Stock Investing and Recession

[jross]

I've been following the stock market and investing for a while now, and I'm curious to hear what others think about the current state of the market and their investment strategies.  Will the market tank by 30% or go up by 20%?  Are you sitting on cash and waiting for the right time to buy or are you riding out the volatility for the long-term?

I was using retirement funds as a set and forget for years.  During the 30% drop in March 2020, I took over direct management and became an individual stock picker.  It was easy to identify the Covid lockdown drop as a buy opportunity and ride the free money press boon.  The inflation fallout was obvious but I didn't expect the war and its consequences.  Energy was an obvious sector for 2022 but its priced sorta high now and its going to tank as the market cycles.  This year is a harder read.  Companies are not as profitable, inflation is high, and the war machine is powered up.  There are conflicting signals that indicate sell and buy.  I keep thinking to move to cash or bonds for security but there is enough conflicting information to cause FOMO.  

[LJB]

if anyone has any ideas on how to turn my $13.67 i have left in savings into the windfall i was promised as a young whippersnapper please do not hold back...

[El Luchador]

I've been investing for 40 years. I'd have been better stuffing into a mattress.   Unfortunately I think it's a bit to late for me. 

[headshuck]

I will continue to buy high, sell low, just before the bounce.

[El Luchador]

Just now, headshuck said:

I will continue to buy high, sell low, just before the bounce.

My wife was talked into buying bit coin 1 month before it peaked. I told her to sell it and buy it back. She didn't. So she apparently subscribed to  your investment model. 

[jross]

I'm going to see a guy later this month on a fish trip.  He's a past retirement gentleman that works in IT security.  He mined 1 bitcoin with some young'un and forget about it years ago.  Then it hit $60K.

[jross]

Starting at $13.67 and adding that same amount monthly for 30 years would cost $4,900 and grow to $25,000 with a compounding interest of 10%.  

Starting at $10,000 and investing $500 monthly for 30 years would cost $190,000 and grow to $1.2M with a compounding interest of 10%.  You can afford eggs now.

Starting at $0 and investing $1000 monthly for 30 years would cost $360,000 and grow to $2M with a compounding interest of 10%.

Starting at $1M and investing $2500 monthly for 15 years would cost $1.5M and grow to $4.7M with a compounding interest of 10%.

A secure return of 4% annually after the nest egg is grown for each scenario above is

• $1K, $48K, $80K, $188K

[LJB]

**eyes glaze over**

**small amount of drool escapes the right corner of mouth**

**lists to the left**

[jross]

My returns were (2020) 22.4%, (2021) 58.3%, (2022) -20.3%, and (2023) 18.3%.  Up 94% since Jan 2020.  Trying to turn my $13.67 into something that allows me to retire before I'm 60.

Over time I've twice made the mistake of raising my standard of living.  I'd like to change back but my family is not excited about the idea of adopting FIRE.

Edited February 10, 2023 by jross

[jmoney]

This month I added to my stable of what I call my castle’s defense. These are funds that I expect to make some money and keep compounding wealth but more importantly avoid the harsh 40% crashes that seem to happen way too often this century. Here is the list. I would advocate putting 2% in each and watching them compound :

VWELX VWINX BALFX DIAMX SPEDX FPACX PPSAX FKUQX MENYX DIVPX ENHRX BAMBX BALPX SGENX

To these add 25% of some DODIX and PIMIX for bonds 

Then sit around 50% in diversified stocks and stop the stock picking. I also did stock picking successfully during pandemic and it’s way competitive again and I’m trying to buy back into funds every time I sell a stock.

I’ve also been buying some 3-4 years cd’s and the etf SPIB which offers excellent yielding investment grade corporate bonds. I’m 41 and at 975k net worth now. I’m around 67% real estate and the rest mostly tax deferred or tax free investments. I’d like to retire around age 55

Edited February 11, 2023 by jmoney

[jross]

What returns are you expecting this year with that strategy?  

Many signs point to a market dump of 20% and that that will offer cyclic buying opportunity.  I’m heavy in a consumer staple stock that has a 60% upside in 2025.  I am trying to judge whether to leave it alone versus move to “cash” as a wager I can buy it back at a discount this year. It’s a recently profitable company that is deleveraging debt.  I’ve considered low return secure investments but want the money free when the time is right. 

I was at my cash out point in Nov 21 and got greedy trying to hold until Feb ‘22 earnings.  The market tanked before my goto cash plan.  I lost three years salary by that summer and ended about one year’s salary down.  I’m close to fully back to Nov 21 numbers.  The speculative stocks are in the trash but the value stocks are good.  This heavy stock is potentially signalling a new bottom and I’m holding for a couple weeks to see if it plays out.  Every bad sector will rotate back in favor…

My net is 30% physical real estate, 5% cash and about 65% stocks. 

I am also 41 and want to retire at 50.  I figured out recently with FIRE calcs that if my wife got a job or if I downsized my house, I could theoretically 8x my 401k balance and retire in 6 years.  As I’m spending now, I will be closer to 55 to retire.  Family is expensive but I choose it every day.

Bidens foreign policy… ugh.

[jmoney]

2 hours ago, jross said:

What returns are you expecting this year with that strategy?  

Many signs point to a market dump of 20% and that that will offer cyclic buying opportunity.  I’m heavy in a consumer staple stock that has a 60% upside in 2025.  I am trying to judge whether to leave it alone versus move to “cash” as a wager I can buy it back at a discount this year. It’s a recently profitable company that is deleveraging debt.  I’ve considered low return secure investments but want the money free when the time is right. 

I was at my cash out point in Nov 21 and got greedy trying to hold until Feb ‘22 earnings.  The market tanked before my goto cash plan.  I lost three years salary by that summer and ended about one year’s salary down.  I’m close to fully back to Nov 21 numbers.  The speculative stocks are in the trash but the value stocks are good.  This heavy stock is potentially signalling a new bottom and I’m holding for a couple weeks to see if it plays out.  Every bad sector will rotate back in favor…

My net is 30% physical real estate, 5% cash and about 65% stocks. 

I am also 41 and want to retire at 50.  I figured out recently with FIRE calcs that if my wife got a job or if I downsized my house, I could theoretically 8x my 401k balance and retire in 6 years.  As I’m spending now, I will be closer to 55 to retire.  Family is expensive but I choose it every day.

Bidens foreign policy… ugh.

Returns are difficult to predict. You want to own some fixed income at these yields because getting 4-5% in bonds is decent growth AND with yield this high it will pressure stock earnings. I’m thinking my diversified hedges will return between -2 and 7%. I expect stocks to return between -6 and 10. So I guess my returns will be between -3 and +8 for the year. Again, besides the bond expectations I really don’t think it makes sense to try and time being in and out of stocks very often. Time in the market tends to beat timing the market. I wouldn’t be surprised if stocks make -15 or +15 this year. Stocks are so hard to predict. I save enough where I’m content to lower my loss potential some since I know I will be contributing a lot of money and I don’t like to lose money. 

[BerniePragle]

An awful lot to think about with retirement.  Just a couple for you:

* Honest question to think about.  If you were able to retire at 50, what would you do with yourself?  Trust me, don't just think about the times when you were on vacation and the weather was beautiful and you would have enjoyed a month or two or twenty off.  Think about the times when you've had a week or two vacation and it's rained almost all of it.  Think about when you have time off in the winter.  I've always loved to read, work on cars, garden, etc, etc but there is something to be said for answering that alarm clock in the morning.  (I know that may be hard to believe, but it's true for the most part.)

* You will have very little knowledge of inflation, your particular health care costs, and many other aspects of the expenditure side of your time from 50 to whenever.  You have little knowledge of how much the government will want you to make up for the last 20 or 30 years of their screwups and many years to come.  I'm only sure that someone will have to pay the freight.  Poor people can't and the ultra rich guys seem to have figured out a way to contribute very little.  That narrows it down a lot.

* You can't be sure of the rate of return of your investments not only from now till 50, but also after 50 to whenever.  Last I knew you couldn't withdraw 401k monies till 59-1/2 so you would need something to live off of till then.  In my opinion, it's extremely debatable if you want to withdraw from your 401k at 59-1/2 anyway.

Everybody's different.  My goals and wants have changed a lot in the 20 years since I was 50.  My wife and I always had jobs that paid very well.  We were lucky to have had many years when it was pretty easy to make 10 to 20 % per year in safe investments.  We've been healthy and don't have any kids or grandkids living in our basement, lol. Most of all we were both lucky to find careers we enjoyed 95% of the time.  We pretty much always lived such that we could survive on either one of our salaries.  You'd be amazed how much more enjoyable jobs are if you can tell whoever you want to go *&%$ themselves if they have earned it.  98% of the time that isn't even necessary if the people who would earn it from you know you would do it.  I once had a worthless, self-serving jackass make some snide remarks about my method of analyzing a system that was well beyond his comprehension.  Things escalated between us.  I zipped up my notecase, shook the hands of the other 4 or 5 people in the meeting, and walked out the door, leaving about $30,000 of a contract behind.  It was worth it.  I had another job in a week anyway.

Think not only about when you think you'd like to retire.  Think about what you'd like to do then.  Not just some of the time, but most of the time.  The toughest questions to answer aren't financial.  They are about life, priorities, and such.

My advice... You're a smart guy, find a job you enjoy, or at least don't mind going to.  Make sure you're getting compensated commensurate with what you're bringing to the party.  Don't plan so much to retire.  Plan to enjoy working till retirement, and maybe beyond.  Just one guy's perspective.  Your mileage may vary.

PS  You're exactly right about the inflation.  Regardless if Biden, DJT, Bobby McGee, whoever is running the country, if the government throws money at companies and individuals without them contributing goods or services (during Covid), there HAS to be inflation.  More money put in circulation, less goods to buy... inflation!

[jross]

It means a lot to me that you would share well-thought advice and I am grateful for it.

I should replace the word retirement with financial freedom to better captain my ship.  

Financially, I expect to work by contact and part time as needed while other opportunities shake out.  I may ramp up on distressed real estate and start a family business.  My eldest currently thinks she is going to start a sports academy but also be an engineer that marries an engineer.  Hey I can help with engineering and sports and business.  My wife may get back to paid work after the kids graduate.

I look forward to being an involved grandparent more than about anything.  If my health allows, I will still play competitive baseball, coach, and may finally spend enough time to properly play the guitar.  The wife says we are traveling more and she’ll have my time.   
 

Work is no longer my identity and I’ve got enough going on to transition without issue.  My mom meanwhile has delayed retirement several times while her husband is out fishing and golfing with new friends.  She doesn’t know what to do with herself and finds her work rewarding.

 

[BerniePragle]

Sounds like a good plan!

[LJB]

my retirement plan is still just slipping over a border and disappearing into the jungle at some point...

that is only half joking...

[BerniePragle]

18 minutes ago, LJB said:

my retirement plan is still just slipping over a border and disappearing into the jungle at some point...

that is only half joking...

Last I knew it was working for Jesse Ventura.  I wish he wouldn't have gone.  I think we could have used him.  Still could.

Note: There was no half joking emoji for me to use.

Edited February 11, 2023 by BerniePragle

[jross]

Am I looking at treasury bill investments in 2023 correctly where the return in 4 months is guaranteed at nearly 4.8%?  Where in theory one can buy 4m maturity bills three times a year and yield 14.4%?  This seems like a no brainer in this market uncertainty.  

[Plasmodium]

17 minutes ago, jross said:

Am I looking at treasury bill investments in 2023 correctly where the return in 4 months is guaranteed at nearly 4.8%?  Where in theory one can buy 4m maturity bills three times a year and yield 14.4%?  This seems like a no brainer in this market uncertainty.  

If these are like savings bonds, the rates are adjusted often and will only return the purchase rate up to the next adjustment.

[jross]

[jross]

I don't know this space very well. I think you are saying that the actual June yield can be different from today's ask yield and that this will change based on market conditions.  So long as the interest rate keeps growing, I would expect the yield to be historically high.  T-bills currently could be a secure place to park cash and it may become less attractive as interest rates drop (much later).

[mspart]

AMC and GME.   Those are the investments for you.

mspart

[BerniePragle]

I'm still all in on Circuit City and Radio Shack.

[jross]

[jross]

I like Coty as a consumer staple.  The company bought another company to increase revenue and was unprofitable and leveraged 7x through 2020 under wrong-domain leadership.  They implemented a turn around plan under an industry renown leader (a boy named sue), leverage is at 4x an on its way to 2x, is now profitable, and is on its way to 2018/2019 share prices in 2025.  Buybacks are planned for 2024 and 2025 and dividends are in discussion at 2x leverage.  There is frequent large continuous insider buying without selling.  I've been buying and selling following the tank to $3 in the pandemic fallout.  Its price has been volatile and is a current buy for me under $9.  It is my largest single holding currently and I'm looking to lighten my risk for 2023 after a 7% rise to $11.17 today.  My short-term exit strategy is $11.00, $11.50, and $12.00 but these 4.8% T-Bills offer more security as a short-term hold while I hold for a potential summer pullback.  

The insider trading caught my attention.  My due diligence allowed for a calculated long-hold risk.  I've been listening to quarterly earnings for a few years now and riding out the volatility.  This recent article covers what some of us have known for awhile.  https://seekingalpha.com/article/4575342-coty-a-deleveraging-story-with-strong-momentum

always do your own due diligence
 

Edited February 14, 2023 by jross