Stocks - The Best Buys 2

[Strange Brew]

So much for the Santa rally.

[Leondros]

Tax loss selling and today is a Quad Witching session for markets. We will see massive block trades today across the market. The blocks are related to the quarterly expiration of stock options, stock index futures, index options and individual stock futures. In addition, today is also the Quarterly Rebalance of S&P indices, which will take place at the close of trading. This is where all of the indices will need to balance out their holdings.

There will be a lot of volatility today.

[Strange Brew]

Barring a last second miracle I don't think we'll see much volatility today. It's just bad.

Tax loss selling is definitely a real thing for retail investors, I have been doing some of that. I just don't know how big an impact that is.

The good news is that there is evidence inflation is coming down but until wage pressure decreases, we're not going to see any Fed pivot. I think we're going to find that getting inflation from say 4 or 5% to 2% is going to be tricky. But eventually equities turn back up. Long term this trough should be a decent buying opportunity as it's rare for market to have two down years in a row.

[Enoch Root]

TSLA down to $150

And still a P/E of 48X

[DoubleK]

I feel like I should post my portfolio as a form of public service.

I seem to have a remarkable ability to pick complete and utter loser companies.

LEV, AQN and RNW are my latest failures.

Literally FML.

[Fuzz]

Originally Posted by Enoch Root

TSLA down to $150

And still a P/E of 48X

And Ford is about 8.3, Toyota is 9.7, GM is 5.68. Yet some people tried to convince me a year ago Tesla wasn't overvalued(and should be higher). I look at it now and think it's still priced too high.

[Fuzz]

Originally Posted by DoubleK

I feel like I should post my portfolio as a form of public service.

I seem to have a remarkable ability to pick complete and utter loser companies.

LEV, AQN and RNW are my latest failures.

Literally FML.

We should have a biggest loser lineup.

[Enoch Root]

Originally Posted by Fuzz

And Ford is about 8.3, Toyota is 9.7, GM is 5.68. Yet some people tried to convince me a year ago Tesla wasn't overvalued(and should be higher). I look at it now and think it's still priced too high.

I put this in the Twitter thread, but it should go here...

TSLA earns $3.62 per share. Auto stocks typically have P/Es of 6 - 8 X earnings. TSLA's is 48 X earnings. The question is why?

Tesla has been priced as a tech company (high P/E) and not an auto company, from the beginning. But should it be? Should it be, going forward, now that it is an auto company, nothing more, nothing less, and their technological advantages are evaporating?

Do you believe that their sales and earnings will continue to grow at a rapid enough rate to justify a P/E of 48X? Or, do you think the auto industry is catching up?

If we give TSLA a P/E of 8X, that puts the price at $29. At 10X, it is $36. Hell, even if you're willing to give it a P/E of 20X, that is $72.

I fail to see any reason why you would pay more than 20X earnings for it. IMO, the right number is more like 10X. I think it is a $30-40 stock.

Can it have a pop from here? Sure. Maybe it jumps from $150 to $180 when it finds some support. But I think the overall downtrend continues, and I think it's trading at more like 10X, a year or two from now. Maybe 20X

[V]

Should be getting some kind of full capitulation here in the first half of the year, seeing a VIX of +45, and then it'll finally be time to buy. Until then, I'm just shorting the hell out of the Nasdaq.

[Slava]

Originally Posted by V

Should be getting some kind of full capitulation here in the first half of the year, seeing a VIX of +45, and then it'll finally be time to buy. Until then, I'm just shorting the hell out of the Nasdaq.

I think that’s what investors would prefer. The market craters like 30% and gets it over with, so to speak, and the recovery can begin. That’s possible, but doesn’t appear to be what’s happening. Instead it’s a bear market with ebbs and flows. The problem for a lot of people though, is that eventually one of these rallies holds and you’re creeping back into a new bull market, but you have no idea which one that will be in advance.

And to help make things murkier, we have a lot of pessimism this week and yet the markets in December aren’t actually down much at all. I sense a lot of negativity and people concerned about the markets crashing, but certainly over 2 months I feel like investors are positive. I suppose it depends on what you’re holding and how your portfolio is structured, but that’s my view.

[V]

Name one bear market that didn't end in capitulation with a VIX over 45. It's true, this may be the first time that it's ever happened, but somehow that feels doubtful.

[DoubleK]

I seriously doubt anyone on CP was investing when Volcker was Fed Chair.

We haven't seen this many rate increases of this size, consecutively.

If JPOW sticks to his guns, each 50 bps is going to hurt more and more.

[Slava]

Originally Posted by V

Name one bear market that didn't end in capitulation with a VIX over 45. It's true, this may be the first time that it's ever happened, but somehow that feels doubtful.

Well that sounds good, but the VIX only goes back to the early 90’s, I think. So that means about 3-4 bear markets that you’re using for this rule? Two of these were the Covid issues of 2020 (pretty unusual circumstances), and the GFC in 2008-09, when the financial system was teetering. Those are obviously highly volatile situations.

[flamesfever]

Originally Posted by DoubleK

I seriously doubt anyone on CP was investing when Volcker was Fed Chair.

We haven't seen this many rate increases of this size, consecutively.

If JPOW sticks to his guns, each 50 bps is going to hurt more and more.

I was investing in the stock market 15 years before Volcker became the Fed Chairman in 1979.

I think the unprecedented changes to the interest rates should be viewed in relationship to the unprecedented challenges we are facing at this period of time. The various factors, FWIW as I see it, affecting the market, are outlined as follows:

1. Problem with the supply chain and its effect on production. I understand it has been improving somewhat.

2. Domestic and worldwide inflation initiated by the release from lockdown, and brought on largely by past government and personal overspending facilitated by chronic low interest rates. Some of the ongoing contributing factors include material and labor shortages, rising wages, falling and rising (US) currencies, etc.

3. Rising interest rates. Are we going back to low rates of the last 10 years, heading for rates similar to the 1970s and 1980s, or somewhere in between? I think we should know the answer sometime in the coming year.

4. How well is our healthcare going to handle disease outbreaks like covid and various viruses? The most important question is how are we going to pay for the required changes.

5. War in the Ukraine and its effect on energy and food markets

6. Climate Change and need to develop a practical, economic and reasonable plan to transition out of hydrocarbons as an energy source. The success of such a plan appears to depend on its effect on our energy requirements and food needs, and on the masses willing to sacrifice many of our present advantages.

7. Numerous problems in helping our Indigenous people

8. Technology...adapting to the positives and the negatives

9. Overpopulation and Immigration

10. Potential war between US and China over Taiwan

11. Black Swans

12. Etc.

[Strange Brew]

This is a great time to be a lender.

[The Cobra]

Originally Posted by Strange Brew

This is a great time to be a lender.

Just because rates are high doesn’t mean their spread has changed.

Their cost of money goes up with rates.

[DoubleK]

Originally Posted by flamesfever

I was investing in the stock market 15 years before Volcker became the Fed Chairman in 1979.



I think the unprecedented changes to the interest rates should be viewed in relationship to the unprecedented challenges we are facing at this period of time. The various factors, FWIW as I see it, affecting the market, are outlined as follows:

If you were investing in 1964, that would put you in your mid-to late 70s.

I do think that your macroeconomic points are relevant to the current situation, but most of them bear no relevance to what happened in the 80s, which was my point.

[Strange Brew]

Originally Posted by The Cobra

Just because rates are high doesn’t mean their spread has changed.

Their cost of money goes up with rates.

Who is they? There are lots of ways to be a lender.

[flamesfever]

Originally Posted by DoubleK

If you were investing in 1964, that would put you in your mid-to late 70s.

I do think that your macroeconomic points are relevant to the current situation, but most of them bear no relevance to what happened in the 80s, which was my point.

I am actually in my mid 80s.

If you are asking what are the parallels between the 1970s and 1980s and today, I would answer as follows:

1. The sudden rise in inflation due mainly to high energy costs associated with the OPEC oil embargo of 1973. I recall WTI ranging in the order of $1. 50 to $2.00 through the 1960s rising to $10.00+ a bbl by 1980. Today there appears to be a strong link between the price of oil and inflation.

2. In those days we were more concerned with running out of oil and gas (peak oil), and as for climate change, people were more worried about another ice age, than global warming.

3. The Federal Reserve raised interest rates to combat inflation, but were constantly behind the curve. I recall everything taking off in 1969, with interest rates in the 5 to 14% range (averaging 8%) through the 1970s peaking in 1981 at around 16%. Of course mortgages followed suit only at least 2% higher, and many companies held off paying their bills for 3 months. In the year 1980, a person could invest $20,000 from their RRSP with the Canadian Government, and receive a 20% return for one year.

4. With all the uncertainty, the stock market crashed on occasion, and was very unstable. With the high interest rates, the safest investment, for those who were frugal enough to save money, was to buy Canada Government Savings bonds, and just clip coupons. There were periods of recession or stagflation.

5. House prices took off and many people, particularly the younger generation, could not afford to buy houses.

6. With the rising price of food, fuel and manufactured goods, and accelerating wages, the Canadian Government, under Pierre Trudeau, put in place mandatory wage and price controls in the mid 1970s.

7. The citizenry was very politically polarized, and the young spent a lot of time protesting against the Vietnam war. I recall watching the tv each evening in the late 1960s and early 1970s, where they announced the number of body bags flown home to the US each day. I seem to recall it was 50 or more.

8. It was a time of high anxiety and uncertainty. The stress relievers/mood elevators were sex, drugs and rock and roll. Things haven't changed much except they are much easier to acquire, thanks to technology and help from the Liberals e.g. pot.

just a few of the things I recall

[DoubleK]

Thanks for taking the time to post that.

Do you recall what happened with wages during that period? In my mind, wages and housing are the sticky parts of inflation now, you addressed housing in your post which remains a problem now.

Did the US Fed print money to finance the Vietnam war just as they did today to fight COVID?