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

[Mr Whippy]

Derek Chevalier said:

Mr Whippy said:

Derek Chevalier said:

Mr Whippy said:

Value isn’t valuable any more?

These events are essentially all the people rushing for the door.

Now the value ‘door’ is flooded, people will be going for the next.

The human emotional response plays out the same time each time.

I'm not sure where you got that from, but it's worth going back and checking the disparity between value and growth. Recent events haven't changed that huge amount.

Well value isn’t valuable as a value investment if it’s over-valued due to everyone rushing into it (the door) and pushing prices sky high.

We’d normally see rotations as the markets clearly changed tack, like the seasons or something.

What we’re seeing feels more like desperation of seeking safety, and lots of volatility.

Does value exist when a run on value is taking place?

MSCI World Value is up 1.5% YTD. Insignificant in the grand scheme of things

How is that composed though?

We’ve seen indexes getting gutted and outwardly looking healthy seem as a single value.

I’m not going to over analyse this because on this scale there is no analysis required.

Human emotions of greed and fear drive the economic cycles we enjoy.

What are we seeing? There is lots of reality starting to bite, and once the herd has the fear response, it’ll be a while until they get greedy again.

[g4ry13]

ooid said:

g4ry13 said:

All i'll say is have an exit strategy in mind because being short could get ugly very quickly.

Well, ATM has always been short on TSLA since he was buying old porsches as far as I know him here…

Yes, I recall him getting stung on doing so a few times.

I like the logic and think Tesla is vastly overvalued. Although the market doesn't seem to share the same opinion as me!

[bmwmike]

The market is always right isn't it? Even when its wrong?

[dimots]

ATM said:

Also got my eye on more Porsches. I'm hoping that the rising petrol prices, falling share prices, rising interest rates and eventually falling house prices will make them cheaper and cheaper too.

So you're long on old Porsches and short Tesla? Are you hoping to lose both ways or just on the Porsches?

[NRS]

Mr Whippy said:

How is that composed though?

We’ve seen indexes getting gutted and outwardly looking healthy seem as a single value.

I’m not going to over analyse this because on this scale there is no analysis required.

Human emotions of greed and fear drive the economic cycles we enjoy.

What are we seeing? There is lots of reality starting to bite, and once the herd has the fear response, it’ll be a while until they get greedy again.

You’ve been posting this for years - why is it this time that you’re right?

[Derek Chevalier]

Mr Whippy said:

How is that composed though?

We’ve seen indexes getting gutted and outwardly looking healthy seem as a single value.

https://www.msci.com/documents/10199/25465a5a-d52c-4bec-b5ed-a7b56eca8e0d

990 constituents

"The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price and dividend yield."


Value tends to bumble along, leaving the boom and bust to large-cap growth.

[ooid]

ATM said:

Also got my eye on more Porsches. I'm hoping that the rising petrol prices, falling share prices, rising interest rates and eventually falling house prices will make them cheaper and cheaper too.

I'll be following the "Mark Cuban Approach" with Porsches. Just like yachts, they are fun to drive and play, but nightmare to own so I skip the ownership

Though, I'm a bit doubtful with your "falling house prices" thinking (Market across central London)

[ATM]

ooid said:

ATM said:

Also got my eye on more Porsches. I'm hoping that the rising petrol prices, falling share prices, rising interest rates and eventually falling house prices will make them cheaper and cheaper too.

I'll be following the "Mark Cuban Approach" with Porsches. Just like yachts, they are fun to drive and play, but nightmare to own so I skip the ownership

Though, I'm a bit doubtful with your "falling house prices" thinking (Market across central London)

If we accept house prices are in a bubble and some of these bubbles will pop then House Prices must go down. The only arguments for House Prices staying where they are are now is that they are either not high - not in a bubble - but just right or that central bankers cant alter interest rates much so access to cheap debt will continue or not get hit too hard.

Personally I believe all the bail outs, free stamp duty, help to buy etc etc etc pushed house prices higher and that last hoorah is over now. Without more stimulus directed towards joe public or towards house prices like stamp duty holidays how can they stay where they are.

I think the rising prices we are seeing now - which are a result of all the money printing not covid or war - will start to hurt the economy and people will start losing jobs.

Or the central bankers raise rates enough to stop prices rising - which doesn't need to be a lot because first they need to stop printing - and this starts to hurt the economy and people stat losing jobs. Even if no one loses their jobs they will start lo lose access to cheap debt and therefore House Price affordability gets hit and therefore House Prices go down.

[DonkeyApple]

I wonder if the risk to house prices is a little different at the moment? We have huge stock of larger properties that are unencumbered by debt but is it not the case that those who are not going to be able to pay heating and food bills will historically be pushed into delaying and defaulting on rent? With so many private landlords now supplying a lot of the stock in that quite large zone above the very bottom are they suddenly not at the highest risk of negative yields on a leveraged asset for a long time? That housing segment is also where new supply has been greatest hits where demand at current levels could evaporate?

As for a general stock market crash, I'm not sold. The markets acted as you'd expect them to during all the events of this quarter. It's been a pretty healthy and organised sell-off. Something we haven't really been seeing for the last decade which was more defined by mini fear crashes followed by some form of intervention and a return rally. To me the markets seem quite healthy and a bit old school. No shortage of risks and plenty of potential events very likely to appear to knock back the most recent climbs but I'm not getting the vibe that we're building to a capitulation event.

I certainly wouldn't want excessive exposure to businesses most exposed to what seems to be an inevitable decline in bottom end consumer spending?

[Phooey]

DonkeyApple said:

As for a general stock market crash, I'm not sold. The markets acted as you'd expect them to during all the events of this quarter. It's been a pretty healthy and organised sell-off. Something we haven't really been seeing for the last decade which was more defined by mini fear crashes followed by some form of intervention and a return rally. To me the markets seem quite healthy and a bit old school. No shortage of risks and plenty of potential events very likely to appear to knock back the most recent climbs but I'm not getting the vibe that we're building to a capitulation event.

That's interesting. I personally think we'll see a recession in the next 2 yrs, but as the saying goes "the market is not the economy"

I tried listening to this yesterday whilst doing something else so couldn't concentrate and understand it properly but hoping to sit in the corner of a dark room and listen to it again. It's supposed to be a good listen https://many-happy-returns.captivate.fm/episode/ma...

[DonkeyApple]

I think we are already in a sectoral recession. I think that's why many businesses have had decking share prices. There's already a bear market in stocks which are predominantly exposed to the excess consumption of lower income earners.

I'm not sure we'll see a general recession. So much of the inflation is due to bouncing back quicker from the lockdowns than anyone expected and repeated lockdowns conditioning firms to not rush to get back up and running.

[vulture1]

We've had inflation in goods and services and inflation in wages to some extent. Now will people be clever enough to use that to pat down their fix loans credit cards outstanding debt or just add the same percentage to their debt pile as the income increase. I suspect they will not learn their lesson.

[Scootersp]

Isn't part of the solidity in stocks the whole TINA thing, in the past you could exit to a 'safe' few percent that was at least keeping your value or perhaps slightly out doing inflation. At present 6-7% official inflation, zero return on anything 'safe' so a harder decision to exit even if a little concerned about market level/economic outlook?

More people just hanging in there as other options are known 'losers', so with talk of the everything bubble just stay with what you are currently in?

[rossub]

Scootersp said:

Isn't part of the solidity in stocks the whole TINA thing, in the past you could exit to a 'safe' few percent that was at least keeping your value or perhaps slightly out doing inflation. At present 6-7% official inflation, zero return on anything 'safe' so a harder decision to exit even if a little concerned about market level/economic outlook?

More people just hanging in there as other options are known 'losers', so with talk of the everything bubble just stay with what you are currently in?

We’re always being told that the stock market outperforms everything else in the long run, so maybe the message has got through to enough investors. The big bounce back after the first few months of Covid has been a real eye opener.

Anecdotally, I’ve decided to keep my monthly drip the same amount and to the same funds, despite the recent drops - so that message has gotten through to at least 1 person

[Mr Whippy]

NRS said:

Mr Whippy said:

How is that composed though?

We’ve seen indexes getting gutted and outwardly looking healthy seem as a single value.

I’m not going to over analyse this because on this scale there is no analysis required.

Human emotions of greed and fear drive the economic cycles we enjoy.

What are we seeing? There is lots of reality starting to bite, and once the herd has the fear response, it’ll be a while until they get greedy again.

You’ve been posting this for years - why is it this time that you’re right?

Which part have I been posting for years?

Things have been bearish for years but central banks keep lubricating the gears and creating what we’re seeing which is bigger gains, bigger losses, bigger volatility, bigger risks.

I’m hedged accordingly for my tastes.

I don’t see S&S moving up by 10% plus, so despite inflation being hot, the money I have set aside for S&S can be put less at risk for a period imo.


The logic that being in cash is bad is only bad if you either:
Think equities are about to rally hard across the board.
Were going to buy something that’s going up in value and unlikely to come down, if you decided to not invest it (ie maybe a house)



I just don’t get all the gnashing of teeth right now.

It’s just risk and attitude to risk. Decide where you sit and act accordingly.

Some people are bullish, great. Others are bearish, great.

I can guarantee that neither ‘side’ will be right, and it’s not really too important in the end of the day.

[Scootersp]

rossub said:

We’re always being told that the stock market outperforms everything else in the long run, so maybe the message has got through to enough investors. The big bounce back after the first few months of Covid has been a real eye opener.

Anecdotally, I’ve decided to keep my monthly drip the same amount and to the same funds, despite the recent drops - so that message has gotten through to at least 1 person

...but the next drop might be an eye opener for a different reason? The 'long run' could be years/decades, not weeks next time?

I think with almost nil safe options the markets are strong partly because of the lack of alternatives combined with good historic performance that gives confidence, so all with excess cash are parked in the markets to some degree? Holding cash is frowned upon as its a certain % loss over time, converting money to precious metals is considered tin foil hat territory, so some hard asset (property cars etc) buying and otherwise general funds/the market.

QE and near zero interest rates are not the norm historically (>4% is) and I don't think it's certain it's all going to play out just fine in the long run (which equally might be months or decades).

[Derek Chevalier]

Scootersp said:

so with talk of the everything bubble

Bubbles where?

[Phooey]

Derek Chevalier said:

Bubbles where?

Property, stocks, cars, everything else? More bubbles than a hot bath with a cap full of Matey.

[ATM]

Phooey said:

Derek Chevalier said:

Bubbles where?

Property, stocks, cars, everything else? More bubbles than a hot bath with a cap full of Matey.

Dont forget Crypto [+ NFT} and all the hyper growth stocks aka Cathy Wood. These are all well down from their highs and might never recover. So while there is still plenty of money floating around some has been lost / wiped out / gone. And therefore the retail crowd must be hurting from this.

Although some people believe that stocks is a 2 way game so as someone wins then someone else loses and vice versa. So has this money disappeared or has someone won on the short side - who knows. I think its just gone - poof.

[Derek Chevalier]

Phooey said:

Derek Chevalier said:

Bubbles where?

Property, stocks, cars, everything else? More bubbles than a hot bath with a cap full of Matey.

Other than the types of stocks held by fund managers that tended to feature in 2021 best buy lists, in which areas of the stock markets are you seeing bubbles?