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[Jeor]

17 hours ago, Paxter said:

I don’t foresee the start of an extended bull run until central banks start cutting rates again. Hard to predict when that will happen, but I wouldn’t assume a 6-month window given the terrible starting point of sky-high inflation and ultra loose fiscal and monetary policy.

Perhaps a year from now? Until then, I’d expect us to stay within this year’s second-half trading range, with short-term fluctuations largely driven by technicals and sentiment. Certainly the current bounce has some legs to it as there aren’t many negative catalysts likely to be priced in this year.

But hey, great time to be invested. Peleton at $170 last year (!) was not. 

I think a central bank will blink in mid-2023, and this will probably start a chaotic period for central bankers worldwide which might be recognised in hindsight as the start of the next bull run. Of course, some think the more likely course is an overtightening mistake, potential financial crisis and further pain for equities. No one knows for sure and I guess that's why investing is a form of white-collar gambling!

I do think however that the speed and magnitude of the COVID recovery in the second half of 2020 has shown that markets and investors are now very quick to react to good news, so when the tide turns it's going to be pretty sharp. Choppy and chaotic, to be sure, big daily moves up and down, but probably in a more condensed time period than previously.

 

Edited October 31, 2022 by Jeor

[Paxter]

I guess it all turns on inflation data and the potential re-emergence of the Fed put. I don’t see any blinking so long as prices are roaring along like this and financial markets are orderly (which they have largely been so far, sans gilts and some dodgy crypto).

But I’m just as likely to be wrong on this, as I was in 2020 when I predicted a long-lasting recession.

 

Edited October 31, 2022 by Paxter

[Wade1865]

On 10/5/2022 at 6:09 PM, Wade1865 said:

TOTAL. Lower, from -9% to -14%.

TOTAL. Higher, -14% to -2%. I absolutely loved the last two weeks of volatility, but none of it made any sense given my lack of development here. The chaos won't last forever, so I'm taking as much joy from the situation as I can. Until this point, I was buying for the long-term, as an investor. Now that I'm retired with more time than I need, I'm transitioning into an investor-trader. It genuinely isn't about money, but mastery over a new game that replaced an old game, hahaha.

AMZN. Lower; +6% to -6%. After holding for a short period, I considered scalping an easy gain, but decided to hold and ride the decline. When it feels right, I'll double- or triple-down as it recovers, which I'm confident will take years from wherever it bottoms out.

T. Higher; -16% to -2%.

KHC. Higher; -6%. to +6%.

WBD. Higher; -58% to -32%. This gain wasn't due to a jump in stock price but a triple-down, which reduced my losses. It can't go much lower; and with David as CEO, who's making big changes including reorienting CNN's outlook, it should imporove.

***

Time-Weighted Return (TWR). Lower; from an all-time high of +25% to +19%; DJIA, -7%; S&P, -15%; and Nasdaq, -30%. Apparently, it's a true representation of performance. I never had time to understand the stock market, so when I recently learned about the TWR, it seems I've been beating the market since 2008; based on a reckless proto-macro strategy.

[Wade1865]

On 10/30/2022 at 8:08 PM, Jeor said:

Market bounce will depend on Fed easing the rhetoric on the December meeting.

Jeor -- today's rate hike of 75 BPS resulted in the DJIA jumping by 300 before ending with a drop of 500! In the past few days I've been getting a feel of potential moderation, and Jerome said he'd contemplate something lower for December. If executed, he'd follow this up with additional hikes. Thus, he'd keep the same Sooo ... the end-state will be higher than expected, and over a longer period of time? Confusing!

Edited November 3, 2022 by Wade1865
edits in red

[Wade1865]

On 10/30/2022 at 9:55 PM, Paxter said:

I don’t foresee the start of an extended bull run until central banks start cutting rates again...

Perhaps a year from now?...

Paxter -- that's what I'm feeling, and I hope I'm right. 6 months before cuts would be good, 9-12 months would be great.

[Jeor]

On 11/3/2022 at 2:11 PM, Wade1865 said:

Jeor -- today's rate hike of 75 BPS resulted in the DJIA jumping by 300 before ending with a drop of 500! In the past few days I've been getting a feel of potential moderation, and Jerome said he'd contemplate something lower for December. If executed, he'd follow this up with additional hikes. Thus, he'd keep the same Sooo ... the end-state will be higher than expected, and over a longer period of time? Confusing!

I think Powell's trying to walk a fine line between showing he's serious about inflation while also realising these monthly super-sized rates can't go on forever. I guess the compromise is that he might think of shrinking the size of the increases while keeping up the consistency of increases over a longer period of time to get to a higher terminal rate. This second phase of rate increases would allow more visibility over the effects of the initial phase of shock and awe increases.

The stubbornly low (from an economist's point of view, not from a general public point of view!) unemployment rate is posing a problem for central banks worldwide. An economic slowdown is not going to really be achieved if unemployment continues to stay that low, so it will be interesting to see how much they push back over that.

Meanwhile, I'm thanking my lucky stars I held onto enough of my downtrending energy utility stock which has just received a takeover offer at a 50% premium to yesterday's closing price. Happy days!

 

[Wade1865]

1 hour ago, Jeor said:

I think Powell's trying to walk a fine line between showing he's serious about inflation while also realising these monthly super-sized rates can't go on forever. I guess the compromise is that he might think of shrinking the size of the increases while keeping up the consistency of increases over a longer period of time to get to a higher terminal rate. This second phase of rate increases would allow more visibility over the effects of the initial phase of shock and awe increases.

The stubbornly low (from an economist's point of view, not from a general public point of view!) unemployment rate is posing a problem for central banks worldwide. An economic slowdown is not going to really be achieved if unemployment continues to stay that low, so it will be interesting to see how much they push back over that.

Meanwhile, I'm thanking my lucky stars I held onto enough of my downtrending energy utility stock which has just received a takeover offer at a 50% premium to yesterday's closing price. Happy days!

 

Jeor -- that was helpful, thanks; cleared up some of my confusion over Jerome’s intent.

It was interesting to see how the market reacted to the mid-terms, dropping significantly. And it will be more interesting to see how it reacts to the CPI tomorrow.

I don’t understand the action-reaction patterns yet, maybe there isn’t any, hahaha.

[Paxter]

I have to say I take perverse pleasure in watching these central bankers squirm. I’ve spent my entire career dealing with smug economists at the RBA and Bank of Canada…now they are looking a little foolish: first pumping too much liquidity into a roaring economy, now potentially tightening too hard, too fast in the inevitable overheating phase. 

[Jeor]

I think the US CPI print tonight will be relatively benign. CPI is usually reported as a year-on-year thing, and last year's October reading was the first of the high readings - so mathematically this CPI figure is likely to be the first smaller number we've seen in a while. Markets might like that.

Then again, month-to-month inflation readings have been notoriously difficult to predict recently.

[Paxter]

8 hours ago, Jeor said:

I think the US CPI print tonight will be relatively benign. CPI is usually reported as a year-on-year thing, and last year's October reading was the first of the high readings - so mathematically this CPI figure is likely to be the first smaller number we've seen in a while. Markets might like that.

Then again, month-to-month inflation readings have been notoriously difficult to predict recently.

Yeah it's difficult to predict. Analysts have been talking about inflation "peaking" and the "transience" of inflation for a loooooong time now (the latter was always odd as any economic condition can be viewed as "transient" in hindsight).

What actually matters for interest rates is the level of inflation as much as how much it is rising or falling over time. And the levels of both headline and core inflation remain well outside of appetite. So, no return of the Fed put for now. 

Edited November 10, 2022 by Paxter

[Paxter]

Slightly cooler print than expected. So yeah the market is going to rip here, tempered slightly perhaps by the crypto jitters that are spilling over into markets of late. As I’ve mentioned before, I’d expect a pretty good run for markets from the elections through to Jan and earnings season.

[Mr. Chatywin et al.]

I told you all crypto was fucking trash. 

Listen to your neighborly drug dealer who can see a scam from 10,000 miles away, and I haven't sold drugs to anyone in over a decade. 

[Paxter]

1 hour ago, Tywin et al. said:

I told you all crypto was fucking trash. 

Listen to your neighborly drug dealer who can see a scam from 10,000 miles away, and I haven't sold drugs to anyone in over a decade. 

Absolutely. In every long bull run we see these manic price rises or mis-pricing of risk for particular asset classes - whether it's tulips, dot-com companies, Japanese corps in the 80s, CLOs/CDOs or CDSs. This time it's crypto and NFTs.

All worthless garbage. And in many instances, it's regulators with egg on our faces for making money too easy and letting financial risk build up. 

For once, we got it right with unbacked crypto, as essentially no systemic financial institutions have meaningful exposures.

Edited November 10, 2022 by Paxter

[Jeor]

The crypto meltdown has been a long time coming and now that it's hitting some of the big exchanges, that's going to hurt. In the absence of a central bank or governing authority, crypto completely relies on trust in the exchanges; after all, if there's no reliable way of buying and selling, then the asset is worthless.

That weaker inflation print came as I thought. Pity I lacked conviction to act on my theory more decisively, I've still only been drip feeding my cash into stocks. Still, I expect it will be a bumpy (but still upwards) ride ahead; the Fed will have to remind everyone that inflation with a 7 in front of it is still very bad and needs strongly restrictive monetary policy.

[Wade1865]

From its peak in late 2021, Bitcoin has dropped at least 75%. Unbelievable! It could go back up, though … 

[Paxter]

59 minutes ago, Jeor said:

The crypto meltdown has been a long time coming and now that it's hitting some of the big exchanges, that's going to hurt. In the absence of a central bank or governing authority, crypto completely relies on trust in the exchanges; after all, if there's no reliable way of buying and selling, then the asset is worthless.

That weaker inflation print came as I thought. Pity I lacked conviction to act on my theory more decisively, I've still only been drip feeding my cash into stocks. Still, I expect it will be a bumpy (but still upwards) ride ahead; the Fed will have to remind everyone that inflation with a 7 in front of it is still very bad and needs strongly restrictive monetary policy.

I think there will still be many opportunities to get all in if that fits your risk appetite. S&P earnings will be nowhere near current expectations if we head into a full-blown recession next year or in 2024. And that means plenty of downward revisions, high VIX days and re-testing of the 2022 lows. 

As for Bitcoin, don't be too surprised if it falls below $10,000 as some institutional players start to unwind their bets. 

[Jeor]

1 minute ago, Paxter said:

I think there will still be many opportunities to get all in if that fits your risk appetite. S&P earnings will be nowhere near current expectations if we head into a full-blown recession next year or in 2024. And that means plenty of downward revisions, high VIX days and re-testing of the 2022 lows. 

Yes, I'm telling myself (as my investing rules page says) not to chase the market up. My cash levels are still relatively high (17%) but that's coming from a recent high of about 30% in the past three months, so I have still benefited from some of the recent uptick, so I can't complain. And in these times, holding a bit of extra cash (I'd normally have about 10%) seems prudent and not particularly bothersome given I'm now getting risk-free interest rates of 4%.

25 minutes ago, Wade1865 said:

From its peak in late 2021, Bitcoin has dropped at least 75%. Unbelievable! It could go back up, though … 

3 minutes ago, Paxter said:

As for Bitcoin, don't be too surprised if it falls below $10,000 as some institutional players start to unwind their bets. 

Crypto enthusiasts will always say there have been crypto winters in the past and then it's always retaken its highs. However, I think the rules of the game have changed now and it's a riskier bet than ever.

Firstly, crypto has never existed in anything other than a low-interest-rate environment (bitcoin having started in 2009). These conditions obviously created room for speculation and experimentation. But now, cash and bonds are not only a much safer store of value than crypto, they're also yielding non-zero interest rates which are probably headed to 5%. Secondly, ESG concerns have now started carrying weight and the environmental issue of crypto mining is not going to go away. Thirdly, the increase in hacking, cybercrime and the instability of exchanges raise real questions about the safety of crypto, not to mention the threat of regulation to address these, which always hangs like a Sword of Damocles.

[Week]

36 minutes ago, Paxter said:

As for Bitcoin, don't be too surprised if it falls below $10,000 as some institutional players start to unwind their bets. 

I had read somewhere that <16-17k or so was a break even point for a lot of miners that would be taken offline at those prices. If so, it would be interesting to see the reduction in energy consumption as a result.

[Paxter]

Who knows, maybe regulation will actually save crypto in the end. 

[Mr. Chatywin et al.]

2 hours ago, Week said:

I had read somewhere that <16-17k or so was a break even point for a lot of miners that would be taken offline at those prices. If so, it would be interesting to see the reduction in energy consumption as a result.

Ethically I feel bad to root for this, many good people who were misled will have their finances destroyed, but this needs to die and die fast. It was always a horrible idea, and when your biggest proponents are criminals, drug dealers and get rich quick folks, RUN!