Reply With QuoteYeah, but 10-Year Treasury bonds were paying over 5% in that period ... bit different now.Originally Posted by Raffe
We'll see about the sustainability of that. I still remember the 2000/2002 sell-off very well, and what happened to all the stocks that were priced according to the 'new normal'.
Yeah, but 10-Year Treasury bonds were paying over 5% in that period ... bit different now.
Just another discount rate for future cash flows, nothing else changed.
The SEC is on it now, opened an investigation after a letter from Liz Warren.
https://www.barrons.com/articles/the...of2&yptr=yahoo
Indeed.
Sorry, I don’t understand the point you are making there.
When you do a company valuation, you estimate their future cash flows (profits) and then calculate the net present value of the future cash flows by using the interest rate (plus a risk margin). This process is called discounting of future cash flows. Zero interest rates just means that future cash flows have a net present value of 100% (ignoring the risk premium for a minute), otherwise nothing changes.
This means that stocks are justifiably worth more when interest rates are low - but not anywhere close to what the market allows these days. This will correct at one point.
I currently have a reasonable amount of cash sat in a company that has seen me well so far in this crisis, lately though its dropped a fair bit to make me realise its stormy waters out there and having the cash safe in the bank at the moment is better than trying to eek out some profits.
I'm hoping for a small rise in its share price where I can sell the majority and keep a less risky amount for the long term/vaccine announcement, the markets just seem to be a bit more fragile now than they were a month or so ago and it feels like some big changes are a coming..
Ah,ok. Understood.
But the point I was making was that in that period if you didn’t fancy putting your capital in equities you could get bonds paying over 5%. That’s not an option now so there is more competition for equities.
I suppose you mean there is less competition for equities.
But this is settled by the discount rate as it addresses your alternative investment alternatives.
I know people have difficulties to accept zero returns, but what counts are real return and in an inflation-free world zero is fine. When bonds were yielding 5%, you also had 5% inflation so the net net is zero (I am simplifying quite a bit here, but the principle stands).
I mean more capital competing for equities as there are fewer other attractive assets.
CPI in 2001 was about 1% and you could get a bond yielding over 5%
Today it’s about 2% and bonds are yield near zero.
So based on that there is more capital flowing into equities as there are fewer options to generate a return.
I don't know where you got your data from, but US CPI was 2.8% in 2001 and the last two readings in May and June were 0.1% and 0.6%.
But anyway, the gap between inflation and real rates is the same for all asset classes and as I said, the low return (whether real or nominal) already leads to a higher P/E ratio through the lower discount rate, so no (logical) reason to bid equities up beyond that. I know reality is different, but my point is all will eventually revert to mean and that correction will be very painful for many.
The figures I quoted were UK not US.
The other difference between 2000-2002 and present is the vast amount of QE being pumped into the economy by central banks.
I agree equities seem over valued but I’m looking for reasons why this may be so ...
No argument there and whatever reason you find, it will be thrown on the ash heap of history when reality kicks in again. Compare Cramer 2000.
Putting in another £3k into a gold ETF tomorrow, as the first £3k I put in only a few days ago is up 3% already.
I was going to wait until 5%, but there’s a lot of money flowing into gold ETFs at the moment.
This crisis has barely started so I see the upside of gold outweighing the downside, especially as gains so far have been relatively modest when compared with the 2009 financial crash.
Money printers are going brrrrrr.
Don’t worry I’ve made a bigger loss on energy shares. I think it’s important to mention this, as you get the feeling everyone wants to tell you their good investment news on this thread, and not their bad investment news
Let's see what today brings
Last edited by ryanb741; 5th August 2020 at 06:33.
Question is what will/could cause reality to kick in an when?
Who knew Reddit was the key to making money? Somebody tell the fund managers.
Last edited by Raffe; 6th August 2020 at 08:50. Reason: included part of noTAGlove's post in quote
Someone who lies about the little things will lie about the big things too.
Honestly I have no idea. You'd think 'irrational exuberance', but we are reaching new levels of that weekly.
But when I see the blind heard mentality in this thread, it cannot end well. Mind you, the dot-com bubble only burst after it bankrupted almost all of its critics.
Someone who lies about the little things will lie about the big things too.
When that bubble burst it was horrendous for many private investors. People had actually given up good jobs in the late 90’s to become day traders thinking it was easy. Putting small fortunes into companies like Baltimore Technology as the price had multiplied a ridiculous amount of times so they all thought they would get in on the act. People went crazy over companies like Last Minute Dot Com thinking they would become millionaires. Even investors sticking to funds as opposed to individual shares caught a cold. Invesco Perpertual GT European growth Fund (huge technology weighting that no one seemed to really understand), Jupiter Technology and Aberdeen Technology, all household names that boomed in the late 90’s and literally dropped off the chart as the bubble burst. People blindly invested as the news every night was talking up the markets and nearly everyone caught a cold. I recall a local firm sending execution only letters telling people how these funds were growing at 50% a year or more, enclosing an application form and getting loads of investments. People putting in 10k for example and it being worth 2k or less within a couple of years. The Microsoft’s of the world came through it, the hyped up rubbish just disappeared.
You can see it happening right now everywhere (on here as well), people speculating on high risk individual stocks. Going way above their normal appetite for risk at probably the most uncertain time in recent history. I’d be fairly certain that I’d some people did a risk profile on themselves they would be surprised.
My risk profile was high, the questions seemed quite banal, I wonder now how I could have got a cautious rating, looking back it seems pretty hard, unless I'd have just said please buy me shares in tampons and funeral parlours
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This should be a sticky frankly.
+1
Someone who lies about the little things will lie about the big things too.
Are they going to keep printing so people can buy iphones and junk off amazon whilst mass job losses keep happening?
Charles MacKay's 'Extraordinary Popular Delusions and the Madness of Crowds' is always a beneficial read imho.
Useful to recall how it was the dotcom boom which really popularised the concept /phrase 'the burn rate'
Last edited by Passenger; 5th August 2020 at 08:57.
It's not unusual for "staff" to sell share and not invest in the company they work for
I agree BT have performed dismally over the past years and of course values can go up as well as down - as I pointed out it dipped below 100p which is when I bought.
One interpretation would have it that there are a fair number "sitting out the loss" in anticipation of the result.
I rather enjoyed that (unintentional?) errant 'a'.
Yes, a joke from my spellchecker.
One interpretation would have it that there are a fair number "sitting out the loss" in anticipation of the result.
I rather enjoyed that (unintentional?) errant 'a'.
Someone who lies about the little things will lie about the big things too.
Ours are at a discount but not quite two for one. Three or five year plans -- most people immediately buy and sell to realise the gain at the end of the period. Can back out at any time. One guy held for about 20 years and he's very happy now.
Last edited by wileeeeeey; 5th August 2020 at 11:05.
Flip side is when a RBS happens, lose your job, put every bonus into RBS shares, go into SAYE schemes and mature out etc...horror stories of cashiers in branches losing £200k in capital
Happy to be all in one basket in the boom years pulling 7% dividend yield
Unless you are sufficiently senior, you’re probably no better informed than the man on the street
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Oil on the move
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Reckon it might be the time to start selling tulips, seems like there would plenty of takers. Human nature doesn't change much. (Not directed at anyone posting here btw)
Maybe with the exception of one...?
Someone who lies about the little things will lie about the big things too.
Very true. My plan is to buy and sell immediately to realise the gain or back out if it goes down. Our company is a huge group of businesses all over the world so it's impossible to be informed. From what I've heard it's popular with institutions as it's very stable and diverse but I have nothing to back that up with.
Be wary of the 'all eggs in one basket scenario' - your salary and you investments tied to one company isn't necessarily a good thing. You also need diversity.
Well said. I see sharesave schemes are being discussed. I dealt with a chap who did rather well with them, did quite a few over the years and was sat on ~£1.2m of the company he worked for. Horribly exposed to that single share along with an enormous CGT liability. Chose to do nothing despite all the evidence being plain to see.
Some quick calcs would suggest, ceteris paribus, that same £1.2m would now be sub £200k. At least his potential CGT liability is probably gone.
I agree. For tax reasons the most we're allowed to buy is £500 per month. You can be in as many 3 or 5 year cycles as you like but the total contribution isn't allowed to exceed £500 per month.
We focus nearly entirely on overpaying our mortgage and putting extra into our work pensions as we're both risk averse.
This thread was meant to give me the balls to jump in but it's taken them from me instead!
Listened to an NPR podcast the other day and the -32.9% figure is calculated as what would happen if the drop in that quarter was repeated throughout a 12 month period - the actual drop was about -9.5%
The -32.9% figure is misleading.
It's the American way of calculating GDP: quarterly, then annualised. No other country in the world uses this methodology to the best of my knowledge. Gives nice numbers on the way up, not so nice on the way down.
Someone who lies about the little things will lie about the big things too.
Yes, it is USA only (according to the economics professor, who is based in the USA). I think the aim of the podcast was to explain the frightening number!
But European GDP is down a real 12% and the UK 19%. That is real year-on-year change.
Someone who lies about the little things will lie about the big things too.
Wow. Baltimore Technology. Haven't heard that name in years. I went to school with Fran Rooney's son.
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In the late 80s I joined a tech start up based on the founders mums farm called Madge Networks. The company did an IPO on the NASDAQ in 1993. For a while it catapulted the founder into the Times rich list but the company later filed for bankruptcy in 2003.
Many employees made significant sums from stock options. Some held their options so long they ended up with very little. I did ok but had I joined a year earlier I’d have been made in my 20s.
During the 90s I invested in companies like Cisco, Bay, Nortel, iii, Baltimore, last minute.com and many others. I did well but in reality any stock in the tech category would do ... I sold the lot in 1999 when I’d concluded it had got silly. The final straw was a company I was involved in evaluating for acquisition and concluded they had no IP, no product but a great storey. We disregarded them and their stock went nuts for years ... they never produced anything and at that point I bailed. Was a good shout.
I’ve bailed back in March and I’m holding more cash than I have ever, I’m currently down compared to if I’d held and that’s tough to bear but I still think markets are way over what the economy should justified, central banks have done way more than I anticipated to prop up markets.
I moved to cash to preserve capital, I’m staying here until I see a good reason to re-invest.
I did buy some gold as an inflation hedge which is 22% up which is helpful.
I don’t like being out of the market but it’s not for me at present as it seems to me we are in a dreadful bind and many businesses will fail and there will be more grim economic situations ahead.
The Fear of Missing Out is a difficult thing to resist but as JP Morgan said "I made a fortune getting out too soon". Like you I've put some into Gold largely to offset inflation rather than to go for significant capital growth. The majority of my money is in Bonds at the moment, maybe more than would be appropriate for my age but I think that's prudent in the current market.
I did exactly the same and for the same reasons, except for a bit of cryptocurrency which i unloaded a few weeks back.
Was you based in Wexham Springs, Stoke Poges? I remember Madge Networks, worked there for a little while in late 90’s ad sat next/near Robert Madge, he was a decent person.
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I started at Lodge Lane in Chalfont St. Giles Which was Robert’s family farm, then we outgrew that and went to Knaves Beech and then the location at Stoke Poges, that was when I left to work overseas. I then return to the company for a year or so in 97. Then I left to work at 3Com.
I liked Robert, I wonder what he’s up to now.
Last edited by Montello; 5th August 2020 at 21:46.
Value creation, explained:
1. 11/2017: Bytedance buys Musical.ly for USD 1 bln
2. 08/2018: name change from Musical.ly to TikTok
3. 08/2020: Microsoft in discussions to buy TikTok US for USD 30-50 bln
4. 08/2020: Microsoft stock rallys >5% on the news, increasing Microsoft market cap by >USD 80 bln
Thanks, it all makes perfect sense now.
I agree. A clear strategy about holding intentions is the best starting point.
15% sounds so much better than £3k.
Cool story, bro.
Last edited by Raffe; 6th August 2020 at 08:47. Reason: mixed up quotes
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