One random trader's own thoughts

[heavenskrow]

Technically we are at a sell level across the board. Especially for US Equities....vs Global markets.

Every bounce is getting sold with ferocity. Chop bore intraday into sell spam.
This market has been asleep for 10 years. Is it different this time?

When I met someone while I was traveling in a different country last year he told me bitcoin was going to 1 million.... Of course he was much older than I and had obviously more assets than me, but I knew what happens with mass hysteria...sure enough it peaked 1 month later at 20k and is trading at 3705 now. I wonder if he still remembers a young asian kid telling him what happened with all bubbles in history?

This current market has had an incredible run for the past 10 years. All corrections were bought aggresively. The question now is will this dip keep being fought? Are we topping and entering a gnarly crash to the likes of 1987 or a slow bear market ? The answer is I dont know, I just need to focus on the market in the present.

Things are getting excited, and im loving this crazy volatility. This is when I thrive, I hope it continues for a while.

 

[ktm]

I think the volatility will absolutely continue.

Just the last few days is a great example. You have an important meeting that took place with various interpretations and accounts of the meaning of what was said or what actually happened. The market goes from euphoric to downtrodden based on a few tweets and some expressed opinions.

Combine that with algorithms that dive into program selling when certain criteria are met and a fickle investing/trading public that largely hasn't seen real volatility or a market downturn and the table is set.

I don't see a huge downturn because there is a value element that underpins the fundamentals, but the road could be quite bumpy.

 

[SteveM]

Technically we are at a sell level across the board. Especially for US Equities....vs Global markets.

Could be, but it is important to remember something huge that doesn't get discussed nearly enough. If I own Euros and let them sit in a bank account, I am basically charged negative interest on my money. I literally wake up with less money in my bank account from one day to the next. Same story with Swiss Francs, same story in Japan.

Draghi came out last week and said that he expects 0% interest rates for the next 12 months, and Kuroda came out and basically implied the same thing for the BoJ. This creates a great tailwind for the USD - there is a sea of capital in the G7, and the USA gives it the best treatment right now.

Also, the idea that US treasury rates are going to massively spike while ECB/BoJ are sitting at 0% seems like a pipedream in my opinion. The ECB/BoJ, SNB, BoA are all functioning as a downward magnet on US treasury yields.

So investors are left with a choice - negative returns from most G7 cash, US treasuries at 30X earnings(coupons), German Bunds at 90X earnings(coupons), or stocks trading at around 20X earnings in the US, and even lower elsewhere.

Are we topping and entering a gnarly crash to the likes of 1987

I doubt it - check out a comparison of investment options today vs 1987:

October 19th, 1987:
30 Year treasury yields: 10.24%
S&P 500 P/E ratio: 15X (7.5% earnings yield)
CPI inflation: 4.2%

Today:
30 Year treasury yields: 3.32%
S&P 500 P/E ratio: 22X (4.5% earnings yield)
CPI inflation: 2.5%

In 1987, there was a compelling case to bail on US stocks for treasuries. The same cannot be said today. Just my opinion, not investment advice.

 

[tommcginnis]

Could be, but it is important to remember something huge that doesn't get discussed nearly enough.
...there is a sea of capital in the G7, and the USA gives it the best treatment right now.
...The ECB/BoJ, SNB, BoA are all functioning as a downward magnet on US treasury yields.

So investors are left with a choice - negative returns from most G7 cash, US treasuries at 30X earnings(coupons), German Bunds at 90X earnings(coupons), or stocks trading at around 20X earnings in the US, and even lower elsewhere.

I doubt it - check out a comparison of investment options today vs 1987:

October 19th, 1987:
30 Year treasury yields: 10.24%
S&P 500 P/E ratio: 15X (7.5% earnings yield)
CPI inflation: 4.2%

Today:
30 Year treasury yields: 3.32%
S&P 500 P/E ratio: 22X (4.5% earnings yield)
CPI inflation: 2.5%

In 1987, there was a compelling case to bail on US stocks for treasuries. The same cannot be said today. Just my opinion, not investment advice.

Terrific post.

 

[Ilgan]

Economic cycles are going from optimism to pessimism. Both are relatively normal cycles in every market-driven economy, but for how long those cycles are going to last nobody can be 100% certain. This trend is especially visible in equities, due some portfolio diversification is good to follow.