Just went 95% cash in Super - Share Market Correction

Why buy something like that when can buy Citi mini warrants if want to play direction. Or XJO options

 

Question is if you believe this do you now sell out with the rebound coming, then buy back later?

 

Personally no. Because what I think will happen and what actually happens could be two different things. I could think it should go down to $60 and it does. So I buy and it goes down to $50. Or I could think it’s going back to $60 but it doesn’t and it’s back above $70 soon. Then I’m kicking myself and buying back in above my sell price.

If I had a magic ball then sure I would. Best thing is to keep some dry powder and buy a little at each interval. That way if it goes up I feel like I got some in before it went up. And if it goes further down I can also feel good about having bought some at the low.

I am actually a little nervous about how this thing is going to play out. I’m not sure what it felt like during the GFC as I wasn’t in the game. But the market movements isn’t what’s worrying me. It’s the unknown of how bad this can get from an economic point of view. My worst fear is that we have large scale business falling over. Don’t know if I am being over dramatic but don’t think it’s that unrealistic if this things doesn’t come under control soon.

Again while I want to achieve the best possible performance I can through buying during this downturn, I am confident that as long as the economy doesn’t come completely undone then anyone following a similar strategy will come out of this ahead In a few years time.

 

I don't know what either of those things are, so that would be one reason. The people I know who are piling in are buying for income as a very long term hold, not to buying to trade in the short term. One is buying a certain amount every pay but buys extra when the price drops.
These are income producing shares that can basically be held forever.

Do warrants or options or whatever do that?

 

No. They are very concerned about the virus. One is taking his child out of childcare and others are canceling their travel plans. If an investor sees that VAS was $90 last month and buys it at $62 during a market downturn, are they a virus denier now?

Or are they just a sensible long term investor building an income stream over the long term?

Are you saying the economy is not going to recover after this global pandemic?

 

No. You’d be wiped out if you got the direction wrong on options or warrants.

 

It's a Psychological head **** some times. I'm sticking with my strategy as well.

Without doubt this will effect many businesses and some will not survive. Had a chat early this week with my local fish and chip shop (best chips ever, nice and crunchy) if he could survive shutting up shop for a month and he said no chance, not even 2 weeks. My work is laying of staff with regularly updates so my addional spending has paused just in case I'm next. I've spoken with many work associates/mates and they cannot survive more than 2 weeks without income, so I'm going guess it will be bad soon. But as you say I'm also confident in time all will be awesome again and our shares will go up.

 

I am in the same position. I keep running scenarios of how I think it will play out and it looks really bad. Then I feel like a doomsdayer and try to run a more positive scenario but when I look at that scenario, I don't believe it.

I find it hard to work out the dollar figures of economic impact from various events but when I look at:

* Massive drop in airline travel (several airlines will go bust without gov intervention)
* Equally large drop in tourism spend (hits small and large business)
* Most of the worlds largest sporting leagues either stopping or no crowds
* All conferences cancelled pretty much globally
* Businesses closing doors due to either government directive or staff/customer infection
* University/education sector hurting
* Consumer spending across the board ultra low due to fear (no figures yet = unknown)
* Major investment houses pausing all investment decisions (GDP risk)
* European economies in lock down (major unemployment and sovereign debt risk)
* Oil producers being pushed to the wall by OPEC (many will go out of business holding large levels of debt)

As I said I don't know the dollar figures, but it is super high and this is the tip of the iceberg.

So when this impact starts to get felt by business the risk of debt default starts to grow, see article below. There is currently around $75 trillion worth of corporate debt, up from $48 trillion in 2008.
If BBB debt starts turning to junk and therefore being mandatorily offloaded by investment funds, businesses start going bust and the holders of debt start to panic. Sound familiar?

Here's what could really sink the global economy: $19 trillion in risky corporate debt - CNN

The big unknown at this point for me is; once the US testing finally gets up to speed over the next few weeks, what will the number be? If by some miracle it is low then a turn around may start.
But my gut is telling me it is actually going to be scary high.

Anyone that hasn't read this article by NYT, take a look.
‘It’s Just Everywhere Already’: How Delays in Testing Set Back the U.S. Coronavirus Response

 

Lol. Yeah I think a few of us are in the same head space and are prone to over analysis and always think of the worst possible outcome. I am not physically a doomsday prepper, but more of a mental doomsday prepper if that makes sense.

The next few weeks will tell us a lot. If we look at this from a balanced perspective rather than an absolute worst case then we should be ok. Yes there will be some tough economic times ahead. But there is just as much possibility that this will pass in the next month or so and not shut the whole world down. I have no doubt that it will come at a cost of many lives such as those most vulnerable. But that tends to be the case with any illnesses. Once this thing spreads and the majority get over it and community immunity starts to build things will slowly get back to normal. And at the rate its spreading I can see that playing out in the next month to two.

 

I tend to think this may be the case in the majority of countries....coming from a positive viewpoint this may actually be a blessing in disguise...the majority of people may get the flu, never be diagnosed with corona virus and get better before they get chance to be tested.

 

Back in August 2019, when I retired, I restructured my holdings in my Super fund.
I opted for a 80 / 20 split. With 80% going across to cash and 20% going to equities. Prior to this I had 100% in the balanced growth option.
Accumulation phase was still continuing within my LIC and ETF funds.
Now that I am receiving my Super pension drawdown twice monthly from my cash holdings within my pension based account, cashflow has been a constant. I am no longer adding to my LIC or ETF holdings. Happy now to just receive dividend payments.
Glad I took that option now with the volatility being presented in the market daily.
Having some cash on hand though presents a good problem. What stocks / when to buy?
A bit like a kid in a lolly shop!

 

The ASX declined by $162 billion today to $1.51 trillion falling 9.7% to 5002. The index has now fallen 30.3 per cent since the high on 20 February and today was the largest one day % fall on record.

https://www.smh.com.au/business/mar...ated-central-bank-action-20200316-p54ae8.html

The big banks have been getting hammered.

 

And the fall continues... I still believe we have a way to go yet:

ASX 200 posts biggest fall on record, $165b wiped off All Ords

 

What about now? Markets seem to be bouncing back, but will they correct when the stimulus winds down?

 

I bet you @sash went 100% cash on 19th February 2020 and back fully into the market on 20th March 2020.

By golly, with hindsight, I wish I did.

 

If stimulus ends when it's expected, markets won't "correct" because it's already priced in.

 

I went 100% cash on 2 March and just got back in. About a 7% gain. Now I've done that watch the markets tank again.

 

Agree.

The sharemarket is forward looking and at the lowest point was pricing in a US or an Italy type scenario for Australia. That has now been averted and more importantly we know how to avert it. While we still have the economic problems to deal with the market was pricing in a health disaster and an economic disaster.
If the market keeps recovering from here I've invested about three quarters of the funds I had to invest so I'll be happy. If it drops again I've still got some dry powder to keep tipping in.
I wouldn't like to be sitting on the sidelines at this point with a bag full of cash waiting for the "big" drop.

 

Well market is actually pricing in the fall in Brazilian iron ore production from Covid and spike in ore prices due to that.

 

Back in for a little while after moving to 100% cash in early March. However, stilling holding a decent cash reserve as I have no doubt there will be another drop.