The Long Term Investor

HERE is the performance for the mutual funds in my portfolio for 2018. The SP500 Index Fund return is from the Vanguard Sp500 Index Fund, VFINX. The BETTER return for this fund, compared to the raw average return for the SP500 is I ASSUME the result of the dividends.

VFINX, SP500 Index Fund -4.52%
Fidelity Contra Fund -2.13%
Dodge & Cox Stock Fund -7.07%

MY COMMENT:

About what I would expect with the general turmoil in the markets. Nice year for the Fidelity Contra Fund, significantly beating the SP 500. Dodge & Cox performance is also in the expected range considering that it is a Value Fund.

 

HERE is the stock portion of my PORTFOLIO MODEL performance for 2018. KEEP IN MIND that the LONG TERM performance figure represents many many years and many many different mixes of stocks over that time in many many different market situations.

Portfolio Model stock performance 2018 -7.4%
Portfolio Model LONG TERM performance (annual) +15.06%

The 2018 performance reflects the BIG correction of the last three months of the year and the fact that my stock holdings are moderate aggressive to aggressive in nature. ONWARD and UPWARD.......

 

The OPEN today was just plain STUPID. Sometimes I think I am now living in the movie IDIOCRACY. The markets drop like a rock at the open due to economic weakness in the Chinese economy. GIVE ME A BREAK, I CHEER this news as should everyone that is invested in the AMERICAN economy. The worse the better as to China. The weaker their economy the sooner they will break and come crawling to the trade table. As China does worse and worse the better we will do in any new trade deal with them. The worse they do the more leverage we have with them. Sometimes I think our economists, financial news media (there is no doubt about the general media) and market experts and media personalities have been taken over by the IDIOCY of SLOGANISM......"diversity is our strength"..."we are the world"...."we are stronger when we all work together"...."Kumbiyah, Kimbiyah"......."cookies and milk and s'mores for everyone"....etc, etc, etc.

NO, there are no participation trophies in investing or business. We ARE NOT the world. That is why I ONLY invest in AMERICAN companies. Yes, I prefer companies that dominate around the world in their products and market. AND, other countries doing well is fine with me. BUT, when it comes to clear trade rivals or in the case of China, outright trade enemies, and brutal dictatorships, we should pursue a total policy of self interest. We are in an economic WAR with China, and you can ignore it if you wish and pretend it is not happening, but it will end up the same way all wars end up when one side refuses to realize that they are in a war.......VERY BADLY. We need to HAMMER China in this trade negotiation to the fullest extent, just as they will try to do to us. Our markets and investors should be standing up and CHEERING this latest news of business weakness out of China. The DOW should have been UP by 500 points or more at the open. LOOKS LIKE some sanity has come into the general markets in the last half hour or so. BUT, I dont try to understand the CRAZY short term actions of the general markets since more often than not over the LONG TERM it is meaningless and more often than not just plain WRONG.

The BOTTOM LINE, business and economic weakness in China is very positive for us and will lead to a quicker trade deal, on better terms to our country and our businesses, with very positive returns going forward for investors. AND......NO......I dont care if it takes another three, six or nine months to get to a trade deal with China. The deal WILL get done and anyone that has engaged in negotiation over any sort of BIG situation knows that it just takes time and sometimes you have to just let the situation "age" and "linger" to get to the best deal.

 

I was thinking about my PORTFOLIO MODEL (see last page of posts) last night. Over the past four plus decades I have owned many many BIG names in the AMERICAN business world. Companies like PG, MO, AMGN, SBUX, CSCO, MSFT, CL, COP, XOM, GE, IBM, PM, KO, PEP, MDLZ, INTC, SJM, KHC, MSFT. etc, etc, etc. I hold them for the LONG TERM and have made very good money on many of them. Of course what all these have in common is I no longer own them. As a LONG TERM INVESTOR, I will hold a stock for as long as possible, but when some change in business model or management, or financials happens, I let it go and sell.

There are some stocks in my current portfolio that I have held for a very long time, over a decade, even over a couple of decades. They are COSTCO, HOME DEPOT, JOHNSON & JOHNSON, 3M, and NIKE. On the mutual fund side of the portfolio, I have held the Vanguard SP500 Index Fund over the VERY long term as well as the Fidelity Contra Fund and the Dodge & Cox Stock Fund.

Over the past 40 plus years of LONG TERM INVESTING other funds have come and gone, usually due to management change which than results in sub par performance. Example Fidelity Magellan Fund, which I held for many many years in its GLORY DAYS.

EDIT: LOOKING BACK, my entire investing lifetime my bias has been toward the consumer staple, consumer durable, or just plain everyday consumer companies. My investing BIAS has always been BIG CAP, DOMINANT, ICONIC PRODUCT, WORLD WIDE MARKET, GOOD MANAGEMENT, AMERICAN, companies.

My current portfolio model continues in that style since I see companies such as AMAZON, GOOGLE, APPLE, etc, etc, as the modern equivalent of the old style consumer companies. I may be pushing 70 but I try to keep up with the times in my portfolio without chasing the current media and investing darling, fad, company of the year.

 

I would be interested, as would any readers of this thread , as to YOUR 2018 investing results. I have no issue with posting my real results on a message board like this one. If YOU are inclined feel free to post your 2018 results and YOUR summary of the good and the bad of the year for you. ALSO, always interested in investing style and portfolio make up of any other sort of investor that is inclined to post that information. GOOD LUCK IN THE NEW YEAR........LETS MAKE SOME MONEY.

 

Well EXHAUSTED my IRA today when I transferred my last year of "living" money to my operating account at Schwab that holds my annual funds. Perfect timing, since this year, 2019, my income annuities kick in and start paying monthly in August. As a self employed person for my entire work life, I knew from the start that I would have to fund my own retirement. So, I socked away the money into an IRA and later a Keogh Plan. I started my IRA the first year they were available. I would usually do the MAX every year and than invested those funds 100% in individual stocks and mutual funds. Later as I retired early, I tried to keep about 3-5 years in cash or cash equivalent since I could NOT take stock market risk with short term "living" money. My plan was to keep about five years in cash at any one time, but depending on the market situation I got as low as three years once in a while. I would try to replenish my cash HOARD once in a while when the market hit new highs. I was lucky to NEVER get into a situation where I had to sell anything at a market low or even a market middle. Living on my own resources for the past 21 years (I retired at age 49) showed me that MOST PEOPLE are going to severely underestimate how quickly funds can be depleted if you are in a bad market situation and having to take out a big chunk of money to live on each year.

My plan was to hopefully see a time when the 30 year treasury got up to a 6% or higher yield and lock in at least $135,000 in annual interest to live on for the LONG TERM along with my Social Security which I anticipated at about $40,000 per year for my wife and I. It became apparent about five years ago that the 30 year treasury was NOT going to recover to those levels any time soon after watching it closely from the time I retired. So, at that point I put $1.8 MIL into six income annuities that were deferred for five years. Those payments of $135,000 per year will start this August on a monthly basis. So, I have basically bought myself and my wife a lifetime pension that will stay in place for as long as either of us is alive.

It was my choice to exhaust my IRA first, since in my opinion, most people underestimate the impact of taxes during retirement and I wanted to reduce taxable income retirement sources first. My tax obligation will be reduced by $10,000 to $15,000 per year once I am fully on the annuity income since a big portion of the annual payout will be return of principle and not taxed as income.

As a result of this guaranteed income, my stock market funds, which are still significant, will be able to continue to be fully invested for the remainder of my life. I will NOT need to use ANY of those funds. AND, since those funds are not needed my tolerance for risk will remain high as usual. LOVE it when a plan comes together, especially a 40+ year plan.

 

WOW.....looks like the general markets managed to close positive in spite of the China and other media and market maven negativity. Closed UP 18.78 on the DOW. This is getting to be somewhat of a regular thing. NASDAQ up very nicely at +0.46%, SP500 up .13%.

In my simple opinion the action of the last five or six trading days shows definite strength and ability to recover coming back into the markets. A GOOD SIGN, but no doubt the market action will remain erratic over the short term as usual.

 

THE GOOD, THE BAD, and THE UGLY....

THE GOOD:

"ADP job growth of 271,000 soars past expectations"

https://www.foxbusiness.com/economy/adp-job-growth-of-271000-soars-past-expectations

"Private sector employment increased by 271,000 jobs in December, according to the ADP National Employment report Opens a New Window. , soaring past analyst expectations of 178,000 jobs.

The better-than-expected number can be attributed to good weather last month and strong holiday hiring, despite a tumultuous month for the markets, according to Moody’s chief economist Mark Zandi.

“Businesses continue to add aggressively to their payrolls despite the stock market slump and the trade war,” he said in a statement. “Favorable December weather also helped lift the job market. At the current pace of job growth, low unemployment will get even lower.”.............(article continues from here with more data and detail)

THE BAD:

"Wall Street rattled by Apple's sales warning"

https://www.reuters.com/article/us-...ed-by-apples-sales-warning-idUSKCN1OX0UW?il=0

"U.S. stocks were set to open sharply lower on Thursday after Apple Inc (AAPL.O) stunned investors with a rare sales warning that inflamed fears that the Sino-U.S. trade war and a slowing China economy would eat into corporate profits more than expected.".........(story continues from here)

THE UGLY:

The MARKET OPEN today and stocks in general. Negative news will ALWAYS trump positive news especially at the open. It will be interesting to see how the day progresses and where we actually close. A "NORMAL" day in the neighborhood.

 

SO.......over the past two days (so far) we have a move of about 1200 points, with a net result of about.......nothing.

HERE is the short term news of the day that is driving the markets today:

"Fed chair pushes stock rally even higher, Dow rises 600 points"

https://www.cnn.com/2019/01/04/investing/dow-stock-market-today/index.html

"The Dow rose more than 600 points after a strong jobs report Friday. The S&P 500 rose 2.7% and Nasdaq was up 3.2%.
At the American Economic Association conference in Atlanta Friday morning, Federal Reserve Chairman Jerome Powell reiterated the strengths of the economy but also signaled the Fed would remain flexible in its management of interest rates. The Fed has worked to gradually increase interest rates over the past couple years and signaled that it would hike rates two or three times next year.

Stocks also got a boost after China took steps to encourage bank lending and stimulate the country's flagging economy. The People's Bank of China announced it would slash the amount of money that banks are required to hold in reserve, the latest in a series of policy changes the government has taken to support growth.

China's slowing economy has been a prime factor in the extreme market volatility of the past several months.
Friday's jobs report signaled the US economy still has some strength left in it. Employers added 312,000 jobs in December, well more than economists had forecast. The unemployment rate rose to 3.9% because many people reentered the workforce. And paychecks rose a better-than-expected 3.2% from a year ago.

Still, investors had been holding out hopes that the Fed would slow its pace of rate hikes after several economic indicators have suggested the American economy would slow down this year. Stock futures had priced in a rate cut next year, even though the Fed did not signal any rate cuts in its last meeting.

Stocks tumbled Thursday. The Dow plunged 660 points, following Apple's (AAPL) warning that its sales would fall well short of guidance, largely because of China's economic slowdown. They fell even further after a weak manufacturing report suggested the trade war was harming both China and the United States' economy.
Stocks have been unusually volatile in recent weeks. The S&P 500 was up or down more than 1% nine times in December, compared to only eight times in all of 2017."

MY COMMENT

The ADVENTURE continues. YET, through it all the general economy and most economic indicators that have anything to do with business fundamentals and economic fundamentals are KICKING ASS. ALL of the market headwinds are basically the result of day to day MEDIA speculation and delusional opinion reporting being reported as NEWS along with program and AI trading. I continue to be invested based on actual REALITY. These are very dangerous investing times for those that let their politics drive their investing behavior or those that are inexperienced and allow the daily headlines to influence their LONG TERM investing behavior.

 

Thanks......Emmett......I......post some personal......stuff......like that......thinking that it might ......give......someone else......an......example......of what worked for......me and my thinking ......and perhaps it might make a difference in how someone else approaches life......and planing for their......future.

WENT CRAZY with the DOUBLE ellipsis...could...not...help...myself...must stop...now.

SERIOUSLY, with the elimination of most private pensions, how people prepare for and manage their own retirement is going to be a very BIG issue over the next decades. For us early baby boomers, many have some level of pension (I did not). But for those that are starting out in the work world or for those that are in their 20's, 30's, and even 40's and 50's, many are going to be on their own when it comes to funding retirement over and above social security. Very few non-government workers are going to have any sort of pension benefits. Even government workers and union workers are not in the clear since the law is quickly evolving to allow entities to bankrupt their way out of pension obligations. Even workers with pension benefits may end up seeing their benefits cut if their pension ends up in bankruptcy or being taken over by the Pension Benefit Guaranty Corporation. Bottom line, EVERYONE needs to build up as much in personal assets as they can to try to be safe and secure. With all the unfunded and underfunded plans there is much potential for a BIG MESS.

LONG AGO when I was in my 20's an older business man introduced me to the concept of "PAY YOURSELF FIRST" every month. Most people are so caught up in paying all their bills and other obligations, they never end up paying themselves. Another HUGE topic that I will simply touch on here is the issue of having some sort of "taxable" savings or brokerage account. I hate the idea of the 401K and IRA converting a lifetime of capital gains into fully taxable income at retirement. Of course, you should contribute to your 401K to the fullest to capture the match. Unfortunately, many people do NOT have the discipline to slowly save and fund a taxable account or to resist dipping into it all the time. DISCIPLINE...long term discipline is the key but for many people, perhaps the majority, is very difficult to practice. The so called, GIG ECONOMY, is going to be a killer for all that are labeled as Independent Contractors and as a result don't even have a company 401K or match. We see another aspect of this topic with all the big corporations that now use temp services and other forms of contract workers with no obligations to them since they are not actual "employees" of the place where they are physically working.

NICE close for the week today in the general markets. What a wild ride the last two days. Next week is a NEW BEGINNING.

 

I should mention....the income annuities mentioned in post 186 were purchased with "taxable account" money from a personal brokerage account. They were NOT purchased with tax deferred or retirement account money.

I should also mention that another very BIG part of my life and retirement plan has been to have a free and clear home for the past 30 years, especially now in retirement. In addition I carry NO debt, no loans, no car payment, nothing that is not paid off every month. That helps to make my retirement income very manageable. Although unfortunately, I do have some housing expense with my home's property taxes being around $17,000 per year.

 

Well not a HUGE house, about 5000 SQ FT. I live in Texas, a high property tax state. Fortunately the big part of my property taxes, for schools, is frozen due to being over 65. Otherwise it would be about $21,000 per year.

It was a HUGE help to have a free and clear house during much of my life as a business owner. My business overhead was about $25,000 per month. Having a paid off house and no house payment helped with cash flow at times and kept my personal living expenses reasonable. At that time we lived in a different state with lower property taxes, but in a bigger more expensive home for the last ten years before moving to Texas. Having a paid off home also allowed me to save and invest much more money in my retirement and taxable accounts. I know lots of people talk about saving more if they had a paid off home. We actually had the discipline to do so. I dont think there is any way I would have been able to retire early if we had $3000 to $4000 a month going toward a house payment.

Speaking of homes, we purchased our first home for $16,000 in 1974 through a HUD program. Payment was $160 per month. We were worried about the extra $10 per month compared to our rent which was $150 per month. Over the next 40 years we owned a total of 9 different homes. Some we made money others we just broke even and considered it a lateral move of our equity into the new home. We just bought what we liked. The first small home, a couple of Victorians, a small but expensive salt waterfront home on acreage, city, rural, a high end suburban neighborhood, acreage in ranch country, and back to suburbia. At least we never lost money on a home. After the second Victorian, all were free and clear from that point on.

 

We have had a good number of UP days over the past couple of weeks and somewhat of a market recovery, although we are STILL way off the market highs. HERE is a "little" article that contains some real truth as to the actions and ability of REGULAR investors to achieve the returns shown by the unmanaged averages. There are both positive and negative messages in this article. I suspect that it reflects the REALITY experienced by many as they try to follow all the media advice on investing over a significant period of time.

"Dow: The secrets of successful stock investing from veteran markets reporter"

https://www.usatoday.com/story/money/2019/01/07/dow-stock-market-lessons-bear-markets/2480874002/

(as usual the BOLD portions are my take on what is important in the article for the average investor)

"If anyone understands how bear markets and plunging stock prices can upend a sense of calm and financial well-being, it’s me.

I’ve spent the past 19 years at USA TODAY reporting and writing about the unpredictable Dow Jones Industrial Average’s good and bad days. And even though the Dow was rising and in a bull market for 15 of those years, the best lessons I learned about investing – and about myself and the way my brain and psyche react to violent market swings – came when stocks were going down.

Today is my last day writing about Wall Street at USA TODAY after voluntarily accepting an early retirement package from the newspaper’s parent, Gannett.

In my final column, I'll share what I’ve learned about the market and personal finance since my first day here.

In a two-decade run as a stock market reporter, “the market” has been my friend, but also an enemy.

The thousands of stocks that I have owned through mutual funds made me and my family a lot of money. Like millions of other Americans, I’m an individual investor with 401(k), IRA and 529 savings accounts whose fortunes rise and fall with the market. But the stock market has also periodically masqueraded as a thief, occasionally draining a sizable chunk of my hard-earned investment dollars from my account balances.

I both revere and fear the stock market. It’s a nature-like force whose movements are amplified by a mass herd mentality around the globe. The market, I’ve come to realize, is everyone, everywhere with a finger on the buy or sell button.

In good times, the market can make your financial dreams come true, like paying for college or saving enough to retire or amassing $1 million. But in bad times, it has the destructive power of a Category 5 hurricane that can test your faith in investing and make you second guess why you even invest in stocks. But I’ve learned that just as the sun reappears following the rain, winds and flooding from a big storm, so do the green arrows after a bad stretch on Wall Street.

I started on March 20, 2000, which turned out to be 10 days after the market top that signaled the end of the 1990s bull run and coming dot-com stock bust. The Nasdaq plunged nearly 4 percent on my first day.

I spent the next 19 months covering my first bear market and explaining to readers why stocks kept going down. Most of the blame was heaped on irrationally exuberant investors who had driven up fledgling and profit-starved internet stocks to sky-high valuations.

I survived that bear, which sliced the broad market’s value nearly in half. But the swoon left a lasting imprint on my psyche and taught me to respect the stock market like hockey players in the NHL who fear a lethal enforcer on the other team.

In some small way, I feel like my byline is part of Wall Street history.

And why not? I covered the two biggest market downturns since the Great Depression – the 2000-02 bear market following the internet stock implosion and the nearly 57 percent drubbing the market suffered in 2007-09 after the real estate bust and banking crisis ushered in the Great Recession.

My years covering the market haven’t been all doom and gloom, however. I chronicled the 2002-07 bull market that saw stock prices double after the dot-com bust and I have written extensively about the current bull – the longest in history – which began nearly 10 years ago in March 2009.

So what have I learned about investing covering the ups and downs of the stock market at USA TODAY?

Timing the market isn't easy, just as the pros say
Countless times in stories during periods of acute market distress I have relayed the following boilerplate message from Wall Street pros to Main Street investors: It is tough, if not impossible, to time the market. The best thing an investor can do is stay the course and stick to their long-term plan.

It’s true.

Why’s that? Nobody has a crystal ball to help them predict the future. And market warning signals, which are clearly visible only in retrospect, never seem to flash as brightly in real time.

I learned the hard way. I’ve never been able to time the stock market with any success. And, if I am totally honest, after screwing up once back in 2010, I never tried again.

My biggest mistake was getting out of the market in the early stages of the current bull market but not having a plan to get back in.

Here’s how I messed up.

On May 7, 2010, a day after the frightening “Flash Crash” sent the Dow spiraling down nearly 1,000 points in minutes for no apparent reason, I took the advice of a Wall Street strategist who said publicly that there’s no reason to feel bad or guilty about taking profits on a 70 percent gain, which was the size of the market gain at that time after the bear market ended in March 2009. So I moved roughly $78,000 invested in stocks in my 401(k) into cash.

The problem is I never moved the money back into the market, which turned out to be in the first year of what is now a nearly 10-year-old bull market.

The financial pain of being out of the market was sizable. On the day I went to cash, the Dow Jones Industrial Average closed at 10,380. On Oct. 3, 2018, the Dow notched a record high close of 26,828. So I missed out on a 158.5 percent gain, costing me $123,000 in lost upside.

The takeaway: Market pros are 100 percent right when they say timing the market requires two correct decisions: when to get out and when to get back in.

Invest using the “sleep-at-night” test
I totally get that investing in stocks and holding what you bought for a long, long time, like billionaire investor Warren Buffett does, is the best way to grow wealth and actually reduces your risk.

But if watching the Dow fall 500, 600, 800 or even 1,000 points in a single day becomes an everyday thing and causes you to fret about losing all your money, putting your emotional and physical health at risk, then you know those huge stock allocations Wall Street pros recommend just aren’t for you.

Forget what the asset allocation models cited by big mutual fund firms or your financial planner or a robo-adviser say you should do. Having close to 100 percent of your money in stocks isn’t for everyone. Because if you can’t handle wild price swings and you wake up in the middle of the night to check to see if stocks are selling off in Japan or if the Dow futures are down big or you fear tuning on CNBC at 9:30 a.m. when the New York Stock Exchange opens, it’s better to accept the way you are wired and play a more conservative investing game.

That’s what I did after the financial crisis. After witnessing that rout, it became clear to me that the key to surviving any severe market downturn is to be able to avoid getting “blown out.” That’s my phrase for losing so much money that it puts your retirement on hold or puts you in a major financial bind.

It’s true when market pros say the key to successful investing is to save, save, save and stay the course. But to stick to your long-range plan and not sell out at a market bottom, you need to marry your risk tolerance with the percentage of your money you have invested in stocks.

Because down markets get me down, I opted for a 50-50 portfolio for me and my wife. Fifty-fifty, as in 50 percent stocks and 50 percent cash and bonds. A money manager I recently met with flat out told me that I didn’t have enough in stocks. He could be right. But I don’t care.

My 50-50 portfolio does a few important things for me. It allows me to make money when the stock market is going up. But it also enables me to sleep better at night when stocks are going down.

More important, it keeps my losses measured in percentage terms in my overall portfolio from mushrooming to catastrophic levels. It also helps me better rationalize any paper losses I do suffer.

I use a simple rule-of-thumb calculation to both tally my losses and keep them in perspective. For example, since I have only half of my money invested in stocks, when the broad Standard & Poor's 500 stock index falls, say, 20 percent, my total portfolio only decreases in value by half that amount. For example, a 50-50 portfolio valued at $100,000 would only decline to $90,000 with my asset mix in a 20 percent market decline, versus a drop to $80,000 if I had 100 percent riding on stocks.

Losing less in a market downturn allows me to avoid all sorts of bad financial outcomes. And that’s a trade-off I am willing to take even though I might leave some money on the table by not going all-in when it comes to stocks.

Tame the voice – and voices – of doom
Beware the pundits.

Repeat.

Beware the pundits.

Especially the voices of doom. I’m talking about the market watchers that try to predict the market’s next move. Both doomsayers and perma-bulls can throw you off track, by either scaring the wits out of you or making you think stocks will go up forever.

The fact is that nobody – as Warren Buffett always says – really knows for sure what direction stocks will go in the short run.

The reason is simple: Things change. Every day the market is greeted with new information, new inventions, new data, new market calls, new tweets, and new, um, news. And changing information changes the narrative for the stock market in seconds.

It’s also important to tame the voice of doom that runs through your own head. Fend off fearful thoughts of the stock market going to zero, because that is a low probability event. Keeping that in mind might help you avoid selling out at a market low just as stocks are poised to rebound. While stocks did go down 86 percent from 1929 to 1932 during the Great Depression, it was a rare event. And it didn’t happen overnight.

At times, the best thing you can do if market gyrations are causing you emotional pain is to turn off the TV, tune out the market pundits and take a break from keeping track of the Dow’s every move.

The market, I have learned, is like a lasting friendship, with ups and downs along the way. Just like life itself."

MY COMMENT

Especially relevant information in this article. SIMPLE, yet excruciatingly relevant. I suspect that the writers experience mirrors that of many if not most investors. AND, this is a person with way more wall street exposure and experience than most people. We are NOW in a time period of EXTREME MEDIA and POLITICAL exaggeration and drama. Everything is EXTREME on all sides of the political spectrum. The average person that can NOT tune out all this CHAFF is going to be constantly whipsawed by the markets. Two things are critical to successful investing for the LONG TERM......first the ability to actually remain invested in the markets for the long term. Second....the ability to tune out all the irrelevant BS that bombards the investing public, much of it from economic IDIOTS masquerading as experts as to stock investing. WHY people think someone with a degree in ECONOMICS knows anything about investing is beyond me. There is NOTHING about an education in economics that gives someone any superior knowledge as to being a successful investor.

Since the first of the year we are now at day eight of the new year and the markets are as follows:

DOW year to date +1.28%
SP500 year to date +1.85%

 

IN MEMORIAM.....the end of an ERA.

"End of era? Sears poised to shutter as bid to save it fails"

https://www.foxbusiness.com/features/sears-could-be-finished-on-tuesday-unless-lampert-ups-his-bid

MY COMMENT

Move on, nothing to really see here. This company has been walking dead for a LONG TIME. A classic example of management malpractice over many many years. If they would have applied their catalog heritage and experience to the internet they would be AMAZON today. A total failure of vision, although a failure that applies to the majority of retailers.

REALLY nothing newsworthy about this event, as a shareholder of AMAZON and never having been a shareholder of SEARS it is only an event for me due to NOSTALGIA. As baby boomer kids, our family used the sears catalog in the 1950's as our Christmas source. Many, many, weeks before Christmas we would begin to scan the latest Sears catalog toy section to begin the process of narrowing down what we would ask Santa to bring us for Christmas. During many of my early childhood years we lived in Europe as a military family on various American bases. It was a time with NO television, only radio programs for entertainment. (late 1950's) The only television available was German and I dont remember anyone I knew having a TV in their military family housing. The SEARS catalog was our connection to American culture and products, other than the PX. It was an interesting experience as a kid, and in hindsight a very positive experience since very few American children of that era ever had any contact or life experience in another country or culture. There was still much damage from the war. We lived in a series of small German town military bases. The country was still classic early post war Germany with no impact of Americanization yet to speak of anywhere in Europe. The SEARS catalog was our lifeline to American culture back in the states. It was the height of the Cold War, and even us kids were issued dog tags. As kids we thought it was cool to have our own dog tags, but now I understand the reality of why they were issued. I still remember the mandatory evacuation education held in the base theater for the wives and children. We had our evacuation routes and emergency go-bag instructions in the event to a sudden Soviet invasion of Western Europe. The families would go one direction, to the West, and all the men would go the other direction to the East to slow things down to give us time to hopefully get out of Dodge. That was the plan in theory. We did not realize, as kids at the time, that it was basically a "sacrificial" plan. As kids, we had a great time riding our bikes and running all over the German villages where we lived. It was my introduction to things like GUMMY BEARS, a favorite of every American. TOO BAD, none of us recognized this as a KILLER product to import to the USA at the time. It was probably at least the late 1970's or later before the GUMMY BEAR swept into American culture and stores as an iconic product.

 

APOLOGIES in advance to all the Technicians, Chartists, and System Investors. But, I always say the hardest thing in investing is the ability to DO NOTHING. Humans CRAVE action, activity, and doing something........"just do something". The human brain craves systems and finding correlations and looking for connections, even if they do not really exist. We are hard wired to seek and crave logical order to events and things and the world around us. As a LONG TERM investor, I ONLY believe in FUNDAMENTALS and the various factors that impact and cause them. In my "personal" opinion everything else that people use in various types of "system" investing is hindsight justification. Investing "systems" have a natural tendency to grow, and expand, and grow, and expand as various rules need to be created to explain events and happenings that do not fit the "system" up to that point. This is my personal BIAS in what I post and believe about investing. Thus, this little article:

"Working Hard Is Bad For Investors"

https://danielsolin.com/working-hard-is-bad-for-investors/

(BOLD is my opinion)

"There’s no shortage of quotes extolling the virtue of hard work. The one I hear a lot is “the harder I work, the luckier I get.”

In most areas of human endeavor, hard work correlates positively with success. In investing, it doesn’t.


And that’s the problem.

Consultants work hard
Consultants to institutional investors work really hard. They generate huge fees based on their purported ability to beat a risk-adjusted benchmark. If their clients weren’t convinced of their expertise, they would simply purchase low management fee index funds and fire the consultants.

Academic studies demonstrate consultants add no value to the pension plans that retain them. After costs, the actively managed funds they recommend don’t beat the returns of comparable index funds.

It’s not because the consultants aren’t working hard enough.

The skill level of your broker
Your broker is also working hard to time the market, pick stocks and select outperforming actively managed mutual funds. It’s unlikely most brokers have the background and expertise of consultants to mega-billion dollar pension plans.

Is it realistic to expect them to succeed where consultants have failed?

The “work ethic” fallacy
Given the evidence on the poor performance of actively managed funds compared to index funds, you would think most investors would invest in index funds. The majority don’t.

This anomaly is confusing. It seems irrational. Could there be another reason for this behavior?

A recent study attempted to solve this anomaly.

It concludes investors are victims of the “conjunction fallacy.” Because hard work generally pays off in most areas of life, they believe the same must be true with investing.

This belief – that the harder you work on your investing, the better your returns will be – simply isn’t true in investing. The authors of the study conclude: But despite clear evidence, it may simply be too difficult for a substantial number of investors to believe that superior returns are available by doing nothing but investing in an index fund rather than investing with active managers.

Active fund managers exploit this fallacy by advertising their talent, resources, and hard work, reinforcing the myth that these traits lead to higher expected returns.

The study explains the survival of active management is based on “the work ethic fallacy”.

The authors propose something I’ve been advocating for years. Actively managed funds should be required to issue a warning to investors, like: Many active investment strategies underperform more inexpensive alternatives. Ask your broker for more information.

I have a better idea.

Limit your investments to low management fee index funds. Avoid brokers or advisors who recommend actively managed mutual funds, stock picking or market timing.

With investing, relaxing is a virtue.

MY Comment:

I always find it interesting that applying scientific research parameters to investing fails to validate market timing, or any of the other investing "systems" that people use. The academic research seems to routinely fail to validate any of this sort of investing behavior as successful. Of course, there is always the chance that those that are actually successful with this sort of investing are playing their cards close to the vest and do not participate in having their techniques exposed to the masses. And, I GUESS there are always outliers that are successful using these sorts of techniques. So, I DO NOT RULE OUT the chance that some of these techniques work, especially for skillful people. That is why to me the bottom line is......as usual.......if it works for you and over the long term produces superior results that beat the unmanaged averages.....JUST DO IT.

(not looking to argue what can NEVER be resolved, so I debated even doing this post)

 

HERE is a pretty good, but short and NOT in depth interview. Posting it for any that are interested to click on the link and read it. BOTTOM LINE, agree or disagree, just one opinion out of tens of thousands....

"What’s Ahead for the Stock Market in 2019"

http://knowledge.wharton.upenn.edu/article/jeremy-siegel-whats-ahead-for-the-markets/

 

For MORAL SUPPORT here is a take on the first 11 days of the new year. The OBVIOUS issue with this sort of article is that it only addresses a handful of trading days and therefore is just FLUFF. BUT, it is the sort of fluff that might being some sanity to the markets and investors that are captured by the DARK SIDE, the doom & gloom side of the recent markets. Being a SANE investor means being able to ride the markets through the good and bad if you want to achieve the LONG TERM averages total returns.

"The stock market just got off to its best start in 13 years"

https://www.marketwatch.com/story/t...-off-to-its-best-start-in-13-years-2019-01-10

(MY emphasis is in BOLD)

"Things are coming up roses in the stock market, lately.

The Dow Jones Industrial Average, S&P 500 index and Nasdaq Composite Index are off to their best starts to a year since 2006 after a powerful series of gains.

The Dow DJIA, -0.02% closed up 0.5% on Thursday, pushing its year-to-date gain to 2.89%, which would mark the best first seven days to a year since 2006, when stocks burst 3.04% higher over the same period. The S&P 500 index SPX, -0.01% rose 0.5% on the day and has returned 3.58% thus far this year, its best start since a 3.68% gain 13 years ago, while the Nasdaq Composite COMP, -0.21% booked a 0.4% gain, enough for a 5.3% year-to-date advance, representing its best seven-session to kick off a year since its 5.72% rise also in 2006.

A late-session rally helped to solidify Thursday’s gains, coming after investors digested comments from Federal Reserve Chairman Jerome Powell, who pronounced at the Economic Club in Washington on Thursday afternoon that the economy is in good health, while adding that the central bank would be cognizant of stresses to financial markets amid rate hikes. The comments were a reiteration of Powell’s remarks last week during a broad panel discussion of current and former Fed bosses that helped to placate anxious investors and reverse what was shaping up to be another dismal year.

Equity markets are emerging from a bruising 2018, which resulted in the worst declines for the three main U.S. benchmarks in about a decade. The year that was capped by the ugliest losses in the trading session immediately before Christmas on record, in a month typically associated with a seasonal uptrend in the market.

It isn’t clear if this year’s solid start bodes well or ill.

For one, January’s early convulsions had put the S&P 500 on pace for its worst start to a year in about two decades, perhaps driving home the point that the current market dynamic leaves investors vulnerable to whipsaw action.

On top of that, the solid gains achieved in 2006 were soon followed by a financial crisis for the ages that took hold in earnest in 2008.

But even a few declines might not translate to an unwind of what has been a remarkable bounce-back in equities. “Look, we’re up like 10% since the day before Christmas and there’s more overhead resistance than my SAT scores so yea, a few down sessions are inevitable,” wrote Michael Antonelli, managing director of institutional sales and trading at Robert W. Baird & Co., in a Thursday financial blog.

“If I had to guess what market prognosticators are expecting I’d lean towards ‘retest in the coming months’ over ‘that was the low’ but we’ll only know in hindsight and that’s what makes stock market investing so hard,” he wrote.

Markets aren’t without concerns. Retailer Macy’s M, +0.04% put in its worst daily decline in its history dating back to 1992, highlighting weakness in the consumer, the heart of any developed economy. Additionally, Powell’s comforting comments on Thursday also came with a proviso: that the Fed’s crisis-era balance sheet would be smaller. That statement may give some pause to buyers who have fretted that a further wind down of the central bank’s roughly $4.1 billion asset portfolio may result in tighter financial conditions and more stumbles lower for stocks.

A partial government shutdown, which on Saturday will mark the longest on record, also may also eat away at investor confidence."

MY COMMENT:

So far so good. AND, time will tell as usual. TODAY we ended the week with a basically unchanged day. But, the one thing I have learned over the years is once a year is over it is over. It is absolutely irrelevant to look back at a past investing year. ALL that counts is what happens moving forward. In other words......ONWARD AND UPWARD. I continue to be fully invested for the long term as usual.

For CONTEXT to the above little article we are at.......Dow year to date +2.87% and SP500 year to date +3.57%. Immediately violating my rule above about looking at the past, it is interesting that the SP500, as measured by the Vanguard SP500 Index Fund, ended last year, 11 days ago, with a total return of (-4.52%). With the recent gain of +3.57% for the first 11 days of 2019, we have now just about cancelled out the negative total return for 2018. Anyway, a NEW BEGINNING is always a nice thing.

Where we closed today we are now within about a 10% to 11% move to take us back to the all time high in the SP500 and the DOW. Will it happen, probably at some point this year. Primary factor will be the appearance, or lack of appearance, of some sort of BLACK SWAN event. Not a prediction, but I would not be surprised to see the markets back equal to the all time high by the end of April 2019, if not sooner. Of course, that is simply the big averages, many individual stocks have more to make up than 10%.