patrick.net

CRE is fucked. Banks are losing their shit on possible defaults (jingle-mail) by their CRE customers. This is another RE bust, except instead of homes, it's business properties, office towers, etc. They borrowed to the hilt under ZIRP, but now that the balloon payments are due, look out below!

Eric Holder says

just_passing_through says

You've got to put down 25% for a SFH rental. (Unless you're someone like Eman maybe)

You can do 3% if you're buying a 2-4 unit property and live in one of them for some time. Or so I was told by the voice reading the audio book on RE investing to me.

This is correct. As long as you occupy one of the units. After 12 months, you can move out, rent the unit you occupy and buy another “owner-occupy” 2-4 units. Rinse and repeat. This approach works for singles and/or DINKs.

KgK one says

Where to find CRE deals like this one.? I don't have no where near 25 mil but would be nice find something worth buying lower cost.

This is the real reason I think insurers are raising rates, btw.

Florida is below the number of strong hurricane landfalls expected in the past decade. For most of this Century, the weather has been milder than most of the 20th.

They're cooking the books and jacking up the property insurance rates to cover the unexpected COVID Commercial Real Estate investment losses, once considered among the safest and surest.

If you're going to be pragmatic and you don't mind investing in evil, purchase Offence Contractor stocks.

Eman says

This is correct. As long as you occupy one of the units. After 12 months, you can move out, rent the unit you occupy and buy another “owner-occupy” 2-4 units. Rinse and repeat. This approach works for singles and/or DINKs.

So is that how you build your portfolio of residential investment properties ? but you are buying as an individual or couple, and not as a business such as LLC ?

keep maximizing the application of "others people money" (OPM) to finance the portfolio

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AD says

Eman says

This is correct. As long as you occupy one of the units. After 12 months, you can move out, rent the unit you occupy and buy another “owner-occupy” 2-4 units. Rinse and repeat. This approach works for singles and/or DINKs.

So is that how you build your portfolio of residential investment properties ? but you are buying as an individual or couple, and not as a business such as LLC ?

keep maximizing the application of "others people money" (OPM) to finance the portfolio

,

No, I didn’t know these rules when I bought my house. I didn’t own investment properties until 2009. Single units are financed with 30-year fixed under our names. Apartment buildings are all under LLC’s. Each building is its own LLC

AD says

Seems like one could just effortlessly invest in Vanguard High Dividend Yield fund.

Here's my issue with the above fund, ~25% of its total holdings are in the Mag 7, which by now, is no longer a secret among traders (Apple, Google, NVDIA, Tesla, Meta, Amazon, MS).

In other words, it's not too distinct from an ordinary S&P500 fund which already has a third parked in the Mag 7.

Let me re-post my earlier comment

https://patrick.net/post/1379839/2023-07-26-when-the-bears-finally-go-home?start=1#comment-2011496

Here's the thing, one can simply use the Nasdaq, QQQ, if they want to swing trade the Mag 7 as they make up a vast majority of its weighted holdings. Here's a chart of that, using the basic 21 day period Stochastic RSI for buy/sell signals. This is an 'All Long' strategy, no short selling involved.



The only thing I'd add to the above is a 120 day exponential moving average filter. And then, you won't get caught with your pants down, when the music stops.

All and all, I use short term earnings to re-invest in high div defensive stocks like Rio Tinto, British-American Tobacco, & Altria. And I keep a remainder to spread out among others like Verizon, Vodafone, Chevron, etc.

@Rin,

So exit QQQ completely when it breaks below 120 EMA? Thanks.

Rin says

All and all, I use short term earnings to re-invest in high div defensive stocks like Rio Tinto, British-American Tobacco, & Altria. And I keep a remainder to spread out among others like Verizon, Vodafone, Chevron, etc.

I want to gift 50k to my teenager and leave it alone for 10 years, where should I invest?

If the teenager is under 18, the account is called "UTMA". Uniform Transfer to Minors Act. If you do this, you can also determine at what age the little dear can actually have access to the money.

My choice would be Vanguard Tax Managed Capital Appreciation.
This fund will not produce a large 1099 every year; taxes are a drag and should always be avioded.

I have usually regretted all of the expensive gifts or favors I have done; your results may vary.

gabbar says

I want to gift 50k to my teenager and leave it alone for 10 years, where should I invest?

If you're not actively trading (vis-a-vis investing) the money and thus, don't have a sense of creating a basket of dividend paying stocks or ETFs, then I'd default to the Dow Jones Industrial Average. The reason for choosing the Dow30 is that unlike the S&P500, only 3 tech "LALA" stocks like Apple, Microsoft, & Saleforce are in the Dow30 capping out at ~15%. Other Dow30 "technology oriented" stocks like Honeywell, IBM, CISCO are no longer a part of the Silicon Valley 'buzz' and almost appear to behave like utility companies from a portfolio p.o.v. And many of the other Dow stocks like Chevron, 3M, Verizon, etc, give dividends and thus, will do all right with a DRIP set in place.

Here's a calculator on how re-investing dividends, during two back-to-back bear markets resulted for the Dow30.



And compare that with the S&P500.

You could always do something ballsy like park it in a 10 year treasury. It pays about 4%, which is about 1.8% over the expected rate of inflation.

Misc says

You could always do something ballsy like park it in a 10 year treasury. It pays about 4%, which is about 1.8% over the expected rate of inflation.

Right now, I have the 50k parked in a 1 month treasury (I learned about treasuries from this site) I see, but please explain which this is ballsy? I assume you are saying that this is bold.

gabbar says

Misc says

You could always do something ballsy like park it in a 10 year treasury. It pays about 4%, which is about 1.8% over the expected rate of inflation.

Right now, I have the 50k parked in a 1 month treasury (I learned about treasuries from this site) I see, but please explain which this is ballsy? I assume you are saying that this is bold.

Nope just super conservative (was being facetious). Also, 1.8% over the rate of inflation is typically what a person would expect from investing in stocks...so getting that guaranteed from a bond investment that is guaranteed by the US government seems like a good bet.

Another investment idea for those with bucks is to just hold the funds in a money market account and buy a trophy property in a few years.

I have a feeling that high-end properties are gonna see a huge devaluation. The rich are just as leveraged as the common folk (there really are no adults) and quite a number of them have been maintaining their lifestyle based on being able to go further and further into debt. Property upkeep and increases in property taxes are gonna put enough of them into the situation of having to sell. There should be enough of these forced sales at once to cause prices to grenade. If you have to sell, but there are no buyers...prices rapidly go to zero. Take a look at all the dilapidated mansions from years gone by to see what the future holds for many of these properties...unless they can get a buyer...and that buyer will pay a pittance for these trophy homes in today's dollars.

Just my opinion.

Misc says

that buyer will pay a pittance for these trophy homes in today's dollars.

True, but one of the reasons is that the tax and upkeep on these trophy homes are stratospheric. A $6million home in a high tax place like Omaha can cost over $10k per month in local property taxes alone.

...And don't forget insurance ! ! ! !

Yet there are a huge number of properties priced today at $10 million or more even with those costs, but when the banks won't lend anymore against the asset...well a massive sell-off.

But yep, a 70% discount on a $10 million manse is still an outlay of $3 million. That does keep the peasants at bay, and then yes the ongoing expenses.

Misc says

Nope just super conservative (was being facetious). Also, 1.8% over the rate of inflation is typically what a person would expect from investing in stocks...so getting that guaranteed from a bond investment that is guaranteed by the US government seems like a good bet.

Gotcha, but I had to look up the meaning of the word, facetious.....lol

Rin says

If you're not actively trading (vis-a-vis investing) the money and thus, don't have a sense of creating a basket of dividend paying stocks or ETFs, then I'd default to the Dow Jones Industrial Average. The reason for choosing the Dow30 is that unlike the S&P500, only 3 tech "LALA" stocks like Apple, Microsoft, & Saleforce are in the Dow30 capping out at ~15%. Other Dow30 "technology oriented" stocks like Honeywell, IBM, CISCO are no longer a part of the Silicon Valley 'buzz' and almost appear to behave like utility companies from a portfolio p.o.v. And many of the other Dow stocks like Chevron, 3M, Verizon, etc, give dividends and thus, will do all right with a DRIP set in place.

I am holding out for a crash. I hear that China is slowing down too. I am gonna give it 6 more months and see how things pan out.
Thank you.

gabbar says

I am holding out for a crash. I hear that China is slowing down too. I am gonna give it 6 more months and see how things pan out.
Thank you.

A stock market crash within 5 months of the election ? Also as far as your post about 1.8% real annual return for stocks, I think it is more like at least 6% not 1.8%.

.

The reason the market will not crash is because it's anticipating a Trump victory

Guns. Guns and ammo. Has anyone seen the illegal alien amnesty bill congress is trying to pass?

just_passing_through says

Guns and ammo

need to focus more on homesteading and survivalist mode ?

Or just some Ilegal-B-Gone.

Misc says

Also, 1.8% over the rate of inflation is typically what a person would expect from investing in stocks

Misc, I would expect to earn that with a 70/30 fund (70% investment grade bond fund/30% stock index fund) such as retirement income fund, but I would reasonably expect at least a 6% real annual return for stocks like total stock market index fund.

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AD says

Misc says

Also, 1.8% over the rate of inflation is typically what a person would expect from investing in stocks

Misc, I would expect to earn that with a 70/30 fund (70% investment grade bond fund/30% stock index fund) such as retirement income fund, but I would reasonably expect at least a 6% real annual return for stocks like total stock market index fund.

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The problem in the investment world is that too many people are trying to "save" or "invest". Some people (like a large percentage of people on this site) think that their "investments" will increase in value. Mathematically, for the vast majority of people, they must lose value on their holdings.

Lemme just give some ballpark numbers. The US GDP is about $27 trillion. The savings rate is about 4%. That means the wizards of Wall Street have to come up with about $1 trillion of new financial instruments each and every year to cover the publics infatuation with saving. But wait...it doesn't stop there. We have to also invent new financial instruments to cover the investment returns of all the savings to date. The US stock market has a value of about $51 trillion. So using your figure of a 6% real return, that means that there must be an added about $3 trillion each year. But WAIT there's more the US government has about $34 trillion in debt. It's currently paying about 2% over the rate of inflation...so lets say $650 billion extra per year. Toss in an extra $120 billon for the interest for State and Local debt. About $17 trillion in corporate debt let's say 3% over the rate of inflation gives us about $500 billion more.

So ballpark about $5.25 Trillion each and every year at an ever increasing amount. Puts it at about 19% of GDP. At this point the Wall Street folks aren't even trying.

People should really regard their financial statements from their financial institutions as they would any other Wall Street propaganda. The sheer amount of malinvestment in unfucking real.

Misc says

Mathematically, for the vast majority of people, they must lose value on their holdings.

Misc says

People should really regard their financial statements from their financial institutions as they would any other Wall Street propaganda. The sheer amount of malinvestment in unfucking real.

Very interesting. Is this how government keeps itself the richest and the most powerful entity?

I've received notice that some of my bonds are being called this week. Well, actually not until the 15th...

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Oh snap , even Google saw a slight decline in advertiser sales thanks to a slowing economy (and also Tik Tok and Facebook competition ?) ... how long can it continue to operate without any earnings ?

Just like Google made job cuts annoucements before earnings call, so did Snap about 2 days ago: https://www.cnbc.com/2024/02/05/snap-to-lay-off-10percent-of-global-workforce-around-500-employees.html

That is somewhat of an earnings red flag if they announce job cuts before earnings call
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See below. Einhorn says the market has very little value investing. This is being worsened by passive investors such as those just pouring money into a S&P 500 index fund as part of their 401k and / or IRA.

As far as value or valuation, the S&P 500 is still not as bad as 1999: https://www.multpl.com/s-p-500-pe-ratio

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https://www.marketwatch.com/story/markets-are-fundamentally-broken-due-to-passive-investing-says-david-einhorn-0e480247

‘I view the markets as fundamentally broken…Passive investors have no opinion about value. They’re going to assume everybody else has done the work.’

— David Einhorn, president, Greenlight Capital

That’s hedge-fund titan David Einhorn arguing it’s tough out there for active money managers thanks to the seemingly inexorable rise of passive investing. The remarks came in an interview with Ritholtz Wealth Management co-founder Barry Ritholtz in his “Masters in Business” podcast.

“Value is just not a consideration for most investment money that’s out there. There’s all the machine money and algorithmic money which doesn’t have an opinion about value it has an opinion about price: ‘What is the price going to be in 15 minutes and I want to be ahead of that,'” he explained.

Amid what’s left of active management, “the value industry has gotten completely annihilated,” he said.

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I differ with Einhorn (see above post) in that the companies that are rallying have been achieving earnings for an extended period, unlike in 1999 with a lot of companies that never were profitable. I would state the active investing is now a lot less speculative compared to 1999.

For example, Google has a P/E of 27 which is rather low for a relatively new company; it went public in 2004 and it has shown steady growth in sales and earnings. Also it is focused on diversifying.

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Dr Michael Burry just bought Google and Amazon stock in 4th quarter of 2023... may be part of reason those stocks rallied in the 4th quarter

Bezos recently sold about $4 billion of Amazon stock

https://www.cnbc.com/2024/02/14/michael-burry-of-the-big-short-fame-buys-amazon-alphabet-and-a-dozen-of-other-new-stocks.html

Burry is starting to look like a one hit wonder.

Nope he's just running a classic pump and dump scam.

How does the media know what trades he's made? ? ? - He is the one that leaks it to them.

Warren Buffett took more than 50% loss on Paramount Global. His buys of Occidental Petroleum and Chevron seem to be indicating that oil price will increase in several months. Burry and Marks are both in JD. Any thoughts on PayPal, value trap or an opportunity?

Paramount global seems to go go down a lot and up , if someone can find trend , or political impact, we can make great $

Misc says

Nope he's just running a classic pump and dump scam.

How does the media know what trades he's made? ? ? - He is the one that leaks it to them.

His holdings are published quarterly as part of his SEC 13F filings, same goes for Warren Buffett, Ray Dalio, Bruce Berkowitz, George Soros, etc.
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What you guys think of 3M MMM it's around 91 $ with 6% dividend? It gave profit warning for 2024 n stock already went down.

KgK one says

What you guys think of 3M MMM it's around 91 $ with 6% dividend? It gave profit warning for 2024 n stock already went down.

gabbar says

What you guys think of 3M MMM it's around 91 $ with 6% dividend? It gave profit warning for 2024 n stock already went down.

That has been on my watch list. I plan to buy if it falls to $90.