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Post by Chahta on Mar 21, 2023 0:00:46 GMT
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Post by steadyeddy on Mar 21, 2023 0:11:39 GMT
I personally think a final flush for this bear market is coming. Then it will be raining roses...
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Post by Chahta on Mar 21, 2023 0:27:49 GMT
I personally think a final flush for this bear market is coming. Then it will be raining roses... You and Morgan Stanley. The end will be ugly I hear. |
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Post by uncleharley on Mar 21, 2023 1:38:34 GMT
I had a tough time making sense out of the article. They seem to be talking about 2 things at the same time. Namely the economy and the stock market. The economy may very well have more pain and suffering before it turns up, However the stock market could surge ahead in a bull market that anticipates an improving economy. I question the validity of any opinion that does not consider that the stock market is a leading indicator of the economy and current economic conditions have little to do with current stock market conditions.
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Post by gman57 on Mar 21, 2023 2:20:21 GMT
From what I've read the market usually turns up before earnings bottom... are we there yet? I agree, the market anticipates an improving economy BEFORE it improves.
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Post by steadyeddy on Mar 21, 2023 2:45:26 GMT
I personally think a final flush for this bear market is coming. Then it will be raining roses... You and Morgan Stanley. The end will be ugly I hear. If uncle Powell stops rate hikes, it will cause the market to go up. To hell with inflation. |
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Post by Chahta on Mar 21, 2023 2:56:49 GMT
I had a tough time making sense out of the article. They seem to be talking about 2 things at the same time. Namely the economy and the stock market. The economy may very well have more pain and suffering before it turns up, However the stock market could surge ahead in a bull market that anticipates an improving economy. I question the validity of any opinion that does not consider that the stock market is a leading indicator of the economy and current economic conditions have little to do with current stock market conditions. I agree the market leads. I just put this out there for discussion. I have no idea if this guy is correct or not. But in the end the bear will end at some point. |
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Post by Chahta on Mar 21, 2023 3:00:51 GMT
You and Morgan Stanley. The end will be ugly I hear. If uncle Powell stops rate hikes, it will cause the market to go up. To hell with inflation. You may be right. But at some point inflation needs to go away. If it doesn’t I don’t see the market or economy working with 6% inflation for very long. This banking crisis was a surprise, at least to me. I wonder if it was a surprise to the Fed? If there are more failures to come it will start to become a little scary. Are we headed to 2008 again? |
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Post by Mustang on Mar 21, 2023 3:58:48 GMT
You and Morgan Stanley. The end will be ugly I hear. If uncle Powell stops rate hikes, it will cause the market to go up. To hell with inflation. Inflation is nothing to ignore. If you remember the 70s the Fed backed off giving inflation time to gather steam. After that there were several years of double-digit inflation.
Does any of this sound familiar:
"The easy money policies of the American central bank were meant to generate full employment by the early 1970s. Unfortunately, they also resulted in high inflation... The Great Inflation was blamed on oil prices, currency speculators, greedy businessmen, and avaricious union leaders. However, it is clear that monetary policies that financed massive budget deficits and were supported by political leaders were the cause... Many Americans were awed by the temporarily low unemployment and strong growth numbers of 1972."
"In 1973, inflation more than doubled to 8.8%. Later in the decade, it would go to 12%. By 1980, inflation was at 14%... People found it difficult and dismaying to plan for purchases from week to week. They had to make unpleasant choices about which needed items to buy... t would take another Fed chair and a brutal policy of tight money—including the acceptance of a recession—before inflation would return to low single digits. In the meantime, the U.S. would endure jobless numbers that exceeded 10%. Millions of Americans were infuriated and suffering by the late 1970s and early 1980s." www.investopedia.com/articles/economics/09/1970s-great-inflation.asp
In '59 through '65 inflation was below 2%. It hit 11.0% in '74 and started coming back down. The Fed thought it was under control but it wasn't. It again hit 11.3% in '79 and then a high of 13.5% in '80 followed by another double-digit 10.3% in '81 The worst years were 1973 through 1982 . www.usinflationcalculator.com/inflation/historical-inflation-rates/
Something that cost $1 in '73 ended up costing $2.05 eight years later. www.usinflationcalculator.com/ It takes a return of 10% per year for seven years to double an investors portfolio.
From 2009 through 2020 inflation was near or below 2%. It jumped to 8% last year. It has started down like it did in the mid-70s. I would really hate for it to jump back up. Unless inflation gets under control returns will be next to nothing in real dollars.
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Post by retiredat48 on Mar 21, 2023 5:02:01 GMT
If uncle Powell stops rate hikes, it will cause the market to go up. To hell with inflation. Inflation is nothing to ignore. If you remember the 70s the Fed backed off giving inflation time to gather steam. After that there were several years of double-digit inflation.
Does any of this sound familiar:
"The easy money policies of the American central bank were meant to generate full employment by the early 1970s. Unfortunately, they also resulted in high inflation... The Great Inflation was blamed on oil prices, currency speculators, greedy businessmen, and avaricious union leaders. However, it is clear that monetary policies that financed massive budget deficits and were supported by political leaders were the cause... Many Americans were awed by the temporarily low unemployment and strong growth numbers of 1972."
"In 1973, inflation more than doubled to 8.8%. Later in the decade, it would go to 12%. By 1980, inflation was at 14%... People found it difficult and dismaying to plan for purchases from week to week. They had to make unpleasant choices about which needed items to buy... t would take another Fed chair and a brutal policy of tight money—including the acceptance of a recession—before inflation would return to low single digits. In the meantime, the U.S. would endure jobless numbers that exceeded 10%. Millions of Americans were infuriated and suffering by the late 1970s and early 1980s." www.investopedia.com/articles/economics/09/1970s-great-inflation.asp
In '59 through '65 inflation was below 2%. It hit 11.0% in '74 and started coming back down. The Fed thought it was under control but it wasn't. It again hit 11.3% in '79 and then a high of 13.5% in '80 followed by another double-digit 10.3% in '81 The worst years were 1973 through 1982 . www.usinflationcalculator.com/inflation/historical-inflation-rates/
Something that cost $1 in '73 ended up costing $2.05 eight years later. www.usinflationcalculator.com/ It takes a return of 10% per year for seven years to double an investors portfolio.
From 2009 through 2020 inflation was near or below 2%. It jumped to 8% last year. It has started down like it did in the mid-70s. I would really hate for it to jump back up. Unless inflation gets under control returns will be next to nothing in real dollars.
OK folks...but remember investing 101. You get through high inflation periods by owning the means of production...aka businesses...aka companies...aka stocks...aka stock mutual funds/ETFs. Bonds way underperform. My accumulation of stock funds in the 1970's enabled me to retire by 1993. R48 |
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Post by Deleted on Mar 21, 2023 5:29:28 GMT
I'm kind of stuck on the historical sequence of recession following inverted yield curve by 12 to 18 months. We are right at 12 months.
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Post by archer on Mar 21, 2023 6:01:03 GMT
retiredat48 , The early-mid 70's provided some good opportunity for buying stocks for an accumulator, but for retirees living off their PFs, it was better to be in cash for an entire decade. Backtest shows 4% WDR comparing cash to US stock market. But, click on the box for "adjust for inflation", and both looked pretty bad!
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Post by Fearchar on Mar 21, 2023 10:53:31 GMT
I believe Mike Wilson of MS is pointing out that the impact of higher rates have yet to be reflected in earnings. So, while earnings currently look fine, he is not expecting that to last.
As earnings begin to falter, there is no reason to expect a FED rescue since they are imposing this. When earnings start to slip, the market will realize what is happening and a large retreat will begin.
Currently, the risk premium for owning equities is much too small to compensate equity owners for this risk.
Also, he is not alone. I am reading this at Blackstone, JPM and Rosenberg. My impression is that the market optimism is largely in the Buy and Hold IRA retail investor who are confused by the media.... or am I confused?
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Post by Chahta on Mar 21, 2023 12:27:39 GMT
“Inflation is nothing to ignore.”
Exactly and we all need to remember that. Inflation compounds YOY. A friend has a fixed annuity from her deceased husbands retirement at a large company. I had to explain to her how that fixed amount shrinks everyday. Inflation can be brutal.
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Post by Mustang on Mar 21, 2023 15:34:05 GMT
retiredat48 , The early-mid 70's provided some good opportunity for buying stocks for an accumulator, but for retirees living off their PFs, it was better to be in cash for an entire decade. Backtest shows 4% WDR comparing cash to US stock market. But, click on the box for "adjust for inflation", and both looked pretty bad! The Backtest data is most revealing. For the 100% stock portfolio, the trend to September 30, 1974 would have scared most retirees so bad they probably jumped ship to try to save what little they had left. If they had gone to cash on that date they would have locked in the loss of almost half of their retirement. Fear leads to irrational decisions. But it is really hard to stay on course in the face of so much negative information. |
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Post by retiredat48 on Mar 22, 2023 1:16:31 GMT
retiredat48 , The early-mid 70's provided some good opportunity for buying stocks for an accumulator, but for retirees living off their PFs, it was better to be in cash for an entire decade. Backtest shows 4% WDR comparing cash to US stock market. But, click on the box for "adjust for inflation", and both looked pretty bad! Yes but...Always a but. But those holding a balanced portfolio of 60-40% (bonds), made out OK, because the 1980s onward market recoveries ensued. There was a time some people who retired in late 1960's and early 70's were UNDERWATER in meeting the 4% Safe Withdrawal Rate, and portfolio surviving 30 years. However this later 80's market rebound brought them into the OK category. I think no-one has gone-dry on 60-40 for 30 years, using a 4% SWR. But a 0-100 all bond portfolio did. And a 100-0 all stock portfolio also has run dry. The OK range is between 15/85 and 85/15. R48 |
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Post by Fearchar on Mar 22, 2023 5:20:14 GMT
retiredat48 , The early-mid 70's provided some good opportunity for buying stocks for an accumulator, but for retirees living off their PFs, it was better to be in cash for an entire decade. Backtest shows 4% WDR comparing cash to US stock market. But, click on the box for "adjust for inflation", and both looked pretty bad! Yes but...Always a but. But those holding a balanced portfolio of 60-40% (bonds), made out OK, because the 1980s onward market recoveries ensued. There was a time some people who retired in late 1960's and early 70's were UNDERWATER in meeting the 4% Safe Withdrawal Rate, and portfolio surviving 30 years. However this later 80's market rebound brought them into the OK category. I think no-one has gone-dry on 60-40 for 30 years, using a 4% SWR. But a 0-100 all bond portfolio did. And a 100-0 all stock portfolio also has run dry. The OK range is between 15/85 and 85/15. R48 Sad to say, but my read of the best Professional advice is calling for what amounts to shifting funds in response to monetary policy and market response. Over weighing short term (<1 year high quality) bonds until the equity premium returns is what was essentially in the article. Asset price inflation was in 2020 and 2021. We are now in a correction, but without a recession (so far). The future will be entirely unique, and I think we are struggling between 2 outcomes. Earnings recession or no. Market sees no hint of a earnings recession right now. However, the Mike Wilson's of the world do. |
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Post by steelpony10 on Mar 22, 2023 10:38:08 GMT
I get a kick out of “signals” Thor. They’re mostly the smoke type, momentary air pollution few see. If this isn’t just a mild slowdown when the Fed raises kick in at year end or so and if the Grizzly comes out investors will panic at the sight of blood flow. So far this is a Teddy bear market. Of course only the ancient ones ever held one of those. 🕺🏾 |
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Post by Chahta on Mar 22, 2023 14:14:22 GMT
I get a kick out of “signals” Thor. They’re mostly the smoke type, momentary air pollution few see. If this isn’t just a mild slowdown when the Fed raises kick in at year end or so and if the Grizzly comes out investors will panic at the sight of blood flow. So far this is a Teddy bear market. Of course only the ancient ones ever held one of those. 🕺🏾 Yep, we are along for the ride that the "Big Boys" create. |
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Post by steelpony10 on Mar 23, 2023 12:00:40 GMT
Chahta , No matter what markets always beat cookie jars, mattresses, the bank and bank like products long term. A few bumps along the way but so far so good.
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Post by Chahta on Mar 23, 2023 12:07:07 GMT
Chahta , No matter what markets always beat cookie jars, mattresses, the bank and bank like products long term. A few bumps along the way but so far so good. Long term yes, but the last 15 months not so much. Possibly yesterday was a turning point with only a 25 BP increase and signaling about cuts. |
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Post by steelpony10 on Mar 23, 2023 12:22:44 GMT
Chahta , No matter what markets always beat cookie jars, mattresses, the bank and bank like products long term. A few bumps along the way but so far so good. Long term yes, but the last 15 months not so much. Possibly yesterday was a turning point with only a 25 BP increase and signaling about cuts. Anything is possible in Disneyland where dreams can come true. |
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Post by retiredat48 on Mar 24, 2023 15:17:24 GMT
Yes but...Always a but. But those holding a balanced portfolio of 60-40% (bonds), made out OK, because the 1980s onward market recoveries ensued. There was a time some people who retired in late 1960's and early 70's were UNDERWATER in meeting the 4% Safe Withdrawal Rate, and portfolio surviving 30 years. However this later 80's market rebound brought them into the OK category. I think no-one has gone-dry on 60-40 for 30 years, using a 4% SWR. But a 0-100 all bond portfolio did. And a 100-0 all stock portfolio also has run dry. The OK range is between 15/85 and 85/15. R48 Sad to say, but my read of the best Professional advice is calling for what amounts to shifting funds in response to monetary policy and market response. Over weighing short term (<1 year high quality) bonds until the equity premium returns is what was essentially in the article. Asset price inflation was in 2020 and 2021. We are now in a correction, but without a recession (so far). The future will be entirely unique, and I think we are struggling between 2 outcomes. Earnings recession or no. Market sees no hint of a earnings recession right now. However, the Mike Wilson's of the world do.
And yes, I am at my largest "cash and short term bond holding" in my 55 year investing lifetime. But I am in process of extending durations to lock in yields. I will likely never, however, take equity allocation to below 50% unless the market does it for me!
R48 |
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Post by chrisjen17 on Mar 24, 2023 17:08:38 GMT
Back to the backtest data provided. Looking at gold in that timespan is eye-popping. I've never been one to hold gold in a portfolio, but definitely see a case being made when comparing in that high inflationary period of time.
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Post by steadyeddy on Mar 24, 2023 23:57:27 GMT
Credit spreads are beginning to widen. So, I began accumulating HY bonds and adding to LT bonds.
Taking credit risk & duration risk is more prudent with new money in my opinion rather than equity risk.
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Post by Fearchar on Mar 25, 2023 0:22:14 GMT
Yes; ICE BofA US High Yield Index Option-Adjusted Spread (BAMLH0A0HYM2) is over 5%.
This is an pretty good spread and isn't normal.
Of course, it can go even higher, but this is a significant milestone.
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Post by steadyeddy on Mar 25, 2023 1:14:56 GMT
I also think more dominos (read banks) will fall over 2023 and perhaps 2024... that will set the real bear market in motion.
So rather than owning equity, I would rather own junk bond funds. It might prove to be a wrong bet but that is the bet I am making now.
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Post by FD1000 on Mar 25, 2023 3:58:03 GMT
What many don't realize is that most times its different. History doesn't repeat itself because conditions are different. The economy, the Fed, inflation, valuation, recessions, QE, QT, deficits, the speed of ups/downs, and others are not the same.
This is why flexible thinking is a must or you can believe in doing nothing. If you (replace you by Gov + The Fed or others) find yourself in a hole, stop digging.
I look at my total portfolio a few times a week and reminds myself, I rather be safe than worry/sorry about what I may miss. Just because something happened in the 60s', 70s' or another time, doesn't mean it will happen in the future. Easy example: in just about 4 year from Q4/2018 to Q3/2022. The SP500 was down 3 times 20-33%.
On another note: while diversification worked better decades ago, it didn't, while several known "experts" had all the "proof", think GMO, Grantham, Arnott, Prof Shiller and others.
I wish all of us good luck, but I don't trust anyone. When someone in the Gov says it's going to be OK, I immediately take action. I ask questions later, because no one knows all the truth and all the answers, and most times the actions are pretty simple.
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Post by chang on Mar 25, 2023 6:44:17 GMT
“I look at my total portfolio a few times a week and reminds myself, I rather be safe than worry/sorry about what I may miss.”
For a young investor with a long time frame, I would advise: “Look at your portfolio once every few years, and remind yourself, don’t worry about short-term ups and downs, or you might miss the long-term upside.”
My mom bought a couple thousand shares of HD in the late 90s at around $15. She never cared about day to day, or month to month, volatility.
Many people who watch, worry, fuss, and trade, constantly churn their portfolios trying to avoid short-term losses, and end up with a terrible LT result.
Buy and hold, stay the course, is far from dead. Actually I maintain it’s still the best approach for a young investor. And, if practiced, that young investor will be a multi multi multi millionaire when he retires, and he won’t have to pinch pennies or analyze thousands of mutual funds every week.
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Post by FD1000 on Mar 25, 2023 14:28:49 GMT
Once upon a time I used to be younger and why I held years. That worked pretty well for me from the start in 1995 to 2008 when I lost 25%. That was a lot of money for me and why I started to trade more, but still held months/years. The older I got with a lot more money things changed.
A major key for me is absolute good risk/reward returns. So, if the stock market lost 20%, I'm not happy with "only" 15% loss for my stock portion. If a diversified stock funds made 6% annually for years while the SP500 made 12%, 6% is far from what I want. If bond funds had 4% annually for many years, I want to do a lot more.
Basically, I don't believe in relative performance. If you are diversified and hold for years, you will get relative performance. That is good and what I recommend for most, but not for me, especially not in retirement.
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