Have We Hit The Top?

[gfp]

You know that feeling when Berkshire rallies "unexplained" while the indices sell off?  Not usually followed by a great time for stocks.

[james22]

1 hour ago, gfp said:

You know that feeling when Berkshire rallies "unexplained" while the indices sell off?

 

Just sold some BRK for 2024 expenses. Nice feeling to be able to do so near the top.

[james22]

On 1/2/2024 at 7:25 AM, mattee2264 said:

And of course there are other reasons to support higher than average PE multiples such as changing market composition (more growth/quality/defensive, less cyclicality), more interventionist monetary and fiscal policy, and perhaps even a generational change in investors as the old timers who remember the Great Depression have been replaced by Gen Z whose motto is "YOLO" and crowd into tech companies they are familiar with. 

 

What would happen to valuations if SS reserves were invested in the market?

 

... some have raised a fair question as to whether investing all of Social Security’s reserves in U.S. bonds is the best investment strategy. The interest rate paid on the bonds is determined by a formula adopted by Congress in 1960. It uses a rolling average of the rate on all U.S. bonds with maturities longer than four years. My rough calculation indicates this has resulted in about a 5.2% average yield since 1960. Currently, the rate is much lower because interest rates have been so low for the last decade, notwithstanding the increase in rates over the last year. According to Social Security Administration data, the average return for 2022 was 2.35%.

 

In contrast, the S&P 500 index has returned 10.15% since 1960. If the reserves had been invested in the S&P 500 during that time, the reserve balance today would be something around $30 trillion and we would not be facing any shortfall for decades.

 

https://www.zerohedge.com/political/congress-has-not-looted-social-security

[Spekulatius]

MBLY - another belated Semiconductor supply chain victim:

https://finance.yahoo.com/news/mobileye-releases-preliminary-fy2023-financial-115000786.html

 

I think this revenue guidance is ~25% below consensus (which is about $2.5B in revenue for 2024). Boggles my mind how this supply glut has escaped management so far. they can see how much their customers have bought and how much cars they are selling with those Mobileye kits.

Edited January 4 by Spekulatius

[valueseek]

2 hours ago, Spekulatius said:

MBLY - another belated Semiconductor supply chain victim:

https://finance.yahoo.com/news/mobileye-releases-preliminary-fy2023-financial-115000786.html

 

I think this revenue guidance is ~25% below consensus (which is about $2.5B in revenue for 2024). Boggles my mind how this supply glut has escaped management so far. they can see how much their customers have bought and how much cars they are selling with those Mobileye kits.

Memories are shorter esp. in the semi space. If one looks at the guidance of these management teams back in 2018, it will be clearer eg. NXPI, etc. Or ADI that is very well regarded more recently. Or MU from 2022-2023 when it was regarded by most investors that the commoditized nature of the industry has gone away due to supply side rationalization. Anyways, but some credit to them that most have been managing the inventory situation much better than in the previous downturns.

[Spekulatius]

2 hours ago, valueseek said:

Memories are shorter esp. in the semi space. If one looks at the guidance of these management teams back in 2018, it will be clearer eg. NXPI, etc. Or ADI that is very well regarded more recently. Or MU from 2022-2023 when it was regarded by most investors that the commoditized nature of the industry has gone away due to supply side rationalization. Anyways, but some credit to them that most have been managing the inventory situation much better than in the previous downturns.

Yes, ADI has done a good job, as did peers like MCHP or NXPI or STM. those all have very diversified customer base, so it's harder to track real consumption versus inventory hording.

MLBY just supplies car makers, so they have relatively few customers and I think they deliver a kit basically. They should know exactly how much goes in one car (one kit or set/ car) and it should not be too hard to find official numbers how many cars have been sold.

 

It should be obvious that you can't take customers by your word in this business as they always give projections that are WAG and supply chain managers are incentivized to order too much because too little means production stops. So they tend to overorder and then adjust down. If they see inventory piling up internally , l they often cancel all PO's all of a sudden and may not order more for month.

 

 

Edited January 4 by Spekulatius

[Luca]

JPM guide to the markets 2024:

 

 

Valuations close to 1 STD above 30 year average.

 

 

Returns at these valuations historically not amazing

 

Profit margins:

 

 

Fundamentals Value vs Growth: 

 

Top 10 performance vs rest: 

 

 

Early delinquencies: 

 

 

Debt:

 

 

 

The consumer: 

 

 

Inflation cooling:

 

 

Expected rate cuts:

 

 

Outperformance EM? 

 

 

EM markets cheap!:

 

 

Interestingly higher buyback announcements in Japan and relative higher discount to US: 

 

 

 

 

 

 

 

Edited January 5 by Luca

[ValueArb]

If inflation rate is still 3%, how can they be planning for the Fed to cut rates? I thought their target was inflation + 2% or am I oversimplifying it?

[Gregmal]

Where recession?

[Gregmal]

1 minute ago, ValueArb said:

If inflation rate is still 3%, how can they be planning for the Fed to cut rates? I thought their target was inflation + 2% or am I oversimplifying it?

The same way inflation wasnt 9% in June 2022, because simply, the calculation showed that at some point between June 2021 and May 2022, the things THEY manufactured into some equation, arrived at that figure....inflation isnt 3% today either. Remove the fake OER its basically 0-1%. The only people who cant accept that are the ones who cant adapt and need to rely on being rigid, inflexible, and certain in their spreadsheet inputs. Real world don't work like that. Election year, and inflation beat, the Fed and Oval Office will likely wanna let you know they did their jobs this year. Thats a relevant input now. 

[Gregmal]

The whole services inflation argument is bullshit too and outside OER that’s the only other leg left on the fallen inflation stool. Lock people away and no duh they’re going to be willing to spend pretty much whatever, doing the things they already loved doing pre COVID…travel, entertainment and restaurant type stuff. On top of the fact the millennial demographic already declared this sorta stuff their passion pre COVID. It’s a secular trend. Has nothing to do with inflation. The wage price spiral theory itself spiraled itself from the textbook to the garbage can the last few years. So basically, there’s just nothing left to the rates/inflation thesis. Told people that fall of 22.

[Gregmal]

Oh boy! The hits keep coming.

 

https://www.nytimes.com/2024/01/04/business/france-carrefour-pepsi-prices.html

 

Reminds me of the good ole days when it seemed controversial to suggest these price hikes had very little to do with inflation. 

[ArminvanBuyout]

A good thread on inflation from a few weeks ago
 

 

[ArminvanBuyout]

I guess separately, what are people's thoughts on the whole consumer excess savings dynamic that bears have been harping on?

It's one of the only points that seems generally plausible, though I guess the counter is that lower rates while jobs continue to stay solid --> slightly better business sentiment --> soft landing before we dig too deep into consumer savings --> stronger foundation for next leg of economy post temp slowdown

[Gregmal]

Bears have been lying and/or just blatantly misrepresenting/deliberately trying to be wrong about the “consumer being tapped out” now since Q2 2021. Wabuffo has done a good job mocking them the entire way through. 
 

Honestly I just don’t really waste much time fretting such things. If you can’t deal with a potential recession don’t play in the stock market. Or do and produce Chanos like returns. More moneys been lost preparing for recessions than anything else, nevertheless, just like the fools who play the lottery, they’re also free to keep trying to guess the next 10-20% pullback.

[Gregmal]

Has anyone checked in on this winner lately?

 

https://www.wsj.com/articles/one-hedge-fund-is-up-223-this-year-thanks-to-a-big-bet-against-tech-stocks-11658223000

[ArminvanBuyout]

10 hours ago, Gregmal said:

Has anyone checked in on this winner lately?

 

https://www.wsj.com/articles/one-hedge-fund-is-up-223-this-year-thanks-to-a-big-bet-against-tech-stocks-11658223000

 

Haha

https://www.institutionalinvestor.com/article/2ccw3nwlyyjuarvu1dam8/premium/this-might-be-the-most-volatile-hedge-fund

[Spekulatius]

Interesting, the first 5 trading days performance is correlated with the full year performance 69% of the time, 83% on election years. Doesn’t bode that well for this year.

 

Edited January 6 by Spekulatius

[brobro777]

https://finance.yahoo.com/news/investors-lost-195-billion-shorting-012139363.html

 

Ouch!

 

[backtothebeach]

6 hours ago, ArminvanBuyout said:

 

2.98 x 0.31 = 0.9238

 

Minus 7.6% in total over two years. Math is a bitch...

 

 

[ValueArb]

2 hours ago, backtothebeach said:

 

2.98 x 0.31 = 0.9238

 

Minus 7.6% in total over two years. Math is a bitch...

 

 

 

Returns are temporary, the fees last forever.

[Gregmal]

40 minutes ago, ValueArb said:

 

Returns are temporary, the fees last forever.

Basically this. That and when you see guys with performance like this, you know their only real goal in the first place was to get lucky and do something crazy enough to get enough publicity to end up with eternal marketing material via Bloomberg and CNBC snippets. Which he definitely accomplished. 

[Sweet]

11 hours ago, Spekulatius said:

Interesting, the first 5 trading days performance is correlated with the full year performance 69% of the time, 83% on election years. Doesn’t bode that well for this year.

 

Not getting at you Spek, but I swear every year they find some new data-mined metric that predicts the markets are going to perform poorly.

[Sweet]

I wonder if these guys ever look at the amount of money lost by investors sitting on the sidelines waiting for a low to buy at.

 

https://www.marketwatch.com/story/uh-oh-everyone-is-back-to-buying-stocks-again-4eba446e?cx_testId=22&cx_testVariant=cx_1&cx_artPos=4&mod=home-page-cx#cxrecs_s

 

If you can buy low and sell high great, it’s definitely my preferred way to invest.  But some of the great companies which produce the best returns don't often trade at low multiples.  They might be 3-4 times higher before you see meaningful correction whilst all you’re holding is your dick.

I don’t think I’ve ever seen an article on MarketWatch on CNBC which calculates the opportunity cost of not buying.

[changegonnacome]

Digging around the Inflation print today and dare I say it - it remains unsupportive of the idea that the Fed will be cutting soon.

 

BLS productivity data for 2023 however genuinely surprised me and I got this wrong....that the US had greater than 1.5% productivity numbers left to squeeze out of itself.....damned inventive is this capitalism thing.

 

So I dunno - maybe the Fed does a funds rate tweak 25b-50bpsps or something later this year....but unless the underlying economic data changes.....its really a staying higher for longer situation again this year with nothign like the big cuts priced in...with obviously increasing MoM chances of the mythical and rarely seen soft landing unicron coming over the hills.......where the Fed cuts 200bps or more not because its white knuckle terrified of what's happening to the economy but rather doing it cause 5% rates are no longer required.