The Long Term Investor

Discussion in 'Investing' started by WXYZ, Oct 2, 2018.

  1. WXYZ

    WXYZ Well-Known Member

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    TO CONTINUE this little theme dealing with the current BOGYMAN of the moment, interest rates:

    Rising Rates Don’t Challenge Stocks

    https://www.fisherinvestments.com/en-us/marketminder/rising-rates-dont-challenge-stocks

    (quotes are bold)

    There is no shortage of plausible-sounding financial theories—and many persist even despite repeated debunking. A popular one rearing its head again is that higher interest rates for cash and bonds mean stocks will fall out of favor. With 3-month, cash-equivalent Treasury bill yields over 2%—broadly matching inflation—and 10-year note yields making seven-year highs at 3.2%, the thinking goes these seemingly “risk-free” rates are attractive enough to lure folks out of stocks and end the bull. However, history shows this thesis has quite a few holes.


    Long rates depend on future inflation, and all signs point to benign prices for the foreseeable future. Despite allegedly jumpy rates, the US yield curve has flattened over the past eight months, and the global yield curve has barely budged over the past year. This should keep money supply growth rather benign, which in turn should keep inflation from running away. And keep bond yields tame.


    Exhibit 1: Stocks’ Earnings Yield Isn’t Correlated With Bonds’





    [​IMG]
    Source: FactSet, as of 10/4/2018. S&P 500 12-month forward earnings yield and 10-year Treasury yield, January 1996 – September 2018.


    Comparing stocks’ earnings yields to Treasury yields isn’t a timing tool. Nor does it come anywhere near predicting stocks long-term returns. Plus, historical long-term government bond total returns aren’t close to stocks’. If your long-term financial goals require equity returns, bonds won’t give you that. Many investors don’t see stocks and bonds as competitors, either. Rather, many long-term growth investors will own some bonds alongside stocks in order to dampen expected short-term volatility. Those arguing interest rates are a driver are setting up a false either/or choice.


    Some also suggest cash is more competitive, too. But for the same reasons, cash is even less compelling than bonds for long-term investors........ if you are investing for the next 10, 20, 30 or more years, and you need long-term growth to meet your objectives, a return that barely beats inflation probably won’t get you there.


    There are long stretches where stocks rise along with Fed rate hikes and bond yields. There are also times they don’t! Interest rate levels don’t dictate stock returns. Investors shouldn’t be led astray by them either.

    MY COMMENT

    INVESTORS that are smart and experienced are not concerned about rate increases in the least. In fact I welcome the rate increases. It is about time that we got back to normal rates in the bond markets and mortgage markets. What WILL MATTER going forward will be the usual, EARNINGS, company MANAGEMENT, and hard facts about individual businesses since after all when you buy a stock you are buying a very specific business model.

    We are just starting to shake off the governmental foolishness of the past 8-10 years and the deflationary period that those policies created and prolonged. My simple opinion is that we are positioned to continue the market advances that we have seen for the past years and especially for the past two years. LONG TERM INVESTORS will continue to be rewarded by investing in stocks and funds, especially those that are "AMERICAN COMPANY" focused and "BIG CAP" focused. The 2-3% that dividends add to the SP500 and the DOW are significant drivers of performance and will be going forward as long as they are reinvested in the markets.




     
  2. WXYZ

    WXYZ Well-Known Member

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    ONE THING about the Fed. You can always count to them to screw things up. They have been chasing non-existant inflation for most of my life. During the one time we did have out of control inflation, the late 1970's and early 1980's they were likewise totally incompetent. Since the early 1980's there have not been a single period of out of control inflation harming the economy. The BIG NEGATIVE times since the early 1980's had nothing to do with inflation....the flash crash, the dot-com crash, and the near banking collapse of 2008/2009.

    Don’t let the Fed scare us into a recession

    https://thehill.com/opinion/finance/410451-dont-let-the-fed-scare-us-into-a-recession

    (quotes are bold)

    Chairman Jerome Powell, a normally savvy financial observer (and former colleague of the author) stated on Oct. 3 interest rates “are a long way from neutral,” and “We may go past neutral.”

    Risky plans for large interest rate increases seem driven by adherence to a failed economic theory, the Phillips Curve, that postulates changes in the unemployment rate determine inflation. In fact, there is no consistent Phillips relationship; what’s more, inflation is quiescent and has been turning down, the economy is expected to slow next year, and the financial markets, which have been more accurate than the Fed, are telling us rates are practically at neutral now.

    In 1958, a New Zealand economist, William Phillips, identified an inverse relationship between unemployment and inflation: as unemployment increased, inflation decreased, and vice versa. His work was elaborated upon by legendary economists Paul Samuelson and Robert Solow in the early 1960s, but late 1970s “stagflation” — the era’s combination of both high unemployment and high inflation — discredited the Phillips relationship.

    Overall, there is no significant relationship between unemployment and inflation, except for services prices, which, being labor intensive, do show a weak but consistent relationship with unemployment. Complex global supply chains and floating foreign exchange rates are among factors cited for the diminished Phillips relationship.

    In 2017, core PCE prices rose a below average 1.6 percent, following the dollar’s appreciation after Donald Trump’s 2016 victory. The dollar slumped through late 2017 and early 2018, leading to current yearly core PCE inflation of 2.0 percent, but, since the dollar bottomed in April, the last three months have seen core PCE inflation of just 1.4 percent. That means inflation is well under control, with no indication of breaking out from its over 20-year range. There is no reason based upon inflation for the Fed to increase rates beyond neutral.

    The projected path for the economy into 2019 is yet another reason the Fed should maintain a neutral policy with limited interest rate increases. The Fed’s own projections call for growth to slow from 2.8 percent this year to 2.4 percent in 2019 as initial stimulus from the Tax Cut and Jobs Act diminishes. Recently slowing of homebuilding and automobile production seem to confirm this forecast. Again, no reason to overtighten.

    A published technical paper describes how to read the bond market’s expectations for future neutral interest rates. Currently those expectations range from 2.88 percent to 3.05 percent, not far from the Fed’s current interest rate target range of 2.00-2.25 percent. Chairman Powell’s comments increased these expectations by 0.10 percent, so they may well settle down again. In any event current rates are close to neutral.

    Every post-World War II U.S. recession has been preceded by significant increases in the target Fed Funds interest rate. Recessions also have been preceded by increases in inflation, and that is not now the case. Slowing inflation and growth and financial market expectations all argue for limiting rate increases to below 3.00 percent.

    Famous economist John Maynard Keynes said “Practical men ... are usually the slaves of some defunct economist.” Let’s hope the Fed is practical and not enslaved to a defunct Phillips curve that could lead the U.S. into recession.

    MY COMMENT:

    This is always an issue. The result of government/theoretical economists that usually have no experience in the real business world. It is too bad that we allow the Fed to be populated by this sort of person. BUT, not a surprize when you look at all levels of the government and business competence.
     
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  3. Jrich

    Jrich Well-Known Member

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    Really great thread man!... And, yea, rather unique here amongst primarily traders... But I dig it!

    Myself, I have two accounts... My personal trading account and a 401k plan through my employer that I manage... The later being more long term oriented, and comprised of sector ETF's... In fact I have my own thread on that portfolio that I haven't updated in quite a while, ill have to get on that

    The thing I find most difficult about long term investing is the lack of instant feedback... When I screw up on a trade, the market gods let me know it pretty quick... Not so much in the long term portfolio, mistakes take quite some time to manifest themselves, all the while sewing the seeds of second guess... Its truly a disciplinary art in its own right

    Anyway, keep the comments and articles coming... Very informative and entertaining
     
  4. WXYZ

    WXYZ Well-Known Member

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    I CHOOSE NOT to own any "international" stocks or funds. I have dabbled in a few international stocks over the past 50 years and have NEVER been satisfied with their performance. It is simply my opinion that the dominant economy and businesses in the world are AMERICAN companies. I am in pretty good company with my belief that there is no need to diversify by owning international investments. Warren Buffett is not a fan of international stocks for ordinary investors. Jack Bogle also recommends against international stocks in his portfolio. He makes a global macroeconomics argument based on his belief that the U.S. economy will continue to outperform the global economy in the future. Yet, we continue to see over and over that it is important to diversify and own some international companies. I often see the same thing with "developing economy" companies and stocks and funds. I have heard this "stuff" over my entire investing career. I dont buy it in the slightest. In my opinion this stuff is simply unsupported blather that has taken on a life of its own. When I hear this stuff my simple response is one word.......WHY? Usually the response is silence. I have yet to see any of the "developing economies" actually develop. Africa...no, South America...no, Central America..no, just a waste of time and money and nothing more than flailing around and investor busy work. Russia...no, China..no. I can not stomach investing in Russia or China, too opaque, rampant fraud, untrustworthy financials, lack of economic and personal freedoms, etc, etc.

    International stocks provide the least protection just when investors need it most

    https://www.marketwatch.com/story/i...n-just-when-investors-need-it-most-2018-10-09

    (quotes are bold)
    U.S. stocks’ performance so far this year offers a perfect illustration of why investors should not exaggerate the benefits of international diversification.

    When the U.S. stock market plunged more than 10% in late January and early February, for example, international stocks lost even more. When the U.S. stock market again fell sharply, between Mar. 9 and Apr. 2, international stocks also fell.

    In both cases, international diversification did not live up to its advance billing as providing a “free lunch” of reducing portfolio volatility while forfeiting very little return in the process.

    ....... it turns out that, historically, what happened in these cases is more the rule than the exception.

    What then accounts for the “free lunch” narrative that is widely associated with international diversification? Because, on paper, such diversification is supposed to work a lot better: Even though international stocks exhibit relatively little correlation with domestic stocks, their return over the long term is quite similar. A portfolio divided equally between domestic and international stocks should therefore produce the same return as a domestic-only portfolio but with significantly less volatility.

    The key word is “should..........”the correlation between domestic and international stocks is not constant. It instead shifts with the bull and bear cycle of the market itself: The correlation is lowest when the U.S. market is rising, and highest when U.S. equities are falling.

    As a result, international stocks provide the least diversification precisely when investors need it most — when U.S. stocks are declining. And when U.S. stocks are rising, and investors don’t need or want any diversification, international stocks provide it in spades.

    What you don’t want to do is wait until the next bear market and discover — too late — that diversification didn’t protect you to the extent you had hoped it would. That’s what happened during the Great Recession: the U.S. stock market lost 55.5% (as judged by the Vanguard Total Stock Market ETF VTI, -1.01% ) and foreign stocks lost even more — 60.3% (as judged by the Vanguard Total International Stock Market Index Fund VGTSX, -0.24% ).
     
    #24 WXYZ, Oct 10, 2018
    Last edited: Oct 10, 2018
  5. WXYZ

    WXYZ Well-Known Member

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    Thanks....Jrich. I am certainly NOT a trader, but, even if I was I would still have a LONG TERM core portfolio that would be focused on producing long term growth of my retirment money and my taxable brokerage account money. You can see from my portfolio and my concentrated bet on 12 individual stocks as a little more than half of my holdings that I am willing to take single stock risk and try to capture momentum on the BIG CAP side of things.

    Anyone, doing any sort of investing or trading is more than welcome to post on this thread. There is something to be learned from everyone and anyone regardless of style or experience. I am glad I stumbled onto this investing and trading community. I appreciate being able to post here.
     
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  6. WXYZ

    WXYZ Well-Known Member

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    Tough open today, the interest rate drama continues. Probably a pretty good environment for traders who like volatility. I would call the last four or five trading days an event/news driven "mini correction".

    Using the language of the "old days", I would say that the market is undergoing a small time period of consolidation after hiting new highs within the last couple of weeks, before moving upward to the end of the year. Earnings should be very nice, but I never doubt the ability of the markets in general to write off good news and especially good earnings. I am sure as earnings are reported the media will nit pick and focus on the forward looking statments and ignore most of the financial data being reported. That is what we have seen all through this year.

    The "professionals" are continuously looking for a reason to talk this market down. Over the past ten to fifteen years we have evolved into a two market schism. On one hand we have the industry professionals, usually jumping in and out, trying to time the markets and often showing fear and panic based on short term news and events. On the other hand we have the vast majority of regular people with their IRA or 401K and thier Index fund investing just plugging along and ignoring everything except the most severe crisis. In any event the markets in general continue to be an interesting commentary on HUMAN BEHAVIOR.
     
    #26 WXYZ, Oct 10, 2018
    Last edited: Oct 10, 2018
  7. Soda13

    Soda13 Member

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    Usually it's the margin calls, the "forced selling" that adds to the sell off and gives it juice. So if people are heavily margined, and stocks fall, even the "buy and hold" people may be forced to sell some stuff at some point. I'm amazed at how fast interest rates are going up. I'm wondering if we will see 4% by January. As far as big events. we have important elections coming up, and a fed that keeps raising rates. Some of these European huge fines of the big techs are going on as well.
     
  8. WXYZ

    WXYZ Well-Known Member

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    Good points Soda 13. Are you a trader or longer term investor, or both? All of those things you reference are certainly over-hanging the general markets.

    As to interest rates, there is only one reason they are going up, they are being driven up by the Fed. Hopefully the Fed wakes up and takes a break after the next raise in December. It would not hurt to allow the economy to digest the raises to date and to slow down for a bit to evaluate the impact on the economy, housing markets, business, etc, etc.
     
  9. Three Eyes

    Three Eyes 2018 Stockaholics Contest Winner

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    Apologies in advance for cherry-picking a couple of your quotes, one IMO expressing a seemingly indifference to Fed rate increases, the other less than 24-hours later (also IMO) indicating something other than indifference to Fed rate increases. But I think the juxtaposition of these thoughts help to illustrate just how difficult it is for investors, traders, and especially the Fed to figure out the health of the economy and how that health impacts our investments (and/or trades).

    The bond yields of the past week, of course, is not directly the Fed's doing, but rather bond traders setting their expectations for future Fed rate changes. For better or for worse, these treasury yields have real-world impacts on the economy. For starters, the government's sale of these bonds is what funds the government. During a time of massive stimulus in the form of tax-relief, the amount of Federal revenue is reduced, thus increasing Federal debt. This debt is paid by these bonds at increasing interest rates, and the markets are trying to figure out whether the growing chunk of Federal budget needed to service that debt will create a dampening effect on the economy, and thus also dampen the earnings prospects of companies we invest in that are dependent on that economy.

    Thanks for the invite. Appreciate the open discussion and hope I've not already overstayed the welcome.

    Cheers!
     
  10. WXYZ

    WXYZ Well-Known Member

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    Welcome Three Eyes.

    Actually, if you knew me and my TOTALLY unemotional approach to investing and many years of experience NOT getting worked up over this sort of short term "stuff" it would be clear that both of the above quotes are MY reality. I DO welcome rates getting back to normal AND I am NOT concerned about rate increases. AND, yes, the increases we are seeing are being driven by the Fed.

    That does not mean that the media and others will not overreact like we saw yesterday. AND, the Fed should be smart about their language and how they structure the increases. My one BIG problem with the increases is the linking of them to talk of inflation. Time will tell, but I dont see any issue with inflation......right now. As I said, it is my opinion that we are currently exiting a deflationary period that started in 2008/2009.

    NOW, if someone is so short term oriented that events like yesterday define their investing world and they are subject to media driven panic and fear.....well different story. Of course, we know from historic return data that a great many people that jump on the investing band wagon will get shaken out of the markets at the slightest hint of trouble especially when it becomes the media story of the moment and is flogged by the media for emotional clicks.

    My opinion remains that current rates are STILL outrageously low. That getting the rates back to normal levels is a good thing. That the current rate increases are being driven by the Fed. That the Fed needs to be smart about their language and plan to raise rates in the current political and media environment and considering the emotional state of people. AND.....YES, there is NO inflation to speak of.

    I see many articles today with all sorts of panic and fear language. The SPECULATION is rampant and the DOOM&GLOOM is running around out there in force as usual. If it was not so sad seeing people being jerked around by emotional media speculation, especially the so called "professionals", it would be funny. As it is, for me as an investor with a LONG TERM perspective, it continues as usual to be an interesting lesson in human behavior.

    I do find it interesting that it is often the so called "professionals" that are running around and jumping in and out of the markets at a moments notice every time there is some FAD or emotional media theme of the day. That is one reason the majority of them can NOT beat the un-managed Indexes even over the shorter term. I DO see the hand of program trading in what happened yesterday. I remember the FLASH CRASH in 1987, now THERE was a crash....22% in one day. Of course it was the market "professionals" that caused that crash. They were all full of hubris with their PORTFOLIO INSURANCE hedging computer models, it was a new era, a new golden age of QUANT theory. The BIG PROBLEM was when the SH*T hit the fan it was their program trading and portfolio insurance model that sustained the crash and caused it to spiral out of control. It was the professionals that panicked that day. AND, as usual for those that had even a MEDIUM term horizon (till the end of the year) the losses were quickly made up and the world continued.

    NO.....you have not overstayed your welcome.

    Actually if you check the data you will see that Federal tax collections and revenue are way up. My take is that tax rate decreases are not responsible for the DEBT in the slightest. It is the inability of government and congress to control their ever escalating spending and the insatiable appetite to consume every penny collected and more that is running up the debt. In fact, the vast majority of debt increase over the past 10 years came before the recent tax cuts. If it was me I would have gone further with the tax cuts and done a nice capital gains tax cut.
     
    #30 WXYZ, Oct 11, 2018
    Last edited: Oct 11, 2018
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  11. WXYZ

    WXYZ Well-Known Member

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    TODAY, I continue to be fully invested for the LONG TERM as usual. The events of yesterday are not relevant to me as a LONG TERM INVESTOR. I will mention just for context that over the past 50 years investing there has only been one time period that I sold ALL and left the markets. In May of 2008 based on MUCH reading and study I concluded that there was an actual POSSIBILITY of a banking collapse. NOT a "probability" but a "possibility. As a result I sold my entire portfolio at that time. I came back into the markets ALL IN ALL AT ONCE in March of 2009. Skill? No, probably luck with the timing, but at least I had a rational reason for leaving the markets and it was based on much reading and study of what was occurring at the time outside of the markets in the Investment banking and banking industries with their collateralized products. It has worked out well for me, being FULLY INVESTED ever since.

    As to today, it should be a very good day for the traders. VOLATILITY is your friend and today we should see plenty. For us LONG TERM people...........well...........WHATEVER.

    I will also mention for THREE EYES or anyone else. We all have our opinions, thoughts, theories, etc, etc. I WELCOME anyone to post theirs on here. I might comment some, but I am not going to argue OPINION on the internet. I see people all the time getting into massive arguments and heated confrontation on the internet over someone's opinion. Odds are that everyone is correct to some degree in their opinions when it comes to their particular life experiences and circumstances. As I said, anyone and everyone, is welcome to post discussion, their portfolio, their investing style, etc, here. I might not agree and I might comment, but it will be discussion and NOT internet argument.
     
    #31 WXYZ, Oct 11, 2018
    Last edited: Oct 11, 2018
  12. WXYZ

    WXYZ Well-Known Member

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    HERE is a typical article that ILLUSTRATES my thinking on the MEDIA, (bold is to make my point). I quote the entire article:

    Markets attempt a comeback after scary sell-off

    https://www.cnn.com/2018/10/11/investing/dow-stock-market-today/index.html

    The stock market is attempting to end its longest slump in more than two years.
    After tumbling overnight, US stocks traded cautiously higher on Thursday morning. The S&P 500 rose slightly, putting it on track to end a five-day losing streak.

    The Dow eked into positive territory following Wednesday's 832-point plunge. The Nasdaq rose nearly 1%, rebounding from its worst day since the Brexit referendum in June 2016.

    The Nasdaq in particular has gotten rocked in recent days, losing 7% so far this month. Investors have bolted from the index, which contains many tech stocks, because they are concerned about holding some of the market's riskiest stocks in a downturn. A proxy for the tech sector had its sharpest plunge in seven years on Wednesday.

    "Halloween started early this month for investors," Ed Yardeni, president of investment advisory firm Yardeni Research, wrote to clients.

    In a positive sign, Apple, Facebook and Netflix all made gains on Thursday.
    Concerns about inflation were eased a bit by a report released on Thursday that showed consumer prices rose less than expected in September.

    Stocks have turned sharply south because investors are increasingly concerned about rising interest rates. As the Federal Reserve raises rates to prevent runaway inflation, investors have been getting out of bonds, driving down their price and driving up their yields. Suddenly, the return on bonds has become competitive with some stocks — particularly risky tech stocks.

    (insert stock photo of concerned trader with chart)

    [​IMG]

    Why stocks are suddenly plunging

    Rising interest rates also increase borrowing costs for households and businesses, eating into corporate profits. America's increasing debt load, a trade war with China and a slowing global economy have also unnerved investors.

    Wednesday's "rout has shaken investor confidence," Nicholas Colas, co-founder of DataTrek Research, wrote to clients. "That will take time to rebuild."

    The Dow plunged 3.2%, on Wednesday. Tech stocks took a beating, sending the Nasdaq tumbling 4%.
    That dragged down stock indexes in the United Kingdom, Germany and France on Thursday, all of which fell more than 1%. Benchmark indexes in Shanghai and Tokyo closed down 5.2% and almost 4%, respectively. Hong Kong's market was down over 3%.

    The S&P 500's 3% plunge on Wednesday was rare. It's only happened in 0.6% of all trading days since 1952, according to Bespoke Investment Group.

    The good news is that the market often springs back to life after such a deep sell-off. Bargain hunters scoop up beaten-down stocks and calmer heads prevail. On average, the S&P 500 has gained 0.4% the day after a 3% slide, Bespoke said.
    That's what happened in February after the S&P 500 twice suffered 3% drops caused by fears about rising bond yields. Both sell-offs were followed by rebounds of more than 1% the next day.

    But Yardeni is optimistic the market will rebound because corporate profits are robust and no recession is in sight.
    "We remain bullish on the outlook for earnings, and expect the market to recover and make new highs going into next year," Yardeni wrote.

    MY COMMENT:

    What I see when I look at this sort of article is.....blah, blah, blah, blah. It makes me laugh. The comment about RUNAWAY INFLATION is especially over the top.
     
    #32 WXYZ, Oct 11, 2018
    Last edited: Oct 11, 2018
  13. Jrich

    Jrich Well-Known Member

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    "Actually if you check the data you will see that Federal tax collections and revenue are way up. My take is that tax rate decreases are not responsible for the DEBT in the slightest. It is the inability of government and congress to control their ever escalating spending and the insatiable appetite to consume every penny collected and more that is running up the debt. In fact, the vast majority of debt increase over the past 10 years came before the recent tax cuts. If it was me I would have gone further with the tax cuts and done a nice capital gains tax cut"

    Amen!
     
  14. WXYZ

    WXYZ Well-Known Member

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    DECIDED in honor of the BIG DROP this week, to post some portfolio performance data. HERE are the stocks in my portfolio and those I manage. Returns are for 3 months.....1 year.....3 year.....and the growth of $10,000 invested in each over the past 5 years. This data was pulled today when the DOW was at +222 points about 15 minutes or so ago. The POWER of LONG TERM INVESTING. BUT.....you know what they say about statistics.

    I believe once things are evaluated in the coming weeks that the majority of the market action this week will be shown to be caused by PROGRAM TRADING and AI algorithms. The type of explosive drop we saw on Wednesday has the fingerprints of ALGORITHM TRADING all over it. The program trading used by all the big investment banks and brokerages in a sudden down day always has the bias to snowball the markets down, down, down. I also strongly suspect that the data will show that the regular "little" investor just sat through it all and it was the "professionals" that were running around like chickens crying that the sky is falling, either intentionally to drive their position profits in the steep drop or because they were actually in panic mode. Either way......irrelevant to LONG TERM INVESTING. Of course the initial factor that set things off was the incessant and massive number of DOOM&GLOOM articles that hit the MEDIA at the start of this week on the issues of INFLATION and INTEREST RATES, and escalating as the week progressed. It became a media feeding frenzy.

    LOOKS LIKE the old market TIME MACHINE has taken us back about a month to a month and a half as to where we are on the averages right now. BIG WOW......that MASSIVE drop that the MEDIA is going crazy over this week has erased about a month to a month and a half of market action. Over the medium to long term.....meaningless. Now of course since I have posted this I expect that have JINXED the markets. As I type this the DOW is now up 118. I would not be surprised to see it negative by anywhere from 50 to 200 points by the end of the day. It will be an extremely volatile day and many will sell before the close to not be holding over the weekend. A GREAT week for the traders that have the talent to take advantage of this volatility.


    STOCK * 3MONTH * 1 YEAR * 3 YEAR * GROWTH OF $10,000
    OVER 5 YEARS

    MMM
    3M CO 7.66% 3.03% 64.21% $21,016.97
    GOOGL
    ALPHABET INC 11.98% 25.11% 93.36% $29,047.63
    AMZN
    AMAZON.COM INC 23.51% 109.43% 297.37% $71,631.79
    AAPL
    APPLE INC 22.24% 49.50% 111.85% $35,888.60
    BA
    BOEING CO -2.18% 49.29% 215.16% $37,492.75
    CVX
    CHEVRON CORP -3.79% 7.92% 82.38% $11,989.93
    COST
    COSTCO WHOLESALE CORP 17.89% 44.88% 76.07% $23,687.00
    HD
    HOME DEPOT INC 8.17% 30.34% 93.66% $30,146.00
    HON
    HONEYWELL INTERNATIONAL INC 8.06% 20.73% 94.55% $22,271.13
    JNJ
    JOHNSON & JOHNSON 13.35% 9.58% 63.97% $17,880.74
    NKE
    NIKE INC 15.08% 62.84% 43.77% $27,764.35 0.64
    NVDA
    NVIDIA CORP 11.36% 60.36% 1,129.01% $200,999.43

    Benchmark:
    S&P 500 TR 7.71% 17.91% 61.43% $19,210.26
     
    #34 WXYZ, Oct 12, 2018
    Last edited: Oct 12, 2018
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  15. WXYZ

    WXYZ Well-Known Member

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    WELL, WELL, WELL.......nice close today. Especially considering where the markets were an hour before the close. Surprised me at the end. Looks like LOGIC and REASON won out over fear and emotion to close the week. Also a win for human reasoning over machine intelligence. BUT, next week is a new beginning. I am sure the volatility will continue and as in any NORMAL market we will go in spurts and dribs and drabs, up, down, up, down, up, down. ONWARD.......two steps forward and one step back as is always the history of investing.

    DOW year to date +2.51%
    SP500 year to date +3.50%

    ADD IN the dividends and you have a total return of about 5-6% right now with earnings ahead of us. As I mentioned earlier I expect that earnings will be VERY GOOD, but everyone will nit-pick the forward looking statements and will find some reason to discount the locked in GOOD at the expense of the unknown future. We have seen this pattern for the past few earnings reporting periods.

    You know the REALITY is that stocks and the averages can not be up every year and we have not had a down year since 2008. We have had a few that were close to down. As to the SP500 as a broad market measure:

    2009 +26.49%
    2010 +14.91%
    2011 +1.97%
    2012 +15.96%
    2013 +32.18%
    2014 +13.51%
    2015 +1.25%
    2016 +12.34%
    2017 +21.67%

    I like the FACT that many stocks in the SP500 are at correction levels and there is NO euphoria on the up side of things. That tells me that we are in a very nice potential (emphasis on "potential") situation going forward for the end of this year and next year.

    Most S&P 500 stocks are deep in correction territory

    https://www.reuters.com/article/us-...re-deep-in-correction-territory-idUSKCN1MM2EF

    "About 380 S&P 500 stocks have fallen 10 percent or more from their 52-week highs, as of midday trading, putting the vast majority of the index squarely within correction territory. Of those, 164 stocks have fallen by 20 percent or more from their highs, establishing them in a bear market, by many investors’ definitions."


    Tells me we have a lot of stocks that have more upside than down. (Although, you know what they way about trying to catch a falling knife. AND, you cant fight the Fed.) I dont see a lot of REASON for this with many of these companies putting up good numbers. I DO NOT in the slightest buy the MEDIA MANTRA that is out there right now that the tax cuts for business will only have an impact this first year.

    I find it interesting that we now seem to be experiencing these COMPRESSED corrections that last a week or two, or just a month or two, as compared to the past when a correction might last for many months or even a year. I GUESS everything happens at a faster speed now. But........I am always looking very LONG TERM. SO......my posts, often focused on the short term, REFLECT my usual stream of consciousness while I hold for the LONG TERM. I continue to have absolutely NO doubt in the strength of the AMERICAN economy and business over the LONG TERM. I remain fully invested as usual. HAVE A GOOD WEEKEND ALL.
     
    #35 WXYZ, Oct 12, 2018
    Last edited: Oct 12, 2018
    T0rm3nted likes this.
  16. WXYZ

    WXYZ Well-Known Member

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    It is the WEEKEND so I will stray on subject matter in this post. ARE there any art collectors on this investing board? I happen to collect AMERICAN Impressionistic art, Western art, and Early Texas art. NOT strictly as an investment, primarily for enjoyment and life enrichment. ALTHOUGH, I have never lost money on paintings that I have sold at auction. HERE are my rules for buying (investing) in art.

    1. Buy what you love.
    2. ONLY buy art by dead artists.
    3. Quality trumps quantity and everything else.
    4. Upgrade, upgrade, upgrade.
    5. Educate, educate, educate yourself and become an expert in your narrow field.

    Number 1 is self explanitory. There is no reason to have art on your walls that you do not like. If you are trying to collect partially as an investment, that is fine, but why have art around you that you do not LOVE.

    Number 2, to me, is the BIG ONE. I was told this by a LONG TIME gallery owner about 30 years ago. He was a national expert on Russell and Western Art in general. He was also a great character. His Bull Dog would usually be in the gallery with him most days. "ONLY buy art by dead artists" was the advice he gave me the first time we went into his gallery in Scottsdale, Az. We were in the gallery area of town and had gone through many galleries that day, most were representing living, active, Western artists. The reason for this RULE is that when a gallery represents a living artist their job is to PROMOTE that artist as much as possible. There is no way to know the real value of many artists work while they are alive. By buying art by DEAD artists, especially those that sell at auction, you know that the market place is establishing the value of their work, not some PR firm or gallery through promotion. Of course, art still goes in and out of style, even for dead artists. But like anything else that is a hard asset and might have value, if something has stood the test of time and has a long history of established value with arms length buyers and arms length sellers, you will probably NOT lose money on the purchase if you purchase at a realistic market price and do not have to sell right away.

    RULE number 3 is also a BIG ONE. Many collectors when they start tend to buy quantity. The frenzy and emotion of a new found interest. BUT, the best approach with art or any collectable is to buy the finest example and best quality single item you can afford. In conjunction with this rule I also try to buy pieces from the TOP NAMES in the field that I am collecting. A fine example of something by a top name will have a better chance to apreciate in value over the years compared to owning a number of average pieces by well known but average artists.

    RULE number 4 goes along with rule 3. Over the years I have sold many pieces in order to consolidate and upgrade the quality of what I own. My collection has tended to decrease in number and increase in price and quality. It is also nice to be able to acquire new items without having to dip into savings by selling items that you already own to generate cash, especially to upgrade.

    ANYWAY.....any other collectors or art or antiques or other "things" on here? It is nice to be able to enjoy nice items around you in life and at the same time if you are lucky enjoy a hedge against inflation or personal disaster and......if you are lucky......appreciation in value.
     
    #36 WXYZ, Oct 13, 2018
    Last edited: Oct 14, 2018
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  17. WXYZ

    WXYZ Well-Known Member

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    In order to be able to take advantage of being a LONG TERM, fully invested all the time, investor for life I have structured my assets in a very specific fashon. I specifically try to be a growth oriented, BIG CAP, investor in stocks and funds. My asset mix is as follows as a percentage of net worth:

    Art and antiques 15%
    Real property 15%
    Income producing assets 20%
    Stock and fund account 50%

    ART AND ANTIQUES is self explanitory. These HARD assets provide diversification into a category that is outside the usual stocks, bonds, real estate, etc, etc. These assets have the potential to benefit in an inflationary environment.

    REAL PROPERTY, is baically my home. In my state my home has a 100% exemption in the event of disaster and bankruptcy. I own my home free and clear and have NOT had a mortgage for 30 years. Even in my younger years I prefered a free and clear home. Our current home is 9th home we have owned since 1974. With my HIGH business overhead when I was a business owner (up to retirement at age 49) it was always my preference to keep my personal life as debt free as possible.

    INCOME PRODUCING ASSETS are the money that I use to live on. At this point in my life it is the payments from a number of defered income annuities (NOT the "bad" annuities, simple income annuities) that I used to basically create a lifetime pension for myself and my wife. With the lifetime annuity payments plus social security we are set for life when it comes to income. With our debt free lifestyle and a free and clear house we have no problem living on a $175,000 per year lifetime income. We do still save a portion of the income that we will use to increase the lifetime income up to $200,000 per year for life at some time over the next five years through the purchase of an additional immediate income annuity.

    STOCK AND FUND ACCOUNT is my TAXABLE brokerage account. I INTENTIONALLY have exausted my IRA/pension accounts. This year was the last year that we used these funds for living expenses and will exhaust them. This is timed with the kicking in of the annuity payments. I learned LONG AGO from older business friends that there is great benefit to NOT having all your money in tax defered retirement accounts.

    In my business era, for a small business like mine, the retirement plan of choice was the Keogh account which I funded to the max ($30,000 per year). You dont see a lot of Keogh accounts these days with all the various retirement vehicles. When I retired and closed out the Keogh pension fund I transfered those funds into an individual IRA account which I used for living expenses starting at age fifty nine and a half. The IRA money, plus funds from the sale of my business, covered our living expenses up to this year.

    The BIG BENEFIT of now having everything in a TAXABLE brokerage account and the immediate annuities will be a BIG drop in taxable income starting next year and a BIG drop in tax bracket. Anything in my brokerage account would be subject to capital gains tax but NOT income tax. My immediate annuity income will only be partially taxed since a big chunk of each payment is return of premium. As a reault of INTENTIONALLY using up my IRA account as soon as possible I will no longer be in a BIG TAX BRACKET for the rest of my life. I anticipate that with the IRA now exhausted, I will save at least $10,000 to $20,000 per year in taxes. I believe it is a BIG mistake the way most people put everything into tax defered accounts and push themselves into the highest tax bracket of their life during retirement. Before retirement it was also a HUGE BENEFIT to have significant funds in a taxable brokerage account so that money was available to use for any expense we wished without having to worry about taxes if withdrawn.

    SO.....that is, and was, my LONG TERM asset plan that I have followed for many years now. AND....this is why my stock market money...50% of my net worth...is able to stay fully invested for the LONG TERM, even in retirement. Being a LONG TERM INVESTOR, to me, includes all the above and structuring my assets so I can continue to GO FOR LONG TERM GROWTH without having to sweat out the times when the markets are DOWN. As a result of my asset and income planing we will be fully invested stock market investors for life with NO RISK to lifestyle or family security.
     
    #37 WXYZ, Oct 13, 2018
    Last edited: Oct 14, 2018
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  18. WXYZ

    WXYZ Well-Known Member

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    SCOURING the MANY market news and opinion sites that I scan and review every day that the markets are open. I see NO, ZERO, ZIP, NADA.....articles on inflation and interest rates. AMAZING. Last week in pure LEMMING fashon the MEDIA was full of nothing else. Was it the shorts? Traders? AI trading quants? The media?.........Or all of the above that for some reason decided to HAMMER on the inflation and interest rate theme last week, ALL at the same time. WHATEVER it was, it was NOT real. It was a MEDIA driven theme of the week for some reason. A perfect example of the power of panic and fear to drive the markets and the power of the media and others to drive that panic and fear very short term.

    A compelling lesson for everyone, especially LONG TERM INVESTORS. This sort of media and market chaff is interesting to watch, but, totally irrelevant. BEWARE this sort of coordinated effort....by sinister, dark, unknown forces (sarcasm)......to drive very short term market direction.
     
    #38 WXYZ, Oct 15, 2018
    Last edited: Oct 15, 2018
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  19. TomB16

    TomB16 Well-Known Member

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    Great point, WXYZ.

    I don't own good stocks, I own good businesses. Good businesses will find a way to succeed in any market.
     
  20. WXYZ

    WXYZ Well-Known Member

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    EXACTLY TomB16. I TOO own businesses, not markets or averages. Even the SP500, I OWN 500 individual businesses.

    GREAT OPEN today. Interest rates, inflation? I guess that foolishness is over for now. I have no doubt it will be raised again, even though in my opinion, it will be more foolishness by the MEDIA and those trying to talk the markets down for their own purposes. Lets see if we can avoid the mid day (lunchtime) and end of the day FADE today. As usual I probably jinxed things by posting this about the open.

    COMPARED to AMERICAN companies, the rest of the world is a disaster waiting to happen. We are the ONLY secure place to invest. Earnings are now center stage, as they should be.
     

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