The Long Term Investor

I am NOT a fan of companies that I own taking social issue stances. The CEO and perhaps the board members....do not own the company. It is NOT their right to PISS OFF half their potential customers by taking positions on social issues that are disruptive. BUT....obviously....many might disagree with my opinion. HERE is a little article....that I happen to agree with on this issue. Feel free to post any contrary view or articles. (I dont intend to argue this issue further.....it would not be productive)(this article does a good job of staying NON-POLITICAL)

Profits, Not Causes
The enduring wisdom of shareholder primacy

https://www.city-journal.org/shareholder-primacy

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

"A few years ago, at a risk-management conference for big-wave surfers, I witnessed a heated debate over the latest innovation: an inflatable vest that could prevent drowning if a surfer wiped out. The vest was a technological marvel that had taken years to develop. Two vendors made the product: Patagonia, which made a black vest; and Quiksilver, which made a red one.

The crux of the debate was that inexperienced surfers who used the vest might feel emboldened to take undue risks, harming themselves and potentially others. Patagonia’s announcement that it would sell the vest only to experienced surfers brought lots of closed-eye head-nodding among the tanned, fit, and flip-flop-wearing surfers. That crowd fiercely disapproved of Quiksilver, which said that it would restrict the number of stores carrying its vest but would be more liberal about whom it would sell to. One well-known surfer said to me, “You see these guys out there on the waves in the red vests—they don’t belong there. . . . Quiksilver is just about making money.”

I later spoke with a Quiksilver executive who winced when I told him this story. He pointed out that his company is not a charity and had spent years and many resources developing the vest. “Besides,” he said, “are we going to not sell something that can save someone’s life?”

Patagonia is a privately owned company; its owner is entitled to sell to whomever he pleases. Quiksilver is a publicly traded company that, in theory, anyway, should be primarily concerned with maximizing profits for its shareholders. But this principle—shareholder primacy—is undergoing a rethink in the business world.

Early corporations in America, mostly privately owned, carried out public works projects and were seen as serving the community. But as the industrial era progressed, publicly held corporations began to dominate the private sector. When the manager is also the owner, it’s clear whom he is accountable to: himself. But when a firm employs many people in a community, produces products or services everyone uses, and is owned by many people with no management role or liability, it’s not so obvious whose interests the corporation should serve. Fifty-one years ago, Milton Friedman made the case in the New York Times Magazine that it was the owners—namely, the shareholders—who have a residual claim on a publicly traded company’s profits.

Friedman argued that shareholder primacy benefits not just the corporation but all of society. When corporate management pursues social objectives other than profit maximization, it is spending other people’s money. The corporate officer who does not pursue profit in effect imposes a tax on shareholders and customers, even though he was not elected to do so and often has no special skills or knowledge when it comes to discerning the common good. Author and biotech entrepreneur Vivek Ramaswamy has questioned why shareholders should subsidize CEOs’ personal brand-building. Friedman went even further, arguing that the alternatives to profit maximization are a slippery slope to socialism.

Friedman acknowledged that the interests of other stakeholders in society often aligned with profit maximization. The economy is not zero-sum. Paying employees well can make them more productive and loyal. Investing in the community generates goodwill, makes it easier to do business, and attracts better talent. For a corporation like Nike, which aims to attract young, hip customers, throwing its weight behind, say, Black Lives Matter is good marketing.

The law, for its part, is not entirely clear on whose interests a corporation must serve. The late Lynn Stout, a Cornell professor, argued that the law does not require corporate managers to maximize shareholder value; their only fiduciary duty is to the corporation itself. Leo Strine, a former Delaware judge, believes that corporate boards should serve the shareholders who elect them. Some state-governing laws for corporations give explicit guidance. Indiana law, for example, says: “A director may, in considering the best interests of a corporation, consider the effects of any action on shareholders, employees, suppliers, and customers of the corporation, and communities in which offices or other facilities of the corporation are located, and any other factors the director considers pertinent.”

Though the law is ambiguous, for the last few decades many corporate officers have behaved, or claim to have behaved, as if they were accountable to shareholders above all. They did so partly because of Friedman’s arguments but also because increasing a company’s share price made it less vulnerable to hostile takeovers in the 1980s.

Now the winds are changing. In 2019, the Business Roundtable, an association comprising nearly all of America’s high-profile CEOs, published a manifesto pledging allegiance not just to capitalism and the needs of shareholders but also to other stakeholders: “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

ProMarket, a publication of the Stigler Center at the University of Chicago’s Booth School of Business, recently published a series of essays in honor of the 50th anniversary of Friedman’s New York Times essay. The concluding one, by Booth School professor and sometime City Journal contributor Luigi Zingales, contended that shareholder maximization benefits society under just three conditions: when corporations don’t have monopoly power—in other words, when they don’t set the rules or prices in the markets that they compete in; when there are no externalities (side effects) to profit maximization, or, if there are, the government can eliminate them through taxation or regulation; and when contracts are complete, meaning that all stakeholders have contracts that specify payoffs in all states of the world.

Zingales notes that for many corporations, none of these conditions holds. Large firms have some pricing control over the market and the ability to influence policy though lobbying. Some damage the environment, and government regulations and voluntary action aren’t always effective at limiting this damage. As for the third condition, complete contracts rarely exist; if they did, there would be ways to insure fully against a company failing, shareholders losing equity, and workers losing wages.

All this suggests that, if a company pursues profit maximization above all, society does not always benefit. Profit maximization can harm the environment, increase risks, and give corporations outsize power in society. And one can cite plenty of examples of corporations pursuing short-term profits to boost their current share price at the expense of long-term growth and job security for their workers.

Still, as Churchill said of democracy, shareholder primacy is the worst system—except for the alternatives. Stakeholder value, or the multiple-stakeholder model, which would require corporate management to consider the needs of everyone with an interest in the firm, would be worse for corporations as well as society.

Stakeholder value leaves corporations without a clear objective. Who, exactly, are the various stakeholders? Workers, bondholders, members of the community where the firm is located, or, as Joe Biden has suggested, the entire society? If a corporation is considering moving a factory from Michigan to Kentucky, whose interests matter? The workers in Michigan (and its local economy), or future workers in Kentucky (and its local economy)? If stakeholder interests conflict, how much consideration should each get? If the primary objective is not profit, the answer is unclear.

Last year, consulting firm McKinsey published a report arguing that the stakeholder model requires measuring “your social and environmental impact,” as well as the impact of everyone in your supply chain. But how much weight should the supply chain get, and what makes a morally impeccable supplier? None of the answers is clear.

In fact, it is so hard to define the identity and interests of various stakeholders that the effect of trying may be to make corporations even less accountable. Corporate officers could argue that profits were down because the company was pursuing some other ill-defined and impossible-to-verify objective in the service of a stakeholder. A paper by Harvard Law professor Lucian Bebchuk and law student Roberto Tallarita estimates that firms that follow the stakeholder model not only skirt accountability to shareholders; they also fail to deliver more to stakeholders (for example, by providing higher wages for employees).

“But here’s the implication for stakeholder capitalism: by making CEOs accountable to literally everyone, those CEOs actually become accountable to no one,” Ramaswamy told me. “It’s the logical extension of the basic consequence of agency problems that arise within classical capitalism, except on steroids.”

Some critics of shareholder primacy argue that it might have made sense in 1970 but no longer works in a world facing threats like climate change and rising inequality. Actually, the opposite is true: Friedman’s argument has never been more relevant.

While we have a better understanding of externalities like pollution, we also live in an arguably more partisan environment. The multiple-stakeholder model would invite that partisanship into the boardroom, since, by definition, it asks businesses to take different, sometimes competing, interests into consideration. Weighing those interests requires making value judgments—an inherently subjective and often political exercise.

Suppose you own a gun because you believe that it makes you safer, and you also own shares in a steel company. Now suppose that the steel company’s management supports gun control—the stakeholder for the firm here is society—and decides not to sell steel to a gun manufacturer, thereby raising gun prices while lowering its own profits. Management’s action would have diminished your welfare as you understood it. Friedman maintained that it would be better for the company to maximize profits and leave management and shareholders to use their own money to support their favored causes. This arrangement may be less efficient if the goal is reducing the number of guns, but it is better at maximizing welfare in a society divided on this particular question.

Injecting such political or moral ends into corporate decision-making is bad for both profits and society. Consider the case of large, public technology firms like Facebook and Twitter. They claim to care about the social harms that their services cause. Currently, people of all political persuasions use the platforms and, in so doing, get some exposure to different viewpoints. Last fall, each corporation temporarily blocked a New York Post article critical of presidential candidate Joe Biden and his son Hunter. Both companies had been pressured to avoid giving a platform to inaccurate or harmful information—especially close to the election. But critics saw the move as targeting conservatives because news stories with similarly sourced information that harmed Trump could be widely shared. As a result of their decision, the story garnered even more attention than it might have otherwise, several politicians threatened the firms with more regulation, and many conservative social media users were motivated to switch to competing social media services like Parler, deemed politically more sympathetic. Thus, not only did their decision potentially harm the social media giants’ bottom line; it also arguably harmed society by reinforcing people’s ideological bubbles. When we all use the same social media platforms, we get some exposure to different viewpoints, but if these trends continue, one day conservatives and liberals may use different social media entirely and see only arguments that confirm their opinions.

It’s certainly true that pure profit maximization is not always morally neutral when externalities are present. Friedman conceded that the pursuit of profits should be constrained by laws and widely held social norms. But companies that explicitly enthrone moral objectives extrinsic to the business inevitably alienate some customers, staff, and shareholders.

The pursuit of moral objectives may also be why many conservatives and libertarians claim to feel uncomfortable working in progressive tech firms. Silicon Valley values may attract progressive talent in the short run but only at the cost of narrowing the overall recruiting pool over time. Economist Lisa Cook claimed that more diversity in Wall Street management would have spared us the financial crisis because including people with different “lived experiences” is a check against the kinds of groupthink that allowed the risks to build unseen. Surely this argument applies to diversity of opinions and values, not just gender and race.

More ideologically homogeneous workforces are a net loss for society, too. The workplace is one of the few venues where people with different views must interact and cooperate. Corporations that pursue moral or ideological goals appealing to only a narrow subset of the population undermine this dynamic.

Adding more stakeholders does not guarantee morally superior outcomes. Public-sector workers get a say in how their municipalities are run and what services are provided. Some teachers’ unions, like the one in Fairfax, Virginia, have said that they would prefer to offer remote-only education until August 2021 and may not agree to open schools fully next fall. If society’s sole purpose were preventing diseases like Covid-19, that might be a wise and ethical choice, but if we also have other goals—like educating children and reducing inequality in the next generation—then this is morally indefensible.

Critics of shareholder primacy also object that it distorts incentives. Corporate officers become fixated on boosting short-term share price, to the detriment of long-term value creation. Investing in new technology and paying and training employees well may not pay off right now, but they eventually benefit society and the company.

Stock prices, however, don’t just reflect short-term expectations. For example, major pharmaceutical companies make large, risky bets on innovation. Drug patents eventually run out, so analysts also look to a company’s pipeline of potential drugs in addition to current profits. Corporations that do not invest in long-term growth accordingly have lower stock prices.

Corporations sometimes try to boost their share price by buying back shares or increasing dividends instead of investing or hiring more. But it’s not shareholder value that makes them do this; such actions often reflect a lack of good investment opportunities. Some evidence suggests that firms have spent less on R&D since shareholder value became popular, but this may also reflect structural changes to the economy that make it more profitable to acquire startups that do the innovating rather than having it done in-house.

Besides, a multiple-stakeholder model would not necessarily make corporations more mindful of the long term. It’s unlikely that labor unions would support R&D investing that would make workers more productive and the firm more profitable but also result in fewer employees. Public-sector unions have a long history of demanding unsustainable health and pension benefits. Multiple stakeholders operating according to different time horizons can make management even more focused on the short term.

Shareholder primacy was no less divisive an idea when Friedman wrote about it in 1970 than it is now. But 51 years later, even as issues like inequality, the environment, and the pandemic have made us realize how interconnected we are, Friedman’s argument stands the test of time. As social norms and values change with lightning speed, maintaining objective, apolitical standards for corporate management has never been more essential.

In these politically charged times, corporations may not always have the luxury of keeping their heads down and worrying only about the bottom line, of course. Young employees increasingly demand political engagement, boycotts threaten profits for some companies, and the rising popularity of ESG (environmental, social, and governance) funds means that taking a moral stance could mean cheaper access to capital.

To return to the big-wave surfers’ debate: Patagonia’s website promises that some of the profits from the vest go to an environmental cause and contains a link (now broken) to submit an application to buy it. Quiksilver doesn’t sell the vest online, instead directing customers to its stores; it also warns that the vest should be used carefully and requires buyers to submit a declaration that they understand the risks involved and will take necessary precautions.

Which of these two approaches is best for society and for shareholders? Buy-in and approval from the big-wave surf community is important for marketing, but this is also a piece of safety equipment that was expensive to develop and now has very limited distribution. The answer is not obvious. It rarely is.

As we become more socially minded and demand that corporations take more aggressive moral stances, goals like profits, innovation, and general welfare may have to take a backseat. If that happens, we will all lose out."

MY COMMENT

NOT going to rehash the above. As a free market capitalist LIBERTARIAN.......and......a corporate shareholder my view is OBVIOUS......it is NOT the business of a company to get involved in social issues taking stances. That is the business of each employee and each shareholder and each customer....individually.

When we get to the TIPPING POINT where it becomes the LEGAL obligation of companies to consider multiple NON-OWNER stakeholders......and......shareholders just become yet another group to consider.....that is the point where investors will have NO INCENTIVE to invest and put their money at risk.

 

HERE is how we finished for the day. My opinion of the day......the good day today was a reflection of buying the dip......AND.....the pause in interest rates.

U.S. stock market snaps 2-day skid and Dow regains perch at 34,000 as investors buy the dip

https://finance.yahoo.com/m/4bad532d-a267-38c7-9cd4-cedcf2fad686/u-s-stock-market-snaps-2-day.html

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

"The main equity benchmarks in the U.S. rebounded Wednesday, halting two straight days of declines as investors dipped their toes into a market that had lost its mojo on the back of fears of a resurgence of COVID in parts of the world.

The Dow Jones Industrial Average finished up over 300 points, or 0.9%, to around 34,138, the S&P 500 index closed up 0.9% at 4,173, while the Nasdaq Composite Index finished up 1.2% to reach 13,950.

The gains were even more pronounced for small-capitalization stocks which have been beaten up over the course of the past several sessions. The Russell 2000 closed up by over 2%. All closing levels are on a preliminary basis.

The gains for stocks came as a rise in bonds in the U.S. has paused, with the 10-year Treasury note yield hanging around 1.56%.

In corporate news, media giant Netflix closed down 7.4%, after it reported subscriber growth for the first quarter was weaker than expected. However, the declines in Netflix were outweighed by gains in other parts of the popular technology sector, with a rise in shares of Amazon.com Inc. , Apple Inc. and Microsoft Corp. finished higher on the day."

MY COMMENT

The STEALTH STORY of the day and for the past two or three weeks is the STABILIZATION of the ten year yield. We have settled into a range from about 1.54 to just over 1.60. This PLUS earnings is the driver for the markets.

My view....the ten year yield is a much more sensitive....immediate.....issue (BOGYMAN) than inflation. Accordingly it has more power to create negativity in the markets. The fact that the yields seem stable recently is a big factor in the positive results we are seeing in the markets.

Do I see yields as an issue.....NO.....my opinion has not changed. We are WAY BELOW historic NORMAL rates.

 

As usual.....the STARS.....of the investing world are the RETAIL INVESTORS. It is the retail investors that stand strong against panic......buy the dips.....refuse to move as a monolithic HERD......and keep their heads when the professionals are in a PANIC over some news issue or some DOOM&GLOOM topic.

Retail investors are still buying stocks

https://finance.yahoo.com/news/retail-investors-are-still-buying-stocks-morning-brief-100203508.html

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

"YOLO trades might be fading, but retail is still around.

The stars of the show in financial markets during the first quarter of 2021 were retail traders.

Retail fueled meme trades, made Roaring Kitty a star, and flummoxed market professionals who insisted this participation would not last. Even though less than two months ago we highlighted survey data that suggested retail traders weren't going anywhere.

And according to data from Bank of America Global Research published this week, individuals remain a durable source of buying in this market. And last week, retail was the only bid still out there.

"Retail clients were the only buyers last week, while institutional and hedge fund clients sold," said Bank of America strategists led by Jill Carey Hall. "Retail clients have been buyers for the eighth straight week, while hedge fund clients sold for the third straight week."

The team at Bank of America notes that cumulative equity flows last week totaled a net $5.2 billion worth of outflows, the largest one-week move out of stocks since November and the fifth-largest on record. In the past, these kinds of exoduses from the market have portended shaky periods for investors.

"In the prior times weekly flows were this (or more) negative, the subsequent week's returns were -1% on avg/median with negative returns 75% of the time," the firm notes. "Four-week average flows have been trending lower in recent weeks and have now turned negative for the first time since mid-Feb, suggesting a pause to increasingly euphoric sentiment."

Stocks on Tuesday fell for the second-straight day this week after closing at record highs last week. Action that is certainly in-line with what Bank of America's work suggests.

But data from strategists on the Street does show that retail's participation in this market is not what it once was. The strategy team over at Deutsche Bank led by Binky Chadha published a report late last week showed that single-stock call options — a core part of the YOLO trade powered by retail — has been declining in recent weeks.

Deutsche Bank's work does, however, capture the same relative strength in retail flows last week as was picked up by Bank of America. But the firm writes that "as the economy has been reopening and the stimulus payments mostly behind us, we have seen signs of this group reducing its market activity."

"Most recently, retail activity looks to have ticked up modestly again, though it remains well below its January peak." the firm adds. "We expect retail activity to continue to fade with reopening and especially a return to work."


Single-stock options activity has declined, a sign to analysts at Deutsche Bank that retail enthusiasm in the market has waned in recent weeks. The bank expects this trend to continue as the economy re-opens. (Source: Deutsche Bank)"

MY COMMENT

RETAIL INVESTORS......."US" or "WE"....stand up and take a BOW. "YOU" are the very foundation of the markets....especially the HUGE....silent majority.....the long term investors that are not supposed to exist anymore. "Supposed to".......being the operative phrase....I suspect if you could survey EVERY investor in the USA....the vast majority would describe themselves as long term investors.

 

LOL.....things will pick up soon.....things have been picking up for 8-10 months now......and.....are going to continue.

Good to hear a nice report on NYC and OH and your business. I agree.....people are FLEEING New York and California in DROVES. I have not visited either place.....but....we are seeing them moving into my city by the thousands. The states that are.....relatively....low taxes, less regulation, positive for business, and less government control......ARE BOOMING.

Congratulations on the John Deere.....fun machines to use.....very dependable. It is very relaxing to mow on one of those machines.

 

Earnings continue to EXPAND. Tomorrow some nice ones before the open....Alaska Air, American Air, SW Airlines, AT&T, and Intel. After the bell....Tractor Supply. Many others.

Next week.......at least 800 companies report. We will start to get into some of the BIG companies. The first couple of days next week....se get into some big names....Microsoft, Starbucks, Tesla, 3M, Google, Eli Lilly, and GE.

By the end of May earnings are wrapping up.

 

FEES. Basically a TAX on investors money. They impact long term returns by ELIMINATING or REDUCING the amount of money that is available to compound.

For Long-Term Investors, Fees Really Do Matter

https://www.forbes.com/sites/forbes...eally-do-matterjonathan-dash/?sh=72d68137d54b

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

"From bull market to bull market over the past 10 years, investors' long-term performance has been boosted by solid stock market returns. Over time, the stock market has consistently rewarded investors with the discipline and patience to stick with their investment strategy. However, many investors' long-term investment performance may be losing ground due to investment fees and costs.

Fees And Expenses Costing Investors More Than They Think

Investment fees have come under intense scrutiny, and for good reason. Some actively managed mutual funds layer on various fees and costs that can amount to as much as 4% of an investor's account balance, which is deducted from the account.

A financial advisor or wealth manager usually charges around 1% of an investor's assets under management, which seems straightforward enough. However, depending on the type of investments, many advisors pass other costs onto their clients. These could include investment platform fees, annual fund management fees, and other expenses for administration, trading, custody and legal fees. Pretty quickly, a 1% advisory fee can increase to 2% or 3% in total fees.

With hidden costs such as revenue-sharing, trading costs and trailing commissions, mutual fund investors could be paying as much as 5%-6% from their account. Some fund managers turn their portfolios over more than 100% each year, creating even more trading costs and taxes that are passed on to clients.

The problem is many investors are not aware of the fees being charged. Either they weren't fully disclosed, or investors never read or fully understood the disclosure. According to the FINRA Investor Education Foundation, 63% of investors either don't think they pay fees or don't know how much they're paying.

The Impact Of Fees On Investment Performance

The problem with bull markets is they often mask the costs of investing. If investors understood the impact of fees and expenses on their long-term investment performance, they might be more careful with selecting investment options. An investor’s mutual fund or financial advisor might be generating positive returns. However, they still may be costing the investor hundreds of thousands of dollars that could otherwise be accumulating in their account.

Consider this hypothetical example. You invest $200,000 over 30 years with an assumed 6.5% annualized return. After 30 years, your investment would have grown to the following based on how much you paid in fees:

• 3% fee: $560,134


• 2% fee: $740,906


• 1% fee: $981,678

When considered in this light, you could say that any fund or advisor that charges two to three times more in total fees than another investment option is inhibiting your ability to grow your capital.

Are Higher Investment Fees Ever Justified?

If you just consider mutual funds, the amount of fees and expenses charged by a fund is based largely on the fund manager's investment style or objective. For example, funds that are actively managed with the fund manager buying and selling securities in an attempt to outperform the market charge higher fees than funds that are passively managed.

That may be fine if the fund manager consistently outperforms the market. However, many don't. According to Morningstar, 76% of active fund managers failed to beat their market benchmarks over the 10-year period ending June 2020. Of the small percentage of fund managers who have outperformed the market, fewer than 15% have been able to repeat their performance consistently.

It's not that most fund managers are poor investors. Many are exceptionally good. The challenge for fund managers is that because of the fees investors pay, they have to outperform the market by as much as 3% to overcome the average 2% in fund costs, which are reflected in the fund's net returns. When you consider all investment costs, some fund managers' real hurdle may be closer to 5%. This is the primary reason passive index funds, many of which charge between 0.2% and 0.5% in annual fees, have generally outperformed active funds in recent years.

Balancing Investment Performance Potential And Investment Costs

To keep investment costs to a minimum, you could simply invest in low-cost, passively managed index funds or exchange-traded funds (ETFs). But these are not foolproof, as there are now thousands to choose from and some that are very risky. If you prefer to invest with the guidance of an advisor, there are other options for balancing performance potential and investment costs.

Over the past several years, robo-advisors have become a popular option among younger investors. Robo-advisors, such as Betterment and Wealthfront, charge as low as 0.25% annually on top of investment costs. They help you set up an asset allocation strategy using low-cost ETFs. For larger portfolios or added fees, you can have limited access to an advisor.

For investors with more than $250,000 to invest, and who want a customized stock portfolio, another option is to work with a Registered Investment Advisor (RIA). RIAs are fiduciary investment advisors that charge around 1% to manage investor portfolios. If there are any additional fees and expenses, an RIA is required to fully disclose them. RIAs will work with you to develop a customized investment strategy based on your specific objectives and risk profile. However, it is important to only work with an RIA who can provide you with a verifiable investment track record.

At the end of the day, investors need to understand they are going to pay fees if they want their investment managed by someone else. The fact is fees do matter in the long-term performance of investment accounts. So, before you invest, make sure you know exactly what you're paying.

MY COMMENT

SO....look at the little example above....showing the IMPACT of fees on a 30 year investment of $200,000 growing at an annualized rate of 6.5%. NOW, imagine.........in addition....... the impact of regular income taxes or capital gains taxes.

ANYTHING that takes a dollar out of an account....is IMPACTING the power of that dollar to compound.

 

AS USUAL

I am once again posting my PORTFOLIO MODEL. My initial criteria to start the process to consider a business are.......BIG CAP, AMERICAN, DIVIDEND PAYING, GREAT MANAGEMENT, ICONIC PRODUCT, WORLD WIDE LEADER IN THEIR FIELD, LONG TERM HORIZON, etc, etc, etc.

PORTFOLIO MODEL

"Here is my "PORTFOLIO MODEL" for all accounts managed which is the basis for MUCH of my discussion in this thread. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 55% of the total portfolio and the fund side at about 45% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing.

As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 12 stock portfolio. At the same time the funds double and triple up on my individual stock holdings............that I consider the BEST individual businesses in the WORLD.

STOCKS:

Alphabet Inc
Amazon
Apple
Costco
Home Depot
Honeywell
Nike
Microsoft
Proctor & Gamble
Tesla
Nvidia
Snow (100 shares, a rare, long term, speculative holding)

MUTUAL FUNDS:

SP500 Index Fund
Fidelity Contra Fund

CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (71). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE. In addition I am a fully invested, all the time, LONG TERM investor. (LONG TERM meaning many years, 5, 10, 20, years or more)"

MY COMMENT

This portfolio is HIGHLY CONCENTRATED on the big cap side of things. OBVIOUSLY between the funds and my twelve stock holdings there is MUCH doubling and tripling up on the stocks. THAT is INTENTIONAL. I strongly subscribe to the view of Buffett and some others that TOO MUCH diversification kills returns. I do NOT believe in the current diversification FAD that most people seem to now follow.......or think they are following. I DO NOT do bonds and think the current level of bonds held by younger investors.....those under age 50.....is extremely foolish.I DO NOT do market timing or Technical Analysis.

 

WELL....not a bad open today....it has promise. The poor DOW....being hammered by a few stocks. Companies that reported before the bell today generally did GREAT.......and....the ten year yield is down. The MEDIA excuse is the virus......might....make a come-back. I dont buy it....I think that the recent hedge fund BLOW-UP and turmoil in the hedge fund universe has had MUCH MORE of an impact on some to the big banks and others in the investment world than anyone is saying. SO......the professionals....ie: banks and hedge funds.....are selling to raise money.

Credit Suisse Races to Contain Archegos Hit With Capital Raising

https://finance.yahoo.com/news/credit-suisse-races-contain-archegos-123139259.html

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

"Credit Suisse Group AG moved to contain the fallout from two of the worst hits in its recent history with a surprise capital increase and a sweeping overhaul of its business with hedge funds.

Switzerland’s second-largest bank is raising $2 billion from investors to shore up capital depleted by $5.5 billion in losses from the collapse of Archegos Capital Management. Chief Executive Officer Thomas Gottstein, who until recently had brushed off concerns that Credit Suisse was taking excessive risks, struck a humble tone Thursday, vowing to slash lending in the hedge fund unit at the center of the losses by a third.

Gottstein, in the role for little more than a year, is trying to persuade incoming Chairman Antonio Horta-Osorio that he’s the right person to lead Credit Suisse, after the bank was hit harder than any competitor by the collapse of Archegos, the family office of U.S. investor Bill Hwang. The timing could hardly have been worse, coming just weeks after the lender found itself at the center of the Greensill Capital scandal, when it was forced to freeze a $10 billion group of investment funds.

“Clearly this loss came as a big surprise,” Gottstein said about Archegos. “Is it an isolated case? I definitely hope it is and I think it is, but we are obviously reviewing the entire bank now just to make sure that our risk processes and systems are where they should be.”

Credit Suisse fell as much as 6.9% in Zurich trading and was 5.3% lower as of 1:54 p.m. local time, taking this year’s losses to about 22%. It’s the worst-performing major bank stock this year and has also suspended a share buyback and cut the dividend.

Having taken on the position more than a year ago, the CEO had stumbled over other hits before Greensill shattered what was supposed to be a new era of calm. While seeking to placate investors hurt by the losses, he also now faces the fresh challenge of navigating enforcement proceedings announced by Swiss regulator Finma on Thursday.

The scandals have left the CEO standing while many once powerful members of his management board had to leave. Gone are investment banking head Brian Chin and Chief Risk Officer Lara Warner, along with a raft of other senior executives including equities head Paul Galietto and the co-heads of the prime brokerage business. Asset management head Eric Varvel is also being replaced in that role by ex-UBS Group AG veteran Ulrich Koerner.

The bank now plans to reduce risk at the investment bank, including cutting about $35 billion of leverage exposure at the prime brokerage unit that services hedge funds, Gottstein said in an interview with Bloomberg Television. That’s about a third of the leverage its extends in that business. Going forward, the bank plans to only service clients in that unit if they do business with other parts of Credit Suisse as well, such as the wealth management unit.

Bloomberg reported earlier that Credit Suisse was planning a sweeping overhaul of the prime business in an effort to protect other parts of the investment bank, which just had a banner quarter. Yet even as Gottstein was explaining steps to prevent future losses, analysts revived a discussion that has haunted Credit Suisse for the past decade, and which executives had hoped to have put to rest with a painful restructuring under Gottstein’s predecessor -- whether it needs such a big investment bank.

“Although capital has been mainly addressed, we still see questions remaining in terms of strategy and risk management,” JPMorgan Chase & Co. analysts wrote in a note to investors. “Capital has been clearly the main focus.”

The bank said Thursday it expects to raise more than 1.8 billion francs by selling notes convertible into stock to core shareholders, institutional investors and high net worth individuals. The sale will help bring the bank’s CET1 ratio -- a key metric for capital -- nearer its target 13%. That number had dropped to 12.2% at the end of the first quarter.

In addition to the enforcement proceedings announced by Finma, Credit Suisse said that the Swiss regulator has told it to hold more capital to guard against losses by taking a more conservative view of its risk. The bank increased its assets weighted according to risk for both Archegos and Greensill. While the capital raise came after Finma boosted capital requirements, Gottstein said the decision was the bank’s own.

“This was not as a reaction to any request by Finma or any other regulator,” Gottstein said on a call with analysts. “It was our proactive view that, together with the board, we decided to issue these two mandatories and that will really help us also against any possible market weakness over the coming months.”

The Greensill debacle is also far from over. Credit Suisse has so far returned about half the $10 billion in investor money held by the funds at the time of their suspension. While the bank marketed the funds as among the safest investments it offered, investors are left facing the prospect of steep losses as the assets are liquidated. Credit Suisse is leaning toward letting clients take the hit of expected losses in the funds, a person familiar with the discussions said earlier this month.

“We have good visibility for a large portion of the remaining positions,” Gottstein said. “There are three more distinct positions which we will work through in the next months and quarters. We are not planning to do any form of step-in. We are very clearly focused on getting the cash back to our investors.”"

MY COMMENT

These big banks and their hedge fund CRONIES are a HUGE danger to the markets. They are supposed to be the brightest of the bright....the professionals...yet they are MORONS. This bank is OBVIOUSLY tied in with the entire hedge fund industry and providing capital for their risky LEVERAGED trades. The relationship between the big banks and the hedge fund industry is......INCESTUOUS and DANGEROUS.

As usual....it is the little investors....the retail investors that BAIL OUT the markets by being the steady dependable influence on the markets and a counter balance to this speculative leveraged trading. Of course......the big banks NEVER pay a price for their INCOMPETENCE and support of the hedge funds and others that SCREW WITH the markets...over, and over, and over. What a JOKE. These people are so smart and sophisticated......yet always shown to be INCOMPETENT.

 

Yeah....TomB16. The current (past 10-20 years) blather in the investment world that "EVERYONE" should hold some percentage of bonds is INSANITY in my opinion. Younger people or those that can take risk or those at least 10-15 years from retirement.....if it was me....NO BONDS.

PLUS...with the low rates right now....bonds have nowhere to go but DOWN in value.

 

BESIDES....great earnings coming in....here is the news of the day. ANOTHER....very positive indicator for the economy and stocks going forward. The strength of the data shows that MANY are underestimating the re-opening.

Jobless claims fall again as employment picture gains strength

https://www.cnbc.com/2021/04/22/us-jobless-claims.html

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


"Key Points

• First-time claims for unemployment insurance totaled 547,000 last week, below the 603,000 Dow Jones estimate.
• The total represented a pandemic-era low and was better than the previous week’s 576,000.
• Continuing claims fell by 34,000 to 3.67 million.

The U.S. jobs market recovery accelerated its pace last week as fewer Americans headed to the unemployment line, the Labor Department reported Thursday.

First-time claims for unemployment insurance totaled 547,000, well below the Dow Jones estimate for 603,000 and a new low for the Covid-19 pandemic era.



The total represented a further decline in claims and gets the jobs picture closer to where it was pre-pandemic, though there’s still plenty of distance to cover.

Markets reacted little to the news, with stock futures pointing to a flat open and government bond yields mixed.

With Covid cases declining and more states relaxing business restrictions, companies again are looking to hire ahead of what is expected to be a summer of close-to-normal activity across the U.S.

“This dip in jobless claims looks good in isolation but what really matters is that it confirms that last week’s unexpected plunge was no fluke,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. “We expect further declines over the next few months as the reopening continues, while payroll growth will accelerate markedly.”

Still, about 8 million fewer Americans are at work than before Covid.

Thursday’s report showed that both unemployment and underemployment remain significant problems for the U.S. economy.

Some 17.4 million Americans are still receiving benefits under various programs, though that data runs two weeks behind the weekly applications claims number. Sharp increases in those applying for benefits through pandemic-related programs boosted the total recipients by nearly half a million.

Continuing claims, which run a week behind the headline data, also fell, dropping 34,000 to 3.67 million, a fresh pandemic low and another indication that conditions are thawing.



Despite the lingering issues for workers, the progress on Covid, particularly the 3 million or so vaccines being administered every day, has helped clear what had been the worst and most rapid job loss in American history.

Jobless claims reached a staggering 6.2 million in early April 2020 in the initial days of the economic shutdown, obliterating the previous record of 695,000 in October 1982. Since peaking last year, the number has trended lower but remains stubbornly high, falling only last week below that pre-pandemic record.

Last week, the Federal Reserve’s periodic gauge of business growth across its 12 districts showed difficulty in finding workers.

“Hiring remained a widespread challenge, particularly for low-wage or hourly workers, restraining
job growth in some cases,” said the report, known as the Beige Book.

The national unemployment rate remains at 6%, well off the pandemic high of 14.7% but still considerably above the 50-year low of 3.5% level just before the pandemic shutdown."

MY COMMENT

I dont think there is a chance of a snowball in hell of the unemployment rate getting back to the pre-pandemic level. Government policy will see that it does not happen. BUT......this is good data.....and....the investment SOOTHSAYERS are WAY UNDERESTIMATING the re-opening.

THEY.....the so called experts.....are also caught up in the day to day little media doom and gloom game. Of course....the day to day turmoil and drama tends to FAVOR them....since they are short term speculators.....so they like a volatile market for their AI trading and program trading.

In FACT......the big MONSTER siting in the corner is....GOVERNMENT. The "possible" tax changes......increased estate taxes.......elimination of some step up basis......increase in capital gains taxes......higher rates......higher corporate taxes.....AND....the BIG KILLER.....the HUGE tax increase on small business and other "pass through" businesses.....is the "potential".....market danger. At least the proposed law has not been released yet....and...there is hope that it will have to be watered down in order to pass.

 

HERE....is the interesting story of the day. Human behavior at its worst.....by the criminals and the victims. GREED and in this case FEAR are two of the most powerful drivers of human behavior. Not investment related....but money related and interesting.....also......SAD to see the elderly preyed on by criminals.

90-year-old Hong Kong woman loses $32 million in phone scam

https://www.cnn.com/2021/04/21/asia/hong-kong-multimillion-dollar-scam-scli-intl/index.html

(BOLD is what I consider important content)

"Hong Kong police have arrested a man after a 90-year-old woman lost around HK$247 million ($32 million) in a scam.

The woman contacted police on March 2 and told them she had made a total of 10 payments after scammers told her her identity had been used in criminal activities in mainland China, according to a police statement sent to CNN on Wednesday.

The woman said she had received a call in August 2020 from someone who claimed to work in law enforcement in mainland China.

Then a man who purported to be a mainland law enforcement official visited her home and gave her a cellphone with which to communicate with them, police said. The woman then made a series of transactions to two bank accounts as instructed.
Police arrested a 19-year-old man on March 25. He has been released on bail and is scheduled to report to police in late April, according to the statement.

The investigation continues and more arrests may be made, the police added.
The woman lives in Hong Kong's most expensive neighborhood, an area called The Peak, the South China Morning Post reported. The exclusive enclave sits at the highest point on Hong Kong Island.

In October 2020, a 65-year-old woman paid HK$68.9 million ($8.9 million) to people who, she said, accused her of being involved in money laundering in mainland China, the South China Morning Post reported. Three men were arrested last week in connection with the incident, the paper added.

In January 2019, an 85-year-old man lost more than $73.9 million in a gold scam that took a total of $80 million from seven victims."

MY COMMENT

Interesting....and....DISGUSTING to see these elderly people taken advantage of. We ALL get calls and email every day from scammers.....unfortunately....just part of the modern world. NEVER...trust a phone call or email having to do with money. We all hear of these crimes....every day....yet they continue over and over and over. SHAME.

 

ANOTHER indicator of the economy and re-opening......my show schedule. I have now jumped up to 11 shows on my calendar......NONE in my city. All are scattered around in other cities or areas....but in the general region.

YEAH...TomB16.....there are a lot of 50/50 and 60/40 portfolio models that people talk about....I still see articles once in a while talking about returns being better or at least as good with less risk. NOT my cup of tea....but for others.....personal choice.

 

"Selling your winners and holding your losers is like cutting the flowers and watering the weeds.”

I have never seen that quote before.....I like it. As I say on here often.....I like to let my winners run as they wish. I am NOT a fan of re-balancing or diversification the way many people practice it today. I agree with Buffett that many investors diversify themselves and their returns to death.

 

Here is a little article on the ROTH IRA....for new investors or people that are starting to think about retirement saving. The ROTH IRA is probably the best retirement vehicle for people that do not have access to a 401K with an employer match....or....for those that want to supplement a 401K....after maxing out the employer match. It is a good way to save post-tax money in small enough amounts that the taxes on the money are painless.....and......the AMAZING PART......ALL the money and the HUGE gains that accumulate over time are....TAX FREE...when taken out.

Roth IRAs: Investing and Trading Do’s and Don’ts

https://finance.yahoo.com/m/575ff8d7-9ffb-3683-89c1-224c57d45b7e/roth-iras-investing-and.html

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

"More than 26.3 million households in the U.S. have Roth individual retirement accounts, which accounted for $1.02 trillion in retirement assets as of 2019, according to the Investment Company Institute. The retirement savings vehicles are funded with after-tax dollars, which means distributions are tax-free.


Key Takeaways

• Roth IRAs are retirement savings vehicles that are funded with after-tax dollars, which means distributions are tax-free.
• While there are a few exceptions, you can hold just about any investment in this increasingly popular retirement account: stocks, bonds, mutual funds, money market funds, exchange-traded funds (ETFs), and annuities are among the choices.
• There are a handful of investments that you are not allowed to hold in Roth IRAs: collectibles, including art, rugs, metals, antiques, gems, stamps, coins, alcoholic beverages, such as fine wines, and certain other tangible personal property the Internal Revenue Service deems as a collectible are prohibited.

Roth IRA vs. Traditional IRA
Introduced in the 1990s, the Roth IRA is the younger sibling to traditional individual retirement accounts (IRAs), which are funded with pre-tax dollars and in which distributions are taxed as ordinary income. They are popular with the self-employed, and a portion of the taxes paid at distribution may be deductible depending on the taxpayer's income.


While there are a few exceptions, you can hold just about any investment in this increasingly popular retirement account. Stocks, bonds, mutual funds, money market funds, exchange-traded funds (ETFs), and annuities are among the choices.


Most Common Investments
According to the Investment Company Institute (ICI), equity holdings figure most prominently in Roth IRA investments.

At year-end 2016, 65% of Roth IRA balances were in equities and equity funds. The next-highest percentage was non-target date balanced funds, at 10%. Target date funds, bonds and bond funds, and money market funds each made up less than 10%. At year end 2016, 78% of Roth IRA assets were invested in equity holdings (including equities, equity funds, and the equity portion of target date funds and non–target date balanced funds).

Prohibited Investments
There are a handful of investments that you are not allowed to hold in Roth IRAs. Collectibles, including art, rugs, metals, antiques, gems, stamps, coins, alcoholic beverages, such as fine wines, and certain other tangible personal property the Internal Revenue Service deems as a collectible are prohibited.

There are exceptions, however, for some coins made of precious metals. Life insurance contracts are also prohibited as investments.

Margin Accounts
Some transactions and positions are not allowed in Roth IRAs. The IRS does not allow you to invest in your Roth IRA with borrowed money. As a result, investing on margin is prohibited in Roth IRAs, unlike a non-retirement brokerage account, wherein margin accounts are allowed.7

Margin accounts are brokerage accounts that allow investors to borrow money from their brokerage firm to buy securities. The broker charges the investor interest and the securities are used as collateral. Because the margin is leverage, the gains or losses of securities bought on margin are increased.

Certain trading strategies and contracts require margin accounts. This includes some options contracts, for example, that require borrowing on margin. You also can’t short stocks in Roth IRAs. Short selling occurs when an investor borrows on margin a stock betting that its price will decline. A profit is made when the investor buys back the stock at a lower price.

Roth and traditional IRAs are a way for investors to save and invest long-term toward retirement with tax benefits, not make a quick profit. Both buying and trading on margin are risky moves and not for the novice or everyday investor.

The Bottom Line
Roth IRAs are the fastest growing among the different types of IRAs, and some believe that paying the tax upfront provides an advantage overpaying tax on distributions, such as in regular IRAs. Roth IRAs allow for investing in a wide array of investment products, although there are a few exceptions. Check with your brokerage firm to see what it has on offer."

MY COMMENT

A GREAT retirement vehicle. Obviously max out your 401K first to the extent of the employer match....that is FREE MONEY. The ROTH is nice since all the money put in PLUS all the gains that build up and compound over a lifetime are.....TAX FREE.....when you start taking the money out in retirement. The ultimate vehicle.....after the 401K with employer match.....for long term retirement savers.