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Post by Norbert on May 15, 2022 5:48:37 GMT
@slooow Quoted from AC forum: "Tend to agree with FD here. "Not only does no one have any idea what will happen in the short term, no one knows how long for tech to bounce back. And why should it bounce back to a place it shouldn't have been? "I have bought some "tech" stocks I thought were reasonably valued over the last year, but then when I looked at it a bit more, I realized they actually seemed reasonably PRICED compared to the much higher PRICES the companies had been at. I sold them immediately after I bought them and am glad I did. Except for Google which is reasonably priced. We still don't know the discount rate, so how to value companies with cash flows so far out? Rhetorical question - everyone will have their own way. For me - mid 20s and above p/es in general are too risky a price for growth. I would be conservative when thinking how long before tech or the market "zooms" up. When I look at Amazon, I am thinking 10 years. Less, cool, but I am not planning on it. If you are younger, I would be buying tech right now, a bit at a time. There is a very good chance the market, led by growth, is going lower. "I believe plenty of managers de-risked - why? because everyone and his uncle knew multiples were going to compress - a lot. The Fed announced every little move it would make. No surprise. How quick before there is a new rotation to growth? What will be the catalyst? Nothing on the horizon now. Think back to when food was expensive - choosing margarine over butter, less beef, less eating out. Not a lot of international travel. Clothes were expensive. Will imports become cheap again? Are we globally contracting? Seems like it. How long will that cycle last? There is a lot of risk out there right now. I have pushed my timeline out as far as expected returns from growth - and international now. Hope I'm surprised." ----- Great post! I do wonder if your opinion about tech valuations might not apply to the stock market as a whole, at least to some degree, considering the rising bond rates? www.currentmarketvaluation.com/models/price-earnings.phpN.
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Post by anitya on May 15, 2022 7:58:55 GMT
"I believe plenty of managers de-risked"
I do not see that in the funds I come across, except may be PRWCX and DODBX. Most of them are acting like (or worse than) their benchmarks, even the fixed income funds which one would think could more easily translate the Fed speak / guidance compared to equity managers.
Do you mind sharing a few funds that had de-risked prior to 1/1/2022 or even after the March FOMC meeting?
It is interesting that a few fund managers that have given interviews predicting market actions did not position their funds in line with their public pronouncements. I learned from past experience not to rely on fund managers to save my investment.
I think we just had the normal periodic euphoria in the investment environment not entirely connected with the FED. Every generation goes through these cycles and it is very difficult to ask them to learn from the past. In this cycle, the most common hype I heard was that the most important valuation metric is TAM (total addressable market) and P/Es do not matter. Now, all of a sudden nobody is talking about TAM and everybody wants to know earnings or a variation of it. I am not outraged by what has happened or happening because every few years we go through this type of environment.
I am not forsaking growth funds or growth stocks. My largest equity OEF is PRWCX and according to M* portfolio tab, it is growth biased in 2022 (Blend in 2020 & 2021 and Value in 2018 & 2019).
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Post by Norbert on May 15, 2022 8:35:29 GMT
anityaYes, this may just be a correction to work off Tech sector euphoria. It's true that this kind of thing happens periodically. It's also true that quality value / dividend stocks are holding up pretty well; no technical chart damage' Or, it could be a more serious, multi-year bear market, especially if inflation gets out of control. The market has been flooded with monetary and fiscal stimulus, resulting in very high RE, bond, and equity prices. Geopolitical events are ugly. Green ideology is helping drive up oil & gas prices in Europe and the US. I tend towards a less benign outlook, but prefer to be wrong.
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Post by Deleted on May 15, 2022 12:57:01 GMT
De-risking - if I de-risked, I am certain a lot of fund managers did too. I did a quick google - plenty of talk about shifting from long duration assets to value. If you watch CNBC the talk by guests has been from growth to value for over a year. I am certain any fund overseen by Jeremey Siegel at WisdomTree de-risked. One little article - citywireamericas.com/news/fund-managers-remain-bullish-but-swap-tech-for-banks-says-boa/a2377243. Haven't we all been talking about this - less bonds is de-risking. Less long duration assets is de-risking. I'm not forsaking growth, but I'm buying it at reasonable prices - most of which still aren't there in my opinion. I'm sure avoiding bonds. I spent a year reducing and repositioning with the idea of multiple compression coming - for ALL assets - not just growth. Again - no one knows what the ultimate discount rate is - for the Nasdaq the p/e average has gone from the 40s to the 20s. Who knows if it goes to the 30s or low teens? Reducing exposure there is de-risking. If fund managers aren't doing it, they are taking on some risk. Woods of course is the extreme. High return unless she rolls snake eyes.
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Post by Chahta on May 15, 2022 12:59:26 GMT
Lest we forget the 2000 tech bubble, it took 10 years to recover for those that bought QQQ at the highs. I know.
I am sure there are differences now but I am not aware of them.
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Post by Deleted on May 15, 2022 13:07:41 GMT
@slooow Quoted from AC forum: "Tend to agree with FD here. "Not only does no one have any idea what will happen in the short term, no one knows how long for tech to bounce back. And why should it bounce back to a place it shouldn't have been? "I have bought some "tech" stocks I thought were reasonably valued over the last year, but then when I looked at it a bit more, I realized they actually seemed reasonably PRICED compared to the much higher PRICES the companies had been at. I sold them immediately after I bought them and am glad I did. Except for Google which is reasonably priced. We still don't know the discount rate, so how to value companies with cash flows so far out? Rhetorical question - everyone will have their own way. For me - mid 20s and above p/es in general are too risky a price for growth. I would be conservative when thinking how long before tech or the market "zooms" up. When I look at Amazon, I am thinking 10 years. Less, cool, but I am not planning on it. If you are younger, I would be buying tech right now, a bit at a time. There is a very good chance the market, led by growth, is going lower. "I believe plenty of managers de-risked - why? because everyone and his uncle knew multiples were going to compress - a lot. The Fed announced every little move it would make. No surprise. How quick before there is a new rotation to growth? What will be the catalyst? Nothing on the horizon now. Think back to when food was expensive - choosing margarine over butter, less beef, less eating out. Not a lot of international travel. Clothes were expensive. Will imports become cheap again? Are we globally contracting? Seems like it. How long will that cycle last? There is a lot of risk out there right now. I have pushed my timeline out as far as expected returns from growth - and international now. Hope I'm surprised." ----- Great post! I do wonder if your opinion about tech valuations might not apply to the stock market as a whole, at least to some degree, considering the rising bond rates? www.currentmarketvaluation.com/models/price-earnings.phpN. N - I am not a valuation expert, but understand the principles enough to make a considered opinion of others' analyses. As you know I respect Siegel's work. He currently feels the market p/e as a whole is undervalued for the long term (10+ years I would assume defines that). He thinks the equilibrium multiple (given I assume his estimate of the discount rate) is 20 and it is currently around 17. Is this the case? I don't know, but as a whole, I would think the market is fairly valued at this juncture - for the long term. I don't see fantastic bargains anywhere.
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Post by Deleted on May 15, 2022 13:29:01 GMT
Lest we forget the 2000 tech bubble, it took 10 years to recover for those that bought QQQ at the highs. I know. I am sure there are differences now but I am not aware of them. We just don't know. The last decade was manipulated financially. The big pro here is that the consumer is currently healthy, earnings good and employment full. Those are big pros. To me - that means when the discount rate adjusts, rather than having a full blown crisis, it might just be a garden variety recession. If we're fortunate. Hopefully, a better outcome. We just don't know. We do know long duration assets are more vulnerable and should be considered in any allocation or risk tolerance decisions. It killed me to sell 25% of my Amazon holdings a few months back. Now I wish I had sold 50% - but I did lecture myself that my timeframe is 10 years. FaceBook - I don't even care if the P/E is low - it's reducing expenses and cutting back on investment. Not good. Microsoft - it's CEO sold 50% of his holdings last year - that was de-risking! And a red flag to us all. And those are the good ones that sell something and are profitable! They are/were overpriced. I got out of my misguided dance with PYPL with my feet intact. Apple is 10% (correction - 9% now) of my portfolio. Originally bought as a dividend stock - lookout is at least 7 years before I start cashing it. Cashed 10% close to its high. It's in a taxable account or I might have cashed more. Point is - timeframe I have set is long. Values are just getting to normal for some. Some still have a ways to go. I agree 100% with what you wrote. We can't look at relative prices to make value decisions.
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Post by Chahta on May 15, 2022 14:01:10 GMT
I bought AMZN last year after the first big drop and sold out $3350 by dumb luck this year. Is it finally hitting the wall or taking a breather? Is it maturing and becoming a cyclical? No dividend makes it look vulnerable. Will it remain a tech growth stock? How big can it become since it is gargantuan already? Too many questions for me to think about so I don't own stocks.
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Post by steadyeddy on May 15, 2022 14:24:13 GMT
I bought AMZN last year after the first big drop and sold out $3350 by dumb luck this year. Is it finally hitting the wall or taking a breather? Is it maturing and becoming a cyclical? No dividend makes it look vulnerable. Will it remain a tech growth stock? How big can it become since it is gargantuan already? Too many questions for me to think about so I don't own stocks. Chahta, you mean you don't own individual stocks?
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Post by Chahta on May 15, 2022 15:02:00 GMT
steadyeddy, yes that was my only individual stock.
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Post by steadyeddy on May 15, 2022 15:40:22 GMT
steadyeddy , yes that was my only individual stock. Chahta, I do not own any individual stocks or bonds or anything individual -- all are funds whether ETFs, OEFs or CEFs.
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mikes425
Commander
generally happy in semi-retirement and dividend income-land
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Post by mikes425 on May 15, 2022 16:35:09 GMT
i have a small number of individual stocks - AMZN one of them which i sold right after the bleak earnings report - happy to at least have gotten out there -- just undecided about buying back in -wherever the bottom may be, or if the June split should be any consideration to this end one way or another. Now down about 600 a share from where i got out of it. Not too eager to add to equity at all right now...but seems it may be awhile before this thing goes anywhere. Seems like sub $2k would not be out of the question pre-split given the current state fear-mongering state of the markets. - This from SeekingAlpha today:
"More than half of traders surveyed by Schwab are expecting a significant correction in Q2 2022 and fewer than a third think the stock market will perform well.
"Overall, in the second quarter, market sentiment among traders is unquestionably skewing bearish," said Barry Metzger, head of Trading and Education at Schwab (SCHW)."
FWIW
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Post by Chahta on May 15, 2022 21:47:59 GMT
I am not motivated to buy stocks. I bought AMZN as a pure speculation after the drop from 3700 to 3000. I thought that was a drop! 3350 to 2000 was a doozy. But M* says the “fair value” is 3850.
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Post by anitya on May 15, 2022 21:53:19 GMT
Thanks for the link @sara. Just know I am not dismissive of what you say about the market environment - I only take exception to the statement that plenty of managers have de-risked because it gives an unnecessary hope to new investors reading this board about merits of buy and forget (hold) strategy, though that may not have been your intention. After reading the article, I am not convinced it is a good source - it was not properly reviewed before being published. I would corroborate from another source like M* before accepting the info / conclusions. Even then the survey may not have translated into managers actions. As I said, I have not seen too many funds that have performed materially better than their benchmarks to conclude that plenty of managers de-risked in time. That article is based on a survey of 374 professional managers managing $1.2T, which comes to about $3B per manager. Not a representative sample of funds where most investors in this board or at M* discuss invest (e.g., Vanguard, Fidelity, TRP, etc.). For example, TRBCX runs $160B. This is from the article -
"The survey, which canvassed 374 professional investors running $1.2tn of assets, suggested that global growth expectations have stabilized and pointed to ‘faith in the global reopening story’, said Michael Hartnett, chief investment strategist at the bank.
In January, just 7% of respondents said there would be a recession in the next 12 months, prompting them to increase their equity holdings to a net 55% as optimism around the global recovery rebounds.
Adding to the optimistic outlook is the belief that inflation will peak this year, with the majority, 56%, saying it remains a ‘transitory’ phenomenon and a net 48% of managers expecting lower consumer price inflation this year, the highest proportion since February 2009.
Three Fed interest rates hikes are being priced in this year, with managers now expecting the first rise in mid-April." There is no FOMC meeting in April and no reason to forecast an inter-meeting rate action.
I have no reason to doubt that Jeremy Segel has been advising his clients and probably running his own portfolio in line with his public pronouncements. Does not mean it is reflected elsewhere. Please let me know which Wisdomtree funds have fared materially better than their benchmarks.
I stand by my statement that investors should not rely entirely on their fund managers to protect their investments. There are too many reasons why the managers can't or will not - I shall leave that job to other posters.
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Post by anitya on May 15, 2022 22:08:27 GMT
anitya Yes, this may just be a correction to work off Tech sector euphoria. It's true that this kind of thing happens periodically. It's also true that quality value / dividend stocks are holding up pretty well; no technical chart damage' Or, it could be a more serious, multi-year bear market, especially if inflation gets out of control. The market has been flooded with monetary and fiscal stimulus, resulting in very high RE, bond, and equity prices. Geopolitical events are ugly. Green ideology is helping drive up oil & gas prices in Europe and the US. I tend towards a less benign outlook, but prefer to be wrong. No disagreement, especially when you had forecasted 2022 market environment 10 months ago and reminded us along the way. I agree that, with current cross currents, investors should be ready for things to get worse or better (with some luck).
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Post by Deleted on May 15, 2022 22:37:04 GMT
Anitya - that was just one quick article. Personally I'm okay with it. There are others. From T. Rowe Price - for the first time in 10 years in Sep 2020 started shifting from growth to value for some of their portfolios. I call that de-risking from long duration assets. As far as comparing performance - everything is bad right now and getting pulled down. It's a correction and irrational so measuring benchmarks doesn't seem real meaningful right now. www.troweprice.com/financial-intermediary/au/en/thinking/articles/2021/q3/how-far-are-we-in-this-value-rotation.html#Anyways - plenty isn't all and plenty doesn't even mean a majority. If you want to get into semantics - plenty probably means a material amount so that it makes a difference. really don't know, but I would sure think a lot of fund managers bailed out of some long duration assets and upped the value part of the portfolio. And plenty did not. As far as urging investors not to rely on fund managers - hallelujah. Completely agree. And also think everyone should be re-examining the long extolled benefits of indexing investing. As far as researching WisdomTree funds - I am still stuck on why de-risking equals beating benchmarks in a correction? I also don't know what the benchmark would be for a value fund - the S&P? I thought value was doing better. Another post with the same January 2022 BOA global manager survey from the article I first posted - www.hedgefundtips.com/january-2022-bank-of-america-global-fund-manager-survey-results-summary/Maybe the announcements of hikes can come after a meeting? Don't know. This survey comes out monthly. Others have shown managers are hoarding cash - markets.businessinsider.com/news/stocks/stocks-cash-global-growth-stocks-bear-market-fund-managers-survey-2022-3To me this is also de-risking.
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Post by anitya on May 15, 2022 22:48:02 GMT
@sara, Not to digress the thread, I forgot if you are primarily an individual stock picker or fund investor. Do you mind reminding me?
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Post by Deleted on May 15, 2022 23:00:57 GMT
@sara, Not to digress the thread, I forgot if you are primarily an individual stock picker or fund investor. Do you mind reminding me? Individual mostly with most international allocation in etfs and mutual funds. Anyways - I've written all I'm going to on whether plenty of fund managers have de-risked. We can differ.
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Post by anitya on May 15, 2022 23:04:17 GMT
@sara, I reluctantly increased my international allocation last year to under 5%; otherwise, I am US centric for both equities and bonds.. What %age of your PV is international?
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Post by anitya on May 17, 2022 7:46:19 GMT
MSFT is currently a $2T market cap company with 27.30 P/E ratio (per Yahoo Finance). MSFT announced today that it is going to double employee salary budget to retain employees and it will also award 25% more stock to employees. I can only imagine the P/E ratio is going to be higher (lower cash flows) than it would have been had there been no such additional employee compensation but this news had no effect on the company stock price today, incl after hours. I am not against paying their employees whatever MSFT thinks they need / want to pay but why are not shareholders adjusting the stock price?
As an aside, over the weekend I said to an executive at a tech company that the tech companies will start giving additional option / RSU grants to compensate the employees for the draw down of the unreasonably high stock prices. He chose not to talk about it. Tech companies did the same during GFC. The current salaries for junior staff in Tech are already off the charts.
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Post by uncleharley on May 19, 2022 23:57:50 GMT
FWIW: CSCO closed down 13% today on exceptional trading volume. Apparently the tech bubble is still bursting.
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Post by mozart522 on May 20, 2022 12:28:56 GMT
Lest we forget the 2000 tech bubble, it took 10 years to recover for those that bought QQQ at the highs. I know. I am sure there are differences now but I am not aware of them. How about very high inflation as a huge difference, and very low rates currently as another difference. 2000 multiples with nowhere to hide.
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Post by mozart522 on May 20, 2022 12:36:43 GMT
So far P has dropped a lot, as the Fed raises rates to kill demand, E will drop pushing the multiples back up. Current forward P/Es are an illusion, IMO, and not a reason to buy. A 14 year bull and very easy money may have caused many to believe there is no true reversion to the mean coming. This may just be the beginning.
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Post by win1177 on May 20, 2022 13:36:05 GMT
FWIW: CSCO closed down 13% today on exceptional trading volume. Apparently the tech bubble is still bursting. Anyone thinking of adding CSCO here? Win
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Post by uncleharley on May 20, 2022 16:47:32 GMT
Nope!!!
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Post by anitya on May 20, 2022 19:08:15 GMT
Looking at S&P 500 monthly returns from March 2020, P is up 65% while E is up only 54%. So, we may have at least another 7% to work off from here, putting the index at 3550, assuming no overshoot. Should we really neglect the basic laws of motion now?
I noticed today for the first time in a while that Treasury rates at every issue are down. The market projection is Fed may not be able to get the next 100 bps rate hike that they had already signaled - economy slowing down?
Doing nothing.
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Post by anitya on May 20, 2022 19:46:18 GMT
uncleharley, When charting, do I look at closing prices or intra-day prices? I am presuming for short term (1 yr or less), I should look at intra-day prices but for long term charts, I should look at closing prices but thought I should ask. Thanks.
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Post by uncleharley on May 20, 2022 20:26:30 GMT
uncleharley , When charting, do I look at closing prices or intra-day prices? I am presuming for short term (1 yr or less), I should look at intra-day prices but for long term charts, I should look at closing prices but thought I should ask. Thanks. The correct answer is Yes. I look at closing prices on daily charts for much of my work. I look at intra-week prices on the weekly charts for my 2nd look and a longer term view. I use intraday charts when my decision to buy or sell has been made but i have not yet executed the buy/sell. Intraday charts are tricky to use because they can have daily price & volume cycles that have no or very little relevance to the primary trend or pattern I am interested in. For more info you may want to start a different thread or go to the chart school at Stockcharts.com. It is free and they are better instructors than I am.
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Post by anitya on May 21, 2022 6:01:38 GMT
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Post by chang on Nov 10, 2023 17:42:21 GMT
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