frommi Posted January 8 Posted January 8 (edited) 30 minutes ago, james22 said: Most young investors, sure. But not all. And it doesn't follow that father's can't learn anything from their sons. Howard Marks as well? Really? I'd think most here are Value investors and so more likely to be surprised to the upside than down. Yes Marks son. And yes also this board. The true value investors here are rare, at least that is my impression. Most people here are now crypto gurus? Edited January 8 by frommi
Blake Hampton Posted January 8 Posted January 8 (edited) Pg. 10, Eye on the Market - JPM @Spooky posted this on the Tidbits thread and It's quite telling. Thanks by the way, it really is an interesting document. Edited January 14 by Blake Hampton
Spooky Posted January 8 Posted January 8 (edited) 3 minutes ago, Blake Hampton said: Pg. 12, Eye on the Market - JPM @Spooky posted this on the Tidbits thread and It's quite telling. Thanks by the way, it really is an interesting document. The charts above caught my eye as well. Saw it and sent some funds to my Spouse to put in her Wealth Simple account which is more globally diversified equities. S&P non-tech and financials looks interesting and so does the S&P 600. Edited January 8 by Spooky
brobro777 Posted January 8 Posted January 8 1 hour ago, frommi said: Yes Marks son. And yes also this board. The true value investors here are rare, at least that is my impression. Most people here are now crypto gurus? You right man, I'm not a value investor, I make bets and I take ideas from everywhere, as long as they're positive EV I'm a tobacco guy tho, not a crypto guru, haha
Blake Hampton Posted January 8 Posted January 8 I don’t blame people for not understanding the situation. This stuff is all a convoluted mess of data, figures, policy, and other esoteric stuff that most people won’t ever understand. And this is precisely what makes it so dangerous. There are so many people now taking on unbelievable amounts of risk, and they don’t even realize it.
james22 Posted January 8 Posted January 8 14 minutes ago, Blake Hampton said: I don’t blame people for not understanding the situation. This stuff is all a convoluted mess of data, figures, policy, and other esoteric stuff that most people won’t ever understand. And this is precisely what makes it so dangerous. There are so many people now taking on unbelievable amounts of risk, and they don’t even realize it. And there are others who assume a different form of risk because they believe they understand the situation. Better to accept it's not understandable.
Malmqky Posted January 8 Posted January 8 (edited) 27 minutes ago, Blake Hampton said: I don’t blame people for not understanding the situation. This stuff is all a convoluted mess of data, figures, policy, and other esoteric stuff that most people won’t ever understand. And this is precisely what makes it so dangerous. There are so many people now taking on unbelievable amounts of risk, and they don’t even realize it. The best way to approach it is to be humble and realize you don’t understand it yourself, even if you think you do. Much less anyone else. This is all incredibly complex and why free market is so much better than planned economy, etc. Once you have a couple decades of experience under your belt, you realize this is stuff that’s all been talked about/people have lived through before. History doesn’t repeat, but it rhymes. Hedge accordingly, and always inverse, especially your own beliefs and assumptions. Like you said, so many people don’t understand the risk, don’t acknowledge they have blind spots, and essentially recklessly gamble. Flip side of the coin is a lot of people think they do understand the risks, and miss out on bull markets. 2011ish and 2018ish being recent examples. Edited January 8 by Malmqky
Gregmal Posted January 8 Posted January 8 Can we please find an $SPY 3000 greatest hits compilation from 2022? It was glorious watching then and even more so now. Mind you most of it occurred with $SPY at like 3800 and the greatest straw grabbing reprieve we had was that on October or something we had a brief intraday low at like 3500….yea they’ll all try to scare us with the “fear the pullback” rhetoric, but once you learn to embrace it rather than fear it, you improve greatly as an investor. Don’t let your brain turn to mush fellas. Listening to folks whom sound smart but don’t put up numbers is the easiest way to do that.
Malmqky Posted January 8 Posted January 8 (edited) ^ Also, 50% crashes happen. But guess what? Even in time periods where market is flat for a decade, there are people who have made phenomenal returns. The time period right before dot-com crash and the decade after was incredibly easy if you were a fundamental focused person who picked individual stocks. You just had to be ok with underperforming during some mania. If you know what you’re doing, macro really doesn’t even matter all that much. If the market crashed 50%, I bet many members on this board wouldn’t be down nearly so much, and the buying opportunities and thus long term performance would be glorious. Edited January 8 by Malmqky
Blake Hampton Posted January 8 Posted January 8 It took the S&P 500 13 years to fully recover from the Dot-com bubble, even amid the FED lowering rates to 0% and conducting large amounts of QE. I vehemently doubt we will be so lucky in the future.
spartansaver Posted January 8 Posted January 8 17 minutes ago, Gregmal said: Can we please find an $SPY 3000 greatest hits compilation from 2022? It was glorious watching then and even more so now. Mind you most of it occurred with $SPY at like 3800 and the greatest straw grabbing reprieve we had was that on October or something we had a brief intraday low at like 3500….yea they’ll all try to scare us with the “fear the pullback” rhetoric, but once you learn to embrace it rather than fear it, you improve greatly as an investor. Don’t let your brain turn to mush fellas. Listening to folks whom sound smart but don’t put up numbers is the easiest way to do that. I’ve seen in the past you state that you’re >100% long. Do you hedge or use options in any way or just let it ride?
Blake Hampton Posted January 8 Posted January 8 (edited) We live in an economy where personal consumption expenditures represent 68% of our GDP. Ever heard of the wealth effect? What do you think happens when reality kicks in? Do you really think people will feel the same when they witness half of their retirement accounts disappear? What about when the fiscal situation finally shows signs of breaking, and Congress is soon forced to reform entitlement spending? Edited January 8 by Blake Hampton
Malmqky Posted January 8 Posted January 8 4 minutes ago, Blake Hampton said: It took the S&P 500 13 years to fully recover from the Dot-com bubble, even amid the FED lowering rates to 0% and conducting large amounts of QE. I vehemently doubt we will be so lucky in the future. And those 13 years were some of the easiest, best performance years for many folks. I doubt we'll be so lucky as well. But what do I know? Just seen this all before, lived through stuff like this, and despite make some really dumbass decisions over the years, outperformed and not blown-up.
Malmqky Posted January 8 Posted January 8 (edited) 5 minutes ago, Blake Hampton said: We live in an economy where personal consumption expenditures represent 68% of our nation's GDP. Ever heard of the wealth effect? What do you think happens when reality kicks in? Do you really think people will feel the same when they witness half of their retirement accounts disappear? What about when the fiscal situation finally shows signs of breaking, and Congress is soon forced to reform entitlement spending? Study 2009. Almost everyone thought the system WAS broken. And it kinda was and is tbf. But still... Also I'm not saying you're wrong or necessarily disagreeing with anything you said. I'm just saying opportunity exists no matter what. Edited January 8 by Malmqky
gfp Posted January 8 Posted January 8 3 minutes ago, Blake Hampton said: We live in an economy where personal consumption expenditures represent 68% of our GDP. Ever heard of the wealth effect? What do you think happens when reality kicks in? Do you really think people will feel the same when they witness half of their retirement accounts disappear? What about when the fiscal situation finally shows signs of breaking, and Congress is soon forced to reform entitlement spending? Just be careful being so sure you have a handle on all this. You are young and it can all seem so obvious. It isn't. Being defensive is just fine. Being sure is usually a mistake. If you stick to ground level blocking and tackling in individual companies compounding your net worth you don't have to be sure about Congress being "soon forced to reform entitlement spending" - whatever you think that means.
Blake Hampton Posted January 8 Posted January 8 Just now, Malmqky said: Study 2009. Almost everyone thought the system WAS broken. And it kinda was and is tbf. But still... I have studied 2009, and the system was broken. It took governments around the world printing tons of money to save the entire banking system. “If we don't do this tomorrow, we won't have an economy on Monday.” - Ben Bernanke, 2008
Malmqky Posted January 8 Posted January 8 (edited) 1 minute ago, Blake Hampton said: I have studied 2009, and the system was broken. It took governments around the world printing tons of money to save the entire banking system. “If we don't do this tomorrow, we won't have an economy on Monday.” - Ben Bernanke, 2008 Good. Continue to form your own opinions. Just remember to inverse them and stay away from absolutes and be agile. And learn from folks who lived through it and have had a decade+ to study the aftermath/what happened. I think you're going to do well over the next few decades. Hope I'm not coming off as too preachy or anything. Edited January 8 by Malmqky
Blake Hampton Posted January 8 Posted January 8 You guys are absolutely right when you say I don’t have a handle on this—it feels impossible to. I’ve spent the last couple of years really digging into this stuff, and every time I think I’ve figured something out, I quickly realize I’m wrong. We don’t know what’s going to happen. That said, I do think it’s possible to understand the different ways it could play out and position yourself for each scenario. The only thing I’m sure of is that none of this is good, and whatever bad comes from it will hurt a lot of people. I don’t plan to be one of them.
Gregmal Posted January 8 Posted January 8 (edited) 25 minutes ago, spartansaver said: I’ve seen in the past you state that you’re >100% long. Do you hedge or use options in any way or just let it ride? Sometimes I hedge with index options. Mainly though I just view things on a look through basis. Stuff like FRPH or MSGS or even BRK are pretty easy to model stress related drawdown expectations. So from there I can determine what’s worth borrowing against. Obviously if you say Berkshire doesn’t have 50% downsides from here, you’ll get feedback that “there was this one time”….but I ignore that because in order to get to 50% drawdown it has to get to 10 or 20% drawdown and during that period of time I can adapt and adjust. Or stated another way, if you don’t think Berkshire has 50% downside, and the market wants to challenge you on that, and you didn’t think to have something on somewhere to capitalize on that…then you shouldn’t be using margin. But the example I stated a few years ago still sums it up well, you can be 70% long Berkshire, 50% long MSFT and GOOG, and have 10% long index puts….you’ll be fine. Edited January 8 by Gregmal
Blake Hampton Posted January 8 Posted January 8 (edited) 16 minutes ago, Malmqky said: Good. Continue to form your own opinions. Just remember to inverse them and stay away from absolutes and be agile. And learn from folks who lived through it and have had a decade+ to study the aftermath/what happened. I think you're going to do well over the next few decades. Hope I'm not coming off as too preachy or anything. Definitely not too preachy. If I didn't have any responses for my comments, I might as well go talk to a wall. Edited January 8 by Blake Hampton
spartansaver Posted January 8 Posted January 8 (edited) 6 minutes ago, Gregmal said: Sometimes I hedge with index options. Mainly though I just view things on a look through basis. Stuff like FRPH or MSGS or even BRK are pretty easy to model stress related drawdown expectations. So from there I can determine what’s worth borrowing against. Obviously if you say Berkshire doesn’t have 50% downsides from here, you’ll get feedback that “there was this one time”….but I ignore that because in order to get to 50% drawdown it has to get to 10 or 20% drawdown and during that period of time I can adapt and adjust. Or stated another way, if you don’t think Berkshire has 50% downside, and the market wants to challenge you on that, and you didn’t think to have something on somewhere to capitalize on that…then you shouldn’t be using margin. But the example I stated a few years ago still sums it up well, you can be 70% long Berkshire, 50% long MSFT and GOOG, and have 10% long index puts….you’ll be fine. When are the times you’ve used index options? Edited January 8 by spartansaver
Gregmal Posted January 8 Posted January 8 Just now, spartansaver said: When are the times you’ve used index options? It’s largely based on gut feelings. Generally if I’ve got a good year going I’ll do it into year end to lock some stuff in. House money approach. Or if there’s some new macro concern lingering it’s worth exploring. The biggest no nos though are just pointlessly throwing money away either proactively with negative or short positions, or passively with too much cash/equivalents on already know stuff. The market is expensive isn’t a thesis. Or post covid, more covid isn’t a thesis, or post inflation, inflation isn’t a thesis. It’s always the first bout that gets the biggest returns. If you played a little bearish on covid in early 2020 you got paid. Anyone who played it after Spring 2020 got hosed. Same with inflation, same with rates, same with the recession post GFC. You generally get one shot at a payday on a macro thesis, after that it’s priced in.
Castanza Posted January 8 Posted January 8 (edited) 43 minutes ago, Blake Hampton said: I vehemently doubt we will be so lucky in the future. What does this even mean? What exactly are you expecting to happen? Edited January 8 by Castanza
Blake Hampton Posted January 8 Posted January 8 17 minutes ago, Castanza said: What does this even mean? What exactly are you expecting to happen? You are extrapolating nominal returns for a situation that we have never before experienced.
TwoCitiesCapital Posted January 8 Posted January 8 (edited) 14 hours ago, Blake Hampton said: Quotes "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative." - Benjamin Graham, Security Analysis "The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities -- that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future -- will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands." - Warren Buffett, 2000 Chairman's Letter "In the first ten years after the war - the decade ending in 1955 - the Dow Jones industrials had an average annual return on year-end equity of 12.8 percent. In the second decade, the figure was 10.1 percent. In the third decade it was 10.9 percent. Data for a larger universe, the FORTUNE 500 (whose history goes back only to the mid-1950's), indicate somewhat similar results: 11.2 percent in the decade ending in 1965, 11.8 percent in the decade through 1975. The figures for a few exceptional years have been substantially higher (the high for the 500 was 14.1 percent in 1974) or lower (9.5 percent in 1958 and 1970), but over the years, and in the aggregate, the return on book value tends to keep coming back to a level around 12 percent. It shows no signs of exceeding that level significantly in inflationary years (or in years of stable prices, for that matter)." - Warren Buffett, How Inflation Swindles the Equity Investor ^ This article still has a ton of applicability today, and it remains one of the best ever written on investment. The Market - TTM S&P 500 ROE: 17.2% - 24-year average S&P 500 ROE: 13.3% - Current S&P 500 P/B: 5.2x - TTM average S&P 500 tax rate: 18.2% - 30-year average S&P 500 tax rate: 30.3% - Increased interest expense as companies refinance debt issued during ZIRP - (ASU) 2016-1 requiring companies to record unrealized capital gains as income If you were to adjust the Shiller P/E using historically average interest and corporate tax expenses, the number would be sitting at an all-time high by a wide margin. We are currently experiencing the most expensive stock market in history, more expensive than at the peak of the tech bubble. The problem is when interest rates were zero, everyone used 0% rates as an argument for why multiples should be elevated (double counting IMO). Now that rates aren't 0%, they've forgotten all of that and multiples are elevated because the US is exceptional and the only country with high quality companies (or Daddy Trump is going to do 1000% better than he did his first 4-year term). In neither environment was I comfortable with the multiples nor satisfied with the explanations provided - but Shiller P/E HAS been elevated basically my entire adult life so who is to say it won't stay that way for a few more years? People will always find an excuse to justify elevated prices because their portfolio values, net worth, and/or happiness is dependent on 'number go up'. And to some extent - they're not wrong. Optimists get rewarded in the market far more regularly than pessimists. For me? I'm very heavily interested intermediate fixed income for someone my age. I own a few conviction names, a small % that I trade around, a hefty slug of Bitcoin, and ~50% intermediate agency mortgages and treasuries. Some people are happy to pay 35-40x for stagnant earnings at Apple. I am much happier getting 4-6% YTMs that are basics guaranteed and can use the income/gains from that position to pick off names that become attractive when they're attractive. Edited January 8 by TwoCitiesCapital
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