Is The Bottom Almost Here?

[Jaygo]

I think i need to cancel my self directed accounts. Maybe a phone call to a broker would be a pain in the ass enough to stop trading in and out. Kind of like a alcoholic pouring all the booze down the drain.

 

I want to use my investing prowess (if it exists) but remove the emotion.

 

The worst is Apple. I held 200 shares at the time of Job's death, I was in the pyrenes hiking when i saw the headline on EL Pais, immediately went to a internet café and sold.

 

I am my own worst enemy, I will never do the calculation on the missed money since i know it would be too much to have any self respect left investing wise. 

 

The same thing that brought me to apple and all the other stuff is peter lynch style owning what you know. Perhaps this combined with some rules for self control would be a wonderful combination for the small guy like myself.

[rkbabang]

2 hours ago, Spekulatius said:

The average investor does not need to beat the market to do well. Just matching about the market and he will do just fine.

 

This is true and if you invest a substantial amount for 40-50 years you will do just fine even if you underperform the market a little bit.  The problem is that I think even investors who invest in index funds usually vastly underperform the market. They start putting money in close to the top after hearing everyone talking about stocks and then get scared and pull everything out after each crash.  The only way to make market returns with an index fund is to keep your money in there and to dollar cost average new money in consistently.  That itself takes discipline that most don't have.

[Spekulatius]

24 minutes ago, Jaygo said:

I think i need to cancel my self directed accounts. Maybe a phone call to a broker would be a pain in the ass enough to stop trading in and out. Kind of like a alcoholic pouring all the booze down the drain.

 

I want to use my investing prowess (if it exists) but remove the emotion.

 

The worst is Apple. I held 200 shares at the time of Job's death, I was in the pyrenes hiking when i saw the headline on EL Pais, immediately went to a internet café and sold.

 

I am my own worst enemy, I will never do the calculation on the missed money since i know it would be too much to have any self respect left investing wise. 

 

The same thing that brought me to apple and all the other stuff is peter lynch style owning what you know. Perhaps this combined with some rules for self control would be a wonderful combination for the small guy like myself.

I think this is a bit nonsense. Your decision may have been a reasonable one, if you assume that Steve jobs was necessary for Apple to succeed. However, once you sold your shares, the mistake may have been that you did not continue to track the company. Apple shares trade every day and you could have bought back the shares, if you came to the conclusion that Tim Cook is a great CEO 5 minutes later, 5 days later, 5 month later or 5 years later.

 

A buy or sell decision is easily reversible (yes sometimes there are tax consequences).

Edited February 8, 2023 by Spekulatius

[dealraker]

44 minutes ago, Spekulatius said:

@dealrakerThat's is some real good performance. Was this with mutual funds or ETF's or was this with individual stock picking? 13% compounded is some serious outperformance.

Individual stocks.  It is likely slightly below 13%, maybe closer to 12.5 or so.  I have now way of knowing now short of going back to plugging in the contributions that began with $50 a month and then went up towards the 1994 end.   I show this to my great neices and nephews.  They buy crypto and tell me how "out of it" I am.  Think I'm kidding?  LOL, they'll learn.  They too quote past returns as proof stocks are inferior.

[Castanza]

3 minutes ago, Spekulatius said:

I think this is a bit nonsense. Your decision may have been a reasonable one, if you assume that Steve jobs was necessary for Apple to succeed. However, once you sold your shares, the mistake may have been that you did not continue to track the company. Apple shares trade every day and you could have bought back the shares, if you came to the conclusion that Tim Cook is a great CEO 5 minutes later, 5 days later, 5 month later or 5 years later.

 

A buy or sell decision is easily reversible (yes sometimes there are tax consequences).

 

Agreed...beating yourself up over past decisions is a good way to negatively influence future decisions as well. Instead you should analyze why you made that decision and if you still agree with the reasoning then move on. If you don't then adapt and carry on. 

 

Just getting started with investing I bought NVDA 50 shares at $30.xx and 100 shares of AMD for $8.xx....I sold Both about a year later for $68 and $21 thinking I've made out like a bandit. Which I did! But also missed a Hell of a lot more growth on those tiny positions. 

 

So from then on I mostly just buy and hold. I do sell here and there but I'd almost rather take the risk of a company going to zero than missing out on upside 5,10, 15 years down the road. Exactly how I view my small positions in INTC and TSN currently. 

 

In my generation I think too many people use money they need to live to invest and this greatly impacts their decision making. I see a lot of people prioritizing investing over paying off student debt, having an emergency fund etc. Couple that with their subscription based lifestyle that has to constantly be fed and there isn't much "I don't need it" money left over to invest. It's more, I don't need it today but I might next month; so at the first sign of trouble they hit that sell button. 

[StevieV]

11 hours ago, Jaygo said:

Stevie find something that you are good at, enjoy somewhat and the market readily pays for.

 

I should clarify - I'm not asking for myself.  I'm just curious if there are career paths people have taken that they'd recommend.  The most common refrain from people seems to be: "don't become a ________".  I'd love to hear opposite examples.

[Castanza]

10 minutes ago, dealraker said:

Individual stocks.  It is likely slightly below 13%, maybe closer to 12.5 or so.  I have now way of knowing now short of going back to plugging in the contributions that began with $50 a month and then went up towards the 1994 end.   I show this to my great neices and nephews.  They buy crypto and tell me how "out of it" I am.  Think I'm kidding?  LOL, they'll learn.  They too quote past returns as proof stocks are inferior.

 

I wonder what older generations said when they saw their children and younger generations telling them to invest in the stock market? They too probably thought it was foolish and better to save your money in your mattress. 

 

"A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”

 

This applies to more than just science 

[John Hjorth]

16 minutes ago, Jaygo said:

... The same thing that brought me to apple and all the other stuff is peter lynch style owning what you know. Perhaps this combined with some rules for self control would be a wonderful combination for the small guy like myself. ...

 

@Jaygo,

 

Please forget the past for triggering grievance and annoyance. It's counterproductive activity [except for non-emotional educational purposes], because none of us - including you - can't change the past.

 

If you really feel a bit lost in your investing endeavour as of now, make the decision to look at it from here forward bound.

 

I also think the various concepts covered in the following book could be tremendous help and support for you going forward: Morgan Housel : The Psychology of Money . [Many of the concepts covered in the book are embedded and ingrained in @dealrakers varius posts here on CoBF, as I see things.]

 

 

[dealraker]

2 minutes ago, StevieV said:

 

I should clarify - I'm not asking for myself.  I'm just curious if there are career paths people have taken that they'd recommend.  The most common refrain from people seems to be: "don't become a ________".  I'd love to hear opposite examples.

Stevie I am posting too much today but read Greg's post again.  I am an all 'rounder type, not special at anything.  Stuck my nose into seemingly everything, made it unorthodox like.  I did obsess over older men and their models (of success), my deceased dad's crowd.  I became "them", precisely them.  My great nieces and nephews do not want to become their parents, uncles, etc.....as of yet.  My guess?  That will change.

[changegonnacome]

"https://www.bls.gov/news.release/realer.nr0.htm#:~:text=From December 2021 to December 2022%2C real average hourly earnings,weekly earnings over this period.

 

From December 2021 to December 2022, real average hourly earnings decreased 1.1 percent, seasonally adjusted. The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 2.0-percent decrease in real average weekly earnings over this period.

 

What a great economy? One where your salary buys less this year than it did last year. For the well schooled and well heeled the cost of living background noise feels over done....you notice your Wholefoods receipt is a little high.......for some folks I know personally.....its very real.

 

People wonder what's the problem with this "strong" economy and great unemployment numbers and why does the Fed need to "wreck it" to fix inflation...............well look at the above.........purchasing power is going backwards.......3.4% unemployment sounds great as a statistic..............but as I said many pages back......an inflationary economy is one where EVERYBODY is losing their job.......just very slowly........and disproportionally the stealth job losses are heaped on the poorest.

 

The second point and back to the E getting whacked question we have going on here on the "bottom" and whether it was October or not......but lets just call it SPY earnings forecasts.......is how to do you fix the US employee/consumer's purchasing power and get them back to good health such that their purchasing power is increasing again?

 

Answer>

Nominal wage increases need to exceed nominal price increases? Such that real wages & purchasing power is growing again.

Whats that got to do with earnings? > 

Well last time I checked in business if your prices are rising more slowly than your costs......your facing margin & earnings headwinds.

 

Thats exactly where companies are right now........pushing price on a weakening consumer doesn't work...........and at the same time your employees are seeking pay increases.

 

In some ways its so simple........the corporate sector is going to have give up some of its margin/earnings and transfer them to employees/consumers to restore their purchasing power. This situation gets fixed once that happens......there are no free lunches in economics only trade off's........and earnings clearly have to give here.....such that consumers/employees can get back on track. 

 

Then we can all get back to the real game of progress which isn't printing funny money, fiscal transfers & QE/QT - its increasing the aggregate amount of real goods and services produced in the economy.

Edited February 8, 2023 by changegonnacome

[changegonnacome]

Surprise Used-Car Price Jump Adds to Fed’s Inflation Worries

https://www.bloomberg.com/news/articles/2023-02-08/surprise-used-car-price-jump-adds-to-fed-s-worries-on-inflation?srnd=premium&sref=7zqHEcxJ

 

I expect lots of inflation surprises like this in the data in the coming months..........inflation doesn't roll off in a straight line .....it meanders and plateaus and sometimes will likely even go back up like above.

 

If, like the market, your extrapolating the journey from 9% inflation to 5%.....and overlaying it on the journey from 5% to 2%........your very wrong IMO.

[Gregmal]

Another one of the pillars of rounding out your investment strategy/acumen is realizing that when you do buy and sell you don’t need to obsessively fret over hitting tops or bottoms. 

[Gregmal]

3 minutes ago, changegonnacome said:

Surprise Used-Car Price Jump Adds to Fed’s Inflation Worries

https://www.bloomberg.com/news/articles/2023-02-08/surprise-used-car-price-jump-adds-to-fed-s-worries-on-inflation?srnd=premium&sref=7zqHEcxJ

 

I expect lots of inflation surprises like this in the data in the coming months..........inflation doesn't roll off in a straight line .....it meanders and plateaus and sometimes will likely even go back up like above.

 

If, like the market, your extrapolating the journey from 9% inflation to 5%.....and overlaying it on the journey from 5% to 2%........your very wrong IMO.

Of course, they’re trying very hard to create “gasp”, “oh no it’s back” moments. As with every ride, there’s gonna be fluctuations but the overall direction is what clearly matters and that’s down.

 

Which if you understand the “ups and downs” part, consistent even with random walk stuff..it’s not surprising at all. Nor nothing to fret. Most of these day in the life fluctuations have occurred for decades, only now have we been trained to scrupulously pick them apart.

[Blugolds]

@changegonnacomewhat your describing has been happening to the middle class for decades, its just sped up a little. 

 

https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/

 

And it will continue. Earnings don’t have to decrease, a little creative finance and marketing…smaller portions in the same packaging, taller/thinner packaging to hide the smaller portions but appear the same..maintains margins. Thinner rolls, smaller cans, lighter bags. 

 

https://www.washingtonpost.com/business/2021/06/01/package-sizes-shrink-inflation/

 

https://www.latimes.com/business/story/2022-06-08/shrinkflation-companies-shrink-package-sizes-inflation-ploy

 

For items that packaging cant be manipulated by, vehicles, electronics etc. Especially those that are financed, they extend the note and close them on payments, what’s that? You want to be below $XXX/mo, no problem we can do that, for <$XXX/mo….for 124 mo you’ll be enjoying your new XYZ as soon as we finish the paperwork. 

 

The avg consumer doesn’t care about inflation…they say it hurts, and they feel it, but look at the consumer debt, they’re putting significant amounts of monthly expenses on credit cards, thats how they are making it, because they haven’t got a “Real” raise in decades..make the minimum payment on the collection of cards in your wallet and kick the can down the road. If they want a bag of Doritos, they’re gonna buy it even if it’s now $8. They might complain, but they still buy it, and they still have all the other stuff, the memberships, the subscriptions, the snacks, the clothes, vehicles etc. Charge it.

 

 

 

[Gregmal]

It’s like everytime the market has had a few up weeks or makes a 5-10% move back up the past 6 months there’s a whole crowd of people who are aghast and screaming about retail mania and bubbles again and it’s just like “wtf are we doing”?

[Masterofnone]

Stevie, you have started a fine discussion, even though it is only tangential to the thread topic.

 

I have found it helpful to have a much smaller "funny money" account to satisfy the need to do something. Playing the Parsad/ Schloss game is fun, though I have found that I don't particularly excel at it. Selling at the "right time" is really difficult.

 

Spek is correct that going into business for yourself is usually just making up your own job to do. This can be wonderful though, if you love the work. It is great to be your own boss if you largely enjoy each day and a great way to control the work/life balance.

[Gregmal]

3 minutes ago, Blugolds11 said:

 

@changegonnacomewhat your describing has been happening to the middle class for decades, its just sped up a little. 

 

Yup. Except now we ve been conditioned to see them as signs of the coming apocalypse. They’re not

[Jaygo]

31 minutes ago, changegonnacome said:

"https://www.bls.gov/news.release/realer.nr0.htm#:~:text=From December 2021 to December 2022%2C real average hourly earnings,weekly earnings over this period.

 

From December 2021 to December 2022, real average hourly earnings decreased 1.1 percent, seasonally adjusted. The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 2.0-percent decrease in real average weekly earnings over this period.

 

What a great economy? One where your salary buys less this year than it did last year. For the well schooled and well heeled the cost of living background noise feels over done....you notice your Wholefoods receipt is a little high.......for some folks I know personally.....its very real.

 

People wonder what's the problem with this "strong" economy and great unemployment numbers and why does the Fed need to "wreck it" to fix inflation...............well look at the above.........purchasing power is going backwards.......3.4% unemployment sounds great as a statistic..............but as I said many pages back......an inflationary economy is one where EVERYBODY is losing their job.......just very slowly........and disproportionally the stealth job losses are heaped on the poorest.

 

The second point and back to the E getting whacked question we have going on here on the "bottom" and whether it was October or not......but lets just call it SPY earnings forecasts.......is how to do you fix the US employee/consumer's purchasing power and get them back to good health such that their purchasing power is increasing again?

 

Answer>

Nominal wage increases need to exceed nominal price increases? Such that real wages & purchasing power is growing again.

Whats that got to do with earnings? > 

Well last time I checked in business if your prices are rising more slowly than your costs......your facing margin & earnings headwinds.

 

Thats exactly where companies are right now........pushing price on a weakening consumer doesn't work...........and at the same time your employees are seeking pay increases.

 

In some ways its so simple........the corporate sector is going to have give up some of its margin/earnings and transfer them to employees/consumers to restore their purchasing power. This situation gets fixed once that happens......there are no free lunches in economics only trade off's........and earnings clearly have to give here.....such that consumers/employees can get back on track. 

 

Then we can all get back to the real game of progress which isn't printing funny money, fiscal transfers & QE/QT - its increasing the aggregate amount of real goods and services produced in the economy.

I am still in the camp that the inflation is caused by government ineptitude and a one time expansion of the money supply. 
 

if they cut taxes and government spending, then lower rates goods inflation will drop. Goods inflation leads to services inflation. 
 

free enterprise is and has always been the best solution to inflation. what I saw last night on the sotu tells me this admin is a circus and entirely willing to run a socialist command economy. Not good imo. 

[Gregmal]

I also kind of became desensitized to the used car and commodity inputs as a bellwether because last time the inflationistas screamed about them they fell off a cliff shortly thereafter and in response to this the inflationistas changed the goalposts and moved on to other more convenient bellwethers. Have we come full circle?

[Blugolds]

9 minutes ago, Gregmal said:

Yup. Except now we ve been conditioned to see them as signs of the coming apocalypse. They’re not

 

Consumers have jobs, and no foreseeable risk of the majority losing them, and they don’t have to worry about losing their homes/housing…so there really is no reason to stop spending. They might complain about the price of gas, or utilities or groceries or whatever else, but do any of them really STOP buying? Do you really think they’re gonna say…whoa, alright, beans n franks this month kids, Nope, its the name brand sugar cereal, snacks, pop, chips, still grabbin that pack of Marbs, still grabbin the case of beer, still gettin the new iPhone, new pair of Nikes, LULU pants etc etc…American consumers gonna consume…give ‘em a job, and a place to sleep, a plastic card and get the F outta their way. 

 

Think about it, pervious generations had magazine ads, and TV commercials to brainwash them as consumers…now the avg American spends how much time on social media per day, that is essentially one GIANT commercial for all things consumable? If its not the brands, companies themselves its their influencers, reels, snaps, toks telling people that if you wanna be cool, pretty, rich etc this is what you need.There has never been a time in human history that the avg person has been more inundated with consumer branding, advertisements etc telling them every where they look, SPEND! BUY! Literally never in history has there been more minutes out of every day that the avg American has been subject to marketing. 

 

I used to think that more consumers thought like I did, but that was flawed thinking, they don’t. If I don’t buy something that I think it overpriced, its on principle, they don’t think that way, they complain and buy anyway, because lets be real, if the majority of them were financially literate and made good choices they wouldnt be in the situation they’re in statistically, they don’t make good choices when it comes to their health, and they don’t make good choices when it comes to their bank account/checkbook. 

 

I called 5 dealerships in 2 states last week to price out a new Honda ATV 4 wheeler for the cabin, best price, I would finance with them if it gave me a better OTD price (then just pay off the next month) or pay cash, up to them. Every single one came back between $1900-$2200 OVER MSRP. 2 years ago my cousin bought one for $200 UNDER MSRP and it wasnt a special deal, and these weren’t limited hard to find machines, they had 8-10 in stock ready to go, in all 3 color options. Consumers are spending, stimulus bucks or not, they don’t care, I think they just accept the new normal, they whine and complain but none of them actually STOP buying, it ends up “well, what are ya gonna do?” And that is the extent of it and the music plays on. 

 

I don’t see any serious scary stuff that is gonna be a problem, and like I said, the loss of purchasing power for the middle class isnt gonna do it, because they’ve been getting F’d for decades and here we are, still spendin, so thats nothing to worry about from a consumer spending standpoint. 

 

The beast is alive and it needs to feed, let it eat. 

[changegonnacome]

17 minutes ago, Gregmal said:

Yup. Except now we ve been conditioned to see them as signs of the coming apocalypse. They’re not

 

Dont think I've ever advocated for an apocalypse coming  My advocacy to folks to the extent they care......is a little more caution than is normal......higher FCF underwriting standards.......more conservative estimations of an enterprises cyclically adjusted earnings power.......shy away from high P/E's.....where a fall in earnings & a fall in optimism one can get really hurt.

 

What I've certainly said and its playing out - is that 2021/early 2022 was peak margins and peak earnings this cycle.......& if your underwriting investments at those levels, on average, you are going to be disappointed....earnings ordinarily go up YoY but the context I've covered helps explain why they are very very very unlikely to go up again (in real terms) in the way we are used to..........that is until earnings first fall, unemployment goes up, inflation returns to 2% and the Fed normalizes rates and we build out from there.....see in 2021 IMO they reached a kind of crescendo of everything going right for corporates...........underneath the hood of the index things are better and worse for individual names of course.......the upper range bound characteristic of SPY IMO (lets call it 4400 between friends) is an interesting way to hedge/play alpha games/sell vol. while picking winners/losers underneath. 

[Gregmal]

Yea for sure I know you're one of the good guys. I just kinda rant on the talking points because a lot of these are the ones manipulated by the bad actors and bullshit artists. Any way you cut it, a market and economy where everything is plummeting, like say, last summer, is not a healthy one. So the obvious skepticism from people who are deceptively lobbying everyone else that this is the answer, is bs and should be called out. Its just coincidental theyre hoarding cash or shorting the market...nothing to see there(shrug)...yea fuckin right.

 

If "everything plummeting" is not the answer, we will obviously have situations where some stuff goes up and some down and thats just always the way things have worked generally speaking, with a gradual longer term bias to the upside. Many last year in H2 got conditioned to scream anytime, anything, went up. I just look forward to what looks like a more normal, normal, going forward. Which should include 4-5% interest rates, not 0 and not 7. 

[thepupil]

seeing dealraker's beautiful 401K got me to look at my accounts. what stands out to me when i look at my accounts is that generally, I have a difficult time compounding my taxable accounts because I lead an expensive lifestyle and pay a high tax rate and am not a tax efficient investor. this is despite both of my taxable accounts handily beating the market / making good absolute returns. On the other hand, I have some earlier stage dealraker-esque tax advantaged accounts. The IRA's that result from my first two years' working (2011-2013) and have no contributions since are a material amount of money. 

 

So there's a lesson in there for some of the young folks. Max out that tax advantaged untouchable compounding vehicles!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Edited February 8, 2023 by thepupil

[dealraker]

And one more post, mentioning the thing that matters over time regardless of good...or maybe awful cycles of whatever comes our way to slaughter our cherished quotes either for a few months or maybe years.   Here goes:

 

On my multi-lined multi-faceted 100 plus year Securities Research Chart framed downstairs, the damn thing is almost 5 feet wide by the way, is a typed note that I taped in the corner that quotes Buffett saying in the year 2000 that (too lazy to go down and verbatim it) "stocks are overvalued such that it likely exceeds 1928".  

 

So I think anyone reading my posts for the last 25 years knows that Berkshire and AJ Gallagher dominate my portfolio/outcome.  And since Buffett's quote in 2000 I think Berkshire is up 7 fold and AJ Gallagher is up (counting div's or not either is grand) about 10 times  that's 10 times it's 22-and-something years ago value.  Yea, stocks were over-valued yet about 9/10th's of my net worth came in those 22 years.  AJ Gallagher had spiked in 2000, surely it was over-valued.......right?  But at a PE of 20 what did I do?  I yawned; I didn't sell.

 

So just like those posting up "We tell all our clients that crypto/Bitcoin has beat stocks..." I have an extreme bias just as strong.   The difference is I don't come here telling Greg that he has to buy Berkshire and AJ Gallagher, suggesting that not doing so means "he just does NOT understand" how great this must-own entitiy(s) is that he has missed - thus he's out of it and ignorant of the NEW ERA. 

 

I come to get introduced to stuff I am unaware of, and I have gotten precisely that!  And my choices, whether luck or skill (I'll sure as hell never know) seem to be working.  Time will tell.

 

 

Edited February 8, 2023 by dealraker

[changegonnacome]

3 hours ago, Gregmal said:

I just look forward to what looks like a more normal, normal, going forward. Which should include 4-5% interest rates, not 0 and not 7. 

Yeah me too I like running 112.5% gross exposure when I’m very comfortable to do so……I’m just not doing anything close to that right now - moving forward I think the Goldilocks scenario is an earnings recession….where those earnings are hurt because prices weaken hurting margins and wages strengthen driving up costs.

 

That’s the route where you can actually square the circle on the price, inflation, wages, productivity story…….and not come up with unemployment and recession….but to be clear every scenario I play out on the journey back to 2% inflation see’s earnings getting whacked.

 

 

Edited February 8, 2023 by changegonnacome