Very good post. I say this all the time. The game has changed, which is why I am bullish in 2021, but sooner or later, rates will go up and the feds will calm down. Gotta be prepared for this.
OT: Stock and Investment Talk
- Thread starter RU-05
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agree, 100%
it's why I say the bubble is not broadbased and it's a sector and one offs carrying the whole thing. Lots of signs to be alarmed about
The Nifty Fifty is before my time, but I’ve read a decent amount on that period and it rhymes a lot with today. Some businesses are so good and so promising that you can “invest and forget.” Prices don’t matter. I wonder how many of those businesses are still around today. Maybe those who did buy have forgotten.
The underlying pattern is almost always the same. Promising new businesses emerge and are deemed can’t miss. A new generation of investors who haven’t experienced similar periods explain that this time is different than the last time,. New investors can see nothing but upside while paying lip service to risk. They can’t see what could derail the current environment. That’s probably the insight experience teaches best. No one, or at least very few, can see the catalyst for a turn.
The justifications are always similar. As are, unfortunately, the inevitable outcome.
Risk is omnipresent. The higher the price and valuation, the less margin for error in performance and expectations. High prices magnify risk.
Forecasting the timing and direction of rate changes is very, very tough (I’d go as far to say impossible). Suppose the bond vigilantes return, making the Fed actions less potent. A rapid surge in rates to reflect increased US credit risk seems unlikely until you actually look at the governments financial statements. Let alone those prepared on an accrual basis.
Just be careful of those travel and hospitality businesses which have raised massive amounts of incremental debt to see them through. That debt will take a larger share of normalized EV, reducing the bounce in share prices with a rebound in conditions.
That's why I switched my SPY etf to RSP which is an equal weighted measure of the S&P, not top heavy.
Watch the 10-year treasury note which just recently breached 1%. Once you get to 1.5% there will be a shift to dividend stocks and to bonds. IMO, that is when a correction will begin. Not saying a bubble burst but at the least, a very healthy correction.
Some have done gangbusters and some have simply bust. One one hand you have:
Disney
Walmart
Pfizer
Texas Instruments
On the other you have:
SS Kresge
Polaroid
IT&T
Schlitz Brewing
Data General
Fixed it to repeat a conversation on this board about a new blue chip in 1999.
absolutely
the travel and hospitiality is not my normal space but I'll invest in the ancillary to that
On the other hand, leveraging up at historically low rates makes for a sharper rebound. Plus, smart management can use the leverage to acquire assets from dumb management at firesale prices.
I don’t worry about the 10 year at 1.5%, but I do worry that the Fed is actively seeking to stoke inflation. My bet is that they will succeed.
Look at the airlines, who issued a ton of debt secured by anything that was unemcumbered (including the rewards programs). If UA was worth $100 with $25 of debt and $75 of equity value pre COVID, is the $100 going to be much different when demand recovers? Maybe a little higher, but you now have $60-70 of debt against that value. More value goes to the debt holders, pending debt pay down. And I wouldn’t hold my breath for debt to be repaid.
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Saw some rather controversial opinions put out there with a couple on bloomberg (forget who) predicting 10-year treasury notes could hit 2% by years end, another gentleman basically called the guy a fool but curious what you think.
I really don't know. I do think it can go from 1% to 1.5% pretty quickly. After that, it really depends on a whole lot of factors both economically, socially and geopolitically.
This is my favorite crypto website. Check out the article and even more, listen the the 15 minute podcast at the bottom. The narrator terrific and thorough.
www.coindesk.com
Why Is Bitcoin Going Up, and Will It Crash Soon? What's Next as Price Doubles to $40K
Crypto pros and newbies alike are asking why bitcoin prices keep hitting new all-time highs, and if prices are due to crash. Here's what the experts say.
Instant replay?When Biden first came to Washington in 1973,the Dow was at its then all time high,closing at 1,051 on Jan.11.It was not to again to hit that level until 1983,dropping to about half of that figure in late '74.Should we look for a drop to around 15,000 by the mid-terms?
And if you know you have a check to write to the IRS in April? The puny rate of interest is better than a CD and you know all of it is going to be there when you write the check.
Interesting stuff, thanks for posting.This is my favorite crypto website. Check out the article and even more, listen the the 15 minute podcast at the bottom. The narrator terrific and thorough.
Why Is Bitcoin Going Up, and Will It Crash Soon? What's Next as Price Doubles to $40K
Crypto pros and newbies alike are asking why bitcoin prices keep hitting new all-time highs, and if prices are due to crash. Here's what the experts say.
Short term bills. Nothing with any duration risk. Speaking for myself, of course,
I looked this morning and a 3 month T-bill returned 0.07. A 3 month CD 0.03. Granted, peanuts.
Taxes are due April 15. That was my example, so 7 months doesn't work.
"...flexibility to withdraw your full balance if you need it beginning 7 days after funding...Easy online withdrawal with no penalty, beginning 7 days after funding."
That's a difference of $1.90 interest per $1000, and in return you take on more than $1.90 of liquidity risk.
Not really. Stocks and market conditions are exactly like the dot.com bubble. However, actions by the feds are protecting it. Once those actions end/change.....pop.
Just saying, enjoy the party for now, but be prepared for the pop (whether it happens later this year or next year).
Not really. I doubt Elon Musk will be on a TV show every week bragging about how rich he is like Mark Cuban. He'll ride it down without hedging.
Do you think BTC will pull back from 40k? Very quick run ups like this always seem to have a short-term corrections.
well, we agree on the illness but differ in the prescription.
Bill Miller says bitcoin becomes less risky the higher the price goes
"It gets less risky the higher it goes. That's the opposite of what happens with most stocks," Bill Miller said of bitcoin.
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