Stock market is a "fully-fledged epic bubble" and will burst
Discussion
Panamax said:
Mr Whippy said:
Greed prolongs the bull run, fear prolongs the bear run.
This. I call it my square wave theory. Reality moves on curves but markets move in steps.Just look, for instance, at the hopeless central banks who started out thinking 0.1% rate increases might tame inflation! Ludicrous.
And so many human participants in "the market" are all acting on the same basic emotions in response to very very similar stimulus, thinking the multimedia they're exposed to which these days all follows very similar trends through the middle of the bell curve, the patterns of their behaviour are essentially a determinable big switch. When does greed turn to fear among enough participants?
Thus the bear runs and bull runs become almost binary, and the "social mood" turns them on and off... I suppose a similar thought to that line in "Margin Call" film with Jeremy Irons talking about knowing when the music has stopped. It's not turned down slowly over weeks, it just goes off one day.
Just look at animals in a herd panic. It's not an orderly rush away from the predator. It's a sudden propagation of fear in an instant and that is that.
People say you can't time markets, but I think you can get a pretty good idea just by reading social media these days.
In the 90s the internet wasn't anything like it is now. I'd struggle to be exposed to enough different sources of information and opinions vs what I can do today.
Ie, Ceefax or buying FT to check on stock price changes... today it's on my iPhone from around the world 24/7, futures and all the other jazz.
Then forums from bulls, to bears, to middle ground, to technicals, to opinion based, to everything else, vs talking in the pub in the 90s.
Interesting stuff.
Yes, I watched the film Pi again the other week too haha
loafer123 said:
Interesting post.
In my view, by the time the shoeshine boy / social media poster is talking about it, the cycle has already turned.
I’m a contracyclical sort of guy having seen a few cycles, so am watching for the abject despair.
Pretty much everyone is predicting a crash up to and including the shoeshine boy. It makes me wonder if Armageddon is close to being priced in. In my view, by the time the shoeshine boy / social media poster is talking about it, the cycle has already turned.
I’m a contracyclical sort of guy having seen a few cycles, so am watching for the abject despair.
Mr Whippy said:
... People say you can't time markets, but I think you can get a pretty good idea just by reading social media these days.
In the 90s the internet wasn't anything like it is now. I'd struggle to be exposed to enough different sources of information and opinions vs what I can do today.
Ie, Ceefax or buying FT to check on stock price changes... today it's on my iPhone from around the world 24/7, futures and all the other jazz.
Then forums from bulls, to bears, to middle ground, to technicals, to opinion based, to everything else, vs talking in the pub in the 90s.
On that basis, I expect you have already made your fortune, but if not, you now know how to.
You are right that there is a far greater flow of information available now.
Before the 2008 crash, it was clear that excessive property lending was likely to end in trouble, but the problem was, no one knew exactly when.
Presumably, as you have described with all the extra information, you already knew in advance that there would be a big boom in the oil and tobacco sectors, from November 2021.
I had no idea that would happen, because I don't know how to time the market, but fortunately am an 'in the market' believer.
Talking about social media information, have you ever visited the LSE Aston Martin shares forum ?
Contributors there have now given up forecasting. I could not even see any mention of anyone losing money (share price fall now exceeds 95%), but they now just seem to spend their time sniping at each other.
Internet information, but what use is it ?
loafer123 said:
Interesting post.
In my view, by the time the shoeshine boy / social media poster is talking about it, the cycle has already turned.
I’m a contracyclical sort of guy having seen a few cycles, so am watching for the abject despair.
Like seeing advert on side of bus....'if your seeing crypto advertised here,maybe you should buy?'.....err probably not In my view, by the time the shoeshine boy / social media poster is talking about it, the cycle has already turned.
I’m a contracyclical sort of guy having seen a few cycles, so am watching for the abject despair.
dmahon said:
loafer123 said:
Interesting post.
In my view, by the time the shoeshine boy / social media poster is talking about it, the cycle has already turned.
I’m a contracyclical sort of guy having seen a few cycles, so am watching for the abject despair.
Pretty much everyone is predicting a crash up to and including the shoeshine boy. It makes me wonder if Armageddon is close to being priced in. In my view, by the time the shoeshine boy / social media poster is talking about it, the cycle has already turned.
I’m a contracyclical sort of guy having seen a few cycles, so am watching for the abject despair.
The NASDAQ people seem to be 'suggesting' that buying silver could be a good idea...
https://www.youtube.com/watch?v=cBTmCGe8YdU
https://www.nasdaq.com/articles/how-to-buy-silver
https://www.youtube.com/watch?v=cBTmCGe8YdU
https://www.nasdaq.com/articles/how-to-buy-silver
b
hstewie said:
hstewie said: Well the S&P 500 is now officially a bear too.
Nearly, it dipped it's toe. Now I don't understand this kind of stuff - but there was some chatter on Twitter about options (Option Expiration) expiring on Friday - which could explain the afternoon rally? https://www.bloomberg.com/news/articles/2022-05-19...
The FED do worry about the Stock market and not wholly because JP has lots of money. In the US, it is a store of current and future wealth and many "ordinary" people value their wealth by it, they hold equities in both 401k's and Roth IRA accounts, if Americans feel poor they stop spending but Biden and his cronies have thrown a spanner in the works by giving away free money.
the reason QE in 2008/09 didn't create inflation, well inflation like today was that the money went to people and places where they weren't spending it on consumption but on buying assets, this pushed the stock market up.
This time the inflation is from supply chain issues so the FED have to balance controlling inflation they can control with crashing the economy. The often unspoken issue is CB's relationship with government, if interest rates go high enough to control inflation everything will collapse not least government debt as we and the US cannot easily service the debt now let alone if rates went up dramatically.
The comparisons to the late 1960's and early 70's, whilst good for headlines are not really comparable, in that era, there was 144 months of highly elevated inflation, this time it 13 months and inflation is likely to start to flat line and then drop albeit slowly.
As for the S&P, I read in January they thought the FED would stop in at 3800, then I read 3500 and now 3100 , the options pricing out to November show lots of bets at 350 on SPY so 3500.
The problem is the the S&P is a "real" index as it does mirror the health or perceived health of America and so over the next year could definitely drip down more.
The Nasdaq is propped up by the big 4 or 5 but in deleveraging who really knows and as for Gold, again in a deleveraging, it could easily drop back to 1300 US/oz. There is a lot of Margin debt in the US system and I know from various forums, a lot of people in the US ( private speculators/investors) are still leveraged 3 or 4 times, it doesn't take much to create a liquidity crisis in these circumstances.
the reason QE in 2008/09 didn't create inflation, well inflation like today was that the money went to people and places where they weren't spending it on consumption but on buying assets, this pushed the stock market up.
This time the inflation is from supply chain issues so the FED have to balance controlling inflation they can control with crashing the economy. The often unspoken issue is CB's relationship with government, if interest rates go high enough to control inflation everything will collapse not least government debt as we and the US cannot easily service the debt now let alone if rates went up dramatically.
The comparisons to the late 1960's and early 70's, whilst good for headlines are not really comparable, in that era, there was 144 months of highly elevated inflation, this time it 13 months and inflation is likely to start to flat line and then drop albeit slowly.
As for the S&P, I read in January they thought the FED would stop in at 3800, then I read 3500 and now 3100 , the options pricing out to November show lots of bets at 350 on SPY so 3500.
The problem is the the S&P is a "real" index as it does mirror the health or perceived health of America and so over the next year could definitely drip down more.
The Nasdaq is propped up by the big 4 or 5 but in deleveraging who really knows and as for Gold, again in a deleveraging, it could easily drop back to 1300 US/oz. There is a lot of Margin debt in the US system and I know from various forums, a lot of people in the US ( private speculators/investors) are still leveraged 3 or 4 times, it doesn't take much to create a liquidity crisis in these circumstances.
DaveA8 said:
.... if interest rates go high enough to control inflation everything will collapse, not least government debt as we and the US cannot easily service the debt now, let alone if rates went up dramatically. ....
Don't know how US government debt is structured, but in the UK (leaving aside the Index gilts), a period of inflation does help the government by reducing the real value of existing gilts. Repay at maturity with devalued money.
The downside though, as public accounts income and expenditure are out of balance, it obviously means locked-in higher interest rates on every new issue gilt.
Jon39 said:
DaveA8 said:
.... if interest rates go high enough to control inflation everything will collapse, not least government debt as we and the US cannot easily service the debt now, let alone if rates went up dramatically. ....
Don't know how US government debt is structured, but in the UK (leaving aside the Index gilts), a period of inflation does help the government by reducing the real value of existing gilts. Repay at maturity with devalued money.
The downside though, as public accounts income and expenditure are out of balance, it obviously means locked-in higher interest rates on every new issue gilt.
superlightr said:
yes - is this how the govt plan to pay off the bill for Covid? Inflation and gilts?
The debt total was horrific, even before the Covid 19 spending.
The classic gilt for repaying with peanuts, was '3.5% War Loan Undated'.
Sold to patriotic citizens, to assist financing the First World War.
Initially 5%, but almost unheard of, was later reduced to 3.5%.
Pounds 100 then might have bought a house.
When interest rates dropped below 3.5% in the 21st century, it was of course beneficial for the government to repay this gilt.
The Pounds 100 repaid, probably bought one weeks grocery for a family. Forget the house.
Think the moral must be;
Be very wary, lending money long-term to the government.
Seems better to only invest in what we can understand.
Edited by Jon39 on Monday 23 May 13:17
Jon39 said:
The downside though, as public accounts income and expenditure are out of balance, it obviously means locked-in higher interest rates on every new issue gilt.
I watched an interview with Howard Marks and Joel Greenblatt and they were perplexed as to why the US had chosen to sell bonds with short maturities to fund Covid measurements especially as in 2019 Argentina had sold 50yr bonds at a couple of %.
DaveA8 said:
Jon39 said:
The downside though, as public accounts income and expenditure are out of balance, it obviously means locked-in higher interest rates on every new issue gilt.
I watched an interview with Howard Marks and Joel Greenblatt and they were perplexed as to why the US had chosen to sell bonds with short maturities to fund Covid measurements especially as in 2019 Argentina had sold 50yr bonds at a couple of %.
Quite a chunk of the UK government debt will continue at existing fixed rates, although this chart shows huge amounts with shorter maturities, so that will have to be refinanced at prevailing (assume higher) interest rates.
The index linked ones are of course at risk of being more expensive to service.
Mr Whippy said:
In about 10 days the Federal Reserve start letting bonds roll off their balance sheet.
14 days later they double tighten.
This is the most aggressive monetary tightening in the USA’s history.
S&P500 going to go up from here?
Stocks are priced against expectations. What has the S&P500 priced in on inflation and QT? I’m afraid at any point in time, no matter how bad things are, I take the view that there’s about a 50.01% chance of it going up next and a 49.99% chance of it going down.14 days later they double tighten.
This is the most aggressive monetary tightening in the USA’s history.
S&P500 going to go up from here?
Jon39 said:
Quite a chunk of the UK government debt will continue at existing fixed rates, although this chart shows huge amounts with shorter maturities, so that will have to be refinanced at prevailing (assume higher) interest rates.
The index linked ones are of course at risk of being more expensive to service.
I wonder what the longest debt period could be bought 100years? If we rolled existing debt into that setup securing security and likely reducing overall debt financing
The reason most new issuances are short dated, and this is rather simplistic, is that no one wants long duration assets, currently. And for this reason issuers would have to pay a much higher coupon on long dated assets. The short dated gilts have feared much better (smaller paper losses).
Second reason we issue short dated is linked to above in that rates are lower and Sunak must manage our cash flow-lower quarterly payments(interest). It’s also a sign he will be thinking about taxing to repay this debt ‘sooner’ that we might think.
On inflation reducing debt-that’s more a function of healthy inflation coupled with growth. We have rampant inflation. It only works if our tax receipts rise via growth and that isn’t looking likely.
Second reason we issue short dated is linked to above in that rates are lower and Sunak must manage our cash flow-lower quarterly payments(interest). It’s also a sign he will be thinking about taxing to repay this debt ‘sooner’ that we might think.
On inflation reducing debt-that’s more a function of healthy inflation coupled with growth. We have rampant inflation. It only works if our tax receipts rise via growth and that isn’t looking likely.
Welshbeef said:
Jon39 said:
Honestly WHY do we not have a very flat and long tail of debt profile. I wonder what the longest debt period could be bought 100years? If we rolled existing debt into that setup securing security and likely reducing overall debt financing
We need somebody working in the gilts market to answer, but as a pure guess, perhaps there is only limited demand to buy extremely long maturity gilts, at first issue.
There would presumably be some demand by annuity and pension providers, needing to create a match against their future liabilities, but would you lock into a 30 year cash equivalent at (say) a 1% return with a guarantee of inflation reducing your capital value ?
Edited by Jon39 on Tuesday 24th May 09:13
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