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Jurrien Timmer

@TimmerFidelity

24 Sep

What’s a bitcoin worth? There are many opinions on the matter, ranging from zero to millions. While many of us tend to focus on price, whether it’s for stocks or bitcoin, what really matters is valuation. (THREAD)

Whether the S&P 500 index trades at 4,000 or 3,000 is meaningless without knowing anything about its valuation. The same applies to bitcoin. What’s the significance of 50k or 10k or 100k if we don’t know what the value is? /2

How do we value a new and aspiring asset class? It’s difficult to do, which is why price discovery tends to be volatile. In my past work, I have focused on the supply dynamics (via the stock-to-flow model) as well as the demand side (its exponentially growing network). /3

Read 14 tweets

Jurrien Timmer

@TimmerFidelity

17 Sep

In this season of market anxiety—September and October are often painful—it will be helpful to take the long view. (THREAD)

One way thinking about the long-term is the chart below. Instead of using time vs. price, I use price vs. price (the 2-year high vs. the monthly low). /2

Yes, it's a roller coaster, but the long trend remains: Up and to the right, with some stomach-turning (and career-ending) drawdowns along the way. Some are short and others are long, with the difference dictated by where we are in the secular trend. /3

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Jurrien Timmer

@TimmerFidelity

13 Sep

I used to be a “mean reverter.” These days, I’m more chill, following the math & trusting the market gods. Typically, I try to stay on the right side of the secular trend & use that trend as context to navigate the market’s inflection points. (THREAD)

Without context, most indicators are reduced to a coin toss. /2

To be sure, there are times when screaming excesses are evident but those signals are fairly rare. Most of the time, the signals are much smaller, meaning the risk of being out of the market—and missing out on compounding magic—is greater than being caught in a squall. /3

Read 4 tweets

Jurrien Timmer

@TimmerFidelity

10 Sep

What lies ahead for the secular rotation between growth and value, large and small? Hard to say. We are at the point in the super-cycle where, on a 10-year rate of change basis, the incumbent style leaders tend to peak. (THREAD)

But that’s on a 10-year rate of change basis. So, the large growers could keep running while the second derivative moderates, in line with the historical analog. The same thing happened from the October 1998 low (LTCM) to the dot.com peak in 2000. /2

I guess it all comes down to cash flows and who produces it, as well as how much of it is returned to shareholders via dividends and buybacks. /3

Read 6 tweets

Jurrien Timmer

@TimmerFidelity

10 Sep

The dominance of the mega-cap growers in this cycle explains the behavior of the overall market. With just the five largest stocks comprising 23% of the market’s value, the S&P 500 continues to plow through. (THREAD)

That's why my expectation in recent months for a 2010-style mid-cycle correction was wrong. Yet another reminder to focus on the long-term. /2

If we look just at value (see chart below), the 2010 analog looks OK. Not as much downside, but a stealthy correction nonetheless. /3

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Jurrien Timmer

@TimmerFidelity

9 Sep

While this has been an usual market cycle going into and coming out of the lockdown, in many ways this cycle has followed in the footsteps of most. Below is the current market cycle relative to the average cycle since the 1920s. (THREAD)

In the chart above: on the left we have the S&P 500 total return; in the middle we have earnings (including earnings estimates through 2022); and on the right we have the trailing P/E multiple. /2

The current cycle is like ones in the past in that price bottoms first, then earnings follow a few quarters later. During that window, valuations soar, only to come back down when earnings start carrying the load. /3

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