The market is fearful right now. I don’t say that lightly. I am saying that based on the very scientific approach of going to CNN’s “Fear & Greed Index” and seeing an “extreme fear” reading. I’m just kidding about taking the CNN Index scientifically, but that fear reading matches up with my conversations with other investors. I feel like people are tripping over themselves to be bearish. Pessimism rules the day; I’ve had multiple conversations with very sharp fundamental focused value investors that have included the phrase “I just feel like we’re set up for a crash.”
There was way too much speculation and junk in the market. Probably in the early innings of a nine inning game in terms of working through that. The knock on effects of this bubble imploding are unknowable, but expect MUCH spillover into areas of the economy and markets that appear safe at the current moment.
But I agree long term investment plans should not be abandoned due to short term economic or market concerns, but crashes and economic downturns need to be planned for. Cash on sidelines for living expenses so you don't have to sell into a depression, avoid margin debt, speculative positions, etc. I personally think very few have planned for what is possibly coming, and most lack the stomach for it.
I am in another spot. I've been very long O&G for about two years now and its obviously really worked out. However, everywhere I turn now all I hear is be long energy. Look at the FCF yields bros are everywhere you look. I have family in the space in North America and I hear about the lack of labor, the lack of investment, the inflation of parts and services, and then there is ESG. Everything and I mean everything is pointing to an extended bull run for commodities but O&G in particular. I don't like putting money to work when things are this way but I also know sometimes the crowds are right. Last week I started to trim some of my holdings and added to some non energy names I like for the long haul.
Isn't it a bit early to be calling a bottom? QT hasn't even started. QT + deficit = ~250bn+ per month of crowding out for the forseeable future. On a 10 year chart, markets are still far above trend. Then there's a lot of other macro/geopolitcal factors. I'd love to put cash to work but I remain skeptical.
Be greedy, not fearful
Also from history, Japan has still not regained its 1987 level. If you were in the market in 1929, the Dow would not return to that level until 1954.
Pull up a 5 year chart on the Dow Jones Industrial Average. Heck of a crash!
https://www.google.com/search?channel=nus5&client=firefox-b-1-lm&q=dow+jones+
There was way too much speculation and junk in the market. Probably in the early innings of a nine inning game in terms of working through that. The knock on effects of this bubble imploding are unknowable, but expect MUCH spillover into areas of the economy and markets that appear safe at the current moment.
But I agree long term investment plans should not be abandoned due to short term economic or market concerns, but crashes and economic downturns need to be planned for. Cash on sidelines for living expenses so you don't have to sell into a depression, avoid margin debt, speculative positions, etc. I personally think very few have planned for what is possibly coming, and most lack the stomach for it.
I am in another spot. I've been very long O&G for about two years now and its obviously really worked out. However, everywhere I turn now all I hear is be long energy. Look at the FCF yields bros are everywhere you look. I have family in the space in North America and I hear about the lack of labor, the lack of investment, the inflation of parts and services, and then there is ESG. Everything and I mean everything is pointing to an extended bull run for commodities but O&G in particular. I don't like putting money to work when things are this way but I also know sometimes the crowds are right. Last week I started to trim some of my holdings and added to some non energy names I like for the long haul.
Investing is fun but it's not easy.
Isn't it a bit early to be calling a bottom? QT hasn't even started. QT + deficit = ~250bn+ per month of crowding out for the forseeable future. On a 10 year chart, markets are still far above trend. Then there's a lot of other macro/geopolitcal factors. I'd love to put cash to work but I remain skeptical.
Good writeup. Certainly time to put some cash to work