Stock scream room

Discussion of the Stock portion of the Permanent Portfolio

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Tortoise
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Re: Stock scream room

Post by Tortoise » Tue Jun 05, 2018 12:34 am

Kriegsspiel wrote:
Fri Jun 01, 2018 8:52 pm
Tortoise wrote:
Fri Jun 01, 2018 7:38 pm
Has anybody here ever compared the total market capitalization of stocks, LTTs, gold, and cash?

If we assume that money "sloshes" between those four assets -- i.e., that if it flows out of one, a roughly equal amount must flow into one or more of the others -- then the portfolio would maintain a constant value only if the four assets were allocated according to total market capitalization, right?

It would be interesting to see those four percentages...
Well If, for instance, all assets were worth $25, and everyone wanted to sell stocks, they'd keep dropping in value until someone felt like buying them. If nobody wanted to buy them until they were at $5, then the total market cap of this economy would be $80. So some money went from, say, cash to stocks, but $20 of value is gone.
If the "total market cap of this economy" includes cash, then it wouldn't change if people "sell" cash to buy stocks, or vice versa, right? As I said, the assumption in this thought exercise is that money sloshes around between the four assets, meaning the total amount of money sloshing around remains constant.

I'm not claiming the assumption is necessarily realistic, but it does seem to be implicit in some discussions about the PP concept. The idea seems to be that money has to go somewhere, and if you're invested in stocks, bonds, and gold, it's probably flowing into at least one of your assets -- unless it's one of those nasty beasts known as a "tight-money recession" where money disappears into a black hole :o
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Re: Stock scream room

Post by Kriegsspiel » Tue Jun 05, 2018 9:09 am

Tortoise wrote:
Tue Jun 05, 2018 12:34 am
Kriegsspiel wrote:
Fri Jun 01, 2018 8:52 pm
Well If, for instance, all assets were worth $25, and everyone wanted to sell stocks, they'd keep dropping in value until someone felt like buying them. If nobody wanted to buy them until they were at $5, then the total market cap of this economy would be $80. So some money went from, say, cash to stocks, but $20 of value is gone.
If the "total market cap of this economy" includes cash, then it wouldn't change if people "sell" cash to buy stocks, or vice versa, right? As I said, the assumption in this thought exercise is that money sloshes around between the four assets, meaning the total amount of money sloshing around remains constant.

I'm not claiming the assumption is necessarily realistic, but it does seem to be implicit in some discussions about the PP concept. The idea seems to be that money has to go somewhere, and if you're invested in stocks, bonds, and gold, it's probably flowing into at least one of your assets -- unless it's one of those nasty beasts known as a "tight-money recession" where money disappears into a black hole :o
Oh, yea maybe if you assume the amount of "money" is constant then sure, everything sloshes into a different asset in equal amounts (like assuming a can opener), but then that isn't really a free market, with market clearing prices. I figure (?) you'd also have to assume stable productivity/wage growth/inflation also, so that some of those resources in financial markets aren't diverted to things like food/smartphones/cars or whatever.
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Re: Stock scream room

Post by boglerdude » Thu Jun 21, 2018 3:22 am

Say a company has a net worth (market cap?) of 100 million. 100 owners (shareholders) each with a million dollar share. The company spends 50 million cash savings to buy out half the owners/shareholders. Now the company's net worth is 50 million?

There are now 50 owners/shareholders, each share still worth 1 million?

But the company's income stream hasn't changed. Earnings per share has doubled? And so the PE ratio "improves" (looks cheaper to buy)?
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Re: Stock scream room

Post by dualstow » Thu Jun 21, 2018 8:36 am

I don’t think just moving money around would halve the net worth.
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Re: Stock scream room

Post by Tortoise » Thu Jun 21, 2018 7:34 pm

If demand for that company's stock among investors remains the same, but supply of that stock suddenly halves, then we would expect the price of each share to roughly double, right? So total market cap of the company should remain roughly the same.
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Re: Stock scream room

Post by ochotona » Thu Jun 28, 2018 6:04 am

Industrial metals, emerging markets, China, Italy collapsing. Even gold. 10 year bond yields backing down. Trade war rhetoric.

I smell deflation again, and a rough patch for stocks. Think Summer 2015.

If the Fed can't raise rates again this year, it means the growth narrative is a lie.
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Re: Stock scream room

Post by dualstow » Thu Jun 28, 2018 7:42 am

ochotona wrote:
Thu Jun 28, 2018 6:04 am
Industrial metals, emerging markets, China, Italy collapsing. Even gold. 10 year bond yields backing down. Trade war rhetoric.

I smell deflation again, and a rough patch for stocks. Think Summer 2015.

If the Fed can't raise rates again this year, it means the growth narrative is a lie.
It's hard to figure out, isn't it. Some day the trade wars are dragging down gold. Others say gold's drop is a sign of confidence in the economy. It feels like anything could happen.
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Re: Stock scream room

Post by ochotona » Mon Jul 09, 2018 8:12 pm

I heard an interesting explanation for why stocks have been going up since the "trade war" began. Some people are viewing it as a short squeeze, that so many people had gone short in advance of the trade war starting that they were too many short, and they could be taken advantage of by short squeeze.

Another reason to not try short term trading!
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Re: Stock scream room

Post by Cortopassi » Mon Jul 09, 2018 10:37 pm

ochotona wrote:
Mon Jul 09, 2018 8:12 pm
I heard an interesting explanation for why stocks have been going up since the "trade war" began. Some people are viewing it as a short squeeze, that so many people had gone short in advance of the trade war starting that they were too many short, and they could be taken advantage of by short squeeze.

Another reason to not try short term trading!
True about the short term trading, but makes no sense overall! This is not a one day event. These tariffs are going to take a long time to play out and can screw a lot of things up.

Those who thought yeah, I'll get short and got burned over the course of a couple days deserve it. They will likely be right long term, however.
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Re: Stock scream room

Post by buddtholomew » Tue Jul 10, 2018 6:54 am

Cortopassi wrote:
Mon Jul 09, 2018 10:37 pm
ochotona wrote:
Mon Jul 09, 2018 8:12 pm
I heard an interesting explanation for why stocks have been going up since the "trade war" began. Some people are viewing it as a short squeeze, that so many people had gone short in advance of the trade war starting that they were too many short, and they could be taken advantage of by short squeeze.

Another reason to not try short term trading!
True about the short term trading, but makes no sense overall! This is not a one day event. These tariffs are going to take a long time to play out and can screw a lot of things up.

Those who thought yeah, I'll get short and got burned over the course of a couple days deserve it. They will likely be right long term, however.
Short squeeze is the excuse bears use when the market moves against them...any long-time Zerohedge lurker will tell you that. Investors do sell leading up to media driven events that spark emotion then come rushing back in when the event doesn’t materialize
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Re: Stock scream room

Post by Don » Wed Jul 11, 2018 3:55 pm

ochotona wrote:
Mon Jul 09, 2018 8:12 pm
I heard an interesting explanation for why stocks have been going up since the "trade war" began. Some people are viewing it as a short squeeze, that so many people had gone short in advance of the trade war starting that they were too many short, and they could be taken advantage of by short squeeze.

Another reason to not try short term trading!
Stocks have been going up because profits are through the roof and economic optimism is off the charts.
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Re: Stock scream room

Post by Cortopassi » Thu Jul 12, 2018 8:00 am

Don wrote:
Wed Jul 11, 2018 3:55 pm
ochotona wrote:
Mon Jul 09, 2018 8:12 pm
I heard an interesting explanation for why stocks have been going up since the "trade war" began. Some people are viewing it as a short squeeze, that so many people had gone short in advance of the trade war starting that they were too many short, and they could be taken advantage of by short squeeze.

Another reason to not try short term trading!
Stocks have been going up because profits are through the roof and economic optimism is off the charts.
Don, that's why I am in the PP. I (partially), and it seems many others here and around the country, believe this market to be some sort of hallucination. How can we be doing well? The news always seems to be bad. Or tweaked. Or fake. Who can believe the market really can still keep on going up? Look at the chart, it is unsustainable. Obama screwed things up. Trump is screwing them up more. Trade wars. Russiagate.
Immigration. Mass shootings.

And on and on. Without the PP, I would be languishing in a hole (either in cash or too much gold) looking at the market going up and up and gold going sideways and getting more and more frustrated that it isn't crashing. At least I am participating.

The PP is the best thing that happened to my investing life.
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Re: Stock scream room

Post by Cortopassi » Thu Jul 12, 2018 3:13 pm

See, here's a perfect example. Market roaring higher. Any reasons? Not really.

Not like you'll hear on the news "Market higher because Trump pissed off NATO allies" Or "Market higher as new tariffs put in place"

I still can't rectify it mentally. I'm just glad I own stocks, even though on days like today they defy all logic.

https://www.marketwatch.com/story/extre ... 2018-07-12
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Re: Stock scream room

Post by ochotona » Thu Jul 12, 2018 6:30 pm

People need simple rules - rebalancing bands, or very simple technical trading rules that are not subject to interpretation.

I vent as much as anyone here, if not more, but I've learned trading by the news flow is a disaster.
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Re: Stock scream room

Post by Cortopassi » Thu Jul 12, 2018 6:43 pm

ochotona wrote:
Thu Jul 12, 2018 6:30 pm
trading by the news flow is a disaster.
Yes. Only things that can do it are computers on a mS timescale.
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Re: Stock scream room

Post by boglerdude » Fri Jul 13, 2018 4:20 am

Billions of people wake up every day and produce tons of stuff. Prices for everything should drop, but currency is printed to keep prices "stable." Scarce real assets (stocks) go up from inflation, inexorably.

Even when organic growth (population growth) declines, govs step in to support asset prices. eg BOJ buying stocks.
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Re: Stock scream room

Post by Cortopassi » Thu Jul 26, 2018 9:16 am

So Facebook is down 18.5% today, to levels not seen, since, gasp, May 7, 2018 A whole 2.5 months ago.

Kind of shows a bit of the craziness of a certain class of stocks, as described in the article below.

https://www.cnbc.com/2018/07/25/this-ma ... -says.html

This doesn't sound like our stock portion is as diversified as we might think.

“What has kept the market near record terrain are a mere six stocks — Alphabet, Apple, Amazon, Netflix, Microsoft and Facebook,” Rosenberg said in a note to clients Wednesday. “Strip out these six flashy stocks, and the overall market has done practically nothing year-to-date.”
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Re: Stock scream room

Post by dualstow » Thu Jul 26, 2018 9:21 am

Cortopassi wrote:
Thu Jul 26, 2018 9:16 am
This doesn't sound like our stock portion is as diversified as we might think.

“What has kept the market near record terrain are a mere six stocks — Alphabet, Apple, Amazon, Netflix, Microsoft and Facebook,” Rosenberg said in a note to clients Wednesday. “Strip out these six flashy stocks, and the overall market has done practically nothing year-to-date.”
Diversified enough to capture some return from those six. That’s why we index, right? Buy the haystack, because it’s not so easy to find the needle.

https://www.bogleheads.org/forum/viewto ... 0&t=253655
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Re: Stock scream room

Post by buddtholomew » Thu Jul 26, 2018 10:35 am

dualstow wrote:
Thu Jul 26, 2018 9:21 am
Cortopassi wrote:
Thu Jul 26, 2018 9:16 am
This doesn't sound like our stock portion is as diversified as we might think.

“What has kept the market near record terrain are a mere six stocks — Alphabet, Apple, Amazon, Netflix, Microsoft and Facebook,” Rosenberg said in a note to clients Wednesday. “Strip out these six flashy stocks, and the overall market has done practically nothing year-to-date.”
Diversified enough to capture some return from those six. That’s why we index, right? Buy the haystack, because it’s not so easy to find the needle.

https://www.bogleheads.org/forum/viewto ... 0&t=253655
Leadership in the S&P changes over time.
I also have a healthy amount of MC and SCV to diversify further.
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Re: Stock scream room

Post by boglerdude » Fri Jul 27, 2018 1:07 am

> “Strip out these six flashy stocks, and the overall market has done practically nothing year-to-date.”

"An equal-weight index of the S&P - which reduces the importance of the top 5 to just 1% of the total - is on pace for a 10% gain in 2018"
via http://fat-pitch.blogspot.com/2018/07/t ... heyre.html

And hasnt small value been doing well? How to reconcile?
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Re: Stock scream room

Post by Cortopassi » Fri Jul 27, 2018 8:21 am

Now it's FAAMG, instead of FANG? Microsoft is a big growth stock again? Whatever.

All the media coverage on Facebook's plunge yesterday was over the top and unsettling. Plummeting! Biggest loss ever by a company in one day!

But again, it only takes them back to where they were on May 4, 2018. Madness!

And of course, people will buy the "dip"

https://seekingalpha.com/article/419080 ... ok-buy-dip

And they will probably be right. What will it take, a week or two to recover? :P
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Re: Stock scream room

Post by buddtholomew » Fri Jul 27, 2018 8:35 am

Cortopassi wrote:
Fri Jul 27, 2018 8:21 am
Now it's FAAMG, instead of FANG? Microsoft is a big growth stock again? Whatever.

All the media coverage on Facebook's plunge yesterday was over the top and unsettling. Plummeting! Biggest loss ever by a company in one day!

But again, it only takes them back to where they were on May 4, 2018. Madness!

And of course, people will buy the "dip"

https://seekingalpha.com/article/419080 ... ok-buy-dip

And they will probably be right. What will it take, a week or two to recover? :P
Corto, even with FB > 20% decline, S&P500 did fine, NASDAQ took a little bit but nothing concerning.
FB was due...
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Re: Stock scream room

Post by ochotona » Fri Jul 27, 2018 2:59 pm

TWTR, wow!
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Re: Stock scream room

Post by hardlawjockey » Fri Jul 27, 2018 3:16 pm

When I see a headline like Mark Zuckerburg "losing" the greatest amount of money any human being has ever lost in a single day it only tells me how financially illiterate people are (or else knowingly posting click-bait with a hyperbolic headline).

I'm assuming, of course, that Mr. Zuckerburg didn't sell any of his stock in his own company to lock in the loss, in which case he still owns the same number of shares he did before. Any accountant will tell you there was no "loss".
Last edited by hardlawjockey on Fri Jul 27, 2018 3:17 pm, edited 1 time in total.
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Re: Stock scream room

Post by buddtholomew » Fri Jul 27, 2018 3:16 pm

ochotona wrote:
Fri Jul 27, 2018 2:59 pm
TWTR, wow!
20 is the new 10, didn’t you know.
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