For the last 40 years, I (we) have invested in a never-ending Bull Market in stocks. During this time: Stay the Course and Buy the Dips worked.
But as Ray Dalio said recently: THE PERIOD OF EASY MONEY IS OVER! The new paradigm will either be Zero or Rising Rates, neither of which will be kind to long term investors.
The BIG MONEY has already begun to or completed exiting stocks. That started around January 1st. Be very careful what you do now!
@TradingView, Easy Money is over but we are still at the lower bound.. smh
Vibranium_Capital
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Great analysis
robyoung567
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I like your analysis. Here is a thought exercise. Let's say the 'Big Money' took all their money out. If the market is 50T, how much of this 50T is big money and how much is retail (like us)? Assuming a 20% drop and every share sold is big money, then big money is 10T? Surely big money is bigger than this. In other words I think big money still has a lot in equities. They don't move it all in or all out. They re-allocate between equities, bonds, sectors, countries etc. Money flows, it does not disappear (it only disappears when loans mature and new loans do not take its place). The question is where did the money go and where will it go? Where is the big money going? It's not US equity at the moment. It's not US bonds or T-Bills they are going down. Its not world stocks as the VEU (Vanguard FTSE All World Excluding US ETF) is down 8% since June 2021. The only thing that is up is US cash (ticker DXY). Real Estate (ticker VNQ) is down, so I don't think it is real estate. Gold, materials, metals are not moving a lot.
Big money is likely going into private ventures, private lending etc. Stuff we don't have access too. Big money also buys companies, not shares in companies. There is a difference. Warren Buffet does not buy shares he buys companies with shares. Big money doesn't quickly and easily sell these companies. Microsoft is still buying Activision because that is what big money does. They see opportunity and don't time the market. If there are wrong they are wrong.
So what actionable is available to us: 1. Buy good companies 2. Invest a little out of the US. 3. Wait with cash on the sidelines to be redeployed.
Personally, I am in cash and a little short. There is a risk to holding cash. The risks are inflation and missing big market moves.
There is a lot of debt in North America (government and personal) and I think higher interest rates combined with QT (as you spoke to above) has yet to fully play out. The SPX is down only 8%. ONLY 8%. There is not enough fear at all to call a bottom. The ten less the two year yield dropping fast. A little more and it could signal recession.
I think we are going to see a protracted sideways with a slight downwards slant market for the next month. Who knows what will happen in a month. In this market, a month is a long long time from now. LOL. Hope you enjoyed the post.
Johnny_Rockets88
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"the period of easy money" is comical. In the time of 120 day pay terms there is no easy money. Bond yields are a symbol of how easy it is to make money with your money, it's the alternative to risk investing. It's quite obvious Dalio and the other bond bears have never owned a business and tryed collecting your money from services rendered. It's anything but easy. The question is, does the business owning class with failing revenues gamble with their saving while having 5k a month mortgage 1k in car payments and 2 kids in college. Or do they take their 1 or 2 million left in the bank and collect 1.9% for 10 years. My bet is the latter....
midnitepoet
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@jscheurichiv, In 1982, I was living on the income from 30 year bonds at 18%. Now I am retired and can't get enough interest to even make it worth while to own bonds. Just sayin'...
Johnny_Rockets88
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@midnitepoet, then what do you do with your money, leave it in the bank and get zero interest or put it in apple at ATH heading into recession? Guaranteed 2% is better then a loss and even a donkey can see whats coming down the pipe. PS, you remember how easy it was to make money on 1984? You could of walked into any trade hall and got put to work at any toilet factory, oil refinery, or Telecom site. All of the jobs were for American owned companies with American workers. Fast forward 40 years and every dollar spent goes over seas leaving our economy forever. You answered your own question if you would think past surface level. Please tell me a business that can make 4% net margin without risk or work? I'm eager for your response.... taxes are also substantial higher then 1984 Btw I could go on all day pointing out the differences none of them positive.
op941
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@jscheurichiv, blood alcohol level is high bc of market conditions. to clarify with a yes or no answer. people are going to settle for 2% yield on their 1 million dollars while inflation is 9% bc buying apple at ATH and losing 50% of their money is worse?
meekmekado
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@jscheurichiv, USA has printed so much currency that they had to move all their production to other countries to be able to continue. They also been the biggest exporter of inflation to other countries but it looks like this has come to an end ;) But it seems that it is a huge dollar shortage, especially in China so... How this will play out, i dunno :S A bold move is that "they", ECB, USA, BoJ, BoE will never throw in the towell and hand over the economy to the east ;) Soon we are going to see funny things play out, old school economics will not work, because this time it is a completly different game. When all else fails you go to war and history always repeats itself, but first let's have a cold war :)