RIP to value investing...

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PackersFan12
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RIP to value investing...

Post by PackersFan12 » Sun Jun 23, 2019 4:07 pm

https://www.cnbc.com/2019/06/21/is-valu ... ed-it.html

And yes, I realize that CNBC is just noise...

Beat The Street
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Re: RIP to value investing...

Post by Beat The Street » Sun Jun 23, 2019 4:53 pm

It’s been a rough go for a while now for value. Factor enthusiasts would argue every factor goes through extended periods of underperformance. Value factor cynics would argue book value is no longer a relevant factor and the market has evolved to the point where it’s useless in application.

Who is right? I don’t know, but when people start claiming a strategy is dead then I think it may come around. Buy and hold was deemed dead at the end of 2009. Value investing was dead in 1999. We’ll see I guess.
“Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have—or don’t have—in their portfolio.” -Taleb

brianc78
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Re: RIP to value investing...

Post by brianc78 » Sun Jun 23, 2019 5:25 pm

If there is a bubble it's a Growth bubble. I came late to the party--I have a 401K but I had it all in bonds from '01-'16. So I'm getting into stocks after they've already had an amazing run. My 401K is in the Vanguard S&P 500 and the Exterior Market, because those are the only stock index funds they offer; but for the money I have more control over I'm counting on some reversion to the mean: 75% VTV and 25% VWO (which I consider undervalued and growth-y). And I know John Bogle didn't like gold (I chose IAU over the higher fee GLD) but I think after dropping so far off its highs it will be at worst pretty stable and at best it'll serve as a solid hedge and outperform during a recession.

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Re: RIP to value investing...

Post by larryswedroe » Sun Jun 23, 2019 5:49 pm

Read this and immediately brought to mind this "death" article right at start of great stock rally ever
Perhaps the most infamous of all market forecasts is “The Death of Equities,” the cover story of the August 13, 1979 edition of BusinessWeek. next 20 years =18% return to market that was dead.

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Re: RIP to value investing...

Post by columbia » Sun Jun 23, 2019 5:51 pm

Is it a growth bubble or is it a tech bubble?
Is it really a bubble (in relation to the other sectors)?

The world is fundamentally different than it was in 1999. Folks looking for the old patterns might be disappointed. We shall see.

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Re: RIP to value investing...

Post by willthrill81 » Sun Jun 23, 2019 6:02 pm

I predict that value will begin outperforming in the near future. :wink:

From 1926-1940, 1974-1981, and 1989-2001, the value premium was zero or negative. The small premium was even more haphazard, being zero from 1946-1977, over 30 years. We've known all along that factors have underperformed for years at a time, sometimes more than a decade. What we've seen since 2006 is little different.

No one knows if historic factor premia will persist going forward, but the past has already shown that a decade or more of underperformance is far from unprecedented.
“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: RIP to value investing...

Post by nisiprius » Sun Jun 23, 2019 6:08 pm

And yes, I realize that CNBC is just noise...
Yeah, this article is pure noise.

This article is just a random mishmash of opinion, with nary a fact to look at. You can't even argue over it because there's nothing there to argue about. And about that opinion? It's the opinion of one Inigo Fraser-Jenkins. That's a fairly memorable name, and I finally remembered where I'd seen it before.

He is the author of "The Silent Road to Serfdom: Why Passive investing is worse than Marxism."

1) "Value investing" is not the same thing as "tilting toward the small-cap value factor" or "pursuing a factor strategy." Thus,
the classic factor investing strategy of picking stocks with cheap book valuation, embraced by the legendary Warren Buffett...
is actually misleading. It's mixing up two things that should be kept separate.

2) Buffett has never been a factor investor. Buffett began investing long before Fama and French published "Common risk factors in the returns on stocks and bonds" (in 1993).

3) Buffett's strategy, to the extent that it can be stated as a coherent strategy apart from his personal business insights, is based on a 725-page book--Security Analysis by Graham and Dodd. It can't reasonably be summarized as "picking stocks with cheap book valuation.

4) "Most of the decade-long bull run has been led by a boom in shares of major tech companies which are disrupting traditional industries." When hasn't that been happening? If Fraser-Jenkins has a quantitative metric and show us a chart for the amount of disruption or the rate of moat disruption, and it happened to line up well with the performance of the value factor, that would be interesting. Without such a metric, a claim that there's more disruption going on now than in Berkshire Hathaway's glory days is just... handwaving. Seriously, wasn't there disruption going on during 1990-1998--you know, the World Wide Web and the commercialization of the Internet? Berkshire Hathaway (blue) was beating the S&P 500 (orange). Why didn't disruption kill Buffett's strategy then?

Image

5) "The long period of low interest rates is the first to blame for the demise of value investing, Bernstein said." Then value investing isn't necessarily dead. It will be permanently dead if interest rates stay permanently low. It will be resurrected if interest rates rise. Is he ready to say "interest rates are at a permanently low plateau?"
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anoop
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Re: RIP to value investing...

Post by anoop » Sun Jun 23, 2019 7:16 pm

I think we are headed for NIRP so I don’t think interest rates are at a permanently low plateau; they have a lot lower to go.

There is too much debt in the system and the only way to keep the game going is to keep lowering interest rates and using unconventional tools like QE and outright buying stocks.

So in that sense value investing is dead.

Just my very likely wrong and uninformed opinion.

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vineviz
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Re: RIP to value investing...

Post by vineviz » Sun Jun 23, 2019 7:42 pm

nisiprius wrote:
Sun Jun 23, 2019 6:08 pm
2) Buffett has never been a factor investor. Buffett began investing long before Fama and French published "Common risk factors in the returns on stocks and bonds" (in 1993).
Buffet has always been a "factor investor", even if he doesn't know it and never thought of himself that way. His investment style is easily categorized by common factors:

Image

And much more of his performance is attributable to factor returns than to stock-pricing acumen (i.e. "alpha").

Image

https://blogs.cfainstitute.org/investor ... -all-time/
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: RIP to value investing...

Post by klaus14 » Sun Jun 23, 2019 7:42 pm

Beat The Street wrote:
Sun Jun 23, 2019 4:53 pm
It’s been a rough go for a while now for value. Factor enthusiasts would argue every factor goes through extended periods of underperformance. Value factor cynics would argue book value is no longer a relevant factor and the market has evolved to the point where it’s useless in application.

Who is right? I don’t know, but when people start claiming a strategy is dead then I think it may come around. Buy and hold was deemed dead at the end of 2009. Value investing was dead in 1999. We’ll see I guess.
p/b is dead. p/e is not.

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packer16
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Re: RIP to value investing...

Post by packer16 » Sun Jun 23, 2019 8:09 pm

vineviz wrote:
Sun Jun 23, 2019 7:42 pm
nisiprius wrote:
Sun Jun 23, 2019 6:08 pm
2) Buffett has never been a factor investor. Buffett began investing long before Fama and French published "Common risk factors in the returns on stocks and bonds" (in 1993).
Buffet has always been a "factor investor", even if he doesn't know it and never thought of himself that way. His investment style is easily categorized by common factors:

Image

And much more of his performance is attributable to factor returns than to stock-pricing acumen (i.e. "alpha").

Image

https://blogs.cfainstitute.org/investor ... -all-time/
It is true that it can explain what he has done in the past but the it falls apart going forward so how does his alpha become beta when you do not know in advance on how to weigh the factors or even if the factors are stable. Also factor portfolios do not replicate the Buffet portfolio so they are obviously missing something. This IMO where useful analysis of history can become a meaningless prediction/bet on the unknowable future.

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Re: RIP to value investing...

Post by vineviz » Sun Jun 23, 2019 8:11 pm

klaus14 wrote:
Sun Jun 23, 2019 7:42 pm
p/b is dead. p/e is not.
P/B might very well be dead (probably will be comatose, at the very least, as long as the cost of capital is so low), but even so I think the perception is that value funds rely on it much more than they actually do.

Among small cap value ETFs, for instance, only the Russell value indexes rely on price/book as their sole value metric. Most other funds use a total of three to five different metrics in combination or else focus on a single metric like dividend yield or ROA.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Beat The Street
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Re: RIP to value investing...

Post by Beat The Street » Sun Jun 23, 2019 8:16 pm

vineviz wrote:
Sun Jun 23, 2019 8:11 pm
klaus14 wrote:
Sun Jun 23, 2019 7:42 pm
p/b is dead. p/e is not.
P/B might very well be dead (probably will be comatose, at the very least, as long as the cost of capital is so low), but even so I think the perception is that value funds rely on it much more than they actually do.

Among small cap value ETFs, for instance, only the Russell value indexes rely on price/book as their sole value metric. Most other funds use a total of three to five different metrics in combination or else focus on a single metric like dividend yield or ROA.
Yes that’s true. DFA for instance sorts for value using price to book, and then applies a profitability screen. They also use momentum screens when buying and selling. DFA’s value funds still rank very high in their categories despite everyone claiming price to book is dead.
“Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have—or don’t have—in their portfolio.” -Taleb

stan1
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Re: RIP to value investing...

Post by stan1 » Sun Jun 23, 2019 8:19 pm

Inflation targeting is still a pretty new thing. I remember my Econ 1 professor in 1980s spending a lot of time talking about stagflation and her conclusion then was 2% seemed like a good number.

columbia
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Re: RIP to value investing...

Post by columbia » Sun Jun 23, 2019 8:42 pm

stan1 wrote:
Sun Jun 23, 2019 8:19 pm
Inflation targeting is still a pretty new thing. I remember my Econ 1 professor in 1980s spending a lot of time talking about stagflation and her conclusion then was 2% seemed like a good number.

As you probably do, I remember the lines at the gas station in the 70s.

Those who advocate LTT for their bond component should consider that anything can happen - including the return of stagflation.

Jesteroftheswamp
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Re: RIP to value investing...

Post by Jesteroftheswamp » Sun Jun 23, 2019 8:47 pm

I’m confused, so does the mean Vanguard Small Cap Value Fund won’t give me a decent return?

brianc78
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Re: RIP to value investing...

Post by brianc78 » Sun Jun 23, 2019 8:54 pm

columbia wrote:
Sun Jun 23, 2019 5:51 pm
Is it a growth bubble or is it a tech bubble?
Is it really a bubble (in relation to the other sectors)?

The world is fundamentally different than it was in 1999. Folks looking for the old patterns might be disappointed. We shall see.
There is some overlap. The Vanguard Growth etf (VUG) is heavy in technology. But there are value tech companies as well. Who knows, maybe in 5 years Value etfs will be heavier in tech. Even today Apple is the number 1 stock in the S&P 500 Value etf (Voov).

columbia
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Re: RIP to value investing...

Post by columbia » Sun Jun 23, 2019 8:58 pm

brianc78 wrote:
Sun Jun 23, 2019 8:54 pm
columbia wrote:
Sun Jun 23, 2019 5:51 pm
Is it a growth bubble or is it a tech bubble?
Is it really a bubble (in relation to the other sectors)?

The world is fundamentally different than it was in 1999. Folks looking for the old patterns might be disappointed. We shall see.
There is some overlap. The Vanguard Growth etf (VUG) is heavy in technology. But there are value tech companies as well. Who knows, maybe in 5 years Value etfs will be heavier in tech. Even today Apple is the number 1 stock in the S&P 500 Value etf (Voov).
Apple - in 2019 - isn’t a particularly innovative company, so that probably makes sense.

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Re: RIP to value investing...

Post by brianc78 » Sun Jun 23, 2019 9:01 pm

Jesteroftheswamp wrote:
Sun Jun 23, 2019 8:47 pm
I’m confused, so does the mean Vanguard Small Cap Value Fund won’t give me a decent return?
Nobody knows the answer to that. Just pick a fund/funds that you won’t be tempted to jump out of if it underperforms for a few years. You don’t want to get in the habit of chasing winners and locking in losses in your losers, just when the old losers start winning again, and vice versa.

brianc78
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Re: RIP to value investing...

Post by brianc78 » Sun Jun 23, 2019 9:10 pm

I like Value for the next 5-10 years but the safest thing is still buying an S&P 500 or Total Stock Market fund. You’ll outperform almost everyone (including some professional geniuses) and the superior diversification will let you sleep better at night.

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Re: RIP to value investing...

Post by finite_difference » Sun Jun 23, 2019 9:27 pm

columbia wrote:
Sun Jun 23, 2019 8:58 pm
brianc78 wrote:
Sun Jun 23, 2019 8:54 pm
columbia wrote:
Sun Jun 23, 2019 5:51 pm
Is it a growth bubble or is it a tech bubble?
Is it really a bubble (in relation to the other sectors)?

The world is fundamentally different than it was in 1999. Folks looking for the old patterns might be disappointed. We shall see.
There is some overlap. The Vanguard Growth etf (VUG) is heavy in technology. But there are value tech companies as well. Who knows, maybe in 5 years Value etfs will be heavier in tech. Even today Apple is the number 1 stock in the S&P 500 Value etf (Voov).
Apple - in 2019 - isn’t a particularly innovative company, so that probably makes sense.
To be fair, Apple (2019) is more innovative than 98% of companies. It just might not be as innovative compared to Apple (2006), which was right before they released the product that changed the world.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

finite_difference
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Re: RIP to value investing...

Post by finite_difference » Sun Jun 23, 2019 9:32 pm

Beat The Street wrote:
Sun Jun 23, 2019 8:16 pm
vineviz wrote:
Sun Jun 23, 2019 8:11 pm
klaus14 wrote:
Sun Jun 23, 2019 7:42 pm
p/b is dead. p/e is not.
P/B might very well be dead (probably will be comatose, at the very least, as long as the cost of capital is so low), but even so I think the perception is that value funds rely on it much more than they actually do.

Among small cap value ETFs, for instance, only the Russell value indexes rely on price/book as their sole value metric. Most other funds use a total of three to five different metrics in combination or else focus on a single metric like dividend yield or ROA.
Yes that’s true. DFA for instance sorts for value using price to book, and then applies a profitability screen. They also use momentum screens when buying and selling. DFA’s value funds still rank very high in their categories despite everyone claiming price to book is dead.
I invest a little in both DFFVX (US target value) and DFIVX (Intl value). Mainly just for fun, and out of curiosity.

Long live value!
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

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Re: RIP to value investing...

Post by fennewaldaj » Sun Jun 23, 2019 10:26 pm

brianc78 wrote:
Sun Jun 23, 2019 8:54 pm
columbia wrote:
Sun Jun 23, 2019 5:51 pm
Is it a growth bubble or is it a tech bubble?
Is it really a bubble (in relation to the other sectors)?

The world is fundamentally different than it was in 1999. Folks looking for the old patterns might be disappointed. We shall see.
There is some overlap. The Vanguard Growth etf (VUG) is heavy in technology. But there are value tech companies as well. Who knows, maybe in 5 years Value etfs will be heavier in tech. Even today Apple is the number 1 stock in the S&P 500 Value etf (Voov).
And Microsoft which has recently become a growth darling again has been more of a value stock for most of the decade.

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Re: RIP to value investing...

Post by Forester » Mon Jun 24, 2019 1:38 am

RIP value investing or RIP price-to-book and value has had a hard time of it.

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Re: RIP to value investing...

Post by AlohaJoe » Mon Jun 24, 2019 1:53 am

Jesteroftheswamp wrote:
Sun Jun 23, 2019 8:47 pm
I’m confused, so does the mean Vanguard Small Cap Value Fund won’t give me a decent return?
Not at all. Conversations about value and factors are almost always about relative returns. VIOV, Vanguard's small cap value ETF, has returned 9.5% a year since 2010. That's at a time when many (most?) pundits and Bogleheads were expecting or planning on 4-5% returns. So even someone who invested 100% in small cap value during a time when "value is dead" is still on track for retirement.

The reality is that whether factors or value wins or loses, whatever side you pick, you may experience some "grass is greener" regret but it probably won't materially affect your retirement since that is affected far more by savings
and spending rates than asset allocation.

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Is value investing dead?

Post by g2morrow » Mon Jun 24, 2019 6:15 am

And this is why i don't pick individuals stocks, or value, or growth, or sector, or cap weight, or manager - nobody can predict the future.

https://www.cnbc.com/2019/06/21/is-valu ... ed-it.html

These reasons seem as good as any to explain the past. So is this time different?

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Re: RIP to value investing...

Post by vineviz » Mon Jun 24, 2019 10:35 am

Nicolas Rabener has a timely blog post at FactorResearch.com called "Mapping My Mind: Value Factor".

https://www.factorresearch.com/research ... lue-factor

He looks at the value factor several different ways, including different metrics (as we discussed earlier):

Image

His brief conclusion:
Given that the performance of the Value factor is similar across stock markets and asset classes, indicates one common driver that is likely related to market structure. Our research suggests that it is mainly risk sentiment that is driving the performance of the Value factor, although that framework requires further validation.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: RIP to value investing...

Post by garlandwhizzer » Mon Jun 24, 2019 12:51 pm

I think the point of the CNBC article is that over the last decade there have been what appear to be secular changes in the economy (low inflation/low interest rates/persistently sluggish economic growth in spite of ultra-aggressive monetary policy, and tech dominance disrupting traditional storehouses of value in favor of tech driven growth). P/B, the initial definition of value has become a joke and value funds are constantly changing their parameters for defining value in attempts to harvest an elusive premium. These macro-economic changes have clearly had impacts on value factor performance however you measure it. How long this macro-economic picture will last is unknown but the next major disruptive tech tidal wave, artificial intelligence, is already gaining force. A I threatens to be more disruptive to more industries and more profitable to tech than the internet tidal wave. As long as rates, inflation, and GDP growth remain low and tech remains essentially the only source of reliable persistent profit growth, I suspect value will continue to struggle and tech driven growth will continue to prosper. Macro-economlic secular trends determine market action IMO more so than factor models, which are after all only models derived from backtesting periods very different from our current situation. I am still hanging on to a 25% SCV in the US (75% TSM) even after a decade of underperformance but until this macro-economic situation changes and we get higher inflation, robust economic growth, and higher interest rates I expect more of the same. Those conditions are historically the times when value shines but they have been absent for a long time. Essentially no one expects them to come back anytime soon.

Garland Whizzer

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Re: RIP to value investing...

Post by vineviz » Mon Jun 24, 2019 12:55 pm

garlandwhizzer wrote:
Mon Jun 24, 2019 12:51 pm
I think the point of the CNBC article is that over the last decade there have been what appear to be secular changes in the economy . . .
Have there been any decades in which there did NOT appear to be "secular changes in the economy"?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: RIP to value investing...

Post by Nowizard » Mon Jun 24, 2019 1:28 pm

Right, just as another recent article was on the demise of index investing.

Tim

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Re: RIP to value investing...

Post by nedsaid » Mon Jun 24, 2019 1:38 pm

larryswedroe wrote:
Sun Jun 23, 2019 5:49 pm
Read this and immediately brought to mind this "death" article right at start of great stock rally ever
Perhaps the most infamous of all market forecasts is “The Death of Equities,” the cover story of the August 13, 1979 edition of BusinessWeek. next 20 years =18% return to market that was dead.
You did have to be patient as the "Death of Equities" article in BusinessWeek was published in 1979. The bull market didn't start in earnest until 1984, so you had to wait another 4 1/2 years or so. There is a lot of "Death of Value" going around now, my guess is that we might have to be similarly patient this time around too.

Interest rates have headed down again and the Fed is starting to think about rate cuts again. If the economy slows down again to 2% GDP Growth, we are back to the "new normal" environment that favored the Large Growth stocks in the first place. Not disagreeing with Larry, just pointing out it could take a while for the ship to turn. Plus, there needs to be an event to change the market psychology as Large Growth has become something of an investing religion. Folks don't change their "religion" easily. Making Value great again was harder than first thought.
A fool and his money are good for business.

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Re: RIP to value investing...

Post by asif408 » Mon Jun 24, 2019 1:48 pm

Value has been underperforming in the US for a while. But the US is only one country, so why is the focus only on the US?

In Emerging Markets it appears the tide turned several years ago, or at least over the last 3 1/2 years: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D. DFA's EM Value Index and the RAFI EM index (which has a value tilt) have both outperformed the market cap weighted EM index fund since mid-January 2016.

A similar story for developed ex-US markets: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D. The DFA International Value fund and the RAFI developed ex-US fund have outperformed the market cap weighted developed ex-US fund since mid-February 2016.

What's even more interesting is that both EM value funds have also outperformed the US stock market index over that time frame (not so for the developed ex-US funds, however). So why have there been no news articles about this outperformance of EM value or the outperformance of value outside the US?

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Re: RIP to value investing...

Post by KyleAAA » Mon Jun 24, 2019 1:54 pm

Time to tilt to value.

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Re: RIP to value investing...

Post by nedsaid » Mon Jun 24, 2019 2:12 pm

garlandwhizzer wrote:
Mon Jun 24, 2019 12:51 pm
I think the point of the CNBC article is that over the last decade there have been what appear to be secular changes in the economy (low inflation/low interest rates/persistently sluggish economic growth in spite of ultra-aggressive monetary policy, and tech dominance disrupting traditional storehouses of value in favor of tech driven growth). P/B, the initial definition of value has become a joke and value funds are constantly changing their parameters for defining value in attempts to harvest an elusive premium. These macro-economic changes have clearly had impacts on value factor performance however you measure it. How long this macro-economic picture will last is unknown but the next major disruptive tech tidal wave, artificial intelligence, is already gaining force. A I threatens to be more disruptive to more industries and more profitable to tech than the internet tidal wave. As long as rates, inflation, and GDP growth remain low and tech remains essentially the only source of reliable persistent profit growth, I suspect value will continue to struggle and tech driven growth will continue to prosper. Macro-economlic secular trends determine market action IMO more so than factor models, which are after all only models derived from backtesting periods very different from our current situation. I am still hanging on to a 25% SCV in the US (75% TSM) even after a decade of underperformance but until this macro-economic situation changes and we get higher inflation, robust economic growth, and higher interest rates I expect more of the same. Those conditions are historically the times when value shines but they have been absent for a long time. Essentially no one expects them to come back anytime soon.

Garland Whizzer
Garland, a pretty good argument has been advanced that Growth represents the future and Value represents the past. Valuethinker has good posts out there outlining this. We have heard all this before: Buffett is an idiot, Value is dead, Vanguard Growth Index achieved non-diversified status, Growth represents the future. Pretty much the same as 1999.

It is a matter of expectations, expectations can be so high that even great companies can become poor investments, hence my comments on the "Four Horsemen of Underperformance." I mean what could be better than AIG, GE, Microsoft, and Pfizer? These were hugely admired companies, with their own followings, there was what I called an investing religion behind each of them. All four were "must have" stocks of the 1990's.

Growth predominated during the 1990's when interest rates were much higher than today. Growth flourished in a higher interest rate period, 6%-7%, and we are seeing 2%-3% today. Who says that Value can't flourish in a low interest rate environment, particularly when Value stocks are supposed to be more highly leveraged than Growth stocks?

I think the reason that low interest rates have favored Large Growth stocks is that until recently, economic growth was also slow. Inflation was so well behaved we were starting to worry about outright deflation. So it seems that interest rates were not the cause of the Large Growth trend, it was slower economic growth. But again, GDP growth was higher during the 1990's than it was from 2008-2019. The 1990's were a Large Growth period also. It does seem that Value does better during times of faster GDP growth.

It could be that what happened was a flight to safety to the Large Growth stocks in the aftermath of the 2008-2009 financial crisis and that investor psychology regarding the US Stock Market has not changed. It might have little to do with GDP growth and interest rates and everything to do with investor preferences. Maybe, just maybe, folks buy the Large Growth stocks because they like them.
A fool and his money are good for business.

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Re: RIP to value investing...

Post by Jesteroftheswamp » Mon Jun 24, 2019 6:22 pm

KyleAAA wrote:
Mon Jun 24, 2019 1:54 pm
Time to tilt to value.
Can you please explain your rationale for this comment?

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Re: RIP to value investing...

Post by vineviz » Mon Jun 24, 2019 6:53 pm

Jesteroftheswamp wrote:
Mon Jun 24, 2019 6:22 pm
KyleAAA wrote:
Mon Jun 24, 2019 1:54 pm
Time to tilt to value.
Can you please explain your rationale for this comment?
I took him to be observing that the appearance of articles signaling the "death" of something is often (only partly in jest) considered to be a good contrarian signal that the thing is imminently going to show obvious signs of life again.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

garlandwhizzer
Posts: 2440
Joined: Fri Aug 06, 2010 3:42 pm

Re: RIP to value investing...

Post by garlandwhizzer » Mon Jun 24, 2019 8:14 pm

vineviz wrote:

Have there been any decades in which there did NOT appear to be "secular changes in the economy"?


It's a matter of degree, not kind. The rate of change in our lives and in the economy increases at an ever faster pace every year due to technology advances. The average iPhone now has more computing power than the most powerful computer in the world did 2 or 3 decades ago. Not to mention the fact that the old computer took up a whole building. The smartphone revolution is only 12 years old. It really got started with Steve Jobs' presentation at Macworld in 2007. Now we can't live without smartphones. They dominate worldwide interpersonal communications and are the leading source of photographs in the entire world. Social media which again is worldwide and dominant is another example. Facebook started only 7 years ago and now 2.1 billion people use Facebook every day. There were revolutions in prior ages--railroads, combustion engines, etc., but they didn't change the world and the economy so radically and so quickly. Tech creates and sustain its own economic momentum with innovation. The cash flow and cash on balance sheet of big cap tech is staggering. APPL has $245 billion in cash on the balance sheet right now, searching for investment opportunities, not a bad problem to have.

It is possible that changes in international trade situation or geopolitical events going forward may change this situation in which case tech dominance may wane. But the above is what has largely been driving the markets and the economy for more than a decade now even as the old traditional economy and the value factor itself have struggled. In a low inflation, low growth, low interest rate environment like ours today, investors seem quite willing to pay the big premiums for the reliable and persistent profit growth that tech has offered. They'll take a harder look at value when either tech stumbles or value starts cranking out robust profit growth.

Garland Whizzer

fennewaldaj
Posts: 777
Joined: Sun Oct 22, 2017 11:30 pm

Re: RIP to value investing...

Post by fennewaldaj » Mon Jun 24, 2019 9:13 pm

garlandwhizzer wrote:
Mon Jun 24, 2019 8:14 pm
vineviz wrote:

Have there been any decades in which there did NOT appear to be "secular changes in the economy"?


It's a matter of degree, not kind. The rate of change in our lives and in the economy increases at an ever faster pace every year due to technology advances. The average iPhone now has more computing power than the most powerful computer in the world did 2 or 3 decades ago. Not to mention the fact that the old computer took up a whole building. The smartphone revolution is only 12 years old. It really got started with Steve Jobs' presentation at Macworld in 2007. Now we can't live without smartphones. They dominate worldwide interpersonal communications and are the leading source of photographs in the entire world. Social media which again is worldwide and dominant is another example. Facebook started only 7 years ago and now 2.1 billion people use Facebook every day. There were revolutions in prior ages--railroads, combustion engines, etc., but they didn't change the world and the economy so radically and so quickly. Tech creates and sustain its own economic momentum with innovation. The cash flow and cash on balance sheet of big cap tech is staggering. APPL has $245 billion in cash on the balance sheet right now, searching for investment opportunities, not a bad problem to have.

It is possible that changes in international trade situation or geopolitical events going forward may change this situation in which case tech dominance may wane. But the above is what has largely been driving the markets and the economy for more than a decade now even as the old traditional economy and the value factor itself have struggled. In a low inflation, low growth, low interest rate environment like ours today, investors seem quite willing to pay the big premiums for the reliable and persistent profit growth that tech has offered. They'll take a harder look at value when either tech stumbles or value starts cranking out robust profit growth.

Garland Whizzer
I would argue prior revolutions changed life and the world a lot more than this current one. Like is the smart phone really as big a revolution as the railroad or the automobile? I find it pretty hard to make that case. Its basically replacing other devices like desktops and laptops and is marginally more useful. Railroad, autos, telegraph, telephone, ect were absolute revolutions in speed of transport communication. I could be wrong but this seems like a much smaller revolution that prior ones.

anoop
Posts: 999
Joined: Tue Mar 04, 2014 1:33 am

Re: RIP to value investing...

Post by anoop » Mon Jun 24, 2019 11:24 pm

fennewaldaj wrote:
Mon Jun 24, 2019 9:13 pm
garlandwhizzer wrote:
Mon Jun 24, 2019 8:14 pm
vineviz wrote:

Have there been any decades in which there did NOT appear to be "secular changes in the economy"?


It's a matter of degree, not kind. The rate of change in our lives and in the economy increases at an ever faster pace every year due to technology advances. The average iPhone now has more computing power than the most powerful computer in the world did 2 or 3 decades ago. Not to mention the fact that the old computer took up a whole building. The smartphone revolution is only 12 years old. It really got started with Steve Jobs' presentation at Macworld in 2007. Now we can't live without smartphones. They dominate worldwide interpersonal communications and are the leading source of photographs in the entire world. Social media which again is worldwide and dominant is another example. Facebook started only 7 years ago and now 2.1 billion people use Facebook every day. There were revolutions in prior ages--railroads, combustion engines, etc., but they didn't change the world and the economy so radically and so quickly. Tech creates and sustain its own economic momentum with innovation. The cash flow and cash on balance sheet of big cap tech is staggering. APPL has $245 billion in cash on the balance sheet right now, searching for investment opportunities, not a bad problem to have.

It is possible that changes in international trade situation or geopolitical events going forward may change this situation in which case tech dominance may wane. But the above is what has largely been driving the markets and the economy for more than a decade now even as the old traditional economy and the value factor itself have struggled. In a low inflation, low growth, low interest rate environment like ours today, investors seem quite willing to pay the big premiums for the reliable and persistent profit growth that tech has offered. They'll take a harder look at value when either tech stumbles or value starts cranking out robust profit growth.

Garland Whizzer
I would argue prior revolutions changed life and the world a lot more than this current one. Like is the smart phone really as big a revolution as the railroad or the automobile? I find it pretty hard to make that case. Its basically replacing other devices like desktops and laptops and is marginally more useful. Railroad, autos, telegraph, telephone, ect were absolute revolutions in speed of transport communication. I could be wrong but this seems like a much smaller revolution that prior ones.
Very interesting perspective and one that I agree with. A lot of innovation nowadays is just incremental improvement (evolution), not something fundamental (revolution). Smartphones existed before the iPhone, it's just that the iPhone got the UI and ecosystem right.

anoop
Posts: 999
Joined: Tue Mar 04, 2014 1:33 am

Re: RIP to value investing...

Post by anoop » Mon Jun 24, 2019 11:55 pm

garlandwhizzer wrote:
Mon Jun 24, 2019 8:14 pm
APPL has $245 billion in cash on the balance sheet right now, searching for investment opportunities, not a bad problem to have.
AAPL also has a ton of debt, so there's some financial engineering going on part of which is to minimize tax liability.

garlandwhizzer
Posts: 2440
Joined: Fri Aug 06, 2010 3:42 pm

Re: RIP to value investing...

Post by garlandwhizzer » Tue Jun 25, 2019 2:04 pm

anoop wrote:

Like is the smart phone really as big a revolution as the railroad or the automobile? I
Good point. I agree that the railroad and the automobile were bigger revolutions than the smart phone. My point is not just how big the revolution is but how quickly it dominates the markets. Smart phones and social media became dominant in a decade or so. Autos were invented in the late 1800s. Henry Ford was making cars in 1896. Autos dominating transportation did not occur worldwide until the 1920s in cities and as late as 1939 in rural areas where the horse and buggy was still commonly used. It is the pace of change that is accelerating in our tech age. New industries like Facebook rise from nothing more than an idea into a dominant worldwide mega-cap in a short period of years. Ford Motor Company was successful but did not do that.

Garland Whizzer

jrbdmb
Posts: 387
Joined: Tue Oct 06, 2015 4:27 pm

Re: RIP to value investing...

Post by jrbdmb » Tue Jun 25, 2019 3:50 pm

BWildt wrote:
Sun Jun 23, 2019 4:07 pm
https://www.cnbc.com/2019/06/21/is-valu ... ed-it.html

And yes, I realize that CNBC is just noise...
Maybe you need to read a thread from the glass-is-half-full side ... Small Cap Value Heads Rejoice !!!

viewtopic.php?f=10&t=282533

KlangFool
Posts: 13682
Joined: Sat Oct 11, 2008 12:35 pm

Re: RIP to value investing...

Post by KlangFool » Tue Jun 25, 2019 4:03 pm

fennewaldaj wrote:
Mon Jun 24, 2019 9:13 pm

I would argue prior revolutions changed life and the world a lot more than this current one. Like is the smart phone really as big a revolution as the railroad or the automobile? I find it pretty hard to make that case. Its basically replacing other devices like desktops and laptops and is marginally more useful. Railroad, autos, telegraph, telephone, ect were absolute revolutions in speed of transport communication. I could be wrong but this seems like a much smaller revolution that prior ones.
fennewaldaj,

You are thinking from the point of view of a developed world country. For many third world countries, smartphones are their only mean to access the Internet.

KlangFool

dharrythomas
Posts: 958
Joined: Tue Jun 19, 2007 4:46 pm

Re: RIP to value investing...

Post by dharrythomas » Tue Jun 25, 2019 5:07 pm

garlandwhizzer wrote:
Mon Jun 24, 2019 8:14 pm
vineviz wrote:

Have there been any decades in which there did NOT appear to be "secular changes in the economy"?


It's a matter of degree, not kind. The rate of change in our lives and in the economy increases at an ever faster pace every year due to technology advances. The average iPhone now has more computing power than the most powerful computer in the world did 2 or 3 decades ago. Not to mention the fact that the old computer took up a whole building. The smartphone revolution is only 12 years old. It really got started with Steve Jobs' presentation at Macworld in 2007. Now we can't live without smartphones. They dominate worldwide interpersonal communications and are the leading source of photographs in the entire world. Social media which again is worldwide and dominant is another example. Facebook started only 7 years ago and now 2.1 billion people use Facebook every day. There were revolutions in prior ages--railroads, combustion engines, etc., but they didn't change the world and the economy so radically and so quickly. Tech creates and sustain its own economic momentum with innovation. The cash flow and cash on balance sheet of big cap tech is staggering. APPL has $245 billion in cash on the balance sheet right now, searching for investment opportunities, not a bad problem to have.

It is possible that changes in international trade situation or geopolitical events going forward may change this situation in which case tech dominance may wane. But the above is what has largely been driving the markets and the economy for more than a decade now even as the old traditional economy and the value factor itself have struggled. In a low inflation, low growth, low interest rate environment like ours today, investors seem quite willing to pay the big premiums for the reliable and persistent profit growth that tech has offered. They'll take a harder look at value when either tech stumbles or value starts cranking out robust profit growth.

Garland Whizzer
Facebook may have only been public for 7 years, it has been around longer than that. I’ve been a member longer than that and I am a late adopter of technology. I got a Facebook account only when my daughter decided that it was “OK” for an “old” person to get an account and it wouldn’t interfere with her. I got an account in 2009, Facebook was already 5 years old.

dh
Posts: 375
Joined: Sun Mar 13, 2011 8:01 pm

Re: RIP to value investing...

Post by dh » Tue Jun 25, 2019 7:05 pm

There will be a "winner" every single year.
https://www.callan.com/periodic-table/
The problem is figuring out the "winner" in any given year. Thus, Bogleheads diversify. Best wishes all! :sharebeer

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