Please be positive and upbeat in your interactions, and avoid making negative or pessimistic comments. Instead, focus on the potential opportunities.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 25
Benzinga reminds Warren said the market valuation at 140% of GDP is “playing with fire”.
As we proceed at valuations much higher than THAT—cash equal to stocks seems a pretty rational. I would suspect cash will continue to build here.
I remember 1999 very well. I felt like a complete idiot holding this stock. Everyone around me was seemingly getting rich and the headlines everywhere: Warren’s old & out of touch. Does he know the Internet is the future..not soft drinks and razor blades? That’s right 25 years ago Warren was too old and out of touch!
Now, with a BitCoin lover heading the SEC, meme stocks, free trades etc we may be in midst of a prolonged drunken party—that we sit out. Back in 1999, I survived this by turning to every very smart long term investor I knew. TexIrish here was among that group. We all shook our heads—and I sat tight because the people I truly respect— confirmed I/we were doing the right thing. When it blew up, Berkshire surged. We made a ton of money in a terrible market. But it was very challenging and lonely.
Prepare for the tough part of this exercise. Remember Charlie Munger reminded us of the brilliance and difficulty of his demand “Just hold the GD stock”. Much more difficult than you think. Few can do it.
No. of Recommendations: 49
“ Prepare for the tough part of this exercise. Remember Charlie Munger reminded us of the brilliance and difficulty of his demand “Just hold the GD stock”. Much more difficult than you think. Few can do it.”
Glad you stayed disciplined LTB and navigated the tech bubble quite well. OTOH, as a young investor who was finally making reasonable coin, I could not resist the sirens and felt the Envy, watching others make easy money. So I switched up from sensible Fidelity funds like Fidelity Contrafund and plowed half my assets into their Biotech & Tech funds which subsequently crashed. Looking back, it was a real blessing to happen in early adulthood and motivated me to dive in to understand the process of real valuation and real investing before being enlightened by Warren & Charlie.
Had I known of investing boards back then, who knows, it may have saved me from my own worst enemy, myself. Lesson learned though!
Thank you Manlobbi for gifting this community and site for all to use and tap into all of its wisdom. It has saved young, and seasoned investors alike, a lot of hard earned money and made us all wiser.
No. of Recommendations: 3
Benzinga reminds Warren said the market valuation at 140% of GDP is “playing with fire”.
Which GDP exactly? 50 years ago, when most US companies were US companies, perhaps only US GDP. But today, where some of (most of?) the largest companies are multinational, perhaps some portion of other GDP should be considered in this calculation?
No. of Recommendations: 15
50 years ago, when most US companies were US companies, perhaps only US GDP. But today, where some of (most of?) the largest companies are multinational,
The change is much smaller than most people suppose. Large US companies have always been exporters, even 50+ years ago. IBM, anyone? For example 27% in 1992 vs 29% in 2019 is not exactly a night and day difference.
Meanwhile, there is an offsetting change...revenues of non-US firms firms inside the US.
Jim
No. of Recommendations: 2
Glad you stayed disciplined LTB and navigated the tech bubble quite well. OTOH, as a young investor who was finally making reasonable coin, I could not resist the sirens and felt the Envy, watching others make easy money. So I switched up from sensible Fidelity funds like Fidelity Contrafund and plowed half my assets into their Biotech & Tech funds which subsequently crashed. Looking back, it was a real blessing to happen in early adulthood and motivated me to dive in to understand the process of real valuation and real investing before being enlightened by Warren & Charlie.
I think I've seen this same post (or something very similar) regularly for the last twenty four years. I think it needs a name. I suggest "The annual double-down." We're behind now boys but if we keep doubling the bet eventually we'll come out on top. Graham commented in his book (and Buffett took it to heart) that tech wasn't investible because the companies need to reinvent themselves every five years. That was before tech companies benefitted from massive network effects in their businesses. The principle of not paying more than a stock is worth remains true today but eliminating tech companies from consideration is a mistake.
No. of Recommendations: 2
>>50 years ago, when most US companies were US companies, perhaps only US GDP. But today, where some of (most of?) the largest companies are multinational,
The change is much smaller than most people suppose. Large US companies have always been exporters, even 50+ years ago. IBM, anyone? For example 27% in 1992 vs 29% in 2019 is not exactly a night and day difference.
Meanwhile, there is an offsetting change...revenues of non-US firms firms inside the US.<<
More basically Warren made the comment about "playing with fire" at 140% of GDP when US export numbers were quite high--I believe the comment was made 16-17 years ago. Probably within 1% of today's numbers. And with the tariffs promised-- exports could easily wind up LOWER than when he made the statement. And we're at 200%.
No. of Recommendations: 3
The change is much smaller than most people suppose. Large US companies have always been exporters, even 50+ years ago. IBM, anyone? For example 27% in 1992 vs 29% in 2019 is not exactly a night and day difference.
It was just a passing thought, not something I investigated at all.
But if you look at how GDP is calculated - GDP = Consumer + Govt + Inv + (Exp - Imp) then if we have a trade deficit, that subtracts from GDP. Furthermore, my point (I think) is that if a company builds a bunch of stuff in Asia, and sells much of that stuff in Asia, then none of that gets accounted for in GDP, yet the profits from that activity [eventually] flow to the company in the USA.
So, while IBM (and all sorts of other companies) exported a bunch 40-50 years ago, they didn't make all that much stuff outside the USA to be sold outside the USA. That is in fact the lament against globalization, that it hollowed out the USA's manufacturing sector.
Meanwhile, there is an offsetting change...revenues of non-US firms firms inside the US.
Great point! All those non-USA firms contribute to GDP, but they are listed on an external stock market (ignoring ADRs for now), and the profits flow to there.
It's an interesting discussion. It would be good if we could at least see the order of magnitude of the numbers. If 50 years ago, 5% of total US stock market earnings came from overseas manufacturing (someone else's GDP), and today 20% of total US stock market earnings come from overseas manufacturing (someone else's GDP), then we could adjust the numbers accordingly.
No. of Recommendations: 9
The principle of not paying more than a stock is worth remains true today but eliminating tech companies from consideration is a mistake.
A mistake for an individual investor or a mistake for BRK? I'm happy if BRK sticks with what they are good at. I would no more buy BRK looking for speculative new tech investments than I would go to Paris looking for good Mexican food.
No. of Recommendations: 3
I think I've seen this same post (or something very similar) regularly for the last twenty four years. I think it needs a name. I suggest "The annual double-down." We're behind now boys but if we keep doubling the bet eventually we'll come out on top..... tech companies.
We? Maybe you. I am not. My since decades never below 60% of net assets in Berkshire not only did very well but gave me the ability to sleep well while playing with other stocks and speculating with options. Would Cathy's ARKK, the Nasdaq or even (today's) S&P give me the same good sleep? How much is that worth in $ or %?
No. of Recommendations: 2
We're right at the beginning of a whole new set of technologies being developed in the world. Wrong time to think the money in tech has already been made.
No. of Recommendations: 4
We're right at the beginning of a whole new set of technologies being developed in the world. Wrong time to think the money in tech has already been made.
I agree. I believe the key is in finding those who will rack in the money. Not those who are at the forefront of developing the technology, but those who provide the bucket and shovel. I'll focus on coattailing those enablers.
No. of Recommendations: 10
Captkerosine: Wrong time to think the money in tech has already been made.
palmersq: I agree. I believe the key is in finding those who will rack in the money.
I rather adhere to the old adage "If you've won the game, stop playin".
With my interpretation: "If you've won the game, stay with what you trust most to keep what you have".
Good luck for both of you.
No. of Recommendations: 7
^^The principle of not paying more than a stock is worth remains true today but eliminating tech companies from consideration is a mistake.^^
Tech investing is (almost) the new railroad investing. The network effects can be almost as strong. Sure, the tech moats are finite in durability, unlike railroad, however they also can expand earnings (draw more income from he same moat) at relatively low cost because of their non-physical nature.
No. of Recommendations: 0
Good luck for both of you.
Thanks. Good luck to you too. We'll look back in 3 - 5 years to see how it would unfold.
I much prefer a market crash or a bruising bear market. It would make it so much easier to find bargains. Yet I have no consistent track record of being able to predict near term market behavior in any degree of accuracy. I can only focus on finding good COMPANIES which I judge are selling at reasonable price. I normally pick 5 - 10 stocks in the entire market universe to put 90%+ of my investment money.
p.s. mungofitch still sees DG as screaming bargains (I'm not taking a view on whether it'll be eventually right or wrong). So should one stays out of the "overpriced" market until market valuation under X% of GDP (choose your number) or dive in for the bargain prospect?
