[2020] A little stock market sense

[DrQ]

MARKETS
Dow falls 800 points, tumbling below 30,000 to the lowest level in more than a year

https://www.cnbc.com/2022/06/15/stock-market-futures-open-to-close-news.html

The Dow Jones Industrial Average tumbled below the key 30,000 level on Thursday as investors worried the Federal Reserve’s more aggressive approach toward inflation would bring the economy into a recession.​

​

The Dow had rallied on Wednesday after the Fed announced its largest rate hike since 1994, but reversed those gains and then some on Thursday, tumbling to the lowest level since January 2021.​

 

[Ralph Sir Edward]

And how do you know when the bottom is?

Kurt

Under the W. . .

 

[DrQ]

Under the W. . .

You record is skipping - hit the needle and go to In - N - Out Burger

 

[Ralph Sir Edward]

You record is skipping - hit the needle and go to In - N - Out Burger

Prefer Whataburger. I'm pointing out the classic bottoming chart pattern, for those interested in knowing when the market bottom is reached. (The W patttern). Also if the Fed is squeezing then bear market will continue. It only turns bull after the Fed has started easing (which hasn't happened yet.)

Market timing 101. . .

 

[MULTIZ321]

Dividend Stocks and Your Roth IRA

Dividend Stocks and Your Roth IRA

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www.marketbeat.com

Richard

 

[Brett]

Prefer Whataburger. I'm pointing out the classic bottoming chart pattern, for those interested in knowing when the market bottom is reached. (The W patttern). Also if the Fed is squeezing then bear market will continue. It only turns bull after the Fed has started easing (which hasn't happened yet.)

Market timing 101. . .

Please let us know when the stock market has finally reached the "classic" W bottom --- then we can start loading up on stocks again

 

[Icc5]

Where have I gone in the market with my buy and hold of my individual stocks? The Dow is down 19% which is exactly where I currently sit. I buy a mix of stocks after watching them for a long time and individually have some in many sectors but the bulk of money is in about 8 of the 20 I own because those have gained the most over the years. Most our dividend payers which is what I really like and over the 50 or so years have kept me going over the years without panicking during bad times.
Seperately both my wife and I have our IRA'S and ROTH'S mostly in funds,money market,etc. and I try not to worry about the Ira's as they too have fallen and it is almost time for me to have to start drawing because of my age. Luckily my wife has about 6 years for hers to recover.
In 2008 we dropped about 50% in my individual stocks but my dividends payouts increased and from my low of 2008 to now I'm just about at double and that's with me adding 4 stocks with 2 of those down from my original cost and 2 that are about double my original cost. Don't ask me why but I usually buy 1,000 shares at a time and normally look at stocks in around the $25 per share range.

 

[Ralph Sir Edward]

Please let us know when the stock market has finally reached the "classic" W bottom --- then we can start loading up on stocks again

I'm not a registered investment advisor.

 

[Ralph Sir Edward]

Bitcoin is now below $19,000.

 

[DrQ]

Top economist Mohamed El-Erian says the everything bubble is over. It’s a paradigm shift away from a ‘silly’ artificial economic world.

Top economist Mohamed El-Erian says the everything bubble is over. It’s a paradigm shift away from a ‘silly’ artificial economic world

'We are exiting that regime, and it’s going to be bumpy,' said the famous Fed watcher Mohamed El-Erian of the world where central banks let the money flow

fortune.com

 

[Brett]

Bitcoin is now below $19,000.

could drop below $18,000

 

[MULTIZ321]

NOBL: Dividend Aristocrats ETF, Outstanding Dividend Growth Track Record, Cheap Valuation

NOBL ETF: Outstanding Dividend Growth, Cheap Valuation

NOBL ETF invests in Dividend Aristocrats, stocks with decades-long track records of dividend growth. Read why I think NOBL is a investment opportunity & a buy.

seekingalpha.com

Richard

 

[MULTIZ321]

The Retiree's Dividend Portfolio: John's May Update: Oil Stocks Serve As Hedge Against Volatility

Retiree's Dividend Portfolio Update: Oil As Volatility Hedge

John's Traditional IRA had a balance of $374.7K as of May 31. Check out how much dividend income John's retirement accounts generated for May.

seekingalpha.com

Richard

 

[pedro47]

Please let us know when the stock market has finally reached the "classic" W bottom --- then we can start loading up on stocks again

Now is the time to invest in stocks, while the prices are low.

 

[Superchief]

Now is the time to invest in stocks, while the prices are low.

I don't think it has reached bottom. The rapid increase in interest rates will send the country into recession and increase federal debt. Too many people have high credit card debt and the increased rates will make it difficult for them to pay the higher gas, food, housing, and utility costs. School districts and other government agencies will also be asking for higher taxes to pay the increased costs for gas and payroll costs. I hate to see our maintenance fee increases for next year. I predict a two year recession, depending on whether government policies are changed.

 

[VacationForever]

I have a "note" that matures on June 29 and will end up with a chunk of money. Still chewing on whether to keep the money as cash or to invest in a dividend / value etf.

 

[Rolltydr]

I don't think it has reached bottom. The rapid increase in interest rates will send the country into recession and increase federal debt. Too many people have high credit card debt and the increased rates will make it difficult for them to pay the higher gas, food, housing, and utility costs. School districts and other government agencies will also be asking for higher taxes to pay the increased costs for gas and payroll costs. I hate to see our maintenance fee increases for next year. I predict a two year recession, depending on whether government policies are changed.

I foresee the stock market rebounding and doubling over the next 2 years. Recession, schmecession? Unemployment is extremely low at 3.6% and wages are increasing. More people working means more people paying taxes to support schools and government agencies so they can educate our kids and take care of our poor, sick and elderly citizens. Gas prices are down here .15/gal this week. The sky is not falling.

 

[Superchief]

I foresee the stock market rebounding and doubling over the next 2 years. Recession, schmecession? Unemployment is extremely low at 3.6% and wages are increasing. More people working means more people paying taxes to support schools and government agencies so they can educate our kids and take care of our poor, sick and elderly citizens. Gas prices are down here .15/gal this week. The sky is not falling.

I guess we will see over the next two years. I hope you are right and I'm wrong but there are just too many economic issues to overcome at this time. Full employment doesn't help when expenses outpace income. A lot of successful restaurants in my area are closing because of their rapidly increasing costs and difficulty in hiring and keeping good people.

 

[VacationForever]

... it's complicated.

 

[PigsDad]

I don't think it has reached bottom. The rapid increase in interest rates will send the country into recession and increase federal debt. Too many people have high credit card debt and the increased rates will make it difficult for them to pay the higher gas, food, housing, and utility costs. School districts and other government agencies will also be asking for higher taxes to pay the increased costs for gas and payroll costs. I hate to see our maintenance fee increases for next year. I predict a two year recession, depending on whether government policies are changed.

The question is how much of the upcoming recession is already priced into the current stock market? As we all know, the stock market is driven by futures, and most stock traders have been predicting an upcoming recession so the 20-30% drop (depending on the sector) we have already seen has been driven by that news. I think a big question is how fast can we get inflation under control -- if it takes longer than the economists are currently predicting, then that will certainly have a negative pressure on the stock market. The stock market tends to recover long before the actual recession is over.

As you mentioned, changes to government policies can certainly make a big difference -- excellent point.

Of course, if I knew all of these answers, I'd be much, much richer and I wouldn't be hanging around with all of you common folk.

Kurt

 

[Brett]

I foresee the stock market rebounding and doubling over the next 2 years. Recession, schmecession? Unemployment is extremely low at 3.6% and wages are increasing. More people working means more people paying taxes to support schools and government agencies so they can educate our kids and take care of our poor, sick and elderly citizens. Gas prices are down here .15/gal this week. The sky is not falling.

The stock market is a reflection of future public company earnings so if employment and revenue holds then the "correction / bear" downturn could be temporary.
(or not)
But I don't think stock prices will double over the next 2 years. maybe in the next 15 or 20 years ...

 

[Rolltydr]

My post was meant to be “tongue in cheek”. I have no idea what the stock market, or the overall economy, is going to look like in 2 years. I was simply rebutting other posters who are into the gloom and doom predictions who have very strong opinions and very few facts. I simply sprinkled in a couple of facts with my uneducated opinions.

 

[Superchief]

The question is how much of the upcoming recession is already priced into the current stock market? As we all know, the stock market is driven by futures, and most stock traders have been predicting an upcoming recession so the 20-30% drop (depending on the sector) we have already seen has been driven by that news. I think a big question is how fast can we get inflation under control -- if it takes longer than the economists are currently predicting, then that will certainly have a negative pressure on the stock market. The stock market tends to recover long before the actual recession is over.

As you mentioned, changes to government policies can certainly make a big difference -- excellent point.

Of course, if I knew all of these answers, I'd be much, much richer and I wouldn't be hanging around with all of you common folk.

Kurt

I think the stock market has been overvalued for some time because people don't have other alternatives to grow their savings safely. The gap between the interest rates we pay versus the rates we earn has never been greater. I recall during the high inflation time in the early eighties, I had CD's and GIC's earning 13-17% while my mortgage was 13.5% variable rate. CD and cash funds were only paying .5% during the last several years while credit card interest was typically 15%+ and mortgage 3-4%. It will be interesting to see how fast and how high the savings interest rates increase with the recent changes. More people will convert from stocks to safe, interest earning alternatives.

There are a few things that are different today than in previous situations in which interest rates were utilized to curb inflation.

1. Federal debt is at an all-time high due to high spending for Covid and other pet government projects. It has been several administrations since we've seen any true effort to balance the budgets. The higher interest rates will increase the money needed just to pay the interest on the debt, compounding the problem.
2. Credit card debt is a lot higher than it was in the 80's. Middle class households are now faced with increased interest rates in addition to higher living costs. Where will this money come from? Will these households be willing to cut back on non-essentials like Doordash, streaming services, Amazon, and streaming service spending?
3. The issue with product supply will still drive inflation higher on essential things because people have no alternatives. Therefore demand will not likely go down significantly enough to reduce the prices unless the supply issues are resolved. Some corporations have also increased their profit margins using supply issues as an excuse, but it will be difficult to continue to get by with this, so their profits will decline.
4. Housing has reached a tipping point. Low interest rates over the last few years have resulted in the real estate market becoming overvalued in many areas. Most home buyers are more concerned with their monthly expense rather than purchase price. They will have to downsize their expectations in order to accommodate the increased interest expense. This is in direct conflict with the dramatic increase in building materials, so I expect new home sales to decline. The move to more remote workers will also significantly impact the demand for corporate offices. Vacancy rates will continue to rise in many cities, impacting local business income and tax revenue.
5. State, local, and property taxes continue to increase and require a greater portion of personal income. Has anyone experienced a decrease in property tax? My property taxes have doubled in the past five years and now are over $800 per month for a house below median market value. Local governments are quick to increase assessments as home values go up, but very slow to reduce them when they go down.
6. No matter how you look at it, a rapid forced conversion to green energy sources creates additional inflationary pressure. Affordable and effective technology need to be available prior to forcing conversion. This impacts consumers, businesses, and government agencies. Uncertainty regarding regulatory environment and viability of the technology create uncertainty in all industries that can be impacted by these changes. I hope the government will work together to develop viable long-term and achievable plans in order to stabilize the current and future economy.

 

[CO skier]

1. Federal debt is at an all-time high due to high spending for Covid and other pet government projects. It has been several administrations since we've seen any true effort to balance the budgets. The higher interest rates will increase the money needed just to pay the interest on the debt, compounding the problem.

No, because the debt is in US Treasuries with a fixed interest rate for the term of the instrument. The price of the bond will decrease as interest rates rise, but the interest rate does not rise. The money to service this debt is constant in a rising or decreasing interest rate environment.

The increasing interest rates will affect only new debt.

 

[Superchief]

No, because the debt is in US Treasuries with a fixed interest rate for the term of the instrument. The price of the bond will decrease as interest rates rise, but the interest rate does not rise. The money to service this debt is constant in a rising or decreasing interest rate environment.

The increasing interest rates will affect only new debt.

I was referring to the new debt, since we know that spending won't decrease in the near future. The bottom line is there will likely be a significant increase in federal debt interest expenses over the next few years unless significant efforts are made to reduce spending that isn't funded by revenue. A recession will also reduce the tax revenue received.