Q&A: Current Market Conditions

 

  

Questions about Market direction

 

·       Where are the markets going?

·       Can it go down by another 20%?

·       How to gauge if the market is reversing/stabilizing?

·       When will it hit bottom?

·       How long before they recover? 

Response: I don’t know; nobody does; the so called “experts” don’t either.

These questions are relevant only if you are a short-term investor. Long term investors know that markets go only in one direction: UP!!

 

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Questions related to the Economy

 

·       What is the cause for markets dropping? Inflation? 

Response: The markets are dropping due to several factors, such as inflation, increase in interest rates, Russia-Ukraine conflict, etc. All these are causing negative investor sentiment. In the end, it is the sentiment that dictates the direction of the market.

  

·       How should I change my strategy if inflation continues, what if recession come in?

·       How will Inflation and depression affect my assets and income in the long run? 

Response: No changes or preparation is needed. 

There is no depression on the horizon. Recession doesn’t mean the end of the world. It may have little or no effect on anything for you. News media exaggerates everything, negative or positive. You should not be investing based on the news you hear, or a worst-case scenario.

  

·       The Euro keeps declining. Does that change the future of Tech/QQQ?

·       Invest overseas? 

Response: The Euro is not crashing and is not expected to drop by 50%. Fluctuations in values of currencies are a normal part of a well-functioning market.

o   Change in value of Euro will not affect technology companies or QQQ.

o   Playing currencies by investing overseas is speculative and will not protect your portfolio.

o   No changes in your strategy are needed.

 

Will housing market crash and the 2008 scenario be repeated and the country will go into a tailspin? 

Response: The country will not go into a tailspin à These ups and downs are normal.

 

 

Advice for the everything in the Economy section above 

  

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Questions related to Individual Stocks

 

·      Buy beaten down stocks (down 80%) rather than indexes
that haven’t dropped as much?

·      Buy top company stocks?

·      Buy dividend stocks?

·      Growth vs value stocks?

·      Hold on to deep-loss stocks and crypto etc. to ride the
upside?

·      How about breakeven on my own individual stocks that
have dropped by 50%+? 

Response:
If you remember, I discouraged you
from investing in individual stocks.

o   I asked you to get out of all individual stocks and
replace them with indexes.

o   Buying individual stocks is speculating, almost like
gambling. You are constantly on an emotional roller coaster. Individual stocks
make large moves; up one day causing euphoria and down the next causing
disappointment and stress.

o   I don’t monitor individual stocks and, therefore, it
is difficult for me to give you any advice on specific stocks or stock types.
You probably know more about them than I do. Please use your judgment when making
decisions to sell. When you are ready, please consider selling all individual
stocks and replacing them with broad market indexes. It is never too late to do
that.

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Questions related to Immediate Actions to Take

 

Should I take a defensive posture?

·       Invest in CDs

·       Treasury/bonds,

·       Diversify: Buy gold, other ETFs, dividend stocks, growth or value stocks 

Response: Over a long period, the stock markets likely will go up substantially from here. If you take a defensive posture now, you’d be giving up opportunity for those gains.

  

Should I sell to stem losses?

Response: This is the opposite of what you should be doing. So far, you only have paper losses. By selling, you are making those paper losses permanent. There will be no opportunity for you to recover those losses after that.

  

Should I sell now and buy when market hits bottom?

Response: Do you know when the market will hit bottom? Will you be able to tell that it is the bottom? I don’t and nobody else does either. That’s the problem with this thinking. You have no way of predicting the markets. You find out about the peaks and bottoms long after they have passed. What if you sell now and the markets start moving up and never return to current level? This plan doesn’t really work, simply because we cannot predict the future.

 

Should I take these actions to quickly reverse losses?

·       Options

·       TQQQ: Leveraged fund to gain at a faster rate than stocks

Response: These products are speculative, risky, and expensive. I doubt you’ll accomplish your goal of quickly reversing losses with these products.

 

Should I Breakeven and leave

Response: Just think about why you decided to invest in the stock market? Wasn’t it the attractive LONG-TERM gains? If so, why would you leave after you break even? Should you not stay in the market for the long term and wait for those good returns to come your way?

 

Should I take losses to offset gains in other stocks

The response for this question is the same as for the one above. By taking losses, you are converting paper losses into permanent losses and passing up the opportunity for substantial gains. Taxes should not drive any decisions to sell.

 

 

Conclusions/Overall comments about all of the above “Immediate Actions”

 

They all point to

·       short term thinking

·       timing the market. 

 

It is impossible to time the market

·      This is the most likely scenario

A.     You’ll move money from the stock markets,

B.     they will go up by 30%,

C.     then you’ll be sad that you took that action. 

 

·       IT HAPPENS ALL THE TIME WITH INDIVIDUAL INVESTORS. They buy HIGH and sell LOW.

·       I am trying to protect you from making the same mistakes that all individual investors make. Please do not panic and sell.

  

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Things to Remember about the course and my teachings 

·       The rules I gave you are evergreen. The advice doesn’t change when markets go down.

·       Only the guidelines about how quickly to invest your large cash change with market level.

o   Once you invest your initial large cash amount, nothing will ever change for you.

·       You bought the logic/rationale of long-term investing. If it was appealing earlier, it should be

EVEN MORE APPLEALING when the markets are down.

 

 

Overall Session Summary and Recommendations

o   If you have ongoing saving from income: Keep investing new savings 

o   If you have no cash left: You can only do the above. No action should be taken with anything else. 

o   If you do have a decent/large amount in cash: Invest over a short period, even at current level. don’t be greedy and wait for lower prices

 

·       Whatever you do, DON’T STOP INVESTING.

o   You’ll regret once the downturn is over and the markets start to behave well.

 

 

 

 o