Wednesday, September 20, 2017

Bloomberg: Fed to Shrink Assets Next Month, Boost Rates by Year End

What does this imply for investors?  Raising rates mean raising mortgage rates, too.  Homeowners with fixed rate mortgages will be OK, but those with variable rate mortgages, and new home buyers, will not be OK.  The only reason people of ordinary means can afford to buy a home now is because of the very low interest rates.  There will be fewer home buyers and some of the variable raters will have to sell.  So I foresee an end to the real estate boom currently going on.

Sunday, September 17, 2017

Florida Real Estate

Why do people still buy homes in Florida, esp. southern Florida?  The danger from hurricanes is obvious, and then there's global warming.  Florida is only a few feet above sea level.  If you deny the existence of climate change, then, sure, buy Florida.  It's scary to think that there are so many who believe the seas won't rise.  My prediction, and I'm not alone in this, is that Florida real estate values will collapse completely within 30 years.

Friday, August 4, 2017

Time to sell oil/gas companies?

Looks like it might be time to get out of the energy sector, because electric cars are going to replace gasoline cars.  The EVs will soon be cheaper to buy, maintain and fuel.  Watch this persuasive video from Canada:
The Rise of Electric Vehicles

Friday, July 29, 2016

The Summer 2016 Outlook

Let's review the current situation.
  • The stock market indices are at, or near, all-time highs.
  • Interest rates are near zero.  They've never been this low.
  • Housing prices have recovered from the 2008 slump and are making new highs.
  • Unemployment is low and GDP is growing, albeit slowly.
It hardly makes sense to buy bonds, except maybe short-term bonds.  They pay little interest.  The market doesn't think interest rates will rise anytime soon, but if rates rise, bonds will drop.  Interest rates can hardly go lower, so the risk is all one-way. Keynes showed, in his General Theory, that interest rates do not have a natural rate that they return to.  Instead, interest rates can stay low (or high) indefinitely.

As to stocks, they're not cheap.  The S&P 500 price to earnings ratio is about 25, on the high end historically.  So one would tend to think the top is near and that it's not a good time to buy.

As to housing, it's high-priced, as I'm sure you know.  The very low interest rates of recent years have allowed buyers to pay more, as their mortgage payments are lower than they would be if interest rates were higher.  I also think housing prices have gone up because there is so much immigration - these folks have to live somewhere.

Scenario One:  Interest rates stay low.  Bonds hold steady, stock market ditto, maybe grows a little.  Housing must surely be reaching a top.  If immigration is curbed, it could go down.

Scenario Two: Interest rates rise.  Bonds crash, stock market crashes, housing slumps. Banks need rescuing.

So not a good outlook.  Be cautious.  On the plus side, technology is changing the world.  Today, the top five stocks by market cap were Alphabet (Google), Amazon, Apple, Facebook and Microsoft.  You need to have positions in these or risk getting left behind.

Monday, October 14, 2013

Debt Crisis: Here We Are Again

Once again we have the crisis of raising the US government debt ceiling, or defaulting on the national debt.  The last time this happened, I sold my regular Treasuries ETF and glad that I did.  I still own a TIPS (Treasury Inflation-Protected Securities) ETF, however.  It's down quite a bit this year, but still above what I paid for it.  So I'm wondering if I should sell it ahead of Thursday's possible default by the federal government.  I'm inclined to think so, for two reasons: (1) the default, if it happens, will surely hit the prices of all government bonds, including TIPS, and (2) TIPS, or at least my TIPS fund, are mostly long-term bonds.  Interest rates have nowhere to go but up from today's near-zero levels, and that will hit all long bonds.

Sunday, April 28, 2013

Orders to buy

I should mention that the rules for selling apply also to buying.  If the next earnings announcement is a week away or less, use a market order, else a limit order.

The one thing that's different is that there should be less urgency to act to initiate a position than to close one out.  You know what they say, the best way to double your money is to fold it in half and put it back in your pocket.

Wednesday, April 24, 2013

The best order form for selling a stock

So you've decided to sell, for whatever reason.  What form of order should you use?

Normally, I like to put in a limit order a little bit above the latest trade price.  There is a certain amount of natural fluctuation from day to day, or within a day.  If you put in a market order, you'll probably get the current price or maybe a little lower.  The limit order will in most cases get you more.

How much is more?  I'm thinking a little bit above the most recent day's high.

BUT if there is an earnings announcement due soon, then this misfires.  Stocks will go up if it's a good report and down if it's bad.  If a bad report, your limit order then won't be filled and you'll own the stock at a lower price.  If it's a good report, you'll get your price alright, but then it will trade higher and you'll miss out on that.

If there's an earnings report due within the next week, then use a market order to sell.  Yahoo! Finance will show the next earnings date and it's free.  I'm sure there are other sites as well.

Some folks advocate using a trailing stop order, so that if the stock continues to rise, they'll get in on that.  This has never worked well for me.  There are too many flash crashes these days.  Just yesterday a hacked AP tweet caused one.  So no more stop orders for me.