Economy crash =/= stock market crash?

adindas

The stock market is far from efficient. Many of the acute hedge fund managers do not believe the "Efficient Market Hypothesis (EMH)". Warren Buffett do not believe that. That is the reason why they are timing the market using their edges.

Many knowledgable people who just know "theoretical" finance and economics. which theoretically is assuming that the market is efficient fail in the real test. In the real test in the real stock market, they do not necessarily perform better than the one who are not educated to that degree.

There was a fund called LTCP (Long Term Capital Management), run by Nobel prize winners in economics Sholes and Merton.

"The Black-Scholes model, also known as the Black-Scholes-Merton (BSM) model, is one of the most important concepts in modern financial theory"

https://www.investopedia.com/terms/b/blackscholes.asp

 They imploded in such a manner that the US government had to bail them out to not cause an impact on the economy or recession. They lost 90% or more of the fund value.

https://www.investopedia.com/terms/l/longtermcapital.asp

Hexane

themoomins said:

Type_45 said:

adindas said:

Type_45 said:

masonic said:

Type_45 said:

My commodities position has made almost 14% since I bought it two months ago.

I am looking to sell it this week when an attractive price becomes available and I will keep the proceeds in cash. 

This will mean that I am approximately 27% in cash.

I think you've done well to catch the end of that trend. I was sceptical it had much further to run. So seems a sensible move to lock in those gains. With a slice of your metal holdings you'll have something resembling a bonds proxy when combined with this cash, but without the interest rate sensitivity.

Yes, it should then be quite a defensive position after I sell the commodities shortly.

Gold (some physical + SGLN) = 30%
Cash = 27% (most of which I will leave in my S&S ISA ready to use as and when)
Silver (some physical + SSLN) = 18%
Gold Miners ETF (GJGB) = 15% (Disaster so far.  Only bought it recently and it's gone down 18%)
Crypto = 9% (An even bigger disaster.  Lost 2/3 of its value since October 2021.  Absolutely horrendous).

My hope would be a melt-up where my Gold Miners ETF and crypto get a boost before I reduce my exposure to them.  I went way OTT with the crypto exposure (it was 20%).

Timing the market during the bear market make perfect sense. That is what many of the hedge fund managers are doing.

Also doing DCA will generally beat Lump-sum during the bear market.

In the past, when a person was saying this in this MSE they always got heavily attacked.

I am expecting the equities market to collapse.  When it does, I also expect gold/silver to go down with it.  But I expect gold/silver to come out of it better once money starts flowing there.

Having a cash allocation means that:

1)  Some of my portfolio is safeguarded when everything goes down.
2)  I have cash to take advantage of cheap gold/silver stocks (SGLN & SSLN) in anticipation of gold/silver rising sharply before equities do.
3)  If I so choose, I can buy equities at a 50%-80% discount.  My plan is to stick with gold/silver ETCs (SGLN & SSLN), but I may be tempted to buy a small bag of equities (probably VWRP) at a 50%-80% discount.



You obviously don't share my views about the financial Armageddon we are facing.  But let me ask you this theoretical question:  if you thought the market was about to tank by 80%, how would you be positioning your portfolio?

I don't understand everyone's optimism.

Of course you don't, you're a Moomin!

"natural disasters, depression and the upheavals of war"

george4064

adindas said:

InvesterJones said:

adindas said:

Sell May and Go away, buy back in November ? (Please note noone is suggesting you do this !!!!)

It is the historical pattern in the wall street

https://www.investopedia.com/terms/s/sell-in-may-and-go-away.asp

https://www.financial-spread-betting.com/Sell-may-buy-november.html

If a lot of people Hedge-fund are still doing this during this current bear market it will put more further pressure on the stock market. Summer is a typical holiday season where many HFs, Traders are not doing trade as many as they do during the other seasons.

This is what current survey of AAII  is showing. These are the people who will normally put their money in the stock market

https://www.aaii.com/sentimentsurvey

Doesn't that chart show that actually that's not the historical pattern? Seems historical average sentiment at this time of year is more bullish than bearish. (Or is the historical average an all-year term, not average for this time of year?)

I refer the historical pattern for "Sell May and Go" buy back November.

The chart"one year bearish is "One year bearish high" taking into consideration when the downtrend started in November 2021. 59.4% happened in week Ending April 27, 2022.

This "sentiment survey" conducted May 25 for the next six months might not have taken into consideration the historical pattern "Sell May and Go, buy back November". Keep in mind the survey is conducted to Individual Investors (e.g retail investors). Not all retail Investors know about the historical pattern for "Sell May and Go, buy back November".

I thought the saying went; "Sell in May, don't come back till St Leger's Day" which is in September.

coastline

george4064 said:

adindas said:

InvesterJones said:

adindas said:

Sell May and Go away, buy back in November ? (Please note noone is suggesting you do this !!!!)

It is the historical pattern in the wall street

https://www.investopedia.com/terms/s/sell-in-may-and-go-away.asp

https://www.financial-spread-betting.com/Sell-may-buy-november.html

If a lot of people Hedge-fund are still doing this during this current bear market it will put more further pressure on the stock market. Summer is a typical holiday season where many HFs, Traders are not doing trade as many as they do during the other seasons.

This is what current survey of AAII  is showing. These are the people who will normally put their money in the stock market

https://www.aaii.com/sentimentsurvey

Doesn't that chart show that actually that's not the historical pattern? Seems historical average sentiment at this time of year is more bullish than bearish. (Or is the historical average an all-year term, not average for this time of year?)

I refer the historical pattern for "Sell May and Go" buy back November.

The chart"one year bearish is "One year bearish high" taking into consideration when the downtrend started in November 2021. 59.4% happened in week Ending April 27, 2022.

This "sentiment survey" conducted May 25 for the next six months might not have taken into consideration the historical pattern "Sell May and Go, buy back November". Keep in mind the survey is conducted to Individual Investors (e.g retail investors). Not all retail Investors know about the historical pattern for "Sell May and Go, buy back November".

I thought the saying went; "Sell in May, don't come back till St Leger's Day" which is in September.

It's an old one that's for sure. Sell in May and Go away or as you say St Ledger's. Many decades ago the brokers went off on holiday so they say . Basically a rally up to the end of April then the summer lull to end of September. Another rally to the year end.

FTSE ALL-SHARE Seasonal Chart | Equity Clock

FTSE 100 Index Seasonal Chart | Equity Clock

Dow Jones Industrial Average Seasonal Chart | Equity Clock

Dow Jones Industrial Average Four-year Election Cycle Seasonal Charts | Equity Clock

This site has a decent write up every week. Basically we're not too far away although it's early days.

Bond Market Reset: What's Next? | Charles Schwab

The Three Bears? | Charles Schwab

adindas

coastline said:

george4064 said:

adindas said:

InvesterJones said:

adindas said:

Sell May and Go away, buy back in November ? (Please note noone is suggesting you do this !!!!)

It is the historical pattern in the wall street

https://www.investopedia.com/terms/s/sell-in-may-and-go-away.asp

https://www.financial-spread-betting.com/Sell-may-buy-november.html

If a lot of people Hedge-fund are still doing this during this current bear market it will put more further pressure on the stock market. Summer is a typical holiday season where many HFs, Traders are not doing trade as many as they do during the other seasons.

This is what current survey of AAII  is showing. These are the people who will normally put their money in the stock market

https://www.aaii.com/sentimentsurvey

Doesn't that chart show that actually that's not the historical pattern? Seems historical average sentiment at this time of year is more bullish than bearish. (Or is the historical average an all-year term, not average for this time of year?)

I refer the historical pattern for "Sell May and Go" buy back November.

The chart"one year bearish is "One year bearish high" taking into consideration when the downtrend started in November 2021. 59.4% happened in week Ending April 27, 2022.

This "sentiment survey" conducted May 25 for the next six months might not have taken into consideration the historical pattern "Sell May and Go, buy back November". Keep in mind the survey is conducted to Individual Investors (e.g retail investors). Not all retail Investors know about the historical pattern for "Sell May and Go, buy back November".

I thought the saying went; "Sell in May, don't come back till St Leger's Day" which is in September.

It's an old one that's for sure. Sell in May and Go away or as you say St Ledger's. Basically a rally up to the end of April then the summer lull to end of September. Another rally to the year end.

FTSE ALL-SHARE Seasonal Chart | Equity Clock

FTSE 100 Index Seasonal Chart | Equity Clock

Dow Jones Industrial Average Seasonal Chart | Equity Clock

Dow Jones Industrial Average Four-year Election Cycle Seasonal Charts | Equity Clock

AFAIK a few people, hedgies doing that during the bull market.  In the bear market there is an apparent risk that during this period the stock market come down to capitulation state where there is no more sellers left. At this point the buyer will step causing the stock market to rally.

A few people like Hedgies, Acute Traders are in summer holiday during this period where they do not have much time for trading and watching the marker regularly. So for them in bull market it is probably better to just close some of their positions and buy back in October/November.

adindas

This is what cause the Market to rally today.

https://www.cnbc.com/2022/05/27/the-feds-preferred-gauge-shows-inflation-rose-4point9percent-in-april-in-a-sign-that-price-increases-could-be-slowing.html

Headline PCE (Personal Consumption Expenditures PCEs) rose just 0.2%, a sharp reduction from March’s 0.9% increase. PCE which could also be linked to core CPI (e.g food,energy) is the method preferred by the Federal Reserve to measure inflation.

https://www.investopedia.com/terms/p/pce.asp

https://www.cnbc.com/2022/05/27/goldman-sees-signs-inflation-is-peaking-could-be-positive-for-stocks.html
Goldman says signs that inflation is peaking could be positive for stocks
Published Fri, May 27 2022

adindas

Type_45 said:

You obviously don't share my views about the financial Armageddon we are facing.  But let me ask you this theoretical question:  if you thought the market was about to tank by 80%, how would you be positioning your portfolio?

Reasonable numbers of Individual growth stocks have tanked 80%+. But the US stock market is commonly associated to S&P500. We are currently in the bear market. But whether the market will tank so deep by 80% is a distance possibility because :

- There has not been any expert opinion ever claim the market will tank by 80%. These experts will need to worry about their reputation making such a major claim if they do not personally firmly believe that. We might not reach the bottom yet, but reaching to that deep, AFAIK no expert has ever claim to this date.

- Even Michael Burry "The King of Short" who frequently benefiting from the falling stock market, market crash, has never publicly made that 80% fall claim. Michael Burry has incentive to keep spreading FUD to spook the market as being "the king of short, he will benefit from the falling market. But the other hand he will also need to worry about his reputation.

- Historically even during the great depression, the stock market has never tanked by 80%.

But everything could happen we will never know that a black swan event could happen in the future such as China invades Taiwan where the US, Russia, Iran get involved. Russia might use Nuclear option.

The good news is that even in the worst years including great depression, it only takes less than 5 years for the stock market to turn around making a reasonable gain.

Prism

adindas said:

Type_45 said:

You obviously don't share my views about the financial Armageddon we are facing.  But let me ask you this theoretical question:  if you thought the market was about to tank by 80%, how would you be positioning your portfolio?

Some Individual growth stocks have tanked 80%+. But the US stock market is commonly associated to S&P500. We are currently in the bear market. But the market will tank so deep by 80% is a very distance possibility because :

- There has not been any expert opinion that ever claim the market will tank by 80%. At least I have heard anyone. We might not reach the bottom yet, but reaching that deep no one has ever claim to this date.

- Even Michael Burry "The King of Short" who frequently benefiting from the falling stock market, market crash has never publicly made that 80% fall claim.

- Historically even during the great depression, the stock market has never tanked 80%.

But everything could happen we will never know that a black swan even might happen where China invades Taiwan and the US, Russia, Iran get involved. Russia might use Nuclear option.

The good news is that even in the worst years including great depression, it only takes around 5 years for the stock market to recover making a good gain.

Five years is typically enough time for markets to start to recover but sometimes it takes considerably longer to fully recover to an all time high. For example, it took around 12 years after the dot com crash. The good thing is that many of us are still contributing and those years of additional contributions help make the picture a lot rosier even though you can feel underwater for a very long time.

Type_45

There are five convergent forces which will push the global economy over the edge and create a depression and an 80% drop on global equity markets:

1) the up-coming global famine
2) the cost of energy crisis

3) inflation
4) global debt 
5) supply chain crisis

Sea_Shell

I think "global famine" is a stretch.

If things were looking that bad, then I'm pretty sure "richer" countries would adopt "war" rationing as a last resort.


I don't think we'll literally starve.  Yes, we might not have unlimited choice and availability, but will that be a cause or effect 😉