I wanted to get something up since I planned to write more and will be busy for next few weeks. However, this chart (which is making the rounds) is so good it needs little commentary. Just a tiny bit of informal commentary.
Although, being contrarian just for the sake of being contrarian is stupid (I still own Greek stocks even now that they are not as hated;bc are still very cheap so I dont care if the world thinks im right now or still thinks im nuts) and things that worked well can do well for many years in a row (US equities since 09), but this just goes to show a few things
1. Contrarian/value investing is and will always be king. HFT or not it probably matters very little to long term investors
David Einhorn’s Greenlight had a strong fourth quarter; Gains on Neubase Therapeutics [Q4 Letter]
David Einhorn's Greenlight Capital was up 5.2% in 2020, underperforming the S&P 500's 18.4% return. For the fourth quarter, the fund was up 25%, which was its best quarterly result ever. Longs contributed 42% during the fourth quarter, while shorts detracted 15% and macro detracted 1%. Q4 2020 hedge fund letters, conferences and more Growth Read More
2. Dont marry an asset class (or security). Unless it is still cheap, you might plan on selling earlier than you planned. I bought some stocks in 09 which i sold after a few months since (I thought) they had reached intrinsic value. However, getting wedded to stock or asset class (yes, I am thinking of you goldbugs)
3. Arguing about valuations is foolish. Although I enjoy following/writing about this topic it really is less important than most investors think. If you cannot buy when things are heap or sell when they are expensive, spending even one second on market valuations is just time wasted. Go spend time with friends family, read a book or do something productive.
4. Recency bias – just because something did well recently does not mean it will do well in the future. Asset classes which have performed poorly will not necessarily perform poorly in the future.
5. I probably shouldnt have commented as the chart alone is good enough. However, one thing which is interesting… If you annualize the returns in Q1 for some assets (ie junior gold miners, gold, mortgage REITs) you get slightly higher returns than 2013 (note this is a big assumption). Meaning if gold miners return 18% in 2014 each Q you get 82% return which is higher than the loss of 2013. However, if something goes down 60% you need a much higher gain to break even, so it is important to keep that in mind. However, it also shows how much room some of these hated assets have to go before they run out of steam. So even though gold miners are unlikely to return exactly 82% the gains in the coming years should be nice if you believe that the drop of 60% was way over done (which I do)
Anyway, here is this really great chart from Pension Partners
Disclosure: I own some of the assets in green (for 2014 of course).
PS hope that title made sense the (double negatives?) threw me off