Open discussion: why does the market seem so relentlessly bullish?

Investment Analysis Clubs Macro Economic Trends and Risks
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I’ve seen this discussed on other investment forums and have been unable to find an answer.

Obviously in any bear market, it’s common to see face-ripping rallies upwards, it’s one of the famous characteristics of a bear market.

However, there seems to be a certain… feverish greed, or desperation (?) to the ‘fear-of-missing-out’ rallies we see.

I don’t remember seeing it in past bear markets I’ve followed.

A single tweet by a WSJ journalist triggers 4-5% moves upwards, a couple of months ago.

Yesterday, the CPI data being slightly low triggered the Nasdaq rising 5% in just 1 hour during premarket. Yet the PPI data being slightly high on Friday did not trigger symmetric behaviour.

Any newspaper talk of ‘pivot’ causes relentless Pavlovian rallies in response. And there has been endless talk - of China pivoting on covid, of the Fed pivoting on rates.

The other forums I spend time in have a much younger group of investors, and it seems almost all of them are using highly geared approaches, ‘0 day to expiry’ options on very volatile shares, or copious amounts of margin and triply-leveraged ETFs.

Get rich or die trying, etc. There seems to be addiction to watching every movement in the market in the way you normally see at the peak of a bull market. The overall feeling (to me) is generally very much like the peak of a bull market. Compulsive gambling, a sense of ‘certainty’ that their bets will win. Ten times more fear of missing out on the ‘big rally’ than fear of being caught in the next big drop. Zero interest in value metrics.

What is everyone else seeing among people they know, in relation to the market?

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There was a similar rally in the fall
of 2008. In fact I deployed a fair amount of my cash in that rally, complimented myself on my savvy, sweated bullets in the subsequent meltdown in March 2009, and got bailed out like everybody else when the Fed used extraordinary measures to engineer a V shaped recovery. People have short memories.

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All I remember of the stock market in the fall of '08 is the waterfall cascade down…

DB2

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Thanks for this post @luxmain. I agree with you that there seems to be NO RATIONALE whatsoever for the current market mayhem. As a matter of fact, I no longer talk investing with other people nowadays as it mostly frustrates me to hear of others trying to get rich quick by gambling in the markets.

OTOH, I’m sure you will hear from others here that will provide a 180-degree position that using the tools that are available out there (margin, options, whatever) and the market variability make for great investing opportunities and that I am the loser by not accepting and playing on the volatility of today’s market.

To each their own I guess!
'38Packard

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IMHO, the market thinks Powell will cave. In December 2018, four years ago, with a strong economy, he tried to do the sensible and rational thing and raise rates. But he caved to political pressure, which a Fed Chair is not supposed to do. People are expecting him to cave again.

Four years ago I lost all respect for Powell. If he had raised rates as he should have done then we would have had ammunition to fight the COVID economy. But we didn’t. And now look where we are.

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American corporations lead the world in having a net sales surplus. The CEOs and executives of the major US corporations are beating their chests that they have pricing power. That is a fundamental analysis matter.

The problem is by February or March of this coming year globally American corporations wont have pricing power. How much less will only be marginal. The corporations and labor are going to cool off. The fundamentals then will reflect being overbought in this period.

The real problem is in both the bond markets and the swaps market. The US paper might get challenging by the end of the 1Q23. The major western central banks and PBoC are selling off US paper. Other corporations that hold US paper ie Japanese insurers are also selling. If or as this spirals the US Treasuries are going to come under increased pressure.

Liquidity will be rushing to dry up. That is a very complex little sentence. The FED/US Treasury are planning Operation Twist. Not to add liquidity but to solve a meltdown in US paper. It will only add some liquidity as they sell the short end of the yield curve and buy the long end of the curve.

That is the forest without getting caught looking at a few of the single trees.

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Plus all the middlemen who make pennies on every trade–brokers, those who transfer shares, registrars, etc–make more when markets are rising. They tend to be optimistic. Now is always a goid time to buy for some reason.

The system has an optimistic bias.

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My cash holding are being depleted at around 20% pa through price rises. Using the ‘rule of 72 calculator’ this means that in 3.6 years the value of that cash will be halved.

At the moment I see shares as a safe haven, certainly safer than cash. Share prices may fall but (one day) they will rise again something that cash will never do.

I suspect the world’s central banks may have to change policy and print currency to protect the bond market so I’m happy with my shares. 33% of these are in mining stock scattered all around the world, avoiding politically sensitive countries.

I also hold gold, silver and a nice little collection of Rolex watches (down in value of late).

When it comes to investing I follow the advice of Sir Francis Bacon:

Money is like muck, not good except it be spread

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My thesis is simple. There’s too much money floating around, and no, not due to covid relief which was a couple thousand in people’s pockets. It’s that there are millions, even billions sloshing around the international monetary systems with no place to go, so an easy pick is the biggest gambling casino in the world: the stock market.

Seriously, we have Russian kleptocrats and newly minted Chinese billionaires and hedge funds in the Caymans; it used to take decades to declare a new “richest man in the world” and now we do it every year or two. Think of the distance between Sam Walton and Warren Buffett, compared to the time between Bill Gates, Paul Allen, Carlos Slim, Larry Ellison, Jeff Bezos, Larry Page, Mark Zuckerberg, Elon Musk, Prices for art are stratospheric, people are buying invisible sky money and losing billions every few weeks, and others are paying hundreds of thousands for a specious URL pointing to bad pictures of apes, and you wonder why the market is bouncing?

I play the quarter slots on the rare occasions I visit Vegas. A couple of rooms over there are people dropping $100,000 on a bad flop, or hiring Molly to run a game so they can say they sat with DiCaprio for a few minutes.

And you wonder why the market is bouncy?

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I have expressed my disdain for “the wise”, the so-called experts that the Fool used to ridicule, before it joined their club. “The wise” that insist that we need to pay them thousands per year in fees to manage our life savings, without any accountability.

I have compared their daily stampedes to lemmings. Unfortunately, the Disney documentary was a fabrication. Lemmings to not act like “the wise”.

Agent K had it right “people are dumb, panicky, animals”

Steve

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This is what I am guessing. There was a time (#oldendays) when people had to have a certain something to invest in stock markets. Even just ONE generation back (I am #50’something) that the only way to get stocks was in a retirement package. All of this kinda leveled the playing field to specific individual tendencies.

I started investing in the early 90’s. An internet bust at that time, while painful, made sense if you compared it to the tulip bubble. There was the idea that people of means invested, then something would “occasionally” get wonky and the market would correct.

This is when I learned the term ‘capitulation’. It was new at the time to all the fresh investors. We all learned that we just had to be patient until ‘capitulation’ happened. THEN!!! everything would be right priced and there was no way to lose after that…(well until the next ‘correction’).

About 15 years or so back, I noticed that there was a whole new direction in the market. Many more people could access brokerages, and many many more people could try to be day traders. At that time, I started to wonder if ‘capitulation’ was a new buzz word that all the “young” traders were looking for? At that time, did the fact that SOOOOOO MANNNNYYYYY new investors could invest, investors were now too diversified for capitulation to ever happen??

Look at market charts from about 2010 to know and you will see that every biggish dip has been followed by some kind of accumulation stage. There are so many new (kinds of) investors that the rules of the last 50some years are thrown out. Too many redit threads that are trying to predict “THE TURN AROUND!!!” that every young investor jumps on.

I agree that it has seemed too bullish in about 20 years now. There hasn’t been that big melt down that drives all the speculators out of the market. There are so many new investors every year that fall for the “it’s different this time” line…that the markets are very frothy.

No idea where this goes from here, but that has been my operating theory for a decade or two now. Just look at crypto for VERY similar chart patterns based on public sentiment and not actual business reasons.

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You just saw me buy stock!

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@dlbuffy - Thank you. Very interesting perspective! It may be very true that the “market” as we knew it is now a different animal and now we investors need to hunt differently.

'38Packard
I’ll need to sleep on that for a while…

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I could have chosen to scrub our kitchen floor or take a nap this afternoon….when I woke up it was too late to clean the floor…

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I remember listening to an old geezer named Bernstein who was on Consuela Mack’s investment show in 2009. She asked the veteran stock picker what he was buying in the midst of the maelstrom. “Bonds” he sez. “Bonds?”, she asks. Yup - he explained that he didn’t need to make any more money, but wanted to retain his money.

As most of us are aware (at some conscious or unconscious level), the market is “fixed” and we are but motes floating in a storm created by the interactions of high frequency CPU trading based on algorithms interpreting a wide variety of electronic tea leaves in a complex “pump and dump” game.

Over the years I’ve made (and occasionally lost) a reasonable amount of money trading stocks. I have come to realize the adage that “this time it’s different” is a hoax to tempt the greedy into overextending themselves (over time, it is never different). The value that a share represents is the proportional slice of the intrinsic value of the company plus a reasonable value of the positive growth in cash flow predicted by metrics that make sense.

Back when I was about 28 and knew “everything”, I was the target of an elderly salesman who was about 55 years old and who was, in my eyes, an over-the-hill relic from a bygone era. It took me about 25 years to realize how wrong I was :slight_smile:

Each generation needs to learn the same lesson. While it’s true that I occasionally sell shares which have either disappointed me or overshot my expectations my current attitude is to pick good (frequently boring) companies which, as a portfolio, will continue to provide a reasonable income stream proportional with the money invested (adjusted for inflation) as well as a moderate possibility for organic growth.

I go on the assumption that I am not going to get important information faster than the computers front-running me, nor am I smart enough to create unique models which they will studiously avoid (followers of gurus like Kathy Woods who convinces many that they have a secret sauce are simply the latest of a long history of rubes who follow the meme that “this time it’s different” - they aren’t the first and they won’t be the last).

Patience is the name of the game and true diversity of assets (both in type/currency/geography) while not maximizing gains at any given moment, provides the ability to build wealth over time.

The likelihood of a recession, with an accompanying stock market “crash” is significant enough that I am currently about 50% in cash (and short-term similar bonds). My equity portfolio has a substantial portion invested in terms of foreign currencies (details on a parallel post put up yesterday).

On a number of recent occasions, various specific shares (Cisco, Meta, FedEx, Citicorp, Tencent, Baba, Baidu all come to mind) have been (IMHO) unfairly whack which allowed me to pick up positions at a bargain. As the market drops I will be keeping my eye out for other opportunities.

At one point, blackjack games in casinos were played with a deck of cards. Nowadays, there are ten decks in a shoe.

For those who prefer gambling, you have a better chance in Vegas than trying to consistently beat the market-makers at their own game.

Jeff

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This thread is full of complex explanations while Occam’s Razor suggests finding simple answers. My simple explanation is that bottoms can only be known in hindsight.

Think back to March 10, 2009. Was that the bottom? Was that a good day to start accumulating? How was that different from a bull trap? How long after March 10, 2009 was it safe to buy?

Had you not sold on the way down you would have less cash to invest and less chance of being caught in a bull trap. Another good reason for not timing the market.

Between October 20 and November 8 I added TSLA at an average of $200.86, now down to $156.80. Good, bad, or otherwise? What will it look like in a year or two?

The Captain

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I’d guess it will probably be up in a year or two. BUT, there are still risks:

  • Musk will likely have to sell some more to get cash to keep twitter afloat. And sell even more to pay taxes (since his basis is close to zero on most of his shares). HIGH probability.
  • Shareholders may eventually revolt and remove Musk. LOW probability.
  • Materials acquisition in 23-24 will probably get tighter and delay production. MEDIUM probability.
  • Competition will increase, especially in mid-tier. This usually has the effect of lowering margins for everyone. HIGH probability.
  • Political issues with China and other countries may interfere with speedy marketing and deliveries. MEDIUM probability.

I think overall, Tesla is still the best EV maker by far. Best financially for sure. Nobody else even comes close to their margins. This will help them retain the leadership position for longer.

I’m thinking of selling puts as a way of acquiring a position in Tesla (or simply keeping the premium if it works out that way). I was looking at the 145 puts early next year. Seems like the market wants to “punish” Tesla a little more, but then the company will report results in January. The results will probably be good, or good enough, but if there is any hint of negativity (China, etc), they may punish it some more. But I don’t think they can hold it down for the duration of next year. Even if there is a recession, the typical Tesla buyer will be less affected by the recession. Not to mention that the typical Tesla buyer already ordered their vehicle 3-9 months earlier! And not to mention that new government tax credits on EVs will begin in 2023, and the Tesla model Y will be one of the [very] few vehicles eligible for the offer.

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This.

Where the market thinks rates will be a year out from now is significantly different than what the Fed is forecasting - which is why the market initially popped but then as the Fed started sharing their thinking, the markets (including today) started to give all those gains back.

So much can happen in an year that I think it is anyone’s guess - including Powell’s.

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Happy to report this thread did not age well. :rofl: :rofl: :rofl:

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I try not to overthink it. The Wall Street bookies were betting on a pivot/pause announcement by the Fed. Instead they got a bigger than expected drop in retail sales plus a firm reiteration that the Fed will not pivot/pause as soon as hoped. So now the are bracing for recession.

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