The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

[Almington]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

That makes me wonder if you have a lot of exposure to technology, since this is their typical slump.

Between things flaring up in Europe and more information about the attack in Libya, coupled with expectations of lower earning this quarter for many companies and the run up this summer I think that some investors are locking in their profits and waiting to see where things go.

The idea that you can "sell in May and go away" historically would give better results than the full period averages for the market as a whole, but I'm not sure of any study that would shows the same result for any individual company making me wary of doing that as a general principle (Disclosure: I do generally make my purchases during October) if I assume that I have made good purchases and still think that the stock is undervalued (or fairly valued) why would I just sell because of what date is on the calender? Seems like a very arbitrary reason to sell.

 

[FlagDUDE08]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

Depending upon your total portfolio, it can be fun as well as instructive to set aside a very small part for pure speculation.

Completely agree. You definitely want to be able to take some chances. Obviously in the case of a retiree you want to be a bit more careful, but speculation has the opportunity to get you somewhere. The BIGGEST thing, though, is to come up with a game plan. How and when are you going to buy it? How long do you intend to hold the principal? What is your exit strategy?

As an example, a spec play for me was Facebook (FB). I thought that, after the initial excitement, the price would go down to about $27, and then start going back up. So, I set up my pyramid, increments of $2, and my normal 10-15-25-50 all the way down to 27. I would hold until June 21st (about 3 weeks, since that's what I saw with other IPOs), and that would be the day of reckoning. If I was down or made a little bit, I was out. If the price was high enough to warrant it, I would have sold off the principal and kept profit in the game. Sure enough, June 21st came around, and sold it all around $32. Made 10%.

My new "spec play" is MKS Instruments (MKSI). Buy into the tech slump on the pyramid ($27 and down by $1.50), wait until the new year (around January or February), and then decide from there. It's about a 2.4% yield on dividend, so I might give a little more wiggle room and allow more profits to stay if I get any, but likely not because this is a short term play for me. No dividend reinvestment with a spec until after the day of reckoning.

One thing that is also good is if you happen to sell an investment where you lose a little on the principal, but make up for it and then some on the dividends. You make money at the lower rate (or main rate if the dividend doesn't qualify) AND you get to claim a loss on your taxes!

 

[DrDemento]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

FF-Your two portfolio question is interesting-sort of like would you rather get a salary of 10,000 per day for a month versus a penny for the first day and doubling the amount each day for the entire 31 day month. I look at investing in the market with a very different eye now at my more advanced age and position than i did years ago. In my 30's and 40's I knew i had lots of time to go and was willing to take far more risk and look for mostly growth of principal. As i reached my 50's and 60's i realized that i could no longer count on a steady growth of income at work and began to look for more dividend income from investments. Also the economy in the US and the world has changed greatly over the 35 years I have invested. There was a time that personal real estate was almost a sure thing. Everything you bought could be sold years later for a substantial profit and gain. This is certainly not the case now and truthfully, may not be again for a very long time if ever. For me, with banks paying gornich for CD interest rates, the market is the only game in town. I have gradually shifted to a totally different portfolio with a far greater percentage of yield stocks and dividend instruments. I can live pretty comfortably that way and more importantly-i can sleep a bit better knwoing that if the market goes down a bit, I am still for the most part drawing a very good dividend yield. The caveat being-no dividend is guaranteed-and I still have to vigilant and watch carefully to be sure i diversify. My approach would be somewhat different if i was the age of most of the posters on here-but drawing social security and getting medicare makes you think differently.

 

[Almington]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

I have gradually shifted to a totally different portfolio with a far greater percentage of yield stocks and dividend instruments. I can live pretty comfortably that way and more importantly-i can sleep a bit better knwoing that if the market goes down a bit, I am still for the most part drawing a very good dividend yield. The caveat being-no dividend is guaranteed-and I still have to vigilant and watch carefully to be sure i diversify. My approach would be somewhat different if i was the age of most of the posters on here-but drawing social security and getting medicare makes you think differently.

You can't buy something only because of the dividend, you have to be confident in the underlying fundamentals of that company to continue to produce profits over the time horizon that you are looking at. It still matters the price that you are buying the stock at also, you shouldn't buy an overvalued stock because of a dividend in case you need to sell that stock in the future.

 

[DrDemento]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

You can't buy something only because of the dividend, you have to be confident in the underlying fundamentals of that company to continue to produce profits over the time horizon that you are looking at. It still matters the price that you are buying the stock at also, you shouldn't buy an overvalued stock because of a dividend in case you need to sell that stock in the future.

That is good advice-but should really be common sense for any investor. No dividend is guaranteed and the higher you go the more risk is involved. I have had many patients who were seniors-most so concerned with safety that they kept much of their assets in CDs and treasuries. They would avoid the market like the plague for fear of losses. But this extended period of time with inordinately low interest rates has forced them to seek out the stock market-lest they be left to try to live on less than a 1% yield. As you mentioned-you have to do home work to be in the market or at least have an advisor who does his homework and understands your tolerance for risk.

 

[Almington]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

That is good advice-but should really be common sense for any investor. No dividend is guaranteed and the higher you go the more risk is involved. I have had many patients who were seniors-most so concerned with safety that they kept much of their assets in CDs and treasuries. They would avoid the market like the plague for fear of losses. But this extended period of time with inordinately low interest rates has forced them to seek out the stock market-lest they be left to try to live on less than a 1% yield. As you mentioned-you have to do home work to be in the market or at least have an advisor who does his homework and understands your tolerance for risk.

Most investors think the market is down for each of the last three years, I don't have much faith in the "average" investor being particularly well informed or acting rationally.

Link

 

[DrDemento]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

Most investors think the market is down for each of the last three years, I don't have much faith in the "average" investor being particularly well informed or acting rationally.

Link

Exactly. It pays not to be an average investor. Wall Street is not the gamble that many think-it certainly is not Las Vegas or Atlantic City and it is not the Lottery. But you have to read and listen and watch. You cannot just blindly buy and sell or even buy and hold. I was educated as a physician-that was just about all I knew. I knew a little about how to earn money but knew nothing about how to make money with money. I had very little clue about investments. I have had to spend a lot of time and effort in learning what I had never been exposed to or taught. I am by no means any sort of expert-just one who has listened and learned from the best advisors I could find. I simply try to limit my losses during bad times or when making mistakes while at the same time maximizing my gains during good times or when I make an educated purchase. I try not to get greedy or be afraid. I have tried to stick to the old adage that Bulls and Bears can make money in the market but Chickens and Pigs get slaughtered. I follow this thread with interest-there is a tremendous amount of intelligent thoughts posted.

 

[FreshFish]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

My approach would be somewhat different if i was the age of most of the posters on here-but drawing social security and getting medicare makes you think differently.

I can appreciate that, to a certain extent....and also I suggest you also keep in mind that for a male in good health who, for illustrative purposes, let's say is age 70....his life expectancy is close to 20 years; if his lovely wife is the same age, her life expectancy is 25 years. A very small portion of the portfolio can still be targeted for those time spans as well, especially if you figure that paper currency and electronic records are not necessarily secure (albeit that each is exposed to different risks).

I've followed more the Jim Rogers school, learn to save assiduously, wait patiently, and act decisively whenever you have good information. The best investment I ever made was a table saw and an electronic miter saw; my ROI on that is unbelievable (although in pure dollar terms it's been relatively modest).

I'm really glad for you that your strategy has worked well for you so far.

 

[DrDemento]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

I'm really glad for you that your strategy has worked well for you so far.

Reminds me of the fellow who jumps out the window from the 67th floor. As he passes someone on the 54th floor leans out and asks how he is doing to which he respond "OK so far". Every one has to decide on what works for themselves and then be willing to adapt that strategy to what the world and US economy does. Part of my strategy at this stage is to take as much out of my retirement funds and pay the taxes now-putting anything I can into personal savings. I just do not think that i will ever see tax rates at this level again in my lifetime. No matter who gets elected, no matter what party controls the country finances-sooner or later tax rates will increase. I am betting that the percentage I pay in total taxes now (federal, state, real estate, sales) will be higher down the road.

As far as life expectancy-your numbers are pretty close-but remember that you are more likely to be able enjoy what you have at age 65-70 than at age 90. A very big part of me would rather spend and enjoy now (while of course saving some for the future years) than deny myself at this stage only to have it all saved for a time when i might be living in a nursing home and not be able to enjoy what I could have had. That is the purpose of having long term care insurance. But i fully agree with you and indeed have targeted some of the investments as a buffer for advanced years if i ever get to that stage.

 

[unh_hockey]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

Anyone else noticing the student loan bubble and increasing default rates of said student loans? Outstanding debt cleared the 1 trillion mark a year ago thereabouts, and I believe defaults are roughly 1/10th of that. More noticeable are the rates of defaults which seem to be climbing. The dynamics are a bit different than the housing bubble, mostly because student loans and mortgages are handled in default differently - but I suspect ( key word here) that there are a lot of derivatives tied up in student loans much like they were in mortgages. Could a rash of defaults cause highly leveraged firms to go belly up again? Will the system need more blind purchases of bad assets again?

I have done little/ no research on this type of thing, and am simply going on what happened before back in 2007. I also take into account that banks have had virtually none of their practices changed since 2008, so I don't see why they would stop using these instruments. I mean if I knew the fed would bail me out, I wouldn't stop making millions per year either....moral hazard right?

Again, this is merely speculation and I could be wrong. I feel that the student loan troubles will only get worse as time goes on.

 

[joecct]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

Didn't Uncle Sam federalize the student loan debt as part of some legislation?

 

[St. Clown]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

Didn't Uncle Sam federalize the student loan debt as part of some legislation?

I don't think they took over outstanding loans, but the Feds certainly took over the issuance of all new student loans.

The thing about student loans is that you can never escape them legally. Even after going through bankruptcy court, you will still be on the hook for student loans.

 

[Almington]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

Anyone else noticing the student loan bubble and increasing default rates of said student loans? Outstanding debt cleared the 1 trillion mark a year ago thereabouts, and I believe defaults are roughly 1/10th of that. More noticeable are the rates of defaults which seem to be climbing. The dynamics are a bit different than the housing bubble, mostly because student loans and mortgages are handled in default differently - but I suspect ( key word here) that there are a lot of derivatives tied up in student loans much like they were in mortgages. Could a rash of defaults cause highly leveraged firms to go belly up again? Will the system need more blind purchases of bad assets again?

I have done little/ no research on this type of thing, and am simply going on what happened before back in 2007. I also take into account that banks have had virtually none of their practices changed since 2008, so I don't see why they would stop using these instruments. I mean if I knew the fed would bail me out, I wouldn't stop making millions per year either....moral hazard right?

Again, this is merely speculation and I could be wrong. I feel that the student loan troubles will only get worse as time goes on.

I believe that the majority of the past student loans were federally insured against default so that the lender isn't at risk of losing the principle. The lender is at risk with private student loans, but since 2005 they are not dischargable in bankruptcy the only way to not have to pay them is to die.

The bigger issue with student loans is the ~10 year repayment overhang drag that they have on the economy. If, for example, the average graduate with debt is paying about $250/month over 10 years that is $30,000 in total, or roughly one year of post-graduation after tax income. How can having a whole generation doing that NOT stunt the growth of the economy going forward (yes, I recognize that money is then re-lended to new students and allows the continual funding of the higher education administrative machine).

 

[unh_hockey]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

I don't think they took over outstanding loans, but the Feds certainly took over the issuance of all new student loans.

The thing about student loans is that you can never escape them legally. Even after going through bankruptcy court, you will still be on the hook for student loans.

right, thats the biggest difference between student loans and mortgages. However, if people can't pay them due to worsening economic conditions, increased cost of living, and lower paying jobs, said loans still do not ( read can't) be paid off. There comes a point where the choice to default is the only real choice left...

 

[dxmnkd316]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

Which is precisely why our family is on it's second generation of the parents paying for college. The loans absolutely destroy your financial life after college. I know I will end up paying for my children's college tuition when the time comes.

The parents will find it far easier to pay for the costs than a new grad will.

 

[Almington]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

Which is precisely why our family is on it's second generation of the parents paying for college. The loans absolutely destroy your financial life after college. I know I will end up paying for my children's college tuition when the time comes.

The parents will find it far easier to pay for the costs than a new grad will.

That's provided that the parents have their own financial house (particularly in terms of retirement) in good order. I'd much rather have to worry about paying off my student loans than to worry about how my parents are going to pay for food, shelter, and medical care in their golden years.

 

[Almington]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

right, thats the biggest difference between student loans and mortgages. However, if people can't pay them due to worsening economic conditions, increased cost of living, and lower paying jobs, said loans still do not ( read can't) be paid off. There comes a point where the choice to default is the only real choice left...

At which point, the lender sues you in court and starts garnishing your wages or the federal government steps in and covers the lender's loss.

Lender's love student loans they are nearly a zero risk loan for them: Either you pay or the federal government pays. They only way they don't get paid is if you die with no meaningful assets.

Student loans may bite the Dept of Ed and the economy as a whole in the backside, but the lenders are not going to suffer with a ton of bad loans they have to write off like they have with mortgages and other toxic assets.

 

[dxmnkd316]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

That's provided that the parents have their own financial house (particularly in terms of retirement) in good order. I'd much rather have to worry about paying off my student loans than to worry about how my parents are going to pay for food, shelter, and medical care in their golden years.

The parents have also been smart enough to start saving at a very young age and they will retire very, very comfortably. They were also smart enough to teach their children to save money as well. Right now I'm saving somewhere between 20 and 25 percent for retirement. Plus another 20% in liquid savings.

 

[FlagDUDE08]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

Which is precisely why our family is on it's second generation of the parents paying for college. The loans absolutely destroy your financial life after college. I know I will end up paying for my children's college tuition when the time comes.

The parents will find it far easier to pay for the costs than a new grad will.

Loans destroy your financial life after college? So that's why since I'm completely debt free after four years removed from college, my life is over?

As for joecct, it's not so much federal loan subsidy as it is the feds themselves are the ones loaning out the money.

 

[dxmnkd316]

Re: The Stock Market thread: BUY! BUY! BUY! Sell, sell, sell...

Loans destroy your financial life after college? So that's why since I'm completely debt free after four years removed from college, my life is over?

As for joecct, it's not so much federal loan subsidy as it is the feds themselves are the ones loaning out the money.

You're one of the lucky ones. Congratulations. Obviously that means no one else has any hardships.