Liquidate entire portfolio until virus is over?

fizio

I liquidated my main portfolio (well into 6 figures) which was a single global mixed fund on friday 13th and took a 7% hit versuss Jan valuation. Given whats been happening since, I'm pretty happy to be in cash and will buy back in small chunks as the markets dip.. As much as everyone says 'don't sell when markets are falling', i am sleeping better having done it. I already bought some back when ftse fell below 5000 the other day and will keep a close eye on how things develop.

Thrugelmir

Alexland said:

It will hopefully get to a point where the market drops deccelerate as the most affected companies will have already devalued to become a smaller proportion of the remaining market.

But without government bailouts from printed money its hard to see how otherwise good companies can continue trading through this.

During the credit crunch the governments took a stake in the banks but this time it seems a bit unfair to dilute the affected company shareholders when the situation is a result of government policy to throttle the outbreak to align to health service capacity.

Inflation seems the most likely outcome.

Why should taxpayers money prop up companies without recourse to reimbursement?  The most affected companies are likely to go under. Not just devalue. Many business models are built on scale of economy. Seems reasonable that the taxpayer takes a stake. Though this concept blows EU regulation on support for industry put of the water. With what are in essence protectionist state polices. 
Deflation maybe the problem ahead. 

EdGasketTheSecond

No it will be inflation this time. The gov'ts are stimulating the demand side with low interest rates and QE but they can't fix the supply side so there will be shortages and price inflation. Not to mention inflation due to the 'money' being created out of thin air again.

bowlhead99

Thrugelmir said:

Alexland said:

It will hopefully get to a point where the market drops deccelerate as the most affected companies will have already devalued to become a smaller proportion of the remaining market.

But without government bailouts from printed money its hard to see how otherwise good companies can continue trading through this.

During the credit crunch the governments took a stake in the banks but this time it seems a bit unfair to dilute the affected company shareholders when the situation is a result of government policy to throttle the outbreak to align to health service capacity.

Inflation seems the most likely outcome.

Why should taxpayers money prop up companies without recourse to reimbursement?  The most affected companies are likely to go under. Not just devalue. Many business models are built on scale of economy. Seems reasonable that the taxpayer takes a stake. Though this concept blows EU regulation on support for industry put of the water. With what are in essence protectionist state polices. 

Yes it does rather put paid to EU restrictions on 'state aid' which have sometimes hindered bailouts or assistance in the past.  For now, governments will spend the money and argue the toss with other governments later.  France has promised €45bn to help its companies and employees with Covid-19, as well as 300bn of state guaranteed bank loans; Germany has unveiled a similar plan with govt guaranteeing 93bn of loans, increasing the lending cap through KfW.  I think if UK had said they were going to give a handout to someone like FlyBe they would have got away with it - but it was hardly 'deserving' of govt support given it has been a poor performer for years and its current owners knew it would be when they bought it. So some businesses will just be allowed to wither and die unless they are strategically super important.

EdGasketTheSecond said:

No it will be inflation this time. The gov'ts are stimulating the demand side with low interest rates and QE but they can't fix the supply side so there will be shortages and price inflation. Not to mention inflation due to the 'money' being created out of thin air again.

Though there will be supply side shortages, a lot of what people buy is not really basic sustenance, and falls into discretionary expenditure. People having a miserable summer without career certainty or a feelgood lifestyle may not be splashing out on the latest fashions, big tellies, holidays, clothes, restaurants, homeware etc etc. Plenty do not live far from the breadline with minimal savings once their zero hours contract starts offering them literally zero hours, and even for the more affluent, if they can bulk-buy rather than convenience shop on the way home from work every day, and have the time while working from home to boil up a bowl of rice for a fraction of the cost of a packet of Uncle Ben's microwave rice, they may embrace it.

Thrugelmir

bowlhead99 said:

Thrugelmir said:

Alexland said:

It will hopefully get to a point where the market drops deccelerate as the most affected companies will have already devalued to become a smaller proportion of the remaining market.

But without government bailouts from printed money its hard to see how otherwise good companies can continue trading through this.

During the credit crunch the governments took a stake in the banks but this time it seems a bit unfair to dilute the affected company shareholders when the situation is a result of government policy to throttle the outbreak to align to health service capacity.

Inflation seems the most likely outcome.

Why should taxpayers money prop up companies without recourse to reimbursement?  The most affected companies are likely to go under. Not just devalue. Many business models are built on scale of economy. Seems reasonable that the taxpayer takes a stake. Though this concept blows EU regulation on support for industry put of the water. With what are in essence protectionist state polices. 

Yes it does rather put paid to EU restrictions on 'state aid' which have sometimes hindered bailouts or assistance in the past.  For now, governments will spend the money and argue the toss with other governments later.  France has promised €45bn to help its companies and employees with Covid-19, as well as 300bn of state guaranteed bank loans; Germany has unveiled a similar plan with govt guaranteeing 93bn of loans, increasing the lending cap through KfW.  I think if UK had said they were going to give a handout to someone like FlyBe they would have got away with it - but it was hardly 'deserving' of govt support given it has been a poor performer for years and its current owners knew it would be when they bought it. So some businesses will just be allowed to wither and die unless they are strategically super important.

EdGasketTheSecond said:

No it will be inflation this time. The gov'ts are stimulating the demand side with low interest rates and QE but they can't fix the supply side so there will be shortages and price inflation. Not to mention inflation due to the 'money' being created out of thin air again.

Though there will be supply side shortages, a lot of what people buy is not really basic sustenance, and falls into discretionary expenditure. People having a miserable summer without career certainty or a feelgood lifestyle may not be splashing out on the latest fashions, big tellies, holidays, clothes, restaurants, homeware etc etc. Plenty do not live far from the breadline with minimal savings once their zero hours contract starts offering them literally zero hours, and even for the more affluent, if they can bulk-buy rather than convenience shop on the way home from work every day, and have the time while working from home to boil up a bowl of rice for a fraction of the cost of a packet of Uncle Ben's microwave rice, they may embrace it.

Hopefully if the Government does step in to support the aviation industry (for example). There'll be preconditions such as the provision of a certain level of internal UK capacity. 

EdGasketTheSecond

WOW it's started; helicoptering money and dumping it on people:

https://www.bbc.co.uk/news/business-51932403

Just like it says in this:

https://www.youtube.com/watch?v=P4_1pwsm5LY&list=PLE88E9ICdipidHkTehs1VbFzgwrq1jkUJ&index=8&t=0s

bostonerimus

Well yesterday's portfolio rebalancing paid off today. Of course that's an almost entirely worthless statement. Remember we are only back to where we were three years ago.

Timing this market, ie. selling and judging where to get back in, is difficult and very risky, but maybe people should be thinking about strategic asset allocation adjustments if this volatility and current level of paper losses either materially changes their long term plan or worries them too much. 

bostonerimus

EdGasketTheSecond said:

WOW it's started; helicoptering money and dumping it on people:

https://www.bbc.co.uk/news/business-51932403

Just like it says in this:

https://www.youtube.com/watch?v=P4_1pwsm5LY&list=PLE88E9ICdipidHkTehs1VbFzgwrq1jkUJ&index=8&t=0s

A stopped watch is right twice a day. You can find numerous posts on here from sober forum members that have warned people of 50% losses. 

bowlhead99

bostonerimus said:
A stopped watch is right twice a day. You can find numerous posts on here from sober forum members that have warned people of 50% losses. 

I couldn't be bothered devoting half an hour of my life to that video. I will however admit to - from time to time - being 'that guy' you mention, i.e. the sober forum member that warns people of the 50% losses.

As a trawl through my post history will show, I do it all the time and it's probably quite tiresome to hear. - I sound like a broken record sometimes.  I don't bang on about the size of likely drawdown in a global markets crash for the benefit of those who have seen it all before and heard it all before on the forums. .Nor because I have some fundamental aversion to stockmarket investing; nor the opposite, that I want to jealously keep all the gains to myself. 

It's because there is always someone new on the forum who hasn't seen a crash before, and risks being suckered in by the last 3 year chart or 5 year chart or 10 year chart which all show bull markets and easy growth from just hopping aboard a 100% equity tracker or a Fundsmith Equity fund or whatever. When markets drop they can really drop, and grown men start to cry when they realise they never really had the risk tolerance that they told themselves or their wife that they had.

A thirty year old was barely old enough to buy a beer the last time the global index started to fall more than a third, but he read the blogs and of course he says he knows he 'will just buy more' if the price goes down. Now he's at home nursing 30% losses hoping the government will send him a cheque  because he's not allowed to go to work.

bostonerimus

bowlhead99 said:

bostonerimus said:
A stopped watch is right twice a day. You can find numerous posts on here from sober forum members that have warned people of 50% losses. 

I couldn't be bothered devoting half an hour of my life to that video. I will however admit to - from time to time - being 'that guy' you mention, i.e. the sober forum member that warns people of the 50% losses.

As a trawl through my post history will show, I do it all the time and it's probably quite tiresome to hear. - I sound like a broken record sometimes.  I don't bang on about the size of likely drawdown in a global markets crash for the benefit of those who have seen it all before and heard it all before on the forums. .Nor because I have some fundamental aversion to stockmarket investing; nor the opposite, that I want to jealously keep all the gains to myself. 

It now becomes apparent why companies have been so anxious to get those DB pensions off their books. 2008 was a big wake up for me and coming out of that I made sure the house was paid off and I went looking for a job with a DB pension, while still playing the stock market. It's certainly tough to see DC balances drop by 30%, but the value of a good cash buffer is now seen. The DB pension comes in and I get the rent too...although I've halved that as my tenants can't work right now. I'm also lucky to have a part time job with a small company where I can still work in the lab without much interaction with anyone as they are all doing software remotely, so I'm counting my blessings.