A 1990s Bubble Stock Today

Marcus Lemonis, the host of CNBC’s popular show “The Profit”, recently lambasted a struggling business owner by saying, “You can’t spend the revenues, dummy.” Hey, we have to take our truths wherever we can find them. And almost eighty years ago, Benjamin Graham added some elegance to that notion when he stated that intelligent men often mistake a company’s rapid overall growth for the amount of profits that would actually be someday attributable to the shareholder.

Charlie Munger called high revenue/low profit businesses “good until reached for” because the money you saw reported on paper looked nice until you actually tried to convert it into cash that shows up in your bank account. … Read the rest of this article!

John Bogle’s Stock Market Prediction

John Bogle recently got asked by Benzinga what kind of returns investors should expect over the coming decade. He assumed that investors owned a portfolio of 50% large stocks (index-fund based) and 50% bonds (U.S. government issued). He argued that he expects 5% earnings per share growth, 2% dividends, and -3% returns due to valuation compression from the S&P 500 as a whole. He expects the P/E ratio to switch from nearly 20x earnings to 15x earnings. This amounts to a 4% return from the stock portion of a portfolio.

With bonds, Bogle is predicting 3% annual returns over the next couple years. The implication is clear: Someone owning a portfolio equally stuffed … Read the rest of this article!