Sunday, March 19, 2023

5 Year Return

 5 Year Return: Mar 18, 2018 to Mar 18, 2023 (Currently valued more than 100B+ Companies)

  1. AAPL 242%
  2. MSFT 189%
  3. NVDA 315%
  4. TSLA 716%
  5. UNH 107%
  6. LLY 312%
  7. AVGO 141%
  8. ASML 200%
  9. NVO 175%
  10. COST 158%
  11. DHR 134%
  12. TMUS 117%
  13. LIN 104%
  14. AMD 729%
  15. LOW 126%
  16. PDD 250%
  17. INTU 133%
  18. DE 129%
  19. ELV 100%
  20. BX 148%
  21. AMAT 98%
  22. CP 114%
My observation for above data...
  • Absence of FANG - Facebook Amazon Netflix Google.
  • Other famous names such as Sales Force or Disney also not in. None of the Banks in it. Starbucks or American Express not in it either.
  • Lot of chip companies in it - 6 out of 22.
  • Sectors matter but not really. Even defensive names such as Railways can generate amazing return. Canadian Pacific Railway.
  • None of the oil names in it but Linde which is chemical company in it - primary business of Gas.
  • It’s not always the best in breed gets better result. Home Depot is better but Lows has generated better return in last 5 years because it was undervalued. Similarly BABA, JD not in it but PDD in it.

Wednesday, February 15, 2023

Buying a House is not a smart Financial Decision

Buffet purchased his first stock when he was 14 year old in 1941 and he bought his house in 1959. Many wealthy people concentrate on achieving something with their career (job or business) before purchasing a house. Buying a house is certainly one of the most important decision of life as it is the most expensive thing you will buy - car being the second most expensive thing. Buying a house - in my opinion - is not the most smartest financial decision - however it is more or less an emotional decision - as you will spend minimum of decade of your life in it (on average) - For many people they spend their rest of the life span in it - so it has to be the very right decision. 

There are lot of variables involved in terms of buying a house. Unlike a popular opinion - that when you buy a house, you are building an house equity - but at the same time, you are also taking a bigger debt that you have to pay - no matter what. Let's take a simple example of an average house price of 300,000$ - for someone who is just started their career. Assuming that you have 20% money to put down as down-payment (60,000$ + closing prices + escrow money + small repairs) roughly equal to 75,000$. You may buy some new furniture and that amount may very well go to around 80,000$. So, you have to have 80,000$ to buy a home - if not - you will pay Mortgage insurance and most likely slightly higher interest rate on your mortgage. 

Let's look at the path of someone who didn't bought the house with 80,000$ (30 years back) - 1992 and invested that money in stock market (S&P 500).

If you had invested $10,000 in the S&P 500 index in 1992 and held on with dividends reinvested, you'd now have more than $170,000. (From Google) - so if you had invested $80,000$ in the S&P 500 index in 1992 then that would have been - 1.36 Million US Dollars. 
It is hard to guess value of the house bought in 1992 - as it strictly depends upon "Location", however, looking at average price of housing in 1992 and comparing it in the 2022 will give a rough idea. 
Home prices rose steadily through the '80s, peaking in 1989 with an average price of $151,200 before sliding to $141,700 in 1992. (Google) 
The average home price in the U.S. is $348,079 in 2022. (Google)
So, by this logic - 300K house in 1992 might be valued today at 736,935$. Bear in mind - house that you might have bought in 1992 might already be 15-20 year old + 30 year - which means you are selling that house which is roughly 50 year old in 2022. So, 750K seems like a reasonable amount to go to for an old house. 
Now, just by literal calculation - you are at least half a million dollar ahead by investing in the stock market compare to house. Now, when you buy a house, you have agreed to make mortgage payment for next 30 years. Apart from the mortgage payment, you will have to pay property taxes, sewer charges, association fees or trash removal fee/cleaning snow fee and other maintenance which you might not have paid if you might have Rented a place. On an average, you would have ended up paying 500$ to 1000$ per month on added expenses - just because you bought a house and not renting it. Even if we go by 500$ (on minimum side) - that is roughly 180,000$ over the next 30 years. Should you consider dollar cost averaging just that amount and invested in S&P 500, that might have fetched you another million dollar by 2022. 
It was probably easy in last 10 years or so to buy a house as mortgage interest rate were very reasonable around 3 to 4% for a 30 year loan. It is also easy to rent that property and collect rent which may pay for mortgage and other expenses but now with interest rate close to 7%, you may not be able to pass down the entire expense to the renter. It is specially difficult to keep an house in a state where property taxes are as high as 2.5 to 3% of property value. 
300K house you may think of buying in a state like New Jersey - you will end up paying 400K in mortgage loan + 300 K in Property Taxes + 200K in other expenses. So your total expense to own that house in 30 years might be 1.2 Million Dollars. Would you recover all that money after 30 years for a house which might be 50 year old in 2052? Assuming that house value goes to 1.2 Million dollar, you just made it even. 
I bought a house in 2014 for 323K which is now valued at 460K - roughly 40% increase in 8 years (which is normal in real estate which goes up 5% annually) comparing that to SPY which is up 230% (from 180 to 414). 
Now - This does not mean, no one should buy a house. I am only saying - it is not a good financial decision to buy a house as there are other better alternatives. Buying a house is an emotional decision. You buy a house when you are mentally prepared to be in that house for minimum of 10 years - You especially buy a house when you have a family with a kid as growing up a kid gets a better environment living in a house (compare to rented place) and a better schooling district as well. You may buy a house as part of diversifying your wealth as real estate is considered as the most safest asset class. 

Tuesday, January 24, 2023

WEEK 1 2023 Important Financial News

January 4 2023: 

  • Rivian Says Produced 10,020 Vehicles In Q4 2022
  • GM GENERAL MOTORS TO ADD 5,000 JOBS IN NORTHERN MEXICO
  • MSFT Microsoft And OpenAI Working On ChatGPT-Powered Bing In Challenge To Google
  • Chinese regulators have said e-commerce giant Alibaba’s (BABA) finance affiliate Ant Group can raise $1.5B for its consumer finance unit in an important step forward after the government called off a planned IPO two years ago and ordered the firm to restructure.
  • CRM Salesforce Inc - On January 4, 2023, Announced A Restructuring Plan salesforce Inc - Estimates That It Will Incur Approximately $1.4 BLN To $2.1 BLN In Charges In Connection With Plan- PLAN INCLUDES A REDUCTION OF CURRENT WORKFORCE BY ABOUT 10%
  • BMW More Than Doubles Fully-Electric Vehicle Sales In 2022
  • MSFT Microsoft to invest in autonomous trucking startup Gatik
  • Qualcomm launches auto chip to handle both assisted driving and entertainment
January 5 2023: 

  • US WEEKLY JOBLESS CLAIMS AT 204,000 LAST WEEK; EST. 225,000
  • ADP RESEARCH INSTITUTE SAYS U.S. ADDED 235,000 JOBS IN DEC.
  • TSLA Tesla Dec China sales 55,796 units vs 100,291 units in Nov.
  • US Mortgage demand slumps 13% as home-loan rates turned higher at the end of a tough 2022
  • U.S. auto sales totaled 13.7 million vehicles in 2022, the lowest figure since 2011 and an 8% decrease from the prior year
  • AMZN Amazon to Lay Off Over 17,000 Workers,
  • T-Mobile Delivers Record Customer Growth, Adding an Expected Industry-Best 6.4 Million Postpaid Customers and 2.0 Million Broadband Customers in 2022
  • Shanghai Disneyland Increasing Ticket Prices Beginning in June 2023
January 6 2023: 

  • US DEC. AVERAGE HOURLY EARNINGS RISE 0.3% M/M; EST. 0.4%
  • US DEC. PAYROLLS INCREASE 223,000; EST. 203,000
  • LUV SOUTHWEST AIRLINES CO - EXPECTS TO REPORT A NET LOSS IN Q4 2022
  • LMT Lockheed Martin secures $139.7M contract and $130.7M modification contract for US Navy
  • RTX Raytheon bags $208.7M Naval Sea Systems contract
  • TESLA MOTORS JAPAN TO CUT PRICES OF MODEL 3, MODEL Y BY AS MUCH AS 9.9%
  • ChargePoint and Mercedes-Benz enhance driver experience with fast charging network in North America
  • COST: today reported net sales of $23.80 billion for the retail month of December, the five weeks ended January 1, 2023, an increase of 7.0 percent from $22.24 billion last year.
  • Iridium, Qualcomm Collaborate to Support Satellite Messaging
  • Buffett-Backed BYD Trounces Tesla as China Reopens; BYD new-energy vehicle deliveries surpassed Tesla’s in 2022
  • Salesforce Inc. division Tableau was hit harder than other units in the company’s largest-ever round of jobs cuts this week.
WEEK 1 2023


Saturday, December 10, 2022

Robinhood Portfolio Recurring Buying list update

My set up in one of the Robinhood Accounts for fraction stocks. I buy 5$ each day in my top 20 stocks, 3$ in 30 other stocks, 2$ in next 30 stocks, 1$ in left over 60 stocks (Total of 140 Stocks) and 10 ETF's (another 35$ daily) ...Total comes around $345 on daily basis...(252 Trading days) so 345*252 = $86,940 each year. Planning to do this for 10 years (doing it since last 2, 8 more to go). I change stocks in this set up may be 3 times a year...For someone who wants to build an investment portfolio from the scratch...

Thursday, November 10, 2022

Relief Rally

If you look at YearoverYear inflation data, then we have a Down Trend from June.

9.05% in June, 8.52% in July, 8.26% in August, 8.19% in Sep and 7.74% in Oct. 4 months in a row, inflation % has went down.

If you look at MonthoverMonth data: Inflation was down from June high to July and August, but in Sep it rise 0.21% and Oct it rise 0.40%, so people can pick the data based on their bias. This seems like a relief rally, Fed will still raise rate in December (25, 50 or 75) to be decided based on other data.
Indexes are going to remain range bound, but individual stocks (based on the latest earnings they have posted), will outperform. We are still in the bear market.

Wednesday, November 2, 2022

FED RATE HIKE/CUT MOVEMENT EXPECTATION

Fed Movement Expectation: IMHO


  • Raise rate 75 basis point in Nov 22 (from 3.00 to 3.75). 
  • Raise rate 50 basis point in Dec 22 (from 3.75 to 4.25).
  • Raise rate 25 basis point in Feb 23 (from 4.25 to 4.50). 


Complete QT by June 2023. 


  • Cut rate of 25 basis point in Sep 23 (rate from 4.50 to 4.25)
  • Cut rate of 25 basis point in Nov 23 (rate from 4.25 to 4.00)


This is inline with Jackson Hole comment that rates are going to be 4% by end of 2023. 

Tuesday, November 1, 2022

Random Thought

The most difficult task to master is "Unlearning what you have learned". It will take years, if not months, when people realize, "Tech Trade" is gone and "Value is here to stay"...Smart money that has moved to "Energy, Financials, Pharma, Health Insurance, Utility, Other Insurance companies (such as Progressive) etc" is not going to come out , Sure some "Tech" will work - but new decade will have new leaders. Good to "Trade" some of these tech stocks, but it might be years, before they go back to their Glory days - some may not even make it...It is a hard task to master to differentiate between , "TRADING" vs "INVESTING" mentality...