Liquidate entire portfolio until virus is over?

MK62

Alexland said:

bargainhunter888 said:

i was just thinking it may still be a good opportunity with it being 15% down it's still a discount.

Some underlying companies are damaged so you are gettting "less for less" similar to buying a small packet of crisps.

It can be a mistake to view current share prices as being at a "discount", simply because they were higher a few weeks ago........

It's a bit like going into a shop and buying some milk.......it may have been £1 last month and "only" 80p today, but it's not a discount if you only get half as much......

Edit.....no idea what happened there....I thought I'd quoted bargainhunter888, but it seems to have quoted Alexland's reply instead.......anyway, for clarity my comment was a response to bargainhunter888, not Alexland...

bowlhead99

bargainhunter888 said:
Yeh, i know they have recovered, i was just thinking it may still be a good opportunity with it being 15% down it's still a discount. just dont know what it will bring next week, just dont know why it's recovering given the situation especially in America

15% down is still a 'discount' if you are comparing a price now to a price before. However, there is a reason it is discounted. The companies in the index will generally have lost revenue this year (either lost permanently or deferred) while they still have costs. And if there is a recession (not unlikely with (e.g.) over 20m extra Americans out of work in just the last few weeks), we can't expect next year revenues or profits to be as good as we were expecting either.  And the impact of not getting revenues this year means it could take a long time to recover and involve extra opportunity costs to pay off debts etc in future, and less easy access to future finance for expansion because they're already loaded up with debt from this year and it's harder to borrow money or fundraise from investors when you're already leveraged up to your eyeballs, even if interest rates are low. 

So the investors were willing to pay £100 when they thought there would be profits of £x over this year and other coming years but now there is not going to be profits of £x, it might only be £y, or in many cases companies are not willing to give any forward guidance at all, so now investors are only willing to pay £85 or less. You can describe the £15 as a 'discount' but that implies that the same thing is being sold cheaply. Really it is not the same thing being sold cheaply. It is a different thing, so there is a different price. 

For example if you go to a shop and something is in the bargain bin because it is scratched and scuffed. You may not get the same utility from it because you don't like looking at something scratched and scuffed and you don't want visitors to come round your house and see you have stuff that's scratched and scuffed. The different thing (the clean untarnished one) still costs full price.  Or you look at the food section of a supermarket and something is marked down because it only has a day of shelf-life left compared to the others that can sit for another couple of weeks. Some people will go for the bargain and feel they are getting 'same thing but cheaaper' but really they are not buying the same thing as the person who is paying full price. 

In the same way, markets were priced high in February knowing that in practice there could be a global pandemic in the next few decades but not knowing if there definitely would be one and so sales and profits hopefully will continue untouched and hopefully the company won't collapse. However, then there was a pandemic, so we know sales and profits won't be untouched, for some period of time, and some companies are more likely to collapse. So if you are buying the index at £85 now you are buying something different to what you were previously willing to pay £100 for.

The reason the fall isn't huge is that if the companies can stay solvent (which many of them will, thanks to trillions of dollars of global government stimulus), they will continue in business and continue to have revenues way out into the future - and most of a company's value is based on potential future profits not simply current year profits. Some may fall by the wayside but that's just better for their competitors which don't, and an index is tracking lots of companies.

Whether 15% is the right amount, who knows - we all have our opinion.  Some of the big companies like Amazon and Google have kept a good proportion of their market value (or even gone up in the case of Amazon) because people think the long term prospects are fundamentally unchanged and that customers will still want retail delivery services and IT services and advertising, even if they buy fewer products or fewer adverts or fewer IT services due to a recession for a while.  So Google might drop only 15% from $1500 before to $1300 today, while Amazon might go up from $2170 to $2400 (10% rise) due to running for several months with extra customers this year and proving that customers will stick with them through thick and thin. As those companies make up a relatively large proportion of the index we can then afford for lots of smaller companies to have 20-30% share price drops and it still average out to only 15% down. 

But like I say, 15% fall might not be the right amount - in hindsight it may not be as much of a fall as a 'fair' amount of fall 'should' be, because we don't yet know the size of the current year and ongoing impact.

bostonerimus

bargainhunter888 said:

Alexland said:

bargainhunter888 said:

i only bought in a small amount of SWDA last week at 4240p, now it's at 4350p wondering whether i should just load up and not look at it again, it is a long term investment or should i hang on for a pullback next week? what are your thoughts?

The markets have recovered enough that there isn't clear benefit in exposing yourself to volatility above a sensible asset allocation for your circumstances. The risk vs long term potential reward profile for going heavy on equities was looking a lot more attractive a few weeks ago when the markets were in panic mode.

Yeh, i know they have recovered, i was just thinking it may still be a good opportunity with it being 15% down it's still a discount. just dont know what it will bring next week, just dont know why it's recovering given the situation especially in America

What if the historical highs were an unrealistic over valuing ie a premium and we don't get back to those highs for many years as the world economy faces contraction and reduced growth. I'm also dubious about this latest rally, but I have no idea where the markets will actually go. So keep cash on hand, rebalance when necessary and if you planned for this sort of thing by paying off your mortgage, being frugal and understanding how to control spending and keeping a diverse set of investments, ie you didn't have everything in airline stocks, you should be ok. The folks who will suffer are the gig economy people who get paid poorly and live pay cheque to pay cheque and of course the poorly paid people in the front line as they have the double whammy of low financial resources and increased potential virus exposure.

BananaRepublic

bostonerimus said:

bargainhunter888 said:

Alexland said:

bargainhunter888 said:

i only bought in a small amount of SWDA last week at 4240p, now it's at 4350p wondering whether i should just load up and not look at it again, it is a long term investment or should i hang on for a pullback next week? what are your thoughts?

The markets have recovered enough that there isn't clear benefit in exposing yourself to volatility above a sensible asset allocation for your circumstances. The risk vs long term potential reward profile for going heavy on equities was looking a lot more attractive a few weeks ago when the markets were in panic mode.

Yeh, i know they have recovered, i was just thinking it may still be a good opportunity with it being 15% down it's still a discount. just dont know what it will bring next week, just dont know why it's recovering given the situation especially in America

What if the historical highs were an unrealistic over valuing ie a premium and we don't get back to those highs for many years as the world economy faces contraction and reduced growth. I'm also dubious about this latest rally, but I have no idea where the markets will actually go. So keep cash on hand, rebalance when necessary and if you planned for this sort of thing by paying off your mortgage, being frugal and understanding how to control spending and keeping a diverse set of investments, ie you didn't have everything in airline stocks, you should be ok. The folks who will suffer are the gig economy people who get paid poorly and live pay cheque to pay cheque and of course the poorly paid people in the front line as they have the double whammy of low financial resources and increased potential virus exposure.

I’m also concerned about this rally as it doesn’t make sense given current economic concerns. Countless businesses are enjoying zero income whilst paying rent, business rates etc. Amazon, streaming services, internet providers, Google, supermarkets and off licences are doing well. We are seeing weak businesses fail. Soon we may see stronger ones fail. And this will go on for a long while not just a few more weeks. 

Thrugelmir

BananaRepublic said:

bostonerimus said:

bargainhunter888 said:

Alexland said:

bargainhunter888 said:

i only bought in a small amount of SWDA last week at 4240p, now it's at 4350p wondering whether i should just load up and not look at it again, it is a long term investment or should i hang on for a pullback next week? what are your thoughts?

The markets have recovered enough that there isn't clear benefit in exposing yourself to volatility above a sensible asset allocation for your circumstances. The risk vs long term potential reward profile for going heavy on equities was looking a lot more attractive a few weeks ago when the markets were in panic mode.

Yeh, i know they have recovered, i was just thinking it may still be a good opportunity with it being 15% down it's still a discount. just dont know what it will bring next week, just dont know why it's recovering given the situation especially in America

What if the historical highs were an unrealistic over valuing ie a premium and we don't get back to those highs for many years as the world economy faces contraction and reduced growth. I'm also dubious about this latest rally, but I have no idea where the markets will actually go. So keep cash on hand, rebalance when necessary and if you planned for this sort of thing by paying off your mortgage, being frugal and understanding how to control spending and keeping a diverse set of investments, ie you didn't have everything in airline stocks, you should be ok. The folks who will suffer are the gig economy people who get paid poorly and live pay cheque to pay cheque and of course the poorly paid people in the front line as they have the double whammy of low financial resources and increased potential virus exposure.

I’m also concerned about this rally as it doesn’t make sense given current economic concerns.

The lull before the storm? Many people haven't grasped the full severity of the situation. Not that anyone in authority is going to tell us what they are actually thinking. As with the GFC. The message is intentionally filtered for public consumption. 

worldtraveller

CLOSING NUMBERS FROM YESTERDAY:

FTSE 100 @ 5,787 - DOWN 25% FROM PEAK

FTSE 250 @ 15,859 - DOWN 28% FROM PEAK

FTSE ALL SHARE @ 3,190 - DOWN 25% FROM PEAK

DOW JONES @ 24,242 - DOWN 18% FROM PEAK

NASDAQ @ 8,650 - DOWN 12% FROM PEAK

TBC15

Fundsmith appears to be down around 10%

DiggerUK

worldtraveller said:

CLOSING NUMBERS FROM YESTERDAY:

FTSE 100 @ 5,787 - DOWN 25% FROM PEAK

FTSE 250 @ 15,859 - DOWN 28% FROM PEAK

FTSE ALL SHARE @ 3,190 - DOWN 25% FROM PEAK

DOW JONES @ 24,242 - DOWN 18% FROM PEAK

NASDAQ @ 8,650 - DOWN 12% FROM PEAK

And the day before that, and the day before that, and not one comment by way of reply.
This thread started 45 days ago, and still the penny hasn't dropped that the fan is beyond repair..._

wmb194

I think that it’s interesting that the Nasdaq has held up so well. IIRC, in previous sell-offs it has usually underperformed the other indexes. The S&P500 looks to be down about 15% from the peak.

Prism

Yes it seems that some sectors like communications, technology and healthcare, all of which are relatively heavily represented on the Nasdaq, have done pretty well. It looks like technology in particular is no longer seen as high risk and is something to be kept during downturns. In particular 'cloud' has gone crazy with examples of Microsoft for example running out of capacity in some areas (thats a good and bad thing). Netflix is almost as valuable as Disney now. Amazon, Paypal and MecradoLibre have all done well as you would expect. Healthcare and biotech has held up pretty well too. L&G technology is up 2.8% YTD and L&G healthcare is up 3.7% YTD - neither of which I hold at the moment unfortunately.