Two weeks ago we saw a severe stock market decline, which was followed up with whipsaw volatility but a leveling off of prices overall last week. We are starting this week off with what appears to be somewhat of a panic by short-term market participants, with stock trading halted within minutes of opening Monday morning after a 7% drop (due to a exchange-imposed “circuit breaker” 15-minute trading halt – a rule in place, but never triggered, since 2013). As if the virus was not enough, now we have collapsing oil prices threatening the viability of an entire sector of the economy.If this week is the first time during the coronavirus scare that stock prices meaningfully diverge from the underlying businesses they comprise (a 2,000 point drop … [Read More...]
Suicide by Robinhood User Shows Some Folks Should Consult With Investing Pros
The stories behind the Robinhood generation of investors is getting worse:Rookie trader kills himself after seeing a negative balance of more than $700,000 in his Robinhood accountIt seems that startups bringing free trades and app-based investing to the uninformed masses might need to be reined in a bit. The narrative in recent years has been that investing can be a low-cost, do-it-yourself kind of thing, where paying professionals a fee is a complete waste of money and only eats into your returns. Of course, that is only true if the small investors have as much knowledge and experience as the professionals and therefore would get zero value from the professional advice (that caveat is rarely mentioned in the same conversation).Now yes, … [Read More...]
Coronavirus Correction: How Far?
So how far will the U.S. stock market fall as the fear of a coronavirus pandemic tightens its grip on daily trading activity? Since there is no way to know, there is little sense to making a prediction on that front. But that does not mean that we cannot set our expectations based on market history, even if there are no assurances that the actual result will be no worse than said expectations.Without full blown recessions, market corrections are typically in the 10-20% range. Today I updated a graphic that I had last posted on this blog in early 2016, which summarizes recent corrections in the S&P 500 index. The data now goes back 10 years: If the virus starts to slow in the coming days and … [Read More...]
Virtual Annual Meetings and Premature Bankruptcies
A list containing the number of ways this recession is unique is quite long, which is making navigating these waters as an investor much more difficult. While unrelated, below is a brief mention of two that are on my mind.1) Virtual annual meetingsWith in-person annual shareholder meetings cancelled, every investor can now attend meetings online without booking a flight and a hotel. Not all meetings are created equal. Some have long Q&A sessions for shareholders and in-depth slide decks, while others stick to business and offer little in the way of helpful data points for investors. So while it may be a hit and miss activity, for those companies you follow closely and are contemplating adding or shedding shares, look to take advantage … [Read More...]
Market Strategists Focus on December 2018 Lows For Support, Does That Make Sense?
It might surprise many investors to know that despite the violent stock market correction over the last few weeks, the S&P 500 index remains above the trough made during the late 2018 decline. Recession fears during Q4 2018 led to a 20.2% bear market from peak to trough over a three-month period, resulting in an intra-day low for the index of 2,346. Given that 2019 corporate profits were only modestly above 2018 levels, and considering that the economic weakness from COVID-19 is tangible and not just a “growth scare” (like 2018) market watchers who believe a drop back to that 2,346 is possible, or even likely, do not seem out of line to me. Even at this week’s low point (2,478) it would mean another 5% lower and a full 31… [Read More...]