Investing Strategies. What is your move?

[PWMDMD]

I’m not debating that the Great Depression was hard. Of course it was. Of course lots of people, including the 75% of folks who were employable and employed suffered. It’s laughable that you would imply otherwise.

But look even at your case of the depression. Debt to GDP went from 16 to 51%. Where are we today? Over 100%? Where will we be soon? 150? 200? Sure, “these are only ratios”. But they’re also uncharted waters, especially for a country and economy as large as ours.

That’s the point.

So you think you should get some wage that the AMA or ADA or whatever lobbying group claims is right, without any sense of the realities and unknowns of where we are. You ask, and again I use the hypothetical you, “what about my business?” Well, it may fail. You may need to take a pay cut. Your business on the indebtedness of my children is not a deal I care to make. As much as I genuinely hope you are as successful as your hearts desires.

The issue is the frivolity of massive handouts, massive printing of money. For what? At whose expense? Into what world of unknowns. Why, so someone could keep their business, or someone could sit at home and do nothing?!?

It’s not that I lack empathy, and it’s not that I want to see anyone suffer. It’s that I have concern about decisions that are not prudent, and decisions intended to pacify the masses, which have lingering and damaging effects. Unknown long term effects, which result in more and bigger “fixes”. There will always be losers. Bad times will always take their toll on some. That’s the unfortunate reality. Unfortunately the result of the current situation hurts everyone and we will be paying it for lifetimes.

We're going to have to agree to disagree because IMO your rationale is loco for choco puffs. It's not like letting the depression happen fixes anything either and it's just MORE pain for everyone and still more debt. We got out of The Great Depression with? You guessed it...Government spending! That's how you get out of depressions - you spend your way out it. That's the biggest flaw to your idea...letting the depression happen still results in massive government spending DURING reduced tax revenue and increased debt.

That's why doing nothing wasn't a viable option...it means reduced GDP and a lot more debt in stead of just a lot more debt. As I said, our problem isn't really the QE, it's our spending in general. If our year-to-year spending wasn't crazy, it wouldn't be a big deal to do some QE when needed because it is the best choice. You must provide enough liquidity during downturns to prevent bank runs and to boost the supply of loanable funds and boost general economic activity.

 

[gfh77665]

This is always a tough crowd. Perhaps a little late to the party, I agree that Powell has handled this about as well as anyone could, not that many here will see it. I mean, so many here still think the economy is in terrible shape as they're gainfully employed, inflation is coming down quickly, gas is reasonably cheap again, and as a bonus, they're riding their +10% YTD returns.

Yes the Fed "arm chair quarterbacks" that come on here and gloat about their juicy gains in their next breath trashes Powell. Go figure.

 

[PimTac]

We got out of The Great Depression with? You guessed it...Government spending! That's how you get out of depressions -

The government spending at that time provided jobs for millions to build infrastructure. Many of those workers had to leave their homes to do so.

Compared to the recent government spending of sending money to people we didn’t get as much benefit as we did back in the Depression. A lot of that infrastructure built back then is still being used today.

 

[PWMDMD]

The government spending at that time provided jobs for millions to build infrastructure. Many of those workers had to leave their homes to do so.

Compared to the recent government spending of sending money to people we didn’t get as much benefit as we did back in the Depression. A lot of that infrastructure built back then is still being used today.

It didn't say it wasn't good spending but we needed to issue a lot of debt to fund those projects and THAT is what got us out of The Great Depression. There really isn't another way - you boost severely low economic activity by spending money to induce more economic activity.

 

[PimTac]

A interesting perspective on the national debt.

US National Debt by Year

The U.S. national debt was over $31 trillion in 2022. In 1930, it was just $16 billion. The biggest impacts have been defense spending, recessions, and recently, the pandemic.

www.thebalancemoney.com

 

[SC Maintenance]

We got out of The Great Depression with? You guessed it...Government spending!

It didn't say it wasn't good spending but we needed to issue a lot of debt to fund those projects and THAT is what got us out of The Great Depression. There really isn't another way - you boost severely low economic activity by spending money to induce more economic activity.

I really don't care about the rest of the argument, but your great depression analysis is considered wrong now. The more modern view is that the depression was caused by a rapid drop in the money supply, caused by the collapse of the bubble of the 20's, exasperated by tight money supply by the central bank in the 30's - lengthened by the new deal (crowded out the private sector for what money did exist), put on hold by WW2, - not lack of government spending. Your confusing fiscal policy and monetary policy.

But don't argue with me - argue with Milton Friedman and Anna Schwartz - in their book monetary history of the USA (doubles as a cure for insomnia). You can also argue with Ben Bernanke - as he publicly agrees with this analysis and uses this as this reasoning for QE in 2008.

The fiscal spending policy of the government during the pandemic gave people that didn't need money extra money causing inflation, and people that did need money didn't get enough. Typical government - potentially well meaning but terribly mis-managed.

The Fed's actions in 2020 on the other hand were justified initially, they simply went too far and for too long. I think that was discussed on here or the other thread - no one is sure why - since it was pretty obvious. As always, we don't know everything they know.

 

[JHZR2]

The government spending at that time provided jobs for millions to build infrastructure. Many of those workers had to leave their homes to do so.

Compared to the recent government spending of sending money to people we didn’t get as much benefit as we did back in the Depression. A lot of that infrastructure built back then is still being used today.

Precisely. It’s a bit clementines to grapefruits…

 

[PimTac]

Precisely. It’s a bit clementines to grapefruits…

Yes. The two situations are different. As I recall from my parents stories of living through the Depression, having a job was difficult. There were lots of day hire type work. One might work one or two days a week if they were lucky. Then the money had to be spent wisely. A lot of things were not available. People improvised on food. That’s why that generation learned to not waste anything. Things were repaired rather than replaced. There was a lot of barter going on as well.

 

[PWMDMD]

I really don't care about the rest of the argument, but your great depression analysis is considered wrong now. The more modern view is that the depression was caused by a rapid drop in the money supply, caused by the collapse of the bubble of the 20's, exasperated by tight money supply by the central bank in the 30's - lengthened by the new deal (crowded out the private sector for what money did exist), put on hold by WW2, - not lack of government spending. Your confusing fiscal policy and monetary policy.

But don't argue with me - argue with Milton Friedman and Anna Schwartz - in their book monetary history of the USA (doubles as a cure for insomnia). You can also argue with Ben Bernanke - as he publicly agrees with this analysis and uses this as this reasoning for QE in 2008.

The fiscal spending policy of the government during the pandemic gave people that didn't need money extra money causing inflation, and people that did need money didn't get enough. Typical government - potentially well meaning but terribly mis-managed.

The Fed's actions in 2020 on the other hand were justified initially, they simply went too far and for too long. I think that was discussed on here or the other thread - no one is sure why - since it was pretty obvious. As always, we don't know everything they know.

Oy vey...I'm not making the distinction between fiscal policy and monetary policy because few here would care. But yes, an increase in the money supply and TOTAL spending/GDP/liquidity/loans/overall economic activity got us out of TGD. That increased liquidity has to get spent to affect economic output.

I'm using the term "government spending" in the loosest sense of the term to include issuing public debt that goes on to provide liquidity in the markets. Most here would accept that as the government "spending" their money at least in a colloquial sense. My entire point is debt went up significantly to get out of The Great Depression and so allowing another depression to avoid issuing debt to prevent the depression makes little sense because there are additional pains associated with depressions.

 

[PWMDMD]

Precisely. It’s a bit clementines to grapefruits…

Sure, but with few limited data points, TGD and a few other episodes world wide are we have to go on. The Fed's policies are mostly based on TGD and the need to to inject liquidity in these situations. I say mostly because they made some modifications to policy after 2008 whereby they now pay interest on bank reserves held at the Fed.

I still hold doing nothing was not a viable option with CV-19 and that it's fiscal policy that needs reform more than monetary policy.

 

[PWMDMD]

The Fed's actions in 2020 on the other hand were justified initially, they simply went too far and for too long. I think that was discussed on here or the other thread - no one is sure why - since it was pretty obvious. As always, we don't know everything they know.

This is my point in opposition of those who believe the Fed should've done nothing. Certainly, the execution could've been better but I guess hindsight is 20/20.

 

[Ahausheer]

I use multiple ETFs and funds and I don’t compare those holdings with US domestic indexes. Admittedly mine is not a simple portfolio.

You should compare those holdings to US domestic indexes for the reasons I stated. Otherwise you might think you are diversified but might not be. Diversification does not mean what most people think it means. It doesn't mean holding a bunch of different things. It means holding a bunch of different things whose price movements habe low or negative correlations, but whose yields are both positive over time. If you are not considering this, are not familiar with historic asset correlations and are not at least loosely familiar with what an efficient frontier is, you should not have anything other than a simple self managed portfolio. Trust me, look into these terms and you will be a better investor.

 

[PimTac]

You should compare those holdings to US domestic indexes for the reasons I stated. Otherwise you might think you are diversified but might not be. Diversification does not mean what most people think it means. It doesn't mean holding a bunch of different things. It means holding a bunch of different things whose price movements habe low or negative correlations, but whose yields are both positive over time. If you are not considering this, are not familiar with historic asset correlations and are not at least loosely familiar with what an efficient frontier is, you should not have anything other than a simple self managed portfolio. Trust me, look into these terms and you will be a better investor.

Diversification is a strategy and performance is a result. People will have many opinions on what is diversification. Jimmy Jim Cramer will tell you to buy FANG stocks and you are diversified. That’s his opinion. I don’t agree with it.

I cannot compare a US small cap growth ETF with a Asian developed country bond ETF.

My diversified portfolio is a strategy I use for the long term. I won’t get the performance that others might in certain years and I am not chasing performance. Rather, I look for decent returns with lower risk. Since I am in my latter years that’s important to me.


Edit: to add for transparency, I just looked up my performance and compared it to the SP500.

SP500 is up 18.69% YTD.

My portfolio is up 10% YTD.

I’m happy with that.

 

[Barkleymut]

I buy Apple stock, then I buy more Apple stock. I am diversified.

 

[PimTac]

I buy Apple stock, then I buy more Apple stock. I am diversified.

That’s what the shareholders of General Electric did. GE was such a diversified company. Their stock went up and up year over year and then suddenly it dropped. That was 1998 and GE has never recovered. If you bought shares in the nineties you have been unfortunate.

I like Apple but I won’t put everything into it.

Check out General Electric's stock price (GE) in real time

Get General Electric Co (GE:NYSE) real-time stock quotes, news, price and financial information from CNBC.

www.cnbc.com

 

[JeffKeryk]

As @PimTac posted, diversification means different things to different people. One of my poor performing products, which I hate, is a double tax free CA Municipal Bond fund. But if I lost everything else, I could exist very well on SSI and the interest on this fund.

Kinda like take you medicine and make a face.

 

[PWMDMD]

As @PimTac posted, diversification means different things to different people. One of my poor performing products, which I hate, is a double tax free CA Municipal Bond fund. But if I lost everything else, I could exist very well on SSI and the interest on this fund.

Kinda like take you medicine and make a face.

...and everyone's risk tolerance means something different to them. If it helps you sleep at night then I think it's a good investment for you!

 

[JeffKeryk]

...and everyone's risk tolerance means something different to them. If it helps you sleep at night then I think it's a good investment for you!

Well, it also makes me crazy when certain investments that I am missing out on are earning bazillions. But at this point in my life, and at the current portfolio value, the goal is to maintain. The Schwab Wealth Advisory program are the experts. People seem to like self directed, but should I self direct my medical health or go to a Doctor?
So I will reluctantly take my medicine. I hate it when that happens.

 

[PWMDMD]

Well, it also makes me crazy when certain investments that I am missing out on are earning bazillions. But at this point in my life, and at the current portfolio value, the goal is to maintain. The Schwab Wealth Advisory program are the experts. People seem to like self directed, but should I self direct my medical health or go to a Doctor?
So I will reluctantly take my medicine. I hate it when that happens.

That's a pretty standard recommendation as people get older - to move away from growth towards preservation.

 

[JeffKeryk]

That's a pretty standard recommendation as people get older - to move away from growth towards preservation.

Schwab has been bugging me about that for years. I have, so far, been able to defy them pretty well. So we ultimately agreed to let me manage my stock options and single pics and they manage the rest. All good.