Easy money baby!

[Financologist]

Between Tesla, Amazon, Zoom and even Kodak... sensational headlines of soaring issues seem to be growing in frequency.

Correspondingly, friends and acquaintances of all walks are making "investments" in the stock du jour.

It's ground hogs day.

I try to stay the course but from time to time am tempted to make a contrarian bet that doesn't stray too far from my plan. I don't attemp to value stocks typically. The one exception I will make is when I see massive panic or unchecked euphoria. In over twenty years of investing I've only made one major exception to my investing plan. In March 2009 I bought a bunch of the NASDAQ 100 (held to this day). Believe me when I say I do not overestimate my investing acumen however in this case I am willing to make a contrarian bet if a good idea comes along.

Interested in BH input to accomplish this (I've already given myself a market timing lecture).

Finally, assume a current portfolio comprised of 12% cash, 18% treasury bonds and 70% stocks split 70% US total market (15% of which is in QQQ, so tech tilt the rest ITOT equivalent) and 30% international.. 25% of which is VWO (emerging) and the rest in line with VXUS.

Thanks for your input.

[livesoft]

My friends tell me about their stock trades. Then I ask how many shares? They are always less than 10 shares, so it's all for fun and talk.

[JoMoney]

Looking for others to give you advice on making a "contrarian bet", is the type of ironic humor I get a kick out of
I'm not necessarily opposed to making a bet/taking a gamble, but when you do, expect a gamblers outcome.

[Ryzen]

My friends tell me about their stock trades. Then I ask how many shares? They are always less than 10 shares, so it's all for fun and talk.

This is an interesting point I haven't considered before. Robinhood and all the other brokers going to no commission trades have opened up trading to the masses with no barriers to entry. Previous "manias" in the markets required people to be purchasing sizeable positions. This mania lets people buy a fraction of a share of Apple. Maybe the market isn't getting that frothy from trading by the little guy after all.

But to your point, the stock you mentions matter. 10 shares of Amazon is a sizeable position compared to 10 shares of Ford.

[Robot Monster]

Between Tesla, Amazon, Zoom and even Kodak... sensational headlines of soaring issues seem to be growing in frequency.

Ignore that noise. Otherwise it's like saying, "With all the adult entertainment available online, I can't help but be turned on. What do you guys recommend? Cold showers?" No, no, no, we recommend shunning such material in the first place. Treat sensational headlines as FOMO-porn, and steer clear.

[arcticpineapplecorp.]

Between Tesla, Amazon, Zoom and even Kodak... sensational headlines of soaring issues seem to be growing in frequency.

kodak? seriously? it's $7.87 a share right now. Sure it shot up from $2.10 on 7/24/2020 to $33.20 on 7/29/2020, but then back down to $14.94 on 8/3/2020 and $7.87 now.

high flyer huh?

perhaps people forget (or never learned) about the Nifty Fifty.

kodak was one of them:
https://en.wikipedia.org/wiki/Nifty_Fifty

Those who don't learn from history are condemned to repeat it.

easy money, huh? easy to lose.

mic drop.

S&P500 (in blue below) and total stock market (in green below) vs. kodak (in orange below) from 2013 (assuming kodak came out of bankruptcy? nothing before that at morningstar):



source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

[Grt2bOutdoors]

My friends tell me about their stock trades. Then I ask how many shares? They are always less than 10 shares, so it's all for fun and talk.

10 shares of Apple 15 years ago is now 560 shares, nothing to sneeze at. 10 shares of Zoom was $2000 a few months ago, it’s now $4,000. That is how people get ensnared in day trading their money away.

[livesoft]

10 shares of Apple 15 years ago is now 560 shares, nothing to sneeze at. 10 shares of Zoom was $2000 a few months ago, it’s now $4,000. That is how people get ensnared in day trading their money away.

Sure, but my friends are telling me about their trades: They've bought and sold. They don't have shares of Apple purchased 15 years ago nor Zoom purchased a few months ago because they already sold those shares.

[Financologist]

Looking for others to give you advice on making a "contrarian bet", is the type of ironic humor I get a kick out of
I'm not necessarily opposed to making a bet/taking a gamble, but when you do, expect a gamblers outcome.

JoMoney, thanks for the laugh. If there are lots of responses , perhaps I'll be able to sift through the BH herd and find the contrarian nugget.

[JBTX]

Between Tesla, Amazon, Zoom and even Kodak... sensational headlines of soaring issues seem to be growing in frequency.

Correspondingly, friends and acquaintances of all walks are making "investments" in the stock du jour.

It's ground hogs day.

I try to stay the course but from time to time am tempted to make a contrarian bet that doesn't stray too far from my plan. I don't attemp to value stocks typically. The one exception I will make is when I see massive panic or unchecked euphoria. In over twenty years of investing I've only made one major exception to my investing plan. In March 2009 I bought a bunch of the NASDAQ 100 (held to this day). Believe me when I say I do not overestimate my investing acumen however in this case I am willing to make a contrarian bet if a good idea comes along.

Interested in BH input to accomplish this (I've already given myself a market timing lecture).

Finally, assume a current portfolio comprised of 12% cash, 18% treasury bonds and 70% stocks split 70% US total market (15% of which is in QQQ, so tech tilt the rest ITOT equivalent) and 30% international.. 25% of which is VWO (emerging) and the rest in line with VXUS.

Thanks for your input.

I'm not clear what bet you want to make. Please be more specific.

[av111]

OP

How about SQQQ $25 calls for December?

[ChinchillaWhiplash]

TZA 3x bears small cap US fund? It is generally a volatile asset class. Might as well bet against it performing

[delamer]

Historically, when “the little guy” started trading stocks it was a sign that a downturn was on the way. Like the story of Joe Kennedy and the shoeshine boy.

Whether the ease and low cost of trading really mean that this time it’s different, who knows?

[LFS1234]

I try to stay the course but from time to time am tempted to make a contrarian bet that doesn't stray too far from my plan. I don't attemp to value stocks typically. The one exception I will make is when I see massive panic or unchecked euphoria.

I do the same thing. In my view it's fine to make rational adjustments around the edges of your portfolio.

Once it turns into a large portfolio, not straying far from "staying the course" is almost always the best thing to do. You're no longer driving a waverunner; you're steering a supertanker and there is a lot more at stake.

I made an adjustment yesterday by funding my DAF for the next several years. This got some highly appreciated and currently richly valued stocks out of my taxable account now, while reducing my expenses for the next few years.

It has become obvious that many market participants now are partying like it's 1999. If this does turn out to be 1999, then history suggests that whenever the high fliers tumble back to earth, they will be accompanied by a drop in much of the rest of the market. The market will eventually resume its upward course, so any such blip doesn't matter much for the passive, well-diversified investor with a long time horizon.

Two guidelines:

- Never sell short. Stocks can only drop 100% but they can go up 1,000% or 10,000% or more.
- Avoid buying on margin. You can never go broke if you don't owe anyone anything.

[whereskyle]

Between Tesla, Amazon, Zoom and even Kodak... sensational headlines of soaring issues seem to be growing in frequency.

Correspondingly, friends and acquaintances of all walks are making "investments" in the stock du jour.

It's ground hogs day.

I try to stay the course but from time to time am tempted to make a contrarian bet that doesn't stray too far from my plan. I don't attemp to value stocks typically. The one exception I will make is when I see massive panic or unchecked euphoria. In over twenty years of investing I've only made one major exception to my investing plan. In March 2009 I bought a bunch of the NASDAQ 100 (held to this day). Believe me when I say I do not overestimate my investing acumen however in this case I am willing to make a contrarian bet if a good idea comes along.

Interested in BH input to accomplish this (I've already given myself a market timing lecture).

Finally, assume a current portfolio comprised of 12% cash, 18% treasury bonds and 70% stocks split 70% US total market (15% of which is in QQQ, so tech tilt the rest ITOT equivalent) and 30% international.. 25% of which is VWO (emerging) and the rest in line with VXUS.

Thanks for your input.

Everyone touting this stuff needs someone to sell their shares to. They are hoping it will be you, and it seems like you are willing to oblige...

[neurosphere]

Correspondingly, friends and acquaintances of all walks are making "investments" in the stock du jour.

I've been looking for an appropriate thread within which to call a "top" to the market. I didn't want to start my own thread, because chance are, I'm wrong, lol.

But I'm writing for the record that there will no more than an additional 7% increase from here, prior to a large decline (or long slow decline or plateau).

That said, I'm making no changes to my allocations or strategy, and am investing with each paycheck, as always.

[texasfight]

Honestly go all in. Not in tesla calls or single stocks like apple though. Diversified indices.

This is the greatest devaluation of labor and revaluation of capital in US history, and you don't want to miss out.

[atdharris]

My friends tell me about their stock trades. Then I ask how many shares? They are always less than 10 shares, so it's all for fun and talk.

10 shares of Apple 15 years ago is now 560 shares, nothing to sneeze at. 10 shares of Zoom was $2000 a few months ago, it’s now $4,000. That is how people get ensnared in day trading their money away.

Don't remind me. As someone who bought 10 shares of Apple in 2007 with his summer earnings from the golf course, I wish I had held all these years... that's the price when you're learning how to invest.

[livesoft]

AAPL is 6.4% of the S&P 500 Index and about 5.1% of Total US Stock Market. That means that for every $100,000 of VOO / VFIAX or VTI / VTSAX there is $6400 or $5100 worth of Apple stock. So if one has say $2 million in VTSAX, then one effectively owns more than 750 shares of AAPL.

it is easy money.

[arcticpineapplecorp.]

My friends tell me about their stock trades. Then I ask how many shares? They are always less than 10 shares, so it's all for fun and talk.

10 shares of Apple 15 years ago is now 560 shares, nothing to sneeze at. 10 shares of Zoom was $2000 a few months ago, it’s now $4,000. That is how people get ensnared in day trading their money away.

Don't remind me. As someone who bought 10 shares of Apple in 2007 with his summer earnings from the golf course, I wish I had held all these years... that's the price when you're learning how to invest.

or you could feel like a sucker holding a company (yes, even Apple in orange below) for 17 years while you watched your $10,000 in Apple from 12/12/1980 (earliest date) gain only $6.02 over 17 years whereas the S&P500 index (in blue below) over the same time period grew by $121,945.78 instead.



source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

you just don't know what's going to happen.

repeat after me:

you just don't know.

everybody thinks they know.

they don't.

can we please stop gambling already?

[hoops777]

Well as much as all of you hate to admit it here, there are a lot of people who invested in FAANG stocks and have made a lot of easy money. I am jealous but that does not change the facts.

[TomatoTomahto]

There are times, like now, where I find comfort in knowing that the PITA Compliance hoops we have to jump through because of DW’s job means we have missed out on some profitable trades, but also missed out on some real stinkers.

I did calculate back of the envelope that, had I invested in TSLA when I bought my Model X to the tune of what the car cost, it would be over $2M. I console myself by reminding myself I would have never let it ride for all these years.

[ChinchillaWhiplash]

I bought some TQQQ and ARKK in March. Made a nice profit later, but sold out a bit soon. Used those funds to buy some standard index funds. I dabble in those things when I see an opportunity. But most of my retirement savings is on autopilot buying index funds each month. Gambling can pay off, but I would keep my bets down to something that you won’t miss if you guess incorrectly.

[BogleFan510]

My friends tell me about their stock trades. Then I ask how many shares? They are always less than 10 shares, so it's all for fun and talk.

10 shares of Apple 15 years ago is now 560 shares, nothing to sneeze at. 10 shares of Zoom was $2000 a few months ago, it’s now $4,000. That is how people get ensnared in day trading their money away.

I think its a bit unfair to equate owning a stock with day trading. It seems indexing has become religion, to the point where people feel a strong need to ridicule other beliefs. I own individual stocks, some with 60x gains, some losses. My average time held approaches 10-20 years. That is not gambling, it is a more narrow form of investing, more like investing in a rental property vs a REIT. Almost every single stock mistake I ever made was selling winners too soon or writing covered calls in a company I knew was solid (and losing my position on call). A buy that falls to 0 is just a typical possible result for a high growth stock.

When my father and I started investing, low fee index funds barely existed and long term buy and hold of individual stocks was among the best investing choices, especially if one knew the industry and company well. At Wharton, in 1983 I developed a computer based statistical model that was successful at predicting future performance, based on a unique algorithm. Computers and the type of information I had access to for that undergrad project were scarce then, so I am skeptical I could do that now, but it worked. My model was theory based and different from what others were doing (professor wanted to study it more) and it worked, so I believe it is possible to pick winners, although difficult and hard to scale. People can PM me if they want details.

Anyway, we dont need to rain on the parade of the sucessful single stock picker, especially if they hold long term, have done their research, and plan to hold through ups and downs like a boglehead holds the index. That plan has more varience, in terms of outcome, but can have a good result at a low fee. It holds many aspects of the boglehead way.

So in summary, I respect the advice of the post, but would modify to advise folks, if you buy a company because you believe in it, hold it until it plays out fully or you really need the money for something essential.

[Financologist]

I made my "contrarian move" this afternoon.

Reduced my govt bond holdings by 10% (not percentage points of overall allocation) and allocated three-quarters of the proceeds to a broad Market International Index Fund and 1/4 to a US small cap index. This Loosely restores intended allocations whereas previously I got a little lazy with rebalancing.

Feel like a crazy man right now.

[Afty]

Is there any evidence that "contrarian bets" pay off any better or worse than the whole market? Efficient market hypothesis would predict otherwise.

[Financologist]

Is there any evidence that "contrarian bets" pay off any better or worse than the whole market? Efficient market hypothesis would predict otherwise.

There is plenty of evidence that contrarian bets pay off sometimes.

[LilyFleur]

Is there any evidence that "contrarian bets" pay off any better or worse than the whole market? Efficient market hypothesis would predict otherwise.

There is plenty of evidence that contrarian bets pay off sometimes.

Exactly.

[Grt2bOutdoors]

My friends tell me about their stock trades. Then I ask how many shares? They are always less than 10 shares, so it's all for fun and talk.

10 shares of Apple 15 years ago is now 560 shares, nothing to sneeze at. 10 shares of Zoom was $2000 a few months ago, it’s now $4,000. That is how people get ensnared in day trading their money away.

I think its a bit unfair to equate owning a stock with day trading. It seems indexing has become religion, to the point where people feel a strong need to ridicule other beliefs. I own individual stocks, some with 60x gains, some losses. My average time held approaches 10-20 years. That is not gambling, it is a more narrow form of investing, more like investing in a rental property vs a REIT. Almost every single stock mistake I ever made was selling winners too soon or writing covered calls in a company I knew was solid (and losing my position on call). A buy that falls to 0 is just a typical possible result for a high growth stock.

When my father and I started investing, low fee index funds barely existed and long term buy and hold of individual stocks was among the best investing choices, especially if one knew the industry and company well. At Wharton, in 1983 I developed a computer based statistical model that was successful at predicting future performance, based on a unique algorithm. Computers and the type of information I had access to for that undergrad project were scarce then, so I am skeptical I could do that now, but it worked. My model was theory based and different from what others were doing (professor wanted to study it more) and it worked, so I believe it is possible to pick winners, although difficult and hard to scale. People can PM me if they want details.

Anyway, we dont need to rain on the parade of the sucessful single stock picker, especially if they hold long term, have done their research, and plan to hold through ups and downs like a boglehead holds the index. That plan has more varience, in terms of outcome, but can have a good result at a low fee. It holds many aspects of the boglehead way.

So in summary, I respect the advice of the post, but would modify to advise folks, if you buy a company because you believe in it, hold it until it plays out fully or you really need the money for something essential.

I own individual stock too but calling a spade a spade is not raining on anyone. It’s fact that there is a ton of speculation going on in the markets especially with cost of margin being so low courtesy of easy money policy. Jack those rates up and you’ll see how fast the air comes out of this tech bubble. Yes, it’s a bubble when shares are jumping $1100 above the trading price based on someone dividing a pizza pie from 8 slices into 32 slices. You want to call that investing?

[Afty]

Is there any evidence that "contrarian bets" pay off any better or worse than the whole market? Efficient market hypothesis would predict otherwise.

There is plenty of evidence that contrarian bets pay off sometimes.

Could you provide links to this evidence? And, critically, can you distinguish in advance the cases where they do pay off from those that don't?

[burritoLover]

I wonder how many Robinhooders are trading on margin.

[firebirdparts]

Yeah, I think it's okay to say the market's gone crazy. I know some people really do think it's efficient and all that, but they don't really bother me. As long as you know that you can't pop the bubble, then I think it's okay to call it a bubble. There's no problem in practice unless you think you can be the one that pops it.

Now as you all know, there are lots of journalists working for a living who are blaming this on retail investors and other 'dumb people'. That I am not so sure about. I am never too certain about the intelligence of the smart money, but more importantly, I know I can't beat either of them, dumb or smart.

[firebirdparts]

I wonder how many Robinhooders are trading are margin.

That is one of the big draws for Robinhood. They have the easiest access to margin. That's what they want.

[RetiredArtist]

"This is the greatest devaluation of labor and revaluation of capital in US history, and you don't want to miss out."
[/quote]

Texasfight, Can you please explain what you mean--are Uber & Lyft examples of devaluation of labor, where workers become interchangeable, like commodities?
And I can't even guess what revaluation of capital means.

[burritoLover]

I wonder how many Robinhooders are trading are margin.

That is one of the big draws for Robinhood. They have the easiest access to margin. That's what they want.

Ah, yeah - looking at it, their "gold" subscription is $5/month and gives you $1000 on margin to get you hooked.

[Grt2bOutdoors]

Is there any evidence that "contrarian bets" pay off any better or worse than the whole market? Efficient market hypothesis would predict otherwise.

There is plenty of evidence that contrarian bets pay off sometimes.

Could you provide links to this evidence? And, critically, can you distinguish in advance the cases where they do pay off from those that don't?

Value indexes you could say are a contrarian bet. The repricing has of its holdings upwards is the bet paying off.

[MotoTrojan]

TZA 3x bears small cap US fund? It is generally a volatile asset class. Might as well bet against it performing

Small-cap valuations are depressed massively compared to large-cap, this trade would terrify me.

OP if you want to be a contrarian, buy some deep-value.

[pennsylvania211]

I wonder how many Robinhooders are trading are margin.

That is one of the big draws for Robinhood. They have the easiest access to margin. That's what they want.

Ah, yeah - looking at it, their "gold" subscription is $5/month and gives you $1000 on margin to get you hooked.

People are their own worst enemies sometimes! Now they have the tools to get there.

[msmtr]

"This is the greatest devaluation of labor and revaluation of capital in US history, and you don't want to miss out."

Texasfight, Can you please explain what you mean--are Uber & Lyft examples of devaluation of labor, where workers become interchangeable, like commodities?
And I can't even guess what revaluation of capital means.
[/quote]

Same questions here.

[burritoLover]

I wonder how many Robinhooders are trading are margin.

That is one of the big draws for Robinhood. They have the easiest access to margin. That's what they want.

Ah, yeah - looking at it, their "gold" subscription is $5/month and gives you $1000 on margin to get you hooked.

People are their own worst enemies sometimes! Now they have the tools to get there.

Those margin calls are going to be tragic if the market crashes. Or even if only TSLA does.

[pennsylvania211]

I wonder how many Robinhooders are trading are margin.

That is one of the big draws for Robinhood. They have the easiest access to margin. That's what they want.

Ah, yeah - looking at it, their "gold" subscription is $5/month and gives you $1000 on margin to get you hooked.

People are their own worst enemies sometimes! Now they have the tools to get there.

Those margin calls are going to be tragic if the market crashes. Or even if only TSLA does.

Going to be a lot of empty wallets and a sobering experience.

[Grt2bOutdoors]

I wonder how many Robinhooders are trading are margin.

That is one of the big draws for Robinhood. They have the easiest access to margin. That's what they want.

Ah, yeah - looking at it, their "gold" subscription is $5/month and gives you $1000 on margin to get you hooked.

People are their own worst enemies sometimes! Now they have the tools to get there.

Those margin calls are going to be tragic if the market crashes. Or even if only TSLA does.

Even if I need to take a decline in my portfolio value as things start tanking this is what is needed to wring out the excesses. Inevitably selloffs impact everyone but the difference is my holdings are sustainable compared to the hot air we have out there.

[keith6014]

what is considered "not easy money"?

[lostdog]

My friends aren't talking about stocks. They're broke and trying to save but can't and a lot of people are still hurting financially during this recession.

Me and my fellow Bogleheads live in a bubble.

This is not easy money.

If all of a sudden they start investing in single stocks, I'll get concerned.

[vitaflo]

My friends aren't talking about stocks. They're broke and trying to save but can't and a lot of people are still hurting financially during this recession.

My fellow Bogleheads live in a bubble.

This is not easy money.

If all of a sudden they start investing in single stocks, I'll get concerned.

Yup, a lot of people I know playing the market are people who would otherwise be saving, usually in index funds. They have the cash to throw around to juice the returns.

When my other friends who aren't really in the market much (either because they don't have the money, or spend it willy nilly) all of a sudden tell me about their Robinhood account, that will be an ominous sign.

[knowledge]

what is considered "not easy money"?

When you actually have to deal with the reality of the risk-reward pairing.

[Financologist]

Is there any evidence that "contrarian bets" pay off any better or worse than the whole market? Efficient market hypothesis would predict otherwise.

There is plenty of evidence that contrarian bets pay off sometimes.

Could you provide links to this evidence? And, critically, can you distinguish in advance the cases where they do pay off from those that don't?

In response to your second question the answer is a resounding no.

[Grt2bOutdoors]

My friends aren't talking about stocks. They're broke and trying to save but can't and a lot of people are still hurting financially during this recession.

My fellow Bogleheads live in a bubble.

This is not easy money.

If all of a sudden they start investing in single stocks, I'll get concerned.

Yup, a lot of people I know playing the market are people who would otherwise be saving, usually in index funds. They have the cash to throw around to juice the returns.

When my other friends who aren't really in the market much (either because they don't have the money, or spend it willy nilly) all of a sudden tell me about their Robinhood account, that will be an ominous sign.

Yes, there are more than a few posters here who live in a bubble, many of them have never been to an unemployment office or online, they are in professions where they have stable, secure work. Those of us who have, we know what its like and we invest because we don't forget that experience. Maybe you can convince your friends to join Bogleheads and learn how to invest to give them a cushion when they get back on their feet.

Well, let me tell you, I've seen the ominous sign, my young child knows about Robinhood, my neighbor told me about his account at you guessed it,
Robinhood and then asked me if I had an account there as well. The WSJ wrote about it on the front page last week, plenty of people home with time on their hands on account of being out of work are day trading in the hopes of making a score of any amount. The last time this happened, those day traders were wiped out shortly there after.

[bugleheadd]

My friends aren't talking about stocks. They're broke and trying to save but can't and a lot of people are still hurting financially during this recession.

My fellow Bogleheads live in a bubble.

This is not easy money.

If all of a sudden they start investing in single stocks, I'll get concerned.

Yup, a lot of people I know playing the market are people who would otherwise be saving, usually in index funds. They have the cash to throw around to juice the returns.

When my other friends who aren't really in the market much (either because they don't have the money, or spend it willy nilly) all of a sudden tell me about their Robinhood account, that will be an ominous sign.

Yes, there are more than a few posters here who live in a bubble, many of them have never been to an unemployment office or online, they are in professions where they have stable, secure work. Those of us who have, we know what its like and we invest because we don't forget that experience. Maybe you can convince your friends to join Bogleheads and learn how to invest to give them a cushion when they get back on their feet.

Well, let me tell you, I've seen the ominous sign, my young child knows about Robinhood, my neighbor told me about his account at you guessed it,
Robinhood and then asked me if I had an account there as well. The WSJ wrote about it on the front page last week, plenty of people home with time on their hands on account of being out of work are day trading in the hopes of making a score of any amount. The last time this happened, those day traders were wiped out shortly there after.

But all those last times didn't have jpowell and his money printer . The current sentiment is stocks can't collapse or go down again like in march because of the trillions being printed.

[Cheez-It Guy]

My friends tell me about their stock trades. Then I ask how many shares? They are always less than 10 shares, so it's all for fun and talk.

Yeah, I just sold my 9 shares of BRKA. . .