OT - Dow plunges 1,175 - worst point decline in history

[C40_guy]

Originally Posted by el cheapo

The financial markets will keep falling especially when the virus hits it's peak weeks from now. Take a look at Italy (Bloomberg article today). The wheels are about to fall off if the USA closes all stores with the exception of groceries and drugs like they have in Europe. Debt payments will be beyond repair.

The closures are a bit more ominous...it's not just shutting stores, it's a near total lockdown.

If/when that's announced in the US, the markets will free fall. May be a decent time to move some cash back into the market...

[verticaldoug]

There is an old saying attributed to Nathan Rothschild during the Napoleonic Wars, " Buy the cannons, sell the trumpets".

I am just not sure in a war against a Virus, if this counts as cannons, or if this is someone still playing a fiddle. . .

[Clean39T]

...

[dave thompson]

Originally Posted by veloduffer

...<snipped>
Perhaps a better way to avoid layoffs is have management to take pay cuts, especially since the US has the highest multiple of CEO pay to average worker. If jobs could be saved by cutting salaries of C-suite executives and other highly compensated staff, then it would reduce the economic impact of the economy as a whole. And in the long term, those monies could also raise wages for the average worker to better afford housing, college, retirement.

.<snip>...
HAHAHAHAHA! The chances of that happening are less than zero. It’s un-American, it’s socialist.

[Clean39T]

...

[C40_guy]

Originally Posted by Clean39T

So, I'm 40, and I have my 401ks and IRAs in index funds and/or "Retirement 2040" type funds offered by the 401k provider. Around 1/3 of the total is split 70/30 stocks/bonds, the rest is in the managed funds.

Is there anything I can or should be doing at this point, or is it sensible to just ride through since I'm not planning to touch any of it for many years?

Also sitting on a fair amount of cash from a house sale and it's earning diddly in a savings account.

Advice such as: "buy that Kirk Onesto you want.." is also acceptable.

Sent from my Pixel 2 XL using Tapatalk

Probably the worst thing you could do right now is to sell any of those funds...you'd be selling at relative (perhaps historic) lows for the underlying stocks. Since you've got a long time horizon, your best bet is to leave your investments as is... There may be *some* sense to rebalancing...taking money out of bonds and putting more into your stock funds, but that would be minor.

With regard to the cash... first, earmark 12 months as emergency funds, plus earmarking additional funds for any expected major purchase...car, bike, etc). Leave that amount in cash. Then maybe consider investing in some beat up stocks. If you're not comfortable essentially losing most or all of that amount (which won't happen), don't do this. You don't want to be second guessing yourself.

Say you've got $50K (after your emergency fund earmark). Put $5K into Apple, $5K into Exxon, $5K into Nvidia... buy a few companies you love, that have been beat up recently. Do some research. See how they were doing before the big V. If they were on an upward tear, they may resume that growth in the future. (Except maybe for cruise lines...)

And there's no rush. If you do it tomorrow, or in two months, in 10 years it won't matter. And btw, I wouldn't do it tomorrow. I'd wait for the next dip. If we have a gov't mandated shutdown, that would cause a significant dip...

[Clean39T]

...

[veloduffer]

Originally Posted by Clean39T

So, I'm 40, and I have my 401ks and IRAs in index funds and/or "Retirement 2040" type funds offered by the 401k provider. Around 1/3 of the total is split 70/30 stocks/bonds, the rest is in the managed funds.

Is there anything I can or should be doing at this point, or is it sensible to just ride through since I'm not planning to touch any of it for many years?

Also sitting on a fair amount of cash from a house sale and it's earning diddly in a savings account.

Advice such as: "buy that Kirk Onesto you want.." is also acceptable.

Sent from my Pixel 2 XL using Tapatalk

The first question to ask yourself is what is your loss tolerance? If you lost another 20-30%, would you truly regret staying put? Everyone is different. In the last recession, a person investing in the S&P 500 would have lost 47% and it took about 4.5 years to get back to even (assuming no new investments).

You should keep a healthy rainy day fund (6-12 months living expenses) in safe accounts. You could earn some interest by laddering Treasuries or CDs, but you want to be able to access a portion of those monies on demand.

You could also payoff any outstanding debt early - mortgage, student loan, auto. Guaranteed positive return.

Assess if your job is secure. If there is potential to lose your job, you need to account for health insurance (COBRA), which gets expensive.

Also, unemployment funds are provided by your state and each has varying benefits. About 50% did not replenish their funds during this expansion, and some did so by reducing the weekly benefits; FL and NC reduced their benefits from 20 weeks to 12 weeks under certain circumstances.

In the last recession, the federal government loaned monies to the states to extend unemployment benefits. There's no assurance the federal government will or be able to (already at high deficits and has expenditures for health measures, etc). The administration has been trying to reduce outlays for food stamps and Medicaid with stricter requirements (mostly work requirements), which could exacerbate the situation for households in distress.

[Rueda Tropical]

Originally Posted by veloduffer

Stocks have been boosted significantly by buybacks, which drive the denominator in P/E are market technicals. With the economy approaching recession, the buybacks go away as firms hold onto cash. Companies are starting to draw down on their revolving credit lines to build cash.

When credit cycles-recessions hit, all companies become correlated by one thing — leverage. Declines in earnings and cash flows become magnified if you have to pay principal and interest. Debt is at record levels everywhere- corporates, consumer and governments. And many firms, even investment grade like Verizon and until recently Kraft-Heinz, have more leverage than before. Kraft got downgraded to junk debt as it’s cash flows haven’t been able to reduce leverage. There are a lot of firms on the edge of being downgraded before the virus hit, like Ford. Falling into junk raises the cost of capital and makes future investment much more expensive.

Companies borrowed money to buy back stocks at inflated prices at the market top. In 2019 it accounted for $480 billion in bids for S&P 500 SPX, according to an analysis by Goldman Sachs, providing more demand than any other source in 2019, including households, mutual funds or exchange-traded-funds.

Sound familiar? Remember 2008? Over extended homeowners buying inflated assets with borrowed money at a market top?

Then there are all the companies floated by toxic debt - like the entire shale oil industry. And of course leveraged bets have been made on all that debt just as in 2008.

Those who don't learn from history are condemned to repeat it. Of course if not learning makes you piles of cash and you can count on getting bailed out when the crap hits the fan you have a lot of incentive not to learn anything.

[veloduffer]

To see how quickly the virus situation could manifest itself into a recession, the NYT has good article on the impact on businesses. It is literally putting businesses in distress overnight.

[Clean39T]

Originally Posted by veloduffer

The first question to ask yourself is what is your loss tolerance? If you lost another 20-30%, would you truly regret staying put? Everyone is different. In the last recession, a person investing in the S&P 500 would have lost 47% and it took about 4.5 years to get back to even (assuming no new investments).

What's the alternative? Move the managed funds into the most conservative option? Move the self-managed into bonds? Touching any of them with the day-to-day volatility right now seems tough. It's only a loss if I need to take the money out, if I was retired and living off it, otherwise it's more of the loss of an opportunity to sell and re-buy and ride the wave back up.. I just don't know how to do that with the mix of funds I have and the transactional friction.

[Tony T]

Originally Posted by verticaldoug

I think Italian data is beginning to flatten. I'm optimistic

Sadly, no.

Italy faces another staggering increase in cases and deaths.

The coronavirus continued its assault on Italy, the hardest hit country outside of China, with officials on Sunday reporting the number of deaths rose to 1,809 — a 25 percent increase over the day before and the largest one-day uptick yet.

The staggering caseload in Italy topped 24,700, even as the entire country has been locked down for a week.

[verticaldoug]

Originally Posted by Tony T

Sadly, no.

Italy faces another staggering increase in cases and deaths.

The coronavirus continued its assault on Italy, the hardest hit country outside of China, with officials on Sunday reporting the number of deaths rose to 1,809 — a 25 percent increase over the day before and the largest one-day uptick yet.

The staggering caseload in Italy topped 24,700, even as the entire country has been locked down for a week.

Mortality is very sad because it has been increasing as a percentage of infections. It's up to 7.3% It's also lagging since you have to be infected before you either recover or die.

Overnight was a 19% growth in new infections. That's lower than the 20% the previous day. and also lower than the mid-20% numbers from earlier in the week (of course data is choppy). They need a few more days of data to see if growth rates trend lower. I still hope they can get down to 1% growth rates by Easter. Although total infections could be higher than China.

[Rueda Tropical]

Originally Posted by Tony T

Sadly, no.

Italy faces another staggering increase in cases and deaths.

The coronavirus continued its assault on Italy, the hardest hit country outside of China, with officials on Sunday reporting the number of deaths rose to 1,809 — a 25 percent increase over the day before and the largest one-day uptick yet.

The staggering caseload in Italy topped 24,700, even as the entire country has been locked down for a week.

We can expect a worse result in the US. As there is no testing there are likely 1000s walking around infected. That number will double every 4 days. Some people barely show symptoms but infect others. Once waves of people start going to the hospital it will become apparent the real situation.

Fatalities are much higher if you have complicating health conditions that are much more common with older people. One of the risk factors is obesity - thats 45% of Americans over 45. We have less then 1M hospital beds in the USA but we may see 20M Covid-19 cases that need hospitalization.

Infectious disease experts warn that when China goes back to work they could see a new wave of infections. This will be with us for months more and we are barely at the beginning in the USA.

Infectious Disease Expert Michael Osterholm explains Covid-19 risks to Joe Rogan:
https://www.youtube.com/watch?v=cZFhjMQrVts

[Miller76]

*FEDERAL RESERVE CHANGES FED FUNDS RANGE TO 0.00% TO 0.25%*

*BREAKING: Federal Reserve cuts rates to zero and launches massive $700 billion quantitative easing program*

*FED WILL PURCHASE $500 BILLION IN TREASURY SECURITIES*

*FED WILL PURCHASE $200 BILLION IN MORTGAGE-BACKED SECURITIES*

*FED: 'IS PREPARED TO USE ITS FULL RANGE OF TOOLS TO SUPPORT THE FLOW OF CREDIT TO HOUSEHOLDS AND BUSINESSES'*

FED, REGULATORS PREPARE STEPS TO ENCOURAGE BANKS TO KEEP LENDING, PEOPLE SAY

*FED, REGULATORS MAY ANNOUNCE STEPS ON CREDIT AS SOON AS MONDAY, PEOPLE SAY*


Sent from my iPhone using Tapatalk