Has the dead cat finished bouncing?

Thrugelmir

Malthusian said:

My view: Coronavirus unlikely to be going away anytime soon and people's behaviour will shift. More unemployment is coming, hoarding money rather than spending will become the norm, high streets will find it almost impossible to trade

The indices reflect the present value placed by the market on the next lifetime's worth of profits generated by listed businesses, not how long it will take people to venture out of their burrows over the next year.

Passive investors do not buy companies on the basis of fundamentals but market capitisation. All investors by their own actions are part of the market. Not idle bystanders. 

Sailtheworld

fiisch said:

Sailtheworld said:

fiisch said:

Seldonista said:

fiisch said:

I'm thinking, as someone with a propensity to gamble, it has got to be worth a punt and sell some of my modest SIPP holding tomorrow morning when the markets open.

Unless someone pops up next week with a vaccine, or governments declare an alternative strategy to battling Coronavirus other than lockdown, the market is surely only going to move one way over the next few weeks?  Therefore the potential gain from selling and buying back in at a later date seems to me to heavily outweigh the possible benefits of staying invested.

Very tempted to sell 50% of my largest SIPP holding (Vanguard 100) to try and profit from what I think is an impending crash, but the old adage of never try to time the market is ringing loudly in my ears.  One to sleep on I think...

Do you trust yourself to know when to get back in? Stock returns are more correlated with last year's rainfall than they are with people's opinions (they actually are as well).

Fair point, and I certainly can't hope to buy back in at the bottom, but at 34, I thought selling was a risk worth taking (plumped for 70% sale of VG holding this morning in my SIPP only).  Will either learn a valuable lesson or thank my future self... time will tell!  I think potential upside outweighs the negative, and I am still invested in other funds/via my ISA.

At 34 I'd be concentrating on increasing my savings rate. That's what your future self will thank you for in 20 years time. Your future self will wonder why you expended so much headspace and took additional risk for what will look like laughably small sums of money in a couple of decades.

Savings rate is already high (40% household income) - any higher, and my future self will regret not enjoying more holidays / a nicer car than my current shed etc. when they were younger!

Comparatively laughable small sums today with the benefit of compounding can be significant sums in 2 decades time...  

If you've just sold then you aren't compounding. With a savings rate of 40% any gain or loss on a short term punt VLS100 is going to look even more trivial in 20 years. You'll look back and wonder why you bothered - it'll look like chump change compounded or not.

MaxiRobriguez

Malthusian said:

My view: Coronavirus unlikely to be going away anytime soon and people's behaviour will shift. More unemployment is coming, hoarding money rather than spending will become the norm, high streets will find it almost impossible to trade

The problem with this view is not that it doesn't reflect reality but that it is exactly what everyone was saying in 2009.

The indices reflect the present value placed by the market on the next lifetime's worth of profits generated by listed businesses, not how long it will take people to venture out of their burrows over the next year.

People who try to use securities representing a lifetime's worth of earnings to place proxy bets on the performance of the economy over the next 12 months are destined to remain extremely confused when it doesn't work out the way they expected.

You misunderstand my post. I suggested (most) markets would decline over the next 12 months, not that the economy would perform badly for the next 12 months and therefore markets would be in tow.

The indices reflect investor confidence more than anything. Furlough schemes, helicopter money, central bank liquidity has helped but debt burdens have built up, consumer behaviours will shift, which will impact many businesses over the next 'lifetime' - the markets don't seem to have appreciated that yet.

Of course just my opinion, I make no assertions that I will be correct, but on the balance of probability I think -10% is a more likely outcome than +10% in the short term. Despite that though I am still 75%+ equities, if anyone cares.

Sailtheworld

MaxiRobriguez said:

Sailtheworld said:

ProDave said:

Time to re assess the elastic properties of the cat?

The last month the stock markets have just about marked time.  Now they seem very much down.

My view. the dead cat bounce is over.  Reality is setting in. As lockdowns ease, cases are rising. I fear lockdowns will be back very soon.  If so I fear there will be no more government support.

The reality of the scale of devastation to the economy is starting to sink in pushing shares down.

I now feel the crash will resume downwards.

Do others feel the same?

Dave, there was no dead cat bounce. The markets went down; lots of people predicted they'd fall further and, instead, they went up - a lot. The dead cat bounce is / was a nice little story for people who can't admit to being wrong because they're probably a bit too old for mummy to stroke their hair and tell them they're a special little soldier.

The dead cat bounce has lasted for four months now - that's not a dead cat bounce - that's just being plain wrong.

If someone's prediction was plain wrong four months ago what value should be placed upon the same prediction being made today. Given they don't even have the self-awareness to realise they were wrong four months ago I'd suggest zero.

I'd rather listen to someone who called the March crash and the subsequent market rally than someone who called two of the last one crashes - at the very least they're a coin flip ahead.

I sold off some stock in February and bought April 1st (mostly tech) - do I count?

My view: Coronavirus unlikely to be going away anytime soon and people's behaviour will shift. More unemployment is coming, hoarding money rather than spending will become the norm, high streets will find it almost impossible to trade. So if you're investing then the indexes will mostly reflect that, so I look with skepticism at most of the indexes - I expect most will be lower in 12 months time and as such I haven't invested in stocks since April, building my cash pile instead, but I did buy a small amount of gold in early May.

There's a couple of indexes I can't really call. The Nasdaq might be fairly priced despite it being expensive by most metrics and recovering the best since March. I thought it was a dead cat bounce but earnings yesterday tell a story, can't ignore that. The other one is the FTSE100, heavy on industrials and banks, hasn't recovered like other markets have. If the virus does dissipate and there isn't a 2nd wave, then the FTSE may outperform, especially if GBP falls with Brexit looming.

But it's a difficult environment for new investment. I'm not really wowed by any opportunities, hence cash stockpiling. 

The bear story always sounds more compelling. The trouble with investing based on the news is that it's predominantly bad so tends to confuse people who think share prices should be more closely aligned to what was on last night's news at 10 rather than a market assessment of long term prospects.

Of course people's behaviour is going to shift but I don't see why this is seen as negative thing. Markets have made real returns of 4% for a couple of centuries and there was no shortage of bad news. Why's that? It's because people don't just crawl into a cave when faced with negative events - they react and try to make things better for themselves. These changes can be nuanced and difficult to predict so generally dismissed.

You've the self awareness to know you called the last leg down incorrectly so maybe you've analysed where you went wrong and the latest prediction is based on better analysis and data. To be honest though if you read your post through I reckon you could've said the same thing 4 months ago and it might well ring true in 12 months time so I'm not sure what's new.

Prism

I'm not even sure why anyone has an opinion on the short to medium term direction of the markets. Nobody really has a clue about the future of the various economies nevermind how the markets choose to interpret that. Economists can't remotely agree. Yet almost every day somebody says they think its going up/down over the next weekmonths/year/.

Here is my only opinion - the markets will probably be higher in 10 years.

Malthusian

fiisch said:

I did briefly consider investing in SUK2 (Legal & General fund for shorting the market), but realised my gambling nature was getting the better of me...!

Not that this image will surprise Fiisch or anyone who vaguely understands short-selling, even its proponents, but...

(Yes, I know that nobody is going to hold a short ETF for 10 years. However, as the graph illustrates, how long are you going to hold it, bearing in mind that more likely than not you'll be crystallising a loss whenever you sell?)

Sailtheworld

Thrugelmir said:

Malthusian said:

My view: Coronavirus unlikely to be going away anytime soon and people's behaviour will shift. More unemployment is coming, hoarding money rather than spending will become the norm, high streets will find it almost impossible to trade

The indices reflect the present value placed by the market on the next lifetime's worth of profits generated by listed businesses, not how long it will take people to venture out of their burrows over the next year.

Passive investors do not buy companies on the basis of fundamentals but market capitisation. All investors by their own actions are part of the market. Not idle bystanders. 

If you've spent an adult life permanently befuddled by the fact markets are pricing in a more optimistic future out of line from your own pessimistic outlook you could get a little introspective and ponder why that is. Or, the easier option, continue to look down your nose blaming the meddling passive investors and those pesky retail investors.

Markets tend to go up over time and there's no reason to think that 31st July 2020 is the date it all stopped. Therefore to make money from a bearish outlook you need to make it quick and then move on unless you really like pushing water uphill.

MaxiRobriguez

Sailtheworld said:

MaxiRobriguez said:

Sailtheworld said:

ProDave said:

Time to re assess the elastic properties of the cat?

The last month the stock markets have just about marked time.  Now they seem very much down.

My view. the dead cat bounce is over.  Reality is setting in. As lockdowns ease, cases are rising. I fear lockdowns will be back very soon.  If so I fear there will be no more government support.

The reality of the scale of devastation to the economy is starting to sink in pushing shares down.

I now feel the crash will resume downwards.

Do others feel the same?

Dave, there was no dead cat bounce. The markets went down; lots of people predicted they'd fall further and, instead, they went up - a lot. The dead cat bounce is / was a nice little story for people who can't admit to being wrong because they're probably a bit too old for mummy to stroke their hair and tell them they're a special little soldier.

The dead cat bounce has lasted for four months now - that's not a dead cat bounce - that's just being plain wrong.

If someone's prediction was plain wrong four months ago what value should be placed upon the same prediction being made today. Given they don't even have the self-awareness to realise they were wrong four months ago I'd suggest zero.

I'd rather listen to someone who called the March crash and the subsequent market rally than someone who called two of the last one crashes - at the very least they're a coin flip ahead.

I sold off some stock in February and bought April 1st (mostly tech) - do I count?

My view: Coronavirus unlikely to be going away anytime soon and people's behaviour will shift. More unemployment is coming, hoarding money rather than spending will become the norm, high streets will find it almost impossible to trade. So if you're investing then the indexes will mostly reflect that, so I look with skepticism at most of the indexes - I expect most will be lower in 12 months time and as such I haven't invested in stocks since April, building my cash pile instead, but I did buy a small amount of gold in early May.

There's a couple of indexes I can't really call. The Nasdaq might be fairly priced despite it being expensive by most metrics and recovering the best since March. I thought it was a dead cat bounce but earnings yesterday tell a story, can't ignore that. The other one is the FTSE100, heavy on industrials and banks, hasn't recovered like other markets have. If the virus does dissipate and there isn't a 2nd wave, then the FTSE may outperform, especially if GBP falls with Brexit looming.

But it's a difficult environment for new investment. I'm not really wowed by any opportunities, hence cash stockpiling. 

The bear story always sounds more compelling. The trouble with investing based on the news is that it's predominantly bad so tends to confuse people who think share prices should be more closely aligned to what was on last night's news at 10 rather than a market assessment of long term prospects.

Of course people's behaviour is going to shift but I don't see why this is seen as negative thing. Markets have made real returns of 4% for a couple of centuries and there was no shortage of bad news. Why's that? It's because people don't just crawl into a cave when faced with negative events - they react and try to make things better for themselves. These changes can be nuanced and difficult to predict so generally dismissed.

You've the self awareness to know you called the last leg down incorrectly so maybe you've analysed where you went wrong and the latest prediction is based on better analysis and data. To be honest though if you read your post through I reckon you could've said the same thing 4 months ago and it might well ring true in 12 months time so I'm not sure what's new.

The difference 4 months ago was that the markets had sold off 30%, which seemed a little overdone at the time, hence why I ended up buying. The tech/stay-at-home/gold play also seemed fairly obvious and has netted me a fair few thousand alone. I'm not sure I'd agree with you that I 'called the last leg down incorrectly' - I'm more sanguine, I think I made some correct calls which have been very profitable but yes at the same time I could have pushed harder rather than turning to cash later on in the recovery, but I suspect there were probably few bullish general voices in late April that would have been vocal about V shape recovery fully taking place.

Anyway, it's by the by isn't it. Decisions will be different for different people based on their investment goals. I can be sanguine because I'm nearer the start of my investing journey, but people closer to or in retirement need to pay much closer attention to the risk/reward spectrum. Just saying 'markets always go up in the long run' has to come with a degree of acceptance that it's not an irrefutable truth, see Japan for the last 30 years. People need to make decisions which are right for them, on a risk/reward basis, and the risk at the moment considering prices is higher than it was in late 2019. 

Will I change my position? Don't think so. I'll continue to hold a 5-20% cash position, buying dips. It's worked well for me in the last few years (and yes, have done the calculations between BTD and just buying as soon the money was available!)

Sailtheworld

MaxiRobriguez said:

Malthusian said:

My view: Coronavirus unlikely to be going away anytime soon and people's behaviour will shift. More unemployment is coming, hoarding money rather than spending will become the norm, high streets will find it almost impossible to trade

The problem with this view is not that it doesn't reflect reality but that it is exactly what everyone was saying in 2009.

The indices reflect the present value placed by the market on the next lifetime's worth of profits generated by listed businesses, not how long it will take people to venture out of their burrows over the next year.

People who try to use securities representing a lifetime's worth of earnings to place proxy bets on the performance of the economy over the next 12 months are destined to remain extremely confused when it doesn't work out the way they expected.

Despite that though I am still 75%+ equities, if anyone cares.

Maybe 75% equities is appropriate for the level of risk you're willing to take and that you'll be less inclined to waste energy waiting for an opportunity to make itself known. Being 100% equities must be quite stressful.

MaxiRobriguez

Sailtheworld said:

MaxiRobriguez said:

Malthusian said:

My view: Coronavirus unlikely to be going away anytime soon and people's behaviour will shift. More unemployment is coming, hoarding money rather than spending will become the norm, high streets will find it almost impossible to trade

The problem with this view is not that it doesn't reflect reality but that it is exactly what everyone was saying in 2009.

The indices reflect the present value placed by the market on the next lifetime's worth of profits generated by listed businesses, not how long it will take people to venture out of their burrows over the next year.

People who try to use securities representing a lifetime's worth of earnings to place proxy bets on the performance of the economy over the next 12 months are destined to remain extremely confused when it doesn't work out the way they expected.

Despite that though I am still 75%+ equities, if anyone cares.

Maybe 75% equities is appropriate for the level of risk you're willing to take and that you'll be less inclined to waste energy waiting for an opportunity to make itself known. Being 100% equities must be quite stressful.

I have been 100% equities before, it's not really much different to 90% all things told. I started investing in single stocks in the middle of last year, now that has been an eye opener! Volatility eclipses anything VLS100!