Fed rate increase = lower hifi prices?

Market is still not happy. Sometimes the best stock investment advice is not to invest.

https://fortune.com/2022/05/02/morgan-stanley-stocks-fall-sp-500-earnings-growth-slows/

Whose crystal ball is best?

That is an EXCELLENT question. In all my years of experience the answer that seems most likely to me is NOBODY’S. And that certainly includes me. Any model can make someone a hero at a point in time, then the market shifts and you’re a dinosaur. Anecdotal note: after Elaine Garzarelli called the crash in 1987 she was on top of the investment strategy world, but she was absolutely paranoid after that because she knew her rep would be tied to calling when to get back INTO the market. She’d call me monthly (she was a client of ours) to see if our models were supporting what hers were saying to give her peace of mind that she wasn’t missing the boat. Point is, even the best know their crystal ball is right only some of the time.

Anyway, It seems I’ve come across as an arrogant ass here, and for that I apologize. The fact is, the longer you do this and if you’re a realist and smart, the biggest thing you learn is humility. My crystal ball is possibly no better than anyone else’s, although I’ve had the benefit of unlimited data and the ability to test and refine it over time. And I agree with many of the insightful points that have been made here. The only difference is I’ve had the opportunity to test my models and refine them into fairly reliable predictive buy/sell indicators over close to 40 years. If you believe in your assertions made here, I’d encourage you to track your own models against the market and try to create upper and lower bounds bounds that denote reliable buy or sell signals over time. Then you’ll be able to put your ideas to work for you in a truly objective and quantifiable way if you really believe in them. I’ll warn you ahead of time, it’s not quite as easy as it sounds, but it can be well worth the effort. I’ll just leave it there and say peace out. Best of luck!

It's the internet @soix, no worries. I find if you push smart people, it makes them think more and you learn more from them. I meant it quite honestly. I have no ego in this area and I did read everything you said looked deeper into some things I have not followed as closely as I could, etc. I have a financial advisor, I regularly talk to our economists and analysts are work because how and what we build is so tightly tied to related commodities, and do my own research.  My advisor encouraged me to invest more after the initial pandemic drop and he was absolutely right and I followed his advice. He thought I was taking too much of a risky position w.r.t. commodities late last year, but that turned out very well. I didn't follow his advice as well as I could w.r.t. Covid medical investments.  Any time human nature can play a huge role in the outcome, nothing is easy.

@deludedaudiophile

I find if you push smart people, it makes them think more and you learn more from them.

Case in point, you’ve got me thinking about the value of using the real earnings yield as part of an indicator. The thing is, you really can’t just use the earnings yield alone as an indicator because it’s always in the context of the current economic environment (i.e. an earnings yield of 5% with rates at 3% is completely different from a 5% yield with rates at 8%). So, to take that into account you need to view it relative to something like bond yields to see what it’s really signaling. I use nominal bond yields in our model so that’s why I’m using a nominal earnings yield, but if you’re up for it I’d highly encourage you to explore using the real earnings yield in some fashion to see if it offers useful predictive abilities. I’d certainly be interested in anything you find.

@soix ,

You have nothing to apologize for. If anything, hearing from you was educational and sobering.

All the best,
Nonoise