Investing General Discussion

Market had ample opportunities to sell off this week and didn't. Price action shouldn't be ignored, a new vix low, closed above the 50day . It is just the first week of consolidating this 25% rally. So far it is consolidating by running sideways. The longer it can hold this region while vix calms down the more bullish it becomes.

Volumes were low - this supports us being stuck in range for a bit

Concerning action for the week was oil (but we finished well off low), Bond yields not climbing. Rally struggling to broaden out beyond tech and healthcare.

Furry said:

I'm pretty sure the oil problem is just sleeping for a couple weeks. The fundamentals haven't been fixed and there's a shitload of saudi on the way.

I think mortgage bonds and state bonds are going to have serious issues coming up. Something in the range of 5% of homes have already taken advantage of this year long forbearance and those bonds still gotta pay out. Mac and may say it's no big deal, but there's a lot of screaming from the gallery that this is the end times and they need a bailout now.

Things are really ugly in places, but this is mostly a self-inflicted wound. Biggest risk of all is that some politicians probably want the wound to be bigger.

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You're speculating about the future, I'm just looking at facts in front of me. Given you responded to me implies it's some sort of counter point. If the market wants to further discount the risks you listed it will become evident in the current price action. There is a long list of negatives the market can latch onto if it chooses but people are more conservatively positioned than at the 09 low. The pain trade remains up until proven otherwise.

OU Ariakas said:

Do you believe 'the market' learns when things like negative oil happen? I.e. do institutional traders that price in information really understand that the June oil contracts are going to go negative in a few weeks when they are set to expire?

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"The Market" is gathering and absorbing all available information and running it through a soup of human action/reaction functions to spit out a consensus on the future. It is highly fallible and is often wrong thus the volatility. But despite that it is far better in the long run at sussing out the truth than any individual. So more to your question there is nothing you know about the future events of the oil market than the net aggregate opinion of everyone involved. No one day or even one week means much but as the markets swing from cloudy outlooks to more clear the price overtime is the clue of the direction things are going to go.

We often make the mistake of guessing about a future then it bares out we believe we knew something the market didn't. In reality the market is weighing all risks far more than just the ones you were considering, it's certainly possible that a particular worry of a particular trader will become of more important over a period of time to all market participants as a whole, that doesn't make that trader more prescient than the market.

This type of thinking is what results in people missing most market moves as it does something they deem stupid, despite that person having far less available information than the aggregated whole.

Furry said:

Not a counterpoint at all. Just adding troubles in the market I see. TBH I'm not sure where it will go from here. Room for scenarios both ways, but if we were to jump forward a month I think the way down has more paths.

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Yup and there are millions just like you mostly in cash or bonds who feel exactly the same as you. That is not an attack on your person, I feel uncomfortable with how much cash I have right now as well. The people who were most concerned with those threats sold in March, billions and billions of shares sold. The only way to get it to go down again is to weigh the feelings of the people who now hold that stock not the people sitting in cash. They are showing as a group that they are not going to be easily scared out of their position and the people on the sidelines will continue to be pressured by a rising market.

The economic news is incredibly obvious so don't waste time on it, anybody with a functioning brain is aware of the economic data. Instead focus on why those holding are bullish, the answer is big tech and liquidity. There is still a very high degree of confidence that MSFT, GOOG, APPL, AMZN, NFLX, FB are not only going to weather this storm but are likely to benefit from it. The market may be wrong about that, I'm not personally going to trade on my opinion on that, but it certainly a more reasonable thing for a person weighing market risk to be focusing their mental energy on. The top 5 represent over 20% of the entire S&P 500 and they represent an even higher portion of this market recovery.

We are not going down unless they crack. They never even broke their Dec '18 lows their charts are bullish and if people want to see further declines then this segment has to flush out. We have seen tech routes before in the last 7yrs and it is intense when it comes. People will talk about how tech is dead and to move to other sectors etc. Maybe another similar scenario is brewing. I'll be watching for those clues in the price action as that tells me more than trying to compete on research. They all report next week. How the market responds following will be very telling. That response may not be immediate sometimes the first move is the wrong one, but let it play out and you'll see whether the current holders of these stocks want to start taking some off the table. That's what is important, not how Joe "I Missed the Rally" rando trader thinks about it.

Furry said:

An important part of watching the markets is realizing a lot of traders in the wild don't have a brain.

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You keep missing the point, you aren't worried about any one trader or a group of traders. It's the net aggregate opinion of all participants vs you. Some of what we equate to lack of knowing is actually a difference in risk tolerance. People who are less risk tolerant than the market as a whole are obviously going to spend their entire careers feeling that market prices are too high given conditions. In general people who are managing their sums of money especially the upper middle class people with $100-600k in investments are going to value and trade with their assets far more conservatively than the institutions who dominate the market making their living off risking other peoples money.

So for many AMZN at it's current valuation is not worth the risk, that doesn't mean that the holders of that equity don't see or know the threats to Amazon. It is that they weighing risk differently or are viewing a longer term prospect more than you are. Retail traders tend on average to be shorter thinking than institutional investors. Every once in awhile like in March we get an event where professional money is being forced to sell because of leverage and the more risk averse patient trader can step in and take advantage of that market disconnect.

Furry said:

Oh, I know it's the net aggregate of opinions, but sometimes a landmine can come along that shifts those opinions suddenly in a way that isn't priced in. I think people see lots of landmines for small companies, and not many for those big ones, which is perfectly reasonable. The way I approach investing is probably a lot different than yours, though. I strictly invest toward retirement.

I set out a very detailed plan in 06 and have followed it closely. It's the main reason my funds are sectioned up 95% that I require myself to keep in broad market funds I consider safe. S&P, voo, mgk, ect. The only reason it's not 100% that is because I got way ahead of where I needed to be thanks to the trump years (twice what I consider necessary to retire in 40s), and sliced off some as play money. I'll hit my goal just sitting in govies and adding money to the pile, which makes me reluctant to expose myself to much risk. Different people different goals.

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I actually took that out of my post didnt want you think I was attacking you. I only mention it because it is actually a very low risk opportunity to make money and those opportunities are rare.

In regards to retirement, how do you plan on living on those funds if interest rates stay low? You say different people different goals but you don't sound much different than me other than just being further back. You mentioned only having a few hundred thousand how would you live on that for potentially 40+ yrs? I live pretty simply with no debt and I still don't see how that is doable without really skimping.