Highlights from Charlie Bilello's 'Put These Charts on Your Wall'
If I ever meet Creative Planning's Charlie Bilello, dinner's on me...
Longtime readers know that I'm a big fan of Bilello, who often provides interesting, counterintuitive, and/or provocative charts that I like to share in my daily e-mails. (You might be surprised to know that I haven't met him yet – but I sure hope to some day!)
Bilello outdid himself with his year-end post, Put These Charts on Your Wall (2024 Edition), in which he shared 47 charts – almost all around the theme of rebutting common sayings that a stock or market "can't" or "won't" and "has to" do something.
He's absolutely right that conventional wisdom is often wrong. So today, I'll share what I think are the highlights of his post...
1) While I have consistently said – most recently in my January 3 e-mail – that long-term investors should stay the course, as the market marches higher, I think investors' expectations about future returns should become more modest.
Simply put, history has shown us that when markets are hitting all-time highs, future returns are likely to be below average – as this chart by Bilello shows:
That said, it's important to note that nobody should be complaining about three-, five-, and 10-year average returns of 31%, 59%, and 137%, respectively... even though that's less than the forward returns from non-peak periods.
2) I don't know how many times I've heard that stocks can't go up when the Federal Reserve is shrinking its balance sheet. Wrong!
... Or when the yield curve inverts. Wrong!
... Or when our national debt is rising rapidly. Wrong!
... Or that interest and mortgages are sure to decline when the Fed cuts rates. Wrong!
3) I'm not an emerging markets investor, but, in general, charts like this make me think that other investors might have capitulated – thereby creating opportunity to profit from a turnaround:
The problem is that this chart looked pretty much the same a year ago and two years ago, so it's a good example of how trends – both negative and positive – can continue a lot longer than you think...
4) This next chart kills me because I owned Apple (AAPL) at a split-adjusted price of $0.35 back in 2000, when it was deeply out of favor – and even wrote publicly about it – but then sold after it went up by a few cents. Sigh...
But it wasn't too late to buy it, even after it went up by 10 times... Or even by 100 times... Or when its price-to-sales ratio went from about 3 to 4 times up to 6 to 8 times. As you can see in this chart from Bilello, it surged above 10 times by late last month:
5) The inverse is also true. Just because a stock goes down a lot doesn't mean it can't go down a lot further.
There's a joke on Wall Street: "What's the definition of a stock that's down 90%?" Answer: "One that's down 80% – and then gets cut in half!"
Bilello gives some examples: electric-vehicle maker Nikola (NKLA):
And home-products company Tupperware Brands:
And AMC Entertainment (AMC):
6) Lastly, this chart of how wrong all the Wall Street "experts" were on what the market would do last year reminds me of another old Wall Street joke that "economists have successfully predicted nine of the last five recessions":
Of course, you should read widely and listen to lots of intelligent commentary. But ultimately, be wary of what the Wall Street experts have to say. And don't bet against America!
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.