Stock market is a "fully-fledged epic bubble" and will burst

[vulture1]

Alot of the stuff that took too far ahead has crashed already or had covid rise and now not worth it. Netflix palintir beyond meat all the stocks with no actual earnings. We will look back at this period as the covid bubble era.

[Digga]

vulture1 said:

Alot of the stuff that took too far ahead has crashed already or had covid rise and now not worth it. Netflix palintir beyond meat all the stocks with no actual earnings. We will look back at this period as the covid bubble era.

Agreed. As a prime example, Peloton ain’t coming back IMHO.

[Vanity Projects]

Digga said:

Agreed. As a prime example, Peloton ain’t coming back IMHO.

Not surprised. I never really liked what they were pedaling.

[LeoSayer]

Vanity Projects said:

Digga said:

Agreed. As a prime example, Peloton ain’t coming back IMHO.

Not surprised. I never really liked what they were pedaling.

It'll be back in the next market cycle

[Phooey]

How Far Will The Stock Market Fall?


https://www.youtube.com/watch?v=QIJh56jWG9E&t=...


For those that can't be arsed to watch the vid, worst case scenario -54% further to go

[ooid]

Derek Chevalier said:

Will be interesting to see how this pans out vs historical events

https://awealthofcommonsense.com/2020/07/the-nifty...

"The average price-to-earnings of the Nifty Fifty was 42x, more than double the 19x P/E ratio for the S&P 500 at large"
"What happened next to these “one decision” stocks is a tale as old at time. They got too far ahead of themselves and crashed even harder than the market at large during the bear market of 1973-1974"

Thanks for the link. In addition to historical P/E ratios, would you also consider historical beta values (levered) of some these equities when we make such analysis? (Only very similar industries of course, excluding pharma or REITS)

[RSTurboPaul]

Some interesting graphs posted by WallStreetSilver on Twitter recently:

https://twitter.com/WallStreetSilv/status/15228638...




https://twitter.com/WallStreetSilv/status/15232413...

[markiii]

probem is if every one believes that, they will sell and drive precisely that behaviour. self fulfilling prophesy comes to mind

[Jon39]

RSTurboPaul said:

Some interesting graphs posted by WallStreetSilver on Twitter recently:
7

The 2008 crash was foreseeable, but as always, when it would happen was the unknown.
The longer that something amiss goes on, the bigger the fall.
Property market lending started to get out of hand, quite a while before that crash.

Warning Signs / Alarm Bells:-
Northern Rock, one of the smaller property lenders, captured 25% of the whole mortgage lending market.
'Liar Loans' to obtain a bigger mortgage debt - very popular, where you exaggerate your income having been told no one will check.
Commercial property lending became very generous.

What was not widely known though, were the 'Trailer Park Loans' going on the the USA..
Mortgages for people with little or even no income, then all those loans were packaged together and sold on to other financial institutions.
Presumbly once securitised, the mortgagee's weak financial status became hidden.

The 1987 crash was also forseeable, but others occur when major economic events happen unexpectedly..


Your Dow Jones chart is interesting.
Is that increase much greater that in the UK?
Do the 'hot shot' businesses form a significant part of the Index? I see Tesla's P/E ratio is over 100. To deliver on that, their future profits growth will have to be phenomenal.
Has the US market risen far more than London, during the period of your chart ?
Possibly many big UK businesses, are still considered to be valued at more conventional levels.


Talking about repeating though, the 1974 crash involved a huge oil price increase, rampant general inflation, strikes for more pay, 3 day working week (electricity turned off for periods, to match reduced generation), etc..
Do those early stages sound familiar now ?
1974/75 was dreadful for the equity investors.
Tempting for brave buyers after that crash though. Some big solid companies, with earnings ratios of just 4.

Edited by Jon39 on Sunday 8th May 14:27

[Phooey]

Jon39 said:

The 2008 crash was foreseeable..

Jon, in your experience from managing your investments for a number of decades - where do you think the markets will go over the next couple of years? Genuinely interested in your opinion

[Derek Chevalier]

ooid said:

Derek Chevalier said:

Will be interesting to see how this pans out vs historical events

https://awealthofcommonsense.com/2020/07/the-nifty...

"The average price-to-earnings of the Nifty Fifty was 42x, more than double the 19x P/E ratio for the S&P 500 at large"
"What happened next to these “one decision” stocks is a tale as old at time. They got too far ahead of themselves and crashed even harder than the market at large during the bear market of 1973-1974"

Thanks for the link. In addition to historical P/E ratios, would you also consider historical beta values (levered) of some these equities when we make such analysis? (Only very similar industries of course, excluding pharma or REITS)

TBH I've not seen any research that looks into this.

[Derek Chevalier]

RSTurboPaul said:

Some interesting graphs posted by WallStreetSilver on Twitter recently:

https://twitter.com/WallStreetSilv/status/15228638...




https://twitter.com/WallStreetSilv/status/15232413...

Very kind of WallStreetSilver to take a break from partying on his private island and post this. But surely he has better things to do?

[Derek Chevalier]

Phooey said:

Jon39 said:

The 2008 crash was foreseeable..

Jon, in your experience from managing your investments for a number of decades - where do you think the markets will go over the next couple of years? Genuinely interested in your opinion

It's a daft question to ask. No one knows.

[bitchstewie]

Derek Chevalier said:

It's a daft question to ask. No one knows.

I do.

It will fluctuate

[Derek Chevalier]

A couple of articles two years apart

https://www.dimensional.com/gb-en/insights/investi...

"For the same reason, I’m confident that if we could go back to August 2010, we would find few investors predicting the FAANG stocks would do as well as they did from 2010 to 2020."

(Of course, I'm sure there will be some that claim they did )

https://www.dimensional.com/gb-en/insights/have-th...

"This year’s reversal is a reminder that investors should be cautious when assuming past returns will continue in the future."



https://theirrelevantinvestor.com/2022/05/07/how-t...

"Having a financial plan is so important because it can help quantify how much risk you need to take in order to achieve your goals. One of the biggest problems investors get into, as I just mentioned, is taking more risk than they can tolerate. "

[Derek Chevalier]

bhstewie said:

I do.

It will fluctuate

That's very true

[bitchstewie]

Completely coincidentally I'm just watching Batnick and Carlson's latest Animal Spirits

[Derek Chevalier]

bhstewie said:

Completely coincidentally I'm just watching Batnick and Carlson's latest Animal Spirits

Team Ritholz are incredible marketing machines - nothing like them in the UK.

[bitchstewie]

Derek Chevalier said:

Team Ritholz are incredible marketing machines - nothing like them in the UK.

Funny thing is I started reading the blogs of all the Ritholz team and didn't realise until I caught some of the YouTube content that they were all Ritholz.

I think a lot of people could do well just by spending an hour every so often watching and reading their content (they make it simple for idiots like me to understand so they're doing something right).

No idea why we don't seem to have that sort of content here.

[Jon39]

Phooey said:

Jon39 said:

The 2008 crash was foreseeable [but importantly, the timing of such events is not known.] ..

Jon, in your experience from managing your investments for a number of decades - where do you think the markets will go over the next couple of years? Genuinely interested in your opinion

Your question might be a tease, but I will take it as genuine.
I must be boring you all now, repeating my strategy story.

'Where do you think the markets are going', is one of the reasons for staying invested continually, long-term.
I have mentioned a few times, that nobody knows what will happen this week, next month, next year, next couple of years. So I cannot answer your question. It is all so unpredictable, so not really worth thinking too much about. Diving in and out of markets, because someone thinks something might happen, involves guessing, hopes and fees.

People who like Index funds, should put money in (regularly would probably be usual) and don't sell each time there is a market panic, because that is trying to guess future market movements. It is the sudden upward movements which can be the killers. If you are not in, then any sudden rises are missed. That has happened this year, with oil companies. Huge share price rises for obvious reasons. I still remember the Gulf of Mexico disaster and an oil price at $25, so the oil business is always prone to swings in both directions. Not long ago, difficulties in the oil sector forced Shell cut their dividend, which had never happened since World War 2.

If you like to own individual shares, my experience is to try to find big businesses, which are established and which you think will have prospects of continuing to succeed and grow. When earnings rise significantly, eventually the share price will follow upwards. If businesses can also make progress during recessions, so much the better. An example of a non-cyclical business being Severn Trent, a steady plodder with continuous demand for the product. Has had a strong rise during the last 12 months though (rerating), so their upward share price climb cannot always continue at that rate.

Good luck with your investing.