[MrBlackhill]

To the question "are we in a bear market", I wonder if people are noticing this pattern of dead cat bounces.

Today NASDAQ bouncing up by more than +3%, but then we keep reaching lower lows.

 

[MrBlackhill]

Wow, bonds ETF are super scary, more than stocks.

Look at this on Portfolio Visualizer.

100% US Stock Market is currently in its 10th worst drawdown of the past 50 years.
100% 10-year Treasury is currently in its 2nd worst drawdown of the past 50 years.

Maybe by the end of this month it'll take the first place!

 

[MrBlackhill]

Yes, pretty sure we'll reach new lows this week. Maybe even today.

 

[MrBlackhill]

This was a thorough ***-kicking today. Can't believe that everything I hold was down... amazing.

That's bear markets for ya.

CSU, our best Canadian tech stock... is up +0.84%, lol.

 

[MrBlackhill]

I hate to say this, but late last year my parents were happy to tell me that their financial advisor finally convinced them to buy a bit of stocks (they were 100% GICs). Something like 20% of their portfolio. Maybe because they could afford a bit more risk, maybe because I kept talking how I was 100% stocks, maybe because I said stocks aren't risky when they are part of a diversified portfolio.

Not sure how they feel at the moment. Not sure how their financial advisor deals with their reaction.

When someone bought GICs their whole life and their first experience in stocks is a -20% drop within a few months, that's one cold shower, even if it's only 20% of their portfolio in stocks.

I guess the right way to see this is their whole portfolio only dropped -4%.

 

[MrBlackhill]

those days are long gone

I think those days are gone... but not long gone.

Rates are peaking, inflation is peaking, recession is coming and high interests won't solve supply issues, there's still lots of people looking for a roof.

I'm looking at stats in the province of Quebec and June 2022 has much fewer sales than June 2021, but average sale time is about the same and median price is about 5% to 20% higher.

As per this graph about my neighbourhood, we're still deep in a seller's market.

 

[MrBlackhill]

Here's a more up-to-date graph including Q1 2022 for Montreal area. So far, all flat exception made for plex. I guess they'll soon release the data for Q2. I don't know how fast can things turn, but in Q1 rates were already moving fast.

Interestingly, I guess that with the new reality of work-from-home, some people simply moved out of the big Montreal area, turning other nice cities into an ever more seller's market and with prices still rising in the +20% range over 12 months.

I am convinced our prices here will be substantially lower by September.

I'm sure that will happen too, but mainly because we've just had a bubble of median prices rising more than +30% over the past 2 years, so even if prices drop -20% it's just a correction. Obviously, like in the stock market, it'll hurt those who bought the bubble.

And, yes, when looking at median price for plex in Montreal which have been hit the "hardest" since April 2022, it's starting to move down. I bought a plex in 2019 and the plex market would have to crash -30% from its peak for me to be below my purchase price... And yet that would mean buying at a higher mortgage rate anyways...

 

[MrBlackhill]

@MrBlackhill you'll notice that on the 'Rational Reminder' forum, people seem to think it's crazy and irrational when stock prices swing around as Powell opens his mouth.

Honestly oftentimes I don't understand them. They believe in the efficient market hypothesis, so every information is priced in, which also means that every new information makes the market move and Powell definitely brings new information every time he opens his mouth. If that information was mostly expected, volatility decreases as the market will price that reduction in the risk of unexpected information since the expectations were confirmed. If that information was mostly not expected, volatility will increase until it stabilises to a new level pricing it that unexpected information.

 

[MrBlackhill]

Looks like we're set for another bloodbath in the markets today. Sigh. Just a month ago it looked like we were getting out of this.

S&P500 won't reach new all-time highs for a while. Certainly not in 2023, maybe even new lows. And most likely not in 2024 either.

 

[MrBlackhill]

I personally believe the market is headed much lower.
It has gone almost parabolic during the pandemic.
As Dr. Burry says, parabolas never end well.

You have to look at this on a log scale though.

3,600 is pretty near a fair value. But with the upcoming recession, we should go a bit lower until we come back up to 3,600 after 2024.

 

[MrBlackhill]

S&P500 reached new lows today!

 

[MrBlackhill]

Since 2020

I wonder if we'll see new lows lower than the 2020 crash. That would be a pretty nice crash.

 

[MrBlackhill]

Unlikely indexes would fall below the lowest 2020 levels IMO. Some stocks might though.

Yes, I also believe it's unlikely.

 

[MrBlackhill]

And the country has maintained strong employment figures all the while. Many say that will not remain true as interest rates continue to rise, but we also have the phenomenon of massive numbers of the tail-end of the Boomer generation retiring. And that is leaving many, many vacancies.

Interesting times indeed.

Yup, yup, look at this. Another 5-10 more years and we'll have a huge issue.

The whole animation of the age pyramid also show the crazy times we've been through and the even crazier times to come.

Age Pyramids

Age pyramids are dynamic applications that allow users to see the evolution of the age structure of the Canadian population over a given time period and for selected geographies.

www12.statcan.gc.ca

 

[MrBlackhill]

New lows for NASDAQ

 

[MrBlackhill]

I've got my LOC ready.
If we see 3200 sp500, I'll tap a little and take a nibble. The further down we go from there, the more I will pull from the LOC.

But I'm not pulling anything until 3200, if it ever hits.

Same. No matter how high are the rates, if the market truly crashes for real, I'll use LoC.

 

[MrBlackhill]

I was wondering... When do we start feeling the pain of a bear market / market crash?

Since I'm still accumulating, I couldn't care less how much the market drops... I'm even happy about it. I'm happy when the market goes up because my net worth increases, I'm happy when the market goes down because I buy cheaper.

I guess the true pain comes at retirement or near retirement? I mean, if I was about to reach my retirement goal and suddenly the market drops -40% and I have no idea how long it'll take to move back up, I'd be pissed. Same if I had just retired. Same if I was in the middle of my retirement and wondering if I'll have enough money.

But otherwise... This is interestingly the 5th worst drawdown in the past 50 years. Wow, really? I guess only the top 3 drawdowns (1973, 2000, 2007) were truly painful as the market dropped by more than -40% and it took many years to recover. I'm expecting the same intensity of market crash, though I'm in my mid-30s, I'm not near my retirement (I wish, though), so I feel absolutely no pain at all, so far. And that's with 100% equities.

 

[MrBlackhill]

Just saying... With today's euphoric bullishness upon the inflation data, the 10-year yield took a hit so the 10-year minus 3-month spread has gone even further down in the negative, which has been inverted for 2 weeks now.

 

[MrBlackhill]

I'm going to be the guy who admits he doesn't know what this yield spread means. Can you tell me in layman's terms what we might expect as a result of this development?

Here's an official source and then different sources. In a few words: when it's negative (inverted yield curve), expect a market crash within the next ~18 months.

The Yield Curve as a Leading Indicator

This model uses the slope of the yield curve, or the “term spread” between long- and short-term interest rates, to calculate the probability of a recession in the United States twelve months ahead.

www.newyorkfed.org

Yield Curve Indicates Stock Market is Strongly Overvalued

Based on the yield curve, the New York Federal Reserve currently predicts the odds of the US being in a recession in 12 months to be ~38%.

www.currentmarketvaluation.com

Current US Yield Curve Today (Yield Curve Charts)| GuruFocus

The current 1 month yield curve is 3.724%. Get more info on the current yield curve, inverted yield curve charts, and more.

www.gurufocus.com

 

[MrBlackhill]

So what's the consensus. Bear market is over?
Stocks and bonds go straight up now?

My portfolio was up 25 grand today. Absolutely ridiculous.

(this post is meant to be funny... nobody can predict where markets go next)

Dead cat bounce.