@Shop-et-al wrote:
There are always interpretations and predictions. All financial pros do the best they can with the information they receive. No one has a crystal ball, but many accomplish good outcomes and some can even explain trends, histories, and decisions well. So, thank you for another resource for financial information.
@shoptastic wrote:
....
Two very good articles from Lyn Alden Schwartzer on gold and silver:
[
seekingalpha.com] (Feb. 20, 2019)
[
seekingalpha.com] (Sep. 18, 2019)
I follow her work and think she writes some of the best pieces on investing at various places, including Seeking Alpha. Able to relay complex information that even lay people can understand.
Lyn Alden's style is great. She explains things with the heart of a teacher (I've emailed her numerous times, too, and she's happy to answer questions about things she posts on).
One of her most enlightening pieces I read was this one:
"This Strategy Tripled The S&P 500 Over 25 Years"
[
seekingalpha.com]
Most people invest 85-90% of all their money into their OWN country. It's a familiarity bias of sorts perhaps. Warren Buffet used to invest 100% of his money in the U.S. alone. Now, he has investments in places like Australia and elsewhere, but still very much focused almost exclusively on the U.S. What's interesting is that Warren had a full decade where he lost money (the "lost decade" as some call it).
Lyn Alden's piece above shows how investing globally where valuations are cheap has outperformed investing solely in the U.S. major indexes (namely, the S&P 500 - which Warren Buffet says to invest in). That's because bubbles often form in various regional stock markets and after they burst, it takes many years for them to return to "normal valuations" and begin to rise again.
If a person invested globally wherever valuations were cheap, they'd have tripled (3x) the returns of the S&P 500 over the last 25 years. The U.S. is up close to 1,000%, while the the global strategy would have netted you around 3,000%.
There are many valuation metrics of stock market overvaluation - Warren Buffet's favorite one that is named after him is the Buffet Ratio/Indicator (the market cap-to-GDP ratio) - and they show the current U.S. market is highly valued. Depending on the metric, it can be said to be around the 1929 pre-Great Depression levels and/or the 2000-2001 dot com bubble levels right now. Once those bubbles burst, it took quite a while for stock prices to return to their pre-bust levels. The dot com bust took until about 2007 (6 years) for stock prices to go back to their pre-bust norms.
During that time, 2002 to 2007, if you invested in emerging markets, where valuations were cheap, you'd have made a killing. The EEM (MSCI Emerging Markets Index) was $11 in 2003 and $53 in 2007. You would have made 5x your money during that boom. Although, the whole "China" craze drove valuations too high and a bubble was created there. After the 2008 crash, emerging markets were then crushed themselves and have been flat for the past decade. The deflation of the "air" (excess value) in those bubbles always takes many years.
But, from 2009 to 2019, U.S. stocks then went on a tear and have increased 4x (you'd have quadrupled your money if buying in 2009). Since U.S. values were cheap during/after the EM bubble (as they deflated from the dot com bubble), they had more room to grow. Although, now many say we're in a U.S. bubble. And EM is cheap.
For the next decade - the 2020's - EM is argued to likely outperform the U.S., as valuations are cheap and they have many drivers of growth. That's what Lyn Alden, Meb Faber and many others have argued using things like the CAPE ratio (which is a P/E ratio that is smoothed across many years, instead of a single year, which can show anomalies) and history.
HOWEVER, as Meb Faber has said, it's always hard to follow this strategy of investing where valuations are cheap. That's because people always want to invest where things are rising fast and there is good news. He says you'd get divorced or fired if a husband or research analyst said to his spouse or mutual fund boss: "Hey, I have a great idea. Let's invest 20% of our assets into a place like Russia, India, and Brazil! The valuations are cheap right now!"
This is especially true if the U.S. is rising quickly and where everyone else wants to invest.
Psychologically and socially, it's hard to do. It's the same with investing in a good company whose stock was crushed based on temporary bad news. People are scared to do it. But, that's often the best time to buy (like in 2008-2009). Instead, people sell!
To make a long story short, I have my eyes on emerging markets right now. I think many, including Lyn Alden, make great cases for them going forward:
"The Case for Emerging Markets"
[
seekingalpha.com]
@Niner wrote:
Shoptastic,
Buying the market was what we used as a comparison to active investing, when I was in grad school for finance and investing. But, to be perfectly straight, the VTSAX is not what broke a million, it was the education and hard work, which allowed for a higher salary. Increased income is the easiest route. I invest around 25% in stocks and am about 50% in real estate, but what enables the any % in anything, is the education and hard work. Mystery shopping lets me reduce my spending, which increases/preserves income.
I agree. You need to first have money to invest. That requires a job that pays the bills and creates surplus for yourself.
I first invested at age 18 ($3,000). Don't ask my age now.
I took my summer job earnings from a hotel restaurant and my parents helped open up an IRA for me. We put it all in there over a decade ago (I've managed it myself since age 21/22-ish). We have multiple family members who have created a lot of wealth from stock investing.
I don't know anything about real estate, as it's not my interest, but I follow and read a lot on stocks and bonds (and, more recently, precious metals).
Edited 5 time(s). Last edit at 10/28/2019 09:18AM by shoptastic.