Have We Hit The Top?

[Castanza]

11 minutes ago, Gregmal said:

I think a large part of the problem is that many of these people just never invested because no matter what they always think stocks are expensive. So when you’ve missed the last 1/3/5/10 years, it’s hard to get involved now knowing you messed up previously, and thus like a lot of underperforming money managers, it’s so much easier to put out this arrogant facade of “I didn’t miss anything, I’m just smarter than everyone else and know the market is going to crash” spiel. When I hear that stuff, like with Einhorn, you know their returns suck and it’s just excuse making. 

Definitely true as well. No shortage of people out there who were sucking their thumbs during the 2020 crash that are “waiting for the next dip.”

 

I just think for the average Joe this mentality comes from using non-expendable cash for investing. If you “might need it soon” you’re going to miss dips or engage in fomo as you try to play catch-up. 
 

I was definitely emotion driven when I started investing for some of the above reasons. We live in a culture of max efficiency now. So as a young investor you want to feel like you’re getting max return on your small capital outlay. r/wsb is a great example of this. But it’s a nasty feedback loop of poor decision making. I still struggle with emotional decisions from time to time, but it really wasn’t until I felt my investment money was “just numbers that didn’t matter in my day to day” that I could better engage with investments and timeframe for expected returns. The more valuable your money is to you for investing the more you nitpick on things that are really noise. Investing is used car shopping. If you’re more worried about every little scratch or ding than how it runs you’re too emotionally involved in the decision. 
 

For me it’s now more learning what type of investments I want to avoid and how to better handicap situations. This last year has been a good lesson for me. I will likely underperform the market by a few points for 2024, because of situational investing and sizing mistakes. Not the end of the world, and I feel the lesson at the cost of a few percentage points is well worth it. 

[John Hjorth]

1 hour ago, Castanza said:

People miss the forest for the trees with these headlines. If you're selling in a major drawdown what's the likely cause? Debt, expenses too high, cashflow too low. If you are seriously concerned about market conditions moving forward maybe you should leave that 401k and brokerage account alone, divert some funds and reduce your debt and bump up your emergency fund. Lot of people out there with 50k Robinhood brokerage accounts, underfunded Roths, 401ks, HSAs sitting on $1k a month auto loans, 2k a month mortgage loans, 10k +CC debt and a stack of Amazon boxes on their porch every time they open the door; all being nursed by their talentless middle management job that could be replaced with a snap of the finger. 

 

Either make yourself more valuable, or your personal finances unbreachable by emergency situations.

 

58 minutes ago, Gregmal said:

I think a large part of the problem is that many of these people just never invested because no matter what they always think stocks are expensive. So when you’ve missed the last 1/3/5/10 years, it’s hard to get involved now knowing you messed up previously, and thus like a lot of underperforming money managers, it’s so much easier to put out this arrogant facade of “I didn’t miss anything, I’m just smarter than everyone else and know the market is going to crash” spiel. When I hear that stuff, like with Einhorn, you know their returns suck and it’s just excuse making. 

 

@Castanza is mean today, attempting to kill us all!  - Great entertainment!

 

Yeah, Greg [ @Gregmal ], some of those persons having their whole investable part of their net worth [and controlled by themselves] parked unproductive on a bank account, because 'everything else is 'too risky'', perhaps being a bit 'entrepreneurial' by also having some long term morgage bonds [Danish phenomen & thingy] , where the bond owners get fleeced if just the interest rates move, does not matter if it's up or down. And then there are the headwinds from inflation and taxes in varying degrees over time, - but, by principle, day in, day out.

[Castanza]

8 minutes ago, John Hjorth said:

@Castanza is mean today, attempting to kill us all!  - Great entertainment!

 

 I've been to too many whiskey nights with the boys where they pull up in their 60k Jeep Rubicon, talk about their 5 bedroom home (mind you no kids), bitch and complain about cost of living and salaries; but can't even answer what their 401k allocation percentage is lol.....it's mind numbing after a bit (and the whiskey doesn't help). Most bitching is self induced these days. We're all homeless, but some of us drive nice cars. 

[UK]

11 minutes ago, John Hjorth said:

unproductive on a bank account, because 'everything else is 'too risky''

+1. And as time passes by, much more is lost in preparing for market crashes than in actual market crashes:)

[Blugolds]

@Castanza your above post was good, when you're dealing with small sums that "hurt" if you lose it changes the emotion. 

 

I also have never understood (or maybe I understood early) that there really are only a couple variables that you completely control when investing. 

 

 How much you sock away

 How long your timeline is to let it "work"

 

If you are saving enough, even what many would consider mediocre returns add up and will provide satisfactory results, and if you give even modest sums long enough to compound (aka start as early as possible) it should provide satisfactory results.

 

Probably the most common lack of focus is people getting the pot large enough to make a difference, they dont save enough or have enough disposable income to get a fat kitty. Instead they put that money toward to oversized home or fancy vehicle, so that when they do "invest", in order to have any meaningful results they would have to have returns that would put them in the .0001% of all investors in history, and thus the appeal of WSB brag posts. They start late in life and have a small pot, trying to work miracles, they want the winning lotto ticket. 

 

Again to your point, 401k allocation, nobody wants to play with compound interest calculators, have no idea what the rule of 72 is, no idea what an expense ratio is etc etc. Very very basic stuff but its not sexy like turning $1k into $100k in 6mo taking a flier on a "hot tip" that they saw/heard someplace and got in before the rest of the crowd. 

 

Also doesnt help that there is now, more than ever before, a plethora of exposure via social media showing them the mansions, exotic cars that resulted in buying a course, attending a seminar, paying a coach to get rich quick. Its like Ozempic for investing lol, nobody wants to put in the work when there is an easy way for them to get what they want without changing their behavior.  

 

[UK]

 

[Fly]

3 minutes ago, UK said:

 

 

The contrarian in me wants to load up on TLT after all these high profile interviews talking about shorting/zero exposure to bonds.

[Sweet]

Why do all these guys believe inflation is going to come ripping back?  I don’t get it.  Is it because they learned their craft during the 80s when we had the double spike in inflation and they expect the same?  Where is the evidence of ‘all roads lead to inflation’ because I don’t see it.

[TwoCitiesCapital]

21 minutes ago, Fly said:

 

The contrarian in me wants to load up on TLT after all these high profile interviews talking about shorting/zero exposure to bonds.

 

TLT has been killed in the last month - but what isn't clear to me is if its anything other than the September effect which has killed bonds in September/October in many of the past few years. 

 

Before September, I was pretty well diversified across short, intermediate, long duration and complimented that with spread and leveraged products for increased yield.  At the end of August, I sold in- and at- the money calls with October expiries against my long duration instruments  and got rid of my leveraged products. That played out well as duration got crushed. 

 

About two weeks ago, I sold the vast bulk of my short-term exposure and a chunk of my "spread" exposure and have rolled it to TLT & ZROZ for duration. 

 

If this is just another September effect, I think this will go quite nicely. 

Edited October 22 by TwoCitiesCapital

[UK]

https://www.bloomberg.com/news/articles/2024-10-23/schwarzman-says-us-to-avoid-recession-no-matter-who-s-president?srnd=homepage-europe

[UK]

https://www.bloomberg.com/news/articles/2024-10-22/jpmorgan-at-odds-with-goldman-sees-solid-run-ahead-for-stocks?srnd=homepage-europe

 

Over at JPMorgan Chase & Co.’s asset and wealth-management divisions, analysts offer a more benign outlook. They’re anticipating that US large-cap equities — the big company stocks that have driven much of the recent gains — will remain a pillar of investors’ portfolios and return an annualized 6.7% over the next 10-15 years.

[Eldad]

22 hours ago, Sweet said:

Why do all these guys believe inflation is going to come ripping back?  I don’t get it.  Is it because they learned their craft during the 80s when we had the double spike in inflation and they expect the same?  Where is the evidence of ‘all roads lead to inflation’ because I don’t see it.

Because the US deficits now look like they are at the point of no return. 120% debt to GDP has historically been where most countries start to have problems. 
 

The US bond sell-off is concerning. Once the world knows that printing money is our only option, the inflation doom loop really starts. 

[gfp]

19 minutes ago, Eldad said:

Because the US deficits now look like they are at the point of no return. 120% debt to GDP has historically been where most countries start to have problems. 
 

The US bond sell-off is concerning. Once the world knows that printing money is our only option, the inflation doom loop really starts. 

 

I wouldn't read too much into a one month bond sell-off.

[Sweet]

24 minutes ago, Eldad said:

Because the US deficits now look like they are at the point of no return. 120% debt to GDP has historically been where most countries start to have problems. 

Japan rewrote the script on debt and inflation so I’m not sure the link holds.  I’m still of the view that the post covid inflation was largely as result of supply chains and not a monetary phenomenon. Although the stimulus checks didn’t help either.

[Ulti]

22 hours ago, Sweet said:

Why do all these guys believe inflation is going to come ripping back?  I don’t get it.  Is it because they learned their craft during the 80s when we had the double spike in inflation and they expect the same?  Where is the evidence of ‘all roads lead to inflation’ because I don’t see it.

https://podcasts.apple.com/us/podcast/grants-current-yield-podcast/id1207583745?i=1000673615724
 

one more guy who sees it

[Eldad]

12 minutes ago, Sweet said:

Japan rewrote the script on debt and inflation so I’m not sure the link holds.  I’m still of the view that the post covid inflation was largely as result of supply chains and not a monetary phenomenon. Although the stimulus checks didn’t help either.

Japan will collapse eventually. 

 

Supply Chains was 2021s lie I thought. 
 

[TwoCitiesCapital]

1 hour ago, Eldad said:

Because the US deficits now look like they are at the point of no return. 120% debt to GDP has historically been where most countries start to have problems. 
 

The US bond sell-off is concerning. Once the world knows that printing money is our only option, the inflation doom loop really starts. 

 

Japan and Europe are both worse off and not THE reserve currency. Neither has really gone through a existential doom-loop yet. That isn't to say they wont, but I doubt the US goes first. 

[TwoCitiesCapital]

55 minutes ago, Sweet said:

Japan rewrote the script on debt and inflation so I’m not sure the link holds.  I’m still of the view that the post covid inflation was largely as result of supply chains and not a monetary phenomenon. Although the stimulus checks didn’t help either.

 

Japan is absolutely having trouble. GDP growth has been minimal and its currency has dropped by 40-50% against the USD in the last 5-years. That is more akin to EM currency risk than a "flight to safety" asset that it has historically been characterized as. 

[Eldad]

30 minutes ago, TwoCitiesCapital said:

 

Japan and Europe are both worse off and not THE reserve currency. Neither has really gone through a existential doom-loop yet. That isn't to say they wont, but I doubt the US goes first. 

True. America has entered the Bread and Circus period it feels like. Both parties competing to offer free stuff. It could take a long time but Inflation will most definitely be the policy of the US government from here on out. There is no other way. 

[thowed]

13 minutes ago, Eldad said:

True. America has entered the Bread and Circus period it feels like. Both parties competing to offer free stuff. It could take a long time but Inflation will most definitely be the policy of the US government from here on out. There is no other way. 

 

Certainly feels like this at the moment.

 

[Castanza]

You don't have to outrun the bear, you just have to outrun everyone else. 

[Gregmal]

Geez it’s like every time we have a 1-2% drop the same old stuff starts up again 

[Spekulatius]

7 hours ago, TwoCitiesCapital said:

 

Japan and Europe are both worse off and not THE reserve currency. Neither has really gone through an existential doom-loop yet. That isn't to say they wont, but I doubt the US goes first. 

Europe government deficits are restraint  (Germany is at 2.1% of GDP, USA is in excess of 6% and that with economy booming). Both candidates are inflationary based on their policies, especially Trump.

 

I think chances are pretty good that we see some raises from the Fed after a few cuts this year. Depends on how the economy is going after the election.

[UK]

10 hours ago, TwoCitiesCapital said:

Japan and Europe are both worse off and not THE reserve currency. Neither has really gone through a existential doom-loop yet. That isn't to say they wont, but I doubt the US goes first. 

+1

[UK]

9 hours ago, Castanza said:

You don't have to outrun the bear, you just have to outrun everyone else.