OT"markets can remain irrational longer than you can remain solvent"
The stock market is sooooo overpriced right now - specifically Nasdaq/Tech. Some of these companies (TSLA, SHOP,AAPL, SEDG,AMD,MSFT....) are trading at multiples that if they grew 20 percent every year for the next 15 years, then in 15 years they would be trading at a PE of 10. It is amazing the multiples that some of these tech stocks are trading at.
Especially the electric vehicle sector. Just a couple weeks ago, a small solar panel installer trading at 1.03 (ticker:SPI) announced that they were going to get into the electric vehicle business. The next day the stock shot up over 46 bucks for an intra-day high. Thats like 2 carpenters who specialize in remodeling bathrooms announcing they are going to get into the electric vehicle business, and becoming instant millionaires the next day because of the investments that pour in. TSLA, NIO, XPEV, LI, NKLA, WKHS - and all the new ones that are merging with existing shells to cut costs and time to market instead of IPO'ing - they are all so overpriced. Its like the .com burst all over again. An absolute frenzy trading on emotion and unreachable speculation.
We are in for another tech correction. There HAS to be one. This is too wild. Million dollar question is - when?
Im up about 80% YTD and i only had about 60% of my cash invested for most of the time. I now am down to about 30 percent invested and am looking to be all cash very soon. Ironically, right now i view the airlines and the cruises as probably the best investments, as they are the only sectors undervalued based on when the economy opens again. But the risk -can they stay afloat until everything opens?
October 5th, 2020 at 2:10 PM ^
Its like the .com burst all over again. An absolute frenzy trading on emotion and unreachable speculation.
Unless we go back to making blatant stock manipulation illegal and actually punish insider trading and fraud regularly, this is business as usual for the US economy.
October 5th, 2020 at 2:15 PM ^
I'm not going argue that these tech names aren't overvalued, but the core of this isn't really a stock market issue, this is a dollar debasement issue.
This will all end badly, but it will be a dollar collapse/hyperinflation issue, not a stock market issue. We have had the Fed keeping interest rates at nearly zero for over 12 years. That's insanity.
October 5th, 2020 at 2:34 PM ^
End badly for who? Boomers are now able to retire with the stock market at all time highs, housing market at all time highs, generated by low interest rates.
Recent college graduates are now entering an inflated housing market and a long bull market that would’ve seen a correction if not for the FED this year.
I’m in my 30’s and feel bad for recent graduates trying to start their independent lives now as they have it harder than I did.
October 5th, 2020 at 5:44 PM ^
I’m in my 30’s and feel bad for recent graduates trying to start their independent lives now as they have it harder than I did.
For sure... although... plus side is that y'all have (hopefully) 3/4-ish decades to dig out of whatever crash may be coming...
October 5th, 2020 at 6:11 PM ^
Right.
If there is a major crash in the next few years the narrative will quickly switch from how lucky the boomers have it to how unfortunate they are to have a massive downturn so early in their retirement.
October 5th, 2020 at 6:35 PM ^
If the market does crash and we experience a recession, the recent college grads will likely be hardest hit again.
“The 2008 recession further compounded the problem.
“The shock of unemployment translated into a 7 percent loss of earnings for baby boomers. Millennials lost nearly double that amount,” she writes. “And boomers saw significant recovery afterward. By 2010, their losses had already shrunk by 65 percent. Millennials didn’t see a comparable bounce back … [due to] limited “employment histories, little to no savings, and a vanishing social safety net.””
October 5th, 2020 at 2:12 PM ^
Valuations now are not comparable to where they were in 1999-2000. Additionally, in 1999, technology uprooting and disrupting virtually every industry was speculation, whereas now it is actually happening.
October 5th, 2020 at 2:13 PM ^
I think point about airlines is a good one. The US can’t let more than 1 of majors (Delta, AA, United, SW) go bankrupt, and even letting one die isn’t going to go over well.
October 5th, 2020 at 2:40 PM ^
A bit of a tangent:
For the last 3 weeks (post-Labor Day), 730K people have passed through TSA daily. Now, those aren't numbers like they usually are, but that's still 730K people a day on an airplane somewhere (the numbers are net of airport employees).
Also, there have been a couple studies that have noted that basically NO CV outbreaks since the spring are attributable to air travel.
I'm honestly surprised we haven't seen more of a marketing push from the airlines "it is safe to fly these days. Come fly with us."
------------
More on the TSA numbers:
(1) Last 3 weeks, average of 730K people daily. Last year for a comparable 3 week period, it was 2.29MM people daily. 31.9% of normal.
(2) The last 3 weeks of August (pre-Labor Day), average of 692K people daily. Last year for a comparable 3 week period, it was 2.35MM people daily. 29.5% of normal.
Quite a ways to go, but I do find the 29.5% to 31.9% increase a bit promising. I intentionally excluded time around Labor Day to not skew the numbers: comparing 3 weeks of "non-holiday periods" directly against each other.
October 5th, 2020 at 2:42 PM ^
Good numbers. I agree - encouraging.
October 5th, 2020 at 3:17 PM ^
That is encouraging, I hope it stays that way. I have thought about flying (just wear an n95), but don't know where to go.
Europe would be great to visit, but I don't think they are taking americans and I'm not sure anywhere out of the country is safe to book since a 2nd wave could get your plans cancelled. Not sure I'm brave enough to take the kids to florida, or really anywhere in the south since they've recently had the largest spikes. I'm guessing a bunch of things in vegas, NYC and California are still closed. So maybe go visit a national park?
I was considering booking a ski trip to northern michigan.
October 5th, 2020 at 3:28 PM ^
The good news about international travel is that airlines are giving you the full value of your flight in vouchers without change fees. The bad news about international travel is that no one is letting in Americans for the foreseeable future.
October 5th, 2020 at 3:21 PM ^
I think the trouble around getting back to normal is going to be around the business travelers.
I’ve read they make up only 12% of fliers (seems too low to me) but account for 75% of the profits (business class, last minute booking, non-stops).
With the quick adoption of Zoom, I can’t say I think business travel will ever fully return to the “norm”.
October 5th, 2020 at 4:16 PM ^
That makes a lot of sense. When I travel for work I fly local out of Traverse City and pay no mind to the ticket price. When it's on my dime I drive to Grand Rapids or Detroit to find a fare at 1/4 to 1/3 the price of local prices.
October 5th, 2020 at 4:32 PM ^
A few thoughts Nittany Fan...
I'm honestly surprised we haven't seen more of a marketing push from the airlines "it is safe to fly these days. Come fly with us."
Fly with us to where? And when I get there I have to stay in a hotel or AirBnB and I have to eat in restaurants. If wherever I'm going will let me in.
Quite a ways to go, but I do find the 29.5% to 31.9% increase a bit promising.
Let me see...an industry down 70.5% improved to being down only 68.1%. I'm sure that will create a stampede to buy airline stocks.
October 5th, 2020 at 5:12 PM ^
I flew to California a few weeks ago, stayed at hotels, an AirBnB, ate inside in restaurants (San Diego County), visited the beaches and the mountains.
Have a trip to the mid-Atlantic planned for next week. Same thing.
There are places to go.
29.5% to 31.9% isn't rocket growth --- but it's better than the alternative.
October 5th, 2020 at 11:09 PM ^
I flew this past weekend to NY to visit colleges with my daughter. Packed flight but it sure was strange to look at the departures board at LaGuardia and see only four remaining outgoing flights on American at 4 PM.
October 5th, 2020 at 2:13 PM ^
My favorite 2020 memory will be when the politicians all knew how bad Covid was going to impact the market before we did, and subsequently dumped all their stocks prior to the news and lockdowns.
October 5th, 2020 at 2:25 PM ^
honestly there are a lot of 2020 memories to choose from
October 5th, 2020 at 4:35 PM ^
My favorite 2020 memories will be the politicians pointing the finger at each other when they all did a lousy job. Right now I would vote for any politician who owns up to their own failures.
October 5th, 2020 at 3:50 PM ^
But I use blind trusts so I had no say in trading...it was just coincidence
October 5th, 2020 at 4:26 PM ^
That already happened! (Well, not ALL of them, I guess)
October 5th, 2020 at 2:26 PM ^
If you're young. Put it in Total Stock Vanguard Fund. Then don't touch that shit and then wait a while. Don't even look at the daily, weekly, or monthly fluctuations. Don't waste your money by investing in gold or other shit in case the economy implodes. If the low cost total stock thing doesn't work out and you need gold, we're fucked and have bigger problems. No one is gonna give 3 shits if you have gold if there is a total collapse. You'll want some guns though.
October 5th, 2020 at 2:30 PM ^
This.
I have been dollar cost averaging two shares of VOO every week for the last ten years. Every Friday morning I make coffee, put in an order for two shares at market price, and go about my day in ignorant bliss.
I realize you're talking total market and my ETF is SP500 focused, but the general principle is the same.
October 5th, 2020 at 2:37 PM ^
Yup, it's the best approach for most people and koalas. I used to DCA, but I've read that it makes no difference over the long-term. Lump sum actually might be better in most cases depending on how much time you have to work with and how often you can add funds, etc.
October 5th, 2020 at 2:43 PM ^
Yeah, I should rephrase. I lump summed a small lump 10 years ago and now am just on a rigid schedule. I enjoyed this article: https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-cost-averaging/
October 5th, 2020 at 3:23 PM ^
This x1,000,000. I jut auto-invest in the Vanguard Admiral shares for S&P and Large Cap. Expense ratio is something like 0.05%. Doing anything else is basically just rolling dice. Doing anything else and paying a money manager to help you do it is basically just rolling dice while simultaneously lighting $ bills on fire.
October 5th, 2020 at 5:51 PM ^
Co-sign all of the above! Unless you have the time, the knowledge, and enough need to justify the risk of market-timing; this is the best bet for most folks (including myself).
To be fair, I know a few people who have generated some overall very nice returns with smart day-trading; but you really have to know what you're doing, be well-informed, and well... fortunate.
Whatever you do, don't pay for a "manager-of-managers" fund... I used to work for a company that specialized in that; that's a horrible investment IMO.
October 5th, 2020 at 5:56 PM ^
Why not own the total market and other things ON TOP of your equity positions? Could be gold, could be bonds, could be bitcoin, could be commodities. You’re sacrificing a better portfolio just by taking the completely passive only US equities way out
October 5th, 2020 at 2:29 PM ^
I don’t buy any individual stocks but tend to use sector ETFs. Generally, energy, real estate, financials and utilities are the major sectors that are still notably below where they were before shutdown. Most of these record highs are being driven by tech (as you mentioned), but also consumer discretionary and staples.
October 5th, 2020 at 2:31 PM ^
Name some stocks to get into that will go up in the future please and thank you.
October 5th, 2020 at 5:46 PM ^
Almost all of them will go up in the future, then down in the future, then up in the future, then down.
Where they stop, nobody knows!
October 5th, 2020 at 2:33 PM ^
so my comments were cut off... and now I need to redo them.
I actually just wrote a paper on this and I don't believe we are in a tech bubble the same way we were in the early 2000s
1) Look at the Russell 1000 Growth. AAPL, AMZN, GOOGL, FB, MSFT. These companies make up 36% of the R1G. You have to go back 5+ years for the last time these 5 companies didn't make up the top 5 of R1G. These companies have staying power.
2) These companies have built their business using very little hard assets (AAPL maybe more than the others). What does this mean? Brain power is there overhead. No machines to replace.
3) These 5 companies have spent the past decade to forgo their earnings to grab an even bigger part of the future earnings. These companies can probably destroy any EPS estimates, but rather than keep those earnings in cash, they invest in their own company. Look at COVID and the balance sheets for these 5 companies. YoY as of June 2020, these 5 companies revenue, cashflow, EBIDA all grew. In a market event like COVID. What does that mean? If we equate this current event to a market cycle (recession, recovery), these 5 companies are making money in all market environments.
4) Because of new economy, the growth cycle has extended to the longest we've ever seen in history. Because of technology, companies are finding more and more ways to grow. Look at AMZN, 20 years ago could you imagine a company like AMZN getting into Healthcare? Or a company like AAPL getting into fitness? No, the technology wasn't there. Also, the core business of these companies are so profitable, it allows for them to take these risks in the first place.
5) Why invest in a dividend paying company when you can invest in a growth company that knows what to do with that money? I don't know about you, but I'd rather have the guys at AAPL take their earnings and invest in themselves, as I'm definitely not as smart as those guys.
6) Mean reversion only happens when there isn't a shift in the market. I'd argue that the shift in the market is the new economy. We are witnessing it now. I question whether mean reversion will happen.
7) Looking at PEs is hard. These companies reinvest so much into their business that it depresses their earnings. Look at AMZN. PE of over 80. Forward PE might be a better indicator.
The bubble here isn't the companies. Based on balance sheet, you can argue that they are more or less justified. The better argument is the velocity of money.
Also, investing in airlines and cruiselines is investing in a mature industry. What you are hoping for here is mean reversion. We're not even out of COVID yet, you probably have time to invest in these industries. There are likely opportunities elsewhere for the short medium term that will do way better for you than a market that hasn't even started to recover.
October 5th, 2020 at 2:41 PM ^
Here's a +1 to double your mgopoints.
October 5th, 2020 at 3:00 PM ^
Thanks.
I just commented on my hope that correction delays till 2070. If you're right, I'll pretend that was my prediction.
October 5th, 2020 at 3:19 PM ^
I'm there with you! Obviously 2070 sounds like hyperbole, but what is stopping these companies? I see one thing, the government coming in and tell them that they are too big. But the thing is, these companies aren't monopolies in the traditional sense. How many cloud companies are out there? Probably in the hundreds. It's just that MSFT has literally BUILT cloud based solutions. MSFT created that economy, but they aren't the only players in the game. There are so many competitors to AAPL. These companies have competition, it's just that these companies not only have a head start, they continue to build the engine to move even more ahead.
So 50 years from now, in 2070, without government intervention is it really that farfetched to believe that there will only be a handful of companies providing services (think Wall-E)?
And again, I'm not saying any of this will happen, but 20 years ago, if you came to me saying what I'm saying now, I would laugh you out the door. Now, I seriously have to consider this as a real future.
October 5th, 2020 at 9:05 PM ^
I'll bite...what's the best play for the next year? 3 years?
October 5th, 2020 at 11:11 PM ^
I am no trade Genius. But people get in trouble when their market narrative, time horizon, and trades don't match. What is a good trade for one person could be a horrible trade for another. Much easier said than done. But i hear if you trade via an I-phone during a pandemic you can't lose.
October 5th, 2020 at 11:12 PM ^
I am no trade Genius. But people get in trouble when their market narrative, time horizon, and trades don't match. What is a good trade for one person could be a horrible trade for another. Much easier said than done. But i hear if you trade via an I-phone during a pandemic you can't lose.
October 6th, 2020 at 7:20 AM ^
It all really depends on your specific time horizon. Do you need the money for a down payment after 3 years? If yes, you probably need some risk free asset.
the best play is some sort of diversified fund. Many here suggest vanguard total stock market fund, or SPY. Based on my analysis above about balance sheet, I’d argue that you want to get rid of some of the dead weight of the S&P. I would look into an ETF like MGK. You get diversification along while getting rid or some of the poor performers of the S&P.
but again, I’m a random guy on a sports forum. Please do your own research before infesting.
October 5th, 2020 at 9:34 PM ^
If the admin changes, I would bet that Amazon and Google get broken up. Even without a change, Facebook might have to divest IG and WA. Google might have to spin off some of its major revenue assets in online advertising. Everyone wants Bezos's head on a platter. Apple will probably be fined from its in-app purchasing rules, but market saturation seems to be a bigger issue.
Honestly, I think Microsoft and Apple are in the best position of the FAANGM companies in the short-term. But Google and Amazon are smart enough to figure out how to side-step the antitrust landmines.
October 6th, 2020 at 7:25 AM ^
You know what, I’m no political expert, but last I remember Obama was in big tech’s pocket. Look at the money going into Biden’s camp. A lot is coming from Big Tech. Biden might play it up for political theatre, but ultimately I think things continue as is.
I do agree with you here, the major risk to these companies is government intervention. Also agree with you on MSFT and AAPL compared to the other 3.
October 9th, 2020 at 12:32 PM ^
You're a new user so you're probably not familiar with the regs but please try to avoid the political responses, even if they're measured. That goes for the people you're responding to as well. It's too hard to moderate this message board; I need those of you who are capable of self-moderation as examples, not venturing over the line because others are doing so.
October 5th, 2020 at 3:29 PM ^
to a hypo.... invest $5000 in each MO and AAPL on 12/12/1980. Reinvest dividends in MO all the while when AAPL didn't pay dividends.... for 39 of the last 40 years your MO outperformed, by a sizable margin. Not until 2019 did AAPL surpass MO.
Then you'll understand the value of reinvesting dividends.
October 5th, 2020 at 3:45 PM ^
Are you telling me that we are in the same market environment we were 50 years ago? Because I don't think we are. Look at the Russell 1000 Value vs Russell 1000 Growth returns since the great recession. 10 year annualized returns as of 9/30/2020
R1G: 17.24
R1V: 9.94
That's roughly 7% better per year. If you invested $100,000 at the start of 9/30/10 you would have 391,000 in the R1G compared to 158,000 in R1V. This is adjusted for dividends.
Dividends worked when companies didn't have other growth areas to invest in. Dividends work when the companies have no more ideas. The new economy blows all of this away.
Sure 50 years ago, you may have been better off investing in a high yield equity company. But I'm betting the next 50 years are going to look drastically different than 1980 - 2020.
Also you just made my point. AAPL has outperformed MO, even without paying a dividend in 2019.
October 5th, 2020 at 3:54 PM ^
Warren Buffet, the king of value investing, just did something he said he would never do. He took a major stake in an IPO, SNOW.
Guys smarter than me are changing their views. I'm just following the trend.
October 5th, 2020 at 4:09 PM ^
39 of the last 40 years.... reading comprehension isn't a strong point for you, is it?
you might realize you and warren buffet probably don't have the same objectives for a portfolio. if his last 15 investments imploded his life wouldn't change a bit, his future is assured, he will never need for anything, financially. if you're in the same position, lucky you. my guess is you aren't.
October 5th, 2020 at 4:25 PM ^
See you're a smug asshole, so I'll enjoy educating you. Are you telling me that MO has outperformed AAPL 39 out of the last 40 annual periods? That is simply not true. So now I have to assume you mean on a cumulative basis. So in 2019, over the past 40 years, AAPL has outperformed MO. Full stop. That's what you are telling me, right? Years 1-39, MO was ahead, but in year 40, AAPL pulls ahead. Again, this proves my point. At the end of the day, if I invested in AAPL, 40 years ago, I'd have more money than if I invested in MO.
And way to ignore my other point about the past 50 years looking like the next 50 years. Tell me again, why are you bringing up a 50 year track record when evidence points to a shift in the economy and the way companies make money.
October 5th, 2020 at 4:28 PM ^
The fact that Buffet can have his next 15 names implode is irrelevant. You think that's his point? He's taking all this risk because he can? A guy as smart as Buffet? No, he understands the shifting economy. Every investment he makes is calculated. Especially the size he put into SNOW.
October 5th, 2020 at 4:34 PM ^
my apologies if i came off as smug. not apologizing for being an asshole. if you are going to base your investment philosophy based on the performance of any investment over the last 12 months, I'm not sure that's a sound strategy, it was a pretty abnormal time.
i've been in this business a long time, decades. i read and study it on an ongoing basis. Yes, MO has out performed AAPL for 39 of the past 40 years, on a cumulative basis. if you read what I suggested, investing 5,000 in each on the day of AAPL's IPO, i would expect you've have understood that.
it's always different......
no strategy is correct for everyone, people have different needs, objectives, etc.
i wish you luck.