Is The Bottom Almost Here?

[Parsad]

9 hours ago, Ulti said:

 G; I worked at grocery stores in high school, college and grad school. all departments including meats, produce, stocking etc. ( use to get tipped in the "70s" at Christmas with booze and cash!  )  I certainly pay attention to unit pricing etc everytime I shop; more than the average person I suspect. A few observations:

There is certainly some inflation going on at the wholesale level... Talking with folks in the fish department for example... labor shortages, fuel cost, feed... antibiotoic cost for farmed raise... not to mention transportation particularly international....this is thruout all depts. I suspect that this will continue into the future.  I also suspect that gauging ..Non organic \organic switching etc is going on ( why not lie and double your price). Will see how much pricing power Whole Paycheck ..etc has on the retail side.

Volumes \traffic is already down at W. P.  Pay has been flat hard to find workers shelves are poorly stocked for some items ... and expensive items are discounted and not replensished. Publix has seen to have held up better but they are dealing with the same issues....If I had to break it down, I would guess

about 50% inflation 50% ripoff......and both levels...

 

 

 

 

Hi Ulti,

 

I'm exactly the same way.  I worked in the grocery business too in my late teens/early 20's.  100% I calculate or check the unit price.  In fact, shrinkflation has been going in Canada well before actual inflation appeared.  I remember seeing jars and containers decreasing in volume from at least 2019.

 

Cheers!

[Parsad]

1 hour ago, Gregmal said:

Yea my rule of thumb varies but you don’t tip for a coffee or any sort of pickup food unless it’s an exceptionally unique situation. That sort of crap is a cash grab. Maybe ice cream where it’s a family business and high school kids working the counter…sure. But not stuff like Starbucks or whatever. Delivery which is never high end, it’s usually just a flat $5-10. If you sit down to eat, even a pizza joint, if someone is serving you, the greater of $20 of 25%. If you can afford to eat at a $400 a dinner place, you should be able to afford to tip $100. That’s how I think about it. Bar is $1 a drink. I’ve never seen a cocktail that takes longer than 3 minutes to make.

 

I ain't tipping 25% unless it's exceptional service or they really made the dinner special with their service, attitude or comments.  If it's pickup/fast food, I'll tip 10%.  Any other restaurant, 15% remains my number for all tips...great service 20-25%, bad service 10%. 

 

What I hate is when the credit card machine is automatically set on 20% or higher...then I have to fiddle with it and get it down to 15%.  In fact, I don't think I've seen a machine that isn't set on at least 18% these days.  

 

Cheers!

[Xerxes]

In Canada, tipping has completely gotten out of hand since the pandamic.

 

It was one thing to tip those who went out during the Dark Days to deliver food etc in 2020, it is entirely different thing to have the machine set in such a way that the 15% is now lowest of the three options.

 

A place where I buy flowers (had to go to two different funerals) after telling them I was paying via credit, I was told I had to answer option on the credit card machine. What she meant was that I had to choose to tip on the machine for the funeral flowers !

[gfp]

It's always interesting seeing the various regional differences in tipping.  I probably live in one of the highest % tipping cities in the world.  New Orleans, LA, USA is a very service-dominated economy.  We don't have a lot of "good" jobs here but service industry folks can make a good living (and pay their rent on time thankfully).  It is very common here to tip almost everyone 20-25% on many categories of services.   Nothing exceptional - that's the base rate.  I tip the barber ~40% (15 on 35) but that is because he charges me less than everyone else for the haircut.  People tip on takeout food from a real restaurant.  Nobody tips anything at a truly "fast food" place like McDonalds, Wendy's or Popeye's.  Bartenders are tipped at least a dollar a drink at a dive, sometimes much more if it is a tip at the end type situation.  Since 2005 we also have a lot of cash only bars that just decided they would remain cash only after Hurricane Katrina gave them an excuse.  You leave New Orleans and barely see cash anymore.  European tourists that come to New Orleans are horrified and so are their servers.  

[Ulti]

https://www.cnbc.com/2023/01/23/high-egg-prices-due-to-a-collusive-scheme-by-suppliers-group-claims.html

[changegonnacome]

 

Think Kolanovic has got it about right above........direction of economy isn't good certainly post mid-year when excess savings go to zero.......earnings follow the weakness........one thing I disagree with is that I do believe that the Fed/Powell is not coming to rescue until it sees the whites of 2% inflation's eyes and the 4% to 2% inflation journey is going to be a slow grind, not a graceful descent like we are experiencing now with MoM inflation prints.

 

The Fed flinching later this year seems to be central thesis for equity bulls (& indeed the smartest guys in the room, the bond market).....if the Fed 'put' doesn't show up........well wow........its gonna get scary out there for lots of market participants. 

 

Mike Wilson below is about the closet commentator to where my thinking is....consumer rolling over once excess savings exhausted, margin driven earnings deterioration already happening with a relatively strong consumer backdrop but things about to get way way worse later this year when the consumer starts running on fumes....   

 

 

[mattee2264]

Wasn't Marko a super bull last year? 

 

Also read the Grantham article. I think he makes an interesting point about sentiment/confidence. 

 

Markets tend to be overvalued throughout bull markets and undervalued throughout bear markets and rarely trade at fair value. 

 

You can try and come up with reasons why confidence will decline. Obviously in 2022 it was central banks turning hawkish but those fears are fading. Historically recessions would have scared investors. But memories are short and the last few recessions we had were extreme and took investors by surprise. Perhaps because this one is so widely expected it is easy to look through it. It also appears that most people assume it will be mild as earnings estimates haven't changed markedly. 

 

And if confidence does not decline sufficiently then markets can go sideways for years until earnings catch up.

 

I remember a few years back Grantham's fair value was 2500 now it is 3200 and perhaps by the time markets do fall back to fair value fair value will be 3800. 

 

 

[dealraker]

So how do you cope with the valuation thing that over time can both make you and also cause you to miss the Holy Grail?   I'm not a good one to try to answer that.  But here's a grand example:

 

So I inherited Berkshire and so did my sis, bro, and step-mom.  Mine and my bro's was in a trust with years before we could access it.  And I'm employed by the guy who put my dad into the stock; my "dad" is my bro-in-law and my "mom" is my sis; my brother is absolutely non-$ focused, he would wear the same pants for 50 years if his wife didn't scream.

 

And so lucky for me, my step-mom remarries the most successful property developer in my are who too is, and this was NOT common, aware of Warren Buffett.  So...

 

I am working for McDaniel Lewis and Co, a stock brokerage, and all I hear is "Why would you own Berkshire....it sells for 2 times book value so you can buy the same stocks Buffett has for half that price?"  Years and years of that stuff, and of course I can't sell.  Meanwhile....

 

$3500 inheritance marches up into 6 figures before I can put my little ignorant hyper active hands on it.  But...family pressure...by then my brother-in-law's entire (already a wealthy family for a small town) owns the stock of Berkshire and it has become a religion in the family, a connection...literally a way of life.  20 years of three men go to Berkshire annual meetings.

 

So what was obviously an over-priced stock allowed me to do all the things that ended up escalating financial growth.

 

Using any logic at all, any common Ben Graham or Jeremy Grantham analysis, Berkshire was a screaming sell.  Not now, but during its best years.

 

Value Investing by numbers?  

[Gregmal]

I just wanna know why the adherence to the other religion? The one that involves perpetual bearishness and constant goalpost moving. Wasn't the consumer certainly tapped out this fall? Then for sure Q4 was when they were screwed. Now? Just meagerly kick the can down the road steady as she goes. Of course its gonna be second half of the year...again! Same with the lovely "index". Wasn't it unanimous amongst these experts that H1 was gonna be super rough, but then things rebound? Everyone and their mother said recession in H1 and then the bullish ones like JP Morgans dipshit, said full recovery in H2. 

 

One of my friends dad, a smart guy, CFO at a big Manhattan based supply company to the apparel industry, once said to me, I dont get all the fuss about stocks. If you hold on long enough, everyone is right. That sticks with me even though it was said probably a decade ago, because every day theres reminders of it. People just keep saying the same things, over and over, and eventually, they get to claim they "called it".

 

So, do you wanna be right, or do you wanna make money?

[dipod]

41 minutes ago, dealraker said:

So how do you cope with the valuation thing that over time can both make you and also cause you to miss the Holy Grail?   I'm not a good one to try to answer that.  But here's a grand example:

 

So I inherited Berkshire and so did my sis, bro, and step-mom.  Mine and my bro's was in a trust with years before we could access it.  And I'm employed by the guy who put my dad into the stock; my "dad" is my bro-in-law and my "mom" is my sis; my brother is absolutely non-$ focused, he would wear the same pants for 50 years if his wife didn't scream.

 

And so lucky for me, my step-mom remarries the most successful property developer in my are who too is, and this was NOT common, aware of Warren Buffett.  So...

 

I am working for McDaniel Lewis and Co, a stock brokerage, and all I hear is "Why would you own Berkshire....it sells for 2 times book value so you can buy the same stocks Buffett has for half that price?"  Years and years of that stuff, and of course I can't sell.  Meanwhile....

 

$3500 inheritance marches up into 6 figures before I can put my little ignorant hyper active hands on it.  But...family pressure...by then my brother-in-law's entire (already a wealthy family for a small town) owns the stock of Berkshire and it has become a religion in the family, a connection...literally a way of life.  20 years of three men go to Berkshire annual meetings.

 

So what was obviously an over-priced stock allowed me to do all the things that ended up escalating financial growth.

 

Using any logic at all, any common Ben Graham or Jeremy Grantham analysis, Berkshire was a screaming sell.  Not now, but during its best years.

 

Value Investing by numbers?  

Just want to say that I really appreciate your posts here. Always very informative and provide a good, long term perspective.

[StevieV]

17 minutes ago, Gregmal said:

I just wanna know why the adherence to the other religion? The one that involves perpetual bearishness and constant goalpost moving. Wasn't the consumer certainly tapped out this fall? Then for sure Q4 was when they were screwed. Now? Just meagerly kick the can down the road steady as she goes. Of course its gonna be second half of the year...again! Same with the lovely "index". Wasn't it unanimous amongst these experts that H1 was gonna be super rough, but then things rebound? Everyone and their mother said recession in H1 and then the bullish ones like JP Morgans dipshit, said full recovery in H2. 

 

One of my friends dad, a smart guy, CFO at a big Manhattan based supply company to the apparel industry, once said to me, I dont get all the fuss about stocks. If you hold on long enough, everyone is right. That sticks with me even though it was said probably a decade ago, because every day theres reminders of it. People just keep saying the same things, over and over, and eventually, they get to claim they "called it".

 

So, do you wanna be right, or do you wanna make money?

 

Almost every year there are reasons to be bearish.  Usually pretty good reasons.  Probably ones that could persuade me.

 

I pretty much have to put that aside and acknowledge that an investor should have a bullish bias.  US companies want to make money and I think they will likely make money over time.

 

Are public US companies going to be worth more or less in 5-years, 10-years, 20-years?  Well, then, is the S&P 500 index going to be up or down in 5-years, 10-years, 20-years?

 

It's fine to be cautious.  It's fine to be bearish.  It's just that being bearish is swimming against the tide over longer timeframes IMHO.  So, the average bull will do better than the average bear.  If you want to be a bear, you have to overcome that.

 

At least that's how I see it.

[dealraker]

43 minutes ago, StevieV said:

 

Almost every year there are reasons to be bearish.  Usually pretty good reasons.  Probably ones that could persuade me.

 

I pretty much have to put that aside and acknowledge that an investor should have a bullish bias.  US companies want to make money and I think they will likely make money over time.

 

Are public US companies going to be worth more or less in 5-years, 10-years, 20-years?  Well, then, is the S&P 500 index going to be up or down in 5-years, 10-years, 20-years?

 

It's fine to be cautious.  It's fine to be bearish.  It's just that being bearish is swimming against the tide over longer timeframes IMHO.  So, the average bull will do better than the average bear.  If you want to be a bear, you have to overcome that.

 

At least that's how I see it.

The "mustable" here though is that you prepare for times of lower quotes, that like your home selling (your brain or your concept of value) to the bidder each day is an illogical valuation model.  Bidders are cyclical, your house - your stocks - will get the cycle, they aren't immune.

 

If you do this in advance, even if you end up thinking "I should have..." it does become tolerable.  In my view tolerance of cycles and bids is the key to investing success.   There's a reason the average fund investor gets a third of the average fund performance, it is simply intolerance for lower prices.  

 

What's the value of these things?  

Edited January 25, 2023 by dealraker

[changegonnacome]

 

59 minutes ago, StevieV said:

It's fine to be cautious.  It's fine to be bearish.  It's just that being bearish is swimming against the tide over longer timeframes IMHO.  So, the average bull will do better than the average bear.  If you want to be a bear, you have to overcome that.

 

At least that's how I see it.

 

Yeah exactly - couldnt have said it better myself........I'm former longtime bull, who has heard the siren song of the bear......I know for a fact & acknowledge thats the wrong posture.......so as I make clear in most of my posts....I remain a fully invested bear.....expressed via bear-ish hedges & slightly higher than normal allocation to cash/bonds etc.

Edited January 25, 2023 by changegonnacome

[TwoCitiesCapital]

2 hours ago, dealraker said:

So how do you cope with the valuation thing that over time can both make you and also cause you to miss the Holy Grail?   I'm not a good one to try to answer that.  But here's a grand example:

 

So I inherited Berkshire and so did my sis, bro, and step-mom.  Mine and my bro's was in a trust with years before we could access it.  And I'm employed by the guy who put my dad into the stock; my "dad" is my bro-in-law and my "mom" is my sis; my brother is absolutely non-$ focused, he would wear the same pants for 50 years if his wife didn't scream.

 

And so lucky for me, my step-mom remarries the most successful property developer in my are who too is, and this was NOT common, aware of Warren Buffett.  So...

 

I am working for McDaniel Lewis and Co, a stock brokerage, and all I hear is "Why would you own Berkshire....it sells for 2 times book value so you can buy the same stocks Buffett has for half that price?"  Years and years of that stuff, and of course I can't sell.  Meanwhile....

 

$3500 inheritance marches up into 6 figures before I can put my little ignorant hyper active hands on it.  But...family pressure...by then my brother-in-law's entire (already a wealthy family for a small town) owns the stock of Berkshire and it has become a religion in the family, a connection...literally a way of life.  20 years of three men go to Berkshire annual meetings.

 

So what was obviously an over-priced stock allowed me to do all the things that ended up escalating financial growth.

 

Using any logic at all, any common Ben Graham or Jeremy Grantham analysis, Berkshire was a screaming sell.  Not now, but during its best years.

 

Value Investing by numbers?  

 

Yes, there are exceptions to every rule. Especially when looking at a man/stock that has compounded above everything else for it's existence as the example. There's probably a handful of other examples that work. 

 

But for every person that just bought and held Apple or Berkshire or Amazon for 20+ years and it worked out there are people who held Blackberry, and General Electric, and Bank of America where it didn't. 

 

unless if you believe you can successfully identify the stocks that will go down, or nowhere, for 20+ year periods of time - valuations matter. And there were plenty of opportunities in ALL or these examples to improve your returns via judicious buys/sells based on valuations and intermediate outlooks. 

Edited January 25, 2023 by TwoCitiesCapital

[Xerxes]

“The New York City taxi cab drivers are now bearish on Big Tech” ~ Dan Ives on  CNBC

 

 

 

 

 

Edited January 25, 2023 by Xerxes

[Gregmal]

@TwoCitiesCapital 

Indeed, but its a slippery slope and not one I believe most are capable of mentally handling. But in general, thats why I use plenty of margin. Its forces you to be judicious and attentive to risk. But at the end of the day its not your money so any returns are better than nothing. As such, lets say a position like VRE, which I just toggled with and eventually decided was worth selling despite still kinda being overall bullish on it, the decision kicker was ultimately that derisking and putting some money in the bank wouldnt kill me. Same thing with the FANG stuff I owned around this time last year. I like it, but dont need it, and am more than fully invested. I'll live without it. But going below 1.1x to me is just a complete no-no. 

 

Further, do folks really need any further evidence that new leadership has emerged? Or is everyone just staring at the lazy, easy, everyone's doing it, indexes?

Edited January 25, 2023 by Gregmal

[Castanza]

2 hours ago, StevieV said:

 

Almost every year there are reasons to be bearish.  Usually pretty good reasons.  Probably ones that could persuade me.

 

I pretty much have to put that aside and acknowledge that an investor should have a bullish bias.  US companies want to make money and I think they will likely make money over time.

 

Are public US companies going to be worth more or less in 5-years, 10-years, 20-years?  Well, then, is the S&P 500 index going to be up or down in 5-years, 10-years, 20-years?

 

It's fine to be cautious.  It's fine to be bearish.  It's just that being bearish is swimming against the tide over longer timeframes IMHO.  So, the average bull will do better than the average bear.  If you want to be a bear, you have to overcome that.

 

At least that's how I see it.

 

Best way to overcome this is invest what you don't need for the next few years minimum. A lot of people in my age range seem to have FOMO when it comes to stocks. Many prioritize investing over an emergency fund, house maintenance fund, etc. I was like this my first two years investing as well. It leads to irrational decisions based on the news cycle that day. In fact a friend messaged me yesterday and said he dumped his GOOGL position that he bought like a month ago citing the new Anti-Trust case. A month ago, he thought it was undeniable cheap with a "long-term" perspective. 

[StevieV]

12 minutes ago, Castanza said:

Best way to overcome this is invest what you don't need for the next few years minimum.

 

I'm definitely for safety, but I think this can be a really high bar for someone starting out.  If you wait until you have several years of expenses saved up, that might take someone out of investing in their 20s.

[TwoCitiesCapital]

31 minutes ago, Gregmal said:

@TwoCitiesCapital 

Indeed, but its a slippery slope and not one I believe most are capable of mentally handling. But in general, thats why I use plenty of margin. Its forces you to be judicious and attentive to risk. But at the end of the day its not your money so any returns are better than nothing. As such, lets say a position like VRE, which I just toggled with and eventually decided was worth selling despite still kinda being overall bullish on it, the decision kicker was ultimately that derisking and putting some money in the bank wouldnt kill me. Same thing with the FANG stuff I owned around this time last year. I like it, but dont need it, and am more than fully invested. I'll live without it. But going below 1.1x to me is just a complete no-no. 

 

Further, do folks really need any further evidence that new leadership has emerged? Or is everyone just staring at the lazy, easy, everyone's doing it, indexes?

 

I get it. I'm not sitting 100% in cash. I'm invested. My stocn portfolio actually did exceptionally well last year relative to the big indices with only my exposure to crypto dragging me down. 

 

But just like Fairfax went to $250 in 2020, and Exor dropped below the net cash that was expected on its balance sheet, cheap tends to get cheaper in panics. 

 

There are cheap things that I own. There are things that I expect will do well earnings wise in those environment. And I also anticipate that it's highly probable their stocks will drop with the broader markets when earnings/multiple expansion turn the opposite direction. 

 

So Im keeping a fair amount of dry powder, trimming exceptional rallies, and buying dips until then. There are periods where buy/hold works. 2009-2018 was probably that period. Since the end of 2018 though, investors have been rewarded with enormous opportunities to "trade" their positions based on sentiment, valuation, risk, and alternatives. 

[John Hjorth]

38 minutes ago, Gregmal said:

...  Further, do folks really need any further evidence that new leadership has emerged? Or is everyone just staring at the lazy, easy, everyone's doing it, indexes?

 

@Gregmal,

 

What are you referring to here?

[Castanza]

2 minutes ago, StevieV said:

 

I'm definitely for safety, but I think this can be a really high bar for someone starting out.  If you wait until you have several years of expenses saved up, that might take someone out of investing in their 20s.

 

I'd say if that's the case then that person needs to re-evaluate their expenses. Likely they are living well above their means. Prioritization is a choice imo. I'm 29 took an additional 2 years for college, worked full time during the last two years, paid off my student debt, paid cash for school, built an emergency fund, bought two vehicles and paid them off, purchased a house and recently paid it off. I still invested a good amount of money in that timeframe. Now I have zero debt and can really hammer the investing moving forward. My wife and I have relatively average salaries and come from working class families who couldn't afford to pay for our school. I have colleagues who also have wives as nurses and still don't own homes and say they don't have much invested, yet they seemingly spend hours every day on Robinhood. Frankly I don't understand what they're doing lol.....shockingly this is far more common than one would think. 

 

To each their own, but I think we will look back in 30 years and see how bad it was to push everyone in their 20's to jump in the market and make that their priority. Most people don't have the stomach for it, and that leads to poor performance. Sure it's just anecdotes....but they add up when you hear all your friends who don't own homes and still have 70k in student debt talking about swing trading r/wsb stocks. 

[changegonnacome]

27 minutes ago, TwoCitiesCapital said:

unless if you believe you can successfully identify the stocks that will go down, or nowhere, for 20+ year periods of time - valuations matter.

 

The buy and hold forever meme in investing is overhyped as @TwoCitiesCapital says I'm sure lots of people went over the cliff telling themselves that in GE or Blackberry......outside some outliers (Coke, American Express) the god of buy and hold forever Buffet himself cuts losers in his stock portfolio & churns the portfolio, not like some hedge fund but more than the hold forever meme attributed to him would suggest (more so years ago when size didnt become such a problem for BRK getting in and out of things).........because as he knows the exceptionally durable businesses are rare.......creative destruction in a capitalist society changes the competitive dynamics constantly....what seems like an impenetrable moat gets eroded over time.

 

Price matters

 

Competitive dynamics matter 

 

Indexing is the way out of this.........holding SPY forever makes sense.....once you step away from this option......the price is eternal vigilance.....you should only do it if you enjoy it......you should only do it if over perhaps 5yr period you've demonstrated some skill at it (& even 5yrs is probably too short to discount pure luck over skill).

 

[dealraker]

1 hour ago, TwoCitiesCapital said:

 

Yes, there are exceptions to every rule. Especially when looking at a man/stock that has compounded above everything else for it's existence as the example. There's probably a handful of other examples that work. 

 

But for every person that just bought and held Apple or Berkshire or Amazon for 20+ years and it worked out there are people who held Blackberry, and General Electric, and Bank of America where it didn't. 

 

1 hour ago, TwoCitiesCapital said:

 

unless if you believe you can successfully identify the stocks that will go down, or nowhere, for 20+ year periods of time - valuations matter. And there were plenty of opportunities in ALL or these examples to improve your returns via judicious buys/sells based on valuations and intermediate outlooks. 

I would reply that diversification would average those disasters out.  But to any bare knowledable investor Blackberry was a joke; GE was just mind boggling obviously faking it in all its businesses; and in the early 2000's it didn't take any deep thought to clearly see irrationality in Kudlow's Cinderella economy/bank behavior. 

 

In any event I've not had such stocks (GE is a good example).  My emphasis is that AJ Gallagher at sometimes 22 times earnings when growing 15% is not a sell.  If it goes to 40-50 like GE and begins to offer-up some crazy income and balance sheet wierdness?  Yea, sell.  

Edited January 25, 2023 by dealraker

[Gregmal]

6 minutes ago, John Hjorth said:

 

@Gregmal,

 

What are you referring to here?

Tech stocks are dead. They were the leaders of the past decade. Same thing happening as post 1999 era transition. Theres no better example of the baton pass than the chart of something like FFH/BRK/MKL... Energy. Companies who make money are and will be en vogue again. 

 

My gut says the people still staring at the indexes are also still staring at the AAPLs, MSFTs, and AMZNs of the world. They'd be better off not doing that cuz they're blinded by the dark. 

[John Hjorth]

Thank you for the elaboration, @Gregmal.