- I hope we have some lurkers from Saul’s board.
- I have lived through some bubbles. Have I learnt anythin’?
- Where are we headed and what might we see?
Good morning, all:
I like looking at charts for general guidance. The current decline has been frightening to some and downright devastating to others. Some smell opportunity now, some smell opportunity later. How should we, who have seen this movie a couple of times, read the tea leaves?
2000 bubble: NASDAQ off 75%, peak to trough; S&P off 50%. Analog: INTC down 82%, MSFT down 50%, peak to trough.
2007 bubble: NASDAQ and S&P both off 50%; Analog: AMZN, MSFT and INTC all off 50 to 60%.
How do I read this? If we have a 75% sell off, it seems to me that the newer names are at higher risk; and they are already way off of their highs. But valuation models have changed…for now. I think recent price action suggests that pricing models have not completely changed, however.
There is a significant probability of NASDAQ <5,500. high probability of NASDAQ seeing <7,000. Very high probability of <9,000 (<9,000 is certainty in my book). S&P, similarly, 2,500; 3,000 and 3,500.
What does that mean for particular names? I suspect we may see AAPL below $100 ($62 in 3/2020), TSLA <$200. 3/'20 may be good comparisons for most established names (GM for $14 anyone?).
DDOG and SNOW? Without earnings, it’s hard to say, but more than 50% below where they are right now. And while that might seem a good place to pick up the SaaS names, if AMZN, INTC, AAPL, MSFT circa 2002 are any indication, they may be dead money for a quite some time when the turnaround comes. We are not likely to have a V recovery in the markets.
I have missed the upside of the past two years; currently about 70% cash. I was 60% cash in January; not because I’ve sold and raised cash, but because the value of my port has gone down. If my 30% exposure takes another 50% hit, then I’ll be down 22% from my personal peak (and be 78% cash). That scares even me (I am preparing my wife, who handles our household finances: she will be way less sanguine than I).
There is still much more pain ahead. Capitulation is inevitable and yet to happen. This time is different. For too many years we have been awash is free cash looking for yield. Time to unwind…all of it and probably then some. That’s what capitulation looks like.
-Randy
I will get back in at S&P 3000. Otherwise, sticking with cash. 3,000 is only a 3 year rewind, to May 2019, of a 13 year bull market.