Current Affairs Stocks and shares and stuff

[SerenityNigh]

Honestly, I don't know if we are in a bear market or just a correction in an ongoing bull market. However, bear markets are typically characterised by rip your face off rallies. Until recently the market was very oversold and due a significant short term rally. Look at the 2000 chart of Nasdaq - bounced around like a yoyo.

The investing environment is still getting progressively worst for risk-on assets as inflation will squeeze margins and lower profits across the board. It is not the time to be investing very aggressively.

Maybe this is an elementary question with an answer that is well documented, but what has the rise of the index fund/retail (retirement fund) investor done to change cycles over the past 30 or so years? is this something that doesn't matter because large investors and compensated shareholders still outweigh retail? or is this a strategy that hedge funds exploit and so the tricks aren't readily shared with retail? (or is this nothing at all?)

 

[SerenityNigh]

How can you buy shares in a painting that is owned by, say, The Vatican or some billionaire? Or a museum?

Sounds and looks like Football Index.

I think the point is these pieces are fully purchased/owned by the holding company (and shareholders), then sold again to new investors for profit. So this is some combination of crowdfunding/venture capital and art dealers creating value or buying undervalued pieces and selling them for value. Or it's a newfangled pump and dump and will work until it doesn't work.

 

[evilwebby]

Maybe this is an elementary question with an answer that is well documented, but what has the rise of the index fund/retail (retirement fund) investor done to change cycles over the past 30 or so years? is this something that doesn't matter because large investors and compensated shareholders still outweigh retail? or is this a strategy that hedge funds exploit and so the tricks aren't readily shared with retail? (or is this nothing at all?)

It's a good question, and imho the truthful answer is that nobody really has a clue.

And it's not the only change that we've seen - the rise of derivatives, HFT, the Fed put, etc all mean that the market is always evolving. The market is always evolving.. you see charts of the S&P and Dow going back 100 years... and then realise that you couldn't even buy index funds until much more recently, so what was the point of taking an index's performance over 100 years when nobody is going to be able to capture that. Nothing works all the time, and if there is an anomaly then the market is always quick to arbitrage it away.
While index funds make it easy to buy stocks without the idiosyncratic risk of an individual stock or active fund manager, it doesn't change the basic human elements have been required to be a good investor - discipline, self-control, consistency, an ability to run with the herd but also knowing when to step aside from the herd. Master them and you will be a successful investor over the long term.

 

[evilwebby]

Stock and bond markets do not look good here.
Jeremy Grantham rang the bell with his dire warning that we talked about earlier; very few listened.
We have a new generation of too-young-to-know-better investors who are going to be humbled and wiped out by the market.

 

[Bruce Wayne]

Stock and bond markets do not look good here.
Jeremy Grantham rang the bell with his dire warning that we talked about earlier; very few listened.
We have a new generation of too-young-to-know-better investors who are going to be humbled and wiped out by the market.

Last year the S&P500 had around $2 trillion in cash on the balance sheet. There's going to be some pretty strong calls for buy-backs I suspect.

 

[evilwebby]

Last year the S&P500 had around $2 trillion in cash on the balance sheet. There's going to be some pretty strong calls for buy-backs I suspect.

It's a bit of a red herring.
Investors can see how much cash a company holds and factor this into the shareprice. What they do with that cash is up to management.

Companies have preferred to return cash via buyback, but actually I suspect that as interest rates rise there will be calls to shore up the balance sheet and pay down debt instead.

 

[evilwebby]

Everything happening is entirely consistent with a major bear market now unfolding

- long term trends have now reversed and path of least resistance is now down
- Transitioning economic paradigm
- Most junky and speculative stocks are getting smashed
- Crypto bubble is bursting
- Markets are technically weak but valuation-wise still expensive
- Sharp rallies are getting sold off again
- Too many people still believe in buy the dip mentality
- Cathie Wood still has a job

 

[catcherintherye]

Maybe this is an elementary question with an answer that is well documented, but what has the rise of the index fund/retail (retirement fund) investor done to change cycles over the past 30 or so years? is this something that doesn't matter because large investors and compensated shareholders still outweigh retail? or is this a strategy that hedge funds exploit and so the tricks aren't readily shared with retail? (or is this nothing at all?)

I'm no expert but on no particular order I would say:

1) the majority of funds are still managed by institutional investors.
2) I would say retail investors have driven up prices, to arguably their highest in history.
3) Currently the correction is funds/institutions selling versus retailer buyers buying. So it may be either delaying, or potentially lengthening the cycle

 

[catcherintherye]

Everything happening is entirely consistent with a major bear market now unfolding

- long term trends have now reversed and path of least resistance is now down
- Transitioning economic paradigm
- Most junky and speculative stocks are getting smashed
- Crypto bubble is bursting
- Markets are technically weak but valuation-wise still expensive
- Sharp rallies are getting sold off again
- Too many people still believe in buy the dip mentality
- Cathie Wood still has a job

We are only starting this bear market. If, as I suspected it would be, we are akin to a dot.com style crash, we have a long way to go. There was something like 15 rallies at that time. For a lot of people newish to investing, it is going to be very testing.

The sentiment has a long way to fall yet. I generally think we will be at the bottom, when nobody wants to touch stocks anymore. We are a long way from that moment.

For those on this thread, my advice would be to try and hold cash, accept you won;t get the bottom, keep your heads, as it may present a fantastic buy opportunity.

 

[catcherintherye]

Last year the S&P500 had around $2 trillion in cash on the balance sheet. There's going to be some pretty strong calls for buy-backs I suspect.

It's true that balance sheets are generally stronger than in a lot of recessions. However all I would add is that this is certainly not every company, and valuations have been insane for a long time.

 

[catcherintherye]

Really nasty selloff on Friday - tech stocks have begun a new downleg.

Nasdaq and Russell are in bear markets, same for many other indexes like the FTSE250

The FAANMGs are falling like dominos
- FB been smashed all year
- AMZN disappoints, gets smashed
- AAPL still strong
- NFLX smashed all year
- MSFT still strong
- GOOG not smashed, but looking weak now

Only 2 out of the 6 are still holding up - they just happen to be the 2 biggest companies in the world, so the broad indexes are holding up quite well, but when and if they start to weaken there'll be nowhere left to hide

I subscribe to the view that we will know this bear market is coming to an end, when investors finally give up on Apple. That's just a personal marker.

On a side note, I think FB is a fantastic business, and took up a position around 190. Will DCA down.

I spoke to someone recently re Netflix, and got asked about investing, and I said I'd wait until it was 60/70 range. I was laughed at. We will see. I think it gets to that point. Can see companies like Peleton/Palantir going below 1.

 

[SerenityNigh]

I subscribe to the view that we will know this bear market is coming to an end, when investors finally give up on Apple. That's just a personal marker.

On a side note, I think FB is a fantastic business, and took up a position around 190. Will DCA down.

I spoke to someone recently re Netflix, and got asked about investing, and I said I'd wait until it was 60/70 range. I was laughed at. We will see. I think it gets to that point. Can see companies like Peleton/Palantir going below 1.

Do you think AAPL is overvalued? If so, why/what's going on?
Do you think NFLX is a good buy for the future? Seems like it has a huge subscriber moat/brand. I know these things can change fast, but seems like they have a lot of intrinsic value once the market factors in future profits.

 

[carolinablue232]

Do you think AAPL is overvalued? If so, why/what's going on?
Do you think NFLX is a good buy for the future? Seems like it has a huge subscriber moat/brand. I know these things can change fast, but seems like they have a lot of intrinsic value once the market factors in future profits.

I think Apple is almost always a buy so I’ll leave that alone, but I left the Netflix train a while ago. There’s so much competition, their prices are out of whack, and their content really isn’t that great imo. What’s their differentiator now?

 

[Bruce Wayne]

It's true that balance sheets are generally stronger than in a lot of recessions. However all I would add is that this is certainly not every company, and valuations have been insane for a long time.

For some stocks maybe, but Alphabet's P/E ratio is currently 20, Microsoft 26, Apple 23. They're not in outlandish territory at all.

 

[Bruce Wayne]

We are only starting this bear market. If, as I suspected it would be, we are akin to a dot.com style crash, we have a long way to go. There was something like 15 rallies at that time. For a lot of people newish to investing, it is going to be very testing.

The sentiment has a long way to fall yet. I generally think we will be at the bottom, when nobody wants to touch stocks anymore. We are a long way from that moment.

For those on this thread, my advice would be to try and hold cash, accept you won;t get the bottom, keep your heads, as it may present a fantastic buy opportunity.

The difference with the dotcom era is that none of those companies were even close to turning a profit, whereas the big tech firms today are making huge sums. I can see Uber, Tesla et al getting panned, but not Google and Microsoft.