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Show a chart of a bear market and I guarantee someone will say: The market went nowhere for years. What a terrible investment! Who would want to own stocks that long just to break even? How are you supposed to make money if it happens again?
Of course, it’s true. The market did go nowhere. Invested money went somewhere. An index, like the S&P 500, is not the same as investor returns.
To the untrained eye, the assumption is investors made no money during that time. I’m sure many investors didn’t. But some investors did. And neither’s returns looked anything like the chart. Continue Reading…
I ran across a PDF where Charlie Munger explains the important difference between companies that make more money than they know what to do with (cash cows) versus companies that always need cash to maintain growth (cash hogs).
So cash cows are obviously better than hogs. And the best cash cows have some type moat – pricing power, economies of scale – and a great capital allocator. See’s Candy is a good example. Continue Reading…
I’m not a fan of high yield bonds. I say this because I subscribe to the view that stocks drive returns while bonds help cushion any falls.
I know this because when the stock market acts crazy, investors consistently run from stocks into bonds for safety. High-quality government bonds benefit and help offset stock losses.
However, high yield bonds don’t. Continue Reading…
In the last post, I mentioned that China’s stock market is in freefall since about the middle of June and how it would be a great case study in investor behavior.
My lack of elaboration caused some confusion around the statement and the chart. So I thought I’d clear one thing up – the MSCI China Index is very different from China’s stock market.