All things STOCKS

[ndubvols]

Imo feel like the effects of student loan repayments starting up again next month isn’t being fully priced in. A lot of discretionary income about to go away for those in their 20s and 30s with credit card balances at all time highs already. Also have a feeling there’s a lot of first time home buyers that bought during the housing run up that maybe didn’t budget appropriately with student loans factored in. Consumer spending remaining fairly strong has been a key to avoiding recession this far, but at some point feel like it has to give.

 

[Thunder Good-Oil]

Imo feel like the effects of student loan repayments starting up again next month isn’t being fully priced in. A lot of discretionary income about to go away for those in their 20s and 30s with credit card balances at all time highs already. Also have a feeling there’s a lot of first time home buyers that bought during the housing run up that maybe didn’t budget appropriately with student loans factored in. Consumer spending remaining fairly strong has been a key to avoiding recession this far, but at some point feel like it has to give.

But… on the other hand taking away the extra spending capacity of that 20s/30s demo relieves some inflationary pressure which is one of the biggest hold ups in investments. Interest rates won’t improve as long as there is any indication of prolonged higher inflation. China not making as much stuff creates inflationary pressure.

There’s so much data and it’s giving mixed signals. Employment for example - it’s great to have a lot of well paying jobs for consumer spending, but that can also mean more risk of inflation and bottom lines being hurt with higher staffing costs.

It’s going to be more of a challenge for the next year or so to find good companies to invest in rather than to go along for an easy ride where EVERYTHING goes up.

The POTUS election cycle is another bit of data to throw into the mix. And the IRA (Inflationary Reduction Act) spending ramping up. The decoupling with China. The huge national debt. Unwinding the COVID lockdown/workers returning to offices. The aging demographics (and pressure on Social Security/Medicare). AI and its LT effect on jobs. The massive transfer of wealth as Boomers cycle out (opportunity for funeral services?). It’s hard to digest all of the information.

 

[ndubvols]

But… on the other hand taking away the extra spending capacity of that 20s/30s demo relieves some inflationary pressure which is one of the biggest hold ups in investments. Interest rates won’t improve as long as there is any indication of prolonged higher inflation. China not making as much stuff creates inflationary pressure.

There’s so much data and it’s giving mixed signals. Employment for example - it’s great to have a lot of well paying jobs for consumer spending, but that can also mean more risk of inflation and bottom lines being hurt with higher staffing costs.

It’s going to be more of a challenge for the next year or so to find good companies to invest in rather than to go along for an easy ride where EVERYTHING goes up.

The POTUS election cycle is another bit of data to throw into the mix. And the IRA (Inflationary Reduction Act) spending ramping up. The decoupling with China. The huge national debt. Unwinding the COVID lockdown/workers returning to offices. The aging demographics (and pressure on Social Security/Medicare). AI and its LT effect on jobs. The massive transfer of wealth as Boomers cycle out (opportunity for funeral services?). It’s hard to digest all of the information.

There’s definitely mixed signals depending on where you look, just feels like the market has been primarily focused on inflation and fed rates. Banks already have shown some stress, will be interesting to see what happens if there’s an increase in consumer defaults and potential for defaults on commercial real estate as well.

All that to say, think the postive outlook on inflation cooling and rates going down next year is already priced in. I’m sure the other stuff mentioned is as well, just doesn’t feel like it with the recent run-up.

 

[Thunder Good-Oil]

There’s definitely mixed signals depending on where you look, just feels like the market has been primarily focused on inflation and fed rates. Banks already have shown some stress, will be interesting to see what happens if there’s an increase in consumer defaults and potential for defaults on commercial real estate as well.

All that to say, think the postive outlook on inflation cooling and rates going down next year is already priced in. I’m sure the other stuff mentioned is as well, just doesn’t feel like it with the recent run-up.

I agree 100% about next year being priced in. At least with most extremely large large caps and the equity averages. And banks are in a conundrum until they get back a normalized rate spread instead of the flat or inverted environment. Other parts of the financial sector look better than banks right now (except for the opportunity of buying beaten up bank stocks).

 

[Jack Burton]

I’m primarily an index investor but have some money on the sidelines. Can anyone share their favorite speculative play that I should research?

 

[Thunder Good-Oil]

I’m primarily an index investor but have some money on the sidelines. Can anyone share their favorite speculative play that I should research?

There are all sorts of ways to speculate. You can go with very high risk stocks. Some that can go to zero. You can trade the 4 option positions (but don’t short calls unless you have the shares in the account and are selling covered calls). You can buy sound companies that have been beaten up. You can buy shares of growth companies.

If you just want to speculate much like rolling dice, buy highly volatile names. Look at the implied volatility for the name.

A way to speculate, but better with a stock that you don’t mind holding for a long time if the stock price moves against you, is selling cash secured put options and then (when assigned the shares) sell covered call options on the shares that were assigned to you. It’s the Wheel Strategy and is easier than it sounds. YouTube has videos. You’ll need cash in your account for 100x the price of the shares to sell the “cash secured” puts. So for a $350 stock you need $35,000 cash in the account for each put contract tgat you sell. For a $5 stock you’ll need $500 in the account.

MicroStrategy (MSTR) is a highly speculative stock. There is an underlying tech business but the valuation is a speculation on Bitcoin as they convert their cash as it’s generated into the crypto currency. I saw that the P/E ratio was in the low 20s but I don’t know how much of that is because of the fluctuation in Bitcoin.

Small cap stocks can be pretty speculative. But stay away from penny stocks. There is a reason that shares are cheap. It would be better to buy 2x shares of a $100 stock than 2,000x shares of a $0.10 stock. Instead of penny stocks, go to Las Vegas or open an online betting account.

Another interpretation of speculating is to simply take on more risk. You can stay in funds and do that. Look at the leveraged ETFs (and inverse leveraged ETFs). You can bet for or against the markets while only putting what you put in at risk. If you short an investment your potential losses are unlimited. You can instead buy short themed ETFs that will profit as (long) investments fall in value. LABD shorts the biotech industry. FAZ shorts the financial sector. Their opposites are LABU and FAS. TQQQ and SQQQ are leveraged ETFs that you can use to speculate on the direction of the Nasdaq 100.

 

[Thunder Good-Oil]

Spirit Airlines (SAVE) is very speculative. Shares are trading around $16.50. JetBlue is trying to buy them for about $31 by December 2024. But the government regulators are attacking the deal. If JetBlue wins in court then the Spirit shares will almost double. If the deal is blocked by the Feds then who knows where the bottom would be for SAVE? They’ll still be selling seats on their airplanes. Maybe shares fall by 50% or more. Maybe the probability of the deal failing is already priced in.

 

[Thunder Good-Oil]

Nvidia is very speculative. Currently $425/share. It could go to $800. It could go to $200.

Right now anything related to AI is speculative. Also any comoany with EV exposure (TSLA, GM, F).

 

[Thunder Good-Oil]

I have a small, speculative position with Axos Financial (AX) right now. They make some huge, risky loans like $100 million to refinance Trump Tower and $125 million for Trump’s Doral golf resort. The CEO and CFO seem kind of shady to me and the largest shareholder is a billionaire that is in the sub-prime auto lending business. The executives recently sold off 10% +/- of their shares. Even so, the Wall Street analysts are generally positive - calling for shares to go from the current $41 to the mid 50s.

With Ameritrade transitioning accounts to Schwab they are losing some of their financial planners that use that platform to hold their client’s accounts. I think that Axos will be picking taking a lot of those accounts.

 

[Thunder Good-Oil]

More stocks that are speculative (I’m only in UPS).

United Parcel Service (UPS) - can they afford the new labor agreement with some drivers making $150,000-$175,000 in pay and benefits?

3M (MMM) - will the litigation over their earplugs wreck the company?

3M and DuPont (DD) - will the fire fighting foam litigation wreck them?

 

[Thunder Good-Oil]

SoFi Technologies (SOFI):
They might do very well as student loans will once again have to be paid back (what a novel concept).

 

[Milehigh_Vol]

Just dropping in, I believe the student loan and commercial office default is a very large looming shadow.

Also rental homes, with increased savings account interest payouts up to 5.9% makes me wonder if it is worth renting out houses with upkeep or sit on the money in one of the high yield accounts.

Good luck

 

[Thunder Good-Oil]

Home builders:
If interest rates stay high enough to discourage existing homeowners from putting their property into the market (rather than selling and giving up the VERY low interest mortgages) then the new home builders will continue to see high demand despite the higher rates on new mortgages.

 

[Thunder Good-Oil]

Just dropping in, I believe the student loan and commercial office default is a very large looming shadow.

Also rental homes, with increased savings account interest payouts up to 5.9% makes me wonder if it is worth renting out houses with upkeep or sit on the money in one of the high yield accounts.

Good luck

If I owned a company that could pull it off, I’d be looking at converting office space to housing. But it might be more efficient to just tear down offices and build new housing from scratch.

Student loans: $1.75 trillion owed. About $30k per student. But employment opportunities are very good for the grads without the garbage degrees. Who knows? I think that a bigger concern is the low birth rate while the 65+ age demo is exploding.

 

[Thunder Good-Oil]

Rocket Companies (RKT) - can they turn a profit?

Robinhood Mkts (HOOD) - can they become profitable? Will the meme traders / wallstreetbets / small account investors forgive them for interfering with the short squeeze and eventually come back to their platform? Will the payment for order flow business model work in the long run?

 

[Milehigh_Vol]

If I owned a company that could pull it off, I’d be looking at converting office space to housing. But it might be more efficient to just tear down offices and build new housing from scratch.

Student loans: $1.75 trillion owed. About $30k per student. But employment opportunities are very good for the grads without the garbage degrees. Who knows? I think that a bigger concern is the low birth rate while the 65+ age demo is exploding.

Do you think that lower birth rate is the downward pressure of student loans and housing though? I know I did not have kids till I considered myself stable. Having a looming debt and unstable housing would cause me not to have children.

I saw a study where people under 35 have on average 3 room mates right now, not including college students.

 

[Jack Burton]

If I owned a company that could pull it off, I’d be looking at converting office space to housing. But it might be more efficient to just tear down offices and build new housing from scratch.

Student loans: $1.75 trillion owed. About $30k per student. But employment opportunities are very good for the grads without the garbage degrees. Who knows? I think that a bigger concern is the low birth rate while the 65+ age demo is exploding.

America is in a great position where it can at least open its immigration doors if we need a younger population to supplement the birth rate. You’re welcome to join us but you have to work and pay taxes.

 

[Thunder Good-Oil]

Do you think that lower birth rate is the downward pressure of student loans and housing though? I know I did not have kids till I considered myself stable. Having a looming debt and unstable housing would cause me not to have children.

I saw a study where people under 35 have on average 3 room mates right now, not including college students.

I think that lower birth rates is more about how society has transitioned away from traditional families that were so prevalent for generations. Like younger groups being more interested in experiences rather than stuff. Like a lower percentage of drivers. I think that fewer kids is a preference rather than an economic decision. But I’m certainly no expert in sociology. It’s a lot easier to understand in China with their one child that began in the 1970s.

 

[Thunder Good-Oil]

America is in a great position where it can at least open its immigration doors if we need a younger population to supplement the birth rate. You’re welcome to join us but you have to work and pay taxes.

It would be great to take more young immigrants. But there’s a downside when the bad guys also waltz right on in. The gangs. The organized store theft. The fentanyl. The homelessness. The strain on the health care system.

 

[Jack Burton]

It would be great to take more young immigrants. But there’s a downside when the bad guys also waltz right on in. The gangs. The organized store theft. The fentanyl. The homelessness. The strain on the health care system.

Yes, it would need to be well regulated, merit based immigration filling gaps where needed in the U.S.

 

[Thunder Good-Oil]

Yes, it would need to be well regulated, merit based immigration filling gaps where needed in the U.S.

If I was in charge, I’d change the anchor baby laws immediately.

I have no idea how to manage even more than the million plus immigrants that we already have. But if the possibility of granting amnesty to the nearly 25% of them that aren’t here legally was shut down decisively then it would help. It is unfair for those they arrived legally when others have the possibility of becoming citizens without following the rules. I’d also slam any and every employer that blatantly breaks laws.

As far as helping with the labor force, work visas are a good thing. But I don’t know how to police it without violating individual’s rights. Big, bloated government is also bad.

 

[Thunder Good-Oil]

Here’s one to speculate on:

Hawaiian Electric (HE)

10% dividend

Possibly negligent and caused billions in property damages and 100+ lives to be lost. They’d have insurance - but how much? Hawaiian attorneys will have a windfall for sure.

 

[Velo Vol]

I think that lower birth rates is more about how society has transitioned away from traditional families that were so prevalent for generations. Like younger groups being more interested in experiences rather than stuff. Like a lower percentage of drivers. I think that fewer kids is a preference rather than an economic decision. But I’m certainly no expert in sociology. It’s a lot easier to understand in China with their one child that began in the 1970s.

Most developed countries are experiencing declining birth rates. A number are now below the needed replacement rate. It's certainly not just a US phenomenon.

 

[Thunder Good-Oil]

Most developed countries are experiencing declining birth rates. A number are now below the needed replacement rate. It's certainly not just a US phenomenon.

Japan has been dealing with it for decades. They planned well. Although it hasn’t been reflected as an investment. But they are apples and oranges to the US in terms of geography and resources. The US stands apart from everybody.

 

[Thunder Good-Oil]

2 more for speculating:
American Axel (AXL)
International Flavors/Fragrances (IFF)

Both with recent sell offs after earnings releases. IFF is a much larger company that isn’t profitable. AXL has a profit and a market cap below $1B.

AXL doesn’t appear to have exposure to internal combustion engines as a risk. Drive trains, axels, differentials. I think that EVs need those components as well.