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

[Harv]

There have been threads here about money and about economics, but not about investing and speculating in equities or other investments. I thought about starting such a thread at times and have finally gotten around to it!

As I write this, the US equity markets seem to be making new highs nearly every day. The Dow Jones Industrial Average (which really is what I follow) is around 16750 and should cross 17000 into new territory. The economy it represents does not seem to feel like it is entering new territory and I find that disturbing.

Selling everything and going to cash does not seem like a viable option because short-term interest rates are basically zero. The next question is what to buy instead - and it is very difficult to come up with options. I do not consider gold to be one of those options because it is really not an investment - It produces nothing. (It is a hedge.)

So if you are replying to this post, how do you describe your investing or trading style? I like to think I invest like an person. I try to see things from a long term perspective - Where is this company going to be in thirty years? I like to see low price to earnings multiples. 14 seems to be a reasonable number (in the USA) because that represents a 7% earnings yield that should also keep up with inflation. So the theory then is the (reinvested) value after 30 years should be about 8 times after inflation. I also like to see good (3% or 4%) dividends that increase every year.

Today I got to see Intel (INTC) pop up in price. Now that it is near $30 a share everybody wants it, but nobody wanted it when it was at $20 a share. I think the time to buy it was when Jim Cramer said:

As for the dogs of the Dow, Intel was the number one loser, down 11% but Cramer said “I have no bull case for it, none.”

-Jim Cramer October 1, 2012

Intel's closing price was 22.76 that day. Everybody's story about Intel was about how they missed on the smartphone revolution.

I hope I did not lose everybody when I mentioned that name! He is very entertaining - but - I also see him as a personification of Mr. Market. He has the same bipolar personality as the market does. When the market is feeling energetic, he is feeling energetic. When the market is feeling depressed, he is feeling depressed. It has been a while since I watched his show, however.

Are there any bargains out there?

Which way do you think we are heading? Where do we finish the year and the decade at?

What do the markets look like outside of the USA?

Who wants to talk about stocks?

 

[gangleri2001]

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

 

[BenitoChavez]

I like to think I invest like an person. I try to see things from a long term perspective - Where is this company going to be in thirty years?

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

 

[JollyRoger]

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.

The speculative fund is aimed at momentum stocks with a typical holding period of one week to one month. I hold 3 at a time. It is fairly systematic with stop gains, a stop loss that floats upwards, and scheduled selling after a period of time. The speculative bucket has beat the market by multiples over the long haul, but you have to be willing to take big swings that may hit the stop loss, especially if you are unfortunate enough to hold a stock that Cramer has probably just shorted before he starts yapping negatively about it.

 

[Whomp]

Bought my first stock at 18 (Bally's which was a video game company at the time) for a high school elective class (our class sold fuller brushes for the investment money)lol. 52 now and still at it. Stocks, munis and private equity. I use contrary behavior, global Econ and trend to help me with my risk budget. All three are positively trending and this has happened only one other time (1996) since I've collected the data.



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[Labtec600]

I have never purchased an individual stock. 401K is all mutual. Last year I thought Bernie Madoff was running it as I had 22% returns. This year it's at like 1.7% which is pretty much the market this year.

I started at a great time - when the whole market crashed. Nothing like putting my money into a rock bottom market that I wont be touching for another 40 years.

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.

Going to put into the Employee Stock plan at my company in six months - automatic 15% discount. Nice little bank for a year to spend money on fun things. Would have done it this time, but I am purchasing a new computer.

 

[Kaitzilla]

Who can really say which way the market will go.
Some interesting reading I think:


This guy seems to think Blackberry is a bargain, but it is down 90% from 5 years ago so who can say.
http://www.fool.com/investing/general/2014/06/05/why-blackberry-is-about-to-look-cheap.aspx


Boeing stock is down 3% lately because Eric Cantor lost to a Tea Party professor.
Cantor was the #1 guy for the Export-Import bank which is up for renewal in September.
http://www.washingtontimes.com/news/2014/jun/12/eric-cantor-loss-clouds-future-of-export-import-ba/
http://online.wsj.com/articles/republicans-should-kill-the-export-import-bank-1402264988


Apparently the stock market is rising to fresh highs all the time because companies keep buying their own stock back.
http://www.washingtonpost.com/busin...c8ddb0-d6e6-11e3-aae8-c2d44bd79778_story.html

Buying back shares is so in vogue that 80 percent of the S&P 500 did it over the past year, according to Kiplinger. Among the more aggressive have been Boeing, Caterpillar, Cisco, 3M, Microsoft, Safeway and Travelers, who all bought back more than 10 percent of their shares, reports Zero Hedge, the widely followed investor Web site. Apple alone has announced it would spend $130 billion to repurchase shares. Last week, Ford joined the parade with an $18 billion buyback.

And make no mistake: In the short term, the buyback strategy works. Stock buybacks in the S&P 500 transformed what would have been an 80 percent rebound from the lows of 2009 into a 178 percent increase, according to a study by Fortuna Advisors.

It would be one thing if most of these stock buybacks were paid for out of the trillions of dollars in cash now sitting on corporate balance sheets. But as it happens, most of them have been paid for by near-record levels of corporate borrowing. Of the $3.4 trillion in additional debt taken on by nonfinancial corporations since 2009, nearly 87 percent has been sent off to shareholders in the form of dividends and stock buybacks, according to Paradarch Advisors.

Borrowing trillions to buy your own stock back.
Whatever boosts stock prices and gets more CEO bonuses.
America has no future worth investing in anymore really, so it probably is the best use of the cash.

http://www.washingtontimes.com/news...ard-cash-overseas-away-from-high-us/?page=all

American corporations seem to be doing just about everything with their record $1.53 trillion in cash holdings except using it to invest and hire in the United States, even though the sluggish economy could use the boost.

Three-quarters of that corporate cash pile was earned overseas and is being held outside the country to avoid the top U.S. corporate tax rate of 35 percent, according to a study by Standard & Poor’s Corp. It remains the highest rate in the developed world despite tax reform pledges by leaders of both major U.S. political parties.

Those guarding the mountains of overseas cash include some of the best-known names in American business, including General Motors Co., General Electric Co., Apple Inc. and Google Inc.

While many companies are simply reinvesting the cash in their operations in China and other overseas markets that have been growing faster than their U.S. operations, others are using it to acquire foreign companies. A majority appear to be using the cash as collateral to borrow funds in the U.S. to finance generous stock buyback and dividend programs for their shareholders. Only a small fraction of the money is being used to increase hiring, wages and business expansion in the U.S...



...Apple, which has the largest overseas cash trove by far at $132 billion, is one of the many corporations that, rather than dip into its cash and take a tax hit, took out debt instead to fund a big stock buyback and dividend program. The move was spurred by Carl C. Icahn and other activist investors frustrated at their inability to get their hands on some of the company’s far-flung cash.

Borrowing to buy stock

Among the 80 percent of blue chip companies listed in the Standard & Poor’s 500 index that conducted major stock buyback programs last year — often after borrowing the money as Apple did — were Ford Motor Co., Boeing Co., Caterpillar Inc., Cisco Systems Inc., 3M Co., Microsoft Corp., Safeway Inc., and Travelers Cos.

“Shareholders are pushing for the return of this cash,” S&P analyst Andrew Chang said.

Apple and other corporations are unwilling to repatriate the money and pay high U.S. taxes on it, so they are borrowing money instead to satisfy investors, Mr. Chang said. He predicted that the trend would accelerate this year.

Corporations get a double tax advantage if they borrow money to pay stockholders rather than dip into their cash. They can avoid giving a third of their earnings to the federal government, and the interest on their debt becomes a tax-deductible business “expense.”

Moreover, interest rates on the debt are some of the lowest on record, thanks to the Federal Reserve, which for the past five years has been trying to boost U.S. economic growth by purchasing more than $3 trillion of the most conservative bond investments: U.S. Treasurys and mortgage-backed securities. The Fed’s dominance of those traditional markets has driven private investors into corporate debt and riskier markets as they seek higher returns than the rock-bottom yields on Treasury bonds.

Investors’ thirst for higher-yielding corporate debt has resulted in a borrowing binge. Corporations are taking out nearly $4 in loans for every $1 in cash they earned in recent years, according to S&P.

Some say the borrowing spree borders on a credit market bubble that is feeding stocks because much of the debt is used to repurchase the companies’ own shares.

In theory, this is safe to do unless sales and profits start going down.
If they need to repay the loans, they can just sell the stock they bought back onto the market right? Hope for lots of buyers

"Corporations get a double tax advantage if they borrow money" seems a bit perverse in my opinion.



All in all I'd say the stock market will keep going up forever.
There are already plans for central banks to start buying each other's stock markets directly. Well, more than plans...
http://www.bloomberg.com/news/2013-...n-equities-as-low-rates-kill-bond-yields.html

Central Banks Load Up on Equities

By Sarah Jones Apr 25, 2013 7:34 AM CT
Central Banks Buy Stocks as Low Rates Kill Yields


Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in record amounts as falling bond yields push even risk- averse investors toward equities.

In a survey of 60 central bankers this month by Central Banking Publications and Royal Bank of Scotland Group Plc, 23 percent said they own shares or plan to buy them. The Bank of Japan, holder of the second-biggest reserves, said April 4 it will more than double investments in equity exchange-traded funds to 3.5 trillion yen ($35.2 billion) by 2014. The Bank of Israel bought stocks for the first time last year while the Swiss National Bank and the Czech National Bank have boosted their holdings to at least 10 percent of reserves.

I love how the guys with printing presses are now "investors"
Gonna be hard to compete with them.

To be fair it only seems to be excess foreign reserves being used to buy ETF's for now by non-US central banks since the Fed can't buy stocks.
But I can totally see The Federal Reserve getting permission to buy stocks during the next crisis from Congress and then trading Japan $10 trillion for 1000 trillion yen and agreeing to buy each other's stock market to boost stock prices +100,000%

The only long-term investment question, is what stocks will you buy when all the good companies become mostly privately held again (holding record debt) with the rest owned by central banks sending dividends to Treasury?

 

[Kaitzilla]

All in all I'd say the stock market will keep going up forever.

Wait, the Fed might be tapering buying of bonds and mortgage backed securities to 0 in October.
http://www.bloomberg.com/news/2014-...tapering-of-qe-to-zero-by-end-of-october.html

Federal Reserve Bank of Dallas President Richard Fisher said he favors a steady tapering in bond buying by the Fed, with a $15 billion cut to zero in October.

“Barring some destabilizing development in the real economy that comes out of left field, I will continue to vote for the pace of reduction we have undertaken, reducing by $10 billion per meeting our purchases and eliminating them entirely” at the Oct. 28-29 meeting, Fisher said today in a speech in New Orleans. He votes on monetary policy this year.

Fed Chair Janet Yellen said May 7 that, with inflation and employment far from the central bank’s goals, “a high degree of monetary accommodation remains warranted.” Policy makers haven’t indicated whether their plans for tapering $45 billion in monthly bond buying would mean announcing an end to purchases in October or a final $5 billion reduction in December.

The reduction by the Fed last month was “in recognition that the economy is improving and acknowledging that we have generated massive amounts of excess reserves among depository institutions,” Fisher said to the Louisiana Bankers Association. “There is abundant liquidity to finance economic expansion.”

Fed officials on April 30 announced a trim to bond buying for the fourth consecutive meeting, saying the economy has strengthened after harsh winter weather slowed growth to a 0.1 percent annual pace in the first quarter. Yellen said in May 7 testimony to the Joint Economic Committee that the central bank will probably end bond buying in the fall if the labor market continues to improve.

Crash in October then?

With the Middle East in the news again, keep an eye on oil prices too.

 

[El_Machinae]

Which way do you think we are heading? Where do we finish the year and the decade at?

I DON'T KNOW.

One thing I cannot figure out is the Baby Boomer effect. For the last 30 years, Baby Boomers have been shoveling their spare income into the market, whether personally or in the form of pension plans. I keep thinking 'surely, this has caused a bubble'. And now, over the next 20 years, we're going to see a drawdown of this money. Not all in one pop, because current pension contributions are going to slow that drawdown in the same way that current payroll tax slows the unsustainable nature of Social Security. It's a rolling debt system in all ways, except that it's a rolling bubble.

Ugh, so now I wanna know how much we're going to see on drawdown, and how much of we're going to see 'regular' economic growth. Plus, there's the 'pop' factor, where some stocks will do very nicely.

I have three major rules:
- I trust banks to always know how to make money.
- Big Pharma has a pile of cash and is going to snap up good ideas from public labs as they see them
- Natural Resources will always go up in price ... until they don't. I trust oil, but I gotta watch out for a seachange. Potassium, Fertilizer, etc. all of these have growing markets and will rise in value as the economy grows. BUT, it's kinda like investing in railties two centuries ago, a great idea until it's not anymore.

Those Baby Boomers are leaping out as a factor, though. I'm already seeing it in the housing market. Old couples wanting to downsize their homes.

 

[Mouthwash]

I did very well on Marketwatch, although I don't remember what I did exactly.

 

[Whomp]

I DON'T KNOW.

One thing I cannot figure out is the Baby Boomer effect. For the last 30 years, Baby Boomers have been shoveling their spare income into the market, whether personally or in the form of pension plans. I keep thinking 'surely, this has caused a bubble'. And now, over the next 20 years, we're going to see a drawdown of this money. Not all in one pop, because current pension contributions are going to slow that drawdown in the same way that current payroll tax slows the unsustainable nature of Social Security. It's a rolling debt system in all ways, except that it's a rolling bubble.

Those Baby Boomers are leaping out as a factor, though. I'm already seeing it in the housing market. Old couples wanting to downsize their homes.

Maybe you are thinking their massive purchases of bonds not stocks? The last 30 years has been the greatest bond market rally ever...(until it can't anymore) and purchases by individuals have been massive.

Financial Analysts Journal had a piece by three Dutch researchers — Ronald Doeswijk, Trevin Lam and Laurens Swinkels, who showed that investors held only 37.7% of global investable assets in equity at the end of 2012.

That and the 37.1% they invested in equities in 2011 were the lowest exposure to equities investors have had since 1959, when records were first kept. It’s considerably below what they held even in the late 1970s, before the Reagan-era bull market began, and in the early 2000s after the dot.com bubble burst.

Previously strong five-year look-back returns of 18% compounded from the S&P 500 index usually elicits enormous enthusiasm like we saw in 1968 and 1999. This produced equity ownership exceeding 60% of investable assets.

Harvard endowment owns less than 12% in public equity. These are the type of behavioral trends I think are important to understand.


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[El_Machinae]

Yeah, they're buying bonds. And the pension funds are buying Blue Chips if they're not buying bonds. It's not easy, I'm trying to figure out what's going to happen when the Baby Boomers start taking their cash back.

 

[DemonicAppleGuY]

I watch the defense contractors and I watch the news. Boeing, Lockheed Martin, and General Dynamics have all made huge gains over the past year. Part of this growth is from countries like Poland and Romania which have committed over the last year to expanding their militaries and increase spending. Much of this spending is going towards purchasing American weaponry.

Defense contractors are usually a fairly stable purchase as well as large countries want to protect their military industries and other countries may/will buy from them.

(I can't even legally purchase stock on my own yet though so take that with a grain of salt.)

 

[Whomp]

Yeah, they're buying bonds. And the pension funds are buying Blue Chips if they're not buying bonds. It's not easy, I'm trying to figure out what's going to happen when the Baby Boomers start taking their cash back.

I've heard Dr. Ken Dychtwald
speak on the subject and he would suggest that baby boomers view the uniformity of school/work/retirement very differently, obsolete even, than the silent generation.

You can read some of their research at agewave.com

(I can't even legally purchase stock on my own yet though so take that with a grain of salt.)

In the US, you could give your parents the money to open an account called a UTMA. After 21 it is your money.

I have our 10 and 13 pick their own stocks and they've a nice job and they're learning a lot too.

 

[Hygro]

Are changes in bank failures a leading indicator of markets?

Spoiler :

I'm just making stuff up I picked bank failures at random. What I know about stocks: listen to Whomp.

edit: bah, graph cuts off part of the bank failures, which are annual so harder to define the exact moment, but nevertheless display at starting to occur just before the crash.

 

[El_Machinae]

Dr. Ken Dychtwald

Thanks. I'll watch some of his talks. People should know by now that I'm all over longevity-themed lectures.

I was thinking about my list upthread. What I'm trying to figure out is a good system to distinguish any rise in commodity prices due to 'demand' compared to 'due to inflation' vs. 'due to a bubble'.

Investing in commodities that will go up in value seems to be a great idea, but merely hedging against inflation not so much. Bubbles are fun, but scary.

 

[Farm Boy]

Den of thieves, usurers, and liars.

 

[Harv]

Den of thieves, usurers, and liars.

Where are the customers' yachts?

It takes me a while to respond to everybody else. Sorry.

 

[Farm Boy]

I thought those were the customers?

 

[LamaGT]

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?