Stock Markets

[amortgageman]

100% Money Market Funds right now, and a 401K loan (@ 4.5%) to pay cash for another foreclosure to fix up and rent out at $500.00 per month, creating a 67% annual return.

[Amerikaner83]

Got a letter in the mail a couple days ago from my work:

effective March 31, 2009, the "safe harbor" matching contribution to your 401(k) will no longer be dispursed. We reserve the right to, at the end of the year, make the equivalent contribution that would have been made otherwise.

No more company match. Dammit.

[Chester P. Dexter]

That's a bite, Amerikaner. If you can, invest in a Roth instead (if you weren't already maxing out a Roth.) You can find better things to invest in than were available in your 401K anyway, I bet.

[jq26]

Amrikaner, apparently this is happening at quite a few places. That really sucks!!!!!! It sounds like they're leaving the option open to make a partial or full match at the end of the year though- and maybe saving this cash will assist in keeping the doors open until the eonopmic readjustment passes.

Roth / Traditional: depends on your marginal rate today and what your marginal rate will be in retirement. For some people, and my wife & I are in this camp, Roths are not a good fit. You essentially lock in a high effective tax rate to avoid a lower (possibly 0%) or equivalent tax rate later.

[jq26]

Maybe this morning is the beginning of a much overdue bear rally. Futures up 2+%. Citi says they're profitable on an operating revenue basis (disregard asset write-offs), and it looks like valuations have dropped so low that its sparking a little M&A activity.

[Chester P. Dexter]

And how about that MOS?!

[jq26]

And how about that MOS?!

I don't own any, but I do follow it. Nice pop today. Check out GE!!! That's a huge move for a goliath company!!

[Dre]

I checked my Roth the other day and it has dropped a little over $1K since last year.

I am only 27, though, but I will keep putting money into it and my mutual funds...things have to get better....

[jq26]

I checked my Roth the other day and it has dropped a little over $1K since last year. I am only 27, though...

Like you I am relatively young- I'm 31. Its times like this that real wealth is built. I know it sounds backwards, but the younger you are the better off you are for investing purposes when the market tanks. If you step up your contribution, you can drop your cost basis significantly. So you're really not down anything. Its money to be used in forty years. Its to your advantage that you are now buying at more reasonable values.

[Dre]

Like you I am relatively young- I'm 31. Its times like this that real wealth is built. I know it sounds backwards, but the younger you are the better off you are for investing purposes when the market tanks. If you step up your contribution, you can drop your cost basis significantly. So you're really not down anything. Its money to be used in forty years. Its to your advantage that you are now buying at more reasonable values.

Thanks for the advice! I'm going to contribute a lot more this year to it, as soon as I have this last credit paid off in May/June.

[Slow Eddie]

Now, here is something I want to run by you guys. Keep in mind I have never bought any stock before in my life but I've always been interested in investing.

Fannie Mae and Freddie Mac... Bad idea? It closed at .38 today. Now I don't know much about balance sheets, and I did recently read that Fannie Mae is current in a negative equity situation financially, but I also don't think that the government would let Fannie Mae or Freddie Mac go under. It would be total disater to the liquidity of the mortgate market.

I also know that eventually this housing market is going to turn around, and when it does I would imagine the stocks would go up in tandem. I can buy over 12,000 shares for about $5000 and sit on it for a while. What if it makes it back to $5 a share one day?

Of course the world is full of what ifs....

Eddie

I'm kicking myself here. Stock was at .38, closed at .85 today. Hit 1.00 last thursday.

Eddie

[jq26]

Hey Eddie, by any measure Fannie and Freddie are entirely INSOLVENT. The bondholders, who have priority over all equity holders, only have value because of substantial government guarantees. You would have to have picked the bottom to buy and picked the top to sell. Its like being ticked off at not playing the lottery last night because some guy in another state won and that could have been you... Highly unlikely and most likely a losing bet.

These companies are insolvent. Stay away, far far away unless its money you're okay to lose.

[stop foreclosure]

My broker gave me a few free trades which I have been thinking about taking advantage of. The problem is figuring out which stocks to go with.

Not having a broker, and trading on my own, I have enjoyed the game. I was approached by a friend with an investment in a pink slip company that is offering stock at half of what it is traded but it is restricted for a year. Because of the low relative cost of the stock to what it is trading, it might as well be a free trade....The company turns algae into oil, but I am not very familiar with the space. I would think that it could be a good investment, but not too familiar with restricted stock. Would it be better to buy more of this stock at a 50% discount or look into a non-restricted that would be more expensive?

[Bigwoodystyl]

Its insanity buying C. They'll be diluted to infinity. And it'll take 'em 100 years to pay back the crushing debt to the point that they'll be shareholder equity again.

I don't disagree with you long-term, but my point was only about short-term. On March 6, I really felt there was short-term opportunity. The very same day I posted that, I went ahead and bought 5,000 shares of C at 1.05 and sold 2 weeks later at 2.87.. more than doubled up even after commisions.

My point was: you know it's a crazy time when buying long the equity that was in mid 2007 the world's largest bank by market cap was basically the same risk as a pure derivative.

I think WFC may be a buy at this point. PNC too (maybe). But I'm not a gambler.

I bought a good bit of both of those too the very same day that I bought C and I'm also up nearly 100% there and may hold them forever.

Efficient market theory? I believe markets are efficient, but over periods of time. In short-term situations, I don't think it holds water. Besides, if the market "priced in" a 10% chance of mark-to-market suspension, then if it happens it still has 90% to go. The info only creates a hedge until it occurs.

This is well said. Might the jumps we've seen upward and the sustained gains we've seen in financials in the last several weeks be one of these short-term 10% hedges out in front of the real gains?

[jq26]

I think WFC may be a buy at this point. PNC too (maybe). But I'm not a gambler.

Wells Fargo, in the midst of this so-called crisis, is about to report $3 billion in quarterly net income. That is 50% HIGHER than the same quarter last year! WFC is a well-run bank. The market is beside itself in disbelief this morning.

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20090409&id=9774334

[jq26]

Additional news: apparently it is being leaked that all 19 banks involved in the Geithner "stress test" have passed. This is putting more upward pressure on the markets.

[Bigwoodystyl]

Two weeks ago, I read that their legacy loans (WFC originated loans, not counting Wachovia loans) were performing 33% better than they were at year end 2007.

Today is a good day. WFC sends the bulls running, and I've now tripled my initial buy.

Further, in a letter to shareholders, Stumpf says they believe they are in a position to repay TARP and maintain liquidiity, and could do so this quarter, but won't do so until it makes financial sense.

Maybe the US Treasury will end up making a lot of cash in dividends after buying all of those preferred shares? Maybe "bail out" is the wrong terminology for what happened?!

Either way, I made a lot of money this morning and, although I did my due diligence, I can't help but feel extremely fortunate.

[jq26]

That's wonderful. And you deserve to be rewarded for putting your capital to work while others bought into the fear. WFC, ING, PNC would have been my targets. RBS could have been bought for a dollar and change!!!! Admittedly, I didn't buy any of the above directly (I am sure the mutual funds in my 401k probably own some of them).

Most of my non-retirement cash is invested in Chinese equities. The CSI300 has done well this year so far. PEs of some of these companies are routinely between 3-5 with half their share price being held at cash. It is astounding the buys that could be made over the past 6 months both in the US and abroad.

[Chester P. Dexter]

I have nothing to complain about today - to put it mildly!

(string of happy expletives goes here)

In addition to all of that, I have to tip my hat to the husband who bought Ford $3.00 call options a few days ago. Spent $330 and just raked in about $1,500.

He's the options person, not me... while I may not understand all of it, I understand the bottom line.

[jq26]

Here is a spec Chinese play: SUTR

[Chester P. Dexter]

That looks sweet.

Where do you find these? I should look up the last "hot tip" you gave me and see how it's doing now.

[jq26]

Currently holding: LVS (short-term trade), WFC, ING, and over 50% spread across a few small Chinese companies. This is non-retirement play $ to put this in perspective.

To put this bank rally in perspective, even after the recent rally banks would have to go up 400% from this point to get back to where they were 18 months ago. Obviously that would never happen, but that's how far they've fallen.... Certainly means there is at least some room for growth for HEALTHY banks.

[jq26]

I should look up the last "hot tip" you gave me and see how it's doing now.

Sweet Jesus. APWR & CSKI.

I wouldn't call it a hot tip really. I don't recommend buying on rumors nor just an email tip. I do endless hours of homework. Tear apart the balance sheet, statement of cashflow, and income statements, and review product lines and upcoming potential contracts, etc. I think there is something to this.

Certainly helps not to have the market crashing every single day too!

[Bigwoodystyl]

That's wonderful. And you deserve to be rewarded for putting your capital to work while others bought into the fear.

Yeah, the results have been tons of fun; however, I'm intensely risk averse, so this has been very trying for me. I often find I need to remind myself that I'm debt free and I have a good job and retirement is still 30+ years on the horizon..... so I can afford to take these risks. Nonetheless, even though I did my due diligence, this market and these short-term gains feel somewhat like gambling.

I was previously short the market until about August, 2008 when I moved into cash. In March, I moved from my cash position back into the market.

At that time, I was expecting and hoping to buy long and hold for 2-3 years and maybe if lucky see gains of 80%, which would have been downright fantastic. No way did I contemplate for even a second that in only 2 months I would earn 30% (GE, PHG, SUN), 100% (WFC, PNC), 160% (C, HBAN) and 325% (FITB).

To put this bank rally in perspective, even after the recent rally banks would have to go up 400% from this point to get back to where they were 18 months ago. Obviously that would never happen, but that's how far they've fallen.... Certainly means there is at least some room for growth for HEALTHY banks.

That's prescient considering you wrote that on April 15 out in front of the huge rally, lol. FWIW, in my head, I think there's still room for a lot more growth even after this week; however, I have a premonition that I can't shake that bank stocks will dip again before they eventually spiral upward. What I'm saying is this crazy rally may have created a mini bubble... where a new tower in the sky is being built again without a real base... the market isn't ready for these 40+% daily gains. I don't think the bull has left the station indefinitely...

Having said that, I sold out and moved back to cash around 3:30 PM today to lock in my gains.

I really wanted to hold these stocks long-term and set my watch for 2-3 years and also pay less capital gains tax, but I just couldn't contemplate the "what if?" factor if it went back down and I didn't take the huge profits today. I would have been distraught.

Anyone think this upward pressure is sustainable? (FWIW, I'd love to be wrong and I'd love to see another surge next week)

I'm leaning toward real estate at the moment. I think I might use my earnings to buy an REO-owned property or two, depending on location and on how cheap I can get in. I'm just not as well versed in real estate because I've always owned paper and real estate trusts but never any real property. So, there is a learning curve there that I need to overcome and I'm sure I'll make some rookie mistakes.

I bought

this book

and I think it's pretty good so far...

[jq26]

Anyone think this upward pressure is sustainable? (FWIW, I'd love to be wrong and I'd love to see another surge next week)

No, I don't. At some point, somewhere between S&P 940-1000, we'll correct. And it could get ugly. Once bitten twice shy. After getting slaughtered last year, the new paradigm seems to be sell now and ask questions later.

Congrats on the gains. I'm sure there were times when you were completely second guessing yourself. Way to stick with it!! I agree with you 100% regarding coming reversal. Fundies are not quite there yet. This was the massive short covering rally that everyone knew was coming just not when.

Let me be clear- I am not a market timer for retirement purposes because, over long periods of time, even the best of the best who get paid hundreds of millions per year cannot time these things. It's futile, especially for a little amateur like myself. But in my "play" account, I went to all cash this week after a 92% gain over 60 days. Quite an unbelievable run.

Because my little play money account grew unexpectedly, I'm liquidating most of it next week and may now buy a larger home for the family. It's hard to pass up the deals right now especially with the low mortgage rates. And now (unexpectedly), we're a year ahead of schedule on achieving our required down payment. We're looking at a half dozen homes this afternoon.

Edited to add: Real estate is a great way to go. I just saw the book you bought. It's fantastic!!!!! You are buying a tax shelter, income stream, and a hedge against coming inflation all in one. Way to go!!