Join institutional investors, analysts and strategists from the world's largest banks: Subscribe today
Already have an account? log in
Remember: Bears Are Never Held Accountable
I keep coming back to the notion that people -- as opposed to machines, and even among systematics p
The AI chip driven rally might in some part be driven by a ptsd reaction to the chip supply line shock that many companies suffered through during Covid. Sort of the mentality of better to have too much than too little. Reminds me of buying something at Costco even though you don’t know what you’ll do with it. A year later you find it on the shelf while doing spring cleaning and throw it in the donation pile.
There certainly is an element out there who are stubbornly skeptical. For long periods. Some out of general cantankerousness. Others are in the ranks of those who continue that stock prices reflect underlying cash flows which can be detected/predicted and acted upon profitably. Thanks to a natural human urge to seek order in the chaos as our Dear Leader once suggested.
It is hard to argue that MACRO cash flows do not drive share prices, or any prices for that matter. Money has to go (or come from) somewhere, as they say. Nothing else really matters.
Almost twenty years ago I came to this realization. Back then an ear on the flows almost guaranteed a trader profitable short-term trades, provided you did not think too much beyond that. I actually negotiated to lease a seat on the NY Cotton Exchange but was waylaid by other things.
Watching today’s equity markets, it sure looks like that logic has only grown more persuasive. Thanks to indexing, buybacks (as H-berg reminds us of) and giant algo models, stocks are just another something to wager on. I may have to renew my Racing Form subscription.
Oops, make that almost 40 years ago in the later 1980s.
One counterpoint though is when are bulls actually held accountable? Because they will say to buy all the way down if the AI bubble were to burst.
It’s like the people who after the dot com and housing bubbles said there were lessons learned and it will never happen again.
Um, no.
Again, the key is always foregone gains.
Agreed. Portfolio managers face a skewed risk-reward environment. Missing a rally is often a death sentence for the fund manager or even the fund itself. On the other hand, losing a lot of money is OK as long as “everyone else” is also getting creamed. Often as not, it’s a matter of comparisons rather than absolute returns that matter.
That’s from the perspective of a fund catering to retail investors. Institutional investors, on the other hand, most often are mandated to remain 100% invested. If the poor deluded manager gets queasy about the outlook, their only option is to rotate into something they perceive as being more defensive.
So shorts face these inherent biases along with the relentless floor provided by share buyback programs. No wonder they generally usually are unsuccessful over time.
Outside of the AI piece of their product offering I am actually surprised that Qualcomm hasn’t been able to properly capitalize on their Snapdragon chipset for laptop computers. Their version of this silicon provides an effective counterweight to the Apple silicon chips providing similar performance and battery life for a lower cost and on Windows. I bought my wife one of these devices at the end of last year and she absolutely loves it. Being that the Snapdragon is a CPU vs. the GPU typical of AI chips, I have no idea if this product execution will translate. But if you’re looking for all week battery life and a capable chip on Windows, it’s a competitive offering.
H-Man, Greenspan December 2006 “irrational exuberance” — Market peak March 10, 2000. It certainly takes some time for the market to get it.
H-Man, yikes not 2006 for Greenspan irrational comment — 1996