Author Topic: Market Wraps Up Worst Year Since 2008  (Read 1661 times)

rcjordan

  • I'm consulting the authorities on the subject
  • Global Moderator
  • Hero Member
  • *****
  • Posts: 15063
  • Debbie says...
    • View Profile
Market Wraps Up Worst Year Since 2008
« on: December 31, 2022, 12:42:53 AM »

The benchmark S&P 500 slipped 9 points on Friday to close the year at 3,839, down nearly 20% in 2022.

The Dow fell 73 points to close the year at 33,147, down about 9% in 2022.

The tech-heavy Nasdaq fared worst of all in 2022: It fell 11 points on Friday to close the year at 10,466, down about 33% since January.


https://www.newser.com/story/329746/dow-wraps-up-worst-year-since-2008.html

ergophobe

  • Inner Core
  • Hero Member
  • *
  • Posts: 8539
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #1 on: December 31, 2022, 02:37:41 AM »
I will as a minimum fully fund my IRAs in an index fund* this year.

I missed some years when I was trying to pay off my mortgage as fast as possible and that was probably an error, though killing the mortgage gave me more peace of mind than adding to savings while staying in debt. But you can't then catch up on the IRA after the fact. Now, regardless of the market, I just max it out in a target retirement date fund. That was an excellent decision in 2020 when I did it near the market bottom. A much less good decision in 2022. But I'm just not sophisticated enough or attentive enough to save any other way.
« Last Edit: December 31, 2022, 02:41:12 AM by ergophobe »

littleman

  • Administrator
  • Hero Member
  • *****
  • Posts: 6180
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #2 on: December 31, 2022, 03:54:51 AM »
I am really happy to not have invest in tech this year.  I have always been tech-avers when it comes to investing, and many years I've missed out on hive-mind gains, but I've missed out on those bubble pops too.  I feel bad for those TSLA investors.

buckworks

  • Inner Core
  • Hero Member
  • *
  • Posts: 1576
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #3 on: December 31, 2022, 04:42:30 AM »
>> probably an error

Don't be too quick to think that. Considering what's happening to mortgage interest rates these days, being mortgage-free has more value now.
 
>> peace of mind

That is a high, high value.

>> error

I recently listened to an audiobook about finances and one of the author's points was that savvy investors <expect> that they'll have some mistakes and bad luck in their mix. We need to make enough good decisions to outweigh the bad but we don't need to be perfect to make financial progress.

Brad

  • Inner Core
  • Hero Member
  • *
  • Posts: 3918
  • What, me worry?
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #4 on: December 31, 2022, 11:06:59 AM »
>tech

The only tech I would consider are renewable power generation resources, like companies that make wind turbines or solar especially in the US and EU.  I haven't looked so they might not be down in value, but given climate change and the cutoff of Russian oil and gas that seems like a good bet for what i call "tech".

rcjordan

  • I'm consulting the authorities on the subject
  • Global Moderator
  • Hero Member
  • *****
  • Posts: 15063
  • Debbie says...
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #5 on: December 31, 2022, 05:25:43 PM »
> renewable power generation resources

Ditto

BoL

  • Inner Core
  • Hero Member
  • *
  • Posts: 1159
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #6 on: December 31, 2022, 06:03:38 PM »
After selling my old place 18 months after moving into a new one, I dipped into a share ISA. Took a wee bit of a hit since April but sticking with it, though a chunk of the proceeds are upgrading/insulating the house. Pay rose with inflation but not energy price inflation...

>renewables

That Ripple energy I invested into (as a co-op)... their live project is now paying 27p/kWh. I'm in for 4400kWh/y in their next project. I use about 2200kWh for the house, expected price next year is meant to be 60p kWh so effectively free at these rates. Lifespan of 25/y but at these nutty prices I'll make my money back in 2/3 years... more importantly will be shielded from future spikes.

Also invested into Greencoat UK Wind PLC, currently at 5% divi yield, decent market cap but funded by some debt with rising interest rates.

I noticed some news recently about the EU being taken to court on their cap. The 'energy price cap' raised in UK parliament threatened this kind of scheme but has been reserved for larger non-community/co-operative wind farms. The limit being something around 20p kWh. It's a bit surreal that the green/cheap providers are being clobbered because of fossil fuel market rates (and at least in the UK, the consumer gets clobbered) 

Bar a fossil fuel price crash or nuclear fusion, pretty confident a 25 year investment in something that ends up costing 4-5p kWh will outdo what it costing 60p kWh day by day just now.


Brad

  • Inner Core
  • Hero Member
  • *
  • Posts: 3918
  • What, me worry?
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #7 on: January 01, 2023, 11:53:29 AM »
Military Tech:

Example:

https://www.telegraph.co.uk/business/2022/12/31/nato-forces-risk-ageing-fleet-russian-helicopters/

Many former Warsaw Pact NATO countries are saddled with old Soviet helicopters that don't perform so well in real life and that they can't get parts to repair.  Means: they are going to be looking to replace these.

But also companies that make man portable anti tank weapons and surface to air weapons like Raytheon are going to be selling everything they can produce. 

In the West, manpower is expensive and not replaceable so Drones of all sorts will also be popular.  Ditto cruise missles, everything from hi-tech Predator drones to cheap Iranian style drones powered by lawnmower engines are going to sell.  Companies are even working on unmanned fighter jets that can use AI for air to air combat.

Companies that can make this stuff are going to be growth investments.

ergophobe

  • Inner Core
  • Hero Member
  • *
  • Posts: 8539
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #8 on: January 03, 2023, 12:12:31 AM »
>> probably an error

Don't be too quick to think that.

That was a bit of shorthand. I am 100% comfortable with the decision. The peace of mind was worth more to me than the marginal gains I might have gotten. I know you recently listened to the Morgan Housel book. If you recall, he made the same decision on the same logic and he is 500X more savvy than me.

Also, that "probably an error" has an unspoken "in hindsight" and, more importantly, from a pure "spreadsheet" approach to the problem. The flip side is that I inherited $25,000 when my grandmother died. Coincidentally, I had $24,000 left to pay on my student loans. I wrote two checks and paid them all off. They were at 4.5% and 6%. My friend told me I was an idiot. She was getting 18% return on her Vanguard 500 index fund. This was in very late 1999. Less than four months later, the market peaked, the dot.com bubble burst and the S&P 500 lost roughly half its value. So I could have followed her advice and turned my $25,000 into $13,0000.

But I didn't make that decision because I was prescient or a financial wizard and I didn't make the mortgage decision because of a lack of foresight and because I'm complete idiot. I made both decisions because debt weighs on me. I don't like it and I'm happier if I don't have it. I know people might say that I would have more wealth and the same amount of debt (zero) if I had paid the debt down more slowly. But that's with the benefit of knowing how things have turned out.

>> renewables

What's your logic there? Though I think there will be huge huge growth in the renewables market, I don't think that necessarily correlates to individual stocks in the sector outperforming. For something to outperform, it means that it has to beat expectations, and I think expectations on renewable energy are sky high, which makes me question whether the publicly-traded companies are in fact undervalued and poised for huge growth. I am sure that some are, but many are not, similar to the dot.com companies perhaps. If you picked Amazon, you were good. If you picked one of the dozens and dozens of companies that went bankrupt, not so much.

Brad

  • Inner Core
  • Hero Member
  • *
  • Posts: 3918
  • What, me worry?
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #9 on: January 03, 2023, 08:53:57 PM »
>renewables
>logic

Given climate change worries, I think demand for renewables will be high for the foreseeable future.

Other trends effecting this (the perfect storm):

Cutoff of Russian gas to EU.
If, we commit to EV's as a replacement for ICE's this will increase demand for electricity.  Make your choice, nuclear or renewables or backslide to fossil fuels (see climate change above.)
Hotter summers will increase use of or adoption of air conditioning.

I can't pinpoint individual stocks.  I'd look for mutual funds focusing on renewables. Specifically Western mfg. because we can't rely on China and all those other supply chain issues that are supposed to be teaching us lessons.

grnidone

  • Inner Core
  • Hero Member
  • *
  • Posts: 1534
    • Yahoo Instant Messenger - e
    • View Profile
    • Email
Re: Market Wraps Up Worst Year Since 2008
« Reply #10 on: January 05, 2023, 11:09:47 PM »
>like companies that make wind turbines or solar especially in the US and EU. 

Or batteries for electric cars.

littleman

  • Administrator
  • Hero Member
  • *****
  • Posts: 6180
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #11 on: January 06, 2023, 10:49:01 PM »
I should have put an * in my statement.  Renewables are in a different category than companies like Alphabet and Meta.

ergophobe

  • Inner Core
  • Hero Member
  • *
  • Posts: 8539
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #12 on: January 08, 2023, 11:29:47 PM »
>>renewables

>Given climate change worries

I agree with that. However, a stock doesn't do well because the company grows, it does well because the company grows faster than expectations.

I would say that I am one level above naive. In the 1990s, I was zero levels above naive, but stocks then were sort of like crypto now - everyone was buying (not necessarily investing) because it looked like a better deal than the Lotto. I fell into that category.

I assumed that future growth is what mattered and bought a couple stocks based on that. Notably and stupidly, I bought stock in Cisco when it was the most valuable company in the world and I was totally naive. I bought at something like $40/share, then it went up and it seems so great, I bought more at something like $50/share, a price it took 20 years to see again in the summer fo 2019. And yet, Cisco revenue has more than doubled over that time. The problem with Cisco is not that it didn't grow, it's that it did not grow inline with expectations. Fortunately, I didn't have a lot so I didn't invest a lot so I didn't lose a lot. But since then I have seen that repeated.

Tesla is a great example -it is the 2022 version of Cisco in 1999.  From an absolute perspective, Tesla had a great year. Year over year growth was a whopping 40%. That's astounding. But the stock price was predicated on a 50% growth, so Tesla stock plunged in value. As one person quipped, Tesla investors realized it's not a "tech" company, it's a "car" company. I honestly have no idea what a "tech" company is, but the operational definition seems not to be a company that develops great technology, but a company whose primary value is their IP, so the cost of goods is very low and expansion is very fast.

When I look at renewables, I think there's a lot of piling on similar to the enthusiasm for Tesla. Every fund now is pushing various forms of ESG and many alternative energy funds are popping up. That suggests that expectations are high.

I do not follow this closely enough to place a bet personally, but if I had to bet, my suspicion is that people are going to find that really, truly expanding renewables at the projected rates is going to require a huge investment in basic nuts and bolts grid upgrades, and there still does not seem to be a will to actually pay for those. I hope very much that I'm wrong about that.

So I'm not convinced that renewables are necessarily a good investment just because they will undoubtedly grow. I'm also not arguing that they are a bad investment. I'm just saying that I don't think "Sector X is poised for massive growth" necessarily maps to "Sector X is poised to see major increases in stock prices."

Stock prices are fundamentally a story people as a collective tell about the future. When the future proves that story to have been incorrect, that's when big gains and losses are made.

Again, that's just one level up from the most naive investor. I've never read a book on investing and I have bought and sold very few individual stocks. So I'm open to the idea that is totally wrong. It's just the one lesson that I have taken from observing booms and busts, mostly from the sidelines.
« Last Edit: January 08, 2023, 11:33:32 PM by ergophobe »

aaron

  • Inner Core
  • Full Member
  • *
  • Posts: 229
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #13 on: January 14, 2023, 02:22:11 PM »
Given climate change worries, I think demand for renewables will be high for the foreseeable future.

Cutoff of Russian gas to EU.
If, we commit to EV's as a replacement for ICE's this will increase demand for electricity.  Make your choice, nuclear or renewables or backslide to fossil fuels (see climate change above.)
Hotter summers will increase use of or adoption of air conditioning.

I can't pinpoint individual stocks.  I'd look for mutual funds focusing on renewables. Specifically Western mfg. because we can't rely on China and all those other supply chain issues that are supposed to be teaching us lessons.
The big winner there is going to be nuclear power as it is far greener than the other green energy sources & is not intermittent. Politicians have been pushing to reclassify nuclear as green.
https://www.reuters.com/business/sustainable-business/eu-parliament-vote-green-gas-nuclear-rules-2022-07-06/

Part of the reason nuclear was originally hated was not only the cold war related fears, but also malthusians who pushed environmentalism as a means of population control:
https://doomberg.substack.com/p/malthusian-malarkey
Quote from: Paul Ehrlich
“In fact, giving society cheap abundant energy at this point would be the equivalent of giving an idiot child a machine gun.”

The uranium market went through a decade plus long bear market due to combo of ...
- cheap natural gas as a free output of US oil fracking (they were even flaring off a lot of it)
- scares related to Fukushima & Japan knocking their plants offline
- many nuclear weapons being recycled for fuel

A pure-play on the nuclear fuel price is Sprott Physical Uranium Trust / SRUUF, U.U & U.UN
https://sprott.com/investment-strategies/physical-commodity-funds/uranium/
It hasn't really mooned, but if oil prices take off again & natural gas prices also lift this could be a secondary way to play energy as many countries try to curtail inflation by investing in more stable energy supplies.

The 2 biggest Uranium producers (equivalent of OPEC for uranium) are Cameco (CCJ) and Kazatomprom (NATKY) Both of them have some fur on them. Cameco bought Westinghouse, which will water down their returns from mining if uranium prices spike. Kazatomprom is in Kazakhstan, with all the political treats that may entail for a foreign investor.

The US is building out LNG export terminals which will reign in gas prices in Europe, while lifting domestic US natural gas prices. Businesses with outsized margins in part from low US nat gas prices may see significant margin compression as the LGN market makes natural gas a bit more like oil, with tighter regional spreads on pricing.

There isn't a ton of western manufacturing on renewables. China keeps increasing their domestic coal usage (some years building more new coal plants than the rest of the world combined) and using their labor + energy price arbitrage to price dump solar cells into other markets. They also have a big advantage with rare earths production & processing due to environmental arbitrage, though production there can get spun up in other markets as supply chains decouple. China is building a ton of nuclear power plants (150 new plants in 15 years)
https://www.bloomberg.com/news/features/2021-11-02/china-climate-goals-hinge-on-440-billion-nuclear-power-plan-to-rival-u-s
Nuclear power plants typically try to keep 2 or 3 years of fuel in reserves, so that is going to be a lot of incremental buying as China brings those plants online. 

Around when I was born the scare was global cooling. The warming stuff may reverse:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7575229/
Quote
"This discovery of double dynamo action in the Sun brought us a timely warning about the upcoming grand solar minimum 1, when solar magnetic field and its magnetic activity will be reduced by 70%. This period has started in the Sun in 2020 and will last until 2053. During this modern grand minimum, one would expect to see a reduction of the average terrestrial temperature by up to 1.0°C, especially, during the periods of solar minima between the cycles 25–26 and 26–27, e.g. in the decade 2031–2043."

rcjordan

  • I'm consulting the authorities on the subject
  • Global Moderator
  • Hero Member
  • *****
  • Posts: 15063
  • Debbie says...
    • View Profile
Re: Market Wraps Up Worst Year Since 2008
« Reply #14 on: January 23, 2023, 08:05:32 PM »
>renewables

Business chief urges green growth to boost economy as forecast warns of deeper recession | Business News | Sky News

https://news.sky.com/story/business-chief-urges-green-growth-to-boost-economy-as-forecast-warns-of-deeper-recession-12793352