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Market knows Jerome Powel can't taper. We're too addicted to easy money
 

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Discussion Starter · #184 ·
Market knows Jerome Powel can't taper. We're too addicted to easy money
Do you remember when everyone was screaming about how rates were going to go up any moment? Man, people really don't get it.

It's kind of cute that people thought the central banks would raise rates. What next, they're going to stop stimulating the mortgage market?
 

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I don't look at my ~30% gains in the last 12 months as legit...just keeping up with real inflation as blue chip equities are prone to do.
 

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Discussion Starter · #186 ·
The market is definitely getting overheated. I just ran into one of my neighbours, and he said he is going to try investing for the first time. Apparently he's been hearing a lot about stocks from his family recently.

Everyone loves stocks when they're at all time highs.
 

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Morgan Stanley’s optimistic view of the economy isn’t keeping it from warning about a looming correction in the U.S. stock market. “The issue is that the markets are priced for perfection and vulnerable, especially since there hasn’t been a correction greater than 10% since the March 2020 low,” said Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management, in a note Tuesday. The bank’s global investment committee expects a stock-market pullback of 10% to 15% before the end of the year, she wrote.

“The strength of major U.S. equity indexes during August and the first few days of September, pushing to yet more daily and consecutive new highs in the face of concerning developments, is no longer constructive in the spirit of ‘climbing a wall of worry,’” said Shalett. “Consider taking profits in index funds,” she said, as stock benchmarks have dismissed “resurgent COVID-19 hospitalizations, plummeting consumer confidence, higher interest rates and significant geopolitical shifts.”

She suggested rebalancing investment portfolios toward “high-quality cyclicals,” particularly stocks in the financial sector, while seeking “consistent dividend-payers in consumer services, consumer staples and health care.”
 

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My stocks are hitting all time highs every time I look at them, it seems. I'm looking forward to the next correction.
 

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Seeing the markets down
  • S&P 500 -0.77%
  • NASDAQ -0.87%
  • Dow Jones -0.78%
  • TSX -0.35%
Makes me feel good when my portfolio is up +0.31%.
 

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Interesting turn of events

According to the British newspaper The Sunday Telegraph, recently the Central Bank of China has stepped up the purchase of shares of British companies, including those that make up the key stock index FTSE100 - the largest companies by market capitalization, whose shares are traded on the London Stock Exchange. According to the publication, as well as Bloomberg statistics, to date, the Central Bank of China owns shares of such companies for a total of $ 17.1 billion.In the second quarter, the Chinese Central Bank owned these shares only for $ 2 billion.

In particular, it is reported that the Chinese state bank now owns 1.5% of the shares of oil and gas companies such as BP and Royal Dutch Shell. In the latter, the Central Bank of China is already the fourth largest holder of class A shares. In addition, the Chinese state bank owns more than 1% in the mobile operator Vodafone and the mining companies BHP and Anglo American.

The Sunday Telegraph clarifies that the Central Bank of China already owns stakes in more than 100 UK companies, with an emphasis on energy stocks, which account for about a quarter of its portfolio in UK companies. In second place are shares of companies in the mining sector: 16% of the portfolio. The British publication believes that foreign shares owned by the Central Bank of China are part of China's foreign exchange reserves, which has recently begun to reduce its investments in the dollar and bonds. It is reported that the Central Bank of China also owns shares in companies in a number of other countries, such as Italy and Malaysia. At the same time, according to Bloomberg, there are no American shares in his portfolio.
 

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Discussion Starter · #192 ·
The level of complacency in the market is incredible.

Nobody really thinks stocks will fall and nobody has any fear. I wonder how long we can go on like this... it's just amazing how quickly everyone forgets.

The declines in stocks in the 2020 crash were incredible. Those were some of the sharpest daily movements we've ever seen. It can all happen again, we just need one bad shock or big surprise. When everyone becomes so complacent and ultra bullish, the vulnerability to downside volatility increases.

I remember one day when the TSX index fell 10% ... in a single day. XIC at some point was down something like 11% or 12% that day in March 2020.

The short memories are amazing and dangerous
 

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The level of complacency in the market is incredible.

Nobody really thinks stocks will fall and nobody has any fear. I wonder how long we can go on like this... it's just amazing how quickly everyone forgets.
Yes

The declines in stocks in the 2020 crash were incredible.
Not really, like I said at the time, they were normal and to be expected.
I still don't understand what the big deal is. Honestly it was just typical market volatility.
It was just as "shocking" as COVID19, which we were pretty much expecting since something we get a pandemic capable virus situation every 10 years, and conveniently COVID19 is even a nice round 100 years from the last major pandemic.

These are normal and expected things.

Those were some of the sharpest daily movements we've ever seen. It can all happen again, we just need one bad shock or big surprise. When everyone becomes so complacent and ultra bullish, the vulnerability to downside volatility increases.
It will happen again. It happened many times before.

The short memories are amazing and dangerous
People make bad decisions. Particularly if they ignore expected repeatable events.

I know a guy who kind of gets money management, and he got an emergency fund.
But then he had his emergency and depleted it, but he wasn't in a rush to replenish it, because "it was a one time thing that won't happen again ". I pointed out that he had 6 "one time things" in the last year, and maybe he should consider that he'll likely have an "emergency" every 2 months or so.
History doesn't repeat itself, but it rhymes.
 

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There is no free market anyways. The Fed will save the market, as we know.

Rectangle Slope Plot Line Font


Let's take a closer look.
Rectangle Slope Line Font Plot


Wait, why did the Fed suddenly increased its balance sheet as soon as September 2019?

Well maybe because of the yield curve inversion which predicts an upcoming recession. Maybe that is the reason of the amazing little bubble of a bull run from September 2019 to February 2020.

Rectangle Black Azure Slope Plot

Light Product Azure Rectangle Font


Also, the Fed saved the market as soon as mid March 2020.

Now we'll just pay with inflation, something ranging around 3% which will hold for 3+ years.
 

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There is no free market anyways. The Fed will save the market, as we know.

Also, the Fed saved the market as soon as mid March 2020.
They didn't "save" the market.

Now we'll just pay with inflation, something ranging around 3% which will hold for 3+ years.
Yeah, we have lots of pent up inflation from all the market manipulation.


When the government goes in and messes with stuff, ie "saving" the market, there will be a price to pay, and it will likely be higher. Printing money and all these games doesn't save the market or solve the problem, just adds more cost that we eventually end up paying for anyway.

The sad thing is most people don't realize how all this hurts them.
 

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When the government goes in and messes with stuff, ie "saving" the market, there will be a price to pay, and it will likely be higher. Printing money and all these games doesn't save the market or solve the problem, just adds more cost that we eventually end up paying for anyway.

The sad thing is most people don't realize how all this hurts them.
Yes, I agree, they didn't "save" the market in the sense of solving an issue, but I meant they "saved" the market in the sense of taking short-sighted action against a crash. But on the long term, that's pretty bad.

That's also why I'm moving towards value stocks. Growth won't last.
 

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The level of complacency in the market is incredible.

Nobody really thinks stocks will fall and nobody has any fear. I wonder how long we can go on like this... it's just amazing how quickly everyone forgets.
I think the savvy investor is aware that stocks can fall. Problem is this conservative investor gives in after being punished every time the Fed props up the market like helicopter parents

The last time the Fed announced a taper the market had a "taper tantrum" like spoiled brats and the the rich parents gave in and open up the candy drawer rather than face reality. The spoiled kids are bringing down the entire neighborhood now. China wants to keep up with the Joneses so they do the same

Of course there are the young investors who are disenfranchised from stagnant salaries and inflated costs who just yolo into into meme stocks. They are playing with relatively smaller amounts
 

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This time it’s different.
View attachment 22206
The US household equity allocation has been the best predictor of forward 10 years market returns.

We are poised to a 0% CAGR between 2021 and 2030. The market may have a -5% to -10% correction by the end of the year. But we're not done with the current momentum yet. Give it another year or two, maybe even three. Then it'll start to fall apart.

Slope Rectangle Plot Font Line


 
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