The Long Term Investor

You can not invest.....if you have no money to invest. Here is the critical first step to financial security and independence.

The Golden Rule of Personal Finance

https://bestinterest.blog/golden-rule/

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

"The Leaning Tower of Pisa has a foundational problem. It’s 186 feet tall and weighs 14,500 tons. But its foundation is only 10 feet deep and built into silt and clay.

Five years after construction (~1178 A.D.), the foundation shifted and the tower famously “leaned.” Oops.

Every building needs a strong foundation. It applies to all buildings of all sizes at all locations.

This brings us to a golden rule of personal finance, one that applies to all people at all levels of income.

Spend less than you earn.

Ok. Let’s shut the browser. I know this one.

I know. You think you know what I’m talking about. But in my ever-growing experience in personal finance, most people think they know this idea, but have not truly internalized it. It’s a foundational rule we too often ignore.


We know the stories of former athletes or Hollywood stars who file for bankruptcy.


“How is this possible?”


Simple. They spent more than they earned.

“But surely someone with $100 million should be able to not spend all their money?!”

I get it. But overspending behavior is the classic slippery slope. Just as buildings of all sizes see foundational issues, people across the wealth spectrum struggle with overspending.

I have a friend of a friend who played Division 1 football and eventually made it to the NFL. But his family was dirt poor growing up. I thought this admission was so profound:

“We were so poor. There was never much money. But the money that was there…it always quickly disappeared. You got used to this idea that money is scarce and never sticks around. So whenever I got money as a kid, it was like, ‘Spend it now, or you might not get another chance to spend it.’ Boom. And I had a big list of things I wanted to spend money on. It’s like a perfect storm. So now I just want to spend everything, save nothing. I don’t trust saving because I’ve never actually seen it work.”

Here’s a guy making millions. But his financial foundation was only inches deep, not nearly strong enough to support a large income.

Our brains work against us. This is a foundational lesson from behavioral economics. We criticize others for overspending but find ways to justify our own similar behavior.

We say, “If I earned another 20%, then I’d start saving more money.” But when the 20% comes, we buy clothes that are 20% softer, houses that are 20% bigger, or meals that are 20% more organic.

The slope remains slippery all the way down. If you’re a global touring music star partying at the club, you justify a $10,000 bottle of champagne. If you’re the heavyweight champion of the world, you justify owning a tiger. We all struggle to say, “enough“.

No way, you say. I just don’t get it. I’d never own a tiger.

You’re not alone. I don’t get it either. I’m with you.

But a few weeks ago, Kelly and I spent $125 on a dinner for two. A nice treat, right?

But a big part of the U.S. population would look at our dinner and say, “No way. I just don’t get it. That’s a full week of groceries or a month of gas. I’d never spend that on one meal.”

A smaller segment of the population would say, “You call $125 a “nice” dinner? How quaint…”

My point is, overspending and comparison happen to all people at all income levels. We all spend money and all judge others on what they spend. Most of all, we all look at people richer than us and think, “If I were them, I’d be all set. Because I’d never spend money like they do on that thing.”

Getting back to foundational fundamentals, I don’t care what people spend money on. Meals, cars, tigers (though, I’m not sure there’s an ethical way to own a tiger.) Because the key is spending less than you earn. Preferably, spending much less than you earn. I ensure I’m doing this through my budget and net worth tracking.

In my experience, most people (including myself, at times) pay lip service to “spend less than you earn.” Don’t worry. You’re only human. But if you want financial success, you’ll eventually have to back up that lip service with real action. You’ll need to dig deep and build a financial foundation that supports your current and future life.

On the spending front, remind yourself of this simple truth:

• Advertisers convince you that buying stuff will make you happy.
• Actual psychological research provides no such evidence. In fact, it might make you unhappy.

You want to spend less? Remind yourself that you’ve probably been brain-hacked by advertising (I know I have) into thinking that more spending = more happiness. I don’t like that I’ve been brain-hacked. I resent it. So out of spite towards advertisers, I actively fight my impulse to spend.

It’s a struggle. I have to dig deep. Just like digging a foundation.

But if you want to build a strong financial life, that’s where it starts. A strong foundation. Spend less than you earn."

MY COMMENT

YEP.....as usual it is the simple that is so true and difficult for most people. You will NOT be investing if you do not have money to invest.

It is all about creating a HABIT of saving and investing. Even when we were on foodstamps back in the early 1970's.....we STILL managed to save $10 per month. That does not seem like much....but our income was only about $580 a month. Of course people back than did not have and use credit cards like they do now.....so we knew we had to pay for when we needed a car repair or a new tire.....so we budgeted for those types of things.

YOU can do it......you just have to be determined and not give in to all the day to day temptations. It is all about being able to defer the rewards into the future.

 

HERE is the start to the market day today. The markets will probably open as I am typing this post.

Stock futures surge as CPI shows inflation eased in October

https://finance.yahoo.com/news/stock-market-news-live-updates-november-10-2022-123913396.html

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

"U.S. stock futures zoomed forward in the early trade Thursday as Wall Street cheered lighter-than-expected inflation data and monitored midterm election tallies.

The Consumer Price Index (CPI) for October reflected a 7.7% increase over last year and 0.4% increase over the prior month, better than Wall Street expected. Economists surveyed by Bloomberg called for a 7.9% annual rise and 0.5% monthly gain.

Futures tied to the S&P 500 (^GSPC) rose almost 3%, while futures on the Dow Jones Industrial Average (^DJI) climbed by over 800 points, or 2.7%. Contracts on the technology-heavy Nasdaq Composite (^IXIC) advanced a whopping 3.6%. Meanwhile, Treasury yields tumbled following the report, with the benchmark 10-year Treasury falling below the 4% level.

"The first downside surprise in inflation in several months will inevitably be received by an equity market ovation," Principal Asset Management Chief Global Strategist Seema Shah said in a note, adding however that Federal Reserve officials remain on pace to proceed with rate increases and a pause is still elusive.

"Let the market enjoy today, it still has another 100 basis points or so of tightening to commiserate," she said.

Thursday's moves come after each of the major averages slid at least 2% in the previous session over midterm election uncertainty.

Republicans appeared poised to take control of the House but did not sweep polls at the extent anticipated, undermining optimism over the market-friendly gridlock investors anticipated.

Even as Wall Street awaits political clarity, with vote counting still underway, GLOBALT Investments vice president and senior portfolio manager Thomas Martin argued that markets are laser focused now on only one thing: the effect of central bank tightening on inflation.

“So far, the effects seem to be not all that appreciably different from zero,” he said in a note late Wednesday. “Yes, there have been data points hinting at the easing of some prices, but they haven’t been able to muster sustainable momentum.”

Until the latest policy-setting meeting earlier this month, traders hoped Federal Reserve officials would ease their monetary tightening plans as economic data softens. But Chair Jerome Powell pushed back against the notion that a shift in the Fed’s path is imminent, with inflation and payrolls still firmly elevated.

“The recent inflation data have again come in higher than expected,” Powell said. “Price pressures remain evident across a broad range of goods and services.”

Renewed risk-off sentiment on Wednesday was also stoked by the fast collapse of FTX, the cryptocurrency exchange run by billionaire Sam Bankman-Fried. Concerns over the possibility of insolvency for FTX after rival Binance walked back on an emergency rescue deal to buy the firm wreaked havoc on crypto markets, with jitters pouring over into other risk assets. Bitcoin (BTC-USD) hovered around $16,300 Thursday morning.

On the corporate front, shares of Bumble (BMBL) sank 15% in extended trading after unveiling third-quarter revenue that missed Wall Street estimates and downwardly revised guidance for the current period over currency headwinds and Russia’s war in Ukraine.

ZipRecruiter (ZIP) shares, meanwhile, jumped by the same amount after the online employment marketplace raised its full-year outlook and greenlighted a $200 million increase to its share repurchase program."

MY COMMENT

We have now opened to cheers and at the levels we were seeing in the futures. Thank you.....CPI report and Ten Year yield. I am sure we are also seeing a bit of a relief rally after the disappointing election.....not giving us immediate gridlock.

We appear to STILL be looking at gridlock....but it will take 2-6 weeks to know for sure.

No doubt we will now see the typical rampant speculation about a FED pivot. I dont see it happening in December......they will want to keep the pressure on for at least one more month. We will also see some new CPI data right before the FED meeting in December......so lets not get too carried away with the FED speculation right now.

 

Cathie Wood.......a one year flash in the pan....at the moment. It amazes me that she claims to be a long term investor with a five year horizon....yet....she jumps in and out of stocks like a maniac.

Cathie Wood’s ARKK hits 5-year low as FTX collapse spurs crypto wreck

https://finance.yahoo.com/news/cath...-low-ftx-collapse-crypto-crash-113509040.html

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

"The flagship exchange-traded fund of ARK Invest has fallen to its lowest level in five years after cryptoworld’s latest crisis sent risk assets into a tailspin this week.

Ark Innovation (ARKK), the firm’s beleaguered main ETF, sank more than 6.5% to $32.57 on Wednesday, deepening the fund’s loss to nearly 80% from its February 2021 high.

As of Tuesday's close, fund is down about 63% so far in 2022.

The slide came as crypto-related stocks cratered following the rapid collapse of FTX, the digital asset exchange run by billionaire Sam Bankman-Fried.

ARKK holdings Coinbase (COIN) and Block (SQ) fell roughly 10% and 9%, respectively, on Wednesday. Roblox (RBLX), another favorite of Wood dabbling in crypto, tanked 21%.

The famed fund manager has been a staunch cryptocurrency bull, forecasting earlier this year that the Bitcoin (BTC-USD) would top $1 million by 2023. After reports Wednesday afternoon that Binance, the world’s largest crypto exchange, backed out of an emergency deal to acquire FTX as it faces potential insolvency. Bitcoin dropped below $16,000 on the news.

Even as the sudden downfall of FTX and concerns around its partnerships rattled the crypto ecosystem this week, Wood expanded her holdings of Coinbase — the second-largest crypto exchange by volume.

On Tuesday, ARK Invest snapped up more than 420,000 shares of the company, per a transaction report from the firm, after it fell roughly 11% – and before it posted another loss of nearly that magnitude Wednesday following the firm's dip purchase.

Coinbase CEO Brian Armstrong asserted Tuesday on Twitter that his company did not have any material exposure to FTX or its subsidiaries."

MY COMMENT

This fund had ONE good year. The media than anointed Cathie Wood as the worlds greatest investor. AND....that one good year was due to a totally aberrant year in the markets due to the pandemic shut-down.

One thing abut Wood....her investors (fans)....are extremely loyal......so far. That is a massive drop in value since her fund hit a high in Feb 2021. An 80% loss.

I like how she talks about having a long term investment style and looking ahead at least five years.....but....her constant trading is at odds with what the says.

 

In reality little to nothing has changed today. BUT.....I will take any gains I can get....even if they are short term. Hopefully we end the day the same way we have started. I could use some additional "cushion" for the inevitable future drops in the market as we fight the current BEAR.

I continue to bounce back and forth between about (-25%) and (-33%). So far I have hit a low in about the same area four times this year. Each time I bounced back up from that point. I am encouraged by this....that the markets are at a bottom. BUT.....even if we have seen the bottom that does not mean that the bear market is over.

No one can predict when the BEAR will be beaten back and go away....but we are probably looking at somewhere between about 6 months and 2 years.

This does not mean that 2023 will be a negative market year for investors........even though we are definitely looking at 2022 being a losing year. I am filled with hope and confidence for the long term markets.

YES.......I remain fully invested for the long term as usual.

 

LETS MAKE SOME MONEY TODAY.

 

For those that are trying to see what is going on with FTX.....here is a little article. They appear to be headed for bankruptcy.

Why Did FTX Pause Withdrawals if It Wasn't Trading Customer Funds?

https://finance.yahoo.com/news/why-did-ftx-pause-withdrawals-163137213.html

 

One hour in...... I have a HUGE gain today. One of the largest gains that I can remember in a long time. I am UP so far by about 6% for the day. EVERY stock is green.

There.....I have now probably jinxed the markets.

 

The art and collector markets continue to be ON FIRE....especially high end items......the best of the best. If I had unlimited money I would be collecting.....comic books, sports cards, sports memorabilia, other one of a kind eclectic items.....and....of course my niche of art that I collect.....American Impressionistic Paintings.

Unfortunately I do NOT have unlimited money.....so at this point in my life I stick to the art.

Microsoft co-founder Paul Allen’s art collection smashes record with $1.5 billion auction

https://www.cnbc.com/2022/11/10/mic...llen-art-tops-1point5-billion-at-auction.html

"Key Points

• The collection of Paul Allen, the late co-founder of Microsoft, was a treasure trove of masterpieces spanning 500 years.
• Several works sold for three or four times their estimates, with several artists setting new records at auction, including Vincent van Gogh, Edward Steichen and Gustav Klimt.
• The sales total for the Allen collection will soar even higher Thursday morning, when another 95 lots head to auction."

MY COMMENT

There is money to be made in collecting and buying......."things". BUT.......you have to be very long term and patient. You also have to be an expert in what you are doing and buying. You also have to be able to buy the finest examples. PLUS....you have to have good timing in buying and selling.

I am content to consider my collecting a success.....if....on the whole the items that we have are at the minimum worth at least what I paid for them when I sell. That means that I at least got to enjoy the item.....and.....some day......did or will......get my money back. I consider it a BIG SUCCESS....if I get my money back plus equal inflation over my holding time.

Of course......I do not collect as an investment.

 

A KILLER DAY in the markets today. The largest.....one day..... percentage gain for "ME" that I can remember. I had a HUGE GREEN day today. Every stock was UP significantly. I also beat the SP500 by a WHOPPING......2.56% today.

HERE are the kind of gains I am talking about......these are the stocks that I own:

AAPL 8.9%
AMZN 12.18%
NKE 8.2%
MSFT 8.23%
COST 4.73%
NVDA 14.33%
HD 8.7%
HON 2.96%
GOOGL 7.58%
TSLA 7.39%

This is one of those days that you have to be invested in the markets to capture. THE power of long term investing. Today moved my year to date LOSS down to (-25.5%)

 

I expect that with a day like this....we will see some profit taking tomorrow at the open...but.....I expect follow-through in the green as the day progresses. Depending on the election news that follow through could be amplified.

 

Of course the FED has to step in immediately and squelch the celebration.

Fed officials: CPI welcome relief, but further rate hikes needed to quell inflation

https://finance.yahoo.com/news/fed-rate-hikes-october-cpi-federal-reserve-184353667.html

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

"Several Federal Reserve officials signaled encouragement from a new reading on inflation showing signs that inflation may be moderating, though they stressed that doesn’t mean it’s time to start easing up on the central bank's rate-hiking campaign.

Dallas Fed President Lorie Logan on Thursday called October’s consumer price index data “a welcome relief” but said “there is still a long way to go.” Cleveland Fed President Loretta Mester said October’s CPI report suggests some easing in inflation. San Francisco Fed President Mary Daly called the CPI number "good news," and Philadelphia President Patrick Harker suggested the pace of rate hikes could soon slow.

CPI clocked in still quite hot in October but cooled from previous months. The inflation gauge, excluding volatile food and energy prices (the so-called core reading), rose 0.4% month over month, coming in below expectations of 0.5% and lower than the 0.6% rise seen in both September and August. On an annual basis, core CPI rose 6.3%, compared with 6.6% in September, 6.3% in August and 5.9% in July. The Fed prefers to strip out food and energy prices since they can be so volatile.

“A positive sign is that the three-month changes in underlying inflation measures are lower now than they were in June, although they remain high,” Mester said in a speech Thursday at Princeton University. “On the other hand, services inflation, which tends to be sticky, has not yet shown signs of slowing.”

Mester says she expects inflation to begin to “slow meaningfully” next year and the following year, reaching the Fed’s 2% inflation goal in 2025 – as the Fed’s rate hikes filter through.

The Fed raised interested rates by 75 basis points last week for the fourth straight meeting. Now, Mester says the Fed’s focus is shifting from how quickly the central bank can raise rates to a level that’s “restrictive” — and to determine the appropriate level of restrictiveness that will continue to bring down inflation.

“Given the current level of inflation, its broad-based nature, and its persistence, I believe monetary policy will need to become more restrictive and remain restrictive for a while in order to put inflation on a sustainable downward path to 2%,” Mester said.

Mester said exactly how much higher rates need to rise and how long rates need to remain elevated depends on how much inflation — and inflation expectations — are moving down. That, she says, is contingent on how much demand slows, supply challenges resolve, and price pressures ease.

Daly echoed Mester's sentiments to focus on becoming more restrictive, suggesting a federal funds rate that ends up higher than the 4.6% forecast in September. The federal funds rate currently sits between 3.75% and 4%.

"I would rather move a little bit higher and have to come back than to move a little less high and then have to tell people we’re going to go higher, because at some point it seeps into inflation expectations," she said Thursday during a fireside chat at the European Economics & Financial Centre.

And Logan said that while she believes it may soon be appropriate to slow the pace of rate increases to assess the impact of completed rate hikes on the economy, she also thinks a slower pace should not be taken to mean easier policy.

“I don’t see the decision about slowing the pace as being particularly closely related to the incoming data,” Logan said. “The restrictiveness of policy comes from the entire policy strategy — not just how fast rates rise, but the level they reach, the time spent at that level, and, importantly, the factors that determine further increases or decreases.”

Logan added: “Inflation forecasts that consistently miss on the low side do not foster confidence that we understand the inflation process well enough to predict success.”

For her part, Mester warned that lowering inflation will take time and won’t be “without some pain.” Mester said higher volatility in markets and lower than average economic growth, admitting a recession is possible.

“With growth likely to be well below trend, it could easily turn negative for a time,” she said."

MY COMMENT

SCREW the FED. These......I will be nice and call them "people".....can not even allow investors to celebrate for one day before the swoop in and try to kill the BUZZ.

No we are not going to see a pivot....but at least let people feel good for one day. In addition they dont seem to realize that the economy is NOT the stock markets. They have an OBSESSIVE focus on killing the markets. It is very obvious that they have a goal of destroying stock market returns. Unfortunately for them and investors.....killing the net worth of the American people will not help with what they are trying to do.

 

CELEBRATE, CELEBRATE.....DANCE TO THE MUSIC.

Stocks stage blowout rally after milder CPI print

https://finance.yahoo.com/news/stock-market-news-live-updates-november-10-2022-123913396.html

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

"U.S. stocks posted outsized gains Thursday, logging their biggest one-day climb in two years, as Wall Street cheered lighter-than-expected inflation data and monitored midterm election tallies.

The Consumer Price Index (CPI) for October reflected a 7.7% increase over last year and 0.4% increase over the prior month, better than Wall Street expected. Economists surveyed by Bloomberg called for a 7.9% annual rise and 0.5% monthly gain.

Moderations in the data again fueled bets that the Federal Reserve may ease the pace of its monetary tightening campaign, with investors shrugging off Chair Jerome Powell's assertion earlier this month that a policy shift is not imminent. Remarks by Federal Reserve Bank of Philadelphia President Patrick Harker also suggested Thursday that officials may be nearing a pause.

The S&P 500 (^GSPC) rallied 5.5% — its biggest intraday gain since April 2020 — while the Dow Jones Industrial Average (^DJI) jumped 1,200 points, or 3.7%, the most since May 2020. The technology-heavy Nasdaq Composite (^IXIC) advanced a whopping 7.4%, its sharpest climb since emerging from the pandemic crash in March 2020. Meanwhile, Treasury yields tumbled following the report, with the benchmark 10-year note falling well below the 4% level.

Sharp gains were seen across technology stocks, with Apple (AAPL) and Microsoft Corporation (MSFT) each up more than 8%. Amazon (AMZN) shares surged 12%, Facebook parent Meta (META) 10% — placing the stock on track for its biggest weekly gain since July 2013 — and Nvidia (NVDA) 14%.

The stocks added roughly $400 billion in market capitalization combined on Thursday, according to Bloomberg data.

"The first downside surprise in inflation in several months will inevitably be received by an equity market ovation," Principal Asset Management Chief Global Strategist Seema Shah said in a note, adding however that Federal Reserve officials remain on pace to proceed with rate increases and a pause is still elusive.

"Let the market enjoy today, it still has another 100 basis points or so of tightening to commiserate," she said.

Elsewhere in economic data — in the shadow of CPI — filings for unemployment insurance rose last week but held near historic lows. Initial jobless claims, the most timely snapshot of the labor market, came in at 225,000, a 7,000 increase from the prior week, Labor Department data showed.

Thursday's market moves come after each of the major averages slid at least 2% in the previous session over midterm election uncertainty.

Republicans appeared poised to take control of the House but did not sweep polls at the extent anticipated, undermining optimism over the market-friendly gridlock investors anticipated.

Even as Wall Street awaits political clarity, with vote counting still underway, GLOBALT Investments vice president and senior portfolio manager Thomas Martin argued that markets are laser focused now on only one thing: the effect of central bank tightening on inflation.

“So far, the effects seem to be not all that appreciably different from zero,” he said in a note late Wednesday. “Yes, there have been data points hinting at the easing of some prices, but they haven’t been able to muster sustainable momentum.”

Until the latest policy-setting meeting earlier this month, traders hoped Federal Reserve officials would ease their monetary tightening plans as economic data softens. But Chair Jerome Powell pushed back against the notion that a shift in the Fed’s path is imminent, with inflation and payrolls still firmly elevated — the latter, still far below the Fed's goal of 2% despite October's decline.

Prior to Wednesday's rebound, renewed risk-off sentiment on Wednesday was also stoked by the fast collapse of FTX, the cryptocurrency exchange run by billionaire Sam Bankman-Fried. Concerns over the possibility of insolvency for FTX after rival Binance walked back on an emergency rescue deal to buy the firm wreaked havoc on crypto markets, with jitters pouring over into other risk assets. Bitcoin (BTC-USD) hovered around $16,300 Thursday morning.

In earnings news, shares of Nio (NIO) rallied 12% after the Chinese electric carmaker reported a jump in third-quarter revenue and forecasted strong production.

South Korean e-commerce Coupang (CPNG) saw its stock gain 23% after posting its first on-record operating profit.

ZipRecruiter (ZIP) shares jumped 16% after the online employment marketplace raised its full-year outlook and greenlighted a $200 million increase to its share repurchase program.

Shares of Bumble (BMBL) rose 10% after reversing a pre-market decline of 15% despite unveiling third-quarter revenue that missed Wall Street estimates and downwardly revised guidance for the current period over currency headwinds and Russia’s war in Ukraine."

MY COMMENT

An EPIC day for stock and fund investors. Even poor Bitcoin was up by +12% as I type this.

NOW....we are in for massive HYPE about a pivot in the media.....as usual....I expect them to be WRONG....at least as to the rate increase in December.

 

Good one RG......you made me laugh.