Personal Finance Megathread

[Will]

@Josh

Yeah there’s still a huge amount of variables in how tariffs play-out, especially in regard to what the US Gvt can’t control, which is of course the actions of other countries (though not for lack of trying LOL).

Agreed! Anyone who pretends to know how this’ll play out either has two crystal balls or doesn’t understand the situation well enough.

@Josh

This is in large part what Trump wants to reverse through keeping more USD in the US, reduced trade deficit, goal of reducing income tax to 0 by utilising the “ERS” approach and DOGE, persuading (read: forcing) American consumer attention back to American products, private sector growth, de-regulation (RIP the EPA?) to allow business expansion = more infrastructure, jobs, skills being deployed on US soil, lower business costs and greater profits in theory translate to better wages and end consumer pricing, though of course not guaranteed.

I’m not overly shy about my employer, so will preface this by stating this is 100% Will opinion, nothing formal. I’ve worked in a manufacturing adjacent industry for nearly a decade now, and have visited over 100 factories across all types of consumer goods, both in the US and abroad. It would take a massive amount of subsidies, a massive amount of time, and great trade relations globally to move manufacturing to the US for most industries. We don’t have the natural resources, we don’t have the expertise, and we don’t have the supporting industries to make it happen without significant financial pain for the consumer. Just to make a button up shirt, you’re talking fabric mills, you’re talking washing facilities, you’re talking button/trim facilities, and then you make the shirt itself. Sure you can build those facilities, and buy those components, but it’s so much less efficient. The juice isn’t worth the squeeze for so many products and industries, which is why I’m hoping that there are adjustments to tariffed categories, and reductions in the rates to maintain (as best we can at this point) positive relations with our trade partners.

@Josh

I also find it comical (but also kinda sad) to see the level of MSM scaremongering going on, which is expected during periods of uncertainty, but uncertainty and turmoil clouds visions of opportunity during these times that are accessible to the average individual.

How to read news almost needs a course taught in schools now. It’s very difficult to find unbiased news, so understanding your source and any associated biases up front will help people process. But most won’t, and it just further polarizes our already Team Magma vs. Team Aqua world.

Anyways, looping this back, we’ll see how interest rates and macro/micro budgets may be impacted here long term. I feel like we just need to wait and see at this point, things can change in minutes as we saw yesterday with market shifts.

[Josh]

@Will LMAO

NEW YORK, April 9 (Reuters) - A violent U.S. Treasury selloff, evoking the COVID-era “dash for cash,” has reignited fears of fragility in the world’s biggest bond market. The $29-trillion Treasury market had surged in recent weeks as investors dumped stocks for the safety of government bonds in a tariff-fueled risk-off shift. But on Monday, even as equities stayed under pressure, Treasuries were hit by a wave of selling that sent benchmark yields soaring by 17 basis points on the day, while trading within a yield range of about 35 basis points, one of the wildest trading swings for 10-year yields in two decades.

Turns out equity turmoil has been a bit too turmoil-y

Some market participants said they believed based on the dramatic Treasury market moves and sharp tightening of swap spreads that investors including hedge funds have been selling liquid assets such as U.S. government bonds to meet margin calls due to portfolio losses across asset classes. Some hedge funds have offloaded stocks as the market plunge forces them to curtail trading using borrowed cash.

[BANKS]

I’m not Financeman so I have a basic finance question:

When people realize loss on stocks, where does that value go, does someone get it in zero sum fashion, or does it evaporate?

i.e. I buy 1 APPLE at $200 and it goes does to $170 and then I sell.

Conversely, where does money come from when I cash out on stocks that have increased in value?

[mrbubbles]

If we just use the analogy of Pokemon cards, the ‘value’ is just someone who is willing to pay you for the cards. Stocks are the same as per my understanding. When the stock price falls from $200 to $170, it is just someone valuing the stock lesser than what you initially purchased it for. Your PSA 10 card is hot right now, but maybe in a month it may cool off and will be $30 lesser in value. The money has not gone anywhere, some is just not willing to pay the price you purchased it for, since there is no actual money in the card itself.

The actualy tangible money (dollar bills we can use to buy stuff) does not go anywhere, it is just transferred from the person you purchased the card / securities from. Same principle in selling for a profit. Someone else’s who is willing to pay more buys it from you so the actual money (tangible bills) are just transferred from them to you.

Cheers!

[filthynwah]

You’re not wrong, but the important difference is that a stock is an ownership share in a company. You are part owner of a company that is (supposedly) profitable and the stock value is (supposedly) based on potential future earnings of that company. It’s like owning a barrel of gasoline. There’s practical value to it.

Pokémon cards, on the other hand, have no practical value. Their value is based soley on what people think about them and their scarcity.

[mrbubbles]

That is correct but the valuation still comes from speculation on how much money the stock / company can make for me in the future. I am no expert, but the line is a bit blurry to me.

The pokemon card was an analogy given the forum but even if we consider a barrel of gasoline, the price will fluctuate on a hour / day / month basis and it is dictated by what someone is willing to pay for the barrel. If I never sell the stock or the barrel of gasoline, there is no practical value on keeping it because if it goes to zero (hypothetically) I still get nothing.

I would rather say that I personally do not think Pokemon cards are a good investment choice since the speculation factor is more volatile, but the vlaue is still there.

Cheers!

[Josh]

Off the back of MrB’s explanation, a simplified example that might help visualise what happens to the money involved in buying and selling stocks:

Let’s say the current share price of Apple is $200.

Timmy Paperhands wants to buy a share at $200. They deposit $200 from their bank account to their choice of exchange (eg. Trading212, eToro, Robinhood etc). They then place a ‘buy order’ for 1 share. The exchange then matches that with someone (let’s say Chad McSellhigh) who has put up a sell order at $200, or thereabouts. There are thousands of buying and selling transactions happening at any given moment, so this match-up usually occurs pretty quickly.

Timmy now owns 1 share of Apple by paying $200, and Chad has received $200 for selling his share. Timmy hasn’t paid $200 directly to Chad as such, as their transactions are both facilitated by the exchange.

Now, let’s say the Apple share price tanks to $150/share the following week. This has happened because more of those transactions are sales than purchases, which pushes the price down. This might be due to a multitude of reasons, for example a quarterly sales target was not met for iPhones and therefore Apple investors lost faith in public demand for iPhones.

When he looks at his screen, Timmy Paperhands thinks, well gosh darn, he’s ‘lost’ $50, because he paid $200 for his share. In reality however, Timmy hasn’t actually lost or gained anything until he decides to sell that share. Because Timmy is a new trader and doesn’t know any better, he gets scared in case the share price sinks any lower, and decides to sell at $150. At that point of sale, Timmy has lost $50.

It just so happens, that Chad McSellhigh believes this lower share price of $150 presents a buying opportunity, and decides to buy a share. Since he sold his original share at $200 and just bought another at $150, he is now the proud owner of an Apple stock again, but also has an extra $50 in his bank account compared to before. Poor Timmy Paperhands on the other hand is down by $50. Overall, the same amount of dollars exist, but one person has ended up with more of them than the other.

That, on a very basic level, is an example of how wealth transfer can occur during the trading of stocks and shares. The same amount of money exists, it’s just that it’s changed hands via the means of buying and selling shares. This is also an example of why Rudy is often heard saying that market downturns are “where wealth is made”.

[BANKS]

@Josh

They then place a ‘buy order’ for 1 share. The exchange then matches that with someone (let’s say Chad McSellhigh) who has put up a sell order at $200, or thereabouts. There are thousands of buying and selling transactions happening at any given moment, so this match-up usually occurs pretty quickly.

This answers my question, I was confused about what exactly the exchange is and what role it plays as an intermediary, seems like it’s mostly PvP, but I am curious about the nuances of the exchange

[Will]

Was reading an article on US Fed rate cuts, and thought I’d post a few excerpts here as we just talked through a bit the other day:

Full article: Kashkari becomes latest Fed official to pour cold water on any near-term rate cuts

Excerpts:

“Minneapolis Federal Reserve president Neel Kashkari said Wednesday that the bar for cutting interest rates is “higher” right now to keep inflation expectations anchored in the face of tariffs — even if the economy weakens and job losses mount.”

“Federal Reserve Bank of San Francisco president Mary Daly on Tuesday said the central bank can take its time before making any adjustments to rates as it waits to see how trade policy changes play out.”

“Fed Chair Jerome Powell also made it clear last Friday that the Fed isn’t in a hurry to take any action on rates due to many uncertainties, saying, “It is too soon to say what will be the appropriate path for monetary policy.””

What worried me a bit was this:

"Market watchers and even President Trump are trying to pile more pressure on the Federal Reserve to consider a near-term interest rate cut or other interventions as the tariff market sell-off deepens.

Traders boosted their bets on the number of Fed cuts this year to five and pulled forward their estimate of when those cuts could begin, starting at the next meeting on May 6-7. The odds of a May cut are now nearly 60%."

End excerpts, enter Will, stage left:

If the Fed doesn’t see enough on the inflation side to cut rates, or even just wants to cut rates fewer than five times, it seems like the broader markets may get worse before they get better. That May Fed meeting will be a market mover.

[Josh]

Just in: 90 day pause on tariffs, markets going vertical. Imagine verticality will be limited considering China not among the pause-ees.

[teraz]

This whiplash is insane lol. PUTS got rektd

[Vertemes]

1st of all: Are we serious? This isn’t ok to keep pausing and resuming tariffs, especially if we’re dealing with countries that are seriously not taking a liking to us. Too many variables on the fly for companies to account for. Eventually not only will foregin companies and enterprises get sick of it, but American companies will too.

It dosen’t take much to know that this is not a sustainable idea for anyone, America included.

[connorc]

we are living in truly nutso times

[Will]

In b4 Lol jk and markets tank again

[Will]

Interestingly enough, bonds yields are still ticking up, they haven’t reacted as quickly as stocks. I don’t know enough about bond trading to know if that’s actually an independent reaction to the news, or if bond markets inherently can’t react as quickly.

[Josh]

These are truly “unpresidented” times….

[kpod]

Buying more Nvidia at the dip for $90

[jabby]

Closed my short late yesterday, I doubt my long profit today will last overnight :

In my view this market isn’t really ‘safe’ until we close above 5775 S&P (200 SMA). We might gap up to 5400-5500 S&P.. but there could be one more dump if we get there is my expectation. Also, seeing pretty low volume on some of the moves, be careful out there. The things I do to buy more Pokemon cards, lol.

[filthynwah]

But you can put the gas in your car and use it. You can wield your influence as a part owner of a company to make it take some action (not practically for most stock owners but in theory). A collectible just sits on the shelf and looks pretty. Or even worse sits in a box hidden forever.

[Kijamon]

I could see the UK Government ISA concept that invests only in UK companies becoming a much more attractive proposal after all this mess.