The wealth-building thread

[blueone]

My investing strategy during previous downturns / recessions has been very simple: Look away! I don't attempt to predict the unpredictable.

That's a variation on my strategy. I only check my accounts when my holdings are going up.

 

[Timcognito]

All-Time Highs in the Stock Market are Perfectly Normal - A Wealth of Common Sense

“If you think the market’s “too high” wait ’til you see it 20 years from now.” – Nick Murray In late July the S&P 500 closed at an all-time high level of roughly 1,988. It was the 26th all-time high based on the closing price for the S&P in 2014 alone. Because we’ve seen all-time highs in...

awealthofcommonsense.com

Agree with this but in my post above in shows a down market lasts an ave. of 17 mo. and average loss of 36% but what is not shown is that one has is how long it take on average to recover that 36% plus that 17 mo. If one is 50years old that's one thing but if one is 70 and living on that income for another 20 years that's another. An up market after big loss is a good thing for sure if one has the time funds to wait it out. Hedging for both situations is the way to go if one needs the dough. IMO

 

[quattro98]

I would address this by asset allocation and portfolio risk, independent of market level/highs/lows.

This can also depend on the size of the portfolio relative to needs. If you have a huge portfolio, it doesn't matter what you do. You can take minimal risk and have enough or take lots of risk, still have enough, and maybe have more. For most of us, the portfolio isn't that big, so asset allocation becomes more conservative as we age.

Agree with this but in my post above in shows a down market lasts an ave. of 17 mo. and average loss of 36% but what is not shown is that one has is how long it take on average to recover that 36% plus that 17 mo. If one is 50years old that's one thing but if one is 70 and living on that income for another 20 years that's another. An up market after big loss is a good thing for sure if one has the time funds to wait it out. Hedging for both situations is the way to go if one needs the dough. IMO

 

[amper42]

Look out below?
SPY MaxPain = 596 today.
Current price = 605.66

Wouldn't be surprised if a bit of profit taking happens in the last 17 days of 2024. 28% annual return on SPY is crazy high.
MaxPain currently quoted at 575 on Dec 20 - one week from today. Could be interesting next two weeks.

 

[Timcognito]

Look out below?
SPY MaxPain = 596 today.
Current price = 605.66

Wouldn't be surprised if a bit of profit taking happens in the last 17 days of 2024. 28% annual return on SPY is crazy high.
MaxPain currently quoted at 575 on Dec 20 - one week from today. Could be interesting next two weeks.

And maybe selling and profit taking in early 2025 to offset write-offs where many predicting a down turn.

 

[amper42]

How do you backtest these things? You should not consider gold as an investment, it is more of a diversification or inflation protection.

I evaluate multiple years of performance under various conditions to try to estimate how an asset may perform.

Gold is certainly an investment for Gold dealers. For everyone else, there are lots of other options too like buying a home, real estate investing or buying the S&P 500 for inflation protection. The nice thing about a home is you can use someone else's money to buy it and reduce the risk of escalating monthly rent. Some claim it costs 30% more to buy than rent but over the long haul it's an easy way to provide financial freedom and insulation from rising housing costs. However, in the long term most will end up paying more for property tax than their first monthly house payment. Government always wants a slice.

 

[amper42]

Nice PUKE on SPY.
We need more 1% down days.
SPY 594 looks like a buy for me.
Hope to ride it to 606 next Tuesday?

Wow 588. lol
Fun days for the BEARS!

 

[JeffS7444]

Nice PUKE on SPY.
We need more 1% down days.
SPY 594 looks like a buy for me.
Hope to ride it to 606 next Tuesday?

Wow 588. lol
Fun days for the BEARS!

If everything worked out exactly, roughly how much $ might a person gain on an investment of $1K, once transaction fees and taxes were considered?

 

[bachatero]

I lost huge (10%) today, wondering if the bears might go back to hibernation Friday?

 

[amper42]

If everything worked out exactly, roughly how much $ might a person gain on an investment of $1K, once transaction fees and taxes were considered?

Probably best to keep your $1,000 or buy the dip rather than try to learn how to short? The odds have been better in that direction over the long run. Llittle skill is required except learning to buy more when your stocks are painfully low.

 

[levimax]

If everything worked out exactly, roughly how much $ might a person gain on an investment of $1K, once transaction fees and taxes were considered?

That all depends on how you want to play it. For all practical purposes commission are $0.00 so if you are just buying and selling the ETF's and bought at 594 and sold at 606 you would make 2% or $20. If you used 50% margin on ETF's you could make 4% or $40. If you are playing the futures with 10% margin then you could make $200. If you are trading short dated options it could be much higher but with a very small chance of "winning". With no margin the most you can lose is your investment, with margin you can lose more than your investment, with options you can only lose your investment.

 

[amper42]

I lost huge (10%) today, wondering if the bears might go back to hibernation Friday?

MaxPain for Friday = 579 and we already dropped to 586 today. In my foolish opinion, the majority of the downside could be in. There is little to gain penetrating 579 with Monday/Tuesday Dec 23/24 PAIN = 606. I would not be surprised to see a 80-90 point rally in the S&P500 between Friday -> Tuesday Dec24. They will call it a Santa rally.

VOO goes ExDiv on Dec23 with dividends payable on Dec 26. My guess is the dividend will be $1.80+ per share for those who purchase VOO by Friday. That might add some sauce to the rebound equation. lol

 

[amper42]

Here comes the SPY rally.
S&P Futures +44 before the opening bell.

To me the 10 year Treasury at 4.555 looks pretty good today or the TLT below 88.

 

[JeffS7444]

That all depends on how you want to play it. For all practical purposes commission are $0.00 so if you are just buying and selling the ETF's and bought at 594 and sold at 606 you would make 2% or $20. If you used 50% margin on ETF's you could make 4% or $40. If you are playing the futures with 10% margin then you could make $200. If you are trading short dated options it could be much higher but with a very small chance of "winning". With no margin the most you can lose is your investment, with margin you can lose more than your investment, with options you can only lose your investment.

Thanks for that clarification; the fact that I still don't fully understand the appeal in light of the risk, tells me that I got no business getting into it!

 

[JeffS7444]

I lost huge (10%) today, wondering if the bears might go back to hibernation Friday?

For me, Wednesday the 18th's were all unrealized losses, but man, it was kinda painful to witness all the same.

 

[JeffS7444]

Probably best to keep your $1,000 or buy the dip rather than try to learn how to short? The odds have been better in that direction over the long run. Llittle skill is required except learning to buy more when your stocks are painfully low.

No, I'm ready to delve into strategies that I barely understand, I'm mostly trying to figure out why you seem excited by moment-to-moment market events, and how it's worked out for you.

 

[amper42]

No, I'm ready to delve into strategies that I barely understand, I'm mostly trying to figure out why you seem excited by moment-to-moment market events, and how it's worked out for you.

Understood. I like financial puzzles. Everyone tells you it's impossible to know when to buy and when to sell. For the most part they are absolutely correct. But that doesn't keep me from studying the data and occasionally acting on it. It's hard to successfully beat the S&P500 over the long haul but there are times when data can offer a hint of what's coming.

When I saw last Friday's PAIN number unusually low and this Friday SPY PAIN all the way down to 579, it told me markets could sell off with any excuse. The Fed meeting offered an excuse. It being the end of year with a 28% gain just adds to the possibility of profit taking. US Married couples filling jointly pay 0 Federal tax on long term capital gains provided their income is below $94,050 for 2024.

I use the dinkytown.net 1040 tax calculator for 2024 to create a mock up of my simple tax return to determine if I qualify. I have long term capital gains in SPY that I would like to reduce. Tax free is good.

So the next trick is to determine how much to sell and try to do it when the odds to buy it back a little cheaper are in your favor. Selling at 606 and starting buying back under 594 was my plan. But as you can see price is down even lower at 588. So instead of simply buying back the same amount as sold, I am buying more than sold below 588 with the thought to trim above 602.

Sometimes things work out. Sometimes they don't. It's about improving the tax basis and buying back at a lower price. For most this will sound like work. For me, it's a fun Financial puzzle. Even if SPY drops further odds are high it will eventually recover to new highs. But if you don't have the stomach for this game, it's probably best not to play. I hope that explains my interest. Have fun!

ps ... if all your investments are in retirement accounts the tax situation will be totally different. See your tax professional as I am not one.

ps2 ... SPY and VOO are about to pay dividends for the quarter so there's another $1.80+ per share profit in the mix for those who purchase before ExDiv date. More fun facts!

What path does SPY follow this week and next?
My guess is SPY will stay in a trading range through Friday close. Then with PAIN moving back up to 595/600 Monday Tuesday, I would not be surprised to see a big rally into Monday.

 

[amper42]

Today, Friday, Dec 20 is the low in the PAIN data for the last days of December at SPY MaxPain 580.
Monday jumps up to 595 and Tuesday 600.

We could easily see a rally of 130+ points on S&P500 into next week.
Let's see if the data turns into reality. The dip certainly did.

Today, SPY goes ExDiv at 1.9655 per share
Dec 23 VOO goes ExDiv at 1.7385 per share

Ok, who started the rally early? S&P500 up +85 now when it started down -40. Crazy times. But the direction to 595+ on Monday is almost already here. lol

They will come up with a rationalization that inflation data has improved to justify the market simply following the options SPY PAIN trade. SPY 600 coming next week plus ExDiv earned. Bulls will be happy!

 

[amper42]

Todays SPY MaxPain = 597
Wouldn't be surprised to see a 67+ point rally on S&P500 on Monday, Dec 23, 2024.
That would take current SPY 590.37 to 597+ by close and into Tuesday half day trading.

Wonderful fake out with low at 587.66 this morning....
Now we rise to 597 by Tuesday or before.

 

[amper42]

Tuesday SPY 596.99 tag in first 10 minutes.
Who says nothing is predictable?

Expect 592 - 600 range for last few days of month.
SPY PAIN
Tuesday 593
Thursday 591
Friday 598
Monday 12/30 - 595
Tuesday 12/31 - 593

Possibly range bound for next week?
Normal Bullish = price sticks a few points above PAIN
Dropping drastically below PAIN usually results in a whipsaw rally within 2 trading days.

Tuesday Dec 24 10 year Bond rises to 4.625% - Not a good sign for stocks or new home buyers. Is 5% in the near future? Market must be concerned about tariffs and unlimited deficits?