Stock Market what do you think
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesStock Market what do you think
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Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
6yI'm still relatively new at RE...so can't give advice there... but I spend a lot of time in the stock market (many hours per day writing about stocks/options/gold etc.)
Right now is NOT a good buying time for stocks for small-time investors. This is a good trading environment because of the high volatility. (options especially)
Currently, we just hit the highest volatility EVER RECORDED...even higher than in 2008. Volatility records the expected movement of stocks. The higher it is, the wider the range. Right now, we're still above 60 on the volatility meter. And today, we saw something major...
Volatility went down...and stocks ended 3% down. That hasn't happened in over 10 years. Usually, volatility has gone down when stocks went up (because we were in a bullish market).
Right now, you're "catching a falling knife" as they say.
Everyone right now says "oh, stocks are cheap, buy now." And some are cheap.
Here's the issue...take Delta Airlines. They're in the hole...down over 70% in over a month. Sounds like a good buy? Well, airlines are highly leveraged industries...even if they do get bailed out...they could still go through bankruptcy (again). If you look at the last time they went bankrupt...their stock went from $20 down to $5 (a 75% drop).
Well...they recovered...but they never hit that $20 price point again until 2013. (4 years later from the drop)
And that came with some heavy stock buybacks which propped their stock price up. (Congress won't let that happen again).
As RE investors, we want a return on our money every year. Well, if history happens again...with some of these industries that need recovery...you could be sitting on dead money for a few years waiting for a return.
***
During a bear market, there's an initial 'shock' drop. Then a rapid advancement back.
Then...there's another drop that goes even deeper. It happened in 2018 (a correction), 2008, 2000...
We are still in the shock drop. We'll see a 10%+ rebound soon. Another drop will follow that's deeper. It's at that last drop you want to buy the companies that will bounce back fast.
Yes, buy the companies in travel and entertainment (like Las Vegas), of course bank stocks, at that time too...invest in the ones that have the solid foundation to continue again. Last time airlines crashed, there was a lot of consolidation. Same with banks.
Watch and wait for that to play out.
We all want to 'get in at the bottom'...the stock market isn't going to pop 100% in a day.
You'll get a sense when the bottom is in once the shock is gone...and you start seeing positive economic signs. You'd rather be 3 months late from the bottom than 12 months early.
Also, you'll want to wait until the VIX is below 35 because then you know the markets have calmed. (You can go to CNBC.com and it's on the very top to see it)
134 Replies
Originally posted by @Joe Splitrock:
Originally posted by @Matt R.:
Originally posted by @Joe Splitrock:
Originally posted by @Joseph Weisenbloom:
@Matt R. Agreed individual stocks are too risky for my liking. I like to make investments based on the movement of the market as a whole. I’ve been nibbling on vanguard index funds. This provides less risk but also allows me to take advantage of the 30% market drop we have just witnessed.
Normally this is good advice to buy whole market index, but this situation is completely different. Whole market includes retail, restaurant, travel and entertainment. There is not enough bail out money to save these companies. When you buy everything, you are buying winners and LOSERS. In this case big losers, as in bankruptcy. It would be better to focus on segment index that track a subset of the whole market like technology or healthcare.
I guess we will have to disagree. 500 companies would be more diversified than any single sector and in theory less risky. Yes some losers too that is why I mentioned equally weighted, so spread over 500 companies at 1/500th per. This is my unprofessional opinion. Good luck!
About 30% of my holdings were in VTI and the rest was split among individual stocks. Although my entire portfolio took a beating, VTI is down significantly more. All my other assets were up significantly from purchase price. I sold out my portfolio and got October 2019 value. If I had 100% in VTI, I would have sold it all at probably 2016 value. Also keep in mind that I said "whole market" in my response and you are talking about S&P 500. That is not a whole market fund, it is targeted at the S&P 500. There is a variety of index funds that are targeted in different areas. I am just saying targeted funds will perform better through this than whole market. I could be wrong, but I just don't see how so many companies can go without income for 6 months without long term repercussions. There is not enough bail out money to make them whole. This is totally different than other recessions, when companies stayed operating, but just at lower output. New game, new rules. Good luck.
Right on. I agree whole market fund could have too many duds. I was not considering SP500 targeted but I guess compared to Russell5000 it is. Good luck!
- Real Estate Broker · Santa Ana CA [South Coast Metro] · Member since 2016 · 459 posts · 202 votes6y
Stocks value are a function of a companies revenues. Its hard to determine future revenue, thus hard to determine the value of the stock.
Last 8 years is propped up by cheap debt, not real profits. Companies have bought most stocks in historic "buy backs" not real value.
We have several never seen before metrics at play here. 1. Corona Virus 2. Oil and Petro Dollar 3. Cheap Interest and debt saturation in ALL asset classes.
There is no precedent to what we are going through, so a low stock price and dividends seem attactive and maybe overvalued but based on what. $6Trillion in bailouts, heading to 40% unemployment etc.
I want to hit some strike prices and maybe some options but have not been able to see the forest through the trees. The common thread I am reading is " I am not a stock guy etc", those are the ones that are gambling not investing. It might work out and it might not. Time will tell
This is more than likely a stimulus fueled short term bottom. But just like the last 2 recessions, there should be a further dip later on when actual q1 q2 numbers come out along with the increase in unemployment.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes6y
I had been going long on dips in broad market indexes. Then I wished I hadn't caught those falling knives just yet.
Yesterday and today (Dow up 3200ish combined) gave me a chance to back peddle a bit just now. I don't think we hit the bottom yet broadly speaking. Always opportunities in certain companies and sectors though.
- Investor · Austin, TX · Member since 2013 · 443 posts · 174 votes6y
I agree with everyones sentiments we have not seen the bottom yet. Last 2 days are just euphoria from stimulus package. We have many more weeks of bad news before things turn around. The bottom is still yet to come. Hold tight and dollar cost average on the way down.
- Real Estate Agent · San Jose, CA · Member since 2017 · 57 posts · 35 votes6y
Buy individual stocks, solid companies.... no one will know exactly when the bottom is... many great companies are very low now. Can buy low now, and more later if goes even lower. Excellent opportunities.
Originally posted by @Steve Vaughan:
I had been going long on dips in broad market indexes. Then I wished I hadn't caught those falling knives just yet.
Yesterday and today (Dow up 3200ish combined) gave me a chance to back peddle a bit just now. I don't think we hit the bottom yet broadly speaking. Always opportunities in certain companies and sectors though.
Yeah this is falling knife city. You still get reactionary big bounces after big drops but it is usually marked by lower highs and lower lows when you pan out. 52 week lows sound great, unless you see 3-10 years lows after that. I was down 14% today on my short, and could be up 100% by Friday. I could also be down 50% by Friday. It is hard to say with trillions coming in but in this environment I have more confidence being on top of the knife vs being the guy trying to catch it. Not advice! Good luck!
- Contractor · Lexington SC · Member since 2019 · 36 posts · 46 votes6y
Warren Buffet says to buy great companies when they are on sale.
That is a loaded statement because what determines a great company and at what price is it on sale?
Those questions are on the investor to figure out. In my opinion I think there are certainly some great companies on sale.
- Real Estate Agent · Houston, TX · Member since 2017 · 292 posts · 233 votes6y
I'm supperrrr tempted to get some CCL - Carnival cruise. Cheap cheap cheap @ $15 / share. and they will come back... eventually. just have to hold for 1 or 2 years to be secure.
- Rental Property Investor · Houston, TX · Member since 2014 · 139 posts · 140 votes6y
@Joe Cassandra well said!
- Rental Property Investor · Houston, TX · Member since 2014 · 139 posts · 140 votes6y
@Keith C. I hope they don't. It's my first time in stocks and bought some BA shares...
Also NCLH and CLC because i love cruising with them.
- Lender · Miami, FL · Member since 2020 · 2 posts · 0 votes6y
@Jay Hinrichs
I bought some cruise companies 1 week ago already have 80% return
- Tyler, TX · Member since 2020 · 25 posts · 7 votes6y
Went with Vegas and airlines and more dividends at a better long term price
- Chester, VA · Member since 2018 · 30 posts · 5 votes6y
Stock market is not great. who knows how it will behave with this new 2 trillion dollar incentive plan. The country cannot continue to keep borrowing money, and we just don't have it in the budget. Our deficit and debt are staggeringly massive, and there will come a time when those debts will be due. Is now that time?Who knows? Will the US be permanently changed by COVID-19, I think so.
- Investor · Tx, GA · Member since 2019 · 313 posts · 337 votes6y
Originally posted by @John Collins:
BA - 100 , open
EOG - 34, open
HD - 160 , open
PSX - 50 , open , long term hold but very very solid company
DIS - 91 , long term , little nervous about theme parks remaining solvent
BP- 17 , open
TSLA-400 , open
Wed was selling day part 1..BA 100 sold 169
EOG 34, sold 40 (will get crushed tmrw)
HD 160, sell 184
BP 17 , sell 24
Open positions:TSLA 400
SQQ 22
SPXU 25
TVIX 360 (got in again)Long term Open, forget about them
Dis 91
PSX 50Today is the big day with unemployment numbers, but everyone knows what is coming so there may not be the panic many are predicting.
They'll be in the millions, 4-7 million, and ofc would be higher if everyone unemployed actually filed them.You also have affluent people like dentists filing for them which makes the situation unique
Not sure they fixed loophole in stimulus where low wage workers would make more by not going to work, will crush small businesses already struggling with marginsthe good news is in light of a recession, talk has begun of many manufacturing sectors not only being moved out of china, but back to the US. So jobs aplenty, but will the ultra wealthy ever agree to sharing a bigger piece of the pie? will the poor and lower middle make better decisions with their money and lifestyle choices? Population is way too high for our resource and environmental load, calamity frequency is only increasing.
- Real Estate Agent · Houston, TX · Member since 2017 · 292 posts · 233 votes6y
@John Collins " will the poor and lower middle make better decisions with their money and lifestyle choices? "
A great question. It's something that's obvious not taught in school, and not enough people understand what the power of money is. Good debt vs. Bad debt? Probably 75% of graduating High schoolers have no clue what that means.
Paycheck to paycheck living has to be unbelievable stressful. Keeping up with the Jones is just not worth it in the longterm
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes6y
Originally posted by @Elias Alvarez:
@Jay Hinrichs
I bought some cruise companies 1 week ago already have 80% return
I would sell and lock in that gain. Cruise companies have a long recovery and money comes with strings attached. There is much better industries to sit in long term. Those ships could be parked for months and it could take years for the industry to recover from the bad press.
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes6y
Originally posted by @Joe Splitrock:
Originally posted by @Elias Alvarez:
@Jay Hinrichs
I bought some cruise companies 1 week ago already have 80% return
I would sell and lock in that gain. Cruise companies have a long recovery and money comes with strings attached. There is much better industries to sit in long term. Those ships could be parked for months and it could take years for the industry to recover from the bad press.
Joe as I stated when this thread started.. and having no real knowledge of the stock market.. I simply bought the companies I personally use and think will be around.. We love to cruise but your right after watching this.. Not sure when I will get back on another one.. We have been planning for a semi round the world cruise for a few years now.. I do think though Vegas will make a quicker recovery than some might think.. Only reason I say that is after the mass shootings there was a big sense of community here.. Also the Raiders stadium will be done and pro football will be here in Fall.. And there will be pent up demand in the convention space .. ??
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes6y
Originally posted by @Jay Hinrichs:
Originally posted by @Joe Splitrock:
Originally posted by @Elias Alvarez:
@Jay Hinrichs
I bought some cruise companies 1 week ago already have 80% return
I would sell and lock in that gain. Cruise companies have a long recovery and money comes with strings attached. There is much better industries to sit in long term. Those ships could be parked for months and it could take years for the industry to recover from the bad press.
Joe as I stated when this thread started.. and having no real knowledge of the stock market.. I simply bought the companies I personally use and think will be around.. We love to cruise but your right after watching this.. Not sure when I will get back on another one.. We have been planning for a semi round the world cruise for a few years now.. I do think though Vegas will make a quicker recovery than some might think.. Only reason I say that is after the mass shootings there was a big sense of community here.. Also the Raiders stadium will be done and pro football will be here in Fall.. And there will be pent up demand in the convention space .. ??
When they shut Vegas down we saw a huge in influx of tourism to Deadwood, SD. It is a city in the western part of our state where they allow gambling. Then people complained and they shut it down yesterday. I guess people didn't like all the extra flights coming in. My point is the appetite for gambling and entertainment will be there after this. I agree Vegas will rebound and probably even surge due to built up demand. The wild card is how long things are shut down. Two months is no big deal, twelve months could be catastrophic. It will probably be somewhere in the middle.
The question with the recent rebound - is now the time to take some profit and wait for the next dip? The virus is going to peak in NYC over the next 2-3 weeks. I feel like there is going to be a sell off when they start recording 500 deaths a day in NYC. It seems that will create some nationwide panic.
- Real Estate Investor · Des Moines, IA · Member since 2016 · 922 posts · 533 votes6y
I've been looking into the airline industry a lot recently as we put some money into Delta Airlines (DAL). It is one of the airlines that's in a 'stronger' position to weather this, but the strongest one (balance sheet, cash on hand, and most importantly, a lack of long term debt liabilities, leases etc. allows to ramp down their cost structure pretty fluidly) - is Alaska Airlines. Of course, there's some exposure there potentially with having their main hub in Seattle. But, the terms of the bailout as it sits should work fine to allow for the strong airlines to ride through this.
Interestingly, Berkshire has stakes in lots of airlines and I don't suspect anyone could have seen this coming, but they have a stake in American Airlines, and I'd suspect long term that AA is in trouble - they have tons of debt and a lot of that debt they cannot ramp down in terms of their cost structure, so they are going to hemorrhaging cash.
We just put a little money into Delta in the low 20s and I wish we had put more. I'm still buying, though.
I'm also looking heavily at the electrical utility sector because a lot of those companies are at a 30%+ discount now, and they pay healthy dividends. I don't see the revenue impact being anywhere close to the price discount now, and utilities have this weird public bargain in which they have little/no risk, because they go in front of a public utility commission every so often, and if they are in a pickle with their revenue vs their costs, the utility commission evaluates their rate case, and just increases rates to cover their costs. Kind of a little/no downside risk situation there... Unless of course there's chaos and substations are getting attacked, etc.
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes6y
Originally posted by @Jim Goebel:
I've been looking into the airline industry a lot recently as we put some money into Delta Airlines (DAL). It is one of the airlines that's in a 'stronger' position to weather this, but the strongest one (balance sheet, cash on hand, and most importantly, a lack of long term debt liabilities, leases etc. allows to ramp down their cost structure pretty fluidly) - is Alaska Airlines. Of course, there's some exposure there potentially with having their main hub in Seattle. But, the terms of the bailout as it sits should work fine to allow for the strong airlines to ride through this.
Interestingly, Berkshire has stakes in lots of airlines and I don't suspect anyone could have seen this coming, but they have a stake in American Airlines, and I'd suspect long term that AA is in trouble - they have tons of debt and a lot of that debt they cannot ramp down in terms of their cost structure, so they are going to hemorrhaging cash.
We just put a little money into Delta in the low 20s and I wish we had put more. I'm still buying, though.
I'm also looking heavily at the electrical utility sector because a lot of those companies are at a 30%+ discount now, and they pay healthy dividends. I don't see the revenue impact being anywhere close to the price discount now, and utilities have this weird public bargain in which they have little/no risk, because they go in front of a public utility commission every so often, and if they are in a pickle with their revenue vs their costs, the utility commission evaluates their rate case, and just increases rates to cover their costs. Kind of a little/no downside risk situation there... Unless of course there's chaos and substations are getting attacked, etc.
Or like CA with MASSIVE wild fires that destroyed 20k plus homes and entire town but agree with you.. i need to check into garbage it works the same way.
- Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes6y
To all you more experience stock people....wheres a good place to start? I don't have a lot of cash to spare but do want to take advantage of the dip as much as I can.
- Investor · Anchorage, AK · Member since 2013 · 229 posts · 133 votes6y
@Jim Goebel I haven't looked at total debt to book or anything on airlines, I just know to stay away. I did want to say that utilities are considered "defensive" however their real risk is the type of debt they carry currently. Many people are concerned about the explosion of corporate debt we've seen over the last decade - There's a lot of reading out there on the subject. Be careful, happy buying.
- Real Estate Investor · Des Moines, IA · Member since 2016 · 922 posts · 533 votes6y
American is up to their nose in debt. They already have negative shareholders equity, and only had ~400mil cash on hand at end of 2019. Lots of long term liabilities there; I'm unsure if American even makes it out of this alive. Who knows.
American has 21.4bil of long term debt as of end of 2019, compared to literally negative equity. 400mil cash
Delta has 8.9bil of long term debt as of end of 2019, compared to 15.3bil shareholders equity, ~2.7bil cash
Alaska has 1.26bil of long term debt as of end of 2019, compared to 4.3bil shareholders equity, ~1.5bil cash
I'd think a lot of those planes in inventory (the bulk of the long term debt) will need to get written down as they're a lot less valuable and will depreciate faster when they are sitting in a hanger not making money. So, the equity numbers above are too high given the state of things. Timing of something like 88 new plane purchases for Delta was unfortunate as it was last year and increased their debt burden substantially.
The airlines that can adjust their cost structure rapidly and don't have that long term debt are by far in the best position. I'm unsure of impact of grant for equity which is the bulk of the form of bailout money, it seems. I'd think the US govt taking an equity position would prop stock price substantially even if just by adjusting trading volume down. I'm new to this stuff, though.
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