Is this sell off only the beginning? What reminds me of 2000 is there were many stocks that were $300 and $400 that were cut in half and investors thought they had the deal of a lifetime and bought at $150 and $200 only to see their stocks go to $30 and many times even lower to “ unimaginable levels”. All while Wall Street pro’s on tv were telling everyone stocks were cheap.
Is this sell off only the beginning ?
- Thread starter gunner_trader
- Start date
Robert Morse
Sponsor
I was an Option Market Maker in 2000 trading on the AMEX floor. There were hundreds of technology companies trading with valuations well above $1billion with no product, no sales and lots of hype, blowing through cash as fast as they were given it. I do not see the correlation to today. I'm not providing any outlook on the market, as I do not have one.
There were also a lot of fiber optic and semi conductor companies with legitimate earnings that lost 3/4 of their value in 2000.
That being said, today is more of an artificially low interest rate/ easy money bubble that caused mass speculation in stocks with little or no earnings and good companies with earnings to trade at ridiculous valuations justified by a low rate environment and an accomodative fed. The easy money is over for now.
Even Greenspan in 2009 said its human nature to cause bubbles and we will have another.
That being said, today is more of an artificially low interest rate/ easy money bubble that caused mass speculation in stocks with little or no earnings and good companies with earnings to trade at ridiculous valuations justified by a low rate environment and an accomodative fed. The easy money is over for now.
Even Greenspan in 2009 said its human nature to cause bubbles and we will have another.
You have no real perspective on year 2000 markets. No wonder you were in panic yesterday. Go back and read everything you posted here end of year you'll see. Memories of March 2020 when poster "Schizo" said we'd never see 3390 again on the SPX in our lifetime because .. well ... remember Japan. If you are so sure of yourself, just sell a shitload of SPY calls expiring January 2023 with a strike price of 4800. Make sure you have margin and how can you lose ?
I think this is the beginning if the sell off.
Of course you do. How many times did you post that on your last account ?
Not sure about a crash, but it's a Fed-driven market. S&P and Nasdaq would be nowhere near current levels if Fed Funds was where they were in 2000. Buy when the Fed is easing, sell before they tighten. On top of that there has been an unprecedented monetary stimulus which shows up in corporate earnings. Take that away and well...
As true as this is, we are now stuck having to guess if they are just jawboning, or serious. We already knew they said they were going to speed up the reduction of bond buying, so I guess that meant by March they would have stopped. They also supposedly forecast 3 rate hikes, and that we knew as well before this past Wednesday.
But I think it was the fact that they are going to also be reducing their balance sheet, hence taking liquidity away, that got the market spooked. Its like the reverse of QE. So at first we had lots of QE. Then less QE, but still some. And instead of going to no QE, they are skipping this coasting stage and going right to tightening. At least this is how I understand it.
Of course what they end up doing is a whole different story, and will their position change if the market goes down 10%, 15%, 20%? So we technically still don't know if there will be any meaningful crash or just a 6-7% pullback. I bet they would love for the market to go sideways as they slowly take away the punchbowl. Its like the game of Jenga. Can they take enough blocks away without the whole thing falling down??
P = fcf / r - g
Ceteris paribus if r rises then P falls. Violence and depth of the move is based upon positioning, asset/sector rotation, and subsequent data. Fed started down this path in December, and meeting minutes were incrementally more hawkish.
If you pay attention and understand basic concepts like asset pricing (& sensitivities to macro factors) you’ll do ok. You won’t beat the market but you won’t be clueless (just slow, until you find edges & sources of alpha!).
Ceteris paribus if r rises then P falls. Violence and depth of the move is based upon positioning, asset/sector rotation, and subsequent data. Fed started down this path in December, and meeting minutes were incrementally more hawkish.
If you pay attention and understand basic concepts like asset pricing (& sensitivities to macro factors) you’ll do ok. You won’t beat the market but you won’t be clueless (just slow, until you find edges & sources of alpha!).