Winter Banter and General Disco 2

[w1pf]

newx in 5 panels..

[STILL N OF PIKE]

10 hours ago, DotRat_Wx said:

I bought into $dis. Just seems like a safe move. What do you think? Also for fun it seems like doge coin is due for a break out

I honestly have no idea with DIS, they saw a amazing run since Early November (for such a mature company) as long as their valuation is still fair seems ok. 

It's just such a key week. The market has broke upward every single time they have touched the bottom rail of this 11 month rising channel, but i mean that only last for so long and if that breaks to the downside..everything is going on sale. 

One note on Yields.. bc when they rise..they are driving the shakiness in stocks (i.e the repricing of stocks  to a less historic valuation) .  You saw the most bubbly stocks hit first...many EV makers...then Green Energy storage companies...really anyone who was  devoid of current earnings and deriving most of their projected revenue years  out in the future..(hyper growth stocks with no earnings/ Spacs) . There is so much liquidity in this market that you can track the last 8 months of bond yield movements (10 yr-30 yr bond) and when that yield was not rising  you saw those Hyper growth stocks (w zero or most of their future earnings in distant years ) rise very quickly...  then  January 6 or so ....https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx   you see a inflection point and yields rose quickly beginning the Pressure build up on the bubbly valuation stocks and that has hit EV Makers, Some Green energy sweethearts, and last week some bubbly e commerce sites like Shop/Meli/Etsy and many others and that was enough to start to sink the Overall Markets. 

edit. The fact that minimum wage and any amendment to that was Just  pulled from Stimulus bill removes a large driver on future Real inflation (inflation that could actually occur and not the pipe dream the market has been warning about for 15 years)  and could be a catalyst to see yields fall back . If that is the case the market resumes its rocket upward. 

[butterfish55]

Just got my first vaccine shot at Gillette. Was able to make the appointment by "accompanying" my 75+ year old parents to their 2nd shots. Very smooth operation, in and out.

[STILL N OF PIKE]

12 hours ago, Supernovice said:

We don’t agree on much but the debate is always cordial. I would put forth that rising rates are ++ for stocks. For instance see this from 6 yrs ago: http://econompicdata.blogspot.com/2015/03/fearful-of-rising-rates-stocks-have-you.html 

Also this is different from say 2018 when the curve was volatile on the short end, last week it was the long end...which to me signals economic optimism. Secondly, last week may have been exacerbated by CTA repositioning...the 2/5/10 yr butterfly trade moved 24 bps which is a true black swan event in that market- like literally a 1 in a billion year event if you calc it out. Down week, little flushing...I like the reset here.

Did 2018 have historic valuations . That is the issue . Did 2018 have “TINA” . Apples and oranges . I’m speaking for sectors that have record valuations .

Rising yields are horrible for speculative growth stocks w sky high valuations .When the earnings and dividend yield on SP 500 falls and Competes   With the yield on bonds people lose T.I.N.A (there is no other option  ) 

 Stocks that have most of their value from not current but future revenue from many years ahead are killed when  yields rise. It’s Really not a debate in any serious circles . Meanwhile cyclicals are favored (Banks / industrials / Real estate ) 

Today we see yields fall back combined with buy the dip being the most rewarding strategy of last 11 months and thankfully we spike 2%  . If valuations were not record breaking in several sectors then rising yields wouldn’t be such a potential issue In those areas . There is a case to be made yields fall back a tad more or remain steady from here, especially as wage increases/amendments  were taken out of stimulus bill today 

[HoarfrostHubb]

37 minutes ago, butterfish55 said:

Just got my first vaccine shot at Gillette. Was able to make the appointment by "accompanying" my 75+ year old parents to their 2nd shots. Very smooth operation, in and out.

When you did that, did they guarantee you a second appointment?

 

[butterfish55]

2 minutes ago, HoarfrostHubb said:

When you did that, did they guarantee you a second appointment?

 

yes.  I made my second appointment during the 15 minute waiting period after the shot.  They gave me a card with a "special" web site.  Got the email confirmation immediately for 3/29.   

[Great Snow 1717]

1 hour ago, butterfish55 said:

Just got my first vaccine shot at Gillette. Was able to make the appointment by "accompanying" my 75+ year old parents to their 2nd shots. Very smooth operation, in and out.

 

how far away was Cam when he threw the needle into your arm???

[DavisStraight]

18 minutes ago, Great Snow 1717 said:

 

how far away was Cam when he threw the needle into your arm???

He misses his arm and hit his foot.

[butterfish55]

Just now, DavisStraight said:

He misses his arm and hit his foot.

It went right into the arm of the guy next to me

[Great Snow 1717]

6 minutes ago, butterfish55 said:

It went right into the arm of the guy next to me

You should have intercepted it and ran it back for a TD!!

 

[Great Snow 1717]

Really clever of him to wear a nurse disguise while doing the vaccinations from 30 yards away....

[Supernovice]

10 hours ago, STILL N OF PIKE said:

Did 2018 have historic valuations . That is the issue . Did 2018 have “TINA” . Apples and oranges . I’m speaking for sectors that have record valuations .

Rising yields are horrible for speculative growth stocks w sky high valuations .When the earnings and dividend yield on SP 500 falls and Competes   With the yield on bonds people lose T.I.N.A (there is no other option  ) 

 Stocks that have most of their value from not current but future revenue from many years ahead are killed when  yields rise. It’s Really not a debate in any serious circles . Meanwhile cyclicals are favored (Banks / industrials / Real estate ) 

Today we see yields fall back combined with buy the dip being the most rewarding strategy of last 11 months and thankfully we spike 2%  . If valuations were not record breaking in several sectors then rising yields wouldn’t be such a potential issue In those areas . There is a case to be made yields fall back a tad more or remain steady from here, especially as wage increases/amendments  were taken out of stimulus bill today 

I mean I guess if you’re talking specific stocks...maybe? But here goes- not my research but it’s money:

From 1954-1960, the 10 year treasury yield went from 2.3% to 4.7%. In that time, the S&P 500 was up 207% in total (17.4% annualized).

Then from 1971-1981, rates went vertical, rising from 6.2% to 13.7%. This period included sky-high inflation and the brutal 1973-1974 crash, but nominal returns were still pretty decent, at 113% in total (7.1% annual).

From 1993-1994, rates shot up from 6.6% to 8.0%. The S&P 500 was still up nearly 12% in total despite some carnage in the bond market.

At the tail-end of the dot-com bubble, rates rose from 5.5% in 1998 to 6.5% in 1999. Didn’t matter. Stocks were up more than 55% (although that was followed by a 50% crash beginning in early-2000).

From 2003 through 2007, rates went from 3.3% to 5.1%. The S&P rose nearly 83% (12.8% annualized) before the onset of the 2008 crash.

And the latest rising rate environment saw the 10 year go from 1.5% in 2012 to 3% by 2018. Even with the mini-bear market at the end of 2018, stocks were still up 131% in total.

[Hoth]

11 hours ago, Supernovice said:

I mean I guess if you’re talking specific stocks...maybe? But here goes- not my research but it’s money:

From 1954-1960, the 10 year treasury yield went from 2.3% to 4.7%. In that time, the S&P 500 was up 207% in total (17.4% annualized).

Then from 1971-1981, rates went vertical, rising from 6.2% to 13.7%. This period included sky-high inflation and the brutal 1973-1974 crash, but nominal returns were still pretty decent, at 113% in total (7.1% annual).

From 1993-1994, rates shot up from 6.6% to 8.0%. The S&P 500 was still up nearly 12% in total despite some carnage in the bond market.

At the tail-end of the dot-com bubble, rates rose from 5.5% in 1998 to 6.5% in 1999. Didn’t matter. Stocks were up more than 55% (although that was followed by a 50% crash beginning in early-2000).

From 2003 through 2007, rates went from 3.3% to 5.1%. The S&P rose nearly 83% (12.8% annualized) before the onset of the 2008 crash.

And the latest rising rate environment saw the 10 year go from 1.5% in 2012 to 3% by 2018. Even with the mini-bear market at the end of 2018, stocks were still up 131% in total.

Thanks for posting these stats. You mentioned the nominal return for the '70s. Did the study include the real return, because I suspect that number isn't great. The early '80s to the present has been one long fixed income bull market, starting at the end of Volker's intense hiking campaign. As the cost of capital dropped, corporate bond issuance rose, magnifying leverage and returns on equity, so I suppose it shouldn't surprise us that stocks have generally outperformed in recent decades. There have certainly been hiccups, the S&L crisis, LTCM, the tech bubble. GFC was probably the first real shot across the bow regarding the dangers of keeping rates too low. I still contend that the central banks have overdone it since then, and are secretly panicked at the monster they've created. This may explain the ever-increasing frequency and size of direct intervention and incessant jawboning. With rates artificially jammed down, they have encouraged an unprecedented debt binge. The hurdle rates for investment is so low that mis-allocation of capital is rife. We see so many unprofitable businesses trading at outrageous valuations because of the expectation that they can just borrow to fund themselves indefinitely. We even see some businesses without revenue trading at multi-billion dollar valuations.  The sheer volume of debt has made the market increasingly sensitive to relatively small fluctuations in rates. A sustained rise, say precipitated by a real and lasting inflationary spike, could make for some real capital destruction. I don't envy those tasked with stewarding client capital in the coming decade. It's going to be a challenging environment.  

[TalcottWx]

On 3/1/2021 at 10:32 AM, butterfish55 said:

Just got my first vaccine shot at Gillette. Was able to make the appointment by "accompanying" my 75+ year old parents to their 2nd shots. Very smooth operation, in and out.

I get mine next week. I'm at risk. Very excited. I will get Moderna or Pfizer in Lawrence 

[NorEastermass128]

1 hour ago, Hoth said:

Thanks for posting these stats. You mentioned the nominal return for the '70s. Did the study include the real return, because I suspect that number isn't great. The early '80s to the present has been one long fixed income bull market, starting at the end of Volker's intense hiking campaign. As the cost of capital dropped, corporate bond issuance rose, magnifying leverage and returns on equity, so I suppose it shouldn't surprise us that stocks have generally outperformed in recent decades. There have certainly been hiccups, the S&L crisis, LTCM, the tech bubble. GFC was probably the first real shot across the bow regarding the dangers of keeping rates too low. I still contend that the central banks have overdone it since then, and are secretly panicked at the monster they've created. This may explain the ever-increasing frequency and size of direct intervention and incessant jawboning. With rates artificially jammed down, they have encouraged an unprecedented debt binge. The hurdle rates for investment is so low that mis-allocation of capital is rife. We see so many unprofitable businesses trading at outrageous valuations because of the expectation that they can just borrow to fund themselves indefinitely. We even see some businesses without revenue trading at multi-billion dollar valuations.  The sheer volume of debt has made the market increasingly sensitive to relatively small fluctuations in rates. A sustained rise, say precipitated by a real and lasting inflationary spike, could make for some real capital destruction. I don't envy those tasked with stewarding client capital in the coming decade. It's going to be a challenging environment.  

This decade looks tough. What’s your outlook in say, 31-34 years from now?  

[Baroclinic Zone]

1 hour ago, NorEastermass128 said:

This decade looks tough. What’s your outlook in say, 31-34 years from now?  

wgaf?  I'll most likely be dead. 

[NorEastermass128]

8 minutes ago, Baroclinic Zone said:

wgaf?  I'll most likely be dead. 

I forgot to add a smiley face to let you all know the question was posed in jest. Whoops! 

[STILL N OF PIKE]

3 hours ago, Hoth said:

 With rates artificially jammed down, they have encouraged an unprecedented debt binge. The hurdle rates for investment is so low that mis-allocation of capital is rife. We see so many unprofitable businesses trading at outrageous valuations because of the expectation that they can just borrow to fund themselves indefinitely. We even see some businesses without revenue trading at multi-billion dollar valuations.  The sheer volume of debt has made the market increasingly sensitive to relatively small fluctuations in rates. A sustained rise, say precipitated by a real and lasting inflationary spike, could make for some real capital destruction. I don't envy those tasked with stewarding client capital in the coming decade. It's going to be a challenging environment.  

Sometimes I wonder if novice reads my post 

I could care less about broad market returns and Decade long changes in interest rates in the 70’s and 80’s What in the .....Does that have to do with my point he highlighted  ..we had a business cycle back then ..I.E the Fed didn’t intervene ..never mind support assets with “all of its tools”. We will never see a fed funds rate of 3% or more in this current monetary system.. ever . 

Im taking about the 100’s If not thousands of companies with tiny or zero earnings trading at huge valuations thanks to Short term interest rates being pinned at zero and 10 year yield having been much less than SP dividend yield ..thus leading the mantra of TINA (there is no other option ) which has pushed valuations higher . This is not the atmosphere that was present in 70’s and 80’s ..it’s painful . I don’t need to repeat myself 5x is someone refuses to “get it “.

The reason why all these growth companies Are more significant this time is because the amount of disruptive technology in several sectors is driving the innovation That is replacing existing tech over the next 15 years . Robotics , automation , fintech, Gene sequencing , ev Battery storage , innovative mining extraction techniques and on and on .

You could probably just listen to the top money manager in 2020 (Cathy Wood) explain why her funds (very high growth / valuations) would be a prime example of stocks under the gun if we we enter a rising yield world (we won’t for long imo bc the fed would intervene ) And that would be a nice buying opportunity once you set aside the companies whose Extreme revenue projections are Actually met and who will scale up to be industry leaders .

[Hoth]

11 minutes ago, STILL N OF PIKE said:

Sometimes I wonder if novice reads my post 

I could care less about broad market returns and Decade long changes in interest rates in the 70’s and 80’s What in the .....Does that have to do with my point he highlighted  ..we had a business cycle back then ..I.E the Fed didn’t intervene ..never mind support assets with “all of its tools”. We will never see a fed funds rate of 3% or more in this current monetary system.. ever . 

Im taking about the 100’s If not thousands of companies with tiny or zero earnings trading at huge valuations thanks to Short term interest rates being pinned at zero and 10 year yield having been much less than SP dividend yield ..thus leading the mantra of TINA (there is no other option ) which has pushed valuations higher . This is not the atmosphere that was present in 70’s and 80’s ..it’s painful . I don’t need to repeat myself 5x is someone refuses to “get it “.

The reason why all these growth companies Are more significant this time is because the amount of disruptive technology in several sectors is driving the innovation That is replacing existing tech over the next 15 years . Robotics , automation , fintech, Gene sequencing , ev Battery storage , innovative mining extraction techniques and on and on .

You could probably just listen to the top money manager in 2020 (Cathy Wood) explain why her funds (very high growth / valuations) would be a prime example of stocks under the gun if we we enter a rising yield world (we won’t for long imo bc the fed would intervene ) And that would be a nice buying opportunity once you set aside the companies whose Extreme revenue projections are Actually met and who will scale up to be industry leaders .

You and I are generally on the same page, although as I've mentioned before I think Cathy is a solid candidate to blow up her funds at some point. She buys a lot of illiquid garbage, often taking 10% percent of the outstanding float. In doing so she drives up the price and her own returns. But she's supposed to offer daily liquidity, which she recently satisfied by selling her more stable liquid positions like Apple and doubling down on the illiquid stuff. I just think that could be a recipe for trouble if we have a period of sustained selling pressure, especially since there are now funds that mirror her portfolio almost exactly.

[STILL N OF PIKE]

8 minutes ago, Hoth said:

You and I are generally on the same page, although as I've mentioned before I think Cathy is a solid candidate to blow up her funds at some point. She buys a lot of illiquid garbage, often taking 10% percent of the outstanding float. In doing so she drives up the price and her own returns. But she's supposed to offer daily liquidity, which she recently satisfied by selling her more stable liquid positions like Apple and doubling down on the illiquid stuff. I just think that could be a recipe for trouble if we have a period of sustained selling pressure, especially since there are now funds that mirror her portfolio almost exactly.

I can see what you are saying w Wood. People do tend to put the top money managers on a pedestal .

Regarding tremendous difficulty allocating folks funds for the next decade I would probably focus on companies like GOOG / AMZN / AMD/NVDA and just keep an eye on competition and change allocations according To any large deviations in valuations.. as well as buy on  market dips but I don’t have that sort of capital (GOOG 2000$/share) and to be honest I would also enjoy a more aggressive active strategy 

[BuffaloWeather]

3 minutes ago, STILL N OF PIKE said:

I can see what you are saying w Wood. People do tend to put the top money managers on a pedestal .

Regarding tremendous difficulty allocating folks funds for the next decade I would probably focus on companies like GOOG / AMZN / AMD/NVDA and just keep an eye on competition and change allocations according To any large deviations in valuations.. as well as buy on  market dips but I don’t have that sort of capital (GOOG 2000$/share) and to be honest I would also enjoy a more aggressive active strategy 

You're not a fan of Wood? I think she is incredibly smart. I'm a pretty big fan. As you already mentioned history means nothing in this market. What has worked or happened in the past will not happen again. We will never see the type of hyper inflation we saw in the 80s with mortgage rates in the 13-15% range.  

[STILL N OF PIKE]

19 minutes ago, BuffaloWeather said:

You're not a fan of Wood? I think she is incredibly smart. I'm a pretty big fan. As you already mentioned history means nothing in this market. What has worked or happened in the past will not happen again. We will never see the type of hyper inflation we saw in the 80s with mortgage rates in the 13-15% range.  

Wood is Brilliant , I am a fan .She saw the innovative landscape taking shape and she saw a monetary policy very accommodating for young growth stocks in several sectors .

She is launching ARKX this quarter 

I own a Bunch of NPA , SRAC (likely to be included and spike when news hits ). If the Fed ever announced it was considering Yield curve control (capping 10 year yields ) these growth stocks would “go to the moon”

[Supernovice]

2 minutes ago, STILL N OF PIKE said:

Wood is Brilliant , I am a fan .

I do read what you write and respect your opinion. Which is why you’re like the only person I interact with on this board re: finance.

My point is and has always been that just to say rates rise= stocks fall isn’t correct. We all know the economy is a complex system, but our primitive brains can’t handle that, so we all get into this mind trap of constructing a neat narrative to explain everything. Will rates rising have a negative impact on short term stock valuations- probably, but to what extent and for how long? What other factors are at play...what’s dollar strength look like, what about the prices of raw materials and commodities? Rates are but one small piece of much larger puzzle.

[Hoth]

46 minutes ago, BuffaloWeather said:

You're not a fan of Wood? I think she is incredibly smart. I'm a pretty big fan. As you already mentioned history means nothing in this market. What has worked or happened in the past will not happen again. We will never see the type of hyper inflation we saw in the 80s with mortgage rates in the 13-15% range.  

Never is a long time. Did you see the ISM reading yesterday? Last time it was that high oil was $140 a barrel.

[MJO812]

No more mask mandate in Texas after the 10th. Businesses  will be fully open.

[HoarfrostHubb]

3 hours ago, MJO812 said:

No more mask mandate in Texas after the 10th. Businesses  will be fully open.

Individual counties can impose the mandate of cases spike

[TalcottWx]

We're almost certainly guaranteed to experience a third wave of less significance compared to the first two, imo. 

[Damage In Tolland]

4 hours ago, MJO812 said:

No more mask mandate in Texas after the 10th. Businesses  will be fully open.

Wish we lived there 

[PhineasC]

27 minutes ago, DotRat_Wx said:

We're almost certainly guaranteed to experience a third wave of less significance compared to the first two, imo. 

People are still talking about these "waves"?

It's over dude.

[PhineasC]

1 hour ago, HoarfrostHubb said:

Individual counties can impose the mandate of cases spike

People have been predicting massive spikes in deaths in TX and FL for a year now and they have yet to materialize. It might be time to just start moving on here. There is no reason to look at decisions made a year ago about masks and lockdowns and second-guess them. People made the best calls they could based on early info. But we need to look at the reality on the ground now and get on with things. The schools especially.