The Story Hasn’t Changed

I haven’t posted in a while.  It’s been a frustrating year.  I was getting excited when the S&P started the year down 5%. I thought “This is it!”  And of course, I was wrong. I keep reading more and more people say that we are in the beginning parts of a new secular bull market.  I actually get upset when I read that.  It’s so unbelievably dangerous.  Secular markets start and end based on valuation.  We are at all-time historical highs in valuation.  Higher values than even 1999 and 1929, in many regards.  Secular bull markets have started, in the past, when the stock market to GDP ratio has been sub 50%, and right now we are at 130%!

Patience is a virtue and I lack it in every aspect of my life…except investing.  I’ve been blessed with that ability to be patient.  Has it been trying?  Of course.  But these cycles do take time.  As John Hussman said in his post tonight, and as a former partner of mine always says “Market tops aren’t just points…They are processes.  We are in the process, hopefully, of this.  I say “hopefully” because I have been wrong for quite some time. But I do feel good knowing that the longer I am wrong, the more likely the devastating result that will follow.  Thinking that another 50% drop (3rd in 15 years) is not likely is a fool’s wish.  History has shown that during times of immense overvaluation, prices fall, fundamentals don’t rise.

For those reading this who think I’m kooky, keep on thinking it.  It’s been hard thinking otherwise.  But again, please don’t say “it was so obvious” in a few years when the market has fallen 40%.  It’s just insulting.

Survey Results – What is the Best Asset Class to Invest In?

As you have seen on the site, you get a survey popping up when you visit. This is not meant to annoy but I genuinely want to see what my readers think of things in the economy and investing.

On March 28th, I put the question up: What is the Best Asset Class to Invest In?  Here are the results











I am not going to lie. I was surprised. 48% said Real Estate! So let’s think back to 2009.What would investors have said about this five years ago? Real estate and stocks would have been at the bottom, right?

So my point here is this:  People follow investments usually in the later stages of their big increases in price.  The key is to find these assets when others don’t want them.  Gold, a few years ago, was untouchable! Now it’s only the favorite of 12% of my readers.

Think independently people.  You can’t chase returns.  You have to think and look at true value and not care what others think.  That’s the only way to get above average returns.  If someone tells you otherwise, they are lying to you to get your money and charge you fees or commissions.  Plain and simple.

When Value Buying Can Bite You in the Ass

Ten years ago, I was given the option to buy shares in an IPO for a small company called Google. You may have heard of it.  I looked at the financials and thought, “Jeez, this thing is overpriced.” So I ignored it.  The IPO price for early buyers was $60, I believe.  It currently sits at $1200 per share.  1900% increase.  Drats.

So here is one of the rare examples of when value buying ends up having you lose out in the long term.  First off, I think Google is worth around $650 a share right now.  I know I know.  That’s almost 50% lower than it sells for today…but it does sell for a premium.

But in 2004, Google had $3Billion in sales and last year it had $60Billion in sales.  So clearly they are a growth machine.  They have done a great job meeting expectations and leading the industry in ads and it prints money.  Who would have guessed that back then?  Not many, I would presume.

So do I beat myself up over this?  Yes and no.  Of course I wish I had done this, so I am upset about that, but if I had invested in Google back in 2004 based on what I saw, then I would have lost TONS more money on other IPOs now and in the future hoping for the same result and would have probably given back all of the Google gains over time.

Having a plan and sticking to it…assess your work over years and years and many investments, not the short term and a few investments.  Warren Buffett and Ben Graham and all of the investing greats didn’t beat the market each year…in fact, when years were good for the stock market, they tended to lag.  But they stick to their system and when times are bad, they tend to fair pretty well.