It could be an interesting day when the markets open tomorrow:
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The 1929 crash was triggered by margin calls. The issue is the ratio of margin to equity. I’m happy to say that my portfolio at this moment is 10% in cash. Survival comes first. Everything else comes next.
BTW, I’m expecting buying back some of my calls on Monday before noon (NY time), allowing selling new calls. This is a great time to accumulate cash. Who knows how long this avalanche will last.
Denny Schlesinger
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Could get quite messy:
It could be another black Monday:
Gold and silver made a surprised drop at the end of last week - might be some big rises this week though!
I’m almost looking forward to it in an odd way. I’m expecting a bloodbath, but who knows? Interesting times for sure.
Edit to add: I’m retired so I don’t really have new capital to deploy, but some stocks are starting to look attractive. Another 10% drop might be a buying opportunity.
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The forward PE of NVDA (20.8) is already lower than that of KO (23.6).
DB2
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That was one of the stocks I was specifically thinking of. As well, GOOG has a forward PE of 16, which is low for that stock.
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Some of my defensive holdings are hardly off their 52 week highs. Thought crossed my mind to flop that money into an S&P 500 index fund, “in the fullness of time”. The Vanguard index fund was off nearly 6% Friday.
Steve
Was that “forward PE” determined before or after many trillions of capital went up in smoke over the last few days? Is it prudent to assume that company capex will remain the same to result in the E that was used to determine the forward PE, or might capex (or advertising spend as the case may be) drop somewhat due to recent events?
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Probably not; at the same time, extend the time horizon to, say, five years. Unless you think the AI revolution is over, buying NVDA when it is on a 50% off sale seems like a worthwhile thing to do. Something about waiting for a fat pitch.
Will the price drop further? Quite possible, but how much do you really care? You got a good price.
DB2
Without looking at any one specific stock, it’s possible the market could go down significantly from here. To quote Mungofitch from the Berkshire board at Shrewdm.com:
What fascinates me is that the shift in mood and market direction is stark, and the investing environment and uncertainty have certainly deteriorated a vast amount, but the two are not [yet] in scale with each other: the market isn't actually down very much. Not relative to where it was, and certainly not anywhere near what one might call a normal valuation level, let alone "cheap". [more]
Based on smoothed real earnings, the S&P 500 would have to drop another 14.6% just to get to its 20 year average valuation level, or drop another 18.5% to get to its 30 year average level. Things ain't cheap. Yet.
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Well, it depends on a lot of things. Let’s say a company is the leader in a certain field, but then an economic shock happens that slows that field down by a year or two? That might give competitors a little extra time to catch up. Then, not only does the leader suffer the short-term decline in sales/profits (due to reduced capex), but also when business picks up again, it faces more competition (lower margins).
It might also give that leader time to get even farther ahead, especially if it has deeper pockets.
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