Jeremy Grantham says stocks could be heading for a ‘melt-up'

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#11
Timing the USA market might be difficult. They have a history of breaking new highs. But timing our STI market seems easier. It always go near back to our lows. And it doesnt have a good history of breaking new highs.
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#11
Timing the USA market might be difficult. They have a history of breaking new highs. But timing our STI market seems easier. It always go near back to our lows. And it doesnt have a good history of breaking new highs.
Reply
#12
(08-01-2021, 12:32 AM)Wildreamz Wrote: As for stocks, depends on where you look, right? I don't think many SG investors are ready to call SG market in a bubble. 

I am not sure whether it's possible to see US or HK "bubble type*" valuations in SGX, for e.g. Zendesk/Zoom, due to the make up of our exchange.

*subjective, for e.g. some investors may focus on earnings potential rather than current earnings. 

https://www.reuters.com/companies/ZEN.N/key-metrics

I think a more appropriate term cld be "overvalued". 

In any case, I noticed the SG/HK/US holdings that I took profit on recently, are traded in very small lots. Does any buddy have the same observation ? 

Does this perhaps indicate we cld be at the tail end of the boom since retailers seem to be actively jumping into the mkt ? 

(08-01-2021, 09:44 AM)Wildreamz Wrote: I still regard myself as a value investor, though I focus on high valuation, high quality names (quasi-monopolies, or future quasi-monopolies). 

Does that mean stocks like Apple, Alphabet , Tencent ? imo, it's not easy to buy these stocks at a "cheap" price, and it is also very difficult to spot early on which company will be able to develop into quasi/monopoly in a sustainable manner. I guess one way is to buy during times of recession where hopefully, their prices correct meaningfully.

I think the purchase price for such stocks also have to factor in regulation MOS like what happened in the recent Alibaba case.
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#12
(08-01-2021, 12:32 AM)Wildreamz Wrote: As for stocks, depends on where you look, right? I don't think many SG investors are ready to call SG market in a bubble. 

I am not sure whether it's possible to see US or HK "bubble type*" valuations in SGX, for e.g. Zendesk/Zoom, due to the make up of our exchange.

*subjective, for e.g. some investors may focus on earnings potential rather than current earnings. 

https://www.reuters.com/companies/ZEN.N/key-metrics

I think a more appropriate term cld be "overvalued". 

In any case, I noticed the SG/HK/US holdings that I took profit on recently, are traded in very small lots. Does any buddy have the same observation ? 

Does this perhaps indicate we cld be at the tail end of the boom since retailers seem to be actively jumping into the mkt ? 

(08-01-2021, 09:44 AM)Wildreamz Wrote: I still regard myself as a value investor, though I focus on high valuation, high quality names (quasi-monopolies, or future quasi-monopolies). 

Does that mean stocks like Apple, Alphabet , Tencent ? imo, it's not easy to buy these stocks at a "cheap" price, and it is also very difficult to spot early on which company will be able to develop into quasi/monopoly in a sustainable manner. I guess one way is to buy during times of recession where hopefully, their prices correct meaningfully.

I think the purchase price for such stocks also have to factor in regulation MOS like what happened in the recent Alibaba case.
Reply
#13
I still remember Apple traded close to PE of 10 in 2016. And people have been calling Amazon and Facebook monopolies since forever. Even today, Alphabet/Facebook doesn’t look particularly expensive IMO.
“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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#13
I still remember Apple traded close to PE of 10 in 2016. And people have been calling Amazon and Facebook monopolies since forever. Even today, Alphabet/Facebook doesn’t look particularly expensive IMO.
“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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#14
Microsoft and Apple were actually not considered as dot com stocks. Just as the big autos are not considered EV plays like NIO and Tesla.

Similarly I would actually expect most of the big autos to be around in 20 years

(08-01-2021, 09:29 AM)Wildreamz Wrote: Don't forget, some of the darlings today (Microsoft, Apple etc.) existed since then too. Gotta give it to the long term investors.

As for Tesla, there are surprisingly not much true tech name in the Transportation and Energy space. They would dominate for at least a few more years, because Elon do seem to know what he is doing (Tesla has one of the more credible, and scalable Self-Driving business out there; and they are riding the cost decline of battery price to almost perfection). Whether or not current valuation is justified in the long run is to be seen.

(vested in Tesla)

Nice comparison

Those who had gone through dot com will remember how crazy a bubble can be. Companies raised billions just by having a website or promising to buy a company. Not that different from SPAC now. It rhymes though I personally don’t think the bubble is as big as back in Y2k. But on the other hand the top 10 tech stocks contributed almost entirely the returns of S&P500 in 2020 ie S&P490 was flattish and not that expensive.

A recent bubble that can actually compare to Y2K dot com is the ICO fever, albeit much smaller in size and impact, as a reference how dumb it can get.

(09-01-2021, 08:28 PM)Corgitator Wrote: Depends on how you define a bubble. I like to structure my thinking alongside these 3 greats in different fields of finance:


  1. Robert Shiller: a bubble is excessive optimism
  2. Cliff Asness: in a bubble, no future outcome can justify prices
  3. Eugene Fama: a bubble must be predictable

To me, definition 1 is useless to a practitioner. You make extra returns by knowing when the bubble pops. Knowing that you are in an excessively optimistic environment does not help in that sense. Many great investors were calling the top to the 2000 bubble since the late 1997. While they were eventually proven right, SP500 was 800-900 when they made the call, and went on to 1400-1500, before crashing back to 800-900. They would have made very little money even though they were right about the excessive optimism.

Definition 3 is the most robust definition, but it's pretty much unachievable. If a bubble is predictable (i.e. you know when it forms and more importantly, when it pops), the predictability itself would prevent the bubble from forming. You would have big players coming in to take advantage of the predictability to bring prices back to more normal levels.

To me, definition 2 is the most practical for true blue value investors. I think Asness explained it best, and I will not butcher his elegant explanation, but will instead just quote it in full:

…To have content, the term bubble should indicate a price that no reasonable future outcome can justify. I believe that tech stocks in early 2000 fit this description. I don’t think there were assumptions – short of them owning the GDP of the Earth – that justified their valuations.

Tech bubble was crazy because risk-free rate was ~6% while normalized earnings yield was more like 2-3%. So the implied equity risk premium was actually negative.

Using definition 2, I don't think any equity market (in aggregate) is in a bubble right now. US is relatively expensive (but not a bubble), while SG is relatively cheap. Some pockets of the market seems bubbly, but overall aggregate valuation isn't too crazy when you take into account that 1) corporate profit margins are structurally higher than before, and 2) rates are really low (go change your risk-free rate from 6% to 0.5% and see the impact on your DCFs, especially for businesses with significant cash inflows from the distant future).

Nonetheless, I don't need to invest in US simply because it's not a bubble. Higher valuations, over the long term, will lead to lower expected returns. I can just avoid the expensive markets, and invest in the more undervalued ones. In that regard, I'm very similar to what GMO is doing (they've been allocating away from US towards EM for many years already), only that they market their decision as avoiding a bubble, while I simply think of it as avoiding a relatively expensive market.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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#14
Microsoft and Apple were actually not considered as dot com stocks. Just as the big autos are not considered EV plays like NIO and Tesla.

Similarly I would actually expect most of the big autos to be around in 20 years

(08-01-2021, 09:29 AM)Wildreamz Wrote: Don't forget, some of the darlings today (Microsoft, Apple etc.) existed since then too. Gotta give it to the long term investors.

As for Tesla, there are surprisingly not much true tech name in the Transportation and Energy space. They would dominate for at least a few more years, because Elon do seem to know what he is doing (Tesla has one of the more credible, and scalable Self-Driving business out there; and they are riding the cost decline of battery price to almost perfection). Whether or not current valuation is justified in the long run is to be seen.

(vested in Tesla)

Nice comparison

Those who had gone through dot com will remember how crazy a bubble can be. Companies raised billions just by having a website or promising to buy a company. Not that different from SPAC now. It rhymes though I personally don’t think the bubble is as big as back in Y2k. But on the other hand the top 10 tech stocks contributed almost entirely the returns of S&P500 in 2020 ie S&P490 was flattish and not that expensive.

A recent bubble that can actually compare to Y2K dot com is the ICO fever, albeit much smaller in size and impact, as a reference how dumb it can get.

(09-01-2021, 08:28 PM)Corgitator Wrote: Depends on how you define a bubble. I like to structure my thinking alongside these 3 greats in different fields of finance:


  1. Robert Shiller: a bubble is excessive optimism
  2. Cliff Asness: in a bubble, no future outcome can justify prices
  3. Eugene Fama: a bubble must be predictable

To me, definition 1 is useless to a practitioner. You make extra returns by knowing when the bubble pops. Knowing that you are in an excessively optimistic environment does not help in that sense. Many great investors were calling the top to the 2000 bubble since the late 1997. While they were eventually proven right, SP500 was 800-900 when they made the call, and went on to 1400-1500, before crashing back to 800-900. They would have made very little money even though they were right about the excessive optimism.

Definition 3 is the most robust definition, but it's pretty much unachievable. If a bubble is predictable (i.e. you know when it forms and more importantly, when it pops), the predictability itself would prevent the bubble from forming. You would have big players coming in to take advantage of the predictability to bring prices back to more normal levels.

To me, definition 2 is the most practical for true blue value investors. I think Asness explained it best, and I will not butcher his elegant explanation, but will instead just quote it in full:

…To have content, the term bubble should indicate a price that no reasonable future outcome can justify. I believe that tech stocks in early 2000 fit this description. I don’t think there were assumptions – short of them owning the GDP of the Earth – that justified their valuations.

Tech bubble was crazy because risk-free rate was ~6% while normalized earnings yield was more like 2-3%. So the implied equity risk premium was actually negative.

Using definition 2, I don't think any equity market (in aggregate) is in a bubble right now. US is relatively expensive (but not a bubble), while SG is relatively cheap. Some pockets of the market seems bubbly, but overall aggregate valuation isn't too crazy when you take into account that 1) corporate profit margins are structurally higher than before, and 2) rates are really low (go change your risk-free rate from 6% to 0.5% and see the impact on your DCFs, especially for businesses with significant cash inflows from the distant future).

Nonetheless, I don't need to invest in US simply because it's not a bubble. Higher valuations, over the long term, will lead to lower expected returns. I can just avoid the expensive markets, and invest in the more undervalued ones. In that regard, I'm very similar to what GMO is doing (they've been allocating away from US towards EM for many years already), only that they market their decision as avoiding a bubble, while I simply think of it as avoiding a relatively expensive market.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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