Is the stock market going to tank?

[Cono Este]

Negative reaction to next Fed easing could be a catalyst. They’ve already announced exit from the repo market in April.

I think oil is going to be the next market to fail. If it does there could be trouble in the junk market. Lots of shale energy debt is maturing and they won’t be able to refinance with low energy price

https://www.google.com/amp/s/amp.ft....d-25e377c0ee1f

Good point. Copper too


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[Cono Este]

Sorry for drift. I realize this isn't the topic of the thread, but it's what I know. I'm into bonds and the secondary mortgage market. No dickwaving portfolio claims. Just leaving this for posterity and I'll try to check back in as shitter time allows... Lots of buzzwords depending on one's background, but goggleable for those who are super interested. Saves me another 5 paragraphs not having to define things like "option adjusted duration."

Short term rates apply to short term loans. Option adjusted duration on an average mortgage varies between 4 and 12 years historically and is hugging the low end of that range now due ti 2017 and 2018 vintages of MBS/mortgages being unequivocally in the money. Anyway, those duration realities make 5s, 10s, and a 5/10 blend the preferred benchmarks for tracking MBS spreads.

The reason mortgage rates aren't falling as fast as treasuries is almost always negative convexity. Long story short, mortgages are bonds that can be called by the consumer any time they want to sell or refi. Mortgage investors pay a premium for the right to collect interest in those loans/bonds. If the consumer calls early, investor is left holding the bag and thus pays much less premium for the next one. Lower premium = lower mortgage bond pricing= higher mortgage rates relative to benchmarks.

This is compounded by lender pipelines where adjusting rate offerings too aggressively risks lock fallout and lost business. Long story short, if people refi too quick, the investors fronting the money aren't going to pay as much because they won't collect as much interest. Investor prepayment expectations cause mortgage rates to move lower like a tortoise to the Treasury market's hare.

Thanks.


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[4matic]

This was only the 109th largest two day decline. As I’ve said, daily volatility used to be much greater than our current fed mitigated volatility.

[xyz]

To answer the threads title question: yes, the stock market is going to tank. Yesterday and today.

If it takes another leg down tomorrow I’m piling in. Fear and greed index is down to 20. That’s usually a good indicator of a bottom.

[yeahman]

Some folks are going to make serious bank buying this virus du jour dip.

[rideit]

Good points.
But geniuses don’t post black on a blue background.

[iceman]

Good points.
But geniuses don’t post black on a blue background.

It works with the white background just fine but it's a cut-and-paste job or just copied in. bots are thick around here lately.

[rod9301]

Yup.

It's a matter of tax avoidance. These guys borrow on their perceived equity, therefore, never cashing out and paying zero taxes. Bezo's lives like this. They get super low rates. Fuck, who knows, maybe their accountants figured a refund in there.

There's no tax avoidance with a mortgage. Interest deduction is way limited now.

And not everyone has a mortgage, i don't.



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[Benny Profane]

You don't get it. It's why little old Benny buys a lot of stuff over time, because my IRA isn't cash, it's taxable income. It's sort of the same thing for Zuck and Bezos on super steroids.

[Kevo]

There's no tax avoidance with a mortgage. Interest deduction is way limited now.

And not everyone has a mortgage, i don't.



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Once you have a sufficiently high net worth a mortgage (or multiple mortgages) is a hedge against inflation. Not that Bezos or Zuckerberg are hedging against inflation with .01% of their net worth, but for someone with say several million to tens of millions in net worth mortgages can be a good hedge.

[rod9301]

Once you have a sufficiently high net worth a mortgage (or multiple mortgages) is a hedge against inflation. Not that Bezos or Zuckerberg are hedging against inflation with .01% of their net worth, but for someone with say several million to tens of millions in net worth mortgages can be a good hedge.

Only if you sell the house and buy a cheaper one

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[Kevo]

Only if you sell the house and buy a cheaper one

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No. It's not about the value of the house. It's about paying a set amount monthly for the house over a long period of time with dollars that are decreasing in value.

[rideit]

Exactly. One house we have has four years left on the mortgage, and the payments are peanuts. (But felt huge when we bought 21 years ago). Great for a rental.

[rod9301]

No. It's not about the value of the house. It's about paying a set amount monthly for the house over a long period of time with dollars that are decreasing in value.

That's true, but buying a house with a mortgage, and investing in the stock market means basically that you're buying stocks on margin, which many studies show it never works.

I understand that most people needed a mortgage, but to say that somebody that had lots of money should not pay cash is stupid.

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[Kevo]

There are plenty of scenarios where it makes sense to hedge against inflation with a mortgage, especially if your net worth is many multiples the value of your house or if you are receiving a fixed pension.

[Benny Profane]

Listen, let me explain. Zuck wants to buy ten million dollar house. If Zuck sells equity to do so, Zuck doesn't own rapidly appreciating equity value anymore. (somebody else does, sort of). Then, on top of that, Zuck is taxed on that gain. I know it's not too much these days in the era of rich guy tax relief, but, it's substantial. So, double hit on his net worth. Now, if this is done in a rapidly rising RE market, then, maybe, a wash. But, no, RE is not there anymore, and certainly is not reliable. Now, Zuck borrows on the value of that stock at bank rates, (I think I read 1.8 at the time) which any bank would give him because he's Zuck, more than good for the loan, but, more important, they want to be nice to him and get his biz. Meanwhile, stock continues rocketing up, making a 1.8 loan literally look like pocket change. No tax burden.

It's like me buying a new car. I take 25 grand out of my IRA, the only real "cash" I have. I am taxed maybe 30% on that money, since it's income, making that car cost me 32,500. And my IRA is 25,000 lighter. Actually, 32,500 plus lighter, because the next April, I'll have a higher tax bill to pay.

Ok?

[rod9301]

Listen, let me explain. Zuck wants to buy ten million dollar house. If Zuck sells equity to do so, Zuck doesn't own rapidly appreciating equity value anymore. (somebody else does, sort of). Then, on top of that, Zuck is taxed on that gain. I know it's not too much these days in the era of rich guy tax relief, but, it's substantial. So, double hit on his net worth. Now, if this is done in a rapidly rising RE market, then, maybe, a wash. But, no, RE is not there anymore, and certainly is not reliable. Now, Zuck borrows on the value of that stock at bank rates, (I think I read 1.8 at the time) which any bank would give him because he's Zuck, more than good for the loan, but, more important, they want to be nice to him and get his biz. Meanwhile, stock continues rocketing up, making a 1.8 loan literally look like pocket change. No tax burden.

It's like me buying a new car. I take 25 grand out of my IRA, the only real "cash" I have. I am taxed maybe 30% on that money, since it's income, making that car cost me 32,500. And my IRA is 25,000 lighter. Actually, 32,500 plus lighter, because the next April, I'll have a higher tax bill to pay.

Ok?

My point exactly, owning equity on margin.

Which is great while the stock goes up.

But plenty of people lost everythingb doing this

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[Brock Landers]

That's true, but buying a house with a mortgage, and investing in the stock market means basically that you're buying stocks on margin, which many studies show it never works.

I understand that most people needed a mortgage, but to say that somebody that had lots of money should not pay cash is stupid.

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What if my cash earned 1% a year and the asset I bought (house, stocks, hookers and blow) instead of holding that cash appreciated 4% a year.

Also...I have enough liquidity (cash) to pay for daily, monthly, annual needs.

Or for the house scenario...I pay a locked in conservative 3.5% for a mortgage, have an asset appreciating, and with the cash buy enough blow to give me a “5% return” kind of high, earn 8% on some long term investments, and 4% on tax free safe muni’s.

Riddle me that shit

[Benny Profane]

My point exactly, owning equity on margin.

Which is great while the stock goes up.

But plenty of people lost everythingb doing this

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No, that's not owning equity on margin. The stock is owned. It's used as collateral. The call is much longer and difficult. Probably through bankruptcy.

[Benny Profane]

What if my cash earned 1% a year and the asset I bought (house, stocks, hookers and blow) instead of holding that cash appreciated 4% a year.

Also...I have enough liquidity (cash) to pay for daily, monthly, annual needs.

Or for the house scenario...I pay a locked in conservative 3.5% for a mortgage, have an asset appreciating, and with the cash buy enough blow to give me a “5% return” kind of high, earn 8% on some long term investments, and 4% on tax free safe muni’s.

Riddle me that shit

Taxes.

[4matic]

Futures trading below 3100

[Danno]

I'm no stock whiz, but the fact that we didn't have a rally today after 2 really bad days, spells trouble to me.

[Cono Este]

Once you have a sufficiently high net worth a mortgage (or multiple mortgages) is a hedge against inflation. Not that Bezos or Zuckerberg are hedging against inflation with .01% of their net worth, but for someone with say several million to tens of millions in net worth mortgages can be a good hedge.

That depends on what you do with the cash and if you have a fixed rate.

I knew a dumb broker whose gimmick was to save his clients money with a floating rate, then buy bonds and earn the spread.

That’s what we called a texas hedge. Double long, double fucked your self if rates rise.

Very successful.


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[4matic]

Weak tomorrow could set up a low. That might be 1000 Dow points lower which would put you close to monthly support. The machines are still hungry.

[Cono Este]

Next step down takes us to 2800


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