Blake Hampton

No just rational.

Apple is not the market, Microsoft is not the market. Go look at the data yourself: https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx

Earnings are measured against book. Return on equity is what's important.

Who gives a fuck?

People piling into assets regardless of the fundamentals, and doing it just because everyone else is doing the same thing, is known as a bubble.

Long-term returns are all about the price paid for the future earnings you’re receiving. If you know that a company will earn 12% on it’s equity forever, and you buy that company at its equity, otherwise known as book value, you can reasonably expect a return of around 12% over time.

Here's some quantitative figures and analysis for VOO (the S&P 500): TTM ROE: 17.2% Pre-TCJA 18-year average ROE: 12.4% Buffett's market average ROE: 12% Current P/B: 5.2x The above chart indicates that recent expansions in the market's ROE are primarily due to lower interest and corporate tax rate expenses, not because companies have generally been employing less equity to make the same amount of profits. Consider also that the U.S. fiscal deficit is at historical highs, and just currency in circulation has expanded threefold since 2008. Likewise, a future with both lower taxes and interest rates seems quite unlikely. Using both Buffett's long-term average ROE figure and the market's current P/B ratio, the S&P 500 is currently selling at an implied P/E of 43.3x. Not exactly cheap. This would equate to an earnings yield of 2.3%, which is approximately half the yield currently offered on 10-year government bonds. Sources: S&P 500 Earnings and Estimate Report - S&P Global How Inflation Swindles the Equity Investor - Warren Buffett Eye on the Market Outlook 2025 - J.P. Morgan

I was still thinking about your reply, and I do see your point. I do think companies can run themselves in a way where their book value soon becomes a meaningless figure. However, I also believe that book value has a place in measuring a company's returns relative to its employed equity. It's one of the most important questions in investing: how much money does it take to make more money? It would be generally more accurate, I think, if you were to use tangible equity instead of book so as to exclude intangibles, but the premise is still the same. I also think that companies with negative P/Bs generally carry a lot of debt, which I of course never like.

Yeah, even then, a 4% return is still surprising.

Congrats on the returns and I honestly think this is the best strategy. Graham would recommend a portfolio split between both stocks / bonds, and I believe cash is the correct substitute for the bond portion at this point. Of course this is just my opinion as it seems everybody here disagrees on this stuff.

Just btw, if any of you haven’t happened to use AI yet, you should really give it a go. I’m just trying to figure out whether I should shift away from ChatGPT to Gemini. I honestly respect Google more than OpenAI, as I don’t really like Altman.

Was that article really written yesterday? Ben Carlson must read this forum cause some of that stuff is eerily similar. I personally don’t think Klarman sitting on a little cash is some bad thing. I think people are overly discounting the Fed’s role in all of this.

If this was in 2010, I’d imagine he’d be bald now

Just something of interest: Chatbot Arena LLM Leaderboard There’s only one open-source model on that list…

Just a week ago, most people would've said that no price was too high for this stuff. I feel like very few people actually have a handle on what's happening with AI.