Milu

I also sold my apple shares. I'd been thinking about it on and off over past year or so as the valuation kept going ever greater. It's was just under a 4% weighting in portfolio and I sold the lot. I think the disclosure of the Buffett sale was the last indicator I needed that it might be work cashing out for potential use down the line. I rarely sell stocks though and most times I do it ends up being an incorrect decision over the long term.

Is the Sahm rule the new yield -curve inversion in that it 'guarantees' an upcoming recession. Never heard of it before but now seeing it mentioned all over twitter. I'm always a bit skeptical of these 'rules' but I suppose we'll find out soon.

I have a quite tech heavy portfolio and due to quite sizeable gains I've began to start considering whether some sort of portfolio insurance strategy might make sense. In my current portfolio I am about 25% Cash and 63% Stocks (50% tech + 13% non-tech) and 12% Crypto. Obviously my sizeable cash percentage is somewhat of a decent hedge to start with, but I am looking into whether something like an out of the money put option on the nasdaq might also be useful. I'm quite comfortable with sizeable drawdowns (was happily deploying cash during covid panic and during the large tech drawdown in 2022. Can take drawdowns of 25-35% without batting an eyelid. Wouldn't mind clipping the tails a bit though and trying to be protected from drawdowns above a certain level. For example for drawdowns of 1% to 30% have no hedge but then be protected from the larger drawdowns of 30% plus. Seems like an index put option 30% out of the money makes the most logical sense but not sure whether the cost of the insurance would be too prohibitive for it to make sense. For example if we think about round numbers let's imagine I had a 1,000,000 portfolio right now, 620,000 of this is in tech stocks and crypto. This is the part I'd like to try hedge from large marketwide drawdown (30% or more) in tech. The nasdaq ETF ticker 'QQQ' is currently at 495 so a 30% out of money put is 350. If I understand correctly to hedge this 620k I would need to divide 620,000 by current index level of 495 which gives 1252 and since options contracts are in blocks of 100 means I would need roughly 13 contracts of the 350 strike put option which is currently 14.98 for the June 2025 date. So the cost for this hedge is 13*14.98*100 = $19,474. Does that seem a bit high or have I gone wrong somewhere in my calculation? Have people done anything similar before to protect their portfolios or do you mostly subscribe to buffets/munger approach of not bothering with buying puts, just deploy cash when things drop and ride out the volatility otherwise?

Could you please define which interest rates are low relative to historical rates? T-bills are 5.25%, the 10-year is 4.57% and the 30-year is 4.7% Buffet's statement was accurate in 2018 when rates were quite a bit lower, not sure he's make the same argument today.

Ya things look a bit pricey at the moment, but I'd argue that the majority of time things are like this. For disciplined buyers there are always a few periods where prices get more realistic. (March/April 2020 during Covid crash, and at points during 2022 when the market came down by 20-25%). The key is to take advantage during these times, and then to just sit on your hands in times like today. Even today though there are some individual stocks that are coming back to reality, Lululemon and Starbucks to name a couple. Not saying they are cheap, but the prices (of these two stocks) are a lot fairer than they have been in the last 5 years or so.

Yup, agree with that.

I suppose the hard thing is determining what is a 'fair' percentage for bitcoin relative to total global Assets. Nobody knows this. For example you could just pick any random asset or group of assets and plonk that square into this chart showing massive upside. I say this as somebody with 10% of my net worth in bitcoin

Yes I am the same. Quality of business and management is the first hurdle a company has to pass before it meets my requirements, earning estimates and price to pay is the very last step so I would have already ruled out the bad businesses (low returns on equity, capital, excessive dilution, excessive leverage, inconsistent margins etc) before they ever get to the stage where I am estimating fair value. Doesn't mean I get it right every time but so far I've mostly avoided value traps. I don't think I have ever bought a business because it was 'cheap'.

That's a good answer and I suppose it depends on the investors approach. I've never quite aligned with the looking out 3-5 years approach. I think it is hard enough to estimate some sort of steady-state earnings number for one year out, that to believe you can do it with any degree of accuracy when looking 3-5 years into the future is not possible (in my opinion). Wars, Oil Shocks, Recessions, Pandemics, Tech Booms etc, how can any logical person look at Apple, Nvidia, Nike for example, and assess with any degree of accuracy what their earnings will be in 2029? Perhaps you will say that these aren't good examples and other firms are more predictable, but I'm not sure. I take a more simple estimation approach, through researching the company, reviewing financial statements history and making adjustments, I come up with a single normalised earnings/free cash flow number that I feel has a reasonable chance of being accurate of being achieved over the next 12 months. I will use this estimate to determine what the stock is currently yielding (earnings/Price), and then lastly I will apply a margin of safety to account for situations where the actual earnings end up being less than my estimate. I don't believe anybody can estimate growth rates with any degree of accuracy (at least I certainly can't) so I try to buy at price where even if their was no growth at all over the coming years I'd still have an acceptable return. Similar to how I believe Alice Schroeder summarised Buffets approach, he like to buy at a 10% pre-tax yield and then just let the growth take care of itself.

Just curious if you use Trailing or Forward multiples when you are assessing the valuation of a stock? Personally I have always used trailing multiples as it feels a bit more conservative, but if you think about it logically then some sort of forward multiple should make more sense as that is the current expected 'yield' of the stock. For example, Meta is currently 32 P/E which gives a earnings yield of 3.1%, forward P/E is roughy 23 which gives earnings yield of 4.3%. Obviously the forward earnings are based on estimates which could be higher or lower than what actually transpires. For fixed income or real estate investors I assume they mostly care about the expected future yields and not necessarily the previous although they would factor these in as part of their general valuation approach. What do you do?

I am trying to build a list of annual letters worth reading from smart CEO's and Investors. Here are some of the typical ones I read but would love some suggestions - Buffett Annual Letter to Shareholders - Jamie Dimon Annual Letter - Amazon Annual Letter (Previously Bezos, now written by Andy Jassy) - Francois Rochon (Giverny Capital) Annual Letter - Mark Leonard (Constellation software), although he doesn't do them anymore

I wouldn't say there is any uniqueness to which companies will do well/badly when markets are flat. I also think defining 2000-2012 period as flat isn't the best framing. It was a period where we had two of the largest stock market crashes in history, along with some pretty good run-ups after. Without looking at the data I would expect that the companies that did well were solid companies from all sectors who consistently grew their earnings, and weren't trading at ridiculous prices (35+ P/E) in 2000.

Yes I was in this boat until 2020. I'd been hearing constantly from a good friend of mine since 2012 about how big bitcoin was going to be and how it was going to change the world. Thought he was talking rubbish and kept pushing back telling him it was a scam. I did hold some gold at the time so I did have some belief in the hard money concepts. I eventually saw sense on April 2020 and decided to take the leap. Have been a believer ever since. Buffett and Munger are still my heroes and are right about the majority of things. They can of course occasionally be wrong and I feel bitcoin is one of those areas. It's such a unique thing that I wouldn't expect them to understand it anyway.

Him and Jim Rogers always at it. Think I have seen this headline or similar from Jim about every year since 2010 https://asia.nikkei.com/Editor-s-Picks/Interview/Jim-Rogers-warns-that-global-good-times-are-nearing-the-end

That's a decent chunk alright, and yes would definitely count MSTR as part of the crypto bucket. My Current high level asset class percentages are; Stocks - 52% Cash* - 31% Crypto - 17% *Mainly USD and EUR short term bonds/bills

For the other investors who hold crypto in the forum, what is the current percent of your net worth you have in the asset class? For me I put about 2.5% of my net worth into bitcoin and ethereum back in Mid-2020, and have just held ever since. As of today this is now close to 17% and is my largest position.

Best bet is just try to ignore the noise. If you are not planning on buying or selling anytime soon based on these movements then it's just pointless checking. Easier said than done of course.

Yes, still very early. If I had to equate with the 90's and tech bubble I would feel we are somewhere around 95/96. Decent chance of a continuous inflating of a bubble over the next 2-3 years, then a drop as people get disillusioned, and then another leg up again once a new base is established. Just a guess though, macro isn't something I or anybody else can really predict.