My Canaries in the Coal Mine are Dying…Quickly

by Evan

I titled this post on June 10, 2020 and then my attention waned, so I didn’t get a chance to write about my experiences until today (5 days later). These market and investing headlines are pretty crazy given that the market was closed 2 of the 5 days since I titled this post:

CNBC Headline about Market Drop

Something interesting is happening out there in the markets, and it goes beyond the fact that for some reason no one cares that we still have double digit unemployment due to an international pandemic (or more likely it is a result of it). In the past 5 days 3 very real canaries in the investing coal mine of my life that just died.

  1. A family member, who has absolutely no business betting on broad macro trends (specifically interested in $NCLH) put together a slide deck presentation wanting to put the last of his liquidity into the stock. The thoughts behind the idea weren’t that off, and the fact that he went as far as to make a presentation was actually pretty impressive – it is that this individual has proven time and time again that the basics of personal finance evade him nevertheless to take the last of his liquidity during this time to bet on one company. To make matters worse, I am pretty sure I saw the phrase, “can’t lose situation.”
  2. A buddy from college, who has been in the rise and subsequent fall, of most of the great (and mini) bubbles in the last 20 years (mortgage business, MLMs, and currently unsecured business loans) called to start his own day trading company.
  3. We had 3 separate requests for penny stock bets in one of my investment clubs.

Any one of these three things in it of themselves, not a bit deal, but to have them all happen within a few days of each other (number 1 and number 2 happened the same freaking morning), is a odd to say the least. Throw that on top of the swings that seem to be happening daily, if not hourly, something feels wrong. I really don’t like market timing, but after 1 and 2 – I moved about 15% of my 401(k) into cash.

Then you have the headlines that have been going around, including Dave Portnoy of Barstool Sports Fame claiming he is the captain of of the market:

Every few years there are a new crop of investors that come along and rip Warren Buffett for being old and outdated because “things are different this time.”

Is this another time that Buffett will be proven correct?

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2 comments

Dividend Diplomats June 16, 2020 - 9:39 pm

These are some crazy times Evan. The market has had a nice injection of cash from the Fed and the government. The economic fundamentals, like high unemployment as you pointed out, and a still sluggish economy even after reopening just aren’t phasing Mr. Market. Eventually, the stimulus funds will dry up and it will be interesting to see what we are left with.

Thanks for sharing your stories about your friends by the way. It is interesting that they large swings and gains are drawing all sorts of people off the sidelines. It would cause me to take a pause for a second as well. Hopefully, the person doesn’t go all in on the one stock and regret it later. That makes me nervous, and I have no skin in this game.

In the end, I wouldn’t doubt Buffett. It is fascinating how many people were quick to point out that he missed out on the airlines gains. Let’s be real, he knew that the stock prices were going to pop eventually like they did. Come on, he has seen this script before. If people read closely, he didn’t leave the industry becasue of the losses. Rather, it was because of the changing landscape in the long term prospects of the industry. That’s what you have to love about Warren. He is always thinking long-term!

Thanks for the article!

Bert

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Evan June 19, 2020 - 2:53 pm

Scary times! I know the family member did not move forward, not because of my well thought out response about his underlying financial situation, but rather his wife (correctly) said no. I has forced me to now watch NCLH every freaking day though lol

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