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

[Mr Whippy]

leef44 said:

Mr Whippy said:

So list all the times the Federal Reserve tightened to control inflation and didn’t cause a recession and attendant stock market correction.

I think it’s one time in ten.

Yes it’s a gamble, and yes past no indication of future, blah blah, but it’s not crazy odds is it?

And markets aren’t rational. They’re driven by greed and fear.

They don’t react perfectly to ‘news’ as it comes in.
Just look at Q1 2020.
Covid spreading. Spreading. China in lockdowns. Spreading. Cases in UK, more in UK. More in UK.
Stocks bobbing around doing not much.
Then bang.
Why? Why no linear drop from mid January to April?
Fear. Who’d sell out when no one else was?

So yes you’re gambling, but not against news and reality, but to the perception of reality which is tinted by greed and fear in the participants.

All the indicators point to a downward trend but then we keep getting unexpected news.

Who knows? Maybe Putin packs it in and calls his whole fiasco a success and the war is over. Everyone piles back in to equity, FOMO drives the markets up to even more unrealistic levels then you wait for the next dip because you missed out after having cashed out.

As others have said, it's so unpredictable, there's not much you can do but drip feed.

All Putin is doing is shooting at stuff.

It’s the West’s sanctions that are imposing financial maladies… and their rhetoric suggests there will be no ‘friends’ again.
It’s utter defeat in Ukraine for Russia, or Putin out of power. Or the collapse of Russia.

In any case, Russia isn’t the driver for much of the problems we see is it?
At best it’s pushed oil and gas up, but no more than we saw organically in the 2008 period when oil was near double what it is today ($200) in inflation corrected terms.


Russia could be best buddies again tomorrow and it won’t stop inflation being stupidly high.

[bmwmike]

Mr Whippy said:

bmwmike said:

Does everyone think the world is caving in or something? If more than a 10 Yr horizon just keep buying more for your money and don't worry.

So BTFD?

Just buy because in 10 years the global economy will be bigger?

This in a finite world, with slowing pop growth, almost negative in the west (need more immigration to fuel our economies!), record debt to GDP, ESG taking a grip, and very serious sanctions driving divides creating a new Cold War?

I mean yeah I’m positive for the future. But it doesn’t mean the whole world can be awash in cash ‘just because’ in 10 years.

Just look at Japan. What happens when that hits the entire world?

The west has been able to export its debt for decades, their money printing having no consequences… for now.

The wealth inequality at all time highs.


To just throw your money in without looking out of the window ahead is like driving a car looking in the rear view mirror and saying “I got this far ok”


Parts of the world are caving in. We can clearly see it happening.

You might be right, but whats a boy to do? I mean, you could sell, or you could keep buying assets. Cash is falling, equities are falling. Last I looked cash only ever goes in one direction though..

[Jon39]

Derek Chevalier said:

The problem you can have with that few holdings is that there's a chance that you miss out on the minority of the market that drives the gains

https://www.thinkadvisor.com/2017/08/21/study-show...

Yes, I agree with you Derek, that a minority of the market drives the gains. We are seeing that at present with the enormous increases in oil share prices. That is what is mostly responsible for me (at present, who knows what is coming) now being up YTD 16%.

The minority driving the gains, would obviously be a different minority from time to time and the very strongest drivers, would be the most cyclical businesses. I do hold some cyclicals, but have never been keen on too many, especially Mining, Construction. They sometimes have very strong rises, so I miss out, but also occasional strong falls, which is the worry I don't want.

I looked at your linked article, 'Shows 96% of Stocks Don’t Beat Treasuries in Long Term', but cannot understand that at all.
You often refer to the USA markets, which I don't follow closely, so perhaps the situation there is different from the UK.

In the UK, the BZW Study shows overall, that UK shares have beaten gilts by a considerable margin.




NOMINAL




INFLATION ADJUSTED

[Jon39]

Mr Whippy said:

.... And markets aren’t rational.
Just look at Q1 2020.
Covid spreading. Spreading. China in lockdowns. Spreading. Cases in UK, more in UK. More in UK.
Stocks bobbing around doing not much.
Then bang.
Why? Why no linear drop from mid January to April?
Fear. Who’d sell out when no one else was?

So yes you’re gambling, but not against news and reality, but to the perception of reality which is tinted by greed and fear in the participants.

Yes, I wondered exactly that in 2020. Once I saw the awful Italian hospital TV pictures, it was fairly clear what we would face in the UK. I left holdings my untouched as usual, but as you describe, I was also surprised that there was a stock market reaction delay. Remember the serious European pandemic was in Italy first, and we had been told about how contagious the disease is. We probably did not know that business would shut and we would all stay at home, but the future certainly looked very serious.

Most stock market trading presumably must be institutional, ie. the decision makers are not playing with their own money, but when a crash begins, they don't like to be accused of being different from the 'crowd'.

Slightly tongue in cheek, but what do you think ?

At least March 2020 provided an opportunity for increasing holdings.

[funinhounslow]

Tye Green said:

leef44 said:

, it's so unpredictable, there's not much you can do but drip feed.

don't drip feed!

drip- feeding suggests the drip feeder has a crystal ball.

what should the drip feeder do with his cash when its not yet dripped in? put it into premium bonds?

whats the point of drip feeding?

How else are you supposed to invest in the stock market if you earn a salary?

I suspect the overwhelming majority of “drip feeders” are like me - have set up a direct debit to go into an ISA/SIPP the day after payday…

[speedy_thrills]

Jon39 said:

Yes, I wondered exactly that in 2020. Once I saw the awful Italian hospital TV pictures, it was fairly clear what we would face in the UK. I left holdings my untouched as usual, but as you describe, I was also surprised that there was a stock market reaction delay.

Few people would likely have predicted we would shut our countries and economies down to slow the spread of a viral pathogen. Pandemics are an irregular occurrence and our subsequent actions (closing societies) created an unprecedented economic situation.

[Phooey]

Interesting to hear these guys opinions - listen from 11:40s onwards for mention of Apple Microsoft Nividia S&P500 etc


https://youtu.be/hzgKwuN4MvE?t=703

[speedy_thrills]

funinhounslow said:

How else are you supposed to invest in the stock market if you earn a salary?

I suspect the overwhelming majority of “drip feeders” are like me - have set up a direct debit to go into an ISA/SIPP the day after payday…

Isn't that the principal of dollar cost averaging?

[dingg]

Phooey said:

Interesting to hear these guys opinions - listen from 11:40s onwards for mention of Apple Microsoft Nividia S&P500 etc


https://youtu.be/hzgKwuN4MvE?t=703

Wonder what they were saying in December 21.

:-0

[Matt p]

DaveA8 said:

Before anyone dismisses this as Covid chancers or bounce back loans, we have 2 projects which I could dearly do with but neither customer can raise the cash nor are willing to go through a Wholesaler ( no cost to them and a long tradition in our industry) and got quite tetchy when we offered to punt it around, the last time I saw this on a regular basis was 2008-10.
The other warning sign is where a customer asks for the price to be sent not to the Wholesaler they've used for years but another one, the stock reason is because the first one is failing on service ( or they're on stop)
These things are coming back with a vengeance
On our purchasing side, we are squeezed as our suppliers have tightened not only limits but not request amounts upfront and citing supply issues as a reason for cost increases.
We are only the tiniest cog in a wheel but we cannot be unique and this must be happening elsewhere, if credit ceases, this creates its own issues

Our projects/retrofit guys have very little coming down the pipeline. A lot of the big ticket stuff is now on ice for the foreseeable.

I have three very large sites that will be coming online over the next 9 months then after that it’s very quiet. These are all within 1/4 mile of each other.

Just to agree with your point regarding 08-10, to me this feels very much the same also. A lot of commercial buildings were being sold off, lots of dross that needed a fair amount of money spending on them got demolished and left as holes in the ground for years. Who remembers the building prior the cheesegrater?, the hole in the ground where now stands the walkie talkie, 100 Bishopsgate and let’s not forget 22 Bishopsgate. It has an ominous feel again.

Or it’ll flash over and will be more of the same, who knows.

[g4ry13]

Phooey said:

Interesting to hear these guys opinions - listen from 11:40s onwards for mention of Apple Microsoft Nividia S&P500 etc


https://youtu.be/hzgKwuN4MvE?t=703

Are these the guys who are experts on the facts and tell us what we already know?

FWIW i'll probably be buying some AMD or Microsoft soon.

[bmwmike]

funinhounslow said:

How else are you supposed to invest in the stock market if you earn a salary?

I suspect the overwhelming majority of “drip feeders” are like me - have set up a direct debit to go into an ISA/SIPP the day after payday…

Yep or salary sacrifice into a SIPP.

FWIW the GBP is down 12% YoY to USD.

Edited by bmwmike on Tuesday 10th May 13:00

[Jon39]

bmwmike said:

FWIW the GBP is down 12% YoY to USD.

Helpful to the shareholders of UK international businesses.

I was surprised about a week ago to see the 1.24 FX.
I think just a week earlier it had been about 1.33.
With that big movement in a week, I even checked another FX website to be certain.

[DaveA8]

[quote=Matt p]

Who remembers the building prior the cheesegrater?, the hole in the ground where now stands the walkie talkie, 100 Bishopsgate and let’s not forget 22 Bishopsgate. It has an ominous feel again.

It never ceases to amaze me how these buildings get filled
As you say could be a thing of nothing and back to business as usual, here's hoping!

[Mr Whippy]

speedy_thrills said:

Jon39 said:

Yes, I wondered exactly that in 2020. Once I saw the awful Italian hospital TV pictures, it was fairly clear what we would face in the UK. I left holdings my untouched as usual, but as you describe, I was also surprised that there was a stock market reaction delay.

Few people would likely have predicted we would shut our countries and economies down to slow the spread of a viral pathogen. Pandemics are an irregular occurrence and our subsequent actions (closing societies) created an unprecedented economic situation.

I believe we’d seen China locking down by that stage, building emergency hospitals etc.

But really then we’re saying people can’t predict how events may turn out, to then predict the impact on the economy and markets.
Then tie in fear and greed, and institutional reaction ‘lag’


That all says to me then that markets aren’t reacting/pricing in things as efficiently as some say they are.

But then other signals get through fast. Ie, USA Federal Reserve tightening signal and corresponding impact on tech stocks, crypto, FX with USD, and bonds etc…

In any case, USA Fed has seen the results of their actions, and they’re maintaining their hawkishness, and adding QT into the mix!

If that wasn’t a signal to be bearish right now on stocks and bonds I don’t know what is.

[mike74]

Jon39 said:

You have reminded me of a Tommy Cooper joke.
Patient - "Doctor, I have broken my arm in three places."
Doctor - "Well, don't go to those places."

It's crashed across plenty of sectors.
Well, don't get involved with those sectors.

You could try one of my favourite sectors, non-cyclicals. Quite boring, but often steady and fewer downward movements.
Today, FTSE 100 ........................ down 2.32%.
My main non-cyclical holding ........ up 0.06%
Another non-cyclical holding ......... up 1.51%

Many took a bashing of course, oils especially, but having risers on a down day, often occurs with non-cyclicals.

Isn't Fundsmith one of the biggest funds out there when it comes to being invested in non-cyclicals?

Abysmal under performance from that particular fund this year suggests non-cyclicals aren't always safe and steady.

[Jon39]

mike74 said:

Isn't Fundsmith one of the biggest funds out there when it comes to being invested in non-cyclicals?

Abysmal under performance from that particular fund this year suggests non-cyclicals aren't always safe and steady.

A fund operated for the public, is usually restricted to a very low percentage for each holding, therefore needing to hold a huge number of different companies. Very different from a private portfolio, where decisions are much more flexible.
That chart I posted of the 2008 crash period, shows how powerful one really good performing non-cyclical can be, but Fundsmith would not have been allowed to replicate that.

I don't know, but when one holding in a public fund is really successful and grows to exceed the percentage limit, do they have to reduce that holding? Discover a wonderful business, but have to turn the power down. Privately we can let the entire holding continue to work for the portfolio. You seem to suggest, that Fundsmith might not yet be 16% up YTD. -

[Derek Chevalier]

Jon39 said:

I looked at your linked article, 'Shows 96% of Stocks Don’t Beat Treasuries in Long Term', but cannot understand that at all.
You often refer to the USA markets, which I don't follow closely, so perhaps the situation there is different from the UK.

In the UK, the BZW Study shows overall, that UK shares have beaten gilts by a considerable margin.

Assuming the UK is similar to the US, I read it that if you strip out the 4% of treasury "outperformers", the remaining basket of shares will track treasuries.

[Derek Chevalier]

speedy_thrills said:

Jon39 said:

Yes, I wondered exactly that in 2020. Once I saw the awful Italian hospital TV pictures, it was fairly clear what we would face in the UK. I left holdings my untouched as usual, but as you describe, I was also surprised that there was a stock market reaction delay.

Few people would likely have predicted we would shut our countries and economies down to slow the spread of a viral pathogen. Pandemics are an irregular occurrence and our subsequent actions (closing societies) created an unprecedented economic situation.

Yep, I think it's easy to believe something was obvious after the event, but maybe less so when it was unfolding in real time.

[Derek Chevalier]

DaveA8 said:

It never ceases to amaze me how these buildings get filled

Maybe cheaper than the west end and more "soul" than canary wharf, and better quality/value than existing buildings in the area?