Investing for beginners

[MinnesotaEric]

I'm an IT guy, consider myself decently smart. I read Eric's post up there and it sure sounds like he knows what he's doing, but may as well be written in French lol. This stuff makes my head spin. Wish I understood it better, especially how to take advantage of a declining market. Buying stock and holding onto it when things are good is easy.

Investopia has all the definitions of terms and a lot more.

 

[MinnesotaEric]

Yup, all greek to me too. Ok, I've a question for you know-how guys. Let's say somebody vested 50/50 stocks/bonds in a managed 401k. Wise move right at this moment to rebalance the portfolio to 80/20 stocks favored, and start aggressively contributing to that?

For the most-part managers have fled to cash and are patiently waiting for the obvious recovery to come rather than risking catching a knife (buying and then things go lower) and getting bull-trapped (fear of selling at a loss and reinvesting on something that is making money). When markets like this start acting "normal" (as in historically normal in our context) both equities and bonds will lose money until at some -point bonds will start acting differently than equities. In a high-interest world, bonds go down and equities go up, but that isn't what we're experiencing or likely to experience for some time. All this to say, cash IS a position and I suggest waiting it out until you have a really good idea what the market will broadly do.

 

[/pine]

Stock tip of the week...
Just a watch notice...maybe set some limit buy orders for the mid 160's...

The Clorox Company (CLX)

 

[MinnesotaEric]

I cooked through one half of my cash purchasing on Wednesday. The kind of stuff I purchased went up on aggregate--i.e., #talkingmybook ARR-PRC, ARR, AGNC, piles of MITT (it went to 1/8th its former value), NLY, some more RAD (short squeeze can happen there in light of an on-going recovery made suddenly more interesting by the sudden drop in lending costs), and reestablishing a position that got shopped out, BABA (because China and my own fear of missing out). I don't particularly think I'll experience more capital gains on those purchases in a choppy news risk cycle through the end of summer, at which time I believe we will have a much better handle on the virus issue and our attention will be mostly on economic recovery from what already feels like an immediate ice age recession. I do, however, expect stupidly high dividends to remain until the mREITs common I purchased offers secondaries to better reposition itself with low-interest rates through higher leverage (mREITs take the interest rates from short or long term notes and leverage that against long or short term notes in whatever way makes the most sense), while I anticipate holding the preferreds I purchased until they are called while collecting a 21% dividend on them with a 300% upside when they are called.

I don't watch Cramer handly at all but I noted that on Thursday he too thought an unknown fund was blowing up on Wednesday. Even so, we've got a lot of price discovery to go through a bad news cycle but if we're ever fearful of deploying our cash in the face of irrationally low valuations, then there is little point in hoarding it.

And today the money I risked a week ago last Wednesday doubled in value. Now the goal is to reset stop losses and live through this mess (as I wish all of you will as well) long enough to be able to spend it all.

I set 6% trailing stops on the ARR-PRC and ARR common and 10% trailing stops on everything else. If the market turns, I pop out with capital gains tax to be sure, but also at a profit and with a bag of cash to reinvest when the time seems right.

 

[Racenut]

To double money at a time like this is impressive. Again, I wish I understood it so much better. I need to start hanging out with financial nerds instead of regular nerds.

 

[MinnesotaEric]

To double money at a time like this is impressive. Again, I wish I understood it so much better. I need to start hanging out with financial nerds instead of regular nerds.

Ever lost a quarter million in three minutes? I have: right after the failed TARP 1 vote. I'm still trying to vote those non-serious clowns out of office. LOL

All to say that in the past I've lost big, and many times against the unforeseen. Most of the time I'm just risk managing my money, but every once in a great while Mr Market just wants to sell out at ridiculously low prices. In this case I now know after the fact that several REITs (including MITT that I was buying with both hands, eek!!!) had received margin calls and was selling their family jewels at stupid low prices. The low valuations ticked off a pile of credit default swaps and this led to all of the Federal Reserve Action that has taken place over the last two weeks because if one of these funds blows up and goes under, it effects the entire sector as well as our banking system.

So I got lucky and if the market turns against me, I'll bounce out again with a bag of cash.

 

[Racenut]

Yeah, I can't say I've lost a quarter million in 3 minutes.. that had to hurt a lil. And yeah, I know nobody is always right. But if you're usually right... then you win. While I'm over here going.. Uhhh, what was the question again?

 

[/pine]

Stock tip of the week...
Just a watch notice...maybe set some limit buy orders for the mid 160's...

The Clorox Company (CLX)

Cha Ching...!

 

[California]

I wonder if replacement car batteries will be another winner after the lockdown ends.

 

[/pine]

Watch for insurance companies to post better than usual bottom lines the next two or three quarters...FWIW...