RuleNumberOne

@Gregmal: looks like i will have to get back into the sewage one last time, i thought i was done posting on CoBF. My advice to you is to stop interacting on this thread right now. I felt really liberated after i decided to stop posting here. Its a complete waste of time. Life is too short and precious to waste. This thread has been very helpful in deaddicting me from posting on CoBF. I will leave the pros with their pea-sized brains to their pea-sized returns. There is no cure for envy. You can find hundreds of thousands of low-IQ people in the finance industry who will have a similar reaction. They have always been around and there is no cure for envy.

petec, Charlie Munger's teachings really resonated with me. He says if one is very curious over a long period of time about why things are happening, they will gradually get better at mental models that explain what's happening around them. I have made mistakes but the plan is to keep getting better over time. IMO the only thing we can do is read the news and see how other investors are behaving. This also includes the behavior of central bankers, politicians, investors, etc. There is no method or metric, just a gut feeling that i think gets sharper over time.

@Gregmal: thanks a lot for your wise perspective twice this weekend! You really are CEO material. @writser: when i said 25-30% in a previous post, i had never looked at my CAGR return, i made a very rough calculation (e.g. 10x to the power 0.1) that i thought would suffice for that post. Only when John Hjorth opened that "CoBF members 2019 returns" thread did i look at what exactly my returns were for the very first time in more than 10 years. I found that last year's IRA returns were 72% in my wife's accounts and 47% in mine, averaging out to 60%. I restrict speculative experiments to my own account and not hers because she quit working long ago. My returns are lower due to the speculations. Another reason is my IRAs are in Wellstrade and ML and those websites are slow and lousy, so i trade more frequently from my wife's Schwab accounts. I don't know what the "since inception" or 5-year returns for my IRA accounts are, nor would i ever bother wasting time calculating them. Are you a finance industry professional? thepupil has said he is a pro. Boy, if finance guys spend their weekend stressing about some stranger's returns and digging through his previous posts, i hate to think what the workweek in the finance industry looks like. I have already wasted too much time talking about my returns on this board, weekends are precious.

My non-IRA reports 30% since 2011 inception. Lot of money went in and came out due to home purchase and home sales, and so on. I don't know what is the true rate of return in the non-IRA. The only accurate measurement i have is the Schwab IRA accounts opened in October 2013 (because i have moved around the other accounts a lot due to mortgage bait-and-switch from WFC and BAC.) Schwab reports returns since inception of 56%.

thepupil, Schwab reports 5-year returns as 49% and returns since 2013 inception as 56%. It is not 17x, more like 13x. Well that makes things more interesting. Mr 55% CAGR regularly stopped his compounding machine to shave an 1/8 or 1/4 off his mortgage? And made 4-5x in the past few months to beef that CAGR from a shitty 30% to a respectable 55%. C’mon RNO, I was really trying to give you the benefit of the doubt and explain your strategy. Now explain the giant factual discrepancy here. That’s some serious track record endpoint sensitivity you’re working with.

thepupil, I made very little from options, a negligible amount. But what you write below about the individual stock returns proves that the only way to make money from such GAAP-profitable stocks is through timing. The alternative is to buy SAAS or other GAAP-loss momentum stocks which I didn't do. I joined in May 2019 and started posting here so that i don't get bored. Before that i used to bother colleagues with my rants. If a stock has a high return over a few years (like stock XYZ had a CAGR of 40% over 10 years), the pros would have bid XYZ to a very high price because the pros have to stay invested all the time. The pros are always chasing each other's returns. They can't get in and out of the market whenever they want - they have to rely on the CAGR of a stock. To summarize, people should find their psychological strengths and use them. For example, i can't short, it stresses me out too much. Staying invested in long-term buy-and-holds also stresses me out too much (e.g. i haven't made money from FAAMG). Timing is what gives me the most peace of mind.

Yeah, i think the returns are just proportional to the timing. I regret not benefiting from FAAMG. I bought and sold GOOG for tiny gains despite having worked there. The 2009-2013 period was great for volatility initiated from Europe. I am afraid the ECB might go crazy and start targeting the stock market P/E. I can't explain why their stock markets are at all-time highs even though they have been in a recessionary state for the last two years. Its a buying panic. Wow. So mostly plain vanilla stocks like what the people here buy. Just better timing lol

The inception was in October 2013. I checked some of the statements for the stocks: BRKB, WFC, USB, BAC, CSCO, ANET, PYPL, BRKR, IONS, BIIB, MRK, USG, WAB, Gopro, Perrigo, DaVita. Stock selection is quite bad, i think its just market timing. Each of those stocks could have been bought and sold for a loss or bought and sold for a profit.

Yes, it falls under the heading of unconventional monetary policy. Lagarde recently initiated a major policy review at the ECB and the ECB people figured that this was all they had left. After a certain cutoff date, dividends will become negative and they will keep getting more negative they longer you wait to buy stocks. It happened with bonds last year. People kept buying yields which were more negative in fear of them going even more negative tomorrow. So they are going to try negative dividends next and see if it can ignite economic growth in Europe. Please support your point that central banks have removed market fluctuations! With facts, not feelings. So when pressed for facts about central bank actions the only thing you can come up with about central banks is some preposterous idea that central banks will "decree dividends to be negative"? I'm sorry, I never in my life thought I'd say this.... but Scottie makes more sense than you when he's stoned. The difference between you and Scottie... honesty. He openly admits he's a troll.

Only domestic individual stocks, and they are all over the spectrum. I have never invested in an index fund, I have never been long futures, maybe i should try it out. But the beta of the stocks would vary with the market's mood. If i don't have too much conviction, i stay in low-beta stocks, otherwise more aggressive. I try to buy stocks where the expectations are low and it is off significantly from the 52-week high. All this also means i miss out on long-term buy-and-hold stories. I have scratched off asset plays (negative experience with Leucadia earlier in this bull market). My belief is that when i buy is more important than what i buy.

Well, the European stock markets are hitting all-time highs even though over the last 2 years Italy and Germany GDP growth rates have alternated between negative and positive. It is mostly a gut feeling. By fluctuations, as Gregmal alluded, I mean the > 10% corrections. For the first time we will have a recession not cause a bear market in Europe, not even a correction. Probably people are in a hurry to buy stocks before the dividends are decreed by the ECB to be negative just like the bonds. Please support your point that central banks have removed market fluctuations! With facts, not feelings.

thepupil, I think the main factor is avoiding the major declines. Having enjoyed the fantastic low-volatility 2017 ride, I got out of the market in Feb 2018 during earnings season and stayed out for a few months. Volatility had come back during earnings season after a long vacation. Then i got back in again around May, probably didn't stay too long in the market because i decided the market was too slippery. But i was definitely out in September 2018 because things started looking frothy with record margin debt. I stayed out during the Q4 correction. Then I got back in again in Jan 2019 immediately after the Powell's U-turn press conference (I bought stocks during the lunch hour as fast as i could bidding well above last sale). Then i got out of the market in March 2019 or so, didn't ride it to the top. Then i got back in again in October 2019 during earnings season. I got out in the first few days of January 2020. One pattern i see is that i get out much before an intermediate peak. RuleNumberOne, Can you discuss your investment style/philosophy/process a little bit? (Past major investments over this period for example) I didn’t go through your whole post history, but saw some earlier discussion of WFC and V but everything else seems to be negative macroeconomic commentary. I’m not questioning the numbers put forth, but am curious how they were generated/what you do (or used to do when you were less bearish) to generate those eye popping returns.

Gregmal, Buffett and Munger agree with us too, they have said so on many occasions that it is the attitude to market fluctuations that makes the money, not the modeling or advanced accounting or a PhD in economics or a DCF model. In the foreword to the Intelligent Investor Buffett also says your investment success will depend on the amplitude of market fluctuations you see in your career. My original point before we went off on a tangent was that central bankers have impaired Buffett's approach by removing market fluctuations.

As a retail investor, the only advantage over the hedge funds is the behavioral advantage. Pros will always know more about a stock, because analysts meet management and hedge funds meet analysts. They get more interesting information than what analysts write in their reports. Otherwise nobody would pay analysts what they get paid today. I have worked at tech companies where the analysts clearly know facts that are not public - the hedge funds also get those facts. Behavioral is the only way to beat them. Market timing is the one big advantage a retail investor can make for himself because the full-time investors have career risk. Its likely rb is a professional in finance. But that does not give an advantage in investing. This guy John Hjorth also jumped at me the other day after i commented on the AAPL and MSFT threads. I have been an employee at two of the FAAMG companies and may look at FAAMG stocks differently, but he probably thought i am clueless.

Thankfully i didn't waste any of my life learning to build an "economic model". Probably you are an expert at economic modeling which is why you would obsess over tiny fluctuations in WFC financial statements. To hold WFC as it dropped from the 50s to the 40s during a great bull market requires a lot of economic modeling with a lot of decimal points, that's a skill i am glad i don't have. Generating 50%+ CAGR returns over the last several years since inception requires the way i go about investing and that is enough for me. quote author=rb " data-ipsquote-contentapp="forums" data-ipsquote-contenttype="forums" data-ipsquote-contentid="17835" data-ipsquote-contentclass="forums_Topic" 395025#msg395025 data-ipsquote-timestamp=1581189979] WOW! You sound like a real winner! You remind me of the CDO manager from The Big Short. You can't build a simple economic model but pontificate on macro issues no end. Please continue to confuse me with your brilliant insights. Keep on WINNING!!!

In my IRA accounts, the 1, 3, 5 year returns are 60%, 55%, 56%. The returns since inception are also around 55-60% (don't remember exact number). The same decisions were made in non-IRA too but since money went in and out, i can't measure it accurately (e.g since inception in 2011 the brokerage reports 30%). Probably my investing insights are too much for you and you cannot understand them. Before i started posting here, i watched you hold WFC for a long time as it dropped. I got those returns from market timing, not holding WFC like you did.

I wonder what Buffett and Munger are thinking in an age where central bankers have replaced Mr. Market. Buffett continues to pile up cash even though none of his maxims can be valid if central bankers continue to interfere with market behavior. Buffett's quaint theory that stock prices cannot outperform operating results forever is invalid. They can outperform forever because central planners can intervene without limits. Buffett's favorite "Chapter 8 and Chapter 20 of the Intelligent Investor" are useless because central planners will never let asset prices fall anymore.

Despite the terrible economy of the last several years, Italy's stock market is also at an all-time high, just like Germany's. The economies keep going down in Europe but the stock market keeps going up, year after year. We can't call it a stock market anymore because it does not reflect any economic results. Therefore nothing that Warren Buffett or Ben Graham or Charlie Munger said applies here. Don't central bankers feel any guilt for destroying free markets? https://tradingeconomics.com/italy/stock-market I wonder if we can get central bankers to stop destroying free markets if we remove their perks. It seems Eurocrats get a bed in their offices for siestas along with lavish drinking and eating budgets.

Yeah, i have surrendered to the Eurocrats and ECB. They have nailed everything down so that nothing and no one can get away. I agree it doesn't look like Italy can leave easily. Nothing ever fails and the markets are never allowed to punish poor results. You would never think the DAX would be at an all-time high with the bad economic news in Europe. Central bankers have bought half of everything everywhere and market prices don't reflect any business results anymore. We should be thankful stocks still have a positive dividend yield. Come to think of it, why do we need a stock market or a bond market anymore? The Soviet Union did not bother with the formality of a stock exchange. https://www.bloomberg.com/news/articles/2020-02-07/german-economic-weakness-exposed-again-as-industry-slumps "Germany is facing a possible recession again after industrial production plunged by the most since the global financial crisis. The 3.5% slide in December’s output comes a day after a report showed factory orders declining at the fastest pace in more than a decade. That suggests Europe’s largest economy may have contracted at the end of 2019, according to Bloomberg Economics, and dragging itself out of the hole this year has become even more challenging with the coronavirus hitting global business. There was further bad news for Europe on Friday, with France reporting a 2.8% drop in industrial output in December, and Spain posting a 1.4% decline. Both readings were far worse than economists had anticipated. The Netherlands added to the gloom, with manufacturing shrinking 1.7%, the most since 2018."

Strange times. DAX index is at an all-time high even as industrial orders keep going down. ECB chief Lagarde says the ECB has nothing left but that only makes the market go up even more. Hubris-filled central bankers have destroyed free markets. https://www.bloomberg.com/news/articles/2020-02-06/lagarde-warns-ecb-has-limited-options-to-fight-lingering-threats "The warning came just hours after data showed a huge drop in Germany factory orders, indicating the manufacturing recession in Europe’s largest economy is far from over. Lagarde told European Parliament lawmakers on Thursday. “This low interest rate and low inflation environment has significantly reduced the scope for the ECB and other central banks worldwide to ease monetary policy in the face of an economic downturn.” https://www.reuters.com/article/us-germany-economy-industrial-orders/german-industry-orders-slump-on-weak-euro-zone-demand-outlook-subdued-idUSKBN2000QA Contracts for ‘Made in Germany’ goods fell 2.1% from the previous month, the Statistics Office said. That was the biggest drop since February and compared with the Reuters consensus forecast for a 0.6% rise.

One security blanket that current investors have is indexing. They feel they are diversified and the index averages a 15% return every year. All the people i talk to who are fully invested use indexing. They shovel all their savings into the index and stay fully invested at all times. They see everyone else doing the same thing and it makes them feel warm and cozy. Europe is actually a bad sign of what can happen. They have had negative rates for years but the economy only keeps getting worse. They have no way of getting out of their slump and rates are already at -0.4%. And i suspect companies and people in Europe noticed that a few quarters ago - that they have no way of getting out of their slump. I talked to someone yesterday who had been working in silicon valley during the dot-com bubble and was also investing in the stock market of 1999-2000. He was of the opinion the yield curve does not matter much. He thought panic could be triggered by either a tightening of venture capital or a layoff announcement from a prominent company.

To buy anything at these inflated prices, we need a guarantee from the Fed that they are going to do "whatever it takes" to support asset prices forever. If the President guesses wrong and appoints a Fed Chairman with a backbone like Volcker, all the pent-up hell breaks loose. All sorts of debt-to-GDP measures keep going up relentlessly even if earnings have gone nowhere for 4 quarters.

Probably there is no such thing as an asset bubble anymore. Central bankers due to various locale-specific reasons such as political wrath (US) or job security (Eurocrats), have been providing non-stop asset price levitation. Now there is a clamor for "rate cuts to combat the coronavirus." That really means we want to "justify a P/E of 60 instead of just 50, so you need to cut rates now." The end-result is Europe: they are unable to get out of their years-long slump because they used up all the big monetary policy catalysts. Their economic plight is going from bad to worse but they are unable to change it. The financial assets there don't see any market pricing since the ECB has guaranteed to not let them fall. Why would the Fed want to turn the US into something like the Eurozone by not saving rate cuts for when you really need it. The Fed really should have raised rates in 2017, 2018.

I am very sorry to hear that. They are in the 50s.

The central bankers stopped being effective a long time ago in Europe. Yesterday's GDP data shows Italy GDP shrank by 0.3%. The last 8 quarters, the percentage growth in Italy's GDP is: 0.1, -0.1, -0.1, 0.1, 0.1, 0.1, 0.1, -0.3. https://tradingeconomics.com/italy/gdp-growth The central planners/bankers whine that they want inflation. When these central bankers buy financial assets, they get asset price inflation. If central planners genuinely want goods inflation, they should just buy chemicals, cars, planes, boats, clothes, toys etc instead of stocks and corporate debt.