The Long Term Investor

Yes......Brownbrody. Put about 1/3 of the money into a SP500 Index fund to balance out your individual stock picks. That is what I would do........if it was me.

 

Well.....we are now done with the first FOUR months of 2022. What a.....wild and crazy.......start to the year. Investors have suffered through the pandemic year, 2020, and all that was involved in that market drop and recovery. Now those same investors......assuming they are still in the market......are suffering through one of the worst corrections in a long time.

Imagine if you started your retirement in January of 2020......and......your retirement was basically self funded through a 401K or IRA account. Talk about nerve-wracking.

Here is a little article on these first four months........and.......THE WORST START TO A YEAR SINCE WWII.

Markets tank over new questions about where the economy is heading

https://www.msn.com/en-us/money/mar...economy-is-heading/ar-AAWLm35?ocid=uxbndlbing

"A barrage of divisive economic signals, combined with plummeting technology stocks, led financial markets to close April at lows last seen when the pandemic began in March 2020.

Uncertainty about the trajectory of the economy played a role in market turmoil on Friday, as the tech-heavy Nasdaq closed down 4.2 percent for the day and the Dow Jones industrial average lost 939.18 points, or 2.8 percent. The S&P 500 tanked 3.6 percent on Friday, erasing 9.1 percent of value in April, its worst month since March 2020. And it’s down 13.8 percent in 2022, the worst start to the year since World War II.

The economy is being pulled in multiple directions at once, weighed down by soaring energy, food and housing prices while being buoyed by a tremendous labor market, pent-up demand, consumers with high savings and continued strong business investment. The next few weeks could determine which economic forces prevail and shape the fortunes of households and businesses heading into the midterm elections.

“The market is worried about a very fragile economic outlook, as it should be,” said Joe LaVorgna, chief Americas economist at Natixis and former Trump White House economic adviser. “The economy is fundamentally soft: The Fed is going to hike next week, the situation in Ukraine is not getting better and high inflation is cutting into costs.”

At the same time, vacation bookings are soaring, car sales are booming and Americans continue to spend with abandon, thanks to higher wages and brisk hiring. Yet, the economy unexpectedly contracted in the first quarter, led by trade deficits and a drop in inventory purchases.

The economy’s diverging paths played out in a Commerce report on Friday that showed surges in both consumer spending, up more than expected in March, and inflation, which shot up in March by the most in more than 15 years.

“There are so many factors pulling on our economy right now — the uncertainty and low numbers — despite the fact that demand is so high,” said Tara Sinclair, an economics professor at George Washington University. “That can be worrisome because when businesses and decision-makers — from the household level to Fortune 500 companies — start worrying about the 'R’ word, it can become a bit of a self-fulfilling prophecy. ”

On Capitol Hill, politicians are pouncing on widely divided numbers to support their policymaking pursuits ahead of the critical 2022 midterm elections. Two years after the worst economic crisis in generations, perhaps no issue is likely to motivate Americans more at the polls than the state of their own finances.

Democrats this week insisted that the 1.4 percent annualized drop in gross domestic product reflected broader economic tail winds — from new shortages in global supply chains to the evolving consequences of Russia’s invasion of Ukraine. As they have for months, party lawmakers instead tried to highlight other, more encouraging indicators, including a continued burst in hiring, a low unemployment rate and sustained consumer spending, all under Biden’s watch.

“It’s not a good sign,” Sen. Richard J. Durbin (D-Ill.), the majority whip, said about the GDP numbers during a brief interview. “[But] there are enough positive indicators that things can turn around.
Meanwhile, for Republicans, the economic contraction provided fresh fodder to intensify their opposition to Democrats’ legislative solutions in the face of a potential sea change this November that might elevate them to majority power. Few GOP lawmakers are expected to support any of Democrats’ efforts to combat inflation, for example, which Republicans instead blame on Biden’s spending policies.

“They’re hurting our economy,” said Sen. Rick Scott (R-Fla.), the leader of the National Republican Senatorial Committee, which aims to elect party lawmakers to the chamber. “It’s making it difficult for people to get back to work.”

Companies across sectors are feeling the economic crosswinds. For example, brisk sales of Apple Watches, iPhones and MacBooks in the first three months of the year helped propel Apple’s sales to an all-time high of $97.3 billion. But looming concerns about the war in Ukraine and coronavirus lockdowns in China, including supply chain snares, could end up costing the company $8 billion this quarter, Apple reported. Apple closed down by 3.7 percent on Friday.

And Amazon led market losses on Friday with a 14 percent drop, the largest one-day sell-off in 16 years. This followed a weaker earnings report, as the company posted its first big quarterly loss since 2015 this week, due to a loss on its investment in electric vehicle maker Rivian.

“There’s no question the market is pricing in a recession,” said Anthony Chukumba, an analyst at Loop Capital Markets. “When you see bellwethers such as Netflix and Amazon miss numbers by a country mile, that’s concerning — particularly when it’s happening in the tech space, which for so long has been the market leader.” (Jeff Bezos, the founder of Amazon, owns The Washington Post.)

The farm and construction equipment company Caterpillar, which posted a 14 percent increase in first-quarter sales Thursday, also warned that widespread coronavirus lockdowns in China could push down demand for excavators later this year. The company said it is also dealing with ongoing shortages and delays for components like semiconductors. Caterpillar closed down 1 percent on Friday.

“The environment continues to be challenging due to supply chain constraints and the more recent covid-19-related shutdowns in China,” chief executive Jim Umpleby told analysts during an earnings call this week.

The one bright spot for the economy has been the labor market — which has added 1.7 million jobs so far this year. The U.S. unemployment rate, at 3.6 percent, is near record lows and wages continue to tick up.

“The economy did hit a speed bump but when you look under the hood, there are a lot of things to like,” said Ken Kim, U.S. senior economist at KPMG. “The good thing is that there’s strength in the labor market. We’re still optimistic about the U.S. expansion for 2022 and don’t see a recession on the horizon, either this year or next.”

But some economists say that momentum is likely to slow later this year, especially as the Federal Reserve continues raising interest rates in hopes of curbing inflation.

The Fed board is scheduled to meet next week and is expected to raise interest rates by another 0.5 percentage points, which will be the biggest increase since the year 2000, and could likely do so again in June. Investors are worried that the dour economic news could influence future rate hikes, which is also rattling markets.

Fed officials, including Chair Jerome H. Powell, have said they are aiming to guide the economy toward a “soft landing,” avoiding a recession, by raising interest rates just enough to cool inflation, though economists say finding the right balance will be tricky.

“It’s hard to get from here to where the Fed wants to be on inflation without an increase in the unemployment rate or a risk of recession,” said Diane Swonk, chief economist at accounting firm Grant Thornton, who expects unemployment to end 2023 at over 5 percent. “When you’re skating on thin ice, it’s not hard to fall through.”

Business owners say they’re also feeling pangs of uncertainty.

At Delta Children’s Products, consumers have so far been happy to splurge on furniture for babies and toddlers — even as the company has marked up prices by as much as 25 percent to offset rising costs of raw materials and shipping. Sales are up 12 percent this year on the company’s cribs, mattresses and strollers, which are sold at major retailers including Walmart, Pottery Barn and Buy Buy Baby.

But President Joe Shamie says he’s worried about the future. Birthrates are dropping, which means he has a shrinking pool of buyers, and lockdowns in China continue to weigh on production and shipping. He’s concerned, too, that consumers may soon begin pulling back if they start to worry about their own financial prospects.

“We’re extremely concerned about what’s going to happen next,” Shamie said. “There are a lot of holes in the economy that need fixing.”"

MY COMMENT

We live in very interesting times. When you look back over the past 50 years......it is amazing what we go through as investors over the short term as we try to capture the long term gains. Unfortunately, history and investing research teach us that you have to be fully invested in the markets all the time and avoid trying to time the markets if you want to capture the EXCEPTIONAL long term gains which average about 10-11% per year.

Looking back over the past 45+ years of being an investor, what I have had to hold and invest through is a very dramatic laundry list of horrible economic and market events. Add the start to the current year to that list. In addition, it looks like the pain this year is far from over. I can easily see another 10% drop from where we are right now.

BUT.......that is the short term REALITY that we operate in as investors with a long term focus. Unfortunately we have to live through the short term world events in order to capture the long term reward.

That is one reason for this thread.....to allow long term investors to gather together, discuss the short and long term events, and provide support to each other as we hang in there through various short term situations.

To all that post and lurk here......thank you......we are a special bunch of people and investors. AND......once again.....thank you to Stockahlics and the staff that run this site. This is the best investing forum on the internet.

 

Just to rub it in.

The Stock Market Isn’t Falling Like It Did In the 1970s—It’s Even Worse

https://www.barrons.com/articles/stock-market-dow-nasdaq-sp-500-51651273777?siteid=yhoof2

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

"It was the worst first four months of the year for the stock market since the 1970s! No, the 1930s! Can’t we just say it was a really bad start to the year?

“Bad” might not do it justice. After dropping 3.3% this past week, the S&P 500 index has fallen 13% during the first four months of the year, its worst start since 1939. But the Dow Jones Industrial Average, after falling 2.5% for the week, has slumped 9.2% in 2022, its worst start since 2020. Not to be outdone, the Nasdaq Composite tumbled 3.9% during the week, putting it down 17% for the first four months of the year. That’s its worst start to a year on record going back to 1971.

For a minute, it looked like it would just be the S&P 500’s worst first four months of the year since 1970. Nobody seems to remember the ’70s as the decade that birthed disco, rap, and punk rock, but only for inflation. It’s an easy comparison to make given the surge in consumer prices in the U.S. The Core PCE deflator, the Federal Reserve’s favorite inflation measure, rose 5.2% year over year in March, according to data released on Friday, while the first-quarter employment cost index rose 1.4% from the fourth quarter, the largest such increase since the data set began.

By the end of trading on Friday, the selloff had gotten worse and we were staring at the worst start to a year since the Great Depression.

Still, a half-point rate hike seems all but assured on Wednesday, when the Fed ends its two-day meeting. It “underlines just how late the Federal Reserve has been to start adjusting monetary policy this cycle,” writes Michael Shaoul, CEO of Marketfield Asset Management.

More can be learned, though, by looking not just at the first four months of the year—simply a quirk of the calendar—but also all four-month declines. Covid-19 caused the S&P 500 to drop 18% over the four months ended in March 2020. And it fell 14% over the four months ended in December 2018 as the market sensed that the Fed’s autopilot interest-rate hikes were pushing the economy to its limits.

Looking back, there have been 25 four-month periods since 1992 when the S&P 500 dropped 10% or more, and on first glance they don’t seem like the worst time to have put money to work: The index has gained a median 2.6% during the six months after those drops.

That understates both the potential risks and rewards. Ten of those declines occurred from January 2000 through October 2002—the popping of the internet bubble—and just four were followed by gains over the following six months. Another nine occurred at the beginning and the end of the 2007-09 financial crisis, with five followed by big gains. You had to catch the end of the bear, not its beginning, to make money.

Not every four-month decline occurred during a recession or even resulted in a prolonged fall. In 1998, the S&P 500 fell 14% due to a Russian debt default that threatened to spill over into the global financial system, before rallying 29% over the next six months. The European debt crisis and the U.S. debt-ceiling showdown in 2010 and 2011 also caused double-digit declines that were followed by large gains.

The point isn’t that the market won’t keep falling. This past week’s selloff on what weren’t terrible earnings is certainly disconcerting—and we don’t need 1970s or 1930s comparisons to tell us that. BofA Securities strategist Savita Subramanian says one-third of a recession is already priced in, given that the S&P 500 drops an average of 32% during a bear market.

If a recession occurs, it will be painful enough. We don’t have to travel back in time to decades past for a reminder."

MY COMMENT

WHATEVER. We move forward from here.

 

I was just siting with the Saturday Business news on the TV......and zoning out....thinking that I need to leave in a couple of hours for my little Saturday 200 mile road trip. I started to think about the above.......and started to count out what the article above means.

We just went though.......THE WORST FOUR MONTHS START TO A YEAR by THE SP500......IN THE LAST 83 YEARS.

 

Yeah.......and what choice do I have......all I do is wait and see how it all works out. I try to NEVER sell.

 

Here is the latest BUFFETT LETTER for anyone that wants to read it.

https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2022/02/26/2021ltr.pdf

Here are what I consider the most relevant quote from the letter.

"Please note particularly that we own stocks based upon our expectations
about their long-term business performance and not because we view them as vehicles for timely market moves. That
point is crucial: Charlie and I are not stock-pickers; we are business-pickers."

 

HERE is the simple TRUTH about the financial world and......modern "investing". Add to the list that Buffett talks about.....the financial media. They seem to be right in there with the brokers, big banks, investment banks, and hedge funds in pushing the trading/gambling mentality.

Warren Buffett rips Wall Street for turning the stock market into ‘a gambling parlor

https://www.cnbc.com/2022/04/30/war...-the-stock-market-into-a-gambling-parlor.html

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

"Key Points

• Berkshire Hathaway CEO Warren Buffett lambasted Wall Street for encouraging speculative behavior in the stock market, effectively turning it into a “gambling parlor.”
• Buffett, 91, spoke at length during his annual shareholder meeting Saturday about one of his favorite targets for criticism: investment banks and brokerages.
• “Wall Street makes money, one way or another, catching the crumbs that fall off the table of capitalism,” Buffett said. “They don’t make money unless people do things, and they get a piece of them. They make a lot more money when people are gambling than when they are investing.”

Sometimes the market’s investment oriented and other times, it’s a casino, says Warren Buffett

Berkshire Hathaway CEO Warren Buffett lambasted Wall Street for encouraging speculative behavior in the stock market, effectively turning it into a “gambling parlor.”

Buffett, 91, spoke at length during his annual shareholder meeting Saturday about one of his favorite targets for criticism: investment banks and brokerages.

“Wall Street makes money, one way or another, catching the crumbs that fall off the table of capitalism,” Buffett said. “They don’t make money unless people do things, and they get a piece of them. They make a lot more money when people are gambling than when they are investing.”

Buffett bemoaned that large American companies have “became poker chips” for market speculation. He cited soaring use of call options, saying that brokers make more money from these bets than simple investing.

Still, the situation can result in market dislocations that give Berkshire Hathaway an opportunity, he said. Buffett said that Berkshire spent an incredible $41 billion on stocks in the first quarter, unleashing his company’s cash hoard after an extended lull. Some $7 billion of that went to snap up shares of Occidental, bringing up his stake to more than 14% of the oil producer’s shares.

“That’s why markets do crazy things, and occasionally Berkshire gets a chance to do something,” Buffett said.

“It’s almost a mania of speculation,” Charlie Munger, 98, Buffett’s long-time partner and Berkshire Hathaway vice chairman, chimed in.

“We have people who know nothing about stocks being advised by stock brokers who know even less,” Munger said. “It’s an incredible, crazy situation. I don’t think any wise country would want this outcome. Why would you want your country’s stock to trade on a casino?”

Retail traders flooded into the stock market during the pandemic, boosting share prices to records. Last year, the frenzy was fueled further by meme-inspired trading from Reddit message boards. But the stock market has turned this year, putting many of those new at-home traders in the red. The Nasdaq Composite, which holds many of the favorite names of small traders, is in a bear market, down more than 23% from its high after an April crush.

Warren Buffett has a long history of deriding investment bankers and their institutions –saying that they encourage mergers and spinoffs to reap fees, rather than improve companies.

He typically shuns investment bankers for his acquisitions, calling them pricey “money shufflers.” Buffett’s $848.02 per share offer for insurer Alleghany reportedly excludes Goldman’s advisory fee.

Earlier in the session, he noted that Berkshire would always be cash-rich, and in times of need, would be “better than the banks” at extending credit lines to companies. An audience member made an inaudible comment while he was talking.

“Was that a banker screaming?” Buffett joked."

MY COMMENT

YES......totally agree.

This is like all the modern BS about splitting off business segments to create.......shareholder value. This type of activity does NOT create long term value for shareholders......is is a sugar high........it creates nothing over the long term. It just creates short term bumps that for the most part help to make the CEO and other insiders RICH. In the end the result is a weaker company.......that is a one niche player and subject to extreme market highs and lows.

 

Another topic Buffett addressed at the annual meeting was.........one of my favorites......market timing.

Here are some of his comments:


"“We’ve never done well with timing the market”

A shareholder from New Jersey asked how Berkshire has always done well with timing the markets, and cited 1987, 1999, 2000 and other years as examples.

Buffett laughed and replied that the shareholder has a job with Berkshire and the shareholder replied that he will take it, but the conversation then veered back to the market-timing question.

Buffett insisted that Berkshire has never done well with timing the markets. In fact, he said that he missed the opportunity in March 2020. Berkshire, he said, is simply good at figuring out if a good company is going cheap. Sometimes the team hopes the target company stays cheap so that they can buy more of it, he said.

He said that they were complimented for staying optimistic on equities in 2008 when everyone else was turning away from the asset. “We spent a big percentage of our net worth at a very dumb time… we spent about $15 billion or $16 billion (in three or four weeks),” he said. This strategy offers opportunities in good companies that are mispriced because of the general sentiment.

He poked fun at financial advisors who claim that they can time the markets. “Take away the management fees and I’d bet on the monkey throwing darts at the board,” he said, implying that the advisors’ right bets are more chance than skill.

Munger chimed in saying “people are charging for their skill and delivering closet indexation”. He called fund managers–who are acting in sync so as not to fall behind their peers and the market and lose their fee–“wildly ridiculous”."

https://www.moneycontrol.com/news/b...ming-inflation-bitcoins-and-more-8437211.html


.

 

There is a reason that the SP500 Index is Buffetts number one investment suggestion for his family and heirs.

The reasoning is very simple.......it is long term investing.......in the 500 or so greatest companies in the world.......with no market timing and no trading. In other words.......proven concepts that are the only way to make real money as an investor over a lifetime.

 

I also like this little article. Talk about encouraging the gambling mentality in the markets...........the poster child of market gambling.....Robinhood. I heard somewhere the other day.......I dont know if it is true......that the account balance of the average Robinhood brokerage account was about $240.

Charlie Munger on Robinhood stock crash: 'God is getting just'

https://finance.yahoo.com/news/char...nhood-stock-was-going-to-crash-174808372.html

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

"Berkshire Hathaway Vice Chairman Charlie Munger did some kicking of a downed dog on Saturday.

"Wasn't that pretty obvious that something like that was going to happen?" Munger said during the Berkshire Hathaway annual shareholders meeting after bringing up Robinhood's business troubles, later adding the company's business model "was disgusting... God is getting just. ... There's been some justice."

Robinhood fired back in a statement to Yahoo Finance.

“It is tiresome witnessing Mr. Munger mischaracterize a platform and customer base he knows nothing about. [No, Robinhood doesn’t charge commissions and does not allow day trading or short selling. We never did.] He should just say what he really means: unless you look, think, and act like him, you cannot and should not be an investor. We’re happy to share our educational tools, as it also seems he is lost on digital currencies," the spokesperson said via email.

Munger has been an outspoken critic of the investing platform, which makes most of its money through payment-for-order flow — that is, selling customer market orders to third parties.

“When you pay for order flow, you’re probably charging your customers more in pretending to be free,” Munger said in February 2021, at the height of the meme stock frenzy and a few months prior to Robinhood's July 2021 IPO. “It’s a really dishonorable, low-grade way to talk, and nobody should believe Robinhood’s trades are free.”

Robinhood stock is down nearly 45% so far in 2022, and shares are down 72% since the company hit public markets.

At last year's Berkshire shareholders meeting, the billionaire stated: "It's just god awful that something like that would draw investment from civilized men and decent citizens. It's deeply wrong. We don't wanna make our money selling things that are bad for people."

Munger's latest comments come on the heels of a brutal week for the retail investor trading platform.

Robinhood announced that the company would slash 9% of its workforce in an effort to reach profitability by the end of the year. The company then reported a very lackluster first quarter, pressured by waning trading volumes for stocks and cryptocurrencies.

The company lost $143 million on an adjusted operating profit basis, compared to a $115 million profit a year earlier, and first quarter sales nosedived 43% from a year ago. Options based trading sales also fell 36% while cryptocurrencies dropped by 39% and equities plunged 73%.

"We all know this is a challenging time in the markets," Robinhood co-founder and CEO Vlad Tenev told analysts on an earnings call. "And our focus during this time is on building a great company for the long term."

Berkshire Hathaway Chairman and CEO Warren Buffett, Munger's longtime business partner, attempted to lighten the mood slightly amid Munger's comments.

"Is it wise to criticize people at all?" Buffett asked.

"Probably not," Munger quipped, "but I can't help it.""

MY COMMENT

SORRY......I will stick with my good old......plain Jane.....Schwab account.