Note: watch a view a video of this post here. These are the top 30 stocks in the S&P 500 over the past 30 years… What stands out? The unfathomable cumulative returns, a product of time and the magic of compounding. What’s missing? The many periods of excruciating pain that anyone invested in these companies would have […]
“Whether you’re excited or nervous when your favorite asset falls in price marks whether you’re investing or merely speculating.” – Naval Ravikant (Founder of AngelList) Are you investing or merely speculating? Naval Ravikant had an interesting take on this most important of questions. The deciding factor: whether you’re “excited” or “nervous” to see your investment going […]
Here are the charts and themes that tell the story of 2021… I. The Free Money Effect In the first few months of 2021, hundreds of millions of Americans (the vast majority of whom had never lost a job during the pandemic) received two more tax-free stimulus checks, setting the stage for one of the […]
If you’re going to bet against Warren Buffett, you better have the odds tilted in your favor. Back in January 2008, Buffett wagered $318,250 that an S&P 500 index fund would beat a hedge fund portfolio (five fund-of-funds chosen by Protégé Partners which invested in over 200 hedge funds) over the next ten years. The […]
“As Ben Graham said: ‘In the short-run, the market is a voting machine – reflecting a voter-registration test that requires only money, not intelligence or emotional stability – but in the long-run, the market is a weighing machine.’” – Warren Buffett (1993 Berkshire Hathaway Letter) Over the last year we’ve seen a rolling series of […]
US equity valuations are high. How high? The CAPE Ratio on the S&P 500 just crossed above 40. When was last time we saw a CAPE ratio above 40? September 2000. What happened after that? The “lost decade” for investors. The S&P 500 declined 15% over the next 10 years, with two significant drawdowns in […]
Rivian ($RIVN) went public last week in one of the largest IPOs ever, raising $12 billion and ending its first day of trading at a market cap of $87 billion. Only a week later, its market cap has surged to $149 billion, higher than both General Motors ($GM) and Ford ($F). Why is that surprising? […]
It’s that time of year again. Endless predictions and price targets about where the markets are headed in 2022: -The S&P 500 is going to ___. -The 10-year treasury yield is going to ___. -Crude Oil is going to ___. -Bitcoin is going to ___. There’s a huge audience for this type of content, but […]
“The Market is always right.” One of the most popular sayings which can also be one of the most dangerous. Why? Because “the market” can be very wrong at the worst possible time. A few examples… 1) Silver in 1980 The price of Silver went up over 10x in the year leading up to its […]
7.5%. That’s been the annual return assumption of pension funds for decades. What mix of assets is required to generate such a return? The answer to that question has changed dramatically over the past 40 years. Let’s take a closer look… January 1981 In 1981, short-term Treasury bills were yielding over 15%, near their highest […]
“Buy the dip.” This has been the mantra for an entire generation of investors. Why? Because we are creatures of habit, and during the last 12 years the best habit you could possibly have had as an investor was to stop worrying and simply “buy the dip.” The fact that dips were often followed in […]
This is a story about expectations. But first, I want you to read about Company A and Company B… Company A had revenues of $66.81 billion over the last year and net income of $7.14 billion. It was founded in 1912 and has 114,000 employees. Company B had revenues of $851 million over the last […]
By changing the start and end date, you can win just about any argument over what’s the best investment. Even the age-old battle between Gold bugs and stock market bulls? Yes, even that one. Here’s a guide to winning the argument, first in favor of Gold and then in favor of Stocks… If you’re a […]
Investing is never easy, but there’s no denying that the last 10 years in U.S. equities have been a far smoother ride than most of history. How do we define “smoother”? In layman’s terms: higher returns with lower risk. In technical terms, we can look at things like the Sharpe Ratio, which measures risk-adjusted performance. […]
Put these charts on your wall for reference the next time you think… All-time highs are a reason to sell… It’s “oversold” or “at support” and has to go back up… It’s “overbought” or “at resistance” and can‘t possibly go higher… Investors are rational and would never buy stock in the wrong company because of a tweet… A meme can’t lead […]
There are two types of investors: Pundits and Professionals… <> The Pundit thinks they know everything. The Professional knows that learning is infinite. <> The Pundit makes subjective predictions. The Professional makes objective assessments. <> The Pundit seeks self-promotion. The Professional seeks self-improvement. <> The Pundit exudes hubris. The Professional exudes humility. <> The Pundit […]
A 17,320% gain in 11.5 years. That’s what happens when you combine 3 turns of leverage with the greatest uptrend in history, the incredible move higher in the Nasdaq 100. The 3x Long Nasdaq 100 ETF ($TQQQ) was launched in February 2010. Since then it has advanced 17,320% (56% annualized) versus a gain of 890% […]
As children we’re taught that the shortest distance between two points is a straight line. Many expect investing to be the same, with high and consistent returns bringing you from point A (starting out) to point B (wealth). But markets don’t operate in the same realm as the physical world. There is no straight line […]
“But valuation doesn’t matter anymore.” You’ve probably heard that statement in some form or fashion over the last year as we’ve witnessed a rolling series of manias in markets like never before. And indeed it is true – at least in the moment. During a parabolic advance, sentiment and herd behavior easily trump valuation and […]
Here are the charts and themes that tell the story of the first six months of 2021… I. The Beginning of the End of Covid-19 The scourge known as Covid-19 started the year at its most prevalent level to date. But the bad news wouldn’t last long. Things were about to change, and change for […]
Here’s a list of the top 30 stocks in the S&P 500 over the past 30 years… What stands out? The unfathomable returns, a product of time and the magic of compounding. What’s lost in this graphic, however, are the many periods of excruciating pain that anyone invested in these companies would have experienced. When […]
What are high yield bonds? I don’t mean the textbook definition (corporate bonds with a credit rating below BBB), but how they actually behave in terms of risk and return. To explore this, let’s address some common questions surrounding the asset class also known as “junk bonds”… Question #1: Do High Yield Bonds Act More […]
You’ve heard the story before: Equity valuations are high… Interest rates are low…. Therefore, high valuations are “justified” by lower interest rates. Why? Some say it’s because stocks are simply the present value of their future cash flows. And lower interest rates (r) in the denominator of that equation should result in a higher present value, and […]
For 40 years (1980-2019), bond investors in the US earned a rate of return that outpaced inflation, and often by a wide margin: In the 1980s, 10-year yields moved from 10.4% down to 7.8%, and bond investors earned an annualized real return of 6.6%. In the 1990s, 10-year yields moved from 7.8% down to 6.3%, […]
Valuations in the US are high, exceeding all prior periods in history with the exception of the dot-com bubble (March 1998 to December 2000).1 The long-run implications of higher valuations? Lower future returns and higher volatility/drawdowns, on average (see recent post). The natural question that follows: what, if anything, can an investor do about this? […]