S&P 500 triggers 15-minute trading halt for the second time this week | Hacker News Reader

S&P 500 triggers 15-minute trading halt for the second time this week

bloomberg.com

340 pointsrococode522 comments

I see only doom & gloom comments here. Did people miss this positive note:

"On Thursday, China said it had just 15 new coronavirus cases and 11 deaths over the previous day." See: https://www.nytimes.com/2020/03/12/world/coronavirus-news.ht...

China has controlled the problem. By taking drastic measures the rest of the world will too. In a couple of months the virus will be under control. The stock market will not recover as quickly as it crashed, but it will recover! How do I know that? Because crashes have happened in the past, and the world didn't collapse and disappear. A single company can collapse and disappear but not the entire stock market.

The only question is, how long will it take to recover. I think it will take 2 to 3 years. People who sold during the financial crisis of 2008 did not get to participate in the recovery that followed. There isn't an email or a notification that goes out when the market starts to recover. Attempting to time the market is futile. Staying out of the market will only mean that you will miss out on the largest portion of the recovery.

And what if China is wrong, lying, or only temporarily correct, causing the virus to resurface when society resumes?

Then there are still some drugs in the pipeline which are proofen to be safe + helpful and only need official approval (if you trust China on that).

> only temporarily correct

FWIW this is not uncommon with pandemics. For example, WHO[0] says "During the post-peak period, pandemic disease levels in most countries with adequate surveillance will have dropped below peak observed levels. The post-peak period signifies that pandemic activity appears to be decreasing; however, it is uncertain if additional waves will occur and countries will need to be prepared for a second wave."

For example, during the spanish flu, the second wave was far deadlier than the first. But there were additional factors (WWI and a mutation that made it more dangerous to the young).

This can continue until enough of the population has been infected that we have herd immunity. This is why there's long-term estimates of 20-60% of population being infected[1][2]

[0] http://www.euro.who.int/en/health-topics/communicable-diseas...

[1] https://www.nytimes.com/2020/03/11/world/europe/coronavirus-...

[2] https://www.axios.com/congressional-physician-predicts-75-15...

So here’s my question. China seems to have done a good job locking down Beijing and preventing an outbreak there. They did not do a good job in Wuhan. Per what you have described above, doesn’t it seem probable that Beijing will see a resurfacing given that relatively few people were exposed to it in the first bout?

Seems likely to me personally but only time will tell. In any case it probably won't be until after the initial panic & quarantine, when regular flights and travel and economic activity resume

Nobody knows if the virus will resurface or not, but China has no motivation to lie and just let people to have the disease since it's very costy to cure people.

However, China is motivated to resume society of other cities otherwise more people will get into economical troubles and it spirals.

>but China has no motivation to lie

You do not know much about China, do you?

President Xi's job (and possible life) is on the line if he fails. The CCP MUST be seen as perfect and Uncle Xi will ensure it is perfect by lying to anyone and everyone.

Genuine question, how does "lying to everyone" cure people?

They’re not lying. I live in Shanghai. Things are kind of going back to normal. The rumor mill says schools may open up again in April. If the coronavirus wasn’t under control it would be impossible to hide. Without public health measures it has a doubling time of four to five days. The health system here would be overwhelmed and it would be obvious to all that it was. I’m not saying the numbers the CPC are publishing are entirely accurate but the trend in cases definitely is. Given strong enough public health measures this can be brought under control. It’s now in over a hundred countries so there will be further outbreaks but with sufficient measures we can limit the deaths until a vaccine is developed.

What’s been going on in Shanghai? How serious has the lockdown been?

This is likely going to happen; right now things are shutting down, people are paying more attention to personal hygiene, etc. But once this settles down again, people will go back to their old habits. Come fall, it'll probably rise again fast.

It's hard to take anything China says as the truth. If there's anything we ought have learned over the decades of lies coming from Chinese Leadership (and generally state controlled messaging) is that at the very least, that's not the whole truth.

If they had to lie, they won't release 80,000 cases. It is coming to an end for them. There is very little point in covering anything now.

I wish the U.S. would test more people like South Korea did.

Everyone lies - it's just a question of degrees. This isn't unique to China.

It makes China look better on the global stage if they do a better job containing the virus than democratic nations. I wouldn't call that a little point.

What's wrong with that?

Fundamentally? Maybe nothing. I was responding to the parent comment which claimed there's no real reason for China to under-report numbers.

Is a complete lock down, that isn’t a win. People are stuck at home so they cannot get infected. Think about it

The virus cannot survive permanently without hosts (human or animal). People are stuck at home until everyone (that's still alive) is clear. Then everyone can come out.

Edit: s/hosts/human or animal hosts/

> human hosts

We think it came from some form of animal, and I've seen a report of a low level infection in a dog.

Edit: While I think the former is common knowledge, here is a source for the latter: https://www.cbc.ca/news/health/coronavirus-dog-spread-humans...

Not practical when you do it for a year. And don’t forget the world around you, you gonna miss cases when someone flys in? Or are you gonna block all borders? The question is how long you gonna let economy suffer. Die by virus or die by economic disaster

the lancet published that the amount of time you remain infectious after infected is usually 20 days, but can go as high as 40 days.

I don't think you understand what you are proposing.

I did not hear anything that it is not possible for a human to spread it while not being affected by it.

At least for influenza that's partially the case and going around the globe.

I think the big gloom right now is that Trump has revealed that the US is not capable of a China or South Korea style response.

Those countries were very well prepared because of SARS.

South Korea is sharing everything they can on how they've handled their response: https://twitter.com/HannahNamMD/status/1237618159840100353

So you're saying that a total shut down of the economy which could cause a depression is whats needed to deal with this virus. And thats no reason to be worried ?

A lot of people are staring at economic ruin. We are staring at potentially multiple quarters of negative GDP growth. I don't think this has happened for a long time. And money printing won't fix it like it usually does.

> So you're saying that a total shut down of the economy which could cause a depression is whats needed to deal with this virus. And thats no reason to be worried ?

Yeah. China covered this up at first, but it responded dramatically and authoritatively once the threat was understood. Being an authoritarian state, their power structures allow them to effectively restrict movement and manage the entire economy to limit the spread, and where they sit now is very nearly a best case scenario for what a response could look like barring that initial delay. And yet, even so, it will still result in countless second/third/nth order effects that will cause devastating public health and financial ramifications (the extent of which will only be slowly realized over time).

In comparison, the US is incredibly poorly situated. This country is a mishmash of loosely coupled quazi-independent governments, and its public health apparatus is mostly just de-facto run by the "invisible hand" of the market. The Federal Government has no ability to respond in the way China did, even assuming the people in control of it understood the potential severity here (which as yet they have not.)

I’m perfectly fine with our mishmash. The US has a strong economy, smart people and smart solutions will emerge.

Are you OK if we check back with you in a couple of months?

Of course. Keep in mind, I'm not saying that this situation isn't serious. I'm saying I have sufficient faith in the framework of the United States, even in light of the virus, that I'm not willing to trade it for the frameworks of China and South Korea. I'm also not saying necessarily anything derogative about either of those countries.

Not to be blasé, but its clear you're not a wage worker. Many people will be out of a job and be unable to pay rent. I have several friends who are ALREADY in the process of being laid off as businesses around Seattle practically shutter. We need a rent/mortgage holiday for both people and businesses in order to keep things afloat.

I’m perfectly fine with a >=50% loss in the market if it gets us to consider national paid sick leave and Medicare for all seriously.

We need to seriously reconsider the incentives of those who even if tested positive for Coronavirus would still not be able to miss work.

This is coming from someone whose nominal 401k portfolio is going down a Tesla per day. Why am I not upset?? — the infrastructure is still there; iMessage still works, AWS still works, there are still oil rigs in operation, it is just the amount of money we are willing to pay for securities has changed.

The primary organizing unit of the united states is the Business, not the family nor the individual.

The problems is those people who don't like paid sick leave and m4a are zealots and it will take more than a pandemic to change their minds. They mind agree that government should help out when it comes to depression era issues but otherwise they don't want anything like that in "normal" economic times. I think the progressive mindset that most people have on reddit and HN are really only 10-20% of the population.

No I’m just a business owner who hasn’t paid himself a salary in over a year despite paying the salaries of many others. But yes let’s just keep throwing out those stereotypes. I am deeply concerned both for myself, my family, my church (which has so many 80+ year olds it might cease to exist in 90 days), my colleagues who my ability to pay is rapidly dwindling, etc.

So you were correctly 'stereotyped' and decide that the best response is to complain about that?

If you aren’t paying yourself a salary it’s not a business, it’s a hobby. Which is fine, but it’s a different thing.

I actually really hope someone does check back in a couple of months and see if people still think their gloominess about financial matters was warranted.

IMHO gloominess about financial matters will be warranted, but probably not in the way people expect. I think the stock market will have mostly recovered, most people (who don't work for small businesses) will still have their jobs - but we're going to have very significant inflation, perhaps even hyperinflation. The Fed just injected what, $2T over the last week into a supply-side shock. Prices are going to go up anyway because of supply chain disruptions now facing 75% of companies, and then on top of that we have a massive amount of liquidity being injected. I think it very likely that that'll kickstart higher inflation expectations, which are hard to tamp down once they've started. Best case we get 1970s-style 15-20%/year inflation. Worst case we get 1920s-style Weimar hyperinflation.

Wish I could do a RemindMe!3months.

I did just read this [1] and do agree that the strategy in South Korea was productive. I think a variant of that where local hospitals provide testing could be useful here in the US.

As for inflation, I think we are little too early to point to one outcome as the likely one. Right now my view is that I can either let my mind go into full freak out mode or I can think about the fact that I do have fairly extensive contacts of people who are first responders, healthcare workers, research scientists, policy makers, innovators and I trust them. If I can trust them, then I can trust that the overall system is going to work imperfect as it is.

1. https://uk.reuters.com/article/us-health-coronavirus-respons...

The part that frightens me is that every doctor I know is totally freaking out right now. If practicing medical doctors said it was going to be okay, I think I'd trust them. That's not what they're saying.

I'm fine with that. As I bet this all turns out to be a nothing burger in reality vs the sky is falling approach that's leading us into a bad recession. No one is concerned over the panddemic of obesity and I guarantee more people will die this year from heart attacks and other obesity related deaths and no one freaks out over those.

People who care enough about their life/health/wellbeing to freak out about being obese aren't going to find themselves waking up the next day obese. The same can't be said for corona virus.

I've seen this argument too. The thing is, we need a war time level response in manufacturing to prevent massive death.

That response will probably not happen until the current system is somewhat strained. 6 days after that point, there will be twice the number of cases.

I have no doubt we could respond to this given more time, but it is simply moving to quickly.

We need national quarantines now.

I’ve never been so tempted to violate the HN rules of polite discourse

I think a "rip the bandaid off" approach makes more sense. If everyone "stayed the fuck home" for two weeks, it would really help contain the spread.

Better that than to prolong things, like Italy did, and then make everyone stay home anyway.

https://staythefuckhome.com/

We should do that but the effects of that on the global economy scare me to be frank. Anyone who says that there's nothing to be worried about here simply hasn't thought through all the consequences we're facing.

It's going to hurt.

But if we don't do it, the thing spreads, and we're forced to do it anyway a few weeks later, like Italy.

Korea seems to be the best example of what has worked well, but I don't know a lot of the details. Seems like a good example to follow, but we're falling down in the US - we can't even test people.

To be honest, I don't think it will be too bad. Just speculating here, but events like this only really hurt when they occur asymmetrically (think 9/11 or housing crisis)

Everyone is going to be rocked by this at basically the same time.

What about an economic pause for 2 months? All rent/mortgage payments are paused, you only have to deal with the most critical costs (food, utilities) for a short period of time and then the economy resumes as best it can after the threat is gone? Of course, its not like it'll go away after just 2 months.

We told our tenants not to bother with next month's rent.

Would it help contain the spread? This started with just a small number of people, and so even a small reintroduction would reset the clock two weeks later.

There are a lot of advantages to spreading it out, by reducing the peak strain on our health care resources and possibly letting a vaccine or drug come about. But a vaccine is likely months off at best, and we can't shut down everything until then. So a two-week quarantine might reduce the death toll, but I'm not sure it will dramatically reduce the number of people infected.

I don't know, to be honest. Seems better to stomp on it and then slowly relax and see how that goes?

I'd love to read an actual expert's advice on this. I'm just going by what I saw happen in Italy. By the time they shut things down hard, it was too late.

My personal feeling is that every day we delay mass-infection is another day that the medical community has to get a handle on this.

The initial wave of cases in a community is going to be a sucker-punch to the hospital staff. They are going to need time to regain their footing. If we can buy them that time, then we will all be much better off.

that won't work. It still just delays it. Everyone needs to just admit they -will- catch coronavirus with almost 100% certainty this year as it is quite virulent and likes to stick around for a few days on surfaces and a few weeks in humans. By limiting very large gatherings and observing handwashing/some isolation the best we can do is stretch it out over time so that the medical system isn't overly taxed.

Does your happiness track GDP?

> By taking drastic measures the rest of the world will too.

That seems optimistic, given the lack of significant action in the rest of the world so far. Personally I think the more likely scenario is that the world plays whack-a-mole with citywide outbreaks over the coming year and a half until a vaccine is available.

No, that's not an apocalypse, but I wouldn't put money down on this being over by the summer.

China's numbers make no sense at all. A country with 1.4B people and they at one point had 80k people with the coronavirus in the country which includes many big cities, smaller cities, and towns. Somehow they only have 15 new cases in the whole country?

How does that make any sense if you take a moment to really think about it? It's clear they are either deliberately not testing or skewing/hiding their numbers for political purposes. It's a bit similar to India's numbers. India (population 1.3B) has fewer cases than Iceland (Isolated island of 300k people), again, how does this make any sense? It only makes sense if they're not testing people or hiding numbers.

Why, concretely, doesn't that make sense? The CCP deliberately trying to hide things is definitely a possibility that should be considered, but I don't follow why you're saying it's impossible or what they'd hope to gain.

It's obvious what they gain? What does the CCP care about more than anything? They care about their image and the stability of their hold on the people.

If China looks like they "fucked it up" then the people become more restless and start questioning the party. Also, they care deeply about their worldwide reputation and that the world sees that their "system" (top down authoritarianism) is seen as more effective than western progressive liberal democracies.

It makes them look a hell of a lot better if they can say to their people, "Look guys, look at how well we handled this crisis compared to the Western countries, this is why having an authoritatian one-party state with absolute control is better for you guys!"

Looking like the idiot country who totally fucked this up doesn't help the CCP at all, which is why they tried to silence the guy who was originally trying to blow the whistle on this whole thing.

But if the virus isn't actually contained, how is lying about it going to help their image or stability? If Beijing hospitals end up stuffed to the brim with pneumonia patients, nobody's going to be fooled by a claim that there are no coronavirus cases.

No one is looking deeply or focusing on China right now. Due to their level of control they can easily hide the problem. But you're a fool if you think that in the last few days across the WHOLE of China that they had a handful of cases? Even with PERFECT lockdown of literally every person you would expect more than like 20 cases across 1.4B people.

India is a democracy with a free press; so the numbers are more trustable. India has low numbers because they are handling the crisis better. See: https://www.theweek.in/news/india/2020/03/05/kerala-earns-pr...

They locked the fucking place down. No movement = no transmission.

But people not doing stuff basically means a recession, if not depression is guaranteed.

Seems like they did but my suppliers have been back to work for over two weeks now.

I'm not sure that locking the place down for a little while per se will cause a recession. Numbers will take a hit for a while because people are prevented from spending and working, but the normal course of action after a snow day or staying home with the flu is to get up and go back to work and resume spending money. This is the path China could be on for its economy overall, if not for its economic interdependence with the U.S., which is handling things differently.

The U.S. is steering itself toward a year-or-more-long issue that has people fearfully avoiding stores, deliveries, workplaces, and the consequences of this will ricochet. A recession happens when people and businesses restrict spending and hiring, and that's exactly what this scenario causes in a chronic way.

But who knows? Maybe Gilead's experimental antiviral will be approved within a month or two, and maybe that will be enough to make people not fearful and regain economic confidence.

A common definition of recession is a decline in GDP lasting for 2 consecutive quarters. It seems likely for this to cause a decline in GDP in Q1 and Q1 at a minimum, so a recession seems inevitable.

I do think there will be a point when going out becomes less of a concern and there will be a lot of pent up demand for travel. The recovery will likely be sharp (V-shaped).

I was speaking to the strategies that could be employed vs what we’re actually doing, and I am concerned that what we’re doing will cause a recession.

To relate the strategy to that formal definition of a recession, if everybody stayed home for a month this quarter, we might lose 1/3 of the quarter’s GDP. But if that break is structured so that it’s expected and we resume normal activity afterward, then in the next quarter we would see the GDP “grow“ a ton, if only back to normal because people are working and spending for the full three months, and we would cleanly avoid this formal definition for a recession.

Oh, I understand what you are saying now. I think the issue is that government officials aren't comfortable defining an endpoint right now. There are a lot of unknowns as to what could stop the spread at this point.

no vaccine will be approved at the earliest 6 months from now. By then the worst will be over. Most vaccines take 1+ years

No they didn't. This literally makes no sense. Do you understand how big China is? Do you understand how many people there are? Are you seriously telling me every person in China was "locked down"? How does that make any sense? Wuhan was "locked down" and one of my good friends who lives in Cali but whose parents are in Wuhan told me they live just outside the city and could leave their house easily and at will. So if they weren't locked down, are you telling me all the many hundreds of smaller cities and towns were "locked down" too??

Only someone who had never visited China and seen the scale of the place woukd say such a thing. It's like saying I locked down all the termite colonies in Australia.

Not really, read any news stories about it. Sure they were tough on people they quarantined, but people moved around.

Climate.

There was a theory that the virus doesn’t fare well in hot climates and that seems to be playing out.

A good example of this is Vietnam. Nearly all their cases have been in Hanoi which has quite temperate weather in the winter versus Ho Chi Minh City which is tropical all year around.

It’s not the only factor, but it does appear to have an impact.

Again. Maybe climate has an "impact" but the size of the numbers makes no sense. Greece isn't exactly a cold place right now, it's massively smaller than India and yet has 30% more coronavirus cases.

India: 1.3B population and right next to China. Greece 10M population and no close land links to China.

These numbers don't pass the common sense test.

Agreed that the impact of climate is a big question mark.

In terms of Greece, it's more like Japan or China than a tropical country.

Right next China is a weak argument. There is an impossibly terrain dividing India and China called Himalayas. Other means of transport are restricted from the very beginning.

It seems far too early to judge the degree to which warm weather mitigates this. There have been a growing number of cases in Australia and South America.

Also consider that in India, there is not only a massive population, but access to tests per capita is probably quite low. Furthermore, the background noise of other infectious diseases is higher there, so many of these cases may go unnoticed or just attributed to common ailments. Death by infectious disease, while tragic, is somewhat more normalized there, and it might be hard to convince a lot of people not to go about their daily lives.

India also has a young population.

That would reduce the death rate, note the infection rate.

How do they know the infection rate unless they are randomly sampling and I haven't read of any country doing anything close to that other than Korea, and it wasn't all the random.

Data from the China CDC shows the mortality rate (not the infection rate) is strongly correlated with age, especially above the age of 50.

https://www.statista.com/statistics/1099662/china-wuhan-coro...

People coming from overseas have to go through mandatory quanrantine in India. Air travel is restricted. A ship with Chinese travelers was halted near coastline as per WHO guidelines recently.

It would be very surprising if they quarantined in time or strictly enough to prevent the virus from entering in significant numbers. Even societies with highly centralized control structures (Iran, Japan) weren't able to keep it out. I doubt a decentralized country like India with huge amounts of human movement without and within could do it, just as the US and EU couldn't.

Without seeing the numbers for tests conducted you're just wildly speculating based on personal opinion about the country.

From WHO stats in the last day China has 50 new cases.

Let's take South Korea instead, they have tested more per capita than anywhere else on Earth by far and conduct over ten thousand a day. Since yesterday they've had 100 new cases.

Sorry to disappoint the doomsayers but all these big grandiose predictions seem far off the mark with a proper response.

Proper response is key.

It's exactly the argument that gets made here from time to time about doing maintenance and paying down tech debt.

The people that do it get called over-cautious and reactionary because shit never actually hits the fan.

From 20+ of my friends in Wuhan, the numbers most likely correct. And in my city, a small city in China with about 3M population, there's about 100 total confirmed cases in the past 2 months, there's news spreaded in local social network for every case before official confirmation. IMO, it's very hard to hide numbers.

In early stage of Wuhan(Jan 2020), there's hiding numbers, and there's lots 'rumours' widely spreaded on social network, e.g. Lots messages from medical staffs in Wuhan, so we known the numbers of Wuhan is not correct. But in recent weeks there's no such 'rumours', the gov may have strong control on many things, but it's not possible to control all(most?) 'rumours'..

I mean, if you look out the window and the market hasn't falling 8 percent in a day in over a week, it might be an alright time to buy.

No that's too late. You want to buy low and sell high, not the other way around!

Depends on how much of a discount you want and how fast the rebound will be. The S&P 500 has now given up 2.5 years of growth. I don't think it will spring within a week of bottoming out

If you truly believe ANY Chinese data, I have a Great Wall to sell you.

China is lying.

The "Start-up Party" is over. Startups will need to plan make profits within 3 yrs. There will never be another WeWork or even another Uber.

The world is returning to normal. Capital will not be free. People will need to earn it.

The reason for the doom and gloom is this weird system we have wherein the strength of the economy is based on human belief in the strength of the economy. Because of this circular relationship, positive feedback events can occur very quickly and result in the material effects of poverty, homelessness, and hunger.

> but it will recover! How do I know that? Because crashes have happened in the past, and the world didn't collapse and disappear.

I’m being facetious with this specific instance, but how would you know? If many worlds had disappeared after catastrophes many times before, we might have no ability to know.

This is “survivor bias”, no?

Anyone who takes the current Chinese numbers seriously is incredibly naive.

I have alot of unvested RSUs and my reasoning is that if 2008 repeats itself, there is a real chance I may get laid off and lose my RSUs. I donate most of my income and I have very little savings.

To protect myself, when I see sharp dips in the markets like this, I usually buy a put (option) just in case 2008 repeats itself. I bought a put last week for 2k (CMG) and now its worth 18k. If the markets keep falling, I may end up with around 30k, which is enough for me to pay my mortgage for a year and a half.

Maybe someone finds this helpful, maybe not. Be safe, play responsibly.

How do you buy a put option if you have zero savings and donate your income?

updated, sorry.

Are rainy day funds not savings?

Smart approach.

Pay attention to unwind it before April please IF it is short duration. Mainly sharing since you state you donate your income (much applauded!). There will be a sharp short slaughter rally in April, but then dropping off a cliff.... (do own due diligence). If you have a put into summer you're fine.

Are you from the future?

It really reads like that doesn't it? If you were from the future this wouldn't be a bad way to share that information.

Goldman and OP both think a further fall by summer is likely [1]

[1] https://www.bloomberg.com./news/articles/2020-03-11/goldman-...

These guys are like George in Seinfeld. So wrong about absolutely everything that doing the exact opposite is the winning strategy.

On a serious note, remember that they are not your friends at all. They make money when the rest of the investors are predictable. There is no incentive whatsoever for making accurate predictions.

The rally in April is pretty certain imo, that's the "dead cat bounce", but the "falling off a cliff" again part isn't. I don't think anyone sees this as another 50% correction... Or do they?

No, but when the obvious trade (short) is apparent, it is easy to take out weak hands with the opposite trade. Plus large institutions need a rally after this warning shot to exit positions. Always look for the shock (which is just a warning) to follow up by an exit position, followed by the real action. Real action should happen later... downwards from May.

thank you John Titor.

Downvote parent all you want, but if you do - set a calendar entry to 90 days and if you are down 10-15% additional from here, please upvote my comment again. You are voting your emotions.

Link for you: https://news.ycombinator.com/item?id=22556929

I bought 20 spx 2500 put options on February 10th for $1.30 ($2,600 total invested) because I had a gut feeling.

Today, those puts hit a high of $310,000

It's a shame I sold them too early!!! But still made about $20K.

I've been slowly winding mine down, it's hurt seeing what the ones I sold would have been worth, but at least I still have some left :) also hurt that I didn't spend more at the start. But I can at least take solace in the fact that the measured approach was probably wise.

Forgive my ignorance, how come they hit a high when the market 'crashes'? The market probably looked better on feb 10, no?

By buying a "put" he is wagering that the price will fall.

The more the market crashes, the higher the value of the put.

The bulk of that profit came from volatility spike, rather than simple directional price difference between strike and underlying ("delta").

VIX (https://finance.yahoo.com/quote/%5EVIX) was at 14-15 just a month ago and now at 65 - one of the highest ever! What a time to be alive after years of suppressed volatility!

Both calls and puts increase in value when volatility increases.

A Put option is the right, but not the obligation, to sell an item K at price X to a counterparty.

If you've agreed to sell a thing for $5 that is worth $4, you're a dollar in the green. As market prices drop your profit increases

Who is the counterparty to these trades? When the market sentiment is negative, the number of these counterparties are narrow and dwindling, surely it's not that easy to find people who will buy a thing for $5? Maybe they would buy at $4.25 or even less?

Good job asking from the other perspective. Here it is (over simplified to state a point, you would need to do more research).

Let's say Tesla stocks are at 700. If someone offered 2k in addition to the opportunity to buy tesla at $620 / share, I'm sure many people will be lined up to buy it. Not only do you get $2000 immediately in the bank, you also get to buy tesla stock at a 10% discount. Not a bad deal.

Thank you and parent posters, this makes it clear to me!

The counter party is set when you sell the put contract. When you set up a put contract, your broker will find a counter party (or none at all). To incetivice the counter party you pay them a premium, which they get to keep no matter what happens. Once you have the contract, it’s locked in and you have the party. That’s why you set up puts _before_ the general sentiment is that the market will go down.

I don’t mean to be dense but I am still missing something. I appreciate the fact that the counter party is locked in when you buy a ‘put’. But what if the counter party wants to get out of a bad deal and they declare bankruptcy? After all if they have to buy Tesla at 620 (using the example above) and Tesla is trading at 400 that’s a significant loss.

That's thinking really far, good stuff. The trading company (Ameritrade for example) insures up to a certain point. Ameritrade wouldn't let you make that trade if you don't have enough capital to back that trade. Lets say you somehow managed to do that trade, and you declare bankruptcy. I think then Ameritrade would have to cover that cost. Then if they can't, then Ameritrade declares bankruptcy. That's as far as I reasoned.

You are missing the key trick - hedging!

The person who sold the put to you can short some shares and lend out some money to create a "replicating portfolio" that inversely mirrors the payoff of the put option they sold you. They're making a small % on selling the put and then immunising themselves from the market movements.

Who lent them the stock to short? Index funds! The people who want to make market returns, still do. Everyone is happy

Put options writers need to post cash collateral to cover their obligations or go on equivalent margin (which will be monitored and enforced by their broker) in order to sell you a put.

If this fails, there's still Options Clearing Corporation managing $120B+ collateral and acting as ultimate guarantor for option contracts.

Typically, the other party is required to hold a margin account. If you sell a put for 100 units at $50, and the spot (current) price is $45, you're ($50-$45)*100 = $500 in the red. Your broker requires you in that situation to hold at least $500 (usually more) in cash (or cash-equivalent securities) in your margin account.

If the price dips even more, your broker will ask you to add more money to your margin account quickly, or they will liquidate your position. That means that when you don't keep enough cash to cover the loss, your broker will use the cash in your account to buy a put at $50, effectively zeroing out your position. You lose the money you had in margin account, but you are no longer losing (or gaining) money on market movements.

Traders selling options need either cash or margin to cover the trade (according to various calculations, not always the whole amount).

Their broker also monitors the risk and will liquidate any position if they feel it's too risky, and they have their own funds and insurance to cover trades.

Also the options exchange itself has funds and insurance to guarantee the contracts. There's enough money and liquidity in the overall market that it's extremely unlikely for you to worry about this counterparty risk.

It's more of a concern if you're a major investment fund making 9 figure moves and want to make sure banks remain solvent.

And since a put is an agreement to sell at a certain price, how can you even sell such an agreement if it’s value has skyrocketed beyond the value of the underlying stock? Certainly the counter party would like to buy the put and let it expire (so they don’t have to pay 620 for a stock trading at 400) but how can the value of the put exceed 620-400? If I paid so much more for a put I would lose the amount that exceeds 620-400 (the amount I would gain)

Imagine it as a bet with a friend. You: "hey, I got this item worth 10 but I believe it will go down in the next five days." Friend: "no way." "want to bet? You will buy it from me for 10 whenever I want to sell it." "nah." "I will give you 2 to keep right now!" "alright."

Your friend has no say when or if you sell. He got paid and hopes you are wrong. Your friend will obviously not agree to pay 10 for an item that is already only worth 5. And yes if the item only goes down to 9 you lost 1 on the bet.

Options are worth an intrinsic value (the current stock price vs the strike price of the contract) and an extrinsic value (the implied volatility of the stock).

Large or sudden moves increase the volatility greatly which can result in the extrinsic value being multiples more than the intrinsic, and this is what leads to the wild profit capability of options.

At the same time, without those moves, or the lack of any umoves, that value can also rapidly decrease and leads to those options being quickly worthless.

> Who is the counterparty to these trades?

Typically large trading firms, market makers.

> When the market sentiment is negative, the number of these counterparties are narrow and dwindling

That's why his $2600 initial investment made in a much calmer market is now worth $310k :)

For the right price you'll find somebody willing to sell you the insurance you seek. But in a volatile market like today, that price may be way too much for most people.

When market crashes, volatility shoots up through the roof and significantly increases value even for such deep out-of-the-money options, by far more than the difference between strike and underlying price. Essentially he made most of that money on volatility spike.

How do you buy a put? On etrade?

trite response: If you are asking this question, you shouldn't.

Actual answer: Most brokers will allow you to buy options and some specialize in it.

Options are very dangerous because you can lose more than you invested. (Which can happen shorting stocks too)

Not if you only buy

You cannot lose more than you invested when buying options.

Almost all brokers will offer options. BUT, before you buy puts or calls, do LOST of research. They are far more confusing and risky than stocks.

Just out of curiosity, where do you buy?

any trading platforms: robinhood, etrade, ameritrade, etc etc.

Sold a bunch of my Amazon stock earlier this year. I am slowly tempted to buy some of it back if markets continue to fall. I still have to figure out a comfortable assumption of where thongs will end up. Could be COVID-19 changes a lot of dynamics.

Buying put options are a great way to protect yourself against downturn risk. I think of it like an insurance policy. You pay a premium to protect yourself in bad times.

However, I'd recommend always having a put contract outstanding, not just when you predict things getting worse. You got lucky this time, but next time you may be too late.

What are the advantages of lowering risk by buying puts over lowering risk by holding cash?

It seems OP is trying to hedge savings in the form of RSUs granted by his employer. Since they can't be sold yet cash isn't an option (pun unintended).

Money's fungible. Hold some cash that you save from your paycheck rather than donating it.

(Little too late to do this for the OP, but it's pretty good advice for anyone else thinking of doing this.)

The OP probably can't cash out on the RSUs at this point, and options plays are like shooting fish in a barrel at the moment. Remember that the hard part of an options play is knowing when something is going to happen with a fair amount of accuracy, but there probably won't be a miraculous recovery of the market in the next 24-48 hours.

No, the hard part of trading anything is having edge over other people. Options are not priced assuming there will be a "miraculous recovery" in the next 24 hours. They're priced based on the world's expectation of future volatility, through a very competitive market mechanism. There is no reason to assume you have better insight than people who model this stuff full-time.

It's irresponsible to suggest that making money trading is akin to shooting fish in a barrel. Best case, it's a slightly negative EV gamble with high variance.

Your strategy is a great one to work - no matter the prevailing trend! The trend for 10 years has been to become lax on protecting the downside. Even large funds have stopped protecting downside with puts. Your strategy doesn't produce the highest ROI year over year, but DOES protect premium year over year. Which is perfect.

AQR disagrees with you: https://www.aqr.com/Insights/Research/White-Papers/Pathetic-...

That article doesn't apply to unvested RSUs: "put options are quite ineffective at reducing drawdowns versus the simple alternative of statically reducing exposure to the underlying asset. "

You can't statically reduce exposure to an unvested RSU.

Also, the article concedes that there is one case where puts are useful: "Put options may offer crash protection"

Most big companies that I know with equity-based compensation typically forbid any hedging of their stock, especially through puts. But assuming hypothetically this is not an issue, you could sell short your company's stock to reduce exposure to your RSUs vested in the future.

I think you’re saying you shorted the entire US equity market, which I think is probably fine.

You probably won’t get caught, but buying puts, or anything modeled to behave like one, for your employer’s stock is almost certainly a violation of your employment contract if they’ve granted you RSUs.

“You will not short, or otherwise participate in derivatives associated with the stock” is standard RSU boiler plate.

He's shorting Chipotle and I doubt he works there.

that's right, I don't work at chipotle and I made sure I don't short my employer's stock.

Also correct, I'm essentially shorting the entire equity market. Chipotle is very volatile so there would be quite an upside if market trends downwards.

> I donate most of my income and I have very little savings.

Unless you're very sure that you're donating to people who will help you in return (a church?), it's wise to see to your own financial oxygen mask before helping others.

I'm all set myself. My only expenses are taxes and mortgage. I grow my own food in the backyard for fun and I'm pretty sure I can scale it up when the going gets tough.

Personally, I believe that giving should be done without expecting anything in return, otherwise it becomes an exchange, which I find incredibly exhausting.

You’re not “all set yourself” if you have little in the way of savings and are resorting to derivatives trading to make your mortgage payments.

Defer your donations until you have a year of payments in a rainy day account. You can’t donate if you’re homeless.

I'm sure it's a troll. It's a humblebrag at best, troll at worst.

But its not a troll. My donations are no different from a startup founder going all in. Except my vision doesn't end up with me making billions of dollars. I'm working towards a vision where people around me has food to eat, gets education, and has a comfortable shelter.

So retirement? What happens when you need care?

Do you wanna / have to work forever?

I think that this is a personal choice, not an objective "it is wise" choice.

You have a mortgage and donate most of your income ... why?

Yeah, you should make sure to have at least a few months worth of cost of living available at all times. What you do with the rest is up to you really, I'd save it to be able to live off of for a year, then invest the rest.

Although I'm holding off on investing for now. Sold some of my 'play' money stocks (tesla etc) and put it in trackers. Might sell off those too and just wait it out a bit.

30 year fixed at 2k / month, 3bed 2bath in Berkeley. I plan to continue paying 2k / month for the next 22 years there's no point paying it off early. Like I said originally, the puts are there to make sure that if market dips I make enough to pay off my mortgage, so any money above 2k / month is extra for me (minus personal expenses).

> I plan to continue paying 2k / month for the next 22 years there's no point paying it off early.

Why? There's some good reasons to pay off a mortgage early:

1. You pay less interest, so you pay less in total. Don't worry about the tax rebate; it's only giving you back maybe 10% of your payments.

2. A mortgage is a loan. Fewer loans means less risk. Your house can't be foreclosed on if it doesn't have a mortgage.

3. Afterwards, you have an extra $2,000 every month, because you're not sending it to the bank. Your expenses (burn rate) goes down, so your savings will last longer if you lose your job.

Let's say they'd have to shell out $400k to pay off the mortgage. Their $2000/month payment would be gone, but if we assume an average of 6-8% ROI on the $400k, they are missing out on a return of $2000-$2600/month. 20 years from now, the $400k becomes $1.282.000. Minus taxes.

Not op. There are also good reasons to donate money today instead of tomorrow. Positive change in the world can also accumulate interest of time, and problems can also get worse over time

ROI or opportunity cost. I can continue to pay 3-4% on a few hundred thousand for a few decades. Meanwhile I have a few hundred thousand “cash in hand” that I can allocate to other assets/investments. I’m betting that my other investments will return more than my 3-4% cost. And since we’re talking decades I can choose when to unwind this allocation. As I near retirement then yes, I expect to pay off the mortgage just like I’ll move out of broad equities and in to bonds and dividend focused equities.

Be sure to harvest some of that profit now. Going all in for 1200% gains is fine for wacky WSB plays using disposable income, but not when you need it to build up a safety net

if the market bounces back my RSUs goes back and I'm back to where I was. I don't plan on harvesting my put profits, I'm secretly hoping I lose it all.

One's investment plan should not rely on "if". Sit with a piece of paper - write down the scenarios that are possible, not the ones you want to happen. Now project forward - thinking what should I have done if each of these were true.

you could lose on both ends. a quick double dip crash would wipe out your RSUs all the same and your options finish out of the money as 90% of them do.

> If the markets keep falling, I may end up with around 30k, which is enough for me to pay my mortgage for a year and a half.

Hope you're factoring in the additional tax burden of extra income. That may decrease your runway from 18 months down to 13-14.

> I bought a put last week for 2k (CMG) and now its worth 18k.

You should really spell out the risk you're taking to get a return like that.

The risk is that you will buy thousands of puts, week after week, waiting for a crash to happen, and when one finally does you will have spent so much on puts while waiting that overall you didn't win anything.

The total risk is 2k. So, the puts could end up worthless at the expiry date.

"Naked selling of put options can be quite dangerous in the event of a steep fall in the price of a stock. The option seller is forced to buy the stock at a certain price. However, the lowest the stock can drop to is zero, so there is a floor to the losses." https://www.investopedia.com/ask/answers/050115/what-types-o...

OP is buying puts, not selling them.

"naked" "selling"

OP is doing neither.

He's buying puts, not selling them.

You think market is going down: Buy puts, sell calls

You think market is going up: Sell puts, buy calls

Maximum loss when buying is only your investment.

I started doing this 3 weeks ago. Lucky me. The drop has been spectacular, as were the drops in 2008 and 2000. I only buy in after seeing spectacular drops. Again I’m not saying it’s the right strategy, I’m saying look into puts, study, observe, and maybe this works for you. Maybe not.

Thanks for sharing. What’s CMG? Also, how easy is it to buy options with Schwab or Etrade or similar?

Possible high return per stock, 10% drop = $60 drop per share, which equates to a potential $6k profit.

You could do the same with Tesla, Google, AMZN. Any strong stable company with reason to fall other than the market trend would do.

Again, these are my thoughts, please take it with a grain of salt and do your own research.

You may need to call up Schwab and Etrade and tell them you want your account approved for trading Options. Or maybe you can already do it, check to make sure.

CMG is the ticker symbol for Chipotle Mexican Grill, Inc.

With Schwab you have to apply for level 1 access to option trading, but it's pretty straight forward and quick since buying is low risk.

Why CMG though?

Possible high return per stock, 10% drop = $60 drop per share, which equates to a potential $6k profit.

You could do the same with Tesla, Google, AMZN. Any strong stable company with reason to fall other than the market trend would do.

Again, these are my thoughts, please take it with a grain of salt and do your own research.

> I usually buy a put (option) just in case 2008 repeats itself. I bought a put last week for 2k (CMG) and now its worth 18k.

Chipotle Mexican Grill? Or is that something related to Chicago Mercantile Exchange?

Cuz like, the terms of my RSU package expclitly forbid dealing in related derivatives. I cannot offset downside risk like this with options.

It doesn't have to be related to offset the risk. For example you could offset using the SP 500 index, not violate the rules, and still protect yourself from a 07/08 style market collapse.

True, but I'm not sure how I feel about buying puts on stocks I own in bulk. If I'm making that kind of directional bet, wouldn't I also be better off shifting from SPY to AGG?

Yes, he's referring to Chipotle

Your employment situation is uncertain, you give away most of your income, you have minimal savings _and_ you speculate in the stock market?

You, sir, are made of sterner stuff than I.

If you expect volatility to increase, which I think is very reasonable, then buying options is a very safe bet, and if you only put in a reasonable amount, it merely serves as insurance against getting laid off.

If the market gets bad enough for him to have to be laid off, his presumption is that the puts will be valuable enough to get him along for a little while. If it doesn't, then he probably loses money on the puts, but he's still employed, so it doesn't make much difference.

edit: I'm an engineer, not an economist, so this is probably wrong, but I think it's the line of thinking that songzme is on too.

> If you expect volatility to increase

If you have high confidence that volatility will increase more than the market expects it to.

> buying options is a very safe bet

There is no world in which buying options in a volatile single stock is a very safe bet

Unless OP actually works at CMG (in which case they're probably forbidden from buying puts), this is gambling, not hedging.

>There is no world in which buying options in a volatile single stock is a very safe bet

I agree. I didn't pick up that CMG was Chipotle (that's what comes up when I search CMG). Do you think if the underlying was something diversified, this would be a safe strategy?

> this is gambling, not hedging.

My understanding of it is that in times of high volatility, options go up. If OP expects ^VIX to go up in the future, which I think is very safe to assume at this point, then won't the value of a diversified option go up?

Again, maybe I'm confused... I don't really trade anything, so I don't have skin in the game. I just talk about the markets a lot with my friend who is into Quant Finance.

> My understanding of it is that in times of high volatility, options go up. If OP expects ^VIX to go up in the future, which I think is very safe to assume at this point, then won't the value of a diversified option go up?

Only if it's not already priced in. The price of options should reflect the market's expectation of what the VIX will do in the future. If everybody else thinks that things are going to get more volatile in the near future, then prices for options go up now, they don't wait for things to actually get more volatile. So when you're deciding whether buying options is a good deal, you not only have to decide whether or not you think that things will be more volatile in the future, you also have to decide whether other people already know that things will be more volatile in the future.

It's pretty dangerous to do this unless you're a statistician with an algorithm that can take all emotion out of the decision. As a (non-sociopathic) human, your natural impulses will be subconsciously influenced by the emotions of the people around you, so when you have a gut feeling that things are gonna get rocky in the near future, it's probably because everyone else already had a gut feeling that things are gonna get rocky in the near future.

More precisely, you can back out an implied forecast of future volatility from options prices, and the VIX index is actually computed from the prices of options on the S&P 500 index; it's not just trailing realized volatility.

That is just a polite way of saying 'idiot'

The Plummet Protection Team has been working every day buying huge numbers of call options on stocks in order to signal a turnaround. It has failed every day and they have now spent hundreds of billions.

If you understand which calls they are making and at what times they make them, then you can buy the corresponding put and make a lot of money. That he increased his investment by a factor of 9 in a week or so shows how much money we are talking about.

If the fed stops doing these daily calls though you can get holding the bag. Also in the event of a total collapse you can end up never being able to redeem your gains.

Elite traders know this game and are happily taking the billions that the fed is shoveling to them.

For the public, we'll see the elite doing well and able to afford the inflated cost of goods that results from pursuing this policy over an extended time period when it has repeatedly been shown to be a failing strategy since there are actual fundamental problems with the market right now, such as supply chain issues, likely loss of large numbers of staff, and upcoming mass unemployment and a global Depression.

Fascinating! Do you have a source for this?

"The "Plunge Protection Team" (PPT) is a colloquial name given to the Working Group on Financial Markets"

If the PPT has not be working during multiple +7% falls on the Dow, they are not doing their job. President Ronald Reagan created the body in March 1988 after the 1987 crash.

The PPT has been "stabilising" (aka rigging) the stock market for nearly 40 years. How they operate and how much money they make is open to speculation. But it is widely believed that they purchase large-cap thinly traded stocks in the past few minutes before the close to minimise closing losses.

TL: DR - The PPT exists to minimise volatility during difficult times and they are doing their job.

I'm specifically interested in the claim that they have spent hundreds of billions on call options.

Yeah, that claim seems really dubious to me.

+ he tries to save his system failure with market timed put options.

Luckily he was right 1 week ago. But it was luck only.

_And_ he uses JavaScript to the extent that he can teach people JavaScript (as per his HN profile). Clearly, he is used to dealing with danger.

I was saying these things in other threads and getting downvoted. Puts are basically insurance against shit hitting the fan. Thank you options and r/wsb

I've had some short positions (different companies) to offset my own RSU market risk since I started my job a year ago.

Until the last few weeks I avoided looking. Now I'll avoid checking my company's stock for a while and look at the shorts instead if I want to waste time patting myself on the back.

Deal with the pandemic. People won't invest again until they feel safe. That doesn't mean tax cuts or propping up shale oil companies. It means getting the deadly disease under some semblance of control.

Yes WTF, this is not about interest rates, it’s about test kits for sick people, sick leave and pandemic risk

For people who think that this is just automatically a buy because "prices have to go back up again, right?", it's worth looking at the Nikkei[1]. Note the peak in 1989 has still not been regained, and the market is about half that level now. Now is the US economy fundamentally less messed-up than Japan? Absolutely (in general). But every fall is not necessarily a buying opportunity even if you have a very long-term horizon.

[1] https://finance.yahoo.com/quote/%5EN225?p=^N225&.tsrc=fin-sr...

Stop bringing this up, it’s been debunked that this isn’t an accurate example.

One reason why it’s not a great example is the exchange rate of the currency. The Yen is worth about double now what it was in 1989.

is there a way to see the graph in more-familiar USD? I'd expect it to not appear as drastic?

Total return on the nikkei in dollars since 1974 is 3.6% annualised. So that's including exchange rate and dividends. That gets you to about double today in nominal terms what it was back then (yay compounding!) but is still a pretty terrible rate of return for having your capital tied up over a very long period of time.

Exactly - if I had lots of money lying around I'd probably invest some of it now. But it's not worth the risk if one doesn't have sufficient cash for bridging at least an entire year.

If it's just a dip - then I'll have to live with not making that money - whatever. But if it is the beginning of a recession then investing earlier than one year from now is financially inefficient.

For now I'll stick to me regular investment strategy/cycle aiming at long term gains.

Or use investing frameworks that help you preserve capital and also size up the market, like CAN SLIM or any of the hundreds or thousands of others.

You don't have to be a daredevil to be participating in the market right now, but study and practice are probably an essential, along with an allowance for the proverbial bop on the nose.

They also have had massive deflation stemming from lack of making babies. They've even have had to gasp allow more foreigners to come in and do some jobs.

The US stopped making enough babies too, but growth continued due to immigration. That is changing. Now I don't think the US market is headed towards something that looks like Japan's, but its something to think about.

somehow, I'm skeptical that the US's main mid term problem is going to be too many old people.

Sorry, but this is a terrible argument.

If we see that type of shift, we're going to be living in a very, very different world where American's general way of living will need drastic change.

I hedge my bets, but somethings go well beyond y control.

Why? Japan didn’t massively shift their way of life. They just had a market bubble.

Nikkei is a price index. Total return with dividends reinvested probably surpassed the 1989 peak a while ago, but it's hard to find that data on it.

I can't find a simple historical total return index on a free source but here's a calculator[1]. It says to me that 100% dividend reinvestment in the nikkei since 1974 would give you a total return annualised at 3.2% in yen and about 3.6% in dollars. Most people would have significantly better hurdle rates than that. So investing in the nikkei if you're a yen or dollar investor has been pretty average over the long term no matter how you slice it.

[1] https://dqydj.com/nikkei-return-calculator-dividend-reinvest...

One thing Japan has going for it is low housing prices. If we end up in a period of long stagnation, the opportunity for lower cost of living could be a good thing for some of the hotter markets like San Francisco and Los Angeles.

This is going to turn out to be the great investment opportunity that I mostly missed out on in 2008.

Everyday is a great investment opportunity given a long time horizon.

True. Investing a little bit each day far exceeds the returns from investing a lot every time there's a local minimum.

There is no argument that the market for a lot of stocks was completely out of control. When stock charts are a 90 degree angle, trading on average at 25:1 price vs earnings, there is a problem.

It's all relative based on what people's options are. What if the government comes out tomorrow and says they will start buying stocks to prop up the values? You're always invested in something, whether it be cash, land, resources, equity, guns, food, water, etc. If you think a handful of large corporations will continue to gain power, it might make sense to pay 25x.

No doubt government will try to do that, they are also running out of options. Those are always temporary. Look what happened to the latest rate change.

Not all governments are equal. The US has a lot more runway to devalue the USD than pretty much every other country.

The argument would be that there's too much savings chasing too few investment opportunities. That causes investment to become speculation with periodical bubbles that do nothing to direct investment into productive areas.

The thing is, there is so much opportunities with long-term pay-off. E.g. high speed rail, transitioning to renewable energy, research into new technologies, etc. they just seem to lack political/societal (or generational...) will?

If the FED or EZB starts buying stocks like the BOJ, like some economists already propose, I'll see that as direct transfer to retirement savings btw. and further encouraging misdirected investment, especially if there is even a notion of doing it for propping up the stock market and not to increase inflation. Needless to say, I'd be very angry about that.

I am obliged to tell you to find a chart of the Nikkei 225 and zoom out

Puts are investments too...

I don't know if I would use that term to describe them. They're investments like gambling is an investment.

All investment is gambling. You’re betting that the stock will go up if you’re long and that you can sell it for more in the future than when you bought it. Call options just allow you to leverage more as do put options.

Your own statement just agrees with me. Investing and trading is gambling, but if you hedge properly you’re able to control the odds of success a bit better than you can at say a craps table.

Erm, capital growth is one way of making money with an asset. It depends on the asset but there are other ways, e.g. dividends.

It's true that you can use put options for purely speculative purposes, but that's not their only use, and that's not what they're supposed to be for.

The more official purpose of a put option is to control your risk profile. That is a perfectly reasonable thing for an investor to do, and is something more like the opposite of gambling.

Right, but purchasing insurance isn't usually considered an investment either. It makes you negative money on average, it buys you more certainty.

Well, an e-trade account isn't typically considered an investment in and of itself, either, but that doesn't mean it isn't a reasonable thing for an investor to have.

I think the word you're looking for is speculation

Do you have a chart that includes dividend payments?

last I heard it's down -7% total return.

I was curious about that, so I went and found this and played around a bit: https://dqydj.com/nikkei-return-calculator-dividend-reinvest...

It looks like if you invested in January 1990, you'd still be slightly negative as of January 2020, even after including re-invested dividends when calculated in Yen. But, when calculated in dollars, it's positive, unless you adjust for inflation, then it's negative again.

The total return (including dividend payments) of Nikkei 225 between 1989-2019 is around -20%.

I don't know any handy English source for it, but I can tell you that this is the correct number.

Note: It's called "Nikkei 225 total return index" (N225TR). AFAIK the monthly numbers since 1979 are available from Nikkei Inc.

On the contrary given a sufficiently broad timeline the value of every company drops to 0.

"In the long term, we're all dead"

Buy an index fund, not individual stocks. All companies don’t go to zero at the same time.

They will all go to zero, given a sufficiently broad timeline. They're making a joke.

I don’t think the investors on the Shanghai stock exchange on 1939 would agree. Nor would anyone invested in any company between Germany and the Soviet Union at that time.

Dividends mean investments can have positive returns even if the companies value goes to zero.

Exactly. In fact, the best way to determine a fair value for an investment is to estimate the net present value of future cash flows to owners: from dividends or a terminal acquisition.

Unless your time horizon was 1965-1982 or 1929-1940

I don't see why the current economy is substantially different from the past and sustained losses over a decade or longer aren't possible.

All things are possible.

You realize in real terms equities prices in EVERY western economy in the world beside the US are negative since 2000, right?

In Japan, they're (very) negative since 89. As much as 7%! Depending on if you measure using global inflation, US inflation, or Japanese inflation.

You realize that even in the US, there are three 20 year intervals where prices did not increase in real terms since 1890, and 1 30 year interval.

That's a decent percentage of the time.

The idea that they can never go down and stay down is lunacy.

No need to be a jerk, I didn't realize that because I'm an American without a background in financial markets' histories.

You could rephrase this comment more cordially

> Most western economies outside the US have been negative since 2000 as well.

> In Japan, they're quite negative over the last 30 years, once one accounts for

> Over the last 130 in the United States, there have been three intervals of >20 years where prices did not increase

You can present additional information that helps illustrate a point without being an antagonist, and people will be more receptive. It's particularly counterproductive to aggressively reply in agreement with more detail.

Well said Mr. Buffet... and accurate.

Tell it to the investors in the Russian stock exchange before 1914. Once you’re investments drop to zero they don’t go up again.

Goldman just ratcheted down 2021 projections, and they're still being optimistic. They will ratchet down again to show a great recession. Don't make a poor financial decision based on FOMO.

Link to source?

@tcharlton posted for me above.

https://news.ycombinator.com/item?id=22557599

How do you know that they are being optimistic? Honestly, they know no more than any of us. Now is basically just as good of a time to buy as any time in the last 10 years.

Many people have clearly not incorporated even the best-case predictions for COVID-19 into their expectations. Even if Goldman is aware of this, it's probably hard for them to add an explicit "people are being dumb about coronavirus" coefficient to their model.

It is in their interest to declare optimism. Pessimism gives one a chance to exit positions on 'green uptrends' and keeps other fees coming in. If people expect a downturn, spending of all sorts is restricted - and fees are questioned.

Shiller P/E ratio is 24.2 today, which is ... slightly below the level of 2006 before the last recession started (25.6 in 2006.3).

Frankly I won't be surprised even if S&P loses more than 30% from the current price. It is simply not a unthinkable scenario, considering that the historical median of S&P500 P/E is around 16.

* https://www.multpl.com/shiller-pe

Ironically, prices are higher if growth is expected to be lower.

Population Growth worldwide is expected to be lower. And most people think productivity growth is also going to be lower (harder to predict, this jumps with major new inventions).

As long as interest rates sit at 0, the P/E ratio is not returning to historical norms.

Prices are still 50% above historical norms. They're not falling that far. Retirees and home owners would riot in the streets.

I've also been thinking along those lines - it seems logical to me that if you expect ~7% yearly profit that the P/E ratio should be around 14 (1 / 0.07) and that if the market is very competitive (lots of available capital, low perceived risk, low-yielding alternatives such as bonds) and therefore you expect ~4% yearly profit the P/E ratio should be around 25 (1 / 0.04). However I have never really encountered this explanation anywhere which makes me wonder whether my reasoning is somehow wrong.

The denominator E goes up over time. If ratio is constant, then P also goes up.

Yes I think that makes sense. If you have real economic growth that can cause E to rise and through that mechanism P to rise. But even without economic growth, by reducing expected returns, you can keep E constant and get P to rise by increasing the P/E ratio. My sense is that historically the first mechanism was more important, but in the last 10 years the second played an important role.

>Retirees and home owners would riot in the streets.

Letting prices fall even further ...

Regarding the price development:

Prices will fall, because interest rates at 0 means that it is cheap to fund competition. Competition drives profits down.

Low interest rates have not funded R&D. R&D is at a record low. I imagine this is because perceived growth is low. Physically, a lot of things can't improve a whole lot more from where they are now. We've picked the low hanging fruits of almost every industry.

Improvements are not needed to compete - think mattress stores. Having a better product can be an aid in market entrance, but it is not needed.

They can't riot because coronavirus

Can you explain what is the "Shiller P/E" , and why it matters?

It is a measure of how valuable a company stock is (price-to-earnings ratio) but in contrast to the standard P/E which looks at data for only one year it looks at data for the previous ten years, so it's less volatile.

https://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-e...

There is more bad news to come. Infections in US and EU, supply chain issues, local business impacts and bankruptcies, repo markets, etc.

Buy-the-dip and dollar-cost-average work but you don't need to go in blind. I advise waiting until there's actually repeat good news before you buy in.

Why would one buy the dip when momentum is heavy downside (long term)? April will most likely be a short slaughter, sure, but after that very unpredictable.

That's what I'm saying. I see too many people get too mechanical about it when they would be better off making adjustments on significant news.

If you don't see some sudden positive in the next quarter, there's no reason to buy in now.

The market reacts to expected news, not just current news. The fact that bad news is coming might already be priced in. It's hard to say how bad a piece of news would have to be to make expectations worse.

The market hates uncertainty the most and nothing about this pandemic or the economic impacts are certain. There is definitely no good news anytime soon for there to be a serious uptrend.

What about selling now in order to re-buy in over time?

That works too. If you think there's a clear trend downward then there's no reason to just stay in and watch your positions lose value. Some people might though to keep their long-term capital gains taxes.

Ecb is flooding market with money again. The dynamics of all this liquidity sloshing around is really hard to grasp. Sure everything is crashing around us but all that liquidity has to go somewhere, and since 08 it's basically just ballooned up the stock market and real estate. Where's the money sloshing off to next?

Right now? US treasuries. They’re paying below 0.5% for the first time ever.

Here is my logic as a retail investor. The market has lost close to 20-30% from the peak. Will it regain the peak, for sure. By when ? Hard to predict. All I know is that the rate of climb need not be the same as the rate of the fall.

This virus will bring about significant collateral damage to the global economy. Already airlines, cruises are hurt. Soon, tourism and hospitality industry will be hit. Transport and logistics will be next followed by retail. So the cascading collateral damage is quite unpredictable at this time. Double this with plunging oil prices.

So unless you are willing to wait for 10+ years from now, it's unwise to invest a lump sum amount at once. If it were me, I will just invest small amounts periodically. Like every couple of weeks or so.

The argument could be made that if you do not have 10+ years to wait, you should not be investing large amounts in the stock market at any time. So now would probably even be a good time to do so, but of course, nobody knows.

This is a mantra repeated by everyone in the field but what about if I have been in the stock market for 10+ years and I wanted to get out in the next month for my retirement? Sure, maybe I have gained something anyway but between this periodic crashes and the commission fees everybody applies looks likr the real winners are just the bankers

You should have been buying bonds in larger amounts over the past years. Any target date retirement plan is doing that for you, because you are targeting a % of your portfolio in bonds/stocks you are probably buying more stocks than bonds now to get into balance. If you are self managed and haven't been doing that - well too bad, delay your retirement.

Note that even if you are retired you should still have some stocks as a hedge against your retirement having more than a year left before you die.

Well personally I'm not going to retire tomorrow but in my specific case I do have a retirement plan which buys from an allegedly vast portfolio and yet right now, after almost 10 years, if I take into account commission fees I own like 10% less of what I put into it. So at least in this case, putting my savings under a mattress would have been a better option.

There are some bad plans. Demand your HR department give you better options.

Trouble is, it's easy to identify the bad plans in hindsight. Reliably predicting which plans will be good for the next few decades and which will be bad may not be so easy.

If you didn't choose a good plan that is on you. If a good plan wasn't an option you should complain. Most big companies had good plans. Fidelity's target date plan have been good, so why are those not an option?

if you had been in the market for the last ten years with SP500 you would be up something like 150% of your initial investment, even with the latest drops. You would be very upset about the latest drop, but you would still be happy with your choice.

EDIT: saw your other reply: sadly many investment funds are just not worth it, it's not your fault, banks and similar are often incentivized to sell you a fund which has high fees and generally trails the market, the best choice is to invest in low cost index-tracking funds, but this is not obvious knowledge.

>but what about if I have been in the stock market for 10+ years and I wanted to get out in the next month for my retirement?

You shouldn't be. Unless you plan to die soon and really live it up, you should be have money you need now, money you need next year, money you need next decade, etc. When you approach retirement, you should start moving the money you need now (at the point of retirement) into much less volatile investments. A year later you should move the money you need next year (at the point of retirement) into a similar vehicle. As you get closer, each bucket of money eventually moves into the safest vehicle possible (FDIC insured savings/checking account, ready for you to use it in day to day transactions). At the point of retirement, assuming you plan to live for a few more decades, most of your money should still be in the market but what you need in the short term should be in cash already and what you need in the medium term should be in a low risk investment to protect against inflation.

This is the general pattern, the exact situation depend upon your own financial situation, health situation, family situation, and many other factors that a financial/investment adviser would be able to help you with.

The last pandemic was the spanish flu which lasted a year, I think the markets will have recovered within a year or two.

The swine flu in 2009/2019 was a worldwide h1n1 pandemic that killed 150k to 500k depending on who you ask/how you count.

The h1n1 prior to that was the 1918 one that killed 500M people.

That doesn't follow. If people expected the markets to be back up in two years, they wouldn't be this low right now.

Just because the pandemic ends doesn't mean the value of companies returns - some will have shrunk, some will have failed.

Does it still make sense to talk about what people expects when discussing the markets? isn't the vast majority of the action these days is coming from algorithms that try to predict the very very near future?

Furthermore, parent is assuming investors are rational. In an environment like the current, when ppl see their portfolio drop 10% in a single day and worry about their lives, they aren’t making rational pros vs cons decisions. They aren’t calculating future value.

They are panicking and just do whatever they can to make their lizard brains feel better.

The majority of individual investors should be dollar cost averaging (investing the same amount of money at consistent intervals) over the long haul. This pandemic isn't impacting my strategy and i'm staying the course. I'm not aiming to retire for 20 years so this will (hopefully) just be a blip in my long-term returns.

Meanwhile people about to retire are watching their retirement funds evaporate.

They might be, but hopefully they realized that you need to change your composition as you get closer to retirement.

Exactly, your strategy evolves as you age. But allocation, investment schedule and amount shouldn't change over a short time period or in light of any external factors.

External factors can impact expected lifespan, expected retirement date, amount available to invest, and long-term structural factors impacting allocation.

Those things shouldn't change in response to short-term market fluctuations, but not all external events are limited to short-term market fluctuations.

I'd really hope that people about to retire don't have a significant amount of their investments in equities...

It is common to maintain a significant amount in equities well into retirement. Due to low interest rates, it sometimes is the only valid strategy.

The key is to maintain a mix that allows for short to medium term fluctuations in the market (and economy) like this.

EDIT: I highly recommend the book "A Random Walk Down Wall Street" for more details on asset allocation strategies at various ages.

> It is common to maintain a significant amount in equities well into retirement. Due to low interest rates, it sometimes is the only valid strategy.

Why are stocks a valid strategy (where there's possibility of easily losing 20-30%), while losing a few percent due to inflation in something like a savings account isn't?

retirements these days can last 20+ years (65 => 85 or earlier if wealthy). Federal Reserve mandate means your money loses significant value every year if stuck in a savings account. i am not aware of savings accounts paying 3%+, even bonds don't return that YoY. yes you may "avoid" losing 20-30% in one year, but those tend to come back quickly; with risk averse investments you're just stemming losses, not breaking even.

also see cFIREsim for an idea of the math: you're basically guaranteed to run out of money if you try to park in safe havens and you end up living a fair bit after you retire.

I wouldn't say that sticking with savings accounts is an invalid strategy. If you have enough money, many strategies are viable.

If you are struggling to stay within a "safe" withdrawal rate of 2-3%, you may find that equities are your only chance of getting the returns that you need.

Isn’t it suggested to wean off equities as one nears retirement age? Isn’t it done automatically by pension funds? I’m from India where the government owned retirement fund (EPF) is only now testing equity waters and the recent fund (NPS) isn’t big enough to cause damage so I’m not aware of how this works.

I've heard the following advice: Hold a % of bonds equal to the % of life you've lived and a % of stocks equal to the % of life you have left.

Ex. If you're 40 and think you'll live to 100, try to hold 40% bonds and 60% stocks.

An even simpler and mostly equivalent formulation is the "your age in bonds" rule of thumb.

The version I’ve heard is “equity share of your investments == life expectancy - current age”

Yes, but pretty much all asset classes are getting hammered except gold.

Most people close to retiring should have already been slowly moving their investments into lower risk forms of investments before now, anyway.

You should start moving from stocks to bonds about 10 years before you retire just because of things like this.

IIRC there is some evidence[0] that investing a lump sum at once will, on average, be better than DCA. But DCA has significant psychological advantages, so it may still be a good choice.

Obviously if you do not hold significant cash and are going to invest your savings monthly there is no difference between DCA and lump sum investing.

[0] https://www.jstor.org/stable/2330513?seq=1

The term 'dollar-cost-averaging' is used ambiguously. Sometimes it refers to intentionally delaying purchasing compared to a lump sum, in order to spread the purchase out. That's what the paper you're linking to is talking about.

However, what retail investors should be doing is investing some fraction of their paycheck each pay cycle, or something like that. That's not the same thing. There is no lump sum at their disposal to invest - they're investing as soon as they have the money. What they're not doing is saving up cash and trying to buy the dips in lump sums, which I think most would agree is a bad idea.

So they're both investing as soon as they have the money available, and they're benefiting from the averaging, which you may or may not call 'dollar cost averaging'. It seems ideal to me, and this is what I think the comment you're replying to is referring to.

10+ years looks a bit extreme.

But the small amounts is a wise advice.

if you bought near the top of the dot com bubble or the 2008 top, it took until 2013 for the S&P500 to reach new highs. not counting dividends though.

Historical analysis says that generally speaking, dollar cost averaging is inferior to one-time lump sum investments unless you buy lump-sum at the very top of a bull cycle. Lump-sum investment is usually better in all other cases, you get the benefit of interest as well, which is at least 30% of the total return.

This is even more true in cases of bear markets. Since the market will most likely rise compared to where it is now, going all-in in a severely depressed market is usually advantageous.

Psychologically, of course, it is more difficult to do so as you have to go against "common wisdom".

Don't get me wrong though,dollar-cost averaging is a great strategy if you don't have lump sums laying around.

I think "every couple weeks" was a reference to an automatic 401(k) contribution from a paycheck.

You seem to be referring to a hypothetical choice between investing a large accumulation of cash at the start of a period and portioning it out over the period, but the actual recommendation for dollar cost averaging is about moving money into investments as it becomes available rather than accumulating cash and trying to time the market.

If you've already accumulated a large cash position, yes, it's almost always better to dump it in the market, but unless it was an unexpected windfall, that just means you were suboptimally failing to use DCA before.

Yes, many people fail to understand this concept of currency cost averaging. Thanks for the succinct explanation.

Invest in funds you know are bearish. That's the market for the next couple of months at the very least dealing with the shocks, even if we get a small rally after good news.

I don't trust Trump to handle this situation with any more grace than he has till now so I predict more crash days.

Buckle up. It's going to be a hell of a ride.

Absolutely. My plan is to increase my 401k and other market account contributions by a reasonable percent. I'm viewing this as a steep discount for 1-6 months or more.

> If it were me, I will just invest small amounts periodically.

Dollar cost averaging is always a solid investment strategy.

> Double this with plunging oil prices.

Who knows how long oil prices will be falling? In the end it's a pissing contest between Russia, Saudi-Arabia and the US. It may be over tomorrow, it may be over in a year...

A recession will depress oil prices all by itself. Plus dramatic reduction in air travel and now people teleworking (reduction in domestic fuel consumption). China has reduced output a lot, restricted movement (work from home), and exported less stuff, meaning less shipping and train oil consumption the world over.

I'm saving money in case of lay offs. Investing is the last thing I'm thinking about.

Definitely a smart plan. I've got six months of expenses in my emergency fund earning peanuts but my mind is much more at ease because of it. Worth it.

Same. It has long been a dinner topic, since my wife has wanted to invest the cash and I have been pushing to actually save more cash.

Now suddenly the statement showing our savings and CDs is my spouse's favorite part of our portfolio.

Index funds that should probanly recover given a sufficient tine don't cover emergency expenses tomorrow!

We'll see but I think in six months the outbreak will be a distant memory. And we'll be wondering why were we so unprepared (psychologically) that is. The disease is not nearly as severe to warrant this much worry. 15K people already died of the flu this year in the US alone (what is that, 200 people per day?), yet nobody talks about that, it is "normal".

That being said I do think that some segments won't be the same for a long time - especially the type of superficial travel, where people only go to a place because other people did it and seemed so cool.

I think "instagram travel" will have lost its shine.

I hope you're right. On the other hand, we can see six months into the future by looking at the southern hemisphere. Tom Hanks and his wife got Covid19 in Australia, during the Australian summer. I worry that this doesn't bode well for hopes of the spread abating in the warmer months.

The death rates are only low because people are able to get hospital care. ~20% of cases require hospitalisation and a large fraction of them will die without hospital care.

At the current growth rate (of confirmed cases) in the US, in about two weeks there will be more cases in the US requiring hospitalisation than there are ICU ventilators in the entire United States.

We need to get that growth rate down, or a decent chunk of the people who are hospitalised and unable to get a ventilator will die.

I think that initially there is a strong selection for discovering cases that do require hospital care. We'll see what the future holds.

In China the CFR (crude fatality rate) started at 17% and dropped to 0.7%, check figure 4 here:

https://who.int/docs/default-source/coronaviruse/who-china-j...

I the end it might be that Chinese response will be the most effective model to how to best respond to an epidemic.

I'm starting to think that these 'we don't know the denominator' arguments are somewhat irrelevant.

E.g. it might be that 20% of cases require hospitalisation. Or it might be that there are ten times as many cases as we thought, and only 2% require hospitalisation.

But the number of people in hospital remains the same in either case, as do predictions for the future strain on the healthcare system (up until the disease infects a significant fraction of the total population).

Society responds very differently to a 20% hospitalization rate versus a 2% one. Emotion is a driving factor. The problem is panic, which will overwhelm hospitals sooner than the actual hospitalization rate. Thus a 2% rate is much much better to mitigate panic

You are more likely to die in the stampede triggered by a fire in a crowded cinema, than the fire itself.

I don't think you're making much sense here.

If 20% of a small number and 2% of a bigger number are the same number of people in hospital, the hospitals will be in the same situation. What is emotion driving? People showing up in emergency? These people will be triaged, and will not take up the most limited resource - ventilators - unless they need them.

I don't think 'panic' will overwhelm anything other than the triage nurses. This is not what you should be worried about.

To me the explanation is straigthfoward

Take any disease that kills 99% of those that get it. You are going to be a lot more scared of it, than one that kills 0.1% of infected targets. It does not matter if the overall death number is the same.

People will act far less logically in the first case than the second.

This is not about "math" it is about emotional responses and how that affects everything. As I said, you are more likely to be trampled to death than die in the fire that caused the panic.

But how strained the hospitals get has little to do with how panicked people are.

I don't care about what tugs on people's fears the most. I'm not afraid of their fear, I'm afraid of hospitals being overrun by actual cases.

Highly encourage everyone to heed the advice in OP's last line.

Hedge your investments. Rather then dump 100k at once into SPY (SPX if not using your 401k) or similar. Invest 10k per week/month. Thousands of people way smarter than you and with 20-30 years of experience fail at timing the market. You will not be able to time the market. Hedge into your investments.

Or buy puts on spy/calls on VXX and hedge your downside in an uncertain market

Yes, but options trading is not for the average trader/faint of heart. You can easily lose your entire position if not timed correctly.

The market call still go down after you call a bottom. The market can still go up after you call a peak. The market can remain irrational longer than you can remain solvent.

I don't think it's wise to judge based on the peaks and bottoms. Those are the outliers. The price touched there for a fleeting moment and then backed away. I'd rather calculate a trend-line over a long timespan that covers multiple boom-bust cycles, and note when the price crosses it. When the price is below the line, that's a relatively better time to be buying, if you have spare cash, and when it's above the line, that's a relatively better time to be selling, if you have the stocks.

You'll drive yourself crazy trying to predict the optimal timing for large orders.

Putting in a little at a time, or taking out a little at a time, based on broad criteria and your own goals as an investor, is way better than intensive analysis or day-trading. Once a paycheck or once a month is fine. Even better if you can set it up to be automatic, and you don't have to think about it too much.

Unfortunately, I don't have any spare cash, but those who heeded the warning of inverted yield and switched from "gradually buy" to "gradually sell" back then probably have enough cash savings and downward movement to switch back, or to at least stop selling for a while.

Perhaps trend-line based approach that you described is similar to the strategy called "Value Averaging" which is a valuation based approach to averaging (instead of dollar cost averaging), where CAPE ratio or expected return is used to estimate long term trend. [1] https://en.m.wikipedia.org/wiki/Value_averaging

“ Will it regain the peak, for sure. By when ? Hard to predict”

I don’t think you can be so sure of this

As someone who has very little grasp of global markets, I'd kind of assumed that bitcoin and other cryptos would rally if stock markets were falling under a global pandemic, but the cryptos seem to be tanking along with them. Is this down to reduced consumer confidence?

There's no one left in the world to get sucked into that scam, they all got obliterated in that last run to $21k

I mean, billions in trading volume says otherwise.

Machines. Just like on the market.

More like a "the world is crash and burning I want real cash in my pocket, NOW!" kinda thing. It's hard to buy toilet paper and water with Bitcoin at your local Costco.

Costco sounds as bad as a flight

It's hard to buy toilet paper at all!

Buy a $60 bidet attachment, you savages!

More like reduced investor confidence, but they are correlated. Essentially, everyone wants a safe place to put their money right now. That usually means bonds (especially government bonds) and cold hard cash.

Most people think of bitcoin as an investment, and a risky one at that. So they are taking their money out and putting it in safer places

My theory is that BTC is a “high risk” position/part of someone’s portfolio. So people are seeing lots of cheap stocks (high risk), noticing an opportunity and moving out of BTC to buy stocks. Just a theory.

> I'd kind of assumed that bitcoin and other cryptos would rally if stock markets were falling under a global pandemic,

Cryptocurrency has been used as a speculative investment.

It's riskier than stocks, so it has fallen further.

Yours was a widespread conviction born of the idea that bitcoin and other crypto-assets would be seen as de-correlated safe-havens for funds drawn from volatile traditional equity markets.

The simultaneous drop in value is the very textbook definition of correlation, and therefore suggests that the same decision processes (perhaps even the same decision-makers) are operating in both types of markets and that, consequentially, bitcoin and crypto-assets are factually not alternatives at all.

Even more interesting is Bitcoin has been a leading indicator for tech stocks for some time now. Bitcoin drops often led FANG drops by a few days.

One of the prevailing ideas in several theories of financial market agent behaviour is that crashes occur when all or at least most participants’ horizons synchronise, leading to everybody acting on the same information uniformly. This is likely what is occurring: probably most investors are focussing on the here-and-now and thus on stopping their losses and/or reducing their exposure to risk.

Makes sense. Good thought

Excellent reply, thank you.

The initial 2008 sell-off just like now also affected Gold negatively, although much less than Bitcoin now. I think BTC could be seen in a few years as a hedge against the USD.

Couple of possibilities:

1. People who buy bitcoin also are in wallstreetbets selling options they don't understand.

When they get a margin call and have to cover the money they lost, they sell bitcoin.

2. people in bitcoin are selling to transfer into stocks

My assumption is a lot of them moved their money to purchase options on the stock market or to cover their butts when one of those options went south.

Not that I know anything about charts, but it did look like a head/shoulder chart as well a while back that would have suggested a dip was coming anyways.

bitcoin has been dropping...

https://www.bitcoin.de/de

The high at 12:00 am today was 7k now it's down to 5700 euro.

People are selling at 5500

"and other cryptos"

"but the cryptos"

Please say cryptocurrencies.

http://www.cryptoisnotcryptocurrency.com/

usage defines language not the other way around

Like it or not, "crypto" now means cryptocurrency, and "cryptography" means cryptography

Linguistically they can both define it as they please really. Just like how a joint can be anatomical, a place, or a drug delivery mechanism.

Really it is surprising that there isn't more contention over abbreviations.

    Usage defines language not the other way around

That depends on whether you take a prescriptive or descriptive approach.

And the prescriptivist approach is dumb, because no one has the authority to prescribe English usage. We don’t have an Academie française, and even English dictionaries explicitly disavow any intent to mandate correct usage and state that they are only cataloging real world speech.

It's also context-sensitive. If you are talking about investing and mention crypto, it's pretty obviously implying cryptocurrencies.

I literally died reading this

> usage defines language not the other way around

I say we start referring to cryptocurrencies as "cyber cash" and then abbreviate it to "cyber". If anyone should suffer from appropriated terminology at the hands of blockchainiacs, it ought to be the insufferable sales staff at security industry conferences.

But "cyber" already means cybersex? I mean, that's what I think of when I hear Cyber Monday, Cyber Security, etc.

"usage defines language"

Yeah that's exactly why GP is asking to change the usage.

Why? "cryptos" only refers to cryptocurrencies since nobody says cryptographies.

There are a lot of communities, from Reddit's /r/crypto to Freenode's ##crypto channel, which use the "crypto" shorthand for "cryptography" have been around for decades and in the past couple of years have been inundated with cryptocurrency obsession.

TL;DR - The main goal is: "Get off our lawn."

Yeah, I get that. But I mean the plural version should be exclusive to cryptocurrencies since I've never seen the plural form of cryptography in use. It seems it's fairly unambiguous in that "cryptos" as a plural term has never been used to refer to cryptography(ies).

In a bull market, every explanation seems right. In a bear market every explanation turned out wrong.

I still assume it is possible and likely that something like cryptocurrency will eventually become incredibly valuable, but I see that happening only when technical and social hurdles are overcome to make it as widespread and scalable as the current credit card system for everyday transactions.

Unfortunately for current cryptocurrencies, they just don't have what it takes to compete with decades of trust to get everyone to put their daily spending money in them, that is what will make a future system valuable. The current role they play as a speculative investment seems quite silly to me, literally they only thing they are good for is transactions, if you can't do that effectively I don't see value in the tokens at all.

Imagine if someone started a stock exchange and listed a single stock, their own, the stock for the exchange itself, and no one else's. While you can buy some things with bitcoin or ethereum, it's nowhere near widespread, so that really seems to be effectively what it functions as for now, which looks very bizarre on its face. Unfortunately for the people who do want to get rich, if there is an eventual winner in crypto, their rise will probably look something like what we see now, limited buy in from speculators followed by some inflection point, so it's entirely possible buying this dip of ethereum or some other coin might be the right thing, but I'm just not sure any of them are ready yet. Even with SegWit and other stuff happening in bitcoin, it just isn't clear to me that becoming a cash or credit card replacement system is even the goal anymore, which seems like they are just riding on their first mover advantage to prop up the value more than anything at this point.

If they were competing markets and the demand transferred sure that would make sense to see that dynamic. But it is common cause in this case and it doesn't privledge Cryptocurrency as it is a delivery and demand issue.

We’re tanking the world economy to try and stop the spread of a virus that cannot be stopped, and has a median death rate older than the expected life span. It’s so mild young people think they have the flu or a cold, and over 80% of people over 80 also recover.

The economic outcomes of the interventions could end up being worse than the disease, as people will lose their jobs, houses, and healthcare.

It’s hysteria without question. So what is the game plan for humanity? Tank the global economy every time a novel virus hits? We are only gonna get away with this hysteria once, it’s not something a society can tolerate. This has to become a ‘new normal’.

Why do we compare covid with "just the flu" like that's supposed to make it seem benign?

The flu is consistently among the leading cause of death annually, often higher than car accidents. Is it just that the flu is so commonplace that we've gotten numb to its impact?

You're missing a very important fact, which is that 15-20% of all ages need a hospital. Get ready for warehouses full of sick people like China had: and that was with a total social lockdown.

I went out to grab some food last night and while I was just standing there waiting to be served I looked around at people. Everyone is close, who know who is making the food. We are all going to get it, its just that simple. It will just go into circulation like the flu. We cant shut down society over this and live in hermetically sealed chambers.

Schools are cancelled, offices are closed and people that work in any form of travel related industry are going to be unemployed with essentially no welfare net.

It sucks but there really is not a long term alternative. Eventually we will have a yearly corona vaccine.

People are panic buying toilet paper for crying out loud.

Unless you are planning on retiring in the next few years, you should be looking at this as the buying opportunity of a life time. This is at least the 4th panic sell off I've seen.

You first.

Your next, I'll follow

The toilet paper "panic buy" is overblown. People are stocking up extra on necessities, sure, but what's different about toilet paper is how bulky it is. I doubt most stores have large stocks to cover extra demand cause it takes up too much space. Hence it doesn't take very much extra demand to deplete shelves.

More charitably, a toilet paper run is a pleasing, simple, humorous and yet correct metaphor for general preparedness. People are buying cans too, but that's not as funny.

It's not as dramatic to show a picture of a shelf of canned goods only half-stocked instead of fully stocked, as opposed to a an empty shelf of toilet paper.

That's what I've seen at my local Costco. TP is gone, canned goods are running lower than usual but not actually out of stock.

I agree with you, but I don't think this is "panic" selling. People are selling because this is causing a significant disruption to the global economy.

Of course, still doesn't change the fact that everyone should be investing fairly normally. A chunk of my next paycheck is still going into the market, just like every other paycheck I've ever received.

If you want to be contrarian:

DO the opposite of whatever the top comment here says

There is some deep truth in your comment, however simple it may seem.

Joe Kennedy, a famous rich investor in the 1930's, exited the stock market in timely fashion after a shoeshine boy gave him some stock tips. He figured that when the shoeshine boys have tips, the market is too popular for its own good.

In general the public consensus seems to be always one step behind after the developments on the stock market. It might actually make sense to do exactly the opposite of what everybody is advising.

Ha, I had a co-worker make the asinine comment that "real estate only goes up!" in about 2007. I sold my property a few months later. Great timing? Naw I put the profit into the stock market just in time for 2008!

I'm downvoting you, to be able to follow your advice.

Something ive wondered about these 'circuit breaker' halts...do they actually work to prevent mass sell off or are they just prolonging the inevitable?

Apparently not only can the powers that be halt trading momentarily, they can simply close the market altogether if trading is "bad" enough. How is that not manipulating the market? Why shouldnt we all be able to sell?

disclosure: Im firmly in the blue collar worker category. I dont own stocks.

> How is that not manipulating the market?

Nobody said it isn't. In fact, that's the whole point: manipulate people to chill out, take a few minutes to think, and then get back to it.

so isnt it bad to manipulate a free market? I know China gets beaten up about it all the time.

Stock exchanges are heavily regulated. That's why trades can be made so quickly.

The market exists through manipulation (regulation).

There is no such thing as a free market that erupts spontaneously. Despite the rhetoric from certain circles, “free” markets are actually highly managed and regulated entities. There’s a reason why places with the best (largely defined as consistent) regulations, and greatest stability are also financial centres.

If markets erupted without any regulatory framework then their quality would be highly correlated with the level of anarchy in a place. Whereas the reality is almost the opposite.

When knowledgeable people talk about "market manipulation", they're generally talking about secret market manipulation, fiddling with the market structure in private to extract value from it. Wash trading is a good explanatory example; you're tricking people into thinking market volume is higher than it actually is, to get them to do things they wouldn't do if they knew the real story. Setting clear rules known in advance is "manipulation" by some definitions, but it's not really the same thing.

There are some people who beat up China for simply setting rules in the market, and they're definitely wrong to do so, although you shouldn't confuse this with people saying the specific rules China sets are bad.

I think it is mostly required because trades are executed so quickly now by so many bots that it's possible for them to get into feedback loops that are hard to model. Stopping the market gives everyone a chance to decide what parameters to tweak before getting back at it.

When you define the rules ahead of time, I think it's perfectly fine. (I tend to be in the camp of "let the market be a market", but these circuit breakers are set well away from any normal market activity, are fairly proportionate, and obviously well-understood ahead of time, so I think they're better [meaning more practical] than my general "let 'em play" attitude.)

Panic is real. And it can be very difficult to undo some of the damage caused by panic.

The circuit breakers are a neutral addition. In some cases they may be triggered unnecessarily and are just delaying the inevitable. In others they may have a very real benefit in giving people time to figure out what’s really going on.

To be fair, I’m not sure how this affects algorithmic trading, which is not gonna be affected by the emotional aspect and are the dominant players today.

It depends. They can help prevent "artificial" crashes caused by liquidity issues and/or algo-driven feedback loops, and, maybe, to some extent, FOMO feedback loops (everyone is selling so I should too!).

If there is sudden mass sell-off, the buy side of the order book can run thin. The order book is supposed to be a representation of people's intentions to buy or sell, but it's no a true representation because people don't necessarily bother putting in limit orders far away from the current price. The halt gives time for people to put in their buy orders and put some back-pressure on the sell-off.

It also gives time for traders to tweak or turn off their algos if they are behaving badly.

If the crash is a "true" crash caused by fundamentals, in other words the economy is going to shit, I don't see how halting can help much.

I'm going to recycle advice I gave earlier this week [1] and say it's way too premature to consider this a buying opportunity. Short term dips followed by recoveries are the hallmarks of a bull market. We're now clearly in bear market territory. In a bear market, you need to be wary of "dead cat bounces" ie a short term rally followed by a steeper decline.

In 2008 this bear market lasted well over a year.

If you're already in the market, well you're kind of stuck now. Who knows how much further it will fall or even if it will? If anyone knew that, they'd be rich.

But this, as always, is a question of probabilities. In the short term there seems to be way more downside than upside potential. As much as it may have fallen in the last month, we're only now really getting back to the long term mean. Typically, during a market correction, the market oversells so further drops are entirely possible, even likely. Another 10-20% drop is (IMHO) completely realistic.

[1]: https://news.ycombinator.com/item?id=22527631

I don't think it makes sense for there to be such a thing as a bear market. If everybody knows that it's going to go down, then they will sell until the price drops to about the place where they expect it to eventually hit. That's what a crash is. The final price after the crash is the price at which the market is split between "it will go up" and "it will go down." If the bears and the bulls had any other proportion than 50/50 then the price would go up or down until the bears and bulls changed teams back to 50/50. The only thing that's guaranteed about stocks is that the average person is always uncertain.

People don't know how far it's going to go down.

We have no idea what kind of disruption is going to happen to global GDP. As the situation clarifies itself, it may very easily become worse, which would continue to drive it down.

What OP is saying is that the current price reflects the average investors best guess at how bad it's going to get. If some more people start thinking it's going to get worse they will sell and that statement will (essentially be) instantaneously true again.

But the 2008 credit crisis was structural in nature and this one is not.

The US political proceed being so fucked up that it can't react in a meaningful and halfway coordinated way is structural. That's far from the whole problem, but it's part.

> If you're already in the market, well you're kind of stuck now.

I don't think this really makes sense, unless there is some barrier to entry to selling. If you wouldn't advise someone with a free $20k to invest, why would you advise someone with $20k in investments to hold on, just because of sunk cost? It's effectively the same thing. If you don't need the money for a long time, you should invest regardless of what the market is doing. If you do need the money soon, you shouldn't be in the market at all.

I certainly understand your sentiment and it's a reasonable one: if you wouldn't buy, why would you hold? Normally I like this POV. People stick with "losers" (stocks, not people) to "get their money back" and that certainly applies there: you've already lost that money, you just haven't realized it.

But there is a difference. Like if you're in the market now, it's for a reason. Likewise, if you're out of the market now, there's a reason. Hopefully your reason for being in is long term (5+ years), at which point, not a lot has changed. If you still have gains and those aren't in a tax-deferred account, you may accrue a tax debt by selling now.

But for those not in yet, there will be opportunity here. There always is because at some point the market is oversold. My point is that we're nowhere near that yet because the number of cases is only going to go up for at least another 3-6 months and the likelihood that you miss a sustained rally in that period is pretty low.

Can anyone say why gold (GLD) is dropping so much too? I would've thought it would be a rough inverse of the market. It's still up over the last month (just barely), but down over the past several days.

The impact of the Coronavirus epidemic means that many companies & individuals can see that they’re going to have a short term cash squeeze this year - they have interest payments due & the income to pay it isn’t going to be there.

So they’re selling anything that can be sold to raise the cash to make those interest payments - in a strongly deflationary environment you’d expect $/£/€ to rise against everything, including gold and bitcoin, which is exactly what’s happening.

People are getting caught in a liquidity crisis, which is one thing that happened during 2008 too (albeit in a slightly different way). They don't have enough cash for basic use and are being forced to sell whatever they have to meet obligations.

I suspect (but I'm far from an expert) that a lot of market products are traded together, automatically by computer systems. Invest in everything, sell and buy a bit of everything at the same time. Why do various cryptos seem to follow each other (roughly) up and downwards?

Let's say you've been buying gold since its been at $1300/oz (or even before that), at what point do you tell yourself the moment is right to start selling in order to buy things for cheap?

The point of gold is to have buying power in times where very few have any of it. So liquidate some gold and start buying healthy companies for the cheap.

officially into the bear market.. so far 8000 points down from its peak in a month, Now this may be good for the option sellers or biggies, regular investors should stay away (or use this to accumulate)

Average people should not try to time the market for good or for bad. It's a fools errand.

Keep putting money into low cost mutual funds, preferably though some tax efficient vehicle (e.g. a pension if possible).

When's the lowest point? I did some rough fits with some stupidly simply logistic function:

http://s9w.io/corona_2020-03-12.png

US point of highest increase according to this is in "2.6" days with a standard deviation of 0.76.

Does this bode well for the private equity technology sector? Intuitively it would seem that people will be looking for different investment vehicles, and here we are in startup land already working remotely, ahead of the curve. Of course the risk is higher and it could be wishful thinking.

Private equity and public markets get money from the same source.

Precious metals like gold is also underperforming when it supposed to act as a safe haven

My suspicion is this is a very small number of entities going "sell our bullion on paper so we can buy the dip", probably why bitcoin is down 25% and change last time I looked too.

I've seen precious metals move a lot more than this for no apparent reason.

Do not "buy the dip". It will go down more, like in 2008.

It seems everyone is a financial guru these days. I wonder what these people are doing on their keyboards. Why aren't they all on gold plated yachts?

Are there no keyboards on gold plated yachts?

I cant even afford a gold plated keyboard. :-(

https://www.tomshardware.com/news/24k-gold-keyboard

Just ordered !

Isn't buying silver plated better due to germicidal properties of silver?

I've pulled off some pretty great trades in my time, for example, I had the conviction that the Sprint merger was going to get approved and I bought Sprint stock in January, nearly doubled my money.

The only problem is that I've only got $5k to invest, especially if I'm maintaining a healthy rainy day fund. And I'm not throwing all $5k into a single stock. That's why I'm not on a gold plated yacht.

The truth is you could be a financial genius but if you grew up in a middle class family and have basically zero inherited wealth, you're not going to have the money to invest.

If you are a financial genius you will soon have money to invest, it doesn't take much to start, and every year there are a few doubling opportunities. Most of us are not financial genius and so we only realize they existed in hindsight. However there were always signs that could have been seen in advance - and there are always ways to cut your losses. If you don't start with might it might take 20 years but a real financial genius can be rich even if their source of income during that 20 years is flipping burgers.

Hey man, posting this from my gold plated yacht.. want some trading advice?

30% returns on chump change is still chump change, but if you already have a yacht, 30% returns will allow you to gold-plate it.

It's far more likely that those financial geniuses are just not worried about retirement or college tuition for their kids. Because the strongest correlating factor for getting richer is already being rich, and not being smart with money.

The real question is... why aren't all yachts now gold-plated yachts? If my father gave me $1 billion 40 years ago, I would have to be literally the dumbest idiot in the world--or the unluckiest schliemazel in the world--to have less than that now. Instead, I just got a debt-free bachelor's degree, and so I'm not rich now, but still doing okay.

Some of us only entered the markets now (puts) because they hedged that they know more about epidemology than investors did.

I don't think I can beat wall street except when wall street doesn't know how to respond.

If your time horizon is more than a year, why not buy the dip?

Sure, I wouldn't put 100% of my cash to work right now, but I think it's sensible to come up with a list of stocks you feel are beat up, and dollar cost average buying them.

Of course this is hard to do if your portfolio is 100% invested already, and you have little cash left.

S&P fell in late 2000 and returned to that peak in in 2007.

S&P crashed in 2008 and recovered in 2013.

1 year is way too short a timeline. Maybe 5-10 years is the shortest time horizon to not be worried about market timing

EDIT: what part of this comment merited the cascade of downvotes (-5 at this moment)? You can verify the first two points fairly easily, and the last line is general advice given by many financial professionals and evidenced by the first two.

And for the Tech bubble, Nasdaq peaked at 5,046.86 on March 1999, and didn't return to that level March 2, 2015, 16 years later.

For a 50% fall, there needs to be a 100% increase to reach back the same levels and hence the timelines might be longer.

True, but we aren't near the peak. Most likely, you don't need to wait 5-10 years for stocks to go above the current price range. You might need to wait longer for it to return the peak, I agree.

"Losers average losers" (Paul Tudor Jones)

Do not average down.

Especially since the number of "confirmed" cases is extremely limited by the number of tests.

The infected numbers will rise precipitously as testing rolls out, and the apparent growth rate will freak people out and roil the market more.

By all means, please keep selling! Personally, I'm betting that the markets will recover pretty quickly after things actually start to improve, and I'll be surprised if this skittishness doesn't pay for the trip to Venice that I'm now planning to take in the Spring :D

It'll still be gamble, but I like these odds.

The other way it'll show up in an absence of testing will be hospitals running out of beds. Which will be invisible in the media until it happens and doesn't let up (see Italy, which was doing okay up to a few weeks ago).

I think and hope that's less likely, but it would still be bad for the markets in the short term either way. I don't think that failing to test people in order to artificially reduce "the numbers" will keep the markets afloat for much longer.

A dip implies a bottom exists. Right now it's just a steep slope with no bottom in sight.

A steep slope with no bottom in sight does not imply that a bottom does not exist.

Indeed it’s clear that a bottom must exist. Being unable to infer where it may be does not negate that certainty.

Money must exist?

No, but companies must have some value greater than zero since they generate future cash flows.

I've got a company to sell you!

A bottom always exists. It is zero. There is no top however.

Leveraged financial instruments can create a negative bottom. Don't assume anything magical about zero.

Honestly, that is always the mentality of the market. Its going up with no top in sight! The next day its going down with no bottom in sight!

Except that bottoms have more natural barriers than tops.

Do not get your investment advice from random internet comments.

Do not make "all or nothing" investment choices. It's perfectly reasonable to stay the course with bi-monthly investment purchases in your 401k.

We will bottom out eventually, but you're unlikely to call the exact bottom.

The market has been overvalued and manipulated for years. Even Apple took out billions in loans for stock buybacks.[0] Boeing took out $43 billion in loans for stock buybacks[1] instead of investing in planes, QA and employees. Everyone knew this was a stock bubble caused by record low interest rates. COVID-19 is the pin that woke everyone up.

[0] https://9to5mac.com/2019/09/05/apple-is-borrowing/

[1] https://wolfstreet.com/2020/03/11/boeing-crashes-as-43-billi...

Interest rates are still low. This is not yet the financial crash and depression that will happen when the bond market pops.

Still, it was the first time when lowering interest rates didn't have a huge effect on the market, so the signs are there.

What is the proposed mechanism for the bond market popping here?

not sure, banks suddenly getting flooded with formerly leased vehicles and stuff like that? banks can be bailed out though but supply chains can't.

Disclaimer: not a specialist, this is what I gather from online research and discussions on reddit (please correct me if I get anything wrong!).

The issue is with corporate debt. A lot of it is unsustainable in the event of an economic downturn [1]. Already people are leaving the junk bond market [2]. There is a risk that BBB-rated bonds will get downgraded, which would mean that pension funds can no longer keep them in their portfolio. If this happens, these bonds will move into the junk bond market, increasing supply in that market with already decreasing demand. That means that interest rates on lower-rated bonds will go up, meaning that it will become harder for companies that are not in a strong position to obtain credit, which they might need to if times get harder.

Especially in a few sectors (tourism, shipping, oil) it's clear that companies are going to get hit this year. Central banks are aware that this is an issue and they are taking some steps to soften the blow.

[1] https://www.theguardian.com/business/2019/oct/16/global-econ... [2] https://www.bloomberg.com/news/articles/2020-03-11/junk-inve...

Interesting. Where can I learn more about this hypothesis?

The clearest explanation about the bond market crash that I have seen is Mike Maloney's Hidden Secrets of Money series, but I'm sure there are others:

https://www.youtube.com/playlist?list=PLE88E9ICdiphYjJkeeLL2...

Interest rates are still low and all of the return-seeking money that pumped up asset prices in the first place is still out there. Why shouldn't we expect it to go right back to seeking returns as soon as this is over? (Remember, stock market crashes leave both the number of dollars and the number of shares unchanged. They just redistribute the dollars.)

This is when the doomsayers come pouring out, as they always do no matter the crisis. In small ways they help provide the buying opportunities that should be taken advantage of as the equity streets fill with blood now and in the coming weeks.

In the last two weeks or so the doomsayers have seen their bullhorns acquire large volume increases, they're being given far too much credibility (like Merkel's obscene, wildly irresponsible statement about how up to 70% of Germans could get Covid; back in reality, it'll be a tiny fraction of that). The emotion and irrationality has now swung too far, per typical herd behavior. That irrationality may get worse yet, the panic is beginning to set in more fully.

> like Merkel's obscene, wildly irresponsible statement about how up to 70% of Germans could get Covid

I've seen numbers in that range from multiple official places from people who are experts in the field. She didn't just pull that number out of the air. And I don't think it is obscene or irresponsible to share - it is a realistic and sobering reminder of the severity of the situation.

> in reality it'll be a tiny fraction of that

Yeah, I don't think I'll give much weight to someone who makes categorical sounding statements without giving any backing evidence...

It's well-known Apple has been moving towards a "net cash neutral" position for years, which is done with dividends or buy backs.

Both return capital to share holders but dividends yields a negative impact to their Market Value since it's dispensing their profits outside of the company.

AAPL is currently valued at a 20.38 P/E ratio, the lowest of all FAANG stocks, hardly overvalued.

Apple is a bad example. They took out that pile of debt primarily to avoid repatriation costs as they sought to return some capital to shareholders. It made perfect financial sense and it was not a manipulation of the market. They could reasonably afford to do it and it posed almost zero risk to the business.

Shareholders were clearly happy with receiving slightly less capital (that which will be lost to debt costs) in exchange for receiving it sooner. That is not a bad exchange, so long as the debt cost is not steep.

Apple can trivially afford their low-cost debt, both out of their extreme cashflow and their cash hoard.

I agree with you in the sense that the debt was primarily a tax optimization strategy for them.

However, I still see it as a bit of a problem. I think it is partially a symptom of a market that has become too focused on a single metric (P/E ratio). The result is that reducing shares is more important than boosting book value.

I'd love for this hypothesis to be proven wrong, but I'm afraid that it is part of what is driving some very questionable practices.

> Even Apple took out billions in loans for stock buybacks.[0]

That article says nothing of the sort. It says Apple issued $7B in bonds despite sitting on $200B in cash, and independently mentions Apple having spent $122B on stock buybacks in the past 18 months. The article also explicitly states the new bond issue is being used to pay off existing, higher-interest bonds that are coming due this year.

> Boeing took out $43 billion in loans for stock buybacks[1]

Again, the article says nothing of the sort. It says Boeing spent $43.4B in cash over a six-year period on stock buybacks. As a result, it does not have sufficient cash reserves to handle the financial fallout from the 737MAX incidents, and so has to borrow to cover those costs and keep the company solvent. The amounts cited in the article are significantly less than $43.4B, though still significant in the absolute.

Disagree completely. Using saved cash is ridiculous when interest rates are very low. These companies are making smart decisions.

German stock market suddenly fell another 3 percent within a few minutes. I wonder if that was triggered by the circuit breaker in the US with traders trying to sell on other market places.

I'm trying to refinance my mortgage. Is now a bad time to put 20% of my savings into the market?

I've been waiting for this moment since 2018

Probably a bad time, no telling where the bottom is. Especially if you need the money soon?

I wouldn't think we are at the bottom yet. But no one knows.

I would wait. Don’t even try to buy into a dip unless there’s at least some period of stability first.

I'm not a financial advisor, but the phrase "don't try to catch a falling knife" comes to mind here.

Buy a little each week to spread the risk. Corona will probably get worse for a few more months.

This.

*This is the way.

Its a good time. Divide your savings over a couple of months, and every week put in a bit to DCA into the market

How's it a good time? This is the second time this happened. How do you know a third and fourth won't happen?

This is why you Dollar Cost Average though. You do the same thing the 3rd and 4th time it happens. It's extremely unlikely there will be a 5th, 6th, etc (if there is, we probably have more important things to worry about like 25% of the world dying)

DCA is riskier and has lower returns than lump-sum investing.

>DCA is riskier

Actually no. Risk = Reward. DCA is less risky, but lower returns than lump-sum investing.

As always, you can cherry pick cases when it underperforms and when it outperforms.

Nope. Studies show it's riskier.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=820004

>Risk-averse investors who prefer dollar-averaging can accomplish the aim of risk reduction more effectively by lowering the fraction of funds invested in the risky asset and investing them all at once.

If you invest the same total amount of money for a constant exposure to the market measured in funds*time in the market, you have higher risk choosing to rely more strongly on the later years (which is DCA) than evenly spreading out the exposure over time (which is lump-sum investing). Theory is very simple. Lump sum is diversification and DCA is the opposite - diversification is a "free lunch" producing lower risk with higher returns.

The study you cite shows this is only true for when there is a positive expected risk premium, hence the evidence only supports cherry picked cases.

Additionally, if you read it, the paper admits the DA is inherently less risky than LS, so it attempted to even out risk by adjusting the investment amounts between the two methodologies until expected returns were even, and then compared. This method is arguably flawed for fairly evaluating total risk, since the total invested amounts at risk are different - that is, it relies on the reward to balance out the risk (ie. a positive risk premium). As so it's mostly tautological evidence...

If there's no expected risk premium, then buying stocks has a 0 expected return, and it clearly doesn't matter how you buy them.

> the total invested amounts at risk are different

Obviously, you need to invest the same amount in total to have a valid comparison. If your argument is that DCA is investing a lower amount, and is therefore lower risk, then the answer is that a lump-sum strategy investing the same amount as DCA is both lower risk and higher return, and therefore strictly better.

>If your argument is that DCA is investing a lower amount, and is therefore lower risk

That's not what I said, in fact the study does the opposite.

>then the answer is that a lump-sum strategy investing the same amount as DCA is both lower risk and higher return...

The problem is that argument only holds true for positive risk premium scenarios. Obviously LS has a potentially higher rewards, because if I bought 100x at $1, and it goes to $2, my reward will better than buying 10x at $1, 10x at $1.10, and so on. Since LS has potential higher rewards, when risk premium is positive, then the reward / risk will also be better with LS. This is a tautology.

The study's evidence only supports these cherry picked cases (positive risk premium scenarios). The market doesn't always have a positive risk premium... it can be also be negative! (like right before a market crash).

You could argue that the risk premium is positive given long enough time frames, or that the market is more often in a positive risk premium state, hence LS is better. But even this is debatable, as no matter how many years of evidence you give, past performance is no guarantee of future results.

If I cherry picked the Nikkei 225 as my case, by comparing LS invested in Jan 1990, vs DCA from then to any timeframe afterwards, DCA would of been less risky than LS at every time frame...

All in all, DCA is a inherently less risky strategy. The study even says so...

>That's not what I said, in fact the study does the opposite.

The study explicitly says it's lower risk because it's investing a lower amount.

If there's a negative risk premium, then any strategy that invests less will automatically do better. But lump-sum will still do better than DCA with the same amount of exposure, since it's still better diversified.

As long you have tolerance for it to keep dropping further you’ll be fine. Don’t expect to know where the bottom there is. People forget the second part of the famous saying. “But when there’s blood in the streets, even if the blood is your own.

If asking HN for financial advice is your strategy I'd probably reconsider. But the vastly contradictory replies you've already received probably already told you that.

IMO, its a very good time. I'd suggest spacing the investments out over a period of time (maybe 2-3 months), though. If it keeps going down for a while, this will lower your total cost of purchasing shares. Obviously the downside is that it would slightly decrease your returns if things move back up in the short term.

No one knows, no one will know until it's over, and anyone telling the opposite is lying. It's impossible to time or predict the market, especially in crisis like these.

People bought boeing stocks at the dip, a few months ago, needless to say this wasn't the best time to buy.

The only thing that can be said with certainty is that it's a better time than a week ago.

Yes, it's a bad time. In that there is absolutely no understanding of where the bottom might be, and anyone claiming otherwise is a charlatan or a fool.

While shares have been pummeled, for many large caps this just erases a few months of gains during a particularly frothy period. If some airlines start declaring bankruptcy, Boeing declares bankruptcy, etc., things can get a lot worse.

In the coming months the actual financial impact is going to start hitting a lot of organizations.

You say it's a bad time, and in the next sentence claim, no one knows the bottom. A bit contradicting.

It isn't contradicting at all. It's a bad time because it is hyper volatile, and there is a lot more room for it to drop than to gain.

That doesn't mean it will drop. It means that saying "it's a good time to buy everything is on sale!" is absurd but common (and people have been saying it since the first drop on February 24th, and will never learn from their wrong advice). There are few scenarios where there is going to be a rapid rise in the market in the near future.

it's early. Usually steep consecutive drops take a while to recover. You might miss the very bottom, but you'll do better than jumping in too quickly. Relax and watch it, cash in this moment is a good thing to have.

For sure now (or ever) is not a good time to take a random advice from random strangers in the Internet.

Just as yesterday, last month, next month, and forever, it's a bad time to get financial advice on Hacker News.

Do not invest if you need the money in the short-term or what you can't afford to lose. I'd be very hesitant to invest with debt financing.

In all likely hood it will recover, but no-one knows when how far long out that will be and you never want to be in a position where you're forced to sell.

What’s the indicator that this is the bottom? Stocks fell last night as soon as Trump opened his mouth. Stock market has been Wile E Coyote running on air for years, now the market is looking at the ground. America has a government incapable of sensible action. There’s a real possibility that the republic ceases to exist within the year, after Trump tries to delay or invalidate the election (and if you think this is far-fetched, recall that’s what his pal Giuliani tried to do after 9/11, so it’s in their playbook).

There’s non-zero volume and interest in S&P future puts striking at 1000. There’s plenty of potential downside.

Please keep this kind of stuff in /r/politics. It has no place on HN.

Government is not politics.

No one can tell you. Consider this though. It is highly likely that the US will institute a lock down in the next few weeks. Exponential growth is nothing to be trifled with. Major world economies may stay in partial lockdown until we have enough herd immunity for our hospitals not to get destroyed by this virus. Most estimates have a possible vaccine 12-18 months out. I doubt the markets have priced this in, because it's practically unfathomable. But the US is running out of options and the virus is already spreading widely here.

People seem to ignore the relative success of South Korea. Wouldn't say life is normal, but it's not under lockdown and new cases have dramatically fallen.

If I had cash lying around or was less skittish about leveraging myself, I'd be buying here.

South Korea however did that one thing that the US is not doing: testing the hell out of people.

Oh, and communicating well-measured responsive actions honestly to the public. That one thing, too.

If this is a repeat of 2008 you will have several months of "bottom" for you to leisurely consider your investment plans.

> Is now a bad time to put 20% of my savings into the market?

You're getting a lot of bad advice here, but you also haven't given us the full picture.

First question is: What is your goal? Are you planning to invest this money for retirement and not withdraw it for several decades? Or do you expect to need these funds for some major purchase in the next 5 years? The answer to that question will greatly influence the correct course of action.

Second, what's your risk tolerance? Most people don't know their own risk tolerance until they see their portfolio drop 20% like this. If you invested today and the market dropped another 20%, would you be able to sleep at night? Would you be tempted to panic sell to limit your losses? Would you check your balance so much all day every day that you can't perform well at your job? If so, you should start slower with something like investing 1% of your savings per week. Do not invest that entire 20% all at once.

> 1% of your savings per week

That would allow to invest what he wanted in 2 years. But the market is likely to ~80% recover in 6 months.

> Most people don't know their own risk tolerance until they see their portfolio drop 20% like this.

Yes: risk tolerance is a very important consideration - thank you for explaining that. But how to find that limit to the risk tolerance in a reasonable time?

I'd suggest ~1% of portfolio investment per day, but only on down days. Do not invest on up days.

you should wait until people around you stop asking that question at least. grab some popcorn and wash your hands in the meantime.

You should pay off your house as fast as possible. This reduces risk greatly because you always have a place to live in the worst case.

You should max out your IRA and 401k plans, or whatever similar applies to you. However that should be regular investments by a plan that you arranged years ago and don't even bother to revisit. When asked their 401k strategy the most common answer of those with the best returns "I don't have a 401k" - which is to say you set it up at 30 and forget about it until you retire.

I wouldn't be surprised if we hit another circuit breaker by the end of the day.

This will get worse before it gets better.

Who got puts? I think a lot of people called this yesterday.

That sudden slide to Biden looks like a big clue.

"Turn those machines back on! Turn those machines back on!"

Big clue for what?

When financial bubbles burst the markets fall an average of something like 42% in the first two months.

Except I don't know if I'd classify this as a bubble bursting this is a true blue recession driven by the pandemic. The market reacting to information of weak fiscal measures against people not spending. A bubble would be something that was artificially propped like 2008 fraud with cdos this just seems like simple economics at play to me.

That said I'm no where near close to informed or experienced enough on these things to say for certain.

Market movements follow a power law, not a normal distribution, so average is an utterly useless measure.

> a normal distribution

Not really clear what you mean here. If you take the peak index value and its value two months into the bubble burst, the average value of this will be ~42% lower than the peak.

Right, but what is the purpose of statistics like this? The purpose is for them to inform our understanding of what might happen in the future. As mentioned above, since market movements follow a power law rather than normal distribution, the average gives us absolutely no information about what might happen. Thus this statistic fails at the goal of having a purpose; it is just a meaningless number, like those meme baseball statistics about who is the third-best thrower of fastballs on a rainy friday or whatever.

> Right, but what is the purpose of statistics like this? The purpose is for them to inform our understanding of what might happen in the future. As mentioned above, since market movements follow a power law rather than normal distribution, the average gives us absolutely no information about what might happen. Thus this statistic fails at the goal of having a purpose; it is just a meaningless number, like those meme baseball statistics about who is the third-best thrower of fastballs on a rainy friday or whatever.

Thanks for restating using almost the same words and using an apparently non-applicable analogy (i.e., the 42% covers all bursts effect on indexes, your sports example covers individual performance). My experience is people who provide such poor explanations usually don't actually know what they are talking about.

Your claim on its usefulness makes assumptions about where to apply the information. The perma-bears use these kinds of numbers to demonstrate why being in stocks during a bubble is a bad idea.

I recommend you read Taleb. Much of his work focuses on the differences between domains following normal distribution vs power law, and the folly of mistaking one for the other.

I very much feel this could be another recession albeit a small one. It has very cascading effects throughout the world. Making everyone stay at home is effectively halting the world economy.

I still have a decent amount in my 401k and stocks, sold 70% of them incase shit hits the wall (I quit my job earlier this year to be an indie hacker)

Plus the upcoming election usually slows things down. So my prediction is until 2021 we’re deffo in for a ride.

My goodness.

I transferred most of my retirement savings out of stocks in early March, realizing a 9% loss. The market had a little upswing that day, so that worked out as well as possible for me, considering.

I was hearing advice from an acquaintance to just "ride it out".... yeah, no. After hearing about the inadequate testing and other half-measures taken by the Administration, I was convinced it would get much worse before it got better.

I had thought about cashing out on January 31st, because I figured Brexit would trigger an Europe-wide recession, which would lead into a worldwide recession. But I didn't get around to that (lazy).

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