U.S. stocks continue to soar!

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lostdog
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Re: U.S. stocks continue to soar!

Post by lostdog »

CurlyDave wrote: Wed Sep 15, 2021 6:51 pm
Yesterdaysnews wrote: Wed Sep 15, 2021 4:17 pm Are all the tech buyback because they have no place good to use the money to grow?? Or that these companies are just so insanely profitable that they have too much money left over even after investing in the business?
The way I understand it is that the buybacks are done from earnings and are instead of paying a higher dividend. Many investors prefer buybacks to dividends because of their tax advantages.

Even if one has held shares for more than a year and the dividends are qualified dividends, they are still taxed at LTCG rates. A buyback increases the value of the shares an investor owns and when they are sold the LTCG tax rate still applies, but the investor has control over when this gain is realized. Taxes on dividends must be paid in the return for the year in which the dividends are paid.

I hold some shares of individual tech companies and much prefer buybacks. My current plans are to either: (1) hold the shares until I die and pass them to my heirs with a step up in basis, or (2) to donate the shares to charity during my life, taking a deduction for the current value of the shares without ever paying capital gains tax.
Thanks for the explanation. I learned something new.
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GP813
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Re: U.S. stocks continue to soar!

Post by GP813 »

The tech giants can buy almost any company but governments are already wary of their size. Microsoft just announced a $60 billion buyback and earlier this year they made inquires about buying PINS(Pinterest) when it was valued at $51 billion, it is now trading down and is currently valued at $35 billion. Microsoft can just buy a company that size, no problem if it were not for outside factors.
nigel_ht
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Re: U.S. stocks continue to soar!

Post by nigel_ht »

minimalistmarc wrote: Mon Sep 13, 2021 3:04 pm
000 wrote: Mon Sep 13, 2021 2:55 pm
Forester wrote: Mon Sep 13, 2021 8:40 am The coming top, very likely by the end of the year, will mark the end of the secular bull market which began in Summer 1982. What follows will be a global bust, not a slowdown. The market could be down 60% by Summer 2022 then bounce back somewhat and SPX be around 2,000 to 2,400 at year end 2022.
Too optimistic in my opinion. Hard to see us going to -60% without dropping further (at least temporarily) to -80%+ due to panic selling and margin calls.
Classic permabear psychology. They never take advantage of the opportunity because they are worried about another little 20% drop.
Mmmm…

$100 drops to $40. 60% drop. I buy in at $40.
Market proceeds to 80% drop. My shares are now worth $20…or half what I paid.

I’m too lazy right now to see how that would have worked out in 1929 but just eyeballing the chart if you bought into the market in 1931 at around $150 you finally felt okay in 1937 and 1938 before you went back underwater until the war ends in 1945 and not seeing the gains you might have expected buying into a “low” at the “60% down must mean it’s a bargain!” mark until 1949.

Image

I’m in the market at the AA stipulated in my IPS but my oh my…the SWAN metric is much lower than I expected it to be…you can’t fight the Fed but man, if they lose control a few years down the road it could end up looking 1929 ugly.

I keep mumbling to myself “this time isn’t different”…but 1929 IS in the data set…
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HomerJ
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Re: U.S. stocks continue to soar!

Post by HomerJ »

nigel_ht wrote: Wed Sep 15, 2021 11:59 pm 1929 IS in the data set…
This is why I have 10+ years in bonds/cash.

I know most everyone else thinks 1-2 years is plenty, but, like you said, 1929 IS in the data-set.
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anoop
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Re: U.S. stocks continue to soar!

Post by anoop »

HomerJ wrote: Thu Sep 16, 2021 12:03 pm
nigel_ht wrote: Wed Sep 15, 2021 11:59 pm 1929 IS in the data set…
This is why I have 10+ years in bonds/cash.

I know most everyone else thinks 1-2 years is plenty, but, like you said, 1929 IS in the data-set.
For someone who doesn't have 10+ years of expenses in bonds/cash, what would be your recommendation?
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Re: U.S. stocks continue to soar!

Post by Triple digit golfer »

anoop wrote: Thu Sep 16, 2021 12:05 pm
HomerJ wrote: Thu Sep 16, 2021 12:03 pm
nigel_ht wrote: Wed Sep 15, 2021 11:59 pm 1929 IS in the data set…
This is why I have 10+ years in bonds/cash.

I know most everyone else thinks 1-2 years is plenty, but, like you said, 1929 IS in the data-set.
For someone who doesn't have 10+ years of expenses in bonds/cash, what would be your recommendation?
Build up to 10+ years with a reasonable allocation that includes some bonds/cash.

Say 80/20. That's what I'm doing. I have 3 years in bonds/cash but 12 in stocks. Once I am at 20-25x, I'll probably be at 60/40 or therabout.
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HomerJ
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Re: U.S. stocks continue to soar!

Post by HomerJ »

Triple digit golfer wrote: Thu Sep 16, 2021 12:07 pm
anoop wrote: Thu Sep 16, 2021 12:05 pm
HomerJ wrote: Thu Sep 16, 2021 12:03 pm
nigel_ht wrote: Wed Sep 15, 2021 11:59 pm 1929 IS in the data set…
This is why I have 10+ years in bonds/cash.

I know most everyone else thinks 1-2 years is plenty, but, like you said, 1929 IS in the data-set.
For someone who doesn't have 10+ years of expenses in bonds/cash, what would be your recommendation?
Build up to 10+ years with a reasonable allocation that includes some bonds/cash.

Say 80/20. That's what I'm doing. I have 3 years in bonds/cash but 12 in stocks. Once I am at 20-25x, I'll probably be at 60/40 or therabout.
Yeah build up to it...

I wasn't suggesting that everyone should have 10+ years of expenses in cash/bonds at all stages of their lives.

But I'm very close to retirement with 25x expenses saved... A 60/40 portfolio means you have 10 years in bonds/cash, and I think that's a very reasonable conservative way to enter retirement. The next crash may indeed take 10 years to recover instead of 1-2 years.
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nigel_ht
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Re: U.S. stocks continue to soar!

Post by nigel_ht »

HomerJ wrote: Thu Sep 16, 2021 12:03 pm
nigel_ht wrote: Wed Sep 15, 2021 11:59 pm 1929 IS in the data set…
This is why I have 10+ years in bonds/cash.

I know most everyone else thinks 1-2 years is plenty, but, like you said, 1929 IS in the data-set.
1929 was 20 years of pain right? Honestly, I don’t think hedging against that is viable without deeply impacting future gains.

I guess if you have enough already it’s fine…

What are you doing again? I remember you said you were setting aside gains even beyond the 50/50 level?
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HomerJ
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Re: U.S. stocks continue to soar!

Post by HomerJ »

nigel_ht wrote: Thu Sep 16, 2021 12:37 pm
HomerJ wrote: Thu Sep 16, 2021 12:03 pm
nigel_ht wrote: Wed Sep 15, 2021 11:59 pm 1929 IS in the data set…
This is why I have 10+ years in bonds/cash.

I know most everyone else thinks 1-2 years is plenty, but, like you said, 1929 IS in the data-set.
1929 was 20 years of pain right? Honestly, I don’t think hedging against that is viable without deeply impacting future gains.

I guess if you have enough already it’s fine…

What are you doing again? I remember you said you were setting aside gains even beyond the 50/50 level?
Nah, it wasn't 20 years... that's just looking at the stock index price. If you count dividends, you got your money back on the stock side a lot faster.

Me, I've got my 25x sitting at 50/50, and I'm crazy conservative enough that all new gains I'm moving to cash... I have gotten myself to 25x sitting at 50/50 with an extra 2x in cash.

Crazy dumb way to look at it, I know, all mental accounting. One could also just say that I'm 46/54 right with 27x expenses.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Triple digit golfer
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Re: U.S. stocks continue to soar!

Post by Triple digit golfer »

nigel_ht wrote: Thu Sep 16, 2021 12:37 pm1929 was 20 years of pain right? Honestly, I don’t think hedging against that is viable without deeply impacting future gains.
Some hedge is better than no hedge.
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HanSolo
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Re: U.S. stocks continue to soar!

Post by HanSolo »

CurlyDave wrote: Wed Sep 15, 2021 6:51 pm
Yesterdaysnews wrote: Wed Sep 15, 2021 4:17 pm Are all the tech buyback because they have no place good to use the money to grow?? Or that these companies are just so insanely profitable that they have too much money left over even after investing in the business?
The way I understand it is that the buybacks are done from earnings and are instead of paying a higher dividend. Many investors prefer buybacks to dividends because of their tax advantages.
While there may be tax differences, buybacks give you nothing.

When I say "you" I mean the buy-and-hold investor. Buybacks do give someone something. There are only two free lunches in investing: diversification, and being a corporate executive who dumps massive shares while your company is goosing the stock price by doing massive buybacks at or near all-time-highs.
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Mrmetalpole
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Re: U.S. stocks continue to soar!

Post by Mrmetalpole »

nigel_ht wrote: Wed Sep 15, 2021 11:59 pm
minimalistmarc wrote: Mon Sep 13, 2021 3:04 pm
000 wrote: Mon Sep 13, 2021 2:55 pm
Forester wrote: Mon Sep 13, 2021 8:40 am The coming top, very likely by the end of the year, will mark the end of the secular bull market which began in Summer 1982. What follows will be a global bust, not a slowdown. The market could be down 60% by Summer 2022 then bounce back somewhat and SPX be around 2,000 to 2,400 at year end 2022.
Too optimistic in my opinion. Hard to see us going to -60% without dropping further (at least temporarily) to -80%+ due to panic selling and margin calls.
Classic permabear psychology. They never take advantage of the opportunity because they are worried about another little 20% drop.
Mmmm…

$100 drops to $40. 60% drop. I buy in at $40.
Market proceeds to 80% drop. My shares are now worth $20…or half what I paid.

I’m too lazy right now to see how that would have worked out in 1929 but just eyeballing the chart if you bought into the market in 1931 at around $150 you finally felt okay in 1937 and 1938 before you went back underwater until the war ends in 1945 and not seeing the gains you might have expected buying into a “low” at the “60% down must mean it’s a bargain!” mark until 1949.

Image

I’m in the market at the AA stipulated in my IPS but my oh my…the SWAN metric is much lower than I expected it to be…you can’t fight the Fed but man, if they lose control a few years down the road it could end up looking 1929 ugly.

I keep mumbling to myself “this time isn’t different”…but 1929 IS in the data set…
How can the Fed lose control? It seems like they will never really raise rates and whenever the next crisis comes along, the fed. gov't learning from the '08 drawdown, will just be over the top accommodative. The cycle will just keep continuing on and on.
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vanbogle59
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Re: U.S. stocks continue to soar!

Post by vanbogle59 »

anoop wrote: Thu Sep 16, 2021 12:05 pm
HomerJ wrote: Thu Sep 16, 2021 12:03 pm
nigel_ht wrote: Wed Sep 15, 2021 11:59 pm 1929 IS in the data set…
This is why I have 10+ years in bonds/cash.

I know most everyone else thinks 1-2 years is plenty, but, like you said, 1929 IS in the data-set.
For someone who doesn't have 10+ years of expenses in bonds/cash, what would be your recommendation?
I started thinking this way because it's so close to 60/40 at 4% withdrawal that I used during accumulation.

Later, folding it into a post-salary finincial plan involved:
1) lots of work defining the minimum we would be comfortable with post-salary (many conversations with DW)
2) debt removal (easy for my personality)
3) written rules for rebalancing that were seasoned by Y2K, 2008 and Corona
4) Children firmly on thier own financial feet (my brother calls this the "Irish" raise :D )

Best of luck.
lostdog
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Re: U.S. stocks continue to soar!

Post by lostdog »

Do we have ourselves an afternoon reversal?
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Zeno
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Re: U.S. stocks continue to soar!

Post by Zeno »

I'm not changing anything investment wise, but I must admit that these issues do seem a lot more "real" as one approaches retirement.

It is likely I will retire in 9 months. Kitces does a great job of explaining why the first decade of retirement is so important from a sequence of return risk/SWR perspective: https://www.kitces.com/blog/understandi ... d-decades/. A bear market with a quick bounce back isn't the problem; instead the problem is a decade-long period of suppressed returns that commences as one enters retirement.

I think we have our safety net in place -- multiples of X in cash/bonds, no debt, relatively low burn rate. I'm relentless optimistic, and the future remains in our hands. There are always things one can do when challenges arise, as they undoubtedly will.

Yet while I'm not being fatalistic, there is an aspect here of there is only so much planning one can do, coupled with the completely random variable of the year in which one retires and what happens in the markets during the next ten years thereafter.

As an aside, I've also been doing some reading to try to understand the interaction between a Perpetual Withdrawal Rate (PWR) and SORR risks. Portfolio Visualizer allows one to assess what happens if the worst years of market returns (up to ten years of them, in fact) come first in one's retirement. It also spits out both a SWR and a PWR. It isn't entirely clear to me if that PWR output, however, means that that specific PWR is enough to overcome the front-loaded decade of poor returns that diminish the success rate of modeled runs. If we can power through our retirement with a PWR, that is our plan. I suspect that DW and I are going to have a very hard time decumulating under all scenarios anyway.

Oh well, I don't know anything anyway.
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Re: U.S. stocks continue to soar!

Post by anoop »

lostdog wrote: Thu Sep 16, 2021 1:12 pm Do we have ourselves an afternoon reversal?
Are you at the gym today? It certainly seems so, and please keep going till it goes green.
jarjarM
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Re: U.S. stocks continue to soar!

Post by jarjarM »

anoop wrote: Thu Sep 16, 2021 1:15 pm
lostdog wrote: Thu Sep 16, 2021 1:12 pm Do we have ourselves an afternoon reversal?
Are you at the gym today? It certainly seems so, and please keep going till it goes green.
He must've been working on his small muscle group, small cap is positive already :D
lostdog
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Re: U.S. stocks continue to soar!

Post by lostdog »

anoop wrote: Thu Sep 16, 2021 1:15 pm
lostdog wrote: Thu Sep 16, 2021 1:12 pm Do we have ourselves an afternoon reversal?
Are you at the gym today? It certainly seems so, and please keep going till it goes green.
No. Wifey is home and we're going biking in a bit.
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anoop
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Re: U.S. stocks continue to soar!

Post by anoop »

lostdog wrote: Thu Sep 16, 2021 1:18 pm
anoop wrote: Thu Sep 16, 2021 1:15 pm
lostdog wrote: Thu Sep 16, 2021 1:12 pm Do we have ourselves an afternoon reversal?
Are you at the gym today? It certainly seems so, and please keep going till it goes green.
No. Wifey is home and we're going biking in a bit.
I guess we have to settle for closing in the red today.
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Re: U.S. stocks continue to soar!

Post by jarjarM »

nigel_ht wrote: Thu Sep 16, 2021 12:37 pm
1929 was 20 years of pain right? Honestly, I don’t think hedging against that is viable without deeply impacting future gains.
Pretty close to 20 years of pain. Based on prof. Shiller's data, using total real return index, the high was at Sep 1929, and return to that high briefly on Nov 1936, and then finally surpassed it for good Jan 1945. So almost 16 years of pain before 100% stock investors fully recover. The dividend yield was quite a bit higher back then, so price index return looked worse along with significant deflation during the great depression era. Also, pricing control during WWII probably played a role too.
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HanSolo
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Re: U.S. stocks continue to soar!

Post by HanSolo »

WyomingFIRE wrote: Thu Sep 16, 2021 1:13 pm Kitces does a great job of explaining why the first decade of retirement is so important from a sequence of return risk/SWR perspective:
I looked at the article and couldn't tell what's actionable in it. Is he recommending that people do something other than what a target date fund does?
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Zeno
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Post by Zeno »

HanSolo wrote: Thu Sep 16, 2021 1:29 pm
WyomingFIRE wrote: Thu Sep 16, 2021 1:13 pm Kitces does a great job of explaining why the first decade of retirement is so important from a sequence of return risk/SWR perspective:
I looked at the article and couldn't tell what's actionable in it. Is he recommending that people do something other than what a target date fund does?
I am not a target date fund investor so don’t know if fully address SORR. They may; I just don’t know.
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Re: U.S. stocks continue to soar!

Post by CurlyDave »

HanSolo wrote: Thu Sep 16, 2021 1:01 pm
CurlyDave wrote: Wed Sep 15, 2021 6:51 pm
Yesterdaysnews wrote: Wed Sep 15, 2021 4:17 pm Are all the tech buyback because they have no place good to use the money to grow?? Or that these companies are just so insanely profitable that they have too much money left over even after investing in the business?
The way I understand it is that the buybacks are done from earnings and are instead of paying a higher dividend. Many investors prefer buybacks to dividends because of their tax advantages.
While there may be tax differences, buybacks give you nothing.

When I say "you" I mean the buy-and-hold investor. Buybacks do give someone something. There are only two free lunches in investing: diversification, and being a corporate executive who dumps massive shares while your company is goosing the stock price by doing massive buybacks at or near all-time-highs.
I don't think this is true. At their very core, stocks represent fractional ownership of a corporation.

If a corporation does a buyback, the total number of shares outstanding is reduced, so any shareholder who does not sell has his fractional ownership slightly increased. For instance, if a company has a good quarter and has the cash on hand to pay a dividend equal to 1% of the stock price, but instead does a buyback of 1% of their stock, a shareholder now owns a part of the company that has increased by 1% of his previous holdings. If he wants to realize this as cash, he has the option of selling 1% of his shares. He gets cash equivalent to what a dividend would have been, and his % ownership in the company is not reduced from where it was before the buyback and shareholder sale.

Warren Buffet explains this much better than I can, and this is what happened recently with his stake in AAPL. The company did a buyback and Warren sold some of his shares. He got cash, but his fractional ownership of AAPL corporation actually increased slightly because he did not sell a percentage of his holding as great as the percentage reduction in outstanding shares.

This is another advantage of buybacks. If the company pays a dividend a shareholder has to take it all. But what if he wants to realize some cash, but not as much as the dividend would have represented. He simply sells fewer shares, gets the cash he wanted and slightly increases his stake in the corporation. Without the tax consequence of a dividend.
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CurlyDave
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Re: U.S. stocks continue to soar!

Post by CurlyDave »

Getting back to soaring, it looks like the 'DAQ is outpacing the S&P near the end. :mrgreen:

I wouldn't say "trampling", but it is positive.
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Re: U.S. stocks continue to soar!

Post by Marseille07 »

Quadruple Witching Friday coming up, could be a volatile day as so many contracts are expiring at the same time.
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HanSolo
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Re: U.S. stocks continue to soar!

Post by HanSolo »

CurlyDave wrote: Thu Sep 16, 2021 2:26 pm
HanSolo wrote: Thu Sep 16, 2021 1:01 pm
CurlyDave wrote: Wed Sep 15, 2021 6:51 pm The way I understand it is that the buybacks are done from earnings and are instead of paying a higher dividend. Many investors prefer buybacks to dividends because of their tax advantages.
While there may be tax differences, buybacks give you nothing.

When I say "you" I mean the buy-and-hold investor. Buybacks do give someone something. There are only two free lunches in investing: diversification, and being a corporate executive who dumps massive shares while your company is goosing the stock price by doing massive buybacks at or near all-time-highs.
I don't think this is true.
Yes, it's true. My source is the article I cited in another thread, which cited an SEC study (see below).
At their very core, stocks represent fractional ownership of a corporation.

If a corporation does a buyback, the total number of shares outstanding is reduced, so any shareholder who does not sell has his fractional ownership slightly increased. (snip)
I know how buybacks work. What would you rather own, half of a business worth a million, or a whole company worth a half million? After the buyback, yes, you own a larger fraction of the company, but you own more of a thing that's worth less than it was before (as the money they used to do the buyback is now gone).

But buybacks are actually worse than a zero-sum game, at least for the buy-and-hold investor, for two reasons.

One is that many companies have a habit of buying back shares at or near all-time highs. Those same shares were originally issued at lower prices. Following a buy-high sell-low strategy is disadvantageous to long-term shareholders.

The other reason is that corporate insiders have a habit of selling a lot of shares around the time of massive buybacks, which the SEC study shows as giving a disproportionate benefit to those insiders. That disproportionate benefit must be at someone else's expense, and that's the long-term shareholder. Note that those same executives are the people who made the decision for the company to buy its own stock near all-time highs, which is arguably a raiding of the corporate treasury. Although this action may not be illegal, one may be reminded of the phrase "pump and dump"... the corporation pumps while the executives dump.

If you have a credible source that refutes the SEC study, or anything that I stated, that would be interesting to know.
HanSolo wrote: Mon Mar 15, 2021 11:53 pm "In the 2017-2018 study, SEC researchers found that insiders were twice as likely to sell on the days following buyback announcements as they were in the days leading up to announcements. Their average sale was also five times larger than before the announcement, at about $500,000."

"The recent SEC studies found that companies, on average, outperform the market by about 3 percentage points in the 30 trading days after a buyback announcement. But at the 90-day mark, companies where insiders sold heavily were underperforming the market — while companies whose insiders didn’t sell continued to outperform, and were beating those with heavy insider selling by 8 points."

https://www.washingtonpost.com/business ... story.html
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Re: U.S. stocks continue to soar!

Post by lostdog »

Almost made it out of the hole.
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HanSolo
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Re: U.S. stocks continue to soar!

Post by HanSolo »

WyomingFIRE wrote: Thu Sep 16, 2021 1:52 pm
HanSolo wrote: Thu Sep 16, 2021 1:29 pm
WyomingFIRE wrote: Thu Sep 16, 2021 1:13 pm Kitces does a great job of explaining why the first decade of retirement is so important from a sequence of return risk/SWR perspective:
I looked at the article and couldn't tell what's actionable in it. Is he recommending that people do something other than what a target date fund does?
I am not a target date fund investor so don’t know if fully address SORR. They may; I just don’t know.
OK. Target date funds aside, did you find anything in the article that's actionable for anyone already doing Boglehead-style investing? I didn't.
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Post by marcopolo »

HanSolo wrote: Thu Sep 16, 2021 4:55 pm
WyomingFIRE wrote: Thu Sep 16, 2021 1:52 pm
HanSolo wrote: Thu Sep 16, 2021 1:29 pm
WyomingFIRE wrote: Thu Sep 16, 2021 1:13 pm Kitces does a great job of explaining why the first decade of retirement is so important from a sequence of return risk/SWR perspective:
I looked at the article and couldn't tell what's actionable in it. Is he recommending that people do something other than what a target date fund does?
I am not a target date fund investor so don’t know if fully address SORR. They may; I just don’t know.
OK. Other than considering target date funds, did you find anything in the article that's actionable for anyone already doing Boglehead-style investing? I didn't.
Not in that article, but in other article(s), he suggests a "bond tent" as a way to mitigate SORR. I am not a big fan of that approach, but I do believe it is different than what a target date fund does
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: U.S. stocks continue to soar!

Post by jarjarM »

Tomorrow is quadruple witching date, surely it'll be interesting, could go up or down or sideways. :twisted:
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Post by sailaway »

jarjarM wrote: Thu Sep 16, 2021 6:06 pm Tomorrow ... could go up or down or sideways.
So glad we cleared that up!
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Post by jarjarM »

sailaway wrote: Thu Sep 16, 2021 6:11 pm
jarjarM wrote: Thu Sep 16, 2021 6:06 pm Tomorrow ... could go up or down or sideways.
So glad we cleared that up!
That's the clarity of my crystal ball :beer
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Post by anoop »

jarjarM wrote: Thu Sep 16, 2021 6:13 pm
sailaway wrote: Thu Sep 16, 2021 6:11 pm
jarjarM wrote: Thu Sep 16, 2021 6:06 pm Tomorrow ... could go up or down or sideways.
So glad we cleared that up!
That's the clarity of my crystal ball :beer
Not quite as clear as up and/or and/or sideways.
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Re: U.S. stocks continue to soar!

Post by CurlyDave »

HanSolo wrote: Thu Sep 16, 2021 3:39 pm
CurlyDave wrote: Thu Sep 16, 2021 2:26 pm
HanSolo wrote: Thu Sep 16, 2021 1:01 pm
CurlyDave wrote: Wed Sep 15, 2021 6:51 pm The way I understand it is that the buybacks are done from earnings and are instead of paying a higher dividend. Many investors prefer buybacks to dividends because of their tax advantages.
While there may be tax differences, buybacks give you nothing.

When I say "you" I mean the buy-and-hold investor. Buybacks do give someone something. There are only two free lunches in investing: diversification, and being a corporate executive who dumps massive shares while your company is goosing the stock price by doing massive buybacks at or near all-time-highs.
I don't think this is true.
Yes, it's true. My source is the article I cited in another thread, which cited an SEC study (see below).
At their very core, stocks represent fractional ownership of a corporation.

If a corporation does a buyback, the total number of shares outstanding is reduced, so any shareholder who does not sell has his fractional ownership slightly increased. (snip)
I know how buybacks work. What would you rather own, half of a business worth a million, or a whole company worth a half million? After the buyback, yes, you own a larger fraction of the company, but you own more of a thing that's worth less than it was before (as the money they used to do the buyback is now gone).

But buybacks are actually worse than a zero-sum game, at least for the buy-and-hold investor, for two reasons.

One is that many companies have a habit of buying back shares at or near all-time highs. Those same shares were originally issued at lower prices. Following a buy-high sell-low strategy is disadvantageous to long-term shareholders.

The other reason is that corporate insiders have a habit of selling a lot of shares around the time of massive buybacks, which the SEC study shows as giving a disproportionate benefit to those insiders. That disproportionate benefit must be at someone else's expense, and that's the long-term shareholder. Note that those same executives are the people who made the decision for the company to buy its own stock near all-time highs, which is arguably a raiding of the corporate treasury. Although this action may not be illegal, one may be reminded of the phrase "pump and dump"... the corporation pumps while the executives dump.

If you have a credible source that refutes the SEC study, or anything that I stated, that would be interesting to know.
HanSolo wrote: Mon Mar 15, 2021 11:53 pm "In the 2017-2018 study, SEC researchers found that insiders were twice as likely to sell on the days following buyback announcements as they were in the days leading up to announcements. Their average sale was also five times larger than before the announcement, at about $500,000."

"The recent SEC studies found that companies, on average, outperform the market by about 3 percentage points in the 30 trading days after a buyback announcement. But at the 90-day mark, companies where insiders sold heavily were underperforming the market — while companies whose insiders didn’t sell continued to outperform, and were beating those with heavy insider selling by 8 points."

https://www.washingtonpost.com/business ... story.html
If there are three choices on the table: (1) retain the earnings and use them to grow the business, (2) use the earnings to pay a dividend, or (3) use the earnings to buy back stock, in most cases (1) is the better choice.

But if there are only 2 choices: (1) use the earnings to pay a dividend, or (2) use the earnings to buy back stock, I prefer (2) for its tax efficiency.
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Re: U.S. stocks continue to soar!

Post by Rowan Oak »

Triple digit golfer wrote: Wed Sep 15, 2021 2:37 pm You guys are always looking for reasons to explain why the market does what it does. Accept that you have no idea.
This is the key.
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Re: U.S. stocks continue to soar!

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CurlyDave wrote: Thu Sep 16, 2021 9:25 pm
HanSolo wrote: Thu Sep 16, 2021 3:39 pm But buybacks are actually worse than a zero-sum game, at least for the buy-and-hold investor, for two reasons. (snip)
(snip)

But if there are only 2 choices: (1) use the earnings to pay a dividend, or (2) use the earnings to buy back stock, I prefer (2) for its tax efficiency.
OK, so what we have is that the two choices are both worse than a zero-sum game, in case (1) it's adverse tax consequences, and in case (2) it's the two reasons I mentioned. I'd have to see the numbers to tell which is worse. Without seeing the numbers, I'd lean toward (1) because I'm in a low tax bracket and therefore unlikely to experience much of a tax impact, and also because the two reasons I mentioned (as disadvantages of option (2)) are both indicative of malfeasance and/or incompetence on the part of management, and it's not OK with me that the people who work for me do business that way. It's basically the management ripping off the owners (and I'm not one to automatically subscribe to the widely-held belief that what's good for corporate managers is good for society).

Bottom line: buybacks give you nothing (in theory) and even less than nothing (in practice).
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Re: U.S. stocks continue to soar!

Post by 000 »

Mrmetalpole wrote: Thu Sep 16, 2021 1:06 pm How can the Fed lose control?
It can happen when other countries reject the dollar due to debasement or the market finds a solution to rate repression.
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Re: U.S. stocks continue to soar!

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jarjarM wrote: Thu Sep 16, 2021 6:06 pm Tomorrow is quadruple witching date, surely it'll be interesting, could go up or down or sideways. :twisted:
Quadruple Witching
My money is on the market going up. In up markets there’s always people who think they are the smartest person in the room, and they bet against the trend. They are getting the floor mopped with themselves of course, so I think we are a bunch of covering going on.

That said…. I’m far from the smartest guy in the room. So this is just a hunch from a humble index investor. I win no matter what …. all I have to do is sit here and wait, and count my money when the tide rolls in. Easiest game in town.
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Re: U.S. stocks continue to soar!

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mrspock wrote: Fri Sep 17, 2021 2:27 am I win no matter what
You mean that's a certainty?
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HanSolo wrote: Fri Sep 17, 2021 3:28 am
mrspock wrote: Fri Sep 17, 2021 2:27 am I win no matter what
You mean that's a certainty?
Nothing in life is absolutely certain…. but given my investment horizon, my AA and my ability to handle crashes, it’s pretty darn close barring nuclear war.

Honestly, I think I enjoy the crashes as much (maybe more) than the bull markets. The amount of money you make in crashes is amazing. TLH, rebalancing, purchases with new capital… it doesn’t get any better.
Last edited by mrspock on Fri Sep 17, 2021 11:18 am, edited 1 time in total.
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Re: U.S. stocks continue to soar!

Post by z3r0c00l »

mrspock wrote: Fri Sep 17, 2021 5:44 am
HanSolo wrote: Fri Sep 17, 2021 3:28 am
mrspock wrote: Fri Sep 17, 2021 2:27 am I win no matter what
You mean that's a certainty?
Nothing is life is absolutely certain…. but given my investment horizon, my AA and my ability to handle crashes, it’s pretty darn close barring nuclear war.

Honestly, I think I enjoy the crashes as much (maybe more) than the bull markets. The amount of money you make in crashes is amazing. TLH, rebalancing, purchases with new capital… it doesn’t get any better.
That was the one good thing in 2020, dropping tons of cash down into that little V-shaped notch paid off super fast, I regret having any emergency fund not in stocks for March 2020. Was living in the woods for 6 months anyway : /
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Re: U.S. stocks continue to soar!

Post by minimalistmarc »

HomerJ wrote: Thu Sep 16, 2021 12:44 pm
nigel_ht wrote: Thu Sep 16, 2021 12:37 pm
HomerJ wrote: Thu Sep 16, 2021 12:03 pm
nigel_ht wrote: Wed Sep 15, 2021 11:59 pm 1929 IS in the data set…
This is why I have 10+ years in bonds/cash.

I know most everyone else thinks 1-2 years is plenty, but, like you said, 1929 IS in the data-set.
1929 was 20 years of pain right? Honestly, I don’t think hedging against that is viable without deeply impacting future gains.

I guess if you have enough already it’s fine…

What are you doing again? I remember you said you were setting aside gains even beyond the 50/50 level?
Nah, it wasn't 20 years... that's just looking at the stock index price. If you count dividends, you got your money back on the stock side a lot faster.

Me, I've got my 25x sitting at 50/50, and I'm crazy conservative enough that all new gains I'm moving to cash... I have gotten myself to 25x sitting at 50/50 with an extra 2x in cash.

Crazy dumb way to look at it, I know, all mental accounting. One could also just say that I'm 46/54 right with 27x expenses.
Yep, dividends made a big difference and wasn’t there also significant deflation which often gets overlooked? To be honest 1929 doesn’t scare me, but I wouldn’t wish it upon my fellow humans because of the suffering it would inflict.
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mrspock wrote: Fri Sep 17, 2021 5:44 am
HanSolo wrote: Fri Sep 17, 2021 3:28 am
mrspock wrote: Fri Sep 17, 2021 2:27 am I win no matter what
You mean that's a certainty?
Nothing is life is absolutely certain…. but given my investment horizon, my AA and my ability to handle crashes, it’s pretty darn close barring nuclear war.

Honestly, I think I enjoy the crashes as much (maybe more) than the bull markets. The amount of money you make in crashes is amazing. TLH, rebalancing, purchases with new capital… it doesn’t get any better.
I'm too chicken to rebalance during a crash. Last March 2020, I had no reason to believe it wouldn't be a prolonged downturn. I just stopped looking at our brokerage balances for a while. That's what I did during the big recession too. Ignorance is bliss sometimes.
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Re: U.S. stocks continue to soar!

Post by Blueskies60 »

All the enthusiasm about buying during a "dip" seems to have evaporated.......
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Re: U.S. stocks continue to soar!

Post by sailaway »

Blueskies60 wrote: Fri Sep 17, 2021 9:12 am All the enthusiasm about buying during a "dip" seems to have evaporated.......
Payday isn't until next week and rebalancing date is two months away!
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Re: U.S. stocks continue to soar!

Post by EnjoyIt »

minimalistmarc wrote: Fri Sep 17, 2021 8:02 am
HomerJ wrote: Thu Sep 16, 2021 12:44 pm
nigel_ht wrote: Thu Sep 16, 2021 12:37 pm
HomerJ wrote: Thu Sep 16, 2021 12:03 pm
nigel_ht wrote: Wed Sep 15, 2021 11:59 pm 1929 IS in the data set…
This is why I have 10+ years in bonds/cash.

I know most everyone else thinks 1-2 years is plenty, but, like you said, 1929 IS in the data-set.
1929 was 20 years of pain right? Honestly, I don’t think hedging against that is viable without deeply impacting future gains.

I guess if you have enough already it’s fine…

What are you doing again? I remember you said you were setting aside gains even beyond the 50/50 level?
Nah, it wasn't 20 years... that's just looking at the stock index price. If you count dividends, you got your money back on the stock side a lot faster.

Me, I've got my 25x sitting at 50/50, and I'm crazy conservative enough that all new gains I'm moving to cash... I have gotten myself to 25x sitting at 50/50 with an extra 2x in cash.

Crazy dumb way to look at it, I know, all mental accounting. One could also just say that I'm 46/54 right with 27x expenses.
Yep, dividends made a big difference and wasn’t there also significant deflation which often gets overlooked? To be honest 1929 doesn’t scare me, but I wouldn’t wish it upon my fellow humans because of the suffering it would inflict.
I tried looking for a graph that included deflation and dividends and can’t find anything.

Any chance someone has better search skill than me that can post such a graphic?
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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Re: U.S. stocks continue to soar!

Post by Marseille07 »

Blueskies60 wrote: Fri Sep 17, 2021 9:12 am All the enthusiasm about buying during a "dip" seems to have evaporated.......
I'm enjoying this month buying a dip.
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Re: U.S. stocks continue to soar!

Post by UpsetRaptor »

EnjoyIt wrote: Fri Sep 17, 2021 9:32 am
minimalistmarc wrote: Fri Sep 17, 2021 8:02 am
HomerJ wrote: Thu Sep 16, 2021 12:44 pm
nigel_ht wrote: Thu Sep 16, 2021 12:37 pm
HomerJ wrote: Thu Sep 16, 2021 12:03 pm

This is why I have 10+ years in bonds/cash.

I know most everyone else thinks 1-2 years is plenty, but, like you said, 1929 IS in the data-set.
1929 was 20 years of pain right? Honestly, I don’t think hedging against that is viable without deeply impacting future gains.

I guess if you have enough already it’s fine…

What are you doing again? I remember you said you were setting aside gains even beyond the 50/50 level?
Nah, it wasn't 20 years... that's just looking at the stock index price. If you count dividends, you got your money back on the stock side a lot faster.

Me, I've got my 25x sitting at 50/50, and I'm crazy conservative enough that all new gains I'm moving to cash... I have gotten myself to 25x sitting at 50/50 with an extra 2x in cash.

Crazy dumb way to look at it, I know, all mental accounting. One could also just say that I'm 46/54 right with 27x expenses.
Yep, dividends made a big difference and wasn’t there also significant deflation which often gets overlooked? To be honest 1929 doesn’t scare me, but I wouldn’t wish it upon my fellow humans because of the suffering it would inflict.
I tried looking for a graph that included deflation and dividends and can’t find anything.

Any chance someone has better search skill than me that can post such a graphic?
See this thread: viewtopic.php?t=294087
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Re: U.S. stocks continue to soar!

Post by Triple digit golfer »

Why are we callin this a "dip?" We're about 2% from the all-time high and in the last six weeks are actually up about 0.40%. On an annualized basis, the last six weeks are actually up more than 3%.

I'll call it six weeks of stock market doing what it does. Dip, schmip.
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Re: U.S. stocks continue to soar!

Post by EnjoyIt »

UpsetRaptor wrote: Fri Sep 17, 2021 9:37 am
EnjoyIt wrote: Fri Sep 17, 2021 9:32 am
minimalistmarc wrote: Fri Sep 17, 2021 8:02 am
HomerJ wrote: Thu Sep 16, 2021 12:44 pm
nigel_ht wrote: Thu Sep 16, 2021 12:37 pm

1929 was 20 years of pain right? Honestly, I don’t think hedging against that is viable without deeply impacting future gains.

I guess if you have enough already it’s fine…

What are you doing again? I remember you said you were setting aside gains even beyond the 50/50 level?
Nah, it wasn't 20 years... that's just looking at the stock index price. If you count dividends, you got your money back on the stock side a lot faster.

Me, I've got my 25x sitting at 50/50, and I'm crazy conservative enough that all new gains I'm moving to cash... I have gotten myself to 25x sitting at 50/50 with an extra 2x in cash.

Crazy dumb way to look at it, I know, all mental accounting. One could also just say that I'm 46/54 right with 27x expenses.
Yep, dividends made a big difference and wasn’t there also significant deflation which often gets overlooked? To be honest 1929 doesn’t scare me, but I wouldn’t wish it upon my fellow humans because of the suffering it would inflict.
I tried looking for a graph that included deflation and dividends and can’t find anything.

Any chance someone has better search skill than me that can post such a graphic?
See this thread: viewtopic.php?t=294087
Thanks. Great thread.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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