If this ‘relentless bid’ dries up, investors could face ‘gruesome nightmare’

Discussion in 'Wall St. News' started by RedDuke, Apr 9, 2019.

  1. RedDuke


    BONECRUSHER likes this.
  2. pipeguy


    BONECRUSHER likes this.
  3. S2007S


    Without trillions upon trillions of stock buybacks this market would be sitting easily 1/3 lower!!
    Buybacks is what is keeping this market filled with lots of hot air!! But of course no one would say otherwise.
    BONECRUSHER likes this.
  4. pipeguy


    After money returned there won't be a reason to grow since fundamentals are weak and less supply on the market. The drop can be severe I guess.
  5. maxinger


    This statement was valid decades ago.

    Experts also said in time of trouble, buy USD ( and sell gold)
    dozu888 likes this.
  6. dozu888


    ‘Stocks are risky. Gold is safe’. Check the forexIG data. WADR that is exactly what the dumb money is doing right now.

    LQD yielding 3.5. SPY yielding 6. You can borrow 3.5 to buy 6. Only idiots won’t do it.

    You tell me when the bids will dry up.
  7. mbondy


    Whatever Goldman says, do the opposite.
    murray t turtle likes this.
  8. I've seen this "relentless bid" kind of market before, but it wasn't this relentless in the past nor was it for such seemingly obvious reasons.... that is, "The Fed's got this. Nothing else matters".

    Great while it lasts, I guess... but I find it unnerving. We all know it's phoney-baloney, but nevertheless that's what we've got to deal with.

    I know of an anecdote big and famous enough to be written up in Stock And Commodity magazine... where some guy with an outstanding track record* for 20 years got WIPED OUT... lost all of his profits, all of his capital, plus deficits... by leveraged shorting one of these "relentless bid" markets. (Much like the Option Sellers group who had recently over-leveredged by writing naked OTM calls and got nailed by a spike rally in NatGas.)

    *Never had a losing year in more than 20 years. I know of this first hand as I was solicitied to be an investor with him. I didn't, just followed for a while... and he eventually got what I feared he was vulnerable to.
    Last edited: Apr 10, 2019
  9. Specterx


    The thing is, while price movement is determined by flows in the short run, in the long run total market cap is determined by relative investor allocations to different asset classes. The "relentless bid" is there because the money supply is growing and more debt is being issued every day, so the aggregate investor portfolio ends up overweight these asset classes and needs to allocate more to equities.

    In order for a sustained bear market to take hold, investors as a whole have to reduce their target equity weightings in favor of cash and/or bonds. That can happen if returns to bonds or cash become attractive again (like 2000 with 5y yields >6%), and/or if some specific catalyst makes investors afraid of losing money (has to be much more than "the market is a bit rich", like the bursting of an obvious equity bubble, or a banking crisis etc).

    In recent years you've had the combo of no clear bear catalyst, abysmal yields on bonds/cash, and the emergence of constant bullish flows from passive funds and ETFs, robo-advisors, pension funds allocating more to stock, and corporate buybacks. No surprise it's been a pretty much nonstop bull grind, except for the occasional quant / leveraged trend-follower blowup.
  10. sle


    Oh, not this shit again. SPY div yield is 1.8%. Only idiots don't understand the difference between returns and yields.
    #10     Apr 10, 2019