I try to buy actively but I will go through periods where I don't buy anything, especially recently because I feel like we are on the verge of a large correction. Which as peter lynch puts it is another way of saying you lose a lot of money in a very short period of time
Though what little I know about markets suggests there are always equities which are undervalued, and equities which are overvaiued. But it's not always obvious which is which.
@jesse_b OK. I'm not sure off the top of my head what OTC is, but it doesn't matter.
India has a concept of off-market trades. Maybe something like that.
No, probably not.
I would guess that most of the information generally available about the markets is unreliable. And mostly about the bigger companies, which constitute the index. This is the case here. And I'm guessing other places are similar.
@FaheemMitha Yeah even undervalued stocks might take a hit if the market as a whole crashes but you can be fairly confident they will come back as long as the underlying business is doing well. As old buffy the capital slayer says if you aren't willing to buy it and not even check the price for the next 10 years you shouldn't buy it
Yeah well when the "market" falls it creates uncertainty and uncertainty creates less buying and more selling which creates lower prices across the board
@FaheemMitha Yeah the US does this really cool thing where we just keep rolling over all of our debt into new bonds and print more money to make up the difference, lower interest rates to make it not noticeable
There are legitimate "economists" that theorize we can print as much money as we want and not actually cause any inflation and the majority of politicians seemingly eat it up.
Well the even more interesting thing is that most of the major economies in the world actually intentionally inflate their currency at the same rate as the US in order to maintain trade. If their currency doesn't inflate around the same rate it will really put a damper on their trade with the US
The US housing market is at a ridiculous high right now too and it's questionable whether or not it's a bubble or just a natural reaction to the crazy inflation we have
Who knows what it actually is because the way the government calculates it is a textbook example of lying with statistics but we have had several stimulus bills since covid started where they decided to just straight up print trillions of additional dollars to "stimulate the economy"
which wasn't actually a new thing just an old thing pushed to new proportions
yeah which is why I try to keep buying securities even though I think we could be in a bubble. I think owning pieces of a company are a great way to guard against inflation. If you own a company that sells tires for example it sort of doesn't matter what the inflation is. If one tire sells for enough to buy a dozen loaves of bread, as long as people need tires it will always be worth a dozen loaves of bread.
@FaheemMitha Not really, they were already up and there have been a bunch of minor corrections since early 2020
@jesse_b Well, it's complicated. The firm could go bankrupt, or its sales could go downhill. And if its overvalued, that can be a problem too. Lots of things to watch out for. I don't pretend to understand the issues, but I'm aware they exist.
@jesse_b sort of like why the housing market doesn’t matter if you’re not investing in it — if you only own your residence, if the market is down when you need to move, you’ll get less for your current home but your next one will also be cheaper
@jesse_b Oh. We had a big crash here in March 2020 because of the lockdown, but weirdly, it seems to have stimulated the markets, which have been rocketing up. It's weird.
@FaheemMitha well yeah but those are issues you need to watch for regardless. Specifically in relation to a major economic depression though there are certain industries that even if the company is doing well that industry being a luxury could cause it's downfall, but there are plenty of companies/industries that will be needed regardless of the economic situation
@FaheemMitha Yeah the march crash recovered, here anyway, due to the first stimulus package. When the government gave everyone their "free money" everything shot back up
@StephenKitt I'm trying to sell my home soon and buy a new one but I'll need to buy my second home shortly before I sell my current one and I am losing sleep every night worrying I will buy my new home, the market will crash, and then I'll have to sell my current
@FaheemMitha yeah. I would imagine your markets follow our markets and it really is a psychological thing more than anything else. The majority of people buying securities sell when the price goes down and buy when it goes up. Almost all crashes follow the same pattern of the great depression and most people are just unable to learn the lesson
@FaheemMitha Yeah I am moving from denver to texas
@FaheemMitha No I just am tired of my home, it's too dry here, I want to be closer to the water, I want more land, etc. I work remotely so I can move basically anywhere but there aren't many good options
@FaheemMitha I consider myself a value investor but I get caught up in it just like everyone else. When a stock is skyrocketing and you truly believe in the company it's very tempting to buy in even at inflated prices. And similarly many people buy stocks they know very little about so when that stock takes a dip it's hard to have confidence it will recover
even if I love a company and am completely confident they will be around and thriving for 10 years to come, it's not worth it unless it's for the right price
@jesse_b Well, if it gets rerated, it can take ages to get back to the original value.
Like 5 years. Say it goes from 60 P/E to 30 P/E. And stays there. Which can happen. It just takes a few years or underperformance. Maybe not even that.
You've just lost half your value. Now your stock needs to double in value to get back where you were. Assuming it doesn't get back the previous rating, that can easily take 5 years or more.
so even if you believe in that company and think they will somehow become the number 1 automobile manufacturer in the world that isn't good enough. They have to not only become number 1 but sell more than 50% of all automobiles worldwide in order to just be worth what they are currently selling for
I personally think there is a lot to be said for looking at book value. Though I'm unsure how one can know the book value hasn't been falsified. Or has hot air built in.
and in my mind that just isn't possible. The innovators of new technology are rarely the ones that profit from it and the automobile industry in general is historically a terrible investment because there is just too much competition and liability. Electric cars will take over the market but it will be electric cars sold from the current big manufactuters
@FaheemMitha when you figure it out let me know heh. Ol buffy the capital slayer has released a lot of good information about decoding a companies 10ks and 10qs
Most of the ways companies hide their income is legal so if you just understand those ways and put yourself in the shoes of the owner you can start to decode them, I don't claim to be an expert though
He goes over them at the berkshire annual meetings which are almost all on youtube but he has also been involved with many of the rereleases of benjamin grahams "the intelligent investor" book in which he adds a lot of footnotes
Things like depreciation and amortization should be added back into net income when you are looking to calculate free cash flow for example. They are fake expenses that are just a way to reduce taxable income
If your company makes 100 million dollars and then invests 95 million in safe short term investments they claim only 5 million in income but really as an owner that 95 million in investments is also income just not income collected presently
If your company buys 100 million in machinery for it's production line you only write off a certain percentage of that up front and then over the course of several years that asset "depreciates"
so each year you can write off more of that as depreciation. But you aren't actually spending any extra money, you are just saying the 100 million dollars worth of equipment is only worth 95 million now because it's older
so on a 10k that 5 million looks like an expense but really it is not
@jesse_b Right. My point about book value is whether the stated value represents true value. In the sense, would you actually get that value if you went to sell it?
@jesse_b Well, it's probably worth less because it's older. Like a car.
the 100 million you spent on that equipment would have been in the capex the year it was bought and then every year you own that equipment (up to a certain amount of years depending on several factors I'm not privy to) you can write off the amount it depreciates as an expense
A lot of companies will be investing a large portion of their profits right now because we have a democratic majority so they can essentially just push those profits off until we get a republican majority and then they will sell off their investments and report greater profits with lower tax rates
I actually find the whole process very fascinating and please don't believe anything I say without researching it first because I'm quite certain there is a lot of things I'm not understanding properly but it is still just incredibly fascinating to dig into all this stuff
here is a spreadsheet I toiled with a while back to try and give me a high level understanding of a few different valuations if you want to peak at the formulas I used: docs.google.com/spreadsheets/d/…
so they’ll have something like a 45-day term on short-lived produce (which is way longer than the sell-by date), but high-volume, longer-lived goods will be paid with a far greater delay, and they’ll get kick-backs too
if anyone wants to be appalled by sleazy business practices and hasn't already I recommend doing a deep dive on US chicken farming
speaking of that though, @StephenKitt do you know off hand how much chicken costs in France?
I have a friend in canada and he says chicken there typically costs over $6/lb. In most parts of the US it's about $1.29/lb, $1.99/lb for the really premium stuff
@JeffSchaller You mean the international standard units of weight used by just about everyone in the world apart from some backwards nations still clinging desperately to their impractical and outdated units?
I've wanted to switch to metric for my woodworking for a while but it would be too much of an uphill battle to replace all my measuring devices. Plus you can find so many good deals on second hand tools and none of them will be in metric
@jesse_b eh, I can't imagine that would be practical. You want to be using whatever measures the country you live in uses. Anything else would just complicated things.
I don't think the US can ever switch because if you told someone they had to replace their great grandfathers starrett machine square with some modern low quality tool they would start another civil war
@terdon theoretically it shouldn't make any difference, it's not like I'm doing part of the work and then passing it on to someone else. As long as I use the same measurements throughout the project it will turn out okay, just make some of the calculations slightly easier
and a lot of the furniture in the US is made in china already so the overall dimensions are probably closer to metric than imperial anyway
I was actually thinking about it over the past few days because I want to get some right handed tape measurers and I was thinking "maybe I'll just buy metric ones" but it's more than just that. All my levels are imperial, I have probably a dozen imperial only straight edges, all my saws have imperial markings on them, even though I don't really ever use them. I have like 6 imperial speed squares, my digital calipers can do both metric or imperial but the mechanical ones don't
Huh. The Brits have a weird mix of the two as well. People under 50 (?) or so use Celsius for temperature, while older folks still use Fahrenheit. Volumes can be in either liters or pints, weights are as often in kilograms as in stone. Quite confusing really.
I suspect it will be considerably clearer after a generation or so.
Distances and speeds on the roads are still in miles or miles/h and not kilometers though .
I think distances in canada are almost exclusively in km except for shorter things, people's heights will usually be said in feet, or if you ask a carpenter the length of a board it will probably be in feet, but that same carpenter will say the store is 2km down the road
@terdon I think some things will take a bit longer, the tool issue I'm having will plague many industries for a really long time
especially things like machining. It's not uncommon for machine shops to use lathes and mills from the 1800s, and those tools will probably still be in use for hundreds of years to come
and you learn skills like that from the people before you, so if they learned imperial they will likely teach imperial
@jesse_b I feel I've asked this more than once, but you've not found a useful forum on US equities? Also, have you tried the various equity funds floating around out there? Including but probably not restricted to mutual funds. Maybe we talked about it. I forget.
@jesse_b In this episode I was watching right now, I learned of the existence of Marburg MS. Apparently regular MS isn't dreadful enough.
@FaheemMitha I don't know of any forums, I've dabbled in a few facebook groups and they are mostly full of GME type people so I don't really find much benefit to them. I buy a lot of S&P 500 index funds and some DIA. I have a mutual fund for my company retirement fund only because the company matches contributions but otherwise I wouldn't recommend them over self managed index funds, they are essentially the same thing with higher fees
@jesse_b Oh, people trying to drive the price higher? I wouldn't have thought that style of investing would be particularly illuminating or educational.
@jesse_b Ah, OK. That's probably correct, yes. Here one was quoted to me as 2.5%. What it is like over there?
I remarked that 2.5% seemed kind of high, but the people selling it to me seemed to think it was quite reasonable. That 2.5% must really hurt when the market is down. Because the investment people will still want to be paid. Nice work if you can get it.
I'm not sure the fees but yeah warren buffett is very vocal on that subject. It is so hard to beat the 12% return that is almost guaranteed with s&p 500 index funds, and if you are paying 2.5% in fees they actually have to make 14.5% in order for it to make sense
Those people were really eager. They would have taken the money out of my pockets if they could.
@jesse_b Right. And it gets dramatically harder to do that.
@jesse_b Just wondering what the US rates look like.
Though as I think we discussed elsewhere, I don't understand what's magic about index funds. It's just an arbitrary collection of companies, some of them overvalued.
But I guess it's a kind of religion to believe this stuff.
BTW, is it true that if a company's stock is outperforming, the mutual fund manager needs to sell some of the stock to bring it back to "scale"?
This is how it was explained to me. I might have misunderstood, but it sounds horribly plausible.
mutual funds are highly regulated because they are typically used for retirement funds and pensions. But essentially they are just hedge funds with restrictions
Sometimes they don't really invest at all but just convince people to keep giving them money and find clever ways to distribute that among a select few
> The essential difference between the two frauds is that a Ponzi scheme generally only requires investment in something from its victims, with promised returns at a later pay date. Pyramid schemes, unlike Ponzi schemes, usually offer a victim the opportunity to “make” money by recruiting more people into the scam.
I think there is less criminal activity going on in "wall street" than people believe. Most of the sleazy activities happen within the confides of the law and when someone does something illegal for their personal gain it's not like everyone on "wall street" is benefiting from it, in fact it usually hurts everyone but a select few.
I'm sure that's true. Illegal activity is the least of it, since that just means breaking a law. Unethical activity, that's a whole different ballgame. There are many, many things that are perfectly legal and still brand you an asshole in my book.
The really unrealistic thing (or one of the outstanding ones) of TV medical shows is that the doctors all care a great deal about their patients and go to a lot of trouble over them. In my limited experience, mostly in India, this is wildly inaccurate.
@FaheemMitha Ouch. That is absolutely awful but hasn't been my experience. The doctors I've dealt with are often arrogant and tend to have an inflated opinion of themselves but they treated their patients (my father, usually) well.
Most of the doctors I met openly couldn't give a damn, and gave the impression of being extremely jaded, and just going through the motions. Of course, I may not have met the best ones.
@terdon Maybe just India. Three things that may exacerbate it. (1) there are too many people, so doctors get overloaded (2) Indian families traditionally think of the medical profession as a safe, lucrative and prestigious one, so push their children towards it, with the result that a lot of people enter the profession that shouldn't.
(3) Indians love money, so after a while it becomes all about money.
@terdon What does your father have? I hope he is doing better.
@FaheemMitha 2 and 3 are pretty universal. 3 most certainly is, and 2 is very much a staple of Greece and other Mediterranean countries. I'm hoping you were just unlucky, but it's more likely I have been lucky. I've heard some awful horror stories in the Greek medical system so I expect many Greek doctors fit the description of your Indian ones. I've just been lucky enough to avoid them.
@FaheemMitha Cancer, most recently. But in remission for a while now. He's just been in and out of hospital many times in the past 20 years with various ailments so I've gotten more experience than I'd like.
@terdon I used to go with references. I'm doing that less now. There is a relatively new site called Practo I've been trying. With verified patient reviews. Based on my relatively limited experiences, it's been at least as good as references.
Greece, or Athens or at least middle class Athens, is a small enough society that you tend to know who you're going to. I will simply never go to a doctor without asking doctor friends for their opinion and they tend to either know each other or know who will know.
Small society. Everyone has some cousin who's a doctor, so you ask your cousin, they ask their friends and eventually you get an idea of a doctor's reputation.
I have dealt with a lot of bad doctors and a few good ones, I think it's just a matter of finding a good one which can be difficult for a general practice doctor and downright impossible in an emergency
@terdon yeah, I mean I sort of get it because the pharmaceutical companies send reps out to the doctors office to essentially lobby them to prescribe their drugs and they will give out swag with their drugs name on it
So it's not uncommon to see like allegra tongue depressor holders, or a viagra stethoscope lol. As a frugal person I can understand taking these freebies and using them just because why not but even if the doctor has the best intentions it really comes across bad
I took someone to see a rheumatologist the other day. She said that no GP would refer her, because she didn't give referral fees. Or something like that.
Another data point. I got new spectacles recently. I had some issues with them. I emailed both the ophthalmologist and the optometrist, and neither of them replied. It two more reminders to get a response. Which was, respectively, I'll look at it, and please resend.
And these people were actually better than average. Usually doctors here just yell at you. And/or ignore you. Sometimes they'll try to persuade you to have surgeries that will do you no good.
@AndrasDeak I didn't say it was creepier. Large scale lobbying is a far more serious problem. However, the idea that someone in the medical profession would display ads in their office shocks me more. I expect that sort of thing from politicians, but I hoped doctors would take more care to pretend to be clean.
