11. 2020-03-16 stock market sell off

2020-03-16

https://finance.yahoo.com/news/european-stocks-slump-2012-low-085628632.html

2012 level is the lowest level that you could expect. 2008-2009 was the worst (historical) crisis, and stocks started to rebound at around 2012.

Stocks have historically been appreciated over time, thus it wouldn't fall back to 2009 level.

If you had extra cash, this would be the best time to pick and accumulate stocks for 12 months ahead.

Many of US stocks haven't been falling back to 2012 level, check individual stocks. This mass sell-off provides very fantastic time to pick stocks. You should be able to double your money in 12 months.

I had posted an article mentioned that a company has come up with coronavirus vaccine and it would be available as early as this summer. Stocks usually move 6 months ahead of good economy news.

By the way, many sound US and Canadian stocks have been dumped along with this general panic sell-off, but they will be back quickly in order of 10%-20% in a day toward 100% up. Use charts to check their price level as compared to 2009-2012 level and its earning reports.

If you're not sure, one of safe US stock is BRK.B, if it was sold off. This company has a lot of cash and wait for this sell off moment. Its stock picking teams are experience, thus BRK would be able to double its current cash in 12 months.

About recession talks in USA and Canada, some analysts said that it was priced in stock markets. If you think about this, in recession earnings would be lower and stock sold off its peak. Currently stocks have been dumped to their lowest possible levels. Could they be down further? So, what would a recession do to stock prices?

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2020-03-16

About oil industry, some analysts said that they're dumping oil stocks because of "sell trigger" or forced sell by their boss. The balance sheets of many oil companies would be deteriorated in perhaps 2-3 quarters ahead due to low oil prices at around US$30/barrel.

Instead of a bear market as usual, they dumped to make matter worse, but this also presented an opportunity for stock buyers.


Oil prices were hovering around US$30/barrel in the past. Which company survived that environment?

Corronavirus will be over, and activities would resume to normal in 12 months ahead with vaccines available to general public. Will oil prices fall back to US$50/barrel again, so will stock prices? Would it be 100% gain, if waited?

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2020-03-16

Try to see farther ahead of time, public panic was out there because pandemic declared and vaccine unavailable.

US started the first coronavirus vaccine shot. Many biopharmaceutical firms are about to release vaccine candidates in a few months. Successful vaccines would be available worldwide regardless of politics or borders.

Q1 2020 report would be bad to many companies with earnings lower. However stocks had been dumped to lowest level, what else would they do?

However public anxiety and activities would dissipate in a few months with many vaccine shots carries out at the same time, i.e. resuming normal social activities around June-July including consumption of gasoline and goods.

Q2 2020 report should show moderate improvement as June and July months were not fully recover.

Money managers would buy shares strongly after reading Q2 reports because they would see stable in incomes. That's normal trading that we were used too. However the last deep correction in the end of 2017 showed that traders would bring stocks back to high levels within weeks instead of months after a recession.

It's up to you to handle your extra cash that you're not planning to touch in 12 months, but buying stocks would be a best option.

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2020-03-16

I just watched BNN briefly, guest analysts or money managers have mentioned 2 common things:

- Is this a bottom? Who could predict that? Can stock markets down to 2009, 2000, or 1930 level? I don't think so, but time will tell.

- A manager is expecting another naughty day like today with DOW 30 off close to 3000 points, so he could buy those 30 stocks. Again also guess. Personally I would pick individual stocks, preferably in SP 500 instead of an index for this type of sell off.

- Some airlines would go bankrupt? Roll back to 2008, governments have saved banks. So, if an airline is a key in economy and transportation, government would save it.

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2020-03-17: SP500 up +1022 or +5.07% from yesterday DOW's -3000 points. Either short sellers buying back shares or investors snapped up bottom out stocks.

If you noticed SP500 up 5.07%, but US:BAC and US:WFC up more than +10%. Picking individual stocks would provide you more gains in this scenario.

Let's say the market is in strong momentum like this, i.e. +1000 points (DOW) for a few days off and on, and then the manager hopping another -3000 points day of DOW30 would be possible. However, it was like the bottom of yesterday, i.e. not lower as he had hope.

Will be another naughty day ahead? Nobody knows for sure. If the markets went up slowly and steadily, blood bath days wouldn't occur.

If my forecast was correct, oil stock would rebound strongly to the same level that it was before oil price crashed from US$50 to US$30/barrel, i.e. months of June or July 2020.

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2020-03-17

The stop loss feature provided by many brokerage firms to their clients could be the main reason for mass selloff in recent weeks including circuit breakers in US stock exchanges. Perhaps a group of short sellers knew the stop loss prices set by large money managers or majority of individual investors, so they ganged up to short stocks down passed that stop loss threshold, which triggered a mass selloff in the market.

In stock investment, you should see a long term approach as nobody could time short term market fluctuation. Buy and hold forever is true for fantastic companies, but short term holding is required attention and regularly buy-sell activities, i.e. stressful for normal persons.

In this situation, I have forecast a few key events and months that normal social activities would resume, so are stable companies’ incomes. Some companies may take more time to recover than others such as airlines, because they have accumulated more debts or little incomes during this period. It is like a recession, because most of companies have scaled down their activities. They would have to ramp up quickly as social activities resumes.

Therefore investing extra cash, which was not needed for 12 months, would lift your stress off or you wouldn’t be worrying by market fluctuation. As you can see in my example above, Q1 2020’s earnings reports may trigger another deep selloff, if stocks have been recovered to a high level from here, i.e. maybe only down a few percent if market is still at low level. Nobody could predict the level of stock market by the Q1 report season. However the overall stock performance would be up around +100% (if you picked good one) after 12 months from now. BRK.B would be up around +30% to +50% from US$180 (my guess), but this is a safe stock.

Many have said that stock market is like a casino. It is not true. You will lose money in casino for sure, but you have a chance to gain in stock market as long as you’re not greedy and patient. Pick good and sound companies with lower expectation would help.

This is a fantastic opportunities to double your money, but it has only occurred during trouble or panicking times.

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2020-03-17

Most of people stepped in stock market and listened to speculators to buy stocks with rumors that their recommended stocks would jumped up 50%, 100%, or even matching Apple and Amazon's performance.

You must understand the fundamental or key information about those companies before putting your money in.

Recently 5G was a hype from many speculators about secret companies would popup 1000%, etc.

Ericsson and Nokia are leaders in 5G, but their stock return (before panic down by general selloff) would be around 10% - 30% annually. If you're not greedy, you would park your money in either one and log reasonable returns. If you followed speculators, you may lose your entire savings.

ERIC and NOK should rebound sharply as panicking period over. I didn't follow Nokia, but Morningstar has estimated that the fair price of ERIC is US$9.50.

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2020-03-17

I can give you 2 examples about speculators out there.

-          Tesla, TSLA, has been creating illusion to their loyalists with many future products without backing up with concrete historical and recent sale data. Most of time, they have said that their cars have been reserved with a “huge” number, but production stalled was the issue. Any company could create hype by inventing “reservation” number. Currently TSLA didn’t provide sale numbers from China, which was the main speculation of stock’s sharp rise. They also hired “many speculators”, I think, in chat room to mention that TSLA will be included in S&P 500 by July 2020 or so. They said that TSLA only missed or only a red quarter. Actually one of conditions to be included in S&P 500 was 5 consecutive profitable quarters. TSLA was in red for the last 5 consecutive quarters as shown in BMO Investorline, i.e. GAAP report is different than TSLA report. However the last news flashed in TV showed that TSLA was in a profit of around US$150M in Q4 2019, if I recalled correctly. Who should be sued in this case?

-          Some speculators sending emails mentioned that an “unknown” silicon company made chip for 5G iPhone, thus its stock would spike more than +100% or even +1000%. The issue was to pay them for the name of that company, and then figuring out how to get confirmation by Apple about the use of that company’s chip. Sound like impossible mission? By the way, you would need to figure out, if true, profit margin made by that company with the chip.

It is up to your judgement about hype out there as everyone loved +100% gains overnight or +1000% gains after a few months or years.

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2020-03-17

TSLA fans or Elon Musk’s fans would be anxious and excited for the incoming spin off of a satellite Internet division from Space X, I think.

Satellite is different than ISP on the ground. You cannot press a power button to reboot or insert a USB key, etc. everything is remote. You cannot upgrade its memory board or processor boards to improve its speed performance, i.e. another (costly) satellite must be launched to replace outdated one.

Back in the 1990’s, cellular phone company charged $0.25/minute for every phone call. Satellite phone used by oil rig floating on the sea paid $3.00/minute.

Did Elon Musk tell you about the cost of all satellites in the orbit or will be to form a network? How much would this company charge per minute or megabyte of data transfer to users? How long would they be able to recover the cost of satellites and technical operating staff, and then be profitable? Have they provided number of users willing to pay for satellite Internet? How about the speed of data transfer? Did they get spectrum approved by US government’s arm (I think US military has a say in this stuff)?

Many speculators in chat room praised Elon Musk as a great visionary leader, but Elon Musk indeed knows how to sell a plan without any backup data to loyalists.

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2020-03-18: Another blood bath day for US stock indices. DOW was in red for -2057 points at 2:39PM.

I think, they have circulated the view of unemployment picture in investment circles.

The world is frozen due to coronavirus, i.e. worse than recession.

Employment application may reach 20% in USA as posted in an article. Yes, this is probably correct as employers couldn't handle paycheck while shutdown. Employees must go for EI during this period.

When social activities resumed, we would see unemployment rate suddenly dropped to low level quickly, e.g. 20% down to 5% in USA within a month report as a miracle, and slowly toward the current lowest rate of 3%.

Stay calm to weather the storm, which we didn't create.