Everything Will Crash in The Next Crash! Even BRK or Value ETFs
Summary
Sven argues that the current investing landscape is fraught with risk, making it difficult to find safe havens for the next market crash. Sven points out that while Berkshire Hathaway holds nearly $400 billion in cash, this strategy is more suitable for large institutions than for individual investors who need to find better returns for their 'life money.' Sven states that sitting in cash is a valid strategy for those seeking certainty, but inflation and potential money printing remain significant risks.
Sven concludes by discussing hedging as a viable alternative for those who cannot tolerate a 50% crash. Sven mentions that paying a 5% premium for put options on the S&P 500 can provide significant protection while still allowing for a 10% gain if the market rises by 15%.
Mentioned Stocks
Reasoning: Sven states that Berkshire Hathaway is currently expensive with a market cap of $1 trillion compared to an intrinsic value estimate of $500 billion to $800 billion. Sven notes that management is not doing significant buybacks, which indicates the price is high, and expects only a 5% return going forward.
Reasoning: Sven argues that the Vanguard Value ETF is too risky because it contains stocks like Walmart and Caterpillar at historically high P/E ratios of 40. Sven highlights that it previously crashed 56% and believes it will underperform and crash more than the market in a downturn.
Reasoning: Sven warns that emerging markets are not yet cheap enough. Sven argues that investors should wait until dividend yields reach double digits or P/E ratios drop to around 5 before entering, as these markets typically crash harder than US markets during panics.