Have We Hit The Top?

[Gregmal]

~15 years.

[Gregmal]

On 8/20/2021 at 4:43 PM, changegonnacome said:

Confidence termites…..I like the analogy

 

His bubble popping/deflating template does seem to be playing out…….the fastly’s & their ilk the most egregiously overvalued stocks etc. have indeed been taken out and shot…..to a certain extent……Russell is struggling and I see in my own portfolio (which skews value) a disconnect between the SP500 being up daily but my modestly priced stocks are having daily drawdowns. 
 

I foresee significant long term capital gains selling effects kicking in soon too - I’m certainly sitting on large gains in certain positions where I’m waiting only for the clock to toll midnight to sell. Suspect I’m not alone…..I’ve a hit list of domino positions that will fall over the next couple of months with 90% of them done by the end of October.
 

 

 

The confidence termites thesis is playing out almost exactly how you'd expect it to. I'm aggressively positioned quite conservatively, but if I wasnt, I'd be taking some BIG swings on the short side here. For now, I have sub 5% tech exposure not counting GOOG/MSFT...wouldnt want much more than that til things shake out. 

[changegonnacome]

5 hours ago, Gregmal said:

The confidence termites thesis is playing out almost exactly how you'd expect it to. I'm aggressively positioned quite conservatively, but if I wasnt, I'd be taking some BIG swings on the short side here. For now, I have sub 5% tech exposure not counting GOOG/MSFT...wouldnt want much more than that til things shake out. 

 

Yep seems that way - each slide is met by a not so equal rally in lots of stocks i keep an eye on while slowly churning downwards in aggregate........lower lows and all that...........I expect possibly a nice rally when the debt ceiling is raised AND Biden bills pass......Biden's bill in the $2tn range seems inevitable to me despite the rhetoric.....possibly the last federal economic $ stimulus commitment for the US economy to come for a long time……….as DC slides back into a food fight where nothing gets done for years. Then its good old productivity growth + consumption/consumer confidence + inflation driving the economic numbers.

Edited October 6, 2021 by changegonnacome

[Spekulatius]

Mr Market is a like drunk, going forward and backwards and not getting anywhere. Typically not a good sign at current elevated levels, Imo.

[changegonnacome]

@Spekulatius absolutely.......a dangerous & interesting time as the hive mind decides wether its still to da moon or back to grandmas......and like that gentleman above.........a feather could knock it over right now........be careful out there kids 

[ANP301191]

11 hours ago, Gregmal said:

The confidence termites thesis is playing out almost exactly how you'd expect it to. I'm aggressively positioned quite conservatively, but if I wasnt, I'd be taking some BIG swings on the short side here. For now, I have sub 5% tech exposure not counting GOOG/MSFT...wouldnt want much more than that til things shake out. 

 

Same boat - though I was thinking whether forums like this and other "value" based investors that I speak to may have made me prone to confirmation bias???

[Gregmal]

45 minutes ago, ANP301191 said:

 

Same boat - though I was thinking whether forums like this and other "value" based investors that I speak to may have made me prone to confirmation bias???

It’s possible for some here for sure. Personally I don’t really rely on the dorkazoid metrics for this. PE blah. I’m just going off price action which is more technical and easily verified. Taboo to the fundamental guys, but for sure, a lot of stuff is having trouble catching and holding a bid. Whether it means much, idk. But it should get ones ears to perk up. 

[TwoCitiesCapital]

We'll see. I'm probably as bearish as they come and have been so for awhile. But a lot of the current technicals show caution/fear even as the S&P was making new highs pre-September swoon.  Those fearful feelings were also amplified post-September swoon when buying the dip didn't work.  

 

The old archetype for equity bubbles is a blow off top and euphoria, right? Not making new high after new high while investors buy scared. Not to mention a lot of these markets are hitting massive resistance lines - yields have massive resistance at 1.5-1.6% and may come down. USD is the strongest this year, but also against resistance and could turn after the recent double top. S&P is at major support while RSI was oversold in over a year, etc. 

 

I think this is a likely a normal 5-10% pullback and we'll see substantially higher levels in the next 6 months as exuberance really kicks in. S&P @ 5000 wouldn't shock me over that period. 

 

That being said, the fundamentals terrify me and I've never been great at technicals so....

Edited October 7, 2021 by TwoCitiesCapital

[Gmthebeau]

On 10/6/2021 at 6:16 PM, Spekulatius said:

Mr Market is a like drunk, going forward and backwards and not getting anywhere. Typically not a good sign at current elevated levels, Imo.

 

agree, I raised my cash position recently to highest ever.  We will find out in a few weeks probably if it’s going to roll over or ramp higher.  Margin hit an all time high last month.  If it starts dropping its lights out.

Edited October 9, 2021 by Gmthebeau

[Viking]

On 10/7/2021 at 7:58 AM, TwoCitiesCapital said:

We'll see. I'm probably as bearish as they come and have been so for awhile. But a lot of the current technicals show caution/fear even as the S&P was making new highs pre-September swoon.  Those fearful feelings were also amplified post-September swoon when buying the dip didn't work.  

 

The old archetype for equity bubbles is a blow off top and euphoria, right? Not making new high after new high while investors buy scared. Not to mention a lot of these markets are hitting massive resistance lines - yields have massive resistance at 1.5-1.6% and may come down. USD is the strongest this year, but also against resistance and could turn after the recent double top. S&P is at major support while RSI was oversold in over a year, etc. 

 

I think this is a likely a normal 5-10% pullback and we'll see substantially higher levels in the next 6 months as exuberance really kicks in. S&P @ 5000 wouldn't shock me over that period. 

 

That being said, the fundamentals terrify me and I've never been great at technicals so....

+1. 

 

Investor sentiment has been falling since April. And now most investors are currently bearish (by a sizeable margin).Can we go lower? Of course. My guess is have a couple more week of turbulence and as we get to the other side of the Delta wave we will see the reopening trade act 2. And my guess is it will be a fast and furious move to the upside.

 

The news flow on the virus has been very good of late. Kids 5+ will soon be getting vaccinated. Therapeutics will soon be available. Governments/organizations finally have enough public support to mandate vaccinations and vaccine passports (at least in most parts of Canada). Opening up of international travel should be a big catalyst for markets (although perhaps another quarter or two away).

- https://ycharts.com/indicators/us_investor_sentiment_bull_bear_spread

 

Edited October 10, 2021 by Viking

[muscleman]

On 10/9/2021 at 6:50 PM, Viking said:

+1. 

 

Investor sentiment has been falling since April. And now most investors are currently bearish (by a sizeable margin).Can we go lower? Of course. My guess is have a couple more week of turbulence and as we get to the other side of the Delta wave we will see the reopening trade act 2. And my guess is it will be a fast and furious move to the upside.

 

The news flow on the virus has been very good of late. Kids 5+ will soon be getting vaccinated. Therapeutics will soon be available. Governments/organizations finally have enough public support to mandate vaccinations and vaccine passports (at least in most parts of Canada). Opening up of international travel should be a big catalyst for markets (although perhaps another quarter or two away).

- https://ycharts.com/indicators/us_investor_sentiment_bull_bear_spread

 

 

In a secular bull market from 2009 to now, you would want to BTFD. Every time when investor sentiment is bad, it is a great time to buy. That will not work in a secular bear market. I think we are going to have the inflection point soon, especially if covid situation quickly improves from now.

 

[TwoCitiesCapital]

2 hours ago, muscleman said:

 

In a secular bull market from 2009 to now, you would want to BTFD. Every time when investor sentiment is bad, it is a great time to buy. That will not work in a secular bear market. I think we are going to have the inflection point soon, especially if covid situation quickly improves from now.

 

 

I don't disagree that there will be an inflection point. I don't know when it will be. But I doubt it's in the next 6 months unless if China just dramatically mismanages this whole Evergrande default and it cascades. 

 

My best guess is is mid-2020s. Demographic picture will be changing with millenials hitting high earnings years at a greater rate than boomer retirements. If there's a "green revolution", you'll see inflation from energy/transportation redesign and the associated utility scale investments. We might start seeing the impact of the simplification of supply chains and some globalization reversing. Etc.

 

By the middle of this decade, multiple disinflationary forces could be gone or reversed and only then do I think there's a significant inflation - which is what I imagine the bear market would be predicated on. 

 

Until then - I imagine it'll be a lot like the two dips we saw in 2018 on the one in 2020. Fast/deep corrections, much faster than historical ones, but ultimately we recover from them in just a few months time. Still keeping elevated cash with this outlook though - always could be wrong on the timing. 

[muscleman]

1 hour ago, TwoCitiesCapital said:

 

I don't disagree that there will be an inflection point. I don't know when it will be. But I doubt it's in the next 6 months unless if China just dramatically mismanages this whole Evergrande default and it cascades. 

 

My best guess is is mid-2020s. Demographic picture will be changing with millenials hitting high earnings years at a greater rate than boomer retirements. If there's a "green revolution", you'll see inflation from energy/transportation redesign and the associated utility scale investments. We might start seeing the impact of the simplification of supply chains and some globalization reversing. Etc.

 

By the middle of this decade, multiple disinflationary forces could be gone or reversed and only then do I think there's a significant inflation - which is what I imagine the bear market would be predicated on. 

 

Until then - I imagine it'll be a lot like the two dips we saw in 2018 on the one in 2020. Fast/deep corrections, much faster than historical ones, but ultimately we recover from them in just a few months time. Still keeping elevated cash with this outlook though - always could be wrong on the timing. 

 

I only have cash and a small amount of put options right now. I plan to add more puts in the coming weeks but don't plan to have a crazy exposure as puts are already leverage bets.

 

I don't think this is a 2008 crash, but more likely a dot com crash. After the crash, valuation will start to matter again.

 

[Gregmal]

The action in tech keeps pointing to a new stage of the cycle. I dont know how it was not at least reasonably obvious after last year where we went from arguably too expensive to undoubtedly expensive to mind boggling. Of course a lot of it, and subsequently the indexes hide behind the FANG stuff which is still not egregious but just fully valued, but everything under it is beyond comprehension in terms of valuations. The behavior has been validated by the capitulation type behavior of value investors seen everywhere from Twitter to VIC to Sohn. Parallels to Druck in 1999/2000. You can spit your carbonated beverage out seeing people drum up delusion inspired bull cases for garbage. And now even the leaders are fading/acting sloppy. Short interest across the board is basically nil...another tell tale sign. And you've got a lot of snowballs building. Ive got a few shorts and some puts+VIX calls along with some ETF type stuff but overall am not participating in much outside of riding the housing wave and the energy crisis, so I honestly dont care what happens. Cash is a waste of time, period. People have been saying "real estate is bad when we get inflation" and my biggest positions for the past year or so.. APTS(+107%), AIV(+82%), PCYO(+60%), FRPH(+27%), CLPR(+30%)...all so "Hi...yes, no, you're wrong, it isnt!".....on the flip side all those do well if rates remain at 1-2%.......we can let the value guys who missed a decade of easy tech money now fight over who thinks Peloton is cheapest not realizing theyre the last ones left at the party and the keg is empty...but otherwise the market is clearly bifurcated so rather than lazily fall back on "big crash bad!"...have some fun with it and play the game where you win either way. If you're buying tech here and its not FANG I'd underwrite 50% drawdowns into an accumulation strategy(thats basically what Ive done on the ~6% of so tech exposure I have)...otherwise, why even waste time with it? Even the FANGs probably have a few years at least ahead of themselves of boring returns. 

[changegonnacome]

I keep an eye on Tesla & BTC/Crypto...........feel like if risk seeking behavior & exuberance are truly rolling over it should be showing up there yet Tesla is flirting with ATH (10% off) along with BTC........these are the ultimate expression of confidence, optimism & speculative valuation zeal...........the fact neither has rolled over just yet makes me think that if you follow Grantham's logic the last chip, the last margin bet has not been pushed into the centre of the blackjack table just yet.

 

Looking forward between now and year end - the debt limit has been resolved and sounds like to me the looney liberals are ready to capitulate on the build back better price tag such that it and infrastructure bill pass and are signed into law by Biden by Nov 15th.......then they all run back to the districts to claim credit. I personally think the market will hold up into the holiday season with that stimualtive positive tailwind of DC largesse ringing in the publics ears but 2022 will see no NEW trillion dollar packages & the economy and by extension the markets will struggle as the D.C. backed injections dry up.

[TwoCitiesCapital]

2 hours ago, changegonnacome said:

I keep an eye on Tesla & BTC/Crypto...........feel like if risk seeking behavior & exuberance are truly rolling over it should be showing up there yet Tesla is flirting with ATH (10% off) along with BTC........these are the ultimate expression of confidence, optimism & speculative valuation zeal...........the fact neither has rolled over just yet makes me think that if you follow Grantham's logic the last chip, the last margin bet has not been pushed into the centre of the blackjack table just yet.

 

Looking forward between now and year end - the debt limit has been resolved and sounds like to me the looney liberals are ready to capitulate on the build back better price tag such that it and infrastructure bill pass and are signed into law by Biden by Nov 15th.......then they all run back to the districts to claim credit. I personally think the market will hold up into the holiday season with that stimualtive positive tailwind of DC largesse ringing in the publics ears but 2022 will see no NEW trillion dollar packages & the economy and by extension the markets will struggle as the D.C. backed injections dry up.

 

I tend to agree. I wouldn't lump BTC in as historically it's had limited correlation to equities but this doesn't strike me much different than September 2020 did. 

 

Tech exploded with everyone excited about Tesla/Apple stock splits, they made highs, and then dipped 10-15% and took 2-3 months to recover. That 10-15% wasn't a regime change and I'm not yet convinced this one is. 

 

If we were out of incremental buyers, I'd expect flows and sentiment to be through the roof. Not anywhere near as negative as it's been for the last 6 weeks even as equity markets were creeping to new highs. Not betting the house on higher highs, but have repurchased names I trimmed now that many are down substantially from where I let them go at. 

[Gmthebeau]

15 hours ago, TwoCitiesCapital said:

 

I don't disagree that there will be an inflection point. I don't know when it will be. But I doubt it's in the next 6 months unless if China just dramatically mismanages this whole Evergrande default and it cascades. 

 

My best guess is is mid-2020s. Demographic picture will be changing with millenials hitting high earnings years at a greater rate than boomer retirements. If there's a "green revolution", you'll see inflation from energy/transportation redesign and the associated utility scale investments. We might start seeing the impact of the simplification of supply chains and some globalization reversing. Etc.

 

By the middle of this decade, multiple disinflationary forces could be gone or reversed and only then do I think there's a significant inflation - which is what I imagine the bear market would be predicated on. 

 

Until then - I imagine it'll be a lot like the two dips we saw in 2018 on the one in 2020. Fast/deep corrections, much faster than historical ones, but ultimately we recover from them in just a few months time. Still keeping elevated cash with this outlook though - always could be wrong on the timing. 

 

I think its likely we see something like  you said what happened at the end of 2018 or March 2020.  While it may be fairly quick meaning not years a drawdown of 20-30% in the indexes typically means many stocks will fall 50%.  I would rather be a buyer than fully invested going into something like that.  Its interesting that some people think cash is stupid while their hero Buffett holds huge amounts just for that purpose to buy when their is blood in streets.   You simply can't do that when you are always fully invested.   Its about risk management.   An individual investor has a big advantage of being able to move in and out very quickly.  You dont have a mandate to remain fully invested like an ETF or mutual fund.   Giving up that advantage strikes me as not the best idea.

[changegonnacome]

One bubble template suggests that a true end to a bubble requires the riskiest assets to go parabolic at the end beyond even the wildest dreams of market participants........BTC and Tesla are my bell weathers for exuberance, confidence & optimism in the future, many have noted how they have moved together in the past..........in fact I know a chosen few who's portfolio contains only these two stocks with a sprinkling of AMC & Gamestop just to make them ultra "now"........Tesla looks like its gone vertical today and BTC not far behind......I'll keep watching these two in amazement but it certainly feels like a mania

 

 

[TwoCitiesCapital]

1 hour ago, changegonnacome said:

One bubble template suggests that a true end to a bubble requires the riskiest assets to go parabolic at the end beyond even the wildest dreams of market participants........BTC and Tesla are my bell weathers for exuberance, confidence & optimism in the future, many have noted how they have moved together in the past..........in fact I know a chosen few who's portfolio contains only these two stocks with a sprinkling of AMC & Gamestop just to make them ultra "now"........Tesla looks like its gone vertical today and BTC not far behind......I'll keep watching these two in amazement but it certainly feels like a mania

 

 

 

I think we'll see a 6 figure BTC in the next 6 months. That'll be the parabolic rise IMO. 

 

Whether the spells the end for equities? It didn't in 2018 - just a minor pull back. Who knows this time around. 

[Gregmal]

The "shit" end of the tech stuff and covid beneficiaries has definitely caught a bit of a bid. It formed a bottom and now seems perky. Interestingly enough, exactly in line with the confidence termites thesis, the quality big tech for the most part is just gyrating around a range. I closed many of my shit tech shorts but have also been pairing down long exposure. The long value, short tech trade put on in Q4/Q1 worked wonderfully, but I am not sure how much juice is left in it. Rather just take shots here and there on highly asymmetric inflation trades and catalyst driven discount to NAV stuff. So thats what I'm doing. 

[changegonnacome]

I wasn’t sure the Tesla move counted as full parabolic but then Gali used that word in the first 30 seconds of his video below today…….if Gali says it went parabolic, you know it went parabolic for sure!

 

Agree with @TwoCitiesCapital in the parabolic move BTC should rally to $100,000…….Tesla at that stage will probably be $1,500. Jeremy Grantham will be licking his lips and going on podcasts every 45 minutes at stage. He’ll have the final piece of his bubble puzzle.

 

 

Edited October 26, 2021 by changegonnacome

[backtothebeach]

A long time ago I read a post on the Motley fool analyzing gaps with historical data. The overwhelming majority of gaps close.  Unfortunately I did not save the post, and I’ve been looking for it a few times but just can’t find it anymore.
 

Now, this is a value investing board and technical analysis may be a big no-no, but one of the few things that could possibly be working is gaps in my opinion. I just checked and there’s only two price gaps  that SPY did not trade through eventually in the last five years. Both are in April of this year. One is really small only six cents on April 1st, but the other is $2.71 on April 5, 2021, from $400.67 to 403.45.

 

I believe at some point in the future SPY will trade down to $400 again. The only problem is from where. Maybe it will reach $500 or $600 before it drops back to $400. So while this is not really actionable, I think it is a good data point to keep in mind.

[changegonnacome]

10 hours ago, backtothebeach said:

A long time ago I read a post on the Motley fool analyzing gaps with historical data. The overwhelming majority of gaps close.  Unfortunately I did not save the post, and I’ve been looking for it a few times but just can’t find it anymore.
 

Now, this is a value investing board and technical analysis may be a big no-no, but one of the few things that could possibly be working is gaps in my opinion. I just checked and there’s only two price gaps  that SPY did not trade through eventually in the last five years. Both are in April of this year. One is really small only six cents on April 1st, but the other is $2.71 on April 5, 2021, from $400.67 to 403.45.

 

I believe at some point in the future SPY will trade down to $400 again. The only problem is from where. Maybe it will reach $500 or $600 before it drops back to $400. So while this is not really actionable, I think it is a good data point to keep in mind.

Interesting know ZERO about technical analysis...whats a price gap indicative off?

 

On the theme of Tesla/BTC..........I've also noticed the SPAC market has somewhat perked up......maybe just the Donald effect....or a sign of more risky behavior.

 

Its funny on Tesla at this point I'm starting think of the common stock as more like a sh!tcoin than an equity.......cant help but feel that BTC gains flow in Tesla & vice versa.........both locked in an ascending spiral to da moon  

[backtothebeach]

1 hour ago, changegonnacome said:

Interesting know ZERO about technical analysis...whats a price gap indicative off?

 

There is a lot of info to be found online, so I'm not going to start going into details.

 

The main theory is that the price of a stock or index will eventually pass through every price point that exists during market hours, and not just gap up at market open above an all-time-high and never close that gap.

 

I wouldn't read too much into it, maybe it's just an artefact of the random walk.

 

[adesigar]

Schiller PE hit 40