Superstars of Wrestling Investing - Ultimate S&P500 Valuation

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InvestInPasta
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Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by InvestInPasta » Thu Jan 18, 2018 7:44 pm

Tonight big fights...
Take the seat earlier...

Oct. 1, 2017 8:50 AM

GS & Montier vs Buffett
In a CNBC article, Goldman Sachs said, “any way you look at it, this stock market is overvalued”. James Montier, strategist at GMO, which has $77 billion in assets under management, also believes the stock market is overvalued and he is famous for having predicted correctly past market crises. However, we have opinions in the opposite camp. In a March 2017 Forbes article, Warren Buffett said that he believes the stock market is not overvalued and we should stay invested.

Shillers vs Siegel
Robert Shiller, Nobel Prize winner in 2013, has come up with the Cyclically-Adjusted PE (known as “CAPE” or “Shiller PE”), which shows the US stock market to be at the third highest point in history.

* Shiller PE of 30.49 as at 19 August 2017

Jeremy Siegel, Professor of Finance at the University of Pennsylvania, however, does not believe that the market is overvalued. In a CNBC article, he said that the CAPE is artificially high because it incorporates the low earnings during the time of the global financial crisis.

...

Conclusion
Based on the above bottom-up analysis, we conclude that the US stock market is extremely overvalued based on Price to Sales and Price to Cash Flow, mildly overvalued based on Price to Earnings and Price to Book and fairly valued based on Dividend Yield. Putting them all together in an optimized way, the Composite Valuation Indicator points to the conclusion that the US stock market is mildly overvalued.

- source: Access to this page has been denied.

I'm wondering if in 1987 they would have agreed on Japanese market being extremly overvalued. :oops:

:confused:
Last edited by InvestInPasta on Fri Jan 19, 2018 1:47 am, edited 1 time in total.
When studying English I am lazier than my portfolio. Feel free to correct my English and Investng mistakes.

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willthrill81
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by willthrill81 » Thu Jan 18, 2018 7:47 pm

One can only know whether a market is overvalued in hindsight.

Those who subscribe to the efficient market hypothesis believe that the market is always priced 'correctly'.*

*I do not believe in the EMH.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by venkman » Thu Jan 18, 2018 10:45 pm

InvestInPasta wrote:
Thu Jan 18, 2018 7:44 pm
In a March 2017 Forbes article, Warren Buffett said that he believes the stock market is not overvalued and we should stay invested.
Would this be the same Warren Buffett who is STILL sitting on $100 billion in cash?

I'm not saying he's wrong about the stock market, but if HE of all people can't find any companies that are attractively priced...

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JoMoney
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by JoMoney » Thu Jan 18, 2018 11:12 pm

https://finance.yahoo.com/news/warren-b ... 28844.html
...repeatedly, Buffett responded by pointing to interest rates.
It’s not as simple as CAPE or market cap to GDP


“Every number has some degree of meaning, ... It means more sometimes than others. … And both of the things that you mentioned get bandied around a lot. It’s not that they’re unimportant. … They can be very important. Sometimes they can be almost totally unimportant. It’s just not quite as simple as having one or two formulas and then saying the market is undervalued or overvalued.”

“The most important thing is future interest rates,” ... “And people frequently plug in the current interest rate saying that’s the best they can do. After all, it does reflect the market’s judgment. And the 30-year bond should tell you what people are willing to put out money for 30 years and have no risk of dollar gain or dollar loss at the end of the 30-year period. But what better figure can you come up with? I’m not sure I can come up with a better figure. But that doesn’t mean I want to use the current figure, either."
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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willthrill81
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by willthrill81 » Thu Jan 18, 2018 11:59 pm

venkman wrote:
Thu Jan 18, 2018 10:45 pm
InvestInPasta wrote:
Thu Jan 18, 2018 7:44 pm
In a March 2017 Forbes article, Warren Buffett said that he believes the stock market is not overvalued and we should stay invested.
Would this be the same Warren Buffett who is STILL sitting on $100 billion in cash?

I'm not saying he's wrong about the stock market, but if HE of all people can't find any companies that are attractively priced...
Buffett is notorious for sitting on mounds of cash, waiting for a good buying opportunity to open up. He isn't just going to put it in a Vanguard S&P 500 fund.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

InvestInPasta
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by InvestInPasta » Fri Jan 19, 2018 2:01 am

willthrill81 wrote:
Thu Jan 18, 2018 11:59 pm
Buffett is notorious for sitting on mounds of cash, waiting for a good buying opportunity to open up. He isn't just going to put it in a Vanguard S&P 500 fund.
Anyway this is what he suggests to do to the average investor and to his wife:

In fact, for his wife (and her future trustee) he has the following plan:

What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit…My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors…
- Buffett's shateholder letter 2013

BTW: is there a website that keeps track of the total cash of Berkshire as a percentage of the overall portfolio?
I have seen many websites that constantly show Berkshire's stocks asset portfolio (each stock and its percentage), but none that shows how much is in cash.
When studying English I am lazier than my portfolio. Feel free to correct my English and Investng mistakes.

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JoMoney
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by JoMoney » Fri Jan 19, 2018 2:49 am

InvestInPasta wrote:
Fri Jan 19, 2018 2:01 am
...
BTW: is there a website that keeps track of the total cash of Berkshire as a percentage of the overall portfolio?
I have seen many websites that constantly show Berkshire's stocks asset portfolio (each stock and its percentage), but none that shows how much is in cash.
You could look at the balance sheet / Quarterly filings
http://berkshirehathaway.com/reports.html
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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nisiprius
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by nisiprius » Fri Jan 19, 2018 3:16 am

I don't mean to criticize mentioning this article--I like financial porn as much as the next guy--but its main value, if it has any, is to illustrate the point that at any given instant in time there are huge differences in the predictions of the best informed and most knowledgeable observers. Of course, that's to be expected, as stock price equilibrate at a point where there is enough difference in opinion on valuations for there to be investors interested in taking either side of any trade.

One should always keep in mind, too, that these are not disinterested parties, and they are not naive or transparent. They may, probably do have self-serving reasons for wanting the public to believe something. To some extent, what's being sold by all of them is a certain view of investing and the stock market. It's like Coke versus Pepsi. It's been known for a long time that when e.g. a cola advertises, it boosts sales of all colas. A Coke ad is not just selling Coke, it's selling the idea that a) everyone should drink cola, and b) it is hugely important and you put a lot of mental effort into deciding which cola to drink.
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InvestInPasta
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by InvestInPasta » Fri Jan 19, 2018 3:49 am

JoMoney wrote:
Fri Jan 19, 2018 2:49 am
InvestInPasta wrote:
Fri Jan 19, 2018 2:01 am
...
BTW: is there a website that keeps track of the total cash of Berkshire as a percentage of the overall portfolio?
I have seen many websites that constantly show Berkshire's stocks asset portfolio (each stock and its percentage), but none that shows how much is in cash.
You could look at the balance sheet / Quarterly filings
http://berkshirehathaway.com/reports.html
Thanks, shall I look at Consolidated Balance Sheet?
https://www.sec.gov/cgi-bin/viewer?acti ... brl_type=v#
I opened a specific thread, I think it could be useful to someone else too and we avoid going OT here:
How much cash/bonds does Buffett's Berkshire own in percentage of its total portfolio?
When studying English I am lazier than my portfolio. Feel free to correct my English and Investng mistakes.

garlandwhizzer
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by garlandwhizzer » Fri Jan 19, 2018 10:52 am

nisi wrote:
I don't mean to criticize mentioning this article--I like financial porn as much as the next guy--but its main value, if it has any, is to illustrate the point that at any given instant in time there are huge differences in the predictions of the best informed and most knowledgeable observers. Of course, that's to be expected, as stock price equilibrate at a point where there is enough difference in opinion on valuations for there to be investors interested in taking either side of any trade.

One should always keep in mind, too, that these are not disinterested parties, and they are not naive or transparent. They may, probably do have self-serving reasons for wanting the public to believe something.
1+ Well said. An important concept to keep in mind when evaluating the advice of "experts."

Garland Whizzer

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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by magneto » Fri Jan 19, 2018 2:02 pm

nisiprius wrote:
Fri Jan 19, 2018 3:16 am
I don't mean to criticize mentioning this article--I like financial porn as much as the next guy--but its main value, if it has any, is to illustrate the point that at any given instant in time there are huge differences in the predictions of the best informed and most knowledgeable observers. Of course, that's to be expected, as stock price equilibrate at a point where there is enough difference in opinion on valuations for there to be investors interested in taking either side of any trade.
+1

As it happens finding market valuation measures contradictory at present.
In our own portfolio find a little more clarity, with most positions pushing to within 10% of historic valuation ceilings. But nothing to prevent those ceilings being penetrated :!:
As we all know, perhaps to our cost, valuations are never the full story (although they may help).
More worrying is that John Hussman has turned neutral.
'There is a tide in the affairs of men ...', Brutus (Market Timer)

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willthrill81
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by willthrill81 » Fri Jan 19, 2018 2:22 pm

InvestInPasta wrote:
Fri Jan 19, 2018 2:01 am
willthrill81 wrote:
Thu Jan 18, 2018 11:59 pm
Buffett is notorious for sitting on mounds of cash, waiting for a good buying opportunity to open up. He isn't just going to put it in a Vanguard S&P 500 fund.
Anyway this is what he suggests to do to the average investor and to his wife
That's after he's dead. He seems to still be confident that he can beat the S&P 500 going forward; his track record in doing so in the past is undeniable.*

*Note: I take this as close to proof that the EMH is false. If the EMH were accurate, the likelihood of anyone, even out of millions of investors,
having beaten the market as much as he has for as long as he has is probably close to zero.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

venkman
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by venkman » Fri Jan 19, 2018 10:04 pm

willthrill81 wrote:
Fri Jan 19, 2018 2:22 pm
That's after he's dead. He seems to still be confident that he can beat the S&P 500 going forward; his track record in doing so in the past is undeniable.*

*Note: I take this as close to proof that the EMH is false. If the EMH were accurate, the likelihood of anyone, even out of millions of investors,
having beaten the market as much as he has for as long as he has is probably close to zero.
Since 2003, Berkshire has basically broken even with the S&P 500.

I won't deny that Buffett has put up amazing numbers over his career; but I haven't seen an analysis that accounts for BRK's use of leverage, and what the S&P numbers would be with equivalent leverage.

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willthrill81
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Re: Superstars of Wrestling Investing - Ultimate S&P500 Valuation

Post by willthrill81 » Sat Jan 20, 2018 12:02 am

venkman wrote:
Fri Jan 19, 2018 10:04 pm
willthrill81 wrote:
Fri Jan 19, 2018 2:22 pm
That's after he's dead. He seems to still be confident that he can beat the S&P 500 going forward; his track record in doing so in the past is undeniable.*

*Note: I take this as close to proof that the EMH is false. If the EMH were accurate, the likelihood of anyone, even out of millions of investors,
having beaten the market as much as he has for as long as he has is probably close to zero.
Since 2003, Berkshire has basically broken even with the S&P 500.

I won't deny that Buffett has put up amazing numbers over his career; but I haven't seen an analysis that accounts for BRK's use of leverage, and what the S&P numbers would be with equivalent leverage.
There was one nine year period where Berkshire was behind the S&P 500 for eight of those years but actually beat the S&P 500 over the entire nine year period because the remaining year was so good.

That's a big problem with active management. It's not that the management is necessarily poor, but any investment strategy will fall behind the overall market at some point, and this can go on for years. But most investors are not willing to be that patient, and year or two of underperformance is enough to send them packing. This is even true for the so-called 'smart money' institutional investors. Also, this is a big reason why closet indexing is rampant among many actively managed funds.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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