Here we are 3 hours into todays market and my portfolio is up 12%. Let’s see Bill is up about 20%, Sentinel 19%, Cloudflare 17.5%, Mongo 15.5%, Snowflake 13.5%, etc.
Now I’m not saying that to brag, I didn’t expect anything like that today. I had no idea No way! You didn’t either. No-one did.
I’m saying just to emphasize why I don’t try to guess the market, and why I don’t sell out at the bottom because the market has been going down. It’s why I stay fully invested in great companies though.
Look, I have no idea whether this rise will last until the end of the day even, or whether it will lose half or all of the gain by then, but just yesterday we had people talking about how the market could go down another 50% from here and you should be in conservative companies, etc, etc, etc, blah, blah, blah. No one knows what the market will do tomorrow, but I can tell you that the businesses of these companies will do very well indeed over the next few years.
Best,
Saul
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Saul,
I think it was predictable what would happen today (I never made that call in this forum, so I recognize I could be completely speaking from hindsight. Though such a call would be OT). Once the Federal Reserve Chair reaffirmed yesterday the 50bps rate hike for June (when markets were fearing a 75bps rate hike), markets were definitely going to stop the bleeding and recover.
I in general agree with your style of investing. But when we get macro sell-offs like this, I wonder if this board should also look for companies being valued like hypergrowths that aren’t, or with clear risks, so we’re hedged.
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It is nice to see green for once. I just have to remember that +10% is less than -10%, and we’ve had a LOT of -10%s or more. The climb always takes longer than the retraction…
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I think that the huge drops in all the market indexes (as well as the even huger one in tech stocks), mean that this may be over sooner than one might expect. Why? Because everyone investing in the stock market in any way now feels a lot poorer, and more like saving his or her money for an emergency instead of spending it on purchases, meaning fewer purchases of goods, cars, houses, new factories, new equipment, fewer new jobs, etc, meaning that there will likely be both suddenly less growth in the economy, and suddenly a lot less inflation, meaning that the Fed will have to stop or slow raising interest rates, or possibly even make small cuts, which means less scare about high interest rates, etc, etc. What to look at will be sequential changes in inflation, not year over year.
When I wrote that yesterday, I knew very well that the April inflation report had already shown slowing of sequential inflation (up only 0.3%), but I assure you that I had no idea that the Fed would recognize it immediately and when I wrote “this may be over sooner than one might expect” yesterday I had no idea that our stocks would respond so violently upward today.
And it will take us a long time (many months) to get back even to breakeven for this year, and this isn’t over yet. The Bear will keep growling and biting and trying to push us down again. It’s not at all over yet, but it’s a start, a beginning.
Best,
Saul
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When I wrote that yesterday, I knew very well that the April inflation report had already shown slowing of sequential inflation (up only 0.3%), but I assure you that I had no idea that the Fed would recognize it immediately and when I wrote “this may be over sooner than one might expect” yesterday I had no idea that our stocks would respond so violently upward today.
Maybe, but I’m not sure that fully explains it. While report showed a slowing, the inflation report was still a miss compared to expectations. The consensus for all-items were 0.2 (month) and 8.1% (YoY); the actuals were 0.3% and 8.3%. Consensus vs actual for core was 0.4% vs 0.6% (month) and 6.0% vs 6.2% (YoY).
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Maybe a clearer way of putting it would be that the mammoth sudden fall in stock prices (tech prices especially) in anticipation of the Fed raising rates to slow growth and inflation, that overselling of the stock prices did the Fed’s work for them without the Fed having to raise rates the way they were anticipating. And today we saw that first sigh of relief.
Saul
33 Likes
Maybe a clearer way of putting it would be that the mammoth sudden fall in stock prices (tech prices especially) in anticipation of the Fed raising rates to slow growth and inflation, that overselling of the stock prices did the Fed’s work for them without the Fed having to raise rates the way they were anticipating. And today we saw that first sigh of relief.
I disagree with this, Saul.
There is no relief in the markets due to inflation rolling over. And no one is seeing signs that the FOMC is changing from hawkish to dovish anytime soon. If anything, they are staying the course (Powell got reconfirmed by the Senate), they have not ruled out additional rate cuts, QT is ramping up and they admitted this week that any “soft landing” will be very difficult to achieve (although they have a few pathways to get there). Also remember, Powell is a Volcker fan and Volcker ripped the bandaid without emotion when he needed to bring inflation down while he was Fed chair.
There will likely be no temper trantrum FOMC reversal any time soon and markets are well aware of this…especially institutional investors.
Jim Jubak did a nice write-up yesterday on what happened in the markets on Friday and what could likely take place on Monday.
https://www.jubakpicks.com/will-todays-huge-bounce-continue-…
I tend to agree with Jim’s point of view. Additionally, short gamma along with low liquidity played a role in the Friday bounce. This is a rabbit hole…people can google it if they like.
Anyways, by your own rules, posting about daily market ups and downs is OT for this board. So I will not vacillate further.
PS. I did celebrate yesterday’s bounce with an extra large peg of scotch. We should enjoy these small successes when we get them.
Beachman (@Iwannabeontheb2)
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I know that about every time in 2022 Saul comments about some bounce towards the upside that it quickly disappears. No one knows anything but I don’t see why this market would all the sudden turn around. The market is repricing the insane multiples our SaaS companies had. Still not buying more…yet.
P.S. Thanks to everyone who contributes to this board. To other newbies (like me) of investing in these SaaS companies I would strongly advise you to start looking elsewhere at historical multiples so the next time our companies start flying high you can take some profits along the way and not get so burnt. Hope this doesn’t get deleted as it may save people a lot of distress in the future. I have learned a lot the past year.
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