VALUE: After Hours (S07 E22): Why the Bull Case Was So Powerful

During their recent episode, Taylor, Carlisle, and Dave Collum discussed Why the Bull Case Was So Powerful. Here’s an excerpt from the episode:

David: And so, I really do believe that that a 30-year recency bias doesn’t mean that it’s not a bias. And so, for 30 years, we’ve had this luxury.

So, here’s the bull case that got us here and I’ll tell you the bear case that gets us out. The bull case was an 81 to that zone. Markets had a PE of six back when you might actually be able to believe the E-part. Now, I don’t believe the E-part so readily. So, they were dirt cheap. They were priced to return, what’s at, 15%. Now, inflation was scary, which is why they were so cheap, but they were priced return of 15% cash flow.

Russia was starved for cash and sold us resources cheaply. We helped them. ExxonMobil, these guys got in there and helped. China was coming out of the dark ages and sold slave labor for pennies on the dollar. They did it for decades. They sold us their wages and sent us their smartest people and everything was just perfect for us. When we paid them, they bought treasuries and things like that. So, these are phenomenal tailwinds.

The boomers hit the marketplace. Demographics are said by some economists to be important. I hesitate to say that, because within the next two minutes, I undoubtedly will insult the economists for being stupid. Quote them selectively as disingenuous, but they do believe demographics is important. They brought their wives. And so, we had a workforce participation rate that soared over those decades.

Warren Buffett wrote an article in 1999 saying that “The only thing that really matters is the direction of long-term rates.” He said from 1967 to 1981, when the markets treaded water for 14 years, which is a long time to wait, and lost 75% if you inflation correct, which is a long–

Jake: Yeah. Nominally treaded water.

David: That’s right. Nominally treaded water, which if it takes you 14 years– It’s one thing to take a beating. It’s not going to take a beating for 14 years. I’d rather lose my–

Jake: Yeah. Toby, how is that? [chuckles]

Tobias: I can tell you about that.

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VALUE: After Hours (S07 E22): Why the Bull Case Was So Powerful

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