Stocks and Trading Thread - Channeling your inner Mono

[Admiral Yi]

So we're all forseeing a crash?

I think the worst is over and we're now going to ramp into the reopening rally.

[Habbaku]

Who's "we"?

I don't foresee a crash any time soon and expect steady growth over the next few years.

[DGuller]

So we're all forseeing a crash?

I think the worst is over and we're now going to ramp into the reopening rally.

I'm not sure that a rally is guaranteed after Covid reopening.  If Covid is bad for stocks and lack of Covid is good for stocks, then why did stocks rally during Covid even despite the initial dip?  On the other hand, if Covid is good for stocks and lack of Covid is good for stocks, then then just doesn't make sense.

My theory is that stocks went way up during Covid because that's how inflation manifested itself.  The people who lost income were typically the people who never had funds to invest in the first place, while the people who worked from home couldn't dine out from home or take vacations from home, so they over-invested in aggregate even more than has been the recent norm.  I suspect that's we'll see a reverse after Covid, and that we may see a real old-fashioned inflation for the first time in a long time as too much money chases too few goods and services rather than too few Bitcoins.

[Admiral Yi]

I'm not sure that a rally is guaranteed after Covid reopening.  If Covid is bad for stocks and lack of Covid is good for stocks, then why did stocks rally during Covid even despite the initial dip?  On the other hand, if Covid is good for stocks and lack of Covid is good for stocks, then then just doesn't make sense.

My theory is that stocks went way up during Covid because that's how inflation manifested itself.  The people who lost income were typically the people who never had funds to invest in the first place, while the people who worked from home couldn't dine out from home or take vacations from home, so they over-invested in aggregate even more than has been the recent norm.  I suspect that's we'll see a reverse after Covid, and that we may see a real old-fashioned inflation for the first time in a long time as too much money chases too few goods and services rather than too few Bitcoins.

Not all stocks rallied in 2020.  Cruise lines, airlines, theater chains etc. got crushed.

[Barrister]

I'm not sure that a rally is guaranteed after Covid reopening.  If Covid is bad for stocks and lack of Covid is good for stocks, then why did stocks rally during Covid even despite the initial dip?  On the other hand, if Covid is good for stocks and lack of Covid is good for stocks, then then just doesn't make sense.

My theory is that stocks went way up during Covid because that's how inflation manifested itself.  The people who lost income were typically the people who never had funds to invest in the first place, while the people who worked from home couldn't dine out from home or take vacations from home, so they over-invested in aggregate even more than has been the recent norm.  I suspect that's we'll see a reverse after Covid, and that we may see a real old-fashioned inflation for the first time in a long time as too much money chases too few goods and services rather than too few Bitcoins.

That certainly seems plausible.  We've already seen big run-ups in things like vacation homes.

There was also a lot of quantitative easing helping to support stock prices, and that will go away (if it hasn't already).

[Tamas]

You guys talk about "stocks" - the overpriced tech people flocked into are suffering (though not all) and the ones people fled or just didn't over-bubble are starting to come to life, that's what happening.

I'd take profit from Tesla as I think that's well on its sub-500 way, but "boomer stocks" I would not worry about.

[Admiral Yi]

You guys talk about "stocks" - the overpriced tech people flocked into are suffering (though not all) and the ones people fled or just didn't over-bubble are starting to come to life, that's what happening.

I'd take profit from Tesla as I think that's well on its sub-500 way, but "boomer stocks" I would not worry about.

Wanna make a side bet on Tesla share price year end?

[Habbaku]

You guys talk about "stocks" - the overpriced tech people flocked into are suffering (though not all) and the ones people fled or just didn't over-bubble are starting to come to life, that's what happening.

I'd take profit from Tesla as I think that's well on its sub-500 way, but "boomer stocks" I would not worry about.

Not that I recommend buying individual stocks in the first place, but if I did, I would agree with this analysis.

[Josquius]

I refuse to comment on tesla. That bubble has looked like popping for years now. Who knows when it actually will and stay down.

[Tamas]

You guys talk about "stocks" - the overpriced tech people flocked into are suffering (though not all) and the ones people fled or just didn't over-bubble are starting to come to life, that's what happening.

I'd take profit from Tesla as I think that's well on its sub-500 way, but "boomer stocks" I would not worry about.

Wanna make a side bet on Tesla share price year end?

No I gamble enough on that already, thanks though.

[Jacob]

So here's a scenario that's come up for me. I'd like your opinion...

When I did my MBA, one of my (and the class's) favourite profs was the corporate finance prof. We did a bunch of case studies, balance sheet and financial statement analysis figuring out where companies went wrong and/ or where opportunities... that sort of stuff. Super fascinating if you're into it.

Anyways, the prof's background is pretty legit and includes stints at Salomon Bros, Merrill Lynch, and Goldman Sachs, as well as a bunch of relevant academic and industry experience. In my judgement he knows what he's doing and is trustworthy (because if I didn't think so, nothing else really matters and I wouldn't be posting about this at all).

This prof, along with a partner of his (that I don't know) managed an investment fund - a search fund - that basically looks for and finds successful owner-operated businesses where the business owner is looking to retire but where there's no clear succession plan. The fund buys those businesses (where the fundamentals indicate it), puts in new management (they have a network of people they can draw on for that), operates the business for a while, and then sells the business on for a profit. Typically a search fund invests in around 30 businesses, with the lifecycle of the fund being 5 to 10 years.

So, the prof and his partner and investors had such a fund, it performed very well, they wrapped it up, and now they're doing it again. They're in the funding stage, with a minimum of $500K. I, alas, do not have $500K lying around to put into interesting investment funds on a lark. However, some of the prof's students and former students are discussing amongst ourselves to pool our money and meet the $500K min to invest.

I am told that the historic IRR of search funds are 33.7% for North America and 28.7% Internationally which is pretty good (though of course, past history is no indication of future performance and all that).

The question, of course, is whether I should invest or not. It wouldn't be a matter of merely reallocating play-money or similar, since I don't really do that. Nor would it be some massive all-in, risk the house type commitment. Rather it would be a "yeah that's kind of inconvenient, and we'll have to give up something somewhere, but if it goes wrong we'll be fine" type of investment. Alternately, I suppose I might be able to put some of my RRSP (retirement fund) money in.

So yeah, those are the broad strokes of the scenario. Should I do it?

[alfred russel]

Yes, assuming you've done due diligence (I assume these guys will get audited, etc?).

It sounds like a private equity company and this is a way to get in on investments other than stocks (diversification) without having to do active work.

[Admiral Yi]

1.  I would like to see his funds total return first, not the industry average.

2.  The pooling of funds to create one joint account sounds like it might create legal issues.  Wouldn't you need to create a legal entity in who's name the money is invested?  How are decisions made about the joint funds?

[Jacob]

Yes, assuming you've done due diligence (I assume these guys will get audited, etc?).

Auditing by KPMG, with 3rd party legal and reporting as well.

It sounds like a private equity company and this is a way to get in on investments other than stocks (diversification) without having to do active work.

Yeah that's what I'm thinking as well. In my case, I'd be diversifying away from mediocre mutual funds.

[Jacob]

1.  I would like to see his funds total return first, not the industry average.

Agreed - based on what I understand, we'll have access to financial models and investor reports from the previous fund before we commit, so there'll be more due dilligence.

2.  The pooling of funds to create one joint account sounds like it might create legal issues.  Wouldn't you need to create a legal entity in who's name the money is invested?  How are decisions made about the joint funds?

Yeah, that's part of the plan. Apparently we'll be incorporating an SPV... though I don't know what SPV stands for

But agreed, there needs to be a clear and acceptable plan for handling the pooled funds.