Quote:
Originally Posted by 2000m2
When reading economic forecasts like this: "This month’s payroll release of a decline in payroll jobs by 701,000 is an 11-sigma event compared with the recent past — totally different from the February data — and there is no need to look at the recent past to interpret the recent data."
https://www.anderson.ucla.edu/center...sis-march-2020 In the back of my mind, I also have Warren Buffett's October 2008 NYTimes article: "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors."
https://www.nytimes.com/2008/10/17/o...17buffett.html Buying now may be early, but no one knows where the bottom is and those waiting for it will miss it. "What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over." Stay safe! |
True, but just like a spring, you need to think of the elastic limit of the economy. For typical earthquakes, a well designed building sways, but if the amplitude is too large, or lasts too long, eventually you can have a structural failure.
I am not saying the US economy is going to fail, but an 11 sigma event is not even the largest event you will see in the near future. There will be a series of events which are progressively larger. April NFP will be north of 10,000,000 losses. What sigma is that?
Lehman Brothers collapse was Oct 13, 2008, but lows in the stock market was not until March 2009.
We have also gone from an event we thought was shorter in duration, to longer and more global.... The shockwaves are still propagating.
I like Warren, but he is much more clever and much less folksy then he pretends. Watch what he does, not what he says. He is still selling his airline holdings as we write this.
After the March 2009 low, you were only back 50% in March 2010, which was still down 40% from May 2008. Right now, you are not even down 40% from the highs. Investors are optimistic. Bear markets don't end in optimism, they end in despair. . Your biggest enemy here will be being anchored on the backside thinking because you didn't buy the low, now you missed it. I'm not arrogant enough to think I need to catch a falling knife. I am happy to play defense now and buy last man standing type cash flows, and later on as things become more visible, I can get more speculative. I just have to fight the 20/20 hindsight glasses which are an anchor.
We use to joke in 2009 in Russian stocks what's the difference between a stock down 80% and one down 90%. When the stock rebounds 100% from the low, it's still down 80% from the previous high. Amazing how many people got anchored to missing the bottom.