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Discussion Starter · #261 ·
As interest rates continue its downward trend, equity valuation gets increasingly sensible to a tiny bounce back rising rates.
'Sensible' was probably a French/English typo, I realize.

Yeah, equities are very sensitive to interest rates. The prices are inflated by low interest rates. Low interest rates have increased prices on everything -- stocks, bonds, real estate. Therefore, we can probably expect to see lower returns in all of these going forward, especially if interest rates rise.

Many people believe that the central banks would not dare raise interest rates, because it would likely cause real estate and stocks to crash. Therefore you might as well buy stocks because it seems very unlikely that the central bank will ever raise rates.

I think this is why poor economic news has generally been good for the stock market. Poor economic or labour data --> reduce probably of rate hikes
 

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Warning! To me, NASDAQ above 14,000 makes no sense! It'll go back to 13,000 at some point, mark my words.
Just a reminder. Posted this on June 2021, 7 months ago. Since then, we went above 16,000, but now we are heading back to 14,000.

NASDAQ currently down -12% from ATH.
 
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There is some serious unwinding occurring in the bubble space. It is interesting in how a lot of them were immediately identifiable; the Zooms, Palantirs, Peletons, etc; no earnings, rapid growth, we are spending to expand despite not having any real moat or competitive advantage that prevents competitors from eating their lunch. But it takes a while for unwinding to occur. When the stock price drops, and there are no earnings, no substance to support the stock price, and the outlook inevitably turns sour, well its like a fire in a movie theatre.

It hasn't all unwound yet, there is still some crazy valuations out there. But a solid bear market for technology is absolutely a requirement to flush out the garbage and there is probably big opportunities in the profitable companies that remain, especially if they get thrown out with the trash. Apple has always been profitable. Microsoft too. And same with Google - $1B of annual net profit in the year before they went public. Amazon has been threading a needle but perhaps underperforming now because of it, eventually investors will want returns.
 

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Discussion Starter · #268 ·
It seems that every "get rich quick" stock, including the coins, are plummeting.

Hopefully this continues so we can wipe out all the speculators and amateurs.
 

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It seems that every "get rich quick" stock, including the coins, are plummeting.

Hopefully this continues so we can wipe out all the speculators and amateurs.
I expect all stocks including safe boomers stocks to go eventually to pre covid levels. Banks are ridiculously expensive now for instance.
 

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Are they? Most CAD banks are at current P/E's of 11-13. Is that expensive
If there's a crash, even cheap stocks will crash, but they are safer because they'll bounce back up faster. But I don't believe we're ready for a crash, it's still just a correction.

I was predicting a crash by the end of 2023, but if they start rising the rates next week, we could have a real crash sooner than later.

Now it's just a big correction due to the expectations of rising rates.
 

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Are they? Most CAD banks are at current P/E's of 11-13. Is that expensive?
6-7 for banks is about right. Look at Russia’s largest state owned bank , it has P/E of 4 and it’s backed by the Russian government with over 600 billion US dollars in reserves. How big are reserves of Canadian government? Of course they can always print as always do.
 

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Now it's just a big correction due to the expectations of rising rates.
Sometimes we even get "buy the news" when the Fed gives "bad news" that isn't as bad as expected

It's like the reverse "buy the rumour" when the rumour is bad news. Just Wall Street doing Wall Street things

JPow loads his pellet gun with a rate hike and looks the rabid stimulus addicted elephant in the eye
 

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The markets peaked in Oct 2007 and began falling and by the time Lehman Brothers declared bankruptcy in Sept 2008, the markets had already lost over 30%.
They then lost another ~%35 for the next 5 months before bottoming out in Feb 2009.
 

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Are they? Most CAD banks are at current P/E's of 11-13. Is that expensive?
Fear of crashes aside, a P/E of 11-13 is average to above average. They often trade around 10, which historically also means you get excellent returns just about whenever you buy, because you nearly always have a chance to get in at that 10% shareholder yield, with 5-6% annual growth, giving you long term 13-15% returns, at least over the last 30-40 years. If the P/E drops below 8, they are typically a screaming buy and offer outsized returns above 15%/year. And the P/E could drop below 6 like in March-June 2020 and that is the last time I was buying. The banks are considered cyclical and just do not get to those P/E of 15 or higher multiples because they can record big losses in recessions.
 

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Headlines at the moment:
Stock market books worst week since March 2020
PS: NASDAQ now down -15% from ATH.
 

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This drop like the others in 2021 is in large part due to bond yields simply rising back to more normal levels. The fed is hiking interest rates maybe 4x in 2022 and 2x more in 2023.

The 10 yr bond yield has risen from, .~ .25% % to ~ 1.9% over the past ~ 6 months. So if your discount factor was say 6% before, it is now 7.65%.

A rise of 27.5 %, so stocks have fallen similarly. Stocks w growth further into the future more. I think this is all for now. At the end of the day there was some buying so it looks like it is done. See what happens on Monday. Adding some nibbles now as there are some good values. SHOP is not the best deal but closed at it's level set back in June 2020.
 

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Microstrategy is getting slaughtered on the news the SEC won't accept their accounting of their bitcoin holdings.

I wonder how other many companies that hold crypto will also have reporting problems.

In other similar news, El Salvador adopted a bitcoin currency and it is getting pounded in the debt markets.

The cost of their bonds quadrupled to 35% interest and they will have trouble finding investors to fund their debts.

The IMF is reluctant to bail out a country that gambles their money in crypto.

Microstrategy bought their bitcoin with high interest debt as well.

Bitcoin is crashing again today......down to $36,300 at the moment.


 
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