Have a question in mind that you think is so dumb you’re embarrassed to ask it? That’s what we’re here for today!
This bonus post was inspired by a reader who wanted to know “where to ask a dumb question” here on Stock Gumshoe… and while his question was not actually stupid, and I’m happy to see questions pop up in our comment threads anywhere on the site, I thought it would be a great idea to open the floor and be more welcoming for the shy, the embarrassed, or, yes, even the uninformed.
So this is a no-judgement zone… smart people do things we’d call “dumb” all the time: Warren Buffett didn’t invest in Google in 2004, Albert Einstein married his cousin, and I just had to go back and double check that I didn’t call him Alfred Einstein (which I’ve done before, in print). So if you have that question that you can’t ask your stockbroker or your brother-in-law or Twitter without feeling like a dummy, let ‘er rip by submitting it below. I’ll be nice… and we might all learn something.
And yes, the SEC is always watching, so I must remind you that I can’t give personal investment advice… but I’ll try to share whatever opinion or answers I can provide to any investment-related question you’ve got, though if we end up with a lot of them it might take me a little while to answer thoughtfully.
So please, let your questions fly using the friendly little comment box below… and thanks for being the best readers in cyberspace!
(I will moderate the discussion just to make sure we don’t get too much profanity or offensive stuff, or personal attacks, but I’ll use a light hand — you can be mean to me if you like, just don’t be mean to any other participants.)
Does anyone know if Dr. Singh Options is a scam
The broker will love you. Complex option charges. But the way I understood the webinars, he does all the work. Adjustments etc. he can say he has a great success rate, but how much does he lose when he does?
Awesome idea. I still don’t get crypto currency. Is there an idiots guide out there?
My favorite explanation of the rationale for the blockchain came from a NY Times article back in January: https://www.nytimes.com/2018/01/16/magazine/beyond-the-bitcoin-bubble.html
Not a “how to trade the latest ICO” article, but a pretty good big-picture pice, I think.
There is a podcast, Invest Like The Best, that has several crypto episodes. It is really informative but will (probably) require multiple listens.
That’s a great podcast in general, some really excellent guests.
Zach Scheidt teasing a marijuana stock that “could” be an investment target for Anheuser Busch. Any ideas which one?/
Yes! This would be Hiku. Started by former Google executive Alan Gertner. Alan ‘s business model is a triple threat as he will have growers, accessories, and retail outlets.
I guess it is Canopy
or Aurora, they just became bigger than Canopy
Yes, Travis of Stock Gumshoe just had a discussion May 18, 2018 “Friday File: “Anheuser-Busch has their sights on one specific microcap marijuana company.” and as stevo says it is HIKU. suggest read more of Travis article.
Are SRB’s gonna take over the Dollar
Somewhere around July 1st 2018?
Is Gold going down?
Is the US dollar done as world currency?
No
Maybe
Not anytime soon
The US dominates the vote at the World Bank and IMF… nothing will be done there to lessen the importance of the dollar. No major country wants to give up control of its currency, and no politician would vote to cede currency control to an international body, so national currencies are here to stay.
The dollar will lose value gradually over time, most likely, as it has done for the past 80 years, and as most national “fiat” currencies have done. Gold should counter that over the long term (the next 50 years), but in the short term (next 10 years) anything can happen.
I don’t think we’ll see a new gold standard or a new global currency regime, but that doesn’t mean it’s impossible. If it happens, it will most likely come because a large country needs “saving” or as part of the rebuilding process for whatever the next major war might be.
Zacks stock services is always teasing their highly rated stock pics – and for exorbitant fees. Have you investigated these gems or not enough clues? Or maybe you did already and I missed it?
Thanks
If you would like Travis to investigate a teaser, just send it to him and request he takes a look,. ilovestockspam@gmail.com. Since there are thousands of people writing though, and only one lovable Travis with his cranky Thinkolator, don’t hold your breath.
So you sold 1/2 position of FB at $155 when it broke your stop loss point. Now FB is heading to where it was, are you adding it back?
No. Part of the reason I let the stop loss hit was because my risk assessment for the company changed, and I still think FB is substantially higher risk than a year ago — mostly because I think there’s a possible inflection point here where usage data drops a bit, advertisers might pull back a bit, and Facebook at the same time has to dramatically increase spending on compliance, which could cut into margins.
Short answer: If FB had margins as low as Google’s, it could drop another 30%. If growth slows, that’s still a possibility. Don’t know if it will or not, and I don’t think it’s the likeliest outcome, but with the business almost entirely driven by the data-fueled ads on Facebook’s news feed, I think the risk is higher than I originally believed and I’d be more comfortable adding to Alphabet than to Facebook at current prices… though both are similar-sized positions for me right now.
I am age 66, on SS, no savings, 0 risk tolerance, just inherited $200k. Does an ATHENE non-spousal inherited IRA/annuity make sense?
I can’t answer questions about individual finances, and I don’t know what that particular type of annuity is, but here’s my general thinking:
If I had zero risk tolerance and was already retired, with bills to pay, I’d put a big chunk of my savings into an immediate income annuity… but every situation is different. Think about hiring a reputable local financial planner (preferably someone who doesn’t work on commission) to look at the situation for you and explain the variables — it should cost a few hundred bucks for a basic consultation, most likely (they usually range from $100-300/hour), but you don’t want an unknown salesman who works on commission making the decision for you if this is the chunk of capital you’ll need to last the rest of your life.
If you have not done so go to a local Fidelity, Schwab, Merrill Lynch, Morgan Stanley or UBS PLEASE visit them first. They will put together an actual plan first before you buy something with a 7 to 12 year surrender charge that pays a high commission. Talk to someone who is a CFP and is acting as a fiduciary.
Good points… just be careful to talk about commissions and how they’re being compensated with whoever you speak with. There are lots of good fiduciaries and advisors with the big firms, but also lots of salespeople.
Go to Fidelity or Schwab local office – they are the best!
How many employees do you have
I have a couple contractors and consultants for administrative and technical work, and a couple writers who submit pieces from time to time, but no full time employees other than yours truly.
Hi there ! I always wondered if real investors use CFDs for other than hedging. I know you trade stocks and options, but never CFDs… why?
Short answer? They’re not very common in the US markets, so I don’t understand them. Hedging can quickly grow very complex, and more complex hedging can certainly work better than the basic stuff that most retail investors try… but for most smaller individual investors, hedging is a waste of time — the best hedge for most individuals is probably a combination of cash (to buy when investments fall in price) and time (to wait for markets to recover).
Here is a dump question. What is CFD?
Contract For Difference — a derivative that provides leverage like options or futures… it’s actually a type of futures contract that lets you bet on future stock prices with cash settlement. More common in Europe and Australia, here’s an article with some examples: https://www.investopedia.com/articles/stocks/09/trade-a-cfd.asp
What is the meaning of love? Kidding Travis. Thanks for all of your research and helpful information.
Hard to put it in words, but I am happy to wake up next to her every morning and tuck them in every night.
Hi, Can you recommend the competitive UK stockbrokers for the international markets?
No, sorry. The international brokerage I like best is Interactive Brokers, and I believe they are available to UK investors, but I don’t know any UK-based brokers so I can’t really fairly compare.
Check out https://youtu.be/L7G0OfJUON8
Anton kreil talks about a few he uses. You tube video that is eye opening.
Hi. I’ve been through this pain (I live in the UK). Had an account with DeGiro and SVS and in the end transffered the whole portfolio to Interactive Brokers and never looked back. The only slight down side is higher fees on penny stocks. On the other hand my portfolio currently is all in US stocks so can’t comment on transactions in other markets.
What is the best medium term trending up indicator for stocks? For example, some say new 52 week highs are actually a good trending up signals.
You can find lots of opinions out there, but in reality no one knows the future. No one.
Some “experts” will say RSI, others Moving Averages, another making new highs. There are many ways to invest or trade and interpret that technical and fundamental data. It is probably most helpful to find what makes the most sense to you.
I don’t think of any of them as indicators — I think of them as histories. The 50-day and 200-day moving averages are interesting to look at when analyzing a stock, giving some idea of the movement of that stock over time and how wild or calm it is. I look at the charts sometimes, but do not ascribe any predictive power to them — I’m not much for technical analysis, as you can probably guess, but it can provide interesting moments… like when a stock that has strong fundamentals drops below the moving average and that causes a further fall by programmatic traders selling, maybe that’s a buying signal. Or if there’s a stock I’m ready to sell, dropping near the moving average and failing to bounce back up might indicate to me that it’s no longer “too soon to sell” because the momentum crowd has abandoned the stock.
Hello Travis,
I would like to know what is your personal opinion on the possibility of a new, accepted, international currency (like SDR if you wish) as a solution to the huge amount of debt most countries carry today? Do you think it should be supported by gold?
Thank you
I think a new international currency framework is very unlikely, unless we have a major non-financial crisis (like a big war). Likewise, absent a crisis that forces dramatic change I don’t think any major country will agree to the restrictions that come with backing a currency with gold or any other hard asset. A politician voting for any new control over their nation’s currency is voting to impose more discipline on his own government’s budget, which no government has willingly done for a long time, it would require a massive shift in politics.
The outlier is China, since that’s the one large country that could do something with a long time horizon and not have to make its citizens happy in the short term — though I also don’t see China giving up control of its currency willingly, either to an international standard or to a physical gold backing.
Thank you Travis.
If I am allowed one more “dumb” question: do you believe Deutsche Bank could be the trigger for the next financial crisis? Would they “allow” it to happen?
“Could?” Sure, we should never say never, and DB has been the most obvious huge, looming counterparty risk in the world since fears of its total collapse first really caught investor attention in 2016. Given all the attention it gets, and how critical DB is to the euro, I would imagine that the ECB and the Federal Reserve will push them to wind down and shrink a lot of the business, so I’d be surprised if Deutsche Bank provides the next “Lehman Moment”, if only because everyone is looking for it. But if you forced me to choose long or short on DB shares, I’d still go short, even after the huge decline.
Wouldn’t you say Germany, France, Italy, Spain and all the rest did just that (except for the gold backing)?
As for China I would say they do not have to give up control because they will be probably among the few countries dictating the conditions.
How many Euro countries do you think would opt to form a currency union today if they weren’t already in the Euro? I’d guess that those countries probably gave up more control than they had wanted, in retrospect, though they certainly made up for some of that with the increasing convenience of cross-border trade. I don’t think we’ll see anything like the Euro happen again for at least a generation, we need some time for those politicians to forget first.
China can dictate a lot of things, but they can’t go it alone. It will be interesting times, and they’re opening up a lot more than I would have expected a decade ago.
What is it I’ve always wanted to know?
How to answer a question with a question?
what referrcense sources do you use for your incredibly thorough reports?
A huge variety that changes every day — basic sources are YCharts for screening and data, most of the major publications and websites for news coverage, SEC filings for real data, often company presentations and PR that provide the “optimism” fuel that ads are built upon.
Thanks Travis, I love your information. What is the best time to buy and sell high dividend stocks. Just to capture the dividend?
Unless you don’t have to pay taxes, it gets tricky and is not necessarily worthwhile — unless you can use a lot of leverage to boost the gains. There’s a good description of basic “dividend capture” strategy here: https://www.investopedia.com/articles/stocks/11/dividend-capture-strategy.asp
But do keep in mind: This is among the easiest things for a computer to do — if a computer can do it pretty well, that means the possible gains from the strategy are very minimal, because anyone can set up programmatic trading to do this with hundreds or thousands of stocks each quarter, which means any theoretical gain is likely to disappear pretty quickly.
This is true of a lot of short-term trading strategies that theoretically make sense: the prevalence of quantitative trading strategies and high-frequency trading means that many day-trading or short-term trading strategies like “dividend capture” fail to generate returns that are any better than just holding the stocks themselves or owning a broad basket of similar stocks (or buying the market through ETFs).
Individual investors can still have an “edge” if they have more patience or a longer time horizon than institutional traders, or if they can follow and stick with individual trends or buy smaller stocks or develop expertise in a sector or a subject area, but they don’t have any advantage when it comes to quantitative or rules-based trading. The machines win, and the big money is much more efficient and has better machines.
I’d like to learn more about the good, bad, ugly of buying straight calls in this mkt, ie, XLE.
This is a copy of a response from Travis from a recent question regarding options. I think it’s as good an explanation as any.
Hopefully it’s helpful.
“”Options provide leverage, and you get more leverage if you buy a riskier bet — sometimes it’s best to think of it by using examples.
What happens if IQ goes to $40 in December? You could buy 100 shares for $2,000 and double it if that’s the case, or buy one $15 call option for $750 and more than triple it to $2,500 (of, if you commit a similar amount of capital, buy three call options for $2,250 and that becomes $7,500). If you buy the December $22.50s for $3.80 that’s $380 turning into $1,750 or $2,280 into $10,500.
Assuming you’re right about where IQ is going, of course — the $15s also have less risk because they’re “in the money” right now so could be exercised and be worth something if they expired today… not $7.50, but at least a little over $5 since IQ is over $20. If IQ drops to $18, then the holder of the stock at $20 loses 10%… the holder of the $15 option loses roughly 50%, and the holders of those $20, $25 etc. options lose 100%. So the risk goes up the price curve as well.
But it’s also important to keep in mind the total capital at risk. The appeal of an out-of-the-money option is that you can get leverage to the underlying stock with less of a commitment if you’re wrong, and with more leverage, so you can get a similar return by putting less capital at risk if you’re right. It’s just that the odds of you being right get worse as the strike price gets higher — IQ is more likely to be at $20 in six months than it is to be at $30 or $40, just because guesses about the future have to start with something and the only thing we really know is that it’s at $20 now. Buying in-the-money call options means there’s less chance of a 100% loss, but less leverage than an out of the money option… and still a much higher chance of a 100% loss than if you’d invested in the stock itself.
You can get into all the “greeks” when analyzing options, but if you’re speculating on a particular stock going up or down I think it’s more sensible to think about a few different good and bad scenarios and estimate what your gains or losses would be — not just in percentage terms, but as a total capital commitment. When buying call options, the odds of a 100% loss are very, very high, so it’s very important to keep in mind exactly how much cash you commit to a position.”
This was my question to Travis, and his response above:
Ok, here the first dumb question. I deal in puts and calls mostly calls and I’m sure I’m missing something lets take IQ Dec calls for example, I’m only going to use the ask price.
7.50 Dec 15
6.00 Dec 17.50
4.70 Dec 20.00
3.80 Dec 22.50
3.20 Dec 25.00
Obviously the Dec 15 at 7.50 is the cheapest and closet to being in the money. Why would you buy any of the others ?
I’m curious to know your opinion on fixed income investments (bonds, etc.). What portion of your portfolio is devoted to such holdings? How would you split up fixed income investments? My wife recently inherited a professionally-managed portfolio, and the fixed-income portion was split up roughly: 35% intermediate-term bonds, 25% munis, 15% developed-market world bonds; 12% high-yield corporate bonds; 3% emerging market bonds, and 10% in a fund classified by Morningstar as “non-traditional bonds,” and seems to be mostly a mix of corporate bonds and mortgage-backed securities. What are your thoughts on this split? Do you (or would you) also incorporate funds containing other asset classes, such as preferreds, convertables, senior loans, or a utility/infrastructure fund that pays monthly dividends? I’ve never held much fixed income before, and have to decide whether to massage the percentages of these holdings or sell them all. Thanks!
Bonus question: Can AlanH return? 🙂
There is insufficient information to answer this question. It depends upon where the bonds are held, ie: retirement fund vs taxable account, your age and need for a steady income vs. capital gains, your risk tolerance, your tax situation, the relative risk and rates of return in each of the bond classes, the possibility of rising interest rates in the economy generally, and the inflation rate.
For example, if a bond yields 4%, and is taxable both state and federal, and inflation is at the Fed’s 2% rate, it is possible that your real return may be close to zero after taxes, inflation, and rising interest rates.
The real question is the percentage allocation between stocks, bonds, and real estate. Don’t overlook the value of your home in creating your asset plan. In my case, at the age of 74, in excellent health, with a still working wife, and limited expenses, my assets are primarily in stocks and high dividend stocks, especially REITs. Less than 25% is in fixed income. My rationale is due to rising interest rates, dividend increases on my holdings, and the fact that over time, the stock market returns will beat bond returns. Bear in mind that the S&P also currently yields about 2% in income which is taxed at a lower dividend rate.
There are many services that will help you with this decision. I use the website Seeking Alpha.com for analysis of dividend stocks, Stock Gumshoe for common sense analysis, and Motley Fool Stock Advisor for general stock selection. I use Schwab as my broker. They can provide excellent advice on managing your portfolio and setting up an estate plan. Their fixed income service is also good, with access to almost any bond.
Good luck. I hope this is helpful. I’ve been in investments for 55 years, both managing large university endowments and on my own. Experience has taught me that if you get the asset allocation right, the individual stock or bond selection has less of an impact on your final returns.
Thanks. Those are great points about the real rate of return, especially as interest rates are expected to rise. As a hedge against a sudden market correction, it may be better to hold cash than a low-rate intermediate term bond fund. I will have to give this more thought.
Cash is the best hedge of all, to be sure — unlimited optionality, as long as you don’t get too afraid to deploy it when the odds of a good return improve.
I’m afraid I don’t know much about building a fixed income portfolio, and I allocate very little of my portfolio to bonds at this point, all of which is either indexed or managed.
Everything depends on need and return requirements, so that’s a very personal portfolio to build. If there’s a need for income, I’d focus on that and keep the duration as low as possible while still supplying the required income. I am very leery of emerging market and high yield corporate (“junk”) bonds right now, just because those tend to be very illiquid markets and they are dominated by passive investments in ETFs.
The biggest potential blow-up that I see coming, with some clarity but not necessarily prescient accuracy, is the crash that comes from having most of a market that has limited daily liquidity (junk bonds, for example) controlled by ETFs that promise daily liquidity. If investors start selling HYG rapidly, for example, that will mean HYG has to sell a lot of bonds that don’t have ready buyers, which will drop the price of those bonds rapidly, which will drop HYG’s NAV rapidly, which will bring more selling.
I don’t have that same worry about shorter-term government or investment-grade bonds… but, of course, the consensus doesn’t worry about those either, which is why the yields are so low. That might change fairly quickly with quantitative tightening from the Fed, but there are a lot of moving parts… which is why my bond allocation overall is very low, and why I let professionals manage it for the most part. I do think we have some decent opportunities in “bond proxy” investments like preferred shares, REITs and the like, and will probably have more opportunity in those as prices drop reflexively the next time market sentiment about interest rates has a sharp move, but we’ll see.
I own 60 different stocks.A few where I have a gain in value I would like to sell and use the proceeds to purchase other stocks.Is there any way to do this and avoid,or defer, the capital gains tax I will owe?
Also,if I can find smeone who owns the stocks I want to buy.can I swap some stocks with him/her and achieve an exchange where no tax is due?
Not that I know of. The only way I’m aware of to avoid or defer paying capital gains taxes (other than by using sheltered accounts, of course, like 401(k)s or IRAs) is by using a “swap fund” or “exchange fund”, which is a pooled partnership set up by investment bankers to help rich people shield their gains, particularly when it’s in a single stock that has gone up dramatically (ie, a former executive has millions of dollars in a single stock). That doesn’t sound like your situation, but there’s an article about it here if you’re curious.
Or, of course, the easiest way to avoid taxes is if you can sell losing positions to offset the capital gains — and if you really like those losing positions, you can still buy them back after the end of the wash sale period, or buy back something similar in the same sector (can’t be too similar).
I’m not at all a tax expert, though, so make sure to ask your accountant. And smile, if you owe taxes that means you made money… and if you don’t have losing positions to offset those gains, it’s better still!
What are top 10 share to buy in 2018?
I don’t know. All I can tell you is what I’ve done with my money — the last 10 stocks I’ve bought, either new purchases or additions to existing holdings, are: Naspers (NPSNY), Premier (PINC), Berkshire Hathaway (BRK-B), Clean TeQ Holdings (CTEQF), Sandstorm Gold (SAND), Fairfax India (FFXDF), Fairfax Financial (FRFHF), iQiyi (IQ), NVIDIA (NVDA), and Boston Omaha (BOMN).
I thought they were appealing buys at the time (all were within the past couple months), but my intention for most of them is to hold the shares for a long time, I don’t have particular reasons to expect that they will beat the market over the next six months.