What Did You Buy Today?

[Otter]

Another way to think of it is, if interest rates went to -6% overnight, where would you put your money? I wouldn't put it in bonds or savings accounts guaranteed to lose money. I would be willing to pay a premium to obtain equities that are growing their earnings. So would everyone else in the market.

[vbin]

(03-25-2021, 11:06 AM)Otter Wrote: A P/E of 15 representing a benchmark for value was formulated when the Federal funds rate was 6%. Even then, investors would traditionally pay 20 or more for "blue chips" or "aristocrats."

When interest rates crater 75% and stay near historical lows for more than a decade, asset competition comes into play. Money ends up invested somewhere. It tends to go where the largest potential returns are, which can re-set traditional valuations that were measured against the expectation of treasuries yielding 6%.

I'm not saying everyone should go out and load up their portfolios with junk-rated equities with no revenues to speak of, but TINA is a real phenomenon, and I am not too keen on fighting the Fed. I sold my SPY puts last year pretty damn quick after the Fed opened the money floodgates. There are absolutely zero signals from the Fed of a near-term tightening of monetary policy. All market-directed statements from Powell and Yellen signal exactly the opposite.

Oh Grantham had something to say on this on the lines of just becouse one thing is bad we are to go for something utterly ludicrous?(worth listening to his interview with bloomberg) What you are saying makes sense but the pe of 35-60 is still not justifiable. What stops feds to realize they have been wrong all along and raise interest rates to 3% and let's the zombies die out in short term.

Apple just 2-3 years ago was reading below 20 pe when people were hating it for not innovating suddenly it's the best on the street( mostly after buffet bought)

[Otter]

(03-25-2021, 11:21 AM)vbin Wrote:

(03-25-2021, 11:06 AM)Otter Wrote: A P/E of 15 representing a benchmark for value was formulated when the Federal funds rate was 6%. Even then, investors would traditionally pay 20 or more for "blue chips" or "aristocrats."

When interest rates crater 75% and stay near historical lows for more than a decade, asset competition comes into play. Money ends up invested somewhere. It tends to go where the largest potential returns are, which can re-set traditional valuations that were measured against the expectation of treasuries yielding 6%.

I'm not saying everyone should go out and load up their portfolios with junk-rated equities with no revenues to speak of, but TINA is a real phenomenon, and I am not too keen on fighting the Fed. I sold my SPY puts last year pretty damn quick after the Fed opened the money floodgates. There are absolutely zero signals from the Fed of a near-term tightening of monetary policy. All market-directed statements from Powell and Yellen signal exactly the opposite.

Oh Grantham had something to say on this on the lines of just becouse one thing is bad we are to go for something utterly ludicrous?(worth listening to his interview with bloomberg) What you are saying makes sense but the pe of 35-60 is still not justifiable. What stops feds to realize they have been wrong all along and raise interest rates to 3% and let's the zombies die out in short term.

Apple just 2-3 years ago was reading below 20 pe when people were hating it for not innovating suddenly it's the best on the street( mostly after buffet bought)

The Fed has two policy objectives: full employment and an annual inflation target of 2%. Neither would be served by a sudden raising of interest rates to 3%. Tied into those two considerations are the cost of servicing the national debt, which cannot be defaulted on (written into the Constitution). Making it harder for the government to service the debt, to the point that it impedes the orderly functioning of government, doesn't serve the interests of government. So, the treasury and Fed work hand in hand to make sure that doesn't happen. Economic policy is also partly national security policy. 

If the treasury cared about the current yield on the 10yr, the Fed would buy 10yr treasuries at whatever price/yield combo deemed sufficient to set the price of those instruments wherever treasury wants it to be. 

I have no idea what the proper yardstick for P/E "value" is with negative real interest rates (even the 10yr is negative on a real basis), which are at least 75% below historical standards. It can't be whatever the yardstick was before, but TSLA with its 1000+ P/E is probably too high.

[fenders53]

(03-25-2021, 11:21 AM)vbin Wrote:

(03-25-2021, 11:06 AM)Otter Wrote: A P/E of 15 representing a benchmark for value was formulated when the Federal funds rate was 6%. Even then, investors would traditionally pay 20 or more for "blue chips" or "aristocrats."

When interest rates crater 75% and stay near historical lows for more than a decade, asset competition comes into play. Money ends up invested somewhere. It tends to go where the largest potential returns are, which can re-set traditional valuations that were measured against the expectation of treasuries yielding 6%.

I'm not saying everyone should go out and load up their portfolios with junk-rated equities with no revenues to speak of, but TINA is a real phenomenon, and I am not too keen on fighting the Fed. I sold my SPY puts last year pretty damn quick after the Fed opened the money floodgates. There are absolutely zero signals from the Fed of a near-term tightening of monetary policy. All market-directed statements from Powell and Yellen signal exactly the opposite.

Oh Grantham had something to say on this on the lines of just becouse one thing is bad we are to go for something utterly ludicrous?(worth listening to his interview with bloomberg) What you are saying makes sense but the pe of 35-60 is still not justifiable. What stops feds to realize they have been wrong all along and raise interest rates to 3% and let's the zombies die out in short term.

Apple just 2-3 years ago was reading below 20 pe when people were hating it for not innovating suddenly it's the best on the street( mostly after buffet bought)

We can cherry pick examples in the longest bull market ever, using one of the finest companies to ever exist.  We can also find some blue chips with little hope of growing 3% for the foreseeable future and a PE that should cause more than a little alarm.  All of you could list one in an instant if you actually look at research.  In the end we are all going to grab a thesis and convince ourselves it is valid.  I enjoy the chat in any event.    

BTW TINA is Very real.  You all read my comments as I accumulated $100K in put option sell premiums for my Age 60-61 Account (in case I decide my pensions aren't enough to live comfortaby).  It's been there awhile now.  I can buy some nice stuff over 2 years with $100K if I choose too.  $100K is a big deal to me.  Collecting 2% as I accumulated and now it earns only 1/2%.  I might as well grab a couple twenties every week and light a match to it as it loses buying power a few years from now.  It does bother me but not enough to buy some extra NKE shares today. 

[fenders53]

I've decided I'm building my own Green Power "ETF" starting tomorrow. I've tried to do adequate research and my success with options has been more than very acceptable, but that's not a durable long position. I've owned the popular green ETFs and they were successful the past 12 months and I enjoyed some of that, but they are simply full of hyped trash with little hope of future returns and no hope of profits for years. Just not my style. Those ETFs were extremely successful exactly because they invested in trash but that doesn't work for me as a buy and hold plan. They are getting wrecked now for good reason. So I will do it myself. I will greatly enjoy tracking them and making very minor adjustments as I go. I'm not so much interested in green EV, but the supporting backbone for that and the gradual move towards residential and business "village" green power. Wish me luck.

[Dividendwayfarer]

As usual I added some (a tiny bit) NKE & TSM today.

[fenders53]

(03-25-2021, 01:58 PM)Dividendwayfarer Wrote: As usual I added some (a tiny bit) NKE & TSM today.

It's just what we do everyday lol.  I have  a half position in TSM now.  Unless it dips  considerably more I think I might add to different chip stocks.  I will be very surprised if TSM doesn't run up when tech settles down.

[divmenow]

Sold out of HII and put the proceeds into APD and AAPL

[Otter]

Took some LMT/LHX dividends and bought DKNG and PLTR.

[Otter]

Also, kudos to whomever bought the 4/1 $56 strike CAH covered calls I sold a few weeks back. Naturally the stock that has been flat/sideways for the past year decides to go straight up right after I sell some calls.

Need to figure out what to replace CAH with . . .

[divmenow]

(03-26-2021, 09:52 AM)I Yo Otter Wrote: Also, kudos to whomever bought the 4/1 $56 strike CAH covered calls I sold a few weeks back. Naturally the stock that has been flat/sideways for the past year decides to go straight up right after I sell some calls.

Need to figure out what to replace CAH with . . .

The stocks that have been consolidating and have done nothing are the ones going up now. Even T is moving now   Maybe the drug stocks are next to run.

[divmenow]

HD new high. $301. Very nice. $400 is on the way now ?