The Long Term Investor

Ridestock.....that sounds pretty amazing.

 

No doubt this will weigh on TESLA a bit on Monday.

Tesla reports 422,875 deliveries for first quarter of 2023

https://www.cnbc.com/2023/04/02/tesla-tsla-q1-2023-vehicle-delivery-and-production-numbers.html

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

"Key Points

• Tesla posted its first-quarter vehicle production and deliveries report for 2023 on Sunday.
• Deliveries are the closest approximation of sales disclosed by Tesla and are not broken out by individual model or region.

Tesla on Sunday posted its first-quarter vehicle production and delivery report for 2023.

Here are the key numbers from the electric vehicle maker:


Total deliveries Q1 2023: 422,875

Total production Q1 2023: 440,808

Deliveries are the closest approximation of sales disclosed by Tesla and are not broken out by individual model or region.

The first quarter numbers represent a 36% increase in deliveries compared to the 310,048 reported during the same period a year earlier, and 4% growth in deliveries sequentially compared to the 405,278 they company reported in the last quarter of 2022.

The company reported deliveries of 10,695 of its higher-priced Model S and X vehicles, about 2% of deliveries in the quarter.

Tesla reported deliveries of 412,180 of its lower priced Model 3 sedan and Model Y crossover during the quarter.

The company did not include production and delivery numbers for its heavy-duty Semi trucks.

Tesla said it produced 19,437 Model S and X vehicles, and 421,371 of its Model 3 and Y vehicles for the period ending March 31, 2023.

“We continued to transition towards a more even regional mix of vehicle builds,” the company wrote in a statement Sunday.

Tesla now sells four models which are produced at two vehicle assembly plants in the US, one in Shanghai and another outside of Berlin. In March, CEO Elon Musk announced the company plans to build a new factory in Monterrey, Mexico, a day’s drive from its factory in Austin, Texas.

The company also produces a heavy-duty truck, the Semi, at its battery plant in Sparks, Nevada. The company began deliveries of the Semi in December 2022.

According to a mean of estimates, compiled by FactSet as of Friday, Wall Street was expecting Tesla to report deliveries around 432,000 vehicles for the quarter. Estimates included in the FactSet analysis ranged from 410,000 to 451,000 deliveries expected.

The independent researcher who publishes under the handle TroyTeslike was expecting deliveries of 427,000 and production totaling 445,920 vehicles.

The first quarter of 2023 was marked by repeated price cuts by Tesla including in the U.S., Europe and China.

Tesla’s moves sparked a so-called “price war” in EVs, and posed a challenge to competitors including Ford and General Motors who are trying to gain marketshare in the fully electric vehicle segment domestically.

Tesla shares rose more than 60% in the first quarter to close at $207.46 on Friday ahead of the production and deliveries report. (They closed at $123.18 on December 30th, the last day of trading in 2022.)

MY COMMENT

These deliveries sound like nice strong numbers to me. Up by 36% year over year and by 4% over one quarter. BUT......the experts that dont have anything to do with working in an actual EV company or for that matter, anywhere in the private auto business......were "expecting" more. At least in some of the articles I have seen. So the stock will probably be down.

As usual it is simply silly that we allow outsiders that do not ever work in the actual business.....to put out the expectations that everyone accepts as fact. I am sure this will be jumped on by those that now want to CANCEL Musk for political reasons.

 

Here is a different take.

Tesla reports record Q1 deliveries as price cuts boost demand

https://finance.yahoo.com/news/tesl...ies-as-price-cuts-boost-demand-183219769.html

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

"Tesla (TSLA) on Sunday reported first quarter delivery and production numbers that topped estimates, indicating price cuts it initiated across the globe are boosting demand.

For the quarter, Tesla delivered 422,875 globally, which is an all-time record for the EV-maker. That figure barely topped street estimates —as complied by Bloomberg —of slightly over 421K deliveries. Tesla also produced 440,808 cars for the quarter, easily topping estimates of 432.5K vehicles. While Tesla doesn’t break out sales by region, global sales of the Model 3 and Model Y SUV surged, following price cuts for both vehicles both in the U.S. and abroad.

Tesla cut prices in China first, in early-January with the Chinese-made Model 3 falling by 13.5%, and the Model Y cut by 10%. Tesla the cut prices in the U.S., with the Model 3 RWD falling by 6.4%, and the Model Y Long range dropping by nearly 20%. Sales in the U.S. were given an even bigger boost when when the IRS in early January allowed all versions of the Model Y to fall under the $80,000 MSRP price limit for tax credit eligibility. It had been reported since then that production wait time for the Model Y pushed out considerably after the IRS ruling.

Returning to deliveries, Tesla CEO Elon Musk said during the company’s Q4 earnings call that he expected Tesla to deliver 1.8 million vehicles for the year, and if there aren’t any production hiccups, that 2 million deliveries would be achievable. The company also indicated its highly-anticipated Cybertruck would enter production in the back half of 2023.

Finally, Tesla said in its delivery report that it would post first quarter financial results after the market close on Wednesday, April 19th, with the investor call scheduled for 5:30p ET on the same day."

MY COMMENT

OK....so earnings will be reported on April 19.

So...we have an all time record high for deliveries. We have record production. We have surging demand and wait times.
BUT....wait and see.....the majority of headlines and articles tomorrow will be the usual fear mongering and negativity.

 

You know Ridestock.....reading your post about AI and code and programing....makes me think that if I was a code writer I would not be planing on having a very long career. The days of programing and code writing being a very desirable skill and occupation are going to come to an end very quickly.

Sounds like GREAT POTENTIAL for the tech industry to greatly increase productivity by not needing huge numbers of employees in the near future. These people are basically inventing and developing themselves.......right out of a job.

 

"HERE IS MY PORTFOLIO.

I have no plans to sell anything or do anything. As a long term....fully invested all the time investor......I will do nothing in response to the current short term events and environment.

AS USUAL.........HERE is my current PORTFOLIO MODEL.

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

PORTFOLIO MODEL

"Here is my "PORTFOLIO MODEL" for all accounts managed which is the basis for MUCH of my discussion in this thread. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 60% of the total portfolio and the fund side at about 40% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing.

As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 10 stock portfolio.At the same time the funds double and triple up on my individual stock holdings............that I consider the BEST individual businesses in the WORLD.

STOCKS:

Alphabet Inc
Amazon
Apple
Costco
Home Depot
Honeywell
Microsoft
Nike
Nvidia
Tesla

MUTUAL FUNDS:

SP500 Index Fund
Fidelity Contra Fund

CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (72). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE. In addition I am a fully invested, all the time, LONG TERM investor. (LONG TERM meaning many years, 5, 10, 20, years or more)"

MY COMMENT

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

 

Hey Jwalker. How are you doing in the markets lately? You must be experiencing a good year so far.

As to owning a TESLA.........or any other EV.......no way. I routinely drive way too many miles to waste time standing around at some charger while my car takes 20-40 minutes to charge up. And that assumes that I am not number two or three in line. I need a car that can get more miles than most of the EV's do from a charge.......or.....the ability to quickly fill up and keep on driving.

In addition I have seen way too many articles giving a "real" view of driving an EV on a long trip and all the headaches of finding chargers and the length of time it takes to charge.

For example:

Road Trips in Our Long-Term EVs Have Been … Interesting
Broken chargers, full charging stations, single-digit temperatures, and optimistic range estimates have tested our patience.

https://www.motortrend.com/reviews/road-tripping-in-our-long-term-electric-test-cars/

For people that dont need to drive long distances or for long hours.....ok. I would consider a plug-in hybrid for my next car in 2-3 years......but I would have to do more research than I have done right now.

I am probably looking at needing a new car in about 2-3 years. At that time I will have about 260,000 to 300,000 miles. At the moment I am at about 200,000 miles on my current little Ford Escape. I prefer a mid-size SUV to haul equipment......and at the same time not be driving a big boat.

 

This article is a classic.

I Rented an Electric Car for a Four-Day Road Trip. I Spent More Time Charging It Than I Did Sleeping.
Our writer drove from New Orleans to Chicago and back to test the feasibility of taking a road trip in an EV. She wouldn’t soon do it again.

https://www.wsj.com/articles/i-rent...e-charging-it-than-i-did-sleeping-11654268401

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

"I thought it would be fun.

That’s what I told my friend Mack when I asked her to drive with me from New Orleans to Chicago and back in an electric car.

I’d made long road trips before, surviving popped tires, blown headlights and shredded wheel-well liners in my 2008 Volkswagen Jetta. I figured driving the brand-new Kia EV6 I’d rented would be a piece of cake.

If, that is, the public-charging infrastructure cooperated. We wouldn’t be the first to test it. Sales of pure and hybrid plug-ins doubled in the U.S. last year to 656,866—over 4% of the total market, according to database EV-volumes. More than half of car buyers say they want their next car to be an EV, according to recent Ernst & Young Global Ltd. data.

By the Numbers
Our reporter’s four-day, three-night EV road trip included many charging stops, little sleep—and less junk food than you might expect

• Miles driven: 2,013
• Number of charges: 14
• Total charging cost: $175
• Hours spent waiting to charge: 18
• Hours of sleep: 16
• Calories of junk food consumed (estimated): 1,465
• Giant chicken statues passed: 1

Oh—and we aimed to make the 2,000-mile trip in just under four days so Mack could make her Thursday-afternoon shift as a restaurant server.

Less money, more time
Given our battery range of up to 310 miles, I plotted a meticulous route, splitting our days into four chunks of roughly 7½-hours each. We’d need to charge once or twice each day and plug in near our hotel overnight.

The PlugShare app—a user-generated map of public chargers—showed thousands of charging options between New Orleans and Chicago. But most were classified as Level 2, requiring around 8 hours for a full charge.

While we’d be fine overnight, we required fast chargers during the days. ChargePoint Holdings Inc., which manufactures and maintains many fast-charging stations, promises an 80% charge in 20 to 30 minutes. Longer than stopping for gas—but good for a bite or bathroom break.

The government is spending $5 billion to build a nationwide network of fast chargers, which means thousands more should soon dot major highways. For now, though, fast chargers tend to be located in parking lots of suburban shopping malls, or tethered to gas stations or car dealerships.

Cost varies widely based on factors such as local electricity prices and charger brands. Charging at home tends to be cheaper than using a public charger, though some businesses offer free juice as a perk to existing customers or to entice drivers to come inside while they wait.

Over four days, we spent $175 on charging. We estimated the equivalent cost for gas in a Kia Forte would have been $275, based on the AAA average national gas price for May 19. That $100 savings cost us many hours in waiting time.

But that’s not the whole story.

Charging nuances
New Orleans, our starting point, has exactly zero fast chargers, according to PlugShare. As we set out, one of the closest is at a Harley-Davidson dealership in Slidell, La., about 40 minutes away. So we use our Monday-morning breakfast stop to top off there on the way out of town.

But when we tick down 15% over 35 miles? Disconcerting. And the estimated charging time after plugging in? Even more so. This “quick charge” should take 5 minutes, based on our calculations. So why does the dashboard tell us it will take an hour?

“Maybe it’s just warming up,” I say to Mack. “Maybe it’s broken?” she says.

Over Egg McMuffins at McDonald’s, we check Google. Chargers slow down when the battery is 80% full, the State of Charge YouTube channel tells us.

Worried about time, we decide to unplug once we return to the car, despite gaining a measly 13% in 40 minutes.

When ‘fast’ isn’t fast

Our real troubles begin when we can’t find the wall-mounted charger at the Kia dealership in Meridian, Miss., the state’s seventh-largest city and hometown of country-music legend Jimmie Rodgers.

When I ask a mechanic working on an SUV a few feet away for help, he says he doesn’t know anything about the machine and points us inside. At the front desk, the receptionist asks if we’ve checked with a technician and sends us back outside.

Not many people use the charger, the mechanic tells us when we return. We soon see why. Once up and running, our dashboard tells us a full charge, from 18% to 100%, will take 3-plus hours.

It turns out not all “fast chargers” live up to the name. The biggest variable, according to State of Charge, is how many kilowatts a unit can churn out in an hour. To be considered “fast,” a charger must be capable of about 24 kW. The fastest chargers can pump out up to 350. Our charger in Meridian claims to meet that standard, but it has trouble cracking 20.

“Even among DC fast chargers, there are different level chargers with different charging speeds,” a ChargePoint spokeswoman says.

Worse, it is a 30-minute walk to downtown restaurants. We set off on foot, passing warehouses with shattered windows and an overgrown lot filled with rusted fuel pumps and gas-station signs. Clambering over a flatcar of a stalled freight train, we half-wish we could hop a boxcar to Chicago.

Missed reservations
By the time we reach our next station, at a Mercedes-Benz dealership outside Birmingham, Ala., we’ve already missed our dinner reservations in Nashville—still 200 miles away.

Here, at least, the estimated charging time is only an hour—and we get to make use of two automatic massage chairs while we wait.

Salesman Kurt Long tells us the dealership upgraded its chargers to 54-kW models a few weeks earlier when the 2022 Mercedes EQS-Class arrived.

“Everyone’s concern is how far can the cars go on a charge,” he says. He adds that he would trade in his car for an EV tomorrow if he could afford the $102,000 price tag. “Just because it would be convenient for me because I work here,” he says. “Otherwise, I don’t know if I would just yet.”

A customer who has just bought a new BMW says he’d consider an EV one day—if the price drops.

“You remember when the microwave came out? Or DVD players?” says Dennis Boatwright, a 58-year-old tree surgeon. “When you first get them the prices were real high, but the older they are, the cheaper they get.”

When we tell him about our trip, he asks if we’ll make it to Chicago.

“We’re hoping,” I say.

“I’m hoping, too,” he says.

A giant chicken
After the Birmingham suburbs, our journey takes us along nightmarish, dark mountain roads. We stop for snacks at a gas station featuring a giant chicken in a chef’s costume. We lean heavily on cruise control, which helps conserve battery life by reducing inadvertent acceleration and deceleration. We are beat when we finally stumble into our Nashville hotel at 12:30 a.m.

To get back on schedule, we are up and out early, amid pouring rain, writing the previous day off as a warm-up, an electric-car hazing.

For the most part, we are right. Thanks to vastly better charging infrastructure on this leg, all our stops last less than an hour.

It isn’t all smooth sailing, though. At one point we find ourselves wandering through a Kroger, sopping wet, in search of coffee after wrestling with a particularly finicky charger in the rain. By this point, not once have we managed to back in close enough to reach the pump, or gotten the stiff cord hooked around the right way on the first try.

In the parking lot of a Clarksville, Ind., Walmart, we barely have time for lunch, as the Electrify America charging station fills up our battery in about 25 minutes, as advertised.

The woman charging next to us describes a harrowing recent trip in her Volkswagen ID.4. Deborah Carrico, 65, had to be towed twice while driving between her Louisville, Ky., apartment and Boulder, Colo., where her daughter was getting married.

Deborah Carrico had to be towed twice during a recent EV road trip.Photo: Rachel Wolfe
“My daughter was like, ‘You’ve lost it mom; just fly,’ ” the retired hairdresser says. She says she felt safer in a car during the pandemic—but also vulnerable when waiting at remote charging stations alone late at night. “But if someone is going to get me, they’re going to have to really fight me,” she says, wielding her key between her fingers like a weapon.

While she loves embracing the future, she says, her family has been giving her so much pushback that she is considering trading the car in and going back to gas.

Smiling at gas prices
At another Walmart, in Indianapolis, we meet Bill Stempowski as he waits for his Ford Mustang Mach-E to charge. A medical-equipment operations manager, 45, he drives all over the Midwest from his home in LaGrange, Ohio, for work.

In nine months, he says, he’s put 30,000 miles on the car and figures he’s saved thousands on gas. “I smile as the gas-sign prices tick up,” he says. That day, his charge comes to about $15, similar to what we are paying to fill up.

We pull into Chicago at 9 p.m., having made the planned 7½-hour trip in 12 hours. Not bad, we agree.

‘What if we just risk it?’
Leaving Chicago after a full night of sleep, I tell Mack I might write only about the journey’s first half. “The rest will just be the same,” I predict, as thunder claps ominously overhead.

“Don’t say that!” she says. “We’re at the mercy of this goddamn spaceship.” She still hasn’t mastered the lie-flat door handles after three days.

As intense wind and rain whip around us, the car cautions, “Conditions have not been met” for its cruise-control system. Soon the battery starts bleeding life. What began as a 100-mile cushion between Chicago and our planned first stop in Effingham, Ill., has fallen to 30.

“If it gets down to 10, we’re stopping at a Level 2,” Mack says as she frantically searches PlugShare.

We feel defeated pulling into a Nissan Mazda dealership in Mattoon, Ill. “How long could it possibly take to charge the 30 miles we need to make it to the next fast station?” I wonder.

Three hours. It takes 3 hours.

I begin to lose my mind as I set out in search of gas-station doughnuts, the wind driving sheets of rain into my face.

Seated atop a pyramid of Smirnoff Ice 12-packs, Little Debbie powdered sugar sprinkled down the pajama shirt I haven’t removed in three days, I phone Mack. “What if we just risk it?” I say. “Maybe we’ll make it there on electrical fumes.”

“That’s a terrible idea!” she says, before asking me to bring back a bag of nuts.

‘Charge, Urgently!’
Back on the road, we can’t even make it 200 miles on a full charge en route to Miner, Mo. Clearly, tornado warnings and electric cars don’t mix. The car’s highway range actually seems worse than its range in cities.

Indeed, highway driving doesn’t benefit as much from the car’s regenerative-braking technology—which uses energy generated in slowing down to help a car recharge its battery—Kia spokesman James Bell tells me later. He suspects our car is the less-expensive EV6 model with a range not of 310 miles, as listed on Turo, but 250. He says he can’t be sure what model we were driving without physically inspecting the car.

“As we have all learned over many years of experience with internal combustion engine vehicles, factors such as average highway speed, altitude changes, and total cargo weight can all impact range, whether derived from a tank of gasoline or a fully charged battery,” he says.

To save power, we turn off the car’s cooling system and the radio, unplug our phones and lower the windshield wipers to the lowest possible setting while still being able to see. Three miles away from the station, we have one mile of estimated range.

“Charge, Urgently!” the dashboard urges. “We know!” we respond.

At zero miles, we fly screeching into a gas-station parking lot. A trash can goes flying and lands with a clatter to greet us. Dinner is beef jerky, our plans to dine at a kitschy beauty shop-turned-restaurant in Memphis long gone.

Then we start to argue. Mack reminds me she needs to be back in time for her shift the next day. There’s no way we’ll make it, I tell her.

“Should we just drive straight through to New Orleans?” I finally ask desperately, even as I realize I’ve failed to map out the last 400 miles of our route.

To scout our options, Mack calls a McDonald’s in Winona, Miss., that is home to one of the few fast chargers along our route back to New Orleans. PlugShare tells us the last user has reported the charger broken. An employee who picks up reasonably responds that given the rain, she’ll pass on checking to see if an error message is flashing across the charger’s screen.

Home, sweet $4-a-gallon home
At our hotel, we decide 4 hours of sleep is better than none, and set our alarms for 4 a.m.

We figure 11 hours should be plenty for a trip that would normally take half as long. That is, if absolutely everything goes right.

Miraculously, it does. At the McDonald’s where we stop for our first charge at 6 a.m., the charger zaps to life. The body shop and parts department director at Rogers-Dabbs Chevrolet in Brandon, Miss., comes out to unlock the charger for us with a keycard at 10 a.m. We’re thrilled we waited for business hours, realizing we can only charge while he’s there.

We pull into New Orleans 30 minutes before Mack’s shift starts—exhausted and grumpy.

The following week, I fill up my Jetta at a local Shell station. Gas is up to $4.08 a gallon.

I inhale deeply. Fumes never smelled so sweet"

MY COMMENT

What a nightmare.

Sure.......the suburban upscale Millennial that drives a little bit here and there in a typical day and than charges in their garage at night......can do it. But anyone that has to drive long trips or in extreme conditions......or cant spend 20-60 minutes (or more) screwing around to charge a car......NO WAY.

 

We have had a good open today. BUT.....as I have been siting here and watching the markets since the open the NASDAQ seems to be stuck.....perhaps even moving a bit more to the negative.

The best thing I am seeing today is the Ten Year Treasury under 3.5% even though it is up today.

 

LOL.......no Zukodany, I am not a car person or a roaring engine fan. I am basically a person that to me a car is simply a commodity. How many miles can I get out of it for the cost. My target car is a mid size SUV that is reasonable cost and will last for 250,000 to 300,000 miles. I look for something that I can use to haul equipment.

At one time in my life over a span of about 15 years we did own a number of different Range Rovers....between 1990 and about 2008. Back than they were still much more of a tough vehicle that could be used for off road and were not as common as they are now. We also bought a Defender 90 in about 1995. Those were very "tough" vehicles....but.....being made in England they tended to have typical English electrical issues and repairs were expensive. They were also not very good to get high miles out of them.

That Defender was a good investment. I cant remember the cost but I think it was under $30,000. In about 1994/1995 Land Rover released the Defender 90 again as a vehicle that was legal to sell in the USA. We used it as a toy and kept it in a garage all its life. By about 2005 it had gone up significantly in value....at that point we gave it to one of our kids.....since it was their dream vehicle. They kept it for about 10 years and finally got tired of it. They sold it through a broker for about $85,000 and the buyer, a dealer in California shortly later had it for sale for $125,000. At that time I think it was one of the cleanest, perfect original paint, low miles (under 15,000) Defenders in the world. I imagine it is worth way more than that now.

Since our Land Rover days we stick with cheaper, commodity, vehicles......a mid size SUV and our 9 year old low miles (35K) Town & Country van. We will always keep the van since we need a vehicle that can haul larger items at times and it has a lifetime bumper to bumper warranty.

 

While I have been BLABBING I see that the DOW has continued to advance.....The poor NASDAQ has continued to linger to the dark side today.

 

I like this little article.

The Active Management Delusion: Respect the Wisdom of the Crowd

https://blogs.cfainstitute.org/inve...ent-delusion-respect-the-wisdom-of-the-crowd/

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

"“My basic point here is that neither the Financial Analysts as a whole nor the investment funds as a whole can expect to ‘beat the market,’ because in a significant sense they (or you) are the market . . . the greater the overall influence of Financial Analysts on investment and speculative decisions the less becomes the mathematical possibility of the overall results being better than the market’s.” — Benjamin Graham

An enduring principle of financial history is that past solutions often plant the seeds of future problems. Among the least-expected examples of this phenomena were the passage of the Securities Act of 1933 and the Securities Exchange Act of 1934. These acts mandated extensive financial disclosures by publicly traded companies and outlawed market manipulation and insider trading. Prior to their passage, Wall Street stock operators routinely profited by cheating markets rather than outsmarting them.

To be clear, these regulations were desperately needed to clean up US securities markets. After they were passed, skillful securities analysis, rather than market manipulation and insider trading, was largely the only way to beat the market. Of course, truly above-the-mean securities analysis was and remains exceedingly rare.

But that hasn’t kept capital from flooding into actively managed mutual funds — even after the first index funds launched in the 1970s. Under pressure to differentiate their products, fund managers introduced a slew of investment strategies covering various asset classes and sub-asset classes. Increased complexity, specialization, and robust marketing budgets convinced the public that professional managers could add value to their investment portfolios beyond what they could otherwise obtain by investing in a diversified portfolio of stocks. Few paid attention when the SEC noted that the average professionally managed portfolio underperformed broad indexes before fees in an exhaustive 1940 study.

For more than 80 years, the fact that few active managers add value has been validated by numerous research papers published by government agencies, including the SEC, and such Nobel laureates as William Sharpe and Eugene Fama, as well as the experience of Warren Buffett, David Swensen, Charles Ellis, and other highly regarded practitioners. Despite a preponderance of evidence, many investors continue to reject the undeniable truth that very few are capable of consistently outperforming an inexpensive index fund. Outside a small and shrinking group of extraordinarily talented investors, active management is a waste of money and time.

The Extraordinary Wisdom of the Crowd
So, why is the active management delusion so persistent? One theory is that it stems from a general lack of understanding as to why active strategies are doomed to failure in most cases. The primary reason — but certainly not the only one — is summed up by the “wisdom of crowds,” a mathematical concept Francis Galton first introduced in 1907. Galton described how hundreds of people at a livestock fair tried to guess the weight of an ox. The average of the 787 submissions was 1,198 pounds, which missed the ox’s actual weight by only 9 pounds, and was more accurate than 90% of the individual guesses. So, 9 out of 10 participants underperformed the market.

Galton’s contest was not an anomaly. The wisdom of crowds demonstrates that creating a better-than-average estimate of an uncertain value becomes more difficult as the number of estimates increases. This applies to weight-guessing contests, GDP growth forecasts, asset class return assumptions, stock price estimates, etc. If participants have access to the same information, the total estimates above the actual amount tend to cancel out those below it, and the average comes remarkably close to the real number.

The results of a contest at Riverdale High School in Portland, Oregon, illustrated below, demonstrate this principle. Participants tried to guess the number of jellybeans in a jar. Their average guess was 1,180, which wasn’t far from the actual total of 1,283. But out of 71 guesses, only 3 students (fewer than 5%) beat the average. Anders Nielsen came closest with 1,296.

Average Participant Guess by Number of Participants


The Seed of the Active Management Delusion
Speculators prior to 1934 understood the wisdom of crowds intuitively, which is one reason why they relied so heavily on insider trading and market manipulation. Even in the late 1800s, market efficiency was a formidable obstacle to outperformance. The famed stock operator Daniel Drew captured this sentiment when he reportedly commented, “To speckilate [sic] in Wall Street when you are no longer an insider, is like buying cows by candlelight.”

The Great Depression-era securities acts improved market integrity in the United States, but they also sowed the seed of the active management delusion. As companies were forced to release troves of financial information that few could interpret, markets became temporarily inefficient. Those like Benjamin Graham who understood how to sift through and apply this new data had a competitive advantage.

But as more investment professionals emulated Graham’s methods and more trained financial analysts brought their skills to bear, the market became more efficient and the potential for outperformance more remote. In fact, Graham accelerated this process by publishing his techniques and strategies and thus weakened his competitive advantage. His book Security Analysis even became a bestseller.

After a time, Graham concluded that beating the market was no longer a viable goal for the vast majority of financial analysts. That did not mean that he had lost faith in their value; he just knew with mathematical certainty that outperformance was too tall an order for most. Despite his indisputable logic, his warning was largely ignored. By the 1960s, too many investment firms and investment professionals had staked their businesses and livelihoods on beating the market.

Letting Go of the Fear of Obsolescence
The flawed belief that we can beat the market persists to this day. What’s worse, it has spread to institutional consulting and other sectors. Many firms base their entire value proposition on their manager selection skills and asset allocation strategies. Yet these are subject to the same constraints as Galton’s weight-guessing contest. For example, average estimates of asset class return assumptions — which are freely available — are likely to be more accurate than those provided by individual firms using comparable time horizons. The same holds for manager selection, only the outcomes are quite a bit worse. The average choice of an asset manager may be better than most individual choices, but by definition, even the average is a losing bet. That is, the average manager is expected to underperform an index fund because most asset managers underperform index funds.

To improve client outcomes, investment consultants and advisers must come to terms with this reality. But over the past several decades, most have only intensified their quixotic quest for outperformance. Their collective failure has saddled clients with portfolios that are overly diversified, laden with unnecessary active manager fees, and unnecessarily invested in expensive alternative asset classes that can only add value to a small subset of highly skilled investors. The consequence is subpar performance, higher fees, and costly neglect of more important financial challenges.

Why can’t advisers and consultants accept the truth about outperformance? Because they fear it will lead to their obsolescence. It is a great irony, therefore, that the opposite is true. Once we let go of the outperformance obsession, we can add extraordinary value for our clients. Clients need us to hone their investment objectives, calibrate their risk tolerance, optimize the deployment of their capital, and maintain strategic continuity. By spending less time on unnecessary tweaks of portfolio allocations, the constant hiring and firing of managers, and unnecessary forays into esoteric asset classes, we can better serve our clients by focusing on what really matters.

The first step is to recognize and respect the wisdom of crowds. Only then can advisers and their clients join Benjamin Graham as elite investors.


MY COMMENT

CHASING performance.....the typical foolish mission of many investors. They jump in an out of the next, great, hot investment strategy. Most people would be better off over their lives simply owning a single investment....a SP500 Index ETF.

I do believe there is a role to play for investment advisors. Their primary role should NOT be managing money or investments...it should be as a barrier between the client and the clients emotions. IN other words:

"Once we (financial advisors) let go of the outperformance obsession, we (financial advisors) can add extraordinary value for our clients. Clients need us to hone their investment objectives, calibrate their risk tolerance, optimize the deployment of their capital, and maintain strategic continuity."

 

The market so far today.

Oil pops, Dow rallies as second quarter gets underway: Stock market news today

https://finance.yahoo.com/news/oil-...derway-stock-market-news-today-133311107.html

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

"The price of crude oil surged early Monday, pushing the Dow higher and offering a new wrinkle for investors as an unexpected oil supply cut from OPEC+ over the weekend shook markets to start the second quarter.

Shortly after the opening bell on Monday, the S&P 500 (^GSPC) was up 0.4%, the Dow Jones Industrial Average (^DJI) was higher by just over 1%, and the technology-heavy Nasdaq Composite (^IXIC) was lower by 0.4%.

Crude oil was higher by about 6% early Monday, with WTI crude oil — the U.S. benchmark — trading near $80 a barrel while the international benchmark price, Brent crude oil, was trading near $85 a barrel.

A nearly 5% gain in shares of Chevron (CVX) helped the Blue Chip Dow lead markets to start the week.

On Sunday, the OPEC+ oil cartel — which includes OPEC members plus Russia — announced it would cut daily production by more than 1 million barrels of oil beginning in May and running through the end of the year.

"Even though, like OPEC, we expect only subdued demand growth this year, the scale of supply cuts will send the oil market balance into a deficit in 2023, with an even larger deficit in Q4," wrote Caroline Bain, chief commodities economist at Capital Economics, in a note to clients on Monday.

Last month, the price of oil dropped to an 18-month low as a glut of supply and fears over the global economy shook the oil market. Additionally, a surge in the dollar as investor concern rose over the banking crisis pressured oil.

But as worries over an acute financial crisis worldwide have ebbed, the dollar has eased and WTI rose by nearly $10/barrel over the final two weeks of March.

A renewed surge in oil prices also potentially complicates the task ahead for the Federal Reserve, which has raised interest rates in a bid to lower inflation. Although the Fed's preferred inflation measures strip out the costs of food and gas, a marked rise in so-called "headline" inflation — which includes energy prices — could complicate the messaging on a pause in interest rate increases later this year.

Data out on Friday showed headline inflation as measured by the Personal Consumption Expenditures (PCE) Index rose 5% over the prior year in February; core PCE showed prices rose 4.6% over last year in February.

The more widely followed Consumer Price Index showed headline inflation clocked in at 6% over the prior year in February. The Fed targets 2% inflation.

On the economic data front, Monday brought investors two key readings on the U.S. manufacturing sector with data from both S&P Global and Institute for Supply Management showing a contraction in activity during March.

Both gauges indicated activity in the manufacturing sector contracted during March, with the ISM's index dropping for the fifth-straight month and reaching a level of 46.3, the lowest since May 2020. Any reading below 50 for this index indicates contraction in the sector; readings above 50 indicate expansion.

Elsewhere in markets on Monday, a merger in the entertainment world will draw investor attention after Endeavor (EDR), parent company of UFC, announced a deal to merge with World Wrestling Entertainment (WWE) to form a new company that will trade under the ticker "TKO."

Endeavor will own 51% of the new company, with WWE holding a 49% interest.

The new company will have an enterprise value north of $21 billion while the companies recognized 2022 revenues of $2.4 billion with a 10% annual revenue growth rate since 2019, the companies said in a press release.

Endeavor CEO Ari Emanuel will lead the new company, with Dana White serving as President of UFC and Nick Khan overseeing WWE. WWE founder Vince McMahon will serve as executive chairman of the new company.

Shares of WWE, which had gained more than 30% this year through Friday's close amid persistent speculation about a takeover, were down 8% on the news early Monday. Endeavor shares were down about 1% early in the trading session.

Tesla (TSLA) shares were also in focus early Monday after the company announced first quarter delivery numbers that set a new record for the electric carmaker as a cut in prices boosted overall demand for Tesla vehicles.

The company delivered more than 422,000 cars in the first quarter and made more than 440,000 new vehicles during the first three months of the year.

Tesla stock was down about 3% in early trade on Monday.

Investors will also keep an eye on Disney's annual shareholder meeting, set to kick off at 1:00 p.m. ET."

MY COMMENT

What do we see once again above.......nothing. A relatively news free day with nothing new for the markets. The financial media is having to stretch to come up with "stuff" to talk about regarding the markets. Investors are already anticipating the last rate hikes by the FED and starting to tune them out. At the same time the FED is in even more turmoil and confusion than normal since they have been somewhat muzzled by the banks.

In the end.......3-6 months from now.......it is going to be supremely apparent that the FED....in spite of all their bluster and blather......actually achieved nothing.

 

Bad news for house hunters.....although these "average" numbers are not particularly representative of the actual market.

Home prices suddenly jump after several months of declines

https://www.cnbc.com/2023/04/03/home-prices-rise-after-declines.html

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

"Key Points

• Home prices suddenly turned higher as mortgage rates slipped.
• Prices nationally rose 0.16% in February, when seasonally adjusted, according to Black Knight.
• In December and January, mortgage rates began pulling back, and homebuyers surged ahead.

"Home prices in February rose for the first time in 7 months

Unexpectedly strong home sales at the start of this year reversed a sharp, several-month decline in home prices. Mortgage rates are behind the swing.

Home prices nationally rose 0.16% in February, when seasonally adjusted, according to Black Knight. That is the strongest one-month gain since May of last year. Home prices are now 2.6% below their peak last June.

Of the 50 largest U.S. markets, 39 saw home prices rise in February. That’s a quick turnaround from November, when prices were falling in 48 of 50 markets.

Behind the quick change are wide swings in mortgage rates. The average rate on the 30-year fixed began rising off of a record low at the start of 2022. By June it had gone from around 4% to just over 6%. Sales slowed down, and prices followed. By fall, the rate shot over 7%, and home prices began cooling more quickly.

In December and January, however, mortgage rates began pulling back, and homebuyers were quick to take advantage. Closed sales of existing homes in February, which represented contracts signed in December and January, shot a remarkable 14.5% higher, according to the National Association of Realtors.

“Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” Lawrence Yun, NAR’s chief economist, said in the February sales release.

As with all real estate, however, the price dynamics differ depending on location. Miami continues to see the largest price gains, along with more affordable markets in the Midwest, like Cincinnati, Columbus, Ohio, and Cleveland, according to Black Knight. Meanwhile, prices are still falling in some of the markets which saw the greatest price inflation over the last several years. Those include Austin, Texas, Las Vegas, Salt Lake City, Seattle and San Francisco.

While mortgage rates were the driving factor for the price turnaround nationally, tight supply is adding to the upward pressure, especially with new spring demand from buyers.

“The unfortunate reality is that the scarce supply of inventory that’s the source of so much market gridlock isn’t getting any better,” said Andy Walden, Black Knight’s vice president of enterprise research strategy, in the release.

The number of homes available for sale fell in February for the fifth straight month to the lowest level since May of last year, according to Black Knight. New listings were 27% lower than their pre-Covid pandemic levels.

“While some price increases – most notably in Miami, which saw the largest of the month – can be chalked up to people moving to the area, we’re seeing stronger price gains more generally in those areas with better affordability and larger inventory deficits,” Walden added.

Mortgage rates began rising again in February and then fell back slightly in March due to market fears over the U.S. banking system, amid several bank collapses.

Demand for homes, however, appears not to have been swayed by the crisis, with real estate agents anecdotally still reporting busy open houses. Black Knight is still predicting prices to move lower again throughout the rest of this year, but if supply continues to drop, keeping the competition strong, prices may not have far to fall."

MY COMMENT

LOCAL, local, local....is the key for real property. if I was a buyer I would be focusing on the best neighborhood with the best schools....for what I could afford. This is what will drive gains going forward.

Here in my local area.......we are seeing a FROZEN market over $1MILLION.....buyers are not buying and owners are not listing....prices are just siting and not moving. Below that the market is fairly active with sellers but very little inventory.

 

I find the McDonalds event that is going on right now very strange. They closed their corporate offices and told everyone to work from home while awaiting news of who would be laid-off in their corporate restructuring.

It is like they dont want to face their employees in person when they tell them they are not going to have a job. They are going to advise everyone by email or text or remote communication. No doubt many of these people that end up not having a job are going to be instantly locked out of all corporate systems and probably the physical offices.

I dont think I have ever seen a company do a lay-off in this fashion before. From reading the articles that are out there on this topic......and reading between the lines....it is obvious to me that many of these jobs are gong to be....OUTSOURCED.

McDonald’s closes corporate offices as workers await layoffs

https://www.cnbc.com/2023/04/03/mcdonalds-closes-corporate-offices-as-workers-await-layoffs.html

 

I still find the above McDonalds news extremely strange.

"The company reportedly sent a mail to its US employees last week to start working from home from Monday to Wednesday. McDonald's took the decision so that it can deliver news about the layoffs virtually.
Employees have also been asked to cancel all in-person meetings scheduled this week."

https://www.connectedtoindia.com/mc...om-home-as-layoffs-planned-reports-10746.html

What a BIZARRE way to do firings.....close your entire corporate offices and tell everyone to stay home and wait for a virtual message.

Are they afraid of their corporate employees? Is it going to be such a bloodbath that they dont want people gathering together?

EXTREMELY STRANGE stuff.

I saw this in one article:

"The number of corporate employees McDonald's Corp plans to lay off this week will tally in the "hundreds," a source familiar with the burger chain's thinking said on Monday, as the company moves forward with a previously announced restructuring.

The fast-food company is closing its offices "out of respect," and to "provide dignity, confidentiality, and comfort to our colleagues," said the source, who was not authorized to speak to the media."

ALSO extremely strange corporate speak.

 

I was looking at my personal accounts today. I have a "small" account (under $1Million at this moment, it was over that before 2022) that was started to hold my 1/2 share of my mom's estate.......and my "big" account that I have had for much longer.

BOTH accounts contain exactly the same holdings. The "small" account was started less than ten years ago. The "big" account was started decades ago. The small account is now the balance of my mom's estate plus gains.....after the purchase of my annuities for $1.8MILLION out of the funds in that account.

In both accounts capital gains and dividends are reinvested in the stock or fund that generated them.

I noticed one difference between the two accounts:

1. In the small account the percentage to the total that is the "stocks" is 58.44%. So the two funds in that account are 41.56%.

2. In the big account the percentage of the total that is the "stocks" is 62.29%. So the two funds in that account are 37.71%.

I was surprised at first by the difference.....but.....thinking about it, this reflects the greater gains over many decades in the individual stocks in the "big" account. I guess that is a good thing since the "small" account shows that my stock picks have been outperforming the SP500 for the time period of less than ten years.....and....the same stock picks in the "big" account have been outperforming the SP500 over the much longer term by more.

All in all I "guess" this shows that I have done a good job on my stock picks over the shorter and longer terms....considering that initially both accounts started about 50/50 between the stocks and the funds.

I use the "small" account for the data in this thread since it never has any additions or withdrawals and is therefore "cleaner". The "big" account has had many additions and withdrawals over its lifetime. When I looked there was a performance difference for today.....one was at (-45%) the other at (-46%).