[2020] A little stock market sense

[letsgobobby]

at the time I was with Merrill lynch he was a broker, not a fiduciary. I moved account in 2000. The broker recommended whatever Merrill lynch told him to push, like Rainforest cafe. Never heard of it? It went bankrupt. And unite a few other busts.
I have no idea what I actually invested dollar wise with new firm, I moved things in, I reinvested dividends, I bought and sold , but over 24 years I stand at 65% of portfolio in unrealized capital gains.

unfortunately i have heard of Rainforest Cafe, because I ate there once. The group outvoted me.

Is your new firm/advisor a fiduciary?

The total return including dividends of the S&P500 over the last 25 years was 7.6% annualized. May not sound like much but that's over 525% return. That includes three wicked bear markets and starting from near historically high valuations.

Since this thread was started the market has more than doubled in value.

Stock picking and market timing are loser's games. Just buy the whole market and never sell. You don't need an advisor to do this and especially not a salesman.

 

[Ralph Sir Edward]

Do you not care about inflation? When was the capital deployed?

2021 and 2023. The dividend has gone up from $3.60 a share at first purchase to $4.08 today. But I don't just have a core stock holding. I have a liquidity fund, inflation hedges, and half of a house. And oil and gas royalties (small), and other odds and ends. No growth funds or stocks currently. Not until the next recession bear market.

 

[Tia]

I forget what the starting date of the film The Big Short is. (looked it up. appears to be 2005. Yes. That early.) I'll look up when NOOF went bankrupt. That was maybe 2 years, maybe 18 months after I put my CA home up for sale? ... google giving me nothing on NOOF bankrupt. Maybe I have the ticker wrong?

seems Bear Stearns went under in March 2008. So, I put my home up for sale 24 months before that, and sold 18 months before that.

Bernanke was already being asked about "housing bubble" in fall 2005. He was famously blind, as Fed-heads tend to be, with too many technocrats between them and reality

loved that movie, was very informative

 

[Carolinian]

You can make far more money by pumping and running a business that is an intermediary for people buying / selling gold and silver than you can by owning gold and silver.

Precious metals is about wealth preservation. The lions share of our money is in residential rental real estate that provides a nice cash flow. Looking at the high level of central bank buying of gold and the price targets from analysts at major international banks, however, it is also an asset that is certain to appreciate significantly.

The gold coins that we have the most of are Imperial German 20 marks. Those Germans holding these very coins after World War I had real money that held its value as paper money became virtually worthless. These very coins have already provided wealth preservation to their owners of a century ago.

 

[TolmiePeak]

Precious metals is about wealth preservation.

Isn't it about making money? The real money is if you can run a business buying gold for $2,000 an ounce and selling it for $2,500.

 

[Ralph Sir Edward]

Isn't it about making money? The real money is if you can run a business buying gold for $2,000 an ounce and selling it for $2,500.

Then you're not investing - you're running a business.

 

[Carolinian]

I see that Warren Buffet keeps dumping his Bank of America stock, a company that his Berkshire Hathaway company used to be the largest shareholder of. I wonder what he knows?

 

[WaikikiFirst]

very informative

Very informative on many levels and even in many small things.
Example, this nonsense people here believe about the ultra-efficient omniscient market "The market knows all. You can't beat it."
Pure BS and there is an old quote at the beginning of The Big Short that gives just one reason why that is such BS.
"It Ain’t What You Don’t Know That Gets You Into Trouble. It’s What You Know for Sure That Just Ain’t So."

"The Market" often "knows" many things that JUST AIN'T SO, and when you drill down to individual stocks, well,
For individual companies and their stocks, "The Market" almost always "knows" things that JUST AIN'T SO.

 

[WaikikiFirst]

wonder what he knows?

well, for 1 thing he knows that BAC's div yld is about half that of the 5.2% he can get from plain ol cash.
He also knows that he will turn over the reins to a successor pretty soon and cleaning the house of the biggest positions before he does will help the next guy: Greg Abel, who is not a portfolio manager, as Buffett always has been.
Knowing something about the company? Well, most of the people here figure THE MARKET KNOWS ALL THERE IS TO KNOW, so how could Warren know more?

 

[ScoopKona]

"The Market" often "knows" many things that JUST AIN'T SO, and when you drill down to individual stocks, well,
For individual companies and their stocks, "The Market" almost always "knows" things that JUST AIN'T SO.

And then there's the case of the market selling off Morton-Thiokol mere minutes after the Challenger Disaster. Sometimes the market gets it right, too.

In general, my strategy of "observe what average people are doing, and then do the opposite" has been going gangbusters. They're selling? I'm buying. They're buying? I'm selling. They like gold? I avoid it.

There are only a handful of exceptions to this rule. Usually the herd isn't just wrong. They're "180-degrees away from what's actually happening" wrong. What's being advertised on the herd network? Gold. Every time I see that network, someone is trying to sling gold at seniors.

 

[WaikikiFirst]

what does "the Market KNOW" about BROS coffee? ANyone? What do you know?
None near me so I know very little, but above questions beginning to interest me

 

[Ralph Sir Edward]

Very informative on many levels and even in many small things.
Example, this nonsense people here believe about the ultra-efficient omniscient market "The market knows all. You can't beat it."
Pure BS and there is an old quote at the beginning of The Big Short that gives just one reason why that is such BS.
"It Ain’t What You Don’t Know That Gets You Into Trouble. It’s What You Know for Sure That Just Ain’t So."

"The Market" often "knows" many things that JUST AIN'T SO, and when you drill down to individual stocks, well,
For individual companies and their stocks, "The Market" almost always "knows" things that JUST AIN'T SO.

The first thing you need to know in investing is what is value. A concept that should not change over time. Only then do you know whether or not something is undervalued, overvalued, or fairly valued. The goal is to only buy undervalued assets, and hold them until they are overvalued.

 

[WaikikiFirst]

market selling off Morton-Thiokol mere minutes after the Challenger Disaster. Sometimes the market gets it right

Having instantaneous reaction to actual "indisputable" NEWS isn't getting it right. It is instantaneous reaction. The only way they could get it wrong is if there actually were not M-T components in the system.

"Getting it right" is knowing how to place a bet on a mosaic of squishy info about a company and its products and its competitors and the economy will play out over the next few years, for that company's financials or maybe its odds of being acquired at a nice price. That is "getting it right". For small(ish) companies and for specialty companies, The Market is frequently pretty lousy at that.

 

[WaikikiFirst]

first thing you need to know in investing is what is value

Value was buying awesome pizza and sushi in Tokyo 2 months ago, not just "world-class" pizza, but high-end of the world-class pizza, at about the price of a Dominos in NYC or the Bay Area ... probably less than the price of a Dominos. When you do that, you think "maybe the yen is under-valued"? or maybe citizens of Tokyo just like to work for peanuts and have no way to move to Europe?

 

[TolmiePeak]

The first thing you need to know in investing is what is value. A concept that should not change over time. Only then do you know whether or not something is undervalued, overvalued, or fairly valued. The goal is to only buy undervalued assets, and hold them until they are overvalued.

Value is defined by whatever price a willing/buyer seller agree on. It changes from day to day.

 

[WaikikiFirst]

sorry, but I have to quote Warren Buffett: "Price Is What You Pay, Value Is What You Get".

 

[TolmiePeak]

sorry, but I have to quote Warren Buffett: "Price Is What You Pay, Value Is What You Get".

Berkshire Hathaway lost value when Charlie checked out.

 

[letsgobobby]

Very informative on many levels and even in many small things.
Example, this nonsense people here believe about the ultra-efficient omniscient market "The market knows all. You can't beat it."
Pure BS and there is an old quote at the beginning of The Big Short that gives just one reason why that is such BS.
"It Ain’t What You Don’t Know That Gets You Into Trouble. It’s What You Know for Sure That Just Ain’t So."

"The Market" often "knows" many things that JUST AIN'T SO, and when you drill down to individual stocks, well,
For individual companies and their stocks, "The Market" almost always "knows" things that JUST AIN'T SO.

you know as well as I that the EMH doesn't mean the market is always right. It means the market has already priced in all publicly available information. Unless you have inside information, you are just making your best educated prediction along with all other investors. As a result the sum total of investors has to perform average, minus their (substantial) fees, and thus underperforms their benchmark by about the amount of their fees.

Furthermore persistent outperformance even before fees seems to be almost unheard of. Lynch, Buffett, etc are a few of the exceptions (and Buffett only in the first couple decades - the last thirty years I believe he has matched the S&P).

Alpha exists but the average investor isn't going to find it. He's going to performance chase, and the Callahan table tells us that's not going to work out well. And he's going to over pay to under perform. He's going to get in at the top and get out at the bottom (this thread being Exhibit A).

And when alpha really exists, it almost never exists net of fees.

Now everyone will say they are a stock market genius. But everyone also says they win in Vegas and yet... Vegas exists.

 

[ScoopKona]

Now everyone will say they are a stock market genius. But everyone also says they win in Vegas and yet... Vegas exists.

Not everyone. For instance, people who are at the director level or higher at casinos aren't allowed to gamble AT ALL. Casinos forbid it. They also very-much encourage all of their employees to find less ridiculous forms of "entertainment." Invest instead of gamble. Build a nest egg.

I've met mathematicians who oversee the mechanics of gaming. None of them gamble. The technicians who fix the slot machines (mostly) don't gamble. Nobody who works casino security is allowed to gamble. It's an industry with a well-developed sense of self awareness.

 

[Ralph Sir Edward]

you know as well as I that the EMH doesn't mean the market is always right. It means the market has already priced in all publicly available information. Unless you have inside information, you are just making your best educated prediction along with all other investors. As a result the sum total of investors has to perform average, minus their (substantial) fees, and thus underperforms their benchmark by about the amount of their fees.

Furthermore persistent outperformance even before fees seems to be almost unheard of. Lynch, Buffett, etc are a few of the exceptions (and Buffett only in the first couple decades - the last thirty years I believe he has matched the S&P).

Alpha exists but the average investor isn't going to find it. He's going to performance chase, and the Callahan table tells us that's not going to work out well. And he's going to over pay to under perform. He's going to get in at the top and get out at the bottom (this thread being Exhibit A).

And when alpha really exists, it almost never exists net of fees.

Now everyone will say they are a stock market genius. But everyone also says they win in Vegas and yet... Vegas exists.

I respectfully disagree.

 

[Brett]

I respectfully disagree.

I respectively disagree with you - - but respectively agree with Bobby. The "efficient market hypothesis" is why active money managers do not 'beat the market' in the long term.
He describes it similar to wikipedia https://en.wikipedia.org/wiki/Efficient-market_hypothesis

" It means the market has already priced in all publicly available information. Unless you have inside information, you are just making your best educated prediction along with all other investors. As a result the sum total of investors has to perform average, minus their (substantial) fees, and thus underperforms their benchmark by about the amount of their fees."

 

[Ralph Sir Edward]

I respectively disagree with you - - but respectively agree with Bobby. The "efficient market hypothesis" is why active money managers do not 'beat the market' in the long term.
He describes it similar to wikipedia https://en.wikipedia.org/wiki/Efficient-market_hypothesis

" It means the market has already priced in all publicly available information. Unless you have inside information, you are just making your best educated prediction along with all other investors. As a result the sum total of investors has to perform average, minus their (substantial) fees, and thus underperforms their benchmark by about the amount of their fees."

View attachment 99260

I tell you what. Start today, with your favorite portfolio, I start with cash. I will put mine in to stocks whenever I think it is the right time, with the stocks I think are the right stocks. We'll compare in a decade. Agreed?

 

[letsgobobby]

I tell you what. Start today, with your favorite portfolio, I start with cash. I will put mine in to stocks whenever I think it is the right time, with the stocks I think are the right stocks. We'll compare in a decade. Agreed?

it's not interesting. it's been done. the argument is settled. you can "respectively disagree" with the data but the data is incontrovertible.

 

[Ralph Sir Edward]

it's not interesting. it's been done. the argument is settled. you can "respectively disagree" with the data but the data is incontrovertible.

I am not a data point. (parody of Our Man Flint not intended) There is no track record of my investing in those averages. I think I can do the equivalent of "card counting" in Vegas blackjack. I'm willing to do a real-time running experiment. Do you care to join?

 

[Brett]

I tell you what. Start today, with your favorite portfolio, I start with cash. I will put mine in to stocks whenever I think it is the right time, with the stocks I think are the right stocks. We'll compare in a decade. Agreed?

And I'll tell you to manage a mutual fund and we'll see in a decade .............

.