***Official*** 2013 Stock Market Thread

[Engineer]

Market does seem high, but I thought it seemed high back when the DOW was 11k, and here we are now at 16k?

If it does crash, I've left a significant "bail out" chunk of money in crap savings accounts all ready to go in when it hits bottom. This part helps me sleep at night?

Well, to be fair, I have almost 20% of my overall in liquid savings (Penfed 5 year CD's earning 3%) but that still doesn't keep the edge off. I'm getting awfully nervous at 30% runups in the S&P500.

By the way, when does one actually know when it hits bottom? I thought it hit bottom at least a dozen times on the way down during the 'great recession' only to almost give up when it actually hit bottom. I guess that's the answer....when you're ready to give up (capitulation?), the bottom is near?

 

[Michael]

Markets always seem "high" before they go even higher.

There is zero evidence that it is possible to time the market on any consistent basis. Hedge funds are underperforming right now because their hedges against stocks dropping have pulled down their returns.

In my opinion, how much to have in the market vs. other forms on investments comes down more to your time horizon than anything else. The less time you have to recover from downturns, the more you should have in more fixed investments.

Michael

 

[KB]

I know this thread is typically about individual stocks (of which I own none) but does anyone else fell like the market is just riding too high and ready to pop (down)? I rode the drop from 2007-2010 down 64% on my funds (and it hurt like hell). I guess I'm just nervous and don't want to do that again (not that I think it will go down 64%....just don't like big drops).

Tempted to just unwind but I know that I should just keep on chugging along....*sigh*

Myself and most analysts thought the taper was going to cause a big drop but it hasn't.
In fact I don't see a catalyst for a 64% drop. In hindsight the housing bubble was obvious. Actually even in fore-sight I thought the housing bubble was pretty obvious, I just had no idea when it was going to fall and just how hard.
Right now there isn't a major bubble in stocks, which are above the historical PE average, but are still not close to the 2007 bubble levels. The greatest headwinds for stocks and the economy as I see it are low-wage growth, rising interest rates, municipal debt/pensions and low inflation. Many analysts are calling for large earnings growth this quarter, which I am not sure will happen, but it still won't cause a 64% drop, maybe 15%?
With the Fed continuing low interest rates and continuing QE, stocks are still the right place to be for now since bonds will drop in value as interest rates rise and CDs and money markets are paying nothing.

 

[KB]

Well, to be fair, I have almost 20% of my overall in liquid savings (Penfed 5 year CD's earning 3%) but that still doesn't keep the edge off. I'm getting awfully nervous at 30% runups in the S&P500.

By the way, when does one actually know when it hits bottom? I thought it hit bottom at least a dozen times on the way down during the 'great recession' only to almost give up when it actually hit bottom. I guess that's the answer....when you're ready to give up (capitulation?), the bottom is near?

How are they able to offer a 3% yield 5-yr CD? Not even internet banks can offer that. I think I would sleep well knowing I had a safe 3% coming my way.

https://home.capitalone360.com/cds

My own credit union isn't even close.

 

[Imp]

By the way, when does one actually know when it hits bottom? I thought it hit bottom at least a dozen times on the way down during the 'great recession' only to almost give up when it actually hit bottom. I guess that's the answer....when you're ready to give up (capitulation?), the bottom is near?

When the thoughts out of my ass feel right.

When that time comes, I'll just "feel" it. Then it will probably drop another 25%, but hopefully, I will be right enough that when the market did recover, I'd gain at least 20%. Partly why I stick to relatively high dividend paying stocks nowadays -- I know I can't predict anything, so may as well try to guarantee some sort of yield.

 

[Engineer]

How are they able to offer a 3% yield 5-yr CD? Not even internet banks can offer that. I think I would sleep well knowing I had a safe 3% coming my way.

https://home.capitalone360.com/cds

My own credit union isn't even close.

Don't know but they popped up (right after I bought a bunch of 3 year @ 2%) about a month ago. I kindly broke just over half of the 3 year CD's and put them into the 5 year CD's (only lost the few weeks of interest on the 3 year CD's with NO penalty other than interest gained). Yea, can't really complain about 3% CD's (right now at least).

Edit: They are still offering them right now (thinking about picking up a few more):

(today's rates)

6 Month 0.300% 0.30%**
1-Year 0.750% 0.75%
2-Year 1.400% 1.41%
3-Year 2.000% 2.02%
4-Year 2.200% 2.22%
5-Year 3.000% 3.04%
7-Year 3.000% 3.04%

 

[Engineer]

The greatest headwinds for stocks and the economy as I see it are low-wage growth, rising interest rates, municipal debt/pensions and low inflation.

The low (or negative real) wage growth at the middle and lower ends is probably the biggest problem of all (for over a decade now). If wages grew, the rest would probably take care of itself. Alas, wages aren't growing except those at the top and right now there is no trickle down.

 

[jpiniero]

The low (or negative real) wage growth at the middle and lower ends is probably the biggest problem of all (for over a decade now). If wages grew, the rest would probably take care of itself. Alas, wages aren't growing except those at the top and right now there is no trickle down.

Well, at least the 50% of Americans who own stocks through their 401k or whatever made money there, even if it will be short lived.

 

[Engineer]

Well, at least the 50% of Americans who own stocks through their 401k or whatever made money there, even if it will be short lived.

That's frozen in account that most people will not touch until retirement (outside loans or cashing out/hardship). Wealth effect maybe? but other than that, no real help to the economy. Besides, the top 10% own 80% of all stock so little help to those bottom 90% from that.

 

[brianmanahan]

buy, hold, rebalance

repeat until dead

 

[Imp]

(today's rates)

6 Month 0.300% 0.30%**
1-Year 0.750% 0.75%
2-Year 1.400% 1.41%
3-Year 2.000% 2.02%
4-Year 2.200% 2.22%
5-Year 3.000% 3.04%
7-Year 3.000% 3.04%

We call CDs GICs (Guaranteed Income Certificate) here, and their rates are similar to those. Sucks because I have a few 5-years just about to mature with interest around 4.3%, so from 2007 or 2008-ish.

A few years before that, north of 5% was pretty common.

 

[Michael]

Those do not appear to be "CD"'s. They are some form of money market certificate. They say the APY can change at anytime.

Michael

 

[Engineer]

Those do not appear to be "CD"'s. They are some form of money market certificate. They say the APY can change at anytime.

Michael

From what I understand, they can change the rate on new ones at anytime but not the current, locked in ones (at least from the FW Finance forum). Now I've got to go read the fine print, lol. (Although I have bought many from Penfed in the past at much higher rates (before the interest rate crash) and they never changed any of them at any time on my holdings).

Edit:

We will establish your certificate on the day we receive your application and funding. Once purchased, the rate is locked in for the term of your certificate.

As I said above, the rate can change at anytime for NEW certificates but not locked in versions. Oh, and you are correct in that they are technically not certificates of deposit (at least in wording) but work essentially the same way and are government insurance backed too.

 

[manly]

Well, to be fair, I have almost 20% of my overall in liquid savings (Penfed 5 year CD's earning 3%) but that still doesn't keep the edge off. I'm getting awfully nervous at 30% runups in the S&P500.

By the way, when does one actually know when it hits bottom? I thought it hit bottom at least a dozen times on the way down during the 'great recession' only to almost give up when it actually hit bottom. I guess that's the answer....when you're ready to give up (capitulation?), the bottom is near?

My market timing is terrible, so don't do what I do.

Although trying to call the cyclical top or bottom is wholly unrealistic (at least for me), you can always look at the S&P 500 P/E and compare to historical norms and have a general sense. I haven't been paying much attention, but there's almost certainly a new tech bubble right now.

On a semi-related note, I thought this book is useful:
The Little Book of Sideways Markets: How to Make Money in Markets that Go Nowhere

 

[Engineer]

My market timing is terrible, so don't do what I do.

Although trying to call the cyclical top or bottom is wholly unrealistic (at least for me), you can always look at the S&P 500 P/E and compare to historical norms and have a general sense. I haven't been paying much attention, but there's almost certainly a new tech bubble right now.

On a semi-related note, I thought this book is useful:
The Little Book of Sideways Markets: How to Make Money in Markets that Go Nowhere

I tried a book once....I thought that I was smart after reading it and lost $60,000 in the market (hence why I no longer own nor AM ALLOWED to own individual stocks - wife orders). I still have about 14 years left on the tax write off schedule. No more books for me.

 

[Michael]

I can save you the purchase price, the advice is always the same (I have not read that book).

1) Dividend stocks

2) Covered calls

3) Various option strategies that pay off if the stock does not move up or down in a certain direction

If you could be certain that the market is "sideways" the advice works. But if you knew that, you would be able to time the market and make a killing anyways.

Michael

 

[mshan]

Thousands of holiday gifts won't arrive by Christmas after an unpredictably large number of packages overwhelmed UPS, the world's largest package delivery service.

"The volume of air packages in our system exceeded the capacity of our network, as demand was much greater than the forecast," UPS spokeswoman Natalie Godwin said Tuesday. "As a a result a small percentage of shipments are delayed and will not be delivered today."

Godwin would not say how many packages had been delayed, but the delays are nationwide."

http://www.cnbc.com/id/101295945

 

[jpiniero]

With the talk that retail sales are going to be super crappy but online sales OK I suppose that shouldn't be a shocker that something like this would happen. People procrastinate as they always have but now they have Amazon Prime.

 

[Engineer]

http://www.cnbc.com/id/101295945

I have packages in UPS that were to be delivered on 12/23/2013 and still haven't made it to Lexington. They still say "on time" though!

I guess that 21% in drop in foot traffic in the stores ended up all shopping online. Places like Amazon offering 30 days FREE PRIME (i.e. free 2nd day shipping) around the holidays probably contributed massively to the UPS load.

 

[mshan]

I also have a package (Amazon 2 day Prime) that was supposed to arrive yesterday.

Tracking says it is stuck in Texas, and so far rescheduled delivery date is January 2, 2014 (hopefully that gets fixed to this Thursday or Friday).

 

[Engineer]

Santa Clause rally continues.

On a side note, all of my packages were delivered this morning. Saw the UPS CFO interview last week stating there would be no delivery issues...oops. Both FEDEX and UPS dropped packages off at my house early this morning. Will be interesting to see how they handle all of the return packages as it was estimated (CNBC) that 1/3 of all online orders are sent back (really, that's high?!?!).

 

[Hugo Drax]

Well, to be fair, I have almost 20% of my overall in liquid savings (Penfed 5 year CD's earning 3%) but that still doesn't keep the edge off. I'm getting awfully nervous at 30% runups in the S&P500.

By the way, when does one actually know when it hits bottom? I thought it hit bottom at least a dozen times on the way down during the 'great recession' only to almost give up when it actually hit bottom. I guess that's the answer....when you're ready to give up (capitulation?), the bottom is near?

Well with SPY for example you can hedge, ie: build a collar position, decide ahead of time what is the maximum profit and maximum drawdown you are comfortable with.

This lowers your gains by insuring your portfolio via long puts, either partially or completely paid for by the money on the short call position on your long stock position.

 

[Engineer]

Well with SPY for example you can hedge, ie: build a collar position, decide ahead of time what is the maximum profit and maximum drawdown you are comfortable with.

This lowers your gains by insuring your portfolio via long puts, either partially or completely paid for by the money on the short call position on your long stock position.

One of these days, I'm going to sit down and learn options as they confuse the living hell out of me.

 

[Imp]

Santa Clause rally continues.

On a side note, all of my packages were delivered this morning. Saw the UPS CFO interview last week stating there would be no delivery issues...oops. Both FEDEX and UPS dropped packages off at my house early this morning. Will be interesting to see how they handle all of the return packages as it was estimated (CNBC) that 1/3 of all online orders are sent back (really, that's high?!?!).

They probably want more returns to double-dip on the same item.

 

[brianmanahan]

I tried a book once....I thought that I was smart after reading it and lost $60,000 in the market (hence why I no longer own nor AM ALLOWED to own individual stocks - wife orders). I still have about 14 years left on the tax write off schedule. No more books for me.

the best financial books i have read are anti-individual stocks, anti-market timing: bogleheads guide to investing and/or bogleheads guide to retirement planning