Jump to content

Intelligent_Investor

Member
 View Profile  See their activity

  • Posts

    180

  • Joined

  • Last visited

 Content Type 

Posts posted by Intelligent_Investor

    Have We Hit The Top?

    in General Discussion

    Posted

    We're in a weird state right now where the fed is trying to fight against the fiscal policy excesses from Washington during the 2020-2021 period as well as the impacts of the Ukraine war while simultaneously trying to avoid killing the middle class. But so much of the stuff that is going on in regards to inflation is out of control of monetary policy - you can't get out of a war or housing supply issues by raising rates, but that's what they are up against now. When rents/home prices have basically gone up and to the right at a double digit % annually clip for 3 straight years with no end in sight due to massive supply shortages, its not surprising that core inflation is still holding up despite heavy rate increases. I just don't see a way the fed can hike its way out of the housing issue without it naturally resolving itself.

    Have We Hit The Top?

    in General Discussion

    Posted · Edited by Intelligent_Investor

    21 minutes ago, Spekulatius said:

    Just remember Avon, Kodak, Polaroid, Xerox, KMart (Kresge), Sears&Roebuck Digital Equipment and Schlitz Brewing were Nifty Fifty stocks too. Survivorship bias is a problem here. Lots of roadkill on the way:

    image.thumb.png.1a28b041d49ac222d9ee4a9440d7baee.png

    Kodak, Polaroid, Sears and others did go to zero, but had you bought an evenly weighted basket of the Nifty Fifty at its very peak in 1972 and held to today, you still would have outperformed. Most people only look at the huge crash and not the longer term compounding of a lot of these businesses. There's at least 5 or 6 hundred baggers on that list and a lot that came really close even if you start from the peak of the nifty fifty. If you bought all of the nifty fifty in 1972 and held for the last 51 years you would very fucking rich right now and have done better than just owning an index fund. The huge winners made up for all the zeros, just like within Berkshire and within the S&P 500. Keep in mind, I'm not saying I would buy those companies at the price, just that even at ridiculous looking valuations, they still did way better than average companies.

    Have We Hit The Top?

    in General Discussion

    Posted

    2 hours ago, mattee2264 said:

    Agree re the quality. But given the size they are now are growth prospects over the next 5, 10, 20 years that great? And is it reasonable to pay at the low end 30-40x earnings and at the high end 60-70x earnings when interest rates are 5%. Companies are usually judged to be great businesses with the benefit of hindsight and there is no question that they've eaten the world over the last decade and done amazingly well. And a lot of Nifty Fifty businesses remained great businesses but their stock price performance disappointed due to multiple compression and earnings growth that was impressive but reflected their maturity. 

     

    I would say though they have a lot more durability and resilience than the tech companies of the 90s and consumers and businesses cannot function without them which should still make them very valuable even if they cannot maintain double digit growth rates going forward. 

    Fair points regarding growth, but meta at 9x FCF, GOOGL at low teens FCF, and AMZN at ~25x normalized operating profit at the beginning of the year isn't anywhere close to the nifty fifty valuations. Even MSFT and AAPL at the time were trading at >4% earnings yield with >10% FCF/Share growth which is still more attractive than a 4.5% zero growth 10 year treasury. Even with the nifty fifty had you bought McDonald's or Coke at like 60x earnings and owned for 2 or 3 decades you still would have beaten the S&P 500. I just don't think automatically writing off a good business as being unable to continue to produce good returns because its optically expensive is a logical conclusion (doesn't mean I'd buy them at this price, but that's a different analysis).

    • Like 1

    Have We Hit The Top?

    in General Discussion

    Posted

    When it comes to the big 7, their performance isn't surprising considering quite a few of them were way too cheap at the beginning of the year. Yeah Meta has more than doubled but that was because it shouldn't have been trading at sub-100 in the first place. Of the 7, 6 are objectively amazing businesses (Tesla the only exception), and of those 6, 3 were very cheap at the beginning of the year (AMZN, GOOGL, META). AAPL and MSFT are/were also reasonably priced relative to their quality. NVDA is really the only one that has run up a lot on AI hype, but their AI offerings are probably the best in the world right now so not entirely unjustified. I don't think its impossible that great businesses stay great for decades - CocaCola, AMEX, Walmart, Home Depot and a lot of other businesses have been top performers for way longer than big tech has.

    Have We Hit The Top?

    in General Discussion

    Posted

    Imo inflation, at least the parts the Fed can control is pretty much done and dusted, what remains is shit like energy and housing (supply issue) which the Fed doesn't really have any control over. Food/grocery prices have round tripped back to approximately where they were pre-pandemic in many items (still high in many items, but prices are starting to fall as well, or have peaked already), job market has done a 180 and cooled, while in many places as layoffs have begun, banks are pulling back on credit issuance, and cracks are beginning to show in the RE markets. The biggest risk right now is stimulative fiscal policy and a congress/Biden administration that seems to be open to running an unlimited deficit to subsidize the American people. If congress pumps out trillions in stimulus as soon as the economy slows, that's going to generate more inflation than any QE the fed does, just like we saw with the post pandemic stimulus.

    Is The Bottom Almost Here?

    in General Discussion

    Posted

    5 hours ago, mattee2264 said:

    I am more inclined to think the market will continue to be range bound/trade sideways as momentum in technology stocks offsets any further weakness in cyclicals. And probably by the time the tech rally runs out of steam and there is a correction there will be grass shoots in the economy and a rotation into cyclicals will keep the market afloat.

    It does seem almost certain that 3500 last year was the bottom for this cycle. 

    When the S&P was at 3500 people were saying it was going to 2300 even on this forum lol fear really does spread like wildfire

    How much does it take to be ‘rich’ now?

    in General Discussion

    Posted

    However much annual income you need pre-tax and multiply by 50, so you are essentially assuming a 2% withdrawal rate on your investments. So if you think you need 150K/year you would need 7.5M I think this withdrawal rate is sufficiently low to provide a buffer if stuff goes wrong/you have an unexpected expense. While you might be able to get away with say 1 or 2 million, one large, unexpected expense and most of your wealth is gone and you need to go work again.

    Fairfax 2023

    in Fairfax Financial

    Posted

    On 5/31/2023 at 9:35 AM, Hoodlum said:

    It looks like Hurricane season will be closer to normal this year, less active than the last few years.  This El Nino effect will likely continue for the next 2-3 years.

    https://www.noaa.gov/news-release/2023-atlantic-hurricane-season-outlook

     

     

    It's not the number that counts, its the severity. 1992 was a very inactive season (only 7 storms, 4 hurricanes, and 1 major hurricane), but the major hurricane was Andrew which was the costliest Atlantic hurricane for a long time. Now, even 30 years later no one talks about 1992 as an inactive season, all anyone remembers is Andrew leveling Miami. Even if there isn't that many hurricanes if we get "the big one", the impacts will be catastrophic and cause losses to the insurance industry

    Is The Bottom Almost Here?

    in General Discussion

    Posted

    Is it really putting people out of work if its just restoring equilibrium in the labor market though? I find it very hard to say that people making $300k in a non-earnings generating shitco losing their jobs is bad for the economy in the long run. People acting like the job losses is all in low-income stuff when its the exact opposite, its the high-income people working in jobs that create little to no value that are losing their jobs as the tide turns from wretched excess to a more normal state of being.

    Is The Bottom Almost Here?

    in General Discussion

    Posted

    The true answer is that no one knows what will happen with inflation, interest rates, and the economy, and over the last 2 years anyone that has tried to predict it has ended up being wrong. Most of the people criticizing the Fed for raising rates were the exact same people that, just 18 months earlier, were criticizing the Fed for not raising rates fast enough and saying we needed to get rates higher than inflation to bring it down.

    Bonds!

    in General Discussion

    Posted

    Imo what's interesting about the bond market isn't what rates are gonna do in the next 12 months (pretty much guaranteed to go to 5+%), but what will happen in the intermediate to longer term. Is the bond bull market finally dead? Or is this a temporary phenomenon and we will be at 3.5% interest rates and on the downtrend by 2025? I personally don't think I'm skilled enough at predicting any of those so I will just roll short term treasuries for now, but this dynamic is fascinating.

×
×
  • Create New...