Have We Hit The Top?

[Gregmal]

More egg on the faces of Jerryband Friends with NYCB. This is pure awesome…force the asset sale, give the ok to the buyer(nycb), then basically pull the rug on them with the “regulatory” angle, effectively causing the typical dominos to fall(media/social media/short sellers screaming hoping to cause a run on the bank), then….blame it on bad management lol. Fuck these people, such idiots all around.

[Luca]

Something that really shocks me: I have an account at a german broker called "trade republic". Its the robin hood equivalent for northern europe. If i simply go to "search", the function to search for stocks etc, I have DIRECTLY on the front page the option for derivates with THREE underlying stocks: 

 

NVIDIA

NASDAQ

SUPERMICRO

 

Its probably based on the most traded derivatives but still, the app is inviting people into buying derivatives on the companies which obviously then also pushes up the prices of the underlying securities...

 

Talking about a bubble...

 

EDIT: 

 

They are managing 35b in assets. 

Edited March 8 by Luca

[Luca]

[Gregmal]

I still occasionally dream of someone hacking the CPI and releasing a 15 print or something crazy just so we can see these mindless monkey boys who “brace” for these sorts releases have seizures. 

[Spooky]

Grantham back at it again: https://www.gmo.com/americas/research-library/the-great-paradox-of-the-u.s.-market_viewpoints

 

 

[Gregmal]

2 minutes ago, Spooky said:

Grantham back at it again: https://www.gmo.com/americas/research-library/the-great-paradox-of-the-u.s.-market_viewpoints

 

 

At this point the guys best and highest use would be running charity auctions for the right to be punched in the face by current and former clients whom he's cheated with his antics. 

[Milu]

1 hour ago, Gregmal said:

At this point the guys best and highest use would be running charity auctions for the right to be punched in the face by current and former clients whom he's cheated with his antics. 

Him and Jim Rogers always at it. Think I have seen this headline or similar from Jim about every year since 2010

 

https://asia.nikkei.com/Editor-s-Picks/Interview/Jim-Rogers-warns-that-global-good-times-are-nearing-the-end

[Gregmal]

Can we create a news network that is not dishonest and actually labels its guests and fodder characters appropriately? Rather than “the guy who called XYZ crash”…wouldn’t “the guy who’s made 643 predictions with a 4% hit rate” be more appropriate? How about? “the guy who’s lost 30% over the past decade while underperforming the index by 300%”…instead of “famed short seller” can we get a more honest “guy who cries wolf a lot and if enough people are dumb enough to fall for it, buys the stuff he says he’s shorting”?

[Spooky]

42 minutes ago, Gregmal said:

Can we create a news network that is not dishonest and actually labels its guests and fodder characters appropriately? Rather than “the guy who called XYZ crash”…wouldn’t “the guy who’s made 643 predictions with a 4% hit rate” be more appropriate? How about? “the guy who’s lost 30% over the past decade while underperforming the index by 300%”…instead of “famed short seller” can we get a more honest “guy who cries wolf a lot and if enough people are dumb enough to fall for it, buys the stuff he says he’s shorting”?

 

The CNBCs of this world are in it for the eyeballs. You might find this interesting, on page 5 of this JPM Eye on the Market they give an "armageddonist update". Obviously, once things have crashed, they all seem to predict further pain to come.

 

https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/five-easy-pieces-amv.pdf

[Blugolds11]

1 hour ago, Gregmal said:

Can we create a news network that is not dishonest and actually labels its guests and fodder characters appropriately? Rather than “the guy who called XYZ crash”…wouldn’t “the guy who’s made 643 predictions with a 4% hit rate” be more appropriate? How about? “the guy who’s lost 30% over the past decade while underperforming the index by 300%”…instead of “famed short seller” can we get a more honest “guy who cries wolf a lot and if enough people are dumb enough to fall for it, buys the stuff he says he’s shorting”?

 

I agree, I would love to see the equivalent of Jon Stewart Daily show but for finance, Make fun of both sides, call a spade a spade, entire show is basically making a mockery of the hypocrisy that is so blatant. There certainly wouldnt be a lack of targets or material to use. Something that illustrated our own personal monologue when watching all these jokers who are self proclaimed industry "experts".

[gfp]

35 minutes ago, Blugolds11 said:

 

I agree, I would love to see the equivalent of Jon Stewart Daily show but for finance, Make fun of both sides, call a spade a spade, entire show is basically making a mockery of the hypocrisy that is so blatant. There certainly wouldnt be a lack of targets or material to use. Something that illustrated our own personal monologue when watching all these jokers who are self proclaimed industry "experts".

 

I guess the closest we have is Matt Levine's column at Bloomberg.  Usually pretty hilarious.

[mattee2264]

https://www.bloomberg.com/opinion/articles/2024-03-12/nvda-vs-csco-a-bubble-by-any-other-metric-is-still-a-bubble?utm_source=website&utm_medium=share&utm_campaign=twitter

 

Bit of a more balanced commentary from John Authers. Agree with the general point that a big question is whether the acceleration of earnings growth of Mag7 post-pandemic and in the case of Nvidia over the last year or so is sustainable and that probably matters a lot more than valuation which are rich but not to the same extent as Nifty Fifty or Dot Com levels. 

[Gregmal]

It’s amazing all over the absolute obsession every outlet and market participant has with talking about “the magnificent 7”…like all consuming obsession. Recently I’ve even seen articles about “Mag 7 underperformed the market since mid January”…and it’s just like wtf is wrong with people? Takes Bruce Berkowitzs “ignore the crowds” slogan to another level…like any guesses how many of the people consumed with Mag 7 analysis(you know, as if they all have some proprietary edge over everyone else and their mother who’s staring at the same 7 stocks….” Are actually outperforming or even sniffing acceptable levels of portfolio performance? A good many Id gander probably don’t even have proper market exposure….

 

This is where we eventually mature and see how investing is easy if you just do your own thing and stop looking at and for the same exact shit everyone else looks at and for…

[LearningMachine]

49 minutes ago, Gregmal said:

It’s amazing all over the absolute obsession every outlet and market participant has with talking about “the magnificent 7”…like all consuming obsession. Recently I’ve even seen articles about “Mag 7 underperformed the market since mid January”…and it’s just like wtf is wrong with people? Takes Bruce Berkowitzs “ignore the crowds” slogan to another level…like any guesses how many of the people consumed with Mag 7 analysis(you know, as if they all have some proprietary edge over everyone else and their mother who’s staring at the same 7 stocks….” Are actually outperforming or even sniffing acceptable levels of portfolio performance? A good many Id gander probably don’t even have proper market exposure….

 

This is where we eventually mature and see how investing is easy if you just do your own thing and stop looking at and for the same exact shit everyone else looks at and for…

 

And, people think they are diversifying when buying Mag 7 and S&P 500, when they all share a high severity & medium probability common risk of high growth expectations and P/E multiple, which when it materializes, some will call it a black swan event even though it is clear ahead of time that it is a common shared risk.

 

You'd be safer to be in a handful of lower probability and lower severity independent risks that all won't materialize at the same time than Mag 7 & S&P 500 that are exposed to a common risk that when materializes will impact a lot of them. 

Edited March 13 by LearningMachine

[TwoCitiesCapital]

1 hour ago, LearningMachine said:

 

And, people think they are diversifying when buying Mag 7 and S&P 500, when they all share a high severity & medium probability common risk of high growth expectations and P/E multiple, which when it materializes, some will call it a black swan event even though it is clear ahead of time that it is a common shared risk.

 

You'd be safer to be in a handful of lower probability and lower severity independent risks that all won't materialize at the same time than Mag 7 & S&P 500 that are exposed to a common risk that when materializes will impact a lot of them. 

 

This is why, historically, equal weighting has tended to outperform over long-periods of time. Hasn't been true of the last 10-15 years, but is likely to revert and come true for the decade ending 2030 IMO. 

[LearningMachine]

1 hour ago, TwoCitiesCapital said:

 

This is why, historically, equal weighting has tended to outperform over long-periods of time. Hasn't been true of the last 10-15 years, but is likely to revert and come true for the decade ending 2030 IMO. 

 

Imagine you could buy a rock for $100 that has SPY or RSP written on it, and imagine that rock gave you $1.36 per year for SPY and $1.67 for RSP, and the rock has a history of increasing earnings at a mere 3% annually over long periods adjusted for inflation, as far out as since 1870 or since 1970 or since 2000 that took advantage of productivity increases from the Internet.   See https://www.multpl.com/ .

 

Who would be willing to buy that rock? 

 

Even if you were to stretch your imagination to imagine that $3.56 in so-called earnings within rock labeled SPY and $5.53 within rock labeled RSP were FCF and distributed to owners of rocks in terms of dividends or buybacks, would you still be willing to buy it? 

Edited March 13 by LearningMachine

[Gregmal]

But also, imagine not even buying the rock…but sitting around obsessing over the rock….whining about how only 7 particles of the rock are the only reason anyone wants the rock, wallowing about how rocks will go out of style, and then spending even more time wondering if you should short rocks, and getting mega excited every 5% pullback thinking this is the beginning of the end of rocks? Meanwhile somewhere else there’s trees paying you $12 instead of $3.56, and ponds with fish that produce $15? Pretty stupid to be focused on the rocks, eh?

[LearningMachine]

1 hour ago, Gregmal said:

But also, imagine not even buying the rock…but sitting around obsessing over the rock….whining about how only 7 particles of the rock are the only reason anyone wants the rock, wallowing about how rocks will go out of style, and then spending even more time wondering if you should short rocks, and getting mega excited every 5% pullback thinking this is the beginning of the end of rocks? Meanwhile somewhere else there’s trees paying you $12 instead of $3.56, and ponds with fish that produce $15? Pretty stupid to be focused on the rocks, eh?

 

Totally agree.  It ends up being that trees paying you $12 and ponds producing $15 go on sale only once in a while, and so you have to concentrate when the sale is going on.  I was reacting to how folks on another thread might be thinking S&P 500 would be safer than diversifying across a handful of trees and ponds.

 

So, I was trying to use an analogy with rocks to help land the point in a simpler way that keeps other non-essential things out, but I might not be landing it well. 

Edited March 13 by LearningMachine

[John Hjorth]

4 hours ago, Gregmal said:

It’s amazing all over the absolute obsession every outlet and market participant has with talking about “the magnificent 7”…like all consuming obsession. Recently I’ve even seen articles about “Mag 7 underperformed the market since mid January”…and it’s just like wtf is wrong with people? Takes Bruce Berkowitzs “ignore the crowds” slogan to another level…like any guesses how many of the people consumed with Mag 7 analysis(you know, as if they all have some proprietary edge over everyone else and their mother who’s staring at the same 7 stocks….” Are actually outperforming or even sniffing acceptable levels of portfolio performance? A good many Id gander probably don’t even have proper market exposure….

 

This is where we eventually mature and see how investing is easy if you just do your own thing and stop looking at and for the same exact shit everyone else looks at and for…

 

1 hour ago, Gregmal said:

But also, imagine not even buying the rock…but sitting around obsessing over the rock….whining about how only 7 particles of the rock are the only reason anyone wants the rock, wallowing about how rocks will go out of style, and then spending even more time wondering if you should short rocks, and getting mega excited every 5% pullback thinking this is the beginning of the end of rocks? Meanwhile somewhere else there’s trees paying you $12 instead of $3.56, and ponds with fish that produce $15? Pretty stupid to be focused on the rocks, eh?

 

Thanks, Greg [ @Gregmal ],

 

Your posts called for a smile, and especially the last one, here also quoted above, made me chuckle!

 

-To keep it simple : It's true.

 

There are still a lot of things to do that appears interesting, if one actually looks around, not even if one is - for one reason or another - restrained to a certain investment style, as alternative to stay flexible.

 

There is still something to do for everyone, if someone asks me [, which nobody does].

 

CoBF related that translates and convertes to : More posts in the Investments Ideas forum, please! [, as an alternative to i.e. posting in this topic!].

[blakehampton]

3 hours ago, Gregmal said:

But also, imagine not even buying the rock…but sitting around obsessing over the rock….whining about how only 7 particles of the rock are the only reason anyone wants the rock, wallowing about how rocks will go out of style, and then spending even more time wondering if you should short rocks, and getting mega excited every 5% pullback thinking this is the beginning of the end of rocks? Meanwhile somewhere else there’s trees paying you $12 instead of $3.56, and ponds with fish that produce $15? Pretty stupid to be focused on the rocks, eh?

What an incredible response

[mattee2264]

People conflate Mag7 with the market because Mag7 is 30% of the S&P 500 and the S&P 493 has basically gone nowhere over the last five years while Mag7 has increased about fivefold. 

 

And at this stage most investors are either indexing (or closet indexing) or buying call options on tech stocks. 

 

And it isn't difficult to understand why. 

 

John Authers in the article I referenced earlier discussed the concept of a "bubble" in fundamentals.

 

Over the last 5 years or so Big Tech have grown earnings around 20% a year and their stock prices have increased by a similar amount. So not that bubbly from a valuation perspective and indeed valuations are far lower than those reached by Nifty Fifty and during the Dot Com bubble. Nvidia is a more extreme example but again a lot of its stock price increase is driven by earnings growth rather than multiple expansion. 

 

But the question is whether this earnings growth is sustainable going forward. Eventually the law of large numbers will catch up. And while AI is seen as extending the fast growth runway for Big Tech and delaying incipient maturity the reality is that aside from Nvidia no one has a moat in the AI space and eventually the hype will need to be supported by evidence of monetisation. And AI is bringing Big Tech companies into direct competition. 

 

And if AI does deliver productivity improvements and allow companies to reduce their headcounts then a lot of companies within the S&P 493 are going to get a double whammy from better earnings and a higher multiple. 

 

 

 

[vinod1]

I remember "law of large numbers" being thrown about when Apple, Microsoft, Facebook, Google were all in the $100 billion range. The reasoning was, trees dont grow to the sky; companies cannot possible be worth $500 billion which would be insane; competition would increase once companies get to $100 billion market cap; etc.

 

Here we are. 

 

 

[Gregmal]

4 minutes ago, vinod1 said:

I remember "law of large numbers" being thrown about when Apple, Microsoft, Facebook, Google were all in the $100 billion range. The reasoning was, trees dont grow to the sky; companies cannot possible be worth $500 billion which would be insane; competition would increase once companies get to $100 billion market cap; etc.

 

Here we are. 

 

 

Totally. I remember making a rather irresponsible earnings wager on Apple in maybe 2012 or so and being told "thats silly, its $400B company...how much bigger can it get?"...these things are silly talking points. 

[vinod1]

A Shiller P/E of 34 (as of March 1st) is in the top 1% of history. Total profits (as a percent of almost anything) are at near-record levels as well. Remember, if margins and multiples are both at record levels at the same time, it really is double counting and double jeopardy – for waiting somewhere in the future is another July 1982 or March 2009 with simultaneous record low multiples and badly depressed margins. Jeremy Grantham

 

So he is telling us somewhere in the future there would be a bear market? 

 

 

[Castanza]

People who constantly worry about this shit are either too leveraged, carry too much personal debt, or have a job/skill that's not really that valuable and could be replaced with the snap of a finger. Manage those three things and you'll enjoy life a lot more. Tomorrow is never a guarantee. I'll be damned if I find ways to create more "worry" in my life. 

 

The only difference between the guys on Wall St. constantly spouting end of the world black swan events and the guy standing on the corner of NYC yelling at tourists is a fancy suit and choice of drug (coke vs meth)....