The Long Term Investor

I LIKE this very little article. Judging by recent history including the REAL CRISIS of 2008/2009 here is about what we are looking at:

Here's When The Stock Market Will Recover, According To Historical Sell-Offs

https://www.forbes.com/sites/sergei...cording-to-historical-sell-offs/#7939b91f56d8

(BOLD is my opinion ow what I consider important content)

"Topline: Although coronavirus—and now an oil price war—continue to roil markets and undermine economic growth, not everyone is panicking: Some experts argue that recession fears are overblown despite the latest sell-offs, as the market historically tends to bounce back in the long-term.

• Coronavirus has taken a big toll on the U.S. stock market and economy in recent weeks: All three major indexes have undergone a correction and are now flirting with bear market territory, down by more than 15% from their most recent highs.
• Though many on Wall Street are trying to gauge the economic fallout from the coronavirus outbreak and now an oil price war, historical data suggests that the market will eventually bounce back from recent losses—even after stocks on Monday had their worst day since the financial crisis in 2008.
• Data from Bespoke Investment Group shows that there have been three other periods since 1990 where the S&P 500 has reached “off the charts” oversold levels (three standard deviations below its 50-day moving average): In October 2008, August 2011 and August 2015.
• While in all three cases, the S&P 500 hit new lows before moving higher, “the market eventually got back on track” over the next three and six month period—with the exception of 2008, when it returned to positive territory after a year.
• According to a report from JPMorgan Chase, the market has priced in too much of a worst-case scenario: Coordinated policy action from the Federal Reserve and U.S. government should help markets recover from the recent sell-offs and “ultimately outlast the outbreak,” the firm’s chief U.S. equity strategist, Dubravko Lakos-Bujas, said in a note on Tuesday.
• While there’s certainly been dramatic market volatility in the past few weeks, it presents “a great opportunity for stock-picking outside of the top 100 or so big-name companies that we talk about every week—as many valuations have become cheaper,” points out Charles Lemonides, chief investment officer at ValueWorks.

Crucial statistic: JPMorgan currently places its year-end price target for the S&P 500 at 3,400—implying that the firm sees around an 18% upside from the index’s current level today. “The speed and intensity of the sell-off has shaken investor confidence with many now modeling recession scenarios even though there is still significant lack of clarity on the actual fundamental impact,” Lakos-Bujas said in his note.

Crucial quotes: Mohamed El-Erian, chief economic adviser at Allianz, wrote in the Financial Times on Monday that the feared impact of the coronavirus is “destroying supply and demand simultaneously,” while the recent launch of an oil price war is further putting pressure on the global economy. He argues that a coordinated “whole of government” approach with “true productivity-enhancing reforms” would effectively stem financial losses, rather than continuing to over-rely on central banks.

Tangent: “There’s very dramatic value to be found in secondary and tertiary names—it’s a good time to be confident when putting money to work,” says Lemonides. He identifies several stocks in particular that are really well-priced right now compared to a couple of weeks ago: Goldman Sachs, Invesco and United Natural Foods. “Position your portfolio through this maelstrom to the other side of it,” he recommends.

Key background: Investors have struggled to judge the economic impact of the fast-spreading coronavirus, especially now that it has started to hit the U.S.—with over 750 infected and 26 dead. Making matters worse is an oil price war that broke out between Saudi Arabia and Russia over the weekend, further fueling fears of a global economic recession. Monday’s historical sell-off saw the Dow and S&P 500 both plunge almost 8% for their worst day since 2008. Oil also fell around 25%—its biggest one-day decline in prices since the Gulf War in 1991.

MY COMMENT

WE...."I"....continue to see a TOTAL disconnect from real life to all the media drama. I have yet to run into ANYONE in real life that is freaking out, scared, panicking, wearing a mask, changing their life, or even worried. Everyone is kind of watching in fascination BUT NO ONE I have come into contact with is reacting in the slightest. Politicians HAVE to show daily concern to PLAY UP to the voters and public that they are doing something. The short term financial firms are having a field day and manipulating and hyping the news and this event to the MAX for trading profits. The MEDIA has a short term GOLD MINE of viewing and ratings. MEANWHILE....the regular person just sits and watches and waits....as usual in any crisis.

 

For any LONG TERM INVESTOR the IDIOCY of this event is shown by the current yields on Treasuries.

Ten Year .76%
Twenty Year 1.16%
Thirty Year 1.28%

I have ONE QUESTION......is anyone going to lock up ACTUAL long term money for ten or twenty or thirty years at these rates? NO. These rates and the current stock markets do NOT reflect long term reality in the slightest. For anyone with a head on their shoulders and a horizon longer than the life span of a housefly TIME will tell the true story.



SEE THAT tiny little down squiggle on a long term chart of the SP500...that is the REALITY of where we are today for a TRUE long term investor. Pretty SCARY......huh....I think I will continue to be fully invested as usual for the long term.

 

I heard something a while ago from one of the TALKING HEADS on CNBC. That APPLE stock is now.....after the drop today and over the past weeks......is STILL up by 55% from where it was a year ago. I assume this is accurate, I have not checked it. BUT this shows where we are in the current market levels. I suspect......BUT have NOT checked.....that this is the situation for many if not MOST stocks that are the BIG holdings of most long term investors that own individual MAINSTREAM stocks.

Kind of puts things into perspective.

 

A "chance"....yes. It is a "possibility". A "probability".....NO...not at the moment. I believe it will be a few months or more to sort out how likely it is for the population, media, trading algorithms, etc, etc, to figure out if they are going to talk the economy into an UNJUSTIFIED recession. At this point in time I see...NOTHING....that indicates that the business environment or economic indicators have changed to the negative other than over the VERY short term. Based on what I see RIGHT NOW, it is my opinion that if we do have a "recession" it will be in name only. In other words a technical recession according to the definition, but one that quickly recovers back to normal.

If WE end up in a recession, it is a sure bet that the rest of the world will end up in one also and for the rest of the world, with their weak economies over the past years, it will could be BRUTAL.......for us.....no. And, if the rest of the world ends up in a brutal recession we will be the safe haven and go-to place for world wide investors and those seeking safety. I would not be surprised to see our economic indicators drop for a quarter or two at worst with a solid recovery after. The rest of the world....potential for a year or two.

Just my opinion....I dont know anymore that anyone else on here.....or on TELEVISION.

 

Stock1234.......has it right. At least, this time of the year, there is a lot of 401K money and IRA money entering accounts. My son will get his bonus in a week or two, about $25,000. PERFECT timing for the percentage that will go into his 401K.....ESPECIALLY for someone that is in their 30's and has a LIFETIME time horizon.

 

I thought my BIG win streak against the SP500 was going to come to an end today. Earlier, for the first time in a few weeks I was lagging the SP500 in my stock holdings. BUT....at the close I BEAT the SP500 again today.....this time by .14%. Got to KEEP this win streak alive. I need something positive to see in my account each day for the short term. ANOTHER positive. In spite of all that has gone on since the dreaded virus began taking over the world at the end of December.......is the fact that as of the close today we are basically back where we were in early June of 2019. So......drum roll please.....we have lost 9.5 months of the past 11 YEARS of gains.

 

HERE is another chart of the SP500 at the close today. KIND OF puts things into perspective as to this little blip in the markets.

 

I doubt they will intervene. I don't know but I suspect that BOEING drew down that line of credit today to lock in the fantastic rates and for the certainty of having the money on hand in case of a funding, credit, crunch at the banks. Boeing was a BIG reason for the DOW drop today.

HERE is absolutely one of the BEST articles I have seen doing a detailed analysis of the current situation. This is related to the question posed by TomB16 above. I will post a summary of the article conclusions....BUT...the article goes into the entire analysis of how and why they arrived at these conclusions. EXTREMELY recommended reading.

Morningstar's View: The Impact of Coronavirus on the Economy
The hit to 2020 should be significant, but we see minimal long-term economic impact, and the treatment pipeline is progressing.

https://www.morningstar.com/article...view-the-impact-of-coronavirus-on-the-economy

• "Overall, we see a weighted average hit of 1.5% to 2020 global GDP and 0.2% to long-run global GDP. We forecast a muted long-term impact because damage to productive capacity will be small, plus economic confidence should quickly return once the virus subsides.
• Our long-term China GDP forecast is unchanged. We have lowered our 2020 China GDP forecast by 250 basis points, but we expect catch-up growth in following years.
• We assume a global fatality rate in our base case of 0.5% among those infected, higher than seasonal flu and recent pandemics like the 2009 swine flu, but much lower than levels reported to date as diagnosis improves. We expect even lower fatality rates for developed countries and the working-age population.
• We see reason for optimism surrounding vaccines and treatments. We should see initial data from Gilead’s (GILD) remdesivir by April; this drug could be a strong defense for patients with severe disease. Among vaccines, Moderna’s (MRNA) is the most advanced, but we don’t expect use until 2021.

Morningstar’s Coronavirus Analysis: Epidemiology and Society’s Response" (SEE ENTIRE ARTICLE)
MY COMMENT

As I said, the body of the article that is NOT posted above DETAILS the analysis, research, data, and other information that went into the above summary. That detailed information is EXTREMELY instructive and helpful for any investor.

 

TomB16....touched a nerve? Guess what....if you go back in this thread and YOUR thread you will see that more and more of what I have posted has turned out to be accurate about this virus. You need to lighten up. NOT MY PROBLEM whatever your problem is at the moment. RELAX.......I am NOT going to engage or argue with you.....a waste of my time. I got over the EGO issues and various types of message board DRAMA a long time ago.

 

"Ken Langone, co-founder of the Home Depot chain, knew where to turn when seeking medical advice on the outbreak. The 84-year-old billionaire called an executive and top scientist at NYU Langone Health, the New York hospital named after him and which he chairs. “What I’ve been told by people who are smarter than me in disease is, ‘As of right now it’s a bad flu’,” he told Bloomberg."

My Comment

That is EXACTLY right. Lots of delusional people out there right now in the MEDIA and otherwise continuing to HYPE this situation for lots of different types of gain.

EVERYONE in politics and government and business wants to error on the side of doom&gloom. No one wants to go down as having underplayed this issue. No one wants liability. BUT...the truth is we have no more ability to deal with this virus than the typical Flu or severe cold every year. And, the statistics are FAR from the 30,000 to 80,000 deaths from Flu every year in this country. REALITY....the virus is going to run its course, the death rate will be what it is, probably way less than Flu since we are half way though flu season and we have about 36 (all but 11 due to the Seattle nursing home) deaths in the USA and about 4500 world wide. It is likely that this virus will fade as the weather warms just like the Flu and seasonal winter colds.

Show me the virulent spread of this virus to tens of millions if not hundreds of millions in China AND a death rate that is spiraling up and up and up in China and I might believe the hype. It is NOT happening. Not just one or the other....show me BOTH the virulent spread AND the death rate geometric increases, and I might care more about this issue.

As to investing.....the point of this thread....there is nothing that can be done one way or the other with the short term markets. I have reached the point and I am sure others have also where I really dont care about the daily ups and downs of the markets anymore. In a situation like this everyone sooner or later reaches the point of.....not caring anymore. I am already at that point. I am willing to sit and lose a year or two of gains if it gets that extreme.

SP500 right now is down about 15.5% year to date. WAKE ME UP when the losses are at 35-40%. At that point we will have wiped out.......ONLY..... the gains of 2020 and 2019 and will be back to about January 1, 2019. NOT TOO concerned since the SP500 has been UP for 11 of the past 12 years......2009 to 2019. The down year being 2018 with a minimal loss.....(-4.52%). The REAL money will be made when this little situation turns around and is over. At that point the average person will sit for a year or two afraid to get back in or waiting for the right time to re-enter the markets. EXACTLY like the 2008/2009 crisis......which was actually real.

 

Husker

I mentioned what....."I would do". "I" would put ALL in a SP500 Index Fund in a Roth IRA to the contribution limit and any other available money I would put in a taxable account. The SP500 is NOT A RISK FREE vehicle. It is NOT a low risk vehicle. It is a stock market investment with stock market risk. The typical PROFESSIONAL TRADER OR INVESTOR does NOT beat the SP500 on a regular basis. That is why I would use the SP500 as my one retirement vehicle.......if it was me. On a historic basis the SP500 will return 10-11%. That is NOT a low risk return or LOW return. There is NO GUARANTEE that anyone will achieve that return.

BUT....I am not comfortable giving ANY advice as to what you should invest in. The ABOVE is NOT investment advice to you. It is WHAT I WOULD DO IF IT WAS ME. I know nothing about you or your situation. YOU are the only one that can make YOUR investment decisions.

As to annual tax breaks:

With a regular IRA - the money you are investing is excluded from your taxable income in the tax year that you put the money in the IRA. When you take that money out of the IRA in retirement you will pay REGULAR INCOME TAXES on the original contribution and ALL the gains or growth of those funds during the years they were invested in the IRA.

With a ROTH IRA - in the year you put the contribution in the IRA you will pay income taxes on the contribution money. When you take that money out in retirement you will pay ZERO taxes on the original money and ZERO taxes on the gains or growth of those funds during the year they were invested in the IRA.

Here is an example.....PLEASE, these are just made up figures:

Regular IRA - Invest $5,000. You pay no income taxes on the $5000 in the year you make the contribution. It is deducted from your income in the year you make the contribution. Assume that $5,000 grows to $20,000 by the time you retire,15 years down the road. When you take that $20,000 out of the IRA to use in retirement you will pay regular income tax on the entire $20,000.

Roth IRA - Invest $5,000. You pay income taxes on the $5,000 in the year you make the contribution. Assume that $5,000 grows to $20,000 by the time you retire,15 years down the road. When you take that $20,000 out of the ROTH IRA to use in retirement you will pay ZERO TAXES on the $20,000. The ENTIRE amount....original contribution and all gains or growth of the money........is TAX FREE.

Please do more reading on the regular and ROTH IRA.

AGAIN......I AM NOT giving you investment advice. YOU have to decide what to invest in and how to invest. Anything in this post IS NOT investment advice.

 

Are we having fun yet?

ANOTHER brutal market day. DELUSIONAL panic is the norm now for the markets. The health risk to the average American is SLIM to NONE. BUT, that is NOT relevant.

US cases - 1339 and 38 deaths.

Global cases - 129,304 and 4752 deaths.

It is a WASTE OF TIME to even talk about this issue......the level of superstition based, irrational thinking is rampant and impossible to cut through..........so I think I will just go back to posting my articles and info as usual. Some of them will obviously deal with the virus and investing in this environment. BUT.....as to personal opinion..a TOTAL WASTE OF TIME.