Stock market is a "fully-fledged epic bubble" and will burst
Discussion
ooid said:
Can’t buy crypto because it’s non-sense.
Can’t buy stocks because of treasury yields.
Can’t buy bonds because of inflation.
Can’t buy real estate because of interest rates.
Going to the casino never been so attractive, probably better odds (+fun)
Retail banks typically benefit as rates rise because their NIM improves. Banks with substantial trading departments tend to benefit from increased volatility.Can’t buy stocks because of treasury yields.
Can’t buy bonds because of inflation.
Can’t buy real estate because of interest rates.
Going to the casino never been so attractive, probably better odds (+fun)
If we actually have a recession firearms, tobacco and alcohol will likely do well. In any market there's someone who will benefit eventually, indiscriminate selling can't go on forever.
In reality, a really good sign has been that the selling hasn't been indiscriminate but healthily selective. Companies that burn cash, have insufficient cash or exist to sell non essential goods or services to people who have required Govt funding or borrowing to maintain their consumer spending are screwed in this economic environment whereas businesses that sell goods or services that are essential have not.
It's arguably why the FAANG heavy US indices have taken a beating while the boring as s
t, futureless, out of date, Gammon FTSE with all its non woke mining, exploration, utility and service sector dead ends that are so finished and so not the future with their goods and services that have to be bought and their so 20th century dividends has held up.
There are vast revenues still being made by companies just not those that exist to sell non essential tat to folk who have spent the last decade borrowing to buy non essentials, living the dream and believing that YOLO meant piss it all away as quickly as possible when it very clearly meant the same as it always has which is to put money away for when the hard times come along.
For some it's always been tough and we and the State are there to support but for the last decade or more very many have put themselves on the rocks through wilful and profligate consumption of tat, creating the billionaires they don't know whether to worship or despise. The companies which have come into existence to feed off those consumer habits must ultimately be left to fend for themselves.
Like crypto, there is an orderly clear out of the weak and feeble at the end of a long party.
It's arguably why the FAANG heavy US indices have taken a beating while the boring as s
t, futureless, out of date, Gammon FTSE with all its non woke mining, exploration, utility and service sector dead ends that are so finished and so not the future with their goods and services that have to be bought and their so 20th century dividends has held up. There are vast revenues still being made by companies just not those that exist to sell non essential tat to folk who have spent the last decade borrowing to buy non essentials, living the dream and believing that YOLO meant piss it all away as quickly as possible when it very clearly meant the same as it always has which is to put money away for when the hard times come along.
For some it's always been tough and we and the State are there to support but for the last decade or more very many have put themselves on the rocks through wilful and profligate consumption of tat, creating the billionaires they don't know whether to worship or despise. The companies which have come into existence to feed off those consumer habits must ultimately be left to fend for themselves.
Like crypto, there is an orderly clear out of the weak and feeble at the end of a long party.
DonkeyApple said:
In reality, a really good sign has been that the selling hasn't been indiscriminate but healthily selective. Companies that burn cash, have insufficient cash or exist to sell non essential goods or services to people who have required Govt funding or borrowing to maintain their consumer spending are screwed in this economic environment whereas businesses that sell goods or services that are essential have not.
It's arguably why the FAANG heavy US indices have taken a beating while the boring as st, futureless, out of date, Gammon FTSE with all its non woke mining, exploration, utility and service sector dead ends that are so finished and so not the future with their goods and services that have to be bought and their so 20th century dividends has held up.
There are vast revenues still being made by companies just not those that exist to sell non essential tat to folk who have spent the last decade borrowing to buy non essentials, living the dream and believing that YOLO meant piss it all away as quickly as possible when it very clearly meant the same as it always has which is to put money away for when the hard times come along.
For some it's always been tough and we and the State are there to support but for the last decade or more very many have put themselves on the rocks through wilful and profligate consumption of tat, creating the billionaires they don't know whether to worship or despise. The companies which have come into existence to feed off those consumer habits must ultimately be left to fend for themselves.
Like crypto, there is an orderly clear out of the weak and feeble at the end of a long party.
Brilliantly put and so very true (as always DA!) I’m surprised it’s gone on for so long..It's arguably why the FAANG heavy US indices have taken a beating while the boring as s
t, futureless, out of date, Gammon FTSE with all its non woke mining, exploration, utility and service sector dead ends that are so finished and so not the future with their goods and services that have to be bought and their so 20th century dividends has held up. There are vast revenues still being made by companies just not those that exist to sell non essential tat to folk who have spent the last decade borrowing to buy non essentials, living the dream and believing that YOLO meant piss it all away as quickly as possible when it very clearly meant the same as it always has which is to put money away for when the hard times come along.
For some it's always been tough and we and the State are there to support but for the last decade or more very many have put themselves on the rocks through wilful and profligate consumption of tat, creating the billionaires they don't know whether to worship or despise. The companies which have come into existence to feed off those consumer habits must ultimately be left to fend for themselves.
Like crypto, there is an orderly clear out of the weak and feeble at the end of a long party.
DonkeyApple said:
In reality, a really good sign has been that the selling hasn't been indiscriminate but healthily selective. Companies that burn cash, have insufficient cash or exist to sell non essential goods or services to people who have required Govt funding or borrowing to maintain their consumer spending are screwed in this economic environment whereas businesses that sell goods or services that are essential have not.
It's arguably why the FAANG heavy US indices have taken a beating while the boring as st, futureless, out of date, Gammon FTSE with all its non woke mining, exploration, utility and service sector dead ends that are so finished and so not the future with their goods and services that have to be bought and their so 20th century dividends has held up.
There are vast revenues still being made by companies just not those that exist to sell non essential tat to folk who have spent the last decade borrowing to buy non essentials, living the dream and believing that YOLO meant piss it all away as quickly as possible when it very clearly meant the same as it always has which is to put money away for when the hard times come along.
For some it's always been tough and we and the State are there to support but for the last decade or more very many have put themselves on the rocks through wilful and profligate consumption of tat, creating the billionaires they don't know whether to worship or despise. The companies which have come into existence to feed off those consumer habits must ultimately be left to fend for themselves.
Like crypto, there is an orderly clear out of the weak and feeble at the end of a long party.
I've heard someone say elsewhere that in these inflationary times they ''wouldn't want to be holding cash rich, cash generative, low debt companies as they will suffer comparatively badly''?It's arguably why the FAANG heavy US indices have taken a beating while the boring as s
t, futureless, out of date, Gammon FTSE with all its non woke mining, exploration, utility and service sector dead ends that are so finished and so not the future with their goods and services that have to be bought and their so 20th century dividends has held up. There are vast revenues still being made by companies just not those that exist to sell non essential tat to folk who have spent the last decade borrowing to buy non essentials, living the dream and believing that YOLO meant piss it all away as quickly as possible when it very clearly meant the same as it always has which is to put money away for when the hard times come along.
For some it's always been tough and we and the State are there to support but for the last decade or more very many have put themselves on the rocks through wilful and profligate consumption of tat, creating the billionaires they don't know whether to worship or despise. The companies which have come into existence to feed off those consumer habits must ultimately be left to fend for themselves.
Like crypto, there is an orderly clear out of the weak and feeble at the end of a long party.
Fundsmith still has the majority of it's holdings in quality, cash generative, low debt companies, essential consumer staples and medical... yet it has noticeably underperformed the wider indexes in this current downturn.
mike74 said:
I've heard someone say elsewhere that in these inflationary times they ''wouldn't want to be holding cash rich, cash generative, low debt companies as they will suffer comparatively badly''?
Fundsmith still has the majority of it's holdings in quality, cash generative, low debt companies, essential consumer staples and medical... yet it has noticeably underperformed the wider indexes in this current downturn.
I don't know who said that, but I have to disagree. Owning highly cash-generative companies that don't have to use that cash to service mountains of debt, and can instead return it to shareholders, is precisely where I would want to be (and am). Owning companies with poor cashflow yields, and distribution thereof, means that your returns are dictated to a far greater extent by market prices.Fundsmith still has the majority of it's holdings in quality, cash generative, low debt companies, essential consumer staples and medical... yet it has noticeably underperformed the wider indexes in this current downturn.
As for Fundsmith...the problem for them, and everyone who's lauded TS as a genius over the last 5-10yrs, is that being a successful large-cap quality stockpicker in that time has come to be functionally equivalent to being a momentum junkie. Now the music has stopped for momentum and people are deciding that valuation actually matters again (as it always does eventually), and everyone who has been the beneficiary of the "quality"(/momentum) wave over the last decade (inc. FS) is getting whacked.
mike74 said:
I've heard someone say elsewhere that in these inflationary times they ''wouldn't want to be holding cash rich, cash generative, low debt companies as they will suffer comparatively badly''?
Fundsmith still has the majority of it's holdings in quality, cash generative, low debt companies, essential consumer staples and medical... yet it has noticeably underperformed the wider indexes in this current downturn.
What you don't want is a company that isn't maximising it's revenue due to not using correct levels of gearing or one that is sitting on mountains of cash that's doing nothing. This is about excesses in any direction. It's why you're seeing big cash generators who have no commercial use for this excess cash, throwing it out to shareholders as special dividends. Fundsmith still has the majority of it's holdings in quality, cash generative, low debt companies, essential consumer staples and medical... yet it has noticeably underperformed the wider indexes in this current downturn.
Smiths problem is that he is 75% US with the rest being Europe. Where is his Asian exposure? Why so heavily overweight in the most debt fuelled consumer market on the planet where the consumers are going to be eating the most arse when debt costs rise? Why is he avoiding Asia which comprises the bulk of the landmass on the planet and holds most of its population? There's a global economic war going on between the US and China and Terry has bet all of his clients' money on one side. Good luck to him but it's a bet nonetheless.
Then when you look at his sector exposures you see it's 30% tech and 30% consumer staples. Those are pretty hefty bets on single sectors. US tech has been built on cheap debt, endless venture capital and rampant consumer debt fuelled spending. That party ended Nov '21. The whole sector is rebasing to work in the new market where consumers are slowing down their rampant shopping, debt isn't as cheap and venture capital is suddenly not interested in subsidising the monthly subscriptions of shoppers in exchange for their Facebook address. And consumer staples while being generally a defensive are going to contain many businesses that go to zero when consumers slow their shopping.
And where is the exposure to banking, financial services, mining, oil and all the sectors that tend to make hay when money becomes more valuable or core resources have restricted supply?
That said, it's only off about 15% this year? And it doesn't look to have holdings that won't adapt or survive. The FAANG Index is off over 33% ytd and there's nothing really on the horizon that underpins when it might stop falling or how many constituents will be left.
loafer123 said:
fesuvious said:
It's a losing bet too.
China will be the world's largest economy by 2032
Will it?China will be the world's largest economy by 2032
With a declining population and increasingly pricing itself out of manufacturing, growth could easily go into reverse.
egomeister said:
loafer123 said:
fesuvious said:
It's a losing bet too.
China will be the world's largest economy by 2032
Will it?China will be the world's largest economy by 2032
With a declining population and increasingly pricing itself out of manufacturing, growth could easily go into reverse.
There is also a significant risk of housing going pop, as they have built so many homes for demand that doesn’t exist.
fesuvious said:
In essence, (and before the fundamentals of the company)
Be in what people NEED
Be out of what they WANT.
For what they want when they've got no dough doesn't get bought
Yup. It's like when Labour get into power you want to position yourself to benefit from the businesses that flog non essential tat to folk with no wealth as lots of free money will be getting lobbed at them and it'll all get accidentally hoovered up by certain businesses. And while that goes in the traditional businesses carry on as before, plodding along, being boring, making cash but they're boring, not making enough cash for our tastes and out of step with fashion. Then the free money runs out, the pop up stores selling wifi enabled, Swarovski butt plugs for French bulldogs go bust and reveals that boring pharmacists the stall has been blocking, which just sells the same old boring stuff it always has. Day in, day out, just selling the stuff everyone needs and prioritises when cash tightens. Be in what people NEED
Be out of what they WANT.
For what they want when they've got no dough doesn't get bought
All that's happened since the mid 1990s is that the entire global economy has been giving away free money to get everyone shopping to excess and to go along with the free money was free debt so that ever one was free to spend next year's income today. Council estates across the world filled up with Mercs and Rangies on tick and everyone could shop like they were a Saudi princess.
And then in 2021 they all gave out a bit too much money to the Legion of Princesses while stopping the tat factories from producing enough tat and it's all gone a bit Pete Tong and we find ourselves needing to spike the cost of Princess Tokens and raising taxes to get things back under control.
Ironically, the most efficient mechanism to date for removing the excessive Covid money from the system and evaporating it has turned out to be the crypto market. Since November it has successfully evaporated $2tln of furlough cash. No one ever considered that when crypto finally found a use it would be something so useful to all of us and transpire to be such a powerful economic tool to safeguard the economy.
loafer123 said:
Can it push up the value chain? Do they have the approach to education and innovation required?
There is also a significant risk of housing going pop, as they have built so many homes for demand that doesn’t exist.
Absolutely they can. Do they have the same innovation mindset as the US and Europe? Perhaps not. However I think the education system is much more likely to produce the kind of people who can deliver that push up the value chain (and this is probably true of most of Asia)There is also a significant risk of housing going pop, as they have built so many homes for demand that doesn’t exist.
I'm not sure Japan and Korea have ever been truly innovative like the US has but they've done ok. I see the path China takes being much the same.
DonkeyApple said:
Yup. It's like when Labour get into power you want to position yourself to benefit from the businesses that flog non essential tat to folk with no wealth as lots of free money will be getting lobbed at them and it'll all get accidentally hoovered up by certain businesses. And while that goes in the traditional businesses carry on as before, plodding along, being boring, making cash but they're boring, not making enough cash for our tastes and out of step with fashion. Then the free money runs out, the pop up stores selling wifi enabled, Swarovski butt plugs for French bulldogs go bust and reveals that boring pharmacists the stall has been blocking, which just sells the same old boring stuff it always has. Day in, day out, just selling the stuff everyone needs and prioritises when cash tightens.
All that's happened since the mid 1990s is that the entire global economy has been giving away free money to get everyone shopping to excess and to go along with the free money was free debt so that ever one was free to spend next year's income today. Council estates across the world filled up with Mercs and Rangies on tick and everyone could shop like they were a Saudi princess.
And then in 2021 they all gave out a bit too much money to the Legion of Princesses while stopping the tat factories from producing enough tat and it's all gone a bit Pete Tong and we find ourselves needing to spike the cost of Princess Tokens and raising taxes to get things back under control.
Ironically, the most efficient mechanism to date for removing the excessive Covid money from the system and evaporating it has turned out to be the crypto market. Since November it has successfully evaporated $2tln of furlough cash. No one ever considered that when crypto finally found a use it would be something so useful to all of us and transpire to be such a powerful economic tool to safeguard the economy.
You’re on form today D_A.All that's happened since the mid 1990s is that the entire global economy has been giving away free money to get everyone shopping to excess and to go along with the free money was free debt so that ever one was free to spend next year's income today. Council estates across the world filled up with Mercs and Rangies on tick and everyone could shop like they were a Saudi princess.
And then in 2021 they all gave out a bit too much money to the Legion of Princesses while stopping the tat factories from producing enough tat and it's all gone a bit Pete Tong and we find ourselves needing to spike the cost of Princess Tokens and raising taxes to get things back under control.
Ironically, the most efficient mechanism to date for removing the excessive Covid money from the system and evaporating it has turned out to be the crypto market. Since November it has successfully evaporated $2tln of furlough cash. No one ever considered that when crypto finally found a use it would be something so useful to all of us and transpire to be such a powerful economic tool to safeguard the economy.
The last para is fascinating…how much was printed, and what proportion has been destroyed?
egomeister said:
Absolutely they can. Do they have the same innovation mindset as the US and Europe? Perhaps not. However I think the education system is much more likely to produce the kind of people who can deliver that push up the value chain (and this is probably true of most of Asia)
I'm not sure Japan and Korea have ever been truly innovative like the US has but they've done ok. I see the path China takes being much the same.
I did some research on this a long time ago, and the general view was that India was much better placed to benefit.I'm not sure Japan and Korea have ever been truly innovative like the US has but they've done ok. I see the path China takes being much the same.
fesuvious said:
It doesn't just need China to grow.
It requires the US to have issues. Nobody right now thinks the US is healthy.
Even if China remains in second place to have no direct investment exposure is a bold decision. However, that isn't specifically Terry's job or responsibility but that of the investor. Terry isn't hiding the bias of his fund from us, it's our responsibility to balance his fund with other funds where their mandate opposes. It requires the US to have issues. Nobody right now thinks the US is healthy.
It's arguably the fault of the investor if they've chosen to back Terry's mandate 100% instead of having him as a balanced part of their basket.
Plus, one must always accept with a blue chip fund that part of the excessive returns in the good years are to offset the poor ones when they come along. His fund was banking something like 20% a year for a long time and that's a lot of outperformance to easily offset the current dip.
NowWatchThisDrive said:
mike74 said:
I've heard someone say elsewhere that in these inflationary times they ''wouldn't want to be holding cash rich, cash generative, low debt companies as they will suffer comparatively badly''?
Fundsmith still has the majority of it's holdings in quality, cash generative, low debt companies, essential consumer staples and medical... yet it has noticeably underperformed the wider indexes in this current downturn.
I don't know who said that, but I have to disagree. Owning highly cash-generative companies that don't have to use that cash to service mountains of debt, and can instead return it to shareholders, is precisely where I would want to be (and am). Owning companies with poor cashflow yields, and distribution thereof, means that your returns are dictated to a far greater extent by market prices.Fundsmith still has the majority of it's holdings in quality, cash generative, low debt companies, essential consumer staples and medical... yet it has noticeably underperformed the wider indexes in this current downturn.
Inflation is ultimately transitory because along with central bank moves to tightening, inflation is destroying demand.
Supply is still bouncing back.
I feel we’re about to witness the biggest supply glut combined with demand dip the modern world has seen.
And this same action happens almost every cycle.
We had inflation worriers in 2007/08 and by 2009 it was all over.
We had people saying stagflation, oh no, don’t hold cash, we’re all doomed blah blah.
Petrol went from about £1.40 to £0.85. That will have had a giant impact on cooling the inflation that’d been experienced up to the peak.
Commodities spiked, and then crashed back down.
Inflation is always transitory, and it’ll be quickly transitory again this time.
egomeister said:
loafer123 said:
Can it push up the value chain? Do they have the approach to education and innovation required?
There is also a significant risk of housing going pop, as they have built so many homes for demand that doesn’t exist.
Absolutely they can. Do they have the same innovation mindset as the US and Europe? Perhaps not. However I think the education system is much more likely to produce the kind of people who can deliver that push up the value chain (and this is probably true of most of Asia)There is also a significant risk of housing going pop, as they have built so many homes for demand that doesn’t exist.
I'm not sure Japan and Korea have ever been truly innovative like the US has but they've done ok. I see the path China takes being much the same.
Take the Chinese, as a workforce they can take hard grafting without protesting into strikes. It's the mindset and culture.
However this gives China a massive economic advantage over the West. This is the same advantage which Japan had over the West in the car industry throughout the 1980's to the late 1990's. The ability to copy the West and mass produce cheaper, more well equiped and more reliable products.
China nowadays has so much clout that it is importing Western science, engineering and technology highly skilled labour force and making that innovation work for them i.e. headhunt the top people in the West, offer three times more pay and all the benefits for their family and entice them to become China employees/directors (or whathaveyou).
Another example is Hyundai headhunting Albert Biermann and that has done wonders for the Korean automotive industry.
So even the innovation competitive advantage of the West will disappear.
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