Reddit Attacks Wall Street

[russ_watters]

If I had to invest with my head rather than my heart, for the short term I would invest most of my money intro crypto for the simple reasons that it is more volatile than stocks (plus no trading fees and no broker to pay), and still goes up much more than stocks in average (that's essentially the reason why a hamster is doing better than Warren Buffet does, lately).

For a daytrader or <1 yr looking to make big short term bets on volatility, ok I guess. But the volatility is such that one can cherry-pick timeframes where it does better and other timeframes where it does worse than stocks.

I saved for my house (8yrs) in largely the same way I'm saving for retirement.

If I had to drop a penny for the very long term and not look back in how it's doing for the next 40 years, I would still bet on crypto. When I look at long term charts like Cac40, I see that since 1997 or so, there is basically no upward trend, however inflation has accumulated a high percentage since then. So, at least in the local stock market, it doesn't really look appealing to say the least, while crypto may (or not) offer a better alternative. It is not clear at all, to me at least, which would be a safer, less riskier, investment.

I'm not sure I'm following. It looks to me like the CAC40 was at roughly 2000E in 1997 and today it's at 7,000. I see two large bubbles (2000 and 2008), plus the brief crash last year, but you can draw a line through them from 1995 to today and the growth trend is otherwise quite consistent. The CPI (sorry for mixing measures, I'm not sure the French equivalent) in that time went from 160 to 270, so after adjusting for inflation the CAC40 growth is 200%. Odds are extremely high that this growth trend will continue for the foreseeable future.

The claim that stocks haven't been a winning bet in the long term is really, really strange/false.

Anyway, crypto has only about 5 years of significant history and if you're predicting it will become a new currency then the growth stops and it becomes a terrible investment. That's what is so odd about this. You're saying you'd use it as a long term investment while simultaneously predicting it won't pan out.

 

[kyphysics]

Market Cap-to-GDP: 2020-21 bubble wins (210% in 2021 vs. 130% in 2000 - the historical avg. is 75-80%)

Shiller PE/CAPE ratio: 2000-2001 bubble wins (44 in 2000 vs. 38.7 in Oct. 2021 vs. 33.1 in 1929 - the historical avg. is about 16-17)

% of Population Invested:
The 1929 bubble had an interesting factoid: something like ONLY 2% of the population held stocks during that bubble. This was shocking to me when I first heard it (if this stat is wrong, someone let me know!). Looking at Tik Tok Investors' Twitter page, you have young kids buying stocks in the current bubble. Mark Cuban's 11 year old son bought WSB stocks. The current bubble seems more widespread than previous ones. Although, the overall % of people holding stocks may have been higher in the dot com bubble.

Equity Risk Premium:
What was insane about the dot com bubble was that it was totally unjustified from an equity risk premium perspective. Interest rates were 5.9% (U.S. 10-year) in 2000! No one had to go out on the risk curve at all! At least the 2020-21 bubble is somewhat "justified" (not necessarily the hyper valuations of some stocks, but more broadly) from an interest rate perspective (near zero percent on the Fed funds rate and a 1.5%-ish U.S. 10-year with a CPI print of 5.38%...some nasty negative real rates).

The '29 bubble was pretty horrific in taking 25 years to get out of the bear market. The 2000-01 NASDAQ bubble took 15 years to get back to its prior highs.

 

[fluidistic]

For a daytrader or <1 yr looking to make big short term bets on volatility, ok I guess. But the volatility is such that one can cherry-pick timeframes where it does better and other timeframes where it does worse than stocks.

I saved for my house (8yrs) in largely the same way I'm saving for retirement.I'm not sure I'm following. It looks to me like the CAC40 was at roughly 2000E in 1997 and today it's at 7,000. I see two large bubbles (2000 and 2008), plus the brief crash last year, but you can draw a line through them from 1995 to today and the growth trend is otherwise quite consistent. The CPI (sorry for mixing measures, I'm not sure the French equivalent) in that time went from 160 to 270, so after adjusting for inflation the CAC40 growth is 200%. Odds are extremely high that this growth trend will continue for the foreseeable future.

The claim that stocks haven't been a winning bet in the long term is really, really strange/false.

Anyway, crypto has only about 5 years of significant history and if you're predicting it will become a new currency then the growth stops and it becomes a terrible investment. That's what is so odd about this. You're saying you'd use it as a long term investment while simultaneously predicting it won't pan out.

Yes about your first point, cherry picking can bias a real comparison.
about the cac40 sorry I mmeant since year 2000 where its value was roughly the same as today, and if I hhad invested a lump sum then, I would still be in the red taking into account inflation (and never once been in the green in the last 20 years. And that's considering I picked an index fund following the cac40 variations, which is considered once of the safest stock bets). For a future long term guess, the popularion will get significantly older, and in countries llike Italy, about half of it will go extinct within the next century. Economy will probably take a hit, at least their local stock market, if I had to guess. However crypto should not be as dramatically impacted.

Regarding yyour comment about crypto in the long term, it really depends on which cryptocurrency you're considering. Bitcoin is limited in supply and if there is a similar demand for it over time, its price will increase over time. I am not predicting this will be a safe bet, I am saying I think it has its chances, and that it's not obvious to me that fiat will still have its uses in, say, 150 years from now. I don't see neither stock nor crypto as a safer bet than the other. My head and heart tells me crypto (not only bitcoin) has an edge. Let's see and wait a few decades.

 

[BWV]

Yes about your first point, cherry picking can bias a real comparison.
about the cac40 sorry I mmeant since year 2000 where its value was roughly the same as today, and if I hhad invested a lump sum then, I would still be in the red taking into account inflation (and never once been in the green in the last 20 years.

CAC40 3/31/2000 (peak) - 11/8/2021
3.6% annualized in EUR
4.5% annualized in USD
US Inflation 2.2% (Europe inflation is lower)

 

[russ_watters]

Yes about your first point, cherry picking can bias a real comparison.

Yes, for example:

about the cac40 sorry I mmeant since year 2000 where its value was roughly the same as today, and if I hhad invested a lump sum then, I would still be in the red taking into account inflation (and never once been in the green in the last 20 years.

I find it very hard to believe that you are actually basing investment decisions off what you must know is cherry-picked analysis that even worse nobody actually does savings-investing that way. Investing for savings is continuous contributions.

Regarding yyour comment about crypto in the long term, it really depends on which cryptocurrency you're considering. Bitcoin is limited in supply and if there is a similar demand for it over time, its price will increase over time.

Beanie Babies are limited in supply too, but their value dropped to zero. But again, the two positions (will become a widely used currency, will appreciate) are mutually exclusive. You can have neither, but you can't have both.

I am not predicting this will be a safe bet [snip]
I don't see neither stock nor crypto as a safer bet than the other. My head and heart tells me crypto (not only bitcoin) has an edge.

You said you'd pick it over stocks, even based on investing with your head, which means a better chance of better returns...then spun an extremely misleading scenario to justify it. I'm really having a hard time understanding what your real position is here/believing that you believe what you are saying.

 

[kyphysics]

There was a technology mutual fund, Firsthand Technology Value Fund (TVFQX) that a friend and colleague bought into, and another friend who bought individual shares in companies like JDS Uniphase, Global Crossing, because the internet was the new and future economy, and traditional industries, e.g., railroads were dinosaurs.

I watch as TVFQX rose from something like $30/share to something like $170, then watched it fall back to $40/share. All the time, my friends expected the stocks to rebound and continue to go up - because that's what the market does. Well, then the accounting scandals of some companies became exposed, and in some cases, companies filed for bankruptcy. The values of many stocks decreased during mid-2000. For example CAT went from $30/share to about $15/share, but it recovered through early 2008, then plummeted again with the crash through the remainder of 2008 into 2009, which would have been a buying opportunity.

TVFQX never recovered, and in 2010, it was closed and folded into a type of closed-end fund ("business development company"). It now trades under SVVC, and they have not done well.
https://www.marketwatch.com/story/firsthand-fundholders-get-second-rate-deal-2010-07-25
https://finance.yahoo.com/quote/SVVC/

What do you think of Peloton ($PTON), Astronuc?

~$25 (Feb. 2020) up to $171.09 (peak) during pandemic...now crashed down to ~$50.

I wonder if this will be a poster child stock of the COVID bubble talked about in textbooks decades from now?

 

[fluidistic]

Yes, for example:

I find it very hard to believe that you are actually basing investment decisions off what you must know is cherry-picked analysis that even worse nobody actually does savings-investing that way. Investing for savings is continuous contributions.

Beanie Babies are limited in supply too, but their value dropped to zero. But again, the two positions (will become a widely used currency, will appreciate) are mutually exclusive. You can have neither, but you can't have both.

You said you'd pick it over stocks, even based on investing with your head, which means a better chance of better returns...then spun an extremely misleading scenario to justify it. I'm really having a hard time understanding what your real position is here/believing that you believe what you are saying.

Sure, because you don't have a big lump sum to invest, but in a growing market over very long time, a single early lump sum investment beats DCA or regular smaller investments. If I had brainlessly invested a lump sum at the 2000 bubble in the cac40 index fund, I wouldn't be happy even today with what I had done.

About the beanies example, sure. But I think Bitcoin has a brigther future (not to be used as a currency, for that purpose other cryptocurrencies are better suited), for store of value, a bit like gold today. It's not a given, not a safe bet, sure, it will depend on how youngsters adopt it.

 

[Astronuc]

What do you think of Peloton ($PTON), Astronuc?

~$25 (Feb. 2020) up to $171.09 (peak) during pandemic...now crashed down to ~$50.

I wonder if this will be a poster child stock of the COVID bubble talked about in textbooks decades from now?

I don't know if it will be a poster child, but it probably will be a case study. Peleton is probably just a fad, and as many exercise or diet fads, it will fade away. I'd rather ride my own bike on trails (nearby rail trail) than sit in my house riding an exercycle. It may work in winter, particularly in the northern climates with ice and snow on the ground, but otherwise, I'd rather be outdoors.

The hype around certain equities is an ongoing issue. I've seen it many times on individual stocks and with the equities markets in general. I've seen MSM hype the run up in the stock markets, only to watch it fall precipitously, as in 1987, 1999/2000

https://en.wikipedia.org/wiki/Black_Monday_(1987)
https://www.investopedia.com/ask/answers/042115/what-caused-black-monday-stock-market-crash-1987.asp
The dotcom bubble burst I reference previously.
https://en.wikipedia.org/wiki/Financial_crisis_of_2007–2008
https://en.wikipedia.org/wiki/2020_stock_market_crash

Often the media talks about the market going up just before it drops steeply.

 

[russ_watters]

Sure, because you don't have a big lump sum to invest, but in a growing market over very long time, a single early lump sum investment beats DCA or regular smaller investments. If I had brainlessly invested a lump sum at the 2000 bubble in the cac40 index fund, I wouldn't be happy even today with what I had done.

I'm being completely serious here - I'm genuinely curious and confused: did you actually drop a large lump sum into the CAC40 in 2000? If so, may I ask from where you got it? If not, can you describe a common scenario that would involve such an action? And do you have a substantial retirement nest egg invested in crypto right now?

You implied before you were generation X. Are you? I am/am 45.

The things you are saying...I an unable to identify any connection to reality in them.

 

[bhobba]

There are no for sure get rich quick schemes, only get rich slowly. I medium-term traded for a while with success. But success after tax compared to long term investing is another matter, and it involves a lot more work. I gave it away and invested using mutual funds. That worked out fine. Then I retired officially on a government pension and just put my money in a high yield bank account. But this high yield account now pays the enormous sum of .1%. I put up with it, but it finally got to me, and I recently decided to reinvest. This time things have changed, and ETF's have changed the landscape. I now use those - in particular two - YMAX and VDHG. The Donnely Zone system determines the weighting:
https://investingtimes.com.au/wp-content/uploads/2015/04/The-Zone-System-research-paper.pdf

Currently, the market has just entered Zone 2, which implies 70% - YMAX and 30% VDHG.

Each fund is different. YMAX buys the ASX 20 that pays high dividends (about 4%). However, it increases dividends by writing calls on the shares. That doubles the dividend to about 8% - sometimes more. It, however, has an interesting characteristic. If the call strike price is reached, the stock must be sold and the profit distributed. That is why you sometimes get better than 8%. Such shares are dividend plays and do not rise quickly. This means it is possible the value of shares held may not increase enough to compensate for the loss from the portfolio in selling. This is what happened with YMAX - it dropped 20% over ten years (the ASX 20 rose 30% in 10 years), cutting into the high 8%+ return, so it is 6-7%. It is a pure defensive dividend play where some of your money is slowly returned. Perfect for an overvalued market. Although just holding the ASX 20 in an ETF gave about a 1% better return, the interest is a lot less overall. You do not get the interest payments retirees generally like. After all, you can't use share price rises to play whoopie.

The second is a fund of funds. It is a Vanguard fund that holds a portfolio of other Vanguard funds that maximises growth. You may think just to put all your money into high growth shares. But the math of portfolio theory is funny due to anticorrelations with other asset classes. For example, in a high growth portfolio, if 10% bonds, it increases return and decreases risk slightly. Strange but true. Vanguard figured out the optimum weightings and invested in all its funds accordingly for maximum growth. Of course, it works best when the market is undervalued, not overvalued like it is now. It complements YMAX - hence the zone 2 30% weighting.

Anyway, that is my strategy. It's long term with tactical weighting but biased toward high dividends. Yes, it involves rebalancing and occasional buying and selling, but by and large, it is buy and hold, which makes it tax effective.

Added Later:
I know the idea of holding 10% bonds in a high growth portfolio and it actually increasing returns while decreasing risk is weird. The optimal amount to hold is about 10% and VDHG does just that. Here is an article explaining why it works:
https://www.passiveinvestingaustralia.com/does-the-10-percent-bonds-in-vdhg-make-it-a-no-go

Thanks
Bill

 

[fluidistic]

I'm being completely serious here - I'm genuinely curious and confused: did you actually drop a large lump sum into the CAC40 in 2000? If so, may I ask from where you got it? If not, can you describe a common scenario that would involve such an action? And do you have a substantial retirement nest egg invested in crypto right now?

You implied before you were generation X. Are you? I am/am 45.

The things you are saying...I an unable to identify any connection to reality in them.

I did not invest in the CAC40 back in that time, in fact I did not enter yet the stock market. However, if I brainlessly follow the saying "stock markets do fine over time, it's been proven since ages", well, aside from the fact that past performance is not an indicator of future performance, if that was really the case then the earlier a lump would be invested, the better the strategy for the long term. So, if I had to take out some of my cryptocurrency savings and place them into the stock market, I should do it right now, in a single drop. However, when I look at the graph, read the news and what not, investing in a CAC40 ETF right now does not look appealing to me. If I was forced to invest, I would DCA, I believe.

But I wonder, back in 2001 when I got first curious about stocks, if that was year 2000 instead and I had read a book from a billionaire and convinced myself that stocks do fine over time, I might have goofed and still pay the price today.

That's probably off-topic by now. :)

And lastly about cryptocurrencies, if many "intelligent" people like Vitalik Buterin, or Silvio Micali (Turing Prize, MIT prof) and many others (including "Satoshi Nakamoto" who probably will never earn a Nobel prize), who do not care much about getting rich for the sake of it bothered to either dedicate their lives to cryptocurrencies or a big part of it, maybe there are deep reasons that are actually "good" for humanity.

I wish twofish-quant was still here on PF to give us his point of view on cryptocurrencies in general.

 

[bhobba]

I wish twofish-quant was still here on PF to give us his point of view on cryptocurrencies in general.

Here is my take on cryptocurrencies as an investment. ETF's using them have started to appear, e.g. CRYP:
https://www.betashares.com.au/fund/crypto-innovators-etf/

As part of a balanced portfolio, they are fine. Cryptocurrencies are known to be VERY volatile. Investors will not maintain the eye-popping returns of CRYP, even though it has only been going for under a month. That is where portfolio theory comes in. By retaining an asset class allocation (either passive or tactical - I use a combination of both), you will take money out of them when they are doing well and put money in them when they are performing poorly. But because of that high volatility, I would make it a small amount - say 10% of your portfolio - like the bonds I talked about above - even a high growth strategy uses them. It will increase returns and reduce overall risk since it is anticorrelated to other asset classes. But you will not go 'bang'. I have lost nearly all my money. Portfolio balancing is essential for long term gains. There is no sure get rich quick scheme - they do not exist. Slowly does it. Through the ages, we have had bubbles like the famous Tulip bubble that even suckered Newton. It is very tempting - but do not fall for it.

Added later:
Just for the heck of it, I put a small amount of money into CRYP. I will not reveal the percentage of my portfolio, except it is small, and I will watch it like a hawk to ensure it remains the same weighting. Interesting to see what happens. Attached is the factsheet with historical returns

Thanks
Bill

 

[fluidistic]

Here is my take on cryptocurrencies as an investment. ETF's using them have started to appear, e.g. CRYP:
https://www.betashares.com.au/fund/crypto-innovators-etf/

As part of a balanced portfolio, they are fine. Cryptocurrencies are known to be VERY volatile. Investors will not maintain the eye-popping returns of CRYP, even though it has only been going for under a month. That is where portfolio theory comes in. By retaining an asset class allocation (either passive or tactical - I use a combination of both), you will take money out of them when they are doing well and put money in them when they are performing poorly. But because of that high volatility, I would make it a small amount - say 10% of your portfolio - like the bonds I talked about above - even a high growth strategy uses them. It will increase returns and reduce overall risk since it is anticorrelated to other asset classes. But you will not go 'bang'. I have lost nearly all my money. Portfolio balancing is essential for long term gains. There is no sure get rich quick scheme - they do not exist. Slowly does it. Through the ages, we have had bubbles like the famous Tulip bubble that even suckered Newton. It is very tempting - but do not fall for it.

Added later:
Just for the heck of it, I put a small amount of money into CRYP. I will not reveal the percentage of my portfolio, except it is small, and I will watch it like a hawk to ensure it remains the same weighting. Interesting to see what happens. Attached is the factsheet with historical returns

Thanks
Bill

I had read that ETF based off cryptocurrencies are just a way to circumvent being taxed while "investing in cryptos". It's probably country dependent, as far as I can guess in France your gains might be taxed around 17% instead of the more usual 30% for cryptocurrencies.

 

[bhobba]

I had read that ETF based off cryptocurrencies are just a way to circumvent being taxed while "investing in cryptos".

I was speaking to a friend, and he made that exact point. He is crypto mad and buys and sells a lot of them. Taxation on them is 'murder' according to him. He didn't specify precisely in what way, just it is very 'yucky'. So I looked it up:
https://www.etoro.com/crypto/cryptocurrency-and-income-tax-in-australia/

He thought my small ETF amount - well, to use his exact words - you are speaking to the wrong person regarding ETF's. My reason was simple - let's see how this crypto thing performs in practice and portfolio theory. If you put a small amount (say 10%) of low-risk investments in a high risk/growth portfolio, you reduce risk with minimal effect on returns (a slight increase/decrease). The opposite is also true. If you put a small amount of a very high risk/growth asset in your portfolio, you increase your risk only slightly, but returns are boosted. Crypto sure is volatile - the market here in Aus is up today, but my small crypto amount shot up like crazy. If it keeps like this, I will have to rebalance soon. I use the 5% rule. My main growth asset VDHG invests in several other Vanguard funds and rebalances it for me. YMAX is simply a defensive dividend play because the market, according to the Donnely Zone system, is overvalued - but has recently eased from significantly overvalued to just overvalued (going from zone 1 to 2). Many other well-known indicators such as Coppock and Buffet say so as well.

Thanks
Bill

 

[kyphysics]

Putting aside the merits of investing in crypto, do people who have never invested ever feel jealous of those making so much money?

Taking bitcoin, in particular, it was .10 cents about 10 years ago. Today, at ~$65,000, if one bought $100 worth of bitcoin a decade ago and never sold, one would be sitting on $65 million dollars.

$65M...that crushes Tesla, Amazon, Nvidia, and other top stocks over the past decade. There's definitely a part of me that envies those who bought early into bitcoin if I am honest with myself.

 

[bhobba]

Putting aside the merits of investing in crypto, do people who have never invested ever feel jealous of those making so much money?

Of course, they do. It's only natural. But they do not understand risk-reward. Many have invested in crypto who do not do well or even lose their money. They do not get the same press coverage. Those who understand risk-reward know it is highly risky with the definite possibility of going out the backdoor. My friend who mucks around with buying and selling crypto has not told me his earnings, but I can say his lifestyle does not reflect being wealthy.

Now for those that understand risk-reward and portfolio theory, they know investing in crypto is OK, possibly even wise, providing it is done with only a tiny percentage of your portfolio and, because it can be so volatile, take profits off the table by rebalancing when say it is 5% more or 5% less of your set portfolio percentage (say 10%). They know get rich quick schemes are baloney - only getting rich slowly works. Even the great Warren Buffet took time to accumulate his wealth. Of course, people like mathematician-physicist Jim Simmons prove one can, by being innovative, get great wealth by unconventional means - but there are very, very few of those. You are unlikely to be able to do it.

A much, much better goal MHO that is within reach of just about anyone in the FIRE movement:
https://en.wikipedia.org/wiki/FIRE_movement

I wish I had done it when young and retired at 35 instead of being forced to retire at 47 due to ill health.

Thanks
Bill

 

[fluidistic]

Putting aside the merits of investing in crypto, do people who have never invested ever feel jealous of those making so much money?

Taking bitcoin, in particular, it was .10 cents about 10 years ago. Today, at ~$65,000, if one bought $100 worth of bitcoin a decade ago and never sold, one would be sitting on $65 million dollars.

$65M...that crushes Tesla, Amazon, Nvidia, and other top stocks over the past decade. There's definitely a part of me that envies those who bought early into bitcoin if I am honest with myself.

Not jealous at all. More like angry at myself for not being curious enough to go past what the media covered in the early days of cryptocurrencies (all was about illegal activities ).
And then, like 2 years ago when I read a bit more and got curious about it, I wanted to invest into ethereum. The price was around 170 dollars for 1 ether. I actually tried to invest, I wanted to invest around 500 euros in it, but then I realized I had to give my ID and other personal informations to websites. In my head I thought cryptocurrencies were supposed to be anonymous (it's not true at all, this is a misconception, unless one deals with monero and very few other cryptocurrencies), so I gave up. The price of 1 ether is now almost 5k USD. Damn it? Yes.

 

[kyphysics]

I don't know if it will be a poster child, but it probably will be a case study. Peleton is probably just a fad, and as many exercise or diet fads, it will fade away. I'd rather ride my own bike on trails (nearby rail trail) than sit in my house riding an exercycle. It may work in winter, particularly in the northern climates with ice and snow on the ground, but otherwise, I'd rather be outdoors.

I mostly agree.

I never personally understood Peloton and those who would pay thousands of dollars for it's subscription. Any thoughts on fellow pandemic meme stock: Zoom ($ZM)?

(anyone can answer that)

Will it be the next Netscape?: https://seekingalpha.com/article/4466835-zoom-stock-acquisition-pricing-revenue-growth-netscape

 

[phinds]

Zoom now has a lot of competition so no longer likely to be a high flyer but it will likely remain a viable slow-growth company. Hard to say with the tech companies though 'cause they, or someone else, could come up with a real game-changer.

 

[Astronuc]

Zoom now has a lot of competition so no longer likely to be a high flyer but it will likely remain a viable slow-growth company. Hard to say with the tech companies though 'cause they, or someone else, could come up with a real game-changer.

Zoom was competition to various web-based or internet-based network conferencing programs, e.g., Cisco's Webex, or networked based platforms, e.g., Microsoft Teams (or it's predecessor Skype for Business). I've used all four based on preferences of different institutions. I don't see an advantage of Zoom, unless it's cost or resource requirements. I find Teams and Webex to work well for the needs of the organizations with which I interact.

 

[kyphysics]

Zoom was competition to various web-based or internet-based network conferencing programs, e.g., Cisco's Webex, or networked based platforms, e.g., Microsoft Teams (or it's predecessor Skype for Business). I've used all four based on preferences of different institutions. I don't see an advantage of Zoom, unless it's cost or resource requirements. I find Teams and Webex to work well for the needs of the organizations with which I interact.

I've used Zoom and Google Meet before. I didn't feel either one was that much better than the other that I'd want to consistently use that one or pay a premium for it.

My church used Zoom during the pandemic and continues to on a smaller scale now (Sunday service is live and in-person, while some small fellowship meetings are sometimes done on Zoom still). I think I very, very slightly prefer Google Meet over Zoom. But, it could just be familiarity, as I used it pre-pandemic (back when it was also Google Hangouts or whatever it was called).

The familiarity is sometimes a component of what business/stock analysts call a "switching moat." One of the "pains" of switching from one software type to another is the annoyance of having to relearn an entire system or way of doing things. Lazy me would prefer to just use the one I'm already using, unless there is a BIG noticeable improvement in the other one (not that Zoom is tough to use or anything - quite the opposite)...If forced to choose, I'd rather stick with Meet for familiarity and especially if Zoom is going with ads now on their freemium version. I hate ads, so that'd be reason for me also sticking with Meet.

 

[kyphysics]

Zoom now has a lot of competition so no longer likely to be a high flyer but it will likely remain a viable slow-growth company. Hard to say with the tech companies though 'cause they, or someone else, could come up with a real game-changer.

If they can grow top line revenue at 10%+, that'd still be a fast grower category - albeit, much slower (vs. the 100%+) than during the pandemic boom.

I'm undecided on them. I do think Eric Yuan is a great manager of the company and love his business philosophies (have listened to several lectures/interviews of his), as he has a Bezos-like obsession with customer focus and happiness. Unlike Bezos/Amazon, however, their employee/internal work culture is less "Hunger Games"-like and more Google-like. One of Yuan's main philosophies is to make his employees happy and enjoy their work environment.

Zoom's high profitability (~30% margins), lack of net debt, and a nice cash pile ($5 billion last time I checked) are attractive. I just think their valuation is very high still for what is an uncertain post-COVID phase. I don't know if they'll grow 5%...10%...20%...? annually from here on out. Makes it hard to value. A few months ago, I tried to model them with 15% annual top line growth at 30% margins and targeted a PEG ratio below 3 (which is already high, but something I could put up with with a "growth" stock not fully monetized yet) and came to roughly about $200/share as an entry point I'd be willing to take a small position in (using no margin of safety).

I've maybe slightly soured on Zoom since...but definitely think they are in much better shape than Peloton.

 

[kyphysics]

Even the great Warren Buffet took time to accumulate his wealth.

Thanks
Bill

Yeah, I recall his "get rich slowly" comments/advice. There's a story actually of a third Berkshire founding partner (told by Morgan Housel) that is more or less never spoken of these days, but who was there with Warren and Charlie at the beginning. Buffett has talked about him on occasion and said he had a bad strategy of trying to get rich with unnecessary risk and used a lot of leverage (back in the 1970's or something like that) and got wiped out. He never recovered. And, we never hear of him today.

Warren and Munger have said they always knew they'd be rich some day. They knew early on that they had the knowledge and understanding of markets and finance to be successful if they followed certain principles. Why rush it? They've always warned against leverage - probably because of that failed partner - and preached getting rich slowly.

Your comments are a good reminder to not rush things. Stay principled. No matter how jealous you may feel, how scared or desperate, etc., don't do anything rash. Think of what Warren Buffett himself would do in that situation (he's quite the role model in almost all aspects of life). Be honest always. Be hard working. Be principled in everything and reap the rewards in life over a long-term.

One of the most amazing investment stories is that of Anne Scheiber. She worked for the IRS in the early part of the 20th century and retired at age 51 with a small amount of savings, pension and social security. She lived in a run-down apartment and lived a spartan existence. But, using her savings derived from daily living, she invested for the next 50 years into stocks she could understand and by the age of 101, she amassed $22 million that was donated to charity upon her death. https://www.washingtonpost.com/arch...ly-pays/ec000053-d7bf-4014-b841-546bd5847a80/

 

[kyphysics]

But I think Bitcoin has a brigther future (not to be used as a currency, for that purpose other cryptocurrencies are better suited), for store of value, a bit like gold today. It's not a given, not a safe bet, sure, it will depend on how youngsters adopt it.

What do you make of regulation risk - the extreme negative end being government banning of cryptos?

 

[phinds]

What do you make of regulation risk - the extreme negative end being government banning of cryptos?

Only authoritarian governments, such as that in China, are at all likely to ban crypto.

 

[kyphysics]

Only authoritarian governments, such as that in China, are at all likely to ban crypto.

There are quite a lot of people in China!

 

[phinds]

There are quite a lot of people in China!

So. What's your point? Do you think crypto can't exist without China?

 

[kyphysics]

So. What's your point? Do you think crypto can't exist without China?

No, just that there are a lot of people in China (that's my only point...they'd get wiped out and/or lead to tanking of the price?).

eta: To clarify more, since I'm typing on the go...I'm wondering if $BTC would take a temporary big - not permanent - hit from a country of China's size outlawing it?

eta2: What do you make of the Fed possibly wanting to ban $BTC if it gets too big and threatens monetary control? Would it still be a case where even IF it got banned somehow in the U.S., it'd still exist in enough place worldwide to retain its use/value? Treat me as a crypto newbie - apologies if these are super simple questions that have already been answered many times over in the community. I'm just a curious observer/outsider for now wanting to learn more, but skeptical and a non-investor (yet).

 

[Stephen Tashi]

Is the proliferation of cryptos a danger to the value of any given crypto currency? What features does one crypto currency have that cannot be duplicated by another?

 

[BWV]

Is the proliferation of cryptos a danger to the value of any given crypto currency? What features does one crypto currency have that cannot be duplicated by another?

History does not repeat, but it rhymes

By the ‘80s, baseball card values were rising beyond the average hobbyist’s means. As prices continued to climb, baseball cards were touted as a legitimate investment alternative to stocks, with the Wall Street Journalreferring to them as sound “inflation hedges” and “nostalgia futures.” Newspapers started running feature stories with headlines such as “Turning Cardboard Into Cash” (the Washington Post), “A Grand Slam Profit May Be in the Cards” (the New York Times), and “Cards Put Gold, Stocks to Shame as Investment” (the Orange County Register). A hobby bulletin called the Ball Street Journal, claiming entrée to a network of scouts and coaches, promised collectors “insider scouting information” that would help them invest in the cards of rising big-league prospects. Collectors bought bundles of rookie cards as a way to gamble legally on a player’s future.

Unfortunately for investors, each one of those cards was being printed in astronomical numbers. The card companies were shrewd enough never to disclose how many cards they were actually producing, but even conservative estimates put the number well into the billions. One trade magazine estimated the tally at 81 billion trading cards per year in the late ‘80s and early ‘90s, or more than 300 cards for every American annually.

Precious few collectors seemed to ponder the possibility that baseball cards could depreciate. As the number of card shops in the United States ballooned to 10,000, dealers filled their storage rooms with unopened cases of 1988 Donruss as if they were Treasury bills or bearer bonds. Shops were regularly burglarized, their stocks of cards taken as loot. In early 1990, a card dealer was found bludgeoned to death behind the display case in his shop in San Luis Obispo, Calif., with $10,000 worth of cards missing. A few weeks later, Bob Engel, a respected National League umpire, was arrested for allegedly stealing more than 4,180 Score baseball cards, worth $143.98, from a Target store in Bakersfield, Calif., and attempting to steal another 50 packs from a Costco.

BTW baseball card prices have been on a tear recently

https://slate.com/culture/2010/03/the-great-baseball-card-bubble.html

 

[Office_Shredder]

Bitcoin does have the advantage of not being infinitely printable.

 

[bhobba]

But, using her savings derived from daily living, she invested for the next 50 years into stocks she could understand and by the age of 101, she amassed $22 million that was donated to charity upon her death. https://www.washingtonpost.com/arch...ly-pays/ec000053-d7bf-4014-b841-546bd5847a80/

Nice story. I especially like the bit about bonds. Having a small amount in bonds (say 10%) make only a minor difference to returns - sometimes even increasing them. However, the risk is reduced by a not-insignificant amount. One of the strange results of portfolio theory and the efficient frontier.

I often discuss this with people who complain about a very popular ETF here in Aus by Vanguard - VDHG. It holds units in other Vanguard funds using a weighting decided by a very sophisticated AI program, so it is as close as possible to the efficient frontier. When rebalancing here in Aus, ETF's that holds other ETF's can't use profits to buy additional funds - it must return them as distributions. It is a high growth ETF that grows about 10% a year which is fine. But because of the rebalancing, it pays a whopping distribution - the last one 9%pa. It averages about 5%pa. Some hate this since unitholders must pay tax on at least part of the distributions. Me, I love it - high growth and high distributions suit me fine since I am retired. It should also be embraced by those still working, as I will explain in a post about leverage. But they ask why to rebalance. The reason is portfolio theory says it increases overall returns. It forces the selling of those assets that have done well and by regression to the mean is more likely to fall than rising, and the buying of those assets that have done poorly, which again by regression to the mean are more likely to increase. That is the whole idea of the efficient frontier. If they did not do it, their total returns would suffer. I do not know if it will suffer more than the tax unitholders may need to pay - but it will suffer.

Thanks
Bill

 

[bhobba]

Buffett has talked about him on occasion and said he had a bad strategy of trying to get rich with unnecessary risk and used a lot of leverage

There is good leverage and bad leverage. The good leverage is the one that reduces tax but does not have margin calls. It is suitable for high growth ETFs like VDHG that pay good dividends that investors have to pay tax on because they are working and in a high tax bracket.

It works like this. The way to reduce tax, increase returns, and accumulate more units in the ETF is to take out a NAB Equity Builder loan to buy the shares. It works differently than typical margin loans with no possibility of a margin call. You put in some money - for VDHG 20% of the amount you want to buy. They supply the other 80%. It is like a personal loan with the ETF as security. You take it out for 3 to 10 years but can pay it off quicker if you wish. There is no chance of the dreaded margin call - the only issue is like any loan making your payments. The big dividend is then used to help payout the loan, so the interest portion becomes a tax deduction rather than a tax liability.

Once paid out, you can do the same again - only this time you also have the first lot of units - so you have two dividends. You can keep doing this over and over, increasing the dividend each time. Eventually, over the long term, even with taxes, it will be self-perpetuating, and you will get a steadily growing number of units and passive income - taxed, of course. But as time goes by, the distribution will be so great you can retire and live off it. The Financial Independent Retire Early (FIRE) people love it. It, and similar strategies, is likely why the NAB Equity Builder is so popular here in Aus. There is an 8-month waiting list.

Thanks
Bill

 

[BWV]

There is good leverage and bad leverage. The good leverage is the one that reduces tax but does not have margin calls. It is suitable for high growth ETFs like VDHG that pay good dividends that investors have to pay tax on because they are working and in a high tax bracket.

It works like this. The way to reduce tax, increase returns, and accumulate more units in the ETF is to take out a NAB Equity Builder loan to buy the shares. It works differently than typical margin loans with no possibility of a margin call. You put in some money - for VDHG 20% of the amount you want to buy. They supply the other 80%. It is like a personal loan with the ETF as security. You take it out for 3 to 10 years but can pay it off quicker if you wish. There is no chance of the dreaded margin call - the only issue is like any loan making your payments. The big dividend is then used to help payout the loan, so the interest portion becomes a tax deduction rather than a tax liability.

Once paid out, you can do the same again - only this time you also have the first lot of units - so you have two dividends. You can keep doing this over and over, increasing the dividend each time. Eventually, over the long term, even with taxes, it will be self-perpetuating, and you will get a steadily growing number of units and passive income - taxed, of course. But as time goes by, the distribution will be so great you can retire and live off it. The Financial Independent Retire Early (FIRE) loves it. It, and similar strategies, is likely why the NAB Equity Builder is so popular here in Aus. There is an 8-month waiting list.

Thanks
Bill

Had not heard of that - apparently its an aussie thing - nothing like this exists in the US, SEC rules mandate margin calls. Much of the benefit of private equity is using the company balance sheet to leverage rather than the investor assuming the liability - and with the disappearance nce of financial covenants, the only way the ‘margin call’ occurs is if a missed interest payment or the debt matures and cannot be refinanced

 

[bhobba]

Had not heard of that - apparently its an aussie thing - nothing like this exists in the US

Only one bank here in Aus does it - NAB. As I said it is so popular there is an 8-month waiting list. I put my name down and will give it a go with a small loan to start with. It could prove interesting.

Thanks
Bill