The history of real estate cycles should inform how to analyze the market. However, there is an abundance of analysis without a review of the history, which generates conclusions that are unrelated to how the real estate market works. Additionally, symptoms are given more prominence than the causes leading investors, speculators, buyers, and sellers down a path of misunderstanding.
Below is a chart of the real estate cycle from 1870 to 2033. Continue reading
Posted in cycle analysis, Cyclical Trends, Market cycles, real estate, Wenzlick
Below is a chart of the iShares 20+ Year Treasury Bond ETF (TLT) from 2003 to 2021 reflecting the year-over-year (YoY) percentage change.
Recently the price of Bitcoin has increased to a market cap above one trillion dollars. This had generated tremendous excitement both for, and against, the continued increase in the crypto currency.
For those hoping that Bitcoin will increase in price, achieving a market capitalization of $1 trillion is a testament to the future viability of crypto currencies. Meanwhile, for those in disbelief of the value of cryptocurrencies, the $1 trillion level highlights the extreme that the bubble has managed to attain.
Because we only follow the price, we were struck by a point made by Charlie Munger of Berkshire Hathaway in 2018:
The question has arisen, “When will ‘they’ create more Bitcoin?” As, Charlie Munger has said, if you have the incentive, new coins will emerge. In our view, that creation of more Bitcoins has already taken place in the form of the thousands of “alt coins” that are free-riding on the concept but have zero value. Some of the alt coins, ranked in the range from 451-500 (by market cap), have a combined market capitalization of over $2 billion dollars. Does anyone believe that the coin ranked 499th will amount to anything down the road? We don’t.
When we run down the numbers for the total value of all the coins with market caps ranked from 3-1,000, which excludes Bitcoin and Ethereum, the total market cap is approximately $484 billion dollars.
As with all new innovations in their early stage, there will be hundreds of competitors lining up to become number one. However, as the cycle for cryptocurrency evolves from the start up phase to the growth stage (can you believe it, we’re only in the start up phase), there will be many “currencies” that will die along the way.
There is a stock market investing theory that says that if you buy and sell only the two leading stocks in a specific industry you will be able make a considerable amount of money. The thinking behind this theory is that the industry will generally do as well or bad as the leaders. Therefore, by using the two leading stocks to confirm a rising or declining trend, you will have the stocks that will thrive in the good time and not die off in the bad times. Almost all the other participants will be gone or become absorbed in the process.
As with most mature industries, there are 5-6 companies that have a meaningful impact on the direction of the business. We don’t have a clue about the other 3-4 crypto currencies that will emerge as the leaders. However, for now, the top two in terms of market capitalization, Bitcoin and Ethereum, are the contenders to be around if central banks don’t take over the concept.
The potential $400 billion (and growing) waiting to be destroyed by willing participants, who either hope the ride will continue or are unaware of the probabilities, will suffer greatly from this creative destruction. The Bitcoin saturation point is here, however, it isn’t in Bitcoin and Ethereum, instead, it is the alt coins.
See Also:
Below are the valuation targets for National Grid Plc (NG.L) for the next 10 years. Continue reading
Posted in 10-year Targets, Altimeter, NG.L
Can you spot the classic “value” purchase?
Below are the shares that Berkshire Hathaway added to their portfolio and the lowest price within the fourth quarter of 2020. The last five years are shown for the relative value for the respective stocks. The stocks are shown in order of largest increase to Berkshire Hathaway holdings.
Verizon (VZ)
T-Mobile (TMUS)
The Kroger Co. (KR)
Merck & Co. (MRK)
Marsh & McLennan Co. (MMC)
AbbVie Inc. (ABBV)
Bristol-Myers Squibb Co. (BMY)
Chevron Corp. (CVX)
RH (RH)
Posted in BRK, BRK-A, Warren Buffett
Below are the valuation targets for Informa Plc (INF.L) for the next 10 years. Continue reading
Posted in 10-year Targets, Altimeter, INF.L
Below is a chart of Telia Co. AB from 2001 to 2021 reflecting the year-over-year (YoY) percentage change. This assessment reviews the probability of performance in the coming year(s).
We have received questions about the US Dollar index and while we are not specialists in the Forex market, the tools we used to assess equity markets, to a certain degree, could be leveraged on this topic.
There's a high probability that unlimited amounts of money printing will lead to weaker currencies and we are seeing assets moved away from the US Dollar to other alternatives such as equities, real estate, precious metal, and even crypto currencies.
The US Dollar peaked in March 2020 at 103 but has fallen -13% since then. Double digit fluctuations in currencies is substantial and should be examined.
To see how far this downward trend can go, we have utilized the Year-Over-Year model (YoY) and reviewed the past for reference.
The chart below shows the year-over-year percentage change of the US Dollar Index, in this case we use DX-Y from Yahoo Finance. We can see that average change is virtually flat at 0%.
Applying +/-1 standard deviation range to establish a trading range of +/- 10%. Currently the index is at -9% for the year and approaching a bottom of the boundary. Given that the Federal Reserve has no intention to stop printing money in the near term, we forecast that this index could reach -15% before any reversal to the declining trend.
As a reference point, we can look back at the financial crisis time frame when the index registered a triple bottom between 2008-2011.
It can be argued that we are in a similar environment where the Fed must print their way out. A near-term bottom could be in place but a risk of double or triple bottom is possible based on the precedence.
We're not as worried about the decline to a new low as much as we are concerned about a sudden rise to the upside.
The following are the established Bitcoin cycles since 2010 which are instrumental in our forecasting of the market price for Bitcoin going forward.
Up Cycles
Down Cycles
Cycle charts and Future Targets Continue reading
Posted in Bitcoin, cycle analysis
Below are the valuation targets for National Bank of Canada (NA.TO) for the next 10 years. Continue reading
The bull market continues to push forward as we end the week with the Dow Jones Industrial Average and Dow Jones Transportation Average closing at their all-time high. The recent bullish Dow Theory signal should not be ignored.
Reviewing our list from last year, the best performing strategy was high P/B with gain of +24.30%. Gains were driven by two stocks with high P/B, Xilinx (XLNX) +62% and Erie Indemnity (ERIE) +60%. On the opposite spectrum, High P/E had the worst performance with State Auto Financial (STFC) declining –44%. Reviewing the table below, the growth strategy continues to outperform.
U.S. Dividend Watch List: February 12, 2021
Bull markets leave little room for companies to trade near their 52-week low. Because of that, we have to broaden the range of stocks that we track from within 10% of the 52-week low to 20% of the 52-week low.
Despite that, there are plenty of great companies with long track records of dividend payments and increases on this list. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
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Below is a chart of the Gold Stock Indicator as of February 12, 2021: Continue reading
Below are the valuation targets for Ashtead Group Plc (AHT.L) for the next 10 years. Continue reading
Posted in 10-year Targets, AHT.L, Altimeter
Below are the valuation targets for Pennon Group Plc (PNN.L) for the next 10 years. Continue reading
Posted in 10-year Targets, Altimeter, PNN.L
Below are the valuation targets for RELX Plc (REL.L) for the next 10 years. Continue reading
Posted in 10-year Targets, Altimeter, REL.L