All about Investments!

[Iskaral Pust]

16 hours ago, DireWolfSpirit said:

Regarding those bonds-

You may have heard of the inverted yield curve, how its a harbinger of economic downturn and so forth.

The entire treasury market is currently upside down with short term yields higher than the long term yields.

Check it out, this is twisted- 1yr and 2yr with a higher yield than the 30yr long bond!

TICKER	COMPANY	YIELD	CHANGE	%CHANGE
US3M	U.S. 3 Month Treasury	2.563	0.005	0
US1Y	U.S. 1 Year Treasury	3.255	0.002	0
US2Y	U.S. 2 Year Treasury	3.25	0.021	0
US5Y	U.S. 5 Year Treasury	2.965	-0.023	0
US10Y	U.S. 10 Year Treasury	2.842	-0.046	0
US30Y	U.S. 30 Year Treasury	3.114	-0.045

There’s also a well-known joke that the inverted yield curve has predicted 11 of the last 7 recessions.

FWIW the current level of inversion is very mild but there is very likely a recession ahead because central banks in most of the developed world need to tame inflation, and therefore they need to slow demand/spending even during a hot labor market.  It’s very unlikely they can cool this much inflation without tipping into recession.  But they may attempt that soft landing by tightening a bit, then pausing to see the lagged effects, and then repeat.  (Unfortunately similar to the 1970s)

The picture varies across different countries. Europe faces even more energy inflation and supply limitation (and Britain has Brexit too) so stagflation-ish is quite likely there.  US was the epicenter of inflation (before Russia-Ukraine) because it had the most fiscal over-stimulus during COVID.  Canada and Australia are in similar situations.  But Japan and China didn’t stimulate as much and their COVID response slowed economic activity, so they don’t need tightening by their central banks — that’s why the yen has plummeted relative to the dollar as the interest rate differential has grown this year.

[kiko]

On 8/13/2022 at 2:04 PM, Wade1865 said:

If capitalism is where I have two cows, but sell one and buy a bull;

and socialism is where I have two cows, but give one to my neighbor;

and communism is where I have two cows, but give both to the government, and receive milk in exchange;

While I do think 2 and 3 can be discussed, I always thought that 1 should be formulated differently.

Maybe: Capitalism is where you have two cows but are forced to sell one to feed the other but after that one died next season you find employment at a multinational that owns all the grazing land.

 

[Wade1865]

2 hours ago, kiko said:

While I do think 2 and 3 can be discussed, I always thought that 1 should be formulated differently.

Maybe: Capitalism is where you have two cows but are forced to sell one to feed the other but after that one died next season you find employment at a multinational that owns all the grazing land.

 

kiko -- that’s a good illustration on a risk inherent in capitalism. Only some people have the capacity to thrive as a capitalist — myself, for example. Others can only survive within the system, albeit subjected to greater exploitation. Likewise, not all people have the capacity to thrive under socialism and communism, and can, at best, survive in them.

The question I want you to answer is, what system — using the three examples above as a model — would minimize wealth inequality while maximizing the health of the planet. Note, there might not be an alternative example.

Edited August 15, 2022 by Wade1865

[kiko]

So if I look strictly at your model then it is clearly the last option. Assuming a benevolent and able government, it is the only one providing goods in equal measures to everyone, regardless on where they have started. It is also the only one that allows for a not self-serving distribution of resources.

The first one is only good if you already started with the means of production and a good education as well as economic literacy. By accident it can improve the health of the planet as you call it. E.g it adds value to one economic centre with a lack of bulls at the same time as to the one with a lack of cows.

The second one is not feasible long term, it will obviously diminish all existing wealth for no apparent reason. But maybe it could serve as a stop gap to address local imbalances.

You might balk at my favouring of option 3 because the assumption of a benevolent and skilled higher Form of organization - here called government. But at the same time we would also have to assume that the successful entrepreneurs are benevolent. Both are not so often monitored in the wild.

Personally I don't really like this cow example. It is always defined from the view of someone who is already comparatively well off. From a completely selfish point of view, there is only one path leading to immediate accumulation of wealth. It somewhat ignores the global status (not everyone has two cows and milk) at the begin and the one at the end ( everyone may or may not have a cow and/ or access to milk)

[Wade1865]

15 minutes ago, kiko said:

So if I look strictly at your model then it is clearly the last option. Assuming a benevolent and able government, it is the only one providing goods in equal measures to everyone, regardless on where they have started. It is also the only one that allows for a not self-serving distribution of resources.

The first one is only good if you already started with the means of production and a good education as well as economic literacy. By accident it can improve the health of the planet as you call it. E.g it adds value to one economic centre with a lack of bulls at the same time as to the one with a lack of cows.

The second one is not feasible long term, it will obviously diminish all existing wealth for no apparent reason. But maybe it could serve as a stop gap to address local imbalances.

You might balk at my favouring of option 3 because the assumption of a benevolent and skilled higher Form of organization - here called government. But at the same time we would also have to assume that the successful entrepreneurs are benevolent. Both are not so often monitored in the wild.

Personally I don't really like this cow example. It is always defined from the view of someone who is already comparatively well off. From a completely selfish point of view, there is only one path leading to immediate accumulation of wealth. It somewhat ignores the global status (not everyone has two cows and milk) at the begin and the one at the end ( everyone may or may not have a cow and/ or access to milk)

kiko — appreciate you humoring me on using the two cows model, and the substantive post was helpful. Although oversimplified and idealized for all systems, it’s an adequate point of reference for a noob like me learning about basic economics.

My key takeaway from you emphasizes how capitalism is not a system comprising of capitalists (which surprised me, to great effect). Instead, I now actively acknowledge only a few can thrive, while most can only survive; and, most likely at the cost of the planet. My own words indicated this, amusingly, but I didn’t realize it until seeing your words.

I previously gained a lot of insight from communist thinking, and believe it or not it informed me on how to practice warfare effectively as a counterinsurgent, but what I want to do now is internalize it (and what you articulated here) into my understanding of economics.

I love capitalism, but I also respect communism. Seems paradoxical, which attracts me to both, I suppose. I’m not looking to debate, have no arguments against your position, and balk at none of it.

[Rippounet]

On 8/13/2022 at 2:04 PM, Wade1865 said:

What I'd like to know is, what market system minimizes wealth inequality and is compatible with the health of the earth.

It's an odd question. No "market system," in itself will minimize wealth inequality or preserve the health of the Earth (that's just not what markets do). OTOH, a near infinity of political structures that will do that are perfectly compatible with markets, from most utopian (like Bookchin's communalism) to very real (Nixon's United States, hilariously enough, came very close to doing just that - though of course, the environmental crisis was considerably less serious in the 1970s).

[Wade1865]

ENERGY -- PERTROLEUM

Energy use, they said, was supposed to have seen a revolutionary change. Uncle Joe, in particular, was determined to (prematurely) move the country toward renewables at the expense of petroleum, though I still don't know why he'd undermine the source of US global dominace! And. then. there. was. war -- who would have thought, the most fundamental human endeavor, wouldn't have returned and impacted energy throughout the world. Consequently, I can imagine the hardships Europe will face this winter.

For as long as I can remember, social and political guidance conveyed to me was to avoid investing in oil companies, even though I had a nationalist affinity for it, and other things (primarily autos). Although oil seems to have been crushed in 2007 (great financial crisis), 2018 (not sure why) and 2020 (COVID), focusing on oil (BP, moderately at 8-10% gains; and XOM, overwhelmingly at 58%) proved to be benefical.

Yet, now I hold risk, and despite my positive feelings toward petroleum and it's current value, I think it's clear there's mostly room to fall (once we get through the war in Ukraine, the threat in Chaiwan, and the next European winter). The question I ask myself, then, is what timeframe would be ideal to unload. Any personal or industry opinions on timeframe for unloading?

[Wade1865]

34 minutes ago, Rippounet said:

It's an odd question. No "market system," in itself will minimize wealth inequality or preserve the health of the Earth (that's just not what markets do). OTOH, a near infinity of political structures that will do that are perfectly compatible with markets, from most utopian (like Bookchin's communalism) to very real (Nixon's United States, hilariously enough, came very close to doing just that - though of course, the environmental crisis was considerably less serious in the 1970s).

Rippounet -- very helpful, thanks (again)! Market systems weren't as clear as I thought they were, especially related your nuance. Your posts and kiko's will be great reference points when I do a dedicated study of economics. And it'll be interesting to discover what aspects of US political structures (if not he market system itself) will influence wealth inequality and the environment.

[kiko]

8 hours ago, Wade1865 said:

Any personal or industry opinions on timeframe for unloading?

Just my personal thoughts on it and why I decided against investment in oil&gas

Oil will be a stranded asset sooner or later. Timeframe completely unknown to me.

I did some projects with TotalEnergy and know that they do think of the future economic environment and their place in it. And they have the power and means to pivot to different commodities. In the end big oil could probably buy out every startup on the market. The key is finding the oil company that invests in the future and not in the one that is doing more of the same. That may come with less dividend though. Perhaps a state owned, like Total. They may feel more pressure to invest in clean energy than their completely private owned competitors. But then everyone recommended Gasprom and where would I be now if I had listened. It's bad enough that I have a indirect position in Wintershall with their stranded assets in Russia and the Baltic sea.

I understand that you are in a stage where you want to conserve your assets and live from their passive income, right? I would really worry where I am with oil& gas in 20 years. The only way that I would invest in oil is via Berkshire. Buffet has tons of oil companies and I would expect him or his predecessor to figure out when to dump them. No dividends for you though.

[Wade1865]

1 hour ago, kiko said:

Just my personal thoughts on it and why I decided against investment in oil&gas

Oil will be a stranded asset sooner or later. Timeframe completely unknown to me.

I did some projects with TotalEnergy and know that they do think of the future economic environment and their place in it. And they have the power and means to pivot to different commodities. In the end big oil could probably buy out every startup on the market. The key is finding the oil company that invests in the future and not in the one that is doing more of the same. That may come with less dividend though. Perhaps a state owned, like Total. They may feel more pressure to invest in clean energy than their completely private owned competitors. But then everyone recommended Gasprom and where would I be now if I had listened. It's bad enough that I have a indirect position in Wintershall with their stranded assets in Russia and the Baltic sea.

I understand that you are in a stage where you want to conserve your assets and live from their passive income, right? I would really worry where I am with oil& gas in 20 years. The only way that I would invest in oil is via Berkshire. Buffet has tons of oil companies and I would expect him or his predecessor to figure out when to dump them. No dividends for you though.

kiko -- that was unexpected (as a counter position), thank you! Never heard the term "stranded" in this context, but I can admit with confidence oil will become increasingly marginalized as time goes on. In fact, stranded defines exactly the risk I felt I was holding. Previously, my internalized guidance on holding oil & gas included nationalism, winter and war in Europe, as well as the clarified intentions of the PRC towards Chaiwan.

I had this same discussion a year ago with a colleague (very smart man, combat arms Soldier turned strategic planner, knows global energy better than I ever will) who highlighted the same core point you did. His informed opinion was big oil (e.g. Total, XOM, et al), if wise, could and would pivot into other energy commodities. He was suggesting I moderate my sole focus on oil & gas. Given your shared outlook, I agree it's a solid consideration and will add that to my previous guidance.

I understand what you said is not advice; all risk is mine when I reallocate to exploit a post-winter peak (as I anticipate, albeit uncertainly), though I'll cycle back and forth over the next two decades as events reveal themselves. And you're correct, in this phase of my life (third quarter) I'm no longer interested in earned incomes; I intend to continue liquidating all real estate incomes and move entirely into passive income sources (stocks, bonds).

Great discussion, very thoughtful, value-added!

By the way, I just realized your location -- I lived in Ansbach for a year or two, and loved the country and people. Drank a lot of Paulaner and Schwip Schwap. The German airmen we partnered with in Poland and Mazar-i-Sharif were amazing. Don't freeze to death this winter!

[Wade1865]

Do we have any knowledgeable locals on this board, or those familiar, with Ukrainian real estate? Kiev (or Odessa), city-center (or seaside) property. Hmm?

Slava Ukraini, by the way 

Edited August 29, 2022 by Wade1865

[Jeor]

Australian investor here; my wife and I are fortunate to be in a good financial position with surplus money for investing. While we were both working and without kids, we built up some investments (friendly competition - she has a property investment, while I've invested in equities). But now with two young children and only one of us working we're treading water financially, which we're comfortable with given the good start we had. 

We were both incredibly lucky to hold onto good-paying stable jobs with regular promotions during the GFC (2008-10), which allowed us to get into the property market and share market when both were at major historic lows. I know they say it's about "time in" the market more than "timing" the market, but for us that period was crucial for giving us a major boost early on. Others were not so fortunate as I had friends who lost jobs or had trouble progressing in their careers. But we got lucky. Now in Australia, Sydney in particular, housing affordability is atrocious.

My wife believes in property investing; find a good agent, ride them hard, get good tenants, and then it's "set and forget" as rental income falls into your lap and the balance on the loan gets reduced over time. In Australia, there are also tax benefits as you can deduct the interest and maintenance costs from your income. Over time there is a good expectation of capital appreciation as well.

I prefer the share market because I prefer the academic research on stocks (I have a maths/statistics PhD) as opposed to dealing with real-world problems with agents/tenants/maintenance issues. With kids, I haven't added any funds to my portfolio over the past few years so it's a closed system - if I want to buy some new shares I need to sell others, and I maintain some cash allocation. Gives added incentive to grow the portfolio organically. Currently its total value is around 150K.

I have a one-pager of investment rules that I strictly follow (e.g. only investing in large-cap stocks, has to tick various fundamental analysis benchmarks, trailing stop-losses of 15% and picking entry/exit points on statistical trendlines). My portfolio is a mixture of individual Australian stocks and international ETFs. No crypto or alternative assets, no options/derivatives. I measure myself against the ASX200 and so far have beat the market for each of the past three years since I started taking proper records (though in 2020 I almost missed out on the COVID rally and only narrowly beat the ASX200 due to a late plunge into some energy stocks that saved my bacon!).

Currently my portfolio is quite defensive, with a high cash allocation (30%) waitng to be deployed and otherwise largely defensive stocks - telco, energy, financial and some materials (which is a large component of the ASX). No consumer discretionary or tech currently. Some Vanguard ETFs too.

[BigFatCoward]

Smug people losing money on crypto/nft's will never not be funny. Especially youtube personalities.

Normal members of the public who got caught up, I feel dreadfully sorry for. 

[Jeor]

25 minutes ago, BigFatCoward said:

Smug people losing money on crypto/nft's will never not be funny. Especially youtube personalities.

Normal members of the public who got caught up, I feel dreadfully sorry for. 

Personally I think crypto is a massive Wild West. If you're into it, good luck to you. But I'm not particularly sympathetic to people who lose money to hacks or Ponzi schemes and then call on the government to compensate them or complain that the environment is unfair or untrustworthy. I thought the whole point of crypto was that it was a deregulated environment free from government control, so you have to take the bad with the good. Hgh risk, high return and all that. There's a reason that "boring" bank accounts and mainstream investments have lower returns, but are safer and compliant with all sorts of regulations.

Edited August 29, 2022 by Jeor

[Wade1865]

45 minutes ago, BigFatCoward said:

Normal members of the public who got caught up, I feel dreadfully sorry for. 

BigFatCoward -- I sympathize with the private investor as well, genuinely. I felt there was merit (but not for me) in cryptocurrencies. And I wouldn't be surprised if it rebounds in the future, though I wouldn't bet money on it... NFTs, on the other hand, were so often advertised (by way of exclusivity, or in an arcane way, by Twitter influencers; e.g., Wall Street Playboys) by the crypto community when Bitcoin, et al., skyrocketed; in order to lend legitimacy, and exploit the uninformed mass who jumped in late. As reckless as I was, I'd never go beyond stocks, bonds, real estate.

21 minutes ago, Jeor said:

Personally I think crypto is a massive Wild West.

Jeor -- that's the best description I've seen on cryptos. Room for profit, yes, if you've got the right touch.

[Wade1865]

1 hour ago, Jeor said:

We were both incredibly lucky...

Jeor -- impressive breakdown, thank you for sharing. I found it valuable and thought-provoking while recalling my own experiences. And I suspect it could provide greater value to young people (in their future, should they recognize it) given how cyclic both stock and real estate markets are in the West.

Likewise, it was a high-paying, stable profession that allowed me an adequate accumulation of money, which I then depolyed shortly after the GFC; and subsequently, the US subprime mortgage crisis. It was during these times when I acquired a taste for (what was then perceived to have been) reckless risk, which I have maintained to this day. In hindsight, of course, it was the height of prudence (...not luck).

The majority of people I knew, including family and friends, lost jobs then homes; and collegues, lost value as their stock holdings collapsed. The rest hesitated and failed to exploit both events. If they'd been able to hold (or add to) their holdings, they'd have seen not only a recovery but substantial increases in value / profit.

I've already spelled out my timeline, so I'll expand by illustrating (by way of ratios) how my stock holdings look now; T is down 6%; XOM, up 72%; KHC, up 6%; and WBD (a T spinoff I kept out of curiosity), down 54%. If it weren't for big oil and the war in Ukraine, I might be toward the bottom, or even underwater.

We diverge on investment methods, which I find to be an incredibly interesting comparative case study, for anyone interested. My criteria is based on feeling and intuition, informed by geopolitics and socially-based traffic (i.e. direct interaction and social media). I use no boundaries (stop-loss, etc.) and pay only passive attention to daily changes. Reckless, I'm sure, but applied the same way I operated downrange, with equally beneficial gains. Warfighting ... moneymaking ... both are nothing more than (very, very serious) games, to me.

***

THIS IS NOT ADVICE -- DON'T BE RECKLESS

HAHAHA

[Jeor]

1 hour ago, Wade1865 said:

We diverge on investment methods, which I find to be an incredibly interesting comparative case study, for anyone interested. My criteria is based on feeling and intuition, informed by geopolitics and socially-based traffic (i.e. direct interaction and social media). I use no boundaries (stop-loss, etc.) and pay only passive attention to daily changes. Reckless, I'm sure, but applied the same way I operated downrange, with equally beneficial gains. Warfighting ... moneymaking ... both are nothing more than (very, very serious) games, to me.

***

THIS IS NOT ADVICE -- DON'T BE RECKLESS

HAHAHA

There's more than one way to skin a cat. My personal belief is that most investing methods work, so long as they're based on a general correct theory and the investor follows them consistently. So if you're a more macro investor, or if I'm more quantitative, both ways can work and they probably work better than either of us trying each other's, because we're more comfortable and knowledgeable following our own systems. No system has a 100% success rate but if you're consistent and get more than half your decisions right then things should take care of themselves.

[Alarich II]

10 hours ago, Jeor said:

My personal belief is that most investing methods work, so long as they're based on a general correct theory and the investor follows them consistently. So if you're a more macro investor, or if I'm more quantitative, both ways can work and they probably work better than either of us trying each other's, because we're more comfortable and knowledgeable following our own systems. No system has a 100% success rate but if you're consistent and get more than half your decisions right then things should take care of themselves.

The thing is - and most market studies show this - that individuals very rarely "beat" the market and that includes most professional, active fund managers. Which is why I am highly sceptical of actively managed funds, stock-picking strategies or cluster strategies (like niche-ETFs). Either they are bascially index-hugging strategies or they are taking disproportional risks to beat a much more diversified market index, which is a bad risk/return ratio.

[Heartofice]

15 hours ago, BigFatCoward said:

Smug people losing money on crypto/nft's will never not be funny. Especially youtube personalities.

Normal members of the public who got caught up, I feel dreadfully sorry for. 

I just watched a Coffeezilla video where it turns out that Jordan Belfort, of Wolf of Wall Street fame is making his name now as an investment guru!! He appears to have done a 180, going from saying that Crypto is a scam to saying that you need to invest in crypto.. and do it now!

I think that if someone like that can survive as a crypto investment guru then that tells you all you need to know about what the crypto market is like. 

[Wade1865]

3 hours ago, Heartofice said:

I just watched a Coffeezilla video where it turns out that Jordan Belfort, of Wolf of Wall Street fame is making his name now as an investment guru!! He appears to have done a 180, going from saying that Crypto is a scam to saying that you need to invest in crypto.. and do it now!

I think that if someone like that can survive as a crypto investment guru then that tells you all you need to know about what the crypto market is like. 

Heartofice -- what's interesting to me is that by now most people should realize the intense volatility of crypto. I won't claim he's not trying to tap or exploit a fresh batch of inexperienced investors, but it also tells me he might genuinely thinks there's now room to profit off the Bitcoin collapse.