Investments Trade Log

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white belt
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Re: Investments Trade Log

Post by white belt »

WFJ wrote:
Wed May 11, 2022 2:21 pm
A bear market shoots the generals last (AAPL, MSFT, GOOG, AMZN are still standing, but limping).
Agreed. Those names are where the BTD (buy the dip) crowd and others are trying to hide out. Once they turn, things will be in full effect. To me, this market correction has been way too orderly. I wouldn’t be surprised if we see some bull trap rallies in the short term. From what I can tell, some of the smart money has reduced risk and taken on more cash, however there are still masses of retail and pension funds that are still holding onto their same stock/bond allocations. I don’t think the reality of further declines and probability of recession is accurately priced in, although I don’t have enough conviction to put on short positions at this time.

Again, I’m waiting for some sort of relief rally and short term positive sentiment shift before putting on aggressive trades (we might not get it). We’re still in the early innings of this. I’m just slowly increasing cash and reducing my stock/bond allocation.

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Mister Imperceptible
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Re: Investments Trade Log

Post by Mister Imperceptible »

I cannot resist posting this:

Image

Source

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Mister Imperceptible
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Re: Investments Trade Log

Post by Mister Imperceptible »

Another metric that has not been referenced in awhile (because it has not mattered) is US all stock market cap to GDP:

https://www.longtermtrends.net/market-c ... indicator/

Let’s see how much mean reversion is allowed to occur before another intervention. We’ve only been deflating a bubble that was built on top of a previously existing bubble, not the bubble that was already there 2 and half years ago.

WFJ
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Re: Investments Trade Log

Post by WFJ »

The problem with the above measure is that the US corporations now receive a larger and larger portion of their earnings from outside the US. In order for this chart to be meaningful, one would have to control for percentage of profit among US companies that comes from outside the US. I suspect when this is done, the market cap to GDP would be in line with past estimates.

white belt
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Re: Investments Trade Log

Post by white belt »

@MI

I don't disagree with any of the points you bring up, I just think that even rising rates might not damper housing that much because there has been such an undersupply in housing for the past few years. The demographics of millenials getting into their home-buying years is a strong force. There is a difference between home builders and home builder suppliers that Kuppy explains in has article, but nevertheless the trade is also highly correlated with lumber prices, so perhaps that's a more appropriate way to think about it. Either way, I haven't yet decided if I'll take a position on it.

white belt
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Re: Investments Trade Log

Post by white belt »

WFJ wrote:
Wed May 11, 2022 2:21 pm
A bear market shoots the generals last (AAPL, MSFT, GOOG, AMZN are still standing, but limping).
Has anyone considered shorting any of these names? I'll include TSLA on that list as well (still at 4x its pre-pandemic price)*. If they will be the last to fall and have held up better than SPX so far, then perhaps that means they will also fall harder? I'm pretty sure we saw that with big names in the dotcom bust. Retail is huge in those names and as far as I can tell, retail also hasn't fully bought into the Fed put expiring. In other words, if ARKK and QQQ are leading the charge down, then the FAANG darlings could bring up the rear by the end of all this. Just as an example, AAPL could realistically still get cut in half to its price levels prior to the COVID crash, while I don't think we will see SPX drop down another 50% to ~2000.

* = Shorting TSLA has been a widow maker trade many times for the past few years, so I'm more hesitant to attempt it.

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Slevin
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Re: Investments Trade Log

Post by Slevin »

white belt wrote:
Fri May 13, 2022 7:03 pm
Has anyone considered shorting any of these names? I'll include TSLA on that list as well (still at 4x its pre-pandemic price)*.

* = Shorting TSLA has been a widow maker trade many times for the past few years, so I'm more hesitant to attempt it.
I have no idea what I’m talking about here from a macro perspective of markets but on the micro level TSLA’s q1 earnings looked great didn’t they? And no hints of huge downturn in demand? Or are you just thinking this because it’s a meme stock that’s theoretically insanely overvalued?

I don’t disbelieve that a car company primarily aimed at the wealthy could completely sunder itself from the trends of the rest of the market when so far the hype has completely out blown all of the massive production quality issues, delivery issues, and naysayers. It would be a weird thing but nothing has stopped the TSLA train yet.

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Seppia
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Re: Investments Trade Log

Post by Seppia »

I’d add that some (especially Google) are incredible businesses.
High margin, not capital intensive, no debt, monopoly of an essential business that should not be impacted by recessions.
It’s the exact kind of business you want to own in hard times.

Not saying Google can’t fall, but if I read the numbers correctly we are talking about a company with the above mentioned characteristics, growing earnings 20%+ a year selling at a PE of 20.
Doesn’t exactly match up with the ARKK shitcos profile

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Slevin
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Re: Investments Trade Log

Post by Slevin »

@Seppia I can only speak to the adtech side of Google, but double click (oh it’s Google ads now apparently) is insanely profitable and owns a huge amount of the display market. And alongside that, they own advertising for Youtube, which is very quickly becoming a backbone of the internet (look at recent estimates of YouTube watch time versus the rest of streaming tv).

It is weird that Google Ads essentially didn’t even try to own the CTV marketplace and it’s been essentially ceded to MGNI and freewheel (branch of CMCSA), but Google Ads is still by far the largest advertiser on the internet. That rev can be somewhat impacted by a recession (less buyers, lower CPM (ad price)), but advertising is super elastic and there are midterm elections coming up in the US (which always means $$$$ to internet advertisers).

alex123711
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Re: Investments Trade Log

Post by alex123711 »

WFJ wrote:
Wed May 11, 2022 2:21 pm
A bear market shoots the generals last (AAPL, MSFT, GOOG, AMZN are still standing, but limping). This is a repeat of 2001 bear market. 99% drawdowns will be common among nearly all "darlings". Cathie Wood is this generations "Henry Blodgett" who will scream buy until nobody listens. Individual investors are still pouring money into ARKK and getting crushed. If one can keep their jobs, the selloff is an incredible opportunity to buy the SP 500 index cheaply for a few years, but many jobs are tied to the stock market (several of my jobs were and why always sell heavily into when it looks like my positions will be eliminated) and people must sell equities to pay off margin debt and pay for living expenses.

I'm still getting crushed but crushing the market on a relative basis. This is why nobody wants a bear market, but they are a feature of a capitalist market system and must be recognized and managed when they occur.
I'm buying now also but the selloff is overstated, its only down around 15% at the moment and still higher than the start of last year, no one can predict where it will go.

white belt
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Re: Investments Trade Log

Post by white belt »

Disclaimer: I'm not an experienced value investor

Jesse Felder did an interview with Fred Hickey: https://thefelderreport.com/2022/05/11/ ... ng-theirs/

In that interview, we hear a lot of parallels between the current environment and the dotcom bust. There were a lot of companies who paid a huge chunk of compensation in company stock, which dilutes shareholder value and leads to wonky accounting (the same thing has been happening with the growthy tech names today, all the way up to the big dogs). It works great when the stock value is climbing, not so much when stock drops. Hickey points out how Buffett complains about that practice because it ultimately ends up screwing over shareholders since companies will try to bail out their employees before shareholders in tough times.

Keep in mind that there were companies who are still very profitable and have been for decades, yet their prices have never returned to levels they reached during the dotcom bubble (look at a charts of INTC and CSCO*). Maybe that's where were headed with TSLA, GOOG, or AAPL? In particular I'm eyeing APPL because they got a huge boost from the work from home trend and all the extra liquidity sloshing around. TSLA is the ultimate retail baby, which means if retail gets crushed and has to panic sell, TSLA will go down with it. This selling will accelerate as passive funds are forced to sell the falling names to buy rising names to keep tracking the index (see Mike Green's thoughts on how passive dynamics can increase whipsaw effects). FB may have been the canary in the coal mine since we see it has pretty much reverted to pre-pandemic price levels.

P/E matters in a world where liquidity isn't sloshing around, which is what appears the world will look like for at least the next 6 months or so. I don't believe we will see another Powell pivot, but that's what would obviously invalidate this whole view.

* = It's even worse when you account for inflation, which has been 63% from 2001 to today.
Last edited by white belt on Tue May 24, 2022 10:39 pm, edited 1 time in total.

candide
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Re: Investments Trade Log

Post by candide »

[Epistemic status: non-rigorous "shooting the shit"]

Watching a bunch of CNBC clips on YouTube I figured we were about to have some upward movement using the purely contrarian indicator of talking head after talking head feeling they could finally point out the flaws in the obviously flawed companies. . . "Can you believe anyone ever bought these companies we were praising a few months ago?"

I feel some justification is in order here: as I am usually beat up either physically or mentally (often both) after a teaching I let myself engage in some real information junk food.

. . .When these assholes get to act like sages about the folly of revenue growth at any price, it is likely that sentiment is starting to get priced in. The real problem is that this is not what is driving this part of market cycle. The Fed to fulfill its inflation mandate legitimately has to destroy enough demand to slow the velocity of money. Any time Gamestop has a good day shows how much money is still sloshing around at high velocity. Even if the Reddit story of a transformative tech company in the make is true, that is going to take time, and that is precisely what rising interest rates are supposed to prevent by making a worse discount rate on future cash flows.

A point? Actual positions? Sure, why not. I have an equal weighting to $SARK (shorting Arkk) and a basket of biotech stocks that had hit the "Magic Formula" list -- ie the combination of high ROIC and low multiple. These bits have anti-correlated beautifully. The only profit I make from this hedged position is the difference between the moon-shoot growth stories of Arkk and my basket that hit value stock multiples and has a record of actually making money off innovation.

(I had bought the bio-tech first and started using $SARK as a tactical hedge when the market started getting bumpy. . . )
Last edited by candide on Sun May 15, 2022 1:25 am, edited 1 time in total.

white belt
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Re: Investments Trade Log

Post by white belt »

Slevin wrote:
Fri May 13, 2022 8:34 pm
I have no idea what I’m talking about here from a macro perspective of markets but on the micro level TSLA’s q1 earnings looked great didn’t they? And no hints of huge downturn in demand? Or are you just thinking this because it’s a meme stock that’s theoretically insanely overvalued?

I don’t disbelieve that a car company primarily aimed at the wealthy could completely sunder itself from the trends of the rest of the market when so far the hype has completely out blown all of the massive production quality issues, delivery issues, and naysayers. It would be a weird thing but nothing has stopped the TSLA train yet.
Elon Musk is the greatest stock promoter in history. The TSLA stock price is completely decoupled from reality, a trend that started after the COVID lockdowns and stimulus. We're still up ~5x compared to Feb 2020. Could it continue? Sure. But I'll just say, there is a reason we've seen positive earnings news come in for a lot of companies and stock prices have still dropped. There are macro factors at play.

Edit: To be clear, this is not me fading the electric vehicle trend. In my opinion, if you want to play that trend you're better off going for commodities that are required for electrification (copper, cobalt, lithium, etc).

white belt
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Re: Investments Trade Log

Post by white belt »

@Candide

Options expiration is next week which always brings increased volatility. That often results in short term upside because dealers get gamma squeezed.

white belt
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Re: Investments Trade Log

Post by white belt »

I am biding my time in hopes of a bull trap rally, as I believe we are overdue for one given how much bearish consensus and panic headlines we're seeing on CNBC. Nevertheless, retail is still trying to ride things out in megacap names:
While retail investors have retreated, they have not completely disappeared. Investors are no longer “buying with both hands”, said Shawn Cruz, head trading strategist at TD Ameritrade. They are instead more selective, he said, buying megacap companies including highly profitable tech companies with proven revenue such as Amazon, Microsoft and Google.
Source: https://www.ft.com/content/39685f90-992 ... 3e71bab0b4

We will be at a tradeable bottom when something breaks and things get disorderly. Retail will panic and exit the market, as they have done during every crash in history. Maybe this time is different because passive and buy/hold are such popular strategies? I'm skeptical because human nature is human nature. I just read another article about how TQQQ has received large inflows over the past few weeks, which tells me there are still a lot of people out there who think the dip is worth buying.

IlliniDave
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Re: Investments Trade Log

Post by IlliniDave »

Well, in the last week I crossed the -10% threshold for the stash since retirement and now sit -12.5% YTD, so iDave is officially in recession. I'm on track for my worst quarter ever in terms of nominal dollars "lost". For now I'm still just holding. I'm really glad I didn't get cold feet and OMY last July because assuming there won't be a dramatic recovery in the next couple of months I don't think I'd have the guts to pull the plug in the midst of the current mess. I still gauge myself in pretty good financial shape overall and probably just need to think about when to look at rebalancing and whether I can do some tax loss harvesting in my non-retirement account.

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jennypenny
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Re: Investments Trade Log

Post by jennypenny »

If you want to play the EV market, IMHO RIVN is a better play.

WFJ
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Re: Investments Trade Log

Post by WFJ »

Shorting = only for pros. At anytime, a short position can be called without reason, just to reduce the risk of a broker (read your margin agreement). Short sellers are usually long 2x and short 0.90 of a portfolio, usually have 50+ short positions and complex hedging strategies. Short sellers make more money in bull markets, but pick up alpha in bull markets. Everyone gets creamed in bear markets.

GOOG other "Ad" companies = Who buys these ads, XOM/MO/UNH or WeWork/PTON/COIN? Ad based business get absolutely creamed in a bear markets. First corporate budgets to get cut is entertainment, next is marketing.

white belt
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Re: Investments Trade Log

Post by white belt »

When I say shorting, I mean using bearish options strategies. I'm unsure how common it is for a broker to cancel put options for retail that aren't bought on margin, but I suppose there is always counterparty risk which is why I have a rule to always execute a trade across 2+ brokerages.

Before/during the initial Ukraine invasion, I "shorted" RSX and made a bunch of money by just buying OTM puts. Not the most sophisticated strategy and you have to deal with things like Theta burn, but at least my downside is limited to what I initially put in. I never trade with margin.

thedollar
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Re: Investments Trade Log

Post by thedollar »

Even after a 20% drop, the Shiller PE ratio is still above 30. :geek: With the average being 16.94, I can't even imagine the pain if the market drops another 20-50% from here. :?

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