Good points, and of course there will be a reckoning, at some point. When has there not been? This has been an extraordinary run in the last 5-6 weeks, +17% on the SPX, much. much more in certain sub-indices. The latter are in for some serious volatility, perhaps as early as Monday. However, for many of the structural reasons you name, and many others, a major Bear is still some time away, perhaps next year. One of my pet theses is that the next real catastrophic financial crack-up will finally mark the shift to the Century of China. As usual, we'll see...
Lot's of writers cover the Buffet indicator or CAPE showing the market way over valued. What I really appreciate about QTR is exploring why it is still headed up. And why it could continue steaming forward. It all adds to the unpredictability of when the iceberg will be revealed. Really appreciate your perspective. Even when I don't agree the disclaimer never fails to make me laugh.
Bubbles precede adaptation. Wonder which of these high flying stocks will take a dirt nap like Sun Micro, Lucent, Nortel, World Com, and Palm? You think Polymarket will offer odds?
Great perspective. The melt up/gamma play will run its course. I’m holding stock positions with stops(yeah I know, they’ll run em sooner or later) and initiated quite a few long term oom puts on SOXX and others. I like where I am and may profit immensely if the break occurs. I believe sooner or later a break occurs along with the margin calls and plan to protect profits and profit from a break. JMO though. May be dead wrong 😂
Thanks for reading my mind and explaining that first chart in plain English. Before I could even go back and look at it again. THIS is where I get value from following you.
While it is always prudent to manage your finances on a routine basis it always comes back to Time Frame. If you were in the S&P 500 since January 1st of 2008 and you dollar cost averaged on a monthly basis (through today) you would have earned approximately 10.5% over the past 18 years...Now add in numerous other factors such as how old were you in 2008...when will you "need" these funds, etc.. This time frame included a few draw downs in the S&P 500....2020 and 2023 are earlier past examples...
I vividly remember certain CNBC types promising a new reality of forever gains in the "New Economy" some 20 yrs ago and the recent luminaires all over SM and the podcast circuit promising a life of liesure and crafting thanks to AI and Data centers. Same acript. Different actors. Another sales job. Although I do buy the downside negatives they are warning us about. But key stroke breast cancer cures? Got a lot of convincing for me with that jive.
I been looking for exit and lock opportunities.
If a 51 year old Tradesman is lying awake at night trying to figure out how to protect my equity I can only imagine what other entities are undertaking. There may be more highs to climb but im gonna do things differently this time.
To share some good news with you all.
Today I help my first born daughter move into her first place. Huge. My investments in my kids are by far my most treasured. 🍻
Just wait until the Fed starts lowering interest rates to please El Trumpo. The top 5-10% is totally disconnected from any semblance of market reality. The distortions could get much more worse. Eventually, the speculation will unwind. Wall Street wins and the average investors sinks like the Titanic.
For someone who started investing in 1956 as a 14 year with the earnings from my newspaper route, I have often been rd indeed by the market that history doesn’t repeat but is sure does rhyme. The differences from other periods of extreme speculation are many, but despite all the circuit breakers and attempts of the central bankers to back stop the market, there will inevitably be another crash , the major question for investors and central banks is whether it will resemble the 1929 crash and its aftermath or the flash crashes caused by Covid, SVB and tariff tantrum. If I ever find the time I will examine the similarities and differences in a Substack.
However, for now I agree that caution is warranted , risk control is paramount and especially that anyone who does not keep enough assets in highly liquid non volatile instruments to allow them to ride out a 3 to 4 year dispiriting bear market is in effect a speculator. There has been no time in my investment lifetime when the earning “ bulls can make money, bears can make money, but pigs will get slaughtered “ is more apropos. Riding the market roller coaster can be very sickening and cause you to jump,off at exactly the worst time.
For many reasons which I will not articulate here, I do not share Chris’ certainty, however, that individual investors { as distinguished from traders) , will fare worse than the “pros”and institutions whenever the correction occurs. Hubris often proceeds a great fall, and the pros are exhibiting increasing signs of hubris.
I have no idea of the timing, but in two respects this period most resembles the 1970’s in my market experience. The original oil price shock led to an inflationary spiral mishandled by the central bank, compounded by political dissension and corruption which eventually led to Nixon’s resignation, and the idea that there was no price too high to pay for really great companies then branded the “Nifty Fifty”.Of course there are differences, that is why history only rhymes.
However, the final similarity is striking. Despite overvaluation off the mega caps and this the averages in that period, below the surface 1975 to 1980 provided incredible opportunities for value investors who were patient and concentrated on companies with good managements and good prospects. And that is exactly my experience in today’s market. While I see many high multiple rapid current growth companies with significant uncertainties about their long term future, I am at the same time finding many compelling stories with good managements at reasonable valuations , a few so attractive that they even meet Ben Graham’s and Warren Buffett’s hurdles regarding a margin of safety and/or reasonably defensible moats and high returns.
Yes, there will be another severe bear market, but as long as I find sufficient opportunities to de-Loy my capital I wil wait for neither it or Godot. 🙂🙂
Common things are common except common sense. Chris, appreciate the insight. While market timing is a fool’s errand, it’s important to periodically rebalance your portfolio to match your risk tolerance. Good luck going forward.
Just talking out of my ass here as I'm no institutional investor or finance wonk. Just a regular guy trying to make sense of it all.
There are two counter arguments I'd like to propose. First, there is no discussion here of Iran and the wild distortions the conflict has wrought in the past 90 days or so. War is rife with uncertainties. How long will it last? Who will be the victor? How much devastation will result when it's over? How much will it cost -- and who will pick up the tab? Then add in the impact of 20% of the world's oil supply, along with natural gas and helium, being strangled and the daily up-and-down in the markets in direct correlation with the latest war update. On top of that, consider the excretable MSM reporting and bloviating on the topic, all but saying that Iran has already won the war and that everything is a disaster. Even the WSJ is on key with MS-Now and CNN. Proving once again that truth is always the first casualty of war.
Second, everyone seems to be doing backflips trying to outdo one another to conflate the A.I. revolution to the dot com mirage. As someone going on four decades in the tech industry I see these as two very different happenings, even if both rode wild bulls. Recall that dot com business evaluations were based on pure vapor. The *promise* of great revenues somewhere down the line, though with no actual business plan on file to describe how this might happen, was the norm. Valuations were based not on revenue but on the size of the subscriber base, a base which was built up though hype and expensive marketing campaigns involving "edgy" advertising. One dot com vapor farm would leverage the purchase of another vapor farm based on this subscriber base ("Look, we doubled in size over night!"), only to find that 2/3 of those "new" subscribers overlapped with their existing ones and the other 1/3 were just trash (bill.gates@me.com).
A.I. on the other hand is a real, tangible thing with real tangible revenues from selling real tangible hardware and software to businesses which cannot get enough of it because they are experiencing a true ROI through productivity gains. The range of sectors participating, from the copper mines which supply the raw materials to NVidia, TSMC, and yes, even Intel, to the data center buildout and its supply chain and labor inputs. The trope is always that silicon is ultimately a commodity product and any equity gains will be short lived. This may or may not stay true this time around. Look at memory prices, 4x - 5x increase in 6 months. Once the A.I. buildout starts to slow, there will still be a considerable backlog of consumer market to absorb outputs. At the very least, any downturn will likely be a few years out.
The largest downside I see is the rush to replace human capital with not ready for prime time A.I., getting ahead of the curve and reducing quality outputs while wreaking havoc in higher wage job categories. This is already happing as jobs for fresh out of college software engineers have all but evaporated. Why hire a college kid you have to train (and de-program) to do grunt work when A.I. can do it cheaper, faster, and better?
Anyway, just wanted to put this out there. Cheers.
Not based on earnings growth? S&P earnings projected to grow 25% this year. Anyone that compares this to the dot com bubble where most companies had little to no revenue and absolutely zero earnings loses credibility immediately.
Markets Top on Peak Euphoria and Bottom on Dismal Despair.....that NECCESSARY INGREDIENT is why "Retail" gets left holding The Bag. Markets do NOT top on "Numbers". Numbers are only a measurement of Peak Euphoria.....or Peak Despair, and further explains why Markets are Irrational.
The answer to the question on everyone's mind - "When Do Markets Top", is one I did not know while trading the 1999-2000 runup to the parabolic final top. But, I have learned that answer (at least the ingredients) from a scant few, very wise (and older) traders. It makes Perfect Sense....and here it is in more detail:
Markets Top when the last skeptic/naysayer has thrown his emotional log onto the fire and there is no more fuel left for that fire. That is why they are Irrational. At that exact fantastic peak in the Market the sky looks blue all around and everyone is Euphoric and nothing can seemingly go wrong. That is also the Peak of the Blazing Fire. From that top, comes the 1st step down because all parties have expended their Fuel, (exuberance) and abandoned their skepticism. It is also the last time we see that blue sky from the Mountaintop.
On January 3rd 2000, JDS Uniphase stock split 2 for 1. On that SAME Day they announced a future 2 for 1 split to take place March 10th, 2000. It would be the THIRD Split in 6-months. That's the type of Emotional Mania that defines coming Tops. "Numbers" will not define a Top. Peak Irrational Euphoria Will.
Good points, and of course there will be a reckoning, at some point. When has there not been? This has been an extraordinary run in the last 5-6 weeks, +17% on the SPX, much. much more in certain sub-indices. The latter are in for some serious volatility, perhaps as early as Monday. However, for many of the structural reasons you name, and many others, a major Bear is still some time away, perhaps next year. One of my pet theses is that the next real catastrophic financial crack-up will finally mark the shift to the Century of China. As usual, we'll see...
Lot's of writers cover the Buffet indicator or CAPE showing the market way over valued. What I really appreciate about QTR is exploring why it is still headed up. And why it could continue steaming forward. It all adds to the unpredictability of when the iceberg will be revealed. Really appreciate your perspective. Even when I don't agree the disclaimer never fails to make me laugh.
Bubbles precede adaptation. Wonder which of these high flying stocks will take a dirt nap like Sun Micro, Lucent, Nortel, World Com, and Palm? You think Polymarket will offer odds?
Great perspective. The melt up/gamma play will run its course. I’m holding stock positions with stops(yeah I know, they’ll run em sooner or later) and initiated quite a few long term oom puts on SOXX and others. I like where I am and may profit immensely if the break occurs. I believe sooner or later a break occurs along with the margin calls and plan to protect profits and profit from a break. JMO though. May be dead wrong 😂
Thanks for reading my mind and explaining that first chart in plain English. Before I could even go back and look at it again. THIS is where I get value from following you.
While it is always prudent to manage your finances on a routine basis it always comes back to Time Frame. If you were in the S&P 500 since January 1st of 2008 and you dollar cost averaged on a monthly basis (through today) you would have earned approximately 10.5% over the past 18 years...Now add in numerous other factors such as how old were you in 2008...when will you "need" these funds, etc.. This time frame included a few draw downs in the S&P 500....2020 and 2023 are earlier past examples...
Thanks Capt. Could not agree more.
I vividly remember certain CNBC types promising a new reality of forever gains in the "New Economy" some 20 yrs ago and the recent luminaires all over SM and the podcast circuit promising a life of liesure and crafting thanks to AI and Data centers. Same acript. Different actors. Another sales job. Although I do buy the downside negatives they are warning us about. But key stroke breast cancer cures? Got a lot of convincing for me with that jive.
I been looking for exit and lock opportunities.
If a 51 year old Tradesman is lying awake at night trying to figure out how to protect my equity I can only imagine what other entities are undertaking. There may be more highs to climb but im gonna do things differently this time.
To share some good news with you all.
Today I help my first born daughter move into her first place. Huge. My investments in my kids are by far my most treasured. 🍻
Excellent and money well spent imo
Just wait until the Fed starts lowering interest rates to please El Trumpo. The top 5-10% is totally disconnected from any semblance of market reality. The distortions could get much more worse. Eventually, the speculation will unwind. Wall Street wins and the average investors sinks like the Titanic.
The passive bid won't unwind
Melt Up. Money printer go brrrrr
For someone who started investing in 1956 as a 14 year with the earnings from my newspaper route, I have often been rd indeed by the market that history doesn’t repeat but is sure does rhyme. The differences from other periods of extreme speculation are many, but despite all the circuit breakers and attempts of the central bankers to back stop the market, there will inevitably be another crash , the major question for investors and central banks is whether it will resemble the 1929 crash and its aftermath or the flash crashes caused by Covid, SVB and tariff tantrum. If I ever find the time I will examine the similarities and differences in a Substack.
However, for now I agree that caution is warranted , risk control is paramount and especially that anyone who does not keep enough assets in highly liquid non volatile instruments to allow them to ride out a 3 to 4 year dispiriting bear market is in effect a speculator. There has been no time in my investment lifetime when the earning “ bulls can make money, bears can make money, but pigs will get slaughtered “ is more apropos. Riding the market roller coaster can be very sickening and cause you to jump,off at exactly the worst time.
For many reasons which I will not articulate here, I do not share Chris’ certainty, however, that individual investors { as distinguished from traders) , will fare worse than the “pros”and institutions whenever the correction occurs. Hubris often proceeds a great fall, and the pros are exhibiting increasing signs of hubris.
I have no idea of the timing, but in two respects this period most resembles the 1970’s in my market experience. The original oil price shock led to an inflationary spiral mishandled by the central bank, compounded by political dissension and corruption which eventually led to Nixon’s resignation, and the idea that there was no price too high to pay for really great companies then branded the “Nifty Fifty”.Of course there are differences, that is why history only rhymes.
However, the final similarity is striking. Despite overvaluation off the mega caps and this the averages in that period, below the surface 1975 to 1980 provided incredible opportunities for value investors who were patient and concentrated on companies with good managements and good prospects. And that is exactly my experience in today’s market. While I see many high multiple rapid current growth companies with significant uncertainties about their long term future, I am at the same time finding many compelling stories with good managements at reasonable valuations , a few so attractive that they even meet Ben Graham’s and Warren Buffett’s hurdles regarding a margin of safety and/or reasonably defensible moats and high returns.
Yes, there will be another severe bear market, but as long as I find sufficient opportunities to de-Loy my capital I wil wait for neither it or Godot. 🙂🙂
Keynes: "Markets can remain irrational longer than you can remain solvent."
....or until you capitulate and go Long......at the TOP.
Common things are common except common sense. Chris, appreciate the insight. While market timing is a fool’s errand, it’s important to periodically rebalance your portfolio to match your risk tolerance. Good luck going forward.
And then there’s Micheal Saylor
https://mail.blockworks.com/p/thursday-links-220e
Just talking out of my ass here as I'm no institutional investor or finance wonk. Just a regular guy trying to make sense of it all.
There are two counter arguments I'd like to propose. First, there is no discussion here of Iran and the wild distortions the conflict has wrought in the past 90 days or so. War is rife with uncertainties. How long will it last? Who will be the victor? How much devastation will result when it's over? How much will it cost -- and who will pick up the tab? Then add in the impact of 20% of the world's oil supply, along with natural gas and helium, being strangled and the daily up-and-down in the markets in direct correlation with the latest war update. On top of that, consider the excretable MSM reporting and bloviating on the topic, all but saying that Iran has already won the war and that everything is a disaster. Even the WSJ is on key with MS-Now and CNN. Proving once again that truth is always the first casualty of war.
Second, everyone seems to be doing backflips trying to outdo one another to conflate the A.I. revolution to the dot com mirage. As someone going on four decades in the tech industry I see these as two very different happenings, even if both rode wild bulls. Recall that dot com business evaluations were based on pure vapor. The *promise* of great revenues somewhere down the line, though with no actual business plan on file to describe how this might happen, was the norm. Valuations were based not on revenue but on the size of the subscriber base, a base which was built up though hype and expensive marketing campaigns involving "edgy" advertising. One dot com vapor farm would leverage the purchase of another vapor farm based on this subscriber base ("Look, we doubled in size over night!"), only to find that 2/3 of those "new" subscribers overlapped with their existing ones and the other 1/3 were just trash (bill.gates@me.com).
A.I. on the other hand is a real, tangible thing with real tangible revenues from selling real tangible hardware and software to businesses which cannot get enough of it because they are experiencing a true ROI through productivity gains. The range of sectors participating, from the copper mines which supply the raw materials to NVidia, TSMC, and yes, even Intel, to the data center buildout and its supply chain and labor inputs. The trope is always that silicon is ultimately a commodity product and any equity gains will be short lived. This may or may not stay true this time around. Look at memory prices, 4x - 5x increase in 6 months. Once the A.I. buildout starts to slow, there will still be a considerable backlog of consumer market to absorb outputs. At the very least, any downturn will likely be a few years out.
The largest downside I see is the rush to replace human capital with not ready for prime time A.I., getting ahead of the curve and reducing quality outputs while wreaking havoc in higher wage job categories. This is already happing as jobs for fresh out of college software engineers have all but evaporated. Why hire a college kid you have to train (and de-program) to do grunt work when A.I. can do it cheaper, faster, and better?
Anyway, just wanted to put this out there. Cheers.
Not based on earnings growth? S&P earnings projected to grow 25% this year. Anyone that compares this to the dot com bubble where most companies had little to no revenue and absolutely zero earnings loses credibility immediately.
Markets Top on Peak Euphoria and Bottom on Dismal Despair.....that NECCESSARY INGREDIENT is why "Retail" gets left holding The Bag. Markets do NOT top on "Numbers". Numbers are only a measurement of Peak Euphoria.....or Peak Despair, and further explains why Markets are Irrational.
The answer to the question on everyone's mind - "When Do Markets Top", is one I did not know while trading the 1999-2000 runup to the parabolic final top. But, I have learned that answer (at least the ingredients) from a scant few, very wise (and older) traders. It makes Perfect Sense....and here it is in more detail:
Markets Top when the last skeptic/naysayer has thrown his emotional log onto the fire and there is no more fuel left for that fire. That is why they are Irrational. At that exact fantastic peak in the Market the sky looks blue all around and everyone is Euphoric and nothing can seemingly go wrong. That is also the Peak of the Blazing Fire. From that top, comes the 1st step down because all parties have expended their Fuel, (exuberance) and abandoned their skepticism. It is also the last time we see that blue sky from the Mountaintop.
On January 3rd 2000, JDS Uniphase stock split 2 for 1. On that SAME Day they announced a future 2 for 1 split to take place March 10th, 2000. It would be the THIRD Split in 6-months. That's the type of Emotional Mania that defines coming Tops. "Numbers" will not define a Top. Peak Irrational Euphoria Will.