New To Investing Thread

[wetwillie]

Fedor you have a gambling problem

[Fedor]

Fedor you have a gambling problem

I have x5+ the rest of my investments so it was a temporary setback.  Poor timing more than anything, one of them is (almost) back in the black already.

[Fedor]

Gold is going to be good for a while.  The other precious metals usually follow gold, so I think silver is getting hot now too but I don't follow silver.

Looks like silver is about 2 months behind gold, so I am only one month late. 
Also apparently copper sucks all the time.
Maybe you could tell me when gold goes in the crapper and I could jump in and make bank and we all party?

Buy low sell high is a joke.  Buy high sell higher is the way.

Last year I bought high - watch in horror as it plunges to 52 week lows in a week. Twice. 
So you could say I am a little risk averse right now.

Sell stops dude.

Longer term one of them should work out fine, the other I am not so sure.   

[TCUHornedFrog]

I found that SPY is a fund that tries to mirror the DOW.  The graphs are right on top of each other.  I guess it does not get any more index than that.

S&P 500 but whatevs

[Emo EMAW]

Gold is going to be good for a while.  The other precious metals usually follow gold, so I think silver is getting hot now too but I don't follow silver.

Looks like silver is about 2 months behind gold, so I am only one month late. 
Also apparently copper sucks all the time.
Maybe you could tell me when gold goes in the crapper and I could jump in and make bank and we all party?

Buy low sell high is a joke.  Buy high sell higher is the way.

Last year I bought high - watch in horror as it plunges to 52 week lows in a week. Twice. 
So you could say I am a little risk averse right now.

Sell stops dude.

Longer term one of them should work out fine, the other I am not so sure.   

A real addict would double down.   

[Fedor]

I found that SPY is a fund that tries to mirror the DOW.  The graphs are right on top of each other.  I guess it does not get any more index than that.

S&P 500 but whatevs

yah, 

[eastcat]

I found that SPY is a fund that tries to mirror the DOW.  The graphs are right on top of each other.  I guess it does not get any more index than that.

S&P 500 but whatevs

yah, 

SPY is for all the fools that don't know about VOO.

Better company and the lowest fees in the biz.

[catastrophe]

Just switched to 100% stocks allocation in my portfolio, because eff bonds, right?

[slobber]

Just switched to 100% stocks allocation in my portfolio, because eff bonds, right?

Yes, eff bonds.

[TCUHornedFrog]

Just switched to 100% stocks allocation in my portfolio, because eff bonds, right?

If you're young and don't mind volatility, then that's a relatively decent play.

Rising interest rates are bad for bond prices.  Interest rates are more likely to increase than decrease from here. 

[sys]

if you're young, catastrophe, you might want to consider going 125% or so stocks.

[slobber]

if you're young, catastrophe, you might want to consider going 125% or so stocks.

Solid advice.

[Fedor]

Interest rate hike in June. 

[slobber]

Interest rate hike in June. 

What the hell is up with the Fed signaling that they may take 2-3 hikes this year? Talk about influencing the market.

[TCUHornedFrog]

What the hell is up with the Fed signaling that they may take 2-3 hikes this year? Talk about influencing the market.

Since the financial crisis, the Fed has felt it is important to be clear about what they're thinking and the likely path of interest rate normalization.  The practice started with Bernanke and Yellen likes it and plans to keep it going. 

[slobber]

What the hell is up with the Fed signaling that they may take 2-3 hikes this year? Talk about influencing the market.

Since the financial crisis, the Fed has felt it is important to be clear about what they're thinking and the likely path of interest rate normalization.  The practice started with Bernanke and Yellen likes it and plans to keep it going.

Yes, but mentioning the possibility of 2 or 3 seems a bit much.

[TCUHornedFrog]

Yes, but mentioning the possibility of 2 or 3 seems a bit much.

The guidance they were giving coming into the year was 3-5 hikes.  They lowered it based upon economic conditions.

[slobber]

Yes, but mentioning the possibility of 2 or 3 seems a bit much.

The guidance they were giving coming into the year was 3-5 hikes.  They lowered it based upon economic conditions.

SAME DIFFERENCE!!!! WHY ARE THEY TELLING US THAT THEY ARE GOING TO EFF THE MARKETS UP XXXX# OF TIMES SO FAR IN ADVANCE!!!!

Good grief, you should just start saying "y'all"

[TCUHornedFrog]

SAME DIFFERENCE!!!! WHY ARE THEY TELLING US THAT THEY ARE GOING TO EFF THE MARKETS UP XXXX# OF TIMES SO FAR IN ADVANCE!!!!

Good grief, you should just start saying "y'all"

The Fed offering guidance on the path of interest rates doesn't eff up the markets. 

[slobber]

SAME DIFFERENCE!!!! WHY ARE THEY TELLING US THAT THEY ARE GOING TO EFF THE MARKETS UP XXXX# OF TIMES SO FAR IN ADVANCE!!!!

Good grief, you should just start saying "y'all"

The Fed offering guidance on the path of interest rates doesn't eff up the markets.

Then why does Wall Street give a crap?http://money.cnn.com/2016/05/18/news/economy/fed-minutes-april/index.html?iid=hp-stack-dom

[TCUHornedFrog]

Then why does Wall Street give a crap?http://money.cnn.com/2016/05/18/news/economy/fed-minutes-april/index.html?iid=hp-stack-dom

The path of interest rates is more important that the absolute level of rates when rates are this low.  Having an idea of what the Fed is going to do is huge if you are a fixed income investor.  Pension plans, banks, insurance companies, and retail bond investors need to understand how/when the Fed is going to act so they don't end up having to sell things when they don't want to (losses, liquidity needs, etc.).

Also, attributing daily price movements with news that day is a bad idea.  Day to day movements in markets are noise.  There can be news that drives meaningful movements but, by and large, news doesn't drive daily price action. 

[catastrophe]

The market always takes a dip when they announce rate hikes. I'm not quite sure why, though.

[TCUHornedFrog]

The market always takes a dip when they announce rate hikes. I'm not quite sure why, though.

Interest rate sensitive securities drive that.

For example, let's look at a perpetual preferred 6% ($100 par) share.  The theoretical value is the dividend divided by your discount rate.  Given that a preferred isn't a riskless security like a Treasury, we need to add a spread to the risk free rate.  So the 10 Year US Treasury currently yields 1.85%.  Let's add an arbitrary 300 basis point spread for a risk premium.  So 6/0.0485=$123.71 (theoretical value, not what it is actually trading at).  Now, let's imagine that the Fed hikes rates by 1% and the 10 year goes to 2.85%.  Keeping the same spread, that preferred's theoretical value is now 6/0.0585=$102.56.

REITs, preferreds, some dividend payers are extremely sensitive to interest rate changes.

Fixed income buyers also get hit as yields and prices are inversely related.

[slobber]

The market always takes a dip when they announce rate hikes. I'm not quite sure why, though.

Interest rate sensitive securities drive that.

For example, let's look at a perpetual preferred 6% ($100 par) share.  The theoretical value is the dividend divided by your discount rate.  Given that a preferred isn't a riskless security like a Treasury, we need to add a spread to the risk free rate.  So the 10 Year US Treasury currently yields 1.85%.  Let's add an arbitrary 300 basis point spread for a risk premium.  So 6/0.0485=$123.71 (theoretical value, not what it is actually trading at).  Now, let's imagine that the Fed hikes rates by 1% and the 10 year goes to 2.85%.  Keeping the same spread, that preferred's theoretical value is now 6/0.0585=$102.56.

REITs, preferreds, some dividend payers are extremely sensitive to interest rate changes.

Fixed income buyers also get hit as yields and prices are inversely related.

If I just send you $100,000, how quickly will you turn it into a million, after your cut?

[TCUHornedFrog]

The market always takes a dip when they announce rate hikes. I'm not quite sure why, though.

Also, the reason for the hike matters. 

If we're early in the business cycle (we're not right now) then that could mean inflation is picking up faster than the central bank wants because the economy is doing awesome.  A rate hike in that scenario should be positive for equities because they should benefit from better economic circumstances.  If it's late in the cycle (like we are now), then rate hikes are good and bad.  They're good because it means that the bank feels like they are controlling inflation.  They're bad because it means that we have a higher probability for recession in that scenario.

This cycle is very different than any that anyone living has been through.  We've not had rates this low for this long ever during actual investor lifetimes.  The Fed is desperate to get rates up so they have an ability to meaningfully cut them if the economy starts to do poorly.