Your writing is just incredibly good. It took all of my willpower during this mania to avoid becoming an outsider bag holder, and I quickly learned not to stand in front of an oncoming train either, so I avoided the fate of the sorry skeptic too. A large part of this was due to voices like yours, wafting silently through the orgasmic shouting of the euphoric bulls. Thank you!
Thanks Shmuel, I'm glad you enjoy the writing, and that you found some of my pontification useful over the past couple years. It really was a wild time to live through, and deserves a little bit of reflection, now that most of it is in the rearview.
This analogy is fantastic! “But both biological viruses and social viruses spread easily through an uninoculated population. Perhaps it’s not a coincidence that the last true stock bubble came twenty years earlier - one full generation.”
Really super piece as usual. Particularly, with my 28 years in FM’s it rings exact.
Wishing you, health, patience and prosperity for 2023.
Hi Last Bear Standing, great article! Wall Street's brick layers - the insider teams bidding up stocks (like building a brick wall) have handed the market over to the demolition teams- the insider's charged with taking the market down. They are not done! Fed funds reaching 5.25% in a slowing economy will be the catalyst for the demolition teams to press the next leg down. They will be blowing up a bunch of good stocks. Like you, I believe that may be a good time to become constructive on high quality stocks laying in the brick rubble. However, I do have a substantial fear about the market heading much lower due to a black swan event like a confrontation with China. It's inevitable in my opinion. What's your view in connection with the timing of a scuffle with China? Or are black swans always unexpected debacles?
Thanks Chris. Any speculation about a China scuffle is very far out of my field of knowledge. Though from what I can tell, it seems that the heat has been turned down in the US/China saber rattling, perhaps as each country realizes they have important domestic issues to deal with. I hope for everyone's sake that there is no conflict in the east. For now its not a big factor driving my thoughts on the market - though that could change if the facts change. And like I said, this is purely errant speculation on my part.
As always, thanks for this TLBS! I love the way you write things and the smooth reading. Even for foreign people whom English is not their native language, keep it up !!
Alwo, that’s why I’m always looking for insider ownership in my holdings plus small to micro caps space.
Fun read TLBS!! For us old timers, “Pump & Dump”, as it was called, used to be the main game of “penny stocks” on the sheet. Now it is mainstream. Caveat emptor.
A nice article to ease into 2023. "See you in 2040" HA! A nice end note to get the grey matter working. Thanks TLBS again, for the effort you put in to make this content available.
Like the other commenters, this piece spoke eloquently to me.
Perhaps in some future week you'll consider the other side of the coin? Are there any general principles or cogent observations related to those rare few occurrences of successful market disruption by a successful innovation? And every so often Black (and Gray) Swan events really cause profound permanent changes.
Absolutely! these happen all the time, but I think are slower than people realize. Perhaps a good topic for future weeks - I always try to keep a balanced diet.
I’ve been reading your pieces for the last year and a half and enjoy all of them. In my 401k I’m only allowed to go long, and I can’t bet against these bad actors. Many employee 401k plans are set up to push you towards buying sector focused mutual funds or a low cost S&P tracking fund. You set it and forget it because the market Always goes up over time, they say. They also say you shouldn’t time the market. They also likely make a lot of money off of my regular contributions to many companies I have no time to actually research and determine if that’s where my money should be invested. Who is they? It’s everybody that controls the game that I’m forced to play to hopefully secure a decent retirement to live later in life. I’d like to hear your thoughts on how this game plays out and what could stop the music that apparently has a never ending source of energy to keep it going. If you have an article that touches on any of my babbling, please point me to it. If not, maybe write about it. Something I’ve asked myself before is why does publicly traded co. Exec A make 1000x what I do? Their company doesn’t even have to perform above average and their stock compensation keeps paying while my required regular 401k contributions make sure their stock keeps punching higher so they can overpay for their 6th vacation home. Can the US market truly go up forever as long as the government can keep inflation positive but low? Thanks for reading my long comment/rant!
My initial reaction is that you're doing the right thing. Contributing consistently to a broad low cost index fund is probably an ideal choice for the large majority of people. Most of what is included in this piece is specifically talking to people who are trying to outperform the market by actively trading and picking specific stocks or sectors. Most people will not succeed in this venture regardless of the outcome.
For a truly long term investor such as a passive 401k contributor like yourself, consider these bumps along the road.
The broad market has a very good 100+ year track record, which is driven both by inflation (earnings are in nominal dollars) and real economic growth which is almost always positive as well. I don't see any reason why this should change in the near term.
As for CEO pay, my best answer is that they take the most they can get away with!
These look like the same stock charts from 1996-2001 and 2005-2009, only the names have changed. Many stocks rise to the moon during a rollicking buyers market, but few have the staying power to orbit it for long and the vast majority crash back to earth. Witness Acrimoto, which peaked above $700 about 2 years ago and it now a sterling buy below $4...isn't it?
The fact is that you can buy stocks at any price and sell at any price. What the rest of Wall Street or the insiders are doing is irrelevant. It's what who you do that matters. Follow the fools to the moon and ride their tails as they crash back to earth. You must do something different when things get a bit too unbelievable.
Study charts from previous hard charging markets. The rise to immortality and the fall to reality is always the same. At some point, if you have made good buying decisions, the froth must be blown away and you sell some shares into the mania. Not always easy, but the big boys don't own the game.
Buy and hold, and hold, and hold, and hold? That is a different game if you choose to play it.
Absolutely - its uncanny how similar the charts look to some of the prior bubbles - and speaks to the repeatable, predictable human nature that causes it.
I think you nailed it - if you are able to recognize a bubble, are seeking to maximize profit, the best thing to do is jump in with both feet on the way up and be prepared to flip 180 at the right moment (though timing is always a bit tricky!)
I forgot I had already liked this article when it was published. In fact I forgot I had read it, even if the conclusions stay with me. I will read it again before 2040.
Thanks Karishma! It was fun to go down the China Property rabbit hole for a couple months, and that remains some of my best work to date. Glad you have enjoyed reading and find it useful.
Your writing is just incredibly good. It took all of my willpower during this mania to avoid becoming an outsider bag holder, and I quickly learned not to stand in front of an oncoming train either, so I avoided the fate of the sorry skeptic too. A large part of this was due to voices like yours, wafting silently through the orgasmic shouting of the euphoric bulls. Thank you!
Thanks Shmuel, I'm glad you enjoy the writing, and that you found some of my pontification useful over the past couple years. It really was a wild time to live through, and deserves a little bit of reflection, now that most of it is in the rearview.
This analogy is fantastic! “But both biological viruses and social viruses spread easily through an uninoculated population. Perhaps it’s not a coincidence that the last true stock bubble came twenty years earlier - one full generation.”
Really super piece as usual. Particularly, with my 28 years in FM’s it rings exact.
Wishing you, health, patience and prosperity for 2023.
Thanks Evan! Had to tie in the pandemic to the pandemic bubble somehow! Otherwise all of our accumulated amateur virology takes would go to waste.
Wishing you a great year as well, and thanks for reading!
Hi Last Bear Standing, great article! Wall Street's brick layers - the insider teams bidding up stocks (like building a brick wall) have handed the market over to the demolition teams- the insider's charged with taking the market down. They are not done! Fed funds reaching 5.25% in a slowing economy will be the catalyst for the demolition teams to press the next leg down. They will be blowing up a bunch of good stocks. Like you, I believe that may be a good time to become constructive on high quality stocks laying in the brick rubble. However, I do have a substantial fear about the market heading much lower due to a black swan event like a confrontation with China. It's inevitable in my opinion. What's your view in connection with the timing of a scuffle with China? Or are black swans always unexpected debacles?
Thanks
Thanks Chris. Any speculation about a China scuffle is very far out of my field of knowledge. Though from what I can tell, it seems that the heat has been turned down in the US/China saber rattling, perhaps as each country realizes they have important domestic issues to deal with. I hope for everyone's sake that there is no conflict in the east. For now its not a big factor driving my thoughts on the market - though that could change if the facts change. And like I said, this is purely errant speculation on my part.
As always, thanks for this TLBS! I love the way you write things and the smooth reading. Even for foreign people whom English is not their native language, keep it up !!
Alwo, that’s why I’m always looking for insider ownership in my holdings plus small to micro caps space.
Thanks for the support as always Alexr! Maybe we can do a small cap screen in a future article
Are you ever good at breaking things down to an interesting and readable level. Well done.
Thanks for reading Lynz! glad you enjoyed
Fun read TLBS!! For us old timers, “Pump & Dump”, as it was called, used to be the main game of “penny stocks” on the sheet. Now it is mainstream. Caveat emptor.
Glad you enjoyed it - and yes it's a tale as old as time.
A nice article to ease into 2023. "See you in 2040" HA! A nice end note to get the grey matter working. Thanks TLBS again, for the effort you put in to make this content available.
I think we are all dusting off the cobwebs from the holidays.
And l thought Insider Trading was illegal
in some senses it is, in many other senses it is not
Nice post. Reminds me of something I would have read in Adam Smith’s Money Game.
That is high praise. Thank you and glad you enjoyed it!
So well written and on point. Lots of education for now and for the next inevitable bubble.
They all tend to look eerily similar - it speaks to immutable human nature.
Like the other commenters, this piece spoke eloquently to me.
Perhaps in some future week you'll consider the other side of the coin? Are there any general principles or cogent observations related to those rare few occurrences of successful market disruption by a successful innovation? And every so often Black (and Gray) Swan events really cause profound permanent changes.
Absolutely! these happen all the time, but I think are slower than people realize. Perhaps a good topic for future weeks - I always try to keep a balanced diet.
I’ve been reading your pieces for the last year and a half and enjoy all of them. In my 401k I’m only allowed to go long, and I can’t bet against these bad actors. Many employee 401k plans are set up to push you towards buying sector focused mutual funds or a low cost S&P tracking fund. You set it and forget it because the market Always goes up over time, they say. They also say you shouldn’t time the market. They also likely make a lot of money off of my regular contributions to many companies I have no time to actually research and determine if that’s where my money should be invested. Who is they? It’s everybody that controls the game that I’m forced to play to hopefully secure a decent retirement to live later in life. I’d like to hear your thoughts on how this game plays out and what could stop the music that apparently has a never ending source of energy to keep it going. If you have an article that touches on any of my babbling, please point me to it. If not, maybe write about it. Something I’ve asked myself before is why does publicly traded co. Exec A make 1000x what I do? Their company doesn’t even have to perform above average and their stock compensation keeps paying while my required regular 401k contributions make sure their stock keeps punching higher so they can overpay for their 6th vacation home. Can the US market truly go up forever as long as the government can keep inflation positive but low? Thanks for reading my long comment/rant!
Hi Ken -
My initial reaction is that you're doing the right thing. Contributing consistently to a broad low cost index fund is probably an ideal choice for the large majority of people. Most of what is included in this piece is specifically talking to people who are trying to outperform the market by actively trading and picking specific stocks or sectors. Most people will not succeed in this venture regardless of the outcome.
For a truly long term investor such as a passive 401k contributor like yourself, consider these bumps along the road.
The broad market has a very good 100+ year track record, which is driven both by inflation (earnings are in nominal dollars) and real economic growth which is almost always positive as well. I don't see any reason why this should change in the near term.
As for CEO pay, my best answer is that they take the most they can get away with!
These look like the same stock charts from 1996-2001 and 2005-2009, only the names have changed. Many stocks rise to the moon during a rollicking buyers market, but few have the staying power to orbit it for long and the vast majority crash back to earth. Witness Acrimoto, which peaked above $700 about 2 years ago and it now a sterling buy below $4...isn't it?
The fact is that you can buy stocks at any price and sell at any price. What the rest of Wall Street or the insiders are doing is irrelevant. It's what who you do that matters. Follow the fools to the moon and ride their tails as they crash back to earth. You must do something different when things get a bit too unbelievable.
Study charts from previous hard charging markets. The rise to immortality and the fall to reality is always the same. At some point, if you have made good buying decisions, the froth must be blown away and you sell some shares into the mania. Not always easy, but the big boys don't own the game.
Buy and hold, and hold, and hold, and hold? That is a different game if you choose to play it.
Absolutely - its uncanny how similar the charts look to some of the prior bubbles - and speaks to the repeatable, predictable human nature that causes it.
I think you nailed it - if you are able to recognize a bubble, are seeking to maximize profit, the best thing to do is jump in with both feet on the way up and be prepared to flip 180 at the right moment (though timing is always a bit tricky!)
This is a master piece....You are Super Awesome! Loved this article. God Bless you!
Thanks Rohit - you are far too kind. I'm glad you enjoyed the piece!
I forgot I had already liked this article when it was published. In fact I forgot I had read it, even if the conclusions stay with me. I will read it again before 2040.
Thank you! Discovered you through your piece on the China Property crisis, lucky me. The way you write makes everything so easy to understand.
Thanks Karishma! It was fun to go down the China Property rabbit hole for a couple months, and that remains some of my best work to date. Glad you have enjoyed reading and find it useful.