In addition to less liquidity, there’s also a real increase in credit risk for something that isn’t FDIC insured. A- is not a great rating, and a state government is not the backstop that the FDIC is.
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Futures pointing to 3500 open. Unbelievable how quickly it got to 3% above ATH.
Isn’t A- on the upper end of investment grade? This is the AM Best ratings. And I know state insurance isn’t quite as secure as FDIC, but from what I understand it’s pretty safe to rely on.
I saw a chart somewhere recently that an A- rated insurance company had less than 1.5% chance of becoming impaired in any given 5 year period. And impaired didn’t mean they defaulted. From what I understand, in most cases impaired insurance companies get gobbled up by healthier companies who honor all the outstanding commitments in order to take on the existing accounts.
Maybe I’m too optimistic, but I think I’m looking at something like less than 1% chance of a default over the period I’ll be invested, with something like a 99% chance if it happens that the state insurance makes me whole. Seems like such a tiny risk that it’s not worth worrying about.
In case you didn’t see before, I sold a while ago after the bad earnings report - I think I made like 25% roughly. Glad you’ve gotten even more out of it, though! Just didn’t want you to think it’s necessarily great value at its current price, it’s definitely above net-net value.
As you note with A- it is not like you’re seriously at risk if default but then again it’s the 7th highest credit rating for a reason. Market participants demand ratings that granular because a 1% probability of having your payments at risk is enough to change the price.
What if, and this is going to sound wild, there was an unprecedented and prolonged surge in nationwide mortality at the same time as a broad economic crisis at the same time as a huge crunch on state finances? It’s quite the trifecta, and each element is almost impossible to imagine, but what if it happened?
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Still not worried about my state defaulting on their insurance obligations. I guess I could hold off 6-12 months and see how the current situation plays out a little more.
You have to make your own judgment about what kind of risk you’re comfortable with and how much risk you think there really is. As an EMH zealot, I just want to make sure everyone understands that the way you get yield is by taking on risk.
I agree with you. Markets aren’t perfectly efficient but if one product yields 3% and one yields 0.5% there’s got to be something going on. Someone is paying you 250 bps for something, what is it?
Yeah, that makes sense. Although I think some of the premium is required due to less liquidity. And that has some risks of its own (i.e. - an individuals risk that they might need access to funds they thought they wouldn’t have to access) separate from the insurance company risk.
Thanks for your thoughts on this.
Tsla approaching 10% up on split day. Elons greatest move yet - saying stock is overpriced at $800 =3x in two months
So crazy that the split happened at the same time as unreported new information that had such a major impact on the net present value of future cash flows. Especially on a day when the broader markets are down. Should call it the DEficient markets hypothesis, amirite??
My BIL just bought some TSLA on Friday. I don’t think he dabbles in stocks at all. So there you go. I kind of laughed at him and now he’s up 10%. Looks like I’m the dumbass here.
Guys why are Apple and Tesla so cheap? The guy on the TeeVee told me to buy them so I think I should.
Lol, AAPL is up almost 5% today, too.
Vix up 15% today on a -.22% spy day. Does not compute.
And my oil co stocks keep tanking. But at least my FXE never fails.
TSLA now up 87% since August 11th when they announced the 5-1 split. They are now the 8th most valuable publically traded company in the world.
So Tesla’s worth ~3x as much as Disney now. Seems legit.
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How many cars had Disney launched into outer space?