Jared Dillian on market sentiment and private equity's big bubble
Mar 20, 2024
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Jared Dillian discusses market sentiment and the potential bubble in private equity. The Fed's interest rate plans, lack of bond signals, and warnings about leveraged ETFs are highlighted. Insights on the second half of 2024 and the importance of filtering out noise in investing are also shared.
Market sentiment analysis is crucial for trading decisions, focusing on private equity's systemic risks is essential for long-term investment strategies.
Deep dives
Background and Experience in Finance and Writing
Jared Dillian began his finance career in 1999 on Wall Street, working for Lehman Brothers in equities and ETF trading. He later started the newsletter 'The Daily Dirtnap,' emphasizing sentiment analysis over quantitative data in markets. Dillian views himself as a writer first and analyst second, specializing in interpreting market sentiment for trading.
Private Equity Bubble and Sentiment Analysis
Dillian highlights concerns about a growing private equity bubble, citing indicators like CalPERS' $34 billion move into private equity. He notes absurdly high multiples in acquisitions and shares anecdotes revealing a saturation point. Dillian considers private equity a systemic risk and has a short position in Blackstone, leveraging sentiment analysis in his investment decisions.
Market Outlook and Investment Strategy
Regarding market sentiment, Dillian observes a bullish market and focuses on private equity as a significant concern. He anticipates higher interest rates due to inflation trends and advises caution in tech investments. Dillian suggests favoring commodities over tech stocks and shares insights on ETF complexities, cautioning against leveraged ETFs and emphasizing the need for simplicity in trade theses.
Future Predictions and Investment Approach
As the market navigates uncertainties like the upcoming election, Dillian anticipates rockier times ahead post-election due to potential liquidity changes. He stresses simplicity in trade ideas, focusing on trends rather than individual data points. Dillian advocates for limiting information intake to reduce noise and emphasizes the importance of succinct trade theses for effective decision-making.
Jared Dillian shares why he focuses on market sentiment (2:30). Private equity's systemic risk (5:30). The Fed wants to cut interest rates and add liquidity before the US election, but the market's not cooperating. No clear signal on bonds (7:35). Why investors should avoid leveraged ETFs (11:00). How to think about the market's 2nd half of 2024 (14:55).
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