RESOURCES

Based on the Shiller P/E, 99% of the return in the first half was driven by valuation increasing, and 1% by the underlying companies producing value. The 36.3x multiple is 68% above its fifty-year average, and 38% above its twenty-year average. For historical reference, prior peaks were 29.1x in September 1929, 45.5x in April 2000, and 39.6x in 12/21.

It’s been said that diversification is the only free lunch on Wall Street.Everyone, from investment professionals to lay people, knows that diversification is prudent and is investment best-practice. On the other hand, there are some people who have ignored the principle of diversification and done extremely well. There are some advantages to concentration instead of diversification.

This fun read was Richard Thaler’s account of his both his own journey and how behavioral economics started as a fringe movement and ended up being widely accepted as more explanatory of how decisions are made in the real world than classical economics.

The most up to date national home value information I found goes through April, and shows a long steep rise in home prices, followed by an inflection even steeper. This is consistent with the bubble paradigm where investment bubbles have steady increases in value culminating in a “blow off top” where greed and fear of missing out takes over to push values to unreasonable levels. I do not know whether houses are in a bubble, but the evidence, including this chart, point to that conclusion.

Quarterly letter with Market update, Personal update, Business update, Personal improvement and book review.

There were two big issues last quarter that captured investors’ attention. The first was interest rates. The second issue that has rightfully held investors’ interest is geopolitics. Sentiment has moved around over the last several quarters. It now has shifted to convinced optimism. Very few people are expecting a recession now, and some have already begun their victory dance, complete with taunting the naysayers.