Whose Got Stock Investments Now, and What are you going to do with it?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
I'm seriously debating this issue, I have been involved in numerous campaigns to thwart the Y2K bug. And I feel that nothing catastrophic will happen outside of a few quirks here and there. (Gut feeling, mixed with a bit of knowledge) Of course, I am making provisions for the worst case scenario either way. The Boy Scout in me I guess.
But, the hype created around Y2K will only heighten. That stock market is a determinating factor in our way of life whether or not you invest in it or not !! The Psychological effects of "Oh my God What if All that doom & gloom they're talking about is true" Will push some/many people to pull out of the market and then it very well could nosedive into a recession/depression, devalue money, etc. (Oh I know, get some gold & silver, etc. etc.) A Real problem created from speculation of possible problems. Even if no Y2K problems topple the world, we're still going to be facing some I fear !
A real catch 22, people are strange, and mass paranoia spreads like wildfire. Creating problems out of fear of unknown problems.
Curious what others are going to do specifically related to the stock market?
-- RWE (firstname.lastname@example.org), April 04, 1999
You saw what happened with Monica, now just imagine how it will be near the end of this year. Besides, from what we know about foreign countries, there will be a significant reduction in international trade for the first quarter of 2000, at the very least. In my opinion, you are probably looking at an overall decline in the Dow of about 10 to 20% between now and Dec. 31. Who in their right mind would leave money in when they could use this as a buying opportunity to get back in when it starts to recover? Just my opinion, your money, do what you like.
-- @ (@@@.@), April 04, 1999.
The stock market is tremdously overvalued by any measure you can think of. It's a balloon waiting to be pricked. If not by the Y2K "pin", then something else. The timing is the question mark; not a question of "if", but of "when."
Previous threads here have talked about this.
Does "south seas bubble", "tulipmania", "1929" mean anything to you?
-- A (A@AisA.com), April 04, 1999.
What to do? Always the question, isn't it? If you think that stocks should be selling at over 400 times SAlLES, then hang on. On the other hand, if you think that, then some tulip bulbs would round out your portfolio. Seriously, even if just the banks in Japan fail to get compliant, it will have very depressing effects on our economy. Having said that, I feel it only fair to tell you that I have been shorting the market for l0 years. Missed a bit of a run-up, didn't I?
-- william fraser (email@example.com), April 04, 1999.
We pulled our 401K and IRA balances out of stocks and stock funds and put them into lower yield, but low to no risk government securities and treasuries this March. We are still buying into the stock fund with monthly allottments but the risk to the lump sums have been lowered. If the forcasted market downturn fails to materialize we may put some of the fund balance back into the stock fund but I am much more confident with buying in monthly rather than transferring large sums back into the market unless the market dives then starts rebounding with a robust economy. As we are within 10 years of retirement, the move we have made is not unwise. Good luck.
-- Ramp Rat (Aviation_R_us@noname.nocity), April 04, 1999.
@@ & AA Thanks for your bit of insight. When , not If does seem inevitable. I tried to scan for previous posts, but it was hard on the eyes. I apologize if this is redundant.
I would guess the internet stocks will be the first to go, Then people are left with the decision to Pull it all out or Cash out the internet stock and re-invest in your traditional steady and secure IBM/ATT/ETC. I would imagine there would be quite a few un-employed computer professionals come the 2nd quarter of 2000 no matter what happens, and yes a recession/depression is my Biggest Y2K worry. As it has the most potential problem energy. Oh I can dream up all sorts of other potential problems like the best of them. But this one bears the most legitimacy.
So, Any advice on what might be a hot stock to invest in, post Y2K?
-- RWE (firstname.lastname@example.org), April 04, 1999.
I'm about 95 percent out of stocks and into a fixed-income fund (guaranteed low-percent gain) with my 401(K). I'll admit that I'm the fearful type to begin with, but I'm concerned what might happen if companies up and down the supply chain can't make themselves Y2K compliant--companies cutting off suppliers, suppliers laying people off or going out of business, companies not being able to produce at current levels because of inability to get parts, etc. And that's even with the infrastructure intact...Of course, your attitude about what's coming may differ. Rotsa ruck with whatever you decide to do.
-- Don (email@example.com), April 04, 1999.
Mere speculation on my part, and I hate to say it, but I think defense industry stocks. It looks like we will continue to blow the crap out of other countries until they live like we do here in America. I think it is Raytheon that makes those cruise missiles isn't it? I bet they'll be busy for the next few years. We'll probably be using more military action to create jobs for everyone who loses theirs from Y2K.
-- @ (@@@.@), April 04, 1999.
Gee, Thanks for input everyone ! Everything you folks have said makes rational sense even :)
Any lil further tidbits or speculations on a 'good' Post Y2K stock are appreciated.
-- RWE (firstname.lastname@example.org), April 04, 1999.
I'm no fortune teller---no one knows the future...the only thing I;ve learned since investing in this 8 year bull run market was to buy low and sell high...I got in at under dow 2000 and just got out at dow 10000---thats selling high to me--and I dont care for the next months if it goes to 11 or 12,000...I made my money and its time to move on...dont get greedy---sell high, wait a while and than go from there when things ever settle down..this whole stock game is a confidence thing and has little to do with sound fundamentals if you ask me. internet stock run ups based only on speculation, potential, and greed are prime examples of how fast this market can move up...and down....buy low sell high...hold elsewhere safe when not sure.
-- billy boy (email@example.com), April 04, 1999.
We ran as hard and fast for the past 8 years with the stock market. But in July of 98 we liquidated it all and put into the mattress. Better a little early than an hour too late. I figure we will just sit on it and then when the dust clears and we can see the survivors we can reinvest at about a 10th of the current price. Also, we have all that cash if we need it during the coming hard times.
I ain't no princess. I sleep well on that lump in the mattress!
-- Taz (Tassie@aol.com), April 04, 1999.
There is a book out by David Steelsmith Elliot (he has a web site) that deals with specific stocks and strategies with gold and silver, stock puts, bear funds, LEAPS, call options ted spreads, strangles etc. etc.
My brother and I bought the book (expensive) and are working out a strategy as we speak.
My advice - buy the book and do some more research on the net... ask the same questions on some financial sites. feel free to e-mail me privately.
-- Andy (2000EOD@prodigy.net), April 04, 1999.
I pulled out of the market about 2 months ago....I moved all my agressive 401K funds into a conservative mode.....I am convinced of a market correction, and am sure it will happen. When? Probably in October, maybe sooner, but probably not. I think there will be a phase of complacency before then. However, because I really don't know...I wouldn't have much in agressive stocks....Are we in for a real downturn? Consider the government debt...5-6 trillion and climbing every year...Japan is still sinking....No capital spending seems to be going on....I just have an eery feeling about it all...I really think this year is gonna wake people up....Kosovo? who knows...why go in there? who cares...I am neutral in those kinds of things....but for sure...it will get worse...that I am sure of....but no large scale preparation is necessary..because if Infomagic and his believers are right...then what's a few bags of rice gonna do? (In the 6.5 out of 10 mode)
-- rick shade (Rickoshade@aol.com), April 04, 1999.
I have been purchasing LEAPS Put Options that expire in Jan. 20000 I will sit on them until the market crashes and my Puts will make me a bundle! Ask your stockbroker to set you up for the biggest opportunity of the century to make money in the stockmarket when it crashes! I just bought 40 wallmart contracts for $25 each for a total of $1000. When the market crashes that $1000 investment could be worth over $100,000.
-- invest (firstname.lastname@example.org), April 04, 1999.
Walmart WMT, is trading around 93 right now. The only Jan 2000 LEAP option available for 1/4 is LWTMF, bid 1/16, ask 1/4, strike at 30. To be at that strike, Walmart would have to fall 63 points or 68%. With Walmart at 30 sometime before 2000, that option might be worth 2-3, which would give you a return of $11,000 or 11:1. If Walmart didn't reach 30 until mid-Jan 2000, that option would be worth zero. Walmart would have to fall all the way from 93 to about 5, or about 95%, in order to yield the 100:1 return you are fantasizing about.
Could this happen? Sure. It is very likely? No. Walmart is as overpriced as your average index stock, but it's not exactly a no-earnings internet pup either. Puts are a good Y2k play. Just make sure you have anlayzed the movements necessary to produce the results you are expecting.
-- Nathan (email@example.com), April 04, 1999.
Nathan! You're grossly mistaken! I bought 40 contracts at $25 each. Wallmart at the money is now at about $1100 per contract for puts or calls.
When Wallmart drops to $30, which is very likely when the Dow drops to 3000, my options would be worth $1100 per contract, multiply that by 40 contracts and you have $44000.
However you forget VOLATILITY!
With the market crashing the volatility will increase and with it the value of my options will also greatly increase. With volatility the "at the money" options could very easily be worth $2500 per contract. Times that by 40 and you have $100,000.
Look at what volatility is doing to Amazon and Yahoo! Those at the money contracts are around $6000 per contract!
It is very likely that my $1000 investment could turn into $100,000!!!
-- invest (firstname.lastname@example.org), April 05, 1999.
You've made a boatload of reckless assumptions here.
1) At-the-money for the Jan 2000 put is more like 9 on the bid and that's with the stock at 93, looking out 9-10 months. If the stock works down to 30, even over a couple of months, the at-the-money premium will follow approximately the same ratio, less a couple of months' time decay. You'd be lucky to get 3.
2) WMT trading down to 30 is a long shot, even with a market collapse. Could WMT trade down to 30? Yes, but it might take severe recession and a couple of years to get there.
3) Yes, the volatility premium will spike here and there on sudden moves, but there are limits. Who in their right mind would pay 25 for a decaying option on a stock selling at 30? That's nuts.
With options, you must think through the parameters of the trade and align expectations. I'm not saying you can't make money on the trade, just that $100,000 100:1 gain is more like lottery odds than ratioal speculation.
-- Nathan (email@example.com), April 05, 1999.
Let me respond with the classic economist's answer, "It depends."
There is a huge difference between the high-risk tolerant 20- something investor and a retired person living on an investment portfolio. What is your capital gains situation?
I have a few decades before I plan to retire. As such, can afford to have a very long term view.
I have been "taking profits" this year. By year's end, about half of my portfolio will be in "cash." While I anticipate a correction, market timing is a slippery business. With my ongoing investments, I continue to buy equities. As a rational investor, most goes into an equities index fund. The rest is split between small caps and international stocks. Right now, I like buying foreign firms "on the cheap."
Personally, if I were shorting stock," I would not pick Walmart. There are other companies who I think are far weaker in an economic downturn. If anything, people who do not shop at Walmart now may begin shopping there in harder times. Walmart sells most "staples," the last items we cut back on. On the whole, it is a well-managed firm with "category killer" status in smaller markets. In fact, it might be one of the last choices for a "short."
Investing is mostly common sense combined with patience. I see Y2K- related jitters as a buying opportunity. The worse the news, the more I'll buy.
-- Mr. Decker (firstname.lastname@example.org), April 05, 1999.
"invest" -- It might clarify if you could answer: What was the strike price of your options? What was the premium (1/4 or ??)? What was the stock price at the time?
-- A (A@AisA.com), April 06, 1999.