The Long Term Investor

SO.......here we are in the middle of a very nice one day rally to start the second quarter. At this point we are about 367 points in the DOW away from the ALL TIME HIGH. Who would have imagined back on Christmas Eve. We are less than 2% away from the record high....actually 1.4%. We are about 2.2% away from an ALL TIME HIGH in the SP500, about 64 points.

As I type this the markets just closed with the DOW at +329.53 and 26,258 (subject to closing adjustment as prices settle). The SP500 ended the day at +30.62 and 2,865 (subject to settlement).

KICKING ASS people. The past year is EXACTLY the reason that I am a LONG TERM INVESTOR and is the perfect micro-example of the UP and DOWN nature of the markets over the short term and the CONSTANT potential for people that get emotional over this short term stuff to SCREW themselves.

My PORTFOLIO MODEL is now beating the SP500 regularly on the DOWN days and half or more of the UP days. TODAY SP500 is up 1.16%. PORTFOLIO MODEL stocks up 1.43% for the day. The KEY is to string this along for the medium term to get to where it means something. It will be interesting to watch the remainder of this year. I am sure there will be much DRAMA and turmoil as we move forward........as is usual with short term market action.

 

So HERE are the news items and take on the markets today. You will NOTE that the FEAR ITEMS of the past week.....China, slowing global growth, and other NEGATIVE items being pushed last week are now GONE...

Dow rises 300 points as China data eases global growth worries

https://www.marketwatch.com/story/u...ating-bullish-start-to-new-quarter-2019-04-01

Dow Leads Markets Higher On Bullish Economic Data

https://www.investors.com/market-trend/stock-market-today/the-stock-market-today-dow-leads/

Dow rallies more than 300 points to start off new quarter on strong US and China data

https://www.cnbc.com/2019/04/01/stock-market-futures-rise-on-strong-china-data-trade-progress.html

MY COMMENT

WTF.......where did the DOOM&GLOOM items and concerns of last week go? HOW can things change so much in a few days? What in the world is going on? WELL......the usual. Political content, bias, and opinion being pushed as financial news. The NEED for eyeballs and clicks by the financial media. The fact that the VAST majority of financial articles published as news these days are simply UNINFORMED OPINION written mostly by SO CALLED journalists that are under age 33 and have NEVER invested to any extent or even lived in the normal world for any length of time.

HAPPY DAYS ARE HERE AGAIN........till........whenever.

 

I totally agree with the premise of this article. HOW and WHY we ever got to this point where EVERYONE thinks it is the job of the FED to control, run, and manage the economy is beyond me. Their history is a record of one DISMAL failure after another. I guess that is why economics is known as the DISMAL SCIENCE. (look up the origin of the term for an interesting historical account) UNFORTUNATELY for the WORLD, the field of economics is anything but science.

BUT.....I digress. In my simple opinion this little article contains the key to economic prosperity......and as a side benefit a golden era for stock and fund investors.

The "Magic Formula" Is The Secret To Another Century Of American Prosperity

https://www.forbes.com/sites/nathan...dium=email&utm_campaign=20190401#7855172355fb

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

"Economics is easy. You just have to get two things right: Low Taxes, and Stable Money. Get this right, and everything else tends to follow with relative ease. Get it wrong, and the endless problems and difficulties that ensue will prove insoluble.

I like to call it "the Magic Formula." If it seems obvious, that's because it is. Capitalist economies don't really work very well when taxes are high or money is unstable. Nevertheless, the Magic Formula is often ignored. Taxes today are not very low; money is not very stable; both might get worse, not better. This has consequences.

I explore this idea in my new book, The Magic Formula, which is now available in print and eBook versions. I don't think people have much idea just how good things can get, with the Magic Formula. It is not a matter of an extra five or ten percent of economic growth. Over the course of only a few years, it can be hundreds of percent. High growth emerging market economies commonly expand at a rate of about 12-16% per annum (nominal growth with a stable currency). But, even an increase of growth by one percent per year -- an amount so small that it is barely noticeable -- can change a country's destiny. In 2018, the U.S. Federal government's debt held by the public was 78% of GDP. Using the Congressional Budget Office's assumption of 1.9% real growth, the debt is forecast to rise to 127% of GDP in 2040. But with 3.0% real growth (the growth rate experienced in 2018 in part due to the recent reduction in corporate taxes), debt/GDP in 2040 has been estimated at 58%.

When you get on the wrong side of the Magic Formula, all these things work in reverse. I call it the "Spiral of Decline." Higher taxes lead to a sluggish economy; tax revenues disappoint; unemployment rises; demands for every kind of socialistic welfare program increase, and justifiably so given the genuine difficulty; corporations turn to government subsidy and corruption to stay afloat; spending rises; budget deficits increase. The next step is commonly a combination of higher taxes, and some kind of "easy money"; and the Spiral of Decline takes another turn for the worse. You can see this process happening all around the world today, among some European governments, or in high-tax States like New York, Illinois and California. In the book, I describe how a similar process led to the disintegration of the Muslim Caliphates in the eleventh century, the Spanish Empire in the seventeenth century, and the British Empire in the twentieth.

One of the things that history shows is that things can get really bad -- Venezuela-like bad -- but a country can recover, in surprisingly short time, once it embraces the Magic Formula. Actually, a country might not only "recover" to some prior level of prosperity, but begin an advance to unprecedented new heights. China actually adopted communist central planning, with results so bad that famine became common. Its economic advance in recent decades, fueled by the Magic Formula, has been a wonder to behold. Greece, one of Europe's laggards today, could become one of the wealthiest countries in Europe, if it adopted the Magic Formula. It wouldn't take long, either; probably, one generation would do it. As I describe in the book, Ireland was for two centuries one of Europe's poorest countries; after the government turned toward the Magic Formula in 1985, it took only twenty years to surpass Germany to become one of Europe's wealthiest. (Unfortunately, the financial crisis in 2008 knocked Ireland off the growth path.)

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Today, in the U.S., we are actually talking about 70% income tax rates and "modern monetary theory." As debt, deficit and entitlement issues intensify in coming years, the U.S. government may turn to higher taxes and, when the economy drags as a result, "easy money" in response. We could have another century of prosperity in the United States, but it will require the Magic Formula -- either as a means to avoid a crisis, or a means to recover afterwards.

But the Democrat socialists are not the only danger. Unfortunately, throughout U.S. history, Republicans have often been as bad as Democrats about this. During the 1950s, top U.S. income tax rates were as high as 91%; the country had four recessions in twelve years, 1949-1960. President Dwight Eisenhower consistently blocked Congressional Republicans' attempts to lower tax rates, citing budget deficits. In desperation, and with an election coming up, the Eisenhower administration took to leaning on the Federal Reserve for assistance; it caused a minor monetary crisis in 1960. It took Democratic President John F. Kennedy to begin the process of amending these self-destructive policies. Taxes in Britain, in the 1950s and 1960s, were far worse; the result was that, in 1970, per-capita GDP in Britain was less than half that of the U.S. In thirteen years of Conservative rule during those decades, nothing was done. Instead, the British pound was devalued twice. Britain had to wait until Margaret Thatcher's embrace of the Magic Formula in the early 1980s stopped the long decline. Today, a broad swath of conservatives remain convinced that keeping U.S. corporate tax rates among the highest in the OECD would have been the only fiscally responsible course. They are as wrong as their predecessors.

I think we are entering an era when big changes will take place. The "post-WWII arrangement" that has long defined the limits of policy will pass; and something new will take its place. This "something new" is likely to be much more socialist, as every Democrat loudly declares today; or, it will become much more capitalist, closer to the America of old, when income taxes were unconstitutional and money was based on gold; and when the Magic Formula not only propelled the United States to the first rank of countries, but inspired the rest of the world to imitation."

MY COMMENT

I was looking at an old tax return a few days ago from 1982. If my memory is right the top tax rate back than was about 60-70%. My return showed an income of about $284,000 and I paid just under $100,000 in income taxes EVEN WITH income averaging. For those too young to know what I am talking about back in those days you could "income average" your taxes over a time period of years to reduce the extreme impact of one high income year. This was done with a form that was part of your income tax return and had the calculations based on averaging a number of years of taxable income. How GROSS is that, the government took 35% of my income for taxes, NOT counting social security and medicare taxes, local taxes, property taxes, gas taxes, sales taxes, business B&O taxes on the city, county, and state levels, FUTA tax, L&I premium (tax), etc, etc, etc. WELL OVER 50% of what I made was going out in taxes.

ANYWAY.....this little article is SO RIGHT. AND, it is so PATHETIC that we NEVER seem to learn the lessons of history.

 

HERE is another article that touches on the topic of the post above:

From a whimper to success

https://www.washingtontimes.com/news/2019/apr/1/eastern-europe-shows-what-can-happen-when-free-mar/

MY COMMENT

THE economic MIRACLE of Europe is the Eastern countries like Estonia, Poland, etc, etc. UNFORTUNATELY the rest of the continent is in the process of committing cultural and economic suicide. NOT a pretty picture for INVESTORS or citizens.

 

I have mentioned a few times in this thread that my NET WORTH MIX is made up of stock/funds, real property, Income annuities and social security, and hard assets. The hard assets are primarily personal property and a little bit of gold and silver. I AM NOT a gold or silver nut. We started many decades ago buying sterling silver at Salvation Army and Goodwill in their junk bins, often in the form of silverware. We than evolved to buying a mint sleeve (20 coins per sleeve) or two of Silver Eagle coins each year just for fun. We stopped buying the silver when we got over 1000oz, and switched to buying one or two AMERICAN 1oz gold coins each year. We continue this habit today and expect to do so for the rest of our lives. We DO NOT see the metals as an investment in the slightest. It is simply an alternative asset that has value and is somewhat liquid and might have good value in a rare and extremely unlikely emergency economic situation. We give a Sliver Eagle to each child and their spouses for birthdays and Christmas and have for many years. It is now a family joke each celebration.........where is my Silver coin?

The primary category of HARD ASSET that we own is personal property. We have the philosophy that if you are going to buy furniture, art, or other property that is going to last some number of years, that you are better off buying something that is quality and collectable, and will probably hold its value over time. For example, if you are into mid century furniture, why not buy the real thing versus reproductions or modern furniture store "stuff". It will probably somewhat hold its value and might even go up in value compared to cheap new stuff that will be worth nothing in a few years. Furniture, art, jewelry, etc, etc, anything that you are into and buy can be done the same way. Whatever your budget and category of item, why not buy the best actual collectable quality item in your category that hopefully will at least hold its value over time?

That is what we have done for a long time. HERE is a little article on this topic. Of course, most people are not going to buy at the price levels of items talked about in this article. BUT, this can be applied on a much lower level. You dont have to be on a celebrity level or even a millionaire. If you are into pottery, save up your money and buy a really good quality vintage pottery piece for $500 or $1000 instead of reproductions or a new piece. If you have a good eye and educate yourself, you can, at worst, hopefully, accumulate items that at the least hold their value and might actually increase in value.

MY number one rule in buying these sorts of assets is........buy the best quality item of whatever it is that you can afford. PREFERABLY an item that is no longer being produced and is already considered collectable in the marketplace.

HERE is another example. Lets say someone is into watches and you really have always wanted a nice watch. About two to three years ago you could have treated yourself and purchased a Rolex Submariner "HULK" (look it up) from a legit grey market dealer for about $8300. At the current prices, this watch would cost you about $14,000 to $14,500 from the same type of dealer. Same situation with many other types of Rolex watches. So in this example, the person that is into watches and always wanted a nice watch, saves up their money, buys a quality, limited brand and in all probability that watch will retain much of its value over time and might even go up in value. Here is another watch example. The new, 2018, Rolex GMT Pepsi and Root Beer, can be had for about $9,500 and $14,500 at an official Rolex dealer. Because they are limited and take a while to get through an authorized dealer they are currently priced on the grey and secondary market at about $2000 ABOVE list. I dont own these but was curious so I talked to an authorized dealer in my city and they dont have any in stock but there is NO wait-list. So I could probably get one within about a year If I was a watch person, through the dealer. At that point I would have a nice watch that is selling over list by $2000 on the market and would own a hard asset that will probably NOT go down significantly. AND, the nice thing about a watch like these Rolex, is that you own something that you can sell in an instant if you ever needed to sell and get the majority if not all or more your initial purchase price back.

AGAIN.......I am NOT a watch person....but as an example.......Does that $9,500 Rolex REALLY cost me $9,500? If I can turn around and sell it for, lets say, $8,000, did I really pay $9,500? Or did I REALLY pay $1,500? In terms of net worth and including the asset in net worth, I did NOT spend $9,500.

Anyway, you get the idea. Here is the article:

The Role of 'Treasure Assets' In Your Investment Portfolio

https://www.realclearmarkets.com/ar...sets_in_your_investment_portfolio_103683.html

(BOLD is my comment and opinion of important content)

"I was recently speaking with a friend about investments. At one point, he disclosed he didn’t have much liquidity. When I asked why, he said it was because he invested several million dollars in McLarens and Patek Philippe watches.

I thought he was kidding, but he was totally serious.

Yet after we talked more, and I did a little research, I gained a greater appreciation for the role hard assets play in certain folks’ portfolios.

Most people associate investing with traditional asset classes like stocks and bonds. “Things” are not typically viewed as investments. Particularly luxury items, like a McLaren supercar.

But make no mistake—collectibles are a real-deal investment class! Last year, Credit Suisse published the broadest study ever looking at long-term returns from privately-held assets. The researchers concluded, “Many private assets have beaten inflation and in a period of low expected financial returns, they offer an emotional dividend that can be attractive to investors.”

Here’s a look at how various items performed over the last decade (source: Visual Capitalist). Cars did best.



In their paper, Credit Suisse uses the term “treasure assets” to describe investments of passion. These can include a range of beautiful and rare items, typically favored by the ultra-wealthy. If chosen wisely, such assets may provide both a status symbol and a mechanism to preserve wealth.

Examples of treasure assets include fine wine, art, rare coins, certain types of jewelry, and high-end automobiles.

Treasure assets often pay nothing other than an emotional dividend up until the point of sale. There are no cash flows to discount. These assets are worth whatever someone is willing to pay for them.

Two factors seem to drive value in this domain. First, supply is often scarce. Second, many of the buyers are so wealthy that the items they bid on are price inelastic.

Look no further than the appreciation rate of sports franchises in recent decades. These qualify as private-market treasure assets. A few years back, former Microsoft CEO, Steve Ballmer, raised eyebrows when he bought the NBA’s Los Angeles Clippers franchise for $2.15 billion. That remains near the highest sum ever paid for a sports team. And let’s face it, the Clippers aren’t the most storied franchise in terms of their win-loss record!

But if you’re worth $45 billion like Steve Ballmer is, does it really matter if you pay $1 billion, $2 billion or even $3 billion? The bottom-line is: if you’re mega rich and want something, you can have it.

And maybe the $2 billion Ballmer paid wasn’t even as outrageous as it first appeared.

Shortly after he completed the deal, Ballmer did an interview with ESPN. “Lots of people run lots of numbers. I feel like I paid a price I’m excited about,” he said. “It’s not a cheap price, but when you’re used to looking at tech companies with huge risk, no earnings and huge multiples, this doesn’t look like the craziest thing I’ve ever acquired.”

Circling back to McLarens, luxury supercars are not like the average vehicle that depreciates the moment it leaves a car lot.

Gordon Murray originally designed the McLaren F1 to be the ultimate driver’s car. Brand new, an F1 typically costs around $1 million. As the years go by, however, the cars can mightily appreciate.

For example, at a 2017 Quail Auction, a 1995 F1 fetched a record $15,620,000. Before receiving that check, the owner had the car for 22 years. They put just 10,000 miles on the odometer, mainly owing to a cross-European road trip shortly after buying the car.

So, let’s estimate the ROI on that. A 15x return over just 22 years. Plus, the road trip of a lifetime. I don’t know about you, but I’ll take that memory and return all day long!

Per the Credit Suisse report, privately held assets—including collectibles and real estate—comprise about 40% of global investors’ portfolios. In the U.S., such assets represent only 23% of net wealth.

Considering how low bond yields are now, U.S. investors may want to try to think more creatively about their asset allocation. Not everyone has the means to drop a million bucks on a car that will mostly sit in a garage. There are plenty of other options, though, including: precious metals, art, coins, and even rare books.

I became more of a believer in what my buddy was doing after he explained the depth of his passion. The guy is no novice collector. He’s an expert. And his specialized knowledge gives him a moneymaking edge when he heads to an auction.

My friend is diversified. He owns stocks, bonds, and real estate. When choosing traditional investments, he analyzes yields and risk profiles.

When it comes to the hard asset sleeve of his portfolio, however, he looks at different criteria. Someone he considers a mentor, whom he originally met at a McLaren Club event, taught him to focus on investing in things he likes.

As a money manager, I can see utility in “liking an investment.” It may spark curiosity to do more upfront research and help stick with an investment to realize the long-term reward."

MY COMMENT:

As I said you do not have to be in the high end category of items mentioned in this article. In any property category there are many levels of collectable that are totally affordable to the average person that will hopefully hold value over time. Of course as the chart above shows, collectable hard assets can go down in value over time. Look at the antique furniture down 32% and Chinese ceramics down 4% over the past ten years. BUT......even though down...those items STILL have value, much more value than if you had bought a NEW piece of furniture or a NEW ceramic. AND, if you are selective and have expertise, and did not buy at the market top, over time, over the long term, you will make some level of money. At the same time you get to enjoy the item as part of your lifestyle. I will point out that to ME these sorts of assets are NOT a substitute for stocks or funds. I dont see any of the categories above that out performed the SP500 since the 2008/2009 time period. BUT.....WTF....if I am going to hang a picture on my wall, I might as well buy one in my price category that has already been established as collectable and desirable in whatever price range I am in.

 

AS TO stocks and funds....some current indicators that MIGHT show the general short term functioning of the economy:

US weekly jobless claims drop to the lowest level since 1969

https://www.cnbc.com/2019/04/04/weekly-jobless-claims.html

AND

As pricey homes hit market, median list price for a house reaches record $300,000

https://www.usatoday.com/story/mone...d-market-inflating-listing-prices/3357094002/

MY COMMENT

We will see the jobs figure later today. TWO takes on what to expect.

Economists Expect Hiring Rise, Wage Gains in March Jobs Report

https://www.wsj.com/articles/what-to-watch-for-in-march-jobs-report-11554370200

AND

How stock-market bulls risk getting caught off guard by another ugly jobs report

https://www.marketwatch.com/story/h...by-a-second-disastrous-jobs-report-2019-04-03

 

POTENTIAL for a big Friday in the markets today. The jobs report is out and it is good. Another REJECTION for the DOOM&GLOOM media, politicians, and those that believe the delusion that passes for news these days. With ALL the sources available, there is NO EXCUSE for any investor to not do their own research and see REALITY. BUT...that is human nature, we crave DRAMA, SOAP OPERA, EMOTION, etc, etc.

HERE is the news of the day:

Job market bounces back in March with 196,000 gain in payrolls

https://www.cnbc.com/2019/04/05/nonfarm-payrolls-march-2019.html

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

"Job creation posted a solid rebound in March, with nonfarm payrolls expanding by 196,000 and the unemployment rate holding steady at 3.8%, the Bureau of Labor Statistics reported Friday.

That was better than the 175,000 Dow Jones estimate and comes after a dismal February that had economists wondering whether the decade-old economic expansion was nearing an end. The unemployment rate met expectations.

Wage gains fell off the recent strong pace, increasing just 0.14% for the month and 3.2% year over year, below expectations of the 3.4% pace from last month. The average work week increased by 0.1 hour to 34.5 hours.

A broader gauge of unemployment that also counts discouraged workers and those holding part-time jobs for economic reasons also was unchanged at 7.3%. The measure, known as the “real unemployment rate” is down from 7.9% a year ago.

Health care led with 49,000 new workers, professional and technical services added 34,000 and food and drinking establishments contributed 27,000. Construction rose by 16,000 but manufacturing saw 6,000 jobs lost.

The numbers came a month after February’s jaw-dropping gain of just 20,000, which was revised up to 33,000 in the March report. January’s big increase of 311,000 also got pushed up a nudge to 312,000, bringing the average gain over the past three months to 180,000. That’s still solid though below the 233,000 average monthly gain for all of 2018.

Household survey data showed there were 201,000 fewer people counted as employed, but that came with a contraction of the labor force by 224,000. Those counted as not in the labor force increased by 369,000 to 95.6 million.The labor force participation rate declined to 63%, down 0.2 percentage points to its lowest level since November.

The total employment level nudged down to 156.7 million, while those counted as unemployed also edged lower to just over 6.2 million.

Broadly speaking, the report is likely to restore some confidence in a labor market that had looked shaky and an economy whose prospects were equally uncertain. Wednesday’s private payrolls reading from ADP and Moody’s Analytics was well below market expectations, indicating that more bad news could be on the horizon. Early-year data on retail sales and housing looked bad from a consumer standpoint, though some of those numbers have improved lately.

Economic conditions now look more favorable than they did at the start of the year. First-quarter GDP is projected to rise 2.1%, according to the Atlanta Fed, which had been tracking gains of just 0.2% only a few weeks ago. Fourth-quarter GDP increased by 2.2%, bringing the 2018 calendar year increase to 2.9%.

Federal Reserve officials continue to watch the jobs numbers closely as well. The central bank recently has indicated that it is on extended pause for more rate hikes as it evaluates the data coming through.

Market pricing currently sees about 50-50 chance the Fed cuts its benchmark interest rate before the end of the year. But that, too, has been in flux. By the Chicago Fed’s measure, financial conditions are at the easiest in 25 years, indicating little need for the central bank to provide more

AND for another take on things:

Hiring speeds up as U.S. economy adds 196,000 jobs in March

https://www.marketwatch.com/story/h...s-in-march-unemployment-flat-at-38-2019-04-05

"The numbers: The U.S. created 196,000 new jobs last month after a swoon in February, an encouraging gain that hints growth in the economy is ready for a revival.

Hiring increased in most major segments of the economy, most notably health care and white-collar firms. The flush of new jobs kept the unemployment rate near a 50-year low of 3.8%, the Labor Department said.

The rebound in hiring might temper unease about the economy after a rocky start in 2019. Although a spate of large companies have announced layoffs recently, most firms are still looking to hire. One of their chronic complaints: A shortage of skilled labor.

The increase exceeded the 179,000 forecast of economists surveyed by MarketWatch.



Professional and technical firms hired 34,000 workers, restaurants increased staff by 27,000 and construction companies took on 16,000 new workers. A month earlier, builders cut employment by the most in a year and a half during a spell of severe cold and heavy snowfall.

Pockets of weakness were found in manufacturing and retail. Manufacturers trimmed 6,000 jobs after barely any gain in February. And retailers eliminated 12,000 jobs.

The amount of money the average worker earns rose 4 cents to $27.70 an hour last month.

The increase in pay in the past 12 months slowed to 3.2% from 3.4%. Still, wages are rising near the fastest pace in a decade. Most economists think yearly pay will soon move closer to the 4% mark.

The increase in jobs was revised up to 33,000 from 20,000. January job gains were little changed at 311,000.

The U.S. added an average of 180,000 jobs in the first three months of 2019 — a solid if somewhat slower pace compared to the tail end of last year.

Big picture: The boomerang in hiring in March should ease lingering worries about the economy after a sluggish start to the beginning of the year.

The U.S. is growing more slowly, it’s clear, and the companies aren’t hiring as rapidly. Yet wages are rising while layoffs and unemployment remain near the lowest levels in a half century.

The combination of stable growth and inflation is expected to keep the Federal Reserve from raising interest rates anytime soon.

Market reaction: The Dow Jones Industrial Average DJIA, +0.64% and S&P 500 SPX, +0.21% were set to open slightly higher in Friday trades.

The 10-year Treasury yield TMUBMUSD10Y, +0.10% stood at 2.53%. Mortgages, auto loans and other common forms of borrowing are tied to changes in the 10-year note. The yield is down sharply from a seven-year high of 3.23% in October.

MY COMMENT:

NOT a shocking report. The FOOLS that have been trying to talk down the economy are exposed once again for just that.....FOOLS. NOW, how or if this will translate to good gains for investors continues to be opaque. As a society we are becoming more and more obsessed with all the DRAMA and SOAP OPERA daily "stuff" you see in what used to be the media. What we see now makes the old supermarket check out rags look like PULITZER PRIZE level reporting. This is why, to me, it is critical to use GOOD SOLID FUNDAMENTAL ANALYSIS as the basis for any stock or fund investing. You will not find the truth in the media. You have to search it out for yourself in the financials of the companies or funds that you might own. YOU are the only one that has the ability to honest with yourself. A CLINICAL, RATIONAL, REALITY BASED, view of actual company numbers is critical to individual stock investing.

 

Lets HOPE this little article turns out to be REALITY. I believe it will. Especially with the potential for a China trade deal still ahead of us as well as all the economic indicators that are looking good for the general economy.

Why the remarkable stock market recovery could just be getting started

https://www.cnn.com/2019/04/05/investing/stock-market-ahead/index.html

(BOLD is my comment and my opinion of important content)

"New York (CNN Business)US stocks are closing in on all-time highs. And stock market bulls don't expect to be disappointed anytime soon.

The first quarter was phenomenal for markets, which have been trending higher on optimism about the Fed's dovish turn and a potential trade deal between Washington and Beijing.
The end result? Fallout from last year's late, chaotic selloff has been almost entirely erased. The S&P 500 finished Thursday just 1.75% away from its all-time high, while the Dow has only 1.65% to go. They could cross those milestones within a matter of days.

It's the first time since 2013 that the S&P 500 was higher in each of the first three months of the year, according to Ryan Detrick, senior market strategist at LPL Financial. That could mean good news for the rest of the year, he wrote in a note Wednesday.
"This won't be an easy ride, and we fully expect some volatility, but this is definitely a bullet point for the bulls in 2019," he said.
A diversified portfolio of stocks is always the best strategy for investing for the long-term. That's the best insurance policy against market dips like the one that took place between October and January. But most market analysts expect stocks that perform well in a strong economy will continue to do well throughout 2019.

Some concerns remain. There are still questions, for example, about how much markets have priced in what is set to be a disappointing round of first quarter earnings. Analyst expectations were steadily lowered throughout the quarter.
Earnings for S&P 500 companies were expected to decline 4.1% as of Thursday, according to FactSet. If this happens, it would mark the first year-over-year decline in earnings for the index since the second quarter of 2016.

Analysts generally believe that companies have adequately managed expectations, and markets have already baked in weaker numbers. It's also difficult to compare results to last year, when companies were buoyed by corporate tax reform.
Yearly corporate earnings growth in the mid-single digits would be "just fine," according to Daniel Miller, director of equities at GW&K Investment Management.

Investors are also probably more concerned about which companies can best play the long game, even if they took a beating at the start of the year. Experts told CNN Business last month that many of the big multinationals can weather short-term turbulence, assuming the United States and China reach a trade deal.
Investors also could experience bouts of panic over data that shows global economic soft spots. And anxiety briefly hit last month when the yield on 3-month Treasuries rose above the rate on the 10-year for the first time since 2007.
A so-called yield curve inversion, in which short-term rates jump above long-term rates, has preceded each of the last seven recessions.
Many investors are brushing aside the flip. They say it's important to watch global economic data for weakness — but that the partial yield curve inversion doesn't say much.

"It tells us what we already know, which is that a recession could come in two years," said Jason Draho, head of Americas asset allocation at UBS Global Wealth Management's Chief Investment Office. "The markets could still perform quite well before then."
Peter Boockvar, chief investment officer at Bleakley Advisory Group, said in a note Thursday the divergence between rallying stocks and depressed bond yields may have an easy explanation.
Maybe it's "just as simple," he said, as the flattening of the bond market curve reflecting the current slowdown. He added that the stock market may just think these issues are temporary, and a "rebound in growth" is coming soon.

The consensus view at present seems to be that US economic growth will slow but will not go negative 2019. and the second half of the year could be stronger economically than the first.
"In spite of all the uncertainty, the US economy continues to grow in 2019, albeit more slowly than in 2018," JPMorgan Chase CEO Jamie Dimon said in his annual letter to shareholders on Thursday.
He continued: "Employment and wages are going up, inflation is moderate, financial markets are healthy, and consumer and business confidence remains strong, although down from all-time highs."
But Dimon added that markets don't always reflect real economic conditions, and volatility in the fourth quarter may be a "harbinger of things to come.""

MY COMMENT:

It will ALL become clear as time goes by and we move forward into earnings and beyond. The KEY, as always, is to focus on the LONG TERM and not get too caught up in the short term. Although it is fun and exciting to watch portfolio balances go up during a good rally. At the moment, I suspect that the probability favors a good rally over the short term, especially if we see a China trade deal within the next month or so. I continue to be fully invested for the LONG TERM as usual.

 

Today was one of those PERFECT STORM days for my account and those I manage. PERFECT STORM day meaning......a big fat lot of NOTHING. LOTS of wind and bluster but in the end NOTHING happened one way or the other. My account lost $88. Thats it...$88. I was surprised that the loss was this low today, but I had not been paying attention to anything to do with the markets today other than seeing that we were down nearly 85 points. I take it as a victory and perhaps an omen of market and economic strength.

 

Drifting, drifting, drifting......for the past couple of days. Seems like there is really NOTHING driving the markets one way or the other for the past few days. We have the Fed today and earnings will be hot and heavy going forward. Not even running into any articles lately that justify comment or posting. PROBABLY not a bad thing, we dont need the markets lurching around, being driven by sensational news all the time. As to earnings, I presume and expect that the trend of the past few earnings periods, where a company reports generally good data, but gets hammered based on some very small, often forward looking detail in the report, will continue to be the norm. SOME times investing is just plain BORING and that is usually a good thing.

 

Not a bad situation to be in TomB16. I am sure you will have a good chance to put some of that cash to use going forward.

I personally keep looking at BOEING now that it is being beaten down some. We got some cash lately from some sales of hard assets (personal property) that I want to keep in hard assets (personal property). We might decide to use it some time over the next year. I have been debating with myself whether to put a good chunk of it into Boeing, but will not make a decision till they report earnings later in April. Their "fix" for the 737 software is a little bit OPAQUE right now. I am not totally comfortable with doing a shorter term investment in the company with the potential for the software issue to become a CASCADING series of issues for a while. I DO LIKE the stock and even with the issues, my existing shares are STRONGLY positive with a good gain.

Here is a "LIGHT" little article that lays out some general financial info. I do find that the timeline of using and eventually terminating term insurance in here matches what my experience has been. I also like the little bit here about NOT needing to spend for expensive long term care insurance once you have the assets to basically self insure. My personal opinion of LONG TERM CARE INSURANCE is very negative anyway. The premiums are high, very few will really need it, the ability of companies to cancel or change things to me makes these policies worthless and a waste of money. As I said we will self insure for this sort of expense.

45 Steps to Success

https://humbledollar.com/2019/03/45-steps-success/

(BOLD represents the things we have actually done in our financial life or are doing right now)

WHAT DOES a good financial life look like? Here’s a quixotic roadmap—comprised of 45 steps:

1. "Stuff part of your babysitting or lawn mowing money in a Roth IRA. Suggest to your parents that they should encourage this sort of behavior—by subsidizing your contributions.
2. Get a credit card when you head off to college, charge $5 every month and always pay off the balance in full and on time. You’ll soon have an impressive credit score.
3. Spend two years—but not much money—at community college, before transferring your credits to the college you want to graduate from.
4. Live at home for a few years after college, so you can mooch off the free food and accommodation.
5. Sign up for your employer’s 401(k) as soon as you join, rather than waiting for automatic enrollment to kick in, and stash everything in a target-date retirement fund. Contribute at least enough to get the full employer match. If there’s a Roth 401(k) option, favor that, because the tax-deduction on the traditional 401(k) won’t be worth much at your current modest income.
6. Skip the new car—and accompanying auto loan—and buy a used car for cash.
7. Stash money every month in a high-yield online savings account. Think of it as your emergency fund, future house down payment and let’s-not-live-paycheck-to-paycheck account.
8. Turn down the chance to buy cash-value life insurance from your old high school buddy.
9. On the third date, steer the conversation to money—and make sure your future spouse shares your financial values.
10. Ponder which charities you care most about. Get into the habit of regularly sharing a slice of your financial success.
11. Fund a Roth IRA. Again, stash that money in a target-date fund, choosing one that invests in index funds.
12. Ask your parents whether you can have a less lavish wedding—and let you use the cost savings toward a house down payment.
13. Get a will. Change the beneficiaries on your IRA and 401(k). Purchase term insurance. Prod your new spouse to do the same.
14. Stretch a little to buy a home that’s big enough not just for you and your spouse, but also for the kids you expect.
15. Now that your latest pay raise has pushed you into the 24% tax bracket, switch your regular contributions from the Roth 401(k) to the traditional 401(k).
16. As soon as the baby’s Social Security number arrives, open a 529 plan.
17. Buy more term insurance—enough to cover the kid’s education and pay off the mortgage.
18. You’re maxing out your 401(k), plus funding a Roth or backdoor Roth every year. Next up: Buy a total U.S. stock market index fund and total international stock index fund in your taxable account.
19. Take the two kids to Disney. Try to contain your shock at how much it costs.T
20. Buy company stock every year through the employee stock purchase plan to take advantage of the 15% discount—but unload the shares as soon as you qualify for the long-term capital gains rate, because you don’t want the risk.
21. Add $100 every month to the monthly mortgage check. Think of it as another way to buy bonds.
22. At dinner, occasionally tell family stories that illustrate your financial values. Talk about how much you earn, where the money goes and how you invest. Ask the kids if they have any questions.
23. Raise the deductibles on your auto and homeowner’s insurance to reflect your burgeoning wealth.
24. Remodel the kitchen. Tell anybody who will listen that it’s a terrible investment, but you still think it’s worth it.
25. Drop some of your term insurance, because you figure that—between the remaining coverage and the savings you’ve amassed—your family would be okay if you went under the next bus.
26. Talk to your high school freshman about how much you can help with college costs. While you’re at it, discuss how much you’ll assist with other major costs, like the kid’s future wedding and house down payment.
27. Now that you’re 50, take advantage of catchup contributions to your 401(k) and IRA.
28. Every year, allocate a little more of your retirement account to bonds.
29. Get powers of attorney drawn up for both you and your spouse—covering both financial and medical decisions.
30. Consider buying long-term-care insurance, but then realize that—come retirement—you’ll have enough socked away to self-insure.
31. Let your oldest move home after college—on condition that the money saved on rent ends up in a savings account.
32. Use your year-end bonus to pay off the mortgage.
33. Draw up a list of all the things you want to do in retirement. Stick it on the refrigerator. Revise often.
34. Drop your remaining term insurance.
35. Decide you have enough.
36. Use your early retirement years to convert part of your rollover IRA to a Roth.
37. Continue to work part-time, largely because you enjoy it—but, hey, those modest paychecks are sort of comforting.
38. Take the kids and grandkids on vacation. Somewhere other than Disney.
39. Delay Social Security to age 70.
40. Write your own obituary. Think about the accomplishments you’re most proud of—and whether there are any more you’d like to add to the list in the years ahead.
41. Downsize to a smaller home—which forces you to empty the basement. It’s your junk. Why should your kids have to deal with it?
42. Make occasional financial gifts to your adult children.
43. Identify a fee-only financial advisor you trust—to help your spouse, should you die first, and as a precaution, in case your mental capacity slips.
44. Cut yourself some slack: Fly business class.
45. Hire a local kid to mow the lawn. Advise her to put the money in a Roth."

MY COMMENT

A simple yet, pretty good financial outline of life for most people above.

 

THIS looks like BIG NEWS for investors. Perhaps the end of the China trade deal is in sight. It will be interesting to see if there is any impact on markets tomorrow.

US, China agree to establish trade deal enforcement offices, says US Treasury Secretary Steven Mnuchin

https://www.scmp.com/news/china/art...ade-deal-enforcement-offices-says-us-treasury

(BOLD is my opinion of important content)

"US Treasury Secretary Steven Mnuchin said on Wednesday that US-China trade talks continue to make progress and the two sides have basically settled on a mechanism to police any agreement, including new enforcement offices.

Mnuchin, speaking on CNBC television, said that a call with Chinese Vice Premier Liu He on Tuesday night was productive and discussions would be resumed on Thursday.

“We’ve pretty much agreed on an enforcement mechanism, we’ve agreed that both sides will establish enforcement offices that will deal with the ongoing matters,” Mnuchin said, adding that there were still important issues for the United States and China to address.

Mnuchin declined to comment on when or if US tariffs on US$250 billion worth of Chinese goods would be removed.


Although President Donald Trump said recently that a deal could be ready around the end of April, Mnuchin declined to put a timeframe on the negotiations, adding that Trump was focused on getting the “right deal”.

“As soon as we’re ready and we have this done, he’s ready and willing to meet with President Xi (Jinping) and it’s important for the two leaders to meet and we’re hopeful we can do this quickly, but we’re not going to set an arbitrary deadline,” Mnuchin said."

MY COMMENT

From what I have seen lately the enforcement mechanism was the big issue holding things up on this deal. If this information is true and accurate, and I have no reason to doubt it since many news outlets are reporting this, we appear to be in the final weeks of negotiation. It will be interesting to see what kind of bump, if any the final deal has on the general markets.

 

The DRIFTING general markets continue. NOTHING is driving them up, nothing is driving them down. I think the MEDIA finally EXHAUSTED everyone and now there is simply NO interest in anything financial. (sarcasm) NEVER FEAR, things will not stay like this for long. Sooner or later some news item or some fad, or some superstition, or some mania, or something will kick things off again and away we will go lurching UP and DOWN as is the short term norm. LONG TERM INVESTORS, living in an alternative universe compared to the masses of short term people, will sit and watch in wonder, as usual. The KEY is to ACTUALLY be a LONG TERM INVESTOR. The reality is that many that call themselves long term investors will sooner or later panic and sell in some media labeled "crash" or "recession" or whatever they are calling it at the moment.

HERE is the REALITY........TODAY. No telling what reality will be tomorrow. The general economy continues to kick ass with little to no indication of inflation. It is amazing that the ten year yield is at 2.497%.

Treasury yields edge lower as investors digest Fed minutes

https://www.cnbc.com/2019/04/11/bon...ge-lower-as-investors-digest-fed-minutes.html

(BOLD is my opinion and opinion of important content)

"U.S. government debt yields were slightly lower on Thursday morning, continuing a downward move after the European Central Bank (ECB) held interest rates steady and the Federal Reserve released the minutes of its latest meeting.

US 3-MO U.S. 3 Month Treasury 2.426 -0.001 0.00
US 1-YR U.S. 1 Year Treasury 2.42 0.007 0.00
US 2-YR U.S. 2 Year Treasury 2.35 0.023 0.00
US 5-YR U.S. 5 Year Treasury 2.304 0.025 0.00
US 10-YR U.S. 10 Year Treasury 2.495 0.018 0.00
US 30-YR U.S. 30 Year Treasury 2.918 0.014 0.00

At around 4:30 a.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 2.4773 percent, while the yield on the 30-year Treasury bond was also lower at 2.8985 percent.

The Fed released the minutes of its March monetary policy meeting on Wednesday, revealing that Fed officials are leaving room for possible interest rate increases by the end of the year but adding that they currently do not expect to make any changes.

Speaking at a press conference in Frankfurt, Germany on Wednesday, ECB President Mario Draghi warned that data gathered by policymakers in recent weeks had confirmed “slower growth momentum” in the euro zone. The German 10-year government bond yield, an important benchmark for European fixed-income assets and one that is viewed as a safe haven for investors, dipped into negative territory on the back of Draghi’s comments..........."

AND

US weekly jobless claims drop to the lowest level since 1969

https://www.cnbc.com/2019/04/11/weekly-jobless-claims.html

"The number of Americans filing applications for unemployment benefits dropped to a 49-1/2-year low last week, pointing to sustained labor market strength that could temper expectations of a sharp slowdown in economic growth.

Initial claims for state unemployment benefits fell 8,000 to a seasonally adjusted 196,000 for the week ended April 6, the lowest level since early October 1969. Claims have now declined for four straight weeks. Data for the prior week was revised to show 2,000 more applications received than previously reported.

Economists polled by Reuters had forecast claims would rise to 211,000 in the latest week. The Labor Department said no states were estimated last week.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 7,000 to 207,000 last week, the lowest level since early December 1969.

The labor market is the main pillar of support for the economy, which appears to have lost momentum in the first quarter as the stimulus from a $1.5 trillion tax cut package fades and a trade war between China and the United States and softening global demand hurt exports.

Nonfarm payrolls increased by 196,000 jobs in March, well above the roughly 100,000 needed per month to keep up with growth in the working-age population. The unemployment rate is at 3.8 percent, close to the 3.7 percent Federal Reserve officials project it will be by the end of the year.

Thursday’s claims report showed the number of people receiving benefits after an initial week of aid decreased 13,000 to 1.71 million for the week ended March 30. The four-week moving average of the so-called continuing claims dropped 11,000 to 1.73 million."

MY COMMENT

As usual.......YES.....there is no inflation. The treasury yields in the face of the jobs and wage information shows that there is NO strength in the economy for inflation. The EU is in DISMAL shape with their NEGATIVE rates which makes our treasuries the GOLD STANDARD for the world. The rest of the world is in bad shape when it comes to the deflationary situation. In my opinion MUCH IF NOT ALL of this situation around the world is due to the socialistic, nanny state, high tax, government regulation and control, bureaucratic, conditions that are rampant. There are VERY FEW openly capitalistic countries in the world, USA, CANADA, AUSTRALIA, perhaps England and India, and some of the Eastern Europe countries. AND......of course the very system that has brought wealth and prosperity and success to these countries is CONSTANTLY under attack. All in all a very nice situation for LONG TERM INVESTORS that are focused on AMERICAN stocks and companies as the basis for their financial future.

 

I find it VERY INTERESTING that the financial story of the past six months is being totally ignored by everyone. (see post above the previous post) Here is what I am talking about:

"US Treasury Secretary Steven Mnuchin said on Wednesday that US-China trade talks continue to make progress and the two sides have basically settled on a mechanism to police any agreement, including new enforcement offices."

This issue has been the stumbling block in the China negotiations for a long time now. If this issue is actually solved the way is now open for a China trade deal in the near future. I dont think a trade deal will be the "be all...end all"........BUT....it could be a nice short term kick in the ass for stocks and business in general. This issue has been hanging over many AMERICAN companies for a while now.

 

JUST after I finished posting the comment above, I happened to hear a young stock analyst on one of the morning business shows make the following comments that I TOTALLY agree with:

Why The Stock Market Rally Will Continue

1. The absence of risk. The focus on the slowing global economy is wrong. The two greatest headwinds are now lifting.....the China deal looks very likely in the near term and the FED is now passive and not likely to raise rates this year,

2. We are in a VERY STRONG economy which is likely to continue. The economic data continues to come in solid report after report. We are in a very solid healthy trend in the data. AND....the data is NOT so strong as to indicate an irrational situation or mania.

3. We are in an UNDER-INVESTED MARKET situation. Most investors in funds have been selling stocks not buying this year. The trend in funds has been redemption. MUCH money is on the sidelines and this is why we are seeing these very shallow market days lately such as today and the past month or so with the market kind of drifting. That money WILL come back into the markets and will be a kick in the ass for stocks in general.

I was impressed that this "YOUNG" analyst seemed to really have his head on straight and be living in the world of reality. Of course......it helps that "I" happen to agree totally with all that he said. (LOL) Including, the comment that we are in...."the most hated bull market of all time". Ten years ago 65% of Americans were invested in the stock market...now that figure is 54%. Even this long after 2008 people are still not trusting of being in stocks or funds and are siting on cash at levels not justified by what has occurred over the past ten years. For LONG TERM INVESTORS, the past ten years and in my opinion probably the next couple of years at the minimum will be the sort of years that are the reason that LONG TERM INVESTORS that stay fully invested in good solid companies or indexes like the SP500 will outperform ALL other types of investors. You HAVE to be in the markets for these types of years to get the long term growth.

BUT........have no doubt....there will be many corrections and a black swan or two over the next couple of years. The great big MOTHER OF ALL BLACK SWANS being the election in about a year and a half.

 

Today was a TYPICAL day this week......UP $83 with a couple more funds yet to post numbers. I doubt it will change much since the primary fund is a SP500 Index and the SP500 was at 0.00% today..........BORING. But I will take any POSITIVE result no matter how small. At least it gives me a new base to try to compound going forward. In 30 years that $83 could be worth about $1328 with compounding. A minuscule amount of gain today compared to the amount of the account. These drifting days seem to weigh on me more than the crazy days where you are lurching from a $20,000-$50,000 gain to a $20,000-$50,000 loss in one day.

 

TOTALLY agree......OBVIOUSLY....with the approach outlined by TomB16 above.

I will say, I am not a .....NERVOUS......market watcher. For me it is simply interesting and when the markets are just drifting it is very BORING. Since I am retired, other than my "professional musician" second occupation, I have plenty of time to watch some of the business news at the open each day and do my financial reading. Since most of the articles I read are short and I am an extremely fast reader, it does not take me long to read what is interesting to me each day. I usually see what is happening at the open and than check again at the end of the day.

As I have said a few times on here, I do manage accounts for a number of family members as well as a family trust. So, I feel like I have more of an obligation to keep up with things closely. For me CLOSELY WATCHING things does not mean compulsion. I have been doing what I do in the way I do it for so long that managing other peoples money is just routine and no pressure. In my business life and over my lifetime I have gotten used to dealing with large sums of money so that is also a....NO PRESSURE....situation for me. I was fortunate to have parents that talked about investing and money in front of us children and taught us about money over our entire childhoods. A very valuable gift to give your children and something we have tried to pass on to our kids. Combine that with my very CLINICAL personality when it comes to investing and money and you have the makings of a LONG TERM INVESTOR

I like to and often talk about extremely short term events and happenings in the general markets and specific companies on here. But....my focus with REAL money is and has been for over 45+ years, LONG TERM INVESTING. I remain fully invested for the long term as usual.