Sanrith Descartes
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I expect lots of volatility today. Nasdaq futures were down more than 3% over night before moving back up.
Investing General Discussion
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Sanrith Descartes
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ABBV double beat and raises guidance and increases dividend by 10% to $5.20 a year (current yield is 6.44%)
edit: +6.5% on the day so far.
edit: +6.5% on the day so far.
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OU Ariakas
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Ok Blazin and Sanrith, this may sound like a beginner question but why do more people not invest in dividend heavy portfolios early in their investing? I was thinking about how all my 'gains' in the stock market are all paper gains and when we talk about mutual fund investing the intent is to hold for a long time and not look at it. That means huge corrections wipe out all your gains because it has just been your money (and your employers match) going into those purchases.
Let's say I invested in some set of broad range dividend yielding stocks that averaged around 6% yield per year. Even if all of the stocks tread water those reinvested dividends are new shares that were not purchased by my money (or my employer match). Are dividend stocks prone to yearly adjustments that would screw with that number? Even if the actual dividends paid moved + or - 10%/year that would still mean you are beating the market (or at least beating inflation) with just the dividends before even looking at stock gains.
I hope that made sense.
Edit: After typing this I went and looked up the top 10 dividend stocks and it looks like most of them pay out less than 3% annually. Those are all giant corporations so I am assuming that there are smaller corporations with higher yields but much riskier when it comes to holding for the long term.
Let's say I invested in some set of broad range dividend yielding stocks that averaged around 6% yield per year. Even if all of the stocks tread water those reinvested dividends are new shares that were not purchased by my money (or my employer match). Are dividend stocks prone to yearly adjustments that would screw with that number? Even if the actual dividends paid moved + or - 10%/year that would still mean you are beating the market (or at least beating inflation) with just the dividends before even looking at stock gains.
I hope that made sense.
Edit: After typing this I went and looked up the top 10 dividend stocks and it looks like most of them pay out less than 3% annually. Those are all giant corporations so I am assuming that there are smaller corporations with higher yields but much riskier when it comes to holding for the long term.
Blazin
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Two sides to the coin, companies who pay dividends are often in the slower growing part of their life cycle. When companies are growing rapidly they need all available cash to grow faster. During a secular bull market (Long period of expansion 8-20yrs) growth companies will outperform by a sizable margin. If you include secular bear markets then the dividend payers with healthy cash flows will greatly outperform. So again it's a matter of perspective of time and economic cycle, a significant portion of S&P gains over long periods are attributable to dividends, because like you mentioned they are incremental buying when reinvested that you miss out on with non dividend growth companies.
The only benefit of owning a non dividend paying company is to sell it to someone else. The benefit is reaped by no longer owning the shares. The vast majority of my investments are in dividend payers. Greater fool investing is not for me, but there is no denying that there are significant gains to be had chasing growth stocks.
My time is finite and as a result I find following companies who change slower are easier for me to be on top of their business and to what degree I want to be involved. Dividend stocks also tend to trade in tighter ranges allowing me to sell calls against my positions very consistently.
I don't believe in one size fits all investing, people need to find what works for them. Your personality and emotions will be your number one enemy to returns in a life time, you need to make choices that you can stick with and understand. So if someone can own the high PE stocks and not be shook out with every sharp 20% correction they can make a lot of money over time if those companies succeed. I will caveat that by saying that One size fits all (dollar cost avg into a broad index fund) should be everyone's default setting but for those who become more involved than that there is more nuance that can vary between individuals and circumstances.
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Sanrith Descartes
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Blazin probably said it better than I can, but it really comes down to math and market fundamentals. Younger companies spend every dime growing their company so there is no profit returned to the shareholder in terms of dividends. As companies mature their rate of growth slows, they really cant spend all their profits effectively to grow the business so they begin to return that capital back to the shareholders in the form of dividends. So in your example, if you invested all your money early in dividend paying value stocks they yes it will grow over time. its a question of opportunity cost. Every dollar spent on value companies making you a 3% annual dividend return is not spent on a growth company that may make you 20% a year in stock appreciation over a 5 or 10 year period.
Like Blazin I believe in a mix of growth and dividends. There are also some companies that discover new revenue streams and can keep growing while paying dividends (for example ABBV and other bio/pharma stocks). In baseball terms I think of dividend value stocks as high average singles hitters. They are consistent performers but you rarely can get a really big inning out of them. Mix them with some low average home run hitters who can get hot and you can run up quite a score.
Like Blazin I believe in a mix of growth and dividends. There are also some companies that discover new revenue streams and can keep growing while paying dividends (for example ABBV and other bio/pharma stocks). In baseball terms I think of dividend value stocks as high average singles hitters. They are consistent performers but you rarely can get a really big inning out of them. Mix them with some low average home run hitters who can get hot and you can run up quite a score.
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Sanrith Descartes
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Sanrith Descartes
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Some of my orders are starting to fill. Its all about buying on fear right??! Tesla almost hit for me at 380, jesus.
Sanrith Descartes
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My TSLA $390 hit.
There is still a ton of trading left and we havent touched the over night lows yet. I am not exaggerating to say I can envision a -5% close on the Nasdaq.
Gravel
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It happens. Often.
Every time it has for us, generally we shoot past the milestone big time the 2nd go around. Which obviously makes sense, as the market recovers and we have even more shares at a lower cost basis, of course we'd look better on paper.
Every drop is a sale. I imagine our October number is going to kind of suck (had hoped to hit another milestone), but as long as Trump wins, we'll probably fly past it by December.
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Sanrith Descartes
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Flobee
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Curious of the opinions here regarding the risk of systemic insolvency once forbearance drops for various debt markets in the coming months? Does anyone else see knock on systemic risks when individuals start defaulting on their homes due to continued unemployment and those effects ripple upward? Am I misunderstanding the economic position we're in? I see so many folks hopeful about future gains but I only see the beginnings of an extended recession after an admittedly amazing run post COVID crash.
Seems to me that we'll be seeing extended asset deflation incoming, bar extensive stimulus that would prop it up for a bit longer I imagine. Unless debt stops meaning anything though the debts will need to be repaid by people who no longer have income.
EDIT: Almost on cue
www.zerohedge.com
Seems to me that we'll be seeing extended asset deflation incoming, bar extensive stimulus that would prop it up for a bit longer I imagine. Unless debt stops meaning anything though the debts will need to be repaid by people who no longer have income.
EDIT: Almost on cue
Zerohedge
ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero
www.zerohedge.com
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Sanrith Descartes
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Don't be surprised if Biden wins that eviction/foreclosure protections are extended until the courts overturn it. It could be years. Real estate is a unquantifiable variable right now.Curious of the opinions here regarding the risk of systemic insolvency once forbearance drops for various debt markets in the coming months? Does anyone else see knock on systemic risks when individuals start defaulting on their homes due to continued unemployment and those effects ripple upward? Am I misunderstanding the economic position we're in? I see so many folks hopeful about future gains but I only see the beginnings of an extended recession after an admittedly amazing run post COVID crash.
Seems to me that we'll be seeing extended asset deflation incoming, bar extensive stimulus that would prop it up for a bit longer I imagine. Unless debt stops meaning anything though the debts will need to be repaid by people who no longer have income.
EDIT: Almost on cue
Zerohedge
ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero
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Blazin
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Credit markets are not showing this at all. HYG is green today. IMO the entire thinking of your post is a wrong approach, don't try to sit there gaming out what you think can or even worse should happen, instead look at the data in front of you. We were told once the extra benefits ran out 3 months ago we were going to have this spike in problems that have not materialized. Look at today's personal spending numbers, so you think people who are on the cusp of losing it all are out there increasing their discretionary spending? Housing market booming, you think when people are about to lose their homes they go out and buy bigger new ones?
Unemployment is high (and declining), and it's high amongst a group that matters very little to our economy. I'm not placing any value judgement on that, it's just reality. I'm not going to get into the politics but the suffering of low wage service sector jobs is not going to drive the overall market. People are also so quick to forget that we have pumped Trillions with a T into the system to offset the very things you are concerned with. IF things deteriorate, which they certainly can, then the data will begin to change and reflect that. Watch credit spreads, watch economic indicators and Trade what is front of you.
TLT is down today, this is not a run to safety decline. We have a lot of unknown right in front of us and that makes buyers not want to step in with new money and some want to take profits off the table. SPY is trading 42M shares at noon. If this run for the hills we are all fucked that would be 130M and credit spreads would be blowing out. Just my 0.02. There is always something to worry about, today tomorrow and forever.
I'm not suggesting what you should do with your money but should still do your best to make those decisions with the facts that are in hand, and not speculative guessing games for the future. We look at the past to help with probabilities of outcomes based on various factors (that part prepares our mind to outcomes it doesn't predict) we then look at what IS and make decisions based on that reality whether even if it doesn't align with that primal part of your brain wired to sense danger and that is driven by fear.
**Note** People sometime have rightly pointed out that I use too much financial jargon or make too many assumptions about areas that people might be familiar with. In the interest of brevity I'm not going to delve into further detail about credit markets and what they tell us about financial system strain. I often type posts like this then just delete them because it feels to me like it's just "too much" People aren't watching gold, the dollar, oil, credit spreads, the vix, asset class behavior, all without a strong knowledge of the past, and without those tools it can be very hard at times to see how one 5% decline may not be like another. I feel it would be irresponsible to just dabble into these ideas with people who could end up hurt by the lack of depth and context for the information.
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Gravel
have it right buy an index fund save as much as you can, buy when you are optimistic, buy when you are neutral, and buy a shit ton when you are fearful. When you are a few years out from retirement start making sure you are sufficiently diversified into more stable asset classes. I'm happy to respond to someone that wants to learn more about a topic but I really don't want to get too far into the weeds when the proper time and due diligence on my part to responsibly convey an idea are not being met. Last thing I'd want is for someone to read a post of mine and do something that could hurt their financial future. I'm leaving the top paragraphs to give context. If this thread turns into WSB or zerohedge it will do nothing but harm to our community.- 5
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Sanrith Descartes
Veteran of a thousand threadban wars
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So if I understand your post correctly I should put all my money into HTZ?Credit markets are not showing this at all. HYG is green today. IMO the entire thinking of your post is a wrong approach, don't try to sit there gaming out what you think can or even worse should happen, instead look at the data in front of you. We were told once the extra benefits ran out 3 months ago we were going to have this spike in problems that have not materialized. Look at today's personal spending numbers, so you think people who are on the cusp of losing it all are out there increasing their discretionary spending? Housing market booming, you think when people are about to lose their homes they go out and buy bigger new ones?
Unemployment is high (and declining), and it's high amongst a group that matters very little to our economy. I'm not placing any value judgement on that, it's just reality. I'm not going to get into the politics but the suffering of low wage service sector jobs is not going to drive the overall market. People are also so quick to forget that we have pumped Trillions with a T into the system to offset the very things you are concerned with. IF things deteriorate, which they certainly can, then the data will begin to change and reflect that. Watch credit spreads, watch economic indicators and Trade what is front of you.
TLT is down today, this is not a run to safety decline. We have a lot of unknown right in front of us and that makes buyers not want to step in with new money and some want to take profits off the table. SPY is trading 42M shares at noon. If this run for the hills we are all fucked that would be 130M and credit spreads would be blowing out. Just my 0.02. There is always something to worry about, today tomorrow and forever.
I'm not suggesting what you should do with your money but should still do your best to make those decisions with the facts that are in hand, and not speculative guessing games for the future. We look at the past to help with probabilities of outcomes based on various factors (that part prepares our mind to outcomes it doesn't predict) we then look at what IS and make decisions based on that reality whether even if it doesn't align with that primal part of your brain wired to sense danger and that is driven by fear.
**Note** People sometime have rightly pointed out that I use too much financial jargon or make too many assumptions about areas that people might be familiar with. In the interest of brevity I'm not going to delve into further detail about credit markets and what they tell us about financial system strain. I often type posts like this then just delete them because it feels to me like it's just "too much" People aren't watching gold, the dollar, oil, credit spreads, the vix, asset class behavior, all without a strong knowledge of the past, and without those tools it can be very hard at times to see how one 5% decline may not be like another. I feel it would be irresponsible to just dabble into these ideas with people who could end up hurt by the lack of depth and context for the information.
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Blazin
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Buy thousands of deep out of the money calls, got to make those tendies.
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Sanrith Descartes
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For those shopping, industrials (specifically defense stocks) are looking like nice entry prices today. I rode them up earlier this year and dumped them near the peak. I restarted a position in GD and NOC so far and am close to entry with RTX and adding to my LMT position. They all beat on earnings have strong balance sheets and are a little safer than growth stocks. I like them to balance my tech/growth stocks.
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