Jump to content
The Klipsch Audio Community
Jeffrey D. Medwin

Is a BEAR Market for Stocks Continuing ?

Recommended Posts

8 minutes ago, Coytee said:

In the option markets, I've always preferred to be a seller, not a buyer.  

 

Sell a covered Call.....sell a covered Put or sell a Credit Spread.

 

Not that anyone cares mind you....but someone might not realize you can be a seller verses a buyer.  Different risks/reward scenario.  There's probably been less than a half dozen times in my career where I "had that little voice" saying it was better to go long verses short.

 

Correct. And that's why most options contracts expire - worthless.

 

At least if you're selling the contract (ie: sell a call option) you are collecting some extra "rent".

Share this post


Link to post
Share on other sites
34 minutes ago, artto said:

Not to be nasty, or start an argument - you are quite wrong my friend.

 

It most certainly does matter who is buying as much as what they are buying. And how much they are buying.

 

Personally, I couldn't care less what the price of gold is, or any other asset.

 

What I do care about, is what is appreciating the fastest - with the least risk. And right now, many components of the MARKET  are showing indecisiveness. They are not showing enough strength yet - haven't proven themselves. In the short term, most of any strength is coming from a group of traders that are notoriously wrong most of the time - especially at extremes - like they are now

Those who firmly believe the market is going South can short it with everything they've got.  Unless this includes you, you at least are unsure enough to doubt it.  At that point, everyone with an opinion can back it as they wish, but that doesn't make it fact, no matter how hard they pound the table.

Share this post


Link to post
Share on other sites
42 minutes ago, Jeff Matthews said:

Those who firmly believe the market is going South can short it with everything they've got.  Unless this includes you, you at least are unsure enough to doubt it.  At that point, everyone with an opinion can back it as they wish, but that doesn't make it fact, no matter how hard they pound the table.

It's not that I am unsure about it. The market is telling me that all of it's participants are unsure about it. What I think doesn't matter. That's where most people go wrong. The market is telling us every moment what the collective vote is. And right now it's pretty much of an equal tug of war between the bulls and bears, especially short term. Longer term (12+months) is a different story.

My concern is what happens between then and now. In other words, just because most of my studies point to excellent longer term returns doesn't mean that we can't go back down to where we were, or lower, before it begins a sustained/sustainable uptrend.

 

So, quite frankly, "those who firmly believe the market is going South" (or North) are just that - believers.

 

I have facts. What I posted are facts, not my opinion. And the facts tell me nothing is very clear at the moment. There have been too many short term warning signs conflicting with medium/longer term positive signs. Therefore, the only honest answer I have in the short term is I don't know. So I'm mostly in cash since just a week or so before the crash. And that position (mostly cash) reflects MY risk tolerance and MY time horizon, based on facts provided by the MARKET and my trading strategies/rules, not my beliefs.

Share this post


Link to post
Share on other sites
52 minutes ago, artto said:

Correct. And that's why most options contracts expire - worthless.

 

At least if you're selling the contract (ie: sell a call option) you are collecting some extra "rent".


yep if you’re right you collect some rent money...if you’re wrong you collect some rent money...either way you end up with a cash asset

 

 

Share this post


Link to post
Share on other sites
2 minutes ago, Coytee said:


yep if you’re right you collect some rent money...if you’re wrong you collect some rent money...either way you end up with a cash asset

 

 

👍

Share this post


Link to post
Share on other sites
7 hours ago, Coytee said:


yep if you’re right you collect some rent money...if you’re wrong you collect some rent money...either way you end up with a cash asset

 

 

... but if you are wrong, the rent you collected is definitely less than market returns, and it can be a lot less if the market rises a lot before you jump back in.  We are in a volatile time; I don't think bulls and bears would disagree on this.  It's about risk tolerance.  

 

And I still say you can't argue with the market.  Point to all the facts you want.  For years, I have maintained what a giant waste of money diamonds are.  People just refuse to see the obvious - that they are spending huge money on dumb rocks... but there it is... the market!  

Share this post


Link to post
Share on other sites
29 minutes ago, Jeff Matthews said:

It's about risk tolerance. 

Exactly.  That is his point as well.  

Share this post


Link to post
Share on other sites

Those with money to spend will spend it on whatever they want. Substitute diamonds for toilet paper. What percentage of the population did that just encompass?

 

The jaded and the thrill seekers fuel a fools market. Social contagion and gambling are are no substitute for the algorithm of the day. 

 

But what is really to lose? Bankruptcy is a business strategy. Investments are disposable. Only now it’s investments from the government, globally. The rich lose nothing but their “inc”, and their staff, that are now unemployed. Their wealth is safe under another name. 

 

There is no long term in the market, only today and once quantized, tomorrow.

 

I have seen nothing about the elephant in this room:

 

What happens when 3 trillion dollars worth of business investments declare bankruptcy and take our money and run?

 

What happens when the entitled become enabled?

 

Or will the milk of human kindness find an alternate ending?

 

Hmmm, maybe I’m just skeptical.

 

 

 

 

 

 

 

 

 

 

 

 

Share this post


Link to post
Share on other sites
8 hours ago, Jeff Matthews said:

... but if you are wrong, the rent you collected is definitely less than market returns, and it can be a lot less if the market rises a lot before you jump back in.  We are in a volatile time; I don't think bulls and bears would disagree on this.  It's about risk tolerance.  

 

And I still say you can't argue with the market.  Point to all the facts you want.  For years, I have maintained what a giant waste of money diamonds are.  People just refuse to see the obvious - that they are spending huge money on dumb rocks... but there it is... the market!  

 

8 hours ago, oldtimer said:

Exactly.  That is his point as well.  

 

 

There are people in life who ramble on and on to make a small point (me??).....  then there are people in life who have the ability to simply nod their head or a single sentence....and make an entirely larger point without all the ramble...(damn you OldTimer!!!!)

 

My hat goes off to Oldtimer because as you can see....  he said in one sentence that which I've yet to say!

 

........

 

.........

 

 

........

 

 

So, I just now typed out an entire "What if you sold a covered Put" scenario....  decided I was blathering on since I don't know that anyone really cares to read that (it's always good if you suffer insomnia) so I deleted it.

 

If you would like a fairly detailed example of selling a Put, Call or a spread...  say so and I'll be happy to oblige.  (note I'm going out of town Friday for several days so if I disappear I'm not ignoring)

 

 

Share this post


Link to post
Share on other sites

The facts that Artto refers to, put and call option ratios of their buying and selling, are useful, my friends and I have been following them since the late 1960s.  They are, however, NOT a market timing tool , as a trend in the market can be in force, and override these ratios when they are skewed, for very long periods of time, and price. 

 

They are one, of many indicators. Every one of them is a fact.

 

Jeff Medwin

 

 

Share this post


Link to post
Share on other sites

Let's try a different angle.

 

Here is a chart both Medwin and Artto show to poke fun at people for timing the market bass-ackwards:

 

image.thumb.png.83c4c029bc49fbfcb3792a4fe8da10c2.png

 

18 hours ago, artto said:

Personally, I couldn't care less what the price of gold is, or any other asset.

 

What I do care about, is what is appreciating the fastest - with the least risk. And right now, many components of the MARKET  are showing indecisiveness. They are not showing enough strength yet - haven't proven themselves. In the short term, most of any strength is coming from a group of traders that are notoriously wrong most of the time - especially at extremes - like they are now

 

The sentiment you are expressing is certainly not one of returning confidence or enthusiasm.  Where do you fit on your sentiment chart?  

 

Maybe this will help explain a point I have been trying, and failing, to make.  The chart is merely humorous.  As an analytical tool to predict market trends, it is useless.  It tells you that you are missing out at every turn.  The fact is, maybe you are and maybe you aren't.  "Smart money," "dumb money."  Rationalize your prediction in whatever way you want.  

 

Example.  Bitcoin.  Apparently, your "smart money" (institutional investors) has stayed clear of investing in cryptocurrency.  That's all fine, except for they missed out on some insane returns.  I guess we need to take a look at the sentiment chart once again... maybe even switch the labels on who is "dumb" and who is "smart."

 

As we sit here today, you can either think the stock market has lost a lot of money lately or it's gained a lot lately.  Depending on your view of "lately," either perception can be correct.  Are you missing out?  You think not, and time will tell.

 

P.S.  Buffett now is getting heat for missing the last decade and continuing to miss with airlines.  Despite his misses, he is candid about what he does vs. what he recommends:

 

Quote

Buffett believes average investors should buy the broad market for the long term instead of following stock-picking advice of others.

 

“In my view, for most people, the best thing is to do is owning the S&P 500 index fund,” Buffett said. “There are huge amounts of money people pay for advice they really don’t need.”

 

“If you bet on America and sustain that position for decades, you’d do far better than buying Treasury securities, or far better than following people who tell you” what to invest, he added.

 

Share this post


Link to post
Share on other sites

"We've surely got trouble! Right here in River City! Remember the Maine, Plymouth Rock and the Golden Rule! Oh, we've got trouble. We're in terrible, terrible trouble."

 

Despite what Jeff Matthews quotes about Warren Buffett, Mr. Buffet has NOT bought this stock market drop, nor have I. 

 

Buffett has the biggest CASH hoard ever in his life, what $130 Billion.  

 

Unlike others, I certainly DO have an opinion as to where we are going. 

 

We are going to have a huge huge huge CRASH, the worst ever in recorded history,  is my personal opinion.

 

I saw this chart today, and an hour ago, and it tipped me over into changing the asset allocation of my PERSONAL account,

 

                                                                                                   from 1/3 Cash, .....2/3 rds Short,

 

                                                                                                                 to .....100% Short

 

 

The chart that follows has a stock symbol of DPST.  It is an ETF, or Exchange Traded Fund.  It is called " Direxion Daily Regional Banks Bull 3 Xs Shares ", and it is a TRIPLE LEVERAGED bull ( to the upside) exchange traded fund.   I have selected a 6 months time frame, so we can all see three months before and after the drop.  What is startling to me is, that since the drop, this has NOT recovered one iota, as this general market had a vibrant Bear Market rally.   DPST fell from 400 to 50, and it is  trading at 55 today. 

 

Holey smokes!! 

 

WHAT does this tell ME??? That the Banks are in huge trouble, and NO ONE seems to be willing to bet it will get better !!!   Most banks are overextended, and we will possibly / probably see massive bank failures as as this progresses in time.

 

  1312363794_5-21-20DPST.thumb.JPG.bad37835fb66d72276c085c71aa6b8a5.JPG

 

 

 

Also factoring into my decision today to go all-in, on the short side, was that someone yesterday put in a bid to buy 25,000 shares of TVIX at $150.00 a share, and there was 100 shares offered at 150.01 !!!  We have never seen that size before in TVIX, as a single bid - at a single price point.  That buyer ( $3.75 million dollars ) eventually got his shares, and I will JOIN him !!!!

 

"We've surely got trouble! Right here in River City! Remember the Maine, Plymouth Rock and the Golden Rule! Oh, we've got trouble. We're in terrible, terrible trouble."

 

I DO hope the Moderator will allow me to freely express my personal view here, as the Original Poster of this timely thread.  It is NOT meant as investment advice for others, which is his concern.  Its just an update on my own portfolio asset allocation, and some reasoning that causes me to act today.  This suits me fine, and is certainly NOT investment advice for others.  Yes, I DO have an opinion, and I act on it, as I see fit, in my own account. 

 

BTW, I bought things other than TVIX today to go all in, other ETFs. 

 

Have fun, I do.

 

Jeffrey Medwin

 

 

Share this post


Link to post
Share on other sites

My PSP account (401k) lost about 20% during the onset of the stock market decline. As of now it has recovered completely and made a little. I didn't have to lift a finger...

Share this post


Link to post
Share on other sites

Jeff (Matthews)..............

 

Please don't get me wrong, but I really don't understand why you think I'm bearish.

 

I've already stated several times, that based on the data I see, from the models I use, that the resultant answer - for me is - I don't know. And I've also stated several times that I'm mostly in cash. To me, that is not bearish. YMMV. If I were bearish on stocks I would be short the equity market, and be in another asset class like bonds which typically perform better than stocks during stock market downturns. (Disclosure: I have a small short position - the DOW inverse ETF, DXD. A somewhat overweight position in AMD, looking to reduce, & very small position in LITE)

 

Yes, "typically" after these kinds of events (crashes or major corrections) the market will have some kind of rebound, not nearly getting back to the top, and then retreat again. Sometimes it gets back down to where it was, sometimes lower, sometimes not quite as much - before resuming (hopefully) an uptrend.

 

So, I am in fact holding both long and short positions, but mostly cash.

 

Just like in audio - it's your ears, your money, you're the one who has to live with it. I'm comfortable with how I'm positioned because it meets my strategies, my goals and my objectives. What is good for me is not necessarily true for anyone else.

Share this post


Link to post
Share on other sites

OH, and BTW, that chart that I posted - I already stated this - --------

 

It's from January 2019. Not the most recent stock market event.

Share this post


Link to post
Share on other sites
2 hours ago, artto said:

Please don't get me wrong, but I really don't understand why you think I'm bearish.

I might be misusing that term.  I'm not an industry guy.  I just mean people who predict it's heading for a crash.

Share this post


Link to post
Share on other sites
33 minutes ago, Jeff Matthews said:

I might be misusing that term.  I'm not an industry guy.  I just mean people who predict it's heading for a crash.

Well, I'm certainly not predicting a crash. In fact I don't predict anything or care for those who do.

 

On top of that - we already had a crash.

 

In 2008 we had a crash. And as is typical, there were rebounds, on the way down to what was to become the actual bottom.

 

It's probably way to soon to call March 23 the bottom.

 

OTOH, there is also an abundance of evidence that suggests the opposite - that we 'probably' did see the bottom on March 23.

 

If you're good with that, it's fine with me.

 

I want to see more evidence. The models, data and indicators I use are all showing mixed signals. Therefore I sit and wait until the proper conditions occur. When they occur I'll know. And I'm ready either way.

 

Much of what I'm saying is dependent on one's time frame. To make it simple, in very general terms, I define this as - short term (1 week to 2 or 3 months), medium term ( 1 to 6 months) and long term (1 year or more).

 

In the short term most studies I'm looking at are bearish. Medium term it gets more bullish. Longer term very bullish.

 

So why don't I just go all in (bullish)? Because from my point of view, based on my decades of experience, and all the data I'm currently looking at, there is still a strong possibility that the stock market may have another leg down and provide a better long term entry opportunity, and at that point, also a higher probability of lower risk.

  • Like 1

Share this post


Link to post
Share on other sites
On 5/20/2020 at 9:42 PM, Jeff Matthews said:

... but if you are wrong, the rent you collected is definitely less than market returns, and it can be a lot less if the market rises a lot before you jump back in.  We are in a volatile time; I don't think bulls and bears would disagree on this.  It's about risk tolerance.  

 

And I still say you can't argue with the market.  Point to all the facts you want.  For years, I have maintained what a giant waste of money diamonds are.  People just refuse to see the obvious - that they are spending huge money on dumb rocks... but there it is... the market!  

 

"... but if you are wrong, the rent you collected is definitely less than market returns, and it can be a lot less if the market rises a lot before you jump back in"

 

That statement says a lot. It shows that what you don't know can hurt you.

 

Little guys like us 'generally' aren't allowed to write "naked" options contracts.

 

When you (we little guys) write a call option, we are offering someone the right to buy our stock, at the price we are asking, at any time in the future, up to a certain date. This is referred to as a "covered" call option.

 

Options contracts are most commonly written in 100 share amounts. In other words, if you want to write a call option on Microsoft, you have to own Microsoft - 100 shares of it.

 

If Microsoft goes down, you collect the "rent", which is the price the other person is willing to pay for buying your call option (which entitles them the right to buy your 100 shares of MSFT at a specific price before the option expiration date). You still own the stock. If MSFT goes up, you collect the rent (the price the other person paid for the right buy your MSFT stock at a specific price before the option expiration date).

 

Either way, MSFT goes up, or down, you still collect the "rent". It can be an effective way to increase your returns. In no way does it lower them. The worse that happens is MSFT goes up more than you thought and the person who bought your MSFT option, "calls" MSFT away from you. They buy it at the higher price.

 

If the stock pays a dividend it gets more complicated. Lets' not go there right now 🤑

Share this post


Link to post
Share on other sites
25 minutes ago, artto said:

 

That statement says a lot. It shows that what you don't know can hurt you.

 

Little guys like us 'generally' aren't allowed to write "naked" options contracts.

 

When you (we little guys) write a call option, we are offering someone the right to buy our stock, at the price we are asking, at any time in the future, up to a certain date. This is referred to as a "covered" call option.

 

Options contracts are most commonly written in 100 share amounts. In other words, if you want to write a call option on Microsoft, you have to own Microsoft - 100 shares of it.

 

If Microsoft goes down, you collect the "rent", which is the price the other person is willing to pay for buying your call option (which entitles them the right to buy your 100 shares of MSFT at a specific price before the option expiration date). You still own the stock. If MSFT goes up, you collect the rent (the price the other person paid for the right buy your MSFT stock at a specific price before the option expiration date).

 

Either way, MSFT goes up, or down, you still collect the "rent". It can be an effective way to increase your returns. In no way does it lower them. The worse that happens is MSFT goes up more than you thought and the person who bought your MSFT option, "calls" MSFT away from you. They buy it at the higher price.

 

If the stock pays a dividend it gets more complicated. Lets' not go there right now 🤑

I think you described the same thing I did. 

 

When I said buying a call can lower your return, I meant that the money you receive for the call can be less than the money you could have made had you not sold the call.  I guess a more artful way to put it is, "Selling a call will give you some rent, but the rent can cost you an opportunity for a better return."

Share this post


Link to post
Share on other sites

And that's why you are not quite "getting it" - yet.

 

I said selling (writing) the call.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


×
×
  • Create New...