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Gambling Mentality Rages On


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I am building a bubble portfolio, that I have puts against. Am hoping to add to it, should Bumble be next (up $10 today but no options yet, darn it).

 

SPCE -Virgin Galactic

TSLA - Tesla

NKLA - Nikola

 

ZM.  Cheers!

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You'd imagine yield curve control would be used to prevent an increase in treasury yields from crashing the stock market as well as reinforcing financial repression.

 

Grantham had a recent interview with Meb Faber and thinks we are in more of an individual frenzy as opposed to an institutional frenzy. He says institutions are over optimistic though.

 

Wonder what the implications of this are? Usually I'd say retail are a small part of the market. But with the amount of leverage they are using and their preferred vehicle call options perhaps there could still be a significant market impact.

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A fun interview with Sam Zell on SPACs and market bubbles:

 

CNBC: The question is always of course the timing of when in fact the music stops. Alan Greenspan very presciently said that there was irrational exuberance in the market in 1996/1997, but then it went on for 3 or 4 more years. And so what do you think would be the tipping point?

 

Sam Zell: Well if I knew the answer to that I'd be rich.

 

CNBC: You are Sam.

 

 

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I am building a bubble portfolio, that I have puts against. Am hoping to add to it, should Bumble be next (up $10 today but no options yet, darn it).

 

SPCE -Virgin Galactic

TSLA - Tesla

NKLA - Nikola

 

Consider adding PLUG and RUN to the bubble portfolio

 

Thanks! Will do.

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Heres another for my bubble portfolio. Zillow, 15 times sales, only 22% growth and $150M loss despite the hottest real estate market in history.

 

"Hottest real estate market in history"? you might be questioning. I just sold my home after a quick remodel, in October when I started my realtor said that the market index of buyers/sellers, which normally bounced between 80 and 120, was at 350. After we closed this week, they said the market was if anything, hotter. Any inventory is selling so fast that available inventory is something a fraction of normal, but sales volume is high.

 

As evidence, we got three offers at $20k-$30k over our asking price before remodel was completed, or property shown, or even marketed. We never even became inventory. This is Scottsdale, Arizona, but I am betting its not a huge outlier from rest of company.

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Saw that interview. I’m surprised he didn’t mention that he is running a SPAC - EQD.

 

A fun interview with Sam Zell on SPACs and market bubbles:

 

CNBC: The question is always of course the timing of when in fact the music stops. Alan Greenspan very presciently said that there was irrational exuberance in the market in 1996/1997, but then it went on for 3 or 4 more years. And so what do you think would be the tipping point?

 

Sam Zell: Well if I knew the answer to that I'd be rich.

 

CNBC: You are Sam.

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I think with SPACs the condemnation is by class rather than every single instance. The same as IPOs. I would be quite happy giving a blank cheque to someone like Sam Zell. And even with Bill Ackman's SPAC you can have some confidence he will make a decent acquisition.

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https://www.jpmorgan.com/wealth-management/wealth-partners/insights/big-government-runaway-inflation-and-a-market-bubble

 

This is quite good. Supports the idea that institutions are optimistic rather than necessarily crazy.

 

Their main arguments:

 

1) US large cap companies earnings power was very resilient in the face of one of the sharpest recessions in history

2) Low interest rates support expensive valuations

3) Even if there is some multiple compression, this will be offset by earnings growth with their expectations of +25% earnings growth for the S&P 500 and +15% earnings growth from all other major reasons

4) Inflation is still well below target and major components such as wages and shelter remain weak and if inflation does pick up it will be in the context of a healing economy

5) We may have passed the hope phase but we still have the growth phase to come

 

 

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https://www.jpmorgan.com/wealth-management/wealth-partners/insights/big-government-runaway-inflation-and-a-market-bubble

 

This is quite good. Supports the idea that institutions are optimistic rather than necessarily crazy.

 

Their main arguments:

 

1) US large cap companies earnings power was very resilient in the face of one of the sharpest recessions in history

2) Low interest rates support expensive valuations

3) Even if there is some multiple compression, this will be offset by earnings growth with their expectations of +25% earnings growth for the S&P 500 and +15% earnings growth from all other major reasons

4) Inflation is still well below target and major components such as wages and shelter remain weak and if inflation does pick up it will be in the context of a healing economy

5) We may have passed the hope phase but we still have the growth phase to come

 

 

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https://www.jpmorgan.com/wealth-management/wealth-partners/insights/big-government-runaway-inflation-and-a-market-bubble

 

This is quite good. Supports the idea that institutions are optimistic rather than necessarily crazy.

 

Their main arguments:

 

1) US large cap companies earnings power was very resilient in the face of one of the sharpest recessions in history

2) Low interest rates support expensive valuations

3) Even if there is some multiple compression, this will be offset by earnings growth with their expectations of +25% earnings growth for the S&P 500 and +15% earnings growth from all other major reasons

4) Inflation is still well below target and major components such as wages and shelter remain weak and if inflation does pick up it will be in the context of a healing economy

5) We may have passed the hope phase but we still have the growth phase to come

 

all true enough. plus JPM can out with an analysis (cant find link) that we can all take our masks off in four months if vac rate continues as is

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Investment banks generally have the view we are in the early innings of a new bull market and the Roaring 20s are ahead.

 

I think the main risk is we have massive amounts of global debt that is predicated on low interest rates. That feels like a house of cards to me.

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https://www.jpmorgan.com/wealth-management/wealth-partners/insights/big-government-runaway-inflation-and-a-market-bubble

 

This is quite good. Supports the idea that institutions are optimistic rather than necessarily crazy.

 

Their main arguments:

 

1) US large cap companies earnings power was very resilient in the face of one of the sharpest recessions in history

2) Low interest rates support expensive valuations

3) Even if there is some multiple compression, this will be offset by earnings growth with their expectations of +25% earnings growth for the S&P 500 and +15% earnings growth from all other major reasons

4) Inflation is still well below target and major components such as wages and shelter remain weak and if inflation does pick up it will be in the context of a healing economy

5) We may have passed the hope phase but we still have the growth phase to come

 

all true enough. plus JPM can out with an analysis (cant find link) that we can all take our masks off in four months if vac rate continues as is

 

Fauci seems to agree saying April is when vaccines will be regularly available.

 

However I am hesitant to see how we get to 25% earnings growth in the S&P500 without inflation or continued consumer stimulus.

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Ben Graham is credited with saying something along the lines of "In the short-run, the market is a voting machine; in the long-run, the market is a weighing machine." 

 

Isn't it a little bit ironic that the powerhouse social media platform of the modern day retail investor -- Reddit -- is literally like a voting machine?  Think about how Reddit works.  It's a platform where users get to "upvote" or "downvote" each others posts if they like it or dislike it.  If a post gets a bunch of upvotes it moves up the Reddit rankings and becomes more visible.  More people see it, leading to additional upvotes.  If a post gets downvotes, it quickly falls and disappears from view. 

 

If you asked Graham to imagine a worst-case literal "voting machine" to maximize this effect over people's thoughts and ideas, and over the market, it might have looked something like Reddit.  I suppose similar comparisons can be made with other platforms - e.g. twitter, facebook, etc., but Reddit just strikes me as a very ironic "voting machine." 

 

Just a random thought of the day.  Ok, back to work. 

 

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Ben Graham is credited with saying something along the lines of "In the short-run, the market is a voting machine; in the long-run, the market is a weighing machine." 

 

Isn't it a little bit ironic that the powerhouse social media platform of the modern day retail investor -- Reddit -- is literally like a voting machine?  Think about how Reddit works.  It's a platform where users get to "upvote" or "downvote" each others posts if they like it or dislike it.  If a post gets a bunch of upvotes it moves up the Reddit rankings and becomes more visible.  More people see it, leading to additional upvotes.  If a post gets downvotes, it quickly falls and disappears from view. 

 

If you asked Graham to imagine a worst-case literal "voting machine" to maximize this effect over people's thoughts and ideas, and over the market, it might have looked something like Reddit.  I suppose similar comparisons can be made with other platforms - e.g. twitter, facebook, etc., but Reddit just strikes me as a very ironic "voting machine." 

 

Just a random thought of the day.  Ok, back to work.

 

WSB moderators / bots are ruthless post removers. Removals frequently seem capricious. Same holds true for the ban-hammer. This kind of skews the democratic process towards a one party system IMO.

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