What can we learn from Bitcoin?

For those of you that follow Bitcoin, you know it’s had a volatile couple months. In early-June the price of a Bitcoin hit about $3,000 at which point many articles were written about how high it could go, etc… It then fell over $1,000 down to about $1,900. That’s a 35% drop in about 1 month (see chart below) before recovering once again. That is not the interesting part….

 

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Quarterly Market Update – This Has Happened Only Two Other Times Since 1900…

It’s that time again. The time when I review the market’s performance and important metrics for the quarter.

In short, it was a strong quarter for most assets. However, market valuations continue to get stretched to extremes implying the ultimate snapback will need to be that much greater. In fact, valuations have only been this high two other times since 1900. The first time was right before the Great
Depression and the second time was at the Dot-Com Bubble
peak.

Therefore, it is reasonable to expect subdued returns over
the next ten years and plan accordingly.

Q2 Market Performance
I’ll just briefly summarize various index returns for the quarter so we can get to more meaningful insights. International stocks continue to be the top performer.

 

U.S. Stock Market Valuations
Today’s price of a future cash flow determines your return. For instance, if you exchange $50 now to receive $100 in ten years that implies a 100% return. If, however, you exchange $90 today for that same $100 in ten years your return drops to 11%. So price paid today is extremely important in determining future returns.

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Quarterly Market Update (2017.Q1)

The following topics are covered in this quarter’s review:

  • A strong quarter for stocks around the world
  • International stocks outperform U.S. stocks
  • Market valuations just barely lagging the Great Depression and Dot-Com Bubbles
  • General economic health
  • Auto industry woes along with two exciting developments

 

Warren Buffett Answered My Question on CNBC! Here’s My Response.

Back in February, CNBC interviewed Warren Buffett. For several weeks in advance the interview, CNBC asked viewers to submit questions via Twitter under the hashtag #AskWarren. I’m not sure how many questions were submitted, but they ended up choosing mine along with a few others.

This is pretty exciting for someone who knew from the age of 14 they wanted to be in finance and closely followed Warren Buffett, read his books, etc…

I’ve included a link to the video of the exchange below. This link will start the video at the point where my question was asked. You only need to listen for a couple minutes. Take a look. My question probably comes off as a little strange if you don’t know the context so, below the link, I explain the context of my question along with my response to his answer.

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The Second Longest Bull Market Since WWII…When Will It End?


Executive Summary

  • The S&P 500 is currently in its second longest bull market since WWII in terms of both magnitude and duration.
  • Various historically-reliable measures of market valuation are indicating returns in U.S. stocks over the next decade may be less than half their historical averages.
  • It’s reasonable to expect about a 50% decline in U.S. stocks during the “bear” phase of this cycle just to bring valuations back to historical averages.

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