OT: Stock trading

[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.

 

[upstater]

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

That's because they're constrained by policy makers.

The answer to overheating economy is not always interest rates. You can do a great many things. If it's too much credit in the system, too much in circulation, congress has the ability to curtail that in ways that don't require huge increases in unemployment. But that's not the world the Fed lives in.

 

[Chief00]

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.

I would argue Economic Theory almost always works long term. Supply and demand, expected inflationary result from money supply expansion (too many dollars chasing too few goods), two negative quarters being recessionary, etc). Often when government intervenes it may change the timing of achieving equilibrium but not the ultimate results the theory expected. When I told people to be careful investing in the recent pages in this thread, the caution was all based on economic theory that has existed for many decades and recent corporate activity that one would expect to respond to these trends driven by that that theory.

 

[B1GEast]

That's because they're constrained by policy makers.

The answer to overheating economy is not always interest rates. You can do a great many things. If it's too much credit in the system, too much in circulation, congress has the ability to curtail that in ways that don't require huge increases in unemployment. But that's not the world the Fed lives in.

That's fiscal policy vs monetary policy. Our governments recenr fiscal policy decisions have put a strain on what the Fed can and can't do.

 

[Excalibur]

People were saying "this time it's different" when stocks were running from 2010-21. Others said "this time it's different" in 2008.

Yes, it may be different, but the overwhelming likelihood is that it isn't. It is only a matter of how long the current cycle lasts. If it is in fact different this time, it's probably going to be due to massive armed conflict or some other society-collapsing event(s), in which case it doesn't really matter anyway.

 

[casual-yardin]

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

Who said anything about prices? The Fed buying bonds has always been about liquidity. Prices are mostly a function of interest rates.

 

[casual-yardin]

That's fiscal policy vs monetary policy. Our governments recenr fiscal policy decisions have put a strain on what the Fed can and can't do.

This. Thank you. Debt, deficits, budgets, policy, regulation, how and why we spend the money are all functions of Congress. The Fed just does the best they can with the limited tools it has.