MungoFitch’s major bottom signal triggered for one day on Sept. 30th and since then the S&P500 is up 9%, half of that increase coming just today. While many of our favorite companies are trading above their September 30th price (i.e. Berk is up over 12% in that time), some are still trading below their price on the day of mungo’s call. GOOG, which is trading under $94, was at $96 on Sept 30th, while META (currently $110) was at $135. I added some GOOG today and I’m tempted to add META as a speculative holding. I wish had added more QQQE around $60, but I may get another chance in the low $60’s before this bear is completed.
Given the positive inflation news today, Mr. Market is going to be persuaded that the FED will loosen its choke hold next year, leading to a softish landing. If so, we may have seen the bottom of this bear being put in just over a month ago. Thoughts?
I think the market is being Foolish and the Fed is going to strangle them to get them to understand they mean business. I have gone into turtle mode until the market starts to realize what is going to happen to them.
[quote=“buynholdisdead, post:2, topic:80215”]
I think the market is being Foolish and the Fed is going to strangle them to get them to understand they mean business. I have gone into turtle mode until the market starts to realize what is going to happen to them.
Andy [/quote]
So, you expect the market to turn in short order and continue down? I haven’t seen any “today’s inflation news” but I infer from the OP that the news is good. Why would the FED insist on “strangling” the market and on what grounds would they try? This gets into a credibility problem for the FED so they can’t just crank rates up if they don’t have the basis to do so.
These are all either rhetorical questions or statements that end with a question mark. I have no native insight. I’m just asking here.
I will admit to being disappointed today at the 4+ % increase. What are they thinking? But, hey, how long was the market overvalued before last Jan? A long time.
Fcorelli,
These are my guesses, but yours are just as valid. I am not an expert nor am I an economist but I have just been reading and listening and thinking.
Powell says he wants to stamp out inflation. So inflation came down a Little with the last report but it is still high. Powell wants it at 2 percent and it is at 7.7 percent so he still has a long way to go. So why would he stop now? I don’t think he will, this is just a bear market rally and I believe at the next fed meeting they will raise another .75 percent. If that happens this market will tank again, especially if Powell says they are not stopping. But if I am wrong and he only goes up .50 percent and then says they are going to wait and see we are off to the races.
Just to make it perfectly clear these are my thoughts and should really have no standing with anyone, I could very well be your taxi cab driver or the doorman at your building with the next hot tip.
I’ve gone into turtle mode in previous bears as well, at great cost. Some companies selling at historically attractive multiples. GOOG infrequently trades at 4x sales (currently 4.2, recently as low as 3.8 x sales). If META doesn’t burn all its value in the metaverse, it has to be a steal at a PE of under 10. Hell, META has a $300 bil market cap, throws off $35-36 bil a year in FCF, and has $40 bill on the balance sheet. If not for Zuck’s insanity, this would be the greatest no brainer of all time. Baxter looks reasonable, as does PKG.
I get the “don’t fight the FED” mantra, and I agree that the S&P500 doesn’t look exactly cheap even after the recent declines, but I’m not suggesting that you buy the market. I’m suggesting that there are a lot of companies out there selling at reasonable to attractive prices, and if the inflation dragon is starting to lose some of his fire then now might be a good time to start shopping. Anyone who did buy the market when Mungofitch announced a major bottom signal on Sept 30th, you’d already be up 12% from that bottom.
There are never clear signals that the bear is over, and bear markets typically end while the storms are still swirling around us, so I’m wondering out loud if this isn’t the turning point.
The guesswork here is around the underlying cause of inflation. Is it caused by a temporary supply constraint, or is it demand driven? Powell originally believed it to be the former, hence his hesitancy to raise rates earlier, but then inflation took off and forced the FEDs hand. If he was right all along, then inflation should start to ease gradually and then quickly as falling demand and rising supply do their magic. Today’s numbers suggested that maybe the peak has been reached and we are now on an inflationary down slope. If the FED raises the rates by .75 points in December, you will see the markets tank. However, given today’s inflation report a .50 basis point increase is far more likely. As Powell said, the target is more important than the level of each increase. They can pace their way to the ultimate target rate, which will be determined by future data on the inflation rate, unemployment, GDP growth, and supply constraint issues.
My problem is that I am always too cautious in bear markets and wait too long to get back into the market. I’m trying to avoid that by buying companies that look attractively priced even if the world is ending.
Yes, that’s my “B” position. The more obvious position is: More correction on the way. All the signs. Inflation, interest rates, supposedly dire earnings reports on the way…? I haven’t seen anything particularly fear inspiring but they have been consistent with a weak economy for most of 2022, cries of mass layoffs and higher unemployment. But they never say what they mean. 10%, 12% or going from the current 3.7-ish% to 4.2-ish %? That ain’t real unemployment.
The"B" position is as you stated. The stock market turns up before the storm has passed. If things begin to clear, we avoid significant unemployment, inflation does bleed itself off, the FED relaxes etc etc by next Summer, this could very well be the inflection point. Will likely be a few more weeks of up/down/up down as bottoms aren’t really “reached” as much as they are “formed.”
Mostly I look at moving averages. ALL OTHER timing aids are either A) pretty “doggie do” (my observation) or they might work but no better than a 40 week SMA and are just as susceptible to whipsaws as the SMA. However, they are all pretty good at discerning trend changes on these long trends. I’m watching and waiting.
I like the companies we own. They range from 22 year to as recent as two months holdings. If the market goes down 50%, life does not change as we still have work income. The most recent purchases fit to Buffett’s 10X or less pretax income to market cap ratio. When more cash piles up, we will buy other fine companies fitting that ratio as well as having other positive qualities.We seldom sell holdings and usually gift a holding that has appreciated and now has a questionable future.
Your right Philip, maybe the answer is to just buy small bites and keep buying them over and over till all your cash is deployed. My thing is that I have the majority of my money in the market and have been riding it. My cash portion I am still holding because I have enough invested, and lost, so waiting for a better entry point.
I’m trying to avoid that by buying companies that look attractively priced even if the world is ending.
Then buy BRK, MKL, maybe BAM, maybe KMX - - - and forget about your knack for tech. GOOG and META are not in the “even if the world is ending”, but in the “bet with a high probability of a good outcome” camp.
I am not in turtle mode, but I still expect lower stocks in the near future. The recession seems like it either hasn’t started or is just getting going. Soft landing means we land in the near future, I don’t see it, many haven’t even declined. Mostly tech has been impacted and had large layoffs, others not so much.
Mostly that’s what I remember about the rout at the end of the 90’s. As bad as it was, it wasn’t really as bad as all that. A lot of tech issues were absolutely crushed, true, but then most probably deserved to be. Like, you know, the excesses of today.
Otherwise the US (and mostly the world) keeps chugging along. People buying diapers, filling their cars, going to the movies or camping, preparing for Thanksgiving. A little bit more, or a little bit less. Absent huge black swan, we have problems that are controllable - and are being controlled, perhaps not perfectly, but then what is?
The market will be fine. It’ll be down some and it’ll be up some, and as long as there’s more or less statis in the world, it’ll be OK, eventually getting better. Don’t worry. Be happy.
I have pushed forward investment money every time the market sells off dramatically. I think it will pay off in the long run. Now I’ll build some cash for a few weeks and keep building if the rally continues. I have ample savings and increasing income, luckily. I feel that we have had some great opportunities.
I’m assuming the high rate hikes will continue until Powell’s talking points change. He’s been clear enough. But I have a long term horizon, and the ability to sock away 25% of my income. If I buy and it drops, I will have another chunk of change to buy with two weeks or a month later.
Maxing out my IRAs (SEP & Rollover) and saving on income taxes when they come due. I figure those savings might offset some short term capital loss.
I see some well priced stocks and some that I’ll stay patient with.
I’m just a rookie, please be weary of utilizing my strategy.