Coming to this thread very late after finishing my chapter on stocks in my masters finance course.
I assume there’s been discussion ITT on how to bet on massive post election instability? What’s the consensus?
I’m annoyed that I was 2 months ahead of the curve on covid (I started the first covid thread) but didn’t do anything with that knowledge.
Well if you recognised covid for being as bad as it is you may well have lost money given bullish sentiment post April. Don’t know consensus regarding election. Market probably views Trump better but then again Biden is more stable especially with regards to China you’d imagine. So yeah nobody knows I’d guess!
Yeah. I’m thinking that this forum is probably weighting the chance of absolute chaos and post election gridlock much higher than anyone else.
The million dollar question (much like covid I guess) is turning that into a specific set of prediction about prices of securities.
Well, if you got some thoughts on how to figure out not just that there will be market instability, but when, then you have something to be actionable. Otherwise, the inevitable instability could always come later than you think it should.
I think I’m going to have to think about refinancing my home loan. I got a 30-year fixed rate loan at 3.00% in 2016, which was a great rate at the time. But rates are crazy low now that I feel like I have to at least run the numbers. 3 factors working against me are jumbo loan, co-op property, and uncertainty in NYC valuations.
This is significant. My budget for a recent new home purchase was around the jumbo threshold. After loan shopping it became clear I’d need to adjust the budget/down payment to stay under the jumbo limit. I’d be surprised if you could get much under 3% and that’s with points.
I just refinanced at 2.75% for 24 years a month ago. 3% still seems pretty good for 30 years, but maybe rates have fallen further.
Jumbo market is confirmed FUBAR.
Well, that’s discouraging, but also, thanks for the warning. We were thinking about leaving the Bay to buy a home, because it ain’t worth the price to live here when you can’t do any of the cool stuff around here, we ain’t going into our offices any time soon, and we’d almost certainly want to move before the kids start school. Rando online mortgage calculators made it look like we could reasonably afford a loan slightly into the jumbo territory, but I guess I have to check if those calcs already include any jumbo shenanigans or if we should think hard about getting less house to get under the limit.
For additional context I got 2.75% with a 0.75 point lender’s credit just under the jumbo loan threshold (30 year). Best jumbo price was 3.75% paying 1 point. That was in June.
This is very bubblcious.
This article is terrible.
First, Warren still has something like $250 billion in domestic stocks, saying he is abandoning america for foreign investments is stupid. He sold some banks, probably because the economy is in recession and its harder to make money on loans in a zero interest rate environment.
Second, just lol at the INFLATION IS COMINGGGGGGGGGG derp I’ve been reading for 15 years now. GTFO.
The article repeats several times to watch what billionaires are doing, but doesn’t give any good examples of what they are doing. Buffet says avoid investing in debt, but then he takes a large position in treasuries. Soros says he’s not participating in the market because he doesn’t understand it. Ok, but that’s a horrible decision if the primary concern is inflation.
If easy money is the new norm for a decade or two then the market (with the exception of some grossly overvalued companies) might be fairly valued. I think the S&P 500 PE ratio right now is 30. That’s high, but that might come down some without the market having to fall if we get past the virus and industries with distressed earning due to the virus see earnings recover some in the near future.
My own changes are to slightly increase the stocks portion of our AA, and to hold about half of our fixed allocation in inflation protected bonds.
Owning land/real estate is probably a good hedge as well. But I hate REITs and have no interest in being a landlord. And it’s not like RE isn’t already in its own bubble.
The article warns about govts printing so much money that govt guarantees might end up worthless. Well, if that happens it doesn’t matter much what we do because we’re all fucked anyway. And we won’t be able to do what the billionaires do, which will be to GTFO and go to some private island or whatever.
I agree with your fundamental point. Classic monetary theory seems to have some fatal flaws and the classic Keynsian levers do not seem to have the results that we thought.
That being said this recession is very different from 2000 or 2008. Asset prices are up across the board. Home prices, stock prices, gold, silver, bitcoin, bonds(prices not yields) are all higher. You are also seeing increases in food prices.
The main thing keeping CPI low over the last 20 years is not the Fed. It is an influx of extremely cheap appliances, electronics and junk from Asia. It has offset increases in other areas. You can buy a 4k 65 inch tv for like $400 now. You can buy an extremely nice computer for under $1000. Those things were all both crappier and more expensive 20+ years ago.
So going back to how this recession is different. This is the first recession we have seen this asset bubble happen within the recession. Both in 2000 and 2008 the bubble preceded the collapse. Asset prices mostly tanked following the crash.
My personal take is absent more stimulus we STILL don’t see inflation this time either though. If anything the crash in asset prices will just lag the economic reality by longer or maybe not happen at all if the irrationality lasts longer than the actual economic shock. I think the disconnect comes from the fact that, so far, the main negative economic impact has occurred in the lowest classes. Those people don’t buy stocks or houses. The more affluent classes have, to this point, mostly been unscathed. To my knowledge that is a first in our lifetimes during a recession. The real question to me is when the 2nd and 3rd level effects start to be felt what happens then? Eventually the lower and middle class pain trickles up you would think.
In my humble opinion the best returns in real estate are direct investing at the property level, but you have to know what you’re doing to evaluate deals and you usually can’t get into them without many millions of dollars of cash.
Advocates of REITs like to say they make institutional quality real estate available to the masses but the price is way too high (because of the liquidity premium) and they’re horribly tax inefficient to the stockholder.
Meanwhile a direct investor usually gets to use depreciation to shield cash flow (compare to a REIT - fully taxable distributions) and often negotiates for some degree of control over the asset and/or the ability to step in and operate if necessary. Also REITs generally only buy and hold stabilized assets while direct investors can access the entrepreneurial returns associated with development.
I should have clarified - by bubblicious I meant this "value of money has fundamentally changed’ talk. I actually just skimmed the article.
There were a lot of articles like that in 1999 to support the insane valuations of dotcom high-fliers.
This is true, but I think that those who do it right are basically buying themselves a second job.
Ain’t nobody got time for that.
That’s why I prefer stonks.
Although, I’m a basic buy and hold guy for the most part, even if I were active, I’d still find stonks to be less unpleasant work.
This, plus for many people it is critical to have an investment plan that keeps the opportunity to make a mistake as small as possible. Buying individual real estate properties to generate income requires a series of decisions and estimates that you might fuck up, so my interest in that is zero. Stocks are imperfect investments but it is very easy to define a strategy with a low low risk of investor error.
The main benefit of buying properties for income is access to leverage. For the most part you cannot borrow a million dollars to buy stocks. A lot of people can borrow a million dollars to buy property.
For sure. Have to distinguish between rental properties (buying a job, good way for middle and upper-middle class people to slowly build wealth) and commercial property, which is what I was referring to.
Rental properties are the easiest way I’ve seen for normal people to get legit rich. It will take a few decades and its easier if you’re a sociopathic monster (tons of money in slumlording if you have no character), but absent huge mistakes (usually a lack of liquidity) most people can do it.
Commercial property investing is way more complex with way more risk factors but can be almost unbelievably lucrative. While a REIT may pay a 7% dividend or whatever, a good commercial property will return several times that. However, its pretty hard to know enough to tell a good deal from an OK one from a bad one, and the people who really know tend to do it themselves.
REIT distributions are only taxable to the extent of net income, so the investors indirectly benefit from property depreciation as well.