Investing Thread

[Jenksismyhero]

Stocks going down down down.

[Y2HH]

Stocks going down down down.

 

Relatively minor correction, IMO. Stocks have been a big "too high" as far as I'm concerned. But, like always, nothing to worry about.

[Jenksismyhero]

Relatively minor correction, IMO. Stocks have been a big "too high" as far as I'm concerned. But, like always, nothing to worry about.

 

I wouldn't call it minor. Most of the gains the last 6 months are gone. But yeah, it'll come back. Eventually.

[StrangeSox]

I wouldn't call it minor. Most of the gains the last 6 months are gone. But yeah, it'll come back. Eventually.

 

six months ago we were at about 13150, now we're at 14733

[caulfield12]

six months ago we were at about 13150, now we're at 14733

 

-3.2%

 

Not the end of the world. I'm more concerned about the tightening up of the shadow banking trend in China than anything going on in the US right now.

 

When the Philippines is outgrowing China's GDP over the last quarter, there's legitimate reason for concern.

[caulfield12]

Thank you, I was actually thinking more about the original set up of the account. At some point I will be taking my name off, ''gifting'' it to them. I am wondering if it would actually be advantagious to just leave me off from the beginning. I do like the opportunity to teach them about investing using my money but they would realize the benefits.

 

The fund itself has modest fees. I am picking it for ease of use and low start up costs. I have consolidated almost everything with USAA abd for a small account like his, I am valuing conveinence over returns.

 

 

I still don't see why you don't go with something as simple as pie like the Vanguard 500 Index, because you're teaching them how investments go up and down with the market, but, over time, gain XYX percent.

 

It used to be 8-9% that we all shot for, maybe even 10%, but that has been corrected downward to 5-6-7% aspirations the last decade.

 

At any rate, their management fees are the lowest in existence, and they don't churn their funds for profits/commissions or to make their funds overperform in the short-term by increasing long-term risk.

 

One of the most valuable "learning moments" from mutual funds is the difficulty of NOT chasing hot funds or managers on a year-to-year basis. Of being consistent, like Warren Buffett or Oakmark Funds, for example.

 

I know firsthand, because my father, when I was in my early 20's, put me into a very good (but conservative and non-sexy) fund callled Nicholas out of Milwaukee. I got frustrated with it in the 90's as everyone else (tech stocks) seemed to be passing it by, sold low and then bought a quantitative/futuristic trading fund from American Century chasing the "next big thing." It was dumb.

 

Same with Bill Miller and Legg Mason. He became famous for beating the market 13 years in a row. Nobody was better or more celebrated. But if you jumped into Value Trust a decade or so ago (in this case, 13 years ago), you'd have amongst the worst results of any fund in the world.

 

These are all "teachable" moments for young investors.

Edited June 25, 2013 by caulfield12

[StrangeSox]

Cheap index funds with minimal fees are the way to go.

[caulfield12]

Cheap index funds with minimal fees are the way to go.

 

 

Jack Bogle (Vanguard) has written a ton on this subject.

 

Paying fees/load upfront and excessive managing or churning of a portfolio makes nobody rich but the fund companies and managers. The average, mom & pop investor, gets screwed out their return over time.

 

 

[caulfield12]

I think you already have her invested exactly as you're looking to do here...500 index funds, value funds, etc...unless you go off the wall risky and start buying proshares funds, I don't really see much more you can do with the index/mutual fund market.

 

You could look at individual stocks that pay big dividends, like AT&T, Verizon, First Energy, etc...or perhaps a bit more conservative and buy something like Coke...they pay dividends that equate to 3+% gains...and they're probably pretty safe all things considered.

 

 

 

 

Done, 500 shares of FE at $37.20.

[Buehrle>Wood]

Quite the price if you bought today.

[mr_genius]

Cheap index funds with minimal fees are the way to go.

 

i just buy lottery tickets and hope for the best

[Y2HH]

-3.2%

 

Not the end of the world. I'm more concerned about the tightening up of the shadow banking trend in China than anything going on in the US right now.

 

When the Philippines is outgrowing China's GDP over the last quarter, there's legitimate reason for concern.

 

I'm convinced China has been gaming the system and it's catching up to them. The term house of cards couldn't be more fitting. China isn't just a worry, but a big worry. I don't trust much of anything they've done with their dubious currency and shadow markets over these years of extreme growth.

[caulfield12]

I'm convinced China has been gaming the system and it's catching up to them. The term house of cards couldn't be more fitting. China isn't just a worry, but a big worry. I don't trust much of anything they've done with their dubious currency and shadow markets over these years of extreme growth.

 

 

Yep, they're trying to tighten up the lending from Beijing to the rest of the provinces, and simultaneously tamp down the housing market at the same time...a lot of Chinese I know feel it's going to end up like a Ponzi scheme or game of musical chairs.

 

And they're also loosening restrictions (slowly) over time to allow Chinese to move their money out of the country, so all those people who were forced to keep their money on deposit and accessible for banks to loan out will have some options, such as HK residency or getting Australian citizenship if they bring X amount of money with them to invest, for example.

[southsider2k5]

It amazes me how similar China is to 80's Japan.

[caulfield12]

It amazes me how similar China is to 80's Japan.

 

Part of the Japanese problem was the reliance on the work unit...basically, lifetime employment contracts with companies that were no longer needed or manufacturing high quality products.

 

When I was first in grad school in 92-93, we closely studied the J. Edwards Deming/Total Quality Management style that at the time was working so well with the car companies and electronics companies.

 

As a comparison to the point about lifetime tenure/demotivation

Not unlike the productivity decrease you sometimes see with teachers in public schools after they've gotten through their first five years and can kind of coast from that point on. (granted, it's not everyone, but I saw it a LOT in Kansas City...part of it was when you get to be 50 years old or so, you can't easily replace that salary and quite a few teachers just don't have the technology and social networking skillls to adapt and advance in other industries)

Edited July 3, 2013 by caulfield12

[ChiSox_Sonix]

I recently purchased some shares of Sierra Wireless and they're up over 10% the past couple days. Very interesting company as they have a big chunk of the M2M market and own over 300 patents.

[Y2HH]

I recently purchased some shares of Sierra Wireless and they're up over 10% the past couple days. Very interesting company as they have a big chunk of the M2M market and own over 300 patents.

 

The hardest part about investing for most people is when they buy something, it goes up -- but later goes down below where they originally bought in. This tends to cause them to panic sell for a loss. Even good companies go through rough times, and it's often better to just leave it alone while they recover (or buy even more), than to panic, especially if they're continuing to pay out their dividend along the way.

Edited December 23, 2013 by Y2HH

[Jenksismyhero]

This would be fun:

 

http://www.moneynews.com/MKTNews/billionai...=nationalreview

 

 

Billionaires Dumping Stocks, Economist Knows Why

Thursday, 02 Jan 2014 11:13 AM

By Newsmax Wires

 

Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast.

 

Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.

 

In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.

 

With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.

 

Unfortunately Buffett isn’t alone.

 

Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee.

 

Finally, billionaire George Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.

 

So why are these billionaires dumping their shares of U.S. companies?

 

After all, the stock market is still in the midst of its historic rally. Real estate prices have finally leveled off, and for the first time in five years are actually rising in many locations. And the unemployment rate seems to have stabilized.

 

It’s very likely that these professional investors are aware of specific research that points toward a massive market correction, as much as 90%.

 

One such person publishing this research is Robert Wiedemer, an esteemed economist and author of the New York Times best-selling book Aftershock.

 

Before you dismiss the possibility of a 90% drop in the stock market as unrealistic, consider Wiedemer’s credentials.

 

In 2006, Wiedemer and a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States. They published their research in the book America’s Bubble Economy.

 

The book quickly grabbed headlines for its accuracy in predicting what many thought would never happen, and quickly established Wiedemer as a trusted voice.

 

A columnist at Dow Jones said the book was “one of those rare finds that not only predicted the subprime credit meltdown well in advance, it offered Main Street investors a winning strategy that helped avoid the forty percent losses that followed . . .”

 

The chief investment strategist at Standard & Poor’s said that Wiedemer’s track record “demands our attention.”

 

And finally, the former CFO of Goldman Sachs said Wiedemer’s “prescience in (his) first book lends credence to the new warnings. This book deserves our attention.”

 

In the interview for his latest blockbuster Aftershock, Wiedemer says the 90% drop in the stock market is “a worst-case scenario,” and the host quickly challenged this claim.

 

Wiedemer calmly laid out a clear explanation of why a large drop of some sort is a virtual certainty.

 

It starts with the reckless strategy of the Federal Reserve to print a massive amount of money out of thin air in an attempt to stimulate the economy.

 

“These funds haven’t made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money passes through the reserves and hits the markets, inflation will surge,” said Wiedemer.

 

“Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, and that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems.”

 

And this is where Wiedemer explains why Buffett, Paulson, and Soros could be dumping U.S. stocks:

 

“Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs.”

 

No investors, let alone billionaires, will want to own stocks with falling profit margins and shrinking dividends. So if that’s why Buffett, Paulson, and Soros are dumping stocks, they have decided to cash out early and leave Main Street investors holding the bag.

 

But Main Street investors don’t have to see their investment and retirement accounts decimated for the second time in five years.

 

Wiedemer’s video interview also contains a comprehensive blueprint for economic survival that’s really commanding global attention.

 

Now viewed over 40 million times, it was initially screened for a relatively small, private audience. But the overwhelming amount of feedback from viewers who felt the interview should be widely publicized came with consequences, as various online networks repeatedly shut it down and affiliates refused to house the content.

 

“People were sitting up and taking notice, and they begged us to make the interview public so they could easily share it,” said Newsmax Financial Publisher Aaron DeHoog.

 

“Our real concern,” DeHoog added, “is the effect even if only half of Wiedemer’s predictions come true.

 

“That’s a scary thought for sure. But we want the average American to be prepared, and that is why we will continue to push this video to as many outlets as we can. We want the word to spread.”

 

 

Edited January 3, 2014 by Jenksismybitch

[StrangeSox]

Seems to be a recycled article from at least early last year

 

http://www.csmonitor.com/Business/The-Simp...-scaremongering

 

Moneynews is part of the Newsmax group, which makes money by selling lots of fear-based products. BUY GOLD! CRISIS GARDEN!

 

[Jenksismyhero]

Yeah I didn't really buy it. If that doomsday scenario happens, the country goes into depression and money basically becomes meaningless anyway.

[southsider2k5]

If you had invested 10,000 dollars in an SP 500 fund 5 years ago, today you would have made $20,871 profit. The same investment in gold would have netted you $4,086 in profit. In a money market you would have made an entire $26.

[greg775]

If you had invested 10,000 dollars in an SP 500 fund 5 years ago, today you would have made $20,871 profit. The same investment in gold would have netted you $4,086 in profit. In a money market you would have made an entire $26.

 

I know a guy who confided in me he has $200,000 total. He is divorced but wife remarried and he has to pay no money to her. He is employed and currently healthy but we know how health can change in an instant. He wants to know what he should be doing with the money to make some rapid gains in his total wealth with about 10 years left to retirement. I had no idea what to tell him because my brother the tax lawyer has mapped out a plan for me. He wants rapid gains. What should he do?

Edited March 11, 2014 by greg775

[caulfield12]

I know a guy who confided in me he has $200,000 total. He is divorced but wife remarried and he has to pay no money to her. He is employed and currently healthy but we know how health can change in an instant. He wants to know what he should be doing with the money to make some rapid gains in his total wealth with about 10 years left to retirement. I had no idea what to tell him because my brother the tax lawyer has mapped out a plan for me. He wants rapid gains. What should he do?

 

 

 

 

Greg, there's no such thing unless you're investing with Bernie Madoff.

 

Rapid gains means what, over 10% a year?

 

The only area you can make that is in individual stocks, emerging markets, high tech...where there is lots of volatility.

 

Especially considering the increases in the stock market in recent months...it's a very high likelihood those rapid gains are gone for the next few years.

 

 

 

 

Of course, nobody knows for sure what will happen.

 

In general, he's taking a risk if he's putting more than 10% of his assets into any one place, especially if he's betting on high returns on 10% or more. History says he's more likely to fail at that than simply putting it into an index fund like Vanguard's 500 (vfinx).

 

I learned this from experience, chasing high performance from Bill Miller (and Legg Mason Value Fund), who had a 13 consecutive year history of beating the index but who completely fell apart in 2007-08-09 and eventually lost his funds because of underperformance and early redemptions.

 

 

 

 

I did the same thing when I was younger, changing from a rather conservative fund (Nicholas, based in Milwaukee) to American Century, which promised "quantitative evaluation models" and high tech exposure and simply ending up being another example for me of selling low and buying on a high.

 

 

 

 

 

[ChiliIrishHammock24]

Got myself in to the stock game with my own money. I own stock that my dad bought for me when I was a kid, but this is my own money and my own account and doing it all myself.

 

Bought stock on Tuesday. Sold it all on Friday. Make a 70% profit. Unfortunately I only invested $97. And after commissions and fees, I only ended up with a $31 gain. Blah.

[Jenksismyhero]

Got myself in to the stock game with my own money. I own stock that my dad bought for me when I was a kid, but this is my own money and my own account and doing it all myself.

 

Bought stock on Tuesday. Sold it all on Friday. Make a 70% profit. Unfortunately I only invested $97. And after commissions and fees, I only ended up with a $31 gain. Blah.

 

 

Feels good doesn't it? Just remember, it's your personal responsibility to give up gains on your own money.