9 ms·
Wall Street heavyweights are sounding alarm about stock prices
- polote 6y agoArticle is 3 days old and nothing different than before has happened
- nafey 6y agoThis does sound concerning however the counter arguments for an imminent stock market crash are that there are no other good alternatives for your investment. Even though fundamentals might not be lining up these conditions can prevail for much longer than one would expect. As they say "markets can remain irrational longer than you can remain solvent".
- valuearb 6y agoCash is an investment.
- badfrog 6y ago> there are no other good alternatives for your investment If the market is going down, then even cash is a better alternative.
- mrits 6y agoIf you KNOW the market is going down you certainly don't want to be holding onto cash...
- Justin_K 6y agoWhat should you take a position in?
- ac29 6y agoIf you could be 100% sure how the market was going to go (up, down, sideways), you could make a lot of money trading options. It's when you're only 65% sure that's difficult.
- nextweek2 6y agoTraditionally gold. However, at this point in the cycle most people have missed the boat. Probably best to ride out the cycle (assuming you have a diverse portfolio).
- paulus_magnus2 6y ago> there are no other good alternatives for your investment said the billionaires, and continued pumping money into rent seeking, cornering existing markets. then one of them got inpatient and built "new" things - SpaceX [$36b] - cheap access to space, potential to revolutionise travel with starship - Starlink [$30b] - ubiquitous planetary Internet - Boring Co. [$1b] - Tesla [$150b] - electric cars people actually want, OTA upgradable software, potential for autonomous cars, recover up to 60% of cities land are currently used for parking. - Neuralink [$0.1b] - OpenAI [?]
- cft 6y agoSince about 2008 stock prices have officially decoupled from the fundamentals, in the post-divident, Sarbanes-Oxley and QE era. The stock market no longer serves as a collective economic planning mechanism. This won't end up well.
- posixplz 6y agoOf what relevance is SOX other than dating the period?
- UweSchmidt 6y agoCould you elaborate or point to an accessible article?
- harryh 6y agoOn Jan 1 2018 the Shiller PE ratio was 24.02. Today it is 26.81. That's hardly a decoupling from fundamentals. https://www.multpl.com/shiller-pe/table/by-year https://www.multpl.com/shiller-pe/table/by-year
- robomartin 6y agoIt absolutely is. P/E ratios of 20 to a zillion to one only happen in the stock market. Don't believe me? Build a company, keep it private and then go sell it to someone. If you ask for anything more than about 5x you'll be laughed out of the room. The stock market is about speculation, plain and simple. At some level is people playing "business owner" without having a clue how to build value or where it comes from. Go back to my prior 5x scenario for context. Nothing wrong a speculative market, it's just a matter of accepting that reality and everything that comes with it. I made a pretty nice living a couple of decades back day trading full time. Traditional investors putting their money into the market have no clue what goes on in the speculative battleground they trust with their savings. Again, to clarify, I am not saying it is a negative. One can do very well in a speculative market. The key point is that it is important not to confuse it with reality in any way.
- harryh 6y ago
- hhs 6y agoThis is a small group of people and may suffer from sampling bias. Is there someplace that keeps track of what more people are saying over time in a systematic manner?
- pmorici 6y agoThe problem with listening to these kinds of things is that you are only getting their opinion at a discreet point in time and their opinion might change quickly one week to the next. Druckenmiller openly talks about how he often changes his mind and does a complete 180.
- hhs 6y agoIndeed, wonder if there’s a term for this type of hedging behaviour, which the article also references when citing the president’s tweet. Is this studied in the economics literature over time?
- harryh 6y agoYes. Prices.
- tryptophan 6y agoThey are just mad that they didn't get to buy in at low prices.
- code_duck 6y agoMy first thought is that they're just attempting to manipulate markets so prices will drop and they can buy some more.
- malandrew 6y agoI found this article about a global dollar short squeeze particularly useful to better understand why the US market may have decoupled: https://www.lynalden.com/global-dollar-short-squeeze/ https://www.lynalden.com/global-dollar-short-squeeze/
- HenryKissinger 6y agoThe stock market has turned into a get rich quick scheme in the minds of many retail investors. The WallStreetBets subreddit isn't helping. They even made the cover of Bloomberg recently. People with little to no financial education see someone make +5,000% returns with a lucky trade or options contracts, and it becomes hard to resist the pull. WSB is the 39th most active subreddit today. At the beginning of the lockdown I overheard two people on the street - likely not finance professionals - chatting casually about stocks. That triggered a red flag in my head. If stock trading becomes a mass popular hobby, like video games and movies, I have a nagging feeling that people are in for a rude awakening.
- harryh 6y agoPeople on WallStreetBets and the like are loud but relatively few in number. They don't have enough money to significantly move the market expect in rare cases and illiquid issues.
- noitsnot 6y agoI don't frequent the sub but I saw a lot of crazy moves where people were losing money not making it.
- klyrs 6y ago> If stock trading becomes a mass popular hobby, like video games and movies... "Stock trading" is already just another form of online gambling. Novices have been doing day trading for quite a long time and it does seem to attract more people during times of volatility.
- valuearb 6y agoAnyone can pull off a hugely profitable trade and become a WallStreetBets god. This is what you do: 1) Open 20 different Reddit accounts. 2) In each of them claim to make a different crazy bet, preferably using options and “document” it. Doesn’t matter if you actually make the bet, photoshop works fine too. 3) Once the trades close, abandon all your losing accounts, and start posting photos of “your” new Ferraris and luxury yachts on your winning accounts. 4) Announce you are using your magical trading skills to open your own trading fund open to a select few redditers who wire you money first.
- jinpan 6y ago> Legendary investors Stan Druckenmiller and David Tepper were the latest to weigh in after a historic market rebound, saying the risk-reward of holding shares is the worst they’ve encountered in years. True, but what are they going to do about it? They would be hard-pressed to find a rewarding asset class today that has billions in liquidity, with less risk. If they hold cash/tbills, they risk losing a good chunk to inflation from the new monetary policies. They could try to hedge for a market crash, but timing it seems difficult - the market can remain irrational longer than they can remain solvent. And hedges are aren't cheap with the higher IV levels today.
- harryh 6y agoWhat inflation? CPI is currently negative.
- Mc_Big_G 6y ago...for now.
- runT1ME 6y agoThe inflation that matters such as asset prices and real estate aren’t captured by CPI.
- harryh 6y agoStock market PE ratios are up a little bit over long run historical averages but hardly out of line with fundamentals. The same goes for price to rent ratio of most real estate.
- jklein11 6y agoThis was largely due to the supply glut of oil. Price of food went up by~3.5%. Additionally CPI tends to be a lagging indicator. In other words it is a good way to determine if we have just seen massive inflation. The stock market is forward looking, meaning analysts are considering future risks in pricing the assets.
- chadmeister 6y agoThese guys are just as prone to bandwagon and herd mentality as those in Venture Capital. When they're all saying the same thing I feel it's the best time to do the opposite of what they say.
- ericmcer 6y agoThere wont be another crash like March, probably just a slow bleed over the next 6 months. My personal plays are Put option Leaps (2022) on a few retailers whose stocks have semi-recovered for now but are definitely destined for the graveyard in the next few years. Don't try to predict the next crash/recovery.
- save_ferris 6y ago> There won’t be another crash like March. This too sounds like a prediction to me. Keep in mind that a bunch of huge companies like Google, Amazon, Wal Mart, etc. own a ton of commercial real estate. If commercial real estate does collapse, it’s going to have impact. The tech giants seem to be sitting on massive piles of cash, but I guarantee that’s not true for everyone. We all saw how devastating the CDO monstrosities were in 2008, and it’s hard to see how this outcome will fare much better if the commercial real estate sector has been playing the same games since the last crisis.
- ericmcer 6y agoThe Fed is actively watching now. Stimulus bills can and will be pushed through in a day or two. The Fed reaction to this was also much faster and more aggressive than 2008, there’s no way they let another 30% drop happen as quickly as in March. That’s not really a prediction other than assuming that they aren’t going to completely change their position and strategy and let it collapse.
- raspasov 6y agoYou can find people who have been "sounding the alarm" since 1980 about stock prices. This is no coherent analysis in this article, just a random collection of out-of-context opinions. I generally expect better from Bloomberg.com .
- RickJWagner 6y agoBloomberg has correctly called 9 of the last 4 market corrections.
- ThrowMeAwayOkay 6y agoThere’s been other discussions if we are in a Black Swan event. My opinion is we are not. We are in a series of Black Cygnet events.