We cannot say for sure man. Lot of these companies financed in low interest rate. We have to wait for 2024 too see how deep the bubble is in tech.

I’m not saying they’re going to happen.

Everything you just described has already happened.

Inflation and an actual war do not go in the opposite direction. I think we can both agree on this. If market senses war 5yr breakevens will go up and cause bond yields to go up as well. Fed will be forced to do yield curve control if 10yr starts going over 6%.

If you look at any war rhetoric man. There has been a skyrocketing inflation with sky high yields. The reason being Fed started printing money for wartime financing. This is the only reason inflation goes up. And yah i totally get your point. War causes stock market to go up. But you need to also remember markets usually drop before the start of the war. That means market has to has to drop right now and then when war officially announces we go in the massive bull run that no one will ever imagine.

Now lets dissect this bull run of war coz i have my some doubts. Maybe you can help me out. If you look back at history. WW1 and WW2 these two wars had PE range 10-20 and when inflation comes around suppose 10%. You used to subtract high PE - inflation rate. And then it was basically the EPS boost that caused the stock market to go up massively. So now lets put this Peter Lynch theory to test.

Scenario 1 : War in 2023 itself. High PE 25 - Inflation rate i.e. 4-5% range. PE will never go above 20. Now you can put your favorite EPS here. Even with 250 you're maxed out at $5000.

Scenario 2 : War in 2024. Inflation will be 2-3%. Max PE 22. Lets say EPS grow to 270 which btw is too high. SPX will be maxed out at $5900.

I mean is this the bull run you want ?

Now circling back to Biden bringing manufacturing in Usa. You do know right that the Usa has to find workers for that. Thats inflationary and yah ofc it will boost gdp and keep labor market strong. But in all of this youre forgetting one major important detail. The way Usa worked in all of the past decade is because of tech and not manufacturing. Manufacturing is what caused the stock market to go in a massive bull run in Ww1 and Ww2 but this time its tech. Tech thrives on low inflation and interest rates and hence this boosted the stock market to a 14yrs of bull run. Its the top 6 tech companies that has more % weighted to index. So tech has to go bust when a lot of these companies will have to refinance in 2024 and that would mean the biggest stock market crash in history somewhere around 2023-24. Timing it will be so so hard. No one in this planet is that good. And after tech goes bust then we can have your favorite bull run of manufacturing. Also don't forget that a lot of these tech workers are actually immigrants who mostly come from Asia. 70% of people in Silicon valley are from rest parts of the world. I mean it would be quite funny if those workers dont protest a/g war and simply just do what they are told.

Overall result : I dont know whats going to happen but i can tell you one thing for sure. If we are headed to inflationary world caused by manufacturing coming back home, labor markets strong, gdp strong and war then my friend youre asking for a tech bubble to pop somewhere in 2023-24. Nasdaq and S&P500 will go down. I cannot say the same about Dow Jones coz its industrial average. Housing will not pop coz inflation will remain higher. Metals, Energy and Oil will go higher as well. There is going to be a bull market but not in tech.

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Then you’re also dealing with time decay. You may not break even despite higher trending IV if time to expiry offsets.

bullgang

You’re talking to 0dte yolo mfs here to be fair.

I do think you drive home the right points right now. I’d add that the push since late last year in equities is driven by excess global CB QE, which appears to have downtrended since mid January. I think this recent departure of equities pricing vs bond yields and liquidity conditions is probably just FOMO / short covering.

Eat my dongus you fuckin nerd.

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>Fed aint doing that coz it thinks job market is still strong and inflation is sticky

I'm not trying to hound you but I think you might be missing a piece of information.

Powell gave an interview shortly after his last FOMC speech. They had new numbers come out and he was talking at some event.

What he said was that they didn't think there was a wage/price spiral anymore, they didn't think inflation was sticky anymore, because they had not taken into account the border closure preventing immigrant workers getting in (I think there was an unspoken 'illegal labor' implication here, but that's not the point really).

And he was VERY chipper about it but said they would keep an eye on the numbers.
I'm curious if you saw this interview of his or if you perhaps missed this (there is so much info out there, it's easy to miss)

It's literally sitting at $407. If it drops $1 tomorrow you already lose.

Ahh.. duh.. I just looked up margin rate… costs more than bond yields

Eat my dongus you fuckin nerd.

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Yah i get it. But i also know we had the 2nd greatest wipe out of all time in the past decade. The first one happened when rates were at 0%. So from my pt of view i don't really see another one coming.

As for your arguments about 2005-08 times. If you look back at those times the PE ratio were basically trading at 16-18. Then Fed cut rates in 07 and PE skyrocketed but so did the equity risk premia and therefore market had already topped out in 2007 and we got the "Fed pivot" crash. The time around we are already there at 18-19 PE levels. We just need Fed to cut rates and blow up the Erp. But Fed aint doing that coz it thinks job market is still strong and inflation is sticky. So they will hold those rates. Meaning a low PE will meet a low EPS somewhere down the line and then Fed will be forced to pivot. But i think it will be too late by then. The damage will be more severe by 2024.

I think that inflation is already dropping and it will steepen. I’m seeing the rhetoric shifting away from inflation at that point and more aggressively towards war.

If inflation is handling itself then the market will need a reason to rally or else we risk subways stagnation.

While the U.S. economy might not have wanted to pull that lever, two other major economies are struggling and are positioning.

I think the WH tapping the more dovish fed Governor is a signal for the fed to lean aggressive in the short term, to get things done.

Circling back to your EPS estimate, then, i would disagree because the war positioning would rally the market.

The U.S. had already positioned for stateside manufacturing as of last September so that’s why i think the bearish sentiment is misplaced.

We can remain overvalued (eps) for an extended period of time in the ramp up and then justify in hindsight that we achieved ‘more accurate’ valuation because production increased.

We are in this euphoric bubble that just won’t pop.

Prior to Powells recent statements i would be agreeing with you on the majority but I’ve had to switch my views as the situation changed.

1d correlation coefficient between SPY and 10Y was 0.7 just 3 weeks ago

now it's around -0.4, which makes sense bc the correlation shouldn't be that high at medium and long term

weekly chart is still positive around 0.6

the correlation has its mean reversion as well so it tends to correct

I remember when I had my first beer

I love you too.

So then it means a low PE ratio of below 18 will meet a low EPS somewhere down the line in range of 210-200.

What's going on there ?

Eat my dongus you fuckin nerd.

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Dude bond prices are +ve correlated with stock price. That means when bond go down i.e. bond yields go up then stock market should drop as well. This is what it means to be +ve correlated in high inflation which it clearly isn't rn.

And yes i agree gold was overbought af but so is stock man especially on the tech side.

As your friend Steve said " Paradigm shift takes time. People don't easily give up on their principles of investing " Hence i believe that one day market will come up to their senses that rates are actually at 5% (could go 6% if sticky inflation theory is correct) not 0%. That means something for equities valuations.

Thanks man.✌️

>Look at this shocking divergence

I don't see any shoking divergence at all between those assets

1. Bonds are positively correlated with stocks in high inflation scenarios

2. gold was overbought af, that correction was indeed... plus DXY on the other side

Yah man. season 2 has been horrible since middle. 😓 Opening episodes were great Oct 2nd week being the perfect bottom.

Now my only hope is finale doesn't disappoint. Thanks for still trusting me man. ✌️