The Long Term Investor

Looks like a good day so far today....same sort of open as we have seen all week in terms of the averages.

As usual....time will tell. I got back late last night from a show. A quick check of my portfolio showed that yesterday I was in the red.....thank you tech holdings.....and got beat by the SP500 by 0.16%.

BUT...that is in the past....hindsight posting.....we have NOW moved on to a new day and a new opportunity to make some money.

 

WOW.....NVIDIA is up BIG today about $25 per share at the moment. COSTCO.....not so much....they are down...being punished for putting up great earnings numbers and for being a go-to place for people to shop during the pandemic. Actually they are a go-to place for people to shop REGARDLESS of the pandemic.

I dont see any particular news on NVIDIA today....so I assume this little gain is due to the upcoming stock split and the fact that earnings came in nicely and the way is now clear to the split. Seems a little early for SPLIT MANIA since it will not take place until July 21. BUT....I am WILLING to take the gain.

 

HERE....is an OBSCURE INDICATOR....for the general economy and for the explosive power of the re-opening:

Dining activity at pre-pandemic levels for first time: OpenTable CEO

https://finance.yahoo.com/news/dini...-for-first-time-open-table-ceo-154955840.html

"The online restaurant reservation site OpenTable.com finds pent-up demand for dining out is exploding across the country. CEO Debby Soo tells Yahoo Finance Live that May 25 was “the first day where we saw dining activity exceed pre-pandemic levels.”"

MY COMMENT

AND...keep in mind this is with half the country NOT being opened back up yet. I have noticed locally that restaurant usage is EXPLODING. We eat out every day. We are seeing lines and wait times at many of our normal places.....way beyond what was normal pre-pandemic. People are VERY eager to go out and get out. I am also seeing very few places locally....especially smaller places....that are requiring masks.

 

I was thinking the other day that in October it will be three years since I started this thread. THAT will actually be LONG TERM INVESTING. SO....anyone that is interested in long term investing will be able to go back to those posts and see how it all ACTUALLY worked out....IN REALITY....for ONE long term investor.

I would consider three years as the MINIMUM for......"long term". I would consider 5-7 years........and beyond, far beyond actually..... more of a NORMAL defined term for what I would call long term investing. BUT....we are approaching the time in this thread when it will be possible for someone to go back and see how things have evolved and worked out over the long term.....at least the minimum long term......3 years.

We have....certainly.....had some interesting and CRAZY times over the life of this thread for investors. AND...probably most of us.....have made some good money.

Markets continue to do nicely over the EXTREME short term......today.

I continue to be fully invested for the long term as usual. SAFE and SANE investing.

 

Bought crypto.......hell yes......I am probably up to about 1/30th of one bitcoin by now. I actually never look....although I will be doing my $100 for the month of June in just a few minutes when I do the bills. AND....I see that Zukodany is ALSO a crypto holder from the above.

I should have held my ONE bitcoin that I bought at about $2900. BUT I sold various parts of it between about $12,000 and $19,000....I think....that is my memory.

 

I was in the GREEN today.......by a very TINY amount....thanks to Nvidia being up by $30. And I beat the SP500 by .o6%. At least it was a WIN to end the week.

HERE is where we are at the end of another week.

DOW year to date +12.82%
DOW for the week +0.94%

SP500 year to date +11.93%
SP500 for the week +1.16%

NASDAQ 100 year to date +6.19%
NASDAQ 100 for the week +2.05%

NASDAQ year to date +6.68%
NASDAQ for the week +2.06%

RUSSELL year to date +14.89%
RUSSELL for the week +2.42%

A PERFECT week.....ALL of the averages were positive for the week and are NICELY positive for the year. this is the starting point.....the BASE....that we build on for the rest of the year going forward.

 

Yeah us bitcoin people have been hanging out in the alley drinking MD2020 and doing a "safety meeting". Unfortunately when I just checked my Coinbase account and made my June buy.....$100.....I saw that I ONLY had 1/56th of one Bitcoin. Damn.

My BIT of gold and silver that I own as a HOARD....is doing WAY BETTER than my little slice of a Bitcoin. BUT....I am NOT a metals investor either. It is another one of my little investing "LARKS" that I do......NOT an investment.

 

At least I am AVERAGING DOWN on my bitcoin.....way down...about 20%. OR....is it called trying to catch a falling knife?

ANYWAY.....it is just mad money.....I am NOT encouraging anyone to invest in crypto or Bitcoin.

Let me say....I am so glad to be able to hang out with you guys on here and talk money. AND......anyone else that is some sort of investor or interested in money......YOU.....are welcome to post here or ask questions or just seek support. Participation is ENCOURAGED. We are ALL in the same boat......investors on the BIG ROUGH OCEAN....that is the daily markets. My particular BIAS is......LONG TERM INVESTING.....yours might be something else. JOIN US.....if you wish.

 

WELL.....I see that you have really SUNK down into the DARK SIDE Emmett.....trading and Bitcoin....at the same time. A.......Menage a trois......with two DEVILS.

At least you are seeing the benefits of the stress free life.

 

Have a great three day weekend everyone. Dont do anything too CRAZY.

 

The DOW is having a.....rare.....year as the average of the year....so far. Plus...it just had its 125th birthday. But it is not a particularly relevant index....anymore.

125 Years Old and Still Broken
Despite its age and status, the Dow Jones Industrial Average is a flawed index.

https://www.fisherinvestments.com/en-us/marketminder/125-years-old-and-still-broken

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

"Happy birthday to the Dow Jones Industrial Average (DJIA), which was born 125 years ago today. Since that first trading day, it has risen 83,737.4%, which is a very large and meaningless number—and not just because it is backward-looking. Rather, because it is so poorly constructed that even with a 29-year head start on the S&P 500’s verified history, the S&P 500’s total return dwarfs it: 1,111,592.6%.[ii] Those figures are so vastly different for three simple reasons: Unlike the DJIA, the S&P 500 represents a broad swath of the US stock market, weights companies by size and includes reinvested dividends. The DJIA architects’ decision to use different methodology consigned it to a lifetime of being a broken, useless index for investors.

Now, we aren’t here to poke at Charles Dow and Edward Jones, who we reckon did the best they could when trying to create a way of measuring the overall market’s performance while having limited data and technology at their disposal. Back in the late-19th century, the non-financial segment of the US economy was mainly heavy industry and railroads, so creating two broad indexes—one for Industrials and one for Transports—more or less made sense. As did having a handful of companies in each, given the relative lack of publicly traded names. Weighting by price, not market capitalization, and excluding reinvested dividends also fit Messrs. Dow and Jones’ primary goal, which was giving people an easy way to see if the then-novel stock market was going up or down (which could then feature in The Wall Street Journal, where Dow was an editor). Share prices were visible and intuitive for the new-to-stock-investing masses to understand, so of course the creators just used an average of said prices. Using market cap instead would have required multiplication (share price times share count)—complexity!—as would factoring in dividends. Accurately gauging the overall value of Corporate America was just less important, in that situation, than tracking broad directionality.

But that was then, and we are at now, now. There are 3,463 companies in the Wilshire 5000, which includes every investible US-listed stock.[iii] That is … a lot more than 30, which is your first sign the DJIA has outlived its usefulness even as a broad indicator of what “the market” is doing. The price weighting, perhaps forgivable in 1896, is now bonkers. With a $364.51 share price as of yesterday’s close, Goldman Sachs is the second-largest DJIA component.[iv] Apple, which closed at $126.90, is in the middle of the pack. But Apple’s market capitalization, around $2.1 trillion, is about 17 times Goldman’s.[v] Which is an overall more meaningful statistic? Share price, which rests on investment bankers’ and corporate boards’ arbitrary decisions about how many shares to float? Or the overall value of a company? We think the latter, making it much more logical to weight by market cap. So whenever anyone asks us what “the market” did, we will look at the S&P 500 for the US and the MSCI World Index for global stocks. Or, if we want to get more nuanced and track US small cap, we will probably turn to the Russell 2000. Whatever your preference, all are big, broad and cap-weighted.

The DJIA is even less useful for measuring your own performance, which we have observed to be the great American investing pastime. The vast majority of investors like to track their account’s value and see how it compares to the broad market. It is a good way to hold yourself or your adviser, if you have one, accountable—and more accurate than comparing yourself to a friend, neighbor or arbitrarily chosen single stock. But the DJIA gets you nowhere in this endeavor. Your account value is not the sum of the price of every stock you own, divided by an arbitrary number. Rather, it is the sum of the value of each position you own: Stock price times number of shares, plus stock price times number of shares, lather, rinse, repeat. Your own personal market capitalization.

Then, too, a big part of stocks’ long-term returns stems from compound growth of reinvested dividends. If you invest faithfully for a few decades and plow your dividends back in, the excess compound growth they generate may also be a huge part of your returns. But the DJIA does worse than exclude this growth. When a company issues a dividend, its stock price falls by the amount of that dividend since the payment reduces the company’s value. That knocks price-weighted indexes. In other words, for the DJIA headlines commonly cite, dividends are a negative. There is a total return version of this index available, but few pay it any attention at all.

Lastly, we would be remiss if we didn’t point out that a good stock index should also be able to serve as a blueprint for portfolio construction. The DJIA doesn’t pass that test—not with just 30 companies and crazy sector weightings. If we turn the DJIA into a cap-weighted index, over half of it is Tech. The S&P 500, by contrast, is just a little more than one-fourth Tech (and the MSCI World has even less). Meanwhile, the DJIA has blind spots to Utilities and Real Estate and big underweights to most other sectors. (Exhibit 1) In our view, using the DJIA’s sector weightings as a guide for your own portfolio would probably leave you woefully undiversified.

Exhibit 1: Comparing the DJIA and S&P 500’s Sector Weightings


Source: FactSet, as of 5/26/2021. Based on sector weightings as of 5/25/2021.

So yes, here’s to the DJIA on its 125th birthday. Many happy returns![vi] But keep it where it belongs: on the shelf as an old relic, not a viable tool for investors today."

MY COMMENT

YES.......the DOW is my least favorite average. AND....I dont think many investors today give it much relevance. It is a good news item when it hits some milestone number....but...that is about it. It is way too narrow and with only 30 stocks and the mix of stocks is NOT a good PROXY for the USA economy today.

In addition as shown above how it treats dividends and being a simple average makes it HIGHLY inaccurate in terms of having value to an investor. It has been a long long time since I have heard any investor talk about having a DOW Index Fund in their portfolio.......or for that matter....using the dogs of the DOW strategy.

It is a historic part of the stock market.....and.....once in a while has a good year like this year....but I STRONGLY prefer the SP500 as a VALID index for the USA markets.

 

Here is a nice little article that is a primer for those that want to invest long term and a good refresher for those that already do so.

How to Do Long Term

https://www.collaborativefund.com/blog/how-to-do-long-term/

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

"Long-term thinking is easier to believe in than accomplish.

Most people know it’s the right strategy in investing, careers, relationships – anything that compounds. But saying “I’m in it for the long run” is a bit like standing at the base of Mt. Everest, pointing to the top, and saying, “That’s where I’m heading.” Well, that’s nice. Now comes the test.

Long term is harder than most people imagine, which is why it’s more lucrative than many people assume. Everything worthwhile has a price, and the prices aren’t always obvious. The real price of long term – the skills required, the mentality needed – is easy to minimize, often summarized with simple phrases like “be more patient,” as if that explains why so many people can’t.

To do long term effectively you have to come to terms with a few points.

1. The long run is just a collection of short runs you have to put up with.

Saying you have a 10-year time horizon doesn’t exempt you from all the nonsense that happens during the next 10 years. Everyone has to experience the recessions, the bear markets, the meltdowns, the surprises and the memes at the same time.

So rather than assuming long-term thinkers don’t have to deal with nonsense, the question becomes how can you endure a neverending parade of nonsense.

Long-term thinking can be a deceptive safety blanket that people assume lets them bypass the painful and unpredictable short run. But it never does. It might be the opposite: The longer your time horizon the more calamities and disasters you’ll experience. Baseball player Dan Quisenberry once said, “The future is much like the present, only longer.”

Dealing with that reality requires a certain kind of alignment that’s easy to overlook:

2. Your belief in the long run isn’t enough. Your investors, coworkers, spouses, and friends have to sign up for the ride.

An investment manager who loses 40% can tell his investors, “It’s OK, we’re in this for the long run,” and believe it. But the investors may not believe it. They might bail. The firm might not survive. Then even if the manager turns out to be right, it doesn’t matter – no one’s around to benefit.

The same thing happens when you have the guts to stick it out but your spouse doesn’t.

Or when you have a great idea that will take time to prove, but your boss and coworkers aren’t as patient.

These are not rarities. They’re some of the most common outcomes in investing.

A lot of it comes from the gap between what you believe and what you can convince other people of. Intelligence vs. storytelling.

People mock how much short-term thinking there is in the financial industry, and they should. But I also get it: The reason so many financial professionals stray towards short-termism is because it’s the only way to run a viable business when customers flee at the first sign of trouble. But the reason customers flee is often because investors have done such a poor job communicating how investing works, what their strategy is, what they should expect as an investor, and how to deal with inevitable volatility and cyclicality.

Eventually being right is one thing. But can you eventually be right and convincing to those whose support you rely on? That’s completely different, and easy to overlook.

3. Patience is often stubbornness in disguise.

Things happen almost daily now that would have been inconceivable just a decade ago (budget deficits, interest rates, meme-stock valuations, retail investor participation, etc.). The world changes, which makes changing your mind not just helpful but crucial.

But changing your mind is hard because fooling yourself into believing a falsehood is so much easier than admitting a mistake.

Long-term thinking can become a crutch for those who are wrong but don’t want to change their mind. They say, “I’m just early” or “everyone else is crazy” when they can’t let go of something that used to be true but the world moved on from.

Doing long-term thinking well requires identifying when you’re being patient or just stubborn. Not an easy thing to do. The only solution is knowing the very few things in your industry that will never change and putting everything else in a bucket that’s in constant need of updating and adapting. The few (very few) things that never change are candidates for long-term thinking. Everything else has a shelf life.

4. It’s hard to know how you’ll react to decline.

If I say, “How would you feel if stocks fall 30%?” you probably picture a world where everything is the same as it is today except stock prices are 30% lower. And in that world it’s easy to say, “That would be fine, I’d even see it as an opportunity.”

But the reason stocks fall 30% is because there’s a terrorist attack, or the banking system is about to collapse, or there’s a pandemic that might kill your whole family.


In that context, you might feel different. You might switch from an opportunistic mindset to a survival mindset. You might not have the endurance you once imagined.

5. Long term is less about time horizon and more about flexibility.

If it’s 2010 and you say “I have a 10-year time horizon,” your target date is 2020. Which is when the world fell to pieces. If you were a business or an investor It was a terrible time to assume the world was ready to hand you the reward you had been patiently awaiting.

A long time horizon with a firm end date can be as reliant on chance as a short time horizon.


Far superior is just flexibility.


Time is compounding’s magic whose importance can’t be minimized. But the odds of success fall deepest in your favor when you mix a long time horizon with a flexible end date – or an indefinite horizon.


Ben Graham said, “The purpose of the margin of safety is to render the forecast unnecessary.” The more flexibility you have the less you need to know what happens next.


And never forget Keynes: “In the long run we’re all dead.”

MY COMMENT

Yes...long term investing.....the most simple form of investing. Pick good stocks or better yet a nice Index like the SP500 and just let time and compounding do its thing. UNFORTUNATELY....doing ANYTHING simple....is just NOT human nature.

Two things CAN put a crimp in long term investing......first.....you have to pick rational and reasonable investments. You can NOT just swing for he fences or pick CRAZY holdings. There needs to be some rational basis for your holdings.....in my view....that is where FUNDAMENTAL ANALYSIS comes into play. Second.....it is not just an exercise in BLIND FAITH....you do have to review and monitor your holdings and......when of if......a holding fails to perform and the fundamentals show that the prospects are just not there anymore.....you have to have the guts to make a change.

Even with all the FLAWS of human nature....long term investing has been shown in reality and in the academic research to be the SUPERIOR means of investing for the vast majority of investors. The returns FAR EXCEED returns of traders, market timers, Technicians, traders......and....other sorts of investing schemes. OF COURSE.....people being human come up with all sorts of rationalizations and arguments to convince themselves that this is not true.