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    Daily Advice Thread - All basic help or advice questions must be posted here. Investing

    August 07, 2019

    Daily Advice Thread - All basic help or advice questions must be posted here. Investing

    Daily Advice Thread - All basic help or advice questions must be posted here.

    Posted: 06 Aug 2019 05:13 AM PDT

    If your question is "I have $10,000, what do I do?" or other "advice for my personal situation" questions. If you are going to ask how to invest you should include relevant information, such as the following:

    • How old are you?
    • Are you employed/making income? How much?
    • What are your objectives with this money? (buy a house? Retirement savings?)
    • What is your risk tolerance? (Do you mind risking it at blackjack or do you need to know its 100% safe?)
    • What are you current holdings? (Do you already have exposure to specific funds and sectors?)
    • Any other assets? House paid off? Cars? Expensive significant other?
    • What is your time horizon? Do you need this money next month? Next 20yrs?
    • Any big debts?
    • Any other relevant financial information will be useful to give you a proper answer.

    Please consider consulting our FAQ first - https://www.reddit.com/r/investing/wiki/faq

    Be aware that these answers are just opinions of Redditors and should be used as a starting point for your research. You should strongly consider seeing a registered financial rep before making any financial decisions!

    submitted by /u/AutoModerator
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    Disney has just announced their bundle which includes Disney+, ESPN +, and Hulu (with ads) for $12.99 a month. Should Netflix shareholders be worried? Will this bring Netflix’s valuation down and what are your strategies in investing the streaming competitors?

    Posted: 06 Aug 2019 03:45 PM PDT

    Trump economic advisor Larry Kudlow says China's economy 'is crumbling'

    Posted: 06 Aug 2019 11:39 AM PDT

    The Chinese economy is crumbling. It's just not the powerhouse it was 20 years ago," White House economy advisor Larry Kudlow tells CNBC.

    China's economy reportedly grew at its slowest rate in at least 27 years.

    Kudlow says "any long chart of Chinese investment" or economic metrics shows "a steady downdraft."

    https://www.cnbc.com/2019/08/06/trump-economic-advisor-larry-kudlow-says-chinas-economy-is-crumbling.html

    submitted by /u/NineteenEighty9
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    Disney shares fall after earnings miss

    Posted: 06 Aug 2019 01:15 PM PDT

    Earnings per share: $1.35 vs. $1.75 per share, according to Refinitiv estimates

    Revenue: $20.25 billion vs. $21.47 billion, per Refinitiv

    https://www.cnbc.com/2019/08/06/disney-fiscal-q3-2019-earnings.html

    submitted by /u/pipsdontsqueak
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    (X-post r/dataisbeautiful) Visualising Every Single Day of the US Stock Market for the Last Decade [OC].

    Posted: 06 Aug 2019 07:14 PM PDT

    Reuters: German industrial output fell more than expected in June

    Posted: 07 Aug 2019 03:29 AM PDT

    https://www.reuters.com/article/us-germany-economy-industrial-output/scary-german-output-figures-propel-recession-fears-idUSKCN1UX0JQ

    Industrial output dropped by 1.5% on the month - a far steeper decline than the 0.4% fall forecast in a Reuters Poll of analysts, figures released by the Statistics Office showed on Wednesday.

    "The continued plunge in production is scary," Bankhaus Lampe economist Alexander Krueger said, adding that a recession in the manufacturing sector was likely to continue due to the escalating trade dispute between China and the United States.

    Both countries are important export destinations for German manufacturers, which means that the tit-for-tat tariff dispute between the world's two largest economies is having a disproportionately large impact on German goods producers.

    In the second quarter as a whole, industrial output fell by 1.8% on the quarter, driven by steep drops in metal production, machinery and automobile manufacturing, the economy ministry said.

    "Industry remains in an economic downturn," the ministry said. Production in construction fell 1.1% in the second quarter while energy output dropped 5.9% in the same period.

    "A look at the individual sectors shows that the crisis in the automotive sector is continuing unabated," Solveen said, adding that car production had not recovered from the slump caused by problems associated with last year's switch to a new emissions measurement standard.

    "However, the main reason for this weakness is now likely to be significantly weaker foreign demand," Solveen said.

    The German government expects the economy to grow by a meager 0.5% this year and rebound with a 1.5% expansion in 2020.

    Andreas Scheuerle from DekaBank said the industrial data suggested the economy contracted by 0.2% in the second quarter after expanding by 0.4% in the first three months of the year.

    submitted by /u/COMPUTER1313
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    How does one justify following a standard 60/40 portfolio and holding 40% bonds with yields where they are?

    Posted: 06 Aug 2019 06:39 PM PDT

    I understand in the past how if rates were 5% and your bonds yielded 8% that if there was a recession and the fed drops rates to 0 that now you have incurred a massive capital gain on your bonds. Your stocks may have declined in a recession your bonds went way up in value, this reduces volatility and has other benefits.

    Now with rates as low as they are I find it come up with a reason to hold bonds. Are people hoping that during the next recession that the fed restarts QE and takes rates back to zero or even lower. Still the capital gains incurred from 2.5% to 0% won't be that substantial.

    Also the real yield on the US 10 year is .2%. I mean why can't I just keep money in a savings account and earn 2% or even better then what a bond, 10 yr yield, would pay me and I have no risk of capital loss. I'm just struggling with this and it seems the majority of people are just going on buying bonds as if we were in the same position as any other time in the last 50 years.

    Basically convince me that the potential for capital gains on bonds is greater than the chance of capital loss when I can get the same rate risk free in a savings account.

    submitted by /u/Let_It_Steep
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    Univeristy of Illinois Economic Analysis on Chinese Grain and Protein Market Prior to Latest Tariffs

    Posted: 06 Aug 2019 05:51 PM PDT

    The USDA releases weekly exports of U.S. agricultural products so it's easy to get raw data for analysis. Economists at the University of Illinois analyzed the export data, policies, underlying changes in price/currencies, and supply/demand to draw a few conclusions. The article has a lot of really good perspective on what is happening in the Ag sector of the trade war. I can't do it justice with a brief summary as it contains a lot of detail for a relatively short article. The authors do a great job of sticking to the facts and providing a pretty neutral view of what is happening between China and U.S. farm goods. It explains a lot behind the tariffs and the position of each side.

    My main takeaway is that China wasn't buying ag products as promised, but they really didn't need the products because the African Swine Flu reduced their pig herd by 25% and that eliminated about 6MMMT of soybean demand. That is about 1/3 of what they bought from the U.S. in 2017. Considering they have already bought about that same 6MMMT quantity from the U.S. this year, it would leave 1/3 of their needs to squabble over. Of that 1/3 you can assume a split with South America considering that they would have been the export preference for half a year. That only leaves about 3MMMT of remaining need in China that would be satisfied by the U.S.. It's not unreasonable that they could have hit that amount through the year even with the slow start.

    Also, South America just had their harvest, which pushes down prices. The U.S. dollar has also been strengthening, making soy valued in other currency more competitive. It may have just made sense to buy Brazilian in early summer.

    There also seems to be some shenanigans played by the Chinese government as they promised transactions that didn't materialize, no matter the reason.

    So it seems that there are elements of truth on each side when it comes to soybean trade.

    submitted by /u/Kmartknees
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    Kiwi Central Bank slashes interest rates .50 points, now down to 1% interest rates

    Posted: 06 Aug 2019 08:22 PM PDT

    Why it’s not too late to invest in Visa

    Posted: 06 Aug 2019 12:12 PM PDT

    Looking at VISA's Investor relation page, and recent fillings, I believe there is still plenty of time to get in on Visa's growth opportunity.

    A quick look:

    Visa is at the center of more than half of the world's credit card transactions. Founded in 1958 (as BankAmericard) Visa cards are used over 40 million times every day. And the Visa brand is one of the most recognized on the planet.

    But what do they do?

    There are 3 key ways VISA makes money:

    1. Service Fees:

    Visa charges banks on their network a small percentage every time the customer of the bank makes a transaction (basically a commission), this fee is typically around $.07, plus 0.11% so the more a product costs, the more money Visa makes. This is particularly interesting, as it's a built-in hedge against inflation.

    In 2018, Visa's services revenue was $8.9 billion on $8.1 trillion of network spend.

    2. Data Processing Fees:

    Visa also earns a fee for settling transactions between banks, these fees are based on the total number of transactions made on Visa's network, regardless of the dollar amount. So, it costs Visa the same to process one million transactions as it does 10 million.

    In 2018, Visa's data processing revenue was $9 billion, on 124 billion transactions, or $.07 per transaction.

    3. Cross Border Fees:

    Visa charges fees for processing cross-border transactions, these transactions are typically harder/ more complex to process meaning the fees are much higher than normal transactions.

    In 2018, Visa's cross-border revenue was $7.2b with an estimated yield of 1%, making it Visa's most profitable product.

    Other interesting stats:

    • 65% Operating Margin
    • $49 billion has been paid to shareholders in the form of buybacks and dividends since 2010

    There is still a lot of work to do:

    • Move to a cashless society: 71% of payment volume in the US is Card & Electronic, meaning there is 29% to still eat into. By Visa's estimate, $17 trillion is still spent on cash and check each year. And this is just the U.S there are plenty of completely unbanked countries.

    • E-Commerce: Its obvious E-Commerce is growing at an enormous rate, which is great for Visa! They estimate that they earn $0.43 of every dollar spent online vs. %0.15 for physical transactions, (because you can't use cash online) so the more that moves online, the better it is for VISA.

    • B2B: Visa has always been a business to consumer company, but they're currently exploring B2B segment with products like Visa Connect.

    • Acquisition of Visa Europe

    To sum everything up, I think Visa is a sure bet on global economic expansion. What do you guys think?

    submitted by /u/LazyInvestor33
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    Gold Hit 1,500 Overnight

    Posted: 07 Aug 2019 01:08 AM PDT

    Markets can remain irrational longer than you can remain solvent

    Posted: 07 Aug 2019 03:19 AM PDT

    Can someone explains this further? Doesn't the market "price in" everything? How can markets be irrational for long if the smartest people in the world and their collective knowledge is what makes up the stock market? I need more clarity on this saying.

    submitted by /u/green9206
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    Gross and net exposure of portfolio

    Posted: 07 Aug 2019 02:08 AM PDT

    Hi,

    First post. I wanted to check my understanding of Gross and Net exposure of a portfolio.

    ​

    Gross exposure = Abs(Long) + Abs(Short)

    Net exposure = Long - Short.

    ​

    Example (totally made up):

    Investor invests in 4 stocks (A,B,C,D) with the following weightings:

    A = 25% Short

    B = 13% Long

    C = 30% Short

    D = 25% Short

    ​

    Then there Gross exposure = 93%.

    Then there Net exposure = -67% (i.e. net short).

    ​

    One other small point, if you are long a put option (say) then would you count that as a long position or short position. Obviously since you bought the put you're long, but since the put allows one to sell I wasn't sure if you'd say it is a short position...

    ​

    Thanks.

    submitted by /u/sutekidane7
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    Why car companies have such low P/E?

    Posted: 07 Aug 2019 01:12 AM PDT

    Volkswagen, Toyota etc. Why do they have such low P/E? They pay great dividends as well. What am I missing?

    submitted by /u/flyingtable_
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    Economist article about how shrinkflation and non-financial employment perks impact inflation and wage growth calculations

    Posted: 07 Aug 2019 03:38 AM PDT

    https://www.economist.com/finance-and-economics/2019/08/06/how-shrinkflation-is-playing-havoc-with-economists-models

    TWO YEARS ago British chocoholics felt the pinch from the decision to leave the European Union. As sterling tumbled, global firms selling to the British market faced the same production costs as before, but got less money for each sweet sold. Rather than raise the price per chocolate, some chose to shrink the chocolate per price. The famous peaks on a bar of Toblerone grew conspicuously less numerous (though Mondelez, the bar's maker, said Brexit was not the cause). Other products suffered the same "shrinkflation": toilet rolls and toothpaste tubes became smaller. The threat of Brexit made the phenomenon more visible, but it is surprisingly common. Statisticians and policymakers need to take note.

    A forthcoming paper by Diego Aparicio and Roberto Rigobon of the Massachusetts Institute of Technology helps make the point. Firms that sell thousands of different items do not offer them at thousands of different prices, but rather slot them into a dozen or two price points. Visit the website for H&M, a fashion retailer, and you will find a staggering array of items for £9.99: hats, scarves, jewellery, belts, bags, herringbone braces, satin neckties, patterned shirts for dogs and much more. Another vast collection of items cost £6.99, and another, £12.99. When sellers change an item's price, they tend not to nudge it a little, but rather to re-slot it into one of the pre-existing price categories. The authors dub this phenomenon "quantum pricing" (quantum mechanics grew from the observation that the properties of subatomic particles do not vary along a continuum, but rather fall into discrete states).

    Just as surprising as the quantum way in which prices adjust is how rarely they move at all. Retailers, Messrs Aparicio and Rigobon suggest, seem to design products to fit their preferred price points. Given a big enough shift in market conditions, such as an increase in labour costs, firms often redesign a product to fit the price rather than tweak the price. They may make a production process less labour-intensive—or shave a bit off a chocolate bar.

    Central banks are starting to see the consequences. Inflation does not respond to economic conditions as much as it used to. (To take one example, deflation during the Great Recession was surprisingly mild and short-lived, and after nearly three years of unemployment below 5%, American inflation still trundles along below the Federal Reserve's target rate of 2%.) In its recently published annual report the Bank for International Settlements, a club of central banks, mused that quantum pricing and related phenomena help account for such trends.

    But firms' aversion to increasing prices may be as much a consequence of limp inflation as a contributor to it. When the price of everything rises a lot year after year, as in the 1970s and 1980s, firms can easily adjust the real, inflation-adjusted cost of their wares without putting off shoppers. A 5.5% jump in the cost of a pint after years of 5% increases does not send beer drinkers searching for other pubs in the way that a 0.5% hike after years of no change might. Thus falling inflation can make prices "stickier". To compensate, firms instead find other ways to impose costs on buyers—such as making products smaller or lower-quality.

    Labour markets are affected, too. Wages are notoriously sticky, especially downwards. In a world of low inflation, the ability to trim pay by raising wages less than inflation is lost to firms, with serious macroeconomic consequences. Economists blame sticky wages for causing unemployment during recessions. Facing reduced demand, firms that cannot cut pay to maintain margins while slashing prices instead reduce output—and sack workers.

    But nimble firms have other options: the employment version of shaving a bit of chocolate from the bar. Some cut costs by boosting output per worker, often by driving workers harder. Tellingly, growth in output per worker now tends to fall in booms and rise during busts, precisely the opposite of the pattern 40 years ago, when inflation was high. Firms can respond to market pressures by reducing the benefits available to workers; Asda, a supermarket, recently announced plans to slash British workers' holiday allowances. Or they can offer workers more tortuous schedules. Research published in 2017 suggests that being able to vary workers' hours from week to week is worth at least 20% of their wages. On the flipside, during good times firms often opt to reward workers with office perks and one-off bonuses, rather than pay rises that cannot easily be clawed back during downturns.

    If it happens on a sufficiently large scale, the practice of tweaking quality in lieu of price could play havoc with essential economic data. Statistical agencies do their best to account for changing product quality, but if adjustments are unexpectedly common or subtle then muted inflation figures could easily be concealing a more turbulent economic picture. Central banks watching for big swings in inflation or wage growth as a sign of trouble could be reacting to figures that bear far less relation to business conditions than they used to.

    What's more, the substitution of quality for price as firms' main way of responding to changing market conditions weakens the case for keeping inflation low and stable. Inflation makes relative prices less informative, economists reckon, making it harder to decide what to buy and how to spend. Rather than clarity, low inflation has brought a different sort of confusion: one of shrinking chocolate bars and lost holidays.

    TL;DR: How does one measure inflation when a jar of peanut butter decreases in size from 10oz to 8z, or when the ice cream has more "substitute" ingredients that were cheaper than using milk/cream/sugar? How does one measure wage growth when an employer simply offers more generous vacation days and company picnics, only to claw them back when times get tough?

    submitted by /u/COMPUTER1313
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    Does anyone use the TD Ameritrade "DRIP" program to have their dividend payments reinvested?

    Posted: 06 Aug 2019 02:32 PM PDT

    I've been reinvesting my AAPL dividend payouts back into more AAPL, and have been doing so manually: wait for the dividend pay date, then figure out how much extra cash I need in my TD Ameritrade account to buy a whole number of stocks, factoring in the TD Ameritrade fee ($6.95), and then making the purchase once the money transfers in from my bank account.

    I just learned today that TD Ameritrade offers a DRIP (Dividend ReInvestment Program) that doesn't charge a fee, and can purchase fractional shares.

    Does anyone use this? Do you know if it works with AAPL stock dividends and purchases (I'll do more research, myself, but wanted to check here, as well)?

    Any downside/caveats?

    It says they don't intend to charge for the service/reinvestment, but that they could change that, though it would never be more than the regular $6.95 fee. I'm assuming they've had the program for some time now, and never charged a fee. I was simply unaware of it.

    submitted by /u/douglas_in_philly
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    Match Group demolishes earnings (again) on strong Tinder results (+19% after-hours)

    Posted: 06 Aug 2019 03:58 PM PDT

    39% YoY subscriber growth adding 503k average subscribers (2nd highest ever quarterly sequential growth)

    https://www.cnbc.com/2019/08/06/match-group-earnings-2019-tinder-subscribers.html

    submitted by /u/hfutrell
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    Tech and health care repeatedly beat the market, so why not try this strategy?

    Posted: 07 Aug 2019 01:53 AM PDT

    IHI FTEC XT

    then add IAU (gold) as a hedge.

    Dollar cost avg for 20 years. It's a winner

    submitted by /u/Bitcreamfapp
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    Why do people like/watch Jim Cramer?

    Posted: 06 Aug 2019 09:26 PM PDT

    He is so annoying that I can't take him for more than two minutes at a time, I hate it when he pops in during the day on CNBC. Why do so many people watch his shows, read his books and follow his advice? He seems like a lunatic to me.

    submitted by /u/sageguitar70
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    How long does it take you to build a decent model? Am I too dumb?

    Posted: 06 Aug 2019 07:37 AM PDT

    I've been at a a buy side research position for just over seven months and I feel as though I'm falling behind in my modeling skills these past few months. How long does it normally take you to build a model? How do you build this skill to have more confidence?

    Right now it takes me around a week to get one done with a DCF valuation for price target. I usually go back five prior years with a five year forecast.

    Depending on the industry, it sometimes seems difficult to follow what other analysts have done and where they get their numbers from the Qs and Ks.

    Does practice really make perfect? Is the old adage, "plagiarize often" in modeling really true? I find it so difficult to follow how analysts at a sell side firm use formulas in their models, so it's been a bit of a strenuous past few months trying to learn because I seem so forgetful so often.

    submitted by /u/golphist
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    Share Market Tips; Top stocks in Action today

    Posted: 07 Aug 2019 03:30 AM PDT

    Can someone explain to me what leverage trading is?

    Posted: 06 Aug 2019 11:44 PM PDT

    First of all, I have very limited experience in trading. I've only ever bought and sold shares normally before.

    I know what buying options mean but I also hear people use the term leverage quite often. Are they the same thing or is leverage trading refering to something entirely different?

    submitted by /u/ga643953
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    Bernie Sanders Proposes Tax of Under One-Half Percent on All Speculative Security Transactions

    Posted: 06 Aug 2019 05:37 PM PDT

    Hey Investing,

    Before I get started, I hope that this post abides by the rules regarding politics. It is not my intent to discuss Bernie vs other candidates, just this idea he's proposed. Additionally, you can be sure I'm not being paid by him to do this or anything by looking at my post history (I'm only on Reddit to talk about weed stocks).

    So anyway, I'm watching his Joe Rogan interview. Bernie says this tax on any stock/bond/option/whatever trade would provide a magnificent amount of money for his initiatives, while also curbing the amount of speculative high-frequency trading. It was the second piece that I found to be most interesting, since I believe that pot stocks have attracted a lot of this sort of intra-day, quick flip trades, intended only to return fractional percentage returns, but on high volumes of shares.

    What are your thoughts on it? Do you see any downsides?

    submitted by /u/Bad_Prophet
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    Company analysis: resource list

    Posted: 06 Aug 2019 04:23 AM PDT

    When doing a research on the company I go through a self-created checklist to make sure I do not miss out an important aspect. Over time I have been building a base of resources I use to assess each factor.

    I just wanted to start a thread where people could share the resources they use while analysing a company, so we could all become better investors. =)

    My list so far:

    Business/industry overview:

    Company's web site, 10-k and conference calls

    Same for company's competitors

    Morningstar.com - company description & moat

    Statista - market opportunity

    Management:

    Cash flow statement: capital allocation & financing

    Youtube - executors speaking

    Glassdoor.com - employee reviews

    https://www.crunchbase.com/organization/ - Acquisition history

    10k - compensation policy, insider ownership

    https://aflcio.org/paywatch/highest-paid-ceos - compare CEO salary with peers

    Risk:

    10k - risk factors

    Fin statements - Operational leverage, req. CapEx

    Historical P&L and share price, Yahoo finance - Market risk

    Balance sheet and P&L - solvency

    10k (geographic segmentation) - country/currency risk

    Opportunities:

    ificlaims.com Number of patents filed

    10k/https://www.strategyand.pwc.com/innovation1000 - R&D as % of revenue/total cash spend and comparison to others

    Valuation:

    Fin. statements - figure out true adjusted FCFF

    Yahoo Finance, GuruFocus, Bloomberg - expected growth rate, WACC (but also check WACC against risks)

    Length of high growth period depends on level of moat and market opportunity

    ​

    This is not the whole list, but resources I use most frequently. I also like browsing Google News for the company to get acquainted with current developments and the media picture.

    Perhaps, will write out my entire process later if anyone is interested.

    I would be very happy to hear your feedback and some suggestions!

    Especially in the area of potential market size, growth, etc. There must be some better resources I don't know about!

    submitted by /u/HeadInhat
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