Down goes the Dow

My point about a lot of work is simply an observation that shorting this market involves razor sharp timing such that a profitable duration must be timed almost to perfection - which means, a lot of time out of the market awaiting re-entry points. That's great if one is dealing with lunch money and it's a akin to a hobby.

If, on the other hand, we are talking about outsized portions of an investor's portfolio, I contend that it has been and will continue to be much more profitable to be on the buy side, and do it with the bulk of one's reserves.

The growth multiples for the big tech over the last decade have always been out of whack. Nothing new there. We were in a sustained bull market, interrupted by Fed rate hikes, a short-lived banking scare, and fear of a looming recession, all of which are waning. So, investors growing emboldened again. If anything, the hints of a slowing economy in China would be my most prescient concern at the moment.

AI is a big deal and the tech world knows it. It's going to change everything, and is well on the way to tweaking how businesses do things. It bestows a competitive advantage on companies that can adopt it's inherent efficiencies. That may be a good thing or it may be bad (or both), but it's as real as can be.

well I'd say the Fab 7 are some of the largest, best-managed, most profitable companies on the planet. That's the thing that differentiates. I mean look at these. Tesla is a little sketchy but the rest are massively profitable, in the billions and billion.

Not fair to say they are just potential. They are very real, very large and very profitable.

Meta Platforms
Apple
Amazon
Alphabet
Microsoft
Nvidia
Tesla

A rare bull from last year! A year ago Piper Sandler said stocks would rally. Not sure what the timing set out was, and stocks did fall hard to new lows just a few weeks after the call, but then they did rally back. But they were very wrong about 2022 Jackson Hole...stocks tanked after that.

These guys now, in 8/23, have a 12/31/23 SP500 target of 4825 so they are still bullish.

Piper Sandler's Craig Johnson
Raising $SPX price target to 4,775. Market breadth washed out June, significantly reversed since w/a historically positive breadth thrust!
Market already discounted bad news, not anticipating anything incremental from Jackson Hole.

1:43 PM · Aug 24, 2022

I’m not sure you took my meaning correctly. By “unbounded potential” I meant, basically, unlimited potential for further growth. Whether such potential growth will be realized by all of them (or, how much, and for how long) is an open question, but it’s this growth potential that excites investors and draws in money, pumping demand and prices, rather than recent earnings that are far more important for relatively mature businesses that won’t double revenues over the next 1-3 years, say.

To hammer home my core point, the market isn’t always dominated entirely by unicorn companies that excite investors toward persistent irrational exuberance, making them willing to pay crazy multiples on the hope of outsized long term returns. But it has happened before, and to repeat myself again, I think the dot com boom (and bust) may be a decent exemplar in many ways.

Yea, and block chain was going to change the world. I think the skills to plumb a toilet will prove to be more useful. I could be wrong. :-)

Why tips, and what is your income assumptions based on?

I'm having fun with a possible short squeeze - I own a few shares of BBW - good earnings, stock up 18% today.

Hoping for a good squeeze. Small cap/micro cap/10% of the float is short, or 1.2 million shares, 6 days to cover all that at normal volume. Beta is 2, so this thing can move around a huge amount.

I don't know why people want to take the time and effort and risk errors to do bond ladders by themselves. Buy a short-term TIPS ETF and an intermediate-term TIPS ETF and then just let them sit. It's basically free, no fat-finger issues, no worries about bonds maturing when you are on vacation or sick, etc.

In the old days, when mutual funds cost 1% or more, then doing it yourself made some sense. But no more.

And probably this poster should consider iBonds too.

Maybe Jay Powell can plumb that NVDA turd? I don’t know?

I talked years ago about duration risk in Treasuries. I would think credit risk is increasingly an issue. Beyond the unhinged spending is demographics. One reason I prefer EM.

Still mostly in cash collecting 5.4% in savings. Argh!

well there's no credit risk, per se....I think what you are referring to is interest rate risk, that would cause losses if bond vigilantes insist on higher rates in the future.

Maybe your point is that in a ladder you do yourself...you will get your money back at each bond's maturity. Whereas in an ETF there is no maturity point...the matured bonds automatically roll back into the fund.

ah the classic different definitions of risk.

In stocks you can lose a lot of money

In savings there's no risk of losing a lot of money short-term but you run the risk of missing out on all those long term gains.

That is good advice for the average person in ordinary times. But that is not what the average person is doing, and these are not ordinary times.

No, credit risk. Why was there a recent downgrade? A reasonable person can see the money can never be paid back. It can be inflated away. So the value is less than face.

credit risk is the risk of not being paid back. US Treasury bonds of all sorts will always be paid back because the treasury can simply print the money to pay you back.

You are thinking of interest rate risk, in which your 4% bond becomes worth less because newer bonds are paying, say, 10%.

Or maybe you want to call it 'risk of negative real return after inflation.'

Bernanke changed the Fed accounting to held to maturity. However, the Fed is already holding bonds that show an over $1 Trillion loss. If it was a business it would be filing for bankruptcy protection. It is impossible for this money to ever be paid back thru tax receipts. Call that whatever you like, I call it credit risk, and I am not alone.