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Thread: The Stock/Investment Thread

  1. #301
    Quote Originally Posted by Loki View Post
    So my mom wants to put some money in the stock market.....
    OK, so how are you advising her to "time" entry into a stock market that's been bubbling "high"....but hasn't had "normal" corrections for at least two years?

  2. #302
    You'll never be able to time the market perfectly.
    Hope is the denial of reality

  3. #303
    In other words....you advised your mother to buy stocks/stock indexed funds during a false *inflated* bubble?
    Last edited by GGT; 02-04-2014 at 07:49 PM. Reason: *

  4. #304
    Dollar cost averaging works around most of those issues, GGT. And I'm putting my money where my mouth is; I plow a few grand into the market every month.

  5. #305
    Quote Originally Posted by wiggin View Post
    Dollar cost averaging works around most of those issues, GGT. And I'm putting my money where my mouth is; I plow a few grand into the market every month.
    Good for you. You're a young professional, whose "investment" life looks as promising as your current employment. You have the "luxury" of putting X amount of your paycheck income toward your savings/retirement plans.....and iirc you put that mark at $5 million. Most working Americans don't have that same "luxury". They don't have a few grand to plow into 'the market' every month.

  6. #306
    I wouldn't call my life luxurious, but prudent.

  7. #307
    And what does "prudence" mean in today's investing environment....if it's not age-specific?

  8. #308
    Despite all the data behind dollar cost averaging and the data against idiots like me timing, I've timed the market fairly well on two big occasions (big in terms of the money put into the market). My time horizon is very long and I'm hoping for another correction soon to try again, but deep down I know it's stupid and I should stop doing it.

  9. #309
    And how does that translate to "advising" your mother?

    PS, that was a rhetorical comment
    Last edited by GGT; 02-05-2014 at 03:37 AM.

  10. #310
    Quote Originally Posted by Dreadnaught View Post
    Despite all the data behind dollar cost averaging and the data against idiots like me timing, I've timed the market fairly well on two big occasions (big in terms of the money put into the market). My time horizon is very long and I'm hoping for another correction soon to try again, but deep down I know it's stupid and I should stop doing it.
    If you're doing it with 'play' money, go right ahead. I get more nervous about people doing it with important (e.g. retirement) money. We've seen just looking at flows into/out of bond and stock funds that people generally are pretty awful at timing the market, even relatively well-informed ones like institutional investors. You might have gotten lucky - and you might even be smarter than the average on this issue - but I wouldn't gamble anything important on that hope. Just IMO.

  11. #311
    Quote Originally Posted by wiggin View Post
    If you're doing it with 'play' money, go right ahead. I get more nervous about people doing it with important (e.g. retirement) money. We've seen just looking at flows into/out of bond and stock funds that people generally are pretty awful at timing the market, even relatively well-informed ones like institutional investors. You might have gotten lucky - and you might even be smarter than the average on this issue - but I wouldn't gamble anything important on that hope. Just IMO.


    Maybe Loki will take that into consideration, since it comes from you.

  12. #312
    Nothing is play money to me, though I do take more risk with certain chunks.

    More importantly, who's into marijuana stocks? That became a pricing bubble really quickly, but I can't deny the appeal of investing in a totally new industry.

  13. #313
    I posted something about Cannibusiness, but I can't recall where or when.

    It's pretty easy to talk about micro-beer breweries, or artisan wineries, as start-up businesses. But not many people want to actually discuss marijuana prospects. It's still pretty "out there" as a legitimate investment sector. Probably based on decades of Reefer Madness propaganda, and political influence from the pharmaceutical industry.

    It's a shame, really. Humans have always pursued 'natural' pleasures and chemical states of mind. Sex, sports, and scripts don't have a monopoly on endorphins.

  14. #314
    Would you be as eager to tell people to invest in tobacco companies?
    Hope is the denial of reality

  15. #315
    Quote Originally Posted by Dreadnaught View Post
    Nothing is play money to me, though I do take more risk with certain chunks.

    More importantly, who's into marijuana stocks? That became a pricing bubble really quickly, but I can't deny the appeal of investing in a totally new industry.
    I think that there's a huge amount of policy/enforcement risk... and that most of the current crop of companies are likely to fail. I imagine there will be a few well-run outlets that will end up owning the market, but it's probably hard to choose those (if they even exist yet). But all of that aside, I'd steer clear because of the policy risk.

    Same reason I wouldn't touch Bitcoin-related stuff with a ten foot pole.

  16. #316
    Here in Colorado, where the stoners are recieving a cold lesson in supply/demand v. cost to the consumer. When retail pot sales opened prices nearly tripled overnight, literally overnight as the customer base was instantly multiplied at least ten-fold. The prices will go through periods of correction and eventually stabilize, of course, but until then I will laugh the space cadets who can't stop whining about it. I guess the lesson here is this: a trendy new (to the market anyway) product is very valuable but only for a short time. Get in early, get in big, but most of all know when to jump ship. Don't worry about the market, pot isn't going away anytime soon.
    The worst job in the world is better than being broke and homeless

  17. #317
    Senior Member Flixy's Avatar
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    It's a bit naive to assume so many more people use it now than when it was illegal, I mean, more people smoke weed in most countries around us here (and even in the USA iirc) than here, and it's been legal for ages here (and with excellent price-quality ). Use is probably spiked now 'because I can smoke now', but realistically, how many people who will keep using it didn't use it when it was illegal? Plus when growing it becomes legal, that will probably increase supply a lot, because growing has always been more risky.
    Keep on keepin' the beat alive!

  18. #318
    Quote Originally Posted by Loki View Post
    Would you be as eager to tell people to invest in tobacco companies?
    Of course not. The tobacco industry manipulated science, pharmaceuticals, marketing/advertising, and legislation for too long to be considered credible. Marijuana is facing the exact opposite forces -- it's nearly impossible to fudge the science, no matter how hard the pharmaceutical industry hopes.

  19. #319
    Senior Member Flixy's Avatar
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    Eh, it's not like it's unheard of to add chemicals/other stuff to marijuana to make it feel more potent either (or simply to make it heavier), or other nasty stuff. I'm not really sure what you mean about fudging the science?
    Keep on keepin' the beat alive!

  20. #320

  21. #321
    Quote Originally Posted by Flixy View Post
    It's a bit naive to assume so many more people use it now than when it was illegal, I mean, more people smoke weed in most countries around us here (and even in the USA iirc) than here, and it's been legal for ages here (and with excellent price-quality ). Use is probably spiked now 'because I can smoke now', but realistically, how many people who will keep using it didn't use it when it was illegal? Plus when growing it becomes legal, that will probably increase supply a lot, because growing has always been more risky.
    Quote Originally Posted by rumrunner View Post
    Here in Colorado, where the stoners are recieving a cold lesson in supply/demand v. cost to the consumer. When retail pot sales opened prices nearly tripled overnight, literally overnight as the customer base was instantly multiplied at least ten-fold. The prices will go through periods of correction and eventually stabilize, of course, but until then I will laugh the space cadets who can't stop whining about it. I guess the lesson here is this: a trendy new (to the market anyway) product is very valuable but only for a short time. Get in early, get in big, but most of all know when to jump ship. Don't worry about the market, pot isn't going away anytime soon.
    Agreed.

    Quote Originally Posted by wiggin View Post
    I think that there's a huge amount of policy/enforcement risk... and that most of the current crop of companies are likely to fail. I imagine there will be a few well-run outlets that will end up owning the market, but it's probably hard to choose those (if they even exist yet). But all of that aside, I'd steer clear because of the policy risk.

    Same reason I wouldn't touch Bitcoin-related stuff with a ten foot pole.
    I don't think this is on the par with Bitcoin. These companies may occupy a slightly shady/untested corner of the stock market, but they are still plugged-in to the conventional financial system in some respect.

    I think the bigger issue is basically betting on the pot market of a few states because, as rumrunner pointed out, demand and prices will shift. And many of these companies will fail (as you mentioned).

  22. #322
    Senior Member Flixy's Avatar
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    Plus they still face problems - I read in a news article here that cannabis growers can't open bank accounts because banks are don't want to get in trouble with federal authorities.
    Keep on keepin' the beat alive!

  23. #323
    Barak "Choom Gang" Obama to the rescue!

    Obama administration clears banks to accept funds from legal marijuana dealers

    By Danielle Douglas, Published: February 14 E-mail the writer

    The Obama administration on Friday gave the banking industry the green light to finance and do business with legal marijuana sellers, a move that could further legitimize the burgeoning industry.

    For the first time, legal distributors will be able to secure loans and set up checking and savings accounts with major banks that have largely steered clear of those businesses. The decision eliminates a key hurdle facing marijuana sellers, who can now legally conduct business in 20 states and the District.

    So far, the Obama administration has dealt with the legal dilemmas posed by Colorado and Washington — where state laws now allow recreational marijuana use — largely by choosing not to enforce the federal statutes. Eighteen other states allow the sale of medical marijuana — though federal law does not allow that, either.

    Last year, for example, the administration said it would not challenge Colorado’s and Washington’s legalization of the drug, as long as they kept a tight rein on marijuana businesses. The administration agreed in August not to prosecute legal dealers as long as they met eight requirements, including not selling to minors.

    This was not, federal officials said, a change in the law itself. Marijuana was still illegal, as far as the federal government was concerned, in all 50 states. Instead, it was just a declaration that the Justice Department had bigger things to worry about.

    On Friday, the administration went a step further by laying out a path for banks to bring marijuana commerce out of the shadows and into the mainstream financial system.

    The Treasury Department issued new rules that could make it easier for banks to do business with marijuana dispensers. In separate guidance, the Justice Department directed U.S. attorneys not to pursue banks that do business with legal marijuana dispensers as long as the dealers adhere to the guidelines issued in August.

    A senior administration official, who was not authorized to speak publicly, acknowledged that the decision could draw legal protests from anti-legalization groups. Some lawmakers have complained that the administration is enabling an industry that is in violation of federal law.

    “Marijuana trafficking is illegal under federal law, and it’s illegal for banks to deal with marijuana sale proceeds under federal law. Only Congress can change these laws. The administration can’t change the law with a memo,” Sen. Chuck Grassley (R-Iowa), ranking member of the Senate Judiciary Committee, said in a statement.

    Financial institutions have feared that they would run afoul of money laundering statutes by accepting money from an activity considered illegal under federal laws. That has made it difficult for the growing crop of legal marijuana dispensers who must operate exclusively in cash, placing them at greater risk of being robbed.

    As it stands, banks have to notify federal regulators of suspicious activity, such as moving money from illicit activity like drug dealing. To address that glaring conflict, Treasury said banks now must file a “marijuana limited” report that says the dealer is following the government’s guidelines, including ensuring that sales revenue does not wind up in the hands of criminal enterprises. But if the bank believes the dealer’s revenue is not coming exclusively from legal sales, then it has to file a “marijuana priority” report to alert regulators.

    “This is very good news,” said Steve Horwitz, owner of the Ganja Gourmet in Denver.

    Last week, Horwitz’s bank, Wells Fargo, discovered that he sells marijuana-laced food and closed his business account.

    “The opposition and difficulties to being in this industry are just unimaginable,” he said. “Every time you think you’re going forward, you go back 100 yards.”

    Horwitz said he has already had to change credit card processors and banks once, and was at a loss as to what his next step should be.

    “Just fifteen minutes ago, me, my office manager and my budtender were discussing this,” he said. Horwitz has heard that other shop owners have opened personal accounts or set up shell companies in order to bank. But he wasn’t sure how he would manage things like payroll or taxes with those options.

    Now, he hopes Wells Fargo will rethink its decision. “We’re good customers,” he said. “We pay extra money for cash deposits, and we move a lot of money. It’s in their interest to keep us.”

    Wells Fargo did not comment on Horwitz’s case but said it is the bank’s policy not to work with marijuana businesses. “We are reviewing the guidance” issued Friday, said Mary Eshet, a bank spokeswoman.

    Financial firms could be handsomely rewarded for banking legal marijuana business. The legal U.S. industry is expected to reach $2.57 billion in sales this year, according to ArcView Market Research.

    But the government’s new rules may not be enough to assuage bankers’ fears.

    The Justice Department has embarked on an aggressive campaign against money laundering, going after banks, including HSBC, for allowing millions of dollars from drug traffickers, terrorists or countries under sanctions to illegally move though the U.S. financial system. Against that backdrop, bankers may turn away business that could paint a target on their backs.

    Nothing in the guidance protects a bank from future prosecution if a new administration decides to prosecute state-licensed companies for violating federal drug laws, analysts say.

    “This guidance doesn’t alter the underlying challenge for banks,” said Frank Keating, president and chief executive of the American Bankers Association. “Possession or distribution of marijuana violates federal law, and banks that provide support for those activities face the risk of prosecution and assorted sanctions.”

    As long as marijuana is classified in the same category as heroin, bankers will remain reluctant to do business with dealers, even if they are operating within the confines of state laws, analysts say.

    A congressional coalition, led by Rep. Earl Blumenauer (D-Ore.) is calling on President Obama to reclassify marijuana. “If we reschedule or de-list marijuana, it would have a series of salutary effects,” Blumenauer said. “We’re fast reaching the point where it is easier for a parent to get medical marijuana for a child with severe epilepsy, than for researchers to get marijuana to study.”

    The banks could face a civil penalty if they do not strictly abide by the rules laid out in the guidance, said a senior Treasury official, who was not authorized to speak publicly. But the official also said that the ultimate goal is to mitigate the risks associated with having these businesses operate in an unregulated all-cash system — not to ensnare the financial institutions.

    “We’ll focus enforcement on individuals or institutions who willfully and systematically act in contravention of the guidance, not some technical mishap,” the official said.

    Until now, marijuana dispensers have had to find backdoors into the banking system. Some set up holding companies with nondescript names that obscure the nature of their business, while others use their personal bank accounts, said Taylor West, a spokesperson for the National Cannabis Industry Association. These accounts, she said, are usually closed once bankers start noticing the large quantities of cash running through them.

    Mike Cuthriell has been lucky. The owner of Metropolitan Wellness Center, a medical marijuana dispensary in the District, has used his personal bank account for his business since opening in August. He would not disclose the name of the bank, out of concern for his relationship with the institution.

    “When we were incorporated, we didn’t reference the business in too much detail with the bank,” Cuthriell said. “But now we can take advantage of small-business loans, and that’s been difficult for our industry.”

    Despite the new banking industry rules, other challenges to the industry remain, he said. Federal tax policy makes it difficult for him to claim deductions on his returns, Cuthriell said.

    “While we’re generating revenue, we’re not cash-flow positive yet. And we’re not certain that we’ll be able to write off traditional business expenses, which will have a large impact on our finances,” he said.

    Cuthriell said his accountant advised him not to attempt to gain any tax benefits from his business. The Internal Revenue Service could come after his business.

    http://www.washingtonpost.com/busine...99b_story.html

  24. #324
    Dread, that reminds me of you posting pictures from Israel. In your younger and more "innocent" years.

  25. #325
    Decided to venture into this thread, seeking advice.

    Now that I've moved house and paid off all unsecured debts, and have a new job with a 25% salary hike, I've got (and should continue to have) spare cash with which to invest.

    I am a total newbie when it comes to this. The most investment I've done is Shares Purchase schemes offered at the banks and insurance companies I've worked for.

    ~

    So how would I start?

    It's going to be small-time to begin with - a few hundred pounds to get me going. Then as I find my feet and familiarise myself with the market and its movements, I'll start to invest more with growing confidence.

    I imagine I'd be best going through a broker? Suggest a spread of high, medium and low risk investments, and see where that takes me, and where I find the most suitable returns?

    Any advice welcome.

  26. #326
    Quote Originally Posted by Timbuk2 View Post
    Decided to venture into this thread, seeking advice.

    Now that I've moved house and paid off all unsecured debts, and have a new job with a 25% salary hike, I've got (and should continue to have) spare cash with which to invest.

    I am a total newbie when it comes to this. The most investment I've done is Shares Purchase schemes offered at the banks and insurance companies I've worked for.

    ~

    So how would I start?

    It's going to be small-time to begin with - a few hundred pounds to get me going. Then as I find my feet and familiarise myself with the market and its movements, I'll start to invest more with growing confidence.

    I imagine I'd be best going through a broker? Suggest a spread of high, medium and low risk investments, and see where that takes me, and where I find the most suitable returns?

    Any advice welcome.
    Major caveats before I start:
    1) I don't know UK tax law, or how UK retirement works.

    2) I don't know your age, risk tolerance, or investing goals.

    That being said, the general spiel I'd give to an American is roughly thus:

    First off, you need an adequate, risk-free cushion. Figure you'll want to be able to cover your basic expenses (mortgages, healthcare, food, utilities, etc.) for an extended period in the event of a catastrophic problem (unemployment, unexpected capital purchase, etc.). I aim for at least 6 months; depending on your job security and the extent of your various forms of insurance, you might be able to skimp on that. This money should be in cash or cash equivalents like government backed savings accounts; hardly a return, but it's safe, which is the first priority.

    The rest of your money can be invested much more creatively. I would first avail yourselves of any tax shelters the UK government makes available for investors - in the US you can normally sock over $20k annually into various deferred-taxation investment accounts with various restrictions (normally on withdrawals before retirement age). If you work out the math, these tax shelters are almost always worth it, provided that your investment goals meet the restrictions. I haven't a clue what those tax shelters are, though, so you'll have to ask RB for those details. I assume they're more modest than the US (since pensions in the UK are much more comprehensive), but are probably still worth it.

    So now you've got three pots of money: emergency cash(ish) savings, tax-protected investments, and taxable investments. For the purposes of the rest of this post, the advice on where to invest your money will be largely the same between the latter two categories. I should note that in the US there are some more 'tax efficient' investments that are good to use for taxable accounts (e.g. certain government bonds, stocks that don't throw off a lot of dividends, etc.), but those details are likely highly specific to where you live, so I'll leave that as an exercise for the reader.

    Okay, so you have your money split up into tax-protected accounts or not - where do you invest it? There are a bunch of discount brokerages you should be able to use that can sell you a wide range of products - grouped stocks or bonds in mutual funds or ETFs plus a whole bunch of more exotic investments (e.g. real estate funds). When looking for a brokerage, try to find one with a wide range of available funds (so you don't need to change brokers if your investment targets shift), convenient usage, and, above all, low fees. You should be paying little to nothing for your trades, and you shouldn't need to pay a 'load' (i.e. an upfront fee) just to buy into a fund. You shouldn't have to pay to get out of a fund, either (unless it's contingent fees, like withdrawing within 90 days of entering).

    Pretty much all funds will have some sort of management fee which will be a percentage of assets under management. This is unavoidable, but you should try to minimize this as much as possible. Two popular ways to do this are through index funds or ETFs. Index funds are so-called 'passive' investing, where you don't have a team of managers trying to find the next hottest stock - instead they just try to weight the stocks according to a known stock index - e.g. the FTSE 100. There are issues with this approach, but it has the advantage of having VERY low fees. Furthermore, it's very hard for any team of managers to consistently outperform the market - studies have shown that over the long run, taking into account higher management fees, people lose money by going to actively managed funds. The other solution, ETFs, won't drive down fees quite as much, but they do tend to be cheaper than an equivalent mutual fund. There are differences between an ETF and a mutual fund, but you can look up the details on your own (bid-ask spreads on thinly traded ETFs can indeed be an issue, though).

    Okay, so now you've found a cheap brokerage, and a group of cheapish funds you need to choose between. What should you invest in? This is where the whole 'investing goals' and 'risk tolerance' comes in. In general, stock-heavy portfolios perform better in the long run, but bond-heavy portfolios have far less volatility (and are generally subject to less loss of principle). If you're willing to endure more risk - and won't panic by losing a lot of value during market downswings - it's generally a good idea to invest more in stocks. However, if your investment horizon is a short period of time (say, 5 years instead of 25), you definitely want to ease back on your stock exposure because of volatility concerns.

    Personally, I am quite tolerant of risk but am allergic to high fees, so I spread most of my money around three general index or index-like investments: a US domestic fund, a developed world ex-US fund, and a developing world fund. As you can imagine, the developing world stock markets are far more volatile but in the long run offer better returns for obvious reasons having to do with disparities in growth rates for the economies involved. Developed non-US markets is a way of hedging against any US-specific issues and getting exposure to some of the stronger performing economies out there (Germany, UK, Israel, formerly Australia, maybe Japan someday?) - though it's weighed down by laggards in France and the like. US markets are the largest and most mature - and tend to be extremely deep and liquid - but don't necessarily offer amazing returns over the long run. I also have a very small exposure to a high quality US bond fund - mostly a mix of decent quality corporate debt and some US government debt. Boring, but it tends to give a reasonable return that often is a counterpoint to stock returns. In your case, I would strongly advise you do have a heavy non-UK exposure - putting all of your eggs in one smallish basket is a bad idea, even if the UK economy has been doing reasonably well lately. Spreading your money around is a better approach to getting more stable returns.

    I should mention that investing right now is a bit kooky. Bond yields are extremely low (meaning prices are high), so one would think that we should be balancing away from bonds. It also seems likely that monetary policy has nowhere to go but up in the future, which will put pressure on prices. Yet at the same time, stock prices (in the US and much of the developed world) are trading at fairly high valuations compared to historical trends. This could be an indication that investors think corporate profits/growth is likely to shoot up in the future - but with profits already at an all-time high, it seems unlikely. So we're in the weird circumstance that neither stocks nor bonds look like great investments in the short to medium term. It's very hard to predict the market, though, so this is just speculation.

    As I mentioned earlier on this page, I would personally avoid trying to time the market, and instead rely on dollar cost averaging (Google for an explanation if you don't know) with regular investments, and de facto value investing through the medium of regular rebalancing of your portfolio towards pre-determined allocations. Maybe it's stodgy and not as much fun as obsessively following the market and trying to time things, but if the recession has taught us anything, it's that people are really bad at predicting these sorts of things. The stock market in the US literally doubled in value in the last 5ish years, but a huge amount of money was just sitting on the sidelines while this happened because of fear. It's better to set up a well balanced portfolio with defined goals ahead of time and stick to them.

  27. #327
    Timbuk, read everything you can find for "free", whether from a public library or internet news sources. Get familiar with financial terminology like P/E ratios, dollar cost averaging, CDOs, MBSs.

    If things don't make sense, consult professional advice. If things still don't make sense, be prepared to walk away

  28. #328
    I second Wiggin's advice, with the same caveat that I don't know anything about the UK market or investment climate. As one more point of reference, I personally I keep about 12-18 months of cash on hand.

  29. #329
    Actually, pardon the double post, but my own dilemma-

    Due to an unfortunate death in the family, I was left a bit of money a few years ago. This money is currently invested in the stock market, so basically I got possession of a few mutual funds. If I sell all of this, I could pay-down 80% of my mortgage. Obviously, I would still have some other cash and investments but substantially less than right now.

    I'm tempted to pay-off as much of the mortgage as I can, then skim the budget a bit over the next few years to pay the whole thing down. My hangup is that it would take me a few decades to make-up this money, and I wonder if it's best kept invested with a long-term horizon in diverse assets. That said, with the status quo I am basically betting on a long-term stock market return in excess of 4% while still paying interest on a mortgage. On the flip side, selling the assets and paying-down the mortgage is doubling-down on the real estate market.

    My gut tells me to not pay-off the mortgage, but I just hate hate hate debt.

  30. #330
    Quote Originally Posted by Dreadnaught View Post
    Actually, pardon the double post, but my own dilemma-

    Due to an unfortunate death in the family, I was left a bit of money a few years ago. This money is currently invested in the stock market, so basically I got possession of a few mutual funds. If I sell all of this, I could pay-down 80% of my mortgage. Obviously, I would still have some other cash and investments but substantially less than right now.

    I'm tempted to pay-off as much of the mortgage as I can, then skim the budget a bit over the next few years to pay the whole thing down. My hangup is that it would take me a few decades to make-up this money, and I wonder if it's best kept invested with a long-term horizon in diverse assets. That said, with the status quo I am basically betting on a long-term stock market return in excess of 4% while still paying interest on a mortgage. On the flip side, selling the assets and paying-down the mortgage is doubling-down on the real estate market.

    My gut tells me to not pay-off the mortgage, but I just hate hate hate debt.
    How long are you planning on living there, and what are the prospects for real estate in your area?

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