The Investing Year Ahead

[Mike Lister]

"China Weighs Stock Market Rescue Package Backed by $278 Billion".

 

https://www.bloomberg.com/asia

 

See, you're probably too late now! I told you should have listened. :))

 

 

[The Cyclist]

On 1/19/2024 at 11:28 PM, spidermike007 said:

I totally agree those are all very relevant points to be taken into consideration. I think the debt maybe the largest threat.

 

Thank you.

 

Apparently they are not pertinent to investing or the context of the thread.

 

I was always mindful of the following phrase " The value of your investment can go down, as well as up "

 

Yer pays yer money and yer take your chances.

[Yellowtail]

8 minutes ago, The Cyclist said:

 

Thank you.

 

Apparently they are not pertinent to investing or the context of the thread.

 

I was always mindful of the following phrase " The value of your investment can go down, as well as up "

 

Yer pays yer money and yer take your chances.

Well, it is worthwhile at least considering what effect hyperinflation might have on your investments. I think it's something to hedge against.

[Digitalbanana]

On 1/9/2024 at 9:28 AM, Yellowtail said:

Why?

 

I think if you look at the number of years the market ends up, versus the number of years it ends down, one might say the opposite.

 

This was discussed on another forum yesterday, here's the stats.

[Yellowtail]

1 hour ago, Digitalbanana said:

 

This was discussed on another forum yesterday, here's the stats.

 

That does not really address what I said. What was the total number of years the market was up between 1928 & 2016? 

 

 And wasn't the S & P was founded in 1957? 

[swissie]

55 minutes ago, Yellowtail said:

 

That does not really address what I said. What was the total number of years the market was up between 1928 & 2016? 

 

 And wasn't the S & P was founded in 1957? 

"Dow Jones" is much older than the S&P 500. Most years it was "up".

 

[swissie]

I started to shake in my boots. I felt, that under the circumstances, stocks are "expensive". But ony the US (especially the tech sector) India and Taiwan are expensive according to P/E Ratios.

Look here:

https://worldperatio.com/

 

[Mike Lister]

4 hours ago, swissie said:

I started to shake in my boots. I felt, that under the circumstances, stocks are "expensive". But ony the US (especially the tech sector) India and Taiwan are expensive according to P/E Ratios.

Look here:

https://worldperatio.com/

 

Hmmm, I like to understand the P/E but as a stand alone tool it's not that reliable, as I'm certain you know but perhaps others don't fully understand. The problem is that P/E can be tweaked to give false readings and in the West, creative accounting means it often is (maybe that's why the US has such high PE ratio's)/ PE also doesn't consider debt load which must be factored in and can change the profitability outlook from positive to negative. The bottom line is that there isn't a single measure you can use to confirm the financial status of a company or country, you have to combine several and look at them from different angles. I like to understand Price to Book Values because that factors out liabilities, which is useful when used in conjunction with PE.

 

https://www.investopedia.com/articles/fundamental-analysis/10/false-signals-pe-ratio.asp

[Mike Lister]

7 hours ago, swissie said:

"Dow Jones" is much older than the S&P 500. Most years it was "up".

 

https://www.slickcharts.com/sp500/returns

[Yellowtail]

9 hours ago, swissie said:

"Dow Jones" is much older than the S&P 500. Most years it was "up".

 

Indeed, but the chart/table posed refers to the S & P, which I assume they had to extrapolate, assuming they are at all honest, which I doubt very much they are. 

[Mike Lister]

I've been thinking about the country P/E table that @swissie posted. I'm trying to get my head around what the relationship is between a country P/E and income per capita or similar because that would explain much and mean that the S&P at 22 and China at 8, is perfectly normal. Anyone?

[Prubangboy]

I'm 71 (today). I invest for current income first and capital preservation second. Growth, third.

 

My allocation:

 

15% muni high yield via VWAHX (one of the few HY Muni funds without Puerto Rico bonds -I got burned).

15% broad muni ETF (MUB)

30% mix of high and middling div stocks (including 5% foreign)

10% MLP and REIT's (for income, not growth).

20% S+P ETF (to get a little growth in the mix)

10% Foreign Stock ETF (15% total is a standard allocation for foreign stocks)

 

I'm following a Morningstar-style bucket strategy. In a crash, I can collect income off of 70% of my portfolio and wait it out for a comeback without selling anything. This is a low growth, high yield approach. 

 

Also have a 2 year income pile in Bangkok Bank, a heart attack fund, and a Christmas tree farm back in the states.

 

Christmas trees are only going straight up in price. But you have to wait. It's one year, one foot, one dollar accrued per tree.

 

Mike, I too sub to Morningstar, and also Seeking Alpha. SA has a lot of fluff, but also decent analysis of REIT's and MLP's, which are less covered elsewhere.

 

 

[Mike Lister]

3 minutes ago, Prubangboy said:

I'm 71 (today). I invest for current income first and capital preservation second. My allocation:

 

15% muni high yield via VWAHX (but without Puerto Rico bonds -I got burned).

15% broad muni ETF (MUB)

30% mix of high and middling div stocks (including 5% foreign)

10% MLP and REIT's.

20% S+P ETF

10% Foreign Stock ETF

 

I'm following a Morningstar-style bucket strategy. In a crash, I can collect income off of 70% of my portfolio and wait it out for a comeback without selling anything. This is a low growth, high yield approach. 

 

Also have a 2 year income pile in Bangkok Bank, a heart attack fund, and a Christmas tree farm back in the states. Christmas trees are only going straight up in price. But you have to wait. It's one year, one foot, one dollar accrued per tree.

 

Mike, I too sub to Morningstar, and also Seeking Alpha. SA has a lot of fluff, but also decent analysis of REIT's and MLP's, which are less covered elsewhere.

 

 

It looks like you're going pretty much by the book for your age, it makes me look like a high risk taker with 50% level 5 global equities funds. 

 

I'm holding about five years expenses in country which is probably why I feel comfortable with what I own. Plus my income stream is safe and consistent and independent of my investments. 

 

But I do like the Xmas tree part, that's nice.

[Prubangboy]

1 minute ago, Mike Lister said:

It looks like you're going pretty much by the book for your age,

 

 

 

 

Another consideration: No need to provide for heirs beyond my wife. She's 10 years younger, but will likely go before me.

 

I am reminded of the lesson of Howard Hughes's butler: When asked how much money Howard left, he replied, "well, he left all of it". We are front loading and upgrading our travel plans.

 

Our Christmas tree biz is a fluke. My wife grew up in the Veuve Cliquot region for Christmas tree-growing (Blue Ridge Mountains) due the unique climate.

 

You plant 'em (or someone else does and takes half the money), you give 'em a light trim and fertilization every year, and they are impervious to drought, insects, everything. They are a rare plant that does well on a poor soil hill slope, so otherwise useless land is valuable where we live.

 

The tree's for Rockefeller Center or the White House often come from our area. A Rockefeller Center tree costs about $15K wholesale, but it's a 20 year wait to get paid. Bunting (pine roping used for rails, stairwells ect.) makes more money than the trees. 20 years ago, it was just useless trim that was thrown away.

[Will B Good]

20 minutes ago, Prubangboy said:

Another consideration: No need to provide for heirs beyond my wife. She's 10 years younger, but will likely go before me.

Before you?.....You have something planned?

[Prubangboy]

Just now, Will B Good said:

Before you?.....You have something planned?

She has a lot of chronic health problems. That's why I always encourage her to order the dozen oysters, not the half-dozen.

[Digitalbanana]

On 1/26/2024 at 10:40 PM, Yellowtail said:

And wasn't the S & P was founded in 1957? 

When you see charts of the S&P 500 dating back to the 1920s, they are typically based on a technique known as "backtesting." Backtesting is a method of testing a strategy or index using historical data to see how it would have performed in the past.

[Yellowtail]

11 hours ago, Digitalbanana said:

When you see charts of the S&P 500 dating back to the 1920s, they are typically based on a technique known as "backtesting." Backtesting is a method of testing a strategy or index using historical data to see how it would have performed in the past.

So, they extrapolated the data. 

[CartagenaWarlock]

At age 62, with three million USD in assets (including real estate in the USA, which is a kind of 80% liquid asset), I don't think of investing any more. In seven years, I will get $4,500 in SS. My investments are in technology, AI, and financial ETFs, target-year funds, VOO, SPY, CDs, and US government bonds. I sleep tight, and if the world comes to an end, I want to die, not survive; hence, I have kept a handgun but am not sure if I would have the courage to pull the trigger or not. Only time will tell.  

[Mike Lister]

This is interesting, it's the Mr Copper and Mrs Gold ratio:

 

- Investors expect rate cuts as early as April in Europe and March or May in the US, with up to six cuts        anticipated for the year.

- The copper-gold ratio, a reliable indicator of rate direction changes, is currently rising, suggesting traders might be misjudging future rate movements.

- Historically, a higher copper-gold ratio correlates with economic growth and potentially higher rates, challenging current market bets on central bank policy easing.

 

If that is correct and rates do rise, the negative impact on US equities will be substantial, as it will on long dated bonds. The bigger impact however will be on EM, in particular Asia where currencies will become less attractive.

 

https://wallstreet-now.com/en/articles/2024/01/28/copper-gold-ratio-signals-potential-rate-hike-misjudgment

 

[Mike Lister]

The article in the link says it all, Wall Street is calling it a once in a  generation bet on EM.

 

As said above, if the Fed cuts, EM will win big, it they hold, not a lot will change, if they increase, EM will get hurt. It all comes down to whether US inflation is up or down, a little or a lot, or flat.......roll up roll up, place your bets now.

 

https://www.bnnbloomberg.ca/traders-line-up-for-once-in-a-generation-emerging-markets-bet-1.2027522

[Yellowtail]

55 minutes ago, Mike Lister said:

The article in the link says it all, Wall Street is calling it a once in a  generation bet on EM.

 

As said above, if the Fed cuts, EM will win big, it they hold, not a lot will change, if they increase, EM will get hurt. It all comes down to whether US inflation is up or down, a little or a lot, or flat.......roll up roll up, place your bets now.

 

https://www.bnnbloomberg.ca/traders-line-up-for-once-in-a-generation-emerging-markets-bet-1.2027522

 

2 hours ago, Mike Lister said:

This is interesting, it's the Mr Copper and Mrs Gold ratio:

 

- Investors expect rate cuts as early as April in Europe and March or May in the US, with up to six cuts        anticipated for the year.

- The copper-gold ratio, a reliable indicator of rate direction changes, is currently rising, suggesting traders might be misjudging future rate movements.

- Historically, a higher copper-gold ratio correlates with economic growth and potentially higher rates, challenging current market bets on central bank policy easing.

 

If that is correct and rates do rise, the negative impact on US equities will be substantial, as it will on long dated bonds. The bigger impact however will be on EM, in particular Asia where currencies will become less attractive.

 

https://wallstreet-now.com/en/articles/2024/01/28/copper-gold-ratio-signals-potential-rate-hike-misjudgment

 

Using historical data to predict future performance? (just kidding)

 

[swissie]

On 1/28/2024 at 3:14 AM, Mike Lister said:

I've been thinking about the country P/E table that @swissie posted. I'm trying to get my head around what the relationship is between a country P/E and income per capita or similar because that would explain much and mean that the S&P at 22 and China at 8, is perfectly normal. Anyone?

P/E can only serve as a "first glance" at things. No more.

[swissie]

On 1/29/2024 at 12:25 AM, Mike Lister said:

This is interesting, it's the Mr Copper and Mrs Gold ratio:

 

- Investors expect rate cuts as early as April in Europe and March or May in the US, with up to six cuts        anticipated for the year.

- The copper-gold ratio, a reliable indicator of rate direction changes, is currently rising, suggesting traders might be misjudging future rate movements.

- Historically, a higher copper-gold ratio correlates with economic growth and potentially higher rates, challenging current market bets on central bank policy easing.

 

If that is correct and rates do rise, the negative impact on US equities will be substantial, as it will on long dated bonds. The bigger impact however will be on EM, in particular Asia where currencies will become less attractive.

 

https://wallstreet-now.com/en/articles/2024/01/28/copper-gold-ratio-signals-potential-rate-hike-misjudgment

 

Copper: No more really important to look at coppers "fundamentals" with a magnifying glass anymore. I believe copper has a "story", supporting it's price for quite some time to come. The story? = The "electrification" of the world.

This underlying story may diminish the prognostic value of a copper/gold ratio. Goes as well as for the copper/peanut or the copper/beer ratio.

 

[swissie]

THE ENIGMA: German stock market near the hights. The most sluggish economy in Europe. Exports declining. Can not compete with Chinese e-cars. Infrastructure neglected for 20 years. (most rural areas still have no access to "fast internet" for example). Income inequality rising fast. Social unrest increasing by the week. A government unable to govern.

- The hope of fast declining interest rates, (that will automatically cure all the ailements of Germany), is the only remaining factor lending support. If those interest hopes should not materialise, the German stock market will make for a nice "short".    

 

[Mike Lister]

I sometimes like to take a retrospective look to see what I should have done, if I'd had perfect hindsight or indeed if I had access to  @swissie fortune teller.  🙂

 

Global Small Caps - up 9% in two months, I should have filled my boots

 

JPM Global Equity - up 8%, I was always going to buy more but I was unnerved that the fund was 24% cash.

 

FTSE AW - Global trackers are nearly always reliable earners, if I was 21 again I'd buy a bunch and forget about it until I was 50. (of course, if I was 21 I wouldn't have any money so the point is moot)

 

Japan - I was too late to the party, I should have got in earlier....but still very good.

 

Money Markets - only time will tell if holding money in this way is sensible.

 

 

[Startmeup]

On 1/2/2024 at 10:37 AM, Mike Lister said:

My portfolio is spread globally, as follows:

Equities = 47%

The remainder is spread across bonds, gold, money market and other things.

 

Of the 47% above:

US= 49%

UK = 7%

EU = 13%

Dev Asia = 10%

EM = 12%

Japan = 7%

Aus = 2%

 

Really, this thread looks at the 47% of the 49% above rather than my overall investment strategy, which may change at some point, or it may not, depending on the analysis.

 

When you say equities I guess you mean ETFs, Is so which ones?
How do you decide which bonds to allocate capital to?
What money market funds and "other things"?

In regards to why the S+P is a good place to park money in 2024 Id look at the returns over the last few years.
S+P 500 % Returns

2016 - 12

2017 - 21.8

2018 - (-4.3)
2019 - 31.5
2020 - 18.4
2021 - 28.7
2022 - (-18.1)
2023 - 26.3

These figures are extremely unusual returns to the upside historically. 



 

With such large outperformance I expect the next few years to be a stock pickers market. 

Almost all fund mangers are holders of the Mag 7, where is the buying pressure going to come from?  
There has been massive lack of capital invested in companies/sectors that are vital to peoples day to day living. I.e Energy/Resources
I think we will see that revert over the 2020s. This was an interesting post on twitter - 

NVIDIA now worth more than:

Exxon

Chevron

Shell PLC

TotalEnergies

BP PLC

Suncor Energy

Marathon

China Petroleum Chemical Corp

Valero Energy

PetroChina

Cenovus Energy

Imperial Oil

Canadian Natural Resources

Combined.

 

If we lost Nvidia tomorrow or all the above which would cause more pain on a global scale?

 

[Mike Lister]

1 hour ago, Startmeup said:

When you say equities I guess you mean ETFs, Is so which ones?
How do you decide which bonds to allocate capital to?
What money market funds and "other things"?

In regards to why the S+P is a good place to park money in 2024 Id look at the returns over the last few years.
S+P 500 % Returns

2016 - 12

2017 - 21.8

2018 - (-4.3)
2019 - 31.5
2020 - 18.4
2021 - 28.7
2022 - (-18.1)
2023 - 26.3

These figures are extremely unusual returns to the upside historically. 



 

With such large outperformance I expect the next few years to be a stock pickers market. 

Almost all fund mangers are holders of the Mag 7, where is the buying pressure going to come from?  
There has been massive lack of capital invested in companies/sectors that are vital to peoples day to day living. I.e Energy/Resources
I think we will see that revert over the 2020s. This was an interesting post on twitter - 

NVIDIA now worth more than:

Exxon

Chevron

Shell PLC

TotalEnergies

BP PLC

Suncor Energy

Marathon

China Petroleum Chemical Corp

Valero Energy

PetroChina

Cenovus Energy

Imperial Oil

Canadian Natural Resources

Combined.

 

If we lost Nvidia tomorrow or all the above which would cause more pain on a global scale?

 

I don't usually buy ETF's, only managed funds, typically Level risk level 5.

 

I'm holding a couple of bond funds (13%). One is a Vanguard Global Bond Index which tracks the Agg and is mostly longer duration bonds, all investment grade. I also use the VG Short Term bond fund as a substitute for money markets, again, investment grade only. Finally, I hold a couple of Strategic Bond Funds that include some junk but of a duration and size that is fairly safe.

 

I'm holding 16% in Money Markets at present which is a lot but it's safe, I also have 14% in Cash.

 

The S&P has been over valued for quite a while and it's getting worse, the spread between the S&P and Asia is pretty substantial. I don't care if the S&P is rising, I don't want to be invested in the US more than the 23% that I am.

 

 

 

[Startmeup]

38 minutes ago, Mike Lister said:

I also use the VG Short Term bond fund as a substitute for money markets

Whats the current annual yield on this, Must check it out.
What is the yield in the money markets?  I am >30% cash right now and I get 4.83% on that through IB in USD cash account. I often take short term bets when I see an opportunity so being liquid is a factor for me but would be willing to tie some up if I got >6-8%. Latam is super cheap, Brazil and Columbia gave me most of my returns the last 12-18 months. 
There is some double digit yielding companies (dividends + buybacks) trading on <4 PE ratios with modest earnings assumptions that are very solid companies. 

[swissie]

3 hours ago, Startmeup said:

When you say equities I guess you mean ETFs, Is so which ones?
How do you decide which bonds to allocate capital to?
What money market funds and "other things"?

In regards to why the S+P is a good place to park money in 2024 Id look at the returns over the last few years.
S+P 500 % Returns

2016 - 12

2017 - 21.8

2018 - (-4.3)
2019 - 31.5
2020 - 18.4
2021 - 28.7
2022 - (-18.1)
2023 - 26.3

These figures are extremely unusual returns to the upside historically. 



 

With such large outperformance I expect the next few years to be a stock pickers market. 

Almost all fund mangers are holders of the Mag 7, where is the buying pressure going to come from?  
There has been massive lack of capital invested in companies/sectors that are vital to peoples day to day living. I.e Energy/Resources
I think we will see that revert over the 2020s. This was an interesting post on twitter - 

NVIDIA now worth more than:

Exxon

Chevron

Shell PLC

TotalEnergies

BP PLC

Suncor Energy

Marathon

China Petroleum Chemical Corp

Valero Energy

PetroChina

Cenovus Energy

Imperial Oil

Canadian Natural Resources

Combined.

 

If we lost Nvidia tomorrow or all the above which would cause more pain on a global scale?

 

I am starting to roll on the floor with convultions. Starting to resemble the Dutch "Tulip Mania" with a P/E of 116. "Tops" what services they provide today. But nothing what a hungry competition can not also achieve over time.