Economics

[Joey D]

I don't want to clutter up the Coronavirus thread since this is starting to get off-topic. I think this thread is probably a better place to discuss this, so I hope you don't mind me moving it here.

No, what you want and what you've 'advocated for' on this forum is a sustained private health system that you can make bank off 👍

And that's fine, but I chortle at the idea that people with morals are happy to financially benefit of of something that fundamentally goes against their personal belief system... but maybe that's just me /shrug

Regardless if there's a universal or private healthcare payer, drug companies are still going to get paid.

I'm also not really making bank. We're talking thousands of dollars, not millions, and I can't even touch the money until I'm 65. I do have some stocks outside of an IRA (like some of my Ferrari stock) that's strictly there as a way to build an account so that my son can have a debt-free post-secondary education if he chooses. I also have some investments set aside if I ever decide to buy a house again and can put a down payment on it.

This also isn't the justification I have for not wanting a universal health system. My beef with that is that it's a government program and I hate all government programs because they're poorly run, full of needless spending, and rarely help anyone. It might be different in Europe, I genuinely have no idea, but in the US our government is woefully inefficient.

I think its even worse than that: its helping to fund things that you morally object to for financial gain. Thats, like... corrupt.

That is something I fully agree with, which is why I don't fully understand the backlash to what Joey said in the first place, although it depends on perspective. His justification and elaboration of his mindset is what I completely disagree with personally.

Really, if you look at any company, they're probably doing something that's morally questionable. From excessive use of natural resources to exploiting the workforce in developing nations, almost every company does it to some extent. Unfortunately, in the US at least, you need to look past that if you want to make enough money to retire. There's no way you'll ever save enough working a normal job so you have to invest your money in order to grow your retirement account enough so that you don't have to work until the day you die. As I said, I'm staunchly anti-war, but defense stocks make money when America gets into its next unresolvable conflict.

I don't exactly agree with the system, but I understand this is how the system works. I can't change it, so I might as well accept it and do what I can to make my life a bit more financially stable. I'm not going to get rich off this by any means.

 

[MatskiMonk]

nfortunately, in the US at least, you need to look past that if you want to make enough money to retire. There's no way you'll ever save enough working a normal job so you have to invest your money in order to grow your retirement account enough so that you don't have to work until the day you die.

Just to put this into perspective then, because I don't understand the U.S. system, what rate of return do you get on your stocks? Is it dividend, or just selling price that will make you the money? I think* the rate of return on my pension fund is about 3.5 - 5% at the moment (*I have 3, they're all set up differently, and I don't manage them closely), that's more than I'd get on a standard savings account (0.15%. AER), but it's not massive, at least not the difference between retirement and working until I die.

 

[Danoff]

Regardless if there's a universal or private healthcare payer, drug companies are still going to get paid.

Wanting to invest in a company that is going to create a healthcare solution to save thousands of lives is not something you should have to apologize for. It's funny because I'd imagine that those same people perhaps invest in something like Tesla. "Oh so you want global warming so that your stock can go up?"

No, you want to support a company that solves problems.

Beyond this, though, there is a fundamental misunderstanding about what it means to own a stock. When stocks are first issued, they raise money for the company. After that, people just trade around those pieces of paper and exchange money between each other. Money does not go back to the company. IPO nets them the money. The rest is just trading. Now trading can benefit CEOs of the company, or other stock holders. But that could be true for literally any traded stock. To take it to extreme, a serial killer might own some Tesla stock right now, so buying from them at a high price would benefit them and possibly help them fund killing people. Of course we know that this is not "on you" morally.

There isn't much of a reason for stock price to go up after IPO, but I'll talk about a few that I know of. One reason is that it gives you a say in how the company operates. A vote. And arguably, buying a vote in how a company that you don't like operates is a good thing. But for the most part, this is moot. Most people don't own enough share in the company to really influence the practices of the company. The second reason is the hope of dividends in the future (profit sharing). And this is the real reason that many stocks are traded. It's reason that speculation on stock price works at all - because in theory, down the road, the company will start sharing its profits with its stock holders. From that perspective, most stocks are wildly over-rated. And that's the main payoff for owning stock.

In theory, owning a share of a company that does something immoral, and which pays you from that immoral act, is bloody money. It's no so much that you supported it directly by owning the stock, but you're receiving those ill-gotten gains. I suppose if you donate it back to a charity you can actually try to offset what they're doing with their own profits.

I guess I should not be surprised that there is so much moral confusion on this subject.

@Touring Mars, @UKMikey @baldgye @Aphelion

 

[Joey D]

Just to put this into perspective then, because I don't understand the U.S. system, what rate of return do you get on your stocks? Is it dividend, or just selling price that will make you the money? I think* the rate of return on my pension fund is about 3.5 - 5% at the moment (*I have 3, they're all set up differently, and I don't manage them closely), that's more than I'd get on a standard savings account (0.15%. AER), but it's not massive, at least not the difference between retirement and working until I die.

I don't get dividends on any of my stocks and mutual funds. Right now, in looking at my Fidelity account I opened three years ago, I've had a 57% return on my investment across the board. If I solely look at my employer retirement account, I'm at a 3% return. My biggest movers are in my self-managed IRAs and general stock account. My self-managed IRA is at a 54% return and my stock account is at an 89% return. However, I only get that money if I sell and then I have to pay capital gains tax on all of it, which I think is 15%. My previous employer didn't do jack in terms of retirement, but my current employer is really generous so that helps out.

I'm in fairly aggressive funds though so I have to keep a close eye on them all the time, I'm making 2 or 3 trades a month typically to ensure I'm in the best position. Fidelity charges something like $9 a trade, so it's worth it to me. We also have a Fidelity branch one train stop away from work so I can always go over there and get help on my lunch break.

If I solely put my money in savings with a CD, I'd be looking at most a 2%-4% return over the same three-year span.

I also have some other odds and ends that have value too like some high-end watches, gold, and silver.

 

[Danoff]

I don't get dividends on any of my stocks and mutual funds. Right now, in looking at my Fidelity account I opened three years ago, I've had a 57% return on my investment across the board. If I solely look at my employer retirement account, I'm at a 3% return. My biggest movers are in my self-managed IRAs and general stock account. My self-managed IRA is at a 54% return and my stock account is at an 89% return. However, I only get that money if I sell and then I have to pay capital gains tax on all of it, which I think is 15%. My previous employer didn't do jack in terms of retirement, but my current employer is really generous so that helps out.

I'm in fairly aggressive funds though so I have to keep a close eye on them all the time, I'm making 2 or 3 trades a month typically to ensure I'm in the best position. Fidelity charges something like $9 a trade, so it's worth it to me. We also have a Fidelity branch one train stop away from work so I can always go over there and get help on my lunch break.

If I solely put my money in savings with a CD, I'd be looking at most a 2%-4% return over the same three-year span.

I also have some other odds and ends that have value too like some high-end watches, gold, and silver.

So just FYI, if you're trading 2-3 times per month, you may trigger short term cap gains rather than long term. You probably already know that. Also, Fidelity (and other brokers) can sometimes report gains in a weird way. There are funds which pay annual dividends and trigger an automatic reinvestment of those dividends. You pay long term cap gains on those. But they go in to the new basis for the stock. So for example. Let's say you bought $10,000 of some mutual fund. At the end of the year they pay a 3% dividend, so you get $300. It gets reinvested so that fund is now worth $10,300. But now the basis for that fund is $10,300. Fidelity reports this as a 0% gain over the life of the fund. Yup... as though it netted you nothing.

Just be careful with how you use their little %gain report-outs.

 

[Touring Mars]

I'm not against people investing in companies that do good - quite the opposite in fact.

But, the issues raised in the Coronavirus thread are slightly different.

Firstly, my main (and indeed only) quibble with Joey's post was that he seemed to be viewing a global pandemic as a money-making opportunity. My point was more that there are slightly more pressing things to be worrying about (wrt the coronavirus outbreak) than one's pension pot.

Upon further posts, however, it also becomes clear that Joey's motivation is not funding companies that do good (indeed, he actually says that he wouldn't normally invest in such companies) but that his motivation is to profit from the development of treatments for Covid-19. He also goes on to state that he doesn't have any qualms in investing in companies in order to make a profit even though he is "staunchly against" what these companies do and how make their money.

These points, to my mind anyway, are at least consistent - bet with your head, not with your conscience - if the goal is solely to make a profit for oneself, it doesn't matter whether you help raise funds for a vaccine or for making cluster bombs.

 

[MatskiMonk]

@Joey D

Thanks that makes sense, but to clarify;

My self-managed IRA is at a 54% return and my stock account is at an 89% return

So these percentages are effectively live rates based on the current sales price minus what you paid for them? Excuse my ignorance, I don't do much saving or investing beyond contributing to my own managed medium risk pensions.

 

[Danoff]

Firstly, my main (and indeed only) quibble with Joey's post was that he seemed to be viewing a global pandemic as a money-making opportunity. My point was more that there are slightly more pressing things to be worrying about (wrt the coronavirus outbreak) than one's pension pot.

What's wrong with wanting to buy stock of a company that seems well-poised to make money saving thousands of lives in the face of some new problem? For example, suppose global warming estimates get revised upward. Is it wrong to want to buy Tesla (or Porsche or whoever is making good EVs) because they're well positioned? Why is that wrong?

Upon further posts, however, it also becomes clear that Joey's motivation is not funding companies that do good

Or at all really. Because buying stock is not actually funding the company. It's just trading with stock holders.

but that his motivation is to profit from the development of treatments for Covid-19.

What's wrong with profiting from medical treatment? I'm sure I own some medical stocks, some of them probably profit share. @Joey D works in the medical industry. He profits directly from it. Why would he not also want to profit by receiving dividends from a company that is also performing medical services?

He also goes on to state that he doesn't have any qualms in investing in companies in order to make a profit even though he is "staunchly against" what these companies do and how make their money. These points, to my mind anyway, are at least consistent - bet with your head, not with your conscience - if the goal is solely to make a profit for oneself, it doesn't matter whether you help raise funds for a vaccine or cluster bombs.

Well... those profits are being made independent of him. Owning the stock allows him to receive them if the company pays dividends. What he does with that is his moral concern. I'll grant you that one might not want to put themselves in a position to root for profits from a company that does something you don't like. It puts your interests at odds with each other.

 

[baldgye]

I guess I should not be surprised that there is so much moral confusion on this subject.

There is no confusion from my end.

 

[Touring Mars]

@Danoff As I said, my quibble was in viewing a possible global humanitarian crisis as an opportunity to make money.

 

[Danoff]

@Danoff As I said, my quibble was in viewing a possible global humanitarian crisis as an opportunity to make money.

What's wrong with that? I hope you don't own any stock in EVs (or solar, or any kind of renewable energy).

 

[Touring Mars]

I hope you don't own any stock in EVs (or solar, or renewable energy).

Why?

Owning Tesla stocks doesn't say anything about one's views on anything.

But categorically stating that you wish to profit from a global medical emergency is a completely different thing to my mind.

 

[Danoff]

Why?

Owning Tesla stocks doesn't say anything about one's views on anything.

But categorically stating that you wish to profit from a global medical emergency is a completely different thing to my mind.

It is no different than buying stock in EVs, or solar, or wind, or whatever due to the fact that those industries stand to benefit in a global warming scenario. You'd be expecting stock price to go up in response to a mounting global emergency.

Profit drives investment into areas of need. Profit is good, because it brings solutions to problems, including emergency problems.

 

[Joey D]

So these percentages are effectively live rates based on the current sales price minus what you paid for them? Excuse my ignorance, I don't do much saving or investing beyond contributing to my own managed medium risk pensions.

Yup, they're live rates based on what I've made over my initial investment. So if that return hits 100%, it means I've doubled my money. For a short time, my Ferrari stock was at a 125% return on investment meaning I'd more than doubled my money. The number changes daily although as @Danoff points out, Fidelity does some weird calculations so it's only a ballpark-ish figure.

Firstly, my main (and indeed only) quibble with Joey's post was that he seemed to be viewing a global pandemic as a money-making opportunity. My point was more that there are slightly more pressing things to be worrying about (wrt the coronavirus outbreak) than one's pension pot.

Upon further posts, however, it also becomes clear that Joey's motivation is not funding companies that do good (indeed, he actually says that he wouldn't normally invest in such companies) but that his motivation is to profit from the development of treatments for Covid-19. He also goes on to state that he doesn't have any qualms in investing in companies in order to make a profit even though he is "staunchly against" what these companies do and how make their money.

These points, to my mind anyway, are at least consistent - bet with your head, not with your conscience - if the goal is solely to make a profit for oneself, it doesn't matter whether you help raise funds for a vaccine or for making cluster bombs.

Say Coronavirus turns into a global pandemic. As we've seen the market is going to take a massive hit because the global supply chain is slowing down and those with investments are going to lose money. However, two areas that will continue to make money is in pharmaceuticals and medical supplies. Shifting my money to that to sector to ensure my investments keep growing makes sense to me. Just like I shift money to defense stocks when America ends up going to war.

I get that you think this makes me a bad person or a misguided one, and that's ok. I don't expect everyone to agree with the investment strategy I have. But the way I look at it, I can't do anything to affect things on a global scale. As a result, I might as well look out for myself and my family, because that's something I can control. If that means shifting money into industries that I may not personally agree with, then so be it.

If I had my druthers, Coronavirus wouldn't exist and people wouldn't be getting sick, so please don't think I'm rooting for a global pandemic.

@Danoff As I said, my quibble was in viewing a possible global humanitarian crisis as an opportunity to make money.

Please don't think I'm making money off this in a way that if a pandemic breaks out I can buy a new car or something. The money I make can't even be touched for over 30 years (well it can, it's just not easy).

 

[Danoff]

If I had my druthers, Coronavirus wouldn't exist and people wouldn't be getting sick, so please don't think I'm rooting for a global pandemic.

I guess my point is, you're not doing anything to make the coronavirus situation worse. Just like buying a solar energy stock doesn't make climate change worse.

 

[Touring Mars]

@Joey D I certainly don't think you are a bad person, and your clarifications make sense to me. My point (more apt for the other thread) was merely that I think there are more important considerations when it comes to how one might respond to the current threat of a coronavirus outbreak, but I concede the point that it doesn't make you a bad person just for sensing that you may be able to optimise your portfolio in the process.

 

[UKMikey]

I guess I should not be surprised that there is so much moral confusion on this subject.
@Touring Mars, @UKMikey @baldgye @Aphelion

I thought we had agreed on other threads that attempting to police likes was a fruitless endeavour?

 

[Danoff]

I thought we had agreed on other threads that attempting to police likes was a fruitless endeavour?

It had switched threads, and I didn't feel like quoting everyone from the other thread, so I thought I would just put a mention on it to folks who I had identified as potentially interested.

 

[Eunos_Cosmo]

Speaking of economics & coronavirus, if the worst happens...what's going to happen to the value of money? Obviously money invested in the stock market is probably going to lose a lot. But what about cash? Are there any potential triggers for big inflation? I mean...we're kind of approaching unprecedented territory here I suppose.

Its tough to say moving money to bonds is a good idea because the US has so much debt and is basically relying on a strong economy to service it....that doesn't look like a bright future right now. Can you imagine the USA defaulting on debt? Talk about losing your faith in...everything.

Gold seems like it's in a speculation frenzy right now.

Real estate is, at this point anyways, still very expensive - meaning it probably has room to fall.

Man...there's nowhere to hide.

 

[Danoff]

Speaking of economics & coronavirus, if the worst happens...what's going to happen to the value of money? Obviously money invested in the stock market is probably going to lose a lot. But what about cash? Are there any potential triggers for big inflation? I mean...we're kind of approaching unprecedented territory here I suppose.

Its tough to say moving money to bonds is a good idea because the US has so much debt and is basically relying on a strong economy to service it....that doesn't look like a bright future right now. Can you imagine the USA defaulting on debt? Talk about losing your faith in...everything.

Gold seems like it's in a speculation frenzy right now.

Real estate is, at this point anyways, still very expensive - meaning it probably has room to fall.

Man...there's nowhere to hide.

Real estate is a decent place to hide. I don't think that inflation would necessarily result from coronavrius panic. Inflation would have to result from printing money, which seems more likely to be triggered by high interest rates. However, if you want to hide from inflation, stock market crashes, etc. Real estate is probably not a bad place. The big threat to real-estate prices at the moment is probably high interest rates, and that seems... unlikely. Not impossible of course.

There is never anywhere to really hide. It's always just a trade of different types of risk.

 

[Joey D]

Speaking of economics & coronavirus, if the worst happens...what's going to happen to the value of money? Obviously money invested in the stock market is probably going to lose a lot. But what about cash? Are there any potential triggers for big inflation? I mean...we're kind of approaching unprecedented territory here I suppose.

Its tough to say moving money to bonds is a good idea because the US has so much debt and is basically relying on a strong economy to service it....that doesn't look like a bright future right now. Can you imagine the USA defaulting on debt? Talk about losing your faith in...everything.

Gold seems like it's in a speculation frenzy right now.

Real estate is, at this point anyways, still very expensive - meaning it probably has room to fall.

Man...there's nowhere to hide.

The stock market will bounce back, although some areas will take far longer than others. Right now the biggest threat to the market is the upcoming election. Investors, for whatever reason, don't seem to care for a president who's a Democrat and prefer a Republican. If Trump wins in November, I expect the market to hold or start climbing again. If Sanders, Biden, Warren, whoever ends up winning there will be a big selloff.

Nevermind this makes absolutely no sense because Trump is trying to control the markets just as much a Democrat might, but the market has always been a funny thing to me which is why I'm always playing the game.

As for what to invest in? Honestly, I'd buy stocks that have a high likelihood of going back up that are low right now.

 

[Eunos_Cosmo]

The stock market will bounce back, although some areas will take far longer than others. Right now the biggest threat to the market is the upcoming election. Investors, for whatever reason, don't seem to care for a president who's a Democrat and prefer a Republican. If Trump wins in November, I expect the market to hold or start climbing again. If Sanders, Biden, Warren, whoever ends up winning there will be a big selloff.

Nevermind this makes absolutely no sense because Trump is trying to control the markets just as much a Democrat might, but the market has always been a funny thing to me which is why I'm always playing the game.

As for what to invest in? Honestly, I'd buy stocks that have a high likelihood of going back up that are low right now.

Your post is somewhat meta. What I mean by that is that you recognize the tendency of the stock market to 'fear' democratic presidents. That acknowledgement is basically the same driving force in the stock market. I don't think individual investors genuinely think that a (generic) democrat will cause the economy to tank, but they recognize that the group, as a whole, hive-minds itself into that position. I think this is probably exacerbated by broad-market ETFs that basically stand in for "the stock market".

 

[Danoff]

I've just got to say, I hate publicly-traded REITs.

In theory, they're wonderful. You get to buy in to a share of real-estate leases and make a return on the rents being paid at those properties. Sounds awesome. In reality, people treat them just like any other publicly-tradable commodity. Meaning that they buy and sell based on fear just like every other stock. As a result, when markets drop 10% on coronavrius fears, so do REITs. One of the REITs I looked at this morning was a communications tower leasing REIT. Holds leases for comm tower land. Down 10%.

So uh... what do we think is going to happen here. The communications company is going to stop paying their lease on their comm tower land because of coronavrius? Seriously? No it has nothing to do with the fundamentals. People are just yanking money back from the place that it's most easily yanked - which is publicly traded commodities. I've been told that REITs are the smart way to do real-estate investments, rather than buying physical property yourself, but it actually seems like the dumb way to do real-estate. You get exposure directly to market whims in an asset that has all the buffer in the world. It's just an irrational asset.

I was told a story by someone recently who had bought into a REIT that was composed of 50% FedEx leases. FedEx posted a quarterly drop in revenue and people sold off the REIT. The person telling me the story bought when the REIT dropped. As he put it to me "it's not like FedEx is going to stop paying their rent because they had a bad quarter". And this was supposedly a smart move. But this move is predicated on the idea that the REIT will be rational in the long term. And that same asset just showed you a huge degree of irrational behavior. When it drops for dumb reasons, maybe don't buy into it because it'll drop again for dumb reasons.

In the meantime, actual physical property hasn't been plummeting 10% over the last couple of weeks. The real-estate listings near me are still what they were a few weeks ago. A builder that is putting up housing near me is still listing the same kind of starting prices. That's because people still want houses and actual property just as much as they did a few weeks ago. Nobody is pulling back out of the housing market on short-term coronavirus fears. Yes the real-estate market is exposed to longer-term irrational behavior, but it's underpinned more solidly by fundamentals. People really want these assets... like to use... not just to trade.

 

[mustafur]

The market is a weird position, a huge collapse is basically inevitable but I'm unsure if the market will accept it being from anything other then natural forces, I know Covid-19 is making it bad right now but I don't see it being the real collapse.

 

[Biggles]

It's apparently the fastest stock market correction in history. At the minute I'm kicking myself for not pulling out of equities a month ago. I felt that the markets were "irrationally exuberant" after climbing (especially in the US) so far, for so long. My financial advisor advised me to stick with it (as they always do). The trouble is, when you get out of the market, it's always difficult to know when to get back in - you inevitably miss the upswing. The corona virus is just the trigger that sowed the seeds of doubt - once doubt sets in & the markets have climbed so far, the selling quickly gathers momentum & becomes unstoppable until a certain (unknowable) threshold is crossed.

 

[Eunos_Cosmo]

It's apparently the fastest stock market correction in history. At the minute I'm kicking myself for not pulling out of equities a month ago. I felt that the markets were "irrationally exuberant" after climbing (especially in the US) so far, for so long. My financial advisor advised me to stick with it (as they always do). The trouble is, when you get out of the market, it's always difficult to know when to get back in - you inevitably miss the upswing. The corona virus is just the trigger that sowed the seeds of doubt - once doubt sets in & the markets have climbed so far, the selling quickly gathers momentum & becomes unstoppable until a certain (unknowable) threshold is crossed.

Same boat. I told myself I'd move my equities to stocks once the dow crossed through 25,000...which it has. Now I'm like...well if I do that and 25,000 was the bottom then I'm a real moron.

 

[Danoff]

I sold off about 10% of my stocks 2 weeks ago based on "irrational exuberance". Saved myself a good chunk of change (1% of my net market assets). Now I wish that I had sold more. I'm not planning to buy back in though, I'm not a huge fan of stocks.

I would have sold more except that I told myself (stupidly) that certain positions would do well in a downturn. I have some funds that should actually rise in scenarios like this. But of course the reality is that people are just pulling money from wherever they can easily. It doesn't matter what the fundamentals are.

 

[Eunos_Cosmo]

Just checked my IRA. Yep. Lost $7k over the last 5 days. It's not doing as bad (percentage wise) as the dow, thankfully.

 

[Dotini]

If I were young, I'd be buying blue chips which yield dividends once the prices drop into bear territory (20% drop).

 

[Eunos_Cosmo]

If I were young, I'd be buying blue chips which yield dividends once the prices drop into bear territory (20% drop).

You mean if you were young and already owned a house/real estate? How old were you when you bought your first piece of property? Just curious.