Have We Hit The Top?

[Blake Hampton]

I also think Iran is a far more formidable enemy than the others we’ve faced in the recent past.

[Gregmal]

There’s always reasons to be scared and generally, most people think stocks are expensive regardless of the price. All this is really just the product of most market participants being scared of volatility and even the professionals being total slaves to the daily quotes. No one worth a damn is even paying attention to the market in July, August anyway.

[Xerxes]

SoftBank is partying like it is 1998, dropping like 20% or so 

[TwoCitiesCapital]

3 hours ago, Gregmal said:

The banks are amazing. Nothing's really happened but in 3 days theyre like -20% LOL. 

 

That's because names like BofA were up over the last 2-3 years while fundamentals and profitability deteriorated at the same time. 

 

Sentiment is only now catching down to the performance they've been displaying  as a business. 

[Red Lion]

1 hour ago, Blake Hampton said:

I question how the U.S government’s finances could even handle a war at this point.

 

More QE and lower rates and inflation. 

[brobro777]

This is probably a hard snapback and then grind down lower/sideways

 

65 VIX! Now that's action baby

[UK]

 

[mattee2264]

If the Japanese carry trade unwinding is the cause of a lot of forced selling then emergency interest rate cuts are just going to make everything a lot worse! And an emergency cut will just reinforce the feeling that something bad is on the horizon. So Fed would be better off waiting until September and if there is further evidence of the economy deteriorating only then think about a first rate cut. 

[UK]

6 minutes ago, mattee2264 said:

If the Japanese carry trade unwinding is the cause of a lot of forced selling then emergency interest rate cuts are just going to make everything a lot worse! And an emergency cut will just reinforce the feeling that something bad is on the horizon. So Fed would be better off waiting until September and if there is further evidence of the economy deteriorating only then think about a first rate cut. 

+1

[Castanza]

2 hours ago, UK said:

 

 

Every year I appreciate this clip of Buffett more and more

 

https://buffett.cnbc.com/video/2016/02/29/buffett-name-me-one-super-wealthy-economist.html

 

 

edit: Also should note market returns if you were to only buy at market peaks. (long-term view is best with the majority of your capital.) 

 

Edited August 5, 2024 by Castanza

[UK]

6 minutes ago, Castanza said:

 

Every year I appreciate this clip of Buffett more and more

 

https://buffett.cnbc.com/video/2016/02/29/buffett-name-me-one-super-wealthy-economist.html

 

 

Good one!:)

[brobro777]

Nikkei 225 snaps back 10% 

 

Haha

 

[Sweet]

3 hours ago, brobro777 said:

Nikkei 225 snaps back 10% 

 

Haha

 

Not sure if that is a good sign.

 

The volatility clearly hasn’t gone.

[nsx5200]

24 minutes ago, Sweet said:

Not sure if that is a good sign.

 

The volatility clearly hasn’t gone.

Just curious, how does volatility factor into your investment strategy?

[Sweet]

Just now, nsx5200 said:

Just curious, how does volatility factor into your investment strategy?

Historically volatility has been good for me because I seem to be able to pick up bargains.  Hopefully that’s still the case going forward.

 

On the broader point I’m making, a normal market doesn’t move 10% down one day and 10% up the next.  

[Parsad]

13 hours ago, Castanza said:

 

Every year I appreciate this clip of Buffett more and more

 

https://buffett.cnbc.com/video/2016/02/29/buffett-name-me-one-super-wealthy-economist.html

 

 

edit: Also should note market returns if you were to only buy at market peaks. (long-term view is best with the majority of your capital.) 

 

 

Although if you are retired and need to drawdown on your capital annually, that September 1929 and March 2000 ones are going to hurt like a mother-effer!  Cheers!

[frommi]

15 hours ago, Castanza said:

 

Every year I appreciate this clip of Buffett more and more

 

https://buffett.cnbc.com/video/2016/02/29/buffett-name-me-one-super-wealthy-economist.html

 

You don't have to be an economist to hedge. A quant would also do it, and there are quants out there that have done a lot better than Buffet  in percentage terms.

[UK]

6 hours ago, brobro777 said:

Nikkei 225 snaps back 10% 

 

Haha

 

 

That was just unwinding of unwinding...now wait for unwinding of unwinding of unwinding:)))

[mattee2264]

No idea whether this is a correction or something more ominous. But what is apparent is: 

 

1)Bad news is now bad news (and therefore rate cuts are unlikely to be bullish but rather will be seen as confirmatory of an incoming recession). It also means that a lot will depend on how much the economy weakens in the coming quarters. 

2) Mag7 are starting to run into problems: Nvidia's latest chip is delayed 3 months, Google lost an antitrust case, Buffett is unloading Apple, Meta are hyping up a glorified AI chat-bot, we aren't really seeing the anticipated acceleration in growth from AI spend and investors are starting to get concerned about the huge capex spend. So the news flow and next earnings reports are going to matter a lot. 

3) Because of 1) if investors rotate out of Mag7 they are going into defensives and cash/bonds and that isn't bullish

4) There are some systemic vulnerabilities that can result in a lot of forced selling and cause various things to break. 

5) Even after the sell-off the equity risk premium is probably inadequate (especially for Mag7) so even repricing of risk is enough to create additional downside. 

 

 

[Castanza]

1 hour ago, frommi said:

You don't have to be an economist to hedge. A quant would also do it, and there are quants out there that have done a lot better than Buffet  in percentage terms.

Yeah and Uncle Rico could have won States if coach put him in…. 

 

There are those that do and those that say they could. You’re talking a different league and different amounts of skin in the game  

[Luke]

57 minutes ago, mattee2264 said:

No idea whether this is a correction or something more ominous. But what is apparent is: 

 

1)Bad news is now bad news (and therefore rate cuts are unlikely to be bullish but rather will be seen as confirmatory of an incoming recession). It also means that a lot will depend on how much the economy weakens in the coming quarters. 

2) Mag7 are starting to run into problems: Nvidia's latest chip is delayed 3 months, Google lost an antitrust case, Buffett is unloading Apple, Meta are hyping up a glorified AI chat-bot, we aren't really seeing the anticipated acceleration in growth from AI spend and investors are starting to get concerned about the huge capex spend. So the news flow and next earnings reports are going to matter a lot. 

3) Because of 1) if investors rotate out of Mag7 they are going into defensives and cash/bonds and that isn't bullish

4) There are some systemic vulnerabilities that can result in a lot of forced selling and cause various things to break. 

5) Even after the sell-off the equity risk premium is probably inadequate (especially for Mag7) so even repricing of risk is enough to create additional downside. 

 

 

Thanks for the detailed answer and agree! 

[Blake Hampton]

Multiples for a lot of these businesses are simply crazy to me. 30x, 40x, 50x for little to no growth with a higher corporate tax rate looming.

 

If the federal corporate tax rate is raised from 21% to 35%, all else held equal, that same income is now worth roughly 18% less. A company selling for 30x earnings would then be selling at 36x. I’m no investment genius but even Buffett cited this concern at his annual meeting this year. He mentioned it when pressed on his initial sale of Apple.

Edited August 6, 2024 by Blake Hampton

[brobro777]

48 minutes ago, Blake Hampton said:

Multiples for a lot of these businesses are simply crazy to me. 30x, 40x, 50x for little to no growth with a higher corporate tax rate looming.

 

If the federal corporate tax rate is raised from 21% to 35%, all else held equal, that same income is now worth roughly 18% less. A company selling for 30x earnings would then be selling at 36x. I’m no investment genius but even Buffett cited this concern at his annual meeting this year. He mentioned it when pressed on his initial sale of Apple.

 

Yea if interest rates are 0% like in 2015 then 30X may be okay but if I can get 5% from short term treasuries? When that company is already so big it's $3Trillion? Trees don't grow to the sky

 

I own everything Apple and I'm never switching from the iPhone but if Warren is selling...

 

 

[changegonnacome]

1 hour ago, Blake Hampton said:

If the federal corporate tax rate is raised from 21% to 35%

 

Yep recessions are recessions - couple of years of depressed earnings....so what....in the scheme of things it doesn't matter to the underlying long term value of a business.

 

TCJA cuts don't get renewed...and all the profit shifting & avoidance rules TCJA created stay (which they will)........and so we go from 21 back to 35%...but it won't be your old late 2010's 35% rate... it will be 35%++ with TCJA avoidance rules layered on with the BEPS & global minimum rates still in place....once that happens, given the very difficult budgetary math in D.C.,  you could be at 35% topline for a very very long time.

 

That really does change the long run value of future cash flows. 

 

TCJA was a very clever piece of Republican electioneering...it created a constituency of capitalists (tech billionaires, private equity etc.)...and helps explain some surprising defections from heretofore die hard liberals.....to the Trump/Republican ticket in 2024.....Biden's age gave them a mental loophole previously to turn red for the first time in their lives....I've seen some of them struggle now to explain why Trump is still their guy in 2024 post-Kamala taking top of the ticket......they can't quite bring themselves to admit thats its the TCJA that really matters to them.

[Red Lion]

2 hours ago, changegonnacome said:

TCJA cuts don't get renewed...and all the profit shifting & avoidance rules TCJA created stay (which they will)........and so we go from 21 back to 35%...but it won't be your old late 2010's 35% rate... it will be 35%++ with TCJA avoidance rules layered on with the BEPS & global minimum rates still in place....once that happens, given the very difficult budgetary math in D.C.,  you could be at 35% topline for a very very long time.

If I’m not mistaken the 21% corporate tax rate was permanent, and would take an act of congress to increase. 
 

The pass through deduction and lower personal income tax rates would revert to pre TCJA.