OT: Pivot or Bear rally

I was watching on the sidelines, but finally sold some of my loser low conviction stocks at a huge huge loss, and put the funds towards building my BRK.B and GOOG positions, and some META ( I know many hate META but it looked almost like a value stock with P/E less than even some very low growth utility/consumer staple stocks)

I have no idea if this is truly the pivot that may send market higher or a classic bear market rally, but regardless even if it goes down, at least I don’t have to worry about 2 of the 3 not recovering.

Would appreciate any thoughts on the macro sentiments…For some reason, this environment feels a lot different to the bear markets from 2000 or 2009. I guess those 2 time periods resulted in a huge recession…but the job markets seen currently hardly portend a recession?

Am I right in feeling the current market situation was created by high inflation/ fed raising rates and QT (and unexpected but likely temporary headwinds from the Ukraine war)….and as and when the market deems that inflation is under control, or will become under control, it should behave as it should (irrationally of course, but generally moving to the up over time, and at least not going down in a soul crushing way!)

Would appreciate any thoughts on the macro sentiments…

There will probably be between 1 and 3 recessions in the next decade.
They come and go.

There will probably be a half dozen huge macro developments, most of them unpleasant.

If the stuff you personally own has a reliable future, the business and its shareholders will do fine.
Surprisingly, the macro environment rarely matters much to investments.
Prices go up and down in good times, and they go up and down in bad times.
Yes, some big macro thing occasionally matters a lot.
But it’s so unpredictable that there isn’t much you can do usefully about it before or during the event other than pick investments that are resilient.

If the businesses do fine, and they aren’t painfully overvalued, you’ll get a good return.
The valuation level and price gyrations of the broad market don’t matter if you’re not an owner of the broad market.

At the very least, resist the temptation to change your investment stance because of something you think might happen in the headlines.
First, you’d have to be right about the macro event.
Second, you’d have to foresee the correct consequences in the real world.
Third, you’d have to foresee the correct consequences in security prices.
Getting all of these right is pretty rare.

So, my two cents:
Focus on owning things that are resilient. Don’t overpay. And ignore present and future headlines.

Jim

43 Likes

Thanks Jim. As always, that was very helpful.

Probably need to completely accept what has happened has happened, and then move forward with more prudent investing. I feel I am in the right place now, thanks again.

Much appreciated

Charlie

5 Likes

Am I right in feeling the current market situation was created by high inflation/ fed raising rates and QT (and unexpected but likely temporary headwinds from the Ukraine war)….and as and when the market deems that inflation is under control, or will become under control, it should behave as it should (irrationally of course, but generally moving to the up over time, and at least not going down in a soul crushing way!)

The economy runs in cycles, there will always be downturns and upturns - learn to accept these and you will be much more successful as an investor (IMO). I won’t focus too much on what is driving the current cycle - it will turn eventually - and then turn again; and repeat.

It sounds like you are starting to build some positions in businesses that you are confident will be able to withstand the ups and downs of the economy - that is a good start.

tecmo

2 Likes

I was going to say “identify compunders, don’t overpay and sit on your hands” That’s what Charlie was saying about BABA with all the macro at the most recent DJCO meeting.

1 Like

Inspired,

I know you are trying to quickly make up a loss, but you are really swimming against the tide trying to compete with professional stock pickers.

I urge you to just buy the index (or Berkshire!) and get on with the good part of life.

4 Likes

Thanks Tecmo, Blackswanny and IwannaBesedated. Truly appreciate your thoughts…Yes, I am increasingly feeling that I should sell everything put it in BRKB and index funds and move on. It is so tough to make that wholesale move, and accept that big a loss…but I have started moving in that direction. And the sooner I come to peace with that decision, the better I will be. Thanks again.

1 Like

I think it’s been discussed on here that we wouldn’t recommend an index going forward for the next decade.

I don’t see the professional stock pickers as competition. Why not look at their top portfolio picks and commentary as an avenue to explore and do more of your own research. This information has never been more freely available.

Use Berkshire as a base and build your own portfolio round the edges.

2 Likes

I think it’s been discussed on here that we wouldn’t recommend an index going forward for the next decade.

As an aside, a possible PS to that:
My thought was that it depends on the index.
QQQE (tracking the Nasdaq 100 equal weight index) didn’t look so bad to me.
A bit more expensive now than it was a few weeks ago, but the valuation level isn’t so different from its historical typical levels.
That’s not something you could say about the S&P 500.

My post on how I valued QQQE, from mid June
https://discussion.fool.com/1-what-is-the-metric-you-use-for-qqq…
I just redid those models, and get figures in the range $62-72.
With the price at $65, the indication is that it’s not particularly overvalued, nor particularly undervalued.

Price is up to $72.80 now, but certainly still not twice the historically average level.

Jim

6 Likes

Jim.

How are you looking at Brks price to book now it’s been written down? (currently 1.42 vs historic 1.2)

Do you revise your entry point and buy signals accordingly or just stick to the historic valuation where you were quoting the long term returns.

1 Like

How are you looking at Brks price to book now it’s been written down? (currently 1.42 vs historic 1.2)

Historically the “peak to date” book per share is a much better yardstick of value than the “latest figures” book per share.
It’s reasonable to assume that dips in book value will be transient.
That makes sense, and also historically worked better as a predictor of forward returns.

A really perfect metric of value would show a share of Berkshire is worth more, not less, than it was a few months ago.
There’ something delightful about a billion in cash showing up every couple of weeks.
Plus the various investments, private or public, rise in value slowly over time on trend.

All that being said, my own valuation metric is almost exactly flat (after inflation) since three quarters ago.
But the three year rate of change is still inflation + 8.9%/year compounded, still above what I generally expect.
(in nominal dollars, inflation + 13.6%/year compounded, but you can’t spend nominal wealth)

Jim

13 Likes

Inspired,

I know you are trying to quickly make up a loss, but you are really swimming against the tide trying to compete with professional stock pickers.

I urge you to just buy the index (or Berkshire!) and get on with the good part of life.

Charlie, I have to agree with this. Buying the index is of course Buffet’s advice for the no-nothing investor. But, as so many here have trumpeted ad nauseam, the S&P 500 is a bit long in the tooth, and needs to revert before it is attractive again. I have a huge slug of my net worth in Berkshire, going back to 97 or so, and have added all along the way on dips…and I’ve never sold a single share. I think that might change for me in the not too distant future.

Putting your toes in the water with a little Berkshire is a good start. But, don’t get crazy like me! :joy: Like you, I have a stash of cash that I fully intend on indexing at some point as a barbell of sorts against my BRK. I may in fact begin to diversify away from my over concentration in BRK soon and sell a bit as it reaches a higher valuation, much as Jim and others on here did recently, by taking some off the table as it approached 1.6 BV. This is something I thought I would never ever do, but I’m phasing into the last third of my life, so I’m not so sure that I could ever be like Warren or Charlie and go all in. So, I’ll put some of those proceeds in cash, and await for an opportunity to redeploy in an index. I don’t think you’ll have to wait a decade though to move into the indexes, so just be patient and sit in cash for now, and wait for occasional, but meaningful downdrafts…that’s not really the same thing as true dollar cost averaging, but it’s a way to capture some value as you incrementally build a position in the indexes over time.

Meanwhile, if Berkshire and Indexing will be your primary investing focus over time, then stay here on this forum. But, I also highly encourage you to slip on over to the bogleheads.org forum and explore all you possibly can about indexing. There are a lot of very smart, but also not so smart, folks over there. You’ll find a wealth of information from others who have made the same mistakes we all have. In spite of their professed disciplined approach to indexing(stay the course), you’ll gain an insightful appreciation for their wavering ambivalence, second guessing, and shifting convictions about what is the best asset allocation model to use. You’ll hear their regrets about loading up on bonds amidst a rising interest rate environment, whether or not international equities have a place in one’s portfolio (and how much), and the endless ongoing debate over cap weighted vs equal weighted stock indexing. You already know how Jim feels about RSP and QQQE, so, go get the other side of that debate — and yes, there is even extended discussions in various threads over there about BRK vs Indexing. It’s a good place to figure out where you want to go…I think you’re on the right track, but don’t rush yourself. Get comfortable, and educate yourself as you have been doing.

13 Likes

*know-nothing…ugh! My bad!

Thanks a lot Jetjockey787.