SMT recent performance

Thrugelmir

BuildTheWall said:

Prism said:

With a trust like SMT it is estimated future financial performance which is driving it rather than just the fact that currently stocks are more attractive due to lower interest rates. 

Estimated future performance will be driving the premium of the trust, not the value of underlying. The value of underlying shares are driven by their own factors. 

There’s a reason money was flowing into tech stocks. Have you looked at the record profits declared by tech companies? Sure, the PE ratios have gone up, but that’s because other industries need to spend on technology to survive in this century and these big techs pretty much run monopolies. 

Premium is all but non existant. 

Tesla profitable ?  Only by selling carbon emission tax credits. 

BuildTheWall

itwasntme001 said:

It is why we got a tech sell-off at the start of 2018 because there was an inflation upside surprise (which itself caused a rise in interest rates) and it is partly why we got a sell-off at the end of 2018 as the FED was looking to move more hawkish (which was U-turned in 2019).

Markets seem to be expecting low inflation for a very long time and so it is not surprising growth/tech stocks have done so well. 

Tech stocks have very little correlation with inflation. Their revenues are dependant on other industries spending on technology, automation and advertising. Which in turn depends on global economic growth. 

A lot of these sell offs happen when global growth indicators indicate slowdown of some form or other. Real Interest rates have been moving quite a bit but have hardly crossed 2%. In fact Fed is signalling it is willing to allow even more inflation before raising rates - which again has no direct impact on tech stocks. 

itwasntme001

BuildTheWall said:

itwasntme001 said:

It is why we got a tech sell-off at the start of 2018 because there was an inflation upside surprise (which itself caused a rise in interest rates) and it is partly why we got a sell-off at the end of 2018 as the FED was looking to move more hawkish (which was U-turned in 2019).

Markets seem to be expecting low inflation for a very long time and so it is not surprising growth/tech stocks have done so well. 

Tech stocks have very little correlation with inflation. Their revenues are dependant on other industries spending on technology, automation and advertising. Which in turn depends on global economic growth. 

A lot of these sell offs happen when global growth indicators indicate slowdown of some form or other. Real Interest rates have been moving quite a bit but have hardly crossed 2%. In fact Fed is signalling it is willing to allow even more inflation before raising rates - which again has no direct impact on tech stocks. 

Global growth expectations have fallen massively since the pandemic, yet tech has been massively outperforming.  Contradicts what you say.  Tech valuation multiples have been rising and these very much depend on nominal interest rates (which have fallen).

When the opportunity cost falls (interest rates), earnings far into the future are more valuable.

The fact that the FED is allowing rates to stay lower for longer is exactly why tech has rallied even more.

AnotherJoe

And that misunderstanding is why you havent made a mint in Tesla shares over the past couple of years.

 

itwasntme001

BuildTheWall said:

itwasntme001 said:

It is why we got a tech sell-off at the start of 2018 because there was an inflation upside surprise (which itself caused a rise in interest rates) and it is partly why we got a sell-off at the end of 2018 as the FED was looking to move more hawkish (which was U-turned in 2019).

Markets seem to be expecting low inflation for a very long time and so it is not surprising growth/tech stocks have done so well. 

Tech stocks have very little correlation with inflation. Their revenues are dependant on other industries spending on technology, automation and advertising. Which in turn depends on global economic growth. 

A lot of these sell offs happen when global growth indicators indicate slowdown of some form or other. Real Interest rates have been moving quite a bit but have hardly crossed 2%. In fact Fed is signalling it is willing to allow even more inflation before raising rates - which again has no direct impact on tech stocks. 

Last I checked real interest rates were negative both in the UK (comfortably) and US for the 10 year term.

itwasntme001

AnotherJoe said:

And that misunderstanding is why you havent made a mint in Tesla shares over the past couple of years.

 

Actually I have via SMT.  And Amazon too

Was going to suggest a stock I have 4x'ed on and has a lot more to go.  But I think I will pass.

BuildTheWall

itwasntme001 said:

Global growth expectations have fallen massively since the pandemic, yet tech has been massively outperforming.  Contradicts what you say.  Tech valuation multiples have been rising and these very much depend on nominal interest rates (which have fallen).

When the opportunity cost falls (interest rates), earnings far into the future are more valuable.

The fact that the FED is allowing rates to stay lower for longer is exactly why tech has rallied even more.

Just look at what’s happening around you. This time almost everyone is working from home except hospitality. The difference with the recession this time is any business that wants to survive has to spend on its website, app and online advertising. Online streaming has grown massively. Many companies don’t want to run their own servers and instead turning to cloud to reduce costs. Who runs cloud computing? Amazon, google and Microsoft. More and more companies are reducing costs by investing in technology.
While traditionally tech companies depended on economic growth, now tech spend is used to reduce costs. And this will continue inflation or not. 

Thrugelmir

itwasntme001 said:

BuildTheWall said:

itwasntme001 said:

It is why we got a tech sell-off at the start of 2018 because there was an inflation upside surprise (which itself caused a rise in interest rates) and it is partly why we got a sell-off at the end of 2018 as the FED was looking to move more hawkish (which was U-turned in 2019).

Markets seem to be expecting low inflation for a very long time and so it is not surprising growth/tech stocks have done so well. 

Tech stocks have very little correlation with inflation. Their revenues are dependant on other industries spending on technology, automation and advertising. Which in turn depends on global economic growth. 

A lot of these sell offs happen when global growth indicators indicate slowdown of some form or other. Real Interest rates have been moving quite a bit but have hardly crossed 2%. In fact Fed is signalling it is willing to allow even more inflation before raising rates - which again has no direct impact on tech stocks. 

Last I checked real interest rates were negative both in the UK (comfortably) and US for the 10 year term.

Reflects a fair degree of economic pessimism in some quarters. 

itwasntme001

BuildTheWall said:

itwasntme001 said:

Global growth expectations have fallen massively since the pandemic, yet tech has been massively outperforming.  Contradicts what you say.  Tech valuation multiples have been rising and these very much depend on nominal interest rates (which have fallen).

When the opportunity cost falls (interest rates), earnings far into the future are more valuable.

The fact that the FED is allowing rates to stay lower for longer is exactly why tech has rallied even more.

Just look at what’s happening around you. This time almost everyone is working from home except hospitality. The difference with the recession this time is any business that wants to survive has to spend on its website, app and online advertising. Online streaming has grown massively. Many companies don’t want to run their own servers and instead turning to cloud to reduce costs. Who runs cloud computing? Amazon, google and Microsoft. More and more companies are reducing costs by investing in technology.
While traditionally tech companies depended on economic growth, now tech spend is used to reduce costs. And this will continue inflation or not. 

I'm not disputing any of that.  I own all three of the stocks you mention and I am happy to hold.  The fact is valuations also depend on interest rates.  That is all I am saying.

itwasntme001

Thrugelmir said:

itwasntme001 said:

BuildTheWall said:

itwasntme001 said:

It is why we got a tech sell-off at the start of 2018 because there was an inflation upside surprise (which itself caused a rise in interest rates) and it is partly why we got a sell-off at the end of 2018 as the FED was looking to move more hawkish (which was U-turned in 2019).

Markets seem to be expecting low inflation for a very long time and so it is not surprising growth/tech stocks have done so well. 

Tech stocks have very little correlation with inflation. Their revenues are dependant on other industries spending on technology, automation and advertising. Which in turn depends on global economic growth. 

A lot of these sell offs happen when global growth indicators indicate slowdown of some form or other. Real Interest rates have been moving quite a bit but have hardly crossed 2%. In fact Fed is signalling it is willing to allow even more inflation before raising rates - which again has no direct impact on tech stocks. 

Last I checked real interest rates were negative both in the UK (comfortably) and US for the 10 year term.

Reflects a fair degree of economic pessimism in some quarters. 

Yep and it looks like they will stay like that for some time.  Only way to reduce the debt burden.