After 25 years of investing and having read most of the finance and investment books I’ve learned many times you can’t time the market. That includes buy and sell.
Best thing is to follow buffets advice of finding good companies that aren’t trading at crazy multiples or has a ton of future growth already priced, then buy in regularly and never sell unless something structural has changed risking downside protection. Don’t sell thinking it’s too expensive because more often then not it will keep going up at some point.
Markets going up or down and recession boom etc is not a structural change. Structural change would be something like if a company loses its moat or takes on so much debt that it risks potential bankruptcy, or permanent shift in consumer trend, etc
Case in point NVDA. So many times I thought it was overpriced and what keeps happening? Now I'll never buy the stock cause I'll always be afraid of it's valuation
Not sure if this is a serious post or not but Costco especially if you have it at a price 10 yrs ago is something you hold forever and pass on to your kids. In an actually apocalypse I would still expect there to be a line for the rotisserie chickens or hot dogs
Nope. Why interrupt compounding unnecessarily? I bought into these investments to hold indefinitely so long as the qualities of the businesses remain in tact. I didn’t buy them because I thought the economy or market was or wasn’t doing something.
Did you invest in a business or did you invest in the macroeconomic outlook?
Surely you can have two ideas in the head at the same time. You can, and should, invest in businesses with the macroeconomic outlook in mind. You dont have to figure it out exactly, as noone can, but absolutely be weary of it.
If I knew a recession was coming in approx 2 years time, and would see a value decrease of 50% across my portfolio, would i not be a fool to ignore it, while hoping for 8% increase up until the slash?
Its not as easy as the above, but it cant be black and white, one or the other.
The point is you can’t know. Being aware of your environment, and making purchase and sale decisions on speculating on what cannot be known are two different things entirely.
If a company does not have the durable competitive advantages that would insulate its intrinsic value during a downtown then it is not a company worth owning. If it’s a solid investment, one should be able to acquire more when prices are depressed, and the company’s dollars will go further on share buybacks and dividends if they’re allocating capital there.
I wouldn’t recommend buying puts or selling off, but even Warren Buffett acts differently when he thinks the market as a whole is expensive, namely by loading up on cash and doing nothing.
He is always building up capital reserves with opportunity costs and capital needs in mind, regardless of the market/economic outlook. Berkshire has sold in the past, typically with regret after the fact, but only when better uses of that capital are identified.
Buffett does not sell his business holdings because he thinks the market or economy will decline, which is what OP is discussing.
If you are true value investor (not a pretend one like many on this sub) you should be raising cash for better opportunities to come. Look at guys like Buffett and Klarman - they are already sitting on a lot of cash - dry powder they can deploy when everyone else is running for the hills.
Hard to sell non growing stable companies at 6-7 times cash flow but I agree. I’m pretty sure the first rate cut will be seen as bearish and that will spook folks big time.
I think there is a group of so called "experts" that keep trying to scare the average investor - not sure why they do it but every day there is one of them talking about a crash. Some want us to put it is gold and silver and what not. I just ignore them and keep investing in the stock market. I lived through the dotcom era - each day I remind myself - it was painful to see the account value BUT it is really really joyful to see the account value now.
Yeah. It's not clear what ~~you~~ they think is going to cause this crash/violent correction in the market. Tech and mag 7 have some ways to go yet and they're driving a lot of growth in the market right now. Will small, mids, and large caps drag the market down at some point? Probably, but this is what the Fed is aiming for in order to reduce inflation. Absent some catastrophic event I'm not sure what's would cause a big drop. A slowing or stagnating market seems more likely for a quarter. But presuming this correlates with consume price decreases you'll see Fed rate decrease and more liquidity enter the market.
As my mother would say: leave well enough alone.
Agreed. Unless there’s some big vulnerability like the sub-prime crisis or a large geopolitical flare up, and trying to predict those would drive anyone mad long before you got it right.
Personally I think some of the problems that were priced in as escalating haven’t turned out as (economically) bad as imagined, so the enduring sense of geopolitical dread isn’t necessarily matched by a corresponding economic dread as well.
During the dot com burst the US debt was $5 trillion and GDP to Debt ratio was 52%. Today the Debt is $34 trillion and GDP to Debt ratio is 122%. How much room is there for the stock market to grow over the next 10 years? Stagnation? Any experts here?
Trying to view that data in isolation might not be the right approach. Also, the macro-economics and broader environments always keep changing. So, a number that you might see as a problem now, might not be a problem later. Even your GDP to Debt ratio that is 122% in Q1 2024 which is a problem, but if we zoom out it was at 133% in Q2 2020. So, I can even make the argument that is trending in the right direction and the high interest rate policy is helping. GDP to Debt Ratio - https://fred.stlouisfed.org/series/GFDEGDQ188S
Now if you look at Federal Surplus/Deficit as part of GDP it will be a different story - https://fred.stlouisfed.org/series/FYFSGDA188S and this can be attributed to the petrodollar system a.k.a US being the global reserve currency means people buy US Dollars and Treasury a lot.
Again, lots of things in the environment can change with introduction of new technologies and your assumptions can go out the window. For e.g. with advent of all the software/cloud/tech companies the market changed and created new things. yes 2001 was disaster, but tech companies are raking it in now. Whereas companies like GE, AT&T which were darlings then are not doing so well.
All this to say, no I do not know and nor can people predict what the entire stock market would do over the next 10 years.
As long as a Team of companies from various sectors perform we are good. Nowadays everyone is betting on LeBron or Brady to win the game without any teammates. That’s what NVDA and FAANG are. The DOW is not doing well and the indication is we are going to fly South soon. The big question is when we start heading North.
If you really can't help yourself and need to change something, you could consider hedging your market beta with a light layer of put options. Generally over time, rolling puts eats a few percent of your return and reduces vol a fair bit
I think the iceberg has flipped and all bad (ish) news will be “oh no, the fed is waiting to long” then when they cut it will be “gosh stuff must be really bad out there for them to cut. What do they see that we don’t. Sellllll”.
The question is what sells from here. Small caps have severely underperformed and while I loath to say it I suspect they will get smashed again.
Most of the names I follow are betting on a back year recovery. With the election drama I’m not so sure.
I run a business that correlates with consumer discretionary pretty well and business went south in 2022 hard but has been otherwise pretty stable since (stabilized at the lower level) Inventories across the channels are really lean but seeing discounting (by manufacturers and b2b and b2c channels) in an attempt to just keep bills paid. That will lead to closures but we aren’t there yet.
I agree with op that this is a hard call.
100% agreement. Yield curve inversion isn't a problem historically. The issue's when it stops inverting (because of rate cuts), because a healthy economy doesn't normally require cuts.
The more you zoom out the more over valued equities feel right now. 3 companies with a 3 trillion dollar market cap feels absurd. Not to mention how overweight the SP500 feels in terms of tech exposure.
He’s not wrong to feel this way, but history says to just let it ride. That being said, I’d rather miss out on a little growth than be decimated by a market downturn.
Something something time in the market better than trying to time the market.
1. Buffet indicator 204%
2. 3mo-10 year, 2-10 year curves both inverted
3. Standard and poor shows value of S&P up 10% to a 3% gain in earnings.
4. Buffett himself reserving a cash position.
5. Shipping data recessionary already
6. Fed adjusting CPI to core CPI (no food or energy) to super core CPI (no real estate I believe) to demonstrate .2% yesterday. That’s called lying.
7. S and P index vs Truck tonnage index shows clear wedge formation.
8. Credit card delinquency skyrocketing.
9. Personal savings rate very low (2.4% last I looked).
10. Concentration Risk in the S@P with NVIDIA at 6.5%.
11. Lastly, no one I know has any money for anything.
All feels pretty ominous. Timing the market seems impossible but being patient isn’t. Now doesn’t seem like a bad time to start accruing a cash position. My two cents.
Buffet holding a large cash position is partly due to the lack of good investment opportunities for Berkshire. at their scale, there are not many places he can invest in that would be worth his time or money
Yeah exactly and to add to that he isn't like dumping all his positions because the world is ending. He's selling what he thinks he needs to and maintaining high cash position for when a good investment comes along. (Not that it should matter since we aren't WB)
So to the point of the original post here, yes he is also seeing the signs but he isn't considering a panic sell like OP is craving to do.
Yeah, I agree with that. I dunno, I’m pretty new to investing so I could be completely off. I’ve read a lot of the value books (Buffetology, Intelligent Investor, One up Wall Street. Little book of valuation, etc). It’s a lot to take in with the macroeconomic stuff. Just trying to have my head not explode.
I think some of your points are more relevant than others. high credit card / personal debt, low savings rates, and shipping data are good points to follow. but others might not be as accurate forecasters for a recession based on data that ive seen. but im also not a professional so who knows lol
I agree with your points and that is largely my thesis as well. It should be noted Berkshires cash position while the largest by absolute dollar amount is still within the average range as a percentage of total assets. Another point Id add is the fiscal stimulus coupled with back to back rate hikes amid 40 year high inflation due to the trend of deglobalization, energy transition, generative ai, geo volatility. Also the fact we had rates at zero not 5 years ago which given the predicted inflationary environment ahead, will result in companies being hit unexpectedly by higher interest payments as well as consumers. I've yet to personally do significant in-depth research but I've read a decent amount and more than most people Id say but take it with a grain of salt from anybody spending their time on the short form infinite scroll of reddit.
Only counter-point I’d add is that mature companies won’t be caught off guard by interest expense when/if their debt rerates.
Most large companies build entire debt maturity models to quantify these impacts.
I mean thats just how its going to be from now on - at least that's what I think. I don't see Apple Facebook Amazon Google truly shrinking in revenue or marketcap
Isn’t that the problem though? If you keep interest rates high - it punishes small and mid cap businesses. If you decrease them ya gotta print money. High interest rates are great for foreign investment, not so great for the US. Low interest rates are terrible for foreign investment, but since they still need dollars - the Federal reserve has gotta print.
It’s Triffin’s paradox essentially. The Fed has no great options right now. As the world reserve currency - what you do that is good for the world is shitty for your own country (and vice versa). At a debt to gdp of 122% I’m wondering how much more inflation the taxpayers can take with our government’s level of fiscal irresponsibility.
Love your comment.
From Buffett letter to shareholders from 1984...
I mean, it has been 40 years since...
"we believe that present fiscal policy—featuring a huge deficit—is both extremely dangerous and difficult to reverse. (So far, most politicians in both parties have followed Charlie Brown’s advice: “No problem is so big that it can’t be run away from.”) Without a reversal, high rates of inflation may be delayed (perhaps for a long time), but will not be avoided. If high rates materialize, they bring with them the potential for a runaway upward spiral."
Buffett, Warren. Berkshire Hathaway Letters to Shareholders, 2022 (p. 307). Explorist Productions. Kindle Edition.
Ya ya ya
And we are still in bullish market and will be for years
Every year there is some guy who is like oh recession is coming
Alan Greenspan when they asked about US credit risk he said “We can always print money”
It’s genius! There are so much ideas behind this concept that you can’t even imagine why US economy is on a top and will be for many years
Keep fearing of recession
I think semis and tech are overheating. Seeing apple jump 12% on their new AI feature, while it is uncelar if this will push iphone sales, makes me very weary.
I will trim my tech stocks and move more into utilities and european energy. DUe to Eu elections and macrons snap election, there is quite the sell at the moment. But I dont forsee any stark political reforms that would affect energy.
Any specific energy stocks you are watching right now.
I just red through le pens election programme (22 points) and they are actually very much in favor of cheap energy and lessening taxes on it so you might be onto something
I am invested in SMA Solar, biggest EU solar inverter manufcaturer, both residential and utility scale. P/e of 7,5, no debt, increasing capacities. CEO and CFO both bought shares recently and it even has a dividend (dont think Enphase would declare one any time soon).
Engie could be interesting, but they own some wind and Le Pen does not like Wind. However, I dont know how a Parliament can so easily reduce the income of existing wind farms.
Its not impossible, but look into Hinkley Point C or the finnish plant (I believe it was the most ctsly building in 2022) - they override their construction budget and schedule. The energy from Hinkley will be one of the most expensive mwh in Europe.
How so with the Debt at $34 trillion and GDP to Debt ratio at 122%? With Gambles like NVDA all those multimillionaires who hopefully will cash out soon is pay off their homes and get ready to pay higher property taxes, utilities and survive or try gambling on an other NVDA. It’s like betting on a single quarterback to win the game without a team.
You don’t know how to measure value, sorry
Nothing is wrong with debt, as long as you pay for it
We can always print and devalue debt 🙂
Nvidia is a real trend, it’s not random company at dotcom
And nobody cares about Debt 😁
Debt is good if there is cash flow. Debt without cash flow is just bad Debt - creditors show up to collect and posses resulting in one becoming trash and useless to the world we live in. That’s why we have credit scores and credit rating.
The thing with "anticipating" a downturn or timing the market is that you need to find the right moment to sell and the right one to buy in again.
> If an investor were to simply miss the 10 best days in the market, they would have shed over 50% of their end portfolio value. The investor would finish with a portfolio of only $29,708, compared to $64,844 if they had just stayed put.
https://www.visualcapitalist.com/chart-timing-the-market/
Since we are in r/valueinvesting you shouldn’t care about the day to day stock price if the value is priced right.
That would only be relevant if you’re invested primarily in index funds and not the individual stocks. Also worth noting that US stocks historically always tends to have a higher value than international stocks.
I've always been 100% equities since 2009. I fight the urge pretty well but when a particular stock pops or there is a big run up (i.e. AAPL recently, META after earnings earlier this year) I may trim a small percentage just for mostly psychological reasons but I'm never more than 5% cash. So my bearish and bullish positions may be considered all bullish to many investors. I also pick up shares when there is a big drop in a company I like/own. Like META after its most recent earnings report and Starbucks when it dropped to $72. Even if these buy and sells are less than 1% of my portfolio it still satisfies the urge to be active. Because the big returns do come from holding long term. (If you buy good companies for long term investments)
Also I don't try to predict when the whole market is over valued or some economic crisis is coming. But I can tell when the 10 or so stocks I like/own are all not nearly as cheap as they were previously.
Oh another thing I do is almost all the companies I have ever invested in were actively buying back shares. So to help me just hold I know that if there is a crash then those cash rich profitable companies will just accelerate their buy back programs which in the long term will be very beneficial. It would be much more difficult to hold on to a growth stock during a crash while they are diluting shares at a faster rate because they don't generate enough cash yet.
Also it may not necessarily be the previous buybacks that matter but more the approved amount left in a buyback program, the current net cash and the expected free cash flow.
I'm not sure where a place is that you can look them up but they announce them usually during earnings calls and can check on the most recent financial statement. Each earnings statement would usually state how many shares they bought back in the last quarter, for how much money, and then how much money is left on their approved buyback plan. Companies have to approve an allotted amount of money for buy backs before a company can do it.
you may wanna take a look at met coal buyback king AMR. all fcf besides capex committed to return to shareholders via buybacks and debt free. risk is met coal prices in the short-term.
Thanks for the suggestion. All the numbers look great but they own coal mines. I don't think it will be dead in 5 years but what is their eventual pivot? I own MO and traditional cigarettes may decline but they are moving to smokeless or vapes, they will sell human vices somehow. I own chevron and Oil may decline(I don't think for a long time) but they are investing in alternative energies. What is AMR's back up plan outside of coal mines?
The recent bankruptcy doesn't scare me. It could, but also sometimes that leads to consolidated industry which leads to bigger profits. I'll have to look more into their financials and industry because coal has never interested me for investments. I do like buybacks but it still has to be a company that is not declining and has prospects for potential future growth.
there is hopefully no pivot. terminal value zero and steady commitment to buybacks. check mohnish pabrai's recent wagons fund earnings call, he's got a good comment on that. the point is they should make a ton of fcf that they wont invest anywhere but return to shareholders via buybacks. they had dividents which they stopped last winter in favor of buybacks. look up mfwarder on twitter to get a better picture if you want, he's a very good analyst of the coal sector.
metallurgical coal that is yes. the premise is it should be profitable long term for a variety of reasons (esg limiting new supply, growth=need for steel). if i got it right AMR has roughly about 30 years worth of metcoal reserves. Hopefully they buy back themselves out of float beforehand.
Change in price is not the same as a change in business. If you can't rest easy knowing you have a years long timeframe that outlives market moves, then what's the point?
I get it but I don't, people who claim they follow a strategy, claim to have "made a decision" to buy something but then get tugged around by public sentiment, fear, market moves. These are not for us to be concerned with.
This is my first post here, so hope I won't be berated too bad. I didn't fight it and I sold all my equity ETFs. They were all up and I felt happy with my returns.
So, while I take a breather, I have put my $ in short term CDs and treasuries. Like One poster said, don't leave it in cash. One key element is, I am very close to retirement.
I think it really comes down to what you can deal with. If you are starting to freak, derisk. Don't get caught up in the FOMO.
Good luck.
I recently (yesterday). :-). got into DES2, a reverse ETF on the DAX. Just as an insurance. ( for 4% of my PF)
10% of my portfolio is Gold and silver ETF's, so there is no problem in case of a recession.
35% of my portfolio is US-T paper and ETF's like XUHY, VECA, VUCF, and SXRC. They all go up in case of a recession.
The other 50% equities, I recently put the stoploss really tight, so when there is a drop, I will get stopped out, and stay in cash to sit out the recession.
That's where Im at. My tech exposure in 2022 made me a bit bearish and I'd like to get a better entry point into VTI, VOO, and possibly SCHD. So, aside from finishing off the target sizes.
Too many may have bought into the "Be greedy when others are fearful..." so for perhaps the first time, that index may be, for once, telling us to stay put instead of being greedy?
If you like the companies/ investments don’t sell. The issue isn’t timing the top it’s also timing when to buy back in again. That’s a very active process.
People were saying this when S&P hit 5000. And in a blink it’s 5400. Maybe it’ll correct, but maybe it’ll launch up to 6500 before correcting back to 5000 and then you’ll have fomo before not knowing when to get back in etc.etc.
For many years, people were telling me AAPL was doomed, there were multiple periods where sp dropped significantly. I did sell 1/3 of my position but have kept the rest since 2006. It's now a 20 bagger not including dividends.
Either hedge or take some profits. Hedging is done based on cost to insure % of total portfolio from downside move or 20-30% or more.
Non-action is still action.
You could rebalance rather than just selling to cash as a way to derisk without giving up
compounding potential. Do you have target allocations or are you in a one fund kind of place?
If you’re investing not trading then there is little reason to sell, remember you have to factor in taxes on your capital gains to lowering the price you’d have to buy back in at for this to be a profitable decision.
It is very natural and smart of you to be wary after several new ATHs. If you want to limit your downside risk maybe consider writing OTM Calls or Bear Credit Spreads. This will be less of drain on your portfolio than puts.
You could also review your equity and fixed income allocations. If you are 100% in equities now is a great time to set up a bond ladder. At these yields you won’t feel dumb lowering your equity risk.
I have decided to adjust my portfolio by taking 15-20% of my profitable positions to hold some cash and wait for a pullback. As well as sell some dead positions that have moved sideways and begin a position in QQQ and VOO. I know I can't time the market and did this right before the cpi report/ fed meeting this week. It could have gone either way, ended up I didn't get to see the same level of profit as I would have if I had not touched my portfolio but trying to move forward in a more balanced way. Not thinking I can time the market....
Selling because what you’re holding is overvalued is prudent. Selling because you think you’ll be able to get a better price in the future is dangerous.
Did WB sell everything prior to the 2008 crisis? Or at any other point in the past before a market crash when it was clear there was a bubble? No, no he didn't.
Look how he's doing.
If you can afford it then it might not be a great time to sell. Missing out on 25% growth is worse than incurring a 10% loss. Those are my assumptions right now. But at the same time I currently *need* to sell (personal reasons) part of my portfolio. But I'd much rather hold it all.
If you’re investing and you don’t have money to buy more when things get cheap than you should rethink what it is that you’re investing in.
Chances are you’re overexposed and can’t afford a loss. If so, derisk some… give yourself some space to think and take a breather.
According to Monnish Pabrai, one should sell only when the price is outrageous. One can define outrageous on their own.
It is 3x intrinsic price for me so I wouldn't sell GOOG at 180 even though it is 30% overpriced. However, If I had Nvidia, I would sell it at 1350 as I consider 450 to be the intrinsic price.
Keep reminding myself of books that I’ve read that gave multiple examples of people trying to time the market and it not working out for almost all of them. I’ve got a 20+ time horizon so I can make it through. Still hard to watch things dump though. I might end up selling a portion like DCA my way out if there is a long dip. Then hopefully DCA back in 😭😆😬
You can sell calls against your positions if they are big enough. It allows you to step off the elevator if it suddenly shoots up and lets you cash out by taking some premium profit now without selling your core positions.
Don’t buy naked puts. And if you don’t understand any of what I just said then definitely stay away from options
In the book The Psychology of Money, Morgan Housel famously quotes Napoleon Bonaparte on what a military genious is: "The man who can do the average thing when everyone else around him is losing his mind." It's the same in investing. I think everyone is feeling like you are. It's been "too good" for a long time and an imminent correction feels to us like the most reasonable outcome. Here you have two options.
1: Listen to people losing their minds.
or,
2: Do average thing.
Another point is that if it was possible to predict corrections, the correction would have already happened. Systematic risk, i.e the market, is random and is determined by factors out of our control, meaning you cannot predict the way things are going anyway. Stay the course, learn to ignore the crowd, and buy the dip.
The original post is emotionally driven decision making and so are most of the responses.
The non emotional response would likely be found in portfolio management theory and rebalancing the portfolio to take advantage of equity gains.
You must consider your tax implications as well. One way to manage this in equities is to not automatically reinvest dividends so that they can be used in rebalancing and for the value investor for preparing to buy companies in a down turn or when they are under valued.
Another way to rebalance is to stop automatically investing in equities when the market is up and instead invest in bonds or a money market fund then use that money to buy equities when the market goes down.
The reference to buying options seems more like an insurance play on puts to offset loses. But just like insurance it often ends up worth nothing.
Good Luck in managing your emotional investing.
Most value and small cap names have been hit hard from the moment of the cpi gap up open. So much so that it has an old timer like me taking notice. When good news is good switches to good news is bad things get weird. That is what’s happening now. For now on. Good news about the economy is bad for value stocks (rates higher) and bad news is bad (fed will wait to long to cut). Watch rates come in (will be seen as a warning sign cuz bonds smart) and when they do cut it will be mass selling not happy buy time for value and small cap stocks. I’ve seen this movie 2-3 times and it will be the same playbook this time. When the % of Russell 2000 stocks above their 200 day ma hit 15-20% then deploy you cash. Currently at 45% (last Oct was 20% for reference)
Yes, selling all my Value holdings that are less than 2k and putting the profits in an ETF. Sometimes it works like Fortinet, sometimes it doesn't like Qualcomm (went up 20% the week after I sold). Only keeping high conviction plays like Mag 7 and a few pharma/health companies.
Personally I have an extra amount on margin that helps my itch of timing the market... I leverage after red weeks/months, and I take profit when back to ATH.
No its not optimal, but it does give me a bit of extra gravy, which is nice
I do the same I just set limits on how much I borrow on margin . I recently felt like the market seems inflated so I sold off the majority of shares I purchased on margin for some nice profit and will wait till I see a dip in prices and start using margin again. If the dip doesn’t occur then I still have been making money so I’m not worried just patiently waiting. And only risking what I can afford to lose.
Tax implications, accurately timing a sell off and then accurately buying the dip is just too tough. I've found the best solution is to always invest in the best quality. That way I'm excited when the drawdown happens.
I both trade and invest. You can do both, and if you're worried about the market coming down, you can just beta neutralize with derivatives (futures, options, etc.).
Buying puts is extremely risky and a short term strategy. It requires timing. Unless you know something about the timing of the next crash/correction that the rest of us don’t, I’d be wary of that strategy. Selling covered calls on part of your portfolio is perhaps a better hedge.
Regardless of the direction of the market at large, there are equities out there that are good values. That’s always true. Personally, I think it’s likely that interest rates won’t go much higher from here, and are more likely than not to fall. That bodes well for bonds (I don‘t own any - still not a fan) and any dividend stocks with reasonable growth/sustainability to their dividend. Those investments have done extremely poorly as interest rates have risen, and should be more resilient if and when rates come down.
You could rotate out of tech/growth and into either bonds or the sorts of stocks that do well in a recession. I like the idea of having a mix of those.
Did sell and derisk most positions and indexes. Still holding long term dividend payers.
Best case scenario we see stagflation, worse case scenarios we see a crash of 30-50%. My expectation is that spy is under 400 by year end and continues to fall, albeit with a long (8-12months) corrective bounce.
It’s brewing and while no one can predict the timeline you’d be foolish to think stocks only go up. It’s ATH’s, you should be taking profit.
I'm much more aggressive in the markets. Not value investing type stuff for the bulk of my portfolio. The low vol stuff I'm keeping as I continue to build those positions. The high vol stuff though is most gone. The options are just about entirely off my books.
Market concentration of gains is too high. I feel like we are running up a ramp that ends in a cliff for most of the bugs gains this year. I'm not going to say we will drop dramatically next week or even next month, but I think we will before next Summer and the gains between now and then are likely to be limited. I would not be surprised if the gains since either or possibly back to October are wiped out when the market decides to drop.
For value stocks it may actually be ok to good, but the high flying stuff is going to get hammered.
Too much liquidity, financial conditions are still loose ... I've been thinking markets would pull back over the last two years, but the market can be irrational longer than I can remain liquid ... I'm not here to make sense of it, but here to make money, so I continue to stay long but diversified, and keep a portion of powder try and trim on gains here and there.
Nope. Gotta know when to cut your losses. When I get upset I’m losing money in the market I switch to VGLT. It’s boring, rarely moves, and kicks a monthly dividend
Now is a real good time to get into value stocks especially in staples as soon as interest start going down interest on MM accounts will drop and people will flock to stable yield defensive stocks and the money flowing in will raise share prices. Myself I’m not touching anything except for buying more monthly.
There is a 50/50 chance for the stock market to drop because you can’t predict the future.
I’m not selling anything. Maybe build up my cash but not selling.
100%
We are at about the rate of compounded inflation from 2021 high of the SPY and the buy back window just closed. Not a lot of room to run. Pull back time
No urge to sell, I have the urge to buy but doesn't feel like it's a completely smart idea so I'm only buying a small amount per paycheck and then saving more into a high yield savings account.
The closest I’m ever going to get to a short position when I’m feeling bearish is directing more money into my HYSA to have dry powder to absolutely fucking unload and go on a buying spree during the next major event.
I think there are values to what OP is saying. Sometimes it is not about maximizing profit, but minimizing loss. To sell off some after a long uptrend is not bad.
Never leave the market fully, but to protect some profit and have money available if and when the market goes down is not a bad idea.
In worst case you will miss out on some gains but selling 20% and see your securities increase in value again is really not a bad thing.
https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions
If you have MATLAB:
```
expansionsDuration = [29,30,43,70];
expansionsYears = [1899,1945,1982,2009];
figure; plot(expansionsYears,expansionsDuration,'LineWidth',2);
title("Economic Expansion Durations Over Time");
xlabel("Year");
ylabel("Months of Expansion");
```
Buying puts on VOO when you own VOO will overall dampen your returns in exchange for downside protection – it is like paying an insurance premium to lock in a minimum price. But if you don’t need the money anytime soon, do you really need to pay for the downside hedge? The puts really only protect you if there is a sudden major downturn and you need the cash badly in the short term, otherwise you can just wait it out and sell the VOO later when prices improve. On the other hand, if VOO continues to appreciate your puts may get wiped out entirely, and there is a time limit (option expiry) after which the losses become irreversible.
I think something you are also not considering – it’s really hard to decide when to close out your options positions! Let’s say you buy a 1-year VOO put this month, VOO goes down 5% next month. Do you close out the position next month? What if VOO goes down another 5% the following month? What if it goes up 5%? Every month you wait is more theta decay you lose on the value of the put option, and the decay accelerates as you get closer to expiry. Time your trades badly and you could be leaving returns on the table or incurring losses you didn’t need to incur. Close the position too early and you lose the benefit of the downside protection you wanted in the first place. Close the position too late and much of the option value would have decayed away if there was no major downturn. And if VOO appreciates even after a dip in price, your puts would lose money. The only way you maximize returns is if VOO has a sharp downturn, and you close the position when prices bottom out. And if you want to minimize theta decay, you’d need to roll over your puts by selling them and re-buying puts that expire later, incurring transaction fees and paying for spreads. The costs and risks with this strategy are abundant.
In short – don’t gamble. Options are not value investments, and are an expensive option for hedging risk. You mention you want to do these trades in your mad money account – so even you recognize that these trades would be a gamble. Most bets against the market lose in the long term. Hedging with options just multiplies the risk with leverage, and forces you to accept a time limit for your predictions to come true. Unless you have a schedule to keep – like you need protection for X months or years before you retire or buy a house or win the lottery – options will create a lot more risky and time-sensitive investing dilemmas than you currently have. Probably the best strategy if you are skeptical about equities is to just allocate more of your portfolio to inversely correlated assets, such as bonds. You still give up returns on VOO, but you do not need to worry about your investment getting wiped out or timing your exit or rolling over your position to avoid theta decay. And if the economy tanks like you fear, inflation and rates should go down, which should make your bonds appreciate.
You don’t *know* a big correction is coming, but let’s pretend you do.
When do you rebuy? Where to you allocate in the interim? How much do you reduce your positions?
You could have a crystal ball and you still couldn’t execute your adjustment perfectly. If you want to derisk, just slow your buying or build into a different part of your portfolio.
Or just stick to the plan you’ve designed for your age and income.
The fear in the market might be a good sign. It could be keeping price levels in check. When u account for inflation, the crash has already happened in value. De risk if u want. But u risk missing gains/income. Perhaps consider bonds for safety and growth. Selling short is just dumb.
If I could time it perfectly, sure, I'd sell everything before a big dip/crash. But I can't. So I'll just hold. My money will be in the market for another 30+ years anyway.
Semiconductors are in a bubble. The only tech i’m interested in is Apple.
If I was holding semiconductor stocks or a focused ETF I would sell. I think the growth expectations priced into that sector are untethered from reality.
“Sell” is a broad term. Nothing about this makes me want to sell my homebuilding or bank stocks.
Have you seen any equal weight charts?
The vast majority of stocks have been flat all year, and small caps havent seen new highs since 2021. Half of the gains in the s&p this year have come from 4 companies. Out of 500.
There is less room for growth in the already overvalued megacap stocks but the broader market has plenty of room to grow once the fed eases back on interest rates.
Less exposure to megacap is not a terrible idea. Theres a lot of high expectations that may not come to fruition.
Also, year 5 on the 10 year seasonal chart is always a huge year for equities.
Imagine what the combination of interest rate cuts, wars ending in ukraine and palestine, and a stable US election could mean for the stock market in 2025?
I doubt that equities are about to cave, but less drastically I think we could see a rotation to value in the near future. This is the reason that you need some diversification in your portfolio - a balance between growth and value. Timing the market is damn near impossible.
In the same boat. If you feel that way then divest. Im 80% out and put the rest in high yeild money market. Might wait till after the election to go back in. No reason not to take a break if that makes you feel more at ease. Things are crazy and mental health is important too.
The democratic party will fly helicopters around the country throwing gold coins to the peasants below before they will allow the stock market crash during this election year. You have till December at the least.
> *”The most important quality for an investor is temperament, not intellect.” -WEB*
After 25 years of investing and having read most of the finance and investment books I’ve learned many times you can’t time the market. That includes buy and sell. Best thing is to follow buffets advice of finding good companies that aren’t trading at crazy multiples or has a ton of future growth already priced, then buy in regularly and never sell unless something structural has changed risking downside protection. Don’t sell thinking it’s too expensive because more often then not it will keep going up at some point. Markets going up or down and recession boom etc is not a structural change. Structural change would be something like if a company loses its moat or takes on so much debt that it risks potential bankruptcy, or permanent shift in consumer trend, etc
This
Case in point NVDA. So many times I thought it was overpriced and what keeps happening? Now I'll never buy the stock cause I'll always be afraid of it's valuation
Better buy now before IT Doubles again
So what do I do with my 10 yr Costco position trading at all time high multiple… which WEB himself cut a couple years ago
Not sure if this is a serious post or not but Costco especially if you have it at a price 10 yrs ago is something you hold forever and pass on to your kids. In an actually apocalypse I would still expect there to be a line for the rotisserie chickens or hot dogs
The acronym tho
Nope. Why interrupt compounding unnecessarily? I bought into these investments to hold indefinitely so long as the qualities of the businesses remain in tact. I didn’t buy them because I thought the economy or market was or wasn’t doing something. Did you invest in a business or did you invest in the macroeconomic outlook?
Surely you can have two ideas in the head at the same time. You can, and should, invest in businesses with the macroeconomic outlook in mind. You dont have to figure it out exactly, as noone can, but absolutely be weary of it. If I knew a recession was coming in approx 2 years time, and would see a value decrease of 50% across my portfolio, would i not be a fool to ignore it, while hoping for 8% increase up until the slash? Its not as easy as the above, but it cant be black and white, one or the other.
The point is you can’t know. Being aware of your environment, and making purchase and sale decisions on speculating on what cannot be known are two different things entirely. If a company does not have the durable competitive advantages that would insulate its intrinsic value during a downtown then it is not a company worth owning. If it’s a solid investment, one should be able to acquire more when prices are depressed, and the company’s dollars will go further on share buybacks and dividends if they’re allocating capital there.
"If I knew a recession was coming in approx 2 years time" stopped reading there.
Seriously, this will be the longest predicted recession in history. The market can stay "irrational" longer than you can stay solvent.
But you don’t *know* anything about the future, which is kinda the point.
I wouldn’t recommend buying puts or selling off, but even Warren Buffett acts differently when he thinks the market as a whole is expensive, namely by loading up on cash and doing nothing.
He is always building up capital reserves with opportunity costs and capital needs in mind, regardless of the market/economic outlook. Berkshire has sold in the past, typically with regret after the fact, but only when better uses of that capital are identified. Buffett does not sell his business holdings because he thinks the market or economy will decline, which is what OP is discussing.
He's been doing that for about a decade and he can afford to, he already owns winners
Yes, but don’t you think there has to be a correction? Most of the market seems overvalued considering the S&P was 3,600 just two years ago.
Yeah, I'm feeling this really hard. I'm a lousy investor. So, if I'm wanting to pull out that means you shouldn't.
You should sell that service. Like someone who always gets rain on their holiday being paid to go anywhere but where I want to go.
Never pull out, ever. Also, staying invested is a good idea as well.
If you are true value investor (not a pretend one like many on this sub) you should be raising cash for better opportunities to come. Look at guys like Buffett and Klarman - they are already sitting on a lot of cash - dry powder they can deploy when everyone else is running for the hills.
Hard to sell non growing stable companies at 6-7 times cash flow but I agree. I’m pretty sure the first rate cut will be seen as bearish and that will spook folks big time.
I think there is a group of so called "experts" that keep trying to scare the average investor - not sure why they do it but every day there is one of them talking about a crash. Some want us to put it is gold and silver and what not. I just ignore them and keep investing in the stock market. I lived through the dotcom era - each day I remind myself - it was painful to see the account value BUT it is really really joyful to see the account value now.
Yeah. It's not clear what ~~you~~ they think is going to cause this crash/violent correction in the market. Tech and mag 7 have some ways to go yet and they're driving a lot of growth in the market right now. Will small, mids, and large caps drag the market down at some point? Probably, but this is what the Fed is aiming for in order to reduce inflation. Absent some catastrophic event I'm not sure what's would cause a big drop. A slowing or stagnating market seems more likely for a quarter. But presuming this correlates with consume price decreases you'll see Fed rate decrease and more liquidity enter the market. As my mother would say: leave well enough alone.
Agreed. Unless there’s some big vulnerability like the sub-prime crisis or a large geopolitical flare up, and trying to predict those would drive anyone mad long before you got it right. Personally I think some of the problems that were priced in as escalating haven’t turned out as (economically) bad as imagined, so the enduring sense of geopolitical dread isn’t necessarily matched by a corresponding economic dread as well.
Do you think they’ll advertise on the media what’s plaguing the financial system for retail to get out on top?
During the dot com burst the US debt was $5 trillion and GDP to Debt ratio was 52%. Today the Debt is $34 trillion and GDP to Debt ratio is 122%. How much room is there for the stock market to grow over the next 10 years? Stagnation? Any experts here?
Lol that’s not how it works It’s Buffets fairytales about debt/gdp
Please elaborate. Buffet will be dead soon. He made money, lived his way and will be gone soon.
Trying to view that data in isolation might not be the right approach. Also, the macro-economics and broader environments always keep changing. So, a number that you might see as a problem now, might not be a problem later. Even your GDP to Debt ratio that is 122% in Q1 2024 which is a problem, but if we zoom out it was at 133% in Q2 2020. So, I can even make the argument that is trending in the right direction and the high interest rate policy is helping. GDP to Debt Ratio - https://fred.stlouisfed.org/series/GFDEGDQ188S Now if you look at Federal Surplus/Deficit as part of GDP it will be a different story - https://fred.stlouisfed.org/series/FYFSGDA188S and this can be attributed to the petrodollar system a.k.a US being the global reserve currency means people buy US Dollars and Treasury a lot. Again, lots of things in the environment can change with introduction of new technologies and your assumptions can go out the window. For e.g. with advent of all the software/cloud/tech companies the market changed and created new things. yes 2001 was disaster, but tech companies are raking it in now. Whereas companies like GE, AT&T which were darlings then are not doing so well. All this to say, no I do not know and nor can people predict what the entire stock market would do over the next 10 years.
As long as a Team of companies from various sectors perform we are good. Nowadays everyone is betting on LeBron or Brady to win the game without any teammates. That’s what NVDA and FAANG are. The DOW is not doing well and the indication is we are going to fly South soon. The big question is when we start heading North.
If you really can't help yourself and need to change something, you could consider hedging your market beta with a light layer of put options. Generally over time, rolling puts eats a few percent of your return and reduces vol a fair bit
I think the iceberg has flipped and all bad (ish) news will be “oh no, the fed is waiting to long” then when they cut it will be “gosh stuff must be really bad out there for them to cut. What do they see that we don’t. Sellllll”. The question is what sells from here. Small caps have severely underperformed and while I loath to say it I suspect they will get smashed again. Most of the names I follow are betting on a back year recovery. With the election drama I’m not so sure. I run a business that correlates with consumer discretionary pretty well and business went south in 2022 hard but has been otherwise pretty stable since (stabilized at the lower level) Inventories across the channels are really lean but seeing discounting (by manufacturers and b2b and b2c channels) in an attempt to just keep bills paid. That will lead to closures but we aren’t there yet. I agree with op that this is a hard call.
100% agreement. Yield curve inversion isn't a problem historically. The issue's when it stops inverting (because of rate cuts), because a healthy economy doesn't normally require cuts.
I feel you on the small caps. Most have only trended downwards, as the MAG 7 stand like Atlas holding the S&P aloft.
No. I fight the urge to invest my rainy day fund. I will if there is a big crash but it is sometimes hard
Zoom out.
The more you zoom out the more over valued equities feel right now. 3 companies with a 3 trillion dollar market cap feels absurd. Not to mention how overweight the SP500 feels in terms of tech exposure. He’s not wrong to feel this way, but history says to just let it ride. That being said, I’d rather miss out on a little growth than be decimated by a market downturn. Something something time in the market better than trying to time the market.
1. Buffet indicator 204% 2. 3mo-10 year, 2-10 year curves both inverted 3. Standard and poor shows value of S&P up 10% to a 3% gain in earnings. 4. Buffett himself reserving a cash position. 5. Shipping data recessionary already 6. Fed adjusting CPI to core CPI (no food or energy) to super core CPI (no real estate I believe) to demonstrate .2% yesterday. That’s called lying. 7. S and P index vs Truck tonnage index shows clear wedge formation. 8. Credit card delinquency skyrocketing. 9. Personal savings rate very low (2.4% last I looked). 10. Concentration Risk in the S@P with NVIDIA at 6.5%. 11. Lastly, no one I know has any money for anything. All feels pretty ominous. Timing the market seems impossible but being patient isn’t. Now doesn’t seem like a bad time to start accruing a cash position. My two cents.
Buffet holding a large cash position is partly due to the lack of good investment opportunities for Berkshire. at their scale, there are not many places he can invest in that would be worth his time or money
Yeah exactly and to add to that he isn't like dumping all his positions because the world is ending. He's selling what he thinks he needs to and maintaining high cash position for when a good investment comes along. (Not that it should matter since we aren't WB) So to the point of the original post here, yes he is also seeing the signs but he isn't considering a panic sell like OP is craving to do.
Yeah, I agree with that. I dunno, I’m pretty new to investing so I could be completely off. I’ve read a lot of the value books (Buffetology, Intelligent Investor, One up Wall Street. Little book of valuation, etc). It’s a lot to take in with the macroeconomic stuff. Just trying to have my head not explode.
I think some of your points are more relevant than others. high credit card / personal debt, low savings rates, and shipping data are good points to follow. but others might not be as accurate forecasters for a recession based on data that ive seen. but im also not a professional so who knows lol
Yeah, me either man, lol. I’m just trying to figure it all out as best I can.
He is worried about potential new tax law as well
I agree with your points and that is largely my thesis as well. It should be noted Berkshires cash position while the largest by absolute dollar amount is still within the average range as a percentage of total assets. Another point Id add is the fiscal stimulus coupled with back to back rate hikes amid 40 year high inflation due to the trend of deglobalization, energy transition, generative ai, geo volatility. Also the fact we had rates at zero not 5 years ago which given the predicted inflationary environment ahead, will result in companies being hit unexpectedly by higher interest payments as well as consumers. I've yet to personally do significant in-depth research but I've read a decent amount and more than most people Id say but take it with a grain of salt from anybody spending their time on the short form infinite scroll of reddit.
Only counter-point I’d add is that mature companies won’t be caught off guard by interest expense when/if their debt rerates. Most large companies build entire debt maturity models to quantify these impacts.
I agree with almost everything except 6.5% is hardly called concentration
Yeah, you are probably right. However, I think the magnificent 7 still account for 30% of the entire index. So I guess that’s a bit scary for me too.
I mean thats just how its going to be from now on - at least that's what I think. I don't see Apple Facebook Amazon Google truly shrinking in revenue or marketcap
But also don’t fight the fed. If stuff happens, money printer goes brrr or whatever
Isn’t that the problem though? If you keep interest rates high - it punishes small and mid cap businesses. If you decrease them ya gotta print money. High interest rates are great for foreign investment, not so great for the US. Low interest rates are terrible for foreign investment, but since they still need dollars - the Federal reserve has gotta print. It’s Triffin’s paradox essentially. The Fed has no great options right now. As the world reserve currency - what you do that is good for the world is shitty for your own country (and vice versa). At a debt to gdp of 122% I’m wondering how much more inflation the taxpayers can take with our government’s level of fiscal irresponsibility.
Love your comment. From Buffett letter to shareholders from 1984... I mean, it has been 40 years since... "we believe that present fiscal policy—featuring a huge deficit—is both extremely dangerous and difficult to reverse. (So far, most politicians in both parties have followed Charlie Brown’s advice: “No problem is so big that it can’t be run away from.”) Without a reversal, high rates of inflation may be delayed (perhaps for a long time), but will not be avoided. If high rates materialize, they bring with them the potential for a runaway upward spiral." Buffett, Warren. Berkshire Hathaway Letters to Shareholders, 2022 (p. 307). Explorist Productions. Kindle Edition.
Very ominous. I feel like there’s AI stocks powered by megacap capital expenditure, and there’s everything else. Hedging seems like a good idea.
Ya ya ya And we are still in bullish market and will be for years Every year there is some guy who is like oh recession is coming Alan Greenspan when they asked about US credit risk he said “We can always print money” It’s genius! There are so much ideas behind this concept that you can’t even imagine why US economy is on a top and will be for many years Keep fearing of recession
I think semis and tech are overheating. Seeing apple jump 12% on their new AI feature, while it is uncelar if this will push iphone sales, makes me very weary. I will trim my tech stocks and move more into utilities and european energy. DUe to Eu elections and macrons snap election, there is quite the sell at the moment. But I dont forsee any stark political reforms that would affect energy.
Any specific energy stocks you are watching right now. I just red through le pens election programme (22 points) and they are actually very much in favor of cheap energy and lessening taxes on it so you might be onto something
I am invested in SMA Solar, biggest EU solar inverter manufcaturer, both residential and utility scale. P/e of 7,5, no debt, increasing capacities. CEO and CFO both bought shares recently and it even has a dividend (dont think Enphase would declare one any time soon). Engie could be interesting, but they own some wind and Le Pen does not like Wind. However, I dont know how a Parliament can so easily reduce the income of existing wind farms.
What ticker symbol do you use to invest in it?
Thanks for the answer. Negative free cash flow and year on year decline in sales, ebitda, cash flow etc is a big turnoff though
They are building 2 fabs right now and declared a new dividend. Also, sales in solar were super strong last year and the bottom for inverter is in.
I’ve been reading up on uranium ETFs this week. Nuclear has a strong outlook.
Its not impossible, but look into Hinkley Point C or the finnish plant (I believe it was the most ctsly building in 2022) - they override their construction budget and schedule. The energy from Hinkley will be one of the most expensive mwh in Europe.
This trend will last years, relax and watch the show
How so with the Debt at $34 trillion and GDP to Debt ratio at 122%? With Gambles like NVDA all those multimillionaires who hopefully will cash out soon is pay off their homes and get ready to pay higher property taxes, utilities and survive or try gambling on an other NVDA. It’s like betting on a single quarterback to win the game without a team.
You don’t know how to measure value, sorry Nothing is wrong with debt, as long as you pay for it We can always print and devalue debt 🙂 Nvidia is a real trend, it’s not random company at dotcom And nobody cares about Debt 😁
Debt is good if there is cash flow. Debt without cash flow is just bad Debt - creditors show up to collect and posses resulting in one becoming trash and useless to the world we live in. That’s why we have credit scores and credit rating.
The thing with "anticipating" a downturn or timing the market is that you need to find the right moment to sell and the right one to buy in again. > If an investor were to simply miss the 10 best days in the market, they would have shed over 50% of their end portfolio value. The investor would finish with a portfolio of only $29,708, compared to $64,844 if they had just stayed put. https://www.visualcapitalist.com/chart-timing-the-market/ Since we are in r/valueinvesting you shouldn’t care about the day to day stock price if the value is priced right.
You don't need to, you can just sell an overvalued market like US and buy an undervalued international
That would only be relevant if you’re invested primarily in index funds and not the individual stocks. Also worth noting that US stocks historically always tends to have a higher value than international stocks.
Higher value for now. I say that- not to disparage the US of A, but future results aren’t indicative of historic data.
Of course but data is all we have to base our decisions off and I don’t see Americans abandoning US companies for international ones.
Assuming you’ve invested in a good business, no If it’s a unestablished that isn’t growing or even making profit. Yes, sell, sleep easy
I'm kind of getting scared. But all macro indicators point upward.
Which ones?
Election year. Hehe kinda /s
Been there, done that. Stay disciplined, friend.
I've always been 100% equities since 2009. I fight the urge pretty well but when a particular stock pops or there is a big run up (i.e. AAPL recently, META after earnings earlier this year) I may trim a small percentage just for mostly psychological reasons but I'm never more than 5% cash. So my bearish and bullish positions may be considered all bullish to many investors. I also pick up shares when there is a big drop in a company I like/own. Like META after its most recent earnings report and Starbucks when it dropped to $72. Even if these buy and sells are less than 1% of my portfolio it still satisfies the urge to be active. Because the big returns do come from holding long term. (If you buy good companies for long term investments) Also I don't try to predict when the whole market is over valued or some economic crisis is coming. But I can tell when the 10 or so stocks I like/own are all not nearly as cheap as they were previously. Oh another thing I do is almost all the companies I have ever invested in were actively buying back shares. So to help me just hold I know that if there is a crash then those cash rich profitable companies will just accelerate their buy back programs which in the long term will be very beneficial. It would be much more difficult to hold on to a growth stock during a crash while they are diluting shares at a faster rate because they don't generate enough cash yet.
Buyback idea is really interesting… I’m gonna look at the buyback yields of my stocks now lol
Also it may not necessarily be the previous buybacks that matter but more the approved amount left in a buyback program, the current net cash and the expected free cash flow.
Gotcha — yes that makes sense. Where do you end up looking up approved amount of buyback?
I'm not sure where a place is that you can look them up but they announce them usually during earnings calls and can check on the most recent financial statement. Each earnings statement would usually state how many shares they bought back in the last quarter, for how much money, and then how much money is left on their approved buyback plan. Companies have to approve an allotted amount of money for buy backs before a company can do it.
you may wanna take a look at met coal buyback king AMR. all fcf besides capex committed to return to shareholders via buybacks and debt free. risk is met coal prices in the short-term.
Thanks for the suggestion. All the numbers look great but they own coal mines. I don't think it will be dead in 5 years but what is their eventual pivot? I own MO and traditional cigarettes may decline but they are moving to smokeless or vapes, they will sell human vices somehow. I own chevron and Oil may decline(I don't think for a long time) but they are investing in alternative energies. What is AMR's back up plan outside of coal mines? The recent bankruptcy doesn't scare me. It could, but also sometimes that leads to consolidated industry which leads to bigger profits. I'll have to look more into their financials and industry because coal has never interested me for investments. I do like buybacks but it still has to be a company that is not declining and has prospects for potential future growth.
there is hopefully no pivot. terminal value zero and steady commitment to buybacks. check mohnish pabrai's recent wagons fund earnings call, he's got a good comment on that. the point is they should make a ton of fcf that they wont invest anywhere but return to shareholders via buybacks. they had dividents which they stopped last winter in favor of buybacks. look up mfwarder on twitter to get a better picture if you want, he's a very good analyst of the coal sector.
No pivot? So they buy back shares until they run out of coal? I don’t understand. Unless you think coal will still be profitable in 50 to 100 years?
metallurgical coal that is yes. the premise is it should be profitable long term for a variety of reasons (esg limiting new supply, growth=need for steel). if i got it right AMR has roughly about 30 years worth of metcoal reserves. Hopefully they buy back themselves out of float beforehand.
Yes.
Why is everyone talking about gold? Why is gold more valuable now than was one year ago?
Expectations of rate cuts and quite significant central bank purchases (especially by China)
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Speaking of gold, I just wrote a DD: https://www.reddit.com/r/stocks/comments/1ded2yo/equinox_gold_eqx/?
Change in price is not the same as a change in business. If you can't rest easy knowing you have a years long timeframe that outlives market moves, then what's the point? I get it but I don't, people who claim they follow a strategy, claim to have "made a decision" to buy something but then get tugged around by public sentiment, fear, market moves. These are not for us to be concerned with.
I don’t understand this trend. Just buy and hold good quality companies. Speculating about ‘should I sell now’ is just trying to read the future
Remember the reason why timing the market is hard, you have to be right about your exit AND your reentry
This is my first post here, so hope I won't be berated too bad. I didn't fight it and I sold all my equity ETFs. They were all up and I felt happy with my returns. So, while I take a breather, I have put my $ in short term CDs and treasuries. Like One poster said, don't leave it in cash. One key element is, I am very close to retirement. I think it really comes down to what you can deal with. If you are starting to freak, derisk. Don't get caught up in the FOMO. Good luck.
I recently (yesterday). :-). got into DES2, a reverse ETF on the DAX. Just as an insurance. ( for 4% of my PF) 10% of my portfolio is Gold and silver ETF's, so there is no problem in case of a recession. 35% of my portfolio is US-T paper and ETF's like XUHY, VECA, VUCF, and SXRC. They all go up in case of a recession. The other 50% equities, I recently put the stoploss really tight, so when there is a drop, I will get stopped out, and stay in cash to sit out the recession.
No wonder only 10 percent can bet the market with this kind of nonsense portfolios lol
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You can't really time these things. The most you can do is increase your cash position somewhat, but I wouldn't overdo it.
That's where Im at. My tech exposure in 2022 made me a bit bearish and I'd like to get a better entry point into VTI, VOO, and possibly SCHD. So, aside from finishing off the target sizes.
Something about being greedy when others are fearful etc etc
I think everyone is greedy right now, so
It's the most greedy I've seen people in a long time
100%
Fear indexes say otherwise
Too many may have bought into the "Be greedy when others are fearful..." so for perhaps the first time, that index may be, for once, telling us to stay put instead of being greedy?
Lots of cash on the sidelines.
If you like the companies/ investments don’t sell. The issue isn’t timing the top it’s also timing when to buy back in again. That’s a very active process.
People were saying this when S&P hit 5000. And in a blink it’s 5400. Maybe it’ll correct, but maybe it’ll launch up to 6500 before correcting back to 5000 and then you’ll have fomo before not knowing when to get back in etc.etc.
For many years, people were telling me AAPL was doomed, there were multiple periods where sp dropped significantly. I did sell 1/3 of my position but have kept the rest since 2006. It's now a 20 bagger not including dividends.
I will dca as long as I have the means to, but I'll adjust the amount according to my macro sentiment
Why is the s&p500 index on fear? The numbers are great
Either hedge or take some profits. Hedging is done based on cost to insure % of total portfolio from downside move or 20-30% or more. Non-action is still action.
You could rebalance rather than just selling to cash as a way to derisk without giving up compounding potential. Do you have target allocations or are you in a one fund kind of place?
If you’re investing not trading then there is little reason to sell, remember you have to factor in taxes on your capital gains to lowering the price you’d have to buy back in at for this to be a profitable decision. It is very natural and smart of you to be wary after several new ATHs. If you want to limit your downside risk maybe consider writing OTM Calls or Bear Credit Spreads. This will be less of drain on your portfolio than puts. You could also review your equity and fixed income allocations. If you are 100% in equities now is a great time to set up a bond ladder. At these yields you won’t feel dumb lowering your equity risk.
I have decided to adjust my portfolio by taking 15-20% of my profitable positions to hold some cash and wait for a pullback. As well as sell some dead positions that have moved sideways and begin a position in QQQ and VOO. I know I can't time the market and did this right before the cpi report/ fed meeting this week. It could have gone either way, ended up I didn't get to see the same level of profit as I would have if I had not touched my portfolio but trying to move forward in a more balanced way. Not thinking I can time the market....
Selling because what you’re holding is overvalued is prudent. Selling because you think you’ll be able to get a better price in the future is dangerous.
Did WB sell everything prior to the 2008 crisis? Or at any other point in the past before a market crash when it was clear there was a bubble? No, no he didn't. Look how he's doing.
If you can afford it then it might not be a great time to sell. Missing out on 25% growth is worse than incurring a 10% loss. Those are my assumptions right now. But at the same time I currently *need* to sell (personal reasons) part of my portfolio. But I'd much rather hold it all.
time in market > time out. don’t be paper hands
If you’re investing and you don’t have money to buy more when things get cheap than you should rethink what it is that you’re investing in. Chances are you’re overexposed and can’t afford a loss. If so, derisk some… give yourself some space to think and take a breather.
According to Monnish Pabrai, one should sell only when the price is outrageous. One can define outrageous on their own. It is 3x intrinsic price for me so I wouldn't sell GOOG at 180 even though it is 30% overpriced. However, If I had Nvidia, I would sell it at 1350 as I consider 450 to be the intrinsic price.
Keep reminding myself of books that I’ve read that gave multiple examples of people trying to time the market and it not working out for almost all of them. I’ve got a 20+ time horizon so I can make it through. Still hard to watch things dump though. I might end up selling a portion like DCA my way out if there is a long dip. Then hopefully DCA back in 😭😆😬
You can sell calls against your positions if they are big enough. It allows you to step off the elevator if it suddenly shoots up and lets you cash out by taking some premium profit now without selling your core positions. Don’t buy naked puts. And if you don’t understand any of what I just said then definitely stay away from options
I like this idea for my most important core positions. Thanks. (And accidentally sold a naked put once - terrifying two minutes.)
In the book The Psychology of Money, Morgan Housel famously quotes Napoleon Bonaparte on what a military genious is: "The man who can do the average thing when everyone else around him is losing his mind." It's the same in investing. I think everyone is feeling like you are. It's been "too good" for a long time and an imminent correction feels to us like the most reasonable outcome. Here you have two options. 1: Listen to people losing their minds. or, 2: Do average thing. Another point is that if it was possible to predict corrections, the correction would have already happened. Systematic risk, i.e the market, is random and is determined by factors out of our control, meaning you cannot predict the way things are going anyway. Stay the course, learn to ignore the crowd, and buy the dip.
The original post is emotionally driven decision making and so are most of the responses. The non emotional response would likely be found in portfolio management theory and rebalancing the portfolio to take advantage of equity gains. You must consider your tax implications as well. One way to manage this in equities is to not automatically reinvest dividends so that they can be used in rebalancing and for the value investor for preparing to buy companies in a down turn or when they are under valued. Another way to rebalance is to stop automatically investing in equities when the market is up and instead invest in bonds or a money market fund then use that money to buy equities when the market goes down. The reference to buying options seems more like an insurance play on puts to offset loses. But just like insurance it often ends up worth nothing. Good Luck in managing your emotional investing.
> be on r/valueinvesting >market it down for like 2 days > "guys should I sell?!?!! Should I derisk?!?!?!" Lmao
Most value and small cap names have been hit hard from the moment of the cpi gap up open. So much so that it has an old timer like me taking notice. When good news is good switches to good news is bad things get weird. That is what’s happening now. For now on. Good news about the economy is bad for value stocks (rates higher) and bad news is bad (fed will wait to long to cut). Watch rates come in (will be seen as a warning sign cuz bonds smart) and when they do cut it will be mass selling not happy buy time for value and small cap stocks. I’ve seen this movie 2-3 times and it will be the same playbook this time. When the % of Russell 2000 stocks above their 200 day ma hit 15-20% then deploy you cash. Currently at 45% (last Oct was 20% for reference)
If the meme stock people at r/Wallstreetbets can resist the urge to sell their bullshit positions, why can’t you?
Yes, selling all my Value holdings that are less than 2k and putting the profits in an ETF. Sometimes it works like Fortinet, sometimes it doesn't like Qualcomm (went up 20% the week after I sold). Only keeping high conviction plays like Mag 7 and a few pharma/health companies.
Most of the stocks I buy cycle, and not increase in value over time. There is no way I could buy and hold the steady gainers like HD, MSFT, or WMT
Personally I have an extra amount on margin that helps my itch of timing the market... I leverage after red weeks/months, and I take profit when back to ATH. No its not optimal, but it does give me a bit of extra gravy, which is nice
I do the same I just set limits on how much I borrow on margin . I recently felt like the market seems inflated so I sold off the majority of shares I purchased on margin for some nice profit and will wait till I see a dip in prices and start using margin again. If the dip doesn’t occur then I still have been making money so I’m not worried just patiently waiting. And only risking what I can afford to lose.
Don’t do that! Sell some covered calls if you want to hedge.
Sell and pay taxes up the ass? Fuck no lol. If you want to buy puts, that would be a hedge but I don’t really feel the need to.
Tax implications, accurately timing a sell off and then accurately buying the dip is just too tough. I've found the best solution is to always invest in the best quality. That way I'm excited when the drawdown happens.
Don’t fight the urge go with your gut… especially when there are alternatives that can pay you like treasuries and MM
I’m not fighting it. Sold half my appl this week.
I both trade and invest. You can do both, and if you're worried about the market coming down, you can just beta neutralize with derivatives (futures, options, etc.).
Buying puts is extremely risky and a short term strategy. It requires timing. Unless you know something about the timing of the next crash/correction that the rest of us don’t, I’d be wary of that strategy. Selling covered calls on part of your portfolio is perhaps a better hedge. Regardless of the direction of the market at large, there are equities out there that are good values. That’s always true. Personally, I think it’s likely that interest rates won’t go much higher from here, and are more likely than not to fall. That bodes well for bonds (I don‘t own any - still not a fan) and any dividend stocks with reasonable growth/sustainability to their dividend. Those investments have done extremely poorly as interest rates have risen, and should be more resilient if and when rates come down. You could rotate out of tech/growth and into either bonds or the sorts of stocks that do well in a recession. I like the idea of having a mix of those.
How old are you and how old would you like to be when you retire? Market swings matter more the closer you are to retirement.
Did sell and derisk most positions and indexes. Still holding long term dividend payers. Best case scenario we see stagflation, worse case scenarios we see a crash of 30-50%. My expectation is that spy is under 400 by year end and continues to fall, albeit with a long (8-12months) corrective bounce. It’s brewing and while no one can predict the timeline you’d be foolish to think stocks only go up. It’s ATH’s, you should be taking profit.
Never derisk!
Better to DCA with your Roth or 401k (if you are capable of doing that)
Yup, I went almost all cash a year ago and loaded up on TLT in the meantime, for those juicy 4.5% dividends.
4.5% dividend at the cost of a 30-50% market run
Actually I bought after the 50% decline.
My hands are diamond my friend.
Bad move.
You could hedge with puts. Or sell covered calls.
I'm much more aggressive in the markets. Not value investing type stuff for the bulk of my portfolio. The low vol stuff I'm keeping as I continue to build those positions. The high vol stuff though is most gone. The options are just about entirely off my books. Market concentration of gains is too high. I feel like we are running up a ramp that ends in a cliff for most of the bugs gains this year. I'm not going to say we will drop dramatically next week or even next month, but I think we will before next Summer and the gains between now and then are likely to be limited. I would not be surprised if the gains since either or possibly back to October are wiped out when the market decides to drop. For value stocks it may actually be ok to good, but the high flying stuff is going to get hammered.
Too much liquidity, financial conditions are still loose ... I've been thinking markets would pull back over the last two years, but the market can be irrational longer than I can remain liquid ... I'm not here to make sense of it, but here to make money, so I continue to stay long but diversified, and keep a portion of powder try and trim on gains here and there.
Been fighting that for 2 years now. "Recession right around the corner."
Nope. Gotta know when to cut your losses. When I get upset I’m losing money in the market I switch to VGLT. It’s boring, rarely moves, and kicks a monthly dividend
Sure, just don't hold cash. There's great rates on bonds right now.
Now is a real good time to get into value stocks especially in staples as soon as interest start going down interest on MM accounts will drop and people will flock to stable yield defensive stocks and the money flowing in will raise share prices. Myself I’m not touching anything except for buying more monthly.
Nope! I’m risk on all of the time.
There is a 50/50 chance for the stock market to drop because you can’t predict the future. I’m not selling anything. Maybe build up my cash but not selling.
I am trimming gains to have dry powder for upcoming value stocks after a dip
100% We are at about the rate of compounded inflation from 2021 high of the SPY and the buy back window just closed. Not a lot of room to run. Pull back time
No urge to sell, I have the urge to buy but doesn't feel like it's a completely smart idea so I'm only buying a small amount per paycheck and then saving more into a high yield savings account.
The closest I’m ever going to get to a short position when I’m feeling bearish is directing more money into my HYSA to have dry powder to absolutely fucking unload and go on a buying spree during the next major event.
Bonds. Thats the traditional hedge and unlike puts, they collect time value instead of bleeding it.
Summer lull it is.
Honestly after many years of trying, you can’t meaningfully move the needle by trying to time the market.
I think there are values to what OP is saying. Sometimes it is not about maximizing profit, but minimizing loss. To sell off some after a long uptrend is not bad. Never leave the market fully, but to protect some profit and have money available if and when the market goes down is not a bad idea. In worst case you will miss out on some gains but selling 20% and see your securities increase in value again is really not a bad thing.
Good, if that trend really start i am finally going to short some names..
I’ve been trimming into these rally’s to ATH
https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions If you have MATLAB: ``` expansionsDuration = [29,30,43,70]; expansionsYears = [1899,1945,1982,2009]; figure; plot(expansionsYears,expansionsDuration,'LineWidth',2); title("Economic Expansion Durations Over Time"); xlabel("Year"); ylabel("Months of Expansion"); ```
Buying puts on VOO when you own VOO will overall dampen your returns in exchange for downside protection – it is like paying an insurance premium to lock in a minimum price. But if you don’t need the money anytime soon, do you really need to pay for the downside hedge? The puts really only protect you if there is a sudden major downturn and you need the cash badly in the short term, otherwise you can just wait it out and sell the VOO later when prices improve. On the other hand, if VOO continues to appreciate your puts may get wiped out entirely, and there is a time limit (option expiry) after which the losses become irreversible. I think something you are also not considering – it’s really hard to decide when to close out your options positions! Let’s say you buy a 1-year VOO put this month, VOO goes down 5% next month. Do you close out the position next month? What if VOO goes down another 5% the following month? What if it goes up 5%? Every month you wait is more theta decay you lose on the value of the put option, and the decay accelerates as you get closer to expiry. Time your trades badly and you could be leaving returns on the table or incurring losses you didn’t need to incur. Close the position too early and you lose the benefit of the downside protection you wanted in the first place. Close the position too late and much of the option value would have decayed away if there was no major downturn. And if VOO appreciates even after a dip in price, your puts would lose money. The only way you maximize returns is if VOO has a sharp downturn, and you close the position when prices bottom out. And if you want to minimize theta decay, you’d need to roll over your puts by selling them and re-buying puts that expire later, incurring transaction fees and paying for spreads. The costs and risks with this strategy are abundant. In short – don’t gamble. Options are not value investments, and are an expensive option for hedging risk. You mention you want to do these trades in your mad money account – so even you recognize that these trades would be a gamble. Most bets against the market lose in the long term. Hedging with options just multiplies the risk with leverage, and forces you to accept a time limit for your predictions to come true. Unless you have a schedule to keep – like you need protection for X months or years before you retire or buy a house or win the lottery – options will create a lot more risky and time-sensitive investing dilemmas than you currently have. Probably the best strategy if you are skeptical about equities is to just allocate more of your portfolio to inversely correlated assets, such as bonds. You still give up returns on VOO, but you do not need to worry about your investment getting wiped out or timing your exit or rolling over your position to avoid theta decay. And if the economy tanks like you fear, inflation and rates should go down, which should make your bonds appreciate.
Eli15....rate cut = equity market up. Is this incorrect?
I did that in 2019. I lost.
You got a huge sell off in early 2020.
I was investing a lot in tech with the nasdaq and MSCI world information technologies. Now I am only on the S&P500 to diversify. Any input on this?
Msft, nvda, amzn, aapl, goog and meta make up 30% of the sp500
You don’t *know* a big correction is coming, but let’s pretend you do. When do you rebuy? Where to you allocate in the interim? How much do you reduce your positions? You could have a crystal ball and you still couldn’t execute your adjustment perfectly. If you want to derisk, just slow your buying or build into a different part of your portfolio. Or just stick to the plan you’ve designed for your age and income.
The fear in the market might be a good sign. It could be keeping price levels in check. When u account for inflation, the crash has already happened in value. De risk if u want. But u risk missing gains/income. Perhaps consider bonds for safety and growth. Selling short is just dumb.
If I could time it perfectly, sure, I'd sell everything before a big dip/crash. But I can't. So I'll just hold. My money will be in the market for another 30+ years anyway.
Semiconductors are in a bubble. The only tech i’m interested in is Apple. If I was holding semiconductor stocks or a focused ETF I would sell. I think the growth expectations priced into that sector are untethered from reality. “Sell” is a broad term. Nothing about this makes me want to sell my homebuilding or bank stocks.
Have you seen any equal weight charts? The vast majority of stocks have been flat all year, and small caps havent seen new highs since 2021. Half of the gains in the s&p this year have come from 4 companies. Out of 500. There is less room for growth in the already overvalued megacap stocks but the broader market has plenty of room to grow once the fed eases back on interest rates. Less exposure to megacap is not a terrible idea. Theres a lot of high expectations that may not come to fruition. Also, year 5 on the 10 year seasonal chart is always a huge year for equities. Imagine what the combination of interest rate cuts, wars ending in ukraine and palestine, and a stable US election could mean for the stock market in 2025?
Buy puts to lower beta. Don't sell and feed the bears.
You can always try to find a cost effective hedge
I do this, would I be embarrassed passing this stock down my grandkids.
Sounds like someone doesn't have any GME
Dca out 20% tops. Set a point you rebuy higher if wrong on your lower target. Keeps emotion out of it.
I doubt that equities are about to cave, but less drastically I think we could see a rotation to value in the near future. This is the reason that you need some diversification in your portfolio - a balance between growth and value. Timing the market is damn near impossible.
In the same boat. If you feel that way then divest. Im 80% out and put the rest in high yeild money market. Might wait till after the election to go back in. No reason not to take a break if that makes you feel more at ease. Things are crazy and mental health is important too.
I just sold everything and dropped it into VOO and now I just chill
The democratic party will fly helicopters around the country throwing gold coins to the peasants below before they will allow the stock market crash during this election year. You have till December at the least.
The Shiller cape is 36, which means the S&P500 is expected to have a very poor 10 year return. Look to other sectors for value.
I try to de-risk with a sizable portion (about 15%) in 3 gold trusts/ETFs. Its done very well for me over the past 5 years.