The Long Term Investor

Keep us posted on your views Trahn as well as your portfolio.

GREAT open today. ALL TIME HIGHS either in place or in easy range. BUT, lets see where we are at the end of the day. I dont see anything particularly negative in the markets, but with these highs I am sure there will be some profit taking along the way.

Ten year treasury has a yield of 2.00%. This has got to be a multi-year low, although I have not checked the data. Good news for the housing market with mortgage rates probably below 4% in most local markets. The GLORY YEARS continue for those that want to buy a home and lock in an amazing payment for 30 years. There are going to be multiple generations of home buyers that will be very spoiled by these rates considering that we have been seeing these historically low rates for the past ten or so years now.

Considering that rates in many of the EU countries are actually negative AMERICA will be the go-to place for investing safe money. In addition to our actual positive rate of return we are the most secure and safe country in the world for investment funds. I imagine that a lot of foreign money will also be flowing into our safe, world leading, dividend stocks for those that want more yield than treasuries with the safety that investing in premier companies brings.

Add the mortgage rates to the ever growing list of economic indicators that are lining up as positive right now. In spite of all the good news the general economy is far from overheating. VERY GOOD NEWS for investors, especially long term investors that will capture these short to mid term gains without the risk of trading, market timing, etc, etc.

 

I guess I am like Trahn. I dont talk about gold and silver much since I do not see it as an investment. To me it is simply a personal asset like art or antiques. It is a hedge against some emergency situation and a fun little play thing. Many years ago my parents started giving us Silver Eagles for Christmas and birthdays. As a result we started buying a couple of sleeves of silver Eagles every year to fill up a green mint box (25 sleeves). When the Silver Eagles and other sterling got up to about 1000 oz a few years ago, we started buying one or two American gold buffalo coins (1oz pure gold) each year instead. We now have about 14 oz of gold coins and plan to continue with the one to two coins per year for life. We now give all our children and their spouses a Silver Eagle for each birthday and Christmas.

We do NOT consider this an investment and do not calculate the value of these coins in our investments. (although over time the number of coins has grown to the point that value has gotten to be real money)

We see our assets as being in three categories:

Real Property
Personal property (antiques, coins, art, etc)
Financial investments (stocks and funds)

All serve to provide diversification.

 

To ME this is the investing news of the week, perhaps the month:

10-year Treasury yield drops as low as 1.97%, first time below 2% since November 2016

https://www.cnbc.com/2019/06/19/us-...-investors-await-federal-reserve-meeting.html

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

"Key Points

• The yield on the benchmark 10-year Treasury note fell below 2% for the first time since November 2016 on Wednesday — breaching a key psychological level.
• The policymaking committee of the Fed also dropped the word “patient” from its statement, a sign interpreted by some investors as a hint that the central bank hasn’t abandoned the idea of a rate cut in 2019.

The yield on the benchmark 10-year Treasury note fell below 2% for the first time since November 2016 on Wednesday — breaching a key psychological level — after the Federal Reserve struck a more dovish tone in its June policy statement and Chair Jerome Powell said that the case for easier monetary policy had strengthened.

Though the central bank maintained the target overnight lending rate, that decision was accompanied by a growing number of officials open to one rate cut by the end of 2019 with eight members in favor. However, the consensus still didn’t expect a reduction until 2020 at the earliest.

The policymaking committee of the Fed also dropped the word “patient” from its statement, a sign interpreted by some investors as a hint that the central bank hasn’t abandoned the idea of a rate cut in 2019. The Fed tweaked its statement to acknowledge that inflation is “running below” its 2% objective.

At around 11:58 p.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, declined below 2% to 1.9821% — around its lowest levels since November 2016. The yield on the 2-year slipped to 1.7209%, its lowest level since 2017. The 3-month Treasury bill yield ticked lower to 2.175%, as of 7:30 p.m. ET.

While stock investors and home buyers may initially cheer the drop in the benchmark for corporate bond and mortgage rates, the return to levels not seen in more than two years raises serious questions about the state of the economy.

Softer economic gauges like May’s anemic jobs report — which showed that the U.S. economy added just 75,000 positions — and a lackluster consumer pricing print suggested to economists and fixed-income traders earlier this month that the central bank may have to assure markets of its willingness to step in if GDP growth decelerates.

Speaking to reporters after the central bank meeting, Powell said policymakers are worried about certain economic data and see an improving case for easier policy.

“Overall, our policy discussion focused on the appropriate response to the uncertain environment,” he said. “Many participants now see the case for somewhat more accommodative policy has strengthened,” Powell said.

Traders are now pricing in a more than 80% chance of a rate cut in July and 70% probability of another reduction in September, according to the CME Group’s FedWatch tool.

“It was largely what the market was looking for: I don’t think they went too far as to spook the market in any way,” said Tom Garretson, a fixed-income strategist at RBC. “Seeing that eight [officials] are seeing a rate cut this year was dovish.”

“This is mostly an inflation story,” he added. “If you look at GDP forecast for 2020 they’re up to 2% from 1.9% ... even if they were worried about tariffs, it didn’t show up in their forecast.”



The Fed has in recent months been grappling with a consistent shortfall in inflation relative to its self-imposed 2% target. The Fed’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index, increased 1.6% in the year to April after gaining 1.5% in March.

Treasury inflation-protected securities — bonds whose payouts are indexed to consumer prices — show that price growth expectations have slid in recent months. Inflation is a threat to the value of a bond’s fixed coupon and principal payments.

Wednesday’s decision from the Federal Open Market Committee came after President Donald Trump’s repeated criticism of the Fed and Jerome Powell specifically for raising rates and tightening monetary conditions over the last year. Trump, who sees recent Fed policy as damaging to American markets and undermining his bargaining position in trade talks, has broken with tradition in his frequent and vocal criticism of the central bank.

Asked Tuesday whether he wants to remove Powell as Fed Chair, Trump said “Let’s see what he does.” Trump’s comments came after Bloomberg News reported Tuesday morning that the White House had looked into demoting Powell in February.

Trump also said Tuesday he will be having an “extended meeting” next week with the Chinese leader Xi Jinping at the G-20 meeting in Japan.

Meanwhile, European Central Bank President Mario Draghi said Tuesday that the central bank may need to ease monetary policy in the coming months if inflation doesn’t bounce back toward its target.

“In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required,” Draghi said."

MY COMMENT

Last thing in the article first........they are not going to be able to stimulate their way to economic success. A bunch of government spending is just a total JOKE. That is why the EU and other parts of the world have been stuck in a deflationary depression for at least ten years now. In fact, WE, AMERICA, are one of the few places in the world right now that is having economic success. WHY....cutting taxes, cutting regulations, getting government out of the way and off the backs of private business.

It is OBVIOUS that even in this country the BIG DANGER now is deflation. It is OBVIOUS that the FED knows this and appears to be ready to try to do what it takes. NOT that I have any faith in the FED. This is another GOOD indicator for stock investors going forward over the short term (1-12 months). YES......there is no inflation.

 

AND......TOTALLY related to the above......here is a little article that reflects WHY we are seeing economic success at the moment as we did in the REGAN BOOM that lasted from about 1984 all the way to the dot-com boom of the 1990's. The fact that many politicians and people REFUSE to believe that tax cuts and regulation cuts is the BEST stimulus to the economy and benefits the broad population is TOTALLY in line with the movie IDIOCRACY.

Arthur Laffer revolutionized the world with his economic theory

https://thehill.com/opinion/finance..._13u1l5w6cUDhOWLN_2XX8IKi96KmLTElZjFYkLcNugtQ

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

"A very strong case could be made that the most influential economist in the world in recent decades has been Arthur Laffer. Ever since the 1970s, Laffer has been at the tip of the spear of the global tax reduction frenzy. He has influenced the economic thinking of great leaders ranging from Ronald Reagan and Margaret Thatcher to Jerry Brown and Donald Trump.

The highest income tax rates in nations around the world from Australia and Britain to France and Russia to Sweden and, of course, the United States have fallen from an average of 65 percent to about 40 percent since Laffer had burst onto the policy scene with his ideas in the 1970s. It is no coincidence that growth surged when these tax rates fell. From 1982 to 2007, the global economy grew at one of its fastest rates in history.

In a perfect world, Laffer would win a Nobel Prize in economics but, given the liberal bias of that award committee, it probably will not happen. The good news is that, on Wednesday, President Trump will award Laffer the prestigious Presidential Medal of Freedom for his tax cutting crusades.

The Laffer revolution began around 45 years ago when this young and precocious economist famously drew a graph in the shape of a turtle shell, pointing out the surprising relationship between tax rates and tax revenues, on a cloth napkin at a private dinner in Washington in 1974. That dinner was attended by Donald Rumsfeld and Dick Cheney, two top White House advisers to President Ford at the time, along with Wall Street Journal writer Jude Wanniski, who over the next few months and years excitedly editorialized about this profound new economic doctrine.

The idea illustrated by Laffer was disarmingly simple. There are two tax rates that produce no government revenues. These are 0 percent and 100 percent. No one works or invests if they have to fork over every penny to the government. In some instances, as when President Kennedy slashed income tax rates from 90 percent to 70 percent, the lower rates cause the economy to accelerate so much that income taxes paid can actually rise.

The left obsesses about whether tax cuts “pay for themselves” and the answer is sometimes yes but more often no. This is a sideshow to the key insight of the real paradigm shift led by Laffer, who refocused economics back to the role of incentives. When politicians cut the tax or regulatory burden on working, investing, or starting businesses, people respond by working, investing, and starting businesses more. This is called supply side economics because the supply of our goods and services is shifted upward. As Laffer has stated a thousand times, “When you tax something, you get less of it, and when you tax something less, you get more of it.”

President Reagan and Jack Kemp took to the idea. The famous 1981 tax cuts were a product of Laffer economic theory. By the end of the Reagan administration, tax rates were slashed from 70 percent to 28 percent. The economic comeback in the United States from the “stagflationary” 1970s was undeniable, with the surge in output contributing to unemployment, inflation rates falling by half, and economic growth surging to 6 percent and averaging just under 4 percent annually from 1982 to 1989. This was just like adding another California to the economy of the United States.

Laffer became the Pied Piper of lower tax rates around the world. Rates of 60 percent, 70 percent, and even 90 percent were falling and often cut in half. Ireland went down to less than 13 percent on its corporate tax rate, and businesses started to pour in. Sweden even abolished its estate tax.

The most recent disciple of the Laffer curve is Trump. Having worked on a tax plan for Trump, I can attest that Laffer was the most persistent and persuasive voice for cutting the corporate tax rate to 21 percent. While the final verdict of how well this all works remains unknown, the boost in growth and wages in our country, along with the record seven million unfilled jobs, has vindicated the true power of the Laffer model.

Amazingly, the Laffer curve notion that lower tax rates and fewer tax loopholes produce a more efficient way to collect taxes had become so mainstream and bipartisan that a tax bill that chopped the highest tax rate from 50 percent to 28 percent in 1986 was overwhelmingly passed in the Senate with 97 votes in favor, including the votes of Democrats like Al Gore, Bill Bradley, Joe Biden, Ted Kennedy, and Howard Metzenbaum.

Unfortunately, the political consensus that had emerged in the 1980s and 1990s that very high tax rates can cause severe economic damage has splintered. Today, the central message of the Laffer curve is sadly under assault from influential Democrats. Some of them in Congress, like Bernie Sanders, Elizabeth Warren, and Alexandria Ocasio Cortez, favor income tax rates on the rich of 50 percent, 60 percent, and even 70 percent.

This is all being promoted as a way to restore “fairness.” But if history is any judge, those tax rates will only slow the economy and hurt those at the bottom of the income ladder the most. Laffer shrugs when he hears talk of the sky high tax rates of the 1960s. “Some people just do not get it,” he laments. “70 percent of zero is still zero.” He adds, “A good tax system should try to make poor people rich, not rich people poor.”"

MY COMMENT

Having been a business owner for much of my life, I could not agree more with this little article. It is totally instructive to me that most that do not agree with this STUFF are government workers, politicians, and others that live off the taxes taken from others and redistributed under various IDIOCRATIC (made up word) programs and theories.

 

Absolutely Jrich. We are NOT into the science fiction apocalyptic stuff or preppers. But having lived in earthquake country for decades at one time in life we do some emergency prep. We have a go-bag near the garage door in a closet with:

First Aid kit.
water purification devices.
Emergency crank AM/FM/Short Wave radio.
Battery lights and flashlights.
Batteries.
Biological masks.
Fire starting devices and materials.
Knives.
Some tools.
2 empty five gallon water containers.
etc, etc, etc.

In addition in a closet in the house we have emergency food for the entire family for two months. Should have a shelf life for 25 or more years. We try to keep the tank full in our second car that normally is not used and sits in the garage (600 mile range). I doubt that we will ever need to use any of this stuff, but you never know with the various types of natural disasters. We are no longer in earthquake country, but we could get other sorts of weather related disasters from time to time. I guess this is some sort of "old people" thing. But we had this stuff drilled into us, as I said in earthquake country.

 

Agree Jrich. There is a line between good preparation and obsession or fanaticism. The SAME could be said in terms of investing.

HERE is another article on the subject a few posts above. Some GENERAL economic info since we are seeing a little well earned pause in the markets today.......at least at the moment.

A well-deserved honor for Arthur Laffer

https://www.washingtontimes.com/news/2019/jun/24/medal-of-freedom-recipient-arthur-laffer-the-harm-/

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

"Most people plod through life, having an impact on their family and friends, but not much on the rest of humanity. Rulers and despots can impact most everyone’s life, as can those who are responsible for great scientific or engineering breakthroughs. Some musicians and athletes bring pleasure to millions. In other fields, such as economics, it is hard to identify individuals who created much in the way of pleasure or pain, or even directly useful knowledge for his or her fellow man.

President Trump awarded the Medal of Freedom, the nation’s highest civilian honor, to economist Arthur B. Laffer, the “father of supply-side economics,” this past Wednesday. For more than four decades, Art Laffer has had an impact on his fellow Americans and many other people around the world, whether they recognized it or not.

Art Laffer became famous for a concept that he did not develop (the idea behind the Laffer Curve had been known for a couple of thousand years) — and for something he did not say — and that is that all “tax cuts pay for themselves.” What Art and many of the rest of us have said is that some tax-rate cuts, like those on capital gains, often “pay for themselves” in a year or so. Other tax-rate reductions never do — but given enough time, tax-rate reductions on labor and capital, particularly from high levels, can pay for themselves by increasing the long-run size of the economic pie because of the additional work, saving and investment they engender.


Several years ago, I calculated that the Reagan tax cuts took seven years to “pay for themselves” — still well worth doing. The Laffer Curve (see accompanying illustration) is a graph showing that, at a tax rate of zero or 100 percent, the government receives no revenue — so the revenue-maximizing rate for any tax is somewhere between zero and 100 percent.

What Art Laffer did do was to show how the negative incentive effects of excessive tax rates, regulation and misguided monetary policy made people poorer. The clarity of his explanations helped foster a national debate.

As President Carter noted at the time, the 1970s was a period of economic malaise. Inflation and interest rates were in the double digits, and the economy was flat. Most countries, including the United States, had adopted Keynesian economic policies (named after the British economist John Maynard Keynes) that called for more government spending when “aggregate demand” was insufficient to create full employment.

Each round of new government spending delivered less and less. Central banks, including the U.S. Federal Reserve, kept creating new money as a way to stimulate the economy, but the money creation showed up in the form of inflation rather than real growth. Milton Friedman was the best-known critic of the Keynesian policies, while in Europe, F.A. Hayek was the leading intellectual critic of Keynesian policies.

Friedman and Hayek, despite having a few policy differences, were close friends and agreed that the central problem was too much government (taxing, regulation and spending) that was destroying the incentives to work, save and invest. Art Laffer (Ph.D. Stanford, B.A. Yale) had become the youngest tenured faculty member at the University of Chicago, where he was not only influenced by his older colleagues, including Friedman, but also by a young Canadian economist, Bob Mundell, who had done breakthrough work on “optimum currency areas” and is often regarded as the father of the euro (Mundell went on to win a Nobel Prize in 1999).

Art was not yet famous when I first met him in Chicago in May 1996, but he had the quickest mind and wit of anyone I can recall encountering. Despite the fact that Art was well ahead of me, we quickly bonded, having much the same worldview and, importantly, a similar sense of humor. Part of Art’s genius was his ability to explain to politicians and those in the news media (ordinary people) what had gone wrong with the world economy and what the solutions were. He could do it through storytelling and humor — which some of his critics mistook for being a lightweight, but just the opposite was the truth (Ronald Reagan had the same problem). Like Donald Trump, Art is a showman — but one with great substance.

Art Laffer understood if you don’t entertain your audience few will listen and the underlying message is wasted. Art also understood that he needed a megaphone of media-savvy heavyweights to help him carry the message. Bob Bartley, late editor of The Wall Street Journal editorial page, and his colleague, Jude Wanniski, became big boosters. Art spent countless hours with the late Jack Kemp, helping to teach him economics and how to make the arguments, and Jack, in turn, taught many of his congressional colleagues. Former students of Art’s, such as Steve Entin and Marc Miles, became part of the information army. Tax economists, such as Norman Ture and Alan Reynolds, who independently had reached many of the same conclusions as Art, became additional constructive voices, as have Steve Moore and Dan Mitchell in recent years. George Gilder wrote the best-selling book, “Wealth and Poverty,” based in part on Art’s ideas.

Art was the indispensable man in getting the Reagan tax-rate reductions. Four decades later, Art Laffer is still in the middle of the battle for sound economic policy taking on pompous academic and media reality deniers and know-nothings — the true “cranks” and “fakes.” The nation is richer because of Art Laffer. The well-earned award he received should be viewed as part of our collective thank you."

MY COMMENT

SO TRUE.......KEYNESIAN economic......"theory"......has been a total and complete disaster. Of course, it fits nicely with the goals of power, control, and central government domination of people. It is amazing that an economic "theory" with such a dismal record of total failure still is accepted by many as having validity.

 

How true TomB16. AND......how difficult it is for most people to sit back and do nothing when the markets seem SCHIZOID.

We are in one of those times when the day to day stuff seems very erratic and disjointed. BUT, at the same time we have great gains for the year to date. This tells me that the FLUFF and other garbage that is being pushed from day to day is out of wack with reality. The media and talking heads are jumping around like crazy from day to day. One day it is the crisis in the EU, the next it is China, the next it is back to the EU, the next it is interest rates, the next it is BLAH, BLAH, BLAH. Yet over the longer short term......for example year to date.....the markets are UP very nicely. Tells me that the day to day stuff is totally OUT OF WACK with reality.

 

To continue the above:

DOW year to date +13.81%

SP500 year to date +16.38%