Today, Trump is saying that tariffs on semiconductors will start soon. That seems a reversal of his previous statement that computers, smartphones and transistors would not be tariffed but I don’t claim to understand anything he does or says. (I kind of pity the officials in his administration who have to explain and justify his whiplashing.)
Yeah it is weird. China announced a halt of rare earth metals export to the US. I was girded for a huge hit to Lucid and Rivian and multiple other companies. And those two right now up 2 to 3%. I think people have just become numb to it.
Agree w your diagnosis in the post I’m replying to.
But if trump is going to tank the USA, despite a lot of upside & downside overreactions along the way, then the investment not trading path is clear.
Don’t chase the waves. Follow the tide. Short the USA every way you can. And sit tight for a couple years.
Be ready to reverse course the day trump dies or is ousted. Not merely threatened with e.g. impeachment, but is actually not the prez anymore. That’s the only way you can lose.
Otherwise it’s a one-way bet. The tide on US economic hegemony is going out/down. More accurately, it’s being pushed out/down by a King Canute who can drive the tides to his will. Mostly because all he’s doing is wrecking. Wrecking is easy; building is hard.
Yeah, and I’m done. I’m too close to retirement. If we get under 10% off highs, I’m going to move from my current 65% domestic equities to 50%. If we don’t get there, then I won’t lock in the losses and I’ll ride it out. And FWIW, that 65% is already a big move from where I was.
Because if investors go numb, then I suspect the decisions will metastasize and we’ll have the stock equivalent of pancreatic cancer. Everything is fine until suddenly you’re in hospice care.
I doubt that Amazon, American Hospital Association and Walmart have gone numb. I count on them to make the system work, to extort legislators to sew on some balls and do their job. Paint me naive, but I rely on pure greed to right the system.
I got margin called on Friday and Fidelity for like $20,000 and so I sold 23,000 worth of gold to cover it. But then today they forced me to buy 80 of my Tesla short stocks and I don’t really know why since I had sold all that gold. It’s hard to track what the margin value of your account is. I think because I’m so short I’m very vulnerable to the sort of thing because I don’t have a lot of assets to collateralize my shorts.
Honestly you’re playing a dangerous game.
Yep, I started working on bringing my margin down to zero as soon as Trump got into office and the stock market started to move crazily. I’m now in surplus with foreign ADRs with good dividends.
The numbness comes because after a certain number of cycles of:
Bad Announcement!
[Stocks Drop]
Good Announcement!
[Stocks Rise]
you stop taking him seriously and figure it makes sense to just wait it out. I don’t see any reason a large investor would be immune to that.
Yeah, I’m not into gambling, but if I were I wouldn’t do it in the stock market.
I doubt intelligent investors take Trump seriously. I was addressing the impact of his floundering on fundamentals. Hospital revenue is about 50% derived from Medicare and Medicaid. Disruption of this revenue flow by arbitrary political acts could send the industry into a death spiral. Similarly low income workers depend on SSI and social security and they shop at Walmart. Reduction of their income decreases Walmart revenue.
My Senator is Rick Scott. Good luck with him giving an RA about a phone call from me. But, I’m sure he listens to Amazon, American Hospital et al. Those guys swing big sticks and they’re wrapped in greenbacks.
So, I have hope that corporate greed will protect the reasonably stable economy that Biden handed to Trump.
In the spirit of fighting ignorance I must speak for King Canute’s endeavour, which was the opposite of what is usually told:
The episode is frequently alluded to in contexts where the futility of “trying to stop the tide” of an inexorable event is pointed out, but usually misrepresenting Canute as believing he had supernatural powers, when Huntingdon’s story in fact relates the opposite.
It seems to me that King Canute is the very opposite of trump, not letting his flatterers get away with it. His piety goes against my taste, but first it is an apocryphal story, and second it was the 12th century. People were more like that then.
/hijack
This is a good insight. And I think this is pretty normal, except I’d add the person always recovers and goes home…and then gets cancer again and is back in hospice - to complete the cycle for the US market analogy. Stability is the direct cause of instability, and vice versa - over n over - forever. It’s just how a free market would work and play out.
It’s also indirectly reveals general news cycles through long periods of time:
People assume good news is permanent and are oblivious to bad news. Then they ignore bad news. Then deny it. Then they panic at bad news. Then they accept bad news.
Then they assume bad news is permanent and are oblivious to good news. Then they ignore good news. Then they deny it. Then they accept good news. Then they assume good news is permanent…
And over and over and on and on it goes. At first it’s not on your radar but slowly gains steam until it dominates and is all you can see and the other is no longer on your radar. The reasons are immaterial.
I think the point is both good and bad are always happening, it’s just collective think that makes one dominate and what can drives markets up and down. We appear to be in the bad news is permanent part/oblivious to good news part.
Late: I should have made the “news” part more an individual/subjective cycle. I don’t think it’s objective but lots of individual viewpoints can add up to a collective group think.
More questions!
At least, American investors, right? This isn’t necessarily a sign of what overseas investors think, is it?
I’m genuinely not sure, myself. It’s that old question of how much he does is actually planned out with a future goal in mind, as opposed to impulse. I can’t see everything he does as 5D chess “distractions.” He’s just not that good at that kind of thinking.
(Not a question, admittedly.)
I keep getting the impression from what I read here and elsewhere that shorting as an investment action is inherently more risky than buying. Is that correct?
It is conventional wisdom that shorting is way more risky. I personally strongly question that conventional wisdom. But I’m just one guy who is not a finance professional.
The theory is that if you buy shares for $1000, the absolute worst that could happen is the shares become valueless and you lose all $1000. Your losses are capped at $1000. OTOH, if you short shares that are presently at $1000, that stock could go up to double, or triple, or 10x, or 100x what you shorted it at. If it went to 100x, and you did nothing along the way, you’d be on the hook to pay out $100K. Oops. Or, even worse, the shares could zoom to infinity and you’d owe infinity zillion dollars. Yikes.
That’s all factually true, but it flies in the face of actual sound investor behavior. And probability. Nobody is going to sit on a short that 2x underwater and watch it go to 100x. Just like nobody is going to go long at some price and sit there watching the stock drop by 90% before acting. At least nobody who is paying the slightest attention to what are in fact semi-risky positions in a volatile era.
And for a non-scam company in trouble, the idea that the shares of anything but a “penny stock” could go up 100x is far-fetched. Even in the meme era.
Even in wacky trumpland, shares of real companies (not scams) move at a measured enough pace that if your long, or short, position moves against you, you can bail out long before you hit the theoretical worst case.
There are other reasons shorts are not for Joe & Jane small investor. But the “OMG unlimited loss” argument is IMO mostly hype.
I’m a reasonably high level techie and, of times I’ve tried to set up auto-sell limits, Fidelity’s UI has been so vague about what I was doing and complaining about what felt like reasonable settings, that I ended up having no confidence that I was configuring it correctly and gave up on those orders. And, so far as I’ve seen, Fidelity’s UI is more user friendly than many competitors.
I wouldn’t recommend short selling to Joe & Jane, and that’s partly because of the infinite loss problem. If the brokerage UIs made sense and had limits as a default, I might agree with you. At the moment, I wouldn’t.
Unfortunately some who are gambling in the market don’t have a cut your loss discipline. “It will correct tomorrow. Double up today!” “Nobody” is a definite underestimate of the number.
My understanding though had always also included the difficulty of shorting. It costs to borrow the stock. You can only hold the short so long so timing it right matters a lot. You have to be more than just right that it is going down when you said it would; it has to down enough to cover the cost of the process.
Agreed w both the above.
Which is one of the reasons the “inverse” ETFs were invented. I’m not going to recommend them because I don’t really understand them yet. AIUI they also are not designed to be “buy and hold” assets. Rather they’re short-term assets for short term traders. But their goal is to provide a low-friction alternative to traditional share shorting for people wanting to take a bearish position on [whatever].
I sold some smaller holdings I had; while they did no worse than the market, they didn’t do markedly better, but they are tools for calmer times. I also sold ~20% of SCHD (Schwab U.S. Dividend Equity ETF), which is my single largest holding that I’ve had for a couple years; it generally fares much better than the market in downturns, and it did for a while, but in the past 10 days it has been lock-step with the larger market, which - for me - negates most of the reason I am in it.
I then doubled-up on JPIE (JPMorgan Income ETF; price YTD -0.42%, 6.0% current yield). I had looked at JPIE a year ago and I didn’t appreciate its talents, but now I definitely do. My take is that it invests mostly in short-term (~2 years average) bonds.
Driven by the dip, I re-started a position in DIVO (Amplify CWP Enhanced Dividend Income ETF), YTD price -2.0%, yield 4.9%) that traditionally does pretty OK for an equity ETF in rough markets. I foolishly closed out my position last Summer thinking the good times would continue to roll (I couldn’t see a way a felon would be elected).
Also due to the dip, I added a little bit to my position in ARCC (Ares Capital), a business development company (BDC) that not unexpectedly took a beating recently in the market downturn, but it’s a very solid company with a long history and a great dividend, so I don’t sweat it’s stock price fluctuations much.
I am no expert on anything financial but this seems like a very narrow window to be reacting to. The idea, as I understand it, is that a more defensive stock fund will, over the time course of a year or maybe more, weather a downturn better. A two week window in a very volatile time seems subject to statistical noise, not reflective of how it will perform over the many months.
I have no idea how it will do over the next year so not disputing the call. Just questioning making it on that basis.
Fair point. But I didn’t close my position in SCHD; I simply trimmed it a bit, as I would rather have a bit more “cash” (for loose definitions of that word) in something more stable/predictable (in an unpredictable time) yet still give me some income. That 20% from SCHD, yielding 4% with a now-uncertain immediate future, is now giving me 50% more income (for now) and in a much more stable vehicle. The other 80% of my SCHD is going down with the ship or up with the tide, whichever happens.
But, again, fair point. Over a long term, SCHD’s total return is on-par with the S&P 500 or even beats it in some periods. The SCHD-specific bad news is that they just completed their annual rebalancing, and via their methodology ended up with more energy/oil stocks than previously; that’s likely to sting for awhile, which is one of the other drivers for my change.