2020 is the “Anti-1980”

2020 is the “Anti-1980” or as Seinfeld might say, the “Bizarro-1980.”

Baby Boomers and the Silent Generation enjoyed a wonderful investing era as they were hitting their career stride, and investing the bulk of their retirement savings, throughout the 1980s and 1990s. Contrast that to Millennials who may be hitting their stride now and starting to put decent money away. It’s really a stark contrast in the market environment between the two eras.

Below is a quick graphic comparing stock market valuations and total debt load within the U.S. economy between 1980 and 2020. The differences are obvious and significant. I’ll summarize below the graphic.


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Signals Through the Noise

It’s no secret that I have been concerned about both (1) our proximity to the next bear market and (2) the potential severity of the decline in the next bear market.

A tricky thing about bear markets, however, is that we can be in one for a long time before we even realize it. That’s because bear markets can only be confirmed in hindsight only AFTER losses have become sufficiently severe. That doesn’t do the “reactive” investor any good because by the time it is known we are in a bear market (or a recession) it’s almost too late to do anything about it. The only way to avoid being reactive is to be proactive, which can only be accomplished if you understand history and are able to pick up on meaningful signals through all the noise. Continue reading “Signals Through the Noise”

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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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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