Brian, thanks for all that you do and running the best damn blog on the planet.
I was on the same flight as you and thought that the tall breaded guy was you. After we landed in Boston, I looked over to my buddy and he asked me if I thought there was a chance we we're going to make it. I agreed and thought that going out after watching Michigan win wasn't the worst thing in the world.
Hey I’m there with you about those types of professors. I think there’s a very fine line here. I’m on the fence about the “some woman” comment leaning towards not sexist at all. But the context of the conversation includes him saying he’d “go at it” in a pool with her and that she was “bitching” at him. Those 2 items lead me to believe his “that woman” comment was sexist.
Calling a male professor "some guy" isn't the same. Women have been discredited for years as not equal to males in the academic field. This just plays into that.
Not necessarily, but if you read the rest of it, he mentioned that if they were in a pool together, they would "go at it" with her and mentions he'd have to divorce his wife. That's the sexist comment.
Also the fact that he's downplaying an accredited professor as "some lady" is pretty damn sexist.
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.
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.
I'm not basing this on 12 months. I'm basing it on 40 years, using AAPL and MO. After 40 years, I'll have more money at the end of the day. Also, I'm allowing you to cherrypick the time period AND the securities. A better way to look at this is to look at the index. Russell 1000 Growth vs Russell 1000 Value
Using a 40 year horizon R1G has outperformed the R1V by over 700% cumulatively (7,140% vs 6,430).
I'm not saying value investing isn't useful. What I'm saying is that the growth cycle of stocks has extended far beyond what we've ever seen historically. 40 years ago, high growth companies such as AAPL, AMZN, MSFT, FB and GOOGL would have migrated to value within 5 years. That is simply not happening now, because like my initial argument stated, we are in the midst of a new economy where companies are making money in new ways. Mean reversion may happen, but I'm almost certain that it will be a new mean.
And I'm there with you, there is no one size fit all strategy. People in different life cycles will invest differently. My observations are on the market in general and why it's different now compared to the tech bubble.
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.
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.
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.
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.
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.
Recent Comments
Brian, thanks for all that you do and running the best damn blog on the planet.
I was on the same flight as you and thought that the tall breaded guy was you. After we landed in Boston, I looked over to my buddy and he asked me if I thought there was a chance we we're going to make it. I agreed and thought that going out after watching Michigan win wasn't the worst thing in the world.
I mean you are the guy that decided to start a whole thread in the first quarter about how Cade is terrible.
Hey I’m there with you about those types of professors. I think there’s a very fine line here. I’m on the fence about the “some woman” comment leaning towards not sexist at all. But the context of the conversation includes him saying he’d “go at it” in a pool with her and that she was “bitching” at him. Those 2 items lead me to believe his “that woman” comment was sexist.
Old habits die hard right? That is the exact reason why he deleted his Twitter. This would have been okay in 1971, but not in 2021.
Well he did say she was "bitching at" him.
Calling a male professor "some guy" isn't the same. Women have been discredited for years as not equal to males in the academic field. This just plays into that.
Not necessarily, but if you read the rest of it, he mentioned that if they were in a pool together, they would "go at it" with her and mentions he'd have to divorce his wife. That's the sexist comment.
Also the fact that he's downplaying an accredited professor as "some lady" is pretty damn sexist.
Anyone else feel like that should be a 25 point win at minimum? A lot of uncharacteristic errors, hopefully due to fatigue from a 1 day rest.
Rutgers vs Indiana playing for first in their division. Like we all expected.
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.
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.
I'm not…
Apology accepted.
I'm not basing this on 12 months. I'm basing it on 40 years, using AAPL and MO. After 40 years, I'll have more money at the end of the day. Also, I'm allowing you to cherrypick the time period AND the securities. A better way to look at this is to look at the index. Russell 1000 Growth vs Russell 1000 Value
Using a 40 year horizon R1G has outperformed the R1V by over 700% cumulatively (7,140% vs 6,430).
I'm not saying value investing isn't useful. What I'm saying is that the growth cycle of stocks has extended far beyond what we've ever seen historically. 40 years ago, high growth companies such as AAPL, AMZN, MSFT, FB and GOOGL would have migrated to value within 5 years. That is simply not happening now, because like my initial argument stated, we are in the midst of a new economy where companies are making money in new ways. Mean reversion may happen, but I'm almost certain that it will be a new mean.
And I'm there with you, there is no one size fit all strategy. People in different life cycles will invest differently. My observations are on the market in general and why it's different now compared to the tech bubble.
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.
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.
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.
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.
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.
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.