changegonnacome

Pretty much - there are no bullish outcomes in the near term given the opportunity set.....10year of ZIRP, Trump corp tax cuts, COVID stimilus.....everything got priced for perfection.....but then perfection didn't show up.......inflation did, then Putin & geopolitical tensions. @Gregmal points out you can still find individual names for sure....but lets be clear....the Fed & the beta had your back in 2010's, it bailed out lots of errors I made thats for sure.....but the stock picking game just got exponentially harder for those not paying attention. The beta is trying to stab you in the back now. So folks don't misunderstand me, I'm urging caution, Im urging enhanced due diligence.....I'm suggesting a larger margin of safety than one would otherwise seek. There are more ways to lose currently....multiple compression, earnings getting whacked, recession. I'm not saying dont play. I'm saying play sure but move forward with extreme caution.....look for 2ft hurdles, not 20ft ones. This is the way. @LC I'm afraid earnings were gonna suck either way.......inflation, all on its own without the Fed or Wall St. narratives on the short side, is/was destroying purchasing power, driving up costs.....which is hurting sales/earnings/profit margins of businesses. Some people act like it was all roses till Jay Powell started talking about persistent inflation and ruined it for everybody.....the real problem is Jay Powell wasn't talking about persistent inflation early enough he was too busy buying god damn MBS's and keeping rates at 0% when they'd put the vaccine into everybody's arms. The Fed can let inflation just do its thing....that is an option they have.......which is to painfully and slowly over time allow it to ravage the economy such that inflation itself gets worse and worse....but eventually left to its own devices inflation itself would put the economy into a horrible recession, which would be disinflationary & return price stability having put millions and millions of people out of work directly and through the meat grinder indirectly for unknown years. or the Fed can administer some tough love.....and hopefully get this thing done in 12-18 months....in a controlled way minimizing misery. There are no good options here folks..........only less bad ones......its an economic Sophie's Choice for you movie/book lovers out there.

https://www.bloomberg.com/news/articles/2022-10-29/good-news-bad-s-p-500-earnings-are-playing-into-the-fed-s-hand?srnd=premium&sref=7zqHEcxJ From article:

Wow hadnt seen it nice too see some, formerly AOC fans, wake up and smell the coffee.........AOC's of the world and her mirror image folks on the radical right.......think only in black, whites & absolutes.....good guys and bad guys.........the world is fifty shades of grey ......and the scary thing about the Ukrainian/Russia situation is maybe the only thing they agree on down in DC is perpetuating & escalating this conflict. https://nypost.com/2022/10/13/aoc-heckled-by-anti-ukraine-war-activists-at-town-hall/ Word.

https://www.telegraph.co.uk/world-news/2022/10/27/us-send-nuclear-weapons-nato-bases-amid-rising-tensions-russia/ Its all just posturing and saber rattling and escalating to deescalate.......until it isn't.

The logical flaw in yours is that you are implicitly assuming that growth isn't negative.......forget 0%, try on -2% for size...then inflation adjust that cash flow growth.....not so hot now.......but listen its a multi-variant equation lots of things can move around but my premise still holds which is there a exists a class of stock with really low FCF yields and exposed to a both peak earnings & a recession....now whats their smoothed out earnings (minus COVID stimulus/demand bubble), whats the FCF on that new smoothed out earnings stream for 10 years (hint: the FCF yield is even lower now)...........now strip out a couple of years trough recession earnings, now inflation adjust it all back from 10 years in future with 8% this, 5% next year, 3% year after, then 2,2,2..........for slow-ish growers....the math is quite scary.......and this why I warn against high multiple stocks, in an inflationary & a rate hiking regime change. But yes I understand a stream of growing free cash flow changes the math....but some things arent growing cash flows nearly enough, or have and wont in the future. Its complicated...but you have to think in alternatives is my main point.....think of everything as just another financial instrument.........cash, bonds, equites, RE....then think about relative risk, duration risk, principal risk.....and ask are you being adequately compensated, are you beating inflation......if not your purchasing power just got whacked.......we've gone from TINA to a new world folks need to start thinking a little more fluidly...

Anyhow - its beyond bonkers IMO the market rallying........and the pivot people are deluded.......unemployment really hasn't budged, the GDP numbers were actually pretty good......is this an economy with 'slack' appearing such that it has strong disinflationary pressures driven by sitting below its productive capacity for a while - such that we are on the pathway back to 2-3% inflation very soon. I just don't see yet. Again define pivot........it used to mean cutting rates and printing fiat.......I guess for people desperate for the market to go up....pivot now means 50bps increases moving forward vs. 75bps. Its funny the way the narrative changes

OK understood dont mean to put words in your mouth @Gregmal........3-4% rates normal and not a big deal.........BUT, and its a big but and a big deal......the equity risk premium traditionally has been about 3-4% in the USA.........4% rates + 3% equity risk premium......gets you a 7% FCF yield........thats a big problem for lots of the 'safest' stocks in the market......floating down in 2,3's. As it pertains to Apple.....because everybody loves talking about it......Tim Apple with each extra toll charge he takes from the Apple ecosystem monopoly is inching ever closer to hardcore DOJ/antitrust action. Tim is the best in the business but its a dangerous game he's playing........and silicon valley will get nasty in the downturn.....META I'm sure has its army of lobbyists slandering Apple behind closed doors in DC as a bully......Google will probably join them if ATT fed into their poor Q.....Apple may be biting the hand that feeds it......they could be shaping up to be a benevolent dictator, once tolerated, that one day turned nasty and needed to be overthrown. It will be quite ironic that the thing that will actually spur the government into serious anittrust action....will be the tech giants turning on each other. (Sorry bit of tangent but that thought just occurred to me)

Yep I talk about Apple because it’s really instructive around concept of holding a financial instrument which is inherently riskier than an FDIC account…like insert any 3-4% FCF yielding slow-ish grower I don’t care everybody likes to talk about the fruit company so I talk about that…...anyway the FDIC account is now paying you more with less risk. @thepupil has talked about fixed income…with real INCOME. Something has to give…..you can have a view on that……which yours I guess is we’re going back to ZIRP soon….then I’m wrong and your right…..but one of those financial instruments has to give up the ghost and return to a logical relationship that is reflective of relative risk.

Nobody is saying Apple isn’t a great business….but no business no matter how great can’t be made a bad investment simply by raising its price (multiple). Apples price (multiple I’m mainly speaking about) has been raised by quite a lot in the last few years and on relative basis…to bonds & to humble savings accounts it’s become over priced. Remember equity risk premium…. @Spekulatius posted some good stuff from Dramdoran on it….an equity investor needs/has to be compensated to move outside FDIC world or he/she is a dummy. Don’t ever confuse me with somehow saying Apple isn’t a great business. Multiple compression is a bitch….that’s why for about 20 pages of this thread I’ve advocated for buying businesses with low multiples….less multiple to compress and catch you offside if indeed this is a secular regime change. it’s why value will outperform moving forward…..earnings can even hold up (I doubt they will) but the multiple being paid for them moving into A-ZIRP world won’t. One outcome, two ways to win.

Hey it’s a rabbit hole that’s worked. I’m long term bullish just not on US stocks in the short term…not a trader but this short term trade, became so obvious to me that I had to play…when I’m less certain I’ll take off the various vol and short things I have knocking around...I mean don’t paint me as an ultra bear…..go have a look at my Hostelworld write up and earlier statements about moving outside the US I’m bullish just not on US…..globally it’s the most egregiously overpriced due to ZIRP and the economy suffering REAL monetary inflation…..the beta sucks in the US, it’s impossible to swim against it……short term there is money to be made recognizing the regime change…..at worst it takes the sting out of holding MSGE….at best much better…..and I’ve been doing bad businesses as well don’t worry . Tesla still doing what’s it’s doing even down nearly 50% ytd ….tells me this bear isn’t near done….your puzzled, as am I…..that’s because we haven’t seen full capitulation yet in US markets, but that’s coming too. This bull has been on the rampage for a decade it will take more than a few lacerations to take it down. Every rally is bear market rally in the short term IMO. Doom porn…..I just like things that make money. The greatest doom porn available this year was Europe around March & I stepped right into it with Hostelworld in a big way. I know retarded doom when I see it….the issues in the US are real, the monetary inflation is real and persistent and pernicious. It’s slowly choking consumers…..the cure is killing foreign earnings…..its a recipe for trouble.

Not during a secular regime change it isn’t…..ZIRP to AZIRP (ABOVE zero interest rate policy) which is exactly where we are right now…..you’ve been holding on to 2010’s ideas too long in the face of compounding evidence to the contrary…..that world is over, it’s a new world…..it’s been working very well for me this year……come on in, the water is warm…..you have an ultra bullish bias…..there will be a time for that, just not now……I’m desperate desperate to turn bullish on the US….but it’s really not the time yet…..FANGMA cracking is just an invitation to get more aggressive on the short side and selling vol. Is it also time and OK to continue talking about E failing off a cliff? Seemed it was dirty word there for a while that garnered derision but I can hear the clicking of Wall St. analysts updating SPY FWD earnings guidance right now on back of META/APHT…..and lets be clear Apple not giving guidance heading into their most important Qtr is a chickenshit move and speaks volumes about the trajectory of their business and how the global economy is deteriorating underneath them.

Just FYI as you seem to think TSLA hasnt been hit or something...its down 44% YTD........its got WAY more to go so agree with you there. AAPL is the last to go over the cliff........but over the cliff it shall go.....it is the quintessential money manager bear market hide out but in the end the bear gets even the best of breed......

https://www.marketwatch.com/story/apple-earnings-show-iphone-sales-miss-amid-questions-about-smartphone-demand-stock-dips-11666903283?mod=election-2020 That didnt take long - iPhone sales miss.......when you on purpose moved the opening couple of weeks of new iPhone sales into this quarter to make the numbers and even that didnt work out.....it does not bode well for the holiday quarter. Not giving financial forecasts at this stage is also bullshit.....I can give you a forecast....its not good....ive listend to some European telco calls and new handsets are in deep trouble.

Know its in good fun but dont cry for me just yet.....I've had way more than just Apple & Tesla shorts on, even them when done with options like I have have given me some fantastic annualized returns especially twinned with Twitter merger arb.....I've been riding the indexes too SPY/QQQ...with the simple thesis that we are in a secular bear market.......every rally is a false flag operation........I buy puts on the rips, and I sell on the dips! Dont count me out on AAPL and Tesla though either - their days are coming too

Another General taken out and shot....

And then.........they started shooting the Generals.......

Advertising businesses are cyclical…….there’s an old market heuristic about buying cyclicals when they look expensive, not when they look cheap…..in regard to meta/goog…..the question is where we are and what remains & at what speed will the secular shift to digital ad spend continue at……for GOOG you only need to answer that question and be comfortable based on your assessment ……for META there are way more difficult questions be answered. META is not Apple in 2017, Google just might be….but not quite yet.

I wasn't really commenting on GOOG's valuation per se.........simply thinking of it as a bellweather for the economy. Definitely FANGMA will come down from its lofty FCF yield of old.........as financial instruments they have competition now not from TikTok or Alibaba.....................but from high yield savings accounts!

People talk a lot about trickle down economics as it pertains to society. It’s a theory with little real evidence of success. One place I know trickle down to be true - is as you alude too in Silicon Valley…it’s a circular economy with VC’s pouring money in at the top of the funnel where it trickles down to Google & Facebook ads to drive growth at all costs. Ponzi’s/Crytpo sure - but don’t dismiss this result with rose tinted glasses…..this does not dissuade me from reading ALOT into these numbers as it pertains to the non-ponzi economy….i.e. the real economy. It speaks to a slowdown. Before you @Gregmal start blaming the Fed and bs inflation narrative….one should note the fact that Fed policy acts with a significant lag…..what these results point to is a weakening in the consumer that pre-dated any real effect from the Fed rate rises….this is a slowdown that occurs in the absence of any Fed intervention , a slow down that occurs when purchasing power of some of 1/3 of an economies consumers (the marginal consumer with little wallet slack) begins to get destroyed by inflation. Then on the international side we have DXY strength & end market weakness etc

Exactly - the social media/adtech space is about to discover for the first time the cyclicality that is advertising…it’s real business activity……artfully obscured as it has been by all the Silicon Valley rhetoric & mission statements. In the last recession ~2008 digital ad spend was some 10% of total ad spend…..the secular trend to digital advertising was so strong that it grew through that downturn….not now when digital constitutes easily 50%+…..when the CFO walks into the CMO office to ‘make the quarter’ the CMO has to cut the digital budget this time.

Only thing you need to note - this is the slowest revenue growth for GOOG since 2013…..2013…..like pretty much a decade. If that doesn’t given you pause I’m not sure what will. Advertising & GOOG is the canary in the coal mine for the economy and the canary in this case has stopped chirping.

https://www.bloomberg.com/news/articles/2022-10-25/microsoft-alphabet-lead-tech-stocks-lower-as-results-disappoint?srnd=premium&sref=7zqHEcxJ Things slowing down..........I mean we shouldn't be surprised......DXY where it is & Jay-P telling you he's gonna slow it down.....and even if Jay-P did jack.....inflation destroying purchasing power would slow the sucker down anyway. Microsoft moaning about strong dollar Google talking about weakening consumer/ad market The above excuses are completely valid and i expect them to be repeated ad nauseam, by lesser lights than GOOG/MS, for the next number of quarters......

Should say that I'm playing devils advocate a bit......nothing is absolute. Bear case always sounds smarter......thats what makes it so seducing for many....and I watch for its siren song. I think the evidence in support of the bear case is mounting however, day by day, week by week. I'm desperately looking for reasons the US doesn't go into a recession with inflation such that we have stagflation and I cant find many/if any reasons why SPY, broad market indxes will do well. Lots of things have to go right for that to be case....

Not sure you have too.......you simply have to accept that perhaps the disinflationary benefits it provided reached its peak in the last decade and the incremental benefits are diminshing/decreasing YoY. As mentioned earlier the productivity gains/benefits from automating a production line happen once, not every year. Why would globalization be any different?.......once you do it, enjoy the surge in productivity the dis-inflation, its then done.