Is it time for a correction ?

Derf

Sooner or later ! Below taken from FMI large cap semi-annual report 3/31/2021

Most stocks did reasonably well in the quarter; deeper-value names (many of suspect quality) and cyclical enterprises were standouts. Firms with a high probability of default,money-losing companies, and other highly-speculative stocks also continued to perform well.Recall that 2020 was a banner year for the most speculative stocks. Companies with over $1 billion market value as of year-end 2020, who also lost money in 2019 (409 money-losing companies),gained on average 123% last year. When the other side of this stock market cycle has been completed, we believe most of these stocks will better reflect fundamental reality

Baseball_Fan

So.... what happens if the market craters by 25-30-35-40-45%? Does that mean all the balance sheet expansion, Bailout, er handout for the rich last March as Lewis B would likely call it goes for naught?

So... is this the sheissefest referenced earlier or just a "healthy" pullback?

Just asking for a friend

Best,

Baseball fan

JD_co

A US equities correction (-10% to -20%) is overdue and would be healthy for the markets. We are far from "...fundamental reality." We have a Fed that is very interested in keeping things fluffy, and that goes a long way in bubble-land.

Even on the debt side, if the bond market were to "collapse", the Fed makes a big show of being able to buy bond ETFs to support. Its more about perception than actions.

Baseball_Fan

Hi @JD_co..from Hussy's latest commentary...comes down to investor psychology...what fed, central banks have done is make it uncomfortable for inwestors to hold 0% monies, thus they step out onto the risk curve, overvaluation be darned...so the question is how do you feel with markets possible going down 20-30-40% etc...how much of your wealth goes poof?

I said it before. We all know this market is nuts and artifiical due to balance sheet expansion. We know it is dangerous. But we are humans and are greedy so we "play" the markets.

Likely time for extreme caution but who knows, market could turn and spike up again.

Casino, yes.

Baseball Fan

JD_co

Baseball_Fan said:

We all know this market is nuts and artifiical due to balance sheet expansion. We know it is dangerous. But we are humans and are greedy so we "play" the markets.

Baseball Fan

I think we are FORCED to play the markets because of Fed tampering. There is no other game (i.e. interest income from a Money Mkt account) in town. Its a funnel. Now that inflation is perking up, the game might turn ugly.

I blame the Fed. The markets should be allowed to play out naturally, and not under their heavy hand year after year.

hank

Not as bad as the afternoon in ‘87 when the Dow fell 27% during the short time I was driving home from work. Or as bad as the day in ‘08 when I happened upon an old HS buddy literally in tears because half his IRA had been wiped out in a few months by an investment in junk bonds he’d considered relatively safe.

Shucks, this kind of noise is normal and healthy for markets. Never invest $$ you will need anytime soon. Nobody’s to blame - unless you mean the charlatans who promise quick gains and would have you believe getting rich investing is so easy “even a cave man could do it.”

If you’ve been around the past half century or more, when it comes to investing, you’ve seen a thing or two.

JD_co

Remember these days?

Q: What was the interest rate on a savings account in 1980?
A: 19.5 percent

Since inflation was still high at more than 12 percent, the Federal Reserve hiked relentlessly between August and December of 1980, bringing the target fed funds rate back up to 19.5 percent.

Most investors today have no idea that interest rates can even go above 3%.

Baseball_Fan

Don't forget @hank, @JD_co...many of the financial advisors, commentators and the like have only come of age during central bank balance sheet expansion...they are the experts now, borderline mocking the wise elders such as Munger and Buffett, how they don't get the crypto, etc.

One day and it might be soon...won't matter how much jaw boning powell etc do...everyone is going to rush to the exits en masse...the whamo-o moment.

Ah well. My what the f moment came when I had a couple 20-something year olds reporting to me a while back...after a business lunch in downtown CHI we were walking back to the office and I realized they had their phones out looking for Pokemon characters...ya, our future...

We'll see how it plays out.

Baseball Fan

hank

Baseball_Fan said:

”Don't forget @hank, @JD_co...many of the financial advisors, commentators and the like have only come of age during central bank balance sheet expansion...they are the experts now, borderline mocking the wise elders such as Munger and Buffett, how they don't get the crypto, etc.”

Maybe the market’s having a “Kathy Wood moment”? Will be interesting to watch the fallout there - as well as for the Robinhood crowd.

Crash

"Is it time?" Way past due. Frothy Markets. Cotton Candy!

JD_co

We can't force the timing, though. It might be starting here, but this week is just as likely to be nothing - a minor blip.

Remember Meredith Whitney's classic MUNI bond "crash" call back on 60 minutes years ago? Nice pearl necklace and all. The markets never listen to those in the prediction business.

The Schiller PE ratio can still make it all the way back up into the low 40s. Why not.

Baseball_Fan

Good commentary @JD_co...like it

Baseball Fan

carew388

hank -was the junk bond fund, by chance, the infamous Oppenheimer Champion Income fund?

hank

carew388 said:

hank -was the junk bond fund, by chance, the infamous Oppenheimer Champion Income fund?

LOL - I don’t know. But I’m well aware of the former Oppenheimer “Champion” high income fund and have referenced it a few times here. Best recollection is it lost about 75% over the ‘07-‘09 bear market. More grievous, perhaps, was Oppenheimer’s “Core Bond” fund that had been marketed as low risk but ended up losing something like 40% during that time. Others may wish to check the numbers..

The friend I referenced is no longer among the living. But, it’s one thing to read some poster whom you’ve never met sharing their financial fortunes online. Quite a different matter to have somebody you’ve known personally most of your life (and like) open up like that and share their loss.

carew388

Yes-and OPIGX is still open for business with 1.9 billion AUM .

Observant1

Stock market corrections (usually defined as a 10% - 20% drop from recent highs) can occur at any time.
A correction in the near future may be helpful in reducing some of the market froth.