Talking Stocks 2.0

[JasoninDenver]

Originally Posted by Krash

Interesting because I’m always vocal about the weighted indices. I just checked again. Three stocks now account for 20% of the S&P 500. The top 7 account for 30%. If those stocks tank, they’re bringing everyone down with them.

But on the other hand, it’s hard to argue with the historical performance of the S&P 500. I often think I could have just put all my money in a mutual fund that tracks the S&P 500, and be done with it. It’s like printing your own money. I never really needed a financial advisor all these years. I never even needed to pay attention to the financial markets at all.


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I am looking at a couple equal weighted ETFs at the present moment just because of our mutual concerns.

Interestingly, Warren Buffet’s instructions to the administrator of his estate is to invest 90% in an S&P Index (VOO specifically IIRC) and 10% cash for his wife’s benefit.

Plus, you have saved hundreds of thousands in advisory fees ober the years. You are a very smart man in my mind.

[HorologyK]

I’ll wait for the yield curve to uninvent and then I’ll buy twos and fives

[BraveBold]

Originally Posted by HorologyK

I’ll wait for the yield curve to uninvent and then I’ll buy twos and fives

This makes little sense. I assume you meant “uninvert”… but it would necessarily be a bull steepening. But why would you “wait” for this to occur (if your thesis) before buying 2Y? Or are you thinking an extreme short-end steepening… which is almost certainly not going to happen.

[BraveBold]

( :-) )

[BraveBold]

Weak NFP. The economy is turning as we would expect. Bonds rallying hard, also as expected.

Acquired NVDA puts essentially at ATH. Helping offset losses but now thinking long and hard about exit point. I personally see fair value far below these levels…

[brandrea]

Originally Posted by JasoninDenver

I am looking at a couple equal weighted ETFs at the present moment just because of our mutual concerns.

Interestingly, Warren Buffet’s instructions to the administrator of his estate is to invest 90% in an S&P Index (VOO specifically IIRC) and 10% cash for his wife’s benefit.

Plus, you have saved hundreds of thousands in advisory fees ober the years. You are a very smart man in my mind.

Equal weight always takes out the outsized risk

That said, ETFs generally have you owning some dogs.

I like to buy long life assets that’ll be around when I’m long gone. If you like Buffet, you should like the rail stocks for example

[SDGT3]

Originally Posted by BraveBold

Weak NFP. The economy is turning as we would expect. Bonds rallying hard, also as expected.

Acquired NVDA puts essentially at ATH. Helping offset losses but now thinking long and hard about exit point. I personally see fair value far below these levels…

The turn certainly feels like it's here with data to back it up. My contention has always been that there has been no soft or hard landing yet because we were still all at cruising altitude and now we're starting our descent to a neutral rate and don't know if it will be a soft landing. We'll see.

The convo has changed from if the Fed will cut due to rapidly deteriorating economy to how much at each meeting. There will be 2 more prints before the Sept. meeting.

B. has much more knowledge than anyone I know when it comes to bond markets, fixed income and more specifically munis, but if one has not converted MM funds to longer duration at this point, perhaps the train has left the station.

[904VT]

Originally Posted by JasoninDenver

I am looking at a couple equal weighted ETFs at the present moment just because of our mutual concerns.

Interestingly, Warren Buffet’s instructions to the administrator of his estate is to invest 90% in an S&P Index (VOO specifically IIRC) and 10% cash for his wife’s benefit.

Plus, you have saved hundreds of thousands in advisory fees ober the years. You are a very smart man in my mind.

I’ve seen people use an equal weight 500 combined with a handful of high conviction individual stock positions do well over the years. Just an alternative approach to buying cap weight (buy high sell low and susceptible to momentum swing pricing).

[Olive Drab]

Originally Posted by BraveBold

Weak NFP. The economy is turning as we would expect. Bonds rallying hard, also as expected.

Acquired NVDA puts essentially at ATH. Helping offset losses but now thinking long and hard about exit point. I personally see fair value far below these levels…

How are you calculating fair value? How are you factoring in earnings for the next few quarters into that assessment? It seems like they should continue to have consistent earnings for a few more quarters.

[BraveBold]

Originally Posted by brandrea

Equal weight always takes out the outsized risk:

Realize this is a watch forum and not an investing / academic forum… but this is incorrect.

[7sins]

Originally Posted by SDGT3

The turn certainly feels like it's here with data to back it up. My contention has always been that there has been no soft or hard landing yet because we were still all at cruising altitude and now we're starting our descent to a neutral rate and don't know if it will be a soft landing. We'll see.

The convo has changed from if the Fed will cut due to rapidly deteriorating economy to how much at each meeting. There will be 2 more prints before the Sept. meeting.

B. has much more knowledge than anyone I know when it comes to bond markets, fixed income and more specifically munis, but if one has not converted MM funds to longer duration at this point, perhaps the train has left the station.

We need to introduce you to more people then, thank you though for the kind words. Been an excellent week for me, closed 1/3 of my QQQ put position at a 58% gain. I do think the bond market is getting ahead of its skis here pricing in 3 cuts this year and 30%+ probability for two cuts in Sept which would be unlikely. We saw a similar over reaction beginning of the year when the market was pricing in 6-7 cuts. Would wait for the 1yr and 2yr forward curve to settle before adding more duration, however, historically, 12 month forward returns for bonds are 2x higher if invested prior to the first rate cut than 1 month after. Personally already seeing massive demand for our UHNW and institutional clients to transition from MMs/Tbills to longer duration - in terms of flow, August should be my best month ever in net new assets. I would be weary of going too long just yet as the asymmetry could be painful if yields normalize a bit higher. Twas a very good week to be a bond trader :)

[HHIslander]

I wouldn’t be surprised to see a surprise rate cut before opening bell on Monday. Particularly if geopolitical gets dicey before then.

[huncho]

Originally Posted by HHIslander

I wouldn’t be surprised to see a surprise rate cut before opening bell on Monday. Particularly if geopolitical gets dicey before then.

can they do that? lol

[brandrea]

Originally Posted by BraveBold

Realize this is a watch forum and not an investing / academic forum… but this is incorrect.

How so?


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[BraveBold]

Originally Posted by brandrea

How so?


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In big market turns, correlation increases.

Also, there is general cost in re-weighting. This is itself a risk.

The types of companies represented in an equal weight approach themselves may have higher risk (ie increasing exposure to small and mid over megacap). In downturns those companies can have more risk than larger cap companies.

I never use the word “always” for anything relating to investing. It is a spectrum of risk…

There is more, but you get the idea…

[HHIslander]

Originally Posted by huncho

can they do that? lol

Lol. It happens.

Goldsbee said this afternoon that if UI gets above 4.1, fed has to respond. But he also said fed shouldn’t overreact too. I think it’s a long shot, but someone who is a lot smarter and richer than me is convinced one is coming.

[brandrea]

Originally Posted by BraveBold

In big market turns, correlation increases.

Also, there is general cost in re-weighting. This is itself a risk.

The types of companies represented in an equal weight approach themselves may have higher risk (ie increasing exposure to small and mid over megacap). In downturns those companies can have more risk than larger cap companies.

I never use the word “always” for anything relating to investing. It is a spectrum of risk…

There is more, but you get the idea…

Hmmm interesting take.

My take, is that equal weight mitigates risk from the holder becoming too over weight in one position (think big 6). It spreads the risk evenly throughout an index average of positions.

I don’t use ETF’s generally speaking, only for investing in markets where I’m not able to buy securities directly.

Anyways you’re correct “always” shouldn’t be used in investing. Much like, “it’s different this time” etc.

No “one” strategy works and everyone has their own financial uniqueness.




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[7sins]

Originally Posted by huncho

can they do that? lol

Yes, they did this in March 2020, it is called a FED emergency meeting. Can't fathom they would do this next week, you would need to see the economy in surely dire straits and or on the brink of economic collapse. Don't forget Q2 gdp growth came in at 2.8%. People are panicking because markets are 10% off the all time high and yet the Qs are still up over 11% YTD. It is not the FED's function to intervene with the stock market.

I could see the FED wanting to get ahead of a slowing labor market but not enough to justify an emergency meeting, this will happen in Sept.

[huncho]

Originally Posted by HHIslander

Lol. It happens.

Goldsbee said this afternoon that if UI gets above 4.1, fed has to respond. But he also said fed shouldn’t overreact too. I think it’s a long shot, but someone who is a lot smarter and richer than me is convinced one is coming.

Originally Posted by 7sins

Yes, they did this in March 2020, it is called a FED emergency meeting. Can't fathom they would do this next week, you would need to see the economy in surely dire straits and or on the brink of economic collapse. Don't forget Q2 gdp growth came in at 2.8%. People are panicking because markets are 10% off the all time high and yet the Qs are still up over 11% YTD. It is not the FED's function to intervene with the stock market.

I could see the FED wanting to get ahead of a slowing labor market but not enough to justify an emergency meeting, this will happen in Sept.

i think they waited too long to hike and are gonna wait too long to cut too. all this data lags by months

regarding the Q's, they're only down 10% but i feel like anyone who's panicking isn't in indexes. semis look like they just had a capitulation week with SMH and nvidia down 25-30% from highs. that sector was a bubble but still, it was the leader and somehow single handedly fixed every problem the market was worried about and seems to have saved the feds asses lol

on the bright side, they say today was the worst day since march 16 2020 which was basically the bottom of the covid panic drop so if anyone wanted a reason to cope...

[Krash]

Originally Posted by huncho

i think they waited too long to hike and are gonna wait too long to cut too. all this data lags by months

...

Yeah, the they’re all over the place. Last 7 or 8 years , they were raising rates when they shouldn’t have. Then they were way too slow to raise rates when we really needed them to, and now they’re waiting too long to cut.

We could be in a recession now, and the data won’t reflect it until the 4th qtr.


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[BraveBold]

Originally Posted by huncho

i think they waited too long to hike and are gonna wait too long to cut too. all this data lags by months

regarding the Q's, they're only down 10% but i feel like anyone who's panicking isn't in indexes. semis look like they just had a capitulation week with SMH and nvidia down 25-30% from highs. that sector was a bubble but still, it was the leader and somehow single handedly fixed every problem the market was worried about and seems to have saved the feds asses lol

on the bright side, they say today was the worst day since march 16 2020 which was basically the bottom of the covid panic drop so if anyone wanted a reason to cope...

I liquidated my NVDA puts, purchased effectively at the ATH, at a 125% one month return. The idea that they nvidia continue on their current trajectory, for years, as embedded in its current valuation - is … optimistic. After this tactical trade, I still retain my long Nvidia position despite my negative outlook.

But this is the same market that still values Tesla about 3x my fair value estimate.

Bonds have plenty further to run. As you say, Fed was late to hike and are now too slow to cut. Most market analysts, even economists, simply do not understand or appreciate the lagged and compounding nature of economic indicators. What we saw today was not overreaction - it was catching up by the market to under-reactions to the significance of data for the past several months. A catalyst to recognition that excess savings have been fully spent and labor market indicators are distorted.

This misreading of data is not new… same thing happened pre 2008-2009. Consumer spending was clearly driven off Helocs that in turn were driven by home price growth. Market built assumptions off those trends - misunderstanding the limitations on heloc utilization (and of course its relationship to asset price risk).

[BraveBold]

Originally Posted by brandrea

Hmmm interesting take.

My take, is that equal weight mitigates risk from the holder becoming too over weight in one position (think big 6). It spreads the risk evenly throughout an index average of positions.

I don’t use ETF’s generally speaking, only for investing in markets where I’m not able to buy securities directly.

Anyways you’re correct “always” shouldn’t be used in investing. Much like, “it’s different this time” etc.

No “one” strategy works and everyone has their own financial uniqueness.




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Perhaps this will better illustrate one aspect of my multiple (still incomplete) reasons above.

Banking sector. Would you prefer to have equal weight exposure or market cap exposure? In a crisis, do you prefer exposure to generally better capitalized or reduce your exposure to BofA and JPM?

Exposure to smaller companies can actually expose you to greater leverage… both financial and operational.

There is no single answer. I think the S&P is risky with some companies like Tesla being overvalued AND massive. But Amazon, Apple, Msft, even Nvidia… the valuation risk is only part of the equation. In a severe recession there is flight to quality. The operating and financial leverage of small caps may support growth on the recovery phase, but more vol in the down phase.

Again, not advocating against avoiding too much concentration. I only very, very selectively use etfs. My only S&P500 index exposure is through put options. I prefer setting my own allocations, and don’t do much trading except as positions get extreme (taking some exposure and rotating)..:

But an equal weight approach as a strategy implies maintaining an equal weight. I don’t like that approach (personally)… not just because I can do better than the market in selecting names, but because I don’t like the systematic adjustments that strategy utilizes.

[BraveBold]

Originally Posted by 7sins

Yes, they did this in March 2020, it is called a FED emergency meeting. Can't fathom they would do this next week, you would need to see the economy in surely dire straits and or on the brink of economic collapse. Don't forget Q2 gdp growth came in at 2.8%. People are panicking because markets are 10% off the all time high and yet the Qs are still up over 11% YTD. It is not the FED's function to intervene with the stock market.

I could see the FED wanting to get ahead of a slowing labor market but not enough to justify an emergency meeting, this will happen in Sept.

Agreed. I do expect the labor weakness will continue and we’ll start to see further easing in inflation… an acceleration in trend lower and more negative prints on durable goods… services inflation will soften further. That is the final piece of the puzzle. Indicators are already pointing in the right direction there. I would not be surprised if we see the Fed cut a total of 75-100 bps by the time 2024 is done..:

[brandrea]

Originally Posted by BraveBold

Perhaps this will better illustrate one aspect of my multiple (still incomplete) reasons above.

Banking sector. Would you prefer to have equal weight exposure or market cap exposure? In a crisis, do you prefer exposure to generally better capitalized or reduce your exposure to BofA and JPM?

Exposure to smaller companies can actually expose you to greater leverage… both financial and operational.

There is no single answer. I think the S&P is risky with some companies like Tesla being overvalued AND massive. But Amazon, Apple, Msft, even Nvidia… the valuation risk is only part of the equation. In a severe recession there is flight to quality. The operating and financial leverage of small caps may support growth on the recovery phase, but more vol in the down phase.

Again, not advocating against avoiding too much concentration. I only very, very selectively use etfs. My only S&P500 index exposure is through put options. I prefer setting my own allocations, and don’t do much trading except as positions get extreme (taking some exposure and rotating)..:

But an equal weight approach as a strategy implies maintaining an equal weight. I don’t like that approach (personally)… not just because I can do better than the market in selecting names, but because I don’t like the systematic adjustments that strategy utilizes.

Perhaps it’s as simple as two different philosophy’s.

I’m not trading in and out of positions. My average hold for a stock is measured in multiples of years so I’m not too fussed about the next “crisis”. In fact, I usually use those up opportunities to buy good companies.

Today for example, I bought CNR. I’ve been a holder of this stock since the mid 90’s … never sold a single share.

There are a lot of ways to invest and I’m certainly not advocating that my way is the only way or the right way. It has worked well for me and my family

[huncho]

Originally Posted by BraveBold

Perhaps this will better illustrate one aspect of my multiple (still incomplete) reasons above.

Banking sector. Would you prefer to have equal weight exposure or market cap exposure? In a crisis, do you prefer exposure to generally better capitalized or reduce your exposure to BofA and JPM?

Exposure to smaller companies can actually expose you to greater leverage… both financial and operational.

There is no single answer. I think the S&P is risky with some companies like Tesla being overvalued AND massive. But Amazon, Apple, Msft, even Nvidia… the valuation risk is only part of the equation. In a severe recession there is flight to quality. The operating and financial leverage of small caps may support growth on the recovery phase, but more vol in the down phase.

Again, not advocating against avoiding too much concentration. I only very, very selectively use etfs. My only S&P500 index exposure is through put options. I prefer setting my own allocations, and don’t do much trading except as positions get extreme (taking some exposure and rotating)..:

But an equal weight approach as a strategy implies maintaining an equal weight. I don’t like that approach (personally)… not just because I can do better than the market in selecting names, but because I don’t like the systematic adjustments that strategy utilizes.

yeah the S&P is literally like 5 stocks at this point. it feels like it's no longer what it was supposed to be which was a giant basket of the best companies in the market and used as a way to limit your overall risk

i believe as of a month ago or so, the top 10 companies account for an insane 37% of the S&P but people just buy it blindly because it's "guaranteed" to go up over time (and it has). i jokingly call the it a ponzi these days but kind of feel like maybe it's not a joke anymore

[SDGT3]

Originally Posted by HHIslander

I wouldn’t be surprised to see a surprise rate cut before opening bell on Monday. Particularly if geopolitical gets dicey before then.

I see a below zero chance of that happening before Monday or even September. If it did, it would send a signal to not just the market, but the world that something is seriously wrong in the economy, and the data doesn't show that.

[HHIslander]

Originally Posted by 7sins

Yes, they did this in March 2020, it is called a FED emergency meeting. Can't fathom they would do this next week, you would need to see the economy in surely dire straits and or on the brink of economic collapse. Don't forget Q2 gdp growth came in at 2.8%. People are panicking because markets are 10% off the all time high and yet the Qs are still up over 11% YTD. It is not the FED's function to intervene with the stock market.

I could see the FED wanting to get ahead of a slowing labor market but not enough to justify an emergency meeting, this will happen in Sept.

I agree. It’s unlikely. But BOE cut 50, todays bond move was downright scary, geopolitical risk looming, yen drama, avoiding a repeat of “they know nothing” and no dot plots all factor in. I’m cool either way, I loaded up on UVIX at the open.

[Krash]

I was actually brave enough to log into my brokerage account this morning. It wasn’t as bad as I expected. At least not yet. But I suppose things could get worse before it gets better. I’m hunkering down and plan to weather storm. Not buying or selling anything…


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[piratfisk]

Originally Posted by Krash

I was actually brave enough to log into my brokerage account this morning. It wasn’t as bad as I expected. At least not yet. But I suppose things could get worse before it gets better. I’m hunkering down and plan to weather storm. Not buying or selling anything…


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Good man. I didn't know of any market activity until I got my usual EOD report from the financial dept. I logged into my Merrill app... *shrug* basically amounts to a door ding in the parking lot in the scheme of things.

I recognize the position I am in, but also know that it is from dedicated injections & not being "Chicken Little" (the sky is falling!) every time a politician farts. "Just be cool, honey bunny. Be cool." (-Pulp Fiction)

[7sins]

Good god, are you guys watching the carnage in Asia? Haven't seen a drop like this in the Nikkei since the 80s. NAS futures down almost 6%, hang on boys, going to be a hell of a ride, maybe even circuit breaker hit tomorrow.

This should rocket VIX past 50 tomorrow, should be a good opportunity to dca puts into there.