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Mag 7 starting to underperform [pdf]

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Re: Mag 7 starting to underperform [pdf]

#111

Post by EA-3167 »

nvme0n1p1 wrote: post #42
Lerc wrote: post #38

Earlier quoted context omitted.

Yes, but when their run ends they tend to underperform. Every time.

If a stock market observation has no predictive power, then it's worthless. I look forward to your weather report too: "It's always sunny outside until one day it starts raining. Every time."

Not at all, if someone tells me that "This stock is historically likely to regress to and beyond the mean," it's information I can use to evaluate my risk tolerance. Just because a piece of information doesn't let you time the market like a psychic doesn't make it worthless, it's just not what you were looking for.

Re: Mag 7 starting to underperform [pdf]

#112

Post by gabriel-uribe »

So many chart crimes, but aside from that.

Seems like we're seeing margin get eaten up by companies upstream of the buildout, and the costs have not been fully passed downstream yet. Eg most consumers still get free/cheap AI.

It'll take a few years to see what happens at scale when prices go up and purchasing behavior changes. Hardware, services etc all downstream of the buildout and supply constraints.

Re: Mag 7 starting to underperform [pdf]

#113

Post by [deleted] »

nvme0n1p1 wrote: post #42
Lerc wrote: post #38

Earlier quoted context omitted.

Yes, but when their run ends they tend to underperform. Every time.

If a stock market observation has no predictive power, then it's worthless. I look forward to your weather report too: "It's always sunny outside until one day it starts raining. Every time."

[deleted]

Re: Mag 7 starting to underperform [pdf]

#114

Post by antoinealb »

gruez wrote: post #107
dheera wrote: post #79

Earlier quoted context omitted.

> Historically stocks that had a good run then tended to underperform This is more of a mathematical axiom than a financial effect, because you're defining "underperform/overperform" with respect to an average that contains them.

>> Historically stocks that had a good run then tended to underperform >because you're defining "underperform/overperform" with respect to an average that contains them. Why is this true? For instance, if you're comparing the GDP growth of countries in the G7, why is it that one country (eg. US) can't consistently overperform year after year? https://ourworldindata.org/grapher/gdp-per-capita-worldbank?... Or if you w…

Shouldn't you look at the YoY change instead, to compare to stock returns ? Otherwise that's like comparing market cap, and then it is obvious that a big company tends to stay big.

Re: Mag 7 starting to underperform [pdf]

#115

Post by throw0101d »

M3L0NM4N wrote: post #30
throw0101d wrote: post #6

Historically stocks that had a good run then tended to underperform: > […] Since 1926, the median ten-year return on individual U.S. stocks relative to the broad equity market is –7.9%, underperforming by 0.82% per year. For stocks that have been among the top 20% performers over the previous five years, the median ten-year market-adjusted return falls to –17.8%, underperforming by 1.94% per year. Since the end of Wo…

I mean these stocks have been performers for decades. If you posted this 10 years ago you'd look really wrong.

> I mean these stocks have been performers for decades. If you posted this 10 years ago you'd look really wrong.

And Japan performed ridiculously well for over decades and then stagnated for decades after that, but it averaged out between the two periods:

> Ben Carlson: It's just a really long mean reversion. You got like 22% per year from 1970 to 1989 in Japan. Small caps in Japan did 30% per year for two decades.

> It's insane. The returns almost had to be poor after that. If you put them together, the boom with the bust, it's like almost 9% per year.

> It's kind of crazy. Over 50 years, the long-term worked. It's just that over that 20 or 30-year period, it didn't work so well.

* https://rationalreminder.ca/podcast/412 (~4m20s)

Annualized 9% per year is pretty good: the S&P 500 has average 10% since 1957 (70 years). Is there anything preventing US equities from doing the same thing: great performance from 2010 until now, and then 10+ years of stagnation starting (theoretically) tomorrow. If you look at 2000s S&P 500 you got zero returns, and the only thing that would have saved a US domestic (only) investor was having a bond allocation:

* https://www.forbes.com/sites/advisor/2010/09/13/its-not-real...

This is why diversification is important. People talk about "US stocks" doing well, but have US industrials done better than non-US industrials? US finances or energy done better than non-US? Or are "US stocks" doing better simply because tech stocks specifically have done better? Perhaps a US allocation is really a tech sector play:

* https://ofdollarsanddata.com/should-your-portfolio-be-100-us...

Re: Mag 7 starting to underperform [pdf]

#116

Post by rightbyte »

Lerc wrote: post #83
eternal_braid wrote: post #68

Earlier quoted context omitted.

Many people who replied to you seem to have missed your joke. I appreciated it.

It is my curse. Years ago, My daughter's science teacher said that school should teach a love of learning. I replied 'I thought the point of school was to make productive worker units in society' And while he explained to me why I was wrong I was thinking to myself 'great, now he thinks I'm a terrible person' It seems I deadpan too effectively.

Poe's law apply to real life too.

Re: Mag 7 starting to underperform [pdf]

#117

Post by twoodfin »

ares623 wrote: post #20
bwfan123 wrote: post #14

I like that the invisible hand of market is slapping the Mag-7 for capex which is the only way to discipline them. Investors are waking up to say: hey, you are spending all your profits on data-centers, where is the return for me ? But, it surprises me that there are vast pools of capital which we collectively call the "market" that makes these calculations, or maybe a simpler causal explanation is the missing stock…

Why is Apple included though?

You can simultaneously believe that the hyperscalers are becoming capital-intensive long-term in a way that’s bad for their profits and that as a result will be raising the COGS of Apple’s business in a way that also hurts profits.

Re: Mag 7 starting to underperform [pdf]

#118

Post by kaonwarb »

ponkpanda wrote: post #89
senordevnyc wrote: post #47

Earlier quoted context omitted.

I guess Google’s Q1 earnings of $62 billion were just hype.

Yes, earnings are essentially hype/BS. Focus on cash/cashflow.

$64B trailing twelve months free cash flow. (https://s206.q4cdn.com/479360582/files/doc_financials/2026/q...)

Re: Mag 7 starting to underperform [pdf]

#119

Post by neogodless »

solumunus wrote: post #34
zerobees wrote: post #31

I am invested in some of the companies that are downstream of the capital expenditures of Big Tech (e.g., COHR), so I have nothing to complain about. I am really struggling to see what's the investment thesis behind Google valuation increasing 2x in response to AI, though. Assuming no magical AGI singularity, by the end of the day, they're still selling the same services, but the services have gotten more expensive f…

The market runs on memes, hype and fraud. Fundamentals haven’t mattered for a long time.

You're half right.

The market sets prices, and they are set based on multiple things. One of those is fundamentals. Consider the value of assets, whether tangible or intellectual property, human resources, binding contracts, etc. that add up to reasonable revenue forecasts and so forth.

And the other aspect of prices is based on conjecture, speculation, meme-joiners, believing hype, and in some cases, fraud.

The secret sauce is always going to be the one who can figure out, between the two factors going into price, what's right, and when.

BUT... just saying that all stock market pricing is based on unreliable factors? That's not a useful, actionable statement. You can certainly stay out of investing in that market, but is that going to be your best course of action?

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