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Where do you feel we are in the US equity cycle?

Matt Likes Analysis wrote:

not sure what hedging has to do with. 70%+ of RJ’s revenues are directly related to client investment assets. RJ has no reason to hedge these assets at the firm level. saut is willing to be tactical when there are convincing signs that a market downturn or recession may be coming. these signs don’t really exist right now.

Wouldn’t that make them nearly analogous?

Anyway, I think there are actually plenty of signs, but people are ignoring them and smart money talking heads who posit otherwise have their own interests in mind at this point. Just my opinion.

“Recognizing risk often starts with understanding when investors are paying it too little heed” - Howard Marks

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maybe hedging is the wrong word. hedging usually means a bank is hedging its long book. RJ doesn’t really have a long book (they’d have a very tiny one related to some of the other 30% of the business). RJ’s main business simply holds and advises on client assets. it really doesn’t have a ton of control over those assets. some assets may be discretionary but if they’re not invested as per client wishes, this discretion can be pulled whenever.

Matt Likes Analysis wrote:

maybe hedging is the wrong word. hedging usually means a bank is hedging its long book. RJ doesn’t really have a long book (they’d have a very tiny one related to some of the other 30% of the business). RJ’s main business simply holds and advises on client assets. it really doesn’t have a ton of control over those assets. some assets may be discretionary but if they’re not invested as per client wishes, this discretion can be pulled whenever.

Yeah they have a small institutional segment where they run money. The majority of it is Financial Advisors that drive their business. If someone works for them outside of St. Pete corporate office or NYC, it is usually on the retail side from what I remember. I only worked there a year but yeah in theory if clients decided, they could easily switch to Merril Lynch, Wells, etc.

We are in the very early stages of Analyst Forum great recession. 

igor555 wrote:

OMG please DONT hedge in the early stages of a Bull market. whats wrong with people?

Did you see this one?

https://www.cnbc.com/2018/08/28/jeff-saut-even-a-20percent-stock-drop-wo...

six to seven YEARS more, not months….I disagree, but he has a pretty great track record of making calls which includes before I was even a thought. hmm…

yep i agree on secular bull market if we are looking at this at a 100 year chart, we will keep raging on for a long time, we essentialy reached a high 2000 that we did not beat until 2012. can ya believe that?! what are the odds!!! but we do need the typical short term bear market to clean the excess fat to wipe away the weak. 

I love my cheese. I got to have my cheddar.

i mean, he’s talking semantics. i don’t think anybody is calling for a multi-decade top a la Japan. if the market falls 20%-50%, i think a lot of people would be disappointed with those losses even if the bull market continues shortly after.

i think a lot of folks are suffering from recency bias. the last 2 crashes were some of the worst in history.

GFC was 2nd worst and 2k blow up was up there.

it s a tough hurdle to overcome especially if you only been investing 10-20 years and witnessed the 2 crashes.

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RIP

Nerdyblop wrote:

yep i agree on secular bull market if we are looking at this at a 100 year chart, we will keep raging on for a long time, we essentialy reached a high 2000 that we did not beat until 2012. can ya believe that?! what are the odds!!! but we do need the typical short term bear market to clean the excess fat to wipe away the weak. 

I know it’s difficult to slap a timeline on what that means, but is this in terms of like weeks, months? surely not years…

its hard to tell but:

  1. “I never became wealthy by buying at the lows or selling at the highs. I was there merely for the middle 60 percent.” – J.P. Morgan

I love my cheese. I got to have my cheddar.

Nerdyblop wrote:

its hard to tell but:

  1. “I never became wealthy by buying at the lows or selling at the highs. I was there merely for the middle 60 percent.” – J.P. Morgan

It really is crazy how in such a complicated arena full of formulas, strategies, theory, and overwhelming amounts of information, that the simplest approach can often be the most successful and lucrative. ie passive management vs active 

Not sure if it’s depressing or just painfully true, but before I even cracked open one page of CFA curriculum or stepped one foot into a Finance underground class, my strategy and personal investment thesis hasn’t really become any more advanced or changed (obviously it has a little, but not to the extent that I thought it would). 

My step dad is a perfect example of this. He finds companies with good leadership, a product with some type of competitive advantage in a growing industry, buys stock, diversifies, holds and makes sure the story is still in tact each quarter……that’s it. 

igor555 wrote:

i think a lot of folks are suffering from recency bias. the last 2 crashes were some of the worst in history.

GFC was 2nd worst and 2k blow up was up there.

it s a tough hurdle to overcome especially if you only been investing 10-20 years and witnessed the 2 crashes.

not really true. inflation indexed declines have often been greater than 30% and the length of bear market has an major impact on investor psyche as well. the nominal chart makes it look like the declines of the past weren’t so bad but back then there was often a 5%+ inflation grind every year. this is particularly true in the 60s and 70s.

30%+ REAL drawdowns were commonplace in the past. numbers below are rough based on eyeing the shiller real S&P price chart. many of these declines were true bear markets, lasting years. if investors have not experienced anything is that of a true bear market, like one that lasts 6 years and causes investors to vomit their savings into a pit of despair, killing all financial knowledge bestowed to them for the past generation. ‘00 was more like a real bear market, lasting about 2 years. investors were spoiled with ‘08. while the drawdown was huge, people didn’t have to agonize for very long. i think that’s why the market has generally been seen with skepticism. people hadn’t really understood what happened before the market started rallying and they brought that confusion and anger into the bull market.

1987: -40%

1976-82: -33%

1973-75: -50%

1969-71: -33%

1946-49: -42%

1937-43: -62%

.

"You want a quote? Haven’t I written enough already???"

RIP

Shorter bear markets are preferable. Harder fall is preferable too.i actually did something analysis similar to this. I recorded total return performance on a monthly basis all the way to 1800s. Everything is a bull market until a 20 percent decline from a new market peak. The back to back harshness from 2000 and 2008, was literally the worst if not as bad as Great Depression. Anywho median loss is -26 percent. I also did some other calculation like how long it takes to hit new high, how long bear markets are, how long to double up from previous peak. I did all this in 2013. Absolutely fascinating stuff!

I love my cheese. I got to have my cheddar.

Matt Likes Analysis wrote:

 investors were spoiled with ‘08. while the drawdown was huge, people didn’t have to agonize for very long. 

Joke or serious?

Maybe you weren’t old enough to experience it first hand but the 5-year period following 2008 sucked massively.  Certain demographics were structurally altered due to the crisis.

Yes the 0.1% fared okay but the rest of us will foot that bill someday.

Everyone struggles but asset prices fall. The ones who can keep their jobs lever up will reap massive rewards. You don’t know the winners until a market downturn. these winners are defined as someone useful, credit worthy, and not levered. It’s the same thing for businesses. The only ones we should genuinely feel bad for are the youth since they suffer from reduced opportunities without the proper amount of time to prove their worthiness. The older people should have seen this coming and prepared

I love my cheese. I got to have my cheddar.

Galli wrote:

Matt Likes Analysis wrote:

 investors were spoiled with ‘08. while the drawdown was huge, people didn’t have to agonize for very long. 

Joke or serious?

Maybe you weren’t old enough to experience it first hand but the 5-year period following 2008 sucked massively.  Certain demographics were structurally altered due to the crisis.

Yes the 0.1% fared okay but the rest of us will foot that bill someday.

serious. and i’m talking about the stock market in particular. obviously humans were not spoiled as much of the economy was gutted by 2008. this gutting is part of the reason why investors did okay.

investors were spoiled with 2008 given the v-shaped recovery. losing over 50% in 18 months is much more tolerable than losing 50% over five years. the 2008 crash and recovery was so fast that advisors didn’t have time to lose many clients and many people didn’t make adjustments to their portfolios until the recovery was well underway. we never reached the “equity markets constantly underperform” stage that was reached in previous downturns. we simply reached the “what the hell was that?” stage followed by the “holy crap, look at that rally” stage. 

weve been in a sideways market since 2000, new bull started when previous high was taken out in 2013

"You want a quote? Haven’t I written enough already???"

RIP

I know Hussman gets a lot of flack, and maybe rightly so given his seemingly permabear stance, but his analysis is pretty compelling imo. For all of you “early cyclers”, sit down and read this article (and yes also spend some time reviewing/analyzing his graphs) and tell me you are still confident we are in the early innings…

https://www.hussmanfunds.com/comment/mc180904/

Hey Hamilton, have a holly jolly Christmas.

i mean the bottom line is what matters the most. not how convincing they are. see beautiful mind or turd. jk mang :) hahahahaha

I love my cheese. I got to have my cheddar.

the trend has been my friend, should be your friend too

"You want a quote? Haven’t I written enough already???"

RIP

IsThereAny wrote:

I know Hussman gets a lot of flack, and maybe rightly so given his seemingly permabear stance, but his analysis is pretty compelling imo. For all of you “early cyclers”, sit down and read this article (and yes also spend some time reviewing/analyzing his graphs) and tell me you are still confident we are in the early innings…

https://www.hussmanfunds.com/comment/mc180904/

We are still in the early mid-innings.  Thing is for all of his P/E related metrics, people forget there are two ways out of a high P/E not to mention failing to factor in the historically low rates.  Beyond that it’s just a bunch of historical analysis and technical mumbo jumbo.  You could easily see 5 more years out of this on consumption and demand growth.

#FreeCVM #FreeTurd #2007-2017

^you should see ev/ebitda. no matter how you slice or dice pe. ev ebitda is overvalued. anyways markets  have  a bias to go up, so i;d never say short it, i will say that i would not lever up to invest right now.

I love my cheese. I got to have my cheddar.

IsThereAny wrote:

I know Hussman gets a lot of flack, and maybe rightly so given his seemingly permabear stance, but his analysis is pretty compelling imo. For all of you “early cyclers”, sit down and read this article (and yes also spend some time reviewing/analyzing his graphs) and tell me you are still confident we are in the early innings…

https://www.hussmanfunds.com/comment/mc180904/

Very compelling read if rather ominous and bearish. 

.....woof

the debate right now is basically one side saying “look at how we just broke out of a multiyear sideways market, valuations don’t matter” and the other side saying “valuations always matter, technicals are stupid”.

the former is reliant on corporate profits continuously growing to a greater percentage of the economy and income inequality worsening more and more. if income inequality does not continue to grow over time, it is nearly impossible to expect 7%-10% equity returns over the next 5, 10, 20 years and to justify current valuations. while this is certainly possible, at some point you will face an extreme reckoning where labour and/or voters rebel and that could result in a great depression like 80%+ real market decline.

the latter (i.e. hussman) is assuming that corporate profits revert - by natural business cycle reverberations, wage pressures or negative corporate tax changes. debt related business cycle issues would likely cause a quick but not long lasting decline of anywhere between 20%-60% while wage strength (i.e. labour rebellion) or negative tax changes could have a decades long impact. given how vocal labour and the left is relative to the past, this is the true risk to equities that is nowhere near priced in. if someone like bernie ever got into power, we should all find other employment for a decade. might be tough to find though.

New Hussman article out… time to change to my plastic bed sheets again… 

https://www.hussmanfunds.com/comment/mc181002/

Hey Hamilton, have a holly jolly Christmas.

“Where do you feel we are in the US equity cycle?”

Near the end of America’s 200-year run. Not a good time to long.

Long what comes next…China. 

I love my cheese. I got to have my cheddar.

Nerdy got me perusing the STL Fed website and I stumbled across the below, which IMO, is a fantastic read:

https://www.moneyandbanking.com/commentary/2018/10/14/assessing-housing-...

I plan on doing a deep dive soon on this. Perhaps we didn’t learn our home loan underwriting lesson? hmm idk. Regardless, pretty interesting

nice. thx for sharing. 

I love my cheese. I got to have my cheddar.