The mayhem that has totally crushed one stock after another for a year breaks through the surface (you can also download the WOLF STREET REPORT wherever you get your podcasts).
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Where do you see housing prices going this year?
They will definitely be going.
Nobody sees anything until it happens. So far, up!
House prices will start to drop hard if we do not figure out plastic.
Fertility rate dropping hard.
No population growth means no significant new demand.
Details in link above.
Avraam Jack Dectis wrote: “No population growth means no significant new demand.”
You worry too much. Even if immigrants decide they would be better off staying away. There are still plenty of people here who feel they can’t call themselves “Middle Class” unless they own 3 or 4 year around residences.
No need to have more fertility.
Billions of people around the world waiting to emigrate to USA.
Seems like it doesn’t belong.
A biotechnology RNA treatment company in a time of a pandemic with total liability immunity.
What do they know of what is coming?
It was just another ridiculously overpriced stock. I have no idea why the stock market morons drove it up like this, from $19 a share to $500 a share. This was just totally nuts. What’s coming is that the pandemic, like all pandemics, will eventually fade, and we might already be in the process of that.
Irrational exuberance needs no explanation, unless that IS he explanation.
Maybe it’s just me, but buy-‘n-hype seems like inadequate as an investment strategy. That said . . . I want my naked shorts back.
That “ruse” killed two of my close family members and made three others very sick.
Moderna is a good place to identify these generational changes in the stock market. The conventional investment approach is find the big winner and get behind that. There are several pharma companies with vaccines, and the notion that one would be dominate doesn’t apply. In this world there is room for more than one Microsoft (and certainly more than one crypto currency) . This belies the assumption that there is a consumer solution for everything when in fact the solutions are collective, (the DNA is open source) and government directed. Hussman calls it value vs growth but that isn’t the entire story. Moderna is still up 500% prepandemic. Consumer solutions are going to attract speculation, but they are passe. The place to start here is find those individual stories which are going to ride the wave of the new social investment, and short the ones which are overbought. Maybe EVs and self driving transport is part of the new social order, and selling Tesla and buying Rivian is the way to invest in these companies (which is what Soros is doing). A lot of these beaten up names are still well above their prepandemic prices.
– The Adance-Decline line for the US stockmarkets rose in the 1st 5 months of 2021. Then the A/D line remained flat for the remaining 7 months of 2021 while at the same time the stockmarkets continued to go higher. That was for me the sign that something was afoot.
2020. High tech distrupter companies that are growing rapidly changing the industry. Profits will eventually come, maybe, one day.
2022. Companies that, now, make a profit and can raise prices fast enough to keep making a profit.
What disrupters do you have in mind?
I keep on hearing this term, yet the examples are nothing revolutionary. It’s a complete exaggeration.
In the last topic, someone mentioned cloud. Cloud isn’t “disruptive”. Yes, many data centers don’t have the latest technology but that’s independent of where it is hosted. Anyone can build their own data center using the same technology. Cloud is the equivalent of a 21st century utility.
They mostly don’t due to economics but that’s a primary motivation for cloud adoption. The second being increased resiliency.
The other thing is the utterly ridiculous market values assigned to these companies, even now.
Someone in another topic mentioned Zoom. It still sells for over 10 times revenue with a P/E of 30 and no dividend.
Since earnings aren’t even real money (it’s an accounting number) and 99+% of shareholders can’t monetize it, any future return is entirely dependent upon an even more inflated stock price.
This company isn’t a “disruptor” either. There is nothing revolutionary about video conferencing. No critical proprietary intellectual property. If MSFT chosses, they can make Teams a free ad on to Office and put Zoom out of business, just as they did with Netscape on the web browser.
When I was at ARCO in 1986, we had video conferencing capability between our 9 separate oil & gas and international businesses. It worked well and lots of meetings were held via video conference. Nothing new here, just better equipment.
Yes indeed, the technology changes. The things that I use daily are a mix of old and new technology.
I have a couple hundred jazz and classical albums from my parents that are late ’50s to late ’80s vintage and they still sound quite good on my turntables.
And my new iPhone 12 mini has a few days worth of uncompressed AIFF digital music (some of which I’ve burned onto a CD from my turntable via hardware/software & my iMac) that I can listen to in my car & SUV with a Lightning/USB cable connection to the vehicle’s media player.
I enjoy listening to music. The ways it can be played and the quality of the sound is pretty amazing really. “Just better equipment.”
Good comparison, Dan.
I, Who Hates Shorting, Just Shorted the Entire Stock Market. Here’s Why
by Wolf Richter • Jun 19, 2020
Hahahaha, yes, immensely shitty timing. Never imagined that this craziness could go this far and last this long before coming unglued.
“Never imagined that this craziness could go this far and last this long before coming unglued.”
You’re certainly not the only one, Wolf. Mkt indexes have shown for years how out of touch with reality they were, and I thought the euphoria would end back when the CCP flu caused mkts to buckle prior to stimmies and the Fed’s buying spree. I still find it hard to believe they purposely blew the bubble even bigger and that citizen-idiots flush with cash thought the good times would last forever and rates would stay low “in our times”.
You gonna close it out immediately if and when you break even?
I think I’m done shorting (once I close the current short!) for good. You can be right about the end result, but wrong about the path or timing and get stopped out. Going long doesn’t suffer from that – if the market goes down, but you believe in the company, you can simply hold or even buy more. There’s no solvency threat or uncapped risk.
Anyway, it’s just a level of psychological discomfort that I don’t get from long-trades.
Hear yea, brother ivanislav!
Cover thy short and redeem thyself for thy unholy trades!
And that is why you use puts when you’re ready to short.
Most puts expire worthless. If I had used a put, it would have expired worthless too. Expiring worthless = 100% loss. My loss so far is a lot smaller, and I have time on my side.
I’m gonna ride it all the way to heck :-]
Just kidding. Since this short is way off plan, I no longer have a plan. Play it day to day, by ear.
@Wolf – that made me laugh, thanks, I respect the honesty.
Michael Burry was a little early on his short just before the GFC and housing meltdown. But he made out by being patient.
If all you lemmings don’t have the guts to play the short game or buy Puts, you can always join Jim Cramers Investment club. Just scan your phone on his TV ad and you’re all ready to go. He’s only down 20% YTD.
Wolf, yes, the puts I sold for 400% profit are now close to worthless (OTM March and April). Now I’m in Jun-Oct.
Why is shorting even allowed? The BS of “borrowing shares” . It amounts to manipulation. I am fine with options strategies but shorting should be abolished
I would imagine the price for unwinding the extra length of rallying will be commensurately greater as well. (Obvious pointing to additional $4T on Fed balance sheet since 2020)
“Never imagined that this craziness could go this far and last this long before coming unglued.”
Hmm. As Keynes noted, Markets can remain irrational longer than you can remain solvent.
See Wolf, anyone who has “common sense” would have done the same.
But as we know now, sense, reality, moral hazard means little in this new world of DEBT DEBT DEBT.
It’s as if one has to turn off their brain and any structure of thinking or doing the right thing in order to mentally survive the insanity that has taken place financially the past 20 years and the coming further insanity by world leaders….
Best wishes for trying to keep us SANE through your articles, allowing us to remember “Hey maybe we are not the only ones thinking this way.”
Getting global citizens hooked on and into technology is the whirring sound of the great reset venturi.
Freedom and Liberty, It’s all coming to a close folks.
To remind you of what Keynes said:
“Markets can stay irrational longer than you can stay solvent.”
The beanstalk that’s growing just outside my window is disappearing into the clouds. I expect a singing harp and some gold eggs very soon.
“Look how often the unexpected happens – yet we still never expect it.” ~ Ashleigh Brilliant
If a coin flip results in heads 10 times in a row, what are your odds of hitting heads on the next toss? The answer is obvious to many investors, but based on your comment, I have to ask.
The odds are like 49.9999% or so, clearly.
I would pick heads! 512:1 that it’s not a fair coin!
Is Jay Powell’s image on the heads side of the coin ??
Sorry, Hal, try again.
10 heads or 10 tails is 1/512. You should measure the probability of “an event as or more extreme than this”, not just the event itself.
If you flip a coin ten times and it comes up heads, what are the chances it will come up heads again? They are very nearly mathematically certain to come up heads.
nick-so is it a ‘loaded’ coin, or a stretch of probability that becomes general belief until the ensuing chaos from the ‘who knew?’ tails flip???
may we all find a better day.
Occasionally a coin will land on its’ edge. That seems to be the international condition right now. Whether it teeters and topalls one way or the other is the big bet at this point. Go short on heads of state.
If you flip a coin ten times and it comes up heads, what are the chances it will come up heads again?
…Can you say “Maturity of Chance?”
A fallacy, of course, just like belief in the existence of Bigfoot, or the female orgasm….
The coin is obviously biased, or a very skillful flipper.
Even in math texts it usually says ‘unbiased coin’. If you are watching a guy flip a coin and it comes up heads 10 times, wouldn’t you examine the coin and insist on flipping yourself?
That’s the mistaken assumption that flipping a coin is unrelated to all else. If you get on an airplane the odds of a fatal crash have nothing to do with you or the plane, but rather the chance that the pilot is on course for his fate. If a guy gets heads 10x, you may want to just leave the room in case the ceiling is about to fall in. Try a different game.
That depends entirely on whether you can trust whoever’s flipping the coin.
et al-Nathan Detroit is alive and well…
may we all find a better day.
The Fed would take that coin away then give you two newly minted ones and say “now flip again, boy” without breaking their glare 🤣
It is always easy shooting when somebody sticks his neck out and things work out differently.
What is interesting to me is not if somebody turns out to be right or wrong in the end, but if he puts a cogent argument together to support his case. Because I can learn something from that and challenge my own thinking.
Especially in the past decade, so many people have made a bundle by being right for the wrong reasons. An impressive P&L, but really no interesting insights to share.
Apart from that, I also believe that most people vastly overestimate what they know about the world (and markets) and what a human can actually predict. It is a complex dynamic system that behaves chaotically.
Even the behaviour of some very simple systems (even deterministic ones!), can be unpredictable. Examples are a double pendulum and a three body system (gravity). Let alone a very complex, time variant dynamic system like financial markets.
But humans are wired to recognise patterns. That is why we see elephants in the clouds or the face of Jesus in the cream on your coffee. We cannot help ourselves and many patterns of course ARE real.
But I digress…
Very elegantly put YuShan.
In other words:
PEOPLE STOP TRYING TO TIME THE MARKET AND PRETEND LIKE YOU ARE A GENIUS
I am far less kind (or intelligent) than many others so that’s why I shout the above in all caps.
YS/Pnut-it seems another human frailty, not far removed from the effect had on many adherents of a religion who go from wanting to ‘know’ their supreme being to wanting to BE their supreme being…
may we all find a better day.
YuShan said: ” Let alone a very complex, time variant dynamic system like financial markets. ”
I contend the greatest variation in our financial system is much more influenced by the creation of money from nothing and interest rate suppression, than by time.
The scary part is that most don’t see that they didn’t collapse as much as they approached their intrinsic value.
The world is over valued because it awash in fiat currency of every stripe, dollars, euros, yen, yuan, solas, pecos, lira
The Fischer Theorem on the value of trade and the alignment of currencies to balance the internal economic impact, has failed. The Bretton Woods alignment has broken down.
Synthetic markets are wonderful for those lucky enough to be considered worthy. Not so good for the 90+ % of us who actually pay for the Fed orgy. The not worthy component that makes up the bulk of our population. Hell, I don’t like most of them. Unfortunately, I need them.
Personally, I think the Federal Reserve System is actually a failure. A creature of the banking system, totally corrupt and compromised, given the keys to the royal bed chamber. They did exactly what even people from Wisconsin would expect them to do,
Make the rich people that told them what to do, richer. They did do that.
A trojan horse. sold to us fools as a motherly institution of the Gov witch is primarily concerned about how the median American is doing rather than the average American.
Let’s face it. Corruption in America dominates domestic life. Dressed up in election garb. Always has, until calamity intervened.
Here are two people who disagree with your comments on the Fed.
Blackstone Inc. Chief
Executive Officer Stephen
Schwarzman took home a record $1.1 billion in 2021
Mr. Gray (Blackstone President) took home $323.8
million in 2021
Then there is Berkshire Hathaway…
Now, what do all these people have in common? I am guessing they are all PLUGGED IN . like a Fed Governor might be.
agree totally d!
Been saying to get rid of ”the fed” ones since a very kind and smart lady realtor in California of all places explained how our money has become SO debased to me in early 1980s…
and, of course, much much worse since then
1913, a loaf of ”real” bread cost a nickel or even a penny
2022, try 8 frigging US dollars…
crazy crazy crazy that WE the PEONs get stuck with the very high cost of the entire FED program
Why bag on people in Wisconsin?
Aside from their brutally cold winters, personally I like the people of the midwest the best out of the entire US.
Democracy is still the best system money can buy
What are solas & pecos?
Imaginary units of commerce, with no intrinsic value besides the relative value assigned it by a frail international monetary system.
Nice dodge there, covered up your mistaken currency identity issues, well done.
may we all find a better day.
They were the “monetary” units used to price Tulips in 1623 Holland.
keep the black ones
Bit of trivia: tulips long- term panned out for Holland. Not as investments just as flowers. They sell about 300 million $ of them and bulbs annually. Other factoid: the US is largest ag exporter country. EU is larger, but is many countries.
However little Holland is #2 country with less than .5 % area of US. They supply EU with most peppers, cukes, etc. Huge in greenhouse tech.
– Jeff Snider of Alhambra Partners pointed out that retail inventories were at a record high in the last 3 months of 2021. Retailers thought that the US consumer would go on an buying binge before Christmas but they didn’t. Do combine that with the fact that there are still some 80, (100 ? 120 ?) ships waiting at sea to be unloaded in the ports of Long Beach and Los Angelos. (How much stuff is still being ordered and produced in China ?) Do combine that the US consumer is feeling the “inflation” pinch (think: e.g. rents) and one can imagine that 2022 could become a big disaster for the US retailer.
– Companies are also suffering from that higher inflation. An australian company called “PROBUILD” wasn’t able to absorb the rising costs of construction/building material and went under.
“Jeff Snider of Alhambra Partners pointed out that retail inventories were at a record high in the last 3 months of 2021.”
1. Keep this moron Snider effing out of here. He doesn’t know what he’s talking about, and by regurgitating his BS, you show that you don’t either.
2. Read my GDF article about retail, and you might actually learn something.
Here is the retail inventory to sales ratio: retailers are dealing with the worst shortages in history, and are just now trying to come out of it
And here is what happened in retail land:
– US consumers may have spent “like drunken sailors” but inspite of that total retail inventory is going up.
– Jeff Snider pointed to something else: MAERSK (the danish container shipping giant) reported (when commenting on the yearly figures of MAERSK) that freight rates were up by 77% but VOLUMES were down by some 4% in the 4th quarter of 2021.
Inventories at retailers are FINALLY going up from extremely low levels, as I said. You never RTGDFAs. The dollar-increases of inventories are based on rampant COST increases (inventories are valued at cost). That’s why I gave you the “inventory-sales ratio” chart because it cancels out the effects of inflation and shows the months of supply of merchandise. ANYONE who knows anything about inventories looks at the inventory-sales ratio. Snider is a moron that doesn’t know anything about inventories.
Container throughput was down at major ports in the US because everything is clogged up. This is one of the REASONS for the shortages in inventory, duh. Shippers cannot get the containers through. This has been well-known and reported for a year. Tell Snider that he is a moron that finally heard some things about containers but doesn’t know what to do with it.
Don’t drag Snider’s crap into here. What goes on over there, stays over there.
Wolf said: “Keep this moron Snider effing out of here.”
Snider has a big following and there are several “guru’s” that admire him and parrot his views ………….. George Gammon, Brent Johnson, Steven Van Metre, etc. They all make a big deal out of the Eurodollar, and the fact that Bank Reserves are locked up and not usable. I have never seen one of them define what bank reserves consist of, and I have asked many times.
Snider seems sincere, likable and smart enough, but if a person can’t define their premises and ascertain their correctness, then they are wasting their time. Building on unsound premises makes someone unsmart in a hurry.
I agree with Wolf that bank reserves are dollars. I have seen no documentation showing they are anything other than dollars.
Bank reserves are dollar-denominated deposits from banks at the Fed: an interest-income producing asset for the banks and an interest-costing liability for the Fed.
Do you buy in that this war is going to cause a 2008 crash due to Russia defaulting on payments? There are Lehman Brother 2.0 rumbles again. Another rumor is that Russia and China are going into the banking business against western counterparts. This will Russia walk around sanctions. What kind of consequence would that have on our economy if that happened?
Gonna be interesting to see whether Russia escalates or is cowed by EU freezing Russia’s central bank’s exchange reserves (preventing them from defending the Ruble/”rubble” as I understand it). Many have speculated that they could demand gold as payment for oil/natgas and detonate the entire fiat system. That they haven’t done so already tells me that even the Kremlin doesn’t have the spine for a move like that, but then again I was wrong about the troop buildup being just sabre rattling…
I mean, who cares what they do to each other. How is this America’s problem as a national security threat when we ignore the Walmart/Apple China monster, smashing shit and apologizing later.
America makes advertising to sell stuff made abroad.
This stuff about growing up in America, if you were white, was wonderful is not accurate, It was a competition with Jos Stalin to make sure that we lived better than them.
Now the bar has been lowered to the level of competition from communist China.
may we all find a better day.
Pozsar has recently been wrong about nearly everything, including all his BS about the Fed’s reverse repos. But he gets a lot of press. Russia’s economy is a lot smaller than California’s. If it weren’t for its energy exports, the Russian economy wouldn’t matter.
Russia may well have a financial crisis, like it had many financial crises before, and no one outside of Russia really cared.
Anyone who compares this to the situation around Lehman is a moron.
Keep things in perspective, people!
Russia may be a small economy but the products it exports are vital to the world. They, with the Ukraine, export massive amounts of wheat,(29% of world exports) corn(19%) and especially sunflower oil(80%). They also export massive amounts of natural gas and oil and huge amounts of the fertaliser that the world needs to grow its own wheat. Without the Russian exports of wheat, corn and natural gas you could almost kiss your bank accounts goodbye because of the inflation it would cause.
You also have to remember that, unlike the West, Russia is not in massive debt and actually had a trade surplus last year of around $145 billion. They also have massive stores of gold and silver and they can feed themselves in food, oil and heating.
We will have to wait and see what happens to inflation but if Russia turns just one of these export off, in retaliation, then……………………..ouch times pi
The U.S. is the largest exporter of food in the world. Russia imports food. The U.S. is the largest producer of oil and gas. The U.S. is the largest exporter of aircraft and weapons.
The U.S. has the highest GDP in the world. Russia is #11. Russian GDP per capita is #17.
“…Russia is not in massive debt …”
Russia’s foreign-currency debt is mostly owed by Russia’s state-owned giant corporations. That’s how Russia has issued foreign currency debt.
It’s ruble debt constantly gets devalued with the ruble.
In 1998, 1 USD = 3 RUB.
In 2012 1 USD = 22 RUB.
In 2014, the ruble collapsed again. By 2015: 1 USD = 60 RUB
Now 1 USD = 107 RUB.
Because Russia’s long-term ruble-debt gets devalued with the ruble, it doesn’t have a lot of long-term ruble debt. And it has little foreign-currency debt because it already defaulted on it foreign-currency debt and no one wants more of it. So Russia borrows through it state-owned giant corporations.
so do Russia’s state-owned Corporations owe a significant amount of foreign-currency debt?
Yes, huge amounts. As do Russian banks. Russian corporate dollar-debt is traded in the global bond market and is held by a gazillion bond funds, insurance companies, and pension funds globally, including the pension funds of California, that are now trying to divest them.
Russia -China already have a competing system
Average age of an empire is 250 years. 2026 is looming. When economics of any country break ties with the hard reality that backs trade, it is game over. The US severed those ties with Nixon’s presidency. The world has benn running on fumes for 50 years. Time’s up.
The Kennedy assassination was significantly more important than is generally realized. A plot point that changed the course of America.
It’s hard to prove that any one event changed the course of history. However, having lived through the Kennedy assassination, I have long thought that it created a dividing line between a country full of optimistic people and a country full of pessimistic people. Of course, my view probably was colored by the Vietnam War, the other political assassinations, and years of inflation.
Yep, the viet nam war and great society of the 60s broke the budget for all times. Nixon had no choice but to suspend gold backing, or watch it all get traded away. The inflation of the 70s was the result and we’ve had crisis after crises since then.
Now congress and the fed print and foolishly waste $1 trillion as casually as you or I would buy a pack of gum.
‘Now congess and the fed print and foolishly waste $1 trillion as casually as you or I breathe air’, since it’s all printed out of thin air!
Slight modification to your wisdom!
The Fed doublemints money?
Close..they double-mince the money.
Yes this reminds me so much of the dot com burst of 2000.
I will add and you pointed out too, all the high-speed trading algos kicking in making things worse, and High Frequency Trading (HFT) whipsawing these markets for a longtime.
Also the ease of trading to people with cell phones!! – laptops, PC’s, etc makes it like a video game, and the zero dollar trades of brokerage houses, along with ease of getting a margin account is mind boggling to me, and back in 2000 the trading rates were like $29 dollars, so it gave some pause to reckless investing.
Add extreme leverage (some say 5x) from crypto accounts buying equities on margin with zero commission – IMO – will dwarf the carnage of 2000.
I can see Robinhood go under as fast as Cathie Woods Titanic-ARKK, and coupled with the extreme hype by WallStreetBetsMorons what could possibly go wrong when margin-calls hit?
I haven’t even mentioned the dereliction of duty of the Fed, however I leave that part up to you! – I continue to learn about that with astonishment.
How long can Softbank hang on?
The Federal Reserve, all on their own, DELIBERATELY altered the Risk Return ratios, the PE ratios in the market place.
The Federal Reserve admitted that their pounding down of long rates was intended to FORCE the investor to take more risk. And now we get the Black Swan event (Ukraine).
The Fed led a cattle drive, and just like 12 cowboys driving 20K head of cattle, the Fed forced, FORCED people to make imprudent decisions.
Where is it in the Federal Reserve Act that mentions FORCING people to take risk based on new parameters set by the Fed?
And we all know what happens at the end of a cattle drive…
The cowboys (the insiders) get drunk and the cattle turn into steak dinners.
The unmentioned third mandate…”Promote moderate long term interest rates” has been carved out with the “dual mandate” game. But this third mandate would have prevented the “cattle drive”, would have kept a balance between lender and borrower, kept a positive yield curve, and would most importantly PREVENTED the reckless creation of debt.
This is why we get the “dual mandate” mantra….and this important mandate is intentionally carved out. (The Fed will NEVER mention it.) They violated “moderate long term interest rates” more than they violated the “stable prices” mandate.
“The Federal Reserve Act 1977 states that the Board of Governors and the FOMC should conduct monetary policy “so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”
Instead, the Fed has morphed into an entity that apparently follows this..
“It is the Federal Reserve’s actions, as a central bank, to achieve these goals specified by Congress: promote unemployment by providing cheap money to the federal government to dole out and encourage idleness, promote inflation, punish savers and holders of dollars, and promote record low long term interest rates so as to facilitate the pulling of wealth forward from the future generations of the United States””
Don’t stop reminding us. Your comments are my favorite. They should be painted onto the side of every building in American until people get it.
Historicus said: “and promote record low long term interest rates so as to facilitate the pulling of wealth forward from the future generations of the United States”””
another possibility: “promote interest rate suppression and record low long term interest rates so a rentier society could be advanced by distributing low cost loans to favored entities (hedge funds & private equity) alowing them to accumulate rentable assets and fleece and expanding supply of renters, making a majority “own nothing and be happy for it””
it is all about about ownership ………………….
Just bought SBER (Sberbank ADR) at -70% from yesterday and -95% from a few weeks ago. Moscow Exchange is closed but still available via ADR. If this blows over I’ll have made life-changing money. Or else lost my entire position! Love the volatility, I’m an “investor” (gambler). Crazy times!
Venezuela, Iran and North Korea have not recovered from sanctions. The ruble is down 20%. People in Moscow are lining up at ATM’s.
Remember the food lines in Russia during the 1980’s when the Soviet Union had some of the richest farm land in the world?
You might find you have to open a brokerage account in another country to exit your position.
I’m not sure what happens if an ADR is delisted. Are the positions automatically closed out? I don’t know, as I never looked into it.
Last year, I was interested in buying CNOOC, a Hong Kong based oil company. The ADR’s were delisted from the NYSE shortly after.
If Russia’s FX reserves are frozen as I read, don’t be surprised if all Russian ADR’s are delisted too.
Yep, definitely a possibility, just part of the gamble.
Sberbank had extensive business outside of Russia. I don’t know what the situation is elsewhere in Europe, but in the Czech Republic, clients started withdrawing deposits last week on Monday. The Bank run took place on Wednesday. Sberbank CZ has been practically out of operation since Friday. Today, the Czech Central Bank initiated proceedings to revoke its banking license.
Sberbank Europe AG is getting shut down by regulators. The ECB said today that the bank “failed” and cannot meet its obligations (paying depositors). The sole stockholder, Sberbank of Russia, which is majority owned by the Russian state, will get bailed in first.
Depositors of Sberbank Europe are insured up to €100,000 per person per bank through the national deposit insurance programs and will be made whole.
ivanislav, how are you purchasing your SBER ADRs?
I know very little about buying ADRs, wondering whether if there are any good resources for me to read and learn more?
I bought on the London exchange because US markets weren’t yet open. You could just buy SBER on MOEX (not the ADR) as long as your broker lets you, whenever MOEX reopens. I’m not a sophisticated investor, but a monkey with an account at Interactive Brokers throwing darts. I like IB because their global footprint lets you trade pretty much any market, unlike a lot of brokers in the US.
No-one made anyone act like the cattle around them. Peoples greed motivated them to do it to themselves. Even at these discounted prices many of these stocks – and many others too- are still way overvalued… in the context of a traditional market…. Why don’t we have a discussion about that? … and what it might take to get some pe compression going? I don’t think that has been outlawed yet but I guess we shall see
“No-one made anyone act like the cattle”
Sure they did….
Being idle…not doing anything, SAVING……WAS PUNISHED by the Fed promoted inflation. You saved, you lost…and are still losing.
The Fed Governor’s own words…”We Forced…” Fisher on PBS “The Power of the Federal Reserve” and as mentions also in “Lords of Easy Money”.
Nothing MADE people put money in these particular shaky assets. We are at push-button proximity to any asset we choose, in this amazing economy. The suckered masses could have made better choices. The cattle factor here is HUGE. It is just another rinse and repeat of countless speculative manias. It’s not the Fed’s fault they plunged off this particular cliff.
I stashed cash mostly, also adding to my real estate equity. That has its own risks, as does everything. The Fed didn’t make me do it. We live in a world of shifty asset values. Powell didn’t invent it. We need to surf the waves we get, we are all roughly in the same contest.
Good one p!
And EXACTLY SO.
Been OUT of the SM since early 1980s, and making a ton of $$ since IN in the ’50s,,, and realizing that either insider or ”mentor” information was the key.
Since then, only in cash and RE, and have done OK to the point of retired with no debt at all, praise be to the Great Spirits, etc.
Came on Wolf’s Wonder to see if I could learn enough about the current situation to invest in SM again for the liquidity…
Damn sure learned a TON,,, and many thanks to WR and you and the other sincere commentors on here…
I didnt say the Fed made YOU do anything…
They did, however, attempt to FORCE investors to take bigger risks…..
By doing so, they SKEWED the PE ratios, they SKEWED risk return ratios, they pushed people out of the “penalty box” of holding cash and into a “buy anything” type mentality. The participation was not 100%, of course. But the intent of the Fed was clear, and admitted to.
In short, they didn’t make anyone eat the sand but they were happy enough to yank the beach towel out while ringing the dinner bell, knowing the burger shack was closed for cleaning.
yeah, i mean the guy pointing the gun at the bank manager’s head didn’t MAKE him open the vault. he could have chosen to have his brains blown out.
@phleep – I’m wondering if you also enjoy playing poker for money in a game where the dealer changes the rules every few minutes?
phleep said: “It’s not the Fed’s fault they plunged off this particular cliff.”
so which cliff’s are the FED responsible for?
most gains made in real estate equity has been through inflation, induced by dollar creation and interest rate suppression, and GOV subsidized loans.
A lot of prudent people have lost purchasing power by holding dollars.
The FED has been in charge of this cattle drive, and they have continuously lied, manipulated and ignored their published mandates.
some win, some lose. Interestingly enough, the wealthy keep winning.
Just guessing but don’t most of Ukraine food exports go to…..Russia.
As for fuel…….if Russia shuts down the pipelines it’s like slicing its own throat. Those probably are most of the Ukraine fuel exports….a guess.
THIS IS THE LAST DAY OF THE FED PURCHASES IN THE MARKETPLACE.
SINCE JAPAN IS ALSO OUT, AND THE ECB IS REDUCED A BIT…….THE MARKETS MAY OPERATE A LITTLE MORE HONESTLY.
Going to be interesting , we either just bottomed….or its only the end of the second leg down…….with a LONG way to go.
you know the markets are kind if you just listen. In 1972 it was the “niffy 50”. Most of the brokers( salesmen ) I knew were still buying all of the over the counter names that had done so well in 1968. When the generals finally started to roll over in 73 it began a brutal bear market that didn’t bottom till the fall of 74. By then you couldn’t give them away. Even the brokers didn’t want you to buy. It’ll be interesting if the fed folds and ruins the dollar and we get 60,000 dow
Ruble is now worth $0.01.
Germany pledges to more than double its military budget to beyond the 2% of GDP NATO requirement, just as a previous president chastised them to do at which they actually laughed at the time.
“US Bans Transactions With Russian Central Bank, Freezing Nearly Half Of Russia’s $630BN In Reserves”
“In Historic Breach With Neutrality, Switzerland Joins EU In Sanctions On Russia”
“Russia Central Bank Bans Selling Of Russian Securities By Foreigners”
And, LOL, this and Canada’s actions expose the myth of digital tulip bulb invulnerability once they actually become a threat to the status-quo and more than a method of wealth extraction from fools.
“ECB’s Lagarde Urges Immediate Crypto Regulation To Stop Putin Evading Sanctions”
Don’t feed me BS about private wallets being a defense as some tulip bulb shill on Tucker Carlson very nervously claimed, probably wondering if Carlson was informed enough to easily wreck his claim. He wasn’t, of course.
You know you dun goofed when the swiss decide to come out of their neutral cave
Speaking of the market..let’s see what kind of day we are going to close today…buy the dip and FOMO crowds, we need you to close the market up again.
Nasdaq is actually up at the moment I write this. This, i light of the nosebleed P/E ratios Wolf ID’d, still in evidence, and Russia.
Why would evolution favor humans biased toward over-optimism? Because nature needs cannon fodder. A young male at the peak of testosterone, popular and brazen in high school, will fight/reproduce/buy meme stocks. By the time he gets sorted out by nature’s wisdom-inducing reversion, and tossed on the rubbish heap of history, he has worked-fought-reproduced, to his equilibrium evolutionary value/yield. Evolution is still in the game, though the optimistic fellow isn’t.
My Maserati-driving rich friend is holding onto her QQQ. It all depends on one’s time horizons — she is in her 60s. We’ll see how dippy this particular dip goes.
I have a friend a little like that, except she doesn’t drive a flashy car and is 75. She has social security and a nice pension, so she just keeps her IRA long all equities and it goes without saying she has compounded a nice return over the last decade. I think she will kick herself if market crashes, but I think she can handle it emotionally because she has safety of social security and pension if her IRA goes to zero
I am just the opposite in that I realize because of progressive tax tax code any further gains I have in an IRA uncle Sam is going to get 30% – 40% of gains so why risk what you have for what you don’t need. Main thing now is to try to keep from making a big mistake you can’t recover from and to not get eaten by inflation over a long period of time.
We have another younger friend who is 50 and earning a good paycheck and squirreling some of it away in a conservative fashion.
We joke no matter what happens, one of us three will be able to take care of the other two as our sources of income are so different.
That’s nice to have friends like that to look after each other. Less common today than you might think.
Human evolution is of course in the midst of shifting what it defines as “strength” and “power”.
A young male at his peak physically is for sure not at his peak intellectually – which I would argue is today’s modern day “strength”
It sucks to go back to work in your 70s, as most of the early stock market retirees will find out. Oh yeah you also need to swap out the Mc mansion for a shaq ;)
Of course, the Ukrainian crisis will allow any economic issues which were already in progress and destined to worsen to be blamed on that alone and a large portion of the typically clueless public will probably buy it. It will also act as a distraction from all domestic news (trucker protest? what trucker protest?) and serve as an economic fall-guy just in time for the mid-terms. A timely coincidence.
The New York Times reported on U.S. intelligence and diplomatic officials from the State Dept. sharing intelligence with Chinese officials in the three months leading up to the Russian invasion which the Chinese then passed on to the Russians.
Many people have looked at that story from the perspective of incompetence, i.e. why would the Biden team be stupid enough to think China would not share the intel? However, when it comes to these types of issues, never ascribe to incompetence that which can be explained by intent.
Elliott Wave 4’s down always seem like the end. We are entering Wave 5 up. Probably one more drop this week, but S&P 4900 by summer, then eventually into the 5000’s
Your predicted S&P values for this year can only be realized in a hyperinflation scenario.
and that is what the Fed is doing
Not really, the January 5 peak was over 4700. S&P 5000’s is only 10% higher.
Stocks are currently overvalued, yes and there are always stocks that go up and come down in any economy, yes. This does not mean stock market is crashing.
I doubt stock market will overall crash at all. All indexes are still near (within ~10%) all time high. With inflation at 10% these stocks have time to catch up and become fairly valued. 10% compounding is a big force, a stock overvalued by 2x will be fairly valued within 5 years. And investors in this economy where these is no where else to go will be fine waiting for 5 years. Well with interest rate being net negative, any amount of leverage is good investment now TBH. Cash is trash and so are bonds so really there is no other place to go.
I understand it is painful for savers and poor and those who shorted wishing and hoping that stocks will crash but remember Warren Buffet once said, Markets can remain irrational longer than you can remain solvent.
“I understand it is painful for savers and poor and those who shorted…”
Don’t feel sorry for them. They did well so far this year. Better than the longs, particularly the longs in the most hyped stocks such as Tesla (-27% YTD). TSLA holders also got hit by inflation, on top of the 27% decline in share prices. A double-whammy.
Somebody tell me when it actually hits the fan because a little collapse or ungluing here or there doesn’t seem to be affecting any market as a whole very much. Jerome hasn’t done anything particularly meaningful yet and a war in Europe doesn’t seem to be changing things any more than the never-ending pandemic or the fact that people can’t necessarily afford what they are buying. High income asset holders are still winning and Regular Joe is still trying to buy the same amount of food. Ain’t no fortune tellers, that’s for sure.
Thank you for this excellent presentation, Wolf!
I was working in tech during the DotCom Bubble. I think today is very similar.
Stocks that went up 800%-1000% in a couple of years came crashing down in less than a year in 2001.
I didn’t have much invested in the hype but was working with some major tech companies. I had purchased Lucent (Formerly Bell Labs) in the 1990’s for $6/share. At the peak of the bubble, it was over $80/share. I didn’t sell. I watched it drop rapidly to $9/share and bought more. It finally bottomed at $3/share before being sold to Alcatel.
I never invested in Pets.com which reached nearly $100/share before going out of business and dropping to $0. I thought selling pet food and accessories online was a great idea! I still don’t understand how Pets.com was not successful.
My point is that I don’t want to repeat the same mistake I made with Lucent. Even if a stock has fallen 60-90% from its peak, it does not mean it has reached a bottom. I look at the stock price from Dec 2019 (admittedly at the time, I thought this was overvalued.) and the fundamentals of the company. If the stock is still 50-100% higher, It has room to fall more (My Lucent example above). If the company has never made a profit, I run away since based on 2001, it will likely go out of business and be worth nothing. Even if it sounds like a good idea.
I got trained by Ben Graham and Buffet to think of stocks as a bond with the potential to grow it’s income. (Cyclical stocks require more skill as you have to understand where you are at in the cycle.)
Anyway a long steady history of earnings that look like they can grow over the next decade and make sure the earnings yield has a good spread to treasury yield is one way to make money long term. It’s kind of the turtle way to hopefully win the race.
In reading BRK annual report I saw even though BRK had performed well it had underperformed SP500 over reference period of 5 or 10 years (can’t remember which). That’s kind of interesting thing to contemplate that average no nothing indexer outperformed one of the best capital allocators. Might be a sign of a bubble, time will tell.
He couldn’t find enough assets at what he considered a good price so he ended up sitting on a huge pile of cash.
You still don’t understand how Pets.com was not successful?
What is your definition of success?
As far as I am concerned, in a non-distorted economy, it would likely never be competitive because the cost of shipping along offsets any price advantage and more to buying in person. I see Chewy packages in my mailroom, all the time.
In any sane financial system, no company like Pets.com would ever get funded over multiple rounds when it incinerates its investor funds.
In a sane economy, if this type of company did succeed, it would have a market cap in the hundreds of millions, not billions or tens of billions.
If you still believe in the concept, you can always in speculate in Chewy which is or might be a public company by now.
I did look up Chewy. It follows Wolf’s model.
$24 in 2019
$118 in Feb 2021 up 5X
Half off! I wouldn’t buy it.
It remains to be seen whether it follows the same path as Pets.com and goes to $0.
There is still a company around ticker symbol PETS. They nearly went under about 15 years ago. Ever since they have ran with no debt and always kept about 100 million on the balance sheet. Pet pharmacy and somewhat a competitor to Chewy.
Memories…… I had to try to look up the history of pets.com
There is a good article on Wikipedia of the history of pets.com
It claims mismanagement killed PETS.
“Although sales rose dramatically due to the attention, the company lost money on most of its sales through mismanagement. It fell victim to the dot-com bubble in the 2000s. As of 2022, the domain redirects to PetSmart’s website. “
You make your money when you buy. For example, in Summer 2019 I bought Zoom and Shopify, well before the pandemic. The pandemic drove their prices to the stratosphere. I suppose I could have sold into the exuberance but that’s not how I invest.
I almost sold my ZM shares in December 2019 but I have a rule that unless the reasons for purchase have changed I hold.
ZM went up 500%. Now it’s up about 100%. Am I sorry I didn’t sell at the top? No. I’m not a trader or market timer. I look for good companies with good management and hold for 3± years.. I’m still up 100% in 2.5 years, which I didn’t expect to when I bought it I will not cry over a 30% return YOY since I bought it.
Same with Shopify. Bought in 2019, went ballistic during the pandemic, now I’m “only” up 100%. Another double in 3 years.
Am I upset that I didn’t get out at the peak? No. These stocks have performed better than I expected 2.5 years ago.
Pigs get fat, hogs get slaughtered.
and if the Fed happens to dump a NEW 4.8 Trillion into the system….in two years……you win.
The Fed not standing to their post, shirking their duties, made winners.
7% plus inflation and zero interest rates, essentially….
no one would have believed it…..but some certainly knew the Fed, for the first time in history, would destroy the purchasing power of the dollar, intentionally. Apparently decided around 2009.
“I look for good companies with good management and hold for 3± years..”
Good advice. I’d also add “Don’t buy at an exuberant peak”. Whenever that is.
If you bought QQQ in 2000, then you needed to hold for 16 years to recover. If it was Cisco or Lucent, then it still hasn’t recovered.
If you bought a good company in 1998 (AAPL 33 cents), you have recovered by now (AAPL).
I think the same is true if you bought a well-managed company in 2019. I still wouldn’t buy if that company is up 100% today. However, I would hold.
It has to go to 100% in order to get to 200%.
AMZN shares went for $1.54 in May 1997.
By the end of the year it was at $4.24. Did the price rise too fast to buy it?
By the end of 1998 at was $32. Did the price rise too fast to buy it?
And each year a lot of people were thinking “that’s too fast.”
And look at the drawdowns. In April 1999 it was $90 but at the end of July it was down to $49. August 2008 $83, December 2008 $42.
During the dot-com bust AMZN hit single digits.
So I consider the price change rate irrelevant without any other background. And all this dancing on the graves of the pandemic stocks looks a lot like history repeating itself.
You’re focusing on the few winners of the dotcom bust. But there were hundreds of publicly traded companies whose stock prices soared during the dotcom boom, similar to the high-fliers today, and that then collapsed, and their shares went to $0 and they disappeared.
Focusing on the few winners makes you think all current stocks will be winners, but most likely, hundreds of the current generation of high-flyers will go to zero, as they did during the dotcom bust, and many others will plunge and may never — or not in decades — get back to anywhere near their bubble highs. Those survivors may do a 20-1 reverse stock split (your 2,000 shares become 100 shares) to keep the stock price above $5, and they’ll plug along at that level for decades.
It’s OK to focus on the winners to see what can happen in the best-case scenario. But if you don’t also look at the many more losers, then you get a skewed impression of the risks. And the losers of the dotcom bust are now very difficult to even look at because they’re gone, and their stocks are gone, and even people like me who traded them and yakked about them have now forgotten about them.
yes. this is classic survivorship bias.
I’m merely showing an example of how just because a stock is up 100% doesn’t mean you shouldn’t buy it.
I also threw in an example that growth stocks are extremely volatile and not for everyone.
Example, not recommended strategy.
Furthermore, my discussion antedated the dot-com bust by several years. You’re focusing on a single event. I wasn’t talking about the dot-com bust.
A 2,000% gain covers a lot of sins in the rest of your portfolio. AMZN has probably doubled the performance of SPY with dividends reinvested by 2x.
My father-in-law in academia really believed in Apple and Sun back in those days. He did very well with Apple but that was balanced out by huge losses in Sun.
Just looking at QQQ which is the index average of 100+ NASDAQ stocks shows that even with Apple and Amazon back then as part of the index, it took 16 years to recover to the 2000 highs. It only took 10 years to recover to 1999 levels.
Sun, Lucent, and Cisco were profitable and well-managed back then. It did not save them from irrational exuberance.
QQQ is considered a good long term investment since it is so high now. Long term, meaning 22 years. It is now up 300% from 2000.
And the next shoe to drop is Big Technology. You can’t grow revenues when your customers are struggling. Think about all the startups and other companies that now have heightened profitability expectations, can’t get financing, and must now cut back their IT budget.
And rising rates will put additional pressure on PE ratios.
Apple product buyers with 20% higher rents might just balk at buying the status of having the latest products.
The war is driving long rates down big time…….stimulating the economy……just when the chip shortage could get really bad due to a lack of neon gas…….and other Ukraine issues.
WAY TO GO JP! Keep screwing it up! Any other fed chair would have announced an immediate sale of securities to drive up long term rates to prepare for a short term tightening…..that is really needed in light of shortages……
but not JP……to busy playing golf……or maybe he is just so dumb that his light is just too dim to see it…….even a crook would not have wanted the mess this guy is creating.
Dictionaries describing the word dumb in the future will have a photo of JP in the definition.
Perhaps some lower level policy analyst should write him a memorandum on the mistakes of underestimating your current situation. Golfing sucks when you have to hold your next meeting on the Belarus border in the middle of winter.
He’s not dumb. He is in the 0.1% and wants to keep his wealth advantage relative to the average citizen.
fred flintstone said: “The war is driving long rates down big time”
Why is there always a buyer for every seller of stock?
The real world doesn’t work that way, not as if every home for sale has a ready buyer.
There is unless the price is $0.
Probably at least 25% of the homes for sale are unsalable for a variety of reasons, and the claim that price can fix anything looks daunting when a domicile needs an awful lot of money put into it, in order to make it actually desirable.
There’s an awful lot of stocks that are essentially ‘fixer-uppers’ or ‘handyman specials’.
During the dotcom bust, I learned that there isn’t always a buyer. And you cannot sell the garbage that’s strewn across your portfolio. Years later, you might ask your broker to remove it manually if you get tired of looking at it, hahahaha. Yup, those were the times :-]
I believe in the crash of 1929 the panic was so bad that there was zero buyers for certain stocks. Seems like it might of been John Templeton that bought every stock that got below $1 and made a lot of money. Memory might fail me on that.
Once again, we enjoin the Car of Clowns, starring Jay, Janet, Ben, and Alan to take a huge, frolicking bow to the American audience, now in tears, but for other not-so-funny reasons. Now these jokesters can take the Wealth Effect theorem they have worshiped every waking hour for the last 3 decades, and hit it and drown it with a clownesque bottle of seltzer.
When you cause the Cost of Money to be grossly under-priced, you get speculation in every asset on the planet, to include tulip bulbs and their modern day equivalent, common stocks. Even an unemployed clown knows that rockets zoom high into the sky, but eventually come crashing back to earth, in a sickening heap, when the run of of fuel. That fuel having been greed via speculation, free money, and crowd mania.
I think I am going to mail each of these Fed Governators a pair of very scuffed and dirty clown feet to wear at their next $200,000 speaking engagement.
1) QQQ trading range Jan 24 hi/ lo.
2) Today bar is an UT, a shooting star.
3) QQQ might breach it’s trading range to test Feb low, before moving
up, above BB #2 (July hi/ 8 lo) to Feb 2/9 area.
4) Every bubble need a backbone.
5) Every Anti bubble also need a backbone.
6) Few stocks entered their Anti BB.
Well, I understood # 7.
AI, show me stocks that entered Feb 28 lo/ Mar 3 hi 2020 area.
You do realize that the gibberish you sprout is almost indecipherable, not that there’s anything wrong with that-but who could possibly be the audience, other than you?
I’ll see your predictive jibberish, and I’ll raise you two quatrains of Nostradamus. Sweatin’ now, aren’t ya?
Did it for nearly 5 decades for a fee, as an institutional manager,…
Calls or straight buys. Puts or shorts.
Until the outright and massive THEFT is ended, why play in a rigged casino?
Isaac Newton did that in the South Sea Bubble, with a nice profit. Then it continued to rocket up and he got FOMO. So he bought back in at a much higher price, rode it over the top and all the way down to the bottom, losing a fortune.
I think if you don’t have the time to watch your individual investments and re-evaluate why you bought them and if anything has changed, don’t buy individual assets.
Too bad you can’t post pictures here. I have a wonderful chart of Netflix drawdowns showing it spent 40% of its time in 30% or greater drawdowns. Yet Netflix, unlike Blockbuster, evolved from a DVD vendor to a a streaming service and content producer. That’s the management factor.
Would you have held through all those drawdowns?
Somebody asked Warren Buffett about did he get anxious about the stock market crashing. He said he didn’t get nervous because he knew what he was doing.
I think the big difference is whether you focus on estimating the future earnings of the business or focus on the stock price which has a mania/panic aspect to it. You can make money focusing on either the business or the stock price, but the logic is more sound focusing on the business I think.
People gonna have to learn how to day-trade. Sitting on your arse holding a stock waiting for it to go up for 6months or a year – isn’t the environment we are in. Depending on other people to invest your money was always an open door to the poor house. No matter what situation is going on, if the stock market is open there will be at least 10 stocks that are gonna gain because billions everyday are moving around to chase that gain. Put your future in your own hands and learn what P/E ratios are, learn how to watch a candlestick graph and other indicators. It’s alot of money to be made in turbulent times and there is no telling which particular stocks are gonna lose half there value and when. I’m moving in and out of positions in 24hrs or less and I’m in the green