Down goes the Dow

agip wrote:

Ghost of Igloi wrote:

https://twitter.com/hussmanjp/status/1353144861650804738

Grantham in 2013, since he uses 7 year returns. The guy has been a very bad prognosticator. He forecast negative returns for US big caps from 2014-2020. That ah did not happen.

"On our data, with U.S. large cap equities offering negative returns (-1.5%) except for high quality stocks (+2.2%), with foreign developed and emerging equities overpriced (+3.7%), and with bonds and cash also very unattractive, investors have to twist and turn to find even a semi-respectable portfolio," Grantham noted. "It is a particularly tough process today with nowhere to hide and no very good investments compared to, say, the time around the 2000 bubble when there were several."

https://www.businessinsider.com/gmo-quarterly-letter-q2-2013-2013-7

I think Grantham has it half right and there's an important message right.

Simply put, everything looks expensive, just as he was want to say in 2013, early on in a massive bull market, and likewise today, investing at these levels looks risky.

He gets it wrong when he infers to avoid anything that doesn't look like a good value. At least he was wrong in 2013 in implying so.

To me, and to Agip apparently, that's good info. The markets are not trading on valuation alone as a leading indicator of investment opportunities.

Ghost of Igloi wrote:

agip wrote:

that is irrelevant

if you predict market performance, you have to take all measures into consideration. You don't get a 'yeah but who would have thought that...' card to play

If I lose money in stocks, I don't get to say 'yeah but who would have thought a once in a century pandemic would crash the world economy' and get my money back.

Grantham made his bet and lost it. He has made the same bet and lost the same bet for years and years and years.

Well the same thing was said in 2000 and 2007, and those you currently rely on for predictions were horribly wrong causing far more economic and investor destruction than Hussman or Grantham.

So, one who follows that investment strategy would not invest until the market crashes at least 60% from current levels?

We see where that got so many unfortunate timers of the market in March 2020 of last year. I mean, we had a crash like few of us have seen in our lifetimes but the perma-bears were still there beating their chests, posting images of volcanoes with their tops being blown off, and preaching of the bottoms we were yet to hit months and years ahead.

On a valuation model, they still wouldn't buy then.

And since then, we've heard how a) the insiders and wealthy dogs jumped on board at that point, and b) everyone who didn't has voiced their regrets here and elsewhere.

oh, and i almost forgot, what came since March 2020 was "a bear market rally". Please tell me what you think of that forecast now.

OK, the DGTD posters may avoid a severe dent to their portfolios, but investors as a class cannot. Of course in a bubble, in this case a massive one, valuations look like a ridiculous metric.

“oh, and i almost forgot, what came since March 2020 was "a bear market rally". Please tell me what you think of that forecast now.”

Well, if the market turns to more extreme lows that would be the case.

Ghost of Igloi wrote:

agip wrote:

that is irrelevant

if you predict market performance, you have to take all measures into consideration. You don't get a 'yeah but who would have thought that...' card to play

If I lose money in stocks, I don't get to say 'yeah but who would have thought a once in a century pandemic would crash the world economy' and get my money back.

Grantham made his bet and lost it. He has made the same bet and lost the same bet for years and years and years.

Well the same thing was said in 2000 and 2007, and those you currently rely on for predictions were horribly wrong causing far more economic and investor destruction than Hussman or Grantham.

not sure exactly what you mean here, but following grantham and hussman for 20 years would certainly have caused households much, much more financial destruction than following GS or Merill or whatever.

It's been a fantastic 20 years for investors, even with the financial crisis and pandemic. Staying out because of hussman and grantham would have devastated people.

But maybe I misunderstand what you are saying.

Ghost of Igloi wrote:

OK, the DGTD posters may avoid a severe dent to their portfolios, but investors as a class cannot. Of course in a bubble, in this case a massive one, valuations look like a ridiculous metric.

A bubble that lasted for 10 years, maybe more, is hardly a bubble. Let's call it "normal".

A bear market rally that sets new daily highs and has risen 67% off its low is hardly a bear market anymore. It is the continuation a long running bull market.

If I were you, i would embrace the notion that the markets are forward looking, because looking back with respect to the much publicized forecasts of the perma-bears, well, that's not a real good optic for them.

Raquetomi:

In defense of my china bet:

China overtook the U.S. as the world’s top destination for new foreign direct investment last year, as the Covid-19 pandemic amplifies an eastward shift in the center of gravity of the global economy.

New investments by overseas businesses into the U.S., which for decades held the No. 1 spot, fell 49% in 2020, according to U.N. figures released Sunday, as the country struggled to curb the spread of the new coronavirus and economic output slumped.

China, long ranked No. 2, saw direct investments by foreign companies climb 4%, the United Nations Conference on Trade and Development said. Beijing used strict lockdowns to largely contain Covid-19 after the disease first emerged in a central Chinese city, and China’s gross domestic product grew even as most other major economies contracted last year.

-WSJ

agip wrote:

Raquetomi:

In defense of my china bet:

China overtook the U.S. as the world’s top destination for new foreign direct investment last year, as the Covid-19 pandemic amplifies an eastward shift in the center of gravity of the global economy.

New investments by overseas businesses into the U.S., which for decades held the No. 1 spot, fell 49% in 2020, according to U.N. figures released Sunday, as the country struggled to curb the spread of the new coronavirus and economic output slumped.

China, long ranked No. 2, saw direct investments by foreign companies climb 4%, the United Nations Conference on Trade and Development said. Beijing used strict lockdowns to largely contain Covid-19 after the disease first emerged in a central Chinese city, and China’s gross domestic product grew even as most other major economies contracted last year.

-WSJ

Fascinating in light of the Trump administration to frame pandemic response in terms of either furthering minimizing deaths or supporting the economy. Many at the time said loudly and clearly that it was not a binary decision, not either-or, but a strong and decisive and unified pandemic containment strategy would ultimately benefit the economy.

The figures you mention above support that conclusion, clearly. Unfortunately for us/ US.

Agreed that our poor handling of Covid hurt, but not as much as our nativism, trade wars and unstable politics.

From the article:

Foreign investment in the U.S. peaked in 2016 at $472 billion, when foreign investment in China was $134 billion. Since then, investment in China has continued to rise, while in the U.S. it has fallen each year since 2017.

Ghost of Igloi wrote:

OK, the DGTD posters may avoid a severe dent to their portfolios, but investors as a class cannot. Of course in a bubble, in this case a massive one, valuations look like a ridiculous metric.

Valuations have been a ridiculous metric for more than a decade.

agip wrote:

Raquetomi:

In defense of my china bet:

China overtook the U.S. as the world’s top destination for new foreign direct investment last year, as the Covid-19 pandemic amplifies an eastward shift in the center of gravity of the global economy.

New investments by overseas businesses into the U.S., which for decades held the No. 1 spot, fell 49% in 2020, according to U.N. figures released Sunday, as the country struggled to curb the spread of the new coronavirus and economic output slumped.

China, long ranked No. 2, saw direct investments by foreign companies climb 4%, the United Nations Conference on Trade and Development said. Beijing used strict lockdowns to largely contain Covid-19 after the disease first emerged in a central Chinese city, and China’s gross domestic product grew even as most other major economies contracted last year.

-WSJ

Yeah, I saw that. Not sure what to make of it yet really. Imagine companies investing in the USSR in the 60s though.

I think this is not quite as big a deal as it may seem. I'll be curious how 2021 turns out for sure.

That is a patently false statement. From the March 2000 the NASDAQ Composite did not reach a new durable high until late summer 2016, almost 16 and a half years later. The S&P 500 performing somewhat better in hitting that bench mark a little over thirteen years later in the spring of 2013. Even using agip time horizon of previous 20 year period, the S&P 500 Index has returned 5.3% in capital appreciation, and about 2% in dividends. That is far below the often quote double digit projected equity returns, and below the the risk adjusted return for bonds over the same period. That is what happens when you have two bubbles expand, and then pop in that time period. To expect that this latest example of extreme behavior is something justified seems a huge stretch to me. As stated before, that is not an indictment against holding stocks, just a purely academic argument to where I think this all ends. Which by the way underscores the main point, if the market gets more overvalued, it does not change the end point of historical average valuation. Using the 2020 expected GAAP EPS of $95.33 and a 16 PE multiple, put that number at S&P 500 1,523.

Ghost of Igloi wrote:

That is a patently false statement. Blah, blah, blah.

This has exactly zero to do with what I wrote.

Igy, if one had invested $10 K in apple on the day you mentioned, March 2000, how much would it be worth today?

A mere $10K would be worth almost $1,389,000.

Does that give you pause about high valuations and how much you might weight you might give to them in this day and age?

seattle prattle wrote:

Igy, if one had invested $10 K in apple on the day you mentioned, March 2000, how much would it be worth today?

A mere $10K would be worth almost $1,389,000.

Does that give you pause about high valuations and how much you might weight you might give to them in this day and age?

unfair to look at just one stock

and anyway, apple was a value stock back then, often considered likely to go out of business, so it's actually partly an argument for Igy's point of view - that buying cheap is how to do this best.

agip wrote:

seattle prattle wrote:

Fascinating in light of the Trump administration to frame pandemic response in terms of either furthering minimizing deaths or supporting the economy. Many at the time said loudly and clearly that it was not a binary decision, not either-or, but a strong and decisive and unified pandemic containment strategy would ultimately benefit the economy.

The figures you mention above support that conclusion, clearly. Unfortunately for us/ US.

Agreed that our poor handling of Covid hurt, but not as much as our nativism, trade wars and unstable politics.

From the article:

Foreign investment in the U.S. peaked in 2016 at $472 billion, when foreign investment in China was $134 billion. Since then, investment in China has continued to rise, while in the U.S. it has fallen each year since 2017.

Thank goodness Dementia Joe will save us by once again letting China manipulate currency and markets and steal our technology.

agip wrote:

seattle prattle wrote:

Igy, if one had invested $10 K in apple on the day you mentioned, March 2000, how much would it be worth today?

A mere $10K would be worth almost $1,389,000.

Does that give you pause about high valuations and how much you might weight you might give to them in this day and age?

unfair to look at just one stock

and anyway, apple was a value stock back then, often considered likely to go out of business, so it's actually partly an argument for Igy's point of view - that buying cheap is how to do this best.

No, Apple was not a value stock. Are you kidding? It was among the poster child of the internet/tech stocks that were considered grossly over valued. The same stuff was spouted then about growth stocks of this ilk.

Maybe before your time, but i remember it well.

Apple was considered one of the bubble stocks.

Remember, it IPO'd twenty years earlier.