Is The Bottom Almost Here?

[Gregmal]

GS, UBER, MKL, CLF, HIW, FFH, CVX, NFLX

 

Bunch of totally random and rather diverse group of stocks. “The market” thing is a lazy crock of crap. Which of these haven’t bottomed or are at risk of new lows because the analysts lower their excel targets or unemployment ticks up to 4%? I have trouble seeing how for most stocks, you didn’t already have your chance. Of course there’s exceptions like with Google or Vornado, but by and large the “everywhere” opportunity already occurred.

[TwoCitiesCapital]

14 minutes ago, Sweet said:

2015 did not have two consecutive quarters of negative growth:

 

Q4 '15:  +0.6%

Q3 '15:  +1.3%

Q2 '15:  +2.3%

Q1 '15:  +3.3%

 

The working definition of what is considered a recession was always two negative quarter until last year.  

The economy did contract for two quarters - it wasn’t a quarterly anomaly.  There is a chance that we have had the recession and the bottom is in.

 

And remember, the covid induced recession was enormous, and it wiped out a lot of businesses and a lot of wealth.

 

I’m not claiming to know if the bottom is in, because I can’t know, but I do feel there is an elephant in the room.

 

 

 

My apologies. I thought I had recalled the oil bust having two quarters of negative GDP growth. I might be recalling incorrectly, thinking of a different period, or maybe the numbers were revised higher after the initial releases.

 

It HAS happened before though. 

 

The 2020 recession DID have two quarters of negative GDP, but was officially announced before the second quarter data was known. 2008 recession was also called prior to two consecutive quarters of negative GDP growth were confirmed.

The 2001 recession NEVER had two consecutive quarters negative and 1947 had two consecutive quarters without ever being declared a recession.  

 

The two quarters rule has been a shorthand for decades, but has never been the official rule. It's always been based on widespread economic impact. Two quarters of -0.1% might not be sufficient. A single quarter of -10% would be. 

 

 

[TwoCitiesCapital]

29 minutes ago, Gregmal said:

GS, UBER, MKL, CLF, HIW, FFH, CVX, NFLX

 

Bunch of totally random and rather diverse group of stocks. “The market” thing is a lazy crock of crap. Which of these haven’t bottomed or are at risk of new lows because the analysts lower their excel targets or unemployment ticks up to 4%? I have trouble seeing how for most stocks, you didn’t already have your chance. Of course there’s exceptions like with Google or Vornado, but by and large the “everywhere” opportunity already occurred.

 

The indices are made up of totally diverse stocks too and tell the same story. This is exactly why I use them to gauge sentiment and overall direction. I fail to see your point.

 

Bear markets are riddled with  periods where the average stock does 15-25% multi-month rallies on the way to new lows. We've seen two prior to this one. 

 

There are always examples of stocks that do better or do worse. There's examples of a few stocks that buck the trend and kill the recession. But on average, stocks aren't where you want to be when earnings are contracting, PMIs are negative, or yield curves inverted. We've got all 3. 

 

 

[Gregmal]

Because the above approach involves living in a vacuum. Just saying indicator a, indicator b, and indicator c….nope, steer clear of stocks! Looking at those companies, admittedly just examples, forces you to envision these gargantuan sell offs and ask yourself 1) what really changes based on the assumptions, 2) why wouldn’t those just be layup opportunities, and 3) what if the really terrible things just never happen…are those bad things to own anyway? I mean does nobody believe in just finding good companies and investing through the cycle? Because the benefit there….is that 3 of the 123 predicted recessions actually end up happening. Bailing on good investments on the other 120 false alarms is guaranteed to produce poor long term results.

Edited February 15, 2023 by Gregmal

[TwoCitiesCapital]

1 hour ago, Gregmal said:

Because the above approach involves living in a vacuum. Just saying indicator a, indicator b, and indicator c….nope, steer clear of stocks! Looking at those companies, admittedly just examples, forces you to envision these gargantuan sell offs and ask yourself 1) what really changes based on the assumptions, 2) why wouldn’t those just be layup opportunities, and 3) what if the really terrible things just never happen…are those bad things to own anyway? I mean does nobody believe in just finding good companies and investing through the cycle? Because the benefit there….is that 3 of the 123 predicted recessions actually end up happening. Bailing on good investments on the other 120 false alarms is guaranteed to produce poor long term results.

 

You act like I'm sitting in cash and afraid. I'm roughly 50-60% stocks. I've been buying every dip - I've just been selling every rip. 

 

I still believe in buying quality companies. I just also believe in trying to maximize my returns and quality companies gotten taken out back and shot in 3/2020, in Q4 2018, in 2008/2009, etc etc etc

 

A rising tide means you can buy just about anything because it lifts all boats. A receding tide means just about everything will fall - some less than others - but most will fall. Why put your cash to work in such an environment where that outcome highly likely? 

 

It's not guaranteed - that's why I still own equities. But it's likely based on historical recessions which is why my risk is dialed way, way back. 

Edited February 15, 2023 by TwoCitiesCapital

[Gregmal]

My point is that this sort of guessing game and fear watching strategy is a losing strategy. The odds are unquestionably against those that play it. Even here, we ve heard whining about expensive stocks, stories of the E falling off, run of the mill recessions, depressions, stagflation, 8% treasuries, you name it. And we re at 4000 SPY. Those mega bears with 3200-2800 targets sit around peddling the datapoints, but from here, what was the right move? Sitting around like a pig for an extra 10-15% in October cuz big bad JPow said “there will be pain”??!? Now at 4,000 those people are what? Gonna hang around hoping to get a quote they had in October? Maybe a few points lower? It’s a dumb game.

[TwoCitiesCapital]

1 hour ago, Gregmal said:

My point is that this sort of guessing game and fear watching strategy is a losing strategy. The odds are unquestionably against those that play it. Even here, we ve heard whining about expensive stocks, stories of the E falling off, run of the mill recessions, depressions, stagflation, 8% treasuries, you name it. And we re at 4000 SPY. Those mega bears with 3200-2800 targets sit around peddling the datapoints, but from here, what was the right move? Sitting around like a pig for an extra 10-15% in October cuz big bad JPow said “there will be pain”??!? Now at 4,000 those people are what? Gonna hang around hoping to get a quote they had in October? Maybe a few points lower? It’s a dumb game.

 

1) everyone who predicted falling earnings was right (I was one of them)

 

2) everyone who predicted inflation being sticky and rates going higher for longer was right (I wasn't one of them)

 

3) we're at 4,000 S&P - significantly off the prior highs AND in an environment less supportive of forward looking returns in equities than before the 19% drop. People like me have been directionally right for the last year. What did being concerned about valuations and increasing economic fragility get me? Dramatically outperforming on equities AND fixed income. My average equity was flat to up last year. My fixed income skewed short term and dramatically outperforming equities and fixed income benchmarks. It was primarily crypto that drug down my absolute returns last year. Largely because I DONT engage in trading it because I don't trust my emotions with swings of 20-30% in a single month so I just held and slowly DCA'd the whole way down. Still outperformed crypto benchmarks by being predominantly in BTC. 

 

4) those mega bears, myself included, are peddling 3,200 targets can still invest. I was buying SI calls when the stock was near $11. I was buying Coinbase in the 30-40s. I bought BABA near it's lows. I was buying GBTC at near 50% discounts to NAV post FTX at $8-9. I've been buying more WCP.TO on every dip below $9. 

 

But I've also sold some of that COIN in the 70s and 80s, I sold some of that GBTC when it hit $11+, I sold some SI calls OTM against my position when it was $19+, I've let go of portions of WCP everytime it's popped above $10-11.

 

The proceeds go into money market, or short term bond funds yielding 4-6% YTM, or intermediate Treasury funds for duration. They sit there until the next opportunity presents itself. Buy the dip. Sell the rip.

 

This isn't a market that has paid you to buy and hold for the last 15 months. Why we suddenly think that has changed is beyond me. Inflation is still here. Stocks are still expensive. The Fed is still removing liquidity and hiking rates. Earnings have become more fragile. Economic indicators are suggesting more pain is to come. The yield curve is screaming economic slowdown. 

 

Rent the rallies. Lower your risk. It worked for me in 2019/2020 where I sidestepped much of the pain that March. It worked for me in 2022 where I sidestepped much of the pain in equity and debt markets. And I believe it will work again in 2023. 

Edited February 15, 2023 by TwoCitiesCapital

[Gregmal]

27 minutes ago, TwoCitiesCapital said:

1) everyone who predicted falling earnings was right (I was one of them)

Except they said falling earning would warrant SPY 3000 or whatever…that’s the problem with this little “let’s be cute” game. Unless you’re playing the pump and dump or smash and grab, short term, trade meaningless fluctuations game, you’re losing big time.  
 

You see it all over. And I guess it’s just the game people play. But if predicting a short lived selloff and then having 3-5 weeks to cover is your alpha, that’s a hard way to make a living. Last year REITs of certain types were the best example of this. You had the Chanos types making all sorts of grand fundamental predictions. Few actually happened. Private markets were resilient. Public markets sold off and “see I knew it!” And “see, REITs are bad inflation hedges”, subscription seller Rob hedgeye “called the INVH decline” and really, you step back, and view things from 50,000 ft, and it’s like…dude you did all this for a short term trading window? Unless you’re in marketing or bought FANG stocks at 40x non gaap eps, you were better off just going to sleep. And that before even factoring in taxes. 

[thepupil]

a lot of this is repetitive from what I’ve already said, but I have a salt/alcohol induced hangover after a lovely Valentine’s Day dinner and am dehydrated and can’t sleep.
 

I think we’re way too early in all this to declare any kind of “winner” and who was “right”. It’s been a very short time period.
 

I think “bears” would be proven right if we see a “lost decade” type environment where stocks fail to provide  much compensation above that of alternatives, specifically bonds, so that’s a 6+ year type of thing and even then will be sensitive as to which point one measures from. “bulls” would be proven right in the opposite case. We’re trying to declare a winner in 6 months vs 6 years. Like if stocks are up 10%/yr for next 7 years and bonds make 4.5%, bulls win. If stocks up 5% yr and bonds make 4.5%
 

but that’s kind of artificial because we don’t have to be bulls or bears and I think the most bearish people on are are 60-80% long stocks and acknowledge that stocks generally provide better LONG term returns. 

 

I’d frame it all as an opportunity to not be a one dimensional bear/bull and use the far more competitive yields offered by fixed income to take incrementally less risk and make similar overall portfolio returns.  For my whole investment career carrying cash/bonds/etc has been a hugely losing proposition and one was kind of consciously forced to take all equity risk.   
 

I’m not hugely bearish or bullish, but do think the game has changed and FI is not so awfully assymetric/betting on breaking the zero bound like it was the last 10 years. 

 

we have positive real yields, and nominal FI yields are similar if not greater than (in some cases) the earnings yield on the stock market. Rising rates are scary if you own rate sensitive things (like say highly levered real estate), but ultimately  this is a wonderful thing for those with capital who don’t want to be entirely in equities.

 

I’ve never felt more wealthy and secure because I no longer have the Fed competing with me for safe assets/yield. Inflation may be 3% 5% or 10%, but the interest income on my (and my retired parents)  slugof safe assets is up 100-300%. A greater balance between the levered equity/asset holders (real estate / PE /etc) and lenders is being achieved.
 

What a time to be a well capitalized rentier!*

 

I think it’s “too good” and want to own some duration because I don’t think it will last. I don’t think I should be able to make 1.6% real in a government guaranteed instrument for 30 years, that’s just a risk free handout to capital. Like why the hell is the US government paying me 7.5% effective interest? It will come down, but it’s still stupid.
 

 

*now I think if you’re gregmal or dealraker, you’d counter that the rise in yields is a trap and that one will compound at a higher rate just saying in stocks/business for the long run. My response is “yea probably” so but I’m only 70-80% sure if that rather than 100%, and I don’t think owning a little FI is gonna kill me. 
 

maybe this is veering on the “bearish” but it does feel to me that outside of the very speculative stuff we are at a point where we’re kind of having our cake and eating it too. Real estate and stocks haven’t really come down too much (in some cases not at all) despite the increase in cost of capital. Sort of a strange, but also a nice opportunity to reevaluate one’s asset allocation without the emotional baggage of a huge drawdown. 
 

I realize this thread is about predicting a short term bottom and I keep trying to make it really boring and proselytizing a 20% bond allocation and I shoukd go over to bogleheads and go buy a Buick or something. 

Edited February 15, 2023 by thepupil

[dealraker]

4 hours ago, thepupil said:

a lot of this is repetitive from what I’ve already said, but I have a salt/alcohol induced hangover after a lovely Valentine’s Day dinner and am dehydrated and can’t sleep.
 

I think we’re way too early in all this to declare any kind of “winner” and who was “right”. It’s been a very short time period.
 

I think “bears” would be proven right if we see a “lost decade” type environment where stocks fail to provide  much compensation above that of alternatives, specifically bonds, so that’s a 6+ year type of thing and even then will be sensitive as to which point one measures from. “bulls” would be proven right in the opposite case. We’re trying to declare a winner in 6 months vs 6 years. Like if stocks are up 10%/yr for next 7 years and bonds make 4.5%, bulls win. If stocks up 5% yr and bonds make 4.5%
 

but that’s kind of artificial because we don’t have to be bulls or bears and I think the most bearish people on are are 60-80% long stocks and acknowledge that stocks generally provide better LONG term returns. 

 

I’d frame it all as an opportunity to not be a one dimensional bear/bull and use the far more competitive yields offered by fixed income to take incrementally less risk and make similar overall portfolio returns.  For my whole investment career carrying cash/bonds/etc has been a hugely losing proposition and one was kind of consciously forced to take all equity risk.   
 

I’m not hugely bearish or bullish, but do think the game has changed and FI is not so awfully assymetric/betting on breaking the zero bound like it was the last 10 years. 

 

we have positive real yields, and nominal FI yields are similar if not greater than (in some cases) the earnings yield on the stock market. Rising rates are scary if you own rate sensitive things (like say highly levered real estate), but ultimately  this is a wonderful thing for those with capital who don’t want to be entirely in equities.

 

I’ve never felt more wealthy and secure because I no longer have the Fed competing with me for safe assets/yield. Inflation may be 3% 5% or 10%, but the interest income on my (and my retired parents)  slugof safe assets is up 100-300%. A greater balance between the levered equity/asset holders (real estate / PE /etc) and lenders is being achieved.
 

What a time to be a well capitalized rentier!*

 

I think it’s “too good” and want to own some duration because I don’t think it will last. I don’t think I should be able to make 1.6% real in a government guaranteed instrument for 30 years, that’s just a risk free handout to capital. Like why the hell is the US government paying me 7.5% effective interest? It will come down, but it’s still stupid.
 

 

*now I think if you’re gregmal or dealraker, you’d counter that the rise in yields is a trap and that one will compound at a higher rate just saying in stocks/business for the long run. My response is “yea probably” so but I’m only 70-80% sure if that rather than 100%, and I don’t think owning a little FI is gonna kill me. 
 

maybe this is veering on the “bearish” but it does feel to me that outside of the very speculative stuff we are at a point where we’re kind of having our cake and eating it too. Real estate and stocks haven’t really come down too much (in some cases not at all) despite the increase in cost of capital. Sort of a strange, but also a nice opportunity to reevaluate one’s asset allocation without the emotional baggage of a huge drawdown. 
 

I realize this thread is about predicting a short term bottom and I keep trying to make it really boring and proselytizing a 20% bond allocation and I shoukd go over to bogleheads and go buy a Buick or something. 

Wined up and such when I read this so the response goes "of course" and such.   I may be in the HIW yield view rather than bonds as much although I did to 100k into PFF a few months back, but its the same thing.

 

Remember I'm the guy who inherited $3500 of Berkshire; watched it all the other stocks in the trust get feed to death by the banks trust dept giving me less money (excluding Berkshire) almost 15 years after inheritance so I do know the stall word.  

 

Yet then...

 

Maybe we got to a point of several hundred times the inheritance?  Yea.

 

So again, my view is simple: "Pick your starting point...and live with it."  Is now a great starting point?  No.  No!  Maybe NO!

 

But in the end we are slammed endlessly with those promoting Bitcoin; those saying Brookfield is selling at 50% of intrinsic; Elon/Tesla is God...any price anytime is good; "I can buy, then sell, and do far better"; people investing in mutual funds, which don't do well...yet these investors do 30% as well as the fund buying and selling it; somebody screaming at me here that I'd have done better in a zero cupon for the last almost 50 years; and whatnot other scrambled eggs.

 

I'm just the oddball old dude who says:  If you buy and hold you won't go old and poor...and it actually is an option in real life, not just in those old books on the shelf you read that nobody pays any attention to.

 

But if you do this at some point at some time somewhere somehow you do have to choose a starting point.  To be honest no starting point to me has "felt good" for the last near 50 years.  

Edited February 15, 2023 by dealraker

[TwoCitiesCapital]

9 hours ago, Gregmal said:

Except they said falling earning would warrant SPY 3000 or whatever…that’s the problem with this little “let’s be cute” game. Unless you’re playing the pump and dump or smash and grab, short term, trade meaningless fluctuations game, you’re losing big time.  
 

 

You're taking a local bottom from 4 months ago, assuming it was the actual bottom, and then using that to make the argument that the earnings contraction that came afterwards doesn't matter because the bottom was already in before the real contraction. I don't know the name of the logical fallacy there, but us not hitting 3,200 yet isn't evidence that we won't.   

 

As far as real estate - it has been more resilient than expected. But it IS still falling in value. Public REITS didn't save you from the disaster in 2022 returns and private REITs are currently taking bailouts from pensions to meet redemption requests to avoid selling and remarking their books. And they've both underperformed inflation as asset classes for the last ~18 months or so. Hardly sounds like a platform to declare victory on just because there hasn't been an outright price collapse yet. 

Edited February 15, 2023 by TwoCitiesCapital

[thepupil]

24 minutes ago, dealraker said:

Wined up and such when I read this so the response goes "of course" and such.   I may be in the HIW yield view rather than bonds as much although I did to 100k into PFF a few months back, but its the same thing.

 

Remember I'm the guy who inherited $3500 of Berkshire; watched it all the other stocks in the trust get feed to death by the banks trust dept giving me less money (excluding Berkshire) almost 15 years after inheritance so I do know the stall word.  

 

Yet then...

 

Maybe we got to a point of several hundred times the inheritance?  Yea.

 

So again, my view is simple: "Pick your starting point...and live with it."  Is now a great starting point?  No.  No!  Maybe NO!

 

But in the end we are slammed endlessly with those promoting Bitcoin; those saying Brookfield is selling at 50% of intrinsic; Elon/Tesla is God...any price anytime is good; "I can buy, then sell, and do far better"; people investing in mutual funds, which don't do well...yet these investors do 30% as well as the fund buying and selling it; somebody screaming at me here that I'd have done better in a zero cupon for the last almost 50 years; and whatnot other scrambled eggs.

 

I'm just the oddball old dude who says:  If you buy and hold you won't go old and poor...and it actually is an option in real life, not just in those old books on the shelf you read that nobody pays any attention to.

 

But if you do this at some point at some time somewhere somehow you do have to choose a starting point.  To be honest no starting point to me has "felt good" for the last near 50 years.  

 

I've had 80-100%+ equity exposure since 2013 or so. Gave up shorting or market timing back then and have been better off for it. I'm not a buy an hold investor. My late grandpa was and it worked out wonderfully for him. 

 

In practice, I simply do not own many stocks for that long. Looking at current portfolio I've held Berkshire from the beginning (so about 12 years) and Tetragon for 9-10 years now, everything else is from 2019 or later. the venn diagram of "discount to NAV" and "buy and hold for 10+ years" doesn't include too many stocks. 

Edited February 15, 2023 by thepupil

[Gregmal]

2 minutes ago, TwoCitiesCapital said:

 

You're taking a local bottom from 4 months ago, assuming it was the actual bottom, and then using that to make the argument that the earnings contraction that came afterwards doesn't matter because the bottom is already in. I don't know the name of the logical fallacy there, but us not hitting 3,200 yet isn't evidence that we won't.   

 

As far as real estate - it has been more resilient than expected. But it IS still falling in value. Public REITS didn't save you from the disaster in 2022 returns and private REITs are currently taking bailouts from pensions to meet redemption requests to avoid selling and remarking their books. And they've both underperformed inflated for the last ~18 months or. Hardly sounds like a platform to declare victory in just because there hasn't been an outright collapse yet. 

These two paragraphs contradict each other. The first says, "cant declare victory over short term moves", the second says "short term moves prove something". The second paragraph is especially dangerous, because you can use whatever 12-18 month period one wants to draw whatever conclusion one wants. I do not care one iota about what 12 months says because anything can happen if you invest in stuff with second by second public quotes. It would be like trying to sell your house to only the dudes who put up those signs saying "we buy homes for cash" on street corner signs. 

 

I really dont sit around looking for bottoms or tops, but rather adequate places to put money to work, with a reasonable expectation and time horizon. Last year, throughout the year, you had ample opportunity to do that. Opportunity that no longer exists but who knows, may again, soon or not so soon. Sitting around predicating it all on "did such and such index really bottom"....I think is totally missing the forest for the trees. The same way we had folks in late 2021 asking for clear proof that "THE TOP IS HERE", when anyone who's been around the markets for a minute could see that the top was February 2021. The index was still near or at highs, but the drivers were off 50%+ already. The key drivers of the next cycle, IMO real businesses, like the ones listed a few responses ago, have already told you what you needed to know and made moves well ahead of the trendy indexes. 

[Spekulatius]

I think the value of this thread could be to create a framework what to invest in rather than buy or sell everything.

 

I mentioned banks here before, because I believe they would benefit from the higher rate for longer framework 9after getting dinged in a pot. recession). maybe European banks become investible as Europe goes from a negative interest regime (which is toxic to banks)  to a couple percent risk free rates

 

Energy could be one of the drivers of inflation for some time, so it may make some sense to put some money in energy related securities.

 

Maybe a higher bond / or MM allocation makes sense for some people.

 

Those are much more interest questions than where the SP500 might go and when or buy or sell everything right now because  XXX may happen.

[Gregmal]

14 minutes ago, Spekulatius said:

Those are much more interest questions than where the SP500 might go and when or buy or sell everything right now because  XXX may happen.

Totally. It’s one of the dumbest hang ups I regularly see for folks and it’s a totally avoidable mistake. 

[TwoCitiesCapital]

37 minutes ago, Spekulatius said:

Those are much more interest questions than where the SP500 might go and when or buy or sell everything right now because  XXX may happen.

 

Nobody is suggesting to sell everything. Nobody is fear mongering here. I don't even think that many of us are caught up on the regular CPI reports and whether it comes in at 5.6 or 6.6 (ironically - Greg is the one commenting on every release lambasting people who watch every release). I literally provided a list of names that I'd been buying over the last year. But I'm also selling them because my framework suggests this is NOT an environment to be taking a ton of risk in. 

 

I'll take that risk when Baba is @ $60. Less excited about that exact same risk when it's at $120. If this were a bull market, I'd be more content to hold it but it's not. 

 

Historically bonds have outperformed stocks when PMIs are contracting. They are. Bonds outperformed last year. I think they're likely to again this year. 

 

Historically stocks have performed terribly when inflation exceeded 4-5%. We've exceeded that and are still above it. Why should we expect stocks that failed to hedge it last year to magically do it this year - particularly now that the earnings contraction is occurring and real business values are being impaired? 

 

Historically the yield curve does a great job of predicting recessions. It is screaming. Stocks haven't traditionally done well in recessions. For those who want to argue the recession is already over, you have to answer why this would be the first recession that ended without the yield curve agreeing. 

 

Historically, stocks haven't done great in periods of earnings contraction. We've just started one and it's deeper than most expected even just 6 months ago. 

 

It'd be one thing if all of this was happening and stocks in aggregate were cheap. But they're not. Historically still very expensive as judged by trailing 12 month earnings which are now shrinking. 

 

So the environment is bad, prices don't reflect the badness, so you're not being paid to take risk in most names. And the names you are being paid to take risk in? Well, you first have to identify what stocks are likely to do well in an environment where the average stock is suffering (hard to do) and then you have to trust that they won't trade down in sympathy in that environment as often happens (also hard to do). It so much easier to buy a short term bond funds and make your 4-6% and wait for the better pitches. When things drop 20-30%, buy some. Take that risk. When they pop 20-30%. Sell some and remove the risk. 

 

The S&P only matters because it is the tide which brings the boats in and out. It doesn't guarantee Fairfax, or Netflix, or Bank of America goes down or up - but it does dramatically alter the probabilities of it happening. 

Edited February 15, 2023 by TwoCitiesCapital

[Gregmal]

I also think the index/macro obsession is one that gets super fueled by the prominence of social media and that whole attention seeking element. What made something like The Big Short iconic is that you had guys with an exact thesis and exact framing of events and subsequent consequences and it played out exactly like they said. The ultimate “I called it”. Today folks just pick up or down and then make shit up and regardless of what happens, as long as directionally things “kinda” ever start moving in the direction of the thesis, even if only for a split second, you get all the retweeting and backslapping and I called it’s. If in 2022, rate hike fueled recession was gonna cause an earnings collapse and drive the market to 2800-3000 was the thesis, and for like 5 seconds, intraday we touched 3500 or whatever and then bounced off that base and now sit at 4,000….sorry, that’s not nailing it, and the thesis was a bust. It’s certainly possible we see earnings dive to 180 for full year 2023, and if that thesis is the S&P “needs” to go to 3200, and we get a temporary dip to 3500 again, are we still gonna have to hear about every prophet who “nailed it”?

Edited February 15, 2023 by Gregmal

[thepupil]

3 minutes ago, Gregmal said:

I also think the index/macro obsession is one that gets super fueled by the prominence of social media and that whole attention seeking element. What made something like The Big Short iconic is that you had guys with an exact thesis and exact framing of events and subsequent consequences and it played out exactly like they said. The ultimate “I called it”. Today folks just pick up or down and then make shit up and regardless of what happens, as long as directionally things “kinda” ever start moving in the direction of the thesis, even if only for a split second, you get all the retweeting and backslapping and I called it’s. If in 2022, rate hike fueled recession was gonna cause an earnings collapse and drive the market to 2800-3000 was the thesis, and for like 5 seconds, intraday we touched 3500 or whatever and then bounced off that base and now sit at 4,000….sorry, that’s not nailing it, and the thesis was a bust. It’s certainly possible we see earnings dive to 180 for full year 2023, and if that thesis is the S&P “needs” to go to 3200, and we get a temporary dip to 3500 again, are we still gonna have to hear about every prophet who “nailed it”?

 

I think many people care about indices because it's their only option. My wife and I save  $67K/year through tax advantaged vehicles. we save more on top of that, but it's a material amount of money for us and our 401k providers only allow various indices/mutual funds. Unless we quit our jobs we have to buy something with that, so having some opinion on the relative merits of the performance of various asset classes is of some use to me. 

 

for me right now I wonder whther I should keep buying bond index, switch to long term bonds, or use it to add international / non USD exposure. my portfolio's always gonna be US stock/RE heavy. for now I think bonds are a better diversifier than non US stocks. 

[TwoCitiesCapital]

I'd rather be directionally right then precisely wrong

 

It's way too soon to say if the contraction that started in 2022 is over. 

 

If we go to 3,300 or 2,900 instead of 3,200? Yes, I'll still take credit because I was still a hell of a lot more right than the guys buying at 4,800 or 4,200 or 3,700 or the guys calling the bottom at 3,500 all whole telling me I was wrong. 

 

If bonds do better than stocks, regardless of their bottom, I'll still declare I was right because I've been advocating for buying bonds over stocks since the 10-year first passed 3%. 

 

I don't have to nail the bottom and go all in on that bottom tick to be right. What I have to do is protect my capital and only take risk when price or environment compensates me for it. Neither is true of the average stock at the moment. 

Edited February 15, 2023 by TwoCitiesCapital

[Gregmal]

15 minutes ago, thepupil said:

 

I think many people care about indices because it's their only option. My wife and I save  $67K/year through tax advantaged vehicles. we save more on top of that, but it's a material amount of money for us and our 401k providers only allow various indices/mutual funds. Unless we quit our jobs we have to buy something with that, so having some opinion on the relative merits of the performance of various asset classes is of some use to me. 

 

for me right now I wonder whther I should keep buying bond index, switch to long term bonds, or use it to add international / non USD exposure. my portfolio's always gonna be US stock/RE heavy. for now I think bonds are a better diversifier than non US stocks. 

Yea I think I generally under appreciate that aspect of most peoples financial picture cuz Ive always been a 1099. Ive also generally never been scrupulous about using the tax advantaged stuff because I just hate the idea of having a 30 year lockup or whatever. But wouldnt conventional wisdom, or maybe its not conventional, IDK, lead one to give a shit a lot less about the short term stuff with that slug of assets? This stuff is probably a totally different subject than obsessing over tops and bottoms, but I guess could play a part. I just try to figure like OK if Ive got $500k in an account I cant touch for decades....does 10/20/30% fluctuations really matter? Especially if Im pumping contributions into it for those next couple decades. The origins of the "doom porn" is some massive GFC or Japan collapse where shit goes down and never recovers. Thats one thing....a big thing. But also rare and totally different than trying to speculate on fluctuations or draw conclusions from regular old stock market volatility. "Calling" a collapse where stuff declines 15% and immediately recovers 8-10% is the same as "calling" a big up move because a fake buyout rumor hits and the stock briefly rises...its a conjob. IMO one of there more underrated long term impacts of ZIRP is that it conditioned people to think stocks shouldn't be volatile. They should. And if you are day tradings I guess thats a big thing. But if you are investing fundamentally its really just part of the game and nothing to fret. 

Edited February 15, 2023 by Gregmal

[thepupil]

I view it as part of my overall portfolio rather than separate. I don't view it as money that I won't touch until I'm 59.5. The roth conversion ladder if i stop w-2 work prior to then is an option. I doubt I'll w-2 until I'm 59.5. Also you get to roll into your own IRA when you switch jobs. I've done so 4 times in 12 years, so in practice it hasn't been 30 year money but 2-4 year money that one then switch to have full control. One can also monetize in other ways (ROBS, loans, SEPP) etc. 

 

It can obviously be very very long term money, but it's not necessarily so. 

 

I'm shocked you haven't set up a SEP IRA or something to build a tax advantaged account, particularly given I imagine your style leads to lots of short term gains. c'mon man! 

 

[Gregmal]

LOL yea that is my dirty little secret. I’m am downright negligent with that stuff. I kind of view my private real estate stuff as a sub/tax efficient asset pool, but yea. Not an accountant by trade and after running into contribution limits a couple times early on was just like fuck this shit.

[thepupil]

Oh man...I'm not that great an investor and it's more from lots of contributions than anything, but here on this semi-anonymous message board, I will brag that I've accumulated about $730K individually and $780K as a couple (grad school's a bitch right!) in various tax advantaged vehicles over 11 years starting from $0.

 

Let that be a little inspiration to the youngsters...I'm inviting the far better investors here to one-up me and inspire further. 

 

I can't imagine having 100% of my investment assets be taxable. gross! 

 

of course, I've yet to access that, so in no way has that money affected my life other than my ability to brag about it on a semi-anonymous message board. 

 

Edited February 15, 2023 by thepupil

[John Hjorth]

3 minutes ago, Gregmal said:

... Not an accountant by trade and after running into contribution limits a couple times early on was just like fuck this shit.

 

@Gregmal,

 

I'm not trying here to be mean or anything else, but I have to say the above actually reads funny to an accountant!

[SHDL]

44 minutes ago, TwoCitiesCapital said:

For those who want to argue the recession is already over, you have to answer why this would be the first recession that ended without the yield curve agreeing. 

 

This may be of interest to you:

https://www.bloomberg.com/news/articles/2023-01-04/pioneering-yield-curve-economist-sees-us-able-to-dodge-recession#xj4y7vzkg

 

Just to be clear I don't have a strong view on this matter one way or the other.