Paradigm
Paradigm
Joined: Feb 24, 2011
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Calder
October 10th, 2019 at 9:11:54 AM permalink
Quote: MaxPen

The questions people need to answer soon is. What happens next as the boomers retire and want their money? Who is going to buy what they are selling? Can their kids afford to buy them out?


What are the Boomers with accumulated wealth going to be "selling"? They don't need to liquidate anything to maintain their lifestyles. They will live in their debt free houses and continue to pull 5-6% off their portfolios each year to do what they want in retirement. There isn't some big sale of real estate & equities that is about to happen because Boomers don't need it to happen to fund their lifestyles.

8% rates of return over long periods of time are very attractive, even after inflation. In 1989 an average CPI item that cost $1, cost $2.07 today...up 107%. A dollar invested 30 years ago generating an 8% annual rate of return is worth $10.06. There is no loss of purchasing power due to inflation when your rate of return is beating inflation.
billryan
billryan 
Joined: Nov 2, 2009
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AxelWolf
October 10th, 2019 at 12:38:09 PM permalink
Quote: SOOPOO

Who would intentionally live in California? Windy day means I have no electricity?

I'm embarrassed that I don't have a standby generator.



Lose power for a few days and suddenly the idea of dropping a few grand on a home generator doesn't seem so crazy.
The difference between fiction and reality is that fiction is supposed to make sense.
Ajaxx
Ajaxx
Joined: Sep 15, 2019
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October 10th, 2019 at 4:02:03 PM permalink
Quote: vegas

Canadian government has been hard on oil companies and especially pipelines. The Trans Mountain Pipeline issue has been a thorn in the side for Alberta who needs it to ship oil to the west coast. They have had a hard time transporting it and have had to resort to using rail cars at a high cost. (It would take too long to go into Trans Mountain so will leave it there) Canadian oil comes mostly from the tar sands and as such it is heavy oil that takes a much more processing for it to be come usable. This takes time and of course money. For companies to sell oil they need to sell it competitively with other countries especially Saudi Arabia who sell it cheap due to much cheaper processing cost. All this means companies in Canada work on much smaller margins and profits.



It sounds like you have done some solid strategizing on the profitability of these positions, and they may very well turn out to beat the market, so well done there. That said, I have to bring up the fact that maximized returns are not the only factor to consider when deciding where to put your money. The size and anonymity of the stock market make it easy to forget that holding a stock or bond is in a very real sense becoming a part-owner of or lender to a company, and in the process giving that company more capital and power to expand its operations. It's voting with your dollar.

If someone found a regulatory loophole that allowed them to dump toxic waste in a small town's reservoir, and offered us a 50% stake in a perfectly legal venture that's returning 25% a year exploiting that loophole, I would hope (and I'll be the first to admit it'd be tempting) that all of us would turn that down on principle. It's a little harder to do the right thing if someone offers you a 10% stake, because the company will likely expand and profit with or without you, which means you'll feel less personal responsibility if you do buy in and more FOMO if you don't. But if you thought it was unethical at 50%, it's hard to make a philosophically-consistent argument that there's some percentage below which it becomes okay (assuming you believe in voting in elections, or refraining from littering, or not stealing small items from supermarkets, or anything else that involves large-scale collective action).

I know that oil companies are more complex than that over-simplified example, but the business model is still to create a net-good for a few (the investors) at the expense of a net-bad for everyone else (the planet). These are not local companies providing a service to local people who otherwise would be left without fuel and with a significantly lower quality of life. They are just adding supply to a competitive global market, which means their growth translates into more fossil fuels burned. If their balance sheet is currently anemic, that is a good thing, and we should divest and hope it stays that way.

Luckily, even if you put profits first, there's a ton of evidence that ESG integration (incorporating environmental, social, and governance concerns) often means lower risk and higher returns, which should make sense; like it or not, the world is becoming more environmentally and socially conscious, so it's basically just betting the long-term trend. For example, the 2018 US SIF Report on US Sustainable, Responsible and Impact Investing Trends gives a 13.6% compound annual growth rate as a class for SRI (socially responsible investing). That may be part of why the "big guys" (who, as much as we may not like it, have a lot more data and market expertise than we do) aren't buying these discount oil stocks right now. If you're looking for alternative exposure in the energy sector, check out CRBN ó +15.19% year-to-date.
Last edited by: Ajaxx on Oct 10, 2019
"Not only [does] God play dice... he sometimes confuses us by throwing them where they can't be seen." ~ Stephen Hawking
Calder
Calder
Joined: Mar 26, 2010
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October 10th, 2019 at 4:15:52 PM permalink
Quote: Ajaxx

...I know that oil companies are more complex than that over-simplified example, but the business model is still to create a net-good for a few (the investors) at the expense of a net-bad for everyone else (the planet)...


Yes, that's exactly what it said in my most recent XOM annual report (in code, of course).
Ajaxx
Ajaxx
Joined: Sep 15, 2019
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October 10th, 2019 at 4:32:54 PM permalink
Quote: Calder

Yes, that's exactly what it said in my most recent XOM annual report (in code, of course).



Must have been some creative stats in that report; Exxon's been anything but good for investors lately. It's -19% for the last 3 years, -16% last 52-weeks.
"Not only [does] God play dice... he sometimes confuses us by throwing them where they can't be seen." ~ Stephen Hawking
unJon
unJon
Joined: Jul 1, 2018
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Thanks for this post from:
Ajaxx
October 10th, 2019 at 6:19:55 PM permalink
Want to be on record to say that Ajaxx is batting 1.000 so far on post quality. Even if you donít agree with his positions it is a pleasure to read his posts.
The race is not always to the swift, nor the battle to the strong; but that is the way to bet.
vegas
vegas
Joined: Apr 27, 2012
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October 10th, 2019 at 6:28:39 PM permalink
Quote: Ajaxx

It sounds like you have done some solid strategizing on the profitability of these positions, and they may very well turn out to beat the market, so well done there. That said, I have to bring up the fact that maximized returns are not the only factor to consider when deciding where to put your money. The size and anonymity of the stock market make it easy to forget that holding a stock or bond is in a very real sense becoming a part-owner of or lender to a company, and in the process giving that company more capital and power to expand its operations. It's voting with your dollar.

If someone found a regulatory loophole that allowed them to dump toxic waste in a small town's reservoir, and offered us a 50% stake in a perfectly legal venture that's returning 25% a year exploiting that loophole, I would hope (and I'll be the first to admit it'd be tempting) that all of us would turn that down on principle. It's a little harder to do the right thing if someone offers you a 10% stake, because the company will likely expand and profit with or without you, which means you'll feel less personal responsibility if you do buy in and more FOMO if you don't. But if you thought it was unethical at 50%, it's hard to make a philosophically-consistent argument that there's some percentage below which it becomes okay (assuming you believe that you believe in voting in elections, or refraining from littering, or not stealing small items from supermarkets, or anything else that involves large-scale collective action).

I know that oil companies are more complex than that over-simplified example, but the business model is still to create a net-good for a few (the investors) at the expense of a net-bad for everyone else (the planet). These are not local companies providing a service to local people who otherwise would be left without fuel and with a significantly lower quality of life. They are just adding supply to a competitive global market, which means their growth translates into more fossil fuels burned. If their balance sheet is currently anemic, that is a good thing, and we should divest and hope it stays that way.

Luckily, even if you put profits first, there's a ton of evidence that ESG integration (incorporating environmental, social, and governance concerns) often means lower risk and higher returns, which should make sense; like it or not, the world is becoming more environmentally and socially conscious, so it's basically just betting the long-term trend. For example, the 2018 US SIF Report on US Sustainable, Responsible and Impact Investing Trends gives a 13.6% compound annual growth rate as a class for SRI (socially responsible investing). That may be part of why the "big guys" (who, as much as we may not like it, have a lot more data and market expertise than we do) aren't buying these discount oil stocks right now. If you're looking for alternative exposure in the energy sector, check out CRBN ó +15.19% year-to-date.





Well said and you make some excellent points. The long term for automobiles is getting away from gas but this will be a long slow process but something to consider none the less. Oil price will increase in the coming years and that will give a needed short term boost for stocks. Many companies are buying back their own shares at huge discounts. Most are way under water right now but they are looking down the road.

You can't time the market but many try. Now until the end of this year is going to see energy drop even further as I believe oil will drop some more and then the huge sell off for tax purposes happens. Happens every year as people want to sell their big losers. Beat up stocks drop even lower. It is also a buying opportunity for those willing to take a chance.

Then next will come the downturn in North America.....but that is another topic.
50-50-90 Rule: Anytime you have a 50-50 chance of getting something right, there is a 90% probability you'll get it wrong
Ajaxx
Ajaxx
Joined: Sep 15, 2019
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October 10th, 2019 at 9:30:02 PM permalink
Quote: vegas

You can't time the market but many try. Now until the end of this year is going to see energy drop even further as I believe oil will drop some more and then the huge sell off for tax purposes happens. Happens every year as people want to sell their big losers. Beat up stocks drop even lower. It is also a buying opportunity for those willing to take a chance.

Then next will come the downturn in North America.....but that is another topic.

I agree ó timing the market is a lot more difficult than people usually think. That said, it sounds like you still have some predictions, specifically that these energy stocks may go even further down before they go up. If you think that's likely, are you planning on selling or even shorting the 5 stocks you own? You mentioned liking the dividends in your original post, but I'm sure you can find stocks that pay decent dividends and that you expect to go up in value. Or, if you really think the dividends are better than what's already priced-in to those stock prices, you could just buy those stocks the day before the ex-dividend date and then jump right back off the sinking ship.

I ask not to give you a hard time. It's just I know (from having done this myself) how tempting and potentially dangerous it is, the idea of finding the diamond in the rough ó that one stock that everyone overlooked, including those stuck-up-Wall-Street-too-big-to-fails-that-possibly-screwed-you-in-2009. You buy it at the absolute bottom, and then you start imagining the price doubling ó which doesn't seem too much to ask when it's only at $2.38 ó and how good it would feel to be up 100% and have your theories validated and feel smart, and before you know it you're hoping with your heart instead of thinking with your head. The cold truth is that there is no such thing as overlooked stocks anymore. There's a finite number of publicly traded companies ó half a million worldwide, less than 10,000 total in the U.S. and Canada ó and firms like Goldman Sachs have the resources and data to train a machine-learning algorithm for every single one and create a custom model that gets updated every fifteen seconds. If Canadian energy stocks aren't selling, it's because someone with more information than we could possibly dream of doesn't think they should be. The internet is full of people with stories about how they saw something "obvious" and capitalized and crushed the market, but such is the nature of randomness ó it'd be weird if there weren't some subset of speculators that got lucky, just as it'd be weird if 10 players at a roulette wheel were all down exactly -5.26% after an hour. That doesn't make it a +EV play to try your luck.

I know it's boring, but I agree with many of the posters earlier in this thread: for those of us that don't have access to an army of quants and unlimited computing power, it's hard to make an argument for doing anything besides buying a low-expense, well-diversified index fund (preferably one like SPYX [+18.91% year-to-date] that excludes unethical corporations). If you are going to look for discount stocks, though, I would urge you to at least limit your search to socially-responsible companies, so you don't find yourself in the uncomfortable position of giving money to and rooting for what National Geographic called "the world's most destructive oil operation." Also, if you really think a security is due for an upswing, there's no need to actually hold a position while you wait ó it's usually much better to set an alert or trail stop order and hop on once it's started to climb a bit than to aim for buying something at rock bottom, when there's a decent chance that whatever pushed it down that far is still going on.
Last edited by: Ajaxx on Oct 10, 2019
"Not only [does] God play dice... he sometimes confuses us by throwing them where they can't be seen." ~ Stephen Hawking
jorgea
jorgea
Joined: Jul 16, 2012
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October 23rd, 2019 at 3:43:41 PM permalink
The stock market is a gamble in most cases.
Ace2
Ace2
Joined: Oct 2, 2017
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October 23rd, 2019 at 4:55:32 PM permalink
Quote: MaxPen


Let's use 20 years. I think the DOW closed around 11k in 1999. Today it's like 27k. So you got 2.5x during that period. But had you been in Gold which closed at 290 or so and is 1500 today you would have a 5x gain over the same period.
.


The 11k Dow base is the very top of a cycle (up 10x from 1980 and culminating with the dot-com frenzy). From that top, 2.5x isnít great but not bad (about 6.5 % pa with dividends). The ride is never straight up, but over the the long term it is unquestionably up.

For an equal comparison, letís also measure gold from its 1980 top of $1000. 20 years later it was down 70% at $300, now itís at $1500, for a 40-year nominal return of 1% (after inflation about negative 4% !!!). Over the same 40 year period, $1000 invested the Dow would now be worth $27,000, before dividends...$55,000 with 2% dividends reinvested. So since 1980 the Dow outperformed gold by 3600 %.

Gold pays no dividends since itís not even an investment...assets generate income, and they are valued by their earnings potential. Gold has no earnings so itís simply worth what the next sucker will pay for it.

You cannot compare the Dow, which is an investment in the US/Global economy to gold, which is at best ďa store of value used during ancient timesĒ

All asset classes (stocks, real estate) are long term when it comes to capital gains. And ďlong termĒ might be as long as 25 years, though youíd have to be very unlucky t to have to wait that long, like you invest everything (which you should never do anyway) in the Dow in 1929.
Last edited by: Ace2 on Oct 23, 2019
Itís all about making that GTA

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