Investing Thread

[JWags85]

I’m dying here. Lots of texts with my daughters today. My daughter is currently sitting on something like a 9,000% gain.

My buddy put $500 in an option account during the pandemic.  He was a traveling consultant who suddenly had a lot of time on his hands and was always an active investor.  But he usually didn’t have the time or attention to trade options.  Well in the crazy volatility, he hit 2 massive gap days and turned that $500 into around $8000. He moved $5000 out, kept around $3000 of profits to play with.  He got chopped around, bout flat, work started to pick back up, he wasn’t gonna option trade anymore. 

But he thought Doge was hilarious, so he dumped the cash into it.  He got, literally, 1 million DogeCoins when it was around .003.  He sold when it spiked to .01 around the New Year and thought he was George Soros.  And also smart enough to take the money and run.

Texting with him today has been hilarious.
“My 3 year old daughter has been glaring at me all day.  It’s like she knows Daddy missed out on her college tuition and a pony with his paper hands”

[Skatastrophy]

I'm so thankful that paper hands and diamond hands are making it into the common lexicon.

[Not A Serious Person]

Anybody buying any interesting stocks that have nothing to do with crypto?

I doubled my BABA position last week, did the same with COST a week or two before that.

What your thesis with BABA?  The Chinese Gov't seems intent on a hostile takeover of the company, shutting down Alipay and marginalizing Jack Ma.

These seem to be huge red flags, which explains why it has sucked in a massive tach rally, reopening trade.

[Not A Serious Person]

I’m dying here. Lots of texts with my daughters today. My daughter is currently sitting on something like a 9,000% gain.

It seems to be one big whale right now.  When he (Elon?) gets bored, it's over.

The trick is to be out before the rug pull.

https://twitter.com/TheStalwart/status/1383063955346710532?s=20

Here's a Dogecoin wallet with $1.3 billion in it that's making some absolutely massive trades in both directions the last couple of days. 

[Hards Alumni]

It seems to be one big whale right now.  When he (Elon?) gets bored, it's over.

The trick is to be out before the rug pull.

https://twitter.com/TheStalwart/status/1383063955346710532?s=20

Here's a Dogecoin wallet with $1.3 billion in it that's making some absolutely massive trades in both directions the last couple of days.

Yup.  What I'm worried about is that when this bubble pops a lot of people with small bags are going to feel the pain, and abandon crypto... This after they've been warned that Doge is a meme coin.

[Not A Serious Person]

Love it and hope your daughter makes another 9000%

The law of large numbers gets in the way really fast.

Currently, Doge has a market cap of $50 billion.  Another 9,000% (or 90x) move puts its market cap at $4.5trillion, or twice as much as all the Russell 2000 stocks.

Currently, the entire crypto universe is $2.1 trillion

Even a 5x move from here (to about $2.50) makes it larger than Ethereum.

[Not A Serious Person]

Yup.  What I'm worried about is that when this bubble pops a lot of people with small bags are going to feel the pain, and abandon crypto... This after they've been warned that Doge is a meme coin.

Exactly, the $$$ losses might not be big for some, but they will lose interest and leave altogether.  That is when the real losses (by not sticking around) will start to pile up.

[Hards Alumni]

The law of large numbers gets in the way really fast.

Currently, Doge has a market cap of $50 billion.  Another 9,000% (or 90x) move puts its market cap at $4.5trillion, or twice as much as all the Russell 2000 stocks.

Currently, the entire crypto universe is $2.1 trillion

Even a 5x move from here (to about $2.50) makes it larger than Ethereum.

Not to mention 10,000 are mined every minute.  Meaning at $0.37, $3700 must be bought every minute of every day to keep it at the same price.

Good luck to those trying to time the dump on this one... not for me.

[Goose]

Hards

You may be right, but I am riding it to the Final Four!! Full disclosure---I did downsize position this morning.

[Hards Alumni]

Hards

You may be right, but I am riding it to the Final Four!! Full disclosure---I did downsize position this morning.

If it's funny munny, and I know yours is, its all good, man. 

I think today was probably the right day to get out.  Pay day, and the hype train is heavy out there... at the top of the mania, best to take the gains and play with the leftovers.

[Skatastrophy]

DJO out here with the rest of you jokers

[Hards Alumni]

Have 30 minutes to spare?  Give Deconstructed a listen to today.

https://play.acast.com/s/1d1223a2-9d05-473b-9e79-c2b65b71d676/cc678489-7001-4f5d-9d4e-ffe807340448

[jesmu84]

Have 30 minutes to spare?  Give Deconstructed a listen to today.

https://play.acast.com/s/1d1223a2-9d05-473b-9e79-c2b65b71d676/cc678489-7001-4f5d-9d4e-ffe807340448

Nice. Just saw this on rising the other day.

So how do I short cmbs/commercial real estate?

Or, should we even bother? Will government just bail out this entire industry if there's any threat to corporate interests?

[MU82]

From the NYT's David Gelles:

Companies battered by the pandemic are handing out enormous pay packages to their C.E.O.s, highlighting the sharp divides in a nation on the precipice of an economic boom, but still wracked by steep income inequality.

Executive compensation has, of course, been soaring for decades now. Chief executives of big companies in the U.S. now make, on average, 320 times as much as the typical worker. In 1989, that ratio was 61 to 1.

In years when the profits are flowing and unemployment is low, such disparities are often explained away. But in this pandemic year, corporate P.R. teams are bending over backward to justify their bosses’ big paydays.

When I reached out to the companies mentioned in my article for comment, they responded with infographics, statements from board members and urgent requests for off-the-record phone calls. Here are three of the common tactics they employed:

Don’t believe your eyes:

A Hilton spokesman stressed that the figure in its latest proxy filing did not represent take-home pay for Chris Nassetta, because the company restructured several stock awards. “Said directly, Chris did not take home $55.9 million in 2020,” the spokesman said. “Chris’s actual pay was closer to $20.1 million.” Hilton lost $720 million last year.

An AT&T spokesman emphasized that while John Stankey was awarded compensation worth some $21 million, that wasn’t what he was “paid,” noting that this includes stock awards that may not be realized. Stankey’s actual take-home pay, the spokesman added, was closer to $10.4 million. AT&T lost $5.4 billion last year.

It could’ve been even more:

Boeing wanted to make clear how much money Dave Calhoun “voluntarily elected to forgo to support the company through the Covid-19 pandemic” — some $3.6 million, according to a spokesman. Nonetheless, Calhoun was awarded $21.1 million last year, while Boeing lost $12 billion.

Disney stressed that “the impact of the pandemic on our businesses led to a meaningful reduction” in executive pay, noting that executive chairman Bob Iger, who was awarded $21 million last fiscal year, gave up his salary for much of that time. Disney lost $2.8 billion in the period.

The great man theory:

Starbucks, which awarded Kevin Johnson $14.7 million, was among many companies making the case that their C.E.O. was essential to future success. “Continuity in Kevin’s role is particularly vital to Starbucks at this time,” said Mary Dillon, a member of the compensation committee. The company made a $930 million profit in its latest fiscal year, down three-quarters from the previous year.

And General Electric sent a 487-word defense of the $73.2 million package awarded to Larry Culp, arguing that he was uniquely equipped to revive the ailing industrial conglomerate. “The board sees Larry Culp as essential to G.E.’s transformation,” a company spokesman said. The company turned a $5.2 billion profit last year, helped by restructuring measures that included reducing headcount by more than 20,000.

[MuggsyB]

When do you experts predict the precipitous drop/correction in the market?  August?   Sooner?  I'm reading a lot of mixed things about the impact of 28% cap gains.

[jficke13]

When do you experts predict the precipitous drop/correction in the market?  August?   Sooner?  I'm reading a lot of mixed things about the impact of 28% cap gains.

That which cannot go on forever won't... however, people who have been afraid of that precipitous drop have had a good argument along the lines of what I said before the ellipsis for a decade or more and outside of a coronavirus black swan have been 0-fer. Personally, I think the capital system has made it clear that it values stock prices above all else to the point that heaven and earth will be moved to keep the asset price gravy train running.

I don't know about trying to time a conversion to cash, tbh, but would be interested in hearing people's strategies to hedge against potential downside.

[Skatastrophy]

When do you experts predict the precipitous drop/correction in the market?  August?   Sooner?  I'm reading a lot of mixed things about the impact of 28% cap gains.

So people that make over $1MM a year (500k of them in the US) are going to do something else with their money that doesn't generate capital gains just to save a little on their profits being taxed? Hold cash? Invest overseas? I doubt it.

A bump in capital gains tax is just returning to what it was in the late 90s. I doubt this impacts the market.

[TSmith34, Inc.]

So people that make over $1MM a year (500k of them in the US) are going to do something else with their money that doesn't generate capital gains just to save a little on their profits being taxed? Hold cash? Invest overseas? I doubt it.

A bump in capital gains tax is just returning to what it was in the late 90s. I doubt this impacts the market.

From Yahoo Finance:

"And so for many investors looking to build wealth for the long term, stocks are an attractive option. And recent history suggests that higher tax burdens don't change this asset's relative merit.

"In 2013, although the wealthiest households sold 1% of their assets prior to the [last capital gains rate hike], they bought 4% of starting equity assets in the quarter after the change and therefore only temporarily reduced their equity exposures in order to realize gains at the lower rate," Goldman Sachs strategists wrote in a note to clients published last week. "Total household equity allocations demonstrated a similar pattern around the two preceding capital gains tax hikes."

‌So while some wealthy investors realized gains ahead of the last increase in the capital gains tax, more than all of those sales were replaced by new flows into the stock market. In other words, higher taxes created a short-term incentive for some investors to sell stocks, but this same higher rate was not a long-term deterrent for those investors when it came to buying stocks.

‌And so on a relative basis, stocks were still deemed the place to be even with the knowledge that future tax burdens would be higher upon sale of those assets. And Goldman expects a similar story to play out if the capital gains tax is increased this year."

[Skatastrophy]

I honestly just wish that this tax bump was something for me to worry about. Sadly, we're not on pace to make $1MM this year. Maybe 2022.

[MU82]

From Yahoo Finance:

"And so for many investors looking to build wealth for the long term, stocks are an attractive option. And recent history suggests that higher tax burdens don't change this asset's relative merit.

"In 2013, although the wealthiest households sold 1% of their assets prior to the [last capital gains rate hike], they bought 4% of starting equity assets in the quarter after the change and therefore only temporarily reduced their equity exposures in order to realize gains at the lower rate," Goldman Sachs strategists wrote in a note to clients published last week. "Total household equity allocations demonstrated a similar pattern around the two preceding capital gains tax hikes."

‌So while some wealthy investors realized gains ahead of the last increase in the capital gains tax, more than all of those sales were replaced by new flows into the stock market. In other words, higher taxes created a short-term incentive for some investors to sell stocks, but this same higher rate was not a long-term deterrent for those investors when it came to buying stocks.

‌And so on a relative basis, stocks were still deemed the place to be even with the knowledge that future tax burdens would be higher upon sale of those assets. And Goldman expects a similar story to play out if the capital gains tax is increased this year."

Yep. In the last week, I have seen 3 studies like this, and all of them showed the enormous investment activity that took place after tax hikes. GDP growth, too.

I honestly just wish that this tax bump was something for me to worry about. Sadly, we're not on pace to make $1MM this year. Maybe 2022.

Exactly. Real-world problems!

[JWags85]

One of the main direct market changes is a lack of incentive to hold positions or investments longer than a year.  So how that affects money and position movement for family offices and funds and the like remains to be seen.

I don’t put too much stock in predicting what will happen based on market reactions in periods 5/10/20 years cause everything in terms of investing and markets changes so much year to year these days.

[MuggsyB]

What if you have made significant cap gains and don't want to sell because of the taxes?  I'm also not sure those lucky enough to make 1m a year have a lot of growth options?  I've always been a long-term investor, but I'm just curious if some of you closer to retirement are concerned with a major (sustained)correction and are looking to diversify?

[TSmith34, Inc.]

What if you have made significant cap gains and don't want to sell because of the taxes? 

Then don't sell?

I'm also not sure those lucky enough to make 1m a year have a lot of growth options?

Since it would be only a marginal tax increase on income over $1M, Goldman's analysis makes sense to me. Can't see it would change much.

I've always been a long-term investor, but I'm just curious if some of you closer to retirement are concerned with a major (sustained)correction and are looking to diversify?

Speaking only for myself of course, I'm already diversified as much as I choose to be. My cash allocation doesn't swing too much based on where the markets are. I've learned I'm not great at market timing.

[MuggsyB]

Then don't sell?
Since it would be only a marginal tax increase on income over $1M, Goldman's analysis makes sense to me. Can't see it would change much.
Speaking only for myself of course, I'm already diversified as much as I choose to be. My cash allocation doesn't swing too much based on where the markets are. I've learned I'm not great at market timing.

I plan/hope to invest for another 25-30 yrs and don't need the money so I'm not sure taking the profit is the best decision.

Let's use this example:  I bought a decent chunk of a stock that's up about 150% in 18 mos..   If I plan to have it for another 25+ yrs and don't need that money now is it really worth taking the profit?  I know you can never go wrong with that return but as a long-term guy I figure after 25 yrs things will be just fine.

[MU82]

I plan/hope to invest for another 25-30 yrs and don't need the money so I'm not sure taking the profit is the best decision.

Let's use this example:  I bought a decent chunk of a stock that's up about 150% in 18 mos..   If I plan to have it for another 25+ yrs and don't need that money now is it really worth taking the profit?  I know you can never go wrong with that return but as a long-term guy I figure after 25 yrs things will be just fine.

Muggs, nobody forces anybody to sell anything. (Well, at least not until RMDs; but even then an investor has choices.) If you don't want to take profits, don't want to sell, don't sell.

I am a very reluctant seller. Among the stocks I own that I have never sold a single share of: MSFT, AAPL, JNJ, PEP, PM, HD, LMT, HON, V, MA, NEE, and others. These are sizable positions.

If you don't sell, there are no taxable capital gains.