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

[Phooey]

Hang on a minute, there’s no prizes for going into cash until you’ve timed the conversion from cash back into equities with equal precision

[ATM]

Phooey said:

Hang on a minute, there’s no prizes for going into cash until you’ve timed the conversion from cash back into equities with equal precision

True

But I don't understand this mantra that you must be in the market.

It's not been difficult to time the market recently. While the FED is loose you buy. When they turn to tight you sell.

Now the switch to buy again will not come till they go loose again. That hasn't happened yet. I'm sure they will tell us when they decide to pivot. They like to tell us way in advance.

[loafer123]

I agree with you ATM…the answer is not binary, but a matter of weighting.

FWIW, signposting is a little more balanced now;

Cooling U.S. inflation builds case for September slowdown in Fed rate hikes

https://www.reuters.com/markets/europe/cooling-us-...

[ATM]

loafer123 said:

I agree with you ATM…the answer is not binary, but a matter of weighting.

FWIW, signposting is a little more balanced now;

Cooling U.S. inflation builds case for September slowdown in Fed rate hikes

https://www.reuters.com/markets/europe/cooling-us-...

A slow down in hikes isn't a buy if you ask me. I'm waiting for the printer to start up again. Until then I'm short.

In the meantime I'm expecting more bad news. The bond market will start to tank once the fed starts selling. Then we'll see recession biting, job losses coming and earnings down with higher mortgage payments for Joe Public and higher energy and higher food and higher everything.

[bitchstewie]

Phooey said:

Yep. I'm almost all equities (Global) with a bit of cash (in my ISA & SIPP) waiting to de dripped in so I'm probably at the top of the tree for risk. However I also see cash as risk so Whippy's probably on the same branch as myself currently

I have been tempted to throw it all into something like RICA (+10% YTD) but if history repeats itself and markets make new highs when I need to draw upon it then I should be ok <crosses fingers>

I have a good chunk in RICA and it's done its job but beware of the premium on the investment trust.

No way I can time selling stuff sitting on the cash then deploying it again so I'll happily sit back and settle for winning by not losing which Ruffer and Capital Gearing have historically been very good at.

[Mr Whippy]

loafer123 said:

Mr Whippy said:

I agree.

I’m pretty much all cash for now.

Keep being tempted by moving some cash ISA to S&S with a provider who’ll offer some kind of exposure to downside money making.

But generally happy to not try being too greedy and just buy in 6-18 months when the “bottom” will invariably be more obvious to see.


The next two weeks will be interesting!

In the current environment, being all cash means your strategy has to return 10% just to stand still.

Your ideology is driving your investment strategy and that will only end badly.

I don’t get this.

CPI/RPI inflation rate is irrelevant if this money is to be used to invest vs spend.

What is relevant is the units I’d have had in Nov ‘21 vs what I can get today, or tomorrow etc.

Asset (stock investment) price inflation/deflation is all that matters shirley?


My investment strategy is driven by technicals. Highest ever prices after largest stimulus ever, at the same time as spiking inflation and highest ever proposed rate of tightening from global reserve currency CB (USA Fed)

[Derek Chevalier]

ATM said:

It's not been difficult to time the market recently. While the FED is loose you buy. When they turn to tight you sell.

.

Are you typing this from your private island?

[tighnamara]

Mr Whippy said:

I don’t get this.

CPI/RPI inflation rate is irrelevant if this money is to be used to invest vs spend.

What is relevant is the units I’d have had in Nov ‘21 vs what I can get today, or tomorrow etc.

Asset (stock investment) price inflation/deflation is all that matters shirley?


My investment strategy is driven by technicals. Highest ever prices after largest stimulus ever, at the same time as spiking inflation and highest ever proposed rate of tightening from global reserve currency CB (USA Fed)

Can you elaborate on what funds / assets you cashed in and when you (Decide) are investing back in and what funds / assets.

Would be interested to see a real “time the market” scenario rather than just posts stating I am timing the market, the markets are overpriced etc.......

Edited by tighnamara on Saturday 28th May 21:38

[ooid]

Ray Dalio recently just said on CNBC "Cash is trash and equities are even trashier"

[Mr Whippy]

Derek Chevalier said:

ATM said:

It's not been difficult to time the market recently. While the FED is loose you buy. When they turn to tight you sell.

.

Are you typing this from your private island?

Fear of missing out as a bull is equal and opposite to fear of losing what you’ve gained (probably by being cautious in the run up) and positioning to cash/safety more heavily.

The net outcome is a flatter performance for the bears, and a bouncy performance for the bulls.

To simplify this to the argument that logically positioning to the Federal Reserve’s stance means you should be making a fortune is daft.

By definition if you’re bearish you won’t make the gains in bull runs, and vice versa.
To try be bullish and bearish at appropriate times is indeed improbable to get right repeatedly.


The Federal Reserve showed us all exactly what their influence is just three years earlier… just go look what their rate rises did to USA indexes, and global ones.

Why wouldn’t you believe markets would react the same again, and that the Federal Reserve weren’t now much more serious given their planned double rate rise in just 15 days… and stopping renewing some bond and treasuries starting next week?


The Fed and BofE have never managed a soft landing when moving hawkish.

And doesn’t this feel similar to an 80s Japan moment?
Or 1920s having just played out over the last decade? Wealth gap widened and a crescendo of asset bubbles?


Let’s see. I think we’ll be seeing some sad faces in week beginning 20th June.

My gut is Fed will suddenly go dovish and the world will go more pseudo UBI, around 2020 low prices.
Then I’ll buy back in.

[Jon39]

Mr Whippy said:

... And doesn’t this feel similar to an 80s Japan moment?
Or 1920s having just played out over the last decade? Wealth gap widened and a crescendo of asset bubbles?

Let’s see. I think we’ll be seeing some sad faces in week beginning 20th June.

My gut is Fed will suddenly go dovish and the world will go more pseudo UBI, around 2020 low prices.
Then I’ll buy back in.

Your gut guidance might be of help to me.
21.2% up YTD; Total annual dividends have increased 2.5% YTD.
I cannot see what will happen next though. What should I do now?

Edited by Jon39 on Saturday 28th May 22:55

[Derek Chevalier]

Mr Whippy said:

To simplify this to the argument that logically positioning to the Federal Reserve’s stance means you should be making a fortune is daft.

There are thousands and thousands of market participants with more information, knowledge, data and ability than the vast majority of people on here (myself included). What have they missed that means the market hasn't already priced in future events and the chance that they might happen?

Mr Whippy said:

And doesn’t this feel similar to an 80s Japan moment?

Not sure I see the connection. Japan was on a P/E of 60, whereas global equities are currently around 15. Developed small cap value is around 10. EM small cap value is around 8.

https://ritholtz.com/2017/10/japan-greatest-bubble...

[ATM]

Derek Chevalier said:

There are thousands and thousands of market participants with more information, knowledge, data and ability than the vast majority of people on here (myself included). What have they missed that means the market hasn't already priced in future events and the chance that they might happen?

If this was true then the market would not move. Or it would only move when new information hits the market. It also implies that everyone in the market has access to this information as soon as it hits. The market is far from perfect. The trajectory of information is not linear and instant.

There is a saying

The market can remain illogical longer than you can remain liquid.

A lot of market moves are not logical or rational. We all know the bull runs go for longer than they should due to momentum. The same can be said for bear markets. Momentum is just herd mentality. If something is going up then it will continue to go up because it has momentum. That's hardly a well thought out thesis based on fundamentals or future events which are priced in.

We were in a bull run. We are now in a bear market.

A lot of market participants are still holding, buying and averaging in because they know nothing different. To assume these people are all better educated or better informed than you is just crazy. Everyone has their own little strategy. These are probably all totally different to yours. Don't over complicate it. Make a decision based on what you think or decide to trust someone else and let that someone else make the decisions for you. In a bear market prices go down. The majority of these trusted advisors will only position you long while their employers could be short. Remember in the 2008 GFC when banks were advising clients to go long while they were net short.

[Mr Whippy]

Jon39 said:

Mr Whippy said:

... And doesn’t this feel similar to an 80s Japan moment?
Or 1920s having just played out over the last decade? Wealth gap widened and a crescendo of asset bubbles?

Let’s see. I think we’ll be seeing some sad faces in week beginning 20th June.

My gut is Fed will suddenly go dovish and the world will go more pseudo UBI, around 2020 low prices.
Then I’ll buy back in.

Your gut guidance might be of help to me.
21.2% up YTD; Total annual dividends have increased 2.5% YTD.
I cannot see what will happen next though. What should I do now?

Edited by Jon39 on Saturday 28th May 22:55

I can’t be sure but weren’t you in oil and energy for those long-term sustainable gains? YTD. Such an indicative timeframe
Have you taken profits yet? Or just assuming oil will go up forever over the decades?

What happened to the end of cycle oil and energy commodity spikes through 2007-2009?
That might give you some clues? Afterall I’m just reacting to what’s going on and what happened before.

Please let us know if you rotate out and where to, or if you just ride it all down to the bottom.



I hope you appreciate that both greed and fear can lead you to make valid decisions, but the underlying movement will be the aggregate of all participants emotions.

You don’t need special insight or skill to make or lose money or understand what’s going on.

You just need to make a non-emotional choice at the time when the stress to make a choice based on your inherent greed/fear biases is at its highest and likely to bias your judgement.

Good luck.

[Derek Chevalier]

ATM said:

Or it would only move when new information hits the market.

Correct

ATM said:

It also implies that everyone in the market has access to this information as soon as it hits. The market is far from perfect. The trajectory of information is not linear and instant.

Not everyone needs access to the information to bring the market to (broadly***) the new equilibrium. Those with the fastest connections, best data, brains etc remove these inefficiencies before the vast majority of participants react.
But exploiting short term inefficiencies (possible for some) is very different from exploiting longer-term inefficiencies/market timing (I'm not aware of anyone that can do this)

• * (not always perfectly efficient?)

https://en.wikipedia.org/wiki/Post%E2%80%93earning...

ATM said:

A lot of market moves are not logical or rational.

Agreed. Which is why market/share commentary should generally be ignored.

ATM said:

We all know the bull runs go for longer than they should due to momentum. The same can be said for bear markets. Momentum is just herd mentality. If something is going up then it will continue to go up because it has momentum. That's hardly a well thought out thesis based on fundamentals or future events which are priced in.

Don't necessarily disagree, but I've yet to see someone that can successfully exploit this.

ATM said:

A lot of market participants are still holding, buying and averaging in because they know nothing different.

I think they are doing it because history shows us that tends to give the most successful outcomes.

ATM said:

To assume these people are all better educated or better informed than you is just crazy

I'm not necessarily referring to the buy and holders (smart) when talking about the smartest people in the market.

ATM said:

The majority of these trusted advisors will only position you long while their employers could be short. Remember in the 2008 GFC when banks were advising clients to go long while they were net short

I don't see the connection TBH.

[Phooey]

bhstewie said:

I have a good chunk in RICA and it's done its job but beware of the premium on the investment trust.

I briefly looked at RICA and CGT recently and although RICA has wiped the floor with CGT YTD (Yes I know, too short a timeframe) and also beaten CGT on 1 and 5 yrs, the all time (taking from 9th July 2004 - RICA inception) is almost identical (+220%). Whatever RICA is doing since the 2020 February lows seems to be having an edge

[Burwood]

Jon39 said:

Mr Whippy said:

... And doesn’t this feel similar to an 80s Japan moment?
Or 1920s having just played out over the last decade? Wealth gap widened and a crescendo of asset bubbles?

Let’s see. I think we’ll be seeing some sad faces in week beginning 20th June.

My gut is Fed will suddenly go dovish and the world will go more pseudo UBI, around 2020 low prices.
Then I’ll buy back in.

Your gut guidance might be of help to me.
21.2% up YTD; Total annual dividends have increased 2.5% YTD.
I cannot see what will happen next though. What should I do now?

Edited by Jon39 on Saturday 28th May 22:55

Shell isn't it? 20 years in Shell. So including the +21%(1 year) gain you would be -50%. Plus a few dividends would be net zero? Do I have that about right, Jon?

[ATM]

Derek Chevalier said:

ATM said:

The majority of these trusted advisors will only position you long while their employers could be short. Remember in the 2008 GFC when banks were advising clients to go long while they were net short

I don't see the connection TBH.

During the build up to the GFC banks like Goldman Sachs were advising clients to buy buy buy while they themselves were net short.

[bitchstewie]

Phooey said:

I briefly looked at RICA and CGT recently and although RICA has wiped the floor with CGT YTD (Yes I know, too short a timeframe) and also beaten CGT on 1 and 5 yrs, the all time (taking from 9th July 2004 - RICA inception) is almost identical (+220%). Whatever RICA is doing since the 2020 February lows seems to be having an edge

Remember they both have fund versions to avoid premium/discount issues but CGT has a proper discount control mechanism.

With RICA the premium can sometimes run away a little so YTD for example the premium accounts for quite a bit of the gain as presumably people are stting bricks so will pay a premium for the shares.

Ruffer make use of options and financial voodoo instruments whilst CGT don't.

Ruffer have a reasonable allocation to gold whilst CGT doesn't.

Both have churned out a steady 6.5% or there about over most time periods and if you ignore passive v active Jonathan Ruffer and Peter Spiller have been around the block.

Long term either would have made you rich but most importantly neither would have made you poor via those crippling drawdowns some funds endue.

[Derek Chevalier]

ATM said:

Derek Chevalier said:

ATM said:

The majority of these trusted advisors will only position you long while their employers could be short. Remember in the 2008 GFC when banks were advising clients to go long while they were net short

I don't see the connection TBH.

During the build up to the GFC banks like Goldman Sachs were advising clients to buy buy buy while they themselves were net short.

I assume you are talking about credit rather than equity? Given the structure, scale and individual influence I don't see the link. Happy to discuss what happened in the credit markets on another thread.


Stumbled across this while reading a book this morning.

https://papers.ssrn.com/sol3/papers.cfm?abstract_i...

"Each investor, using the market to serve his own self-interest, unwittingly makes prices reflect his
information and analysis. It is as if the market were a huge relatively low cost continuous polling
mechanism that records the updated votes of millions of investors in the continuously changing
current price. In the face of this mechanism, it is almost always a folly for a single investor (in
the absence of inside information) to believe that prices are significantly in error. Public
information should already be embedded in prices. Indeed, stocks are highly responsive to news
that clearly relates to them. Even if he were fortunate enough to be possessed of non-public but
not inside information, it may do him more harm than good if he is tempted to take a position
based on it – for the price may already reflect other non-public information known to other
investors which may nullify the effect of his information. So one of the lessons of modern
financial economics is that an investor must take care to consider the vast amount of information
already impounded in the price before he makes a bet based on his information."