Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 24
It looks like two additional timing indicators went bearish today. One is the 200DMA slope as measured by lohill, comparing today's level to the level 10 days ago.(It may have actually triggered late last week). The other is the crossover of the 50DMA below the 200DMA.
Elan
No. of Recommendations: 13
Stockcharts says not quiiite yet on the 50/200 cross, kitten's whisker time, but of note they have both rolled over into negative trend.
Also, FYI by the end of this week, DBE 99D version will go bearish on smallcaps, and in @15 days on the Naz. the S&P hit a token new high 2/19 JUUST before the waterfall started so it'll be July 8th before that goes off.
No. of Recommendations: 8
This would be the First NEW Hi 99 day signal in a while.
New 5m New 5m Last Hi(99) Last Hi(99)
Signal Chg Date Signal Chg MktD MktD Date MktD Chg
SP600 (IJR) Daily 19-Jul-23 636 25-Nov-24 95
SP400 (MDY) Daily 12-Jul-23 643 25-Nov-24 95
SP500EW (RSP) Daily 12-Jul-23 643 29-Nov-24 92
SP1500 (ITOT) Daily 01-Feb-23 804 19-Feb-25 35
SP500 (.SPX) Daily 01-Feb-23 804 19-Feb-25 35
GD_
No. of Recommendations: 6
Stockcharts says not quiiite yet on the 50/200 cross
If not yesterday then definitely today.
No. of Recommendations: 2
No. of Recommendations: 22
Speaking of timing indicators...
Stock market valuations are notoriously terrible for giving any insight into the likely next direction of markets. But terrible isn't exactly zero.
Maybe you think there will be a US recession in the next year or so. Is that priced in?
An article in the FT notes the following reasoning--
In the five US recessions since 1980, on average stock market valuations have gone from 16 to 11 times forward earnings, always ending no higher than 14x.
Currently the market is sitting at around 18x, and earnings estimates have not yet really begun to fall because it takes time for economic developments to affect numerical estimates. Mr Dimon suggests that a 5% drop should be expected. Apply that to forward estimates, and assume an ending level of 11 times (revised) forward earnings, and you get the expectation of a drop of another 40% from here.
That is not my forecast, but I am trying to be entirely prepared for it. I recently bought some disaster puts against small caps, as they usually take a beating. Not a lifestyle-affecting position, but if things hit the fan it's always nice to have something green on the screen to cheer you up. And some profits you can realize to buy something good that has gone irrationally on sale.
Jim
No. of Recommendations: 2
Maybe you think there will be a US recession in the next year or so. Is that priced in?
As of today, I do not expect a recession, but I am watching the data as it rolls in. It is most definitely not priced in.
I recently bought some disaster puts against small caps
Care to share a good example of a disaster put? I am always looking to learn.
No. of Recommendations: 4
Care to share a good example of a disaster put? I am always looking to learn.
I'm not Jim, but having been listening to him a while, it would not surprise me if he bought some ~20% OTM Puts about a year out. For example, IWM 31MAR26 150P (19% OTM) are selling for $5.86).
Tails
No. of Recommendations: 2
For example, IWM 31MAR26 150P (19% OTM) are selling for $5.86).
But today's not the day to buy the small-cap disaster Puts. I believe you'd want to wait for 1) a relatively calm market day, and 2) where IWM is in the green that day.
Tails
No. of Recommendations: 5
I believe you'd want to wait for 1) a relatively calm market day, and 2) where IWM is in the green that day.
Sounds good.
I wonder when we'll see a calm day again? : )
I got a terrible entry on mine, but I was switching from different puts and I got good prices for those, so I tell myself (without much concrete evidence yet) that the two cancelled out.
I may write some offsetting index puts on the next "hard down" day. e.g., if I think the market is going to drop 35%, I don't need protection below that level, and writing a put that far down will get me some premium to offset the cost of the higher strike puts I bought. This sounds risky...but isn't provided you're always long at least as many of the higher strike ones!
Jim
No. of Recommendations: 0
I enter all my equity positions with cash covered put writing.
The biggest issue with the strategy really is what you leave on the table when you don't get exercised.
No. of Recommendations: 6
In the five US recessions since 1980, on average stock market valuations have gone from 16 to 11 times forward earnings, always ending no higher than 14x.Can you confirm the data points you are using?
SP500 : 5250 (current)
SP500 : 6100 (peak)
2025 EPS : $260
2025 PE : 20x (Current)
2025 PE : 23x (Peak)
So statement of "16 to 11" is interesting, the market is at 20x not 16. Is this peak to bottom? (historically)? We might extrapolate a 30% compression in PE (16->11), if we use peak values we would get a target PE of 16x, which would imply 4160 as a target index value.
Interestingly, my "typical recession" estimate for SP500 was right around 4200... clearly this is not yet priced in.
tecmo
...
No. of Recommendations: 0
I recently bought some disaster puts against small caps, as they usually take a beating. Not a lifestyle-affecting position, but if things hit the fan it's always nice to have something green on the screen to cheer you up. And some profits you can realize to buy something good that has gone irrationally on sale.
I thought you completely withdrew from the US and want to stay that way?
No. of Recommendations: 4
Scary times, for sure.
Consider:
1) The majority of the stimulus money has been spent.
2) Interest rates are rising and consumer debt is extremely high.
3) US debt is $36T and rising. We were never going to pay it off but I thought we could service the debt. Now, that number is mind chilling at these rates and the debt is bound to rise.
4) Foreign countries could very well dump our treasuries in unison which is what Bessent seems concerned about.
5) Tariffs, though transitory, may well increase inflation.
6) Congress is paralyzed with half of the country actually cheering for the economy to fail so they can regain power. Same when the other party was in control.
What is a 70 year old retiree in relative good health supposed to do?
Lockbox
No. of Recommendations: 2
What is a 70 year old retiree in relative good health supposed to do?
One of Ben Graham's later suggestions was to always be between 25% and 75% in stocks, if I was in the US I would read that as in the US market - whichever portion you think is best value at the moment, and somewhere in the 25-50% invested area. Treasuries pay decent rates just now, and having 50-75% "spare ammo" to use if markets fall a long way gives some compensation for the losses you might incur in that fall.
SA
No. of Recommendations: 6
I thought you completely withdrew from the US and want to stay that way?
I sold most of my positions, something like 93% of the tickers. I still have a few, mainly derivatives, close to market neutral in aggregate. The tentative plan is to wind those down over time, we'll see.
But in this context, I see no financial or geopolitical or moral problem betting against a US stock or index.
Jim
No. of Recommendations: 14
In the five US recessions since 1980, on average stock market valuations have gone from 16 to 11 times forward earnings, always ending no higher than 14x.
...
Can you confirm the data points you are using?...
So statement of "16 to 11" is interesting, the market is at 20x not 16. Is this peak to bottom? (historically)?The calculations weren't mine, I was quoting from an FT article which came out the day of my post so the market levels should have matched the comments, within a day. The main thing to note is the word "forward" earnings. Yes, they were talking about peak to trough drops.
My own calculations look at things more from valuation levels. A post of mine from four days ago:
https://www.shrewdm.com/MB?pid=673935954Precis: I have no idea what will happen, but IF valuations based on smoothed real earnings revert to what has been the normal valuation levels in the last 20-30-40 years, you'd expect the S&P to be at roughly 3650-4320 these days, a drop of about 26-38% from here. Emphasis on the "IF"--this is an observation of what the arithmetic says, not a market call.
Note also that this would only get things back down to "average". As you might expect, the market spends about half its time below the average valuation level, so bear market bottoms would be expected to be meaningfully lower than that.
Jim
No. of Recommendations: 3
IF valuations based on smoothed real earnings revert to what has been the normal valuation levels in the last 20-30-40 years, you'd expect the S&P to be at roughly 3650-4320 these days, a drop of about 26-38% from here. Emphasis on the "IF"--this is an observation of what the arithmetic says, not a market call.
Note also that this would only get things back down to "average". As you might expect, the market spends about half its time below the average valuation level, so bear market bottoms would be expected to be meaningfully lower than that.
Yep, if we have a recession-fueled serious bear market, the S&P 500 could find it's way down to a drop of 50-60%. We'd expect it to take a year or two for the bear to play out.
No. of Recommendations: 13
I believe you'd want to wait for 1) a relatively calm market day, and 2) where IWM is in the green that day.
Thank you for that advice. I'm totally expecting the market to be down 50% from its high in the next 6-12 months. So first thing first, I just sold my entire IWM position. It's not panic selling by any means. So far in the last six months I've gone in my main investment account from 100% stocks to about 75%.
Elan
No. of Recommendations: 13
In the five US recessions since 1980, on average stock market valuations have gone from 16 to 11 times forward earnings, always ending no higher than 14x.A search turns up several charts of S&P 500 Forward P/E ratio. The longer term trends look more significant. For example:
S&P 500 Forward P/E ratio
increases to peak of 24 around 19991231
decreases to trough of 10 around 20081001
increases to peak of 22 around 20201231
https://am.jpmorgan.com/us/en/asset-management/ins... GTR1 can calculate a S&P 500 Forward P/E ratio. This shows a similar curve with peaks in 1999 and 2021, and a trough in 2008:
Date PE
19991230 25 peak
20081121 9 trough
20210111 23 peak
PE did not change much during the 3 recent recessions, but Forward Earnings Estimates did:
month Earnings MktCap PE Recession Dates
200102 0.56 11.07 19.9 Early 2000s March 2001 – November 2001
200112 0.47 10.02 21.1
change -15% -9% 6%
200711 0.95 13.25 14.0 Great December 2007 – June 2009
200907 0.66 8.40 12.6
change -30% -37% -10%
202001 1.54 28.32 18.3 COVID-19 February 2020 – April 2020
202005 1.37 25.10 18.4
change -11% -11% 0%
Year end values:
Date [sumE] [sumMC] [EY] PE decreasedE decreasedMC
20250414 2.66 47.03 5.7% 18 --- TRUE
20241231 2.44 52.03 4.7% 21 --- ---
20231229 2.15 41.91 5.1% 19 --- ---
20221230 2.01 33.61 6.0% 17 --- TRUE
20211231 1.97 42.39 4.7% 21 --- ---
20201231 1.47 32.99 4.4% 22 TRUE ---
20191231 1.53 27.82 5.5% 18 --- ---
20181231 1.52 21.64 7.0% 14 --- TRUE
20171229 1.29 23.78 5.4% 18 --- ---
20161230 1.19 20.17 5.9% 17 --- ---
20151231 1.16 18.95 6.1% 16 TRUE TRUE
20141231 1.17 19.09 6.1% 16 --- ---
20131231 1.12 17.11 6.6% 15 --- ---
20121231 1.06 13.02 8.1% 12 --- ---
20111230 1.01 11.84 8.6% 12 --- ---
20101231 0.90 11.65 7.7% 13 --- ---
20091231 0.71 10.33 6.9% 14 --- ---
20081231 0.69 7.87 8.8% 11 TRUE TRUE
20071231 0.94 13.41 7.0% 14 --- ---
20061229 0.88 13.05 6.7% 15 --- ---
20051230 0.80 11.54 6.9% 14 --- ---
20041231 0.69 11.19 6.1% 16 --- ---
20031231 0.58 10.22 5.6% 18 --- ---
20021231 0.50 7.72 6.5% 15 --- TRUE
20011231 0.49 10.52 4.7% 21 TRUE TRUE
20001229 0.52 11.00 4.7% 21 --- TRUE
19991231 0.47 11.48 4.1% 25 --- ---
19981231 0.42 9.51 4.4% 23 --- ---
19971231 0.38 7.09 5.4% 19 --- ---
https://gtr1.net/2013/?~SP500_PEforward:h1::sp500....
No. of Recommendations: 13
Based just on current market breadth/health and trend indicators, FWIW I'm temporarily 0% US stocks.
50% investment-grade to high yield income funds / CEFs, increasing to 60%.
I'm a bit younger than you but it's absolutely fine to preserve capital until a clearer picture emerges. Who knows what Crazy-in-Chief will randomize to in 85 days?
FC
No. of Recommendations: 1
Hi FC .... I think you missed my earlier query about which CEF/Yield funds you are using.
Care to share?
Thanks!
AC
