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.
- Oil breaks above $50 for the first time since February
- Jeremy Grantham of GMO: "I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000."
- Remember that time JPM Berkshire and Amazon were going to crush healthcare?
- Long-term strategies to preserve purchasing power
- Does anybody know why the "Supermajors" of green energy are not included in ICLN?
- How trustworthy is "The Motley Fool" ?
- Why are $RIOT and other bitcoin mining stocks overpriced?
- China in the Dark due to Coal Shortage
- The Fraying of the US Global Currency Reserve System
- Am I missing something w/ GME?
- List of known permabears?
- Monthly dollar-cost average OR buy the "monthly" dip? Optimization
- Large Cap vs Small Value Cap vs Momentum Factor. A Question regarding Ben Felix's Video
- Beginner
- AYRWF: 3-6x Cannabis Opportunity
- Making proper DD
- Finance Gurus
- Honest question: when do you think Virgin Galactic will perform its test flight again for FAA certification of its spaceship?
- Holding volatility as an asset class and the art of hedging
- What is up with GME and naked short selling.
- Angel List and Alumni Venture Group Investing Question
- Dutch stocks
- Investing Privately In Local Business, Specifically Cannabis Dispensaries
| Daily Advice Thread - All basic help or advice questions must be posted here. Posted: 06 Jan 2021 02:00 AM PST If your question is "I have $10,000, what do I do?" or other "advice for my personal situation" questions, you should include relevant information, such as the following:
Please consider consulting our FAQ first - https://www.reddit.com/r/investing/wiki/faq And our side bar also has useful resources. 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! [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Oil breaks above $50 for the first time since February Posted: 05 Jan 2021 08:10 AM PST https://www.cnbc.com/2021/01/05/oil-breaks-above-50-for-the-first-time-since-february.html Oil has bounced back a lot from the crash earlier last year. I just wish I had a ton of land so I could have bought oil futures contracts when they were going for negative $$ and would have been paid to receive thousands of barrels which i could sell now. damn lol [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Posted: 05 Jan 2021 08:54 AM PST A very thought-provoking piece by Jeremy Grantham that I thought was worth of discussion on this subreddit:
Grantham still finds it very difficult to time a bubble, even when he feels certain he's looking at one right now, because it's so tough to call the top. But he sees some interesting characteristics:
And then his recommendation at the end:
I don't understand everything that goes into Grantham's piece, but he takes such a historical and experienced approach to giving context to the current stock market that I think this is worth a read for anyone who's relatively new to investing and wants to experience some battle-hardened weariness when looking at Dow 30k. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Remember that time JPM Berkshire and Amazon were going to crush healthcare? Posted: 05 Jan 2021 12:05 PM PST | |||||||||||||||||||||||||||||||||||||||||||||
| Long-term strategies to preserve purchasing power Posted: 05 Jan 2021 10:46 PM PST Let me start by providing some context: my portfolio sits at 500k, but the current climate in the equity markets scares me. I'm not some rich kid, this money is the result of 10 years of grueling work. Long story short, I want to get out. Actually, I'm already out (85% cash), but I realized that even cash is an explicit decision. Not only cash is a decision, even the currency is a decision. I'm originally from Europe and it's likely that I'll go back at some point. At the moment I sit on USD 425k, but I can imagine a number of reasons why cash might be a bad idea. With a timeframe of 20 years:
My question is: how do I preserve the purchasing power of my savings in a safe and currency-agnostic way? I'm not after crazy returns, I just want to make sure that my current purchasing power is preserved. The same arguments that apply to cash also seem to apply to other investment classes: you can buy real estate, but there may be a housing bubble, you can buy gold, but people may lose interest in it as a hedge. There doesn't seem to be a truly neutral long-term investment. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Does anybody know why the "Supermajors" of green energy are not included in ICLN? Posted: 06 Jan 2021 12:23 AM PST Bloomberg has a good article from November 2020 about clean energy companies. I compared them in ICLNs portfolio (that is based on the S&P Global Clean Energy Index) and didn't find any of them. https://www.bloomberg.com/graphics/2020-renewable-energy-supermajors/?srnd=green It talks about companies like NextEra (NEE), Enel (ENEL) or Orsted (ORSTED) which have market capitalization of multi billion $. Why are those not in the index. My guess is, that these companies still have other energy sources that are not renewable and therefore do not fulfill the C02 footprint requirements of the index, but I have no transparency about that. This lead to the questions though: - How does S&P pick the stocks for the Global Clean Energy Index? I couldn't find details for that. - Is it likely that if a company like NextEra, planning to replace their own traditional energy sources with solar and wind to be added to the index in the next couple years? - Is there other ETFs that contain the "Supermajors" of green energy? [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| How trustworthy is "The Motley Fool" ? Posted: 06 Jan 2021 01:39 AM PST Hi everyone, I discovered this website and their investing advice a few days ago. On the paper it looks great to identify fast-growth stocks. But it also looks too good to be true somehow. Do you have any experience with it ? And would you recommend it ? (this is not a promotional post, I do not work for them, thus I will not put any link) [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Why are $RIOT and other bitcoin mining stocks overpriced? Posted: 05 Jan 2021 06:51 AM PST I've spent the last week and a half researching bitcoin mining, looking at financials, purchase orders, equipment, making spreadsheets, etc. I don't see any possible world where owning 10,000 mining units (and an order for another 25,000 to arrive by October) imputes a $1b+ valuation, especially when there will be close to 1,000,000 of these units manufactured by that time. There is nothing proprietary about what $RIOT does -- what they do is done 1000x over across the world: Buy mining hardware and plug it in. Is the total market cap for bitcoin mining somehow in the trillions? If owning these units is so amazing valuable, why are the manufacturers selling them rather than using them to mine? I'm wondering if I'm missing something here... Happy to expand on this more if there's any interest. About Mining Bitcoin Mining is the process of buying specialized hardware (which has a hashrate), hooking it up to electricity, and getting back some amount of BTC. The amount of BTC you get is: your hashrate divided by network hashrate times reward. Currently the reward is 1000 BTC per day. This halves every four years, so if you're a miner, get wrecked. But anyway, just assume it doesn't half. Now the amount of $ rewards you get is the above equation times the price of BTC, or $USD. So to recap: You spend $2400 to get hardware that gives you 100 TH/s... the network hashrate is 150,000,000 TH/s, so you get 1/1,500,000 of 1,000 BTC per day (.0067 BTC), times $30,000, that's $20/day. Pretty sweet, right? You'll break-even in 120 days, and from then on out, it's all profit, right? Race to the bottom Except, here's the golden rule of bitcoin mining: The more profitable it is to mine, the more the network hashrate grows. It's that simple. Miners collectively see it is profitable to mine, so they buy a ton of that hardware, and now the network hashrate will, for example, double... so you're netting $10/day instead of $20/day. This is how it works -- miners are all competing, adding hardware when it's profitable, and driving the profit margin down to the lowest point they can tolerate, given the volatility of $BTC. There is nothing proprietary about mining, and there are no economies of scale. There's nothing special about any miner's hardware -- they all buy it from one of a few manufacturers (Bitmain, MicroBT, Canaan, eBang, etc). There's nothing special about electricity -- low cost electricity is available all around the planet. During the bull run of 2017, BTC went from $1,000 to $14,000 -- but during that same period hashrate went from 2 EH/s to 16 EH/s -- so even though $BTC exploding in value, the actual mining profit margins only increased a little bit. By the end of 2017, the same hardware you had in Jan would now mine 1/8th the amount of BTC. (The story got WAY worse in 2018) From my analysis I've concluded that on average miners can hope for 1-2x return on their hardware investment across 2 years -- by that time, the hardware has negative profit margin. Not bad.. but not worthy of $1b+ valuation. Of this 1-2x, the vast majority of return comes from when the newest hardware is just released, and/or when there are spikes in $BTC that happen faster than miners can provision new hardware. The arms race All things being equal ($BTC, network hashrate), there is another factor that guarantees network hashrate will go up -- and that is availability of new hardware. For $2400 you could get 20 TH/s... then a year later, 50 TH/s. Per the golden rule of mining -- if it's more profitable to mine, network hashrate goes up. About every year the next generation of mining hardware is released and is much more profitable, so miners must upgrade to it or they'll be left in the dust as the network hashrate explodes. When the dust settles, they are still getting the same amount of BTC, but have had to shell out $ for the new hardware. Nobody wins, except the hardware manufacturers. About RIOT $RIOT is a publicly traded company at above $1b valuation. They've done essentially nothing but hook up a few thousand hardware units and operated at a loss. They sell shares constantly to raise cash to pay for their losses and ridiculous salaries. There is nothing special about their operations -- what they do happens on a scale 1,000x over across the world: buy mining hardware, hook it up to electricity. Throughout 2020 they ordered $83m in equipment which will trickle in throughout 2021... (which they'll have to do more share offerings to finance as their purchase orders require payment in various months). Meanwhile, the rest of the mining world has done exactly the same, probably to the total tune of a few $billion in orders. The miners in china will get their equipment in greater quantities, and earlier, and at better prices (no tariffs, cheaper shipping, etc). *If $83m purchase order for late-arriving, overpriced mining hardware (which will only amount to a tiny fraction of global hashrate) is worth $1b+ market cap... doesn't this impute a ridiculous valuation on the BTC mining industry as a whole? Litmus test Do you think that purchasing $50m in hardware (which will not arrive until later this year) somehow imputes a $1b valuation, when literally $billions of the same mining hardware were purchased by all other miners? Do you think the manufacturers are too stupid to realize that they could be multi trillion dollar companies if they just announced they are going to mine with their hardware rather than sell it? Do you think 1% of the network hashrate a year from now is worth $1b? (Btw, they will not even come close to 1%... network hashrate will have gone up 2-4x by then.) Do you think $RIOT can compete against Chinese miners that get preferred deals with manufacturers, get first dibs at newest hardware, get better deals, don't have to pay tariffs, don't have to wait for shipping, and use their precious Guanxi? Do you think that when $BTC doubles, somehow all miners will forever make double the returns from their hardware? Am I missing something? How are $RIOT, $MARA, etc, seeing such insane valuations right now? Would it make sense to short them? Thanks. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| China in the Dark due to Coal Shortage Posted: 05 Jan 2021 06:22 PM PST China unofficially banned coal imports from Australia in October, leading to sky high prices on LNG and Coal. This is also during a cold winter with high power demand in Asia. Seems like a great time to be a gas/power/coal trader in Asia. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| The Fraying of the US Global Currency Reserve System Posted: 05 Jan 2021 06:01 PM PST This blog post provides an excellent primer on reserve currencies, why the US Petrodollar is the world's reserve currency since 1971, and the potential scenarios that might change the status quo. https://www.lynalden.com/fraying-petrodollar-system/
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| Am I missing something w/ GME? Posted: 05 Jan 2021 02:36 PM PST Correct me if I am wrong GME is a dying company with their back against the wall. Everyone cites the consoles as a reason for the stock to go up but the consoles are a disaster for them because the cheaper versions don't have CDs which effectively eliminates Gamestop as a third party seller. The stock and company has been declining for years w/ revenue and profitability shrinking. So why is it going up now? Am I missing something? [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Posted: 05 Jan 2021 06:35 PM PST Would be really helpful navigating the space of financial content online to know who's always calling a crash and take those dire warnings with a grain of salt. Would also be helpful to list any conflicts of interest that said permabears might have that influence their bearishness, i.e. constantly suggesting that the stock markets gonna crash because that scares people into buying gold and silver and they either sell or have large holdings in gold and silver [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Monthly dollar-cost average OR buy the "monthly" dip? Optimization Posted: 05 Jan 2021 01:14 PM PST So we all know that time in the market beats timing the market. This is what makes "buying the dip" a worse performer than DCA: missing out on the big gains made while forever waiting for the next dip. But what if you lower your "dip" expectations in order to trigger at least ~1 monthly dip? The goal is to invest monthly, as with DCA, but not at a random price. Pro: prevent buying overpriced/all-time highs. Con: stay out of the market a few more days. There can be many strategies to identify this dip. Personally, after the paycheck I make my one monthly buy&hold at the 1st occurrence when the price passes over the 15-day moving average, as I found this a sweet spot to trigger at least one monthly buy opportunity at "discount". To visualize, the green vertical bars here represent these 15-MA crossover buy spots, it's an indicator I created on TradingView: https://i.imgur.com/kl9VAeP.jpg As you can see it triggers many "dips" for Nasdaq-100 which I'm most invested in, even during months with huge growth (March-September). It's important to define your dip so it triggers ideally at least once a month, so you don't stay out of the market too long, otherwise the strategy won't beat DCA. What are your opinions on this approach? Thanks for reading :-) [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Large Cap vs Small Value Cap vs Momentum Factor. A Question regarding Ben Felix's Video Posted: 06 Jan 2021 03:07 AM PST Hello everyone,
I have recently seen a video from Ben Felix (which I recommend, great content) where he showed that Small Value Cap Stocks tend to outperform Large Cap stocks. Here is some data: Annualized since 1994 we have the following Gross Returns: MSCI World: 7,42% MSCI Large Cap: 7,77% MSCI Small Cap Value: 7,82%
It does seem that Small Cap Value has outperformed Large Cap. As per usual his investment advice is to own a low cost World ETF. But he said that if that was not exciting enough you could consider adding a little more weight to Small Value Cap Stocks. (more potential returns=more risk).
My question is about Momentum Factor. Annualized since 1994 it has a Gross Returns of 11,55% (!) I was thinking 80% MSCI World + 20% MSCI World Momentum (I am aware of the overlap). Is that statistically reliable enough to add to my Portfolio? Am I trying to beat the market? What am I missing?
Ben's Video: https://www.youtube.com/watch?v=foqswJT3Spc Sources: https://www.msci.com/documents/10199/9f8cadb3-5923-442d-96d1-7434b6593416 https://www.msci.com/documents/10199/c101addd-4f24-4a63-90a8-c206b4700241 https://www.msci.com/documents/10199/904e031c-94e4-4dbc-a314-7c373446dffa [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Posted: 05 Jan 2021 11:16 PM PST Hello all, I want to start investing now that I have money saved up. I have $10,000 saved up on a savings account. I was wondering where I should start investing $100 a month. I have been looking into index funds, and about to pull the trigger but hesitated. Any advice would help. Thank you! [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| AYRWF: 3-6x Cannabis Opportunity Posted: 05 Jan 2021 12:19 PM PST Hey guys, first wanted to thank everyone for the community here. I appreciate your contributions. This is my first post and I'd love any feedback! I've been doing a lot of work in the US cannabis space and 2021 is shaping up to be a big year for the cannabis industry and for Ayr Strategies (AYRWF), a US multi-state operator. TL;dr: The stock could be a 3-6x over the next two years and 10x+ longer-term. The US MSOs will be the most direct beneficiaries of growing cannabis consumption, and AYRWF has a strong management team, the highest growth over the next two years, best-in-class margin profile, and lowest valuation. Note: the company is listed in Canada under AYR.A and is available over-the-counter under AYRWF (OTC ticker recently changed from AYRSF to AYRWF). Thesis
What is the stock worth?
Risks
Overview of AYRWF's state footprint
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| Posted: 06 Jan 2021 02:32 AM PST Hello, I'm quite new to the world of investing. I've noticed that some people post their DDs here. It's amazing and thank you for that but how do you find those niche industries? How do you know that something that was stale or going down for years is going to go up? Do you just check random industries and look for undervalued ones or is there something more in it? [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Posted: 06 Jan 2021 02:27 AM PST Seems like there are a bunch of new personal finance gurus popping up out of the woodworks every day. I'm almost sure most of them don't hold any professional licenses/certifications and yet, I see them selling coaching services or courses that contain advice on investments. Isn't this illegal? [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Posted: 05 Jan 2021 11:49 AM PST https://www.cnbc.com/2020/12/14/virgin-galactic-spce-stock-drops-after-aborted-spaceflight-test.html The last test got aborted, but on the positive side showed that it's safety systems worked flawlessly. Now they just need to do the analysis fix the computer connection issue and launch its next test flight. When do you think it will be? [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Holding volatility as an asset class and the art of hedging Posted: 05 Jan 2021 09:49 AM PST Hi all, I recently finished up a side project and want to get the results out there for some feedback and comments. Long post ahead! And also my first in /r/investing so please let me know if this isn't appropriate. TL;DR: You can buy option spreads that are highly correlated to the VIX as a way to hedge, but I don't think the performance is worth it to hedge a UPRO portfolio. Hedging is notoriously difficult and involves the selection of the right asset class, right allocation, and right time to remove the hedge (ideally at the bottom of a correction). If the VIX were directly investable, holding it as an asset in a portfolio would provide a significant edge. However, you cannot directly "buy" the VIX, and tradable VIX products (like VXX, UVXY, etc) have notable under performance when used as a hedge. A paper by James Doran (2020) proposed that a portfolio of SPX options that is highly correlated to the VIX could be held as a long-term hedge. The portfolio buys an ITM-OTM put spread and sells an ATM-OTM call spread when the VIX is at normal values, and does not hedge when the VIX is above the mean plus one standard deviation. In this way the portfolio systematically removes the hedge when vol is the most expensive and therefore more likely to revert to the mean. I was interested in replicating the results of this paper, extending the findings to the end of 2020 (the paper stops in 2017), and finding if the option portfolio would hedge a leveraged stock portfolio holding UPRO (3X leveraged S&P500). Step 0: Obtain data, write backtest code Option data: I obtained end of day option prices for the SPX index from a subscription to OptionMetrics for 1996-2019. 2020 data were purchased from historicaloptiondata.com. Extended UPRO and TMF data: These products began trading in 2009, but we definitely want to include the early 2000s dotcom crash and 2008 financial crisis in our backtests. Someone on the bogleheads forum simulated the funds going back to 1986. Backtesting: I wrote a simple program to backtest an option portfolio in R. This program buys a 30 DTE spread as described above and typically holds to expiration. When VIX is low, a fixed percentage of the portfolio value is placed into the option portion during each rebalance, which occurs when the options expire. When VIX is high (above mean plus one standard deviation), the portfolio only holds the base asset class. If VIX transitions from low to high, the hedge is immediately abandoned, and if VIX transitions from high to low, the hedge is repurchased. Step 1: replicate the results of Doran (2020) with the SPX index To ensure our option backtest works as expected, I first replicated the results from the Doran paper using the SPX index. I allocated a fixed 5% to the hedge. I found performance was improved by using options 10% ITM or OTM, so these were used in all backtests. Below are the returns of these portfolios from 1996-2020, starting with $100,000. Although the hedge does well in negative markets, the under performance in the bull market of the last 10 years is quite apparent. The hedge also didn't protect much against the rapid COVID crash in March 2020 – I think because VIX spiked very quickly and the portfolio wasn't hedged for much of the crash. My results don't exactly match those in the paper (even using a 5% spread width). I think differences in the option prices, especially early in the dataset, are playing a role in this. Equity curves for SPX
Step 2: extend the option hedge to a portfolio holding UPRO How does the hedge work using 3X leveraged fund UPRO? I conducted the same backtest, and found that 10% allocated to the hedge is better. This makes sense – you need something with higher volatility to balance out the extreme swings in UPRO. Hedged performance is definitely better than holding UPRO alone, which has pathetic stats over this time period. Better returns than holding SPX alone, but more variance and a equivalent Sharpe ratio. Holding the VIX as an asset is still the winner here. Equity curves for UPRO
Comparison to a UPRO/TMF portfolio The option-hedged portfolio needs to outperform a 55/45% UPRO/TMF portfolio for me to consider running it for real. I used portfoliovisualizer.com to easily compare these portfolios with monthly rebalancing. The returns with TMF have less variance than the option hedged portfolio and end up almost exactly equal at the end of this time period. However, in 1996-2008, the option portfolio definitely outperformed. Holding VIX is again the clear winner in both absolute and risk-adjusted returns, but still suffers severe drawdowns. Conclusions I don't think holding this portfolio will provide a significant advantage compared to a UPRO/TMF portfolio. Given the limitations below and no significant advantage in the backtest, I won't be voting with my wallet. The option hedge portfolio did provide significant advantages in the 1996-2008 period, where it outperformed all other portfolios (even the optimal 70/30 UPRO/VIX!) with a Sharpe ratio of 1.01 and max drawdown of 47% in the dotcom crash. I may paper-trade this strategy to get a feel for position sizing, slippage and fills on these spreads, though. Limitations: Why I won't be hedging with this method
Future directions to explore
Questions? Other ideas to test? Let me know! I'll also happily release returns or code (it's not pretty) if you are interested. References:
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| What is up with GME and naked short selling. Posted: 06 Jan 2021 12:35 AM PST I saw this post on wsb: Is this potentially illegal or is this just some typical shitposting from wsb? Unfortunately I don't have the knowledge to evaluate the situation myself, that's why I came to this sub. Thanks! [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Angel List and Alumni Venture Group Investing Question Posted: 05 Jan 2021 08:47 PM PST Does anyone have experience with investing in rolling funds on AngelList? What was your experience like? Any suggestions on how to pick a specific rolling fund? What returns did you get? When did proceeds start coming in? Same question with Alumni Venture Group... Have you used AVG? How did you select the specific fund? What returns have you gotten? [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Posted: 06 Jan 2021 12:11 AM PST As a small investor mainly in dutch stocks. Ive bought myself shares from a wood company ( AXS ). ytd = 13.9% up the year range is 55% up Thei financials for last year is known and better then ever and their stocks are going up. fyi: one of my first post here so feedback would be nice. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||
| Investing Privately In Local Business, Specifically Cannabis Dispensaries Posted: 05 Jan 2021 03:37 PM PST I live in Texas and while its likely one of the last states to ever legalize the use of cannabis recreationally I was curious how or if its possible for someone to invest in say a local dispensary. Im trying to do research and find a community of people under the same mindset. Is this type of passive investment (just putting the capital up front to get it running) usually barred off to big players only of people wanting to drop 250k to millions and not say like 50k? How would one find like minded people if its in the private sector? Its not exactly publicly traded. Hopefully this doesn't break rule 2. Don't think this is too specific, looking to find private investors in a particular market. [link] [comments]  |
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