Member Info for fela96

Walp, I don't disagree with anything you said. Nevertheless, SMT has been a poor investment since the 90s. It is mere speculation whether that will turn around.

Walp, again I agree that SMT will probably outperform from here or some even lower point when the tide turns. Else I wouldn't be a holder. But I still think it's sad that it got to this point in the first place, where SMT underperforms a simple nasdaq index over any long-term period (even 30 years).

Sure, I know nasdaq isn't what SMT is aiming to beat. However, put it this way: SMT has high volatility (higher than nasdaq), so wouldn't you want to achieve higher returns there in return for putting up with the volatility, than you would expect in a simple tracker?

Anyway, I tend to agree with you that this probably marks a low point. On the other hand, if there's another low point in say 30 years (when I intend to sell this trust), it will be of little consolation.

Walp, I invested in SMT for two reasons:

- I like its style of investing (high growth)

- I think passive investing has gone too far, in the sense that too much capital is thrown at "the market", amplifying the decisions of a smaller and smaller share of active investors

In recent years though, I have come to the conclusion that passive investing, while boring, probably beats active for me as an individual, over the longer term.

I understand SMT investors being offended when I present these arguments because I share the cognitive dissonance that looking at those figures causes, being a holder of this trust myself. Believe me I really want trusts like this to beat a boring nasdaq tracker. I am just more and more doubtful that they ever will, especially given that now SMT loses to it over 1, 2, 5, 10 and 30 years. I'm sad about that.

Don't ask me - I was only replying to LLL's post which seems to imply that the recent drop can be explained by a combination of previous outperformance, as well as private company exposure.

If that's the case, then "private company exposure" is doing a lot of work here.

The outcome is that, at least over the period mentioned, SMT was crushed by a simple index despite its outperformance in 2020-21. If SMT's correction had been worse than the index, to the same extent that its rise was greater, then it would be on par with the index right now. But as it is, SMT is up only about 20% over the past five years, while the nasdaq is up more than 100%.

In the context of the above fact, the argument that "SMT rose a lot so you'd expect it to fall a lot" doesn't seem to hold much water. SMT's fall has hugely over compensated for its rise. In fact the outperformance that SMT did achieve in 2020-21 would only benefit somebody who traded it at the right moments. It would not have benefited anyone buying and holding any time during the boom (as you'd expect), but nor would it have benefited anyone buying years beforehand and holding through the boom either.

All SMT's boom demonstrates is that it has high volatility and low performance, at least in the past few years.

I guess the market was "right" under the assumption that interest rates would remain negative (in real terms).

Maybe the problem is that interest rates are now positive (in the US, anyway), so the "correct" valuation is lower (at least until rates go negative again).

The argument that I can't get my head around is that inflation is the driver here. Inflation has been close to killed in the US, the US stock market has recovered almost completely as a result. But SMT hasn't recovered at all.

Yep I tend to agree with your analysis here Senator, which is why I feel more and more uncomfortable holding SMT at a 20% discount.

Have any of you backtested this hypothesis and found it to be profitable?

Either it's profitable and there's literally free money to be made, or it isn't, and all of this is nonsense. Easily verifiable :-)

Do you think the efficient market hypothesis (or an approximation of it) doesn't apply here? If people are selling SMT irrationally then couldn't hedgies make a load of free money just by going long.

Alternatively, maybe there's a fundamental reason for the discount?

Idk.

Beachhouse, that seems like a rather silly method for two reasons:

1. A drawdown may recover and then dip again. When do you count the "true" recovery? For example the s&p 500 dipped from 2000-03, recovered by 2007, then dipped again in 2008 and recovered in like 2010 back to its 2000 level. So is 2007 or 2010 the recovery date?

2. Things should be measured compared to the other investments available at the time, as well as inflation and the risk free return, not in absolute terms. If a global tracker makes 30% and your fund made 10%, you wasted money. If a global tracker lost 30% and your fund lost 1%, you did well. It's all relative.

LLL, you seem to have a chip on your shoulder because I claimed SMT is currently failing on a 5 year basis. I was never being devil's advocate for anything, I hope you can make peace with that. I genuinely am curious why anyone would think UK inflation or interest rates are in the slightest bit relevant to SMT's performance.

LLL, are you being deliberately obtuse?

Ubik mentioned "inflation cooling slower than expected, rate rises" "this week". US hasn't had rate rises this week, inflation cooling hasn't been slower than expected in fact US inflation is now very close to the Fed's target. (Hence the recovery in their stock market?)

Clearly Ubik was referring to the UK data released this week and you know it, why pretend otherwise.

I'm wondering how you came to the conclusion that UK-specific inflation figures are relevant to SMT performance?

SMT's allocation to UK equities is trivial isn't it?

I suspect there's a lot of indiscriminate "private company bad" or "unprofitable bad" going on. The tide will turn, eventually.

"NASDAQ took about 16 years to recover from the dot com crash."

This is a little unfair. A DCA strategy would have recovered much sooner than that. Arguably putting all your retirement money into the NASDAQ during drawdown, would be a silly idea, so anyone in this kind of investment should be doing DCA.

LLL: If investment firms ask explicitly to be judged over 5 years [or more], then their value as investment firms should be apparent over any random 5 year period, otherwise they are moving the goalposts when it turns out that over the past 5 years they underperformed (and underperformed the Dow Jones at that, a tame index with low volatility). Fair enough if you want to turn a blind eye, but it seems like special pleading to say that by their own criteria, they aren't failing at this point.

In addition, to talk about 30 continuous years as "random" seems a little blasé to me. 30 years is an entire career in a lot of cases. It's a third of a long life. If I can't expect my active investments to outperform a passive index over this period of time, then what value does it present to me as a mortal human being? I can't afford to wait centuries and I can't pick which 30 years my prime was placed in.

Probably nasdaq tracker.

LLL, SMT underperforms nasdaq over 30 years too. Anyway, the reason I choose 5 years to judge is:

- Over longer time periods, management style can change so it's kind of hard to make a fair assessment

- 5 years is the typical figure given out by people advocating "time in the market" as the minimum investment horizon to hold stocks

- BG themselves ask to be judged over 5 years (!) https://www.theaic.co.uk/aic/news/citywire-news/baillie-gifford-us-growth-dont-judge-us-until-the-five-year-mark

Call me jaded or boring or whatever but my next investment will probably be a vanguard tracker.

And if you'd just kept the whole lot in the S&P tracker the whole time, would you be better or worse off?