Is this The Year

Is this the year when the chickens come home to roost and we see a (beginning of a) massive downturn?

Personally I’m split on the matter. If the CBs raise interest rates, there must be an effect on the valuation levels. Companies have maassiiive debt piles on their balance sheets (I think like 25% of publicly listed companies in the US barely make enough to cover their debt expense). So raising rates too much can lead to a cycle of bankruptcies. From the other side, the only way to reign in inflation is to raise rates. The CBs could also just let inflation run its course without raising rates. That would help the indebted to burn off some of their debt but at the same time the debtors would take a massive hit on their receivables.

While nobody was looking, the Shiller P/E is almost at 40X. Highest ever was 44X. I know many will say that this measure is garbage, it requires many adjustments, it’s never right, etc. All fair points. But to me I am not expecting to tell the precise day or time by looking at the leaves changing colors. Autumn leaves are not a wristwatch. That’s not what they are useful for. You can, however, tell that the season is changing by looking at those leaves.

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Stock markets haven’t even crashed yet though. This is totally within reason what’s going on. Down 2%… wow so scary.

Up until March of 2020 I think you could have counted on three fingers how many circuit breakers we hit - we experienced seven of them in that one month (don’t quote me on that).

I think the topic we should be discussing first is if crypto is finally going the way of the beanie baby or not?

Because if inflation is going to peak at 6% then the long end of the curve isn’t going to run anything passed that. Even so, it’s quite cheap to hedge against that “well no one saw this coming” moment.

Have you hedged? If so, how?

Not really, I scored on an ultrabond put earlier this month, but I’d hate to call that a ‘hedge’, especially since the one I bought last week disintegrated like the Black Panther.

My point is that if you look at those securities, and are actually worried about interest rate shocks, you can buy protection for cheap with considerable time to maturity at lower strikes that represent the “holy ■■■■” moment. There’s like no liquidity in those options though is what I’m finding out. Every time I tried to liquidate it the market makers would only bid me half of what I wanted (so imagine trying to buy one too). Or if you’re a real cheapskate - like me - I’d bet there’s probably mispriced options out there on some forex pairs that stand to get fisted if the interest rate shock continues globablly. I’d look at pairs like JPY/USD assuming that the Japs have to resort to an immediate over accomodative monetary policy while the Fed struggles to even move the needle. It’s long been my belief that the bond market sets rates and not the fed anyways.

Equity future options are far more expensive though - I just looked and the December '22 SPX 3,500 future put is asking 200 points, whoever is selling that ■■■■ to me, you HAVE to figure is buying something like UVXY to hedge himself - so I’d rather just beat him to the punch and buy UVXY, especially since I’ll win in the long run if this “SCARE” fizzles out like a wet firecracker.

I don’t know much about hedging, but I do know that I like to go to bed at night with my hand on a titty, weed in my lungs, and zero stress, and UVXY is probably your safest bet to whipsering “go ahead and make my day” in the ears of all the “WalL Str3eTerS”.

Like you said in the other thread: Occams Razor please! No time to read and take in all that ■■■■ :smiley:
Jk, I hear you. Something is going on and we might see a massive downturnn. Proceed at your own risk!

Dammit, that’s a good point you have. I’ll summarize in the “yada-yada” fashion.

Yada-Yada 1) Strategical asset allocation
Yada-Yada 2) Buy your losers sell your winners
Yada-Yada 3) Titties

I hope you’re right. I’m market agnostic: every month I put in X usd no matter what. Market movements for me is more of an intellectual exercise and I like to voice my lopsided views whenever possible :smiley:

So, there might be a downturn or there might not be a downturn?

I mean, the timing is the tricky piece. But if you see when it gets that high, over 140 years of data when the number gets this much altitude, it doesn’t stay that way for long. Not saying it’s going to happen tomorrow, but do I think US equities have 18% per year in the tank for another 3-4 years? I’m doubtful.

I appreciate the sentiments of the “this time it’s different” crowd. Sometimes it is. But I’ve yet to see the killer argument that makes me say, heck yeah, P/E’s of 50-60 in US core equities are reasonable and sustainable. No effing way. Despite the cool kids pumping it up on Reddit, in the end the gravity of fundamentals always ultimately comes to harvest its souls.

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Where do I get my hands on #3??? :wink:


Ay mijo!

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