Have We Hit The Top?

[73 Reds]

7 minutes ago, Blake Hampton said:

Thanks for the post. I don’t believe that all stocks are overvalued. However, I firmly believe the general market is extremely overvalued.

 

I find it interesting because people don’t have investing options in a 401(k). They simply get the choice between large caps, bonds, or cash, sometimes international equities, but that’s normally it. This dynamic, where people are almost forced into buying the market seems incredibly dangerous. This is especially true considering how it’s recently performed.

 

I’m curious on what your thoughts are.

I'm not Parsad but a 401 plan is also a dollar cost average plan.  In such case when you are investing for times that are often well into the future, today's prices are immaterial to long term results.

[Spooky]

13 minutes ago, Blake Hampton said:

I find it interesting because people don’t have investing options in a 401(k). They simply get the choice between large caps, bonds, or cash, sometimes international equities, but that’s normally it. This dynamic, where people are almost forced into buying the market seems incredibly dangerous. This is especially true considering how it’s recently performed.

 

If you look at long stretches of time this is probably better for most people than the alternative. The average person in my opinion should not be selecting individual stocks. It is extremely difficult to beat the S&P 500 consistently over long stretches of time, only a small number of people are able to do so.

 

There will definitely be crashes and twists and turns in the market, it is impossible to predict what will occur. The key is to think long term and dollar cost average, especially when the market reverses. Invert your thinking, volatility is part of the game and when we are young it would be better for us if the market crashed.

 

If you haven't yet check out the book stocks for the long run. There is lots of interesting data in there. In the short term stocks can go anywhere, but in the long run they tend to go up.

Edited 10 hours ago by Spooky

[Masterofnone]

1 hour ago, 73 Reds said:

Best strategy is to take advantage of any such events rather than be afraid of them.

The catch is that the way to take advantage of them is to have some unaffected liquid assets or use debt. Using debt can be tricky if assets continue to go down further. Raising cash is "timing the market" and being wrong reduces returns. Getting 4.6% for holding cash or equivalents makes this a bit less problematic. But as you stated, you have a good chance of being wrong.

 

That said, I have gone to about 15% cash for the first time in my investment career. I'm in my 7th decade now and potentially reduced returns doesn't seem all that bad. And on the other side is my experience in early 2009 when I had to turn over every rock to find a way to invest. Berkshire traded at 2x book in 2007 and in obvious hindsight raising a bit of cash then would have been pretty damn smart. There are objectively high valuations currently and for those of us with shorter horizons, it doesn't seem all that dumb to protect a bit on the downside and to also have some powder if prices become objectively stupid on the low end.

[Masterofnone]

14 minutes ago, Spooky said:

If you look at long stretches of time this is probably better for most people than the alternative. The average person in my opinion should not be selecting individual stocks. It is extremely difficult to beat the S&P 500 consistently over long stretches of time, only a small number of people are able to do so.

Problem is that even with the restricted parameters, many people mess up by "changing options" at the worst time. Being greedy while others are fearful takes knowledge and guts. So many folks bailed at just the wrong time in 2008-2009.

[73 Reds]

1 minute ago, Masterofnone said:

The catch is that the way to take advantage of them is to have some unaffected liquid assets or use debt. Using debt can be tricky if assets continue to go down further. Raising cash is "timing the market" and being wrong reduces returns. Getting 4.6% for holding cash or equivalents makes this a bit less problematic. But as you stated, you have a good chance of being wrong.

 

That said, I have gone to about 15% cash for the first time in my investment career. I'm in my 7th decade now and potentially reduced returns doesn't seem all that bad. And on the other side is my experience in early 2009 when I had to turn over every rock to find a way to invest. Berkshire traded at 2x book in 2007 and in obvious hindsight raising a bit of cash then would have been pretty damn smart. There are objectively high valuations currently and for those of us with shorter horizons, it doesn't seem all that dumb to protect a bit on the downside and to also have some powder if prices become objectively stupid on the low end.

To your point, there is nothing wrong with cash when your intent is to deploy the cash into an actionable investment and you don't look for too many excuses along the way.  Age and investment objectives have a lot to do with this as well.  When you no longer need any more to maintain your lifestyle indefinitely, why risk what you've got?  At least retain as much as you will ever need in reliably safe assets (reliability and safety will vary with every one of us).  Personally, I shun debt because losing money is bad enough but when you wind up paying to lose money, well....

[Junior R]

10 hours ago, frommi said:

Funny thing is that a lot of people think that value investing doesn't work anymore or that the lessons from Grahams book are outdated, yet my automated NCAV system has produced 50% annual returns since the covid crash in 2020.

Can you please share high level  my automated NCAV system?

 

Thanks

[Red Lion]

14 minutes ago, Masterofnone said:

So many folks bailed at just the wrong time in 2008-2009.

So many people bailing at once is kind of what makes it the good opportunity in the first place. 

[Gregmal]

50 minutes ago, Masterofnone said:

Problem is that even with the restricted parameters, many people mess up by "changing options" at the worst time. Being greedy while others are fearful takes knowledge and guts. So many folks bailed at just the wrong time in 2008-2009.

Conversely I’ve also heard that the market is detached from reality and that “everyone is being greedy and euphoric/irrational” in…2012, 2013, 2015, 2017, 2018, 2019, 2020, 2021, 2023, 2024, 2025…

[frommi]

47 minutes ago, Junior R said:

Can you please share high level  my automated NCAV system?

 

Thanks

 

[Eng12345]

I just read the last few pages and a 5 years ago when I was simply indexed into my 401k I probably would have loved the content and discussion. Now I read the last few pages and can't help but think how brain numbing. I credit this forum for that change in mindset. 

 

I guess my general thoughts are:

Why should I care about the market value? I'm not buying the market. I'm buying stocks. 

• Yeah sure in some super macro event I may draw down ~30% but if you're not ready for that you're not ready for the volatility of great returns given by concentrated positions.

 

The US dollar is going to collapse. Oh really? What is the world's wealth going to flow to? The euro - where they are mired by in fighting amongst different member countries and even after a decade of losing world strength and influence cannot manage to shift focus to why. Oh I guess the wealth will slowly shift to the yuan? Yeah, no I don't see that happening as the world has shifted views over the past few years.

 

Maybe some of the BTC guys will say the worlds wealth will shift to some unbreakable blockchain - but the truth is if that happens every government in the world will likely be against that. Hell on the BTC topic - I wouldn't be surprised if the NSA already has it compromised in a severe way. Nevermind the very real energy consumption issues with it (hint: energy consumption is a transaction cost). (BTW I'm sure the BTC guys will come and attempt to put my head on a pike for saying something along those lines but my overarching point remains) 

 

The reality is the world is likely to revert to its natural state - fractured. And in a fractured world the US has some of the biggest unchangeable advantages of the world. I'm not talking about education. I'm talking about geography - we're uninvadable (especially once Canada is the 51st state ) and the natural resources of our country are for the most part unmatched and untapped in comparison to other areas of the world. So even if I play this macro view crap - what is the risk to the US dollar? 

 

But even if all that horrible crap does happen? What does it matter to me? I buy individual stocks with a goal of buying them when they are cheap. 

Edited 8 hours ago by Eng12345

[Blake Hampton]

Should I go day two on mindlessly arguing about Macro?

 

Seems pointless, and a lot of you are right in many respects. But if you really believe that there aren't deep, systemic issues within the U.S. economy—and the global economy too, for that matter—you must be reading different materials than I am. The same goes for general valuations across major asset classes. The current adjusted Shiller P/E would be around 50x, and the median home sales price to median household income is about 5.2x. Both of these are greater than at the peak of the Dot-com and pre-housing bubbles, respectively. I won't even go into the massive amount of chicanery I constantly see going on, none of which can be any good.

 

This is not normal. I will listen to Bitcoin fanatics and investors 3x my age tell me all day that it is, but I will never believe it.

 

Once again, arguing is pointless, and the ones here advising to just go and find 4-6 ideas are probably correct. But I'm personally wary about the future. Maybe I'm not smart enough to properly convey it, but something inside me feels amiss.

 

Thanks for the input everyone.

 

Edited 7 hours ago by Blake Hampton

[Malmqky]

2 minutes ago, Blake Hampton said:

Should I go day two on mindlessly arguing about Macro?

 

Seems pointless, and a lot of you are right in many respects. But if you really believe that there aren't deep, systemic issues within the U.S. economy—and the global economy too, for that matter—you must be reading different materials than I am. The same goes for general valuations across major asset classes. The current adjusted Shiller P/E would be around 50x, and the median home sales price to median household income is about 5.2x. Both of these are greater than at the peak of the Dot-com and pre-housing bubbles, respectively. I won't even go into the massive amount of chicanery I constantly see going on, none of which can be any good.

 

This is not normal. I will listen to Bitcoin fanatics and investors 3x my age tell me all day that it is, but I will never believe it.

 

Once again, arguing is pointless, and the ones here advising to just go and find 4-6 ideas are probably correct. But I'm personally wary about the future. Maybe I'm not smart enough to properly convey it, but something inside me feels amiss.

 

Thanks for the input, everyone.

Shiller P/E is something people put too much stock in.

 

I agree there are systemic issues and shit will hit the fan at some point.

 

Why don’t you think that’s an opportunity in itself though? Yes, bad for poor folks, bad for economy in general, etc. but as an individual?

 

Well 50% crashes where everyone thinks the world is ending are a blessing. You don’t even have to be smart to take advantage of times like that. I’m not dismissing the damage things like that cause fyi.

 

I guess my question is why do you think as an individual investor this isn’t a massive opportunity for you if you’re correct?

[Eng12345]

7 minutes ago, Blake Hampton said:

Should I go day two on mindlessly arguing about Macro?

 

Seems pointless, and a lot of you are right in many respects. But if you really believe that there aren't deep, systemic issues within the U.S. economy—and the global economy too, for that matter—you must be reading different materials than I am. The same goes for general valuations across major asset classes. The current adjusted Shiller P/E would be around 50x, and the median home sales price to median household income is about 5.2x. Both of these are greater than at the peak of the Dot-com and pre-housing bubbles, respectively. I won't even go into the massive amount of chicanery I constantly see going on, none of which can be any good.

 

This is not normal. I will listen to Bitcoin fanatics and investors 3x my age tell me all day that it is, but I will never believe it.

 

Once again, arguing is pointless, and the ones here advising to just go and find 4-6 ideas are probably correct. But I'm personally wary about the future. Maybe I'm not smart enough to properly convey it, but something inside me feels amiss.

 

Thanks for the input everyone.

 

You're missing the point. 

 

Are you buying the market or are you buying stocks? 

 

And even then:

 

What is a 50% draw down on money you don't need? 

Opportunity. 

 

 

And if you need the money: well then, you're not rich enough. 

Hence why cash flow is everything (especially so in your personal life)

 

[Masterofnone]

1 hour ago, Gregmal said:

Conversely I’ve also heard that the market is detached from reality and that “everyone is being greedy and euphoric/irrational” in…2012, 2013, 2015, 2017, 2018, 2019, 2020, 2021, 2023, 2024, 2025…

True dat.

Hard to get any attention announcing that the sky is not falling.

And hard to see the big picture that good companies do well regardless over the long run.

If you own Berkshire, you should hope that occasionally the sky does fall.

[Spooky]

16 minutes ago, Blake Hampton said:

Should I go day two on mindlessly arguing about Macro?

 

Seems pointless, and a lot of you are right in many respects. But if you really believe that there aren't deep, systemic issues within the U.S. economy—and the global economy too, for that matter—you must be reading different materials than I am. The same goes for general valuations across major asset classes. The current adjusted Shiller P/E would be around 50x, and the median home sales price to median household income is about 5.2x. Both of these are greater than at the peak of the Dot-com and pre-housing bubbles, respectively. I won't even go into the massive amount of chicanery I constantly see going on, none of which can be any good.

 

This is not normal. I will listen to Bitcoin fanatics and investors 3x my age tell me all day that it is, but I will never believe it.

 

Once again, arguing is pointless, and the ones here advising to just go and find 4-6 ideas are probably correct. But I'm personally wary about the future. Maybe I'm not smart enough to properly convey it, but something inside me feels amiss.

 

Thanks for the input everyone.

 

 

The world is currently stacked against young people in terms of creating wealth. Stocks, housing, etc. are all expensive relative to historic norms. It is not nearly as easy to build wealth as in the post-world war two period. I have been struggling with this issue for a long time now. The reality is that there is so much capital out there chasing a finite set of assets / investments which raises the prices of assets / lowers the cost of capital. There are also a lot of heightened geopolitical risks and uncertainties - but this has always been the case. Regardless, there is still a lot of opportunity in the world, it just takes more work and you have to look further afield. Look at individual companies where you have high certainty on their future performance. Look at international opportunities. You also need to be prepared to capitalize on a big market crash - these can be life changing opportunities so be resilient and patient.

[73 Reds]

2 minutes ago, Spooky said:

 

The world is currently stacked against young people in terms of creating wealth. Stocks, housing, etc. are all expensive relative to historic norms. It is not nearly as easy to build wealth as in the post-world war two period. I have been struggling with this issue for a long time now. The reality is that there is so much capital out there chasing a finite set of assets / investments which raises the prices of assets / lowers the cost of capital. There are also a lot of heightened geopolitical risks and uncertainties - but this has always been the case. Regardless, there is still a lot of opportunity in the world, it just takes more work and you have to look further afield. Look at individual companies where you have high certainty on their future performance. Look at international opportunities. You also need to be prepared to capitalize on a big market crash - these can be life changing opportunities so be resilient and patient.

Wow, so many fatalist attitudes on this board.  I would gladly give up everything I own to be young again with the same knowledge I have now.

[Paarslaars]

1 minute ago, Spooky said:

 

The world is currently stacked against young people in terms of creating wealth. Stocks, housing, etc. are all expensive relative to historic norms. It is not nearly as easy to build wealth as in the post-world war two period.

Not as easy by traditional means... But other opportunities pop up left and right and the big advantage young people have is that most of the traditionally rich people tend to stay away from those opportunities.

[Spooky]

2 minutes ago, 73 Reds said:

Wow, so many fatalist attitudes on this board.  I would gladly give up everything I own to be young again with the same knowledge I have now.

 

Did you read my whole post? I am still an optimist and I am in the top 1% of income but I am lucky to be blessed with a lot of talent and parents who could provide me a decent education. It is just a fact that Millennial and Gen Z have less wealth at this stage than the baby boomers. Salaries have not risen as fast as the price of housing, stocks, education etc. and a lot of young people are locked out of the housing market or are in huge debts from college.

 

[Jaygo]

8 minutes ago, Spooky said:

 

The world is currently stacked against young people in terms of creating wealth. Stocks, housing, etc. are all expensive relative to historic norms. It is not nearly as easy to build wealth as in the post-world war two period. I have been struggling with this issue for a long time now. The reality is that there is so much capital out there chasing a finite set of assets / investments which raises the prices of assets / lowers the cost of capital. There are also a lot of heightened geopolitical risks and uncertainties - but this has always been the case. Regardless, there is still a lot of opportunity in the world, it just takes more work and you have to look further afield. Look at individual companies where you have high certainty on their future performance. Look at international opportunities. You also need to be prepared to capitalize on a big market crash - these can be life changing opportunities so be resilient and patient.

I must disagree here.

 

What a lot of people see and sadly compare themselves to is extraordinary wealth or extraordinary amounts of debt consumption. By seeing this they feel poor or disenfranchised. 

 

Take a step back and really think how much money you actually want. I personally want to spend around 200,000 CAD per year (2025 money)

 

I can go a a few amazing trips, keep my kids in hockey, not think about money at all, pay by bills, pay my mortgage and save 40k per year for investments.

 

As a small business owner at favorable tax rate I need about 300K in profit to do that. Its honestly fairly easy if your willing to work hard and find a niche. 

 

Once I decide to take it a bit easier I will have built up a large enough portfolio to get about half my yearly spend from the investments and that will happen around the same time as I pay off my mortgage. Voila at 50 or in 10 years I should be free of absolutely necessary work. That sounds pretty rich to me however I doubt anyone will be drooling over my life on instagram. 

 

If I was 22 today I would set myself on this path asap, dont worry about the market, the national debt or the current administration. Just worry about how to build a successful business in a needed industry and for the love of all things marry the right girl!!!!! 

 

[73 Reds]

2 minutes ago, Spooky said:

 

Did you read my whole post? I am still an optimist and I am in the top 1% of income but I am lucky to be blessed with a lot of talent and parents who could provide me a decent education. It is just a fact that Millennial and Gen Z have less wealth at this stage than the baby boomers. Salaries have not risen as fast as the price of housing, stocks, education etc. and a lot of young people are locked out of the housing market or are in huge debts from college.

 

Perhaps but young people have more opportunities today than ever.  Again, I'd trade places with any broke young person in a heart beat.  

[Gregmal]

Opportunity is what you make of it. If you do what everyone else does you get what everyone else gets. If you think differently you have the chance to arrive at different outcomes. 
 

I have a bunch of friends whom have top 5-10% jobs. Most avoid the stock market. Some do real estate. Whatever. But even of them, the ones who want to just save their paychecks and earn 5% are fully committed to working for 30+ years. To each their own.

[Castanza]

23 minutes ago, Spooky said:

 

The world is currently stacked against young people in terms of creating wealth. Stocks, housing, etc. are all expensive relative to historic norms. It is not nearly as easy to build wealth as in the post-world war two period. I have been struggling with this issue for a long time now. The reality is that there is so much capital out there chasing a finite set of assets / investments which raises the prices of assets / lowers the cost of capital. There are also a lot of heightened geopolitical risks and uncertainties - but this has always been the case. Regardless, there is still a lot of opportunity in the world, it just takes more work and you have to look further afield. Look at individual companies where you have high certainty on their future performance. Look at international opportunities. You also need to be prepared to capitalize on a big market crash - these can be life changing opportunities so be resilient and patient.

Nonsense! There are far less barriers to success today than there ever has been in human history. The only thing preventing people from becoming “successful” is motivation and self discipline. The real difference between today and the 1950s post war era is attitude. 

 

 

[Spooky]

11 minutes ago, Jaygo said:

I must disagree here.

 

What a lot of people see and sadly compare themselves to is extraordinary wealth or extraordinary amounts of debt consumption. By seeing this they feel poor or disenfranchised. 

 

Take a step back and really think how much money you actually want. I personally want to spend around 200,000 CAD per year (2025 money)

 

I can go a a few amazing trips, keep my kids in hockey, not think about money at all, pay by bills, pay my mortgage and save 40k per year for investments.

 

As a small business owner at favorable tax rate I need about 300K in profit to do that. Its honestly fairly easy if your willing to work hard and find a niche. 

 

Once I decide to take it a bit easier I will have built up a large enough portfolio to get about half my yearly spend from the investments and that will happen around the same time as I pay off my mortgage. Voila at 50 or in 10 years I should be free of absolutely necessary work. That sounds pretty rich to me however I doubt anyone will be drooling over my life on instagram. 

 

If I was 22 today I would set myself on this path asap, dont worry about the market, the national debt or the current administration. Just worry about how to build a successful business in a needed industry and for the love of all things marry the right girl!!!!! 

 

There is certainly an element of that where people are seeing extravagant wealth through social media which makes them unhappy but that’s not what I’m talking about. I’m just looking at data like this which applies to a lot of countries:

[Spooky]

2 minutes ago, Gregmal said:

Opportunity is what you make of it. If you do what everyone else does you get what everyone else gets. If you think differently you have the chance to arrive at different outcomes. 

 

This exactly is the point I was trying to make. Need to think outside the box.

[james22]

1 hour ago, Blake Hampton said:

But if you really believe that there aren't deep, systemic issues within the U.S. economy—and the global economy too, for that matter—you must be reading different materials than I am.

 

Or we've read the very same bearish material for longer than you've been alive and learned how unhelpful it is.