The Long Term Investor

I have ZERO knowledge on virgin Galactic or 5G companies. Sorry...

BUT.....here is a little article that I tend to like as a consolation prize:

The ‘Fed story’ will win out over second wave and election fears, UBS says. It’s time for investors to get off the sidelines

https://www.marketwatch.com/story/t...sidelines-2020-06-22?siteid=yhoof2&yptr=yahoo

(BOLD is my opinion OR what I consider important content)

Investors are once again grappling with myriad factors, hopes and fears.

Coronavirus infection rates have risen in a number of countries and states yet investors are also closely tracking the economic recovery. U.S. stocks opened lower on Monday before recovering to make gains, with the Dow Jones Industrial Average DJIA, 0.36% rising 0.5%.

In our call of the day, UBS said the Federal Reserve’s “unambiguous” story would drive stocks higher in the medium term and said now wasn’t the time for investors to be sitting on the sidelines. The central bank unveiled plans to start buying a broad and diversified portfolio of corporate bonds last week, sending stocks higher. Other central banks, including the Bank of England and the European Central Bank, have implemented further support in recent days.

The analysts, led by chief investment officer Mark Haefele, said three narratives were currently driving markets; the ‘Fed story’ — ongoing central bank stimulus — the second-wave story, and the U.S. election story. Fears of a second coronavirus wave have come to the fore in recent days, with spikes in Beijing, Germany and a number of U.S. states. The UBS team said that U.S.-China tensions fed into the election narrative, which would come into focus over the next four months.

“Overall we see the second-wave and U.S. election stories as contributing to market volatility as headlines feed investors’ hopes and fears about the speed and strength of the economic recovery. But it is the Fed story that will endure over the medium term,” they said in a note on Monday. They said they were positive on the outlook for both equities and credit, preferring USD high yield, Asian high yield and USD-denominated emerging market sovereign bonds as well as stocks in sectors that have so far lagged behind the market.

“Against this backdrop, we think the most important thing an investor can do is to be invested, rather than sitting on the sidelines. As earnings are likely to recover in the second half of the year and excess liquidity continues to support risk assets, we see further upside potential in global equities, in particular among sectors that have lagged the rally so far,” they added."

MY COMMENT

Agree completely. UNFORTUNATELY anyone still siting on the sidelines has missed out on 30-35% gains over the past few months. AND.......as usual.......any deciding to come into the markets right now will come in at or near the top of the current market rally. TOTALLY part of the reason that I try to ALWAYS be a long term, fully invested all the time, investor.

 

NICE to start the week on the right foot......a solid GAIN. ALSO nice to be Green in the old accounts today and beat the SP500 by .79%.

I will say.....investors are REALLY skittish right now. The election, the virus, and all the other "stuff" that is going on has many investors a little freaked out. If we do get a little bit of a correction some time over the next 2-6 weeks I could see where there could be a little bit of PANIC selling. I DO NOT see any reasonable probability of retesting the March lows.

I WILL say that I BELIEVE there is a probability that some time this summer or early fall we will have a correction. Perhaps a 10-15% loss. In other words......a TYPICAL summer correction. Who knows what will set it off. Would I anticipate doing anything in response.......NO. I dont have any funds that are available.....everything is FULLY invested.

 

A GOOD MORNING when the markets are UP nicely at the open and for the first hour or two of markets being open. It may not hold.....but it is better than starting the day down 200 points. I am ALWAYS positive on the markets.......at least it seems that way. One reason is because I am always looking out a year or two into the future. I am always looking at the long term.

The Behavioral Bias Blinding Investors To a New Bull Market

https://www.realclearmarkets.com/ar...ng_investors_to_a_new_bull_market_496983.html

(BOLD is my opinion OR what I consider important content)

"Legendary 19th century financier JP Morgan said, “A man generally has two good reasons for doing a thing—one that sounds good, and a real one.” Pundits cite loads of seemingly smart reasons you should dismiss global stocks’ rally since March. But their real reason? Admitting the upturn is real also admits they were wrong. Tough for most of us! So instead, they grasp for anything supporting their prior negativity. Behavioral psychologists see this as a subset of “confirmation bias.” It drives the “Pessimism of Disbelief”—the foundation of every new bull market, as I highlighted in May. Those falling prey it to suffer a costly but simple behavioral error.

After late-stage bear markets’ steep, panicky plunges, battered investors get myopic. They fixate on bad news, spinning any positives into negatives—like now. That’s the Pessimism of Disbelief. It sets expectations so low almost any eventuality lifts stocks, force feeding a new bull market in the process. It persists for a long time. But why … cycle in, cycle out, always? Why does it persist as stocks rise?

Simple: Confirmation bias—the ubiquitous tendency to see what we want to see or believe we should see—while not seeing contradictory evidence. When most buy a stock that rises they think they were smart and accumulate pride. But if it drops, they’ll blame distractions, illness, their spouse—anything other than themselves. It’s called accumulating pride and shunning regret. Humans have done it forever. It motivates us to keep trying, which was essential in Stone Age days and helps in lots of things now. But it hurts us all in stock markets.

Today, it causes most experts and investors to deny they were wrong since late March. The rally is fake they say—all “stimulus” optimism which boosted valuations unjustifiably high, teeing up another drop. They hype any resurgent volatility, like mid-June’s, as vindication. Or they argue euphoric investors ignore a potential second COVID wave. Or the rally is all Millennials day-trading on Robinhood. Or surging US debt will doom the dollar and zap markets. Or, or, or! It surely isn’t a sustainable new bull market, they grumble. The higher stocks climb, the more vehement the dismissals grow.

This happens in every new bull market, without fail. Consider the last one to see confirmation bias run wild. In 2009, stocks soared off March lows while bears shrieking “sucker’s rally!” grasped at bogeymen. Deflation. Consumers unable or unwilling to spend. A “New Normal” of lower returns for decades. Confirmation bias built well into 2010. Remember all those double-dip recession fears? Massive inflation’s inevitability? The looming municipal default deluge? To disbelievers, these weren’t reasons a new bull market would end. They were reasons it should never have started. In doubling down, they got it doubly wrong.

Confirmation bias makes disbelievers overlook a simple, basic truth: Markets never dwell on today—they look forward, somewhere from 3 to 30 months ahead. Exactly how far shifts unpredictably, but once economic contraction hits and negativity dominates news—like now—stocks are usually pre-pricing a far brighter future. They shift focus further out into that 3 – to- 30 month range. All the negatives pessimists tout are already factored into prices—rendering them incapable of triggering another big down leg. That would take new, big, bad problems no one has contemplated yet. With pessimists touting risks widely, I can’t see anything new stocks haven’t pre-priced to some degree.

Absent that new problem, this rally looks picture-perfect like every early bull market to me. Expect short-term volatility. Recoveries are always jagged, testing investors’ faith and shaking out the weak. But a retesting of March’s low? It would be historically unique. Consider: from February 19 through March 23’s low, the S&P 500 plunged -34%. Before mid-June’s volatility, it had recaptured over 75%of that decline. Since 1928, only two bear market or mid-correction rallies clawed back 75% of their drop and then headed down to retest lows—1957 and 2000. But they were different.

Both those rallies started before the declines even hit the -20% bear market threshold. Hence, they were absolutely much smaller than this year’s. In 1957, stocks fell -14.8%, recaptured 90% of that, and then headed lower—into bear market territory. In 2000, they fell -11.2%, regained nearly all that and continued their long, slow slog to 2002’s low. Neither was like now. At all! Those who call this upturn a head-fake project something unprecedented. That doesn’t mean impossible. It means unlikely.

This bear market began without warning. Nothing is certain, but dollar to a donut it ended the same way March 23rd. If you missed the rally so far, don’t compound your mistake. Look to that brighter 2022 and 2023 far-future—just like stocks do."

MY COMMENT

EXACTLY. We see the same behavior over, and over, and over, etc, etc, in every bear market and every bull market. Human behavior does not change. The day trading going on right now is EXACTLY the same as the day trading mania we have seen many times over the past 50 years. The technology may be different, but the behavior is the same. CLASSIC herd behavior by young males. Or.......if you prefer a more modern name......a trading FLASH MOB. It will end the same way it always ends.....BADLY for most. The good news is that the lessons being learned by those traders will DRIVE them to become more realistic longer term investors.

B Russ and TomB16.......yes.....I think you guys are right about Tesla. That is why I will probably add some shares over the next few months.....at least in some accounts. I will probably start with about 10 shares at first. It seems like I never get much of a REAL feel for a stock till I own it and get more involved in it. It is hard to say how they will end up as a company over the longer term........20-30 years. BUT.....at the moment.....they have proven a lot of their doubters wrong. I LIKE to buy companies that have gotten over that initial growth phase and proven that they will survive and PROBABLY thrive. I think TESLA is at that stage. As I have said before....I dont have to get into a company at the very beginning. I prefer to get in when they are at the start of becoming DOMINANT. TESLA.......MAY....now be at that point. It STILL concerns me that much of their income is in government subsidized areas. BUT.....on the other hand what is not government subsidized or supported in some way these days.....visible or not visible?

 

WELL.....being an ACTION kind of guy and NOT a fan of market timing......I went ahead with a couple of small TESLA positions. Eight shares in one account and 15 shares in another. YES.....I know, I am buying near the all time high. BUT....with the growth potential I see from this company....I do not care. Emphasis on......"potential"......definately not a sure thing. But what in stock investing is a sure thing? The SWEET SPOT for this company will be if they can make the move from the upper level consumers to becoming a mainstream dominant company. Time will tell. I do like the fact that their battery tech has great potential over and above the car business.

 

HERE is a repeat of the portfolio model.......as usual:

I am once again posting my PORTFOLIO MODEL. My initial criteria to start the process to consider a business are.......BIG CAP, AMERICAN, DIVIDEND PAYING, GREAT MANAGEMENT, ICONIC PRODUCT, WORLD WIDE LEADER IN THEIR FIELD, LONG TERM HORIZON, etc, etc, etc.

PORTFOLIO MODEL

"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 10 stock portfolio.

STOCKS:

Alphabet Inc
Amazon
Apple
Costco
Home Depot
Honeywell
Johnson & Johnson
Nike
3M
Microsoft
Proctor & Gamble
Tesla (small position)

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. (70). 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. In addition I am a fully invested, all the time, LONG TERM investor. (LONG TERM meaning many years, 5, 10, 20, years or more)"

MY COMMENT

This portfolio is HIGHLY CONCENTRATED on the big cap side of things. OBVIOUSLY between the funds and my eleven stock holdings there is MUCH doubling and tripling up on the stocks. THAT is INTENTIONAL. I strongly subscribe to the view of Buffett and some others that TOO MUCH diversification kills returns. I do NOT believe in the current diversification FAD that most people seem to now follow.......or think they are following. I DO NOT do bonds and think the current level of bonds held by younger investors.....those under age 50.....is extremely foolish.I DO NOT do market timing or Technical Analysis.

 

HOPE so. I should mention that one reason......a BIG reason.....that I am buying now is the anticipated inclusion of TESLA in the SP500 some time over the near future. At that time my position will increase due to the large amount of SP500 Index Fund that I have in every account. I EXPECT that that event will cause a nice short term bump up in price.

 

Agree, TomB16. I think they are probably overpriced at the moment. BUT....how often did we hear that about Amazon, Apple, Google, etc, etc, over the years leading up to them becoming dominant, semi-mature companies. I am willing to take that down side risk of perhaps as much as $100 to $200 per share for the upside potential.

There has been a lot of discussion about TESLA coming to Texas recently in my general area. 10,000 to 30,000 jobs......a 2000 acre site......the truck gigafactory as well as SUV capacity........and.......the possible move of the entire HQ out of California. I am very familiar with the property that they are possibly going to build on.

The small buy I made today is it for me for now. I need to see what happens when they go into the SP500 and beyond......but......I have a toehold in the company now that will force me to follow them.

 

LOL.

No, I would not buy an EV. I would however consider a hybrid or a plug in hybrid in about three years when I wear out the current everyday vehicle. For me a car is simply a commodity.......I go through one about every 4-5 years. (200,000 to 250,000 miles) So....it is not worth it for me to spend a lot on a car. I tend to stick with medium size SUVs. I put too many miles on a car for an EV to be an option for me. It is not unusual for me to hit 300 - 600 miles in a day at least 4-5 times a month, sometimes more.

 

ANOTHER nice GREEN day in the accounts. AND....a nice 0.6% beat of the SP500. I am waiting for the day when the DOW and SP500 are positive for the year. NASDAQ is.......+12.91% for the year. As to the others.......DOW (-8.35%)....SP500 (-3.08%).

The BIG EVENT that will impact markets soon will be the 2nd quarter earnings. I have NO IDEA what to expect or what the impact will be. At least this is not critical for long term thinkers.