Stock volatility in 2022

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.wsj.com/articles/giant-stock-swings-kick-off-202…

**Giant Stock Swings Kick Off 2022**
**Hundreds of U.S.-listed companies are off more than 20% from highs. Many are in a bear market.**
**by Gunjan Banerji and Peter Santilli, The Wall Street Journal, 1/17/2022**

**U.S. stocks are off to a rocky start in 2022. Under the surface, things are even more volatile.**

**More than 220 U.S.-listed companies with market capitalizations above $10 billion are down at least 20% from their highs. While some have bounced from their lows, many remain in bear-market territory. ...**

**The tech-heavy Nasdaq Composite has been particularly turbulent. Around 39% of the stocks in the index have at least halved from their highs, according to Jason Goepfert at Sundial Capital Research, while the index is roughly 7% off its peak. At no other point since at least 1999 — around the dot-com bubble — have so many Nasdaq stocks fallen that far while the index was this close to its high...** [end quote]

As widely predicted, the fall in overvalued stocks, especially tech stocks which depend on the crack cocaine of free lending, began when the Federal Reserve observed that inflation was not transitory and announced a program of monetary tightening in the near future. The entire 2020-21 asset bubble was always strongly reminiscent of 1999. This is especially true of companies with a good story (“eyeballs” in 1999, SaaS in 2021) but no earnings now.

https://www.multpl.com/shiller-pe

The Wall Street Journal article has a lot of information on specific companies and also on sectors. They have a bubble chart that starts at zero on the right-hand side and goes negative from there. The hardest-hit sectors are technology and consumer discretionary. The least affected are energy and the financial sector. Most companies cluster between zero and negative 20% but a fair number of outliers have lost 40% or more, including Moderna and Biogen. Some giants, including Meta, Alphabet, Microsoft, Apple, Tesla and Amazon, are on this chart.

There are two key takeaways here.

Valuation matters. Companies that are priced for perfection (not to mention future perfection) in an emergency low-interest rate environment (and an epidemic which is expected to go away soon) will fall when the emergency support is withdrawn and conditions normalize. Companies without a dividend have no cushion against volatility.

The second key takeaway comes from the Shiller chart. When a bubble pops, it often pops suddenly and violently. Valuations may take decades to return to the bubble peak. Personally, I don’t expect to live that long.

Will the bubble burst suddenly or will the valuations gradually leak away like a balloon with a loose knot? Will the Fed chicken out (as it did before) when the market has a taper tantrum and stop its sloooowwww stroll toward normalization?

Wendy

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It can be far to easy without doing the proper research to say the markets all move as one.

Intel maybe very undervalued. Maybe.

https://schrts.co/fxXDbtxz

The real work begins when we look at an individual corporation.

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WendyBG asks,

Will the bubble burst suddenly or will the valuations gradually leak away like a balloon with a loose knot? Will the Fed chicken out (as it did before) when the market has a taper tantrum and stop its sloooowwww stroll toward normalization?

The Fed will manage the economy for the greater good. There’s a very small constituency for higher interest rates.

intercst

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The Fed has a very clear dual mandate: price stability and maximum employment consistent with price stability. That’s the greater good.

Their mandate does NOT include maximizing the value of assets.

Wendy

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The Fed has a very clear dual mandate: price stability and maximum employment consistent with price stability. That’s the greater good.
Their mandate does NOT include maximizing the value of assets.

What makes you think they are trying to “maximize” the value of assets?

I do think they would like to see the bubble end without a huge implosion, as when that happens people “feel poor”, pull in the reins on spending, and foment recession. Which, I guess it needs to be pointed out, kills the idea of “maximizing employment”, leaves manufacturers with oodles of unsold inventory, reduces tax receipts, and increases government costs in social programs.

I’m pretty sure that’s not a desirable outcome, see: 1929, 1999, 2008.

OF course we could start a war to get the economy going again, see: 1941, 2002.

Somehow war is always a yes, while putting money directly in people’s hands is always a no. Strange, I think.

(PS: For the cost of Afghanistan, just Afghanistan, not the entire DoD budget, we could have given rooftop solar systems to every household in America, and put them on most business buildings as well.)

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OF course we could start a war to get the economy going again, see: 1941

IIRC, there was already a war started a couple of years earlier by some chaps in Europe…

DB2

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OF course we could start a war to get the economy going again, see: 1941

IIRC, there was already a war started a couple of years earlier by some chaps in Europe…

World War 2 began in Europe with Germany’s invasion of Poland - on 1 September 1939. Two days later Britain and France actually lived up to their obligations under mutual-defense treaties two days later, unlike when they left Czechoslovakia hung out to dry back in March 1939.

And in East Asia… there are disputes about when it began: most of the world says 1937 (start of the Second Sino-Japanese War) but China says 1931 (Japanese seizure and occupation of Manchuria).

Russia says WW2 began in 1941, when Germany invaded THEM (their prior invasion of Poland in conjunction with Germany doesn’t count, apparently), and the US also says 1941, when Japan attacked THEM. Somehow these claims don’t attract much sympathy in Poland and China.

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The Fed has a very clear dual mandate: price stability and maximum employment consistent with price stability. That’s the greater good.
Their mandate does NOT include maximizing the value of assets.

What makes you think they are trying to “maximize” the value of assets?

Goofy,

How about some basic reading comprehension? She is responding to others that might thing that. It is not her thinking.

Again you have struck the “must be an idiot bell” getting likes when you are the one who does not read properly.

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World War 2 began in Europe with Germany’s invasion of Poland - on 1 September 1939. Two days later Britain and France actually lived up to their obligations under mutual-defense treaties two days later, unlike when they left Czechoslovakia hung out to dry back in March 1939.

Saw a program today that said WWII began in Europe in 1935, when Mussolini invaded Abyssinia (Ethiopia). At that time there was no agreement between Italy and Germany but Hitler liked very much what this absolute dictator was able to do and “learned at his knee.” In 1935, according to this program, Hitler was very much the little brother to Mussolini’s big “Il Duce”.

The Berlin-Rome Axis agreement followed in 1936. Hitler was learning from Mussolini: he had the “Black Shirts”, Hitler had the “Brown Shirts”. I’ll Duce promised a New Roman Empire, Hitler talked of The Third Reich. The Axis pact was expanded and formalized in 1940, but the seeds were in 1935 when those two psychopaths decided to take over Europe and all the democracies would be put asunder.

Interesting theory, anyway. (They go on to say it was Mussolii’s adventure in Africa that eventually led to Hitler’s downfall. Italian troops were not prepared for a long engagement nor occupation (they won at first because it was tanks vs. donkeys) and Hitler had to rescue him, thus drawing significant troops away from and delaying the Nazi campaign in Russia. That, of course, was a fiasco and split Nazi troops away from the Western Front giving the Allies a better chance when it came tine for invasion.)

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Goofyhoofy: Interesting theory, anyway. (They go on to say it was Mussolii’s adventure in Africa that eventually led to Hitler’s downfall. Italian troops were not prepared for a long engagement nor occupation (they won at first because it was tanks vs. donkeys) and Hitler had to rescue him, thus drawing significant troops away from and delaying the Nazi campaign in Russia. That, of course, was a fiasco and split Nazi troops away from the Western Front giving the Allies a better chance when it came tine for invasion.)

May 13, 1943
Six days later, on May 13, 1943, the Axis forces in North Africa, having sustained 40,000 casualties in Tunisia alone, surrendered; 267,000 German and Italian soldiers became prisoners of war.

Far more Axis troops were captured in Tunisia than at Stalingrad. Hitler kept feeding fresh troops in by air with tremendous losses when shot down in transport planes. The Luftwaffe transport fleet never recovered.

Anymouse

https://en.wikipedia.org/wiki/Operation_Flax#Palm_Sunday_Mas…

https://www.youtube.com/watch?v=yBXUgQoWxfM

Often overlooked, the Luftwaffe’s effort to resupply Axis troops in Africa in 1943 ended in a disaster rivaling that of Stalingrad. What exactly happened?

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…thus drawing significant troops away from and delaying the Nazi campaign in Russia.

I’m not sure about that. Sea Lion was abandoned in September 1940, releasing large numbers of troops and equipment. Barbarossa launched in June of 41.

The Steve nightmare scenario:

Background: Syria and Lebanon were occupied by Vichy French forces, which, were hovering closer to the Axis.

Greece fell to the Axis April 30, 41. From Greece, Luftwaffe elements flew to and started operating in Syria, with the cooperation of the Vichy authorities.

On April 1, 41, the pro-British government of Iraq was overthrown in a coup, with Italian assistance.

The ruler of Iran at the time was also regarded as pro-Axis.

If the Germans had not been obsessing about Russia, they could have landed in Syria, driven through friendly held Syria, into friendly held and oil producing Irag, to friendly held and oil producing Iran.

In May, the Brits scraped up enough forces to slam the door on that scenario.

https://en.wikipedia.org/wiki/Anglo-Iraqi_War

https://en.wikipedia.org/wiki/Syria%E2%80%93Lebanon_campaign…

https://en.wikipedia.org/wiki/Anglo-Soviet_invasion_of_Iran

Steve

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World War 2 began in Europe with Germany’s invasion of Poland - on 1 September 1939. Two days later Britain and France actually lived up to their obligations under mutual-defense treaties two days later, unlike when they left Czechoslovakia hung out to dry back in March 1939.

And in East Asia… there are disputes about when it began: most of the world says 1937 (start of the Second Sino-Japanese War) but China says 1931 (Japanese seizure and occupation of Manchuria).

Russia says WW2 began in 1941, when Germany invaded THEM (their prior invasion of Poland in conjunction with Germany doesn’t count, apparently), and the US also says 1941, when Japan attacked THEM. Somehow these claims don’t attract much sympathy in Poland and China.

=======================================================

Some say that the WW II started with the Spanish Civil War in 1936.
The Nationalists versus Republicans
Nationalist were supported by Italy, Germany and Portugal
Republicans were supported by Soviet Union, Mexico and France

For the Finns, WW II started when the Soviet Union invaded Finland in 30 November 1939.

For the Baltic countries, WW II started when they were annexed by the Soviet Union in June 1940 by force.

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Greece fell to the Axis April 30, 41. From Greece, Luftwaffe elements flew to and started operating in Syria, with the cooperation of the Vichy authorities.

Barbarossa was delayed by several weeks when Hitler had to rescue the Italians after their invasion of Greece foundered. Those weeks came back to haunt them when Winter caught them in summer uniforms.

Anymouse

https://en.wikipedia.org/wiki/Greco-Italian_War

Italy’s invasion of Greece, launched from Italian-controlled Albania, was a fiasco: six divisions of the Italian Army, badly organized and insufficient to manage a full-scale invasion, encountered unexpectedly tenacious resistance by the Hellenic Army and had to contend with the mountainous and muddy terrain on the Albanian–Greek border. By mid-November, the Greeks had stopped the Italian invasion just inside Greek territory. As the British bombers and fighter aircraft struck Italy’s forces and bases, the Greeks completed their mobilization and counter-attacked with the bulk of their army to push the Italians back into Albania – an advance which culminated in the Capture of Klisura Pass in January 1941, a few dozen kilometers inside the Albanian border. The defeat of the Italian invasion and the Greek counter-offensive of 1940 have been called the “first Axis setback of the entire war” by Mark Mazower, the Greeks “surprising everyone with the tenacity of their resistance”.

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Whoops, forgot this bit.

https://en.wikipedia.org/wiki/Greco-Italian_War#Impact_on_Ba…

Impact on Barbarossa
Hitler blamed Mussolini’s “Greek fiasco” for his failed campaign in Russia. “But for the difficulties created for us by the Italians and their idiotic campaign in Greece”, he commented in mid-February 1945, “I should have attacked Russia a few weeks earlier,” he later said. Hitler noted that, the “pointless campaign in Greece”, Germany was not notified in advance of the impending attack, which “compelled us, contrary to all our plans, to intervene in the Balkans, and that in its turn led to a catastrophic delay in the launching of our attack on Russia. We were compelled to expend some of our best divisions there. And as a net result we were then forced to occupy vast territories in which, but for this stupid show, the presence of our troops would have been quite unnecessary”. “We have no luck with the Latin races”, he complained afterwards. Mussolini took advantage of Hitler’s preoccupation with Spain and France “to set in motion his disastrous campaign against Greece”.[229] Andreas Hillgruber has accused Hitler of trying to deflect blame for his country’s defeat from himself to his ally, Italy.[230]

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Hitler blamed Mussolini’s “Greek fiasco” for his failed campaign in Russia. “But for the difficulties created for us by the Italians and their idiotic campaign in Greece”, he commented in mid-February 1945,

Typical CEO: always looking for a scapegoat for his failures. ;^)

The Germans would have failed in Russia either way. With Greece as a springboard, the landing in Syria and drive to the Iraqi and Iranian oil fields would have paid much greater dividends. There are reports that the Germans were trying to get Turkey to come into the war on their side, again. Then the Germans could skip the landing, and drive from Greece, through Turkey to the Iraqi oil fields.

Steve

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Impact on Barbarossa

We should thank the Italians!

Andreas Hillgruber has accused Hitler of trying to deflect blame for his country’s defeat from himself to his ally, Italy.

Isn’t that what losers do? Never accept blame?

The Captain

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Isn’t that what losers do? Never accept blame?

The Captain

Truth is that Hitler was a terrible military leader who got lucky in 1940 and considered himself a military genius. Churchill cancelled a planned assassination of him by SOE in fear that a competent leader might take over and extend the war.

Anymouse

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