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On 9/15/2020 at 1:24 PM, Deleterious said:

There is a great chance to double dip on this.  Make money on the way up and then short the **** out of it when it inevitably implodes.  Timing that implosion might be a bit tricky though.

https://www.cnbc.com/2020/09/21/nikola-founder-trevor-milton-to-voluntarily-step-down-as-executive-chairman.html

Down 30% in pre-market right now.  There was a part of me that didn't want to believe some of the complaints against the company as I didn't think GM would get into bed with a fraud.  That deal is a win/win for GM though, if it doesn't work out, no harm no foul, so i'm not as confident they did their due diligence as much as I previously had though.

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Wow, this thread's been quiet lately.

I've been searching for ways to explain this goofy stock market lately, and I found this.  The Great Asset Bubble:

Quote

The Great Asset Bubble (?)

At long last, asset-price inflation may have finally arrived.

Aug 17, 2020
 
 

False Signals
In 32 years, I have never believed a word about U.S. government officials creating an “asset bubble.” The charge has often been made, initially in the mid- and late 1990s, less emphatically during the middle of the following decade, and then noisily throughout the 2010s. But as far as I can see, it has never been correct.

The 1990s featured the spectacular rise of growth stocks, along with Federal Reserve Chairman Alan Greenspan’s famous 1996 lament about the difficulty of recognizing when the stock market suffered from “irrational exuberance.” But it is difficult to attribute that behavior to government policies. Short-term interest rates averaged 5%, and fiscal policy was relatively conservative, with the United States running a budget surplus from 1998 through 2001.

The Fed then lowered rates to combat the ensuing recession and the budget surplus became a deficit, due to tax cuts and the cost of the Iraq War. However, as the 2000s progressed interest rates steadily increased, reaching a peak of 5.25%, while deficits shrunk. Clearly, the real estate marketplace had become speculative, but the prices for financial assets weren’t bloated. (To be sure, stocks got crushed in 2008, but those losses were caused by a banking disaster.)

The allegation became more credible following the 2008 global financial crisis, as the Federal Reserve not only kept interest rates near zero, but boosted money creation through the new technique of “quantitative easing.” In addition, budget deficits remained high. On the other hand, despite repeated warnings that the government’s largesse would rekindle inflation, prices remained steady, even as the S&P 500’s earnings grew by 130%. With such strong fundamental results, further explanations for the stock (and bond) market’s gains were unnecessary.

Mea Culpa

It was with this mindset--that asset bubbles never exist--that I wrote Friday’s column . That article challenged the belief that U.S. stock prices recovered from their late-March lows because equity shareholders adopted a long-term view, shrugging off COVID-19’s effects. If that is so, I wondered, then why have Treasury-bond prices not also returned to their previous levels? By this argument, stock shareholders look to the future, while Treasury owners invest for the here and now. So concluded the column, having identified a puzzle but not its solution.

In hindsight, the likeliest answer was blindingly obvious. My article was correct that economically, stock and Treasury-bond investors have diverged. High equity valuations anticipate tomorrow, while low bond yields reflect today’s condition. But it overlooked that the two assets have behaved similarly, in a broader sense. Both equities and bonds have treated the investment glass as being half full. Stocks discount today’s bad news, while bonds ignore tomorrow’s potential woes.

That angle entirely escaped me, because for three decades I have ignored claims that asset bubbles exist; however, I must now take that argument seriously. To date, it is the only explanation that I have encountered that fits the evidence.

All at Once
Which is, that since April 1, all assets have risen, across the globe. American stocks are up, as are Japanese, British, and Chinese, along with just about every other country’s equities. Gold is 50% above its March bottom; crude oil has rebounded sharply from when it registered negative value; U.S. housing demand has soared; and bitcoin has reached its record high, save for a December 2017 spike. The only investments that have not increased have been high-quality bonds, but as they have retained their March gains, they have appreciated substantially on the year.

What economic scenario could explain such unanimity? It appears from their stock prices that companies will thrive, thereby justifying their relatively steep price/earnings multiples (on average, 20 for global developed markets, based on trailing 12-month results). Such robust growth presumably will support the commodity and real estate markets. Yet somehow, despite this expansion and record levels of global debt, inflation will remain dormant, for decades to come.

Perhaps we live in the best of all possible worlds. Ten years ago, many thought it certain that U.S. interest-rate policy would spark inflation; and 10 years before experts believed that of Japan. Neither event occurred. It may be that once again, the global economy will prove more resilient than expected. It may be that everything can simultaneously rally, based solely on rational future expectations.

The New Reality (?)
That, however, would not be the way to bet. That all major assets immediately rose in price (or, in bonds’ case, stayed put) after the world’s central banks cut interest rates and bought securities in the open market, while legislators authorized massive stimulus programs, would appear to be no coincidence. The simplest explanation is also the likeliest: Much of the money created by global governments during this spring and early summer has “leaked” into asset prices.

To an extent, such a result was planned; central bankers wished to maintain confidence in the financial system, by supporting the stock and bond markets. They hoped to avoid a repeat of the 2008 global financial crisis, when investment losses rippled into the general economy. But the effect appears to have substantially outgrown the intent. Seeking stability is different than having stocks fully retrace their losses, bonds retain their peak values, and commodities surge.

Such behavior was perhaps unavoidable, in the task of preventing systemic panic. This column is not to second-guess emergency decisions. It is instead to confront the prospect that for the first time during my investment experience, the wolf of asset-price inflation has arrived. At some point, if enough liquidity is created through central-bank actions and deficit spending, those funds will push asset prices higher than they otherwise would be. That time would seem to be now.

Which leaves me with little advice to offer, this being new territory. One obvious concern is portfolio diversification. If rapid money creation can cause all assets to rise at once, then presumably the opposite policy might lead all assets to fall at the same time. That would be disheartening. It would also seem to be an implicit recommendation to hold more cash, and thus fewer risky assets.

I could have never guessed that the Fed's money printing could have caused such a spike in stock prices.  I got out of the market a while ago thinking that prices couldn't go higher.  Obviously, they could have.  But I'm glad I have cash now.  There was an asset bubble even before COVID, so the fact that stocks have rebounded to their pre-COVID highs, despite record contraction (yes record, even worse than the Great Depression) of GDP, is a sign of how crazy asset prices are right now.

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Leading out of the article, what the chances that all assets could fall at once and fiat cash collapses due to rampant inflation, basically leaving nothing as being safe except maybe, I don’t know, metals and land?

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3 hours ago, chasfh said:

Leading out of the article, what the chances that all assets could fall at once and fiat cash collapses due to rampant inflation, basically leaving nothing as being safe except maybe, I don’t know, metals and land?

Well one possibility is that you will have the 70-80s again. Once the boomers start dying off the population will being to skew younger and per-capita consumption could start to tick back up. That would create some demand pull inflation pressure that would force interest rates back up some. As soon as interest rates start back up, the stock market will go dead just as it did in the 70s inflation and does whenever interest rate yields exceed outrageously high P/E ratios like we see in this ZIR environment.

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On 10/17/2020 at 9:09 AM, chasfh said:

Leading out of the article, what the chances that all assets could fall at once and fiat cash collapses due to rampant inflation, basically leaving nothing as being safe except maybe, I don’t know, metals and land?

Might want to hold some of your cash in Yen just to mitigate some risk.

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This is the biggest single day hike I have personally seen on my account.  It has gone up and down by 2% a few times, even 3% once, but 4.2%?  Wow.....that just takes me back up to where I was 10/13/20, but still.  What an uptick.  Wondering what tomorrow holds.

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3 hours ago, John_Brian_K said:

This is the biggest single day hike I have personally seen on my account.  It has gone up and down by 2% a few times, even 3% once, but 4.2%?  Wow.....that just takes me back up to where I was 10/13/20, but still.  What an uptick.  Wondering what tomorrow holds.

Healthcare socks had a monster day yesterday, so I am guessing you have some kind of healthcare loaded fund.  Healthcare has come back to earth today, but the overall market is looking great again.  

Edit: Stocks not socks!

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31 minutes ago, tiger337 said:

Healthcare socks had a monster day yesterday, so I am guessing you have some kind of healthcare loaded fund.  Healthcare has come back to earth today, but the overall market is looking great again.  

Yeah that section of our portfolio is heavy with health care, a contra fund, Puritan and a select health care.  All very strategic purchases when I made them and have been doing really well for us.

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2 hours ago, John_Brian_K said:

Yeah that section of our portfolio is heavy with health care, a contra fund, Puritan and a select health care.  All very strategic purchases when I made them and have been doing really well for us.

Is that Fidelity Contrafund?  I have had that one for years and it's been great.  

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1 hour ago, tiger337 said:

Is that Fidelity Contrafund?  I have had that one for years and it's been great.  

Yup, FCNTX - I have had the largest portion of our money in that account and it has been the best one we have.

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I was told by many (on here) that the president has no effect on the stock market...I know that is BS, but it is funny to see people crediting Biden for the bump in the market.

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11 minutes ago, John_Brian_K said:

I was told by many (on here) that the president has no effect on the stock market...I know that is BS, but it is funny to see people crediting Biden for the bump in the market.

Oh, hey, I guess I'm unblocked now. Cool.

Anyhow, some may be tempted to call it a Pfizer bump, because of the vaccine announcement today, but as of noon today, the two biggest sector ETFs moving today by a wide margin are Energy and Financial, followed by Real Estate, Utilities, Industrial, Technology ... and then Health Care.

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2 hours ago, John_Brian_K said:

I was told by many (on here) that the president has no effect on the stock market...I know that is BS, but it is funny to see people crediting Biden for the bump in the market.

It is not the presence of Biden, it is the absence of Trump that will restore stability.

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51 minutes ago, Charles Liston said:

It is not the presence of Biden, it is the absence of Trump that will restore stability.

That is the same thing.  Come on people...you cannot have it both ways.  When the "other side" has their president in there they talk about the time it takes for an economy to catch up to the sitting president.  When "your side" has their president in office it is doing well because he is in there or it is doing crappy because of the last guy.  Other than the expected dip from COVID, Trumps DJIA numbers are right in line with the democratic presidents before him.

Round and round.  

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3 hours ago, John_Brian_K said:

That is the same thing.  Come on people...you cannot have it both ways.  When the "other side" has their president in there they talk about the time it takes for an economy to catch up to the sitting president.  When "your side" has their president in office it is doing well because he is in there or it is doing crappy because of the last guy.  Other than the expected dip from COVID, Trumps DJIA numbers are right in line with the democratic presidents before him.

Round and round.  

I agree with this.  I think the President has very little to do with the market.  Trump manipulates the markets with his tweets short-term (a day or 2), but long-term the market is going to do what it wants regardless of the president.  

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6 hours ago, chasfh said:

Oh, hey, I guess I'm unblocked now. Cool.

Anyhow, some may be tempted to call it a Pfizer bump, because of the vaccine announcement today, but as of noon today, the two biggest sector ETFs moving today by a wide margin are Energy and Financial, followed by Real Estate, Utilities, Industrial, Technology ... and then Health Care.

I think some of that is related to Pfizer though.  Sectors like energy that got pounded during the Pandemic will come back if there is hope that the Pandemic is closer to ending.   

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14 hours ago, tiger337 said:

I think some of that is related to Pfizer though.  Sectors like energy that got pounded during the Pandemic will come back if there is hope that the Pandemic is closer to ending.   

I should have been in Pfizer a couple months ago, but I was waiting for our direct deposits to catch up so I could buy them outright.  I ended up buying 5 yesterday.  It is more personal for me then just a COVID vaccine.  I really should have had some way before now.

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On 11/9/2020 at 11:44 AM, John_Brian_K said:

I was told by many (on here) that the president has no effect on the stock market...I know that is BS, but it is funny to see people crediting Biden for the bump in the market.

I still don't think the President has much affect on the stock market.  It's been doing mostly great for about 12 years now under two (three?) very different presidents.  Every time, it starts to slip, the Federal Reserve steps in and gives it an artificial boost.    

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After not speaking in public for nearly 3 weeks, the lame duck President spoke for 1 minute and 4 seconds and proceeded to praise himself and his staff for the Dow 30,000. 

The best part is the markets continues to rise after he lost meaning the President has no impact on them or they are excited that Biden is going to be in the White House.   Typical Trump that he’s too stupid to see that he’s patting himself on the back for something that he actually had a negative impact on.   

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I just realized that I’ve broken the cardinal rule of the Investing thread.   I truly apologize for my error and beg for your forgiveness.

 I would say that it will never happen again but it probably will since I read from the new activity feed and don’t pay much attention to the thread title and just the post.   Thanks for your understanding on this and also for future infractions where I will beg for your forgiveness again

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It's all right.  The thread caretakers (deleterious and screwball) have disappeared anyway.  I hope they are doing well.  

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