Investment Thread

[YmoBeThere]

Worst investment move of the year?

Putting my 2020 IRA(non-deductible) contribution into a small cap fund to better diversify that "portfolio".


Second worst move - not keeping on my short in Delta Airlines for a couple more weeks. I made pennies when I could have made dollars.

[Bluedog]

Worst investment move of the year?

Putting my 2020 IRA(non-deductible) contribution into a small cap fund to better diversify that "portfolio".


Second worst move - not keeping on my short in Delta Airlines for a couple more weeks. I made pennies when I could have made dollars.

I skew to small-cap too, and am going to ride the wave. It's been out of favor for a while now, so I would think the expected returns for small-cap are larger than large-cap in the upcoming decade as a "reversion to the mean." But nobody know nothing. Delta is also up 5% today, so that short position wouldn't have been good today at least.

[Jeffrey]

Give me time to finish executing (hopefully, tomorrow) and I’ll show the play here.

The other team made some great halftime adjustments (last night), so I'm not running the second piece of the play today (as planned).

FWIW, here was one of the plays in my new playbook...

Yesterday, I bought CMA under $27 and CFG under $17.50 (adding more risk to my overall portfolio). Paid for the pair selling domestic, broad market, index funds (did not change my overall asset allocations). I'm having a hard time believing the overall market should be down ~ 17% when these regional banks were down more than 50%. IMO, if banks are going to hell (which is certainly possible!), then the overall market is likely to follow. I found CFG and CMA very attractive, at yesterday's prices, and they serve different U.S. regions. I'm expecting, and hoping, both discontinue their dividends (prefer they use the money for capital building) until this is over. I like their aggregate stated book values (it's almost impossible to currently value their loan portfolios and probably losses) and capital positions. I doubt liquidity will become a concern for either.

I'd love to hear any, and all, weaknesses anyone sees with my play!

[YmoBeThere]

Delta is also up 5% today, so that short position wouldn't have been good today at least.

I shorted it at 45 and closed it out in the high 43s.

[duke79]

The other team made some great halftime adjustments (last night), so I'm not running the second piece of the play today (as planned).

FWIW, here was one of the plays in my new playbook...

Yesterday, I bought CMA under $27 and CFG under $17.50 (adding more risk to my overall portfolio). Paid for the pair selling domestic, broad market, index funds (did not change my overall asset allocations). I'm having a hard time believing the overall market should be down ~ 17% when these regional banks were down more than 50%. IMO, if banks are going to hell (which is certainly possible!), then the overall market is likely to follow. I found CFG and CMA very attractive, at yesterday's prices, and they serve different U.S. regions. I'm expecting, and hoping, both discontinue their dividends (prefer they use the money for capital building) until this is over. I like their aggregate stated book values (it's almost impossible to currently value their loan portfolios and probably losses) and capital positions. I doubt liquidity will become a concern for either.

I'd love to hear any, and all, weaknesses anyone sees with my play!

Certainly a smart, short-term trade (at least), given the price action today in these two bank stocks. IMHO, buying bank stocks at this point is really a bet on how fast the economy comes back. If we see a rapid return to "normalcy" and the job market bounces right back, then most bank stocks are screaming buys at this time. BUT, if the economic pain continues well into the future (the rest of 2020 and into 2021, perhaps), then I would guess the bank stocks could fall much farther. The problem I've always had with owning bank stocks is that it is very hard to know the quality and extent of their loan portfolio. In good times, when most consumers and businesses can make their loan payments, it may not matter that much. But when the economy hits a rough patch, you can then sometimes find out that the banks made a lot of stupid loans that won't get paid back (what happened in 2007-2009).
Good luck with that trade!

[Jeffrey]

Thank you for your input!

BUT, if the economic pain continues well into the future (the rest of 2020 and into 2021, perhaps), then I would guess the bank stocks could fall much farther.

From current levels, if the economic pain continues well into the future (the rest of 2020 and into 2021, perhaps), then I believe the overall market (the index funds I traded for the two bank stocks) would fall as much (on a percentage basis) as the two banks. Do you agree?

OTOH, if the opposite happens, then I agree...

if we see a rapid return to "normalcy" and the job market bounces right back, then most bank stocks are screaming buys at this time.

[duke79]

Thank you for your input!



From current levels, if the economic pain continues well into the future (the rest of 2020 and into 2021, perhaps), then I believe the overall market (the index funds I traded for the two bank stocks) would fall as much (on a percentage basis) as the two banks. Do you agree?

OTOH, if the opposite happens, then I agree...

Yea, no doubt that if the economy continues to crater for the remainder of this year and into 2021, then the broad averages will perform poorly. But the bank stocks tend to be more highly leveraged to the economy and perform worse (or better) than the entire stock market. For example, this year, the S&P 500 is down about 11% but the bank stock ETF (KBE) is down almost 44%. The same difference in performance happened in 2007-2009 as well. I'm not saying that your purchase isn't a good trade but I do think it is a strong bet on the economy (and the stock market) doing much better in the future. I hope this does happen!

[Jeffrey]

For example, this year, the S&P 500 is down about 11% but the bank stock ETF (KBE) is down almost 44%. The same difference in performance happened in 2007-2009 as well.

Thank you for your input!

The four fold relative fall in bank stocks is the reason for my trade. The same magnitude did occur from 2007-2009, but I believe the situation was extremely different. In ‘07-‘09, many banks were highly leveraged, with insufficient capital, and likely to fail. Banks are not to blame, this time, and they’re much better prepared (higher capital, more liquidity, less leverage, substantially better loan collateral, etc.) to survive. Banks are not currently selling loan portfolios for 50-65 cents on a dollar, like ‘08-‘10. Markets are not lacking liquidity and buyers, like ‘07-‘09. Currently, loan reserve requirements are substantially more stringent. If the US Government continues to hand trillions to bank customers, then that should help banks.

Just my opinion, Mr. Market clearly disagrees with me!

[Jeffrey]

The four fold relative fall in bank stocks is the reason for my trade. The same magnitude did occur from 2007-2009...

Sorry, it’s late and took me a couple minutes to realize that’s not even possible. The overall market fell more than 50% from ‘07-‘09, there’s no mathematical way banks fell four times that amount (more than 200%). Upon reflection, I like my trade even more.

[Jeffrey]

Good luck with that trade!

Thank you, very much, for clearly stating your concerns with my trade! I think it’s absolutely critical to hear, understand, and contemplate alternative and opposing views. It’s extremely valuable in my decision making process of how long to stay with this trade.

Anyone else see any concerns?

[throatybeard]

I'd love to hear any, and all, weaknesses anyone sees with my play!

None past the (inherently) wildly risky practice of buying and selling individual stocks constantly.

I'll take stuff I'm never doing for $200, Alex.

[duketaylor]

Told the wife 3 weeks ago when market tanked and Markel stock went to $635/share it was time to buy; of course i know nothing, it’s only gone up 300 points since. I used to be a registered agent, no longer, so i can post about anything. Buy this on dips, they don’t split and are a great company. Secondary insurer.
Do your own due diligence. I know the main guy there, huge UVA guy. Great company, has been for a long time!!

[duketaylor]

What am i buying? Precious metals, mostly silver, a little at a time. Would buy gold but outta my price range plus silver is was undervalued, imo.

[YmoBeThere]

My concern with CMA would be related to their loan portfolio. I know they moved from Detroit to Dallas a decade or two ago, I believe their lending likely followed from manufacturing(auto) to Oil and Gas. Even after the supply cuts announced last week, oil has continued to fall. Bankruptcies in the oil patch will soon follow if prices remain at current levels (see Whiting Petroleum).

[YmoBeThere]

My concern with CMA would be related to their loan portfolio. I know they moved from Detroit to Dallas a decade or two ago, I believe their lending likely followed from manufacturing(auto) to Oil and Gas. Even after the supply cuts announced last week, oil has continued to fall. Bankruptcies in the oil patch will soon follow if prices remain at current levels (see Whiting Petroleum).

West Texas Intermediate down 15 to 20% in the pre-market.

[YmoBeThere]

As we approached Friday's close, I could tell I would be very close to break even for the year: 12/31 value + 2020 contributions + change in value. In other words my change in value would be under 1%. I was tempted to sell it all...

[Jeffrey]

My concern with CMA would be related to their loan portfolio. I know they moved from Detroit to Dallas a decade or two ago, I believe their lending likely followed from manufacturing(auto) to Oil and Gas. Even after the supply cuts announced last week, oil has continued to fall. Bankruptcies in the oil patch will soon follow if prices remain at current levels (see Whiting Petroleum).

Thank you for your input!

I strongly agree, there are a lot of Texas oilmen, who made $100-250k per year, who will not work until barrels exceed $30. I have a very frugal friend, who owns ~ 100 wells, and he breaks even near $28. Most break even in the high 30’s. Most Texas oilmen spend their money rather quickly and borrow substantially for their F-350s and nice homes. Of course, they’re a small percentage of the overall Texas labor market.

To be honest, I prefer CMA’s Texas loan portfolio. The main reason is Michigan currently has the highest unemployment, in the nation, at ~ 21%. Texas has the second lowest, in the USA, at ~ 7%.

I believe the main reason CMA has fallen more is the issue you prudently addressed. I believe it’s already factored into CMA’s current market price.

[Jeffrey]

None past the (inherently) wildly risky practice of buying and selling individual stocks constantly.

I'll take stuff I'm never doing for $200, Alex.

Thank you for your input!

Without a doubt, it’s a tough game in the paint. Noses break, teeth fly, and blood splatters. And, the more blood, the more sharks.

[YmoBeThere]

As we approached Friday's close, I could tell I would be very close to break even for the year: 12/31 value + 2020 contributions + change in value. In other words my change in value would be under 1%. I was tempted to sell it all...

Should have sold, but getting back in is a lot of work. I shouldn't be dismissive of the work involved, but it can be mentally draining also.

[budwom]

worst quasi investment move of the year has to go to the esteemed MBS of Saudi Arabia, for deciding to flood the market with crude oil to wrest market share from the Russkis, and to whack the U.S. shale industry. How's that working out, Prince?

Tripling down on his other astute moves, e.g. whacking Khossoghi (and not well), fighting a war in Yemen (d'oh!), arresting and shaking down most of his relatives...the man is on a roll.