OT: Lets talk about stocks (Part 2)

[Stoneburg]

Buy stocks on margin, shorting, etc. But companies are already levered, you don't need leverage yourself. You should not use debt on something volatile like stocks. If you do, do so lightly like Berkshire Hathaway. Say they invest 100$ in a company, they may borrow an extra 10$ to invest 110$ in said company. But 10/11 of the money is actual cash.

"My partner Charlie Munger (Trades, Portfolio) says there are only three ways a smart person can go broke: liquor, ladies, and leverage. Now the truth is - the first two he just added because they started with L - it's leverage."

"This table offers the strongest argument I can muster against ever using borrowed money to own stocks. There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions."​

Timeless Advice from Warren Buffett on Using Leverage​

Why do you want to use leverage?

If Munger said that, he is being disingenuous, or he has revised his philosophy.

Read this:

Charlie Munger: Loading Up on Leverage

he was willing to borrow money to make money, whereas Buffett had never borrowed a significant sum in his life."

 

[QuebecPride]

If Munger said that, he is being disingenuous, or he has revised his philosophy.

Read this:

Charlie Munger: Loading Up on Leverage

he was willing to borrow money to make money, whereas Buffett had never borrowed a significant sum in his life."

That was in his youth. He's not a big fan of leverage... Nor is Buffett.

 

[QuebecPride]

I was holding out for the end of the year, hoping they'd stay up. But LSPD crashed with a bad report. I gave it until earnings and then it crashed again. I got out with a small gain.

Nuvei kinda followed along. Not as bad but... the market forces are too big to ignore right now. I think Nuvei's a great stock but with all the downward pressure I see more downside than up in the short term. Hopefully I didn't sell at the wrong time because that can happen too.

I'm going to wait and see and then look at re-entering later. Right now with all the fears on interest rates it just seems like a good time to take a breather on tech stocks. At least I realized some big gains on some of them.

Lightspeed and Nuvei are great companies, but the stock prices are expensive. I'll eventually own some via QXM which is fine to me, but I don't think I could buy the stocks outright personally, not at that price.

 

[japhi]

When looking at quotes regarding leverage you have to consider the time the quote is from. In the 80s rates were in the mid teens, and this low rate environment is only 15 years old. Free money - borrowing below inflation - around 3 years. So I can see someone unwilling to borrow on margin at 10% having a change of heart at 2%.

This part will always be accurate however:

"There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions."

An absolute ton of retail investors have entered markets the past few years. Will be very interesting to see how they handle a long, protracted market correction. If the past is prologue, they will panic like they did when the dotcom bubble crashed. Maybe showing my age, but in 1998/99 the talk in the lunch room was all about stocks, and all the guys killing it. That talk ended pretty quick and most retail investors were wiped out.

I say this as a retail investor that is always trying to keep perspective. Not trying to fear monger but this bubble is so ridiculously inflated at some point it will pop.

 

[japhi]

Lightspeed and Nuvei are great companies, but the stock prices are expensive. I'll eventually own some via QXM which is fine to me, but I don't think I could buy the stocks outright personally, not at that price.

When Nuvei went public they were looking to raise about 1B. Most of us in the industry had them as a 1B company. Their market cap at 16B is flat out ridiculous, they will never deliver earnings to justify that valuation, it is pure speculation. They will be a 30-40 dollar stock at some point in the next 2-4 years IMO and that is being generous.

 

[Lafleurs Guy]

Lightspeed and Nuvei are great companies, but the stock prices are expensive. I'll eventually own some via QXM which is fine to me, but I don't think I could buy the stocks outright personally, not at that price.

Give it another month…

 

[Scintillating10]

If Munger said that, he is being disingenuous, or he has revised his philosophy.

Read this:

Charlie Munger: Loading Up on Leverage

he was willing to borrow money to make money, whereas Buffett had never borrowed a significant sum in his life."

I think that was different times. Interest rates are low and market is in bulk run. Changes the perspective.

 

[Scintillating10]

Borrowing a bit on your house to invest in the market is not a bad idea, but investing on margin through your broker, yeah, don't do it.

On your house you can fix the rate, the margin will increase in cost as the rates rise.

I think having a good portofolio is key to leveraging. levaging is not bad. Its leveraging the right stocks.

Take Tesla for example, backbone of my portfolio, its trading around $1100. Everybody knows it a year it will be $1500 at least. A 40% increase. Borrowed at 5%, leaves 35% margin. For every $100,000 you have leveraged leaves take home profit of $35,000

 

[QuebecPride]

I think having a good portofolio is key to leveraging. levaging is not bad. Its leveraging the right stocks.

Take Tesla for example, backbone of my portfolio, its trading around $1100. Everybody knows it a year it will be $1500 at least. A 40% increase. Borrowed at 5%, leaves 35% margin. For every $100,000 you have leveraged leaves take home profit of $35,000

Tesla is exactly the stock you should not leverage. Because of its volatility. You do not want your collateral to be volatile, or else you risk getting margin called.

You could leverage an RBC or another large bank, that would be wiser. The goal of leveraging is increasing your return on invested capital, or ROIC. You usually do that with investments that are more stable in order to slightly increase their returns.

You don't need/want more volatility on Tesla, Shopify or AMC/Gamestop. Besides, the returns on Tesla is good enough that you don't need leverage.

 

[QuebecPride]

Give it another month…

Maybe one day they'll get cheaper, but I doubt it. The market craves for those tech stocks that provide solutions to sell on internet and payment solutions.

As I said, great companies, but out of my price range. They will continue to grow, but the price to sales/earnings/cash flow is ridiculous. (Same could be said of Amazon, which has been an amazing investment). That's why instead of betting on who's the next big tech company, I prefer to invest in all companies via index funds. I don't make any homeruns, but get a lot of hits.

 

[Scintillating10]

Tesla is exactly the stock you should not leverage. Because of its volatility. You do not want your collateral to be volatile, or else you risk getting margin called.

You could leverage an RBC or another large bank, that would be wiser. The goal of leveraging is increasing your return on invested capital, or ROIC. You usually do that with investments that are more stable in order to slightly increase their returns.

You don't need/want more volatility on Tesla, Shopify or AMC/Gamestop. Besides, the returns on Tesla is good enough that you don't need leverage.

Tesla is exactly stock to leverage. Tesla going to surge again when fully automated cars comes out. It will blow past $1,500.

Royal Bank is stock not to leverage. It is solid but little gain. Why do it? No money there. Averages 10-15% return last 5 years. By time you pay 5% interest, 3% to inflation and a little to tax. The 10% is ate up. On good year may make a little profit but on average year nothing there.

 

[QuebecPride]

Tesla is exactly stock to leverage. Tesla going to surge again when fully automated cars comes out. It will blow past $1,500.

Royal Bank is stock not to leverage. It is solid but little gain. Why do it? No money there. Averages 10-15% return last 5 years. By time you pay 5% interest, 3% to inflation and a little to tax. The 10% is ate up. On good year may make a little profit but on average year nothing there.

You leverage RBC because you want to increase your return and because it's not volatile.

I'm being serious man, you should not leverage Tesla. If you do, be ready for some big roller coasters. And you could seriously burn yourself and your capital.

If you're ok with potentially losing more than 50% of your money invested in Tesla, then go ahead. But you need to understand that what you want to do is as risky as it gets.

You will do just fine by holding stocks unleveraged, you don't need the added risk with leverage. You should sincerely reconsider that idea. Be very careful with leverage. The shit can hit the fan rather quickly.

 

[McGees]

Been killing it with Metaverse coins and stocks this last week. The hype is real!
sand.x
Mana.x
Gala.x
Smurf (tokens.com)

 

[Scintillating10]

You leverage RBC because you want to increase your return and because it's not volatile.

I'm being serious man, you should not leverage Tesla. If you do, be ready for some big roller coasters. And you could seriously burn yourself and your capital.

If you're ok with potentially losing more than 50% of your money invested in Tesla, then go ahead. But you need to understand that what you want to do is as risky as it gets.

You will do just fine by holding stocks unleveraged, you don't need the added risk with leverage. You should sincerely reconsider that idea. Be very careful with leverage. The shit can hit the fan rather quickly.

Not going to lose money on TSLA

 

[zzoo]

You leverage RBC because you want to increase your return and because it's not volatile.

I'm being serious man, you should not leverage Tesla. If you do, be ready for some big roller coasters. And you could seriously burn yourself and your capital.

If you're ok with potentially losing more than 50% of your money invested in Tesla, then go ahead. But you need to understand that what you want to do is as risky as it gets.

You will do just fine by holding stocks unleveraged, you don't need the added risk with leverage. You should sincerely reconsider that idea. Be very careful with leverage. The shit can hit the fan rather quickly.

In my book, TSLA is the best stock and by far. My next tier would be: NVDA, COIN, SQ, SE and SHOP.
TSLA is like McDavid, all alone in his tier. And the next tier would be: Draisailt, McKinnon.

 

[QuebecPride]

In my book, TSLA is the best stock and by far. My next tier would be: NVDA, COIN, SQ, SE and SHOP.
TSLA is like McDavid, all alone in his tier. And the next tier would be: Draisailt, McKinnon.

It has nothing to do with whether or not Tesla is a good or bad stock. You need to look at volatility. You do not want to lever up something so volatile, plain and simple.

Do so at your own risk.

Look, you can take whatever you want from what I tell you. I just don't want anybody to go broke on easy mistakes like these. You simply don't need leverage on a stock that has been so good for its investors. The return, as is, is already amazing. It's pointless to lever, it's unncessary risk.

As a former Risk management intern for a big Canadian Pension fund, I'm honestly anxious reading about leverage on here. I don't think people realize how risky leveraging stocks really is. Smarter people than you and I have lost billions due to leverage. Look up Long Term Capital Management. Nobel Prize level Financial researchers and mathemacians. Their recipe worked wonders, until it all blew up.

Another billionaire blew up this Summer because of leverage, I believe he was of Asian descent, but can't recall his name. He was already rich and had his family office leveraged up to the skies. Totally unnecessary.

Small investors should not venture into those waters. I'm blown away as I read these posts. Really.

 

[Scintillating10]

Wonder how this new variant will affect market this week?

 

[Scintillating10]

How did you fellows make out investing in 2021? I had a good year. Still few days left but I think I returned 56% for this year. Made around $157,000 profit.

 

[Scintillating10]

In my book, TSLA is the best stock and by far. My next tier would be: NVDA, COIN, SQ, SE and SHOP.
TSLA is like McDavid, all alone in his tier. And the next tier would be: Draisailt, McKinnon.

NVDA has come fast this year. But how much more can it go?

I chip stock is one I am missing from my portfolio. Which one should I buy into?

 

[Lafleurs Guy]

How did you fellows make out investing in 2021? I had a good year. Still few days left but I think I returned 56% for this year. Made around $157,000 profit.

Did well in my RRSPs. Sold pretty much everything before the tech crash.


Should’ve sold earlier in my TFSA. At one point I was up over 100 percent. Wound up selling at 20 percent profit. Not bad but not great. At least I made money though. If I’d waited I’d be way underwater.

 

[Omar]

You leverage RBC because you want to increase your return and because it's not volatile.

I'm being serious man, you should not leverage Tesla. If you do, be ready for some big roller coasters. And you could seriously burn yourself and your capital.

If you're ok with potentially losing more than 50% of your money invested in Tesla, then go ahead. But you need to understand that what you want to do is as risky as it gets.

You will do just fine by holding stocks unleveraged, you don't need the added risk with leverage. You should sincerely reconsider that idea. Be very careful with leverage. The shit can hit the fan rather quickly.

Tesla is the single best risk adjusted investment out there. They’re working on the single most important piece of software in the last 20 years. Maybe longer.

 

[Omar]

In my book, TSLA is the best stock and by far. My next tier would be: NVDA, COIN, SQ, SE and SHOP.
TSLA is like McDavid, all alone in his tier. And the next tier would be: Draisailt, McKinnon.

I own TSLA, NVDA, COIN and SQ. Nice list!

I’m keeping my eye on Teladoc, Palantir, Invitae and a bunch of genomics and biotech.

Invitae may be the next GOOG or TSLA. They have a flywheel where customers order genomic tests that train their AI to further improve testing, like GOOG with search or TSLA with full self driving.

They charge under $300 for a one time genomic test for life where they can tell you which medications to take and not take based on your genetics. And in the future they’ll be able to work with pharma to make personalized drugs for you as an individual.

$300 for lifetime knowledge of which drugs work and don’t work for you. Who wouldn’t buy one?

 

[Omar]

How did you fellows make out investing in 2021? I had a good year. Still few days left but I think I returned 56% for this year. Made around $157,000 profit.

What do you own?

 

[Omar]

NVDA has come fast this year. But how much more can it go?

I chip stock is one I am missing from my portfolio. Which one should I buy into?

NVDA is the enabler for blockchain, NFT craze, data centers, AI and autonomous driving. Basically everything futuristic depends on them.

 

[Omar]

It has nothing to do with whether or not Tesla is a good or bad stock. You need to look at volatility. You do not want to lever up something so volatile, plain and simple.

Do so at your own risk.

Look, you can take whatever you want from what I tell you. I just don't want anybody to go broke on easy mistakes like these. You simply don't need leverage on a stock that has been so good for its investors. The return, as is, is already amazing. It's pointless to lever, it's unncessary risk.

As a former Risk management intern for a big Canadian Pension fund, I'm honestly anxious reading about leverage on here. I don't think people realize how risky leveraging stocks really is. Smarter people than you and I have lost billions due to leverage. Look up Long Term Capital Management. Nobel Prize level Financial researchers and mathemacians. Their recipe worked wonders, until it all blew up.

Another billionaire blew up this Summer because of leverage, I believe he was of Asian descent, but can't recall his name. He was already rich and had his family office leveraged up to the skies. Totally unnecessary.

Small investors should not venture into those waters. I'm blown away as I read these posts. Really.

I agree don’t leverage!