Is the stock market going to tank?

**ElToroPequeño** · 03-12-2020, 02:25 PM

Originally Posted by 4matic

There is no safe income generation other than cash. In fact, bond income might be more risky than dividend income at this point.

I can't comment on what to do with your particular asset allocation but with dividend re-investment it might be too late to re-balance

“In fact, bond income might be more risky than dividend income at this point.”

I hope you don’t actually believe that.

**up an down** · 03-12-2020, 02:25 PM

Originally Posted by El Chupacabra

IMHO that is not a particularly valid comparison to use. If you go back in time to whatever date you would like to use for the Japanese stock market -- would you have put 100% of all holdings in that market? Likewise, for 2020: would you put 100% of everything in the US stock market, and nowhere else?

The point of the comparison wasn't to contrast Japan against USA ..or any other country...it was about pointing out that buy and hold isn't an automatic winning strategy... Except for the financial advisor that keeps making $ from clients

**4matic** · 03-12-2020, 02:32 PM

Originally Posted by ElToroPequeño

I hope you don’t actually believe that.

Sure do. With a 10y yield at .80% a return to 2% yield you have locked in less than 1% return for at least 10 years. With cash currently yielding .5% you retain liquidity and principal.

A stock with a 5% dividend returns all your money in 20 years and whatever is left is your profit vs a bond. So the stock only has to be worth 1% at the end of twenty years to beat bonds

Just measuring risk vs reward on income

**Benny Profane** · 03-12-2020, 03:21 PM

Originally Posted by ElToroPequeño

“In fact, bond income might be more risky than dividend income at this point.”

I hope you don’t actually believe that.

It stops at cash generating income. Wut?

**Benny Profane** · 03-12-2020, 03:25 PM

Originally Posted by up an down

This recession will destroy fundamental valuations... And...The astonishing amount of debt is the financial sword of Damocles hanging over the market and will be so for years..there will be trading rallies... Just as there was this afternoon...But until all the bad news fundamentals are known..And acknowledged..I don't think any rally will stick

Of course a rally is coming. Money is heading to negative, if not already there. When everybody peeks out of their caves with whatever stuff they protected when the all clear sounds, they'll start spraying at cheap assets. Where else are you going to go? 30 years are being rejected. Nuts.

**AdironRider** · 03-12-2020, 03:28 PM

Originally Posted by 4matic

Sure do. With a 10y yield at .80% a return to 2% yield you have locked in less than 1% return for at least 10 years. With cash currently yielding .5% you retain liquidity and principal.

A stock with a 5% dividend returns all your money in 20 years and whatever is left is your profit vs a bond. So the stock only has to be worth 1% at the end of twenty years to beat bonds

Just measuring risk vs reward on income

XOM is yielding 9.4% at close today. I really don't see how that bet comes up bad with a 7.5 year payback.

**Cono Este** · 03-12-2020, 03:36 PM

Originally Posted by 4matic

Quarterly expiration next with lots of derivative leverage to unwind. What say Cono?

Good point. This was mostly a surprise. So Probably a lot of open interest and we could quiet down and get pinned at strikes for expiration.

Implied volatility was cheap, so most market makers probably made a mint. And if the street is short it all we could get pinned.

But the there’s that guy in the White House.

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**ElToroPequeño** · 03-12-2020, 03:54 PM

Originally Posted by 4matic

Sure do. With a 10y yield at .80% a return to 2% yield you have locked in less than 1% return for at least 10 years. With cash currently yielding .5% you retain liquidity and principal.

A stock with a 5% dividend returns all your money in 20 years and whatever is left is your profit vs a bond. So the stock only has to be worth 1% at the end of twenty years to beat bonds

Just measuring risk vs reward on income

Ok sure that is fair if you are getting involved in the current market today which is totally dislocated and volatile and with where rates are. There are very few stocks that pay a 5% div yield though even at these prices besides XOM and a few REITs and MLPs and your fundamental risk still outweighs that of bonds not to mention you are comparing the yield of a risk asset to Tsys. RIP to PCG and anyone that was relying on those dividends. Total return and capital appreciation of stocks has to be more the focus and analysis than simply income generation. Especially when potential unforeseen liquidity needs arise and you can’t just be a buy and hold investor. With current volatility and the prospect for corporate earnings to get hammered dividend paying stocks could be at risk for both loss of income and principal for holders.

**mcsquared** · 03-12-2020, 04:04 PM

Originally Posted by AdironRider

XOM is yielding 9.4% at close today. I really don't see how that bet comes up bad with a 7.5 year payback.

Until they reduce or suspend the dividend. I own some and have gotten hammered but I waffle back and forth about averaging down.

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**Toadman** · 03-12-2020, 04:29 PM

Originally Posted by mcsquared

Until they reduce or suspend the dividend. I own some and have gotten hammered but I waffle back and forth about averaging down.

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I pulled the trigger on some XOM today. It was running at about 8.25% yield when I hit the target. I have my doubts that the board will not touch the dividend. All depends on how long this COVID-19 issue and resultant recession and low oil prices lasts. But Greta ain't going to kill the oil industry for awhile, so I have time to see how it plays out over the next decade.

**AdironRider** · 03-12-2020, 04:41 PM

37 straight years and they haven't touched it. I don't think the rat flu will be the tipping point.

Full on panic has reached my little ski town bubble. Working from home for the indefinite future. I expect a 10% yield by the morning and will be buying.

**LeeLau** · 03-12-2020, 04:44 PM

In on Carnival Cruise Lines ftw! Now yielding 13.3% I bought when it was down 68% from highs. Now down 75%! Long and strong old people with disposable income!

Then I got to ski CoronaVirus bowl today! Double woohooo. A bit excited cos I hardly ever trade anymore.

Will look at XOM

**shroom** · 03-12-2020, 05:06 PM

Originally Posted by shroom

i was trying to figure out my number in the tram today. kinda tough cause i don’t stare at the market month to month anymore.

i sold BA at 145 in 2016 after 100% relative gain in a few years and higher in my account. i think i buy stocks again at BA 175.

or AMZN 1200.

that was a bit quicker than expected. i’m too much in vacation mode for this right now.

halting the free market is the weirdest shit to me. almost as weird as cross-nation agreements on oil prices. public price fixing isn’t, or something.

**iceman** · 03-12-2020, 05:17 PM

well AMZN 1200 is a ways off yet. Is there a floor for BA at this point?

**Toadman** · 03-12-2020, 05:23 PM

Originally Posted by iceman

well AMZN 1200 is a ways off yet. Is there a floor for BA at this point?

Are we talking a price floor? Or the bathroom floor? Because BA isn't looking too good these days. Not that it looked good the past year.

**4matic** · 03-12-2020, 05:23 PM

Originally Posted by Cono Este

Good point. This was mostly a surprise. So Probably a lot of open interest and we could quiet down and get pinned at strikes for expiration.

Implied volatility was cheap, so most market makers probably made a mint. And if the street is short it all we could get pinned.

But the there’s that guy in the White House.
]

The 87 crash wipeout a lot of option and futures traders. Selling strangles was popular for amateurs at the time.

**rideit** · 03-12-2020, 05:28 PM

English?

**skaredshtles** · 03-12-2020, 05:31 PM

Originally Posted by rideit

English?

Not sure if this will help: https://en.wikipedia.org/wiki/Strangle_(options)

I had totally forgotten about straddles and strangles. Vaguely remember learning about them in advanced finance courses at college...

**Toadman** · 03-12-2020, 05:31 PM

Originally Posted by 4matic

The 87 crash wipeout a lot of option and futures traders. Selling strangles was popular for amateurs at the time.

Yeah, what the hell is a "strangle"?

**rideit** · 03-12-2020, 05:35 PM

I think it’s what we all want to do to Steep.

**4matic** · 03-12-2020, 05:36 PM

Originally Posted by Toadman

Yeah, what the hell is a "strangle"?

The popular strategy was selling way out of the money puts and calls to earn income. A contract you sold for .05 mighty be worth $100 at expiration after crash.

In 1987 The SP500 futures contract was $500 x the index a point. Many big brokerages were wiped out. Its $250 a point on the big one now. The e-mini is $50 a point.

A single SP contract on 1987 crash day lost almost $200k

**LeeLau** · 03-12-2020, 05:41 PM

Originally Posted by iceman

well AMZN 1200 is a ways off yet. Is there a floor for BA at this point?

BA at 82 would be grand!

**Toadman** · 03-12-2020, 05:49 PM

Originally Posted by 4matic

The popular strategy was selling way out of the money puts and calls to earn income. A contract you sold for .05 mighty be worth $100 at expiration after crash.

In 1987 The SP500 futures contract was $500 x the index a point. Many big brokerages were wiped out. Its $250 a point on the big one now. The e-mini is $50 a point.

Thank you for the lesson.

**4matic** · 03-12-2020, 05:54 PM

After the 87 crash there were countless contracts and orders that weren’t settled. There were extended hours and special rules. It took months for liquidity to return. Trading was dead for days at a time.