Don't invest in horses

[Christine]

Those who did about 100 years ago got disrupted. Fast.


Tony Seba shows which sectors are about to be disrupted now:

I found this very enlightening. So many things changing at once.

 

[Christine]

Part 2 of 3 in this series:

 

[ncbill]

Re-hashing what others have claimed.

But there's still no clear path to a fully autonomous vehicle, no matter how 'smart' someone claims AI will become.

Chinese EVs can't be sold in the developed world because of their poor safety standards.

IIRC, a Russian TV station famously crash-tested a popular, conventional ICE Chinese vehicle & the engine ended up in the driver's lap!

So a 'cheap' EV here in the USA (& in Europe, etc.) will cost more like $30k instead of $10k.

 

[NW-Bound]

I skimmed through Parts 1 & 2. Have not watched Part 3.

It's easy to talk about "disruptive technologies", but to turn the idea into a successful investment is not.

On this forum, a while back I made a comparison between Cisco and Hormel. Yes, Hormel, the guy who has been making Spam for 85 years and will continue to do so for the foreseeable future.

Back in the late 90s, everybody knew the Internet and the Web were going to be BIG. Some of us still remember that Cisco was destined to be the 1st trillion dollar company. Of course, more things have been done on the Internet than I could picture back then.

Yet, if you put $10K into Cisco and Hormel in Jan 2000, what would you have now, as of Nov 1, 2022?

Cisco: $11,936

Hormel: $140,173

Source: Portfolio Visualizer, growth numbers are with dividends reinvested.

PS. The above numbers are in nominal dollars. Here are the numbers with inflation adjustment. Cisco could not keep up with inflation.

Cisco: $6,768

Hormel: $79,482

 

[finnski1]

I skimmed through Parts 1 & 2. Have not watched Part 3.

It's easy to talk about "disruptive technologies", but to turn the idea into a successful investment is not.

On this forum, a while back I made a comparison between Cisco and Hormel. Yes, Hormel, the guy who has been making Spam for 85 years and will continue to do so for the foreseeable future.

Back in the late 90s, everybody knew the Internet and the Web were going to be BIG. Some of us still remember that Cisco was destined to be the 1st trillion dollar company. Of course, more things have been done on the Internet than I could picture back then.

Yet, if you put $10K into Cisco and Hormel in Jan 2000, what would you have now, as of Nov 1, 2022?

Cisco: $11,936

Hormel: $140,173

Source: Portfolio Visualizer, growth numbers are with dividends reinvested.

PS. The above numbers are in nominal dollars. Here are the numbers with inflation adjustment. Cisco could not keep up with inflation.

Cisco: $6,768

Hormel: $79,482

Or the other SYSco. Much better than Cisco.
Up about 8-10 fold since late 90's

 

[braumeister]

And in terms of the thread subject, there are folks here in Kentucky who have made some pretty vast fortunes investing in horses.

 

[Sojourner]

Yet, if you put $10K into Cisco and Hormel in Jan 2000, what would you have now, as of Nov 1, 2022?

Cisco: $11,936

Hormel: $140,173

Source: Portfolio Visualizer, growth numbers are with dividends reinvested.

PS. The above numbers are in nominal dollars. Here are the numbers with inflation adjustment. Cisco could not keep up with inflation.

Cisco: $6,768

Hormel: $79,482

To be fair, starting the comparison in January 2000 (at the peak of the dot com bubble) stacks the odds pretty heavily against Cisco. Starting in Jan 1997 would be better, prior to the dot com boom/bust. Here is where they end up in Oct 2022 starting from there:

Cisco Systems, Inc. $90,438 CAGR: 8.90%
Hormel Foods $224,852 CAGR: 12.81%

Hormel still wins handily, but Cisco isn't a complete dud.

Still, though, it is fascinating that Cisco, the "gold standard" of networking, couldn't figure out a way to stay competitive and innovative enough to truly capitalize on the huge growth era of the Internet. There are certainly many other similar examples. BlackBerry, Tivo, Netscape, etc.

 

[NW-Bound]

To be fair, starting the comparison in January 2000 (at the peak of the dot com bubble) stacks the odds pretty heavily against Cisco. Starting in Jan 1997 would be better, prior to the dot com boom/bust. Here is where they end up in Oct 2022 starting from there:

Cisco Systems, Inc. $90,438 CAGR: 8.90%
Hormel Foods $224,852 CAGR: 12.81%

Hormel still wins handily, but Cisco isn't a complete dud.

Still, though, it is fascinating that Cisco, the "gold standard" of networking, couldn't figure out a way to stay competitive and innovative enough to truly capitalize on the huge growth era of the Internet. There are certainly many other similar examples. BlackBerry, Tivo, Netscape, etc.

Yes. One would make good money with Cisco if he invested early, say 1990.

My point is that, at the height of the tech bubble when everyone knew the importance of the Internet, it was already too late to pile onto the leaders in the field.

Everybody now knows about EVs. and lithium battery. Where does one put his money now?

 

[Christine]

Yet, if you put $10K into Cisco and Hormel in Jan 2000, what would you have now, as of Nov 1, 2022?

Cisco: $11,936

Hormel: $140,173

If you invested in Tesla i 2010 then $10K would grow to $1,430,491 as of Nov 1 which isn't too shabby either.


But the point of Tony Seba was that industries that get disrupted can fall very fast from grace. I would guess that Hormel hasn't been disrupted like Nokia was when the iPhone came?


I believe that most here probably don't invest in single stocks but rather in index funds. But for those of us that do it would be wise to look out for disruptors. Or we could end up with the new Nokia.

 

[athena53]

When I was in my first Real Job out of college (1975), the WSJ would have ads for limited partnerships that offered a first-year tax write-off of multiples of your initial investment- sometimes 7X or 8X. Most involved horse farms or oil drilling.

Sigh. I could use a few of those now.

 

[GravitySucks]

I do agree with much of what he says. Especially the speed of change. That's why I don't buy individual stocks or corporate bonds longer than 5 years.
But how actionable is it? Remember we were going to have to rethink cities because of the Segway? And as for the Tesla a example, $10k invested in their rival Fisker would now be worth around $9k.
Anyway to make a bet of National Grid not being around in 25 years as we'll all have our own home fusion reactor and won't need power lines?

 

[brett]

My father taught me to stay clear of slow horses and fast women.

 

[NW-Bound]

My father taught me to stay clear of slow horses and fast women.

How should we handle fast horses and slow women?

 

[athena53]

Another consideration is that some companies are better at spotting trends and adapting. Where would Netflix be if they had stuck to mailing rented DVDs back and forth? Where would the cable companies be if they hadn't begun offering streaming video on demand? Amazon started out selling books.

 

[NW-Bound]

If you invested in Tesla i 2010 then $10K would grow to $1,430,491 as of Nov 1 which isn't too shabby either.

But the point of Tony Seba was that industries that get disrupted can fall very fast from grace. I would guess that Hormel hasn't been disrupted like Nokia was when the iPhone came?

I believe that most here probably don't invest in single stocks but rather in index funds. But for those of us that do it would be wise to look out for disruptors. Or we could end up with the new Nokia.

If you invested $10K in Cisco in Jan 1990, by Dec 1999 you would have $6,564,255 according to Portfolio Visualizer.

Cisco went down hill from there.

The danger with disruptors is that they themselves get disrupted later.

And a while back, I recounted the story of some Cisco employees who exercised options to have shares worth several million dollars, but did not sell because they expected it to go up further, and ended up being liable for $2.5 million in taxes that could not be covered by selling all the shares after the price collapse.

See: https://www.latimes.com/archives/la-xpm-2001-apr-13-mn-50476-story.html

 

[The Cosmic Avenger]

And in terms of the thread subject, there are folks here in Kentucky who have made some pretty vast fortunes investing in horses.

There are almost always people who have made vast fortunes in fields where most people lose money. For most of us, if you have a horse you might as well just feed it cash instead of hay.

 

[Christine]

The danger with disruptors is that they themselves get disrupted later.

Exactly. So if you hold single shares then you'd better be on top of your investments and don't get complacent. And if you do then it's better to invest in Bogle-inspired strategies with index funds etc.


I made my own investment strategy with this on my yearly checklist. If I haven't really kept up to date with my TSLA then it's time to get out.

And a while back, I recounted the story of some Cisco employees who exercised options to have shares worth several million dollars, but did not sell because they expected it to go up further, and ended up being liable for $2.5 million in taxes that could not be covered by selling all the shares after the price collapse.

See: https://www.latimes.com/archives/la-xpm-2001-apr-13-mn-50476-story.html

Oooooo not good!

 

[Taco]

But the point of Tony Seba was that industries that get disrupted can fall very fast from grace. ...
But for those of us that do it would be wise to look out for disruptors. Or we could end up with the new Nokia.

The photos below illustrate your point about the speed of disruption. 2 photos from NYC, 13 years apart. The first, one lone car amongst a sea of horses. The second, cars everywhere.

The trick though, when looking for disruptors, is who will last. Often the first is not the ultimate winner. There were many, many car companies that came and went in the early 1900s.

I like Tesla. And they definitely have the first mover advantage. But there is nothing particularly proprietary that will prevent competition. It could be, that 10 years from now, VW or Ford or some company we don't even know about yet has replaced Tesla as the dominant force in EVs. Tesla and their amazing growth is also no secret, as reflected by the price. Just my humble opinion, but I would be cautious putting too many of my eggs in the Tesla basket given the uncertainties with exactly how the EV disruption will play out.

 

[marko]

Only slightly off topic, but for this reason I'm always leery of looking too far back in time financially.

"...well, since 1970, the X has performed y%..." etc. Looking back "since 1929" is a complete waste of time IMO. (sorry FireCalc...I do love you)

The world is an entirely different place than it was 30, 40, or 50 years ago and I always wonder how to compare that world to today’s.

 

[NW-Bound]

Only slightly off topic, but for this reason I'm always leery of looking too far back in time financially.

"...well, since 1970, the X has performed y%..." etc.

The world is an entirely different place than it was 30, 40, or 50 years ago and I always wonder how to compare that world to today’s.

It's true that nothing lasts forever, and that includes corporations.

I don't remember where I read this, but someone wrote that in the long term most corporations go bankrupt.

 

[Christine]

I like Tesla. And they definitely have the first mover advantage. But there is nothing particularly proprietary that will prevent competition. It could be, that 10 years from now, VW or Ford or some company we don't even know about yet has replaced Tesla as the dominant force in EVs.

It could be. Then Tesla is not the first mover in EVs. They are the first lot who managed to grow substantially many years in a row with a product that many enough want to buy so that they make profit each quarter.


One defunct first mover were Norwegian car company Think who made EVs around year 2000 before lithium had it's breaktrough. They were bough by Ford who failed to build the brand and enough cars to be profitable. So it was shut down.


The most interesting part of Ford and GM for me now is how they will manage the challenge of declining sales of their ICE vehicles combined with the amount of R&D needed to make EVs that can compete with Tesla.


When the sale of their profitable cars drop it's not very far down to a level where the profits are lost since their margins are thin. And drop it will when more and more people realize that EVs are cheaper to run and own.


Then when your existing product line stop being profitable how do you finance the switch to EVs? The current EVs are not profitable for most of the traditional brands. And they are inferior to Tesla both in efficiency and price. It is an expensive gap to close.

 

[gcgang]

This may be off topic, but the thread was titled about horse investing.

Have a friend that started “investing” in race horses about 10 years ago. His 2nd horse, bought for only $40k, made it to the Kentucky Derby! I don’t think he’s made money on it, but what an experience, to be able to walk the track with your horse at The Derby!

 

[Koolau]

When I was in my first Real Job out of college (1975), the WSJ would have ads for limited partnerships that offered a first-year tax write-off of multiples of your initial investment- sometimes 7X or 8X. Most involved horse farms or oil drilling.

Sigh. I could use a few of those now.

IIRC most such excess write-offs got disallowed by IRS but YMMV.

 

[Taco]

It could be. Then Tesla is not the first mover in EVs. They are the first lot who managed to grow substantially many years in a row with a product that many enough want to buy so that they make profit each quarter.

There were electric vehicles back in the late 1800s / early 1900s. So yes, Tesla was not the first EV company. But note the word "significant" in this definition of first mover advantage:

"In marketing strategy, first-mover advantage (FMA) is the competitive advantage gained by the initial ("first-moving") significant occupant of a market segment."

I definitely consider Tesla to be the first significant EV company.

Then when your existing product line stop being profitable how do you finance the switch to EVs?

The switch is already happening. I just did a search for "ev sales in europe 2022" and the first chart I saw was for sales in Q2 of 2022. Tesla was second, behind the Fiat 500. Right on the heels of those two were cars by Peugeot 208, Kia Niro, Skoda Enyaq Ford Kuga, Volkswagon ID.4, Renault ZOE and Mercedes GLC Class.

The market share of the top 10 EV models accounted for only one-fourth of total EV sales. It is already a fragmented market. I think it will continue to be so.

 

[CaptTom]

It's true that nothing lasts forever, and that includes corporations.

With a few notable exceptions, this is very true. I think in some cases they get taken over by MBAs and bean-counters, always playing it "safe" while trying to squeeze every penny out of the organization, employees, suppliers and customers.

The switch is already happening. I just did a search for "ev sales in europe 2022" and the first chart I saw was for sales in Q2 of 2022. Tesla was second, behind the Fiat 500. Right on the heels of those two were cars by Peugeot 208, Kia Niro, Skoda Enyaq Ford Kuga, Volkswagon ID.4, Renault ZOE and Mercedes GLC Class.

Based on what little reading I've done about EVs (mostly, just the headlines) and talking to people, it seems the word is out that Tesla isn't the EV to buy any more. Many more options, and most are reported to be better and/or cheaper than TSLA.