Overlords Investment Conclave [OIC] Recruitment Thread

[Carpet_pissr]

If they increase earnings 22.7 times over 2013 by 2018 and the stock price goes nowhere, they will still have a PE of 22.

I'm not sure the traditional P/E model works for Amazon, as is the case for many other tech companies. Too much innovation, new hardware, investments being made in new tech today that will have near term impacts for P/E to be a reasonable metric, IMO.

[noxiousdog]

Had an AMZN conversation with a friend and decided:
1. Sell lots of stuff at low margin. (btw, Wal-mart sells 5 times what AMZN sells at 3 times the margin. Approximate due to AMZNs irregularity. AMZN's last year .3%. Their 5 year: 1.7%)
2. ????
3. Profit.

[Carpet_pissr]

Had an AMZN conversation with a friend and decided:
1. Sell lots of stuff at low margin. (btw, Wal-mart sells 5 times what AMZN sells at 3 times the margin. Approximate due to AMZNs irregularity. AMZN's last year .3%. Their 5 year: 1.7%)
2. ????
3. Profit.

I think 2. is "completely disrupt traditional B&M stores by becoming world's highest grossing online retailer, use that position to:"


But to not appear too fanboyish, I do have real concerns about the increasing number of states that will require Amazon to include tax over the next few years. Since margins are already razor thin, that simple move could have pretty nasty implications.

[LawBeefaroni]

Had an AMZN conversation with a friend and decided:
1. Sell lots of stuff at low margin. (btw, Wal-mart sells 5 times what AMZN sells at 3 times the margin. Approximate due to AMZNs irregularity. AMZN's last year .3%. Their 5 year: 1.7%)
2. ????
3. Profit.

I think 2. is "completely disrupt traditional B&M stores by becoming world's highest grossing online retailer, use that position to:"

2. Buy WMT shares, double (or so) margins with their 2% yield.





I speculate all the time. AMZN is something I'd speculate on. It's not something I'd accumulate on a regular basis or on "dips" and just forget about it. Well, except maybe in funds somewhere.

[Pyperkub]

I chose Costco over Wal-Mart when the economy tanked and it has been a much better performer over the time period. But in the past year I've picked up that small piece of Amazon too.

[noxiousdog]

I think 2. is "completely disrupt traditional B&M stores by becoming world's highest grossing online retailer, use that position to:"


But to not appear too fanboyish, I do have real concerns about the increasing number of states that will require Amazon to include tax over the next few years. Since margins are already razor thin, that simple move could have pretty nasty implications.

Let's assume 2 is correct. How high can they then push their margins? 6%?

Their sales growth rates seemed to top out in 2011 at 40%. Two years ago it was 27%, and '13 was 22%. Wal-mart (and I use them because they are Amazon's biggest competitor) continues to add sales in the process, though not at the same percentage as Amazon. The rates are comperable. Since 2009, 50 billion in additional sales for AMZN. 70 Billion in additional sales for Walmart. Last year AMZN added more, the previous year Wal-mart added more.

Let's pretend that AMZN can grow at 15% a year and all of it comes at the expense of Wal-mart and their competitors, so 20 years from now AMZN pushes their margins to 6%. That gives them 1218 in sales and 73 billion in profits. I guess that's the scenario you're looking for as it should make them a trillion dollar business. That's a good return for the risk you're taking at about 14% annualized.

I put a zero percent chance on that scenario, but as I said, good luck.


edit: Also, I love AMZN as a company. I just wouldn't want to be an owner at the price it costs to be one.

[Pyperkub]

This is why I took my losses and got the hell out of the Financial Sector:

Think about it. This week alone, Bank of America announced that it had made a big mistake calculating its capital and had significantly less than it had told regulators during its first-quarter earnings. BNP Paribas reportedly may have to pay a fine of as much as $2 billion for violating U.S. international sanctions, while prosecutors reportedly are getting ready to press criminal charges against it and Credit Suisse. The banks might even plead guilty.

And then there's Barclays bank. Not only does it have to create a 'bad bank' to separate and try to spin off more than $90 billion worth of toxic assets it's holding (like Citigroup during the darkest days of 2009), but it was also embarrassingly called out in the Financial Times' opinion page this weekend by a former investment bank head and shareholder who wrote that Barclays was overcompensating bankers for abysmal performance.

After two years of earnings misses, Barclays' numbers make that hard to argue with.

I really thought that BofA was going to come out of the Mortgage crisis smelling like a rose, especially with the cheap acquisition of countrywide.

What I learned was that there was no reason to trust any numbers coming out, and that I would never have good enough information to make an informed decision in that sector until serious reforms took place. I think the incentives to cheat far outweigh the risks currently. Some of that is no doubt priced in, but not enough for me to get back in to that sector for a long time.

[LawBeefaroni]

This is why I took my losses and got the hell out of the Financial Sector:


...

What I learned was that there was no reason to trust any numbers coming out, and that I would never have good enough information to make an informed decision in that sector until serious reforms took place. I think the incentives to cheat far outweigh the risks currently. Some of that is no doubt priced in, but not enough for me to get back in to that sector for a long time.

I've liked BPOP since mid-2012 or so but I'm probably done there. Still like it, but low teens to 30s is good enough for me to sit out the summer.

[Carpet_pissr]

Down goes Amazon!

Watching carefully to see if this goes below $290. Why $290, you ask? Random threshold.

I will likely buy anywhere below that to bring my average cost to around $300 (currently $310 I think)

[LawBeefaroni]

Down goes Amazon!

Watching carefully to see if this goes below $290. Why $290, you ask? Random threshold.

I will likely buy anywhere below that to bring my average cost to around $300 (currently $310 I think)

I'm still looking for $280 before I even decide if I want to buy.

Likewise it's just an arbitrary number based on gut but it saves me from doing to much work until/unless it gets there. I'm still wary of all tech this summer.

[LawBeefaroni]

AMZN broke below $290 ($286.7 LOD so far). Back above at the moment but won't hold I'm guessing.

[Zaxxon]

Someone mentioned looking for a deal on TSLA earlier. It briefly dropped below $200 this morning, and earnings are after close today. One never knows what TSLA will do after earnings, but their overseas expansion this past quarter nearly guarantees fewer delivered cars than Q4. Could be on sale after-hours and tomorrow. If Musk shares good news on the upcoming battery factory / Model X / China demand, it could spike.

[Carpet_pissr]

Someone mentioned looking for a deal on TSLA earlier. It briefly dropped below $200 this morning, and earnings are after close today. One never knows what TSLA will do after earnings, but their overseas expansion this past quarter nearly guarantees fewer delivered cars than Q4. Could be on sale after-hours and tomorrow. If Musk shares good news on the upcoming battery factory / Model X / China demand, it could spike.

Dry powder waiting and ready.

[LawBeefaroni]

If it gets crushed after hours it might be worth a bounce play tomorrow but I'm not putting long-term money into it. Its bulls/fanboys are strong and stubborn so I would expect a bounce after bad earnings but the fundamentals are still scary. Plus it has 25M shares short (~30%) as of last report.

[LawBeefaroni]

Was just looking at YHOO on all this Alibaba stuff. Here's an interesting chart.

[Pyperkub]

Was just looking at YHOO on all this Alibaba stuff. Here's an interesting chart.

I see alibaba as a threat to Amazon's space more, though I have to admit I don't pay too much attention to Yahoo, though it has been on my watch list ever since the MS rumors pre-Mayer.

[LawBeefaroni]

Was just looking at YHOO on all this Alibaba stuff. Here's an interesting chart.

I see alibaba as a threat to Amazon's space more, though I have to admit I don't pay too much attention to Yahoo, though it has been on my watch list ever since the MS rumors pre-Mayer.

Yahoo has a 20-something percent stake in Alibaba. That's why I was looking at it. Most estimates put Yahoo's stake in the alibaba IPO as being worth more than all the rest of YHOO.




The NASDAQ composite is only off 32 points right now (0.8%) but it looks like all the "hot" four-letter momo stocks are getting hit much harder today. KNDI, AMZN, TSLA, TWTR, GRPN (down 21%!), YHOO, ZNGA.

[Pyperkub]

I had forgotten about that even after hearing on market watch.

[Pyperkub]

Tesla down another $13+ in after hours trading today.

[LawBeefaroni]

Apple may be buying Beats for $3.2B. That's a lot IMO but with $140B in cash reserves, who's counting?

I was discussing with a friend last night and I figure that in addition to whatever they think they're getting with the purchase, that it's also a way to repatriate a lot of that offshored cash without paying taxes.


I also determined that Apple could further secure their future by buying some hearing aid companies as well.

[Pyperkub]

I see the Apple purchase as another sign that they don't have the same drive and innovation w/o Jobs. They're so big now that it may not matter, but I don't think Jobs would ever have even considered this.

[LawBeefaroni]

I see the Apple purchase as another sign that they don't have the same drive and innovation w/o Jobs. They're so big now that it may not matter, but I don't think Jobs would ever have even considered this.

Agree, he never would have touched Beats.

[Pyperkub]

I wonder if this will impact Cisco, et al:

A June 2010 report from the head of the NSA's Access and Target Development department is shockingly explicit. The NSA routinely receives – or intercepts – routers, servers, and other computer network devices being exported from the US before they are delivered to the international customers.

The agency then implants backdoor surveillance tools, repackages the devices with a factory seal, and sends them on.

It may already have been priced in though...

[Isgrimnur]

Talk to me about stop loss orders. With the S&P cracking 1900, is a stop loss, perhaps a trailing percentage stop loss of 1% on my 11 SPY shares (1/10 S&P) a decent way to set a floor in the event that it tops out and heads back down?

From reading, that would limit my loss if there was a retrenchment, throw the funds to my cash reserves, then allow me to make adjustments in the future? Looking at my provider's site, I can have the order in place for 6 months, and from research, if it continues to rise, the floor will track up with any future improvements, and keep a decent floor under me until the trigger or expiry.

Is there any drawbacks to setting this? Or would it make more sense to set a dollar amount rather than a percentage?

[LawBeefaroni]

Talk to me about stop loss orders. With the S&P cracking 1900, is a stop loss, perhaps a trailing percentage stop loss of 1% on my 11 SPY shares (1/10 S&P) a decent way to set a floor in the event that it tops out and heads back down?

From reading, that would limit my loss if there was a retrenchment, throw the funds to my cash reserves, then allow me to make adjustments in the future? Looking at my provider's site, I can have the order in place for 6 months, and from research, if it continues to rise, the floor will track up with any future improvements, and keep a decent floor under me until the trigger or expiry.

Is there any drawbacks to setting this? Or would it make more sense to set a dollar amount rather than a percentage?

A stop loss is just a conditional order. You're saying that if share price breaks below a certain point to initiate a market sell order (in this case).

There are risks. Let's assume a 1% stop loss on SPY. Now 1% is pretty tight even on something like the SPY. Just eyeballling a chart, with a 1% stop loss you'd have sold SPY 5 or 6 times since April 4. So there's the risk that you get stopped out on a fairly mundane drop where you wouldn't normally have intended to sell.

There's also the risk inherent to all stop loss oders that an equity opens with a huge loss. Say news breaks that Russia blew up a government building in the Ukraine and markets tumble on fears of escalation of the conflict. SPY opens down 10%. Your stop would trigger and you'd sell at market (-10%) despite your 1% "stop loss" setting. Then it turns out that it was a gas line that burst in the building, not a Russian attack, and markets recover. You're out SPY at 10% below market. That's an extreme example but just be aware that setting a stop loss doesn't guarantee that your losses will be limited to whatever number you set. It's is just the maximum tolerance you have set. A lot of stop losses were hit on the flash crash, for example.

But otherwise, you have a handle on how it works. If you want to set a stop loss on SPY, I'd make it higher than 1% though. There also stop limit orders which are similar but instead of executing your order at market, you can set your execution price. And of course most brokers offer far more complicated trade triggers that you can set with boolean precision.

Dollar vs. percentage is really up to you. I think % is best if you're thinking long term because it will scale with the equity. Just be aware of the differences.

[Isgrimnur]

Yeah, I screwed up the math in my head. I Was thinking more of 1% of the S&P rather than the SPY. Lowest in the last 6 months was 178, which would still be within the threshold of 1% of S&P.

I suppose it's another sort of risk if I set, say a 10% stop-limit order, so, say, at 190 it would sell if it dropped below 171, but have a limit floor of 160. I'd still hold if it crashed from 172 direct to 159 and below, but I'd basically be in hold mode until after it recovered...?

[noxiousdog]

Yeah, I screwed up the math in my head. I Was thinking more of 1% of the S&P rather than the SPY. Lowest in the last 6 months was 178, which would still be within the threshold of 1% of S&P.

I suppose it's another sort of risk if I set, say a 10% stop-limit order, so, say, at 190 it would sell if it dropped below 171, but have a limit floor of 160. I'd still hold if it crashed from 172 direct to 159 and below, but I'd basically be in hold mode until after it recovered...?

If this is money in your 401k that you won't be touching for 30 years, don't put a stop loss order. You're over thinking. That theoretical 10% you might save in a drop, will be a rounding error in 2045.

[Isgrimnur]

Technically a rollover IRA, and 30 years is about right. The idea isn't to save the 10%, it's to keep the loss at 10% if we end up headed south below 1,000 like we did during the recession. If I can stop the loss at 10% when the total loss is 50%, I'm more interested in that.

At the moment, I'm up 37% over my cost basis. Mind you, this is all of ~2k.

What I really need to do is

a) stop putting my 3% into the non-matched 401k
b) Move the 22k I have vested from my previous job's 401k

and move them to a Roth IRA so I can put it into some ETFs rather than the limited options that the companies provide.

The real trick is is the cost benefit analysis of the 11%/year pension contribution that doesn't vest until September 2018. That'll be a substantial chunk of change left on the table if something happens.

[Zaxxon]

The question to ask yourself is whether limiting that loss is worth the very real risk of missing the recovery. On a 30-year time horizon, that answer would be no for me. YMMV.

[Carpet_pissr]

If this is money in your 401k that you won't be touching for 30 years, don't put a stop loss order. You're over thinking. That theoretical 10% you might save in a drop, will be a rounding error in 2045.

+1

Also, then you have to decide what to do with that money when it opens up from the stop loss order. Get in again immediately? Wait 1 month? 3 months? See where I'm going? Now you're into market timing...something most people are notoriously bad at, just due to simple human nature.

[Isgrimnur]

Oh, trust me, I'd not be targeting this for some short term trading. I'm not worried about short term volatility or market corrections. So perhaps I need to expand the limit.

The reason my cost basis is only 37% is that I bought at ~135 on the way down in 2008.

I heard the crash coming in 2007, which made me motivated to finally get out of the college town and get my first big boy job. Aside from a piddly 401k, I didn't have that much to lose at that point except more years of my future.

I remembered what I had heard in 1999 when I was trying to get out of school. Turns out I was one semester too late and was a wet-behind-the-ears MIS graduate in the depths of the dot-com crash. The idea here is to keep an ear out for the psychological breaking point for the next one and drop out after the slide starts and wait for the bottom. I didn't know, nor have enough experience to realize that this slide was going to play out over a year plus, and bought SPY too early.

[Carpet_pissr]

Talk to me about stop loss orders. With the S&P cracking 1900, is a stop loss, perhaps a trailing percentage stop loss of 1% on my 11 SPY shares (1/10 S&P) a decent way to set a floor in the event that it tops out and heads back down?

Just something to think about: Why is the S&P cracking new highs potentially changing your investing behavior? Unless you think we have peaked, and it's all downhill from here, that could get you into trouble (and of course some people DO believe that, but it's just something to consider from a macro view, vs. "it's the highest it's ever been, thus it's likely to go down from here" argument (which is fallacious)).

[Isgrimnur]

Oh, I'm not speculating that it's near its peak like some people in this thread have been, but I'm prepared for the idea that I'm wrong. If I'm not, great, and my portfolio gets better. But if I'm wrong, I've had too much lost on the "hold forever" strategy to want to watch those shares lose half their value again and console myself that all I have left is dollar cost averaging.

[Pyperkub]

Oh, I'm not speculating that it's near its peak like some people in this thread have been, but I'm prepared for the idea that I'm wrong. If I'm not, great, and my portfolio gets better. But if I'm wrong, I've had too much lost on the "hold forever" strategy to want to watch those shares lose half their value again and console myself that all I have left is dollar cost averaging.

Hold forever or hold since 2008? That's a big difference in terms of the time frames you are looking at @ your age. In the absolute, worst, worst case it has taken the market (*allegedly) 25 years to make up the difference.

*According to that article, that estimate can be as low as 4.5 years, not including what was a 14% dividend rate in a deflationary economy.

Look at recent times - it took the market less than 3 years to make up the difference in the peak and one of the worst market drops in history, and those purchases at the time are really worth it now...

[noxiousdog]

Oh, I'm not speculating that it's near its peak like some people in this thread have been, but I'm prepared for the idea that I'm wrong. If I'm not, great, and my portfolio gets better. But if I'm wrong, I've had too much lost on the "hold forever" strategy to want to watch those shares lose half their value again and console myself that all I have left is dollar cost averaging.

First, the chances of a 50% drop is very unlikely. Even if it happens, it won't last long.

Second, what do you mean lost too much? You said you have 2k. If you're worried about a 1k loss, then you shouldn't be in the market at all and need to be in Smoove's CD strategy. I guarantee you will have days that you lose $1,000.

[Isgrimnur]

Right now, my money is in 3 places. A current 401k with no employee match, a former employer's 401k with 22k vested, and 2k that was pushed from a former employer's 401k into a rollover IRA.

I'm exploring methods to become more active in the management of my funds. I'm not going to go trend chasing or day trading, but I'd like to be able to make some better moves so that when the next slide happens, I can make some mitigating moves. Recessions last months to years at a time. I'm not going to play to catch the very tops or bottoms, but I can bob along with the general trends.

What I want to avoid is what I saw post college where I get a quarterly statement where I see my contributions, the company's contributions, and a net change of value that's higher than both put together.

I expect to see losses. I don't watch the numbers daily or even weekly. Again, I'm not looking to catch highs and lows on a short term, just trying to mitigate long-term risk. I'm trying to figure out if that means setting a 10-20% stop loss order in place for 6 months that would avoid normal bobs but mitigate an unseen catastrophic drop is a reasonable strategy as an added insurance policy.

I'm trying to hedge my bets against "very unlikely". At the end of the day, I'll be happy if those never trigger, but, as much as anything can be safer about strategy, I'm trying to learn and make better decisions. But if I can stop loss at 15%, it drops another 35%, and I can pick it back up on the upswing at 35% below the top and save 20% of the value through those actions, again, on a timescale of months, isn't that a rational set of actions to take?

If I mis-time it, and it doesn't drop that far, and I miss just a bit of growth before realizing that I sold near the bottom, I'm only out a few transaction fees.

And I can't do Smoove's CD strategy, as all my funds are tied up in areas where I take a hit to get to it, and it would take forever to accrue the principal necessary to make it worth a damn, even if rates do come back in the near term.

[LawBeefaroni]

Oh, I'm not speculating that it's near its peak like some people in this thread have been, but I'm prepared for the idea that I'm wrong. If I'm not, great, and my portfolio gets better. But if I'm wrong, I've had too much lost on the "hold forever" strategy to want to watch those shares lose half their value again and console myself that all I have left is dollar cost averaging.

First, the chances of a 50% drop is very unlikely. Even if it happens, it won't last long.

Second, what do you mean lost too much? You said you have 2k. If you're worried about a 1k loss, then you shouldn't be in the market at all and need to be in Smoove's CD strategy. I guarantee you will have days that you lose $1,000.

OTOH there's nothing wrong with seeking out ways to protect gains.


If it's just insurance (peace of mind) you're after, you could buy some LEAPS puts. One SPY mini DEC 2016 put contract for $175 would cost around $150. That would limit your downside (well, 10 of 11 shares worth anyway, since a mini contract is for 10 shares) for anything below ~$160. $190s would be around $240/contract. Not that I recommend it, I haven't researched it at all (and I hate greeks), but it's an example of one of the many ways to mitigate risk.


Personally, I don't like the blind buy-and-hold strategy. At the very least, seek some income from that pile of shares you're sitting on.

[Isgrimnur]

Funny, your post is Greek to me.

I may have been in the business school, but I only paid enough attention in Econ, Acct, and FIN to get the grades I needed to keep going.

[noxiousdog]

OTOH there's nothing wrong with seeking out ways to protect gains.

It depends. There is nothing wrong with making rational and informed decisions. Stop loss orders are rarely either. As Buffett would say, be greedy with others are fearful, and fearful when others are greedy. Stop loss orders are being fearful when others are fearful.

The easiest way to deal with it is to keep a certain percentage in several asset classes including cash. That way if the equities, in this case, are high, you are adding to your cash pile instead of more equities. When the market tanks 50%, you can put that cash pile to use.

[LawBeefaroni]

OTOH there's nothing wrong with seeking out ways to protect gains.

It depends. There is nothing wrong with making rational and informed decisions. Stop loss orders are rarely either.

People rarely make rational, informed decisions in the face of volatility. [Trailing] Stop loss orders are meant to remove the emotion that is the cause of a lot of poor decisions. They may not be the best strategy (I never use them) but they are simply a tool. They don't make the decisions. They execute them. Anyone who has been the victim of the sunk-cost fallacy can understand the value of stop losses.

The easiest way to deal with it is to keep a certain percentage in several asset classes including cash. That way if the equities, in this case, are high, you are adding to your cash pile instead of more equities. When the market tanks 50%, you can put that cash pile to use.

Which is essentially market timing, right?

As Buffett would say, be greedy with others are fearful, and fearful when others are greedy. Stop loss orders are being fearful when others are fearful.

Buffett is a great investor and a great role model for investors and that's decent advice, of course. But he can be greedy when others are fearful because he absolutely cannot lose. He gets BAC warrants at pennies on the marked-to-market-dollar. He makes millions before the ink is even dry.