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Hey, if this things lasts another few years, you're gonna have bigger problems than losses in the stock market. I'd almost say get in now because if the economy tanks any further, it won't matter, and if it recovers, you're positioning yourself to make a good return in a short time period. Changing Technicals and Fundamentals and confused j00 "experts" notwithstanding, of course.Quote:
Originally Posted by Dreadnaught
Sorry, but the other fallacy is that new market investors can hope to catch up to the old market investors. That you can base your retirement on market profits, like your parents did. Sure, they'll all say young folks "have a longer time horizon" and a longer employment future. So even if there's another crash, you'll have more time to catch up and recoup your losses.Quote:
Originally Posted by Dreadnaught
Don't believe it. Don't take investment advice from people who can tread water, naked, with sharks circling.....long after you've lost your shorts. The tide keeps coming and going--but it's really hard to run naked, find new swimming trunks, and get back in the water. To surf with the sharks and violent tides, and hope "this time" will be better is nothing more than gambling. May as well take your hard-earned money to Vegas, bet on the ponies, or play on-line poker. Your chances are about the same at this point in time, and it's all a crap shoot.
*shrugs* It's a matter of perspective. If I went value investing right now, it would be to scoop up buys for the medium to long term (more than 5 years), so I'm not worried about persistent market weakness. Furthermore, that's why you buy solid companies whose recession performance is likely to be decent though not stellar - you know, staples and the like. I think my suggestion to buy some housing-related stocks (e.g. Caterpillar) was much riskier since that was trying prognostication. All I'm saying now is that I wouldn't mind owning a chunk of X company at the current price given its fundamental value. Even if it trades below that fundamental value for a long time, I don't really care; I know it's a solid pick.Quote:
Originally Posted by Dreadnaught
I guess in a way it is 'beating the market', but only because the market is composed of either people who are in it for quick bucks (so won't touch a stable value stock without a really good reason) or who are, frankly, idiots (like all of the people who pulled all their money out of stocks at the bottom of the crash). It's not that I know something the market doesn't about these valuations; it's that I'm following different goals than much of the market. I don't disagree that the economy sucks, and that will drag on earnings for some time to come. I just don't care that much about short term earnings.
Well, it's not so much human-caused panic as...robots. I read in some news article recently that currently, 60% of all trades are via algorithms. So, in Soviet Stock Market, robot trades YOU.
The robots cause churn, but I wouldn't say they actually own much of the assets. I wouldn't say algorithmic trading (*outside of special occasions*) is actually driving pricing that much.
For loose definitions of "algorithm." Having a stop order to sell at x or a standing order to buy at y is considered an "algorithm" for the purposes of that measurement, which of course means that human panic and stampeding behavior is a part of a large number of those "algorithms."Quote:
Originally Posted by agamemnus
So not so much "robots" and what not as simple rules applied to human accounts by humans.
Well, ok, that's an algorithm too, but I'm pretty sure they meant things beyond simple stop orders. For instance, many if not all Prudential IRA funds do function based on algorithmic valuations of stocks and bonds and have no human interference beyond an IRA holder adjusting his or her proportions of said funds. The valuations are typically quite simple anyway, based on simplistic risk assessment that uses past values and movements of the stocks/bonds in question.
And, that kind of risk assessment can in fact algorithmically generate what you refer to as "panic" and "stampeding behavior". For instance, a certain fund I have been following switched to 40% bonds (from something like 10%) in one month based on a sudden increase in stock price volatility and downward movements... and it took about a 4% loss doing so.
So, on mutual funds:
I usually like to sift through mountains of data before making individual stock picks, and I haven't had that kind of time lately, so my money's going into mutual funds instead. I prefer to spread my money around different funds there too. Anyone have any suggestions good funds that they like? I will be doing at least a casual validation, so I'm afraid the United Cain Money Fund is right out.
I'm playing a stock market game currently. I shorted Netflix and RIM (not enough; only 7% of the portfolio!!) last week, and gained a lot, but that didn't help. I shorted everything I could. Stocks were up a lot last week, and I was down 6%. Shorting the horribly beat up fashion clothing sector wasn't a good idea. For this week though, now I'm up 9% and 4% overall for the month
* Netflix: The stock market at large has turned into a casino run by the investment banks. Individual stocks, too. Prime example: Netflix. News does not justify the move that they had, from ~300 to ~130 in a few months. IMO, It's investment banks piling on and then dropping the stock, after realizing they couldn't hold the con anymore. It still has a ways to go. I'm guessing maybe the $25 - $35 range. Today, huge sell-off but Netflix is up 1%; pure speculation.
* Apple: The stock is still barely swayed, but I'm guessing two to three quarters will deflate Apple quickly, perhaps 50% down. Obviously not as quickly as Netflix, since Apple is sitting on a veritable fortune and a huge market share in lucrative markets (soon to be not), while Netflix is/was sitting on a future fortune that will never materialize...
* GOLD: With the stock market tanking today, gold is crashing as well. You'd think it wouldn't, but I guess that bubble just burst.
* MCD's: McDonald's is still going strong. Cows with guns yet to materialize.
Apple and Netflix are completely different animals. Netflix had a stratospheric valuation, and frankly still is pretty ridiculously priced. Apple's valuation is only marginally higher than average (P/E of 15 or 16?) and has been demonstrating phenomenal growth in profits coupled with a rock-solid balance sheet. I can't imagine Apple losing 50% in value any time soon, absent total disaster for one of their main products (e.g. if the new iPhone actually explodes on users). Netflix has been headed for a correction for ages, and their shift in business strategy is lining them up against some of the biggest companies out there in a bidding war with content providers.
Apple's profit margins are dependent on having little to no competition in iPads and iPhones. I presume the iPhone market margins have already dropped. iPod margins must be miniscule by now. With such a lucrative market, their earnings will plummet soon enough -- assuming they don't manage to patent-suit their way to 90% market share...
They cannibalized their own iPod market with the iPhone/etc., but they still sold some 9 million units in the first quarter of this year. Not too shabby. Their iPhones still command a remarkable amount of the market, and their iPads are unchallenged in the tablet space. Their PC business isn't doing too shabby, either.
Look, I agree that they can't sit on their laurels, but even if their earnings growth becomes flat, they're still trading at a fairly reasonable multiple of current earnings given their strength as a company. Let's imagine earnings stay flat in the next year (fat chance!) but we get the 50% drop in stock price you forecast. Then Apple would be trading at 7-8 times earnings?! No way.
I haven't thought about the stock market very much to be honest. However, I have a couple investment strategies I'd like to propose, and see what people think.
Suppose your a millionaire, couldn't you artificially inflate a stock if you like then sell it? Start buying a lot of the stock increasing the demand that raises the price then you sell it.
Secondly, what if we looked at say the Hong Kong Stock Exchange and noticed in certain stocks the majority of buyers and sellers are chinese. What if we were to sell while most of those people were sleeping (night), and buy during peek hours(day). Illusions was using the term day-trading I don't know if that's the same concept or not.
Thought Experiment
A thought experiment has occured to me, what if you were the only buyer and trader in the stock market. Suppose you bought a stock, the capacity for that stock to go up, will depend on what, how the company performs. They'll raise their price for a stock as they do better, becuase obviously they want to sell their company for a higher price as the business gets bigger. It could also depend upon, essentially, artificial demand pressure you apply. could you not start buying up their stocks rapidly then they raise their cost per stock, and then you sell? If nothing else, surely, it can still be profitable to invest if you invest in a company that give dividends.
Pump-and-dump scams are a great idea that almost never get found out, as are schemes involving buying and selling based upon arbitrary time periods that don't meaningfully correlate to market fluctuations.
Also, calling a "market" of one person a thought, or a market, is being rather fast and loose with definitions. In a market with only one participant, there is no profit (or loss) potential, because the sole participant is "buying" and "selling" from/to himself. There's also no meaningful valuation, since again, the sole determinant of "price" (value) is the sole market participant, who can't make a profit or a loss selling to/buying from himself anyway, so price or valuation is rather irrelevant anyhow.
You could still profit with dividends. I realize generally you don't buy the stocks directly from the company. Let's say during the IPO, if nothing else you would be buying directly from the company I'd imagine (correct?). Then could you apply a lot of pressure in buying stocks quickly and the company likely would react by raising the price.Quote:
Also, calling a "market" of one person a thought, or a market, is being rather fast and loose with definitions. In a market with only one participant, there is no profit (or loss) potential, because the sole participant is "buying" and "selling" to himself.
I understand once there is enough stocks circulating amongst people.. people are buying and trading from eachother, and not with the company who the stock gives stake in.
No, you could not still profit with dividends, because as the sole market participant, you'd be the sole company owner, and would thus be paying yourself dividends from your own money.
The earnings will fall. :)Quote:
Originally Posted by wiggin
New thing.
Short Amazon for the long term.
They have the most terrible ideas and some of the most disconnected merchant customer service imaginable.
They just came out with a policy that makes it impossible for sellers with fewer than 25 sales to sell on Amazon between something like November and January, unless of course you send them your product, which would just double the shipping cost...
Any messages to customer service generally just gets you the same reply over and over. The Indian support has no connection/communication whatsoever to the corporate offices, they just parrot their lines.
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Theoretically, no, and you'd probably even lose money. This is because if you buy the stock the price goes up.. if you sell the stock the price goes down as you're selling bits of it. You can't just buy a huge amount of stock all in one go unless you have a public agreement with the company; that would raise the price astronomically. Think of it as ordering 100 tomatoes from a farm stand that only has 10. The farm stand needs 90, so they go out and buy them back from everyone who has bought tomatoes recently, and they visit all the farms again... that costs money, and of course the farm stand wants a commission.Quote:
Originally Posted by Lebanese Dragon
It's not the same concept. It's called arbitrage. All the theoretical profit from that is taken by algorithmic trades that make very fast trades between markets in milliseconds. I say theoretical profit because stock market prices aren't dependent on "peek hours" or time of day.Quote:
Secondly, what if we looked at say the Hong Kong Stock Exchange and noticed in certain stocks the majority of buyers and sellers are chinese. What if we were to sell while most of those people were sleeping (night), and buy during peek hours(day). Illusions was using the term day-trading I don't know if that's the same concept or not.
Day trading is simply a term referring to people who have turned trading as a curiosity/interest into a living off of buying and selling stocks every day.
PS: I'm now up 12% for the month in my fake stock portfolio. :)
I would think, I could do exactly that if there was enough sellers, because, by in large, when you buy a stock, you're not buying from the company, you're buying from those who already have a stock in that company (the secondary market). Which (not that this matters) the whole secondary market (resale) is all arbritage. I don't see why I can't buy as much as they're willing sell (unless you're citing some specific rule that most companies have), can't have x% of our stock unless certain conditions are met, I really don't think i need to buy that muchQuote:
You can't just buy a huge amount of stock all in one go unless you have a public agreement with the company.
I agree as you buy a lot the price will go up, as it does, it'll invite even more sellers to sell, but also peeking the interest of buyers, who are seeing the stock go up. The idea would be you'd sell to them all simulataneously, which I don't see why you couldn't do that. (the only danger I see is if you bought too much you could get stuck with stock, so there is a balance).
I do know that some people do this as groups. For example, I buy the stock when it's low, then I invite a ton of others to do the same (make a T.V. announcement like the guy on mad money does, Cramer, or post on a popular site, like reddit, if it gets enough hits, people will start buying and as they're buying it up, raising the price, you just sell at some point during that rollercoaster ride. Then they all get screwed) I know the idea in bold is possible, because I've heard of it being done.
I signed up for a virtual stock game, I'll mess around in it, unfortunately I can't try my gimmicks, since I won't affect the real market. Starting with 100k. I'll post here how it goes.
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Edit:
Correct me if i'm wrong, the entirity of a public comanpy is not neccesarily held by the public, right? the company could withold say 20% for themselves, and only have 80% of their stock in circulation.
Secondly the one that pays dividends is the company not fellow stock owners. So, if you were the only person buying and selling stocks, some stocks would be owned by their respective companies, the rest will be owned by you. Those stocks which pay dividends will come from the companies pockets, as a return on your equity in the company. Am I correct in all of this. I knew this all in high school at one time, but then I never really though about it. I think i'm right, but would like some verification.
Uh... riiiiiiight. Even flat earnings over the next year is wildly unlikely, let alone dropping earnings.Quote:
Originally Posted by agamemnus
I guess I'll just ask 3 questions and I should be able to answer the rest of my questions on my own.
1.) For dividends they are paid out by the company whose stock you hold. Meaning, that even if you were the sole possesor/buyer of stocks that you could still profit off holding stocks in the form of dividends. Not trying to say cain is wrong, just trying to clear up some details.
2.) Secondly, during the IPO you are buying directly from the company who sets their price at whatever they want, correct?
3.) Lastly, as long as there are buyers/sellers available at the time, I can buy and sell in volume at whatever the price is at that moment, correct? So, even if I somehow am able to artifically inflate the price of a stock myself, I could sell it all instantly once it hits a desirable price.
Thanks, I'll do some research.
Ag, while I'm not very into the stock market, (yet, i'm going to refresh myself on it's innerworkings) I did study economics, and it always came pretty easy to me. I will say though you are super pumped up right now on stocks, there is a lot more that goes into how a stock will change in price than just "ill news" or "good news" regarding that company. There are issues of what it's competitors are doing, how market fads turns out, many other seemingly unrelated events affect the price. I'm glad you're getting into it, but just take your time, in making judgements is my advice.
I know with my minigame of starting with 100k my questions won't really matter. I don't have enough starting money, and am in a fake game to boot to try to create any sort of "market influence" on price. I remember playing these games in highschool.
Erm.... not sure where the question is here. The corporation itself pays corporate taxes, and also you pay capital gains taxes afterwards. If you owned it 100% yourself you could turn it into a different form of corporation (not public) where you only pay one form of tax. There are numerous different forms of corporations and all have different tax advantages/disadvantages.Quote:
Originally Posted by Lebanese Dragon
The typical process is that a company, through a company such as Goldman Sachs, offers shares to select investors, who buy them at a price set by the company. Those investors then can publicly trade shares with anyone in the stock markets (like the NYSE) at the IPO time.Quote:
2.) Secondly, during the IPO you are buying directly from the company who sets their price at whatever they want, correct?
First part of your question: yes.Quote:
3.) Lastly, as long as there are buyers/sellers available at the time, I can buy and sell in volume at whatever the price is at that moment, correct? So, even if I somehow am able to artificially inflate the price of a stock myself, I could sell it all instantly once it hits a desirable price.
Second question: no, because buyers don't just appear when *you* want to sell. The "price" of a stock is actually just the last price that a buyer and seller agreed on in the market. So if you want to sell 5,000,000 shares of a stock that usually has a trade volume of 500,000 a day, you will have to lower the price to attract more than the usual buyers.
To a question in your previous post: you might get some speculative interest in a stock if you offer to buy an unusually large amount of the stock. But then, there's speculative interest that you were wrong, too! There's a recent case of Warren Buffet buying a huge amount of "preferred stock" from Bank of America here. The price of regular "common" stock rose for a while on speculation that Buffet knew something others didn't: and then it fail when investors realized he was simply a rich guy making a bet.
But that's exactly-sort-of what I'm saying! The stock price should be affected by all those things, but if the stock is bought up by a bunch of companies somehow, and they all follow some sort of signal (which turns up to be incorrect) on where the company is heading, then the little guy can get really confused by which valuation is correct: is it the valuation of the huge institutional investors, or all those other things you mentioned?Quote:
Ag, while I'm not very into the stock market, (yet, i'm going to refresh myself on it's innerworkings) I did study economics, and it always came pretty easy to me. I will say though you are super pumped up right now on stocks, there is a lot more that goes into how a stock will change in price than just "ill news" or "good news" regarding that company. There are issues of what it's competitors are doing, how market fads turns out, many other seemingly unrelated events affect the price. I'm glad you're getting into it, but just take your time, in making judgements is my advice.
The institutional investors, if they follow the wrong signals, could get burned a lot, if markets are efficient... but the little guy can get burned completely.
Finally, see Keynes':
"Markets can remain irrational a lot longer than you and I can remain solvent."
Although I don't think his policies make sense in the complex economy and government of today, I like that quote. :)
Basically I think what i'm saying could work, if I could ensure there would be enough buyers and sellers at the time of sale. Whether that's because I hype it up, or because my pushing the price up draws people attention to buy it. In order to solely influence a prices stock though you'd have to do it on a smaller sized company.
As for dividends, if you owned 100% of the stock you would own the company. That was a disconnect between my question and the answer, I did not mean to imply the person owned 100% of stock only that they were the only person who bought during IPO's and there was no secondary market.
Dividends are a payment from the company to it's shareholders, generally based upon the profit the company made, and the number of shares you hold. It's not about taxes.
I was just trying to clear up some "situations" for myself. I read up on alittle nice website that goes through details fairly thoroughly.
Well, big difference between a private corporation looking for investors, and one that goes "public" with an IPO. Structurally, it's similar to an auction and the company hired to be the auctioneers. And how the contracts are written.
<In my area of the US, public auctions are commonplace. Auctioneers are known to offer "best price bids" with a percentage for the client, or a cut from the take of the Lottery they run. In other words, an Estate seller can choose if their valuables are "valuable" (and the bidders know their value), or if they'd rather cut their losses and take a cut of the day's Lottery profits. You'd be surprised how many $2 dollar lottery tickets can accumulate so quickly, and a "cut" of those proceeds is often more profitable than selling valuable stuff. Auctioneers have fine-tuned this and turned it into a cottage industry.>
Well, if you own the company 100% it can make sense to remove the "dividend" part of it and just (in the simplest form) make your company part of your personal assets. That will remove the capital gains tax and only give you a corporate tax, or maybe vice-versa.
Bloop... the NFLX bubble has burst some more. It's going to go down more...
Quick question now that this has been bumped:
As most of you know, in reality I'm a boring investor; most of my money is in a very low cost index mutual fund (uh, 0.09% or so?). My question is related to the relative advantages/disadvantages of index ETFs compared to mutual funds. Almost all of my investments are in tax-protected accounts, so that's not a specific concern. As I understand it, ETFs have lower expense ratios - for example, Vanguard's VTI has a 0.07% expense ratio - and can be traded at all times like a stock. Yet on the other hand, there can be pretty big bid-ask spreads, depending on the fund. I'm also a little concerned at some of the sampling methods used by some index ETFs, though to be fair that can also be a problem for an index mutual fund.
So - what do you guys do? Is the slightly lower expense ratio of an index ETF worth the potential issues of a bid-ask spread or other oddities with an exchange-traded vehicle?
As for NFLX - yeah, long time in coming. Their projected subscriber base for end Q4 was pretty horrible; looks like consumers are really punishing them for their total screwup in the last few months. Kinda sad, though - as a consumer there aren't many viable streaming options out there, and at least Netflix had been trying to secure a decent library. I'd jump on a similarly priced (but better selection) offering in a minute, but honestly where is there to go? Amazon Prime doesn't cut it, and most of the other content libraries are pretty small.
CAT is doing pretty well based on Q3 revenues/profit and Q4 projections. Might it be a leading indicator for a modest recovery in housing and construction?Quote:
Originally Posted by wiggin
HD has also gotten some good ratings so far, and they look better positioned than Lowe's. Don't know if either are as much of a buy for me as it was in August, but still something to think about.
ETFs themselves have a range of expenses, depending on what kind of ETF you get. Most have lower expenses because they track indexes, but that's not always the case. While I like ETFs in concept, I don't have much money with them. This isn't really the product of any strategy, just sort of how things have fallen. If you're going for just straight indexing, I think ETFs are worth at least a substantial portion of your investments.Quote:
Originally Posted by wiggin
I haven't heard anything about wide bid-ask spreads, but ETFs are nominally more liquid because they trade throughout the day (unlike most mutual funds). However, I do worry that ETFs have become something of a bubble. Many of their benefits are driven by subtle (but important) differences in how ETFs are taxes. Taxation is itself is a fickle thing, and for someone who has a long-term outlook that question mark on ETFs should raise people's antenna's more than they do.
In case you're curious, I recently moved about 11% of my straight-cash holdings into the Vanguard Dividend Growth Fund (GFinance). The fund basically captures one part of my long-term strategy and, for middle-of-the-road fees, lets me stop mucking around in individual stocks while still knowing that I'm investing in a spread of cash-producing companies.
Yeah, I'm specifically comparing EFT index funds (something like VTI) compared to mutual index funds. It varies, but generally the difference is a few basis points on expenses. I'm not very interested in any exotic or actively managed funds - as it is, my wife's 401(k) only has relatively high expense actively managed funds, so a huge portion of our retirement savings already captures that world (too much IMO; I'd prefer to have a basic domestic index, MSCI EAFE-like fund, a developing world fund, and a basic total bond market fund).Quote:
Originally Posted by Dreadnaught
Yeah, the liquidity makes sense for a relatively active trading strategy, but I don't think it matters in the slightest for my retirement savings. ETFs might be better than mutual funds on some tax considerations, but not necessarily, and all of my current investments are in tax protected accounts anyways, which means they'll almost certainly be taxed at income tax rates when they're withdrawn anyways. (Quite a bit of my index fund exposure is in a Roth, which makes the tax question completely irrelevant regardless.) I think the bid-ask spread is mostly an issue for smaller funds; the bigger ones probably don't have a very big spread because they're actively traded.Quote:
I haven't heard anything about wide bid-ask spreads, but ETFs are nominally more liquid because they trade throughout the day (unlike most mutual funds). However, I do worry that ETFs have become something of a bubble. Many of their benefits are driven by subtle (but important) differences in how ETFs are taxes. Taxation is itself is a fickle thing, and for someone who has a long-term outlook that question mark on ETFs should raise people's antenna's more than they do.
I've heard a lot of people use ETF index funds for taxable accounts, though. Once I have enough money to have a taxable account, it's probably worth a look. ;)
Not the worst choice, probably. A low-cost dividend strategy is probably a decent 'safe bet'.Quote:
In case you're curious, I recently moved about 11% of my straight-cash holdings into the Vanguard Dividend Growth Fund (GFinance). The fund basically captures one part of my long-term strategy and, for middle-of-the-road fees, lets me stop mucking around in individual stocks while still knowing that I'm investing in a spread of cash-producing companies.
While we're talking about cash holdings - my wife and I have a fairly substantial chunk of change sitting in an internet bank earning some pathetic amount (1% or so?). We do this because of economic uncertainty, and we want a sizable cash cushion, but we could probably take about half of it out and still have enough liquid assets to deal with any issues. The reason I haven't invested it is because we're building up a down payment for a home (which, if we stay in Boston, will probably run to $200k in cash) and I don't want to be exposed to rather substantial market risks on such a short investment horizon (~3 years?). Any suggestions for what to do with a wad of cash that's better yielding than a bank account, but still relatively liquid and exposed to minimal market risk? Short term Treasuries are obviously out, which doesn't leave much to work with. It's kinda frustrating; once I am gainfully employed in a real job, that amount of excess cash is likely to grow very quickly, and it's going to essentially sit around doing nothing...
Wiggin, try .4%...
Anyhoo, buy HP. :P No risk, there...
The P/E is really good and Meg Whitman just said they weren't going to sell the personal PC hardware business. Seems to be a really slow reaction from the market given the very negative and very large reaction when HP said they WOULD sell earlier...