True, it’s very hard to accurately and correctly predict those changes! Nevertheless, I believe we are now in a better financial/political environment for value than growth. In harmony, I’m also boldly calling a bottom on interest rates. Mr. Market now has multiple ways to possibly school me.
Mr. Market is being extremely generous and highly effective vaccines should be available soon. There’s still a lot to be thankful for in America. Mr. Market clearly believes that.
No doubt this is part of what is driving the stock markets higher and, I think, many investors are anticipating that Joe B and the Dems in Congress are going to pump a LOT of money into the economy which should be good for the economy and for corporate profits in the short run. Plus, for many investors, there really is no other place to invest your money besides stocks. Of course, in the longer run, you have to wonder how all of the "free money" is going to be paid back. I'm predicting that by the end of Joe B's first term, the federal government is going to be $40 TRILLION in (direct) debt (and also with tens of trillions of dollars in unfunded liabilities). It has truly just all become "funny money" that will never get paid back and may eventually sink the country (see, e.g., Venezuela). There IS a reason why the dollar is now sinking fast against most other currencies.
I guess my primary concern now is how much of Mr. Market's optimism (e.g. re:vaccines) is responsible for price levels, and how much is based upon people looking there, anywhere, for yield.
Yea, I doubt interest rates will stay this low forever. Eventually, the bond vigilantes around the globe will demand that the US pay higher rates before they will buy our debt (and then we'll be in trouble). I just checked - the 20+ year US bond inverse ETF ("TBT") is already up 12% since late November. Not a bad bet to hedge rising interest rates.
Speaking of luck, my wife and I bought our first house in 2016 for only $250k. We will be selling it in May and it looks like it will go for about $350k. So lucky and fortunate, so far! I got really worried when the pandemic hit but Vegas has weathered the storm even with high unemployment thanks to low inventory, California buyers, and low interest rates. Let’s keep it up a few more months!
I’ll generously give you the short answer…
The CARES Act gave lenders a lot of abnormal flexibility on loan date extensions. Normally, regulators attempt to limit massive extensions, but they have been relatively powerless. As a result, delinquency schedules reveal little about current ability to pay.
The first round of PPP included total loan forgiveness, for most participants, regardless of the participants’ profitability status. For example, a company I invest in (Atlas Airway) was given/forgiven $400 million, even though they were highly profitable, mostly flying Amazon packages, in 2020. A substantial amount of PPP funds paid mortgage, lease, and rent payments.
Bank deposits have grown substantially (10-30%) in 2020 largely due to stimulus payments. Aggregate ability to pay is surprisingly high.
FWIW, my plan, two months ago, was to make a relatively quick 50% and sell C when it hit 70. Now, at 67, I like C more than most alternatives and may not sell at 70. Overall, I’m continuing to take profits in order to keep my equity holdings at 60% of my net worth. I’m still very heavily weighted in individual financials.
There are times, like this morning, when I wonder if Mr. Market smokes crack? JPM’s earnings report today was strong and the stock is down 2.5%. Wonder why Mr. Market thinks JPM is worth 2.5% less than yesterday?
Mr. Market smokes crack, drinks heavily, is a teetotaler, is an evangelist, is an atheist, is a day trader, is in it for the long haul, is an algorithm, is a live trader, is analytical, is completely emotional, etc., etc. A blip is not a trend, and it could just be random herd noise.