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Originally Posted by kiora
"index fund inflows are now distorting prices for stocks and bonds in much the same way that CDO purchases did for subprime mortgages more than a decade ago. The flows will reverse at some point, he said, and “it will be ugly” when they do."
https://finance.yahoo.com/news/big-s...104146627.html
Well Michael Burry got lucky calling the subprime crash. I recall after he went investing into water / drinking water assets ; so how did that turn out? Eitherway, it's drastically different to call ETFs or Index Funds to be comparable to complex derivatives and level of risk associated in the GFC. Furthermore, we need to question why Warren Buffet insists on just buying the index fund is the best strategy for the typical investor than to just try and time and pick stocks. For good reason because even the expert managed funds that pick individual stocks door a poor job beating the index.
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Micael Burry's liquidity risk argument is a good one imo, not sure about the rest stacking up.
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Originally Posted by Joshuatree
Micael Burry's liquidity risk argument is a good one imo, not sure about the rest stacking up.
I'm not seeing liquidity as a problem. Even during 2008 / 2009 did the DOW and S&P500 lose out on liquidity? Not even a hope in chance. Though I do agree liquidity is a risk in small cap stocks for the simple reason that the kind of investors that buy such sub $1/share stocks tend to be more trigger happy at exiting their positions; it's a issue of quality vs issue of liquidity. Large caps are long running companies that have tested through decades of stock market crashes, therefore the investors buying such stocks tend to hold them longer or less likely to sell off. Likewise in a recovery, they're more likely to rebound while the small caps you'll find the vast majority just disappear. In a sense, Mr Burry is ignoring the "quality" aspect of investing in stocks.
Now for a brief moment, let's look at the NZ stock market. Is there an explanation why liquidity has been drying up in the NZX? The large hedge funds looking to buy NZ stocks are well aware of the major liquidity risk involved. As all brokers i've spoken to in NZ, if a person had $1M invested in any NZX share, how quick could the investor buy or sell that single NZ listed company without going unnoticed when the share price spikes or drops so quickly? Just look at the commission scheme NZ brokers work on - large positions are costly to buy and sell and must be done over a spread, many days or weeks resulting more commissions for the brokers. My belief why the NZX is drying up is more to do with gov't regulations (ie the FMA) and many brokers in the US for eg. have simply exited the NZ share market and thus, for their clients operating hedge funds.
I did enjoy the movie The Big Short. But the reality is there's countless of guys like Mr Burry that simply got lucky. Even Buffet himself said he was lucky on his performance record. You have guys like Robert Kyosaki (Rich dad....poor dad) calling each year that the stock market will crash, sooner or later he will guess it right. But no one knows with certainty year after year where the markets will go.
I strongly advise investors (especially new into this game) to at least spend the full 12 minutes watching Buffet do a spew against hedge funds (ie. managed funds, Kiwi Saver funds, any portfolio where they try to beat the index by trying pick winners).
https://www.youtube.com/watch?v=xp9KUCel778
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Member
Originally Posted by SBQ
Well Michael Burry got lucky calling the subprime crash. I recall after he went investing into water / drinking water assets ; so how did that turn out? Eitherway, it's drastically different to call ETFs or Index Funds to be comparable to complex derivatives and level of risk associated in the GFC. Furthermore, we need to question why Warren Buffet insists on just buying the index fund is the best strategy for the typical investor than to just try and time and pick stocks. For good reason because even the expert managed funds that pick individual stocks door a poor job beating the index.
He also went long Gamestop, so far not looking like a good bet. https://markets.businessinsider.com/...9-9-1028516635
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Originally Posted by kiora
"index fund inflows are now distorting prices for stocks and bonds in much the same way that CDO purchases did for subprime mortgages more than a decade ago. The flows will reverse at some point, he said, and “it will be ugly” when they do."
https://finance.yahoo.com/news/big-s...104146627.html
Yep as ugly as it can get?
https://www.marketwatch.com/story/wh...eo_top_stories
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Yep
Couldn't get much uglier when investors looking for liquidity
“It was a flight to cash,” says Kenneth Nutall, a financial planner at BlackDiamond Wealth in Wilmington, Del. “People were selling whatever they could sell and were selling whatever was liquid.”
https://www.marketwatch.com/story/mo...of2&yptr=yahoo
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Originally Posted by kiora
Yep
Couldn't get much uglier when investors looking for liquidity
“It was a flight to cash,” says Kenneth Nutall, a financial planner at BlackDiamond Wealth in Wilmington, Del. “People were selling whatever they could sell and were selling whatever was liquid.”
https://www.marketwatch.com/story/mo...of2&yptr=yahoo
"In a regular correction or bear market, retail investors typically cash in stocks but hold close to their bonds, which are seen as a safe haven and usually go up in value."
Thanks to gov't bail outs and a fully comprehensive funding plan by all gov'ts around the world and by the World Bank and IMF, we're not seeing much of a crash like before. So far the recovery has been strong and confidence is back. The underlying message in that article is, people are so sick of low % returns from the bond market that they're better off moving it to equities. We're talking even wealthy seniors that traditionally should hold their assets in fixed term deposits that are flee out of bonds because... 1 or 2% a year just doesn't cut it anymore.
Never let the opportunities of a crisis go unused!!! I do feel the worse is past regardless of the bad news coming out.
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The shareholding notices seem to indicate its the insto's buying
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Could be interesting.8 am Sunday,this morning
"Yahoo Finance is the exclusive online host of the 2020 Berkshire Hathaway Annual Shareholders Meeting which takes place on Saturday, May 2nd. Live coverage begins here at 4:00pmET. Investors and non-investors alike can witness history, live, as Berkshire Hathaway Chairman and CEO Warren Buffett shares his unscripted views on the company, the markets, the economy, corporate governance, and a lot more. Please join us here for this unique event on Saturday May 2nd at 4:00pmET."
https://finance.yahoo.com/brklivestream/
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Originally Posted by kiora
Could be interesting.8 am Sunday,this morning
"Yahoo Finance is the exclusive online host of the 2020 Berkshire Hathaway Annual Shareholders Meeting which takes place on Saturday, May 2nd. Live coverage begins here at 4:00pmET. Investors and non-investors alike can witness history, live, as Berkshire Hathaway Chairman and CEO Warren Buffett shares his unscripted views on the company, the markets, the economy, corporate governance, and a lot more. Please join us here for this unique event on Saturday May 2nd at 4:00pmET."
https://finance.yahoo.com/brklivestream/
Warren's message, don't bet against America. Do you agree ?
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