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I would attribute some of this to recency bias. (cognitive bias that causes us to assume that future events will resemble recent experiences.) Nearly everyone had a good run with S&P / AI, hence there are many investment geniuses with very impressive short term trading record. But the fact remains that US GDP and profit growth did not match the rise in valuations. Can S&P continue its upward trajectory in vaulations without a similar growth in fundamentals? It can to a certain point, until it cant. And if history is any guide, we are closer to that point than ever before.
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(05-10-2024, 02:32 PM)weijian Wrote: ..
Is timing the market more important OR time in the market? ..
Also important, or even more importantly is, are you right in the first place? Specifically, right on your assessment on the specific instrument you choose to invest in. Be it about STI, HSI, SPY, or KWEB.
The same philosophy can't be blindly transplanted from one market (or even time frames) to another without considering the specific context of the market (is it one that Adam Smith's free market principle is functioning properly?)
“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
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@Big Toe,
Recency bias is definitely a huge factor in our decision making, which is also why we keep returning to the same durian stall for our fix until the day it sold us bad/fake durians.  In the corporate scene, it reflects the phenomenon that we are only as good as our last mistake. At the same time, I'll also say that availability bias is at work too - ie, the cognitive bias where we over/under represent (generally is over represent) the probability of something happening because strong emotions were evoked the last time. Surely, a crash due to valuations deviating from reality (AFC1997, dot.com and a partial tech stock crash in 2021) evokes strong memories.
@Wildreamz,
Adam Smith's free market principle is just idealogy at best But this idealogy had been the good fundamental building base for mankind to progress economically and then we (the most adaptive "species") add all the exceptions (anti-monopolistic rules, Central Bank as lender of last resort, protective markets to develop local champions etc etc)
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(06-10-2024, 01:53 PM)weijian Wrote: ..
@Wildreamz,
Adam Smith's free market principle is just idealogy at best But this idealogy had been the good fundamental building base for mankind to progress economically and then we (the most adaptive "species") add all the exceptions (anti-monopolistic rules, Central Bank as lender of last resort, protective markets to develop local champions etc etc)
Well. That's just an example. Setting aside to what extend Adam Smith's free market principle is necessary for a capitalistic economy to function at optimum efficiency; the key point I'm trying to make is, is your original thesis about the investment vehicle right? That's the ultimate determining factor of whether your investment will be successful.
Time in the market or otherwise, is just a part of it.
“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
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(06-10-2024, 02:29 PM)Wildreamz Wrote: Well. That's just an example. Setting aside to what extend Adam Smith's free market principle is necessary for a capitalistic economy to function at optimum efficiency; the key point I'm trying to make is, is your original thesis about the investment vehicle right? That's the ultimate determining factor of whether your investment will be successful.
Time in the market or otherwise, is just a part of it.
Hi Wildreamz,
Thanks for the clarification. I think there is lots of wisdom in your key point. There are very distinct differences between (1) been right about one's prediction, (2) The kind of action to take based on the prediction and (3) investment vehicle to represent the action.
Let's put it into investing in China since this is a China's thread. For example:
(1) Prediction: China GDP is going to keep growing
(2) Action: The action to take will start to vary - You could decide to be long on import commodities or financial services or consumer discretionary spending. Or one could even decide to be long the index (CSI300).
(3) Investment Vehicle: Let's say we decide to be long on consumer discretionary spending as the action to take. Then finally one needs to know the type of investments to make. I will just use 3 equities recently discussed on VB.com as a way to be exposed towards the China consumer --> (a) Local baijiu champion Kweichow Moutai, (b) LVMH whose products are like lights that attract Chinese moths, © a couple of gold retailers which have similar sounding names.
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Thesis: China GDP is going to keep growing.
Some points of consideration: What percentage of this growth is driven by real estate? What percentage of the benefit is accessible to public investors through investable instruments? If GDP growth is mainly concentrated within SOEs, will they generate outsized profits that investors can capitalize on? If focusing on specific companies, then idiosyncratic risks come into play—have all associated risks been considered?
Agree that there are many opportunities in the Chinese market given long-term GDP growth backdrop (other macro-economic factors aside), but the actionable steps may not be as straightforward as one may think.
“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
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From the available literature, the link between GDP growth and stock market performance is quite weak. There is actually a more recent visual capitalist representation. That seems to be not working today, https://www.visualcapitalist.com/cp/stoc...dp-shares/ . The older MSCI article which summarizes it is https://www.msci.com/documents/10199/a13...adb948f578.
The summary is long term real earnings growth falls behind long term GDP growth in many countries.
Disclaimer :-
I am not an investment professional.
I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.
Nothing written here is an invitation to buy or sell any particular stock.
At most, I am handing out an educated guess as to what the markets may do.
The market will always find a new way to make a fool out of me (and maybe, even you!).
Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.
I am not immune to that, so please understand that any past success of mine will probably be followed by failures
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(06-10-2024, 08:58 PM)Shrivathsa Wrote: ..
The summary is long term real earnings growth falls behind long term GDP growth in many countries.
Intuitively, that seems true. Another example would be Singapore GDP vs STI. Since 2007 we have more than doubled our GDP, but STI has yet to exceed it's 2007 highs.
Rigorously, identifying a trend like increasing GDP is important, but still inadequate in formulating a complete investment thesis.
“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
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