Crazy Market Pricing / Stocks for Zero, Bonds For 6% Rates
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- Опубликовано: 14 июн 2024
- The financial markets are pricing things very differently these days, we have stocks priced like rates are already at zero while bonds are priced like rates will stay around 5% or go down just a bit.
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Great video, I have a quick question. I am an aspiring trader, I am looking study some traders and earn off their expertise rather than investing myself and lose money emotionally. Whats your take on copy trading? Do people really make money? Just looking for some reassurance.
Thank you!
Just ''buy the dip'' man. In the long term it will payoff. High interest rates usually mean lower stock prices, however investors should be cautious of the bull run, its best you connect with a well-qualified adviser to meet your growth goals and avoid blunder
Yes true, I have been in touch with a brokerage Advisor. With an initial starting reserve of $80k, my advisor chooses the entry and exit commands for my portfolio, which has grown to approximately $550k.
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? i'm in dire need of proper portfolio allocation
ANGELA LYNN SCHILLING' is her name. She is regarded as a genius in her area and works for Empower Financial Services. She’s quite known in her field, look-her up.
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
Sven, could you do a crash course on buying bonds on IBKR? I'ts quite difficult to understand.
Could you analize Canadian Pacific Kansas City Limited?...big moat there!
Sven, thanks for the video. Do you think it makes sense to pay attention to the free cash flow yield instead of dividend yield as the strongest companies in SPY are focusing on buybacks instead of the dividends?
Fcf yield does not work with REITs, financials and utilities.
Good info. I agree the US markets are over-priced. It may be a good time to look overseas.
Great video, Sven. Makes me think. But it can't be this simple. The markets should not be underestimated. Could the high stock prices be explained by the market placing an unexpectedly low future value to currencies?
Actually, the prevalent passive index savings strategy supports it: trading money to an index *regardless of the index price* displays extremely low view on the value of money...
@Sven, do you think there is any truth to the people who claim that the old 15 pe average for the market is not as relevant given the shift to more tech companies with higher gross margins and less capital intensive etc. so that it make more sense to have higher average pe for the market? Or is this just the usual "its different this time" justification for overvaluations of market and stocks.
Do only the tech companies have the higher PEs?
The current PE for machinery companies is on average 27 right now with no projected earnings growth this upcoming year, for instance.
Dividend yields are not the only way to measure shareholder return. In recent decades, S&P 500 companies have increasingly used share buybacks to return value to investors, often far exceeding the total value returned through dividends.
I bought 2 oz of gold last month, and am planning to have around 10-15% of my assets in physical gold (very long term, my kids will get them), those coins sure are alluring when holding them in your hand...
Hi Sven thanks for the videos! Little bit off topic : What are your thought on TLT? When would it ever be a buy?
@Sven - please explain the calculation how P/E 27 becomes a long term yield of 3.3% if the interest rate is 2%. What is yield if interest rate is 4%?
100:27 gives you the earnings yield. Interest rates don't impact the earnings yield, that is just compared to it.
Recession is here. What to do. Move all to cash? Buy undervalued markets in asia?
Just wanted to add regarding the real estate market from professor Shriller new book "Narrative Economics", that there's a disconnect between the economy and real estate prices. People set real estate prices based on social interactions (wha price neighbors sell at) and they view the economy as a set of mysterious forces. Because of this bubbles can often form in the real estate market. You also mentioned and I agree, if disposable income does not support such real estate prices and rates are high, there's no way people can afford a mortgage unless prices come down. In southern California (where my parents live) average disposable income is high $60s to low $70s, so a $1 million dollar home at 5%+ interest rates is not affordable for an average individual, but people still want the $1 million price of the pandemic.
What do you think about Hugo Boss?
Hey Sven, have you considered the the market's low dividend yield is not just a function of valuation but also due to a reduction over time in dividend payouts as a percentage of earnings? With the dominance of tech in recent history many of the largest companies have chosen to reinvest their cashflows and don't pay significant portions of their earnings in dividends. So the largest components of the market are paying out far less of their earnings compared to the industrial and oil giants that dominated the market 50 years ago.
Good morning Sven.
In all the analyzes you mention the financial destruction that was done through the printing of money. You claim that companies are overvalued. But as you know, hard assets tend to appreciate in value with inflation. Thus, it will not only be the result of revenues but also through inflation that companies will be more valued. Therefore, it is also necessary to take into account the appreciation of assets as a result of inflation!
I agree and have similar idea on inflation being priced in. But it's not necessarily true. Nobody knows what the market is pricing in (except perhaps under exceptional events).
Didnt Cleveland Fed made projections already? Cpi reading will be stagnent in Apr. And projected to move slightly higher in May.
Historically the projections r not too far off actual results.
Hello Dear Svan,
Is there any chance you are analyzing for Uber?
The company started off on the left foot, but in the last two years you can see a radical positive change.
I would appreciate it if you could analyze the company in your time, I promise you that you will be pleasantly surprised.
Thanks in advance
Maybe the market is correctly priced for higher long term inflation.
If companies are expected to hedge against inflation by growing profits nominally than the valuations might make sense.
If we get 5% inflation for 10 years for example then: treasuries yield 0% in real terms and stocks yield 4% in real terms
good point
Trading " as if a rate cut has already happened " = future looking.
Yes, but that future is far from guaranteed.
You can have another pandemic, war, debt crisis, oil shock, inflation spike and all your “future looking” goes to trash and you are left holding overpriced asset(s).
i.e. risk/reward is asymmetrically bad.
@@essenceofsias Such is life.
Then what is your allocation given the market conditions? Are you mostly invested in short-term bonds, Asian stocks, or something else?
about 30% Asia, 30% value, 30% hedge
@@Value-Investing Could you give more details on the hedge you are using?
I've observed the same, but gold is trading like the smart money is very nervous. Also, equity indexes may be going up but most stocks have been chopping sideways for a few years now. This situation is more obvious outside the US.
With Fed slowing down QT on treasuries, this is the next attempt to lower the bid. So if it's going up don't expect that to happen in a straight line.
Market is pricing 2 rates cuts, at the moment
There is always a huge lag up and down in markets as people buy stocks at certain prices and can't afford for them to fall a large amount or they take huge losses whether on paper or not. So these pot committed people keep the stock prices extra high until upward momentum can't be sustained, then they will crash it again to recreate the wave like rise of the stock market driven by big money and traders.
You will not see us in the next video, but we will see you in the next video!
:-))))
Question, come to think of it, should the stock market yield be one over PE + Div Yield + Buybacks?
buybacks don't create value, they move it from one box to another.
@essenceofsias Doesn't matter. From an academic standpoint, it is a driver of returns, ceteris paribus, and one that stems from cash generating activities by the company being analyzed.
I agree with you, btw, I don't like BBs, but again, doesn't matter.
In fact, the yield of a given buyback is slightly higher than the %change.
Yield = ( Price 1 / price 0 ) - 1
Price = mkt cap / outstanding shares
Outstanding shares = OSS
Ceteris paribus
Yield = ( OSS 0 / OSS 1 ) - 1
OSS1 = OSS 0 * (1 - %BB)
Yield = 1 / (1 - %BB) - 1
Yield = %BB / (1 - %BB)
So a rational investor deciding between bonds vs stocks will be comparing Bond yields (or the risk free, for simplicity, assuming no credit risk) vs stock yields, which I guess can be written as
(1/PE) + DVDy + %BB/(1-%BB) + e
Being e the error term, which will look one way or another depending on whether you wanna use the rational makets hypothesis.
@@essenceofsias It creates value if the company is undervalued. It's just a box to box move if the price is fair and it destroys value if it is overvalued as AAPL.
AI hype is messing things up but how many use cases are profitable for Gen AI? That's a good question. If big cloud don't see a ROI on the AI chip, eventually, they will stop hoarding chips. NVDA crashes and brings the market down.
Never thought I'd see the day when a 30 PE was on the lower end
:-)))
In my opinion we should value asset in real terms. If you adjust values for the inflation of the last 4 years the s&p 500 Is not as High as a prepandemic level and house prices seems much more fairly valutated
thanks for sharing!
So many people losing their jobs in the US (banks (goldman, JP Morgan), tech (Microsoft, Meta), videogame industry... in unprecedented numbers, and yet the stock market charges ahead as if it's all dandy.
The market is in a bubble at close to 30 CAPE, devoid of any link to reality and fueled by AI mania.
Old easy trading days ( 1980 -2022 ) is over , making money in the future will be for sure tougher.
Sven the perma bear.
Housing prices are up because investment funds have locked up large amounts of the Us housing stock, during the pandemic.( they came into the markets with blank check more or less and out bid the local buyer in some cases 300% and 400%) There really isn't a housing supply shortage.
thanks for sharing
Even at Morgan Stanley they forecast S&P 500 at 4.500 by the end of the year, and considering they profit if you invest it's quite the teller of the exuberance of this crazy period in the stock market.. 🙃
:-)
Market is pricing A.I
Two ways you can tell someone has a passion for research. First is when their fingers are all taped up due to paper cuts, like Sven here. Other way is when they need 2 inch thick glasses because staring at numbers for 70 years burned their eyes out of their head, like Charlie Munger.
If everything would be misspriced then should be easy to make money
A hedge fund manager told me that he struggles way more to find value dislocations in the bond market than in the stock market, since the bond market is mostly traded by professionals, and therefore, more efficient and rational. Probably we should pay more attention there
That is not a contradiction and it is not crazy. That is just the market pricing in a less severe stagflation.
thanks for sharing
Companies are doing buybacks while executives are selling. The same executives who decide to do the buybacks. Not shady at all.
I think we should stop using past centuries market averages as a reference for the current market valuations, since economy is very different compared to 1901-2000. SP500 may be overvalued but expecting it to return to (or take as a reference) a dividend yield of 4% is a bit exaggerated.
Globalization made so many people living outside their own countries and more people consistently need to travel to see their families so do not see oil price crashing easily unless EV adoption accelerates or make electric/hydrogen planes possible. I believe gold will become valuable when we see inflation keeps rising and money becomes worthless or crypto market crashes
When you compare the S&P 500 from 1900 with today, it is a total different beast. Just look at the asset "heaviness" in the beginning of the century to today. The asset heavy companies in the past also had very different free cashflow margins then today. In a past video you mocked the anticipated earnings estimates from all the banks for the following years. So far your assumptions were not correct. I would like a more balanced way of interpreting data
I'd like a cheeseburger well done.
Those big tech companies are quickly becoming asset heavy with the AI mania. Chips and data centers aren’t cheap. The issue is can they monetize those investments as profitable as before? Or will they cannibalize their existing business.
Dangerous to bet on S&P at high valuations and high concentration. Better opportunities
At 30-40x earnings, growth must remain strong, margins must remain wide and multiples must remain high in order to get a return. That’s a lot of must’s: too many people are just trying to convince themselves that perpetually high multiples are normal and disregarding earnings yield. This has never ended well.
You are free to do anything you want with your money. You can buy SP500 and be happy. IMO index investing at this point of the market is too risky and doesn’t make much sense. BTW your comment sounds like “this time it’s different” and also like you are commanding Sven to make videos according to your preferences which doesn’t make sense - he’s doing free videos according to his beliefs which you can agree with or disagree :)
S and p500 only up because of nvda and other faang group
Sven, macro is noise. You are a smart guy. Focus on the companies future cash flow and you will too, like me, beat the market
Understanding macro is important to gauge current market psychology. If everything is priced to perfection, that tells you that investors are exuberant. That translates directly into high PE ratios. It does not mean you stop looking for good stock buys, but you are competing with people that are exuberant. It is hard to find good buys.
The comfort is that we know we are somewhere near the top of a range. It does not mean we know when it is going to change, but we do know that when it changes (and it always changes) that investor psychology will most likely drop to the bottom of the range (which directly translates into a lower PE being paid for stocks overall).
It does not mean we stop looking for deals. It does mean that we should be positioning ourselves for this possibility of the macro environment changing, so (as Buffett said) when it starts raining money we have a bucket and not a thimble.
What up cuh!?
1st
Who cares?
Who cares?
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