Posted on 03/23/2024 7:13:51 AM PDT by millenial4freedom
Stock have notched a string of record highs this year, driven by a tech frenzy and high federal spending that have blotted out all else, Bill Gross wrote in his latest investment outlook.
It's these factors that have spurred the S&P 500 up over 20% since mid-2022, even as interest rates tightened aggressively in the same timeframe, sending Treasury yields higher.
And the trend isn't going away anytime soon, he asserted: "Buckle up for excessive exuberance."
Typically, bond yields will decline ahead of stock euphoria. For instance, the Nasdaq 100 increased twelvefold after the 10-year real rate fell from 2% to negative 1% between 2004 and 2022, he noted — though other factors also drove the gains.
(Excerpt) Read more at msn.com ...
I can see AI manipulating the market place to drive stocks up so people buy them, so venture funds can cash in at high points and then let the stock crash so they can buy it up again.
The only defense to this is to find stocks that have solid value behind them and hold onto them and take the dividends.
Headline doesn’t quite agree with the article. He’s buying the 2yr Bond, shorting the long end. I’ve been sticking with the 3-6 T-Bills for about 18 months. I’m going to start moving into the 2yr as well.
Inflation is heading up again, looks like one rate cut at best this year. We’ve seen this movie before.
I say this (above) because I have been an AI investor for several years and have had a chance to watch how the market responds to its development.
The market sees that there is significant value to AI stocks like Nvidia and AMD, but it has difficulty understanding how these stocks' values are not a measurable function of foreseeable earnings. Both Nvidia and AMD are more a function of the estimated future demand for AI chips and platforms (the AI market) than for future earnings.
That's why Nvidia (more than AMD) moves 3 steps forward and 2 steps back...and sometimes even drops when very positive earnings results are reported (and this isn't just because of investor disappointment in earnings reported...it is often because investors don't know how to interpret the results).
You can download the daily stock prices of AI stocks at Nasdaq.com. The AI market is much too large and complex to be manipulated by anyone.
If you analyze stock price movements in comparison to the market in general and to events that affect the market, I think you'll see that your theory isn't correct.
These are the “bright, shiny new thing” industries that attract a flood of capital from investors who are chasing gains without any regard for the fundamentals of the companies they are buying.
I never said AI can be manipulated, but the stock market can be manipulated by AI. Blackrock makes money on the margins. They only need to push a stock up or down by a small bit to make a lot of money and they can do that continuously.
The average person cannot use AI to the same point that the giant venture firms can. The average person is almost helpless on that point.
So, Bill Gross is generally avoiding AI related stocks and not buying bonds. Where’s he putting his money in? CDs?
“The only defense to this is to find stocks that have solid value behind them and hold onto them and take the dividends.”
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Yes. Get paid while you patiently wait for them to hopefully rise, and enjoy the tax advantage of qualified dividends.
However, some stocks that undulate can be profitable trades if you can find them. But you’ll generally wind up paying tax on short term gains so then there’s that to consider.
“I’ve been sticking with the 3-6 T-Bills for about 18 months. I’m going to start moving into the 2yr as well.”
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I’m shorter than that with floating rate treasuries. But to each his own.
Best of luck to you.
“...without any regard for the fundamentals of the companies they are buying”
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How very true. And they wonder why they don’t make any money.
He’s in 2year Bonds while shorting the Long End of the Bond curve. That’s just Bonds, he’s probably in many other things too.
Thanks, and same to you.
OXSQ, SJT and SPOK.
Stocks have always been risky, but I got out just before the dot-com bust and never looked back. It became just plain gambling, IMO. And yes, I could have made a killing had I stayed in. That was also common knowledge in September of 1929 too. But October was a comin’.🤣
I remember, the december before the dot-com bust, a friend talking about his stock portfolio and how amazing it had been doing. I remember thinking of that investor just before the crash of 1929 deciding to get out when his shoe shine boy was talking about his own stock portfolio doing so well.
I got out just before the bust, but to be honest, I had to because of divorce fallout. I even paid the penalty for cashing out my 401K, but I still made out a lot better than if I’d hung on to it when the bust came (unless I hung on to it for another couple of decades, of course).
bttt
I agree on the excessive exhuberance stocks are getting, mostly on projections/belief of increased revenues and profits TO COME (over time) from the use of AI. THAT is also noticeable because the DOW and S&P indexes have risen mostly from stock value rises of just a few big companies that are heavy weights in the index, mostly “tech” related.
The truth is that belief right now is hype and yet to materialize greatly. It may, or it may not. Only a very few companies right now, like Nvidia, is actually, demonstrably seeing revenue and profit growth from AI. That is because they are not on the end-user side of AI but on the AI chip making side. Yes they are benefitting from the surge in attention to AI with every company wanting to build their internal AI processes. Their stock holders may be greatly disappointed if time proves the current atmosphere is one of excessive exhuberance.
Sadly, I tend to agree and hope I'm wrong.
Just re-fi'd an auto loan a couple of days ago, as after looking at data and sentiment, decided that re-fi was better sooner.
I think the market the last couple of days is coming to grips with the increasing probability that there will be no rate cut in the spring (among other factors).
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