Unlike BS, I have no crystal ball, but Aug 1 is a pretty significant date…three months from now. As I’m sure you all know, most big US crashes (all with the exception of the flash crash and the recent COVID crash?) have taken place after Aug 1. Would you take the same bet for Dec 1?
lol nah. govt can print as much money as they want. federal reserve is telling govt to spend more money. so govt is getting the green light to get all debt crazy.never fight the fed. if there is one positive in all this. it is that. consumers and corps will be weak, but government can step it up.
I can see where you’re coming from, but I also see both sides. -25% GDP for 2020 is definitely more on the pessimistic side. I’m seeing closer to -13% with a clear recovery in 2021. But nobody knows, really.
Honest question: If you’re fearful of a near term correction do you plan to adjust your current holdings to reflect that? Or is the plan to simply hold those positions and use levered cash to buy on a dip? I’m a perma-bull long term because I believe firmly the fix is in. Nobody wants to see a slowdown and central banks/govt’s are more than willing to throw in the kitchen sink to avoid it.
I’m also fully invested with about 15% leverage/net worth laid out. I’m comfortable with that and I could add to it if we do see a near term pull back. But I don’t see myself making directional trades on current positions due to short term market expectations. I do agree with you that buying strong balance sheets is the play right now. That’s mostly what I’m doing with a few flyers here and there (I’ll take the W on my CVE trade a few weeks back). Wish I had CEO stones to take large directional bets in the short term, but sadly I don’t.
i plan to add to new positions when i refi my mortgage. im clsoing on may, but my first payment is in july haha. i have 5 stocks i want in on since that is cheaper, but ultiamtely i want to buy a new real estate property closer to work as i am tried of renting. when you rent, u just dont care about the place. its a different vibe. i like i want to upgrade ■■■■, but its like, this aint my place so no thx.
anyways in terms of the market in the short run. I dont believe that we have seen the bottom. it would be unprecedented literally the shortest bear market where we foudn the bottom in 1 month. the downside was a lot , but its age is very suspect. ppl think that just because covid goes away that this will all be better. but i disagree. sure this was self induced, so we can just reopen. but imo ppl are now scarred. similar to a car accident. it takes awhile before you are back driving recklessly.
i nthe long run. im a perma bull. i’ll sell to reposition the stocks. usually its because something i like has gotten cheaper. but i wont be a net seller. over time my cash just naturally builds. when i look at this market, i see a 15% discount. but i am already pretty much invested as is. for me to take on more risk, things need to be far cheaper. i dont like to go all in or all out. i ease into it. based on the max drawdown of the overall market. at current rates, i would normally have a 7% bond/cash position. when markets were rising i had as much as 15% in cash, i just let it build naturally wihtout me doing anything, and i dipped all the way to 3% in net cash during hte bottom, which is about 6 months of spending.
now i am about to come up on some cash. im closing on a mortgage that will bump my leverage to 15 to 30% of my net worth. but I will sit on it rather and keep my cash position at net 3% of my net worth. i look at irt this way. if prices dont drop. then i paid a 2% net interest on lets sat say 30% of my net worth which is about 0.6% cost in my net worth. not a big deal. small cost considering the risk of being unemployed with no liquidity.
anyways i actually have a pretty nifty was on deciding my optimal cash. i literally do a monte carlo for a 10 year investment performance between bonds and equity. whatever the odds that bond will outperform the stock market, thats how much cash/bonds i hold. if bonds rates were at 10% for example, i would have a 55% bond position. if bond rates were 5%, i would have a 25% bond position. now i will prolly modify that based on market conditions. if stocks are super cheap, i’ll go with more stocks, but i’ll try to keep it within a 20% band. so i might go at most 20% leverage to my net worth given where rates are. etc etc.
you missed the bottom nephew
I would still be ok with Dec 1 but like any option, time has value right. I mainly just wanted something nearish and concrete not open ended heads I win tails you lose statements.
Good observation though.
Yeah that’s a safe play. Interesting strategy with your overall investing philosophy. Not saying it’s right or wrong, just an interesting approach. I’ve literally never bought a bond in my life. 100% equity with longer term investments. Granted, I’m 37 with a heavy appetite for risk. Sometimes it pans out and sometimes it’s short term pain… net net, I’d venture the markets have been extremely kind over the past decade. I do hold some cash in guaranteed investments at laughable rates, but that’s earmarked for real estate hopefully later in the year. Also keep 3 - 4 months cash on the side for emergencies and what not.
The pace of this recovery has no doubt been unprecedented. But so too has the monetary and fiscal response. Keep in mind this is a voluntary recession… I don’t think it’s comparable to past episodes. Surely there will be a shift in spending patterns and valuations in certain sectors reflect that. It’s a digital age, not all companies are going under here. The Nasdaq is almost flat for the year. Unbelievable really, until you look at the underlying companies. We could go lower, but as you know equity markets don’t follow a straight line with current state of affairs. As of now it’s pricing in a steep recovery (V shaped, even) in 2021… hard to see it now but it’s been a losing bet going against the market for a long, long time.
ive never gone on margin yet. i havent bought bonds either. when i say bonds, i literally mean cash. since they yield the same dumb rate nowadays. i did buy a cd 10k cd 10 months ago, but i already have it in cash again. 9 month cd at a 1.75% promo rate at chase. lol. anyways when bond rates are ■■■■ as they have been since 2008. then it makes sense to go equity.
but rates really do affect ur bond position though. imagine if bond rates were at 20% like htey were in 1980 something. you wouldnt have bought any bonds? lets say it was 30% rate. anyways there is an important stat on stock cagrs. the longer your time horizon, the narrower range of annualized returns are going to be.
for example any 30 year rolling period CAGR for stocks range only from 4 to 14%.
I just dialed back the exposure. I went 3x levered on sp500 and the financial sector a month or so ago when things were trading like the apocalypse. Sold the 3x went back into 2x SPY. Should help my taxes out this year.
Noice noice.
When you guys go 3x S&P or any other similar leveraged deal, does the leverage work both ways? Where I’m from, we have these 5-10X products that knock out if theres even a slight pulldown but you gain the upside 5-10X. So basically the max amount you can only lose is the principal. A very different risk profile compared to a product where you can lose more than what you invested. Asking just out of curiosity.
nah you cant lose more than the principal. limited liability. this aint no partnerhsip.
stay away from 5-10x
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I would never use leverage which can produce returns in excess of 100 percent with circuit breakers. I haven’t seen much evidence greater than 3x is a good long term strategy. I went 3x because I thought the crash would be longer and I was going to keep DCA into it.
haha I stay away from all leveraged products.
If we retest the lows I’m increasing leverage to 50%, buying 3X exposure and selling puts on the position.
im guessing all this trading you guys are doing is in a tax advantaged accoutn right? cuz im about to get some 90k in taxable accounts. and im thinking imma stick with traditional spy over there. just so i never have to sell it. where im from my marginal tax for cap gains is like 25%.
Im all taxable.
Before you say it, yea I know I’m gonna owe a lot of money.
hows everyone doing?