"My shares have fallen 30% what should I do?" "Is this a good time to invest in the stock market?"

cremeegg said:

But to say my opinion is worthless, is hardly within the spirit of AAM.

Click to expand...

Hi cremeegg

Brendan Burgess said:

And my opinion, your opinion, and Daddy Ireland's opinion are worthless.

Click to expand...

I am simply pointing out that your opinion as well as mine is worthless. We can't predict the market.

Read the stockbrokers' comments and the analysis from the journalists. They all clearly outline sound reasons, but they can't predict the future.

My opinion and your opinion on many other issues are very valuable. But on this issue, they are worthless.

Brendan

Gordon Gekko said:

cremegg, I think it’s naive in the extreme to say that markets have failed to reflect the enormity of Covid 19.

There’s field hospital in Central Park, the world is in lockdown, and thousands of people are dying every day.

Do you think that someday the authorities will announce that everything is okay and then markets will recover?

Click to expand...

There is a field hospital in Central Park, unemployment is through the roof

and

the markets are In general term back two years. That’s ONLY two years.

The markets, so far, are reacting as if Coronavirus was only a moderately big deal.

I completely accept the point that we can’t tell the future, but we can have an opinion on the present.

The markets are not reflecting panic about the Coronavirus. Yet.

cremeegg said:

The markets are not reflecting panic about the Coronavirus. Yet.

Click to expand...

The markets did panic and they fell dramatically.

Then they did analysis and came up with a balanced assessment to reach the current level.

In doing this assessment, they knew that morgues were being built in Central Park. They knew that the death toll was going to get a lot worse. They expected that the restrictions would be extended.

They did their analysis and arrived at their conclusions.

The market is made up bears and bulls. The current price reflects the balance between them. One of them is right, but I don't know, and you don't know which one is.

The bulls would probably say that the sell-off is overdone and that the economies will recover quickly. They will say that the bears have simply not underestimated the spike which will occur when there is good news e.g. the development of a vaccine or an effective antibody test which shows that there is herd immunity.

And the bears will say that the share prices should fall to the same extent as they did in 1929 as this recession is going to be worse.

There is huge uncertainty. That is all we can agree on.

Brendan

The record of economists forecasting what is going to happen is very poor.

It does feel like the end of the World is nigh. But my guess is that it isn't nigh. And that is as good a guess as the economists' guess.

These things are very complex and it's impossible to forecast accurately.

I have reviewed the first post in this thread. I think it still stands today as it did a month ago, with the Duke's amendment.

Brendan

Brendan Burgess said:

It does feel like the end of the World is nigh. But my guess is that it isn't nigh.

Click to expand...

Of course this is not the end of the world, but the markets are behaving as if it is little more than a minor blip.

The S&P 500 at 2,800 is back where it was just this time last year.

cremeegg said:

Of course this is not the end of the world, but the markets are behaving as if it is little more than a minor blip.

The S&P 500 at 2,800 is back where it was just this time last year.

Click to expand...

And was the world ending then?

If the global market was a blue chip investment property somewhere, this crisis has all the hallmarks of its solvent and successful tenant just not paying the rent for a quarter or two.

Ultimately, it has very little impact on its long-term value.

Purveyors of doom both here and in the media love to paint the worst possible picture. For the latter, that drives clicks and revenue because headlines like “ARMAGEDDON!” and “MARKETS CRASH!” create more of a reaction than “Keep Calm & Remember Your Time Horizon”. In reality, markets fall by 10% or more at least once a year on average. What are markets down now Year-to-Date, around 15%? Not pleasant, but hardly a disaster either.

I'm a firm believer in efficient markets and you'll never see me try time the market or pick winning stocks or losers for that matter.

But even the most adamant of efficient market theorists (if that's a word!) Has to look at the S&P now and the S&P a year ago and wonder how they can be the same price.
So either it was undervalued before or overvalued now because the economic conditions are not the same. The market at the moment seems totally disconnected with the actual economy.
There have been alot of commentators on here saying in the last year or so they felt stocks are at historic highs and seem expensive before this pandemic.

I don't know what the future holds like the next person but I don't agree with the influence of the FED , I've been thinking on a micro level what would happen if I throw loads of money at a market and what I am guessing at is much more volatility in future. I don't think it's a good thing for investors long term, I think future returns could potentially be lower. I think corrections are needed for a healthy market , we don't want a gauranteed return otherwise we will all have to accept a much lower return.

Markets are up 25-30% so talk of the slump being over and whether it’s time to “get back in or not” seems almost academic.

What I would like to know is - all these clever people who anticipated the fall in stock prices and sold out - where did they put the proceeds?

I would not like to have money in cash.

If the World order collapses as many think it will, then banks and governments will collapse as well.

Even if the banks and governments survive, the inflation risk must be greatly increased now.

I think my share portfolio is uncertain and risky. But it seems to me to be the least risky option.

Brendan

Brendan Burgess said:

What I would like to know is - all these clever people who anticipated the fall in stock prices and sold out - where did they put the proceeds?

I would not like to have money in cash.

If the World order collapses as many think it will, then banks and governments will collapse as well.

Even if the banks and governments survive, the inflation risk must be greatly increased now.

I think my share portfolio is uncertain and risky. But it seems to me to be the least risky option.

Brendan

Click to expand...

If I may - taking the worst possible outcome you mention where banks and government fail, do you think if that happened that equities (and stock markets generally) would survive? If someone was planning for such an eventuality would the best strategy not be physical assets.

Inflation risk hits many (not all) equities. Again I think there is correlation

Brendan Burgess said:

What I would like to know is - all these clever people who anticipated the fall in stock prices and sold out - where did they put the proceeds?

I would not like to have money in cash.

If the World order collapses as many think it will, then banks and governments will collapse as well.

Even if the banks and governments survive, the inflation risk must be greatly increased now.

I think my share portfolio is uncertain and risky. But it seems to me to be the least risky option.

Brendan

Click to expand...

Is this camp 3 emerging, those who believe in the world order collapsing.

Why can't we have a camp which thinks Coronavirus is something serious not adequately reflected by a 12 month pullback in the markets, without going full dolally and a collapsing world order.

cremeegg

There are two main camps here. Those of who can't predict the future, and those like you who can.

Let's assume for the moment that you are right and the stockmarket is going to fall dramatically and permanently. What practical implications does that have for you?

Brendan

cremeegg said:

Why can't we have a camp which thinks Coronavirus is something serious not adequately reflected by a 12 month pullback in the markets, without going full dolally and a collapsing world order.

Click to expand...

Exactly this. It's quite clear to me that markets with valuation levels of ~12-18 months ago, seem not to be fully pricing in the probable full negative effects of C19 on companies' earnings. Especially, when you consider that these valuation levels were themselves inflated e.g shiller PE at ~28-30 which is way above long term average of ~16. I think that the IMF economists may have put the cat back among the pigeons this week when they reeled off some fairly stark projections for the world's economies.....

Of course you have to ask if the market is already taking account of all of this bad news, but also factoring in the counter cyclical central bank stimulus and government fiscal responses, and on balance came to this considered view of the s&p at these prices, based on likely future company earnings!?!

Or, alternatively, one can take the view that this recent rally is merely a fairly typical bear market rally, and that stock markets will likely make significant further moves downwards, as the true effects of covid crystallize into reality in London, New York & everywhere else, to end up at valuation levels that reflect significantly lower earnings for a year or 2 of recession, & readjustment to covid measures.

I'm more inclined to the latter opinion, more so after the IMF were so bleak, but I'm a bit of a bear anyway. Nonetheless as Brendan rightly says, my opinion & others are totally unimportant. It's only the opinion and valuation of the market that really matters.... hey!?

Brendan Burgess said:

cremeegg

There are two main camps here. Those of who can't predict the future, and those like you who can.

Click to expand...

I don't claim to be able to predict the future, you are only hearing what you expect to hear, not what I am saying.

I am saying that the markets have not adequately reflected the economic impact of the Coronavirus, that is an opinion about the present not a prediction for the future.

I do not rely on any claim to expertise to support this opinion (there are no experts on the economic implications of the lockdown), rather reasoned argument.

It would be nice if people would respond to these arguments exposing the flaws of understanding or reason they may contain rather than just repeating "you can't predict the future"

Brendan Burgess said:

Let's assume for the moment that you are right and the stockmarket is going to fall dramatically and permanently. What practical implications does that have for you?

Brendan

Click to expand...

Again you are hearing what you expect to hear. If I am right and the market does not adequately reflect the implications of the coronavirus it is a further step to say that it will, remember Keynes 'the market can stay irrational longer than you can stay solvent'.

There is not even a hint in anything I have posted that any fall would be permanent. In fact I have said that inefficient firms may die off as a result of the lockdown and fitter ones emerge.

The practical implications for me include a serious fall in my income, not permanent I hope but a concern at the moment. Although a lot of economic comment suggests that while the sector may recover it will not recover to pre-covid levels. But hey I am an optimist, I dont think they can predict the future.

cremeegg said:

I am saying that the markets have not adequately reflected the economic impact of the Coronavirus, that is an opinion about the present not a prediction for the future.

Click to expand...

So your argument is that the market consensus is wrong but you are making no predication about whether it will ever correct itself.

Is that right?

Brendan Burgess said:

Hi cremeegg

As requested, let me expose the flaw in your reasoning.

If you are saying that the markets have not adequately reflected the economic impact, you are implying that the market is overpriced.

If you are saying that the market is overpriced, you are implying that it will fall.

If you are implying that it will fall, you are making a prediction.

You could say "The market is overpriced. It should fall. But it might remain overpriced forever." But that is also a prediction that the market will remain overpriced. So either way, you are making a prediction.

Brendan

Click to expand...

I'm been totally impartial here and I think @cremeegg is making reasoned arguments, the economy is not the same as last year yet the markets seem to have priced them reasonably the same. I am with @cremeegg that either the markets where undervalued last year or overvalued now. I am not predicting what they should be I am taking 2 positions in time where the markets are of similar value but the economies are in a vastly different state.

@cremeegg is not alone in making predictions , I do remember over the years of my investing reading many posts by regular contributors here saying they felt the markets where high.

This is a quote from yourself @Brendan Burgess only on Feb this year "where should I invest aged 65 thread" I don't think @cremeegg is saying much different to what you are saying ?

Brendan Burgess said:

I was asked this again recently and thought it worthwhile revisiting this thread.

Has anything changed in the meantime to alter the advice?

Returns on deposits are even lower than they were.

I know one can't time the stockmarket, but it just does seem to be a bit high at the moment.

Brendan

Click to expand...

I know one can't time the stockmarket, but it just does seem to be a bit high at the moment.

Click to expand...

I think that quote shows my inability to time the stock market. And my worry that even so, it seemed a bit high.

I would not claim that I predicted the subsequent crash. Because it crashed for different reasons.

Brendan

Brendan Burgess said:

Hi Fella

That is not the point. Cremeegg is saying that the markets have not allowed for Covid. Therefore he is making a prediction.

I am saying that I don't know the future. I don't know if the markets are too high or too low. I can't predict the future.

You are making a finer point. The market was wrong then or now. But you don't know which. I think that you are saying that it was possible that the market was undervalued a year ago, and fairly valued now?

Brendan

Click to expand...

Well my point is if you look at the S&P 500 its the same price now as roughly June last year. I don't know if that price was wrong last year I don't try to predict the market. But last year people seemed to be saying the markets are high , but now the same people seem to be saying everything is priced in and the markets are correct now.

I don't get involved in the markets are high debate because I believe in efficient markets. I don't know why the markets are where they are today but there is something fundamentally wrong in my mind as the economic outlook has changed significantly from June last year to now , so for me there is a total disconnect between the economic outlook and the markets.

I was watching the news the other day and Boeing had announced cancellation of orders and no work coming in and at the same time they pull up a graph and it shows Boeing stock up 5% or something for the day. This is not unique to Boeing you could argue they are oversold or whatever , the markets where also rising while another 6 million signed on in America , I don't expect a direct correlation between news and share prices but if the markets are rising solely on the back of intervention by the Federal Reserve I think it's probably not a great thing for all investors long term.

The Bank of England Governor today said:

Economy may be heading for its worst three months since comparable records began, with a 35% plunge in GDP "not implausible" in this quarter.

Click to expand...

I have to admit that I too am surprised, not at the initial correction, but by the relative recovery, which is even more pronounced across the pond. We are of course seeing the Fed PUT in operation with injections of liquidity also at historic levels. All the same I wouldn't be investing in these circumstances, and no that is not a prediction. On the other hand I will not be reducing my already relatively low exposure to equities.

Fella said:

Well my point is if you look at the S&P 500 its the same price now as roughly June last year.

Click to expand...

Everyone is preoccupied with the Fed and S&P however the european markets even after the recovery are only back where they were in 2011 and 2013 yet the euro area money supply has more than doubled in that decade from just under 4 trillion euros to 9 trillion euros now. The question is where did all those euros go, they definitely did not go into the european stock markets. There was never a bull market in Europe.