The Investment Thread

[zurch1818]

30 minutes ago, LouisEly said:

I'd have to say that the list of people who are able to put 70% down on a $500K home is a pretty short list, especially for a 36-year-old.  My calculations were based on the standard 20%.

Well it was only 400k in 2018 when we bought it. The Waunakee housing market is going bananas right now. Covid was the one time in recent history that it grew like the stock market. There is also a supply problem...especially when the interest rates were so low. I also saved money like crazy person from age 24 to 31. I lived super cheaply and when I got raises, I just saved more towards a house. I wasn't as aggressive with investing for retirement at that time. I bet it doesn't surprise you that I struggle to spend money and I get paralyzed doing it. Looking back, 2/22/22 was the payoff date and I'd do it all over again.

[BrewerFan]

14 hours ago, LouisEly said:

I'd have to say that the list of people who are able to put 70% down on a $500K home is a pretty short list, especially for a 36-year-old.  My calculations were based on the standard 20%.

Consider yourself fortunate to have that much to put down at that young of an age.  You essentially paid cash.

Right...there was never meant to be any type of insult. I was talking about my experience. We did put 25% down and owed well into the 6 figures for it and interest rates were much lower than what I could have gotten through just about any investment. 

If we'd have put 70% down, that'd completely change the equation. 

[zurch1818]

None taken. You guys are simply more willing to be risky than me. I will say, if you get enough proceeds to pay off your primary residence in this sale, I'd recommend it. It's so nice from a cash flow perspective that a significant portion of my income isn't already spent.

However, I'm guessing you will have a hefty tax bill doing so.

LINK

[GAME05]

57 minutes ago, zurch1818 said:

You guys are simply more willing to be risky than me.

 

Naturally it's always easier to be risky when it's other people's money.

[BrewerFan]

9 hours ago, GAME05 said:

 

Naturally it's always easier to be risky when it's other people's money.

I wasn't talking about anyone else's money, I was saying I'd rather still be carrying a mortgage(on the investment property) and have taken the extra 8K a month and put that into an investment fund that very likely(in retrospect absolutely) would have grown at a much higher rate than the interest I was paying. That's hindsight though. But I'd do that moving forward.

Talking about your own home, while it's an investment, it's an entirely different mindset. I wish I'd have done things differently as this is exclusively an investment. Your home is your home. I understand why you'd want to get that paid off. Especially when you pay 70% up front. 

 

10 hours ago, zurch1818 said:

None taken. You guys are simply more willing to be risky than me. I will say, if you get enough proceeds to pay off your primary residence in this sale, I'd recommend it. It's so nice from a cash flow perspective that a significant portion of my income isn't already spent.

However, I'm guessing you will have a hefty tax bill doing so.

I bought my home a few years later, I just had to wait, so I may take some of that and "invest" it into a house to help my Sister out while the interest rates are so high, but if I move forward with the original agreement, I'm probably just going to put that money into a a couple different smaller investments.

If I move forward with the cash offer, then I'm going to take out another mortgage and re-invest into a building with more units. 

 

I'm about 90% sure I won't be going through with the owner financing as they came back today with this...ABSURD ask in the contract that they be allowed to take a loan out on the property before paying it off. That'd mean I'm in the secondary position on the title and if they defaulted, I'd assume that risk....and obvious non-starter.

 

So at this point, they either drop that or we go with another buyer. They led off with a request for no penalties for early payment...which obviously I'd have no problem with and then dropped that in my lap like it was a reasonable request. I don't know if they were just testing us or what, but it's just an outlandish ask. 

 

As for the capital gains, yeah, that's not gonna be fun, but how I handle that will depend on what we decide to do next and what the sale ends up being, but the 15% has already been accounted for.

That is the larger part of the question, anyone have any recommendations on what they'd invest in. I like taking this out and hearing different suggestions when it comes to investments. Again, if not another property, I'm thinking ~20% to my Dad just to...do whatever he wants, 60% into a Vanguard gen fund that is relatively safe and HAS been pretty consistently seeing 7% returns and then the rest into more specific, individual companies or stocks. 

[wallus]

Rough few days for the market. The jobs report unexpectedly showed there are more jobs available now, which is hurting it today. I also still maintain that student loans are a big deal too.

[nate82]

Going to be a rough day for the markets on Monday with what happened in Israel today.  Hopefully it doesn't spread to Lebanon but that area could have a larger impact on an already stressed part of the world. 

[wallus]

On 10/7/2023 at 9:03 PM, nate82 said:

Going to be a rough day for the markets on Monday with what happened in Israel today. 

Just giving you a hard time, this is why I DCA and don't change from it. 

[nate82]

12 minutes ago, wallus said:

Just giving you a hard time, this is why I DCA and don't change from it. 

Crude did jump over 4% today.  Which depending on future actions in the area could make it jump higher.  The market may correct itself if all out war occurs in the Middle East.

[owbc]

This isn't going to spread beyond what it currently is. Hamas did this to kill the Israel - Saudi peace deal. Israel will respond and then things will go back to the way they have been for seemingly forever. We already heavily support Israel so I don't know what can change there, presumably this will be used as an excuse to not fund Ukraine. 

I'm still waiting for the other shoe to drop on the US economy. I feel like I was too conservative in investing this year given that the S&P 500 is up 12% and it was only my retirement funds that really captured that. I only got the easy 4-5% in my short-term investments. However, I buy a decent amount of my company's stock and that is up 34% so overall I did fine. Curious how it's going for others -- what has worked and what hasn't this year? 

[GAME05]

I had the same thought, that the economic ball was going to drop, so I moved my money into more recession-type accounts. About six months ago moved my 401k into a bond account, though how garbage my 401k mutual funds are, it really hasn't much under performed the other options. Even their "small cap fund" is 60% bonds.

Took a big hit when Origin Materials had a bad report and lost 65% overnight. That one hurt. Otherwise moved things to Western Union which is doing a +12%, Cal-Maine Foods is a +5% but it pays an 11% dividend. Also holding onto Butterfield Bank which is an offshore tax haven bank at +16%. 

Origin Materials has me losing to the S&P YTD but otherwise I'm doing ok. May be the first time in a while I don't beat the market on the year.

Butterfield was recently downgraded but I'm otherwise holding to what I have. Still not positive on the economy and happy with WU and CALM.

[LouisEly]

44 minutes ago, GAME05 said:

Cal-Maine Foods is a +5% but it pays an 11% dividend

I wouldn't trust that dividend - or the stock price - to hold up.  Every time I've chased a high yield on a stock I've gotten burned.

Their Trailing 12-Month revenue and operating income is down from their last fiscal year (ending 5/31/23).

 

[wallus]

I finally recently bought a house. We will see if I made a horrible mistake, lol. 

[owbc]

16 hours ago, wallus said:

I finally recently bought a house. We will see if I made a horrible mistake, lol. 

Congrats! 

[nate82]

16 hours ago, wallus said:

I finally recently bought a house. We will see if I made a horrible mistake, lol. 

Just remember to refinance once the rates come back down in 3-5 years. 

[Fear The Chorizo]

On 10/10/2023 at 11:44 AM, owbc said:

This isn't going to spread beyond what it currently is. Hamas did this to kill the Israel - Saudi peace deal. Israel will respond and then things will go back to the way they have been for seemingly forever. We already heavily support Israel so I don't know what can change there, presumably this will be used as an excuse to not fund Ukraine. 

I'm still waiting for the other shoe to drop on the US economy. I feel like I was too conservative in investing this year given that the S&P 500 is up 12% and it was only my retirement funds that really captured that. I only got the easy 4-5% in my short-term investments. However, I buy a decent amount of my company's stock and that is up 34% so overall I did fine. Curious how it's going for others -- what has worked and what hasn't this year? 

For the first part of your post, no this doesn't really feel like Israel is interested in going back to the way things have been since 2005, and there's a strong likelihood this could spiral significantly in the region after people realize that this won't be a week or two week response.  I don't want to totally derail this thread though.

For the 2nd part, I don't even know if there are economic indicators even worth basing investment strategies on anymore - it really does seem like the US economic policy is to continue printing $$ and racking up debt to keep as many people afloat as possible and rely on the rest of the world being in worse economic shape so capital keeps flowing into domestic markets no matter what interest rates or costs of goods and services are.  At some point, that approach stops working, and the adjustment is abrupt - but it's incredibly difficult to time when it hits the fan right from an investment standpoint.  I've been in the "keep your blinders on and stay the course" approach of investing with my retirement fund, and while I'm sure I've missed out on larger gains I've also avoided taking hits by poorly timed investment buying/selling based on where I though stock and/or bond fund markets were headed.

The current economic landscape just feels weird, and investments seem to be largely untethered from day-to-day earning and spending habits of most people that are getting ground down but still hanging in there financially.

[wallus]

1 hour ago, nate82 said:

Just remember to refinance once the rates come back down in 3-5 years. 

That was a small part of making this purchase. We were looking to build but the pricing on that was not competitive.

When this house came on the market, we both assumed something was wrong with it because it was priced well. Come to find out the owner was moving out of state and needed to sell quickly so maybe this will be fine.

[owbc]

On 10/13/2023 at 9:43 AM, nate82 said:

Just remember to refinance once the rates come back down in 3-5 years. 

It's tricky to speculate what rates will be like in 3-5 years, but I think we can be fairly confident that if rates do go down, housing prices are going to shoot up again. The nationwide housing shortage isn't going anywhere. The best time to buy is in the past and the second best time to buy is right now (if you can afford the monthly payments). 

 

[zurch1818]

6 hours ago, owbc said:

It's tricky to speculate what rates will be like in 3-5 years, but I think we can be fairly confident that if rates do go down, housing prices are going to shoot up again. The nationwide housing shortage isn't going anywhere. The best time to buy is in the past and the second best time to buy is right now (if you can afford the monthly payments). 

Good point. Here are the average 30 year mortgage rates over the last 50+ years. Interest rates are still historically pretty low...just way higher than what we are used to.

I know there is a housing shortage...but I wish I understood why. Boomers should already have their houses and I don't believe the US population is exponentially growing at this time. Is it just families want bigger houses?

[Fear The Chorizo]

1 hour ago, zurch1818 said:

Good point. Here are the average 30 year mortgage rates over the last 50+ years. Interest rates are still historically pretty low...just way higher than what we are used to.

I know there is a housing shortage...but I wish I understood why. Boomers should already have their houses and I don't believe the US population is exponentially growing at this time. Is it just families want bigger houses?

For starters, the US population is growing pretty rapidly - probably 60 million more US citizens now compared to 2000.  And yeah, baby boomers have their houses, but they haven't yet reached the collective age ranges where they're destined for retirement villages or the afterlife, meaning the big turnover of houses from them to others looking to enter the housing market hasn't happened yet.  When that does, I can see the housing shortage quickly turning into a glut.

Also, I think it's got alot to do with people who have the means to move from urban city centers to suburbs much more readily than a generation or two ago, which means more single family homes per capita - US cities are being hollowed out

[nate82]

1 hour ago, zurch1818 said:

Boomers should already have their houses

Boomers are not moving out of their houses.  Also new housing supply has only recently gone back up. For example new housing supply in 2020 was at its lowest since the 2000’s.  The right time to buy was in 2008 and 1980.  

 

Even in your graph the rate has gone up and down.  So I would expect it to go down maybe not below 4% again but we should see 5% again and maybe sub 5% in the next 3-5 years.

[homer]

10 hours ago, nate82 said:

Boomers are not moving out of their houses.  Also new housing supply has only recently gone back up. For example new housing supply in 2020 was at its lowest since the 2000’s.  The right time to buy was in 2008 and 1980.  

 

Even in your graph the rate has gone up and down.  So I would expect it to go down maybe not below 4% again but we should see 5% again and maybe sub 5% in the next 3-5 years.

Didn't the housing market crash in the fall of 2008?

[homer]

Just as an aside, I was down a rabbit hole and found this gem. Note the date:

 

 

[Fear The Chorizo]

13 minutes ago, homer said:

Didn't the housing market crash in the fall of 2008?

I was going to say, we bought our 1st house in spring of 2008 with a zero down, 6% 30 yr mortgage and promptly went underwater for a few years while the market cratered from 2008  through about 2011.  1980 was a precursor for economic malaise across all sectors due to inflationary pressures, too.

Those were far from the right times to buy due to financial pressures moreso than housing supply....there are some parallels in this current economy to those times, unfortunately.

Regarding mortgage rates - I don't think they're nearly as tied to home prices as they are towards the base rates dictated by the Fed...and as inflation has remained stubbornly high I don't see them dropping back anywhere close to 4% anytime soon.  Those ~2.5-4% mortgage rates were a historical anomaly based on an extended period where the Fed basically set a 0% Fed funds rate to keep the economy growing for 7 years through 2016 after the last bad recession caused largely by an overheated housing market and overleveraged wall street balance sheets, then had it at 0% through Covid that really jumpstarted the upward inflationary pressures we are still dealing with now.

what do they say about history repeating itself??

[nate82]

38 minutes ago, homer said:

Didn't the housing market crash in the fall of 2008?

Well depends on if you were buying a new home as in newly built and when you bought the house.  Mid to late 2008 and you are fine.  I will have to look it up again but there has been some studies that suggest that people who bought in 2008 are better off than those who didn’t.