What Did You Buy Today?

[Otter]

(06-16-2021, 03:09 PM)crimsonghost747 Wrote:

(06-16-2021, 01:19 PM)divmenow Wrote: Powell is an A hole lol What a premature for Powell to say about a possible couple rate hikes 2023 ??

What else can he say?
Inflation is kicking up and interest rate hikes are the most effective way to keep it under control. But you can't raise rates now since that would be destructive to a market riding ridiculous leverage at all-time highs.

So you say "yeah we will see end of 2023" and then keep pushing it forward when necessary.

I remember this stupid game being played from 2009 through 2019. I remember rates getting so eye-wateringly high that I immediately dumped all of my A credit rated DGI stocks so I could buy bonds on margin.

There were so many taper tantrums and speculative taper tantrums that were purely based on rumor, but nevertheless the market kept going up.

I keep going back to the basics:

1. The United States government cannot function with rates back at historical norms, given where the debt is.
2. The United States government is prohibited by the Constitution from defaulting on its debt (Fourteenth Amendment, Section 4).
3. There will be no meaningful cuts to any spending that matters as a substantial percentage of the budget (Medicare, Social Security, and the world's largest jobs program - the United States Military). To do so is political suicide for any party that tries it.
4. That leaves inflation (through the Fed and Treasury continuing to work together to apply modern monetary theory, as they have for decades). U.S. deficits are just a sovereign controlling a global reserve currency increasing the amount and rate of flow of that currency, to stimulate economic activity and growth. There is a difference between managed inflation and hyperinflation. Hopefully the Fed and Treasury don't cause the latter.

Point 4 is where I get caught up on Bitcoin and cryptocurrencies. The U.S. government zealously guards the sanctity of it reserve currency, the almighty Petrodollar. It has allowed us to enjoy outsized economic dominance and growth for roughly 50 years. The first decade after Nixon abandoned the gold standard/Bretton Woods was pretty rough, as the revolutionary change to fiat caused a lot of inflation at the beginning, but since then careful management of that system has brought the U.S. far more wealth than GDP alone should have. The U.S. has every reason to try to regulate Bitcoin out of existence, as it presents a threat to the Dollar, and we don't like threats to the Dollar (Middle Eastern countries have been invaded shortly after threatening to price oil transactions in Euros, surely just a coincidence). That said, anyone who has lived in a country like Nigeria or Venezuela where the government devalues currency at will, imposes currency controls, or otherwise casually seizes people's assets and life savings, knows the value of an asset that can't be inflated, and that allows direct transactions between people without a government intermediary standing between them. Unstoppable force meets immovable object.

[Otter]

The other thing that makes these Fed press conferences so stupid is that no one is allowed to reveal the man behind the curtain. The stability of a currency depends in large part upon the vast majority of people never giving it any thought. So long as people believe that a dollar is a dollar, and that something being a dollar has meaning, then the system works. So, having a press conference where people say "the totally fictitious system that we have created, that most people believe in for some reason, continues to work, so we are just going to let it keep working, and from time to time we will increase the supply of this stuff to keep the thing that we all believe in circulating so the economy keeps working and growing and pesky things like default covenants don't get triggered and tank the economy, or tank the value of all this made up stuff that we collectively believe in thanks to irrational human psychology."

It wouldn't be any different if we used a gold-backed currency, tulip bulbs, or Dogecoin as legal tender. People still have to believe that it is real, and want to engage in economic activity (a fancy word for advanced bartering of goods and services) with the stuff. The global monetary system is a myth, and always has been, but it works great as long as lots of people don't think about it too much.

[fenders53]

Good post Otter. I hope I don't sound overly reactive as I think you perceived yesterday. I think more than half "our money" is invested and doing the boring DGI long-term thing. We don't make the rules and there will be games indeed. I highly doubt it goes any other way. The market will react to these games. SPECs will swing 30%+ in both directions. I don't scare too easily, but I will adjust my risk level a bit when I see fit. I will find opportunity in fear. A greedy market makes me swing 10% more into cash, or a few % of my port into an inflation hedge. The perception of interest rate scares my UTEs into swing trades every year or two. I'll trade that too.

Will I beat the SPY? Who knows but I sure am this year with literally half the risk. That's a win. I will protect it if I see fit.

[crimsonghost747]

Inflation is certainly a must in the modern economy. Not just in the US but in pretty much any western country. I know the EU is absolutely shitting themselves over the amount of debt that some of the members have, and inflation is indeed pretty much the only way to take care of it, seeing as as your points #1 and #3 are true in the EU as well and the ECB will simply not let anyone fail in their debt obligations since that would literally be the end of the euro and most likely the end of the EU. It just won't happen.

But yeah a 2%-3% inflation wouldn't worry me too much. Now if we start talking about 5% then I start getting worried.
Overall, as long as it's below my portfolios average dividend raise % then I'll be fine.
But most people aren't that lucky. The average joe with no investments will be in a tough spot if inflation creeps up.
There is a country somewhere there, far far away, where the YoY inflation was somewhere just north of 2%. And the YoY wage growth? 0.2%.
Someone tell me how that doesn't end up in a disaster for the regular joe.

[crimsonghost747]

(06-16-2021, 04:09 PM)fenders53 Wrote: Will I beat the SPY?  Who knows but I sure am this year with literally half the risk.  That's a win.  I will protect it if I see fit.

The underlined part is super important these days. 
I have been left in the dust by the s&p500 for most years during my investment career. I'm conservative, the s&p500 is not right now. 
I don't really care as long as the dividends keep coming and as long as I know that I can comfortably sit on 95% of my holdings even if we see a 50% correction.

[Otter]

(06-16-2021, 04:11 PM)crimsonghost747 Wrote: Inflation is certainly a must in the modern economy. Not just in the US but in pretty much any western country. I know the EU is absolutely shitting themselves over the amount of debt that some of the members have, and inflation is indeed pretty much the only way to take care of it, seeing as as your points #1 and #3 are true in the EU as well and the ECB will simply not let anyone fail in their debt obligations since that would literally be the end of the euro and most likely the end of the EU. It just won't happen.

But yeah a 2%-3% inflation wouldn't worry me too much. Now if we start talking about 5% then I start getting worried.
Overall, as long as it's below my portfolios average dividend raise % then I'll be fine.
But most people aren't that lucky. The average joe with no investments will be in a tough spot if inflation creeps up.
There is a country somewhere there, far far away, where the YoY inflation was somewhere just north of 2%. And the YoY wage growth? 0.2%.
Someone tell me how that doesn't end up in a disaster for the regular joe.

It has already happened in America:

[fenders53]

I don't allow him to influence my investing strategy much, but I do enjoy Peter Schiff videos. He and a few others really have exposed this monetary house of cards game long ago. But the equity market doesn't care and that makes him wrong for practical purposes. Even if he isn't wrong some decade soon too much lost opportunity if you refused to play by the house rules.

[fenders53]

[quote pid='26813' dateline='1623877908']
Inflation is certainly a must in the modern economy. Not just in the US but in pretty much any western country. I know the EU is absolutely shitting themselves over the amount of debt that some of the members have, and inflation is indeed pretty much the only way to take care of it, seeing as as your points #1 and #3 are true in the EU as well and the ECB will simply not let anyone fail in their debt obligations since that would literally be the end of the euro and most likely the end of the EU. It just won't happen.

But yeah a 2%-3% inflation wouldn't worry me too much. Now if we start talking about 5% then I start getting worried.
Overall, as long as it's below my portfolios average dividend raise % then I'll be fine.
But most people aren't that lucky. The average joe with no investments will be in a tough spot if inflation creeps up.
There is a country somewhere there, far far away, where the YoY inflation was somewhere just north of 2%. And the YoY wage growth? 0.2%.
Someone tell me how that doesn't end up in a disaster for the regular joe.
[/quote]
I bet about half the retirees in the US live off SS only.  It's not important who's fault that is.  It just is, and we can't have 6% real inflation, and the government playing games with the stats and increasing their checks 1.5%.   They were already in trouble the day they couldn't work anymore.  That game won't work for long.

I feel sorry for some of the old folks that work with me at HD.  I'm just there trying to stay out of my retirement to avoid withdrawal penalties for another year.  Some of them are truly there at age 75 with terminal illnesses.  

I'm not optimistic where this is heading in a decade.

[Otter]

(06-16-2021, 04:17 PM)fenders53 Wrote: I don't allow him to influence my investing strategy much, but I do enjoy Peter Schiff videos.  He and a few others really have exposed this monetary house of cards game long ago.  But the equity market doesn't care and that makes him wrong for practical purposes.  Even if he isn't wrong some decade soon too much lost opportunity if you refused to play by the house rules.

Any monetary system that works has to be the result of a collective delusion, because we all have to agree to ascribe value to something. Money is an abstraction/derivative, but holds no intrinsic value other than allowing you to obtain the goods or services you want, because other people are suffering under the same delusion as you and will take money in return for those goods or services.

So, I don't get particularly upset over the fact that large parts of our monetary system are ridiculous on their face. Any system that replaced it would be equally ridiculous, because any monetary system is 100% invented and fake. The system works, major upsets to the plumbing of the system in the past have caused a lot of heartache and unhappiness (like what happened shortly after we withdrew from Bretton Woods), and I'm happy for it to just keep working in the background, and for the vast majority of people never giving it a second thought, because that would be destabilizing.

[fenders53]

[quote pid='26818' dateline='1623878996']

(06-16-2021, 04:17 PM)fenders53 Wrote: I don't allow him to influence my investing strategy much, but I do enjoy Peter Schiff videos.  He and a few others really have exposed this monetary house of cards game long ago.  But the equity market doesn't care and that makes him wrong for practical purposes.  Even if he isn't wrong some decade soon too much lost opportunity if you refused to play by the house rules.

Any monetary system that works has to be the result of a collective delusion, because we all have to agree to ascribe value to something. Money is an abstraction/derivative, but holds no intrinsic value other than allowing you to obtain the goods or services you want, because other people are suffering under the same delusion as you and will take money in return for those goods or services.

So, I don't get particularly upset over the fact that large parts of our monetary system are ridiculous on their face. Any system that replaced it would be equally ridiculous, because any monetary system is 100% invented and fake. The system works, major upsets to the plumbing of the system in the past have caused a lot of heartache and unhappiness (like what happened shortly after we withdrew from Bretton Woods), and I'm happy for it to just keep working in the background, and for the vast majority of people never giving it a second thought, because that would be destabilizing.
[/quote]
It absolutely would be destabilizing.  It may be decades before this game ends and as I mentioned I will play by the house rules.  That doesn't mean I have to load my port with blue chips trading at valuations stretching any historical limit, because nobody can assure me we don't revert to the mean in a year or two.  Maybe near interest rates justify it in the end, maybe it doesn't end like that.

BTW I have a minor in Econ back when they had candles for classroom lighting.  I memorized Keynesian Theory for a grade.  Conversations with you two invoke far more insightful thought in the real-time modern world.  If VSTO or one of my solar stocks does a 50X I'll flip you guys a couple bucks for a good coffee. 

[stockguru]

Won't the big dividend payers suffer now with rising interest rates on the way? Banks, brokerages and industrials should fare well.

I'm wondering if getting into growth stocks like GOOG and FB is the way to play now?

[fenders53]

Will a half point or even a point affect your decision to own MO or an oil company? So much can happen in two years. A UTE or DGI with a 2 % yield and a little too much debt looks less attractive if they aren't growing enough.