damn, the whole thing was a pump and dump from the russians. i bet they were all over CL and ES futures
Investors looking at the US indices since the 1932 can correctly state that the longest time they go sideways is less than 20 years (1966 to 1982). However the Japan experience is interesting. What if you bought Japanese equities in the early 1990s when the Nikkei was at about 40,000? 25 or so years later, and you're still down more than 50%. Or what if you waited in the early 1990s for a 50% decline, and at Nikkei 20,000 you thought you were getting a great bargain. Then 25 years later, despite zero interest rates, QQE for a few years, and now negative interest rates, and you've still lost money, with the Nikkei below 18,000. Daal - do you have any concerns that in 25 years time, the S&P 500 could be trading below 2,000 points? If not, why not? .
I'm not very concerned about that. Over the long-term corporate profits growth follows NGDP growth with a good correlation. The Fed has been very effective at preventing deflation (which the BOJ has failed at, and to some extend the ECB). The Japanese and European QEs have been modest, the promises to keep rates low have been shy and they always worry about 'doing too much', that has prevented expectations from becoming inflationary but also prevented them from getting out of deflationary dynamics. The Fed didn't do that, if anything, they get criticized for doing too much. Which is good, its better to take a small chance of severe inflation than guaranteeing a high chance of deflation and stagnation (or even worse, a depression). Over the long-term, its hard to bet against the US. No mattter how bad things get, the country always seem to bounce back. If you own a mix of US stocks and bonds and shifted from the bonds as stock valuations improved (during the declines), you are likely to compound returns at a very good rate. The US has a lot of advantages over other countries, if you want to fire someone or hire people, its very easy to do. That makes the country very resilient to shocks and companies don't stay into a zombie state, forced to employ people during recessions. The rule of law is also very strong, specially compared to other places. There is a reason why the US has 4.4% of the world population but 16% of world GDP, as Buffett says, the US has a great system and that unleashes capitalism like no other country
Thanks Daal - you raise some excellent points there. The thing I like about the US market (and almost by definition, the S&P 500) is that is provides a great diversified basket of companies (many with operations and sales and profits outside the US) in a wide range of industries. There are both high-growth technology companies, and also some fantastically boring consumer staple companies as well. Contrast that with countries like Australia / Canada / Brazil, which seem to be heavily reliant on commodities. And in the case of Australia / Canada, the big 4 or 5 banks are also heavily weighted in the main market indices. .
Yes, thats an issue. However, when everybody is bearish in an asset class, usually, the implied forward return goes quite a bit higher. Everybody and their mother was bearish on oil, oil is now up like 5 dollars off the lows even though you had the mother of all inventory builds. A lot of people in the media talk about also about the S&P500 'ex-energy', the last time I heard that was when people talked about the S&P500 'ex-financials', of course, the financials had a huge run after that The tricky part is that often, the asset class will go lower, sometimes a lot lower before it comes back. I started in long EWZ even though I had reasons to think it would drop. I probably should add more now. The second the market sees an end to the recession, the indice will rip 20-40%, the currency should also rise which will push EWZ up even more. Maybe it wont work this time but history is on my side. Usually, buying a stock market during a recession at low valuation is a good bet. That is, unless there is a bigger issue at play (like in Greece with its inability to create devalue its currency)
Yeah I think what I meant (but didn't explicitly state) is that the stockmarkets of Australia / Canada / Brazil seem to be considerably more volatile than those of the US, mainly due to the commodity exposure. If the multi-decade returns for each country are approximately the same, then the US seemed to be a better risk-adjusted bet. Especially if the commodities that underpin AU/CA/BRZ stocks don't have a massive V-shaped bounce back near their old highs. .
I guess thats true, the US tend to be a safe haven even in stocks, they are down this year less than most other places
One thing is for sure, what is going on in Brazilian stocks right now is very unsustainable. Inflation is high, this pushes NGDP up. NGDP is going up even though the country is in recession. Despite all of this the index is going down. That after having gone down for several years straight. The only way this can happen is if the market is getting cheaper. If this were to continue forever, at some point, companies would be able to announce dividends and overnight have 20-30% dividend yields or something ridiculous like that. Right now the avg price to cashflow is around 5x (3x for EWZS, the small cap ETF). 10x PE. Some of that can change as companies struggle but recessions don't last forever.So its certain that this will reverse. A lot of the time people don't want to buy because its going down, they keep waiting for a signal to get in. Buyers pullback and sellers panic. But when the buyers get the signal that they want, they pile in like nuts because they know its very cheap and the only reason they didn't buy was because they didn't want to fight the momentum