Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[Discuss Thrower]

Originally Posted by lewdog

Oh I do remember now! I do appreciate you being honest. We all have different pucker factors. I am in no way trying to change what you do.

That being said, the power of compounding interest is very real. People like to look at the highest value of their portfolio, and freak out when it loses money in a correction like this week. Truth be told, those with 25-30 year investment windows. who consistently contribute to retirement accounts, will come out vastly ahead of those who do not use such accounts, simply due to compounding interest of decades.

I have a family member who started investing into a stock market retirement account in 1978. Fast forward to 2008 when the market crashed. At that time they had contributed a total of $150k throughout those 30 years into this account. Even at the absolute bottom of the market in 2008, it was still worth $400k. Sure it was scary and worrisome to see their retirement money get cut in half! But as they told me, they were still well ahead of where they'd be if they had simply placed that money into a savings account all those years. Fast forward another 10 years to 2018, and without adding another penny to this account in those 10 years, it's now worth close to $1M.

That's the power of compounding interest at work.

Too risky.

[Amnorix]

Originally Posted by petegz28

The real bite the last couple of days was there was no where to run but cash. Usually you would see bonds or even gold catching a bid but everything has been on sale. Today you did see bond yields come in a bit and the 10 yr is already back to 2.68% in from 2.88% less than 48 hours ago. The markets are still selling off world wide as we speak. Japan is down over 5% and London futures are down over 6% while Dow and SP500 futures in overnight trading are off 2% give or take.

A week ago every was screaming that we needed a correction. Today people are screaming cause we are getting it.

What people primarily need is PATIENCE.

[Hog's Gone Fishin]

Well, got back about 60% of yesterdays losses.Reduced portfolio from 12 to 4 yesterday. Bought Amazon at the close yesterday and Boeing today. Tomorrow is the last day I get to pull my hair out and then fishin for 3 days.

[Rain Man]

Originally Posted by Amnorix

What people primarily need is PATIENCE.

What's the symbol for that? I'll look into it.

[Rain Man]

It's going back up! Exuberance! I feel exuberance!

[Hog's Gone Fishin]

Originally Posted by Rain Man

What's the symbol for that? I'll look into it.

It's not in my portfolio either.

[Rain Man]

Originally Posted by Hog's Gone Fishin

It's not in my portfolio either.

I feel like I should add it immediately.

[Hog's Gone Fishin]

Bought two books this week:

Jim Cramers, "Getting Back to Even" . It's old but I think it will be a good read.

Chuck Hughes, "Trade like Chuck". He supposedly won last years trading championship and a couple of years ago took like 4,600 dollars and turned it into $600,000 in two years and developed his own trading method. I'll believe it when I see it though. Probably included a winning lottery ticket for 1 mil in that figure and actually lost 400k.

Anyway it's some education, good or bad.

[TwistedChief]

Originally Posted by Hog's Gone Fishin

Bought two books this week:

Jim Cramers, "Getting Back to Even" . It's old but I think it will be a good read.

Chuck Hughes, "Trade like Chuck". He supposedly won last years trading championship and a couple of years ago took like 4,600 dollars and turned it into $600,000 in two years and developed his own trading method. I'll believe it when I see it though. Probably included a winning lottery ticket for 1 mil in that figure and actually lost 400k.

Anyway it's some education, good or bad.

It's not quite an investing book per se, but if you want to read what's truly the all-time best book on trading, it's Reminiscences of a Stock Operator. Markets are probably driven 70% by psychology and this book - although written 100yrs ago - is absolutely spot-on and brilliant. Any great trader will tell you the same.

[Hog's Gone Fishin]

Originally Posted by TwistedChief

It's not quite an investing book per se, but if you want to read what's truly the all-time best book on trading, it's Reminiscences of a Stock Operator. Markets are probably driven 70% by psychology and this book - although written 100yrs ago - is absolutely spot-on and brilliant. Any great trader will tell you the same.

Thanks, ordered on amazon for 6.21 plus shipping.

[Cornstock]

Originally Posted by Iowanian

Investing is a lot like driving in a demolition derby. You put in the work, earn extra money and spend it on something fun that could/should result in a return if you're skilled and have good luck.

Then you log into your accounts, hear the count down and back up and smash into something hard. you pull forward and back into a sorry dodge dart that is stuck on the rail, making some impact and a slight display for the crown for a while, feel a rush of adrenaline. You spin mud as you round the corner through the smoke of the wreckage of the cryptocurrency chevrolet that is smashed into the bitcoin buick...you put your foot down and spin mud as you blaze through the fog and smoke just in time to find yourself blindsided in the drivers door. Your seatbelt breaks and as your body catapults across the cab into the collision with the drivers door, you see the battery sparking.

Now, I'm trying to stay composed as Ricky "rainman" Bobby is running around on the track in his underwear screaming about being on fire, even though he's not....

Today, I'm sitting back up in the driver seat, I wiggled the positive cable on the battery cut into the seat, and even through the noise I can hear the starter turning and hoping the carb isn't flooding.

I'll try to tie the seatbelt together and if this fires back up, I've still got a strong motor and the radiator is in tact.


My biggest fight right now is the urge to put money in and buy into my same stocks at the discount rate.

While most of this went over my head, this is a winner's attitude.

Be bold when others are afraid.

[Cornstock]

Originally Posted by Rain Man

I own Wells Fargo! I own Wells Fargo!

via GIPHY

Normally I would say just chill and ride it out...

But in the case of WF, this is the correct reaction.

[Cornstock]

Originally Posted by lewdog

Sitting in cash allows your to be eaten up by inflation in no time, especially if your timeline is a decade or more. The $10k you saved in 2004, is not worth anything close to $10k in today's money.

You realize if the market corrects 10-15% this week, people are still sitting with more money than they had a year ago? Factor in compounding interest over decades and it's very hard to lose money in the stock market with consistent investing across mutual funds, ETFs and indexes. Dabbling in individual stocks is a different story, however.

This. To cherry pick and take yesterday as an excuse to be in cash is to ignore an entire year of nearly unprecedented gains.

It's poor theory to willfully ignore the erosion of capital to inflation.

[Cornstock]

Originally Posted by lewdog

What’s the reason you don’t post in here more? We could use your great dialogue and knowledge.

This is probably my favorite CP thread. People are cordial, offer advice and there’s very little bickering.

This thread is what brings me back to CP in the down times. Great idea sharing and a positive environment.

[TwistedChief]

Just to give you guys a flavor of sentiment in the industry:

Very widely held belief that this was a technical and borderline healthy adjustment. Markets periodically go through something called a VaR shock, which in simple terms means a low vol environment leads to a larger build-up of positions and leverage to achieve the same return, only to see vol spike and then those positions need to similarly be scaled down (often at the worst possible time with everyone heading for the exit at the same moment). The people who rushed into inverse levered ETNs on the VIX were probably largely responsible for the truth depths of the sell off on Monday. Other "culprits" include CTAs (as I mentioned before, momentum-following accounts who have been feasting on broader macro trends this year) and Risk Parity (in simple terms, balanced funds who run long equity and long fixed income strategies normalized by volatility; Bridgewater is the largest).

People cite the strong fundamentals, etc and think that the pace of gains will slow from here but the general direction is higher.

My main concern with the above narrative is simply how widely it's shared. For several years the post-crisis landscape was dominated by central banks buying assets - primarily low risk but not always the case - and depriving investors of their return. Those investors who sold a US Treasury to the Fed for example were crowded out and then bought a corporate bond. Then the person who sold the corporate bond needed something to buy and he bought equities. This is called the 'portfolio balance channel.'

In any case, we're well past the crisis and central banks are beginning to dial back this sort of stimulus. The narrative, say, 3-4yrs ago was that risk assets benefited from this sort of easing, and when it's unwound, those same assets should suffer. Pretty basic mirror image (there are of course flaws in that logic). But as the Fed has hiked 125bps and is now running down its balance sheet of assets, equities and credit haven't blinked.

I think this has lulled people into the belief that the monetary policy unwind would be a complete non-event for risk assets (e.g., equities, credit). My concern is that the jitter we saw this week - which perhaps not uncoincidentally was preceded by the highest Treasury 10y yield since early 2014 - was the first shot across the bow to challenge that belief. Markets tend to trade certain themes when they choose to, and if you told me 6 months from now equities were languishing a little bit lower and people were citing this as the cause, I wouldn't be surprised for a second. The market is chalking this all up to be a technical sell-off but I'm not entirely convinced (though I do agree it's entirely possible).

Consider this: the Fed influences the economy through financial conditions, which you can think of as the stimulatory impact of equities (higher = better), credit rates (lower = better), and the dollar (lower = better). Since the Fed started hiking rates in late 2015 to gently slow the economy, financial conditions have actually become significantly easier. I.e., it has gone in the complete opposite direction that you would normally expect given the strong bid to equities and the ever-narrowing credit spreads to Treasuries (the dollar recently has also been contributing positively). So the Fed is trying to slow the economy, but their lever to do so isn't working.

Anyway, the above is just to say that the market is likely to be bumpier in the months ahead. I'm hardly trying to be a Cassandra here but you have literally just gone through one of the most impressive market moves in generations. Some details on that (credit Tony P at Goldman Sachs):

- the gross return of S&P in 2017 was +19.4%. including a dividend stream of 2.4%, the total return of S&P was +21.8%; this ranks as 78th percentile since 1962.

- realized volatility was 6.7%, the second lowest on record (1964 = 5.2%).

- the vol-adjusted total return of 3.3 ranks second only to 1995 (when the S&P returned 38% on 8% vol).

- the median daily market move was just 0.18% -- the smallest on record -- and the largest peak-to-trough drawdown was 2.8%, the mildest since 2.5% in 1995.

- wire-to-wire: the market didn’t trade negative at any point in the year, marking just the 10th such occurrence since 1928 (the most recent being 2013).

- 58% of days were up days (93rd percentile).

- for the first time on record, the S&P delivered a positive total return in each and every month this year.

Hope maybe this provides some useful perspective somewhere.