Is anyone panicking yet ?

[JDot]

Latest US unemployment claims in a graph.

https://twitter.com/BenChu_/status/1248 ... 93/photo/1

https://www.theguardian.com/business/20 ... oronavirus

[westmoreland9]

i've been dithering recently. i like the look of legal and general and forterra (legal in particular). very low valuations and in the case of legal, i think it's a very resilient business model. annoyingly, whilst i dithered, legal has shot up from about 1.65 to 2.11, and forterra also.

in my defence, i've only logged into my accounts to add more money, so i haven't been tempted to sell anything at depressed prices!

there are some companies that will be hit very hard in the short run, but i think valuations are at a level that will mean a fairly quick payback period once the dust settles. NRR springs to mind, and i note the shares have had something of an uptick recently.

my main unit trust holding fund smith is only down about 10% from its recent peak which i find remarkable given the volatility elsewhere.

[gryffron]

US unemployment is a big issue, but what really matters is how fast it recovers after event. Clearly right now employers are laying off millions of staff. If they take them all back on again in a couple of months time then this is just a minor hiccup and no big deal. But if they're slow to re-employ after the crisis, that could cause seriously big problems in the US and RoTW. I don't think the figures right now is giving us much clue about the future.

Gryff

[Wuffle]

I think maybe they (data generally) do give an indication that there will be work to do when taken in context.
The rescue plans will only partially cover individual and corporate outgoings and some sail closer to the wind than others. Often not their fault, it is not a level playing field and narrow margins are encouraged with corporates The US market has leveraged up considerably and a bit more debt to service and nervous consumers might not be conducive.
The mechanism for administering any of this simply is not present in sufficient scale for starters however positive it sounds as a soundbite.
It is a helpful reminder that this tap won't just come back on if it stays off for too long.
I am holding plenty of cash for a second wave down, rightly or wrongly when a clearer picture emerges of the tangle.

W.

[JDot]

I am holding plenty of cash for a second wave down, rightly or wrongly when a clearer picture emerges of the tangle

I'm building a cash reserve also. Unless the FED and the Bank of England are actively buying market index ETF's, I can not understand how or why the market is rallying with these kinds of numbers coming out.

[johnhemming]

It is a helpful reminder that this tap won't just come back on if it stays off for too long.

Nobody really knows as they haven't tried this before. Obviously some of the economy is still pottering along, but government spending is going through the roof both in the theoretically non-money printing variety (where the money is actually being electronically printed for now rather than borrowed and then QEed) and the printing of electronic money to encourage the banks to lend out.

In the medium to long term one would expect fiat currency to take more of a hit than normally.

[westmoreland9]

my main non unit trust / investment trust holding, is domino's pizza group, which hasn't really been hit that hard. go compare is the other main one, i think it's about 65-70p atm, but i am comfortable with either business model, and so won't be selling.

Indeed, Domino's seem to have experienced growth in sales as people order takeaways to their homes. Moreover, although they are not paying the dividend in April, they did commit to reviewing that over the months ahead, so it may be that we do receive a dividend but some months later - depending on circumstances.

Renishaw cancelled their interim, which is no surprise as they are very cyclical - they cut the dividend in 2009 but restored it to a new record in 2010.

I am hoping the likes of Kone, Unilever, Diageo and AstraZeneca will maintain their dividends.

Best wishes

Mark.

yes, i'm a key worker and i've seen plenty of people ordering domino's to the workplace. it's the default takeaway order, and that's because of the strength of the brand, the quality of the product, and the breadth of delivery coverage. they adapted quickly by doing no contact delivery, and although i do expect a fall in revenue, i expect a proportional fall in profit, i.e. not greater.

i expect them to emerge from this crisis as a business that generated cash throughout. lots of restaurants / takeaways will go bust, taking capacity and competition out of the market. perhaps the crisis will also help the franchisee term negotiations. the largest franchisee, surrinder kandola / mandeep singh (IIRC With hundreds of stores), has been investing in rolling out tim hortons coffee and bakeshop, basically saying if you dont agree to my terms, i'll go elsewhere. with those shops shut and losing cash fast, how will he be feeling now about where to invest? McDonalds, KFC, subway etc all closed. even during normal times, domino's stores earn better returns on capital. this is something i think the market is not pricing in.

[WickedLester]

the quality of the product

Have you ever eaten a Domino's pizza? Quality is not the word for them.

[westmoreland9]

the quality of the product

Have you ever eaten a Domino's pizza? Quality is not the word for them.

i love domino's, and i'm comparing it to cheapy takeaways, not quality restaurants etc.

[johnhemming]

I wouldn't say I love dominos, but we ate a mixture of things from Dominos about 15 minutes ago. They have a narrower menu at the moment, but are probably doing OK financially.

[WickedLester]

I just thought i'd post an update to this thread.

I was wondering what people's feelings were on the state of the market in general and where it is headed next. Is it business as usual or is this a bear market rally and the market has a lot further to fall?

I have been very lucky in that my largest investment was ODX which has become a COVID-19 favourite and has risen 1000% from its lows. I sold too early as per usual but still did well enough that I am back in profit overall. The net effect of this is that I am now over 30% in cash and struggling to find anything I want to invest in at the moment.

I'm not sure I agree that we are in for a V-shaped recovery, I think the recession could be longer and worse than many commentators are suggesting.

I think we're in for a couple of years of poor figures and low income from stocks, I just read an article which suggested Greggs are likely to make a £50m loss this year and nearly every stock I hold has cancelled its dividend.

I have been trading in and out of bombed out stocks taking a quick profit where I can and am happy to hold the rest of my stocks for recovery having done a sense check of their financial strength.

But what do others think, should I invest my cash now or will the market hit new lows in the coming months?

[ReformedCharacter]

But what do others think, should I invest my cash now or will the market hit new lows in the coming months?

It doesn't have to be a binary decision, you could drop money in every couple of months. Now might be a good time for some cost-averaging IMHO.

RC

[tikunetih]

I'm not sure I agree that we are in for a V-shaped recovery, I think the recession could be longer and worse than many commentators are suggesting.

I think we're in for a couple of years of poor figures and low income from stocks, I just read an article which suggested Greggs are likely to make a £50m loss this year and nearly every stock I hold has cancelled its dividend.

I have been trading in and out of bombed out stocks taking a quick profit where I can and am happy to hold the rest of my stocks for recovery having done a sense check of their financial strength.

But what do others think, should I invest my cash now or will the market hit new lows in the coming months?

As ever, how things turn out depends upon events along the way...

But, (i) making an assumption of there being no "2nd/Nth Wave" virus effect capable of causing material global economic impact, and (ii) ignoring the UK because I don't know what will happen re Brexit which could yet be messy, then from the "menu" of economic outturns that are possible then the one I think most probable is for a very strong global economic rebound over the next 18 months or so, possibly reaching mini-boom status ultimately.

That scenario would give a large tailwind generally to equities, and probably especially to EM given relative valuations and the prospects for a weaker dollar ahead.

But the monetary expansion we've seen and strong economic rebound to come would/will lead to inflationary pressures emerging eventually, and perhaps this ensuing significant inflationary pickup will cap equity markets and usher in difficulties for them in the 18-months-plus timeframe.

If so, that would warrant a tactical approach of making hay while the sun shines (and indeed while the sun has barely begun rising...), but perhaps not hanging around for the sun to set.

The above is pretty non-consensus I suspect, which is always good.

[bluedonkey]

My guess is that the recent mini-rally will peter out this week/next week and there will be a falling back. That's just a short-term prediction. After that I have no idea. Situation normal.

[tikunetih]

My guess is that the recent mini-rally will peter out this week/next week and there will be a falling back. That's just a short-term prediction. After that I have no idea. Situation normal.

NB In the "18 month strong economic rebound" intermediate scenario I outlined above then the tactical emphasis for those who do that sort of thing would be on buying pullbacks - such as the one you're shortly anticipating - vs. selling rallies, so as to be aligned with the primary trend.

Getting rather OT here, so I'll leave it there.

[SalvorHardin]

There has been quite a big improvement in North American railroad car loadings at the end of May compared with previous weeks. That's a bullish indicator for American and Canada. We can't infer much from this about the UK though.

From the Association of American Railroads, commenting on May 2020 traffic.

"Overall traffic levels last week were down from the prior week as would be expected for a week which includes a national holiday” said AAR Senior Vice President John T. Gray. “However, it is somewhat heartening to note that 11 of the 20 carload categories, including several major commodity areas, improved their showing versus 2019 when comparing their current loading rates to those we have seen the last four weeks. Perhaps most notably, automobile loadings improved to about one-third the normal level as assembly plants began the intricate process of reopening. While this is still a long way from where we would like to be, it is far better than the ten percent of norm of only two weeks ago"

https://www.rtands.com/freight/aar-rail-traffic-for-may-and-the-week-ending-may-30-2020-somewhat-heartening/

Railroad car loadings are a very good leading indicator as to the state of the North American economy. I've also seen comments on bulletin boards that point towards a surprisingly large increase in traffic in the last couple of weeks. Union Pacific shares are up 3.4% today as I type this, compared to 1.1% for the S&P500.

[GoSeigen]

There has been quite a big improvement in North American railroad car loadings at the end of May compared with previous weeks. That's a bullish indicator for American and Canada. We can't infer much from this about the UK though.
.

That's very useful to know. I think I'll load up on S&P 500 futures in case it rises 45% in two and a half months.



GS

[seekingbalance]

I just thought i'd post an update to this thread.

I was wondering what people's feelings were on the state of the market in general and where it is headed next. Is it business as usual or is this a bear market rally and the market has a lot further to fall?

I have been very lucky in that my largest investment was ODX which has become a COVID-19 favourite and has risen 1000% from its lows. I sold too early as per usual but still did well enough that I am back in profit overall. The net effect of this is that I am now over 30% in cash and struggling to find anything I want to invest in at the moment.

I'm not sure I agree that we are in for a V-shaped recovery, I think the recession could be longer and worse than many commentators are suggesting.

I think we're in for a couple of years of poor figures and low income from stocks, I just read an article which suggested Greggs are likely to make a £50m loss this year and nearly every stock I hold has cancelled its dividend.

I have been trading in and out of bombed out stocks taking a quick profit where I can and am happy to hold the rest of my stocks for recovery having done a sense check of their financial strength.

But what do others think, should I invest my cash now or will the market hit new lows in the coming months?

The rise has been amazing, and is clearly anticipating a solid pickup of economies around the world. As ever the US is leading the way, though up until now it has been very narrowly driven by the mega techs. But others are rising too, in anticipation of opening, for example Disney is up over 30% in the last couple of weeks alone as theme parks look like being opened soon. Similarly, support and services are clearly expected to improve, and may replace big tech as risers going forward. The U.K. tends to follow, slower and later, so we may well see continued rises. But earnings, even after things open up, are going to be horrendous for all but the obvious gainers from the tech trends we have seen recently, so my guess is that after a bit more of a rise we will plateau and then fall for some time, as earnings are crystallised and new PEs are discovered, and new levels are found for the new normal. My gut says it will be lower than now, but who really knows?

But never bet against the fed, nor in our case the Chancellor and the Bank of England. These institutions seem to be far more proactive and responsive than in the past and seem on a mission to prop the economies and markets up at any cost. So the floor could be not all that far below.

All that said, what I have reconfirmed over the last 4 months is that judging the directions and timing of the market is nigh impossible, and while it was clear share prices would fall, it was no guarantee they would bounce so much so quickly, and while I have made good gains on the way up by putting back in the money I raised on the way down, I could have done much better by deploying all my reserves as well, and while I have done a fair bit better than I would have by doing nothing, I do wonder whether it was worth the effort and ducking n diving rather than being fully invested.

So my current plan is to not try to be too clever on timing but to diversify a bit more, sell more risky sectors (such as property, retail) on strength, and use the proceeds and my remaining cash to buy more pharma/healthcare, growth and US, Asian shares and Trusts, buy more bitcoin and gold, and to do all that over the next 6 months to avoid placing too big a timing bet at any one time.

[bluedonkey]

Headline in the FT today online: "Hedge funds brace for second stock market plunge. Managers say asset prices have become too detached from bleak fundamentals".

[IronPyrites]

Hi All

I have been mulling over what to do with my investments and in recent days I have decided to move heavily into cash along with some gold (quality miners and ECTs) while still keeping some of my quality equities.

It is also interesting to note that Warren Buffet has been selling more than buying in 2020 and is sitting on a large cash pile.

I find it helpful to write down my reasoning and this thread seemed appropriate. I have no crystal ball so this is just my opinion.
I should start by saying that I’m usually a glass half-full kind of fellow but currently I am struggling to understand some of the optimism regarding the markets. My reasons are as follows.

Firstly at the individual company level.
Some companies won’t survive. There will be the laying off of staff at many more. Unemployment will rise and this will become more apparent when furlough schemes end which they will do shortly. Money will become tighter for many individuals and families which means they will be spending less. Consumer spending being necessary in a recovery.
There is talk of changes to ‘how we do business’. Some businesses will thrive but many will struggle though I suspect that the changes won’t be as far reaching as some pundits predict. Periods of change often are accompanied by uncertainty and don’t happen overnight and if busineses do come out of it leaner and fitter it will not be without considerable pain.

Then there is that inherent human factor called sentiment.
Currently most people are relieved and even excited to be allowed out again after lock-down. This has been helped by glorious weather. My observation is that many are not sticking to the ‘rules’. Certainly not the younger generation who live near me (the local skate park was heaving at the weekend). There do appear to be a significant minority who are obeying the rules religiously and these are mainly, but not exclusively, from an older generation.
At this point people are feeling good or at least relieved – this is also I believe being reflected in the attitude to the markets.

Businesses on the other hand are trying to obey the rules they have been given which makes life more difficult for them and is not without extra costs. On top of all the other stresses they will be coping with.

There are a number of commentators suggesting that a vaccine may be just around the corner. Again historically it has taken 12-18 months minimum to achieve this. It may not even be possible to produce a vaccine and then we will have to live with covid for some time to come. Herd immunity might be our main weapon and this will take time and inflict more heartache. Certainly I think it unlikely that a suitable vaccine will be available before next year.

So this feel good factor will not last. Looking at previous epidemics a second wave is likely. The second wave of infection was bigger than the first for Spanish Flu and killed more people. Not following the rules makes a second wave more likely and in the UK the R number is perilously close to moving above one in many regions.
Coupled with unemployment, redundancies, financial difficulties and the mental health issues associated with covid, sentiment in general will deteriorate. This sentiment will, I believe, be reflected in the stock market.
Increased volatility, which we are seeing at the moment is likely to lead to increased nervousness. Jitters often lead to panic.

Then there is the macroscopic picture.
How often has there been a true V shaped recovery after a market crash? Compare this with the number of times there has been a second fall to lower lows after an initial rally. In 1929 the market rose 50% before finally falling to new lows. We are currently at an initial recovery of about 45-50%.
Optimists will say ‘it is different this time’ (as they did with the dot-com boom).
We have had money printing, very low interest rates, better management of the crisis by the US Fed and governments and yes this has helped in the current recovery.
But when it comes to the markets things are seldom ‘different this time’ as history has shown us.

Various measures are banded about. The so called Buffet indicator tells us the market is overvalued.
http://www.currentmarketvaluation.com/m ... icator.php
It is 63% higher than the long-term trend for the US.
The Brock value is not so clear cut citing low interest rates as a counter balance to current valuations. https://brockvalue.com/
Factors to bolster which ever side of the argument you are on.

The long and short of it is that this has become a real economic crisis, all be it engineered to save lives from covid. Most of the world has been in enforced stasis for nearly 6 months and this has never happened before. We cannot manage our way out of it by simply printing money and lowering interest rates even if this helps in the short term. The price we will pay for tackling covid as we have and preserving lives will be a period of economic hardship and this, in my opinion, will be reflected in market returns for years not months to come.

I hope I am wrong in this regard but the positioning of my investments reflects what I believe the future holds.

Regards
Iron