I sorta misstated my point. Or you glommed onto a side issue, not the main one. The point was not trump admitting a mistake as such. I agree that’s vanishingly unlikely.
My real point was that trump said something amounting to: “Calvinball! Remember all those tariffs? That was Tuesday. Now it’s Opposite day and we’re all doing something completely different. Because I said so.”
The underlying point being that even if the tariffs themselves are disappeared, the damage from the haphazard me-first screw the world decision process is still there.
This being an investment thread on a board of old people, I figured I’d ask for advice.
Here’s my situation: I’ve got a 401k at work with a good match, an IRA, and an index fund account with Vanguard. I’m trying to figure out how much cash to keep on hand, given current events, how to invest or use anything beyond that given the world today, and how I know when to switch tracks if and when the time comes.
Relevant facts: I’ve been at my current job for seven years now. It’s a big company that makes something non essential, but it’s privately owned and has enough support that I have no current, immediate reason to fear layoffs, which I understand would be pretty unprecedented there. I contribute to the 401k regularly, and have good benefits. My expenses are currently such that I do have money left over regularly at the end of the month, a little over $1000 when I’m putting money into the 401k.
I’ve currently got over a year’s worth of typical expenses in cash. I’m trying to prepare for at least rough financial times immediately and of course my future beyond that, both short and long term. I figure I can weather a recession or slightly worse sitting pat; I also figure it’d be hard to prepare for a depression or apocalypse without its own big risks.
Any thoughts for me? Any factors I didn’t think of?
OK, my prediction is that if tariffs stay, we’ll drop at least another 5% across the board. I also believe a recession is basically inevitable now, so as those numbers come in markets will further erode. In a “yes tariffs, yes recession” I predict a bottom 20-25% off highs (I think the Nasdaq 100 is already 22% off its highs). If we back off tariffs quickly, then we might be at the bottom now, at least until something new happens. FWIW, all my predictions are on the S&P 500, since that’s the index I pay the most attention to.
@Leaper you didn’t say how old you are. That’s a huge factor.
If you have more than 10 years to retirement, I wouldn’t change anything. Keep investing, you’re buying things on sale. You’ve got the year’s savings- I hope you have that in a proper money market. Your local bank is probably paying 0.4% while someone like Fidelity will give you 4%, so make sure you’re not leaving money on the table; Fidelity will even let you write checks against it, so there’s no reason not to put that money to work. If you’re worried about a really deep and long term disaster, I wouldn’t sell anything in my 401k but you could change your contributions to something like a bond index fund, but be aware that while it’s safe you won’t make a killing on it. Probably 4-5% / year. I was probably 90% stocks until I hit 50. Now, since I want to retire no later than 60, I saw this mess coming and I’ve upped my bond position. Mostly total FTBFX but a bit in SPHY for the yield, though the NAV on that is getting hammered because of the recession fears.
Just because sometimes you’re the pigeon, and sometimes you’re the statue, in 2008 I worked for a division of a public company that was bought by a private co. This was, of course, the Financial Crisis. I had a retention bonus due to be paid in early 2009 if I stayed, since everyone was fleeing. People didn’t like the idea of working for Private Equity. That retention bonus was to be paid as an extra add to my 401k.
By sheer luck, it paid in early 2009 just about on the low point of the S&P 500. That relatively small tranche of money has the best returns I’ll ever see, at least on the S&P.
The phrase “index fund account” makes no real sense.
Do you mean you have a non-tax advantaged account (IOW not an IRA) at Vanguard? And that as a separate matter you have (some / most / all) of the money in that account invested in some sort of index fund(s)? If so, indexing what? Not all index funds are simply following the US broad stock market.
In an indirect sort of way, the Tesla thing cost me a bunch of money on this tariffs crash. This is exactly the sort of opportunity I was looking for to bet against the US market. But after Tesla had absolutely every reason to fall and then went up, I thought obviously I don’t understand how this shit all works and I should probably not dig myself any deeper into making shorts/puts. So I sat out liberation day, and the sort of plays I would’ve made a lot.
As I’ve said, I’m not celebrating the fall of the US economy. I’d very much like it not to happen. But it’s going to happen whether I want it to or not. But I want to mitigate the personal damage as much as possible by betting against it if it’s going to fall, and I recommended the same to everyone.
I’m thinking of making some puts on Monday though. We’re nowhere near the bottom. The prices didn’t fall as much as they would if world trade for the US is truly over. The fact that Trump could easily say “okay, well everyone is scared now and we mean business and we got the best deals and everyone crumbled so I can remove the tariffs now” was propping the market up. A lot of people didn’t sell because they were expecting reversing this decision. Which may still happen, but if it doesn’t, we’ve got a long way to go. We’re guaranteeing a depression, guaranteeing massively nerfing the buying power of US consumers when US consumers are 65% of the economy. We’re talking about a great depression level fuck up and the fall has barely started.
I thought my Euro defense stocks were going to be as immune to any stock on the planet to this. I get that the US market drags everyone down, but I figured they’d be least affected because 1) the US collapse actually compels more euro defense spending, and 2) the nature of defense spending is to rely on trade/imports as least as possible because it’s a security issue, so they’d be relatively immune from the US imploding.
So, I acknowledge this is wildly risky, but I’m considering selling my Euro defense position to put into the US market crashing. What do you think?
At the end of the day, you’ve only got two options:
Hold assets
Hold cash
I don’t believe in the second, because of the potential for currency devaluation - but you’re free to believe otherwise.
But if you’re going to do the first then, unless you’re into regular active trading, buy the best thing and hold it. You don’t need to grow your money, you just need everyone else to fall more than you, to move up in purchasing power relative to everyone else in your society.
Most of my money is in various index funds at Vanguard and they sent out email on Thursday encouraging their investors not to freak out too much.
Stay the course. We’ll be right there with you.
With the White House announcing new tariffs, the markets have become volatile, testing the resolve of even the most disciplined investor.
During uncertain times, resist the urge to deviate from your financial plan.
Ugh, yes, that is rather elementary information, isn’t it?
Yes, over ten years to retirement age of 65 (no guarantee I will actually attempt to do so as soon as possible, of course.) Good idea for money market. I’m with a credit union right now, so I’m not being squeezed nearly as much in that regard.
Okay, then, what I think I meant is that I have some amount of money invested in an index fund at Vanguard. (Though I may still be missing something.)
Well I am on the set it and (try to) forget it long term stay the course side of investing, so it definitely is not what I’ll be doing.
But even my temperament can see some possible utility in it … as a hedge to decrease risk in highly volatile time. The approach that would fit my comfort zone would be to keep my growth positions, including the EU defense ones, and use the puts to soften the losses if it drops. Of course I gain less if it goes the other way but I’ve lessened my volatility. I could even see temporarily moving a bit out of bonds to do it.
But I’ll just do the same thing I always do. No not take over the world Pinky. Nothing.
I don’t think we’re in a dip, I think we’re on the very beginning of a big crash, so it doesn’t make sense to me to buy here. I also don’t think that bouncing back is guaranteed. We’re just assuming it will because in all of the historical crashes it does, but in every historical crash we’ve had people in charge who wanted to bring the market back up. Sure, sometimes they had bad strategies and didn’t do a good job of it, but at least they intended to fix it. Right now we have someone who is actively trying to kill the US market and world trade for decades to come. I think the assumption that we’re going to have a normal recovery at some point is ill-founded.
I think we don’t want to acknowledge it, but the damage is done. And for years to come and most likely decades. Could we avoid a great depression if Trump reverses everything? Maybe. But our position in the world is gone. People are going to rebuild the world trade networks to exclude and not rely on the US. They’re going to boycott US products. We’re going to move away from the US dollar as the world’s reserve currency. We’re going to see less foreign investment in the US markets and their rate of growth will be permanently stunted.
I think the massive declines we’ve had this week are actually optimistic – that the possibility of reversing them before (people perceive) the damage is fully inflicted has kept them from falling enough. They will continue into this week.
Unless Trump reverses everything – and then there will be a sudden surge of (somewhat unjustified) exuberance thinking things can go back to normal. Which will then be followed by a longer, slower crash. I think that’s my main risk if I go with an all short portfolio – such a surge could wipe me out pretty hard.
I won’t be holding US assets long for a long time.
Honestly, I would be fine with that. My horizon is sufficiently far out that I won’t be selling for 6-9 years likely, and will be buying in the meantime as I finish up working. A depressed market will give me the chance to invest at lower prices rather than the inflated values we’ve seen the last couple years.
As long as we are not talking about permanent damage to the economy, I should be able to wait this out without selling.
From my prediction obviously I think so too. But I don’t know. In fact that’s all I have confidence about right now: that I don’t know. I’m not willing to bet big on my prediction. Shorting other than as a hedge requires more confidence than I have.
I will do my usual rebalancing when the anniversary date comes and try to be patient.
The poster 69Mustang was right in the other thread about the market continuing from last week. It’s too bad he reacted so badly and got banned. All told, futures on the S&P, Russell and Nasdaq are still blasting up 4-5 percent for tomorrow morning.
If you did want to hold an asset during this period, I’d probably put it into gold rather than equities. It’s at a bit of a discount right now I think (best explanation I’ve heard is people selling gold to cover leveraged positions) but it should bounce back as a rock of stability in troubling times. I have about 15% of my portfolio and gold and thought about more. I did a $281 call on GLD etf ending friday that I think will be solidly profitable (it’s already up 40% in contract value). I don’t know how much it might soar, but people buy gold in times of crisis, right? I don’t see why gold wouldn’t at least stay at its ATH if not go up.
I put a call on VIX (the market volatility index) at $38 and I screwed up there a bit. I put a limit order for the midpoint in the buy/sell gap (it was like $1.64/$1.68 and I put in 1.66) and the contracts were moving up so quickly in price that it only had a partial fill available (10 contracts) when I ordered 25. Then the price moved up so fast the rest of my contracts didn’t sell. But that was up 130% (2.3x) on the day, so I certainly wish I’d have paid an extra cent or two for the contracts and got it all filled (at current value, I lost $6300 by not bidding a few extra cents).
I have a Nike $65 put from a couple of weeks ago. Only a small put, 5 contracts, which was only $633, but it’s up 839% since then so I certainly wish I’d have bought more contracts. That’s along the lines of the sort of moves I was thinking for tomorrow. Something really heavily affected by tariffs.
And I still have all my TSLA. 350 short shares, several puts at various price points and time, and some TSLZ. I’m finally above water on that again so anything further from this point is profit.
But I don’t have much left on my margin account. I’d have to sell something to put down more puts. That means one of the Euro defense stocks, filling the nike contract (doesn’t expire until May 16), or selling the VIX or gold calls.
If you’re risk averse because you’re retiring, I’d probably go with a non-equity portfolio with a heavy dose of gold and some bonds, maybe even a high yield savings account. This is absolutely not financial advice, I have no idea what I’m talking about, I’m just recognizing the obvious overall trends here. I wouldn’t be confident that everything will be back to normal on a 10 year timeline. Bonds and savings will leave you vulnerable to inflation and so that’s why I’d have an unusually heavy load of some sort of asset like gold, but I don’t think this is some discount on the market where you can “buy the dip”
No, of course not, but you have to go with the best bet you have given the information you think you have. We assume that just keeping in the market is always the safest play because it will always recover over any 7 year time span (or whatever the number is) because that’s how it always worked, but there’s good reason to believe this time is different.
But I understand – if I was holding long positions right now I’d hate having to sell them off too. I guess my advice would be to take your most owned positions and make some puts in case they crash hard as a hedge.
Like the esteemed @DSeid I’m not quite convinced it’ll be a crash that takes just weeks, but rather than something more like the sustained unstoppable descent of the Japanese stock market at the end of their boom. And like them, we may be left stagnated for multiple decades.
Dow Jones Industrial average futures fell 1,531 points, or 4.1% Sunday evening, pointing to another brutal session ahead on Monday. S&P 500 futures shed 4.6%. Nasdaq-100 futures lost 5.3% as investors continued to shed their one-time tech winners to raise cash.
It’s possible there’s a morning bump - a lot of people have the “buy the dip” mentality and so you could see those orders drive up the market for a bit. I was thinking even of waiting until it happened to buy my puts. But it’s likely to be temporary and the market will be down at the end of the day.
But the futures may be so bad that it just goes right to being straight down again.
I’ve said this elsewhere (and other folks on this thread have alluded to it), but the worst part of the current situation is the limbo it puts me in.
I am not a big fan of the idea that, only two years after buying my first home and seven after getting my best job ever, after years of stagnation, everything I’ve worked for is about to be rendered worthless and pointless, but this thread seems to generally agree that it’s pretty much a done deal for me to lose my job in my very profitable but nonessential industry and make my savings and investments essentially worthless.
If that’s true, then I need to make extremely radical changes RIGHT NOW, possibly even a major felony or two (only half joking), but I just can’t pull the trigger for fear of being wrong and blowing up my life for nothing, even though it’s still pretty sure that it’ll happen, but… Back and forth until the worst happens. It’s frustrating.