Livewire article - VG1 - Ouch!, page-24

Not only is there concentration risk, VG1 has a concentration in what I believe to be super pricey stocks. We as investors dont get a say in this risk and we are trapped at sub NTA. VG1 was meant to buy and hold stocks that continue to produce earnings not some fad stock.

Let's look at Pinterest for a second. I'm not saying it can't grow it is just that the level of concentration VG1 has in it represents a risk to the fund and goes against what the fund set out to do - don't lose money. i.e. it probably doesn't belong in the fund.

Pinterest trades on a trailing PE of 245 times and has never paid a dividend. The entire US market expects you to live off virtually no earnings and borrow against the stock going up to buy food to eat. The central bank's role in the development of the wealth effect has caused euphoria to extreme levels at a time when it wouldn't seem possible. It is absolute madness. Imports and consumerism in the country are at all-time highs but funded with debt. Private debt to GDP is at extreme levels. Yeah I see Pinterest as a medium where people can look for "stuff" to buy in the short term but this debt-funded party can't go on forever. If you ever remember owning a credit card when you first left home and your debt was double or more your income, it left you wondering how to make the next repayment. This is the new America for more than 70% of citizens. You can't maintain this level of ecstasy when you have borrowed your last dollar. Debts generally must be repaid. When you are all in, what are you supposed to do beyond that point? It cant be done. If the government continues to inject cash, it can keep the ball in the air but at the end of the day, all the paper money in the world cannot change what is justified by the necessary flow of dividends, earnings and making debt repayments. Pinterest earnings may have doubled in 3 years but the stock price climbed a nadir of 4 times. Yes, the number of app users of the platform have grown 4 times but this isn't how stocks should be priced. It is all about earnings not subscribers. You cannot eat subscribers(or maybe it will come to this) but rather you can only eat dividends. This sort of game isn't sustainable in the current macro climate. You look at the Pinterest chart (below) and note the wild swings in price which IMO is a clear sign of a bubble top. In all previous market crashes, you see the pricey stocks swing the most first. Even if this wasnt true, Pinterest certainly doesn't look like a healthy growth stock that VG1 should own. Where is the surety of the future stream of Pinterest dividends in this climate?

Sorry to rant but I don't like feeling trapped in VG1 with the current risk of a concentration of pricey stocks. VGI partners have a history of responding too slowly. I wake up at night in cold sweats with no confidence in what they are doing and I am trapped at sub NTA.