Replies to post #102184 on Mohacsy's Safe Portfolio Member Forum

[dexprs]

Eric, if we are looking at a strong market for the rest of this decade, teck will be strong, but I think the financials will take the lead for a while. New Bulls are rarely lead out by the leaders of the previous Bull.

[gfp927z]

Santafe2, Thanks for the insights. With all the variables and uncertainties, there's a lot to be said for simply owning quality stocks and holding them longer term. As you said -

>> "just buy GOOGL and forget about it for five years. That is, buy great companies with excellent management" <<



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[10nisman]

Let's start with the overarching question: Is this a secular or cyclical bear market? There is still some disagreement on this point but while there are still several unresolved issues I see a very strong economy over the rest of this decade as AI, robotics, advanced medicine, CO2 mitigation and Internet 3.0 begin to seriously drive economic growth.

Fairly obviously from my posts, I think this was a cyclical bear and the market is looking forward past the war in Ukraine, supply chain issues, inflation, over supply of retail stuff, re-shoring, a possible Chinese real estate disaster and a few things I'm not thinking about today. When the market looks this strong in the face of this many issues, I listen.

If you see a very strong economy ahead, then you should be factoring in significantly higher interest rates. A portion of current inflation is obviously transitory (i.e., Ukraine, China shutdowns, some of the supply chain issues, etc.), however, you're not factoring in stickier costs like rents, wages, etc. Higher wages leads to stronger consumption / demand and thus, inflation at significantly higher levels than we've seen for the past decade plus. Also, onshoring and climate related investment/energy are inherently inflationary. If the Fed wants inflation at or near 2% (they may settle for 3-4%), it means rates need to move significantly higher (i.e., at least 4%). Also, you've not factored in the Fed has trillions of dollars of QT to unleash over the next couple of years. Sounds like you're up for fighting the Fed.

What are bonds telling us? The 10-year note is still under 3% and 30 year mortgages are about 5%. Unless we think bond investors are idiots which we know they're not, inflation is not the problem we should be looking at.

Everyone says this, yet Bond investors took it in the shorts very badly earlier this year and they think buying 10 - 30 year bonds yield 2-3% is a great investment. But, let's assume your statement "Bond market investors" are right today. If they thought there was going to be very strong economic growth over the next decade, they wouldn't be willing to buy 10 years at sub 3% --- they would demand significantly higher rates. So, either the bond market is right and we'll see significantly lower economic growth ahead, or they are wrong and rates will need to be significantly higher (i.e., 10 year at 5% or higher).