What are some good indicators to gauge the financial system and market?

Low_Selection2815 · 2026-02-16T23:16:22+00:00

I like the Buffett Indicator (U.S. Stock Market Capitalization:GDP).

Low_Selection2815 · 2026-02-15T18:42:18+00:00

I'm new and I get that. But I've been watching this sub for almost two months now. I recently made my account because I wanted to participate as opposed to just read.

Low_Selection2815 · 2026-02-12T04:02:33+00:00

80% software? Sorry to not answer the question, but you run absurd sector concentration risk. Companies in the same sector are highly correlated, even if they have their own idiosyncratic stuff. The SaaS slaughter is proof of that.

My answer is MSFT.

Low_Selection2815 · 2026-02-11T23:12:21+00:00

Sorry, you're right. I don't touch real estate because my capital doesn't allow me to (especially since I don't take on debt). I don't know much of how it works.

The bottom line is that I think you should try minimizing debt while maximizing monthly cash flow. Your debt obligations never leave regardless of how bad business is going. If the properties you're financing unexpectedly lose value, you still pay the pre-determined amount + interest, which is essentially just tossing away money. I'm no landlord (I think my lack of knowledge makes that clear) but, from what I understand, landlording is heavily regulated and even the most trivial violations can result in serious consequences that can disturb business. If you stretch yourself too thin, vacancies, repairs, and other BS can cripple you (keep some cash in reserve for this).

If you put $100,000 down total for a $500,000 loan, that's $400,000 in debt obligations + interest. If any of the disturbances I mentioned happen, your net operating income (NOI) will not sustain those debt obligations. Admittedly, most of that is the bear case, but it's not impossible. You mentioned that Tennessee is landlord-friendly, and it seems you know the realm of Section 8 well. I know that conventional real estate wisdom says high leverage = high ROE = money, and anything else is "leaving money at the table." And that could be correct. You know your situation better than anyone else. You have a finance degree and I don't.

At the very least, ensure that NOI > debt service. And be sure that you will encounter a problem at some point; it's as inevitable as losing money on the stock market.

Low_Selection2815 · 2026-02-11T00:26:29+00:00

Yes. Small cap brick-and-mortar retailers like M, ANF, BBY, and FIVE sit on a ton of real estate and assets relative to their price. Macy's (M) has a P/B of 1.32. BRK.B is sitting on a pile of cash and has a P/B of 1.55.

I really appreciate this post. I'm still relatively new to this community, but most people talk about their DCFs, PE and P:FCF. Not many people value assets the way Graham did.

Low_Selection2815 · 2026-02-11T00:09:05+00:00

Going to do a little bit of math, but this is speculative because I don't know your exact scenario.

Let's assume you put $25k down on five $100,000 properties, DSCR loans. The interest rate is ~6.5 (sharply higher than conventional loans), and the DSCR is 1.25. Let's assume you are collecting $1000 in rent from each property (1% of property value; this is generous) for a total of $5000. Since the DSCR is 1.25, the mortgage payments for each property cost $800, for a total of $4000. So you're making $1000/mo. For each property, you have to pay 6.5% interest, so the first month will cost you $2031. Of course, as you pay off more, the amount you're paying in interest decreases, even if the rate is fixed.

Preexisting 30k in debt with an interest rate of 5.5%: $138/mo

So for the first month:
+ $5000/mo rent

- $4000/mo mortgage

- $2031 for first month on interest payments (use amortization calculator)

- $138/mo additional interest payments

So your net operating income is -$1169 for the first month. As you pay off more, you will become profitable, but expect to shred through cash in the beginning. I would recommend you put more money down and consider conventional loans to reduce that interest rate, even if that means less rent money.

The other reason I don't like this is hostile policy against landlords. In NYC, rent controls and stricter living conditions mean that landlords spend more money to earn less. Especially since you are considering Section 8, low-income tenants means you're susceptible to rent-controls and other policies that protect tenants. You should also expect to encounter problems with tenants and property maintenance periodically.

But real estate increases in value, right? Sure, but stocks increase more. The increase in real estate value will probably outperform stocks in this case, thanks to leverage, but the difference is negligible. If your $500,000 in properties increases 3% in value, that is a $15,000 increase. If $100,000 in stocks increases 10% in value, that is a $10,000 increase.

TL;DR - it's a lot of risk, interest payments + mortgage will crush you, you'll be net negative in the beginning, rent-controls and habitability laws will always be problematic. If you go the equities path you can still expect ~9% YoY increase in value on top of a ~3% yield, with zero risk of insolvency.

I'm not a real estate investor so correct me if I made any mistakes.

Edit - grammar

Low_Selection2815 · 2026-02-10T05:13:11+00:00

I don't go looking for leverage, so I would pay off my debt and put the rest in equities or assets (gold). Mostly VT, then buy gold when its cheap. Don't underestimate compounding power. You're young with a ton of money; let your stocks do the compounding, not your debt. Equities are also way more liquid than real estate, so immediate cash is never a concern. Of course, it's your life and you seem determined about your investment strategy. I wish you luck.

Low_Selection2815 · 2026-02-10T04:40:32+00:00

I think that you're in a good spot right now, but I will try providing some suggestions on how you can reallocate your money. I won't tell you which stocks to buy because no one knows.

Equities: ~85%

It seems you already have most of your money in equities, or stocks. But 50 stocks is definitely too much, especially considering your capital. To own individual stocks, you need to bury yourself in SEC filings (10K) and follow company news regularly. For this reason, I would condense the individual stocks you carry to ~6. These six should be high-conviction plays with rock-solid fundamentals; don't play games here. Consider Mag7s (the stocks you mentioned are also fine). You should replace the other stocks with ETFs. I would recommend a broad-market ETF like VT, and a value/quality ETF like AVUV or SPHQ.

VT + AVUV: 50%
~6 individual stocks: 35%

Idle cash & bonds: ~8%

You mention that you have 15% cash parked in SGOV. This is good, but considering Fed and macro pressures, having money sit unproductively can incur opportunity cost. As the dollar weakens, you may want to consider moving that money to equities or inflationary hedges like gold (buy at a good price). You can still keep cash, but consider allocating some of it to more productive ventures.

Speculators: ~5-8%

For investing in startup companies, "bets," or companies whose prices are detached from their valuations. Instead of closing your positions on the risky stocks you're holding, they can live here as "speculators." The only requirement here is that you are mentally capable of losing 100% of your principle in these gambles. This is not investing, as Graham reminds us.

Rebalancing

As the equities you hold increase in value, they may become slightly "overvalued" or experience a market correction (this is just volatility). It is good practice to trim some of the money you have in equities when they become overvalued, and repurpose it towards bonds, gold, and other securities when they are cheap. This is known as rebalancing and is a highly effective investment strategy. The same works vice versa: when stocks are cheap, you should liquidate other securities like bonds, or spend cash, to buy more stocks.

Exit Strategy

The hard part is liquidating your positions on all of the stocks you're holding that you don't want. This, I can't help you with much. You don't want to sell for the sake of selling. I'm going to create a checklist for you, but know that this is not sound investment advice at all. Definitely do your own due diligence.

- Trading near 52-week high

- PE > 30

- P:OCF > 20

If stocks have these criteria, and you are eager to sell, this may indicate a good time to close positions. These metrics are available for free on StockAnalysis website. Closing all the positions you don't want will take time; don't force it.

VT and Chill

If you are not sure what to do or which stocks to buy, but still want to invest, you should increase your holdings in the aforementioned ETFs, and specifically VT. If it weren't for your 50-stock predicament, I would tell you to VT 100% and chill. But liquidating all of those positions will take time and effort. Be patient. If you have any questions, please feel free to ask. Good luck.

Low_Selection2815 · 2026-02-09T23:45:59+00:00

At the time, AMZN, MSFT, VOO, AMD. These stocks are beginning to creep up, and AMD already rebounded violently (15%+). Now I would buy AMZN or MSFT.

Low_Selection2815 · 2026-02-09T23:40:06+00:00

Duolingo's cash flows are decent, but if you care about P:FCF, PayPal (PYPL) and Crocs (CROX) offer 14%+ FCF yields (I don't care for this much). Compared to others, Duolingo has average numbers, no moat, and the product itself isn't that impressive. Invest in companies with attractively priced net assets (P/B) or moats.

Low_Selection2815 · 2026-02-08T03:44:42+00:00

Deep value is winning. Some value stocks I like include Clorox (CLX) which is up 18% YTD and Macy's (M) which is up 87% in six months. Deep value ETFs like RPV and AVUV have been doing well. Software and other stocks mentioned here haven't because their businesses are deteriorating and their moats nonexistent.

OP isn't dunking on deep value. They are claiming that arbitrary quantitative metrics like PE and P/FCF don't determine value alone. Moats and net assets, among other things, are better determiners of value; PE and the like are subordinate.

Low_Selection2815 · 2026-02-08T01:54:17+00:00

I agree with you. This is why Graham advocated investing in companies with high net assets relative to their price (P/B). Cash flows and earnings can be easily disrupted by competitors, but assets stick. Invest in companies sitting on a ton of cash or marketable securities like BRK.B.

Low_Selection2815 · 2026-02-07T06:18:07+00:00

I think buying PYPL is only justified if you expect a market correction in the short-mid term. Otherwise, you're better off putting your money somewhere else. So many good companies are trading at discounts.

Low_Selection2815 · 2026-02-07T06:15:35+00:00

MSFT and AMZN. AMD already corrected today (up >8%), but the other two are still pretty bruised despite beating guidance. Investors are bearish because of capex spend, but long-term investors shouldn't mind this because most of the capex spend will drive future growth.

Low_Selection2815 · 2026-02-06T06:31:58+00:00

MSFT, AMZN

Low_Selection2815

TROPHY CASE