What happened to European stocks starting April 2015?

[Spekulatius]

I know it’s against the narrative here, but Unicredits results look pretty good to me:

https://www.unicreditgroup.eu/content/dam/unicreditgroup-eu/documents/en/investors/group-results/2019/4Q19/UniCredit_PR_4Q19_ENG.pdf

Pretty much any metric (profits, capital buffer, Non performing assets ) turned in the right direction.

 

Also, the Italian election turned into a whimper and pretty much kept the status quo. It doesn’t look like Italy will be leaving the EU anytime soon.

 

[RuleNumberOne]

Yeah, i have surrendered to the Eurocrats and ECB. They have nailed everything down so that nothing and no one can get away. I agree it doesn't look like Italy can leave easily.

 

Nothing ever fails and the markets are never allowed to punish poor results. You would never think the DAX would be at an all-time high with the bad economic news in Europe.

 

Central bankers have bought half of everything everywhere and market prices don't reflect any business results anymore. We should be thankful stocks still have a positive dividend yield. Come to think of it, why do we need a stock market or a bond market anymore? The Soviet Union did not bother with the formality of a stock exchange.

 

 

 

https://www.bloomberg.com/news/articles/2020-02-07/german-economic-weakness-exposed-again-as-industry-slumps

 

"Germany is facing a possible recession again after industrial production plunged by the most since the global financial crisis.

 

The 3.5% slide in December’s output comes a day after a report showed factory orders declining at the fastest pace in more than a decade. That suggests Europe’s largest economy may have contracted at the end of 2019, according to Bloomberg Economics, and dragging itself out of the hole this year has become even more challenging with the coronavirus hitting global business.

 

There was further bad news for Europe on Friday, with France reporting a 2.8% drop in industrial output in December, and Spain posting a 1.4% decline. Both readings were far worse than economists had anticipated. The Netherlands added to the gloom, with manufacturing shrinking 1.7%, the most since 2018."

 

I know it’s against the narrative here, but Unicredits results look pretty good to me:

https://www.unicreditgroup.eu/content/dam/unicreditgroup-eu/documents/en/investors/group-results/2019/4Q19/UniCredit_PR_4Q19_ENG.pdf[/utl]

Pretty much any metric (profits, capital buffer, Non performing assets ) turned in the right direction.

 

Also, the Italian election turned into a whimper and pretty much kept the status quo. It doesn’t look like Italy will be leaving the EU anytime soon.

[Cigarbutt]

^Disclosure: I don't have specialized knowledge about Italy's finances but have followed the banking sector and Unicredit and have shared some sentiment with people living in Italy.

 

The big story for many European and Italian banks (including Unicredit) has been the net interest margin and the evolution of non-performing loans. Unicredit has done a reasonable job at cleaning its balance sheet and the Bank of Italia has recently downgraded the non-performing loans issue from threat to financial stability to a number to simply follow. However, the process has been painstakingly slow and IMO incomplete. Of course, the ECB (and Italy's growing public debt) has allowed that. It is fair to say that slow adjustments are less painful but I wonder if this is not an example of a wasted crisis opportunity as the potentially dead has become a zombie. Private credit growth has been declining (see second link and click max) and how can this trajectory be changed within the Euro construct does not appear possible under present circumstances.

 

https://www.econstor.eu/bitstream/10419/173102/1/PC-06-2017.pdf

https://tradingeconomics.com/italy/loans-to-private-sector

https://www.bloomberg.com/news/articles/2020-02-08/ecb-s-visco-sees-significant-risks-for-italy-s-economy-in-2020?srnd=markets-vp

I can provide a few quotes from the third link if access is a problem.

 

Spekulatius, I really admire the way you change your mind when facts don't go your way at times and wonder if the ECB and other macroprudential public entities should not apply the same principles when dealing with the economic consequences of superficial peace.

 

BTW, Unicredit tends to produce good research about who's holding what in the public and reciprocal sphere:

https://www.research.unicredit.eu/DocsKey/fxfistrategy_docs_2019_170284.ashx?EXT=pdf&KEY=KZGTuQCn4lsvclJnUgseVEGHysWJl2NsEwG0xblWxFK9BVQAB4eryA==&T=1

 

[RuleNumberOne]

Despite the terrible economy of the last several years, Italy's stock market is also at an all-time high, just like Germany's. The economies keep going down in Europe but the stock market keeps going up, year after year.

 

We can't call it a stock market anymore because it does not reflect any economic results. Therefore nothing that Warren Buffett or Ben Graham or Charlie Munger said applies here. Don't central bankers feel any guilt for destroying free markets?

 

https://tradingeconomics.com/italy/stock-market

 

I wonder if we can get central bankers to stop destroying free markets if we remove their perks. It seems Eurocrats get a bed in their offices for siestas along with lavish drinking and eating budgets.

[rb]

There are several idiosyncrasies between Europe and the US that result in stock market differences.

 

1. There is A LOT more private business in Europe. This simply doesn't show up in the stock market, so the stock markets of Europe are far less representative of the underlying economy than in the US. Germany in particular, for the size of its economy, its stock market is a joke.

 

2. Dividend yields tend to be higher in Europe. So you get more of your return via dividends which puts downward pressure on nominal stock index values.

 

3. Related to 2 above, there is far less buyback activity in Europe than in America. This probably has to do with the fact that they use less far fewer stock options in executive compensation. This of course creates differences in the share prices and the value of some indexes.

 

4. Bond yields. European bond yields are lower and have been for a while. Which normally lead to lower absolute results. Stock returns are a risk premium posted on bond returns. You lower bond yields and you'll end up with lower stock returns even though as a stock investor you will be adequately compensated for your risk.

[RuleNumberOne]

I wonder what Buffett and Munger are thinking in an age where central bankers have replaced Mr. Market. Buffett continues to pile up cash even though none of his maxims can be valid if central bankers continue to interfere with market behavior.

 

Buffett's quaint theory that stock prices cannot outperform operating results forever is invalid. They can outperform forever because central planners can intervene without limits. Buffett's favorite "Chapter 8 and Chapter 20 of the Intelligent Investor" are useless because central planners will never let asset prices fall anymore.

[rb]

Yea, I keep seeing you on these boards rambling about central banks. That's almost all you talk about. But it's pretty obvious that you have no idea what you're talking about.

[RuleNumberOne]

In my IRA accounts, the 1, 3, 5 year returns are 60%, 55%, 56%. The returns since inception are also around 55-60% (don't remember exact number).

 

The same decisions were made in non-IRA too but since money went in and out, i can't measure it accurately (e.g since inception in 2011 the brokerage reports 30%).

 

Probably my investing insights are too much for you and you cannot understand them. Before i started posting here, i watched you hold WFC for a long time as it dropped.

 

I got those returns from market timing, not holding WFC like you did.

 

Yea, I keep seeing you on these boards rambling about central banks. That's almost all you talk about. But it's pretty obvious that you have no idea what you're talking about.

[rb]

In my IRA accounts, the 1, 3, 5 year returns are 60%, 55%, 56%. The returns since inception are also around 55-60% (don't remember exact number).

 

The same decisions were made in non-IRA too but since money went in and out, i can't measure it accurately (e.g since inception in 2011 the brokerage reports 30%).

 

Probably my investing insights are too much for you and you cannot understand them. Before i started posting here, i watched you hold WFC for a long time as it dropped.

 

I got those returns from market timing, not holding WFC like you did.

 

Yea, I keep seeing you on these boards rambling about central banks. That's almost all you talk about. But it's pretty obvious that you have no idea what you're talking about.

WOW! You sound like a real winner! You remind me of the CDO manager from The Big Short.

 

You can't build a simple economic model but pontificate on macro issues no end. Please continue to confuse me with your brilliant insights.

 

Keep on WINNING!!!

[RuleNumberOne]

Thankfully i didn't waste any of my life learning to build an "economic model". Probably you are an expert at economic modeling which is why you would obsess over tiny fluctuations in WFC financial statements. To hold WFC as it dropped from the 50s to the 40s during a great bull market requires a lot of economic modeling with a lot of decimal points, that's a skill i am glad i don't have.

 

Generating 50%+ CAGR returns over the last several years since inception requires the way i go about investing and that is enough for me.

 

 

quote author=rb " data-ipsquote-contentapp="forums" data-ipsquote-contenttype="forums" data-ipsquote-contentid="17835" data-ipsquote-contentclass="forums_Topic" 395025#msg395025 data-ipsquote-timestamp=1581189979]

In my IRA accounts, the 1, 3, 5 year returns are 60%, 55%, 56%. The returns since inception are also around 55-60% (don't remember exact number).

 

The same decisions were made in non-IRA too but since money went in and out, i can't measure it accurately (e.g since inception in 2011 the brokerage reports 30%).

 

Probably my investing insights are too much for you and you cannot understand them. Before i started posting here, i watched you hold WFC for a long time as it dropped.

 

I got those returns from market timing, not holding WFC like you did.

 

Yea, I keep seeing you on these boards rambling about central banks. That's almost all you talk about. But it's pretty obvious that you have no idea what you're talking about.

WOW! You sound like a real winner! You remind me of the CDO manager from The Big Short.

 

You can't build a simple economic model but pontificate on macro issues no end. Please continue to confuse me with your brilliant insights.

 

Keep on WINNING!!!

[Gregmal]

RuleNumberOne, you can be a dick, but so can all of us. I do think you may go overboard at times, but again, so do some of us(especially myself). But in terms of approach, you are 100% right. I read something a while ago and did some research on the subject, and while I forget the exact numbers, a HUGE percentage of overall stock returns occur in very brief periods of time. Timing is everything. I find your ranting to be a useful dose of "the other side of the coin" that few else here bring to the table. Of course, no one is forced to read any of it. Heck, if theyre soft enough, they can always ignore you.

 

I also concur, the folks who obsess over modeling and whatnot, often have poor returns and often consistently get hung up on stupid stuff that prevents them from seeing the big picture. Out of school I went into the biz overly focused on that kind of shit because thats what your told is important. But its not and most of it is a total distraction and downright waste of time.

[RuleNumberOne]

As a retail investor, the only advantage over the hedge funds is the behavioral advantage. Pros will always know more about a stock, because analysts meet management and hedge funds meet analysts. They get more interesting information than what analysts write in their reports. Otherwise nobody would pay analysts what they get paid today. I have worked at tech companies where the analysts clearly know facts that are not public - the hedge funds also get those facts. Behavioral is the only way to beat them.

 

Market timing is the one big advantage a retail investor can make for himself because the full-time investors have career risk.

 

Its likely rb is a professional in finance. But that does not give an advantage in investing. This guy John Hjorth also jumped at me the other day after i commented on the AAPL and MSFT threads. I have been an employee at two of the FAAMG companies and may look at FAAMG stocks differently, but he probably thought i am clueless.

 

 

RuleNumberOne, you can be a dick, but so can all of us. I do think you may go overboard at times, but again, so do some of us(especially myself). But in terms of approach, you are 100% right. I read something a while ago and did some research on the subject, and while I forget the exact numbers, a HUGE percentage of overall stock returns occur in very brief periods of time. Timing is everything. I find your ranting to be a useful dose of "the other side of the coin" that few else here bring to the table. Of course, no one is forced to read any of it. Heck, if theyre soft enough, they can always ignore you.

 

I also concur, the folks who obsess over modeling and whatnot, often have poor returns and often consistently get hung up on stupid stuff that prevents them from seeing the big picture. Out of school I went into the biz overly focused on that kind of shit because thats what your told is important. But its not and most of it is a total distraction and downright waste of time.

[RuleNumberOne]

Gregmal,

 

Buffett and Munger agree with us too, they have said so on many occasions that it is the attitude to market fluctuations that makes the money, not the modeling or advanced accounting or a PhD in economics or a DCF model.

 

In the foreword to the Intelligent Investor Buffett also says your investment success will depend on the amplitude of market fluctuations you see in your career. My original point before we went off on a tangent was that central bankers have impaired Buffett's approach by removing market fluctuations.

[rb]

 

In the foreword to the Intelligent Investor Buffett also says your investment success will depend on the amplitude of market fluctuations you see in your career. My original point before we went off on a tangent was that central bankers have impaired Buffett's approach by removing market fluctuations.

 

Please support your point that central banks have removed market fluctuations! With facts, not feelings.

[thepupil]

In my IRA accounts, the 1, 3, 5 year returns are 60%, 55%, 56%. The returns since inception are also around 55-60% (don't remember exact number).

 

The same decisions were made in non-IRA too but since money went in and out, i can't measure it accurately (e.g since inception in 2011 the brokerage reports 30%).

 

Probably my investing insights are too much for you and you cannot understand them. Before i started posting here, i watched you hold WFC for a long time as it dropped.

 

I got those returns from market timing, not holding WFC like you did.

 

Yea, I keep seeing you on these boards rambling about central banks. That's almost all you talk about. But it's pretty obvious that you have no idea what you're talking about.

 

RuleNumberOne,

 

Can you discuss your investment style/philosophy/process a little bit? (Past major investments over this period for example) I didn’t go through your whole post history, but saw some earlier discussion of WFC and V but everything else seems to be negative macroeconomic commentary. I’m not questioning the numbers put forth, but am curious how they were generated/what you do (or used to do when you were less bearish) to generate those eye popping  returns.

[Gregmal]

 

In the foreword to the Intelligent Investor Buffett also says your investment success will depend on the amplitude of market fluctuations you see in your career. My original point before we went off on a tangent was that central bankers have impaired Buffett's approach by removing market fluctuations.

 

Please support your point that central banks have removed market fluctuations! With facts, not feelings.

 

Well for one, just look at the VIX.

 

But of course a fluctuation is all relative. Some people buy 1% dips and naturally they'll be more active than folks looking for 10%.

[RuleNumberOne]

thepupil,

 

I think the main factor is avoiding the major declines. Having enjoyed the fantastic low-volatility 2017 ride, I got out of the market in Feb 2018 during earnings season and stayed out for a few months. Volatility had come back during earnings season after a long vacation.

 

Then i got back in again around May, probably didn't stay too long in the market because i decided the market was too slippery. But i was definitely out in September 2018 because things started looking frothy with record margin debt. I stayed out during the Q4 correction.

 

Then I got back in again in Jan 2019 immediately after the Powell's U-turn press conference (I bought stocks during the lunch hour as fast as i could bidding well above last sale).

 

Then i got out of the market in March 2019 or so, didn't ride it to the top. Then i got back in again in October 2019 during earnings season.

 

I got out in the first few days of January 2020. One pattern i see is that i get out much before an intermediate peak.

 

In my IRA accounts, the 1, 3, 5 year returns are 60%, 55%, 56%. The returns since inception are also around 55-60% (don't remember exact number).

 

The same decisions were made in non-IRA too but since money went in and out, i can't measure it accurately (e.g since inception in 2011 the brokerage reports 30%).

 

Probably my investing insights are too much for you and you cannot understand them. Before i started posting here, i watched you hold WFC for a long time as it dropped.

 

I got those returns from market timing, not holding WFC like you did.

 

Yea, I keep seeing you on these boards rambling about central banks. That's almost all you talk about. But it's pretty obvious that you have no idea what you're talking about.

 

RuleNumberOne,

 

Can you discuss your investment style/philosophy/process a little bit? (Past major investments over this period for example) I didn’t go through your whole post history, but saw some earlier discussion of WFC and V but everything else seems to be negative macroeconomic commentary. I’m not questioning the numbers put forth, but am curious how they were generated/what you do (or used to do when you were less bearish) to generate those eye popping  returns.

[RuleNumberOne]

Well, the European stock markets are hitting all-time highs even though over the last 2 years Italy and Germany GDP growth rates have alternated between negative and positive.

 

It is mostly a gut feeling. By fluctuations, as Gregmal alluded, I mean the > 10% corrections. For the first time we will have a recession not cause a bear market in Europe, not even a correction.

 

Probably people are in a hurry to buy stocks before the dividends are decreed by the ECB to be negative just like the bonds.

 

 

In the foreword to the Intelligent Investor Buffett also says your investment success will depend on the amplitude of market fluctuations you see in your career. My original point before we went off on a tangent was that central bankers have impaired Buffett's approach by removing market fluctuations.

 

Please support your point that central banks have removed market fluctuations! With facts, not feelings.

[thepupil]

Okay, so when you are long, are you long futures? Or individual stocks? If so, how many? What types of companies (GARP, value-y stuff? Domestic?) you don’t have to go through your whole portfolio month by month or anything, I just generally have a feel for the frequent posters investment biases and styles, and I can’t say I understand yours.

 

 

*for example, thepupil post about asset plays that are at a 20-50% discount and unlikely to have hard catalyst or be great ideas, but are unlikely to permanently impair capital. He doesn’t generate a lot of new ideas and trades around positions on a small number of names because their stock vol tends to be higher than intrinsic value vol. he isn’t the guy to ask about a compounded or get ahead of a company transformation.

[rb]

Well, the European stock markets are hitting all-time highs even though over the last 2 years Italy and Germany GDP growth rates have alternated between negative and positive.

 

It is mostly a gut feeling. By fluctuations, as Gregmal alluded, I mean the > 10% corrections. For the first time we will have a recession not cause a bear market in Europe, not even a correction.

 

Probably people are in a hurry to buy stocks before the dividends are decreed by the ECB to be negative just like the bonds.

 

 

In the foreword to the Intelligent Investor Buffett also says your investment success will depend on the amplitude of market fluctuations you see in your career. My original point before we went off on a tangent was that central bankers have impaired Buffett's approach by removing market fluctuations.

 

Please support your point that central banks have removed market fluctuations! With facts, not feelings.

So when pressed for facts about central bank actions the only thing you can come up with about central banks is some preposterous idea that central banks will "decree dividends to be  negative"?

 

I'm sorry, I never in my life thought I'd say this.... but Scottie makes more sense than you when he's stoned.

 

The difference between you and Scottie... honesty. He openly admits he's a troll.

[RuleNumberOne]

Only domestic individual stocks, and they are all over the spectrum. I have never invested in an index fund, I have never been long futures, maybe i should try it out. But the beta of the stocks would vary with the market's mood. If i don't have too much conviction, i stay in low-beta stocks, otherwise more aggressive. I try to buy stocks where the expectations are low and it is off significantly from the 52-week high. All this also means i miss out on long-term buy-and-hold stories.

 

I have scratched off asset plays (negative experience with Leucadia earlier in this bull market).

 

My belief is that when i buy is more important than what i buy.

 

Okay, so when you are long, are you long futures? Or individual stocks? If so, how many? What types of companies (GARP, value-y stuff? Domestic?) you don’t have to go through your whole portfolio month by month or anything, I just generally have a feel for the frequent posters investment biases and styles, and I can’t say I understand yours.

 

 

*for example, thepupil post about asset plays that are at a 20-50% discount and unlikely to have hard catalyst or be great ideas, but are unlikely to permanently impair capital. He doesn’t generate a lot of new ideas and trades around positions on a small number of names because their stock vol tends to be higher than intrinsic value vol. he isn’t the guy to ask about a compounded or get ahead of a company transformation.

[RuleNumberOne]

Yes, it falls under the heading of unconventional monetary policy. Lagarde recently initiated a major policy review at the ECB and the ECB people figured that this was all they had left.

 

After a certain cutoff date, dividends will become negative and they will keep getting more negative they longer you wait to buy stocks. It happened with bonds last year. People kept buying yields which were more negative in fear of them going even more negative tomorrow.

 

So they are going to try negative dividends next and see if it can ignite economic growth in Europe.

 

 

Well, the European stock markets are hitting all-time highs even though over the last 2 years Italy and Germany GDP growth rates have alternated between negative and positive.

 

It is mostly a gut feeling. By fluctuations, as Gregmal alluded, I mean the > 10% corrections. For the first time we will have a recession not cause a bear market in Europe, not even a correction.

 

Probably people are in a hurry to buy stocks before the dividends are decreed by the ECB to be negative just like the bonds.

 

 

In the foreword to the Intelligent Investor Buffett also says your investment success will depend on the amplitude of market fluctuations you see in your career. My original point before we went off on a tangent was that central bankers have impaired Buffett's approach by removing market fluctuations.

 

Please support your point that central banks have removed market fluctuations! With facts, not feelings.

So when pressed for facts about central bank actions the only thing you can come up with about central banks is some preposterous idea that central banks will "decree dividends to be  negative"?

 

I'm sorry, I never in my life thought I'd say this.... but Scottie makes more sense than you when he's stoned.

 

The difference between you and Scottie... honesty. He openly admits he's a troll.

[rb]

WOW!!!

[kab60]

ECB figured they'll turn dividends negative? Like, where'd you get that idea (not to say how would that work...). I think Lagardes point is there is only so much Central bankers can do to stimulate inflation and growth. Monetary politics is out of ammo. Whereas fiscal policy is still in the quiver but that's up to politicians.

[thepupil]

RNO, so we are clear, you are saying that your IRA’s have returned 56% per year for five years (9.5x cumulative return) from buying out of favor domestic stocks and then dodging the market correction, correct?

 

Can you give examples of these stocks? The thing I’m having trouble with is you seem wired against holding the types of stocks that have generated crazy returns in this environment (like say SAAS for example, I am too) but have clearly been doing something right.

 

So what have been say the top 3-5 contributors over that time frame? What maximum leverage (if any) have you utilized?

 

Any notable outliers in there? Again, just trying to understand how you invest as it’s not clear from the posts I’ve read