Translation: get the oil before it’s too late. Unique official health claim. Limited edition and many months until the next harvest is available.
Jag fick nyligen följande mail från ArcticMed och insåg att riktigt bra fisk- och olivolja ofta är en bristvara på hösten:
Jag kom på att vi glömt att informera våra kunder om att vår fantastiska extra virgin olivolja finns i lager i begränsad upplaga sedan några månader tillbaka.
Sorry about that!
Jag vet att många har väntat länge på besked om att olivoljan finns tillgänglig igen.
Senaste skörden blev avsevärt mindre än tidigare år, vilket har medfört högre kostnader och färre antal flaskor. Kvaliteten är dock som vanligt något utöver det vanliga.
För dig som vill beställa vår olivolja rekommenderar vi att du gör det snart, då vi just nu endast har 150st 6-pack på lager och först till kvarn gäller. När de är slut får vi inte in något mer förrän ett antal månader efter nästa skörd.
What does a stock price represent? What is it? What decides its level, and its direction?
The simple answer is that, just as on a square market for apples, the price is determined by a negotiation between a buyer and a seller, not by value, nor by surprises, but by a confluence of hidden variables.
The seller of a stock is happy to part with it at a certain price, since they have an alternative and “better” use for the money, given they are paid enough for their shares. Maybe they want the money for “personal reasons”, maybe for buying another stock they like more at the prevailing prices, maybe they are going to park the money on a bank account, hoping for better opportunities later. Maybe they have made an analysis pertaining to that particular stock and consider it too “expensive” from some kind of absolute perspective, whatever that might mean.
The buyer simply has idle cash available that they could keep as is, or buy any stock or asset they like, but they have zeroed in on this particular stock for some reason. They simply had an impulse. Maybe they read a news article. Maybe the company just published a strong earnings report that triggered their interest. Maybe their neighbor or Uber driver said something that piqued their interest. In any case, they logged onto their Robinhood account and placed a bid for the shares at what they considered a “fair” price, however that assessment is made.
Most people, including fund managers, trend followers and certain kinds of algorithmically governed funds, don’t make a thorough theoretically based valuation of a stock before buying or selling it (nor perform a rigorous technical analysis of price patterns either). Most just buy and sell based on emotions, on perceptions of price trends, and the narrative around a company. Most actually couldn’t care less how a company actually creates value and makes money; they buy a story, a narrative. The story is part about the company, part about the stock price itself. “Is AI hot right now? Is Nvidia the place to be? Is the stock moving upward? Is the price trend just starting, is it stable, is it reliable?”. Mostly the story is about themselves and their neighbours; they feel a fear of missing out.
In fact, the correct way to evaluate a project or a stock is so long-term and theoretical as to render it mostly useless: Over very long periods of time, the value a company creates is the sum of its profits or cash flow. If the net winnings from paying for inputs and collecting sales proceeds over the total lifetime of the company is $100, then that’s the total value of the company, $100, minus deductions for the time cost of money. If you get that net $100 in just 1 year, it’s much more valuable than if it takes 100 years.
Hence, most use various shortcuts instead when investing in equities, such as identifying short-term stock price trends (applying Technical Analysis methods) or using valuation multiples (multiples of one year’s profits or revenues, as an estimate of the sum total value of a stream of 10-20-50-100 years of profits). What these investors are really doing is akin to observing the town square fruit negotiations, and making more or less well informed guesses on the next price for an apple, a pear, an orange, potatoes etc. “Who cares what an apple is really worth? What’s important is if I can sell it at a higher price to somebody else, and then repeat the trick with another fruit”
In the short term, up to a decade (!) or so, the market is a guessing machine, a beauty contest, a trend guessing system, in effect a flock of blind sheep leading each other back and forth across the landscape. In the short-term there are always just as much buying force as selling force on the market. The buyers are convinced in their narrative of brighter times ahead, of a rising stock price, due to a for them profitable combination of future profits and future valuation multiples. But the sellers are equally convinced that there are better alternatives, that the future does not promise a better combination of Earnings and P/E-ratios than today, or at the very least that other stocks are more promising in those respects.
In the long-term, however, the market is a weighing machine. The prices are pulled toward a centre point, where the price paid for a stock relates to the company’s earnings in such a way that the buyer on average gets a 10% return per year. For the total stock market that equates to around a P/E-ratio of 15 for next year’s earnings after tax, or a Price/Sales ratio of 1. That’s how it’s been for the last century. The market has always sooner or later gravitated to a level where the coming twenty years provided a return of 10% per year.
The valuation swings have been pretty big though, sometimes the valuation fell to such depths that the coming decade provided 20% returns per year (compound average: CAGR), sometimes euphoria pulled valuations so unwarrantedly high that the coming decade provided zero or even negative annual returns.
But a bad decade was typically followed by a good one, so on average over just about any 20-year period the last 100 years, the return was 10% per annum. When one paid 1x revenues or 15x next year’s earnings after tax for the stock market, one got approximately 10% annual returns over the ensuing 10 years. Please note that Price/Sales is the more reliable of the two valuation gauges. It’s much more stable than P/E and holds a much higher predictive value for future returns. Pleas also note that, an average is an average due to recurring periods below the average as well as above.
The “1x sales leads to 10% annual returns, and the market always finds its way back there or lower” heuristic is good to keep in mind. It means that unless human psychology or the functioning of the economy shift materially and permanently, we have an absolute valuation anchor, a time-tested market wisdom of what is a “fair” price for an asset. It’s 15x earnings for the average company, growing at an average pace, with average profitability. Or, rather, it’s 1x sales (a more robust and useful measure) for a company with market-average characteristics, not least its profit margin.
What’s fair unfortunately doesn’t help us that much in the short term, especially not regarding individual stocks. But it helps in determining whether the general market on average will constitute a kind of headwind or tailwind over the coming decade. When the market on average is priced below or around fair value and is in an uptrend, all stocks get a tidal lift upward. Any stock story gets the benefit of doubt. Such long, predictable, and reliable, tidal waves begin from low market valuations, at or below P/S=1. Right now, in July 2023, we’re at about 2.5 times that level. That’s higher than right before the two major downturns over the last century, that started in 1929 and 2000 respectively, and only surpassed by the stimulus-induced bubble of December 2021.
Anyway, let’s get back to the main message of this article, that stock prices at any point in time are governed by the negotiation between a buyer and a seller, two entities who came to diametrically different conclusions about the attractiveness of a share. They have access to basically the same information about the company’s operations, profits, reputation, brand, management, stock price trend, valuation metrics, narrative, competition, about the general market, about investment alternatives, including other stocks, bonds, cash, gold, education, real estate etc. And yet, the same number of shares are sold as are bought at any point in time.
So, what does actually govern prices, if all that information makes for just as eager buyers as sellers anyway?
Make no mistake, the market is not right; one side is the right one and the other one is making an error. One side is collecting and cross-referencing the available information better than the other. They might base their decision on technical analysis of short-term price trends, or of whether the company is fairly valued or not and are ready to stick around until the rest of the market realizes the same thing. The right side knows more about history and the lessons it holds for investors. The right side is better at assessing risks and opportunities, in discerning trends in fundamentals, prices and narratives. The right side has a strategy, a method, is competent, agile and patient.
Some are of course just lucky in choosing the right side, while some are skilled at noticing trends and understanding value creation. In The Investing Course, I explain my framework for combining company based fundamentals with trends and narratives, as well as portfolio management and risk management methodologies for optimizing risk-adjusted returns and controlling the absolute downside risk. In short, I help extract and guide the skilled and intuitive investor residing in all of us, but is temporarily distracted by the confused noise in the media and among amateur investors.
A common question is whether a stock price moves upward or downward based on the level of some piece of news, or of the deviation from expectations, i.e., the “surprise”. I think the answer is neither, at least not in a useful sense of the words. An individual investor doesn’t rush to buy or sell stocks based on the surprise. The person, fund manager, and algorithm buy based on emotions, instincts, pre-programmed criteria, based on stock screens suddenly identifying something as “cheap” or “with a positive price trend” etc. A positive earnings surprise or other news measured against some kind of “consensus” doesn’t automatically make short-sellers cover or holders of liquidity decide to buy new shares (from just as many sellers). That’s a way too simplistic view of how reflexive, herd-psychology driven market places work. An apple at the town square, or a share of Apple on the stock market, is bought and sold at a certain price based on a myriad of more or less opaque reasons and reasoning.
Sometimes a strong earnings report coincides with a large short seller pulling the trigger after a prolongued research period, resulting in a lower stock price for the day. Sometimes a negative surprise and initial price drop lures bargain hunters that create a positive momentum leading to a higher final share price for the day. Sometimes absolute earnings levels eventually make a value investor push the buy or sell button.
The market is a complex place, with millions av participants, some value-oriented, some more primarily governed by price trends or incremental information surprises. Their interactions with each other, and affected by micro and macro news are as complex as the human brain. More so actually, since there are a million brains involved in the final price point.
In the short-term, the market is frustratingly fickle and unpredictable, and the trend really is your friend, guiding and governing stock prices. The trend is always governing human relations, we always subconsciously find comfort in the group, the tribe, whether its our choice of education, clothes, music, work or investments. But the trend is only our friend until it turns. And turn it does sooner or later, because over 10+ years, the trend can’t hold a candle to the wind of the gale of valuations.
Eventually valuations will pull market prices toward a level consistent with a fair compensation for time and uncertainty. That compensation is as we know 10% per year, and the valuation level is a Price to Sales ratio of 1. Lest we go looking elsewhere – not in the moment but on average over the following years.
Over six weeks in The Finance Course, I guide the TIC members through techniques for making forecasts of fundamentals, valuations and stock prices. The first five weeks deal with valuation, screening for new ideas, company research and forecasting, investing and timing with technical analysis and macroeconomic considerations, and portfolio and risk management. Week six is dedicated to a case study from A to Z, using free online tools for identifying, researching and investing in a specific stock.
Valuation and trend following are more art than science, but as with any art you can be more or less skilled. When it comes to investments all too many jump into the deep end of the pool risking their hard earned money with zero preparation or knowledge, wasting hundreds or thousands of dollars, or more, on simple and common mistakes that could easily have been avoided with just a little education. I can’t promise immediate and stellar returns, just as a tennis teach can’t promise immediate tournament victories. But I can show you the methodologies, techniques and tools to commence your journey from beginner/intermediate investor to good or even expert/professional.
The art lies in constant adaptation and improvement, in applying both time-tested fundamental valuation anchors embedded in market wisdom absolute multiples, and insights into herd psychology and short term trend analysis. Narratives are fundamentals too.
In the short term, “surprises” to some extent govern price direction, but in the long term it’s valuation levels that decide where the market goes. The smart investor knows when to rely more or less on either factor.
Join the waiting list for The Investing Course here, if you want to know more about my investment framework that I’ve used as a hedge fund manager since the year 2000. The first (temporarily discounted) installment of TIC will start soon. Let’s just hope not too many join us, since if all market participants were rational fundamentals-based investors the investment opportunities wouldn’t be as many or as large in the future.
Comment from a reader of my newsletter where these thoughts about the financial markets were first published:
Yes, you’re right:
…the stock market is a mix not only of wrong and right individuals, but a mix of different time frames, therefore both the winner and the loser can be right in many cases
…bubble is a shortening of the investing time frame
It’s only from the point of view of whether the market is assigning a price that reflects the underlying cash flow generation potential of the listed companies that there is a right or wrong. You can of course rightly speculate in the short term direction no matter if the price is higher than the valueor the price is lower than the value.
It’s just that I’m so laser focused on the actual value being the sum of cash flows that a long term holder will get, that I forget that value can be for example “likelihood of short term direction in my favor“
However, I still maintain that when the market is pricing future cash flows of $100 at for example $200, then the market is wrong. The buyers and sellers may both be right in their different endeavours, but the market as a mechanism for estimating the value of the company’s cash flow generation is wrong. And any buyer desiring access to that value is also wrong if the value is lower than the market price. And even a speculator buying in the hope of bigger fools further down the road is facing a headwind that grows stronger with time as the actual cash flows become public.
Also, I think that an investor can’t have a short time frame. The sum of all future cash flows = value of the company, by definition plays out over very long time frames. Hoping for a bigger fool taking your shares for a higher price in the short term simply can’t be regarded as investing, only as speculation (no matter how well grounded in likely bigger-fool-price-patterns, aka momentum or trend, or other TA).
We do discuss the philosophical underpinnings of valuations in The Investing Course, and of right or wrong prices, but the absolute main focus is always on practical methodologies for finding, analyzing, and investing in publicly listed stocks, as well as subsequent evaluation of the investments and the resulting implications for one’s investment strategy and execution.
This is just a short update on my health progress and current supplement usage.
I’ve used Arctic Med’s fish oil since 2006 (under a different name in the beginning). Before taking 10 ml a day (two teaspoons or a small tablespoon) I regularly got a cold 3-4 times per year, as well as several short bouts of a sore throat. Since then I’ve only had one real spell of falling ill in 17 years (!). That was when I caught Covid-19 in early March 2020.
Before 2006 I was slowly getting weaker (lower bench press maximum), and took longer to recover from exercise, so I had to gradually cut back from 5 to 2 sessions of strength training per week. After 2006 and the beginning of my daily ArcticMed regime (I was 34 at the time), I slowly increased my number of workouts back to 4-5 per week, and my bench press maximum skyrocketed from around 110kg to 150kg (about when I turned 40). Being old turned out to be just a number, the number of spoons of fish oil consumed!
ArcticMed referral link (10% discount on your first purchase of fish oil and the super special antioxidant rich olive oil used to protect the fish oil), or use this coupon code: PDJHBOA15V.
Today I’m 51 and the last four years I’ve exercised at least 6 days per week (actually closer to 345 days per year, so practically every day). My routine is to wake up without an alarm, meditate for a few minutes, then head to the outdoor gym for my daily 300 bodyweight strength training repetitions. Yes, I train outdoors no matter if it’s +30 degrees or -15 degrees. I do chin-ups, inverted muscle-ups, bar dips, ring-dips hanging leg raises, air squats, walking lounges etc.
I simply make sure I get a full body workout of a total of 300 BW repetitions every morning. Followed by a cold shower,as cold as possible, for about a minute. Back in the old (young) days I would most certainly have fallen ill, overtrained, got hurt, become weaker and so on. But now age doesn’t seem to matter.
I’m sure I’ll start losing ground sooner or later, but as of now, I keep progressing instead, hoping to soon add muscle-ups to my repertoire for the first time in my life. New strength and agility records thus awaits in life’s second half. I ascribe that to my daily fish oil intake.
Please notehowever that I’m not a medical doctor, nutritionist, PT or any such thing. I can only refer you to ArcticMed’s own research, and I take no responsibility for any medical claims myself. My only credentials are my six-pack and athleticism (as an office worker at close to 52 years of age) as sometimes seen on my Instagram account.
Apart from my daily fish oil, I eat a lot of chili, cacao, turmeric, garlic, kale, spinach, beans and black pepper, not to mention salmon, tofu, vegetarian soy products and quite limited amounts of land living animals and birds. I also take Vitamin-D capsules during winter since I live in Sweden, plus occasionally creatine (especially after learning on Huberman Lab that it’s really effective for headaches and head trauma). I also fast 16 hours a day since around 2013-2014 (temporarily 18h/day for a while this summer; between 20:30-14:30 every day).
I don’t hesitate recommending to everyone I can to drink a bit of fresh fish oil from ArcticMed everyday, and replace one’s old olive oil with AM’s super oil (check out the specifics on the AM website). I might be a case of one, an outlier. And I do sleep well and generally take care of myself, but I did that before 2006 too. Actually the way the fish oil effect was originally discovered was through Norwegians becoming much healthier in years when they had to eat a lot of salmon rather than meat. In later years Norwegian athletes (soccer players) increased their exercise frequency and reduced their recovery time after starting with AM’s fish oil.
Again, I’m not an MD, so form your own opinion, perhaps by taking the AM fatty acid blood test, and then trying the fish oil for 3 months before updating the fatty acid test!