Sanrith Descartes
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Finished the day with my AMZN and OXY buys in the green Plus AAPL and UNC. Doubling down on my NVDA put ending looking solid so far.
Investing General Discussion
- Thread starter Furious
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Guest, did you like the last podcast notification?? Well here's the second one, and for the third podcast! Yep. This Thursday 8-8-24 at 7pm Central
Go here to check out his podcast thread for info on topics and links!Go into the FoH discord and find the Happy Time Fun Hour channel and give it a listen!
Big Phoenix
Pronouns: zie/zhem/zer
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Junk as in low volume or should have been higher for a panic?
Both qqq and iwm where 200% and spy was 165%
Blazin
Creative Title
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those are %s on historically low volume. We are experiencing record low volumes. People are completely tuned out. That's kind of the pt when 82M shares is 165% when just even a year or two ago that would have just been a normal day.
Even the baby ass correction from spring bottomed on 100M on SPY which was quite low. Serious corrections bottom substantially higher volume. Today's vol came in at below the 5yr average volume. IE Sad
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ToeMissile
Pronouns: zie/zhem/zer
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But which one has a better chance of getting you back to Tendytown?
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Tmac
Adventurer
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Big Phoenix
Pronouns: zie/zhem/zer
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Shouldn't lower volume be expected though? Spy and qqq are twice as expensive compared to 5 years ago.
Blazin
Creative Title
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Volume matters from the perspective of the % of the float that is involved. Spy shares outstanding is pretty stable usually around 900m- 1b. When volume is low it tells you that a significant percent of holders did nothing irrelevant of price.
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Loser Araysar
Chief Russia Correspondent / Stock Pals CEO
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As I understand it, price fluctuates a lot more on lower volumes because there are less buyers and sellers so the bid/ask spread stretches out more to get both what they want.
And if there are few buyers, sellers will keep dropping price until they find buyers.
Blazin
and
Jysin
probably can offer better insight- 1
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As I understand it, price fluctuates a lot more on lower volumes because there are less buyers and sellers so the bid/ask spread stretches out more to get both what they want.
And if there are few buyers, sellers will keep dropping price until they find buyers.
Araysar
hit the biggest part of it. Imagine you're in a room with 1000 people, each person flips a coin. Odds are you're going to come in around 500/500 heads/tails (which would be average/normal) and you'll occasionally see something like 4 or 5 heads in a row, or tails in a row, but it will average out because you have 1000 people. That's a normal volume day.Now say you only have 20 people, You still have the chance of a 4 or 5 heads/tails streak, but you only have 20 people to flip the coin, so the odds of it regressing to the mean are much lower. Now think of heads as a seller (driving price down) and tails as a buyer (driving price up). The difference between coin tosses and the stock market is that there are external influences which can also "bend the odds" on the coin toss one way or the other (news, good or bad earnings reports, whatever). So combine low volume with a triple whammy of news the market doesn't like (no rate cut, unemployment ticks up, non-farm payrolls seriously underperform expectations) and your odds of that bad streak go up, and you lose 2% of your net worth in a day...
Since we're talking loss porn, if it makes you feel any better...
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Sanrith Descartes
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Just to add on to Haus, this is really the #1 reason people preach diversity of assets in a portfolio and why indexes are the safest bet.
Now say you only have 20 people, You still have the chance of a 4 or 5 heads/tails streak, but you only have 20 people to flip the coin, so the odds of it regressing to the mean are much lower. Now think of heads as a seller (driving price down) and tails as a buyer (driving price up). The difference between coin tosses and the stock market is that there are external influences which can also "bend the odds" on the coin toss one way or the other (news, good or bad earnings reports, whatever). So combine low volume with a triple whammy of news the market doesn't like (no rate cut, unemployment ticks up, non-farm payrolls seriously underperform expectations) and your odds of that bad streak go up, and you lose 2% of your net worth in a day...
Since we're talking loss porn, if it makes you feel any better...
View attachment 539550
Own 5 individual stocks and one blows earnings and drops 20%. We can call this one INTC. Assume your portfolio is 20% weight per stock and the other four are even on the day. Your INTC being down 20% means your portfolio lost 4% on the day even though the other four are even.
This is the power of indexes. Mad diversity in the number of stocks owned. Now, in the modern era, the big 7 have grown so large in market cap that they can still move the overall index on a bad/good day. But the sheer number of stocks in SPY or ITOT really help mitigate individual drags.
The other diversity is sector diversity. Own an index but that index is FTEC or XLK and Tech sector has a bad day and you are tanking even with diversity because you are owning lots of stocks but they are all tech.
Rotation moves show this. Money flows out of Tech and into safe harbors like Staples and Utilities and if you have sector diversity you end up red on some stocks and green on others. It mitigates a total assfucking like the dotcom bubble crash at the turn of the century if you were heavy into tech.
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Lambourne
Ahn'Qiraj Raider
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My current strategy is index fund coupled with some individual blue chip stocks to offset the tech heaviness of the largest indices (I'm mostly in MSCI World, which is 1500 first world companies but the top 3 tech companies alone make up 15% of the index).
My biggest blue chip is Pepsico which actually gained 1.75% on Friday so that lessened the pain somewhat.
My biggest blue chip is Pepsico which actually gained 1.75% on Friday so that lessened the pain somewhat.
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Sanrith Descartes
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Buffett has now dumped half of BRK's stake in AAPL. Read into it whatever you like. BRK is now sitting on 1/4 Trillion in cash.
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Sanrith Descartes
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Part of the hedge strat is accepting you aren't 100% maximizing gains to give yourself some downside/rotation protection. There are reasons people/funds own stocks like PG, KMB, WMT etc and the reasons aren't their 30% a year gains (which they don't have).
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Seananigans
Honorary Shit-PhD
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Kithani
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The_Black_Log Foler
PalsCo CEO - Stock Pals | Pantheon Pals
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I think I agree with most of the concepts wrt volume, but we're talking about tens of millions of shares exchanged per day--even if you cut that by 10x, I don't think it would impact the price movement in a meaningful way from a liquidity perspective.
Almost by definition, large price movements up or down are associated with increased local volume. An ETF probably isn't the best vehicle for this convo, but here's SPY's absolute daily gain/loss vs. volume for the last ~20 years. You can see the paired volume spikes associated with larger % movements:
I think the point Blazin is making is that even the increased volume was well below the norm relative to the size of the swing. -2% with 250M volume is different from -2% with 80M volume (roughly 8% of float). The major SPY pullbacks above ('08/'09, Q2 2010, Q3 2011, Q4 2018, Q1 2020, start of '22 even) certainly have major volume tied to them.
But let's look at the day in context. We'll use a half-percentage band and look at every day in the -1.60% to -2.10% range over the last 10 years and see how the volume on 8/2 compares.
It's clearly one of the lowest volumes within the loss band, even just looking at the post-COVID time period. Adjusting for shares outstanding would probably drop it a bit further vs. all those 2022 days at parity. Interestingly, it isn't outlier low, despite following what I'd definitely call an outlier low pair of months (see purple chart in spoilers). Hard for a layman like me to look at the above and say 'of course this is nothing', but mass hysteria this was not.
Almost by definition, large price movements up or down are associated with increased local volume. An ETF probably isn't the best vehicle for this convo, but here's SPY's absolute daily gain/loss vs. volume for the last ~20 years. You can see the paired volume spikes associated with larger % movements:
I think the point Blazin is making is that even the increased volume was well below the norm relative to the size of the swing. -2% with 250M volume is different from -2% with 80M volume (roughly 8% of float). The major SPY pullbacks above ('08/'09, Q2 2010, Q3 2011, Q4 2018, Q1 2020, start of '22 even) certainly have major volume tied to them.
Just to confirm for myself, SPY has consistent shares outstanding the past ~10 years, so we can more or less read the nominal volume without adjustment:
And we know it's been a bit of a volume trough lately:
And we know it's been a bit of a volume trough lately:
But let's look at the day in context. We'll use a half-percentage band and look at every day in the -1.60% to -2.10% range over the last 10 years and see how the volume on 8/2 compares.
It's clearly one of the lowest volumes within the loss band, even just looking at the post-COVID time period. Adjusting for shares outstanding would probably drop it a bit further vs. all those 2022 days at parity. Interestingly, it isn't outlier low, despite following what I'd definitely call an outlier low pair of months (see purple chart in spoilers). Hard for a layman like me to look at the above and say 'of course this is nothing', but mass hysteria this was not.
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Tmac
Adventurer
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Is it just me or is this chart pretty consistent? Meaning that you could use it to time volatility?
The days aren't evenly spaced in actuality. If I graphed it to include blank space in the calendar year it would look more like this:
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Cutlery
Kill All the White People
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Is there a point in the natural ebb and flow of ups and downs in this shit where it makes sense to sell off your shit and just sit on cash while you wait for it to bottom out, or is that just chasing ghosts?
Like, I'm down about 5k from my ultimate peak in my IRA, but realistically, I'm still up like 20k, so I'm not worried about it. But let's say it just keeps falling, what's the better strat?
I'm 20 years away from retirement still, but I ain't keen on losing this whole fucking thing, South Park style!
.....aaaaaaaand it's gone.
Like, I'm down about 5k from my ultimate peak in my IRA, but realistically, I'm still up like 20k, so I'm not worried about it. But let's say it just keeps falling, what's the better strat?
I'm 20 years away from retirement still, but I ain't keen on losing this whole fucking thing, South Park style!
.....aaaaaaaand it's gone.