Prices, Inflation/Deflation, Interest Rates & The Fed

Eusebius Erasmus

Pelican
Orthodox
Most of the companies she buys earn nothing. They are extremely long duration assets. The ones that should be decimated by very high inflation.
Her entire business is a giant bet on persistant low inflation.
She will blow up at some point.


As I've already alluded to, she's a short-term investor whose technical analysis works in limited settings.

Michael Burry and other value investors will always win in the end.
 

Max Roscoe

Pelican
Orthodox Inquirer
Value investors always win *under a sane and logical financial system*

What we are seeing now is a departure from logic and accepted norms, and increases in stock manipulation, fraud, and insider trading.

Tesla being valued at 351 times its earnings, when stocks historically trade around 15 times earnings, is but one example (they also sell a fraction of the number of vehicles of any other car company, and seem to have trouble producing more).

The number of stocks whose values are higher today than a year ago, despite barely operating during the pandemic, is another.

Toyota, who has slashed its car production almost in half (while still retaining its full workforce and manufacturing capacity, with their mostly fixed expenses), being worth over 40% more than a year ago, is another.

In other words, I don't know what to believe in today. Sure, people like Warren Buffet have models that are sound, and work well, but the system is broken and there are no rules. If cutting 40% of your sales doesn't make your company worth less, then how can you make any rational decisions about investing?
 

vstk

Pigeon
As I've already alluded to, she's a short-term investor whose technical analysis works in limited settings.

Michael Burry and other value investors will always win in the end.
We partially agree. I think Michael Burry is really good at finding value stocks and that value investing is a more robust way to make money if you are going to be in this business for many decades. Cathie Wood always seemed like a dummy to me, only hearing her speak made me feel like shorting Tesla. But as we know, even the dumbest person is going to get it right once in a while, even if it is not for the right reasons.

However, I think of Cathie Wood more as a long term investor than Michael Burry. Her portfolio turnover is significantly lower than Burry's. She is betting on revenue streams far into the future.
Michael Burry usually sells his position within a year. He only buys when technical analysis shows a strong support area and sells out if price breaks down below that area. In that sense, he is more of a trader than an investor.
He buys companies that look like road kills whose fundamentals are actually not that scary and sells them as soon as the market finds out the price decline was overdone. Just like the early Warren Buffett.

Not really the subject here but I thought I'd give my view on this.
 

Blade Runner

Ostrich
Orthodox
Value investors always win *under a sane and logical financial system*

What we are seeing now is a departure from logic and accepted norms, and increases in stock manipulation, fraud, and insider trading.

Tesla being valued at 351 times its earnings, when stocks historically trade around 15 times earnings, is but one example (they also sell a fraction of the number of vehicles of any other car company, and seem to have trouble producing more).

The number of stocks whose values are higher today than a year ago, despite barely operating during the pandemic, is another.

Toyota, who has slashed its car production almost in half (while still retaining its full workforce and manufacturing capacity, with their mostly fixed expenses), being worth over 40% more than a year ago, is another.

In other words, I don't know what to believe in today. Sure, people like Warren Buffet have models that are sound, and work well, but the system is broken and there are no rules. If cutting 40% of your sales doesn't make your company worth less, then how can you make any rational decisions about investing?
This is correct, but the intelligent (and probably wiser) like Burry realize that they are playing in a type of rigged game as well. So they just need to be aware of that on some level so as not to get crushed/lose solvency (as per the common trope). That's what Erasmus is referring to, they just make sure they stick around long enough and they will win out in the end. And likely with a huge win since the anti-fragile plays result in HUGE gains, they're just unpredictable (at a given point) and rare.
 

Blade Runner

Ostrich
Orthodox
Cathie Wood always seemed like a dummy to me, only hearing her speak made me feel like shorting Tesla. But as we know, even the dumbest person is going to get it right once in a while, even if it is not for the right reasons.
What's going on here is our skepticism of the world, and in particular, in social garbage and affirmative action type endeavors. Of course, the reason the people need help is largely because they are less competent, but then it doubles in creating doubt because everyone is aware of the fact that you can't now differentiate the rare person of class X from the rest since all were given stuff they never deserved. The Carly Fiorinas of the world and (insert) POC are too many to mention. They're just mimickers and social animals, which is what business/finance became when the economy started being paper pushing and Wall St social clubs.

The people who you know are legit that buck the trend (like Lyn Alden) have unmistakable characteristics that make it obvious how different they truly are, because they remind you of smart men.
 

vstk

Pigeon
The people who you know are legit that buck the trend (like Lyn Alden) have unmistakable characteristics that make it obvious how different they truly are, because they remind you of smart men.
She definitely sounds like a man to me.

I sometimes wonder how nice it would be to have a spouse like that - truly original thinking, doesn't care about social cues and peer validation. Then I remind myself she probably doesn't make tasty homemade dinners.
 
Why would you put so much emphasis on “traditional” ratios for a growth and industry birther like Tesla? Clearly if they corner the EV market that’s huge future cash flows. Thus people are betting on that.
 

Max Roscoe

Pelican
Orthodox Inquirer
Why would you put so much emphasis on “traditional” ratios for a growth and industry birther like Tesla? Clearly if they corner the EV market that’s huge future cash flows. Thus people are betting on that.
Tesla is not trading on any sort of ratio.
Tesla in 2020 was a $50 stock. What exactly is the business rationale for the company being worth more today than it was at the start of the pandemic? Note that major product announcements, including the truck with the fake smashable window, the model S, the expansion of charging stations, etc. all had a relatively minor effect on the company's value, but whatever covid is doing, it sure is great for.... an electric car company!

If anything, I would expect Tesla is facing the same sort of production issues Toyota is, and the stock should be worth 20% to 40% less today than in 2020.

I'm sorry but "people got really excited in March, 2020 that it might be a really dominant car company one day, which they didn't really consider in the 7 years before) is just not believable.

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You have to wonder if the Fed knows it's full of it. Here China warns things aren't going so well (and anyone following global markets can see how fragile things are). What does the Fed want to do? Hike those rates! Everything is fine! EVERYTHING IS FINE!


Meanwhile, Chinese equities drifted lower after what Bloomberg called was a "dour warning" from Premier Li who cautioned about “downward pressure” for the economy. Hang Seng falls as much as 1.2% after tech shares resume slide.

Question for the thread: if the Fed controls rates...how can the rates be below their targets??????
 

budoslavic

Eagle
Orthodox
Gold Member
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Max Roscoe

Pelican
Orthodox Inquirer

Pure evil. A nation's economic advisor openly stating they will devalue your money by a third.
You think this was the kind of thing Thomas Jefferson had in mind about the tree of liberty?
 

Thomas More

Hummingbird

Pure evil. A nation's economic advisor openly stating they will devalue your money by a third.
You think this was the kind of thing Thomas Jefferson had in mind about the tree of liberty?
This is highly insincere on the part of the fed. 33% inflation over 20 years would be very low.

I am expecting 100% inflation over the next 3-5 years, such that the national debt is effective cut in half as a percentage of GDP. I expect them to keep interest rates artificially low compared to inflation during this time.

Make sure to keep your money in real assets over the next few years. Also, any low interest debt you have now is likely to be paid off with future inflated dollars. No matter what you do, don't keep money as cash, or it is likely to lose a lot of value very quickly.
 
Highest inflation since...1990!!!!!!!! After 2 decades of missed inflation targets no less. The talk about gold surging today ahead of the BIGGEST CPI EVER was also a mockery since it's at 5 month highs, hardly a breakout to 1970s style inflation. What's that? Rates went DOWN with the CPI print? That doesn't sound like the market is expecting across the board inflation.

Hopefully most of you are waking up to being lied to. There still hasn't been any inflation because there hasn't been any money printing.


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