WBI = 203 We just aggressively broke through a new ATH that is a nice, round, number. I'm a bit drunk on that feeling. This market continues to defy common sense in the best possible way. At this time, I wish to thank the teenagers who opened accounts and are gambling with their Mom's credit card. My wife and I are extremely grateful. Also, give Mom a kiss from us. We are still around 23% cash. I continue to nip at the heels of three companies but no fills in a while. We are in no hurry at all.
I've been thinking about the crash predictors of 2014/2015. They were relentless. If they got out when they said the market is about to crash, they would have substantially less than half the wealth they would have if they stayed in the market until now. Even if the market loses 50% of it's value instantly, these people would have been better off to stay in. Trying to get out before a crash is an excellent way to miss out on market gains.
Timing the market is, without a crystal ball, hard to do successfully. I dont have one! I keep a diversified portfolio of stocks and that's it.
This is a repeat. Skip due to tedium. When I had reason to occasionally work at banks, a couple of times per year I would hear about someone who would walk in, ask if they had enough to retire, the CSR would have a look and they would have 2~4M of net worth. It was always the same story. They would put their savings into a broad index, set up a monthly automatic purchase, and ignore it for 20+ years. The results were always amazing. I don't know of one trader who successfully left his job for very long. Of the people I used to work with, quite a few were aggressive traders. They all made buckets of money. Their citations of earnings were astonishing, doubling their money multiple times per year. Of that group, two went bankrupt. Many of their spouses had to extend their careers beyond planned retirement to dig themselves out of debt. None of them have retired and several of them are older than me. There is a retirement group we meet when we are in Mexico. In 2018, we met a 38 year old man from Calgary, Alberta. He had just quit his job and was ready to retire. He was an aggressive trader and mentioned a few times he was wildly successful. He was included in the group and started looking for a place to live. I didn't see him in 2019. In 2020, I asked about him and someone said he went back to work in 2019. Another trader from Phoenix joined the group. We met him in 2019. He was a nice guy and offered trading help to anyone interested. He wasn't retired but was about to retire. He joined the group because a relative was in the group and he always dreamed of moving there. Last I heard, he was renting a mobile home in Yuma while going through a messy divorce. Every story of massive trading gains that I have had some ability to audit has turned out to be a falacy. I think traders have modelled themselves after MLMs. They claim to be successful, and perhaps one or two are, but legions of people are chasing that dream without success.
Meanwhile, the WBI is 204.34. The energy sector is starting to appear fertile, from my perspective. Sure, the world is moving away from fossil fuel but we still aren't migrating away fast enough to reduce fossil fuel usage. We are almost at a steady state where new power production nearly matches power use expansion. Coal production is being shut but some of it is being replaced with natural gas. Nuclear, solar, and wind can't carry the entire load. The world is going to need a lot more wells drilled and sludge pumped over the next 30 years.
I was long several oil companies but have opted into renewables. So far, other than waiting too long to dump USO I'm VERY happy with my decision.
I've known oil was on the way out since 2008 but I have made a lot of money from oil companies since then. On the other hand, the only renewable energy company I can see with the potential to provide a reasonable return is Tesla. For what it's worth, I expect to own Tesla again in the next 12 months but I am not fixated on it.
After all the talk of a market contraction, we are now at an ATH by a little bit. I like thinking that, broadly, people are thinking for themselves and ignoring what the talking heads tell them to do.
The WBI is currently 205.74. Even in this fluffed up market, we recently acquired a non-trivial amount of a new company. This is the first major purchase I've made since March 2020.
I've had a long standing limit order open for months that was filled last week. Looking at the chart for that day, it looks like an odd, low, glitch. None the less, we are pleased to have a new company in our core. Meanwhile, the market has boosted the hell out of it so we are up a ridiculous amount, a few days after buying. Obviously, this piece of serendipity is total luck but I'm not complaining. My wife seems to think this is normal. I'm pretty sure she is out spending the gains, right now.
Thank you, Syynik. The WBI is currently 206.4. I track 14 indicators and find it interesting how aligned they are. It's rare to see disagreement among the indicators. These indicators mostly represent different points of view of the same idea. That makes them good for reconciliation of each other. WBI is simply a direct comparison of market wealth versus GDP. Common sense suggests these two metrics should follow a similar trajectory so the ratio should remain reasonably static. It doesn't so perhaps the deltas are caused, in part, by market exuberance. A comfortable WBI range is 120~140. Below 120 means: back the truck up. 140~155 is a state of caution. Above 155 is the red zone. According to the WBI, the market is over valued by approximately 35%. Another indicator that I find to be of value is one I call the "Lynch Indicator". Peter Lynch opined that reasonable valuations of the market are a P/E ratio of 20 - <inflation>. So, when inflation is 5%, a reasonable market P/E is 15%. This doesn't translate directly to individual stocks, due to a number of factors. For example, a company with high growth will have an ugly P/E and still be a compelling stock. Other industries are stagnant so they may have very attractive P/E ratios but their lack of growth makes them less appealing over time. Still, it is a compelling indicator. According to multipl.com, the current S&P 500 PE ratio is 35.17. This suggests the market is over valued by approximately 40%.
When market froth is extreme, long term stable, high earning, companies become very desirable. Boring companies, such as REITs and utilities can even increase their PE ratio during market corrections. Money used to go from the equities markets to bonds during a correction. These days, a decent portion of contraction money remains in the market and flows into sedate earners. I can see this trend in my portfolio. Typically, my REITs would go up considerably during a tech pull back. What then of a low market? Yes, I'm old enough to remember what that was like. It would make sense to move into growth companies during an off market but I think growth companies become less desirable during a correction or crash. Growth companies do best at times like right now, when 100% of IPOs achieve funding. It's so ridiculous, Rivian is mounting an IPO based on an $80B valuation and I have every expectation they will achieve it. Does anyone remember when startup companies struggled with shoe string budgets for years before they achieved a comfortable operating posture? New public companies are awash in cash from LD1. I think growth companies are like falling stars in that they come along every once in a long while and they are mostly unique and random. These have little to do with market froth, although market strength controls their growth to an extent. During a down market, smart money moves into a broad market index. If a market correction happens, and that is less certain now that money moves within the market rather than in and out of it, I intend to broadly move from my old man companies into a broad market index. I don't think my companies will outperform VOO. They will generally underperform it. The reason I've done well on these companies, over the last decade, is because of M&A activity. Several of our REITs have been bought out at a premium. Unexciting companies have the potential to substantially resist a market correction. When VOO is down 50%, REITs will likely be down far, far less. Perhaps on the order of 15% but, of course, this is a wild guess.
I'm kind of hacked off by TD Ameritrade's handling of a debenture IPO. I'm not a big bond/debenture guy but after selling all of our bonds at face value plus all interest that will accrue to maturity, I placed a substantial expression of interest on FC.DB.K. That expression of interest legally bound me to purchase the debentures I had committed to. Oddly, their verifying and accepting of my expression of interest did not bind them to selling me those debentures. I received about half of the debentures I registered for. I hope they get an ingrown hair on the tip of their dick.
WBI = 207.7 Cathie Wood cites Tom Lee's assessment that we are in a millennial driven bull market that is going to continue for years. She directly refuted the idea we are in a bubble. I don't drive our portfolio based on Cathie Wood, or any analyst. I do my own analysis. For my part, I don't know if we are in a bubble but it does seem likely we will endure low to no returns for an extended period of time. Of course, I thought that in 2019. I'm still buying, where I can find value. I've found quite a bit of value lately, so I've bought quite a bit but we still have a mountain of cash. If there is a crash tomorrow, we will be able to do a small amount of shopping at the discount counter. I think major crashes are going to change behaviour. Lots of people like me have long standing buy orders that will vacuum up discounts as they happen. Because of that, I've placed my buy orders at points I hope are the way down. I want to buy at the lead of the next market badness. For what it's worth, August was a record month for my wife and I. It's comical how well everyone is doing these days.
I've done some research on the chip shortage and here's what I've come up with. There are quite a older generation factories that operate 200mm (8in) wafer fabrication equipment. These facilities are being run to produce lower technology parts which are still needed. Their technology has been mostly neglected and are just being milked for cash before decomm. In the short term, the 200mm fabs are going to be upgraded by pretty much all operators. For a relatively small investment, these fabs can be made to produce vastly more wafers than they currently do. Some of them will even bump up their process a few nodes but I don't expect anything remotely close to ELUV or the top fabs. This is where most of the new capacity will come from. In fact, this new capacity should start hitting the market by the end of this year and should be in full swing sometime later next year. The massive new investments in 300mm fabs with leading edge process nodes will not start to bear fruit until 2025, or so. I think TSMC has a new fab coming online sometime in 2023 that will probably move the needle a bit. Until then, don't expect Ford/GM/VW or any other car maker to start taking on Tesla with big volume production. My money is on Tesla to substantially widen the lead in the near to medium term.
