Investment advice thread

[The-Noid]

Originally posted by: heyheybooboo
$999,565,217.39 profit on common stock options to date
$500,000,000.00 profit on preferred stock


I am an idiot.

Gee, you mean the stock price went up from where it was when the received their warrants and they made money. What a concept, doesn't that mean everyone else that owned Goldman (like I own you) made money. Gee isn't that how free markets work. He also doesn't receive the dividend on the preferred for 6 months and it will be 250,000,000 every 6 months. Nice math though.

In the end I bought at 114 and sold at 135 and made 168,000$ which my guess is more than you make in a year. Keep shorting, I could really care less I am out of the trade.

If you really think the banks will go under, my guess is you are short LIBOR as an increase in LIBOR means the banks are paying more to borrow...as you can't straight out short GS there are ways around everything. You fail to understand there is a difference between a good trade and a fundamental company.

In the end though, GS will never fail, the name is worth too much they could lay off significant amounts of employees and keep just their M & A advisory business and still be solvent. The investment bank has made money for them over the last 5 years. This is the same conversation that happened in 87, 91, and 2000 "The investment banks will never make money again" it seems Wall Street always finds a way to make money.

FYI Warrants != Options. My guess is this will be like every other thread with heyheybooboo, he gets owned and then never comes back. He is a lot of fun for me. In the left corner you have a guy who knows a shit, in the right corner you have heyheybooboo.

 

[imported_Lothar]

Originally posted by: Yoxxy

Originally posted by: Lothar
I'm pretty sure both Buffett and Benjamin Graham don't use P/E ratios in buying stocks.
P/E ratios, PEG ratios, and Forward P/E are generally useless statistics to go by in picking stocks.

Ever heard of David Dreman, the man pensions and endowments use? He would disagree.

http://en.wikipedia.org/wiki/David_Dreman

Thankfully, no.
Why listen to the likes of him for investment advice when I can listen to the masters Warren Buffett and Benjamin Graham?

 

[imported_Lothar]

Originally posted by: Yoxxy


Gee, you mean the stock price went up from where it was when the received their warrants and they made money. What a concept, doesn't that mean everyone else that owned Goldman (like I own you) made money. Gee isn't that how free markets work. He also doesn't receive the dividend on the preferred for 6 months and it will be 250,000,000 every 6 months. Nice math though.

In the end I bought at 114 and sold at 135 and made 168,000$ which my guess is more than you make in a year. Keep shorting, I could really care less I am out of the trade.

Shens.

 

[The-Noid]

Originally posted by: Lothar

Originally posted by: Yoxxy


Gee, you mean the stock price went up from where it was when the received their warrants and they made money. What a concept, doesn't that mean everyone else that owned Goldman (like I own you) made money. Gee isn't that how free markets work. He also doesn't receive the dividend on the preferred for 6 months and it will be 250,000,000 every 6 months. Nice math though.

In the end I bought at 114 and sold at 135 and made 168,000$ which my guess is more than you make in a year. Keep shorting, I could really care less I am out of the trade.

Shens.

From another thread

Yoxxy

Oh and btw I bought 8,000 shares limit 114. You can check the trades if you get tick by tick, two lots one of 3,000 @ 113.91 other of 5,000 @ 113.85. Glad I did because I had no idea Buffet was going to put money in but I will close out at the open tomorrow, or maybe sell the October 115's and pocket the cash, don't know how long I want to be in the trade though.

If you would like I can show you the trade confirms on Monday when I get into work...

 

[GroundMeat]

Note: $126k profit requires a $912k stock investment for a stock going between $114 - $135.

Lothar you actually have to know what all of the ratio's mean otherwise you're right they are worthless.

Heyheybooboo, you might want to know a little more about Buffet and how Berkshire work before using that line of attack.

Anyone can buy preferred stock there are some awesome yields out there right now.

Back on topic.

There are two things to keep in mind:

- Your time horizon

- Your risk tolerance

Put those together and you will determine you asset allocation. Then balance your portfolio against those.

If your using MF's do your due diligence on their indexing (r*2, the bigger the number the more likely your better off with an ETF index) and performance. If you're using stocks look for the best of breed for the sector.

Re-balance every quarter.

Take whatever you hear on the T.V. / Radio with a bucket of salt.

Feel free to ask for more details don't be afraid of your own thread.

 

[The-Noid]

10 basic for investing.

1.) Never let a position take more than 10% of your investment account.
2.) Always buy stocks, etf's, or indexed mutual funds. Mutual fund managers are guys that couldn't make it in the hedge fund business or couldn't trade their own account well enough. No reason to pay them a fee to lose you money and lag their index.
3.) Always use pairs trades. Pair what you think your winner will be with what you know will be a loser.
4.) Hedge, hedge, hedge. There is a reason futures and options exchange volume has blown up.
5.) Be creative, as I said earlier in the thread, I am short LIBOR as you can't directly short financials. Financials make less money as LIBOR rises (Libor trades inverse to the contract, 100 = 0, - ticks from 100 = a gain for the short, +ticks to 100 = a gain for the buyer. This covers the "good" financials I hold in my account.
6.) Diversification can be helpful, but too much diversification just means you will never make any money. Don't be afraid to take on a larger position.
7.) Always use a trading plan, know where you want in and where you want out. Using a stop or a limit helps this. Technical stops are best, but you should always have a stop regardless because people leave their screens.
8.) Take from your winners and give to your losers if you still believe in them.
9.) Learn how the options market works. Buying puts on speculative positions helps, while selling calls on securities you already own can generate some income (short term cap gains) in a less volatile market.
10.) Never purchase a LEAP unless you understand the tax consequences.

 

[mshan]

Not all index funds are created equal.

You have to know what is actually being indexed, what the expense ratio is, and how long-term shareholder friendly the manager and fund company is, especially if you are investing in a taxable account (you don't want to have to pay capital gains taxes while you are still early in that accumulation phase when you realize that you need to move your money to a better index fund, when you realize your current manager and fund company are only interested in collecting tons and tons of assets to make them very rich, irrespective if you end up significantly underperforming the market over time).

Logic behind indexing in general is low expenses (0.2% management fee, vs. 1%+ active manager fee, hidden costs in terms of frequent trading costs - underlying index should have very low turnover, so fund doesn't always have to buy and sell new stocks to match index; I believe Bogle has said this hidden cost can be 1.5 % - 2% of total return, which when combined with excessively high management fees, is what Bogle refers to as the tyranny of compound interest), combined with a buy and hold approach over an ideally long period of time (10, 20, 30+ years).

As John Bogle recommends, Vanguard Index Total Stock Market (VTSMX) is a fantastic core retirement holding, especially in a taxable account:
- almost truly 100% stock exposure all the time (vs. typical 90 - 95% stock exposure for many active managers)
- very low turnover and 99%+ tax efficiency (basically paying taxes on reinvested dividends)
- very low expense ratio (a lot of "index" funds charge high expense ratios, so you have to look at details)
- Vanguard automatically shifts your shares to even lower expense ratio Admiral shares when your positions reaches their minimum requirements

If you've already fully funded your tax sheltered retirement costs, dollar cost averaging into VTSMX is a great way to take advantage of current market volatility. You are investing in the future of the total US stock market, so unless you think we are going back to the medieval ages and should be loading up on a lot of guns, ammo, power generators, and tons of canned goods, there is a lot of long term value being created right now. Plus you can let this pseudo tax shelered position continue to compound through your early retirement years (as growth against inflation component), take your required distributions first, and probably get another 10 years of essentially tax sheletered compounding work for you.

 

[The-Noid]

Originally posted by: mshan
Not all index funds are created equal.

You have to know what is actually being indexed, what the expense ratio is, and how long-term shareholder friendly the manager and fund company is, especially if you are investing in a taxable account (you don't want to have to pay capital gains taxes while you are still early in that accumulation phase in order to have to move your money into another taxable and better index fund, when down the road, you find out your current manager isn't as long term shareholder friendly as you would like).

Logic behind indexing in general is low expenses (0.2% management fee, vs. 1%+ active manager fee, hidden costs in terms of frequent trading costs), combined with a buy and hold approach over an ideally long period of time (10, 20, 30+ years).

As John Bogle recommends, Vanguard Index Total Stock Market (VTSMX) is a fantastic core retirement holding, especially in a taxable account:
- almost truly 100% stock exposure all the time (vs. typical 90 - 95% stock exposure for many active managers)
- very low turnover and 99%+ tax efficiency (basically paying taxes on reinvested dividends)
- very low expense ratio (a lot of "index" funds charge high expense ratios, so you have to look at details)
- Vanguard automatically shifts your shares to even lower expense ratio Admiral shares when your positions reaches their minimum requirements

If you've already fully funded your tax sheltered retirement costs, dollar cost averaging into VTSMX is a great way to take advantage of current market volatility. You are investing in the total US stock market, so unless you think you should be loading up on a lot of guns, ammo, power generators, and tons of canned goods, there is a lot of long term value being created right now. Plus you can let this pseudo tax shelered position continue to compound through your early retirement years (as growth against inflation component), take your required distributions first, and probably get another 10 years of essentially tax sheletered compounding work for you.

Great advice.

If you aren't going to manage it yourself, Vanguard is generally the way to go for equities, and Pimco, Payden for Fixed.

Blah blah, this is not an offer to sell or buy any security, please consider the funds investment objectives and your own investment objectives before making any financial decision. Please also contact your own financial advisor with any questions.

 

[mshan]

I think we both agree that there are a lot of successful strategies to make money and create wealth in the stock market.

But successful traders / investors have to have a complete strategy that they understand and are comfortable with, not just an isolated trading tactic they picked up on the last episode of Mad Money. :roll:

 

[The-Noid]

Originally posted by: mshan
I think we both agree that there are a lot of successful strategies to make money and create wealth in the stock market.

But successful traders / investors have to have a complete strategy that they understand and are comfortable with, not just an isolated trading tactic they picked up on the last episode of Mad Money. :roll:

Couldn't agree more, I think overall Cramer does provide some insights that people would otherwise never have heard of. Otherwise I have only been able to stand watching around 45 minutes ever (except for stop trading, which I have on at work).

 

[imported_Lothar]

Originally posted by: Yoxxy
10 basic for investing.

1.) Never let a position take more than 10% of your investment account.
2.) Always buy stocks, etf's, or indexed mutual funds. Mutual fund managers are guys that couldn't make it in the hedge fund business or couldn't trade their own account well enough. No reason to pay them a fee to lose you money and lag their index.
3.) Always use pairs trades. Pair what you think your winner will be with what you know will be a loser.
4.) Hedge, hedge, hedge. There is a reason futures and options exchange volume has blown up.
5.) Be creative, as I said earlier in the thread, I am short LIBOR as you can't directly short financials. Financials make less money as LIBOR rises (Libor trades inverse to the contract, 100 = 0, - ticks from 100 = a gain for the short, +ticks to 100 = a gain for the buyer. This covers the "good" financials I hold in my account.
6.) Diversification can be helpful, but too much diversification just means you will never make any money. Don't be afraid to take on a larger position.
7.) Always use a trading plan, know where you want in and where you want out. Using a stop or a limit helps this. Technical stops are best, but you should always have a stop regardless because people leave their screens.
8.) Take from your winners and give to your losers if you still believe in them.
9.) Learn how the options market works. Buying puts on speculative positions helps, while selling calls on securities you already own can generate some income (short term cap gains) in a less volatile market.
10.) Never purchase a LEAP unless you understand the tax consequences.

1.) That's a stupid rule. Makes little sense.
2.) Nope. Look up Bruce Berkowitz. I'd take FAIRX over any index/etf funds any day of the week. I've had that fund for years now.
3.) ??? Does that mean one should go long in both Intel and AMD? Or are you advocating a go long on the winner, short the loser strategy?
4.) I don't short stocks.
5.) No comment.
6.) I don't believe in diversification.
7.) Agreed.
8.) Nope. I rebalance by adding any extra money I have to the losers, not selling the winners to buy more losers. If I still believe in my winners more than my losers, selling the winners to buy more losers is a stupid idea.
9.) Agreed.
10.) No comment.

 

[mshan]

My take on Yoxxy's Rules:

Risk, Risk, Risk... (i.e. you've got to respect the permanent loss of capital, not beta, aka day to day stock market volatility)

I think his trading strategy is based upon compounding small successful trades at a very high rate, over and over again, while at the same time minimizing losses that can totally take you out of the game.

In practice, probably very hard to do consistently over time, but if you can, I suspect that the potential to make a lot of money is really, really there.

 

[imported_Lothar]

Originally posted by: GroundMeat
Lothar you actually have to know what all of the ratio's mean otherwise you're right they are worthless.

Companies may resort to short-term decision-making to boost quarterly EPS, which will affect current P/E, PEG ratio, and fwd P/E. They may resort to accounting shenanigans or make charges against earnings in order to sweep the results of bad management decisions under the carpet. Book value is a long-term thing and cannot be easily hidden.

Looking at a company's Book value/share growth and CAGR over a period of 20 years is more indicative of valuation than just saying "This company has a current P/E ratio of 9 which is low historically, and therefore must be a great investment".

 

[JJChicken]

Originally posted by: Blackjack200
It all depends on what your timeline is. You should not have significant exposure to the market if you need access to your money in 3 or 4 years, this is true in good times and bad. If you have a long timeframe you need to stay in the market right now. Asset prices are falling and probably will fall further, but if you have a diversified portfolio, you should look at this as a good thing - you are getting your stocks at a bargain price.

Right now is a brilliant time to buy. some of the valuations out there are just rediculous: Goldman Sachs is trading at a P/E of under 8. That's an insane price for the best investment bank in the world. I wouldn't specifically recommend buying the stock because I haven't done any due diligance on it, but this is probably the cheapest it's been in the last 20 years. If you really want to know how to take advantage of a down market like this, read Benjamin Graham. That's where Warren Buffet got his start.

ALso, considering Buffett bought Goldmans recently, I think it's a good time to buy

 

[JJChicken]

Originally posted by: gevorg
For those of you who think that the current crisis is not going away anytime soon, one worry free way of investing is paying off your loans and credit cards. This will give you guaranteed returns and you'll sleep well at night. Mortgage counts too, assuming you didn't buy it during the bubble period.

This is what I'm doing right now, regardless of how the markets work. It is easily the best investment strategy from a risk-free perspective.

 

[JJChicken]

Originally posted by: Lothar

Originally posted by: Yoxxy

Originally posted by: Lothar
I'm pretty sure both Buffett and Benjamin Graham don't use P/E ratios in buying stocks.
P/E ratios, PEG ratios, and Forward P/E are generally useless statistics to go by in picking stocks.

Ever heard of David Dreman, the man pensions and endowments use? He would disagree.

http://en.wikipedia.org/wiki/David_Dreman

Thankfully, no.
Why listen to the likes of him for investment advice when I can listen to the masters Warren Buffett and Benjamin Graham?

I agree that Buffett and Graham (and Seth Klarman for anyone who's heard of him) are great but there's many ways to make money. P/E ratios are also extremely important in the market and are a legitimate statistic. I wouldn't advise using it by itself, but it will definately help build the overall picture.

 

[imported_Lothar]

Originally posted by: GroundMeat
Anyone can buy preferred stock there are some awesome yields out there right now.

What is the ticker symbol of the one Buffett bought, and where can I buy them?
And no, I'm not talking about the Goldman Sachs Class A/B/C/D preferred stock because I've already looked at those and don't see much value in them.

 

[imported_Lothar]

Originally posted by: Barack Obama

Originally posted by: Lothar

Originally posted by: Yoxxy

Originally posted by: Lothar
I'm pretty sure both Buffett and Benjamin Graham don't use P/E ratios in buying stocks.
P/E ratios, PEG ratios, and Forward P/E are generally useless statistics to go by in picking stocks.

Ever heard of David Dreman, the man pensions and endowments use? He would disagree.

http://en.wikipedia.org/wiki/David_Dreman

Thankfully, no.
Why listen to the likes of him for investment advice when I can listen to the masters Warren Buffett and Benjamin Graham?

I agree that Buffett and Graham (and Seth Klarman for anyone who's heard of him) are great but there's many ways to make money. P/E ratios are also extremely important in the market and are a legitimate statistic. I wouldn't advise using it by itself, but it will definately help build the overall picture.

Read 11 posts below that one.

 

[The-Noid]

Originally posted by: Lothar

Originally posted by: Yoxxy
10 basic for investing.

1.) Never let a position take more than 10% of your investment account.
2.) Always buy stocks, etf's, or indexed mutual funds. Mutual fund managers are guys that couldn't make it in the hedge fund business or couldn't trade their own account well enough. No reason to pay them a fee to lose you money and lag their index.
3.) Always use pairs trades. Pair what you think your winner will be with what you know will be a loser.
4.) Hedge, hedge, hedge. There is a reason futures and options exchange volume has blown up.
5.) Be creative, as I said earlier in the thread, I am short LIBOR as you can't directly short financials. Financials make less money as LIBOR rises (Libor trades inverse to the contract, 100 = 0, - ticks from 100 = a gain for the short, +ticks to 100 = a gain for the buyer. This covers the "good" financials I hold in my account.
6.) Diversification can be helpful, but too much diversification just means you will never make any money. Don't be afraid to take on a larger position.
7.) Always use a trading plan, know where you want in and where you want out. Using a stop or a limit helps this. Technical stops are best, but you should always have a stop regardless because people leave their screens.
8.) Take from your winners and give to your losers if you still believe in them.
9.) Learn how the options market works. Buying puts on speculative positions helps, while selling calls on securities you already own can generate some income (short term cap gains) in a less volatile market.
10.) Never purchase a LEAP unless you understand the tax consequences.

1.) That's a stupid rule. Makes little sense.
2.) Nope. Look up Bruce Berkowitz. I'd take FAIRX over any index/etf funds any day of the week. I've had that fund for years now.
3.) ??? Does that mean one should go long in both Intel and AMD? Or are you advocating a go long on the winner, short the loser strategy?
4.) I don't short stocks.
5.) No comment.
6.) I don't believe in diversification.
7.) Agreed.
8.) Nope. I rebalance by adding any extra money I have to the losers, not selling the winners to buy more losers. If I still believe in my winners more than my losers, selling the winners to buy more losers is a stupid idea.
9.) Agreed.
10.) No comment.

My rules apply to stocks and individual bonds except for investing in indexed mf's. That is why I say limit positions to 10%. I don't really deal with indexes unless it is a short term future so I canuse the leverage...

As for pairs trading that of course assumes you will be shorting the loser.

 

[imported_Lothar]

Originally posted by: Yoxxy
My rules apply to stocks and individual bonds except for investing in indexed mf's. That is why I say limit positions to 10%. I don't really deal with indexes unless it is a short term future so I canuse the leverage...

Whatever suits you.

If you do your own proper research, you shouldn't have to follow that rule.
I'll keep my 20% portfolio investment in LUK, thank you.

 

[JJChicken]

Originally posted by: Lothar

Originally posted by: Barack Obama

Originally posted by: Lothar

Originally posted by: Yoxxy

Originally posted by: Lothar
I'm pretty sure both Buffett and Benjamin Graham don't use P/E ratios in buying stocks.
P/E ratios, PEG ratios, and Forward P/E are generally useless statistics to go by in picking stocks.

Ever heard of David Dreman, the man pensions and endowments use? He would disagree.

http://en.wikipedia.org/wiki/David_Dreman

Thankfully, no.
Why listen to the likes of him for investment advice when I can listen to the masters Warren Buffett and Benjamin Graham?

I agree that Buffett and Graham (and Seth Klarman for anyone who's heard of him) are great but there's many ways to make money. P/E ratios are also extremely important in the market and are a legitimate statistic. I wouldn't advise using it by itself, but it will definately help build the overall picture.

Read 11 posts below that one.

Was that the post on accounting earning manipulations etc? It really depends though, good companies typically have fairly reasonable accounting assumptions and policies and the fraud normally kicks in when the shit hits the fan. I may adjust earnings for once-off items but then again the main use of P/E ratios is to see what the market thinks of the company's growth propects and to provide reality check for my DCF valuations. In that regard it is still quite useful.

 

[The-Noid]

Originally posted by: Lothar

Originally posted by: Yoxxy
My rules apply to stocks and individual bonds except for investing in indexed mf's. That is why I say limit positions to 10%. I don't really deal with indexes unless it is a short term future so I canuse the leverage...

Whatever suits you.

If you do your own proper research, you shouldn't have to follow that rule.
I'll keep my 20% portfolio investment in LUK, thank you.

blah, your a know it all. Holding companies are the equivalent of buying a mutual fund. You knew that when you posted it. Even day traders won't fill their books more than 10%. As even day traders always have powder in treasuries. Having said that LUK is running low on cash so their prospect for increasing revenues through consolidations and purchases is lower than it has been in the last 2 fiscal years. To expand at the rate they have and to keep those P/E ratios that you hate they are either going to need to issue (more) debt (that is what I would not want to do in this environment) or issue more equity and dilute you.

Wait a year and we will see how your LUK does my guess is around negative 10-12 percent from this today.

There are limits to every rule, but generally for the average investor they should have no more than 10% in a single holding, unless there is a specific situation. Look at the many LEH or BSC employees that had 90% of their net worth in their own stock which was averaging 20% a year. Now where are they?

 

[JJChicken]

Craig234 The golden rule of investing, and I advise you to invest and not speculate, is undertake your own analysis and find a value for the stock you are looking at. If the stock is considerably below your own assessment (providing a 'margin of safety') purchase it. Sell the stock once it hits your assessed value. Discipline is the key to success.

 

[imported_Lothar]

Originally posted by: Yoxxy

Originally posted by: Lothar

Originally posted by: Yoxxy
My rules apply to stocks and individual bonds except for investing in indexed mf's. That is why I say limit positions to 10%. I don't really deal with indexes unless it is a short term future so I canuse the leverage...

Whatever suits you.

If you do your own proper research, you shouldn't have to follow that rule.
I'll keep my 20% portfolio investment in LUK, thank you.

blah, your a know it all. Holding companies are the equivalent of buying a mutual fund. You knew that when you posted it. Even day traders won't fill their books more than 10%. As even day traders always have powder in treasuries. Having said that LUK is running low on cash so their prospect for increasing revenues through consolidations and purchases is lower than it has been in the last 2 fiscal years. To expand at the rate they have and to keep those P/E ratios that you hate they are either going to need to issue (more) debt (that is what I would not want to do in this environment) or issue more equity and dilute you.

Wait a year and we will see how your LUK does my guess is around negative 10-12 percent from this today.

There are limits to every rule, but generally for the average investor they should have no more than 10% in a single holding, unless there is a specific situation. Look at the many LEH or BSC employees that had 90% of their net worth in their own stock which was averaging 20% a year. Now where are they?

I'm not a day trader so your comparison there is irrelevant.
Why make the 10% rule to limit yourself when you can invest more into your best idea? That's like saying "one shouldn't have more than 10% of their portfolio in Berkshire".

I've waited 4 years since I first purchased the stock. I will continue to wait.
LUK has been overvalued the past 2 years. I haven't bought any additional new shares since then.
If your guess is really a negative 10-12% then that means I suspect you're also expecting the market to drop double your "expected" amount, right?
Sounds like a good deal to me compared to picking a generalized S&P 500 index fund.

We also have an 11% portfolio stake in JNJ which is ahead of your hard "10%" limit as well. :roll:

Again that's a stupid comparison. We don't have 90% of our net worth in one particular stock. LUK is the highest at 19.4%, and if by net worth you also include car, house, and other things we own then it's much less than that.

 

[imported_Lothar]

Originally posted by: Barack Obama
Craig234 The golden rule of investing, and I advise you to invest and not speculate, is undertake your own analysis and find a value for the stock you are looking at. If the stock is considerably below your own assessment (providing a 'margin of safety') purchase it. Sell the stock once it hits your assessed value. Discipline is the key to success.

:thumbsup:

To add to that, recommended investment books to read are...
1) "Intelligent Investor"
2) "Security Analysis"
3) "The Interpretation of Financial Statements"
4) "Common Stocks and Uncommon Profits"
5) Warren Buffett's annual letters.