Skip to comments.Investment & Finance Thread (week July 20 - July 26 edition)
Posted on 07/20/2014 4:02:51 PM PDT by expat_panama
Year-to-date wrap-up time.
General markets varied a lot but right now they're all together at 5-10% up so far. Actually that's pretty good as it represents a 5-year doubling time.
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A closer look at stock indexes so far this year are showing roughly the same track but my dim eyes are somehow seeing us having a plateau for the past 3 weeks. That's usually a good sign; witness the run-up after the mid-April basing.
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.As Torch says, "Discuss".
This is the thread where folks swap ideas on savings and investment --here's a list of popular investing links that freepers have posted here and tomorrow morning we'll go on with our--
Open invitation continues always for idea-input for the thread, this being a joint effort works well. Keywords: financial, WallStreet, stockmarket, economy.
Merry Sunday Eve to all!
This morning a neighbor who is fully invested in the stock market came down with a case of the jitters. He said with the stock market collapse almost imminent (probably just after the election was his prediction) and the dollar collapse equally so where should he put his money?
I said I would put his question up to you folks. I know he’s not fond of gold or silver and he figure jewels aren’t the way to go so any ideas you have I’ll email to him.
He’s in his 70’s and his home is free and clear.
Farmland, then rent it out.
We’re having a drought out West. Farming isn’t a good bet right now..
If he's honestly convinced that stock prices will fall then he can sell shorts. If he's also afraid to do that then he's got to admit that he really doesn't know what stock prices are going to do. If he decides there's a chance of either way then there are all kinds of ways he can hedge --half'n'half stocks/cash, stocks along side of downside options, etc.
Merry Sunday Eve to you too expat...
Anyone at that age (70s) that is fully in equities is not properly allocating assets. He should be in fixed income in the 50 to 60 percent range, depending upon his risk tolerance
When you are younger, and have time to make up for down markets, one’s assets should be more in equities. Investing for the long term will even out the down years.
But at advanced ages, when (WHEN, not IF) a down market hits and you are fully in equities, you’re risking heavy losses, with a short lifespan to make it up.
Also, one should never do drastic moves with ALL of one’s assets all at one time. Work at the margins.
Why Tesla Motors can’t sell cars in most of the United States
Seems we got a continuing base this morning for both stocks and metals as futures see gains in metals while stocks fade a bit --complete opposite of last Friday's trade. Barring more chaos in Europe things may quiet down as our report week (CPI, Home Sales, Durables, etc) are all scheduled for Wed. - Thurs. This morning's news:
8:30 am CPI - Consensus +0.3% (+.02 ex food/energy)
9:00 am FHFA Home Price Index
10:00 am Existing Home Sales - Consensus 4.995M
8:30 am Initial Claims
9:45 am PMI - Manufacturing Flash
10:00 am New Home Sales (June) - Consensus +480K
8:30 am Durable Goods - Consensus +0.6%
More on Asset Allocation
Asset allocation is one of the most important decisions that investors can make. In other words, the importance of an investor’s selection of individual securities is insignificant compared to the way the investor allocates their assets to stocks, bonds, and cash equivalents.
Rules of thumb
Although your exact asset allocation should depend on your goals for the money, some rules of thumb exist to guide your decision.[footnotes 1]
The most important asset allocation decision is the split between risky and non-risky assets. This is most often referred to as the stock/bond split. Benjamin Graham’s timeless advice was:
“We have suggested as a fundamental guiding rule that the investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequence inverse range of 75% to 25% in bonds. There is an implication here that the standard division should be an equal one, or 50-50, between the two major investment mediums.”
John Bogle recommends “roughly your age in bonds”; for instance, if you are 45, 45% of your portfolio should be in high-quality bonds. Bogle also suggests that, during the retirement distribution phase, you include as a bond-like component of your wealth and asset allocation the value of any future pension and Social Security payment you expect to receive.[footnotes 2]
Investors choosing to increase their equity proportion, either through less conservative guidelines or a desire to increase return, should understand why they feel they have the need, ability, and willingness to take on the greater inherent risk.[footnotes 3]
All age-based guidelines are predicated on the assumption that an individual’s circumstances mirror the general population’s. Individuals with different retirement ages (earlier or later), asset levels (those who have saved enough to fund their retirement fully with TIPS, or needs for the money (e.g. college savings) would be well-advised to consider what circumstances make their situation different and adjust their asset allocation accordingly.
Asset allocation by age is often used by people planning for retirement with accounts such as 401(k)s. The theory behind age-based asset allocation is that a younger investor has more time to recover from losses and take advantage of potential gains, making stock market investing more beneficial. As you age, you invest more in less-volatile investments such as bonds, possibly even switching to ultra-safe investments like certificates of deposit as you reach retirement. Even at retirement, some of your nest egg may not be used for many years, so stocks still could make sense for a portion of your funds.
The best rule of thumb is to have 100 minus your age in equities. (Percent)
One thing I was going to add to the discussion is the individual’s personal situation.
For example, a retired couple that are both knocking down fat government pensions with gold-plated medical retirement plans might be able to take a little more risk with their portfolio, as they really don’t “need” their nest egg money to meet basic living expenses. That is assuming that their house is paid for, they don’t have kids in college, etc. In other words, their money is “play” money for wants instead of needs.
Conversely, people who must rely on their portfolio to generate cash for everyday living expenses must be a little more careful to not crack the egg and see the yolk run out on the floor.
But an exercise in market timing, and trying to pick the absolute top and bottom, and then deploying ALL your assets to match is mighty risky, at least to me.
All of the above assumes you’ve mastered Rule Number One.
Spend less than you have coming in.
If that rule isn’t observed, no amount of planning, market timing, stock tips, or anything else will work.
Here’s the associated article:
Fattening Profit Margins Continue To Be The Dominant Driver Of Earnings Growth
Earnings season is under way, and one theme is clear: fat profit margins are driving earnings growth.
“[T]he majority of earnings growth we have observed so far this quarter has been a function of margins, as companies continue to operate with as few expenses as possible,” write analysts at JP Morgan Asset management.
Ever since the financial crisis, sales growth has been weak. However, corporations have been able to deliver robust earnings growth by fattening profit margins. Much of this has been done by laying off workers and squeezing more productivity out of those on the payroll.
“With earnings growth (5.5%) rising at a faster rate than revenue growth (3.0%) in Q2 and in future quarters, companies have continued to discuss cost-cutting initiatives to maintain earnings growth rates and profit margins,” said FactSet’s John Butters on Friday.
But with profit margins near record-highs, many agree that we’re do for at least some pull back.
“Looking forward, however, it is not clear that margins can continue to materially increase, meaning that the baton will need to be passed to revenues in order for earnings to continue pushing higher over the coming quarters,” said JPM.
Working faster, smarter, harder, and longer to pay for those who don’t?
Not a good long term trend. Health care costs are falling for a similar reason - no innovation and as drugs come off or patent the costs drop creating the false appearance of improvement.
The disparity between corporate profits, earnings for the top 20% of income earners and the rest of the country is driven almost exclusively by government fiscal policy at the national, state and local level.
Working faster, smarter, harder, and longer...
--which is pretty much how our loony Marxist colleagues in the press would have us see it.
Those of us working for a living have to stick with reality, and the facts are that while the % employed is down since the '09 crisis, the workweek's been cut back while pay and productivity's increased.
Evil corporate productivity "squeezing" is for comic books. Real life means laying off cheap slow workers and keeping the expensive fast ones means wages increase w/ productivity.
While we can't argue about the facts, the reasons why are open for debate. My take is what we're seeing is typical for a big hike in min. wages during anti-business public policies.
It's bad but not the way you mean it. Historically average yearly corp profit growth is about 7%, but for the past four years it's hit a brick wall even while employee compensation's jumped another ten percent.
Corp. profits are a good thing, we need them but they're lagging.
Corp. profits have increased more than pay, though it's been a bit more erratic...
Wage growth is always last as slack in the labor market is worked through. Job markets are tightening (look at the JOLTS) but we aren’t at the inflection point for wages...quite yet. It’s coming though. And the Fed sees it.
Top'o'the morning to everyone as we continue our back'n'forth markets. While this must be great for day-traders my swing-trading (2-3 week frame) just sees everything stalling flat. Note, today's futures have stocks up and metals down awaiting today's CPI and home sales.
CPI +1.9% ex food/energy vs +2.0% consensus
Just to be clear, I love corporate profits, particularly when they’re my corporate profits. ;-]
There is a trend, and its causes are relatively broad, but generally are driven by government policy, to reduce human labor. Conservatives can address this and I think Uber/Lyft are pointing it out very well. What benefit is there to workers and consumers of a “taxi license”? It helps crony capitalists and Chicago government.
Chicago recently had a license auction and expected prices to be around $360K minimum per license. Nobody came.
There are too many of these kind of anti-labor regimes in place at the local/county and state level. Wise focus on these kinds of working class economic issues - tariffs that benefit only a few families, cab licenses that have cabbies paying $100/day before they’ve made dime one, etc. are easy sells in an urban setting.
What if the top 10 American cities were run by Rudy Giuliani clones?
The trend is real and unless we undo the negative incentives to labor this will force us into a crisis. The result will be permanent transfer payments to what ostensibly would be America’s middle-class. Much of that is already in place.
You have hit the nail on the head. In a fast changing world the government on all levels is clutching for their ability to control who wins and who loses. Instead of allowing entrepreneurs to succeed they seem to want to stifle it. Uber and Tesla’s direct sales are two glaring examples.
They’ve been impoverishing people like that for decades in our cities. It’s only going to get more and more exacerbated as we go forward. It must change and will change by legislation or just breaking completely.
The key here, I believe, for the conservative cause is to get out in front of these issues. We’re not going to get urban centers to come to every cause. They’re just too filled with radical libs (30% normally), but we can capture 51% of voters in election after election by pushing real progress via conservative economic policies. Economic liberty is a real winner.
Who is keeping Walmart and jobs out of the cities? Democrats and their liberal masters.
I also think that arguing in favor of families and marriage will be widely accepted. 4 out of 5 poor families are headed by females who had babies in their teens and never graduated HS. Vouchers also would easily pass in black neighborhoods and among many poor/middle class as well. In Chicago getting into a good public HS is not merit, but politics based.
You're absolutely right --what gets my pants in a wad is reading "...robust earnings growth by fattening profit margins... ...by laying off workers..." knowing that the Fed's BEA numbers say otherwise. You're also right that a stupid press is only bad while a stupid government is worse.
Depends on which state of the union they are talking about.
Illinois workforce shrinks by largest margin in state history - See more at: http://www.illinoispolicy.org/illinois-work-force-shrinks-by-largest-margin-in-state-history/#sthash.bi7vJU9E.dpuf
These are the policies Cook County Democrats have brought to the nation.
Have you been following this Hebalife/Ackman thing? Popcorn worthy.
HLF +25% today!
AAPL missed on sales, beat on EPS. Lowers 4Q guidance. Shares pretty much flat after market.
I wasn’t really paying attention until I saw Akman near tears on the telly.
AAPL generated $10.3B in cash from operations during the quarter and returned $8B to shareholder through buybacks and dividends...
P.S. I hate buybacks... worthless.
Wish I had of had some PBYI. Up 225% after hearing.
Hours . Damn phone.
Futures traders are looking at gains in both metals and stocks this morning after yesterday's flat metals and rising stocks w/ increasing volume. Looking like those that sell have sold. Reports today amount to just the Mortgage Index first thing and Crude inventories 3-1/2 hours later.
huh, I find buybacks a good sign. First that management sees their company as a great investment, and second that they've demonstrated they can create wealth.
Depends on which state of the union they are talking about. Illinois workforce shrink
--and that's where corporate management ends and government policies trump. These two maps show what the left prefers to hide from:
They have a history of never providing any real value. The theory is decent, but they never work. Better to spend the cash on something that will generate higher returns.
The 5.5-Inch iPhone 6 Will ‘Cannibalize The iPad, Which Is A Good Thing’
Apple’s June quarter was pretty much a snooze, with everything in line with expectations.
There was one thing that stood out, though: The iPad was worse than expected, and the Mac was better than expected.
This runs contrary to the story line that had been forming as of late. We’re supposed to be in a post-PC world where tablets become the new PC, and the PC dies.
On a unit basis, this story is still true. Apple sold 13.3 million iPads and just 4.4 million Macs. On a revenue basis, however, the product lines are nearly even. iPad revenue was $5.9 billion, and Mac revenue was $5.5 billion.
The iPhone was strong, with Apple selling 35.2 million units, which generated $19.7 billion in revenue.
There are a number of logical reasons for the iPad’s slow down: Apple sold 225 million iPads since it launched in 2010. The iPad doesn’t need to be upgraded as often as a phone, since it’s not used as much as a phone. And, duh, it’s not as productive/useful as a laptop, and people are probably due for laptop upgrades. Plus, the growth for tablets is coming from low end of the market, and Apple doesn’t do low-end.
(A simpler theory comes from our own Henry Blodget, who put it best on Twitter last night: “Basically, you just don’t need iPhone, iPad, and Mac pick your two.”)
The deterioration of the iPad business is particularly interesting right now. Apple is expected to launch two new iPhones with bigger screens at the end of September. The current iPhone has a 4-inch screen. The iPhone 6 is expected to come in 4.7-inch and 5.5-inch screen sizes.
What happens to the iPad when Apple launches a 5.5-inch iPhone? “Kaboom,” says Blodget. After all, a big iPhone will do pretty much the same stuff an iPad does.
Apple analyst Gene Munster agrees. And he thinks it “is a good thing.” He lowered his iPad estimate for 2015 from 78 million to 74 million as Apple looks to release its 5.5-inch iPhone.
“Overall, we see this as a positive trade off given we expect the 5.5 inch iPhone ASP to be around $700 (in line with Samsung Galaxy Note pricing) with gross margins of ~45%, which compares to iPad Mini ASP of around $400 with gross margins of ~30%,” says Munster.
If the iPhone 6 eats the sales 4 million iPads, it actually adds $1.2 billion to Apple’s sales and $780 million in gross profits.
So, while the iPad business is slowing, and shows no signs of getting better, it’s not that big a problem for Apple. The iPhone is going to pick up the slack.
--who'll never be convinced of what is no matter what. The fact that humankind becomes better off as the years go by is not surprising, but what always amazes me is how we keep hearing from too many folks that still long for the "good'ol'days".
So once again, why aren’t conservative leaders carrying this and putting it out there. I believe there is a very strong case for conservative populism. It’s the necessary next step to get back our republic.
You aren’t saying for conservatives to attack businesses improving profit margins because of labor efficiencies are you?
Of course. If conservatives and liberals both attacked corporations we could make them hire all the unemployed and get back to the good old days under FDR!
If we got rid of all our corporations we could go back to living just like the Founders did...
Okay I feel better... :-)