All about Investments!

[mcbigski]

On 11/10/2022 at 10:52 AM, Paxter said:

For once, we got it right with unbacked crypto, as essentially no systemic financial institutions have meaningful exposures.

I think the biggest reason I've stayed out of crypto is that it's eliminating the middle man.  The middle man in this case controls nation states, interest rates, and ICBMs.  One should expect that centralized power is not going to sit idle if their interest might be undermined.

On 11/10/2022 at 2:48 PM, Paxter said:

Who knows, maybe regulation will actually save crypto in the end. 

Regulation comes from the top down.  I'm not a crypto guy in general, but having crypto regulations be written by today's best grifting lobbyists may not lead to the optimal long term outcome for the average person.

On 12/15/2022 at 5:10 PM, Wade1865 said:

A day after Jerome's 50 bp hike, the markets dropped 2.25%, DJIA; 2.49%, S&P; and 3.23%, NASDAQ. And my overall holdings dropped around 3.25% (!!!). This reaction seems overly dramatic given that 1) it wasn't 75 bp and, 2) it should have been expected. Tomorrow should be interesting.

Given the now steadily declining inflation, I'm sure the next few hikes will be 25 bp, and (as warned), there will be more of them. Unless the war in Ukraine expands / intensifies, or a new one flares in the Pacific, 2023 could realize a softer landing than I anticipated ...

If you bet with the establishment, you have a lot of institutions supporting your play.  But you'll never get anywhere as good a price as the insiders.  So figure out where the over reaction is happening and play the other side.  

I wish I had had more money to put into casino, oil, and cruise line stocks in March to June of 2020. 

I think I still like energy going forward, as an inflation hedge, and I'm probably a little early on going back into consumer discretionary stocks but the market is a leading indicator.  So I'm willing to buy too early here.

The economy is trash because we're being ruled by people that are anti energy and anti food production, but reality has it's own bias, as they say.

 

Edited December 18, 2022 by mcbigski

[Paxter]

A few scenarios to consider heading into the new year:

1. Soft landing - no recession, lower inflation (maybe 3-4%), downward earnings revisions, a bit more monetary tightening. Not great (but not terrible) for stocks and meh for bonds.

2. Bumpy landing - mild recession, lower inflation, significant earnings recession plus some financial jitters, central banks pause for most of the year. Bad for stocks and OK for bonds. 

3. Hard landing - recession and significantly higher unemployment, much lower inflation, severe financial stress in some markets, central banks cutting before the end of the year. Really bad for stocks and good for (investment grade) bonds.

There is also the more remote possibility of “no landing” - where the economy shrugs off monetary policy and roars ahead, with inflation largely unchecked or easing only slightly.

Any others?

Edited December 20, 2022 by Paxter

[BigFatCoward]

Looking for some advice, wife is about to go freelance so no longer has access to workbased pension scheme.  She has asked me to do some research and i haven't got a clue, work does all that shit for me. 

Anyone got any advice on a really easy to understand investment for retirement plan in the UK, or a website that advises in very basic terms for her?

[A wilding]

@BigFatCoward

Depends a bit on whether she is a higher rate taxpayer.

If not, I personally would forget about a pension scheme. Just pay a regular sum into a low cost ISA investing in a range of tracker funds. You can of course put up to £1666 a month into an ISA. The advantage of an ISA is that you can access it as and when you want and there is absolutely no tax to pay.

As a higher rate tax payer you could do the same, but you might want to wrap some or all of the investment in a SIPP instead of an ISA. A SIPP is basically a type of pension. Here you are taking advantage of the SIPP higher rate tax rebate - you get your tax reduced. However there is no point in paying more into a SIPP than you get higher rate tax rebate for (i.e. at most pay in the amount of salary that you go past the higher rate threshold by). The disadvantage of a SIPP is that there are rules on how and when you can take your money, and it gets taxed when you do take it (though only at the basic rate unless you are taking out > £40K per year).

Though as a freelancer I think that there are some additional options, particularly if she needs to set up her own company. In that case she will need an accountant, you might want to have a chat with them.

Hargreaves Lansdown is one big company that provides cheap ISAs and SIPPs, and has a website with explainers. but there are plenty of others out there.)

Disclaimer: I Am Not a Financial Advisor.

Edited December 20, 2022 by A wilding

[BigFatCoward]

16 hours ago, A wilding said:

@BigFatCoward

Depends a bit on whether she is a higher rate taxpayer.

If not, I personally would forget about a pension scheme. Just pay a regular sum into a low cost ISA investing in a range of tracker funds. You can of course put up to £1666 a month into an ISA. The advantage of an ISA is that you can access it as and when you want and there is absolutely no tax to pay.

As a higher rate tax payer you could do the same, but you might want to wrap some or all of the investment in a SIPP instead of an ISA. A SIPP is basically a type of pension. Here you are taking advantage of the SIPP higher rate tax rebate - you get your tax reduced. However there is no point in paying more into a SIPP than you get higher rate tax rebate for (i.e. at most pay in the amount of salary that you go past the higher rate threshold by). The disadvantage of a SIPP is that there are rules on how and when you can take your money, and it gets taxed when you do take it (though only at the basic rate unless you are taking out > £40K per year).

Though as a freelancer I think that there are some additional options, particularly if she needs to set up her own company. In that case she will need an accountant, you might want to have a chat with them.

Hargreaves Lansdown is one big company that provides cheap ISAs and SIPPs, and has a website with explainers. but there are plenty of others out there.)

Disclaimer: I Am Not a Financial Advisor.

Cheers, She is a top rate tax payer, I had looked at a SIPP, but I have no interest in managing it for her and I know she wouldn't stay on top of it. 

I already have an ISA with Hargreaves Landsdown which i did suggest she just top up, however its paid pretty much nothing over the last few years and she is reluctant to commit more to it. 

 

Edited December 21, 2022 by BigFatCoward

[A wilding]

Well to say the obvious:

It has been a rough few years for shares, but not investing in them typically means keeping your savings in cash, and historically shares have always beaten cash savings accounts by a wide margin in the long term, i.e. when investing for retirement. Of course, who knows what might happen in future ...

But really a SIPP is no more work than an ISA to invest in. The only wrinkle is that you need to tell the taxman you are doing so to get the higher rate tax rebate from them. And if you are that wealthy you need to keep an eye on the maximum lifetime amount of pension investment you can make (about a million at present.)

[Jeor]

Three more trading days to go in 2022 and the ASX200 is down 6.35% for the calendar year. Not as bad as it looked halfway through, but still a negative year nonetheless. The real question is whether this carries over to 2023. Of @Paxter's options I think the "bumpy landing" or the "no landing" are the most likely options.

On 12/20/2022 at 3:54 PM, Paxter said:

2. Bumpy landing - mild recession, lower inflation, significant earnings recession plus some financial jitters, central banks pause for most of the year. Bad for stocks and OK for bonds. 

There is also the more remote possibility of “no landing” - where the economy shrugs off monetary policy and roars ahead, with inflation largely unchecked or easing only slightly.

Any others?

Corporate earnings haven't suffered any major hits yet, and the jury's still out on whether that will happen and to what extent. I think there is a chance that earnings stay relatively stable (with a few exceptions of downgrades) and inflation returns to a more benign reading (probably not 2%, but at least more with a 3-4 handle) with a few more interest rate hikes and then a pause at a 5-handle. In this scenario, unemployment might not have to rise too much. So for shares, I think 2023 might be mildly positive. I'm certainly still staying invested.

[Paxter]

9 hours ago, Jeor said:

Three more trading days to go in 2022 and the ASX200 is down 6.35% for the calendar year. Not as bad as it looked halfway through, but still a negative year nonetheless. The real question is whether this carries over to 2023. Of @Paxter's options I think the "bumpy landing" or the "no landing" are the most likely options.

Corporate earnings haven't suffered any major hits yet, and the jury's still out on whether that will happen and to what extent. I think there is a chance that earnings stay relatively stable (with a few exceptions of downgrades) and inflation returns to a more benign reading (probably not 2%, but at least more with a 3-4 handle) with a few more interest rate hikes and then a pause at a 5-handle. In this scenario, unemployment might not have to rise too much. So for shares, I think 2023 might be mildly positive. I'm certainly still staying invested.

I think 2023 will be another down year. 2022 simply reversed the worst excesses of the pandemic (crypto, mega cap tech, pandemic plays etc). 2023 will see the pricing in of the slowdown/recession and continued monetary tightening.

Inflation…the core reading is going to be sticky, which will keep central bankers as humble as they have been since the 80s. The headline number might come down a bit but could also surge upward if there is an energy crunch at any point (e.g. due to China reopening).

[Jeor]

Equities are a bit hostage to the central banks next year, that's true enough. If rates keep rising, money will shift from stocks to bonds and the stock market will run into some trouble.

When I say mildly positive, I'm looking at further trouble for the first half of the year but some sort of recovery in the second half. There are still a lot of overvalued stocks out there, but given the propensity of the share market to be a forward indicator, I think towards the end of 2023 there will be enough people gorging themselves in preparation for the eventual recovery that the market might find enough support. Enough people missed the 2020 COVID bull run that there will be some trigger happy fund managers out there looking for signs of life.

As a personal example, I've cashed up again (my technical rules got me out of a couple of positions in the recent malaise) to about 25% but I expect to find good opportunities to deploy that in early 2023.

I also think the ASX200 might be a little more resilient than some of the other markets, as the RBA will be a bit more dovish than most, given the high proportion of variable loans and short-term fixed loans.

 

[Paxter]

9 hours ago, Jeor said:

When I say mildly positive, I'm looking at further trouble for the first half of the year but some sort of recovery in the second half. There are still a lot of overvalued stocks out there, but given the propensity of the share market to be a forward indicator, I think towards the end of 2023 there will be enough people gorging themselves in preparation for the eventual recovery that the market might find enough support. Enough people missed the 2020 COVID bull run that there will be some trigger happy fund managers out there looking for signs of life.

The Fed put was in play in 2020. I wouldn’t expect history to repeat this time. That’s why I see most markets going not better than sideways next year.

[Jeor]

I must admit to a bit of schadenfreude about the Tesla stock price carnage going on right now. It's not so much that I dislike Elon Musk (which I do), it's more that this stock has been way overpriced for years. They only recently became profitable and even before then, their market cap was somehow worth more than all the other automakers combined which made no sense.

There will be a bounce when Elon eventually refocuses on it, but I think ultimately it still has a long way down to go. In prior years they were operating in an environment where they just couldn't deliver enough cars for the demand for a Tesla. If they could make one they would always be able to sell it. But now, once they've ramped up production, they're finding the demand has melted away - through a combination of Elon's bad PR, other autos catching up, and plummeting consumer sentiment for a high-priced luxury vehicle in a recessionary environment.

[Deadlines? What Deadlines?]

Tesla Semi launched 3 years late. And it's not clear to me that those are production vehicles or beta testers for Pepsi co.

The 2nd Generation Tesla roadster is 2 years late and counting.

Who the hell knows when Cyber Truck will launch, but since they've shown it, F-150 Lightning, Silverado electric and Hummer EV have all hit the market. You can go into a dealership and buy those vehicles right now. 

No one runs a car company like this. Not a successful one anyway. 

Edited December 28, 2022 by Deadlines? What Deadlines?

[Jeor]

2 hours ago, Deadlines? What Deadlines? said:

Tesla Semi launched 3 years late. And it's not clear to me that those are production vehicles or beta testers for Pepsi co.

The 2nd Generation Tesla roadster is 2 years late and counting.

Who the hell knows when Cyber Truck will launch, but since they've shown it, F-150 Lightning, Silverado electric and Hummer EV have all hit the market. You can go into a dealership and buy those vehicles right now. 

No one runs a car company like this. Not a successful one anyway. 

Elon has always made a habit of overpromising, which was okay when there was no competition. But now Tesla's lack of discipline (or Elon's overly ambitious timelines) are coming up against actual alternatives. They've lost their first-mover advantage, and the brand has lost its "cool" when their CEO is mouthing off all the time. It's going to keep going down in the long run.

[Loge]

There is also the issue of "full self driving." Tesla has been charging for this feature for years, and never delivered.

https://jalopnik.com/elon-musk-promises-full-self-driving-next-year-for-th-1848432496?utm_source=twitter&utm_medium=SocialMarketing&utm_campaign=dlvrit&utm_content=jalopnik

So far they have got away with it, but not much longer, apparently. California has made a law that forbids to advertise cars as fully autonomous unless they really are (Teslas aren't).

https://gizmodo.com/tesla-elon-musk-full-self-driving-autopilot-1849930860

There are also criminal investigations:

https://www.reuters.com/legal/exclusive-tesla-faces-us-criminal-probe-over-self-driving-claims-sources-2022-10-26/

There are also lawsuits from customers. Tesla's defence is ... interesting.

https://www.latimes.com/business/story/2022-12-08/tesla-lawsuit-full-self-driving-technology-failure-not-fraud

Edited December 28, 2022 by Loge

[Paxter]

I’d put Tesla in a similar category to FAANG, crypto and the ARKK stocks as far as pandemic excesses are concerned. The Twitter fiasco is the straw that broke Tesla’s back, but I think a similar drawdown was always on the cards.

These and other securities were benefitting greatly from the era of ultra-loose monetary, in which investors were borrowing money to trade, bonds (and many other stocks) were not offering real positive returns and future cash flows were barely being discounted. Now that this era is over (at least in the short-term), there is no easy path back to previous values. 

Edited December 29, 2022 by Paxter

[Jeor]

It will be interesting to see how some of the older Big Tech companies go in the near future. Microsoft and Apple have weathered the storm better than the others in terms of stock price, and unlike some tech companies, their businesses have decades of being proven profitable cash cows. But Apple is starting to hit 52-week lows and an upcoming recession and lack of new product is not going to be pretty. In this sort of environment I reckon Microsoft is the only tech company that might hold up. The NASDAQ is not going to look pretty in 2023.

[Paxter]

3 hours ago, Jeor said:

It will be interesting to see how some of the older Big Tech companies go in the near future. Microsoft and Apple have weathered the storm better than the others in terms of stock price, and unlike some tech companies, their businesses have decades of being proven profitable cash cows. But Apple is starting to hit 52-week lows and an upcoming recession and lack of new product is not going to be pretty. In this sort of environment I reckon Microsoft is the only tech company that might hold up. The NASDAQ is not going to look pretty in 2023.

Agreed. And given the S&P500 is roughly a third tech, I don’t think the broader US market is going to have much fun either. 

[Jeor]

Do you invest in the US stock market, @Paxter? I know you're in Canada but I wonder if it's easier to do from there.

I've always thought about it, but figured for someone in Australia the exchange rate risk wasn't really an attractive thing. One of my stocks is the Vanguard Global ETF which has a composition of about two-thirds US stocks (and it's top three holdings are Apple, Microsoft and Amazon), so I figure that's the way I get my international diversification.

[Paxter]

Yeah it’s pretty easy here (at least via the Big Six banks) to get direct US deposit and investment accounts. I imagine this occurs via their US subsidiaries.

Personally I don’t have either, though I’ve considered it.

Edited December 29, 2022 by Paxter

[Paxter]

On 12/27/2022 at 12:19 AM, Jeor said:

I'm looking at further trouble for the first half of the year but some sort of recovery in the second half.

I wonder if it could be the opposite- bounce to start the year in the hope of the soft landing, then new lows as the hope dissipates.

Certainly a bad day for the S&P shorts today.