Maserati wrote:
Maybe you should drink more often, that was one of your best posts.
Needless to say, I’ve been drinking. ?
Ha, I see today is "Make a long post about the existential state of the market" Day
Maserati wrote:
Maybe you should drink more often, that was one of your best posts.
Needless to say, I’ve been drinking. ?
Ha, I see today is "Make a long post about the existential state of the market" Day
Maserati wrote:
Once again, buying equities is gambling, pure and simple. Always, by anyone, unless you buy a majority stake or have significant board influence.
Equities are just tools to realize profit or loss. Vehicles. And every tool has conditions under which it works. There is no such thing as intrinsic value, unless one is talking liquidation or insured value—and one never does. I have made lots of money using “overpriced” equities as tools.
Sell higher than you buy, by more than just covers your costs. Period. Dividends don’t count, boards can disapprove of them at any time—which you are seeing now.
This is a combo of corona and bad management. There is no question that pretty much every company could have been better-managed to better face a situation like we have. How about reserves? Companies maxxing out their revolvers after 2 weeks of nothing is insane. And there are a lot of them. Total mismanagement, total reliance on the system, total hand-to-mouth, total knife edge, total joke.
However, there is also no question that the corona response has effects above and beyond those of mismanagement. All things being equal, no corona = no max revolver, normal revenues, etc.
Some say if it not corona, it would have been something else...however, they have been saying it would be something for the past 10 years, and it never has been.
We crossed the rubicon after 2008. TBTF is a joke. The proper response would have been bankruptcy and re-organization with attendant losses, and possibly mandatory break-up of anything TBTF. A big 5 bank TBTF? Ridiculous. Many banks have failed throughout history. Not one of them is big enough to have been deemed a monopoly and broken up, so how could one be TBTF? If it failed it would only represent, say, 15% of “the banking system”.
But once we crossed the Rubicon, there was no going back.
But you can always use a stock as a tool to make money—even now. Fortunes have been made shorting this event. I have seen it. If you can’t use the right tool at the right time in the right manner, you reduce your odds of winning. Nobody is the master of all tools in all conditions—for example, I don’t short, I rarely do commodities futures, etc. I don’t play in sliding markets. Igy uses only certain tools, only in very particular and limited circumstances, which limits his success.
We all have our strengths and weaknesses.
I actually don't have a question. I just wanted to comment that this is an excellent post.... sums things up nicely... especially the first sentence.
Ghost of Igloi wrote:
“Now there's a literal Black Swan event and bears are breaking out the champagne ready to issue the biggest I Told You So ever, but the reality is that no one could have predicted this (because that's what Black Swan events are....) and stocks aren't falling because of corporate debt.”
Like most posters here you believe valuation doesn’t matter. Financial metrics over centuries says otherwise.
Financial metrics have changed even from just 10 years ago, let alone hundreds of years ago. "Value" is a moving target. The economy is changes a little everyday under normal circumstances, let alone events like now, 2008, or the dot com bust.
Yeah, we enter the modern battlefield with guns, but they sure as hell aren't muskets.
Another great Zerohedge article posted by Igy in December 2018.
Ghost of Igloi wrote:
https://www.zerohedge.com/news/2018-12-26/worst-yet-come-next-year
Oh, so is that why the five and twenty year S&P 500 Index returns are only 2%, which is less than Treasuries. Seems like this new metric isn’t working very well. I’ll trust the old fashion ones that have worked for about four thousand years. Thank you though.
Stanley Morgan wrote:
Another great Zerohedge article posted by Igy in December 2018.
Ghost of Igloi wrote:
https://www.zerohedge.com/news/2018-12-26/worst-yet-come-next-year
Boy have you lost a lot of money the last couple of weeks. Couldn’t happen to a more deserving piece of crap.
?
It seems to me that as long as demand < supply, stock prices will continue to fall. Could happen for a good long time.
Also enjoying the long posts! Thanks!
Politically, I see both sides. The virus is a wake-up call to focus more on goods & services that are actually needed, provided by efficient actors. Politicians pay themselves & their benefactors by subsidizing businesses that should fail.
I guess it’s always that way. I certainly believe we were horribly out of balance before the virus.
Factor in all the “buy on the dippers” getting burned. Fed having your back doesn’t seem to be working anymore. Who would’ve known?
Ghost of Igloi wrote:
Oh, so is that why the five and twenty year S&P 500 Index returns are only 2%, which is less than Treasuries. Seems like this new metric isn’t working very well. I’ll trust the old fashion ones that have worked for about four thousand years. Thank you though.
Even if you weren't cherry-picking dates, that's not how that works anyways. The dot com bust was a problem with valuations and that's when the whole "valuations" narrative really began. That was a good ol fashioned equity bubble fueled by investor confidence that any tech company could do anything and ever since then there's been a desire to predict and peg every future recession to that narrative (again, look at the number of people who really want CLOs to be like CDOs)
The Great Recession was a financial crisis caused by a run on credit markets. Now we're in some weird sh!t with a virus. None of them are the same kinds of crashes.
As for the current crisis; in my opinion this is going to be more like the events of the lead-up to the Great Depression. Consumer credit was way overextended, everyday people were getting in involved in and speculating excessively in the market, and households couldn't survive 2 weeks without an income.
jesseriley wrote:
Also enjoying the long posts! Thanks!
Politically, I see both sides. The virus is a wake-up call to focus more on goods & services that are actually needed, provided by efficient actors. Politicians pay themselves & their benefactors by subsidizing businesses that should fail.
I guess it’s always that way. I certainly believe we were horribly out of balance before the virus.
Hey, now you got it Jesse!
Unfortunately both parties have their hands out.
The Republican tax cut had to be the most stupid and poorly timed.
They tell the sheeple to stay in the market long term. That you can't time the market. Then we find out some senators were selling like CRAZY before the drop. Really disgusting.
Please rally Monday. Please.
Ghost, a rally would be good for you bears too. You could buy some cheaper puts with lower IV. Reload.
why can't we trade on weekend? wrote:
Ghost, a rally would be good for you bears too. You could buy some cheaper puts with lower IV. Reload.
IV is so high on puts that unless the market rallies like 15% in a day then it won't be worth it much
Racket wrote:
Ghost of Igloi wrote:
Oh, so is that why the five and twenty year S&P 500 Index returns are only 2%, which is less than Treasuries. Seems like this new metric isn’t working very well. I’ll trust the old fashion ones that have worked for about four thousand years. Thank you though.
Even if you weren't cherry-picking dates, that's not how that works anyways. The dot com bust was a problem with valuations and that's when the whole "valuations" narrative really began. That was a good ol fashioned equity bubble fueled by investor confidence that any tech company could do anything and ever since then there's been a desire to predict and peg every future recession to that narrative (again, look at the number of people who really want CLOs to be like CDOs)
The Great Recession was a financial crisis caused by a run on credit markets. Now we're in some weird sh!t with a virus. None of them are the same kinds of crashes.
As for the current crisis; in my opinion this is going to be more like the events of the lead-up to the Great Depression. Consumer credit was way overextended, everyday people were getting in involved in and speculating excessively in the market, and households couldn't survive 2 weeks without an income.
Agreed. You missed one point, the same dynamics that over extended consumer credit filtered to corporate balance sheets, fueling stock buybacks. That and market speculating on no lose trading drove valuations rivaling the Tech Bubble on a variety of metrics. Keep in mind that during the Tech Bubble dividend paying stocks (value) was ignored. This time as stocks moved higher corporations borrowed cheap to pay for raising dividends and buybacks. The mantra was a cash return to shareholders. It was really a huge fake of the masses to enrich management. If you are socially minded, this should be the focus of your outrage.
why can't we trade on weekend? wrote:
Ghost, a rally would be good for you bears too. You could buy some cheaper puts with lower IV. Reload.
I am really not a bear. Us value guys get accused of that, but it is really looking for better prices. Sure the volatility is great for trading. It is hard to imagine a bounce of more than 10% before rolling over again. The news flow is likely to be horrible for awhile. Perhaps some new drug that turns the tide. Then again, the economic damage is huge, and doubt whether it can turn on a dime.
But I see your point.
Fake futures tanking -650 points. We'll see tomorrow. Hoping for a miracle. No more pressers please.
I wish I had the courage to go short Friday. I seriously thought about it. I knew that testing skyrocketed around Thursday so even with no major change in infection rate, we would see a big jump in positive coronavirus cases by Monday.
On Thursday night, positive US cases stood at 13, 678. Today, Saturday, 48 hours later, it's 25, 493 as I type this. Worse, the US leapfrogged Germany, Spain, and Iran to be 3rd in positive cases behind only China and Italy. By Monday, we will almost certainly top 30,000 cases.
I expect the market to open down 1,000 on Monday. I'm a chartist and while a few stocks look like they might give a bullish Bollinger Band signal with another up day or two, everything else is still bearish.
I'm almost completely out of the market, except for Zoom Video (ZM).
Sometimes doing nothing is a much better choice. It does seem like politicians and the Fed are just throwing whatever they can at this crisis. The press conference, well......
Hard to imagine not hitting your downside target rather quickly. A week ago I would have thought, oh six months. Seems much more steep. Like the drop in employment and GDP. Maybe the realization a V-shape recovery very unlikely.