You know it's time to sell when. . . you are getting stock tips from CFC!

[Kaitzilla]

Well, Blackberry is up 13% today!
Maybe that guy knew something
http://money.cnn.com/2014/06/19/technology/mobile/blackberry-earnings/



The Economist just came out with an article on the Vancouver Housing Bubble:
http://www.economist.com/blogs/americasview/2014/06/housing-vancouver

It is still an utter mystery what is driving the bubble

But exactly how much of Vancouver’s property market is being fuelled by foreigners, and how rapidly they might disappear, is uncertain. Although there are data on investor immigrants—those who have at least $800,000 to invest in order to fast track their application to get Canadian citizenship—there isn’t information on where they are investing their money or how much goes into property.


So analysts have had to look for patterns themselves. One study monitored electricity bills as a way of figuring out how many high-end city-centre condominiums sit empty most of the year. That analysis led to the conclusion that foreign investors own 8 out of every 100 apartments in pricey areas in downtown Vancouver. Another survey tracked where municipal assessments of property values were sent and found that less than 1% was mailed overseas to China. Yet another report counted mainland Chinese-sounding names on sales records for luxury homes that were priced at C$3m and more: 74% of the buyers ticked this box.

Another option is to look at macro-level data. Robin Wiebe of the Conference Board of Canada, a research outfit, has charted the links between China’s economic health and the local housing market in Vancouver, and found significant correlations between China’s real GDP growth and growth in housing prices. Urban planner Andy Yan, who sits on the city’s planning committee, says that understanding the impact of foreign investors on real estate is like searching for the Higgs particle. “Everyone knows it’s there, but it’s proving it that’s the problem. We know it’s not wage growth; and it isn’t the economy here. All we know is that in Vancouver, real estate has been de-coupled from the local economy.”

If so, prices may soon drop back. The number of investor immigrants has dropped since 2012; earlier this year, the Canadian government axed the programme entirely. That should soon give analysts more clues to the mystery of the Vancouver housing market.

And what about E-cigarettes?
It seems like they are everywhere all of a sudden.


mmm, Argentina threated to default today. Who do they owe money to?
http://www.reuters.com/article/2014/06/19/us-argentina-debt-idUSKBN0ET1RK20140619

But others say that will never happen.
http://www.businessinsider.com/listen-argentina-is-not-going-to-default-2014-6

 

[Harv]

It is still an utter mystery what is driving the bubble

Here is my best understanding: Just like air inflates a balloon, borrowed money inflates an asset. As you keep blowing air into a balloon, the balloon keeps expanding, until it pops - Then the air escapes.

In this case, the asset we are discussing is real estate. You can borrow money to buy real estate. If the market is strong, then the price of the asset will rise, and you will have more borrowing power to buy more real estate. Eventually, demand is driven by the expansion of borrowing power, which is driven by the rising asset price, which is driven by the demand.

This cycle is accompanied with a sense of mania; nobody believes prices will ever go down; and everybody and his aunt are getting into the business. It is very obvious in hindsight, but not at the time.

When it pops, the cycle operates in reverse. Supply is driven by asset sales, driven by contracting borrowing power, driven by falling asset prices, driven by the same asset sales.

2008 was a very bad crash, but I think you will live long enough to see it play out again. By then you will be very old and nobody will listen to you.

In any case, any important tips for a beginner?

Your location is Italy and I do not know much about the Italian market or the Eurozone, or how taxes and foreign withholding work. So I cannot give specific advice about specific companies for that reason. If you are losing 25% of a 4% dividend to foreign withholding, that will be 30% of your investment after 35 years. (0.99^35 = 0.703) Hopefully somebody from the Europe who is interested in the subject can give you help.

Get educated. Try a library and look at a few books or go online. I will try to think of a good book, but somebody here is likely to beat me to it.

Think long term. Where is this company going to be in 30 years?

Think quality as in best of breed. Who do you think will win the World Cup?

Speaking of World Cup - What companies are displaying their ads around the soccer pitch?

Similarly, in the USA, there is no need to follow the NASDAQ. Follow NASCAR.

Think value. How much you paid for a stock is half the equation in calculating your profit. If you paid too much, then making a profit is more difficult.

Avoid <snip> appeal. If owning the stock is likely to help me get a second date with a girl, then it is likely to be overpriced. Boring comanies will have better prices.

You might do well to consider a fund, like an index fund.

Past performance is no guarantee of future results. Expense ratio is a pretty good indicator, in my opinion.

Long stock, short stock, calls & puts, futures and bonds. Yummy! Greed is awesomegastic!

I have never tried shorting stocks and have never tried anything in commodities futures. I have bought and sold options. What I have found is my performance tends to lag when I trade options. On the other hand - Options are one of two reasons I still had a portfolio in 2008.

Wouldn't an person be more concerned about the short term? Because you know....they don't have long to live.

Actually I meant I look for tried and true as opposed to new and trendy.

I have a conservative bucket and a speculative bucket that changes with age, so now that I am 46, it is 46% conservative and 54% speculative. The conservative bucket is in mutual funds, again that adjusts with age - 46% stocks/54% bonds at the moment.

Firstly I will note that you are older than I am by five years.

I thought it would be 54% stocks and 46% bonds. I do not consider stocks to be speculative. If you have an urge to speculate, then you can set aside some money for speculation. Have you considered an index fund? You can have, say, 10% in an index fund and 10% in your speculative fund and see which does better.

I have some money in a managed account and it has been doing better than my self-managed accounts. It drives me nuts.

The speculative bucket has beat the market by multiples over the long haul

Congratulations! I track my performance against the Dow Jones Industrial Average Total Return Index. (DJITR and I find it on ycharts) I cannot say that I have been doing as well. I had one or two good picks years ago.

if you are unfortunate enough to hold a stock that Cramer has probably just shorted before he starts yapping negatively about it.

I do not think Cramer does that. I have heard that some people short a stock in the after-hours market just as Cramer talks it up. It is called the Cramer short. (Maybe I will google it and post a link.) However, I do think Cramer is a personification of Mr. Market. When Mr. Market feels good, he is manic. When Mr. Market feels down, he is depressed.

But, I really really really wish I would have put money into Ford. When all the US automakers were collapsing and Ford was not taking the bailout....oh yeahh, I could have ridden that thing up and got a nice return on it.

I was working with somebody who kept telling me to buy Ford at $1.00. It did not pass the $10,000 test to me. I was not willing to put $10K into it. Even if I did, when it doubled, how much of it was I going to sell. Was I going to hang on to all of it and have it worth $168K or whatever the initial invesment would be? (Quote: 16.80)

 

[Whomp]

I've actually been thinking about buying some stocks myself... First I'll need to save up some money though. I was thinking that first rule would be to invest in electronics companies, since I know that field pretty decently.

In any case, any important tips for a beginner?

Don't be afraid or intimidated by the process. It is actually fun and interesting to learn about great companies. You will make plenty of mistakes but if you accept they will happen and cut losses when the fundamentals are not happening you should cut them off. Winners should be ridden hard. This is where you will capture all of your returns.

Understand that 70% of movement in the short run is market related and 70% of movement in the long run is company related is good to remember.

Lastly, Sir John Templeton said something that reminds me of where we are in a cycle which helps me adjust my risk budget.
Bull markets are...
Born on pessimism
Grow on skepticism
Mature on optimism
And die on euphoria

I feel we are at "skepticism" right now but pick your own narrative.


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[Harv]

Bull markets are...
Grow on skepticism

I feel we are at "skepticism" right now but pick your own narrative.

Although the pessimism phase was in March of 2009, you might be right about the skepticism phase. Nobody seems to understand why the market is going higher and everybody is calling "bubble." There has been no optimism for the market to mature on and certainly no euphoria.

By that logic, I should be mobilizing the rest of my spare cash.

 

[Hygro]

Although the pessimism phase was in March of 2009, you might be right about the skepticism phase. Nobody seems to understand why the market is going higher and everybody is calling "bubble." There has been no optimism for the market to mature on and certainly no euphoria.

By that logic, I should be mobilizing the rest of my spare cash.

Despite what I said to Whomp a number of months ago here, we have way higher savings than investment right now, which tells me the private sector is probably not overleveraged as whole. That is a very good sign. The direction of private savings did turn negative though which is not a good sign.

Here's with S&P, all indexed to a 100 value that was the bottom of the recession.

 

[Harv]

I track my performance against the Dow Jones Industrial Average Total Return Index. (DJITR and I find it on ycharts) I cannot say that I have been doing as well. I had one or two good picks years ago.

My information has the DJITR at 33510.64 at the close of June 20, 2014. This is up 3.4% from December 31, 2013.

By my own count, I am up 7.1% on the year so far, so it is off to a good start!

Still need to mobilize a bit more, but not sure what bargains are out there.

 

[danjuno]

I've been looking at the Auto sector in Google finance and it amazes me how far Tesla is ahead of everybody else. How do you guys think their releasing patents to Public Domain is going to affect the market?

 

[El_Machinae]

It's a gamble on their part. It will be years and years before there's any payoff from the idea.

 

[Whomp]

If he helps grow the industry it is a huge win for Tesla. Infrastructure will be built and other industries and entrepreneurs will take advantage. Interestingly, I don't think as many current automakers will want to cannibalize their own products and he expects reciprocation. I think b school people would call this strategy "network externality" (think VCR vs. Betamax).


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[JollyRoger]

I am looking forward to the day that my portfolio of stocks and bonds is as massive and diverse as IglooDude's.

 

[Harv]

DJIA hit 17K and is retreating a little bit. I just got back from a vacation.

So, what do you think is a good price for JP Morgan Chase? (JPM) I think 53.30 is a good price but have been waiting a long time. Is there an American bank that you like better?

 

[Antilogic]

Haven't read the entire thread, but given my limited resources I stick with mutual funds (specifically, an S&P 500 index fund) because the overhead costs are ridiculously low and every share you buy is instant diversification.

 

[Whomp]

Haven't read the entire thread, but given my limited resources I stick with mutual funds (specifically, an S&P 500 index fund) because the overhead costs are ridiculously low and every share you buy is instant diversification.

I use something called "active share" which allows me to select managers that actually manage money versus act as "closet indexers". The difference is the managers I choose have high conviction in their holdings.


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[Antilogic]

I figure I don't know enough to pick a good active manager, and considering the majority of them underperform the national stock index and charge significantly greater fees for the privilege, it has struck me as a particularly bad option.

 

[Whomp]

Fair enough. I choose to select managers which have returned more net of fees and taxes. That said your strategy is a good option versus the alternative.


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[Zkribbler]

Haven't read the entire thread, but given my limited resources I stick with mutual funds (specifically, an S&P 500 index fund) because the overhead costs are ridiculously low and every share you buy is instant diversification.

Good idea

 

[El_Machinae]

Won't the increasing popularity of an S&P 500 index fund cause it to bubble?

After really thinking about it, I'd like to find a mutual fund that invests in Indian banks, especially in more a more aggressive start-up fashion. i.e, targeting early investment in potential risers.

 

[Antilogic]

Fair enough. I choose to select managers which have returned more net of fees and taxes. That said your strategy is a good option versus the alternative.

I was a bit unclear on what you meant by high conviction, but I think I see how you are picking them now. Have you come across good ones that keep their management fees below the 2-2.5% range?

Won't the increasing popularity of an S&P 500 index fund cause it to bubble?

After really thinking about it, I'd like to find a mutual fund that invests in Indian banks, especially in more a more aggressive start-up fashion. i.e, targeting early investment in potential risers.

I don't think it works that way; the index fund is a computer-controlled system that aggregates the contributions of individual mutual fund holders and purchases shares the 500 stocks on the index (plus it has a couple extra line items for short-term holdings to make the mechanics work--I just checked the website and it has 503 listed holdings). So any additional purchases of an indexed fund should distribute the money to the companies listed on the index and not cause a bubble in the index fund itself.

I can't help you on the second, but it does sound like an interesting investment opportunity.

 

[El_Machinae]

Rethink what you're saying. If you're deliberately putting money into the 500 companies, their value will rise. That's where bubbles come from, people buying stuff because they think they're gonna go up in price.

 

[Antilogic]

Rethink what you're saying. If you're deliberately putting money into the 500 companies, their value will rise. That's where bubbles come from, people buying stuff because they think they're gonna go up in price.

Sorry, I may have misinterpreted what you meant. I thought you were saying there could be a bubble in the index fund, independent of the activity in the stock market. Bubbles in the stock market are still possible (and index funds will track them, both as they inflate and as they pop).