The Investment Thread

[wallus]

The fed definitely did not act fast enough but I would bet a lot of money that June was peak inflation and it will start to go down in July. I am expecting a .75 rate hike at the next meeting.

[Fear The Chorizo]

3 hours ago, wallus said:

The fed definitely did not act fast enough but I would bet a lot of money that June was peak inflation and it will start to go down in July. I am expecting a .75 rate hike at the next meeting.

Yes, but that decline doesn't really mean much - going from 9+% in June year over year to say 7% in July year over year still means stuff costs a ton more a full year after inflation started spiking.  Changes from the interest rate hikes won't be seen in inflation numbers for another few months, at which time the rest of the economy will be firmly entrenched in a progressively worse recession (we're already in a recession that will get worse).  The big rate hikes coming now are kind of like a fire department showing up to a kitchen fire and then proceeding to wait until the entire house is a raging inferno before starting to run the hose to the nearest hydrant, then proceed to extinguish the fire on a destroyed house and not turn the water off until they've flooded the rest of the homes in the neighborhood.

There should never have been a 2021 round of COVID stimulus printed out (frankly there probably shouldn't have been any in 2020 either but gov't policy panicked).  And as soon as that bill was passed the Fed should have started significant rate hikes a full year ago to offset what they knew was coming.

Gas/fuel prices are the biggest inflation driver, since everything sold in a store at one point or another got there after being transported by something running on fuel.  Gas prices will drop a bit due to reducing demand as summer moves to fall (prices always go down during this stretch), but now the problem is the US needs to stop drawing from its strategic reserves and actually try to replenish them when the cost of oil is near a record high.  That will curtail supply and prevent gas prices from dropping faster than they otherwise would have - so we'll get a fresh round of blaming oil companies raking in huge profits.  Meanwhile, US refining capability is basically running at max capacity and there are terrible permitting/financing disincentives for those companies to even try to use profits for building new refineries, expanding existing ones, or increasing drilling/production to try and get more in line with demand and get prices at the pump to a reasonable level for consumers.

The other option is to make everyone buy electric cars they can't afford to destroy the environment much faster by mining the heavy metals needed to produce batteries, and then subsequently blow out the existing electrical grid.

It's going great...

[homer]

I find it hard to believe US Covid stimulus payments are causing global inflation

[PlayerHader]

This tweet touches on it. Folks like Peter Zeihan point to a draw back from globalization causing economic conditions that make little sense within our understanding of the past several decades.

 

[LouisEly]

15 hours ago, Fear The Chorizo said:

There should never have been a 2021 round of COVID stimulus printed out (frankly there probably shouldn't have been any in 2020 either but gov't policy panicked).  And as soon as that bill was passed the Fed should have started significant rate hikes a full year ago to offset what they knew was coming.

Gas/fuel prices are the biggest inflation driver, since everything sold in a store at one point or another got there after being transported by something running on fuel. 

The 2021 stimulus payments are not being used for food and gas right now, and those two things are about as inelastic as you can get for demand anyway, thus the 2021 stimulus has little to do with inflation right now.

Gas prices peaked in June, thus why inflation spiked.  Gas price affects the cost of every tangible good, and no Fed action is going to have any significant impact on the demand for/price of gas. 

Gas prices are up almost 50% over a year ago.  Diesel prices are up over 60%.  That's what's driving inflation.  That, and housing which is a supply issue and also inelastic in demand because whether own or rent, people have to live somewhere.  Either home prices go up or rent goes up, or both if supply is too low. 

[PlayerHader]

Consumer spending up 1% last month. I wouldn’t bet much that we get that 2nd consecutive quarter of negative growth.

[Austin Tatious]

Oil is trending lower and may continue to do so in the short term.  And that might help bring a reading or two down for upcoming CPI prints.  But, there is a long term supply issue and energy could go the other direction again.  If so, some other inputs will need to come down, particularly housing, or else inflation could be choppy and a more protracted problem than people want to believe.

[Austin Tatious]

The recent upswing in stocks: counter rally in a bear market or we’ve already bottomed?  I tend to think it’s the former.  

[GAME05]

3 hours ago, Austin Tatious said:

The recent upswing in stocks: counter rally in a bear market or we’ve already bottomed?  I tend to think it’s the former.  

Me, too. Retail sales and unemployment are weirdly contradictory to a recession, but I'm more inclined to think we have more hurt coming, at least until the public is confident inflation is going down and will continue going down.

Right now is just such a great time to be buying stocks and crypto regardless of the future and people recognize that.

[Fear The Chorizo]

On 7/15/2022 at 11:39 AM, PlayerHader said:

Consumer spending up 1% last month. I wouldn’t bet much that we get that 2nd consecutive quarter of negative growth.

Should've been much more willing to bet way, way more....because that's exactly where we're at.  

[GAME05]

What do you guys think of Weight Watchers (WW)? Lot of debt but EPS has been improving. Been falling for 16 months now, but if they get their stuff together they were a $40 company selling for $6 today. The speculation side of me says maybe there will be a greater demand for weight loss after these lockdowns and eating bad food from working at home.

[zurch1818]

Investing in single stocks is too risky for me. I know a lot of people do it but it something I personally wouldn't ever do. If I were to invest in something more risky like that, it would be into a business that would play a physical active role rather than with a public company. 

For retirement, I believe in very boring compound interest from slow and steady growth style mutual funds. I'm happy my work has a pretty good mix of them.

The stock market is on sale right now, so my wife and I just decided to start our early retirement brokerage account, something to tap into before we can touch our main nest egg. It can also double as big purchase fund. We invested in two Vanguard index funds, their growth one, VIGAX and their total stock one, VTSAX, to try to diversify a little bit (yup very boring). They seem to have a very good track record.

[nate82]

5 hours ago, zurch1818 said:

Investing in single stocks is too risky for me. I know a lot of people do it but it something I personally wouldn't ever do. If I were to invest in something more risky like that, it would be into a business that would play a physical active role rather than with a public company. 

For retirement, I believe in very boring compound interest from slow and steady growth style mutual funds. I'm happy my work has a pretty good mix of them.

The stock market is on sale right now, so my wife and I just decided to start our early retirement brokerage account, something to tap into before we can touch our main nest egg. It can also double as big purchase fund. We invested in two Vanguard index funds, their growth one, VIGAX and their total stock one, VTSAX, to try to diversify a little bit (yup very boring). They seem to have a very good track record.

You are missing out.  In 2012 I bought AMD and NVDA for about $4 a share each and invested $3k total and now my investment is sitting around $200k.  There have been some losers in that time frame like loan depot and others but overall I am up far more than I would be if I just invested in mutual funds.  

If you are just investing in mutual funds you are not actually diversified and you should have some individual stocks.  If you want to go the safe route there is always GE and others.  Also finding stocks that pay consistent dividends and consistently increase the amount paid in dividends is another good strategy to add for individual stocks.  

[GAME05]

90% of mutual funds don't beat the market. Not only are you paying their fees, but they have a certain obligation to move money around just for the sake of it, because "I didn't do anything this quarter" doesn't sit well with investors. 

There's good books on dividend investing. There's a good few companies out there which pay a pretty steady dividend every quarter, and that can be great in retirement to just cash out the dividends instead of re-investing. It doesn't take millions invested to get a decent monthly income out of that. Buying REITS can help you with that diversification you want, too.

Owning individual stocks aren't necessarily a risk even relative to an index fund. Plenty of large- and mega-cap companies out there with a terrific moat that aren't going out of business anytime soon and provide a really healthy return.  

[nate82]

Haven’t checked around but currently Affirm has a 1.25 APY on their savings accounts.  It is 100% digital and you can only access it through their app on your phone or tablet.

I think this is the highest APY on a savings account.  This is a FDIC insured account.

[PlayerHader]

2 hours ago, nate82 said:

Haven’t checked around but currently Affirm has a 1.25 APY on their savings accounts.  It is 100% digital and you can only access it through their app on your phone or tablet.

I think this is the highest APY on a savings account.  This is a FDIC insured account.

Ally just bumped up to 1.4% on savings accounts.

[zurch1818]

Thanks for the insight on individual stocks vs mutual funds. I completely agree that not all mutual funds beat the market. That was pretty good insight to buy Nvidia and AMD at that point. I think that's a average 50% ROI, which is crazy! Nice work doing your homework on that one! It doesn't seem like that is sustainable forever (similar to a high babip).

I just looked at one of the mutual fund I bought and that ROI was 15% since 2012. I feel like in the long run, I don't want to be buying lottery tickets and do "set it and forget it" instead. I feel like for every one of those, I would lose out on others. If I can get 10-11 percent returns on mutual funds that beat the market (which is what I've done), then my money will double every 7 years. With my income level and how I'm investing, in the long run that will more than enough to sustain the lifestyle I want to live.

Maybe I would buy some rentals with cash in 5 to 10 years? Real estate with a rental does seem to have a pretty good ROI and seems more sustainable and something I would have more control with than an individual stock. I can pick the property, the tenant, and the monthly rent. The value of the house will also go up too. If I ever needed to get out, I could sell the house. I believe there are only 2 times in the last 100 years where housing prices crashed, the great depression and 2008.

 

[homer]

If you're just starting out you may want to subscribe to something like Kiplinger's. Or check out AAII.

[PlayerHader]

16 hours ago, PlayerHader said:

Ally just bumped up to 1.4% on savings accounts.

Just got another email. Ally goes to 1.6% tomorrow.

[LouisEly]

CPI flat from June, down if you exclude housing costs.  Supply chain pressures easing, starting to hear of gluts in some products/commodities.  If you're thinking of making a big purchase, hold off for a month if you can.

[owbc]

Yeah, round 1 of inflation is over.

I'm still worried about another energy crisis. It's almost guaranteed for Europe this winter, but even beyond that there is no excess supply anywhere. Any disruption is going to send gas back to $5 or more. 

The glut of raw materials is a very good thing for easing the housing crisis...interest rates will surely suppress home prices but rental prices are absurdly high right now. It will take a while to build enough new units to make a dent there. 

[GAME05]

An inflation figure which sent the market rising yesterday is the same figure which sent it way down only a few months ago.

Europe is already buying Russian oil via India, so I'm not too convinced it'll hit anything at crisis level unless winter there gets particularly cold. I'm more concerned about the housing market here and especially in China.

[homer]

27 minutes ago, GAME05 said:

An inflation figure which sent the market rising yesterday is the same figure which sent it way down only a few months ago.

Europe is already buying Russian oil via India, so I'm not too convinced it'll hit anything at crisis level unless winter there gets particularly cold. I'm more concerned about the housing market here and especially in China.

It's year over year comparison. So July 2022 to July 2021  +8.5% compared to June 22 to June 21 +9.1%. The stock market was reacting to the difference from one month to the next so May - June was bad, June - July was good.

It is weird sometimes how the market reacts to economic news. There are days I think it will tank on some kind of big story and the market just says "meh".

[Fear The Chorizo]

On 8/11/2022 at 1:23 PM, homer said:

It's year over year comparison. So July 2022 to July 2021  +8.5% compared to June 22 to June 21 +9.1%. The stock market was reacting to the difference from one month to the next so May - June was bad, June - July was good.

It is weird sometimes how the market reacts to economic news. There are days I think it will tank on some kind of big story and the market just says "meh".

And July 2021 was roughly the time when inflationary pressures started gaining steam...any sort of year over year increases in the months ahead means prices are still going up significantly despite demand cratering due to economic inactivity.  That essentially is stagflation.  Reality is that in order to get prices back to reasonable levels, there probably needs to be an extended period of deflation where we are seeing a prolonged stretch of negative year over year prices - similar to what we saw through most of 2009.

The fact demand has dropped to the COVID wasteland of spring 2020 isn't really anything to be optimistic or happy about either - there was so much pent up demand forced on the economy from 2020-mid 2021, the fact there isn't significant economic growth beyond that in 2022 despite the inflationary pressures is a bad sign pointing to a sustained and long-lasting recession.  

As for the market, it's acting almost independent from what the day to day economic reality is facing most of the country - tough to say when another correction will occur because of so many levers committed to propping the market up, but that most likely will happen after people start scratching their heads as to why the FED continues jacking rates up each month despite monthly inflation rates getting back to 1-2% year over year.  This economy is more or less malfunctioning and unpredictable.

[nate82]

43 minutes ago, Fear The Chorizo said:

As for the market, it's acting almost independent from what the day to day economic reality is facing most of the country - tough to say when another correction will occur because of so many levers committed to propping the market up, but that most likely will happen after people start scratching their heads as to why the FED continues jacking rates up each month despite monthly inflation rates getting back to 1-2% year over year.  This economy is more or less malfunctioning and unpredictable.

The FED was slow on getting the hikes in place why wouldn't they be slow on stopping them?