The Long Term Investor

Well have a nice day off....everyone.....if you are actually off. We come back for a one day market tomorrow.

 

WELL.....I LOST money today.

Not in the markets they are closed for Juneteenth. I purchased a piece of Western Art Sculpture. It came from a gallery that we know in Jackson Hole, WY. A nice addition to our collection. Lately we have been focusing more on Western Sculpture versus paintings.

EASY COME.....EASY GO.

This is a living artist but one with an auction record so hopefully it will retain value going forward.

 

A little article in line with my posts this morning.

Empathy Isn’t Part Of The S&P 500

https://tonyisola.com/2025/06/empathy-isnt-part-of-the-sp-500/

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


"Never confuse normal with abnormal.

War and mayhem are market constituents and forever will be.

The Stock Market is a microcosm of the actions of billions of often irrational human beings. Thinking mayhem to be something outside the economic forces of supply and demand is a dangerous game to play.

Last week, Israel decided to destroy the nuclear capability of their arch-enemy Iran. In addition to the conflict in Gaza, a far bigger regional war is now raging.

I’ve been doing this job for a long time. Next week, I will receive calls from the usual suspects asking, “Should I revisit my vacation plans until things calm down?”

My stock response: “ Unless you’re planning a trip to Tehran, putting your life on hold while waiting for peace in the Middle East is a ticket to never leaving your house.”

Since 1948, when Israel declared its statehood, bloodshed has been the rule, not the exception, as evidenced by the following chart. These conflicts do not include three major U.S.-led wars in Iraq(Twice) and Afghanistan.


Did this regional chaos obliterate the retirement plans of the average American investor?

The answer is decidedly NO!

Israel was declared a state on May 14, 1948. As of June 2025, the S&P 500 had increased 350-fold from about 18 to over 6,000 during this period, equivalent to a 10% annual return, including reinvested dividends.

The same can be said for most “Markets in Turmoil” events.

This excellent chart from Carson Group tells the tale.


It turns out the negative market behavior wasn’t the result of the event itself but due to other exogenous factors.

What stands out from the chart is not so much the downside risk of geopolitical events, but the coincidence of drawdowns and recessions independent of geopolitical risks. If you look at the major drawdowns, most take place during or near a recession, including 1956, 1973, and 2000-2001.

Of course, all bets are off if you own a concentrated, leveraged portfolio, ignoring the proven benefits of broad diversification among asset classes, investing styles, and countries.

War is a heinous thing, but its effects on human life and property differ significantly from its impact on a diversified portfolio.

There is always a silver lining hidden behind violence and chaos. This week, I spoke to a long-time client with significantly more money than when we started working together years ago.

He mentioned that we have survived numerous extinction-level events and will likely emerge stronger from this latest conflict.

What he told me next warmed my heart.

You taught me that when things are bad, don’t look at your portfolio. Instead, take two actions: leave things alone or buy more. I wish other people would do the same instead of getting scared out of the market at the worst possible time.

From your mouth to God’s ears.

When the Dogs of War begin barking, stocks are indifferent to human misery. The Nasdaq couldn’t care less about your feelings.

Markets often rally at the peak of conflagration, sensing better days ahead.

Maybe this time is different.

I wouldn’t bet your retirement portfolio on it.

Barton Biggs perfectly sums up the ingredients for successful long-term investing.

“Staying power, faith, and a strong stomach were required.”

It’s not so easy to kill a stock market, despite how hard we may try."

MY COMMENT

The little IRAN event that is happening now is very much a MINOR event in terms of market impact and past world events......assuming.....nothing larger happens and it does not significantly escalate.

I will be taking NO action at all since......I continue to be fully invested for the long term as usual.

 

I like this little article.

A Quick Glance at the Latest US Data
What to make of retail sales and industrial production?

https://www.fisherinvestments.com/e...mmentary/a-quick-glance-at-the-latest-us-data

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

"Between the G-7 summit, trade talks, ongoing strife in the Middle East and tomorrow’s Fed meeting, Tuesday’s economic releases didn’t get much ink. In a way, that says a lot about where sentiment is right now—things everyone once watched for hints of how tariffs are affecting the economy and recession risk now get short shrift as new fears take over. The fear morph is part and parcel of how bull markets work, but the data themselves are still worth a look, as they help illuminate what markets have been dealing with.

No Surprises in Retail Sales

Though it fell off the front pages swiftly, coverage of retail sales’ fall was broadly pessimistic. Headline sales fell -0.9% m/m, which some outlets called a sign tariff anxiety is weakening spending and, therefore, growth. Others focused on the -0.9% drop in restaurant sales as potential evidence cash-strapped consumers are pulling back on discretionary spending and affordable luxury.[ii] Given food service is the lone services category within retail sales—and given services is the majority of consumer spending—some coverage extrapolated the decline as a bellwether for services and spending generally.

It all strikes us as reading too much into monthly swings. Sales jumped earlier this year as consumers front-ran tariffs before the Trump administration’s Liberation Day announcement. That big, 1.5% m/m jump in March was never going to be a sustained growth rate. Rather, it smelled like a one-off that pulled demand forward. Whenever pending changes pull demand forward, whether tariffs here or Japan’s sales tax hike several years ago, they tend to leave a pothole in the ensuing months. The US’s retail landscape appeared to be in that pothole in May.

Consider: While restaurants got attention for falling the most since 2023, the primary detractor was auto sales’ -3.9% m/m decline, which followed March’s 5.7% boomlet.[iii] People knew tariffs were about to make cars more expensive once dealers worked through inventory, and they raced to get ahead. If you were considering buying a car this summer, it made sense to bite the bullet and do it in March, lest you pay a radically higher price once the tariff was in effect. Multiply that across the US auto-buying public, and you get these sharp swings. Cars that would have been bought in May, June, July, whenever got purchased in March instead.

This doesn’t really tell you much about the broader economy’s health or prospects. It is a consumer behavior story. Restaurant spending’s decline could well be part of this, if households funneled all their springtime discretionary budgets into tariff avoidance. The category isn’t immune to one-off drops. February’s -0.5% m/m restaurant sales drop preceded a 2.5% jump in March, probably as tariff-beating shoppers paused for lunch.[iv] Drops in January and March 2024 didn’t presage a broader spending decline. Nor did February 2023’s -2.6% m/m jolt.[v] Not every bad month is the start of a trend. These things take time to materialize.

So overall, we see a pretty big gap between sentiment and reality. If everyone were broadly dismissing this as a nothing-to-see-here tariff after effect, we would be a little suspicious that fear faded so fast. The persistent pessimism we saw instead looks like strong evidence this bull market’s wall of worry is nice and high.

Manufacturing Rolls Along

Coverage of industrial production was also pretty weary. Headlines noted that the topline -0.2% m/m decline masked a 0.1% rise in manufacturing, with utilities’ -2.9% m/m decline the main detractor from overall production.[vi] But they quickly dismissed manufacturing’s modest growth as a figment of rebounding auto production (up 3.9% m/m), implying weakness elsewhere indicated the true state of US manufacturing.[vii]

In reality, it was a pretty mixed report overall, in line with the pretty mixed reports we have seen for the past couple of years. Manufacturing of fabricated metal products, nonmetallic mineral products and machinery fell, fueling fears of tariff-induced component shortages weighing on output. But production of textiles, apparel, furniture, electrical equipment and consumer electronics rose nicely. The good and bad simply netted out to meh. Yet even meh is better than the frequent declines that dotted 2024 as manufacturing hit a soft patch globally. That weakness is very familiar to markets by now, and they have already shown they can overcome it.

Yes, a material reacceleration would probably be positive. But the absence of a positive isn’t a negative, especially if expectations are in check—which they are now. So for markets, this report seems largely par for the course."

MY COMMENT

NOTHING negative to see here. I am struck by the fact that the media can not let go of the Tariff story line. Probably due to the IDIOCY of the FED making obscure predictions.....not based on data.....that GDP is going to drop and tariffs are going to cause inflation.

We are already past the point where future inflation can be blamed on Tariffs. We have seen ZERO impact.

 

To continue.

My personal view is that Powell should RESIGN. The FED is now totally disconnected from any data. They have constantly claimed to be reacting to the data. BUT now......they are ignoring all the data and operating on some obscure focus on future data that is totally unknown and unpredictable.

Powell has basically lost all credibility with this current stance that is CONTRARY to the data. If you believe in the data we should have seen one or two rate cuts.....this year.

The FED just like everyone else has ZERO ability to project future data in the current environment. We are seeing action or lack of action by the FED that is either.....totally CONFUSED.....or worse.....political. They have now lost all credibility.

We have two options....we can muddle through the next ten months with Powell and a FED that is out of touch and has abandoned their data dependent actions of the past years.. Or....Powell can resign and the FED can operate under new....more rational and perhaps more relevant leadership.

One thing is sure....we dont need a FED that is operating by trying to predict future data and economic events....that are UNPREDICTABLE.

 

Moving on.

Expected Returns in the Stock Market

https://awealthofcommonsense.com/2025/06/expected-returns-in-the-stock-market/

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


"A reader asks:

I was reading your post “3% Market Returns For The Next Decade” and it got me thinking about something you wrote about a few years ago — the John Bogle Expected Return Formula. I don’t remember how you were able to get the numbers to calculate the formula, but I’d love to see an update about what the formula says today.

I came across the Bogle Expected Returns Formula in his book Don’t Count On It.

Bogle looked back at the history of stock market performance going back to 1900 by breaking down returns into three main components:

1. Dividend yield
2. Earnings growth
3. The speculative return or change in valuations

Bogle broke out these return variables by decade to show where stock market performance comes from:



The 9.1% return from 1900-2009 was made up of mostly dividends (4.3%) and earnings growth (4.5%) with little change in the speculative element (0.3%). But the individual decades are all over the place.

There have been decades with average fundamentals but highly speculative returns (1950s), poor fundamentals with little change in the speculative return (1930s) and good fundamentals with poor valuations (1970s).

Obviously, there are reasons for each environment. Context matters.

Then Bogle used that same formula to come up with expected returns for the next decade:

The stock return over the coming decade is projected at 7 percent, based on today’s dividend yield of about 2 percent and prospective nominal earnings growth of about 6 percent, with a shading for the slightly lower price-earnings ratio that I expect a decade hence.

Here’s a chart from the book:


The below-average return forecast was the result of speculative returns being so high in recent decades and starting dividend yields being so low. At the time this sounded reasonable. Lots of people were forecasting lower returns following the Great Financial Crisis.

Remember the new normal?

This book was published in the fall of 2010, so we can see how the actual returns compare to the forecast.

Over the 10 years from 2011 to 2020, the Vanguard Total Stock Market Index Fund was up 263% in total or 13.8% annualized, nearly double Bogle’s forecast.

So where did Bogle’s assumptions go wrong?

I’ve updated his formula through 2025:


Earnings growth in the 2010s and 2020s have been much higher than expected and valuations have continued to increase.

To be fair to Saint Jack1, no one was predicting the tech stock dominance that was coming. These corporations became high-margin, hyperscaler, high-growth, cash-flow-producing machines.

It’s also surprising that we had 13.6% annual returns in the 2010s and have matched those same returns in the 2020s (so far).

The past is great and all but investors care more about what happens in the future.

The current dividend yield of the U.S. stock market is 1.3%. Let’s assume technology and AI keep earnings growth above average from productivity and efficiency gains — call it 7-8%. On pure fundamentals alone, that’s pretty good, even if my earnings estimates are too high.

The unanswerable question is how do investors feel about stocks? That’s all valuations are, is feelings.

Depending on the environment, sometimes investors are willing to pay more for earnings and sometimes less.

Risk appetite has been strong throughout the 2020s. It feels like that will continue at the moment but who knows what the market gods will throw at us in the coming years.

This exercise is a good reminder of the difficulty in predicting the future. Your earnings forecast could be spot on in the years ahead and you still probably won’t be able to estimate forward returns from here.

That’s not to say that fundamentals don’t matter. Of course they do…over the long run.

I’ll give the final word on this to Bogle:

Over the very long run, it is the economics of investing–enterprise–that has determined total return; the evanescent emotions of investing–speculation–so important over the short run, have ultimately proven to be virtually meaningless.

Amen."

MY COMMENT

There is no formula or other way to predict or anticipate the markets.

I deal with this by investing in the BEST companies in the world for the long term. In the end it is all about business performance under great management.....fundamentals....that will win over the long term. The last thing I care about is some prediction of returns or stock prices.

There is NO magic formula to explain or predict it.

 

Speaking of little bits of anecdotal information and the markets.

Darden Restaurants lifts sales forecast, beats quarterly estimates on casual dining demand

https://finance.yahoo.com/news/darden-restaurants-lifts-sales-forecast-121553546.html

Kroger raises sales forecast, backs profit outlook amid 'uncertain' economic backdrop

https://finance.yahoo.com/news/krog...id-uncertain-economic-backdrop-122531489.html

Kroger lifts annual sales target on resilient demand for groceries

https://finance.yahoo.com/news/kroger-lifts-annual-identical-sales-120711745.html

 

As to the IDIOCY of the FED.

The Fed is also in 'wait and see' mode about AI taking jobs

https://finance.yahoo.com/news/the-...-see-mode-about-ai-taking-jobs-100055107.html

MY COMMENT

The FED is starting to sound like the fear-mongering media. Basically talking about wait and see mode means that the FED is PARALYZED. Not a good way to operate.

 

Typical.....and self defeating behavior by short term traders, speculators, and fear driven people that think they are investors.

US equity funds see hefty outflows on Israel-Iran conflict

https://finance.yahoo.com/news/us-equity-funds-see-hefty-112241201.html

 

Filter out all the BS and media opinion based fear mongering.....and we are left with a basic market day with nothing actually going on today.

Just another day in a disrespected and IGNORED little BULL MARKET. We continue to climb daily and constant walls of worry. Most of them simply fade away within days....leaving us to conquer the next wall that is thrown up by the ignorant or the biased or the click hungry....or all of the above.

IT IS ALL.....NOISE. A constant cacophony of background NOISE that no one pays much attention to anymore. AND....in their mania for clicks.....when their content is ignored.....it drives the media and others to get more and more extreme with the headlines and opinion content. It is a MASSIVE loop of negativity.

 

Oh yes......the meaningless futures are all.....GREEN.

Meaningless....but better green than red.

 

A very nice open today. NOW....lets see how it can be chipped away by the.....DAILY and RELENTLESS.... negative feedback loop.

 

One market driver today.

Fed's Waller: Rate cuts should be considered by July given inflation data

https://finance.yahoo.com/news/feds-waller-rate-cuts-considered-130048767.html

"WASHINGTON (Reuters) -The Federal Reserve should consider cutting interest rates at its next meeting given recent tame inflation data and the fact that any price shock from import tariffs will be short lived, Fed governor Chris Waller said on Friday.

"Any tariff inflation ... I don't think is going to be that big and we should just look through it in terms of setting policy," Waller said on CNBC's Squawk Box. "The data the last few months has been showing that trend inflation is looking pretty good ... We could do this as early as July."

His dovish comments follow a Fed meeting where the central bank held rates steady and indicated they would remain on hold for now."

MY COMMENT

DUH.

 

I had a bit of extra cash today so I bought.....TWO....shares of PLTR......$277.76. I am expecting those two shares to grow to over $1.3MILLION over the next two years.

(you know I am joking....right? About the growth....I did buy 2 shares)

 

I will answer this question......the RELENTLESS, OBSESSIVE and NEGATIVE media coverage and second guessing of this stock. The constant negative speculation never stops. As a result earnings for the past 4-8 quarters have been just about totally SQUANDERED. I have never seen something like this in my investing life. The greatest company in the world....that is refused RECOGNITION and REWARD for what they are doing.

This sort of "stuff" is what will eventually KILL the markets.

Boston Hedge Funds Are Now Reportedly Wondering What’s Keeping NVIDIA Shares From Breaking Out To The Upside

https://wccftech.com/boston-hedge-f...vidia-shares-from-breaking-out-to-the-upside/

 

I had a small/medium loss today. Not bad considering. I also lost out to the SP500 by.....0.19% today. Another week in the books.

 

The week that was.

DOW year to date (-0.44%)
DOW five days (-0.88%)

SP500 year to date +1.69%
SP500 five days (-0.55%)

NASDAQ 100 year to date +3.25%
NASDAQ 100 five days (-0.11%)

NASDAQ year to date +0.86%
NASDAQ five days (-0.02%)

RUSSELL year to date (-5.48%)
RUSSELL five days (-0.52%)

Not a bad week...very mild RED for the past five days in the averages. I missed last week being out of town....and did not calculate my total portfolio gain or loss YTD. As of the close today i am at YTD for my entire portfolio of....+4.16%. Looking at my YTD for my entire portfolio two weeks ago...I was at +2.16%.

 

I am expecting the year to get better and better as we progress from here. So being at +4.16% puts me solidly on track for a total return of hopefully at worst.....+10%. At best perhaps........+18%. I would call that range for TOTAL RETURN......10% to 18%.....as PROBABILITY.

keep in mind the above is....."hopefully"......"Probability".