I'll start by saying I think it's a great time to be liquid. My thoughts are we double-topped this year from a market technical stand-point, so we might be in for our next dip / recession. I will be liquid in case that happens and buy-in when it's time. Thoughts?
The market has been going up at really exciting levels recently. However, we are overdue for a market correction (recession), and he is waiting until after the recession hits to buy back into the market and ride it back up. He currently has a lot of liquid (cash or near cash) assets instead of having it all tied up in his investment portfolio.
The market went way up this year so it might be a good time to cash out your investments while shares are still high and then prepare to reinvest the cash (liquid) if the market drops.
Agree with the two posters above me are saying. Only qualm is that we reached highs, but we've also recently gotten low this past week - essentially wiping out all gains from this year (hence the double-top i mentioned; we peaked twice but never got past a resistance level). So yes we WERE at highs, but currently we are not.
Hold on now. I'm in science, not an economist. But stock market drops, even literal corrections, do not equal recessions. A recession is two consecutive quarters of negative GDP growth, and with a super strong labor market I don't see that happening in the next year or two at least.
That being said, the equities markets have actually been on a similar upward trajectory for roughly 10 straight years now (not one or two), so a major correction is certainly reasonable. And with interest rates inevitably going up (which is healthy), the markets are obviously going to feel that as people put more money into bonds.
One last non-expert comment: the tax cuts that were passed last year were a terrible idea, because with interest rates still very low, you now have basically no bullets left in your gun if there is economic stimulus needed. Also, Trump's tariffs are essentially economic suicide. That's not meant as a political statement btw, just a statement of near-fact.
Again, not an economist, these are all just my opinions. Anyone who knows what they are talking about feel free to correct me. :)
Admittedly without looking at any actual data, my understanding is that wages are actually slightly rising, just not in correlation with the job market. But yeah, wages have been essentially stagnant for YEARS now.
Still, I don't see an actual recession as likely, although I'm 90% certain that we're going to have an economic downturn (probably sooner than 18-24 months, maybe even starting now-ish!), due to the normal business cycle and the VERY poorly thought out tariffs. But will we have 2 consecutive quarters with negative economic growth, which is the technical definition of a recession? I just don't see it.
I couldn't disagree more, and I think 90% of economists would agree with me.
The tariffs are about as dumb an economic move as you could make, and a lot of economists blame them primarily for the stock market dive we've seen in recent months. They have led to no new jobs (I have no idea where you heard that from), and in fact a lot of companies that are affected are laying off employees (see Harley Davidson) because it now costs them more to make their products. Also, its a virtual guarantee that they will have a negative effect on consumer prices for that same reason.
You have repeatedly claimed that tariffs are dumb while offering no proof otherwise. Tariffs have lead to a new NAFTA deal that greatly benefits the USA. Tariffs have greatly benefited the US steel industry, China no longer controls world steel prices. Harley Davidson is scrambling to save face because their anti-American business strategy has been exposed. Meanwhile, companies that want to do business in the US are stepping in and taking their place. Our trade imbalances are so great that we can afford to play the tariff game with China and we will win. We're already seeing that China is looking to make new deals because our economic policy is producing results. And again, prices have not gone up for any consumer goods.
Macroeconomics is something that you need to view long term. Tariffs over time have consistently negative impacts across the board. That's why anyone who stayed awake in freshman econ knows they're a bad idea. Everything you've said is 90% opinion, and the 10% that isn't shows a fundamental lack of understanding of basic economic principles.
Tariffs over time have consistently negative impacts across the board.
Source? I've read more nuanced analyses of the topic of tariffs. They do have a place, particularly if another country appears to be dumping products under cost in order to gain market share.
Here's a Wall Street Journal discussion of what China has been doing:
Tariffs presently, have shredded the futures market in particular, soybeans. This has directly impacted my line of work and subsequently driven some of my smaller guys to the point of folding it in. We have seen since a high on 5/29 a drop of $1.90 on the ZSX. Brazil has seen some benefits to this, but they have their own problems i.e a transportation strike that halted the export flow of beans.
The only redeeming thing is while Brazil can grown just as much, we can grow better and more consistently. So if we can stop this pissing match we can return to normal hopefully
And again, prices have not gone up for any consumer goods.
Yet.
There was a big inventory push as companies were trying to get ahead of the impending tariffs. That is about to fizzle. Keep an eye on prices heading into 1Q 2019. I think we will get through the holiday shopping season without seeing much as most companies have already been ramping production for the holiday, after that, I think we will see the effects. I think Trump tried to time the tariff push so the pain hits after the midterms.
You are correct. If anything, it implemented some very small changes that were being discussed already by the previous administration and left in a key concession for Mexico and Canada.
"Near fact" is opinion. Seems to me that we've dived head first into a political issue, posing as an economics/investing one.
One last non-expert comment: the tax cuts that were passed last year were a terrible idea, because with interest rates still very low, you now have basically no bullets left in your gun if there is economic stimulus needed. Also, Trump's tariffs are essentially economic suicide. That's not meant as a political statement btw, just a statement of near-fact.
Certainly, many might agree your conclusion, but the results are still up in the air. The experts I've seen comment on this issue aren't making a prediction, as the results are fairly difficult to predict. Too many politics involved. But let's examine a couple the premises from the comment.
1) "no bullets left in your gun" One type of "bullet" would be the ability to adjust interest rates, and the Fed has certainly been raising interest rates. The tax cuts did not eliminate the government's ability to stimulate the economy. Both the Fed and the government have tools if they were to need them. Plus, the economy is still in positive territory now, and there is no indication of a change.
2) "Trump's tariffs are economic suicide" The jury is still out on the effects of Trump's tariffs, but they certainly fall short of "economic suicide". The only relationship this has with the topic of investing is that they might contribute to overall uncertainty, and the stock market really hates that. Looks like political opinion pages territory.
I suggest that we stop poking the bear with this line of commentary. These are political in nature, and only tangentially related to investing.
Sort of reminds me of those "I know this is going to sound like I'm bringing up religion, but..." comments.
I won't push my argument any further, but I do want to clarify that my comment on the tariffs were in relation to the original topic, in that I have heard a lot of commentary that the recent sliding of the markets may be largely due to fear of the tariffs.
Also, just want to clarify on your first point that while lowering interest rates can stimulate the economy, they are already so low that lowering rates won't have a huge positive impact. That's what I meant when I said that tax cuts during a boom takes away a potential "bullet."
Every comment I made is 100% based solely on what I have heard. I'm not an expert at all. But when I hear 9 out of 10 actual experts say the same thing, I tend to believe it.
I have heard a lot of commentary that the recent sliding of the markets may be largely due to fear of the tariffs.
That, I agree with. I don't doubt that the things you listed go into that wide mix of things that people are fearful about. I could list a bunch more. But the reason people are fearful of them isn't necessarily because they understand them, but because they've heard those opinions expressed in the media. The markets hate uncertainty, and tariffs do add that. This doesn't make tariffs a good or bad idea, though.
Also, just want to clarify on your first point that while lowering interest rates can stimulate the economy, they are already so low that lowering rates won't have a huge positive impact. That's what I meant when I said that tax cuts during a boom takes away a potential "bullet."
Tax cuts are different than Fed action. Different organizations, different tools, different effects. Interest rates are low, limiting some types of Fed action, but they're actively raising them now. They have nothing to do with Trump's tax cuts. The Fed isn't out of tools, and neither is the Federal government.
I don't believe in "9 out of 10" arguments. I'd be interested in sources you think are valid. A good bit of what gets played in the media is alarmist fluff or political.
Thanks for the insights, and for keeping me honest. It's cool that on TKP we can stay civil even if we have some disagreements. It's not like that in most corners of the internet.
I'm sure 9 out of 10 was a big overstatement on my part. And I should probably keep my mind more open to differing analysis and opinions.
There is no indication of a recession any time soon.
Volatility in the stock market, or even a pullback/correction is not a recession. A correction is actually a healthy thing, as it slows the market without requiring Fed action. With any luck, the Fed will reconsider the timing of their proposed interest rate hikes.
The recent plunge in oil prices do not bode well. Typically a demand for oil (or lack thereof) is a good indicator of economic slowdown. Combined with the market pullback, the rise in inflation, the uncertainty over tariffs and the certainty that tariffs are hurting our farmers and home builders, and the natural economic cycle with periods of growth generally followed by recession, I would say that the signs are building in that direction
Not stock market, but this could be a good time to diversify into commodities (if you're into it) fundamentally grains may not be at it's bottom yet but it is closing in. We are 1-2 global buyers away from a rally imo
The NASDAQ is in correction mode...if it drops any further (i.e. another 10%) we're staring a recession right in the face. Buy some SQQQ (which is a triple leveraged ETF short of the NASDAQ market) to help protect yourself for this scenario.
But its been stated a few times here - the Stock Market and economic activity (recession) are not synonyms.
The stock market has a loose affiliation with the US macro economy. The Feds raised rates recently, which probably has as much to do with the drop as it does with it just being ripe for a selloff. In general, the stock market doesn't like Fed hikes, but, a Fed hike is generally a signal the Fed is trying to combat inflationary pressures.
By most accounts even with Q3 updated numbers analysts are still projecting a slow 2019 with a slight recession being pushed into 2020.
Again, not trying to call you out or anything - but just wanted to pull some people off the ledge. That being said, the markets are selling pretty high right now, so caution is probably a smart play.
It was originally in 100% stocks. I requested it be switched, but the way the interface works I can only request the allotment, I can't actually do it myself (at least I haven't figured out a way to).
I'm not suggesting anything officially. And i'm slightly better than the lay observer, so don't change your financial future based on an observation on an off-topic thread on a football board.
My 2 cents is that fundamentally it seems like there could be a deep(er) pullback. Again, 10 months into 2018 we've wiped out all year-to-date gains (twice!) in the year. Doesn't scream upward momentum to me, but what do I know?
In any case, i'm going to be liquid in case it does go down further. I'd wager if it does go back up it'll probably come back down again not too soon after since the 200 day averages for a lot of indicies seem to me met at this point - would need continuous and sustained upward momentum to break the recent trend.
Lastly (and promise, not politically meant) - the recent uptick has been unanimously been attributed to the tax cuts to corporations which bumped up results and what companies could pocket, but that was more of a short term driving factor (IMO). That, combined with the recent trade wars also are now being played out.
Stock buybacks certainly propped some valuations. Combined with the uptick that was more a reflection of businesses upping production/distribution in anticipation of the negative tariff effects later in the year, and you have the behavior we have witnessed over the last 2 quarters.
Again, avoiding a political commentary here, but it is difficult to discuss this topic without acknowledging those policy decisions.
My advice: If you need more Christmas lights, buy them now because those puppies are not gonna be cheap at Target/Walmart this year
I think it's coming but we have one more high first. When this current dip is over (may already be, but hopefully in the next week for sure) I think we go back up to around SPX 3100. Then look out below (2400).
It's an interesting time because there is a lot of global systemic risk (economic issues in other countries, rising interest rates, trade/tariff issues) but yet companies are still making a lot of money. I think the market is just trying to figure out what the true future valuation of companies is and that is why there is so much volatility. I think GDP numbers tomorrow will cause the market to move pretty big one way or the other because it may signal what the fed will do with interest rates going forward.
Yes they're supposed to raise one more time in December. The big question is how many times they will raise next year? Powell suggested they might raise another 3-4 times next year and that is what set off this round of selling.
As the effect of tax cuts and interest rate increases to combat inflation begin to take effect, along with the full realization of tariff effects on domestic and global markets begins to take shape, a period of high volatility and correction/recession seems almost inevitable at this point.
It's been a bull market for almost a decade. We are overdue for a recession.
This is my own assessment (based on understanding the warning signs from 2007 since history repeats itself) but consider these general observations/points:
-stock market confidence and optimism by the general public is high
-National unemployment levels are low; it appears businesses have been trying to hire workers from a pool that doesn't have any
-housing market appreciation and valuations are outright ridiculous again
-higher prices in crude oil
-increases in T-bond rates
-and sadly, the tariff wars
My dad before retiring, worked at a container shipping terminal and said he noticed significant decreases in container imports months prior to the great 2007 recession. Some port authorities publish container data publicly. I definitely suggest taking that into account as an indicator to assess whether we are trending for a market correction.
I know this is strictly anecdotal, but a neighbor and good friend of mine owns a debt collection business (along with many other businesses), and we had a long conversation over the weekend about the trends he is starting to notice and that they reflect a lot of the things he and his partner saw before the recession in 2008.
No scientific research to go along with it, but here in Scottsdale I certainly see it with home valuations getting red hot again. I bought a home in 2011 for $343k, and I had a recent appraisal north of $800k. Its getting crazy all over again.
You've obviously made out well on your house, but you'll be paying the same premium on another house. I'd read up on capital gains to understand what (if any) taxes you'll on a nearly 500K profit. For moving now, I would base the decision on how much you would expect your current house vs future house to appreciate/depreciate. Or you may just want a new house for other reasons.
from what I understand based on my research of just selling my home (and someone can correct me if I'm wrong), if you sell a house, and it was a primary residence 3 of the last 5 years, no taxes on gains. Otherwise, it's capital gains and taxed accordingly.
So, if anyone plans to rent out a property they once considered the primary home, they'll want to hold on to it less than 2 years or long enough that the capital gains cancel out the losses on taxes (or I guess move back into for 3 years).
This is also current law, which can change at any point.
Edit: The link by the poster below says it's 2 of the last 5 years, not 3.
First $250K in profit is tax free if you're single. That increases to the first $500K if you're married. Any excess above those amounts will be taxed at the Capital Gains Tax Rate.
You also need to hit some residency milestones, which it sounds like you have. See the link below for more details.
None at this time. We plan to l live where we are at minimum another 10+ years barring any unforeseen changes. After that the plan is still to keep it as a rental property at the least.
As mentioned, people keep approaching us with offers to buy because the neighborhood is hot, but the questions I ask is always "and go where?" We could afford a bigger house but I would just as soon do that after the market dips again rather than paying a premium.
interest rates may make this not a great idea. depends on the situation.
rent is also a way to lose out on a lot of your wealth. rent literally causes a great divide in wealth, makes privileged land owners richer and those without land poorer.
First, the appraised value is an estimate. The actual value is what someone signs a contract for on your house.
Second, there are tax implications, as mentioned above. But you're certainly in the catbird seat.
Most importantly, though, is whether you like where you live. There must be something special about your location for the value to appreciate like that. Other locations in your area have also likely appreciated. If you moved, what would you be giving up?
In terms of the overall economy, values of the highest priced homes will likely drop some as interest rates rise. It's just a fact of life. At the same time, rents will also continue to rise with inflation. Another fact of life. The problem with "cashing out" is that you lose a little bit of control and asset diversification. Hopefully, there are laws in place limiting the price appreciation for property tax purposes.
One thing I wouldn't do is cash out equity to buy stuff. That's the one thing that you could do that could come back to haunt you. Any other move is fair game.
What would you do with the money if you sold? Buy another house? Invest in a diverse portfolio? Buy a Porsche and a condo? All of these are legitimate, but just be sure and have a solid plan.
There's likely a reason you bought in your neighborhood to begin with. Start there. Does that reason still hold up?
I appreciate the insights, but I am not looking to sell, was simply making a point about the real estate market getting overheated again.
Frankly, the wife and I are exploring opening a HELOC around $100k and adding on to build a custom master suite. With current valuations that money spent will be money earned in the long run. My mortgage right now is right around $1700 with good timing on an earlier refinance, so I can't see myself ever selling the property.
I understand your point, but home prices were only 1 of a number of factors associated with the crisis. It was a key one, but still need rampant predatory lending, lack of appropriate risk evaluation by rating agencies especially subprime, bad default rate modeling, synthetics on synethics, etc. Not saying all of those aren't true today as well, but ups and downs in home prices are normal.
That's the key. Buy lost cost mutual funds from a place like Vanguard and don't stress about market corrections. You can find tons of people recommending to liquidate over the last decade. If you had done that, you would have missed out on tons of earnings.
^This is the best personal finance advice for people who don't want to make personal finance a full time hobby.
Buy mutual funds that track the S&P500 or other major index - these will be low cost, and contribute to them regularly. Use a 401K, Roth IRA or IRA as you see fit.
Generally speaking, if you try timing the market you will miss most of the gains, and hit most of the losses.
From my understanding, if you are still a ways away from retirement, the best thing to do is leave your 401ks/IRAs invested as they are and continue investing as usual so you don't accidentally pull out a year early and miss on any gains; your accounts still have plenty of time to recover if the market takes a dive. If you are close to retirement, it may be time to get liquid or move into bonds.
That 40% drop on my 401k was a bad hit. Sure I was super aggressive and it did recover plus some...but knowing what I know now and some of these trends are unavoidably obvious, I'm redistributing it against lower-risk indexes and going all in aggressively at the tail end of the upcoming recession.
My work had our 401(k) adviser come in and discuss plans with us. He showed that if you stayed in through the crash of 2008, you would have still just about doubled afterwards. If you pulled out, just missing the 10 biggest days of the year would have dropped that number by like 80%. As you said, if you are far away, just leave them be. Most conservative investments shouldn't be too greatly affected and really aggressive investments should have been made with the intention of long term growth.
This is my strategy currently as I am 30 years from retirement. Buying on the way down will still lower my average price per share. I may shuffle some things around now to take a more conservative position with my funds, but some of the individual companies I invest in are long term plans and grabbing up cheap shares on the fall doesn't sound so bad.
This is a tangent but one thing I did enjoy during the recession was the perks of not waiting for a table at restaurants. Those couple of years afterwards were eerily quiet.
Seems like a good place to ask so could any of you recommend any good sites (or people to follow on social media) for gaining more knowledge in this area? I've been meaning to learn more but with work and other life stuff, I've just been putting it off. I don't need super basic stuff, but something that transitions from say beginner to intermediate level would be a good jumping in point for me. Like right now, I know enough to get by but I'd like to at least be proficient enough to where I'm not just putting so much blind trust into a financial advisor (he's great, friend of the family for years, but you know what I mean)
I've also learned quite a bit (and gotten market perspective) from Jim Cramer's books. His TV show (mad money) is less informative, but better for commiserating after a tough market day. I've had several friends call in, which is always fun. His show is about individual stocks. You might also try "Bogleheads". All of these will make you more aware of investing.
"A random walk down Wall Street" is also pretty good background.
It's easier to invest in industries you understand. I started out investing in professional services firms because I worked for one and I understood the business. Then you can spread out to a more balanced portfolio. In the mean time, index funds are pretty good for optimizing market results. You have to do a lot of work to confidently invest in individual stocks.
It's a lot easier to successfully invest for the long term than to try and benefit from stock volatility.
I understand, I read a study years ago that researched car sales to friends and family that showed you paid more for the car that if you weren't friends with the salesman. (not my father works for GM deals, those are good deals until you realize you bought a GM) .
I learned a lot from asking finance questions to a family friend finacial advisor. He managed a lot of bigger accounts so his philosophy with me was that I could do much more on etrade for cheaper than going through him, and it wasnt worth his time I the long run.
The first question I would ask is what is he charging you. Vanguard, Fidelity, and Principle have some of the lowest rates I have found. But any more Ijust stick to index funds and bonds so I could do without paying someone. I like having some one i can call for advice when i need to. Investing isnt my job, but it's how i make my money so having experts that can advise you is important to me. Not everyone needs them.
No expert here, but I have been the beneficiary of some inherited stocks, and the investors bought blue chip stocks and held them for decades. Plenty of slow, safe growth. While it doesn't always work that way, a financial advisor can help spot the bad stuff before it becomes too bad.
Less than 50% of the people in this country own any stocks at all, but usually the ones that do seem to fall into the "active" and more "passive" categories. I think the risk of active trading isn't worth it for folks like me who don't spend half the day studying the market to try to make a buck. Slow and steady will win the race, and if you invest in the market responsibly, it's hard to justify selling and buying repeatedly, with its attendant risks, unless you are an expert. Buy good stuff, don't freak out over corrections, even recessions, unless you are nearing an age that you'll need liquidity to move on. Think long term, it's worked for many of my friends, family and acquaintances over the years. Easy money isn't usually easy. Yes, you need to pay attention, and you need to be in routine contact with your advisor, but if you trust that advisor, it doesn't have to be a nerve wracking experience.
Just my .02 worth.
I can appreciate the idea of "staying liquid", but in the mean time there are lots of gains that will likely be missed. we could have had this discussion at any time in the past 5 years. I remember wondering if I should get out of the market before the last election. Stocks have gained 20% since then, even accounting for this past week's results.
Investing is about discipline as much as timing. There are better strategies than "I'm going to beat the market through really savvy timing. If you are liquid during a big drop you might feel pretty good, but if you're liquid during a big gain, you've missed it.
Studies show that a blend of stocks and bonds optimizes results, and that the mix should be determined by your timeframe (basically, your age) and tolerance for risk. The longer the timeframe, the more stocks. The shorter the timeframe, more bonds. Index funds are a great way to participate if you don't want to do a lot of homework.
It's really more about valuations than about what was gained in the past. Taxes, interest rates, inflation, and economic growth are more important than when you bought in. Of those, inflation is really the silent investment killer that people tend to miss. Generally speaking, your dollar today is worth less than a dollar tomorrow, so cash isn't as safe as it seems.
So my recommendation is to assess your timeframe and your risk tolerance. Immediate volatility isn't really as important if your timeframe is long.
Be good to your IRA, and your IRA will be good to you.
Studies show that a blend of stocks and bonds optimizes results, and that the mix should be determined by your timeframe (basically, your age) and tolerance for risk. The longer the timeframe, the more stocks. The shorter the timeframe, more bonds. Index funds are a great way to participate if you don't want to do a lot of homework.
Oh the risk is extreme, but the gains you can make are ludicrous. A few friends and I spend most of our downtime at work day trading, and we've found some real gems. Last week, I got into one that went up 200% in a couple days.
The risks are there, but you have to keep your losses small. I got in one earlier this month that doubled overnight. I'm currently holding one over the weekend that's up 45%. I'm still fairly new to it though.
Anyone want to ELI5 with regards to what to expect with the housing market come spring? Wife and I are looking to buy our first home. I see a lot of folks in r/RealEstate talking about the housing bubble getting ready to bust but it's hard to tell if its sensationalism or a reality.
Part sensationalism/part reality. Part of it depends on where you're going to buy. Has the area you're looking at appreciated a lot in the past few years? Are houses there priced out of the average person's ability to purchase? Could absolutely be a factor. Prices will likely come down as interest rates go up. If you're going to borrow money to make your purchase, that will make a difference as well.
If you're going to be there a while, a good bit of it may come out in the wash between prices and interest rates, but it will be location dependent.
We are planning for this to be our forever home. We're looking in the Lynchburg area, and appreciation just depends it seems like. Some areas are going up, some are rather stagnant. It's interesting.
Since these threads always end up going off a deep end in investment advice/speculation and scare away a lot of people who don't have a lot of knowledge on the subject, I'll post the usual reminder that no one ever knows what the stock market is going to do, but over time it has always gone up, and is at an all-time high more often than not. You can go back to any period in history and find people certain that a recession/dip is imminent and that anybody with sense is pulling out of the market, and making their investments liquid to take advantage of the inevitable drop. And those people are almost always wrong.
In the meantime, buy low-cost index funds (Vanguard is the best imo), buy into the market regularly (ie. every paycheck) and don't stress. The only funds you'll ever need are VTSAX, VBTLX, and VTIAX (US total stock, US total Bond, and International). Allocate more to stocks if you're younger, more to bonds as you get closer to retirement, and wait it out.
I know about how the market works. Just was trying make a point about how fear and greed can drive people to make trades based on emotion. Those two things drive market momentum up and down. It can drive dicsiplined investors nuts but also creates opportunities.
I was just pointing out that investor emotion is getting amplified by programmed trades and index funds.
But you're right, it also creates opportunities if you're disciplined and focus on the long term. What's more important are average returns over years.
Bleh. I'm in college and had a nice little internship last year. Decided to invest some of that cash in some stocks pretty much coinciding with the peak. Not looking too great now haha
For what it's worth, I saved a bit of cash working a summer job after I graduated high school and invested it all in a Roth IRA. It wasn't a ton of money, but it felt like a lot at the time. That was the summer of 2008, right before the whole housing marked crashed. I just left it in there and forgot about it until this year. It had fully recovered and was up 25%. So, it *can* come back.
I think we see the fear slide for a few more weeks until the holiday consumer spending reports come out. If the reports show consumer confidence then I think that will help curb the effects of the slide and the negativity the media is spreading on economic policy. I can see flat movement or maybe some slight retraction through the first quarter but the middle half of 2019 I predict a growth market.
Not trying to be political, just saying that the media feeds off negativity and fears, it's what gets them viewership. In turn, that viewership starts to panic, spending stops-saving starts-sell offs, etc etc. The media definitely adds and keeps the fuel going for that fire. However, I think the health of the stock market is controlled by the top 2% and what investment the middle class contributes isn't enough to move the needle.
For what it's worth, in my 36 years of life and as someone directly engaged in what the economy is doing (current CFP(r)), I can count on two hands the number of glowing articles I've read about the economy doing well.
The simple fact is that when things are great, most people know they are great and don't spend time thinking about it. When things arnt as great, that's when people start paying attention. The "media" doesn't market to people that arnt paying attention.
There are some concerns about the economy, and I don't think it's because there are negative media pieces out there.
There are always concerns about the economy, but the good is definitely outweighing the bad at the moment. Rising unemployment and wage growth are good things.
Seems to me the overall outlook is good. The short term jitters are over the Fed raising interest rates and international trade, but it seems to me those will get worked out.
The stock market is definitely spooked, but the economy still looks good. There are lots of gains to lock in, and there are lots of scary things (read uncertainty) in the market.
Right now we're back to where stocks were in January over all, but if you've been in stocks all along, you're likely doing well.
It could very well continue to get worse before it gets better, but people who get out of the market all together will also likely miss out on bigger gains later.
Stocks are better used as a long term bet. Nobody can predict daily movements accurately.
If we're back to where we were in January, then wouldn't your portfolio in general have been flat over the course of the year? Not sure I understand the statement "if you've been in stocks all along you're likely doing well"
Everyone knows that stocks have been up over the last several years I guess the "all along" as reading the sentence made it sound as though the timeframe being referenced was only 2018
I'm hesitant to assume what "everyone knows" regarding the stock market, so my last post was meant to clarify the earlier statement and put it into the intended context.
Wanted to comment on tariiffs (bad) and stock market volatility (some math).. I run a chemical company and we import a lot (resources like RM for glycine can only be made in certain areas) and we are getting crushed by China tariffs .. We re creating "friendly" warehousing arrangements with Thailand to reduce impact, but still costs us more.. Like someone said earlier, the impact will hit the customer in Q1 2019, but hits our company now because we have fixed contracted rates and many customers loaded up in summer seeing the tariffs and driving up GNP. When gavel hits and we raise our prices, the consumer will pay dearly (we sell to Nestle, proctor Gamble, is is ONLY because of tariffs- same issue with Bauxite (makes aluminum) that has been added to our costs from SO America--- US has little bauxite so the idea of tariff on this to stimulate and increase manufacturing in US has no correlation- but our increased prices will be passed on.
Quick thought on stock volatility- let's say the following--
nov 2018 $50 in 401k
Nov- market loses 20%
New amount $40k
To make up that $10 loss requires a 25% increase in the market to get back to the $50 you had before the loss. This is only a math concept that sometimes gets pushed out of our minds
Tariffs are not good for our economy but they are not the end goal. The tariff is the tool being used to bring China and Europe to the table to renegotiate 30 year old trade deals. Understanding the framework for international trade requires being familiar with the General Agreement on Tariffs and Trade (GATT) established in the 40s. It is essentially the rule book that the World Trade Organization (WTO) uses to establish trading parameters. GATT is a product of the cold war and was used to unite western democracies by encouraging trade and incentives to unite western allies against cold war adversaries. The rules and dispute resolution mechanisms with the WTO never anticipated an autocratic planned economy like China being part of the system. China was admitted to WTO under the assumption they would reform to more Western democracies. They have not done this and have abused the system with trade protectionist policies.
China's economy has been weakening and the US currently has the leverage to use these tariffs to force China to renegotiate and adopt a fairer trade system. The US economy is believed to be strong enough to withstand the negative impact the tariffs will have on our economy. The problem I see is the authoritarian nature of China's government is less reactionary to the suffering of it's people and will not yield before 2020 as they expect a new administration to be in power.
I am not posting this to be political and have no political intent with this. I am merely trying to provide the context that is needed to have an informed opinion on the current trade dispute.
This is really informative and insightful. I wish I could give you more than one leg. Thank you. I still think there has to be a better way to do this than to hurt the American consumer, even if temporary.
1. Diversification, and
2. Don't put anything into the stock market that you can't afford to lose, and
3. If you've got a long time horizon, you definitely need some money in stocks (either index fund or direct).
What are your goals? If you're in it for the long run you have to diversify (I know you've heard this a ton of times) ALL of your investments. Not just stocks. For stocks, you may want to consider an index fund or ETF because they don't take active management from you.
At this point in the short run, you are probably looking at buying high. To counteract that you would have to take a LONG position on your holdings. Generally, you want to buy low and sell high.
If you have a significant amount of money to invest consider getting an advisor who is paid on AUM (assets under management) vs. transactions.
TBH I had some disposable income and figured it be fun to buy some stocks and do a bit of trading. It's a small amount, and I'd rather play it slow and safe, but that's all it is. It's something I'd like to do myself. I have other assets for retirement and saving, etc., that I work with a financial planner on.
I usually subscribe to the Warren Buffet method for long term stocks. I usually go pull up a search on Buffets Top 10 Stock Holdings and once I have that list determine which of them I am comfortable with. Usually the stocks he owns tend to have high regular dividends which helps to grow your portfolio as long as you set the dividends to automatically reinvest. Has done wonders for me so far.
Well, in that case. You are going to have to develop a strategy and an analysis method to determine which stocks fit your strategy. Reading Finance books could be helpful. I have been wanting to get into this and have a list of books I want to read. I'm mobile now so the only one I remember off the top of my head is "A Random Walk Down Wall Street".
Also, check out the Efficient Market Hypothesis. When you trade individual stocks you may want to consider its implications.
I've looked into advisors but the costs seems really high for the return. 33 to up to 100 bps makes me feel like I can do it myself and still come out ahead
It all depends on what help you need. Choosing investments is relatively simple if you are following a long term buy and hold/diversified strategy and remember to rebalance from time to time.
As a CFP/RIA, I would be the first to tell you that if your advisor is only choosing investments for you, they arnt adding any value.
If they are doing their job right they are adding a lot more value than a few basis points, but addressing a lot more than the investment level items.
I use RobinHood, its a really good and legit platform with no trading fees. I first heard about it through the Solid Verbal podcast but was surprised after asking around how many people use it.
I'm playing the long game and have no interest in seeing tens if not hundreds of thousands of dollars eaten up by fees, so I go with Vanguard ETF's. The short version is an ETF (exchange traded fund) is like a mutual fund in that it's composed of many (often hundreds) of different stocks, but you can buy and sell shares just as you would a stock. In Vanguard's case the ETF's fees are ever so slightly lower than the comparable mutual fund, but honestly either method is a good bet. The drawback to an ETF is that, like a stock, you can't buy fractional shares. So if you have $125 to invest and a share costs $100, you can't buy 1 and a quarter shares so that $25 will just sit there doing nothing until you chip in more cash.
Because these funds require so little management, the fees are obscenely low. They also offer quarterly dividends, which you can and should reinvest. I'm assuming you probably have a strong math background, so I don't need to tell you about the miracle of compounding interest.
If you trust that the American economic system will continue to work for the foreseeable future, these and funds like them are good, safe bets for someone starting out. If I have the S&P 500 covered in a single fund, if one single company goes belly up, it's not going to kill my portfolio. By the same token, if a single company skyrockets, it won't budge me up all that far. But as they say, slow and steady makes you a millionaire.
Trade deals should be completed sometime soon. When that happens the market will probably go up one or two thousand points, so it may be premature to be in a cash position at this time. Hokie CFA has some good points after that.
Be careful spreading that rumor. Those sales that Robinhood did was likely them calling in on the margin that these people were using to trade. That would be legal and pretty justified with how volatile it is. Now if they were selling long positions in cash accounts then that is fucked up and would definitely be illegal i think.
Comments
I'll start by saying I think it's a great time to be liquid. My thoughts are we double-topped this year from a market technical stand-point, so we might be in for our next dip / recession. I will be liquid in case that happens and buy-in when it's time. Thoughts?
Could you explain this to me like i'm 5?
The market has been going up at really exciting levels recently. However, we are overdue for a market correction (recession), and he is waiting until after the recession hits to buy back into the market and ride it back up. He currently has a lot of liquid (cash or near cash) assets instead of having it all tied up in his investment portfolio.
The market went way up this year so it might be a good time to cash out your investments while shares are still high and then prepare to reinvest the cash (liquid) if the market drops.
The market is essentially flat after yesterday, year to date
It went way up and it has come all the way back down after yesterday. Q2 of 2019 things might get ugly.
Agree with the two posters above me are saying. Only qualm is that we reached highs, but we've also recently gotten low this past week - essentially wiping out all gains from this year (hence the double-top i mentioned; we peaked twice but never got past a resistance level). So yes we WERE at highs, but currently we are not.
AXD is the koolaid man.
Hold on now. I'm in science, not an economist. But stock market drops, even literal corrections, do not equal recessions. A recession is two consecutive quarters of negative GDP growth, and with a super strong labor market I don't see that happening in the next year or two at least.
That being said, the equities markets have actually been on a similar upward trajectory for roughly 10 straight years now (not one or two), so a major correction is certainly reasonable. And with interest rates inevitably going up (which is healthy), the markets are obviously going to feel that as people put more money into bonds.
One last non-expert comment: the tax cuts that were passed last year were a terrible idea, because with interest rates still very low, you now have basically no bullets left in your gun if there is economic stimulus needed. Also, Trump's tariffs are essentially economic suicide. That's not meant as a political statement btw, just a statement of near-fact.
Again, not an economist, these are all just my opinions. Anyone who knows what they are talking about feel free to correct me. :)
Normally the strong unemployment numbers would also correlate with rising wages.
I wonder if the diminutive wage growth means the low unemployment numbers are not an indication that a recession is unlikely in the next 18-24 months.
Admittedly without looking at any actual data, my understanding is that wages are actually slightly rising, just not in correlation with the job market. But yeah, wages have been essentially stagnant for YEARS now.
Still, I don't see an actual recession as likely, although I'm 90% certain that we're going to have an economic downturn (probably sooner than 18-24 months, maybe even starting now-ish!), due to the normal business cycle and the VERY poorly thought out tariffs. But will we have 2 consecutive quarters with negative economic growth, which is the technical definition of a recession? I just don't see it.
everyone says everyone is employed, but everyone is not too good at math anymore, or everyone is dishonest about what being employed means
Tariffs have lead to better trade deals, more jobs coming to the USA, and no impact on consumer prices. I'd say they seem to be working.
I couldn't disagree more, and I think 90% of economists would agree with me.
The tariffs are about as dumb an economic move as you could make, and a lot of economists blame them primarily for the stock market dive we've seen in recent months. They have led to no new jobs (I have no idea where you heard that from), and in fact a lot of companies that are affected are laying off employees (see Harley Davidson) because it now costs them more to make their products. Also, its a virtual guarantee that they will have a negative effect on consumer prices for that same reason.
You have repeatedly claimed that tariffs are dumb while offering no proof otherwise. Tariffs have lead to a new NAFTA deal that greatly benefits the USA. Tariffs have greatly benefited the US steel industry, China no longer controls world steel prices. Harley Davidson is scrambling to save face because their anti-American business strategy has been exposed. Meanwhile, companies that want to do business in the US are stepping in and taking their place. Our trade imbalances are so great that we can afford to play the tariff game with China and we will win. We're already seeing that China is looking to make new deals because our economic policy is producing results. And again, prices have not gone up for any consumer goods.
Macroeconomics is something that you need to view long term. Tariffs over time have consistently negative impacts across the board. That's why anyone who stayed awake in freshman econ knows they're a bad idea. Everything you've said is 90% opinion, and the 10% that isn't shows a fundamental lack of understanding of basic economic principles.
Source? I've read more nuanced analyses of the topic of tariffs. They do have a place, particularly if another country appears to be dumping products under cost in order to gain market share.
Here's a Wall Street Journal discussion of what China has been doing:
China steel industry
Agreed. Free trade is good. Fair trade is even better.
I now see that my business degree is worthless, but I'm done with this thread. My apologies for engaging in wrong think.
You think you are the only one here with a business degree?
Shoot, Brazilian soy bean farmers are seeing larger benefits from these tariffs than farmers here in the US.
You have expressed your opinion which is fine, but a large majority of folks with business degrees would disagree with your assessment.
Tariffs presently, have shredded the futures market in particular, soybeans. This has directly impacted my line of work and subsequently driven some of my smaller guys to the point of folding it in. We have seen since a high on 5/29 a drop of $1.90 on the ZSX. Brazil has seen some benefits to this, but they have their own problems i.e a transportation strike that halted the export flow of beans.
The only redeeming thing is while Brazil can grown just as much, we can grow better and more consistently. So if we can stop this pissing match we can return to normal hopefully
Yet.
There was a big inventory push as companies were trying to get ahead of the impending tariffs. That is about to fizzle. Keep an eye on prices heading into 1Q 2019. I think we will get through the holiday shopping season without seeing much as most companies have already been ramping production for the holiday, after that, I think we will see the effects. I think Trump tried to time the tariff push so the pain hits after the midterms.
There was no new NAFTA deal. They renamed the old deal. There were no substantive changes
You are correct. If anything, it implemented some very small changes that were being discussed already by the previous administration and left in a key concession for Mexico and Canada.
False.
They did change the Canadian dairy deal, and they did change some of the auto worker arrangements.
They didn't need to rename it, but there were substantial changes in it.
"Near fact" is opinion. Seems to me that we've dived head first into a political issue, posing as an economics/investing one.
Certainly, many might agree your conclusion, but the results are still up in the air. The experts I've seen comment on this issue aren't making a prediction, as the results are fairly difficult to predict. Too many politics involved. But let's examine a couple the premises from the comment.
1) "no bullets left in your gun" One type of "bullet" would be the ability to adjust interest rates, and the Fed has certainly been raising interest rates. The tax cuts did not eliminate the government's ability to stimulate the economy. Both the Fed and the government have tools if they were to need them. Plus, the economy is still in positive territory now, and there is no indication of a change.
2) "Trump's tariffs are economic suicide" The jury is still out on the effects of Trump's tariffs, but they certainly fall short of "economic suicide". The only relationship this has with the topic of investing is that they might contribute to overall uncertainty, and the stock market really hates that. Looks like political opinion pages territory.
I suggest that we stop poking the bear with this line of commentary. These are political in nature, and only tangentially related to investing.
Sort of reminds me of those "I know this is going to sound like I'm bringing up religion, but..." comments.
Fair enough about this devolving into politics.
I won't push my argument any further, but I do want to clarify that my comment on the tariffs were in relation to the original topic, in that I have heard a lot of commentary that the recent sliding of the markets may be largely due to fear of the tariffs.
Also, just want to clarify on your first point that while lowering interest rates can stimulate the economy, they are already so low that lowering rates won't have a huge positive impact. That's what I meant when I said that tax cuts during a boom takes away a potential "bullet."
Every comment I made is 100% based solely on what I have heard. I'm not an expert at all. But when I hear 9 out of 10 actual experts say the same thing, I tend to believe it.
That, I agree with. I don't doubt that the things you listed go into that wide mix of things that people are fearful about. I could list a bunch more. But the reason people are fearful of them isn't necessarily because they understand them, but because they've heard those opinions expressed in the media. The markets hate uncertainty, and tariffs do add that. This doesn't make tariffs a good or bad idea, though.
Tax cuts are different than Fed action. Different organizations, different tools, different effects. Interest rates are low, limiting some types of Fed action, but they're actively raising them now. They have nothing to do with Trump's tax cuts. The Fed isn't out of tools, and neither is the Federal government.
I don't believe in "9 out of 10" arguments. I'd be interested in sources you think are valid. A good bit of what gets played in the media is alarmist fluff or political.
Thanks for the insights, and for keeping me honest. It's cool that on TKP we can stay civil even if we have some disagreements. It's not like that in most corners of the internet.
I'm sure 9 out of 10 was a big overstatement on my part. And I should probably keep my mind more open to differing analysis and opinions.
Good financial luck to everyone out there!
Hey, it's all good. We all learn from each other, and discussing these topics helps us all refine our perspectives.
I enjoyed the discussion.
I feel like the overall investing environment is still pretty good these days, in spite of the uncertainty. Diversification is your friend.
There is no indication of a recession any time soon.
Volatility in the stock market, or even a pullback/correction is not a recession. A correction is actually a healthy thing, as it slows the market without requiring Fed action. With any luck, the Fed will reconsider the timing of their proposed interest rate hikes.
The recent plunge in oil prices do not bode well. Typically a demand for oil (or lack thereof) is a good indicator of economic slowdown. Combined with the market pullback, the rise in inflation, the uncertainty over tariffs and the certainty that tariffs are hurting our farmers and home builders, and the natural economic cycle with periods of growth generally followed by recession, I would say that the signs are building in that direction
"near-fact" and "opinion" are contradicting arguments, that's just an observation : )
Not stock market, but this could be a good time to diversify into commodities (if you're into it) fundamentally grains may not be at it's bottom yet but it is closing in. We are 1-2 global buyers away from a rally imo
The NASDAQ is in correction mode...if it drops any further (i.e. another 10%) we're staring a recession right in the face. Buy some SQQQ (which is a triple leveraged ETF short of the NASDAQ market) to help protect yourself for this scenario.
Not to be that guy
But its been stated a few times here - the Stock Market and economic activity (recession) are not synonyms.
The stock market has a loose affiliation with the US macro economy. The Feds raised rates recently, which probably has as much to do with the drop as it does with it just being ripe for a selloff. In general, the stock market doesn't like Fed hikes, but, a Fed hike is generally a signal the Fed is trying to combat inflationary pressures.
By most accounts even with Q3 updated numbers analysts are still projecting a slow 2019 with a slight recession being pushed into 2020.
Again, not trying to call you out or anything - but just wanted to pull some people off the ledge. That being said, the markets are selling pretty high right now, so caution is probably a smart play.
All fair points my dude.
My 401k and my ulcer can't handle this.
I asked to switch my Roth IRA to like 90% bonds a month ago to avoid losses during an imminent drop, but I'm pretty sure it's still in 100% stocks.
Not sure I understand - if you switched to 90% bonds then why would it be 100% stocks?
It was originally in 100% stocks. I requested it be switched, but the way the interface works I can only request the allotment, I can't actually do it myself (at least I haven't figured out a way to).
i think we've figured out who is sending the care packages
So, we are getting ready for a recession now? Like 2008, or 1920s?
The crash that started the Great Depression happened on October 29th. October 29th is Monday. Coincidence?
That's the $1M question. Its no longer a matter of "If" at this point, more like "How long?" and "How bad?"
I'm not suggesting anything officially. And i'm slightly better than the lay observer, so don't change your financial future based on an observation on an off-topic thread on a football board.
My 2 cents is that fundamentally it seems like there could be a deep(er) pullback. Again, 10 months into 2018 we've wiped out all year-to-date gains (twice!) in the year. Doesn't scream upward momentum to me, but what do I know?
In any case, i'm going to be liquid in case it does go down further. I'd wager if it does go back up it'll probably come back down again not too soon after since the 200 day averages for a lot of indicies seem to me met at this point - would need continuous and sustained upward momentum to break the recent trend.
Lastly (and promise, not politically meant) - the recent uptick has been unanimously been attributed to the tax cuts to corporations which bumped up results and what companies could pocket, but that was more of a short term driving factor (IMO). That, combined with the recent trade wars also are now being played out.
So, take that for what it's worth. Stay tuned.
Stock buybacks certainly propped some valuations. Combined with the uptick that was more a reflection of businesses upping production/distribution in anticipation of the negative tariff effects later in the year, and you have the behavior we have witnessed over the last 2 quarters.
Again, avoiding a political commentary here, but it is difficult to discuss this topic without acknowledging those policy decisions.
My advice: If you need more Christmas lights, buy them now because those puppies are not gonna be cheap at Target/Walmart this year
Yeah I don't think it's really possible to discuss the financial markets/economy with any remote amount of depth without discussing policy decisions.
Policy sure - politics is what I was trying to avoid (at least the horribleness that is politics nowadays).
I think it's coming but we have one more high first. When this current dip is over (may already be, but hopefully in the next week for sure) I think we go back up to around SPX 3100. Then look out below (2400).
It's an interesting time because there is a lot of global systemic risk (economic issues in other countries, rising interest rates, trade/tariff issues) but yet companies are still making a lot of money. I think the market is just trying to figure out what the true future valuation of companies is and that is why there is so much volatility. I think GDP numbers tomorrow will cause the market to move pretty big one way or the other because it may signal what the fed will do with interest rates going forward.
I read a day or two ago that the Fed will probably raise interest rates one more time. I think it was Yahoo finance.
Yes they're supposed to raise one more time in December. The big question is how many times they will raise next year? Powell suggested they might raise another 3-4 times next year and that is what set off this round of selling.
As the effect of tax cuts and interest rate increases to combat inflation begin to take effect, along with the full realization of tariff effects on domestic and global markets begins to take shape, a period of high volatility and correction/recession seems almost inevitable at this point.
Good thing I cashed out my 401k last week to buy Mega Millions tickets.
Good thing that winning lottery ticket was from a gas station 10 minutes from where I work...
Does South Carolina require you to go public if you win?
Nope!
It's one of the few that let you remain anonymous should the winner choose.
It's one of eight states where you can be anonymous.
It's been a bull market for almost a decade. We are overdue for a recession.
This is my own assessment (based on understanding the warning signs from 2007 since history repeats itself) but consider these general observations/points:
-stock market confidence and optimism by the general public is high
-National unemployment levels are low; it appears businesses have been trying to hire workers from a pool that doesn't have any
-housing market appreciation and valuations are outright ridiculous again
-higher prices in crude oil
-increases in T-bond rates
-and sadly, the tariff wars
My dad before retiring, worked at a container shipping terminal and said he noticed significant decreases in container imports months prior to the great 2007 recession. Some port authorities publish container data publicly. I definitely suggest taking that into account as an indicator to assess whether we are trending for a market correction.
Subprime loans are on the rise again, this time in the auto market. And automakers are having a difficult time selling their cars.
Interesting last point there.
I know this is strictly anecdotal, but a neighbor and good friend of mine owns a debt collection business (along with many other businesses), and we had a long conversation over the weekend about the trends he is starting to notice and that they reflect a lot of the things he and his partner saw before the recession in 2008.
No scientific research to go along with it, but here in Scottsdale I certainly see it with home valuations getting red hot again. I bought a home in 2011 for $343k, and I had a recent appraisal north of $800k. Its getting crazy all over again.
Any thoughts on selling it or riding it out longer?
You've obviously made out well on your house, but you'll be paying the same premium on another house. I'd read up on capital gains to understand what (if any) taxes you'll on a nearly 500K profit. For moving now, I would base the decision on how much you would expect your current house vs future house to appreciate/depreciate. Or you may just want a new house for other reasons.
from what I understand based on my research of just selling my home (and someone can correct me if I'm wrong), if you sell a house, and it was a primary residence 3 of the last 5 years, no taxes on gains. Otherwise, it's capital gains and taxed accordingly.
So, if anyone plans to rent out a property they once considered the primary home, they'll want to hold on to it less than 2 years or long enough that the capital gains cancel out the losses on taxes (or I guess move back into for 3 years).
This is also current law, which can change at any point.
Edit: The link by the poster below says it's 2 of the last 5 years, not 3.
Just a note: the capital gains deduction is limited to $250K for individuals, and $500K for couples.
The problem, like people have said, is buying in an equivalent neighborhood/location. There is clearly something desirable about that location.
First $250K in profit is tax free if you're single. That increases to the first $500K if you're married. Any excess above those amounts will be taxed at the Capital Gains Tax Rate.
You also need to hit some residency milestones, which it sounds like you have. See the link below for more details.
Source: https://turbotax.intuit.com/tax-tips/home-ownership/tax-aspects-of-home-...
None at this time. We plan to l live where we are at minimum another 10+ years barring any unforeseen changes. After that the plan is still to keep it as a rental property at the least.
As mentioned, people keep approaching us with offers to buy because the neighborhood is hot, but the questions I ask is always "and go where?" We could afford a bigger house but I would just as soon do that after the market dips again rather than paying a premium.
Sell your house and rent for a few years. If there truly is a housing bubble in your area, there will be plenty of houses for sale shortly.
interest rates may make this not a great idea. depends on the situation.
rent is also a way to lose out on a lot of your wealth. rent literally causes a great divide in wealth, makes privileged land owners richer and those without land poorer.
OK, here are some thoughts to consider.
First, the appraised value is an estimate. The actual value is what someone signs a contract for on your house.
Second, there are tax implications, as mentioned above. But you're certainly in the catbird seat.
Most importantly, though, is whether you like where you live. There must be something special about your location for the value to appreciate like that. Other locations in your area have also likely appreciated. If you moved, what would you be giving up?
In terms of the overall economy, values of the highest priced homes will likely drop some as interest rates rise. It's just a fact of life. At the same time, rents will also continue to rise with inflation. Another fact of life. The problem with "cashing out" is that you lose a little bit of control and asset diversification. Hopefully, there are laws in place limiting the price appreciation for property tax purposes.
One thing I wouldn't do is cash out equity to buy stuff. That's the one thing that you could do that could come back to haunt you. Any other move is fair game.
What would you do with the money if you sold? Buy another house? Invest in a diverse portfolio? Buy a Porsche and a condo? All of these are legitimate, but just be sure and have a solid plan.
There's likely a reason you bought in your neighborhood to begin with. Start there. Does that reason still hold up?
I appreciate the insights, but I am not looking to sell, was simply making a point about the real estate market getting overheated again.
Frankly, the wife and I are exploring opening a HELOC around $100k and adding on to build a custom master suite. With current valuations that money spent will be money earned in the long run. My mortgage right now is right around $1700 with good timing on an earlier refinance, so I can't see myself ever selling the property.
I see that it was someone else who was wondering about the possibility of cashing out.
I like your plan better.
I understand your point, but home prices were only 1 of a number of factors associated with the crisis. It was a key one, but still need rampant predatory lending, lack of appropriate risk evaluation by rating agencies especially subprime, bad default rate modeling, synthetics on synethics, etc. Not saying all of those aren't true today as well, but ups and downs in home prices are normal.
So is this a r/wallstreetbets or r/personalfinance type of discussion?
this is definitely leaning wallstreetbets
Still one of my favorite reddit posts of all time.
I didn't understand a word of this
That is amazing. Geeze I wish I had that kind of luck
So what I'm gathering is now is a great time to start investing in stocks.
obligatory "time in the market > timing the market"
hey there's the r/personalfinance
That's the key. Buy lost cost mutual funds from a place like Vanguard and don't stress about market corrections. You can find tons of people recommending to liquidate over the last decade. If you had done that, you would have missed out on tons of earnings.
The best piece of advice I've ever gotten about investing: "You haven't lost any money until you sell it"
opportunity losses...
^This is the best personal finance advice for people who don't want to make personal finance a full time hobby.
Buy mutual funds that track the S&P500 or other major index - these will be low cost, and contribute to them regularly. Use a 401K, Roth IRA or IRA as you see fit.
Generally speaking, if you try timing the market you will miss most of the gains, and hit most of the losses.
From my understanding, if you are still a ways away from retirement, the best thing to do is leave your 401ks/IRAs invested as they are and continue investing as usual so you don't accidentally pull out a year early and miss on any gains; your accounts still have plenty of time to recover if the market takes a dive. If you are close to retirement, it may be time to get liquid or move into bonds.
That 40% drop on my 401k was a bad hit. Sure I was super aggressive and it did recover plus some...but knowing what I know now and some of these trends are unavoidably obvious, I'm redistributing it against lower-risk indexes and going all in aggressively at the tail end of the upcoming recession.
My work had our 401(k) adviser come in and discuss plans with us. He showed that if you stayed in through the crash of 2008, you would have still just about doubled afterwards. If you pulled out, just missing the 10 biggest days of the year would have dropped that number by like 80%. As you said, if you are far away, just leave them be. Most conservative investments shouldn't be too greatly affected and really aggressive investments should have been made with the intention of long term growth.
This is my strategy currently as I am 30 years from retirement. Buying on the way down will still lower my average price per share. I may shuffle some things around now to take a more conservative position with my funds, but some of the individual companies I invest in are long term plans and grabbing up cheap shares on the fall doesn't sound so bad.
Why invest in cheap shares when you can invest in sheep chairs?
I leave my investing up to the good men at Stratton Oakmont.
RECOOOOOOOOOOOOOOOOO
Because SOMEONE should be able to enjoy your investments, am I right?
This is a tangent but one thing I did enjoy during the recession was the perks of not waiting for a table at restaurants. Those couple of years afterwards were eerily quiet.
Seems like a good place to ask so could any of you recommend any good sites (or people to follow on social media) for gaining more knowledge in this area? I've been meaning to learn more but with work and other life stuff, I've just been putting it off. I don't need super basic stuff, but something that transitions from say beginner to intermediate level would be a good jumping in point for me. Like right now, I know enough to get by but I'd like to at least be proficient enough to where I'm not just putting so much blind trust into a financial advisor (he's great, friend of the family for years, but you know what I mean)
The Motley Fool
They have some books too if you're more old school.
I like Motley Fool quite a bit.
I've also learned quite a bit (and gotten market perspective) from Jim Cramer's books. His TV show (mad money) is less informative, but better for commiserating after a tough market day. I've had several friends call in, which is always fun. His show is about individual stocks. You might also try "Bogleheads". All of these will make you more aware of investing.
"A random walk down Wall Street" is also pretty good background.
It's easier to invest in industries you understand. I started out investing in professional services firms because I worked for one and I understood the business. Then you can spread out to a more balanced portfolio. In the mean time, index funds are pretty good for optimizing market results. You have to do a lot of work to confidently invest in individual stocks.
It's a lot easier to successfully invest for the long term than to try and benefit from stock volatility.
Couple of podcasts I listen to are Sound Investing by Paul Merriman and The Dough Roller Money Podcast.
I understand, I read a study years ago that researched car sales to friends and family that showed you paid more for the car that if you weren't friends with the salesman. (not my father works for GM deals, those are good deals until you realize you bought a GM) .
I learned a lot from asking finance questions to a family friend finacial advisor. He managed a lot of bigger accounts so his philosophy with me was that I could do much more on etrade for cheaper than going through him, and it wasnt worth his time I the long run.
The first question I would ask is what is he charging you. Vanguard, Fidelity, and Principle have some of the lowest rates I have found. But any more Ijust stick to index funds and bonds so I could do without paying someone. I like having some one i can call for advice when i need to. Investing isnt my job, but it's how i make my money so having experts that can advise you is important to me. Not everyone needs them.
I don't think I've ever watched the show in my life, but for some reason I love listening to Squawk Box in the mornings on CNBC on SiriusXM.
Tony Robbins has some good books on personal finance
Anybody else here work directly in the investment field?
I'll always refrain from commenting on investment related boards because of that but I love reading you alls thoughts.
No expert here, but I have been the beneficiary of some inherited stocks, and the investors bought blue chip stocks and held them for decades. Plenty of slow, safe growth. While it doesn't always work that way, a financial advisor can help spot the bad stuff before it becomes too bad.
Less than 50% of the people in this country own any stocks at all, but usually the ones that do seem to fall into the "active" and more "passive" categories. I think the risk of active trading isn't worth it for folks like me who don't spend half the day studying the market to try to make a buck. Slow and steady will win the race, and if you invest in the market responsibly, it's hard to justify selling and buying repeatedly, with its attendant risks, unless you are an expert. Buy good stuff, don't freak out over corrections, even recessions, unless you are nearing an age that you'll need liquidity to move on. Think long term, it's worked for many of my friends, family and acquaintances over the years. Easy money isn't usually easy. Yes, you need to pay attention, and you need to be in routine contact with your advisor, but if you trust that advisor, it doesn't have to be a nerve wracking experience.
Just my .02 worth.
It's often hard for experts to beat the S&P
I can appreciate the idea of "staying liquid", but in the mean time there are lots of gains that will likely be missed. we could have had this discussion at any time in the past 5 years. I remember wondering if I should get out of the market before the last election. Stocks have gained 20% since then, even accounting for this past week's results.
Investing is about discipline as much as timing. There are better strategies than "I'm going to beat the market through really savvy timing. If you are liquid during a big drop you might feel pretty good, but if you're liquid during a big gain, you've missed it.
Studies show that a blend of stocks and bonds optimizes results, and that the mix should be determined by your timeframe (basically, your age) and tolerance for risk. The longer the timeframe, the more stocks. The shorter the timeframe, more bonds. Index funds are a great way to participate if you don't want to do a lot of homework.
It's really more about valuations than about what was gained in the past. Taxes, interest rates, inflation, and economic growth are more important than when you bought in. Of those, inflation is really the silent investment killer that people tend to miss. Generally speaking, your dollar today is worth less than a dollar tomorrow, so cash isn't as safe as it seems.
So my recommendation is to assess your timeframe and your risk tolerance. Immediate volatility isn't really as important if your timeframe is long.
Be good to your IRA, and your IRA will be good to you.
This is the best answer
Bad time for real long term investing, but there's still money to be had day trading if you're smart about it and have the time.
Care to 'splain why?
Seems to me that the day trading with this volatility is a fairly risky business.
But like you said, it can be done. Better have a pair of brass balls.
Oh the risk is extreme, but the gains you can make are ludicrous. A few friends and I spend most of our downtime at work day trading, and we've found some real gems. Last week, I got into one that went up 200% in a couple days.
I meant more in terms of "bad time for long term investing". If it's long term, the "timing" matters much less doesn't it?
Correct.
It's never a bad time for long term investing.
But there are certainly strategies to ease in if you've got a lump sum to invest.
The risks are there, but you have to keep your losses small. I got in one earlier this month that doubled overnight. I'm currently holding one over the weekend that's up 45%. I'm still fairly new to it though.
Shorting Hokies to the acc championship
Well played.
Sold some 2018 calls and bought some 2018 puts. Double short the hokies. Its a guarantee.
Anyone want to ELI5 with regards to what to expect with the housing market come spring? Wife and I are looking to buy our first home. I see a lot of folks in r/RealEstate talking about the housing bubble getting ready to bust but it's hard to tell if its sensationalism or a reality.
Part sensationalism/part reality. Part of it depends on where you're going to buy. Has the area you're looking at appreciated a lot in the past few years? Are houses there priced out of the average person's ability to purchase? Could absolutely be a factor. Prices will likely come down as interest rates go up. If you're going to borrow money to make your purchase, that will make a difference as well.
If you're going to be there a while, a good bit of it may come out in the wash between prices and interest rates, but it will be location dependent.
We are planning for this to be our forever home. We're looking in the Lynchburg area, and appreciation just depends it seems like. Some areas are going up, some are rather stagnant. It's interesting.
I would think Lynchburg would be relatively stable for the long term.
Here's a good article from the Washington Post on this topic today, to offer a bit of perspective:
How I learned to love a good downturn in the stock market
Since these threads always end up going off a deep end in investment advice/speculation and scare away a lot of people who don't have a lot of knowledge on the subject, I'll post the usual reminder that no one ever knows what the stock market is going to do, but over time it has always gone up, and is at an all-time high more often than not. You can go back to any period in history and find people certain that a recession/dip is imminent and that anybody with sense is pulling out of the market, and making their investments liquid to take advantage of the inevitable drop. And those people are almost always wrong.
In the meantime, buy low-cost index funds (Vanguard is the best imo), buy into the market regularly (ie. every paycheck) and don't stress. The only funds you'll ever need are VTSAX, VBTLX, and VTIAX (US total stock, US total Bond, and International). Allocate more to stocks if you're younger, more to bonds as you get closer to retirement, and wait it out.
What happens when everyone takes the same advice to sell?
Prices go down. People with trades programmed in get pulled into trades. More automatic trades take over and the whole market drops.
Professional investors who have a good idea of the actual values attempt to wait for the bottom, and get stocks at a discount.
I know about how the market works. Just was trying make a point about how fear and greed can drive people to make trades based on emotion. Those two things drive market momentum up and down. It can drive dicsiplined investors nuts but also creates opportunities.
I was just pointing out that investor emotion is getting amplified by programmed trades and index funds.
But you're right, it also creates opportunities if you're disciplined and focus on the long term. What's more important are average returns over years.
Considering we're only a few hundred ppl on this site, nothing substantial at all....
....unless one of you fools secretly has a few billion invested.
Just to bring up a slightly older thread. How are folks feeling now?
I'd say we're in bear market territory.
Bleh. I'm in college and had a nice little internship last year. Decided to invest some of that cash in some stocks pretty much coinciding with the peak. Not looking too great now haha
For what it's worth, I saved a bit of cash working a summer job after I graduated high school and invested it all in a Roth IRA. It wasn't a ton of money, but it felt like a lot at the time. That was the summer of 2008, right before the whole housing marked crashed. I just left it in there and forgot about it until this year. It had fully recovered and was up 25%. So, it *can* come back.
I don't think we're in a bear market yet. I'll put this in Red Dead Redemption 2 terms;
Right now, we're walking in the forest. We just heard a growl, our horse got spooked and ran off, and now it's eerily quiet...
I think we see the fear slide for a few more weeks until the holiday consumer spending reports come out. If the reports show consumer confidence then I think that will help curb the effects of the slide and the negativity the media is spreading on economic policy. I can see flat movement or maybe some slight retraction through the first quarter but the middle half of 2019 I predict a growth market.
Not sure what you're suggesting. Are you talking about the tariffs?
Yes and the speculation on their overall effect
I don't know if you're subtly trying to be political or not. I disagree with your personal speculation though. I will leave it at that.
Not trying to be political, just saying that the media feeds off negativity and fears, it's what gets them viewership. In turn, that viewership starts to panic, spending stops-saving starts-sell offs, etc etc. The media definitely adds and keeps the fuel going for that fire. However, I think the health of the stock market is controlled by the top 2% and what investment the middle class contributes isn't enough to move the needle.
How often do you see a positive article about the economy? The negativity in the media isn't just about tariffs.
For what it's worth, in my 36 years of life and as someone directly engaged in what the economy is doing (current CFP(r)), I can count on two hands the number of glowing articles I've read about the economy doing well.
The simple fact is that when things are great, most people know they are great and don't spend time thinking about it. When things arnt as great, that's when people start paying attention. The "media" doesn't market to people that arnt paying attention.
There are some concerns about the economy, and I don't think it's because there are negative media pieces out there.
There are always concerns about the economy, but the good is definitely outweighing the bad at the moment. Rising unemployment and wage growth are good things.
Seems to me the overall outlook is good. The short term jitters are over the Fed raising interest rates and international trade, but it seems to me those will get worked out.
The stock market is definitely spooked, but the economy still looks good. There are lots of gains to lock in, and there are lots of scary things (read uncertainty) in the market.
Right now we're back to where stocks were in January over all, but if you've been in stocks all along, you're likely doing well.
It could very well continue to get worse before it gets better, but people who get out of the market all together will also likely miss out on bigger gains later.
Stocks are better used as a long term bet. Nobody can predict daily movements accurately.
If we're back to where we were in January, then wouldn't your portfolio in general have been flat over the course of the year? Not sure I understand the statement "if you've been in stocks all along you're likely doing well"
By "all along", I mean longer than a year.
A year is pretty short-term in relation to stocks.
Stock returns (DJIA) since 2014:
Year percent
2014 . . 7.5
2015 . . -2.2
2016 . . 13.4
2017 . . 25
The thing to look at is average overall return vs other investments.
Everyone knows that stocks have been up over the last several years I guess the "all along" as reading the sentence made it sound as though the timeframe being referenced was only 2018
I'm hesitant to assume what "everyone knows" regarding the stock market, so my last post was meant to clarify the earlier statement and put it into the intended context.
Wanted to comment on tariiffs (bad) and stock market volatility (some math).. I run a chemical company and we import a lot (resources like RM for glycine can only be made in certain areas) and we are getting crushed by China tariffs .. We re creating "friendly" warehousing arrangements with Thailand to reduce impact, but still costs us more.. Like someone said earlier, the impact will hit the customer in Q1 2019, but hits our company now because we have fixed contracted rates and many customers loaded up in summer seeing the tariffs and driving up GNP. When gavel hits and we raise our prices, the consumer will pay dearly (we sell to Nestle, proctor Gamble, is is ONLY because of tariffs- same issue with Bauxite (makes aluminum) that has been added to our costs from SO America--- US has little bauxite so the idea of tariff on this to stimulate and increase manufacturing in US has no correlation- but our increased prices will be passed on.
Quick thought on stock volatility- let's say the following--
nov 2018 $50 in 401k
Nov- market loses 20%
New amount $40k
To make up that $10 loss requires a 25% increase in the market to get back to the $50 you had before the loss. This is only a math concept that sometimes gets pushed out of our minds
I don't understand how some people think these tariffs are are good thing for our country.
Edited to be less crass.
Tariffs are not good for our economy but they are not the end goal. The tariff is the tool being used to bring China and Europe to the table to renegotiate 30 year old trade deals. Understanding the framework for international trade requires being familiar with the General Agreement on Tariffs and Trade (GATT) established in the 40s. It is essentially the rule book that the World Trade Organization (WTO) uses to establish trading parameters. GATT is a product of the cold war and was used to unite western democracies by encouraging trade and incentives to unite western allies against cold war adversaries. The rules and dispute resolution mechanisms with the WTO never anticipated an autocratic planned economy like China being part of the system. China was admitted to WTO under the assumption they would reform to more Western democracies. They have not done this and have abused the system with trade protectionist policies.
China's economy has been weakening and the US currently has the leverage to use these tariffs to force China to renegotiate and adopt a fairer trade system. The US economy is believed to be strong enough to withstand the negative impact the tariffs will have on our economy. The problem I see is the authoritarian nature of China's government is less reactionary to the suffering of it's people and will not yield before 2020 as they expect a new administration to be in power.
I am not posting this to be political and have no political intent with this. I am merely trying to provide the context that is needed to have an informed opinion on the current trade dispute.
This is really informative and insightful. I wish I could give you more than one leg. Thank you. I still think there has to be a better way to do this than to hurt the American consumer, even if temporary.
The United States has been trying to "gently" negotiate with China for decades, which is why we are where we are now.
Resurrecting this old thread to say I'm starting to dabble in the market a bit- any tips for a newbie?
1. Diversification, and
2. Don't put anything into the stock market that you can't afford to lose, and
3. If you've got a long time horizon, you definitely need some money in stocks (either index fund or direct).
What are your goals? If you're in it for the long run you have to diversify (I know you've heard this a ton of times) ALL of your investments. Not just stocks. For stocks, you may want to consider an index fund or ETF because they don't take active management from you.
At this point in the short run, you are probably looking at buying high. To counteract that you would have to take a LONG position on your holdings. Generally, you want to buy low and sell high.
If you have a significant amount of money to invest consider getting an advisor who is paid on AUM (assets under management) vs. transactions.
TBH I had some disposable income and figured it be fun to buy some stocks and do a bit of trading. It's a small amount, and I'd rather play it slow and safe, but that's all it is. It's something I'd like to do myself. I have other assets for retirement and saving, etc., that I work with a financial planner on.
I usually subscribe to the Warren Buffet method for long term stocks. I usually go pull up a search on Buffets Top 10 Stock Holdings and once I have that list determine which of them I am comfortable with. Usually the stocks he owns tend to have high regular dividends which helps to grow your portfolio as long as you set the dividends to automatically reinvest. Has done wonders for me so far.
Well, in that case. You are going to have to develop a strategy and an analysis method to determine which stocks fit your strategy. Reading Finance books could be helpful. I have been wanting to get into this and have a list of books I want to read. I'm mobile now so the only one I remember off the top of my head is "A Random Walk Down Wall Street".
Also, check out the Efficient Market Hypothesis. When you trade individual stocks you may want to consider its implications.
I second the fee based advisory approach vs. the transaction model.
Finding a good RIA (registered investment advisor) will go a long way in your future planning.
I've looked into advisors but the costs seems really high for the return. 33 to up to 100 bps makes me feel like I can do it myself and still come out ahead
It all depends on what help you need. Choosing investments is relatively simple if you are following a long term buy and hold/diversified strategy and remember to rebalance from time to time.
As a CFP/RIA, I would be the first to tell you that if your advisor is only choosing investments for you, they arnt adding any value.
If they are doing their job right they are adding a lot more value than a few basis points, but addressing a lot more than the investment level items.
I use RobinHood, its a really good and legit platform with no trading fees. I first heard about it through the Solid Verbal podcast but was surprised after asking around how many people use it.
I love Solid Verbal.
How do they make money?
Here is an article that tries to explain it.
How does Robinhood make money?
Good article. Now I get it.
I'm playing the long game and have no interest in seeing tens if not hundreds of thousands of dollars eaten up by fees, so I go with Vanguard ETF's. The short version is an ETF (exchange traded fund) is like a mutual fund in that it's composed of many (often hundreds) of different stocks, but you can buy and sell shares just as you would a stock. In Vanguard's case the ETF's fees are ever so slightly lower than the comparable mutual fund, but honestly either method is a good bet. The drawback to an ETF is that, like a stock, you can't buy fractional shares. So if you have $125 to invest and a share costs $100, you can't buy 1 and a quarter shares so that $25 will just sit there doing nothing until you chip in more cash.
Check out these ETF's for starters:
VOO - S&P 500 ETF
VYM - High Dividend Yield ETF
Because these funds require so little management, the fees are obscenely low. They also offer quarterly dividends, which you can and should reinvest. I'm assuming you probably have a strong math background, so I don't need to tell you about the miracle of compounding interest.
If you trust that the American economic system will continue to work for the foreseeable future, these and funds like them are good, safe bets for someone starting out. If I have the S&P 500 covered in a single fund, if one single company goes belly up, it's not going to kill my portfolio. By the same token, if a single company skyrockets, it won't budge me up all that far. But as they say, slow and steady makes you a millionaire.
Trade deals should be completed sometime soon. When that happens the market will probably go up one or two thousand points, so it may be premature to be in a cash position at this time. Hokie CFA has some good points after that.
Hey guys
Lots to discuss. Really surprised no one has brought it up here. Reddit has the stock market going CRAZY
Just shows how the fix can be in.
Game Stop
Dogecoin
Robinhood getting sued for shutting down trading.
I definitely got in on doge coin!! Going to throw a few more dollars on it in the morning.
Also: fuck robinhood.
How does one get this Doggy coin?
You have to be a good boy
I'm able to purchase cryptocurrency through robinhood.
Fuck Robin Hood. All my homies hate Robin Hood
Seriously. They've now killed instant transactions for cryptocurrency. Fuck robinhood.
Now they're getting sued for selling off Gamestop stock from the people who bought it to call the short.
That 100% deserves a lawsuit and I think any non-wallstreet jury will give them the win.
Be careful spreading that rumor. Those sales that Robinhood did was likely them calling in on the margin that these people were using to trade. That would be legal and pretty justified with how volatile it is. Now if they were selling long positions in cash accounts then that is fucked up and would definitely be illegal i think.
It might make sense to spin up a new thread since this one is old. I'll close this one up if you do.