Thread by @TihoBrkan

1/ Are we at the similar point in time to the late 1990s?

Tech sector started rising in an exponential trend around 1997/98 while it was already fully priced.

The risk was high.

However, during the next 3 years the bubble kept inflating & eventually peaking in March 2000.

2/ Was it wrong to hold onto tech stocks at that point in time?

For speculators & traders, it wasn’t wrong at all because they continued to ride the trend higher for the next couple of years.

The question is: how many successfully rode it up to the peak & got out in time?

3/ Long term investors, especially those focused on value, approach things in a different manner.

Once they commit capital, they hold on with a 10+ year time horizon.

In hindsight, the bet was wrong as 15 years would pass without any positive returns by the tech sector.

4/ It is clear that there are no universal right or wrong answers when investing.

Almost everything is subjective and on a case by case. What works for you might not work for others.

It really all depends on your investment mandate, skill set, risk tolerance & time horizon.

5/ No matter which way you slice it or dice it,

Growth being overly expensive vs value, tech stock nosebleed valuation & investor sentiment overwhelmed by greed like in the late 90s,

It is clear that tech is fully priced & very risky.

6/ Does that mean it cannot go up further?

Of course not.

History provide clear lessons that bubbles run further than anyone of us think they will.

From 1997-2000, is a clear example of that.

But the further it goes, the more risky the investment becomes over the long run.

7/ For us, it isn’t a good buy, because the risk over the long term (and that’s the key for our investment mandate) is far too high.

As Howard Marks once said:

“Investment success doesn’t come from “buying good things,” but rather from “buying things well.”

#buylow
#sellhigh