bet. When they have guessed right, they profit. If they guess wrong, they lose. These gamblers are often called Day Traders and, as knowledgeable and savvy as many are, like professional poker players, it is a mistake to consider them as anything else.”
Poor Daytraders! Can’t get no respect! 🙂
I consider daytraders to be smart. Daytrading protects their money, if they have a good daytrading plan and execute it. Daytrading keeps one out of the market when things are most dangerous to an investor, like when they are sleeping and not watching the market.
Overnight sell offs have ruined many an investor. They won’t ruin a daytrader because the daytrader won’t have any money in the market during the overnight sell off.
Daytrading isn’t difficult if you have a plan and discipline, and $25,000. Yes, that’s right, a person has to have a minimum of 25,000 to put into a trading account before they can daytrade.
Why this federal rule was ever implemented is a mystery to me. Why would the U.S. government want to penalize people who don’t have $25,000 laying around? But they do. Some poor guy out there might be a natural daytrader with the potential to make millions of dollars all by himself but he’ll never get a chance to see because he doesn’t have $25,000 to start with. I see no benefit to this law.
And then we have the daytraders on steriods: The computer program traders that exaserbate the movement of the stock market both up and down moving the stock market hundreds of points in a day. Figure about half of the stock market’s gain or loss in today’s market is coming from program trading, trying to guess which way investors are going and get ahead of it, up or down.
I think program trading should be outlawed because it distorts the markets.
And individual daytrading should be made availible to anyone that wants to get involved. The government has no business saying who and who cannot daytrade.
Tom ==> Ah, if wishes were fishes … the same personality types Day Trade and/or play Poker Online. I’ve know professional at both – personal friends – each have had periods when they win and when they lose.
To be at all successful, both professions require knowledge, skill, and luck. The smart gamblers in both fields have a system and a plan, and stick to it – not ruled by emotion.
The most successful poker gambler I ever met finally admitted, after weeks of counseling, that his success was due to the fact that he “cheated” — was part of a “poker cheating team” that worked the Las Vegas casinos for years. The cheat was getting three or more players of the team (out of ten team members all of whom were recognized as regulars in the casinos) at the same table with a targeted fat wallet high roller. Using a series of signals they would communicate the relative strengths of their hands and force pots high when one of them had a particularly good hand. Once they had cleaned out the victim, they would leave the table one at a time over the next couple of hours and meet up in a distant desert diner for breakfast, where they would split up the profits for the night. With ten regulars on the Team, it never looked suspicious when a random combination of three of them would be at the same table. He made an annual “salary” of over 200,000 a year.
“To be at all successful, both professions require knowledge, skill, and luck. The smart gamblers in both fields have a system and a plan, and stick to it – not ruled by emotion.”
That’s the secret! And it is much easier said, than done.
Here’s a scenario: You buy a stock and decide how much you are prepared to lose and keep that price in mind (if you are an experienced daytrader) or set a sell limit stop (if you are not) and if your stock price starts declining and reaches the sell point, then you sell, and within five minutes the trend has reversed itself, goes above the point where you sold, and continues to climb the rest of the day, and you ended up losing money on a trade that would have made you money if you had not sold at that point.
So, what do you do the next time you get in that situation (probably the next day)? You better sell at your sell point! That’s the discipline. If you hang on hoping the price will reverse, like it did before, you may lose your shirt, if it doesn’t, so instead of losing a little bit of money follwing your strategy, you end up losing a lot of money.
You have to have a daytrading plan. You have to execute the plan. Or you should go find something else to do because you are not suited to daytrading.
As for your cheating gamblers story, I don’t see how it applies to a daytrader.
Stock movements are predictable to a certain extent. One can make money by understanding the patterns.
I used to just follow one stock and daytrade it continuously. Then I stopped doing it a few years ago and just let the stock sit all through the Wuhan downturn and now it’s up about 300 percent from where I bought it. It’s a housing stock. I guess lots of people are leaving New York City and other Democrat-run cities and are looking for houses to buy in less crazy parts of the nation. I’ll hang on to this stock. 🙂
I prefer swing trading now.
You are neglecting the inflation that goes with all the bailouts. These rises are a preview. Yay, my money has doubled — but the dollar buys only half as much. How rich am I?
Willy ==> We have yet to see inflationary pressure here in the US. One never knows, but so far so good.
For most of us retirees, our incomes are looking good and our capital is preserved which is the point of this essay.
Epilogue:
Thanks to all the readers who have joined in the discussion – even the couple of hecklers.
I hope that the good news about the major stock markets has helped dispel some of the gloom.
Thanks for reading!
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A little mathematical nitpick. You can’t just divide the 5-year percentage return by 5 to get the annual return. You must take into account the compound growth of the portfolio each year.
On this basis your figures of 13%, 13.8% and 26% should actually be 10.5%, 11% and 18%.
But still a healthy return for those with patience and nerves.
Richard ==> I suspect you are right … just quick back of envelope figures here.
Yes, and you have the point right ….. these are very healthy returns even before the dividends (if any) are taken into account.