Long March to Socialism
Invest Like A Farmer is an investing blog by T. H. RAPKO AND COMPANY, LLC’s managing member Thomas H. Rapko focused on macroeconomics. It presents Tom’s insights and thoughts on the markets. Although the author expresses a view on the likely future performance of certain investment instruments, each individual should carefully consider his or her investment position in relation to his or her own circumstances and with the benefit of professional advice prior to making any investment decisions.
Thursday, May 20, 2021
Long March to Socialism
Wednesday, May 19, 2021
Crypto Meltdown
Crypto Meltdown
Monday, May 17, 2021
Taxpayer Elegy
Taxpayer Elegy
Thursday, May 13, 2021
Buying Dips
Buying Dips
Buying dips is one of the great advantages long-term retail investors (aka Financial Farmers) have over their sporting counterparts who are focused on short-term (read high tax) trading gains. Here's how to do it.
When you buy a dip your goal should be to add acreage to your financial farm...at a price YOU are willing to pay rather than chasing a stock up. Even before the market sells off 700 points like it did yesterday for example, an investor looking to capitalize should be ready. The first step prior to even making a shopping list of potential targets, though, is making sure you have investible cash not only ready to go, but preferably deposited with your brokerage. Sometimes in the heat of the moment cash can be transferred but remains "unavailable" because it hasn't been cleared. Always have cleared cash ready.
Now with your cleared cash ready, the other thing that should be handy is your shopping list. This is a living document which has been assembled after careful thought, research, and diligence. It is often updated with new information or thoughts. Regardless, this shopping list has as its basis a group of stocks you want to own and the price you're willing to pay for them. Price discipline is essential. During a dip you are a price maker instead of a price taker. That is an important distinction. Bid low.
Buying dips is a confluence of action and inaction; the financial farmer has cleared cash prepositioned and a shopping list ready, now comes the order flow. Selloffs are tricky in that they often come on the heels of unpredictable data, by that very metric investors don't necessarily know the full impact of that data on the moment of release. Sometimes there are global macro events that trigger massive flights to liquidity that unravel over days, weeks, and months. Sometimes it happens in hours. The future is nebulous. But the investor should be prepared for the worst. This means that a selloff can markedly accelerate quickly. Very quickly. That is why having a comfortable margin of error is vital on the purchase price. Use limit orders.
The other leg of the trade is the timing. Sometimes even if you get the stock you want at the price you want you still overpaid! Selloffs have a nasty habit of lasting longer and diving deeper than we think is possible, or even reasonable. That's why you should buy in tranches.
If your goal is to have a total 1000 shares of XYZ, consider buying the entire position in segments; make a an initial buy of perhaps 100 shares at the first price point (with a margin of err0r build in) that you think is reasonable. Then stagger those limit orders lower and lower and lower. The risk here of course is the opportunity cost of NOT getting your full desired position, but by using staggered limit orders you can ideally pick up some portion of your goal at pricing more favorable in to you. Stagger your order flow.
So to recap: Buying Dips is a great strategy for long-term investors who want to pick up stocks during a period of market weakness. The strategy involves having cleared cash ready to invest at your brokerage, having a shopping list on hand, and placing staggered limit orders. Although not foolproof, history has shown being prepared to buy quality stocks on a dip can result in meaningful gain over time. An old adage in the real estate world is, "You make your money when you buy, not when you sell."
Wednesday, May 12, 2021
Inflation Kills
Inflation Kills
Coming soon to a purchase near you...inflated prices! Often called "the silent killer," in economic terms that's exactly what inflation does; it strips away the buying power of the consumer. This morning's Consumer Price Index (CPI) release by the Bureau of Labor Statistics was truly shocking, well at least to people who haven't eaten food, driven a car, or purchased any physical goods for the past several months. For average Americans, there has been no doubt the damage being done to their purchasing power. Everything of value is markedly higher. A lot higher.
Over the past 12 months the all items index rose 4.2%, the largest increase in 13 years. That doesn't sound like much, right? Consider some of the outlying data: the index for used cars and trucks rose 10% in APRIL alone, this was the largest 1-month increase since 1953. The energy index has risen 25.1% over the past 12 months. Food they claim "only" rose 2.4%...assuming you're buying in bulk, and I don't mean Costco, I mean TONS of soybeans. Who are they interviewing for these price points, animals on a farm?
As previously mentioned, inflation is the silent killer. Why does inflation kill? Inflation kills because it marginalizes the backbone of our society: the American Middle Class. The Middle Class is the most sensitive to out-of-pocket purchases; typically they are small business owners or employees subject to the inelastic demand for vital goods-and-services; like gasoline, food, housing, education, medical for example. Inflation ravishes the American Dream because the cost for life necessities consume an ever-increasing share of the Middle Class wallet.
What can be done? As financial farmers you can vote with you money by buying stocks in companies that have the power to pass on increased costs to consumers. Darwinian? Yes. Effective? Yes. Buying inflation pegged consumer staples puts you in lockstep with bad government policy, at least you don't get crushed twice. Second, you can vote members of Congress out of office who do not have a sense of fiscal responsibility. Unfortunately, this takes years. So an alternative approach is to vote with your feet to lower cost areas of the country. If this isn't a viable option, then stick with ideas 1 & 2, and in particular make a God-awful stink to your local, regional, State, and Federal government. Remember they work for you!
Failed fiscal and monetary policy results in rampant inflation. The first flight is usually into dirt (real estate) and gold...fiat paper money continues to lose purchasing power until costs become absurd. In Weimar Germany wheelbarrows full of money were needed to purchase simple goods. Are we there yet? Not by a long shot, but rampant spikes in real estate, food, and vehicles indicate that people aren't dumb to what is occurring...money for nothing never ends well. You can't expect to burn a candle at both ends and not have the lights go out.
Friday, May 7, 2021
Big Tech Five
Big Tech Five