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Maybe cap weighting like the S&P 500 index won't always perform so well.
Yup, there's a lot of great reading about the S&P 5 vs S&P 495.

With the concentration in weight of the top mega caps that just mostly doubled their valuation multiples, I wouldn't be comfortable with market cap indexing at this point.

For those who still want to use passive indexing solutions, I'd start looking at equal weighted like RSP and QQQE.

When reading about S&P 5 vs S&P 495, one interesting point is that fund managers can't afford to exit their positions on the S&P 5 stocks because they are currently the very best performers, so they have to ride that momentum... until it reaches the peak and then they try to time the market right before the bubble pops.

What happens to market cap indexing when the momentum is on those mega caps? Pretty scary for those passive investors.
 

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Canada had this issue with the TSX60 & nortel.

Really the mega-caps mess stuff up.
It doesn't help that my high risk portion is now these mega caps.
 

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Discussion Starter · #183 ·
Canada had this issue with the TSX60 & nortel.

Really the mega-caps mess stuff up.
It doesn't help that my high risk portion is now these mega caps.
That's what I thought at first as well, that highly concentrated indexes like the TSX 60 have Nortel kind of problems. But longer term this hasn't been the case. XIU (the TSX 60 tracker) performance since inception is 7.12% which is great, despite inception being right near the Nortel bubble peak. Cap weighted indexes have, in fact, adapted over time.

In fact, TSX 60 performance since 2000 is almost identical to the S&P 500. That's despite the TSX 60 being heavily concentrated in Nortel at the start of that comparison period which probably looked very scary.

I think that pretty much proves that mega cap weightings in the TSX 60 aren't a problem.
 

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Discussion Starter · #184 ·
Regarding craziest bubble stocks, now the crowd has shifted (back) to marijuana stocks!

Look at HMMJ go
 

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Discussion Starter · #186 ·
Yup, marijuana stocks are all over the place.
So what do you think, is it time to now abandon all your tech stocks and pursue marijuana and bit coinz instead?

Tech stocks are kind of old news. Here is trailing 1 year return

SPY +19% ... honestly why would anyone bother with this? Pointless!
QQQ +44%
HMMJ +150%
Bitcoin +355%
TSLA +421%
NIO +1483%
Dogecoin +2319%

I believe you wanted aggressive high returns, IIRC. Aren't you kind of wasting your time with tech stocks, given these other opportunities?

(Warning: above post is tongue-in-cheek)
 

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So what do you think, is it time to now abandon all your tech stocks and pursue marijuana and bit coinz instead?

Tech stocks are kind of old news. Here is trailing 1 year return

SPY +19% ... honestly why would anyone bother with this? Pointless!
QQQ +44%
HMMJ +150%
Bitcoin +355%
TSLA +421%
NIO +1483%
Dogecoin +2319%

I believe you wanted aggressive high returns, IIRC. Aren't you kind of wasting your time with tech stocks, given these other opportunities?

(Warning: above post is tongue-in-cheek)
Hehe! Actually, my tech sector exposure is currently 25%, which is even less than SPY. My huge overweight is currently in O&G-correlated stocks (20% exposure), which I plan to dump on signs of weaknesses. Crazy risk though, because stocks drop faster than they rise and oil-related stocks can tank pretty fast... getting burned with oil is not cool. Anyways.

I will take a position on a momentum stock only if I'm ok with its fundamentals.

I think cannabis have a future the same way tobacco stocks had a future, but I'm not ready to enter those stocks yet for a momentum play on speculative stocks with weak fundamentals.

If I were to buy cannabis-related stocks, it'd probably be TRUL.CN on the Canadian side or IIPR on the US side. Seriously, watch this one (IIPR).

That was my 2 cents.
 

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Oh... I hold XBC.TO and it just announced that it had an order from FCEL, that crazy soaring stock. I'm wondering how it will affect XBC.TO, which can also be bought through XEBEF.

Not sure if I should continue this discussion here or on Xebec's thread.
 

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Why the 'stonk' bubble poses major global risks and could trigger a 1930s-style market crash
Carson Block: Cheap money leading to excessive speculation contributed to the 1990s dotcom bubble, the 2000s housing bubble and now the stonk bubble
The real risk to markets is that passive flows go negative (if widespread layoffs lead workers and employers to cut their 401K contributions). If that were to happen, passive fund selling would quickly overwhelm the market. Such a crash could resemble 1929-1932 in magnitude but at 2021 speed.
 

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Discussion Starter · #191 ·
Another indicator of bubble territory... SPACs (Special Purpose Acquisition Companies) which are a variation of IPOs that give blank cheques to money managers, allowing them to invest in whatever they want without any guidelines or targets. These have become incredibly popular in the last couple years and many people believe this is a sure sign of a bubble. The SPAC structure is incredibly easy to abuse and can easily cheat investors.

There's a character, Chamath Palihapitiya, known as the 'King of SPACs' and I've also heard him referred to as 'SPAC Jesus'.

He's a bit like Elon Musk. Incredibly self obsessed, seems like a bit of a con man, and tries to cultivate a following, constantly tweets, pretends he is a man of the people (fake populist). In that article I link, Chamath thinks he can become the next Buffett and create a business empire like Berkshire.

He says that he'll generate enough wealth to shrink the inequality gap in America. All of this by doing "all things Chamath", in his own words.

It's silly and ridiculous. This is a kind of delusion and grift that comes near end of cycles.
 

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Another indicator of bubble territory... SPACs (Special Purpose Acquisition Companies) which are a variation of IPOs that give blank cheques to money managers, allowing them to invest in whatever they want without any guidelines or targets. These have become incredibly popular in the last couple years and many people believe this is a sure sign of a bubble. The SPAC structure is incredibly easy to abuse and can easily cheat investors.

There's a character, Chamath Palihapitiya, known as the 'King of SPACs' and I've also heard him referred to as 'SPAC Jesus'.

He's a bit like Elon Musk. Incredibly self obsessed, seems like a bit of a con man, and tries to cultivate a following, constantly tweets, pretends he is a man of the people (fake populist). In that article I link, Chamath thinks he can become the next Buffett and create a business empire like Berkshire.

He says that he'll generate enough wealth to shrink the inequality gap in America. All of this by doing "all things Chamath", in his own words.

It's silly and ridiculous. This is a kind of delusion and grift that comes near end of cycles.
Well, Elon is using corporate funds to gamble on bitcoin, it's the trendy thing to do.

I was recently asked, and I said, only buy stocks in companies that you understand how they will make money.
Put some in cash/fixed because who knows with the stock market.

The people who give these guys money deserve what happens.

Also specific to Elon, he uses the companies like his own personal playthings, and the owners/directors are encouraging this, it's their fault too.

To be fair, Elon has generated good results, so betting on him might be a good idea.
 

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Discussion Starter · #193 ·
Well, Elon is using corporate funds to gamble on bitcoin, it's the trendy thing to do.
The SEC also banned him from doing this (he's not supposed to be running the company), so Elon might be violating regulatory rules with this Bitcoin thing.

Elon has been violating securities laws/regulations for quite a while now. It's not a good thing that he can break the law and get away with it, repeatedly. These regulations are supposed to be in place to protect the public markets from crooks.

I think Elon is a crook. I think Chamath is a crook too.

The people who give these guys money deserve what happens.
Yeah I think so too, but TSLA is now a huge weight in the S&P 500. Every investor on earth, and every pension fund, is exposed to Elon's wacky and erratic behaviour, and his illegal behaviour (which he continues to do even in violation of the SEC).
 

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All the popular WSB stocks jumped today, a few hours before market closed.

GME (+103.94%), AMC (+18.05%), BB (+8.85%), KOSS (+54.96%), NAKD (+31.07%), EXPR (+40.69%)

After hours are also crazy.
 

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The SEC also banned him from doing this (he's not supposed to be running the company), so Elon might be violating regulatory rules with this Bitcoin thing.
Never heard that, heard he wasn't the chairman of the board, but he's still CEO.

As far as Tesla on the market, yeah, indexing has it's flaws.
 

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Discussion Starter · #196 · (Edited)
PLUG
TSLA
NIO
FCEL
ARKK
Looks like many of the bubble stocks are falling together, today

SHOP -10.1%
BLDP -11.5%
PLUG -13.7%
TSLA -10.0%
NIO -13.9%
FCEL -17.3%
ARKK -7.5% (that's a whole ETF)
HMMJ -8.9% (another whole sector)

Wow! This also implies that SHOP was, in fact, one of the bubble stocks. To drop like this, it means it was in those portfolios which built up mania stocks.

Or maybe it's a buying opportunity! Many of these have not even yet hit their 200 day moving averages. Maybe this is the buying opportunity of a lifetime... what do you think @MrBlackhill is this just the pause before these double in value again?
 

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what do you think @MrBlackhill is this just the pause before these double in value again?
I called it when NASDAQ was reaching 14,000. I said it was either the start of a bubble or there would be a quick and healthy correction. I was expecting TSX to perform better than S&P500 and NASDAQ this year. In fact, I'm expecting NASDAQ to be the worst performer this year. As I expect TSX to have single-digit performance this year and S&P 500 to be flat, maybe NASDAQ will end the year in the red. Sure thing to me, indices will be performing no more than single-digit this year.

What comes next is hard to tell. Maybe this is just a correction like in 1998 before a strong bounce back.

Money is moving from growth to value, and currently from tech to energy. Energy in 2021 could be the tech of 2020.

It will be a great opportunity to buy tech... when the drop will stabilise at a decent level. To me, a decent level for NASDAQ should at least be below 12,000 and I'd gladly buy NASDAQ below 11,000 this year. Not sure it'll happen though.

But so far it's nothing more than what happened in September 2020.
 

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Wow! This also implies that SHOP was, in fact, one of the bubble stocks. To drop like this, it means it was in those portfolios which built up mania stocks.

Or maybe it's a buying opportunity! Many of these have not even yet hit their 200 day moving averages. Maybe this is the buying opportunity of a lifetime... what do you think @MrBlackhill is this just the pause before these double in value again?
Shopify is the original bubble stock of this bull run. It rose to bubble status even before Tesla. It was worth more than Tesla in various periods of 2019.
 

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Shopify is the original bubble stock of this bull run. It rose to bubble status even before Tesla. It was worth more than Tesla in various periods of 2019.
I agree that Shopify is expensive and I'm waiting for a better valuation, but one thing though about this comparison of Shopify vs Tesla (other than they are not in the same industry):
  • SHOP 3-year revenue growth is 60% vs 35% for TSLA
  • SHOP 5-year revenue growth is 65% vs 50% for TSLA
  • SHOP profit margin is 10% vs 2% for TSLA
 

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Discussion Starter · #200 ·
This could be a "buying opportunity" for all people who believe that these stocks are great long term investments.

If you think these are the real deal, and not just bubble stocks, wouldn't you want to buy on a correction?

TSLA is down 27% form its peak
PLUG is down 52% from its peak
FCEL down 52%
BLDP down 42%
 
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