OT: Stock trading

[Chief00]

You can always short the markets via ETF's like SQQQ, SDS, etc. And if China bellies up CHAD and YANG are the places to be. Remember Michael Burry and what he accomplished back in '08 in those volatile times.

I dislike rooting for the negative macro but using a Bear Fund sometimes I will short 15% or so to hedge against a downside, but more often just go to cash. This past year, bond funds haven’t offered the expected diversification from stock downside - so I left bonds by MLK Day. A utilities fund has been decent considering the bad environment. Japan has also been interesting.

 

[upstater]

Inflation is slowing down fast. CPI has dropped off a cliff. The last two months have gone backwards, not even flat.

The fed is proactive and always tries to get ahead, but they won't figure out they've clamped down hard until it's already obvious to anyone, especially Wall Street.

In other words, Wall Street will start buying 6 months BEFORE the upturn. And if that upturn is in 7 months, that means Wall Street will start buying this month.

 

[Chief00]

Inflation is slowing down fast. CPI has dropped off a cliff. The last two months have gone backwards, not even flat.

The fed is proactive and always tries to get ahead, but they won't figure out they've clamped down hard until it's already obvious to anyone, especially Wall Street.

In other words, Wall Street will start buying 6 months BEFORE the upturn. And if that upturn is in 7 months, that means Wall Street will start buying this month.

The reason inflation has fallen off is that we are in a Recession. Corporations are adjusting both their 2022 and 2023 budgets accordingly. Chief will not be doing any significant buying anytime soon, unless the market totally tanks.
Energy is a big question mark. Europe is most vulnerable to Soviet energy pullbacks during the winter months. Gas tax holidays will be ending, yet at some point the U.S. has major work to do replenishing our energy reserves drawn down to dangerous levels. When we do that it will have the reverse impact of when we released it. If the Recession is as deep as some fear there may not be as much of a spike, due to a pullback in demand. I love your optimism and it’s complicated but I would error on the side of being very cautious given the macro economic environment.

 

[HuskyHawk]

Inflation is slowing down fast. CPI has dropped off a cliff. The last two months have gone backwards, not even flat.

The fed is proactive and always tries to get ahead, but they won't figure out they've clamped down hard until it's already obvious to anyone, especially Wall Street.

In other words, Wall Street will start buying 6 months BEFORE the upturn. And if that upturn is in 7 months, that means Wall Street will start buying this month.

I don't know when it happens. Pointless to time it. I'd say this: almost every major stock or index you'd consider buying will be higher 2 years from now than it is now.

 

[B1GEast]

While we're on the subject, there's a difference between the economy and the market and they don't always align.

Employment numbers are still strong, and companies are reporting profits.

Certain sectors will be harder hit. Fuel and energy, food prices and the supply chain will all affect how things turn out.

I think there is a global reset and offshoring and globalization will slow down. You're going to see a drive to nationalism to grow industries locally to avoid supply chain issues.

My whole point is, everything has changed and we can no longer approach investment from a historical point in time.

We are in new territory and the factors of the past no longer apply

 

[8893]

While we're on the subject, there's a difference between the economy and the market and they don't always align.

Employment numbers are still strong, and companies are reporting profits.

Certain sectors will be harder hit. Fuel and energy, food prices and the supply chain will all affect how things turn out.

I think there is a global reset and offshoring and globalization will slow down. You're going to see a drive to nationalism to grow industries locally to avoid supply chain issues.

My whole point is, everything has changed and we can no longer approach investment from a historical point in time.

We are in new territory and the factors of the past no longer apply

 

[Tuna]

I'd say this: almost every major stock or index you'd consider buying will be higher 2 years from now than it is now.

And why is that?

 

[HuskyHawk]

While we're on the subject, there's a difference between the economy and the market and they don't always align.

Employment numbers are still strong, and companies are reporting profits.

Certain sectors will be harder hit. Fuel and energy, food prices and the supply chain will all affect how things turn out.

I think there is a global reset and offshoring and globalization will slow down. You're going to see a drive to nationalism to grow industries locally to avoid supply chain issues.

My whole point is, everything has changed and we can no longer approach investment from a historical point in time.

We are in new territory and the factors of the past no longer apply

It's some pretty bad mismanagement by the fed and other policy makers. That goes for foreign leaders too.

• Inflation was heating up and was ignored and labeled "transitory" when it should have been obvious that printing trillions in a period of constrained supply would trigger massive inflation.
• Fed kept rates artificially low a year after they should have raised them. Then aggressively raised them just as the economy slowed. They have created a see-saw effect, and should probably pause increases and not pursue QE. Just stop.
• The supply chain issues are still not fully resolved. China is having problems. Europe is having something worse than problems. Global businesses are in a challenging place. U.S. companies are diversifying out of China, but that takes time.
• Energy policy further constraining supply, while pumping demand for electricity. Oil has stabilized a bit for now, but winter may still change that. Already fuel oil is scarce in the northeast.
• Housing is a disaster in the U.S. Demand is high, but high rates limit buyers, and lower prices are causing potential sellers to simply stand pat. China real estate situation appears to be worse than terrible.

There's just a lot of uncertainty and headwinds at a macro level.

 

[HuskyHawk]

And why is that?

Since 1982, the stock market has completely recovered from bear markets within 5 months or less if the losses were less than 30%. Not talking about junk, speculative stocks. But I'd feel pretty good about the best companies and S&P 500.

 

[Tuna]

Since 1982, the stock market has completely recovered from bear markets within 5 months or less if the losses were less than 30%. Not talking about junk, speculative stocks. But I'd feel pretty good about the best companies and S&P 500.

OK. What makes this a cyclical bear market?

Are we supposed to ignore that the entire economy was bailed out of a once-in-a-century health crisis with historic helicopter money and ZIRP. You don't think that bailout has to be unwound? If so, at what cost?

 

[B1GEast]

It's some pretty bad mismanagement by the fed and other policy makers. That goes for foreign leaders too.

• Inflation was heating up and was ignored and labeled "transitory" when it should have been obvious that printing trillions in a period of constrained supply would trigger massive inflation.
• Fed kept rates artificially low a year after they should have raised them. Then aggressively raised them just as the economy slowed. They have created a see-saw effect, and should probably pause increases and not pursue QE. Just stop.
• The supply chain issues are still not fully resolved. China is having problems. Europe is having something worse than problems. Global businesses are in a challenging place. U.S. companies are diversifying out of China, but that takes time.
• Energy policy further constraining supply, while pumping demand for electricity. Oil has stabilized a bit for now, but winter may still change that. Already fuel oil is scarce in the northeast.
• Housing is a disaster in the U.S. Demand is high, but high rates limit buyers, and lower prices are causing potential sellers to simply stand pat. China real estate situation appears to be worse than terrible.

There's just a lot of uncertainty and headwinds at a macro level.

The Fed should have never had a balance sheet buying private corporate bonds. That kept companies alive that should have been allowed to naturally end. Now we have zombie companies that are struggling to survive

The Fed had actually raised rates prior to the pandemic and was on track to continue raising rated.

I agree that energy policy is hurting right now

Housing was affected by demand from foreign buyers

 

[ctkaiser]

The Fed should have never had a balance sheet buying private corporate bonds. That kept companies alive that should have been allowed to naturally end. Now we have zombie companies that are struggling to survive

The Fed had actually raised rates prior to the pandemic and was on track to continue raising rated.

I agree that energy policy is hurting right now

Housing was affected by demand from foreign buyers

Watching professional traders on CNBC and one Bryn Talkington said the Fed has over 400 PhDs and they still don't get things right.

 

[casual-yardin]

The Fed should have never had a balance sheet buying private corporate bonds. That kept companies alive that should have been allowed to naturally end. Now we have zombie companies that are struggling to survive

The Fed bought bonds on the secondary market, not from the issuing company's.

 

[Chief00]

Watching professional traders on CNBC and one Bryn Talkington said the Fed has over 400 PhDs and they still don't get things right.

The poll of executives is more telling. 97% thought we were in a recession or will be shortly. They have lots of visibility into their sectors of the economy. At some point a great buying opportunity, but lots of months of blood letting first. Be careful my friends.

97% of execs say we're in a recession or headed toward one, Stifel survey finds

The overwhelming majority of corporate executives are bracing for a recession, according to a Stifel survey.

news.yahoo.com

 

[B1GEast]

The Fed bought bonds on the secondary market, not from the issuing company's.

I never said they did, I didn't think I needed to clarify that, obviously the Fed is going to buy for the secondary market, that's how most bonds are purchased, but the Fed isn't justified for maintaining that balance sheet

 

[casual-yardin]

I never said they did, I didn't think I needed to clarify that, obviously the Fed is going to buy for the secondary market, that's how most bonds are purchased, but the Fed isn't justified for maintaining that balance sheet

Why not?

 

[B1GEast]

Why not?

Because

 

[Tuna]

The Fed bought bonds on the secondary market, not from the issuing company's.

So you don't think purchases of existing bonds in the secondary market will affect the price of any new issues?

 

[8893]

And why is that?

OK. What makes this a cyclical bear market?

Are we supposed to ignore that the entire economy was bailed out of a once-in-a-century health crisis with historic helicopter money and ZIRP. You don't think that bailout has to be unwound? If so, at what cost?

Watching professional traders on CNBC and one Bryn Talkington said the Fed has over 400 PhDs and they still don't get things right.

Why not?

What I've noticed is that a lot of people are very good at asking questions, i.e., issue spotting, but very few if any are good at answering them when it comes to predicting cause and effect. Seems we usually don't truly know the cause(s) until long after the fact.

Which is why it's called economic theory, not science; and why they are called forecasts.

If we are in unprecedented times, are we supposed to ignore historical trends? Take them with a grain of salt?

I don't pretend to have the answers, but it's interesting to watch the swings.

 

[Tuna]

What I've noticed is that a lot of people are very good at asking questions, i.e., issue spotting, but very few if any are good at answering them when it comes to predicting cause and effect. Seems we usually don't truly know the cause(s) until long after the fact.

Which is why it's called economic theory, not science; and why they are called forecasts.

If we are in unprecedented times, are we supposed to ignore historical trends? Take them with a grain of salt?

I don't pretend to have the answers, but it's interesting to watch the swings.

That's all fair. One thing I'll say is that I don't think there is anything cyclical about this bear market. I also don't think there is any reason to believe with any certainty that the major indices have to be higher in two years based solely on historical market returns. There is nothing normal about what we have been and are going through now.

 

[B1GEast]

If we are in unprecedented times, are we supposed to ignore historical trends? Take them with a grain of salt?

I don't pretend to have the answers, but it's interesting to watch the swings.

I'm not suggesting that we throw the baby out with the bath water.

What I meant about being in new territory was that it's quite possible that historical trends may not fiit in a new paradigm.

I never suggested that we disavow 100 years of economics,

These are just opinions

 

[B1GEast]

There is nothing normal about what we have been and are going through now.

Spot on, and that was the whole gist of my point in an earlier post

 

[mussels]

Spot on, and that was the whole gist of my point in an earlier post

Lots of money to be made rebalancing your investments when everyone starts thinking "this time its different"

 

[8893]

That's all fair. One thing I'll say is that I don't think there is anything cyclical about this bear market. I also don't think there is any reason to believe with any certainty that the major indices have to be higher in two years based solely on historical market returns. There is nothing normal about what we have been and are going through now.

I'm not suggesting that we throw the baby out with the bath water.

What I meant about being in new territory was that it's quite possible that historical trends may not fiit in a new paradigm.

I never suggested that we disavow 100 years of economics,

These are just opinions

Spot on, and that was the whole gist of my point in an earlier post

I agree that it is right to question all the assumptions. I just get a kick out of those who poo poo the people who have to make decisions about what causes will lead to which effects, when it's all guesswork.

 

[HuskyHawk]

I'm not suggesting that we throw the baby out with the bath water.

What I meant about being in new territory was that it's quite possible that historical trends may not fiit in a new paradigm.

I never suggested that we disavow 100 years of economics,

These are just opinions

I agree that it is right to question all the assumptions. I just get a kick out of those who poo poo the people who have to make decisions about what causes will lead to which effects, when it's all guesswork.

I fully agree that some of what is going on is fairly unprecedented. But then we've been through unprecedented changes several times in my lifetime. The stock valuation approach I was taught at UConn hasn't been valid for 30 years. It's all vastly different. The macro differences are huge. China wasn't an economic power not that long ago either, those changes and the internet were bigger than whatever adjustment is happening now. In some ways, the supply chain correction was long overdue. Covid exposed a vulnerability that needed to be addressed anyway.

So I'm choosing to expect that the bumps will be sorted out, some businesses will fail, some will rise out of nowhere, others will remain strong and shares of those will climb from these lows. Because the alternative is that you should sell your stocks, buy a cabin in Maine with solar panels, a windmill, a well, a woodstove and a crap ton of non-perishable food and hope for the best. I don't think a Great Depression level event is coming. Europe is somewhat FUBAR, but sanity on energy seems to be returning, if slowly. They've got big food issues though. That's another lesson they can learn from.