I hope this will be my last post on this subject

Investment Analysis Clubs Saul’s Investing Discussions
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To the members of the board,

I hope that this will be my last post on this subject. Here is how I see it. While those of us who have invested in the cloud revolution, by investing mostly in SaaS companies, are up by ridiculous, even indecent, amounts, with portfolios having tripled in value or more in the past year and eight months (up 200% or 250%), others, being more cautious, have invested in value stocks, or conventional companies, or S&P indexes, and have gains of a tenth or less of our gains over the same time.

They see themselves as meritorious, having been “good boys,” and having followed the rules of caution that have been preached at them for years, and thus feel cheated at seeing us “bad boys,” who didn’t follow the rules, harvesting these huge gains. “Where’s the justice in that?” they think. “We’ve been good and followed the rules! Why do they get rewarded?” Their only hope is to see us “punished” by being brought back almost to their levels of small gains, by an outrageous Bear Market, which I think they almost hope for. So each time in the past couple of years, when the Tech Market has sunk 10% to 15% in a couple of weeks, they come to the board and cheer and say, “We told you so!” but then they are confounded a week or two later as the market for our stocks resumes its rise. It must be very frustrating for them. I really do understand their pain. They have not seen their “sane and sensible” investing being rewarded, while what they see as our “risky” and “naughty” style investing has been extremely and hugely rewarded. There’s no justice in the world. Some of them have been forecasting an imminent Bear for eight or ten years now. Of course it will come, but who knows when.

As I have written many times, I advise you to keep enough money aside so that you can ride out a Bear without having to sell stocks at the bottom for living expenses, and just sit back and enjoy this lovely ride for as long as it lasts.

Best,

Saul

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Exactly and whilst those less fortunate or just ultra careful as in risk adverse, read the KB three times and the associated links as I just don’t believe you have ever done so, or probably gave up, as it’s all there, including multiple times how it doesn’t work for everyone and always put cash aside for quite a few years…

We are big boys here and understand what could and no doubt will happen at some stage. You takes your money and makes your choice. Until then…
Zzzzzzzzzzzzz.

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…Of course it will come, but who knows when…

Who knows but it will be about the time people quit bragging about their internet honest to god profits. If it’s on the web it just has to be true. Never seen that before. :slight_smile:

Honest to goodness you have no idea how much real money I have in this market… :slight_smile:

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They see themselves as meritorious, having been “good boys,” and having followed the rules of caution that have been preached at them for years, and thus feel cheated at seeing us “bad boys,” who didn’t follow the rules, harvesting these huge gains. “Where’s the justice in that?” they think.

Good vs Bad… Now you are framing this like politicians.

I have observed how any views that doesn’t share your enthusiasm, you point that they are short, etc and posted about them, disagreement is what makes market.

I like this board for its singular focus on growth. There are going to be, time to time, folks expressing doubts and concerns. If I may, I would encourage you to view them in a positive way.

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Kingran,

I do not necessarily disagree with you, as long as you are not anchoring on the internet bubble that was puffed up by more than just the internet, but also Y2K paranoia, and the Fed paranoid by printing money at an extremely rapid pace, not to mention new stock option rules that changed how executives are compensated, which favored stock options vs. how they were compensated before.

No, we are not even close to that, nor to the financial panic that was actually less severe than the internet bubble. And yet from the financial panic every quality company has had incredible returns, thus the cut by 50 or 75% was transitory and hurt those who panicked and did not understand the fundamentals.

I believe that the present but out value of Zs is probably between $4 to $6 billion, whether or not the market crashes, even if it went down to $3.5 billion, that is less than 50% ad not catastrophic, but that is worse case scenario. And Zs will recover as the economy does.

I believe that MongoDB is undervalued in regard to a buy out, whether or not the economy collapses. Far from being catastrophic, and yes Mongo will recover when the economy recovers.

Then I gave Teladoc a thought. Teladoc is one of those companies that may pick up great marketshare and revenues (I always think of Exodus from so long ago for those who were around) but that may have a difficult time creating a money printing machine. Such a company has a less than certain buy out value (relatively speaking), and a smaller chance to recover its value post crash, as such crashes tend to toss out the wheat from the chafe.

In any event, it makes much better sense to speak aut specific companies instead of generalities in regard. And as I stated before, why take out the umbrella on a sunny day, with no clouds in the sky just because you know it will rain, someday. Enjoy the sun, do sun activities, and when it rains, take out the umbrella and deal with it in good course.

Tinker

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. There are going to be, time to time, folks expressing doubts and concerns. If I may, I would encourage you to view them in a positive way

It’s the same people with the same concerns, quarter after quarter. They bring up their concerns about how well everyone is doing, but never talk about what they are investing in or a company that they think is great. If asked what they have its usually a noncomittal or index funds. This board is for growth stock investing and people that invest in Reits, index funds, or dividends are really not going to understand this board. While disagreements may make a market, they were not talking about generalizations. As I have said before, anyone that is bringing up their concerns please give me a time line of when this next drop is going to happen. As Saul has said, keep some cash for a drop if you are not still working, but if you are still working you are trying to grow your portfolio so that you can have a great retirement. I know people that are still holding large sums of cash from the last drop, that are waiting for the market to go down. 9 years ago and they are still waiting, some really concerned, smart investors.

Andy

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I always think of Exodus

A friend of mine lost a great deal of fortune… And I lost mine on webvan…

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Saul,

People are jealous…plain and simple…

They think that since you are retired and have no other source of income, that your top 10 stocks should be VZ, IBM, XOM, CVX, PG, KO, PFE, CSCO, MRK and JNJ.

They want to make you an example of why one would never invest 34% in two stock positions, or why one should never hold a concentrated portfolio, etc…

They want to brag about having 10-20% in cash to spend when a Bear Market hits…

They don’t think it is fair that they spend so much time with their valuation models determining intrinsic value vs market value and waiting for the price to reflect their cigar butt investing…

Ignore the naysayers and continue to be a trailblazer…

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This board is for growth stock investing and people that invest in Reits, index funds, or dividends are really not going to understand this board.

Disagree. I get that this board is pure growth but someone who diversifies cannot understand growth is very simplistic view.

There are many folks who don’t want to win the game twice… just saying.

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Ajm,

I asked you a simple question that you should have all the answers to and would be very helpful to the discussion and yet you respond with “pride before the fall?”

I must ask then, why are you even here? I gave you the respect to ask you to contribute and join the conversation. You are clearly not to join in and enrich our discussion.

You are on ignore, and I suggest anyone else here who wants to discuss things seriously do the same. Obviously Ajm is a fl. amer (as the word is apparently otherwise considered a profanity, but not at all, it means somewhere here just to get their kicks or to sell a short or to promote a long from some penny stock with no legitimate intent to help any of us).

More accurately of course would be 125% return on investment. How has your not investing in Mongo done for you?

Good bye.

Tinker

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Saul, your post is not quite fair: you choose to interpret the discussion as being the result of envy, throwing in a bit of crowing and schadenfreude for good measure.

The subject under discussion is risk.

(Ch.) ‘I would now like to introduce our new Chief Investment Officer and ask him to address this Finance Committee of the Lowmead Old Folks Home Foundation about his plans for the forthcoming year. Please go ahead Jack.’

(CIO.) “Thank you. I see it as my fiduciary duty to advise that we should invest our charitable donations much more conservatively in future. We are lucky not to have been punished for the speculative stuff we have held in the 150 years of the Foundation’s existence to ensure we can always meet payroll and maintain the high standard of care home for which we are renowned whatever the circumstances. Instead we should be prepared to act far more sanely and sensibly in these modern times. I will recommend the Foundation should now invest the vast majority of our funds in very high growth, smallcap business software companies without earnings, paying absolutely no attention to price. This new, more cautious approach will make ridiculous, even indecent returns, more solidly assuring the Foundation’s future and delivering…” (etc.).

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I would make the point that ‘naysayers’ who believe that Saul’s board, approach to investing and the companies which are discussed here are fascinating and fully worth devoting maybe 8% of a portfolio to, are not ‘naysayers’! Quite the opposite.

To define terms, I am a naysayer about people with little investment experience who are mad enough to think they have found the Holy Grail and need do nothing else. I share the view that they are probably well-represented on this board’s readership. Unfortunately.

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Mongo will recover when the economy recovers.

This is an important part of this issue. If one is invested in the right companies, there may be a scary drop in a market downturn, but there is likely to be a recovery and continued growth afterwards. Trying to time that swing, getting out before the big drop and getting back in at the low, while a very appealing idea, is not something I have ever seen a convincing theory of how to do.

One can, of course, be invested in the wrong company. A friend of mine was heavily invested in Bank of America before th 2008 drop. It, being a part of the reason for the drop, was very, very slow to recover.

The other issue is that we keep focusing on 2000 and 2008 … but virtually all market corrections are smaller and briefer and consequently less painful. We have no reason to expect a repeat of either since both were the result of fairly unique conditions, not just regular up and down of the market.

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Kingran,

Disagree. I get that this board is pure growth but someone who diversifies cannot understand growth is very simplistic view.

There are many folks who don’t want to win the game twice… just saying.

I see your posts on the Reit boards and the Dividend boards. You don’t bring high growth stocks to those boards, so why would you think you have the right to define this board? I have been on this board since Saul started it and yes it has evolved but it was always a growth board. Saul defined it and out of respect to his wishes, I follow his lead. The rules that Saul has set up on these boards, no politics, growth stocks, discussing stocks and businesses, has lead to a very successful board and highly focused. The reason we are all here is because of Saul, it’s his board, so watch, participate, and learn.

Andy

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Strelna,

To define terms, I am a naysayer about people with little investment experience who are mad enough to think they have found the Holy Grail and need do nothing else. I share the view that they are probably well-represented on this board’s readership. Unfortunately.

I don’t think you have a clue of what you are talking about. You have made up this fantasy in your mind Unfortunately. Most of the people on this board love investing and talking about growth stocks, just because they do that on this board, does not mean they are not on other boards. I would say before you make statements like this you might want to have facts to back them up.

Andy

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The other issue is that we keep focusing on 2000 and 2008 … but virtually all market corrections are smaller and briefer and consequently less painful. We have no reason to expect a repeat of either since both were the result of fairly unique conditions, not just regular up and down of the market.

We’re brewing our own set of unique conditions, though. Big stimulatory tax cut in the 9th year of an expansion has kept the market rolling, hitting sky high valuations seen only once before (per Shiller S&P 500 PE-10). Meanwhile trade war tactics are hurting companies in many sectors, the deficit is shooting past $1 trillion, and the government is deregulating like mad, while the little guy is doing a little better, with unemployment very low, but wage growth and tax cuts have been anemic for the lower-middle class on down, so demand growth may be limited. Seems like a bubblicious recipe to me. Could percolate on up for a year or two but the crash will come and it won’t be pretty.

Glad to see people making a killing on hot stocks/great companies as the bubble ascends. Saul stocks might keep zooming like mad for a while yet. Best of luck to all the investors on this board! If there are those among you, as I suspect, who have made some pretty serious coin on these stocks, and maybe on crypto, but do not have other significant, diversified financial assets … please do heed some advice to set some winnings aside into other productive asset classes than US stocks. A chunk of Vanguard ex-US Global Stock Index would be a nice balance against a US tech dominated portfolio. Rebalancing a portfolio between different asset classes is a way to automate a buy-low/sell high mechanism long term, and can ensure that your portfolio survives an intense bear market.

Rock on!

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You don’t bring high growth stocks to those boards, so why would you think you have the right to define this board?

I don’t discuss REIT stocks here, only the stocks that are discussed here. I have not defined anything. On the other hand you mentioned people who invest in other asset classes cannot understand “high growth” investing, which is what I disagreed.

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We’re brewing our own set of unique conditions, though.

Pretty much every recession (and boom) is unique to one degree or another … in particular, the depth and speed of the dip, the duration, and the rate and speed of the recovery in addition to the precipitating causes. Point being that there is only fear and speculation to expect anything like those two prior events to happen again.

As for Shiller, changes in GAAP make current numbers poorly comparable with numbers in earlier years so drawing any conclusions about “sky high valuations” is very dubious. We have lots examples of companies that grow and grow and grow without producing much in the way of GAAP earnings so clearly this is also going to shift the environment.

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Saul,

Your last line is key. It’s what makes the doom and gloom posts irrelevant.

if we invest in truly great companies, live below our means, and have money set aside, we can withstand down markets and stay invested until our great companies come out stronger on the other side.

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Their only hope is to see us “punished” by being brought back almost to their levels of small gains, by an outrageous Bear Market, which I think they almost hope for.

I’m not sure what your point is.

Do you think:

  1. There’s not going to be another big bear market?

  2. You will be able to predict it in advance?

  3. Your stocks will somehow not go down - A LOT - during that bear market?

Because all I am saying is that:

  1. There will be another big bear market, and probably relatively soon, given that recessions always trigger bear markets (well in advance) and that the economy has grown for about 9 years now

  2. You (or anyone) probably won’t be able to time that bear market

  3. Your stock portfolio is likely to go down a lot, even if the companies in it will end up performing (in terms of their business development) as expected over the next decade

I am not worried about people who sit on big gains. What I’m worried about is are people who get into the market now, or went in just recently. I want to make sure that they understand that a drawdown of 75% on tech stocks that have run up a lot is not outrageous and unrealistic. It’s NORMAL. It’s what you should expect. And if that 75% drawdown is “real money” (vs. paper gains) please be sure that you can ride it out. And understand that some of these stocks will inevitably fall to zero, eventually. This is the tech sector. Among its growth companies, there are no sure things. Do not ever delude yourself that there are.

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