The Fed, Snowflake, and Stocks

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epicahab
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The Fed, Snowflake, and Stocks

Post by epicahab »

So, the Fed signals that it wants to keep rates low for three more years:

https://finance.yahoo.com/news/fed-fomc ... 45057.html

Canada’s pension fund is reevaluating bond holdings:

https://www.cnbc.com/2020/09/16/singapo ... rates.html

And you’ve got an army of small and large investors bidding up companies like Tesla and Snowflake to absurdly high P/Es:

https://finance.yahoo.com/news/snowflak ... 41815.html

All of this combines to make me think, are we as individual investors now forced to buy equities? Is this the mother of all bubbles in which there’s literally no other things suitable for purchase?

Strange times, what do you all think?
Tigermoose
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Re: The Fed, Snowflake, and Stocks

Post by Tigermoose »

Let it ride!

My opinion is that the governments of the world and their central banks will always provide more liquidity and increase the money supply in the face of economic slowdowns or possible depressions. That leads me to believe that inflation is coming. So buy some real assets (such as real estate) and equities and let it ride!
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Re: The Fed, Snowflake, and Stocks

Post by Robot Monster »

Re: Fed press conference

"#Fed projections

- Faster #GDP recovery in 2020 (that's old news)
- Weaker #GDP momentum in 2021-22 (that's the slower phase 2 of recovery)
- Recoup Q4 '19 #GDP level by end '21

- #inflation firmer but still undershooting 2% until '23

- #unemployment not back to 4% until '23" source

***

In explaining the new forward guidance, Powell corrects himself after referring to unemployment and instead refers to labor-market conditions.

This is important. In 2012, the Fed used the unemployment rate as a threshold. Now they are not tying themselves so hard to this number.
source

***

#Fed Chair #Powell press conference

> Conditions to raising rates:
- labor market conditions have reached levels consistent with the FOMC assessments of maximum employment
AND
- inflation has risen to 2%
AND
- inflation *on track* to moderately exceed 2% percent for *some time*
source

***

"A lot going on in today's Fed release. A few high points:

1. New projections show rates near-zero for years
2. Inflation hits 2% only in 2023
3. The Fed doesn't expect to hike rates until inflation has risen to 2% and is expected to exceed 2%" source

***

"...this is the first time in a long time that any Fed members are predicting inflation above 2%, with at least one participant forecasting PCE of 2.4% next year" source

***

"[Fed] officials see inflation getting to 2% by 2023 and unemployment getting down to 4% around that time" source

***

Related, from an Economist article published today: "Even Goldman Sachs, which is bullish about the prospect for a vaccine, does not see American unemployment falling to its pre-pandemic rate of 4% until 2025." source
Last edited by Robot Monster on Wed Sep 16, 2020 2:04 pm, edited 3 times in total.
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Re: The Fed, Snowflake, and Stocks

Post by Grt2bOutdoors »

Tigermoose wrote: Wed Sep 16, 2020 1:34 pm Let it ride!

My opinion is that the governments of the world and their central banks will always provide more liquidity and increase the money supply in the face of economic slowdowns or possible depressions. That leads me to believe that inflation is coming. So buy some real assets (such as real estate) and equities and let it ride!
Coming? It’s here, it’s been here for a while. This is a service economy, the price of services is through the roof. When plumbers and electricians are charging doctors prices you have a problem. The auto mechanic is charging $110 an hour for labor. There is plenty of inflation.
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LFKB
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Re: The Fed, Snowflake, and Stocks

Post by LFKB »

Snowflake is trading at 180x last twelve months revenue. My friend works there in enterprise sales and is not even very senior and made about $4 million today.
Last edited by LFKB on Wed Sep 16, 2020 1:50 pm, edited 1 time in total.
Tingting1013
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Re: The Fed, Snowflake, and Stocks

Post by Tingting1013 »

LFKB wrote: Wed Sep 16, 2020 1:50 pm Snowflake is trading at 180x last twelve months revenue
How about forward revenue?
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Re: The Fed, Snowflake, and Stocks

Post by LFKB »

Tingting1013 wrote: Wed Sep 16, 2020 1:50 pm
LFKB wrote: Wed Sep 16, 2020 1:50 pm Snowflake is trading at 180x last twelve months revenue
How about forward revenue?
I haven't seen a projection for 2021 revenue but my guess is it is likely around 85x 2021 revenue
Tingting1013
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Re: The Fed, Snowflake, and Stocks

Post by Tingting1013 »

LFKB wrote: Wed Sep 16, 2020 1:51 pm
Tingting1013 wrote: Wed Sep 16, 2020 1:50 pm
LFKB wrote: Wed Sep 16, 2020 1:50 pm Snowflake is trading at 180x last twelve months revenue
How about forward revenue?
I haven't seen a projection for 2021 revenue but my guess is it is likely around 85x 2021 revenue
That would be literally off the charts even for cloud.

https://www.bvp.com/bvp-nasdaq-emerging-cloud-index
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Re: The Fed, Snowflake, and Stocks

Post by Robot Monster »

Regarding Snowflake, from Economist article, "Why Snowflake is about to raise $3bn in a record software IPO: But competition in the database business is heating up":

"Despite these promising numbers, and Mr Buffett’s blessing, Snowflake has its work cut out. The company’s uniqueness will not last much longer, says Donald Feinberg of Gartner, a research firm. Rival firms, in particular the big cloud providers, have been beefing up competing products and even dabbled with the multi-cloud. A few startups are already offering cheaper and more flexible “open-source” alternatives such as ClickHouse, a particularly zippy data-management system marketed by a startup called Altinity. Other challengers are building more specialised digital repositories...[can't copy and paste too much, sorry]...So Snowflake is unlikely ever to become as dominant as Oracle. Snowflakes fly high in a flurry. They also melt."

Let's check back on this post in five or ten years.
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heyyou
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Re: The Fed, Snowflake, and Stocks

Post by heyyou »

So the future seems to have significant uncertainty these days.

I suppose I will just hope to adapt my spending, in order to muddle through with my current allocation, knowing that choice will be imperfect. In retrospect, it has been good enough for the uncertainties of my previous forty years of investing in index funds. Inertia is my current strategy for dealing with uncertainty.
HenryPorter
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Re: The Fed, Snowflake, and Stocks

Post by HenryPorter »

So, is this reminiscent of Netscape's IPO?
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Re: The Fed, Snowflake, and Stocks

Post by flyingcows »

I think of stocks like TSLA as “collectables”, similar to pokemon cards or bitcoin. The price of collectables can move to any level, but eventually, no idea when, the people buying the collectables will get bored and find new collectables to focus on
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epicahab
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Re: The Fed, Snowflake, and Stocks

Post by epicahab »

I think people that can't go to a casino are opening Robinhood accounts instead.
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Re: The Fed, Snowflake, and Stocks

Post by BlueEars »

.....
Last edited by BlueEars on Wed Sep 16, 2020 7:17 pm, edited 1 time in total.
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Re: The Fed, Snowflake, and Stocks

Post by nisiprius »

epicahab wrote: Wed Sep 16, 2020 1:25 pm... Is this the mother of all bubbles...
Briefly, yeah, I think it's a bubble. I really do. And I'm doing nothing about it, because based on my direct personal experience and everything I've read and the data I've looked at, there's no point in trying to do anything about it. Anything you can do is no more effective than trying to save yourself in an falling elevator by jumping off the floor just before the elevator hits.
...Strange times, what do you all think?...
I think it always feels strange. It is only in our memories of the past that think there was some Golden Age when things were "normal." We are always "entering uncharted territory."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
itsmeagain
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Re: The Fed, Snowflake, and Stocks

Post by itsmeagain »

nisiprius wrote: Wed Sep 16, 2020 6:11 pm I think it always feels strange. It is only in our memories of the past that think there was some Golden Age when things were "normal." We are always "entering uncharted territory."
Speaking of a past “Golden Age” I recall reading as an early investor (in the 1990s) about past eras when dividend yields on common stocks were higher than the yields on bonds. Wow, that sounded so great, I thought, if only I had that opportunity I’d have been a great investor.

Well, here we are: The average yields on the DJIA and S&P500 are higher than even a 30-year Treasury Bond. Sounds great, huh? Nope. Now it's terrifying!
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Re: The Fed, Snowflake, and Stocks

Post by PicassoSparks »

epicahab wrote: Wed Sep 16, 2020 1:25 pm So, the Fed signals that it wants to keep rates low for three more years:
Canada’s pension fund is reevaluating bond holdings:
And you’ve got an army of small and large investors bidding up companies like Tesla and Snowflake to absurdly high P/Es:
All of this combines to make me think, are we as individual investors now forced to buy equities? Is this the mother of all bubbles in which there’s literally no other things suitable for purchase?

Strange times, what do you all think?
I’m investing for decades. What do I care about the next three years of Fed rates or any of the rest of this aside from generally lowering my expected returns as I’m making plans?
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Re: The Fed, Snowflake, and Stocks

Post by Dottie57 »

What the heck is snowflake?
Angst
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Re: The Fed, Snowflake, and Stocks

Post by Angst »

Dottie57 wrote: Wed Sep 16, 2020 8:35 pm What the heck is snowflake?
Sounds like some sort of thoughtless epithet, or maybe some street drug, but it's BRK's latest purchase, sort of...

https://www.cnbc.com/2020/09/16/warren- ... g-ipo.html
itsmeagain
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Re: The Fed, Snowflake, and Stocks

Post by itsmeagain »

Angst wrote: Wed Sep 16, 2020 8:44 pm
Dottie57 wrote: Wed Sep 16, 2020 8:35 pm What the heck is snowflake?
Sounds like some sort of thoughtless epithet, or maybe some street drug, but it's BRK's latest purchase, sort of...

https://www.cnbc.com/2020/09/16/warren- ... g-ipo.html
You can read more about Snowflake's IPO here:
https://www.marketwatch.com/story/snowf ... 1600294394
Shares of Snowflake SNOW surged 111.6% in Wednesday’s session after the company produced the largest software IPO on record. The stock’s big rally, which came after Snowflake priced its offering above an already-raised range, left the company with a market value of roughly $70 billion, more than five times the private-market valuation of $12.4 billion that it fetched in February. ... Snowflake generated $403 million in revenue over the past four quarters by offering database software for the cloud, leaving it with a market capitalization-to-sales ratio of about 175x.
That's not a price-to-earnings ratio of 175, it's a price-to-sales ratio of 175 :shock:
Tingting1013
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Re: The Fed, Snowflake, and Stocks

Post by Tingting1013 »

Dottie57 wrote: Wed Sep 16, 2020 8:35 pm What the heck is snowflake?
Data warehousing in the cloud
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epicahab
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Re: The Fed, Snowflake, and Stocks

Post by epicahab »

If a company says the word cloud they instantly get a huge P/E.
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Re: The Fed, Snowflake, and Stocks

Post by mrspock »

I’d argue Bogleheads circa 1999 had it waaaay worse (valuation wise) than whatever this is. They seemed to do just fine.

Even at those crazy PEs, they bought the S&P 500 at 1300, saw a crash, got their money back plus a little profit.... then another crash...and never looked back.

If they DCA’d through this, they made out like bandits. With a PE of 30 in a pandemic no less (you’d think it would be worse)... they probably look at threads like this and just smile.
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Re: The Fed, Snowflake, and Stocks

Post by Tingting1013 »

Snowflake’s valuation is unprecedented.

But what should a company that is winning against Amazon be worth?
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Re: The Fed, Snowflake, and Stocks

Post by WoodSpinner »

Tingting1013 wrote: Wed Sep 16, 2020 9:20 pm Snowflake’s valuation is unprecedented.

But what should a company that is winning against Amazon be worth?
Note, Amazon is in the Cloud Computing business. Cloud Data Warehousing is just a small subset of that world.

It might be a great company but I have been out of the loop on Cloud Computing since 2018 (which is several Lifetimes).



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Re: The Fed, Snowflake, and Stocks

Post by Portfolio7 »

The hardest thing for most of us to accept is that understanding a few things about the economy in no way justifies an opinion about market direction. There are mountains of data and hundreds of different market segments (obv am thinking beyond the industry segments) that all have their own intracacies. I'll never understand them all. I mean, I could right now talk Ted and Libor spreads (& more) that suggest smooth sailing, in opposition to everything you just said - but the fact is there's just too much to figure it all out. I'm not that smart, even though my lizard brain is in denial. As JP Morgan said, the markets "will fluctuate".

I'm going to keep buying the same stuff I've been buying all along.

If the S&P 500 et. al. crashes, I'll rebalance at my trigger point. That worked out fine earlier this year.

For everything else I rely on my AA:
-If the dollar continues to decline, well, about 40% of my equities are international and EM Index funds.
-If the dollar increases, I'm no worse off than I have been these past few years, and I did ok.
-If tech co's fail, well QQQ is only 5% of my portfolio.
-If rates rise, I have very few exposed bonds... mostly stable value.
-If rates decline, stocks will go up too.
-If Large Caps lag, I've significant investments in midcap and smallcap.
etc...
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Tingting1013
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Re: The Fed, Snowflake, and Stocks

Post by Tingting1013 »

WoodSpinner wrote: Wed Sep 16, 2020 9:41 pm
Tingting1013 wrote: Wed Sep 16, 2020 9:20 pm Snowflake’s valuation is unprecedented.

But what should a company that is winning against Amazon be worth?
Note, Amazon is in the Cloud Computing business. Cloud Data Warehousing is just a small subset of that world.
One could argue that data management is the lynchpin of cloud computing, upon which all other workloads are built.
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Re: The Fed, Snowflake, and Stocks

Post by bottlecap »

nisiprius wrote: Wed Sep 16, 2020 6:11 pm
epicahab wrote: Wed Sep 16, 2020 1:25 pm... Is this the mother of all bubbles...
Briefly, yeah, I think it's a bubble. I really do. And I'm doing nothing about it, because based on my direct personal experience and everything I've read and the data I've looked at, there's no point in trying to do anything about it. Anything you can do is no more effective than trying to save yourself in an falling elevator by jumping off the floor just before the elevator hits.
...Strange times, what do you all think?...
I think it always feels strange. It is only in our memories of the past that think there was some Golden Age when things were "normal." We are always "entering uncharted territory."
I largely agree with the first notion.

I'm starting to think the second is a mirage. Yes, we are always in "uncharted territory" because intervention in financial markets has been ever increasing for the last 100 years. But we seem to hit a point where a) we only have stomach for more intervention and b) the only interventionist solution to continue the bubble by forcing investors and banks into ever more speculative investments.

It’s crazy. The solution to a bubble is to reinflate the bubble.

Rates at the window are near zero. I can’t imagine a scenario to correct this that would be palatable to public or the powers that be.

Or maybe I’m just a little pessimistic lately. Or a heretic. Maybe it depends on the day.

JT
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Re: The Fed, Snowflake, and Stocks

Post by boglerdude »

Regarding inflation breaking out...

Circa '66-'86, how did the Fed explain why inflation was over 2%. How did they explain not meeting their mandate for so long

Why'd the gov raise rates vs increasing taxes to slow inflation? Would it be different today?
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Re: The Fed, Snowflake, and Stocks

Post by anoop »

I registered interest in the IPO with my brokerage but got an allocation of 0 shares. :(
(They think very highly of my business.)

But the party is just starting. Per the party organizer, the punch bowl is expected to be available until at least 2023. Since the party organizer has unlimited resources, I don't doubt we'll run out of punch by then. Some of the co-party organizers thought they should keep the punch bowl going until we have a sustained 2% inflation which we may or may not ever get.

Right now I'm just placing small bets regularly with no more than ~1/10 th of the my portfolio invested. I have already made about 25% gains within a few months. Of course, after tax it will probably be closer to 12-13%. If the markets look like they are correcting, I will set out and sit on the sidelines. Otherwise, the general rule is buy on a down day, sell on an up day and make a few bucks, since the general trend is up, up, up.

Keep in mind house builder confidence is at all time highs while the world's biggest landlord is planning to invest $500M in mobile home parks.

Awesomeness all around! Don't just sit this one out. Jump in and join in the fun!!
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Re: The Fed, Snowflake, and Stocks

Post by Seasonal »

Portfolio7 wrote: Wed Sep 16, 2020 9:44 pm The hardest thing for most of us to accept is that understanding a few things about the economy in no way justifies an opinion about market direction. There are mountains of data and hundreds of different market segments (obv am thinking beyond the industry segments) that all have their own intracacies. I'll never understand them all. I mean, I could right now talk Ted and Libor spreads (& more) that suggest smooth sailing, in opposition to everything you just said - but the fact is there's just too much to figure it all out. I'm not that smart, even though my lizard brain is in denial. As JP Morgan said, the markets "will fluctuate".
The market likely moves by comparing reality (economic and otherwise) to its expectations. If reality is better than expected, the market goes up and vice versa. This is why good news can lead to a market decline - the market had expected great news.

If so, you just have to know what the market expects, what reality will be and how the market's expectations will change as a result. Then investing is easy. Alternatively, you can pick an investment policy and stick to it.
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Re: The Fed, Snowflake, and Stocks

Post by whereskyle »

epicahab wrote: Wed Sep 16, 2020 1:25 pm So, the Fed signals that it wants to keep rates low for three more years:

https://finance.yahoo.com/news/fed-fomc ... 45057.html

Canada’s pension fund is reevaluating bond holdings:

https://www.cnbc.com/2020/09/16/singapo ... rates.html

And you’ve got an army of small and large investors bidding up companies like Tesla and Snowflake to absurdly high P/Es:

https://finance.yahoo.com/news/snowflak ... 41815.html

All of this combines to make me think, are we as individual investors now forced to buy equities? Is this the mother of all bubbles in which there’s literally no other things suitable for purchase?

Strange times, what do you all think?
I'd say we're in a bubble on a bubble on a bubble on a bubble on a bubble on a bubble on a bubble on a bubble on a bubble on a bubble by this point. Everything is fueled by debt and all of monetary policy is an attempt to manage that never-ending debt.

Stay the course. I'm buying equities and just bought a house. Someone will eventually use debt to buy these things from me.
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Re: The Fed, Snowflake, and Stocks

Post by lostdog »

There is always a new narrative for the markets. There is never a normal. Don't react to the new narrative with emotion and follow your plan.
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Re: The Fed, Snowflake, and Stocks

Post by Portfolio7 »

Seasonal wrote: Thu Sep 17, 2020 3:35 am
Portfolio7 wrote: Wed Sep 16, 2020 9:44 pm The hardest thing for most of us to accept is that understanding a few things about the economy in no way justifies an opinion about market direction. There are mountains of data and hundreds of different market segments (obv am thinking beyond the industry segments) that all have their own intracacies. I'll never understand them all. I mean, I could right now talk Ted and Libor spreads (& more) that suggest smooth sailing, in opposition to everything you just said - but the fact is there's just too much to figure it all out. I'm not that smart, even though my lizard brain is in denial. As JP Morgan said, the markets "will fluctuate".
The market likely moves by comparing reality (economic and otherwise) to its expectations. If reality is better than expected, the market goes up and vice versa. This is why good news can lead to a market decline - the market had expected great news.

If so, you just have to know what the market expects, what reality will be and how the market's expectations will change as a result. Then investing is easy. Alternatively, you can pick an investment policy and stick to it.
That's not really what I was talking about. My point was that you can't discern market direction by accumulating facts about the economy.

Even so, that feedback loop you describe concerning expectations certainly exists. It's often possible to even be plugged into the gestalt of the day. Then, at some point, nothing makes sense, and it all turns on you. Bill Miller gave back a decade's worth of outperformance in a few years. I've personally taken advantage of it in the past when I thought I had my thumb on the market's pulse, and was reasonably successful for a while, riding the REIT train in the first part of last decade as one example... but it fades, it turns, things go south. If you can show me a decades long track record of significant outperformance, I'd say congratulations, but that type of thing is a pretty rare find in my experience...
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epicahab
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Re: The Fed, Snowflake, and Stocks

Post by epicahab »

I think one bubble indicator is all of these SPACs registering and selling shares for an entity with literally no business activity and only the promise of finding a business to merge with some time in the future. Remind anyone of the South Sea bubble?
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Re: The Fed, Snowflake, and Stocks

Post by Seasonal »

Portfolio7 wrote: Thu Sep 17, 2020 9:50 am
Seasonal wrote: Thu Sep 17, 2020 3:35 am
Portfolio7 wrote: Wed Sep 16, 2020 9:44 pm The hardest thing for most of us to accept is that understanding a few things about the economy in no way justifies an opinion about market direction. There are mountains of data and hundreds of different market segments (obv am thinking beyond the industry segments) that all have their own intracacies. I'll never understand them all. I mean, I could right now talk Ted and Libor spreads (& more) that suggest smooth sailing, in opposition to everything you just said - but the fact is there's just too much to figure it all out. I'm not that smart, even though my lizard brain is in denial. As JP Morgan said, the markets "will fluctuate".
The market likely moves by comparing reality (economic and otherwise) to its expectations. If reality is better than expected, the market goes up and vice versa. This is why good news can lead to a market decline - the market had expected great news.

If so, you just have to know what the market expects, what reality will be and how the market's expectations will change as a result. Then investing is easy. Alternatively, you can pick an investment policy and stick to it.
That's not really what I was talking about. My point was that you can't discern market direction by accumulating facts about the economy.
Agreed and consistent with what I posted.
Portfolio7 wrote: Thu Sep 17, 2020 9:50 amEven so, that feedback loop you describe concerning expectations certainly exists. It's often possible to even be plugged into the gestalt of the day. Then, at some point, nothing makes sense, and it all turns on you. Bill Miller gave back a decade's worth of outperformance in a few years. I've personally taken advantage of it in the past when I thought I had my thumb on the market's pulse, and was reasonably successful for a while, riding the REIT train in the first part of last decade as one example... but it fades, it turns, things go south. If you can show me a decades long track record of significant outperformance, I'd say congratulations, but that type of thing is a pretty rare find in my experience...
A key point is that the market moves by comparing events to expectations. That's a major reason why "you can't discern market direction by accumulating facts about the economy".
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Re: The Fed, Snowflake, and Stocks

Post by Robot Monster »

"When the Fed raised rates in 2015, unemployment was at 5% and officials thought core inflation would end the year at 1.3% and would not hit 2% for three more years. Today, they project zero rates after unemployment reaches 4% and core inflation nears 2%"
Source
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Re: The Fed, Snowflake, and Stocks

Post by hagridshut »

epicahab wrote: Wed Sep 16, 2020 1:25 pm Strange times, what do you all think?
FOMO.

A lot of people got rich on FAANG stocks, nVidia, and Cryptocurrency speculation.

The moment news broke that Warren Buffett was in on the Snowflake IPO, the event became a mad rush to get shares, almost without regard to cost.
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Re: The Fed, Snowflake, and Stocks

Post by rich126 »

hagridshut wrote: Thu Sep 17, 2020 11:18 am
epicahab wrote: Wed Sep 16, 2020 1:25 pm Strange times, what do you all think?
FOMO.

A lot of people got rich on FAANG stocks, nVidia, and Cryptocurrency speculation.

The moment news broke that Warren Buffett was in on the Snowflake IPO, the event became a mad rush to get shares, almost without regard to cost.
I think you meant "without regards to cost". I follow some other financial boards that are more gung ho on tech stocks but even those folks all thought the price was way beyond anything they would buy. They were fine with the IPO price or even at $120 a share but it went way beyond that.

The FED news makes it clear to me that LT treasuries and gold are still good investments for the foreseeable future. I won't say the same for Snowflake.

While BRK's stock has had its issues, the last 3 months it has easily doubled (21% to 9%) the SP500 and is about even with it over 5 yrs. Greatly trails the SP500 over the last year.
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Oicuryy
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Re: The Fed, Snowflake, and Stocks

Post by Oicuryy »

boglerdude wrote: Thu Sep 17, 2020 12:59 am Circa '66-'86, how did the Fed explain why inflation was over 2%. How did they explain not meeting their mandate for so long
The Fed did not get their current mandate until 1977.
https://www.federalreservehistory.org/e ... ct_of_1977

The chairman of the Fed for much of the '70s did not want to cause a recession. He blamed inflation on everything but the Fed.
https://www.richmondfed.org/publication ... ter/hetzel

Ron
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Portfolio7
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Re: The Fed, Snowflake, and Stocks

Post by Portfolio7 »

Seasonal wrote: Thu Sep 17, 2020 9:56 am
Portfolio7 wrote: Thu Sep 17, 2020 9:50 am
Seasonal wrote: Thu Sep 17, 2020 3:35 am
Portfolio7 wrote: Wed Sep 16, 2020 9:44 pm The hardest thing for most of us to accept is that understanding a few things about the economy in no way justifies an opinion about market direction. There are mountains of data and hundreds of different market segments (obv am thinking beyond the industry segments) that all have their own intracacies. I'll never understand them all. I mean, I could right now talk Ted and Libor spreads (& more) that suggest smooth sailing, in opposition to everything you just said - but the fact is there's just too much to figure it all out. I'm not that smart, even though my lizard brain is in denial. As JP Morgan said, the markets "will fluctuate".
The market likely moves by comparing reality (economic and otherwise) to its expectations. If reality is better than expected, the market goes up and vice versa. This is why good news can lead to a market decline - the market had expected great news.

If so, you just have to know what the market expects, what reality will be and how the market's expectations will change as a result. Then investing is easy. Alternatively, you can pick an investment policy and stick to it.
That's not really what I was talking about. My point was that you can't discern market direction by accumulating facts about the economy.
Agreed and consistent with what I posted.
Portfolio7 wrote: Thu Sep 17, 2020 9:50 amEven so, that feedback loop you describe concerning expectations certainly exists. It's often possible to even be plugged into the gestalt of the day. Then, at some point, nothing makes sense, and it all turns on you. Bill Miller gave back a decade's worth of outperformance in a few years. I've personally taken advantage of it in the past when I thought I had my thumb on the market's pulse, and was reasonably successful for a while, riding the REIT train in the first part of last decade as one example... but it fades, it turns, things go south. If you can show me a decades long track record of significant outperformance, I'd say congratulations, but that type of thing is a pretty rare find in my experience...
A key point is that the market moves by comparing events to expectations. That's a major reason why "you can't discern market direction by accumulating facts about the economy".
I get your point better now, agreed.
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Re: The Fed, Snowflake, and Stocks

Post by Robot Monster »

Oicuryy wrote: Thu Sep 17, 2020 12:27 pm
boglerdude wrote: Thu Sep 17, 2020 12:59 am Circa '66-'86, how did the Fed explain why inflation was over 2%. How did they explain not meeting their mandate for so long
The Fed did not get their current mandate until 1977.
https://www.federalreservehistory.org/e ... ct_of_1977

The chairman of the Fed for much of the '70s did not want to cause a recession. He blamed inflation on everything but the Fed.
https://www.richmondfed.org/publication ... ter/hetzel

Ron
"The FOMC adopted an explicit inflation target of 2 percent in January 2012...Although the FOMC didn’t explicitly name an inflation target until 2012, St. Louis Fed President James Bullard has argued that the U.S. had “an implicit inflation target of 2 percent after 1995.”
Source

"In 1996, Fed policymakers privately agreed that their target for inflation was 2 percent, but, at Greenspan’s insistence, they didn’t tell anyone. In 2012, at the urging of then-Chair Ben Bernanke, the Fed formally and publicly announced that they were targeting a 2 percent inflation rate."
Source

Would appear there is nothing much stopping the Fed from adopting another inflation target, as, indeed, the above source suggests:
"One alternative to the Fed’s current approach would be to keep targeting the inflation rate, but to raise the target from the current 2 percent, perhaps to 3 percent or 4 percent."
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Re: The Fed, Snowflake, and Stocks

Post by Tingting1013 »

From the WSJ:

Image

:shock:
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Re: The Fed, Snowflake, and Stocks

Post by Robot Monster »

Now We Know Who at Berkshire Invested in Snowflake, and Why

Small extract:
But even [Snowflake CEO Frank] Slootman thinks Snowflake's stock action was nutty last week...When asked if the company left money on the table by not pricing the shares even higher, Slootman responded:

We need to live with our investors for a very long period of time, so we try to sign up people that can hold multibillion-dollar positions, people that don't chase momentum up or down, and people that want to sign up for the mission for five or 10 years. And so that's a very different crowd from the people you saw on Wednesday, that were chasing this thing up. They were buying, you know, at any price. And there was zero discipline that has, you know, been pointed out by other observers.
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Re: The Fed, Snowflake, and Stocks

Post by chassis »

Grt2bOutdoors wrote: Wed Sep 16, 2020 1:45 pm
Tigermoose wrote: Wed Sep 16, 2020 1:34 pm Let it ride!

My opinion is that the governments of the world and their central banks will always provide more liquidity and increase the money supply in the face of economic slowdowns or possible depressions. That leads me to believe that inflation is coming. So buy some real assets (such as real estate) and equities and let it ride!
Coming? It’s here, it’s been here for a while. This is a service economy, the price of services is through the roof. When plumbers and electricians are charging doctors prices you have a problem. The auto mechanic is charging $110 an hour for labor. There is plenty of inflation.
Mercedes dealers charge $200 per hour, a brake job (pads and rotors at a dealer) costs what it did 10 years ago, bacon is the same price at the grocery store as it was 30 years ago, and gasoline is $2.00 per gallon. Inflation is not here, yet.
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Re: The Fed, Snowflake, and Stocks

Post by TheLaughingCow »

chassis wrote: Sun Sep 20, 2020 8:56 pm
Grt2bOutdoors wrote: Wed Sep 16, 2020 1:45 pm
Tigermoose wrote: Wed Sep 16, 2020 1:34 pm Let it ride!

My opinion is that the governments of the world and their central banks will always provide more liquidity and increase the money supply in the face of economic slowdowns or possible depressions. That leads me to believe that inflation is coming. So buy some real assets (such as real estate) and equities and let it ride!
Coming? It’s here, it’s been here for a while. This is a service economy, the price of services is through the roof. When plumbers and electricians are charging doctors prices you have a problem. The auto mechanic is charging $110 an hour for labor. There is plenty of inflation.
Mercedes dealers charge $200 per hour, a brake job (pads and rotors at a dealer) costs what it did 10 years ago, bacon is the same price at the grocery store as it was 30 years ago, and gasoline is $2.00 per gallon. Inflation is not here, yet.
Perhaps your gasoline is cheap, but have you tried to purchase college textbooks or urban real estate recently?
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Re: The Fed, Snowflake, and Stocks

Post by garlandwhizzer »

Warren made $800,000,000 on the first day of trading in Snowflake. Financial firms that underwrite IPO offerings keep huge blocks of the initial offering which they make available to their firm's biggest and most important whale investors at the opening price. Certainly Berkshire Hathaway is a such a whale investor. Individual investors have no such opportunity for hot IPOs. They must buy after the market takes off. The big firms that run the hot IPOs sell to their most prized clients before the opening at the anticipated opening price. Many observers believe that such firms when they know they have a hot new tech IPO, purposely pick a low opening price basically as a payoff for whales who bring big trading bucks their way. It is hard for me to believe that all the brilliant and experienced executives at the firms that brought Snowflake public--Goldman Sachs, Morgan Stanley, Citigroup, JP Morgan, etc.--are so clueless that they missed the offering by 100%. Instead I suspect they low balled the initial price so their biggest clients who got it on the cheap could make a killing fast at the expense of little guys.

https://markets.businessinsider.com/new ... 029599049#

Quote from article:
Warren Buffett's holding company held roughly $730 million worth of shares at the start of Wednesday. In its first day of trading following its $3.4 billion IPO, Snowflake closed 111% higher than its offering price of $120.

Berkshire's position included $250 million worth of Snowflake shares purchased at their IPO price. The rest of the stake consisted of stock bought from another shareholder at Snowflake's debut price. Basing Buffett's gains on Snowflake's IPO price, the legendary investor's gains surpassed $800 million as his stake ballooned to $1.55 billion by Wednesday's market close.
I do not believe that Warren has abandoned his value slant in favor of tech high flyers. Instead I believe he anticipated this price action on opening day. I suspect he views Snowflake very positively as a long term investment IF PURCHASED AT A 100% DISCOUNT TO MARKET PRICE. Whether he views it as a long term holding I don't know. He can sell his stake at any time now and make a killing. He's the same old guy, with a sharp eye out for unusual opportunities and not afraid of taking risk when he finds one.

His experience with APPL has been outstanding. In some ways APPL is a value stock at least relative to say AMZN, TSLA, and ZOOM. Unlike typical value stocks APPL has massive positive cash flow, a very wide moat, 192 million in cash sitting on the balance sheet, and a compelling global business model that will continue to produce massive profits for years whatever direction the economy goes in. It's not the traditional low PE, PB value stock but it's entirely possible that it may be what passes for value going forward--a bullet-proof, rapidly growing business that is not selling at an absurdly outrageous price. AMZN has been selling at absurd levels of PE, PB since it started and yet it just keeps on getting more and more absurd as time passes. Can this keep going? I doubt it. I've looked at buying it multiple times in the last 15 years but its excessive valuation always soured my enthusiasm.

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Re: The Fed, Snowflake, and Stocks

Post by Grt2bOutdoors »

chassis wrote: Sun Sep 20, 2020 8:56 pm
Grt2bOutdoors wrote: Wed Sep 16, 2020 1:45 pm
Tigermoose wrote: Wed Sep 16, 2020 1:34 pm Let it ride!

My opinion is that the governments of the world and their central banks will always provide more liquidity and increase the money supply in the face of economic slowdowns or possible depressions. That leads me to believe that inflation is coming. So buy some real assets (such as real estate) and equities and let it ride!
Coming? It’s here, it’s been here for a while. This is a service economy, the price of services is through the roof. When plumbers and electricians are charging doctors prices you have a problem. The auto mechanic is charging $110 an hour for labor. There is plenty of inflation.
Mercedes dealers charge $200 per hour, a brake job (pads and rotors at a dealer) costs what it did 10 years ago, bacon is the same price at the grocery store as it was 30 years ago, and gasoline is $2.00 per gallon. Inflation is not here, yet.
Price of car is what? My head gasket job is being quoted at $2K, 5 years ago the same job was $1200. No inflation huh? The price of bacon may be the same but the price of produce is up, oatmeal is up, health insurance is up, Insurance for home and auto is up. My personal inflation level is up. There’s plenty of inflation. P.S. eating bacon 24/7 is bad for you unless your name is George Hormel.
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unclescrooge
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Re: The Fed, Snowflake, and Stocks

Post by unclescrooge »

garlandwhizzer wrote: Sun Sep 20, 2020 9:29 pm I suspect he views Snowflake very positively as a long term investment IF PURCHASED AT A 100% DISCOUNT TO MARKET PRICE.
Mathematically, it would be a 50% discount. 100% discount would imply he got the shares for free.
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Re: The Fed, Snowflake, and Stocks

Post by Seasonal »

Grt2bOutdoors wrote: Sun Sep 20, 2020 10:43 pm
chassis wrote: Sun Sep 20, 2020 8:56 pm
Grt2bOutdoors wrote: Wed Sep 16, 2020 1:45 pm
Tigermoose wrote: Wed Sep 16, 2020 1:34 pm Let it ride!

My opinion is that the governments of the world and their central banks will always provide more liquidity and increase the money supply in the face of economic slowdowns or possible depressions. That leads me to believe that inflation is coming. So buy some real assets (such as real estate) and equities and let it ride!
Coming? It’s here, it’s been here for a while. This is a service economy, the price of services is through the roof. When plumbers and electricians are charging doctors prices you have a problem. The auto mechanic is charging $110 an hour for labor. There is plenty of inflation.
Mercedes dealers charge $200 per hour, a brake job (pads and rotors at a dealer) costs what it did 10 years ago, bacon is the same price at the grocery store as it was 30 years ago, and gasoline is $2.00 per gallon. Inflation is not here, yet.
Price of car is what? My head gasket job is being quoted at $2K, 5 years ago the same job was $1200. No inflation huh? The price of bacon may be the same but the price of produce is up, oatmeal is up, health insurance is up, Insurance for home and auto is up. My personal inflation level is up. There’s plenty of inflation. P.S. eating bacon 24/7 is bad for you unless your name is George Hormel.
Inflation is a general increase in prices. There are always some things that go up in price as well as other things which go down. Sometimes the things which go up are very noticeable, but that does not mean inflation has necessarily increased. The CPI, or the PCE or the billion prices project, measure a general increase and those are not showing much inflation.

You may be experiencing meaningful increases in prices in things that are important to you, and that can have a major impact on your spending, but that doesn't mean everyone is experiencing an increase. Personal inflation is significant for those experiencing it, but it's not the general increase in prices that defines inflation.
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