Stock Market Discussion, Chat About the Latest Market Action

[Andreas Thiel]

Some more charts that tell a story.

Right now earnings per share look pretty good.


The next image shows how consensus estimates have developed over time. For 2022 ... they are still at the elevated level like nothing happened.


The last image shows what has happened ... to the access to cheap money and how earnings have responded to changes in the past.

Earnings should respond to the lack of cheap money, consensus EPS revisions should get worse and worse. Not sure how fast this will play out.

 

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[Andreas Thiel]

Another reminder and update ...

the story in the post above means a double whammy combined with another chart.
As mentioned previously, there has to be a spead between bond yields and share yields - which is healthy around 3% more for equity (because bonds are less risky).

The blue line shows the bond yields that lag inflation data (brown line). Most experts seem to expect a 100 basis points hike, for example, so blue catching up with brown seems to be the current trajectory.
If this actually happens, eroding EPS (due to the credit impulse contraction) will make it a lot harder to uphold the spread.
Share price declines will have to be more extreme to make buying shares attractive again.



Interestingly it was reasonable to assume that inflation data could be less severe than it actually was. Raw materials / energy actually got cheaper.



It seems that services / labor costs were responsible for the high inflation data. We read a lot about layoffs and maybe those layoffs will lead to relatively stable earnings ... and with inflation going down as labor costs go down these forces might regress towards the mean relatively fast, unless there are disruptive events ... like for example a price cap on Russian oil leading to oil prices around $380. Either way, I think this gives us a reasonable idea of the magnitude of the short term tension in the financial markets.

 

[socaldude]

The 2-10 yield curve is FULLY pricing in a recession. A 20 basis point spread. Stocks don't seem to be pricing that in.

TREASURIES-U.S. yields mixed, lower on long end, as Fed meeting looms

 

[Kevin88660]

The 2-10 yield curve is FULLY pricing in a recession. A 20 basis point spread. Stocks don't seem to be pricing that in.

TREASURIES-U.S. yields mixed, lower on long end, as Fed meeting looms

Its pretty weird these days. Fed is signaling and probably saying explicitly that they are willing to sacrifice asset prices for inflation.

The market seems not fully buying into that.

I am hearing far stretched opinion that Fed will save the market when recession comes, and hence there is no need to fear.

It seems to me the market participants think that the economy or stock market is “too big to fail”.

But I think they fail to consider that we are at a point whereas Fed has to choose to fight between the inflation (currency purchasing power) or saving asset prices.

The government and Fed can allow assets price to collapse. Rich people gettjng bankrupt and committing suicide is not something that the government cannot allow to happen. It happened many times in history. Bull market for the last 30 years seem to have cause people to forget about that.

Currency collapse due to inflation is something that the government cannot allow to happen. Because that will be game over for the entire nation.

 

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[Kevin88660]

Its pretty weird these days. Fed is signaling and probably saying explicitly that they are willing to sacrifice asset prices for inflation.

The market seems not fully buying into that.

I am hearing far stretched opinion that Fed will save the market when recession comes, and hence there is no need to fear.

It seems to me the market participants think that the economy or stock market is “too big to fail”.

But I think they fail to consider that we are at a point whereas Fed has to choose to fight between the inflation (currency purchasing power) or saving asset prices.

The government and Fed can allow assets price to collapse. Rich people gettjng bankrupt and committing suicide is not something that the government cannot allow to happen. It happened many times in history. Bull market for the last 30 years seem to have cause people to forget about that.

Currency collapse due to inflation is something that the government cannot allow to happen. Because that will be game over for the entire nation.

I am quite bearish right now. Of course I do want to consider that the other side of the argument.

Maybe we get inflation under control quickly, and we are back to easing.

Maybe the economy gets so bad that fighting recession is a bigger concern.

But it just does not seam that we are going to end inflation quickly without killing of asset price further first. Asset prices are much more interest rate sensitive compared to inflation. we live in a world where 0.25% difference means a lot to public confidence in investment, whereas inflation still relies a lot on global supply chain getting back in place.

On the economy, Fed was ready for aggressive rate hike given their own reasoning that labor market is tight, so that a slower economy will not leave to massive layoff and pains for the average person. But in the event that the recession gets so back that we need more easing (a 180 degree turn in policy, which I highly doubt so), even then asset price will be toasted first.

I struggle to think of a theoretical scenario that will save the asset prices in the future without killing asset prices first.

 

[Zardiw]

Thought it would be cool to have a separate stock market discussion thread, like the "Random Thoughts/Chat" thread -- this is the thread to post in if you want to discuss any stock market trading day, including any insights or forecasts you might have. Or, this is the place to post random economic activity information, posts, tweets, etc.

Here is the thread to vote on where 2022 will end:

INVESTING - Your 2022 Stock Market Predictions? Vote (Closed)

Where will the 2022 stock market end up on Dec 31st, 2022? Please vote your thoughts and feel free to comment. For voting purposes, the stock market to predict is the Dow Jones Industrial Average... On Dec 31st, 2021, it looks to close around 36,000 Where will it be on December 21st, 2022?

www.thefastlaneforum.com

So I'll start...

Which is to say that we're having a pretty interesting start to 2022! Is this just a minor correction, or something more ominous? This downdraft is caused by interest rate speculation, and that the FED will start raising them.

There's a company called Triad Pro ($TPII)....they've developed products that use an E-Cell instead of Lithium Batteries.....pretty disruptive tech. I bought one of their Solar Powered Golf cars over a year ago (have never had to plug it in. And still runs great). They also recently got an order for 50 of their GenSets from a major oil company in Canada (Syncrude).
I think this company will be huge.......I mean....replacement for Lithium Batteries?....doesn't get any bigger than that.....lol.........

Website: Triad Pro

Stats:
Current Price: .015 or so
AS: 500M, OS: 334M, FL: 153M
No Conv debt.

Z

PS. Here's my software for trading stocks. Got a lot of good reviews/feedback on the main page: DDAmanda Stock Scanner/Screener
PPS. Golf Car Hill Climb Video:

View: https://www.youtube.com/watch?v=7qOPuTD9fRY

 

[YanC]

Walmart cuts profit outlook as inflation forces shoppers to spend more on necessities

Stock down 10% after close yesterday... TGT & AMZN taking a hit too.

 

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[MJ DeMarco]

Facebook missed both revenue and EPS. What a joy!!! (Although the stock doesn't seem to mind).

 

[ZF Lee]

Facebook missed both revenue and EPS. What a joy!!! (Although the stock doesn't seem to mind).

Well I guess its because iTs pRicEd iN.

Never have I seen such a fake market before in the face of doomsday.

We've had the President's men claim that two consecutive quarters of GDP doesn't MEAN recession any longer (although most economists use that benchmark since eons ago):

Biden Team’s Take on ‘Technical Recession’: It’s Not Real

www.bloomberg.com

And then today it comes official that recession is here...

https://www.cbc.ca/news/business/us-gdp-recession-1.6534650

Considering the previous CPI leaks, you know we are in shit when the administration is spinning things as they go.

If I were a longterm investor, I think I would have just given up on the markets and sold everything.
But well...the Paycheck Pot does use some of the markets to generate the passive income...

 

[AceVentures]

Hyper-inflation or recession with rising unemployment? Neither dem or rep want to admit to their constituents that we need 10% unemployment and several years of hardship to bring inflation under control. They quite literally need to destroy demand, this is the simple answer that is being constantly massaged to appear otherwise to the average American. "Soft-landing" "transitioning" lol.

To tame inflation, it would appear we need tremendous leadership that is willing to tackle both the demand and the supply side of the problem: address demand by way of reducing access to credit, effectively resulting in only profitable value-additive ventures being able to spin that credit, and improved supply by way of innovation (which it seems would also be made possible by tightening access to credit). I struggle to see how any of our elected representatives have the knowhow or the courage to practically tackle the problem with real leadership. Who wants to be the one to tell an entire generation of broke millennials that they not only can't have a home or a car, but they can also no longer enjoy a cushy job pushing buttons at corporations that can only afford to employ them thanks to free money?

Is hyper-inflation the obvious alternative to lack of leadership in this situation? It remains to be seen, but if history is a teacher, it would suggest it is the inevitable path for the USD as has been for all the other failing fiat currencies around the world (past and present).

What the markets wants to do with this whole mess is anybody's guess, and I'm personally tired of trying to guess. I used to be this guy in the below meme - but now I try to let go of the nonsense and focus solely on one thing: innovation. It's the only way out of this mess. We've got to continuously produce and innovate, to bring costs of goods and services down and to deliver a higher quality of life to as many people as possible.

 

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[YanC]

Yeah nothing seems to make sense seriously... But if Mr Market and I disagree, I guess I'm likely to be the one who is wrong.

Guess I'll just stick to selling strangles and adjust to whatever bullshit the market is throwing at me.

 

[MJ DeMarco]

Is hyper-inflation the obvious alternative to lack of leadership in this situation? It remains to be seen, but if history is a teacher, it would suggest it is the inevitable path for the USD as has been for all the other failing fiat currencies around the world (past and present).

There are a few variables that are different this time that might save USD from any type of currency collapse, or reset.

#1 -- there is complete globalization that has never existed in human history, both trade, collusion, and information and #2 -- there are 100X more dominate, large corporations (like Apple, Google) which have a global presence, and they all trade on the US Markets.

These variables have never been present in another country where the currency went to crap.

 

[Kevin88660]

Something big is happening right now that market is not paying too much attention.

If Pelosi’s visit to Taiwan trigger a war that could send stocks crashing down, and VIX shooting through the roof.

Right now market doesn’t think that is too likely.

 

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[socaldude]

Pretty interesting.

10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity

 

[socaldude]

Classic bollinger band 4 SD “sell” on that SP chart. It’s timing does take a little bit though.

 

[socaldude]

Yields making a run up and indexes haven’t even reached their lows. A lot of activity around Sept 22 strike VIX put options. Looks like a lot of long VOL plays. Gonna be fun.

 

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[MJ DeMarco]

Some really bad market action in the last week, and it's a bit scary to think that it can drop 20% more before some relief is perceived.

 

[loop101]

Some really bad market action in the last week, and it's a bit scary to think that it can drop 20% more before some relief is perceived.

If the 40 year bull-market is a byproduct of deficit-spending since the 1980s, inflated more by QE since 2009, I would expect QT to lower the DJIA to around 20k (pre-QE levels).

 

[loop101]

If the DJIA stayed between 8k and 15k for 14 years (red), and then more than doubled after QE was started, why wouldn't it drop back down to that range after QT is complete? Deficit-spending also inflates the market with debt money, so there is that upward pressure. If they *really* do QT, I expect the DJIA to go to 15k-20k, but I don't think the politicians have the guts to do it. They can't save the markets and save the US dollar, so I expect them to slow down the money printing, and then go back to it, until the dollar collapses. They will choose a $100 minimum wage over a DJIA of 15,000.

 

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[AceVentures]

The euro is 30% undervalued against the dollar. What will happen to the euro if European natural gas prices evolve in line with the futures?

At some point the EURUSD bear trade will probably become overdone, ripe for a good reversal

The risk/reward remains sloppy until there is some resolution in sight to the energy situation.

 

[MJ DeMarco]

Inflation exceeds expectations showing no sign of receding or bottoming... stocks tanking.

Inflation rose 0.1% in August even with sharp drop in gas prices

The consumer price index for August was expected to decrease 0.1% from the previous month and increase 8% from a year ago, according to Dow Jones.

www.cnbc.com

 

[socaldude]

Inflation exceeds expectations showing no sign of receding or bottoming... stocks tanking.

So much for inflation peaking and signaling a market "bottom". LOL

Yesterday the VIX up one handle in the cash session while SPX was up like that told me immediately VOL traders were up to something.

 

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[MJ DeMarco]

Yesterday the VIX up one handle in the cash session while SPX was up like that told me immediately VOL traders were up to something.

Funny you noticed that too .... that divergence caused me to close to Short SPX put positions. That move, as of now, looks like it saved me about $6K.

 

[socaldude]

SP 500 futures below 3900 in the first hour of trading!

Based on the weak price action the day after Tuesday my guess this is real and not fake. We should see a new high in the VIX.

 

[loop101]

Apparently the Feds are ending their MBS purchases today. It will be interesting to see if there is a cascade of other financial problems caused by this.

The Fed Stopped Buying MBS Today. | Wolf Street

wolfstreet.com

 

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[loop101]

Here is a longish animation of Yield Curve inversions, and how they predicted recessions between 1990 and 2022. Set to the opening track of "2001: A Space Odyssey". It ends with a developing inversion for a big recession.

https://twitter.com/i/web/status/1571166840352477184

View: https://twitter.com/WallStreetSilv/status/1571166840352477184

 

[socaldude]

View: https://m.youtube.com/watch?v=FhBXXzRrL84


Interesting interview, I have a cash account at tastyworks where I started with $2k in February where all I do is take long option premium directional bets. At one point my P/L YTD was up $40k. It’s at $18k right now. Since options are a directional instrument, it makes sense these huge variance of returns exist. You do get to see how options prices have to reflect it’s probability of expiring ITM very distinct from its classic +/- ATM .5 delta direction. Like today, where the Fed meeting is near. In other words, I’m still left scratching my head how Delta shares two definitions. I know in propositional logic that can’t be so.

Here is a longish animation of Yield Curve inversions, and how they predicted recessions between 1990 and 2022. Set to the opening track of "2001: A Space Odyssey". It ends with a developing inversion for a big recession.

Bonds are a boring misunderstood instrument where I think a lot of opportunities exist. Also, they always tell the REAL story. Looking at both bond prices and yields I knew right away the market was saying “we don’t believe the Fed”. Bonds are saying inflation is here to stay.

 

[MJ DeMarco]

Short term downtrend has now turned into a mid-term downtrend. Looks like a lot more pain ahead...

Beware of FIRE acolytes screaming "buy the dip!" The market can go down longer than most people can stay solvent.

 

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[socaldude]

Short term downtrend has now turned into a mid-term downtrend. Looks like a lot more pain ahead...

When the market rallied with a 50% retracement then made a U-turn I knew this bear market was here to stay for a while. I actually think we will revisit pre-pandemic levels around 3200.

In the meantime nothing but crickets from every WSB thread, FIRE movement proponent and Suze Orman.

It's actually kind of depressing and sad to think people "bet" their future on these markets.

 

[socaldude]

One of the reasons I haven’t bought long VOL contracts like VIX calls or UVXY calls in this market is because volatility has been acting wierd. Looks like a lot of short premium sellers coming in and selling puts and not a whole lot of panic to buy downside protection. You can tell a lot of pros went long VOL but they did through short VIX puts. Although if we breach the lowest lows of this market my guess is we will see a volatility explosión with the VIX reaching upper 30s or even maybe upper 40s. Seeing what happens tomorrow in the market after today’s banker meeting will be a big “tell” going forward.

Also a lot of risky geopolitical stuff going on in Europe and in China. Here in the US we can get away with fraudulent economics because we are the largest economy but it can be harder in other parts of the world. There is still a war going on in Ukraine and China’s currency manipulation might back fire. LOL