Great commentary / article as always! Quick question, is there a specific reason to assume no growth? And what do you think would / should change in case we plug in any growth reducing the cost of capital. Thanks a lot!
assuming no growth is a conservative estimate. but i do use NTM eps which does assume growth...assuming that growth forecast is realistic (currently not). all told, i think of valuation models as only approximations and a guide for central tendency rather than precision. i think probably more useful to evaluate the valuation model's gap from fair value relative to its own history (over relevant timeframe) to determine over/under valued. hope that helps shed some light
historically treasuries (10yr total return futures) perform well in Sept, but that has not been the case in recent years with treasuries lower in 4 of last 5yrs and 6 of last 10yrs...not including this year.
Man. I appreciate a guy who shares actionable information ,doesn’t talk book,or condescend and excels at making some what arcane shit simple. Thank you . This helps. All your interviews do. Smart guy. Humble guy. Look man , if you ever need a tuba player ok nevermind. I am useless
reposting reply to another comment....i have been leaning in that direction since early April. since then we sold off, rallied, and sold off again. i have a more pessimistic growth outlook while the market seems hyperfocused on fed hikes which ironically only embolden the weak growth outlook. i do think there is value in adding long bonds w/ 10yr >=3.25% and real rates firmly positive, but best to keep sizing manageable and buy weakness rather than chase strength given current market conditions (i.e. negative momentum).
my focus has been on adding closed end muni funds where in addition to attractive yield many also trade at wide discounts vs NAV. i also believe short end cash yields have a place in the portfolio.
Comprehensive, balanced, realistic and informative view. Can a change in policies “like the elections and ending Ukraine war” and energy market “increasing supply” save the situation from an inevitable recession?
yes several “what ifs” could change the view. i’m all for considering possibilities but i don’t find it useful to trade/invest on hypotheticals. if the data changes my view will adapt with it.
i have been leaning in that direction since early April. since then we sold off, rallied, and sold off again. i have a more pessimistic growth outlook while the market seems hyperfocused on fed hikes which ironically only embolden the weak growth outlook. i do think there is value in adding long bonds w/ 10yr >=3.25% and real rates firmly positive, but best to keep sizing manageable and buy weakness rather than chase strength given current market conditions (i.e. negative momentum).
my focus has been on adding closed end muni funds where in addition to attractive yield many also trade at wide discounts vs NAV. i also believe short end cash yields have a place in the portfolio.
yes its part of the trading toolkit, but in this environment i find other trades more attractive. for example, selling call to buy put spread or even simply buying put and then leg into put spread on a down move. generally speaking i like using/trading VIX when its <=15 and has the potential to go to >30, but find it less attractive to buy >=25 for a move to 40.
in the 1990s we were blessed with great demographics, debt supercycle, low/stable inflation, productivity boom and robust/rising potential growth as well as the financialization of the economy as boomers grew up. 90s more the exception than the rule in my view.
Great commentary / article as always! Quick question, is there a specific reason to assume no growth? And what do you think would / should change in case we plug in any growth reducing the cost of capital. Thanks a lot!
assuming no growth is a conservative estimate. but i do use NTM eps which does assume growth...assuming that growth forecast is realistic (currently not). all told, i think of valuation models as only approximations and a guide for central tendency rather than precision. i think probably more useful to evaluate the valuation model's gap from fair value relative to its own history (over relevant timeframe) to determine over/under valued. hope that helps shed some light
Thank you Mr. Blonde!
Mr Blonde. Absolutely great stuff as usual. Loved it.
Quick Q on the maths for the valuation table.
Using 2023 EPS of 240, BBB yield of 5.64% and 5y avg div yield of 1.75%, i get SPX = 3250.
Thats correct?
yes that is the maths
So much good stuff. And free. I'd happily pay a suscription for this.
Thanks so much
this is excellent and motivating feedback, thank you
Another excellent article. Thank you sir
I'm curious, do you know if the September seasonality of stocks also has been the pattern in long treasuries?
historically treasuries (10yr total return futures) perform well in Sept, but that has not been the case in recent years with treasuries lower in 4 of last 5yrs and 6 of last 10yrs...not including this year.
As always, great, data driven and actionable content. Thank you for sharing your expertise, Mr. Blonde.
Man. I appreciate a guy who shares actionable information ,doesn’t talk book,or condescend and excels at making some what arcane shit simple. Thank you . This helps. All your interviews do. Smart guy. Humble guy. Look man , if you ever need a tuba player ok nevermind. I am useless
this is great and welcome feedback. it motivates. thank you
Thanks for the update. Any thoughts on likely yield peaks (timing and levels)? Much appreciated!
reposting reply to another comment....i have been leaning in that direction since early April. since then we sold off, rallied, and sold off again. i have a more pessimistic growth outlook while the market seems hyperfocused on fed hikes which ironically only embolden the weak growth outlook. i do think there is value in adding long bonds w/ 10yr >=3.25% and real rates firmly positive, but best to keep sizing manageable and buy weakness rather than chase strength given current market conditions (i.e. negative momentum).
my focus has been on adding closed end muni funds where in addition to attractive yield many also trade at wide discounts vs NAV. i also believe short end cash yields have a place in the portfolio.
Got it, so Short the Russell 2000
looks like the right market short at the moment
Comprehensive, balanced, realistic and informative view. Can a change in policies “like the elections and ending Ukraine war” and energy market “increasing supply” save the situation from an inevitable recession?
yes several “what ifs” could change the view. i’m all for considering possibilities but i don’t find it useful to trade/invest on hypotheticals. if the data changes my view will adapt with it.
Valuable content! Thank you very much for your work!
Thank you.
Thank you, would you say it´s time to buy the long bond given dismal performance YTD ?
i have been leaning in that direction since early April. since then we sold off, rallied, and sold off again. i have a more pessimistic growth outlook while the market seems hyperfocused on fed hikes which ironically only embolden the weak growth outlook. i do think there is value in adding long bonds w/ 10yr >=3.25% and real rates firmly positive, but best to keep sizing manageable and buy weakness rather than chase strength given current market conditions (i.e. negative momentum).
my focus has been on adding closed end muni funds where in addition to attractive yield many also trade at wide discounts vs NAV. i also believe short end cash yields have a place in the portfolio.
What's your thoughts on the VIX plays, e.g. UVXY
yes its part of the trading toolkit, but in this environment i find other trades more attractive. for example, selling call to buy put spread or even simply buying put and then leg into put spread on a down move. generally speaking i like using/trading VIX when its <=15 and has the potential to go to >30, but find it less attractive to buy >=25 for a move to 40.
Interesting how we see the decline in the 1990s but market rally any fundamental reason?
in the 1990s we were blessed with great demographics, debt supercycle, low/stable inflation, productivity boom and robust/rising potential growth as well as the financialization of the economy as boomers grew up. 90s more the exception than the rule in my view.
Always on my first read list. Thank you for sharing your expertise!