Official Shiny Things thread—Part III

[revhappy]

No, that's not right. I don't think anybody sensible has 100% of his/her wealth invested in stocks. And if you're planning to retire tomorrow a "textbook" allocation would be something like 30%-70% (30% stocks, 70% bonds), the end point of a many year, glide path portfolio adjustment.

I see Bogleheads, most people about to retire or already retired are way higher in stocks and even most conservative are 50:50 allocated.

Also most people wouldn't have created a big enough nest egg to survive off 0% bond yields with 70% bonds. So they got pushed into equities by this ridiculous central banks hunting for inflation and creating an asset bubble. Many of these people are trapped now.

 

[BBCWatcher]

I see Bogleheads, most people about to retire or already retired are way higher in stocks and even most conservative are 50:50 allocated.

That's probably fine. Most of the people on Bogleheads are getting (or will get) U.S. Social Security retirement benefits, and there's definitely a skew toward the wealthiest individuals and households. There's a big difference between total wealth of US$15 million falling to US$10 million on a short-term basis and US$100K falling to US$65K.

Many of them are also inclined toward intergenerational behaviors. In other words, they're more aggressively invested than the "rule of thumb" allocation would suggest because they expect (quite sensibly) never to burn through anywhere near their total wealth, and so their kids and grandkids are going to inherit lots of assets. Relatively wealthy and wealthier people have certain advantages, and this is one of them: the luxury of a longer time horizon that survives themselves, of maintaining "dynastic wealth."

Also most people wouldn't have created a big enough nest egg to survive off 0% bond yields with 70% bonds. So they got pushed into equities by this ridiculous central banks hunting for inflation and creating an asset bubble. Many of these people are trapped now.

To some extent it's relative, though. The cost of living was really low during the Great Depression, for example. These U.S. individuals are paying a lot less for gasoline and home heating oil right now, as another example. Always remember that money is only valuable in terms of what real goods and services it buys, now or in the future. If you have less money, but it still buys just as much (or more), no problem! And we seem to have lots of deflationary pressures right now, so it seems appropriate to mention this.

I wouldn't be too concerned about the "typical" Bogleheads poster. Almost all of them will be fine, and many of them will be more than fine because they're buying cheaper financial assets every month right now.

 

[razoreigns]

Yes, this topic has come up several times. I think it's OK if you wish to include a couple or a few months of regular monthly savings/investment flow in your general pool of emergency reserve funds. For example, if you decide you want to keep 12 months' worth of emergency reserve funds on hand (in an ordinary bank account, Singapore Savings Bonds, and -- to the extent it can service a mortgage -- CPF OA), plus add 4 months' worth of regular dollar cost averaged savings/investing, that could be perfectly reasonable. Then, if/when a genuine emergency occurs, you can decide what to do. For example, if it's a job loss, but it's also rational to forecast a return to work within a month or two, no problem, household spending and saving can stay pretty much level and that's that. For emergencies that you expect to be more serious and sustained, you might take a different approach.

Hi BBCW,

Is the 4 months worth of DCA a random suggestion or is it because that's the ballpark average time for a market correction?

 

[LoUsyGamER]

To all gurus,

I had reallocated 50% of my ETFs into put options across mid-late Feb. Last week, I had reduce my put options (20%) to buy VIX put options and sold VIX options yesterday.

So now, I'm holding 50% etfs, 30% put options and 20% cash.

I am thinking of executing huge spread iron condor using half of my cash. Hence, will like to consult the gurus on what do I need to be careful with when having huge spread iron condor portfolio?

 

[highsulphur]

You check to make sure all your U.S. dividend taxes were properly withheld: not too much, not too little. Then keep that form in your personal financial records.

It seems you have a form of performance anxiety. OK, no problem, take some number of months -- 10 is probably as good as any. Divide your warchest by that number, and start diving in, one month at a time, every month. If valuations crash, you win: you're buying cheaper assets. If they don't, you win: you have a long time horizon ahead of you, presumably. Or some of both.

The "110 minus age" rule is what's known as a "rule of thumb." It doesn't apply to every situation, and (as it happens) I prefer an operationally simpler rule of thumb. It doesn't apply toextreme wealth. Jeff Bezos doesn't follow this rule, as another example.

That's what I am saying. For me it doesn't event have to be extreme wealth. 20m will do

 

[BBCWatcher]

Is the 4 months worth of DCA a random suggestion or is it because that's the ballpark average time for a market correction?

It's definitely not the latter. Dollar cost averaging doesn't attempt to time markets.

Four months is only an example, but I think it's a pretty good one because it should be long enough to figure out whether a particular emergency is persistent and serious enough to require a major adjustment.

 

[Johnpierpontmorgan]

I have 70% in cash!!!

Need to deploy 10% over next two months (buying weekly maybe)

Remaining 60% cash reserves will be used at every trigger price points downwards. Pouring in at 40%,42%,44%,46% all the way down to 75% crash scenario. If rebound at 60% drop from all time high, I am still satisfied with the current program, meaning the remaining cash can stil be deployed all the way up to recovery.

Hahahahahahaha

Besides, also have huge investments in precious metals.
Stagflation!!! Qe to Infinity! Fed balance sheet 8 trillion is a done deal, but I believe will definitely go way beyond! Debt monetisation perpetually


Sharing my secret formula. U r welcome

 

[gerdhold]

Us jobless claims 3million!! Holy smokes!

 

[Johnpierpontmorgan]

Not for the unlimited fed help, the whole corporate bubble and FI bubble burst. Fallen angels. All defaulted including banks

60-80% correction from peak please!!!


Fed is working hard to support you! Did I hear stag...

https://www.marketwatch.com/story/the-fed-is-working-hard-to-support-you-now-powell-says-in-rare-morning-television-interview-2020-03-26?mod=article_inline

 

[Maeda_Toshiie]

HAHA MONEY PRINTER GO BRRRRR

(I love that meme. Seriously, run the money printers! Too much money right now is not a problem; the problem is that the economy is going to stop dead for a few months. We should do everything necessary to bridge that gap, and then once the economy is back on its feet, we can figure out how to wind back the stimulus measures.)

The coronavirus is going BRRRR too (or maybe BRRT like the A-10). Is Carrot Top really keen on herd immunity by sending everyone back to work on Easter?

Meanwhile, everyone and his dog is absolutely keen on defaulting on their rent (or maybe I hang out on Twitter too much). This is going to put a lot of pressure on landlords, especially those reliant on rentals to pay for their mortgage loans. There are doomsayers sounding alarm over the mortgage market.

Seriously though, if you think “the Fed is buying everything in sight” is going to drive the price of everything up, that would suggest you should buy stocks. Bringing inflation and economic growth back to thwould be fantastic for stocks.

Bond traders used to say “don’t fight the Fed”, it might be time for equity traders to learn that lesson too.

Where is all this *sfx* BRRR QE infinity money going? Economic growth? Not when the bottom half of the population's income has been stagnating. We have trillion dollar company/ies (one left after the sell offs, but QE will create more), so the stock market is certainly growing. But the economy is not the stock market, and vice versa. So where's the economic growth? Productivity growth anemic.






What the FX is going on over there...

 

[Shiny Things]

maaan this thread has become a sh1tshow. So many weirdos coming out of the woodworks and trolling.

I guess it's a bear market thing?

Yeah, don’t get me started. Just click the “report” button and move on. Must get rid of toxic in community.

Hi Shiny, can I ask, is the worse over?
So market is recovering now?

Let’s be clear: nobody knows. The stock market is going up, but don't forget: stock markets right now are volatile and whippy.

Hi Shiny,

To be fair, I have been thinking through this issue quite alot too and it's been a worry. […]To mitigate this risk, would you recommend to also keep a buffer of funds to cover monthly DCA investments (6 months?) when laid off?

Um. This is a very good question, but my reflex would be “no, keep it simple”. The easiest thing is “invest with your paycheck; if that stops, then start drawing down your emergency fund to tide you over”.

Also, just thinking about prudent money management—if you’ve been fired, there are more important things than investing! Focus on keeping yourself fed and housed first.

Actually doesn’t this mean ST keeps warchest too? How to buy down if DCA monthly?

No, I don’t keep any sort of war-chest. I’ve been buying stocks with the cash coming out of my pay check.

Anyone here using Standard Chartered, and is familiar with buying stocks OTC?

Why can't I see OTC stocks such as TENCENT:TCEHY? Is it that SC does not provide OTC access?

So I don’t actually know the answer to this, but I wouldn’t be at all surprised if Stanchart doesn’t let you trade OTCBB stocks. The American OTC market is a cesspit, give or take the ADRs that trade over the counter as well.

Hi, I'd like to ask about a rough estimation of the dividends I get from an ETF with US companies only, both on US stock exchange and LSE(Ireland domicile)

Let's say I want to buy S&P500 etf:
US stock exchange: 0.7 x dividend yield - expense ratio
Irish-domiciled LSE: 0.85 x dividend yield - expense ratio
Would this be a good estimation?

Point 1: the expense ratio gets taken from the fund assets, not the dividends;
Point 2: the dividend tax on Irish ETFs gets taken out before the dividends are calculated.

So the right numbers are, unless I’m missing something:

US-domiciled-and-listed: 0.7 * dividend yield
Irish-domiciled LSE: 1.0* dividend yield.

Think of it this way. Because the USD is so strong, you have to spend relatively fewer USD to get the same lump of stocks in IWDA.
[…]
regarding your above quote - so actually its quite balanced on both sides regardless SGD/USD up or down ?
[…]
is the train of though correct?

Yep, you’ve got it.

Isn't printing infinite USD going to bring down the value of the dollar in future?

Sent from HUAWEI VOG-L29 using GAGT

Not if every other central bank is in full HAHA MONEY PRINTER GO BRRR mode as well.

ST, any thoughts on Warren Buffett's proposed 90-10 indexing portfolio for layman? Is it too risky?

Yeah. That’s too aggressive. Imagine you’re a retiree headed into retirement with 90% of your portfolio in equities - if you were about to retire and you saw a drawdown like we’re going through now, that would ruin your retirement plan.

I have a "warchest" that was in place since 2017-8. Although right now is a good time to deploy said "warchest". I find it even more difficult to deploy now because thoughts like "This is going to go even lower!", and "Cash is king! Stock will never recover" always pop up in my mind. Reading the news would always be stuffs like "Great Depression 2020!" etc

[…]I guess my point is that different people may be suitable for different strategy.
Some people may be risk takers and can deploy their "warchest" once it "hit the bottom". That is also the best way to earn in fact. But some people may hesitate and not move at all until at the worst possible timing. Thus, having a DCA for them is more towards to eliminate the emotion side and continue to invest instead of just stopping forever.

I totally understand where you’re coming from. The thinking that you describe in your first paragraph is very common—very few people are actually able to take the plunge and buy stocks when blood is running in the streets. A big part of the reason that I advocate regular investing so strongly is that it removes that mental block to investing.

(Really, the best solution would be automatic direct-deposit investment! My invitation to robo-advisor companies and brokers still stands—if you want to build a really good automatic-investment offering, call me! I’ll help you design it!)

Hi guys

Just wondering if anyone of you using IBKR received a tax form 1042-S? What to do about it as it does not seem to apply to me as I only invest in IWDA. I’m neither a US citizen nor reside/work/do business in the US.

The 1042-S is just informational - it’s IBKR saying “here’s how much tax we withheld this year”. You don’t need to do anything with it.

The coronavirus is going BRRRR too (or maybe BRRT like the A-10). Is Carrot Top really keen on herd immunity by sending everyone back to work on Easter?

Donny Two Scoops has lost the goddamn plot. Ignore everything he says.

Meanwhile, everyone and his dog is absolutely keen on defaulting on their rent (or maybe I hang out on Twitter too much). This is going to put a lot of pressure on landlords, especially those reliant on rentals to pay for their mortgage loans. There are doomsayers sounding alarm over the mortgage market.

A lot of that is because, over the last week, a lot of leveraged mortgage bond holders have been abruptly and gruesomely margin-called into oblivion. That’s tanked mortgage-bond prices… and, I would suggest, made the mortgage market look worse than it fundamentally is.

I don’t like being short rate vol, but if I did I’d be hovering up mortgages right now.

Besides, also have huge investments in precious metals.
Stagflation!!! Qe to Infinity! Fed balance sheet 8 trillion is a done deal, but I believe will definitely go way beyond! Debt monetisation perpetually

Switch to decaf.

I’m curious: if you actually think the US is about to go into stagflation, why are precious metals a better investment than, say, European or Japanese sovereign bonds?

Or even US equities? Equities will do well in an inflationary environment.

I had reallocated 50% of my ETFs into put options across mid-late Feb. Last week, I had reduce my put options (20%) to buy VIX put options and sold VIX options yesterday.

So now, I'm holding 50% etfs, 30% put options and 20% cash.

Uh, mate. VIX put options are going to be negatively correlated with equity put options. One is a bet that the market will go up or stay stable (the VIX puts); and one is a bet that the market will go down fast (the equity puts)

I am thinking of executing huge spread iron condor using half of my cash. Hence, will like to consult the gurus on what do I need to be careful with when having huge spread iron condor portfolio?

I think you should take a step back and say “what is my view on the market?”. An iron condor is a bet that the market will stay stable. Buying VIX puts is also a bet that the market will stay stable. Buying equity puts is a bet that the market will plunge by a lot. Your options portfolio has a bunch of bets that are in conflict with each other.

 

[highsulphur]

One qn

How does a etf act upon corporate action? Eg sia issuing convertible bonds to existing shareholders. Would es3 be subscribing to those bonds? If not wouldn't it be at risk of diluting it's shares in sia?

 

[philosopherd]

Hi guys, I’ve got a question. I’m actually no longer residing in Singapore and relocated 4 months ago. Right now my IBKR account details, address, etc still using my old Singapore address. Do I actually need to update that? Is there any tax implication or whatsoever that I need to be aware of? Thanks

 

[cassowary18]

Regarding SIA rights issue...

What will SPDR and Nikko AM do for their SIA shares? How will that affect the value of ES3 and G3B?

 

[highsulphur]

The financial markets are reacting (overly) optimistically imo to the government measures. Reinforce the implicit put given to the wealthy on their financial assets which will only drive the wealth gap wider after this crisis

 

[LoUsyGamER]

Uh, mate. VIX put options are going to be negatively correlated with equity put options. One is a bet that the market will go up or stay stable (the VIX puts); and one is a bet that the market will go down fast (the equity puts)



I think you should take a step back and say “what is my view on the market?”. An iron condor is a bet that the market will stay stable. Buying VIX puts is also a bet that the market will stay stable. Buying equity puts is a bet that the market will plunge by a lot. Your options portfolio has a bunch of bets that are in conflict with each other.

Thanks. These portfolios are running at different time frame and hedging against one another. As VIX options has shorter time frame until Nov and personally felt that the delta are not fantastic, will buy only when the future reaches certain price. Hence, thinking of replacing VIX options with huge spread iron condor.

 

[hahaman111]

ABF or MBH?

I was using SSB previously. But already redeem to re balance into equity, but the stock flew off while I was waiting for SSB to be cashed in. Now my choice for that sum is back into bonds. And I had realize the downside of SSB.

 

[BBCWatcher]

Regarding SIA rights issue...
What will SPDR and Nikko AM do for their SIA shares? How will that affect the value of ES3 and G3B?

How does a etf act upon corporate action? Eg sia issuing convertible bonds to existing shareholders. Would es3 be subscribing to those bonds? If not wouldn't it be at risk of diluting it's shares in sia?

I think I can answer this question.

The sale of additional Singapore Airlines shares dilutes existing shares. ES3 and G3B are Straits Times Index stock funds, and Singapore Airlines is one of the 30 STI stocks. The fund managers will adjust their Singapore Airlines stock holdings across this event in order to keep their holdings tracking the STI. I think this means they'll buy some of these shares, but it's just a question of math and how it shakes out within the index. These two funds will have some tracking error across this event since they won't be able to make an instantaneous adjustment.

 

[highsulphur]

I think I can answer this question.

The sale of additional Singapore Airlines shares dilutes existing shares. ES3 and G3B are Straits Times Index stock funds, and Singapore Airlines is one of the 30 STI stocks. The fund managers will adjust their Singapore Airlines stock holdings across this event in order to keep their holdings tracking the STI. I think this means they'll buy some of these shares, but it's just a question of math and how it shakes out within the index. These two funds will have some tracking error across this event since they won't be able to make an instantaneous adjustment.

What about convertible bonds? Are the fund managers going to buy those as well?

 

[BBCWatcher]

What about convertible bonds? Are the fund managers going to buy those as well?

No. ES3 and G3B are not bond funds.

However, if the convertible bonds actually convert to shares 10 years from now, then the fund managers will make any necessary adjustments at that time, consistent with keeping their funds tracking the Straits Times Index and assuming Singapore Airlines hasn't dropped out of the STI.