Is The Bottom Almost Here?

[MikeL]

1 hour ago, dealraker said:

Old dealraker is chatty this a.m.; don't take me too seriously.

 

Some amount of look-back as to macro posts during all the previous era's would probably produce some amount of lessening of intense worry.  Years ago in the 1990's I simply loved Bill Fleckenstein's posts about the dot com and subsequent profitable tech severe over-valuations, he was perfectly right.  Then Hussman comes along, he's a terriffic read too, his stuff at one time literally made more sense than anything to me.

 

Still, I just read and held stocks and such.  March 9, 2009 was also entertaining for me...you say "that's sick Charlie" but remember I'm hardened from the 1980-82 period when prime was 20 and I had a $500,000 personal baloon loan out that I was not able to make bank delivery on.  But anyway...

 

We have leaders...elderly supposed billionaires who literally, and I mean literally, are out scaming and begging the poor for money every day --- along with elderly, extremely elderly who can barely read the teleprompter, in office leadership.  They are elderly for so many reasons...they are all out-of-it via age and their completely separated from reality life.  Day-traders...very old leaders of the USA are insider trading and my guess is that's more their focus than you think.  

 

Ain't it awful?

 

Kennedy, in my growin' up era was 3.5 decades younger.  Clinton, comparatively young, in my view was simply brilliant.  No, I do not align with a political party!  I like the quick thinkers who are scheming enough to force others to compromise.

 

In any event I picked a few things out of the blue.  One of the posts changegonnacom made included "I woke up and..."  All I will add is that all kinds of "stuff" is in your guys future and more so on average than me because I'm older than most of you.  You have absolutely no clue whatsoever what this "sfuff" is.

 

Again, I always state that what you are obsessed with now is missing what is far more relevant and important...that you aren't even aware of.  I assure you it is there and waiting to (as changegonnacom would say) wake you up.  My guess is that it is so significant that the macro you write about today will be lost from your memory.

 

In any event I processed all that was "awaken" in this discussion years ago, you should have too.  We quote hedge fund runners, they'll be new ones and we'll quote them too.  Jim Chanos will be out and shout; Hussman's still looking for "he was right high five's" (that's called fees no matter the performance) from his bunch.  My guess is we'll have difficulty going forward with having free elections and some of you will initially like that, but then most will eventually engage to stop such and it will be very ugly trying to stop what "we" allowed.

 

My guess too is that if you don't go nuts one side or the other and get yourself killed or imprisoned you'll live a lot longer.  And investments, not cash, will be the way to go.  Along with that I'll further say that avoiding the current euphoricly supported winners will enhance your investment outcome.

 

We seem to be obsessed with Meta and Google.  Old dealraker will simply say one thing: Bet cha the bargains are elsewhere...'cause that's almost always the case.

 

Don't take me too seriously, just chantin' and chatting up some of my biased and slanted stuff.  Wife and I are headed out for a few days of NC hiking in the mountains.  

 

 

 

 

 

Was just yesterday, October 2021, ARK was supreme...SAAS stock raging and 

 

 

I really enjoy reading what you wrote, have a nice hike and please keep posting.

Edited November 2, 2022 by MikeL

[DooDiligence]

58 minutes ago, Spooky said:

 

 

This Odd Lots podcast was pretty interesting on the topic - if I'm remembering correctly, a lot of Japanese banks / companies needed to rebuild their balance sheets so the bailout funds / increase in the money supply didn't make it into general circulation: https://podcasts.apple.com/us/podcast/richard-koo-explains-why-the-recovery-will-be-so-difficult/id1056200096?i=1000474211676

 

The concept also helps to explain why the bailouts in 2008 didn't result in widespread inflation but the helicopter money delivered from central banks and fiscal authorities directly to individuals during the pandemic led to the current inflation.

 

I also think that Milton Friedman's theory of monetary inflation has also been shown not to be completely accurate - there is not necessarily a direct relationship between an increase in the money supply and inflation. I read a paper on this once but would have to dig it up.

 

The Truth About Inflation: Why Milton Friedman Was Wrong, Again

 

"Milton Friedman has been dead for more than a decade, but his ghost still haunts us. In the 1960s, Friedman declared that inflation is ‘always and everywhere a monetary phenomenon’ — a problem of printing too much money. Since then, whenever inflation rears its head, you can count on someone to reanimate Friedman’s ghost and blame the government for spending too much."

 

"The idea that averages should be reported together with a measure of variation is a basic part of empirical science. And yet when economists study inflation, this practice is conspicuously absent."

 

"The real story of inflation — the one that goes largely unreported — is of wildly divergent price change among different groups of commodities."

 

"For some reason, economists didn’t listen to the memo given to all other scientists — the one that said ‘thou shalt report an average alongside a measure of variation’."

 

"Like most good ideologies, this argument contains a devious trick. What monetarists won’t tell you is that the money supply gives meaningful insight into inflation only if price change is uniform."

 

"Having seen that price change varies greatly between commodities, you might wonder why this matters. Well, it matters because it means that inflation is not purely a ‘monetary’ phenomenon. Inflation redistributes income."

 

"Nitzan and Bichler have discovered, for instance, that inflation systematically benefits big business."

 

"So it seems that in the real world, inflation looks nothing like it does in economics textbooks. Yes, inflation is a ‘monetary phenomenon’ — as is anything to do with prices. But more importantly, inflation is a power struggle over who can raise prices the fastest."

 

https://evonomics.com/the-truth-about-inflation-why-milton-friedman-was-wrong-again/

 

I'm not sure whether such a complex phenomena can be treated so easily without a rearview mirror and a well constructed narrative.

Edited November 2, 2022 by DooDiligence

[UK]

1 hour ago, dealraker said:

Old dealraker is chatty this a.m.; don't take me too seriously.

 

Some amount of look-back as to macro posts during all the previous era's would probably produce some amount of lessening of intense worry.  Years ago in the 1990's I simply loved Bill Fleckenstein's posts about the dot com and subsequent profitable tech severe over-valuations, he was perfectly right.  Then Hussman comes along, he's a terriffic read too, his stuff at one time literally made more sense than anything to me.

 

Still, I just read and held stocks and such.  March 9, 2009 was also entertaining for me...you say "that's sick Charlie" but remember I'm hardened from the 1980-82 period when prime was 20 and I had a $500,000 personal baloon loan out that I was not able to make bank delivery on.  But anyway...

 

We have leaders...elderly supposed billionaires who literally, and I mean literally, are out scaming and begging the poor for money every day --- along with elderly, extremely elderly who can barely read the teleprompter, in office leadership.  They are elderly for so many reasons...they are all out-of-it via age and their completely separated from reality life.  Day-traders...very old leaders of the USA are insider trading and my guess is that's more their focus than you think.  

 

Ain't it awful?

 

Kennedy, in my growin' up era was 3.5 decades younger.  Clinton, comparatively young, in my view was simply brilliant.  No, I do not align with a political party!  I like the quick thinkers who are scheming enough to force others to compromise.

 

In any event I picked a few things out of the blue.  One of the posts changegonnacom made included "I woke up and..."  All I will add is that all kinds of "stuff" is in your guys future and more so on average than me because I'm older than most of you.  You have absolutely no clue whatsoever what this "sfuff" is.

 

Again, I always state that what you are obsessed with now is missing what is far more relevant and important...that you aren't even aware of.  I assure you it is there and waiting to (as changegonnacom would say) wake you up.  My guess is that it is so significant that the macro you write about today will be lost from your memory.

 

In any event I processed all that was "awaken" in this discussion years ago, you should have too.  We quote hedge fund runners, they'll be new ones and we'll quote them too.  Jim Chanos will be out and shout; Hussman's still looking for "he was right high five's" (that's called fees no matter the performance) from his bunch.  My guess is we'll have difficulty going forward with having free elections and some of you will initially like that, but then most will eventually engage to stop such and it will be very ugly trying to stop what "we" allowed.

 

My guess too is that if you don't go nuts one side or the other and get yourself killed or imprisoned you'll live a lot longer.  And investments, not cash, will be the way to go.  Along with that I'll further say that avoiding the current euphoricly supported winners will enhance your investment outcome.

 

We seem to be obsessed with Meta and Google.  Old dealraker will simply say one thing: Bet cha the bargains are elsewhere...'cause that's almost always the case.

 

Don't take me too seriously, just chantin' and chatting up some of my biased and slanted stuff.  Wife and I are headed out for a few days of NC hiking in the mountains.  

 

 

 

 

 

Was just yesterday, October 2021, ARK was supreme...SAAS stock raging and 

 

 

 

I hear you and agree on almost all points, especially re trying to nail macro. I find your posts very interesting and informative! However I disagree a little, in that we should not be obsesed with Google, Meta, maybe even Amazon etc and other fine companies, not necesseraly from tech sectors (Nike, LVHM, UMG just to name a few), which litteraly went on sale this year. I think there could be very rare oportunity to invest in some of them at reasonable or even undervalued prices. And yes, with most of them, then you can just stay patient for long. If it is allready time to go all in or not yet, I have no idea, but time to be obsesed-for me yes!:)

 

Edited November 2, 2022 by UK

[Gregmal]

1 minute ago, UK said:

 

I hear you and agree on almost all point, especially re trying to nail macro. I find your posts very interesting and informative! However I disagree a little, in that we should not be obssesed with Google, Meta, maybe even Amazon etc and other fine companies, not necesseraly from tech sectors (Nike, LVHM, UMG just to name a few), which litteraly went on sale this year. I think there could be very rare oportunity to invest in some of them at reasonable or even undervalued prices. And yes, with most of them, then you can just stay patient for long. If it is allready time to go all in or not yet, I have no idea, but time to be obssesed-for me yes!:)

I actually think a basket of the NKE, LVMH, etc outpaces the FANGs. The FANGs had a half decade of indisputable fad like following. It’ll take more than 6 months to unwind that. My guess is 18-24 months. 

[UK]

15 minutes ago, Gregmal said:

I actually think a basket of the NKE, LVMH, etc outpaces the FANGs. The FANGs had a half decade of indisputable fad like following. It’ll take more than 6 months to unwind that. My guess is 18-24 months. 

 

You may be right. Also these non techs have better visibility. But i think most of the speculations and extremes were in profitless "fake tech", and even FANGs are not all equal, e.g. I just cannot see Netflix on par with others. But Apple, Google, Microsoft, Amazon, maybe even Meta, these are very strong companies, growing faster then most other (maybe not every year OK) and I think that will continue in the future. Just look at the cloud or world digitisation in general, it is nowhere close to the end.

 

Edited November 2, 2022 by UK

[Gregmal]

The media commentary is utterly remarkable. You’d think investing has officially been reduced to nothing more than a weird amalgamation of scrabble and bingo. What will he say? How will he say it? In what order will he say it? Good grief. 

[Spekulatius]

2 hours ago, Gregmal said:

I actually think a basket of the NKE, LVMH, etc outpaces the FANGs. The FANGs had a half decade of indisputable fad like following. It’ll take more than 6 months to unwind that. My guess is 18-24 months. 

NKE looks incredible faddish to me at 30x earnings. It's not luxury either or bullet proof regarding economic pressures, just a well managed consumer good company.

 

Significant exposure to China as well.

Edited November 2, 2022 by Spekulatius

[Gregmal]

At 2pm investors decide they want to buy stocks and then sell stocks and then buy stocks and then sell, sell, sell based upon perceived commas and semicolons embedded in Powell delivery of remarks. 

[Castanza]

3 minutes ago, Gregmal said:

At 2pm investors decide they want to buy stocks and then sell stocks and then buy stocks and then sell, sell, sell based upon perceived commas and semicolons embedded in Powell delivery of remarks. 

 

Lmao is it just me or are these questions just pitiful? Everyone just grasping at straws looking for nuance to extrapolate "deep" investing angles. 

 

Dude said he is hiking rates and will continue to hike. Does it need to be made any more complicated? 

[mattee2264]

I think it goes to show that it is a news driven speculative market still. People are trading Fed announcements and earnings releases and not really focusing on long term fundamentals. This kind of behaviour makes me feel we aren't anywhere near a bottom. 

 

[WayWardCloud]

Do people generally focus on long term fundamentals at market bottoms?

I'm agnostic whether we are near one or not by the way. Just not understanding your logic.

[Gregmal]

Yup. The prevailing sign of, idk if you have to say "bottom" but maybe peak negativity, is huge cash allocations, high volume put activity, and a general fear that "tomorrow" the market will be down. 

[Gregmal]

In fact Id say that the majority of the time regardless of the market being up or down, the overwhelming majority of people are ignorant retail traders trying to get rich quick, promotional folks trying to gain followings, and fruitcake hedge fund guys/analysts trying to manipulate short term narratives. Its why we need another @dealrakerstory about focused long term investing or maybe just a trip to google to find a story of the latest 85 year old librarian who left 8 figures of bluechips to the local food pantry. 

Edited November 2, 2022 by Gregmal

[Ross812]

1 hour ago, mattee2264 said:

I think it goes to show that it is a news driven speculative market still. People are trading Fed announcements and earnings releases and not really focusing on long term fundamentals. This kind of behaviour makes me feel we aren't anywhere near a bottom. 

 

 

I think this time around we may be in a case of "this time is different". The number of "free" brokerages has exploded and the leverage offered to short term traders with options and futures is insane. Many of these traders are agnostic on the direction of the market; they only want the volatility. The short term "static" has increased; the long term direction is still dictated by fundamentals. 

[Ross812]

Gamestop was just the beginning. The number of retail traders through around trading daily options on SPX, XSP, SPY, QQQ etc is through the roof. The reddit bro with a 20k account trading 5 options of XSP is controlling $187.5K worth of equities for $950. The last chat room I looked at had about 50 people actively posting at any given time and three times that during a big new event like the FOMC. 

 

The  IWM trade I posted about in the other thread came off the message board. You take 150 people throwing $500 leveraged 200x and you are talking $15M repeated two or three times this afternoon. They are not all winning, but the market maker has to buy the shares to remain neutral. 

 

That is one message board. If the average stock bro had 20k - the total collective account size on the board is $3M. COBF has individuals with far larger accounts, but I doubt we threw around $15M collectively today. Their message board threw around $30M+ today! 

[dealraker]

Greg I swear to God this is true and when the guy dies I'll tell you his name and you can see his estate figures.  We have a near 90 year old guy in my club I have known since childhood who inherited nicely, his family owned shares of the local furniture business that sold to Masco for half a billion.  But his part was less than 2 mil.

 

Anyway he had this pathetic looking little shirt mfg business named Manhatten in a crappy old building.  Sold the damn business three times and financed it.  Got it back thru failure of new owners all three times.  Closed it down.  He contracted at one time making Polo shirts I recall.

 

20 years ago he gave 1 mil to the YMCA here.  He's in my investment club.  His largest stock holding was GE!!!!  He has not sold!  I know, he tells me regularly.

 

He got a new computer...too old to figure it out!   Had me and my brother-in-law come over to help him.  My bro-in-law says "You know he's rich don't you...like really rich."  I said, ""No damn way."

 

We got his computer up and going, got his passwords set up.  Got him back on his broker websites.  Dude has $50 damn mil in those accounts.  My bro in law says. "There's more."

 

His daughter is 5 years younger than me but we lived close growing up and have stayed in touch...she lives in Blowing Rock NC and has no children.  I could not help it...I called her and asked her if she knew his finances, she says:  "Oh yea Charlie... I know all about it"  Not a penny passed to her yet...she said laughing almost uncontrollably.

 

Yea, these things are true.  How they happen I don't have a clue.  He owns a lot of stocks!

 

 

 

Edited November 3, 2022 by dealraker
Spelling

[UK]

I remember reading similarly very scary letter from them somwhere in 2020 spring or early summer:), but just to keep this discussion alive:

 

https://www.ft.com/content/f3bb0f96-1816-4481-8318-4f7583326a4a

 

The world is “on the path to hyperinflation”, it said, which could lead to “global societal collapse and civil or international strife”. While such an outcome is not certain, this is currently the direction that the world was headed, it added.

 

However, Elliott said markets had not fallen far enough, given the many risks present, and warned of a further reversal of the so-called ‘everything rally’ seen near the top of the bull market of recent years, as sky-high investor exuberance lifted all manner of risky assets. There are so many “frightening and seriously negative possibilities” that it is hard not to think that “a seriously adverse unwind of the everything bubble” is coming, it said.The hedge fund estimates a 50 per cent fall from peak to trough would be “normal”, suggesting further large falls to come in major equity markets, although it added it was impossible to know whether or when that would happen. Elliott, which is up 6.4 per cent in 2022 and which has only lost money in two calendar years since launch in 1977, pointed to a handful of areas of potential stress that could accelerate market falls. It highlighted banks’ losses on bridge financing, potential markdowns of collateralised loan obligations and leveraged private equity as areas of potential risk for markets.The firm was also critical of investors who believed market falls will always prove shortlived and can be “ignored”.The idea that “‘we will not panic because we have seen this before’ does not comport with the current facts”, it said.

[dealraker]

4 hours ago, UK said:

I remember reading similarly very scary letter from them somwhere in 2020 spring or early summer:), but just to keep this discussion alive:

 

https://www.ft.com/content/f3bb0f96-1816-4481-8318-4f7583326a4a

 

The world is “on the path to hyperinflation”, it said, which could lead to “global societal collapse and civil or international strife”. While such an outcome is not certain, this is currently the direction that the world was headed, it added.

 

However, Elliott said markets had not fallen far enough, given the many risks present, and warned of a further reversal of the so-called ‘everything rally’ seen near the top of the bull market of recent years, as sky-high investor exuberance lifted all manner of risky assets. There are so many “frightening and seriously negative possibilities” that it is hard not to think that “a seriously adverse unwind of the everything bubble” is coming, it said.The hedge fund estimates a 50 per cent fall from peak to trough would be “normal”, suggesting further large falls to come in major equity markets, although it added it was impossible to know whether or when that would happen. Elliott, which is up 6.4 per cent in 2022 and which has only lost money in two calendar years since launch in 1977, pointed to a handful of areas of potential stress that could accelerate market falls. It highlighted banks’ losses on bridge financing, potential markdowns of collateralised loan obligations and leveraged private equity as areas of potential risk for markets.The firm was also critical of investors who believed market falls will always prove shortlived and can be “ignored”.The idea that “‘we will not panic because we have seen this before’ does not comport with the current facts”, it said.

One day I am surely destined to discover somebody somewhere who has thrived either investing in hedge funds and/or going all cash repeatedly with perfect timing.  I'll let you know.  One thing is certain...the day a market falls these guys will get their stories out.  And when markets really tank reposts will be shared to such extent suicide hot lines will overload to levels of shut down.  CNBC might even avoid Cathie interviews, now that will be something!

 

In the meantime I own Erie Indemnity (ERIE)....and would somebody here who's is wiser than me please explain the stock movements to me?!

[UK]

58 minutes ago, dealraker said:

One day I am surely destined to discover somebody somewhere who has thrived either investing in hedge funds and/or going all cash repeatedly with perfect timing.  I'll let you know.  One thing is certain...the day a market falls these guys will get their stories out.  And when markets really tank reposts will be shared to such extent suicide hot lines will overload to levels of shut down.  CNBC might even avoid Cathie interviews, now that will be something!

 

I agree, nothing to add:). In 2008-2009, when I was younger but much dumber, it almost cost me a lot to listen to much to such scaremongering. Thanks god, that autumn, I think in October 2008, biography of WB just came out, and my wife accidentally decided to buy one for me, while returning home from some foreign trip. After reading it and then all BRK letters, I quickly become much more balanced in terms of who you should follow and listen to:). Signer is smart investor, but he costantly tries to sell you an idea, that world is super dangerous and becouse of that you should almost always be hedged, of course only they know how to do this, therefore, you cannot invest without them.

 

[nafregnum]

I've had this vague sense of worry for a few years, and Kuppy wrote it here a lot better than I could've done (see below).  It seems like The Fed needs to talk a big game, because they know that there's no way they could actually allow ALL of the US national debt to roll over to a much higher interest rate.  Think of the old advice to "Talk softly and carry a big stick."  The fact that JP is talking loudly & tough may be hiding the reality that they don't have a big stick.  I seriously wonder: What can they do if the tough talk doesn't scare away the inflation?

 

https://adventuresincapitalism.com/2022/10/09/the-fed-is-fuct-part-4/

 

Quote

 

The Fed is trapped in a box of their own creation. As a result, they may want to talk tough, but their ability to maneuver is severely restricted. The Fed claims that they’re targeting a terminal rate of 4.6% for Fed Funds, but if they did that for any period of time, they’d only succeed in blowing up the Treasury.
 

Our government has run obscene deficits over the past two decades. This was only made possible by the Fed suppressing interest rates. Despite a succession of Treasury Secretaries, the US debt was never termed out. The majority of the debt is actually quite short term. During 2021, the Federal government paid $392 billion in interest on $21.7 trillion of average debt outstanding—or an average interest rate of 1.8%.
 

Now imagine if Fed Funds actually got to the terminal rate and stayed there for any period of time. What would paying an average rate of 4.6% on year-end 2021 debt do to the interest expense? Well, it rises by $636 billion to $1.028 trillion or the more than the cost of our entire military spending of $801 billion in 2021. Ignoring the budget pressure, the interest cost would then be 4.5% of total GDP, up from 1.7% in 2021. That’s like tying a lead weight around the neck of our economy.

 

 

[CorpRaider]

I never get this argument.  They're paying the debt in nominal dollars and the assets and income stream are also priced in nominal dollars.  Aren't we just anchoring on the old numbers and saying that interest amount sounds too big.

[UK]

 

https://www.bloomberg.com/news/articles/2022-11-03/boe-hikes-by-75-basis-points-but-rejects-market-rate-path?srnd=premium-europe&leadSource=uverify wall

 

The Bank of England delivered its biggest interest rate increase in 33 years but strongly pushed back against market expectations for the scale of future increases, warning that following that path would induce a two-year recession. Staying on the market path used in the forecasts, which peaks at around 5.25% next year, would knock 3% off GDP and ultimately push inflation to zero, the BOE said. An outlook based on rates staying at their current 3% level implies a shorter, shallower recession and sees inflation fall close to target in two years’ time. “We think bank rate will have to go up less than what’s currently priced into financial markets,” BOE Governor Andrew Bailey said at a press conference. “That is important because, for instance, it means that the rates of new fixed-term mortgages should not need to rise as they have done.” The remarks mark a sharp contrast with Federal Reserve Chair Jerome Powell, who said Wednesday that US rates will probably go higher than people are thinking. UK government bonds and the pound fell after the BOE’s decision. Investors had already tempered their view for UK rates, suggesting a peak around 4.75%.

 

Not in US, but this sounds like some pivot, no? So Japan, UK, EU probably soon. What if:

 

https://www.bloomberg.com/news/articles/2022-11-02/gundlach-tells-cnbc-no-75bp-rate-hike-next-time-as-a-base-case

 

In his view, the US inflation data will cool off in 2023, and if the Fed is successful in bringing down inflation to the 2% area by the end of next year, it will continue declining and would go well below 2%. “It is implausible” to think that inflation will halt at the 2% range and stay there. “It will go negative,” he says.

 

 

Edited November 3, 2022 by UK

[Spekulatius]

The Fed can pay 5% interest rates with a 7%+ inflation forever. In fact even with 5% inflation, they would pay zero. Their income from the tax base increases with inflation.

 

Now real positive interest rates could be a problem, but just nominal interest rates are meaningless unless inflation is subtracted.

[flesh]

48 minutes ago, CorpRaider said:

I never get this argument.  They're paying the debt in nominal dollars and the assets and income stream are also priced in nominal dollars.  Aren't we just anchoring on the old numbers and saying that interest amount sounds too big.

It IS riskier with more debt as a % of gdp though, correct? There are many scenarios where the article your responding to

could happen to varying degrees, correct? Inflation could come down faster than rates because rates can't always be zero

or else there's less room to stimulate. I never have understood your argument, I mean if your above inputs remain constant I get it, but why would they remain constant? If inflation comes down rates will likely come down but how much? Afaik, anything is possible, even probable, and there are tipping points/non linearities embedded in everything, no? Isn't there already enough precedence? I just can't wrap my head around this MMT/MMT directional stuff, why add blow up risk to a game that's working so wonderfully?

 

We can print/tax but there's limits/trade offs. 

 

Looking to understand not to battle. What I believe I know has been widdled down to almost nothing generally speaking. 

 

 

[CorpRaider]

Agree more debt is riskier than less but that's not what I read the above to say.