The stock market

[diehardtwinsfan]

Think the problem is that when it corrects, those gains get wiped out in a hurry.  That's party of why I tend to stay in shorter term positions usually going long in positions that have broken out so to speak.  I just don't stay there.  A 20% drop in the market would wipe out just about all of those gains. Yes, you'll get it back, but I'm not a fan of trying to catch a falling sword.

[Willihammer]

Last fall I was convinced the oil market was in a bubble. I was looking at the S&P's high P/E and figured if there was one catalyst at the time to cause a correction, if not an outright bear market, oil would be it. So I shorted it, figuring it would be at worst a hedge and at best a chance to make a little profit. I still think the oil market is screwed up, but now I have several hundred dollars of margin interest and negative capital gains to close (I have been paying it down gradually). I believe the addage "the market can stay irrational longer than you can stay solvent" to be more true than ever now. Shorting is just one way to hedge, but if you think the market will correct, or turn bearish, you need to be 10x more certain of it than you would to go open a regular long position. Because you're betting against 100 years of rising tide. The "safe" play for me, is long. But we all have different risk tolerances.

[Willihammer]

As discussed a few pages back, the p/e is not that high in relation to interest rates. (Wish I knew that 4 months ago). By one calculation (now a couple months old) the S&P was at the time a bit undervalued.

Edited January 15, 2017 by Willihammer

[diehardtwinsfan]

 

Last fall I was convinced the oil market was in a bubble. I was looking at the S&P's high P/E and figured if there was one catalyst at the time to cause a correction, if not an outright bear market, oil would be it. So I shorted it, figuring it would be at worst a hedge and at best a chance to make a little profit. I still think the oil market is screwed up, but now I have several hundred dollars of margin interest and negative capital gains to close (I have been paying it down gradually). I believe the addage "the market can stay irrational longer than you can stay solvent" to be more true than ever now. Shorting is just one way to hedge, but if you think the market will correct, or turn bearish, you need to be 10x more certain of it than you would to go open a regular long position. Because you're betting against 100 years of rising tide. The "safe" play for me, is long. But we all have different risk tolerances.

 

Well, I trade options, though I always hedge them to minimize losses.

 

I get what you're saying, and you're right that it can stay irrational longer than solvent. I tend to use ETFs that move inverse the market for some of that.  Not as much risk (or reward) in that scenario, which I'm fine with.  That's just like buying/selling stocks at that point, except these go up when the market goes down and vice versa. 

 

That said, if you do technical trading at all, you can see plenty of signs of a top in the market. That's pretty normal, which I guess is my point. Barring a crash, it just means a temporary 10-20% correction. I'm not saying short the whole thing, but I think there's a ton of merit right now in allocating some spare funds to hedge your long positions and take a quick profit or closing a few winners that are overbought.

 

PS... oil should be in a bubble.  There's a huge glut of supply right now and it is not shrinking...  I refuse to touch that one. 

[gunnarthor]

Trying to time the market has never worked for me.  The safest thing you can do is in invest in boring index funds.  After that, research the company (and sector) so you understand how it works (Tata Motors was a huge hit for us once we understood what it was doing).  Buy it when you can and just hold it until you actually need the money for something else (buying a home, paying off debt, retirement).  If you're selling, it means someone else thinks the price you're selling at is a good price to jump in at.  And they might be smarter than you.  They are certainly smarter than me.  

 

[Brock Beauchamp]

 

Trying to time the market has never worked for me.  The safest thing you can do is in invest in boring index funds.  After that, research the company (and sector) so you understand how it works (Tata Motors was a huge hit for us once we understood what it was doing).  Buy it when you can and just hold it until you actually need the money for something else (buying a home, paying off debt, retirement).  If you're selling, it means someone else thinks the price you're selling at is a good price to jump in at.  And they might be smarter than you.  They are certainly smarter than me.  

Yep, learned a few nasty lessons early in my investing about timing the market.

 

Basically, the people who do this for a living are far more informed than I am so I buy into a company I believe in and just stick with it. So far, it has worked out very well for me, much better than trying to game the market with layman knowledge.

[diehardtwinsfan]

I'm not sure I'd call it timing the market. It simply involves paying attention to signals and investing accordingly.  Technical trading works, and with pretty good odds. You don't have to time it perfectly, just position yourself when the market starts putting in the red flags.  You win far more than you lose, you get in trouble when you try and time the market to maximize profits.

[Brock Beauchamp]

I've decided that having 20% of my portfolio in Apple is no longer something I'm interested in doing so I'm going to pull $3-4K out of Apple and put it into a mix of dividend stocks. Any suggestions? Doing some research now and compiling names.

[gunnarthor]

 

I've decided that having 20% of my portfolio in Apple is no longer something I'm interested in doing so I'm going to pull $3-4K out of Apple and put it into a mix of dividend stocks. Any suggestions? Doing some research now and compiling names.

I own a few good dividend stocks like WFC and DE.  I think the big banks (USB, GS, JPM) are relatively safe returns in this market and I like oil (HP is a oil rig company that I've owned in the past). 

 

If you don't want to own oil or banks, something like Pfizer might be of interest.  I don't own any Pfizer but it has a solid dividend and there are people out there that think Pfizer is a potentially great buy IF a few things happen. 

[diehardtwinsfan]

 

I've decided that having 20% of my portfolio in Apple is no longer something I'm interested in doing so I'm going to pull $3-4K out of Apple and put it into a mix of dividend stocks. Any suggestions? Doing some research now and compiling names.

 

Well, with the dollar starting to fall, gold, silver, and really any commodity would make for a decent short term play.  Not a bad way to be up 10% or so in a month.  Then sell and get something else.

[Willihammer]

 

Well, with the dollar starting to fall, gold, silver, and really any commodity would make for a decent short term play.  Not a bad way to be up 10% or so in a month.  Then sell and get something else.

Maybe so, but I think Brock is looking for yield. Cash yield.

 

I did some basic research on REITs a few weeks ago, before my last buy. BXMT and ARI were the winners of what I looked at. Strong revenue, net income, and ROE trends.

[Brock Beauchamp]

 

Maybe so, but I think Brock is looking for yield. Cash yield.

I am. I don't have a lot of faith in the market right now and I'm looking for stable companies that return a high yield. I don't expect to see big gains in stock price so I'm shifting to dividends to weather the potential storm.

 

Right now, my primary targets are WFC (damn, I wish I had just pulled the trigger on them after the scandal) and possibly GE.

 

I may split between several companies with smaller investments to offset my risk, though. I'm really undecided.

[Brock Beauchamp]

And I haven't even decided whether I'm in a hurry to do this at all. Apple's earnings report is due in a little less than two weeks. Do I hold out in hopes the iPhone 7 and new Macbooks had a positive effect on holiday earnings or do I bail out beforehand, expecting another underwhelming quarter from them?

 

It's a difficult decision.

[gunnarthor]

Brock, how old are you?  If you're not near retirement age, I don't think you should overly worry about diversifying your investment.  Just buy 3k of something and let it ride for 20 years.  Also, you might want to consider some of the Vanguard admiral index funds - it requires a 3k minimum investment (I believe) but the admiral funds have a pretty good return and many reinvest profits like a dividend.  

 

https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0623

 

Obviously, everyone is different but I'd stay away from trying to make a quick 10% and focus more on longterm quality investments.  If you invest 3k and sell when you have 10%, that's only $300, minus any fees and minus the tax hit (I think it's around 20% if you own it for less than a year), so that $300 gets cut down pretty fast.  It's better to have a system in place where you are constantly adding to your portfolio.

[Brock Beauchamp]

I'm not doing short-term investments, to be clear. If I buy into a company, I keep them for AT LEAST one year. I don't bounce around my money and have no interest in playing that game, as I'm more likely to lose than win.

 

The main reason I'm diversifying my investment in Apple is:

 

1. Apple was my first major buy. I made a lot of money on them quickly - about 60% - and then their stock stagnated. I'm not completely divesting from Apple but I no longer want 20% of my portfolio in the company. More like 10-12% would be preferable.

 

2. My faith in Apple has waned. I'm sticking with the company but, again, no longer want them as my "portfolio centerpiece".

[diehardtwinsfan]

well, setting aside short term, I have no complaints about MSFT (full disclosure, I work for them).  Share price has gone up about 20% in the two years I've been there.  Our cloud solutions are growing at absurd rates right now, and that's a high margin line of business.  I own shares in my 401k account, and I haven't sold off any of my vesting shares either. 

 

edit:  they pay dividends as well. 

[Brock Beauchamp]

I haven't ruled out Microsoft, as I like how they've repositioned themselves - ignoring their outright failure in mobile, which they've largely given up on entirely - but I'm wary of investing in more tech stocks, as that's over half my portfolio.

 

Then again, I know tech so that's a plus. I see a roadmap for Microsoft and while it's not a huge gain stock, it's solid.

[Mike Sixel]

I like MSFT also. I have money in drgo and GM for safety and dividends also.

 

Sold a lot of Nvidia today, at around 250℅ return to pay off some debt. Nice year. Still have a lot of that stock. Still love it.

[diehardtwinsfan]

 

I haven't ruled out Microsoft, as I like how they've repositioned themselves - ignoring their outright failure in mobile, which they've largely given up on entirely - but I'm wary of investing in more tech stocks, as that's over half my portfolio.

 

Then again, I know tech so that's a plus. I see a roadmap for Microsoft and while it's not a huge gain stock, it's solid.

 

So I would note that as tech, we are far more diversified than most places.  Those self driving cars, we are there.  Robotics, we are there.  Cloud, we are there. Security, we are there. etc. 

 

You're right though, you aren't diversified.  The flip side is that I think in terms of value, technology right now is finally starting to reach the promise that was expected out of them during the dot com bubble. I don't think that sector will be as volatile... Now that said, if you're looking for up and coming, I think the next big movement within tech may be security firms. Companies are getting the rear ends handed to them by hackers.  Finding the next big security firm would probably yield a good payday.

[Brock Beauchamp]

 

You're right though, you aren't diversified.  The flip side is that I think in terms of value, technology right now is finally starting to reach the promise that was expected out of them during the dot com bubble. I don't think that sector will be as volatile... Now that said, if you're looking for up and coming, I think the next big movement within tech may be security firms. Companies are getting the rear ends handed to them by hackers.  Finding the next big security firm would probably yield a good payday.

I fully agree. That's not my wheelhouse in tech but I know a few people who are security experts. Next time I see them, I need to pick their brains and get some opinions.

[Brock Beauchamp]

Another good quarter for Netflix, up 8% in after hours trading.

[gunnarthor]

Well the Dow hit 20000 today. I'm sure Trump will tweet to take credit for that.  

[Vanimal46]

With the impending reduction in corporate tax rate, I'll be looking to invest in more U.S. equities than I have in the last 2-3 years. 

[Vanimal46]

Also, this is a little too early yet, but with Trump looking to spend $1 Trillion on infrastructure (most likely going to be $300-400 Billion instead) it may be worth looking into specific companies that will get the work to improve bridges, roads, etc. No idea who that company(ies) could be right now.

Edited January 26, 2017 by Vanimal46

[gunnarthor]

FLR's your man.  Right after Katrina, I kicked around buying it but I didn't.  Wish I had.  Nice dividend.

[Vanimal46]

Since this is top of mind as I just had a meeting with my financial advisor yesterday.... 

Wins in 2016:

Microsoft - Brock explained it best. Recovered well from their failed attempt in mobile. Hoping for more growth

 

Union Pacific Corp - Big y/y growth from $69 a share to $110 today. 

Time Warner Inc - Bought in at $70 a share - $96 today. Even though they have the worst customer service on planet Earth. 

I'm also waning about Apple.... since I don't have enough shares to make a difference, we'll ride out the waves. 

[Brock Beauchamp]

 

I'm also waning about Apple.... since I don't have enough shares to make a difference, we'll ride out the waves. 

I have enough shares to make a difference to me - 70 or 80, I think - but I decided to hold out for their earnings report.

 

After that, there's a good chance I'll bail if I can decide *where* to bail.

 

Well, about half of those shares, anyway. I'm not ready to give up on Apple entirely. Not yet, anyway.

[Mike Sixel]

 

I have enough shares to make a difference to me - 70 or 80, I think - but I decided to hold out for their earnings report.

 

After that, there's a good chance I'll bail if I can decide *where* to bail.

 

Well, about half of those shares, anyway. I'm not ready to give up on Apple entirely. Not yet, anyway.

long term?

 

shopify. How many times do I need to type that. Or nvidia (only made 240% on it last year.....). Or MSFT. Or AMZN.

 

But, the next three years could be bumpy for any tech stock. You'll need a strong stomach.

 

If the 20% tax on mexico is real, I need to see how much GM uses Mexican plants!

[diehardtwinsfan]

well supposedly, a lot of those Mexican car plants are to build the smaller cars at a better price point, or so the official word is. The big thing, I suspect, with Trump is that if he has his way, imports are going to get more expensive while taxes on exports (which according to Trump is something we do) will hopefully drop.

 

The other note is he's been kind of trashing the dollar a bit.  Inflation is already creeping back into the market and the dollar is dropping, all of which will likely benefit exporters in the short term.  Companies that are heavily dependent on exports might get a nice bounce, even if the market takes a hit. It still looks like a major top is forming, so a 10-15% correction in the market in the next few months is another very real possibility. 

[Mike Sixel]

Trying to convince my wife that we should reconsider not buying a house ever again (even though that was/is my idea). Prices continue to skyrocket here, and interest rates are going to go up for sure.....

 

OTOH, I really don't want to own a house....and holy cow it's expensive here.