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Thread: The Stock/Investment Thread

  1. #571
    Why do you think that S&P500 is going down?
    The only news on Jan 10 was about Chinese imports and exports going down and yuan going down for several days.
    It should make S&P500 to grow.
    Freedom - When people learn to embrace criticism about politicians, since politicians are just employees like you and me.

  2. #572
    Quote Originally Posted by Dreadnaught View Post
    Probably. Though I'm more prepared for things just going sideways for a while -- as they probably should. Did a lot of scheduled buying from February to March. Mostly paused and will just sit for a while, as this is all long-term investments.
    Invest in porn and a decent teledildonics index fund.
    "One day, we shall die. All the other days, we shall live."

  3. #573
    The end of this month we'll start getting quarterly earnings posted, and it's the end of the fiscal year for many companies. That's probably a good opportunity for an economic shock leading to a market over-correction.

  4. #574
    I've given up on the market reacting to economic news in sane ways.
    Hope is the denial of reality

  5. #575
    Periods of irrationality happen, but they always end. Usually dramatically.

  6. #576
    Still, I've never seen so much speculation go in the opposite direction of just about everyone's expectations. It's one thing when a stock goes up more than it should. It's quite another when it goes up in the face of overwhelmingly bad news that's unlikely to improve for at least a year.
    Last edited by Loki; 06-14-2020 at 05:22 AM.
    Hope is the denial of reality

  7. #577
    Quote Originally Posted by Aimless View Post
    Invest in porn and a decent teledildonics index fund.
    I legitimately just looked at the famous "VICEX" ETF fund and HOLY HELL I can't believe people buy into a 1.49% expense ratio. What a premium for a throwaway-but-fun idea. Anyone know of cheaper funds like it?

    Quote Originally Posted by Wraith View Post
    The end of this month we'll start getting quarterly earnings posted, and it's the end of the fiscal year for many companies. That's probably a good opportunity for an economic shock leading to a market over-correction.
    Agreed, so many investors have no transparency into what even April was like for public companies. It will be a good reality check on earnings multiples, though I'm sure companies will be keen to also message how much better May/June was.

    FREE ENTERPRISE NCC-1701 WILL PREVAIL

  8. #578
    Now I know what caused the S&P500 to go down. Federal reserve forecasted lower than people anticipated.
    However I suspect these estimations do not consider chip manufacturing jobs coming from China and many other companies.
    And liquidity is enough to get some recovery.
    However some people think at this time fundamentals do not support more S&P500 growth until we have recovered preCOVID revenue.
    Freedom - When people learn to embrace criticism about politicians, since politicians are just employees like you and me.

  9. #579
    CLOs will probably be the straw that breaks the economy this time. Earnings reports will merely begin pulling back the curtain on how banks are using CLOs to understate the true risks of the consolidated debt they carry. Banks are way under capitalized for the true risk. When the shit goes down the banks will blame the credit rating agencies just like they did with CDOs. Lot of good Dodd - Frank did to prevent institutional overleveraging.
    Faith is Hope (see Loki's sig for details)
    If hindsight is 20-20, why is it so often ignored?

  10. #580
    I assume you read the Atlantic piece about CLOs. I think it was a bit overblown; banks are better capitalized than they were and I think the risk of financial contagion is still relatively moderate. But certainly the risk is a lot higher now than it was 6 months ago.

    I'm assuming that we're going to see all sorts of gyrations in markets for a while. No one really knows where the economy is going to end up, and where social distancing sensitive sectors (e.g. travel, entertainment, etc.) are going to end up even if employment recovers part of its losses relatively quickly. In that context, no one really knows what an airline or a movie theater chain should be worth.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  11. #581
    I read an interesting theory about why the markets are being more stupid than usual. We know that consumption from the top 10% is way down (while consumption from pretty much everyone else has already returned to pre-covid levels). So you have a lot of upper-middle class/upper class people with a ton of money and nothing to use it for. Given the terrible interest rates in banks, are they moving all that money into brokerage accounts?
    Hope is the denial of reality

  12. #582
    I saw this theory as well! I actually think it may make some sense, more sense than arguments about psychology or people having more time on their hands. You don't need all that much more money to flow into the market on the margins to push up prices. On the other hand, if the big institutional investors really think this rally is a flash in the pan, why isn't there more profit taking and short positions building up? It seems like a lot of people are confused by the rally but aren't willing to question it all that much.

    I suspect there are technical gauges that might allow us to better understand if this hypothesis is accurate. Unfortunately, I don't know enough about that kind of analysis to suggest what we might be able to analyze.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  13. #583
    Quote Originally Posted by wiggin View Post
    I saw this theory as well! I actually think it may make some sense, more sense than arguments about psychology or people having more time on their hands. You don't need all that much more money to flow into the market on the margins to push up prices. On the other hand, if the big institutional investors really think this rally is a flash in the pan, why isn't there more profit taking and short positions building up? It seems like a lot of people are confused by the rally but aren't willing to question it all that much.

    I suspect there are technical gauges that might allow us to better understand if this hypothesis is accurate. Unfortunately, I don't know enough about that kind of analysis to suggest what we might be able to analyze.
    I think we'll have to wait for consumption to pick up to see if it leads to lower stock prices (which could contradict conventional wisdom about the effect of greater consumption).

    I also think we're in a massive bubble and everyone is buying on the assumption that they'll manage to cash out before the whole thing collapses.
    Hope is the denial of reality

  14. #584
    Number of new cases tops its previous high by 25%. Stock market goes up 1%.
    Hope is the denial of reality

  15. #585
    Some questions:

    What is "the economy"?

    What benefit does the economy get from the Fed buying increasing amounts of corporate bonds?

    When will the Fed begin buying stocks?

    What benefit can the economy expect from the Fed buying stocks?


    My current thoughts:

    "The economy" is consumption and speculation. If E=(1-S/C) then the economy is more positive the more C outweighs S.

    Fed buying corporate bonds has minimal effect on consumption and increases speculation.

    Fed will begin buying stocks when the effect of buying corporate bonds diminishes.

    The economy will benefit from the Fed buying stocks by stabilizing speculation with minimal effect on consumption.
    Faith is Hope (see Loki's sig for details)
    If hindsight is 20-20, why is it so often ignored?

  16. #586
    The US needs to stop assuming that the US dollar is the most important metric....

    Freeee Markets lol
    Last edited by GGT; 06-27-2020 at 12:08 AM.

  17. #587
    My assumption is the market won't be too rational until Q3 earnings. Then things will get bloody again and we'll see what things really look like.

  18. #588
    Faith is Hope (see Loki's sig for details)
    If hindsight is 20-20, why is it so often ignored?

  19. #589
    I wonder how long it will take before the Investment Class takes a hit? The compartment bubble has held so far -- including reports that "the housing market" is booming -- even tho 30% of Americans couldn't pay their mortgage or rent the last quarter. It's a "good market" for people with money and high credit scores looking to buy RE or re-finance, along with banks and mortgage originators, but it's a crappy economy for everyone else.

    If it isn't a HUGE thing when millions of people get evicted from their apartments....that will just reinforce the inequities in housing and banking, the impotence of congressional regulators, and the Tale of Two Americas. The "food lines" have been long since mid-March, and will only get worse. The tent cities during the Great Recession were bad, but will only get worse.

    It will be a condemnation of our Freee Market Capitalism if "the markets" continue to go up while the lives of millions deteriorate, and spiral downward. This boom/bust mentality that only benefits the top 10% (who can swim against the tide without trunks) is for the birds.

    I can't even imagine what the hundreds of billions of dollars "given" to big Pharma (and their investors) -- in order to create a vaccine for covid-19 -- would look like if it had been *invested* in Public Health & Prevention initiatives that benefited people first.
    Last edited by GGT; 08-04-2020 at 01:30 AM.

  20. #590
    Just how much money do you think has the government given to pharma companies to develop and/or manufacture COVID vaccines?

    (hint: it's not even close to hundreds of billions of dollars)
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  21. #591
    $1.2 billion to AstraZeneca
    $1.6 billion to Novavax
    $1.95 billion to Pfizer
    + the $300 million spent by Big Pharma on lobbyists
    + the millions of dollars given to Universities for R & D, underwritten by Big Pharma

    You're right, it's not really hundreds of billions, but multiples of millions and billions. Thanks for pointing that out, it makes things soooo much better.

  22. #592
    So, with a massive global pandemic that's costing the global economy trillions of dollars (if not tens of trillions of dollars), you're worried about... $5 billion to figure out how to stop said pandemic. As if $5 billion would significantly move the needle on 'public health and prevention' initiatives.

    I guarantee you, pharma companies (and the healthcare industry writ large) are quite unhappy with the disruption to their normal business as a result of this pandemic. They're not exactly rubbing their hands eagerly trying to get a few piddling billions of dollars when all of their other business is up in the air.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  23. #593
    No, I'm saying those dollars would have been better spent on Public Health, not just in pandemic prevention but general health initiatives.

    $5 Billion + would have gone a longer way on the front end; it costs more to catch up after the fact. Pound wise but penny foolish, an ounce of prevention is worth a pound of cure, etc.

    I'm criticizing politicians who say it's "too expensive" to treat Universal Healthcare as a public *investment*, and refuse to make changes to our fucked up system because it might upset the Investor Class, and their profit models that don't have anything to do with the Greater Good. Let alone health.

  24. #594
    BTW, I'm also criticizing myself, because I'm part of the Investor Class that holds stocks in ethically challenged sectors (like oil, tobacco, fast food, pharmaceuticals, etc.) because it's profitable, and funds my retirement. I feel horrible about it, very conflicted, and wish things were different. Things should be different. That's what I'm trying to say....

  25. #595
    Apple is now valued at $2 Trillion. Growing more during the global pandemic recession than in any other quarter, along with other tech companies like Amazon.

    https://www.wsj.com/articles/apple-s...ue-11597848808

    Remember when Facebook was valued at $30 Billion and that seemed outrageous?

    No doubt about it now -- there's a total disconnect between the stock market (the investor class) and the "real" economy (workers).

    <The federal minimum wage is still $7.25 per hour.>
    Last edited by GGT; 08-22-2020 at 09:11 AM.

  26. #596
    Quote Originally Posted by GGT View Post

    <The federal minimum wage is still $7.25 per hour.>
    They must be happy with not paying to work.
    Faith is Hope (see Loki's sig for details)
    If hindsight is 20-20, why is it so often ignored?

  27. #597
    Here's a fun question for you folks: my company (a medical device startup) gives me stock options as part of my compensation. As is pretty standard in startups, they have a one year clip/four year vest structure (you get 1/4 of the options at 1 year after employment, and 1/36 of the remainder vests every month for three years); additional option grants happen as you move up in seniority/importance, typically also with four year vesting on a new start date.

    The options right now are useless; if I exercised the vested options and bought the shares, I wouldn't be able to sell them to anyone as the company is privately held. But here's the fun part: there are two different ways to realize a profit on the options.

    1. Wait until the company goes public through an IPO or is acquired; in the former case, you can exercise the options and sell at your leisure on the open market. In the latter case, you are forced to exercise the option and sell immediately to the acquirer. Your profit will be the difference between the share price at sale and the share price at option grant.

    2. Buy the options with cash now and then hold them until an acquisition or IPO event.

    On the face of it, there's no reason to do option 2 (why part with cash now for the uncertainty of a future acquisition/IPO? After all, startups are super risky). But taxes tell a different story. If you do option 1 (especially on an acquisition), your profits are treated as income. And since it's likely to be a big chunk of change, you could be talking about a marginal tax rate upwards of 40% (fed + state) on much of your earnings. If you had a minimum 1 year holding period of the stock (i.e. between exercise of the option and sale of the stock), the proceeds are treated as capital gains, which have a tax rate (for large sums) of about 20%. So you get to save a fifth of your earnings, potentially.

    Here's the rub: it means that I have to decide to exercise options and purchase shares (figure to the tune of low 5 figures in cash) at least a year before an acquisition, or else I'm on the hook for a huge tax bill. But as soon as I do so, I've committed a large amount of cash to an incredibly uncertain venture with no guarantee of return... and timing an acquisition can be very challenging. There are a few obvious points to consider (start of first in human testing, 1 or 2 year first in human data, start of pivotal clinical trials, pivotal 1 or 2 year data), and that can be spread out over 5-10 years! So you might be committing money too early to a venture that has a good chance of failure, or you might be throwing away hundreds of thousands of dollars in taxes that you could have avoided.

    What would you do? Exercise options aggressively as soon as it looks like you're ~1 year away from the earliest likely acquisition event? Hold off until an acquisition and eat the tax implications, but get peace of mind? Some middle ground where you split the difference? (For the purposes of this discussion assume that AMT ramifications for early exercise of ISOs are irrelevant.)
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  28. #598
    If I understand you correctly, you will lose either 20% of extra profits or 100% of your own money if you buy now. If you wait (and the company doesn't go bankrupt), you lose 40% of extra profits.

    Let's assume stock prices double if everything goes well.

    Under scenario 1 (wait):
    If you think the company has a 50% chance of succeeding, then you get 0.6x half the time and nothing the rest of the time. An average of 0.3x.

    Under scenario 2 (buy now):
    If you think the company has a 50% chance of succeeding, then you get 0.8x half the time and -x the rest of the time. I.e., -0.1x on average.

    For 85% success, those numbers are .6*.85 + 0 = .51 for wait, and .8*.85 - (-1*.15) =.53 for buy now.

    I.e, assuming you expect shares to double in the best case scenario, you need to believe your company has an 85% chance of reaching that scenario for buying now to make sense. Those numbers change if your best case scenario is more than a doubling. You can plug in the numbers.
    Hope is the denial of reality

  29. #599
    Sure, I can do an expected value problem just like anyone. But the chance of success (and the payoff) is extremely uncertain. I'd say that the payoff is highly likely to be more than double if the company succeeds (say, maybe 10-100 fold? I'd expect the company to be purchased for high 9 figures/low 10 figures if things go well)... but the uncertainties inherent in clinical trials mean that the probability of success is also variable. Then of course there are all sorts of in between versions of 'success' - an acquisition for a lowball price because the clinical data is okay but a bit mushy, or an earlier/later acquisition depending on the strategy of the board (later might be a bigger payoff but with more risk before you get there... and more capital raising, diluting shareholders). It's really complex and even though I'm one of the few people in the world best situated to fully evaluate the risk to the company, my confidence interval is still pretty wide.

    I guess my real question, though, doesn't come down to an expected value problem. People are not homo economicus and are much more averse to losing cash in hand than potential losses in the future to taxation. If you had to plunk $10k or $20k down now to potentially save yourself $200k in taxes, or potentially lose all of the money - would you make the decision entirely based on expected value, especially with such soft parameters? Or would you bias towards either the optimistic view (invest it all, let it ride, the payoff is huge) or the pessimistic view (a bird in the hand...)?
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  30. #600
    It depends on how much that $10-20k means to you and how much the $200k would mean to you. If losing the former would really hurt your bottom line, don't do it. Otherwise, that's a pretty hefty payout. I also realize that there is a lot of uncertainty, but you should still arrive at a rough ballpark figure. You can calculate the probability of the company going bust, of being lowballed, of making a small profit, and making a giant profit.
    Hope is the denial of reality

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