Gregmal Posted February 21, 2023 Posted February 21, 2023 @thepupil lol I’m doing it somewhat tongue in cheek, but now that we can agree the “market” is a world index, now I know what chart and PE I should be looking at to determine whether it’s a good time to buy individual stocks for the next couple quarters!
thepupil Posted February 21, 2023 Posted February 21, 2023 (edited) 5 minutes ago, Gregmal said: @thepupil lol I’m doing it somewhat tongue in cheek, but now that we can agree the “market” is a world index, now I know what chart and PE I should be looking at to determine whether it’s a good time to buy individual stocks for the next couple quarters! Like I said, I love a good MSCI Factsheet. For a quick snapshot of "what do all the world's stocks look like?" "What P/E multiple do high quality US companies trade for?" etc. and you just google "MSCI ____ Factsheet"...available to everyone. MSCI ACWI https://www.msci.com/documents/10199/a71b65b5-d0ea-4b5c-a709-24b1213bc3c5 MSCI ACWI Quality https://www.msci.com/documents/10199/9386d956-d8a5-4cf1-9eaa-fc597c10ad81 MSCI USA https://www.msci.com/documents/10199/67a768a1-71d0-4bd0-8d7e-f7b53e8d0d9f MSCI USA Quality https://www.msci.com/documents/10199/4af921f5-0bbc-470b-ad69-19a177fad9cf MSCI EAFE https://www.msci.com/www/fact-sheet/msci-eafe-index/05694439 MSCI EM https://www.msci.com/documents/10199/c0db0a48-01f2-4ba9-ad01-226fd5678111 MSCI US Real Estate https://www.msci.com/documents/10199/a3fb12a5-ada1-48e2-a5dc-df570d1c7137 Edited February 21, 2023 by thepupil
Simba Posted February 22, 2023 Posted February 22, 2023 On 2/20/2023 at 6:09 PM, TwoCitiesCapital said: How can you say they were totally wrong? Leading indicators have been negative for 10 months running and many are ACCELERATING to the downside. Corporate margins are contracting and earnings are falling. Housing prices are falling while most of the market for buys/sells has stalled. New construction and permits have basicsally dried up. Consumer savings have cratered while revolving credit balances are exploding. If anything, the people suggesting economic weakness and malaise have been absolutely right with most of the data (and risk asset returns) supporting that deterioration. You just think they're wrong because a handful of unprofitable tech companies are having a multi-month bounce. I tend to think that is just symptomatic of the last 15-year psychology of the Fed saving markets which isn't going to be true this time around - people just haven't changed their minds about it yet. wait your telling me I shouldn't pay up for tech companies valued on TAM on a revenue basis, and on 2048 Adj. Earnings before all expenses, when the 10Y is at 4%
changegonnacome Posted February 22, 2023 Posted February 22, 2023 (edited) I have no interest in the world market..........as I've outlined previously..........what makes the US indexes such a bad bet (or interesting opportunity) right now IMO is a kind of toxic mix of three things not really found in other markets: (1) high absolute multiples being paid relative to high interest rates/risk free rates....and especially relative to my permanently higher inflation/rates thesis which is a conversation for another day (2) Earnings that reached a cyclical perfect BOOM peak in 2021 on the back of unprecedented fiscal stimulus....and are absolutely declining in nominal terms....but actually much larger declines when one inflation adjusts EPS figures.....for example when Home Depot today says SSS are gonna be flat this year....they really mean they will decline in real terms ~5% given the outlook for 2023 inflation....if you arent growing your topline in an inflationary environment....your bottomline is screwed! (3) then finally and most importantly for equity returns......you've got Monetary inflation which has unfortunately IMO embedded in the economy.....as I've repeated.....wages (Jan BLS wage data confirmed my fears), nominal spending increases (Jan retail sales data for example) are ALL happening against the backdrop of full employment/max output economy with terrible productivity growth...........it is ultimately the definition of of inflation......too much money (wage increases/spending increase) chasing a finite fixed level of domestically produced goods and services that just arent growing as quickly as wages/spending are....................such that broad prices HAVE to exceed the inflation target. Putting the monetary authorities in a horrible bind. THIS is the most important thing right now, cut out the noise....the fact stock market multiples remain high here, when the truth is so clear. Is amazing to me. You can absolutely pick your spots in this market.........but the reality is.....the bitches brew I've outlined above does not speak well for the prospective returns of SPY/QQQ for the next couple of years......so your dealing with shitty beta & your dealing with a Fed that needs to engineer a serious deceleration in nominal spending growth & wage growth. The question of the thread is the bottom almost here - which I take to mean was the ~3500 on SPY seen last year the low.......my answer......not a chance.........the low will come, most likely based on past history....only after the Fed has begun to cut rates to try to revive an economy it put on the skids on purpose.......we've got based on the recent data a Fed that I think probably has to get terminal rates up closer to 6% now.....and will hold them there even as unemployment accelerates up to 5+%.....its gonna be very jarring for a market so used to the Fed put. We'll rip through 3500 IMO very easily in that scenario. Let's see. Edited February 22, 2023 by changegonnacome
Spekulatius Posted February 22, 2023 Posted February 22, 2023 @changegonnacome bet against America to your peril and that included the stock market. It the EM's that I would be worried about when liquidity gets drained. I expect to see more Adanis moments there.
changegonnacome Posted February 22, 2023 Posted February 22, 2023 1 hour ago, Spekulatius said: @changegonnacome bet against America to your peril and that included the stock market. It the EM's that I would be worried about when liquidity gets drained. I expect to see more Adanis moments there. Yep hate to do it…..but it’s really the stock market here Im bearish on….why?…….cause there’s not really a scenario I can credibly play out in my mind where SPY doesn’t get run over on the journey to getting back to 2%….. …….if you think about the soft landing scenario in the context of what I’ve said Re: wage growth, nominal spend, output & prices.…..and how you square the circle of bringing inflation back to 2, maintaining unemployment where it is and modest positive growth……..it’s really the corporate sector that has to pay the price via shrinking margins…..done by not pushing price while simultaneously delivering pay increases = earnings getting whacked……..and that’s like the best case scenario for the economy and the soft landing everybody is dreaming off. In my mind soft landing for the economy is actually bad news for SPY……and to a certain extent it’s already happening……it’s corporate America that’s beginning to suffer an earnings recession…..while the consumer…and broad economy still does OK…..the only problem of course is when the corporate sector feels earnings contract it reacts by cutting cost….done by a company in isolation it works beautifully to restore margins/earnings…..done simultaneously and broadly across the economy it doesn’t work at all.
james22 Posted February 22, 2023 Posted February 22, 2023 How many here invest in a S&P 500 or TSM index fund? Anyone?
no_free_lunch Posted February 23, 2023 Posted February 23, 2023 I sometimes will hold broad index funds James. I only do it when I'm short on ideas and afraid to hold cash. For the past 6 months it's been easier to find stuff and so I don't know if I own any etfs today.
LC Posted February 23, 2023 Posted February 23, 2023 Only in forced accounts where my options are limited. I look at it like a balancing hedge on the overall portfolio. But really it’s because I have no other option. It’s about 25%.
ourkid8 Posted February 23, 2023 Posted February 23, 2023 2 hours ago, james22 said: How many here invest in a S&P 500 or TSM index fund? Anyone? Only for my work DC pension as the options are pretty limited.
changegonnacome Posted February 23, 2023 Posted February 23, 2023 https://www.bloomberg.com/news/articles/2023-02-23/fed-powell-worry-about-south-s-inflation-fueling-job-market?srnd=premium&sref=7zqHEcxJ Single digit margins businesses when they have to pay their workers more pass through 100% of the increased labor costs to the underlying prices of the goods/services they sell.......why wouldn't they........accepting lower margins in this sector of the economy is akin to becoming a not-for-profit charity organization. When you think about where the bottom one third of households by income actually spend the majority of their income....its mainly with businesses that operate in this minuscule margin economy.....and so this bottom one third "feels" and actually experiences inflation to a greater degree both in nominal terms (the prices they see) and in relative terms (the proportion of their income that is exposed to rising prices). People wonder why the consumer sentiment surveys are coming back with such negativity.....but is it any surprise when you overlay the above.
Gregmal Posted February 23, 2023 Posted February 23, 2023 Nice. So now wage price spiral has devolved into “wage price spiral in specific markets”. Dem goalposts keep moving for Mr Powell annd co. Also easily explained by migration rather than some all else equal theory, and fully supported by economic growth in those regions. There really isn’t much of a reason for the pre COVID gaps between pay/prices in Atlanta or Miami vs coastal anymore.
Gregmal Posted February 23, 2023 Posted February 23, 2023 Powell is basically the new Fauci. Like we get it bro, you enjoyed the spotlight, but the gig has run its course, move on. Please stop lingering around trying to scrape together more reasons to be relevant. Meanwhile the bear camp keeps doing its thing. One side of the mouth “OMG inflation is rearing its ugly head again, used car sales ticked up. Economy running too hot. Must. Raise. Rates. More!” Other side of the mouth? “Oh look, GM idling plants because of plummeting demand. I knew the economy was deteriorating!”
TwoCitiesCapital Posted February 23, 2023 Posted February 23, 2023 18 hours ago, james22 said: How many here invest in a S&P 500 or TSM index fund? Anyone? I am limited to mutual funds/ETFs in my HSAs and 401ks which makes up a reasonably sizable portion of my savings. Only my IRAs and taxable accounts are self directed. While a reasonably large portion of my portfolio, I'm still stuck with index beta OR other people's tracking error on a large portion of my funds.
changegonnacome Posted February 23, 2023 Posted February 23, 2023 2 minutes ago, Gregmal said: Nice. So now wage price spiral has devolved into “wage price spiral in specific markets”. Dem goalposts keep moving for Mr Powell annd co. To be clear I am not saying that! Nationwide BLS wage data from January + 2022 Productivity data speaks to an inflation problem across the nation.......as we've talked about.......in a full output/employment economy with flat productivity......you cannot pass through ~4-5% annualized nominal pay increases, that then translates into nominal spending increasing by a similar amount against effectively a relatively fixed (due to poor productivity) basket of domestic and goods services that even if they are increasing its barely at all..........and then turnaround and expect prices of those goods and services to rise at about 2%......like you cant get simpler than that........based on those figures your looking at a pretty in-grained 5% inflation rate on what the Fed calls core non-housing services.....I refer to the same thing as domestic goods and services. I've said it before to help folks understand it.....but think of nominal wages/spending.....as kind of like shares in a company.......increasing the share count (wages/spending).....does nothing to change the underlying amount of goods/services being produced in the economy........it only serves to change the quoted price of those goods/services.......in the exact same way that issuing new shares in a company simply serves to dilute existing holders of shares........it does nothing to change the underlying economic intrinsic value of the entity in question. The pizza and slices analogy is the most commonly used with stock splits.........and its equally as applicable to the current macro economic situation......the pizza isn't really growing at all (output).........but increases in nominal wages translating into nominal spending growing are in a significant way......and all its really doing is slicing the USA Inc. pizza pie into slimmer and slimmer slices.....manifesting in your dollar bill YoY commanding less and less. Your dollars 'slice' of goods & services is getting smaller.
james22 Posted February 23, 2023 Posted February 23, 2023 Maybe I underestimated the fraction of portfolios here included savings plans with limited options. Just don't seem to remember S&P 500 or TSM funds showing up in the Portfolio thread.
Spekulatius Posted February 24, 2023 Posted February 24, 2023 3 hours ago, james22 said: Maybe I underestimated the fraction of portfolios here included savings plans with limited options. Just don't seem to remember S&P 500 or TSM funds showing up in the Portfolio thread. Chances are that if you are working and have a 401k or equivalent, then you also have exposure to index funds. That’s the case for me and my wife and pretty much anyone I know,
Blugolds Posted February 24, 2023 Posted February 24, 2023 1 hour ago, Spekulatius said: Chances are that if you are working and have a 401k or equivalent, then you also have exposure to index funds. That’s the case for me and my wife and pretty much anyone I know, Same, Im that guy with savings plan (401K) with limited options, all high ER funds with mediocre to poor returns vs SP, so the index with ultra low ER and DCA makes it appealing, not ideal, just better than other options in that account. Ironically, I have more options investing HSA funds than in my 401K, IRA is also self directed with unlimited options. Taxable holds significantly more than 401K and obviously you can do what you like with that, so I view the 401K as the set and forget, dont pay much attention to it even though its maxed every year for the last decade plus. Can only play the hand you're dealt as best you can. Out of all investment dollars, I've always mentally considered 401k and Pension as a cherry on top, main focus has always been IRA,HSA and taxable accounts, these hold the bulk anyhow and the only which I can "control".
Spooky Posted February 24, 2023 Posted February 24, 2023 I have a chunk of VOO in my RRSP and my spouse contributes regularly to a robo-advisor, Wealth Simple. Insurance in case I fuck up picking individual stocks and lets me take some more risks with the rest of the portfolio. If I am able to one day quit my day job and pick stocks full time I would move to a totally concentrated portfolio of 6-10 individual securities.
changegonnacome Posted February 24, 2023 Posted February 24, 2023 Fed’s Preferred Inflation Gauge Accelerates, Adding Pressure for More Rate Hike https://www.bloomberg.com/news/articles/2023-02-24/us-pce-inflation-accelerates-adding-pressure-for-more-fed-hikes?srnd=premium&sref=7zqHEcxJ This is what I expected based on BLS wage data from Jan - workers/social security retirees took their newly minted 2023 pay increases..............and unsurprisingly turned pay increases into aggregate nominal spending growth.........the increase in NOMINAL spending of course, and this is the PROBLEM, flowed into a basket of REAL domestic goods and services that had increased not at all over the prior year because..........well everybody with a pulse is already working and in a developed economy like the USA there are no easy productivity enhancing PP&E investments to be made anymore. The USA is not Nicaragua where you automate a production line for the first time & get a productivity/output windfall....all those types of investments were made long ago....and if they werent made long ago.....they were certainly made during ZIRP where the hurdle rate for any PP&E productivity investments was basically 0% so they got green lit. We are hitting, as I've said before, the sticky underbelly of monetary inflation..........the Made in China, Energy, supply chain disinflation was real but it masked a core domestic monetary inflation problem that wont go away.....it was a head fake around a linear fall to 2%........as we've talked about the journey from 5% inflation to 2% is gonna be a bitch. It can only be achieved really, given what I've said about poor prospects for productivity growth, by reducing aggregate nominal spend significantly......reducing credit creation which turns into nominal spend wont do the job on its own..........you've got to get the consumer to moderate spending......unfortunately thats usually achieved by putting a proportion of the population out of work & then those remaining in-work fearful enough that they begin to save more of their income.....reducing overall aggregate spend. Its more commonly referred to as a recession.
Dinar Posted February 24, 2023 Posted February 24, 2023 3 minutes ago, changegonnacome said: Fed’s Preferred Inflation Gauge Accelerates, Adding Pressure for More Rate Hike https://www.bloomberg.com/news/articles/2023-02-24/us-pce-inflation-accelerates-adding-pressure-for-more-fed-hikes?srnd=premium&sref=7zqHEcxJ This is what I expected based on BLS wage data from Jan - workers/social security retirees took their newly minted 2023 pay increases..............and unsurprisingly turned pay increases into aggregate nominal spending growth.........the increase in NOMINAL spending of course, and this is the PROBLEM, flowed into a basket of REAL domestic goods and services that had increased not at all over the prior year because..........well everybody with a pulse is already working and in a developed economy like the USA there are no easy productivity enhancing PP&E investments to be made anymore. The USA is not Nicaragua where you automate a production line for the first time & get a productivity/output windfall....all those types of investments were made long ago....and if they werent made long ago.....they were certainly made during ZIRP where the hurdle rate for any PP&E productivity investments was basically 0% so they got green lit. We are hitting, as I've said before, the sticky underbelly of monetary inflation..........the Made in China, Energy, supply chain disinflation was real but it masked a core domestic monetary inflation problem that wont go away.....it was a head fake around a linear fall to 2%........as we've talked about the journey from 5% inflation to 2% is gonna be a bitch. It can only be achieved really, given what I've said about poor prospects for productivity growth, by reducing aggregate nominal spend significantly......reducing credit creation which turns into nominal spend wont do the job on its own..........you've got to get the consumer to moderate spending......unfortunately thats usually achieved by putting a proportion of the population out of work & then those remaining in-work fearful enough that they begin to save more of their income.....reducing overall aggregate spend. Its more commonly referred to as a recession. When NY State has 40% of the population on Medicaid, the assertion that everybody with a pulse is already working is clearly wrong. There are plenty of misallocated resources. I was at the Intrepid yesterday with my kids, the place could be run with half of the employees. Google, Facebook, Microsoft, et all added 200,000+ jobs in the past couple of years, what are all of those people doing? How many people are engaged in diversity/equity/inclusion racket? Colleges are bloated with admin staff, today Harvard has more administrators than professors. Start taxing endowment gains and take away Pell Grants and federally subsidized student loans, and watch colleges magically cut tuition and expenses. Raising productivity is doable in the US, it starts with good schools, and not subsidizing college degrees in English/Cultural Anthropology/Art History while looking down at trade schools and closing vocational high schools. Take away college subsidies and see how greatly labor force will increase.
Gregmal Posted February 24, 2023 Posted February 24, 2023 (edited) 11 minutes ago, Dinar said: Raising productivity is doable in the US, it starts with good schools, and not subsidizing college degrees in English/Cultural Anthropology/Art History while looking down at trade schools and closing vocational high schools. Take away college subsidies and see how greatly labor force will increase. Totally. It’s nuanced and divided much like the blue collar vs white collar dynamic in the labor market. At the same time, there’s the noise. Todays spending was another indicator of consumer strength. What do they do? Scream for more destructive hikes or blame credit cards endlessly. The South is too robust…wage price spiral! Ignore the deflation elsewhere. Oh but energy will be a problem! Energy falls…back to touting used car prices. The only way to win this game is just to ignore the noise and focus on individual fundamentals. The ironic part in all of this…like 90% of my friends and contacts who are vividly in the bear camp…didn’t even make money last year and got ripped in q1 so far. Sometime just sticking to your preferred knitting is best. The inflation/recession/economy too strong game is just a self serving shit show for the people selling it. Edited February 24, 2023 by Gregmal
changegonnacome Posted February 24, 2023 Posted February 24, 2023 6 minutes ago, Dinar said: When NY State has 40% of the population on Medicaid, the assertion that everybody with a pulse is already working is clearly wrong. What odds would you give that this fact, even if true, is going to change any time soon such that productivity is going to sky rocket? I rest my case. I deal in reality......not fantasy.
Gregmal Posted February 24, 2023 Posted February 24, 2023 Change the case rests on monthly .2s, .4s, .6s….which have always bounced around and now do so more than ever.
changegonnacome Posted February 24, 2023 Posted February 24, 2023 2 minutes ago, Gregmal said: Change the case rests on monthly .2s, .4s, .6s….which have always bounced around and now do so more than ever. It isnt the monthly's & it isnt decimal points here as I've said........its nominal aggregate spend increasing substantially in 2022.......while output remained flat = inflation.........yearly 2022 figures are in, it aint MoM noise.........the base level economic characteristics that would suggest 2023 would be different than 2022 in terms of wages, spending & productivity aren't there yet...............so 2023 is shaping up to look alot like 2022.......wages up, nominal spend up & productivity flat = inflation........this is the Fed's problem.....they know the math has to change somewhere........wage increases need to moderate, aggregate spending growth needs to decelerate and/or productivity needs to skyrocket. If things stay like this 2023 will have a CPI figure in the 5's........something has to give.......whatever can give in the variables I've outlined is not good for the market. If you really believe in a productivity miracle for the USA to get us out of this........I'm really sorry......that part is completely deluded.....social security programs are not getting cut........the diversity and inclusion, ESG cult is not going away......and what fat exists in silicon valley......is not all of sudden going to show up in factories in the Rust belt......or chicken processing plants in Idaho. 15 minutes ago, Gregmal said: like 90% of my friend and contacts who are vividly in the bear camp…didn’t even make money last year and got ripped in q1 so far. Bear market rallies can be epic.......i agree that everybody needs to stick to their knitting.......very few people in history, like Druckenmiller or Soros, have shown an ability to be able to profitability trade market psychology/gyrations around a base macro thesis. The moves can be too epic that you get shaken out. I remain a slightly less than fully invested bear.....with some macro-esque bear-ish hedges. It made me money, at the margins, in 2022........and I expect them to make me money in 2023......as of today I'm re-opening some shorts on fallen angels, that turned back into angels for a while.......the much higher, for much longer trade is here.
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