We cannot say for sure man. Lot of these companies financed in low interest rate. We have to wait for 2024 too see how deep the bubble is in tech.

Inflation and an actual war do not go in the opposite direction. I think we can both agree on this. If market senses war 5yr breakevens will go up and cause bond yields to go up as well. Fed will be forced to do yield curve control if 10yr starts going over 6%.

If you look at any war rhetoric man. There has been a skyrocketing inflation with sky high yields. The reason being Fed started printing money for wartime financing. This is the only reason inflation goes up. And yah i totally get your point. War causes stock market to go up. But you need to also remember markets usually drop before the start of the war. That means market has to has to drop right now and then when war officially announces we go in the massive bull run that no one will ever imagine.

Now lets dissect this bull run of war coz i have my some doubts. Maybe you can help me out. If you look back at history. WW1 and WW2 these two wars had PE range 10-20 and when inflation comes around suppose 10%. You used to subtract high PE - inflation rate. And then it was basically the EPS boost that caused the stock market to go up massively. So now lets put this Peter Lynch theory to test.

Scenario 1 : War in 2023 itself. High PE 25 - Inflation rate i.e. 4-5% range. PE will never go above 20. Now you can put your favorite EPS here. Even with 250 you're maxed out at $5000.

Scenario 2 : War in 2024. Inflation will be 2-3%. Max PE 22. Lets say EPS grow to 270 which btw is too high. SPX will be maxed out at $5900.

I mean is this the bull run you want ?

Now circling back to Biden bringing manufacturing in Usa. You do know right that the Usa has to find workers for that. Thats inflationary and yah ofc it will boost gdp and keep labor market strong. But in all of this youre forgetting one major important detail. The way Usa worked in all of the past decade is because of tech and not manufacturing. Manufacturing is what caused the stock market to go in a massive bull run in Ww1 and Ww2 but this time its tech. Tech thrives on low inflation and interest rates and hence this boosted the stock market to a 14yrs of bull run. Its the top 6 tech companies that has more % weighted to index. So tech has to go bust when a lot of these companies will have to refinance in 2024 and that would mean the biggest stock market crash in history somewhere around 2023-24. Timing it will be so so hard. No one in this planet is that good. And after tech goes bust then we can have your favorite bull run of manufacturing. Also don't forget that a lot of these tech workers are actually immigrants who mostly come from Asia. 70% of people in Silicon valley are from rest parts of the world. I mean it would be quite funny if those workers dont protest a/g war and simply just do what they are told.

Overall result : I dont know whats going to happen but i can tell you one thing for sure. If we are headed to inflationary world caused by manufacturing coming back home, labor markets strong, gdp strong and war then my friend youre asking for a tech bubble to pop somewhere in 2023-24. Nasdaq and S&P500 will go down. I cannot say the same about Dow Jones coz its industrial average. Housing will not pop coz inflation will remain higher. Metals, Energy and Oil will go higher as well. There is going to be a bull market but not in tech.

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Yah i get it. But i also know we had the 2nd greatest wipe out of all time in the past decade. The first one happened when rates were at 0%. So from my pt of view i don't really see another one coming.

As for your arguments about 2005-08 times. If you look back at those times the PE ratio were basically trading at 16-18. Then Fed cut rates in 07 and PE skyrocketed but so did the equity risk premia and therefore market had already topped out in 2007 and we got the "Fed pivot" crash. The time around we are already there at 18-19 PE levels. We just need Fed to cut rates and blow up the Erp. But Fed aint doing that coz it thinks job market is still strong and inflation is sticky. So they will hold those rates. Meaning a low PE will meet a low EPS somewhere down the line and then Fed will be forced to pivot. But i think it will be too late by then. The damage will be more severe by 2024.

I love you too.

So then it means a low PE ratio of below 18 will meet a low EPS somewhere down the line in range of 210-200.

What's going on there ?

Dude bond prices are +ve correlated with stock price. That means when bond go down i.e. bond yields go up then stock market should drop as well. This is what it means to be +ve correlated in high inflation which it clearly isn't rn.

And yes i agree gold was overbought af but so is stock man especially on the tech side.

As your friend Steve said " Paradigm shift takes time. People don't easily give up on their principles of investing " Hence i believe that one day market will come up to their senses that rates are actually at 5% (could go 6% if sticky inflation theory is correct) not 0%. That means something for equities valuations.

Thanks man.✌️

Yah man. season 2 has been horrible since middle. 😓 Opening episodes were great Oct 2nd week being the perfect bottom.

Now my only hope is finale doesn't disappoint. Thanks for still trusting me man. ✌️

3, 10, 23, 24, 23, 01

Yup looking at Ueda san past he wont let go YCC that easily. Although he will have to hike rates this year if Mr Kuroda doesn't hike in his last meeting.

Widening of Ycc to 75bps from 50bps is the safest bet you can play if none of the above happens.

Yah but it only works if inflation goes under 4% or sometime 5% and fall off the cliff which could happen in back half of 2023 as CPI major component is housing. I already discussed that "Barrons article" few letters ago.

"Bonds price will go up, stocks price will go down" eventually.

But before this happens i was discussing the theory for 1H 2023 where inflation might feel sticky and Fed could go beyond 5.1% Dec SEP projections. Another reason Japan. These both factors could push 10yr bond yields above 4% and cause rise in Erp.

How ? Isnt it pretty easy forward that Equity risk premia has gone to historic lows which is stopping markets from having a significant pullback or a bear mkt rally crash.

Correction : I wrote Mr Kuroda will widen the band on 10yr JGB from 25 to 50bps. It should be 50bps to 75bps.