The Long Term Investor

YES......the POWER OF LETTING GO.......in other words the POWER OF LONG TERM INVESTING......

The control delusion

https://www.evidenceinvestor.com/the-control-delusion/

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

It shouldn’t really be a surprise by now, but when it comes to investment we humans are nowhere near the cool and calculating machines the textbooks make us out to be. This is the first of a new series which will look at discoveries in the fascinating field of behavioural finance, starting with the delusion that we have far more control over things than we actually do.

In an Indian Premier League cricket match, the opening batsman in one team ordered his minders to search his hotel room for his missing “lucky” bat. The bat turned up just in time for the first ball to be bowled. But the star batsman ended up being bowled for a duck anyway.

Like sports stars who hang their success on lucky charms or pre-match rituals, some investors cling on to their own superstitions. These might include selling a stock that has risen for five sessions, or avoiding the “spooky” month of September or taking cues from the Superbowl.

When these individuals’ portfolios perform strongly, they might put it down to their own stock selection acumen. But when their portfolios suffer, they tend to pin the blame on factors beyond their control. Rarely do they consider the possibility that all of these possible outcomes are just random.

Behavioural finance view
Behaviouralists have a phrase for this tendency to claim credit for all the good things that happen and to disown the bad ones: “Self-attribution bias”. This behaviour springs from the illusion of control, a psychological need to believe we have more agency than we actually do.

The illusion of control was first documented in 1970s by US psychologist Ellen Langer, who in a series of experiments where there were random outcomes — like picking a card from a deck — people tended to see causality when there was none. So they might have more confidence about the outcome if they were cutting the deck themselves than if somebody else was.

You often see this tendency in casinos where people playing craps tend to throw the dice harder in expectation of a high number and softer in the hope of getting a lower number.

In investment, people who sell out of the market ahead of a steep fall or buy in before a big rise might start to believe they have “cracked the code” and will exercise that strategy again and again, often without further success.

This illusion is ultimately self-defeating. The investor fails to reap the benefit of good markets, and then in down markets, makes a bad situation worse. He (and it is usually a “he”) buys high and sells low or bets the house on a concentrated portfolio that leaves him prone to otherwise diversifiable risks related to individual stocks or sectors.

You also see the illusion of control in the so-called “hot hand fallacy” in which investors chase last year’s returns or back stock pickers they believe are on a winning streak. But even if those stock pickers have had a run of wins, we know every winning streak must end. The assumption these speculators make is to assume that past trades affect future ones.

The power of letting go
Of course, it doesn’t have to be this way. While our behavioural biases will always be with us and often are useful in our everyday lives, we can help ourselves by limiting their influence on our investment decisions and paying attention to those things within our control — like diversification and discipline.

By its very nature, the stock market will rise and fall. Uncertainty never goes away and volatility tends to increase when there is greater uncertainty than usual. Of course, it’s human to want to have control over outcomes, but we have to accept that day-to-day fluctuations are unpredictable.

In a way, letting go of the control fallacy is liberating because it frees you from the burden of believing you are responsible for things well outside your zone of influence. By letting go of those illusions, you are actually better able to maintain control over what you can deal with.

The outcome is that your investment decisions are based more on evidence than on speculation, superstition or guesswork. And because of that, you are more likely to reach the goals that you have set for yourself.'

MY COMMENT

YES.....the ULTIMATE power of letting go.......stopping the trading......and.....simply investing in realistic and logical investments with a proven PROBABILITY of success.....for the long term.

 

The markets are simply a waste of good time today....so....I am off to do other more productive things with my time.

 

Yeah.....you cant fight the tape.....so why even try. I was a TOTAL SWEEP today......ALL RED. AND.....as expected I got beat by the SP500 by .72%.

After ALL thee turmoil last week and now this week.......the SP500 is at +15.88% year to date. I did not calculate what I was year to date today when I just looked at my account and I am too lazy to log back in and see.

 

Looks like we are all in good company.....although I do not give any credence to media driven funds based on one outsize year returns.

Surging Treasury yields add to ARK fund's 2021 woes

https://finance.yahoo.com/news/surging-treasury-yields-add-ark-170421808.html

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

"NEW YORK (Reuters) -A broad selloff in technology and growth names battered the flagship fund of star stock picker Cathie Wood’s ARK Invest, as investors shifted away from tech shares amid a sharp rise in Treasury yields.

The ARK Innovation ETF, which had $21.4 billion in assets as of last week, according to Refinitiv, was down 3.8% on Tuesday, outpacing a 1.9% drop for the benchmark S&P 500 and a 2.5% fall for the tech-heavy Nasdaq.

Losses have accelerated in recent days, fueled by a rise in Treasury yields that has hit the broader universe of technology and growth stocks in the wake of the Federal Reserve’s monetary policy meeting last week. The central bank took a hawkish tilt at that meeting, which some interpreted as a vote of confidence in the U.S. economy.

“Anytime we see the 10-year UST yield move such a dramatic amount in a short period of time ... it generally coincides with a market sell-off of some magnitude,” said Brian Price, head of investment management for Commonwealth Financial Network, in a note. “It is not surprising to see value and cyclical stocks hold up better than their growth counterparts given the increase in yields.”

While rising bond yields tend to reduce the relative attractiveness of many stocks, they can particularly weigh on tech and other growth names whose valuations rely more on future cash flows, which are discounted more severely as bond yields rise.

Since Wednesday, the yield on the 10-year U.S. Treasury note has climbed 23 basis points to 1.53%, while the ARKK ETF has fallen over 4% and the Nasdaq is down 2%.

While stock indexes remain near record highs, many individual names have struggled in recent weeks. Half of S&P 500 stocks were down 10% or more from their 52-week highs as of Tuesday afternoon. That included over 60 stocks that had fallen 20% or more.

Wood’s fund, which was the best-performing U.S. equity fund in 2020, is down more than 9% so far this year, while the S&P 500 has gained 16%. The ARKK fund ranks in the lowest percentile year-to-date among 601 mid-cap growth funds tracked by Morningstar.

The high-growth names that helped Wood reap outsized gains during last year’s coronavirus lockdowns have hurt the fund’s performance in 2021, with so-called stay-at-home stocks such as Teladoc Health and Roku losing their luster as investors have turned to financials, energy companies and other economic reopening plays at various times over the last few months.

“What worked for the fund in 2020 has not persisted even if the long-term trends favored by ARK remain relevant,” Todd Rosenbluth, head of ETF & mutual fund research at CFRA, said in an emailed comment.

Earlier this month, Wood reiterated her call that slowing economic activity in the United States will bolster growth stocks. ARK Invest had no immediate comment on Tuesday. Short interest in the ARKK fund amounts to 21.41 million shares, or 11.9% of the float, with short interest declining by 1.1% in the past week as shorts have covered their bets, according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. The fund’s top holdings include electric car maker Tesla Inc as well as virtual health company Teladoc and television streaming firm Roku. While Tesla has climbed over 9% in 2021, Roku has slumped 5% and Teladoc shares have dropped some 35%. Last week, China's moves to crack down on bitcoin trading dealt another blow to the fund, which lists cryptocurrency trading firm Coinbase Global Inc as its fifth-largest holding. Since its inception in 2014, the ARKK fund is up about 450% against a gain of roughly 115% for the S&P 500, and ranks in the top percentile in its category of funds tracked by Morningstar over a five-year period."

MY COMMENT

STILL a good fund at least since 2014 and for five years. But to date this fund has ONLY existed during a historic BULL MARKET and during a historic TECH RALLY. Wood has been doing way too much trading in and out of companies lately for my taste. It will be interesting to see how this fund does going forward during different types of markets.

 

For anyone that was hiding under a rock today....here is what happened to investors today.

Stock market news live updates: Nasdaq drops 2.8%, posting worst day since March as Treasury yield jump slams tech stocks

https://finance.yahoo.com/news/stock-market-news-live-updates-september-28-2021-221826114.html

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

"Stocks sank Tuesday, with technology stocks leading the way lower as investors nervously eyed a swift rise in U.S. Treasury yields.

The Nasdaq, a proxy for technology and growth stocks, underperformed against the other two major stock indexes, dropping more than 2.8% by market close in its worst day since March. The S&P 500 also dropped 2%, while the Dow shed more than 550 points, or 1.6%. A new disappointing report on consumer confidence in September added to the risk-off mood in markets, with the Conference Board's closely watched Consumer Confidence Index dropping to the lowest level since February as concerns over the coronavirus lingered.

The rapid rotation away from growth and technology stocks also came as Treasury yields added to recent gains. The yield on the benchmark 10-year note (^TNX) jumped more than 5 basis points to top 1.54%, reaching its highest level since June.

"The prospect of higher energy prices, fueling inflation, and rises in bond yields that appear to be pre-empting tighter monetary policy by central banks, have prompted widespread selling across global stock markets," Chris Beauchamp, chief market analyst at online trading platform IG, said in an email on Tuesday. "As yesterday, it is the highly-valued growth stocks that have taken the brunt of the selling, as investors fret that a lower growth, tighter policy environment will hurt these previous star performers."

"Undoubtedly, some of the fabled month/quarter-end movements have a part to play here, fund managers being keen to book some profits as Q3 draws to a close," he added. "This suggests we have some more volatility to come over the rest of the week."

Yields, which move inversely to prices, have held at low levels throughout the pandemic, and rising yields are seen in large part as a bet on a strengthening economic environment. However, the rapid rise in borrowing costs also serves as a headwind to "long-duration" growth stocks, which are valued heavily on future earnings.

Oil prices also added to gains, and positive economic data including a much stronger-than-expected durable goods report out Monday helped underpin the move. West Texas intermediate crude oil futures (CL=F) were on track to climb for a sixth consecutive session and broke above $76 a barrel, or the commodity's highest price since July. And Brent crude oil, the international standard, touched $80 per-barrel level to reach its highest since October 2018.

"Really what you're seeing is, across asset classes, the market [is adopting] a pro-cyclical view, which means better growth in the future, higher inflation, higher bond yields," Tom Essaye, The Sevens Report Research Founder, told Yahoo Finance Live. "You're seeing that from commodities through to equities."

Investors also continued to watch developments out of Washington, with lawmakers facing a deadline this week to fund the government by Thursday night to avert a government shutdown.

The effort to pass a new government budget has been swept into ongoing debates around whether or not to raise the federal debt ceiling and pass an expansive $3.5 trillion reconciliation package, which would advance a number of initiatives central to President Joe Biden's economic agenda. In a move widely expected, Senate Republicans on Monday evening blocked a bill that would have funded the government through Dec. 3 and also raised the debt ceiling through the end of 2022. While Democratic lawmakers have called for raising the debt limit to be a bipartisan move, Republicans have argued Democrats, as majority members of both chambers of Congress, should increase it without their support.

Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen testified before the Senate Banking Committee Tuesday morning about the Fed and Treasury's responses to the pandemic. In prepared remarks, Yellen addressed the ongoing debt ceiling debate, reiterating her concern over the negative implications to the U.S. economy, should lawmakers fail to take action.

"It is imperative that Congress swiftly addresses the debt limit. If it does not, America would default for the first time in history," Yellen said in the remarks. "The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession."

For investors, the plethora of overlapping debates in Washington could be a near-term source of more market choppiness.

"I think there's the opportunity for volatility to pick up a little bit," Eric Freedman, U.S. Bank Wealth Management chief investment officer, told Yahoo Finance Live on Monday.

"Not only do you have concerns about the debt ceiling and what legislation may come out, but you also have concerns about when the Federal Reserve may step in, and you also have earnings come up," he added. "So we're in that shoulder period for the next couple of days when the only announcements coming from companies tend to be negative ones. We've had some of those over the past week, particularly focusing on cost pressures."

2:44 p.m. ET: 'Whenever you see pullbacks, it makes sense to buy quality names': Strategist
Tuesday's rout across equities came as heavily weighted companies in the technology sector fell sharply, with each of Amazon, Apple, Microsoft and Alphabet sinking.

"Whenever you see pullbacks, it makes sense to buy quality names," Kevin Simpson, Capital Wealth Planning founder and chief investment officer, told Yahoo Finance Live Tuesday afternoon. "We've seen a rotation happening as far as a correction happening for the past few months. There are so many companies that have had 10-15% peak to trough pullbacks — this is one of the first times where we're seeing it with some of those larger names."

"So as far as where to put money today ... absolutely be looking at financials. Why financials? They're beneficiaries of rising rates," he added. "In addition to the financials, also sticking with the thematics of higher rates, and some inflation, also energy names can be a great place to go."

10:00 a.m. ET: Consumer confidence unexpectedly fell in September, reaching lowest since February
Confidence among U.S. consumers sank to the lowest level in seven months in September as concerns over the ongoing spread of the coronavirus kept individuals jittery about the short-term outlook.

The Conference Board's monthly Consumer Confidence Index dropped to 109.3 in September, dipping from 113.8 in August. This represented a third straight monthly decline in the index. Consensus economists were looking for the Consumer Confidence Index to tick up to 115.0 in September, according to Bloomberg data. Subindices tracking consumers' assessments of current conditions as well as expectations for future business, income and labor market conditions also pulled back compared to August.

“Consumer confidence dropped in September as the spread of the Delta variant continued to dampen optimism,” Lynn Franco, senior director of economic indicators at The Conference Board, said in a press statement.

"Consumer confidence is still high by historical levels—enough to support further growth in the near-term—but the Index has now fallen 19.6 points from the recent peak of 128.9 reached in June," Franco added. "These back-to-back declines suggest consumers have grown more cautious and are likely to curtail spending going forward.”

While short-term expectations for inflation eased slightly compared to earlier in the summer, they still remained elevated compared to historical levels, Franco said.

9:40 a.m. ET: U.S. goods trade deficit increased more than expected in August
The U.S. trade deficit in goods widened by a greater-than-expected margin in August, suggesting businesses were stepping up imports as inventory levels dipped due to supply chain challenges.

The advance U.S. merchandise trade deficit reached $87.6 billion in August, yawning from the $86.82 billion posted in July, according to Commerce Department data on Tuesday. The increase came as imports rose 0.8%, outweighing a 0.7% increase in goods exports."

MY COMMENT

Of course the CLOWN SHOW in DC continues to hamper the markets. It is ABSOLUTELY MORONIC that Yellen had this to say today:

"It is imperative that Congress swiftly addresses the debt limit. If it does not, America would default for the first time in history,".........."The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession."

Is it any wonder that the Ten Year Treasury yield has jumped up with this sort of brainless rehortic being thrown about by someone that should know better?

The "stuff" spread in the media about the big tech stocks being interest rate sensitive because they are young growth companies......and higher yields are going to impact their future growth and therefore their value.....just drives me CRAZY. ALL of the companies that are the BIG TECH leaders are semi-mature companies.....Microsoft is at least 31 years old.....Amazon is 24 years old.....Google is 17 years old.....Apple is 41 years old......I dont buy this BS in the slightest. BUT....it does not matter......I dont believe in the slightest that the average retail investor was selling today.....it was ALL the professional traders......AS USUAL.

 

I RESPECT the financial publication....INVESTORS BUSINESS DAILY.....even if I dont agree with some of their technical indicators that they use. At least they are honest.......and.....they NAILED the reason for the drop today that you will NOT see in other sources:

Dow Jones Dives On Janet Yellen Warning, Stocks Sell Off As Bond Yields Rise

https://www.investors.com/market-tr...-stocks-sell-off-bond-yields-rise/?src=A00220

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

"The Dow Jones Industrial Average dived nearly 500 points midday Tuesday as stocks sold off on Treasury Secretary Janet Yellen's default risk warning and bond yields rose.

The Nasdaq sank 2.6%, the S&P 500 shed 1.8% and the Dow Jones industrials lost 1.3% in the stock market today. Small caps tracked by the Russell 2000 were down 1.8%. Volume was higher on both major exchanges vs. the same time Monday.

Among exchange traded funds, Innovator IBD 50 (FFTY) slumped 5.5%, while the Nasdaq 100-tracking Invesco QQQ Trust (QQQ) fell 2.2%. The IBD 50 ETF, which hit a new high Thursday, fell back below a 50.06 consolidation buy point and is testing its 50-day moving average.

Rising Treasury yields are putting pressure on rate-sensitive stocks such as technology. The yield on the 10-year note rose 7 basis points to 1.56%, the highest since June.

Default Risk Fears
Late Monday, Senate Republicans blocked a bill to fund the federal government until Dec. 3 and raise the debt ceiling. Federal Reserve Chairman Jerome Powell and Treasury Secretary Yellen are testifying before the Senate Banking Committee. Yellen warned Congress must raise the debt limit by Oct. 18.

"It is imperative that Congress swiftly addresses the debt limit. If it does not, America would default for the first time in history," Yellen said in prepared remarks. "The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession."

The U.S. economy continues to recover from the Covid-19 pandemic, which triggered nationwide lockdowns over a year ago. Most states had relaxed restrictions as vaccinations continued to roll out and cases decreased. But cases are rapidly rising again in some places, and mask mandates are returning in some states as the delta variant spreads.

Cumulative Covid-19 cases worldwide have topped 233 million, with nearly 4.8 million deaths, according to Worldometer. In the U.S., cases are approaching 44 million with more than 709,000 deaths."

MY COMMENT

It is REFRESHING to see some honesty about the drop today. EVERYONE knows that this and the screwing around in government is causing the current issues for stocks and rates.......but....few want to say it.

 

I had to look since I mentioned this in an earlier post. I am now....after today at +17.34% year to date.

 

AMEN Zukodany.....and while we are at it......BEAM ME UP SCOTTY...........these primitive humans are driving me CRAZY.

The bottom line.....people are exhausted, people are tired, the markets are exhausted, the markets are tired, small business is exhausted.......give it a break.....please. People are struggling to make a go of it......especially small business.

 

I am hoping that this year is BIG for me on the cost of living raise for Social Security. I have had DISMAL luck with the raises since I went on SS in 2015 My raises......payable with the January payment of the next year have been:

2015 0.0%
2016 0.3%.
2017 2.0%
2018 2.8%
2019 1.6%
2020 1.3%

What a sorry record of increases.....for "me"......HOPING for 6.0% minimum for this year. I want some of that FREE government money. I ALSO never did get the last stimulus payment of $1400 for myself and my wife......I will have to wait and take it as a credit on my taxes for 2021. EVERYONE else seems to get free money but we never seem to get any.....BUMMER.

 

LOL......oldmanram.....I was up in Dallas all day today so out of touch. I did listen to VARNEY on the way up so I heard the market open on satellite radio. Looking now it seems that the markets dropped off toward the end of the day especially the NASDAQ.

At least I was moderately positive for the day......so a green day for me even if not a lot of money. I got beat by the SP500 for the day by 0.04%.

At least we stopped the bleeding today and if we are lucky today will be a transition to a nice positive close to the week over the next two days.