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When should we get greedy?

Investment discussion for beginners. Why you should invest your money, get help getting started
GoSeigen
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Re: When should we get greedy?

#507032

Postby GoSeigen » June 14th, 2022, 7:08 am

vrdiver wrote:
GoSeigen wrote:In my previous post "When the yield inverts" should read "When the term structure inverts".

GS

I've been reading your posts on this thread for a while, but am still embarrassingly ignorant of what you are actually doing!

Could you point me to a primer that I could read (think Ladybird edition of "GoSeigen Straddles Mr Market") :o

VRD


Hi VRD. "Straddle" is jargon for an option purchase of both a put and a call option with the same strike price, usually purchased "at the money" (ATM) meaning the underlying price is close to the strike price.

The effect of buying a straddle is that you stand to profit whether the market rises significantly or falls significantly. The direction doesn't matter. You lose if, by expiration, you have not closed out your options in the money (ITM) and if the market has not moved enough to cover the purchased option premium.

Here's an explanation of straddles: https://www.theoptionsguide.com/long-straddle.aspx

I've also traded strangles: they are similar but you purchase out-of-the-money (OTM) options instead. This reduces losses from a quiet market but makes it harder to profit (larger swings needed).

I track the VIX term structure to help make decisions to either buy or write (go short of) these options. The VIX measures the implied volatility of the S&P500 index; its term structure plots the price of VIX futures vs their expiration date, similar to a bond yield curve.


This thread within a thread was started during the 2020 crash when the OP asked whether it was time to buy, and I remarked that given the extreme volatility of shares (because convexity) I preferred to try a market-neutral strategy and see how that performed, which I have been tracking ever since. It has been reasonably profitable for me, however it is only a small portion of my portfolio.

The long straddle trade is nice psychologically because you are happy to close out gains on your puts when the market has fallen and equally gains on the calls when it has risen. (So you are buying low and selling high.) Conversely, when the market is quiet you are happy to watch the premium drop on your short positions. (So you are profiting from being patient and not champing at the bit.)


GS

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Re: When should we get greedy?

#507193

Postby vrdiver » June 14th, 2022, 3:49 pm

Many thanks GS.

I've started to read the link you provided, which is helping my understanding!

On the basis that "there ain't no such thing as a free lunch" I think I need to do a bit more reading before putting my toe in the water with this, but it's interesting to see the possibilities.

Now to re-read this thread...

ATB
VRD

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Re: When should we get greedy?

#557892

Postby JDot » December 30th, 2022, 7:58 am

vrdiver wrote:Many thanks GS.

I've started to read the link you provided, which is helping my understanding!

On the basis that "there ain't no such thing as a free lunch" I think I need to do a bit more reading before putting my toe in the water with this, but it's interesting to see the possibilities.

Now to re-read this thread...

ATB
VRD


A couple quotes come to mind.

Be fearful when everyone is greedy and greedy when everyone is scared! (Warren Buffet)

Only invest in things you understand! (Warren Buffet)

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Re: When should we get greedy?

#557905

Postby SalvorHardin » December 30th, 2022, 9:39 am

JDot wrote:A couple quotes come to mind.

Be fearful when everyone is greedy and greedy when everyone is scared! (Warren Buffet)

Only invest in things you understand! (Warren Buffet)

Another Buffett classic is "You pay a very high price in the stock market for a cheery consensus.". When the pundits are almost unanimous about a company and many people who've never bought shares are buying, then it's time to sell.

JP Morgan used to get his shoes shined every Wednesday. One day the shoe shine boy asked if he and his friends could buy some stock through Morgan’s brokerage, saying that they had $40 to invest. Morgan politely declined, rushed back to his office and told his dealers to sell everything. Morgan said, “If the shoe shine boys are buying stocks, who else is left?” The 1929 stock market crash was only a few days away and Morgan looked like a genius.

And of course Nathan Rothschild's "Buy when there's blood in the streets" plus the much less well known second half of the sentence "even if the blood is your own".

I've been buying American REITs for the past couple of months, some of which were down by over 60% from their peak and now yield more than 10%. I've left a bit of blood on the carpet, but am reasonably confident that they will still keep pumping out those dividends.

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Re: When should we get greedy?

#557915

Postby JDot » December 30th, 2022, 10:19 am

SalvorHardin wrote:
JDot wrote:A couple quotes come to mind.

Be fearful when everyone is greedy and greedy when everyone is scared! (Warren Buffet)

Only invest in things you understand! (Warren Buffet)

Another Buffett classic is "You pay a very high price in the stock market for a cheery consensus.". When the pundits are almost unanimous about a company and many people who've never bought shares are buying, then it's time to sell.

JP Morgan used to get his shoes shined every Wednesday. One day the shoe shine boy asked if he and his friends could buy some stock through Morgan’s brokerage, saying that they had $40 to invest. Morgan politely declined, rushed back to his office and told his dealers to sell everything. Morgan said, “If the shoe shine boys are buying stocks, who else is left?” The 1929 stock market crash was only a few days away and Morgan looked like a genius.

And of course Nathan Rothschild's "Buy when there's blood in the streets" plus the much less well known second half of the sentence "even if the blood is your own".

I've been buying American REITs for the past couple of months, some of which were down by over 60% from their peak and now yield more than 10%. I've left a bit of blood on the carpet, but am reasonably confident that they will still keep pumping out those dividends.


I like some UK Reits also right now as well such as Home reit, Civitas reit, ( short sellers drama with open letters regarding housing associations viability to pay rent passed to them via government ) Target health, Ebox, etc. All selling at a massive discount to NAV.

Don't like US stocks because of the 30 % withholding tax levied on foreign investors like myself.

Question are US Reits rental income taxed and treated different to stocks dividend receipts under WBen8 for foreign investors?

Disclaimer I am not very experienced although I have had money in the market for a couple of years.

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Re: When should we get greedy?

#557940

Postby SalvorHardin » December 30th, 2022, 11:23 am

JDot wrote:I like some UK Reits also right now as well such as Home reit, Civitas reit, ( short sellers drama with open letters regarding housing associations viability to pay rent passed to them via government ) Target health, Ebox, etc. All selling at a massive discount to NAV.

Don't like US stocks because of the 30 % withholding tax levied on foreign investors like myself.

Question are US Reits rental income taxed and treated different to stocks dividend receipts under WBen8 for foreign investors?

Disclaimer I am not very experienced although I have had money in the market for a couple of years.

The 30% withholding tax on American dividends becomes 15% if you have completed the W8-BEN form that your broker will get you to complete. Also withholding taxes can be offset against your UK tax liability (to avoid double taxation).

American REIT dividends are treated just like the dividends from American non-REITs.

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Re: When should we get greedy?

#557948

Postby JDot » December 30th, 2022, 11:47 am


The 30% withholding tax on American dividends becomes 15% if you have completed the W8-BEN form that your broker will get you to complete. Also withholding taxes can be offset against your UK tax liability (to avoid double taxation).

American REIT dividends are treated just like the dividends from American non-REITs.


Thanks Salvor I do appreciate.

What are your thoughts on the UK Reits I suggested,
Home
Civitas
Soho
Target health
All supposed in defensive no cyclical sectors paying high dividend with huge discounts to NAV. Do you like any of them, or have I missed something?

SalvorHardin
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Re: When should we get greedy?

#557968

Postby SalvorHardin » December 30th, 2022, 12:36 pm

JDot wrote:
Thanks Salvor I do appreciate.

What are your thoughts on the UK Reits I suggested,
Home
Civitas
Soho
Target health
All supposed in defensive no cyclical sectors paying high dividend with huge discounts to NAV. Do you like any of them, or have I missed something?

Sorry, I can't help you with any of those. I have only heard of Civitas. You know much more about them than me!!

My UK REITs are the Central London specialists (Derwent London, Great Portland Estates and Shaftesbury). Low dividends, discounts of around 40%, they are a bet on the London office market recovering in 2023-24.

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Re: When should we get greedy?

#559983

Postby TheMotorcycleBoy » January 8th, 2023, 10:09 am

SalvorHardin wrote:
JDot wrote:
Thanks Salvor I do appreciate.

What are your thoughts on the UK Reits I suggested,
Home
Civitas
Soho
Target health
All supposed in defensive no cyclical sectors paying high dividend with huge discounts to NAV. Do you like any of them, or have I missed something?

Sorry, I can't help you with any of those. I have only heard of Civitas. You know much more about them than me!!

My UK REITs are the Central London specialists (Derwent London, Great Portland Estates and Shaftesbury). Low dividends, discounts of around 40%, they are a bet on the London office market recovering in 2023-24.

As an employee whose been WFH since March 2020 (and wants to stay there!), I'm a bit suspicious about this recovery.

There's a lot of talk of the "hybrid work model", and apparently firms are attempting to get "more ppl back in". But WFH is a juicy carrot with rising costs of living for many.

Matt

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Re: When should we get greedy?

#560681

Postby Gilgongo » January 11th, 2023, 8:07 am

TheMotorcycleBoy wrote:There's a lot of talk of the "hybrid work model", and apparently firms are attempting to get "more ppl back in". But WFH is a juicy carrot with rising costs of living for many.


While anecdotes aren't data, I work for a company based in a large modern building in Holborn, Central London. I'd say the office (or my part of it) gets to perhaps 50% capacity on some days, while others - notably Mondays and Fridays - are almost deserted (in fact I think the canteen has stopped serving hot food on those days now). I'd not buy any REITS until I saw more than 10% in on a Monday :lol:

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Re: When should we get greedy?

#560735

Postby SalvorHardin » January 11th, 2023, 11:36 am

TheMotorcycleBoy wrote:As an employee whose been WFH since March 2020 (and wants to stay there!), I'm a bit suspicious about this recovery.

There's a lot of talk of the "hybrid work model", and apparently firms are attempting to get "more ppl back in". But WFH is a juicy carrot with rising costs of living for many.

Whilst work from home (WFH) works for a lot of people and their employers, it doesn't for many others. We're seeing a good example of this with large parts of the public sector, in particular Local Government and the Civil Service agencies where productivity and efficiency ain't what it used to be (especially the Passport Office and HMRC).

As an investor I'm banking on the combination of employers seeing how WFH reduces productivity (for some employers), the forthcoming recession encouraging attendance (fear that WFH employees will be the first to get the push when there are job cuts) and employers stuck with underused property on long leases wanting to put this office space to better use. A recession will reduce the bargaining power that some employees have at the moment when it comes to demanding WFH

Also there does seem to be a shift away from the secondary offices towards the primary offices (for whom demand seems to be more solid). Derwent London and Great Portland Estates (my only two UK REITs - Shaftesbury was sold recently but I will be back after the merger with Capital & Counties is finalised) have been talking about the demand for primary offices being pretty resilient (which is really all they offer in Central London). It's the secondary offices which are much more at risk IMHO.

American is a different market when it comes to offices. WFH didn't get the same level of traction there and lots of bosses have been very vocal about getting people back into the office (and sacking reluctant returners). Elon Musk is a very good example of this.

Also a lot of WFH worries are already priced into the market. I've been buying some American REITs which are more than 70% off their peak, yielding 10% or more. American inflation is already falling and America doesn't have the same energy crisis as Europe. If the worries about rising American interest rates turn out to be overblown, then there is the prospect of a serious recovery in the American office REIT market (currently 15% of my portfolio is in American REITs (offices, medical facilities, apartments and farmland) and I'm planning to put a further 10% into the sector when the ongoing situation regarding Manchester United possibly being sold is resolved (one way or the other within the next six months).

I could be wrong. Seriously wrong. That's what makes a market :D

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Re: When should we get greedy?

#560793

Postby TheMotorcycleBoy » January 11th, 2023, 3:56 pm

Gilgongo wrote:
TheMotorcycleBoy wrote:There's a lot of talk of the "hybrid work model", and apparently firms are attempting to get "more ppl back in". But WFH is a juicy carrot with rising costs of living for many.


While anecdotes aren't data, I work for a company based in a large modern building in Holborn, Central London. I'd say the office (or my part of it) gets to perhaps 50% capacity on some days, while others - notably Mondays and Fridays - are almost deserted (in fact I think the canteen has stopped serving hot food on those days now). I'd not buy any REITS until I saw more than 10% in on a Monday :lol:

Yes, I've only been in about 6-8 times since March 2020. Of those times, only once did I do about 0.5d of work on site. The other times were to collect hardware, or attend the odd meeting that I fancied doing on site.

EDITED: From talking to the catering manager the last time I went in, he said that offices are a lot less populated than was HR's plan.

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Re: When should we get greedy?

#560802

Postby TheMotorcycleBoy » January 11th, 2023, 4:30 pm

SalvorHardin wrote:
TheMotorcycleBoy wrote:As an employee whose been WFH since March 2020 (and wants to stay there!), I'm a bit suspicious about this recovery.

There's a lot of talk of the "hybrid work model", and apparently firms are attempting to get "more ppl back in". But WFH is a juicy carrot with rising costs of living for many.

Whilst work from home (WFH) works for a lot of people and their employers, it doesn't for many others. We're seeing a good example of this with large parts of the public sector, in particular Local Government and the Civil Service agencies where productivity and efficiency ain't what it used to be (especially the Passport Office and HMRC).

Yes I think you're right. So I've spoken to HMRC and power tool suppliers over the pandemic who were WFH and sometimes they were quite glitchy over the phone, and files took slightly longer to download for them.

For me, and other softies, it's arguably the reverse. I no longer spend 1.5-2 hours travelling so I have more time and energy to do productive work now. Fibre to the premise and decent office equipment (better than my firms) helps too. Equally I get many fewer distractions, since for some work types, the famous "open plan office" is hell, basically having to be audience to loud neighbouring banter, or test engineers deciding that the building is a stage for stand-up comedy, or debating today's headlines.

The medium term issue for my firm I guess, is how to justify their 3 office campus, while they wait for the lease to expire on their oldest one, and then *possibly* they'll become a 2 office campus. But that's conjecture on my part.... ;)

American is a different market when it comes to offices. WFH didn't get the same level of traction there and lots of bosses have been very vocal about getting people back into the office (and sacking reluctant returners).

I actually think it's worse for the States. So I've got a colleague, who since the pandemic has moved away from Cambridgeshire (my firm has currently has a 3 office campus in Cambridge Biz Park) to Portmouth. But in the States, I believe some employees have moved to different States, i.e. for different laws, tax regimes, weather. I don't how they'll get those employees back, perhaps that's why the pundits are reporting the US job market to be very tight at present.

I could be wrong. Seriously wrong. That's what makes a market :D

Or maybe right! As you say that's all a function of market dynamics. Personally I think it's so hard right now to know what horse to back. In additional to staying diverse, I'm looking at less growth stocks, more ITs which pay a decent div, and I'm even considering adding some corporate yield exposure, they'll being several I've seen with 7-8% running yields and below par.

Matt


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