Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Covid-19
30-04-2020, 12:23 AM. (This post was last modified: 30-04-2020, 12:26 AM by BlueKelah.)
Post: #161
RE: Covid-19
(29-04-2020, 11:32 PM)holymage Wrote: Karlmarx,

Long-term average earnings yield of about 20% would imply a P/E of 5. That's very very low. I don't think most companies with some growth will be priced at P/E of 5. So your opportunity set will be really limited, and you will most likely not own high quality companies, with the exception of some high quality companies in cyclical companies.

Most of US high quality companies, including old economy business are still expensive, with the exception of cyclical and micro-cap companies. I would recommend you to take a look at stock chart and trailing P/E of 3M, Macdonalds, Costco, PepsiCo, Coca Cola etc. It is very easy to assume and give a sweeping statement without taking even a closer look at the companies. 

Not sure if you even took a close look at Exxon when quoting it as an example. But, I did took a quick look some time back. Exxon might seem reasonable on a normalised earnings basis. But if you take into consideration of debt, it is not even cheap on an EV/EBIT basis. The same is happening to a lot of US corporations currently as they leverage to perform share buybacks and issue dividends, to juice management compensation. While I don't think Exxon will go bankrupt, I am uncomfortable with that amount of debt and uncertainty in oil prices which may result in changes in capital structure.

Maybe, and to my surprise, the market is suddenly having a long-term orientation (looking past and writing off 2020-2021 financial results) to justify current valuations hahaha. Guess, I am losing my advantage.

If you take Buffetts measure of Market cap to GDP, markets are still looking very very bubbly. American GDP has basically gone off a cliff now so u can imagine how big the ratio is becoming.

I can guarantee that the "reopening" of american economy will not be successful at all. in fact for most big countries which have not got the virus under control before reopening, they will get hit by the next big wave which will overwhelm health systems and cause further shutdowns. Even for countries with good control and measures like Taiwan, there can be sudden undetected clusters appear. Of course Singapore is another example what happens. 

So for sure in America whilst they have situation under a bit of control in places like new york after lockdowns, other cities u will get big clusters happening whereever there are people in mass gathering. 

USA has ~330m population, the way the people there dont care about social distancing, do you think the virus will be under control after the ~1m cases they have now? assuming they have ten times undetected cases which recovered, thats only 10m cases, still 320m of the population not immune. And dont forget fatality rate is only sub 1% if health system is not overwhelmed.

As for China, their economy has not converted enough yet to a consumer driven one and still quite reliant on manufacturing trade with the rest of the world, especially the American consumer which is the driving force. So with record unemployment starting in USA and much of OECD, you can see where things will go next half year. 

And lets not forget poorer nations with large population centers like India and africa plus south america. Those countries are unlikely to be able to tolerate any prolonged lockdown measures due to poverty people have to work just to survive. So what happens to global demand as the people in these nations inevitably get the disease and for the coming year have high death rates and so many sick that their economies get hit and might even result in social unrest?

IMHO the recent rally is just a relief rally. FED is also pumping money into the system to prop things up. Similar thing happened during 2008 crash, big dip during october panic then some recovery and ups and downs till the march lows almost half year later. I would be waiting another four five months before making any big moves into the market really.

Just sit back and wait for the wave of oil sector and airline/hotel/tourism sector bakruptcies to rock the market
=========== Signature ===========
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com

Find Reply
30-04-2020, 01:19 AM.
Post: #162
RE: Covid-19
I have a different view on covid longer term impact on economy...

About 1.3m people died from road accidents worldwide every year, yet more greener, cost efficient, more powerful, flashy vehicles manufactured yearly becos of the economical benefits...

We may have to live with the virus till the scientists came up with something...

Find Reply
30-04-2020, 08:52 AM. (This post was last modified: 30-04-2020, 08:55 AM by karlmarx.)
Post: #163
RE: Covid-19
(29-04-2020, 11:32 PM)holymage Wrote: Karlmarx,

Long-term average earnings yield of about 20% would imply a P/E of 5. That's very very low. I don't think most companies with some growth will be priced at P/E of 5. So your opportunity set will be really limited, and you will most likely not own high quality companies, with the exception of some high quality companies in cyclical companies.

Most of US high quality companies, including old economy business are still expensive, with the exception of cyclical and micro-cap companies. I would recommend you to take a look at stock chart and trailing P/E of 3M, Macdonalds, Costco, PepsiCo, Coca Cola etc. It is very easy to assume and give a sweeping statement without taking even a closer look at the companies. 

Not sure if you even took a close look at Exxon when quoting it as an example. But, I did took a quick look some time back. Exxon might seem reasonable on a normalised earnings basis. But if you take into consideration of debt, it is not even cheap on an EV/EBIT basis. The same is happening to a lot of US corporations currently as they leverage to perform share buybacks and issue dividends, to juice management compensation. While I don't think Exxon will go bankrupt, I am uncomfortable with that amount of debt and uncertainty in oil prices which may result in changes in capital structure.

Maybe, and to my surprise, the market is suddenly having a long-term orientation (looking past and writing off 2020-2021 financial results) to justify current valuations hahaha. Guess, I am losing my advantage.

It looks like you want to buy big blue chips, with a net cash balance sheet, and stable long-term growth of earnings, at very low p/e valuations. Sure, I can see the attractiveness of that. But so does everyone else. There are millions of investors scouring the market for cheap stocks, and probably hundreds of thousand of them are professionals. 

If you wanted to date the prettiest and most popular girl in school, who's not only hot but also smart, and really nice to people, and you only want to bring her to a hawker for fishball noodles when she's expecting more like steak at Morton's, you can't blame her if she doesn't want to take up your bid. Because there are tons of people queuing to give her what she wants, and more.

But if Morton's is more than what you want to pay, there are other pretty girls around too. Sure, they may be lower in profile, less pretty, maybe has a mole on the face, or has less than perfect IQ. But otherwise, they are just as good a potential mate. And some of them are willing to have fishball noodles at a hawker. Obviously, their high-quality vis-a-vis their low demands makes them rare. So it is your job to find them, and hopefully before others do, or you'll have a bidding war.

===

Again, as I've mentioned, 'cheapness' depends a lot on your long-term outlook, and your time horizon. This means discounting future profits/dividends/cashflow to the present. Which means you have to figure out what those future profits/dividends/cashflows are, to be able to determine if something is cheap. Cheap does not necessarily mean low present p/e, p/b, or whatever ratio you may use. 

I've probably looked at over a thousand companies, and I've found some which not only match my criteria, but also at prices I'm willing to pay. They're not easy to find, there's always a lot to consider, and there's no guarantee that they'll turn out as I expect them to. But it is also important to remember that this is a competitive sport, and if done right, can set one up for life (financially), so it isn't supposed to be easy

That pretty girl isn't going to come up to you and ask you to take her out for fishball noodles.

===

If by "took a close look at Exxon" you mean dissecting its financials, then no, I haven't done that. But I did read a 600-page book about Exxon. If you're wondering whether I'm just saying stuff here without due consideration, I'm hope not. 

And if your point is that Exxon doesn't look like a good investment candidate in spite of its low valuations, I get that. But there are better ways for you to put that point across. 

As for the reasons which you think makes Exxon unattractive, I will say that quality companies selling cheap are always accompanied by some kind of bad news/developments. Maybe your pretty girl was seen pushing an old lady unto the ground, and now everyone thinks she is a wicked witch? It is the investor's job to investigate whether there are any negative changes to the long-term earnings ability of any company hit by bad news/developments. 

For those interested in the book on Exxon:
https://www.goodreads.com/book/show/1337...Nl9&rank=1

===

I might have made plenty of sweeping statements, and I might have not looked close enough at every company/business being discussed. But I do wish to remind that VB readers are not paying members of an investment course, 24/7 investment advice, or whatever it is that the charlatans are offering these days. I'm not paid to write stuff here, and neither am I getting a cut of the advertising revenue, or any form of benefits, from the owners of VB.

Where facts are concerned, I do try my best to ensure that what I've written is accurate. Where opinions are expressed -- which happens most of the time -- I try to support them with data and reasoning. But this isn't the Business Times or some academic journal. There are no editors or academic peers reviewing the posts before they are published.

VB readers have to remember that their financial well-being is sole responsibility. In so doing, they are encouraged to exercise their own discretion in not only checking the facts, but also the validity of any argument, being put forth here.

Find Reply
30-04-2020, 10:04 AM. (This post was last modified: 30-04-2020, 11:25 AM by AQ..)
Post: #164
RE: Covid-19
For the first batches of QE after GFC, the Fed's b/s grew from <1 to 4.5tri. It took ~5yrs until 2013, and Bernanke started Taper. It then took ~4yrs to 2017 and Powell started hiking rates. It took ~2yrs to 2019 to stop hiking. Even without COVID, the Fed will prob have to start easing gradually since the US was entering a slowdown anyway. 

COVID meant that it had to go full blown MMT.

Post COVID til now, the Fed b/s has grew to ~6tri (i think). If things go worse, expectations are prob for the Fed to do
1. ETF buying inc equities 
2. YC control

If so, the b/s is estimated to grow to between 8-13tri.

Go figure how long it will take for the eventual "normalisation"+throw in other CB's MMT too. TINA will be back in play again.
There will be generations of people who dunno what an interest rate is.

Find Reply
30-04-2020, 02:32 PM.
Post: #165
RE: Covid-19
(30-04-2020, 01:19 AM)TerryT Wrote: I have a different view on covid longer term impact on economy...

About 1.3m people died from road accidents worldwide every year, yet more greener, cost efficient, more powerful, flashy vehicles manufactured yearly becos of the economical benefits...

We may have to live with the virus till the scientists came up with something...

nice new perspective here. As of now, the world has like 218k deaths from covid. We dont really think much about road accidents. Once upon a time, i thought about the fact that if someone dies everyday from road accidents, where wont the governments around the world ban cars, or at least compromise on banning motorcycle?

Find Reply
30-04-2020, 03:05 PM.
Post: #166
RE: Covid-19
Because car accidents doesn't increase exponentially in cases and severity as people congregate?
=========== Signature ===========
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger

Find Reply
30-04-2020, 03:59 PM.
Post: #167
RE: Covid-19
well in the end its abt tradeoffs right. you can also look at smoking.

Find Reply
30-04-2020, 04:02 PM.
Post: #168
RE: Covid-19
(30-04-2020, 02:32 PM)money Wrote:
(30-04-2020, 01:19 AM)TerryT Wrote: I have a different view on covid longer term impact on economy...

About 1.3m people died from road accidents worldwide every year, yet more greener, cost efficient, more powerful, flashy vehicles manufactured yearly becos of the economical benefits...

We may have to live with the virus till the scientists came up with something...

nice new perspective here. As of now, the world has like 218k deaths from covid. We dont really think much about road accidents. Once upon a time, i thought about the fact that if someone dies everyday from road accidents, where wont the governments around the world ban cars, or at least compromise on banning motorcycle?

Thats what american thought too. Initially it was oh worlwide deaths still less than the deaths we had in a season of flu nothing to worry. Then oh gun deaths 100 per day in USA still more than Covid deaths, until they hit 100 dead per hour from Covid. And now we have people comparing this to road traffic deaths lol.. go figure.  Huh Huh  

another point people forget when comparing numbers is that deaths from a whole flu season or whatever other cause of death you wanna compare it to is over one year , whereas the deaths from Covid so far are just a couple months. The way we are going, shouldnt be hard to hit 1million deaths in a few months time.
=========== Signature ===========
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com

Find Reply
30-04-2020, 04:05 PM. (This post was last modified: 30-04-2020, 04:10 PM by TerryT.)
Post: #169
RE: Covid-19
My apology, I would like to clarify – I am in no ill intention to said that human lives lost in covid-19 ain’t important.
I’m just making comparison with the statistics and highlight the economic benefits that actually save/ improved human lives worldwide.

An estimated over 6 million children under the age of 15, died yearly due to poverty/ preventable diseases.
https://www.who.int/news-room/detail/18-...-the-world-

No doubts, Covid causes many casualties and PANICS as it was UNKNOWNS. From news & statistics, it is very contagious like flu, but good thing, scientists seem to have much better understanding of the virus now. Not forgetting there are many other diseases/ causes that have far more deaths every year, eg. Heart disease, stroke, other kind of respiratory diseases, cancers, diabetes… and so on

Importantly - health care system come down to more manageable/ not overloaded level.

Find Reply
30-04-2020, 05:18 PM. (This post was last modified: 30-04-2020, 05:29 PM by Wildreamz.)
Post: #170
RE: Covid-19
(30-04-2020, 04:05 PM)TerryT Wrote: My apology, I would like to clarify – I am in no ill intention to said that human lives lost in covid-19 ain’t important.
I’m just making comparison with the statistics and highlight the economic benefits that actually save/ improved human lives worldwide.

An estimated over 6 million children under the age of 15, died yearly due to poverty/ preventable diseases.
https://www.who.int/news-room/detail/18-...-the-world-

No doubts, Covid causes many casualties and PANICS as it was UNKNOWNS. From news & statistics, it is very contagious like flu, but good thing, scientists seem to have much better understanding of the virus now. Not forgetting there are many other diseases/ causes that have far more deaths every year, eg. Heart disease, stroke, other kind of respiratory diseases, cancers, diabetes… and so on

Importantly - health care system come down to more manageable/ not overloaded level.

Perhaps this short clip can show it more clearly: https://public.flourish.studio/visualisation/1712761/

[Image: fHcWhUh.png]

Note that this is with preventive measures, such as social distancing, and shelter-in-home orders. Imagine the mortality rate and case fatality rate without these policies in place.

Also, it is estimated that Covid-19 is 2-3x more contagious than the flu (https://www.businessinsider.sg/coronavir...?r=US&IR=T), and at least 10x more lethal (https://www.who.int/news-room/q-a-detail...-influenza). Even when healthcare system is not overwhelmed. To complicate matters, we do not have vaccines (we do have flu shot) nor any approved antiviral (we do have oseltamivir for flu).
=========== Signature ===========
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger

Find Reply


Forum Jump:


Users browsing this thread: 4 Guest(s)
Valuebuddies.com | Return to Top | Lite (Archive) Mode | RSS Syndication | CONTACT US: n......@valuebuddies.com