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

[DaveA8]

Derek Chevalier said:

DaveA8 said:

Derek Chevalier said:

DaveA8 said:

but I would say smarter people than me definitely look at them as indicators particularly around short term sentiment, the same as looking at the Options market, it's a good indicator of sentiment.

But there are far smarter people out there that with automated processes - I'm not clear how the human loking at a chart can compete (but always open to seeing some evidence).

DaveA8 said:

because a "value" investor who has adopted a view will rigidly hold to the notion that nothing else can work and if it works, it does so only against the overall long term probability

I don't know of many value investors that hold a rigid view - most are constantly questioning and are driven by the evidence/data

DaveA8 said:

In fact Value investors should be glad lots of "schmucks" partake since they must be able to capitalise on the schmucks mistakes but they seem offended by the actions of non strict value investors.

Who is offended?

I was going to actually respond but upon re reading, I can sense your indignation, almost rage that some person across the internet has offered a view that doesn't accord with yours. I could counter and counter persuasively but it's like a losing trade, it's going nowhere and I have no emotional attachment to your opinion nor I do I have a right to change it. It's a sort of Gordon Gekko situation.

No indignation/rage at all (there are plenty of other things in life to get wound up about ), always interested in all viewpoints, especially those that are backed by evidence.

Fair enough, no intention on my part to offend but I posted on the assumption that we are talking about "The Stock market" not individual shares. The evidence of the usefulness of charts is that after looking at the chart and looking at the options market, it is a very clear indicator of sentiment, that is if all participants need to buy insurance ( puts) then the sentiment is that they fear a fall, typically due to costs if the market is Bullish, puts are cheaper because less people want insurance but the chart has a part to play in that because it broadly tracks sentiment.
It is ceteris paribus but even on individual shares ( where I think much less reliance would be placed), they do tell something but I was clear that they are only a part of something because other external factors can rapidly alter a chart.
If a chart is going left to right at a 45 deg angle up or 45 deg Down, in extreme it's telling the viewer something, it's up to that person to look at external sources to decide. To be fair this thread is labelled the "stock market" and that's what I refer to, not specific stocks.

[Mr Whippy]

Derek Chevalier said:

Mr Whippy said:

Derek Chevalier said:

Mr Whippy said:

The recent highs were the largest anomaly on record vs long term averages.

On a global basis or just U.S. based large-cap growth stocks?

US large cap.

Is your point that you’re ok to hold exUSA global funds?

Like the global economy is somehow separate to the USA.

USA is tied at the hip to China, and that’s a big issue.
Then EMs will suffer up as USD rises with their rate hikes.


Global recession doesn’t sound good for the E side of PE ratio.

My point is that on a global basis, valuations don't seem too hideous, with P/Es in many areas being close to, or in single digits.

But E side of PE is based on China and USA not being in recession, and E lags reality by a quarter or two.

[Derek Chevalier]

Mr Whippy said:

Derek Chevalier said:

Mr Whippy said:

Derek Chevalier said:

Mr Whippy said:

The recent highs were the largest anomaly on record vs long term averages.

On a global basis or just U.S. based large-cap growth stocks?

US large cap.

Is your point that you’re ok to hold exUSA global funds?

Like the global economy is somehow separate to the USA.

USA is tied at the hip to China, and that’s a big issue.
Then EMs will suffer up as USD rises with their rate hikes.


Global recession doesn’t sound good for the E side of PE ratio.

My point is that on a global basis, valuations don't seem too hideous, with P/Es in many areas being close to, or in single digits.

But E side of PE is based on China and USA not being in recession, and E lags reality by a quarter or two.

China is ~3.5% of global market cap

https://www.msci.com/documents/10199/a71b65b5-d0ea...

Agreed that E can fall, but a lower starting P/E might be preferable to one that is far higher.

[Mr Whippy]

Derek Chevalier said:

China is ~3.5% of global market cap

https://www.msci.com/documents/10199/a71b65b5-d0ea...

Agreed that E can fall, but a lower starting P/E might be preferable to one that is far higher.

China might be 3.5% of global market cap, but it’s ~ 30% of global manufacturing output.

That means they generate economic activity for all their suppliers.
It’s no surprise commodities track China GDP.

And USA is probably a good chunk of the global consumer.


If you have China and USA in recession, AND USA tightening into that recession, then global ex-US is going to be doing not so great either.


It’s a very bleak picture.


But it’s the price we now have to pay to control the inflation to keep economies workable.



Either we have recession and stock price corrections, and PE getting hammered down…

Or we have employees dictating pay, salaries going out of the wazoo, and P going down, and PE getting hammered down from the other side.


It’s time to pay for the last 15 years of QE induced fragility, moral hazard, and zombification of the global economy at zero bound of cost of borrowing.


It’s not a new normal, or a new paradigm, it’s just the old paradigm reasserting itself.

That paradigm is… no free lunch.

[bmwmike]

No free lunch.... So investing for long term is a misnomer and really it's all about timing the market after all?

[speedy_thrills]

bmwmike said:

...it's all about timing the market after all?

I've never really bought into the idea that you can't time the markets to be honest. The old adage "time in the market beats timing the market" is true but that doesn't mean you can't substantially benefit through cyclical adjustment.

Timing the market perfectly is nearly impossible but I've substantially avoided the deleterious effects of three major recessions in my adult lifetime either by substantially cashing out (as in this one) or adjusting my risk profile before wand after (as in the financial crisis and .com bubble.) Admittedly I missed the Coronavirus dip but as I was fairly diversified I just rode the cycle.

[Mr Whippy]

bmwmike said:

No free lunch.... So investing for long term is a misnomer and really it's all about timing the market after all?

Investing long term is about your buy in points and sell point/s.

What impacts that is how good the business is, and the sentiment of the day against the economic backdrop.


Do as you wish.


Cost average purchasing is a form of timing risk mitigation.
Selling down to safe assets, mitigation.
It seems like people are already taking timing into account when investing.

[Phooey]

Just an observation from scanning various forums - but a lot of people seem to st themselves, talk about going into cash, switching into 'safe havens' etc when markets turn negative (bear) but forget the positivity (bull) when sentiment changes and markets rip at speed to new highs. Just take a look at the past history of returns of bull markets and ask yourself - would you really want to miss the next one??

[simong800]

Mr Whippy said:

It’s a very bleak picture.


.

Very surprised to hear such a bleak picture from you, your posts are normally full of optimism

[simong800]

Phooey said:

Just an observation from scanning various forums - but a lot of people seem to st themselves, talk about going into cash etc when markets turn negative (bear) but forget the positivity (bull) when sentiment changes and markets rip at speed to new highs. Just take a look at the past history of returns of bull markets and ask yourself - would you really want to miss the next one??

Indeed, people love to find something to be fearful of.

Markets are high - no I am not investing, markets are too high
Markets are lower - no I am not investing, markets are lower
Markets have a bull run - no I am not investing, will wait for it to drop
Enter a bear market - no I am not investing, will wait for the bear market to be over

Etc etc

[simong800]

speedy_thrills said:

I've never really bought into the idea that you can't time the markets to be honest. The old adage "time in the market beats timing the market" is true but that doesn't mean you can't substantially benefit through cyclical adjustment.

Timing the market perfectly is nearly impossible but I've substantially avoided the deleterious effects of three major recessions in my adult lifetime either by substantially cashing out (as in this one) or adjusting my risk profile before wand after (as in the financial crisis and .com bubble.) Admittedly I missed the Coronavirus dip but as I was fairly diversified I just rode the cycle.

Have you measured whether your performance would have been better if you just stayed invested? What difference to your overall returns has your entering and exiting the market made?

[bitchstewie]

Phooey said:

Just an observation from scanning various forums - but a lot of people seem to st themselves, talk about going into cash, switching into 'safe havens' etc when markets turn negative (bear) but forget the positivity (bull) when sentiment changes and markets rip at speed to new highs. Just take a look at the past history of returns of bull markets and ask yourself - would you really want to miss the next one??

But that's the point about get your risk appetite right and "just keep buying".

Fair enough if you need it in six months time it's different to if you're buying for retirement in 15-2- years time.

I've asked Whippy before what's his buy back in point?

I might have missed it but I don't think I saw an answer.

[Jon39]

si800 said:

speedy_thrills said:

I've never really bought into the idea that you can't time the markets to be honest. The old adage "time in the market beats timing the market" is true, but that doesn't mean you can't substantially benefit through cyclical adjustment.

Timing the market perfectly is nearly impossible but I've substantially avoided the deleterious effects of three major recessions in my adult lifetime either by substantially cashing out (as in this one) or adjusting my risk profile before and after (as in the financial crisis and .com bubble.) Admittedly I missed the Coronavirus dip but as I was fairly diversified I just rode the cycle.

Have you measured whether your performance would have been better if you just stayed invested? What difference to your overall returns has your entering and exiting the market made?

Am interested how you dealt with the 2008 financial crisis.
With the liar loans and 125% mortgages, I can understand at some stage (how you knew when I don't know) you went all cash.
However, it was a lengthy crash, so how did you know when to return to equities ?
It is usually the difficult part and timing investors often remain out of the market too long, so miss the eventual initial sharp upturn.
That is why remaining invested tends to work better, although defensive holdings certainly help during recessions.
The start of an eventual recovery, feels the same as one of the, sometimes many, 'dead cat bounces'.


This chart shows a remain invested throughout portfolio.
Did your cyclical adjustment method work better ?




How could you have missed the summer 2020 crash opportunity? Certainly there was a risk of capitalism coming to an end, but the share prices of many good businesses were so cheap. I was busy buying and self isolating.

Edited by Jon39 on Friday 1st July 09:27

[Derek Chevalier]

Mr Whippy said:

Derek Chevalier said:

China is ~3.5% of global market cap

https://www.msci.com/documents/10199/a71b65b5-d0ea...

Agreed that E can fall, but a lower starting P/E might be preferable to one that is far higher.

China might be 3.5% of global market cap, but it’s ~ 30% of global manufacturing output.

That means they generate economic activity for all their suppliers.
It’s no surprise commodities track China GDP.

And USA is probably a good chunk of the global consumer.


If you have China and USA in recession, AND USA tightening into that recession, then global ex-US is going to be doing not so great either.


It’s a very bleak picture.


But it’s the price we now have to pay to control the inflation to keep economies workable.



Either we have recession and stock price corrections, and PE getting hammered down…

Or we have employees dictating pay, salaries going out of the wazoo, and P going down, and PE getting hammered down from the other side.


It’s time to pay for the last 15 years of QE induced fragility, moral hazard, and zombification of the global economy at zero bound of cost of borrowing.


It’s not a new normal, or a new paradigm, it’s just the old paradigm reasserting itself.

That paradigm is… no free lunch.

I think we may be arguing two different things:

My point is that the last 15 years have not blown bubbles uniformly across the globe.

Going forward, and as is always the case, there is a huge range of potential outcomes. It could be worse than the 70s, Great Depression etc. Or we may just muddle through. Looking back at the "How far will house prices fall" thread(s), things don't always pan out as we expect.

[Derek Chevalier]

speedy_thrills said:

I've never really bought into the idea that you can't time the markets to be honest.

If you have this skill/ability surely it's worth doing this on a professional/full-time basis (assuming you aren't already)?

Edited by Derek Chevalier on Friday 1st July 10:27

[dmahon]

Derek Chevalier said:

speedy_thrills] I've never really bought into the idea that you can't time the markets to be honest. /quote said:

If you have this skill/ability surely it's worth doing this on a professional/full-time basis (assuming you aren't already)?

Banks predictions make me laugh - e.g Bitcoin to rise to 28k. If they can predict the market even 51% of the time, shut the bank down and start taking leveraged investment positions. Jobs a good ‘in.

[Derek Chevalier]

dmahon said:

If they can predict the market even 51% of the time, shut the bank down and start taking leveraged investment positions. Jobs a good ‘in.

Yep

“If you trade a lot, you only need to be right 51 percent of the time,” Berlekamp argued to a colleague. “We need a smaller edge on each trade.”
― Gregory Zuckerman, The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution

[Jon39]

Derek Chevalier said:

Yep

If you trade a lot, you only need to be right 51 percent of the time, ...

Sounds good, but would just a 1% gross margin, pay for the operating and time costs involved ?

[bogie]

Jon39 said:

Sounds good, but would just a 1% gross margin, pay for the operating and time costs involved ?

Maybe if you are playing with a $20Billion pot ? ...but not for the amateur individual

[bmwmike]

Derek Chevalier said:

dmahon said:

If they can predict the market even 51% of the time, shut the bank down and start taking leveraged investment positions. Jobs a good ‘in.

Yep

“If you trade a lot, you only need to be right 51 percent of the time,” Berlekamp argued to a colleague. “We need a smaller edge on each trade.”
? Gregory Zuckerman, The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution

Yes and if you can predict the market 51% of the time its surely then just a question of making sure all the bigger trades fall into that 51% to maximise profits.

ancientproverb said:

51% of the time, it works *every* time