How do you come to this conclusion if I may ask?
Gotta love ZERO RISK in the SP500 = $$$
- Thread starter makloda
- Start date
You're correct, Nine is from Canada and knows nothing about the US markets. March 2020 lows are a paper line which will be pierced. Fuck the wall, man. SP going to 666. Short the shit out of it, dude. Go on, perma-bear.
they won't raise enough.
even if inflation is 20% rates will be like 2-3%
they may rise only when national debt will deflate enough so debt payment are sustainable
let's see current debt around 30 trln and GDP 26 trln
over years debt payments are arounds 2% of gdp. they want to stay it this way
if rates needs to go to 10% that means 3 trln debt payment - which is 12% of gdp so gdp must go somewhere to the 100 trln+ before they can raise rates enough and even that we should hope inflation is 10% by then and not 20 or 30%
there will start printing again very soon
expect in the next years something like this
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I'm English ffs, not only do the Scottish and the Irish laugh about me, in this forum even the 'Muricans will laugh.
Jokes aside, I really wanted to hear his opionion, beeing still open minded for ideas.
I base my opinions on valuations, long term technicals, historical patterns, and assessing the current motivations of bigger players. For example :
1. SPX forward P/E is now 18-20 lower normal range and dropping.
2. Rarely will an index like SPX crash hard twice within 3 years ( maybe the 1930s ? ).
I attribute that to the first experience being fresh in investors minds; anyone who panic
sold in March 2020 regrets it now it cost them money.
3. There are a number of positive catalysts in play later this year that aren't priced in at all.
4. Sentiment is ridiculously negative in media and short term traders.
5. Known negatives ( eg inflation ) aren't yet market killers like Covid or a SubPrime Crisis.
6. There are some sectors like energy that are going to remain extremely profitable
for at least a year. Those will help mitigate deep drops in markets.
7. Every drop in QQQ I see the same patterns in the non-IT stocks I own. Irrational drops
in prices by weak hands followed by volume buying. Might be a TSX thing.
8. Cash/GICs are a negative paying asset this year, as likely are bonds. Crypto and Gold
are failing as a counter trade on QQQ drops.
9. People are genuinely cash rich right now; the amount of cash on the sidelines is huge.
10. There is a consumer demand waiting to be unleashed when people feel good.
11. IT has a lot of crap still but they have dropped so much that further drops won't
have much of a meaningful impact on SPX. In fact, stocks like GOOG/AMZN/FB are
getting close to the point they represent strong long term value. They can certainly
overshoot on the downside, but once the big buyers pile in it's over, and the big buyers
will pick spots when traders least expect it.
None of this suggests a 45-60% drop in SPX is coming on top of the 20% that already occurred. A lot of the downside is because SPX is 30% IT. I'm not saying there isn't potential for more downside, especially in weak IT stocks. I am referring to broader markets. Probabilities suggest bears are going to be disappointed to some degree the rest of this year unless they are strictly shorting IT and the market cooperates. And my forecasts are for lasting moves not 1-10 day outlier moves that get reversed in short order.
I find it hard to be confident in projecting market ranges for 2022 because of a lot of conflicting factors. Both bulls and bears have strong cases, in my estimation.
Potential bullish indications:
1. Supply chain disruptions due to electronic component shortages, still insufficient freight capacity, and China’s Covid related lockdown are likely to maintain or even increase pent up demand for manufactured items.
2. The Federal Reserve has shown itself to dynamically adjust liquidity according to market inputs fairly quickly and before announcing policy changes at its scheduled meetings. Recently, credit markets have increased its relative strength versus equity market rallies, either as a correction or potential quiet Fed liquidity providing. However, the Fed is officially scheduled to reduce liquidity in June.
3. Excessive intangible asset risk taking has seemingly be brought under control for now, seemingly allowing the Fed and investors some headroom.
4. Employment is still very strong. Strong employment combined with pent up demand as seen with huge amounts of backordered goods does not suggest a major economic downturn at this time.
5. Rural traffic patterns that includes consumer interest in rural property buying and surprising expansion by major corporations into small, if not micro markets suggest there is a significant demographic shift underway. This shift may be related to concerns over urban issues to includes crime, geopolitical tensions, cost differentials, and increased availability of telecommuting. The net effect may be construction and related demand remains relatively robust.
6. US equities has seen a significant correction and is roughly 5 ATR from its quarterly moving average, an area that historically has been a good area to buy stocks. Historical statistics, depending on major market index, suggest the odds of the index rising after a month is 62%.
7. High energy and basic metals prices should stimulate corporate expansion of the basic materials producers, adding to economic growth potential, all other things equal.
8. Technological progress tends to increase productivity and is a strong impetus for growth. There are so many industries benefitting from artificial intelligence with even individuals having access to capabilities that will only ramp up innovation even further. Increased productivity often means more efficient utilization of resources and new products. Increased productivity tends to reduce cost pressures as well.
The bears have their strong points as well:
1. Rising mortgage rates of about 200 basis points will a profound impact on home purchasing. Home buying is a major economic driver. Rising energy costs, sustained appreciation, and higher rates has caused housing affordability to plummet. Current demand in high cost areas may be temporary as it appears to be related to well qualified buyer’s fear of missing out due to possible perceptions of them fearing even higher rates. Mortgage refinancing, a significant source of income for many lenders, is likely to dry up for a while, pressuring that industry.
2. Consumer sentiment has been plummeting, increasing risks of consumers delaying major purchases. It should be noted the consumer discretionary sector has sold off particularly hard in the recent market selloff. If demand for durable goods falls, so does demand for manufacturing, raw goods, construction, and related services leading to increased potential of a recession.
3. Government, corporate, and consumer debt loads are relatively high with increasing debt service costs. This reduces capacity to handle an economic slowdown, increasing systemic risk.
4. A consideration of market valuation is discounting estimated cashflows by a long term interest rate. As interest rates go up, all other things equal, debt laden corporate bottom lines are reduced as well as valuation metrics of cashflow/rate for a huge double whammy. Further, relatively higher US interest rates have increased the value of US dollars versus most trading partners. This will increase competitive pressures on US manufacterers.
5. Sanction against Russia that led to the withdrawal of major corporations from the Russian market will lead to major charge-offs and elimination of related earnings stream for an extended period, further reducing affected company valuation propositions. There is potential for sanctions and retaliatory actions to expand to additional countries that support Russia, covertly or otherwise, increasing valuation risks.
6. Covid may still be a risk factor in spite of us being almost 2 1/2 years into the pandemic. For all the natural immunity and vaccinations, new variants and variants of variants increase potential of increased economic risk due to possible lockdowns or loss of productivity as people get sick and die.
7. Geopolitical risks include the increased possibility of WW III.
8. Demographics in most developed countries is unfavorable leading to lower productivity and potentially disruptive changes in capital allocation.
Based on the above ideas, perhaps the best answer to the question “Has the market bottomed” is “I don’t know”.
Potential bullish indications:
1. Supply chain disruptions due to electronic component shortages, still insufficient freight capacity, and China’s Covid related lockdown are likely to maintain or even increase pent up demand for manufactured items.
2. The Federal Reserve has shown itself to dynamically adjust liquidity according to market inputs fairly quickly and before announcing policy changes at its scheduled meetings. Recently, credit markets have increased its relative strength versus equity market rallies, either as a correction or potential quiet Fed liquidity providing. However, the Fed is officially scheduled to reduce liquidity in June.
3. Excessive intangible asset risk taking has seemingly be brought under control for now, seemingly allowing the Fed and investors some headroom.
4. Employment is still very strong. Strong employment combined with pent up demand as seen with huge amounts of backordered goods does not suggest a major economic downturn at this time.
5. Rural traffic patterns that includes consumer interest in rural property buying and surprising expansion by major corporations into small, if not micro markets suggest there is a significant demographic shift underway. This shift may be related to concerns over urban issues to includes crime, geopolitical tensions, cost differentials, and increased availability of telecommuting. The net effect may be construction and related demand remains relatively robust.
6. US equities has seen a significant correction and is roughly 5 ATR from its quarterly moving average, an area that historically has been a good area to buy stocks. Historical statistics, depending on major market index, suggest the odds of the index rising after a month is 62%.
7. High energy and basic metals prices should stimulate corporate expansion of the basic materials producers, adding to economic growth potential, all other things equal.
8. Technological progress tends to increase productivity and is a strong impetus for growth. There are so many industries benefitting from artificial intelligence with even individuals having access to capabilities that will only ramp up innovation even further. Increased productivity often means more efficient utilization of resources and new products. Increased productivity tends to reduce cost pressures as well.
The bears have their strong points as well:
1. Rising mortgage rates of about 200 basis points will a profound impact on home purchasing. Home buying is a major economic driver. Rising energy costs, sustained appreciation, and higher rates has caused housing affordability to plummet. Current demand in high cost areas may be temporary as it appears to be related to well qualified buyer’s fear of missing out due to possible perceptions of them fearing even higher rates. Mortgage refinancing, a significant source of income for many lenders, is likely to dry up for a while, pressuring that industry.
2. Consumer sentiment has been plummeting, increasing risks of consumers delaying major purchases. It should be noted the consumer discretionary sector has sold off particularly hard in the recent market selloff. If demand for durable goods falls, so does demand for manufacturing, raw goods, construction, and related services leading to increased potential of a recession.
3. Government, corporate, and consumer debt loads are relatively high with increasing debt service costs. This reduces capacity to handle an economic slowdown, increasing systemic risk.
4. A consideration of market valuation is discounting estimated cashflows by a long term interest rate. As interest rates go up, all other things equal, debt laden corporate bottom lines are reduced as well as valuation metrics of cashflow/rate for a huge double whammy. Further, relatively higher US interest rates have increased the value of US dollars versus most trading partners. This will increase competitive pressures on US manufacterers.
5. Sanction against Russia that led to the withdrawal of major corporations from the Russian market will lead to major charge-offs and elimination of related earnings stream for an extended period, further reducing affected company valuation propositions. There is potential for sanctions and retaliatory actions to expand to additional countries that support Russia, covertly or otherwise, increasing valuation risks.
6. Covid may still be a risk factor in spite of us being almost 2 1/2 years into the pandemic. For all the natural immunity and vaccinations, new variants and variants of variants increase potential of increased economic risk due to possible lockdowns or loss of productivity as people get sick and die.
7. Geopolitical risks include the increased possibility of WW III.
8. Demographics in most developed countries is unfavorable leading to lower productivity and potentially disruptive changes in capital allocation.
Based on the above ideas, perhaps the best answer to the question “Has the market bottomed” is “I don’t know”.
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I agree on most parts but not the cash on the sidelines. The 21 bull was fueled by buying on margin (look it up). The average Joe did take out loans on their house to buy. As rates go higher, cash becomes more scarce. I don't think we will se Covid lows either.
The more ppl expect a strong bear market rally, the more the likelihood it will do the opposite. I think we continue heading lower. I don’t see this as a doomsday scenario, for now at least, let’s not forget that fiat has no protection against inflation which is here to stay for the next hell knows how many years as the FED won’t keep raising to the needed level to control inflation, so just look for a bottom and invest in tech stocks that have solid financials as AI trend is just starting out.