No. of Recommendations: 9
I wrote and LongTermBRK responded "I think the panic reflected in those near record high numbers early in the month was entirely justified,"
Those numbers historically are ALWAYS justified. There are always real reasons why people are negative.
Yes, you have a point. But was there a blood in the streets moment? It was building to that kind of situation, but basically Trump announced the 'reciprocal' tariffs, a lot of people panicked because most people could see that it would be an utter catastrophe, and when the mood got so bad that the bond market was affected, Trump put them on hold.
As I asked before: "will things cascade lower when the national news starts reflecting data of swelling unemployment and plummeting profits?" Many, many companies are taking it on the nose at the momment. The tariffs he left in place, especially the 175% one on China, will be very damaging to the economy. And even if the China tariff gets rationalized down to 25% or something, along with 10% on all countries, it's enough to cause significant problems.
The S&P 500 is off about 10% from it's all time high. Valuation as measured by CAPE is a very, very high 34 with Excess CAPE Yield is a very low 1.8%. The market is priced for robust growth despite the 10% correction. What is the bull case aside of the pessimism?
When you're priced for perfection, yet there are flashing warning signs that a drastic slowdown is occurring, with little reason to expect a turnaround any time soon, downside risk is very high.
BRK is not overpriced to the same extent, but it's priced high enough that in the last couple of decades, one typically saw negative short-term returns when it was this high.
This looks like an opportunity to sell high and buy low in the nearish future. But it's hard to do successfully, no doubt. I won't be surprised if I end up looking dumb.
