The Stock/Investment Thread

[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.

[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.

[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.

[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.

[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.

[Being]

I find the juxtaposition of these two points to be... puzzling.

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.

[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.

[GGT]

So long as "adjusting" doesn't mean you have to work until you're dead.

[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.

[GGT]

wiggin, you left out the risk of Medical Bankruptcy. That's a REAL risk if you develop a medical condition which means you not only lose your employment, but also your employer-based health insurance.

Even if you DO manage to plan-and-save-and invest during your working career years, that's no guarantee that you (or your estate) will be able to afford assisted-living, aka "Nursing Home" care....that often lasts for decades. You'll need much more than $5 million to afford that privilege. See what I mean?


edit: I think it's a lame excuse to say nothing is foolproof, or "c'est la vie," as if policy doesn't matter

[wiggin]

wiggin, you left out the risk of Medical Bankruptcy. That's a REAL risk if you develop a medical condition which means you not only lose your employment, but also your employer-based health insurance.

Even if you DO manage to plan-and-save-and invest during your working career years, that's no guarantee that you (or your estate) will be able to afford assisted-living, aka "Nursing Home" care....that often lasts for decades. You'll need much more than $5 million to afford that privilege. See what I mean?

I was talking about a plan to reach a given size nest egg, not whether the planned nest egg size was adequate. Yes, long term care is a big issue that doesn't have a good solution yet (LTC insurance is notoriously awful and expensive). I don't have a good solution for that other than saving a lot more than your median scenario. As for medical costs during working years, there are some insurance options that can help mitigate the risk since they're generally fairly low probabilities so the premiums won't be awful.

edit: I think it's a lame excuse to say nothing is foolproof, or "c'est la vie," as if policy doesn't matter

I think you're confusing a comment on prudent planning in the current environment with an endorsement of the current set of risks that a typical American family has to mitigate.

[GGT]

I was talking about a plan to reach a given size nest egg, not whether the planned nest egg size was adequate. Yes, long term care is a big issue that doesn't have a good solution yet (LTC insurance is notoriously awful and expensive). I don't have a good solution for that other than saving a lot more than your median scenario. As for medical costs during working years, there are some insurance options that can help mitigate the risk since they're generally fairly low probabilities so the premiums won't be awful.

Huh? The main purpose of "investment" is to preserve capital for the future. If one of the biggest future costs is Long Term Health Care, but you're not seeing that as part of the equation, then you're just hoping that profits are enough to absorb anything/everything. That's a failure of imagination that should be laid on "conventional wisdom" -- and flaws in the financial industry that gets investors to buy into our for-profit healthcare industry, that is against their own interests (affordable ageing).

I think you're confusing a comment on prudent planning in the current environment with an endorsement of the current set of risks that a typical American family has to mitigate.

Perhaps. But I think you're conflating privilege and policy. Most Americans can't mitigate or negotiate their risks or losses like you or I can -- but instead are victims of a messed up system that gives too much power to the already wealthy and powerful.

There's definitely something wrong with our system that takes SS and Medicare taxes out of low-income wage workers, then forces them to declare destitution in order to realize those benefits. You're not immune just because you make more money, or have insurance. The national average cost of assisted-living/Nursing Home Care in the US is $20,000 per month. Even the Insurance Industry can't keep up with those escalations in cost. Good luck growing old...

[wiggin]

Huh? The main purpose of "investment" is to preserve capital for the future. If one of the biggest future costs is Long Term Health Care, but you're not seeing that as part of the equation, then you're just hoping that profits are enough to absorb anything/everything. That's a failure of imagination that should be laid on "conventional wisdom" -- and flaws in the financial industry that gets investors to buy into our for-profit healthcare industry, that is against their own interests (affordable ageing).

Let's follow the bouncing ball: You claimed I needed $5 million to retire, and suggested that getting from today to retirement with $5 million would be fraught with uncertainty despite my best laid plans. I responded arguing that relatively conservative assumptions about my investments gave me a good chance of hitting a decent sized nest egg, but I acknowledged other risks that could affect that savings/investment trajectory.

I further added that $5 million was probably not enough.

From there, you jumped to risks in retirement to having an adequate nest egg. This is a complete non sequitur; I never made some big argument about a specific number being adequate to insure against the cost of long term care or anything else. I'm not guilty of a 'failure of imagination' so much as actually responding to the first point you made.

Perhaps. But I think you're conflating privilege and policy. Most Americans can't mitigate or negotiate their risks or losses like you or I can -- but instead are victims of a messed up system that gives too much power to the already wealthy and powerful.

Obviously I'm in a much better position than the vast majority of Americans. I acknowledge that, though there is some important contextual data. If I want to keep the house that I hope my wife and I are able to purchase in the future - at least for a while - then we'll have pretty high basal costs that people living in cheaper parts of the country can avoid. I also assume that there will be nearly 100% effective taxation on some portion of my nest egg as SS/Medicare benefits are yanked back once you hit certain income thresholds. They've already started doing it by making some SS benefits taxable (which has pretty serious ramifications when you factor in RMDs), and I fully expect this to accelerate in the next few decades as our budget and entitlement problems become severe.

All of that aside, however, it's absolutely unconscionable that regular Americans are being made to shoulder so much risk about which they have precious little control, and little in the way of good options to mitigate. My wife and I might - by dint of substantial insurance, oversaving/underconsuming, etc. - be able to rationally and appropriately manage these risks, mostly because we have the education to evaluate them and the income to mitigate them. But most people don't have that option, and just hope they get lucky.

[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.

[Being]

This is a problem,

While investors who build a stake of more than 5% in a U.S.-listed company usually have to disclose their position and future transactions, that’s not the case with stakes built through the type of derivatives apparently used by Archegos. The products, which are made off exchanges, allow managers like Hwang to amass stakes in publicly traded companies without having to declare their holdings.

Stakes without ownership, covert financial instrument. Because you didn't use your own money, you get to do it in secret. What a fucked up financial system.

[Being]

“The psychology of all that leverage with no risk management, it’s almost nihilism.”

[Being]

If it's good for the stock market then it is good for you. Corporations are not just people, they are tax exempt people. But it's okay! As long as all the other big economies keep printing money the way we do to lift corporate profits, everything will be peachy. I mean why burden the untouchable "people" with something as destructive as taxes that would only be spent on crap like the underlying infrastructure they are built on?

https://www.msn.com/en-us/money/mark...cbG?li=BBnb7Kz

[Lewkowski]

Decided to get into crypto this year, wish I had done so earlier. What (if any) impact do you guys think Turkey banning it will have?

[Ominous Gamer]

That blip has already passed and it's already working on its next correction as the dogecoin scam continues to unfold. India eventually banning private coins is going to have a much larger impact.

[wiggin]

Decided to get into crypto this year, wish I had done so earlier. What (if any) impact do you guys think Turkey banning it will have?

I continue to not understand why people put money into cryptocurrencies. There's literally no reason why BTC should be worth $1 or $1 million. I suspect that we'll only see real effects once (a) the Fed or ECB get involved, or (b) the bubble bursts.

[Hazir]

Decided to get into crypto this year, wish I had done so earlier. What (if any) impact do you guys think Turkey banning it will have?

Turkey's monetary policy is more detached from reality than bitcoin itself. In theory hard currency isn't allowed for internal use either.

[Wraith]

I continue to not understand why people put money into cryptocurrencies. There's literally no reason why BTC should be worth $1 or $1 million. I suspect that we'll only see real effects once (a) the Fed or ECB get involved, or (b) the bubble bursts.

Funny you should say that, because the crypto community has been basically begging the Fed for years to get on top of the whole market and offer regulatory clarity beyond "we'll punish anyone who breaks the rules, but we won't tell you what the rules are yet". The lack of Fed involvement has been a depressing effect on the market. The market gets a bump upwards every time there's solid rumors of the Fed or ECB getting involved. The current run up started not long after the Fed started getting a little more involved and signed off on several of the bigger coins as legitimate assets.

If reality keeps defying your expectations, eventually you have to start considering that it might not be reality that's wrong. I'm not a fan of BTC - they've squandered their potential and they're mostly sustained by marketing and tribalism right now, but crypto in general has some obscenely powerful disruptive tech. Coinbase has an education program that will pay out a small bit of crypto in exchange for learning about it if you'd like. I haven't bothered with it myself, but it's free money.