Stimulating stimulus.

[786Trader]

The markets love stimulus.  Talk of stimulus is stimulating. It excites the markets, brings them up, perks them up, they rise like a spring tide with even the idea of stimulating stimulus. Oohh stimulus is soo exciting I know markets will rise. The markets are saying " give it to me", Congress is saying "I've got it, You want it? Yes, you know you do" Predicament Trump says "I gonna give it to you and it's going to be real big!" Jerome says, watching on, " Go on give it them "  ..  coy Mitch says "ooh you want too much but I'm gonna give it to you"...And so the markets rise with even the mention of the word Stimulus. The markets foment and rise in anticipation....and promises are made...and the markets rise. And rise. Until investors realise (too late) that they have bid the market up so high that it's suddenly over valued and overbought! Again.

Reminds me of particularly unsuccessful nights in my youth when finding an attractive, potential partner and flirting and hoping, but at the end of the evening wholly and completely failing to get laid. Such is the Mitch, Nancy and Donny love in. Perish the thought, it's enough to put one off one's breakfast. Even if they did get it on now and sign a deal, it would be like a **** of shame, a liason of ludity, a sham shameful **** that all parties come to regret.  "We did it for the union" even if the very idea of unity is anathema to them. I fear they have missed their opportunity for stimulating stimulus. No big bribes for Thanksgiving, for black Friday, for the election. Maybe a bit more talk, but sooner or later the markets and electorate know they are not going to get lucky any time soon. After the election maybe, which may not be as straightforward as appears now, with perhaps a split senate and an uncertain result, as there is no way Teflon Don will be going easy into the night (even if he has lost by 6 million votes). 

Maybe it's better to dream of stimulus and politicians doing the right thing for their electorate..... I did say dream....

[HMB]

2 hours ago, 786Trader said:

Until investors realise (too late) that they have bid the market up so high that it's suddenly over valued and overbought!

Interesting post!

I tend to agree with you, but let me just play the advocatus diabolo here for the sake of progressing the discussion:

Which market are you referring yo - NYFANG +MSFT (and maybe TAN and UBER etc.) or the rest of the world?

Define overvalued.  Financial conditions are unprecedentedly easy across the globe - so what to compare current levels of P/E, EV/EBITDA etc. with?  To me this market seemed overvalued since 2018 the latest...

The alternative narrative is, that what's going on is simply everyone trying to get a piece of ownership in an obvious future pie, to be grown by a massive change of our way of life due to convergence of various fast-progressing technologies.  Wouldn't be the first time....  The stimulus theme is certainly more than a side show, and accelerated  dynamics, but it didn't create the underlying trend.  Hence its absence alone would not end it.

negative earnings for a while would, eventually, though, I guess... 

how much do Apple, Microsoft, Facebook and Tesla earnings depend on stimulus?  (genuine question - I have no idea)  

[Kodiak]

1 hour ago, HMB said:

Interesting post!

I tend to agree with you, but let me just play the advocatus diabolo here for the sake of progressing the discussion:

Which market are you referring yo - NYFANG +MSFT (and maybe TAN and UBER etc.) or the rest of the world?

Define overvalued.  Financial conditions are unprecedentedly easy across the globe - so what to compare current levels of P/E, EV/EBITDA etc. with?  To me this market seemed overvalued since 2018 the latest...

The alternative narrative is, that what's going on is simply everyone trying to get a piece of ownership in an obvious future pie, to be grown by a massive change of our way of life due to convergence of various fast-progressing technologies.  Wouldn't be the first time....  The stimulus theme is certainly more than a side show, and accelerated  dynamics, but it didn't create the underlying trend.  Hence its absence alone would not end it.

negative earnings for a while would, eventually, though, I guess... 

how much do Apple, Microsoft, Facebook and Tesla earnings depend on stimulus?  (genuine question - I have no idea)  

Lets first see how the election goes (president and congress) before we price in future earnings

"It is one way Mr. Biden hopes to reverse President Trump’s 2017 tax cuts and extract money from corporations if he wins the presidency and Democrats take full control of Congress. The argument for higher corporate taxes resonates with many voters."

https://www.wsj.com/articles/biden-tax-plan-targets-profitable-companies-that-pay-almost-nothing-11595848477

[HMB]

9 minutes ago, Kodiak said:

Lets first see how the election goes (president and congress) before we price in future earnings

"It is one way Mr. Biden hopes to reverse President Trump’s 2017 tax cuts and extract money from corporations if he wins the presidency and Democrats take full control of Congress. The argument for higher corporate taxes resonates with many voters."

https://www.wsj.com/articles/biden-tax-plan-targets-profitable-companies-that-pay-almost-nothing-11595848477

good point - mainstream narrative recently seems to be that market expects tax hikes later, stimulus first...  I believe the technology convergence/growth story (well described in "The Future is Faster Than You Think", Diamandis/Kotler) dominates both, though, and I can't see Biden/Congress damaging US Tech dominance too much...  (they're needed to stay ahead of China..)  however I of course agree these (taxes, also monopoly issues...) are factors potentially creating significant volatility    

[dmedin]

Apparently the 'free markets' need lots of free money from government to keep them going.

Your average human being?  They can just muddle on with redundancy and mounting bills.  Who cares about human beings?

[dmedin]

1 hour ago, Kodiak said:

"It is one way Mr. Biden hopes to reverse President Trump’s 2017 tax cuts and extract money from corporations

 

This is another example of how corrupt the mainstream media is.  Biden actually only wants to partially reverse Trump's tax giveaway to billionaires and huge corporations.  The effective rate of tax will still be lower than it was under Obama.

F*k the MSM and everything they stand for.

[HMB]

5 hours ago, dmedin said:

The effective rate of tax will still be lower than it was under Obama.

interesting

[HMB]

5 hours ago, dmedin said:

Apparently the 'free markets' need lots of free money from government to keep them going.

Your average human being?  They can just muddle on with redundancy and mounting bills.  Who cares about human beings?

...the average human being in the so-called developed countries wears 100-dollar T-shirts with names of millionaires glorified for their soccer-playing skills on them, buys a half-square-meter "mobile" phone with a glass surface case to carry outside and then gets sad about scratches, owns a 150mph top speed car in a country were the limit is 70, begs night club bouncers for being squeezed into a drunk, sweaty crowd in a tiny room with beats at health-threatening, unbearable volume, fights at the crowded bar to get over-priced drinks, drops their trash everywhere they go, drives like an a**h**e...  blames foreigners for their "misery" and votes for Brexit.  sadly, Nietzsche comes to mind here...  why care about the AHB...?

(obviously deliberately provocative) - hoping for a convincing counter-argument, save the day dmedin!

[dmedin]

1 hour ago, HMB said:

...the average human being in the so-called developed countries wears 100-dollar T-shirts with names of millionaires glorified for their soccer-playing skills on them, buys a half-square-meter "mobile" phone with a glass surface case to carry outside and then gets sad about scratches, owns a 150mph top speed car in a country were the limit is 70, begs night club bouncers for being squeezed into a drunk, sweaty crowd in a tiny room with beats at health-threatening, unbearable volume, fights at the crowded bar to get over-priced drinks, drops their trash everywhere they go, drives like an a**h**e...  blames foreigners for their "misery" and votes for Brexit.  sadly, Nietzsche comes to mind here...  why care about the AHB...?

(obviously deliberately provocative) - hoping for a convincing counter-argument, save the day dmedin!

 

 

That's true of a lot of them.  Don't believe what the media tells you, though.

A lot of these people, you'll find, had rough upbringings and lacked opportunities in life.  The kind of opportunities that the likes of Boris Johnson took for granted.

A lot of them are actually fundamentally good people.  Some of them even work hard and do indispensable jobs.

That's more than can be said for those obnoxious c&nts in the City of London.  We all know that they are fraudsters and swindlers, defend their rich masters, consider their clients stupid and even utterly despise one another.  They lead unfulfilling lives, and are constantly competing with each other, backstabbing and constantly attacked by feelings of guilt and jealousy.

I'm tempted to think that Tories aren't even human.

[dmedin]

Only the Tories would take away job support and impose hardship on people at the same time as forcing people out of work.

They are truly subhuman sc&m.

And the wealthy barrister, 'Sir' Keir Starmer, is exactly the same as Boris Johnson.

https://uk.reuters.com/article/uk-health-coronavirus-britain/more-uk-cities-may-face-stricter-lockdown-but-at-what-cost-idUKKBN2700NZ

Edited October 15, 2020 by dmedin

[786Trader]

19 hours ago, HMB said:

Interesting post!

I tend to agree with you, but let me just play the advocatus diabolo here for the sake of progressing the discussion:

Which market are you referring yo - NYFANG +MSFT (and maybe TAN and UBER etc.) or the rest of the world?

Define overvalued.  Financial conditions are unprecedentedly easy across the globe - so what to compare current levels of P/E, EV/EBITDA etc. with?  To me this market seemed overvalued since 2018 the latest...

The alternative narrative is, that what's going on is simply everyone trying to get a piece of ownership in an obvious future pie, to be grown by a massive change of our way of life due to convergence of various fast-progressing technologies.  Wouldn't be the first time....  The stimulus theme is certainly more than a side show, and accelerated  dynamics, but it didn't create the underlying trend.  Hence its absence alone would not end it.

negative earnings for a while would, eventually, though, I guess... 

how much do Apple, Microsoft, Facebook and Tesla earnings depend on stimulus?  (genuine question - I have no idea)  

Like the alternative position. By markets I refer to the Dow which (to my mind) has looked over valued when it hit  27750 last year. Why overvalued? By historic measures such as P/e and EBITA. Really showing my age ,I know.

Agree this crisis has precipitated the convergence of pre existing tech into a new work dynamic and it is understandable that people and companies want a piece of it. However, one should examine the financials and bottom line. For example has Apple's profit increased commensurate with its share price over the last year? Or Facebooks? Or  Tesla? Tesla being a good case in point. Tesla's profit are contingent on govt largesse, in the form of green subsidy per vehicle. Share price has increased 400%+ in 10 months, but have profits? Is Tesla the only manufacturer of EVs? Will it continue to maintain market dominance? How reliant is Tesla on Elon Musk? Is Tesla truly disruptive tech?

I agree Tech  and Data will be the main economic drivers  of value going forward. But also suspect their market dominance will be tempered by regulation, both in the USA and abroad. This will affect profits as the FANGs become viewed more as utilities then innovative tech firms. 

It is entirely feasible the markets will push on as equity values have historically done, especially so in the last decade. My point was the markets and especially the Dow have over compensated, as exchanges generally do, and such is the case now. In a virus free environment, with near full employment , my argument loses gravitas, but I tend to try and look objectively at the present. The present market conditions suggest the need for stimulus to keep the engine of commerce moving and stimulus is not what it is getting. Hence the loss of confidence and fall in price of the Dow.

[dmedin]

3 minutes ago, 786Trader said:

The present market conditions suggest the need for stimulus to keep the engine of commerce moving

 

That's a very peculiar way of saying that the government needs to help millions of jobless people with no savings who are on the brink of homelessness.

[786Trader]

Fair point Dmedin. I was speaking from a market perspective.  Stimulus is  direct q/e, without the middleman. Yes the people of the US really need it now, but this is an election year and this is politics, we all are aware that politicians rarely give a **** about actual normal people, so it should be of little surprise  they are want to be forthcoming with the folding green stuff (or credits in modern vernacular) needed by all of those actual voters and non voters. It is a game of spite and malice played with real people's lives. In truth, the markets don't give a **** about people's lives, it is not the function of a market to actually give a ****, that should be the job of elected politicians who are supposed to have a mandate to act for the people they represent.

I know, pure fantasy....

[dmedin]

Keep being told that there are trillions of dollars sloshing around looking for yield.  Which means 'investors' already have lots of money.  They're just keeping it in cash.

Any suggestion of taxing some of their trillions and using it to stimulate aggregate demand is billed as 'raiding' or 'stealing' from the wealthy.

So we know who is in control of the system.

Edited October 15, 2020 by dmedin

[786Trader]

When was it ever not  thus? They are holding cash as they sense the next down turn and realise equity is too risky. So holding 20- 30% in cash makes sense in tumultuous times. Also, how can you tax it if it is constantly on the move? Obscenely wealthy companies, individuals and families do not like paying tax as they fundamentally distrust govt  (comes from bribing so many of them, I suppose). Also, holding cash means that when bargains come along, the money is there to  put a down a deposit, leaving one free to borrow the rest at just over zero% interest. Win win. Nice work if you can get it.

[HMB]

4 hours ago, 786Trader said:

This will affect profits as the FANGs become viewed more as utilities then innovative tech firms. 

important scenario to consider, I think

 

4 hours ago, 786Trader said:

historic measures such as P/e and EBITA.

yes, they are extreme - not relative to UST yields, though - but that's exactly your point about stimulus

 

3 hours ago, 786Trader said:

holding cash means that when bargains come along, the money is there to  put a down a deposit, leaving one free to borrow the rest at just over zero% interest.

like the guys buying late March - looks like such opportunities come around every decade or so..

 

[HMB]

...can't help thinking from time to time that this might have played a role for decisions about asset price-inflating stimulus measures..:

"Even before the record first-quarter losses, public pension plans were $4.1 trillion short of the $8.9 trillion they will need to cover promised future benefits, according to the Federal Reserve.

Decades of overoptimistic return assumptions, insufficient pension-fund contributions and lengthening lifespans created massive shortfalls in public pension funds that the 11-year bull market didn’t cure.

Over the past decade, public pensions had ramped up stockholdings and other risky investments in an effort to meet aggressive return targets that average around 7%, according to a survey by the National Association of State Retirement Administrators.

For the 20 years ended March 31, public pension-plan returns have fallen short of that target, however, returning a median 5.2% according to Wilshire TUCS."

https://www.wsj.com/articles/public-pension-fund-losses-set-record-in-first-quarter-11589240175  (May 12)

[dmedin]