I think this is fine with respect to bonds. The argument for a tiny amount of bonds is that if you do want to end up with, say, 50% bonds at age 65 then its probably a good idea to get there systematically, adding a little bit each year until you get to 50%. That might be preferable to needing to reallocate big chunky pieces of your portfolio in the few years before retirement which invites all kinds of market timing anxiety.
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The Vanguard target retirement funds automatically rebalance into bonds as you get closer to retirement
It really is a set it and forget it low cost fund
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I wouldn’t bother with mid and small cap. Just do a total market fund for US and then add in some small cap value. Small cap value funds are the only class of index fund that seems to offer outsized returns. So some mix of VSIAX and VTSAX. I do 50/50 but I’m a degenerate gambler.
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Yeah, this is what I recommend to everyone.
Are you tilting to small and value to capture factor premiums? If so, I think there are better choices like AVUV. More expensive, but it’s going to invest in what you are targeting a lot more effectively.
If you are not doing that, then I’d just buy VTSAX and call it a day.
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I more or less agree with all of that, but I think you left out one of the most important parts:
Inflation is real, and it is not transitory. So either the Fed has to raise the rate, which causes a stock market crash, or they have to allow inflation. If they allow inflation, either it’s runaway (wages grow → prices inflate more → wages grow → prices inflate more), or the cycle has to slow/stop and the squeeze is on prices and thus profits, because there’s not much room left to squeeze workers. If profits drop, now the P/E ratios are even more ridiculous and that could cause the crash.
And if you decide to squeeze the workers instead, or perhaps automate your way out of the problem, haven’t you just significantly reduced American consumer demand?
And if the inflation is runaway, then we lose reserve currency status, which makes rates go up, which makes the market crash and which probably causes government austerity, which causes a recession.
Like, all the fundamentals to me say that one way or another, this thing has to crash at some point in the not too distant future… But that’s been the case for a while now and it just hasn’t had that reckoning yet.
I think the ruling class wants to attempt to thread the needle by increasing rates a tad, letting inflation happen a bit, and just create like a sideways 10-20 years in the stock market so that Boomers don’t get wiped right now, and Millennials and Gen Z just take it on the chin and lose 10-20 years of investment growth. Essentially, I think the goal is for the Boomers to have gotten a 10-20 year advance on the growth of the stock market, and thus they’ve stolen it from future generations.
But that’s an awfully tough needle to thread, I think. Especially in the current state of the world.
I don’t think the American economy is going to fail, I just think the stock market is way overvalued. I think income/wealth inequality is waaaaaay too high for a consumer-driven economy, and one way or another the chickens have to come home to roost at some point.
I think if we woke up tomorrow and the S&P was down 75%, it should theoretically have no impact on the American economy. Emotionally wealthy people will be pissed and tighten their belts and fuck over workers, but fundamentally it doesn’t need to be the case.
Like I was talking to a friend who said if stock XYZ crashes, they’ll have to lay off a bunch of people, and I said why? If their earnings per share are $10 and they’re currently priced at $500, and now the earnings per share are $10 and they’re priced at $125, fundamentally that business is just as successful as it was! They’re turning the same profit off the same financials! Why lay anyone off? I mean, shit, aren’t we in a labor shortage anyway? They’re trying to hire workers because they think paying a new worker $X per year will generate them > $X a year in revenue. Does that change if the stock price changes? No, it shouldn’t.
tldr; I’m not saying the economy is supposed to crash, I’m saying the stock market is. There are threats to the economy due to the pandemic (supply chain, labor shortages), but I think we pull through just fine over the next 5 years economically at a broad scale. I just think the stock market has to crash.
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I know basically zero about Peloton, so this is probably a dumb question. But what prevents competitors from just copying this. It sounds like you were using that stuff even before you had the treadmill. Surely someone else could just make some similar videos and charge less. Is there a competitor that is already doing this?
Oh here’s the other thing. I think current stock prices factor in a 100% chance of a bailout if a bunch of American corporations fail. They’re leveraged to the hilt, and the multiples are massive.
I think the chances are closer to 0% right now than they are to 100%. I mean, let’s start here. Does McConnell give the Dems the votes to bail out major American corporations if they need them?
If not, then it’s gotta be reconciliation, and then the question becomes: do Joe Manchin, Kyrsten Sinema and Bernie Sanders find their way to any agreement on a bailout? I think that answer is no. Manchin would want it funded, Sinema wouldn’t want to raise taxes, and Bernie would want something like a 1 to 1 ratio of help for the working class.
Am I the only one that’s trying to diversify outside the US and have a big chunk in foreign index funds?
No, my portfolio is global. But when stocks crash correlations are high. Its hard to imagine a scenario where there is a massive correlation in US stocks but offsetting big gains elsewhere.
NordicTrack has something similar in iFit. I’ve never experienced it, but what I’ve read seems to be universal in that Peloton’s content is light years better. Their instructors really are great, and they have to be because you could arguably just watch random people on youtube for free.
I’m trying to diversify into real estate. But it’s not going great. I want something as effortless as just buying an ETF. I know there are publicly traded REITs but those are pretty well correlated with stonks.
The best thing would be to buy property and rent it out. But that is actually work (both the initial due diligence and just the shit work of managing the property) and I’m lazy. Ain’t nobody got time for that.
Oh yeah when the big one happens the US is dragging everyone down with us.
I’m just thinking Euro-land, Asia and emerging markets might have room to grow in the meantime.
That’s my point. How is it possible for Peleton content to be that much better? If it truly is, then all someone needs to do it watch it and copy it.
I mean isn’t the worst case scenario here for PTON customers likely to just be a buyout and someone else running the company?
Like they have 2.5 million people paying like $40 a month, right? Their current market cap is $8 billion. If all they did was sell bikes at breakeven cost and maintain that subscriber base as a value stock, they’d have a valuation around $18 billion at a P/E of 15. Their margin on the subs is 60%. 2.5 million * $480 = $1.2 billion/year in profits.
So the question is, is it possible to sell exercise bikes at a breakeven cost? Other companies do it for a profit, so…
Like at some point the price gets so appealing that someone like Berkshire Hathaway just buys them up and Warren B teaches them how to run a business.
I thought Buffet’s strategy was more like buying a business that is well run and just letting them do their thing. Maybe the resident Buffet fanboy can help us out.
No, my retirement accounts which is where all my investing is done are currently 50-50 cash to equities. My equities are about 50% foreign, split between SPEM and KT.
If the US just trades sideways for 10-20 years and that’s how we get out of this mess, I would expect foreign stocks and especially emerging markets to return profits over that period.
I think they kept the price up for brand building reasons. Without the brand cache they run into the timeless problem of they eventually end up competing with free on the content side. They clearly fucked up their cost structure on the bikes though, and that should be somewhat fixable.
Generally I think that’s his strategy, but I have to assume at some point in time he’s bought a company that should be turning a profit that isn’t and installed a CEO who knows what the fuck they’re doing.
Like, Peloton’s subscription market cap should be $18 billion, and the stock’s market cap is $8 billion. If someone can just turn the rest of the company break even and maintain, not even grow, the subscription base, then it’s worth 2.25x the current valuation to a value investor.
I don’t know how much it has to drop before someone like Buffet says fuck it I’m in, and I’m hiring a new CEO, but I’ve got to imagine that’s the eventual outcome here… Someone takes it over and figures out how to not lose money selling exercise bikes for $2,500 and gets a huge ROI.
Isn’t this true of any entertainment-adjacent service/product? How is it possible for Adele or Taylor Swift or Leonardo DiCaprio to be so much better and higher paid than everyone else? Can’t someone just watch them and copy it?
But I’m also leaving out the music, which is great but carries very high royalty charges with it.
So could a competitor come in and offer comparable quality at $40/month or $13/month (the two different subscription rates)? Maybe, but no one seems to have done it yet.