cameronfen

Ok I'm clearly in the minority, but let me add, from 1926 to 1946 which I think is at least among the worst performing 20 year period ( I'm on my phone with no ability to use excel thoroughly) and the total return averaged 7%. 15 years return averaged 4%. People saying the returns for the next 15 to 20 years will be 5-7% nominal are basically saying the markets will perform as bad or worse than they did for the 20 year period covering the great depression.

The 10% number is the average return of the market over the past 100 years. It's an unconditional expectation. I then adjust down to the return expected 0% over 15 years and suggest how far away from this average return you have to be for your outlook (i.e. conditional expectation) on the world to make sense.

The tricky thing is that stock returns, viewed as a univariate process, don’t appear to be i.i.d. Instead, a sequence of very high returns tends to be followed by much lower returns - just as most value investors would predict. If you have the inclination, you can actually go fetch some data from Robert Shiller’s website and see this for yourself. So there is some correlation between returns as I did mention as a disclaimer, and there are ways to take into account autocorrelation (HAC/HAR). However, I don't want to spend that much time on actually doing this, but, you can clearly see, the p-value is so low, it's likely the same condition will hold true. For example, even if you doubled the 15-year volatility the p-value would be around 5%. Another way of thinking about this basically you are assuming real growth will contribute -50% growth commulatively (off of todays 100%) in 15 years as I think you have to assume around 2% inflation every year. Are valuations 50% to 33% overvalued currently, and at the same time is productivity not going to grow at all over 15 years. It's easy to look at outside information and see high CAPEs and PEs and say the market is overvalued, but compared to the magic of compounding, valuation within normal ranges hardly matters going over long periods. If productivity grows 2%, population + increased share of capital grows 2%, and inflation is at 2%, that's 6% growth per annum which is 140% growth over 10 years. Even if the market is only worth half what it is trading for right now, in 15 years it still should on average have grown by 20% (on our original current 100%). This is why I never try to market time. It's simply not worth it to assume my outside information is enough to outweigh the massive effect of compounding. Edit: One more thing, even if volatility was 100% correlated which it is the most it can be for all 15 years, this equals a volatility of 360% which implies that using my original 10% growth rate average you are still -.9 standard deviations below the mean which implies that getting a constant return or worse has a base rate of only 18%.

Base rates. The average return for the market is 10% per year. The average volitility is 18% a year (despite the name this is a standard deviation). Going 15 years into the future: 1.1^15=4.17. So the market is on average expected to appreciate 317 percent over 15 years. The standard deviation of that appreciation is .18*sqrt(15)= .7. This is not exactly correct because vol is correlated but is imo ok napkin math. -3.17/.7= -4.5 standard deviations which implies a probability of occurring of less than .00005. Does the particular circumstances of the s&p today really shift your beliefs so much such that something that has a .00005 chance of happening become what you expect to happen?

I have it. It once in awhile suggests something cheaper but I havent figured out how the rewards thing works

If your in San Fransisco or another of the big coastal CA cities I have seen companies like Zeus that do relatively pain-free real estate management. You buy the house they do everything else and give you a check. I think the payoff is pretty good as they do short term rentals for businesses (i.e. a consultant is working a job for 4 months and needs a place to stay): https://zeusliving.com/ Zeus also has competitors which you can find here (and price shop): https://techcrunch.com/2019/03/15/zeus-corporate-housing/ As a value investor maybe you will ask what is the catch, obviously they skim some off the top (but lets be honest VCs are likely funding some of your profit just as we have Softbank to thank for cheap Uber rides), but this concept of landlord as a service is both new, unknown and untested. I have never used and don't live in a Zeus city but I think its a good idea. With scale and more reputation, your returns may go down.

7238.T ( Akebono Breaks) will Test that hypothesis. Terrible looking balance sheet and ominous language in their last quarterly report about going concern. This is an interesting case, because Akebono is actually a decent brand name in its space. One company went bankrupt on the Nikki last year (at least according to them). I wonder if it will be Akebono will be that one this year (I havent looked at the company).

These guys have an interesting stratagy( http://sureinvesting.libsyn.com/private-equity-investing-in-the-public-markets-with-dan-rasmussen-and-nick-schmitz ): Basically cheap on an ev basis with most of the ev being debt. They say there strategy works best in Japan for a variety of reasons: not only is japan cheap, but it's also basically impossible to go bankrupt, and paying back debt fixes the corporate governance risk in Japan.

I think the point with ecological footprint and earth carrying years is that with current technology and amount we consume, the earth only replenishes half the resources we use every year. Long term we can either consume less, or more optimistically innovate our way out. The problem is the pace of innovation is slowing down, so the probability we figure out something that is akin to the invention of agriculture is low.

I think the fact that climate scientists can't forecast accurately is more of a reason to play it safe and protect against climate change. If scientists were sure climate change would cost between 5 to 10 trillion to the global economy we could prepare for that. However if the range was 1 trillion to 25 trillion you have to be more proactive as the potential pain of 25 trillion significantly outweighs the upside suprise of only 1 trillion in costs. Additionally most climate scientists have usually been wrong by being too optimistic. Your argument has an unjustifiable lack of symmetry. Since we can't forecast accurately we should assume bad cases on both sides. For example if global warming is in fact preventing an incipient ice age than the cost of preventing it could be 100 trillion or more. So I say the surprise of an ice age vastly outweighs the pain of warming. There is also another problem. The future is filled with tail events like this...all of which have huge potential costs. You cannot avoid and plan for all of them simultaneously both because plans may be mutually exclusive and because you won't have the resources. My argument is that you would be far better off focusing on adaptation to an unknowable future than pretending you can predict it and avoid all its various worst cases. You buy health insurance right? Does it matter if you have a staph infection and have a massive fever or if you suffer from hypothermia? If the risk of both these things is bankruptcy if they happen, makes sense to pay something to insure from getting the worst-case scenario, even if most of the time you will be paying the insurance company for nothing. If ice age was a huge risk worse compared to global warming I would say we should take preventative measures to insure against catastrophe too and if that included artificially warming the planet, so be it. But lucky for us, there is no evidence of catastrophic ice age. I concede no one buys insurance for being struck by lightning because of the odds are so small. But the odds of catastrophic global warming odds wise is more in the same ballpark of getting seriously ill than being struck by lightning. So I feel it makes sense to "take an insurance policy out" in this situation. We are in an interglacial right now. A catastrophic ice age WILL happen. On the other hand there is zero evidence of catastrophic warming both now and over almost all of Earth's recorded history including the times where C02 was highest. In the last 20k years Earth's temperature has risen 4-7 degrees which exceeds what we expect from global warming and sea levels have risen 120m which is essentially cannot happen again even in the case of an ice free earth. During that time Earth's civilization rose up. So I only see benefits to global warming both based on our own history and based on the history of life on the planet which has always reacted positively to warming. The predictions of global warming are not desserts. To get high sensitivities for C02 you must have an assumption that relative humidity remains constant which implies greater amounts of water vapour. This basically means the Earth will be wetter and hotter. When combine with the effect of C02 whose biggest direct impact is to fertilize plants you basically have the recipe for hot, wet and green. I don't see how that is bad for the environment or us. The greening effect has already been observed. So I see it as beneficial warming which perhaps slightly delays a horrible ice age...win/win. 95% of climate scientist believe we will have global warming. 95% of other scientist including other nobel prize winners whose field is something other than climate agree. No scientist (although I'm sure you can find someone some where), believes we will have an ice age in the foreseeable future (we are due for an ice age in the next 100,000 years that's true, but that's not a pressing concern). I dont know what I'm talking about with regards to climate science, I made an economic argument which is my expertise. The fact that you are claiming this, suggests you dont know what you are talking about either.

I dont mean to denigrate you when you were brave enough to admit your mistake and BAC was my first stock purchase so I obviously changed philosophy. However, I've recently been thinking as a retail investor, the average old school financial company (basically banks and insurance) and are not worth the effort. Sure as a value investor you have an easy rule: buy when price to book goes under 1. But this simple rule hides the fact that these companies have low to middling ROE, are horrendously complicated, and unlike other companies, growth is as often bad as good (taking on assets no one else wants). Leave it to the guys with 1 billion in assets and resources to get the 10-12% IRR you probably get with the average basket of undervalued banks and insurance comapanies. Maybe a Quant strat of buying every bank under .75 of TBV, but if one is going to spend time learning an industry, there are easier fruits to pick in my mind. I dont know maybe other people have better luck with these things and I dont know what I'm talking about. Just something that occurred to me as a thought that was worth putting down at least for my sake.

I think the fact that climate scientists can't forecast accurately is more of a reason to play it safe and protect against climate change. If scientists were sure climate change would cost between 5 to 10 trillion to the global economy we could prepare for that. However if the range was 1 trillion to 25 trillion you have to be more proactive as the potential pain of 25 trillion significantly outweighs the upside suprise of only 1 trillion in costs. Additionally most climate scientists have usually been wrong by being too optimistic. Your argument has an unjustifiable lack of symmetry. Since we can't forecast accurately we should assume bad cases on both sides. For example if global warming is in fact preventing an incipient ice age than the cost of preventing it could be 100 trillion or more. So I say the surprise of an ice age vastly outweighs the pain of warming. There is also another problem. The future is filled with tail events like this...all of which have huge potential costs. You cannot avoid and plan for all of them simultaneously both because plans may be mutually exclusive and because you won't have the resources. My argument is that you would be far better off focusing on adaptation to an unknowable future than pretending you can predict it and avoid all its various worst cases. You buy health insurance right? Does it matter if you have a staph infection and have a massive fever or if you suffer from hypothermia? If the risk of both these things is bankruptcy if they happen, makes sense to pay something to insure from getting the worst-case scenario, even if most of the time you will be paying the insurance company for nothing. If ice age was a huge risk worse compared to global warming I would say we should take preventative measures to insure against catastrophe too and if that included artificially warming the planet, so be it. But lucky for us, there is no evidence of catastrophic ice age. I concede no one buys insurance for being struck by lightning because of the odds are so small. But the odds of catastrophic global warming odds wise is more in the same ballpark of getting seriously ill than being struck by lightning. So I feel it makes sense to "take an insurance policy out" in this situation.

I think the fact that climate scientists can't forecast accurately is more of a reason to play it safe and protect against climate change. If scientists were sure climate change would cost between 5 to 10 trillion to the global economy we could prepare for that. However if the range was 1 trillion to 25 trillion you have to be more proactive as the potential pain of 25 trillion significantly outweighs the upside suprise of only 1 trillion in costs. Additionally most climate scientists have usually been wrong by being too optimistic.

I'm hoping that the tax cuts will generate more than enough growth to offset the loss of tax revenue. It's probably to early to determine if it will. But I remain hopeful. I would only add to your post that the debt to GDP ratio has been going in the wrong direction for years. https://tradingeconomics.com/united-states/government-debt-to-gdp I think that the tax cut being revenue neutral is unlikely. The point where revenue for government is maximized is according to some economists (one cant really trust this as we've havent been in this bracket in recent times) is around 70 to 80% top marginal. Below this level increases increase revenue and we are way below this. Doesnt mean tax cut was wrong, but it definitely could have been timed better (like the next recession).

The problem is not to look at the total debt but the growth rate of debt. If debt grows slower than total gdp growth (ie with inflation added), basic math like in a dcf will imply debt to gdp will stabilize at some value. With the new tax cut we are definitely not there, but the biggest problem is that we used our trump card when times are good (pardon the pun), no ammo for the next recession. For the federal govt, like 70% of spending is transfers and military, so talking about lazy public servants is basically a moot point. Social Security should have a higher retirement age (in my world mainly for white collar workers but ppl would say that's unfair). Govt health care should be reformed (but I'm not going to state my views on that). Same with military. These problems definitely exist more with states, including the one big problem of the pensions.

^^ Yes but you can make a lot of money in the stock market with good predictions without understanding why those predictions are made. I doubt many professional pool players understand the underlying physics of the system, yet they can tell you what happens.

Also his plan is likely to drive everyone out of India so he will have a telecom monopoly and charge exorbitant prices. I'm sure the thought has crossed Indian policymakers minds, but they are probably bought off or worried that it would be bad politics to stop people from getting free phone service not to mention you probably are making an enemy with 50 billion dollars.

From what I have seen (not much) Mukesh is corrupt and ruthless AF. He was also an industry advisor of the government group the kneecaped foreign ecommerce companies, preventing them from selling their own brands or any exclusive items on their sites in India. This was less than one month ago. Then after destroying the value of flipkart (owned by walmart) and Amazon, he has announced basically the same week this regulation went out that his firm Reliance Industries is going to get into ecommerce (which is of course majority owned by him an Indian and so is not subject to these rules). Also do you want a guy in your country that would go out of his way to bankrupt your less succesful brother? They've been feuding for a while but really? I agree it would be nice to have dirt cheap (basically free for a developed country person--look at their prices) phone service.

The comment also goes to trying to learn from him. Why spend time learning the strategy of someone who hasn't outperformed the market over a long time and with small funds. It seems like it would be detrimental to adopt his techniques and maybe not only be a waste of time by using up time to perform even poorer.

I like intelsat and rimini street. intelsat owns lots of spectrum, and is trading at levels before all the positive rulings out of the FCC. Bond markets have already reacted positively, but equity holders are a bit slow it seems... See kerisdales thesis on SA. rimini good too but dont have time right now to describe as I'm writing this in the restroom of fogo de Chao. (family dinner).

if you are anywhere decent in coding, you can use python or another language, gives you more flexibility than an excel add on. It sounds fancy but coding on you own well enough for these simulations basically requires teaching yourself a coding language for one month or so and is less daunting than it seems. Granted with the amount of effort allow myself to put in now on research, I dont have the time to build simulations.

I can only repeat what I heard second hand but its basically it's on the asset side. Partially it's doing what WEB have been doing, basically selling insurance to generate capital for mutual funds, but with the balance sheet and leverage that resembles an insurance company rather than a company like Berkshire that can withstand losses. Granted, when I heard this I thought well greenlight and third point have there own insurance businesses too, which may be a way of saying the traditional insurance is skeptical of maybe good innovation. At the same time, I think I remember my dad talking about this guy trying to make money by aggressively pursuing a carried interest trade, I dont remember the context, but I think it's likely (havent done research) that he's doing the same thing now with MSRs (mortgage servicing rights), instead of selling more insurance to buy MSRs (which admittidedly were a great deal), I think athene borrowed a lot of money so they could buy more. This is no longer insurance but risky carried interest trade. Even though rates were low when you bought, what happens if rates collapse, and people refinance a mortgage and you lose both the MSR and have to pay back a loan that was made at higher interest rates. Granted they did these deals at historic low rates, but as a buyer of insurance, you dont participate in any of the upside, you just want to get your money when you need it.

My dad works in insurance and even though the CEO of athene is very famous, among actuaries etc he is known as a cowboy and takes inordinate risks to get his returns. He succeeded in the past, maybe he is misunderstood by acturies, or maybe he got lucky.

FYI, It's probably more efficient to buy tencent through naspers.

I don't think that even requires any pathological condition. Just to be removed enough from the situation by distance (emotional and geographical). People do a lot of things indirectly that they wouldn't do directly. Drone operators blowing people up from halfway around the world, but they wouldn't knife them in the heart if the very same people were tied up on a chair in front of them. Doesn't make them psychopaths or NPDs, just human. Sure. Maybe that example was bad but sometimes its beneficial for society when a company does anything it can to benefit itself even when it involves moral grey areas. Basically there are externalities (both positive and negative) to having a really cutthroat company. Now not every company in the industry should be cutthroat, as there are advantages to working together, but if everyone is focused on getting along, there will be a lot of low hanging fruit that a cutthroat competitor can pick that would go unpicked. I also dont think pathology is binary. Usually it's a spectrum where people get less and less empathetic and at some point we draw the line. Would I be able to handle being a drown pilot or even a combat soldier, I dont know I'm very squamish about killing things and don't even eat meat. At the same time an I thankful there are some people with less hangups about those things than me: yes. At some point and in some situations, I think that bleeds into being thankful there are some psychopaths out there that companies out there are being efficiently run and that people are being fired that arent needed for example, even if I would find it difficult to do that myself.