All Forum Posts by: Sam Josh

In 2008 I started to dollar average Bank of America in the teens and it fell to $3. Sure it came back in due course but the ride down was very painful. I know of buddies a few years back who dollar averaged on GE stock. So dollar averaging might be lucrative rude but it’s not an easy ride.

Problem with sudden crisis like these is a lot of investors are suddenly found swimming naked with very high leverage and limited to no cash reserves. Buying anything for them is a stretch even if everyone else is shivering in fear.

I also think the market while down is still going to recede. While DoW has corrected, the broader S&P is just about the same levels as in Dec 2018. Same with the Nasdaq. Dec 2018 lows were caused by the failing China trade deal. That crisis is a dwarf compared up where we are today. The contagion impact of this lockdown plus oil shocks is TBD. Also not everything springs back in double quick time. The Nasdaq took a whole decade and more to get back to its previous highs set in 2001, just as an example. Oil has not tested its high in years. Who would have thought!

Finally while we all love the Great Warren Buffett’s advice, there are few very unique things he does that many small investors don’t.

1) Buffet keeps a massive amount of cash as a buffer. Always, never breaks that discipline. Many things he is buying he has probably been eyeing for years.

2) Buffet buys equities in established high quality companies (vs class B and class C companies) with deep track records and solid management teams. He is very well connected and besides his instincts he does his homework very well.

3) It’s also well known that Buffet takes a cautious approach to his investments. During the 2008 crisis, he was a big buyer but we also know he used convertible preferred equity (with a fat coupon) as a way in to many high quality companies. Of course he took board seats in many of those companies.

4) Buffet does not speculate! Period.

5) Buffet does not like too much leverage. He loves a clean balance sheet and cash flows.

@Serge S.

Ends with a lot more nicer and humbler people.

Plenty of unknowns with COVID and what lingering impact it’s going to leave on the economy and RE. Expectations are to see massive job losses, business closures, layoffs etc.

Are you all prepared for this? What are you doing to prepare to protect yourself financially?

@Carolyn Fuller

Please define “easily switch”?

@Russell Brazil

Sage advice Russel Brazil.

I d urge people to run scenarios on their personal finances, things like - what if they lost their jobs, had elevated vacancy rates on rentals, had to drop rents by 30 - 40%. This may be an academic exercise but will give comfort on how deep in the water you are in extreme situations.

Just spoke to a bud earlier, has multiple mortgages on properties in cheaper states as part of "buy OOS and BRRRR" world. I did not know but now I know he has highly leveraged his primary home here in the Bay Area to make it all work. His industry has started laying off already! Luckily no tenant issues yet but it might happen.

To me that’s precarious. I do think he will be ok but that is an example of how quickly things can shift.

@Victor S.

They took a beating in 2018 because of the stalemate in trade talks. That crisis was nothing compared to what we have on our hands today.

Imagine Apple stores are closed. Ad revenue is going to go down. For Visa, consumers are not swiping, because they are not spending as much. NvDA will have huge supply chain blockages. So to me the situation is a lot more dire than 2018.

The last time we had market lows was dec 2018. Stocks and indexes are still trading way beyond those levels. How then should I call a 20% retreat a bottom! I think stocks should fall a lot more.

Example:

Visa. Currently 175 vs Dec 2018, 124

FB : 173 vs 133

Goog : 1219 v 979

MSFT : 159 vs 105

Amzn : 1785 vs 1377

AAPL : 278 vs 148

NVDA : 240 vs 146

NFLX : 336 vs 256

But then the Dow has hit the same bottom as it did in Dec 2018. 23185 now vs 23063 then.

S&P 500 index: 2711 now vs 2485 in Dec 2018

Nasdaq not so much. It’s at 7874 now vs 6585 in Dec 2018.

@Jacob Lapp

With all due respect I wouldn’t take stock market investing advice on BP.

Impact:

1) Lower rates

2) Lower prices (soon)

3) Less buyers

4) More savvy investors

5) Lot more humble people

6) More caution

7) Less RE talk at parties

@Kevin Lefeuvre

As you can see, there are so many opinions here that the right answer is “we truly don’t know”.

Historically if we look at SARS, Swine Flu, Mad Cow etc, they have come and gone. Covid may fit that pattern. Yes it could be a “pandemic” like the ones that happened in the 1930’s or 1950’s but then medicine and drug discovery were not as advanced. So then the odds of a pandemic are slim.

So there is a reason to think, this might be a short term kick in the pants for the US economy and ironically a healthy one that cuts back some of the CB euphoria and leverage that was going on until Covid struck.

This might actually also soften the real recession that would have come our way next year as part of the normal business cycle.