For me, these are uncertain times. At this point, anything could happen both good and bad. For that reason, I'm happy to be pretty much cashed up. We haven't purchased stock, other than our DRIPs, since the December bottom. It's time to start buying again but only with new money. Our cash buffer will remain intact.
Perhaps this would be a good time to share some insight into our allocations. Readers of my posts are probably wondering how we can go from about 1% cash in December to almost 10% in May. Suffice to say, the vast majority of that cash did not come from distributions. I started investing in the 1980s. Small numbers and all stocks, at that time. Back then, I made gains like casino wins. It was a wild time. In the late 1990s, I took all of my nest egg and put it into real estate. That did extremely well, for about 15 years.... In 2009, I heavily diversified: couch potato, stocks, real estate, mortgages We are savers. Between my business, my wife's surplus cash, fixed income proceeds, and various other sources, our cash replenishes quickly. This lets me go "all in" when I spot a deal. I try not to do this very often but I've been "all in" about 5 times in the last decade. If I was 100% market investments, I would not be able to have take advantage of the December 2018 sale. I don't have any special vision of where the market is going to navigate the price vicissitudes. I just buy where I see value and stretch as far as I can to "bulk up" when I see extreme value. By the way, I don't necessarily recommend the extreme diversification we have embraced. If I were doing it again, I don't know if I would make the same choices. Maybe. It's a lot to keep track of. Every month, we've got something coming due and cash that requires re-distributing into another compounding mechanism. I'm getting a bit old to buy more real estate. We're also a bit old and comfortable to stretch ourselves to take advantage of low markets. I suspect we will always do it but our days of skipping vacations to pay for an investment are over. Vacation money has become insignificant, anyway.
Just plain short term SILLINESS in the markets today and the reaction to Trumps tariff threat. Apparently all the traders, media, financial experts, great business people..........have NEVER heard of NEGOTIATION TACTICS and STRATEGY. Only an IDIOT would telegraph where they are going and negotiate from a position of weakness.
HERE is a set of good current articles that have to do with LONG TERM INVESTING or at least topics that are important to reasonable investors. With this number of relevant articles I am not going to highlight them. 6 facts about bonds that you need to understand now https://www.usatoday.com/story/mone...ond-facts-you-need-understand-now/3645291002/ 7 big thoughts from Warren Buffett during annual Berkshire Hathaway meeting https://www.usatoday.com/story/mone...tt-highlights-from-companys-meeting/39445713/ Investors are losing thousands trying to ‘time’ the market https://nypost.com/2019/05/04/investors-are-losing-thousands-trying-to-time-the-market/ Federal Reserve must learn to leave the stock market alone https://nypost.com/2019/05/04/federal-reserve-must-learn-to-leave-the-stock-market-alone/ MY COMMENT I had a THEME going on the first two articles.......6 of that.....7 of this....etc, etc. But I lost it on the next two.....oh well. Some RANDOM thoughts.....I do believe much of the same things as Buffett when it comes to investing in specific stocks and evaluating businesses for investment. I also strongly believe, like him, that for many people that are long term investors, a simple SP500 Index Fund investment is about all many people will ever need. Although I do not "follow" Buffett as a trendsetter or as a stock picker or as someone that I would choose to invest in through Birkshire. As to bonds.....I have never owned any outside of some 30 year treasuries that were in the 12-13% range back in the early 1980's when the rates were way too good to pass up. BUT, for readers of this thread the article on bonds might be good basic information. Incidentally, I got rid of my 30 year treasuries when rates dropped so far that a HUGE profit (capital gain) was locked into the bonds. The event that prompted me to actually SELL ALL my HIGH INTEREST 30 year treasuries was when my broker called out of the blue one day offering to buy my treasuries. I dont know what crisis or problem they were experiencing, but the amount they were willing to give me for each treasury was extremely high....above market. After coming to terms on what they were going to pay for the first one, I realized something out of the ordinary was going on and I asked for more on the second one. I had 4 or 5 separate 30 year treasuries at the time and I was able to squeeze more and more out of them for each one as we negotiated each separately and I realized that they were in some sort of bind or issue and were willing to pay over the market value for each. I never did find out why they were so eager to get those treasuries. The third article showcases the typical investor behavior that KILLS returns. It contains some good very recent research data from DALBAR as to investor behavior during last fall and December and into 2019. The article on the FED in my opinion reflects just plain old common sense. NOW........AS TO CHINA. Looks like the meetings this week are still on. It is NICE to actually see us negotiating from strength and NOT the typical WIMP positions we always seem to take in negotiations. To be simple and blunt, China is our enemy. It is ASININE that we allow them to steal tech and business from us. In fact, I would not care in the slightest if the trade deal did not occur (I believe it will). It would not take long for us to devastate their FAKE, FRAUD based economy with 50% tariffs on ALL their goods. It would be a good thing if our government put into place policies to drive American companies and businesses to other places for their manufacturing. There is no shortage of third world countries that would welcome our manufacturing business. We saw the quick impact of economic war then we drove RUSSIA to collapse, and freed Eastern Europe, East Germany, and East Berlin as a result. Too bad we seem to NEVER have the guts to do what needs to be done in the short term in order to gain massive long term benefit.
I HAPPEN to totally agree with this article.....and......the BROADER concept that the field of ECONOMICS is simply BALONEY, as practiced and taught. Buffett Falsely Assumes the Phillips Curve is True https://imfcinc.com/ifiblog/buffett-falsely-assumes-the-phillips-curve-is-true/ (BOLD is my opinion and what I consider important content) "In recent years we’ve witnessed simultaneously low rates of inflation and unemployment: a bullish combination (for equities) and the opposite of the bearish “stagflation” seen in the 1970s. Yet for many decades economics textbooks and professors have taught a bogus, Keynesian-inspired “Phillips Curve” which assumes an inverse relationship between inflation and unemployment. The Phillips Curve denies the possibility both of fast, low-inflation economic growth, and its opposite: inflationary recessions. It insists, against ample evidence, that inflation (the depreciation of money) is caused by real factors: an “excessive” rate of economic growth (an “overheating” economy) and a “too-low” jobless rate. Most Fed officials still believe this false textbook theory, which is why they raise rates when the economy grows quickly while the jobless rate goes low. They deny that the Fed alone causes inflation (a solely monetary, not real, phenomenon), and they believe the Fed must slow the economy and boost joblessness to “fight inflation.” They claim inflation is due to “excessive” wage demands which are due to a “tight labor market” and “excessive” growth. The Fed so clings to this fallacious theory that it resists having new board members (like recent nominee Steve Moore) who reject it. Because the Fed operates according to a myth, it’s crucial to know how that myth works in practice. Of course, investors who use the Phillips Curve to forecast inflation (or markets) will be wrong far more than right; but they can use the Curve to reliably forecast the Fed’s nescient and punitive policies. Reporting recently from Omaha, CNBC’s Becky Quick said even Warren Buffett “noted that unemployment is at generation lows, yet inflation and interest rates are not rising” and “no economics textbook I know that was written in the first couple of thousand years discussed the possibility that you could have this sort of situation continue and have all variables stay the same.” In short, Buffett, like Fed officials, is addled in biased disbelief because “no economics textbook” concedes that the bullish combination of simultaneously low rates of inflation and unemployment are possible. They think such combos must end, “eventually” – or be terminated deliberately by a punitive policy. In truth, only Keynesian textbooks deny that this bullish combination is possible, just as they denied in the 1970s that the opposite, bearish combination of “stagflation” (high unemployment and high inflation) was possible. The dogma of the Phillips Curve persists – not in textbooks written over the past “couple of thousand years,” as Buffett claims, but only in those written since 1948, when colleges used the first edition of what would become a widely-adopted textbook written by MIT Keynesian Paul Samuelson. In its fourteen subsequent editions through the early 1990s, it always pushed the Phillips Curve. It polluted millions of minds, many of which obviously still influence market-making and policy-making. For decades Buffett has insisted he doesn’t invest based on economics or macro-forecasting; that’s been good for him, not because sound economics or rational forecasting are impossible per se, but because they’re impossible if Keynesian." MY COMMENT No comment necessary, the above just about says it all.
WEIRD......I have not seen the USUAL flood of "Sell In May" articles in the financial media this year. I guess they have other more immediate fear mongering stories to push this year. Trying to "guess" the short term market direction and why anything happens is fraught with danger. BUT....I think this little article has a point. With all the on, off, on, off, on, off again drama around the China trade deal there is at least a significant potential that when a deal does happen the market response will be a great big YAWN. Opinion: Prepare for a ‘sell the news’ scenario once a U.S.-China trade deal is signed https://www.marketwatch.com/story/p...-08?mod=mw_theo_homepage&mod=mw_theo_homepage (BOLD is my opinion and what I consider important content) "The big run-up in U.S. stocks since their Christmas Eve lows was propelled by the strong economy and a pause in interest-rate increases by the Federal Reserve. But most of all it was driven by the hope that the U.S. and China would strike a trade deal to end the tariff war launched by President Donald Trump in March 2018. As optimism grew that a deal was near, stocks reached new all-time highs — until the Tweeter in Chief sent markets reeling with threats he would impose higher tariffs on $200 billion of Chinese goods by this Friday. The Shanghai and Shenzhen indices fell more than 5%, the Dow Jones Industrial Average DJIA, +0.01% shed more than 500 points, and the S&P 500 Index SPX, -0.16% gave up 2.1% in the two trading days since the president’s Twitter hammer fell. Yet I think this sell-off would have happened even if a deal had been struck. Months of positive comments from administration officials had led investors to expect an imminent trade deal between the world’s two economic superpowers. Pundits had speculated Chinese President Xi Jinping would fly to Mar-a-Lago as early as June to affix his signature to a freshly minted bargain, sealing a triumph for President Trump a year and a half before the 2020 election. Through much of 2018, worries about trade kept a lid on stocks: They sold off on bad news and rose along with hopes of a resolution. Last December, Aditya Bhave, an economist at Bank of America Merrill Lynch, estimated that trade tensions had shaved 6% off the S&P 500’s potential gains. Happy talk But since the late-year sell-off, both the Trump administration and the Chinese government have struck a more positive note, and investors have bid up stocks. In mid-February, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin met with President Xi, and President Trump called the talks “very productive.” In late March, China’s official news agency, Xinhua, noted “new progress” in subsequent negotiations with Lighthizer and Mnuchin, while Larry Kudlow, director of the National Economic Council, said the two sides had made “good headway.” Just last week, Mnuchin expressed hope the two sides would make “substantial progress” in coming negotiations, including a visit by chief Chinese negotiator, Vice Premier Liu He, to Washington, D.C., this week. These are only three examples of the drumbeat of happy talk coming from the negotiators this year, and through all of them, stocks kept rising: The S&P 500 and the Nasdaq Composite Index COMP, -0.26% both hit new all-time closing highs last Friday, before the president’s tweets hit the fan. Correction ahead Obviously, this year investors’ expectations of a trade deal have been baked into stock prices, and that’s why the president’s weekend tweets caused the two-day selloff. But I think they’re only a preview of what could happen when a deal is finally done. Why? Because we’ve seen this movie before. Just before the 2016 presidential election, the S&P 500 bottomed at 2085.18 points. When Wall Street, which had overwhelmingly backed Democrat Hillary Clinton, realized that a Trump administration would enact massive tax cuts for businesses (including them), stocks began a nearly 15-month-long rally. They didn’t go straight up — fears of war with North Korea and skepticism even a Republican Congress would pass tax cuts caused lots of jitters along the way — but by the time the president signed the new tax bill on Dec. 22, 2017, the S&P 500 had tacked on nearly 600 points. It kept going through late January 2018, topping out at 2872.87, for a whopping 38% total gain from the pre-election lows. Then, once Wall Street had digested the reality of tax cuts, the profit-taking began, shaving 10% off the S&P 500 by Feb. 8, 2018. Clearly investors had anticipated the Trump tax cuts by bidding up stocks, and it was time to cash in some chips. That’s exactly what I expect to happen this time around with trade. I think the current sell-off is temporary, and the president’s sudden hard line looks like a negotiating tactic. Once some more differences are resolved, a deal will be done because both presidents need one. That will take stocks to new all-time highs followed by, I expect, a decent correction. Those post-trade-deal highs would be a good time to take some profits. It’s one of Wall Street’s oldest rules: Buy on the rumor, sell on the news. It still works in both English and Chinese." MY COMMENT A little simplistic. Although, I do believe the trade deal could end up being a very short or non-event when it happens. I certainly do NOT expect any media coverage considering how the media operates now. If anything, the media will look for anything to cry and whine about in the deal and will in every way try to put a negative spin on any deal. Or the alternative is it will be a headline for about one or two days and than you will never see a word about it again. I believe this article is being a little dramatic to try to pin a correction to the deal in some way. If or when a correction happens it will have many causes and most likely will be triggered by some emotional reaction on the part of the so called professional traders and/or those that think they are long term investors but bail at the slightest hint of.....anything in the news, true or not. We all KNOW......if we are living in REALITY.....that the general economy and business in general are booming. Earnings are coming in MUCH better that anticipated. NOT a surprise to anyone with a lick of common sense. OF course, a total surprise to the "experts", who as usual continue to put out WRONG information in their future projections. The percentage of companies in the SP500 that are beating earnings is way up.......SEE POST BELOW.
REMEMBER how earnings were going to be bad this quarter? REMEMBER how the impact of the tax cuts wold fade by now? Remember all the interest rate drama and fear a few months ago? REMEMBER how the trade war was going to kill business? ETC, ETC, ETC,........WELL here is REALITY for long term and other investors: Detailed Look at Q1 Earnings Season https://finance.yahoo.com/news/detailed-look-q1-earnings-season-212609771.html "Here are the key points: With results from 85% of S&P 500 and 78% of the small-cap S&P 600 members already out, the bulk of the 2019 Q1 earnings season is now behind us. The Retail sector is the only sector at this stage that has more than half of the results still to come. The market’s favorable reaction to otherwise mixed Q1 results suggests that many in the market feared a much weaker showing. In other words, lowered expectations helped actual results look better than they actually are. Total earnings for the 426 S&P 500 members, or 85.2% of the index’s total membership, that have reported results are up 0.4% on +4.9% higher revenues, with 76.5% beating EPS estimates and 59.9% beating revenue estimates. Q1 earnings and revenue growth is unsurprisingly tracking notably below what we had seen from the same group of 426 index members in the recent past, but the proportion of companies beating EPS estimates is tracking above the historical trend (revenue beats are relatively less common). Total earnings for the Tech sector (73.1% of Tech companies in the S&P 500 have reported) are down -6.9% from the same period last year on +4% higher revenues, with 81.6% beating EPS estimates and 73.5% beating revenue estimates. This is a weaker showing than has been the trend in other recent periods. Total earnings for the Finance sector (all results are in) are up +2.7% on 8.2% higher revenues, with 78.4% beating EPS estimates and 61.9% beating revenue estimates. Looking at Q1 as a whole, total S&P 500 earnings are expected to decline -0.4% from the same period last year on +5.0% higher revenues and 60 basis points of compression in net margins. Earnings growth is expected to be negative for 6 of the 16 Zacks sectors, with Technology and Energy as the biggest drags. If we do get an earnings decline in Q1, it will be the first year-over-year decline since 2016 Q2. Driving the Q1 earnings decline is margin pressures across all major sectors even as revenues continue to grow. Tough comparisons to last year when margins got a one-time boost from the tax legislation coupled with the rise in payroll, materials and transportation expenses are weighing on margins. For the small-cap S&P 600 index, we now have Q1 results from 469 index members. Total earnings for these 469 companies are down -14.3% from the same period last year on +3.2% higher revenues, with 61.0% beating EPS estimates and 55.2% beating revenue estimates. Looking at Q1 as a whole for the small-cap index, total Q1 earnings are expected to be down -13.8% from the same period last year on +4.6% higher revenues. For full-year 2019, total earnings for the S&P 500 index are expected to be up +2.2% on +3.2% higher revenues, which would follow the +23.3% earnings growth on +9.3% higher revenues in 2018. Double-digit growth is expected to resume in 2020, with earnings expected to be up +11.0% that year. For 2019 Q2, total earnings for the S&P 500 index are expected to be down -1.2% on +4.6% higher revenues. Estimates for Q2 as well as full-year 2019 have come down, with the current +2.2% growth rate for full-year 2019 down from +9.8% in early October 2018. The magnitude and pace of negative revisions to Q2 estimates compares favorably to what we had witnessed ahead of the start of the Q1 earnings season. The implied ‘EPS’ for the index, calculated using current 2019 P/E of 17.6X and index close, as of May 7th, is $163.95. Using the same methodology, the index ‘EPS’ works out to $181.95 for 2020 (P/E of 15.9X). The multiples for 2019 and 2020 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year." MY COMMENT The rest of the article goes into MUCH detail. I have highlighted what I consider is important above. That being, the positive earnings news that confounded the "experts". Although, in this particular article much of the positive earnings surprise is hidden in various negative comparisons by the author. The bottom line is this earnings season pas been VASTLY more positive than predicted and reflects the very strong general business environment going forward.
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Early in the 20th century, there were several hundred automobile manufacturers in the United States. Almost all of them failed. No doubt, there will be money in weed over time but picking a winner among competitors is going to be a lottery win. Winners will undoubtedly be influenced by politics and other non-business factors. Weed is too risky to me.
HOPE....DESPAIR....HOT.....COLD......LIGHT.....DARK.....YIN.....YANG..and on and on and on. Does anyone think the China trade deal will be remembered by anyone in one or two years? Talk about a TEMPEST in a teapot. As I said previously, I would be just as happy to see us HAMMER China with 100% or more in tariffs on their entire product mix. They are our enemy, they are mass murderers and the greatest threat to humanity, they more than any other country represent the potential for world war and world wide turmoil. Their economy is based on fraud. Hundreds of millions live in fear and dictatorship under their government. The steal our technology. Etc, etc, etc. BUT, unfortunately, we will end up with a trade deal with them sooner or later. And at that point all this SILLINESS about the trade deal will be over. The current situation is a CLASSIC situation that causes the average investor to severely under-perform the averages due to investor fear, panic, and emotion. In any event......HERE is the YIN and YANG of how this issue is being framed in the media. TAKE YOUR PICK....neither will be remembered in a year or two and looking at a chart of the markets during the current months will show NOTHING out of the ordinary. That is why I am a LONG TERM investor that is ALWAYS fully invested. U.S. Stocks Are Set for ‘Exuberance’ After a Rough Week, Evercore Says https://finance.yahoo.com/news/u-stocks-set-exuberance-rough-133642111.html The trade war is now the biggest risk to markets https://www.cnn.com/2019/05/12/investing/stocks-week-ahead/index.html MY COMMENT SMART investors that are in it for the long term will believe little to nothing that will be in the media over the next year and a half leading up to the election. EVERYTHING you see in the way of predictions will be suspect and political. BE WARY.....and ONLY believe what you see in the ACTUAL company financials and ACTUAL economic data for the nest eighteen months.
I think right now everything is overpriced; I would allocate the majority of my portfolio to short term bonds that are the closest to cash. I think we are in a MAJOR bubble now. Here is why: The work of Robert Shiller on the irrational exuberance in the market is really eye opening. I recommend it to every one (definitely grab a copy and read it). Inspired by Benjamin Graham's value investing, he has devised CAPE which is a metric predicting the expected future returns of the market based on the past performance. The current CAPE for the S&P 500 with dividends reinvested is sitting at around 34 which is almost 2 standard deviation higher than the historical average (for instance, this website: sigmean.com/). There were only two times that the total return CAPE have been higher than the current valuation: July 1929 at 38 and June 1999 at 48. And we all know that what happened after two times... For not Ray Dalio's asset allocation is perhaps the best strategy. I would divide my portfolio between stocks and bonds 25/75 now just because stocks are so in bubble territory.
Uncertain times. Unfortunately it is really so. We live in uncertain times. It's not easy but we should keep trying 'cause it's all we have. Let's not forget that there is always such help as https://mosheslaw.com/personalinjury/ in case we face difficult situation related with business problems or with violation of human rights problems. Today it's much easier to protect your rights than it was before and I believe it's a big step.
When you are dealing with the short term (one to two years) and investing, ALL times are UNCERTAIN. NO ONE has a crystal ball, no one can predict short term news and other events and the impact they will have on stocks and funds and markets. As someone that has been investing and interested in financial matters for over 45 years I can say with CERTAINTY that times now are no more uncertain than ever. The ONLY THING that makes investing more certain is having a very LONG TERM perspective. The ONLY thing that makes a particular time seem uncertain is the YOUTH of the person doing the "remembering". UNCERTAINTY is the norm. The current China situation and the markets response today is simply a very short term news driven event. Such events rarely have any impact beyond a few weeks to a few months at the most. BUT....these sort of news driven market days are exactly the kind of days that cause inexperienced investors to jump in and out of the markets at exactly the worst time. I heard earlier today that Go-Pro was moving their manufacturing out of China. My opinion is that any American company that chooses to manufacture in China is committing BUSINESS and MANAGEMENT MALPRACTICE. There is no shortage of countries that can manufacture at low wages......India, Viet Nam, the rest of Asia, Mexico, etc, etc, etc. There is absolutely no need for any company to do business with a partner that is going to blatantly steal your technology and produce competing products. China can NEVER be trusted as a business partner. This is a golden opportunity for other countries to grab manufacturing business away from China. China is WAY more dependent on us than we are on them. Days like this.............I simply do nothing and continue to be fully invested for the LONG TERM as usual. Personally, I do not feel that we are in a bubble. The economy is very strong on all fronts and business financials as shown by current earnings reports are nice.
I phrased my "uncertain times" post poorly. I'm not sure we disagree. I was confident going all-in at Christmas was the right thing to do. It was a nice sale on companies. Now, I'm not confident so I will revert to slow buying as cash comes in. I haven't sold anything due to market factors, nor will I. It's a matter of spending the cash buffer down at the end of 2018, rebuilding it, and now returning to slowly buying more stock at a normal pace where I see value. For the record, I did buy 50 more shares of Tesla a few weeks ago (missed the bottom) but that was a pretty minor transaction. Perhaps the point is that every spending spree is followed by austerity so there is money for the next spending spree.
ALL OF US, myself included, as humans are so EGOCENTRIC that we fail to understand that the world is ALWAYS full of uncertainty and unknowns. This is true as to investing and everything else in life. We view and interpret the world through the experiences of our own life span and have little ability to understand things that occurred before our own coming of age at about age 18. RELEVANT articles for the day. (BOLD is my opinion and my opinion of important content) First a general article: AMID COUNTLESS DOOMSDAY SCENARIOS, THINGS HAVE NEVER BEEN BETTER https://www.washingtontimes.com/news/2019/may/13/despite-proliferating-doomsday-scenarios-its-yet-t/ The Tariff Tango’s Latest Moves https://www.fisherinvestments.com/en-us/marketminder/the-tariff-tangos-latest-moves "Editors’ Note: MarketMinder favors neither party nor any politician. Our discussion of politics herein is limited to assessing the potential market impact of policy change. Eight days ago, US President Donald Trump took to Twitter to tell the world trade talks with China weren’t moving fast enough, leading him to threaten to jack up tariffs on $200 billion in Chinese imports to 25%. He followed through on this threat Friday. Predictably, China responded with tariffs of its own Monday morning, as Chinese officials announced they would jack tariffs up on a range of about 5,000 US goods worth $60 billion from 5% ̶ 10% to 25%. Many now fear the tit-for-tat will continue, with Trump targeting the remaining $325 billion in Chinese imports. Already, the US Trade Representative’s Office has filed preliminary paperwork to that effect. Pundits are apoplectic—and markets are rocky, with US stocks dropping about 2% in early trading Monday. But in our view, this reaction is too hasty. We think now is a time to stay above the fray and remain calm. In our view, these new tariffs—even including threats— likely lack the necessary scale to derail the bull. While recent swings haven’t been fun, they aren’t atypical for markets—even in terrific years. Exhibit 1 details the tariffs, showing the amount of goods targeted, the old and new tariff rates, and the resulting impact. In the last week, tariffs have increased by a total of $42 billion. (That is the sum of Friday’s US increase and Monday’s Chinese response.) If—and this is just an “if” at this point—the US enacts 25% tariffs on the remaining untaxed $325 billion in imports, tariffs would rise $81 billion more. Presumably, China would respond to this as well, although they haven’t given any specifics about what this may entail. We can’t scale that response as a result. Exhibit 1: The Table of Tit-for-Tat Tariffs Source: Office of US Trade Representative, The Wall Street Journal, as of 5/13/2019. Italics indicate tariffs are under consideration but are not in place. China’s old tariff rate ranged from 5% to 10%; we use 5% here to intentionally overstate the increase the new, higher rates bring. Those numbers may seem big, and yes, we think tariffs—always and everywhere—are economically bad. But scaling matters. Combined US and Chinese nominal GDP was $34.1 trillion at 2018’s end. Tariffs now total $65 billion, or 0.19% of combined GDP. The actual change in the last week is even smaller—$42 billion, or 0.12%. Even if Trump enacts tariffs on the remaining $325 billion, the total would amount to 0.43% of GDP. Not huge. And these estimates assume that tariffs 1) are paid in full and 2) remain in place. We are skeptical of the former, and the latter seems contingent on trade talks. Hence, stocks’ volatility in response to the tariff increase looks much more sentiment-driven than fundamental—likely to prove fleeting, in our view. This does little to change our expectation 2019 will prove a great year for stocks globally. Wobbles come with the territory in stocks and, unfortunately, such moves are the price tag for their historically high returns. As we type, the S&P 500 is down -4.6% from its record high.[ii] It could decline further. But either way, we think it is worth noting this isn’t an unusual move, even in great years. The S&P 500’s five best years since World War II are 1954, 1958, 1975, 1995 and 1997.[iii] All but 1995 had a decline similarly large or larger. 1975 featured a correction (a short, sharp, sentiment-driven drop exceeding -10%).[iv] 1997 had several bouncy periods, one rounding to a correction (-9.6% at its trough) and one reaching correction territory.[v] In our view, now is a time to remain calm. In the end, we expect cooler heads—and the bull market—to prevail, whether these tariffs remain in place or not. Overthinking every move in the tariff tango the US and China are dancing seems unnecessary to us." AND Trump's hardball tactics against China just might work https://www.usatoday.com/story/opin...ariff-may-work-editorials-debates/1194131001/
AS USUAL.......looks like the MEDIA fear mongering push on the China issue is over, or at least on the back shelf, waiting for the next time it is brought down and flogged as the financial scare story of the day. It is all about clicks, ratings, and publicity. (disregarding the obvious political reasons) Fear mongering is one of the best ways to get the public's attention and boost ratings. The financial media is just as complicit in this sort of short term fear mongering as any other media sources. If you are a professional trader or a big investment bank or company the more short term volatility the better. At least that is what they think........this has not worked out too well for the hedge funds. BUT, for the average investor this sort of constant fear mongering and media bombardment leads to market timing, trading on fear and panic, and all the other investor behaviors that KILL returns. UNFORTUNATELY the "trading mentality" is common and in my opinion is the way the average person, that is not an educated investor, thinks the markets work. ALL of the "trading mentality" STUFF is for the most part DIVORCED from what should be the total focus of any investor.........fundamental focus on the actual business of specific businesses or fundamental focus on the specific business make up of various averages and indexes. My personal BIAS......charts....worthless, technical analysis.....worthless, market timing...worthless, all the various complex systems that people use....worthless, short term trading....worthless, etc, etc, etc. If you see yourself as an investor the ONLY thing that counts is the financial success and financial future of the actual business that you are investing in. The SHORT TERM STUFF.....China, treasury rates, Iraq/Iran, Political "stuff", the fear mongering news of the day, etc, etc, is nothing more than CHAFF and NOISE. As I type this the DOW is at +234, the SP500 is at +32.65, the ten year treasury yield is at 2.408%, etc, etc. ALL aspects of the economy are hitting on all cylinders. Earnings are very good and the BULL market is alive and well. At the moment: DOW year to date +10.95% SP500 year to date +15.07% LONG TERM investing is the key to success and wealth generation for the average person. I was talking to a Vice President and Investment Manager at a major financial company a few days ago. We were discussing people, like myself, that are successful life long investors. Being in the business, he agreed with ALL that I post and discuss.......BUT.....he commented that over his 50+ years in the business he had seen only 10-15 people that had the clinical focus and ability to equal or beat the general markets. As we discussed this issue we both agreed that it is EMOTION and failure to control EMOTION that is the downfall of the average investor. The PRIMARY goal for any investor that wants success over the LONG TERM should be to turn off the emotion.
We continue to be in a very JUMPY, shallow market. The slightest news sends the markets down. The good news is these HITS are extremely short term often lasting hours to a few days. In my opinion this shows the strength of the REAL, underlying economy and business. We continue to see very nice positive earnings reports. As we have seen for the past year or two, the slightest, mildly negative detail in any earnings report is vastly overreacted to. The stock market punished earnings misses more than it rewarded earnings beats https://www.marketwatch.com/story/t...arnings-beats-2019-05-17?mod=mw_theo_homepage (BOLD is my opinion and represents important content) "Stock-market investors were in a rare mood during first-quarter earnings season, ready to deliver outsize punishment to shares of companies that disappointed on earnings while providing relatively meager rewards to companies that topped expectations. FactSet measured share price reaction over a four-day period beginning two days before a company reported results through the two days after. The numbers showed that companies in the S&P SPX, -0.58% that reported negative earnings surprises saw a 3.5% fall, on average, over the four-day period. That compares with a five-year average of a 2.5% fall over the window, said John Butters, senior earnings analyst at FactSet, in a Friday note. Companies that topped earnings forecasts for the first quarter saw a 0.7% price rise over the four-day window, compared with the 1% gain seen on average over the past five years. FactSet “Given this market reaction, it is interesting to note that companies and analysts have sent mixed signals to date on earnings expectations for the second quarter,” Butters said. He noted that 80% of S&P 500 companies have issued negative guidance for the second quarter, compared with the five-year average of 70%. When it comes to revisions of earnings estimates by industry analysts, the 1% aggregate decline in estimated earnings over the first month of the second quarter was smaller than the 5-year (-1.7%), 10-year (-1.5%), and 15-year (-1.8%) average for the first month of a quarter. While more S&P 500 companies have issued negative guidance for the second quarter than average, Wall Street analysts have made smaller cuts to second-quarter earnings pare share estimates than average, he said. With 92% of S&P 500 companies having reported results, first-quarter earnings season is largely in the books. Butters said 76% of those companies reported earnings that topped estimates, topping the five-year average of 72%. In aggregate, companies reported earnings 5.4% above estimates, which topped the five-year average of 4.8%. Meanwhile, 59% of companies reported actual sales above estimates, matching the five-year average, Butters wrote. In aggregate, companies topped sales forecasts by 0.4%, which was below the five-year average of 0.8%." MY COMMENT There you have it. A great earnings season that is totally ignored to focus on the sensational and irrelevant sensationalized news of the day. Seventy six percent of companies reported earnings beats and fifty nine percent reported sales above estimates. Perfectly fine news for the LONG TERM INVESTOR.
As to this "trade war" baloney: The Trade War Will Make Stocks Scary. 5 Reasons Not to Panic. https://www.barrons.com/articles/tr...shareToken=stbcd3cbd8565b49f0b8614c41c8e20647 (BOLD is my opinion and important content) That seemed to be the lesson earlier in the past week when global markets tumbled as trade tensions quickly escalated between the U.S. and China. Yet even after a tit-for-tat on tariffs between the two economic superpowers—and President Donald Trump’s move to restrict Chinese telecom-equipment giant and national champion Huawei Technologies from possibly accessing the U.S. technology and semiconductor chips that it needs to operate—the U.S. stock market proved resilient. The S&P 500 index was trading early on Friday afternoon at 2875, down 0.2% for the week. So what is the reality here? We asked money managers, trade experts, and market strategists to put the trade-related risks into perspective. The consensus: put aside the playbook for a trade war and global recession for now, but be prepared for uncertainty and bouts of stock market volatility for months to come. “The market has been overvalued, not paying attention to any risk; it has been priced for the best-case scenario,” says Rupal J. Bhansali, chief investment officer for international and global equities at Ariel Investments. “Now, it will take notice of any risk that materializes with a knee-jerk reaction.” In other words, expect market swings as investors dissect tweets and economic data to gauge the next plot twist in the trade drama. Yet even then, there is reason not to hit the panic button. Both the U.S. and China are in a better economic position to withstand the latest tariffs. And the Federal Reserve and other accommodative central banks offer markets a cushion. Changing trade patterns, meanwhile, could reduce the impact of the trade dispute on the global economy. “If you were ever going to impose costs on the U.S. consumer, the time is when unemployment is at 50-year lows and inflation is a pancake,” says Christopher Smart, head of Barings Investment Institute. “And it’s clear that the Chinese government has tools that work [to deal with tariffs]—and even more fiscal firepower than the U.S.” In China, the trade dispute is feeding a wave of nationalism, with commentators comparing it to the nation’s humiliation by foreign powers during the colonial era—a longtime sore spot with the Chinese. That could complicate negotiators’ goals of pushing Beijing to make structural reforms, nailing down enforcement details, and working out thorny issues related to technology. But the standoff over trade ranks low on the escalation scale, says Marc Chandler, a longtime currency analyst and chief market strategist at Bannockburn Global Forex. “It’s like children in the sandbox, still hitting and spitting at each other, not killing each other,” he says. Moreover, the Wall Street consensus is that there will eventually be a deal with China. Many are looking to the meeting of the Group of 20 nations at the end of June as an opportunity for Trump and President Xi Jinping to de-escalate the situation, as the two leaders did last year. Stocks at Risk Even as such optimism holds sway, stocks could still fall: Bank of America Merrill Lynch strategists have forecast a pullback of 5% to 10% in the S&P 500 related to the latest round of tariffs. That’s not to minimize the risk of a full-blown trade war, whose odds are rising but still low. Bank of America forecasts a 20% to 30% hit to the S&P 500 if the White House imposes tariffs on the rest of Chinese goods that would hit a wider swath of consumers and businesses. Also worth watching: if the moves by Washington to restrict Huawei draw retaliation from the Chinese and the strategic battle over technology spills into the trade war. That would almost certainly provoke Chinese retaliation through boycotts of U.S. goods, currency devaluation, or increased scrutiny and regulations on U.S. companies operating there. It could spill over into geopolitics, through conflict in the South China Sea, disputes over Iranian oil, or North Korea issues. And that would mean recalibrating all sorts of expectations. Strategists, however, see such a scenario unpalatable for both sides. Headed into the 2020 election season, Trump will want to talk up a strong economy and a bullish stock market, while Chinese leaders will want to stabilize their economy as the Communist Party celebrates its 70th anniversary in power. Even if all $500 billion in Chinese exports to the U.S. are subject to tariffs...$21.1 T U.S. GDP...only 2.4% of the U.S economy is tied to exports from China at risk for tariffs. $13.4 T China GDP...and 3.7% of the Chinese economy is tied to exports to the U.S. at risk for tariffs. Still, while a phone call between the leaders or a scheduled meeting of trade negotiators could cheer the markets, trade experts caution against expectations for a tidy resolution. As China tries to make the transition from being the world’s factory to being more competitive in higher-value manufacturing and technology, tensions between the two countries could persist, probably for years, as they try to coexist with different political and economic systems—and different strategic interests. For investors, that means factoring in the risks of continued confrontation, companies living with tariffs, and reassessing where they make goods and what technology to invest in. “The stock market now is just pricing in a few months of delay,” says Caroline Atkinson, who served as deputy national security adviser for international economics under President Barack Obama and now advises investment firm RockCreek Group. “I don’t believe any deal will be completely settled before the 2020 election. People need to get used to that idea of uncertainty.” Here’s how the experts assessed the five biggest trade risks: RISK: Trade tensions send markets into a tailspin. REALITY: Stock markets might decline, but a more dovish Fed should offer a safety net. The Fed’s turn from raising interest rates to becoming more patient and flexible in reducing its Treasury holdings has lifted investors’ optimism that the central bank is more likely to swoop in with a rate cut if things get dicey. But some strategists had already been recommending a more balanced portfolio in anticipation of bumpier times, as stocks have logged hefty gains this year and growth has softened. The trade escalation only adds to those calls. In a note to clients, BlackRock chief equity strategist Kate Moore reiterated her recommendation to maintain “ballast in portfolios,” such as U.S. government bonds, while sticking with U.S. and emerging market stocks, and favoring companies that can grow even as economies slow, particularly in the U.S. health-care and technology sectors. Other strategists have pared riskier assets from model portfolios, including emerging market stocks and bonds. They are taking a closer look at cyclical sectors such as technology and industrials, which rely heavily on China for sales, and manufacturing stocks, all of which could take a hit as trade tensions rise. “Cyclicals were beginning to outperform as people were getting comfortable with the economy growing at a faster pace. The uncertainty around trade throws that into question,” says Jason DeSena Trennert, CEO of Strategas Research Partners. “We are overweight financials, industrials, and technology, and those last two are probably the biggest risk to our market call.” Barclays equity strategists analyzed not just foreign sales but also import and export levels to identify stocks most vulnerable to trade tensions. Among those high on the list are Apple (ticker: AAPL), Cisco Systems (CSCO), Qualcomm (QCOM), Honeywell International (HON), and Eaton (ETN). Apple has become exhibit A for trouble in China. Much of its hardware is made in China, where it also generates about a sixth of its sales. Wolfe Research analyst Steve Milunovich estimates that increased tariffs could add as much as $150 to the average iPhone price and jeopardize as much as 20% of Apple’s earnings per share. Retailers and their suppliers are also vulnerable, with VF (VF) and Nike (NKE) high on Barclays’ list. More than a third of clothing imports and 70% of footwear comes from China; Cowen analyst Oliver Chen recently warned that retailers might not be able to pass on higher costs to shoppers, potentially cutting earnings per share by 10% to 30%. RISK: Trade Tensions Bring Global Growth to Standstill. REALITY: A trade war would hurt global growth, sapping business confidence and curtailing spending and investments. But some context is helpful: For the $21 trillion U.S. economy, even the full $500 billion in Chinese exports that could be at risk for tariffs is small—accounting for just 2.4% of U.S. GDP. China gets a larger share from trade, but even then, less than 4% of its GDP is tied to the U.S. China is increasingly trading with other emerging markets, not to mention shifting its economy to focus more on its own consumers, who account for about 75% of GDP growth. Changing trade patterns have reduced global trade’s impact on economic growth—one reason that Sonal Desai, chief investment officer of Franklin Templeton’s Fixed Income Group, describes trade wars as “the dog that didn’t bark.” In the 15 years before the financial crisis, global trade grew at twice the pace of global GDP growth. In the decade after, global trade grew at a 20% slower pace than global GDP growth. Yet the global economy still grew at roughly the same pace—3.6% versus 3.7% when trade was stronger. That could mean the recent trade skirmishes have a more muted impact on global economic growth than some expect, Desai says. The International Monetary Fund forecasts that U.S. GDP could fall by as much as 0.6% while China’s GDP could fall by up to 1.2% if 25% tariffs were levied on all of the bilateral trade between the U.S. and China. The impact depends on a range of factors, including how consumers and companies respond, Desai says. After the tariffs imposed in January 2018 on imported washing machines, the median price for a washing machine rose nearly 12% from its pre-tariff price of $749, according to a paper from the Federal Reserve Board and the University of Chicago. U.S. producers didn’t take market share, but instead raised their prices, too. That suggested that the U.S. consumer was healthy enough to spend even though prices rose, Desai says. Walmart (WMT) on Thursday said that it would raise prices because of tariffs, but expected customers to absorb them, which could help preserve its profitability. If other companies have similar luck, inflation could rise. That could put the Fed in the difficult position of having to raise rates in the middle of a trade conflict. RISK: China’s economy buckles under tariffs. REALITY: About $5.3 billion on a net basis flowed out of Chinese equities in the past two weeks as tensions flared, according to the Institute of International Finance. The worry: that trade could derail China’s efforts to stabilize its economy. When the threat of a trade war loomed last fall, China reported its weakest quarterly economic growth rate since the financial crisis, and sentiment was at rock-bottom among investors and business owners. China is on steadier ground now, following a wave of stimulus measures such as tax cuts, infrastructure investments, and looser lending standards, says TS Lombard economist Rory Green. And more stimulus is expected to cushion the latest tariffs, including possible subsidies for cars and appliances, and cuts to banks’ reserve-ratio requirements to spur more credit. Companies making goods in the cross-hairs of the tariffs, such as toys or footwear, or that are part of technology supply chains, could suffer. And China would feel the brunt of a full-on trade war, with Chinese stocks possibly falling to 2015-16 lows, according to Bank of America strategists. While at some point, too much stimulus will spook investors concerned about China’s long-term debt, it should boost consumption for now, helping domestically oriented companies. Divya Mathur, co-manager of global emerging markets strategy at asset manager Martin Currie, is looking to add to those with strong franchises unaffected by trade or that are able to raise prices to offset tariffs. Alibaba Group Holding (BABA) and Tencent Holdings (700.Hong Kong), two stocks widely held by U.S. investors, could face near-term pressure as investors shed China-related stocks. But Mathur would use pullbacks to add to the companies, citing their long-term growth prospects, as they capitalize on the millions who use their platforms and reap benefits of investments they are currently making in emerging technologies. RISK: China uses its currency as a weapon. REALITY: A weaker currency could take the sting out of tariffs for China by making its exporters more competitive. But it could also escalate tensions with the U.S., which has accused China of manipulating its currency in the past. A stronger dollar would hurt U.S. exporters and multinational companies. China’s surprise devaluation of its currency in 2015 sent markets tumbling and $700 billion in capital fleeing the country. Memory of that panic is still fresh in investors’ minds. Beijing, however, has taken steps to restrict capital outflows to prevent a repeat. Plus, increased scrutiny by the U.S. of Chinese acquisitions, a Chinese push to keep investment local, and the recent inclusion of Chinese A shares and bonds in major emerging market benchmarks, which forces fund managers to invest more in the country, means more money sloshing around to give China some breathing room. Still, a weaker Chinese currency could bring other emerging markets pain, hurting exporters in South Korea, Taiwan, and Thailand, and possibly causing those countries to weaken their currencies to stay competitive. A stronger dollar raises costs for countries servicing dollar-denominated debt and for those, such as India, that import dollar-denominated oil. Investors becoming more risk-averse in the wake of the trade-conflict escalation could reduce emerging market holdings, leaving them open to further declines. The MSCI Emerging Markets index was down 2.2% as of Thursday’s close, reversing about a third of its rally this year. But not everyone loses: Latin American agricultural companies could attract more orders as China tries to diversify its commodity sources, while Mexican manufacturers and Southeast Asian countries’ economies could benefit over time as companies shift production away from China. RISK: China dumps Treasuries. REALITY: Called the “nuclear” option, the fear that China would dump all or most of its $1.1 trillion in U.S. Treasury holdings resurfaces every couple of years. While China is the largest foreign holder of Treasuries, its holdings are small in the scope of the $22 trillion market, and buyers are plentiful—especially if fears of a global slowdown or geopolitical event mount. And it is an unlikely move. “Where would they put the trillions of dollars? 10-year German Bunds are below Japanese 10-year yields; there aren’t a lot of options,” says Bannockburn’s Chandler. “They also don’t want their currency to appreciate, so that handcuffs them,” he says, adding that dumping would only hurt themselves. “China tends to find things to hurt adversaries without hurting themselves.” MY COMMENT I dont find this so called trade war SCARY, even for a minute. The impact on anyone in this country has been minimal. The impact on our economy has been minimal. The impact on CHINA will be HUGE as time goes by. However, it is unlikely you will ever see any REAL results put out by China since all their financial data is manipulated just as their currency is manipulated. It was a HUGE mistake to allow them into the WTO, just as it has been a HUGE mistake for the US government to sit by and allow them to take over our technology and become our primary manufacturing partner. (using the word partner in the loosest sense) With the current posture of the negotiations.....using the word negotiations loosely.....I would now not be surprised to NOT see a deal before the election. It is obvious that China has been negotiating in BAD FAITH and has simply strung this along till we are now in election season. That is their remaining card to play....hope that Trump is going to cave to get a deal to boost his chances in the election. An alternative view would be that they are willing to flip a coin on the election and wait and see if Trump loses and at that point all will go back to the same old, same old, with a renewal of our age old, IDIOTIC, globalist, policies toward China. Probably not a bad strategy for China. They strung things along, pretending to negotiate and than pulled back on the pending deal at the last minute to wait out the election. For investors, once this becomes OLD NEWS in a few weeks and the media moves on to other stories, China will be irrelevant to investors, especially investors that have a REALITY based, LONG TERM perspective. I remain fully invested for the long term as usual.
HERE is a little article that I like. YES......there is no inflation. In my opinion the world in general especially the EU has been in a deflationary era since 2008. FORTUNATELY our current tax and regulatory policies have caused our economy to BOOM while we continue to experience low to normal inflation. YES....a certain level of inflation is normal and healthy for an economy. Some U.S. Fed officials are more worried by weak inflation https://www.reuters.com/article/us-usa-fed-evans-idUSKCN1S91CC (BOLD is my opinion and what I consider important content) "STOCKHOLM/STANFORD, Calif. (Reuters) - Two Federal Reserve policymakers on Friday said they were increasingly worried about weak inflation, an indication that some U.S. central bankers see a growing case for a future interest rate cut even as others push for continued patience. Chicago Fed President Charles Evans, speaking at a conference in Stockholm, said this year’s drop in inflation excluding the impact of food and energy was worrisome. He said he was also concerned the economy might underperform. “Then policy may have to be left on hold - or perhaps even loosened,” Evans said in his speech. St. Louis Fed President James Bullard was even more emphatic about his concern about the softness in so-called core inflation, which rose only 1.6 percent in the 12 months through March, well below the Fed’s 2 percent target. “If we go through the summer here and inflation expectations are still too low and actual inflation doesn’t seem to be picking up then I think the level of my concern would get more intense,” Bullard told Reuters in an interview. “I am open to a rate cut to try to combat this, but it would be a rate cut not because of bad data on the U.S. economy. It would be a rate cut because we want to make sure that inflation expectations and eventually actual inflation is more consistent with our 2 percent target,” Bullard said. The remarks by Evans and Bullard, who both have a vote on Fed policy this year, contrasted with Fed Chairman Jerome Powell’s comments to reporters after the release of the central bank’s latest policy statement on Wednesday. Powell repeatedly answered questions about the prospect of a rate cut by saying there was no strong case for moving rates in either direction. That sentiment was echoed on Friday by another senior policymaker, Fed Vice Chair Richard Clarida. He said the U.S. economy was in a “very good place,” with inflation expectations seemingly “stable,” and that the central bank had time to look at incoming data before deciding on any further interest rate changes. FED’S CONUNDRUM Data pointing to economic strength, highlighted by a jobs report on Friday that showed the unemployment rate fell to its lowest level in nearly 50 years in April, and inflation that may be signaling underlying weakness is a conundrum for the Fed. “Underlying inflation trends may be mired below 2 percent,” said Evans in Stockholm, noting that the Fed could some of the credibility that would be needed to fight future recessions if it can’t hit its inflation target. But he added that it was also possible inflation could surge and require rate hikes “over time.” Bullard, in an earlier interview with CNBC, said the current level of inflation was making him a little nervous and that the Fed’s gradual three-year tightening cycle, which ended in December, might be constraining the economy despite signs of robust growth. “We’re a little tight,” Bullard said, referring to the federal funds rate, which the central bank uses to control borrowing costs. It is currently set in a range of 2.25 percent to 2.50 percent. The Fed is increasingly under pressure from U.S. President Donald Trump to ease monetary policy, a situation that has raised concerns about the central bank’s ability to maintain its independence. Trump, who has said recent rate hikes have undercut his efforts to boost economic growth, called on Tuesday for rates to be cut by a full percentage point. The top White House economic adviser on Friday said the central bank would likely move in that direction. “With these low inflation numbers, I think the Fed is actually looking at rate cuts,” White House National Economic Council Director Larry Kudlow told Fox Business Network. “Our views right now intellectually are not really far apart from the Federal Reserve.” Kudlow has said the Fed is free to set policy as it sees fit, while Powell and other U.S. central bankers have insisted they operate independently from political pressure." MY COMMENT At this point my opinion is that we should just leave rates alone. Perhaps for a significant time. The lack of inflationary pressure is starting to freak out the......"economic experts".....that think they should and can run the economy. Perhaps the real answer to what is going on is the fact that the ECONOMIC theory that many of these ivory tower idiots use for their view of the world is simply WRONG. I do believe that we were in a mild deflationary depression starting in 2008 and continuing for the next eight to nine years. In today's world with all the changes that technology is imposing on society, labor, employment, productivity, etc, etc, etc, I have no doubt that it is possible to be in a booming economy with low inflation or even deflation. The FED of course continues in general to chase the inflation BOOGEYMAN as they have been doing for the past 40 years. In my opinion the greatest danger to the economic health of the world and even the USA has been and continues to be the risk of a full fledged deflationary depression.
As we approach the end of MONTH FIVE of investing year 2019 stocks and business are performing strongly and consistently. So far, so good. At the moment: DOW year to date +10.44% SP500 year to date +14.07% HERE is my PORTFOLIO MODEL that is the basis for my LONG TERM INVESTING and what I post on this thread. I repeat this information every few pages in this thread for reference. "Here is my "PORTFOLIO MODEL" for all accounts managed which is the basis for MUCH of my discussion in this thread. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 55% of the total portfolio and the fund side at about 45% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing. As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a VALUE style component (Dodge & Cox Stock Fund), a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 12 stock portfolio. STOCKS: Alphabet Inc Amazon Apple Boeing Chevron Costco Home Depot Honeywell Johnson & Johnson Nike 3M MUTUAL FUNDS: SP500 Index Fund Fidelity Contra Fund Dodge & Cox Stock Fund CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (65+). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE." MY COMMENT: HOPEFULLY the stock portion of the portfolio will now be stable for many years into the future with good performance on the part of the various companies in their business and no trades necessary. I prefer to NOT make changes or trades, but if necessary I will pull the trigger without hesitation or emotion.
