Investment Thread

[Jeffrey]

Mr. Market smokes crack, drinks heavily, is a teetotaler, is an evangelist, is an atheist, is a day trader, is in it for the long haul, is an algorithm, is a live trader, is analytical, is completely emotional, etc., etc. A blip is not a trend, and it could just be random herd noise.

Exactly, Mr. Market is only efficient in the long run. He is also significantly more efficient with large caps. This is being further magnified by the on-going large cap index surge. The small game is full of opportunities.

[CrazyNotCrazie]

There are times, like this morning, when I wonder if Mr. Market smokes crack? JPM’s earnings report today was strong and the stock is down 2.5%. Wonder why Mr. Market thinks JPM is worth 2.5% less than yesterday?

Matt Levine of Bloomberg's daily newsletter just hit my inbox and the lead story is about JPM earnings. He doesn't really get into the relationship with today's stock price performance but it is still an interesting read. It looks like they brought down loan reserves a bit, but they are still high, so there is some uncertainty there.

[Jeffrey]

Matt Levine of Bloomberg's daily newsletter just hit my inbox and the lead story is about JPM earnings. He doesn't really get into the relationship with today's stock price performance but it is still an interesting read. It looks like they brought down loan reserves a bit, but they are still high, so there is some uncertainty there.

Thanks, I’ll check it out. It’s, appropriately, many people’s lead. I own some, love Jaime, but prefer Citi at current market prices. Citi’s now trading at an 11%+ discount to tangible book. Bought more today.

Busy day, I’ll follow up later.

[Jeffrey]

Matt Levine of Bloomberg's daily newsletter just hit my inbox and the lead story is about JPM earnings. He doesn't really get into the relationship with today's stock price performance but it is still an interesting read. It looks like they brought down loan reserves a bit, but they are still high, so there is some uncertainty there.

Well, to be honest, I understand Jaime’s comments more than Matt’s varied interpretations. The comments make total sense, to me...

Jamie Dimon, Chairman and CEO, commented on the financial results: “JPMorgan Chase reported strong results in the fourth quarter of 2020, concluding a challenging year where we generated record revenue, benefiting from our diversified business model and dedicated employees. While we reported record profits of $12.1 billion, we do not consider the reserve takedown of $2.9 billion to represent core or recurring profits – essentially reserve calculations, while done extremely diligently and carefully, now involve multiple, multi-year hypothetical probability-adjusted scenarios, which may or may not occur and which can be expected to introduce quarterly volatility in our reserves. While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over $30 billion continue to reflect significant near-term economic uncertainty and will allow us to withstand an economic environment far worse than the current base forecasts by most economists.”

Matt didn’t seem to acknowledge it, and may honestly not know, but Jaime was explaining how CECL is calculated and the ramifications of introducing CECL right before COVID destroyed the economy. Your earnings will be highly volatile, due to extreme loan loss reserve adjustments, and you’re very likely to over reserve during terrible economic periods. I think it was obvious two months ago...

https://forums.dukebasketballreport...25#post1309125

Citi said basically the same...

“We ended a tumultuous year with a strong fourth quarter. As a sign of the strength and durability of our diversified franchise, our revenues were flat to 2019, despite the massive economic impact of COVID-19. For the year, we generated $11 billion in net income despite our credit reserves increasing by $10 billion as a result of the pandemic and the impact of CECL.," said CEO Michael Corbat.

Citi also emphasized other key issues, we have previously discussed in this thread...

“We remain very well capitalized with robust liquidity to serve our clients. Our CET 1 ratio increased to 11.8%, well above our regulatory minimum of 10%,: he added. "Our Tangible Book Value per share increased to $73.83, up 5% from a year ago. Given the Federal Reserve decision regarding share repurchases as we have excess capital we can return to shareholders, we plan to resume buybacks during the current quarter."

[JNort]

Curious, what platform do y’all use and why? Have you thought about changing? I currently have Vanguard since that’s where my 401k is and they have a seemingly good reputation but I feel pretty ignorant on these platforms overall.

[bundabergdevil]

Curious, what platform do y’all use and why? Have you thought about changing? I currently have Vanguard since that’s where my 401k is and they have a seemingly good reputation but I feel pretty ignorant on these platforms overall.

Schwab bought USAA's investment business last year so that's where I ended up. So far I'm pretty happy; interested to see how the tax document hand-off goes since the switch occurred mid-year. I'm a regular investor, not a frequent trader but the move to no commission trades has been nice.

Have been exploring some of the fintech platforms like FundRise for alternative access to real estate deals.

[Bluedog]

Curious, what platform do y’all use and why? Have you thought about changing? I currently have Vanguard since that’s where my 401k is and they have a seemingly good reputation but I feel pretty ignorant on these platforms overall.

I use Vanguard and Schwab. I like both. Schwab probably more functionalities for "traders" but I'm a long term buy and hold investor. I've also used Fidelity in the past. Can't go wrong with any of those three in my opinion. Some people think Vanguard's (phone) service isn't as good as Schwab/Fidelity but I never call them so don't care. I do everything online. The few times I have called just to get information have been perfectly fine with them being helpful.

The only area that can be annoying with Vanguard is they are usually stricter/require more work in setting up accounts, transferring to a trust, joint ownership, etc. Require more paperwork, possibly not only a notary but signature medallion and they don't have local offices to figure that stuff out. Some people may view this favorably because of security concerns. But once the initial paperwork is done and account setup, I think vanguard is a great platform, particularly for those that are auto DCA into their mutual funds. I've also heard Vanguard is pickier on closing accounts to those that don't have a US address, while Schwab and others don't care much.

I use Vanguard for 75% and Schwab for 25% about... Schwab's cost basis team and calculator are good which helped me out for some really old stock purchases. Everyone has really upped their games and offerings in the last 10 years or so - competition is good for the consumer!

[JNort]

I use Vanguard and Schwab. I like both. Schwab probably more functionalities for "traders" but I'm a long term buy and hold investor. I've also used Fidelity in the past. Can't go wrong with any of those three in my opinion. Some people think Vanguard's (phone) service isn't as good as Schwab/Fidelity but I never call them so don't care. I do everything online. The few times I have called just to get information have been perfectly fine with them being helpful.

The only area that can be annoying with Vanguard is they are usually stricter/require more work in setting up accounts, transferring to a trust, joint ownership, etc. Require more paperwork, possibly not only a notary but signature medallion and they don't have local offices to figure that stuff out. Some people may view this favorably because of security concerns. But once the initial paperwork is done and account setup, I think vanguard is a great platform, particularly for those that are auto DCA into their mutual funds. I've also heard Vanguard is pickier on closing accounts to those that don't have a US address, while Schwab and others don't care much.

I use Vanguard for 75% and Schwab for 25% about... Schwab's cost basis team and calculator are good which helped me out for some really old stock purchases. Everyone has really upped their games and offerings in the last 10 years or so - competition is good for the consumer!

Why 2 different platforms?

[Bluedog]

Why 2 different platforms?

A few reasons for me:
1. If, for some reason, there's an IT/account issue at one (unlikely but it's possible as during crazy busy days there have been periodic moments where the site is down or something, or an account somehow gets locked out - I've never been locked out myself), at least I have a backup option and don't have to fret too much. My money isn't at risk and I can just use the other platform temporarily. Also in case of a hack/security breach.

2. I had both opened already when their offerings were quite different. I use the Schwab checking for foreign travel as they have unlimited ATM fee reimbursements and no foreign transaction charges, but that requires a brokerage account. Nowadays, a ton of credit cards offer no foreign transaction fee, but the ATM reimbursements definitely come in handy in many countries that are more cash-centric.

3. Schwab's platform also slightly different strengths so I used to use Schwab in cases I went the ETF/individual stock route, whereas Vanguard was the DCA auto-invest mutual fund route. It was also cheaper. Now that both have upped their games and have free ETF/stock trades (and Vanguard doesn't have a separate MF account anymore), it's largely a relic from the past. But I do think Schwab's interface for making these sorts of transactions is a bit better (e.g. better limit order functionality, information, etc.). I do like Vanguard more for auto investing but certainly Schwab is fine now in that regard too. So this may no longer be much of a reason but was in the past.

[OldPhiKap]

Sorry if this has been covered before:

in the run-up to the election, when it was presumed that Biden would win but the Republicans would likely hold the Senate, most things I read in the WSJ suggested that industries and traders thought this would be fine. Maybe greater regulation on industries and roll-backs of tax cuts, but increased spending and less chaos would basically equal that out.

Since the Dems pulled off a double win in Georgia, of course we had the insurrection the next day so financial news has sort of fallen off the cliff for me in the last two weeks.

I know the market is drifting sorta up, but -- are most folks still thinking the same thing? That there may be some rotation in favored/unfavored sectors and companies due to policy shifts, but overall we're still looking on an upward path? Does Janet Yellen's presumed confirmation change this?

Not looking for political discussion -- more financial impacts on the overall market, growth projections, etc. Thanks!

[Jeffrey]

Sorry if this has been covered before:

in the run-up to the election, when it was presumed that Biden would win but the Republicans would likely hold the Senate, most things I read in the WSJ suggested that industries and traders thought this would be fine. Maybe greater regulation on industries and roll-backs of tax cuts, but increased spending and less chaos would basically equal that out.

Since the Dems pulled off a double win in Georgia, of course we had the insurrection the next day so financial news has sort of fallen off the cliff for me in the last two weeks.

I know the market is drifting sorta up, but -- are most folks still thinking the same thing? That there may be some rotation in favored/unfavored sectors and companies due to policy shifts, but overall we're still looking on an upward path? Does Janet Yellen's presumed confirmation change this?

Not looking for political discussion -- more financial impacts on the overall market, growth projections, etc. Thanks!

If you believe history is the best predictor of the future, then the longer term answer is easy... we went (due to the two GA Senate races) from the best scenario (Dem in WH, divided government) to the worse (Dems having complete control). Shorter term, Mr. Market will love substantially more stimulus and Yellen. Longer term, Mr. Market is not going to love substantially higher corporate and capital gains taxes, and more regulations.

[Bluedog]

Sorry if this has been covered before:

in the run-up to the election, when it was presumed that Biden would win but the Republicans would likely hold the Senate, most things I read in the WSJ suggested that industries and traders thought this would be fine. Maybe greater regulation on industries and roll-backs of tax cuts, but increased spending and less chaos would basically equal that out.

Since the Dems pulled off a double win in Georgia, of course we had the insurrection the next day so financial news has sort of fallen off the cliff for me in the last two weeks.

I know the market is drifting sorta up, but -- are most folks still thinking the same thing? That there may be some rotation in favored/unfavored sectors and companies due to policy shifts, but overall we're still looking on an upward path? Does Janet Yellen's presumed confirmation change this?

Not looking for political discussion -- more financial impacts on the overall market, growth projections, etc. Thanks!

My read was that Wall Street liked the split government because not much would be passed (i.e. "gridlock") and thus "status quo" would reign with no new regulations, keeping the low corporate taxes, etc. With Dems taking over, some of that can no longer be assumed but they have a razor thin margin. In addition, Wall Street now seems to think that Dems will be much more likely to spend a lot of money via stimulus, which will spur economic growth. So, even with the potential prospect of increased regulations and/or slight tax increases, the extra spending is a boon to business. At least that's my understanding of it, but the market doesn't always make sense and its predictions do not always come to fruition.

[Jeffrey]

My read was that Wall Street liked the split government because not much would be passed (i.e. "gridlock") and thus "status quo" would reign with no new regulations, keeping the low corporate taxes, etc. With Dems taking over, some of that can no longer be assumed but they have a razor thin margin. In addition, Wall Street now seems to think that Dems will be much more likely to spend a lot of money via stimulus, which will spur economic growth. So, even with the potential prospect of increased regulations and/or slight tax increases, the extra spending is a boon to business. At least that's my understanding of it, but the market doesn't always make sense and its predictions do not always come to fruition.

IMO, the “razor thin margin” is sufficient and we will experience more than “slight tax increases”. Some recent announced financial nominations are not exactly moderates.

https://apple.news/AiG9JlvxxROmmFD0iab1n2w

[OldPhiKap]

If you believe history is the best predictor of the future, then the longer term answer is easy... we went (due to the two GA Senate races) from the best scenario (Dem in WH, divided government) to the worse (Dems having complete control). Shorter term, Mr. Market will love substantially more stimulus and Yellen. Longer term, Mr. Market is not going to love substantially higher corporate and capital gains taxes, and more regulations.

My read was that Wall Street liked the split government because not much would be passed (i.e. "gridlock") and thus "status quo" would reign with no new regulations, keeping the low corporate taxes, etc. With Dems taking over, some of that can no longer be assumed but they have a razor thin margin. In addition, Wall Street now seems to think that Dems will be much more likely to spend a lot of money via stimulus, which will spur economic growth. So, even with the potential prospect of increased regulations and/or slight tax increases, the extra spending is a boon to business. At least that's my understanding of it, but the market doesn't always make sense and its predictions do not always come to fruition.

Thanks for both of your responses. (And any that follow!)

[bundabergdevil]

My read was that Wall Street liked the split government because not much would be passed (i.e. "gridlock") and thus "status quo" would reign with no new regulations, keeping the low corporate taxes, etc. With Dems taking over, some of that can no longer be assumed but they have a razor thin margin. In addition, Wall Street now seems to think that Dems will be much more likely to spend a lot of money via stimulus, which will spur economic growth. So, even with the potential prospect of increased regulations and/or slight tax increases, the extra spending is a boon to business. At least that's my understanding of it, but the market doesn't always make sense and its predictions do not always come to fruition.

I have to believe the short-term focus (for both real and political reasons) will be the pandemic and stimulus. Has anyone seen timing or prioritization for Biden’s tax platform? I have to imagine it’s at least 12 months out, which would put it in mid-term limbo. I think there is a more than reasonable scenario that no major tax changes are achieved before mid-term...then, we’ll see based on outcomes.

[Bluedog]

IMO, the “razor thin margin” is sufficient and we will experience more than “slight tax increases”. Some recent announced financial nominations are not exactly moderates.

https://apple.news/AiG9JlvxxROmmFD0iab1n2w

Seems like appointments can certainly impact regulations and general monetary policy (which certainly has some impact), but cannot impose tax changes and/or spending decisions without Congress passing laws in those areas generally, right? But as you said, perhaps the margin is sufficient. Depends on Joe Manchin...Clearly, though, Wall Street hasn't been THAT scared yet, market is up since Dems won both GA seats. And certainly up since Biden was elected. I think they still think government spending escalating is helpful as a counter-balance to those other areas. And the prospect of getting on the other side of COVID with the vaccine rollout certainly is also a major factor. We shall see though...

[Jeffrey]

I have to believe the short-term focus (for both real and political reasons) will be the pandemic and stimulus. Has anyone seen timing or prioritization for Biden’s tax platform? I have to imagine it’s at least 12 months out, which would put it in mid-term limbo. I think there is a more than reasonable scenario that no major tax changes are achieved before mid-term...then, we’ll see based on outcomes.

I agree vaccinations/herd immunity come first. I predict substantial tax increases in 4Q 2021 or, more likely, 2022 via the reconciliation process.

[Bluedog]

I have to believe the short-term focus (for both real and political reasons) will be the pandemic and stimulus. Has anyone seen timing or prioritization for Biden’s tax platform? I have to imagine it’s at least 12 months out, which would put it in mid-term limbo. I think there is a more than reasonable scenario that no major tax changes are achieved before mid-term...then, we’ll see based on outcomes.

I've just seen speculation that similar to TCJA, passing a bill towards the end of the year is possible. Congress theoretically could make it retroactive to Jan 1, 2021 but would be unlikely to do so. So, most are prognosticating a change effective for 2022 as the most likely scenario. I think it's pretty high priority for Congressional Democrats (yes, stimulus and pandemic are #1, but taxes & healthcare are 1b). Busy agenda for sure!

[Jeffrey]

We shall see though...

Absolutely, there’s no true market without different opinions and expectations. I certainly hope you two are correct, but I’ve already made substantial financial adjustments.

[Jeffrey]

Absolutely, there’s no true market without different opinions and expectations. I certainly hope you two are correct, but I’ve already made substantial financial adjustments.

To be clear, since my post leaves room for many interpretations, the substantial financial adjustments I’ve already made are earned income (substantially reduced my 2021 compensation) and capital gains/equity sales (minimizing substantially in 2021). I have not changed my 60% equity allocation.