Clueless Analysts

I think we are in another period of "irrational exuberance" and some people are likely to get burned......some BAD.

 

Long awaited confirmation just yesterday of a new Supercharger under construction with pics in Ozark, AR filling the national coast to coast I-40 hole perhaps? Just kidding but can't hurt.

 

i suspect many are pulling out of loser stocks like ford, gm, et al, and plowing it into a winner, along and hedging it with gold

 

. . . . says someone - as Tesla stock passed $2,030 / share yesterday.
Reminds me of folks that couldn't believe Amazon was selling just over $50 / share, end of 2008 - when we bought 14 shares on a lark with vegas / 5% of our 401k converted to a stock fund Roth (tax free !!!)
now it has dropped to a measly $3,284.00 / share.
Even so . . . someone will tell you, "i'm sure another train will be coming along - eventually

.

 

there's no safe or profitable place to park your money. people won't stop investing in the market until the bottom falls out.

 

The only relatively safe place for investments might be Stable Value funds but these are only available is large 401k funds. The Stable Value funds use Governments guaranteed investments like TIPs, guaranteed US Savings Bonds, CD's, Insurance contracts etc.

These Stable Value funds paid a whooping 2% when the market was up almost 18% but did pay 3% in 2008 when the bottom dropped out of the market and caused mass panic.

If you have enough money in it or lead a modest lifestyle the 2% return might be enough to meet living expenses. Be forewarned these funds are not for traders- they are designed to prevent trading with delays on selling shares and restrictions on where you can reinvest for a certain time frame after selling shares to prevent day trading or trying to beat the market.

But all that being said if you are an older investor who doesn't enjoy roller coaster rides on individual stocks or the market itself and has a nest egg the Stable Value fund can be a place to visit knowing a 2 to 3 % increase is as good as it gets on that particular ride and that you can't even get on that ride unless you are part of a large 401K plan.

All Smart Funds aren't created equal and it is a very good idea to investigate their holdings before investing as some Stable Value funds are glorified diversified bond holdings only.

 

what is a stable value fund paying so far this year, and what is the projection in a market collapse?

 

Stable Value Fund returns depends on how the fund is invested. By definition their value doesn't change much no matter if the stock market soars to 40,000 or drops to 5,000. You should expect a 2% to 3% return.
The fund I am familiar with is currently returning 2.1%

Here is a quote from a Barron's article written after the 2008 crash

"Stable value fund returns generally ranged between 3 to 5 percent for 2008. Stable value funds are comprised of a diversified portfolio of fixed income securities that are insulated from interest rate movements by contracts from banks and insurance companies. The protection from interest rate volatility is universal and unique to stable value funds."

These funds are insulated from market panic so what the market does doesn't really dramatically affect them

If you are interested in returns these are not for you, they are only for asset protection with a return that barely keeps up with inflation. You must be in a large 401k before you can even invest in these. College endowments and Pension Plans are big holders of these type investments to a certain degree. Some Funds that pool public investors money may be able to buy a ticket into a Stable Value Fund, this would be a way the general public can get in and at one time Vanguard investing offered a Stable Value Fund - not sure what sort of instruments they are using

How Did Stable Value Funds Respond To COVID-19 Turbulence?

 

You can create your own equivalent to the Stable value fund with I-bonds. My wife and I plowed much of her salary into I-bonds for over 20 years. Every pay day, another two bonds. I cashed the first 8 in the other day and was amazed at how much guaranteed interest plus yearly inflation compounded to over 20+ years. Was it as much as if I had invested in VTSAX or the equivalent? No But there have been times where it was close. But is is a nice counterweight to market linked investments. When the market tanks, it is nice to have that sea anchor out.

 

Mike I had completely forgotten about Government Treasury Bonds, some even have their return rate adjusted automatically to keep up with inflation. A whole previous Generation of Americans depended on them for their investments and to guarantee returns. A very safe and patriotic way to invest.

I don't know how old you are but it used to be a thing when you graduated high school or got married Grandma's and Grandpa's might give the lucky kid a US Savings bond for the event. Looking back this was a practical and very thoughtful gift.

Years ago when I first entered the work force many employers actually had programs where you could purchase and accumulate US Savings Bonds through a payroll deduction plan.

 

The I-bonds add a fixed rate of interest determined when you buy them (market based) and then an additional interest rate based on inflation adjusted every 6 months. The current rates (both factors included) for 6 months if you bought today would be 1.06%,

Since my wife worked for the US Treasury, it was rather easy for her to buy bonds. Back in the dark ages you actually got paper bonds mailed to you. Now all electronic but I think you can still buy paper for gifts.