ValPPCC Warned Against Entering the Stock Market on March 9
The S&P 500 plunged from 2,800-2,900 to 2,100-2,200 in two and a half weeks, according to ValPPCC, who advised against buying in March.
English · Original discussion in Spanish · Published
Why March 9 Wasn't the Time to Invest in the Stock Market
For ValPPCC, investing on March 9, 2020, was a costly mistake. According to his account, the S&P 500 was trading between 2,800 and 2,900 points and ended up at 2,100-2,200: a 35% drop in two and a half weeks.
Those who entered thinking they had found the bottom saw the decline continue. And, according to ValPPCC, those who waited also didn't get it right through their own merit: the Fed had to activate an unlimited QE to stop the bleeding.
Was the Cobi19 the Cause or Just the Excuse?
The disagreement here was fundamental. One interpretation holds that the bicho merely precipitated a readjustment that had been years in the making: rock-bottom interest rates, expensive real estate—Germany included—and stretched stock markets after a decade of gains. The cobi19 would have been the trigger, not the cause. The uncomfortable version is the opposite: the bicho had only just begun, and if Europe ended up like Italy, industrial shutdowns and quarantines would last for months.
No one answered the essential question: there was still no vaccine, no timeline, and no plan for when lockdowns would be lifted. With planes grounded, restaurants closed, and cinemas at a standstill, what exactly were people buying? An 8-9% rebound in an airline with a large part of its fleet idle was not a signal. It was a twitch.
The Calculation That Decided Whether to Buy: PB x PER
The most useful discussion wasn't macro, it was arithmetic. The MSCI World was trading at a PB of 2.0, a PER of 15.7, and a dividend yield of 3%. Cheap or expensive? It depended on the point of comparison: a PER of 16 with ten-year bonds at 5% is nothing like a PER of 16 with those bonds at 0-1%. It wasn't a steal; it wasn't prohibitive either.
The rule a forum user employed was as simple as it was brutal: multiply PB by PER and only buy below 22.5. Above that, stay put. With Google, Amazon, or Alibaba, the formula breaks down, and many other factors must be considered, but for the rest, it serves to avoid impulsive buying.
The IBEX 35 and Political Risk
In Spain, the problem wasn't just the price. Utilities and dividend-paying stocks with state involvement came under regulatory suspicion: Enagás or REE approaching March lows with uncertainty about what a government willing to intervene would do. Some made it clear without mincing words: definitely not the IBEX. And some preferred foreign dividends with low withholding taxes rather than assume country risk.
The calculation didn't hold up for long. Months later, a forum user claimed that those who had invested in continuous market stocks would have made 20%. A personal portfolio appreciated with stocks like Airbus, with nearly 40%, and another forum user reported stocks with 140% and 87% gains since March. Within the thread itself, some admitted that, in hindsight, it had indeed been a good time for the IBEX 35.
Periodic Contributions: The Boring Strategy That Works
The strategy that aged best was the least flashy. No trying to time the bottom: regular contributions, diversification, and ignoring the noise. With periodic purchases, every euro is worth more during downturns, and you don't need to hit the exact low. The problem is psychological. Those who risk their liquidity all at once in a single entry suffer greatly and sell at the worst moment.
There are also those who entered with 40% of their planned capital and regret it. And those who boast of having bought Repsol below 8 euros with Brent crude at 30 dollars. In the end, as the most repeated phrase sums it up, the person who is right isn't the one who predicts best, but the money.
According to the record shared by ValPPCC, by the end of October 2020, 500,000 daily cases of ELbichito were being recorded. With the American elections in between, the scenario he depicted was one of false rallies and partial lockdowns in Europe and the United States. He himself admitted not having a crystal ball and that no one knows if the market will return to the March lows.
For ValPPCC, investing on March 9, 2020, was a costly mistake. According to his account, the S&P 500 was trading between 2,800 and 2,900 points and ended up at 2,100-2,200: a 35% drop in two and a half weeks.
Those who entered thinking they had found the bottom saw the decline continue. And, according to ValPPCC, those who waited also didn't get it right through their own merit: the Fed had to activate an unlimited QE to stop the bleeding.
Was the Cobi19 the Cause or Just the Excuse?
The disagreement here was fundamental. One interpretation holds that the bicho merely precipitated a readjustment that had been years in the making: rock-bottom interest rates, expensive real estate—Germany included—and stretched stock markets after a decade of gains. The cobi19 would have been the trigger, not the cause. The uncomfortable version is the opposite: the bicho had only just begun, and if Europe ended up like Italy, industrial shutdowns and quarantines would last for months.
No one answered the essential question: there was still no vaccine, no timeline, and no plan for when lockdowns would be lifted. With planes grounded, restaurants closed, and cinemas at a standstill, what exactly were people buying? An 8-9% rebound in an airline with a large part of its fleet idle was not a signal. It was a twitch.
The Calculation That Decided Whether to Buy: PB x PER
The most useful discussion wasn't macro, it was arithmetic. The MSCI World was trading at a PB of 2.0, a PER of 15.7, and a dividend yield of 3%. Cheap or expensive? It depended on the point of comparison: a PER of 16 with ten-year bonds at 5% is nothing like a PER of 16 with those bonds at 0-1%. It wasn't a steal; it wasn't prohibitive either.
The rule a forum user employed was as simple as it was brutal: multiply PB by PER and only buy below 22.5. Above that, stay put. With Google, Amazon, or Alibaba, the formula breaks down, and many other factors must be considered, but for the rest, it serves to avoid impulsive buying.
The IBEX 35 and Political Risk
In Spain, the problem wasn't just the price. Utilities and dividend-paying stocks with state involvement came under regulatory suspicion: Enagás or REE approaching March lows with uncertainty about what a government willing to intervene would do. Some made it clear without mincing words: definitely not the IBEX. And some preferred foreign dividends with low withholding taxes rather than assume country risk.
The calculation didn't hold up for long. Months later, a forum user claimed that those who had invested in continuous market stocks would have made 20%. A personal portfolio appreciated with stocks like Airbus, with nearly 40%, and another forum user reported stocks with 140% and 87% gains since March. Within the thread itself, some admitted that, in hindsight, it had indeed been a good time for the IBEX 35.
Periodic Contributions: The Boring Strategy That Works
The strategy that aged best was the least flashy. No trying to time the bottom: regular contributions, diversification, and ignoring the noise. With periodic purchases, every euro is worth more during downturns, and you don't need to hit the exact low. The problem is psychological. Those who risk their liquidity all at once in a single entry suffer greatly and sell at the worst moment.
There are also those who entered with 40% of their planned capital and regret it. And those who boast of having bought Repsol below 8 euros with Brent crude at 30 dollars. In the end, as the most repeated phrase sums it up, the person who is right isn't the one who predicts best, but the money.
According to the record shared by ValPPCC, by the end of October 2020, 500,000 daily cases of ELbichito were being recorded. With the American elections in between, the scenario he depicted was one of false rallies and partial lockdowns in Europe and the United States. He himself admitted not having a crystal ball and that no one knows if the market will return to the March lows.
Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (251 replies).
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