Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 2
Continuing to widen the underperformance gap versus the lowly S&P 500.
Print the post Back To Top
No. of Recommendations: 7
Continuing to widen the underperformance gap versus the lowly S&P 500.

What conclusion do you draw?

Jim
Print the post Back To Top
No. of Recommendations: 2
Anyone with any sense knows the market-capitalization weighted S&P is grossly overvalued due to several high flyers. But what if we sit through another 15 years of this when many of our investing lives will be over? Is WEB content with holding $150 billion in cash indefinitely when he told shareholders it wouldn’t be right to do this?
Print the post Back To Top
No. of Recommendations: 17
Anyone with any sense knows the market-capitalization weighted S&P is grossly overvalued due to several high flyers.
But what if we sit through another 15 years of this when many of our investing lives will be over?


I hear you, though I think 15 years would be a long wait.
I don't think Berkshire will get materially cheaper than this on average. (though it sure might during a selloff)
Meaning returns from here will, on average, therefore track value gain. Which will be slow and steady, but pretty much inevitable.
So we might lag, but we'll still make money.

But as you note, it's an unpleasant wait.

My recent thought is that I'd like to profit from the current "bubble". They don't come by that often, and it's a shame to miss one.
I didn't get in early enough on very many of the high flyers, and it's probably too late to jump on board the bullish train.

So I'm starting to think of any two foot hurdles that might be coming soon on the short side.
I think there are probably some reasonably long dated put options with $5 of upside for every $1 of money at risk, with better than a 20% chance of working out before they expire.
A basket of those might be fun. It might also provide a windfall at precisely the right moment to cash out and go shopping during a market rout.
And make us feel better about missing the ride up.

I have to say, I have also considered shorting out the Apple portion of my Berkshire holding.
If the market assigns the "correct" value to the holding within Berkshire, I'd then be merely neutral, not short.
But I think Mr Market is unfortunately fully capable of valuing a bundle of $100 bills differently from a bundle of $100 bills with an elastic around them.
The thinking: the market hasn't really given Berkshire any credit for the Apple position's increase in market value.
But the next time Apple's stock goes out of fashion, it's quite possible the market will remember who owns that big block and Berkshire will get whacked too.
I'd like to lock in the gains before then...or, since the gains have been nugatory, at least dodge the loss.

Jim
Print the post Back To Top
No. of Recommendations: 0
Don’t you think GameStop is disgustingly overpriced?
Print the post Back To Top
No. of Recommendations: 1
"But the next time Apple's stock goes out of fashion, it's quite possible the market will remember who owns that big block and Berkshire will get whacked too."

It's a shame the market didn't recognize Berkshire while Apple stock was (is) in fashion. Shocking to me that it hasn't.
Print the post Back To Top
No. of Recommendations: 1
Sure BRK has underperformed the index, but in this market the S&P is a different animal. My cash and bonds have underperformed the index as well, but I lose no sleep over that. BRK is a middle of the road sleep loser, while the S&P has launched into the serious sleep deprivation zone.
Print the post Back To Top
No. of Recommendations: 0
I've read that 60 of the 500 S&P elements are priced @ 10/annual sales or greater.
If true, perhaps this will make you value-huggers (like me)sleep better.

Be well,
KCC
Print the post Back To Top
No. of Recommendations: 1
If you're going to be afraid of missing out on something, then be afraid of missing out on international stocks. That's where the real value is.
Print the post Back To Top
No. of Recommendations: 6
The Gamestop thing is a reminder that investing is not the study of finance. It's the study of how people behave with money, and sometimes those behaviors are incredible. - Morgan Housel
Print the post Back To Top
No. of Recommendations: 11
I've read that 60 of the 500 S&P elements are priced @ 10/annual sales or greater.
If true, perhaps this will make you value-huggers (like me)sleep better.


Strangely enough, if you held an equally weighted portfolio at all times of nothing but firms trading at over 10 times sales in the last 5,10,15 years, you'd have beat the S&P quite handily.
Who knew?

The secret is the hidden implication that you sell when rapidly when a given stock stops trading that high.
It's kind of like an "overvaluation stop loss". You get out of each one at any faint hint of less than total exuberance.

I didn't include very small caps.

Among the Value Line 1700 set of stocks, the long run average is around 40 stocks (from among those with sales figures) and median 32 stocks at 10 times sales.
It was well over 75 stocks for a while in the tech bubble (peak about 150), but not over 75 between then and late 2018.
During 2018 the count hit 108.
Lately it has been about 175-200.

Jim
Print the post Back To Top
No. of Recommendations: 0
Among the Value Line 1700 set of stocks, the long run average is around 40 stocks (from among those with sales figures) and median 32 stocks at 10 times sales.
It was well over 75 stocks for a while in the tech bubble (peak about 150), but not over 75 between then and late 2018.
During 2018 the count hit 108.
Lately it has been about 175-200.


I don't think there is any doubt we are in a bubble, but the question is, when does the clock strike midnight? Missing the crash is a good thing. But missing the exuberant part of things can cost you too. As long as the Fed is holding rates at effectively zero, it probably keeps going.
Print the post Back To Top
No. of Recommendations: 1
I don't think there is any doubt we are in a bubble, but the question is, when does the clock strike midnight? Missing the crash is a good thing. But missing the exuberant part of things can cost you too. As long as the Fed is holding rates at effectively zero, it probably keeps going.

My way of dealing with asset bubbles is to steer clear of them.

What makes you think that the coming collapse of the bubble requires a trigger? Even with the benefit of 20-20 hindsight, nobody can explain what happened in March 2000 to cause the NASDAQ to start the collapse. The same is true of the crash of 1929.

What makes you think that you have the ability to hang on until the bitter end but still bail out in time when you're competing with millions of others plus AI bots that never have to go to work, eat, sleep, shower, use the bathroom, etc.? I don't know about you, but I know better than to think I have a chance at playing this giant game of musical chairs.

If you MUST be afraid of missing out, then be afraid of missing out on the bargains in international stocks. When you take the low valuations AND the strong US dollar into account, you're looking at a level of undervaluation that the DJIA and S&P haven't offered since the 1930s or 1940s.
Print the post Back To Top
No. of Recommendations: 2
Doppler, what international stocks do you like? I have Vanguard Total International, and wouldn't mind adding to that allocation.
Print the post Back To Top
No. of Recommendations: 3
My favorite international stock ETFs are DFJ, DGS, MOTI, DGRE, IQIN, FNDC, and GWX.

MOTI is the international moat fund. Its portfolio contains the kinds of stocks that justify higher multiples, yet sells for only 111% of book value (according to Morningstar).

DGRE is the emerging markets dividend growth fund. Its portfolio contains the kinds of stocks that justify higher multiples but sells for only 198% of book value. Out of my favorite international stock ETFs, this one has been the best-performing so far. DGRW is the US version of this fund (and comes from the same fund company), yet sells for 491% of book value. That's nearly two-and-a-half times more expensive.

All the others are plain vanilla funds with good diversification. (The biggest position in each of these other funds is less than 2% of the portfolio.) DFJ has dividend-paying small-cap Japanese stocks and sells for just 76% of book value. The other four funds are all just slightly above book value. DGS applies the small cap dividend strategy to emerging markets. IQIN has large cap developed market stocks. I like to think of it as analogous to the S&P 500 but with less concentration in the biggest positions. FNDC and GWX have small cap developed market stocks.

dwerme, your top international pick (VXUS) sells for 163% of book value and has 1.57% of its portfolio in its largest position. I'm not crazy about it, but it's still far better (in my opinion) than VTI or VOO. I don't own any of Vanguard's international stock ETFs, but if I had to choose one, I'd pick VSS. It's a small-cap fund at 136% of book value and just 0.43% of the portfolio in its biggest position.

For money market funds and bond funds, a rock-bottom expense ratio is essential, because there is no chance of hitting the jackpot. For stock funds, I'm willing to pay a higher (albeit still reasonable) expense ratio to get a strategy that I cannot get elsewhere. That's why none of my favorite international stock ETFs are from Vanguard. The international fund universe has far fewer choices than the US stock universe (especially at Vanguard), and the limited competition for investor dollars is part of the reason the expense ratios are higher. In other words, beggars can't be choosers.
Print the post Back To Top
No. of Recommendations: 16
What makes you think that the coming collapse of the bubble requires a trigger? Even with the benefit of 20-20 hindsight, nobody can explain what happened in March 2000 to cause the NASDAQ to start the collapse. The same is true of the crash of 1929.
What makes you think that you have the ability to hang on until the bitter end but still bail out in time when you're competing with millions of others plus AI bots that never have to go to work, eat, sleep, shower, use the bathroom, etc.? I don't know about you, but I know better than to think I have a chance at playing this giant game of musical chairs.


Like long term buy and hold, I've found it's one of those things that doesn't require any great skill, just patience.
I don't care about a trigger. Prices will change of their own accord at some point.

In 2000, the market indexes topped in March.
I gave it a a few weeks, then a few months, to be sure the top was past and the enthusiasm was waning.
There is no need to spot the top tick, or the top week, or month, or even season.

I took some short positions starting September 25 2000. (mainly a US bear mutual fund)
I traded too much, sold some of the positions way too early, and I held some of the bearish positions much too long, even bought some after the bear in 2004, and gave back some of the gains I made.
So my ability to predict and time or price the market was sketchy at best.
But I still cleared a profit in the high six figures.

Short term price movements (in which I include bull/bear cycles) are vastly larger than long term trends.
The only argument against trying to trade those movements is they are generally way too hard to predict.
It's a good argument.
But...maybe not always?
Did anybody think prices were crazy in 1999-2000?
Was the subsequent big price fall really very surprising?
As noted above, one didn't have to be very good at all about picking the top to make a good buck.
In the same way that doing well buying stocks in a bear market doesn't require picking the bottom.

As you note, simply steering clear of bubbles is entirely reasonable.
There is certainly no obligation to try to trade anything shorter term, on the way up or the way down.

But there's nothing wrong with looking at the opportunities available.
Sometimes there is a simple, clear, honest and respectable way to make money with high reliability that isn't something you've done before.
Mr Buffett is a master of that. I'm not, but I'm willing to broaden my horizons occasionally.
Maybe the current bubble with present some opportunities like that. Maybe not.

Jim
Print the post Back To Top
No. of Recommendations: 1
Doppler...in just a few months this 39.93% outcome...

...and I appreciate your posts as otherwise I would not have made this investment!

EEMpopup
Action for symbol EEM in account IRA
ISHARES MSCI EMERGING
$55.84Last updated at01/26/2021 $0.000.00% $0.00 +39.93%
Balances balances help
Money accounts
Print the post Back To Top
No. of Recommendations: 20
The level of the 10 year Treasury is the single biggest factor here. Per Buffett's instruction on valuing common stocks. Its why Buffett is very heavily positioned in business ownership here: pieces of businesses and entire businesses. And, for him, is historically underweight fixed income.

The 10 year Treasury was 6 TIMES higher in 2000. And higher most of the past century.

Why is this factor either ignored or brushed aside? I don't get it.

Income from blue chip dividend payers has arguably never been more valuable nor reasonably priced.

A 3% dividend payer in a 1% world is golden. A 3% dividend payer in a 6% world is not that attractive. Same stock...identical balance sheet and income statement. 2000 versus today. Night and day different.
Print the post Back To Top
No. of Recommendations: 1
chompin: Congratulations on making 40% in just a few months!

I'm not crazy about EEM (iShares MSCI Emerging Markets ETF) for these reasons:
* According to Morningstar, it's selling for 190% of book value. It's almost as expensive as DGRE (emerging markets dividend growth) but doesn't specialize in the top quality companies that justify higher multiples.
* It's not that well diversified. The biggest position is 6.65% of the portfolio. Yes, this is the same knock I have against the S&P 500.
* The expense ratio is 0.68%, which seems awfully high for an index fund and is more expensive than any of my international stock ETFs. At the same time, EEM doesn't appear to offer anything lacking in my top picks. I'm guessing that Blackrock can charge this much because nobody else offers a fund that tracks the MSCI Emerging Markets Index.
Print the post Back To Top
No. of Recommendations: 0
Doppler I have 5 etf's of emerging markets and China securities. The EEM is just the easiest to access and post, so that's it in a nutshell. Honestly I didn't have the time or the interest in doing my homework on that issue w-h-e-n I came to the conclusion that the time was ideal to commit.

I basically bought...then began thinking about it. Not a big deal.

Keep posting please.
Print the post Back To Top
No. of Recommendations: 3
What makes you think that the coming collapse of the bubble requires a trigger? Even with the benefit of 20-20 hindsight, nobody can explain what happened in March 2000 to cause the NASDAQ to start the collapse. The same is true of the crash of 1929.

What makes you think that you have the ability to hang on until the bitter end but still bail out in time when you're competing with millions of others plus AI bots that never have to go to work, eat, sleep, shower, use the bathroom, etc.? I don't know about you, but I know better than to think I have a chance at playing this giant game of musical chairs.


Mungo's 99 day no new high indicator gives a decent signal. It isn't necessary to get in at the absolute bottom or out at the absolute top to make a little money. Our goal is to profit from Mr. Market's irrationalities, not join them.

That's why I keep a few limit buy orders out there at stupidly low prices, so that if there is another flash crash I get a few bargains.
Print the post Back To Top