The Investment Thread

[wallus]

Yet oil went under $80 per barrel yesterday. I think gas prices will go up over fears that China re-opening will drive up demand significantly. 

Ironically, the bears that have been saying the economy and market would get destroyed appear to be wrong (or they have been saying "it's still coming!") and that will push up oil prices.

[wallus]

So that job report... wow

[GAME05]

Didn't see it. I'm gonna guess "wow" means bad.

[PlayerHader]

14 hours ago, GAME05 said:

Didn't see it. I'm gonna guess "wow" means bad.

Bad as in “massive Fed rate hikes aren’t cooling the job market yet.” 517k new jobs. Staggering number, really.

[owbc]

If you take out all of their “adjustments” it sounds like the conclusion to draw is that it’s basically a wash and there hasn’t been much change to the job market. It’s pretty obvious the January report will show job losses given everyone waited until the new year to do layoffs. 

[LouisEly]

21 hours ago, owbc said:

If you take out all of their “adjustments” it sounds like the conclusion to draw is that it’s basically a wash and there hasn’t been much change to the job market. It’s pretty obvious the January report will show job losses given everyone waited until the new year to do layoffs. 

Yep, the layoffs, particularly in the tech sector, come with severance that I'm sure many are going to use to take some time off, travel, and do some bucket list things before job searching.  The unemployment claims are forthcoming.

Other context to the jobs report:

• The labor force participation rate edged higher to 62.4%.  Greater supply of workers.  Every 0.1% increase in labor participation rate is an additional >$300K workers.
• A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons also edged higher to 6.6%. 
• A bulk of the created jobs (128K) were in the leisure & hospitality sector, which involve a lot of part-time and lower-wage jobs.

[wallus]

On 2/3/2023 at 11:29 AM, GAME05 said:

Didn't see it. I'm gonna guess "wow" means bad.

No, the number was way higher than forecasted. Pretty much everywhere but Tech is still doing decent. (even Tech employment is beyond pre-pandemic levels)

[GAME05]

More of a personal finance question but it relates and I'm curious the thoughts on the matter:

I learned recently that I have a work benefit where I can withdraw my 401k early, at retirement, without incurring the early-withdrawal penalty.

I've been doing personal savings outside of an IRA since I'll not only be homeless at retirement (live in work housing, though I expect to rent for a while after retiring), but my pension won't be enough to live off of, especially without social security benefits kicking in yet (which'll likely be pushed back soon enough, too).

But learning this, all of a sudden what I'm thinking is that I could put all my personal savings (and crypto) into an IRA because I'd have the 401k money. Likely up that contribution, too. That way my savings will be subject to taxes once instead of yearly capital gains taxes. And then 401k+pension would (hopefully) be enough for the seven years between retirement and 62 (yes I could work longer but that's probably another post).

The downsides to this, at least that I can see, is that I'm a better investor than the mutual fund company. But maybe/probably not so much considering capital gains taxes. I'm also more subject to the value of the 401k plummeting due to a market crash right before retirement, whereas via personal investing I can mitigate that risk.

Investing completely within IRAs seems like the smartest way to go, but I still wonder if there's considerations I'm not thinking of. Especially since I can't dump a bunch of money in an IRA and just change my mind and remove it.

[nate82]

You can mitigate risk with your 401k also.  The closer you get to retirement start switching over to safer investments.  So at 55-60 start allocating more towards bonds and cash.  Once at your retirement and withdrawal age go completely cash and bonds and then cash out.  Also removing your 401k wouldn't be a good idea if your employer is matching.  I am not sure with government jobs if that is an option.  But you would be losing money if there is a match. 

I wouldn't draw from social security until you are at the age of retirement for social security.  You lose a lot per month if you draw early.  

[GAME05]

The expectation right now is to retire at 55. It's when I hit the next five-year tier and it only goes up about $30/month for each additional year unless I worked to 60 (I won't, or at least not as an LEO). So my main concern is supplementing my income between 55 and when social security benefits kick in because my pension alone won't be enough to live on.

Right now my crypto and some % of stocks are in a regular, taxable account. The thought is moving them both entirely to an IRA which I then couldn't touch until 62. And then my age 55-62 income would be pension+401k. I currently contribute to my 401k, but I'd have to significantly up it beyond the matching amount to meet my income needs. Before this "you can withdraw early" news it was going to be pension+personal savings.

Also the current plan is to move to Belize when I retire, and that country has no capital gains taxes. I still couldn't withdraw a personal IRA early because of US taxes, but that may otherwise make a difference especially in terms of using income from dividend payments and not paying taxes on those after I get there.

 

[owbc]

48 minutes ago, GAME05 said:

The expectation right now is to retire at 55. It's when I hit the next five-year tier and it only goes up about $30/month for each additional year unless I worked to 60 (I won't, or at least not as an LEO). So my main concern is supplementing my income between 55 and when social security benefits kick in because my pension alone won't be enough to live on.

Right now my crypto and some % of stocks are in a regular, taxable account. The thought is moving them both entirely to an IRA which I then couldn't touch until 62. And then my age 55-62 income would be pension+401k. I currently contribute to my 401k, but I'd have to significantly up it beyond the matching amount to meet my income needs. Before this "you can withdraw early" news it was going to be pension+personal savings.

Also the current plan is to move to Belize when I retire, and that country has no capital gains taxes. I still couldn't withdraw a personal IRA early because of US taxes, but that may otherwise make a difference especially in terms of using income from dividend payments and not paying taxes on those after I get there.

 

I read the personal finance reddit and many of those folks were all putting in the max $6,500 into their IRA in January. To me the biggest risk is lack of liquidity as you noted, especially in your 55-62 window when you might need the cash. I see it as one piece of a diversified investment portfolio -- and it's a piece that you don't really have to think about after making the contribution. I didn't make a 2022 contribution (still can until tax day) so I might do that depending on what my bonus/raise looks like. 

It would sure be nice to retire at 55! I spent so much time getting my PhD that I figure I'll work until 70, but I guess we'll see.

[GAME05]

The more I think about it, the more I will indeed go the IRA route and really up the 401k. I need about another $1,000 per month to supplement my pension, so even a 100k 401k would be able to do that. That would get me to my current salary, though that's still just 'getting-by' money. And it's not like I can't still have an emergency fund personal savings.

I got into this job really late in life, myself, and so I'll only be getting about 65% of a full pension and medical. But the nature of law enforcement work is such that I don't want to be doing it when I'm older. Hoping for my state to change LEO retirement to 25 years which would help. Or some sort of "please retire" lump offer since my Division doesn't really want LEOs in the first place (I'm not a typical County or Municipal officer).

 

[Fear The Chorizo]

Some of the tea leaves I've been reading indicate the consumer spending portion of economic output has been propped up by people dipping into their savings and racking up credit card debt at an unsustainable pace to maintain their day to day quality of life in the face of inflationary pressures - there is some growing concern that these things are going to come to a head later this year and there's going to be a sharper than expected dip in economic output.  In short, the start of 2023 is kind of a dead cat bounce on the consumer side of things economically, and inflationary pressure isn't going to ease fast enough to avoid a rough end to this year.

[nate82]

19 minutes ago, Fear The Chorizo said:

Some of the tea leaves I've been reading indicate the consumer spending portion of economic output has been propped up by people dipping into their savings and racking up credit card debt at an unsustainable pace to maintain their day to day quality of life in the face of inflationary pressures - there is some growing concern that these things are going to come to a head later this year and there's going to be a sharper than expected dip in economic output.  In short, the start of 2023 is kind of a dead cat bounce on the consumer side of things economically, and inflationary pressure isn't going to ease fast enough to avoid a rough end to this year.

From a few economists that I have read from they are predicting a 4.3 CPI for tomorrow.  Which if true probably means more rate hikes. 

[owbc]

1 hour ago, Fear The Chorizo said:

Some of the tea leaves I've been reading indicate the consumer spending portion of economic output has been propped up by people dipping into their savings and racking up credit card debt at an unsustainable pace to maintain their day to day quality of life in the face of inflationary pressures - there is some growing concern that these things are going to come to a head later this year and there's going to be a sharper than expected dip in economic output.  In short, the start of 2023 is kind of a dead cat bounce on the consumer side of things economically, and inflationary pressure isn't going to ease fast enough to avoid a rough end to this year.

1000%. It's kind of crazy that consumer demand hasn't fallen yet and the only reason it hasn't is probably that most people carry over credit card balances so they may be ignoring how much they are falling behind. I also know at least personally, the significant number of people in my inner friend/family circle who have been laid off in the last 6 weeks is influencing my thinking for the year as well. 

[wallus]

Layoffs appear to be happening in tech and on the coasts. Here in flyover country there are still huge amounts of open positions. This may be a regional recession. 

[GreatNWwi]

I can always tell when my company’s execs think the economy is going to crash.  In preparation for 2023 we cut our capital budget in half, offered early retirement buyouts, laid off 3000 or so workers, cut travel to only essential trips, cut training funds and more.

It is always of sign of things to come with the overall economy.  We are deep in preparation mode right now.

 

Oh........and my promotion cycle always ends up at the kick off of this austerity budget so all promotions are on hold until further notice.  My boss just started the cycle that takes about 6 months in Q3 of 2022.

Edited February 14, 2023 by GreatNWwi

[Fear The Chorizo]

14 hours ago, nate82 said:

From a few economists that I have read from they are predicting a 4.3 CPI for tomorrow.  Which if true probably means more rate hikes. 

Try 6.4

Layoffs appear to be happening in tech and on the coasts. Here in flyover country there are still huge amounts of open positions.

Job openings are great, but a good number of them are likely due either to a lack of workers in that area qualified/experienced for those positions or the compensation being offered in those roles by employers isn't enticing enough to get people to work for them.  ''We're Hiring" signs and job postings can quickly be taken out of windows and off recruiting websites, too - oftentimes replaced by "Going out of Business" signs.

In my field, one thing I'm noticing with my company is a ton of upper management folks retiring across offices all over the country - it's mainly a product of my industry being around roughly 40 yrs and the baby boomer generation that really made their first lifelong careers in it are ready to move on.  So the job openings we have as a company are more in the backfilling of roles as people are leaving the workforce, basically treading water as a company and not growing in terms of # of employees.  Just the sheer volume of Americans hitting that retirement age is likely driving increased hiring beyond what a struggling economy normally sees, because in the end companies need bodies to fill roles. 

 

[LouisEly]

Yes on retirement - if they were close to retirement age and had a halfway decent financial planner, if they didn't retire in 2019 they sold everything and retired at the end of 2022 after the market spiked.

Milton Friedman said 12-18 months before you can get any effect on prices from rate hikes.  Fed only started tightening 11 months ago, and much slower than they probably should have.

[owbc]

4 hours ago, Fear The Chorizo said:

Try 6.4

Layoffs appear to be happening in tech and on the coasts. Here in flyover country there are still huge amounts of open positions.

Job openings are great, but a good number of them are likely due either to a lack of workers in that area qualified/experienced for those positions or the compensation being offered in those roles by employers isn't enticing enough to get people to work for them.  ''We're Hiring" signs and job postings can quickly be taken out of windows and off recruiting websites, too - oftentimes replaced by "Going out of Business" signs.

In my field, one thing I'm noticing with my company is a ton of upper management folks retiring across offices all over the country - it's mainly a product of my industry being around roughly 40 yrs and the baby boomer generation that really made their first lifelong careers in it are ready to move on.  So the job openings we have as a company are more in the backfilling of roles as people are leaving the workforce, basically treading water as a company and not growing in terms of # of employees.  Just the sheer volume of Americans hitting that retirement age is likely driving increased hiring beyond what a struggling economy normally sees, because in the end companies need bodies to fill roles. 

 

Yeah, a huge chunk of the tech layoffs is sales and recruiters. The other chunk is basically people with $300K+ total comp who may need to accept a 20% pay cut in their next job at a startup or traditional company. And those folks are chomping at the bit to get some of that talent which was previously out of their price range. There's a lot of good talent there because the layoffs were not very discriminate in most cases. 

[homer]

4 minutes ago, owbc said:

Yeah, a huge chunk of the tech layoffs is sales and recruiters. The other chunk is basically people with $300K+ total comp who may need to accept a 20% pay cut in their next job at a startup or traditional company. And those folks are chomping at the bit to get some of that talent which was previously out of their price range. There's a lot of good talent there because the layoffs were not very discriminate in most cases. 

that happened to a friend of mine. he was laid off from Salesforce and got a job with a start up. 

[nate82]

The tech jobs the actual tech jobs that are being lost are being gobbled up by startups and financial institutions.  These layoffs are not like the banking layoffs.  The tech jobs translate to other jobs if you get laid off at Google or Twitter you can pick up a job easily in the financial sector.  If you got laid off by a financial company in 2008 you were not going to find another job as easily. 

Inflation is still a problem and with the recent CPI numbers I wouldn't be surprised if the FED goes back to a 75BP hike.

[RobDeer 45]

22 hours ago, LouisEly said:

Yes on retirement - if they were close to retirement age and had a halfway decent financial planner, if they didn't retire in 2019 they sold everything and retired at the end of 2022 after the market spiked.

Are you saying financial planners know when the market will peak and then sell off all your equity investments when you retire?

[GAME05]

I think I've solved for my savings issue. I will self-direct in an IRA and then eventually transfer that into the 401k. It seems to be the best way of using the taxed-once retirement plans while also best taking advantage of the early-withdrawal benefit I have. I'll just have to be mindful of the $23,000 401k individual contribution limit.

[LouisEly]

15 minutes ago, RobDeer 45 said:

Are you saying financial planners know when the market will peak and then sell off all your equity investments when you retire?

I'm saying that if someone is close to and contemplating retirement, their financial planner should know to sell higher risk equities after a long market rally.