Investment general discussion thread

In My Humble Opinion
1141

Right. I’ve said this before, but the US is not alone here. Reform UK, National Rally, and AfD are all pulling in 25-35% and are continuing to grow. And The AfD is literally skirting the prohibition on “Alles fur Deutschland ” by replacing it with “Alice fur Deutschland”

About two years ago, when I was in Belgium, I met multiple people who, upon finding out I was American, said “We need a Trump here!”

I would have said that people need to learn from the US, but it seems like they in fact are.

Edited to fix the German being backwards

1142

Yes those are the ones who sell low so you can buy low.

No snark meant - just mentioning the obvious .

1143

US Treasuries

The “trust” conversation was principally about not having faith in the US and buying our debt/dollars. If you don’t trust someone to pay you back/change the terms, normally, you’d go buy an alternative. The problem is scaling. There is no real alternative that can scale to the trillions of dollars for countries to park their money. There are no alternatives to the dollar. US treasuries/dollars still check all the boxes for a safe investment at that scale. It’s the only thing that can.

Germany/Euros is about the closest in terms of very little risk (AAA)/liquid, etc, but not nearly big enough. But countries are definitely alarmed and trying to diversify more…a little. The problem is you just can’t not buy US Treasuries/dollars. Everything is kind of locked into the dollar that would break all kinds of things across the globe if you try to exit/stop buying.

Other countries also have to want to be the reserve currency. It’s not all good and you lose control of your currency. I don’t get the sense China wants to lose control of anything.

Late: To be clear, I’m not saying it can’t or won’t happen, it definitely can and will. It will just happen over several decades. I don’t think it’s possible to happen faster than that.

1144

The dollar losing more ground?,

As I mentioned up thread the dollar lost 10% of its value this year which means that any investment in foreign currency became immediately 10% more profitable, compared to the usd. This just by chance get overshadowed by the huge gains in Wall Street but visualize a flat Wall Street now and you would be 10% poorer than you were at the beginning of the year ( just by the fact that you invested in dollars vs euro).

1145

that’s exactly what it is. An entity that can have an ownership interest in assets. You seem to be on your way to getting the structures in place that you need. Good job.

1146

Sure, but the loss so far isn’t really concerning. Look at the US dollar index over the last 30 years.

https://www.marketwatch.com/investing/index/dxy?gaa_at=eafs&gaa_n=AWEtsqdSTLBl4vSQsUpvSNo6qPB4Cr444_AJXAdfvKusiWp0fsFS6fs104ifNyhEyRw%3D&gaa_ts=6941af87&gaa_sig=xvJCAat852Fi-m_7Ld_CgdrNlXlVcfM8XoJHG4FwmpEns29uxq6qg8o-p2gcHd9MF4cbC5YQ5NrMI0FoU95kZQ%3D%3D

We’re solidly in the middle of that band, and mostly flat for the past 6 months. So we saw an adjustment, but not “line go down and to the right” and not something that takes us into uncharted waters. So it looks more like an adjustment than a collapse (or ongoing bloodletting) to me.

Agreed. Not only is the Euro not large enough, but it’s at the mercy of 27 different central banks’ and economies’ wants and desires. We’ve seen that cause trouble in the past.

Not only that, you have to trust the data that you get about the underlying economy, and I don’t think anyone trusts China. For instance, total Chinese debt is not known by anyone. Because they don’t want it known, and for instance local cities and provinces hold massive off-the-books debt. And yes, I know someone will come along and point out we might not be able to trust US data going forward, but as of now that’s not the case, and if it is, it’s new.

1147

Yea. The Euro/EU is the only one that could plausibly do this, but they don’t want to. Or they would structure it different than 27 different economies/bonds. Even if they did do that, it would be still be difficult to scale because we all know Germany is the country paying it back. That’s oversimplified, but 27 EU countries doesn’t mean 27 great AAA countries, it means a few.

For Anyone:
To tie this back to investments, or, how could a collapse of trust in the US/US unable to manage its debt affect my wanting to own Apple stock (ie, US equity). I really don’t know. I think it definitely could, I’m just not smart to understand how. There’s probably some indirect way, though.

I think one objective way to measure “trust” in the US to see if lack of trust is even actually happening is by watching whether the US has to raise interest rates on US treasuries. They would do that to attract investors who are presumably leaving treasuries for other assets. The rates are fine, 4%'ish. While it did quickly double to that, it was pre-Trump 2.0, probably related to being too low from prior crisis, and also 4%'ish is a normal boring rate. I checked back year by year from present to 2016 (Trump 1.0) and they are boring, or way too low (1-2%) - the main key is what are they during a crisis and everyone still holds US treasuries in a crisis (rates go low), attracted to them even. So I can have all the negative opinions I want about US politics, but these rates would move if that sentiment was actually being acted on. But that probably goes back to no real alternatives.

This is saying more about how ingrained the US/dollar is into the world, and much less about how bad Trump is.

1148

Understood. This is just another example of the rich get richer. The advice is to keep six months in cash, just in case. That is a lot easier to do if you aren’t living paycheck to paycheck.

1149

So getting back to investing… And as a disclaimer I don’t deal with options, so this is purely an academic question.

I have a FQ that should have a straightforward answer, I think, but I cannot find.

Playing around in Fidelity, I was looking at options analytics. And one of the things you can do is see what the options market is predicting for future price. Pretty straightforward, right? If you buy an option you’re betting on where the price will be in the future, and you can use information from all the investors doing so to declare that (real example as I write this): VOO (S&P 500 index) has a 10.99% chance of being 20% higher on 06-April-2026. To be clear 10.99% chance based on the predictions of options buyers, nothing else. It’s basically the Vegas Odds, but the house is all the options investors.

Now it seems to me that we could test how accurate this is after the fact. We could come back in April and do a whole bunch of statistics to determine how well options predicted this 4 months out, we could do it across a bunch of stocks/funds, we could do it at all different horizons, and we could do it over and over and eventually make some general statements about how useful a tool this is.

I cannot find any such analysis online. I did see one paper on it from 2001, but I’m thinking a lot has changed in markets and technology since then. Hell, that’s right around the time we STARTED democratizing markets.

Any thoughts on this? Any resources I just didn’t find?

1150

Unfortunately I cannot find such an instrument, although it would be interesting and perhaps useful.
On a related note, I always found it frustrating that the price of options is calculated with a formula that includes several terms (see wikiarticle on valuation of futures), one of which is an estimate of the future volatility of the underlying security’s price over the life of the option. When I asked my bank how they estimated this future volatility they said that it could be calculated back based on the current price of the options, to which I objected that this was circular logic. They denied this! I was not happy at all with that. I thought the bank should know more and better than me.
I think the instrument you are looking for would be apt to evaluate whether the estimations of the Teeming Millions* are correct or not. My feeling was that they are rather arbitrary, particularly in the longer term.

*I guess there are not that many investors who feel comfortable with options, but the phrase has a tradition here.

1151

Well, I no longer have to feel conflicted about whether or not to invest or pay off my student loans, because a kindly benefactor just wiped out my entire loan balance.

I had nine years of payments left.

I’ve had student debt for so long it’s hard to imagine my life without it. I’m still in shock.

1152

Congratulations!

1153

Thank you.

I guess that just leaves investments and hoping to build enough capital to buy a condo some day. It seems within reach now. (We’re thinking condo because we both hate yard work and exterior maintenance, which is obvious from looking outside our current manufactured home.)

1154

huh?!! Was this someone you know?

1155

Yeah, my husband’s Grandma.

She said she just didn’t want us to be burdened with it.

So different than how I grew up. Not much money, very pull yourself up by your own bootstraps. I was expected to be out of the house by age 18. I left at 17.

My husband isn’t wealthy but he’s had certain advantages his whole life. We come from very different backgrounds. It’s hard for me to process gestures like this.

1156

I’m more likely near your parents ages than his grandmother but to me that is just good estate management.

I’ve repeated this many times in this thread. Paying for the next generations educations is an extremely efficient form of intergenerational wealth transfer. I am happily liquidating some of my 401K to pay for my youngest’s grad school, and the second oldest is going to return to grad school next year (assuming he gets in) and I will gladly pay for it.

If I am so lucky as to have grandkids someday I will contribute to 529s right off.

If that second oldest marries his partner at some point and I am past paying for these grad schools I am hoping to get my wife’s okay to help her payoff her loans too.

All this is predicated on having confidence that there is going to be an estate left behind. OUR having enough to live off of into Dick Van Dyke years comes first. But after that investing it in our children, grandchildren, and their spouses by extension, is better than having it in a fund that they will get when we die!

She loves her grandson and you probably, her great grandson too! Don’t be shocked if next year has her offering to put something in the 529.

1157

I don’t know if you know what an extraordinary gift that is.

I think she was really impressed we set up a trust for our son. I haven’t talked to my husband yet about what all went down, but he went over there this morning to give her a photo book he made for her, and then somehow this happened.

I’m writing her a personal letter because this is really personal to me. I hate hate hate having student loans. And after eleven years of payments, it’s always, oh, but we’ll get a higher rate of return if we invest, and it’s just been a big psychological burden I’ve had to learn to live with. And affecting our cash flow quite a bit. We finally paid off his loans, but with the most recent windfall we decided to invest and set up the trust. And so I’m like shit, I have to keep living with these loans until they are discharged in nine years. We won’t be able to afford a mortgage payment until they’re gone. Etc.

But I presume she asked if we paid off the student loans, he said, no, we set up a trust for our son, and she wrote a check and said: For goodness’ sake, just pay off the loans.

So it’s like she personally granted me permission to get rid of them.

I tried to articulate this in the letter. I barely know this woman because we’re usually in a huge group and I’m very shy, but I wanted to get across how personal this is for me, how important my education was to my upward mobility and how difficult things have gotten with my son’s medical needs. I also want her to know how much I love her grandson, because, well, I dunno, I think I would want to know that my grandson was extremely loved by his wife.

We do have a 529 for our son, and we’re contributing $300/month, which is what we could afford. We could probably raise it now but at our last calculation we could probably get him through our alma mater at $300/month.

Of course right now we’re just trying to get him through kindergarten. It’s harder than we thought.

I was hesitant to set up a 529 because with his disability I’m not sure whether he will be college ready, but once they changed the rules to allow Roth contributions I felt a lot better about the choice.

Which reminds me, does anyone happen to know if you can make a trust the beneficiary of a 529?

1158

@DSeid looks like you were more right than I was. She had planned to do this in advance. It had nothing to do with my husband’s visit.

1159

It is an extraordinary gift. I get that. And I understand that there is some joy in seeing the good your legacy can bring to those you love while you are living rather than missing that by being dead at that point.

I guess I do wonder why she gave a check. Estate consideration POV she could have done better gifting you appreciated equities to sell I’d think.

1160

I think she enjoys handing them out. I really think that’s it.

We decided to go to Chicago for our 20 year wedding anniversary in June. We can afford this sort of thing now.