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On 3/21/2020 at 3:35 AM, explo said:

 

I don't try to speculate (bottom picking), but if I should guess I don't think we are near the bottom, but maybe near a significant bounce as the rate of change of "the new normal" slows a bit.

 

Could be right based on stimulus package coming and the suggestion that Trump is tilting to reassessing the stay at home and social distancing suggestions in order to open businesses up. Though he did not shut down schools and businesses.

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On 3/21/2020 at 3:35 AM, explo said:

I don't try to speculate (bottom picking), but if I should guess I don't think we are near the bottom, but maybe near a significant bounce as the rate of change of "the new normal" slows a bit.

Not trying to pick a bottom, but removed my shorts and went long at about 60% this morning. Bought  into INTC MSFT and WM again. MSFT has a potential of 25% upside, INTC  a 20% upside and WM a 40% upside. None of those pushed them towards their recent past highs.. I also took a long position in UDOW and TQQ for a short term bounce based on the initial FED actions and congress along with the Global efforts to create liquidity. 

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23 hours ago, SCSolar said:

Could be right based on stimulus package coming and the suggestion that Trump is tilting to reassessing the stay at home and social distancing suggestions in order to open businesses up. Though he did not shut down schools and businesses.

Yes. The market goes through its phases (denial in equities when bonds already saw concern for example). The fear phase before was due to not seeing that this is a bell curve and we will see the light at the end of the tunnel quite quickly. First on the infection rate and then on the economy.

To know that the infection rate slowing measures do not need to be applied during the whole bell curve build up in order to flatten the curve will be a big relief. As more people have been infected the virus will naturally be slowed by increased difficulty to find new uninfected (non-immune) host chains. One immune person can break a whole chain of infections that would otherwise happen. When enough persons are immune (60%+ it becomes very difficult for the virus to spread among the non-infected). So if the infection rate bell curve is formed over months, rightly timed restrictions of the right kind might only be needed for a couple of weeks for the curve to reach ideal shape, since we don't want a too slow infection rate either. We want a balanced infection rate so that the health care system doesn't collapse and so that we reach herd immunity quickly so that the general population no longer risk passing on the virus to a big share of the risk group (which probably should remain isolated longer than the rest).

Then a second wave of fear will likely arise regarding the uncertainty about how much damages was inflicted, but for now the market is relieved that the damage will not go on for an extended period. How deep the bottom test goes and when happens is difficult to say sometimes it double dips and sometimes it is another large leg down. 

Edited by explo

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18 hours ago, SCSolar said:

Not trying to pick a bottom, but removed my shorts and went long at about 60% this morning. Bought  into INTC MSFT and WM again. MSFT has a potential of 25% upside, INTC  a 20% upside and WM a 40% upside. None of those pushed them towards their recent past highs.. I also took a long position in UDOW and TQQ for a short term bounce based on the initial FED actions and congress along with the Global efforts to create liquidity. 

Great timing of what looks like a bounce building.

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Slightly Back in Black overall. We shall see how long it lasts, backed out my long the market position yesterday afternoon.holding my 2 core dividend stocks and back to 65% cash

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8 hours ago, SCSolar said:

Slightly Back in Black overall. We shall see how long it lasts, backed out my long the market position yesterday afternoon.holding my 2 core dividend stocks and back to 65% cash

Interesting. Very active allocation.

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26 minutes ago, explo said:

Interesting. Very active allocation.

Yes, I am actively managing it. As a retired person it is my full time job. My long position was in TQQQ and UDOW. My short positions I take for protection to prevent downside exposure is in SQQQ and DXD. I sold 2/3 long holdings in dividend stocks and whent about 80% cash as of late this morning when the market was up.  I put a short the market in place to cover my 20% holdings to protect  my gains when the DOW  breached 100 down.

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13 hours ago, SCSolar said:

Yes, I am actively managing it. As a retired person it is my full time job. My long position was in TQQQ and UDOW. My short positions I take for protection to prevent downside exposure is in SQQQ and DXD. I sold 2/3 long holdings in dividend stocks and whent about 80% cash as of late this morning when the market was up.  I put a short the market in place to cover my 20% holdings to protect  my gains when the DOW  breached 100 down.

Good luck. It looks like a dead cat bounce could be forming and that more than half of its potential has been exhausted by now. Multiple year growth projection revisions are starting to come in from heavy institutions (governments and their major agencies) and the come with dire short-term scenarios. It looks like it will take a couple of years before we are back on track. Back on track meaning to be where we would be at that time had this outbreak not occurred. The recovery to get back on that track will start however start quite quickly, we are talking quarters not years. Then the questions is if/when the market buys this scenario and if it focuses its asset pricing on earnings 2023- or 2020-2022.

I'm still waiting for more fills so a double bottom or just slightly deeper final bottom would suit my tactics at this time. A much deeper bottom would force me to heavy leverage management trading again (opportunistically trimming and maybe topping up my around 130 assets). Much of the beta has been eliminated from my funds basket so I should not be pulled down as deep I was during the initial crash and my beta should be in more liquid assets for better ability to do more optimal handling of asset price changes.

Right now I'm at just slightly positive return since the start of 2018.

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2 hours ago, explo said:

Good luck. It looks like a dead cat bounce could be forming and that more than half of its potential has been exhausted by now. Multiple year growth projection revisions are starting to come in from heavy institutions (governments and their major agencies) and the come with dire short-term scenarios. It looks like it will take a couple of years before we are back on track. Back on track meaning to be where we would be at that time had this outbreak not occurred. The recovery to get back on that track will start however start quite quickly, we are talking quarters not years. Then the questions is if/when the market buys this scenario and if it focuses its asset pricing on earnings 2023- or 2020-2022.

 

Pain is coming and that is why the FED has been buying up toxic assets and trying to back fill banks with liquidity. I did not realize that safe havens of say some REITS, electric companies etc were going to have cash flow shortages. I do not think the recovery starts as fast as you might think.

You have companies all across the U.S. that has laid off workers(tens of millions).  Those companies have no cash flow to pay rents or bank loans that are coming due. You have banks that gave companies lines of credits with the expectations that they would never be drawn down but were there as a business building block. Those credit lines are being asked to be filled now and the banks do not have the cash. You have people that are unable to pay the rents held by Realty Trusts. The money the Fed has offered is a paltry sum that covers the cost of food and little else. That sum of money is going to skip many people who do not quality. All those people will decide, Mortgage or Food? Electricity or Food? Gas or Food? Food or Garbage pickup, Food or Cable TV or cell phone etc. You have a large swath of companies across the spectrum that are going to suddenly not have payments coming in. The monies authorized by Congress is only about 1 months GDP. This is (and always has been) looking to be a 3-6 month problem if not longer as many companies up and close forever.

 

The cure is to shutdown everything for a long time, that is starting to be realized by those that would risk 100,000s of thousands of deaths to keep the economy going.

 

Not to sound pessimistic but I wondered why the stable Electric, Trash , phone and cable companies were dropping when gas prices and interest were at record lows.  Now it makes more sense to me as they are going to have defaults on payments to them.

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I agree it looks like a bad flush. My strategy (allocating long-term strong companies) should hopefully work well for a likely "strong getting stronger" scenario.

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On 3/25/2020 at 7:06 PM, explo said:

16 of 44 filled now.

 

26 of 55 filled now.

filled.thumb.png.0bf67abf802201010f701ba91f4378fd.png

Edited by explo

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On 4/1/2020 at 2:53 PM, explo said:

I agree it looks like a bad flush. My strategy (allocating long-term strong companies) should hopefully work well for a likely "strong getting stronger" scenario.

I blew it on my flip to my short position. I had 2 ETF purchases that I thought were my short coverings., instead I realized  at the last minute of the trading day they were longs. Not soon enough to get rid of them before close. The market plunged 400 points that day from when I bought those positions   and dropped 900 points the next morning at open. That was about a 15% swing as the were 3x market etfs. That mistake cost me 2-3% on gains for the week by having to take losses instead gains. Instead of being up 3% on the year, I am up only 0.5%.

Good news,

3 of 5 accounts are positive.

1 is up 6%(College Scholarship fund). It is back to 100% cash.

 two are up 3%. They are 80% cash for now.

The bad news 1 account which is   50% of my total assets is down 2% on the year.

One account(sons account) is down 12% for the year. It has primarily been 75% maker invested with minimal short protection.

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I can imagine that the mistake stings a bit, but for the year you have a massive outperformance by moving to the vastly superior asset class (cash) at the right time.

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5 hours ago, explo said:

I can imagine that the mistake stings a bit, but for the year you have a massive outperformance by moving to the vastly superior asset class (cash) at the right time.

It is not the first time I bought the wrong stock and it certainly won't be the last time either. If you can't take a little loss at times then you should not be in the markets. I got drubbed back in the 2010 market collapse with solar as my primary investments. I made even more back when they rebounded.

 

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On 4/5/2020 at 7:23 PM, SCSolar said:

It is not the first time I bought the wrong stock and it certainly won't be the last time either. If you can't take a little loss at times then you should not be in the markets. I got drubbed back in the 2010 market collapse with solar as my primary investments. I made even more back when they rebounded.

 

It’s been a melt up lately. Are you holding, increasing or reducing defensive position here? I’m raising buy limits and adding more buy orders. I now have 61 buy orders I’d like to see filled.

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6 hours ago, explo said:

It’s been a melt up lately. Are you holding, increasing or reducing defensive position here? I’m raising buy limits and adding more buy orders. I now have 61 buy orders I’d like to see filled.

I was in a holding pattern. Took a slight loss previous week. This past week up slightly. I am down 1.37% on the year.  3 of 5 accounts are profitable. One the college scholorship fund I setup in memory of my daughter is up 6% and has been sitting in cash for 3 weeks. I have no market shorts as of Tuesday.   I have limited exposure to anything other than Intel and Microsoft.

 That bull run to 24,000 is quite unexpected.  If Goldman and the rest are accurte, the recovery is 12 to 18 months.  Earnings futures are not going to be justifying the price IMHO.

 I guess backstopping  all investments and bonds and bad debt by the FED by pumping 10 Trillion into the pockets of banks and brokers is one way to get them back in the markets instead of selling due to margin calls.

 

 

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9 hours ago, SCSolar said:

I was in a holding pattern. Took a slight loss previous week. This past week up slightly. I am down 1.37% on the year.  3 of 5 accounts are profitable. One the college scholorship fund I setup in memory of my daughter is up 6% and has been sitting in cash for 3 weeks. I have no market shorts as of Tuesday.   I have limited exposure to anything other than Intel and Microsoft.

 That bull run to 24,000 is quite unexpected.  If Goldman and the rest are accurte, the recovery is 12 to 18 months.  Earnings futures are not going to be justifying the price IMHO.

 I guess backstopping  all investments and bonds and bad debt by the FED by pumping 10 Trillion into the pockets of banks and brokers is one way to get them back in the markets instead of selling due to margin calls.

Ok, sounds sound. Holding on to initial tactic seems wise here as the market moves around and we don't know when it will go where with its sharp moves.

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On 4/19/2020 at 1:10 AM, SCSolar said:

 That bull run to 24,000 is quite unexpected.  If Goldman and the rest are accurte, the recovery is 12 to 18 months.  Earnings futures are not going to be justifying the price IMHO.

Two weeks later the bear market rally seems to have lost steam and is at an inflection point to gain new traction or cave to retest the low. What scenarios do you see from here? I'm sort of half bargain filled here so either is ok for me, but I expect that the bear market rally has topped out already and volatility to return second half of May.

For me it's ideal to have a moderate drop from here (10-15%) to get many fills but not to dwarf the previous low, since I don't want to get back into risk management mode (reduce margin call risk) or even hit final survival mode (handle margin calls). The risk management is largely done though by shedding illiquid beta. That curbs the rebound opportunity, but limits complete portfolio collapse risk. In fact it completely robbed my funds basket of the chance for a swift recovery. Instead I'm using the room created by the risk management for stock bargain buying, which will position the stock basket in an extra good position for the recovery. In total for the portfolio I think this was the right thing to do, but doing a major risk reduction right at the bottom stings.

Edited by explo

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7 hours ago, explo said:

Two weeks later the bear market rally seems to have lost steam and is at an inflection point to gain new traction or cave to retest the low. What scenarios do you see from here? I'm sort of half bargain filled here so either is ok for me, but I expect that the bear market rally has topped out already and volatility to return second half of May.

For me it's ideal to have a moderate drop from here (10-15%) to get many fills but not to dwarf the previous low, since I don't want to get back into risk management mode (reduce margin call risk) or even hit final survival mode (handle margin calls). The risk management is largely done though by shedding illiquid beta. That curbs the rebound opportunity, but limits complete portfolio collapse risk. In fact it completely robbed my funds basket of the chance for a swift recovery. Instead I'm using the room created by the risk management for stock bargain buying, which will position the stock basket in an extra good position for the recovery. In total for the portfolio I think this was the right thing to do, but doing a major risk reduction right at the bottom stings.

The Fed filled the coffers and backstopped many levered companies. The average debt held by American companies is far higher than any time in history. That leaves them in trouble in case of downturns like we just hit. If not for the Fed pumping in Trillions to banks and companies, the market would be at 15,000 or less.

The real question is what happens from here. The brick and mortar  clothing stores were already in trouble and some will die.

The Oil and Gas should have many companies fail, but the Trillions designated for large companies is going to go to those Oil and Gas companies first. They can not handle a prolonged down turn.

You have to realize, the U.S. GDP is about 25 Trillion. The Fed and the Government has pumped $8Trillion in equity so far. That is for something that has had 2 months of impact and that impact is only about 15-17% decline.

 I am still out of the markets as I do not like the uncertainty or market volatility and earnings are not going to bounce back for many any time soon. 

 

I am sitting down 1% for the year vs the 10% of the overall markets

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17 hours ago, SCSolar said:

 I am still out of the markets as I do not like the uncertainty or market volatility and earnings are not going to bounce back for many any time soon.

Ok.

17 hours ago, SCSolar said:

I am sitting down 1% for the year vs the 10% of the overall markets

Very good result. A lot of active return generated this year.

My active return is recovering, but it is still disappointing. Normally it should do well when markets do bad.

return.thumb.png.454beb55de5954b8aa3438de3787bcaf.pngattribution.thumb.png.ea3b58595e9f2d94de10d29d29734c85.png

I'm around 15% down for the year now. An improvement from the 46% down at the low.

Below are two charts to ponder about long-term market timing. They both show only the growth part of equities, i.e. return without reinvested dividends. In the first one the dividend is collected as income as a solace during periods of disappointing return and in the second one the "2 x dividend net of interest on 1 x debt" can be collected / needs to be paid. Timing is as expected even more critical with leverage, but most evident is that buying and selling should be temporally diversified to reduce the uncertainty about the long-term return compared to one entry and one exit. Right now we are slightly expensive, but still a far cry from 1999 and of course even more far away from the extremely inflated 1929. This offers less poor outlook for long-term return than those times. We are however not near the same opportunity for long-term return as the entry points of 1932, 1942, 1974, 1982 and 2009 offered. Given enough time (70+ years) there will always be decent long-term return regardless of entry point.

SP500.thumb.png.fe77bd79bfc69fdae981cd0c1aa674f7.pngSP500_2xL.thumb.png.efe9a5f42df2d3782d0a970b49799d16.png

These charts show that it is tricky to time the market with a long-term perspective as, even though the opportunity points can be seen in retrospect, it would require extreme patience to wait to pick long-term opportunistic buying and selling points. The latter will always appear eventually. The former can be very far away with the risk of occurring too late to offer lower entry (like end of 1990 with 1987 in fresh mind or 2011 with 2008 in fresh mind). A rebalancing strategy with something of decent return and low correlation to equities offers a scheme to automatically buying stock market when it is down and selling it when it is up. This can both increase return (with use of leverage) and lower risk if successful compared to just being in the stock market.

Edited by explo

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1 hour ago, explo said:

I'm around 15% down for the year now. An improvement from the 46% down at the low.

 

That is a good climb back. I caught some of the upswing but I got out far to early. and have sat on the sidelines as soon as I trended negative from being up ever so slightly.  The buying of debt by the FED did more for the markets than anything by stabilizing what would be high risk companies. See Coal and gas markets.

 

Depending on how you look and invest in the markets, the Dow is down 17%, the SnP is down 11.36% and the Nasdaq is up almost 0.5%. I basically sum them all together based on actual point value and have an average of down 12.71%. 

 

It is clear that the manufacturing is looked at as being far more at risk and impacted by the Virus than say the tech heavy Nasdaq.

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33 minutes ago, SCSolar said:

It is clear that the manufacturing is looked at as being far more at risk and impacted by the Virus than say the tech heavy Nasdaq.

I think there are some things that have not been talked about a lot. So companies enjoy stimulus (cheap capital), but it also seems they have gotten an excuse to "tighten" their cost profiles (cut slack and keep best performers and make them work harder). CEOs likes those excuses as they can later enjoy applauds for great margins.

Another point is that after a long expansion with unemployment at record low the risk of economy heating and price inflation starts to come into the risk sentiment. That has been completely put out for years now, so if the economy can normalize again it will do it with slack cut, inflation risk eliminated, ample labour supply and likely cheap money to continue for years.

The one big risk is the debt load. Debt load can either be paid down at expense of growth or with the combination of low interest rates and high growth be naturally diluted at low cost, so the real risk of the high debt is that we would see interest rates rise absent growth. These sort of things is why it is difficult to say whether we are in a bear market rally or market recovery. Based on time it seems too early for the latter though.

Edited by explo

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You could view it as an exhausted economy, after a record long expansion, getting an involuntary well needed reboot to start up the machine in a leaner (fluff flushing) and maybe even more efficient (upgraded by accelerated information technology adoption) state. I still lean towards the bear market rally scenario though as the market might again change focus to the with certainty darkening clouds coming (hard to ignore) and not try to see the possible bright sun behind them anymore.

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