The stock market

[Mike Sixel]

 

That's awesome you've gotten that kind of return but a 5-year sample size for one portfolio is way too small to judge someone smarter than the market. Most research on the topic suggests on average you will underperform the broader market after expenses, on any kind of meaningful sample size (25+ years) with an advisor.
Even a guy like Warren Buffet, its debatable whether he possesses any actual skill or is just the anomaly way out on the bell curve who has gotten extremely lucky for the last 50+ years.

 

Oh, ya.....if she could do that consistently, she'd be SUPER rich......that's why most "advisors" are not worth any money at all.....

[ashbury]

I don't know how she's done it

I'll reinforce what Willihammer and Mike just said, and recommend you get inquisitive about this.

[Brock Beauchamp]

Yeah, that's an insane return rate. I was able to pull 25-30% for two years on my own but to sustain that kind of growth when the market isn't a bull is... Amazing, really.

[Vanimal46]

All solid advice, guys. Thanks for the assistance. I do need to get more involved with my money and learn more about the investment side of things, since I won't be able to rely on the financial advisor forever. I think she's in her early 50's as she has 3 daughters all either attending college, or about to attend college. 

And I sure as hell don't trust anyone my age managing the portfolio... 

[Willihammer]

Something to keep in mind.

 

Academic research has shown that undervalued equity markets have achieved higher future returns in the long run than their overvalued counterparts

 

http://www.starcapital.de/research/stockmarketvaluation

 

This page updates quarterly.

 

RSX, FXI, EWZ, might be good buys right now.

[gunnarthor]

 

Something to keep in mind.

 

http://www.starcapital.de/research/stockmarketvaluation

 

This page updates quarterly.

 

RSX, FXI, EWZ, might be good buys right now.

I'm not a smart enough investor to know a lot about foreign markets but I'm sure there is money to be made there (and lost there).  The only big foreign gamble we took was a 10k buy of TTM - a car company from India - about 10 years ago.  It's annual gain is just under 10% for that period so it was a good investment but I bought it simply because an Indian friend of mine suggested it.  We've kicked the tires of some other stocks and funds but never pulled the trigger.  Mike's Mexico stock would have been a nice buy.

 

I think if you did go there a fund like EWZ would be the best bet.

Edited July 7, 2016 by gunnarthor

[Mike Sixel]

Good golly I've lost a lot* in China and Europe the last two years!

 

*percent wise, not dollar wise, I didn't have much there, but it still hurts

Edited July 7, 2016 by Mike Sixel

[Willihammer]

I have lost a lot of (unrealized) value in China too, because I'm not a disciplined buyer and bought at the height of the bubble. I really need to take my own advice and stick to the CAPE guide more closely.

Should probably sell some US stocks while I'm at it, which for me is a mostly VDE, Apple, and VBK.

[Mike Sixel]

Apple is a tough one....I have it, and bought at a peak.....but, man, they have SO MUCH cash and they seem undervalued now (if that is possible with them), so we are holding it.

[Mike Sixel]

My other thing I do......I almost never sell stock unless I need the money. It is very rare I sell it to buy different stock......

[Vanimal46]

 

Apple is a tough one....I have it, and bought at a peak.....but, man, they have SO MUCH cash and they seem undervalued now (if that is possible with them), so we are holding it.

That's one where the financial advisor has purchased a ton of volume for me this year. It would have been great to have volume in September 2012 when it was $700 a share.... 

[Brock Beauchamp]

Apple is a tough one....I have it, and bought at a peak.....but, man, they have SO MUCH cash and they seem undervalued now (if that is possible with them), so we are holding it.

I'm also sticking with Apple. I've taken a hit in the past year but made quite a bit before then... Picked them up around $70/share.

 

And they've been paying me dividends for 3+ years. I don't plan to reevaluate them until their auto project is closer to fruition.

[glunn]

I am nervous about the entire market and am looking for safe havens.

[Mike Sixel]

 

I am nervous about the entire market and am looking for safe havens.

 

Here is what I have told others:

 

If you don't need the money for 10-20 years, why are you nervous about this fall, or Brexit, or even the next 5 years?

 

That said, i understand your anxiety......

[Willihammer]

The thing with Apple is it has a mountain of cash yeah, and most times when it dips into it, its to buyback shares. $40b in buybacks since 2014 but the stock price has... stayed flat. And now margins on its phones are shrinking, sales are slowing. Seems like Apple has to find a more profitable way to invest that cash than itself, because itself isn't as profitable as it used to be.

[Mike Sixel]

 

The thing with Apple is it has a mountain of cash yeah, and most times when it dips into it, its to buyback shares. $40b in buybacks since 2014 but the stock price has... stayed flat. And now margins on its phones are shrinking, sales are slowing. Seems like Apple has to find a more profitable way to invest that cash than itself, because itself isn't as profitable as it used to be.

 

I agree.....not sure what they should buy, but there must be some undervalued companies out there they like......

 

I am  considering Ford again....same huge pile of cash, ok dividends, seems to be quite profitable again. That said, I have this recession fear holding me back.

[Brock Beauchamp]

 

The thing with Apple is it has a mountain of cash yeah, and most times when it dips into it, its to buyback shares. $40b in buybacks since 2014 but the stock price has... stayed flat. And now margins on its phones are shrinking, sales are slowing. Seems like Apple has to find a more profitable way to invest that cash than itself, because itself isn't as profitable as it used to be.

Well, not really... Their margins are still best in the business. They saw a slight, temporary dip as they released the SE - a lower margin phone - but that should help buoy them in emerging markets where they need to entrench themselves (as they're attempting to do in India now and have already done in China).

 

The biggest problem facing Apple is saturation and phone hardware... As the phone market matures, phones will continue to last longer and longer... So Apple needs to open new markets.

 

The problem is that there aren't any significant markets to open, at least not as far as I can see. Watches are a hobby and unless something radical happens, will never be the "next big thing". TV is intriguing but it will never be a power player for Apple (or anyone, really) because the set-top boxes are cheap and last forever... Though the FCC's new strategy of forcing an open standard on all cable providers - allowing AppleTV, Roku, etc. to become the default box for all things TV - could really boost the market. Virtual reality is a lulz market. It has cool features and can do amazing things but it's going to be a niche for at least five years, probably more like a decade. Consumers are suffering gadget exhaustion and they're not going to drop a grand to strap a video game machine to their noggins. VR needs to step into "must have and affordable" territory and I don't see it happening.

 

Apple's next big gain/loss will come from their auto project. Everything else will keep them raking in cash hand over fist but the cash flow will be mostly flat.

 

Apple has several solid markets that will keep them very profitable: phones, tablets, Macs, watches, and TV boxes. I don't see big growth in any of those markets (and some will decline) but none of them are poised to fall off the Earth, either.

[Mike Sixel]

That's why I wonder if Apple will/should buy some software companies (say, when the recession happens and prices drop), and diversify into more fields, Brock.

 

Right now, I struggle to see the next iPad, iPhone, iPod like thing they can really cash in on. I agree on watches and on VR. I do wonder if a Nike/Apple deal for shoes and / or clothes makes sense, but I bet Nike would go on their own.....

 

Maybe the they can be the first company to crack the code on holograms or on projecting from your phone, but that's hard to see, or hard to see how they'd keep the grip on technology long.

[Brock Beauchamp]

 

That's why I wonder if Apple will/should buy some software companies (say, when the recession happens and prices drop), and diversify into more fields, Brock.

I'd be more inclined to agree if Apple operated like Google or Microsoft:

 

1. Buy company

2. Integrate company into your services but allow them to continue operating (mostly) as-is

3. See (relatively small by comparison) profit!

 

Apple doesn't do that. If they buy a company, they fold them into Apple as completely as possible. They often disband the company altogether, keeping only the pieces that will serve Apple's needs. It's how Apple lost out to Google during the bidding war for Waze.

 

Beats is a good example of this. Beats was a hardware company, which fit Apple's strategy. So Beats headphones stayed and continued as-is... But Beats Music? No, Apple don't play that game. They took the pieces of Beats Music they liked, folded it into the company completely, and it reemerged as Apple Music.

[Brock Beauchamp]

Another thing to consider is that we don't even know what services Apple is working on right now. They play things so close to the vest that it appears they're doing nothing much of the time.

 

For example, Google and Facebook are in the middle of a well-known deep learning battle. It's all over the news... But where's Apple? Dunno, but it's been mentioned (in a roundabout Apple sort of way) that they're also working on deep learning and have been for years... They're just not telling anyone about it.

 

Apple only announces things when they work on Apple products. Unlike Google or Facebook, who want people to work with their deep learning systems and improve them, Apple only wants their deep learning project to work on Apple devices (again, they're a hardware company) so they have no reason to let anyone know about the project until Tim Cook is onstage, telling us how much better Software X makes This Gadget You Need To Buy.

[Vanimal46]

I should be in the target demographic for VR... Mid-20's, grew up with video games, still love them today when I have the time, and disposable income. None the less, I have zero.... ZERO interest in virtual reality gaming. And don't know anyone that is interested.... 

[Brock Beauchamp]

 

I should be in the target demographic for VR... Mid-20's, grew up with video games, still love them today when I have the time, and disposable income. None the less, I have zero.... ZERO interest in virtual reality gaming. And don't know anyone that is interested.... 

Hardcore gamers.

 

And hardcore gamers are mostly mixed on VR.

 

Hardcore gamers can't support a real market, either.

 

It doesn't help that VR is currently in the midst of 3-4 companies all trying to push a proprietary format... That's going to stall out VR for at least half a decade, maybe forever.

 

A small, dedicated market can't support 3-4 companies vying for attention with no interoperability. Whoever wins VR can turn a tidy profit but when companies like Facebook, Sony, and Microsoft are the players in question, I won't even wager a guess who wins that battle (though I think Facebook is currently positioned well).

[Vanimal46]

 

Hardcore gamers.

 

And hardcore gamers are mostly mixed on VR.

 

Hardcore gamers can't support a real market, either.

 

It doesn't help that VR is currently in the midst of 3-4 companies all trying to push a proprietary format... That's going to stall out VR for at least half a decade, maybe forever.

 

A small, dedicated market can't support 3-4 companies vying for attention with no interoperability. Whoever wins VR can turn a tidy profit but when companies like Facebook, Sony, and Microsoft are the players in question, I won't even wager a guess who wins that battle (though I think Facebook is currently positioned well).

All good points. Video games are a tricky business. They need to make games more difficult to appeal to the hard core gamers of the world, but once they're too hard, it loses the casual gamers. I know for me I was out from the Call of Duty franchise for good once I was out of college and couldn't play for hours on end. 

It'll be interesting to see who comes out on top from this 3-4 company race to be the market leader of VR. 

[Brock Beauchamp]

 

All good points. Video games are a tricky business. They need to make games more difficult to appeal to the hard core gamers of the world, but once they're too hard, it loses the casual gamers. I know for me I was out from the Call of Duty franchise for good once I was out of college and couldn't play for hours on end. 

It'll be interesting to see who comes out on top from this 3-4 company race to be the market leader of VR. 

The biggest problem facing gaming - and it's been this way for a decade now - is spiraling costs of development.

 

A top-shelf Playstation game (mid-90s) cost, say, $200,000 to build.

 

A top-shelf Playstation 2 game (early 2000s) cost, say, $1,000,000 to build.

 

A top-shelf Playstation 3 game (mid 2000s) cost, say, $10,000,000 to build.

 

A top shelf Playstation 4 game (today) costs, say, $50,000,000 to build.

 

You can see the problem here.

[Brock Beauchamp]

And by the way, those numbers are just to get a good, but not spectacular, kinda upper end but not mind-blowing game out the door.

 

There are many games that have cost well over $100,000,000 to develop in the past five years.

[Vanimal46]

Those are mind blowing numbers. Something I never take into consideration when I spend $60 for a game at Target.

[Willihammer]

 

Well, not really... Their margins are still best in the business. They saw a slight, temporary dip as they released the SE - a lower margin phone - but that should help buoy them in emerging markets where they need to entrench themselves (as they're attempting to do in India now and have already done in China).

 

The biggest problem facing Apple is saturation and phone hardware... As the phone market matures, phones will continue to last longer and longer... So Apple needs to open new markets.

 

The problem is that there aren't any significant markets to open, at least not as far as I can see. Watches are a hobby and unless something radical happens, will never be the "next big thing". TV is intriguing but it will never be a power player for Apple (or anyone, really) because the set-top boxes are cheap and last forever... Though the FCC's new strategy of forcing an open standard on all cable providers - allowing AppleTV, Roku, etc. to become the default box for all things TV - could really boost the market. Virtual reality is a lulz market. It has cool features and can do amazing things but it's going to be a niche for at least five years, probably more like a decade. Consumers are suffering gadget exhaustion and they're not going to drop a grand to strap a video game machine to their noggins. VR needs to step into "must have and affordable" territory and I don't see it happening.

 

Apple's next big gain/loss will come from their auto project. Everything else will keep them raking in cash hand over fist but the cash flow will be mostly flat.

 

Apple has several solid markets that will keep them very profitable: phones, tablets, Macs, watches, and TV boxes. I don't see big growth in any of those markets (and some will decline) but none of them are poised to fall off the Earth, either.

OK but what the hell are they doing with the buybacks? I agree they should remain profitable but I am losing confidence in their ability to smartly reinvest those profits. They've already spent $117b on itself, buying at as high as $128/share. And they're gonna buy another $58b worth of Apple stock over the next two years. 

 

Profits are one thing, but that's wasteful. And its certainly not the behavior of a growth company, is it?

Edited July 7, 2016 by Willihammer

[Brock Beauchamp]

 

OK but what the hell are they doing with the buybacks? I agree they should remain profitable but I am losing confidence in their ability to smartly reinvest those profits. They've already spent $117b on itself, buying at as high as $128/share. And they're gonna buy another $58b worth of Apple stock over the next two years. 

 

Profits are one thing, but that's wasteful. And its certainly not the behavior of a growth company, is it?

I think it's a byproduct of a few things:

 

1. Apple has more money than they know what to do with... No point in leaving it in a bank to waste away.

2. Apple is too stringent with their purchases of other companies (as I pointed out in a later thread).

3. A nice byproduct of investing in yourself is that your stock is unlikely to be as affected by market fluctuations and it shows stability.

4. Apple, at least outwardly, has lacked imagination since Jobs died and doesn't have enough good ideas to consume all that money in R&D (though their R&D expenditures have exploded in recent years).

 

Mostly, I think it's number one.

 

It's mind-boggling when you realize that Apple has enough money to pay for 80% of Amazon's market capitalization in cash.

[gunnarthor]

 

I agree.....not sure what they should buy, but there must be some undervalued companies out there they like......

 

I am  considering Ford again....same huge pile of cash, ok dividends, seems to be quite profitable again. That said, I have this recession fear holding me back.

Ford has a great dividend but I'd stay away.  I just don't trust it much over the longterm. I know it's improved but it always seem the last to the party on improving its cars.  I might make a small investment in it but certainly not a big one.  I think there are safer buys.

[Brock Beauchamp]

Ford has a great dividend but I'd stay away. I just don't trust it much over the longterm. I know it's improved but it always seem the last to the party on improving its cars. I might make a small investment in it but certainly not a big one. I think there are safer buys.

I could be wrong but I think GM has a higher dividend. I invested in GM about a year ago... Static stock price, nice dividend.