Have We Hit The Top?

[bluedevil]

I was thinking today about Prem Watsa's comment on the 3Q 2020 earnings call.

 

Since then, Root insurance is down 90%, while Fairfax has almost doubled. 

 

Zoom has lost 62%, and Exxon has doubled.

 

I hope this continues, versus the "confidence termites" taking out every one!

 

* * * 

 

Let me just tell you, I've been in the business for 45 years. And I have rarely seen a time period where there's such a divergence from growth-oriented stocks like technology and value-oriented stocks.

 

So, I gave you a few examples in our own portfolio. But let me just give you one that I just came across today. I just looked it up. I looked at it again. Zoom, which we all use Zoom Technology, Zoom video. It's got a market cap of $139 billion.

 

At the end of July, for the first six months, it had a revenue base of approximately $1 billion and a net profit of $200 million. $139 billion that by the way, is about the same size as Exxon. So, we have this situation him where if you're growth oriented and it's growing significantly. And that you have market capitalizations that we haven't seen.

 

And it can only be justified for a short period of time in the stock market. In the insurance business, and I don't follow this too much. And just know that insurance was a few days ago. Root went public, company called Root $7 billion.

 

It's got $500 million of the premium. And it's $7 billion market cap is almost as big as Fairfax, which has $20 billion of approximately $20 billion of premium. Like exceptional divergence. And I've seen this over long periods of time. And it reminds me really of the late 60s and the early 70s when you had the Nifty 50.

[glider3834]

1 hour ago, bluedevil said:

I was thinking today about Prem Watsa's comment on the 3Q 2020 earnings call.

 

Since then, Root insurance is down 90%, while Fairfax has almost doubled. 

 

Zoom has lost 62%, and Exxon has doubled.

 

I hope this continues, versus the "confidence termites" taking out every one!

 

* * * 

 

Let me just tell you, I've been in the business for 45 years. And I have rarely seen a time period where there's such a divergence from growth-oriented stocks like technology and value-oriented stocks.

 

So, I gave you a few examples in our own portfolio. But let me just give you one that I just came across today. I just looked it up. I looked at it again. Zoom, which we all use Zoom Technology, Zoom video. It's got a market cap of $139 billion.

 

At the end of July, for the first six months, it had a revenue base of approximately $1 billion and a net profit of $200 million. $139 billion that by the way, is about the same size as Exxon. So, we have this situation him where if you're growth oriented and it's growing significantly. And that you have market capitalizations that we haven't seen.

 

And it can only be justified for a short period of time in the stock market. In the insurance business, and I don't follow this too much. And just know that insurance was a few days ago. Root went public, company called Root $7 billion.

 

It's got $500 million of the premium. And it's $7 billion market cap is almost as big as Fairfax, which has $20 billion of approximately $20 billion of premium. Like exceptional divergence. And I've seen this over long periods of time. And it reminds me really of the late 60s and the early 70s when you had the Nifty 50.

Yep Prem nailed it 

[ValueArb]

ARKK is a pretty good proxy for the frothiest part of the tech bubble and it's at $86 right now, down about 45% from a $160+ peak in first half last year. SPCE is at $11.92 down from the 60s, PTR down to $16.90, WKHS, $4.12, etc.

 

It's a bloodbath out there.

[CafeB]

6 hours ago, bluedevil said:

Zoom has lost 62%, and Exxon has doubled.

 

Related chart:

 

theirrelevantinvestor.com/2022/01/06/rules-for-buying-crashing-growth-stocks/

 

[muscleman]

6 hours ago, bluedevil said:

I was thinking today about Prem Watsa's comment on the 3Q 2020 earnings call.

 

Since then, Root insurance is down 90%, while Fairfax has almost doubled. 

 

Zoom has lost 62%, and Exxon has doubled.

 

I hope this continues, versus the "confidence termites" taking out every one!

 

* * * 

 

Let me just tell you, I've been in the business for 45 years. And I have rarely seen a time period where there's such a divergence from growth-oriented stocks like technology and value-oriented stocks.

 

So, I gave you a few examples in our own portfolio. But let me just give you one that I just came across today. I just looked it up. I looked at it again. Zoom, which we all use Zoom Technology, Zoom video. It's got a market cap of $139 billion.

 

At the end of July, for the first six months, it had a revenue base of approximately $1 billion and a net profit of $200 million. $139 billion that by the way, is about the same size as Exxon. So, we have this situation him where if you're growth oriented and it's growing significantly. And that you have market capitalizations that we haven't seen.

 

And it can only be justified for a short period of time in the stock market. In the insurance business, and I don't follow this too much. And just know that insurance was a few days ago. Root went public, company called Root $7 billion.

 

It's got $500 million of the premium. And it's $7 billion market cap is almost as big as Fairfax, which has $20 billion of approximately $20 billion of premium. Like exceptional divergence. And I've seen this over long periods of time. And it reminds me really of the late 60s and the early 70s when you had the Nifty 50.

 

This is a repeat of the 2000 dot com bubble top. First we get a rotation of tech stocks down value stocks up. Then all stocks go down together. The bottom will be in 2 years later.

[ERICOPOLY]

19 hours ago, muscleman said:

 

This is a repeat of the 2000 dot com bubble top. First we get a rotation of tech stocks down value stocks up. Then all stocks go down together. The bottom will be in 2 years later.

 

There was a recession tied into that, not just a stock market revaluation.  Recessions drop stock markets overvalued or not.

 

The businesses in my community cannot afford to layoff any workers -- they need at least some warm bodies in the room until robots can replace everyone.  I think the layoff cycles deepen recessions (people losing jobs stop spending).

[Castanza]

4 minutes ago, ERICOPOLY said:

 

There was a recession tied into that, not just a stock market revaluation.  Recessions drop stock markets overvalued or not.

 

The businesses in my community cannot afford to layoff any workers -- they need at least some warm bodies in the room until robots can replace everyone.  I think the layoff cycles deepen recessions (people losing jobs stop spending).

Stores have been closing everywhere here. First is was reduced hours and now it's "we aren't opening due to staffing shortages". 2/3 Dunkin Donuts in my immediate area are closed. Burger King, Starbucks, Panera Bread and a bunch of other chains are the same way. Even some hardware stores are closed or working on reduced hours. 

[ERICOPOLY]

Let's say TSLA market cap gets destroyed.  So f'ing what guys.  Who cares.  They are selling the cars like hotcakes and making profits.  They won't lay off their workers just because the stock goes down.  This isn't like the Dot Com bust where the companies themselves evaporated overnight and all jobs were lost along with it.

[ERICOPOLY]

Layoffs?  Where?  Who will need to layoff staff?

 

Apple?  Good luck.

Microsoft?  Good luck.

Facebook?  Good luck.

Tesla?  Good luck.

Amazon? Good luck.

Netflix?  Good luck.

[ERICOPOLY]

Homebuilders?  We're undersupplied nationally.

[ERICOPOLY]

And then you have the domestic and global travel industries already decimated today... will a recession more decimate it?  Is that even possible?

Edited January 7, 2022 by ERICOPOLY

[Spekulatius]

23 hours ago, ValueArb said:

ARKK is a pretty good proxy for the frothiest part of the tech bubble and it's at $86 right now, down about 45% from a $160+ peak in first half last year. SPCE is at $11.92 down from the 60s, PTR down to $16.90, WKHS, $4.12, etc.

 

It's a bloodbath out there.

Funny thing is that even after this bloodbath, all of these stocks are still overvalued.

[Spekulatius]

1 hour ago, Castanza said:

Stores have been closing everywhere here. First is was reduced hours and now it's "we aren't opening due to staffing shortages". 2/3 Dunkin Donuts in my immediate area are closed. Burger King, Starbucks, Panera Bread and a bunch of other chains are the same way. Even some hardware stores are closed or working on reduced hours. 

I think we could get a recession while the Labour Market remaining relatively strong. A recession is just 2 quarters of negative GDP. It doesn’t take much to get to that point. Could be just a consumer strike due to eroding buying power for example.

[JRM]

This is a funny thread: 

 

[Gregmal]

11 minutes ago, Spekulatius said:

I think we could get a recession while the Labour Market remaining relatively strong. A recession is just 2 quarters of negative GDP. It doesn’t take much to get to that point. Could be just a consumer strike due to eroding buying power for example.

This is a good point. People get way too hung up on silly words. Recession? So what? I'd be more focused on the how and why of it. Rather than just some dumb thing that largely everyone is already aware of. Same shit folks were doing with OMG WORST NUMBARS! SINCE GREAT DEPRESSION when everything shut down in Q2 2020. Yawn. Get over it. What did you expect to happen when it became illegal to go to the store?

[fareastwarriors]

I don't mind seeing more carnage out there. The crap is rightfully getting killed sure but the quality stuff is not down all that much.

 

 

[fareastwarriors]

Randomly saw this. Wow, so much money out there earning negative yield. As a layperson, it's hard to comprehend. 

https://www.bloomberg.com/opinion/articles/2022-01-07/-10-trillion-in-negative-yield-debt-should-bolster-stocks

 

The Most Important Number of the Week Is $10 Trillion

The amount of bonds globally that have negative yields should support the stock market for some time even as central banks turn hawkish.

[ERICOPOLY]

1 hour ago, Spekulatius said:

I think we could get a recession while the Labour Market remaining relatively strong. A recession is just 2 quarters of negative GDP. It doesn’t take much to get to that point. Could be just a consumer strike due to eroding buying power for example.

 

We had a recession in 2020 didn't we?  Stocks went up I think?

[Spekulatius]

13 minutes ago, ERICOPOLY said:

 

We had a recession in 2020 didn't we?  Stocks went up I think?

Yes, but first they went down by a little bit.

 

This whole thing is just speculation anyways. Oh wait…

[ERICOPOLY]

25 minutes ago, Spekulatius said:

Yes, but first they went down by a little bit.

 

This whole thing is just speculation anyways. Oh wait…

 

Yes, and TSLA skyrocketed.  It had to be the most "oh shit!" moment for the insurance company shorting them as a hedge against market decline.

[Xerxes]

Was not sure where to put this interview. 

 

Something we hear often, how after every downturn, when the Fed raise rate the economy buckles at lower and lower rate. (ala Q4 2018, when the whole thing started to warp). Making the case that in 2022-23, Fed can only raise rate perhaps 4x 0.25, before the market start to cough. Not that it is Fed's job to keep the stock market afloat, but just using the stock market as a proxy of the overall sentiment.

 

And i think this has been the core belief of the Bitcoin community that notwithstanding 2022-23 where the rate will increase, the Fed would have no choice to circle back. (ala Japan) ... unless if there is a powerful independent Fed that could engineer a recession and let the market fall where it may.

 

 

 

[Thrifty3000]

 

Buckle your safety belts!

 

^ why I don’t own an S&P 500 index fund

Edited January 14, 2022 by Thrifty3000

[kab60]

I've always been on Team Gregmal, thinking it was idiotic to hold cash as a private investor as I always found stuff to do. And I probably still am, but for like the first time since I started investing, I'm raising some cash. Mainly by selling positions, which had a good run, and might be trading above fair value (I'm selling the flowers).

 

What's happening with oil is fascinating. Every single public producer is focused on ROIC and returning cash to shareholders - not expansion. Oil stock prices probably still have to double, before their cost of capital is appropriate for chasing growth. So it doesn't seem unlikely that oil stays here, or even goes higher, increasing the cost of a lot of stuff.

 

You've got inflation running hot, and you've got rates hikes coming. You have a ton of investors who's gotten complacent thinking that the FED will bail you out. But I wonder if an equity crash won't be better for the real economy. The number of people quitting their jobs, or thinking about quitting their jobs, probably due to wealth effects, is pretty incredible.

 

I think most likely inflation peaks and then returns to a more usual average, while FED hikes and equity mkts do fine as higher rates are also a function of higher growth, so everything will probably be fine. But, for the first time since I started investing, this time does feel different (don't say the words!).

 

I don't like taking directional bets (espescially not on macro, and I'm probably more in camp deflation LT anyway), and it's not like I'm going long canned foods and selling all my stocks (mostly holding Big Tobacco, Berkshire and auto dealers), but I feel okay being a bit on the sideline and seeing how this plays out.

 

Perhaps I'm also becoming a bit of a pussy after a good run. If I don't do dumb shit, I can probably "retire" at age 35.

Edited January 14, 2022 by kab60

[thepupil]

3 hours ago, kab60 said:

I've always been on Team Gregmal, thinking it was idiotic to hold cash as a private investor as I always found stuff to do. And I probably still am, but for like the first time since I started investing, I'm raising some cash. Mainly by selling positions, which had a good run, and might be trading above fair value (I'm selling the flowers).

 

What's happening with oil is fascinating. Every single public producer is focused on ROIC and returning cash to shareholders - not expansion. Oil stock prices probably still have to double, before their cost of capital is appropriate for chasing growth. So it doesn't seem unlikely that oil stays here, or even goes higher, increasing the cost of a lot of stuff.

 

You've got inflation running hot, and you've got rates hikes coming. You have a ton of investors who's gotten complacent thinking that the FED will bail you out. But I wonder if an equity crash won't be better for the real economy. The number of people quitting their jobs, or thinking about quitting their jobs, probably due to wealth effects, is pretty incredible.

 

I think most likely inflation peaks and then returns to a more usual average, while FED hikes and equity mkts do fine as higher rates are also a function of higher growth, so everything will probably be fine. But, for the first time since I started investing, this time does feel different (don't say the words!).

 

I don't like taking directional bets (espescially not on macro, and I'm probably more in camp deflation LT anyway), and it's not like I'm going long canned foods and selling all my stocks (mostly holding Big Tobacco, Berkshire and auto dealers), but I feel okay being a bit on the sideline and seeing how this plays out.

 

Perhaps I'm also becoming a bit of a pussy after a good run. If I don't do dumb shit, I can probably "retire" at age 35.

pretty much same here.

 

-now 4-5% net cash/ SPACs in the investment portfolio 

-completely undrawn HELOC despite planning on using it to buy i bonds (just actually paid for them instead),

-not cash out refi-zing despite HPA de levering me to 55% LTV,

-cars paid for

- sold my two most complex and levered businesses (Brookfield and Softbank)

- have even considered stopping my buy $x  k of index / month in the 401k

- top of portfolio emphasizes the most excessively capitalized

 

feels a little market time-y to me but I have lower conviction in the risk reward right of overall portfolio right now…trying to resist urge to go 10% or even 20% cash. 
 

I’ll never understand the “I think the market should trade for 10x earnings and am 100% cash” crowd, but I’m a little bit more of a pansy now than I have been In most Recent past 

 

 

[Aurel]

15 hours ago, Thrifty3000 said:

 

Buckle your safety belts!

 

^ why I don’t own an S&P 500 index fund

It kinda makes sense, because the E of the P/E was down because of that COVID-thing.

Edited January 14, 2022 by Aurel