The Stock Market thread

[flere-imsaho]

This is a great topic.

I've actually been concerned about this since I first started contributing to a 401k, though mostly from the perspective of "I know the stock market returns 10%+ annualized on average, but that's really been from 1950 to 2000, a 50-year period of enormous economic expansion by the U.S. That can't continue forever, right?"

Here's the thing, though, the stock market is driven, mainly, by U.S.-based global companies who get their growth from anywhere in the globe they can. I once thought it made sense to invest in emerging market portfolios in case the U.S. stagnated, but the fact is the companies in even the S&P 500 are going to be the ones snapping up a lot of that growth.

In addition, capital continues its flight to the U.S. markets, which continue to be the a combination of stable, transparent, but also growth-focused that doesn't exist anywhere else. Look at this (spoilered because big image):

Spoiler

While the percentage of the stock market in retirements has certainly grown, it has not grown as much as foreign ownership (to my point above). In addition, we aren't necessarily seeing a drop due to Boomer withdrawals.

The concerns you both raise certainly have validity, however, and I'm on record as saying that Wall Street valuation is mainly driven by emotion vs. fundamentals, but I do feel the appeal of placing money in U.S. markets will continue for decades as I don't really see another competitor country offering the same mix of stability, (relative) transparency, and growth. The biggest risk, here, honestly, is allowing another Trump or Trump-like Administration to tank the economy and/or the House GOP being allowed to irrepably damage the financial reputation of the U.S. government.


A quick aside on pensions: IMO companies have looked to offload pensions less because of the returns needed to support payouts and more because pension commitments represent a decades-long sinkhole on their balance sheets like nothing else (even long-term debt for companies can be manipulated for, say, short-term relief).

It's similar to reason that a lot of companies have shifted to "unlimited PTO", especially in states where you're required to pay out accrued time off when someone leaves. Such a policy requires keeping cash on hand for those payouts, which is another sinkhole on the balance sheet. And it's also why most companies eliminated the ability to roll over PTO.

[Edward64]

Don't know how they calculated the valuation but $3.2B for CS seems to be a great bargain for UBS, especially with Swiss government guaranteeing much of it.

At least the shareholders or depositors didn't go completely bust. Let's hope this helps the markets next week.

https://www.cnbc.com/2023/03/19/ubs-...ng-system.html

UBS agreed to buy its embattled rival Credit Suisse for 3 billion Swiss francs ($3.2 billion) Sunday.

The terms of the deal will see Credit Suisse shareholders receive 1 UBS share for every 22.48 Credit Suisse shares they hold.

The Swiss National Bank also pledged a loan of up to 100 billion Swiss francs ($108 billion) to support the takeover.

[RainMaker]

Why shouldn't the shareholders have to go bust for making a terrible investment in a bank that has been incredibly sketchy for decades?

Anyway.....

US Banks borrowed over $150 billion from the Fed's discount window last week, blowing past the previous record during the 2008 financial crisis ($112 billion). pic.twitter.com/kafFGZErWx

— Charlie Bilello (@charliebilello) March 19, 2023

[RainMaker]

The inflation hawks got eerily quiet once they needed some bailouts.

[sterlingice]

Originally Posted by RainMaker

The inflation hawks got eerily quiet once they needed some bailouts.

They'll be back in October 2024

SI

[Edward64]

Seems like the fire sale has been going on for a while. $1.5B for 10% six months ago.

https://www.marketwatch.com/story/sa...?mod=home-page

It wasn’t even six months ago that Saudi National Bank paid $1.5 billion for a 9.9% stake in Credit Suisse.

That stake is now worth about $215 million after UBS UBS, -5.50% reportedly swooped in to acquire its fallen rival for more than $2 billion.

Others taking a hit.

The Saudis aren’t the only Middle Eastern investor nursing a heavy paper loss. The Qatar Investment Authority has a 6.8% stake in Credit Suisse, its sixth largest position in its portfolio. Olayan Group, which is headquartered in Liechtenstein but whose founder was a major Saudi businessman, is the number-three shareholder.

Looked up the below. The sovereign fund has $1.2T and "in December 2021, it was worth about $250,000 per Norwegian citizen". That was an interesting way to put it vs with US social security, it talks about monthly/annual payouts.

Another major shareholder is the Norges Bank Investment Management, the sovereign wealth fund of Norway.

[Edward64]

Exciting times.

Consensus is the Fed will raise rates next Wed, prob .25.

https://www.cnbc.com/2023/03/17/fed-...t-turmoil.html

Markets largely agree that the Fed is going to hike.

As of Friday afternoon, there was about a 75% chance of a quarter-point increase, according to CME Group data using Fed funds futures contracts as a guide.

But reading on, the below quote made sense to me also.

Zandi, who has been forecasting no rate hike, said it’s highly unusual and dangerous to see monetary policy tightening under these conditions.

“You’re not going to lose your battle against inflation with a pause here. But you could lose the financial system,” he said. “So I just don’t get the logic for tightening policy in the current environment.”

Let's see how the markets play out on Mon & Tue, but if it's still shaky and Jerome calls me up ... I'd be onboard with a pause this month.

My guess is inflation will go down in March because of the financial mess & worries even without a rate hike.

[RainMaker]

It's a really funny dance they're doing. They need to raise rates because they don't want workers making money. But it's screwing the banks a bit so they have to keep doing all these weird elaborate bailouts to keep them happy.

[Edward64]

Originally Posted by NobodyHere

I'm thinking I should thrown in collard greens with my corned beef this weekend instead of cabbage.

Whatever you ate, try eating it every day

Nice day today for the markets. No meltdown (yet) other than for First Republic down 47%. Wonder what will happen to the 11 "bailout" banks if FR craters to a penny'ish stock.

[sterlingice]

Originally Posted by RainMaker

It's a really funny dance they're doing. They need to raise rates because they don't want workers making money. But it's screwing the banks a bit so they have to keep doing all these weird elaborate bailouts to keep them happy.

The more complex the bailout, the easier to hide the fine print from the plebes

SI

[Edward64]

I was monitoring Jerome's speech Wed and the markets were up 1%+ early during the speech. Then it started to come down (and I groaned). Regardless, the markets did seem to recover on Mon & Tue and so continuation of a .25 hike doesn't seem unreasonable.

Jerome did hint at no more hikes soon (I read an article say one more, another said he was done) so giving plenty of notice. Really hope the CPI and PPI continue to show a decreasing pattern.

There were some articles that say recession odds have increased. If the definition is 2 consecutive quarters of negative growth, it just doesn't feel to me (and little that I know) we'll go into one.

[Edward64]

DB is the biggest bank in Germany and has about 1.5T euros in assets, so about same'ish size as CS. Probably too big to fail also.

https://www.cnbc.com/2023/03/24/deut...nce-costs.html

Deutsche Bank shares fell by more than 14% on Friday following a spike in credit default swaps on Thursday night, as concerns about the stability of European banks persisted.

The German lender’s shares retreated for a third consecutive day and have now lost more than a fifth of their value so far this month. Credit default swaps — a form of insurance for a company’s bondholders against its default — leapt to 173 basis points on Thursday night from 142 basis points the previous day.

Other European banks too. The German Fed equivalent is either cussing out Jerome or calling him for some tips.

Deutsche led broad declines for major European banking stocks on Friday, with German rival Commerzbank shedding 9%, while Credit Suisse, Societe Generale and UBS each fell by more than 7%. Barclays and BNP Paribas both dropped by more than 6%.

Deutsche Bank has reported 10 straight quarters of profit, after completing a multibillion euro restructure that began in 2019, with the aim of reducing costs and improving profitability. The lender recorded an annual net income of 5 billion euros ($5.4 billion) in 2022, up 159% from the previous year.

[sterlingice]

Is this just a slow moving crash of the fractional banking service? It doesn't /feel/ like 2008, but there are some things that /feel/ like 2008

SI

[RainMaker]

I don't think you can put Deutsche Bank in the same boat as other banks. They're definitely in trouble, but they have a different business model than most banks.

[RainMaker]

lol

Gruenberg: The ten largest deposit accounts at SVB held $13.3 billion in the aggregate.

— Nick Timiraos (@NickTimiraos) March 27, 2023

[Edward64]

Markets seem to be stabilizing. Couple articles I read said we are probably done with the US bank contagion worries and now have to deal with back-to-regular Fed rates, inflation & recession fears. Sure hope that is true.

We also have Binance and potentially Coindesk suits & ramifications to deal with. But crypto exchange disasters don't really seem to impact the broader market as much.

Disney is laying off 7,000+ included all/most of their metaverse team. Metaverse was all the rage two years ago, and now with metaverse champion Meta on the ropes, it looks like my hopes for a "Ready Player One" world (along with full auto driving) won't happen anytime soon.

On other news, my Zillow price is up again from 3 weeks ago.

[GrantDawg]

From what I am seeing, housing prices stabilization is because there are a lack of sellers. Overall, housing sales are stagnant/decreasing, but hardly anyone is even trying to sell right now.

Sent from my SM-S916U using Tapatalk

[Edward64]

Okay, so low inventory. I thought primarily because rates are up.

A neighbor is trying to sell his house. He said he's getting a lot of visits but he's hearing price is too high. So there is definitely a drop off in what people are willing to pay now vs the craziness of last year. He is the only house for sale in our 400+ subdivision.

[Edward64]

Nice day. Whereas last year it was 1 day forward, 4 days back, now it feels like 3 days forward, 2 days back.

One more day to go but looked up Q1 2023 performance below.

S&P +5.2%
Nasdaq +14.6%
Dow -1%

Had to eyeball these in charts, so not totally accurate. As I'm overweight on tech (Nasdaq), I'm still feeling pain but this was a good Q1 for Nasdaq.

S&P high 4,619 - current 4,050 = -12.3%
Nasdaq high 15,433 - current 12,013 = -22.1%
Dow high 36,799 - current 32,859 = -10.7%

[Edward64]

Hiring and # of open jobs are both down. I read an article that said "decent chance" Jerome will pause rate increases before starting to cut. I think we need to see what is happening in the CPI and PPI before that happens. Next Fed meeting is May 2-3.

https://www.cnbc.com/2023/04/05/adp-march-2023.html

Private sector hiring decelerated in March, flashing another potential sign that U.S. economic growth is heading for a sharp slowdown or recession, payroll processing firm ADP reported Wednesday.

Company payrolls rose by just 145,000 for the month, down from an upwardly revised 261,000 in February and below the Dow Jones estimate for 210,000.

That took first-quarter hiring to an average of just 175,000 jobs a month, down from 216,000 in the fourth quarter and a sharp reduction from the average of 397,000 in the first quarter of 2022.

Interesting to me the breakdown of job gains & losses. I get the losses but seems that leisure & hospitality has been going gangbusters for a while.

Last month, though, financial activities lost 51,000 jobs and professional and business services fell by 46,000. Manufacturing also saw a decline of 30,000.

On the plus side, leisure and hospitality added another 98,000 workers, trade, transportation and utilities grew by 56,000, and construction rose by 53,000. Natural resources and mining also showed a gain, up 47,000, while education and health services added 17,000.

And my zillow price is up again. 3 times now in about 2 months. Hope it's real vs zillow adjusting algorithm or something.

[Edward64]

Originally Posted by Edward64

I hope she gets the book thrown at her.

Elizabeth Holmes trial verdict: Guilty on four out of 11 charges | CNN Business

I'm glad her having 2 babies didn't work as an excuse/factor. 11 years is a nice long time.

https://www.cnbc.com/2023/04/11/ther...of-prison.html

Disgraced Theranos CEO Elizabeth Holmes has been rebuffed in her attempt to stay out of federal prison while she appeals her conviction for the fraud she committed while overseeing a blood-testing scam that exposed Silicon Valley’s dark side.
:
The judge’s decision means Holmes, 39, will have to surrender to authorities April 27 to start the more than 11-year prison sentence that Davila imposed in November. The punishment came 10 months after a jury found her guilty on four counts of fraud and conspiracy against the Thearanos investors who believed in her promises to revolutionize the health care industry.

[NobodyHere]

Hopefully a good day in the market today.

https://www.cnbc.com/2023/04/11/stoc...e-updates.html

[Edward64]

Hopefully.

But looks like the markets are already losing some steam from the initial pop.

PPI will be reported Thu.


EDIT: overall CPI came in lower than expected & trend looks good. But when stripping out Energy & Food, the Core CPI actually had a small uptick. So I'm thinking still running a little hot.

Hoping tomorrow's PPI will provide more clarity.

[NobodyHere]

I think I jinxed today.

I will atone by buying a can of collard greens. One day I may even eat it.

[sterlingice]

What is the connection between collard greens and the stock market?

SI

[GrantDawg]

Delusion
Edit: but to be fair that can be said about most things surrounding the stock market.

Sent from my SM-S916U using Tapatalk

[Edward64]

Originally Posted by GrantDawg

Delusion
Edit: but to be fair that can be said about most things surrounding the stock market.

Sent from my SM-S916U using Tapatalk

Eating collard greens or sacrificing virgins?

Both will work but I say go with the benign solution

[Edward64]

Originally Posted by NobodyHere

I think I jinxed today.

I will atone by buying a can of collard greens. One day I may even eat it.

May not have been you (this time). The Fed staff projects a mild recession coming up. I want to know if they were the same staff that believed inflation was transitory though.

https://www.cnbc.com/2023/04/12/fed-...utes-show.html

Fallout from the U.S. banking crisis is likely to tilt the economy into recession later this year, according to Federal Reserve documents released Wednesday.

Minutes from the March meeting of the Federal Open Market Committee included a presentation from staff members on potential repercussions from the failure of Silicon Valley Bank and other tumult in the financial sector that began in early March.

Though Vice Chair for Supervision Michael Barr said the banking sector “is sound and resilient,” staff economists said the economy will take a hit.

“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” the meeting summary said.

[sterlingice]

But why specifically collard greens? Like most superstitions make some sort of sense if you squint. Is there some genesis of this that makes sense in a weird way?

SI

[GrantDawg]

Originally Posted by sterlingice

But why specifically collard greens? Like most superstitions make some sort of sense if you squint. Is there some genesis of this that makes sense in a weird way?

SI

Old Southern tradition of eating collard greens on New Years Day so that you will have a financially prosperous year.

[Ksyrup]

It's no different than black eyed peas (which I'm more familiar with as a new year's tradition).

[sterlingice]

Originally Posted by GrantDawg

Old Southern tradition of eating collard greens on New Years Day so that you will have a financially prosperous year.

Ah! Had never heard this one before. Black eyed peas is more what I heard of growing up in Texas, but had never heard of the financial ties

SI

[Edward64]

Originally Posted by NobodyHere

Hopefully a good day in the market today.

Alright, let's try it again and hope the markets can sustain the pop

March producer prices index declined by 0.5% month over month, vs. expectations for the data to be flat. Excluding food and energy, the core PPI reading shed 0.1% month over month, much better than the 0.2% increase expected by economists.

EDIT: so far a great day for Big Tech MAGA stocks (Apple, Google, Amazon, Meta) up 2.3+% vs 1.3% for Nasdaq.

[Edward64]

Relatively uneventful week. Excitement for sure next week (along with the NFL draft)

Apple is week after next. I've been getting a lot of positive articles on their AR/VR headset (but who really knows). Initial pricing is in the $000's so I won't be an early adopter.

Earnings continue next week with results on deck from Big Tech companies Amazon, Alphabet, Meta Platforms and Microsoft.

Redditors have been posting images like below. Assume it's by market cap. Good way to visualize

I didn't realize Berkshire Hathaway was bigger than Exxon, or how small Walmart is compared to Amazon, or how relatively small AT&T-Verizon etc. are etc.

[sterlingice]

Yeah, that's a market cap heat map - they're pretty cool for visualizing the market.

But, for instance, that's why Tesla is huge in the graphic compared to GM or Ford, which are larger companies with more revenue and more employees.

SI

[RainMaker]

Bankrupt 2 years after wasting a billion on stock buybacks. Feels like a fancy way lf legally embezzling money.

https://www.cnbc.com/2023/04/23/bed-...rotection.html

[Ksyrup]

One of my favorite Simpsons store names - Bloodbath and Beyond.

[albionmoonlight]

Originally Posted by RainMaker

Bankrupt 2 years after wasting a billion on stock buybacks. Feels like a fancy way lf legally embezzling money.

https://www.cnbc.com/2023/04/23/bed-...rotection.html

Stock buybacks need to be strongly discouraged--tax them heavily, etc. They aren't good for the overall economy.

[sterlingice]

Yes.



SI

[RainMaker]

Originally Posted by albionmoonlight

Stock buybacks need to be strongly discouraged--tax them heavily, etc. They aren't good for the overall economy.

It just feesl like legalized embezzlement. Buy up stock and have the executives paid in stock. Juice the stock with a massive buyback with all the free cash you have. Sell the stock to rubes. Go bankrupt.


You're just gutting the company. There should be some fiduciary duty to try to be a profitable company.

[Ghost Econ]

I wandered into a Bed Bath and Beyond while my family were shopping in Old Navy (good God that took forever). It was literally the eeriest store I've ever been in. Almost perfectly silent. Only a few other people there. Massive store. There was no music playing. It was so quiet you could hear the security tags buzzing on the expensive merchandise. I honestly felt like there was a chance I could get murdered and never be found.

[Edward64]

It's been a while since we've been in Bed Bath & Beyond. Same with Kohl's (since kids have grown up). Not adapting (or fast enough) to the changing times. The poster child is Sears, still limping along. Kudos to Barnes & Noble, very surprised they are still around with the Amazon juggernaut.

Yay Google & Microsoft. It'd be great if Apple & Amazon also surprises on the upside.

Next CPI report is May 10. Let's hope it shows a continued downward trend. Then consensus is one more rate hike and Jerome will pause.

[Edward64]

Just great, First Republic is in trouble again.

I don't see how it survives the lack of confidence without the Feds propping it up (some more), or some sort of acquisition. Or let it fail but guarantee the deposits, including the excess amounts ... that precedence has been set already.

The stock of First Republic (FRC) plunged 49% Tuesday after the bank surprised investors and analysts by revealing an outflow of more than $100 billion in deposits in March.

[Edward64]

Originally Posted by Edward64

Just great, First Republic is in trouble again.

I don't see how it survives the lack of confidence without the Feds propping it up (some more), or some sort of acquisition. Or let it fail but guarantee the deposits, including the excess amounts ... that precedence has been set already.

Hah, great gamesmanship (or blackmail). I don't know if I believe the last sentence.

https://www.cnbc.com/2023/04/26/firs...-it-fails.html

Advisors to First Republic will attempt to cajole the big U.S. banks who’ve already propped it up into doing one more favor, CNBC has learned.

The pitch is something like this: Purchase bonds from First Republic at above-market rates for a loss of a few billion dollars. If not, these same banks will face roughly $30 billion in FDIC fees when First Republic fails.

The advisors have already lined up potential purchasers of new First Republic stock if they can fix the bank’s balance sheet, according to sources.

[Edward64]

GDP on 1Q was +1.1% which was much less than the expected 2%. Feds to meet May 2-3 which is before the CPI/PPI report on May 10-11.

Jerome will have another interesting decision to make whether to hike or pause in May. I'm thinking another .25 hike because that's what they've been telegraphing and (I think) earnings season has been coming in higher than expected.

[Edward64]

I've used the term "stagflation" before in describing worst case scenario of high inflation (e.g. from what I remember in Volcker raising rates in the early 80's) and why I agree Jerome needs to continue increasing rates until inflation is beaten, even if it causes a recession.

This is the first time I've read of fears in MSM. Hope they're wrong.

The latest GDP numbers have economists fearing more than just a recession: ‘The U.S. might well be facing stagflation’

Annualized U.S. gross domestic product growth slowed to 1.1%, the Bureau of Economic Analysis (BEA) reported Thursday, well below consensus expectations on Wall Street for 1.9%. At the same time, one of the Federal Reserve’s favorite inflation gauges, the personal consumption expenditures (PCE) index, increased to 4.2%, higher than the expected 3.7%.

“This morning’s data was the worst of both worlds, with growth down and inflation up,” said Chris Zaccarelli, chief investment officer of Independent Advisor Alliance.

... the latest GDP and inflation numbers have some experts worried that stagflation—the toxic economic combination of slow growth and high inflation that crippled the U.S economy in the ’70s—could be on the menu too.
:
And some 86% of fund managers said stagflation best describes the outlook from the global economy over the next 12 months in Bank of America’s April Global Fund Manager Survey.

[NobodyHere]

The condo above me just listed for about 2.5 times the price that I paid for my own just under 4 years ago. I'm interested to see what it actually sells for. From looking at the general specs it looks like it has the same layout as my own place.

[Edward64]

Neighbors house sold way below asking recently, so that’s got me a little concerned as Zillow says my house value has steadily increased for the past 2-3 months.

If you can get 2.5x for your condo, sounds like a great way to put the profits into your FIRE accounts. But then you’d need to find another (and cheaper) place to live

Btw eat some more collard greens. I did last weekend and see what happened …

[GrantDawg]

Originally Posted by Edward64

Neighbors house sold way below asking recently, so that’s got me a little concerned as Zillow says my house value has steadily increased for the past 2-3 months.

If you can get 2.5x for your condo, sounds like a great way to put the profits into your FIRE accounts. But then you’d need to find another (and cheaper) place to live

Btw eat some more collard greens. I did last weekend and see what happened …

Poop.

[NobodyHere]

Originally Posted by Edward64

Neighbors house sold way below asking recently, so that’s got me a little concerned as Zillow says my house value has steadily increased for the past 2-3 months.

If you can get 2.5x for your condo, sounds like a great way to put the profits into your FIRE accounts. But then you’d need to find another (and cheaper) place to live

Btw eat some more collard greens. I did last weekend and see what happened …

You don't really get much cheaper than a 1 bedroom condo in Toledo unless you're moving out of the country.