One more thing… we could be at the peak of the credit cycle. The massive amount of consumer and corporate debt suggest we may be. If that’s the case, we should anticipate deleveraging, which will result in asset prices going down.
And one more one more thing… buy-backs are a major reason why stocks have been going up since the Financial Crisis. The vast majority of companies have stopped buy-back programs in order to preserve capital. That’s one less force we have buoying stocks.
First off, I agree with many of your points. If you’re looking at the market from the broad S&P 500 / SPY then there is more pain to be had at least in the short and medium term. However, I really don’t care so much about the short and medium term…
Which leads me into…
As the same with weight training and sport, you have to ask yourself “What season is it and what is my goal?” Everyone has a different goal.
I don’t care so much about short and medium term. I care about long term. Ive got investable cash and history tells me that the best place to put my money is in the stock market.
I do my own research and pick my own stocks. I would not be in a SPY or broad ETF right now because I don’t feel it is fairly valued. Which is inline with what you stated above.
I will however selectively pick stocks that are fairly valued. I DCA my way down in high quality stocks that I deem are at a discount. I also pick risky stocks that I deem have appropriate risk/reward profiles.
When the time is right (season) I’ll throw some cash in a broad ETF. Now is not that time.
I collect dividends, I reinvest them. I have an investment account with cash that I don’t need to keep my family’s expenses covered.
I’ve been ahead of this downturn for months. I went all cash in my 401K in January and have flopped back and forth several times through this pandemic. I’m up 8% YTD.
You are looking at the market from a broad short or medium term perspective. That’s not how everyone looks at it.
Also, stock buybacks are only temporarily halted. Every company making money beyond what they can use in house (+ M&A) and distribute to shareholders through dividends is going to buy back stock. What do you think these companies are going to do with their cash? It’s a valid way to use it.
I get that the market hasn’t caught up to the economic reality of the current and future, and I am almost entirely cash right now and have been for a few months (got lucky). I’m basically just sitting on a large high yield savings account and making decent money each month in interest. However, some of these historicslly low prices for large companies and essential goods sectors have me interested
As a long term stock, how would USO be a bad move right now? It’s under $3, WTI isnt going to go bankrupt (trump has said he will do what it takes to support american oil companies), and has never been close to this low. I get it can and probably will go lower in the coming months, but you’d still be getting in at historic lows right now, right?
Assume you are speaking to an idiot, if you don’t mind haha.
USO is not a long-term investment vehicle nor is it meant to be. It’s primarily a hedging vehicle for people trading WTI and crude products. If you do hold it long-term you’re going to get killed on the rolls.
Yeah, yours may be the optimal strategy all things considered. No way to tell at this point. Consider this though. The economic conditions that lead to these stocks being fairly or under valued are still in effect. Not only that, but those conditions may persist into the mid term or even long term (however you define it). The stock market has moved sideways for years in the past. I think averaging into stocks over time will certainly reduce your risk. Just make sure your cash pile doesn’t run out before (if) we bottom again!
Funny, everyone participating in this thread is sitting on large piles of cash.
That means one of two things. Either we’re a bunch of liars or everybody who is not sitting on cash is too pissed off to even think about stocks. LOL
Not sure who’s lying, but I have not read anything in this thread that suggests that. I do not consider myself to be on a large cash pile. But if you consider my cash:stocks/equities ratio, I’m about 80/20 so maybe I am?
However, there are many people in their 50s and 60s right now that are very much sweating their retirement portfolios, and my heart goes out to them. But at the end of the day, they did not manage their positions properly.
If you had $1,000,000 cash right now, what would you do with it? How you divide it up?
All TSLA. Tesla is the most reliable store of value in the world right now.
I’m only sort of kidding.
I’m probably around 50-60% cash right now.
I’d arbitrarily say more than 35% of investable assets as cash = large pile.
I don’t count my rental house. Just what I have in brokerage accounts.
Pay off house. Put the rest all in on red 18 (USO options 2 years out).
Gold and silver,
gold and silver miners, explorers, streamers
Cash, waiting for a bond market collapse which might not happen if enough stimulus. If it does collapse then I would very much expect stocks to follow
Maybe buy an apartment somewhere on a big loan if I could get it quick enough so I can pay it down with inflated dollars later harharhar. But it might be too late already, banks are probably not much lending these days
Buy some blue chips on the way down if it slides steadily lower and eat some short term losses since I can’t time it perfect. Or if crazy inflation pushes stocks higher then ease into them
My opinions
Yeah, I’m thinking buy 250k of super high risk/reward stock (like USO or Boeing or cruiselines) to hold for 5-10 years, and keep the rest in cash in a high yield savings account until the stock market starts making some sense again.
Real estate scares me now as prices haven’t dropped at all yet, where I’m at and loans (while cheap AF) are tough to get.
USO isn’t a long-term (> 45 days) investment vehicle. USL would be more appropriate.
Is it because they always buy options and lose on time decay?
We need the visionaries to speak up in this thread. I think I’m competent at seeing long term trends. The world is going toward automation, electrification of transportation and one day green energy. The baby boom generation is getting old. Those trends are easy to see.
I suck at seeing the medium term. The implications of the pandemic over the next 2-3 year. Will things go back to normal or will industries like, gyms, cruiselines, airlines, senior living, etc never be the same again?
Will the economy come back all at once with people rapidly rehired or will it be a slow process? Will infrastructure activity come back all at once since everything was neglected for a solid 3 months?
Will the pandemic continue in waves? In other words, will we have flareups and have to go into shutdown mode multiple times?
The last two places I’ve lived they would tear up all the roads every summer and then slap them back together by winter. If they miss the whole summer of exercising that muscle, what the heck is going to happen next summer? How can we invest our capital to take advantage of it?
I think this economic freeze is going to create economic waves going forward that we can capitalize on if we’re smart enough to see them coming.
Let’s hear some thoughts and projections. It’s okay if you don’t think you qualify as a visionary, let’s get ideas on the table.
Assuming we’re both talking about the ETF, they purchase futures not options and have to roll their position monthly. If you look at the table I posted above you can see the price of WTI increases as you go farther out. You could buy the June contract for $13.86 but when it comes time to roll it into the July you’re buying the July for $20.83. You kind of had the right idea though.
There are also structural issues with the way the ETF was constructed that’s causing it to 1) not track front month futures accurately right now and 2) trade at a huge premium to NAV.
Here’s a recent article on it. Don’t Get Burned: How To—And How Not To—Invest In Oil - Barron's
Lack of traffic equals significantly less maintenance necessary, for starters. Also a non-issue in warm areas like the Southern US. Most infrastructure is not being neglected and suffering way less wear and tear than normal.
Short term, quaratine lifts and everything goes nuts. Business will scream to life and things will boom. Mid-term, foreclosures and defaults, some pain, doubled if there’s a new hit when flu season hits.
In areas where temp swings are 40-50F, negative to positive, it’s not so much traffic but freeze/thaw.
Although, is road construction stopping? It’s considered essential, right? I haven’t stopped any projects.
