The Long Term Investor

That film is GREAT. Acting, story, editing, etc, etc, ALL very nicely done. Very professional.

 

Thanks.....Emmett. It is nice to know something about posters.......outside of investing........ once in a while.

 

OK......another week about to go........in the can. As I sit here today......with this FANTASTIC summer rally going on for the past weeks.......I WONDER how many people are STILL siting and having issues with reinvesting in stocks and funds. I am sure there are a lot. I remember the last investing CRISIS........2008/2009......and the many people that I saw still sitting in cash two, three, four, years later waiting for that MYTHICAL........big drop......in prices to get back into the markets.

HERE is another PIECE OF THE PUZZLE that is the economy at the moment:

U.S. consumer spending rises solidly; income rebounds

https://www.reuters.com/article/us-...g-rises-solidly-income-rebounds-idUSKBN25O1TQ

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

"WASHINGTON (Reuters) - U.S. consumer spending increased more than expected in July, strengthening expectations for a sharp rebound in economic growth in the third quarter, though momentum is likely to ebb as the COVID-19 pandemic lingers and fiscal stimulus dries up.

The report from the Commerce Department on Friday also showed a rise in personal income after two straight monthly declines, while monthly inflation pushed higher. The Federal Reserve on Thursday rolled out a sweeping rewrite of its mandate, putting new weight on the U.S. labor market and less on worries about too-high inflation.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 1.9% last month, after jumping 6.2% in June. Economists polled by Reuters had forecast consumer spending gaining 1.5% in July.

Consumers boosted spending on goods like new motor vehicles. Spending on goods has rebounded above pre-pandemic levels. They also lifted spending on healthcare, dining out and on hotel and motel accommodation. Still, outlays on services are below February levels as consumers remain wary of exposure to the virus.

That is a bad omen for the services-based economy, which slipped into recession in February. Though new COVID-19 infections have subsided after a broad resurgence through the summer, many hot spots remain, especially at college campuses that have reopened for in-person learning.

The economy suffered its deepest contraction in at least 73 years in the second quarter, with consumer spending at the forefront of the decline in gross domestic product.

While economists are anticipating a sharp rebound in GDP in the third quarter, led by consumer spending, they are cutting estimates for the fourth quarter.

RETAIL INVENTORIES REBOUND
Prospects for third-quarter GDP growth were boosted by another report from the Commerce Department on Friday showing a rebound in retail inventories in July. That could offset a potential drag from rising imports, which led to a widening in the goods trade deficit last month.

U.S. stocks were trading higher as the prospect of super low interest rates for a prolonged period spurred risk appetite. The dollar fell against a basket of currencies. U.S. Treasury prices rose.

Americans in low-wage jobs have borne the brunt of the economic downturn. A $600 weekly unemployment supplement from the government expired on July 31. Though President Donald Trump extended the supplement, the payout was cut to $300 per week and funding for the program is expected to be depleted by September.

A few states are offering the extra unemployment benefit. Economists estimate the loss of the $600 could cut $50 billion from retail sales in August. At least 27 million people are on unemployment benefits.

Last month, income rose 0.4% amid an increase in wages as more businesses reopened, offsetting a decrease in government transfer payments. Income fell 1.0% in June. Wages gained 1.3% after increasing 2.2% in June.

With spending heavily tilted towards goods, monthly inflation increased further in July. The personal consumption expenditures (PCE) price index rose 0.3% after surging 0.5% in June. In the 12 months through July the PCE price index increased 1.0% after gaining 0.9% in June.

Prices excluding the volatile food and energy components rose 0.3%, matching June’s advance. In the 12 months through July, the so-called core PCE price index climbed 1.3% after increasing 1.1% in June. The core PCE index is the preferred inflation measure for the Fed’s 2% target, which is now a flexible average.

MY COMMENT

EVERYTHING is coming in nicely in the general economic data. It is AMAZING......considering....that we shut down the entire economy just six months ago. We are on the edge of a SUSTAINED recovery........AND......multi year BULL MARKET for investors. HISTORIC confirmation of the ACADEMIC RESEARCH that totally supports long term investing versus market timing and trading.

AS USUAL.......the "economists"........somehow......miss the figures to the negative side of things. MORONS.

BUT.....ALL the above is IGNORING the HUGE ELEPHANT in the room........the election. NOT MUCH I will or can say about that topic......EXCEPT.......voters will get the REALITY they deserve.

 

There is ANOTHER BOOM going on right now. At least.........in SOME parts of the country........REAL ESTATE........that is, residential real estate. Of course, this is more local. Our area is BOOMING as is the MAJORITY of Texas.

Our area has 3000 homes. At the moment.......and.......for the past 1.5 years, we have been in a sellers market. At the moment......out of 3000 homes.......there are 11 homes for sale. We DOWNSIZED from 5000 square feet with five bedrooms and six bathrooms about 14 months ago. We went down to about 3600 Sq ft.

At the time we bought, the house was "coming soon". I crunched ALL the neighborhood comps and using........HIGH.........figures calculated the MAXIMUM value of the house at $730,000. Since we REALLY wanted this house we offered $800,000. WE KNEW we were GROSSLY OVERPAYING. We were the......ONLY......offer. Of course,.....the house was NEVER oficially on the market. I figured it would take about 2 to 2.5 years for the value of the house to reach what we paid.

NOW about 14 months later, the house down the street with the same footprint, just sold for $825,000. So the value of this home has INCREASED by about $100,000 in just over a year.

One of my kids just sold their house in the same neighborhood. They bought........six years ago........for $449,000. SIX YEARS LATER.......they sold for $655,000........$55,000 over list price with six offers in ONE DAY. A $206,000........46% increase in 6 years.

This is CRAZY.......yet there is no end in sight. We are seeing buyers from EVERYWHERE in the country and the world. I am AMAZED at the number of younger families that have the ability to afford these homes. There is a LOT of money........OUT THERE......right now.

THANK GOD our taxes are FROZEN. (as seniors)

For those curious.......if our taxes were NOT frozen......they would be about $21,000 per year. With our TAX FREEZE carried over from our old house.......we pay about $12,500 per year.

 

MY.....kind of week this week. Another.....positive.......week in the bag. I got some green today.......BUT......lost out to the SP500 by .12%. BUMMER.

For the week the SP500 was up by a WHOOPING 3.265%

SP500 year to date +8.58%
DOW year to date +0.40%

VERY NICE to see that positive return on the DOW for the year to date. Dow is NOW ONLY 898 points away from the ALL TIME HIGH. ONLY...........3.13%. AMAZING. The POWER of investing in stocks and funds for the long term.

 

I do agree with the concept of this little article. I.......STRONGLY......believe that too many people are investing based on generalities and general market and economic data:

The Danger of Investing on the Big Picture

https://www.morningstar.com/articles/999853/the-danger-of-investing-on-the-big-picture

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

"Satan's Apple
Investing by the broad view is alluring. When performed in hindsight, it’s inevitably profitable, and requires far less work than sweating through the details.

Navigating the 1990s? Be aggressive. Productivity gains from technology advances plus subsiding inflation will combine to create a great bull market. Beginning the New Millennium? Retreat. When an index’s price/earnings ratio hits 80, as did that of the NASDAQ 100, nothing good will happen.

Sadly, anticipating the future is more easily said than done. What’s more, because stock prices reflect consensus beliefs, it’s not enough to see what others perceive. Entering the 1990s, U.S. equity investors knew that inflation had been tamed and that technology was rapidly improving. However, profiting from that knowledge required realizing that events would be even better than expected.

Recognizing this difficulty, I had never invested on the big picture. Perhaps that was because my introduction to the financial markets came in late 1987, when dire predictions of impending doom, uttered after Black Monday’s crash, proved wholly false. The economy chugged along, with equity prices gradually recovering their lost ground. The pundits had failed. Better to emulate those who never claimed to possess such understanding, such as Fidelity Magellan’s (FMAGX) Peter Lynch, who would later write, “If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes.”

(Which, by the way, is a peculiar quote. If you spend 13 minutes analyzing macroeconomic data, fine. However, if you spend 14 minutes on the task, then you have wasted 10 minutes, which means that the sensible limit is 4 minutes, rather than the original 13 minutes. But geniuses are often inscrutable.)

Taking a Bite
This March, I broke my long fast. The stock market had already plummeted, but I believed that it had further to go, because the economic consensus appeared to be overly optimistic. For example, on March 16, the UCLA Anderson School of Business forecast called for a 6.5% second-quarter drop in U.S. gross domestic product, with a resumption of fully normal business activity by the fourth quarter. That same month, Oxford Economics (a private firm, not the university department) published a “downside scenario” of a 2.5% GDP decline for calendar year 2020.

Such outcomes struck me as utopian. Surely the economic damage caused by the coronavirus pandemic could not be so easily contained. If the U.S. imposed drastic measures, the second quarter’s GDP slide would be far worse than 6.5%. And if the government took a gentler approach, then the coronavirus would linger, thereby harming the economy for the foreseeable future. Either way, those GDP projections could not be met.

For the first time in my investment life, I possessed conviction. I felt, strongly, that I recognized better than other observers the economic problems that COVID-19 would inflict upon the United States. These struggles, presumably, would further depress equity prices. I resisted the drastic step of selling stocks, but I did spend 2% of my portfolio on stock-market puts. From my perspective, I had become an honorary member of “The Big Short,” while looking less silly than did Brad Pitt.

Right but Wrong
My economic intuition was correct. The second quarter’s GDP decrease was a whopping 33%, the largest U.S. quarterly decline ever recorded. The calendar year is of course not yet completed, but when it finishes, its results will also trail expectations. For example, the recently published “upside case” for this year’s GDP from economics researcher The Conference Board is worse than that of UCLA Anderson’s previous “downside scenario.”

None of which benefited me in the least. The stock market immediately and (from the perspective of three-month options) permanently reversed course within a few days of my transaction, leading my puts to expire worthless on June 30. Easy come, easy go. Or at least, easy go.

The problem was, my thesis was only half correct. My skepticism about the length and depth of COVID-19’s effects was warranted. What I had missed, however, was that unlike in 2008, the contagion would not spread. When this year’s panic arrived, the banking system was well capitalized; the Federal Reserve immediately instituted strong countermeasures; and Congress promptly passed a stimulus bill. These strengths convinced equity investors to overlook the current bad news.

Those items were not impossible to foresee. Had I thought harder and longer, I could potentially have anticipated their effects. When I made my trade, Morningstar’s banking analyst, Eric Compton, had already noted that banks had addressed their previous deficiencies. Predicting the government’s response would have been trickier, but I could have considered that policymakers would have been desperate not to repeat 2008’s systemic failures.

Practical Difficulties
These items, however, are clear only in hindsight. At the time, it was very tough to perceive that of all the factors that might affect the next few months’ equity prices--1) COVID-19’s spread; 2) the pandemic’s near-term economic effects; 3) the banking industry’s health; 4) Congressional acts; and 5) the Federal Reserve’s actions--those five would prove to be the most important. Nor was it easy to realize that the latter three items would dominate the first two.

Even that discussion oversimplifies the analysis, because it overlooks global issues. No matter how the U.S. had reacted, if (say) Western Europe’s bourses had remained at their March levels, American equities would be trading well below today's prices. One tends to talk of the U.S. stock market in isolation, to streamline the research, but that is not how equity prices behave.

Once burned, twice shy. I won’t invest on the big picture again--at least not until the memory of this year’s debacle fades.

MY COMMENT

I strongly PREFER to invest according to the MICRO PICTURE. In other words.........according to what I expect from a particular......specific.....business. Or.......from a particular specific fund.........a basket of businesses. The LAST THING I care about is the view of a bunch of market........PUNDITS.

 

I STRONGLY agree with this little article. BUT.....if it turns out to be wrong......as a long term investor......It will be right EVENTUALLY:

This Market Rally Has Legs, Six Strategists Say. Here’s Proof

https://finance.yahoo.com/news/market-rally-legs-six-strategists-110001442.html

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

"When the stock market started to revive from the depths of the March lows, the killjoys were ready. It can’t last -- just look at the state of the economy, they said. It’s going to crash again.

That message was repeated over and over even as the S&P 500 advanced more than 50% and added $10 trillion in value. Since surpassing its pre-Covid high last week, the index has notched records more than a half-dozen times.

The market’s relentless run has prompted many analysts to check what’s under the hood. Some now see evidence to justify further gains, citing everything from the Federal Reserve’s new policy goals to sidelined piles of cash that are ready to be deployed.

“I can’t see what’s going to change people’s perspective on why we should stop buying,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab & Co. “If we continue to buy and we have a few more pullbacks, which I think is likely, people will just continue to jump in and buy those dips.”

In the wake of the S&P 500’s surge, a number of strategists have raised their forecast for where the index will end the year. Those at Goldman Sachs Group and RBC Capital Markets did so earlier this summer. On Friday, Brian Belski, chief investment strategist at BMO Capital Markets, reinstated his year-end S&P 500 target of 3,650. That represents a roughly 4% advance from current levels.

Pointing to the resourcefulness of American companies and society’s ability to pivot, Belski wrote in a note that “U.S. stocks have exhibited an epic price recovery that not only is unprecedented but tests most major academic and common-sense assumptions.”

Many also cite the Fed’s interventions. Shawn Snyder, head of investment strategy at Citi Personal Wealth Management, says it seems unlikely the central bank would allow a large decline in stocks to happen.

“When investors believe that, it gives them excess confidence and they’re willing to take on more risk and buy stocks even though valuations are high,” he said in an interview. “There are several bears that have thrown in the towel.”

Rule of 72

To Keith Lerner at SunTrust Advisory Services, the move higher over the past few months has created a stretched market, but the buying pressure is reminiscent of what’s typically seen during the first stage of a bull market. Record prices shouldn’t be viewed as a concern, as history shows stocks tend to gain an additional 9.2% over the 12 months following a record high. And he said that an important transition is underway -- earnings appear to again be a major contributor to the upward move.

Lerner, who is SunTrust’s chief market strategist, says valuations might stay elevated given the lack of other attractive options to put money to work. He cites the Rule of 72, used to calculate how long it will take for an investment to double given a fixed annual rate of return. (Divide 72 by the assumed rate of return to estimate how many years doubling might take). Using a 5% annualized return, it takes about 14 years for equity investors to double their money. It takes more than 100 years for a 10-year Treasury investment to do the same and 900 years for cash.

“The weight of the evidence in our work still supports a positive longer-term market outlook,” Lerner wrote.

Negative real rates -- which take inflation into account -- make stocks, as well as certain other hard assets like homes, “particularly attractive” at a time when retail cash in money market funds is hovering near record levels, according to Evercore ISI strategist Dennis DeBusschere. Some of that money could find its way toward equities, he said.

Victoria Fernandez, chief market strategist for Crossmark Global Investments, says she wouldn’t be surprised to see a pullback before the end of the year, but overall, she expects the market to trend higher. In her view, breadth will strengthen, with sectors including consumer staples and financials joining the rally. Any possible positive news on Covid-19 will support stocks, and the Federal Reserve is extremely stimulative.

“You’ve got these really low rates,” Fernandez said. “That’s going to help drive the market.”

MY COMMENT

Pretty basic stuff above......but I do agree. I am SURPRISED that NO ONE in the article seems to mention that the PRIMARY driver of the BULL MARKET will be the recovery of the economy, jobs, and life to NORMAL as we continue to reopen from the INSANE shut down of the entire economy........on a voluntary basis. For the most part.........the reopening is in its INFANCY. I believe there is GREAT POTENTIAL for a run-away recovery and a runaway economy over the next 1-2 years. (I do not mean that in a bad way.)

In addition........we are ONLY a month or two away from having one or more covid vaccines. My........non-medical opinion is.........that the vaccines will be EXTREMELY effective. Another........HUGE......kick starter for the continuation of the BULL MARKET.

As USUAL........the wet blanket........covering and smothering all of this is the ELECTION.

 

I have NOT posted much about MILLENIALS for a while now. Here is a relevant story......even though it does not mention them:

More sellers list homes, but eager buyers snap up inventory

https://www.foxbusiness.com/real-estate/more-sellers-list-homes-but-eager-buyers-snap-up-inventory

Looks like...........GASP.......how can this be true........all the MEDIA BS about them being different.......not wanting to buy homes, just being interested in "experiences", etc, etc, etc.......turns out to just be TOTAL BS. The Millennial buyers are FLOODING into home ownership. Their generation is going through.......EXACTLY.......the SAME phases as every young generation before them. They are now moving into the suburbs in droves as they seek a nice environment with good schools to raise a family. They have also discovered stock and fund investing.

HERE is an EASY prediction to make........ALL.......yes.......ALL......the self absorbed MEDIA BS about how different things are for this generation......in hindsight........will turn out to be TOTAL BULL SH#T.

This is......yet again.....MORE good news for the future of investing In AMERICAN BUSINESSES and long term investing.

 

andyvds

Sounds like a plan. See how it goes. If good......fine. If not....move on to something else.

GE......now there is a VERY SAD story of EXTREMELY poor management and a board that allowed it to happen. Used to be a GREAT American ICONIC company. A holding in EVERY portfolio. Even the greatest company........can become obsolete OR be destroyed.