The Long Term Investor

Thanks to the GREAT......I mean dismal.....jobs report we had a very nice day in the markets today. I was in the GREEN by a nice amount. PLUS....beat the SP500 by.......0.07%. Just another days gains away from a new all time high. My ONLY loser today was.....Amazon.

NOT a bad week considering. One of those weeks that has the FELL of being much worse that it was. The ONLY.....down....average for the week was the NASDAQ........and variations of the NASDAQ.

DOW year to date +13.63%
DOW for the week +2.67%

SP500 year to date +12.69
SP500 for the week +1.23%

NASDAQ 100 year to date +6.45%
NASDAQ 100 for the week (-1.02%)

NASDAQ year to date +6.70%
NASDAQ foe the week (-1.51%)

RUSSELL year to date +15.03%
RUSSELL for the week +0.23%

 

We are currently in one of those markets that I FEEL like it would be best to have broad exposure to a good number of stocks in the BIG CAP world.....like the SP500 Index. The particular stocks that are actually UP week to week is very erratic. BUT....it seems like at the same time a broad average like the SP500 does a good job of spreading the risk across the big cap universe and captures gains as a result.

That does NOT mean I am considering in the least ditching my little 11 stock side of my portfolio. It kind of flies in the face of REASON and REALITY and the financial numbers.....but.....Amazon continues to lag and even with a day like today that benefited the BIG CAP darlings....the stock could not end in the green. A great company with a huge future....but.....it is in the process of a management change over and Bezos is selling a lot of shares. NOT a reason to sell.....but....any time you have a management change from the founder of a company like this........it is a bit of a dangerous time.

 

I just LOVE this story. It is CLASSIC.

IRS employees say ‘out of ink’ printers are delaying tax returns

https://finance.yahoo.com/news/irs-...nters-are-delaying-tax-returns-171522801.html

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

"The Internal Revenue Service is having a tough time processing tax returns this year, potentially delaying refunds for many Americans. Among the many challenges the agency faces: Out-of-order printers and copiers.

"IRS employees stated that the only reason they could not use many of these devices is because they are out of ink or because the waste cartridge container is full," the Treasury Inspector General for Tax Administration wrote about the copiers and printers in a report released on Friday. "The contract for supplies and service of the printers ended in September 2020."

Sixty-nine out of the 164 devices — or 42%— used by the submission processing functions were not usable as of March 30, 2021, the watchdog found.

The report also noted that a substantial backlog from last year, a late start to the filing season, and too few staffers are contributing to the agency's slow pace.

As of March 5, 2021, the agency issued 36 million tax refunds down, 32% from the same time last year when 52.7 million refunds were processed.

'Remain concerned about the IRS’s continued challenges'

While the filing season opened on February 12 — a delayed start compared with previous years — the agency is still grappling with 2019 tax returns and a lack of staff.

At the end of 2020, the IRS had a backlog of more than 11.7 million paper returns, both individual and business, that needed to be processed. The backlog for individual returns was nearly 20 times higher than at the end of 2019.

While the IRS increased its hiring goals for the 2021 fiscal year, they have been unable to hire as many employees as needed, the report found. The agency met only 37% of its staffing goal, hiring 2,021 out of the 5,473 people it needs. Too few applicants and problems processing applications delayed hiring.

"We remain concerned about the IRS’s continued challenges in hiring sufficient staff needed to work backlog inventory and process Tax Year 2020 tax returns at the same time," the report said. "The inability of the IRS to hire sufficient staff could further affect taxpayers awaiting refunds."

Calls going unanswered

Many taxpayers with unprocessed returns may have trouble contacting the understaffed IRS, further delaying their refunds.

The agency's telephone representatives answered only 4.4 million calls out of 46.3 million total attempts made by taxpayers to contact the IRS. As of March 5, the IRS addressed only 27% of received calls, down from 59% in 2020 when the IRS was struggling amid the pandemic.

There's still just over a week left in the filing season. The tax deadline was been pushed to May 17 from the typical April 15 date, largely because of some major changes this year.

Taxpayers can claim the first and second round of stimulus checks on their 2020 taxes as a Recovery Rebate Credit if they didn't receive a stimulus payment or received the wrong amount.

Additionally, the IRS recently announced that jobless workers who already filed their taxes and are eligible for the newly-implemented tax break on the first $10,200 of unemployment benefits do not need to amend their return if they filed already. Instead, the agency will send a second refund automatically for the difference."

MY COMMENT

Where do you even start with a story like this......all I can say is........LOL.

So....someone FORGOT to line up the contract for the printer ink and service. They are behind 2020 in processing returns....in issuing refunds.....in answering the phone......in finding employees.....in EVERYTHING. The PERFECT EXAMPLE of total government INCOMPETENCE. AND....these people....the government....are the people that many think should be and/or are running and managing the economy.

How in the world can you.....with a straight face.....give the excuse for the total break down of this agency being......"we ran out of ink". HORRIBLE service to their customers......the American people.

NOW....if I was a cynic....I might think this was ALL....one big ploy.....to get a HUGE BOOST in the agency budget and spending. Make the people feel the pain.....and you get..... the budget gain.

I will probably be contacted soon for a....."random audit"......for doing this post.

 

Oh yes......the DOW and the SP500 set new all time records today.

Stock market news live updates: S&P 500, Dow set record highs as tech shares jump after jobs report miss

https://finance.yahoo.com/news/stock-market-news-live-updates-may-7-2021-221812613.html

(BOLD is my opinion OR what I consider important content)
"Stocks rose to reach record highs on Friday as investors digested a disappointing April jobs report, which showed the U.S. economy added back far fewer jobs than expected last month despite easing stay-in-place restrictions.

The S&P 500 and Dow each reached highs. The Nasdaq advanced, after the disappointing economic data appeared to make a case for monetary policy to stay on hold and interest rates to stay low, supporting tech and growth stocks. Treasury yields steadied after sinking immediately following the jobs report, with the 10-year yield hovering below 1.58%.

The Labor Department's April jobs report showed that U.S. employers brought back just 266,000 jobs in April, whereas a gain of at least 1 million had been expected. Payroll gains for March were also revised lower. The unemployment rate unexpectedly increased to 6.1%, widening further from its pre-pandemic level of 3.5%.

The disappointing data served to bolster some economists' and central bankers' claims that risks to the downside still persist for the U.S. economic recovery, even as more social distancing standards get lifted. Altogether, the U.S. economy remained 8.2 million payrolls short of pre-pandemic levels, and both the unemployment rate and labor force participation are still off from their February 2020 levels.

Federal Reserve Chair Jerome Powell has suggested he would want to see a "string" of strong payroll gains totaling more than 1 million before the central bank considers adjusting its ultra-accommodative monetary policy posturing. With the April jobs report such a stark disappointment, it appeared the economy still did remain far from the central bank's targets of reaching maximum employment, and would keep the Federal Reserve on hold with its current policies.

“The smaller rise in payrolls should at least assuage some concerns around the Fed policy outlook," Seema Shah, Chief Strategist at Principal Global Investors, wrote in an email Friday morning. "As we have heard several times in recent days, even a very strong jobs number wouldn’t have caused the committee to formally discuss changing the pace of bond purchases, so today’s number certainly won’t be giving the Fed cause for concern. They will be in no rush to bring forward tapering plans."

Heading into the report, investors had been contemplating improvements in other economic data with both optimism about the post-pandemic rebound and trepidation over the implications for monetary policy, with persistently strong data likely to bolster the case for the Fed to ease up on policies that had supported the recovery as well as asset prices. Prospects of higher interest rates have especially weighed on growth and technology stocks, which would see valuations come under pressure once rates lift from their current near-zero levels. "

MY COMMENT

YES.....NEVER doubt the incompetence of government. I have one hypothetical question.....what if all the various programs and bills being pushed by the government right now......are simply the WRONG ANSWER? I RARELY see anyone in the......financial media.......question all the "stuff" that is being put forward right now.

 

Although regarding the above....there are a FEW voices that are willing to speak out. Here is one.

Dimon on Raising Taxes: ‘Just Throwing Money, It Doesn’t Work’

https://www.bloomberg.com/news/arti...ing-taxes-just-throwing-money-it-doesn-t-work

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

"JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon urged lawmakers to spell out -- very specifically -- targets for building roads, funding college degrees and creating jobs if they embark on a massive spending spree to bolster the economy.

“Just throwing money, it doesn’t work,” Dimon said in an interview posted Thursday for the Investment Company Institute’s general membership meeting. “We already waste tremendous sums of money.”

Asked about raising taxes, Dimon said he would want an itemized list on what they would go toward. U.S. President Joe Biden has proposed trillions of dollars in spending on infrastructure and social projects to be paid for with tax increases on the wealthy.

“On highways, how many miles are you going to build, how much is it going to cost, when’s it going to get done, who’s responsible?” he said. On education, he doesn’t think that “free community college” is precise enough. “How many kids are going to graduate, how many kids are going to have a job at $65,000 a year?”

Lawmakers and the administration owe that to the public, he said. They should promise, “If you’re going to give me your money, I’m going to be a good steward of it and here’s what I am going to accomplish and I am going to report back to you,” he said, comparing it to the information companies disclose."

MY COMMENT

YEAH....good try. BUT......it will NEVER happen. At least he had the GUTS to say what most people will NOT say.

 

OK.....lets talk about inflation. I do NOT believe we are seeing ABNORMAL inflation at the moment. BUT....that does not mean we will never have an issue.

Here is my take on the......."POTENTIAL"....... DANGER to the economy that....."COULD"......happen now ......"IF"....events played out properly.

My view is that the BIG danger now....if all the events lined up is NOT inflation itself.....but a repeat of 1970's and early 1980's STAGFLATION

HERE is my view of Stagflation from what I lived through in the 1970' and 1980's.

"Stagflation occurs when the government or central banks expand the money supply at the same time they constrain supply. The most common culprit is when the government prints currency. It can also occur when a central bank's monetary policies create credit. Both increase the money supply and create inflation.

At the same time, other policies slow growth. That happens if the government increases taxes. It can also occur when the central bank raises interest rates. Both prevent companies from producing more. When conflicting expansionary and contractionary policies occur, it can slow growth while creating inflation. That's stagflation." https://www.thebalance.com/what-is-stagflation-3305964

A necessary component to cause Stagflation....in my view...... that we saw in the 1970's to early 1980's was a.....PRICE/ WAGE SPIRAL. Here is my view of price/wage spiral:

"The wage-price spiral refers to the strong mutual link and between wage growth and inflation.

• Rising wages invariably put upward pressure on prices and inflation.
• High inflation creates upward pressure on wages as workers seek to gain an increase in wages to meet the rising prices and maintain living standards."https://www.economicshelp.org/blog/glossary/wage-price-spiral/

So what is the danger of STAGFLATION now:

FIRST:

The government is raising taxes which WILL slow economic growth.

At the same time the government is expanding credit through abnormal low rates....and....through massive government stimulus and deficit spending expanding the money supply.

At the same time the government through the economic closure and NOW the erratic re-opening is slowing growth in the REAL guts of the economy...the small business economy. The focus of the current government on increasing regulation and social policy will also, further, slow growth.

SECOND:

Add in the potential for PRICE/WAGE SPIRAL caused inflation. The......government policies......fear of covid......erratic health information from government.......benefits rewarding not working, etc, etc....could lead to an extreme lack of workers available in the economy....especially the small business economy. As a result...business has to pay ever higher wages to attract the minimum number of needed workers. As a result business is compelled to raise prices to make up for the impact of the wage increases on the bottom line. Leading workers to fall behind and demand higher wages, etc, etc, etc. A vicious circle.

MY COMMENT

In my view it is the combination of the above factors that has the......."potential"......to produce another era of STAGFLATION.....out of control inflation, along with a stagnant economy and eventually even...."possibly"..... high unemployment as a result.

In my mind the KEY to how and where we eventually end up will be.......WAGES......especially......potentially rapidly ESCALATING WAGES.

Factors that in my view are......."possibly"....going to keep wages under control......out of control legal and illegal immigration......the outsourcing of jobs to other countries by global corporations moving manufacturing out of the country.....the outsourcing of jobs through remote work......the end of benefits that encourage and cause labor shortages......the sudden influx of workers into the system when artificial incentives to not work are ended.....the world wide deflationary environment of the past 10 years.......etc, etc.

So......STAGFLATION is one issue I see that could.....emphasis on "could"...happen in the near future......6-18 months. To me that is the REAL danger....not inflation itself.

Will this happen...probably not...just some weekend random thoughts.

 

HERE is ONE drag on Amazon shares this week......a second BIG sale of shares by Bezos.....in one week.

Jeff Bezos Just Sold Billions Worth Of Amazon Stock—For The Second Time This Week

https://www.forbes.com/sites/kenric...-doubling-his-one-week-sales/?sh=46e98c135b81

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

"After staying put with his Amazon stock all year, the e-commerce and cloud computing giant’s founder Jeff Bezos completed his second stock sale in the same week, according to filings to the Securities and Exchange Commission. The outgoing Amazon CEO sold more than $2.4 billion worth of Amazon shares, bringing his one-week total to $4.9 billion.

Bezos sold nearly 740,000 shares worth $2.5 billion on Monday and Tuesday, in his first sale of Amazon stock since Election Day last year. According to five SEC documents, he did the same thing on Wednesday and Thursday, selling another 740,000 shares to net $1.9 billion after taxes, based on Forbes estimates. He also took home $1.9 billion from his early week sale (to be more precise, he gained about $40 million less in the second sale, owing to slight movements in Amazon’s stock price).

Bezos is now worth $191.7 billion, Forbes estimates, a slight drop from his $192.6 billion net worth after the stock sales earlier this week. He remains the richest person in the world, more than $9 billion ahead of No. 2, LVMH’s Bernard Arnault.

The tech tycoon’s stock sales this year are now halfway to his 2020 mark, when he sold $10 billion worth of shares. As before, the sales come as part of a routine plan to unload shares in compliance with SEC requirements. As of Friday, he maintains a 10.3% stake in Amazon."

MY COMMENT

It is what it is.

 

Have fun playing with the new toy this weekend....oldmanram.

 

Well it is the weekend so I am going to talk about....local....real estate. The market here in my little 4200 home area continues to be EXTREMELY HOT. At the moment.....we have 9 homes for sale. There are a few homes in every price range.

There are 4 homes over $1MILLION....ranging from 7100 sq ft for $8MILLION to the low of 4200 sq ft for $1.65MILLION.

There are 3 homes in the middle price range....ranging from 3600 sq ft for $825,000 to the low of 2800 sq ft for $710,000.

There are 2 homes in the low price range....ranging from 2600 sq ft for $589,000 to the low of 2000 sq ft for $555,000.

In our area there is currently nothing for sale below $555,000. For comparison......8 years ago.....there were many listings in the area between $275,000 and $360,000......although this was the low end of the market. The home we purchased eight years ago for $760,000 would now sell for $1.6MILLION.

 

Siting around doing nothing so I decided to play with some numbers. SO.....what is the impact of REINVESTING ALL DIVIDENDS and CAPITAL GAINS.....using the SP500. I ran some numbers for intervals.....From April of "X"year..... to April 2021.

1971 to 2021 +7.635% +10.713%

1981 to 2021 +8.906% +11.643%

1991 to 2021 +8.235% +10.398%

2001 to 2021 +6.325% +8.394%

2011 to 2021 +11.843% +14.006%

2020 to 2021 +47.644% +49.407%

The above numbers show the average annual gain per year for the time period. The first number is without......reinvesting dividends and capital gains. The second number.....is with reinvesting. A pretty BIG difference. In addition a pretty strong illustration of the power of.....long term investing.

Here is the SP500 Index return calculator that I like to use:

https://dqydj.com/sp-500-return-calculator/

 

HERE is a good weekend article. Some general investing lessons that are valuable......and....a few life lessons too as an added bonus.

10 Things You Shouldn’t Care About as an Investor

https://awealthofcommonsense.com/2021/05/10-things-you-shouldnt-care-about-as-an-investor/

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

"It’s never been easier to pay attention to everything that’s going on with the markets, economy, individual companies or your own portfolio.

People used to get their paper statements in the mail on a monthly basis to know what was going on with their investments. Now we can watch the changes in market values instantaneously.

So it’s more important than ever to filter out the stuff you shouldn’t care about as an investor. Here are 10 things that fit the bill:

1. How rich other people are getting. John Pierpont Morgan is attributed with the quote, “Nothing so undermines your financial judgement as the sight of your neighbor getting rich.”

And JP didn’t have to deal with friends, influencers and celebrities constantly bragging about their lifestyle and wealth on social media all day long. There will always be people with more success, prestige, money and accolades than you.

Easier said than done but not worrying about how much money other people are making can save you a lot of unnecessary stress and angst.

2. What you paid for an investment. Morningstar’s John Rekenthaler recently update the work of Hendrik Bessembinder to show how many stocks outperform the stock market:


Although the stock market itself has been strong, the results for individual companies as a whole are not as good as you would expect in a bull market:

Although the Morningstar U.S. Stock Index enjoyed a 13.90% annualized gain for the decade, only 42% of individual equities finished in the black. Nearly as many (36%) posted 10-year losses. The final 22% vanished. While I did not investigate the fates of the dead, Bessembinder’s research suggests that half the expired stocks were acquired, with decent results, while the other half were delisted, with dire consequences.

Even during a decade marked by an almost uninterrupted bull market, the average stock wasn’t much good.

Picking stocks is harder than you think. Buy and hold is a terrific strategy for some stocks. For others, it’s the equivalent of an investor death sentence.

I’ll just wait until I breakeven is a tough place to be as an investor because some stocks don’t come back…ever.

There’s a fine line between being disciplined and being stubborn when it comes to investing.

3. The amount of time and effort you put into your investments. In many areas of life, trying harder leads to better results. That’s not the case when it comes to investing. In fact, trying harder and paying more attention to your investments will often lead to worse results.

There are no extra points for degree of difficulty when it comes to the markets.

Most investors would be better served doing less, not more.

4. One year performance numbers. One year (or any shorter time frame for that matter) returns don’t tell you anything about yourself as an investor. Every investor will have good years and bad years.

Diversification often looks silly over the short-term. Risk management can seem useless. Luck can trump skill.

You’re probably not as good or as bad as your short-term performance numbers suggest. Long-term returns are the only ones that matter.

5. Your IQ. EQ matters more than IQ when investing.

Yes, some level of intelligence is required but as Warren Buffett once said, “Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”

There are plenty of intelligent people involved with the markets but not nearly as many who have control over their reactions.


Intelligence alone does not guarantee success in the markets.

6. Financial advice from billionaires. Ultra-successful people typically offer some of the worst financial advice. They’re simply too out of touch with normal people to provide useful advice.

It’s also important to remember these people say stuff all the time that they don’t actually act on. You have to watch what they do, not what they say. And even then, these people don’t know your financial circumstances. How can they possibly offer you actionable advice?

And billionaires have the ability to make huge mistakes with their wealth and they’ll still be fine. If you make a huge mistake it’s going to hurt a lot more.

7. How much you could have made if you would have only put $10k into… I hate these comparisons.

You know, if you would have put $10k into [something that’s up 10,000%] you would be fabulously wealthy.

Oh really, thanks for that. Very helpful. Maybe next time tell me beforehand.

It’s also true that if you put $10k into Enron stock you would have $0 right now.

These fantasies serve no purpose unless you know how to spot them ahead of time.

8. Success in other areas of your life. Your biggest risk as an investor depends a lot on your personality, emotional make-up and station in life.

The biggest risk for most young investors is the fact that they don’t know how they will react under certain market conditions. At a young age, you don’t know how much you don’t know yet and that can come back to bite you.

For more seasoned investors, your experience can actually work against you if it allows you to become overconfident in your own abilities. This is true of people who have found success in other areas of their life as well.

The worst investors are often those who assume success in their career automatically translates to success investing in the markets. It doesn’t work like that.

9. Timing the market perfectly. Investors waste far too much time trying to find the perfect entry point for their investments. That perfect entry point is only known with the benefit of hindsight. You’re far better off putting your money to work when you have some money to put to work and letting compound interest make up for any ill-timed purchases.

Here’s my regular reminder that a long time horizon can trump even the most poorly timed of investments:

<span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span>

It’s fun to look at returns from the tops and bottoms for certain markets or stocks but no one actually invests consistently at the peaks or troughs.

10. Producing alpha in your portfolio. Jason Zweig once told a story about interviewing dozens of residents in Boca Raton, FL, one of the wealthiest retirement communities in the country:

Amid the elegant stucco homes, the manicured lawns, the swaying palm trees, the sun and the sea breezes, I asked these folks — mostly in their seventies — if they’d beaten the market over the course of their investing lifetimes. Some said yes, some said no. Then one man said, “Who cares? All I know is, my investments earned enough for me to end up in Boca.”

No one on their death bed has ever regretted the fact that they didn’t have a better Sharpe ratio.


The whole point of investing in the first place is achieving your financial goals, not beating the market.

MY COMMENT

IT is NOT a race or a competition. It is about achieving....YOUR.....goals.....not meeting the expectations of anyone else. I do believe that MOST....the vast majority of investors....make it far more difficult than it needs to be. Investor....BUSY WORK........a from of self hand holding.....or a security blanket.