The Long Term Investor

Mizugori

Yep....you have it right...property taxes and Homeowners insurance are very expensive in Texas.

 

I have not looked all day....but the averages are way down and I usually lag them when it is a negative market.....so no doubt I am doing poorly. I am waiting for my last worker of the day to get here.

 

No I dont like the "W".......I certainly DO NOT approve and I refuse to accept it.

But for today.....red enough that I did not even look at individual positions....no need. Plus.....I got WHACKED by the SP500 by 1.39%.

Not much else I can say about today. I am in good spirits....floating above the fray......and not caring about the market drop......so:

I continue to be fully invested for the long term as usual.

 

Just to make myself feel better I decided to look up the ARK Innovation ETF. Year to date down by about 34%.

 

Since I love to punish myself.....here is the markets today.

Stock market news live updates: S&P 500 sinks further into correction, setting new 2022 low with Russia-Ukraine in focus

https://finance.yahoo.com/news/stock-market-news-live-updates-february-23-2022-231403641.html

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

"Stocks extended losses on Wednesday after a steep sell-off during Tuesday's trading day, which pushed the S&P 500 and Dow to their lowest settlements so far of 2022.

The S&P 500 wiped out early advances to trade sharply lower in afternoon trading. The blue-chip index had also closed lower by just over 1% on Tuesday, bringing it more than 10% from its record closing high from Jan. 3 — or below the threshold to enter a correction. The Nasdaq and Dow also rose following declines a day earlier.

Hopes of a diplomatic resolution for tensions between Russia and Ukraine appeared to deteriorate this week, as President Joe Biden publicly called Russia's move to deploy troops to separatist regions of Ukraine "the beginning of a Russian invasion" of the region. The U.S. unleashed a first tranche of sanctions on Russian financial institutions, sovereign debt and several key individuals in the country. Late Tuesday, U.S. Secretary of State Antony Blinken also said he called off a meeting with his Russian counterpart, Foreign Minister Sergei Lavrov, that was supposed to take place this week.

Risk assets slid on Tuesday as investors considered the financial market implications of an escalating threat of military attack and greater sanctions on Russia. As European allies also coordinated their response to Russia's increased military presence in and around Ukraine, Germany halted approval of the Nord Stream 2 natural gas pipeline that would have deepened western Europe's energy link to Russia, the world's largest natural gas exporter. Crude oil prices spiked to a seven-year high, and Brent crude neared $100 per barrel as investors contemplated the potential for further energy-linked sanctions on Russia, the third-largest oil producer in the world.

For U.S. investors, the mounting geopolitical concerns also further complicate the next move by the Federal Reserve, which has so far signaled it is prioritizing bringing down inflationary pressures. Though investors are already pricing in an at least 25 basis point interest rate hike from the Fed at its mid-March meeting, the tensions between Russia and Ukraine — and potential further price increases that an escalating conflict could stoke — create a further communication and policy complexity for the central bank.

"If the status quo holds, all we're going to see is a very limited impact on growth and inflation. Should we see a full-fledged invasion followed by much tougher sanctions, then we're going to be in a very different world," Joe Brusuelas, RSM chief economist, told Yahoo Finance Live on Tuesday. "Our baseline is now expecting a 20% increase in the price of oil. Now that's from two weeks ago — we're about 7% of the way there. If that occurs, you'll see 1% shaved off growth this year .. and you'll see an addition 2.8% or thereabouts increase in inflation."

"The Federal Reserve and their global central banking brethren are in a very difficult position now," he added. "They're going to have to hike into what could be an energy shock and a slowing global economy. My sense is the Federal Reserve ought to hike by 25 basis points at the March meeting, but they ought to use the opportunity in both the communique and the Summary of Economic Projections, to note the risks around the evolving global environment.""

11:18 a.m. ET: Mortgage applications fell for a third straight week as rates rose

Mortgage applications slid last week to reach their lowest level since Dec. 19, posting a third consecutive weekly decline as interest rates crept higher.

The Mortgage Bankers Association's weekly market composite index trading mortgage loan application volume fell 13.1% week-on-week for the period ended Feb. 18. This followed a more than 5% drop during the prior week.

Refinances fell by 16% over last week, and by a marked 56% compared to the same week last year. Purchases, meanwhile, fell 10% on a week-on-week basis, when adjusted for seasonality. Compared to the same period last year, purchases were down by 6%, not seasonally adjusted.

"The 30-year fixed rate was 4.06%, almost a full percentage point higher than a year ago. Higher mortgage rates have quickly shut off refinances, with activity down in six of the first seven weeks of 2022,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press statement. “Purchase applications, already constrained by elevated sales prices and tight inventory, have also been impacted by these higher rates and declined for the third straight week. While the average loan size did not increase this week, it remained close to the survey’s record high.”"

MY COMMENT

Not much to be said about the short term. I am sure this market drop and the Ukraine situation will have a NICE impact on what the FED is able to do. It should put some brakes on all the talk of going hog-wild on the rate increases.

The silver lining for me personally is that the housing market in my little local level is CRAZY HOT. While I am losing money in the stock markets......I am making money (on paper) in terms of the value of my house.

A house the same size as mine and perhaps a bit less fixed up just sold in my immediate neighborhood for about $200,000 OVER what I thought my house was worth. It sold in ONE DAY with multiple offers. So I am losing money in stocks and at the same time....in theory...making BIG BUCKS on my home value. At this new level my house has.......DOUBLED......in 2.8 years.

In my little area of 4200 homes....there are now ONLY.......THREE.....homes actively for sale right now.

We are seeing FREEZING weather today that will continue for a while....perhaps into the weekend. BAD NEWS for me since that means I will probably see two shows canceled. BUMMER......more lost money.

 

That is great news Emmett. Net worth is net worth....no matter where it comes from.

The BIG danger of the housing boom for those of us seeing our equity skyrocket.....is the temptation to use your house as a piggy-bank. Personally I NEVER take money of of my house.......it is my untouchable.......last resort.....emergency fund.

I know some people do take cash out of their house and use the money to invest......under the theory that they can make more than the 3-4% that they are paying for the money. For some people.....that have good financial discipline and are very clinical in calculating their finances.......this strategy can work. BUT.....it is not for me.

 

Speaking of houses. Out of 4200 homes in my area......there are now.......ONLY TWO......houses for sale. Another one went pending today and that knocked us down to two available homes. The home that just went pending was the one home in the neighborhood that was lingering on the market for 120 days....it was overpriced. I guess the market finally caught up with their price.

So....you want to move into this area.....you have a choice between TWO houses.....one for $725,000 and one for $1.7MILLION.

 

It is a long time till the open and futures dont really translate.........but the futures are tanking after the Putin speech tonight.

Russia's Putin Announces Military Operation in Ukraine

https://www.newsmax.com/newsfront/ukraine-tensions/2022/02/23/id/1058218/

FUTURES at 10:00PM Central time.

DOW -779

SP500 -97

NASDAQ -374

There is really nothing that our government or anyone will do that is meaningful. It will all be FLUFF over substance........as usual. We are at the beginning of being able to move on as investors.......it is a shame.....but that is just how it is.

 

Yeah Zukodany.....I guess Covid is over with......as the media and government move on to other problems. In the end we did ACTUALLY achieve pretty good herd immunity with between 75% and 80% of the population having good antibodies. NOT from the vaccines......but due to the virus itself in the form of Omicron.

 

Here come the markets. Nothing has changed for American business and our economy.....but.....the short term reaction is going to be exactly what you would expect. With world events and the FED raising rates over the next month this would be a great time to dollar cost average into stocks and funds over the next 6-8 weeks.

 

NOW.....trying to make any sense out of inflation data for the next 2-6 months will be impossible. The data will be completely absorbed by and distorted by world events. Investors need to just TRUST their gut and totally ignore the media over this time period. We are now going to see the MOTHER of all media fear mongering and distortion.

What is going on short term is the reason that I am a LONG TERM INVESTOR. I can trust that over the long term stocks and fund results will be based on ACTUAL business results and earnings.....in other words fundamentals. That WILL continue into the future as always. As I have said before....what I consider long term is at the minimum FIVE years.......but.... I actually prefer to see long term as SEVEN years and beyond.

Many investors talk long term but in reality invest and act short term. The current little market drop.....which is not even into bear market range yet.....and the various economic and world events driving it......are the perfect time for investors to do some self evaluation and make adjustments as necessary in their investment thesis and portfolios. This is risk tolerance evaluation time for investors. If you can calmly do nothing and on a clinical level look past all the current news coverage......you are probably in good shape.

 

This little article is a good message for the next few weeks.

What to Do—and Not to Do—When Volatility Strikes
An asset allocation built for your long-term goals and needs should be able to withstand volatility along the way.

https://www.fisherinvestments.com/e...t-to-do-and-not-to-do-when-volatility-strikes

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

"Between the escalating situation in Ukraine and stocks’ entering their first correction (short, sharp, sentiment-driven -10% to -20% decline) for this bull market, the urge to “do something” can beckon strongly. But for investors, reacting to these items is usually counterproductive—and costly. Your portfolio’s performance during (and your personal reaction to) volatile spells may reveal some positioning weaknesses that you would be wise to address, but this is best accomplished in a measured, forward-looking manner, not a knee-jerk move when stocks are falling. With that in mind, here are some dos and don’ts to help you get through a difficult stretch of headline worries and rocky markets.

Do: Above all, keep a longer-term perspective. We think your asset allocation—the mix of stocks, bonds, cash and other securities in your portfolio—should be based on your long-term goals, time horizon, ongoing needs and comfort with volatility. Bouts of negativity alone shouldn’t cause you to veer from it. Ideally, your asset allocation should be one with a high likelihood of reaching those goals over time regardless of the ups and downs along the way.

Keep in mind what your asset allocation’s components are there to do. If you hold some cash, it is probably there for cash flow needs, emergencies and known, upcoming purchases. Having some bonds can reduce the magnitude of portfolio swings and, therefore, the likelihood of having to take scheduled withdrawals after a large drop. Stocks are usually there for long-term growth, which is the reward for their higher expected short-term volatility. For most folks, these can work in concert toward long-term goals.

Veering from your asset allocation is perhaps the biggest risk you can take, as it moves you off your long-term path. If your goals have changed, then maybe a different asset allocation is in order. But that should be unrelated to volatility, in our view, unless your comfort with volatility is so low that you risk making a reactionary error. This is something to consider carefully, not decide in the heat of the moment.

Do: Distinguish between normal volatility and bear markets. Short-term volatility is unpredictable and includes corrections that can occur for any or no reason. Contrast this with bear markets, which are typically long, fundamentally driven declines exceeding -20%. Unlike corrections, we think it is possible to identify bear markets early on and avoid some downside. Yet if you are wrong and sell well into a correction, you risk getting whipsawed—locking in the decline and missing the recovery that follows.

Positioning for a bear market should be a forward-looking decision—not a reaction to past declines. In our view, it is beneficial to do so only if you identify a bear market before the bulk of the downside has passed—you see a strong likelihood of substantial further declines. In our experience, this can manifest in one of two ways. One, after stocks finish climbing the wall of worry and euphoria blinds most to deteriorating economic conditions. Two, a huge but broadly ignored negative development capable of wiping a few trillion dollars off global GDP looks very likely to materialize. Here, “broadly ignored” is the key—risks everyone discusses are probably reflected in prices already.

Bear markets usually start gradually with rolling tops—slipping on average by about -2% a month—and lull many into complacency. They generally don’t announce themselves with big, sudden drops that spook everyone. About one-third of a bear market’s decline occurs during the first two-thirds of its duration. Then, the bulk of its decline takes place in the last third. We think the slow start is what makes it possible to cut out a chunk of the downside.

Note though, even if you don’t identify a bear market in time to take a defensive stance, it shouldn’t automatically put your goals out of reach. Participating in a bear market isn’t desirable, of course. Yet bull markets always follow bear markets, and stocks’ long-term returns include all the bear markets along the way. Therefore, being invested in bear markets shouldn’t put long-term growth out of reach as long as you participate in bull markets, which far outweigh bear markets in time and magnitude.

Do: Check that your portfolio is well diversified. Make sure your portfolio isn’t overly concentrated in any one security, sector or country. Remember, you can always be wrong. If that concentration doesn’t work out, it could be a severe setback. Staying diversified makes sense in either rocky or calm periods, but viewing a pullback as a stress test can help you identify areas to address.

To assess whether you are diversified sufficiently, check your holdings against your benchmark—ideally, a broad, market-cap weighted index with a long performance history, such as the MSCI World Index. If your portfolio is down (or up) much more than your benchmark, that could be a sign of misalignment. Check that your sector and regional weightings aren’t far out of line with the benchmark’s composition, and check for individual holdings that make up a much larger share of your portfolio than they do the benchmark. If you see issues, taking immediate action in the heat of volatility may not be wise, but at least you can develop a plan to execute when the time is right.

Don’t: Buy portfolio ‘insurance’ like alleged low-volatility ETFs or option strategies designed to dampen market swings. You will likely be paying a premium for something that might not work as advertised—and, even if it does, it would likely limit your returns in an up market. If it detracts from your portfolio’s long-term returns, the momentary peace of mind it may provide isn’t worth it. Markets are efficient. There isn’t any magic product with high, equity-like returns that aren’t commensurate with its risks—an investment rule to always remember.

Don’t: Dive into supposed safe havens. Similar to products marketed as portfolio protection, alleged safe havens like gold, real estate or other assets that many think will hold their value in tough times often don’t deliver. They can fluctuate as much as or more than a mix of stocks and bonds, without contributing anything to your portfolio. Also, they can be illiquid, adding to investment risks. Keep in mind the tax considerations, too, which may involve complicated planning and paperwork—another risk.

Avoiding volatility at all costs is antithetical to the very concept of investing. We find a more helpful way to look at the markets’ sometimes wild gyrations is to reframe them: Short-term volatility is the price you pay for long-term returns. This doesn’t mean you shouldn’t manage volatility along the way. But that is what bonds are for if the ups and downs of stocks are too much for you or are inconsistent with your goals and needs. You will be hard pressed to find a better substitute or alternative, in our experience. There aren’t any shortcuts when it comes to investing.

MY COMMENT

YES.....there are NO shortcuts when it comes to investing. There is ALSO.......NEVER......a new normal. Investing is NOT trading. It is the long term allocation of money into various financial instruments that provide historical returns that match your personal goals and aspirations. History provides the roadmap.

 

I will hopefully remember to check out the Buffett letter on Saturday. Always good reading.

Warren Buffett to release annual shareholder letter this week
Berkshire currently owns more than 90 businesses and holds stock in several major companies, including Apple, Bank of America and Coca-Cola

https://www.foxbusiness.com/markets/warren-buffett-berkshire-hathaway-annual-shareholder-letter