The Long Term Investor

HEY....everyone can sleep in on Monday.......yeah right........the markets are closed for MLK DA (January 18). So...stocks will take a 3 day weekend and than put in a short 4 day week.....next week

 

I see a couple of simple articles today talking....in glowing terms..... about how the new administrations stimulus and other plans will REVIVE the the inflation that has been Missing since 2008. I will NOT bother to post them....since.....they just seem like POLITICAL PR and cheer-leading.......to me. BUT....yes....we like most of the world.....have been in a DEFLATIONARY ENVIRONMENT since 2008. HERE.....is s LONG article that I believe has MUCH BETTER reasoning on this issue......and......reflects the REALITY.......that we are NOT going to see inflation....if anything we are going to see an even MORE severe DEFLATIONARY SITUATION over the next four years. This is one of those......get down into the weeds....types of articles......not the usual media FLUFF.

They Keep Assuring Us Japan Can't Happen Here

https://www.realclearmarkets.com/ar...ssuring_us_japan_cant_happen_here_656635.html

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

"He actually meant it to be soothing, a reassuring statement of clear and unequivocal support for a reeling market. This statement, however, was received in the exact opposite way. The selling which had gone on seemingly unchecked for weeks was suddenly and materially amplified. The government was no longer going to be buying, but this was no big deal?

It wasn’t actually the government, though, and its official statement issued through the Finance Minister really was ambiguous – at best. This was December 1998 in Japan. After nearly a decade of the worst, most insipid form of economic disease(s) here was yet another one for officials to confront, yet another opportunity for them to screw it up.

Kiichi Miyazawa had already been the Japanese Prime Minister in 1992 and much of 1993, some of the worst parts of the bubble collapse and its immediate aftermath. Having suffered what initially appeared to be a heavy but typical downturn, it was clear by mid-decade the country’s economy was wedged underneath something very different.

Fiscally cautious by nature, successive Japanese governments had approached the ideas in the Keynesian textbook with equally as much skepticism as reverence; especially when it came to the government’s credit. Even when dutifully acceding to the textbook need for spending under the name “automatic stabilizers”, or when piling onto them with an almost regular schedule of supplementary budgets, the tilt toward care had been thrown out the window by the end of ’97.

You could at least understand why they’d end up with a radical departure; after suffering a huge wipeout and economic downshift to start the nineties, there hadn’t been a recovery yet and the nation didn’t really see many prospects for a legitimate one until the closing months of 1996. And even then, it was arguable; recoveries, when they are true recoveries, aren’t controversial.

Convinced otherwise (convincing themselves otherwise), the Japanese government recommitted to fiscal responsibility believing that, though it took more time than initially thought, economic salvation had been fairly won. A tax hike and end to other favorable credits was scheduled for ’97 – right into the teeth of what later became known as the Asian Financial Crisis (or Asian “flu”, since the fundamental dollar disease at its core proved to be contagious).

There are times when you do something you aren’t sure about, and then immediately come to regret not listening to your doubts. That was Japan at its 1997 tax hike(s). By the start of the next year, any lingering objections to fiscal profligacy no matter how well-reasoned and well-established were thrown right out the window.

In April 1998, a massive “rescue” package was announced, totaling ¥16.7 trillion. Though the net contribution of government spending and tax cuts was significantly less than the headline number, it was substantial and represented a sweeping increase and departure nonetheless.

But as shocked as anyone might have been at this first one, a second, even larger package would be put forward that same November. Jumping up to ¥23.9 trillion, the Japanese people had begun to believe their government had collectively lost its mind.

Among them, there were those who had invested heavily in the Japanese government bond (JGB) market wondering if it was even worse than that. Who would be left standing to buy all those bonds the central authority would have to issue in order to finance such massive deficits? Whereas JGB prices had relentlessly increased for years as the “lost decade” depression only deepened, and the same market which had totally and completely discounted the ’97 recovery prediction, suddenly in late ’98 there was a palpable sense of basic economics.

On November 16, Prime Minister Keizō Obuchi, who had only been in office for a few months, having replaced Ryutaro Hashimoto whose first big “stimulus” package hadn’t arrested the economy’s slide, announced this much bigger second program. The following day, analysts (and their models) from Moody’s downgraded JGB debt from Aaa to Aa1.


The bond rout was on.

The yield on Japan’s 10-year JGB had been as low as 77.2 bps early in October ’98. As the government debate progressed, the indicated rate would back up as high as 96.5 bps and was trading 91 bps on the 16th when the government announcement came. The initial downgrade hadn’t triggered the bond selling initially, but combined with a global recovery gaining steam and what that might mean for Japan (inflation and risk-wise), by the end of the month yields were off to the races (higher).

And then Miyazawa.

As Finance Minister, the guy was also the head of something called the Trust Fund Bureau (TFB). A quasi-government agency, this entity took in deposits from Japan’s Pension fund reserves and more importantly more deposits from the Postal Savings system (the Japanese people had historically deposited and held the majority of their savings with the Japanese equivalent of the Post Office). Along with borrowed cash received from the Postal Life Insurance Fund, this TFB had sat in the middle of a complicated, dizzying array of financial tentacles stretching through numerous parts of the real economy as well as government.

It was something like a GSE, or at least one-half of what we might think of when examining Fannie or Freddie. The TFB was the fund-raising arm of a quasi-superbank structure not held together under one roof. The other part, the disbursements, went to local governments as well as the central government’s General Account. In both of those cases, the TFB bought bonds issued by each.

This meant that the TFB was a big buyer of JGB’s. But with Japan suffering a serious downturn in ‘98, nearly every participant on the other end of those tentacles had their hand out looking for rescue.

Miyazawa realized that TFB’s ability to buy more JGB’s was going to have to be pushed way down on the list of disbursement priorities; a policy change which he announced on December 22.

But, as I started out, the Finance Minister thought he was being a reassuring presence. What he said was, “the suspension of government bond purchases by the Trust Fund Bureau is not a particularly serious matter.” The JGB market, initially, disagreed believing that any tapering of purchases by such a pivotal financing arm in the face of a huge increase in supply could do more than upset such a highly-priced government bond market (pop this “bond bubble”, as so many have called it).

The selling which had been widespread and harsh to that point grew more widespread and even more harsh in what came to be known (to the few who followed or still follow the history of JGBs and Japan) as the Trust Fund Bureau Shock. Whereas the 10-year JGB yield had surged to 1.47% in the days before this, in just three sessions it would spike nearly 50 bps more to 1.982% by December 24, 1998.

To end such a tumultuous year, the 10s would achieve 2.117% and ultimately 2.43% by February 5, 1999. The last thing Japanese authorities had wanted was sharply rising interest rates.


Despite the introduction of so much fiscal “stimulus”, the outcome it might lead to was far from assured. In fact, the Bank of Japan, who you’d think would have been the Finance Ministry’s best friend in all this, remained highly skeptical of its potential effectiveness (and why not, having witnessed several packages roll out over the years with little positive impact even if they hadn’t been quite so large?)

In its regular Monthly Report for December 1998, the Bank of Japan wrote:

“With the implementation of the government’s comprehensive economic stimulus package and recently launched emergency economic measures, the economy is likely to be underpinned mainly by public investment toward the first half of fiscal 1999. Furthermore, the Bank’s monetary and financial measures and the government’s measures to alleviate the credit crunch are expected to take effect gradually. Nevertheless, an immediate self-sustained recovery in private demand is hardly expected since corporate profits and household income are deteriorating and the constraints from corporate finance are likely to persist for some time due to cautious lending attitudes of private banks.”

Not only would this prove to be true, in February 1999 the BoJ voted to begin the world’s first experiment with a zero interest rate policy, or ZIRP. The situation came to be dire as demonstrated by a seriously negative GDP rate for Q1 ’99 (-1.2%, q/q at a quarterly rate). The government may have done big things in ’98, but these hadn’t created a recovery, either.

Instead, “attitudes of private banks” prevailed; as these always had prevailed before (in 90s Japan) and have continued to prevail ever since (not just in Japan nor just in the nineties).

So, what to do when the banking system won’t step aside even in the face of the biggest “stimulus” programs? Common sense dictates fixing the banking problem – which the Japanese were busy doing, or thought they were doing, using bank reform and recapitalization projects – but Economists have other ideas.

It might also seem logical that if the banking system continues to be the single most significant impediment (clogged transmission channel) to recovery that you instead find ways to simply circumvent it. On the surface, it makes perfect sense; banks get in the way, then go around them by using the central bank or central government, or central bank financing the central government, to put cash directly in the hands of businesses and people.

While this might sound a relatively new theory, a radical departure put forward only in the last days of, say, December 2020 around this side of the Pacific, this is nothing new. In fact, neo-Keynesian Economists like Ben Bernanke have been discussing the theoretical merits of what they called “money-financed fiscal expansion” for a very long time.

And a lot of that discussion took place because of what really happened in Japan (what wasn’t supposed to have happened). Here’s what Bernanke wrote in 2003:

“Isn’t it irresponsible to recommend a tax cut, given the poor state of Japanese public finances? To the contrary, from a fiscal perspective, the policy would almost certainly be stabilizing, in the sense of reducing the debt-to-GDP ratio. The BOJ’s purchases would leave the nominal quantity of debt in the hands of the public unchanged, while nominal GDP would rise owing to increased nominal spending. Indeed, nothing would help reduce Japan’s fiscal woes more than healthy growth in nominal GDP and hence in tax revenues.”

This materially differed from the typical bond-financed fiscal expansion which had, they thought, triggered the bond rout leading up and past the Trust Fund Bureau Shock of ’98. If the government needs to increase spending and aid because “aggregate demand” has declined substantially, the last thing it needs is the bond market opposing that “necessary” expansion by worrying about too much bond supply.

Instead, along comes the central bank to – in the short run – finance (not “monetize”; they’re careful to point out how they believe there’s a difference) this expansion so as not to upset the bond market’s potential to absorb the burst of new bonds which have to be issued.

By undertaking money-financed fiscal expansion, proponents claim, they get around the banking system’s clogging and inject the government money directly into the real economy in sufficient measure. As this is expected to lead to full recovery, those rising economic fortunes quite necessarily create much higher tax revenues (bringing the fiscal situation back in line) and then inflation – which in the future requires the central bank to sell those JGB’s it previously had bought back out to the public.

Neat, clean, easy; it's practically self-extinguishing – if it was ever to work flawlessly in such a way.

You see, the Trust Fund Bureau didn’t just buy up JGB’s thereby funding the central government being a middleman between postal savings and the government’s deficits. One other significant recipient of its accumulated financial heft was something called the Fiscal Investment and Loan Program (FILP).

In fact, one of the reasons why Kiichi Miyazawa’s Finance Ministry had planned to reduce their JGB purchases in late ‘98 was because officials knew they’d need to send more to the FILP.

What was the FILP? Though its roots date back to 1953, it was essentially an off-the-books mechanism by which the government could implement desired real economy projects. Whether finance public works or the like directly, or to lend and grant to private companies, the FILP was pretty much the thing Economists had in mind which could and quite often did circumvent the banking system to directly inject an increased fiscal expansion directly into the economy.


And its footprint had grown enormously throughout Japan’s “lost decade.” The FILP had even come to be known as the “second budget”; referring to the central government’s ability to use the thing, and as many as 38 related special accounts, agencies, and public corporations, to direct off-the-books spending and aid all financed by this quasi-public banking.

It was estimated that by 1999 these opaque, largely unaccounted activities of the FILP had equaled around 70% of the government spending on the books in the general budget accounting. It’s not like the Japanese hadn’t tried.

But, as that economy settled right back into its same rut in early ’99, confirmed by the Bank of Japan’s panicky imposition of ZIRP at that same time, JGB bond yields went right back down again. And in the more than two decades since, they have yet to get back to as high as February 1999; the 10s once nearly touched 2%, for a brief time, in 2006.

What Ben Bernanke had also said in November 2002 goes here. Having discussed and mythologized the Fed’s printing press, and all its possible uses – including money-financed fiscal expansion – what he said was, very simply:


“We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

He and those like him, including Jay Powell as well as Janet Yellen, presumably believe that even today. What Japan has established, and has really proved, is that, no, even a “determined government” may encounter deflationary, depressionary forces beyond its ability to manage (or understand). Furthermore, these can last a very, very long time (which the trio Bernanke, Yellen, and Powell should know already from personal experience). Worse, repeated failure can even contribute to the stubbornness by which these persist.

Economists, of course, will object to these characterizations; typically, they claim that given the chance, as Powell and Yellen together will presumably be given in the upcoming months if not weeks, they won’t repeat the Japanese mistakes. If Japan failed at any of these things, it’s because, they say, the Japanese – specifically - failed.

Sound theory, bad execution. Not for nothing, they said the same things about QE.

In terms of money-financed fiscal expansion, you can easily predict the criticisms – not “enough”; or, not the “right” sort. Our people will figure out the “correct” way to get it done.

What if the problem isn’t the Japanese version, what if the theory is just wrong? How might we know?

Seems to me there is a lesson here in JGB’s. For a few months, anyway, what turned out to be a minor hiccup, this Trust Fund Bureau Shock, it was simply the first look at a potential unknown. But, the JGB market for more than two decades since, now the theory, and its potential, these happen to be very well known."

MY COMMENT

HEAVY STUFF.....weekend economic discussion.......probably.....NOT relevant to the average investor.

HERE is the GUTS of this article:

"We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

He and those like him, including Jay Powell as well as Janet Yellen, presumably believe that even today. What Japan has established, and has really proved, is that, no, even a “determined government” may encounter deflationary, depressionary forces beyond its ability to manage (or understand). Furthermore, these can last a very, very long time (which the trio Bernanke, Yellen, and Powell should know already from personal experience). Worse, repeated failure can even contribute to the stubbornness by which these persist.

Economists, of course, will object to these characterizations; typically, they claim that given the chance, as Powell and Yellen together will presumably be given in the upcoming months if not weeks, they won’t repeat the Japanese mistakes. If Japan failed at any of these things, it’s because, they say, the Japanese – specifically - failed."

OUR economists were UNABLE to do ANYTHING about our DEFLATION for the eight years from 2008 to 2016. Even NOW........we see NO revival of inflation at a level that is HEALTHY for the economy. I remember....very well....the late 1970's early 1980's period of STAGFLATION.......it was kicked off and driven by massive increases in WAGES. It was basically WAGE INFLATION that swept through the country causing an out of control SPIRAL of price increases.

The ECONOMIC DANGER over the next four years....is and will be.....DEFLATION. We will CONTINUE in a period of stagnant and dropping wages. This event will be CAUSED......as a direct result of GOVERNMENT POLICY.....importing millions of unskilled and skilled workers that are willing to work for lower wages to get here.....a FLOOD of Illegal Immigration........continued reductions in work force in corporations caused by technology.......a FLOOD of businesses moving manufacturing to third world countries ONCE AGAIN........tax increases.......CENTRAL GOVERNMENT economic planing by government.....policies like RAISING the minimum wage and causing millions of job losses......the destruction of the small business base.....etc, etc, etc.

We SEE this deflation......most clearly....in our government bond yields.....look at the ten year yield....which is the basis of mortgage rates and much of our banking system. In fact.....look at the history of mortgage rates over the past years. Look at the 30 year Treasury yields........the safe haven financial instrument for the world.

Japan has been MIRED in a DEFLATIONARY DEPRESSION for over twenty years.......this is the true DANGER that we ALSO face.....having been in this situation......now......for the past 12 years ALREADY.

The ELITES and those of us that are INVESTORS will ACTUALLY benefit. Of course.....the end result will be EVEN MORE......concentration of assets in the hands of the very upper classes. The REAL CURE to this type of situation......FREE MARKET policies.......the ABANDONING of modern monetary theory (to a degree)........the ABANDONING of foolish Keynesian economics......which.....has NEVER successfully worked.....the continuation of TAX CUTS and perhaps additional tax cuts. My view on the ODDS of this actually happening......ZERO. We APPEAR to be in some WEIRD WORLD that combines the WORST of MMT and KEYNESIAN policies......as the basis for government economic policy. A TRUE IDIOCRACY.....if there ever was one. We.....for some reason.....are compelled to keep doing the same FAILED economic policies over and over and over......somehow thinking.....that they will SUDDENLY work.

The way I see it.......being an investor is the ONLY way to be safe in this sort of environment. IF......and I believe it will....we continue in the current deflationary environment.......as an investor........indirectly.......riding the government coattails as they pick winners and losers.....is the way for an individual to benefit. I will ride those coattails as a BIG CAP investor. If my analysis turns out to be wrong.......well....being a long term BIG CAP investor will......STILL.....work out just fine.

 

Anyone that reads here knows what I think about investing in Chinese companies. It is BAD ENOUGH that so many American companies have such strong ties to China and are DEPENDENT on their manufacturing facilities and components and raw materials. FOR ME....to even consider in the slightest......investing in ANY Chinese company....I would have to review the ENTIRETY of the American business market and determine that there was NOT a single invest-able company in existence. SO......NOT going to happen.

Since it is the weekend.......here....is another article relevant to investing in Chinese companies.......and.......the SINGLE GREATEST inherent danger of doing so.

Jack Ma was China’s most vocal billionaire. Then he vanished

https://www.wired.co.uk/article/jack-ma-disappear-ant-group-ipo

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

"Jack Ma is no stranger to taking risks. In October 2020 he was China’s wealthiest man, preparing to float Ant Group, a fintech company, in what was billed to be the largest IPO in the world. “Miracles happen,” he told the assembled dignitaries, academics and political heavyweights who had gathered at the Bund Summit in Shanghai on October 24. At the time, Ant Group was prepared for a dual listing in Shanghai and Hong Kong. “This is the largest listing ever priced in the history of the entire human race, and the pricing happened in a place other than New York City,” he said.

But the listing never happened. That night was the last time that he was seen in public — since that speech, despite being one of the most high-profile people in the global tech sector, Ma has vanished.

In the weeks before his disappearance, there were rumours circulating that regulators in China might be about to slam the brakes on Ant’s listing. But if Ma’s intention was to win over the audience – which included the vice president of China Wang Qishan (who had delivered the opening remarks of the summit), the head of the People’s Bank of China, and all of the major players in Chinese finance – then the rest of his speech was a deft lesson in how to lose friends and alienate people. He described China’s financial system as operating “with a pawnshop mentality” and that the regulatory environment was akin to trying to “use the way to manage a railway station to manage an airport”.

His comments were so brash that they reportedly caught the attention of Chinese president Xi Jinping. Retribution was swift. On November 2 Ma, alongside Ant’s executive chairman Eric Jing and CEO Simon Hu, was summoned and interviewed by regulators. When this interview was made public by the China Securities Regulatory Commission, the Shanghai Stock Exchange decided to halt Ant’s IPO on November 3, just two days before it was supposed to go live.

Alibaba Group, the tech giant that Ma founded and which launched his international reputation, had a 33 per cent share in Ant Group. Its stock price dropped seven per cent on the announcement. But that was not all – over the coming weeks the laws surrounding antitrust would be redrafted in China and Alibaba would be fined. And, all the while, Ma was nowhere to be found.

By the end of the year Alibaba’s shares had fallen by almost a quarter. Ma’s net worth dropped by almost $10 billion over the same period, according to data from Bloomberg. Ma Huateng, the founder of rival tech firm Tencent, pushed him off the top spot to become China’s richest person.

So how did everything go so wrong? After all, Ma is known for his charisma – he speaks good English, is a darling of the Western media and is not shy of being the centre of attention. He once impersonated Michael Jackson, in full costume and with accompanying dance moves, in front of 30,000 Alibaba employees at the company’s annual party. He starred in his own Kung-Fu movie, which he decided to premiere at Alibaba’s Singles Day event in 2018, inviting Nicole Kidman on stage to clap along.

But this was not the Ma that appeared at the Bund Summit in October 2020. Gone was his carefree charm and irreverent humour. “Mr Ma is a big personality, but on stage he seemed stilted. He read his speech instead of giving it off the cuff which is out of character,” says Duncan Clark, an early consultant to Alibaba and author of The House That Jack Ma Built. “There are a lot of powerful vested interests and a lot of employees within Alibaba itself who would have made a lot of money in that IPO,” he adds, “I’m sure he was under a lot of pressure.”

On September 16, 2020, a little over a month before the speech, the China Banking and Insurance Regulatory Commission issued new guidelines stating that funding from banks and shareholders should not exceed a microfinance company’s total net assets. This was potentially a huge blow to the company.

In recent years Ant has taken on an outsized role in providing credit and loans, acting as matchmaker between China’s dynamic and expanding consumer class and the ossified state banking sector that has been unable to reach them. As per the filing to the Hong Kong exchange, Ant said it retained only about two per cent of these loans on its balance sheet as of June 30, with the rest funded by third parties or packaged as securities and sold off. The new guidelines potentially meant a huge shake-up to Ant’s core revenue stream – and Ma’s future plans.

It wasn’t just Ant that had been coming under scrutiny. China’s tech scene is dominated by three companies, often referred to as BAT – Baidu, Alibaba and Tencent. As of 2018 these companies alone either invested in or owned outright over half of the 124 ‘unicorns’ in the Chinese economy (companies valued over $1bn).

The three firms have been accused of using this power to create impenetrable monopolies and prevent market competition by using their vast scale to quash smaller rivals. In recent months the government has made numerous overtures that it was ready to bring these giants to heel. It’s unclear therefore whether Ma simply misread the room or whether his speech was a strategic last-ditch attempt to save his IPO. After all, he is no stranger to making bold comments and standing his ground.

When Ma created Alipay, the digital payments service that is a cornerstone of Ant’s business, he was stepping into controversial territory. That this crucial piece of digital infrastructure should have been created by a private enterprise in China, and not one of the state-owned banks or the central bank itself, was a risk. He repeatedly told key executives in Alibaba that he was willing to go to jail if it came to it, aware that launching the product might see him fall foul of the authorities. He had already formalised a line of successors should his underlings also have to follow him. The gamble paid off – as of last year Alipay had 700 million users and handled a staggering $17 trillion payments – all but $100bn of them within China alone.

It was deft moves like this that had propelled Ma to global fame and, until his recent change in fortunes, to his pedestal place as China's most successful business person. His comments could be seen as just another case of Jack being Jack, attempting to ward off the coming storm from the regulators. Had they paid off, and he managed to get his IPO through, it would have been another footnote in the long saga of his success. But it wasn’t to be.

The last time he was seen in public was at the Bund Summit itself, and after his meeting with regulators the trail goes cold. By December 31, 2020, media organisations in the West started reporting that Ma had gone missing. The Financial Times noted that he hadn’t appeared at Africa’s Business Heroes, a talent show where he was a judge. He was abruptly replaced for the show’s final shot in November, and promotional videos were hastily cut to remove any reference to him.

For Ma, a regular at international functions like Davos, to suddenly disappear after crossing the government raised eyebrows. In 2019, China’s most famous actress Fan Bingbing similarly vanished from view for four months. She emerged with a Weibo post pledging loyalty to the communist party and a fine of nearly £100m for tax evasion and other offences.

Could the same thing be happening to Ma? In early November, sources confirmed to the Wall Street Journal that Xi Jinping himself had been involved in halting Ant’s IPO. On realising that Ma had been absent from public view for a while, the rumour mill quickly cranked itself into overdrive.

Sources close to Ma told WIRED that he is lying low, keeping himself out of the spotlight and making himself available to the authorities while the regulators decide what to do about Ant. He is said to be in Hangzhou, the city where he founded Alibaba.

In a question and answer session with reporters in late December, Pan Gongsheng, a deputy governor of China’s central bank, said Ant’s corporate governance was “not sound” and ordered it to “return to its origins” as a payment services provider. However, as Zichen Wang, a reporter for the state-run Xinhua News Agency pointed out, neither Ant nor Ma were accused of breaking any law or committing any crimes.

They are accused of “rule-breaking” for the way that the company leveraged the poor regulatory framework in China to create an elaborate credit and lending system in such a short space of time without having to maintain the kind of leverage that banks do. If the crux of the complaint is a technical one on how the business operates, rather than egregious wrongdoing or illegal activities, it appears that Ma is not in serious trouble.

Instead, his decision to lay low may not just be because of the government itself, but because of pressure from the many investors and employees within Alibaba who have lost millions from the stalled IPO.

Ma has admitted in the past that Alibaba’s success is due in no small part to significant support from the local government in Hangzhou. He has said that his relationship with Beijing is cordial, but not close – he once told reporters that the best relationship you can have with the government is to “be in love with them, but don’t marry them”. On a local or provincial level that doesn't mean there is no significant government investment in Alibaba and Ant group. While these entities may not have the power of Beijing, their power should not be underestimated.

It is likely that we won’t see Ma until regulators have delivered a final verdict on what will happen to Ant and Alibaba. Until then, to be seen in public would mean fielding questions to which he may not yet have the answer; and to risk saying something that might once again put him in hot water. Reached for comment, a spokesperson for Alibaba declined to comment on when Ma can be expected to be next seen in public.

It can be easy, as some commentators have done, to portray this story as a clash of egos. China’s richest person tried to talk down a room of China’s most powerful politicians, and spectacularly failed.

But it’s far more complex than that. Ma’s star has dimmed in recent years in China. He stepped down as CEO of Alibaba in 2019 and hasn’t turned up to the two record-breaking Single’s Day events that the company has held since then, allowing the spotlight to shine on current CEO Daniel Zhang. His focus on philanthropic enterprises may have increased his profile in places like Africa and Latin America, but has meant he is less present in the Chinese media.

He has also made comments that have caused widespread ire amongst Chinese netizens. Referring to problems with overworking, which are endemic in China, he said people were lucky to have jobs that made demands of them. “I personally think that 996 is a huge blessing," he said, referring to work days that last from 9am to 9pm, six days a week. "How do you achieve the success you want without paying extra effort and time?" The comments did little to ingratiate him with the hundreds of hundreds of millions of struggling Chinese who are not billionaires.

If it wasn’t a clash of egos, then what brought the IPO crashing down in such dramatic fashion just days before it was supposed to go live? “It’s regulatory failure,” says Rui Ma, a tech analyst specialising on China. The fact that the IPO was called off so close to the line and in such dramatic fashion has cast aspersions on how mature markets are in the country. “The problem is that there is fine fragmentation of the regulatory bodies, which means that an internet business like Ant that spans multiple industries allows regulatory bodies to step back and say that’s not really my domain.” The fact that there are also a lot of powerful vested interests in Ant and Alibaba has also surely acted as a brake on any regulation.

In the shadow of the failed IPO, it appears regulators are keen for Ant to be seen as a financial services provider. Draft rules have already been drawn up which would place a $45,000 cap on microloans and that lenders will have to put up 30 per cent of the capital in any trade. This will mean a huge reallocation of assets and liquidity within Ant Group. If it is understood as a financial services company and not a tech company it will also create profound downward pressure on its future valuation if it ever does manage an IPO.

The fact that these rules did not come sooner represents a key issue that China faces as it develops into a mature economy with a more developed technology sector. The government is desperate to boost innovation and maintain steady economic growth, but it is wary of ceding too much control to private firms. In the realm of personal finance not only did Ant pose a risk in terms of leverage, but also in amassing such a huge body of consumer data that the government may find useful for its own purposes.

Chinese netizens have welcomed the government’s decision to intervene. Ant has been widely criticised for predatory lending in recent years. The two per cent leverage it held on its books created moral hazard to incentivise making ever riskier loans to people unable to pay them back. One commentator for a state broadcaster called Ant a “vampire” and a “parasite”. On Weibo one person commented, “Ant Group has been sucking the blood out of Chinese borrowers for a long time. The punishment is long overdue.”

It appears that the antitrust case against Alibaba will only deepen. Zhang Gong, the head of the The State Administration for Market Regulation (SAMR), reaffirmed the agency’s commitment to keeping the pressure on, according to an interview published on by Xinhua. Zhan said that SAMR will move first to cure the “causes” of monopolies and regulate their “consequences”."

MY COMMENT

As Americans........or.......citizens of other semi-free countries......we look at China through OUR experiences and actions....as well as EXTREMELY rose colored glasses. The TYPICAL person in the world.....outside of China....has NO CLUE about this totalitarian dictatorship and their leadership class. In my youth it was called......THE UGLY AMERICAN.......someone that was so caught up in their OWN view of life that they could not understand and had no clue that other countries and cultures were NOT the same as us.

As for myself......I will NEVER invest in a Chinese company.......I dont care to take the HUGE EXTRA RISK....outside of the company and its business......of doing so.

 

The attack of the banks........no not a sci-fi movie.....EARNINGS, this coming week. EVERY day is loaded with....BANKS, BANKS, BANKS.

Here are a few of the BIG earnings next week:

Monday: N/A

Tuesday: Halliburton (HAL), Charles Schwab (SCHW), Bank of America (BAC), Goldman Sachs (GS) before market open; Netflix (NFLX) after market close........plus a huge number of small banks.

Wednesday: Morgan Stanley (MS), US Bancorp (USB), Citizens Financial Group (CFG), Bank of New York Mellon Co. (BK), Procter & Gamble (PG), UnitedHealth Group (UNH) before market open; Alcoa (AA), United Airlines (UAL) after market close.........plus a huge number of small and mid size......yes.....banks.

Thursday: Truist Financial (TFC), Baker Hughes (BKR), Union Pacific (UNP) before market open; IBM (IBM), Intel (INTC) after market close........and......yes.......once again.....many more banks.

Friday: Kansas City Southern (KSU), Schlumberger (SLB), Ally Invest (ALLY) before market open......and.....YES.......more banks.

I guess after next week.....we will have a pretty good idea how the banks did this last quarter. If you LOVE bank stocks you will be in heaven this coming week. If you dont care about banks.....well......earnings will be a non-event for you and your portfolio.

At least.....for those of us that dont care about banks......the inauguration will occur on Wednesday. At that point ALL of the....regulatory, tax, and legislative plans.....that have been speculated about WILL quickly become REALITY. I cant wait.........I am actually being SERIOUS. I would rather deal with REALITY......as an investor.....even if I dont like it.....compared to rampant speculation and opinion in the media. It will ALSO be better for the markets....to be able to deal with REALITY.

 

A while back.....I posted about the IRa sending me a notice that my 2019 tax return was received a month late. It WAS NOT late and they reversed themselves.....of course.....they would NOT admit they screwed up. Now I see why it was......PERCEIVED.....as late:

Americans should avoid filing paper tax returns amid backlog, IRS says

https://www.foxbusiness.com/economy...o-avoid-filing-paper-tax-returns-amid-backlog

A WARNING.......and......A TIP to anyone that is considering sending in a paper return in April.....I will be taking my own advice on this issue...

TAKE your return to the post office in person and mail by priority mail with a tracking number. Personally.....I will want to have a receipt proving when I mailed it.......and......tracking ability. I have always just dropped my return in the mail box.....from now on I will take it to the post office in person.

I will.....ALSO....pay the extra $1.50 and get a "certificate of mailing" from the post office:

"Proof of Mailing
For added peace of mind, you can buy a Certificate of Mailing at the Post Office. A Certificate of Mailing is a proof of mailing receipt that proves you mailed your tax return on a certain date. After you send your taxes, keep your receipt in a safe place. The Postal Service® does not keep copies of receipts. If your return is delayed or lost, the postmark will not be available, but your Certificate of Mailing receipt will prove that you mailed your return on time."

 

As a long term.......fully invested all the time.....lifetime investor....I consider what I do OUTSIDE my stock investments as just as important as those assets. I have INTENTIONALLY set up my financial and every day life to......TRY......to give myself a safe and secure asset base from which to live life. I tried to..... NOT....get too bogged down in the weeds and details.....but.....I have INTENTIONALLY tried to UNIFY my financial assets. By setting my financial assets up in the fashion that I have......I allow myself to take the ADDED RISK......of being fully invested in 100% stocks and funds all the time. I do not need......extreme risk tolerance.......even though I do have a fairly high risk tolerance.....because my life and income are secure without my stocks and funds.

My GENERAL plan involves SEVEN PILLARS:

1. STOCKS and FUNDS. My brokerage accounts containing stocks and funds. These accounts are fully invested 100% in stocks and funds....100% of the time. I do not......and....never have owned any bonds in these acccounts. I want to achieve the growth that ONLY stocks can provide.....for life. this is my primary LONG TERM investment vehicle.

2. REAL PROPERTY. I believe EVERY investor should have exposure to real property. First for diversification and second as another long term growth asset. Secondarily, as a lifestyle enhancement. My real property allocation is simple.....it is my primary residence. I have had a paid off home since I was about 36 years old. This was important for me.....as a small business owner. With my personal assets on the line every day for my business and being in a business that had erratic income.....due to the nature of the business........as well as significant monthly overhead....about $25,000 per month.....I choose to NOT have a house payment.

3. ART, ANTIQUES, PERSONAL PROPERTY. I have maintained a significant asset base in this category over many years. These assets represent hard assets that I could convert to cash if necessary. These are items with distinct markets........and.....they are sold at auction houses. I REALIZED many years ago that I could buy items that would hold their value.......and....hopefully actually increase in value over the years.....instead....of buying cheaper "stuff" that would become worthless over time. Furnishings, art, personal property........items......that give me quality of life and personal satisfaction.....and....at the same time have monetary value. They also offer some protection from inflation.

4. FIXED INCOME. When I was age 65 I purchased $1.8MIL of income annuities. PLAIN.....SIMPLE.....income annuities. These pay me and/or my wife a lifetime income. Basically like purchasing a pension. I deferred the income on these annuities till age 70 to allow the pay out to be higher. I structured the annuity amounts so I would be protected under my State Insurance Guarantee fund...by using three different insurance companies and placing three annuities under my name as primary annuitant and three under my wife's name as primary annuitant. ALL six annuity contract will pay the ENTIRE AMOUNT for the life of myself......AND..... my wife whichever one of us lives longest. ALL SIX annuities will pay either one of us.....they do not terminate or change while at least ONE of us is alive.

These annuities ALLOW me to be a LIFETIME stock investor. I will NEVER need to use any of my brokerage account funds for living expenses. Therefore......I can and will.......continue to be a fully invested all the time......long term investor.....for life. As a self employed businessman......I had NO pension other than my own assets.....these annuities are my retirement income......although they are NOT purchased with tax deferred money or in a tax deferred account.

5. RETIREMENT VEHICLES. During my life as a business owner up to age 49 in 1999......I established a KEOGH plan....a type of pension plan that used to be used by many small businesses. I contributed the MAXIMUM ($30,000) every year that I could. The funds in the KEOGH account were invested in mutual funds. When I retired, I rolled the KEOGH over into an IRA.

When I hit age 59.5.....I began to use the IRA funds for my annual income. I INTENTIONALLY EXHAUSTED the IRA money from age 59 to age 69. I had no need for the IRA money at that point with the annuities kicking in at age 70. In addition......and....more importantly....I wanted to EXHAUST the IRA funds FIRST....because....it was taxable income.....subject to FULL income tax rates.

Going forward after age 70....my annuities SIGNIFICANTLY reduce my TAX BILL. EACH annuity payment is broken down into return of principal and earnings. The MAJORITY of each annual annuity payment is return of principal. As a result .....starting at age 70.....my income tax LIABILITY each year.......has been cut from $25,000 to $40,000 depending on the year....to an average of about $8000 per year.

In addition.....since my brokerage accounts are taxable accounts......if I did choose to take funds out of those accounts for some use.....they would be taxed as capital gains......NOT.....as regular income.

6. SILVER AND GOLD. Over many years......at least 40+ years....I have purchased a small amount of PHYSICAL silver and recently gold each year. NOT as an investment.....simply as a fun little diversion. Over many years the "little amounts have become a nice "little" EMERGENCY HOARD.

7. SOCIAL SECURITY. I consider Social Security an assert. In addition to the income annuities it provides a nice little chunk of our annual income. Being on MEDICARE has greatly REDUCED our cost for medical insurance and drugs. I know that a lot of younger people think it will NOT be around when they retire. I personally...dont see this happening. It WILL be around......the retirement age WILL slowly increase......BUT......most people WILL get benefits when they retire.

SO........this is how I INTENTIONALLY set up my financial life.....starting many many years ago. At first I did not have a plan.....but......starting about 40 years ago....it all kind of EVOLVED into.....and..... fell into place as the unified plan above. It has ALL worked NICELY as a LONG TERM LIFE PLAN. We did a lot along the way to treat ourselves.....we did not live like MONKS........we bought and sold 10 houses......lived life.....raised kids......BUT....through it all we had the long term discipline to slowly ENERGIZE the plan.....WITHOUT.....being fanatical about it to the point that we were missing out on living life.

WHY am I posting this? WELL......it is a BORING day with the markets closed.......and.....JUST to show that ANYONE can use the power of long term thinking to give yourself a good life and a good retirement. The amount of time that it takes to do this......spread over many, many years.....is MINIMAL. It just takes a little bit of LONG TERM VISION and PLANING in a realistic and reasonable way....as well as ESTABLISHING GOALS. YOU....might not hit all the goals.......and....things may EVOLVE along the way......BUT.....having somewhat of a plan is better than just being.....RANDOMLY....... carried wherever the winds might take you.

 

MANY of us know this information.....BUT.....for younger and new investors here is a little info on CAPITAL GAINS and CAPITAL GAINS TAXES:

A Guide to the Capital Gains Tax Rate: Short-term vs. Long-term Capital Gains Taxes

https://www.thestreet.com/personal-...rm-capital-gains-taxes?puc=yahoo&cm_ven=YAHOO

"The Internal Revenue Service taxes different kinds of income at different rates. Some types of capital gains, such as profits from the sale of a stock that you have held for a long time, are generally taxed at a more favorable rate than your salary or interest income. However, not all capital gains are treated equally. The tax rate can vary dramatically between short-term and long-term gains. Understanding the capital gains tax rate is an important step for most investors.

What is a capital gain?
Capital gains are profits you make from selling an asset. Typical assets include businesses, land, cars, boats, and stocks. When you sell one of these assets for more than the price you paid to buy the asset, that can trigger a taxable event. This often requires that the capital gain on that asset be reported to the IRS on your income taxes.

What's the difference between a short-term and long-term capital gain?
Generally, capital gains are taxed according to how long you've held a particular asset – known as the holding period. Profits you make from selling assets you’ve held for a year or less are called short-term capital gains. Alternatively, gains from assets you’ve held for longer than a year are known as long-term capital gains. Typically, there are specific rules and different tax rates applied to short-term and long-term capital gains. In general, you will pay less in taxes on long-term capital gains than you will on short-term capital gains.

What is the 2020 short-term capital gains tax rate?
You typically do not benefit from any special tax rate on short-term capital gains. Instead, these profits are usually taxed at the same rate as your ordinary income. This tax rate is based on your income and filing status. Other items to note about short-term capital gains:

• The holding period begins ticking from the day after you acquire the asset, up to and including the day you sell it.
• For 2020, ordinary tax rates range from 10% to 37%, depending on your income and filing status.

2020 Short-Term Capital Gains Tax Rates

What is the 2020 long-term capital gains tax rate?
If you hold your assets for longer than a year, you can often benefit from a reduced tax rate on your profits. Those in the lower tax bracket could pay nothing for their capital gains rate, while high-income taxpayers could save as much as 17% off the ordinary income rate, according to the IRS.

2020 Long-Term Capital Gains Tax Rates

What are the exceptions to the capital gains tax rate for long-term gains?
One major exception to a reduced long-term capital gains rate applies to collectible assets, such as antiques, fine art, coins, or even valuable vintages of wine. Typically, any profits from the sale of these collectibles will be taxed at 28% regardless of how long you have held the item.

Another major exception comes from the Net Investment Income Tax (NIIT), which adds a 3.8% surtax to certain net investments of individuals, estates, and trusts above a set threshold. Typically, this surtax applies to those with high incomes who also have a significant amount of capital gains from investment, interest, and dividend income.

What is the capital gains rate for retirement accounts?
One of the many benefits of IRAs and other retirement accounts is that you can defer paying taxes on capital gains. Whether you generate a short-term or long-term gain in your IRA, you don’t have to pay any tax until you take money out of the account.

The negative side is that all contributions and earnings you withdraw from a taxable IRA or other taxable retirement accounts, even profits from long-term capital gains, are typically taxed as ordinary income. So, while retirement accounts offer tax deferral, they do not benefit from lower long-term capital gains rates.

How can capital losses affect your taxes?
As previously mentioned, different tax rates apply to short-term and long-term gains. However, if your investments end up losing money rather than generating gains, those losses can affect your taxes as well. However, in this case, you can use those losses to reduce your taxes. The IRS allows you to match up your gains and losses for any given year to determine your net capital gain or loss.

• If after fully reducing your gains with your losses and you end up with a net loss, you can use up to $3,000 of it per year to reduce your other taxable income.
• Any additional losses can be carried forward into future years to offset either capital gains and up to $3,000 per year in ordinary income.
• Since you don't generate capital gains or losses in a retirement account, you can't use losses in IRAs or 401(k) plans to offset gains or your other income.

How can you minimize capital gains taxes?
There are several ways you can minimize the taxes you pay on capital gains:

1. Wait to sell assets. If you can keep an asset for more than a year before selling, this can usually result in paying a lower capital gains rate on that profit.
2. Invest in tax-free or tax-deferred accounts. By investing money in 401(k) plans, Roth IRA accounts, and 529 college savings plans, you could save significantly in taxes. This is because these investments are able to grow tax-free or tax-deferred, meaning that you won't have to pay capital gains taxes on any earnings right away — and in certain circumstances, you won’t pay any tax even when you take the money out.
3. Don't sell your home too quickly. One major exception to the capital gains tax rate on real estate profits is your principal residence. If you have owned your home and used it as your main residence for at least two of the five years prior to selling it, then you can usually exclude up to $250,000 of capital gains on this type of real estate if you're single, and up to $500,000 if you're married and filing jointly. It's also important to note that you typically can't exclude multiple home sales from capital gains taxes within two years."

MY COMMENT

The above is a little bit of NECESSARY information for EVERY investor.

THIS is an investing thread.....the above is NOT intended as tax advice to ANYONE. If you have TAX QUESTIONS talk to a professional.......DO NOT make tax assumptions based on this thread.

 

YEAH......the government gives NO tax break to collectors. If they could figure out some way to TAX the enjoyment of the item while the collector owns it.....they would. At least they let you keep the other 72 cents on every dollar in gain that you might get.

OK.....we are back in business tomorrow......time to make some money.

 

NICE OPEN today......so far. We seem to be seeing a little bit of a drop from the open.....that is either an issue with follow through.....or.....simply profit taking from the nice open. Time will tell as we move through the day. I SUSPECT that we will see a strong day since......bank earnings hit it out of the ballpark.....and Yellen is going to PUMP money into the economy. This little article pretty much sums up today....so far:

Stocks surge as Yellen set to tell Congress to 'act big' on coronavirus stimulus

https://www.foxbusiness.com/markets/us-stocks-jan-19-2021

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

"U.S. stock futures were pointing to a higher open in President Trump’s final full day in office as traders awaited Treasury Secretary nominee Janet Yellen’s Senate testimony on Capitol Hill.

Dow Jones Industrial Average futures were higher by 183 points, or 0.6%, while S&P 500 futures and Nasdaq Composite futures were up 0.78% and 0.91%, respectively. The major averages were closed Monday in observance of Martin Luther King Jr. Day.

Yellen, the former Federal Reserve chair, will appear before the Senate Finance Committee Tuesday for her confirmation hearing. Yellen will say Congress needs to "act big" to combat the economic slowdown caused by the COVID-19 pandemic, including extending more aid to families and providing additional money to expedite the distribution of vaccines.

In stocks, Goldman Sachs Group reported strong quarterly results that were bolstered by continued strength in dealmaking and trading. Annual investment banking revenue hit a record while trading revenue was the strongest in a decade.

Bank of America reported a quarterly profit that exceeded estimates but revenue fell short. The firm’s board of directors announced a $3.2 billion share buyback plan.

In deals, Lumentum Holdings agreed to buy laser manufacturer Coherent Inc. for $5.7 billion in cash and stock. Coherent shareholders will receive $100 cash and 1.1851 shares Lumentum shares for each Coherent share they own.

Elsewhere, Tesla Inc. delivered its first made-in-China Model Y crossover vehicle.

GameStop Corp. shares squeezed higher for the third time in four sessions as short-sellers continued to head for the exit. Shares had gained 78% over the three trading sessions through Friday.

In commodities, West Texas Intermediate crude oil ticked up 18 cents to $52.54 per barrel and gold climbed $5.10 to $1,835 an ounce.

Germany’s DAX 30 paced the advance in Europe, up 0.3%, while Britain’s FTSE 100 was higher by 0.12% and France’s CAC 40 edged up 0.08.

Asian markets ended mixed with China’s Shanghai Composite sliding 0.83% while Japan’s Nikkei 225 rallied 1.39% and Hong Kong’s Hang Seng added 2.7%."

MY COMMENT

We have had an ERRATIC month so far. As I type this the DOW is now STILL falling a little bit.....now down into the 170's from the higher open. TALK ABOUT....the short term....I am talking about the first ten minutes of the market day in this post.....YIKES. On earnings....Halliburton and Experian both......generally.....had earnings beats. Netflix will report after the close.....I assume they will produce an EASY beat with the pandemic viewing bump. I am sure a HUGE number of people........like we did.....added Netflix due to staying home more in the virus economy. As I continue to type the DOW is now continuing to FADE.......now at 115.

 

WOW.....weight333. $19,500 is a HUGE amount of saving in a year. YOU are a super-saver. If I am remembering correctly.....you work in public service? If so....I assume that your normal work week is 10 hour days. One of my kids and their spouse works in public service. They......also....benefit greatly from working a 10 hour day and having overtime available. One of them ROUTINELY works their four ten hour days and than adds an extra work day each week from the overtime pool. It is a HUGE advantage to have the ability to add extra income whenever it is needed by being able to work overtime.

I DO NOT collect sports cards or any sports items.....but......I do follow the Heritage sports auctions. I get all their auction catalogs (those that I have designated to receive).......as a good customer.......I am not sure it is a good thing to be a "good customer" of an auction house.

The prices and strength of the sports collectables market has been AMAZING. The market has REALLY MATURED. It has moved from little card shops in the 1980's and 1990's to the big time auction houses now. AMAZING that a Mickie Mantel rookie card from 1952 recently sold for $5.2MIL........in PSA 9 condition.....a very rare condition.

In my generation.....MANY....of us probably had that card when we were kids. I remember having some of those early cards in the late 1950's.....Roger Maris, Mickey Mantel, etc, etc.......but....back than none of us really cared about condition and none of us kept those cards as we got older.

 

"Never look a gift horse in the eye".......even if it is comic books or sports cards.

Yeah....weight.....my kid and spouse will be able to retire at FULL pay after 30 years.....regardless of age. Like you they are also in a large city...but the crime rate is reasonable......and....NO mandatory overtime. They contribute 13% of their pay to the pension. They get 3.3% of final pay per year in the plan. My kid will have 12 years this year at age 36.......so will be able to retire at FULL PAY at age 54. The spouse will be about the same.

I have BOTH of them putting $500 per month each into a SP500 Index Fund......on automatic deduction from their checking accounts. A month ago they hit $200,000 for the first time and were GENUINELY EXCITED. They are usually not too into investing....but hitting that number got the GREED going. They can NOW see what I have been talking about all these years. I told them that a GREAT pension is a......very rare and good thing these days.....but......you dont want to have to live for the next 40 years after you retire like you are living on a JOB SALARY. Having the extra $1-2MIL that the life long investing will give you......plus Social Security....... will provide TOTAL FREEDOM and allow you to do much more in your young retirement than if you are still living on wages like you are working a job. PLUS....their retirement will NOT be indexed to inflation. I told them if they got up to $500 per month each....I would QUIT BUGGING them about investing.

Zukodany.....you might be right....you are an expert in that area. Whatever the reason....the prices have gotten so high......that comics and sports collectables have taken on a life of their own. The collecting area is NOW spilling out BEYOND the sports and comic collectors. Those items are becoming a HIGH END investment commodity for the rich and famous to use as a financial hedge.

 

TODAY.....nicely green. BUT....got beat by the SP500....again......by .49%.

Looks like Netflix blew away earnings today after the bell:

Netflix shares rise 13% on strong subscriber growth, considers share buybacks

https://www.cnbc.com/2021/01/19/netflix-nflx-q4-2020-earnings.html

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

"Key Points

• Netflix reported fourth quarter 2020 earnings Tuesday that beat analyst expectations on revenue and net subscriber additions but fell below EPS estimates.
• The company said it is close to being free cash flow positive and will consider returning cash to shareholders through buybacks.
• Netflix said it would no longer need to raise external financing for its daily operations.

Netflix reported earnings for the fourth quarter of 2020 after the bell on Tuesday, announcing it is “very close” to being free cash flow positive and is considering stock buybacks. This year, it expects to be around break even on cash flow.

The stock was up about 13% after hours.

Here are the key numbers:

• Earnings per share (EPS): $1.19 vs$1.39 expected, according to Refinitiv survey of analysts
• Revenue: $6.64 billion vs $6.626 billion expected, according to Refinitiv
• Global paid net subscriber additions: 8.5 million vs 6.47 million expected, according to StreetAccount

Netflix’s expectation of soon becoming free cash flow positive would bring to life the bull case for the stock. Netflix said it would no longer need to raise external financing for daily operations and would even explore returning cash to shareholders.

Netflix hasn’t made such a move since 2011, a pivotal year in the company’s shift from DVDs to streaming.

The company said it intends to pay down more of its debt as well. It’s raised $15 billion in debt since 2011 and currently has $8.2 billion cash on hand.

Netflix has been free cash flow positive for the past three quarters, though executives mostly credited that as an effect of postponed production during the pandemic. Free cash flow for Q4 was negative as predicted due to production restarts in some regions, but not as significant as expected. Free cash flow for full year 2020 was +$1.9 billion versus -$3.3 billion in 2019.

In Q4, Netflix had to contend with several new competitors in streaming including Apple TV+, Discovery+, Disney+, HBO Max from AT&T’s WarnerMedia and Peacock from CNBC parent NBCUniversal. Still to come is ViacomCBS’s Paramount+.

Executives said in their letter to shareholders that 2020 was a “testament” to the company’s approach of improving the platform for subscribers’ satisfaction to stand up to competition.

“Disney+ had a massive first year (87 million paid subscribers!) and we recorded the biggest year of paid membership growth in our history,” executives wrote.

The company shared details of some of its biggest hits from the quarter, like “The Queen’s Gambit,” which 62 million member households watched in the first 28 days on the service. In addition to becoming the “biggest limited series in Netflix history,” Netflix boasted its cultural impact, prompting chess board sales.

“The Midnight Sky,” starring and directed by George Clooney, was the biggest original film of the quarter, Netflix said, with 72 million member households watching in the first four weeks.

Netflix said production is “back up and running in most regions.” It previously announced it would plan to release one new original film per week in 2021."

MY COMMENT

I do not own this stock.....but......hopefully.....this will drive the markets tomorrow. We NEED to see a sustained move UP from here. WHY? Well just.....because.

Actually I want to make some new investing goals and it would be nice to see a positive two or three months. If we can RACK UP some good earnings in addition to ALL the money that is going to be PUMPED into the economy.......we should be in a good position for a few months.

 

OK.....I cant help it......I have to talk about Jack Ma. I dont know why....but......perhaps I have a weird sense of humor....but It is REALLY funny to me to wake up to the media today nearly GLOWING that.....JACK IS BACK. He made a "PUBLIC APPEARANCE" today and gave a speech.....blah, blah, blah. So I decide.....well what did he.....actually.... say, since no one I heard in the sound bites had any of the speech. So I look up the FACTS......and find:

The so called......public appearance.......was not live or in person....it was on video. One source describes it as being from a grey walled room that the location could not be identified. SO....I continue reading.....the ENTIRE video was.....50 seconds long.......YES......a WHOLE 50 seconds. SO....he has STILL.....NOT......been seen....or.....appeared..... in public.

As to his remarks........

"Ma said in the video remarks that he has been “learning and thinking” and he concluded that Chinese entrepreneurs must serve the country’s visions of “rural revitalization and common prosperity”.

I BET he has.....been "learning and thinking"........in ONLY the way that the phrase can be used when dealing with the worlds most totalitarian communist dictatorship. I LOVE the part about how Chinese entrepreneurs.....MUST.....SERVE the countries vision.

I LOVE the part of the 50 second video where he states:

"China has realized a complete eradication of poverty and is revitalizing the countryside in a “new development stage” of “common prosperity” for the nation."

YEAH....RIGHT......we ALL know that is true.

AND.....of course the spokesman for.....the CHINESE COMMUNIST GOVERNMENT........UHHHHH, I mean a think tank.....sums it all up in a press release that:

The key message that Jack Ma wants to express via this public appearance is that … Alibaba is still operating normally and the government has not specifically suppressed the company,” “This is also a message to the capital market that the Chinese government does not target privately owned companies.”

I just LOVE IT...........YEAH.....this is REALLY going to make me run out ant invest in Chinese companies. ANYWAY......I just thought it was HILARIOUS.....so I had to post this.......sorry. You just could not possibly get any more transparent on what is REALLY going on behind the scenes. REMINDS me of some really bad Saturday Night Live skit from the 1970's when they had their classic cast. I can just see John Belushi playing Chariman Xi Jinping.

 

NOW......back to our previously scheduled talk about investing.....the markets are on fire today. I have not looked at any accounts today....so I dont know how broad this rally is....but I am sure it is a GOOD ONE. The positivity should carry over for the rest of the week.

I noticed that one of my.....OLD SCHOOL.....holdings......PG.......totally kicked ass on their earnings. This company is one of the last of the old time stocks and conglomerates and dividend kings that I STILL hold.

P&G raises forecast after earnings top expectations, fueled by 8% jump in sales

https://www.cnbc.com/2021/01/20/procter-gamble-pg-q2-2021-earnings.html

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

"Key Points

• Procter & Gamble said its fiscal second-quarter revenue rose 8%, led by higher demand for its cleaning products and grooming tools.
• The Tide owner is among the consumer companies that have benefitted from at-home consumption trends driven by the coronavirus pandemic.
• P&G raised its fiscal 2021 outlook for the second consecutive quarter.

It also said its second-quarter revenue rose 8%, fueled by higher demand for its cleaning products and shaving and styling products as the pandemic continues to guide consumer behavior.

The company, whose brands include Tide, Pampers and Bounty, now expects sales growth of 5% to 6% in fiscal 2021, up from its prior outlook of 3% to 4% growth. It is also forecasting that its adjusted earnings will rise 8% to 10%, up from the previous target of 5% to 8%.

Shares of the company fell 1% in early trading Wednesday.

Here’s what the company reported for the quarter ended Dec. 31 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: $1.64, adjusted vs. $1.51 expected
• Revenue: $19.75 billion vs. $19.27 billion expected

P&G reported fiscal second-quarter net income of $3.85 billion, or $1.47 per share, up from $3.72 billion, or $1.41 per share, a year earlier.

Excluding items, the company earned $1.64 per share, beating the $1.51 per share expected by analysts surveyed by Refinitiv.

Net salesrose 8% to $19.75 billion, topping expectations of $19.27 billion. Its organic sales, which strip out the impact of acquisitions, divestitures and foreign currency, also rose 8%. New products helped lift the quarter’s sales.

“It’s a combination of products that were planned and a quick response to real, emerging needs,” CFO and COO Jon Moeller said on CNBC’s “Squawk Box.”

Its Microban 24-hour disinfecting spray, for example, launched in February just before U.S. consumers began buying up every cleaning product they could find because of the pandemic.

P&G’s fabric and home care segment saw organic sales rise 12% in the quarter, the company’s largest increase by business unit. Home care, which includes Comet cleaning products, saw organic sales growth of 30% as more consumers cleaned surfaces and dishes.

The health-care segment, which includes Oral B and Vicks products, reported organic sales growth of 9%. Price increases combined with consumer demand for higher-end products boosted sales. But the company said demand for its respiratory products was lower this year because fewer people contracted colds or the flu.

The grooming and baby, feminine and family care segments saw organic sales rise 6% in the quarter. Organic sales of P&G’s grooming appliances jumped 20% as consumers look for at-home styling and shaving products.

P&G’s beauty segment, which includes Olay and SK-II, reported organic sales growth of 5%.

The distribution of vaccines has prompted questions abut whether consumer giants like P&G or Conagra Brands will be able to sustain the same pace of growth once their customers are back to their previous routines. Moeller said on a press call that there will likely be reduced demand for some of its products that experienced significant sales surges, but other products that were weakened by recent trends may bounce back. The company is also predicting the disappearance of “some very strong headwinds,” like supply chain challenges.

In fiscal 2021, P&G is forecasting foreign currency headwinds that will cost about $100 million after tax, as well as higher freight costs that will also cost $100 million after tax.

The company expects it will buy back as much as $10 billion of its own stock during the fiscal year, up from a prior estimate of $7 billion to $9 billion."

MY COMMENT

Those numbers, above, represent a MASSIVE earnings beat.

OF COURSE.......as always happens in the modern stock market era.......the share price is DOWN over 1% on this news. In my opinion....this company.....is one of the few old school BIG CAP CONGLOMERATES that has made the transition to the modern economy. There is some REAL thinking going on with management in this company.

It is a shame that many of the other BIG CAP OLD SCHOOL companies just sat back and allowed their dominant, iconic, product lines to be trashed by total failure of management and marketing. COMBINE some......nimble management and marketing.....with the old school products of some of the BIG OLD companies and there is good potential to REVIVE them........but when or if it will happen.....who knows. Until it does happen I will avoid many of the.....former.....BIG CAP GIANTS. IF....it does ever happen....I would definately consider some of them.