The Long Term Investor

Emmett....I really dont know what those people do or if they have a stake in the game. All I know is they come out of office and their jobs with huge amounts of money WAY beyond what they make. They all take care of each other.....kind of like the MEDALS they award to each other.

 

A BEAUTIFUL day today for me and the markets. I was UP by a SOLID amount....well into the green. PLUS a very nice beat on the SP500 by 0.30%. DOUBLE PLUS......a new all time high for my account.

I think there is a good chance that we are going to see a historic week this week for investors. One of the BEST in a long time.

My down stocks today were Costco, Home Depot, and Proctor & Gamble.

 

I dont care about the little articles I am seeing right now trying to fear monger the Fed symposium or inflation. RASPBERRIES....to them all......the markets have a mind of their own.

Stock market news live updates: Stocks rebound from last week's losses, Nasdaq posts fresh record closing high

https://finance.yahoo.com/news/stock-market-news-live-updates-august-23-2021-113141567.html

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

"Stocks gained on Monday, rising to fresh record levels after last week's volatility as investors looked ahead to a key event from the Federal Reserve later this week.

The S&P 500 advanced and reached a fresh all-time intraday high. The Nasdaq Composite outperformed, adding 1.6% to reach record intraday and closing highs. The positive sentiment extended into other risk assets, and oil prices also rebounded following recent declines. U.S. West Texas intermediate crude oil futures (CL=F) topped $64 a barrel, and Brent crude (BZ=F) jumped above $67 per barrel after suffering its longest losing streak since early 2018 as of last week.

"It's the return of risk appetite in the broader financial markets," Vandana Insights CEO Vandana Hari told Yahoo Finance of the rebound on Monday. "The real blow last week was signals the Fed might start tapering towards the end of this year, and I think that was a real double whammy for oil."

The Dow rose as shares of Boeing and Chevron (CVX) outperformed. Shares of Pfizer (PFE) jumped after the pharmaceutical company announced it will acquire the cancer drugmaker Trillium Therapeutics (TRIL) for $2.3 billion. Separately, the U.S. Food and Drug Administration fully approved Pfizer's top-selling COVID-19 vaccine following months of use under emergency authorization.

Stocks came under pressure late last week after the Federal Open Market Committee's July meeting minutes signaled that "most" Fed participants believed the economy will have recovered enough to warrant the start of asset-purchase tapering by the end of this year. The S&P 500 posted its first weekly decline in three weeks, albeit while closing out Friday's session to the upside. Central bank officials are set to hold their annual Jackson Hole Symposium this week starting on Thursday, which could serve as a forum for more remarks about the size and scope of the Fed's tapering plans.

A host of new earnings and economic data have also come in. On the whole, corporate profits have been exceptionally strong, with nearly 90% of S&P 500 companies having topped consensus earnings per share estimates, according to FactSet. That's come even as concerns over the spread of the Delta variant have resurged and issues around supply chain and materials and labor shortages have remained.

"I think we certainly are not going to get the kind of fiscal stimulus that we've had over the past year-and-a-half, nor the monetary stimulus. So I think overall, the market's handling all this remarkably well," Ed Yardeni, Yardeni Research president and chief investment officer, told Yahoo Finance. "The perception is that the Federal Reserve is now seriously moving in the direction of tapering because the economy is doing fine. But any way you slice it or dice it, it's going to be slower growth, slower earnings growth, slower economic growth, and that's probably keeping the bond yield down and giving some weakness to the oil patch.""

MY COMMENT

The HUGE silent majority of investors are saying.....screw you.....to the short term fear mongers and those trying to jaw-bone their trades with well placed media tid-bits. The markets are sick and tired of all the BS. They want to go up and they are simply.....going to go up.

There is ABSOLUTELY NOTHING new this week going on. The markets and investors are handling it......."remarkably well"....because they DONT CARE. They are TIRED of all the constant BS.......and looking way into the future....as earnings come in at HISTORIC levels with 90% of reporting companies now topping consensus estimates.

In other words......the analysts were.....WRONG....this earnings season 90% of the time. What a STERLING record.......correct on perhaps 1 out of ten calls......way WORSE than simple random chance. AND....I know that their record is even worse because they ALSO probably missed nearly all the companies that ended up UNDER performing. YES....the old proverbial.....MONKEY THROWING.....darts would totally kick their ass. How PATHETIC is that......when these are the WALL STREET PROFESSIONALS that do this stuff for a living.

 

I like this little article. A RARE article on long term investing.......a forgotten topic.

How to get mentally prepared for long-term investing — no matter what the stock market is doing

https://www.marketwatch.com/story/h...ock-market-is-doing-11629737176?siteid=yhoof2

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

"Whether the stock market is riding a rollercoaster or your investments are sailing smooth, understanding your own risk tolerance is imperative to making and maintaining sound decisions.

Retirement Tip of the Week: Check in on your portfolio to see how it’s allocated, and make sure that aligns with your goals and comfort level.

Not only can the wrong asset allocation send a portfolio’s trajectory in the completely wrong direction, but it can also keep investors up at night or push them to make a bad decision in a panic. Financial advisers will assist their clients when making investment choices for their retirement accounts, but individuals who are contributing to an employer-sponsored retirement account or managing a portfolio on their own should conduct a check-up themselves.

Many of the major investment firms that offer investment portfolios have risk tolerance questionnaires for investors, which ask a series of questions about money and their comfort level with the stock market. Individuals will answer questions pertaining to their investments, such as how much time will pass before they need the money, and the results typically provide a suggestion for how to allocate the portfolio based on that information. Think of this as a starting point — it’s not the same as talking to a financial planner who can ask deeper questions or get a sense of how confident a person is in their answers.

Vanguard’s questionnaire asks 11 questions, including: when and how investors plan to use the money from their investments, how much they agree or disagree with feelings about market movement and hypothetical questions based on previous market history. Schwab has a similar questionnaire that determines the investor’s “profile,” and then offers suggestions based on those results and whether a person’s investing personality is considered conservative, moderately conservative, moderate, moderately aggressive or aggressive.


When completing these questionnaires, it’s also critical to remember that how you feel today may not be how you feel when the stock market is acting differently in a week, month or year. For example, when answering questions while her portfolio’s balance is climbing day after day, an investor may think she feels more comfortable with risk — until a month later when a correction hits and she loses a percentage of that balance. The opposite is also true — an investor may think he’s too nervous to have any risk in his portfolio because the market is acting up, but then lose out on potential returns over the next few decades until retirement.

Also see: Stock-market volatility is a great way to test your nerves as an investor

Other firms, like Betterment, include factors such as time horizon and downside risk, into their asset allocation suggestions when an investor is creating a portfolio. The company creates a glide path, similar to those that target-date funds use, which recommends portfolios become more conservative the closer to the goal’s deadline. Investors can follow the suggestions or deviate from them.

There’s one more thing to consider when determining risk tolerance — risk capacity. That means how much risk a portfolio needs or could use to reach the investor’s goals. For instance: a 30-year-old investor planning to retire at 65 would normally be advised to invest aggressively to achieve her goal of having millions in retirement, but if she’s afraid of risk in her portfolio and only invests in highly conservative options, that goal might be hard to accomplish. Financial planners can also talk clients through these decisions, but if investors are working alone, they should consider what amount of risk they could reasonably expect to need — and how to become more comfortable with it."

MY COMMENT

Probably one of the more important considerations in investing.....risk tolerance and risk analysis. Being a long term investor requires being able to remain invested during many different types of markets. ESPECIALLY corrections, bear markets, and recessions. If you can not sleep at night or are always in a panic or white knuckling it....there is something wrong with your portfolio and your risk tolerance analysis.

I suspect that many investors WAY OVERESTIMATE.....their risk tolerance and are way more aggressive than they should be in their holdings.

 

We have been in a HISTORIC market rally for 13 years now....since 2009....with a brief interruption for the pandemic.

Investors are terrified ... of missing out on the market rally

https://www.cnn.com/2021/08/23/investing/stocks-fear-greed-fomo/index.html

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

"New York (CNN Business)The Delta variant. Inflation. The Fed tapering its stimulus. The mess in Afghanistan. There are a lot of things for investors to be nervous about these days.

It shouldn't come as a huge surprise that the CNN Business Fear & Greed Index, which measures seven gauges of investor sentiment, is showing signs of Fear in the market. It actually was an Extreme Fear territory Friday.
Still, stocks remain near all-time highs. The S&P 500 was rallying for the third-straight day Monday and is now up nearly 20% in 2021. What gives?

Another powerful fear factor is lifting stocks: The fear of missing out on this seemingly never-ending rally.
Corporate earnings for the second quarter were exceedingly strong. Although profit growth is expected to cool a bit in the second half of the year and in 2022, earnings increases are still likely to be fairly solid for the foreseeable future.

Investors also have little choice but to keep buying stocks because other assets simply don't seem attractive.
Bond yields have risen modestly as of late but the yield on the 10-year US Treasury is still hovering around 1.27%. They were around 1.8% at the start of 2020 before the pandemic shut down the US economy, Conservative investors, therefore, need to search elsewhere for higher yields.

"There are ridiculously low yields on bonds. How do retirees and pension funds manage that?" said Eric Diton, president and managing director of The Wealth Alliance in an interview with CNN Business. "They have to shift to stocks. I'd rather own big dividend payers like Pfizer or Verizon."

Pfizer (PFE) pays a dividend that yields 3.2% while Verizon's (VZ) dividend yields 4.5%.
Gold prices have fallen in 2021 as investors bet on the Fed beginning to taper its asset purchase plan later this year or early next year and possibly raise rates as soon as late 2022.

Fed not likely to upset the markets that much anytime soon

But there is no guarantee that the Fed is going to hastily make changes to policy.
Questions about whether more stimulus will be coming from Washington and concerns about how quickly Congress will act to raise the debt ceiling that allows the government to borrow more money could keep the Fed on the sidelines for even longer, which should also support stocks.

"The Fed would prefer to know the stance of fiscal policy before committing to a direction for monetary policy," said David Kelly, chief global strategist with JPMorgan Funds, in a report Monday.

"The longer negotiations continue, the greater is the risk that something goes wrong with the political calculus and the Fed would prefer to be past this uncertainty before commencing tightening," Kelly added.

The research team at Principal Global Investors argues that the Fed will likely remain on hold until the beginning of next year too.
"Investors shouldn't expect the Federal Reserve to alter their plans to begin easing policy, and we reiterate the view that the Fed will likely begin tapering in early 2022," the Principal analysts wrote in a report Monday.

They added that "investors shouldn't worry that runaway inflation will derail the positive trajectory" for riskier assets like tech stocks and other high-growth sectors.

Delta variant likely won't cause repeat of 2020 shutdown

Several strategists aren't terribly concerned about the Delta variant having a major impact on the economy or earnings either. With millions of Americans vaccinated, the chances of businesses imposing stringent lockdowns like they did in the spring of 2020 seems remote.

"Expect a moderation but not a halt in the recovery as the government and consumers adjust to the rise of the Delta variant," said Glenmede strategists Jason Pride and Michael Reynolds in a report Monday morning.
Business leaders remain fairy upbeat too, which bodes well for stocks.

According to a survey of corporate executives, business owners and private equity investors released by investment firm Stifel Monday, many companies are still planning to raise cash for mergers and other strategic initiatives in the foreseeable future.
"There's a general sense of optimism following a long period of Covid-induced disruption," said Michael Kollender, managing director with Stifel, in the report. But he added that companies must adapt to a rapidly changing economy, with labor shortages and tax reform as two key challenges."

MY COMMENT

For the short term....I think we are at the start of a real BOOMER of a week......this week. For the long term.....the whole thing is about the re-opening. We have just BARELY scratched the surface of the re-opening to date. SO....my money is on the BULL MARKET continuing for at least a year or two more. BUT....you know me.....I am in it for the long term.

I want to......WRING....every possible...gain out of the current market run. I want to ride this wave till it is exhausted.....than....I will simply sit through whatever happens next....and ride the next wave. Repeat over, and over, and over. There is ABSOLUTELY no way to anticipate this sort of historic market....so I stay FULLY INVESTED in order to catch this sort of event from the very beginning. That is what I have done for the past 45+ years and will continue to do.......for life.

 

Oldmanram.....NO...no profit takers allowed. This week is going to be EPIC.

 

Markets are open to the green.....we need to build from here. I like this little article today.

Quantitative vs. Fundamental Analysis: Finance’s 60 Year Schism

https://themarket.ch/meinung/quantitative-vs-fundamental-analysis-finances-60-year-schism-ld.4820

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

"Quantitative investment strategies have intellectually dominated the financial industry for sixty years. In practice, however, fundamental analysis offers crucial advantages. Therefore, it's time for the two camps to overcome their differences and work together.

Investment finance has two main camps, which for the past 60 years have spoken past rather than with each other. The two branches are almost pure opposites of one another. One group believes past returns and historic company data are the key characteristics to set expectations about future returns, while the other believes prospective company characteristics set expectations about future returns. The branches broadly defined are: Quantitative Analysts versus Fundamental Analysts. This is a broad simplification, but it works well enough.

The roots of this schism developed with the advent of the CAPM in the 1960’s which distilled a stock’s future return expectations to understanding its mean/variance attributes. Combined with the Efficient Market Hypothesis, such a world view, if correct, dismissed the need for fundamental analysis. The spirit behind this view is captured by Eugene Fama in a paper called My Life in Finance, which every serious finance student should read to appreciate how Fama has shaped modern finance through the breadth and depth of his work. In describing his early days in finance, he writes –

The Limitations of CAPM
This schism between the quantitative and fundamental approaches is unfortunate, as the skills required to excel in each camp are quite different but ultimately complementary. But there is no doubt over the past 60 years, the quantitative camp has intellectually dominated the fundamental analysis camp.

This has been an unfortunate development, as there has been no intellectually credible alternative over the past 60 years to quantitative financial theories. Quantitative finance would have benefitted from a credible and robust fundamental analysis perspective.

The CAPM is very precise, and elegant, but the model has not worked well in practice. Estimating the model’s parameters required backward-looking assumptions that ultimately proved inadequate, as from a CAPM expected return perspective, low expected return «safe» stocks too often outperformed high expected return «risky» stocks making the model’s risk/reward predictions unreliable. Fischer Black identified that buying low beta stocks was a great trade in the 70’s.

In 1992, Fama/French shifted the quantitative finance toolkit from the CAPM to a 3-Factor model which introduced a classic fundamental analysis concept to asset pricing - a firm’s book to price ratio, which is now commonly referred to as the «value» factor.

The Value Factor
While Fama/French introduced a fundamental analysis variable into their model, they continued the tradition of relying on historic data to understand future returns. Examining the data Fama/French used in their study, it is easy to understand how book to price dominated their research, and why they felt comfortable relying only on historic data.

From 1963 to 1992, long and short portfolios formed on book to price performed extraordinarily well, resulting in a mesmerizing narrative that a firm’s book to price ratio is a critical concept to understand market returns (For a more in-depth discussion on the «value» factor pre and post 1992, see – Quantitative Value Investing is Broken).

Enhancing this narrative is the fact that high book to price firms generally exhibit riskier business characteristics than low book to price firms, on markers such as profitability and leverage, leading to the following conclusion – the market compensates owners of high book to price firms because they carry more risk. Such a risk-based narrative is suspect to fundamental analysts, as a book to price ratio conflates many valuation characteristics such as: profitability, growth, competition, and risk.

Academics and practitioners generally accepted the «value» factor as a critical concept to explain subsequent price returns and its marketplace acceptance has been legendary. However, as practitioners started using the Fama/French 3 Factor model in a live setting, it suffered the same fate as the CAPM – seemingly safe stocks (low book to price) outperformed risky stocks (high book to price) stocks, making the model unreliable.

By 2015 Fama/French formally recognized the shortcomings of book to price, and subsequently expanded their model to 5 factors, by adding profitability and investment growth factors. They motivated this expansion using a simple dividend discount model, driven by profitability and investment to reflect intrinsic value.

Misinterpretation of Investment
While Fama/French motivated their 5-Factor model from an intrinsic value lens, they did not sufficiently reflect the wealth creation process required to correctly determine intrinsic value. They modeled a world where asset growth always decreases a firm’s value, and thus they reasoned that firms with aggressive investment characteristics should underperform conservative growers.

The model they used to reflect a firm’s value failed to capture the interactive nature of profitability and investment. By missing the interaction of profitability and growth, they failed to reflect how firms with returns above their cost of capital that are investing – create, not destroy value. This is a very basic fundamental analysis principle – investing above the cost of capital leads to wealth creation.

The investment factor represents an incompletely specified theory of firm value, unfortunately validated through statistically significant empirical results. Slowly, the flaw in this work is being understood as prominent academics are questioning the premise that investment growth is unconditionally bad.

For example, Lu Zhang of Ohio State University developed the Q Theory, as an alternative to the 5-Factor model, that incorporates wealth creation as an important concept to understand future returns. Professor Zhang’s framework differs from the approach developed at Applied Finance in the 90’s but is intellectually related in emphasizing the importance of wealth creation to explain stock returns.

To visually illustrate this principle, Applied Finance developed the Wealth Creation Matrix™ which links a firm’s economic performance to its strategy of investing, divesting, or returning capital. Consistent with common sense and economic theory, firms generating high levels of economic profitability and aggressively investing, increase their intrinsic value, which provides the basis to generate superior stock returns.

The Wealth Creation Matrix™ below illustrates the relation between profitability and investment growth. Wealth compounders through history have represented the greatest investments available to investors, actively avoiding such companies is an egregious intellectual and practical error, which has cost investors dearly. Examples of such amazing companies include at various times in their history – McDonald's, Wal-Mart, Microsoft, Intel, Apple, and Alphabet, among others.


Time to Work Together
The blanket assumption that investment growth leads to lower intrinsic value is just wrong. It is unfortunate that virtually every prominent quantitative value manager has adopted some form of the investment factor into their portfolio construction process.

More unfortunate, is that the fundamental analysis camp did not actively point out that while quantitative finance has many strong attributes, the widespread acceptance of the investment factor is a mistake. This illustrates the lack of confidence fundamental analysts have developed over the years to argue core ideas with quantitative finance researchers. Sad.

The move to use factors without a strong underlying valuation model has been problematic. For example, since 2015, it is widely accepted that the 5-factor model has been replaced by a 6 or 7 factor variant. Quantitative value investing appears to have been reduced into a never-ending factor hunt, untethered to strong valuation theory. Further, these new models have no live, out-of-sample track record. Each significant model change restarts the clock on any live, out-of-sample track record.

Fundamental analysts need to step up and rightfully defend their role in finance. Well executed proforma modeling, valuation, and company-specific financial analysis is important for society, markets, and client portfolios, though fundamental analysts must adopt more quantitative rigor and transparency to be held accountable for their analysis. Experts need to continually demonstrate their worth by showing they can value companies and that through time market prices converge to their intrinsic value estimates.

So, 60 years later, we have quantitative analysts dominating finance, but starting to incorporate more and more fundamental analysis concepts into their work, albeit incompletely. This highlights the need for these two camps to work more closely together and expand investment finance knowledge.

MY COMMENT

In the end for ANY "quant" method to work will require a model that is able to TOTALLY incorporate and use FUNDAMENTAL ANALYSIS. It will....still....be called "quant"....but in reality it will just be an "AI" version of classic fundamental analysis. In my view....ANY....quant system that does not use fundamental analysis is simply going to fail over the longer term. It will be the typical HUBRIS of the technocrats.

 

I tend to agree with this short term analysis of the day. I dont see investors caring about any of the current "drama" topics that are out there.

Stock market news live updates: Stocks extend gains, hovering near record highs

https://finance.yahoo.com/news/stock-market-news-live-updates-august-24-2021-221636132.html

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

"Stocks gained on Tuesday, hovering near all-time highs as optimism over earnings and the economic reopening at least temporarily outweighed lingering concerns over the virus and changes to monetary policy.

The S&P 500 edged up. Big Tech stocks including (AMZN) added to gains, and the Nasdaq outperformed to set an intraday record. "Reopening" stocks including the airlines and cruise lines also increased after rising on Monday, with optimism over a broader leisure and travel recovery coming after the U.S. Food and Drug Administration granted full approval to Pfizer (PFE) and BioNTech's (BNTX) COVID-19 vaccine.

Shares of Chinese technology companies rose, shaking off the past several weeks' steep declines amid a regulatory crackdown of the major tech firms in China. The jump came after Ark Investment Management — run by the closely watched investor Cathie Woods — scooped up shares of Chinese e-commerce company JD.com (JD) following the firm's better-than-expected quarterly results. Peers including Alibaba (BABA) and Baidu (BIDU) also advanced, and the Hang Seng index (^HSI) increased by 2.5%.

Investors are also eagerly awaiting the Federal Reserve's virtual Jackson Hole Symposium beginning on Thursday. The event is expected to serve as another forum for central bank officials to discuss their assessment of economic conditions, and offer hints as to when the Fed might announce and eventually begin the process of tapering its crisis-era asset purchase program.

New economic data out at the start of the week disappointed relative to Wall Street's estimates, with an index tracking activity in the U.S. services sector cooling to an eight-month low as concerns over the Delta variant started to weigh on demand.

Despite the ongoing risks around the virus, however, three major factors have served to help keep equity markets marching toward fresh all-time highs, according to one strategist.

"The first one, that's extremely low discount rates. The 10-year Treasury yield is barely off the August lows," Michael Darda, MKM Partners chief economist, told Yahoo Finance. "So all things equal, if interest rates are low, if discount rates are low, valuations will tend to be higher because of a lack of competition."

"In addition to that, we have a very high liquidity environment ... and earnings have been incredibly strong," he added. "Typically when long-term interest rates are falling, earnings or the economy is faltering. In this case, the earnings have been quite robust, really historic. So we're really going to need to see one of those three pillars disturbed in some fashion for a big decline in equity prices."

Others offered a similarly upbeat take on the trajectory for U.S. equities.

"We think the primary trend is higher," Keith Lerner, Truist Wealth chief market strategist, told Yahoo Finance. "You're only about one year into this economic expansion. Economic expansions last about five years. And the earnings season which we just got out of was phenomenal once again."

"Even if it's peak growth, we still think it's going to be strong growth," he said. "You have earnings moving forward, and then you look at the relative comparison of stocks relative to bonds and they're still attractive ... Overall we think the right position is to be overweight stocks."

10:06 a.m. ET: New home sales rose in July for the first time in four months
New home sales rose in July, Commerce Department data showed on Tuesday, suggesting some firming in housing market activity even amid rising prices and low inventory levels.

New home sales increased 1.0% in July compared to June, bringing sales to a seasonally adjusted annual rate of 708,000. Consensus economists were looking for a rate of 697,000 homes. Sales in June were also upwardly revised to a seasonally adjusted annualized rate of 701,000, from the 676,000 previously reported.

9:45 a.m. ET: Peloton shares gain after company announces it will restart treadmill sales following recall
Fitness equipment company Peloton (PTON) announced Tuesday that its lower-priced connected treadmill will go on sale in the U.S., U.K. and Canada starting on August 30, marking the return of the product following a recall after a series of reported injuries related to the device earlier this year. The U.S. Consumer Product Safety Commission had called for the recall of both the Tread and higher-priced Tread+ in May.

The Tread resuming sales at the end of this month will cost $2,495

"We've worked hard to make sure the new Tread truly earns its spot in Members' homes," Peloton CEO and Co-founder John Foley said in a press release. "We'll always continue to innovate our hardware, software and safety features to live up to our commitment to Member safety and to improving the full Member experience.""

MY COMMENT

Sounds about right to me. There is ONE SINGLE FOCUS right now for investors......the re-opening. This one factor will strongly outweigh everything else....as it should.

 

I like the discussion above....very good stuff.

I was moderate green today....but happy to see the general averages doing well. I am STILL expecting this to be a killer week for the markets and the first two days have been great. I got beat by the SP500 today....by 0.07%.