Stock market is a "fully-fledged epic bubble" and will burst
Discussion
Mr Whippy said:
ATM said:
I don't think the supply shock had much to do with it. I think that's an excuse government want us to believe. The fact is they printed more money than ever and gave it directly to people. That's caused the spike in demand. Yes supply was hit a bit due to coming out of Covid but let's face it, if everyone didn't have lots of free helicopter money then demand wouldn't have gone through the roof.
They have to start talking about rate rises now because inflation has gone crazy. If it had not they would not have to. With all this free money floating around paying these higher prices the only chance they have to control this is tightening. A lot of people are talking about 10% interest rates to control 10% inflation. Personally I think that just a couple of percent interest will be enough to cool the increasing prices and reduce disposable incomes. The helicopter money has now also stopped. It might not take 10% interest rates to rain in spending.
Good points.They have to start talking about rate rises now because inflation has gone crazy. If it had not they would not have to. With all this free money floating around paying these higher prices the only chance they have to control this is tightening. A lot of people are talking about 10% interest rates to control 10% inflation. Personally I think that just a couple of percent interest will be enough to cool the increasing prices and reduce disposable incomes. The helicopter money has now also stopped. It might not take 10% interest rates to rain in spending.
I’m expecting this inflation is indeed transitory, artificial supply limitations are now triggering its persistence… it is after all mainly in food and energy, two things otherwise in abundance sans anti-Russia policy.
I think rates will peak, recessions will be called, markets will have dipped, easing in Q3/4, and then Russia does a ‘covid’ and is suddenly forgotten, prices suddenly all down before they have a material effect through winter and cripple economies across the EU and European area.
My gut is saying just average in as always.
Into what, rather than if at all, is probably more important right now.
Possibly best to aim to stand still in bear markets, rather than make money against inflation.
bmwmike said:
Cant see the chart detail on my mobile but assuming its showing a loss via averaging in, and averaging-in in a rising market also nets fewer units, what is the answer? That there are no gains in the stock market over time? Seems like the saying time in the market vs timing the market are both wrong depending on timing. Everyone says attempting to time the market is wrong approach and impossible. Or maybe we can pick and choose times and make any graph to prove or disprove any point?
If you can Mike, try to see the chart on a bigger screen.
I invest very long-term in equities, purposely including some less cyclical core holdings. The portfolio is rarely changed, so that green line over nearly 5 years, would include the same holdings throughout.
The red line is the FTSE All-Share Index, so that I think should be representative of the 'average in' strategy mentioned on this topic.
2008 was extreme, with a fall of almost 50% in 3 years, but in my experience there are some business sectors you do not want to be in during a crash. Stay away from those and the theory should help you experience a smaller fall. With an index type fund, presumably you would be in all sectors, so hence an average result.
This strategy has won for me in each market decline since 1988. Winning on the way down, is equally important to the other way round. When a market average fall is for example 15%, then if your holdings fall say 5%, then count that as a good result When the upturn comes, you already have a lead in hand, ready for the next time period (as shown in that chart, when it became a 40% gain on the average).
Jon39 said:
bmwmike said:
Cant see the chart detail on my mobile but assuming its showing a loss via averaging in, and averaging-in in a rising market also nets fewer units, what is the answer? That there are no gains in the stock market over time? Seems like the saying time in the market vs timing the market are both wrong depending on timing. Everyone says attempting to time the market is wrong approach and impossible. Or maybe we can pick and choose times and make any graph to prove or disprove any point?
If you can Mike, try to see the chart on a bigger screen.
I invest very long-term in equities, purposely including some less cyclical core holdings. The portfolio is rarely changed, so that green line over nearly 5 years, would include the same holdings throughout.
The red line is the FTSE All-Share Index, so that I think should be representative of the 'average in' strategy mentioned on this topic.
2008 was extreme, with a fall of almost 50% in 3 years, but in my experience there are some business sectors you do not want to be in during a crash. Stay away from those and the theory should help you experience a smaller fall. With an index type fund, presumably you would be in all sectors, so hence an average result.
This strategy has won for me in each market decline since 1988. Winning on the way down, is equally important to the other way round. When a market average fall is for example 15%, then if your holdings fall say 5%, then count that as a good result When the upturn comes, you already have a lead in hand, ready for the next time period (as shown in that chart).
g4ry13 said:
Mr Whippy said:
ATM said:
I don't think the supply shock had much to do with it. I think that's an excuse government want us to believe. The fact is they printed more money than ever and gave it directly to people. That's caused the spike in demand. Yes supply was hit a bit due to coming out of Covid but let's face it, if everyone didn't have lots of free helicopter money then demand wouldn't have gone through the roof.
They have to start talking about rate rises now because inflation has gone crazy. If it had not they would not have to. With all this free money floating around paying these higher prices the only chance they have to control this is tightening. A lot of people are talking about 10% interest rates to control 10% inflation. Personally I think that just a couple of percent interest will be enough to cool the increasing prices and reduce disposable incomes. The helicopter money has now also stopped. It might not take 10% interest rates to rain in spending.
Good points.They have to start talking about rate rises now because inflation has gone crazy. If it had not they would not have to. With all this free money floating around paying these higher prices the only chance they have to control this is tightening. A lot of people are talking about 10% interest rates to control 10% inflation. Personally I think that just a couple of percent interest will be enough to cool the increasing prices and reduce disposable incomes. The helicopter money has now also stopped. It might not take 10% interest rates to rain in spending.
I’m expecting this inflation is indeed transitory, artificial supply limitations are now triggering its persistence… it is after all mainly in food and energy, two things otherwise in abundance sans anti-Russia policy.
I think rates will peak, recessions will be called, markets will have dipped, easing in Q3/4, and then Russia does a ‘covid’ and is suddenly forgotten, prices suddenly all down before they have a material effect through winter and cripple economies across the EU and European area.
My gut is saying just average in as always.
Into what, rather than if at all, is probably more important right now.
Possibly best to aim to stand still in bear markets, rather than make money against inflation.
Food can grow in your garden for free.
And wheat isn’t a quality foodstuff. We shouldn’t be sad that Ukraine can’t plant it, and we can’t eat as much.
We should celebrate the opportunity to eat better different foods instead.
Ie brocolli and scrambled egg for breakfast.
Let people keep chickens in their gardens. Brocolli grows in gardens.
Job jobbed. Healthier people getting a solid breakfast
Let the chickens eat the leftover food, and compost from the rest to fertilise the soil for the brocolli.
And it’s not like people are starving to death.
Westerners waste 20% of food. Calorifically we obviously eat too much.
Definitely too much wheat and bread.
Indeed, too much food, and wheat, is probably killing us more than not having enough.
Same with processed naff sunflower oil. It’s not a good oil.
So no major issue here except lazy fat westerners paying more for their bad foodstuffs.
That’s no bad thing.
egomeister said:
.... On my previous post, I commented that it might pay to be more selective in the choice of sector at the moment so not a million miles away from the approach you are advocating.
Yes exactly right. Not only at the moment, but whenever the economy is facing a downturn.
However, because that aspect is so difficult to foresee, my holdings continually adhere to that basis. It does seem to work well, avoids chance moves by dancing in and out of the market, and also eliminates investor work attempting to time the market. After constructing your portfolio, leave the work to the millions of employees in your businesses.
Think which business sectors suffer most in an economic slump, because holding those will pull you down further during a crash.
I don't hold too many cyclicals; builders, construction, mining etc. Will lose out during the boom times of course, but I manage well enough. Oils are of course cyclical and I do hold those. When the cost of petrol goes up, at least there is a satisfying balance with the share price increases, but of course oils do have their lows aa well. The oil majors are strong dividend payers, and total dividend income is a significant portion of overall investment returns.
Edited by Jon39 on Monday 2nd May 16:34
Mr Whippy said:
So no major issue here except lazy fat westerners paying more for their bad foodstuffs.
That’s no bad thing.
Except they've then got less money to spend on energy, which has also gone up a bit, and will be more prone to vote for politicians offering bread and circuses, which doesn't always end well.That’s no bad thing.
There's also the small matter of rising food prices in the areas that were impacted by the Arab spring, so scope for unrest there.
Unfortunately Mr Whippy not everyone has a garden to keep chickens or grow food in. Even to buy eggs is going to rocket soon. A friends feed bill has went from £900'000 to £1'300'000, electricity from £40'000 to £80'000,increased labour and haulage costs. If the price he receives (and many like him) does not increase dramatically he is ready to pack it in. This refusal by supermarkets to accept higher prices for goods has to be sorted soon.
Arla asked supermarkets to increase price for milk by another 2p litre (already up 6p last month. They refused so Arla said ok,it's all going to be processed into milk powder. Supermarket pays up!
For the first time in a very long time there is not going to be enough to go around. Yes the west will cope but as always the poor will suffer!
Arla asked supermarkets to increase price for milk by another 2p litre (already up 6p last month. They refused so Arla said ok,it's all going to be processed into milk powder. Supermarket pays up!
For the first time in a very long time there is not going to be enough to go around. Yes the west will cope but as always the poor will suffer!
egomeister said:
I've always understood averaging in to be how you deploy your capital into the market, ie consistently drip feeding in rather than trying to time your entry, irrespective of the asset you are investing in. On my previous post I commented that it might pay to be more selective in the choice of sector at the moment so not a million miles away from the approach you are advocating.
It is, you could average in on a super dodgy AIM start-up tech fund, or a super stable defensive fund. If I remember right Jon39's graphs also had something missing which he regards as right but most knowledgeable people said should be included to be a proper comparison. I think he'd done well anyway, but it did make a big impact on what was being shown. NRS said:
... If I remember right Jon39's graphs also had something missing which he regards as right but most knowledgeable people said should be included to be a proper comparison. I think he'd done well anyway, but it did make a big impact on what was being shown.
Hello NRS,
Are you are referring to the red Index trace not including dividends, whereas the portfolio has dividends included as each one is received during the year? Obviously that flatters the green portfolio trace.
However, there is a practical problem for me with this aspect.
I measure performance annually (from 0% on 1st January) and a computer creates a league table report every week after the markets close. The chart is therefore compiled from that report. It all only takes 10 minutes.
The FTSE All-Share Index figure is readily available online, so that is what I use for the reports.
Total return figures might be published by the Financial Times each day, but I am not a subscriber.
There lies the problem.
However, at the end of each year the FTSE All-Share Total Return (including dividends) figure becomes available to me, so I am then able to adjust the end of year figures.
It obviously does make a difference to the Annual Wins score, but perhaps not as often as you might think.
Annual Portfolio Wins to A/S Index Wins ................................. 26 years to 8 years.
Annual Portfolio Wins to A/S Index Total Return Wins ........... 21 years to 13 years.
2022 is my 35th year of attempting to be a serious investor.
This year has begun in a most unusual way.
YTD 2022 Portfolio +16.62% (A/S Index -0.54%).
Looks good now, but completely meaningless until we reach 31st December 2022.
None of us know what will happen next, but I have learnt over the years - remain calm and don't sell.
If capitalism comes to an end though, then cross out that last bit.
Good luck everyone with your investments.
Derek Chevalier said:
ooid said:
Very true 
. Successful investing outcomes tend to involve a certain level of slothfulness!Although the more I look at it, the more the false equivalence of a trader and investor annoys me
Bit of a wake up call for anyone yesterday thinking a recovery has started. I was listening to something earlier in the week where they were discussing Amazon and predicting the SP would go back to pre-covid levels.. which we're already seeing in some of the tech / growth names. After today's BOE figures / predictions along with the US reporting negative GDP for the qtr, it's not looking great
Jon39 said:
NRS said:
... If I remember right Jon39's graphs also had something missing which he regards as right but most knowledgeable people said should be included to be a proper comparison. I think he'd done well anyway, but it did make a big impact on what was being shown.
Hello NRS,
Are you are referring to the red Index trace not including dividends, whereas the portfolio has dividends included as each one is received during the year? Obviously that flatters the green portfolio trace.
However, there is a practical problem for me with this aspect.
I measure performance annually (from 0% on 1st January) and a computer creates a league table report every week after the markets close. The chart is therefore compiled from that report. It all only takes 10 minutes.
The FTSE All-Share Index figure is readily available online, so that is what I use for the reports.
Total return figures might be published by the Financial Times each day, but I am not a subscriber.
There lies the problem.
However, at the end of each year the FTSE All-Share Total Return (including dividends) figure becomes available to me, so I am then able to adjust the end of year figures.
It obviously does make a difference to the Annual Wins score, but perhaps not as often as you might think.
Annual Portfolio Wins to A/S Index Wins ................................. 26 years to 8 years.
Annual Portfolio Wins to A/S Index Total Return Wins ........... 21 years to 13 years.
2022 is my 35th year of attempting to be a serious investor.
This year has begun in a most unusual way.
YTD 2022 Portfolio +16.62% (A/S Index -0.54%).
Looks good now, but completely meaningless until we reach 31st December 2022.
None of us know what will happen next, but I have learnt over the years - remain calm and don't sell.
If capitalism comes to an end though, then cross out that last bit.
Good luck everyone with your investments.
Phooey said:
Bit of a wake up call for anyone yesterday thinking a recovery has started. I was listening to something earlier in the week where they were discussing Amazon and predicting the SP would go back to pre-covid levels.. which we're already seeing in some of the tech / growth names. After today's BOE figures / predictions along with the US reporting negative GDP for the qtr, it's not looking great
The rout in online shopping; Amazon, eBay, Etsy is a sign consumers either have not enough disposable income or are sufficiently fearful they will not soon. It's a powerful sentiment. Takes some reversing and, given inflation and rising base rates, it is unlikely to alter soon.I’m sat out of most of the market with my SIPP as I don’t think it’s finished going south. I’ve been positioned broadly like this since the end of Jan this year.
60% cash held as
- 70% USD 10%GBP, 5%CAD, 5%AUD, 5%HKD
10% <1 year US Tresury Bills via BBLL
5% 1-3 Year US treasury notes via IDBT
10% Gold (In USD, not GBP)
5% Silver (In USD, not GBP)
3% Aluminum
3% Copper
2% Chinablue (Chinese fertilizer company)
2% Polymetal
I’m up about 5% since Jan, mainly through dollar strengthening and people running to short treasury bills for safety from the crashes. I got very lucky with some Polymetal sales timings too.
It’s a pretty stable portfolio so I haven’t needed to look over it non stop during the chaos, which is good as I have a proper day job and don’t want to be a trader, just protect my retirement pot.
Going to keep riding it for the sidelines as I don’t think it’s bottomed out yet, Fed is only just about to tighten.
60% cash held as
- 70% USD 10%GBP, 5%CAD, 5%AUD, 5%HKD
10% <1 year US Tresury Bills via BBLL
5% 1-3 Year US treasury notes via IDBT
10% Gold (In USD, not GBP)
5% Silver (In USD, not GBP)
3% Aluminum
3% Copper
2% Chinablue (Chinese fertilizer company)
2% Polymetal
I’m up about 5% since Jan, mainly through dollar strengthening and people running to short treasury bills for safety from the crashes. I got very lucky with some Polymetal sales timings too.
It’s a pretty stable portfolio so I haven’t needed to look over it non stop during the chaos, which is good as I have a proper day job and don’t want to be a trader, just protect my retirement pot.
Going to keep riding it for the sidelines as I don’t think it’s bottomed out yet, Fed is only just about to tighten.
Vanity Projects said:
Going to keep riding it for the sidelines as I don’t think it’s bottomed out yet, Fed is only just about to tighten.
I don't think it's bottomed yet either, growth and tech still mainly expensive so will continue to be sold. But I wouldn't be surprised to see the Fed and BOE pause raising rates for fear of a hard landing - which is what we really don't wantPhooey said:
growth and tech still mainly expensive
Large growth P/E now at 23.7%, 128% of 20 year average. https://am.jpmorgan.com/us/en/asset-management/adv...
P/E of the S&P 500 during the inflationary 70s went into single digits
https://www.multpl.com/s-p-500-pe-ratio/table/by-y...
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"
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