Gregmal

100%. It’s interesting that despite all the talking, and everyone really laying it on thick the past 6-12 months, TTM performance, depending upon what you look at, the markets still aren’t even really down all that much(said while still struggling to decipher what “the market” is in terms of an index or group of stocks…is it really just FANG???). Which is funny cuz I do chat with a lot of folks and see plenty of commentary from others and those mega bears all still claim to have profited handsomely and gotten rich but then when you point out a lot of this stuff, you always get some iteration of “oh I cashed in my options/shorts”, which then kind of brings about a look of like “oh, wait, but much of the things you have been peddling didn’t even really happen or haven’t happened to nearly the degree you said”….and then you get a “but the stock went down” type of response….and have your “eureka!” moment where it’s like “oh, now I see what game you’re playing”…

Thats exactly my point. What I said was that theyre still of like 90% from the ATHs. Thats definitely not what a top is, and if we're trying to be cute and pinpoint bottoms, thats typically how they form. Exactly and this is the same thing because every single year Ive paid attention to the markets we've had people suggesting this course of action. 3 or 4 years its temporarily been a good one, especially with the benefit of hind site. I mean even the bond thing...now you cant even just say "buy bonds" you have to redefine with the benefit of hind site, what worked. So 15+ years, 2,3,4 times you get these temporary blips where those things look wise, and the rest of the time theyre generally garbage. I still hear Peter Schiff calling for gold to go to $5000/oz in 2011. Whereas every one of those years you could have just paid attention to quality stuff, averaged out purchases and done better. The ironic thing about hoarding bonds and cash and gold is that the years they outperform, are the years youd be silly to allocate to them versus quality stocks. Unless of course, again, you're the 1/1000 who's got a crystal ball and buys at exactly the right time and sells at the right time and then reallocates at the right time. Ive played that game, and im not even half bad at it, but over time its just become so obvious that betting on 1/1000 is a fools game and when you consider how easy the alternative is...I mean why waste time with this stuff?

So if I may summarize, and correct me if I’m wrong; -the markets going higher from here is inconceivable barring something crazy. I guess the popular refrain is “the Fed cuts rates to 0 again”(which I don’t think anyone forecasts and is something I’d put 95% of my net worth on NOT happening in the next few years) -the best case scenario is the markets are 7-10% overvalued -the most likely scenario is that they’re 15-20% overvalued -a less likely, but still reasonably probable scenario is that the markets are 25% overvalued

I mean I simply ask the same question Ive asked before..whats the point in this obsession with "the market" and "the bottom"??? I wake up in the morning with a list of assets I own, and a list of things and scenarios in which I wish to own others. What exactly do we get out of "calling" the top/bottom or next recession? Well, money one would think. But thats if you nail the top and the bottom which is a suckers game. Otherwise, whats the point if we claim margins(which everybody already knew where pretty darn close to peak) will come down? We short stuff like AAPL or Costco on a macro and earnings deterioration story but then best shot we ever get at making money is some short term hysteria cuz someone said something and you get a bit of....pause....stock market volatility inspired decline? Followed by a swift recovery and then whoops wouldnt you know it, those earnings were awful and "I knew it" and....Apples at $150, and Costco $500 again....Im not totally mocking this to be denigrating as ive definitely gotten caught up in this sort of shit, including Apple...but at some point its just head scratching. Like what are we gonna sit around for the next year debating bottoms and IDK, who wins if SPY is flat for 2023? Of flat from today? Or up 10% or down 10%? Cuz thats still indicative of a bottom being in. If we get 3300 and then a bounce...is that validating that we were super duper smart know it alls not falling for last years "false bottom" a mere 4-5% higher? This is dumb.

Dude the crappiest of crap is off like 90% from highs but clearly bottomed with the SoftBank and Tiger liquidations is June. You guys have been talking about savings getting wiped out and then pointing to misleading metrics like upticks versus a year ago. You’ve claimed the consumer is tapped out for 3 straight quarters with the recession coming “any month now”. Corporate margins have contracted from huge one off benefits but still remain healthy. Look no further than homebuilders. I don’t think you’re wrong because a handful of crap tech bottomed in June, I think you are wrong because you’ve sat around regurgitating talking points like yield curves and “past recessions” and a whole lot of other backwards looking historical comps and meanwhile everything from Markel to Facebook, Uber to DR Horton, Prologis to Cleveland Cliffs has ripped face in classic bottom style and yet we continue to be obsessed with “never before in history” and crap like that. It’s the same thing we had in late 2021 when folks claimed the top wasn’t in cuz “the indexes”. Never before in history is true until it isn’t. That’s why markets are markets. Because they don’t always follow the exact playbook that everyone and their mother says they should. This is the problem with the perma bear position, you can be right and a few things and still not make money because at the end of the days there’s too much guesswork and making shit up involved. Claiming we re headed to 2800-3000 on deteriorating earnings and then sitting at 4000 with a quick visit to 3500 doesn’t warrant a victory lap but I guess if we want to keep saying “bear market rally” we can keep the gig going in perpetuity. Where is the cutoff?

Says who though? We keep hearing of this euphoria and market being asleep and everyone all in on a pivot, except I don’t actually hear ANY of this? Meme stocks are getting bid up because of bozo hedge funds covering short positions. No one is shouting for all time highs on the indexes. You keep saying Fed taking rates to 0…I haven’t heard a single person say that. The predominant chorus is highly bearish and complains about PE multiples and screaming about non traded REITs doing non traded reit things and this is now third Q is a row where the consumer is “running on fumes”….a lot of this stuff just doesn’t add up. It still basically seems that the bear thesis was to scream about the economy blowing up, inflation being 10%, housing crashing….and they were totally wrong and now pivot to “it’s too strong we need to raise rates more” hoping for a second chance.

In terms of just in a vacuum, sure? In terms of a thesis where this would cause 2800-3200 SPY? Not yet and so far that thesis is quite wrong.

Looks like he literally just made up the chart and created “zones”. Also, IIRC, isn’t this the guy who in Q4 had this major “call” for a 20% decline in H1 followed by a huge rally to end the year around 4000? I really can’t believe any of this shit gets taken seriously anymore.

This is a thing that over time Ive desensitized myself to. For the past decade plus, every single year in memory we've had "signs" of impending doom or downright disaster and plenty of folks claiming theyre just around the corner. Every single one of them. Same goes with the "valuation" argument. In hind site everyone knows just how obvious this fed and liquidity driven, decade long boom was. At the time? LOL Not so much. So my default answer is to just invest wisely and buy things that are durable and desirable.

I dont think we see 1-2% sustained barring some sort of massive and unlikely reset. But if the range of outcomes is 0-4%, 4-6%, and 6%+....I certainly think that overall we're treading in the middle right now, and that we are probably closer(hence valuations) to pricing into the 0-4% inflation range, but at the same time, going all out on an aggressive short or cash hoard approach seems to be banking on a hard swing into the 6%+ range. So in a roundabout way, summing it all up, I think you need to be picking single stocks wisely and with a longer term fundamental based approach, because "the indexes" or whatever just seem like they dont have a predictable catalyst to go up/down in a way that makes wagering on that worthwhile. Kuppys blog again on "I just dont know" seems spot on. The clear bubble stuff is gone. Theres some stuff thats cheap but not nearly as much as a couple Qs ago. So otherwise, its like what are we playing for?

A lot of the real estate stuff and underpinning inflation is all complicated by the fact that there’s varying degree of correlation and it’s not all good or bad but a mixture that largely bets itself out. You aren’t poorer because property taxes went up; your property taxes went up because most likely, your home value went up. Costs of new water heaters and copper pipes goes up, but again, the cost to build did, if you own the build, it’s more negligible than you thought. Insurance goes up, because your home would cost more to replace, etc. That’s what I think gets missed a lot when people only look at say, an NOI or a fluctuating stock price. You aren’t getting as poor/rich as you think; it’s largely, by it’s very nature, just a robustly decent inflation hedge.

Yea between ABNB and the MSG earnings calls, I’m not sure there’s any signs of a struggling consumer…at least if you are picking your spots wisely.

I guess this is where I circle back into my thing about hating FANG stocks in todays environment and only being interested in potential 5-10x stocks if I’m venturing into the tech space. I guess I’m just literally incapable of seeing “the market” because I’m 1000% a specific stock guy. So everyone says market and I think of a gazillion interesting sub sectors of the market and say “wtf are people wasting their time with”.

Yea, I guess this is part of the “market” discussion…I almost want to start a new thread disclaiming that we are no longer allowed to include FANG is any discussions about the markets cuz it just obfuscates things. No interest in those. And I’m not talking about CVNA type rallies either. But ABNB, RBLX, ROKU, UBER, TTD, etc. Even Z…what to make of this? Something, nothing? Idk. But if you’re following this whole time the market things…those were some of the first to crash, first to bottom, now breaking out.

I’m kidding cuz I pulled up a trending stock/news feed while at dinner and there’s all these tech stocks blasting off after earnings beats the last couple days. As you probably know, my tech stock exposure is minimal…so I have no real horse in the game outside of a few positions. But it’s weird to see.

Student in the back row raises hand and asks question….. Teacher, if earnings keep coming in better than expected and stocks respond favorably because of this, what is the proper refrain? Revert back to “it’s a bubble and people are euphoric so the market still needs to crash”? Or what?

This is halfassedly how I look at it and think it makes sense. We have shorter term, "transitory"(I know, gasp!) issues related to the covid experience that need to work their way through the system. The short term rate...4-5%....shockingly, is pretty darn close to what the real inflation rate is right now, give or take a few basis point. Inflation is NOT what the inflationistas are pointing to... IE CPI or some >5% rate. It wasn't even high most of last year either. It just went bonkers over 18 months and now averages out, no different than when people quote you on a 3-5 year annual return rate but the returns are flat 3 years, negative one, and then like 40% for one year. The past 3 years of market activity have been beautiful for everyone; investors, speculators, fraudsters, etc because theres such an amalgamation of datapoints that literally allow one to weave whatever the F the want to and create a somewhat believable narrative using largely real data.

Frankly I don’t think the big banks are even allowed to be stressed anymore. They’re kind of indestructible from the systemic shock angle due to regulation. They’re basically utilities with some upside. The smaller ones….yea I’d be a little more careful.

LOL yea that is my dirty little secret. I’m am downright negligent with that stuff. I kind of view my private real estate stuff as a sub/tax efficient asset pool, but yea. Not an accountant by trade and after running into contribution limits a couple times early on was just like fuck this shit.

Yea I think I generally under appreciate that aspect of most peoples financial picture cuz Ive always been a 1099. Ive also generally never been scrupulous about using the tax advantaged stuff because I just hate the idea of having a 30 year lockup or whatever. But wouldnt conventional wisdom, or maybe its not conventional, IDK, lead one to give a shit a lot less about the short term stuff with that slug of assets? This stuff is probably a totally different subject than obsessing over tops and bottoms, but I guess could play a part. I just try to figure like OK if Ive got $500k in an account I cant touch for decades....does 10/20/30% fluctuations really matter? Especially if Im pumping contributions into it for those next couple decades. The origins of the "doom porn" is some massive GFC or Japan collapse where shit goes down and never recovers. Thats one thing....a big thing. But also rare and totally different than trying to speculate on fluctuations or draw conclusions from regular old stock market volatility. "Calling" a collapse where stuff declines 15% and immediately recovers 8-10% is the same as "calling" a big up move because a fake buyout rumor hits and the stock briefly rises...its a conjob. IMO one of there more underrated long term impacts of ZIRP is that it conditioned people to think stocks shouldn't be volatile. They should. And if you are day tradings I guess thats a big thing. But if you are investing fundamentally its really just part of the game and nothing to fret.

I also think the index/macro obsession is one that gets super fueled by the prominence of social media and that whole attention seeking element. What made something like The Big Short iconic is that you had guys with an exact thesis and exact framing of events and subsequent consequences and it played out exactly like they said. The ultimate “I called it”. Today folks just pick up or down and then make shit up and regardless of what happens, as long as directionally things “kinda” ever start moving in the direction of the thesis, even if only for a split second, you get all the retweeting and backslapping and I called it’s. If in 2022, rate hike fueled recession was gonna cause an earnings collapse and drive the market to 2800-3000 was the thesis, and for like 5 seconds, intraday we touched 3500 or whatever and then bounced off that base and now sit at 4,000….sorry, that’s not nailing it, and the thesis was a bust. It’s certainly possible we see earnings dive to 180 for full year 2023, and if that thesis is the S&P “needs” to go to 3200, and we get a temporary dip to 3500 again, are we still gonna have to hear about every prophet who “nailed it”?

Totally. It’s one of the dumbest hang ups I regularly see for folks and it’s a totally avoidable mistake.

These two paragraphs contradict each other. The first says, "cant declare victory over short term moves", the second says "short term moves prove something". The second paragraph is especially dangerous, because you can use whatever 12-18 month period one wants to draw whatever conclusion one wants. I do not care one iota about what 12 months says because anything can happen if you invest in stuff with second by second public quotes. It would be like trying to sell your house to only the dudes who put up those signs saying "we buy homes for cash" on street corner signs. I really dont sit around looking for bottoms or tops, but rather adequate places to put money to work, with a reasonable expectation and time horizon. Last year, throughout the year, you had ample opportunity to do that. Opportunity that no longer exists but who knows, may again, soon or not so soon. Sitting around predicating it all on "did such and such index really bottom"....I think is totally missing the forest for the trees. The same way we had folks in late 2021 asking for clear proof that "THE TOP IS HERE", when anyone who's been around the markets for a minute could see that the top was February 2021. The index was still near or at highs, but the drivers were off 50%+ already. The key drivers of the next cycle, IMO real businesses, like the ones listed a few responses ago, have already told you what you needed to know and made moves well ahead of the trendy indexes.

Except they said falling earning would warrant SPY 3000 or whatever…that’s the problem with this little “let’s be cute” game. Unless you’re playing the pump and dump or smash and grab, short term, trade meaningless fluctuations game, you’re losing big time. You see it all over. And I guess it’s just the game people play. But if predicting a short lived selloff and then having 3-5 weeks to cover is your alpha, that’s a hard way to make a living. Last year REITs of certain types were the best example of this. You had the Chanos types making all sorts of grand fundamental predictions. Few actually happened. Private markets were resilient. Public markets sold off and “see I knew it!” And “see, REITs are bad inflation hedges”, subscription seller Rob hedgeye “called the INVH decline” and really, you step back, and view things from 50,000 ft, and it’s like…dude you did all this for a short term trading window? Unless you’re in marketing or bought FANG stocks at 40x non gaap eps, you were better off just going to sleep. And that before even factoring in taxes.

My point is that this sort of guessing game and fear watching strategy is a losing strategy. The odds are unquestionably against those that play it. Even here, we ve heard whining about expensive stocks, stories of the E falling off, run of the mill recessions, depressions, stagflation, 8% treasuries, you name it. And we re at 4000 SPY. Those mega bears with 3200-2800 targets sit around peddling the datapoints, but from here, what was the right move? Sitting around like a pig for an extra 10-15% in October cuz big bad JPow said “there will be pain”??!? Now at 4,000 those people are what? Gonna hang around hoping to get a quote they had in October? Maybe a few points lower? It’s a dumb game.