Author Topic: Definitely In A Bubble  (Read 4234 times)

Gregmal

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Definitely In A Bubble
« on: November 01, 2019, 05:06:10 PM »
http://brklninvestor.com/blog.php

Good read about how silly all the bubble talk is.


cherzeca

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Re: Definitely In A Bubble
« Reply #1 on: November 01, 2019, 05:14:34 PM »
thought the japanofication of markets discussion was interesting.  I worry some about that, and also if for some gawd awful reason warren becomes POTUS (also discussed). I think she is out of her mind and her policies are worse, and this is not intended as a political but rather a market comment.  I am already thinking about what to do this time next year, but I just dont think that polls will be reliable enough to be comfortably out or in the market if, as I expect, the polls show a close race.  and of course MM will have warren in the lead.
« Last Edit: November 01, 2019, 07:02:36 PM by cherzeca »

Gregmal

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Re: Definitely In A Bubble
« Reply #2 on: November 01, 2019, 05:29:58 PM »
I agree about political risk and have tapered, and continue to taper my portfolio to be much more neutral by the time we get a handle on the Democratic nominee. Japan comparison has always fascinated me, but I think its unlikely, some of the reasons in the blog post address why. But whats important to consider with Warren, is not really what the actually policy does to a business's fundamentals, but the effect it will have on the market. Maybe nothing tangible materializes, but that still doesnt mean we couldn't/cant see multiple contraction.

Spekulatius

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Re: Definitely In A Bubble
« Reply #3 on: November 01, 2019, 05:43:59 PM »
thought the japanofication of markets discussion was interesting.  I worry some doubt that and if for some gawd awful reason warren becomes POTUS (also discussed). I think she is out of her mind and her policies are worse, and this is not intended as a political but rather a market comment.  I am already thinking about what to do this time next year, but I just dont think that polls will be reliable enough to be comfortably out or in the market if, as I expect, the polls show a close race.  and of course MM will have warren in the lead.

The bubble may not within the equity market, its want in the equity markets either in 2007, when valuations were actually lower than they are now. The bubble is most likely related to some lending,  could be European real estate (bubble due to low or non existent interest rates ) or the whole negative yielding bond markets which are trillions of Euro in size. One could argue that this is a bigger bubble than the subprime mortgages were in 2007.
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cherzeca

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Re: Definitely In A Bubble
« Reply #4 on: November 01, 2019, 07:07:14 PM »
@greg

couldn't agree more, that the market wont wait to see if any of her policies are enacted, market would take a dive on the Wednesday after election.  I have a fair amount of gain positions that I would prefer not to sell in taxable accounts, but I am already thinking of going to cash in my nontaxable accounts. might do it right after democratic convention.

jgyetzer

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Re: Definitely In A Bubble
« Reply #5 on: November 01, 2019, 07:54:01 PM »
Have any of you given thought to how your behavior in investing and/or work might change if Warren were elected?  Do you think youd spend more as opposed to investing?  Work less and enjoy your time more?  If she had her wish list, I honestly do think Id become more of a hedonist.  I wonder if other professionals would consider the same types of changes and what that would mean for the economy and culture.  What are the second order effects?

Gregmal

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Re: Definitely In A Bubble
« Reply #6 on: November 01, 2019, 08:12:16 PM »
Have any of you given thought to how your behavior in investing and/or work might change if Warren were elected?  Do you think youd spend more as opposed to investing?  Work less and enjoy your time more?  If she had her wish list, I honestly do think Id become more of a hedonist.  I wonder if other professionals would consider the same types of changes and what that would mean for the economy and culture.  What are the second order effects?

I'd still probably spend the same amount of time on investing...I'm an addict. David Winters said it best when he called inviting a "global treasure hunt"...but yes, to answer your question...we'd basically become France...where June-August offices are mandatorily closed and it would be illegal to respond or even check work emails between 6pm and 6am. How boring...and how opportunistic for those of us that dare work, or enjoy what we do.

cameronfen

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Re: Definitely In A Bubble
« Reply #7 on: November 01, 2019, 09:40:01 PM »
@greg

couldn't agree more, that the market wont wait to see if any of her policies are enacted, market would take a dive on the Wednesday after election.  I have a fair amount of gain positions that I would prefer not to sell in taxable accounts, but I am already thinking of going to cash in my nontaxable accounts. might do it right after democratic convention.

I feel like all of you are way overestimating the role of the president on the economy.  If you follow one rule: goverment spending during a recession, you will do about as well as an average president in a cycle.  Warren can't propose her more leftwing policies without consent from congress and republicans will likely control the senate.  It's unlikely she will politicize bureaucratic roles as the current state of the world is abnormal for politicians of any stripe.  So while she might encourage anti-trust to go after big tech firms in her speeches, the general hands off policy over the last 20 years will be more the norm with maybe a little reversal.  Healthcare is a huge bogeyman, but again, Obamacare didn't do anything huge to the stock market in general and again she needs a dem senate.  Tax raises for corporations, whoop-de-do, the market has been on a 10 year bull market and most of it was before tax cuts.  Might see some effect, but that doesn't change the long term competiveness of American firms.  As Buffet says always stay invested if you can find good valuations in corps to buy and trust in American businesses, true when Trump took office and will be true if Warren does. 

cherzeca

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Re: Definitely In A Bubble
« Reply #8 on: November 02, 2019, 08:16:18 AM »
@greg

couldn't agree more, that the market wont wait to see if any of her policies are enacted, market would take a dive on the Wednesday after election.  I have a fair amount of gain positions that I would prefer not to sell in taxable accounts, but I am already thinking of going to cash in my nontaxable accounts. might do it right after democratic convention.

I feel like all of you are way overestimating the role of the president on the economy.  If you follow one rule: goverment spending during a recession, you will do about as well as an average president in a cycle.  Warren can't propose her more leftwing policies without consent from congress and republicans will likely control the senate.  It's unlikely she will politicize bureaucratic roles as the current state of the world is abnormal for politicians of any stripe.  So while she might encourage anti-trust to go after big tech firms in her speeches, the general hands off policy over the last 20 years will be more the norm with maybe a little reversal.  Healthcare is a huge bogeyman, but again, Obamacare didn't do anything huge to the stock market in general and again she needs a dem senate.  Tax raises for corporations, whoop-de-do, the market has been on a 10 year bull market and most of it was before tax cuts.  Might see some effect, but that doesn't change the long term competiveness of American firms.  As Buffet says always stay invested if you can find good valuations in corps to buy and trust in American businesses, true when Trump took office and will be true if Warren does.

the brilliance of our constitution is that it is hard for any one branch of govt to screw things up totally...but POTUS comes the closest.  unless you have been under a rock, you may have noticed that there is a substantial portion of our society that has embraced victimization, and shirked responsibility as a primary civic objective.  my big issue with warren would be that she would absolutely entrench this slackerism bordering on socialism as official govt policy, and as POTUS, she can absolutely get much of her policies ingrained into the bureaucracy...an example is the extent to which Obama reformed universities to eliminate due process rights for those accused of sexual misconduct, simply as an adjunct to receiving federal funds.

now, back to the market.  almost every industry will become a battleground...increase corporate taxes, eliminate private health insurers (I cant even imagine the disruption that this will cause over 20% of the US economy), tech (break them up), banks (breaks them up) etc.  she doesn't have to accomplish this in order to wreck the economy. just proceeding as the big and beautiful POTUS would be enough.

obama for all of his faults was a relative neophyte in matters financial and economic, so he tended to rely on advisors (who were relatively mainstream).  warren thinks she knows better than any one in matters financial and economic, and is absolutely inclined to concentrate power in a massively undemocratic bureaucracy (think CFPB, her baby).   

this is not a political rant, this is a market rant.  the market will observe these prospects and vomit.  on the day after the election of warren.

wabuffo

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Re: Definitely In A Bubble
« Reply #9 on: November 02, 2019, 08:36:10 AM »
the market will observe these prospects and vomit.  on the day after the election of warren.

The market is fairly good at handicapping political outcomes.  It will mark-to-market the odds of either party winning on a daily basis throughout the political campaign season - and thus, won't wait until election.  Unless its a complete surprise ("Dewey Wins!")

Also - what if these ultra-low long-term Treasury rates are here to stay for the next 10-20 years?  Stocks might actually be undervalued at a 3% risk-free long-term rate.  I think the comparisons to historical valuations are really comparisons at much higher discount rates (and higher domestic corporate tax rates).

What is $1 pre-tax earnings worth at a 35% tax rate and 7% 30-year Treasury ($0.65/.07 =  9.3x pre-tax earnings) vs
a 21% tax rate and a 3% 30-year Treasury ($0.79/.03 = 26.3x pre-tax earnings).  Of course, if that 3% 30-year Treasury rate is here to stay................

wabuffo
« Last Edit: November 02, 2019, 08:57:08 AM by wabuffo »