value investor forum presentation 2015 (print version)
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A Man Looks Into The Abyss, Theres Nothing Staring Back At Him. At That Moment, Man Finds His Character. Lou Mannheim, Wall Street
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The U.S. Economic Recovery Is Real
US Job Creation Hits Record Not Seen Since The 1990s
US Unemployment Rates Falls And Economic Recovery Strengthens.
An Improving Economy Gives Obama His Game Back
In Case You Missed ItThe Economy Is Back.
-
-3.0
2.0
Personal Income
Personal Income
1.4
1.9
Employment
All Employees: Total nonfarm
0.01.02.03.04.05.06.0
Industrial Production
Industrial Production Index
2.03.04.05.0
Consumer Spending (PCE)
Personal Consumption Expenditures
1.0
3.0
5.0
7.0
9.0
Personal Savings Rate
Personal Saving Rate
3.0
3.5
4.0
4.5
5.0
GDP
Gross Domestic Product
-
15.00%
16.00%
17.00%
18.00%
19.00%
20.00%
21.00%
2007 2008 2009 2010 2011 2012 2013 2014
Social Benefits As % Of Real Disposable Income
-
$50,000
$51,000
$52,000
$53,000
$54,000
$55,000
$56,000
$57,000
$58,000
$59,000
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
Seasonally Adjusted Median Household Income (March 2013 $)
Gallup Poll - Family Of Four Living Needs
-
65
4
60
7
59
8
17
4
-95
8
13
6
56
-42
1
80
1
1,2
54
12
2
93
8
12
0
52
2
36
7
19
0
71
0 83
8
1,6
09
1,3
65
1,3
48
1,9
51
1,2
98
80
6
62
5
1,3
56
75
8
2,1
58
2,2
82
2,0
60 2
,30
9
1,9
80 2
,29
4
1981 1985 1989 1993 1997 2001 2005 2009 2013
Workers Not In Labor Force Soars
Annual Chg. To NILF
-
More Than 93 Million Americans No Longer Counted Roughly 80% Of The Population Lives Paycheck-To-Paycheck 1-in-4 Americans On Some Form Of Government Assistance Highest Level On Record Of 70+ Aged Individuals Still Working Equity Ownership In Private Business At Lowest Levels Since 2000 Household Net Worth Lower Today Than In 2007 Household Investments In Financial Assets Lower Today Than In
2007
-
-8000.0
-6000.0
-4000.0
-2000.0
0.0
2000.0
4000.0
6000.0
8000.0
2009 2010 2011 2012 2013 2014
Employment Gains Since 2009 - Including/Excluding B/D Adj.
Cumulative Employment Since 2009 Cumulative Employment W/O B/D Adjustment
Cumulative Employment Adj For Gallup
Employment Overstated By3,678,000 Jobs
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42.00%
44.00%
46.00%
48.00%
50.00%
52.00%
54.00%
56.00%
58.00%
1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Employment To Working-Age Population (16-54)
Does This ReallyLook Like A 5.6%Unemployment Rate
-
500.0
700.0
900.0
1100.0
1300.0
1500.0
1700.0
1900.0
2100.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
S&P 500 Index
QE1 QE2OperTwist
QE3
-
REVENUE
RET
UR
N
SALES
REWARDDIVIDENDS
BU
YBA
CK
S
EPS IN
VES
TIN
G
EARNINGS
VALUE
PR
ICE/
EAR
NIN
GS
RISKC
HEA
P
ESTIMATES
RATIOCAPECAGR
GROWTH
RET
UR
ND
OLL
AR
INVESTING WITH A LACK OF VALUE
-
32
64
128
256
512
1024
2048
4096
8192
16384
32768
65536
1965 1973 1981 1989 1997 2005 2013 2021 2029 2037 2045 2053 2061
S&P
50
0 I
nd
ex
Act
ual
& P
roje
cte
d (
Log
Scal
e)
What Analysts Promise & What Happens Likely Very Different
Actual S&P 500 Projected S&P 500 Expon. (Projected S&P 500)
7% Annualized Return
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Capital Not Available,
25.00%
Capital Needed For Other Things,
Psychological Mistakes,
50.00%
A recent DALBAR study shows that much of the shortfall in
investor returns are due to psychological factors such as Loss
Aversion, Narrow Framing, Herding or Optimism.
There are actually three primary causes for the chronic
shortfall for both equity and fixed income investors:
-
-6000
-4000
-2000
0
2000
4000
6000
8000
10000
32
64
128
256
512
1024
2048
4096
8192
16384
32768
65536
1965 1973 1981 1989 1997 2005 2013 2021 2029 2037 2045 2053 2061
Act
ual
Vs.
Pro
mis
ed
Re
turn
sTh
ou
san
ds
S&P
50
0 I
nd
ex
Act
ual
& P
roje
cte
d (
Log
Scal
e)
Impact Of Bear Markets Are Have Substantial Effects On Outcomes
Promised Growth Of $10000 At 7% Actual Growth Of $10000 Return Gap
Actual S&P 500 Projected S&P 500 Expon. (Projected S&P 500)
-
010
20
30
40
50
64.00
128.00
256.00
512.00
1,024.00
2,048.00
Jan-1871
Jan-1886
Jan-1901
Jan-1916
Jan-1931
Jan-1946
Jan-1961
Jan-1976
Jan-1991
Jan-2006
Real S&P 500 Index With Recessions(Robert Shiller Real Price Data)
Recessions S&P 500 (Real Price) Expon. (S&P 500 (Real Price))
-
35
2126
19 1723 20
32
1811
43
9
2126
20
49
79
3644
38
23
105
35
57
11
91
119
72 70
Mar
-18
79
May
-18
85
Ap
r-1
88
8
May
-18
91
Jun
-18
94
Jun
-18
97
Dec
-19
00
Au
g-1
90
4
Jun
-19
08
Jan
-19
12
Dec
-19
14
Mar
-19
19
Jul-
19
21
Jul-
19
24
No
v-1
927
Mar
-19
33
Jun
-19
38
Oct
-19
45
Oct
-19
49
May
-19
54
Ap
r-1
95
8
Oct
-19
60
No
v-1
970
Mar
-19
75
Jul-
19
80
No
v-1
98
2
Mar
-19
91
Sep
-20
01
Jun
-20
09
Historical Economic Recoveries Average 40 Months
Recovery Length - No Of Months
-
-
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
1936 1943 1950 1957 1964 1971 1978 1985 1992 1999 2006 2013 2020
Earnings Reversion - The Never Foreseen DangerPost S&P Revisions (2015)
S&P 500 Earnings as of 06/01/14 EPS Growth Rate Lower Bound (5% Trough to Trough)EPS Growth Rate (6% Peak To Peak) Earnings Growth Trend LineS&P 500 Earnings as of 3/1/15 (Post-Rev)
2014 Estimates
Analysts NEVER sawthe earnings reversions
STREETTALKLIVE.COM
2015 Estimates
2020 Estimates
The current slope of estimated earnings growthhas never occurred in history.
2015 Actual
-
05
10
15
20
25
30
35
40
45
50
-5%
0%
5%
10%
15%
20%
25%
30%
CA
PE
Ro
llin
g 2
0-Y
ear
Ret
urn
s
S&P 500 Real Rolling 20-Year Annualized Returns CAPE Valuations
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-100.00%
-80.00%
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Actual & Est. YoY % Change In Reported EPS
Tap
er B
egin
s
QE-
1
QE-
2
QE-
3
Op
. Tw
ist
Esti
mat
es
No
Q
E
24
2.5
4%
78
8.1
9%7
93
.48
%4
73
.05
%
-
64.00
128.00
256.00
512.00
1,024.00
2,048.00
1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009
Real S&P 500 Index With Record Highs(Robert Shiller Real Price Data)
Real S&P 500 Index
-
300.0
500.0
700.0
900.0
1100.0
1300.0
1500.0
1700.0
1900.0
2100.0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
S&P 500 Index Linear (S&P 500 Index)
Phase 1
Phase 1
Phase 1
Phase 2
Phase 3
Phase 2
Phase 2
Phase 3
Phase 3
-
20000
40000
80000
160000
320000
640000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
MISSING THE 10-Best vs 10-Worst Days
$100,000 Missing 10 Best Days $100,000 Missing 10 Worst Days $100,000 Invested In Index (Buy and Hold)
-
010000
20000
30000
40000
50000
60000
70000
80000
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Compound REAL Return Of $1000 Plus $100 Monthly Contributions (DCA vs Lump Sum)
Compound Value Of $1000 plus $100 Monthly Contributions (DCA)
Compound Value Of $1000 + $100 Mthly Cont. (Lump Sum)
RETIRE
OR NOT
Missed The TopAnd The Bottom
Missed The TopAnd The Bottom
-
(20)
(15)
(10)
(5)
-
5
10
15
20
25
30
32
64
128
256
512
1024
2048
4096
8192
1/1
/19
00
1/1
/19
10
1/1
/19
20
1/1
/19
30
1/1
/19
40
1/1
/19
50
1/1
/19
60
1/1
/19
70
1/1
/19
80
1/1
/19
90
1/1
/20
00
1/1
/20
10
CA
PE
Rat
io, I
nfl
atio
n
Infl
atio
n A
dju
ste
d R
etu
rn O
f $
10
0The Real Value Of Cash
Monthly Compound Real Return Of $100Valuation Adjusted Return Of $100 (23x = Cash, 6x = Stocks)P/E Capped At 25xAnnual Change In Inflation
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1990 1994 1998 2002 2006 2010 2014
S&P 500 Stock Price Index
SELL IT ALLSELL IT ALL
???
Not HereEither...
Absolutely Not Here...
Liquidity Bubble
Credit/Real EstateBubble
Nope...No Bubble Here.
I Don't Need An Advisor - I'm A Genius
Tech Bubble
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