The Stock/Investment Thread

[Being]

Is the economy doing so well because we are not allowed to save?

https://fixedincome.fidelity.com/ftgw/fi/FILanding

[Dreadnaught]

I think there's some impact on economic growth (people borrowing for homes/home renovations). But a more immediate impact in asset valuations. This kind of punishment for saving isn't ideal, and we've had a decade of it. It was finally beginning to turn around before the pandmic but methinks we'll have another lost decade for savings unless we start seeing inflation bad enough that rates must come up to tame it.

[GGT]

Monetary policy can do a lot, but it can't fix bad fiscal policy. Or predatory financial "products".

We haven't been pro-savings for many decades, since credit and debt became monetized, and getting a mortgage for a HOME turned into profiteering propaganda that too many people fell for. <Borrow now, sell later, use the profits to fund your retirement.> When that didn't pan out so well, the reverse mortgage became the new financial instrument promising to fill the gap between RE assets, income, and COL (including health insurance).

Modern Home Ownership (ie mortgage debt) is either a massive grift, or a huge Ponzi scheme. Just look at what MBS (Mortgage Backed Securities) did in creating the Great Recession.

[wiggin]

I've been dumbfounded by Tesla's performance in the last 6 months; frankly I just don't understand how the company could possibly be worth that much money, unless they somehow end up becoming the single dominant player in the auto industry (which seems rather unlikely). An $830 billion market cap on a smallish luxury car maker?

I would argue people should short it except that Tesla skeptics have been screwed in the past based on stock performance that seems unmoored from reality or fundamentals. I heard someone comparing it to Amazon 20 years ago (in terms of no profit, etc.) but it's such a fundamentally flawed comparison - first, because the P/E ratio is ridiculously higher, because Amazon benefitted from network effects and scalability that's simply not possible with a manufactured good like a car, etc. It's just baffling.

[Wraith]

I've been dumbfounded by Tesla's performance in the last 6 months; frankly I just don't understand how the company could possibly be worth that much money, unless they somehow end up becoming the single dominant player in the auto industry (which seems rather unlikely). An $830 billion market cap on a smallish luxury car maker?

They got into the mass market with the Model 3. It's still at the higher end of the mass market price range, but tech improvements mean they'll be able to keep making it cheaper. Advancing tech across the board has been favoring Tesla really, and the last couple years have seen some massive leaps in battery tech.

Two things that are likely fueling their recent price hikes are the announcement of targeting the release for fully autonomous driving in their consumer vehicles for this year, and the release schedule and all the shipping industry interest in the Tesla Semi, which has been successfully making autonomous deliveries in limited trials for about a couple years now (or more, don't quote me), and is starting mass production.

There's also a good bit of FOMO, natch, but it should be priced relatively high based on future profit projections. I wouldn't advise shorting it, but wouldn't advise buying it at this price either.

[wiggin]

They got into the mass market with the Model 3. It's still at the higher end of the mass market price range, but tech improvements mean they'll be able to keep making it cheaper. Advancing tech across the board has been favoring Tesla really, and the last couple years have seen some massive leaps in battery tech.

Two things that are likely fueling their recent price hikes are the announcement of targeting the release for fully autonomous driving in their consumer vehicles for this year, and the release schedule and all the shipping industry interest in the Tesla Semi, which has been successfully making autonomous deliveries in limited trials for about a couple years now (or more, don't quote me), and is starting mass production.

There's also a good bit of FOMO, natch, but it should be priced relatively high based on future profit projections. I wouldn't advise shorting it, but wouldn't advise buying it at this price either.

All of these are reasons to value Tesla at higher valuations than an established auto company. A valuation of $830 billion, however, is larger than the valuations of Toyota, Volkwagen, Daimler, Honda, GM, BMW, Volvo, Fiat, Ford, and Hyundai combined... and still have $100 billion+ for pocket change. If you offered me one or the other I'd turn down Tesla in a heartbeat.

I wouldn't short it because this is clearly driven by irrational exuberance and is completely unmoored from reality or fundamentals. But there is no world in which that kind of market cap is justified unless Tesla will be make, at least, half of the cars in the world within 5-10 years. The only other potential pivot would be if they became a supplier to established companies for e.g. autonomous tech. The prices we've seen for companies like Mobileye suggest that that wouldn't justify such a truly crazy valuation either.

[Being]

$140 billion of bitcoin has lost passwords. What happens to those bits?

[Serapis]

Ok, so after the last stock market crash, I regretted not putting some money in stocks of banks that would obviously recover. So with the current situation; I increased! Yay for disaster capitalism!

Here's what I brought shares in;
* Fenix outdoor International
* Joules
* Nordex SE
* Carbios
* Lloyds Banking
* NatWest
* Marks and Spencers
* Svenska handelsbaken
* Bt
* United natural foods

My technique generally was to squint at the graphs and roughly to look at the average in the past, and if I'd double by money when they returned to normal, then that was a good indicator for me. With a slight bias to ethical companies.

I brought some shares after the main stock market dip, some which haven't done so well (United natural foods) and others which have (nordex +72 %).

Apparently I'm up by 50 %, plus I was given £1k by the government for investing.

I'm thinking about selling bt.

[Steely Glint]

Reddit has brought a 13 billion dollar hedge fund with a short position on gamestop to it's knees by shitposting and meming.

This is funny, to me.

I am genuinely finding this amusing.

[Steely Glint]

In fact, I am lead to believe that this is actually a situation known as, in the jargon of the finance industry, "not stonks".

[Flixy]

I did notice a lot of posts, but did not realize what was going on. How exactly did they manage that?

[Steely Glint]

A bunch of rich assholes with a hedge fund shorted Gamestop stock, so some redditor assholes decided to all buy stock in game stop so now the rich assholes will lose a lot of money, leading the rich assholes to cry about it in a fashion which is extremely funny.

[Being]

.
Finally some positive news for those of us who prefer CDs over stocks...

Banks Must Refill the Till

[wiggin]

I think you should continue to assume that CD rates will be near or below inflation for the foreseeable future. Small changes like this are not going to materially affect the secular environment, which will continue to have quite loose monetary policy and a savings glut.

[Being]

Seeing 5 year at 1.0% and 10 year at 2.0% is encouraging.

[wiggin]

Long run inflation is about 3%, though in the post-2008 world it's been more like 1.5-2% most of the time. I doubt you're going to get sustained CD rates much better than inflation for a very long time.

[Being]

.
Keeping up with inflation is better than not, right?

[wiggin]

I'd prefer real returns of 3-5%, but maybe that's just me.

[Being]

I'd prefer real returns of 3-5%, but maybe that's just me.

I understand that. Same as me when I was your age. I am retired and would rather not worry about risks involved with my money. The thing about stock investing is that it is not your money until you sell. And the way traditional IRA management works, I have at least a 24 hour disadvantage to other investors if I smelled something sour and wanted to get out.

[Lewkowski]

I understand that. Same as me when I was your age. I am retired and would rather not worry about risks involved with my money. The thing about stock investing is that it is not your money until you sell. And the way traditional IRA management works, I have at least a 24 hour disadvantage to other investors if I smelled something sour and wanted to get out.

What do you mean by traditional IRA management works? The IRA should just be a shell, you can still buy/sell like a non IRA account outside of certain margin/day trading issues.

[Being]

What do you mean by traditional IRA management works? The IRA should just be a shell, you can still buy/sell like a non IRA account outside of certain margin/day trading issues.

If I place an order after close, the price will be at the next day's closing price. That's 24 hours of finger crossing. If I'd be idiot enough to trade Friday after close that is 72 hours. I can place an order right up to close but in reality orders must be placed at least 30 minutes prior to close to have a reasonable expectation of them being executed. 30 minutes is a long time.

[wiggin]

Yes, that is the conventional wisdom and the same advice I get from my IRA management. I just haven't heard a convincing reason for that. If you have reached your goal before retirement, why on earth is it wise to take any risk at all?

If I place an order after close, the price will be at the next day's closing price. That's 24 hours of finger crossing. If I'd be idiot enough to trade Friday after close that is 72 hours. I can place an order right up to close but in reality orders must be placed at least 30 minutes prior to close to have a reasonable expectation of them being executed. 30 minutes is a long time.

I find the juxtaposition of these two points to be... puzzling. Retirement funds aren't meant to be day traded, but drawn down in a boring and predictable manner (even better if you can just pull out dividends and leave the shares untouched); there's generally no reason to worry about the exact time in which a withdrawal is executed unless you have a crystal ball and are trying to time the market, which seems like behavior that is at odds with a sober and low risk mindset. To see that coupled with an argument about having no stock exposure because the risk is too great...

I guess that even if I have a notional number I want to hit, it's all based on probabilities. If you can exceed that number, or stretch your withdrawals a bit, you insulate yourself from longevity risk that wasn't accounted for by your original model. There's also some evidence that some modest stock exposure can actually reduce your volatility, as bond prices have historically moved opposite stocks (this assumption has been tested in recent years with the zero rate bound, though, so it may not be as relevant today). *Shrugs* to each his own.

[wiggin]

Oh, sure, as I get older I'll drop my exposure but even so I'd still have a 25-50% exposure to stocks...

[Being]

Yes, that is the conventional wisdom and the same advice I get from my IRA management. I just haven't heard a convincing reason for that. If you have reached your goal before retirement, why on earth is it wise to take any risk at all?

[Being]

I wonder how long it will take for the dictionaries to catch up with the real world definition of Free Market.

[GGT]

I wonder how long it will take for the dictionaries to catch up with the real world definition of Free Market.

"Free Market" is a modern-day myth, created by the 'market-makers' of unfettered capitalism, perpetuated by politicians who take campaign 'contributions' from well-paid lobbyists that don't want regulations/oversight/guard-rails and frame that SSSocialsim.

PS you're right about the unfairness of trades made around closing. That's why High Frequency Trading done by big financial firms has an advantage over the individual investor, regardless of the platform (AmeriTrade, RobinHood, etc.) Freeee Markets my ass.

[GGT]

If my memory is correct, wiggin plans on having a $5 million retirement account -- with all "probabilities" based on employment income, 401K or employer pension benefits, plus individual investments in stocks/bonds/IRAs, and/or RE assets.....where all those things gain value over time per conventional wisdom.

It doesn't take much to crush that plan, ya know.

[Being]

...

It doesn't take much to crush that plan, ya know.

Still, having a plan is great. Adjust as necessary.

[wiggin]

One has nothing to do with the other. The first, I muse as to why I'm not in stocks; the other, I'm answering an unrelated question from Lewk.

Right, but that question was directly based on your earlier elaboration of why you don't like holding stocks in your IRA. Whatever, this isn't meant to be a gotcha, it's your money to do with as you wish, and I'm delighted that you believe you have a more than adequate cushion using a very conservative investing strategy.

If my memory is correct, wiggin plans on having a $5 million retirement account -- with all "probabilities" based on employment income, 401K or employer pension benefits, plus individual investments in stocks/bonds/IRAs, and/or RE assets.....where all those things gain value over time per conventional wisdom.

It doesn't take much to crush that plan, ya know.

Obviously there are many things that could change my trajectory! But with relatively conservative assumptions about my rate of return and not increasing my current annual retirement savings rate a single dollar, I should be able to comfortably reach a decent sized retirement.

The big issue is that $5 million of mostly taxable money only nets $150-200k each year in pretax money assuming a traditional 3-4% withdrawal strategy. That's obviously great, but a big drop from what a two-earner professional household would be earning near the end of their careers. So in reality, taking into account inflation and the likelihood of seriously curtailed social security benefits for high earners, I'd need to save much more.

I think that market risk is actually a pretty small risk given the long investment horizon, assuming I rebalance to less risky asset allocations as I get older. The biggest risks include, in no particular order: one of us dying, a divorce, or sequence of returns risk in early retirement. Those would all likely spell the doom of my plan as it currently exists. There are ways to recover (buy more life insurance, invest in our relationship, have a soft retirement to keep alternative income streams supplementing things), but none are foolproof. Such is life.

[Being]

Right, but that question was directly based on your earlier elaboration of why you don't like holding stocks in your IRA. Whatever, this isn't meant to be a gotcha, it's your money to do with as you wish, and I'm delighted that you believe you have a more than adequate cushion using a very conservative investing strategy.

I'm not playing gotcha either. I just give my take on things and appreciate any feedback even if I argue against it. On that note, cash (FDIC spread or CDs) is only maybe 50% of my overall retirement portfolio. The remainder is single family rentals I have owned for more than 20 years. They provide supplemental income and a fairly liquid escape route should my cash run out.