Stock market is a "fully-fledged epic bubble" and will burst
Discussion
Doddler said:
With regards to the OP and wether this is in fact an epic bubble, how do we feel the current BOE statement of a 2 yr recession will affect UK and Global markets? Is it a good time to go into more cash, say 50% as markets are likely to tumble 20-30% over the coming months/year?
Which markets though? I can see U.K. property dropping 10% a year for a few years and I can see clear recession in specific sectors but an equity index can still rise in a recession as it depends on how much it is exposed to the sectors that are impacted most. Plus, indices self cleanse and dispose of the weakest every quarter on average and replace them with winners. I find it very hard to see where an index like the ftse will go. It has a fair yield, quite a few defensives and quite a few sectors that will prosper. Stocks exposed to non essential retailing and housing activity are likely to have a grim time but my wild guess is that housing will be where you don't want to be and the ftse will be ok. Assuming no specific capitulation event in either.
DonkeyApple said:
Derek Chevalier said:
DonkeyApple said:
The issue with small caps is that we are in a phase of market readjustment where companies that can't feed themselves are being selected out of the heard and shot.
The small cap sector is much more exposed to the issue of cash burn being greater than cash revenue so my thinking would be that while small caps may look cheap by some metrics, there has to be more culling yet to be done?
I'd be happier sticking with despised, dull futureless companies that persist in selling goods and services that are needed and keeping the powder dry for the more glamorous stuff until we've seen more of the market shift?
Small cap value has tended to do slightly better during rubbish times according to recent research by Avantis.The small cap sector is much more exposed to the issue of cash burn being greater than cash revenue so my thinking would be that while small caps may look cheap by some metrics, there has to be more culling yet to be done?
I'd be happier sticking with despised, dull futureless companies that persist in selling goods and services that are needed and keeping the powder dry for the more glamorous stuff until we've seen more of the market shift?
https://www.evidenceinvestor.com/how-do-small-stoc...
"As you can see in the table below, covering the period 1973-2021 and showing average monthly returns, while small value stocks did earn negative returns during the first half of recessions, their losses were actually slightly less than those of the overall market."
As NowWatchThisDrive points out, the key is in screening out the poor quality and lottery style stocks.
Developed markets small cap (arguably mid cap) value is positive YTD (in GBP), and there are systematic, low cost funds that can capture this return.
Speaking of "cheap", interesting to hear Rob Arnott's views on relative valuations - US vs rest of the world.
https://blog.validea.com/show-us-your-portfolio-ro...
Edited by Derek Chevalier on Monday 31st October 18:40
You definitely don't want to have been in the top right (large growth) this year.
Anything value-oriented (left column) has done a lot better
https://theirrelevantinvestor.com/2022/10/28/reven...
"I would never have thought boring names in the healthcare and energy sector could offset so much of tech’s decline. In the last year, the biggest names in tech have lost $3.7T (NFLX, PYPL, NVDA, TSLA, META, MSFT, GOOG, AMZN)"
"This list is, again, fairly boring names that you’d find in the Dow Jones Industrial Average, which is back with a vengeance. The Dow is outperforming the Nasdaq-100 by 21% year-to-date and is wrapping up the best month of relative outperformance since 2002!"
While those tilting towards the bottom left are getting towards flat, even in USD terms.
"Thoughtfully constructed SMALL VALUE funds are a nose-hair away from being positive YTD.
Make sure you’re considering the entire opportunity set (not just the S&P500), and gaining exposure to asset classes effectively."
https://www.linkedin.com/feed/update/urn:li:activi...
If you read this, from 2005, you will see so many parallels to today, it's scary
https://www.aqr.com/-/media/AQR/Documents/Insights...
"Now that the bubble has burst, the most important question is: What have we learned from this devastating experience?"
Unfortunately, many investors are fighting yesterday's battles, don't diversify, and have piled into "what is working now", and you will find no shortage of people willing to sell them great stories. Unfortunately, great stories don't necessarily translate into future success.
ooid said:
Layoffs announced in the last 24 hours
- Lyft 13% of workers
- Opendoor 18%
- Stripe 14%
- Chime 12%
- Twitter 50%
- Morgan Stanley (% unknown)
Looks like "The big tech" getting a beating.
It'll be interesting to see where these lay-off are geographically. - Lyft 13% of workers
- Opendoor 18%
- Stripe 14%
- Chime 12%
- Twitter 50%
- Morgan Stanley (% unknown)
Looks like "The big tech" getting a beating.
The worst aspect about the domestic staff is that they would have been on deflated salaries due to the promise of stock options and many will have taken on debt to synthesise a higher salary than their base could afford. Combine that with tech workers being amongst the largest consumer shopping demographic in terms of how much of their salary they apportioned to consumerism and there are considerable ramifications for economies such as California where so much 'money that hasn't been made yet' has been turbocharging the economy via rampant and insane over consumption.
So anyone had a short position on Made.com Group Plc last year or so?
https://uk.news.yahoo.com/made-com-shares-suspende...
https://uk.news.yahoo.com/made-com-shares-suspende...
Doddler said:
With regards to the OP and wether this is in fact an epic bubble, how do we feel the current BOE statement of a 2 yr recession will affect UK and Global markets? Is it a good time to go into more cash, say 50% as markets are likely to tumble 20-30% over the coming months/year?
The time to get more or fully into cash was a few months ago when the FED started talking about tightening. Now it depends where you are deployed.Some people thinks Bonds or Treasuries are a good buy now if you believe the FED will go back to QE in the next 3 to 24 months and you will hold for longer.
Some people think value businesses are a good buy right now especially businesses which sell stuff people need rather than stuff people want.
Some people think energy is a good buy now as it will only go higher.
Some people think miners are a good buy now as metals - precious and / or copper etc - will only go higher.
Some people think fertiliser companies are a good buy now as food is only going higher and therefore fertiliser will be in higher demand.
ooid said:
So anyone had a short position on Made.com Group Plc last year or so?
https://uk.news.yahoo.com/made-com-shares-suspende...
There can't be many companies had such a dramatic fall in value in such a short space of time, especially without any particularly extraordinary circumstances actually causing it.https://uk.news.yahoo.com/made-com-shares-suspende...
ATM said:
The time to get more or fully into cash was a few months ago when the FED started talking about tightening. Now it depends where you are deployed.
Some people thinks Bonds or Treasuries are a good buy now if you believe the FED will go back to QE in the next 3 to 24 months and you will hold for longer.
Some people think value businesses are a good buy right now especially businesses which sell stuff people need rather than stuff people want.
Some people think energy is a good buy now as it will only go higher.
Some people think miners are a good buy now as metals - precious and / or copper etc - will only go higher.
Some people think fertiliser companies are a good buy now as food is only going higher and therefore fertiliser will be in higher demand.
Sounds about what I'm thinking. Some people thinks Bonds or Treasuries are a good buy now if you believe the FED will go back to QE in the next 3 to 24 months and you will hold for longer.
Some people think value businesses are a good buy right now especially businesses which sell stuff people need rather than stuff people want.
Some people think energy is a good buy now as it will only go higher.
Some people think miners are a good buy now as metals - precious and / or copper etc - will only go higher.
Some people think fertiliser companies are a good buy now as food is only going higher and therefore fertiliser will be in higher demand.
Would a 60/40 lisfestrategy fund more less cover all this?
mike74 said:
ooid said:
So anyone had a short position on Made.com Group Plc last year or so?
https://uk.news.yahoo.com/made-com-shares-suspende...
There can't be many companies had such a dramatic fall in value in such a short space of time, especially without any particularly extraordinary circumstances actually causing it.https://uk.news.yahoo.com/made-com-shares-suspende...
It was a business that was slammed upwards by free furlough capital and then came all the way back down when that free money came to an end.
Without those free money coupons that no one seemed to want so tried to get rid of as quickly as possible, it would probably have just been a business that hoped to get profitable but probably would have died some time around now anyway.
Very sad but I fear just one of many.
lizardbrain said:
Sounds about what I'm thinking.
Would a 60/40 lisfestrategy fund more less cover all this?
I'm not a fan of these funds / trackers / etfs. Someone of moderate intelligence should be able to pick individual names or sectors better than just buying everything.Would a 60/40 lisfestrategy fund more less cover all this?
Just reading this thread shows you have an interest beyond the level of the average investor who wants to DCA into one of these funds. And even if you dont then some of the posters here will give you a better idea.
Personally I am not so confident in the Bonds story. The FED may start trimming rates but we could be entering a longer term bear market for Bonds with lower lows and lower highs - and you would effectively be buying the dip here. Bonds have been in a Bull market for something like 40 years. Maybe that party is over. If inflation is here to stay and you jump in now you may be under water for a long time. I've not really dug into this so not sure what else to say. I dont think that's tin foil hat time but lets see what people here think?
mike74 said:
There can't be many companies had such a dramatic fall in value in such a short space of time, especially without any particularly extraordinary circumstances actually causing it.
No need for extraordinary circumstances, it just burned too much cash to acquire customers and still lost money in the best environment you could imagine for an online furtniture retailer. Didn't they effectively state that they were only a Going Concern on the basis that someone would come along to buy them and pump a load more cash in?!Edited by NowWatchThisDrive on Monday 7th November 10:36
ATM said:
I'm not a fan of these funds / trackers / etfs. Someone of moderate intelligence should be able to pick individual names or sectors better than just buying everything.
This is clearly true, and why the majority of fund managers outperform a comparable index fund year after year.
xeny said:
ATM said:
I'm not a fan of these funds / trackers / etfs. Someone of moderate intelligence should be able to pick individual names or sectors better than just buying everything.
This is clearly true, and why the majority of fund managers outperform a comparable index fund year after year.
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