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Comments (49)

Sep 26, 2015 - 1:26pm

Residential Real estate is probably the one truly undervalued asset class in the country. So, if you have good credit, I'd lock in a 30yr mortgage on a house with low property taxes in an area where you want to live for 10+ years. The mortgage interest deduction will provide you a guaranteed return on your investment even if you're hitting AMT.

As far as securities, I'd be defensive in this environment. Fixed income is about as high as it can get. So, I'd look then (very warily) to equities.

In the big picture, the rest of the developed world is facing a debt overhang and cannot generate demand. Interest rates being at emergency levels in a period where China was blowing its own bubble led to overallocation of investment to commodity producers. Now that China has busted, there is commodity oversupply.

I'd be interested in US automakers as a macro play on the combination of a US return to full employment, increased purchases of consumer durable goods, pent up demand for cars in the US, and global oil prices remaining in a rut for an extended period of time. I'd be beta hedged, because you could have an overall multiple contraction given that we're about to go into a rate hiking cycle with GDP growth under 3%.

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Sep 20, 2015 - 9:34am

I had a similar question from a wealth adviser . I said, "I invest in low-maintenance etfs, money market and some bonds." Everyone knows this is playing safe and for us lazy asses who can't manage their money because they work 80 hrs a week. She went spewing on about emerging markets, buying-up china, etc.

If this is the response, say: no one made money longterm betting against America.

Oct 5, 2015 - 2:44am

I had a similar question from a wealth adviser . I said, "I invest in low-maintenance etfs, money market and some bonds." Everyone knows this is playing safe and for us lazy asses who can't manage their money because they work 80 hrs a week. She went spewing on about emerging markets, buying-up china, etc.

If this is the response, say: no one made money longterm betting against America.

Just you wait til our North Korean overlords rise up and take over the world...

Sep 24, 2015 - 3:07pm

I was asked a similar question, but it was not limited to investments (e.g. I could have bought a Mercedes). I think the goal is to tie this to something that means something to you. Pitching some complex investment strategy just makes you look like a tool because this has nothing to do with IB. The goal of the question is to see how you think or what is meaningful to you.

Sep 24, 2015 - 3:52pm

Some retarded answers here. Just kidding. The clear investment for Q4 is long dollar with the Eurozone, China, Japan, Russia, and LaTam all weakening their currencies, along with the 'soonish' rate raise that inevitably occur to strengthen the greenback even more. Call these factors priced in if you want; analysts were saying that back in February and it still went up another 8%.

Sep 24, 2015 - 6:43pm

With respect, I don't need to hear any condescending pejoratives - you should either comment on the actual investment idea or don't.

You like the oil services sector? Do you know how fucked they've been over the past 8 montths? Every single independent in Texas and North Dakota has squeezed their contract costs down by 25%. How these service companies afford to this is is by cutting labor, not increasing structural efficiency, so when activity does pick up again, they will need to rehire, raising their own costs.

As much as producers would like to replace equipment, 99% of them have exhausted well over 65% of their capex budgets for this year and have planned even more capex cutbacks for next year. A lot of them will be facing debt troubles after October 1st.

Best Response
Sep 25, 2015 - 9:53am

Have you looked at the balance sheets of a lot of these manufacturers? There is plenty of cash on them to weather this downturn. Just looking at the past 8 months seem like an awfully short period of time to discount their future earnings power by up to and sometimes more than half. These companies have had plenty of layoffs, but they are also most likely going to run more lean going forward. Thinking out to next year is also a short time horizon, demand is still healthy so someone still needs to build the equipment to get it out of the ground. You also named two regions that are mainly shale, what about the rest of the world and conventional plays?

I won't claim to know anything about the dollar appreciating/depreciating as I believe there are too many factors at risk. Buffet bet against it in the mid 2000's, but for completely different reasons. Seems like there are just too many factors to feel comfortable making a bet in either direction.

Sep 24, 2015 - 11:45pm

I'd gladly take the opposite position on the dollar. Significantly overvalued right now IMO. Plus interest rate parity should work in my favor while Eurozone rates are low.

I'd go ultra long the euro and get in now while EURUSD is at rock bottom. Once the Fed finally raises rates, profit big time. For proof of the concept look at the EURUSD in the 5 minutes leading up to the Fed release last week. I'd put my money in an ETF like ULE for the straight ForEx exposure.

Sep 24, 2015 - 3:54pm

Gold - GLD, gold miners, NEM

twitter: @StoicTrader1 instagram: @StoicTrader1
Sep 24, 2015 - 3:55pm

If you want a value investing pitch, take a look at US shale companies from a short perspective. They are about to face their bi-annual borrowing base redtermination, which will effectively raise their debt burden industry-wide because, without hedges at $90 a barrel, their assets will be newly valued at 25% markdown. For a lot of these companies, gains from derivative settlements in the past year made up nearly a third of revenues. They've already cut costs by 25% by firing workers and renegotiating service contracts; there is literally nowhere to run now.

Sep 24, 2015 - 4:23pm

Equities, primarily focused on oilfield equipment manufacturers such as Weatherford, NOV, and others as they are either going to be acquisition targets or rebound sharply following an upturn in the market. Very undervalued due to investors not understanding the companies in this space and focused too much on low oil prices.

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Sep 24, 2015 - 4:46pm

Its an interview, you always say what ever the group covers.......

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

Sep 24, 2015 - 5:47pm

Midstream Oil & Gas MLPs. Lower cost of capital , steady quarterly distributions, deferred capital gains tax on distributions (CG tax rate is lower than general income tax rate). Distribution typically yield 6-8% and grow up to 10%. MLPs also usually have below average risk. Enterprise Products, Tesoro Logistics, Phillips 66 Partners, and Targa Resources are all pretty solid. Usually you don't hold MLPs for the appreciation of limited partner units, but I would short Midcoast Energy Partners (Enbridge Energy's Nat. Gas sub). It is having terrible earnings and will probably start having problems paying the distributions over the next few years. MEP's gathering and processing assets are located in shale plays across Texas that have seen a sharp drop off from falling prices. MEP is also struggling to see quality returns (frac-spreads) on its NGL assets.

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  • Anonymous Monkey
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Sep 24, 2015 - 10:38pm

Interesting commentary on energy...OFS will have a tough road ahead but has the most cyclical upside to the commodity besides the commodity itself. Still opportunities in the sector besides can own some pretty good long term names for cheap (HP, OII) that will pay you dividends to wait. Agree, tough in the sector, but people who say it's "fucked" fail to grasp that the pendulum will swing the other way, always does.

If your thesis is short the world in E&P based on borrowing base season you're way too late. Better way to play is long and overweight liquids E&Ps with strong balance sheets that survive, retain the upside and consolidate prior to the recovery, given a somewhat longer time horizon. The quality companies have already proven nowhere close to $100 oil is necessary for strong returns. Also, pretty easy to avoid Fall redeterminations by avoiding non-investment grade E&Ps altogether.

For what it's worth.

Sep 25, 2015 - 12:27am

In my experience, the biggest your return you'll see is by investing it in your own education. MBA. M.Fin or similar would be my suggestion.

Those who can, do. Those who can't, post threads about how to do it on WSO.
Oct 3, 2015 - 12:39pm

The correct answer:

I would never invest into a single asset class or in one sector - I would hold onto a broadly diversified portfolio.

“Elections are a futures market for stolen property”
Oct 3, 2015 - 3:54pm

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Shaanan Domschine BSFM, Financial Management
Oct 3, 2015 - 5:47pm

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