Things that go splat for $8 trillion.
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My option strategy could use some cooling off and even some backing down.
The Captain
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I don’t put much value in such concerns. Markets have been very concerned abt AI bubble and when the rally will end. Earning have been strong this qtr in the tech sector and investors have been willing to bid up stocks previously though fully valued if not over valued.
Last year Nvidia traded over a narrow range. Worry warts bid it down below $170 vs high of $212. Now it’s abt $220. If you bought below $170 you are up 30%.
Nvidia reports earning next week. This is all anticipation based on other company numbers.
When will this end? No one knows, but not now.
Meanwhile the K- shape recovery seems to be telling us the bottom leg is in recession. The top leg is carrying the economy mostly on tech stocks. It’s a stock pickers market.
Choose wisely.
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Not sure I have ever read an index chart that went only straight up for five weeks.
I suspect AI trading for the last five weeks’ movement.
There are no circuit brakers for a down AI movement.
And over the last four quarters earnings per share went from $2.94 to $4.90, an increase of 67%.
DB2
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And promptly $NVDA is reinvesting those profits in the AI echo system by investing in $CRWV 's of the world…
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It’s really just market timing by another name. “Sell now because something bad is going to happen”. It could be correct, or it may not be.
If nothing fundamental to a given company has changed, why change your strategy?
As others have said, I don’t put much value in concerns of this sort. The only exception I can think of is if something comes along that is disruptive. For example, when quantum computers (not just a few qbits, but full-on computers) come out, internet and banking security -as it stands today- is out the window. That will be a huge disruption, and people are going to have to move very fast to adapt (or perish). Short of that, I’m not too concerned about my position in CRWD. Yet.
Said the investors in Countrywide, Bear Stearns, and Fannie Mae in 2008.
Said the investors in Lucent, WorldCom, and Nortel in 2000.
Said investors in the Nifty 50 in 1973.
Said investors in RCA, GE, and US Steel in 1928.
Sometimes you think you spot a fly in the soup. The circularity of the AI enthusiasm might be one of them. Or might not. As Michael Burry thought, Joe Kennedy thought, Howard Marks warned, sometimes it’s smart to get out or stay out. Sometimes not. You pays yer money and you takes yer chances.
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Sure. But total collapse overnight is rare. Usually the downward trend gives plenty of notice that mood of the market has changed.
Buy the dips is not a bad strategy. When you spot a bottom.
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As they say about the lottery
“You can’t lose if you don’t play”.
Seriously right now? You want to play? You probably pay.
NVDA is not value investing.
But it is definitely a growth company.
DB2
Different strokes for different folks
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Not to pick on you, but aren’t you the one who sold most of his holdings in 2016 when DJT won the election? The fundamentals of any given company didn’t change. You were betting on a catastrophic drop that didn’t happen.
Not exactly timing, but trying to guess something you can’t know is at least related. I shared your sentiment, but I wasn’t going to bet on a future I couldn’t know. So I held tight.
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Maybe he had been listening to Paul Krugman. From November 2016…
Paul Krugman: Trump will bring global recession
https://www.politico.com/story/2016/11/krugman-trump-global-recession-2016-231055
The economic fallout of a Donald Trump presidency will probably be severe and widespread enough to plunge the world into recession, New York Times columnist Paul Krugman warned in a New York Times opinion piece published early Wednesday…“So we are very probably looking at a global recession, with no end in sight.”
DB2
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I have been learning more about Trump’s statements in his first term on the national debt. He walked back his threat to renegotiate the debt. He is a wild card, alright.
The current valuations and coming private credit defaults are the main clouds on the horizon. Eventually, the lack of revenues from AI will catch up with that part of the market as well.
We may come out of Beijing with a pivot on Taiwan.
The clouds are gathering. The consumer is disappearing.
Inflation has been relatively high and is beginning to rise. Unless the employment gives out first.
The market is unlikely to crash just after making new highs. Tops are rounded while bottoms are vshaped. Based on past ups and downs of the stock market, to avoid selling too soon and getting whiplash, it works best to delay getting out of the market for some 99 trading days.
DB2
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Yes I did. And you are right that the recession didn’t come … until 2020. So there was some opportunity cost there, for sure.
For the sake of completing the record, I also sold out almost entirely in 1999-2000 (as Mrs. Goofy and I took off on a very long road trip and were out of touch in those pre-smart phone days. And felt the market was terribly overvalued with dot-com mania.) And also sold out almost entirely in 2008 when the market began to wobble.
In both cases I did not get out at the very tippy top (but close enough) nor back in at the very bottomy bottom (but reasonably decent), so in those two of three cases I came out comfortably ahead.
I will confess that during the recent slide my fingers began twitching. We were not affected because we are heavily in oil and Berkshire, but also with significant cash (and almost no exposure to the Magnificent 7 or whatever they’re called). We do have some SNDK and other, lesser things, but overall we’re at the portfolio all-time high, with cash ready to deploy.) But the market only slid 10% and I was expecting 15%, maybe 20%. I had said to Mrs. Goofy at 15% I’m going to start buying. Never happened. Oh well. I’m rolling over cash and that’s fine, but it’s not “get rich” money. Then again, as I have said, I’m just trying to “stay rich”. We have everything we want, if we had another $5 million nothing would change except for the charities in our will.
Anyway, I don’t advocate market timing in the sense of jumping in and out on a whim, but there are certain macroeconommic events which justify it. The Trump election was not one of them; I screwed up. The dot-com bubble was, the 2008 fiasco was. Two out of three. I’ll take it.
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The traders are creating a very different pattern. Five weeks straight up? AI trading? Trouble may or may not be brewing. Surprises are the name of the game.
But really the ideological shift has happened. We are now in a demand side econ period. We are fighting it, and will pay a steep price for fighting it.
At times of an ideological shift economic and market forces do an invertion in their relationships.
US producer prices rose far more than expected in April, official data showed, echoing signals in the consumer inflation release that rising fuel prices are stoking wider price pressures. On a year-over-year basis, headline wholesale inflation came in at 6% in April, overshooting estimates of 4.8%.
Regarding Krugman’s 2016 prediction, maybe his prediction was right but his timing wasn’t.
“It’s tough to make predictions, especially about the future”
Yogi Berra
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It that case the prediction wasn’t right. And, yes, there was a world-wide recession in 2020, but there was caused by a bat out of Wuhan rather than a presidential election.
DB2
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Trump’s tariff policies only came to the fore in 2019.
The 1893 depression began with tariffs in 1890, 2.5 years earlier.
Bad policy is bad policy. In this case, it is not just mistakes. It is ignorance.