What a f'n day in the market. I am not sure if it was a dead cat bounce or an actual rally from being oversold. I'm confused. Any input?
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Bought back in this morning, what a wild day, feels so good after the past two weeks. Not sure if it will hold but its nice to bring home a winner for a day.
Dead-cat bounces rarely amount to 4+%. We haven't hit the bottom, but I think this is a signal of lower vol ahead.
Thanks IP. I want to buy in when the Vol declines.
Today was a great day for both longs and shorts. What's not to like about a 640 point intra-day swing? Plenty of opportunities to make money today.
I wouldn't call it a dead cat bounce. I'd call it blind bulls who don't know how to do anything but buy. Their day will come.
Short-term views aside, are people really going to completely stop consuming electricity? Are they going to stop heating their homes with natural gas? Will we all be living in tents and gardening our own food? If you believe civilization is going to come to an end in the next few years, now is a great time to become a Franciscan friar and give away all of your possessions in the hope of the second coming. If you don't believe that, you have to believe that conservative dividend-paying equity investments have to be a good deal over the next ten years when yields are north of 5% and many P/Es are getting to the single digits.
Yeah. On the one hand, I have strong conviction that 10 years from now, I'll have made a fair amount of money in real terms off of the utility, timber, and oil stocks yielding 5-9% that I've been buying. On the other hand, my mild suspicion is that we haven't quite bottomed in the short-term yet. Bottoms don't form with P/Es on the SPX at 11.5 after a series of brutal days like this.
During 2008, the panic with a week full of 7% down every day ended with a 7% rally. I suspect we're seeing a smaller, slightly less panicked version of that here. I suspect we won't find the bottom until we're down another 15%. The only thing I'm willing to bet my life on is that buying cheap dividend-paying stocks today will be seen as having been a fairly good move- even if I didn't call the bottom precisely- ten years from now.
QFT.
We still have a bottom to find. Europe is still in shambles and the market will realize it over the next 2-3 days and we'll see some pullback.
I work on a growth fund but the notion of buying into high div yielding stocks with stable cashflows and moderately low multiples is absolutely the way to go for the next few months.
DuPont is one that I like, even though I hate their sudden desire to move more into solar panel inputs. 3.5% div yield, strong hand in the ag market, and strong base chemicals outlook.
I just have a hard time seeing an upward surge like today's as being anything other than irrational. There wasn't anything even remotely positive about the FOMC notes (uhhh...there's nothing we can do that we aren't already doing, but the good news is we'll keep doing it!). The market is willing to seize on anything to go higher. I'll bet against that every chance I get until reality gets priced in.
We bounced off the bottom in the initial panic as retail investors came in on valuation. As in "Holy cow! Wyeth Pharmaceuticals is yielding 7%! I'm buying!"
You can short here and actually probably make some money- October 2008 wasn't the bottom three years ago, but short of a currency supply contraction ala 1930, I don't see nominal earnings declining more than 20% from here on a long-term basis and I don't see P/Es going much below 8. This gives us a worst-case downside of perhaps a 40% loss, all the while collecting 4-5% dividends vs. 2-3% on treasuries or 0 on gold and 0 in short-term cash. Meanwhile, if we get back to a P/E of 14 on the S&P- simply the long-term P/E average over the past 80 years, we're heading back up to 1400 on the SPX.
We will probably see a decline tomorrow. When you get a move this big, there's almost always a retracement. I doubt it will 100% cancel out today's gains. But the fear has been taken out of the market. We're at reasonable valuations for zero or even negative growth and the weak hands who apparently were not aware that stocks could drop 5% in a day have left the game. The next down day might be a good time to sell your puts- I hedged about 50% of my portfolio down 20% for the debt deal and sold 1/3 of those puts yesterday. (See I am not a perma-bull, just a cautious optimist). As we approach expiry and the theta costs start increasing on me, I'll sell off more- I've made enough from the vanna. :D
IP, I can't disagree with anything you've said. I'm just waiting patiently for that 8 P/E. When we get there, wild horses couldn't keep me away.
And I'm not a perma-bear. I went long DXD a couple times today, lol.
I thought you were mostly out of the trading game?
How many trades did you make today? What's your average (or does it totally depend upon perceived opportunity)?
I never said I wasn't trading. I said I wasn't buying.
I made 3 trades today (the same 3 I made in our mock competition, only I used options in my real account). Well, 6 if you count buys and sells, obviously. And that's a busy day for me. I'll sometimes go a couple weeks without trading, but lately it's just been too good.
Gaah, it seems like you are taking the six month view, and I am taking the six year view. Yes, I am inclined to agree with you on a negative outlook over the next few months. That shouldn't scare away long-term investors, though- it should just get them thinking about buying but maybe with a covered call strategy given that the VIX is north of 35.
A P/E of 8 brings us to the SPX at 800. A P/E of 14- the median during the 1965-1983 secular bear market when inflation hit 10%- brings us up to 1400.
Bernanke says "We are definitively not touching interest rates for another 1.5 years"
You can't stick your money in cash anymore because it's returning 0.10% and will continue to do so. You can't buy 10 year t notes anymore because they're yielding 2.25%, the Dow yields 2.5%. Gold? Fuck gold. Gold is a commodity and produces no cash flows whatsoever. What's left? Equities seems like a logical answer given the strong rally we saw today.
First of all I don't know how cash returns "0.10%". Still trying to figure that one out..
Fuck Gold? Yes, fuck gold. I bought in @ 450 and I'm saying fuck gold also.. RIGHT.
Yes, equities seem like such a logical answer right now considering market volatility is unprecedented right now.
Please. Unless you're a pro, I'd be on the sidelines with maybe a few commodity plays. Hell, with the dollar nose diving both the Yen & the Franc look damn good as well. Ignore the intervention, all that is is a buying opportunity. Intervention rarely beats out the market.
IlliniProgrammer,
Which stocks did you buy today if you don't mind sharing, and/or what are your best picks in the cheap dividend-paying stocks category? Was too busy today but plan on buying in tomorrow if the market doesn't rally another 5% before I get the chance. Thanks bro!
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Alas, my firm's compliance policy specifically prohibits me from mentioning specific securities in online forums. If we wind up grabbing a beer at the next meetup, I'll be happy to let you know what I've been buying.
Just look for 4%+ dividends in companies with sub-10 PEs, big economic moats, and less than a 70% liability/asset ratio. If they have a lot of growth attached to them, even better.
Alright sounds good bro. What do you mean by big economic moats? Also any preferable sectors? Times like these that make me realize I would much prefer being a trader / working at a HF than doing this mindless BS work in IBD...
Big economic moat means that it's a tough business to get into. Think a company that makes operating systems, a utility with a bunch of power plants that are tough to build, or a telecom company.
Don't buy an airline, trucking company, or ho-hum retailer. Anybody can start those.
Eddie, you're retired. Life should be easy and fun when it's funded by dividends and interest. You don't want to worry about trading in a 45 VIX market.in my opinion the irrationality has more so been to the downside. the economic story didnt change in the past two weeks but we sold off 20 percent from the highs or so, so the buying is warranted. sure, we may go down lower but whats not to like about a 20 percent sell off? and speaking of yields, as i said yesterday we had preferred stocks kicking out 10-12 yield of certain 'risky' companies and 8.5-10 percent yields on even safer companies.
You know, I still want to ask you if you lived up to your name every time I see you post.
nope im contrarian. if you couldnt tell from my above post :P
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