or Connect
Styleforum › Forums › Culture › Business, Careers & Education › Talking stocks, trading, and investing in general
New Posts  All Forums:Forum Nav:

Talking stocks, trading, and investing in general - Page 226

post #3376 of 5561

Quote:

Originally Posted by idfnl View Post


Ok, help me out here because I'm a bit confused.

Lets consider it money supply, I use printed generically, its not in circulation per se unless it is lent. So isn't that money sitting there in reserve? You call it swapping, but in reality isn't the Fed buying bank assets and its own bonds? This money exists on balance sheets. You can't just snap a finger and it disappear. I think what you are saying is that unless that money is released into the money supply it won't trigger inflation.
 

 

Essentially, we disagree over is the fundamental nature of banking; the exogenous vs endogenous theory of money. I subscribe to the endogenous theory, so I'll do my best to explain it.

 

Private sector banks create all the money in our modern monetary system. They create money by making loans. Banks first extend credit, simultaneously creating a deposit, and then collects deposits and reserves after the fact. The amount of money they create depends on their risk appetite. When risk appetite is high, liquidity appears to be abundant and vice versa.

 

In the aggregate, banks don't lend reserves (the money multiplier is a myth that exists only in our textbooks.) They can shuffle them amongst each other but ultimately they stay in the banking system. Its a closed loop.

 

When the Fed's desk engages in QE two things can happen: 1) the bank gets the reserves and the Fed gets the bond, assuming the bank is the seller or 2) if QE is done via a non-bank (i.e. asset manager) the individual receives a deposit, sells the bond to a bank, and the bank on-sells a bond to the Fed. The important thing to take away is that the net worth of the private sector doesn't change, only the composition of its capital structure.

 

Quote:

Originally Posted by idfnl View Post

I have the feeling that they want inflation, though. I believe they want to use it to water down the deficit. Interest rates jumped very recently, how did the Fed want that? It seemed like a market force to me.
 

Of course Bernanke wants inflation, he is a student of the great depression. He recognizes that in an economy with a large private sector debt, there is a relationship where a fall in asset prices causes a shortage of dollars, thus producing deflationary pressures that can spiral out of control, a la the great depression, if the central bank does not intervene.

 

The Fed has nothing to do with the deficit, that is fiscal policy, the Fed focuses on monetary policy. Don't conflate the two so liberally.

 

The Ten Year has increased 1% from the lows of May. That is it. The One Year has actually decreased. If the Fed wanted to bring the long end down, they would simply announce that they were targeting a specific yield on the 10, 20, and 30 year bond, crush a few foolish bond traders, and let the market do the rest.

 

Quote:
Originally Posted by idfnl View Post


If the market tanked, you'd be rolling in a short ETF. I wouldn't put much in it and it would be a short term trade of a matter of days, I want to stay in cash and GLD.

That is exactly the point. What makes you so sure you will be able to put on that position in time? You and everyone else is looking for that trade. Can you identify a major market break before everyone else? What happens if you get your timing wrong? What if there is lots of volatility? It seems like an exorbitant amount of risk relative to the reward.

 

You say stick with gold, but why? What happened to gold in '08? It lost value when investors needed it most. Do you think this time is different? Precious metals are small and relatively illiquid markets relative to the kinds of positions the biggest 5 minute macro tourists have. And when they decide to leave the door is going to look surpisingly small. Does that not concern you?

post #3377 of 5561
Quote:
Originally Posted by indesertum View Post

If you had $100 million dollars what would be the most painless way to make steady gains on it without having somebody else manage it? ETFs?

interesting discussion.
i'm equally clueless about this type of stuff so how about a more realistic question that would be relevant for a lot of SF-ers?
i have a healthy 401K and savings account but never really looked in to investing until now, did not feel like i had the disposable income.

i'm in my mid-30s and thinking i would like to invest around 20 - 30K a year with a view to growing it for retirement.
what type of investments should i be looking at? i don't want to spend a whole lot of time thinking about it, but obviously i'm prepared to do my research.
post #3378 of 5561
ETFs give you immediate liquidity and won't require you to negotiate with the fund sponsor. By contrast, Vanguard won't take a large investment in their index funds if they suspect you're just using it as a parking place or trading vehicle.

But if you're in it for the longer term, index funds (or separate accounts, if you're a very big fish) are a better deal. You may pay a bit more going in, but will have next to no fees over the life of the account. And unless there are a lot of redemptions by other shareholders, you won't have a lot of taxes.

Also, you won't have the kind of operational concerns that might spring up with ETFs, given that HFs will use them to short and there are a lot of other reasons that they might blow up. None has, that I know of, but there are risks.
post #3379 of 5561

I moved to a more passive Index Fund based retirement planning.  What a lot of people do not take into consideration is that their 401(k), Roth IRA, and other investments should be looked at as one basket of retirement funds.  So when you figure out what sort of asset allocation you want (60% stock/40% bonds) or something like that, you look at your whole portfolio.  I currently sit at 20% bonds, 50% US stocks, 20% International Stocks, 10% REITs.  I manage my fiancee and my retirement accounts as 1 basket and have found the cheapest funds to achieve our desired asset allocation.  Her 401(k) sucks in terms of what they charge for fees and she did not feel right not contributing any to her 401(k) and me increasing my % to make up for hers.  

 

If you really want to get passive, see this artcile :http://www.marketwatch.com/story/the-ultimate-buy-and-hold-strategy-2013-07-17

post #3380 of 5561
Why REITs?

Article was really good thanks
Edited by indesertum - 7/31/13 at 6:49am
post #3381 of 5561

Gives us some diversification from an otherwise 80/20 split.  Also my fiancee comes from a background of owning rental property and instead of buying property ourselves and having to learn to maintain it, the REITs give us some of that exposure.  We will diversify a little more as our current portfolio grows but that is currently how it sits.  I had a plan similar to that in the article then found the article and book marked it.  At the end you can go to his website for better views of the graphs and the funds he recommends.  I like passive investing myself

post #3382 of 5561
Quote:
Originally Posted by idfnl View Post

Look at the chart since '95. Its tested that range a number of times.

Leaving aside the relative values over time, I seem to recall a few things happening since '95 aside from the occasional softening of investor sentiment.
post #3383 of 5561
Nvm
post #3384 of 5561
Quote:
Originally Posted by seeldoger47 View Post

Stuff

The Fed used to target money supply rather than interest rates.

Narrow money supply is, by definition, something that the Fed can create. And they have. A lot.

And banks don't just sit on excess reserves which is exactly why every regulator wants to impose leverage ratios more stringent than what banks would maintain on their own.
post #3385 of 5561
Quote:
Originally Posted by Piobaire View Post

I rarely talk about individual buys, as I make no bones about the fact I'm mainly a passive investor, but I just made a nice buy of IWM (Russell 2k Index).

And the ultra rare follow up to one of my rare posts here...so got in for about $95 that day and got out today at $105 on half of what I bought. Will hold the other half for who knows how long. For me that is a big score in six weeks.
post #3386 of 5561

Very nice Piob!  

post #3387 of 5561
Anyone here park their cash in an S&P 500 ETF?

I have too much idle cash laying around that's going to waste and I'm looking to invest in a single ETF for the short-term (next 6 months or so).

Bad idea?
post #3388 of 5561
Quote:
Originally Posted by GreenFrog View Post

Anyone here park their cash in an S&P 500 ETF?

I have too much idle cash laying around that's going to waste and I'm looking to invest in a single ETF for the short-term (next 6 months or so).

Bad idea?

 

As long as you are okay with the risk of losing money then you could park it there.  There has been talk of a pull back for a while but it could still be a strong bull market and rise for another 6 months.  With the recent US and Interpol terror alerts, something outside of the stock market could have effect that lowers it a few % or more.  But if you want some sort of interest maybe a savings account as they usually give you an introductory higher percentage for 3-6 months?

post #3389 of 5561
Id, even if your gut is correct, sometimes these things can take a very long time to become reality. I would not want to sit on a leveraged short ETF waiting for people to become depressed about the market. Being short too early is a bad way to go, IMO. How many shorters got completely crushed prior to the tech bubble bursting when they were 6 months early.

I'm buying stocks on dips, as I usually do. They are expensive in my opinion so I'm avoiding adding to anything in the more expensive sectors unless they've seen some pretty good sell offs, like big dividend payers such as utilities. Many businesses have improved dramatically in the past 5 years, so the E has fallowed the P to some degree. I have been moving into enough cash to take advantage of a dip. I dont expect the stock market to be cut in half, I think that would take more than the fed tapering their buying.

The threat of tapering in June caused a decline of about 900 points.
Edited by SkinnyGoomba - 8/4/13 at 11:50am
post #3390 of 5561
Quote:
Originally Posted by jbarwick View Post

As long as you are okay with the risk of losing money then you could park it there.  There has been talk of a pull back for a while but it could still be a strong bull market and rise for another 6 months.  With the recent US and Interpol terror alerts, something outside of the stock market could have effect that lowers it a few % or more.  But if you want some sort of interest maybe a savings account as they usually give you an introductory higher percentage for 3-6 months?

I am comfortable with losing cash and I do have a pretty high risk-appetite so I don't want to simply park my cash in a regular savings account that's going to give me, what, 30-40 bps? Money market funds are out of the question because the bps on those are even more laughable and I obviously don't have the size of a cash position to warrant parking in a MMF.

That leaves me with the S&P 500 ETFs and the market has obviously been performing very well lately, but you do raise a very good point on the recent alerts on terrorism.

I'll hold back a week or so and see how that event plays out. Good call.
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: Business, Careers & Education
Styleforum › Forums › Culture › Business, Careers & Education › Talking stocks, trading, and investing in general