Why not go to cash?

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Submitted by carlsbadworker on March 4, 2021 - 10:20pm

Just finished reading Rich's latest investing article, I concur.

My answer to "Why not go to cash" is much simpler though.

Four words: I could be wrong.

Submitted by gzz on March 5, 2021 - 12:29pm.

I also read it and agree. Rich and I think mostly alike, I know we independently looked at Euro blue chips a while ago and bought in for example, we purchased our homes within a few months and 5 miles of each other at the very bottom of the market.

Relatedly, the Chad Value Investor vs the Virgin Growth Investor. Vulgar but I laughed.

http://www.creditbubblestocks.com/2021/0...

Submitted by Rich Toscano on March 5, 2021 - 12:57pm.

carlsbadworker wrote:
Just finished reading Rich's latest investing article, I concur.

My answer to "Why not go to cash" is much simpler though.

Four words: I could be wrong.

I agree with that, but I think it goes beyond that... even if you're right (ie there's a bubble and it eventually bursts) there are a lot of ways the "go all to cash" thing could backfire.

Certainly, though, your four-word summary is a great thing to always keep in mind.

Submitted by Rich Toscano on March 5, 2021 - 1:04pm.

gzz wrote:

Relatedly, the Chad Value Investor vs the Virgin Growth Investor. Vulgar but I laughed.

http://www.creditbubblestocks.com/2021/03/the-chad-value-investor-vs-virgin.html

Great writing... that was awesome. :-D

Submitted by evolusd on March 5, 2021 - 10:46pm.

I took this exact action in mid-March last year when pandemic hit. Didn't work out so well. Damn hindsight.

Submitted by scaredyclassic on March 5, 2021 - 10:57pm.

Pretty much the only thing ive learned over my life is that im usually wrong.

Submitted by Coronita on March 11, 2021 - 9:34am.

Funny, I had a conversation with my old neighbor about this. Tongue and cheek. He's of the opinion that now that both China and US are printing more fiat money, he's of the opinion to buy as many different kinds of investment as possible (equities, real estate ,etc). Because in his opinion, staying in cash for an extended period of time will be a losing proposition.

So he's trying to rack and stack more investment properties, even at current prices...Shifting some of his holdings from China to the US.

I asked him if I was crazy wanting to cash out refi my old primary and take the equity to buy more houses. His exact words was. "Yes, because that's what I'm doing to let the banks eat the depreciating dollar later..."

Feel sorry for the new home buyers that is just starting out...People spending the same amount some of us spent on a SFH years ago for a condo now... That's pretty sad....

Submitted by The-Shoveler on March 11, 2021 - 1:18pm.

I am seeing inflation at Costco IMO.
Seems everything is .50 to 1.00 more than around 6 months ago.

Not thinking of getting out yet but I do feel stocks that touch the sky will fall eventually LOL just never know when.

Disclosure, I am not currently putting new money in stocks, seems a bit frothy IMO .

Submitted by Coronita on March 12, 2021 - 8:04am.

I think besides putting money into international index etfs like vxus, Im going to camp out in boring consumer staples.

I figure if we have more inflation, companies like P&G can get away with charging more for things like diapers and toilet paper...

Meanwhile, Im not so sure tech companies can do the same thing without consumers balking....

I applied for a $750k conforming plus cash out refinance. Will see how it goes....

Interesting times

Submitted by gzz on March 12, 2021 - 5:22pm.

My consumer staples are KHC KMB WBA T and VZ. They’ve done well, mainly because I got them in March and April 2020 when any pick would have done well.

I also have a lot of GO, which I purchased because I adore that store and was an instant convert. They have a changing variety of fancy euro-cheeses at Velveeta prices! I am not the only one, store count is growing about 10% a year and SSS are consistently excellent.

Submitted by Coronita on March 12, 2021 - 5:26pm.

gzz wrote:
My consumer staples are KHC KMB WBA T and VZ. They’ve done well, mainly because I got them in March and April 2020 when any pick would have done well.

I also have a lot of GO, which I purchased because I adore that store and was an instant convert. They have a changing variety of fancy euro-cheeses at Velveeta prices! I am not the only one, store count is growing about 10% a year and SSS are consistently excellent.

I just get an etf XLP

Submitted by gzz on March 15, 2021 - 11:55am.

XLP has a lot of weight in Coke, Pepsi, and Walmart: junk food and B&M retail. None of those are going to disappear, but I think they're in terminal decline.

My own experience: I like visiting Wally World at night when it isn't crowded, I don't have Amazon Prime, and I have a slight anti-Amazon bias because they are so big.

Yet I still shift more and more spending from Wal-Mart to Amazon and to a smaller extent to Target and Home Depot. I think I only go 2-3 times a year now versus 8-10 when I moved here.

California's soft-on-shoplifting policy has also resulted in a large increase in the portion of Wal-Mart that is walled behind glass. It isn't just liquor and electronics anymore. That degrades the shopping experience and reduces order sizes.

Submitted by Coronita on March 26, 2021 - 8:18pm.

I dropped by my old house to drop of some stuff and ran into my old neighbor and had a nice chat with him. One of thing i brought up was I wasnt sure whether i should continue renting out my house out or sell and cash in on the crazy insane home prices right now.
What he said stuck in my mind. His opinion, both China and the US were both beyond the point of no return, the only real option for both was to print their way out and devalue both currency. It was interesting that he said he was doing just about everything except staying in cash. He was curious why I was thinking about selling my house and I mentioned well this one in Carmel V, rent isnt great, tenants are a pain in the ass and dont stay that long, and right now with Carmel V homes costing more than $600+ per square ft, seems like appreciation is way better than rental income will be over many years...

He sort of chuckled and said well, just about the worst thing anyone could have done is stayed in cash for so long. If someone did in san diego, counted solely on their wages, never took on higher risk in assets/investments, and stayed renting all these years...there is no doubt...they are most likely priced out of the San Diego housing market right now and probably indefinitely...if you sell your house, you might want to think about doing so to obly buy real estate that cash flows better elseehere in dan diego, otherwise yoi might ever be able to reenter the market again short or something else keeping up with the printing that will happen...

In hindsight. All those people thst boufht houses in say 2005-6. Was it rrally a bad decision if they were able to hold on? Maybe not...

Submitted by Rich Toscano on March 26, 2021 - 8:50pm.

Buy real estate now or you'll be priced out forever... hmm, when did I last hear that? :-D

Submitted by Coronita on March 26, 2021 - 9:43pm.

Not sure if i belief in being priced out forever, but I certainly wouldnt want to be a first time home buyer right now here, unless i was one of those Bay Area tech workers paid Bay Area comp packages with the option to work remotely from san diego. I guess some of them figured out spending $1.5+million here is still a better deal than spending $1.5million in a hole-in-the-wall place in Santa Clara. that or maybe banks relaxed lending standards and its easy to get stated alt-a loans again?

Submitted by Rich Toscano on March 27, 2021 - 8:31am.

Agree on all that... but that's kind of my point, the more expensive it gets, the less likely that prices will keep going up at a rate that would price you out forever.

Submitted by sdrealtor on March 27, 2021 - 1:44pm.

Rich Toscano wrote:
Agree on all that... but that's kind of my point, the more expensive it gets, the less likely that prices will keep going up at a rate that would price you out forever.

Rates will do that once prices stabilize

Submitted by svelte on April 25, 2021 - 2:34pm.

OK. I didn't go all cash, but I just made the biggest shift I've ever made in my 401K.

I went from 15% stable to 40% stable.

My reasoning is this:
- That is about where the Vanguard retirement planning mutual funds say I should be at my age
- I'm over 40% up from where I had projected I would be right now. I made those projections 3, 4 and 5 years ago.
- Most major market corrections happen in the July-October time frame
- I've always waited just a few weeks too long to move money out in the past and I don't want to miss the boat again.
- I may miss out on some of the future up movements, but at least I've locked in the 40% upside I already have.

Those of you younger probably shouldn't make such a drastic move yourself. But at my age, it is the right thing to do. Now maybe my 401K account will stop sending me nastygrams saying I'm investing too aggressive for my age!

Submitted by svelte on April 25, 2021 - 2:55pm.

Coronita wrote:

I figure if we have more inflation, companies like P&G can get away with charging more for things like diapers and toilet paper...

I've been listening to the inflation vs deflation discussions a lot lately. Personally, I think we have more risk of deflation than inflation going forward.

The savings rate is way up:
https://time.com/nextadvisor/banking/sav...

Boomers are retiring and slowing their spending down.

And then there is this writeup about how overvalued the market is right now:
https://pcasd.com/a-major-bubble-in-grow...

That data on Tesla is just jaw-dropping. That can't last.

Submitted by scaredyclassic on April 25, 2021 - 6:30pm.

I have a question.
With trading fees zero, why buy a mutual fund?

Submitted by svelte on April 25, 2021 - 7:37pm.

scaredyclassic wrote:
I have a question.
With trading fees zero, why buy a mutual fund?

I guess that depends on whether you want to actively manage your mix of stocks. People who like to hold just a few companies will probably manage the trades on their own. That seems risky to me.

It seems safer to have my $$ spread over a wide range of stocks and have someone who has the time to watch that mix daily for patterns emerging in the market. I don't have that kind of time. I check in on my accounts every couple of months. That leaves me exposed to major turns in the market.

Besides, most of my money is in my 401K. I can't buy individual stocks there that I know of.

Submitted by Coronita on April 25, 2021 - 9:02pm.

svelte wrote:
scaredyclassic wrote:
I have a question.
With trading fees zero, why buy a mutual fund?

I guess that depends on whether you want to actively manage your mix of stocks. People who like to hold just a few companies will probably manage the trades on their own. That seems risky to me.

It seems safer to have my $$ spread over a wide range of stocks and have someone who has the time to watch that mix daily for patterns emerging in the market. I don't have that kind of time. I check in on my accounts every couple of months. That leaves me exposed to major turns in the market.

Besides, most of my money is in my 401K. I can't buy individual stocks there that I know of.

Some 401k plans dont give you a self directed option. There's a couple of actively managed funds i just like to keep around just in case, things like Fidelity Contrafund that comes in many 401ks.

Regarding index funds versus etf...I do bi+monthly contributions to index funds or sorts...while there are etf equivalents, one thing I found useful is not being able to sell right away and having some sort of penalty for frequently trading (ie being restricted to buy new shares X days from selling) has been good discipline for me on passive side of my portfolio. Having similar ETFs elsewhere, Im finding its much more tempting for me to try to time the markets in those accounts, and do more trading in and out off positions, which probably is a fruitless effort in the long term, at least for me.

Ive moved out of individual tech stocks, except 3. One, IBM, i simply bought for the dividend a few months ago. I dont expect a lot of hoopla on it, which is the point. About 2 months ago, i moved into visa and mastercard and some banks that were beaten down..because i figure given how much stimulus money is being thrown at people, people are going to end up spending $4 on credit for every $1 of stimulus they got, being good American consumers as they are, paying 19% APR, which probably will go higher on the not so far future...That, and costco will always be costco.

Submitted by gzz on April 26, 2021 - 10:44am.

svelte: Agree on all points.

scaredy: Mutual funds are more convenient, but if you just buy a whole bunch of small investments in large caps, you can harvest tax losses in a way that an identical mutual fund can't.

flu: Visa and MC and amex make their money on interchange fees, which are higher in the USA than other developed nations. Will they stay that way forever?

If Biden wants to make three large companies angry but a zillion companies that take credit cards happy, he can crack down on the fees. This is not a wild scenario: it already happened in many other nations all over the world.

Submitted by scaredyclassic on April 26, 2021 - 11:06am.

a mutual fund is always going to charge a fee. if you just bought the same stocks, you'd already be ahead of a murual fund.

as to the mutual fund being smarter or beating the market, through trading or a sense of what's coming, in general, they're wrong. seems like ti would be better to just buy the same stocks as a fund you like and hold them. save the .3 or .5 % a year they charge to do the buying for you.

Submitted by svelte on April 26, 2021 - 1:23pm.

scaredyclassic wrote:

as to the mutual fund being smarter or beating the market, through trading or a sense of what's coming, in general, they're wrong. seems like ti would be better to just buy the same stocks as a fund you like and hold them. save the .3 or .5 % a year they charge to do the buying for you.

Oh, I don't know. In some ways you are right.

I'll never forget the series of stories WSJ did in the 90s showing that throwing darts at a dartboard picked stocks as well as if not better than the pros.

However, I do have my money in a few mutual funds that do outrageously well over the long term, even after taking into account fees.

Here are a few of my favorites, alphabetically:

Alger Weatherbie Specialized Growth A Fees: 0.81%
3yr: 27% 5yr: 26% 10yr: 15%

ClearBridge Large Cap Growth Fund IS Fees: 1%
3yr: 18% 5yr: 18% 10yr:15%

Fidelity Contrafund Fees: 0.86%
3yr: 18% 5yr: 19% Life: 15%

JPMorgan Large Cap Growth Fees: 1.04%
3yr: 27% 5yr: 25% 10yr: 17%

Now let's look at what a low fee SP500 index fund returned:

Schwab S&P 500 Index Fund (SWPPX) Fees: 0.02%
3yr: 16% 5yr: 16% 10yr: 13%

So - if I'm getting a better return with managed funds AFTER they deduct their fees than I could get with the SP500 Index fund with almost no fees, why wouldn't I buy the better managed funds?

Submitted by gzz on April 26, 2021 - 5:38pm.

80%+ of active funds under-perform the S&P. If you're good enough to pick and buy the best 20% of funds in advance, you might be even better at picking stocks.

That JPM fund was ranked 11 out of 600+ funds in its category.

Also, "Front load 5.25%"

Wow!

Submitted by scaredyclassic on April 26, 2021 - 7:36pm.

Even at 1 percent, you'll be up 10 percent creating your own mutual fund after a decade. And you'll more likely at least track the market

Submitted by svelte on April 27, 2021 - 9:23am.

gzz wrote:
80%+ of active funds under-perform the S&P. If you're good enough to pick and buy the best 20% of funds in advance, you might be even better at picking stocks.

That JPM fund was ranked 11 out of 600+ funds in its category.

Also, "Front load 5.25%"

Wow!

I'm not claiming I'm super skilled at mutual fund picking. There are only so many funds offered in my 401K, I look at their history over the long term and select my investments based on that. Pretty simplistic.

I don't have the time nor desire to put a lot of energy into studying individual stocks.

Front loads usually range from 3.75 to 5.75, so yeah 5.25 is on the high end of that. Need to leave $$ in there long term to make it worth it, not doing buy/sells all of the time.

Finally, I just found out that Warren Buffett has positioned Berkshire Hathaway at 37% cash, 63% stock so I came to about the same conclusion as Buffett independently!

Submitted by Coronita on April 27, 2021 - 7:42pm.

gzz wrote:

flu: Visa and MC and amex make their money on interchange fees, which are higher in the USA than other developed nations. Will they stay that way forever?

https://finance.yahoo.com/m/86e32efe-ad5...

Submitted by Coronita on April 28, 2021 - 4:22am.

And one of the few tech stocks i still have...looks like as predicted, starting to do serious damage to Intels data center business. Ha ha.

https://finance.yahoo.com/m/224fd3a1-395...

Intel.is sort of in a pickle...For our servers, weve all switched over to AMD epyc.

For home desktop, those of us running PCs are all using either AMD Threadrippers or the 12 or 16 core consumer ryzen, 3900 3950, and some are upgrading to the latest 5900 5950 when available.

and for apple specific development, the M1 is pretty quick.

intel not being used.

Submitted by svelte on May 12, 2021 - 4:28pm.

Well it happened this past weekend.

We went out with a group of friends and one of them whom I would never have guessed even followed the stock market gave me a stock tip.

Suddenly the 1928 saying came to mind:
"You know it's time to sell when shoeshine boys give you stock tips."

We may still have a year or two to go, but methinks the end of the bull is nigh.

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