We're all fomosapiens now

15th Jun '20 by mojomogoz

9 comments 876 reads

Warning: I have no idea what's going to happen. Don't take any of this as advice. DYOR and thinking etc

Repeat after me:

"There are only two options

1) Debt deflation driven depression

2) Something else"

The above should play like a catchy crap song in your subconscious. Do and think whatever else you like but keep this soundtrack playing.

Data and rationality will inexorably take you to option 1. Inexplicably, option 2 is the right answer...well inexplicable if you're trying to construct a case based on charts and data looking back at history for clues that is. A very rational thing to do but quite close to useless right now. I love Stockopedia but I also point out that their scoring algorithms may be vulnerable to misfiring too (as are any screens no matter how sophisticated).

So, what's 'something else'? Er, dunno. But it is definitely the option that's going to play out.

Honestly, I'm not trolling you (well most of you)...this is the clearest view possible right now. Anything macro and market related that doesn't follow this simple insight is wrong and quite possibly hubris and ego. Everyone's got their thing and bit of history they've read and understood and they tend to get hung up into it, particularly when stuff gets a bit crazy. Be very careful with your thing right now.

Take my astounding inshite above and apply it to all thoughts you have. Option 1 will keep on trying to suck you in to its intellectually beguiling gravity....fight it hard! Shake it right out, all traces of it. If you use it to inform or handicap your thoughts and risk taking in any way it will just weigh you down. It is the road to nowhere, An impossible destination.

Option 2 is unsatisfactory. Intellectually inexact and lacking in wholesomeness. Its got no proof for it. Emotionally you are going to fight 2 and take a strange depressive comfort in 1. WRONG! Always hum the tune and choose option 2 and expunge option 1 thoughts...option 1 is an unreality and reality that is a version of impossibility.

Its going to be choppy. Its going to feel uncomfortable. I've got thoughts on what option 2 is likely going to be but that's not the important thing. The important thing is to fight the pull of option 1 in your mind.

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mojomogoz

15th Jun '20

Hey! Red thumb people. Don't be shy...share your contra view. We'd all like that and benefit from reading it....clearly you will be wrong as my logic is the only possible path but it will be interesting to see where you are wrong.

Go on!

aflash

Thank-you for making me laugh.

It is a sad reflection on the human condition that we are affected by what other people, especially in our peer group, think of us. It makes it difficult to buy or sell when received wisdom is against us. Yet this involves dollars and cents and people rejecting us is free. The method I have adopted is to avoid returning to a discussion until weeks afterwards. Not difficult when there is so much market action.

Commenting at a tangent because making no attempt to forecast or hold an economic view, I have made profits in the last 3 months by trades of a few days that rely on sentiment.

Thus HSBC, HMSO, MNG, MKS, CCL, RDSB, RR., CARD, XOM, GILD, PAM (yes! even gold stocks) and the list goes on, all bought in oversold conditions and sold when hope or short covering intervenes.

All my positions based on a hypothesis, such as the direction of the price of oil, have lost money.

I do believe in cycles but have difficulty measuring where we are along their progression.

It could be worse. Krondatieff was shot for his opinions.

jwebster

"Something else"

Options...

Unreliable soundbites from around the world say workers are not worrying yet, they are even loading those government cheques into robinhood accounts. The music stops when the schemes end but governments will phase them surely. So September will be rocky, just in time for the election. Trump will be tempted to pump another round of stimulus. Historically USA election years are good for stocks, the year after bad.

That debt overhang is tricky, governments will reschedule it into magic perpetual bonds and recycle the interest. Maybe some tax rises too, UK and US have somewhat low corporate tax rates right now.

Meanwhile, interest rates are lower for longer. What are trillions of future benefit payouts in pension funds to do? A 60:40 port mix won't cut it. Let alone PE firms, hedgies, regular funds and pensioners who have just seen their favourite names slash dividends. The search for yield will intensify and anything with yield or promises of growth is bid to the moon. Wouldn't surprise me if private pensions are eventually nationalised as a solution to their under-funding.

So, with low rates, I'm guessing growth stocks may have a good run yet in the yield scramble. If the indexes hold up I plan to stay in popular names mainly US tech and divy earners like builders but otherwise sell out i.e. the price is the news. When people stop talking about gold might be time to buy GDX.

aflash, I'm pleased to entertain. I'm not that worried what people think of me although prefer they like me...not being a psychopath etc ;) But I have had a lot of training in being an outsider so my skin is thick, I do my own thing and don't get too down about being stupid

Congratulations on your endeavours! I can never be very short term (or not very often and not very well). I think that long term views (strategic and specific) tend to provide the opportunity and I like to position that way and then question and doubt short term. I find investment crowds tricky. There's knowledge and wisdom there but there's also collective hubris.

I don't like straight cycle stuff. Always look for hidden optionality and/or driving factors in the cycle that are specific rather than more general economic cycle.

I never really try and forecast what is going to happen, rather I start from what I think wont and what the array of possible looks like (that's option 2). This may be confused when communicating with people as I forecast xyz...but the verbal process is a short cut of the mental process. This is perhaps why people call be a contrarian although I'm not really a fan of contrariness. I'm more a capital cycle investor which does mean pushing against the flow of wisdom.

jwesbster, some responses...

If the economy doesn't miraculously heal itself then 100% certain that the US govt will be doing whatever it takes for Main St. The danger to this is the Dems trying to stand in the way of Trump pre-election. However, this would be too much self-harm and would probably ensure a Trump victory IMO if his largesse is being stalled by Congress. The game theory of this leads to Trump being as generous as possible to make his campaign and the Dems not being able to stand in the way.

A strange thing has been occurring since the monetary stimulus started rolling. The US Treasury General Account at the Fed has hit an all time high at $1.5tr (it's always below $500bn and often far less). This figure is spectacular and is spectacular in the context of ongoing govt spending into the economy. In effect it means that the Fed has provided more monetary stimulus than has been used. Why? I don't think anyone knows for sure but my guess is that this is an election war chest the executive has salted away. If trouble comes again the Fed still needs to step on the gas regardless of the TGA funds.

The debt is not getting paid back whole. First hope is that inflation will whittle it away as it did from 1945 to 1980. 1945 had debt levels in excess of now. Over 35 years inflation was above nominal debt levels and despite ongoing high govt spending debt came down to <30% GDP. If that doesn't work some form of forgiveness will occur...for the govt this will be debt monetisation at large scale (so what we've seen in UK this year but persistent and cumulatively large) or if its for private debts then govt taking them off private balance sheets and putting them in some form off-balance sheet structure.

Pensions. Big. out of time right now.

Gold. Its near to no brainer IMO. Not as its money but as its an outlet for all the uncertainty

Gromley

Getting rid of the CoronaDebt is really quite simple Mojo.

Back in May the UK Gubmint sold some bonds at a coupon of minus 0.003%. Borrow several trillion more on the same terms and use the interest to payoff CoronaDebt.

Meanwhile to prove the private capital is more efficient than public I am considering offering GromleyBonds at the bargaintastic rate of minus 0.0025% much better value than HMG .

Anyone interested please private message me - minimum stake £100k - no time-wasters.

Very good Gromley.

I'll be in touch re your bargain bonds. Just want to check ongoing funding requirements and future supply. I've been in touch with WhizzBang Investment Bank and secured funding with minimal collateral requirement. Prudently I think I can put at least 50 turns behind it. The bigger you think the better...

Momoko Miyamoto

UK govt will be trying hard to stoke inflation to reduce the debt burden, BoE will print as much money as the Gilts market lets it get away with. Medium term risk with this is that if the economy doesn’t recover quickly then foreign investors will dump GBP or demand a higher yield. If borrowing rates rise then expect tax rises and more austerity or possibly even IMF bailout followed by worse austerity.
Brexit may save us as there’ll probably be another Euro crisis as Germany can’t keep bailing out Italy, France, Spain, Greece, Portugal, Greece, Cyprus and others. I don’t think the world will need quite as many BMW, Mercs, Audis & VWs for a while and Trump pulling troops out of Germany will necessitate more defence spending there. Eurobond money may switch to GBP.
Current UK govt policy despite appearing inept is reducing the trade deficit. Quarantine forces Brits to spend at home and no car scrappage scheme for those imported shiny German motors.

16th Jun '20

MM I agree with quite a few things you say

Some responses

As money is clearly no longer real (for country with status and control of money) and correspondingly govt debt is not very real the old bond-money-gdp relationships don't hold or at least suspended for time being.

For the foreseeable future markets will reward unconventional policy. They are fully aligned with policy experimentation. Equity, bond and USD market wouldn't like US austerity and leaving economy to heal itself. We are in an entirely different paradigm from 1945-c.1995

Germany has acute problems best summarised as its ageing very rapidly and it lacks consumption for its massive economy (not purely an age thing). I suspect that is what has led a significant change of heart re genuine fiscal sharing in Europe. Not that the age profile is great elsewhere but there is consumption demand. France and UK have better demographics and big consumption markets. Lost the former and more risk than thought that they could lose the latter (more as France realises that Germany is weak)

Germans don't know it yet but they are going to re-arm. It will take one tense event with Russia and the US saying so what.

Haha re quarantine....I did think it seemed like a way to keep a little extra £s in the country

We're all fomosapiens now

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Mojomogoz

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