Have We Hit The Top?

[maplevalue]

42 minutes ago, Xerxes said:

Greg,

I believe that Bloomberg Front Row interview was done few weeks ago, tidbit of which was released only. And this week additional tidbits are released. I still cannot find his full interview. He did one last year which I thought was pretty good (but early).

 

I think I heard on Bloomberg Radio that the full interview gets released tonight at some point. 

[Gregmal]

Thanks for the clarification. Dont watch much tv. Just heard he was talking again and its like, how many times do we need to hear what this guy is peddling? Him and Faber have been doing their thing since I started investing. 

[maplevalue]

1 hour ago, maplevalue said:

 

I think I heard on Bloomberg Radio that the full interview gets released tonight at some point. 

 

Here it is 

 

[hasilp89]

was re-reading this article by Nick Train today and made me think of this thread. have to stay grounded but i think being optimistic pays off over the long run. I'll listen for perspective but the only thing i've gained from listening to grantham/faber types is unnecessary stress.  

 

Daniel Kahneman:  'Optimism is normal, but some fortunate people are more optimistic than the rest of us. If you were allowed one wish for your child seriously consider wishing him/her optimism.

 

https://citywire.com/wealth-manager/news/nick-train-why-i-taught-myself-to-be-bullish/a1105912?section=wealth-manager

[Gregmal]

11 minutes ago, hasilp89 said:

was re-reading this article by Nick Train today and made me think of this thread. have to stay grounded but i think being optimistic pays off over the long run. I'll listen for perspective but the only thing i've gained from listening to grantham/faber types is unnecessary stress.  

 

Daniel Kahneman:  'Optimism is normal, but some fortunate people are more optimistic than the rest of us. If you were allowed one wish for your child seriously consider wishing him/her optimism.

 

https://citywire.com/wealth-manager/news/nick-train-why-i-taught-myself-to-be-bullish/a1105912?section=wealth-manager

It’s even simpler than that. Look at the long term stock market chart. Pick your timeframe. 10/20/50/100 years? No difference

 

Second, every event that the perma bears point to as being something you should be scared of? Is a generational buying opportunity. 

[changegonnacome]

Market calls are useless - buy cash flowing assets with durable business models & at valuations that are not completley out of line with long run median multiples, hold them and you’ll be rewarded over time…….simple to say perhaps and harder to do for some.

[Xerxes]

I listened to the new Jan 2022 interview with Jeremy Grantham (admittingly I had watched his Jan 2021, i think 3 times, in the past year; Yes i am a Jeremy's fan). So I cannot say that I disagree with the things he says.

 

That said, I would disagree with his assertion that in 1929, you would have only made it in 1954. I think that point is irrelevant and it does not belong to this discussion. For one thing that means the investor never invested money again between 1929 and 1954 (possible in a Great Depression, but certainly not after).

 

Furthermore, from 1929 to 1954 you had:  a deep global Great Depression, and World War, a complete obliteration of the industrial base in Europe, collapse of the Japanese Empire, creation of atomic bombs and its impact on geopolitical calculus, and establishment of a New World Order centered around Moscow and Washington and defanging of the British Empire. So all bets are off, in terms of what can one predict. And since we cannot predict I think the better example is 2000-2003 where the market rolled over lost half of its value ever 2-3 years with a sandbox of economic cycle. .... and not 1929 apocalyptic scenario and where the world change half dozen times over till "break even" is reached in 1954. You may have already died in 1944.

 

In my view, 1987 could have been a 1929 moment, but it didn't take hold, because the action policy makers took and so many other things that we dont even know about.

 

[thepupil]

I think @Xerxesmakes a spectacular point about "point in time" vs dollar cost averaging. 

 

If you invested $1mm in SPX on 8/2000 (peak), you lost 40% to March 2009 and only recovered in 2011. You have $4.7mm ending 2021

 

If you did the same $1mm but were adding $50K/year, your 3/2009 balance is $940K, and you have $9.1mm ending 2021

 

inflows don't solve everything, but for a working individual they certainly help a TON. to the extent inflows >5% / year the math is more dramatic. 

 

At various % of inflow, the 3/2009 figure relative to August 2000 is 

 

0%:       61%

5%:      94%

10%:   126%

20%:  189%

 

also, as you get older one's beta decreases ad you accumulate other assets...

 

obviously the 2000-2009 experience was brutal for indexers...but inflows help (and you don't have to only own the index)

 

also getting way too theoretical here, but the $1mm no additions in August 2000 owned $35K of S&P 500 earnings, owned $42K of them in 2009, and now owns $182K. 

 

The $1mm with $50K / year owned $35K in 2000, $65K in 2009, and now owns $354K.

 

Edited January 26, 2022 by thepupil

[Viking]

Well the Fed update is over…. And bond yields are spiking higher across the curve. IF bond yields continue higher it will be very interesting to see where the more speculative parts of the stock market goes. 
 

The Fed clearly sees inflation as public enemy number 1. Rate increases are coming in March and balance sheet run off is coming shortly after.
 

Markets look pretty rational right now. 

Edited January 26, 2022 by Viking

[Gregmal]

Powell says “quite a bit of room to raise rates”…

 

Gregmal: checks rates… hmmmm, from 0? Sounds mathematically accurate. Goes back to being amazed at grown men and sophisticated investors being petrified of 25-50 bps hikes….

[TwoCitiesCapital]

6 hours ago, Xerxes said:

I listened to the new Jan 2022 interview with Jeremy Grantham (admittingly I had watched his Jan 2021, i think 3 times, in the past year; Yes i am a Jeremy's fan). So I cannot say that I disagree with the things he says.

 

That said, I would disagree with his assertion that in 1929, you would have only made it in 1954. I think that point is irrelevant and it does not belong to this discussion. For one thing that means the investor never invested money again between 1929 and 1954 (possible in a Great Depression, but certainly not after).

 

I don't think you're wrong here. But it overlooks those who can't add like the 25% of the population that became unemployed during that period and retirees. They're just kind of f*cked.

 

But if we're going to ignore them, then I think you're generally right. But you also need to also make adjustments for "real" returns. 

 

Still a miserably bad outcome to break even nominally after 7-10 years when that money is worth 20-30% less after that decade. 

 

Maybe we won't see 25% unemployment and a Great Depression, but is it possible that we dip 50-60% from here and don't sustainably recover until 2030? And is it possible at that point those nominal breakevens will be worth 30-40% less of inflation is actual trending higher than last decade? And is that acceptable in an environment where a massive chunk of society is living in retirement without the ability to add? 

Edited January 27, 2022 by TwoCitiesCapital

[Xerxes]

Well that was kind of my point. I was not suggesting that gentleman in 1928 (on the eve of Wall Street crash) was thinking, "well, we just have to dollar average, see you in 1954", if something happens.

 

My point was that there is so much stuff happened between 1929 to 1954, it is unthinkable to even suggest that an investor who was invested in 1929 took him till 1954 to be made whole. Which is the point Jeremy made on the interview. That investor could have taken his/her life in 1933 for all we know. Entire nations were destroyed in the world war.

 

That point (about dollar average) though is very valid for 2000 bust and thereafter as society evolved to where we are today.

Edited January 27, 2022 by Xerxes

[TwoCitiesCapital]

28 minutes ago, Xerxes said:

Well that was kind of my point. I was not suggesting that gentleman in 1928 (on the eve of Wall Street crash) was thinking, "well, we just have to dollar average, see you in 1954", if something happens.

 

My point was that there is so much stuff happened between 1929 to 1954, it is unthinkable to even suggest that an investor who was invested in 1929 took him till 1954 to be made whole. Which is the point Jeremy made on the interview. That investor could have taken his/her life in 1933 for all we know. Entire nations were destroyed in the world war.

 

That point (about dollar average) though is very valid for 2000 bust and thereafter as society evolved to where we are today.

 

Got it. Think I just misunderstood the point. 

[JRM]

9 hours ago, Xerxes said:

My point was that there is so much stuff happened between 1929 to 1954, it is unthinkable to even suggest that an investor who was invested in 1929 took him till 1954 to be made whole. Which is the point Jeremy made on the interview. That investor could have taken his/her life in 1933 for all we know. Entire nations were destroyed in the world war.

 

Was the US investor only made whole because we won the war and destroyed most of industrial Europe? We may not win next time.

[boilermaker75]

41 minutes ago, JRM said:

Was the US investor only made whole because we won the war and destroyed most of industrial Europe? We may not win next time.

 

How did shareholders of companies like Mercedes Benz do over this time period?

Edited January 27, 2022 by boilermaker75

[Spekulatius]

33 minutes ago, boilermaker75 said:

 

How did shareholders of companies like Mercedes Benz do over this time period?

They lost a lot of money during WW2 when Mercedes Benz essentially was destroyed, then completely rebuild post war. The Nazi's shut down the stock exchange in the 40's I think. The Reichsmarks was later exchanged 1:10 for Deutsche Mark.  I think investors were breaking even in the Mid fifties from a purchasing power POV and then started to make a lot of money.

 

I knew a older fellow who inherited Daimler shares bought pre-war from his parents and held them until the late 1980's at least and did fairly well.

 

In any case, the investors in Daimler shares beat those who stayed in cash. I can confirm however that losing a war and getting the entire country destroyed is not great for the stock market.

[Xerxes]

2 hours ago, JRM said:

Was the US investor only made whole because we won the war and destroyed most of industrial Europe? We may not win next time.

 

United States immensely benefitted from its geographical location (surrounded by two large oceans)*, its natural endowment & resources, and that it became that natural candidate to take the mantle of global leadership from the United Kingdoms and Europe.

 

While United States proper (continental US) remains unscathed throughout the war and turmoil in Europe, I think the geopolitical changes were so immense that it is wrong for Jeremy Grantham to sit there and casually observe that how bad the market return it was, as if most people stayed in the market and were watching Jim Cramer on CNBC etc. There were so many hurdles in life that individuals had to go through (relatively better if they lived in the U.S. and relatively worse if they lived in Europe) that point was not need to be made. I realize that Buffett also made the same point in 2020 AGM.

 

A better comparison is 2000, because while you had 9/11 etc., one could make the statement that all else being equal (since there were no major geopolitical event) this is what happened when the economy rolled over. So really isolating what we want to focus in.

 

 

*people complain all the time about Middle East and its politics, but they forget that the region does not have a natural barrier protecting it from the outsiders. It is often easy for people from U.S. and Canada to look down at the rest of the world and wonder why there are so many wars and conflict and look how great we are. Another case in point, Japan and United Kingdoms. Both islands at the far extremes of the Eurasian continent.

 

 

 

[Gregmal]

@Xerxes this style or type of market fear behavior is normal and what hinders people who can’t find a way to overcome it. Whenever real fears are rationally dismantled, I almost always expect to hear “well what about this”….with “this” being some super low, multiple standard deviation type catastrophic event. To which I’m like “ok, we’ll this cycle of worry never ends…do I spend my time repeatedly entertaining stupid what ifs….or do I just go put my time to work making investments”.

[rohitc99]

1 hour ago, Xerxes said:

 

United States immensely benefitted from its geographical location (surrounded by two large oceans)*, its natural endowment & resources, and that it became that natural candidate to take the mantle of global leadership from the United Kingdoms and Europe.

 

While United States proper (continental US) remains unscathed throughout the war and turmoil in Europe, I think the geopolitical changes were so immense that it is wrong for Jeremy Grantham to sit there and casually observe that how bad the market return it was, as if most people stayed in the market and were watching Jim Cramer on CNBC etc. There were so many hurdles in life that individuals had to go through (relatively better if they lived in the U.S. and relatively worse if they lived in Europe) that point was not need to be made. I realize that Buffett also made the same point in 2020 AGM.

 

A better comparison is 2000, because while you had 9/11 etc., one could make the statement that all else being equal (since there were no major geopolitical event) this is what happened when the economy rolled over. So really isolating what we want to focus in.

 

 

*people complain all the time about Middle East and its politics, but they forget that the region does not have a natural barrier protecting it from the outsiders. It is often easy for people from U.S. and Canada to look down at the rest of the world and wonder why there are so many wars and conflict and look how great we are. Another case in point, Japan and United Kingdoms. Both islands at the far extremes of the Eurasian continent.

 

 

 

which kind of comes to the point that if the country we live in gets into a war and gets destroyed, the stock markets and its returns will be the last of our priority. Ukraine comes to mind here in the present.

 

Actually the experience of the US and some of the european countries for the last 200 yrs is the exception. most other place have seen huge destruction of life, property and wealth

 

I would invest hoping the country survives and does well, but if doesnt then i have other and bigger problems to worry about

[Guest]

Hate saying it but the permabears are right. Eventually all countries (and companies) end up being zeros at some point. If you can just hold those shorts long enough. haha

[Gregmal]

Always thought an interesting question to ask folks was what they’d do investment wise if an asteroid was reported to be headed towards earth with almost certain probability of impact. 

[boilermaker75]

46 minutes ago, Gregmal said:

Always thought an interesting question to ask folks was what they’d do investment wise if an asteroid was reported to be headed towards earth with almost certain probability of impact. 

 

short insurers

[Xerxes]

1 hour ago, Gregmal said:

Always thought an interesting question to ask folks was what they’d do investment wise if an asteroid was reported to be headed towards earth with almost certain probability of impact. 

 

Scan the asteroid for its composition (gold, nickel etc.) and short whatever commodity it has within because the marketplace is about to get a massive supply glut. Head to the freezer. Re-emerge 3,000 years later. Of course RBC Direct Investing is still operational and as is the internet. Close the shorts and capture the windfall.

 

Get on Corner of Berkshire & Fairfax and showcase the CAGR for the return thread for the Year 5022.

 

 

 

 

[LC]

4 hours ago, Gregmal said:

Always thought an interesting question to ask folks was what they’d do investment wise if an asteroid was reported to be headed towards earth with almost certain probability of impact. 

 

First, buy enough drugs cigarettes and alcohol and go skiing. Then, go long long long every superstock that the rest of u all shorted

Edited January 27, 2022 by LC

[Gregmal]

13 minutes ago, LC said:

 

First, buy enough drugs cigarettes and alcohol and go skiing. Then, go long long long every superstock that the rest of u all shorted

Pretty much would be my answer. First set the table with family and friends for one final blowout….then go balls to the wall long on margin with options that won’t ever get settled at the very last minute. It’s either all over and nothing you did matters or if not, you make a fortune.