The Top of the market is Looming?

Dark1975 · 20 February 2021

Value Collector said:
Compounded growth works like that.

The USA economy is the largest it has ever been in the last 200 years, so you would expect debt to be the highest its ever been, everything grows as the economy grows including debt.

Yes there is more money in circulation, but there is also more avocados, cars, movies, etc etc etc being consumed than ever before, and the money can be removed from circulation if needs be, the Fed has the ability to shrink or expand the money supply when ever it wants.

The fed can shrink or expand the money supply ?
With only with monetary policy , this is either lowering the requirement of the bank reserves required. Which this has been done,Or play there last hand which increasing the reserves the banks require to have, in effect reducing the amount of loans given,
In short - crushing growth and confidence,
In short any play from here adversely changes the environment.
In short there problem will be GDP vs Debt ,

Value Collector · 20 February 2021

Smurf1976 said:
Agreed but if Fed did shrink the amount of money then what happens to the market?

My expectations is that any shrinkage is going to prove extremely difficult in practice without blowing anything up.

if it caused interest rates to start rising again then that would create downward pressure on market prices, as investor demand larger dividend/earnings yield compared to risk free treasury bonds.

But what happens to the market prices of shares is kind of irrelevant, the Fed isn’t there to protect share prices, it’s there to maintain the money supply and support the real economy, which in the long run is good the companies that trade on the share market anyway.

the market prices of the companies we own will fluctuate, but as I explained above that doesn’t real matter that much, the most important thing is that the companies you own continue to do decently, and pay the dividends or create real growth over time.

The earnings yield companies trade on will change like the tides ebbing and flowing, what matters is that those earnings grow and dividends continue.

Value Collector · 20 February 2021

Dark1975 said:
The fed can shrink or expand the money supply ?
With only with monetary policy , this is either lowering the requirement of the bank reserves required. Which this has been done,Or play there last hand which increasing the reserves the banks require to have, in effect reducing the amount of loans given,
In short - crushing growth and confidence,
In short any play from here adversely changes the environment.
In short there problem will be GDP vs Debt ,

There is a lot more to it than that, for example the fed had been buying loads of government and corporate Bonds and other financial assets.

If the Fed simply stopped these purchases, over time as these existing investments matured the money supply created by them would shrink, if they wanted to shrink faster they could simply begin to sell them, or buy more to expand.

Dark1975 · 20 February 2021

Value Collector said:
There is a lot more to it than that, for example the fed had been buying loads of government and corporate Bonds and other financial assets.

If the Fed simply stopped these purchases, over time as these existing investments matured the money supply created by them would shrink, if they wanted to shrink faster they could simply begin to sell them, or buy more to expand.

I value your opinion, And yes and I stated previously I wont debate inflation/ mom policy - you could create another topic.
Also I don't want to plant seeds of doubt in young traders that the market will collapse.
I simply putting my personal opinion that I'm moving from bullish to neutral at this point at time.
I could be completely wrong and miss another 10 year bull run.
Tho being that I day trade as a profession and have a family and property and business loans to pay, I'm still in the every day market and just lowering my leverage in a overall position at thus point of time.

Dark1975 · 23 February 2021

Could this be the Top of the market?
A little more evidence is needed,
Tho when i was trading crypto markets last night and @ 2.15 am est I seen btc go from 69k to 61k in 10mins, and slowly recovered,
As stated previously a good indication for me is when BTC/ SPACS and stocks like Tesla (-8% last night) that have had massive gains in the market are usually the first to retract with huge daily drops and then slowly recover, And will become more regular as volatility sets in,
Well a little early too call it yet !
Tho a lot of red flags were pooping up for me, I am currently sitting @ 85% cash atm, and set stop losses on my current holdings,
Indeed a interesting time!
Pls DYOR
And this isn't any financial advice, just my own personal opinion, could be absolutely wrong ?

moXJO · 23 February 2021

Debt to gdp is at near 130%?
Every dollar the government spends is returning less and less the more this number blows out.

Dark1975 said:
Could this be the Top of the market?
A little more evidence is needed,
Tho when i was trading crypto markets last night and @ 2.15 am est I seen btc go from 69k to 61k in 10mins, and slowly recovered,
As stated previously a good indication for me is when BTC/ SPACS and stocks like Tesla (-8% last night) that have had massive gains in the market are usually the first to retract with huge daily drops and then slowly recover, And will become more regular as volatility sets in,
Well a little early too call it yet !
Tho a lot of red flags were pooping up for me, I am currently sitting @ 85% cash atm, and set stop losses on my current holdings,
Indeed a interesting time!
Pls DYOR
And this isn't any financial advice, just my own personal opinion, could be absolutely wrong ?

Elon made a negative comment on bitcoin and it dropped. There's still a lot of stimulus to wash through the system and vaccination will open up the world again. It's possible inflation will pump the market a bit more yet.

I am skittish though. I'm usually a year out predicting crashes but it feels very toppy to me. Watch for black swans out of south China Sea action.

Dark1975 · 23 February 2021

moXJO said:
Debt to gdp is at near 130%?
Every dollar the government spends is returning less and less the more this number blows out.

Elon made a negative comment on bitcoin and it dropped. There's still a lot of stimulus to wash through the system and vaccination will open up the world again. It's possible inflation will pump the market a bit more yet.

I am skittish though. I'm usually a year out predicting crashes but it feels very toppy to me. Watch for black swans out of south China Sea action.

Yeah tend to agree with your comments,
Reference to the stimulas to come, is what is probaly holding it up,
Yes noticed also the elon musk tweet, tho the Asian / Europe market is on now, and still volatile on crypto, good time for a quick flip,
Been flipping bnb (binance) best volatile spreads,
E.g bought bnb @ $295 last morning and flipped it 20mins later @ $345 - still great opportunity in volatility

investtrader · 23 February 2021

The ASX has largely missed the huge 13 year bull market with total index price return of about 120% over this time, with 3 bear markets in between. It doesn't feel like 2000 where everything was going up, that's for sure.
The US is a totally different story. The S&P 500 returned 600%+ and Nasdaq 1,300%+!!!!!!
It seems obvious that something will crack in the US markets at some point. Then there may be a once in 15 year opportunity. I think maybe futures will be the way to profit unless it short and really sharp like this year and then it is hard for us mortals.

Note : these are monthly charts. Nasdaq is gong parabolic. I didn't post Russell but it is worse.

moXJO · 24 February 2021

Michael burry (big short fame) seems to think hyperinflation for the US. Guys twitter is a mess and he just turned it invisible again. Might have just been one of his rants.

Over years though. He thinks it's on the cycle.

Craton · 24 February 2021

moXJO said:
Michael burry (big short fame) seems to think hyperinflation for the US. Guys twitter is a mess and he just turned it invisible again. Might have just been one of his rants.

Over years though. He thinks it's on the cycle.

A little research led me the businessinsider.com.au re. Burry's predication.
His Twitter account.
More on Burry's thoughts on how BTC and Gold could be squashed by govts due to inflation

Dark1975 · 24 February 2021

Craton said:
A little research led me the businessinsider.com.au re. Burry's predication.
His Twitter account.
More on Burry's thoughts on how BTC and Gold could be squashed by govts due to inflation

Im paying attention to him ? enjoyed the movie also the big short

Dark1975 · 26 February 2021

Will be a bloodbath today, especially in the afternoon, So tempting to buy this afternoon, tho how this is unfolding I will have patience and see how the dow appears on the Friday? Time to get a coffee today @ the beach and get popcorn and enjoy the show
The bears are a wake ?

qldfrog · 26 February 2021

Dark1975 said:
Will be a bloodbath today, especially in the afternoon, So tempting to buy this afternoon, tho how this is unfolding I will have patience and see how the dow appears on the Friday? Time to get a coffee today @ the beach and get popcorn and enjoy the show
The bears are a wake ?

you assume a dip not a crash...

Dark1975 · 26 February 2021

qldfrog said:
you assume a dip not a crash...

Depends on your terms a dip?
Say last week, I would be normally buying in on a classic Friday afternoon sellout,
Tho today I won't be buying in, i feel like this selloff will be a bit more dangerous to buy in to, given the nature of the volatility on hand gauged on momentum.
I will protect my postion and see what the dow does, I mean it might be a sell out on the dow come Friday ( investors cautious ) not holding over the weekend , this will lead in to a maybe a buying opportunity Monday?
Plus watching the cypto markets looking shaky, we could see a possible pause and a retraction in the general market,

Dark1975 · 26 February 2021

Mr frog,
If you get a chance to watch this clip?
Watch from 30.30 mins , it will only take 2mins, but this is my theory also on the start of the cracks showing
Great watch from co- founder of Boston gmo

joeno · 26 February 2021

investtrader said:
The ASX has largely missed the huge 13 year bull market with total index price return of about 120% over this time, with 3 bear markets in between. It doesn't feel like 2000 where everything was going up, that's for sure.
The US is a totally different story. The S&P 500 returned 600%+ and Nasdaq 1,300%+!!!!!!
It seems obvious that something will crack in the US markets at some point. Then there may be a once in 15 year opportunity. I think maybe futures will be the way to profit unless it short and really sharp like this year and then it is hard for us mortals.

Note : these are monthly charts. Nasdaq is gong parabolic. I didn't post Russell but it is worse.

That 15 year opportunity might turn out to be a 15 year bag hold like what happened to the Japanese markets.

The point being everyone seems to know it's overpriced. But to not "time" it because 5 years ago people were saying stocks were overpriced. It's capitulation to the markets which is the right move. However wrong stocks (imo) with bad fundamentals.

Everyone and their mother now is saying "if the market drops like in March then I'm all in!".

So i can almost guarantee it will not be another case of a 30% market wide drop then V-shaped recovery. We could keep going up. Trade sideways. Or a painful see-saw drop down over years to reflect economic realities.

Value Collector · 26 February 2021

Dark1975 said:
I value your opinion, And yes and I stated previously I wont debate inflation/ mom policy - you could create another topic.
Also I don't want to plant seeds of doubt in young traders that the market will collapse.
I simply putting my personal opinion that I'm moving from bullish to neutral at this point at time.
I could be completely wrong and miss another 10 year bull run.
Tho being that I day trade as a profession and have a family and property and business loans to pay, I'm still in the every day market and just lowering my leverage in a overall position at thus point of time.

If you want to learn a bit more about the Federal reserve, this is a good university lecture by the chairman of the fed at the time.

Value Collector · 26 February 2021

joeno said:
The point being everyone seems to know it's overpriced.

The trouble is "over priced" compared to what, Bond and cash yields are so low that what is traditional considered "over priced" probably now represents good relative value, compared to the returns of the alternative defence assets you might want to run to.

If something is throwing of 5% yields (including franking) and it has a natural inflation hedge, it if far better than a 0.70% cash yield that gets taxed and has the capital base eaten by inflation.

If cash yields start to rise then maybe todays share prices will start to look more expensive, but if thats 5 years down the road then 5 years worth of higher returns and inflation protection will offset any loss from a return to mean.

moXJO · 27 February 2021

Craton said:
A little research led me the businessinsider.com.au re. Burry's predication.
His Twitter account.
More on Burry's thoughts on how BTC and Gold could be squashed by govts due to inflation

He deletes his twitter weekly sometimes. It's back up as of now with one post again. I think it's archived though.

joeno · 27 February 2021

Value Collector said:
The trouble is "over priced" compared to what, Bond and cash yields are so low that what is traditional considered "over priced" probably now represents good relative value, compared to the returns of the alternative defence assets you might want to run to.

Yep i agree there is no viable alternatives. Hence I'm steadily buying and not selling.

I actually think the Aus market is priced ok. March last year was a brilliant time to buy in hindsight as the ASX was sent back to 2012 levels. Currently it's lower than 2007 levels but still somewhat bubbly imo.

It's' more the US stocks (and specifically NASDAQ) which are overvalued. Sure returns are better than bond / savings. But stoically the world prob doesn't work so simplistically that when markets fall and jobs are lost the central banking can just money print, throw it at people and buy equity to keep everything rosy. There's no free lunch. Equities go up, inflation goes up. Want inflation down? Well now got to export that inflation elsewhere. The international establishment heavily screws people until there's either no one left to screw or the screwed rise up against the system (latter being more likely).

I don't know if we're in for a correction or not but it's worth being careful. We're in uncharted territory in terms of interventionist policies. Everything looks good but that might be because nobody's figured what the cracks are. And when the cracks do reveal itself we could be in for at least a scenario like 2008 where the stock markets have a really hard time recovering for a long time. Or worse. I get a lot of thoughts in my head when everyone's saying "we're going to be shooting up until at least 203X" and pinpointing parts of the last century and saying "that's us" like we're guaranteed to go up no matter what.

The Top of the market is Looming?

Dark1975

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