Why I think 2021 will be a blockbuster year for stocks

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Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Wed Nov 11, 2020 11:40 am

This is something that keeps coming to mind lately, and I don’t see a lot of people talking about these points. So here is why I think 2021 will be a blockbuster year for stocks, with S&P going to 4,000+. There is a pocket where potential weakness can still happen between now and about Feb, but with Nov-Feb also being the seasonal best time of the year I’m not so sure there is a lot of risk in that timeframe.

1) YoY economic and earnings statistics are going to look phenomenal starting around Feb 2021, due to the extremely low bar of 2020 for comparison.

2) Vaccine is likely in 2021.

3) Savings rate has increased massively this year. Once we have a vaccine and people feel comfortable, expect a record spending splurge, especially in the beaten down travel sector, bringing savings back down to more normal historical levels.

4) General sentiment in society will improve post-vaccine, and improved general sentiment = higher stocks.

5) Second stimulus package likely which will help speed the recovery along.

6) Large infrastructure spend likely under Biden, which will create jobs, as well as the government providing wage competition that the private sector will have to compete with (i.e. decent wage growth for the first time in years).

7) Inflation will pick up, but it won’t be the bad kind, it will be inflation that is followed by economic growth (especially in YoY stats). This inflation and growth will feel amazing after a decade+ of deflationary pressures and economic stagnation (S&P 500 earnings in aggregate peaked all the way back in 2012….).

8 ) Odds are high this also leads to continued dollar weakness, which is good for everybody across the globe.

9) Historically, after a large stock market correction stocks perform above average going forward for at least a year or two.

I mean, I really have a hard time finding any real argument for a bad stock year next year. Even without a vaccine the kindling is still in place for a blockbuster year. I really don’t think we have any realistic potential for a new secular bear market until at least 2022-23 timeframe. I think it would take a really massive “unknown unknown” happening to end the secular bull market anytime from now until the end of 2021. And those "unknown unknown" scenarios are a potential threat any year, but very rare in the grand scheme. Sure, bond yields will go up if my narrative comes to fruition, but unlike 2018 it will be accompanied by growth and inflation, which means stocks and gold respectively will shrug it off.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pp4me » Wed Nov 11, 2020 1:48 pm

Sounds reasonable to me with the caveat that if Biden occupies the white house and institutes strict nationwide lockdowns, we may have to put off the blockbuster times for a while to come.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Wed Nov 11, 2020 2:11 pm

pp4me wrote:
Wed Nov 11, 2020 1:48 pm
Sounds reasonable to me with the caveat that if Biden occupies the white house and institutes strict nationwide lockdowns, we may have to put off the blockbuster times for a while to come.
I already considered that possibility. Lockdowns couldn't keep the market down in the spring when they were an "unknown unknown", why on earth would they suddenly matter to this extent when they are now a "known unknown"? "Known unknowns" don't have the same power over the market as an "unknown unknown". The virus now is a known entity, and the risks are known. Nobody is going to get caught with their pants down like they did in March. The probability of lockdowns is already baked into the current market price. I also think "strict nationwide lockdowns" are a low probability. Any lockdowns would be targeted and warranted. And companies have evolved quickly in the last year, so a second round of lockdowns isn't going to have the same economic implications it had earlier this year, at least at the macro level that the stock market cares about. If anything, Biden being in office makes me even more bullish than Trump because we are going to get the stimulus to feed the recovery, Biden is a better global diplomat than Trump and trade relations should improve, and Biden is less polarizing and divisive than Trump so the political climate should at least cool down a few degrees (I mean, for real, this year was the closest we've come to civil war... since the Civil War).
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pp4me » Wed Nov 11, 2020 2:19 pm

pmward wrote:
Wed Nov 11, 2020 2:11 pm
pp4me wrote:
Wed Nov 11, 2020 1:48 pm
Sounds reasonable to me with the caveat that if Biden occupies the white house and institutes strict nationwide lockdowns, we may have to put off the blockbuster times for a while to come.
I already considered that possibility. Lockdowns couldn't keep the market down in the spring when they were an "unknown unknown", why on earth would they suddenly matter to this extent when they are now a "known unknown"? "Known unknowns" don't have the same power over the market as an "unknown unknown". The virus now is a known entity, and the risks are known. Nobody is going to get caught with their pants down like they did in March. The probability of lockdowns is already baked into the current market price. I also think "strict nationwide lockdowns" are a low probability. Any lockdowns would be targeted. And companies have evolved quickly in the last year, so a second round of lockdowns isn't going to have the same economic implications it had earlier this year, at least at the macro level that the stock market cares about.
I'll agree with that but again with the caveat that we have a known unknown in that we have no clue what Biden's going to do to "get control of the virus". The original lockdowns put millions out of work and destroyed many businesses. Biden says Trump didn't do enough. So we'll just have to wait and see about that.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Wed Nov 11, 2020 2:27 pm

pp4me wrote:
Wed Nov 11, 2020 2:19 pm
pmward wrote:
Wed Nov 11, 2020 2:11 pm
pp4me wrote:
Wed Nov 11, 2020 1:48 pm
Sounds reasonable to me with the caveat that if Biden occupies the white house and institutes strict nationwide lockdowns, we may have to put off the blockbuster times for a while to come.
I already considered that possibility. Lockdowns couldn't keep the market down in the spring when they were an "unknown unknown", why on earth would they suddenly matter to this extent when they are now a "known unknown"? "Known unknowns" don't have the same power over the market as an "unknown unknown". The virus now is a known entity, and the risks are known. Nobody is going to get caught with their pants down like they did in March. The probability of lockdowns is already baked into the current market price. I also think "strict nationwide lockdowns" are a low probability. Any lockdowns would be targeted. And companies have evolved quickly in the last year, so a second round of lockdowns isn't going to have the same economic implications it had earlier this year, at least at the macro level that the stock market cares about.
I'll agree with that but again with the caveat that we have a known unknown in that we have no clue what Biden's going to do to "get control of the virus". The original lockdowns put millions out of work and destroyed many businesses. Biden says Trump didn't do enough. So we'll just have to wait and see about that.
"Known unknowns" don't matter as much, because institutions can price them in and hedge their odds. And the destruction of the first round of lockdowns is already done, and at the macro level that the stock market cares about was mostly mitigated by stimulus (which has since dried up, hence the pocket of potential weakness I mentioned between now and Feb). The businesses that survived round 1 would mostly survive round 2, at least at the macro level that the stock market cares about. I really don't think the risks you mention could do anything more than a 10-20% correction sometime in Q4 or Q1, which would still not break my thesis of a blockbuster year by the time it's said and done. The dynamic we are in for the rest of the secular bull market is late 90's dynamic, the volatility is here to stay, and a continuing trend of an average two 10-30% corrections per year going forward is my expectation; but the bull will still continue to run until at least 2022 barring any real severe "unknown unknowns" of course.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by D1984 » Fri Nov 13, 2020 11:02 pm

pmward wrote:
Wed Nov 11, 2020 11:40 am
This is something that keeps coming to mind lately, and I don’t see a lot of people talking about these points. So here is why I think 2021 will be a blockbuster year for stocks, with S&P going to 4,000+. There is a pocket where potential weakness can still happen between now and about Feb, but with Nov-Feb also being the seasonal best time of the year I’m not so sure there is a lot of risk in that timeframe.

1) YoY economic and earnings statistics are going to look phenomenal starting around Feb 2021, due to the extremely low bar of 2020 for comparison.

2) Vaccine is likely in 2021.

3) Savings rate has increased massively this year. Once we have a vaccine and people feel comfortable, expect a record spending splurge, especially in the beaten down travel sector, bringing savings back down to more normal historical levels.

4) General sentiment in society will improve post-vaccine, and improved general sentiment = higher stocks.

5) Second stimulus package likely which will help speed the recovery along.

6) Large infrastructure spend likely under Biden, which will create jobs, as well as the government providing wage competition that the private sector will have to compete with (i.e. decent wage growth for the first time in years).

7) Inflation will pick up, but it won’t be the bad kind, it will be inflation that is followed by economic growth (especially in YoY stats). This inflation and growth will feel amazing after a decade+ of deflationary pressures and economic stagnation (S&P 500 earnings in aggregate peaked all the way back in 2012….).

8 ) Odds are high this also leads to continued dollar weakness, which is good for everybody across the globe.

9) Historically, after a large stock market correction stocks perform above average going forward for at least a year or two.

I mean, I really have a hard time finding any real argument for a bad stock year next year. Even without a vaccine the kindling is still in place for a blockbuster year. I really don’t think we have any realistic potential for a new secular bear market until at least 2022-23 timeframe. I think it would take a really massive “unknown unknown” happening to end the secular bull market anytime from now until the end of 2021. And those "unknown unknown" scenarios are a potential threat any year, but very rare in the grand scheme. Sure, bond yields will go up if my narrative comes to fruition, but unlike 2018 it will be accompanied by growth and inflation, which means stocks and gold respectively will shrug it off.
I hat to be a wet blanket here but......

barring their winning both seats in the Georgia runoffs (not very likely....they probably don't even win one let alone both), the Dems will not have 50 votes in the Senate. This means that Mitch McConnell will remain Senate Majority Leader.

What incentive does Senator McConnell have to allow Biden to get anything passed? It seems to me that his incentive is just the opposite...refuse to even allow things to pass committee (much less come up on the floor for a vote) and then if by some miracle they do make it to the floor they will be defeated 51-49 or 50-48....and if, say, any decent sized stimulus bill or any kind of infrastructure bill DOES appear to be getting anywhere close to fifty or 51 votes McConnell will either whip the defecting Rs back in line or failing that, just have the whole thing filibustered. Senator McConnell can then go on TV and say "see, it's the Democrats that are preventing the government from doing anything....if the House and President Biden wouldn't send us these crazy extremist bills, maybe we could work with them....but since they won't stop doing that, nothing can get passed".

The goal would be to keep the economy sluggish enough to help ensure Biden (or whoever the Democrats nominate in 2024) gets defeated. This was pretty much McConnell's "make Barack Obama a one-term President" strategy down to a T and while it didn't make him a one-term President, it did help Republicans successfully pin the slow recovery (from lack of adequate stimulus given the yawning output gap caused by the 2008 crash and ensuing recession) on Obama and lead to an R landslide in the 2020 elections.

I'm not trying to hate on McConnell or the GOP here; if I was in Mitch's shoes and I was facing the same electoral incentives he was facing I'd do exactly what I just described above; given the political realities of the country today McConnell would be absolutely right--in a rather Machiavellian sort of way--in assuming anything he could do to slow down an economic recovery on Biden's watch would redound to the GOP's benefit in the midterms and in 2024.

I just don't see why he (or the rest of the GOP Senate majority) have any rational reason not to suddenly and magically re-discover the heretofore forgotten virtues of green eyeshaded fiscal responsibility and aversion to deficit spending, tell President-elect Biden to sit on it and rotate, let him get almost nothing passed that would be remotely stimulative, and then pull out all the strings to blame him for the ensuing glacial pace of economic recovery.

If I'm missing something please tell me what I'm failing to see.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by flyingpylon » Sat Nov 14, 2020 5:42 am

D1984 wrote:
Fri Nov 13, 2020 11:02 pm
If I'm missing something please tell me what I'm failing to see.
Mitch will do what’s right for Mitch, which may or may not be the same as what’s right for anyone else.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Sat Nov 14, 2020 7:57 am

Sure, Mitch is a douche, we all know that. Republicans love to deficit spend when they are in office, and love to try to tank the economy as a weapon when a Democrat is in office. BUT Biden actually has a history of working pretty well with him. Some of the biggest wins Obama got through were actually negotiated between Biden and McConnell. Obama started sending Biden to talk to him because Biden had better luck with Mitch than he did. The best trait Biden has is a track record for being able to work across party lines (this working across party lines is also why the "progressive" left was not enamored with Biden coming out of the primaries). Biden is much more of a centrist than Obama was. This should also lead to a much lower political temperature in this country. Biden is not going to create the populist circus show that Trump did.

I would also like to point out 2 things.

1) All the leading economic and stock markets indicators I look at are all pointing up and to the right, and have been since late March / early April. They are still pointed up today, which means the recovery is still taking place. Now, these things don't predict speed, just predict recovery. Could McConnell slow the speed down? Certainly. But as long as we continue to recover stock prices will continue to climb.

2) The stock market as a whole has already considered and priced in these thoughts you have. And what was the stock markets take? It closed at both a new daily and weekly closing high yesterday. The market got exactly what it wanted, Biden as president with a split congress to block his tax and regulation ideas (I personally think it's unlikely Georgia will go blue on both seats, Trumps "we got screwed" tactic will rile up more conservatives than liberals to vote in the runoff, imo). Trump was a very difficult president on the markets. The overnight tweet risk, the trade war, the drama, the uncertainty. These negatives outweighed the positives he did for investors. Wall Street has voted, and they are happy with the result.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by jalanlong » Sat Nov 14, 2020 8:22 am

pmward wrote:
Wed Nov 11, 2020 2:11 pm
pp4me wrote:
Wed Nov 11, 2020 1:48 pm
I already considered that possibility. Lockdowns couldn't keep the market down in the spring when they were an "unknown unknown", why on earth would they suddenly matter to this extent when they are now a "known unknown.”
A second lockdown wouldn’t be the same as the first. This would be national, not local. Plus, when you are punched in the face once and then a second time, the second one causes more damage then the first due to the damage already inflicted by the first punch. I don’t consider it a known at all.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Sat Nov 14, 2020 8:45 am

jalanlong wrote:
Sat Nov 14, 2020 8:22 am
A second lockdown wouldn’t be the same as the first. This would be national, not local. Plus, when you are punched in the face once and then a second time, the second one causes more damage then the first due to the damage already inflicted by the first punch. I dom’t consider it a known at all.
I don't think you understand how these things work here. A "known unknown" is something that is known. If you got sucker punched once, and the person is still standing in front of you, you're prepared for the second punch. The first punch was a surprise. There was no guard and it scored a direct hit. The second punch is expected. Since the second punch is expected, it is guarded against, and there is less damage. Companies have evolved quickly in the last few months. They are more prepared. A lockdown sometime this winter or spring would not damage year end 2021 stock gains... just like it didn't damage year end 2020 gains. Can a correction happen? Sure. Will it be the end of the secular bull market? No. If this happens, will the market recover and blast higher, just like it did this year? Yes. The lockdown argument does not change anything. I know this forum is more paranoid than most, but look at this year as an example. If the bull had enough strength to get back to new highs this quickly, why on earth would it not have enough strength to weather another correction? How many years did it take to set new highs again after the .com bubble? The financial crisis? Compare that to this year. The bull still has more than enough strength.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by mathjak107 » Sun Nov 15, 2020 3:01 am

i think stocks have been priced today for 2021 admission ...

markets are already expecting a good 2021 and pretty much wrote off 2020 results from their current stock prices . things are not priced for 2020 at all

so i don't think the bar is set low . i think if 2021 does not meet at least the higher expectations we have of it now in the stock prices being good , we will see a sell off.

the bar was low last march , i no longer see that as the case late 2020. already built in expectations for 2021 are pretty high .
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Sun Nov 15, 2020 8:36 am

mathjak107 wrote:
Sun Nov 15, 2020 3:01 am
i think stocks have been priced today for 2021 admission ...

markets are already expecting a good 2021 and pretty much wrote off 2020 results from their current stock prices . things are not priced for 2020 at all

so i don't think the bar is set low . i think if 2021 does not meet at least the higher expectations we have of it now in the stock prices being good , we will see a sell off.

the bar was low last march , i no longer see that as the case late 2020. already built in expectations for 2021 are pretty high .
I don't think the bar analogy really works in the markets. It's an easy concept for the human mind, but it doesn't really tend to play out that way in the markets. As long as the recovery continues, stocks will continue to go up. We don't even have to get back to pre-COVID economic levels in 2021 for my scenario to work. Especially since bonds are likely to be down next year. Markets look at YoY data above all other, and YoY 2021 is going to look really good starting in about Feb.

The biggest risk to my scenario is that we don't get stimulus round 2. Without stimulus round 2 the recovery does stall out. But, I think this is low probability, especially with a Biden presidency, and especially since if the recovery does start to stall out it will lubricate things through congress. Once we hit about a 20% correction in March congress was willing to throw whatever it took at the problem. I could see a similar thing play out between now and spring, where the recovery stalls and stocks correct 10-30% again and then congress throws another 2+ trillion at the problem... which still winds up in S&P 4K+ in 2021. Congress will capitulate again. I'm not saying we are taking a straight line to 4K+, but I don't really see a scenario that we don't get there barring any severe "unknown unknown".
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by mathjak107 » Sun Nov 15, 2020 8:41 am

earnings for 2021 are predicted to be about 8% higher than 2019 ..2020 is not even a benchmark ...it is just an outlier so to speak .

this is based on what we know up until today
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Sun Nov 15, 2020 1:34 pm

mathjak107 wrote:
Sun Nov 15, 2020 8:41 am
earnings for 2021 are predicted to be about 8% higher than 2019 ..2020 is not even a benchmark ...it is just an outlier so to speak .

this is based on what we know up until today
Predictions don't matter either. How often do "beats" get sold and "misses" get brought? It happens all the time. What one analyst, or another, or even an aggregate of them say is meaningless in the short to medium term.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by mathjak107 » Sun Nov 15, 2020 1:40 pm

well when the estimates and predictions are wrong , that is when prices change .
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Sun Nov 15, 2020 2:16 pm

mathjak107 wrote:
Sun Nov 15, 2020 1:40 pm
well when the estimates and predictions are wrong , that is when prices change .
No. Estimates and predictions are wrong more than they are right. There are times they are wrong and nothing happens. There are times they are wrong and go in the way they are predicted (a beat turns into an increase in price, a miss turns into a decrease in price), and there are times they are wrong and the response is the opposite of what would be predicted (a miss turns into a gain in price, a beat turns into a decrease in price). Statistically speaking, it's a dice roll. You never know for one if they will beat or miss, and for two how the market will take that beat or miss. Assuming that a miss will always be sold, or a beat will always be bought is one of the most common mistakes beginner traders make.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by mathjak107 » Sun Nov 15, 2020 4:06 pm

personally i think we are headed for stagflation .

this virus likely will not end until the world reaches critical mass where in some shape or form most of the population gets exposed to it and the transmission of it has less and less of a population to go to .

the vaccine will likely be ineffective as the strain morphs like the flu does .

that is eventually how the pandemic in the 1900's finally ended , it reached a point of critical mass .

so i think we are in for more pain and higher inflation as the gov't tries to spend their way out
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by dualstow » Sun Nov 15, 2020 6:44 pm

This is the first i’ve seen of this thread, as I was tied up last week.
D1984 wrote:
Fri Nov 13, 2020 11:02 pm
I hat to be a wet blanket here but......

barring their winning both seats in the Georgia runoffs (not very likely....they probably don't even win one let alone both), the Dems will not have 50 votes in the Senate. This means that Mitch McConnell will remain Senate Majority Leader.

What incentive does Senator McConnell have to allow Biden to get anything passed?
...

Doesn’t the stock market love gridlock? There’s already pretty good political gridlock.

I *would* say that I agree with pmward’s premise that is the title of this thread. The only reason I’m not saying it is because i don’t want to jinx it. But if I were able to say I agree without negatively altering reality, I would.
Let 2022 be the year of GOLD
Gold drops to 1777 (WED 1:30EST)
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Mon Nov 16, 2020 7:50 am

mathjak107 wrote:
Sun Nov 15, 2020 4:06 pm
personally i think we are headed for stagflation .

this virus likely will not end until the world reaches critical mass where in some shape or form most of the population gets exposed to it and the transmission of it has less and less of a population to go to .

the vaccine will likely be ineffective as the strain morphs like the flu does .

that is eventually how the pandemic in the 1900's finally ended , it reached a point of critical mass .

so i think we are in for more pain and higher inflation as the gov't tries to spend their way out
See I disagree on many fronts. Now that we have congress actually supplying fiscal the "stag" part of "stagflation" is off the table. There will be growth alongside the inflation, for all the numerous reasons I listed in the OP. MMT is coming, whether we agree with it or not. I don't invest based on the ideal of what I feel should happen, I invest based on the reality of what is happening and will happen. So stocks will do well. What we are headed towards at some point in the years ahead (another deflationary event or two prior in the coming years is still possible before the new secular trend begins in earnest) far more resembles the 40s than the 70s. Growing economy. Volatile unpredictable spikes of inflation instead of consistent inflation (maybe boom 15% one year, 2-3% the following 2 years, boom 12% the year after, etc). Yield curve control holding the treasury yields down to inflate the debt away (2-3 10%+ spikes over the next 10-12 years with yields held at say 2% would basically make the debt problem go bye bye). Fed basically holding the majority of the debt, being the main bag holder, and potentially even "forgiving" the debt they hold. What happened in the 40s when they eventually released the yield curve control? Absolutely nothing. It was a total non-event. Yields stayed down on their own for decades following. In this world I don't see stagnation. I see the table set for a lot of growth. Just like we had a lot of growth in the 40s-60s as and after the debt was inflated away. Bad for bond holders (at least in real after-inflation terms), great for owning literally anything else other than bonds.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by jalanlong » Mon Nov 16, 2020 7:51 pm

pmward wrote:
Mon Nov 16, 2020 7:50 am
mathjak107 wrote:
Sun Nov 15, 2020 4:06 pm
personally i think we are headed for stagflation .

this virus likely will not end until the world reaches critical mass where in some shape or form most of the population gets exposed to it and the transmission of it has less and less of a population to go to .

the vaccine will likely be ineffective as the strain morphs like the flu does .

that is eventually how the pandemic in the 1900's finally ended , it reached a point of critical mass .

so i think we are in for more pain and higher inflation as the gov't tries to spend their way out
See I disagree on many fronts. Now that we have congress actually supplying fiscal the "stag" part of "stagflation" is off the table. There will be growth alongside the inflation, for all the numerous reasons I listed in the OP. MMT is coming, whether we agree with it or not. I don't invest based on the ideal of what I feel should happen, I invest based on the reality of what is happening and will happen. So stocks will do well. What we are headed towards at some point in the years ahead (another deflationary event or two prior in the coming years is still possible before the new secular trend begins in earnest) far more resembles the 40s than the 70s. Growing economy. Volatile unpredictable spikes of inflation instead of consistent inflation (maybe boom 15% one year, 2-3% the following 2 years, boom 12% the year after, etc). Yield curve control holding the treasury yields down to inflate the debt away (2-3 10%+ spikes over the next 10-12 years with yields held at say 2% would basically make the debt problem go bye bye). Fed basically holding the majority of the debt, being the main bag holder, and potentially even "forgiving" the debt they hold. What happened in the 40s when they eventually released the yield curve control? Absolutely nothing. It was a total non-event. Yields stayed down on their own for decades following. In this world I don't see stagnation. I see the table set for a lot of growth. Just like we had a lot of growth in the 40s-60s as and after the debt was inflated away. Bad for bond holders (at least in real after-inflation terms), great for owning literally anything else other than bonds.
So with that outlook do you still hold a classic 4x PP with its bond exposure?
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Mon Nov 16, 2020 8:15 pm

jalanlong wrote:
Mon Nov 16, 2020 7:51 pm
pmward wrote:
Mon Nov 16, 2020 7:50 am
mathjak107 wrote:
Sun Nov 15, 2020 4:06 pm
personally i think we are headed for stagflation .

this virus likely will not end until the world reaches critical mass where in some shape or form most of the population gets exposed to it and the transmission of it has less and less of a population to go to .

the vaccine will likely be ineffective as the strain morphs like the flu does .

that is eventually how the pandemic in the 1900's finally ended , it reached a point of critical mass .

so i think we are in for more pain and higher inflation as the gov't tries to spend their way out
See I disagree on many fronts. Now that we have congress actually supplying fiscal the "stag" part of "stagflation" is off the table. There will be growth alongside the inflation, for all the numerous reasons I listed in the OP. MMT is coming, whether we agree with it or not. I don't invest based on the ideal of what I feel should happen, I invest based on the reality of what is happening and will happen. So stocks will do well. What we are headed towards at some point in the years ahead (another deflationary event or two prior in the coming years is still possible before the new secular trend begins in earnest) far more resembles the 40s than the 70s. Growing economy. Volatile unpredictable spikes of inflation instead of consistent inflation (maybe boom 15% one year, 2-3% the following 2 years, boom 12% the year after, etc). Yield curve control holding the treasury yields down to inflate the debt away (2-3 10%+ spikes over the next 10-12 years with yields held at say 2% would basically make the debt problem go bye bye). Fed basically holding the majority of the debt, being the main bag holder, and potentially even "forgiving" the debt they hold. What happened in the 40s when they eventually released the yield curve control? Absolutely nothing. It was a total non-event. Yields stayed down on their own for decades following. In this world I don't see stagnation. I see the table set for a lot of growth. Just like we had a lot of growth in the 40s-60s as and after the debt was inflated away. Bad for bond holders (at least in real after-inflation terms), great for owning literally anything else other than bonds.
So with that outlook do you still hold a classic 4x PP with its bond exposure?
Most of my portfolio is in a levered tactical strategy these days. I still have cash and gold static allocations, but stocks and bonds are currently decided by a quant TAA strategy (of which I currently have no bonds, my tactical strategy currently has me in U.S. large caps and emerging markets). When my strategy tells me to be in bonds, I'm in bonds. But it's all decided algorithmically using volatility, trend, absolute momentum, and relative momentum. I don't take inflation or yields into account in any way. So regardless what yields and inflation are at, my strategy would not change.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Thu Dec 10, 2020 12:55 pm

More emerging evidence to back up my 2021 expectations... AirBnB and DoorDash IPO's. If both of these IPO's can double in price day 1, it shows there is still pent up appetite for speculation. Bull markets die ONLY when the appetite for speculation runs out. There's still way too much speculative appetite for the bull market to be done. There has to be at least another year left to the secular bull market from the 09 lows.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by jhogue » Thu Dec 10, 2020 3:11 pm

Don't bull markets die when earnings fail to prop up P/E's?
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by pmward » Thu Dec 10, 2020 3:17 pm

jhogue wrote:
Thu Dec 10, 2020 3:11 pm
Don't bull markets die when earnings fail to prop up P/E's?
Nope. Earnings have nothing to do with it. It's all about cash flows. As long as cash flows (which are primarily driven by speculation) are willing to keep flowing in, the bull will continue. P/E's don't matter in a bull market, they matter in a bear market. The moment the speculative cash flows are no longer willing to go in, the bull dies and the bear begins. The reason those flows stop coming in can be fundamental (like in 2000) but not always. Crazy markets tend to get more crazy.

Obviously ABNB and DASH's earnings in P/E are pretty ridiculous. But speculation is not only willing to put cash flows into them, but to double both stocks price on day 1. This is 1998 behavior, not 2000 behavior. Before the peak in 2000 the IPO's started failing. The IPO's failing were the first warning shot that speculators were exhausted. We have the opposite right now, we have signaled that the appetite for speculation is through the roof. The speculators want more, they are nowhere near exhausted. As long as appetite for speculation is high, the stock market will keep going up.
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Re: Why I think 2021 will be a blockbuster year for stocks

Post by mathjak107 » Thu Dec 10, 2020 5:07 pm

I liked it better when so many were pessimistic.....bull markets don’t end with the pessimism we had .

Now by just about any measure things are overly bullish again .that scares me
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