1999 again?

[TwoCitiesCapital]

Anyone shorting today? If so, care to share any ideas?

 

I've been shorting the Nasdaq via put spreads. Hasn't worked so well.

 

Was also shorting American Airlines and Carnival Cruises via put spreads with the thesis being all value will accrue to the debt holders higher in the cap structure and the equity could go to single digits for each if this is more prolonged than we currently expect.

 

That was working well until just recently. Probably still up a 5% or so on the position, but that's all mostly time value due to how I structured the spreads (buy in the money, sell out of the money) and because I rolled to lower strikes back in October saving me from this pain.

[Castanza]

https://blogmaverick.com/2013/01/10/the-stock-market-2/

 

Mildly interesting blog post from Mark Cuban in 2004 regarding the market and his personal experience taking a company public.

[LC]

Castanza, I was going to post the same thing. I saw it on reddit/securityanalysis yesterday :D

 

It is an interesting read to hear his thoughts, particularly the bit on "fundamentals", where in my opinion he somewhat contradicts himself:

 

If the value of a stock is what people will pay for it, then Broadcast.com was fairly valued. We were able to

work with Morgan Stanley to create volume around the stock. Volume creates demand. Stocks don’t go up

because companies do well or do poorly. Stocks go up and down depending on supply and demand. If a stock is

marketed well enough to create more demand from buyers than there are sellers, the stock will go up. What about

fundamentals? Fundamentals is a word invented by sellers to find buyers.

 

Price-earnings ratios, price-sales, the present value of future cash flows, pick one. Fundamentals are merely

metrics created to help stockbrokers sell stocks, and to give buyers reassurance when buying stocks. Even how

profits are calculated is manipulated to give confidence to buyers.

 

And then in the very next paragraph:

 

I get asked every day to invest in private companies. I always ask the same couple questions. How soon till I

get my money back, and how much cash can I make from the investment? I never ask what the PE ratio will be, what

the Price to Sales ratio will be. Most private investors are the same way. Heck, in Junior Achievement we were

taught to return money to our investors. For some reason, as Alex points out in The Number, buyers of stocks have

lost sight of the value of companies paying them cash for their investment. In today’s markets, cash isn’t earned

by holding a company and collecting dividends. It’s earned by convincing someone to buy your stock from you.

 

I think he is partially right and partially wrong. How can he say fundamentals are merely metrics used to sell stock, when he asks the same question to private investors. Asking "how soon can I get my money back?" and ignoring earnings or sales ratios is kind of silly.

 

BTW, have you or anyone read the book he recommended, "The Number by Alex Berenson"? Probably I should post in the correct forum.

[Gregmal]

I think the gist of what he is trying to communicate is accurate. I posted in another thread something similar regarding trading, and how its viewed by some. Supply and demand is probably the single most important variable in an otherwise large equation. Thats why some shareholders throw temper tantrums with respect to dilution. There's so many "value" investors who are downright stupid or willfully ignorant when it comes to this. They "dont believe" in trading, and think trading is a "losers game" in the long run. Theyre idiots though. If I dump 3% of a companies shares inside of a day, no duh! it will create a short term imbalance. Now play with this example over different time periods. Its the magic sauce to why something like Dillards is repeatedly such an easy trade to make money on. This can occur on every level of the market from a single stock trade over a 10 second span to multi year(even decade) spans. Of course the fundamentals of the business matter as does your ability to get your money back. They too have a big place in the equation. But its more of a backstop and place of support that will eventually create a supply/demand imbalance. Its why buybacks are a huge beneficiary to long term shareholders. The fundamental idea of a buyback is that at a certain price, the company can exhaust the shares outstanding before it exhausts its assets/runs out of cash.

[Read the Footnotes]

Castanza, I was going to post the same thing. I saw it on reddit/securityanalysis yesterday :D

 

It is an interesting read to hear his thoughts, particularly the bit on "fundamentals", where in my opinion he somewhat contradicts himself:

 

If the value of a stock is what people will pay for it, then Broadcast.com was fairly valued. We were able to

work with Morgan Stanley to create volume around the stock. Volume creates demand. Stocks don’t go up

because companies do well or do poorly. Stocks go up and down depending on supply and demand. If a stock is

marketed well enough to create more demand from buyers than there are sellers, the stock will go up. What about

fundamentals? Fundamentals is a word invented by sellers to find buyers.

 

Price-earnings ratios, price-sales, the present value of future cash flows, pick one. Fundamentals are merely

metrics created to help stockbrokers sell stocks, and to give buyers reassurance when buying stocks. Even how

profits are calculated is manipulated to give confidence to buyers.

 

And then in the very next paragraph:

 

I get asked every day to invest in private companies. I always ask the same couple questions. How soon till I

get my money back, and how much cash can I make from the investment? I never ask what the PE ratio will be, what

the Price to Sales ratio will be. Most private investors are the same way. Heck, in Junior Achievement we were

taught to return money to our investors. For some reason, as Alex points out in The Number, buyers of stocks have

lost sight of the value of companies paying them cash for their investment. In today’s markets, cash isn’t earned

by holding a company and collecting dividends. It’s earned by convincing someone to buy your stock from you.

 

I think he is partially right and partially wrong. How can he say fundamentals are merely metrics used to sell stock, when he asks the same question to private investors. Asking "how soon can I get my money back?" and ignoring earnings or sales ratios is kind of silly.

 

BTW, have you or anyone read the book he recommended, "The Number by Alex Berenson"? Probably I should post in the correct forum.

I think the key to understanding the points he is making without seeing them as contradictory is to so see them in historical context. If this is from 2004, it's just a couple of years after Sarbanes-Oxley (2002) and the scandals that prompted the reforms. Earnings are more easily manipulated than cash (especially then), and earnings based multiples are more easily manipulated that cash based multiples.

 

The Number by Alex Berenson is a further hint that this was his meaning. The Number was about earmings manipulation and the scandles at Enron, Worldcom, Halliburton, Tyco and others. The manipulation was driven by the desire to meet earnings expectations or manage earnings. These manipulated earnings were then fed in to the Wall Street system for analysts selling the stock and its results which then impacted the supply and demand factors driving the price higher and of course making the executive stock options more valuable.

 

To bring this up to date, in the current environment, it would make more sense if Cuban was today saying that we shouldn't pay attention to the price to non-GAAP adjusted bullshit EBITDA numbers (P/BS-EBITDA  ;)). Instead should be focused on the verification of FCF and then the use of P/FCF.

 

The best updating of all would be to urge caution regarding the use of price to tangible addressable market market (P/TAM), which if you haven't heard of it yet, P/TAM is a real honest to god new form of lunacy that is roughly the equivalent of what price to potential eyeballs would have been in 1999.

[LC]

Ok that makes a lot more sense - thanks for providing the context.

 

I wonder what the price:TAM is for a bridge in Brooklyn?

[Castanza]

Castanza, I was going to post the same thing. I saw it on reddit/securityanalysis yesterday :D

 

It is an interesting read to hear his thoughts, particularly the bit on "fundamentals", where in my opinion he somewhat contradicts himself:

 

If the value of a stock is what people will pay for it, then Broadcast.com was fairly valued. We were able to

work with Morgan Stanley to create volume around the stock. Volume creates demand. Stocks don’t go up

because companies do well or do poorly. Stocks go up and down depending on supply and demand. If a stock is

marketed well enough to create more demand from buyers than there are sellers, the stock will go up. What about

fundamentals? Fundamentals is a word invented by sellers to find buyers.

 

Price-earnings ratios, price-sales, the present value of future cash flows, pick one. Fundamentals are merely

metrics created to help stockbrokers sell stocks, and to give buyers reassurance when buying stocks. Even how

profits are calculated is manipulated to give confidence to buyers.

 

And then in the very next paragraph:

 

I get asked every day to invest in private companies. I always ask the same couple questions. How soon till I

get my money back, and how much cash can I make from the investment? I never ask what the PE ratio will be, what

the Price to Sales ratio will be. Most private investors are the same way. Heck, in Junior Achievement we were

taught to return money to our investors. For some reason, as Alex points out in The Number, buyers of stocks have

lost sight of the value of companies paying them cash for their investment. In today’s markets, cash isn’t earned

by holding a company and collecting dividends. It’s earned by convincing someone to buy your stock from you.

 

I think he is partially right and partially wrong. How can he say fundamentals are merely metrics used to sell stock, when he asks the same question to private investors. Asking "how soon can I get my money back?" and ignoring earnings or sales ratios is kind of silly.

 

BTW, have you or anyone read the book he recommended, "The Number by Alex Berenson"? Probably I should post in the correct forum.

 

I figured some others on here saw the article.

 

Yeah he definitely does contradict himself a bit. I tried to ignore those points and focus more on the psychology of what he was saying.  Read the Footnotes sums it up nicely. At some point (hence the 1999 thread) it seems like fundamentals don't matter at all. At least for the broader market. It seems like as long as some analyst is willing to slap a BUY rating on a stock it will go up. Cathie Wood has made a hell of a lot of money using this psychology to her advantage.

 

I have not read the book.

[Guest cherzeca]

see Grantham. https://www.gmo.com/americas/research-library/waiting-for-the-last-dance/

 

I do think however that 2021 will differ from 2000, in the sense that there will be a significant upsurge in economic activity this year, imo, due to delayed consumption/entertainment/etc re covid. that will only enhance the bubbliciousness going into 2022. then Biden starts dribbling from the corner of his mouth, commie-la starts wearing only kente cloth outfits and the market goes to hell...

[TwoCitiesCapital]

Interesting notes from Cuban above. Thanks for the additional context from Read the Footnotes! I generally agree that value investors do not pay enough attention to things like flows, technicals, and the structure of demand. Even I don't pay enough attention to them or have reliable sources for measuring them despite recognizing this as a short-coming in my process.

 

see Grantham. https://www.gmo.com/americas/research-library/waiting-for-the-last-dance/

 

I do think however that 2021 will differ from 2000, in the sense that there will be a significant upsurge in economic activity this year, imo, due to delayed consumption/entertainment/etc re covid. that will only enhance the bubbliciousness going into 2022. then Biden starts dribbling from the corner of his mouth, commie-la starts wearing only kente cloth outfits and the market goes to hell...

 

Was just about to post Grantham's letter myself, but see that I've been beaten to it.

 

Is delayed consumption really a thing?

 

Obviously, coming off a low base is always an improvement. But if we use 2018/2019 as a base - I don't think my activities in 2021 will exceed 2018/2019. Even ignoring that it will take months for vaccines to roll out, sports to readmit fans, travel restrictions to become less onerous, etc. I don't think my activity levels in 2022 will much exceed 2018/2019 by much.

 

I'll go back to buying sporting tickets, traveling, eating out, etc. But I don't think it's going to be much more just because I didn't do it for 2 years. I think it will be front-loaded in the first quarter things are "normal", but it will decelerate back to normalized levels quickly. Because I expect it will be quick and unsustainable, I don't know what impact it will really have on profits and growth.

 

Assuming I'm wrong, is it big and sustainable enough to offset the deceleration in stimulus? Is it enough to offset the drag that is likely from millions still working through the long-term hardship of business failures, underemployment, and unemployment? Is it enough to offset the impact of rising interest rates and debt service in a real recovery?

 

Just seems to me that I might expect 2022 aggregate earnings/GDP to be similar to 2018 or 2019 levels in a good-case scenario. But we are ~30% and ~15% above those respective levels with another 2-years to go before we have that certainty. Even if achieved, there is more debt sitting in front of the equity and more shares outstanding to share the remaining profits with. It's not at all clear to me the delta in EPS is positive relative to 2018/2019 (at the aggregate index level).

 

Maybe we do get bubblier from here. But I don't think it's pent-up demand, improving fundamentals, or economic growth that does it. I think it's entirely based on flows that would HAVE to come from more fiscal stimulus.

 

All of the other stuff is 100% priced in for the next 2 years while ignoring the risks of it not happening or the likelihood of higher rates/inflation if it does happen.

 

 

[Castanza]

Michael Burry had an interesting tweet this today.

 

https://twitter.com/michaeljburry/status/1346565099750793217?s=21

 

Claim was 529k company bankruptcies in 2020. Apparently that is a 35 year low.

 

When the cocaine wears off....

[LC]

Do more cocaine?

[TwoCitiesCapital]

Michael Burry had an interesting tweet this today.

 

https://twitter.com/michaeljburry/status/1346565099750793217?s=21

 

Claim was 529k company bankruptcies in 2020. Apparently that is a 35 year low.

 

When the cocaine wears off....

 

https://www.bloomberg.com/news/articles/2020-11-24/u-s-bankruptcy-tracker-march-of-the-zombies-is-coming-soon

 

Here's a Bloomberg article that discusses 2020 being the worst year since 2009 for numbers of bankruptcies for firms with greater than $50 million in liabilities. Seems like rent/mortgage deferrals, PPP loans, EIDL loans, etc really did help small businesses stay afloat temporarily. But how many can remain that way in 2021 without that ongoing support?

[mattee2264]

 

Interesting to see how it plays out. But I am guessing politically there will be a lot of pressure to provide ongoing support as the pandemic wasn't anyone's fault so forebearance, enhanced unemployment benefits, government subsized loans etc will continue. I think 2022 rather than 2021 might be the year of reckoning.

 

I think the pent up demand argument is probably a bit exaggerated. It is probably going to be limited to certain sectors e.g. travel/entertainment and to some extent will displace spending on consumer goods and speculating on stocks. And because of supply constraints these activities will probably become a lot more expensive so it will contribute towards inflationary pressures. And stock markets have already pretty much priced in a V shaped recovery to pre-COVID levels.

 

If the bubble continues it will be because as Grantham argued there is no moral hazard. Stock prices can seemingly only go up with the Fed swooping in to reverse any sharp market declines. And a whole new generation has discovered the joys of easy money. That dynamic could go on for at least another year or two until the Fed removes the punch bowl or inflation spooks markets and undermines confidence that the Fed can keep interest rates low.

[Castanza]

Do more cocaine?

 

  ;D I hear it works on Wall Street!

 

Michael Burry had an interesting tweet this today.

 

https://twitter.com/michaeljburry/status/1346565099750793217?s=21

 

Claim was 529k company bankruptcies in 2020. Apparently that is a 35 year low.

 

When the cocaine wears off....

 

https://www.bloomberg.com/news/articles/2020-11-24/u-s-bankruptcy-tracker-march-of-the-zombies-is-coming-soon

 

Here's a Bloomberg article that discusses 2020 being the worst year since 2009 for numbers of bankruptcies for firms with greater than $50 million in liabilities. Seems like rent/mortgage deferrals, PPP loans, EIDL loans, etc really did help small businesses stay afloat temporarily. But how many can remain that way in 2021 without that ongoing support?

 

According to U.S. Bureau of Labor Statistics, 20% of small businesses fail within the first year and 33% make it to year 10. So many nuanced variables that will have drastic impacts on the outcome of small businesses in this environment. I imagine the bankruptcy numbers will increase substantially post covid. Even with ongoing support, it feels like a death by 1000 cuts. If consumers are slow to pick up the reigns post stimulus, I think a lot of owners will simply not bother with the effort and hang it up. This could change the appetite to start or own small businesses. At least in the short term 1-5 years.

 

 

 

 

[Spekulatius]

^TYX (30 year treasury) at 18.25 - highest level since late February 2020

[TwoCitiesCapital]

Interesting notes from Cuban above. Thanks for the additional context from Read the Footnotes! I generally agree that value investors do not pay enough attention to things like flows, technicals, and the structure of demand. Even I don't pay enough attention to them or have reliable sources for measuring them despite recognizing this as a short-coming in my process.

 

see Grantham. https://www.gmo.com/americas/research-library/waiting-for-the-last-dance/

 

I do think however that 2021 will differ from 2000, in the sense that there will be a significant upsurge in economic activity this year, imo, due to delayed consumption/entertainment/etc re covid. that will only enhance the bubbliciousness going into 2022. then Biden starts dribbling from the corner of his mouth, commie-la starts wearing only kente cloth outfits and the market goes to hell...

 

Was just about to post Grantham's letter myself, but see that I've been beaten to it.

 

Is delayed consumption really a thing?

 

Obviously, coming off a low base is always an improvement. But if we use 2018/2019 as a base - I don't think my activities in 2021 will exceed 2018/2019. Even ignoring that it will take months for vaccines to roll out, sports to readmit fans, travel restrictions to become less onerous, etc. I don't think my activity levels in 2022 will much exceed 2018/2019 by much.

 

I'll go back to buying sporting tickets, traveling, eating out, etc. But I don't think it's going to be much more just because I didn't do it for 2 years. I think it will be front-loaded in the first quarter things are "normal", but it will decelerate back to normalized levels quickly. Because I expect it will be quick and unsustainable, I don't know what impact it will really have on profits and growth.

 

Assuming I'm wrong, is it big and sustainable enough to offset the deceleration in stimulus? Is it enough to offset the drag that is likely from millions still working through the long-term hardship of business failures, underemployment, and unemployment? Is it enough to offset the impact of rising interest rates and debt service in a real recovery?

 

Just seems to me that I might expect 2022 aggregate earnings/GDP to be similar to 2018 or 2019 levels in a good-case scenario. But we are ~30% and ~15% above those respective levels with another 2-years to go before we have that certainty. Even if achieved, there is more debt sitting in front of the equity and more shares outstanding to share the remaining profits with. It's not at all clear to me the delta in EPS is positive relative to 2018/2019 (at the aggregate index level).

 

Maybe we do get bubblier from here. But I don't think it's pent-up demand, improving fundamentals, or economic growth that does it. I think it's entirely based on flows that would HAVE to come from more fiscal stimulus.

 

All of the other stuff is 100% priced in for the next 2 years while ignoring the risks of it not happening or the likelihood of higher rates/inflation if it does happen.

 

Maybe "pent up demand" is actually a thing

 

https://www.npr.org/sections/money/2021/01/12/955617983/what-1919-teaches-us-about-pent-up-demand

[Arski]

What do you guys do to adjust your portfolio for a probable crash or do you invest as y'all do as normal?

 

I've a lot of cash at hand (30%) but I am not sure if it's the best strategy. I'm interested in gold and SPACs for storing my money, but haven't invested in one of those yet.

[Spekulatius]

I did some more research on this topic and this is what I found:

https://www.reddit.com/r/wallstreetbets/comments/kzf0jz/when_boomers_are_proud_of_their_2020_gains/?utm_source=share&utm_medium=web2x&context=3

[Viking]

My wife’s niece (in her early ‘30’s and no investing knowledge) texted her this weekend asking if this was a good time to buy Tesla.

 

A buddy of mine texted me last week. His son was keen to invest in two companies (they were small; i had never heard of them) and wanted to know if they were a good investment.

 

This is starting to feel a little like the late ‘90’s...

 

—————————

 

My recollection of the late ‘90’s was it was a VERY bifurcated market.... new economy = bubble; old economy = on sale.

 

I do think there are parallels today. Tesla = bubble; however lots of sectors are cheap = telecom, pipelines, energy and lots of other stuff is not crazy expensive = financials, insurance, some reits and more.

 

—————————-

 

Where do we go from here? The .com bubble blew bigger for 4 or 5 years so we could just be getting started with this version. Perhaps at some point we see a crash in the high flyers and a rotation into the cheap stuff (similar to what happened when the .com bubble popped).

[Xerxes]

Why does history needs to repeat itself the way it did in 1999-2000. If the 1999-2000 debacle never happened or if it did happened but we were not born or too young to remember, we would not have that bias.

 

The new generation as they grow old in the next 10 years will remember the pandemic and the 2020 March market crash for what it was: the shaking out of the previous generation of investors who cashed out in a great hurry (close to retirement etc,) while opening door for them to build foundations. Sure there are the Robinhood gangs on WSB but many are not.

 

The same way that value investors, youngsters then, fondly remember the Dot.com crash and how it presented opportunities to them ... while also providing them with a gift of a bias - point of reference - forever seared into their minds: Remember 1999

 

There are many ways to see the past. We chose to see things in a linear way and choose to draw clear parallels between events, because it suits us.

 

The question to ask is then, is experiencing 1999 a handicap ? is the gift of a bias a curse.

[Gregmal]

Why does history needs to repeat itself the way it did in 1999-2000. If the 1999-2000 debacle never happened or if it did happened but we were not born or too young to remember, we would not have that bias.

 

The new generation as they grow old in the next 10 years will remember the pandemic and the 2020 March market crash for what it was: the shaking out of the previous generation of investors who cashed out in a great hurry (close to retirement etc,) while opening door for them to build foundations. Sure there are the Robinhood gangs on WSB but many are not.

 

The same way that value investors, youngsters then, fondly remember the Dot.com crash and how it presented opportunities to them ... while also providing them with a gift of a bias - point of reference - forever seared into their minds: Remember 1999

 

There are many ways to see the past. We chose to see things in a linear way and choose to draw clear parallels between events, because it suits us.

 

The question to ask is then, is experiencing 1999 a handicap ? is the gift of a bias a curse.

 

I think this is a great comment. I've long said that betting against the "exceptions to the rule" has been almost fool proof, especially right after the exception just occurred. I can name on probably 405 sheets of loose leaf paper the number of folks I know who have missed great investments because they were scared of "MSFT was a bad investment if you bought at the top in 1999".

 

That said, this isnt really an endorsement of the markets. I think "the market" is a stupid and lazy term. A better approach is just really to use common sense. When you see a gazillion no/low revenue spac deals representing BILLIONS going up the way it has, you would be wise to use caution. Garbage companies with no path to profitability are not sustainable regardless of what market we are in. A clever story stock with a long runway? Well, thats a different story. A clever story stock thats already valued at $800B? A robust and durable cash cow trading at 15x? I mean sometimes the market is really simple. I think bubble is definitely accurate in terms of some areas. Being honest with yourself about what makes sense and what doesnt is key to it. How many stupidly academic smart guys over the years shorted things because "30x sales" while ignoring "new tech", "300M market cap", "respected founding partners/investors", "low rates", etc. Its really easy not to become someone who blows themselves up when the bubble bursts, and its also really easy not to become someone who generates dogshit returns because you're scared of the bubble. Just use your head and stay within your confidence zones.

[valueinvestor]

Why does history needs to repeat itself the way it did in 1999-2000. If the 1999-2000 debacle never happened or if it did happened but we were not born or too young to remember, we would not have that bias.

 

The new generation as they grow old in the next 10 years will remember the pandemic and the 2020 March market crash for what it was: the shaking out of the previous generation of investors who cashed out in a great hurry (close to retirement etc,) while opening door for them to build foundations. Sure there are the Robinhood gangs on WSB but many are not.

 

The same way that value investors, youngsters then, fondly remember the Dot.com crash and how it presented opportunities to them ... while also providing them with a gift of a bias - point of reference - forever seared into their minds: Remember 1999

 

There are many ways to see the past. We chose to see things in a linear way and choose to draw clear parallels between events, because it suits us.

 

The question to ask is then, is experiencing 1999 a handicap ? is the gift of a bias a curse.

 

I think this is a great comment. I've long said that betting against the "exceptions to the rule" has been almost fool proof, especially right after the exception just occurred. I can name on probably 405 sheets of loose leaf paper the number of folks I know who have missed great investments because they were scared of "MSFT was a bad investment if you bought at the top in 1999".

 

That said, this isnt really an endorsement of the markets. I think "the market" is a stupid and lazy term. A better approach is just really to use common sense. When you see a gazillion no/low revenue spac deals representing BILLIONS going up the way it has, you would be wise to use caution. Garbage companies with no path to profitability are not sustainable regardless of what market we are in. A clever story stock with a long runway? Well, thats a different story. A clever story stock thats already valued at $800B? A robust and durable cash cow trading at 15x? I mean sometimes the market is really simple. I think bubble is definitely accurate in terms of some areas. Being honest with yourself about what makes sense and what doesnt is key to it. How many stupidly academic smart guys over the years shorted things because "30x sales" while ignoring "new tech", "300M market cap", "respected founding partners/investors", "low rates", etc. Its really easy not to become someone who blows themselves up when the bubble bursts, and its also really easy not to become someone who generates dogshit returns because you're scared of the bubble. Just use your head and stay within your confidence zones.

 

Probably two of the best comments I've seen here on COBF.

[Spekulatius]

Why does history needs to repeat itself the way it did in 1999-2000. If the 1999-2000 debacle never happened or if it did happened but we were not born or too young to remember, we would not have that bias.

 

The new generation as they grow old in the next 10 years will remember the pandemic and the 2020 March market crash for what it was: the shaking out of the previous generation of investors who cashed out in a great hurry (close to retirement etc,) while opening door for them to build foundations. Sure there are the Robinhood gangs on WSB but many are not.

 

The same way that value investors, youngsters then, fondly remember the Dot.com crash and how it presented opportunities to them ... while also providing them with a gift of a bias - point of reference - forever seared into their minds: Remember 1999

 

There are many ways to see the past. We chose to see things in a linear way and choose to draw clear parallels between events, because it suits us.

 

The question to ask is then, is experiencing 1999 a handicap ? is the gift of a bias a curse.

 

I think it is a curse especially if you take the analogy too far. Every crash or bubble has its own fingerprint and while some of what we have today is similar than in 1999, it is not quite the same. For example in 1999, old economy quality mid and small cap stocks were very cheap while stocks that were cheap in this crash were of much lower quality for the most part. Back then we had higher interest rates and credit stress, while we now have the Fed intervening to reduce all credit stress and low interest rates just to name a few.

 

Some of the excesses seem the same though. I knew quite a few folks who blew up their portfolio and retirement accounts in 1999 and I think we will the same thing happening now. You can only neglect fundamentals so long and by definition not everyone can sell out before the crash because the sellout is the crash.

[Viking]

Why does history needs to repeat itself the way it did in 1999-2000. If the 1999-2000 debacle never happened or if it did happened but we were not born or too young to remember, we would not have that bias.

 

The new generation as they grow old in the next 10 years will remember the pandemic and the 2020 March market crash for what it was: the shaking out of the previous generation of investors who cashed out in a great hurry (close to retirement etc,) while opening door for them to build foundations. Sure there are the Robinhood gangs on WSB but many are not.

 

The same way that value investors, youngsters then, fondly remember the Dot.com crash and how it presented opportunities to them ... while also providing them with a gift of a bias - point of reference - forever seared into their minds: Remember 1999

 

There are many ways to see the past. We chose to see things in a linear way and choose to draw clear parallels between events, because it suits us.

 

The question to ask is then, is experiencing 1999 a handicap ? is the gift of a bias a curse.

 

Xerxes, events like 1999 (and 2020) are a test for investors; experiencing adversity (bear markets) is a great test of skill and fit. There are always good lessons to be learned from looking at the past.

 

How an investor does over the entire cycle (encompassing both bull and bear markets) should provide good feedback for an investor of his/her investment philosophy (does is generate an acceptable return and meet your other objectives) and fit (does it let you sleep at night). And as i get older i am noticing small adjustments over time (it is not static) as both objectives and tolerance to risk change.

[kab60]

I'm from Denmark which has a very poor equity culture in that very few retail investors participate. But it seems everybody is talking about stocks at the moment. It's so stupid how after markets have moved up, people are lured in. I know few that go shopping right after holiday sales are over.

 

My collegues, who knows nothing about stocks, talked about Tesla and Shopify and Apple last year. My neighbour, who couldn't read an income statement if his life depended on it, have made good money buying EV stocks. Another mentioned how he overhead two grocery clerks talking about what a waste it was to work, when one could just trade penny stocks at home: They always go up!

 

I'm still very long and think most of my stuff is very cheap to fairly valued, but it's crazy at the moment. With high taxes on realized gains I've come to accept the volatility and always stay fully invested, abd I can't seem to figure out a clever pay to play this, but still I've found myself looking at various hedging strategies. This is definately not going to end well for a lot of people.