Is there a value rotation going on today?

[BG2008]

11 minutes ago, Spekulatius said:

 

 

Hunger games is good analogy:

 

Value:

 

vs Growth right now:

 

 

For now.  Let's not get ahead of ourselves.  Us Value Bros are known for being stoics.  It is good for me to go through my own version of 1999 and not bought into the growth hypes and see these growth names get crushed.  You can read about it and try to understand it from the history books.  But it is another thing to live through it and deal with potential under performance.  To say that it didn't bother me would be disingenuous.  It got me curious enough to throw 1-2% at $PTON etc.  But not enough for me to throw in the towel on my RE shitcos and completely change my strategy.  So I am proud of sticking to my strategy with a bit of experimentation mixed in.  

Edited January 4, 2022 by BG2008

[Spekulatius]

18 minutes ago, BG2008 said:

 

For now.  Let's not get ahead of ourselves.  Us Value Bros are known for being stoics.  It is good for me to go through my own version of 1999 and not bought into the growth hypes and see these growth names get crushed.  You can read about it and try to understand it from the history books.  But it is another thing to live through it and deal with potential under performance.  To say that it didn't bother me would be disingenuous.  It got me curious enough to throw 1-2% at $PTON etc.  But not enough for me to throw in the towel on my RE shitcos and completely change my strategy.  So I am proud of sticking to my strategy with a bit of experimentation mixed in.  

I don't need to read history books to understand the 1999/2000, I am old enough that i lived through it. In a way though I think 2020/2021 was even crazier than 1999 with meme stocks   GME, AMC and some tech valuation were just as much out of whack than they were in 1999. Some stocks like LMND, DKNG and SKLZ pretty much look like the Pets.com back then.

 

I do think that the people that look at the Fangs as an example of excess valuation are looking in the wrong place.

Edited January 4, 2022 by Spekulatius

[BG2008]

8 minutes ago, Spekulatius said:

I don't need to read history books to understand the 1999/2000, I am old enough that i lived through it. In a way though I think 2020/2021 was even crazier than 1999 with meme stocks   GME, AMC and some tech valuation were just as much out of whack than they were in 1999. Some stocks like LMND, DKNG and SKLZ pretty much look like the Pets.com back then.

 

I do think that the people that look at the Fangs as an example of excess valuation are looking in the wrong place.

 

I do think that FANGMAG or whatever you call it isn't really that crazy.  It is interesting to see that these companies were 5-6% of the index and are now 26%.  Whenever someone ask me why have a 1% position, I would probably point them to that trait.  Power laws really do move the needle.  But yes, there were a ton of shitcos 

 

Virgin 

Nikola 

GME 

AMC 

And 97% of the SPAC deals were total turds 

 

It is interesting to see so many of the #neversell on Twitter staying so quiet lately. What looked like geniuses may just have been a massive pull forward in returns.   

[maplevalue]

The move over the past few days feels like a bit of a headfake. Classic scenario where market goes into a new year and everyone has read year ahead pieces talking about higher interest rates, tech is overvalued, bull market in commodities, blah blah blah. The market may move that way over time but it feels like it has moved a little too fast this week.

[Viking]

My read is what the Fed does matters to financial markets. Monetary policy has never been as stimulative as it has been over the past 22 months. We have also had unprecedented fiscal stimulus (government spending/direct transfers to people) over the past 22 months. 
 

Asset prices (stocks and real estate) the past 22 months have ripped higher. My guess is the unprecedented monetary and fiscal stimulus was a factor driving asset prices higher. 
 

As of today we KNOW the fiscal stimulus is largely done. And the monetary stimulus will be quickly reversed starting Jan 1. End taper first (Q1). Then higher Fed funds rates (starting March?). Then shrink Fed balance sheet (2H 2021?). 

 

If all the stimulus (monetary and fiscal) helped spike asset prices higher it makes sense to me that when it is withdrawn that will have a negative impact on asset prices. I just have no idea what the magnitude will be… Or how it will play out… 

Edited January 7, 2022 by Viking

[KFS]

1 hour ago, Viking said:

My read is what the Fed does matters to financial markets. Monetary policy has never been as stimulative as it has been over the past 22 months. We have also had unprecedented fiscal stimulus (government spending/direct transfers to people) over the past 22 months. 
 

Asset prices (stocks and real estate) the past 22 months have ripped higher. My guess is the unprecedented monetary and fiscal stimulus was a factor driving asset prices higher. 
 

As of today we KNOW the fiscal stimulus is largely done. And the monetary stimulus will be quickly reversed starting Jan 1. End taper first (Q1). Then higher Fed funds rates (starting March?). Then shrink Fed balance sheet (2H 2021?). 

 

If all the stimulus (monetary and fiscal) helped spike asset prices higher it makes sense to me that when it is withdrawn that will have a negative impact on asset prices. I just have no idea what the magnitude will be… Or how it will play out… 

 

This  

 

One of the most under-appreciated facts IMO has been the surge of the personal savings rate that resulted from huge amounts of stimulus.  The chart below aligns shockingly well with the meme/bubble era over the past 22 months.  The savings rate finally returned to normal level around October 2021 to a rate consistent with the pre-covid stimulus era.  As you said, we know the stimulus is done, and policy will begin to reverse as the Fed has made very clear recently with persistent inflation as the driving factor.  No idea how or when it plays out, but it seems hard to imagine that the meme/bubble and other stocks which rocketed due to stimulus will not be impacted by the reversal of the very thing that drove them up in the first place.  

  

 

source:  • U.S.: personal saving rate monthly 2021 | Statista

 

 

 

 

 

 

 

 

[Thrifty3000]

1 hour ago, KFS said:

 

This  

 

One of the most under-appreciated facts IMO has been the surge of the personal savings rate that resulted from huge amounts of stimulus.  The chart below aligns shockingly well with the meme/bubble era over the past 22 months.  The savings rate finally returned to normal level around October 2021 to a rate consistent with the pre-covid stimulus era.  As you said, we know the stimulus is done, and policy will begin to reverse as the Fed has made very clear recently with persistent inflation as the driving factor.  No idea how or when it plays out, but it seems hard to imagine that the meme/bubble and other stocks which rocketed due to stimulus will not be impacted by the reversal of the very thing that drove them up in the first place.  

  

 

source:  • U.S.: personal saving rate monthly 2021 | Statista

 

 

 

 

 

 

 

 

Don’t forget the impending crypto bust that will happen as soon as the greatest greater fool has placed their bet - and the crypto cult finally figures out how to discount all future cryptocurrency dividends to the present.

[Spekulatius]

Anyone here also thinks that 2023 may be the year of recession? I think even Elon Musk tweeted a similar take. By 2023, the stimulus money hoard that is saved up will be burned and the inflation will start to eat seriously into the buying power.

[ERICOPOLY]

1 hour ago, Spekulatius said:

Anyone here also thinks that 2023 may be the year of recession? I think even Elon Musk tweeted a similar take. By 2023, the stimulus money hoard that is saved up will be burned and the inflation will start to eat seriously into the buying power.

 

I'm confused as to what is going on at present.  Local businesses haven't been able to find bodies to fill positions... how do they cut staff in a recession?

[KFS]

1 hour ago, Spekulatius said:

Anyone here also thinks that 2023 may be the year of recession? I think even Elon Musk tweeted a similar take. By 2023, the stimulus money hoard that is saved up will be burned and the inflation will start to eat seriously into the buying power.

 

Is this the real reason Musk has been selling his TSLA shares??  lol.  

[KFS]

9 hours ago, Thrifty3000 said:

Don’t forget the impending crypto bust that will happen as soon as the greatest greater fool has placed their bet - and the crypto cult finally figures out how to discount all future cryptocurrency dividends to the present.

 

Agreed.  I tend to include all crypto in the meme/bubble basket which I'm sure will be unpopular with some people here.  I have a very small position on MSTR puts.... if (when) bitcoin drops below ~30k, this turd is toast. 

  

[Thrifty3000]

I have a friend whose mom has boxes of Beanie Babies sitting in an attic that originally cost something like $16,000. Every time I see her mom I have the smart assed thought to ask how many divvies those babies paid out last quarter. I refrain.

Edited January 7, 2022 by Thrifty3000

[ERICOPOLY]

49 minutes ago, KFS said:

 

Is this the real reason Musk has been selling his TSLA shares??  lol.  

 

One theory is that SpaceX needs money to fund his satellite network.

[Spekulatius]

10 hours ago, Thrifty3000 said:

Don’t forget the impending crypto bust that will happen as soon as the greatest greater fool has placed their bet - and the crypto cult finally figures out how to discount all future cryptocurrency dividends to the present.

The Fed did not sent out the stimulus checks, the Treasury did. If you don’t believe, check who signed the stimulus checks. QE and all this does little for the average John Doe, but a stimulus check does, because he can and did spent it. The Fed did a lot of stuff during the Great Recession but they could not prevent the Great Recession. The only institution who could have prevented or at least lessened the Great Recession was the Treasury. If the Treasury had sent enough checks (the helicopter money that Bernanke contemplated about, but never really pursued ) then maybe the Great Recession would have been a much smaller event than in turned out to be.
Pinging @wabuffo here.

 

[Gregmal]

10 minutes ago, Thrifty3000 said:

I have a friend whose mom has boxes of Beanie Babies sitting in an attic that originally cost something like $16,000. Every time I see her mom I have the smart assed thought to ask how many divvies those babies paid out last quarter. I refrain.

LOL as a 90s and early 2000s child, I can relate. My siblings and I had many a things like that.
 

However, recently while visiting my parents in Tampa, in their 3 car garage, which is floor to ceiling stuffed with the remnants of 5 kids now out of the house, next to that bag of beanie babies, was a box containing a bunch of boxes of baseball cards I got in middle school. One of which was an 80s set, entire thing maybe cost $5-10 in the late 90s. In that set, a Barry Bonds rookie, current value, ~$700. No dividends though, but capital gains work just the same.  If nothing else, it’s validation that supply and demand ultimately rule all. 

[KFS]

23 minutes ago, Thrifty3000 said:

I have a friend whose mom has boxes of Beanie Babies sitting in an attic that originally cost something like $16,000. Every time I see her mom I have the smart assed thought to ask how many divvies those babies paid out last quarter. I refrain.

 

LOL.  One of my favorites is this picture of a couple in divorce court dividing up their collection of beanie babies one by one, ~1999.  

 

[mcliu]

lol I wonder what the "market cap" of beanie babies was at the peak. 

[Longnose]

12 minutes ago, mcliu said:

lol I wonder what the "market cap" of beanie babies was at the peak. 

 

Not exactly the market cap but still pretty absurd. 

 

https://www.wbur.org/hereandnow/2015/03/02/beanie-baby-bubble

 

There was also almost nothing on the man behind them. Ty Warner had an education that consisted of one year studying drama at Kalamazoo College and a net worth that Forbes estimated at $2.6 billion, all of it the product of the three-year Beanie Babies craze

[adesigar]

Well every day for the last week it seems like BRK is up while indexes are down so it does seem like people are moving to value.

[thepupil]

For recent time periods:           Berkshire>Financials>Value>Growth

 

Over 5-10 yr time frame:          Growth>Financials>Berkshire>Value

 

 

 

[thepupil]

sorry, thought this was about Berkshire and not general value rotation. The answer is yes, there's a broad based value vs growth rotation occurring. I personally hate making money this way lol. It feels so unsustainable and arbitrary. I prefer takeouts and blow-out earnings/reports from my holdings, but I'll take it. Whatever. 

 

[Viking]

20 hours ago, Spekulatius said:

Anyone here also thinks that 2023 may be the year of recession? I think even Elon Musk tweeted a similar take. By 2023, the stimulus money hoard that is saved up will be burned and the inflation will start to eat seriously into the buying power.

i don’t see a recession in 2023. Too many tailwinds… housing is a big economic engine and it should continue to roll (even if the Fed raises rates 3 times in 2022). Tech is growing like crazy (and hiring like crazy). Broken global supply chains will see more production shift back to the US (slowly). People (finally) are getting China (adversary) and this will see investment shift back to US. Services part of the economy will boom post Omicron, especially international travel. The US has lowest energy costs in world; this will see production for some energy intensive industries shift back to US. Investment in electric vehicles will be massive. Investment in alternative energy will be massive. Investment in infrastructure will be large.
 

The US has a BIG problem today. It does not have the labour for all the demand today. Demand for labour is exploding.. except.. there is no corresponding increase in labour supply. Can a severe shortage of labour in an otherwise strong economy cause a recession? Economics is really interesting because sometimes stuff happens that ‘the models’ have never seen before… so ‘economists’ (and everyone else… politicians, central banks etc) gets it completely wrong. But of course they actually got it ‘right’ based on their (flawed) models… Its not what you know that gets you in trouble; it’s what you know that ain’t so…  
—————

Population growth is an interesting thing. Highly correlated with GDP growth. Immigration is one solution…

Edited January 8, 2022 by Viking

[scorpioncapital]

Main street can do well while capital markets go nowhere for a generation. It happened before. That's what pulling forward demand means.

If you didn't make a killing since the Great Recession you will need to go to Main Street to make some money, not Wall Street, in the years ahead )

 

 

Btw, a very good article explaining why Munger's BABA bet is very good one - https://themarket.ch/interview/louis-gave-a-hawkish-fed-could-provoke-an-equity-crash-ld.5727?mc_cid=429e1f79a0&mc_eid=93647a64ab

 

Edited January 8, 2022 by scorpioncapital

[Spekulatius]

5 hours ago, Viking said:

i don’t see a recession in 2023. Too many tailwinds… housing is a big economic engine and it should continue to roll (even if the Fed raises rates 3 times in 2022). Tech is growing like crazy (and hiring like crazy). Broken global supply chains will see more production shift back to the US (slowly). People (finally) are getting China (adversary) and this will see investment shift back to US. Services part of the economy will boom post Omicron, especially international travel. The US has lowest energy costs in world; this will see production for some energy intensive industries shift back to US. Investment in electric vehicles will be massive. Investment in alternative energy will be massive. Investment in infrastructure will be large.
 

The US has a BIG problem today. It does not have the labour for all the demand today. Demand for labour is exploding.. except.. there is no corresponding increase in labour supply. Can a severe shortage of labour in an otherwise strong economy cause a recession? Economics is really interesting because sometimes stuff happens that ‘the models’ have never seen before… so ‘economists’ (and everyone else… politicians, central banks etc) gets it completely wrong. But of course they actually got it ‘right’ based on their (flawed) models… Its not what you know that gets you in trouble; it’s what you know that ain’t so…  
—————

Population growth is an interesting thing. Highly correlated with GDP growth. Immigration is one solution…

Granted my hypothesis that there could be a recession in 2023 is pure speculation, but it’s some themes fun to think how this could happen. I believe a recession is a possibility but if it occurs, it will not feel like regular recession. For once, I don’t think we will see high unemployment in such a recession as a decreasing GDP will just reduce the labor market tightness.

 

I believe the most likely reason for a recession will be either and unforseeable event or an asset value deflation probably caused by rising interest rates. We are seeing already some of this  with tech stocks, but what happens when it goes to crypto, real estate and even the board stock market?

 

I think one of the reason the Labour market is so tight because people have made a lot of money in stocks, real estate and crypto. It has pulled forward the retirement a couple of years or his enabled others to got from full to part time employment.

 

If this funny money evaporated, some of the people might have to go back to work. I have seen this happening after the Y2000 tech bubble as well, but this time, the asset inflation is broader, so the impact of wealth disappearing could be much more severe.

[ERICOPOLY]

6 hours ago, Viking said:

Can a severe shortage of labour in an otherwise strong economy cause a recession? 

 

Rising wages might cause some marginally profitable businesses to call it quits, but that will free up labor to help grow the stronger companies.

 

And rising wages will stoke consumer demand.