The Active Stock Market Trader, or Traders of Other (Crypto ect.) Market's Thing's Thread.

[ROAD_DOGG33J]

If one person owns all of the stock of all of the companies, then they have to find someone to sell it to for it to be worth anything.

If a small group of people is buying 90% of the stock, if that group of people decides to stop buying, the price plummets. It's a small group of people determining that value of all of the stock - and they can change their minds all at once.

I'm sure they could find someone to buy it.

Okay, so if they decided that stocks weren't the way to go, and decided to go all in on crypto then stock prices would go way down. I wonder how that top 10% look comparatively over the years. Is it that much of a risk compared to before?

The conventional wisdom says "it's time in the market, not timing the market". If you're a young investor now I would be looking at the long term & not getting too caught up in the short term. My own experiences trying to time the market have not been productive, but he long term trajectory of the market has been solid. Since 1982 the Dow has gone from 800 to over 35,000. Having said that ... there have been long periods when stocks have basically gone sideways: 1915 to 1950 & 1950 to 1982 (with big peaks in the middle).

I concur. I think one decent strategy if you think the market is running high is to stop contributing and keep the cash aside. Then buy in with that money when you think the market dropped enough or as it's going down.

edit: This would work best with an individual account, and not a 401k retirement account or the like.

 

[Biggles]

I'm sure they could find someone to buy it.

Okay, so if they decided that stocks weren't the way to go, and decided to go all in on crypto then stock prices would go way down. I wonder how that top 10% look comparatively over the years. Is it that much of a risk compared to before?


I concur. I think one decent strategy if you think the market is running high is to stop contributing and keep the cash aside. Then buy in with that money when you think the market dropped enough or as it's going down.

edit: This would work best with an individual account, and not a 401k retirement account or the like.

It's easy to say that ... but in practice it's really hard to know when the market is "running high". And when the market does drop significantly the impulse is to stay out for fear that more is coming. The recoveries usually happen very quickly by which time you're likely to have missed out.

I bailed out in 2008 & went entirely to cash. I did this when the market had only dropped about 30% of the amount it eventually lost (30% is still a big hit). By chance, I started putting money back in the very day the market hit bottom. Brilliant! But I went back in cautiously, so in the end I missed most of the recovery & ended up more or less exactly where I would have been if I just stayed in for the whole ride.

In March 2020 I again sold off about 75% of my stock investments. This time, I told myself, I'll make sure to go back in more aggressively. As it turned out, due to a whole variety of factors, the recovery was almost instantaneous ... & continuous. There was, once again, no obvious time to "go back in". There were many pundits offering the opinion that a further crash - similar to 2008 - 09 was coming ... but it never happened & here we are, up about 17% from where we were at the Feb 2020 peak. You tell me if the market was running high in Feb 2020 ... or if it's running high now? FOMO (fear of missing out) is always present together with plain old fashioned fear of losing everything.

Another factor I see, especially for young investors, is unrealistic expectations created by the explosive growth of tech stocks like Apple, Google, Amazon, Tesla etc. This makes 6% or 7% annual growth rates seem very tame in comparison.

My suggestion - like the advice of most financial advisors - is to invest broadly on a regular schedule over time: "dollar cost averaging". If the market continues on the trajectory of the past 40 years you will do fine over the course of 20 to 30 years. *

* Disclaimer: This post is for informational purposes only and is not an offer to buy or sell any security. It is not intended to be financial advice, and it is not financial advice.

 

[Danoff]

I'm sure they could find someone to buy it.

At a much lower price.

 

[ROAD_DOGG33J]

In March 2020 I again sold off about 75% of my stock investments. This time, I told myself, I'll make sure to go back in more aggressively. As it turned out, due to a whole variety of factors, the recovery was almost instantaneous ... & continuous. There was, once again, no obvious time to "go back in". There were many pundits offering the opinion that a further crash - similar to 2008 - 09 was coming ... but it never happened & here we are, up about 17% from where we were at the Feb 2020 peak. You tell me if the market was running high in Feb 2020 ... or if it's running high now? FOMO (fear of missing out) is always present together with plain old fashioned fear of losing everything.

I did cash out a couple of stocks in 2020, but ended up re-buying them quicker than expected and didn't really make a whole ton on that. But I wasn't buying a ton of stocks around that time, so I had funds to buy stocks as the market was dropping. Not all of them were bought at rock bottom, but those purchases are doing pretty well right now.

I wasn't saying to sell stocks and time the whole thing. I would consider stopping contributing or dollar cost averaging and waiting until there is a better time to start putting more in. As to when is a good time to go back in that will depend on the person. If we look at 2020, the SP500 was dropping from around February 20 to March 20.

In the short term the market can be highly irrational. It does seem a bit high right now, and I'm finding it difficult to put money into index funds. But I had the same feeling at the end of 2019. I prefer currently to find individual stocks that seem like they're priced decently. And some of this is probably just me trying to keep things more interesting and testing things out.

 

[Danoff]

In the short term the market can be highly irrational.

And in the long term.

 

[Biggles]

Irrational compared to what? The market is driven by such a wide variety of factors - some of which have nothing to do with "market fundamentals". That's what makes timing the market so difficult.

 

[Danoff]

Irrational compared to what? The market is driven by such a wide variety of factors - some of which have nothing to do with "market fundamentals". That's what makes timing the market so difficult.

Compared to rationality. I think you're putting forth here that the market is at least in part driven by irrationality always, and if that's so, I would definitely concur.

 

[Exorcet]

I think one decent strategy if you think the market is running high is to stop contributing and keep the cash aside. Then buy in with that money when you think the market dropped enough or as it's going down.

As long as the market is going up you stand to make money, and that can help cushion the fall if everything tumbles. Over the past year, there was a nearly constant upward trajectory until September. That one month wiped out most of the gains I had made up to that point from the rest of the year. I was still left with a decent return though because I had been constantly investing each month the whole time, and I even continued to invest in September. Just one month later and I've more than made up for the losses.

My anecdote only covers a narrow timeframe, but it is sort of representative of how the market can act over the long term. I'm not sure if holding back during good times is really worth it. Even if there is a big correction, it's usually followed by a strong recovery. If I was going to gamble with trying to predict trends, I'd do it when the market was low. If there's a really big crash I might lower my monthly investments until it looks like it has bottomed out (although how you can tell is an open question) and maybe focus instead of paying down debt. Ultimately the biggest safe guard to market downturns is to have already been in the market and having years of profit ready to absorb some of your losses.

 

[Biggles]

Compared to rationality. I think you're putting forth here that the market is at least in part driven by irrationality always, and if that's so, I would definitely concur.

The point, as I have tried to make to you on many occasions about a variety of topics - is that the world, or at least human actions in the world - are to a very significant degree, not "rational", at least not in an easily articulated way. The irrationality is baked in - it's not a deviation from the norm ... it IS the norm.

As long as the market is going up you stand to make money, and that can help cushion the fall if everything tumbles. Over the past year, there was a nearly constant upward trajectory until September. That one month wiped out most of the gains I had made up to that point from the rest of the year. I was still left with a decent return though because I had been constantly investing each month the whole time, and I even continued to invest in September. Just one month later and I've more than made up for the losses.

My anecdote only covers a narrow timeframe, but it is sort of representative of how the market can act over the long term. I'm not sure if holding back during good times is really worth it. Even if there is a big correction, it's usually followed by a strong recovery. If I was going to gamble with trying to predict trends, I'd do it when the market was low. If there's a really big crash I might lower my monthly investments until it looks like it has bottomed out (although how you can tell is an open question) and maybe focus instead of paying down debt. Ultimately the biggest safe guard to market downturns is to have already been in the market and having years of profit ready to absorb some of your losses.

Exactly right! The biggest safeguard - especially if you are young - is to look to the long term & not be overly-concerned about the short term. Those 5%, or even 10% or 20% corrections don't look so significant looked at from the perspective of several decades (still sucks if you put money in & immediately see it drop, however. )

 

[Danoff]

The point, as I have tried to make to you on many occasions about a variety of topics - is that the world, or at least human actions in the world - are to a very significant degree, not "rational", at least not in an easily articulated way. The irrationality is baked in - it's not a deviation from the norm ... it IS the norm.

I don't know why you're trying to make that point to me. I'm well aware. And it is effectively what I said. You don't have to tell me the stock market is irrational, or that irrationality is ubiquitous, I'm saying that to you (and everyone else in this thread).

This is why it's very important, critical in fact, to remember that stocks have very little inherent value. There is some, but it is not primarily what stocks trade on. They trade on perception, and furthermore, they trade primarily on the perceptions of a very small group of people.

The stock market has done well over the last century, but it is still predicated on some very basic things that dramatically affect perception, including the stability of the US government, a presumption that is being tested in a big way, possibly since before the stock market existed.

I own plenty of stock, and I buy more with every paycheck. But I say to anyone whose nest egg is invested in stocks and funds alone, it is not diversified. You need "non-correlated" assets. And you need them before 2024.

 

[Biggles]

This is why it's very important, critical in fact, to remember that stocks have very little inherent value. There is some, but it is not primarily what stocks trade on. They trade on perception, and furthermore, they trade primarily on the perceptions of a very small group of people.

You must be talking about the people who invest wisely. ​

Mitch McConnell slams Democrats' proposal to tax billionaires, calling it a 'hair-brained scheme' to penalize people who 'invested wisely'​

Mitch McConnell slams Democrats' proposal to tax billionaires, calling it a 'harebrained scheme' to penalize people who 'invested wisely'

Democrats are floating a "billionaires tax" to fund their social-spending bill, which would include measures like affordable childcare and paid leave.

markets.businessinsider.com

 

[MIE1992]

Rivian's been doing great so far since it started trading last week, I bought like five shares when it was about $117. Thinking of putting $1k into Ethereum this next week, too, especially since they have a plan to become more environmentally-sustainable compared to other cryptos.

 

[Danoff]

I'm betting hard right now on inflation.

If Biden takes office and a COVID vaccine comes around, I think inflation is going to be quite noticeable. At least that's what my financial outlook is based on.

There was some risk that the rails would come off, and that a vaccine would not materialize, but for the most part, this was pretty easy to predict. I'm doing a better job predicting government than market.

Some inflation is a pretty safe bet for a while. Granted I don't think it'll stay at its current pace, but it's not going to zero, for a multitude of reasons. First, the government needs inflation to continue in order to make paying on the debt easier. Second, we just signed a big government spending bill into place - and that should keep some level of inflation rolling. Third, it's going to be a while before supply chains get fully sorted out, because the world is still emerging from the pandemic.

What I did in October of 2020 was to play in real-estate in a way that would benefit from inflation in 4 key ways. So far that's worked out.

 

[Joey D]

Rivian's been doing great so far since it started trading last week, I bought like five shares when it was about $117. Thinking of putting $1k into Ethereum this next week, too, especially since they have a plan to become more environmentally-sustainable compared to other cryptos.

I bought 100 shares of Rivian yesterday at the opening bell, I'm not disappointed. I figured with enough luck, it'll end up being a down payment on a house. I also copped 50 shares of Pfizer a couple of weeks back right before they announced the COVID pill and vaccines for 5-11-year-olds. I'm not disappointed in that move either.

 

[Joey D]

Me when I looked at my Pfizer stock this morning after buying more shares last week for myself and my son.

 

[88GTA]

How do we all feel about the Metaverse? Thinking of getting in during this dip.

 

[Danoff]

How do we all feel about the Metaverse?

It's garbage.

 

[88GTA]

Garbage as in you would never entertain the metaverse personally or garbage as in you think there is no value there?

 

[Danoff]

Garbage as in you would never entertain the metaverse personally or garbage as in you think there is no value there?

I think it's a fad, and quite a volatile one, with a lot of pushback, and people jumping ship. I don't want any piece of the metaverse. To give you context on who you're talking to though, I think Apple largely cashes in on fad behavior as well, and that the actual technology underpinning their products doesn't merit the premium they sell for. Apple as a company is a hell of a lot more solid than metaverse, but I don't want any piece of Apple either, because I think it's over valued.

 

[88GTA]

Thanks for the insight.

 

[ROAD_DOGG33J]

Crypto coins seem to roughly correlate with stock market performance. Stock market is going down? Your crypto value is also likely to be going down. So in terms of hedging against inflation, crypto is turning out to be useless so far.

 

[VolkswagenX]

Crypto coins seem to roughly correlate with stock market performance. Stock market is going down? Your crypto value is also likely to be going down. So in terms of hedging against inflation, crypto is turning out to be useless so far.

You should zoom out. Nobody who has been in BTC long term has lost money. Even people who bought the 2018 top are in profit now. BTC is a very good hedge against inflation for people in it for the long term.

 

[Danoff]

You should zoom out. Nobody who has been in BTC long term has lost money. Even people who bought the 2018 top are in profit now. BTC is a very good hedge against inflation for people in it for the long term.

"long term"

 

[Blitz24]

"long term"

Pretty sure that also applies to the stock market as a whole but what do I know?

 

[ROAD_DOGG33J]

That's a fair point. In the short term, both markets can be highly irrational. Still time will tell if there's any case for crypto's use in hedging inflation.

 

[Danoff]

That's a fair point. In the short term, both markets can be highly irrational. Still time will tell if there's any case for crypto's use in hedging inflation.

Even gold (at least ETFs) is not that great at hedging inflation. Gold is bought and sold quickly on the stock exchange, and anything that is bought and sold quickly has the potential to be highly volatile and traded on the basis of news headlines. Gold rises and falls hard, sometimes counter to what you'd expect and divorced from fundamentals.

If you want to hedge against inflation, you need to buy something that is somewhat painful to sell. That way prices stay sticky even when the news changes. The answer is real-estate of course.

Real-estate has an added benefit against inflation, which is that rent is inflation adjusted. So the return on real-estate tracks with inflation as does the price of the asset. REIT ETFs trade like gold and crypto... too fast, too volatile, and can be long term disconnected from fundamentals.

Edit:

The stock market itself can be something of a hedge against inflation, but, like any of the other things mentioned, it's a super long term play. Inflation does not fundamentally help stocks, it hurts them. The thing is, stocks can be so separated from fundamentals that it drives the price up simply because other people think it will drive the price up.

 

[Eunos_Cosmo]

Also too - considering crypto (which is supposed to be money) like an asset defeats the purpose of crypto and renders it pointless and therefore practically valueless. @Danoff will probably say that crypto is deflationary but that doesn't make it any more suited to being money than being inflationary...in fact it probably makes it worse. You'd have to be crazy to spend a deflationary currency on anything that doesn't appreciate as much as the currency itself. I've accepted that this doesn't seem to matter (at least until people don't have free money to gamble with) but I see crypto as a pretty nonsensical "investment".

Also too, bitcoin uses more than 1MW/hr of energy for every transaction. A MEGAWATT. Just imagine a Bugatti Veyron at wide open throttle for an hour on a dyno, just to buy a bagel. Ethereum is around 10x less energy intensive than bitcoin but that still makes it around 100,000 times more energy intensive than a credit card transaction. Is this really the future? Come on...

It's made a few people quite rich and it's novelty has captivated basically the entire planet, I'll give it that, but I'm not sure what it's really good for aside from that. I'm almost certain that the majority of countries will be either banning cryptocurrencies completely, sharply regulating them, or outright controlling them in the next 5 years.

 

[Danoff]

Also too - considering crypto (which is supposed to be money) like an asset defeats the purpose of crypto and renders it pointless and therefore practically valueless. @Danoff will probably say that crypto is deflationary but that doesn't make it any more suited to being money than being inflationary...in fact it probably makes it worse. You'd have to be crazy to spend a deflationary currency on anything that doesn't appreciate as much as the currency itself. I've accepted that this doesn't seem to matter (at least until people don't have free money to gamble with) but I see crypto as a pretty nonsensical "investment".

Also too, bitcoin uses more than 1MW/hr of energy for every transaction. A MEGAWATT. Just imagine a Bugatti Veyron at wide open throttle for an hour on a dyno, just to buy a bagel. Ethereum is around 10x less energy intensive than bitcoin but that still makes it around 100,000 times more energy intensive than a credit card transaction. Is this really the future? Come on...

It's made a few people quite rich and it's novelty has captivated basically the entire planet, I'll give it that, but I'm not sure what it's really good for aside from that. I'm almost certain that the majority of countries will be either banning cryptocurrencies completely, sharply regulating them, or outright controlling them in the next 5 years.

I'm not touching crypto. I think you're right about future regulation, and also it's just not clear which will eventually win (if any). The rest are likely headed to zero. Quantum computing is problematic for it as well.

 

[ROAD_DOGG33J]

I have some money in crypto, but I did consider that it may all go bust at the end when I decided on the amount.

 

[Eunos_Cosmo]

I'm not touching crypto. I think you're right about future regulation, and also it's just not clear which will eventually win (if any). The rest are likely headed to zero. Quantum computing is problematic for it as well.

That's the other thing - Bitcoin seems to be the winner but it cannot possibly be the future of currency with its energy consumption. I did a back of the envelope calculation and the world does not actually produce enough energy (by a large margin!) to convert every financial transaction to bitcoin. Imagine that - a world desperately trying to switch to lower energy emissions and more sustainable energy infrastructure - using all its energy production for a single currency.

I won't touch crypto because I think its awful all around.