"Bank of XOM versus 'risk-free treasuries'" since 2009

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"Bank of XOM versus 'risk-free treasuries'" since 2009

Post by nisiprius »

On 10/8/2009, "Allocationist" started a thread on "Bank of XOM" vs. "Risk-free" Treasuries.
...IMO United States Treasury debt can no longer be considered "risk free." For those of you who may share my opinion has anyone considered the "Bank of Exxon Mobil" (holding their stock) as an alternative to vanilla treasuries or even TIPS?

XOM has a pristine balance sheet, diminishing share count and holds solid assets worldwide as collateral and yields about 2.4% with a payout ratio of about 26%.
The risk in "deposits" in the "bank" of XOM showed up.
$10,000 invested in the Vanguard Intermediate-Term Treasury fund on 10/8/2009 would today be worth $14,623.22.
$10,000 invested in XOM on the 10/8/2009 would today be worth $8,976.01. Whatever was paid out in dividends along the way was more than lost in capital losses.

Yes, stocks actually are riskier than bonds, even stocks of companies with "pristine balance sheets."

Source

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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by rascott »

How would have XOM bonds fared compared with Treasury bonds?
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by EnjoyIt »

But, but, but, XOM s paying 8% dividend right now and is a dividend aristocrat.

Prior to being a boglehead I was a dividend growth investor. For some reason (explained below) I kept XOM when switching over.

I kept XOM because I figured the dividends cover my gas expenses every year. Silly, I know. And I had decent capital gains and I did not want to pay taxes. Now I don't want to sell it at a loss. Reality is, I should just sell and buy Total US stock instead but can't get myself to do it. At least it is a tiny portion of my portfolio between 1-2%
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by anon_investor »

How would the bank of VTSAX have fared?
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by nisiprius »

anon_investor wrote: Tue Aug 25, 2020 12:18 pm How would the bank of VTSAX have fared?
Image

But I'm not sure where you're going, because the point of "Allocationist's" post was to draw a distinction between stocks in general and XOM in particular. Unlike stocks in general, XOM had such a "pristine balance sheet" etc. that putting money into XOM was more like putting money into a bank than putting into stocks. That putting money into XOM stock was less risky than putting it into Treasury bonds. That stocks in general were riskier than Treasury bonds, but that you could easily pick out some big, stable blue chips that that were not.
Last edited by nisiprius on Tue Aug 25, 2020 12:30 pm, edited 1 time in total.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by anon_investor »

nisiprius wrote: Tue Aug 25, 2020 12:26 pm
anon_investor wrote: Tue Aug 25, 2020 12:18 pm How would the bank of VTSAX have fared?
Image

But I'm not sure where you're going, because the point of "Allocationist's" post was that, unlike stocks in general, XOM had such a "pristine balance sheet" etc. putting money into XOM was like putting money into a bank, and that holding XOM stock was less risky than holding Treasury bonds. That is, stocks in general were riskier than Treasury bonds, but that you could easily pick out some big, stable blue chips that that were not.
So the bank of Microsoft? I think they are one of the few companies with a AAA rating.

I guess we can look back in 2030.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by nisiprius »

anon_investor wrote: Tue Aug 25, 2020 12:29 pm
nisiprius wrote: Tue Aug 25, 2020 12:26 pm
anon_investor wrote: Tue Aug 25, 2020 12:18 pm How would the bank of VTSAX have fared?
Image

But I'm not sure where you're going, because the point of "Allocationist's" post was that, unlike stocks in general, XOM had such a "pristine balance sheet" etc. putting money into XOM was like putting money into a bank, and that holding XOM stock was less risky than holding Treasury bonds. That is, stocks in general were riskier than Treasury bonds, but that you could easily pick out some big, stable blue chips that that were not.
So the bank of Microsoft? I think they are one of the few companies with a AAA rating.

I guess we can look back in 2030.
He was not arguing for XOM bonds. He was arguing for using XOM stock instead of Treasury bonds.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by anon_investor »

nisiprius wrote: Tue Aug 25, 2020 12:30 pm
anon_investor wrote: Tue Aug 25, 2020 12:29 pm
nisiprius wrote: Tue Aug 25, 2020 12:26 pm
anon_investor wrote: Tue Aug 25, 2020 12:18 pm How would the bank of VTSAX have fared?
Image

But I'm not sure where you're going, because the point of "Allocationist's" post was that, unlike stocks in general, XOM had such a "pristine balance sheet" etc. putting money into XOM was like putting money into a bank, and that holding XOM stock was less risky than holding Treasury bonds. That is, stocks in general were riskier than Treasury bonds, but that you could easily pick out some big, stable blue chips that that were not.
So the bank of Microsoft? I think they are one of the few companies with a AAA rating.

I guess we can look back in 2030.
He was not arguing for XOM bonds. He was arguing for using XOM stock instead of Treasury bonds.
Understood. Just shows you no single stock is safe. I was just trying to say that if the same question was asked today, I think Microsoft would likely be the analogous stock. The Bank of MSFT!
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by the way »

Looks like Exxon is being dropped from the DOW 30 after 92 years. Nothing lasts forever I guess.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by Grt2bOutdoors »

the way wrote: Tue Aug 25, 2020 12:48 pm Looks like Exxon is being dropped from the DOW 30 after 92 years. Nothing lasts forever I guess.
Them being dropped has zero to do with their current issues and more to do with Apples stock split. Go read up on it. Same with Pfizer and Raytheon. It has everything to do with the stock prices.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by Grt2bOutdoors »

anon_investor wrote: Tue Aug 25, 2020 12:39 pm
nisiprius wrote: Tue Aug 25, 2020 12:30 pm
anon_investor wrote: Tue Aug 25, 2020 12:29 pm
nisiprius wrote: Tue Aug 25, 2020 12:26 pm
anon_investor wrote: Tue Aug 25, 2020 12:18 pm How would the bank of VTSAX have fared?
Image

But I'm not sure where you're going, because the point of "Allocationist's" post was that, unlike stocks in general, XOM had such a "pristine balance sheet" etc. putting money into XOM was like putting money into a bank, and that holding XOM stock was less risky than holding Treasury bonds. That is, stocks in general were riskier than Treasury bonds, but that you could easily pick out some big, stable blue chips that that were not.
So the bank of Microsoft? I think they are one of the few companies with a AAA rating.

I guess we can look back in 2030.
He was not arguing for XOM bonds. He was arguing for using XOM stock instead of Treasury bonds.
Understood. Just shows you no single stock is safe. I was just trying to say that if the same question was asked today, I think Microsoft would likely be the analogous stock. The Bank of MSFT!
Not the bank of Apple?
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by anon_investor »

Grt2bOutdoors wrote: Tue Aug 25, 2020 12:56 pm
anon_investor wrote: Tue Aug 25, 2020 12:39 pm
nisiprius wrote: Tue Aug 25, 2020 12:30 pm
anon_investor wrote: Tue Aug 25, 2020 12:29 pm
nisiprius wrote: Tue Aug 25, 2020 12:26 pm

Image

But I'm not sure where you're going, because the point of "Allocationist's" post was that, unlike stocks in general, XOM had such a "pristine balance sheet" etc. putting money into XOM was like putting money into a bank, and that holding XOM stock was less risky than holding Treasury bonds. That is, stocks in general were riskier than Treasury bonds, but that you could easily pick out some big, stable blue chips that that were not.
So the bank of Microsoft? I think they are one of the few companies with a AAA rating.

I guess we can look back in 2030.
He was not arguing for XOM bonds. He was arguing for using XOM stock instead of Treasury bonds.
Understood. Just shows you no single stock is safe. I was just trying to say that if the same question was asked today, I think Microsoft would likely be the analogous stock. The Bank of MSFT!
Not the bank of Apple?
I would say Microsoft is more analogous to ExxonMobile because it has been a top 10 company in the S&P500 since 1995 vs. Apple since 2009.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by nisiprius »

Grt2bOutdoors wrote: Tue Aug 25, 2020 12:55 pm
the way wrote: Tue Aug 25, 2020 12:48 pm Looks like Exxon is being dropped from the DOW 30 after 92 years. Nothing lasts forever I guess.
Them being dropped has zero to do with their current issues and more to do with Apples stock split. Go read up on it. Same with Pfizer and Raytheon. It has everything to do with the stock prices.
It is probably not news to people who follow individual stock prices, but I find it disorienting to have three companies familiar to me--ExxonMobil, Pfizer, and Raytheon--replaced by three companies I barely know, and can hardly identify what businesses they are in.

Amgen, Salesforce, Honeywell? Amgen is a vaguely familiar name, but until I looked them up two minutes ago I wouldn't have been sure if they were into multilevel marketing, insurance, or electricity. Apparently the "gen" is for "gene." Salesforce, I'm not sure I've even heard of. I would have guessed they were a temporary worker or an outsourcing agency. Honeywell is quite familiar but I didn't even know they still existed, or whether they are the same company that made all those thermostats and was one of the long-forgotten "seven dwarfs" of the computer industry. I have no doubt they are all big companies but would never have guessed they were DJIA calibre.
Last edited by nisiprius on Tue Aug 25, 2020 1:19 pm, edited 1 time in total.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by atdharris »

I admittedly have flirted with buying a chunk of AT&T for the yield to serve as a pseudo-bond fund. 7% yield, relatively safe dividend, strong cash flow, and sitting near a 10 year low. So far I have resisted
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by Grt2bOutdoors »

nisiprius wrote: Tue Aug 25, 2020 1:19 pm
Grt2bOutdoors wrote: Tue Aug 25, 2020 12:55 pm
the way wrote: Tue Aug 25, 2020 12:48 pm Looks like Exxon is being dropped from the DOW 30 after 92 years. Nothing lasts forever I guess.
Them being dropped has zero to do with their current issues and more to do with Apples stock split. Go read up on it. Same with Pfizer and Raytheon. It has everything to do with the stock prices.
It is probably not news to people who follow individual stock prices, but I find it disorienting to have three companies familiar to me--ExxonMobil, Pfizer, and Raytheon--replaced by three companies I barely know, and can hardly identify what businesses they are in.

Amgen, Salesforce, Honeywell? Amgen is a vaguely familiar name, but until I looked them up two minutes ago I wouldn't have been sure if they were into multilevel marketing, insurance, or electricity. Apparently the "gen" is for "gene." Salesforce, I'm not sure I've even heard of. I would have guessed they were a temporary worker or an outsourcing agency. Honeywell is quite familiar but I didn't even know they still existed, or whether they are the same company that made all those thermostats and was one of the long-forgotten "seven dwarfs" of the computer industry. I have no doubt they are all big companies but would never have guessed they were DJIA calibre.
Amgen is a huge biotech firm with blockbuster drugs for a variety of illnesses. Honeywell is in aviation, hydraulics, brakes, electronic controls. They were actually bought by Allied Signal and the acquirer took the name. Salesforce dot com makes sales software uses the cloud and just released their earnings which made the stock jump 37 points from the open to after hours trading today. Get ready for more wild swings in the DJIA, when these 3 join.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by Diligent Hands »

I used to own a lot of XOM and it did nothing for years. In early 2019 I found this site and the wisdom of being a Boglehead. I sold all my XOM in mid 2019 and bought total market index funds. You guys saved me big $$$ in the XOM 2020 price drop, and my index funds have done great.

Now if I could just figure out what to do with the Apple stock?
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by 000 »

Timely thread as many people who previously would not have invested much in stocks now seem to be rushing into stocks.

Even some prominent figures are recommending "safe" "quality" "blue-chip" dividend stocks as a bond replacement...
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by atdharris »

Diligent Hands wrote: Tue Aug 25, 2020 9:36 pm I used to own a lot of XOM and it did nothing for years. In early 2019 I found this site and the wisdom of being a Boglehead. I sold all my XOM in mid 2019 and bought total market index funds. You guys saved me big $$$ in the XOM 2020 price drop, and my index funds have done great.

Now if I could just figure out what to do with the Apple stock?
I am still trying to figure out what to do with all my FAANG stocks I owned since 2013-2015. Problem this, they're in a taxable account and they just keep going up!
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by 000 »

atdharris wrote: Tue Aug 25, 2020 10:38 pm
Diligent Hands wrote: Tue Aug 25, 2020 9:36 pm I used to own a lot of XOM and it did nothing for years. In early 2019 I found this site and the wisdom of being a Boglehead. I sold all my XOM in mid 2019 and bought total market index funds. You guys saved me big $$$ in the XOM 2020 price drop, and my index funds have done great.

Now if I could just figure out what to do with the Apple stock?
I am still trying to figure out what to do with all my FAANG stocks I owned since 2013-2015. Problem this, they're in a taxable account and they just keep going up!
Never understood the mentality of trying to defer taxes forever. Unless one dies with one's stocks, one will pay capital gains tax eventually.

I prefer to sell high rather than low. Some seem to feel otherwise...
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by atdharris »

000 wrote: Tue Aug 25, 2020 10:56 pm
atdharris wrote: Tue Aug 25, 2020 10:38 pm
Diligent Hands wrote: Tue Aug 25, 2020 9:36 pm I used to own a lot of XOM and it did nothing for years. In early 2019 I found this site and the wisdom of being a Boglehead. I sold all my XOM in mid 2019 and bought total market index funds. You guys saved me big $$$ in the XOM 2020 price drop, and my index funds have done great.

Now if I could just figure out what to do with the Apple stock?
I am still trying to figure out what to do with all my FAANG stocks I owned since 2013-2015. Problem this, they're in a taxable account and they just keep going up!
Never understood the mentality of trying to defer taxes forever. Unless one dies with one's stocks, one will pay capital gains tax eventually.

I prefer to sell high rather than low. Some seem to feel otherwise...
Perhaps so. I am torn between letting the winners run or selling them while they're at all time highs and investing the proceeds into VTI/VEA/VWO. Such decisions to make
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by 000 »

atdharris wrote: Tue Aug 25, 2020 11:03 pm Perhaps so. I am torn between letting the winners run or selling them while they're at all time highs and investing the proceeds into VTI/VEA/VWO. Such decisions to make
Murphy's law says whatever decision you make, the market will go the other way :twisted:
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by rascott »

nisiprius wrote: Tue Aug 25, 2020 1:19 pm
Grt2bOutdoors wrote: Tue Aug 25, 2020 12:55 pm
the way wrote: Tue Aug 25, 2020 12:48 pm Looks like Exxon is being dropped from the DOW 30 after 92 years. Nothing lasts forever I guess.
Them being dropped has zero to do with their current issues and more to do with Apples stock split. Go read up on it. Same with Pfizer and Raytheon. It has everything to do with the stock prices.
It is probably not news to people who follow individual stock prices, but I find it disorienting to have three companies familiar to me--ExxonMobil, Pfizer, and Raytheon--replaced by three companies I barely know, and can hardly identify what businesses they are in.

Amgen, Salesforce, Honeywell? Amgen is a vaguely familiar name, but until I looked them up two minutes ago I wouldn't have been sure if they were into multilevel marketing, insurance, or electricity. Apparently the "gen" is for "gene." Salesforce, I'm not sure I've even heard of. I would have guessed they were a temporary worker or an outsourcing agency. Honeywell is quite familiar but I didn't even know they still existed, or whether they are the same company that made all those thermostats and was one of the long-forgotten "seven dwarfs" of the computer industry. I have no doubt they are all big companies but would never have guessed they were DJIA calibre.

Salesforce is a monster cloud software company.... their ticker (CRM) is based upon the fact that they are THE company when it comes to CRM software..... something anybody loosely working in sales or marketing knows all about. Colleges have been teaching about CRM in business school for 20+ years.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by wootwoot »

Talk about cherry picking a timeline.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by nisiprius »

wootwoot wrote: Wed Aug 26, 2020 12:17 am Talk about cherry picking a timeline.
I could have picked 10, 5, 3, or 1 year time periods and gotten something similar. What timeline do you think I should have picked, and why?

If your objection is to the uneven number of years resulting from starting with the post comparing XOM stock to a bank account, we can also do an even 20 years (final chart).

It's easy to find starting dates for periods of time when intermediate-term Treasuries would have outperformed XOM stock. I think "cherry-picking" is needed to find a starting date from which they wouldn't have.

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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by BanquetBeer »

Yes, stocks have a big part of their value based on earnings and those are always at risk. I don’t know the inflation risk with TIPS if we go the way of Zimbabwe or Venezuela. I’m not too concerned about it though at this point. We have lots of rich citizens, quite a few of them advocating for higher taxes on themselves.

I also see some strengths and benefits of our economy. We don’t have the drag of Europe (they have to provide education, healthcare, etc for their citizens). As is often said something like the top 10% own 90% of stocks. The rest are just consumers.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by MarkRoulo »

wootwoot wrote: Wed Aug 26, 2020 12:17 am Talk about cherry picking a timeline.
Cherry picking is bad form if one is attempting to PROVE something.

Cherry picking is perfectly fine is one is attempting to illustrate by way of example.

I don’t think it will be easy to find a timeline in which XOM behaves like a treasury bond. That this timeline was un-bond-like and BAD illustrates very well the danger of treating XOM like a treasury bond.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by columbia »

wootwoot wrote: Wed Aug 26, 2020 12:17 am Talk about cherry picking a timeline.
What is your preferred timeline, aside from the original prediction?
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by MarkRoulo »

atdharris wrote: Tue Aug 25, 2020 1:19 pm I admittedly have flirted with buying a chunk of AT&T for the yield to serve as a pseudo-bond fund. 7% yield, relatively safe dividend, strong cash flow, and sitting near a 10 year low. So far I have resisted
Yahoo finance shows $1.64/share earnings for the past twelve months and annual dividends of $2.08/share.

Dividend payout greater than earnings is not safe (though maybe not as bad as it appears ... accounting rules can be strange).

Still, AT&T stock is not a bond.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by TJSI »

000, said:

"Murphy's law says whatever decisions you make, the market will go the other way."

Let's give credit where credit is due. This is more accurately know as the "Nedsaid Effect".

TJSI
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by arcticpineapplecorp. »

the way wrote: Tue Aug 25, 2020 12:48 pm Looks like Exxon is being dropped from the DOW 30 after 92 years. Nothing lasts forever I guess.
24 years of big company change (every 4 years):
https://americanbusinesshistory.org/lar ... 1994-2018/
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by BigJohn »

arcticpineapplecorp. wrote: Wed Aug 26, 2020 12:36 pm
the way wrote: Tue Aug 25, 2020 12:48 pm Looks like Exxon is being dropped from the DOW 30 after 92 years. Nothing lasts forever I guess.
24 years of big company change (every 4 years):
https://americanbusinesshistory.org/lar ... 1994-2018/
One of the coolest graphics I’ve seen, thanks!
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by arcticpineapplecorp. »

BigJohn wrote: Wed Aug 26, 2020 5:54 pm
arcticpineapplecorp. wrote: Wed Aug 26, 2020 12:36 pm
the way wrote: Tue Aug 25, 2020 12:48 pm Looks like Exxon is being dropped from the DOW 30 after 92 years. Nothing lasts forever I guess.
24 years of big company change (every 4 years):
https://americanbusinesshistory.org/lar ... 1994-2018/
One of the coolest graphics I’ve seen, thanks!
your welcome, but I can't take credit. I found it after someone else (sorry I don't remember who) posted it on bogleheads.

pass it on. That's how it works.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by anon_investor »

arcticpineapplecorp. wrote: Wed Aug 26, 2020 7:01 pm
BigJohn wrote: Wed Aug 26, 2020 5:54 pm
arcticpineapplecorp. wrote: Wed Aug 26, 2020 12:36 pm
the way wrote: Tue Aug 25, 2020 12:48 pm Looks like Exxon is being dropped from the DOW 30 after 92 years. Nothing lasts forever I guess.
24 years of big company change (every 4 years):
https://americanbusinesshistory.org/lar ... 1994-2018/
One of the coolest graphics I’ve seen, thanks!
your welcome, but I can't take credit. I found it after someone else (sorry I don't remember who) posted it on bogleheads.

pass it on. That's how it works.
Such a great graphic. But after only 2 years it is very out of date, just goes to show you how quickly the "top" companies can change!
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by arcticpineapplecorp. »

anon_investor wrote: Wed Aug 26, 2020 7:04 pm
arcticpineapplecorp. wrote: Wed Aug 26, 2020 7:01 pm
BigJohn wrote: Wed Aug 26, 2020 5:54 pm
arcticpineapplecorp. wrote: Wed Aug 26, 2020 12:36 pm
the way wrote: Tue Aug 25, 2020 12:48 pm Looks like Exxon is being dropped from the DOW 30 after 92 years. Nothing lasts forever I guess.
24 years of big company change (every 4 years):
https://americanbusinesshistory.org/lar ... 1994-2018/
One of the coolest graphics I’ve seen, thanks!
your welcome, but I can't take credit. I found it after someone else (sorry I don't remember who) posted it on bogleheads.

pass it on. That's how it works.
Such a great graphic. But after only 2 years it is very out of date, just goes to show you how quickly the "top" companies can change!
and the bottom ones too.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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anon_investor
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by anon_investor »

arcticpineapplecorp. wrote: Wed Aug 26, 2020 7:07 pm
anon_investor wrote: Wed Aug 26, 2020 7:04 pm
arcticpineapplecorp. wrote: Wed Aug 26, 2020 7:01 pm
BigJohn wrote: Wed Aug 26, 2020 5:54 pm
arcticpineapplecorp. wrote: Wed Aug 26, 2020 12:36 pm
24 years of big company change (every 4 years):
https://americanbusinesshistory.org/lar ... 1994-2018/
One of the coolest graphics I’ve seen, thanks!
your welcome, but I can't take credit. I found it after someone else (sorry I don't remember who) posted it on bogleheads.

pass it on. That's how it works.
Such a great graphic. But after only 2 years it is very out of date, just goes to show you how quickly the "top" companies can change!
and the bottom ones too.
Crazy to think that Tesla has a larger market cap than Walmart!
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arcticpineapplecorp.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by arcticpineapplecorp. »

anon_investor wrote: Wed Aug 26, 2020 7:09 pm
arcticpineapplecorp. wrote: Wed Aug 26, 2020 7:07 pm
anon_investor wrote: Wed Aug 26, 2020 7:04 pm
arcticpineapplecorp. wrote: Wed Aug 26, 2020 7:01 pm
BigJohn wrote: Wed Aug 26, 2020 5:54 pm
One of the coolest graphics I’ve seen, thanks!
your welcome, but I can't take credit. I found it after someone else (sorry I don't remember who) posted it on bogleheads.

pass it on. That's how it works.
Such a great graphic. But after only 2 years it is very out of date, just goes to show you how quickly the "top" companies can change!
and the bottom ones too.
Crazy to think that Tesla has a larger market cap than Walmart!
maybe that's why the p/e for each is:
1,107.99 tesla
24.86 walmart

think i'd rather pay the walmart price than the tesla.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
jello_nailer
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by jello_nailer »

000 wrote: Tue Aug 25, 2020 11:05 pm
atdharris wrote: Tue Aug 25, 2020 11:03 pm Perhaps so. I am torn between letting the winners run or selling them while they're at all time highs and investing the proceeds into VTI/VEA/VWO. Such decisions to make
Murphy's law says whatever decision you make, the market will go the other way :twisted:
^ This. Of course.
My buddy Jim had the same problem, always goes against him. Oh yeah, I had the same problem. So dumb and dumber have a great idea - we each do the opposite of what the other does. Jim goes long, I go short. I go long, he goes short.

How did that work out? Market went sideways of course.

As my other buddy said to me - every time I try and get cute I have my head handed to me.

I think asset allocation takes care of the problem. Don't just do something, stand there.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by brad.clarkston »

Grt2bOutdoors wrote: Tue Aug 25, 2020 12:56 pm
Understood. Just shows you no single stock is safe. I was just trying to say that if the same question was asked today, I think Microsoft would likely be the analogous stock. The Bank of MSFT!


Not the bank of Apple?
No divi, so no MSFT or Apple outside of TSM.

I do hold XOM as my largest position in a roth divi port which has nothing to do with the Dow 30 or the current stock dip.
Northern Flicker
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by Northern Flicker »

EnjoyIt wrote: Tue Aug 25, 2020 11:54 am But, but, but, XOM s paying 8% dividend right now and is a dividend aristocrat.

Prior to being a boglehead I was a dividend growth investor. For some reason (explained below) I kept XOM when switching over.

I kept XOM because I figured the dividends cover my gas expenses every year. Silly, I know. And I had decent capital gains and I did not want to pay taxes. Now I don't want to sell it at a loss. Reality is, I should just sell and buy Total US stock instead but can't get myself to do it. At least it is a tiny portion of my portfolio between 1-2%
Why should I care about the dividends? XOM total return with reinvestment of dividends was -11% over about 11 years. The high dividend payout is just an extra tax drag on return if you live in a state that taxes dividends as regular income, or earn enough for dividends to be taxed.
Risk is not a guarantor of return.
stormcrow
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by stormcrow »

000 wrote: Tue Aug 25, 2020 10:56 pm
Never understood the mentality of trying to defer taxes forever. Unless one dies with one's stocks, one will pay capital gains tax eventually.

I prefer to sell high rather than low. Some seem to feel otherwise...
Same. Obviously try to minimize the hit, but take the taxes as a sign you won.
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anon_investor
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by anon_investor »

stormcrow wrote: Thu Aug 27, 2020 8:17 am
000 wrote: Tue Aug 25, 2020 10:56 pm
Never understood the mentality of trying to defer taxes forever. Unless one dies with one's stocks, one will pay capital gains tax eventually.

I prefer to sell high rather than low. Some seem to feel otherwise...
Same. Obviously try to minimize the hit, but take the taxes as a sign you won.
Isn't that what the old dividend investing strategy all about that? You live off the dividends and only pay taxes on those and never sell any shares, which are then passed to your heirs with a step up in basis?
Jags4186
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by Jags4186 »

In fairness, if you did not reinvest dividends, XOM did leave you with more than $10,000 (just barely) at the end of the time period. Taxes on dividends could be offset by a capital loss on the sale of your XOM stock. Of course, if you invested $100,000 and not $10,000, you'd be waiting an awfully long time to get back the taxes at $3000/yr.
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dodecahedron
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by dodecahedron »

Lots of folks around Schenectady (GE workers and retirees) were counting on the Bank of GE.

Perfect storm, since GE stock has tanked, GE has cut jobs and shuttered facilities. GE filed for property tax abatements on their shuttered properties, hurting local government coffers. GE job cutbacks have decreased demand for homes and hence value of home equity for folks who live around here. On top of that, GE eliminated generous retiree health plans (hurting local hospitals) and ended corporate matches for retiree charitable giving (hurting local nonprofits.)

Perfect storm.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by Grt2bOutdoors »

brad.clarkston wrote: Wed Aug 26, 2020 9:55 pm
Grt2bOutdoors wrote: Tue Aug 25, 2020 12:56 pm
Understood. Just shows you no single stock is safe. I was just trying to say that if the same question was asked today, I think Microsoft would likely be the analogous stock. The Bank of MSFT!


Not the bank of Apple?
No divi, so no MSFT or Apple outside of TSM.

I do hold XOM as my largest position in a roth divi port which has nothing to do with the Dow 30 or the current stock dip.
You quoted it as being attributed to my comments but I didn’t write that.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
brad.clarkston
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by brad.clarkston »

Grt2bOutdoors wrote: Thu Aug 27, 2020 10:11 am
brad.clarkston wrote: Wed Aug 26, 2020 9:55 pm
Grt2bOutdoors wrote: Tue Aug 25, 2020 12:56 pm
Understood. Just shows you no single stock is safe. I was just trying to say that if the same question was asked today, I think Microsoft would likely be the analogous stock. The Bank of MSFT!


Not the bank of Apple?
No divi, so no MSFT or Apple outside of TSM.

I do hold XOM as my largest position in a roth divi port which has nothing to do with the Dow 30 or the current stock dip.
You quoted it as being attributed to my comments but I didn’t write that.
Oops sorry about that! I must have cut off the wrong part of the quotes, that's what I get for trying to shorten the thread.
Northern Flicker
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by Northern Flicker »

anon_investor wrote: Thu Aug 27, 2020 8:22 am
stormcrow wrote: Thu Aug 27, 2020 8:17 am
000 wrote: Tue Aug 25, 2020 10:56 pm
Never understood the mentality of trying to defer taxes forever. Unless one dies with one's stocks, one will pay capital gains tax eventually.

I prefer to sell high rather than low. Some seem to feel otherwise...
Same. Obviously try to minimize the hit, but take the taxes as a sign you won.
Isn't that what the old dividend investing strategy all about that? You live off the dividends and only pay taxes on those and never sell any shares, which are then passed to your heirs with a step up in basis?
The dividends are just portfolio withdrawals. They are not like bond interest payments where principal remains intact after the interest payment. If a company declares a $1/share dividend, the company becomes worth $1/share less when the cash leaves the company's coffers. Stock volatility hides the behavior reasonably well.

The attractiveness of the strategy was becsuse trades were expensive and mutual funds had high liads and high ERs. With cheap, no-load mutual funds and ETFs you can withdraw more tax-efficiently and there still is a stepped-up basis if any shares are left to an estate.
Risk is not a guarantor of return.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by anon_investor »

Northern Flicker wrote: Thu Aug 27, 2020 12:29 pm
anon_investor wrote: Thu Aug 27, 2020 8:22 am
stormcrow wrote: Thu Aug 27, 2020 8:17 am
000 wrote: Tue Aug 25, 2020 10:56 pm
Never understood the mentality of trying to defer taxes forever. Unless one dies with one's stocks, one will pay capital gains tax eventually.

I prefer to sell high rather than low. Some seem to feel otherwise...
Same. Obviously try to minimize the hit, but take the taxes as a sign you won.
Isn't that what the old dividend investing strategy all about that? You live off the dividends and only pay taxes on those and never sell any shares, which are then passed to your heirs with a step up in basis?
The dividends are just portfolio withdrawals. They are not like bond interest payments where principal remains intact after the interest payment. If a company declares a $1/share dividend, the company becomes worth $1/share less when the cash leaves the company's coffers. Stock volatility hides the behavior reasonably well.

The attractiveness of the strategy was becsuse trades were expensive and mutual funds had high liads and high ERs. With cheap, no-load mutual funds and ETFs you can withdraw more tax-efficiently and there still is a stepped-up basis if any shares are left to an estate.
Yes, I agree dividend investing is not the best strategy anymore with today's options. Which is to say the "Bank of" any single stock is probably too risky to rely on.
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by PhooBooKhoo »

Perhaps you weren't cherrypicking a time period, but you surely have cherrypicked a stock. I've owned AAPL since February 2007. Compare that one to the bond fund and see which wins out.
Northern Flicker
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by Northern Flicker »

PhooBooKhoo wrote: Thu Aug 27, 2020 3:44 pm Perhaps you weren't cherrypicking a time period, but you surely have cherrypicked a stock. I've owned AAPL since February 2007. Compare that one to the bond fund and see which wins out.
The point is not which stock, but that any single stock has much more risk than a diversified stock portfolio.
Risk is not a guarantor of return.
PhooBooKhoo
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Re: "Bank of XOM versus 'risk-free treasuries'" since 2009

Post by PhooBooKhoo »

Northern Flicker wrote: Thu Aug 27, 2020 4:39 pm
PhooBooKhoo wrote: Thu Aug 27, 2020 3:44 pm Perhaps you weren't cherrypicking a time period, but you surely have cherrypicked a stock. I've owned AAPL since February 2007. Compare that one to the bond fund and see which wins out.
The point is not which stock, but that any single stock has much more risk than a diversified stock portfolio.
That's a given, but most don't have an investment in a single stock only. So if the OP wants to make a balanced point, he should be comparing VOO or SPY to 5-10 stocks, not just one that is currently in a Covid-caused down-cycle. XOM will more than likely recover, making this post moot. Plus he's comparing it to a bond fund, which usually have a small range of volatility. Kind of apples and orange.

I'm conservative, but not completely risk-averse. I've owned AAPL, MSFT, GOOG, AMZN and BRKB for a long time, as well as Vanguard mutual funds (REIT, Health Care, Utilities, High-Yield) as well as a bond fund and VOO. If I would have avoided those 4 stocks, I would not be in the position I am now--which is a set for life one. It doesn't hurt to vet single companies and invest in them.
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