Money Flow Trading Method along with Risk Management

Good morning,
Day 6, here are my results. Have a great day.
Cheers.

Hello loveandpeace

You can email me at [email protected] to bring me up to date on yourself and your recent activities. Yes, I will arrange for $50,000 Canadian to be deposited for Domenico at Friedberg Direct in Toronto.

Now to this article.

Trump Considers Kevin Warsh for Treasury Secretary then Fed Chair – MishTalk

Trump Considers Kevin Warsh for Treasury Secretary then Fed Chair
November 21, 2024
•
9:40 pm
•
21 commentson Trump Considers Kevin Warsh for Treasury Secretary then Fed Chair
•
Economics
This strategy is a bit bizarre because Warsh is a free trade advocate. More 5D thinking?
https://i0.wp.com/mishtalk.com/wp-co...ality=80&ssl=1
Please note Trump Considers Warsh Serving as Treasury Secretary.
President-elect Donald Trump has floated selecting financier Kevin Warsh as his Treasury secretary with the understanding that he could later be nominated to lead the Federal Reserve when Jerome Powell’s term as chair ends in 2026, according to people familiar with the matter.

Trump discussed the potential arrangement with Warsh during a meeting Wednesday at Mar-a-Lago, the president-elect’s private club in Florida, some of the people said.
Warsh is a front-runner to lead the Treasury Department, but as of Thursday evening, Trump hadn’t decided whom he would choose for the pivotal cabinet position. The people familiar with the matter said Trump was still weighing how he would approach the Fed vacancy and likely wouldn’t make a final decision until closer to when Powell’s term as chair ends in May 2026.

Trump’s aides often caution that he is prone to changing his mind. He could decide not to pick Warsh or Bessent for these roles and instead select one of the other top contenders to lead Treasury, such as Apollo Global Management Chief Executive Marc Rowan. Trump has been deliberating behind closed doors for days over his choice for Treasury secretary.

During the Wednesday meeting, Trump asked Warsh about his past stance on tariffs, according to one of the people familiar with the matter. Warsh has been a critic of protectionist trade policies. He suggested in a 2018 opinion piece in The Wall Street Journal that Trump’s tariff plans could lead to what he called “economic isolationism” for the U.S.

“Mr. Trump’s mercantilist rhetoric may prove more than a negotiating tactic, auguring new tariff and trade restrictions the world over,” Warsh wrote. “Economic isolationism would do great harm to our economic growth prospects.”

Trump in August asserted that as president he should have more say over how the Fed sets interest rates. If carried out, that would buck a longstanding custom under which the central bank enjoys political autonomy to fight inflation with often unpopular rate increases.
Trump flirted with removing Jerome Powell in a dispute over interest rates back in 2018. But in a June interview with Bloomberg News, he said: “I would let him serve it out [his term], especially if I thought he was doing the right thing.”

Trump lost his bluff over Matt Gaetz, so what is this all about?

Meanwhile, in the real world, Continued Unemployment Claims Are the Highest Since November 13, 2021
Also note, China’s Puts Export Curbs on Minerals US Needs for Weapons and Technology

One of my readers proposed “Dig, Baby, Dig”.

However, if Trump provokes China enough and it does pull the plug on rare earths, there is no time for digging.
We should have been doing that years ago. Biden blocked the latest efforts.
Returning to the Fed …

Trump Will Have a Second Chance to put a Gold Advocate on the Fed, Go For It!
Judy Shelton in back in play for a Fed nominee. Please do it President Trump.

Good morning,
Tomorrow will be my 9 trading day , and the end of my two week run. Here are my results.

Good work and please do a brief summary in your own words explaining how you have been able to achieve your results. It will help others want to try to learn as you clearly have.

WWW.AVIELFOREXLEARNINGEDGE.COM

HISTORY REPEATS. let's see.

Reflecting on My Overnight Trading Success:
A Journey of Consistency and Growth Over the years, Bruce developed a trading pattern that has proven to be successful, particularly when it comes to overnight trading. As anyone who’s ventured into the world of financial markets knows, trading can be both exhilarating and challenging. But what I’ve learned through trial and error, as well as careful analysis, is that my overnight trading strategy provides consistent success. Today, I want to share insights into my trading performance, the mechanics behind my strategy, and how I’ve achieved a high success rate.

Understanding My Overnight Trading Strategy Overnight trading involves holding positions through the evening and into the next day, often capitalizing on trends, market events, and global factors that influence the price movements after the U.S. markets close. This pattern fits well with my schedule, as I’m able to analyze market conditions, identify strong setups, and place trades without the pressure of constant monitoring during the trading day.

My strategy revolves around a few key principles:

Trend Identification: I focus on identifying strong trends that are likely to continue overnight. This often involves analyzing both technical indicators and fundamental factors that may drive market sentiment, such as earnings reports, economic data, or geopolitical developments. Entry and Exit Points: I’m disciplined when it comes to timing my entries and exits. My goal is to enter a trade at the most opportune moment, often after a solid confirmation of market direction. My exit strategy is just as important Risk Management: Perhaps the most critical aspect of my overnight strategy is risk management. I make sure that each trade has a well-calculated risk-to-reward ratio, ensuring that potential losses are kept within acceptable limits while aiming for high-probability, high-reward trades.

Analyzing My Trading Performance
When I evaluate my trading performance, I break it down into several key metrics: win rate, risk-to-reward ratio, and consistency.
Win Rate: One of the things I’ve been most proud of is the consistency of my win rate. On average, my success rate for overnight trades is around 75%. This means that, out of every 10 trades, I can typically expect 7 to be profitable. While this might not sound overly impressive on the surface, it's important to note that I focus on high-quality setups rather than the sheer volume of trades. This focus on precision is key to sustaining such a high win rate over time.

Risk-to-Reward Ratio:
My trading philosophy revolves around taking calculated risks. I aim for a 2:1 risk-to-reward ratio on most trades, meaning I am willing to risk $1 to potentially gain $2. This has proven to be an effective way to balance risk and reward, ensuring that even if I experience a losing trade, it doesn’t drastically impact my overall profitability.

Consistency:
One of the defining features of Bruce's trading pattern is its consistency. By adhering to a clear, well-tested strategy, I’m able to produce steady profits over time. Of course, no trader wins all the time — there are inevitable drawdowns and periods of uncertainty. However, the key is maintaining discipline and sticking to the plan. Over the long term, my consistency has been my biggest asset.

The Factors Behind My Success Rate

Several factors have contributed to my strong success rate, and I believe that understanding these factors is crucial for anyone looking to improve their own trading performance. Market Understanding: I keep a close watch on both the domestic and global economic landscape. This allows me to anticipate market-moving events and understand how global sentiment may impact overnight price action. Whether it's the release of major economic reports or geopolitical events, I strive to stay ahead of the curve and factor these into my trading decisions.

Adaptability:
The markets are constantly evolving, and so too must my trading approach. I regularly backtest my strategies, fine-tune my technical indicators, and adjust my risk management rules to adapt to changing market conditions. Staying flexible and open to change has been instrumental in improving my performance over time.

Psychological Resilience:
Trading isn’t just about charts and numbers — it’s also about mindset. One of the main reasons behind my success rate is my ability to maintain psychological resilience. I’ve learned to control my emotions, avoid impulsive decisions, and stick to my strategy even during drawdowns or when faced with uncertainty. This mental discipline has been a game-changer.

Continuous Learning: The financial markets are never static, so I commit to continuous learning. Whether it’s reading market reports, engaging with other traders. I’m always looking for ways to refine my skills and keep improving my strategy. This mindset of lifelong learning is one of the cornerstones of my trading success.

What’s Next for My Overnight Trading Strategy?

Looking ahead, I’m excited to continue refining my overnight trading strategy. The key to success in trading is not just having a successful pattern, but evolving with the market and finding ways to enhance performance. I’ll be exploring new technical indicators, testing out different risk management techniques, and adapting to changing market conditions as they arise. For those who are just starting their journey in trading, I recommend focusing on developing a strategy that fits your personal style and schedule. Overnight trading might not be for everyone, but with the right approach, it can be a highly effective way to capture market opportunities. My advice is to always remain disciplined, manage risk effectively, and continuously refine your strategy to improve your chances of success. In conclusion, Bruce's overnight trading pattern has proven to be a powerful tool in my trading arsenal. By sticking to a well-structured approach, managing risk carefully, and maintaining psychological resilience, I’ve been able to achieve a high success rate that I’m proud of. As I continue to grow as a trader, I’m excited about the future and the opportunities that await.
Cheers.
Happy trading!

Thickpipe

Thank you very much for the descriptive words on what I started working on 22 years ago.

Brùce

https://mishtalk.com/economics/huge-...private-wages/

Huge Negative Revision of $91.8 billion to Second-Quarter Private Wages
November 28, 2024
•
12:41 pm
Economics
The BEA hugely revised GDI to the downside. Hmm. It seems that voters weren’t fooled.
https://i0.wp.com/mishtalk.com/wp-co...ality=80&ssl=1

Chart Notes

1. Gross Domestic Product (GDP) and Gross Domestic Income (GDI) are two measures of the same thing.
2. Income should match products sold, and does over time. But the discrepancies since Covid have been on the wild side.
3. Real Final Sales is the bottom-line estimate of GDP. The rest is inventory adjustment that nets to zero over time.

On Wednesday, the BEA released its Second Estimate of GDP and its first estimate of GDI for the third quarter of 2024.
Current‑dollar GDP increased 4.7 percent at an annual rate, or $337.6 billion, in the third quarter to a level of $29.35 trillion, an upward revision of $4.4 billion from the previous estimate.

The price index for gross domestic purchases increased 1.9 percent in the third quarter, an upward revision of 0.1 percentage point from the previous estimate. The personal consumption expenditures (PCE) price index increased 1.5 percent, the same as previously estimated. Excluding food and energy prices, the PCE price index increased 2.1 percent, a downward revision of 0.1 percentage point.
Real GDP, Real Final Sales, Real GDI in Billions
https://i0.wp.com/mishtalk.com/wp-co...ality=80&ssl=1

The gap between GDP and GDI is widening again.
Also note the gap between Real Final Sales and GDP. This is inventory adjustment and inventory padding.
Due to Trump tariff threats, importers are likely padding as much inventory as they can before Trump hikes tariffs.
I expect a huge jump in inventories for the fourth quarter.
If buyers don’t show up for this stocked merchandise, merchants will get clobbered holding stuff people aren’t buying.

Updates to GDP

1. The second estimate reflects upward revisions to private inventory investment, nonresidential fixed investment, state and local government spending, and residential fixed investment.
2. The second estimate reflects downward revisions to exports, consumer spending, and federal government spending. Imports were revised down.

Updates to Second-Quarter Wages and Salaries

1. Private wages and salaries are now estimated to have increased $65.0 billion in the second quarter, a downward revision of $91.8 billion.
2. Personal current taxes are now estimated to have increased $39.8 billion, a downward revision of $15.5 billion.
3. Contributions for government social insurance are now estimated to have increased $7.0 billion, a downward revision of $12.4 billion.
4. With the incorporation of these new data, real gross domestic income is now estimated to have increased 2.0 percent in the second quarter, a downward revision of 1.4 percentage points from the previously published estimate. See lead chart.

The BEA explains “Today’s release presents revised estimates of second-quarter wages and salaries, personal taxes, and contributions for government social insurance, based on updated data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages program.”
Mish July 26, 2024: Expect the BLS to Revise Job Growth Down by 730,000 in 2023, More This Year

At the heart of these revisions is a horribly flawed birth-death model used by the BLS. My calculation closely matches an estimate by Bloomberg’s chief Economist.
Mish August 21, 2024: BLS Revises Jobs Down by 818,000 the Most Ever, About 68,000 Per Month

Do I get to say I told you so? My advance estimate a month ago was 779,000 lower. Bloomberg estimated 730,000.
Quarterly QCEW Data Provides More Evidence of BLS Jobs Overstatement

On November 20, I commented Quarterly QCEW Data Provides More Evidence of BLS Jobs Overstatement
My prior comparisons and advance calls suggest we see negative revisions in nonfarm payrolls from 2023 Q2 to 2024 Q2 of well over one million. My initial stab is about 1.2 million to the downside.

The BLS Birth-Death model is seriously messed up an/or the BLS is oversampling large corporations and under sampling small businesses.
The BLS monthly nonfarm payroll reports are consistent garbage.

Reflections on BEA Revisions
If jobs overstated, income is too. And on Wednesday we found out the BEA overstated wages by a massive $91.8 billion from $156.8 billion to $65.0 billion.
This resulted in a downgrade in GDI growth from 3.4 percent growth to 2.0 percent in the second quarter.

It appears the BEA is incorporating BLS garbage into its reports as well. That massive 3.4 percent to GDI in Q2 was fiction as I suspected all along due to QCEW data analysis.

Expect more negative revisions because they are coming.
Lacy Hunt pinged me with this observation: “The economy looks more and more like 2008, when for many the economy appeared to be just fine. Then came the downward revisions. When all was said and done, the NBER determined the cycle peak was December 2007. The deep revisions are continuing just as sixteen years ago.”

Neither of us think this recession will look like 2008 or 2020. It won’t for many reasons, but the revision signs are flying high.

Two Big Economic Shocks Coming
On top of negative revisions, the key driver of job growth, immigration, will end. So will the surge in related government handouts.
For discussion, please see my October 6 post Government Jobs Rose by Nearly 1 Million Unadjusted in Sept, What Going On?
On an unadjusted basis government jobs rose by 984,000. The BLS says jobs rose by 73,000. A reader asked about this.
Also see my November 1 post Nonfarm Payrolls Rise a Mere 12,000 with Government Jobs Up 40,000

Job Stats vs One Year Ago

1. Nonfarm Payrolls: +2,173,000
2. Employment: +216,000
3. Full Time Employment: -1,000,600

Second, a big consumer tax hike is coming assuming Trump does what he says.

So, we have already slowing job growth and now we have a migration shock and a tax hike shock coming just as nearly everyone has given up on the recession idea.
Good luck with that. Voters weren’t fooled, just the economists.

In case you missed it, please see My Thanksgiving Thanks to Followers

GOLD

The price of gold is climbing as the Ukraine-Russia conflict intensifies. Tensions peaked this week after Ukraine fired U.S.-provided missiles into Russia for the first time following approval from President Biden.

Russia has repeatedly warned that if the U.S. allowed Ukraine to use Western missiles, the U.S. would be considered a “direct participant” in the war.

Prior to the missile strike, Valdimir Putin approved a new nuclear doctrine, lowering the threshold for a nuclear strike in response to an attack on Russia.

Act Before The Conflict Escalates:

Tensions are rising quickly. Don’t miss an opportunity - now is a potentially strategic time to strengthen your portfolio.

Gold prices dipped after the presidential election. But further conflict could quickly drive gold prices up offering recent investors the potential for significant gains.

Right now, we’re offering up to four 10oz gold bars at spot pricing—no premiums, no hidden fees.

Get Gold at Spot Price »

Click-to-Call: (844) 643-1830

FOR THICKPIPE from BWM

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3. /XAU/USD: Gold Swings Higher as Traders Brace for Fed’s December R…

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ImportantExclusive
XAU/USD: Gold Swings Higher as Traders Brace for Fed’s December Rate Cut
Nov 29, 202403:44 EST
https://s3-symbol-logo.tradingview.com/metal/gold.svgXAUUSD+0.99%
Key points:

1. Gold prices rise to $2,660
2. Markets eye Fed’s rate decision
3. Volatility to persist for months ahead

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Illustration by TradingView
Shiny metal advanced above $2,660 as markets pivoted to safe-haven assets in the leadup to December’s interest rate cut by the US central bank.

1. Gold prices https://s3-symbol-logo.tradingview.com/metal/gold.svgXAUUSD moved higher Friday morning, surpassing $2,660 and hitting a session high of $2,665 per ounce. Gold enthusiasts are likely bidding up in anticipation of the Federal Reserve’s projected cut to interest rates next month. Now that the Fed’s preferred inflation gauge, PCE, came in at the expected 2.3% growth clip, central bank officials will feel more comfortable slashing borrowing costs when they meet on December 17-18.
2. Despite this price bump, the shiny metal is looking to wrap up the week at a loss of about 1.7% as markets are still not exactly convinced it’s time to jam their cash in safe-haven assets. With the President-elect going out and about on what he will do in office, traders expect risk assets to perform superbly well thanks to Trump’s plans for deregulation, lower taxes and higher tariffs on all things imported to the US.
3. Gold has seen elevated volatility this month. With just a day to go before November ends, the precious commodity is staring at a 2.6% monthly loss, on track to log the third month in decline in the past fifteen months. Looking ahead, markets are expected to keep prices volatile as Trump’s agenda takes shape in the leadup to his inauguration on January 20.

Thickpipe

Any reason you have stopped posting your daily results ? Please update !!!

BWM

Domenica

Why have you stopped your daily postings here ? The 227,000 NEW NFP were all part time jobs.

The USA is in a recession.

BWM

GOLD

The price of gold is climbing as the Ukraine-Russia conflict intensifies. Tensions peaked this week after Ukraine fired U.S.-provided missiles into Russia for the first time following approval from President Biden.

Russia has repeatedly warned that if the U.S. allowed Ukraine to use Western missiles, the U.S. would be considered a “direct participant” in the war.

Prior to the missile strike, Valdimir Putin approved a new nuclear doctrine, lowering the threshold for a nuclear strike in response to an attack on Russia.

Act Before The Conflict Escalates:

Tensions are rising quickly. Don’t miss an opportunity - now is a potentially strategic time to strengthen your portfolio.

Gold prices dipped after the presidential election. But further conflict could quickly drive gold prices up offering recent investors the potential for significant gains.

Right now, we’re offering up to four 10oz gold bars at spot pricing—no premiums, no hidden fees.

Get Gold at Spot Price »

Click-to-Call: (844) 643-1830

https://mishtalk.com/economics/the-c...hats-going-on/

The Complicated Syria Civil War Mess, What’s Going On?

December 7, 2024

1:21 pm

The Complicated Syria Civil War Mess, What’s Going On?

Economics
The government of Syrian President Bashar al-Assad is about to collapse. Let’s discuss the long saga.
https://i0.wp.com/mishtalk.com/wp-co...ality=80&ssl=1
Syrian Government forces, Turkey, the US, Iran, ISIS remnants, Lebanon, Iran, Russia, and the Kurds are all involved with intertwined and conflicting goals.

Understanding the Mess
The New York Times has an excellent write-up of the parties involved. Here is a free link to its report How to Understand Syria’s Rapidly Changing Civil War
Rebel groups fighting to depose President Bashar al-Assad of Syria battled regime forces on the outskirts of the strategic city of Homs on Saturday as they pushed toward the capital, Damascus, according to the rebels and a war monitoring group.

Arab Spring and escalating into a bloody, multifaceted conflict involving domestic opposition groups, extremist factions and international powers including the United States, Iran and Russia. More than 500,000 Syrians have died, and millions more have fled their homes.

Who Is Fighting?

1. Syrian Government: The Syrian government, led by Mr. al-Assad, has been central to the protracted and devastating civil war that began in 2011. Mr. al-Assad, who took power in 2000, is part of the family that has run Syria since a 1970 coup. They are Alawites, a minority sect that is an offshoot of Shiite Islam.
2. Hayat Tahrir al-Sham: Hayat Tahrir al-Sham, whose name means Organization for the Liberation of the Levant, began to form at the beginning of Syria’s civil war, when jihadists formed the Al Nusra Front to fight pro-Assad forces with hundreds of insurgent and suicide attacks. The group had early links to the Islamic State, and then to Al Qaeda. But by mid-2016, the Nusra Front tried to shed its extremist roots, banding together with several other factions to establish Hayat Tahrir al-Sham. The United States and other Western countries still consider it a terrorist group.
3. Kurdish forces: Forces from Syria’s Kurdish ethnic minority became the United States’ main local partner in the fight against the Islamic State in Syria, under the banner of the Syrian Democratic Forces. After the extremist group [ISIS] was largely defeated, the Kurdish-led forces consolidated control over towns in the northeast, expanding an autonomous region they had built there. But Kurdish fighters still had to contend with their longtime enemy, Turkey, which regards them as linked to a Kurdish separatist insurgency.

Foreign Powers

1. Turkey: Since the beginning of the civil war, the Turkish military has launched several military interventions across the border into Syria, mostly against Syrian Kurdish-led forces. Turkey now effectively controls a zone along Syria’s northern border. Turkey also supports factions such as the Syrian National Army, a coalition of armed Syrian opposition groups. President Recep Tayyip Erdogan of Turkey issued a qualified approval of the rebel advance. “The opposition’s march continues. Our wish is that this march in Syria continues without incident.”
2. Russia: Throughout Syria’s civil war, Russia has been one of Mr. Assad’s most loyal foreign backers, sending Russian troops to support his forces and jets to bomb his enemies. It has maintained a strategic military presence in Syria with air and naval bases, which it uses to support military operations in the region.
3. Iran and Hezbollah: Iran smuggles weapons to Hezbollah across Iraq and Syria. Iran and Hezbollah have repaid the favour by sending thousands of militants to fight on Mr. al-Assad’s side during the civil war.
4. Israel: Israel’s military activities in Syria have been mostly focused on airstrikes against Hezbollah and Iranian targets, especially senior military personnel, weapons production facilities and the transport corridor that Iran uses to send weapons to Hezbollah.
5. United States: The U.S. role in the Syrian civil war has shifted several times. The Obama administration initially supported opposition groups in their uprising against the government, providing weapons and training, with limited effect.

Tangled Web
Please read that paragraph on the United States again. The US was giving weapons to Syrian opposition groups. Many if not most of those weapons eventually ended up in the hands of ISIS.

The US was also giving weapons to the Kurds who were helping to fight ISIS.
Meanwhile, Turkey, our alleged ally, was fighting the Kurds, our one genuine ally.
The US has troops stationed in Syria, not welcomed by the Syrian government or by Turkey because we are helping the Kurds [Adding: and we want what little oil Syria has].

US Acts of War
Placing troops in foreign countries is an act of war.
It should be up to Congress to declare war, but Congress is too weak to challenge the President. This holds whether there is a Democrat or a Republican as president.
Both Democrats and Republicans support war, so they let the president conduct war without having to vote on it.
That way, the hypocrites can support war without having to officially declare war.

A More Moderate ISIS?
For many countries, Mr. al-Assad offered a semblance of control, while a rebel takeover threatened more uncertainty in a region already in upheaval. Some Arab states last year began to normalize diplomatic relations with the Assad regime after shunning his government for years.

Publicly, American officials have been cautious about Hayat Tahrir al-Sham. But inside the U.S. government, some officials believe the group’s turn toward pragmatism is genuine, and that its leaders know they cannot realize aspirations to join or lead the Syrian government if the group is seen as a jihadist organization.

Assad Government Might Fall Soon
CNN Reports Syrian Rebels Edge Closer to Damascus as US Officials Say Assad Regime Could Fall Soon
Residents in Irbin, a northwest suburb of the Syrian capital Damascus, have been seen celebrating the progress of anti-regime rebel fighters as they move closer to the city center.

In a video geolocated by CNN, residents were observed flooding the streets, lighting fireworks and honking car horns.

Irbin is just 10 kilometres (6 miles) from the center of Damascus.
Earlier, the southern rebels — who launched their offensive just a day ago — said they had reached “the gates” of the capital.
The US supported the overthrow of Assad for over 10 years but not by Hayat Tahrir al-Sham. That’s a conflicted policy that never made any sense from any angle.
Also, the US supports the Kurds but ignores Turkey’s attacks on them. Thus, multiple parties are simultaneously our friends and enemies.

As long as the fighting continues, we can supply the region with weapons. Was that the real goal all along?
Regardless, neither Russia nor Iran is willing or able to further assist Assad. So, the end of Assad is at hand. Time will tell what it means.
The biggest irony is that Russia’s involvement in Ukraine, not any actions by the US, is the force behind what happens next.

WWW.AVIELFOREXLEARNINGEDGE.COM

https://www.hussmanfunds.com/comment/mc241117/

The Turtle and the Pendulum

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John P. Hussman, Ph.D.
President, Hussman Investment Trust
November 2024

The market is a pendulum that forever swings between unsustainable optimism, which makes stocks too expensive, and unjustified pessimism, which makes them too cheap. The intelligent investor is a realist who sells to optimists and buys from pessimists.
– Benjamin Graham

Imagine a turtle walking along the shoreline. On its shell is a pendulum, swinging backward and forward, also aligned with the shoreline. When the pendulum swings forward, the bob at the end of the string swings ahead even faster than the turtle. When the pendulum swings backward, the bob loses ground even as the turtle plods forward. At any point in time, the movement of the bob is driven not only by the average speed of the turtle but also by the gradual emergence and elimination of accumulated extremes, along with random gusts of wind as the pendulum swings back and forth.

Change is the sum of fundamental trends, the gradual elimination of accumulated extremes, and the random arrival of new shocks. This is true for nearly every process, including economic growth and stock market returns.

Before discussing valuations, it’s critical to emphasize that valuations are not a timing tool. Valuations are enormously informative about the prospects for long-term investment returns, and potential downside risk over the complete market cycle. However, investment returns over shorter segments of the market cycle are driven by investor psychology, including the frequent attachment of that psychology to day-to-day developments that have very little bearing on long-term cash flows.

Our most reliable gauge of speculative versus risk-averse psychology is the uniformity or divergence of market action across thousands of individual stocks, industries, sectors, and security types because when investors are inclined to speculate, they tend to be indiscriminate about it. We also attend to overextended extremes in prices, sentiment, valuations, and other considerations that comprise the core of our investment discipline.

In addition to that core discipline, I’ve found it hard to suppress my enthusiasm about a forceful and – as a former options mathematician – analytically elegant hedging adaptation we introduced in September. I expect it to increase our investment flexibility in nearly every investment environment, even amid what I continue to view as the extended top-formation of the third great speculative bubble in U.S. history.

For now, suffice it to say that it was the wrong question to ask how we might cleverly dart between a defensive outlook and a bullish one amid historically ominous market conditions. The better question was how to vary the intensity of a valid defensive outlook, in a way that can be expected to benefit even in a further advance, provided only that the market fluctuates along the way. More on the solution to that question later in this comment.

The turtle and the pendulum – how valuations drive long-term returns

When we examine market valuations, we can choose any fundamental to be our “turtle,” but keep in mind that a share of stock is nothing but a claim on some very long-term stream of cash flows that investors expect to be delivered into their hands over time. As I discussed in Making Friends with Bears Through Math, three considerations are essential: first, the fundamental you use should be essentially proportional – in a long-term sense – to the very long-term stream of cash flows that stocks will deliver over time; second, the fundamental you use shouldn’t fluctuate a great deal over the economic cycle, as earnings unfortunately do; and third, always look for the proof in the pudding – the valuation ratio you use (technically its logarithm) should be tightly correlated with actual subsequent market returns, particularly over a horizon of 10-12 years. It’s also preferable for the numerator and the denominator to be apples-to-apples. So S&P 500 index to S&P 500 revenues, or nonfinancial market cap to nonfinancial gross value-added, are somewhat more reliable than say, nonfinancial market cap to nominal GDP.

As I’ve often noted, a reliable valuation measure is just shorthand for a proper discounted cash flow analysis. The chart below shows our Margin-Adjusted P/E, which considers cyclical variations in profit margins and their impact on the price/earnings ratio, along with the ratio of the S&P 500 to the present value of actual subsequent S&P 500 dividends since 1900, discounted at a constant rate of 10% annually. The ratio therefore estimates the extent to which likely long-term S&P 500 total returns are likely to depart from a 10% average return. The higher the valuation, the larger the expected shortfall from historically run-of-the-mill expected returns of 10%.


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In the discussion below, I’ve chosen nonfinancial corporate value-added as our fundamental “turtle” (essentially the revenues of U.S. nonfinancial corporations, excluding double counting, and including our estimate of foreign revenues). The chart below shows the ratio of nonfinancial market capitalization to gross value-added – what I call MarketCap/GVA – in data since 1928. It remains our most reliable valuation measure, based on correlation with actual subsequent 10-12-year S&P 500 total returns across history. Last week’s record high featured the most extreme level of valuation in U.S. history.


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If we write the growth rate of fundamentals as g, and the ratio of nonfinancial market capitalization to gross value-added as McGVA, we can estimate the average annual total return of U.S. stocks over any horizon of T years as:
Average annual total return = (1+g) x (McGVA_future/McGVA_today)^(1/T) – 1 + average dividend yield
The growth rate g is the average speed of our turtle. The pendulum is the swing in valuations, which we “amortize” over T years. The average dividend yield completes our total return.

Let’s do some simple arithmetic. While the market capitalization of U.S. nonfinancial companies doesn’t precisely match that of the S&P 500, the correlation of their annual changes is above 0.95. The arithmetic that follows applies equally to other measures such as price/revenue and price/earnings multiples. Whatever fundamental one chooses, as noted above, it’s preferable to choose one that is proportional to and representative of very long-term expected cash flows.

From the 1990 market low to the 2000 bubble peak, MarketCap/GVA more than tripled, from roughly 0.7 to 2.4. During that year, U.S. corporate gross value-added grew at an average rate of about 5% annually, and the dividend yield of the S&P 500 averaged 2.4% annually. Remarkably, the nominal total return of the S&P 500 over those 10 years averaged over 21% annually. Why? Do the arithmetic:
Average annual total return = (1.05) x (2.4/0.7)^(1/10) – 1 + 0.024 = 21.2%

In contrast, from March 2000 to March 2009, MarketCap/GVA dropped by about two-thirds, from 2.4 to roughly 0.8, below the long-term historical norm of 1.0 for this measure. During those 9 years, nonfinancial gross value added grew by about 4% annually, while dividends contributed an average yield of about 1.7%. Yet for the full 9-year period, the nominal total return of the S&P 500 averaged a loss of more than -6% annually. Why? Do the arithmetic:
Average annual total return = (1.04) x (0.8/2.4)^(1/9) – 1 + 0.017 = -6.3%

From the 2000 bubble peak nearly 25 years ago to the current extreme, MarketCap/GVA has increased from 2.4 to an unprecedented extreme of nearly 3.5. During the intervening years, nonfinancial gross value added has grown by about 4% annually, while dividends have contributed an average yield of about 2%. The total return of the S&P 500 over that nearly 25-year period has averaged about 7.6% annually. Why? Do the arithmetic:
Average annual total return = (1.04)*(3.5/2.4)^(1/25) – 1 + 0.02 = 7.6%.

Change is the sum of fundamental trends, the gradual elimination of accumulated extremes, and the random arrival of new shocks. Having arrived at the most speculative valuation extreme in U.S. history, investors now rely on the absence of any future retreat from these extremes, and the assurance that all future shocks will be favorable.

Now consider the coming decade. The only way to prevent the pendulum from swinging backward is for valuations to sustain a permanent extreme. In that case, we would expect an average annual growth of about 4.5% from the turtle (U.S. corporate revenues), coupled with a contribution of about 1.3% from dividends. The only time the S&P 500 dividend yield was lower was in the months surrounding the 2000 bubble peak. Assuming that valuations never retreat, these assumptions would imply estimated average nominal S&P 500 total returns on the order of 5.8% annually.

Allowing MarketCap/GVA to retreat over the coming decade to the level of 2.3 seen as recently as October 2022, estimated 10-year S&P 500 average annual nominal total returns fall to just 1.5%.

Allowing MarketCap/GVA to retreat to the level of 1.8 seen as recently as March 2020, estimated 10-year S&P 500 average annual total returns fall to -1%.
Allowing MarketCap/GVA simply to touch its long-term historical norm of 1.0, even ruling out lows like 2009 and 1990, as well as the level of 0.4 observed in 1982, estimated 10-year S&P 500 average annual total returns fall to -6.5%.

All of this simple arithmetic is why, in data since 1928, the historical relationship between MarketCap/GVA and actual subsequent 12-year S&P 500 average annual nominal total returns looks like this.


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A quick note on share buybacks. While corporate stock buybacks are often called a “distribution to shareholders,” the only shareholders that receive those dollars are the ones that sell. What buybacks do for other investors is to reduce shares outstanding, thereby increasing fundamentals per share. Notably, per share fundamentals for the S&P 500 such as earnings, revenues, and dividends fully reflect the impact of share buybacks. The buybacks do affect the level and growth rate of these fundamentals, but since per-share fundamentals take that into account, anything beyond that (such as treating buybacks as if they are dividends) is double counting.

As it happens, including the full effect of share buybacks since 2000, the growth rate of per-share S&P 500 revenues has been 4.3% annually. Data-free appeals to “buybacks” don’t get investors around the arithmetic that links observable valuations to subsequent long-term returns.

Meanwhile, it’s worth keeping in mind that an S&P 500 dividend yield of 1.3% implies a “duration” of 1/0.013 or about 77 years. Duration is essentially the sensitivity of prices to changes in the returns demanded by investors, and it’s also a measure of how many years it takes for an investment to be “paid off” in present-value terms. 77 years is easily more than double the typical equity duration risk that investors have accepted across history.

Here’s something that might surprise you but shouldn’t. Extremely low S&P 500 dividend yields and high durations tend to be followed by higher volatility of subsequent market returns, and profound full-cycle drawdowns across history. The chart below shows equity duration (the inverse of the S&P 500 dividend yield) along with the annualized volatility of monthly S&P 500 total returns over the subsequent 4-year period.


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We also know that extreme valuations are associated with depressed long-term returns and deeper full-cycle drawdowns. In the chart below, the highest point in the upper back right corner is August 1929, which featured the most extreme level of MarketCap/GVA in U.S. history, until the extremes of early 2022 and today. Put simply, extreme valuations dramatically impair the long-term and full-cycle return/risk ratio of the market.


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Even if valuations stay within the top 20% of historical extremes, high valuations imply large price fluctuations in response to very small changes in the expected return demanded by investors. As I’ve noted before, a market crash is nothing but risk aversion meeting a market that’s not priced for risk. For our part, particularly with the adapted hedging implementation I’ve described in recent months, it will be enough for us simply for the market to fluctuate – whether in a permanently high range of valuations, or visiting run-of-the-mill norms, or collapsing to depressed levels, or anywhere in-between.

The Martian
At some point, everything is going to go south on you, and you’re going to say ‘This is it – this is how I end.’ And you can either accept that, or you can get to work. That’s all it is. You just begin. You do the math. You solve one problem, and then you solve the next one, and then the next. And if you solve enough problems, you get to come home.
– Matt Damon as astronaut Mark Watney in The Martian

When we encounter difficulties, we get to work, we do the math, we address the largest problems first, and we gradually try to solve enough problems to get home. Introducing market internals to our discipline in the late-1990 bubble helped us to better navigate speculation that continued to advance beyond every post-war extreme, but that would eventually take technology stocks down by 83%, with the S&P 500 losing half its value, posting a negative total return from its 2000 bubble peak more than a decade later. By the end of the global financial crisis (GFC), we had admirably navigated decades of market cycles, bubbles, and crashes.

In the aftermath of the global financial crisis, I introduced a set of “ensemble methods” as a stress-testing response to incorporate and navigate not only post-war data but Depression-era data as well. The second half of the June 2024 comment, You Can Ring My Bell, details that approach, and the Achilles Heel that emerged in the face of zero interest rate policies. Following a progression of modifications, we finally abandoned the ensemble implementation in 2021, shifting the focus of our investment discipline more directly to the key factors that were responsible for our success across decades of cycles before and through the GFC — valuations and market internals.

The chart below presents the cumulative total return of the S&P 500 in periods where our main gauge of market internals has been favourable, accruing Treasury bill interest otherwise. The chart is historical, does not represent any investment portfolio, does not reflect valuations or other features of our investment approach, and is not an assurance of future outcomes.


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From the January 2022 peak through early August of this year, the total return of the S&P 500 outperformed Treasury bills by just 2%. Following a nearly unbroken 13-week advance since August, the S&P 500 has outperformed T-bills – I expect temporarily – by about 14% since January 2022. Meanwhile, the equal-weighted S&P 500 is less than 5% ahead of T-bills since early 2022, and the Russell 2000 small-cap index has lagged T-bills.

Despite the persistently negative condition of market internals during the advance in the S&P 500 over the past year, I remain convinced that internals are measuring exactly what they are intended to measure. As I detailed in our September comment Asking a Better Question, it’s the wrong question to ask how we might cleverly dart between a valid defensive outlook and a contrived bullish one amid historically ominous market conditions. That would be equivalent to chasing nickels in front of a steamroller. The better question is how we might vary the intensity of our defensive outlook to benefit even in a further advance, provided only that the market fluctuates along the way.

I’m still fairly certain that nobody fully appreciates what we accomplished in September, partly because – with the S&P 500, Nasdaq 100, and Russell 2000 riding along their upper Bollinger bands (two standard deviations above their 20-period averages) at every resolution – daily, weekly, and monthly – there’s only been one week since late-September when we’ve held anything but a tight hedge. So it will help to offer a bit more detail, to better understand the impact of the hedging adaptation we introduced in September.

While this adaptation informs the intensity of our hedge position in all market conditions (including the strike prices we choose for call options in compressed market conditions, and when using leverage, as we commonly did in the early years of the 1990s tech bubble), the analysis below focuses on bearish hedges.

The blue line in the chart below offers a sense of how the S&P 500 has typically behaved in market conditions that our current discipline (as adapted in 2021) classifies as “bearish” despite the S&P 500 being above its 40-week average – a popular “trend following” measure. The hedging implementation I discussed in September essentially breaks that blue line, representing about 13% of market history, into two subsets: An orange line, representing about 5% of market history – but unfortunately, the part of history that we’ve been living in for much of the past year – and a red line, representing about 8% of market history.

The orange line shows periods when our adapted strike-price implementation indicates put option hedges of the inexpensive “tail risk” variety. Notice that the market has indeed historically lagged T-bills even in this environment (which is part of the reason “forcing” internals to be favourable would improve recent results only by damaging historical reliability).

The red line shows periods when our adapted strike-price implementation indicates a preference for a tight hedge. In our present implementation, that sort of hedge would have applied in only about 37% of the year-to-date period (including the past several weeks), and also about 37% of the period since January 2021. Those hard-negative periods have been quite hostile for the S&P 500.


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Again, the market has historically lagged T-bills in both the orange and red subsets, but as I noted last month, the hedging adaptation gives us “a better ability to distill bearish periods when the market loses value, on average, but only at a moderate average rate, versus bearish periods when the market also loses value, on average, but at a wicked average rate.”

The chart below shows the impact of this adaptation on a bearish investment stance. The red line shows the cumulative return of a continuous S&P 500 index put option hedge, since January 2022, using at-the-money put option strikes. The figures assume a put option position with a notional amount equal to portfolio value, with the remaining funds invested in Treasury bills. Option values are estimated using the Black-Scholes model with market-based inputs and volatility. In practice, despite extreme valuations and unfavourable internals, we’ve had a handful of weeks since 2022 when compressed market conditions encouraged us to adopt a slightly constructive outlook (primarily using call options).

The green line shows the cumulative return of the same continuous bearish investment position, but using the put option strike prices indicated by our September 2024 hedging adaptation. Even assuming a constant bearish position in a market that has advanced, varying the intensity of the hedge is beneficial.


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Although there’s no point since the early 2022 market peak when our discipline would have encouraged an unhedged or leveraged investment outlook, this hedging adaptation would have indicated the use of in-the-money call options in a handful of weeks that featured compressed market conditions – particularly in October 2022 – rather than the at-the-money or out-of-the-money call options we used in practice (the impact of constructive positions is not shown above).

As I observed in September, the greatest benefit of the new implementation occurs when a bearish outlook, in hindsight, turns out to be wrong. The “pain trades” – maintaining a tightly bearish market outlook during an uncharacteristic advance, as we’ve experienced in recent months – become far less frequent. Not by “forcing” a constructive outlook despite “trap door” combinations of extreme valuations and unfavourable internals, but by refining the sensitivity of the hedge so we no longer “bleed” time premium.

I expect that our adaptations in recent years will enable us to navigate and welcome any trajectory that valuations may take, provided only that the market fluctuates.

“If you solve enough problems, you get to come home.” Across decades of market cycles, bubbles, and crashes before this seemingly interminable half-cycle bubble, our “home” was a discipline that admirably navigated complete market cycles. Investment outcomes are never assured, but I hope that the analysis above helps to better understand my enthusiasm about the hedging adaptation we introduced in September. We are as comfortable with the prospect of a market collapse as we are with a continued advance, provided only that the market fluctuates along the way. I do believe that the solution to this problem is the one that gets us home.

On the structural drivers and prospects for U.S. economic growth
One would think that with all the society-changing technological innovations since 2000, GDP growth and S&P 500 revenue growth would have been faster, not slower, than in the past. It has not.

Investors make the repeated mistake of basing valuations and growth expectations on excitement instead of arithmetic. As Arthur C. Clarke wrote more than half a century ago, “Any sufficiently advanced technology is indistinguishable from magic.” Across a century of market cycles – automobiles, oil, telephones, modern appliances, and radio in 1929, the ‘onics/’ Tronics boom of the late1960, the Nifty Fifty of the 1970s, the internet in the 1990s, and big tech today, every speculative bubble believes that it is the first to witness magic, and every one of them relives the same mistakes.

GDP growth has two drivers: output per employed worker (productivity), and the number of employed workers. Productivity is driven by investments in capital goods, education, infrastructure, and research & development. The number of employed workers can be broken into a “structural” component – demographic labour force growth, and a “cyclical” component – fluctuations in the unemployment rate.

In the chart below, the blue line shows the 10-year average annual real GDP growth. The red line is the “structural” component driven by trend productivity and labour force growth (where the share of the population participating in the labour force has snapped back since the pandemic). The green line shows the contribution or reduction in top-line real GDP growth as a result of changes in the unemployment rate. At present, core structural GDP growth is running at just over 2% annually.

A profound improvement in labour force growth and productivity would be required to push structural growth back to even 3% annually. Understand that the plausible range of variation in trend productivity and structural GDP growth – and one that would comprise a dramatic economic shift – is only about 1%.


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Given that 1948, 2000, and 2024 have all featured an unemployment rate of about 4%, the real GDP growth rates between these periods were driven solely by the two core components: output per worker (productivity), and labour force growth. Notice that the contributions of both components have been markedly lower since 2000. Part of this reflects slowing population growth and an aging workforce, and part reflects a progressive deterioration in net domestic investment as a share of GDP, despite record corporate profits.


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It’s not uncommon to hear arguments that technology has created a world where stocks now deserve “premium valuations” that can be sustained indefinitely. We can’t rule out indefinitely rich valuations (though we doubt that outcome). We can, however, say without hesitation that unless higher valuations are accompanied by higher growth rates – and they have not been despite all of the technological progress since 2000 – the higher valuations are mathematically associated with lower long-term returns. Holding the trajectory of cash flows constant, a “premium valuation” is equivalent to a “sub-par return.”

I expect that our adaptations in recent years will enable us to navigate and welcome any trajectory that valuations may take, provided only that the market fluctuates. As noted in the first section, we would estimate long-term nominal S&P 500 total returns on the order of 5.8% annually in the event of permanently elevated valuations, though with materially higher volatility even if valuations never collapse. That would be fine with us. We don’t need a crash. All we need is fluctuation.

It may seem odd that record profit margins don’t boost corporate investment or economic growth, but they do not – certainly not reliably. We can see this in two ways. The chart below shows the net capital formation of U.S. corporations in green (business investment net of depreciation), along with after-tax U.S. corporate profits in blue, both as a share of gross value-added (revenues).


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Similarly, there has been no positive relationship between S&P 500 operating margins and capital expenditures of S&P 500 companies as a share of revenues.


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In my view, if Congress chooses to use fiscal policy to boost productive investment, growth, and labour productivity, it’s best to do it directly through accelerated depreciation and investment tax credits – particularly during recessions, when greater investment enables the economy to absorb greater saving without promoting a “Keynesian” contraction in national income.

For a deep, data-rich dive into corporate profit margins, including the impact of interest costs, taxes, and unit labour costs, along with an analysis of relative margins of mega-cap stocks relative to other S&P 500 components, see the March comment Universal Capitulation and No Margin of Safety.

Given the structural drivers of U.S. economic growth, the lack of positive correlation between profits and net business investment, the relatively narrow range of productivity improvement that comprises “significant” change, and the position of the U.S. economy relative to its full employment capacity, what are the baseline prospects for U.S. economic growth?

Well, one of the features of the U.S. economy that investors may not entirely appreciate is that U.S. real GDP is still running well above its sustainable full employment potential as estimated by the Congressional Budget Office (CBO). We’ve previously observed that the CBO estimate is closely aligned with our estimates that simply use productivity and labour force demographics, so while one might find a little bit of wiggle room in the estimates, real potential GDP has generally been a reliable guide to the general position of the U.S. economy within the economic cycle.

Recessions typically emerge after the rate of unemployment has dropped to low levels, and GDP has run beyond its sustainable full-employment potential. In those periods of tight capacity, the Fed will typically be raising short-term interest rates, to cool demand that has run beyond sustainable supply. In this context, it’s not Fed hikes that cause a recession, but Fed hikes that accompany periods of tight capacity, which in and of themselves are naturally followed by economic retreat. Recessions are typically blamed on Fed tightening, but that’s not really how it works.

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Now consider our turtle and pendulum. A useful way to think about prospects for future growth is to consider both the “structural” trends, as well as the gradual elimination of accumulated extremes. The chart below shows this approach, applied to the baseline prospects for real U.S. GDP growth over the coming 4-year period. The blue line in the chart below reflects the estimated 4-year structural GDP growth, minus the current output gap, amortized over 4 years. The red line shows actual subsequent 4-year real annual U.S. GDP growth.


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At present, our baseline estimate for real U.S. GDP growth over the coming 4 years is about 1.5% annually, with the caveat that recessions typically induce a striking shortfall from these estimates. I don’t expect tax policies that will promote either increased labour force participation (which would primarily involve expansion of policies like the earned income tax credit, child and dependent care credits, transportation access, and availability of affordable housing), or increased net domestic investment (which would primarily involve policies to directly encourage investment, rather than hoping to indirectly influence it by cutting tax rates on profits, high incomes, and financial gains). The problem is that economies don’t enjoy sustained growth without labour force growth or investment-led productivity growth. That’s not politics. It’s just arithmetic.

In contrast, I’ve always observed that recessions are first and foremost periods when a mismatch emerges between what the economy has been producing, and what the economy now demands. Those mismatches can be driven by shifts in consumer preferences, interest-sensitive investment, technology, government spending, credit strains, or crises like the pandemic. Disruptions triggered by these mismatches take time to resolve, absent massive bailouts and deficit spending. My impression is that we may experience more than a bit of mismatch and disruption in the next few years.

Provided complementary policies are in place to encourage labour participation and investment, tariff protection for some time can sometimes benefit strategic and infant industries that are critical for self-sufficiency. But policies focused on broader tariffs are among the sources of disruption and mismatch that tend to harm economies, as we should have learned from the Smoot-Hawley tariffs passed in June 1930. The economy and financial markets were already enormously vulnerable after years of speculative malinvestment, and until the FDIC was created in 1933, there was no formal way to take failing banks into receivership, which also contributed to the Depression.

The vast majority of financial and economic collapse emerged between mid-1930 and mid-1932. Indeed, while the stock market lost 89% during the Depression, the 1932 market bottom represented an 80% loss from the lowest level reached in late 1929 after the initial October crash.

As for present observable conditions and immediate economic prospects, leading employment data remain mixed but have not deteriorated. Job growth and openings are both easing, but new unemployment claims aren’t rising in a way that suggests imminent risk, and openings as a share of non-farm payroll employment are not yet at levels that tend to permit employment losses. In my view, greater weakness would be needed to expect a recession.


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Meanwhile, our order surplus gauge (new orders + backlogs – inventories) based on regional and national ISM and Fed surveys also continues to hover at the threshold that typically separates expansion from recession. Again, greater weakness would be needed to expect a recession.


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A note on new eras, mega-cap stocks, and “premium” valuations

The ‘new era’ doctrine – that ‘good’ stocks were sound investments regardless of how high the price paid for them – was at the bottom only a means of rationalizing under the title of ‘investment’ the well-nigh universal capitulation to the gambling fever. The notion that the desirability of a common stock was entirely independent of its price seems incredibly absurd. Yet the new-era theory led directly to this thesis… An alluring corollary of this principle was that making money in the stock market was now the easiest thing in the world. It was only necessary to buy ‘good’ stocks, regardless of price, and then to let nature take her upward course. The results of such a doctrine could not fail to be tragic.
– Benjamin Graham & David L. Dodd, Security Analysis, 1934

Let’s go back to our turtle and pendulum and examine how the “new era” stocks that emerge with every bubble tend to perform over time. It’s worth remembering that the tech-heavy Nasdaq 100 lost 83% of its value following the 2000 bubble peak. Still, some of the innovators in the tech bubble did go on to do well over the long term. A bit of arithmetic will help to understand why some did better than others.

Consider the largest three tech stocks at the end of 1999 by market capitalization: Microsoft, Cisco, and Intel. Their total returns, respectively, since 1999 have averaged 10.4%, 1.9%, and 0.3%. The average is 4.2%. Seeing the largest companies in each market cycle go on to lag, as a group, is the norm, not the exception.
High growth rates and profit margins aren’t fixed numbers. They’re trajectories. When investors value stocks based on extrapolation of the growth phase, they put a pendulum on their turtle and swing it all the way forward. The fact is that except during the speculative blowoffs that drive them to an extreme market share (e.g. 1929, 1972, 2000, today), the largest cap stocks tend to follow by underperforming the average stock over time.


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Now consider two companies that have enjoyed phenomenal returns since the tech bubble. Compared with Microsoft’s 1999 market capitalization of $600 billion, Amazon’s was just $26 billion in 1999, with a price/sales multiple above 40 at its high. Yes, Amazon did lose over 93% of its value from December 1999 to October 2001, but it’s also true that revenue growth averaging 30% annually (from that low base) since 1999 has resulted in a 17.5% annual return for Amazon since then.

Why have total returns been substantially lower than the growth rate of Amazon’s revenues? Simple, even though our turtle sprinted ahead, the valuation pendulum on its shell swung backward.


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Now consider Apple. Compared with Microsoft’s $600 billion market capitalization, Apple’s was just $16 billion in 1999, with a price/sales multiple of 2.7 at year-end, on a modest base of revenues. Yes, Apple lost over 80% of its value from March 2000 to April 2003, but it’s also true that revenue growth averaging close to 20% annually since 1999 has resulted in an even higher 25.7% annual return for Apple since then.

Why have total returns for Apple been substantially higher than its growth rate, and how could it have outperformed Amazon, which enjoyed far more rapid revenue growth? Simple, not only did Apple’s turtle sprint ahead, but the valuation pendulum on its shell swung forward as well.


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Seeing an enormous and mature company trading at a price/revenue ratio of nearly 9.0 despite a 3-year revenue growth of just 2% annually might help to understand why Warren Buffett no longer owns this particular stock. Seeing MarketCap/GVA at higher levels than at the 1929 and 2000 bubble peaks may help to understand why Berkshire Hathaway holds the largest pile of cash in its history (primarily in Treasury bills comfortably earning about 4.5%). Market conditions and valuations will change. In the meantime, both patience and discipline will matter.

As I’ve noted before, the point of analysis like this isn’t to dismiss the idea that technological change can produce a “new era” in economic activity, but rather, to emphasize that the whole history of U.S. economic growth is made of no other substance than the constant introduction of “new eras.” The most dynamic layer of the economy is constantly regenerating in new forms. Again and again, the early profitability and growth of the most glamourous companies are subsequently eroded by the “creative destruction” of market expansion, competition, and even newer innovations. As Joseph Schumpeter wrote a century ago, this process is the “essential fact” of an entrepreneurial economy.

The problem for investors is that every bubble – everyone – is associated with new-era thinking. The earliest, seemingly impervious, and most richly valued leaders in a new industry – Visicalc, Sun Micro, Netscape, AOL, Nokia, and Blackberry – are often replaced. Even when they aren’t, they often experience profound losses on their way to eventual dominance. In any event, the companies that gain the most tend to be those with modest starting valuations on a tangible but relatively moderate revenue base.

Whatever you choose to do with individual stocks or the equity market as a whole, I hope that the turtle and the pendulum will help in your investment decisions. For our part, extreme valuations, unfavourable market internals, lopsided bullish sentiment, and a motherlode of overextension syndromes hold us to a defensive outlook here. Yet even if valuations remain elevated forever, the intensity of our outlook is likely to change more frequently and usefully than investors may have come to expect, and we’re very much looking forward to that change.


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IDF Tanks Reach Just 25km From Damascus As Netanyahu Declares Golan Is 'Ours Forever'

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by Tyler Durden

Tuesday, December 10, 2024 - 10:00 AM

With Assad overthrown and Syria in shambles, Israel has declared the permanent annexation of the Golan Heights. "The Golan Heights," announced Prime Minister Benjamin Netanyahu, "will forever be an inseparable part of the State of Israel."

He said that control over this historical Syrian territory "guarantees" Israel's security and sovereignty and is of "great importance". The announcement came as Israel pounded with airstrikes numerous Syrian bases, abandoned army assets, parked warplanes and helicopters, and even naval ships off Latakia.


https://assets.zerohedge.com/s3fs-pu...?itok=MwEHuwJN
Israeli tanks on the day Benjamin Netanyahu said he ordered the seizure of a buffer zone, via AFP.


The attacks kept going throughout the night, as Israeli and international sources describe:
Regional security sources and officers within the now-fallen Syrian army who spoke to Reuters described Tuesday morning’s airstrikes as the heaviest yet, hitting military installations and airbases across Syria, destroying dozens of helicopters and jets, as well as Republican Guard assets in and around Damascus.

"The rough tally of 200 raids overnight had left nothing of the Syrian army’s assets, said the sources," the report adds.
Netanyahu further hailed that this signals the start of a "new and dramatic chapter" in the history of the Middle East. He called Assad a "central element of Iran’s axis of evil" but that Iran over-invested and everything collapsed.

Israeli media has further confirmed that after Israeli forces crossed the Golan area deeper into southern Syria, establishing a so-called security and buffer zone, IDF tanks are closer to the Syrian capital than ever before in history.

The Times of Israel details:
An Israeli military incursion into southern Syria has reached about 25 kilometers (16 miles) southwest of the capital Damascus, two regional security sources and one Syrian security source says.

The Syrian security source says Israeli troops reached Qatana, which is 10 kilometers (6 miles) into Syrian territory, east of a demilitarized zone separating the Golan Heights from Syria.

Despite the claims, the IDF has indicated that it only plans to operate on the ground inside the buffer zone, and not beyond it.
Some critics of the now ruling Hayat Tahrir al-Sham (HTS) have pointed out that this supposed "revolution" has resulted in a situation where Turkey is carving up the north and Israel is carving up the south, while the whole country is defenseless, without anti-air protection, against Israeli strikes.
This morning, the Israeli army reached Qatana, about 20 kilometers from Damascus. Israel is advancing into Syrian territory to fulfill Netanyahu's vision of a “Greater Israel.” Last night, Israel claimed to have conducted its biggest air operation in history against Syria. pic.twitter.com/oaWOi7UuTh
— red. (@redstreamnet) December 10, 2024

Meanwhile Israeli Defense Minister Israel Katz also had a message in the wake of the dramatic changes in Syria. He warned HTS and the armed factions now in control, saying that if they threaten Israel they will be attacked relentlessly:
"The IDF has acted in the last few days to attack and destroy strategic capabilities that threaten the State of Israel," Katz says, warning the rebels that "whoever follows [ousted president Bashar] al-Assad’s footsteps will end up like Assad did. We won’t allow an extremist Islamic terror entity to act against Israel from beyond its borders… we will do anything to remove the threat."

On Sunday into Monday, Israeli warplanes had also targeted Syria's chemical weapons stockpiles, but it's unlikely that they were able to destroy everything. More sporadic attacks are expected, and the situation remains extremely fluid and unpredictable.
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In examining the behavior of certain individuals, we often find that their actions stem from deep-seated insecurities, and for some, those insecurities can manifest in ways that are difficult to understand. One such example is Bruce Warren Margolese, whose actions and attitudes often raise eyebrows.
It's clear that Mr. Margolese exhibits behaviors associated with narcissism, frequently seeking validation and attention to maintain his sense of self-worth. This need for external affirmation can sometimes result in a distorted view of reality, where the truth becomes secondary to how one wishes to be perceived.
Additionally, it's evident that Mr. Margolese faces challenges in managing basic aspects of his life, from personal habits to day-to-day responsibilities. His disorganization, while perhaps stemming from deeper emotional struggles, can make him appear disconnected from the reality others navigate.
There are also repeated patterns of inconsistency in his communication, with a tendency to embellish stories or, at times, outright fabricate information. This behavior may stem from a desire to feel important or to protect his fragile self-esteem, especially when faced with the painful reality of personal shortcomings.
Despite these traits, it's important to recognize that people, including Mr. Margolese, are often shaped by their past experiences, environments, and unmet needs. Behind the facade of narcissism and exaggeration lies someone who may be dealing with personal struggles, and it’s through understanding and compassion that we can hope to foster positive change.
We can only hope that, through self-reflection and support, individuals like Mr. Margolese will begin to recognize the harm their behavior causes not just to others, but to themselves. In time, it's possible for anyone to evolve, taking ownership of their actions, and working toward a healthier, more authentic version of themselves.

For some time now, I had stepped away from actively trading on this account. Life has its ebbs and flows, and I chose to focus on other aspects of personal and professional growth. Trading, while fulfilling, I need to start with real funds and let go of the demo account.
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[quote=thickpipe;15085625]For some time now, I had stepped away from actively trading on this account. Life has its ebbs and flows, and I chose to focus on other aspects of personal and professional growth. Trading, while fulfilling, I need to start with real funds and let go of the demo account. However, a recent, rather unpleasant comment from Bruce stirred something inside me. His words were dismissive and critical, which initially motivated me to post again. But as I reflected on it, I realized something important: I don't need validation from anyone, especially