Jul 18, 2022·edited Jul 18, 2022Liked by Richard Excell
As a UIUC student outside of the finance major, I want to say that these blog posts are invaluable. The detail and scope of each week's overview, paired with your LinkedIn content is a boon. This is especially true when it comes to staying on top of the market situation. I appreciate your perspective and care... I don't think many realize what a privilege it is to have ready access to this resource. I can attest, its nearly impossible to find something like this anywhere else. Thank you!
During investment banking training last week at BMO, I lost track of the amount of times that the word "recession" was uttered. My contrarian ears really perked up when even the head of equity capital markets proclaimed her bearishness to a bunch of naive new hires that the bank is trying to butter up and excite. Leveraged finance heads even admitted to us that the rush to refi last year -- often "out as many as 5 years" -- means their work has dried up and they also submit to the bearish narrative. Yet this admission should be reason to be confident since that should mean corporate balance sheets are capitalized, right? I know I personally have found a lot of inefficient balance sheets with "too much" cash.
I wasn't market-conscious in 2007-2008, but I can't imagine the banks were proclaiming to their shiny new analysts that a generational downturn was around the corner. Rich, is it fair to say that not only were the banks not prepared but they were ignorant, too?
I had the post-WWII idea a couple months back but wasn't sure what to look for to justify it, only that I knew a flat market with cheap stocks was exactly the environment in which I wanted to begin building a portfolio. Now as the market has bounced from what you called a short squeeze, is an investor that doesn't think there's another 20%+ left to fall rooting against the squeeze since it will become easier to be bearish again if that side of the boat can get a breather as bulls find a speck of optimism?
Finally, you have said bear markets end when all capital is destroyed. It doesn't appear that all capital is destroyed just yet, what more do we need destroyed / priced to be destroyed? Housing capital is priced to be destroyed and the data is coming out showing as such. Are there any worlds left to conquer besides TSLA and ARKK?
For the past 4-6 weeks, it seems as if the sentiment/positioning set-up for a rally has been in place, but still the market seemed to struggle. You are spot on the highlight the market reaction to CPI report. It appears to be "the tell" that the bulls have been waiting for. I have no idea whether "the bottom" is in or not, but am confident in a trough to peak 15% rally, helped by a peak in yields. I also have no idea what the Q2 GDP report will be, but just trolling through history reveals that everytime 2 consecutive quarters of negative GDP growth have occured the NBER has some 1-year or so later said that was a recession. The Fed meetings one day before GDP is released. They will know the number. Yet, they appear to be dead set on hiking 75bps. Now here is a factoid to consider. Has the Fed ever hiked rates after 2 consecutive negative GDP quarters? No they have not...It may be different this time, so confidence is low that the Fed's July hike is its last, but just maybe the stock market might begin to speculate about that and greet a negative Q2 GDP print with a positive reaction. Having said that, I am not all that confident that Q2 GDP will echo the Atlanta Fed's forecast and actually be negative, so that is worth bearing in mind.
I read that corporate buy backs are now allowed. That billions of dollars should run things up. After that window shuts, we might change direction and test some lows. Also by then the FED might be done tightening and we are back to bubble days.
As a UIUC student outside of the finance major, I want to say that these blog posts are invaluable. The detail and scope of each week's overview, paired with your LinkedIn content is a boon. This is especially true when it comes to staying on top of the market situation. I appreciate your perspective and care... I don't think many realize what a privilege it is to have ready access to this resource. I can attest, its nearly impossible to find something like this anywhere else. Thank you!
During investment banking training last week at BMO, I lost track of the amount of times that the word "recession" was uttered. My contrarian ears really perked up when even the head of equity capital markets proclaimed her bearishness to a bunch of naive new hires that the bank is trying to butter up and excite. Leveraged finance heads even admitted to us that the rush to refi last year -- often "out as many as 5 years" -- means their work has dried up and they also submit to the bearish narrative. Yet this admission should be reason to be confident since that should mean corporate balance sheets are capitalized, right? I know I personally have found a lot of inefficient balance sheets with "too much" cash.
I wasn't market-conscious in 2007-2008, but I can't imagine the banks were proclaiming to their shiny new analysts that a generational downturn was around the corner. Rich, is it fair to say that not only were the banks not prepared but they were ignorant, too?
I had the post-WWII idea a couple months back but wasn't sure what to look for to justify it, only that I knew a flat market with cheap stocks was exactly the environment in which I wanted to begin building a portfolio. Now as the market has bounced from what you called a short squeeze, is an investor that doesn't think there's another 20%+ left to fall rooting against the squeeze since it will become easier to be bearish again if that side of the boat can get a breather as bulls find a speck of optimism?
Finally, you have said bear markets end when all capital is destroyed. It doesn't appear that all capital is destroyed just yet, what more do we need destroyed / priced to be destroyed? Housing capital is priced to be destroyed and the data is coming out showing as such. Are there any worlds left to conquer besides TSLA and ARKK?
Thanks for the wisdom, Rich
For the past 4-6 weeks, it seems as if the sentiment/positioning set-up for a rally has been in place, but still the market seemed to struggle. You are spot on the highlight the market reaction to CPI report. It appears to be "the tell" that the bulls have been waiting for. I have no idea whether "the bottom" is in or not, but am confident in a trough to peak 15% rally, helped by a peak in yields. I also have no idea what the Q2 GDP report will be, but just trolling through history reveals that everytime 2 consecutive quarters of negative GDP growth have occured the NBER has some 1-year or so later said that was a recession. The Fed meetings one day before GDP is released. They will know the number. Yet, they appear to be dead set on hiking 75bps. Now here is a factoid to consider. Has the Fed ever hiked rates after 2 consecutive negative GDP quarters? No they have not...It may be different this time, so confidence is low that the Fed's July hike is its last, but just maybe the stock market might begin to speculate about that and greet a negative Q2 GDP print with a positive reaction. Having said that, I am not all that confident that Q2 GDP will echo the Atlanta Fed's forecast and actually be negative, so that is worth bearing in mind.
I read that corporate buy backs are now allowed. That billions of dollars should run things up. After that window shuts, we might change direction and test some lows. Also by then the FED might be done tightening and we are back to bubble days.