Reserve Bank watching US economic 'chaos' as Macquarie Bank warns of potential share crash

Thanks @Strawman for your take on the macro situation. Good stuff.

Bring it in Andrew . . . someone needs a hug

No big surprise, Trump brings volatility, as you say SM stay in quality is the best strategy to survive. sentiment is in the toilet now, should you sell? i have no idea but we have been saying for a while to stay liquid and quality after two very strong years.

IMO the US large caps are now approaching some LT valuation support, up by the stairs and down by the elevator. i will be looking to add over time. As for TSLA BTC PLTR you are on your own. Shouldn't you be comparing BTC to gold SM? I'm just kidding compare it to whatever you want, lol ive got no idea what BTC is worth.

as a PS, when i mean quality i don't mean 3DP et al, like someone suggested last time i mentioned it in the last downturn!!!

I'm still trying to see if AMZN or CSL is a better buy in this situation

Both have operations and foreign income out of the US which is a win when the USD falls.

Anyone else have thoughts on this?

If you think that global markets are often driven by liquidity flows in the short term then Japanese yields going parabolic is likely the key driver of the correction. Low yields that were managed against a global backdrop of higher rates drove an epic carry trade which now would likely be reversing, sucking liquidity with it.

haha @DrPete -- honestly, I'm not worried in the slightest. Genuinely!

I know what i own, and why I own it.

I have my health, a loving family.. i feel like the richest guy on Earth. Of course, like everyone, it's not all rainbows and lollipops, but I cant really complain.

Also, this is not my first rodeo. I have invested through the dot com crash, the GFC and covid, along with myriad other economic and financial hiccups. The regret is always never being bold enough. Fear is an anathema to long-term returns!

As for the BTC comparison to gold @Solvetheriddle -- that is a far, FAR better comparison to equities, but for now the majority of the world still sees it as a "risk asset". And, given that, it really is amazing how well it has held up. (It hasn't yet been mentioned here, and much of the media has somehow ignored it, but this week the US established a Strategic reserve, with a plan to acquire more through budget neutral measures. Kind of surreal..)

just to get you excited SM, i saw a talking head who predicts that if the US equalises BTC to gold holdings in its reserve, it goes to $2m....you heard it here first!!!, i know there is no way you are off that train.

@edgescape, unless you're a trader, I'd take "in this situation" out of your question. Macro and micro are only weakly correlated. For some, I can see how macro may slightly influence overarching asset allocation - in particular, lowering debt in challenging times (but even this decision needs to be taken early, before everyone is rushing for cash; better just never to play with debt to the extend it can threaten liquidity).

I think trying to factor macro into a decision between investing in behemoths like Amazon and CSL may be trying to finesse the decision too much. Both companies are long term plays with intrinsic valuation that will wash through macro cycles.

Predicting macro is near impossible. Might be worse tomorrow. Might be better. Trump could go quiet tariffs. Musk gets bored and decides he better focus on being a CEO again. Europe is talking about big increases in spending on defence and infrastructure. Japanese yields may be increasing, but US yields have just dropped. Lower central bank rates and oil prices might soften the dip. Macro is a massive engine with complex positive and negative feedback loops. Just too hard to predict.

Root our decisions in fundamental value. Build and lean upon conviction. Stay liquid. Eternal guideposts.

Thank you Andrew and others for weighing in.

The price action skews bearish, and it could certainly get a lot worse until it gets better - indexes as well as key individual securities (including some of the ones mentioned in this thread) have lost important technical support levels.

We're certainly due for a call from the bear after all the fat largesse in 2023 and 2024 with limited drawdowns.

@thunderhead agree. Market was looking for an excuse for a pullback and Trump has given it several.

Personally, these are the times when I take out my shopping list and cash reserve and look for opportunities to add quality names.

That's the way to go @mikebrisy.

Great post as always @Strawman

Times like these, the Buffett quotes around the falling tide, dangers of leverage, and not wanting to start again ring louder and clearer. It also reinforces how powerful the concept of regular investing via dollar-cost averaging is.

I will continue to add each month to the NASDAQ, Bitcoin, Berkshire, and Soul Patts – probably not so much into my other holdings (note: the first 4 make up the vast majority of my portfolio). No guarantees in investing, obviously, but... I am confident that in, say, 5 years' time, I will only wish I had held more of those 4 regardless of what their prices do in the coming months.

Once the bottom has been hit, the only way is up!

Price drives narrative. 6 weeks ago Trump tariffs were bullish for the US economy. Their GDP per capita growth was an global outlier and the USD dollar strength was unstoppable. 6 weeks later and Trump tariffs are spiralling the US economy headfirst into an unavoidable recession. GDP is quickly being revised lower and the USD is sliding as investment dollars are being re-shored.

No view on either scenario, just always find it interesting how the the interpretation of the macroeconomic environment often relies on what the price action is doing.

So true @Wini!

It’s a reminder that while macro is important, it’s often more of a justifying mechanism than a predictive tool. Narrative shifts usually tell us more about the prevailing mood than the actual impact of a policy.

A useful mental check: when a new narrative emerges, ask whether the facts have actually changed or if sentiment is just catching up to price action.

@Wini so true. For example, only a few weeks ago the big brains at GS were talking up US exceptionalism and the US equities story, and now, on the back of the recent headlines in a "Should we buy the dip" podcast, the answer was "No", Europe is the place to go - growth focus, defence industries, coming off cyclical lows blah blah....

I think that, as a long term investor where I try to keep my horizon out 3 to 5 years (minimum) in terms of thesis development, it is important to realise that so many in the market are churning their portfolios according to the narrative of the day, and the IB are measuring their quarterly and annual "returns" - coz that's how they earn their bonuses. The narratives are all in service of this short term churn and nothing about compounding and holding quality businesses over time.

I think of volatility as my friend. In the quality part of my RL portfolio, I've recently (including today) been buying $BRG, $RMD, $WTC, and today I even succumbed to getting back into to $TNE which has dipped below my central case valuation of $27.00 (I know, I need to update my SM valuation.)

I'm not trying to time the market, or call the bottom or anything like that. There's no "Story" behind what I am doing. The market is just giving me the opportunity to by quality stocks that I know well, below my valuations. For the last 6 months I've been sitting on an unhealthy cash surplus in RL, and history says that if ever you choose to buy, then doing it when things have pulled back a fair bit is not a bad thing, if you are prepared to judge success over the longer term.

Oodles of wisdom there @mikebrisy

For the record, I've been macro bearish since.. *checks notes*.. forever! Thankfully I've remained fully invested though.

What else do you do with long term savings? Cash!? Pfft hahaha

Thank you all for your contributions. I've been reflecting through the last few weeks on the clear shift in sentiment and my actions have been turning off most of the news. My RL portfolio has been hit, but it's majority is in broader index and larger companies which have good business structures, etc.

I really wish I had some surplus cash to buy more at the moment, but I'm fully deployed and am recently on a single income with my wife on mat leave...

@Strawman I know I am well and truly infected with the investment bug.

Recently I thought about upgrading my car,... but then I thought about the opportunity cost versus keeping the money invested.

Wife: "But you can't take it with you ( i.e., when you die)

Mikebrisy: [Glazed over look, staring into the distance ,... manic smile]

I listened to a podcast dicsussion with some pro-Trump investors this week. All of them agree that Trump was "delivering what he promised" with his trade tariffs. Yet none of the agreed on what the goal of the tariffs were, much less the strategy behind repeatedly announcing and delaying them. Trade protectionism? Illiegal immigration? Fentanyl? Or just revenue raising? It's all, none, or some, depending on the day of the week.

The result in uncertainty. I'm expecting more volatility for the time being. I've trimmed a few positions to prepare for this. I'm not worried as such, but I think there will be opportunities to buy high quality companies and I want to be ready to take advantage of them.

If you can believe the words coming out of their mouth, both Drumpf and his Treasury Secretary have indicated that they are going to "rebalance" the US economy towards Main Street v/s Wall Street, and they are prepared for the economy to "roll" in the meantime.

That just translates to more volatility and uncertainty till the market finds a new "equilibrium", or if they throw in the towel and revert to the typical skew to Wall Street i.e. the pain becomes too unbearable.

Hey @mikebrisy , a car can be an investment. Look at Rowan Atkinson's McLaren, he bought it for about $1.2 million in 1997 and it just sold for $15 million. Not a bad little earner there, and he even crashed it a couple of times. Maybe float the purchase of a McLaren with the missus....

@tomsmithidg Now you're talking.

But I live in QLD, and between the terrible drivers on our road and the pot-holes, it would probably never leave the garage if I was to preserve its value!

@mikebrisy I live in QLD too mate, just sneak out in the middle of the night and drive it down the M1 to the Gold Coast and back ;)

@thunderhead I would be surprised if Trump was out there supporting main street.

But the whole theme on protectionism definitely resonates well with the view on the ground.

@DrPete I'm not a trader but I do realise that any dramatic change in the macro would impact valuations no matter what happens on the currency market or otherwise.

So the attractive multiples of say AMZN or anything else on the market could get less attractive very quickly!

It's interesting that Gold has held up. Been meaning to sort out my unallocated gold and perhaps now is the time to let go. They are much better than holding a gold company.