thefatbaboon Posted December 22, 2018 Posted December 22, 2018 I guess I see things total opposite to you cigarbut except for the bit where you caution for caution in the face of an unknowable future. But as for your little economic history I would reply simply that I would much prefer to have lived through and looked for work in 1973-1983 compared to 1929-1937 and I would much prefer 2007-2009 to 1973-1983. In each case the recessions were significantly milder and the recoveries more potent compared to the size of the decline being dealt with. Why not look to the mid 19th century and the pax britannica if you want a better idea of how growth rates and interest rates can moderate and debt capacity increase? I think it’s possible that the current American peace with higher levels of prosperity, lower population growth, the internet, and greater peacefulness should have a good chance of carrying more debt for longer and at lower rates than the British empire.
John Hjorth Posted December 22, 2018 Posted December 22, 2018 Personally, I appreciate this discussion ongoing. To me, Mr. Powell & Mr. Williams are decision makers on this particular matter at hand, and we can each personally agree or disagree - which in the end won't change one whit [<-learned that expression from Uccmal!]. Somehow, I'm a more practical, hands-on person also, thinking in actual portfolio and what to do in this overall situation. Actually, I've been extremely busy during the downturn, buying and selling quite intensively. Every challenge is - approached mentally the right way - also an opportunity. In the accounts I have for years been struggling with "misplaced" stocks, between the tax deferred accounts and taxable accounts. It's about what I call "misplaced pure play compounders" [stocks with steady growth potential, paying no or low dividends], which I prefer to hold in taxable accounts, to defer taxes as long as possible]. For me, these are BRK.B, MKL & TOP.CPH [<- this one has been], and also FFH.TO is in this basket, for which I [for historical/legacy reasons] have been forced to buy them in tax deferred accounts, because of how and in which order capital has become available for investment. This sell-off has created an opportunity to sell at depressed prices in taxable accounts to get fairly low taxes on realized capital gains in taxable accounts, to rearrange stock positions between taxable and tax deferred accounts. [TOP.CPH has changed from being such a "pure play compounder" [with no dividends] to a pure play dividend stock, after Sampo Plc has taken effective control over the company and changing the buyback program to a dividend program.] [ I don't post on here about those transactions.> The opportunity to get out of small, low conviction positions ["legacy positions"], considered fairly priced, at low taxes, and at the same time the opportunity to roll into / adding to positions, that I right now consider cheap. [i post here about those transactions.> Gregmal Posted December 22, 2018 Posted December 22, 2018 I personally find this whole thing to be hilarious. It's gotten so out of hand, and it's turned a lot of otherwise sensible people into clueless idiots. The stories and headlines, the emotional crap, the complete reversals in sentiment. Oh goodness. It's like everyone sits around bitching about valuations and begging for a pullbacks and then they get the most no brainer one possible and they don't know what to do with themselves...and these are just the people who call themselves investors! -Nothing changes but a .25% rate hike. So what? -The economy is still strong, but indeed shows potential signs of slowing a bit, so what? -The Fed has ALREADY basically said they fucked up and will cater to the market, if you read between the lines. These guys were out giving interviews and trying to say the right things A DAY AFTER they raised rates and saw the reaction! -The market turns the screws on Trump, I guarantee you we get a China deal next year; he needs good news. -The biggest farce I see is people saying "one time boost from tax cuts". WTF do people come up with this stuff? The tax rates don't go back up next year! How in the world is it a "one time boost" when in perpetuity companies will be keeping 40% more of their profits? And oh yea, the "boost" we saw this year? Where, S&P has responded to this increase in corporate profitability by posting -10%! -I've spoken to probably a half dozen CEO's and CFO's over the past two weeks, and maybe it's just particular to the companies Im invested in, but NONE have seen any reason to be have a different outlook or expectation that you had 6 months ago. Overall I think we just had a convergence of kind of one off events that tripped people out and caused contagious panic. First real year of widespread tax loss selling, no Santa rally on WS, massive fund liquidations and wind downs, minor softness in numbers plus super duper scary headlines and fear mongering. Fear that the Fed is going to crush the economy. People are just running with the crowds right now and have convinced themselves of something that doesn't exist. A stupid but true reality is once people started seeing turbulence, many likely just dumped shit and figured they'll pick back up after the holidays-on the institutional side there is definitely a lot of this type of stuff. I will be buying next week because I believe once the big boys get back from holiday in January things should get back on track. This downturn if anything has just given well run companies the opportunity to suck up A TON of their own shares and spring load next years numbers. Which in any case shouldn't be bad, especially at these new valuations. For example. I will be adding to MSG. If you can get to $5B on the Knicks, and add back the cash, you currently have a NEGATIVE EV! And then still have billions in other assets. There's plenty of others like this now. How does any of the shit all the pundits are "concerned" about all of a sudden effect my investments? It doesn't.... As such, I'm a buyer all the way down, screw the naysayers. There were people calling another 20% downside in the S&P when it hit 675 during the crisis. We are no where near a crisis, despite all the crazy things people are now saying that seem to be 100% reactionary to the market decline, and 0% based in what's really going on in the US. Viking Posted December 22, 2018 Posted December 22, 2018 I personally find this whole thing to be hilarious. It's gotten so out of hand, and it's turned a lot of otherwise sensible people into clueless idiots. The stories and headlines, the emotional crap, the complete reversals in sentiment. Oh goodness. It's like everyone sits around bitching about valuations and begging for a pullbacks and then they get the most no brainer one possible and they don't know what to do with themselves...and these are just the people who call themselves investors! -Nothing changes but a .25% rate hike. So what? -The economy is still strong, but indeed shows potential signs of slowing a bit, so what? -The Fed has ALREADY basically said they fucked up and will cater to the market, if you read between the lines. These guys were out giving interviews and trying to say the right things A DAY AFTER they raised rates and saw the reaction! -The market turns the screws on Trump, I guarantee you we get a China deal next year; he needs good news. -The biggest farce I see is people saying "one time boost from tax cuts". WTF do people come up with this stuff? The tax rates don't go back up next year! How in the world is it a "one time boost" when in perpetuity companies will be keeping 40% more of their profits? And oh yea, the "boost" we saw this year? Where, S&P has responded to this increase in corporate profitability by posting -10%! -I've spoken to probably a half dozen CEO's and CFO's over the past two weeks, and maybe it's just particular to the companies Im invested in, but NONE have seen any reason to be have a different outlook or expectation that you had 6 months ago. Overall I think we just had a convergence of kind of one off events that tripped people out and caused contagious panic. First real year of widespread tax loss selling, no Santa rally on WS, massive fund liquidations and wind downs, minor softness in numbers plus super duper scary headlines and fear mongering. Fear that the Fed is going to crush the economy. People are just running with the crowds right now and have convinced themselves of something that doesn't exist. A stupid but true reality is once people started seeing turbulence, many likely just dumped shit and figured they'll pick back up after the holidays-on the institutional side there is definitely a lot of this type of stuff. I will be buying next week because I believe once the big boys get back from holiday in January things should get back on track. This downturn if anything has just given well run companies the opportunity to suck up A TON of their own shares and spring load next years numbers. Which in any case shouldn't be bad, especially at these new valuations. For example. I will be adding to MSG. If you can get to $5B on the Knicks, and add back the cash, you currently have a NEGATIVE EV! And then still have billions in other assets. There's plenty of others like this now. How does any of the shit all the pundits are "concerned" about all of a sudden effect my investments? It doesn't.... As such, I'm a buyer all the way down, screw the naysayers. There were people calling another 20% downside in the S&P when it hit 675 during the crisis. We are no where near a crisis, despite all the crazy things people are now saying that seem to be 100% reactionary to the market decline, and 0% based in what's really going on in the US. Agreed. Right now Mr. Market is very pessimistic. Why? Not really sure. The stock market's ability to predict the future is less than stellar. The bond market, with 10 year US yields at 2.79%, does not look overly fussed (and I think the bond market is a much better predictor than the stock market of what may be going on in the general economy). Perhaps the ending and reversing of QE is having a much, much bigger impact on financial assets (especially the stock market) than most understand or recognize. Perhaps the current sell off in stocks has little to do with trade wars or slowing economies. Gregmal Posted December 22, 2018 Posted December 22, 2018 I personally find this whole thing to be hilarious. It's gotten so out of hand, and it's turned a lot of otherwise sensible people into clueless idiots. The stories and headlines, the emotional crap, the complete reversals in sentiment. Oh goodness. It's like everyone sits around bitching about valuations and begging for a pullbacks and then they get the most no brainer one possible and they don't know what to do with themselves...and these are just the people who call themselves investors! -Nothing changes but a .25% rate hike. So what? -The economy is still strong, but indeed shows potential signs of slowing a bit, so what? -The Fed has ALREADY basically said they fucked up and will cater to the market, if you read between the lines. These guys were out giving interviews and trying to say the right things A DAY AFTER they raised rates and saw the reaction! -The market turns the screws on Trump, I guarantee you we get a China deal next year; he needs good news. -The biggest farce I see is people saying "one time boost from tax cuts". WTF do people come up with this stuff? The tax rates don't go back up next year! How in the world is it a "one time boost" when in perpetuity companies will be keeping 40% more of their profits? And oh yea, the "boost" we saw this year? Where, S&P has responded to this increase in corporate profitability by posting -10%! -I've spoken to probably a half dozen CEO's and CFO's over the past two weeks, and maybe it's just particular to the companies Im invested in, but NONE have seen any reason to be have a different outlook or expectation that you had 6 months ago. Overall I think we just had a convergence of kind of one off events that tripped people out and caused contagious panic. First real year of widespread tax loss selling, no Santa rally on WS, massive fund liquidations and wind downs, minor softness in numbers plus super duper scary headlines and fear mongering. Fear that the Fed is going to crush the economy. People are just running with the crowds right now and have convinced themselves of something that doesn't exist. A stupid but true reality is once people started seeing turbulence, many likely just dumped shit and figured they'll pick back up after the holidays-on the institutional side there is definitely a lot of this type of stuff. I will be buying next week because I believe once the big boys get back from holiday in January things should get back on track. This downturn if anything has just given well run companies the opportunity to suck up A TON of their own shares and spring load next years numbers. Which in any case shouldn't be bad, especially at these new valuations. For example. I will be adding to MSG. If you can get to $5B on the Knicks, and add back the cash, you currently have a NEGATIVE EV! And then still have billions in other assets. There's plenty of others like this now. How does any of the shit all the pundits are "concerned" about all of a sudden effect my investments? It doesn't.... As such, I'm a buyer all the way down, screw the naysayers. There were people calling another 20% downside in the S&P when it hit 675 during the crisis. We are no where near a crisis, despite all the crazy things people are now saying that seem to be 100% reactionary to the market decline, and 0% based in what's really going on in the US. Agreed. Right now Mr. Market is very pessimistic. Why? Not really sure. The stock market's ability to predict the future is less than stellar. The bond market, with 10 year US yields at 2.79%, does not look overly fussed (and I think the bond market is a much better predictor than the stock market of what may be going on in the general economy). Perhaps the ending and reversing of QE is having a much, much bigger impact on financial assets (especially the stock market) than most understand or recognize. Perhaps the current sell off in stocks has little to do with trade wars or slowing economies. I actually think the biggest catalyst for the current sell off the fact that nobody really has a good explanation for it. Fear of the unknown and also don't underestimated the significance of the time of year. No not Christmas but month 3 of the quarter. I highly doubt this continues with S&P components popping earnings out every other day. It's just a weird convergence of events and news flow IMO. Nothing more. maybe4less Posted December 22, 2018 Posted December 22, 2018 -The biggest farce I see is people saying "one time boost from tax cuts". WTF do people come up with this stuff? The tax rates don't go back up next year! How in the world is it a "one time boost" when in perpetuity companies will be keeping 40% more of their profits? And oh yea, the "boost" we saw this year? Where, S&P has responded to this increase in corporate profitability by posting -10%! I don't disagree with your bullishness, but tax cuts are definitely a one time boost to growth. The rate of change is more important than the level and we aren't getting a tax cut every year. nkp007 Posted December 22, 2018 Posted December 22, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? maybe4less Posted December 22, 2018 Posted December 22, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? As long as those tax rates stay in place, yes the increased value is "permanent." However, I'm talking about GDP growth. Cutting taxes gives a boost to GDP growth (not GDP level) that is transitory. Gregmal Posted December 23, 2018 Posted December 23, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? As long as those tax rates stay in place, yes the increased value is "permanent." However, I'm talking about GDP growth. Cutting taxes gives a boost to GDP growth (not GDP level) that is transitory. Which I agree in macro terms is important, but when I look at specific portfolio companies, it really isn't. If I own FRP, and their income consists of lease revenue, interest income, and cash from the rock pits... let's say all of this stays the same, just to keep things simple. At 22% tax rate the company is now significantly more valuable, even with the same figures as last year, when paying 35%. You can look at different figures, but simplistically, you should be throwing a multiple onto that incremental income, and the value of the company should be higher. The markets right now in a lot of cases are saying the opposite. People have essentially fabricated the recession narrative out of nothing, and what I'm saying is that even if it were true(to the extent that is reasonable, ie not a crisis) it doesn't in many, many instances, with a lot of companies, support lower equity prices. LC Posted December 23, 2018 Posted December 23, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? Yes and this is reflected in a one-time change in NPV. Cigarbutt Posted December 23, 2018 Posted December 23, 2018 1-I guess I see things total opposite to you cigarbut except for the bit where you caution for caution in the face of an unknowable future. But as for your little economic history I would reply simply that I would much prefer to have lived through and looked for work in 1973-1983 compared to 1929-1937 and I would much prefer 2007-2009 to 1973-1983. In each case the recessions were significantly milder and the recoveries more potent compared to the size of the decline being dealt with. 2-Why not look to the mid 19th century and the pax britannica if you want a better idea of how growth rates and interest rates can moderate and debt capacity increase? I think it’s possible that the current American peace with higher levels of prosperity, lower population growth, the internet, and greater peacefulness should have a good chance of carrying more debt for longer and at lower rates than the British empire. 1-Collecting data is different from interpretation and application but the Federal Reserve does provide useful tools so that one can factually verify assumptions: https://www.minneapolisfed.org/publications/special-studies/recession-in-perspective IMO, it could be cause and effect or simple association but greater involvement by the central banks has been linked to worsening downturns and weaker recoveries. These days, a 0.25% announcement is considered a major event. We're OK as long as strong fundamentals are maintained but some cans that are kicked down the road by centrally-planned unconventional tools may simply keep getting larger and, at some point, this may be reflected in many portfolios. 2-Contrary to what you seem to write and others seem to imply, IMO the major factor behind the relay between Pax Britannica and Pax Americana was not because of pervasive involvement by central banks managing the economy but because there was an environment conducive to enduring real productivity growth. At least, that's what a guy, who seemed to know how nations become and stay prosperous, used to say in 1969. http://scienzepolitiche.unical.it/bacheca/archivio/materiale/2467/PDF-Books%20for%20Mr%20Pisula/David%20Landes-The%20unbound%20Prometheus-Cambridge%20University%20Press%20(1969).pdf If I understand correctly, Mr. Druckenmiller says that political and monetary forces are distorting the markets and that's always the case to some degree. It just seems that the some of the distortion has reached certain thresholds with potential spill-over effects in individual holdings. This is not a problem if the buy and hold definition has been properly framed. maybe4less Posted December 23, 2018 Posted December 23, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? As long as those tax rates stay in place, yes the increased value is "permanent." However, I'm talking about GDP growth. Cutting taxes gives a boost to GDP growth (not GDP level) that is transitory. Which I agree in macro terms is important, but when I look at specific portfolio companies, it really isn't. If I own FRP, and their income consists of lease revenue, interest income, and cash from the rock pits... let's say all of this stays the same, just to keep things simple. At 22% tax rate the company is now significantly more valuable, even with the same figures as last year, when paying 35%. You can look at different figures, but simplistically, you should be throwing a multiple onto that incremental income, and the value of the company should be higher. The markets right now in a lot of cases are saying the opposite. People have essentially fabricated the recession narrative out of nothing, and what I'm saying is that even if it were true(to the extent that is reasonable, ie not a crisis) it doesn't in many, many instances, with a lot of companies, support lower equity prices. I don't disagree with you. I was making a different point about why the Fed might be in danger of making a policy mistake. maxthetrade Posted December 23, 2018 Posted December 23, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? I depends of how much of the tax cut will get competed away, which depends on industry, market position etc. I expect that most of it will get competed away in commodity businesses. Regulated businesses and those which already enjoyed very low tax rates won't profit very much either. So in aggregate IV certainly has not increased by 20%. Spekulatius Posted December 23, 2018 Posted December 23, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? I depends of how much of the tax cut will get competed away, which depends on industry, market position etc. I expect that most of it will get competed away in commodity businesses. Regulated businesses and those which already enjoyed very low tax rates won't profit very much either. So in aggregate IV certainly has not increased by 20%. The tax rate for many business was already way below the nominal tax rate befor the tax cut. When have you seen the last multiples national pay 36% tax rate? I GE’s tax rate was in the low 29% range before the tax cut even.nSame with tech companies. Domestic companies like insurers, and banks that don’t have that many opportunity to hide taxes benefited the most. maybe4less Posted December 23, 2018 Posted December 23, 2018 I would add that it seems tax reform is one time stimulus that has juiced growth this year, such that some of the headline strength this year may prove ephemeral. This is correct - so obviously correct, in fact, that I would be absolutely shocked if the Fed got this wrong... Yeah, fair enough. As others have posted the Fed seems to have done a very good job through the crisis and since. However, I think this is the market's concern as evidenced by the flat/inverted short-end of the curve (i.e., that they will have to reverse some of the planned rate hikes in the near-term). I can see the point too. The Fed is being fairly aggressive despite the short-term nature of the stimulus, so why not pause a bit and see how the economy develops? However, I'm not smart enough to say which is right, let alone that the Fed is definitely making a mistake. NeverLoseMoney Posted December 23, 2018 Posted December 23, 2018 Just dropping this in here. Apparently the big banks are fine: and https://www.bloomberg.com/news/articles/2018-12-23/mnuchin-called-top-u-s-bank-executives-about-market-stability Never say your banks are fine if they are fine. Gregmal Posted December 24, 2018 Posted December 24, 2018 Just dropping this in here. Apparently the big banks are fine: and https://www.bloomberg.com/news/articles/2018-12-23/mnuchin-called-top-u-s-bank-executives-about-market-stability Never say your banks are fine if they are fine. This is getting insane. You'd think we are in the midst of some massive crisis. Or that every listed company in the US is cooking it's books... I know Tepper basically just declared the Fed Put dead, but all the writing on the wall, at least to me, seems to indicate that with a little more pain, a lot of folks are going to start looking to resurrect it. John Hjorth Posted December 24, 2018 Posted December 24, 2018 Just dropping this in here. Apparently the big banks are fine: https://twitter.com/stevenmnuchin1/status/1076958380361543681 and https://www.bloomberg.com/news/articles/2018-12-23/mnuchin-called-top-u-s-bank-executives-about-market-stability Never say your banks are fine if they are fine. This is getting insane. You'd think we are in the midst of some massive crisis. Or that every listed company in the US is cooking it's books... I know Tepper basically just declared the Fed Put dead, but all the writing on the wall, at least to me, seems to indicate that with a little more pain, a lot of folks are going to start looking to resurrect it. Twitter links & links to Bloomberg articles ... -It would be nice if this could be a data & facts driven discussion. rb Posted December 24, 2018 Posted December 24, 2018 These people need to stop tweeting. NeverLoseMoney Posted December 24, 2018 Posted December 24, 2018 Just dropping this in here. Apparently the big banks are fine: https://twitter.com/stevenmnuchin1/status/1076958380361543681 and https://www.bloomberg.com/news/articles/2018-12-23/mnuchin-called-top-u-s-bank-executives-about-market-stability Never say your banks are fine if they are fine. This is getting insane. You'd think we are in the midst of some massive crisis. Or that every listed company in the US is cooking it's books... I know Tepper basically just declared the Fed Put dead, but all the writing on the wall, at least to me, seems to indicate that with a little more pain, a lot of folks are going to start looking to resurrect it. Twitter links & links to Bloomberg articles ... -It would be nice if this could be a data & facts driven discussion. Seems like a fact to me that he said it at this point. Are you worried about his statement? And is that why you'd have preferred me not to post those links? Because I'm a bit worried now that you might be worried... I'm not in fact, but that's how confidence works and it can affect markets. If it was mostly about data and facts there would be a lot more rich mathematicians out there. rb Posted December 24, 2018 Posted December 24, 2018 Yea the banks are fine. But Stephen Mnuchin may not be that bright. Which in itself is not very confidence inspiring either. I think I heard Jamie Dimon yell "WHAT THE ACTUAL FUCK!" when that tweet went out. Spekulatius Posted December 24, 2018 Posted December 24, 2018 Just dropping this in here. Apparently the big banks are fine: and https://www.bloomberg.com/news/articles/2018-12-23/mnuchin-called-top-u-s-bank-executives-about-market-stability Never say your banks are fine if they are fine. This is getting insane. You'd think we are in the midst of some massive crisis. Or that every listed company in the US is cooking it's books... I know Tepper basically just declared the Fed Put dead, but all the writing on the wall, at least to me, seems to indicate that with a little more pain, a lot of folks are going to start looking to resurrect it. Ouch! I just miss the infamous phrase: “ Our liquidity is strong”. Feels more and more like September 2008 to me when they introduced TARP. They really should keep their mouth shut. Back then there was a problem, now there isn’t, unless they fabricate one. Liberty Posted December 24, 2018 Posted December 24, 2018 https://www.bloomberg.com/news/articles/2017-11-02/trump-has-340-million-of-debt-linked-to-powell-s-rate-decisions Cardboard Posted December 24, 2018 Author Posted December 24, 2018 From RB: "Btw, I am in the camp that the fed shouldn't tighten. The reason for that, which is the right argument for tightening, is the headline numbers are painting a wrong narrative. If the economy is doing so great then the labour market is banjo tight. At this level we should see wage inflation, but we don't see that. So maybe the economy is not doing so great. One of the worst mistakes in the history of the fed was the recession of 1937. Maybe we should avoid that this time around." Really??? So why so much arguing? I am seriously amazed by the discussion here and the level of amnesia. For example, don't you guys recall that only 4-5 short years ago, a great deal of people on this website were anxiously reviewing every bank Fed review/stress test to figure if Bank of America could pay out something on any given year to its investors? Then there is the other bunch such as Gregmal implying that so many are stupid and panicking because the market is heading down: you should try to profit and buy! By the way, I was up 80% from the start of 2008 to the end of 2009, so I know a thing or two about averaging down and trading value! These large recessions are really bad for the regular folks who don't even have a dime invested in the stock market. Many lose everything: job, family, sometime their homes. And after seeing a few of these cycles, it is obvious to me that the Fed is always too slow on the way up, then over-reacting as we head down. On the other hand so far, I think that they were doing just fine. However, looking at various signs right now such as copper prices, slowdown in EM, housing, inflation, it seems obvious that things are pausing or decelerating. So recent hikes combined with the unwinding of QE and the simple end of a cycle seem to all be playing a part to slow things down. Druckenmiller said a very important thing in this interview or how easy it is to break confidence. Buffett also said in other words that tapping the brakes via higher interest rates always send you in the windshield while tapping on the gas does not always respond. Is it asking too much to try to get a soft landing or a mild recession? Cardboard Jurgis Posted December 24, 2018 Posted December 24, 2018 Yea the banks are fine. But Stephen Mnuchin may not be that bright. Which in itself is not very confidence inspiring either. I think I heard Jamie Dimon yell "WHAT THE ACTUAL FUCK!" when that tweet went out. ;D Prev 1 2 3 4 5 6 7 Next Page 4 of 7 Create an account or sign in to comment You need to be a member in order to leave a comment Create an account Sign up for a new account in our community. It's easy! Register a new account Sign in Already have an account? Sign in here. Sign In Now Share https://thecobf.com/forum/topic/16358-druckenmiller-and-trump-were-right/ More sharing options... Followers 1 Go to topic listing
Gregmal Posted December 22, 2018 Posted December 22, 2018 I personally find this whole thing to be hilarious. It's gotten so out of hand, and it's turned a lot of otherwise sensible people into clueless idiots. The stories and headlines, the emotional crap, the complete reversals in sentiment. Oh goodness. It's like everyone sits around bitching about valuations and begging for a pullbacks and then they get the most no brainer one possible and they don't know what to do with themselves...and these are just the people who call themselves investors! -Nothing changes but a .25% rate hike. So what? -The economy is still strong, but indeed shows potential signs of slowing a bit, so what? -The Fed has ALREADY basically said they fucked up and will cater to the market, if you read between the lines. These guys were out giving interviews and trying to say the right things A DAY AFTER they raised rates and saw the reaction! -The market turns the screws on Trump, I guarantee you we get a China deal next year; he needs good news. -The biggest farce I see is people saying "one time boost from tax cuts". WTF do people come up with this stuff? The tax rates don't go back up next year! How in the world is it a "one time boost" when in perpetuity companies will be keeping 40% more of their profits? And oh yea, the "boost" we saw this year? Where, S&P has responded to this increase in corporate profitability by posting -10%! -I've spoken to probably a half dozen CEO's and CFO's over the past two weeks, and maybe it's just particular to the companies Im invested in, but NONE have seen any reason to be have a different outlook or expectation that you had 6 months ago. Overall I think we just had a convergence of kind of one off events that tripped people out and caused contagious panic. First real year of widespread tax loss selling, no Santa rally on WS, massive fund liquidations and wind downs, minor softness in numbers plus super duper scary headlines and fear mongering. Fear that the Fed is going to crush the economy. People are just running with the crowds right now and have convinced themselves of something that doesn't exist. A stupid but true reality is once people started seeing turbulence, many likely just dumped shit and figured they'll pick back up after the holidays-on the institutional side there is definitely a lot of this type of stuff. I will be buying next week because I believe once the big boys get back from holiday in January things should get back on track. This downturn if anything has just given well run companies the opportunity to suck up A TON of their own shares and spring load next years numbers. Which in any case shouldn't be bad, especially at these new valuations. For example. I will be adding to MSG. If you can get to $5B on the Knicks, and add back the cash, you currently have a NEGATIVE EV! And then still have billions in other assets. There's plenty of others like this now. How does any of the shit all the pundits are "concerned" about all of a sudden effect my investments? It doesn't.... As such, I'm a buyer all the way down, screw the naysayers. There were people calling another 20% downside in the S&P when it hit 675 during the crisis. We are no where near a crisis, despite all the crazy things people are now saying that seem to be 100% reactionary to the market decline, and 0% based in what's really going on in the US.
Viking Posted December 22, 2018 Posted December 22, 2018 I personally find this whole thing to be hilarious. It's gotten so out of hand, and it's turned a lot of otherwise sensible people into clueless idiots. The stories and headlines, the emotional crap, the complete reversals in sentiment. Oh goodness. It's like everyone sits around bitching about valuations and begging for a pullbacks and then they get the most no brainer one possible and they don't know what to do with themselves...and these are just the people who call themselves investors! -Nothing changes but a .25% rate hike. So what? -The economy is still strong, but indeed shows potential signs of slowing a bit, so what? -The Fed has ALREADY basically said they fucked up and will cater to the market, if you read between the lines. These guys were out giving interviews and trying to say the right things A DAY AFTER they raised rates and saw the reaction! -The market turns the screws on Trump, I guarantee you we get a China deal next year; he needs good news. -The biggest farce I see is people saying "one time boost from tax cuts". WTF do people come up with this stuff? The tax rates don't go back up next year! How in the world is it a "one time boost" when in perpetuity companies will be keeping 40% more of their profits? And oh yea, the "boost" we saw this year? Where, S&P has responded to this increase in corporate profitability by posting -10%! -I've spoken to probably a half dozen CEO's and CFO's over the past two weeks, and maybe it's just particular to the companies Im invested in, but NONE have seen any reason to be have a different outlook or expectation that you had 6 months ago. Overall I think we just had a convergence of kind of one off events that tripped people out and caused contagious panic. First real year of widespread tax loss selling, no Santa rally on WS, massive fund liquidations and wind downs, minor softness in numbers plus super duper scary headlines and fear mongering. Fear that the Fed is going to crush the economy. People are just running with the crowds right now and have convinced themselves of something that doesn't exist. A stupid but true reality is once people started seeing turbulence, many likely just dumped shit and figured they'll pick back up after the holidays-on the institutional side there is definitely a lot of this type of stuff. I will be buying next week because I believe once the big boys get back from holiday in January things should get back on track. This downturn if anything has just given well run companies the opportunity to suck up A TON of their own shares and spring load next years numbers. Which in any case shouldn't be bad, especially at these new valuations. For example. I will be adding to MSG. If you can get to $5B on the Knicks, and add back the cash, you currently have a NEGATIVE EV! And then still have billions in other assets. There's plenty of others like this now. How does any of the shit all the pundits are "concerned" about all of a sudden effect my investments? It doesn't.... As such, I'm a buyer all the way down, screw the naysayers. There were people calling another 20% downside in the S&P when it hit 675 during the crisis. We are no where near a crisis, despite all the crazy things people are now saying that seem to be 100% reactionary to the market decline, and 0% based in what's really going on in the US. Agreed. Right now Mr. Market is very pessimistic. Why? Not really sure. The stock market's ability to predict the future is less than stellar. The bond market, with 10 year US yields at 2.79%, does not look overly fussed (and I think the bond market is a much better predictor than the stock market of what may be going on in the general economy). Perhaps the ending and reversing of QE is having a much, much bigger impact on financial assets (especially the stock market) than most understand or recognize. Perhaps the current sell off in stocks has little to do with trade wars or slowing economies.
Gregmal Posted December 22, 2018 Posted December 22, 2018 I personally find this whole thing to be hilarious. It's gotten so out of hand, and it's turned a lot of otherwise sensible people into clueless idiots. The stories and headlines, the emotional crap, the complete reversals in sentiment. Oh goodness. It's like everyone sits around bitching about valuations and begging for a pullbacks and then they get the most no brainer one possible and they don't know what to do with themselves...and these are just the people who call themselves investors! -Nothing changes but a .25% rate hike. So what? -The economy is still strong, but indeed shows potential signs of slowing a bit, so what? -The Fed has ALREADY basically said they fucked up and will cater to the market, if you read between the lines. These guys were out giving interviews and trying to say the right things A DAY AFTER they raised rates and saw the reaction! -The market turns the screws on Trump, I guarantee you we get a China deal next year; he needs good news. -The biggest farce I see is people saying "one time boost from tax cuts". WTF do people come up with this stuff? The tax rates don't go back up next year! How in the world is it a "one time boost" when in perpetuity companies will be keeping 40% more of their profits? And oh yea, the "boost" we saw this year? Where, S&P has responded to this increase in corporate profitability by posting -10%! -I've spoken to probably a half dozen CEO's and CFO's over the past two weeks, and maybe it's just particular to the companies Im invested in, but NONE have seen any reason to be have a different outlook or expectation that you had 6 months ago. Overall I think we just had a convergence of kind of one off events that tripped people out and caused contagious panic. First real year of widespread tax loss selling, no Santa rally on WS, massive fund liquidations and wind downs, minor softness in numbers plus super duper scary headlines and fear mongering. Fear that the Fed is going to crush the economy. People are just running with the crowds right now and have convinced themselves of something that doesn't exist. A stupid but true reality is once people started seeing turbulence, many likely just dumped shit and figured they'll pick back up after the holidays-on the institutional side there is definitely a lot of this type of stuff. I will be buying next week because I believe once the big boys get back from holiday in January things should get back on track. This downturn if anything has just given well run companies the opportunity to suck up A TON of their own shares and spring load next years numbers. Which in any case shouldn't be bad, especially at these new valuations. For example. I will be adding to MSG. If you can get to $5B on the Knicks, and add back the cash, you currently have a NEGATIVE EV! And then still have billions in other assets. There's plenty of others like this now. How does any of the shit all the pundits are "concerned" about all of a sudden effect my investments? It doesn't.... As such, I'm a buyer all the way down, screw the naysayers. There were people calling another 20% downside in the S&P when it hit 675 during the crisis. We are no where near a crisis, despite all the crazy things people are now saying that seem to be 100% reactionary to the market decline, and 0% based in what's really going on in the US. Agreed. Right now Mr. Market is very pessimistic. Why? Not really sure. The stock market's ability to predict the future is less than stellar. The bond market, with 10 year US yields at 2.79%, does not look overly fussed (and I think the bond market is a much better predictor than the stock market of what may be going on in the general economy). Perhaps the ending and reversing of QE is having a much, much bigger impact on financial assets (especially the stock market) than most understand or recognize. Perhaps the current sell off in stocks has little to do with trade wars or slowing economies. I actually think the biggest catalyst for the current sell off the fact that nobody really has a good explanation for it. Fear of the unknown and also don't underestimated the significance of the time of year. No not Christmas but month 3 of the quarter. I highly doubt this continues with S&P components popping earnings out every other day. It's just a weird convergence of events and news flow IMO. Nothing more.
maybe4less Posted December 22, 2018 Posted December 22, 2018 -The biggest farce I see is people saying "one time boost from tax cuts". WTF do people come up with this stuff? The tax rates don't go back up next year! How in the world is it a "one time boost" when in perpetuity companies will be keeping 40% more of their profits? And oh yea, the "boost" we saw this year? Where, S&P has responded to this increase in corporate profitability by posting -10%! I don't disagree with your bullishness, but tax cuts are definitely a one time boost to growth. The rate of change is more important than the level and we aren't getting a tax cut every year.
nkp007 Posted December 22, 2018 Posted December 22, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher?
maybe4less Posted December 22, 2018 Posted December 22, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? As long as those tax rates stay in place, yes the increased value is "permanent." However, I'm talking about GDP growth. Cutting taxes gives a boost to GDP growth (not GDP level) that is transitory.
Gregmal Posted December 23, 2018 Posted December 23, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? As long as those tax rates stay in place, yes the increased value is "permanent." However, I'm talking about GDP growth. Cutting taxes gives a boost to GDP growth (not GDP level) that is transitory. Which I agree in macro terms is important, but when I look at specific portfolio companies, it really isn't. If I own FRP, and their income consists of lease revenue, interest income, and cash from the rock pits... let's say all of this stays the same, just to keep things simple. At 22% tax rate the company is now significantly more valuable, even with the same figures as last year, when paying 35%. You can look at different figures, but simplistically, you should be throwing a multiple onto that incremental income, and the value of the company should be higher. The markets right now in a lot of cases are saying the opposite. People have essentially fabricated the recession narrative out of nothing, and what I'm saying is that even if it were true(to the extent that is reasonable, ie not a crisis) it doesn't in many, many instances, with a lot of companies, support lower equity prices.
LC Posted December 23, 2018 Posted December 23, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? Yes and this is reflected in a one-time change in NPV.
Cigarbutt Posted December 23, 2018 Posted December 23, 2018 1-I guess I see things total opposite to you cigarbut except for the bit where you caution for caution in the face of an unknowable future. But as for your little economic history I would reply simply that I would much prefer to have lived through and looked for work in 1973-1983 compared to 1929-1937 and I would much prefer 2007-2009 to 1973-1983. In each case the recessions were significantly milder and the recoveries more potent compared to the size of the decline being dealt with. 2-Why not look to the mid 19th century and the pax britannica if you want a better idea of how growth rates and interest rates can moderate and debt capacity increase? I think it’s possible that the current American peace with higher levels of prosperity, lower population growth, the internet, and greater peacefulness should have a good chance of carrying more debt for longer and at lower rates than the British empire. 1-Collecting data is different from interpretation and application but the Federal Reserve does provide useful tools so that one can factually verify assumptions: https://www.minneapolisfed.org/publications/special-studies/recession-in-perspective IMO, it could be cause and effect or simple association but greater involvement by the central banks has been linked to worsening downturns and weaker recoveries. These days, a 0.25% announcement is considered a major event. We're OK as long as strong fundamentals are maintained but some cans that are kicked down the road by centrally-planned unconventional tools may simply keep getting larger and, at some point, this may be reflected in many portfolios. 2-Contrary to what you seem to write and others seem to imply, IMO the major factor behind the relay between Pax Britannica and Pax Americana was not because of pervasive involvement by central banks managing the economy but because there was an environment conducive to enduring real productivity growth. At least, that's what a guy, who seemed to know how nations become and stay prosperous, used to say in 1969. http://scienzepolitiche.unical.it/bacheca/archivio/materiale/2467/PDF-Books%20for%20Mr%20Pisula/David%20Landes-The%20unbound%20Prometheus-Cambridge%20University%20Press%20(1969).pdf If I understand correctly, Mr. Druckenmiller says that political and monetary forces are distorting the markets and that's always the case to some degree. It just seems that the some of the distortion has reached certain thresholds with potential spill-over effects in individual holdings. This is not a problem if the buy and hold definition has been properly framed.
maybe4less Posted December 23, 2018 Posted December 23, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? As long as those tax rates stay in place, yes the increased value is "permanent." However, I'm talking about GDP growth. Cutting taxes gives a boost to GDP growth (not GDP level) that is transitory. Which I agree in macro terms is important, but when I look at specific portfolio companies, it really isn't. If I own FRP, and their income consists of lease revenue, interest income, and cash from the rock pits... let's say all of this stays the same, just to keep things simple. At 22% tax rate the company is now significantly more valuable, even with the same figures as last year, when paying 35%. You can look at different figures, but simplistically, you should be throwing a multiple onto that incremental income, and the value of the company should be higher. The markets right now in a lot of cases are saying the opposite. People have essentially fabricated the recession narrative out of nothing, and what I'm saying is that even if it were true(to the extent that is reasonable, ie not a crisis) it doesn't in many, many instances, with a lot of companies, support lower equity prices. I don't disagree with you. I was making a different point about why the Fed might be in danger of making a policy mistake.
maxthetrade Posted December 23, 2018 Posted December 23, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? I depends of how much of the tax cut will get competed away, which depends on industry, market position etc. I expect that most of it will get competed away in commodity businesses. Regulated businesses and those which already enjoyed very low tax rates won't profit very much either. So in aggregate IV certainly has not increased by 20%.
Spekulatius Posted December 23, 2018 Posted December 23, 2018 Isn't the intrinsic value of profitable American businesses permanently higher with lower tax rates? Like 20% higher? I depends of how much of the tax cut will get competed away, which depends on industry, market position etc. I expect that most of it will get competed away in commodity businesses. Regulated businesses and those which already enjoyed very low tax rates won't profit very much either. So in aggregate IV certainly has not increased by 20%. The tax rate for many business was already way below the nominal tax rate befor the tax cut. When have you seen the last multiples national pay 36% tax rate? I GE’s tax rate was in the low 29% range before the tax cut even.nSame with tech companies. Domestic companies like insurers, and banks that don’t have that many opportunity to hide taxes benefited the most.
maybe4less Posted December 23, 2018 Posted December 23, 2018 I would add that it seems tax reform is one time stimulus that has juiced growth this year, such that some of the headline strength this year may prove ephemeral. This is correct - so obviously correct, in fact, that I would be absolutely shocked if the Fed got this wrong... Yeah, fair enough. As others have posted the Fed seems to have done a very good job through the crisis and since. However, I think this is the market's concern as evidenced by the flat/inverted short-end of the curve (i.e., that they will have to reverse some of the planned rate hikes in the near-term). I can see the point too. The Fed is being fairly aggressive despite the short-term nature of the stimulus, so why not pause a bit and see how the economy develops? However, I'm not smart enough to say which is right, let alone that the Fed is definitely making a mistake.
NeverLoseMoney Posted December 23, 2018 Posted December 23, 2018 Just dropping this in here. Apparently the big banks are fine: and https://www.bloomberg.com/news/articles/2018-12-23/mnuchin-called-top-u-s-bank-executives-about-market-stability Never say your banks are fine if they are fine.
Gregmal Posted December 24, 2018 Posted December 24, 2018 Just dropping this in here. Apparently the big banks are fine: and https://www.bloomberg.com/news/articles/2018-12-23/mnuchin-called-top-u-s-bank-executives-about-market-stability Never say your banks are fine if they are fine. This is getting insane. You'd think we are in the midst of some massive crisis. Or that every listed company in the US is cooking it's books... I know Tepper basically just declared the Fed Put dead, but all the writing on the wall, at least to me, seems to indicate that with a little more pain, a lot of folks are going to start looking to resurrect it.
John Hjorth Posted December 24, 2018 Posted December 24, 2018 Just dropping this in here. Apparently the big banks are fine: https://twitter.com/stevenmnuchin1/status/1076958380361543681 and https://www.bloomberg.com/news/articles/2018-12-23/mnuchin-called-top-u-s-bank-executives-about-market-stability Never say your banks are fine if they are fine. This is getting insane. You'd think we are in the midst of some massive crisis. Or that every listed company in the US is cooking it's books... I know Tepper basically just declared the Fed Put dead, but all the writing on the wall, at least to me, seems to indicate that with a little more pain, a lot of folks are going to start looking to resurrect it. Twitter links & links to Bloomberg articles ... -It would be nice if this could be a data & facts driven discussion.
NeverLoseMoney Posted December 24, 2018 Posted December 24, 2018 Just dropping this in here. Apparently the big banks are fine: https://twitter.com/stevenmnuchin1/status/1076958380361543681 and https://www.bloomberg.com/news/articles/2018-12-23/mnuchin-called-top-u-s-bank-executives-about-market-stability Never say your banks are fine if they are fine. This is getting insane. You'd think we are in the midst of some massive crisis. Or that every listed company in the US is cooking it's books... I know Tepper basically just declared the Fed Put dead, but all the writing on the wall, at least to me, seems to indicate that with a little more pain, a lot of folks are going to start looking to resurrect it. Twitter links & links to Bloomberg articles ... -It would be nice if this could be a data & facts driven discussion. Seems like a fact to me that he said it at this point. Are you worried about his statement? And is that why you'd have preferred me not to post those links? Because I'm a bit worried now that you might be worried... I'm not in fact, but that's how confidence works and it can affect markets. If it was mostly about data and facts there would be a lot more rich mathematicians out there.
rb Posted December 24, 2018 Posted December 24, 2018 Yea the banks are fine. But Stephen Mnuchin may not be that bright. Which in itself is not very confidence inspiring either. I think I heard Jamie Dimon yell "WHAT THE ACTUAL FUCK!" when that tweet went out.
Spekulatius Posted December 24, 2018 Posted December 24, 2018 Just dropping this in here. Apparently the big banks are fine: and https://www.bloomberg.com/news/articles/2018-12-23/mnuchin-called-top-u-s-bank-executives-about-market-stability Never say your banks are fine if they are fine. This is getting insane. You'd think we are in the midst of some massive crisis. Or that every listed company in the US is cooking it's books... I know Tepper basically just declared the Fed Put dead, but all the writing on the wall, at least to me, seems to indicate that with a little more pain, a lot of folks are going to start looking to resurrect it. Ouch! I just miss the infamous phrase: “ Our liquidity is strong”. Feels more and more like September 2008 to me when they introduced TARP. They really should keep their mouth shut. Back then there was a problem, now there isn’t, unless they fabricate one.
Liberty Posted December 24, 2018 Posted December 24, 2018 https://www.bloomberg.com/news/articles/2017-11-02/trump-has-340-million-of-debt-linked-to-powell-s-rate-decisions
Cardboard Posted December 24, 2018 Author Posted December 24, 2018 From RB: "Btw, I am in the camp that the fed shouldn't tighten. The reason for that, which is the right argument for tightening, is the headline numbers are painting a wrong narrative. If the economy is doing so great then the labour market is banjo tight. At this level we should see wage inflation, but we don't see that. So maybe the economy is not doing so great. One of the worst mistakes in the history of the fed was the recession of 1937. Maybe we should avoid that this time around." Really??? So why so much arguing? I am seriously amazed by the discussion here and the level of amnesia. For example, don't you guys recall that only 4-5 short years ago, a great deal of people on this website were anxiously reviewing every bank Fed review/stress test to figure if Bank of America could pay out something on any given year to its investors? Then there is the other bunch such as Gregmal implying that so many are stupid and panicking because the market is heading down: you should try to profit and buy! By the way, I was up 80% from the start of 2008 to the end of 2009, so I know a thing or two about averaging down and trading value! These large recessions are really bad for the regular folks who don't even have a dime invested in the stock market. Many lose everything: job, family, sometime their homes. And after seeing a few of these cycles, it is obvious to me that the Fed is always too slow on the way up, then over-reacting as we head down. On the other hand so far, I think that they were doing just fine. However, looking at various signs right now such as copper prices, slowdown in EM, housing, inflation, it seems obvious that things are pausing or decelerating. So recent hikes combined with the unwinding of QE and the simple end of a cycle seem to all be playing a part to slow things down. Druckenmiller said a very important thing in this interview or how easy it is to break confidence. Buffett also said in other words that tapping the brakes via higher interest rates always send you in the windshield while tapping on the gas does not always respond. Is it asking too much to try to get a soft landing or a mild recession? Cardboard
Jurgis Posted December 24, 2018 Posted December 24, 2018 Yea the banks are fine. But Stephen Mnuchin may not be that bright. Which in itself is not very confidence inspiring either. I think I heard Jamie Dimon yell "WHAT THE ACTUAL FUCK!" when that tweet went out. ;D
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