Is the stock market going to tank?

**iceman** · 05-03-2016, 08:53 AM

What's the market unhappy about today?

**4matic** · 05-03-2016, 08:56 AM

Originally Posted by iceman

What's the market unhappy about today?

Currency and interest rates. This is a good time for a selloff; between now and end of June. I'd buy equity around 2000 $SPX is the dollar is steady.

**skiNEwhere** · 05-03-2016, 08:57 AM

Crude taking a hit this week

**Benny Profane** · 05-16-2016, 09:05 AM

Buffet puts one billion (pinky to mouth) of Berkshire money into Apple shares. Damn.

**4matic** · 05-16-2016, 09:52 AM

Originally Posted by Benny Profane

Buffet puts one billion (pinky to mouth) of Berkshire money into Apple shares. Damn.

.20% stake. Not really a Buffet type play. And, he added to IBM where he owns a much larger percentage stake. MSFT is probably a decent bet right here.

**VTeton** · 05-16-2016, 07:40 PM

Anyone want to weigh in on my odds of making a 7.5% annual return for the next 15 years? Debating switching to a 15 yr fixed. Currently have a large 2nd at 4.25% that I could refi into a 15 year first.

**iceman** · 05-16-2016, 07:47 PM

I would say the odds are pretty slim that you would see that in an index fund scenario. The right managed funds or individual stocks might do it but which ones are those?

**Mazderati** · 05-16-2016, 08:09 PM

ice, did you narrow down or settle on a fixed income type product?

**iceman** · 05-16-2016, 08:16 PM

nah, still working on that but the last couple weeks I haven't done anything about it, too much travel and other shit lately. Where I left it is basically dividing shit among a few Vanguard funds: dividend, dividend growth, s&p index, and some combo of the Wellesley and Wellington balanced funds plus some individual staocks and bonds we have. Hopefully when taken together it'll get me in the neighborhood of what I'm trying to do.

**Mazderati** · 05-16-2016, 08:25 PM

Cool.

To anyone interested, the Sequoia Fund opened up again last month. Had a big stake in Valeant so were hammered over the last year. Value fund so I'm a fan.

**4matic** · 05-16-2016, 09:10 PM

Originally Posted by VTeton

Anyone want to weigh in on my odds of making a 7.5% annual return for the next 15 years? Debating switching to a 15 yr fixed. Currently have a large 2nd at 4.25% that I could refi into a 15 year first.

I'm not following the investment theme. What is the scenario?

**4matic** · 05-16-2016, 09:20 PM

Originally Posted by Mazderati

Cool.

To anyone interested, the Sequoia Fund opened up again last month. Had a big stake in Valeant so were hammered over the last year. Value fund so I'm a fan.

It's not classified as value on Morningstar. It's large growth. Based on its holdings I'd just buy Berkshire.

**VTeton** · 05-16-2016, 09:49 PM

Originally Posted by 4matic

I'm not following the investment theme. What is the scenario?

Current loans as follows. 30 yr fixed 3.625%. 10 yr fixed 4.25%. About 18 months into them. I can refi both into a 15 year fixed and my monthly nut increases by $250. However in year 8.5 when second would have gone away, I will have 6.5 more years at new loan amount. Built a spreadsheet and I'd have to earn that return on the $250/month plus the $1,750 a month on the second that would have matured in 8.5 years to be able to stroke a check in 15 years to pay it off w investment savings vs keeping loan. Interest deductions don't do much for my tax return. It's confusing but basic premise is pay off debt or invest?

**Mazderati** · 05-16-2016, 09:52 PM

I mean, Morningstar is free to classify it however they want, but the fund is a poster child for value investing. The guys running it for the last few decades go back to Graham and Dodd.

FUND OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGY

The Fund’s investment objective is long-term growth of capital. In pursuing this objective the Fund focuses on investing in equity securities that it believes are undervalued at the time of purchase and have the potential for growth. A guiding principle is the consideration of equity securities, such as common stock, as units of ownership of a business and the purchase of them when the price appears low in relation to the value of the total enterprise. No weight is given to technical stock market studies. The balance sheet and earnings history and prospects of each company are extensively studied to appraise fundamental value.

**iceman** · 05-16-2016, 10:09 PM

I'd be worried that they'd make another huge wrong bet like Valeant. I can definitely see why people got into Valeant but you would wish Sequoia had been able to see through it. It makes you wonder about their research and judgement. Maybe unfair? I dunno.

**4matic** · 05-16-2016, 10:33 PM

Originally Posted by VTeton

It's confusing but basic premise is pay off debt or invest?

I'd prefer the flexibility of additional liquidity.

**4matic** · 05-16-2016, 10:42 PM

Originally Posted by iceman

I'd be worried that they'd make another huge wrong bet like Valeant. I can definitely see why people got into Valeant but you would wish Sequoia had been able to see through it. It makes you wonder about their research and judgement. Maybe unfair? I dunno.

Like Perrigo, which they own. With a 1% fee and no dividend Berkshire looks much better to me. Two of the top holdings in Sequoia are Berkshire A and B. They are getting taken out of PCP by Berkshire and Mohawk is a direct competitor to Berkshires Shaw Flooring. Own the original.

**Mazderati** · 05-16-2016, 11:11 PM

All good points. I'd never bet against Berkshire with a coherent Buffett and Munger at the helm.

**VTeton** · 05-17-2016, 04:50 AM

Originally Posted by 4matic

I'd prefer the flexibility of additional liquidity.

I hear yeah but for first 8.5 years the payments are almost identical.

**Obstruction** · 05-17-2016, 04:51 AM

Originally Posted by VTeton

Current loans as follows. 30 yr fixed 3.625%. 10 yr fixed 4.25%. About 18 months into them. I can refi both into a 15 year fixed and my monthly nut increases by $250. However in year 8.5 when second would have gone away, I will have 6.5 more years at new loan amount. Built a spreadsheet and I'd have to earn that return on the $250/month plus the $1,750 a month on the second that would have matured in 8.5 years to be able to stroke a check in 15 years to pay it off w investment savings vs keeping loan. Interest deductions don't do much for my tax return. It's confusing but basic premise is pay off debt or invest?

Add additional principle payments to the 30 yr product unless a refi to a 15 improves your cash flow. If cash is tight in any given period or you have a better use for it -- it's available. It ain't as if the bank that holds the 15 is going to let you adjust your payment down, (even if it's only $250 per month).

Or as 4matic said liquidity creates flexibility.

**rod9301** · 05-17-2016, 05:19 AM

If we will have inflation in a few years, which we probably will, you will be really glad to have a low interest mortgage, as you will make your fixed payments with increasingly cheaper dollars.
So my recommendation is a 30 year fixed.

**Benny Profane** · 05-17-2016, 05:24 AM

Good luck with that inflation thing.

**jono** · 05-17-2016, 06:03 AM

Originally Posted by VTeton

Current loans as follows. 30 yr fixed 3.625%. 10 yr fixed 4.25%. About 18 months into them. I can refi both into a 15 year fixed and my monthly nut increases by $250. However in year 8.5 when second would have gone away, I will have 6.5 more years at new loan amount. Built a spreadsheet and I'd have to earn that return on the $250/month plus the $1,750 a month on the second that would have matured in 8.5 years to be able to stroke a check in 15 years to pay it off w investment savings vs keeping loan. Interest deductions don't do much for my tax return. It's confusing but basic premise is pay off debt or invest?

Are you getting a lower rate at 15? Do you have a way to split the loan between the 15 and a small HELOC? (Or just swap out the 10?) If you can get the right terms on the HELOC that would lower your monthly nut up front (interest only at first on the HELOC) and let you pay down that portion a little quicker/as you're able to, while building liquidity since you can access that equity, and further lowering the monthly.

You'd be exposed to rising rates on that piece, but I've usually found that if they'll lock it for a short period there's some amount of principle for which I'm comfortable paying it down through that period to reduce that exposure if it's a big concern. And for some reason the banks have always waived fees just for keeping the line open for something like 1-3 years, even if the balance hits zero, so the only cost was the (usually) higher rate on a (usually) small part of the loan--I want to say right now you could do better than your 10 year rate but it's been a while since I did that.

How confident are you you'll be in that house in 8-15?

**VTeton** · 05-17-2016, 06:43 AM

Originally Posted by jono

Are you getting a lower rate at 15? Do you have a way to split the loan between the 15 and a small HELOC? (Or just swap out the 10?) If you can get the right terms on the HELOC that would lower your monthly nut up front (interest only at first on the HELOC) and let you pay down that portion a little quicker/as you're able to, while building liquidity since you can access that equity, and further lowering the monthly.

You'd be exposed to rising rates on that piece, but I've usually found that if they'll lock it for a short period there's some amount of principle for which I'm comfortable paying it down through that period to reduce that exposure if it's a big concern. And for some reason the banks have always waived fees just for keeping the line open for something like 1-3 years, even if the balance hits zero, so the only cost was the (usually) higher rate on a (usually) small part of the loan--I want to say right now you could do better than your 10 year rate but it's been a while since I did that.

How confident are you you'll be in that house in 8-15?

Wife plans on dying in the house so 30-50 years. Have business w 25 year lease in walking distance of said house. Her family has lived within .25 miles for 100+ years. New rate would be 2.875. if I aggressively pay down in 15 yrs under current loans, I still lose about 45k to interest.

**jono** · 05-17-2016, 10:19 PM

At that rate/confidence the 15 seems like a no-brainer. If you're looking to hold a little liquidity, a small HELOC (and thus slightly smaller principle on the 15) gets you a smaller nut in the long run. If you pay the HELOC off and then market returns pick up, perfect. Also great if you happen to be the sort of people that pay off the card every month but get paid more often (or less for that matter)--treating a HELOC like a savings account saves a lot more interest than the savings can earn. I don't think I ever had the stomach to drain savings entirely just to cut that monthly interest, but it was tempting.