Value Investing with Sven Carlin, Ph.D.|06. Aug.
Everything Will Crash in The Next Crash! Even BRK or Value ETFs
Main Thesis
- Sven argues that in the next crash everything will crash – including value ETFs and Berkshire Hathaway (BRK).
- Holding cash is an option but carries inflation risk.
- Example: Vanguard Value ETF lost 56% from 2007 to 2009 (more than the overall market).
- Current valuations of many holdings (e.g., Walmart, Caterpillar) have P/E ratios of 40 – no longer 'value'.
- Structural issues with ETFs: they automatically buy more of the most expensive stocks – not true value protection.
- 10-year return only about 6% – stagnating.
- Intrinsic value calculation: Net income $45B, of which $15B from cash (4% yield) → operating businesses only generate $30B.
- In a downturn, operating earnings drop to $20B; with cash, BRK could buy cheap assets, but current market cap of $1T is overvalued.
- Few share buybacks – a sign that BRK itself is expensive.
- These will also fall harder than US markets.
- They become cheap only at dividend yields of 10% or P/E below 5 – not currently the case.
- Cash makes sense if you need capital preservation (e.g., for short-term expenses).
- Hedging with options: Sven recommends paying 5% annually for a put on the S&P 500 – with 15% market rise, you keep 10% return with maximum safety.
- Important: Know your own situation (risk tolerance, goals) – don't blindly trust 'value'.
- The next crash will hit value ETFs and BRK hard.
- Those seeking safety should hold cash or hedge with options.
- Sven's research platform supposedly offers a '21-day money-back guarantee'.
