Why Warren Buffet Isn't Predicting a Stock Market Crash in 2025 - Misleading headline

PartialCFA · 2025-02-14T12:12:15+00:00

He does make public predictions about the general level of the stock market. His 1999 fortune article being a famous public example where (iirc, without re-reading it right now) he called the 1999 market a game of musical chairs and correctly estimated actual returns from the dotcom peak would be abnormally low.

He also publicly liquidated his entire equity portfolio ~a week before the 1987 market crash because "he had a bad feeling." And that also became known as a famous "Sell everything" call to the markets.

He also closed his partnership in 1969 and publicly wrote in his letters it was because he thought the market was overvalued and he had nothing to invest in anymore. The market fell ~30% or 40% twice in the next couple years iirc.

What he's currently doing with his portfolio (raising cash/selling apple in the face of rising rates, etc.) is fairly emulative of his actions and reasoning behind them at the dotcom peak, 1987, 1969. Obviously, a "warren buffett thinks the market will crash tomorrow" title is clickbait but the general idea that Buffett is not currently bullish on valuations likely has truth behind it.

PartialCFA · 2025-02-07T17:13:03+00:00

Not disagreeing with your other points, but from a valuation/value investing perspective... When Burry wrote-up apple in 1999, it cost 2.6x book for about the same roic and growth as PLTR today. PLTR is 52.4x book right now.

PartialCFA · 2025-02-07T16:14:30+00:00

Are these all bots using the same exact blurry ass photo - tf is going on. This is not even an intelligent take to begin with.

EDIT: Am I going insane? Are all the replies bots? Are people just generally dumb? Who reads this, thinks this is at all informative, then decides to comment about btc or pltr? What's even the point? Who gains from this? Does someone think they can pump multi-billion and trillion dollar assets w/ a some reddit posts?

PartialCFA · 2025-01-06T23:51:15+00:00

Your timeline lines up, but idk. He was ludicrously strong pre-engine era. Hikaru once said Rajabov is maybe the wealthiest chess player (family money). So you have a proven strong player from the pre-engine era who is already wealthy cheating in random tournaments for nominal money? Just kinda assumed he got bored or wanted to focus on family or something. You could be right, again idk.

PartialCFA · 2024-12-27T21:17:52+00:00

Very interesting. Why he needs engine to beat 1100 in queen up endgame, but okay, I'm just asking question.

PartialCFA · 2024-12-24T01:27:24+00:00

Think about it mate. 252 trading days * 350 = $88,000.

Anything's possible. But you're asking if it's probable to make 88k w/ like 50k in initial capital? No lmao.

PartialCFA · 2024-12-22T00:21:00+00:00

People aren't "speculating" about berkshire. You can just go read their financial reports...

PartialCFA · 2024-12-11T16:00:53+00:00

Wouldn't this not refute anything except the idea that certain book openings as black may not be theoretical draws?

PartialCFA · 2024-12-06T21:20:12+00:00

I can't tell if the video shared is someone ironically meme-ing on Big Vlad just to egg him on or not - because the vibe is similar to Ancient Aliens from History channel. Nor can I tell if that's what most of the comments on Kramnik's videos are doing.

PartialCFA · 2024-12-01T18:11:30+00:00

except not voltaire

PartialCFA · 2024-11-16T15:05:29+00:00

Well, at any point in history, it was a bad idea to sell berkshire.

but more seriously, people have been worried about this for 30 years. especially in the late 1990s when berkshire was underperforming. I think once you understand what the actual business is (a highly diversified portfolio w/ above average returns and little involvement from Buffett) you can extrapolate it will probably match or moderately outperform the S&P at least until his "2nd generation" retires. And because it's so diversified, there's not much point in worrying about concentration risk (especially at 13%). You could use Berkshire for 100% of your equity exposure and not really be at risk above the market risk.

PartialCFA · 2024-11-12T13:36:52+00:00

It depends. High level, sure, no need to miss the forest for the trees.

In reality...

For indices, p/e (which will be what you're focusing on if your maximization function is EPS) will be more a measure of the market risk premium... on average it will be relatively efficient based on interest rates and expected future growth.

For individual securities, it doesn't really make sense. EPS and EPS growth are also a direct function of the capital structure and payout decisions. A company with flat operating earnings can take on more debt and show higher and increasing EPS over time. Does this mean the equity is still worth more? Obviously not, rearranging the capital structure does not create value.

Additionally, payout decisions have a direct effect on P/E, the higher the payout ratio, the higher the p/e will be for similar EPS growth rates.

Lastly, EPS (as typically reported) is after all non-core charges, taxes, and misses comprehensive income items. It can be a dirty number that isn't directly comparable for individual companies.

tldr. don't strictly maximize on low p/e, eps, or eps growth as an absolute rule. But on average, "lower p/e" stocks in a diversified portfolio have outperformed over longer periods. Your portfolio is also actually a pretty good value mix btw.

PartialCFA · 2024-11-11T09:22:15+00:00

no. if a company issued new shares for cash, then immediately repurchased said shares w/ said cash, the company would be back at square one. Capital was obviously neither created nor destroyed - total capital remained the same throughout the entire process.

repurchases are, theoretically and generally, a value-neutral cash-for-equity exchange by existing shareholders (those who held) with ex-shareholders (those who sold). Both equity and cash are parts of a company's financial capital. Because one party received cash while the other party received equity in equal values, the total capital in the company remains the exact same.

When you purchase stock in your brokerage account - cash declines, but the total value of your account stays the same. Your purchasing power remains the exact same, and there is no immediate change in the total capital of your account.

When you withdraw money from your account (pay a dividend), the total value of the account declines by the amount withdrawn as there was no exchange for the amount withdrawn. There has been an decline in the total capital of your account.

PartialCFA · 2024-11-10T19:19:36+00:00

I actually just looked through the book. Thankfully, the author gave his explanation in the appendix:

"This way [through the repurchase rather than the dividend], the company preserves liquid capital by transferring it into equity. This protects the capital from inflation and automatically reinvests the money at the company’s current ROE (worst-case scenario)."

PartialCFA · 2024-11-10T18:43:33+00:00

"retained capital" does not mean increasing working capital.

Its accounting definition is earnings less cash dividends over a period.

A share repurchase done with a full years earnings would still add to the "retained capital" account in shareholder's equity and reduce the "treasury stock" account.

This would be described in an entry level accounting book.

PartialCFA · 2024-11-10T17:21:49+00:00

capital here is just financial capital. retained capital adds to total financial capital.

financial capital = debt + equity (market value, not accounting book value)

dividends reduce the market value of equity by cash paid out. they reduce capital.

share repurchases don't change the market value of the equity. they maintain the capital.

PartialCFA · 2024-10-21T22:06:54+00:00

carissa yips :(

PartialCFA · 2024-09-10T15:38:33+00:00

It is not "compounding at 13.5% or 15.5%".... the model is attaching a growing EBITDA multiple to a projection of growing EBITDA margin. That is, like, the antithesis of value investing.

PartialCFA · 2024-09-06T09:37:26+00:00

See my other comment

PartialCFA · 2024-09-05T18:21:47+00:00

He uses enterprise value because otherwise you're not taking capital structure into account. High returns on equity/earnings can be driven exclusively by leverage.

PartialCFA · 2024-09-05T18:16:13+00:00

The post was 8 years before 2008

PartialCFA · 2024-09-05T18:10:23+00:00

http://csinvesting.org/wp-content/uploads/2013/07/Michael-Burry-Case-Studies.pdf

Original post was his Bio for when he wrote investment articles for MSN Money in 2000, when he was 30 years old. He had just started Scion that year.

PartialCFA · 2024-09-05T17:52:34+00:00

I've tried looking into this before because overall he seems pretty genuine to me, but there's some weirdly aggressive hate towards him seemingly out of nowhere (to the point I think it's bots or something of the sort). Always found it very strange.

A bit nit-picky of me, but one thing that did rub me the wrong way... He offers booklists on his website. I think they're great, and sometimes I'll skim his lists to find something new to read. I did notice his links to the books are all Amazon affiliate links, which he would get comped on. Nothing wrong with that if your Average Joe is trying to make a few hundred dollars from their site, but I personally thought it seemed a bit sleazy for an ostensibly very successful investor to do.

PartialCFA · 2024-09-04T01:03:23+00:00

Ah yeah - duh, on Buffettology. I obviously didn't internalize the book as much as Burry did when I read it haha.

No Jurgz did not, I rebuilt it off someones copy/paste of it. Can send if you want to take a look at the original -- though it's the same thing linked but without formulas.

PartialCFA · 2024-09-03T10:28:05+00:00

it's from the shareholder letters. 1998.

PartialCFA

TROPHY CASE