Credit deflation and the reflation cycle to come (part 9)

[23rdian]

2 hours ago, Roger said:

Great post. I just wanted to pick up on this point, if I may. My gut would tell me that for every winner in the market, there's a loser. So for those 50% that fail to beat the market, there'll be 50% who succeed (ignoring spreads for the house).

So when you say it's "extremely difficult" to beat the market, are you saying that it's difficult for us lay people because the dice are loaded against us? I.e. the winners are largely insiders/ knowledgeable trading with large sums and we tend to be on the other side?

I'm starting to trade less now I think. I still like dividend stuff and indexes but omg I've bought some dogshit over the last few years. 

CLLN, JUP, HZM, POG, EVR etc

Not huge losses but it all starts to add up.

 

 

 

 

 

Edited April 19 by 23rdian

[Mandalorian]

6 hours ago, montecristo said:

I would disagree.  Good to have a different point of view.  I would call my self financially illiterate.  I read a lot from Buffett and and his below statement always sticks in my mind.  I followed it and I buy EFT funds.  I look at my portfolio today and it is up 30% - 40%.  

“By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals. Paradoxically, when ‘dumb’ money acknowledges its limitations, it ceases to be dumb.”

Thought outside the groupthink and circlejerk isn't welcome here.  Not going to stop me giving my thoughts though,

[Mandalorian]

6 hours ago, Errol said:

People were saying this about gold decades ago.

The difference is that gold is never rubbish (or seemingly these days, cheap). 

As JP Morgan supposedly said:  "Gold is money.  Everything else is credit."

[Mandalorian]

3 hours ago, Roger said:

Great post. I just wanted to pick up on this point, if I may. My gut would tell me that for every winner in the market, there's a loser. So for those 50% that fail to beat the market, there'll be 50% who succeed (ignoring spreads for the house).

So when you say it's "extremely difficult" to beat the market, are you saying that it's difficult for us lay people because the dice are loaded against us? I.e. the winners are largely insiders/ knowledgeable trading with large sums and we tend to be on the other side?

Investing isn't a "zero sum" game though.  There isn't one loser for every winner.

It's difficult to beat the market consistently.  Everyone gets lucky.  Some get lucky for a few years in a row and then get some genius complex.  Until the market smacks them in the face.

 

The only consistent beat the market winner I am aware of is the Renaissance Technologies Medallion fund which is full of quants and uses MASSIVE computing power, ultra, ultra fast fibre optic cables and split second automated high frequency trading that's beyond the reach of the likes of the average punter.  or even most investment trusts.

They say it has an average annual return of around 66% before fees and 37% after since 1988.

https://en.wikipedia.org/wiki/Renaissance_Technologies

No.  You can't join in.  Employees only.

[Plan-b]

Recent huge selling volume on the Mag 7 ETF, not a large fund in itself, more a show of poor sentiment for the popular tech stocks.

[Mandalorian]

23 minutes ago, Plan-b said:

Recent huge selling volume on the Mag 7 ETF, not a large fund in itself, more a show of poor sentiment for the popular tech stocks.

🤷🏻‍♂️ shrug

[DurhamBorn]

57 minutes ago, Plan-b said:

Recent huge selling volume on the Mag 7 ETF, not a large fund in itself, more a show of poor sentiment for the popular tech stocks.

All incredible companies,BUT at some point they will be valued at 10 free cash flow,all of them.So the question is only what will their max free cash turn out to be? Tesla has been cut in half already,but at todays price it needs to get to $50bill a year free cash flow,Nvidia needs to get to $200 billion free cash flow  ,Microsoft $300 billion etc etc.

 

[TNS]

1 minute ago, DurhamBorn said:

All incredible companies,BUT at some point they will be valued at 10 free cash flow,all of them.So the question is only what will their max free cash turn out to be? Tesla has been cut in half already,but at todays price it needs to get to $50bill a year free cash flow,Nvidia needs to get to $200 billion free cash flow  ,Microsoft $300 billion etc etc.

 

Funny money, how it continues is beyond me. But, then again, nothing surprises me anymore.

[goldbug9999]

7 hours ago, Errol said:

If people just followed Celente they would be fine. He's been buying gold for decades, and advising others to do the same. And gold still hasn't really got going yet.

Yeah so long as they ignored his monthly stock market crash predictions.

[goldbug9999]

1 hour ago, TNS said:

Funny money, how it continues is beyond me. 

Tech stocks have become a unsophisticated investors play on scarcity essentially meme crypto coins for people who don't like crypto, noone cares about P/E and whatever. And there is essentially an infinite supply of such "dumb money" courtesy of the Fed.

Edited April 19 by goldbug9999

[Lightscribe]

15 hours ago, geordie_lurch said:

Why don't you start your own thread @Mandalorian about S&P 500 trackers etc as you seem unable to read the room here and I'm sure I'm not the only one getting tired of reading your endless diatribe against what this thread is specifically here to discuss and the person who created it 

 

I don’t know, I miss Stuey. Doesn’t feel quite the same without his ramblings of slashed yields, interest rates cut to zero and property prices to the moooon. 

I think Mandalorian should stick around to see  how much US passives that are weighted in tech sell off in the forthcoming shitshow.

 

[BurntBread]

12 hours ago, Mandalorian said:

Thought outside the groupthink and circlejerk isn't welcome here.  Not going to stop me giving my thoughts though,

I don't think that is true really. For example @Frank Hovis, @WICAO, @Harley and @nirvana all have approaches to investing that differ radically from the main thread ideas (and two of them have views quite similar to yours, I believ). They are all regular(ish) and welcome contributors, and nobody else kicks up a fuss about being presented with contrary views.

I'm not saying you aren't welcome, but I think what I don't so much appreciate, is someone trying to take over the thread with lots and lots of posts, most of which are loudly telling other people what to do, rather than just talking about what the poster, himself, does.

Stuey was a bit like that when he joined the thread, telling everybody that it was much better to bet on football results, rather than this stock market malarkey. However, he did settle down once he had basked for a while in the attention he wanted.

[nirvana]

4 minutes ago, BurntBread said:

@nirvana all have approaches to investing that differ radically from the main thread ideas

sort of......I can be lucky at BTFD......but then i get carried away and can be a bit of a reckless gambler 

we all did well when oil etc dipped during convid but yeah sold that too early......

boss man @DurhamBorn is good at BTFD too....he calls it laddering though

dunno I've always liked the idea of 'buying value'........maybe that's why I refused to live in the UK a while ago  

be lucky brother bread

[BadAlchemy]

Not sure what all the fuss is about. There's the "Ignore User" feature. If someone believes someone else is derailing and/or missing the point of a thread then use it and filter them out... for a while or for good.

[jamtomorrow]

Follow up on "lenocracy" from JMG: https://www.ecosophia.net/the-secret-of-the-sages/

Spoiler: his suggestion (teased in a somewhat click-baity fashion) will seem quite familiar to the likes of us. Good read nonetheless.

"Billions upon billions of dollars a year are being spent to convince you that the only thing you can do with even the most pallid and pointless craving is run right out to the nearest available store, online or off, and waste money trying to satisfy it.  It’s essential to the scam that what you buy never actually satisfies the desire, or at best does so only for a very short time  To keep the system from imploding, you and everyone else have to be kept in a perpetual state of frustrated craving, forever buying things that don’t do what their marketing claims they will do."

[Frank Hovis]

32 minutes ago, BurntBread said:

I don't think that is true really. For example @Frank Hovis, @WICAO, @Harley and @nirvana all have approaches to investing that differ radically from the main thread ideas (and two of them have views quite similar to yours, I believ). They are all regular(ish) and welcome contributors, and nobody else kicks up a fuss about being presented with contrary views.

I'm not saying you aren't welcome, but I think what I don't so much appreciate, is someone trying to take over the thread with lots and lots of posts, most of which are loudly telling other people what to do, rather than just talking about what the poster, himself, does.

Stuey was a bit like that when he joined the thread, telling everybody that it was much better to bet on football results, rather than this stock market malarkey. However, he did settle down once he had basked for a while in the attention he wanted.

 

Yes, my main investments are low fee weighted trackers in developed economies, as long as you take a long term view on these you are always going to do very well IMHO.

Though I last year started up share trading again for fun so have had more interest in this thread as a result, though it's been mainly miners, baccy and defence sticks to date.

[Lightscribe]

41 minutes ago, BurntBread said:

I don't think that is true really. For example @Frank Hovis, @WICAO, @Harley and @nirvana all have approaches to investing that differ radically from the main thread ideas (and two of them have views quite similar to yours, I believ). They are all regular(ish) and welcome contributors, and nobody else kicks up a fuss about being presented with contrary views.

I'm not saying you aren't welcome, but I think what I don't so much appreciate, is someone trying to take over the thread with lots and lots of posts, most of which are loudly telling other people what to do, rather than just talking about what the poster, himself, does.

Stuey was a bit like that when he joined the thread, telling everybody that it was much better to bet on football results, rather than this stock market malarkey. However, he did settle down once he had basked for a while in the attention he wanted.

And opposing views should be encouraged. Some on here believe that the US $ will win out, flight to USTs etc, that the economy will continue to revolve around the $ for the foreseeable. 

I’m bollocks deep in gold miners at the other end of the spectrum, that we’re heading to what our beloved leaders believe in their WEF utopia.

Live and let live. Some of us will be right and some wrong. I hope I’m wrong. 

[RupertT]

44 minutes ago, Jesus Wept said:

The Nasdaq composite is down 7.6% from its recent ALL TIME HIGH of 16538 pts

 

It currently stands at 15282 pts - 7.6% 

 

The S&P is down - 5.6 % since its ATH

(-4.6% in the last month).

 

Has the crash started?

What is the definition  of a crash? 

 

 

 

 

 

10% generally taken to be a correction and 20% a crash 

[headrow]

4 minutes ago, RupertT said:

10% generally taken to be a correction and 20% a crash 

The ftse would need to crash about 40% from here to take out the covid low.

20% would take it back to around 6600 , roughly near the levels it traded at in 2014 when I was buying every month.

 

I've not bought any stocks for months now , even opened a cash ISA instead of sticking it my S&S ISA. I'm quite happy accumulation cash and leaving it as cash at the moment as I feel the market is ahead of itself. I think I've entered wealth preservation mode after spending the past 15 years in accumulation mode.

A nice deep correction would suit me fine too , but Ukraine didn't even provide that .

[wherebee]

39 minutes ago, Lightscribe said:

And opposing views should be encouraged. Some on here believe that the US $ will win out, flight to USTs etc, that the economy will continue to revolve around the $ for the foreseeable. 

I’m bollocks deep in gold miners at the other end of the spectrum, that we’re heading to what our beloved leaders believe in their WEF utopia.

Live and let live. Some of us will be right and some wrong. I hope I’m wrong. 

The other thing is to invest contrary to your personal income/work stream.  For example, if you work in real estate, and your main income depends on that, investing online in real estate linked businesses risks if the sector collapses you lose twice - your job and your investments.  

if the plates keep spinning for 3 years, I will continue to have 3 years of income from my clients and skills base.  If there is a fiat collapse/BK, consultancy work stops dead in my field, but my investments in gold miners should do pretty well.  

So for each individual, investing will have different drivers.

 

[baffledbyzirp]

16 hours ago, Roger said:

Great post. I just wanted to pick up on this point, if I may. My gut would tell me that for every winner in the market, there's a loser. So for those 50% that fail to beat the market, there'll be 50% who succeed (ignoring spreads for the house).

So when you say it's "extremely difficult" to beat the market, are you saying that it's difficult for us lay people because the dice are loaded against us? I.e. the winners are largely insiders/ knowledgeable trading with large sums and we tend to be on the other side?

Partly, but also the cost structure acts against individual investors via tax, market maker spreads, management fees etc. If you attempt to replicate the FTSE100 performance independently you fail because every middleman and the government, all of whom extract a fee on every transaction rather like a Tobin tax. Hence the popularity of ETFs and Trusts leading to market imbalance in favour of passivity.

The idea that the market is balanced and fair is fallacious because the winners dwarf the losers and belong to a different class. As @Harleypoints out, the market is simply a collective expression of human idiosyncrasies; greed, sloth, hope, recklessness, prudence etc. Really sophisticated participants such as high frequency traders or Jim Simmons have cracked the code. They recognise the shapes and patterns before they emerge and plunder the rest of us. Ref HFT it is simply a racket where our buy and sell signals are sold in advance to unscrupulous dealers who front run our trades. Don't get me started on dark pools, share buy backs or the self-interest of star investors such as Ackman and Icahn. Put simply the market is rigged and flawed; people on the inside have the knowledge, influence and power to move it in ways we could not imagine. Ladies and gentlemen I give you Nancy Pelosi.

One of my investing heroes is a woman called Anne Schreiber, a New York Jewish lady who died in 1995 at the age of 102 leaving 22 million USD to Yeshiva University. Schreiber had been retired for over 50 years following a career in the Internal Revenue Service as an auditor. At her retirement in the 1940s she had a pension of $3500 pa. The IRS never promoted Schreiber, nor did they recognise her legal qualifications.

Living in a rent controlled studio apartment for her entire adult life her outgoings were tiny. Schreiber never drew income from her shares preferring to reinvest to avoid tax. She used to attend shareholder meetings and fill her handbag with food and wore the same clothes throughout her adulthood. She never married or had kids. Her stock analysis was done at the library so that she didn't pay for news papers. When she died her bequest to Yeshiva University was exempt of tax as a charitable donation.

Perhaps this demonstrates a wasted life. I like to think that her ability to accumulate wealth and prevent her former employers getting their hands on it has contributed to the education and life chances of younger women who might otherwise been overlooked. Schreiber was certainly a Dosbodder cut in the fashion of @DurhamBornwho played the game according to their rules and beat the system. For me saying Fuck You to the people who are trying to rob us of what we have fairly amassed and prevent it being passed to the next generation is the whole objective. GLA enjoy the weekend. The sun is shining in North Yorkshire and not a cloud to be seen!

[Axeman123]

1 hour ago, Jesus Wept said:

Has the crash started?

We haven't seen the requisite mania yet IMO.

It could just be that even a contrarian like me has been so numbed to mania by the QE era that I didn't see it though. We haven't had the first Fed cut though, so I therefore find it hard to beleive we have seen the sentiment peak.

If anything indexes being off their highs and sentiment mixed is a prerequisite for a Fed cut, as they wouldn't want to cut into mania in an election year. In a way bearishness is bullish...

[Harley]

2 hours ago, BurntBread said:

For example @Frank Hovis, @WICAO, @Harley and @nirvana all have approaches to investing that differ radically from the main thread ideas

I don't know.  What are the main thread ideas?  Are the ideas stock/sector picks or investment approaches or both?  If I do/don't maybe it's only to a degree such as using basic techs to time buys and sells rather than just a story.

I come here to be stimulated with ideas, to stay fresh, and also to test my ideas (some stuff I start to write here doesn't even make sense to me!).  It's essential for me and to my performance to be open to challenging myself.  I'm  competent and confident enough to seek it.  I do it all the time and I do change.  Indeed, I've tried most approaches in the decades playing this game, some good, some bad, and some just at the wrong time.  I will always be on a journey and I'm not only content with that, I now relish it.

I also post to maybe stimulate and technically inform others.  To help, as I wish I had been given a head start on some ideas, whether I had taken them up or not.  I don't come here as a form of cheap penis extension, mental therapy, needed power trip, self confirmation, etc.  And I try to take great care to write thoughtfully, accurately, and properly and I apologise now for when I fall short.  So no cheap drive-by shiteposting, especially against someone who has generously taken the time and effort to politely contribute, regardless of content.

So I react badly to the toxic posters (as defined above).  Usually an ignore is sufficient but some are infuriating because their content provides an element of value but is surrounded by toxicity in the delivery.  I'm tempted to un-ignore them now and then.  Sadly it rarely ends well!  It seems such a waste but such is the way of things.

Edited April 20 by Harley

[Harley]

1 hour ago, headrow said:

I think I've entered wealth preservation mode after spending the past 15 years in accumulation mode.

This is where we are and it's been an interesting struggle to define what that should look like.  But we have been very thorough.  We would be an FAs dream, but doubt they would be ours!  We'll keep an eye on our friends journey with one though!

We initially went into dividend investing but are unsure about that.  The 2020 crash taught us a lesson, as did our work on reward:risk, etc.  The main reason we would hold stocks for yield is to diversify from the counterparty risks of holding funds (which are not to be ignored and where we have suffered in the past).  So we've been off looking for a "better" way.

We have a small equity allocation atm.  Say about 14%, mainly in those accounts we can't easily change.  We hold about 25% in hards, mainly PMS.  We sold almost all our bonds but are buying back corporates for the yield.  The rest is in diversified cash equivalents.  We will increase our equity positions when the basic techs go positive and may also increase our single holding of gilts held to maturity.

We are currently structuring things to provide the low volatility cash flows to meet "needs" (hence certain corporates and various money market funds), combined with a mix of allocated funds and trading to meet "wants" and maybe top up the "needs" to meet inflation, etc. 

By "allocated funds" we mean certain funds, the allocation of which we will flex (from say 2% to 5% each) depending on the intermediate term techs.  We were doing this quite well last year but have various learnings to incorporate such as the optimum definition of "intermediate" and granularity of the funds.

Above all, we want a quiet life with time to devote to other things.  We want to dabble and be stimulated but not for things to consume too much time.  So a few hours a day is fine, especially as we don't have a TV licence!

PS:  And here is a direct example of my comment about posting stuff to challenge, etc myself.... 

I read that back and could hear someone say "but what about the Permanent Portfolio you were so keen on?".  Blooming good question that had me off looking for an answer and doing some sums.

The bonds bit was a particular challenge.  A bit of thought and what we've done is combined the cash and bond 25%'s to deliver our "needs", probably plus a little bit more.  We'll hold some bonds in that if/where it adds value, but short duration only atm. 

So an investment in one post and I've usefully gained further clarity.

 

Edited April 20 by Harley

[Lightscribe]

1 hour ago, wherebee said:

The other thing is to invest contrary to your personal income/work stream.  For example, if you work in real estate, and your main income depends on that, investing online in real estate linked businesses risks if the sector collapses you lose twice - your job and your investments.  

if the plates keep spinning for 3 years, I will continue to have 3 years of income from my clients and skills base.  If there is a fiat collapse/BK, consultancy work stops dead in my field, but my investments in gold miners should do pretty well.  

So for each individual, investing will have different drivers.

 

I’ve recently moved departments and my new role is centered around crypto and digital currency. (Some on here know) so essentially I’m doing that very thing.