Discover more from The Vagabond Way
Bear Markets Breed The Best Bulls
We are in a global bear market at the moment. Brown bear, Polar Bear, Yogi bear. let's see when Ferdinand the Bull will drop by
Since the rate hike mission begun by Central banks around the world almost a year ago, we have seen a global crunch in credit, liquidity, and stonks. Everything is down as the cost of borrowing has skyrocketed, and we still have high inflation levels to put a bow on it.
You would have seen a very flashy sales guide last week, but we primarily post on very nerdy macroeconomic material. Today we will try and predict the next bull market and most likely fail too.
Thanks for reading Vagabond Research! Subscribe for free to receive new posts and support our work.
A few months ago, we predicted that the pain could only last for so long. Markets could only take so much pain before they began caving in. In one article, we outlined how the mortgage cliff was fast approaching, where the bait and switch from Fixed rate to Adjustable rate mortgages in Australia would affect over $500B worth of mortgages. If you want to have a more solid understanding of how we got here, read below.
We said it was possible that Central banks around the world were beginning to understand that rampant inflation was a long-term issue that would have a degree of stickiness. Ultimately poor and risky assets would be the first to be cut. And then SVB collapsed, and soon after, we saw IB behemoths UBS and Credit Suisse teeter on the brink. But by economic standards, this is now modern history. Even if the RBA paused rates and the FOMC followed, what exactly does this mean for you, and how can you capitalize?
TECH IS SEXY, BUT IT IS DEAD
We have ONE overarching rule for you. Find the vacuum and Fill it.
You MUST zoom out from individual stocks, crypto, commodities, and fashion industries to cultivate your thesis. We cannot give financial advice and are not pretentious enough to say this information is gold. All we can do is follow my nose and write about it occasionally.
Although Covid is in the rearview mirror, the ensuing supply chain crisis and its effect on markets remain. You need to look at out-of-favor assets and industries which are not in the news. When you buy a ramping tech stock, you will most likely be someone else’s exit liquidity.
Industrials, Manufacturing, Chemicals, and hospitality are industries to look out for. Covid hammered these industries, and unlike drop shipping clients, the supply chain crisis meant lumbar importers were not getting their wood on time. Therefore creating a severe Imbalance between buyers and sellers. Sellers called the shots, and wood was gold at one point.
You must look at industries still suffering from supply chain shocks, trading at consistent lows, and having a history of resilience. Tech companies are a dime a dozen; that timber company in your neighborhood has probably been there since 1850. In short, look deeper if it’s listed, survived Covid/Inflation, and is printing quite profits. They may not be 20x in 2 years but may be 5x in 5 years.
Your money is precious; don’t blow it on leveraged call options for Tesla… Also, use Chat GPT. See what a quick search yielded:
Treat the market like it’s 2009
All those Warren Buffet quotes about blood in the streets are relevant now. Don’t just hang wallpapers of the fella. Apply his tactics.
Equities are trading at all-time lows, and there is blood on the streets. That stock you saw trading at 100x during the stimulus cheque area will most likely be trading at cost. Obviously, apply the knowledge above and find sectors out of the news. As lame as it sounds, researching the global price of Timber and platinum will provide more insight than a 30-minute guru video on youtube.
One possible line of thought to follow. When Lumbar was expensive, Manufacturing and Homebuilding equities suffered as it was a seller’s market. However, as lumbar prices stabilize, more and more companies will be able to source raw materials and produce more whilst trading on low share prices.
Learn How To Actually Invest
You must do the hard yards. We are currently doing this. YOU WILL NOT LEARN STOCKS on Social media. This knowledge is found in textbooks and spreadsheets. The most basic thing you must learn is how to read financial statements: the income statement, the balance sheet, and the profit & Loss statement. Supplementary knowledge includes analyzing market-sensitive announcements and their effect on stocks. Examples include the Vesting of shares, new deal signatures, new product releases, and notable resignations.
If you can also learn how to read order flow, you will be in better hands than 80% of traders; however, this is incredibly complex, and you are going up against proprietary and High-Frequency Traders. Here’s a piece of advice for free. Bots will outpace your trading in short time frames. HOWEVER, algorithms and GPT cannot digest financial information in longer time frames and make judgment calls. Although some funds will probably find a way to do this, the layman will be tricked into thinking his chatGPT prompt represents an accurate historical perspective of how certain markets performed. It does tend to make stuff up when it has no idea what to output. This is why we like to invest long-term and not day trade.
To wrap it up, our short-term prediction is a global jump in market sentiment if rate hikes pause, hinting at a new day that a sudden uptick will follow in Inflation. This will worry Powell and his counterparts worldwide, and there may be a handful of rate increases to drive Inflation down and make it manageable in the long run. Then we will finally see rate cuts in EOY 2023 and a brighter Q4 2023 - Q1 2024.
You must be well-placed to capitalize to take advantage of the next boom. You can make mistakes for cheap as markets are slow. You can test yourself now and learn how markets operate.
Because trust us, you’ll be too busy making money in the bull run to be reading accounting textbooks.
Thank you for reading our work and supporting our message🗡️