Stock market tips and experiences

[2023G87M2]

The best stock market tip is to go back in time and invest in the companies you know will blow.up or invest $1000 in bitcoin when it was less than pennies
Do not invest in crypto now though. It's all a pump and dump scam or just scam in general, including bitcoin.

[XutvJet]

Originally Posted by antzcrashing

Do some research.

The average American family has a $748,000 net worth, according to Federal Reserve data. But the median net worth is $121,700.

The median is the more accurate number vs the average net worth. The upper 1% own 30%+ of the wealth in this country and the upper 10% own 70%+ of it. This income inequality is what massively skews the $748K net worth number.

The upper 10% is defined as a annual household income of ~$212K.

The upper 1% is $570K (dual income).

The median income in the US is around $79K.

It's those in the median income range and below that will struggle with retirement because they simply aren't or can't put money away in retirement. Over 67% of the households in the US make less than $100K/yr and over 55% less than $76K/yr.

I know it's hard for some on this site to believe these numbers because they have high incomes and surround themselves with similar income friends.

[Tyga11]

Originally Posted by XutvJet

The median is the more accurate number vs the average net worth. The upper 1% own 30%+ of the wealth in this country and the upper 10% own 70%+ of it. This income inequality is what massively skews the $748K net worth number.

The upper 10% is defined as a annual household income of ~$212K.

The upper 1% is $570K (dual income).

The median income in the US is around $79K.

It's those in the median income range and below that will struggle with retirement because they simply aren't or can't put money away in retirement. Over 67% of the households in the US make less than $100K/yr and over 55% less than $76K/yr.

I know it's hard for some on this site to believe these numbers because they have high incomes and surround themselves with similar income friends.

You are not accounting for equity in homes but the rest is spot on.

[antzcrashing]

So what you guys doin now that it remains uncertain? I am heavily in cash and selling what I have in 1+ yr ownership territory (capital gains). I feel SP500 is going to yearly low (3583)

[XutvJet]

Originally Posted by antzcrashing

So what you guys doin now that it remains uncertain? I am heavily in cash and selling what I have in 1+ yr ownership territory (capital gains). I feel SP500 is going to yearly low (3583)

I'm heavily invested in S&P 500 index funds. I'd pay a small fortune in capital gains taxes if I went largely cash. I plan to stay as is and weather the impeding storm which will be here in a few months. I fully expect my portfolio to drop ~20% and stay that way for 1-2 years, but I'm in it for the long haul. I know it will all come back and will do so significantly just as it's done in the past. I've been through all the market tumbles since the late 1990s.

If I were close to retirement age, I'd be more cautious and consider moving things around. But I'm 48 and looking to retire in 5 years or so.

[chassis]

Originally Posted by antzcrashing

So what you guys doin now that it remains uncertain? I am heavily in cash and selling what I have in 1+ yr ownership territory (capital gains). I feel SP500 is going to yearly low (3583)

Cash in MM at nearly 5% isn't bad, it throws of some reasonable interest every month.

Might buy 6-12 month Treasuries if rates keep going up.

A few of my stock are touching ATH.

Staying the course, heavy stock allocation.

[tgrundke]

Originally Posted by XutvJet

I'm heavily invested in S&P 500 index funds. I'd pay a small fortune in capital gains taxes if I went largely cash. I plan to stay as is and weather the impeding storm which will be here in a few months. I fully expect my portfolio to drop ~20% and stay that way for 1-2 years, but I'm in it for the long haul. I know it will all come back and will do so significantly just as it's done in the past. I've been through all the market tumbles since the late 1990s.

This is the way.

[chassis]

Originally Posted by XutvJet

I'm heavily invested in S&P 500 index funds. I'd pay a small fortune in capital gains taxes if I went largely cash. I plan to stay as is and weather the impeding storm which will be here in a few months. I fully expect my portfolio to drop ~20% and stay that way for 1-2 years, but I'm in it for the long haul. I know it will all come back and will do so significantly just as it's done in the past. I've been through all the market tumbles since the late 1990s.

If I were close to retirement age, I'd be more cautious and consider moving things around. But I'm 48 and looking to retire in 5 years or so.

What is the thesis behind a 20% drop for 1-2 years?

[2000cs]

Originally Posted by chassis

What is the thesis behind a 20% drop for 1-2 years?

The thesis I’ve heard is that inflation is stubborn and somewhat unresponsive to the FED’s actions, so the FED keeps tightening and raising rates. That pushes the economy from “no landing” (currently priced into the market) through “soft landing” to “hard landing” (recession). The recession begins later this year and lasts to mid-late 2024 (it’s an election year, so there could be a lot of fiscal shenanigans offsetting the FED’s tightness). Markets are forward looking, so begin to recover probably right after the election. The expectation is more like a 15% S&P500 decline, not 20%.

There are some problems with this thesis, of course. One being the labor market remains tight and participation low, so there isn’t much slack there and it is unlikely unemployment will push up, at least for a while. Another is consumer spending remains high, although consumer debt is increasing as well. And while inflation is a problem, it seems consumers have largely adjusted to it, and those with fixed rate mortgages and car loans are suddenly flush. Finally the 401(k) flows continue to go into stocks, so there is cash flow that didn’t exist in the 1970s when this scenario actually played out (stagflation).

[2008M36MT]

I’m sitting with all cash in my discretionary brokerage account and don’t really know what to do.

[antzcrashing]

Inflation is mad sticky, just look at your own habits, we buying shit at whatever the market price. I hate to say it but Fed is very right

[Tyga11]

Originally Posted by antzcrashing

Inflation is mad sticky, just look at your own habits, we buying shit at whatever the market price. I hate to say it but Fed is very right

I don't think it's that sticky. Housing is skewing inflation numbers.

I've posted this before but it doesn't really matter if eggs are $4.29 a dozen or $5.29 in the grand scheme of things.

[dradernh]

Originally Posted by Tyga11

I don't think [inflation is] that sticky. Housing is skewing inflation numbers.

I've posted this before but it doesn't really matter if eggs are $4.29 a dozen or $5.29 in the grand scheme of things.

So, 1) don't buy a house right now or change your rental unit; and, 2) don't worry about food prices that are 10-30% higher than they were not so long ago while your income is lower, flat, or somewhat higher?

Most Americans can win at #1, especially given the generally low inventory available to home buyers.

For #2, however, read Kroger's 4th quarter earnings report to learn what Americans are choosing to do in response to significantly higher food prices.

[antzcrashing]

Fed dropped the ball when they first found inflation to be transitory. It has run from there. The higher rates will help cool things but it has already become ingrained

[tgrundke]

Originally Posted by antzcrashing

Inflation is mad sticky, just look at your own habits, we buying shit at whatever the market price. I hate to say it but Fed is very right

100% correct. Inflation is pernicious and is moving from asset class to asset class. Services are getting clobbered while durable goods are normalizing. Insurance, airfare, hotels are all still sky high. Wages are still on an upward trajectory and workforce participation will continue dropping.

Add to that the move to near-shore and re-shore manufacturing, increasing LNG exports, and federal clean energy mandates and this is a recipe for cyclical costs going up. Add to that the increase in labor costs in China.

We spent the last 45 years offshoring everything in order to reduce costs of consumer goods at home. We've pretty much run this playbook as as much as possible and we'll be in a period of increasing rates for at least the next few years / next major financial crisis.

[tgrundke]

Originally Posted by Tyga11

I don't think it's that sticky. Housing is skewing inflation numbers.

I've posted this before but it doesn't really matter if eggs are $4.29 a dozen or $5.29 in the grand scheme of things.

Not really - inflation has moved into services. As for housing, as a percentage of CPI, it's fairly minimal.

You haven't lived like the majority of Americans if you think that the price of eggs increasing $1 (more like $3), or milk doubling in price won't have an impact on your spending. Inflation hits those with fixed incomes (young and retiree alike) very hard. When your food costs increase 40% in one year and your insurance costs increase 20%, something's got to give.

[tgrundke]

Originally Posted by antzcrashing

Fed dropped the ball when they first found inflation to be transitory. It has run from there. The higher rates will help cool things but it has already become ingrained

Precisely. They left rates too low for too long and then responded too late. Toss on an additional $5 trillion in direct federal spending the last three years and you've got a recipe for inflation madness.

Fed's trying to avoid breaking something catastrophically. Crypto got deflated, building materials are deflating, consumer goods are deflating, and now the real estate market is really starting to show it.

So far, they've actually done a decent job of not cratering the economy, considering it takes ~12 mos. for rate changes to be fully absorbed by the market.

The problem is that there's always something lurking out there that will suddenly pop and cause a cascade - and nobody knows what that "thing" is.

[chassis]

Originally Posted by 2000cs

The thesis I’ve heard is that inflation is stubborn and somewhat unresponsive to the FED’s actions, so the FED keeps tightening and raising rates. That pushes the economy from “no landing” (currently priced into the market) through “soft landing” to “hard landing” (recession). The recession begins later this year and lasts to mid-late 2024 (it’s an election year, so there could be a lot of fiscal shenanigans offsetting the FED’s tightness). Markets are forward looking, so begin to recover probably right after the election. The expectation is more like a 15% S&P500 decline, not 20%.

There are some problems with this thesis, of course. One being the labor market remains tight and participation low, so there isn’t much slack there and it is unlikely unemployment will push up, at least for a while. Another is consumer spending remains high, although consumer debt is increasing as well. And while inflation is a problem, it seems consumers have largely adjusted to it, and those with fixed rate mortgages and car loans are suddenly flush. Finally the 401(k) flows continue to go into stocks, so there is cash flow that didn’t exist in the 1970s when this scenario actually played out (stagflation).

Thanks. What are you doing with your investments as a consequence of your views/thesis?

[2008M36MT]

Does anyone think it’s worth it to put cash into a 4-6 month CD at 5% and come back to the markets in Q3-4?

[chassis]

Originally Posted by 2008M36MT

Does anyone think it’s worth it to put cash into a 4-6 month CD at 5% and come back to the markets in Q3-4?

Better yet, put the cash in a money market fund that pays nearly 5% and is immediately liquid, unlike a CD. FZDXX is an example if you are able to make a $100k or more initial purchase. $100k balance does not need to be maintained.

[LuvMyE92]

Originally Posted by tgrundke

Inflation hits those with fixed incomes (young and retiree alike) very hard.

Nothing against you tg, but I hate this expression. I'm on a fixed income too, ya know. I'm salary and don't get any kind of bonuses or commissions. Sure, I get a "merit increase" most years, but this past year the social security recipients got more (percentage-wise) than I did.

Anyway... I was watching the national news last week, and they had a bit on how car insurance is going up so much (many factors involved, most of which are d/t higher costs and fewer cars) and I wondered, how does the average person who barely makes enough money to pay their rent (which has also gone up recently) and buy food get by? I do most of the grocery shopping, and I see first-hand how much food has gone up. I can't imagine how someone making $60K a year with some kids can survive without draconian cuts. Surely at some point this is going to affect the economy.

And it's not just the USA, it's a world-wide thing.

[2000cs]

Originally Posted by chassis

Thanks. What are you doing with your investments as a consequence of your views/thesis?

That is a thesis I’ve read many times, but not one I support as you may infer from the last paragraph. I’m a long term bull, but expect some bumpiness as many factors sort out. Bumpiness translates to buying opportunities if I can watch closely.


I sold a house last fall and bought another (moved to a different state). To make that work I sold a lot of stocks in the fall - stocks I no longer wanted to own so won’t buy back. That put me at about 1/3 cash in the total portfolios, excluding my house (no mortgage). I’ve been sitting on that cash anticipating the market would be weak/volatile through Feb/Mar, but it firmed up earlier than I had expected so I’m late getting back in (but happy with my positions, just not optimized).

I also took on a full-time consulting gig starting Jan and have been really busy with that, so I haven’t had the time to look closely at stocks and put in the buy orders - I’m just watching at a high level. So I may delay getting back in a few more months. At that time I’ll go to about 85% stocks and 15% cash (I’m retired so that cash is next year’s expenses plus a cushion). I don’t like bonds because they typically have poor real yields, and I think we are in a long-term rising interest rate cycle (18 more years to go, or so), which will deflate their values. I’d rather have a dividend stock or fund with some growth potential if I was looking for a cash generator. All of that reflects my risk tolerances and very long term outlook/horizon. (“Cash” in this context is money markets and other short-term stuff, it is all earning, just poorly).