james22

The addition of retirement accounts and automated contributions was a game-changer for financial markets. https://awealthofcommonsense.com/2023/09/how-individual-retirement-accounts-changed-the-stock-market-forever/

Fair enough. I think most are Tech/Growth or Value investors though. Not many can shift orientation with the environment.

But why would anyone look at only the past three years? No doubt.

If he'd been in Tech for even just several years at that time, he'd have a lot to give back before hurting. 5-year returns: VITAX (IT) +113% BKR +69% Buffett and Berkshire aren't irrelevant, but let's not kid ourselves.

From a boating forum I frequent: Well after 20+ years of doing this job my body hurts in ways I never thought. it’s not just driving around delivering shoe boxes Like most people think. Covid really changed so many things for us also. Not only because everyone started ordering online, but many of these shippers started putting everything from furniture to appliance to gym equipment into boxes. people are looking at what our total compensation package is valued at now and thinking that it’s bullshit and that we are way over paid. But another thing they don’t understand is we are the only carrier in the industry that has the production standards that we do, vehical Telematics and safety standards that we have to answer for on a daily basis, and service expectations that’s we do. Believe me when I say we earn our pay and benefits. as far as what it takes to get to a top scale pay driving position, it really depends on alot of factors. What area you live, what hub you work at, seniority employees ahead of you, job creation, retirees, current volume, ect. Everyone starts at part time and is promoted based on seniority. when I started it at $8.50 an hour it took me about 4 1/2 years to go full time, then another year or so to get top scale pay. There were some guys who waited upwards of 10 years to get promoted . it’s just the way it goes sometime. but nobody is hired as a driver and even if you do start driving within a couple of years you still have a pay progression to go though. What you are seeing on the news as far as us making $49 an hour for top scale drivers is at the 5th year of our new contract. So for those wanting to come work for us with the hopes of getting that right off the bat be ready to be very disappointed https://www.riverdavesplace.com/forums/threads/what-can-brown-do-for-you.272887/#post-4898167

Mauldin this week, echoing the first post in this thread: Long-time readers will know that I am bullish on energy (oil and gas in particular), precisely because the ESG movement, including numerous governments, is limiting both the amount of money and places that can be drilled for oil and gas. Economics 101 says that if you reduce a supply of something that has an increasing demand the price is going to rise. Felix Zulauf and others at my conference were talking about $120-$150 oil next year. In a normal world, that shouldn't happen, yet it is.

*Like*

How good is AI in generating new ideas? The conventional wisdom has been not very good. Identifying opportunities for new ventures, generating a solution for an unmet need, or naming a new company are unstructured tasks that seem ill-suited for algorithms. Yet recent advances in AI, and specifically the advent of large language models like ChatGPT, are challenging these assumptions. https://archive.ph/e6L3N#selection-4423.0-4429.345

https://cleantechnica.com/2023/09/10/lithium-deposit-in-extinct-nevada-volcano-could-be-largest-in-the-world/

It's not quite so simple. If you consider the possibility of a one-time jump in equity valuations as investors increasingly recognize stocks aren't much riskier than bonds (followed by bond-like returns), there's risk in missing the move and then being unable to support a historical SWR with what has become an essentially 100% bond portfolio.

They did. Did you bet on bonds at the beginning of 2022? How did that inform your decision at the beginning of this year to hide out the forecast 2023 recession in bonds rather than equities?

You could have bet on stocks at the beginning of the year, yeah? Yet you bet on bonds. YTD, that bet isn't paying off: VMBSX (Mortgages) +.23% VICSX (Corporate) +2.18% VWEAX (HY) +5.46% VEGBX (EM) +6.01% VFIAX (S&P500) +18.71% VITAX (IT) +36.43% It may have been the smart bet ex-ante, but . . .

At least in my case, it's also that I could credit myself with patience if I stuck with it. And I could defend the previous allocation by reference to the smart guys. Whereas changing strategy means admitting I'm both giving up the chance of eventually being proven right and am now assuming the risk of being proven whipsawed wrong. Now I'm alongside every other drunk at the party bragging how they're killing it in tech.

No benchmark?

I was pretty much all Small Value (factors), Emerging Markets (Modern Portfolio Theory), and Cash (valuation) from the Great Financial Crisis to retirement in 2020. Because that was what all the smart guys (Fama-French, DFA, Swedroe, Hussman, etc.) recommended. I've all the books. (Despite working in Corporate Planning and spending my time forecasting the impact of technological change.) That was costly. The Covid dip allowed me to shift from 50/50 to 90/10, and more recently I've made a significant allocation to Information Technology. Admitting I've been off-sides has been difficult, but like Templeton conceded: when people say things are different, 20% of the time they are right. All the history-informed smart guys miss that. Don't want to be the value investor who capitulated in 1999, but optimism seems to carry the day. I'll defend my optimism with the Dow 36,000 and "second half of the chessboard" arguments, but really it's just a belief that the Wall of Worry will continue to be climbed.

How'd that work out this year?

JB. Yep. Okay. I wanna talk about tech. So you wrote this thing about the second half of the chess board and you're talking about, I guess exponential growth. Tell, tell us about this analogy that you're using and why you wanted to write about that over the last week. NC. Yeah, so there's an old story that technologists use and, and it's kind of a fable about the origin of chess in India in the 12, 13 hundreds. And the story goes that the minister that invented chess goes to his local ruler and says, I have this new game. King loves it. Says, what kind of reward do you want? I love this game. You know You can You know have all the gold in my treasury or whatever you want. And so the, the minister says, no, all I want is this. And he points to the chess board and says, I want you to put one grain of wheat on the first square, two on the second, four on the third, eight on the so forth double every time. And whatever grain there is on the chess board at the end, that's my reward. The king thinks he's getting off easy. He calls his treasure, starts doling it out. And the first half of the chess board's pretty much okay, it's like 279 tons of wheat in the first half of the chess board. The problem is in the second half of the chess board. 'cause you've doubled so much and you keep doubling the numbers in the second half of the chess board get mammoth. There's more grain on the 32nd square than there is in the whole first half. Right. Right. By the end of it, you've got like 1500 times the amount of wheat production in the world today. So either the king one story goes, the king rewards the minister for being so clever gives him a better job. The other one is he has a guy kill on the spot. Yeah. Because he is You know sassing the king and that's not good. Yeah. And the analogy to tech is more, Gordon Moore wrote Moore's Law in 1965 with a couple of already turns of improvement in the semi cycle. JB. Moore's law is that the, the speed of the chip doubles every what, two years? NC. It's the power per dollar doubles every two years. Or the size it'll shrink by half every two years. Yeah. Yeah. So the two of those things together, we now have had 32 turns of Moore's law since 1960. So we're literally at the 33rd square of the chess board. JB. Okay. Right now where things start to get wild. NC. Where things start to get wild because you've already permeated the, in this case society with so much technology and now AI comes along. And my thinking was we don't need another consistently doubling of Moore's Law to keep working. AI already starts with this massive platform and we're in the second half of the chess board with AI as the driver, not just the hardware and cost per computing. MB. Yeah. Great analogy. Love It. Okay. What are the implications for investors? NC. The implications come down to thinking about what stocks work. And it's, as much as we all like to sort of talk about how expensive tech is and what these multiples look like, there is a rationale behind them. There's a reason why those stocks have worked so well for so long. They have worked the first half of the chess boards so effectively. Right. The second half, it's not gonna change. You know and I hear so many times. Okay. Whether it be value investing reverting to some kind of long-term mean or eventually things have to stop. Moore's Law has to end. And the point is it doesn't. Yeah. 'cause we have this now huge base and every next double, even if the doubles only happen every five years instead of every two years, it's still a huge amount of change. MB. Look at, look at this chart from Goldman. This. So this is world technology compared to the world M T and the world ex-MT and technology is just in another universe. This is earnings per share by the way. Yeah, not even price earnings per share. So I pulled a couple of numbers from this chart. So in MSCI world, the top five names, global stocks, everything Apple, Microsoft Alphabet, Amazon, Nvidia, they are 14% of the market cap of all stocks in the world. Yeah. And that's why. JB. So there is now an emerging way of thinking about this, where we're not talking about the chip level anymore. Now we're saying one unit of compute is actually a full data center. Hmm. Seriously, like the data center is the computer. If that's the realm that we're going into. And it increasingly feels like we are, that I think that upends a lot of what we used to think about when we traditionally tried to value companies in this, in this ecosystem. Because there aren't gonna be 50 companies running their own data centers. They're just too expensive. So we have reached a point where only a few companies are gonna be able to actually com compete in this world. They're gonna largely have this to themselves. So if the unit is no longer the chip or the, or the computer or even the server, the unit is actually the full data center. And that's how we're starting to think about this. I think a lot of people are gonna have to get more comfortable with technology companies that trade 30, 40 times earnings and could conceivably grow 20% plus for a decade to come. Unless all of a sudden we, we all just decide we're not interested in making progress anymore and everything. Like everything is good how it is right now, let's just stop. That's the only thing that can stop where I think this is all going. So I don't know how that factors into Moore's Law. But I do know that when I listen to technologists on podcasts, this is now the way they're talking, the GPU doesn't matter. The data center filled with GPUs is the difference maker and is the thing that's gonna drive spending and CapEx and r and d and that's like a whole new, that's a whole new ballgame. NC. The same exact thing happened with mainframes in the seventies and eighties. Okay. Remember Ross? Remember Ross Perot? Yeah. EDS. That was the entire EDS pitch. Let us literally buy your data center from you and then will run it. Okay. And this is just the next level. Yeah. Like forget about having to have a computer You know a PC or an office computer will handle everything in the cloud. Yeah. JB. It's happening. Right. The power of any one individual computer is not terribly important. Yeah. It's, it's where the work, where the work is being done. And that's why I think Snowflake is a stock that we're all gonna be forced to pay attention to for the next 10 years. Obviously Nvidia, and then you look at like some of the field programmable g arrays. So you look at like a lattice semiconductor, that stock's going crazy outta nowhere. People discovering that. And they're saying, wait a minute. Now we're at a point where people that wanna do ai, you actually can't prefab the chip for these companies. You have to just give them a chip that they can program in the field. Like literally program it to the specs of whatever they're building. NC. That's a whole new world. So I feel like we might be be still relatively early in semiconductor stocks. You know in the types of networking companies that are supporting these data centers here. MB. Here's pushback but not pushback. So the NASDAQ 100 and I know a lot of that is outside of these chip names, but the NASDAQ 100 has compounded at 19% the year since 2013. It's a lot of Wealth creation. The counterpoint to what I just said is that Nvidia is training according to Goldman at 26 times, estimated 24 month forward earnings. So two years from now, for a company that's growing like this and defining it, what could be the biggest game changing technology that the world has ever seen? That doesn't sound that rich. NC. It doesn't. It doesn't. I mean, growth investing is not so much about valuation as it is about momentum. You know. And that's why momentum and growth together are two most powerful factors in investing. And yeah, I mean valuation matters to some degree always, but ultimately is not in the short term. Where are you gonna be? You know it. You're right. Not on the Cape You know shoulder PEs predict zero five-year returns.

Maybe the better question: on which square are we on the chessboard?

Worse, we've had similar before (SARS, avian/swine flu, etc.) which played out differently.

Yeah, I don't think it was intended to be actionable. Just a recognition of what an odd period it has been.

Interesting. Thanks, drzola.

Do efficient markets drop $20 bills?

That's why they can't just do whatever they want, sure. I was curious why Luca believed they shouldn't. Innate rights (secured and protected by law) wasn't his answer.

U.S. Commerce Secretary Gina Raimondo said U.S. companies have complained to her that China has become "uninvestible," pointing to fines, raids and other actions that have made it risky to do business in the world's second-largest economy. . . . "Increasingly I hear from American business that China is uninvestible because it's become too risky," she said. Raimondo said American firms are facing new challenges, among them "exorbitant fines without any explanation, revisions to the counterespionage law, which are unclear and sending shockwaves through the U.S. community; raids on businesses – a whole new level of challenge and we need that to be addressed." . . . "All of that creates uncertainty and unpredictability," Raimondo said of recent Chinese actions. "So businesses look for other opportunities, they look for other countries, they look for other places to go." Referring to both old and new business restrictions, Raimondo said, "The sum total of which is making China feel too risky for them invest." https://www.reuters.com/markets/us-commerce-chief-set-meet-chinese-vice-premier-beijing-2023-08-29/