All about Investments!

[Jeor]

3 hours ago, Paxter said:

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.

That's definitely possible. But my theory is based on thinking that any bounce at this time of year will be very short-lived. The Fed will pour cold water on any talk of pausing or easing at this point of time so these "relief rallies" are a bit silly and I expect gains to be given back pretty quickly. Historically the suggestion is that the next bull market in stocks begins when the recession is at its worst, which will probably be late 2023.

Oil is going to be an interesting one to watch. There's a tug of war there between China potentially mounting a comeback (or not), the Russian/Ukraine war stopping to ease supply (or not), and a global recession destroying demand (or not). That's too many unknowns for me, I suspect the oil market is going to be schizophrenic this year.

 

[IheartIheartTesla]

On 11/4/2021 at 7:20 PM, Iskaral Pust said:

I’d suggest that any US citizen should take a look at TreasuryDirect.gov Series I savings bonds right now.  7.5% guaranteed yield (currently) with no risk of default is pretty good.  And many people can make it tax free, e.g. buy for your kid or only redeem it for qualifying education expenses.  Do your own research on whether it’s appropriate for you but it’s an opportunity that probably goes unnoticed.

I know this is an old post, but just wanted to note that I started purchasing Series I bonds last year (a modest start with $50 per paycheck) based mostly on this recommendation. Since its partially pegged to inflation it isnt a bad choice at all (now up to 9% return I believe). On a side note I also have an American Express savings account tethered to market rates that also offers about ~3.3% interest right now that is better than what my primary and local credit union banks are offering.

Unfortunately, my 401k doesnt have the option for Series I so no employee match...meh, whatever. Apart from that I havent messed with my investments much and the 401k is pretty much untouched.

Edited January 7 by IheartIheartTesla

[Iskaral Pust]

2 hours ago, IheartIheartTesla said:

I know this is an old post, but just wanted to note that I started purchasing Series I bonds last year (a modest start with $50 per paycheck) based mostly on this recommendation. Since its partially pegged to inflation it isnt a bad choice at all (now up to 9% return I believe). On a side note I also have an American Express savings account tethered to market rates that also offers about ~3.3% interest right now that is better than what my primary and local credit union banks are offering.

Unfortunately, my 401k doesnt have the option for Series I so no employee match...meh, whatever. Apart from that I havent messed with my investments much and the 401k is pretty much untouched.

I hope it was a good option for you.  I purchased the max for my wife, son and myself before the end of 2021 (the max allowance is by calendar year), and then again in October 2022 before the latest coupon re-set.  A lot of my colleagues did the same.

The coupon rate will decline with inflation but it’s nice to have such a high yielding safe diversifying asset, with some upside if inflation doesn’t fully normalize all that quickly.

FWIW, 2yr Treasury bonds are now the most appealing opportunity among this circle.  You can buy those directly on TreasuryDirect.gov too at one of the frequent auctions, although I haven’t got around to it yet.  Money market funds have been slow to adjust their yields upward, but you can get ~4.5% by just buying the Treasury bonds directly and they’re exempt from state income tax (just as muni bonds are exempt from federal income tax, but those offer a lower yield and plenty of default risk)

I am not giving investment advice.  Just pointing out simply accessed opportunities that are heavily used by investment professionals that may have gone overlooked.

[Paxter]

12 hours ago, Jeor said:

That's definitely possible. But my theory is based on thinking that any bounce at this time of year will be very short-lived. The Fed will pour cold water on any talk of pausing or easing at this point of time so these "relief rallies" are a bit silly and I expect gains to be given back pretty quickly. Historically the suggestion is that the next bull market in stocks begins when the recession is at its worst, which will probably be late 2023.

Oil is going to be an interesting one to watch. There's a tug of war there between China potentially mounting a comeback (or not), the Russian/Ukraine war stopping to ease supply (or not), and a global recession destroying demand (or not). That's too many unknowns for me, I suspect the oil market is going to be schizophrenic this year.

 

Late 2023 may be too early for the recession (if one occurs) based on the economic data we are seeing at the moment. Unemployment is at historic lows across the world and I wouldn’t expect any follow through to consumption until that changes.

Even investment (usually the most sensitive to interest rate changes) seems quite sticky at the moment, courtesy of government spending. 

Those selling the idea of rolling recessions across different industries may be onto something.

[Wade1865]

Me, when my favorite stock climbs from -54% to -30%  

[Wade1865]

On 12/8/2022 at 12:27 AM, Wade1865 said:

TOTAL [100%]. Higher, -2% to +0.2%.

TOTAL [100%]. Higher, +0.2% to +5%. Prematurely returning above water on all but my most favorite holding. I don't get it, but I suppose the recent positive indicators are strong enough to support this (e.g., employment, amazing; inflation, improving; hike, reasonable). I hedged my bets (if that's the right term) several months ago by moving out of cash, but I'm still waiting (i.e., hoping) for at least a bumpy landing that would see my holdings drop to -15% or worse.

Well done, Uncle Joe; well done. Where do I send the 10% 

***

T [29%]. Higher, +2% to +3%.

MMM [19%]. Higher, -1% to +1%.

KHC [18%]. Higher, +11% to +18%.

AMZN [13%]. Higher, -7% to 0%.

DOW [8%]. Higher, +2% to +18%.

WBD [2%]. Higher, -43% to -30%.

CS [1%]. Higher, -4% to +10%.

CASH [10%]. No change.

[Paxter]

Markets are getting more optimistic about the prospects of a soft landing / Goldilocks scenario. This is the mini-boom I was expecting to see at the end of last year, but perhaps it got killed off by tax loss selling. 

Certainly the odds of a Goldilocks scenario have risen with the last two inflation prints. But it would still be unusual to not see some sort of recession and hit to earnings after a rapid tightening cycle, yield curve inversion and a commodity price shock in '22. 

No hit to earnings is really priced into the S&P right now. So in theory we could still be testing the Oct '22 lows within the next few months.

Edited January 13 by Paxter

[Jeor]

On 1/13/2023 at 12:58 PM, Paxter said:

Markets are getting more optimistic about the prospects of a soft landing / Goldilocks scenario. This is the mini-boom I was expecting to see at the end of last year, but perhaps it got killed off by tax loss selling. 

Certainly the odds of a Goldilocks scenario have risen with the last two inflation prints. But it would still be unusual to not see some sort of recession and hit to earnings after a rapid tightening cycle, yield curve inversion and a commodity price shock in '22. 

No hit to earnings is really priced into the S&P right now. So in theory we could still be testing the Oct '22 lows within the next few months.

The strong start to the year is not what I was anticipating, though I have enjoyed some of the ride up. I suspect the recessionary risk to stocks is rather low (it might just be a mild recession if inflation is subsiding already, which means the everyday consumer will still keep the economy going), but the real risk to the share market are geopolitical. 

China's reopening - so far is on track, and the Chinese seem to be giving a more conciliatory tone (e.g. loosening the de facto embargos on Australian products). The real wildcard is the US debt ceiling - these crazy Freedom Caucus Republicans are going to shut the government down and potentially run into a first-ever default, which is a bona fide black swan event. It's hard to plan for this because pretty much anything will fall in a market where the US Treasuries are destroyed.

[IheartIheartTesla]

Everyone's from somewhere. so probably.

[Paxter]

20 hours ago, Jeor said:

The strong start to the year is not what I was anticipating, though I have enjoyed some of the ride up. I suspect the recessionary risk to stocks is rather low (it might just be a mild recession if inflation is subsiding already, which means the everyday consumer will still keep the economy going), but the real risk to the share market are geopolitical. 

It all depends on the unemployment rate. If it does climb significantly, I think recession/earnings is still the main market risk, followed by geopolitical as you mention. But that unemployment feels a loooong way off right now.

The US treasury market is an interesting one. In theory it’s one of the world’s most liquid markets, but in practice we’re not sure how it play out given that two of the biggest purchasers (the Fed and the banks) will likely be on the sidelines.

[Jeor]

22 hours ago, Paxter said:

It all depends on the unemployment rate. If it does climb significantly, I think recession/earnings is still the main market risk, followed by geopolitical as you mention. But that unemployment feels a loooong way off right now.

The US treasury market is an interesting one. In theory it’s one of the world’s most liquid markets, but in practice we’re not sure how it play out given that two of the biggest purchasers (the Fed and the banks) will likely be on the sidelines.

I think unemployment will stay relatively manageable, with the bulk of rate-rising done and likely a more pedestrian path for the next year. 

The geopolitical stuff is what worries me the most, and there's no way to anticipate it - and some of it will happen quickly. There are four main ones now that I think of it:

1. US government shutdown and default in Treasuries - I think this is almost certain to happen, unless moderate Republicans and Democrats join together to force something past. This may be a cataclysmic financial event.

2. Japanese bond market - the first interest rate rises in the Japanese market may be coming. This is going to be chaotic for the government. Not only do they have massive amounts of debt (260% of GDP) which will be much harder to service with higher rates, which will almost certainly cause a massive austerity budget and economic pain, but Japan is a huge creditor as the highest holder of US Treasuries, not to mention large holdings of other government bonds (such as Euros). If, say, the Japanese bonds start becoming competitive to the ECB bonds and some repatriation of money occurs, that could spell trouble.

3. European debt crisis - in a world of rising rates, the ECB is going to have trouble managing the differences between north and south. Italy in particular is always watched as the country most likely to blow up and the ECB are headed for a fair few rate rises still. I wouldn't be surprised if there's some crisis there.

4. Chinese uneven recovery - the property market may still crash or be unresponsive to stimulus, which will affect the global resources and commodities boom.

I'm sounding like a Nouriel Roubini or some other doom and gloomer, so to be sure, I'm still reasonably invested in markets - I'm just being hyper vigilant if something happens and keeping a war chest of cash (now about 25%) on the side.

[Paxter]

Hey, that’s harsh on my beloved Italy when the (Northern European) UK has actually been much closer to financial peril of late!

The spread between Italian and German bonds has been pretty stable in the last few years. And there is no indication that Meloni will govern as badly as Truss. If Salvini was PM, it might be a different story, but we avoided that trap.

I’m not as pessimistic as @Jeor on geopolitics - I think the US will walk back from the brink and there won’t be a default event. 

On unemployment - you’re assuming that inflation can fall to 2% or about without a meaningful rise. It’s possible but perhaps unlikely from a historical perspective.

[Wade1865]

The CNN Fear & Greed Index now reflects extreme greed. A year ago, it was approaching extreme fear. Data points seem positive, and the position of Bank of America / Merrill Lynch is a likelihood of a mild and short recession. Yet, the market's reaction doesn't feel appropriate (e.g., missed earnings). It should be signaling anxiety.

And there should be a reasonably predictable action / reaction / counter-reaction cycle, but consequences in this game seem to be hit or miss. On the other hand, I know it's not all luck. Given that (at most) 3% of professional traders are successful, year after year, maybe it's 97% luck, hahaha. Since I'm not part of the professional 3%, I suppose the most reasonable approach is to posture for success regardless of market direction.

[Paxter]

The new year rally is finally starting to fade as investors wake up to the reality of “higher for longer” and at least a shallow recession. My portfolio has already given up most of its 2023 gains. 

[Jeor]

Yes, this rally seems to be short-lived but I'm not ruling out a last gasp rally upwards before everyone starts heading for the hills.

My portfolio has held up reasonably well but that's only due to a couple of company-specific bright spots. One of them had a flagging takeover offer reaffirmed and the other had a good earnings season. I've taken a bit of money off the table and now up to 30% cash. I had considered sticking my idle money in a market ETF just so that it was doing something useful, but as I suspect for most other investors, keeping cash isn't as bad an option as it used to be, my interest-bearing account is now earning something like 4.50% p.a., and that's likely set to rise.

Most stocks look a bit too expensive or overvalued at this stage given the earnings risks and the likelihood of something breaking somewhere. I have a wish list of stocks ready to go if the market plunge occurs but for now I'm okay with missing out on a bit more of a rally.

[Jace, Extat]

So, embarrassing question...

Do you like get... paid for your stock? 

Like, I've wondered this since I rented Wall Street from the library, I think. 

Do you... get dollars for it? Like every year or something I mean? Isn't that what owning part of something is supposed to be? Getting part of the profit or something? 

It always felt to me like you could buy monopoly money from a company. And sometimes you could sell it later for a little more America money. - I get that part 

But the part I don't understand is what these people think they're buying besides monopoly money? 

Elon didn't buy monopoly money. As far as I'm concerned (not a money person) he did not buy "stock" 

As far as I understand he bought Twitter

I do not understand "Stock" 

[Altherion]

13 hours ago, Secretary of Eumenes said:

Do you like get... paid for your stock? 

Like, I've wondered this since I rented Wall Street from the library, I think. 

Do you... get dollars for it? Like every year or something I mean? Isn't that what owning part of something is supposed to be? Getting part of the profit or something? 

It always felt to me like you could buy monopoly money from a company. And sometimes you could sell it later for a little more America money. - I get that part 

But the part I don't understand is what these people think they're buying besides monopoly money?

Many (but not all!) corporations pay dividends which are indeed part of the profits that are being returned to the shareholders. So if you invest in those companies, you will indeed get paid either every year or half year or quarter depending on how their dividend is structured. There is a school of investing (the "value" investors) wherein this stream of future payments should be considered the main reason to buy a stock and they avoid the companies that don't pay anything. Note that in the US (and possibly some other countries; I do not know international tax law) the dividends for stock that you've held for longer than a year are taxed at a lower rate so it's better than getting interest from a savings account (which is taxed as regular income).

[maarsen]

14 hours ago, Secretary of Eumenes said:

So, embarrassing question...

Do you like get... paid for your stock? 

Like, I've wondered this since I rented Wall Street from the library, I think. 

Do you... get dollars for it? Like every year or something I mean? Isn't that what owning part of something is supposed to be? Getting part of the profit or something? 

It always felt to me like you could buy monopoly money from a company. And sometimes you could sell it later for a little more America money. - I get that part 

But the part I don't understand is what these people think they're buying besides monopoly money? 

Elon didn't buy monopoly money. As far as I'm concerned (not a money person) he did not buy "stock" 

As far as I understand he bought Twitter

I do not understand "Stock" 

I definitely get paid for owning stocks. I tend to put my retirement savings, here in Canada, in dividend paying stocks. My favourite stocks are Canadian banks because they tend to be boring and reliable payers. A couple of them that I own have not missed a dividend payment for the last 150 years or more. When you look at a stock, divide the price of the stock by the dividend payable each year. This gives you your price/earnings ratio. A ratio of ~10 to 15 is really good as in 10 to 15 years the dividends will pay back your purchase price. Any lower than this is a sign the company may be in trouble. Much over 20 for the ratio means the stock is overvalued and I would hold off on buying it.

  If buying a stock, buy after bad news has affected the price. The dividends remain the same even as the price drops. Unless the bad news is a dividend cut.  I hopes this helps

[Jace, Extat]

I understood clearly 

4 hours ago, Altherion said:

Many (but not all!) corporations pay dividends which are indeed part of the profits that are being returned to the shareholders. So if you invest in those companies, you will indeed get paid either every year or half year or quarter depending on how their dividend is structured. 

This and thank you for it

2 hours ago, maarsen said:

I definitely get paid for owning stocks.

And this. I also thank you for it. 

Regarding the rest... it's all barbarian to me  

[Paxter]

ETA: Switched my Silicon Valley Bank post to US Politics to avoid duplication. 

Edited March 10 by Paxter