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Markets still falling like whoa

Llano Estacado

By Llano Estacado
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Eastwood
Eastwood

That's why I'm out. There is no end game, IMO. This has to be fixed outside of the market and I got too nervous about what that entails for retail investors. They will always be last on the list, if o

Rusty Shackelford
Rusty Shackelford
Eastwood
Eastwood

I'm not a financial advisor. This is not financial advise. I don't work in finance. I do not have a degree in finance. Actually, I have a BA and I'm bad at math past Cal I. I won't apologize for the l

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Wally Fairway

Wally Fairway 5539

Posted
Posted
Just now, Dontshootrude said:

I am still here buying index funds. My portfolio was up 20% last year despite me spending about 15 minutes managing my investments for the entire year. Carry on traders.

How are you doing this year? What are you doing to hedge/protect the downside?

I purchased 60-119 day puts on about 40% of my funds on Friday. I meant to do it earlier but didn't pull the trigger soon enough. I'm down about 7-9% from the January highs

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Dontshootrude

Dontshootrude 374

Posted
Posted (edited)
3 minutes ago, Wally Fairway said:

How are you doing this year? What are you doing to hedge/protect the downside?

I purchased 60-119 day puts on about 40% of my funds on Friday. I meant to do it earlier but didn't pull the trigger soon enough. I'm down about 7-9% from the January highs

20% is in the TSP G fund that will be used to rebalance if my asset allocation goes beyond +/-5% of Target allocations.

Not really sure how I am doing this year as I haven't checked.

Edited by Dontshootrude
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Dontshootrude

Dontshootrude 374

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Posted (edited)

My favorite Warren Buffett parable from his 2005 shareholder letter needs to be on page 1 too.

 

Quote

How to Minimize Investment Returns 


It’s been an easy matter for Berkshire and other owners of American equities to prosper over the years. Between December 31, 1899 and December 31, 1999, to give a really long-term example, the Dow rose from 66 to 11,497. (Guess what annual growth rate is required to produce this result; the surprising answer is at the end of this section.) This huge rise came about for a simple reason: Over the century American businesses did extraordinarily well and investors rode the wave of their prosperity. Businesses continue to do well. But now shareholders, through a series of self-inflicted wounds, are in a major way cutting the returns they will realize from their investments. 


The explanation of how this is happening begins with a fundamental truth: With unimportant exceptions, such as bankruptcies in which some of a company’s losses are borne by creditors, the most that owners in aggregate can earn between now and Judgment Day is what their businesses in aggregate earn.


True, by buying and selling that is clever or lucky, investor A may take more than his share of the pie at the expense of investor B. And, yes, all investors feel richer when stocks soar. But an owner can exit only by having someone take his place. If one investor sells high, another must buy high. For owners as a whole, there is simply no magic – no shower of money from outer space – that will enable them to extract wealth from their companies beyond that created by the companies themselves. 


Indeed, owners must earn less than their businesses earn because of “frictional” costs. And that’s my point: These costs are now being incurred in amounts that will cause shareholders to earn far less than they historically have. 


To understand how this toll has ballooned, imagine for a moment that all American corporations are, and always will be, owned by a single family. We’ll call them the Gotrocks. After paying taxes on dividends, this family – generation after generation – becomes richer by the aggregate amount earned by its companies. Today that amount is about $700 billion annually. Naturally, the family spends some of these dollars. But the portion it saves steadily compounds for its benefit. In the Gotrocks household everyone grows wealthier at the same pace, and all is harmonious. 


But let’s now assume that a few fast-talking Helpers approach the family and persuade each of its members to try to outsmart his relatives by buying certain of their holdings and selling them certain others. The Helpers – for a fee, of course – obligingly agree to handle these transactions. The Gotrocks still own all of corporate America; the trades just rearrange who owns what. So the family’s annual gain in wealth diminishes, equaling the earnings of American business minus commissions paid. The more that family
members trade, the smaller their share of the pie and the larger the slice received by the Helpers. 

This fact is not lost upon these broker-Helpers: Activity is their friend and, in a wide variety of ways, they urge it on. After a while, most of the family members realize that they are not doing so well at this new “beat-my-brother” game. Enter another set of Helpers. These newcomers explain to each member of the 
Gotrocks clan that by himself he’ll never outsmart the rest of the family. The suggested cure: “Hire a manager – yes, us – and get the job done professionally.” These manager-Helpers continue to use the broker-Helpers to execute trades; the managers may even increase their activity so as to permit the brokers to prosper still more. Overall, a bigger slice of the pie now goes to the two classes of Helpers. 
The family’s disappointment grows. Each of its members is now employing professionals. Yet overall, the group’s finances have taken a turn for the worse. 

The solution? More help, of course. It arrives in the form of financial planners and institutional consultants, who weigh in to advise the Gotrocks on selecting manager-Helpers. The befuddled family welcomes this assistance. By now its
members know they can pick neither the right stocks nor the right stock-pickers. Why, one might ask, should they expect success in picking the right consultant? But this question does not occur to the Gotrocks, and the consultant-Helpers certainly don’t suggest it to them.

The Gotrocks, now supporting three classes of expensive Helpers, find that their results get worse, and they sink into despair. But just as hope seems lost, a fourth group – we’ll call them the hyper-Helpers – appears. These friendly folk explain to the Gotrocks that their unsatisfactory results are occurring because the existing Helpers – brokers, managers, consultants – are not sufficiently motivated and are
simply going through the motions. “What,” the new Helpers ask, “can you expect from such a bunch of zombies?” 


The new arrivals offer a breathtakingly simple solution: Pay more money. Brimming with self-confidence, the hyper-Helpers assert that huge contingent payments – in addition to stiff fixed fees – are what each family member must fork over in order to really outmaneuver his relatives. The more observant members of the family see that some of the hyper-Helpers are really just manager-Helpers wearing new uniforms, bearing sewn-on sexy names like HEDGE FUND or PRIVATE
EQUITY. The new Helpers, however, assure the Gotrocks that this change of clothing is all-important, bestowing on its wearers magical powers similar to those acquired by mild-mannered Clark Kent when he changed into his Superman costume. Calmed by this explanation, the family decides to pay up. 
And that’s where we are today: A record portion of the earnings that would go in their entirety to owners – if they all just stayed in their rocking chairs – is now going to a swelling army of Helpers. 


Particularly expensive is the recent pandemic of profit arrangements under which Helpers receive large portions of the winnings when they are smart or lucky, and leave family members with all of the losses – and large fixed fees to boot – when the Helpers are dumb or unlucky (or occasionally crooked). 
A sufficient number of arrangements like this – heads, the Helper takes much of the winnings; tails, the Gotrocks lose and pay dearly for the privilege of doing so – may make it more accurate to call the family the Hadrocks. Today, in fact, the family’s frictional costs of all sorts may well amount to 20% of the earnings of American business. In other words, the burden of paying Helpers may cause American equity investors, overall, to earn only 80% or so of what they would earn if they just sat still and listened to no one. 


Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases. 
* * * * * * * * * * * * 
Here’s the answer to the question posed at the beginning of this section: To get very specific, the Dow increased from 65.73 to 11,497.12 in the 20th century, and that amounts to a gain of 5.3% compounded annually. (Investors would also have received dividends, of course.) To achieve an equal rate of gain in the 21st century, the Dow will have to rise by December 31, 2099 to – brace yourself – precisely 
2,011,011.23. But I’m willing to settle for 2,000,000; six years into this century, the Dow has gained not at all.

 

Edited by Dontshootrude
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Red Six

Red Six 131

Posted
Posted
1 hour ago, Captainant said:

I just got free options trading on robhinhood lol. I have no idea how to do options trading. Anyone have good tips for reading and learning before I jump into a fun new exciting way to lose money?

1. Prepare your anus.

 

2. Have fun placing bets on leveraged, decaying derivatives, like a drunken derelict at a roulette table.

 

3. Feel like a drunken derelict getting tossed out of a casino after blowing a payday loan on video poker, trying to make up for all the drunken bets on roulette.

 

4. Actually learn about options.

 

5. Get a real trading account -- TastyWorks if you want to go cheap ($1/leg), TD AmeriTrade/Thinkorswim if you want analytics, or Interactive Brokers if you have > $10k and trade often.

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skipmcgee

skipmcgee 197

Posted
Posted
1 hour ago, Captainant said:

I just got free options trading on robhinhood lol. I have no idea how to do options trading. Anyone have good tips for reading and learning before I jump into a fun new exciting way to lose money?

https://www.amazon.com/Options-as-Strategic-Investment-Fifth/dp/0735204659

Options are great for hedging, leverage, and creating asymmetric payouts.  They're also a great way to turn investing into a casino game.  Robinhood is great, but it's also not the most robust options trading platform.

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Jack Burton

Jack Burton 35

Posted
Posted (edited)
On 3/25/2018 at 4:55 PM, Dontshootrude said:

I am still here buying index funds. My portfolio was up 20% last year despite me spending about 15 minutes managing my investments for the entire year. Carry on traders.

If you want to start the "Set it and forget it" thread I'll participate. We can talk about small cap value and SPDR ETFs every 3 weeks.

Edited by Jack Burton
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Fudge Nuggets

Fudge Nuggets 19184

Posted
Posted
15 hours ago, Captainant said:

I just got free options trading on robhinhood lol. I have no idea how to do options trading. Anyone have good tips for reading and learning before I jump into a fun new exciting way to lose money?

Take your money into the parking lot and set it on fire.  Same result but a lot more entertaining. 

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Fudge Nuggets

Fudge Nuggets 19184

Posted
Posted
15 hours ago, Captainant said:

I just got free options trading on robhinhood lol. I have no idea how to do options trading. Anyone have good tips for reading and learning before I jump into a fun new exciting way to lose money?

Take your money into the parking lot and set it on fire.  Same result but a lot more entertaining. 

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swraith

swraith 345

Posted
Posted
10 hours ago, Jack Burton said:

If you want to start the "Set it and forget it" thread I'll participate. We can talk about small cap value and SPDR ETFs every 3 weeks.

That thread is the Bogleheads forum.  If that is your strategy, that forum has everything you need. 

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Amobie

Amobie 58

Posted
Posted

Most of the damage is being done in tech names.

Social media stocks are getting hit because of the facebook selling data fiasco has started to spill over into other names.  Could be a problem if they no longer have that revenue source.

Amazon is possibly the target of further government regulation.  Down 7%

TSLA is getting smacked over another automated car having a fatal car accident.  Some analyst on marketwatch came out and said that they might be bankrupt in 4 months if they don't pull together some financing. 

 

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skipmcgee

skipmcgee 197

Posted
Posted (edited)
10 minutes ago, Amobie said:

Most of the damage is being done in tech names.

Social media stocks are getting hit because of the facebook selling data fiasco has started to spill over into other names.  Could be a problem if they no longer have that revenue source.

Amazon is possibly the target of further government regulation.  Down 7%

TSLA is getting smacked over another automated car having a fatal car accident.  Some analyst on marketwatch came out and said that they might be bankrupt in 4 months if they don't pull together some financing. 

 

I think getting downgraded by Moody's is a bigger issue than the accident for TSLA.

Edited by skipmcgee
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Aqua Buddha

Aqua Buddha 14581

Posted
Posted

As long as AMZN trades like a tech company and not a real company, then everything should be fine with their stock.  When and if Wall Street ever holds them to the same P&L standards of the competitors in their industries, they'll crash.  Otherwise, full speed ahead.

Only in Silicon Valley are Elisabeth Holmes and Travis Kalanick considered legitimate CEO's.....

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Captainant

Captainant 27618

Posted
Posted
2 hours ago, Aqua Buddha said:

As long as AMZN trades like a tech company and not a real company, then everything should be fine with their stock.  When and if Wall Street ever holds them to the same P&L standards of the competitors in their industries, they'll crash.  Otherwise, full speed ahead.

Only in Silicon Valley are Elisabeth Holmes and Travis Kalanick considered legitimate CEO's.....

How do you mean they don't trade like a real company? They pull in a ludicrous amount of revenue from AWS and are reaping tons of benefits from vertical integration. They're trying to double the headcount in AWS within the next couple of years for christsake! That's "big" "real" company shit right? Their revenue isn't venture capital and they're best in class for an entire commerce platform

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Aqua Buddha

Aqua Buddha 14581

Posted
Posted
10 minutes ago, Captainant said:

How do you mean they don't trade like a real company? They pull in a ludicrous amount of revenue from AWS and are reaping tons of benefits from vertical integration. They're trying to double the headcount in AWS within the next couple of years for christsake! That's "big" "real" company shit right? Their revenue isn't venture capital and they're best in class for an entire commerce platform

The companies they compete against are held to different profit standards than AMZN.  (Revenue is not profit.).

AMZN trades like a tech company.  Only in tech can you spend $14B on something and a year later still have no announced strategy around it and have no investor blowback.

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