2020 Stock/Market Strategies?

thebrofessor:

FUCK the bears.

The one thing that Vikings fans and Packers fans will always be able to find common ground on.

Thanks for the solid advice too.

Just saying, does anyone believe that permabears are actually short the market? Because I don't, for a second.

Ask Ivandijski to show you his portfolio. I don't doubt he might own physical gold and Bitcoin, I also don't doubt that his portfolio is not a bearish one. Suuure at a certain point the US dollar will stop being the world reserve currency, but that might as well be outside our lifetime. They know it.

Cheerleading, wishful thinking and fundamental hypocrisy are part of human nature.

That being said, I agree with brofessor's base advice, though I'd personally keep some 20% into anything that's essentially non-performing, but if shits hits the fan, it hits the moon. VIX being my personal favourite.

Fear/greed? I see apathy and boredom. We've been going for years with a system that sees central banks print money, lend it to a restricted circle of extremely high creditworthy elements, who then put it back into the market so that asset values go up. With the only noticeable issue that those very same are running out of assets to put their money into, so they look for whatever bs looks fashionable.

Also yeah, indicators are bullshit; however people need to know and they need an explanation that makes sense to them, so we have indicators.

As a degenerate gambler I've been looking for a near-term correction coming out of the holidays as the market has become quite stretched and sentiment indicators quite full.

As an investor you have to look out further than what is going to happen in 2020. Invest for the long-term.

It is fine to gamble on short-term calls as long as you recognize that it is no different than heading to the casino. The macro-directional game is extremely difficult to get right and even more difficult to repeat consistently. When you are young you think you'll just time the market right that one time and make a killing and be all set. Then you watch as the market goes up 70% of the time while you earn nothing in interest on your cash (at least during this cycle).

I mostly agree with thebrofessor 's comments here. Especially love that he called out guys like Mauldin/Hussman/Zero Hedge. You read one of Mauldin's write-ups and you'll be convinced the world is gonna end and the only way you'll survive the coming debt super cycle apocalypse is if you...pay for his news letters. The common thread with perma bears is they are trying to use fear to sell you something or get more clicks so they can generate more ad revenue through their websites. They are salesmen. I don't have much to add here but I'll leave you with a relevant quote: "The most expensive investing mistake you can make is to be a pessimist".

thebrofessor:

I created a thread Q4 2018 on market strategy but this is as good a time as any. I'll give you my advice first and then tell you why.

assuming you're young and have no income needs from the portfolio put everything you're worth outside of emergency funds into a diversified global stock portfolio, if you pick your names, don't let any one name make up more than 5% of the overall, but I'd recommend ETFs and low cost mutual funds mostly. that's it. specific to 2020? nope, but long term, be in the stock market, full stop.

disclosure - if we go into the dark ages because of an electromagnetic pulse, the global currency system collapses, or some other catastrophe that is not plausible outside of the darkest corners of the internet, I'll be wrong. but in every other scenario, I'd bet the house that markets continue trending up over time.

why? because you have time on your side and the general trajectory of the markets is up. going all the way back to the 1920's, there has not been a single 20 year time period where stocks have had a negative CAGR (US, I mean). the worst CAGRs you saw were immediately following the depression and even still those were positive.

there will ALWAYS be bears out there lurking but aside from the once in a while victories, most of them are broken clocks who always call for a crash and when one comes they're praised for calling it yet never called out for the countless other mistakes they made (john mauldin, john hussman, marc faber, porter stansberry, zero hedge). take them as seriously as you'd take a stripper giving a homily.

on economics, again, BULLSHIT. sure, you can point to all sorts of indicators for a recession but has anyone been able to consistently tell you when a recession is coming and MORE importantly, how that affects your money? hint, the answer is no. one of the worst recessions in recent memory (1980-1982) had a calendar year return of.........................minus 4.7%. the preceding year was up over 31% and the year following the declines was up 20%. even after the terrible returns of the 1970s with Vietnam and stagflation, your 10y return for the decade was 4.7%, not great, but no reason to be a chicken shit and buy T bills. we will continue to go through recessions, bubbles, expansions, crashes, maybe another depression or two, but until risk ceases to be rewarded, you need to be a buyer long term. also, many of your economic indicators (PMI) are absolute dogshit investment signals, so don't conflate the economy with your investments, they don't follow in lockstep.

on greed/hysteria, where are you seeing this? because we rebounded 31% after going down 20% in 3 months? I call that normal, not hysteria. sure, trading indicators (like CNN's fear/greed index) are pointing towards a short term correction, but does that mean you should stop investing in stocks? no, it means rebalance, maybe sell something overvalued, and buy back in when you get the chance. furthermore, hysteria is when investors are putting money into markets recklessly. did you know that nearly $200 billion left the stock market last year and over $440 billion went into fixed income? tell me how that squares with greed and hysteria

finally, the most notable "gotcha" to being nearly permanently bullish - valuation. I'll spare you John Hussmans mental masturbation and use proven metrics like Shiller's PE, hands down the most accurate forecasting metric in American history. it can tell you WITH CERTAINTY whether returns for the ensuing 10 years will be average or above/below average. HOORAY! now, what do you do with this information? do you sell all of your stocks because the Shiller PE is almost 30 right now? OK, great! put that in bonds and lose 1% per year to inflation. the Shiller PE hit nosebleed levels in the 2000s but the difference is you got paid 4-7% in high quality fixed income at the time. so yes, you should be mindful of valuation, selling winners when PEs get way ahead of themselves, but I'd never advocate bailing out because of valuation unless there was a suitable alternative that paid you well.

TLDR - stay long, stay diversified, pare your folio when valuations get frothy (keep dry powder), buy me a drink with your winnings in 20y when you've quadrupled your money. and don't forget, FUCK the bears.

tagging some others for good discussion

DickFuld Secyh62 GoodBread Eddie Braverman IlliniProgrammer LeveragedTiger jankynoname ke18sb Kassad Keyser Söze 123 Disjoint zanderman Synergy_or_Syzygy InfoDominatrix neink DeepLearning The Stranger

DickFuld:

thebrofessor:

don't tell me what you think, just tell me what's in your portfolio”

100% equity for me. Balls deep.

I think we're in the same place we were at in late 2018 honestly: overall bullish outlook, with some serious over-valuation and potential weakness in a few individual sectors (most parts of retail; leveraged loans). An overall diversified portfolio should be able to broadly mitigate these concerns. Will keep dollar cost averaging a low cost index ETF to victory.

My only addition to this is that I think the market is poorly prepared for any 'black swan' movements right now. The end of 2018 was brutal for markets - you had the Fed acting hawkish, while Trump was out making a mess of US-China relations, which no one had thought possible up until that point in time. Despite this, anyone with a set of balls that bought in at that time has made a killing since then (I went long Apple, and Nvidia - feeling pretty chuffed on those trades right now).

As central banks eased in response to global trade dynamics, and US-China trade negotiations have softened in hostility, the market slowly bought back in to the 'everything is fine' narrative. But as a Anthony Jenkins, a favourite market commentator of mine, says "buy the rumour, sell the fact". So most strategists are talking about 2020 being another moderately positive year because of a resumption in global economic growth, but I think this is stupid - that growth has already been priced in after 2019's monster return.

So to go back to my original point, with the market fully pricing in any upside relating to global economic growth, I think we're highly sensitive to any downside news again. Just think about how much consensus there is on big-bucket issues: US-China have a constructive relationship again; there's a permanent lid on oil prices thanks to US shale; central banks have extended the business cycle due to accomodative monetary policy; governments will engage in stimulative fiscal policy to push the needle on growth, etc. Any one of these narratives can vanish overnight, and that's where I think the risk is currently.

If I were to extend my thoughts into the realm of speculation, I generally think that oil is the one aspect of the market that's prime to blow out - the market has been overestimating the US as a swing producer due to shale, despite all indications suggesting that shale oil is non-economic (see continuing bankruptcies, oil majors cutting back shale CapEx, consolidation in the sector). Add in some geopolitics and BOOM. And just think about all of the second- and third-order consequences of oil blowing out. Cost of fuel goes up, consumers have less money for everything else, transportation costs go up making e-commerce less competitive, consumers spending less leads to less growth in sexy growth consumer products companies, big implications for global economic growth (particularly in the US) as GDP is heavily-weighted to consumer spending, central bank inability to fix GDP growth stalling or even contracting. It'll be a fucking mess.

Given all this information, what would I do? Well, I think market-timing is dumb, I don't have the guts for short-selling, and I'm fundamentally a 'going long' kind of guy. This leads me to say that staying long in some high-quality names where you have a nice dollar-cost average significantly below current levels is a nice place to be. Beyond that, keep some cash on hand to capitalize on some unexpected market dislocations in 2020.

Thanks for the tag. I don't have much to add to what thebrofessor wrote, sage advice as usual. But I would keep my eye on Crypto because of the geopolitical environment, election year, Brexit, etc. I think it may be coming into its own as what many have called it, "digital gold" - not necessarily going to become a replacement currency on par with state currency like its most vocal borderline-anarchist backers would have you believe, but it may certainly serve a useful dual-purpose of hedging/diversification plus more utility as a medium of exchange than metals. Disclaimer: I'm not a crypto expert and have only been really digging into it in any meaningful way for the last few months (more to understand better from a technical level for starters than from an investor's perspective).

Thanks for the tag bro! I'll comment below so I don't get lost in the comments.

Thank you for the tag, and I want to compliment you on your advice which provides much needed clarity amidst the misguided frenzy that is todays financial market. I'm on the IB side, and the only thing I can add is a word of caution for investors pertaining to company valuations. Irrational company valuations are out the market, and will continue to become more prevalent until a correction. Stay diligent, stay invested, and perhaps cautiously liquidate the overvalued dogs in your portfolio for future bargain hunting.

Your advice ressonates as I'm working through Benjamin Graham's Intelligent Investor, and I quote from his text, “The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell. It is far from certain that the typical investor should regularly hold off buying until low market levels appear, because this may involve a long wait, very likely the loss of income, and the possible missing of investment opportunities. On the whole it may be better for the investor to do his stock buying whenever he has money to put in stocks, except when the general market level is much higher than can be justified by well-established standards of value. If he wants to be shrewd he can look for the ever-present bargain opportunities in individual securities. Aside from forecasting the movements of the general market, much effort and ability are directed on Wall Street toward selecting stocks or industrial groups that in matter of price will “do better” than the rest over a fairly short period in the future. Logical as this endeavor may seem, we do not believe it is suited to the needs or temperament of the true investor—particularly since he would be competing with a large number of stock-market traders and first-class financial analysts who are trying to do the same thing. As in all other activities that emphasize price movements first and underlying values second, the work of many intelligent minds constantly engaged in this field tends to be self-neutralizing and self-defeating over the years. The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances. He should always remember that market quotations are there for his convenience, either to be taken advantage of or to be ignored. He should never buy a stock because it has gone up or sell one because it has gone down. He would not be far wrong if this motto read more simply: “Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop.”

As I shared in @thebrofessor ‘s 2018 Raging Bull thread, call me Pollyanna, the overall optimist, 80-85% equity and 15-20% cash/bonds/fixed.

I like and use funds from Dodge & Cox and from Edgewood, to name a few. I'm not a fan of funds that are supposedly benchmarked towards a specific retirement age/year such as T.Rowe 2040. They seem to do ok, not great. There are so many of them nowadays and I'm just often wary of anything too “popular.” Popular doesn't necessarily mean good, although I think it's interesting to watch things like vice funds as well as how ESG and impact investing are changing the investing landscape.

I don't often do specific stocks, but when I do, I make a point of usually looking at stocks that pay a dividend, such as Anheuser Busch back in the day. Hubby likes to do more individual stock picking more than I, but then he worked on the NYSE for many years, so he enjoys the day-to-day highs and lows, that energy/stress factor, that some personalities thrive on.

Definitely make your youth work for you, always try to max out your 401K or IRA contributions. Definitely look at the bigger, long-term picture. DEFINITELY don't feed into the naysayers and doomsday mentalities -- we've pretty much experienced anything and everything from wars to depressions to recessions to companies/sectors faltering/failing and everything in between.

Will there be market corrections? Yes. Will there be bubbles? Yes. But since figuring the exact timing of these comparatively-speaking small-windowed events in near-impossible, save and invest what/when you can AND REMEMBER you can do everything "correct" and still wind up with financial problems.

Hubby and I lost our jobs in the same week in May 2009, after we'd already sold our house in 2007 pre-real estate bubble burst and after he survived Lehman's shutting down in Sept 2008. We'd downsized to a co-op apartment and he wound up taking a 65% paycut when he could not get a Wall St job. I was out of work for almost all of 2008, having been outsourced from my corporate library job at a Swiss bank.

What saved us was never assuming that we'd always be making the same/more. It hurt to live off savings while I took any gig I could [house cleaning, resume writing, selling real estate, respite care provide] until I was able to get back into the corporate world, but our savings along with having no mortgage made all the difference in making a very difficult time manageable.

that you, warren buffett?

what about them? like I said, a globally diversified stock portfolio. I never said exclude mid & small

the keys are - diversify, be patient, and be bullish

Same issue here.

tbateman:

What should those of us with shorter time horizons for needing our $ be doing? Have searched and not found a great answer other than high yield savings accounts or CDs.

the advice you're getting is correct, and it has to do with the relative certainty of the time frame in question. it's possible to get a deeply negative CAGR over a 5y period, but we've never had a 20y negative CAGR for stocks. you match the level of stock exposure to the timing of the expense.

so, put your money in CDs, treasuries, munis, money market, or if you want a little more potential return for some risk, do like 20-30% stock exposure. another thing with this is you want to be buying real estate when prices are collapsing, so your source of funds needs to be liquid, quickly, which doesn't exactly lend itself to having a lot of stock exposure.

on the index fund thing, the math is exactly backwards in the bond market, meaning the average fund manager does outperform the index, so rather than looking for the cheapest option via index funds at vanguard/ishares, I'd go with an active fund.

I'm still a bear for valuation reasons, but as I've said before, shorting is incredibly difficult. I may be right long term but wrong for 5 years before they go bankrupt

any one stock, just like the market, can stay irrational longer than you can remain solvent.