The Bear Market awakens...

Nov 19, 2018 100 Comments

Update: while I do believe this is the start of a bear market. Tech has wiped off 1 Trillion in value over the last month and much of the tech sector is registering the most oversold readings in many years . So we are do for a big rally in the short term over the next several weeks probably (barring any crazy bad macro news).

I covered most of this a while ago....

https://www.teamblind.com/article/Close-to-the-Bull-Trap-phase-of-the-market-cycle-sNzEBUKZ

Trade War isn't ending anytime soon. This increases CPI (much more CPI increases coming next year). Tarriffs going up 250% in January. FED can't really back down...they can slow down a bit...but they are backed into a corner to some degree. They have 4.1 Trillion they have to dump into the market ontop of raising rates a bit. Trump's budget calls for a 1 Trillion + deficit per year...and the FED can't buy the debt up. All of these factors lead to higher treasury interest rates. Which makes the stock market much less appealing since there are much safer investment vehicles available that are now returning great guaranteed rates.

Beyond that...many companies in tech have been valued at 100x-300x multiples based on 150% YoY growth. Did you really think that would last forever? No company can grow 150% every year forever. Once growth slows the growth rate of the stock has to correct...extremely hard. If you are wondering NO we have not even gotten close to a full correction for the high growth sector yet.

Global markets in bear market. US market will enter a bear market fairly soon I believe. Tech led the way up and will lead the way down.

In the coming years...expect the the US treasury rates to impact the corporate debt market (bond market) which has ballooned. This will be the Big Short 2.0 (The Central Bank 0% Rate Bubble...The Poppening) and will cause the next financial catastrophe. I'll share insight on that in the future...but when that happens...look out. It could be worse than 2008...Hopefully not. Time will tell. In any case still have some time on that one. But it's time to pay attention.

The chart below is NVDA on a monthly time-frame. I have the volume profile up so you can see where the support is....we have a tiny bit of support at the $110 area...but most of the support is actually under $40. I'm showing you this chart to give you context for all the high growth tech companies who's stocks are up 100% YoY every year. When they go parabolic...they come down even faster. MY best guess on NVDA is that it pauses at $100 until the next ER...and then crashes down to $45. NVDA FAANG etc all great companies...but clearly their stocks were overvalued and now we're going to start to find out what the true value is. Price discovery can be painful. Good luck to all. Not financial advice.

The Bear Market awakens...

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TOP 100 Comments
  • Facebook Etiys
    Good charts again. I think we will see a repeat of dot com crash in the next year. But other asset classes will also go bust unlike dot com crash eg. Residential and commercial real estate will all go bust on a scale closer to 2008 than a normal recession. Junk bonds are going to be toast and have ballooned hugely. So it could be a worse hit to the economy, whereas dot com crash barely registered as a recession. If/Once the realization sinks in that there will not be a QE3, the shit will hit the fan. But this will play out over the next year or so. I'm not buying into any rallies in the meanwhile.
    Nov 19, 2018 26
    • Facebook Etiys
      You want to interview and test how smart you are? DM me.

      I am not trying to convince anyone. Everyone can invest their money how they see fit and as it suits their temperament etc.
      Nov 20, 2018
    • Capital One cofisblind
      I’m just saying, that is an absolutely terrible strategy that if you employed over time would surely be beat by purely passive investing. Setting a threshold for entry after a stock is a certain level below ATH is fine, the opposite is ridiculous.
      Nov 20, 2018
  • New / Eng uhYr23
    OP, I'd love to create and analyze these graphs myself. Now I just have to believe (or not believe) in people's analysis, while I can't tell if they're right or wrong. The problem is as a fellow dev I'm too busy leetcoding! Do you have suggestions or source/blogs/books that help me get to speed?
    Nov 19, 2018 12
    • New / Eng uhYr23
      We are in parabolic range now?
      Nov 19, 2018
    • New / Eng uhYr23
      The nvidia you posted is.
      Nov 19, 2018
  • Amazon ly4307
    You’re spot on. We have been artificially fueling an unsustainable market, the low interest rates, 3% unemployment and stock gains can’t continue. If it feels like a bubble, it’s because it is.
    Nov 19, 2018 1
    • OP
      ^^ This lady gets it.
      Nov 19, 2018
  • McAfee JohnMcPee
    Is it time to get schwifty?
    Nov 19, 2018 1
  • Microsoft TegridyBud
    You're just showing a bunch of graphs with lines connecting them . Do you even know what any of that shit means ?
    Nov 20, 2018 11
    • Lending Club @@@@@::::
      From 7000 to 5000 - possibly 3500? I just crapped in my pants, hide cash under bed?
      Nov 20, 2018
    • Facebook Etiys
      No just keep it in money market funds or short term treasury funds :-) as close to hiding under bed as possible.
      Nov 20, 2018
  • LinkedIn
    LCFTW

    LinkedIn

    PRE
    Goldman Sachs
    LCFTWmore
    FB, MSFT, etc actually have pretty low P/E tho
    Nov 19, 2018 2
    • Cisco randynash
      Msft is good.

      FB will evaporate like friendster and orkut
      Nov 19, 2018
    • OP
      💯
      Nov 19, 2018
  • Symantec O (1)
    Tech & Energy is in bear market. Rest of the sectors seem to be well off. Time to buy utilities with good dividends?
    Nov 19, 2018 2
    • OP
      Not sure but yes I’d say you’re better off with value and dividend stocks than tech right now. Short term treasuries are a good bet. Cash is a good bet.
      Nov 19, 2018
    • Oath / Eng lol 😂
      What utilities do you recommend?
      Nov 20, 2018
  • Intel / Other 10% ESPP!
    ITT: a bunch of fancy looking graphs engineers don't understand
    Nov 19, 2018 1
  • We’ve been running without pants since at least 2014. I really don’t get why anyone would be surprised now.

    As much as one would like to believe given the wizardry of modern day monetary policy sophistication, money doesn’t fucking fall out of the sky magically.
    Nov 20, 2018 0
  • Amazon Northman
    MSFT is solid. FB is a value trap. AMZN looks pricey still but I think has growth and cash flow likely to justify current value. Just may take a while to see 2000 a share again.
    Nov 19, 2018 0

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