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Started By
Message
My case for a bear market L recovery, and that the SP 500 hasn't bottomed yet
Posted on 4/8/20 at 6:30 pm
Posted on 4/8/20 at 6:30 pm
People assuming this is a quick V recovery that comes back up just as fast as it went down are making four assumptions that I believe are wrong:
1. The assumption that the economy is like a water faucet that can be turned back on and it quickly work just as well as it did right before you turned it off. Wrong. Only 68% of people paid their rent on April 1. Unemployment is at great depression levels. We have yet to see the actual trickle down effects of a population scarred from the reminder that suddenly they feel poor and need to conserve what limited money they have.
2. The assumption that 2-3 months of non-existent income for a business can somehow be "made up" later. Or even worse, the idea that it doesn't matter if you can "blame it on coronavirus." Those 3 months are gone and are never coming back. A balance sheet showing a net loss for the year is still a net loss even if you shout "but before corona things were going well."
3. The assumption that access to liquidity from the government or banks means few bankruptcies and that surviving companies will quickly return to normal. False. Practically every company that does survive the worst case from this will be saddled with debt that will make operating post-coronavirus even harder.
4. The assumption that the market was fairly valued prior to coronavirus. This market was already irrationally inflated and was screaming for a recession. Coronavirus only took out 2019 gains for most companies. Do you really think many of these stocks are worth buying at March 2019 numbers in the midst of a pandemic that literally does not allow the business to operate?
Having said all of this, I am still buying and selling the hardest hit sectors to profit from the volatility, but I am waiting for the next real crash before buying quality names for the long term. We have not hit bottom yet. The mainstream big name "safe" stocks have barely lost any value. Retail, oil, and travel stocks crashing doesn't mean the actual recession has happened yet. If you want to buy quality names for a long term profit, keep waiting. These companies that have only dropped 10-15% will go down 30-40% or more when the real recession happens after the trickle down effects hit the economy. And this will happen after the social distancing has been lifted, not before.
1. The assumption that the economy is like a water faucet that can be turned back on and it quickly work just as well as it did right before you turned it off. Wrong. Only 68% of people paid their rent on April 1. Unemployment is at great depression levels. We have yet to see the actual trickle down effects of a population scarred from the reminder that suddenly they feel poor and need to conserve what limited money they have.
2. The assumption that 2-3 months of non-existent income for a business can somehow be "made up" later. Or even worse, the idea that it doesn't matter if you can "blame it on coronavirus." Those 3 months are gone and are never coming back. A balance sheet showing a net loss for the year is still a net loss even if you shout "but before corona things were going well."
3. The assumption that access to liquidity from the government or banks means few bankruptcies and that surviving companies will quickly return to normal. False. Practically every company that does survive the worst case from this will be saddled with debt that will make operating post-coronavirus even harder.
4. The assumption that the market was fairly valued prior to coronavirus. This market was already irrationally inflated and was screaming for a recession. Coronavirus only took out 2019 gains for most companies. Do you really think many of these stocks are worth buying at March 2019 numbers in the midst of a pandemic that literally does not allow the business to operate?
Having said all of this, I am still buying and selling the hardest hit sectors to profit from the volatility, but I am waiting for the next real crash before buying quality names for the long term. We have not hit bottom yet. The mainstream big name "safe" stocks have barely lost any value. Retail, oil, and travel stocks crashing doesn't mean the actual recession has happened yet. If you want to buy quality names for a long term profit, keep waiting. These companies that have only dropped 10-15% will go down 30-40% or more when the real recession happens after the trickle down effects hit the economy. And this will happen after the social distancing has been lifted, not before.
11
Posted on 4/8/20 at 6:33 pm to MillerLiteTime
Good luck with your short covering. Not buying any of your analysis - this disruption was not a technical one, period.
Posted on 4/8/20 at 6:35 pm to MillerLiteTime
And you are?
Posted on 4/8/20 at 6:36 pm to Janky
quote:
And you are?
Someone with common sense.
Posted on 4/8/20 at 6:40 pm to JakeRStephenes
So much common sense that you didn’t realize the poster below you was not replying to you.
Posted on 4/8/20 at 6:41 pm to MillerLiteTime
1. why can't we just turn it back on? do people not want to work all the sudden?
2. ok so we gave up all our 2019 gains seems fair for 2-3 months of gains. maybe even too much if that's really it. also it's not like eveyrone made nothing plenty of companies still made money the first quarter probably more than people expect.
3. companies can handle debt. it's not like they're running up the credit cards. interest rates being nonexistant it's not as hard to meet obligations if you can get cash coming in again.
4. the market wasn't really that inflated. it was only in the 20 PEs and honestly we now live in a time of such liquidity through algo trading etfs, etc where people steadily invest in the market through their paychecks regardless of business climate. so a little inflation to historical PE probably is needed to account for the changes to the market.
2. ok so we gave up all our 2019 gains seems fair for 2-3 months of gains. maybe even too much if that's really it. also it's not like eveyrone made nothing plenty of companies still made money the first quarter probably more than people expect.
3. companies can handle debt. it's not like they're running up the credit cards. interest rates being nonexistant it's not as hard to meet obligations if you can get cash coming in again.
4. the market wasn't really that inflated. it was only in the 20 PEs and honestly we now live in a time of such liquidity through algo trading etfs, etc where people steadily invest in the market through their paychecks regardless of business climate. so a little inflation to historical PE probably is needed to account for the changes to the market.
Posted on 4/8/20 at 6:43 pm to MillerLiteTime
Check historical data of the 250 days after large pullbacks if the equity market with a recession recession. You will significant returns in the market.
Posted on 4/8/20 at 6:49 pm to MillerLiteTime
This market scares me just on the Fed money printer . Fundamentals are out the window. Everything about a company can look good , we invest, and then, “Breaking News, Fed decides to end unlimited QE “ , BOOM , stock now down 20%.
Posted on 4/8/20 at 6:53 pm to JakeRStephenes
record-breaking unemployment numbers week after week but everything is okay??
lol and we have no path to get ppl back to work.
yeah, i know which side I'm on
lol and we have no path to get ppl back to work.
yeah, i know which side I'm on
This post was edited on 4/8/20 at 6:54 pm
Posted on 4/8/20 at 6:53 pm to MSTiger33
quote:
Check historical data of the 250 days after large pullbacks if the equity market with a recession recession. You will significant returns in the market.
If people have a long term outlook, then sure, buy long at today's levels and of course you will eventually make money. Nothing wrong with that. But most of the people putting tons of cash in right now thinking they will quickly double it are the same types who will panic in 3 months and sell when they realize they are down 20% and might need the money to live on if this is an actual recession.
This post was edited on 4/8/20 at 6:56 pm
Posted on 4/8/20 at 6:55 pm to rocket31
So you're short?
Posted on 4/8/20 at 6:58 pm to Janky
we will probably see a 10 mm unemployment claim tomorrow 
beyond that this isn't even just an American problem, this is a global problem which will affect world wide spending
beyond that this isn't even just an American problem, this is a global problem which will affect world wide spending
Posted on 4/8/20 at 6:58 pm to MillerLiteTime
quote:
But most of the people putting tons of cash in right now thinking they will quickly double it are the same types who will panic in 3 months and sell when they realize they are down 20%
Why do you give a damn about these people? Just focus on your short covering.
Posted on 4/8/20 at 7:01 pm to rocket31
quote:
we will probably see a 10 mm unemployment claim tomorrow
So, you're short?
BTW, where is the market since the last two terrible jobs numbers?
Posted on 4/8/20 at 7:01 pm to JakeRStephenes
quote:
Not buying any of your analysis - this disruption was not a technical one, period.
Maybe I should have made this the #5 false assumption. That if some deep flaw in the economy didn't cause the recession, then the recession doesn't actually count. The bottom line is it doesn't matter what caused the recession. If people aren't working, employers are scared to hire, people aren't spending money, rent and mortgages aren't being paid, and energy companies can't make a profit, then you have a long, tough recession like pretty much all the other one's have been. Mortgage backed securities in 2008 was a tiny part of the economy, but it took down all of it. A virus can do the same and it doesn't mean the economy bounces all the way back in a month once the virus is gone.
Posted on 4/8/20 at 7:03 pm to MillerLiteTime
IMO the question isn’t if we test lows again it is when. Could be the end of the year or two weeks from now. I bet it will be when everyone stops talking about retesting lows and is back to thinking things are all good though
Posted on 4/8/20 at 7:05 pm to thatguy777
I hope it happens tomorrow.
Posted on 4/8/20 at 7:05 pm to MillerLiteTime
As Santelli said, this is the Great Cessation. So, if a restaurant owner was at 60% capacity prior to shutdown, could it be possible that 100% capacity in the future can make up that shortfall? Duh.
Cover those shorts!
Cover those shorts!
Posted on 4/8/20 at 7:06 pm to Janky
im trading both short and long
but yea, that is hard to explain, the market is decoupling from the real world imo
but yea, that is hard to explain, the market is decoupling from the real world imo
Posted on 4/8/20 at 7:06 pm to Janky
It’d be nice to get it over with but that’s not how things work around here haha. You know it just as good as I do
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