Sell Tesla?

ToneControl · November 2020

RandallFlagg said:

ToneControl said:

https://markets.businessinsider.com/news/stocks/stock-market-outlook-investing-legend-jeremy-grantham-bubble-crazy-rally-2020-11-1029801632

"The market can go up on bad news and go up on good news," Grantham said. "It can interpret a Trump victory as bullish and then seamlessly interpret a Biden victory as bullish. There are all the characteristics of a bubble. There's nothing much you can throw at when it gets going."
He added that an effective coronavirus vaccine or more fiscal stimulus in the US wouldn't change the fact that the stock market is in a bubble.
Grantham has successfully called three market bubbles: Japan's asset-price bubble in 1989, the dot-com bubble in 2000, and the housing crisis in 2008.

On Thursday, he said one year would be a "stretch" for the bubble to continue inflating while two more years of rising prices would be "extremely unlikely."

It's glib to say "the market is in a bubble". Is every stock in the US is inflated in a bubble? Not a chance. Many of the S&P500 companies are down way below their highs, a few companies pull up the index, same with the Russell.

What do you do? sit out for 1 year? 2 years? 3 years? that's not going to help with building a retirement fund. How many years do you let go by waiting for that "I told you so" moment?

Jeremy Grantham has been forecasting doom and gloom since before 2017, he says returns have been inflated for the last 100 years. He'll get it right one of these years. he was probably skipping round his living room in March, albeit briefly.

Will the US stocks market crash 50% from current values again? yes, without a doubt, but should you sit on the sidelines letting years go by in fear of it? no.

to answer your question
my mate has invested actively and traded indices since 1995, and every year has earned more than his family's living costs, I think he has made more than £250k this year so far

he frequently sits on cash for years

usually he uses the cash as collateral for going short and long on the S+P, without ever buying shares in it

RandallFlagg · November 2020

ToneControl said:

looking at this chart

For the S+P
if you invested in 1929, your pension fund would go down 85%, and not recover until 1955, 26 years later
if you invested in 1937, your pension fund would go down 50%, and not recover until 1946, fair enough there was a war
if you invested in 2001, your pension fund would go down 45%, and not recover until 2007

it's not happened much recently, you need to research why that is in the USA
compare the FTSE and S+P charts

The US has pumped lots of cash into the markets effectively. This cannot carry on indefinitely
https://www.investopedia.com/ask/answers/021015/how-does-quantitative-easing-us-affect-stock-market.asp

https://www.investopedia.com/articles/investing/082515/how-do-asset-bubbles-cause-recessions.asp

Asset price bubbles shoulder blame for some of the most devastating recessions, including those faced by the United States in its history. The stock market bubble of the 1920s, the dot-com bubble of the 1990s, and the real estate bubble of the 2000s were asset bubbles followed by sharp economic downturns. Asset bubbles are especially devastating for individuals and businesses who invest too late, meaning shortly before the bubble bursts. In this regard, asset price bubbles bear a similarity to Ponzi or pyramid scams. The inevitable collapse of asset bubbles wipes out net worth of investors and causes exposed businesses to fail, potentially touching off a cascade of debt deflation and financial panic that can spread to other parts of the economy resulting in a period of higher unemployment and lower production that characterizes a recession.
read all that and tell me that you believe everyone should simply invest permanently, and passively

That chart doesn't allow for dividends either taken or reinvested.

This is the correct valuation for long term investment in the S&P500:

https://www.officialdata.org/us/stocks/s-p-500/1920

RandallFlagg · November 2020

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Is that sustainable, long term? Statistically and according to researched historical data, no it's not, its gambling and you got lucky. Unless you are saying you are gifted and able to time the market consistently?

And is that something you can leave your wife to manage after you've gone?

ToneControl · November 2020

RandallFlagg said:

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Is that sustainable, long term? Statistically and according to researched historical data, no it's not.

And is that something you can leave your wife to manage after you've gone?

Your assertion is that it's not possible to successfully invest if you don't remain constantly 100% invested in equities

But my friend has done it for 25 years successfully
The fact that not everyone could do this does not mean that it's not possible for people who choose to learn how to do it, and have the ability

My daughters have both been taking Economics A levels, I hope they'll be able to manage their own investments

Most people do choose ropey funds, most funds don't outperform the indices
Many indices are loaded with zombie companies, e.g. BT, which is almost like a pension fund with a business attached.

In the absence of final salary pensions, I think everyone needs to wake up and take control of their pensions, I only know a tiny fraction of my friends that are doing this at present, and even those who do are just selecting from a poor selection of funds, as I was 15 years ago

RandallFlagg · November 2020

ToneControl said:

In the absence of final salary pensions, I think everyone needs to wake up and take control of their pensions, I only know a tiny fraction of my friends that are doing this at present, and even those who do are just selecting from a poor selection of funds, as I was 15 years ago

On that we agree Tony! for sure. Whatever people do with their money, they should do it with deliberate purpose and be aware of where their pension is invested and choose a deliberate path to manage it.

Whether it be passive index investing, good diversified active mutual funds or dip and out of spot markets, at least do something with purpose!

Lebarque · November 2020

I do enjoy you two bickering on here. It's very educational!

ToneControl · November 2020

RandallFlagg said:

ToneControl said:

looking at this chart

For the S+P
if you invested in 1929, your pension fund would go down 85%, and not recover until 1955, 26 years later
if you invested in 1937, your pension fund would go down 50%, and not recover until 1946, fair enough there was a war
if you invested in 2001, your pension fund would go down 45%, and not recover until 2007

it's not happened much recently, you need to research why that is in the USA
compare the FTSE and S+P charts

The US has pumped lots of cash into the markets effectively. This cannot carry on indefinitely
https://www.investopedia.com/ask/answers/021015/how-does-quantitative-easing-us-affect-stock-market.asp

https://www.investopedia.com/articles/investing/082515/how-do-asset-bubbles-cause-recessions.asp

Asset price bubbles shoulder blame for some of the most devastating recessions, including those faced by the United States in its history. The stock market bubble of the 1920s, the dot-com bubble of the 1990s, and the real estate bubble of the 2000s were asset bubbles followed by sharp economic downturns. Asset bubbles are especially devastating for individuals and businesses who invest too late, meaning shortly before the bubble bursts. In this regard, asset price bubbles bear a similarity to Ponzi or pyramid scams. The inevitable collapse of asset bubbles wipes out net worth of investors and causes exposed businesses to fail, potentially touching off a cascade of debt deflation and financial panic that can spread to other parts of the economy resulting in a period of higher unemployment and lower production that characterizes a recession.
read all that and tell me that you believe everyone should simply invest permanently, and passively

That chart doesn't allow for dividends either taken or reinvested.

This is the correct valuation for long term investment in the S&P500:

https://www.officialdata.org/us/stocks/s-p-500/1920

the shape of the graph is much the same: see this diagram

RandallFlagg · November 2020

Lebarque said:

I do enjoy you two bickering on here. It's very educational!

We share a common goal but prefer 2 different paths through the maze to reach it...

RandallFlagg · November 2020

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Oh, and before I go and cook tea, only 62%? tut tut tut, I have done nothing this year but leave some ISA money in these 2 funds and beat your 62%

ToneControl · November 2020

RandallFlagg said:

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Oh, and before I go and cook tea, only 62%? tut tut tut, I have done nothing this year but leave some ISA money in these 2 funds and beat your 62%

yes, but I've avoiding investing in US Funds, because of the bubble, my profits were made in London traded stocks, so much lower risk

you need to look at risk of losing cash as well as possible return

WiresDreamDisasters · November 2020

You pair make me feel economically stupid. And every time I get a jolly on to go and try to research this stuff, my brain quickly starts swimming like a weed head at a drum circle.

ToneControl · November 2020

Lebarque said:

I do enjoy you two bickering on here. It's very educational!

we do a bit by email, but it's nice to share discussions with others here

ToneControl · November 2020

WiresDreamDisasters said:

You pair make me feel economically stupid. And every time I get a jolly on to go and try to research this stuff, my brain quickly starts swimming like a weed head at a drum circle.

it's a lot of work, no rush though, but worth learning

RandallFlagg · November 2020

IToneControl said:

RandallFlagg said:

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Oh, and before I go and cook tea, only 62%? tut tut tut, I have done nothing this year but leave some ISA money in these 2 funds and beat your 62%

yes, but I've avoiding investing in US Funds, because of the bubble, my profits were made in London traded stocks, so much lower risk

you need to look at risk of losing cash as well as possible return

Can you demonstrate that the risk premium is higher for the funds I invest in compared to the London traded stocks you mention?

RandallFlagg · November 2020

ToneControl said:

RandallFlagg said:

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Is that sustainable, long term? Statistically and according to researched historical data, no it's not.

And is that something you can leave your wife to manage after you've gone?

Your assertion is that it's not possible to successfully invest if you don't remain constantly 100% invested in equities

No, my assertion is that market timing as a strategy for building wealth long term will not be the most lucrative strategy for the overwhelming majority of investors, it's proven in historical data.

ToneControl · November 2020

RandallFlagg said:

IToneControl said:

RandallFlagg said:

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Oh, and before I go and cook tea, only 62%? tut tut tut, I have done nothing this year but leave some ISA money in these 2 funds and beat your 62%

yes, but I've avoiding investing in US Funds, because of the bubble, my profits were made in London traded stocks, so much lower risk

you need to look at risk of losing cash as well as possible return

Can you demonstrate that the risk premium is higher for the funds I invest in compared to the London traded stocks you mention?

yes, but it would take a long time to do properly

put simply, London prices are widely believed to be undervalued at present, US stock prices are in a bubble, and are mostly overvalued, if you watch CNBC, you will see loads of experts saying this, and commentators mocking or criticising the Robin Hood investors who blindly invest. Did you read this story. https://www.bloomberg.com/news/articles/2020-06-09/fangdd-or-fang-china-real-estate-firm-adds-395-in-mystery-move. These are the kind of people driving up share prices in the US.

btw Are you aware that lots of US firms have been getting cheap loans for years, and have been buying back their own shares which drives up prices, but makes the firms dangerously in debt?

If you buy a London top-notch REIT with 25% LTV, at a 60% discount, well under half NTAVPS, you can be confident it is unlikely to drop much in value, and will most likely increase in the short and medium term. See CAPC and SHB.
A US market fund is based on stocks all at the top of their highest ever valuation, with NTAVPS far below the share price, you know you are on thin ice, and that your investment is based on sentiment, and momentum trading, not on intrinsic value.

I seriously recommend anyone to read up on value investing when dealing with life savings and pensions

ToneControl · November 2020

RandallFlagg said:

ToneControl said:

RandallFlagg said:

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Is that sustainable, long term? Statistically and according to researched historical data, no it's not.

And is that something you can leave your wife to manage after you've gone?

Your assertion is that it's not possible to successfully invest if you don't remain constantly 100% invested in equities

No, my assertion is that market timing as a strategy for building wealth long term will not be the most lucrative strategy for the overwhelming majority of investors, it's proven in historical data.

Let's assume you are correct, I wasn't fully convinced by our cheerful Canadian friend:
Are you content to be the same as "the majority of investors", and take no active part in your investments?

The people who make real fortunes in investment are above average intelligence people (but not geniuses) who put time and effort into choosing shares in companies at the right time (or use options and futures), not people who put money in managed funds.

What I can't understand is when people say "there's a pandemic, share prices will crash, sell now" which is clearly what experienced investors were doing, but you insist that the best thing is to ride it out and sell nothing. Believe me, if you sell at the top and buy at the bottom, you would be a lot better off, even if you slightly miss the bottom.

ToneControl · November 2020

RandallFlagg said:

ToneControl said:

RandallFlagg said:

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Is that sustainable, long term? Statistically and according to researched historical data, no it's not.

And is that something you can leave your wife to manage after you've gone?

Your assertion is that it's not possible to successfully invest if you don't remain constantly 100% invested in equities

No, my assertion is that market timing as a strategy for building wealth long term will not be the most lucrative strategy for the overwhelming majority of investors, it's proven in historical data.

btw historical data has the S&P500 out performing inflation by about 2% a year on average. The fact that it's gone nuts for the last 10 years should tell you something

ToneControl · November 2020

this looks interesting, not read it yet:

https://realinvestmentadvice.com/neel-kashkari-is-the-definition-of-moral-hazard/

RaymondLin · November 2020

That means my Index Fund now owns a TINY piece of Tesla.

RandallFlagg · November 2020

PToneControl said:

RandallFlagg said:

ToneControl said:

RandallFlagg said:

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Is that sustainable, long term? Statistically and according to researched historical data, no it's not.

And is that something you can leave your wife to manage after you've gone?

Your assertion is that it's not possible to successfully invest if you don't remain constantly 100% invested in equities

No, my assertion is that market timing as a strategy for building wealth long term will not be the most lucrative strategy for the overwhelming majority of investors, it's proven in historical data.

Let's assume you are correct, I wasn't fully convinced by our cheerful Canadian friend:
Are you content to be the same as "the majority of investors", and take no active part in your investments?

The people who make real fortunes in investment are above average intelligence people (but not geniuses) who put time and effort into choosing shares in companies at the right time (or use options and futures), not people who put money in managed funds.

What I can't understand is when people say "there's a pandemic, share prices will crash, sell now" which is clearly what experienced investors were doing, but you insist that the best thing is to ride it out and sell nothing. Believe me, if you sell at the top and buy at the bottom, you would be a lot better off, even if you slightly miss the bottom.

I don't need or expect to make a fortune, just enough. I have no plans to let investing become my job, I just want to continue to progress along the steps to financial independence that I am following and reach a point where my invested money will passively generate enough to live on without need for paid employment. There are a few aspects to this including becoming debt free, having a 2-3 year cash buffer, and a plan for what to do with my time. All of those aspects are progressing well, my wife retires at age 52 in April 2022 as soon as she reaches 35 years NI contributions, which coincides with the last mortgage payment and I will follow her 1-3 years after that depending on how long I can stomach the job I am currently in. I'm also looking at taking up a part time job, may be volunteering, rather than launching straight into retirement, doing something far more fulfilling and enjoyable that I don't rely on for income.

As for market timing, yes of course sell at the top buy at the bottom is the ideal but it's impossible to do reliably, consistently, month by month, year in year out. It's been easy to see this year due to a once in a decade catalyst event and it's easy to make money on a big crash rebound like we have seen after the February drop, it won't be so easy to spot going forward and I would say is a far higher risk strategy than holding some carefully selected US stocks in a diversified buy and hold portfolio or having a sensible percentage of a portfolio allocated to a US index.

RandallFlagg · November 2020

RaymondLin said:

That means my Index Fund now owns a TINY piece of Tesla.

Not yet. The S&P committee have set a date of 21st December but are discussing with investors on how to best incorporate Tesla and may do it in stages as there is an estimated $35BN of Tesla shares needed to be purchased by index tracker funds once they they are in the index, they will also need to sell off some of the rest of the companies in the index to rebalance.

ToneControl · November 2020

RandallFlagg said:

PToneControl said:

RandallFlagg said:

ToneControl said:

RandallFlagg said:

ToneControl said:

so when I made 62% for my daughters in the last 2 weeks, after sitting on cash for months, then reverting to cash, I made a mistake?

Is that sustainable, long term? Statistically and according to researched historical data, no it's not.

And is that something you can leave your wife to manage after you've gone?

Your assertion is that it's not possible to successfully invest if you don't remain constantly 100% invested in equities

No, my assertion is that market timing as a strategy for building wealth long term will not be the most lucrative strategy for the overwhelming majority of investors, it's proven in historical data.

Let's assume you are correct, I wasn't fully convinced by our cheerful Canadian friend:
Are you content to be the same as "the majority of investors", and take no active part in your investments?

The people who make real fortunes in investment are above average intelligence people (but not geniuses) who put time and effort into choosing shares in companies at the right time (or use options and futures), not people who put money in managed funds.

What I can't understand is when people say "there's a pandemic, share prices will crash, sell now" which is clearly what experienced investors were doing, but you insist that the best thing is to ride it out and sell nothing. Believe me, if you sell at the top and buy at the bottom, you would be a lot better off, even if you slightly miss the bottom.

I don't need or expect to make a fortune, just enough. I have no plans to let investing become my job, I just want to continue to progress along the steps to financial independence that I am following and reach a point where my invested money will passively generate enough to live on without need for paid employment. There are a few aspects to this including becoming debt free, having a 2-3 year cash buffer, and a plan for what to do with my time. All of those aspects are progressing well, my wife retires at age 52 in April 2022 as soon as she reaches 35 years NI contributions, which coincides with the last mortgage payment and I will follow her 1-3 years after that depending on how long I can stomach the job I am currently in. I'm also looking at taking up a part time job, may be volunteering, rather than launching straight into retirement, doing something far more fulfilling and enjoyable that I don't rely on for income.

As for market timing, yes of course sell at the top buy at the bottom is the ideal but it's impossible to do reliably, consistently, month by month, year in year out. It's been easy to see this year due to a once in a decade catalyst event and it's easy to make money on a big crash rebound like we have seen after the February drop, it won't be so easy to spot going forward and I would say is a far higher risk strategy than holding some carefully selected US stocks in a diversified buy and hold portfolio or having a sensible percentage of a portfolio allocated to a US index.

nah, my mate has done it consistently every year for 25 years
he's now living as a tax exile, sitting on a pile of cash

RandallFlagg · November 2020

ToneControl said:

nah, my mate has done it consistently every year for 25 years
he's now living as a tax exile, sitting on a pile of cash

That doesn't mean you will be though does it?

ToneControl · November 2020

RandallFlagg said:

ToneControl said:

nah, my mate has done it consistently every year for 25 years
he's now living as a tax exile, sitting on a pile of cash

That doesn't mean you will be though does it?

you said it was impossible

BBBlues · November 2020

A really interesting note put out today by Morgan Stanley, who're now bullish on Tesla after being one of the short voices in the market. In their fundamental analysis they've decomposed the business into 6 segments (3 of which that don't even exist yet!), ran DCF models projected over 10-20 years and come up with new target share price of $540 (up from $360).

The take away quote, "its expensive on what we know, and cheap on what we don't".

RandallFlagg · November 2020

BBBlues said:

A really interesting note put out today by Morgan Stanley, who're now bullish on Tesla after being one of the short voices in the market. In their fundamental analysis they've decomposed the business into 6 segments (3 of which that don't even exist yet!), ran DCF models projected over 10-20 years and come up with new target share price of $540 (up from $360).

The take away quote, "its expensive on what we know, and cheap on what we don't".

This is the line the Bulls are taking, look beyond EVs and see Tesla as a disruptive energy company with enormous future upside.

Stock price up another 12% today.

I'm invested via my stake in the Baillie Gifford American fund who own a lot of Tesla stock and, since June this year, they they are also now 2% of Dow Jones Islamic Global Market Titans Index fund I hold.

The Tesla stock price isn't going to be boring for the next month or so that's for sure, I'm expecting some volatility!

RandallFlagg · November 2020

On another note, I may be coming into a few spare quid in December and I'm thinking of buying into a China fund, this Baillie Gifford fund looks interesting:

https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F000002NAB&tab=13

ToneControl · November 2020

OK, so I subscribe to an investment educational commentary by Professor Glen Arnold

http://newsletters.advfn.com/deepvalueshares/2020/09/02/james-montier-s-thoughts-on-the-rise-of-the-us-market

here's a quote from a recent one, called "James Montier’s thoughts on the rise of the US market

PUBLISHED: 02 Sep 2020 "

Montier thinks the US equity market has moved into “absurd” territory. It is close to its highest price ever relative to fundamentals such as earnings at exactly the time that it is facing one of the worst economic downturns. It is just not allowing for the possibility of there being a downside – everything is rosy – the market is priced for a perfect business future. The odds of perfection being attained are not good.

lots more to read, and to finish

Regarding my portfolio, my solution is to hold half my portfolio in cash and to purchase put options on the Dow Jones. The half of my portfolio invested in companies are in shares already priced low and the companies are likely to survive a recession in an good state ...
I expect to use my cash to pick up plenty of UK bargains after the US has led the worlds’ equity markets downward.

I tell you this stuff because when my pension funds dropped 50% in 2008, I felt very sick. I would not like anyone to have that happen.

RandallFlagg · November 2020

ToneControl said:

I tell you this stuff because when my pension funds dropped 50% in 2008, I felt very sick. I would not like anyone to have that happen.

After it dropped 50% what did you do? and what happened to the fund it was invested in?

All funds holding stocks/equities went down up to 50% in the 2008 crash but the majority recovered in 12-24 months.

I was down £70K earlier this year but it's all back now, plus.

Howdy, Stranger!

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Sell Tesla?

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