The Long Term Investor

Nice MILD open and early action today. Good enough for me compared to the past couple of weeks. With this sort of open I am GUESSING that we have a very good chance to end the day in the green. I "looked" a few minutes ago and six of my ten positions were in the green to start out the day.

Hopefully the "temporary" fascination and connection of the markets to Bitcoin and crypto is NOW over. the two should NOT be connected anyway.

 

HERE is a bit of a hint to what is going on at the moment...although this type of information is mostly BACKWARD LOOKING.

Consumer confidence ticks down in May, but remains strong

https://finance.yahoo.com/news/consumer-confidence-ticks-down-may-141422898.html

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

"Consumer confidence ticked down slightly in May but remains nearly as high as its been since the pandemic began.

The Conference Board reported Tuesday that its consumer confidence index fell to 117.2 from April's 117.5 reading, the highest level since February of 2020, just before the pandemic began.

The present situation index, based on consumers assessment of current business and labor market conditions, rose to 144.3 from 131.9. Although the percentage of consumers surveyed claiming that business conditions are “good” fell slightly from 19.4% to 18.7%, those claiming conditions are “bad” declined more, from 24.5% in April to 21.8% in May.

Consumers’ assessment of the labor market also improved as the percentage of consumers saying jobs are “plentiful” climbed from 36.3% to 46.8%. Those saying that jobs are hard to get fell to 12.2% from 14.7%. Unemployment claims have fallen to pandemic lows each week for the past the month.

The Conference Board's expectations index, based on consumers' short-term views for income, business and the job market, fell to 99.1 in May, from 107.9 in April.

Consumers' expectations for the future may be less bright because the tailwind from Americans spending their $1,400 stimulus checks could be fading. Earlier this month, the Commerce Department reported that retail sales in the U.S. flattened out in April after soaring in March, when many Americans received those government checks and boosted their spending.

Economists have said that rising confidence should bolster overall economic growth as consumers, who account for 70% of economic activity, spend more as lockdown restrictions are eased or abandoned altogether in many places.

Recent government data shows that the nation’s gross domestic product — its total output of goods and services — is expected to continue to rise. Following a 4.3% gain in the fourth quarter of 2020, the government’s first estimate of the January-March quarter came in at a brisk 6.4% annual rate. Some economists expect even bigger growth in the current April-June quarter — an annual pace of 10% or more — driven by a surge in people traveling, shopping, dining out and resuming their pre-pandemic spending habits.

That optimism is on full display in U.S. markets with five of the six top gainers on the S&P 500 carrying the tickers of airlines or cruise companies.

Shares in United Airlines rose more than 5% Tuesday after the airline said ticketed yields from casual travelers are near prepandemic levels. Shares in Delta Air Lines jumped 2% after the company said bookings have been better than expected."

MY COMMENT

I dont give much weight to this sort of data....but it is better to be positive than negative. The economy is opening up very quickly.....at least in the states that are being RATIONAL. It is am seeing it first hand in my state. BUT.....obviously there are many states that are not opened yet and are aiming to open this summer. As a result there should be a pretty good KICK START to the entire national economy over the next 6 months.....so we move on from here.

 

As I skim financial sites today.....I am STILL seeing a focus on crypto and Bitcoin. NOT much new....just a re-hash of the same old content that has been there for the past week or so. I consider that a good indicator for the very short term....this week. NO news is GOOD news. NOTHING seems to be going on is DC at the moment so again....no news is good news. People and investors need a BREAK from the continuous YELLING and DRAMA.

 

HERE is where we are.....IN GENERAL....at the moment.

S&P 500 rises slightly as reopening stocks continue to rally

https://www.cnbc.com/2021/05/24/stock-market-futures-open-to-close-news.html

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

"U.S. stocks gained for a second day on Tuesday as investors piled into reopening trades amid optimism about an economic recovery.

The S&P 500 added 0.1%, on pace for back-to-back gains for the major benchmark which has stalled out as of late. The tech-heavy Nasdaq Composite climbed 0.6%. The Dow Jones Industrial Average traded flat.

Airlines and cruise lines led the market higher. United Airlines jumped 3% after the carrier said yields on domestic leisure tickets purchased this month topped 2019 levels amid the reopening. Boeing also gained 1.7%. Norwegian Cruise Line and Royal Caribbean rose more than 4% each.

Bitcoin’s recent rout, which has hit tech stocks like Tesla and dented overall investor sentiment, stabilized on Monday. The cryptocurrency was back near $38,000 early Tuesday after falling below $32,000 at one point on Sunday. Crypto prices rebounded as Elon Musk said he was having discussions with bitcoin miners regarding sustainability.

Tesla, a big holder of bitcoin, was flat in morning trading. Crypto-exchange Coinbase gained 2.5% with the shares also getting a boost from a JPMorgan buy call.

Big Tech shares Facebook, Amazon, Apple, Microsoft, Netflix, Nvidia, and Alphabet were all higher.

The major averages rose on Monday, led by tech stocks and companies that benefit from a strong reopening from the pandemic as Covid cases dropped to their lowest level since June. The Dow Jones Industrial Average rose 186 points, helped by gains in Microsoft, Salesforce and Cisco.

The S&P 500 climbed 1%. The Nasdaq Composite was the relative outperformer, jumping 1.4% as Facebook, Amazon, Apple, Netflix and Google-parent Alphabet posted gains. The small-cap benchmark Russell 2000 climbed 0.5%.

Monday “was driven by inflation anxiety relief,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC. “Evidence that inflation fears were calming in the bond and commodity markets began to drive the stock market late last week and has continued into today.”

“Growth stocks including technology have regained leadership as yield and inflation fears ease,” Paulsen added.

After Monday’s gain, the S&P 500 is now in the green for the month of May. The S&P 500 is down only about 1% from its record hit earlier this month before a pullback.

MY COMMENT

Of course the averages have turned at this moment. BUT....as I said.....we move on.....micro moves day to day are IRRELEVANT. The LONG and MEDIUM term is EXTREMELY positive.

 

WELL.....that was a good day once I looked. I was GREEN.....and I got a good beat of the SP500 by .43%. eight of my ten positions were positive for the day. The only red ones were Apple and Honeywell. Nice to see good results when the markets are down.

 

A good article on what happened today.....at least as believed or put out there by the financial media and sources.

Stock market news live updates: Stocks slightly lower, giving back some gains after economic data disappoints

https://finance.yahoo.com/news/stock-market-news-live-updates-may-25-2021-222445408.html

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

"Stocks ended slightly lower on Tuesday after new data on consumer confidence missed expectations.

The S&P 500 edged lower after the index closed out Monday's session higher by 1%. The Nasdaq and Dow also gave up earlier gains to end the session lower. Treasury yields added to losses, with the yield on the benchmark 10-year note hovering below 1.6%. Cryptocurrency prices steadied, and Bitcoin prices (BTC-USD) traded little changed to hold just below $38,000 during afternoon trading in New York.

A new print on consumer confidence for April came in below expectations, with the Conference Board's headline sentiment index falling more than expected last month. At least some of the decline came as short-term income prospects were pressured by concerns over inflation, the Conference Board noted. And a separate report out Tuesday morning showed home prices surged by the most in 15 years in March, underscoring more key areas of the economy where supply and demand mismatches were pushing up prices.

Still, some members of the Federal Open Market Committee suggested market participants may not need to worry that rising prices will catalyze a near-term move in monetary policy in the near-term. St. Louis Fed President James Bullard told Yahoo Finance on Monday that he believed increases in inflation would be "mostly temporary," and that the Fed was "not quite there yet" when it came to discussing tapering its asset purchases.

And in separate comments, Kansas City Federal Reserve President Esther George said she did not want the Fed to be "overly reliant on historical relationships and dynamics in judging the outlook for inflation." The statement added to a litany of recent remarks from Fed officials downplaying the need for a near-term monetary policy move that might dampen the market rally.

Though the past two days of trading offered an at least brief respite for investors after last week's equity selling, some strategists still struck a cautious tone on stocks, given the still-elevated concerns around inflation.

"Right now everyone knows they should be worried about inflation and inflationary pressures and what that could mean in terms of a monetary response, or also companies' profitability," Shawn Cruz, senior market strategist at TD Ameritrade, told Yahoo Finance on Monday. "If they decide to keep those rising input costs on their balance sheet, then great, we're not going to see inflation rise at least on the consumer side, but we might see margins come in when [second-quarter] earnings come out."

"I think the path of least resistance could still be higher, but I do expect this choppiness to remain somewhere around what we're seeing right now, just off of highs, at least until we get a little more clarity, maybe some indications that can help us inform expectations moving forward," he added.

Others also noted that the latest technology-led advances might prove short-lived.

"We don't think there's any problem with the fundamentals in the tech space ... but we think it's been an over-owned, overvalued part of the market, and it's just the wrong macro backdrop for this part of the market at this moment in time," Lori Calvasina, chief equity strategist for RBC Capital Markets, told Yahoo Finance. "And so bottom line we still think inflationary pressures are here, and tech is one of the biggest sources of funding for rotation back into reflationing plays, things like financials, energy and materials," Calvasina said. "And we don't think those inflation pressures are going to abate any time soon.""

MY COMMENT

ACTUALLY....the lower ten year treasury rate today referenced above is a market POSITIVE. As are the steady crypto prices.

As to the consumer confidence report......there is a post above on this....HERE is the real story....again a positive for the markets:

"Consumer confidence ticked down slightly in May but remains nearly as high as its been since the pandemic began."

SO.....in reality......most of the stuff above is just EXCUSES for a MILD down day that in my opinion does not really reflect anything at all....other than a very mild down day. AND.....actually.....shows the strength of the economy and markets as most investors hover just at or below all time highs as do the averages.

 

HERE is where I am with my portfolio after the recent sell of Tesla and Snowflake:

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
Nvidia


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.

 

FUTURES....looking very nice at the moment. Plus we have some earnings tomorrow that might make a difference to the markets......after the close......NVIDIA and SNOWFLAKE.

We will see if NVIDIA can beat the JINX of good earnings leading to a down stock for the next few days. Plus there is some speculation that Nvidia announced the split before the earnings to........provide cover.......for earnings that might not be up to expectations. Who cares.....when we can see the REALITY tomorrow.

 

OK.....another good but mild positive open today. Seems like a repeat of yesterday to me.

Stock market news live updates: Stocks rise as traders shake off inflation concerns

https://finance.yahoo.com/news/stock-market-news-live-updates-may-26-2021-221836109.html

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

"Stocks rose on Wednesday as investors at least temporarily set aside concerns over rising inflation.

Each of the S&P 500, Dow and Nasdaq opened higher on Wednesday, reversing course after a choppy session a day earlier ultimately ended with the major indexes in the red.

Investors this week have continued to contemplate prospects that higher inflation during the post-pandemic recovery will ultimately curb the extent of the rebound in economic activity and rally in stock prices. New data Tuesday showed consumer confidence dipped in April even as more social distancing standards were lifted, with the decline coming in part as consumers took note of rising price pressures.

“I do think we’ve been in this consolidation phase, really since early April. That’s when we started a new phase in this market cycle, the first one [was] that recovery in stay-at-home stocks from March to November last year, the second phase was the reopening phase from November to March,” Gabriela Santos, global market strategist at JPMorgan Asset Management, told Yahoo Finance. “Now we’re moving beyond the recovery and focusing on the expansion up ahead. And we haven’t had a lot of new data on this recently, so it makes sense to see stocks consolidate.”

“What we’ll start to see over the next few months is for growth to peak and then slowly moderate,” she added. “That’s still a constructive backdrop for stocks. It’s just that the actual sector selection, company selection becomes a lot more important. And the focus is increasingly on inflation rather than real growth, and ways to hedge upside risks to inflation in this new cycle.”

But at least as it relates to monetary policy, a short-lived jump in inflation would not spur the Federal Reserve to immediately wind down its crisis-era support, numerous U.S. central bank officials recently reassured market participants. On Tuesday, Federal Reserve Vice Chair Richard Clarida told Yahoo Finance that "there will come a time in upcoming meetings" when the central bank would discuss scaling back asset purchases, but that "it is going to depend on the flow of data" – reaffirming the Fed is not on a set timeline when it came to rolling back policies that have supported the economic recovery and asset prices.

Stocks traded choppily as investors weighed these and other Fed comments against a mixed batch of economic data, which has offered unclear signals as to whether investors need be immediately disquieted by inflationary pressures. But as many strategists have said, the rise in inflation and eventually in interest rates will be an inevitable part of the recovery.

“You’re fighting the Fed actually if you think inflation’s going to get lower than that," Greg Staples, head of fixed income North America at DWS Group, told Yahoo Finance, referring to the Fed's stated goal of letting inflation run moderately above 2%. "[Fed Chair Jerome Powell] is really going to do everything he possibly can to stimulate it. And when the economy is overheating, you’re talking about potentially 6% growth in the first quarter, maybe 10% growth in the second quarter. We’ve got a lot of momentum here."

"He’s continuing to add stimulus on the monetary side, and then with Congress and the infrastructure plan on the fiscal side," he added. "So we think everything’s on a go for continued growth. And ultimately, that’s going to lead to stable more stable and systemic higher inflation, which will ultimately lead to higher rates.""

MY COMMENT

I do agree that we have been in a time of CONSOLIDATION for stocks and the markets during the past month or so. We are STILL in that period. This is part of the reason that HUGE earnings and much positive news has not caused a market boom. Of course part of the reason for this consolidation is the erratic re-opening with half or more of the country lagging behind and not open even to this day.

At least it is good news that there is NOTHING new going on. It is the same old talk....day after day...about inflation and the FED. ALL of this "stuff" is totally baked into the markets at this point. It is NOW irrelevant.

Time to move on......with moving on meaning higher stock and market prices.

 

So....to get into theoretical and philosophical discussion....here is a little article that I like. Who knows....it might even be new information for many of the younger people that have NO CONCEPT of much of the information discussed in the article.

Supply-Side Neoliberalism Sure Beats the Alternative

https://www.aier.org/article/supply-side-neoliberalism-sure-beats-the-alternative/

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

"Besides “capitalism,” the two concepts perhaps most reviled by left-leaning intellectuals are “neoliberalism” and “supply-side economics.” These intellectuals harbor an odd antagonism, because each concept is associated with greater freedom, prosperity, and security. As such, one might suspect that the antagonists yearn for something other than these human values.

But what’s not to like about capitalism? It’s the social system that codifies individual rights to life, liberty, property, and the pursuit of happiness, the system in which property is owned and controlled privately. Capitalism was made possible by the Enlightenment, by the 18th century respect for reason in all fields – in science, politics, economics, the arts. In just a couple of centuries it revolutionized and modernized our material world; for the nations that embraced it, capitalism improved their health, increased their wealth, and extended their lifespans.

We no longer have a pure capitalist system, of course. The ideal form was best practiced in America between the Civil War and WWI. But whenever social systems have been closer to capitalism’s pure form (e.g., Hong Kong), they have performed wonders; systems farthest from capitalism, we all know (or should) have produced horrors.

Why does capitalism perform wonders? Why is it so efficient, practical, productive, and life-enhancing? Because it is the optimal habitat for humanity. It provides individuals the freedom to think, act, and pursue their self-interest. Some of capitalism’s foes are nihilists, of course, eager to terminate (not merely “redistribute”) its opulence; but many more foes disdain its ethical code of rational egoism, a disdain felt alike by secular socialists and religious conservatives (who otherwise pose as rivals). Many also hate inequalities in income, wealth, and social status, even though in freer nations that mostly reflects the diversity of developed talents and life choices.

What about “neoliberalism?” It means “new liberty” and refers to the post-WWII spread of pro-capitalist ideas from the likes of Ludwig von Mises, Friedrich Hayek, Ayn Rand, Milton Friedman, Robert Nozick, James Buchanan, and others. Liberty had not been as defended since before WWI.

The nearby exhibit – “A Timeline of Neoliberalism” – depicts key works in moral theory, politics, and economics that appeared over five decades and inspired party platforms, campaigns, and elections. The successful, multi-year governance of political leaders like Ronald Reagan, Margaret Thatcher, and Brian Mulroney would not have been possible without the fuel of neoliberal ideas. Nor would there have been pressure placed on the Soviet Union and its East European colonies; when they too relented, it could be said without hyperbole (as Thatcher put it) that neoliberals “won the Cold War without firing a single shot.” Even successors to the neoliberals in rival parties dared not change policy much. In the 1990s Bill Clinton first beat the Reagan successor (GHW Bush) who had pledged “no new taxes” (before raising them), then, before a Republican-controlled Congress, declared “the era of big government is over.” Soon thereafter, Clinton signed a law to “end welfare as we know it.” In Britain in 1995, Labor Party leader Tony Blair demanded a recission of the nationalization plank (in place since 1918) and with other neoliberal acts served as Prime Minister (1997-2007).


Amid the rise of neoliberalism and the fall of the U.S.S.R., Marxism and Keynesianism were in disrepute and retreat. Ideologues and control freaks in each camp detested the spread of neoliberalism; still today they use the term as an epithet, preferring a return to the old despotism.

What about “supply-side economics?” It was developed primarily by economists Robert Mundell (Nobel prize winner, 1999) and Arthur Laffer (famous for the Laffer curve, which showed the disincentive effects of high marginal tax rates and called for material cuts). Their work was popularized by Jude Wanniski (The Way the World Works, 1978) and Bob Bartley (in charge of the editorial pages of the Wall Street Journal, 1972-2002). Supply-side doctrines were applied with great success by practitioners including Congressman Jack Kemp, Treasury economists Paul Craig Roberts (The Supply-Side Revolution, 1984) and Bruce Bartlett – and, of course, America’s 40th President – in the form of “Reaganomics.” It is true (and sad) that few supply-siders were willing to shrink the morally suspect welfare state, but neither were their critics (who demanded a still larger version). Besides, their failure to get shrinkage does not negate their valid principles, one of which is that the real burden on the economy is government spending, not how it is financed.

Just as many intellectuals and politicians despised neoliberalism, they despised supply-side economics, deriding it as “voodoo economics” and “trickle-down economics.” Even Reagan budget director David Stockman, a brief convert, tried to appease critics by claiming it was a “trojan horse” to provide “giveaways to the rich.” Despite foes’ smears, supply-side economics was neither untrue nor untried; it was a healthy revival of the sound doctrines and policies explicated by Jean-Baptiste Say (1767-1832), Frederic Bastiat (1801-1850), and Joseph Schumpeter (1883-1950). The trio’s pro-capitalist ideas and policies were dismissed and distorted (albeit never refuted) under the onslaught of Marxian-Keynesian dogmas during the brutal first half of the 20th century.

The essence of supply-side economics is not, as critics claim, that “tax cuts will balance the budget.” It’s not even a minor principle but, rather, a “straw man” argument which no supply-sider ever advanced. Budget balance (or imbalance) is determined as much by public spending as by tax revenues; if the former is excessive, no amount of tax reform can ensure budget balance. Moreover, the uniqueness of the supply-side approach to taxation is to focus on tax rates and how they affect incentives to produce, earn income, save, and invest. Unlike most other models, this one makes the reasonable assumption that people are self-interested, don’t pay taxes out of duty, and dislike paying their hard-earned income to corrupt and fiscally profligate governments.

Supply-side fiscal theory contends that if tax rates are too high (confiscatory, punitive) they can depress the tax base and thus tax revenues. If so, a cut in rates can increase output and income as well as the tax base (hence tax revenues). This is common sense, basic economics; it is price theory (microeconomics) applied to the economy (macroeconomics) and to public finance. It is the essence of the Laffer curve, which has been verified empirically in dozens of cases worldwide since the 1970s. It is precisely the much-reviled supply-side revolution that fueled the case for material cuts in top marginal tax rates in major nations since the early 1980s (Figure One) – and those cuts also, predictably, fueled a revival in economic growth rates in those nations.


Another major myth about supply-side economics is that it pertains only to taxes or to the maximization of government revenues. As did Say, Bastiat, and Schumpeter, supply-siders today rightly extoll entrepreneurship, profit-seeking, and prosperity. They know that wealth creation requires the rule of law, the protection of all aspects of private property rights, sound (gold-based) money, low and flat tax (and tariff) rates, free trade, efficient infrastructure, and national defense. For supply-siders, the real burden on any economy is government spending, not how it’s funded. Unlike demand-siders (whether Keynesian or Monetarist), they stress supply, production, and wealth creation; they recognize that supply is the only source of real demand, that demand is not akin to consumption (the using up of wealth), that government spending per se creates neither supply nor demand, that aggregate supply and aggregate demand are never “out of balance” or in need of a government corrective, since they’re the same thing viewed from different angles.

Figures One and Two illustrate the dramatic decline on top marginal tax rates resulting from the supply-side revolution of the 1980s and 1990s. The U.S. federal government’s top marginal tax rate on personal income (Figure One) was cut from 70% in 1980 to 50% by 1983, then further to a low of 28% in 1986 (a rate that lasted for only five years, until the Bush tax hikes). Notice how tax rates likewise were cut in Britain, Germany, France, and Japan. This was a global revolution. Yet rates have been raised again in the opening decades of this century. The top U.S. rate is now 40%.

Top corporate tax rates also were cut dramatically due to the supply-side revolution (Figure Two). In 1984 top marginal rates averaged 42% in OECD nations; by 1999 the average was 32%; today it is 22%. Germany’s top rate was 55% in 1980; by 1999 it was 40%; today it is 14%. The top U.S. rate for large “C-corporations” was cut from 46% in 1980 to 35% in 1986 and remained there, above the OECD average, until the Trump rate cut (to 21%) beginning in late 2017. In the U.S., the top tax rate for smaller, pass-through business entities (“S-corporations”) was equivalent to the top personal rate, which was cut from 70% in 1980 to 28% in 1986; this tax-rate differential inspired faster growth in small-to-midsize businesses in the U.S. relative to larger firms.


A crucial aspect of the supply-side revolution was pro-capitalism and anti-cronyism. A main goal was to simplify the tax code, with fewer brackets and fewer special exemptions, deductions, and credits. Private sector activity would shift from tax avoidance to wealth creation. The idea was to lower tax rates while widening and increasing the tax base (i.e., taxable income). That meant a much lower negative impact on total tax revenues. Moreover, less onerous tax rates and fewer tax favors radically reduced the motivation to lobby for special tax breaks (i.e., far less cronyism).

The supply-side revolution – being pro-capitalist, pro-entrepreneur, pro-profit, pro-growth, and pro-prosperity – understandably has faced many counterrevolutionaries in the early decades of this century. Top marginal tax rates on personal income have been increased, although not back to pre-1980 confiscatory levels; pressure is building to further raise top rates, and politicians who endorse the idea have been gaining traction and getting elected. The reactionaries also have been busy reintroducing tax favoritism, eliciting more lobbying, campaign contributions, and cronyism.

We have heard a lot in recent decades about capitalism allegedly degenerating into “cronyism” or “plutocracy” (rule by the rich). But cronyism has nothing to do with capitalism. The only way to get money out of politics is to get politics out of money making. That is a uniquely supply-side prescription, but it is the last thing in the world any Marxist, Keynesian, or welfare-state fan wishes to see. It is ludicrous when foes of supply-side policy claim that it “favors the rich,” for these foes are the same people who, by seeking to punish the rich, insidiously seek their favors.

Tax policy aside, there has also been a boom in government spending this century, which supply-siders interpret as a burden (not a “stimulus”) for the economy. There also has been greater regulation, stemming from 9/11 (PATRIOT ACT), the accounting scandals of the early 2000s (Sarbanes-Oxley Act), the financial crises of 2008-09 (the Dodd-Frank Act), and the Covid-19 lockdowns of 2020-21. Finally, there have been sharp policy turns away from free trade.

Back in 2012, fearful of a Romney-Ryan victory and a mere preservation of supply-side policies, two analysts at the left-leaning Center for American Progress issued a report titled “The Failure of Supply-Side Economics.” They included a half dozen graphs allegedly showing that “supply-side doesn’t work.” They showed no such thing. They cherry-picked data, conveniently altered time periods, and posited irrelevancies. Their shoddy work was yet another in a long train of similarly bogus “studies” that have appeared since the beginning of Reaganomics in the early 1980s.

Let us review the relevant empirics, both fully and fairly. Table One summarizes and contrasts U.S. economic-financial performance in 1980-2000 versus 2000-2020. Whereas the last two decades of the 20th century were animated by globalism and supply-side neoliberalism, the first two decades of the 21st century have been animated by nationalism and demand-side neofascism.

The extent of the differential performance should be astonishing to those unaware of the facts but honest enough to learn them. Tragically, America has shifted from prosperity to austerity in a single generation. Real GDP growth was 3.4% per annum in 1980-2000, twice the rate of 2000-2020. Industrial production over the last two decades has been a mere 1/6th of the previous annual rate. Real private fixed investment expanded by 4.8% per annum in 1980-2000, more than double the rate since then. Growth in civilian employment this century has been a mere quarter of what it was in 1980-2000.

What about the dollar and money? The dollar appreciated at a compounded annual rate of 1.1% in 1980-2000 but depreciated at that same rate in 2000-2020. In real terms (ounces of gold), the dollar appreciated 3.9% per annum in 1980-2000 but has been devalued 9.2% per annum since then. The money supply has increased 15% per annum so far this century, triple its rate of increase in 1980-2000. To what end? For what purpose? Obviously, the production of money isn’t the production of real wealth. As more money has been issued, more has been demanded (hoarded). That hardly depicts a robust, future-oriented, risk-taking, entrepreneurial economy.


What about real gains on financial assets? The S&P 500 returned 11.7% per annum in the supply-side decades of 1980-2000, more than double what it has delivered since then (5.3% per annum). U.S. T-Bonds returned 8.1% per annum in 1980-2000, likewise double their return since (3.6% per annum). Prices of key commodities like crude oil, gold, and food declined in 1980-2000, but have since increased. With robust growth in output and jobs in 1980-2000 came less costly living.

What about U.S. public finances? The supply-side policy mix is ridiculed most, perhaps, for its alleged fiscal profligacy. But Table One reveals how federal spending has increased far more in 2000-2020 (6.9% per annum) than it did amid supply-side dominance in 1980-2000 (5.6% per annum). Recent profligacy hasn’t done very much to “stimulate” the economy, has it? But surely federal tax revenues stagnated amid all the tax cutting of 1980-2000? No, they grew by 7.0% per annum, more than twice their growth rate so far this century. Whereas in 1980-2000 revenue growth outpaced spending growth, the reverse has occurred in 2000-2020, with spending growth outpacing revenue growth. The result: a relatively faster rise in the national debt this century. The turn of the last century recorded four straight years (1998-2001) of budget surpluses. So much for fiscally “reckless” supply-side policies. The U.S has registered not a single surplus since 2001.

The near-phobic disdain for supply-side economics and neoliberalism this century is part of a new wave of anti-capitalist sentiment. We have seen this movie before. It is a horror film. The true friends of rationality, liberty, and prosperity should wake up, stand proudly, and contend boldly."

MY COMMENT

Having lived through all the time periods reflected in this article I strongly agree. OBVIOUSLY our free market capitalistic system is under constant attack recently. Part of this issue reflects very different values and attitudes among younger age groups in society.

The bottom line....the more we go toward government involvement in EVERYTHING and CONTROL of more and more......the worse our economy and economic system will be. History has shown many times that the KEY to economic and business success is ACTUALLY......LOWER TAXES and LESS REGULATION. GOVERNMENT....by any party....has NO ability to be successful in attempts to manage and control the economy. What does work is.....free market capitalism....to the greatest extent possible in our society.

Does history and actual results matter any more.....probably not. We ALL know that there is NO history prior to the internet age....starting about year 2000.

 

What a DRAMATIC change in just one day.....24 hours. ALL of the articles on Bitcoin have gone away. A day ago probably 60-70% of all financial content was......24/7....Bitcoin and Crypto. TODAY.....they are ALL gone.

It is so nice to see this happen. Perhaps that is part of the reason we are seeing a good strong market today at the open and during the early market day. We had a HUGE amount of IRRELEVANT content happening over the past week with all this....."STUFF". None of it had.....ANY....real relationship to anything relevant to stocks and funds. It was ALL.....media driven mania.....for clicks.

 

HAPPY BIRTHDAY.....to the DOW. I guess it is appropriate that the DOW is kicking ass this year compared to many of the other averages.

The U.S. stock market’s second-oldest benchmark turns 125 years old

https://finance.yahoo.com/m/d7b78533-2968-33ec-8728-ec56d95879d8/the-u-s-stock-market’s.html

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

"As S&P Dow Jones Indices, who runs the Dow, explains it, the index was created by Charles Dow, who co-founded the Dow Jones, publisher of The Wall Street Journal. Originally, the Dow consisted of 12 companies but has now grown to 30 companies and is a price-weighted index, compared with the younger S&P 500 (SPX) launched in 1957, and the Nasdaq Composite (COMP) indexes, launched in 1971, which are both weighted by market capitalization. The Dow’s price-weighting means the value of the stock gauge is determined by the price changes of its components, rather than percentage changes."

MY COMMENT

I dont see the DOW as particularly relevant today. It is just not reflective of the general economy.....and....it is too shallow of an index having only 30 holdings. BUT....it is certainly having a good year this year.....so far.

HERE......is a bit more historical info:

https://www.wsj.com/articles/dow-jo...-years-as-wall-streets-bellwether-11622001661

"One hundred twenty-five years ago, the Dow Jones Industrial Average made its debut.

The index of 12 smokestack companies closed that first trading day, May 26, 1896, at 40.94. It included General Electric Co. as well as long-forgotten names like American Cotton Oil and Distilling & Cattle Feeding.

Since then, the Dow has evolved with the U.S. economy, giving investors from Wall Street to Main Street a measure of financial markets through the Great Depression, two world wars and all the events that shaped the 20th and early 21st centuries.

It has risen an average of 7.69% each year and notched 1,464 record closes, according to Dow Jones Market Data. It climbed above 100 in 1906, topped 1000 in 1972 and crossed 10000 in 1999. Just this year, as the U.S. economy continued to shake off its pandemic induced slow-down, the Dow bounded above every milestone from 31000 to 34000."

 

OH yes.....for those that were all DOM&GLOOM about the ten year treasury yield a few months ago.....NEVER MIND.

The yield today at this moment......1.56%. AS USUAL.......the much feared and touted event....does NOT happen. The past year has been......ONE CONTINUOUS LESSON.....in fear mongering, panic type thinking and doom and gloom. We had constant predictions of negative things over the past year.....every quarter was going to be bad.....just wait till a month from now it will be disaster......the ten year yield....inflation.....the pandemic will never go away....vaccines will not work...mutations will overwhelm us.....the world is ending.....it is a new normal......everything has changed.....the old rules dont apply anymore.....blah, blah, blah.

WELL.....as usual....life goes on and all the......DANGER and DOOM.....never happened. GEE....who would have ever predicted this outcome.

A VICTORY for long term investors and a classic lesson for ALL investors.

 

Well actually.....positive stories dont sell. The negative....the scary....the sensational.....sells much better and in today's world gets more clicks. It is all about racking up those views for those advertising pennies.

 

A very nice article here with some definite lessons for investors....especially long term investors.

Using History's Lessons to Evaluate Today's Investments
The odds favor equities.

https://www.morningstar.com/articles/1040769/using-historys-lessons-to-evaluate-todays-investments

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

"The Nifty 50s
History permits us to observe with unaffected eyes, to see things our predecessors missed. It is not that they lacked our intelligence (to put the matter gently), but rather that they were products of their times. Perhaps after conducting the exercise, we can bring a like mindset to today’s investments. Perhaps we can avoid becoming too caught up in our particular moment.

In that spirit, let’s revisit 1950s investment prices. The chart below shows the dividend yield on large-company stocks for that year, along with interest rate paid by long-term government bonds, and the previous decade’s annualized inflation.



Wow! Inflation had averaged more than 5% per year during the 1940s, and yet American investors demanded only a 2% yield from long bonds, which possessed no ability to combat inflation. Meanwhile, the equities of companies that could and did raise their prices in response to inflation, thereby growing their earnings, distributed 8%. At first glance, those numbers seem as if they should have been reversed. Bonds should have yielded 8%, with stock payouts being 2%.

Clearly, 1950s investors had the Great Depression on their minds. In the 1930s, any guaranteed income whatsoever was a bargain, given that stock dividends shrunk, many corporate bonds defaulted on their obligations, and consumer prices had declined rather than risen. In that light, a 2% Treasury payout was sufficient, while stocks needed to distribute a much higher amount, because their yields were not to be trusted.

Also, the economy had recently been poor. The “postwar boom” did not begin immediately after the conclusion of World War II, when the soldiers returned home. It took a few years to arrive. In 1950, the nation’s gross domestic product was slightly below its 1945 level, although production had been slowly increasing over the previous three years. Investors could therefore have been pardoned for believing that economic weakness was a greater overall danger than overheating.

However … the point of this review is not to place ourselves fully in the past, but instead to appreciate why our predecessors believed as they did, before stepping aside to examine the situation dispassionately. Could another powerful recession have occurred? Sure, it could have. Had investment prices overly discounted that possibility? They certainly had. The numbers suggested to buy stocks heavily and then buy some more.

Over the next 30 years, U.S. large-company stocks grew by 10.85% annually, while long government bonds made 2.27%. That is the charitable view. The less charitable approach is to consider each asset’s cumulative, inflation-adjusted performance. In real terms, large stocks gained $5.73 during those three decades on each dollar invested. Meanwhile, long bonds lost 41% of their value. Ouch.

Entering the 1980s
By the end of the period, when 1980 arrived, valuations had flipped.



What a difference 30 years made. Long government bonds went from possessing one fourth of equities’ yields to double their amount. No longer did investors fear recession more than inflation. Although the former remained a concern, inflation had become the overriding threat. Consequently, bondholders demanded a substantial premium. Whereas in 1950 long government bonds yielded 3 percentage points less than the previous decade’s inflation rate, by 1980 they were paying 4 points more. Bonds carried a large margin of safety.

Once more, the era’s investors had their reasons. Inflation had subsided for a while before once again crossing the 4% mark, in 1968. From then it just kept rising, and seemingly would not stop. It exceeded 12% in 1974, came down somewhat as oil prices stabilized, and then surged again in 1979, surpassing 13%. In that light, an 11% bond yield did not necessarily seem excessive to them.

Nor does it to me, considering the available information. In 1980, there was a significant chance that inflation would continue to rise, with global governments unable to protect their currencies. Therefore, I do not regard that period as presenting an obvious investment opportunity. That said, were inflation to be conquered, both stocks and bonds were priced to profit handsomely.

And so they did. From 1980 through 2009, large stocks returned 11.12% annually in nominal terms, and 7.45% in real terms. Adjusted for inflation, they outdid their previous performance. This time, though, long bonds followed suit. Instead of losing real money, as had occurred during the prior 30 years, they gained an annualized 5.93% after inflation, which led to a 462% cumulative real return.

Considering Today
Now for the current markets. What do they signal to the disinterested observer?



Hmmm. In 1950, stocks distributed much more than the prevailing inflation rate and bonds paid much less. Thirty years later, the positions had reversed, with bonds yielding well above the previous 10 years’ recorded inflation, while equities were 2 percentage points below. Today, all three numbers are roughly similar.

Stocks are undoubtedly expensive. Only from 1999-2001 were their yields lower. One can defend their valuations by pointing to the past decade’s low inflation rate--but doing so would violate the terms of this exercise, which is to avoid being swayed by current arguments. The broader view breeds skepticism. In 1950, investors were undaunted by inflation. They were wrong. Thirty years later, they feared it. Also wrong. Now they are sanguine. Such confidence is unconvincing.

If equities’ prospects are mixed, they at least surpass those of bonds. Should inflation revert to the mean, stock prices will suffer, but after a while companies will compensate by increasing their prices, just as they did through the 1970s and 1980s. No such luck for government bonds, which have shed the margin of safety they possessed in 1980. If inflation resurfaces, they will be blitzed. Even if not, they will likely trail equities, probably by a large amount.

In summary, adopting the broad perspective offers a unambiguous verdict on today’s investments: Better stocks than bonds. Equities aren’t remotely as attractive as they were in 1950; at today’s prices, they do not represent that sort of opportunity. But neither is the contest a toss-up, as in 1980. The odds now clearly favor equities.

MY COMMENT

SOME historical perspective here in this little article. BUT....not a lot that is BIG substance. AND....some data that might be of help to those that invest according to BROAD ECONOMIC conditions.

I personally prefer to NOT invest according to BROAD ECONOMIC conditions. I prefer to invest according to the specific companies and funds that I own and their current financials and future prospects. BUT articles like this do provide CONTEXT.