Discussion ***Official*** 2020 Stock Market Thread

[FelixDeCat]

If HTZ stays above $1 tomorrow that's truly going to be one of the most amazing calls I've ever seen.

I'm keeping my fingers crossed.

Sigh.

I was holding tight all day long. I had a chance to cover under 10 cents, walking away with a nice profit. But with the stock under pressure from Icahns announcement and then Trump threatening to unleash on China tomorrow...my plans to profit started to unravel quickly. The ask is now 15 cents.

I *could* simply be assigned. The cost basis will be 84 cents. Then I might sell the 50s for next week. The risk is that they get delisted it goes to the pink sheets. Then selling calls wont be an option and who knows where the bottom is.

They dont call it "Hertz" for nothing!

 

[FelixDeCat]

I hate bankruptcy stocks. My rule of thumb is ALWAYS avoid them. They are frustrating as hell.

The majority of bankrupt companies die in the process as there is all kinds of trickery played. Assets that were once the bedrock of a good balance sheet are sold at fire sale prices in favor of creditors, that is why its easy for shareholders to get wiped out!

I have seen many bankruptcies in my day. The only survivors I have witnessed were:

Covad Communications in 2001 - a DSL provider that got caught up in the dot com crash and expanded too quickly but survived

Pilgrims Pride Corporation in 2008 - filed for bankruptcy when feed prices skyrocketed and demand plummeted. Stock went to 25 cents. By early 2009 feed prices crashed and demand picked up. Stock went back to $11 in 6 months and $32 in four years.

Ultra Petroleum in 2016. I owned the shares when it fell down to 50 cents, and sold for a tiny profit. Within a few months the shares rebounded sharply to $14 when they were able to have the majority of unsecured claims settled. They were inclined to allow the company repay its debts vs the alternatives. IRONICALLY they filed for BR again in 2020 and this time the stock sits at zero.

 

[FelixDeCat]

Out .10, profit

 

[ponyo]

Out .10, profit

Never seen such weak toilet paper hands in my life. Your balls are smaller than sun dried raisins.

 

[FelixDeCat]

So I only made a grand instead of 3 grand. It was that or risk being assigned 20,000 shares in a bankrupt company.

I am now going to drown my sorrows in a bowl of cornflakes and bourbon.

 

[dasherHampton]

That was a great gut call on your part, whether you kept the puts or not. Just a fantastic instinct.

I never in a million years would have had the stones to make a trade like that.

 

[ThatsABigOne]

Will be buying more Hertz and holding long. They aren't going anywhere.

 

[dasherHampton]

Be careful.

Should You Buy Hertz Stock Now? | The Motley Fool

Understanding Hertz's current scenario is important to avoid a huge investing mistake.

www.fool.com

 

[IEC]

Will be buying more Hertz and holding long. They aren't going anywhere.

Sarcasm detector critical failure. Recalibrating...

 

[FelixDeCat]

Will be buying more Hertz and holding long. They aren't going anywhere.

You are welcome to do as you please, its your money. I've traded them on occasion but only paltry amounts. Most BR companies suffer from dirty tricks played in the courtroom like assets sold at far less than face value to bidders buying the valuable parts of a business and leaving the crap behind. After they are done carving up the company, you usually wind up with the rotten core. I have seen this too many times.

I posted above a handful of survivor stories, and if you think the EXISTING equity survives, try to have a good thesis. Then play Devils Advocate and look at the opposite of your arguments.

One of the BIGGEST MISTAKES people make when it comes to BR stocks is AVERAGING DOWN. As the chances of survival decline so will the existing equity. When insiders dump, take that as a big hint. Icahn has already left, that is telling.

But I agree with you, Hertz will survive as a brand name. The question is - will there be enough equity left for existing shareholders to come along for the ride? Better take this one slow and careful and see what happens over time because only time will tell.

Good luck to you either way.

 

[FelixDeCat]

I heard today that the savings rate in America is approaching 30% as people are trying to save as much possible to weather this storm.

U.S. savings rate hits record 33% as coronavirus causes Americans to stockpile cash, curb spending

The personal savings rate hit a historic 33% in April, the U.S. Bureau of Economic Analysis said.

www.cnbc.com

 

[ponyo]

Will be buying more Hertz and holding long. They aren't going anywhere.

Are you crazy? Hertz is bankrupt. Stock is worth $0. Sell all shares while stupid people are still buying.

Don't mistake my comment I made about Felix toilet paper hands and thinking I think Hertz is worth something. HTZ common stock is worth $0. But HTZ puts Felix sold was expiring at the end of yesterday. There was good chance the puts he sold was going to expire worthless due to stupid people buying the worthless common stock. But he bailed early at the first sign of profit like he always does because he has raisin sized balls and toilet paper hands. He left over two grand on the table. It's good he made profit but he trades scared all the time. Scared money makes no money or only small money. But that's different from dumb or stupid money. Stupid money is buying HTZ stock when the company is bankrupt. Felix might be scared but he's not dumb.

 

[s0me0nesmind1]

Are you crazy? Hertz is bankrupt. Stock is worth $0. Sell all shares while stupid people are still buying.

Don't mistake my comment I made about Felix toilet paper hands and thinking I think Hertz is worth something. HTZ common stock is worth $0. But HTZ puts Felix sold was expiring at the end of yesterday. There was good chance the puts he sold was going to expire worthless due to stupid people buying the worthless common stock. But he bailed early at the first sign of profit like he always does because he has raisin sized balls and toilet paper hands. He left over two grand on the table. It's good he made profit but he trades scared all the time. Scared money makes no money or only small money. But that's different from dumb or stupid money. Stupid money is buying HTZ stock when the company is bankrupt. Felix might be scared but he's not dumb.

Yeah I mean, it's a valid speculation to think that the government will never let one of the Big 4 airlines fall - but as far as car rental companies? While Hertz is one of the big ones, I honestly would be willing to bet our government would have no problem if they get gobbled up by Avis or National.

 

[s0me0nesmind1]

I heard today that the savings rate in America is approaching 30% as people are trying to save as much possible to weather this storm.

U.S. savings rate hits record 33% as coronavirus causes Americans to stockpile cash, curb spending

The personal savings rate hit a historic 33% in April, the U.S. Bureau of Economic Analysis said.

www.cnbc.com

Of course people aren't spending like they normally would...

There are plenty of people that are types where they only buy stuff like furniture, clothes, etc... if they can see/touch it in stores.

Of course, this is only for the people that are actually still employed and making decent money lol. Majority are still broke and on the brink of a huge housing crisis once all these rent/mortgage payments are due.

 

[FelixDeCat]

That was a great gut call on your part, whether you kept the puts or not. Just a fantastic instinct.

I never in a million years would have had the stones to make a trade like that.

Believe me, that trade was scary - especially when the shoes started dropping on Thursday. Looking back on it the risk / reward was too high. Way too much downside risk with that stock.

I got lucky it did not break a buck which might happen next week. Even worse, the stock can be kicked off the exchange and put on the pink sheets. That is common for bankruptcy stocks. What wants to be short puts when that happens?

Im going to avoid HTZ for the time being, but will definitely keep up with the story.

 

[ThatsABigOne]

The amount of shares purchased is paltry compared to what you guys are doing. If it becomes a loss, so be it. If it rebounds, fine by me too. The HTZ purchase so far is about .0214 % of my portfolio.

 

[FelixDeCat]

I have a fascination with the bankruptcy process, both personal and commercial.

I got sucked into one back in the late 90s. I made all the rookie mistakes including averaging down.

It was a company I used to work for and figured I had had an understanding of the company. I lost big money because I had a misunderstanding of the bankruptcy process itself.

Ever since I've been interested in the process.

 

[ponyo]

Yeah I mean, it's a valid speculation to think that the government will never let one of the Big 4 airlines fall - but as far as car rental companies? While Hertz is one of the big ones, I honestly would be willing to bet our government would have no problem if they get gobbled up by Avis or National.

Hertz already failed. They declared bankruptcy. Creditors now own the company and not the equity holders. Common stock equity holders are going to get wiped out. They're last in line in bankruptcy. Creditors are first in line. HTZ will probably continue to trade on the pink sheets once they're kicked off the New York Stock Exchange but that's pretty much death.

The amount of shares purchased is paltry compared to what you guys are doing. If it becomes a loss, so be it. If it rebounds, fine by me too. The HTZ purchase so far is about .0214 % of my portfolio.

Even $1 invested in HTZ stock is too much. It's worthless. People are trying to flip quickly to the next sucker but HTZ value is $0. Do not get left holding the bag. Use that money on some option calls on some other stock. Or donate the money to charity or the poor.

 

[alcoholbob]

I heard today that the savings rate in America is approaching 30% as people are trying to save as much possible to weather this storm.

U.S. savings rate hits record 33% as coronavirus causes Americans to stockpile cash, curb spending

The personal savings rate hit a historic 33% in April, the U.S. Bureau of Economic Analysis said.

www.cnbc.com

I figure part of that is just so much of businesses are still closed and there's only so much you can buy at Target or Amazon, but the other thing is deferred rent/mortgages might mean people are just saving the money they otherwise would have paid to their landlord/bank.

 

[FelixDeCat]

I figure part of that is just so much of businesses are still closed and there's only so much you can buy at Target or Amazon, but the other thing is deferred rent/mortgages might mean people are just saving the money they otherwise would have paid to their landlord/bank.

Its easy to make assumptions about possible to outcomes. When people withhold money from the economy one possibility is deflation. People notice prices on desired items start to fall because nobody is buying new TVs, cars, furniture, etc. Demand does not start to pick up when prices are marked down to cost or below and sometimes not even then.

This is called deflation. More layoffs = less people buying things = even lower prices. Now you have a deflationary spiral leading to big layoffs, recession as businesses cut back to meet lowered demand. Lower GDP, less prosperity, etc.

Deflation was a big contributor to the Great Depression.

I dont know if we go into a deflationary spiral, but we might wind up with a Japanese style zombie economy. After the great expansions of 60s-70s and 80s, Japan hit a wall. China was on the rise, the population of Japan aged and the savings rate in hit all time highs. To discourage this, Japan cut rates to zero. The benefits were temporary. Theyve had zero rates for decades.

Personally I think its a good thing people are saving more. Having less than $500 saved is a recipe for trouble. You need at least 6 months of expenses saved. Sometimes thats hard to do when you live paycheck to paycheck. I blame landlords who have raised rents so high that the average family can no longer get ahead.

 

[alcoholbob]

Its easy to make assumptions about an possible to outcomes. When people withhold money from the economy one possibility is deflation. People notice prices on desired items start to fall because nobody is buying new TVs, cars, furniture, etc. Demand does not start to pick up when prices are marked down to cost or below and sometimes not even then.

This is called deflation. More layoffs = less people buying things = even lower prices. Now you have a deflationary spiral leading to big layoffs, recession as businesses cut back to meet lowered demand. Lower GDP, less prosperity, etc.

Deflation was a big contributor to the Great Depression.

I dont know if we go into a deflationary spiral, but we might wind up with a Japanese style zombie economy. After the great expansions of 60s-70s and 80s, Japan hit a wall. China was on the rise, the population of Japan aged and the savings rate in hit all time highs. To discourage this, Japan cut rates to zero. The benefits were temporary. Theyve had zero rates for decades.

Personally I think its a good thing people are saving more. Having less than $500 saved is a recipe for trouble. You need at least 6 months of expenses saved. Sometimes thats hard to do when you live paycheck to paycheck. I blame landlords who have raised rents so high that the average family can no longer get ahead. Then the government encourages this with bad tax policy that attempts to shield most RE income and capital gains from taxation.

Sorry, had to rant.

Deflation is driven by money not changing hands enough, i.e the velocity of money crashing. The easiest way to break that chain is to give people cash, which IMO is why UBI is such a great idea. The problem is humans are hierarchical, so any time we help the poor, we have to help the rich even more. This results in most stimulus going to big business and the rich, who use that capital to consolidate ownership of the economy which kills velocity even more because money is held by a smaller and smaller number of people in society. This often means central bank intervention becomes counter productive, and makes the problem worse.

In Japan's case the consolidation of big business due to cheap money has completely killed velocity, destroyed small businesses, and forced everyone to crowd into ever more expensive urban environments, and compete for an ever decreasing supply of jobs at big companies. Since none of the central banks will stop printing until there's a currency crisis, we just have to wait for a major black swan event to completely wreck the fiat currencies IMO and just let us have a monetary reset and get out of the zombie economies that have been propped up by central banks and hopefully the next system we get is something akin to the pro-labor economic systems that came out of WWII and we can go through a new Great Compression era.

 

[Red Squirrel]

Would be nice if deflation also applied to bills, but I doubt it would. Lower bills would mean more extra money for spending, which would in turn be better for the economy. I can barely afford to save let alone spend on stuff I don't need, because all my bills take up most of my pay and go up each year.

 

[alcoholbob]

Would be nice if deflation also applied to bills, but I doubt it would. Lower bills would mean more extra money for spending, which would in turn be better for the economy. I can barely afford to save let alone spend on stuff I don't need, because all my bills take up most of my pay and go up each year.

Deflation (or inflation) are simply calculated by money velocity x the supply of money. U.S. money supply YTD is up 30%, so things which are high in demand like food or PPE are going up because both velocity and money supply have increased. We have deflation overall in the economy because the money velocity has crashed, even as money supply has surged. But this overall deflation is because the cost of most things (mainly services) are zero because you simply can't buy them anymore (as well as energy prices have crashed).

 

[skull]

Would be nice if deflation also applied to bills, but I doubt it would. Lower bills would mean more extra money for spending, which would in turn be better for the economy. I can barely afford to save let alone spend on stuff I don't need, because all my bills take up most of my pay and go up each year.

You always go on about your bills like its someone elses fault. Its not your the one thats bought what you've bought and now you pay the price, take some responsibility or cry somewhere else.

 

[FelixDeCat]

https://finance.yahoo.com/news/wells-fargo-stock-too-cheap-175103415.html

Wells Fargo stock did not change hands for 75% of the bank’s book value for very long. When the economy started to improve, it quickly shot up to 100% of book value per share and then rose further.

Book values on financial companies are always a risky proposition. I learned that lesson back in 2008. You cant trust what you see. However, taken at face value, WFC @ $26.47 trades under book value of $39.67.

Considering the 7.50% dividend yield and the stock being 51% off its 52 week high, the stock looks tempting. If the market pulls back I think the stock might see the low $20s.

We all know the troubles WFC has seen and still faces. Even Warren Buffet has been reducing his stake in the bank:

Will Warren Buffett Sell Wells Fargo? | The Motley Fool

Buffett reduced his position in the bank in the fourth quarter of 2019, and now the bank's outlook is worsening.

www.fool.com

The biggest risk to all banks are anticipated loan losses related to the pandemic and high unemployment. If WFC has to set aside even more money for loan losses the stock will continue to decline and the dividend may be slashed or even eliminated.