Hi All
since we have had about 6 months to get ready for this hopefully everyone has high conviction positions left that you are happy to add to. i remain on the defensive side only adding to quality stocks, b/s fcf etc. this may not be over for a while. individuals reading the macro is of some use but really it depends on the Feds view not ours. they still look angry. where will the cost of capital and valuations go to? is the question i have the most issue with. valuations are relative and depend on the CoC which will be higher but by how much? where will valuations rest. until i can get a read on that i stay defensive and dribble $ in.
just to clarify what i mean by defensive my largest 5 posioitns IRL are CSL ALL ALX APA REA so pretty bullet proof, move out the risk curve as per above
Today is definitely NOT a day to sit glue-eyed to the screen watching the carnage.
In my mind, I have already adjusted to seeing around 3% to 4% of my portfolio evaporate.
But its not lost, unless I sell. And I'm not.
The tide goes out and the tide comes back in - may be not in six hours, but it will at some time and I don't have any specific use for that 3% to 4% for quite a few years.
So I will take the bride of 48 years to lunch and check in just after to see whether my 'crab pot' of possible buys has been triggered.
Life is about so much more than money.
Hi Strawpeople. Just having a look at some market numbers. I know forecasting is for suckers, but just wanted to put in perspective where the market sits right now and gauge some risk levels. No one can possibly know where to from here, but interested to hear what peoples best guesses are?
SP500 is at 3900 on a PE of 19.71. The mean is 15.97. Which would mean to revert to the mean we would need the SP500 to fall a further 30% approx. that takes it to pretty much bang on 3000pts. Or we need corporate earnings to increase for the US half years. Mean earnings growth of the SP500 is 23%. If thats true for 2022 then half year could see earnings increase of 10% for the half. Then reverting to the mean could possibly be only a 20% fall over the next few months. Also market tends to move in a pendulum type manner, so overbought (hype and greed) to oversold (fear and pessimism). And as a pendulum does, the higher the hype cycle the lower the fear cycle will be following. If you believe the market was severely overbought, we could see the market overselling past the mean in a corresponding significant factor.
My guess which is probably wrong because nobody knows, is that earnings will show weaker growth, because of inflation and wage pressures. And the risk of mean reversion is closer to be more likely 30%+ from here than 20%.