It's 2019, but It Sure Feels a Lot Like 1998 for Stocks

My alma mater, a small midwestern college in the last five years has had record enrollment. My two nieces just graduated and had to apply to close to a dozen schools. On all of their visits, the tour guide consistently reported enrollment numbers were at all time highs and how competitive it had become to get accepted.

These were not huge Big 10 or Ivy League schools. Most of them were small liberal arts colleges on the west coast and a handful of smaller midwestern state universities.

Despite the narrative that kids should opt out of college, it would appear the trend is more than likely kids are continuing to go to college and in record numbers.

Thiel and co. don't have the resources to fund that dream for so many individuals.

Maybe consider college is not a universal good.

[1] https://asia.nikkei.com/Business/Markets/Bank-of-Japan-to-be... (Bank of Japan to be top shareholder of Japan stocks)

You hardly see that anywhere else in the market, like you'd never see Ford go up 2000% in 5 years without people screaming the sky is falling in every economic publication, but here we are with these tech evaluations. It's almost as if smart money dictating these headline narratives doesn't want retail to stop buying one off shares of FAANGs, and that is worrysome.

And the DAX has generally given decent results since 1955:

* https://topforeignstocks.com/2014/01/09/dax-index-returns-by...

Meta: interesting paper called "The Rate of Return on Everything, 1870–2015":

* https://economics.harvard.edu/files/economics/files/ms28533....

https://ofdollarsanddata.com/realistic-investment-results/

I think what I took from it is there's a level at which I sort of don't take the criticism I guess seriously (more like harsly?) of DCA, because like, after much gnashing and grinding of teeth, life looks a lot like dollar cost averaging for most folks.

So okay, then we can talk about diversification, which is important, and this and that and blah. But like, unless you hit it big and sell your business or something and suddenly have to figure out what to do with 7-8 figures, you don't quite experience the same problem.

It just feels like as tempting as the standard deviation on potential performance looks like, and as convincing as the anecdotes feel, how real is any of this? There's more important factors that are definitely in your control, vs things that questionably or I suppose reasonably aren't.

It's extremely unlikely that the next 100 years will be anywhere near as turbulent as the past 100 years. In particular nuclear weapons increase the variance to the point that it's no longer relevant for stock portfolios. We're not going to have another Great War or WW2. Either we'll have peace between the great powers, or you won't care about your stock portfolio because you'll be vaporized.

Moreover, if that sort of thing ever does happen again, your biggest problem is not that your stock portfolio is doing poorly, it's that you're in Nazi Germany in the midst of an all out war.

Most people (who do invest) invest by cutting off a slice of every paycheck. This strategy will happily let you weather crashes.

Combined with a guaranteed-payment pension (Social security, employer pension, government pension, etc), it's a pretty good way of securing your retirement (Even if you have to take a haircut on the payout of the guaranteed-payment pension.)

https://www.cadtm.org/Russian-bonds-never-die

(basically, the Russian Empire borrowed a lot of money (several billions of Gold Francs), specially in France, and the Soviets, when they came to power, defaulted on these debts).

When Emptying the house of my late grand-mother after she died we actually found a few of these bonds.

I got one and, now, it's in a frame as part of my home decoration (I didn't feal like asking Mr. Putin for my ancestors' money back).

I see no reason to be bearish on equities long term, but I do know that certain industries will run into serious problems, I just don't know which ones that will be necessarily. I buy broad index funds because I'm bullish on the market in general, but not on any particular sector.

If you buy today and the economy crashes tomorrow, it's only going to be a problem for you if you sell. Wait 2 years and you are back where you were today, wait another 2 years and you've made money. Recessions only really affect people about to retire or on the chopping block for layoffs.

The primary reason most people save/invest is for retirement. So if you start saving at the age of 25, after schooling, that's forty years until the 'traditional' retirement age of 65.

> IMO, you invest strategically. Build cash positions over time as you ride the business cycle.

The odds are stacked against you when buying the dip:

> Why is this true? Because buying the dip only works when you know that a severe decline is coming and you can time it perfectly. Since dips, especially big ones, haven’t happened too often in U.S. market history (i.e. 1930s, 1970s, 2000s), this strategy rarely beats DCA. And the times where it does beat DCA require impeccable timing. Missing the bottom by just 2 months lowers the chance of outperforming DCA from 30% to 3%.

* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...

https://www.google.com/search?client=firefox-b-1-d&biw=1536&...

Oh, yeah, when it went from 100 to about 7 in 1999-2001. It's currently about 1700.

If. /Sparta

I think the main reason for this is that all the upside and speculation has already been taken by earlier investors and an IPO is done only when there is basically no upside left. In 1998 Uber would have gone IPO much earlier and retail investors would have driven up the price, not the VCs as it’s done now.

What’s common is that we have a lot of companies who don’t even have the slightest idea how to become profitable other than a miracle happening.

Not sure how this will end but judging from 2002 and following it won’t be pretty for a lot of people that are flying high in the current market.

And lots of people pretty sure the whole thing was a bubble but almost feeling compelled to jump in anyway.

I'm not saying there won't be a correction at some point but you're mostly not seeing the wild price increases in the absence of any fundamentals and, in fact, the market seems to have mostly said "meh" to the Blue Aprons, WeWorks, and Ubers of the world.

Today's companies , even if they have losses, are cash-flow positive. They are operating at a profit but reinvesting those profits on large capital expenditures, which produce losses. This is similar to Amazon, Tesla, Netflix, and Salesforce.

Zoom and Twillio.

Zoom and Pager Duty. To your point, everything else has been meh.

But they are going to coding bootcamps.

Tech companies make money because the cost of scaling a tech service to support more users is pennies on the dollar. Just spin up more servers - most of your expenses are fixed, regardless of whether you serve 2 users, or 2 million. This is why Wall Street fawns over them.

Unless Tesla has built a Star Trek replicator, it's not a tech company. It's a car company, that must spend 95 cents on building a car, to secure 1 dollar of revenue from selling it.

It's institutional investors (think pensions) chasing returns because of low interest rates.

PE's played a role in a lot of things we're currently seeing.

I wouldn't characterize its role in tech quite as propping up a bubble. Easy money means companies are trying a winner-take-all approach, loss-making longer, and delaying IPOs. Tech IPO performance has been mostly lackluster because of a lack of profits and private investors already captured gains from most of the growth.

Outside tech, they've been buying up medical companies, raising out-of-network rates, leading to surprise medical bills.

They're also under fire for leveraged buyouts, but turning around distressed assets is what PE's historically been good at, and for all the noise about leveraged buyouts and store closures, these were already sinking ships. PE didn't kill Toys R Us, Amazon did.

SP500 companies are also on average holding much more Net cash than in 1998.

Banks are also much more prepared in Asset and Cashflow due to regulation puts into place after the 2008. Not saying they cant financially make go burst, but at least on paper they are better.

So Apart from the Macros, Countries with much higher debt and sociality as a whole with inequalities.. etc. Business on the whole are doing very well.