Jensen estimates that roughly 40% of the US equity market “can...

Jensen estimates that roughly 40% of the US equity market “can only survive essentially with new buyers entering the market because they're not cashflow generating themselves. And that’s near a historic high, that's like basically right in line with ‘99, 2000.

I read the above opinion a few times to understand what it meant. So that' saying that 40% of US listed companies are not cashflow generating and that their survival rest on the willingness of market participants prepared to subscribe to their capital raising for more cash. Today I posted a couple of companies who made ultra large CR to stay safe preparing themselves for a turbulent future. Sayona raised $190m despite Street Talk initially mooted that they were raising $50m. They obviously raised as much as the market has appetite for , and right now the appetite remains good for lithium space. Raise as much as you can while it remains so.

Small/micro cap investors need to be careful about Buy and Hold for reason mentioned above. They have been smashed yes but the love for them is not likely to come back anytime soon and for the still much loved sectors, time is running out.
Bridgewater’s Greg Jensen Warns Markets Are Still ‘Overly Optimistic’

Gregory "Greg" Jensen, co-chief executive officer of Bridgewater Associates.
Photographer: Simon Dawson
By
Tracy Alloway and
Joe Weisenthal
May 23, 2022, 8:00 PM GMT+10

Even after several tumultuous weeks that have seen both bonds and stocks tumble, Bridgewater Associates’ Greg Jensen says that markets are “overly optimistic” and investors have yet to adapt to a period of “secular change” that involves both higher inflation and slower growth.

Speaking on an episode of the Odd Lots podcast, the co-chief investment officer of the world’s biggest hedge fund warned of a toxic brew for asset prices as the Federal Reserve raises interest rates and unwinds its balance sheet to deal with the highest inflation in decades.

Markets have already been under pressure, with the S&P 500 down roughly 18% from its peak, while yields on the benchmark 10-year U.S. Treasury had jumped to more than 3% this month before falling back to 2.78%.
Despite those moves, Jensen argues that investors are actually positioned for a relatively smooth landing scenario, or one in which the central bank is able to bring down prices without necessarily sparking a recession.

“The markets are pricing in actually a pretty darn smooth landing here,” Bridgewater’s Co-Chief Investment Officer says. “And so I think today's market pricing is still overly optimistic. It's been a small move relative to the secular change that we're actually experiencing.”


Jensen, who serves as co-CIO with Bridgewater founder Ray Dalio and Bob Prince, also warns that investors also shouldn’t expect the central bank to step in to save them. Instead the Fed will be hamstrung by its need to tighten financial conditions in order to bring inflation under control. This idea that the Federal Reserve is not afraid of a stock market selloff — and in fact may actually welcome one — has been expressed by the likes of former NY Fed President Bill Dudley in a Bloomberg Opinion piece from April.

“They want the asset prices to fall to a certain degree. And even if they fall more than they want them to, they're weighing the inflation picture against that. So all of a sudden you've got a much bigger dip possibility before you get relief from policy makers,” Jensen said. “And in fact, the dip has to become disinflationary in order to do that.”

Jensen estimates that roughly 40% of the US equity market “can only survive essentially with new buyers entering the market because they're not cashflow generating themselves. And that’s near a historic high, that's like basically right in line with ‘99, 2000.”

As more liquidity gets sucked out from the market, assets that have seen their valuations rise as a result of investor inflows rather than cashflows, are now vulnerable.

“The assets that need liquidity the most, that don't themselves have cash flows are getting killed because liquidity is being withdrawn from the aggregate system and those assets that require kind of Ponzi-like ongoing purchases to support the assets, are getting hit the hardest,” he said.