Author Topic: Will S&P 500 Retest Recent Low By End of April  (Read 30235 times)

DooDiligence

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Re: Will S&P 500 Retest Recent Low By End of April
« Reply #210 on: May 22, 2020, 09:44:22 AM »
I think another issue that is being pushed down the line is the impact of eventually withdrawing the life support which I think we will have to do eventually or else individuals and businesses will become dependent on government money and unable to stand on their own two feet even when it is "safe" to go back to work and re-open businesses.

individuals and businesses will become dependent on government money and unable to stand on their own two feet

That ship sailed a long time ago.

Interest rates barely went up after 09. People became addicted to the low interest rates and subsequent raging 10 year bull market. We live in a credit addicted, got to have it now, no-consequence, entitled, bubble wrapped society.

Truth.

Lawyers hammer the airwaves incessantly with the idea that we aren't obligated to pay back debts. "Are you tired of calls from harassing bill collectors?"

Social security disability, no problem, you are not obligated to work and we'll prove to the guvmint that you are cray-cray so they'll start sending you eckchays.

Ambulance chasers have been telling us that nothing is our fault for decades now, "Let me help get you the money you deserve", and I hear many of these legal weasels actually describing "slip & fall" as an area of expertise, on TV ads.

Add to this, modern medicine has made it possible for us to live recklessly in the knowledge that someone will provide a therapy to right the wrong.

Fat & lazy, take a pill.
Depressed & hazy, take a pill.
Straight up whack-a-doo crazy, take a pill.

If any of these pills do you further harm, don't fret, there's a jack-leg waiting to take your call.

Now the highest executive officer in the land puts the capstone on "take no responsibility", and the sheeple eat it up.

Has there ever been a parallel that involved this extent of entitlement of the general populace in another country / era, and if so, how did it turn out?

Will we ever have national leadership that inspires integrity and hard / smart work in the general populace, ever?

As to the original question posed by this thread, I think we should be asking, "Will US businesses test new lows?"
AFL // BRK.B // CLB an incredibly stupid move // DIS // EW // GPC // MO an incredibly stupid ex-CEO // NVO // PSX // ULTA // VDE // VLGEA // WFC

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SHDL

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Re: Will S&P 500 Retest Recent Low By End of April
« Reply #211 on: May 23, 2020, 12:09:08 PM »
https://open.spotify.com/episode/4AfforwTrX3zk3piK4zvDN?si=iq50hLL1QVGAR-okDOxBvg

I was recommended this interview which touches upon a lot of what was discussed in this thread and elsewhere on this board. The interviewee is a young guy and some of the ideas discussed seem a little far fetched (like if the S&P were to drop 20% tomorrow politicians will panic and put out a stimulus bill so large it will create a huge asset price bubble that brings the S&P above 4000 by year end) but interesting stuff nonetheless.


Gregmal

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Re: Will S&P 500 Retest Recent Low By End of April
« Reply #213 on: May 26, 2020, 05:10:22 PM »
https://www.barrons.com/articles/u-s-stocks-are-risky-what-gmos-ben-inker-says-to-buy-instead-51590192015


This guy is gloriously arrogant, even for a finance guy. "markets have been wildly overvalued for 20 years"...LOL. No. Just because YOU disagree with the valuation, doesnt make that true. A year? Maybe... Two decades? GTFO

TwoCitiesCapital

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Re: Will S&P 500 Retest Recent Low By End of April
« Reply #214 on: May 26, 2020, 05:29:01 PM »
https://www.barrons.com/articles/u-s-stocks-are-risky-what-gmos-ben-inker-says-to-buy-instead-51590192015


This guy is gloriously arrogant, even for a finance guy. "markets have been wildly overvalued for 20 years"...LOL. No. Just because YOU disagree with the valuation, doesnt make that true. A year? Maybe... Two decades? GTFO

On the flip side, can you explain why markets COULDN'T be overvalued for bulk of two decades?

I tend to agree that isn't useful for every-day investor in terms of timing the market, but on the flip side, there are periods at market bottoms that show bonds dramatically outperforming stocks for long periods of time (we just had an example at the market lows in March - bonds had outperformed equities annualized for the preceding 20-years). That shouldn't be reasonably possible after 20-years of compounding unless if markets were dramatically overvalued when purchased and/or dramatically undervalued when sold.

I tend to believe there are long term cycles in markets which are fueled by inflation and debt cycles which expand and contract P/Es and profit margins. It's not uncommon for these to span 1-2 decades and we've had periods in the past where nominal stock returns were close to 0% per annum over 10-20 years and real stock returns worse (we just witnessed one from March 2000 to March 2020).


"Sure," you say, "but the starting point was the tech bubble and the end point was a local market low." I'll give you that, but I don't think it's so wild to think that markets have been overvalued much of that time which explains why a single drawdown of can destroy 2-decades worth of relative out-performance.

As far as making it useful to investors with a finite life span, I imagine you did alright by buying stocks at, or below, average valuations (early 2000s after the tech bust, 2008/2009, following the drawdown in 2015, and March 2020)  and slowly moving to a mix of Treasuries/corporates/MBS/munis in periods when valuations were more than 1 standard deviation above long-term averages following those purchases.

I can't say whether or not it would've beat the S&P because we could argue all day about the measure to use for the 1 std dev, (price to book, price to earnings, price to cash flow, EV/EBITDA, etc) and how much to move at a time, but you'd probably have been damn close with far less volatility and which is enough for me to say there is some validity to the market being overvalued much of that time if it's isn't clear that equities dramatically outperformed over the preceding 20-years.
 
« Last Edit: May 26, 2020, 06:22:16 PM by TwoCitiesCapital »

Read the Footnotes

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Re: Will S&P 500 Retest Recent Low By End of April
« Reply #215 on: May 26, 2020, 05:34:53 PM »
https://www.barrons.com/articles/u-s-stocks-are-risky-what-gmos-ben-inker-says-to-buy-instead-51590192015


This guy is gloriously arrogant, even for a finance guy. "markets have been wildly overvalued for 20 years"...LOL. No. Just because YOU disagree with the valuation, doesnt make that true. A year? Maybe... Two decades? GTFO

Maybe I'm just biased because I've spent time talking with him and I know how smart he is, and that he thinks like a value investor, but I can't see how you took that away from the article.

He basically says that domestically in the USA it's a stock pickers market and the stocks to pick are value stocks. Otherwise he likes emerging markets. That seems to be pretty close to his default position for 10-20 years based on my familiarity with him. He got really excited and bought more broadly for a brief period and then lightened up. So how does any of that make him an idiot?

By the way, I think the stuff that GMO puts out to attract attention is not necessarily their best thinking it is just a teaser and not necessarily representative of the ways in which they have added value for their clients when they have added value. That should be a surprise as that is often the case for people and firms that have shown some degree of investing ability and fundraising ability. In the case of GMO, I think that has led to misconceptions among some. 


Gregmal

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Re: Will S&P 500 Retest Recent Low By End of April
« Reply #217 on: May 27, 2020, 01:01:42 AM »
For one, I dont think he is an idiot.

Second, generally speaking I do agree with the bulk of what he is saying.

That said, 20 years is between 30-50% of ones useful investing life assuming ages 20/25-60/70 or some variance of that. If you want to look at bonds, who is to say bonds are not in a massive multi decade bubble? Why is it widely assumed that the bond market is accurate but the stock market subject to "valuation" concerns? IMO 0-1% long term interest rates is infinitesimally more egregious that a 20-25x multiple on stocks.

My main point, perhaps missing the forest for the trees in an otherwise reasonable article, is the sheer absurdity to anyone making some kind of self aggrandizing, wanton claim about "the market" over a period of time THAT long!

TwoCitiesCapital

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Re: Will S&P 500 Retest Recent Low By End of April
« Reply #218 on: May 27, 2020, 10:14:36 AM »
For one, I dont think he is an idiot.

Second, generally speaking I do agree with the bulk of what he is saying.

That said, 20 years is between 30-50% of ones useful investing life assuming ages 20/25-60/70 or some variance of that. If you want to look at bonds, who is to say bonds are not in a massive multi decade bubble? Why is it widely assumed that the bond market is accurate but the stock market subject to "valuation" concerns? IMO 0-1% long term interest rates is infinitesimally more egregious that a 20-25x multiple on stocks.

My main point, perhaps missing the forest for the trees in an otherwise reasonable article, is the sheer absurdity to anyone making some kind of self aggrandizing, wanton claim about "the market" over a period of time THAT long!

I think we're broadly on the same page then - because I generally agree that the market was overvalued for much of that time, but that there were still places and ways to invest to make a reasonable return and that is what GMO is being paid to do.

As far as bond being overvalued, I probably also agree in the long-term. That being said, assuming we don't get hyperinflation, the losses from bonds reverting back to fair value yields over the course of the next decade doesn't look anywhere near as bad to me as the potential losses accruing to equities in margins or inflation normalize OR the markets realize that the current corporate earnings drawdown isn't just going to immediately reverse.

buffetteer1984

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Re: Will S&P 500 Retest Recent Low By End of April
« Reply #219 on: May 27, 2020, 01:47:34 PM »
I agree it's one thing for the markets to misprice for a short period of time but to say it was mispriced for 20 years is suggesting ALL capital investing during that time was dumb money.  Not to mention everyone's favourite oracle has for a long time said markets are cheap, whether his actions suggest it or not.  Valuation at the end of the day is subjective.  Subjective to everyone's risk tolerance, hurdle rates, discount rates etc.  No ONE person can say it's overvalued when the price is the price for that long.

For one, I dont think he is an idiot.

Second, generally speaking I do agree with the bulk of what he is saying.

That said, 20 years is between 30-50% of ones useful investing life assuming ages 20/25-60/70 or some variance of that. If you want to look at bonds, who is to say bonds are not in a massive multi decade bubble? Why is it widely assumed that the bond market is accurate but the stock market subject to "valuation" concerns? IMO 0-1% long term interest rates is infinitesimally more egregious that a 20-25x multiple on stocks.

My main point, perhaps missing the forest for the trees in an otherwise reasonable article, is the sheer absurdity to anyone making some kind of self aggrandizing, wanton claim about "the market" over a period of time THAT long!