OT - Bert's take on the markets

Bert sent out an update to his subscribers which seemed very sensible and reassuring to me. I asked his permission if I could post substantial parts of it on this board and he kindly agreed. Let me say again that anyone in these high growth stocks who hasn’t sprung for the trivial price of a subscription to his Ticker Target is insane, as the cost is irrelevant compared to the investing ideas and words of wisdom you receive. I feel the same way, by the way, about the Motley Fool Rule Breakers and Stock Advisor. All you need is for one idea to click to pay for 50 years of subscriptions. (For example, I bought Shopify when they recommended it two months in a row in 2016, and it had quintupled in two years when I sold it. Compare THAT to the cost of a subscription!)

And of course try to restrain yourself from responding on the board! If you just have to say something about it I don’t mind you answering off-board directly to me.


Here are Bert’s words, lightly shortened and edited by me:

Last week was obviously the worst of the year, both for our portfolios and for the stock market as a whole. One thing to note in this kind of correction/bear market is that there has been no real place to hide. About the only place to hide has been in utilities or in cash, and hanging out in those kinds of assets implies a sense of market timing that I simply do not have and am unlikely to obtain.

I wrote earlier in the week about my thoughts on the outlook for the operational performance for the (growth) portfolio companies in the event of a recession. I will suggest that the share price performance lately has become completely disconnected from the operational outlook for these companies.

I have been through these periods of cognitive dissonance on various occasions. They are extremely stressful and can lead investors to throw in the towel. In the short-term stock prices are determined by supply/demand criteria, and there has been lots of supply and negligible demand from institutional buyers.

I am indebted to one subscriber for some of these comments that are reprised from a strategist at Raymond James. One factor that is weighing on stocks is that 150 hedge funds are closing their doors on December 31st. In addition, even hedge funds that are continuing have a 6-week withdrawal window that opened on 11/15.

Many hedge funds have materially under-performed this year. They were caught flat-footed by the rally in the first part of the year, they helped make the highs in the summer and have now been wrong-footed into the correction. In addition, there has been a brisk level of mutual fund redemptions coupled with tax loss selling… The global political instability, the fear of global recession and basically the fear of fear itself, has led to a crippling lack of confidence and risk taking on the part of portfolio managers. In turn, this has led to self-reinforcing “risk-off” trades, almost regardless of recommendations or presentations or valuation paradigms.

How does this end? One thing that has happened already is that Fed Governors have taken notice of the error of their latest moves. The New York Fed Governor, John Williams remarked that the Fed is open to rethinking rate hikes next year. He also suggested that the Fed would be listening to markets. And markets have spoken quite loudly. The fact is that the preservation of healthy capital markets, while not an explicit Fed mandate, is necessary in order to maintain full employment and economic growth. And most of the Fed Governors recognize that markets that are in disarray and capital flight are not healthy. The unwinding of the Fed’s balance sheet at $50 billion a month (Quantitative Tightening), makes no sense except to those wedded to some static view of the world. I think the idea that the Fed will not take reasonably bold steps to reverse policy errors is off base. I believe that the Fed Board will swing around to a far more accommodative policy shortly.

The other factor that is happening is or course that valuations are compressing at a furious clip. Not to restate the obvious, but an entity that is enjoying rapid growth and which has seen its share price fall 25%, is now selling for half the valuation or less that it had just a year ago.

Markets are made of the constant struggle between fear and greed. While fear is in the ascendant at the moment, the operational performance of high growth companies will be at levels that ultimately change the feelings of portfolio managers. Hedge funds are paid to invest and not to hold cash. And with the long bond yield backing down to just marginally above the inflation rate, holding cash is not a real alternative. At some point, holding low risk, low yield securities will give way, as it always has, to a thirst for better returns. At the moment, high growth names are seeing negative relative strength because that is where hedge funds have been going to raise capital, and thus that is the trade by quantitative funds who explicitly look for anomalies to trade against.

One thing I think worth noting. This is not the tech panic of 2000 or the financial crisis of 2007-8. The companies in the IT sector are real… They sell real things to normal enterprises. And they get paid cash to do so. They have a strong gross margin profile. And, the highest growth continues to go to companies with the most innovation. And there is no real asset bubble that is oppressing bank balance sheets. Residential real estate has seen some leveling off in terms of its value, but the kinds of financial misfeasance that broke bank balance sheets 10 years ago is not to be seen.

I have little doubt that most of you have seen your portfolios contract in a painful fashion. I know that has happened to me. And I don’t have the kind of second sight that might allow me to set a time and level for a turn-around. But I know that bottoms are made at times of disgust, feat and discouragement. And I have seen some of that already.

I am a long-term investor and I do not try to time the market. Markets will fluctuate. Painful as this has been for subscribers, and for me, it comes with the territory of investing in higher growth names. I try to find companies for you that have extraordinary prospects over the long term because of their disruptive technologies and market position… I strongly advise patience and fortitude in these frustrating times. I do not think I am a Pollyanna or that I am ignoring real risks. The Fed may not behave rationally. Some misguided government policy may lead to a problem that proves to be intractable. But that said, the IT sector is on sale now. The sale might last a bit longer. I really can’t foretell the specific event that will break the pessimistic, self-reinforcing cycle. But markets are eventually rational, even if that is not totally visible at this point.


Hi Saul,
Bert’s thoughts are very interesting. I think you finally talked me into subscribing to his letter. I had no idea so many hedge funds were closing shop. The failure, from their clients perspective, must have been spectacularly bad. Good argument to manage your own money, eh? To me the pull back isn’t a huge deal. I’ve been hear before. I too think this is not the tech panic of 2000 or like the 07 - 08 financial crisis. In 2000, for the first and only time in my investing career, I completely bailed on stocks, and placed everything I had in TIPS for two years. I did that because both the Fortune 500 company I was leaving and the Fortune 500 company I was moving too had replaced most of their hardware and would not be buying new hardware for a while. They did that because they had a healthy concern about Y2K. Now a days, that seems a bit like a hysteria, but they were dead serious about it. My point of view was if stodgy companies like Clorox or Kimberly-Clark felt that way, many other companies did the same thing and there would be a fall of in tech orders. After that, we had the tech wreck. The drop in orders was real.

I had no inkling of the financial crisis, but held the course, and here we are today. Besides that I survived Black Monday, 1987. My point is that this drop off in the market is par for the course, except for one thing. The Tech Wreck of 2000 and the Financial Crisis of 07-08 did real damage to the economy. As for today, we face interest rates that will eventually approach historic norms and a trade war that I think will work itself out within a year. These issues just don’t concern me that much. Maybe we are re-entering a second Great Depression, but I seriously doubt it today. I did worry about that during the financial crisis. As you have pointed out, subscription based companies are a wonderful hedge against ups and downs with the economy, even if interest rates and the trade war damage our economy.

I wonder how much of this drop is due to programatic trading during the holiday (typically a light volume time), the government shutdown (how much did the other shutdowns really matter?), or rising interest rates (severe over reaction?).

Maybe a bigger question is how many readers of this board have lived through some of these things? Me, I will stay the course. If I am wrong and the free world does collapse, the fishing in Wisconsin is excellent. Make your way here, and we’ll all have a giant cookout :o).




In my home country, Austria, stocks and the market are almost never discussed in public media. So when they do, I usually take notice. In the past, I observed that when these papers start writing articles about stocks, usually when markets are crashing, it is a good signal that a bottom is near, since they only start writing when most damage has been done. They won’t notice before…

Today I saw an article from our public media company about the demise of the big 5 internet giants (MSFT, AMZN, etc). The author opined that growth will come to a halt in 2019 and made comparisons to the 2000 tech bubble - which I found quite ridiculous.

As most people here, I don’t try to time the market. No one knows what will happen and neither do I. However, this „public media company that knows nothing about stocks reporting about markets“-indicator has served me well in the past, so I wanted to share it with you.

No matter how you look at it, I think it’s save to say that today is a much better time to buy stocks than it was in September. It’s great to have someone knowledgeable like Bert reassuring your investments in a timely manner when it’s needed most. That is what you will get + world class research and very enjoyable writing when you subscribe to Bert. So I would also urge anyone interested in the enterprise IT sector to subscribe to Bert‘s Ticker Target. Very much worth it!



Mitch Zacks, from Zack’s Portfolio Management, also said recently that when everyone is panicking like this it makes him feel much more bullish. A tiny quote from the multipage ad I received:

Investors are getting increasingly edgy and bearish as stock market volatility continues apace, which is actually having the opposite effect on me – it’s making me more bullish.


I can’t find that article on ticker target. What is it titled?

I can’t find that article on ticker target. What is it titled?

It is in this week’s portfolio commentary on his site.



I can’t find that article on ticker target. What is it titled?

It’s from a paid subscription newsletter. The best Christmas gift you can give yourself.

“And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful” --W. Buffett

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This will give you a smile. It’s just the edition of Business Insider Prime (trial subscription) that I received today. Here are the titles of the six articles:

  1. As stocks hurtle towards a crash…

  2. After Amazon’s cloud encroaches on its turf, a startup is taking a stand:

  3. We just got the most alarming sign yet that investors are bracing for a stock market crash

  4. The struggling stock market is facing 6 main problems — here’s why one expert thinks a crash is the only thing that can resolve them (Saul: I’ll give you a clue. He thinks “full employment” is one of the problems (it makes the Fed raise rates which is bad for stocks), “volatility is too low right now” is another, and “plunging profit expectations” is a third. Does he sound like an “expert” to you?)

  5. BANK OF AMERICA: A bubble in the stock market is bursting — and its demise marks a significant regime change for investors

  6. “Investors are staring at the bleakest future since the Great Depression” — here’s why one market bear thinks a crash could wipe 60% from stocks (Of course he has predicted it every year)

Does that ever sound like a bottom! Five out of six articles predicting the end of the world! That sounds like exactly what I was hearing at the bottom in Nov 2008. What fun!




2008 was the end of the world. Or would have been had the Fed not intervened. The goods on the shelves at Walmart were not being shipped because of lack of liquidity.

But, today isn’t then. Not even close. There is no Leman Brothers, there is no 100 dollar a barrel oil. . . nothing.

There are however a lot of people putting a lot of money bi weekly into thier 401ks.

Qazulight (Raised a little cash last month, may pick up a few shares here and again in January.)


There are however a lot of people putting a lot of money bi weekly into their 401ks.

In 2008 - 2009 I shared an office with the 401k administrator at the firm I worked for. She started getting calls of people wanting to sell all their stocks and funds and go to cash. I decided that was the bottom and moved my contribution percentage from 5% to 20% of my paycheck. At 28, that was a lot for me! But I think that happened in March 2019. :slight_smile: Worked out pretty well.

Just a reminder that as scary as it gets for anyone who is retired and living on their nest egg, there are plenty of people looking for a place to put new money. They will see this pullback as an opportunity.

It’s always fear vs greed.



But I think that happened in March 2019.

Oops…I meant March 2009, of course. Turned out to be pretty near the bottom!


I have the paid subscription but can’t find it. What’s it titled?

Check out post 49699 by Phoolio 18


The webpage that appears when you log in has a large horizontal grey coloured bar near the top of the page that contains the title “Ticker Target Posts”. Immediately below this bar are three boxes arranged horizontally across the breadth of the page. The one on the left is titled “Ticker Target Posts”, the one in the middle is “Seeking Alpha Articles”, and the one on the right is titled “Portfolio”. Click on the one titled “Portfolio” and scroll to the end. He usually gives a commentary about the portfolio and the market in this location each time he makes changes to the portfolio. It is well worth reading because he often addresses the angst that we are all feeling with timely insights and with the benefit of a lot of investing experience.

Im my case, I was notified by email about a post relating to the portfolio. I have just the entry level subscription by the way and not the more expensive one. You might want to make sure that you are getting email notifications of his blogs. I receive one in my inbox every time he writes something new. Send him an email and ask to be put on the mailing list if you are not receiving these. You usually get several every week.



I’ve been heavy cash (50% plus) for over a year now as I just felt that regardless of political noise, the bull market had to correct at some point.

Like most markets I think it went up too far, so I was early in my defensive posture.

I have been looking for the S&P to confirm a bear market, which it finally did at the close.

This is the time to start moving in to great companies, accepting that this official bear market could easily continue to go down as pendulums almost always swing too far.

Im not seeing the whites of their eyes yet, and fully prepared that true panic might not come into play until we see an ugly start of the year.

What happens is that everyone just wants to see 2018 end, with hope that we can reset for a more comfortable 2019. I think the market is being set up right now though for an ugly plunge to start 2019, which will bring in real panic selling.

I bought at the close and will continue to move into the market as most start running the other way.

Going to be painful, but there is always light at the end of the pain.



Having lived and invested though the tech bubble, the financial crash and various predictions of recessions then this article by Morgan Housel always keeps me grounded when times get tough.
It’s quite astounding how the biggest winners over the past 20 years have dropped so dramatically and frequently during the course of their rise:

"It’s hard to grasp how the best-performing stock of the last 20 years could spend the majority of that time with returns that would make you want to vomit. It’s easy to think that the single-best investment to own is one that would make us smile every morning we woke up owning it.

But it wasn’t. It never is. And it never will be. That’s the nature of the stock market. On the way to making serious money, you spend a lot of time losing serious money. It’s a reality anyone investing in stocks, no matter what you own, has to face.

I looked at the 10 best stocks to own over the past 20 years. These are all cherry-picked for their stellar returns, and the stocks you would probably choose to own if you had a time machine. On average they increased more than 28,000%.

But they all spent a majority of the time well below their previous high mark. They all had multiple declines of 50% or more. A few had multiple 70% drops."


Merry Christmas and a happy new year to everyone here.
Cheers, PB.


Agreed; I don’t think we have seen a real washout yet.

The monthly charts are still NOT oversold; SPX could easily drop to 2000-2100 and NDX to 4800-5000

Personally, I have been fully hedged since mid-November and as my stocks have fallen less than the market, my account has in fact gone up in value since then.

Just before the plunge in stocks, I’d introduced the concept of hedging (using trend following) to this board but back then, I was told this subject was 'OFF TOPIC".

Well, my hedges have protected my account equity during this brutal sell-off and when the dust settles, I’ll use the profits on my NQ shorts to invest in new companies and add to existing positions.

Before implementing hedging, I’d backtested this strategy going back decades and it had outperformed ‘buy & hold’ by almost 3X and its worst drawdown was less than 0.35X ‘buy & hope’.

Now, ‘buy & hold’ investors are facing anxiety/hoping for a bottom, meanwhile, us trend followers/hedgers are quite relaxed about the whole thing and in fact, hoping for lower prices, so profits on hedges become even larger (thus, buy even more stocks at bargain basement prices).

Yes, this downtrend in equities will end sooner or later, but remember, the FED is burning $50 BILLION each month due to QT, so the pain could continue for a while. After all, ZIRP and QE goosed asset prices for a decade, so it is only logical that rising rates and QT are deflating them.



This is just one example but I thought it would be worth mentioning. Personally will max out my Roth and my wife’s Roth and my family HSA on Jan. 1st. I realize I am just one person and it is anecdotal but I do think there are more people out there that will be doing the same early in the year. That is there will be some new monies entering the market after the first of the year. I (and others) have to wait due to the tax restrictions even though I have the funds now. I only mention this as if I had some uninvested cash I would be looking at this next week as an opportunity to put it to work before that new year money.


Good point Ryan. I will be investing a lot more than the Roth contribution tomorrow morning. This is a great buying opportunity but with the partial government shutdown fear may win out for a while longer. This is my last post on this OT.


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