The Silicon Valley Long-Term Investors Meeting on Current Investing Environment

On Jan 14, 2016 we had a small informal brain storming session on Current Investing Environment at the Silicon Valley Long-Term Investors (SVLTI) Meetup. The past SVLTI events have been more focused on investment education, rather than taking a snapshot of current investing conditions. It was good to have a meetup on the current investment environment at the beginning of the year, as that sounds like a good time to take stock of (no pun intended) the state of economy and the markets in general.

As usual, we started the meeting by having the attendees introduce themselves. Then we moved on to the current state of economy. We discussed about business cycles and talked about the average span of time between recessions. Then we moved on to the discussion of the economic indicators - both leading and lagging. We discussed how pundits have used the slope of the yield curve as a reliable predictor of future real economic activity. Some of the members had done research to point out how government figures and forecast on the economy could be misleading. It was thought by the members that already 6 to 7 years have passed since the last recession ended, so the next one may be around the corner. But as always nobody had a crystal ball.

At this point we moved onto how different sectors of the economy are affected differently by the different phases of the business cycle. During the early-cycle phase, interest-rate-sensitive sectors— such as consumer discretionary and financials historically tend to outperform the broader market. During the late-cycle phase, energy and materials sectors, defensive-oriented sectors and those in which revenues are tied more to basic needs and are less economically sensitive, particularly health care but also consumer staples and utilities tend to perform well.

During a discussion on the U.S. growth stocks we talked about the story of Twitter stock and how some financial authors had come undone by their pattern finding way of investing in the market. Thinking that A has done well in the past, and since B is similar to A so B is the obvious choice to riches next is a very typical behavioral bias that has burnt many a proverbial investing hands.

Last, we spoke about the rise of the super-unicorns - Uber ($50 billion), Airbnb ($25 billion), Pinterest ($12 billion), Flipkart ($15 billion) etc. It was thought their private valuations look too lofty and they may have problems supporting these valuations once they public.

Overall, once more we had a fantastic discussion and we learnt a lot from each other's investing experience.

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