The Stock Market - A daily diary

Well I will throw your same comment back on you in the same way, why do you assume that we will return to 160-170 earnings on the S&P? Because rates are low because the FED is our wet nurse, because Trump says so? I dont know how someone can think this is a two quarter dent and then all is good again?

Has our RE market taken a hit? Has the CLO market taken the hit that is coming? Have all the bad loans from the oil shale group sorted themselves out and are all the losses dealt with? Are there any ripple effects of these obvious issues in front of our face? Have you seen that the muni universe is having issues and that the rating firms are only starting to take action on downgrades? How will that change debt pricing and debt instruments? Will there be any other type of "oil" disruptions and how long will it take for oil to sort itself out? Are we going to see the obvious relapse when these idiotic south states re-open and we revisit more death and loss? What about a global relapse or a place like India who thinks they can reopen after a few weeks with their population density?

So this quarter and next will be the end and we will be smooth sailing back to the S&P highs and higher? No damage or long term impact? No worry that the float for companies are going to expand like United did tonight or that buybacks are obviously going to slow going forward? What is the impact of a lending giant like JP not offering HELOC loans and tightening lending standards? Any potential dirt hiding in these banks closets that they are trying to minimize right now hoping for the best?

Nah....Trump says its all a hoax scam to get him out of office so we should be back to normal in a month or so, back to leveraged high frequency trading to over 3k on the markets!

ALL things considered, I will take a wild guess that the next decade will result in a positive return. 

Market bears with a view of extreme pessimism were not served well over the past decade as their relative wealth took a beating. 

This is fact.

It is also a fact that I can not predict the future.

Just for fun I went and took a look at the 30 and 10 yr treasury charts and went back to when I did my 15 yr mortgage and compared..

So when I did my mortgage it was almost exactly five years ago and the 30 yr bottomed at 2.25 the 10 was at 1.68. So if by some miracle I caught the bottom of the bottom back then those are the rates that mortgages were based on and at that time I nailed a 2.75 rate.

Fast forward to the present and today the 30 yr is at 1.16 and the 10 is at .57. So the differential from that time to now is 1.09 percent on the 30 and 1.11 on the 10 year...

The lender I used posts online fresh rates daily so today the 15 yr mortgage they are offering, same product as mine and in fact I got a no-cost loan, the rate of 2.75 also included all closing costs, I paid nothing at close but funding my escrow and I got the escrow back from the previous loan, it was a wash. 

So the rate they are offering today is 3.25 which is .50 higher than the rate I have been paying on for five years and at the same time the rates used to base mortgages are a full one percent lower...how does that work?

In fact the situation is worse because lenders like mine are likely tapping FED funds and also using more short term funding so Id bet their cost of the loan is near .25 percent...or lower.

How does that work...rates lower for the lender, but mortgage rates are higher....I can tell you how it works, the little guy is getting the stiff one as usual and the lender(s) are holding rate and making more money in the process.

Historically rates should be less than 2 percent now...maybe more like 1.50 on a 15 yr...but that cannot happen for obvious reasons.

Wall, the point about buybacks is a point I think a lot of people will miss.  So many companies are ceasing their buybacks for the foreseeable  future, that it is going to make EPS figures come back to earth,  further inflating the P/E ratio of the S&P.   

Its also been one of the largest sources of buying flow for the last five years in the market...

That is for sure.. the prior bull market was noted as the most hated bull market ever, because the retail investor largely sat it out.   

Shocking news flash came across....banks getting sued for putting their big clients first on this loan scam thing and shutting out the little guy. JP, BofA, Wells, USBank etc...

Who would have thought that the cheaters who make more vig off larger loans would do the wrong thing?

Sorry. Just seeing this. 

Wow!  A lot of things in this.  Obviously, I am a C fund guy.  But, when you are retired there are so very many considerations.  Obviously, if you are not at least 55 (depending) or 59.5, you have to look at taxes.  Then you have to look at how you are taking your withdrawals — and this depends on a lot also.  Where from? Roth, traditional.  Do you need steady income or need to fund just once a year.  All of these things matter in how you keep it invested.  

Without knowing way more particulars it would be hard to tailor a plan.  But for sure I would NOT be moving it around a lot and trying to time the market.  Do NOT do this with retirement funds.  

There are a lot of good investment forums online.  There are some good financial/retirement experts to sit down with.  

There is something to be said for some in the G fund depending on needs and risk.  Being retired you should not be as risky.  

My opinion is the market will do what it always does — go up longterm.  But that matters more to a 25-year old than a retiree.  But if you have a substantial amount already in savings — then you probably just need less risk and steady return.  

Assuming everything is paid off and you just have standard monthly bills —  I would get a wise mix for yourself.  Maybe 40% G fund, 30% C fund, and maybe split the rest in international and maybe an appropriate L fund.  

But if you are even asking about market direction — I think that indicates some concern or risk-aversion.  So—go sit with someone that can ‘see’ your personal situation and tailor you a plan.  

Good luck in your retirement!! 

That's just so frustrating to hear . And  The senate just passed another $484B for small business and hospital funding.   Let's hope this time Congress is smart enough to exclude any publicly traded company to these funds.   They've already got so many avenues for raising money.   Let's focus on mom and pop business like it was intended.   

We are passing out money like it's candy.  Have we hit $30T in debt yet ? 

Rush51 your always on the money - Run for Congress 

Lol... Thank you for the kind words artdb.   

So, "that guy" that was on CNBC a few weeks ago that I referenced on April 9 (post#277) was on again today.   For starter's the guy's name is Chamath Palihapitiya.   The guy is absolutely brilliant IMHO.  His prior interview on CNBC went viral because he hit such a nerve with people.  I invite all you guys to check today's interview out.  It was more of the same great points.. 

Google  palihapitiya: Need direct cash injection to people

Some news for us CVX investors out there...  Trump orders Chevron to halt oil production in Venezuela.  

I have to say... Is there another industry out there that catches more grief than the oil industry?    Whether it be (1)  high gas prices at the pump and your local TV channel interviewing ticked off people,  (2) confiscation of oil resources by hostile country (or forced production halt as in this case), or (3) global warming  and EOG funds banning any investment in these companies.  And lastly, it appears to the most volatile commodity in human history that actually has a utility in our society (that excludes you BTC :)  It's been difficult enough making money these past years in oil.  Then, you have the U.S. government telling you that you can longer have any production in Venezuela.  Granted, CVX must have seen the writing on the wall for years, but that doesn't make it right that your investments become , in effect, "confiscated"  by the host country.   And this is nothing new in the oil industry.  Nigeria among others engaged in this same behavior.  

I'll continue to be an oil investor because the industry is going nowhere, despite what global warming community would like.  To that point,   I haven't seen anybody design a car that operates with solar energy.  And Electric Vehicles ??  What do you think the fuel is that provides the power to your home ?   By and large, it's Natural Gas that powers the Power Plant... and this percentage is only growing with the decline in coal fired plants.  The vast majority of our energy consumption is by vehicles and long haul truckers on our highways.  It WILL take time, but people WILL start driving again, and we WILL start to work off the excess capacity in our oil reserves.  

Energy has been demolished, and only represented about 3-4% of the S&P 500 weighting before the Chinese Virus hit.  It seems wise to put "some" money in this sector, maybe not at the 10% allocation that Energy saw 10 years ago, but "some."     Raiders correctly referenced earlier in this thread an old Warren Buffet Axiom ; buy when there is blood in the streets... and here's another one... Buy when others are fearful.  Doesn't this sound like Oil today ?? 

And just for the record, I wouldn't advise anyone to "play around" with their retirement portfolio strategy .  This is more applicable to your "mad money" that you might have in a taxable account..  

You pitched big energy here a few months ago. Remember what I told you? 

I'm stuck 60-70% on decade plus positions in energy. Dividends probably ease that burden by half as I dump all dividends into cash. Still....stuck is stuck.

While we may be at a bottom in energy, I see very little in energy that will propel the sector higher. The Saudis and Russia would be foolish to take the boot off of the throat of US energy. If they finish the job, oil can and will go lower. 

I'm down big in energy but I'm not foolish enough to chase this sector to the grave any deeper.

Sector Diversification will tell you that we are in oversold conditions in Oil.   All I'm saying is that there is typically a reversion to the mean in investing.  Oil has been the worst performing sector the last 10 years.  Do you think it will be the worst for the next 10 ?  It is often difficult to come to grips and rationalize "how" it will get there, but probability and statistics will tell you otherwise.  

Rush,

Yeah that was the point I was making the other day about how to create inflation...but the UST and FED are not interested in giving money directly to people, they want to support the banks and corps because they are obligated to always give money to the wealthy/elite/corporation due to the political structure we have and I bet you a dozen donuts that many politicians and elite think that giving money to the lower rung is money wasted and not utilized in the most efficient way. That has some truth to it...young people are not savers or job creators now and older people not in the workforce are not going to use to generate inflation. But the easiest and fastest way to generate inflation is to give money to the spenders who generate inflation...not to corps who will hold it and maybe hire or maybe not, maybe buy some capital goods maybe not...the decisions that drive corporate action are not access to funds its what is the best use of funds and that is why there is a massive flaw for giving money to banks and corps.

Stock buybacks and dividend increases, leveraged arbitrage on currency and market futures are not job creators or inflation drivers...but with the decisions the FED has made to keep rates at or near zero for a decade has made the financial decision of how to best utilize cash flows, debt and freebies to buy back stock and increase dividends. If rates were higher then the ratios do not work as well and maybe capital purchases or investing in job creating activities might be stronger than buybacks and dividends. I am not a big fan of government involvement but I think there needs to be some restrictions of how monies can be used and how much corps can buyback stock if they are using government resources.

Its too complex to structure how you can efficiently give money directly to people...too inefficient and time consuming but I am for giving money to those at or under the poverty level but as I mentioned people at or under are going to spend money in a way that might not best help their needs rather maybe purchase more impulse items. Thats a generalization but its what I have noticed with my multiple years of experience. 

To me oil is a value play now...whereas say 5-10 years ago when people might have been dividend chasing they might have been trying to get a better yield than market and to me that is when people might make bad choices. I wont buy trying to beat the market if the value isnt there relative to historical prices..so I wouldnt buy a stock near the high end of its range because the yield is better than a money market but the stock is expensive, in fact for me the divi yield is a reason I might solidify my decision but my reasons are usually valuation based and usually quite conservative.

Break even on US shale is what? Big energy in the USA is a loser and has been a loser going on two decades. The situation is outside of the control of the USA. There is little value if we are losing money on every barrel produced. If a recovery is to be achieved it will not happen quickly. Yes...the dividends are nice, but I would expect stock price depreciation when the dividend money is paid out. Simply put, I don't see anything changing until consumption resumes and some level of SA/R cooperation exists. We have neither now.

To the first highlighted item, that is a sad reality .  I know you've been beating the drum on this for a very long time, Wall.  I guess I am just too naive, thinking those those folks in the Fed & Treasury have the best intentions in helping the common person, but make the wrong choices to solve economic problems.  Who the hell knows .. Maybe I'm just too naive like I say.  

To the 2nd highlighted area, I totally agree w/ you, and well said.   ""Stock buybacks and dividend increases, leveraged arbitrage on currency and market futures are not job creators or inflation drivers.""   As you say,    These decisions do nothing to increase worker wages nor create jobs.  What does is capital investment .   Chamath even eluded to this exact point today in his interview..    This has so many forms, R&D investment, investing in another plant, investing in a new product, investing in technology for operational efficiency,  etc..  All of these are Long-term investments that create greater value for Everyone, including more jobs and the current worker who should  be paid more, because he is now able to do more w/ less.  The Stock buybacks is destructive behavior that invests in the "stock" , as opposed to investing in the "company" where the worker will benefit as well..    Capital Investment !  Yes !...  Stock buybacks ! No !    

To your last point, Wall, If rates were higher then the ratios do not work as well and maybe capital purchases or investing in job creating activities might be stronger than buybacks and dividends.   Very interesting point.. So (again) low interest rates may have other unintended consequences in how companies use their free cash flow to buy back stock,  instead of investing in the company.   Interesting subject to say the least..   We could go on and on and on about how companies "should" allocate their resources to best help both worker + shareholders... but like you, I'm not so sure the government should be involved in the process, except for those that take tax payer money from the trough. 

Wall, out of curiosity, did you ever end up playing any futures on oil prices (from Detox's thread) .   I saw where the futures for a few months out seem to show crude oil in the mid-20s, which seems about right in the current environment .  What's your take ?  

I still think the best way to play  is with equities.  I'm holding firm, and actually picked up a few "high beta" plays with Parseley Energy & Diamondback Energy last week.  ( I took my own advice when answering Detox's question in his thread for long term plays. Lol.. ) 

Did anyone else note Trump's comment on Monday, pledging financial support to Oil Companies.   We've all heard about the "Fed Put"... What about the "Presidential Put."  Even if Trump never takes any action for support, oil stocks may springboard from here... and they have so far since Monday.  This strikes in some similarity to previous ECB president Mario Draghi years ago..  I remember his "whatever it takes" commitment to support the European Banks when they were really in dire straits..  He never took any immediate action at the time, and the European markets springboarded from there I recall.  Sometimes a commitment alone is enough to move markets.  I see some parallels to Trump's action on Monday.  Whether you agree with the action or not (I don't), it can , and it appears to have moved the oil market,  in particular.  Trump's comments and oil turning "negative" on Monday seem to have been an inflection point on oil... We shall see.  

 I caught part of the guy's interview a couple weeks ago, & again yesterday.........very interesting. One of the few times I put down what I'm doing & watch/listen.

Rush,

No I didnt open a futures account but you are right the forward curve I think the Dec contract was 30 and under, but what ticks me is the current contract hit 8 and under and today it was over 18 and that is a 200 percent plus move in a few days. I have all my oils but I didnt get ALL my money in, about 75% total. I wasnt sure the bottom at the time would be so I waited.

What IS interesting his how the he11 Trump isnt being sued for his chlorine (sp) spamming over and over and over...he cant do that and I saw that piece that came out which said people DIED using his suggested potion...how the crap can the leader of this country come out and act like a total pompous dope like he does? Its irresponsible and toxic...Trump has got to shut up and start being a leader.