The Long Term Investor

NICE little article about MSFT. Of course for disclosure,I do own this stock and have made some nice money on it lately.

There Has Simply Never Been a Stock Like Microsoft Stock

https://finance.yahoo.com/news/simply-never-stock-microsoft-stock-183338374.html

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

"It’s likely that no other company has done what Microsoft (NASDAQ:MSFT) has of late. To be sure, there is only one other stock that has done what Microsoft stock has done: reach a market capitalization over $1.4 trillion.

Apple (NASDAQ:AAPL). But the Apple story is different.

Its historic rally has come from a point when the stock actually was cheap by fundamental standards. After a plunge in early 2019, its shares traded at just 12-13x forward earnings expectations.

Microsoft stock did see a sharp decline in late 2018 during the last broad market correction. But even at December 2018 lows, investors still were paying a healthy multiple for the stock. MSFT didn’t have a core bearish argument as Apple did, as investors fretted about “commoditization” and pressure on sales in China.

Back near the highs, the argument over the stock again comes down to valuation. And in that context, it’s worth noting what truly is unprecedented about Microsoft.

Microsoft reported its fiscal second-quarter earnings on Jan. 29, which handily beat analyst estimates. The beat wasn’t much of a surprise. Microsoft revenue and earnings have topped Wall Street consensus almost without exception for over four years now.

But investors should take a step back from the expectations game and consider just how extraordinary the report was. This is the second-most valuable company in the world. It’s a mature business. And it grew revenue 14% year over year, and adjusted net income by 36%.

That type of growth from that type of business simply doesn’t happen. Increases of 36% in net income are what small- and mid-cap growth stocks provide in good quarters.

And even among the market’s most valuable companies, Microsoft’s numbers look impressive:

• Apple drove 9% revenue growth and 11% net income growth in its fiscal first quarter — but benefited from an easy comparison. Remember, it was slashed guidance for last year’s first quarter that led AAPL stock to plunge in early 2019.
• Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) increased revenue 17%. Operating income climbed just 13% against a 35% jump for Microsoft. (Alphabet’s net income did grow 19%, but that metric is affected by a series of accounting factors.)
• Facebook (NASDAQ:FB) drove faster revenue growth, with its top-line rising 25%, but it’s obviously a much younger company than Microsoft. Operating earnings rose only 13%, which badly lags the growth rate at Microsoft.
• Sales at Amazon (NASDAQ:AMZN) rose 21% in a blowout quarter. Operating income gained 2.4%, thanks to costs from one-day shipping.
• Alibaba (NYSE:BABA), purely from a growth perspective, did top Microsoft, with revenue up 38% and Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) up 37%.

To be sure, some of those companies grew revenue or profits at a faster rate than Microsoft. But they should be growing faster. They are younger companies that are earlier in their development.

Indeed, Microsoft was dominating the software industry before most of those companies (save Apple) even existed. And they are the best, most valuable companies in the entire market.

It’s possible that a company like General Motors (NYSE:GM) or General Electric (NYSE:GE) posted similar growth in a single quarter when they were the market’s most valuable company (or second-most) decades ago. But it’s likely that kind of growth would have come after the Great Depression or during the postwar period, thanks to either an easy comparison and/or external factors.

Whether the specific numbers Microsoft posted in Q2 have been reached or not isn’t necessarily the point. Rather, the point, again, is to step back.

A mature, dominant company just grew profits 36% year over year. And while it is just one quarter, analyst estimates (which have a strong probability of being raised again) suggest a full-year increase in earnings per share just shy of 20%.

Companies don’t drive 20% earnings growth in their 45th year in a normal environment. Cyclical names might post those numbers in the recovery from a recession: Exxon Mobil (NYSE:XOM), for instance, grew profit over 50% in 2010, when it was the world’s most valuable company. (Incredibly, its market capitalization is now less than 20% that of Microsoft or Apple, a little over eight years after Apple passed Exxon for good.)

This is not a cyclical company. There has been no recession. Microsoft doesn’t have some soft earnings comparison in fiscal 2020: in fact, adjusted net income rose 22% in fiscal 2019. This is just a massive company driving essentially unprecedented growth.

The one concern is that the valuation assigned Microsoft stock, too, seems unprecedented. Shares now trade at over 32x the consensus EPS estimate for fiscal 2020 (ending June). The figure is still right at 30x, even backing out the net cash on the balance sheet.

45-year-old companies don’t grow like Microsoft in normal conditions; they also don’t receive price-to-earnings multiples of 30x in normal conditions.

And so there are valuation concerns, one reason I argued ahead of earnings that the gains in Microsoft would slow, if remain nicely positive. That was half-right: Microsoft stock already has risen 17% in 2020.

But as I wrote before, this market valuation alone has not been a reason to sell. Now, the biggest risk to Microsoft stock seems to be a decline in the market as a whole — as seen in the fourth quarter of 2018.

Investors are not going to decide that the stock is too expensive without making similar calculations for the rest of the market.

If investors are going to own U.S. equities, then, Microsoft stock still seems like a strong pick. Yes, the valuation is high. So is the earnings growth. But it’s that unprecedented growth that drives the unprecedented valuation."

MY COMMENT

I owned this stock from 1990/1991 to 2002. I than sold all shares and did not repurchase the company till the past year or so. I ATTRIBUTE the recent success of MSFT to MANAGEMENT. Those managing the company have it hitting on all cylinders. The company went through various management changes from about 2000 till the current management. Blamer and the rest of them were in my opinion incompetent. I like this stock and where they are headed. I watched current management for about 4-5 years and they are the REAL DEAL. MSFT stock is the perfect example of what GOOD management can do for a company compared to the glad-handing, media darling, celebrity, stye of CEO that rose in prominence......to the DETRIMENT of shareholders.....in many companies in the 2000 to 2015 time period.

ANOTHER nice week in the markets last week. At the moment while waiting for the open on Tuesday we are at:

DOW year to date +3.01%
SP500 year to date +4.62%

 

HERE is a nice little article in the form of a book review. The lessons in this article are EPIC ad in my opinion are a PRIMARY driver of the poor performance and/or total failure to invest at all, exhibited by the majority of investors. It is CRITICAL that an investor have a unimpaired view of REALITY. A TOTAL CLINICAL view of REALITY. Something very few people are able to achieve. Personal bias and world and political view are KILLERS to investing returns.

https://reason.com/2020/02/13/economic-story-hour/

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

"In October, David Leonhardt of The New York Times published an animated chart that was supposed to show how much less progressive American tax rates had become since 1950. Back then, the animation said, the marginal income tax rate on top earners was 70 percent; now it's only about 23 percent. Meanwhile, the rate paid by the poorest Americans had gone up.

Many people retweeted the chart, including presidential candidate Elizabeth Warren. But not everyone was impressed. Economists on both the left and the right noted that the scholars behind the estimate, Gabriel Zucman and Emmanuel Saez, did not account for transfers, such as the Earned Income Tax Credit or Social Security benefits, and that they made debatable assumptions about who bears the burden of corporate taxes. Others took issue with how Zucman and Saez calculated income. Most other estimates show the opposite—that in the United States the tax code is quite progressive. Several economists were distressed that new results were released to such a high-profile outlet before being fully vetted.

But far more Americans read The New York Times than follow tax economists on Twitter. A compelling narrative has taken hold that the rich pay less income taxes than the poor. This fits snugly with another popular story—the one where there's clearly room to finance new entitlements and far-reaching environmental programs by jacking up taxes on the wealthy, without asking most Americans to pay a cent. If Warren becomes president, it will bolster her case for large tax increases. Accurate or not, the ideas behind the chart could have major consequences for the economy.

It's not the first time something like this happened.

The Yale economist Robert Shiller has spent his career arguing that human irrationality drives financial markets. His new book, Narrative Economics, asks what drives those "animal spirits." He argues that narratives, which "generally take the form of some recounting of events, whether actual or fictional," are a key factor. Often, he says, "the specific events described are little more than bits of color brightening a concept and making it more contagious."

This is a profound departure from how economists tend to think about the economy. They usually assume a recession is caused by an external shock—say, an increase in oil prices or a big rise in interest rates. How much damage the shock does depends on things like monetary policy or government spending.

Shiller doesn't deny those factors, but he argues that it is narratives about the economy that drive consumer and investor sentiment, prompting people to spend or not to spend, to invest or not to invest. In this way, narratives can cause or exacerbate a recession. Drawing data from Google Ngrams, a program that lets users search for words or phrases in books going back to the 1500s, he argues that narratives spread the way a disease does. Whether a particular narrative takes off is fairly random, like a virus mutating. But as any newspaper editor knows, viral narratives tend to have certain common features: They generally feature compelling, memorable stories that include a person you can either sympathize with or hate, often an archetypal figure. Popular conspiracy theories tend to have an us-vs.-them feature and some vague grounding in reality.

Those narratives, in turn, can change the economy. Shiller offers the example of bitcoin, which he argues became so popular as an investment, despite having no intrinsic value, because it played on several prevailing narratives, such as fear of government.

The best part of the book retells 19th and 20th century economic history through this narrative-centric perspective. Shiller spends a lot of time on the stock market crash of 1929, showing first a buildup in sentiment that money could be made in the stock market and then, after the crash, a narrative that the economy was too severely damaged for people to spend.

One of the most compelling chapters is on the housing market, the area where Shiller made his name. He describes how the narrative that a home is an investment, rather than merely a place to live, took hold in the latter half of the 20th century. Before this, land was a speculative asset, but the press rarely discussed the prices of single-family homes. This changed in the mid–20th century, when owner-occupied housing became more expensive. This coincided with data on house prices, especially house price indexes, which changed how homeowners saw where they lived. Schiller takes some responsibility for that shift, as he is the co-creator of the Case-Shiller index, which tracks real estate prices and helped fixate people on the value of their homes.

That isn't the only time the availability of new data sparked new narratives. Economists didn't start estimating inflation until the 1910s, and they didn't start measuring unemployment until the 1930s. This changed how people viewed the state of the economy. Schiller found newspaper articles from the '20s, for example, that said people weren't spending because they were waiting for prices to return to "normal"—normal being prices in 1913, the first data point in the new price index. It will be interesting to see how "big data," the new huge data sets drawn from technology that monitors our behavior, will fuel new narratives about, and thus change, the economy.

Just as narratives shape economic events, economic events shape narratives. When inflation was high and unpredictable, Shiller recounts, many people blamed unions for rising prices, arguing that they bid up wages. After decades of low, predictable inflation, the younger generation is less fearful about rising prices—and less susceptible to anti-union arguments that invoke inflation. Shiller's Google Ngram data show the phrases "cost-push inflation" and "wage-price spiral" spiking at times of peak inflation and showing up rarely now; Gallup surveys show an inverse trendline when it comes to public sympathy for unions.

The narratives Shiller discusses are mostly harmful: inaccurate stories that distort economic activity for the worse. But presumably there are benevolent narratives too, or even narratives with both benign and malign effects. Shiller is not a fan of the "American dream" narrative—the idea that any American can succeed with enough hard work or ingenuity—because he thinks it is partly to blame for the housing bubble. On the other hand, the same idea has helped bind Americans together through economic ups and downs and at times of political crisis.

Lately that idea has been giving way to a different narrative, one where mobility has decreased and the American dream is no longer true. In fact, relative mobility has not budged that much over the years; being born into certain families or locations has always improved (or lowered) your odds of success. What's changing isn't the economy but the popularity of two rival narratives—but that change could itself have repercussions for the future of the economy and the country.

Shiller's argument is compelling, but at times it feels incomplete. He could have said more about why certain narratives take off. Are some populations more susceptible to popular narratives than others? Are inaccurate narratives more likely to spread during times of economic uncertainty? Are people more attracted to stories that suggest that they—or someone—has control over the world?

And while Shiller makes a strong case that narratives deserve more attention from economists, I was less convinced when he argued that they should be included in economic forecasts. If most narratives don't have a significant economic impact, and if it's impossible to reliably predict which ones will, then including them in one's models may make those models less accurate. (That said, Shiller's suggestion that economists spend more time talking to people, instead of relying just on data, is a good one.)"

It is also worth wondering how economists could use narratives not as forecasting tools but to communicate their own messages. A narrative has been brewing on both the left and the right that "globalist" economists have led policy makers astray. That notion, in turn, has helped drive support for restrictions on immigration and trade. In fact, trade and trade-friendly reforms have increased living standards, not only for the 2 billion people around the globe who have escaped poverty over the last three decades but for the vast majority of Americans. But that is not a narrative that has gained much traction.

MY COMMENT

I believe one of the most difficult aspects of being a successful investor is avoiding PERSONAL BIAS. Successful investing requires a total CLINICAL view of what is going on in a particular business and the world. With the 24/7 CRAZY media environment that is now the NORM this is nearly impossible for a large percentage of investors. Perhaps, this is one more reason that INDEX investing is the right approach for most people these days compared to buying individual stocks.

Food for thought........recently we have seen the markets driven on a short term basis by the Corona-virus narrative. Is this REALLY justified or is this the equivalent of middle ages, superstition based, thinking? Is this an EMOTIONAL, fear based reaction, or is there really science to support this virus being a world wide threat? Time will tell......personally....I dont see any threat......to the markets or world health. That is one reason that I use LONG TERM INVESTING......it is one way to divorce yourself from all the emotion and drama of short term events that are likely to impact and play on your psychological impulses. Of course, the one problem with being a long term investor is the fact that many people say and think they are long term investors, but in reality, they can NOT maintain the approach. NEVER discount the ability of humans to screw something up by not being able to keep from and avoid the temptation of......DOING SOMETHING.

 

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 VALUE style component (Dodge & Cox Stock Fund), 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 10 stock portfolio.

STOCKS:

Alphabet Inc
Amazon
Apple
Costco
Home Depot
Honeywell
Johnson & Johnson
Nike
3M
MSFT
PG

MUTUAL FUNDS:

SP500 Index Fund
Fidelity Contra Fund
Dodge & Cox Stock 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. (70). 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 ten 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.

AS TO TODAY.......the markets cant go up every day. At times there has to be a pause to consolidate the gains to date and take into account daily news that impacts the markets but has NO REAL relevance to investors beyond the very short term. We are also nicely into earnings reporting with results WAY ABOVE what was generally expected..........AS USUAL. ONWARD AND UPWARD........TO INFINITY AND BEYOND.

 

With the markets closed today for presidents day.......here is sort of a financial lifestyle article. It covers the long term by focusing on financial lessons for a lifetime. GENERALITIES.......yes....but good lessons none-the-less. Lets come back from this little three day break and PUSH the markets to 30,000 DOW. It is time to move on past the short term bumps and push FORWARD.

10 money lessons I wish I’d heard — or listened to — when I was younger

https://www.marketwatch.com/story/1...o-when-i-was-younger-2020-02-12?mod=home-page

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

"I have devoted my entire adult life to learning about money. That might sound like cruel-and-unusual punishment, but I’ve mostly enjoyed it. For more than three decades, I’ve spent my days perusing the business pages, reading finance books, scanning academic studies and talking to countless folks about their finances.

Yet, despite this intense financial education, it took me a decade or more to learn many of life’s most important money lessons and, indeed, some key insights have only come to me in recent years. Here are 10 things I wish I’d been told in my 20s—or told more loudly, so I actually listened:

1. A small home is the key to a big portfolio. My first wife and I bought a modest house, because we worried that we couldn’t really afford anything bigger. I ended up living in that house for two decades.

Financially, it turned out to be one of the smartest things I’ve ever done, because it allowed me to save great gobs of money. That’s clear to me in retrospect. But I wish I’d known it was a smart move at the time, because I wouldn’t have wasted so many hours wondering whether I should have bought a larger place.

2. Debts are negative bonds. From my first month as a homeowner, I sent in extra money with my mortgage payment, so I could pay off the loan more quickly. But it was only later that I came to view my mortgage as a negative bond—one that was costing me dearly. Indeed, paying off debt almost always garners a higher after-tax return than you can earn by investing in high-quality bonds.

3. Watching the market and your portfolio doesn’t improve performance. This has been another huge time waster. It’s a bad habit I’m belatedly trying to break.


4. Thirty years from now, you’ll wish you’d invested more in stocks. Yes, over five or even 10 years, there’s some chance you’ll lose money in the stock market. But over 30 years? It’s highly likely you’ll notch handsome gains, especially if you’re broadly diversified and regularly adding new money to your portfolio in good times and bad.

Over the past decade, I’ve upped the bond position in my portfolio, so today—at age 57—I’m at 60% stocks and 40% interest-generating investments. (The latter includes the private mortgage I wrote for my daughter.) But long before then, I spent an awful lot of time debating whether to invest more in bonds. It simply wasn’t necessary.

5. Nobody knows squat about short-term investment performance. This is closely related to point No. 4. One of the downsides of following the financial news—or, worse still, working as a columnist at The Wall Street Journal—is that you hear all kinds of smart, articulate experts offering eloquent predictions of plummeting share prices and skyrocketing interest rates that—needless to say—turn out to be hopelessly, pathetically wrong. In my early days as an investor, this was, alas, the sort of garbage that would give me pause.

6. Put retirement first. When I was in my 20s, I remember a financial expert saying that, “If you don’t own a house by age 30, you’ll likely never own one.” I didn’t realize it at the time, but not only was this alarmist nonsense, but also it prioritized the wrong thing.

Buying a house shouldn’t be our top goal. Instead, retirement should be. It’s so expensive to retire that, if you don’t save at least a modest sum in your 20s, the math quickly becomes awfully tough—and you’ll need a huge savings rate to amass the nest egg you need.

7. You’ll end up treasuring almost nothing you buy. Over the years, I’ve had fleeting desires for all kinds of material goods. Sometimes, I caved in and bought. Most of the stuff I purchased has since been thrown away.

Today, I have a handful of paintings and some antique furniture that I prize, and that’s about it. This is an area where millennials seem far wiser than us baby boomers. They’re much more focused on experiences than possessions—a wise use of money, says happiness research.

8. Work is so much more enjoyable when you work for yourself. These days, I earn just a fraction of what I made during my six years on Wall Street, but I’m having so much more fun. No meetings to attend. No employee reviews. No worries about getting to the office on time or leaving too early. I’m working harder today than I ever have. But it doesn’t feel like work—because it’s my choice and it’s work I’m passionate about.

9. Will our future self approve? As we make decisions today, I think this is a hugely powerful question to ask—and yet it’s only in recent years that I’ve learned to ask it.

When we opt not to save today, we’re expecting our future self to make up the shortfall. When we take on debt, we’re expecting our future self to repay the money borrowed. When we buy things today of lasting value, we’re expecting our future self to like what we purchase.

Pondering our future self doesn’t just improve financial decisions. It can also help us to make smarter choices about eating, drinking, exercising and more. Tempted to have one more slice of pizza? Tomorrow’s self would likely prefer you didn’t.

10. Relax, things will work out. As I watch my son, daughter and son-in-law wrestle with early adult life, I glimpse some of the anxiety that I suffered in my 20s and 30s.

When you’re starting out, there’s so much uncertainty — what sort of career you’ll have, how financial markets will perform, what misfortunes will befall you. And there will be misfortunes. I’ve had my fair share.


But if you regularly take the right steps—work hard, save part of every paycheck, resist the siren song of get-rich-quick schemes—good things should happen. It isn’t guaranteed. But it’s highly likely. So, for goodness’ sake, fret less about the distant future, and focus more on doing the right things each and every day."

MY COMMENT

SIMPLE......yes. BUT....it is the simple things that ADD UP to BIG MONEY and a great life if followed. Over my lifetime of investing I have NEVER seen anyone that is following some complex investing strategy succeed. Perhaps that is due to the sort of people I hang around with. OR....perhaps that reflects the fallacy of the human brain when it comes to investing activity. If something can not be done in a simple, repeatable way........it probably DOES NOT WORK. Over my life i followed some of the above. I focused on setting up my retirement for life very early in my investing and work life. Knowing my retirement was taken care of gave me more freedom to invest outside of retirement and handle RISK. Focus on the long term was critical. We did stretch to purchase as much house as we could since I saw the home as one leg of our financial net worth and it balanced out the stock/fund side of our net worth. I became self employed as soon as possible and was able to LEVERAGE my time and effort. We worked to be debt free......especially our house. I have not had a home mortgage in over 25 years. We invested 100% of our money in stocks and funds for the LONG TERM. I dont buy the Millennial EXPERIENCE stuff......media laziness. It will NOT prove to be true when we look back on this generation. BUT.....I do buy the thinking of evaluating purchases for need, versus want, versus status, versus fad,versus, etc, etc.

ANYWAY.....a well deserved day off for the markets. They are KICKING ASS this year to date.

 

LOOKING BACK in time. Here is a post from this same time last year. It is RELEVANT to the post above of my PORTFOLIO MODEL to add a little context:

"As to my MODEL PORTFOLIO. YES, I have done very well with the form of investing that I use and have used for the past 40+ years. I am sure you are aware that my emphasis is on the BIG CAP, ICONIC PRODUCT, WORLD WIDE MARKETING, AMERICAN, DIVIDEND PAYING (all reinvested),DOMINANT, company. In fact, I have done so well I sold my business and retired....on my investments gains, not my business proceeds.....at age 49 and have self funded my retirement ever since over the past 20 years and some months. My investing has allowed me to spend the last 20+ years doing what I love to do full time.

SEE.....I am a LONG TERM INVESTOR, NOT a trader. To me there is a massive difference. Today, there are a lot of "hobby" traders which to me is those that dabble in trading and are NOT able to do it as a living. In my opinion, I believe that very few of the "hobby" traders are actually matching or even coming anywhere close to the simple returns of the SP500 with dividends reinvested.....ESPECIALLY after they take into account expenses and taxes on their short term gains as taxable income. Why do I say this? BECAUSE, I know from the data that even the full time professionals can NOT beat the SP500, so it stands to reason that all of the part time "hobby" investors working a regular non-investing industry job are NOT beating anything either if they were honest with themselves.

NOW, if someone just loves the challenge of trying to trade...OK. OR, if someone does trading to learn skills and as study...OK. OR, if someone does trading as a "hobby"...OK. BUT, fooling yourself into thinking that trading is going to establish you financially.....well my opinion is it is NOT going to happen. BUT.....like they say on those commercials......"it is your money". That is why I am a stock and fund INVESTOR and NOT a trader.

That is why I do this thread and have on another site and this site for decades. This thread is, at least in my mind, a LONG TERM INVESTOR, primer. NOT organized of course, but someone could read this thread from start to finish at any time and the knowledge is NEVER outdated or irrelevant. (at least to "ME"...LOL)

If you are interested in the SP500 HERE is a SP500 RETURN CALCULATOR with dividend reinvestment. You can put in any time period and calculate the total return of the SP500 over that time period with dividends reinvested. When I use it I DO NOT have it adjust for inflation. A FUN tool to play around with.

S&P 500 Return Calculator, with Dividend Reinvestment

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

ALSO

Looking BACK at 2019.....HERE is where we were at this same time last year:
DOW year to date +10.99%
SP500 year to date +10.89%

So.......we are off to a good start for 2020, but NOT as CRAZY as 2019.

 

Nasty.......but expected......day in the markets today. With APPLE making their little announcement (impact of China virus issue on earnings) the current open was a given. BUT......when I looked at my primary account things were better than I expected. The SP500 was down about 1/3 of a percent BUT my account was at negative 1/4 of a percent. About half the holdings were positive and about half negative. So, all in all, NOT much of a hit.

TomB16 in his investing blog mentioned interest rates. At the moment the ten year treasury is at 1.551%. I REALLY dont see anything that is going to drive up rates. The world economy generally sucks, rates in other developed countries are at zero or negative. Our economy is doing very well, but there is absolutely NO pressure that would cause rates to go up significantly. It is like we are in the opposite of the STAGFLATION era of the late 1970's, early 1980's. At that time the economy was stagnant and rates were booming. Now the economy is booming and rates are stagnant and extremely low. I believe central banks have every right to be concerned around the world. A deflationary depression environment is NOT a good thing. To the extent that we are seeing inflation in the USA.....that is a good thing and in my opinion a positive. A healthy economy NEEDS some inflation....perhaps around 2%. I hate to sound like a broken record......there is a phrase that anyone under 40 is saying WTF does that mean.......BUT, we, the USA are the only game in town when it comes to interest bearing instruments, stocks and funds, real property, etc, etc, etc. The ONLY negative I see is our politicians HABIT of screwing up things......but that is a CONSTANT that all investors and businesses have to just live with.

 

I was thinking about the 30 year Treasury today as I was driving around. When I was younger I expected that I would take about $2MIL at some point near retirement and put it in 30 year Treasuries. I expected that I would be able to....HOPEFULLY....get about 6% (if I was lucky 7%) on my money and be able to generate a PERPETUAL retirement income of about $120,000 per year (in addition to Social Security and other income) PLUS be able to preserve my $2MIL. As I got closer and closer to retirement I realized that it was doubtful that I would ever be able to get that rate or anywhere close. That is why I decided to bite the bullet and five years ago put $1.8MIL into income annuities, for the life of me and my wife, that were deferred for five years. At the time I purchased the annuities I took the gamble that rates would NOT rise over the five year deferred time period. the annuities are based on the 10 year Treasury yield.

The annuities KICKED in last August and will pay for the rest of my or my wife's life.

As to my plan in my 30's 40's, and 50's to use 30 year Treasuries. SO MUCH FOR A PLAN....as I look at a year by year list of the 30 year yield......average yield per year......the rates are a STEADY drop from 1977 to now. Over that time the rates drop, drop, drop. In the late 1970's the rates were 8-10%. In the 1980's, 11.27% to 8.45% in 1989. In the 1990's from 8.61% in 1990 to 5.87 in 1999. From a rate of 5.94% in 2000 to a rate of 4.08% in 2009. The rates ranged from 4.25% in 2010 to 2.58% in 2019.

The current rates over the past couple of years are the lowest in the past 43 years and if you look at a chart year by year the rates go down, down, down, down year by year in a very steady fashion.

What does this mean? Certainly bad news for insurance companies and other that use 30 year Treasuries to provide a guaranteed return. I find the current rate......about 2%.....CRAZY. We now have people and businesses and governments willing to lock up money for 30 years at 2%. At least if you are refinancing earlier debt you can do so at a big savings. Earlier today the rate was 1.99%. I dont see much anticipation of inflation. VERY dismal info for anyone that was expecting to use 30 year Treasuries to fund a pension or retirement.

TREASURIES-Yields fall as Apple sales warning dents risk appetite
https://www.reuters.com/article/usa...les-warning-dents-risk-appetite-idUSL1N2AI113

Treasurys see modest rally as 30-year bond fetches lowest yield on record

https://www.marketwatch.com/story/t...ronavirus-cases-buoys-haven-assets-2020-02-13

 

At this point in time I have ZERO expectation that the Coronavirus will be a world wide health event or have much of a business impact beyond the short term. BUT....for those that are interested in this little event......here is some info:

The coronavirus outbreak will hurt Q1 earnings. Here's why investors shouldn't freak out just yet

https://www.cnn.com/2020/02/18/investing/apple-stocks-earnings-bellwether/index.html

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

"Apple's surprise warning that it won't meet its first quarter revenue guidance because of the coronavirus virus sent tremors through global financial markets. Investors awoke Tuesday to the idea that other companies with exposure to China might not meet their first quarter earnings expectations, either.

The billion dollar question: Is the financial fallout from coronavirus a short-term problem or a longer-term trend?
"This could be a very short-lived one-quarter blip," JJ Kinahan, chief market strategist at TD Ameritrade told CNN Business.
It's hardly surprising that a company as heavily reliant on producing and selling in China would feel the impact of the outbreak. But Apple (AAPL)'s announcement was significant because the trillion dollar firm is the first major US business to specifically notifiy its investors that it will take a hit. The company said the outbreak is hurting both its production and sales in China more than previously expected.

In response, US stocks kicked off their shortened Presidents' Day week Tuesday in the red, with the S&P 500 (SPX) down 0.4%. Apple's announcement overshadowed news of a slowdown in the rate of new virus cases and more government stimulus measures to prop up China's markets and economy.

The announcement was a timely reminder that the next earnings season could be painful, as investors brace for more companies to make similar projections. Consumer brands such as Under Armour (UA) and Canada Goose (GOOS), have already issued warnings that the outbreak will hurt their bottom line.

Food and beverage companies like McDonald's (MCD) and Starbucks (SBUX) are also likely to feel some pain after closing stores in China to limit the spread of the virus.

Both the supply chain and end markets for the semiconductor industry are likely affected by the outbreak, so investors are curious to see if companies like Intel (INTC) or Nvidia (NVDA) may be the next to provide some guidance.
"I'm really interested to hear from some of the chip makers," said Kinahan.

Semiconductor companies led the best performing stocks last year, even though their big exposure to China made them vulnerable to the US-China trade war. This year, the coronavirus outbreak hasreplaced that concern, Kinahan said.

For some American companies, the obstacle is in their supply chain rather than their end market. Those businesses can fall back on their existing inventories for now, but at some point that buffer will run out, said Glenmede Trust Company's investment strategy team in emailed comments.

Meanwhile, retail giant Walmart, which reported earnings on Tuesday, didn't provide any guidance about any financial effects from the outbreak, saying it expects a strong 2020.

Amid all the uncertainty, investors would be wise to remember that earnings estimates for the first quarter and the full year are running ahead of the historical trend, according to Credit Suisse chief US equity strategist Jonathan Golub. Even if companies miss estimates, it doesn't mean their earnings will fall off a cliff.

For now, the coronavirus impact is expected to be a one-quarter phenomenon that will have little impact on the broader US economy. Economists at BMO estimate the US GDP growth at an unchanged 1.8% in 2020, albeit with growing downside risks. Case in point: Wedbush Securities analyst Daniel Ives remains bullish on Apple despite Monday's announcement.
"While trying to gauge the impact of the iPhone miss and potential bounceback in the June quarter will be front and center for the street, we remain bullish on Apple for the longer term 5G super cycle thesis," he wrote in a note."

MY COMMENT

I would be surprised if this event lasted even a quarter. I am guessing a few weeks to a month or two. I will continue to be fully invested for the long term as usual. I would not be surprised to see some companies use the virus as an excuse for lower earnings. Why let a good fear mongered crisis go to waste? This event and the reaction of the Chinese government is YET ANOTHER BIG WARNING to businesses that rely on China for production or sales. As I have said many times.....corporate management malpractice.

 

NICE open today with the SP500 and the Nasdaq hitting new all time highs. A GOOD DAY IN THE NEIGHBORHOOD. Here is the info if you are interested:

S&P 500, Nasdaq scale new highs on China stimulus hopes, drop in new virus cases

https://www.reuters.com/article/us-...s-hopes-drop-in-new-virus-cases-idUSKBN20D1RI

NOW......on a different subject DIVIDEND INVESTING. I have been a dividend investor for much of my adult life. Not that I make a point of following dividends. The companies that I tend to invest in......BIG CAP, DOMINANT, ICONIC PRODUCT, AMERICAN, etc, etc......tend to pay nice dividends. There is MUCH to like with these sorts of companies and dividend investing. With the low bond yields dividends are often at or above bond yields. Of course you than have stock market risk. On the flip side you get the positive....potential for growth.
There is much in the little article below that is nicely instructive. Even though the topic is dividend investing it touches on long term investing, growth investing, avoiding over diversification, etc.:

9 secrets of dividend investing, from a couple of stock pros who beat the market

https://www.marketwatch.com/story/9...he-market-2020-02-19?siteid=yhoof2&yptr=yahoo

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

"Many income-focused investors dwell on dividend yield and buy largely on that basis. More income is better, right?

Not so, say the two dividend-minded mutual-fund managers who run the outperforming Guinness Atkinson Dividend Builder Fund GAINX, -0.52% . Matthew Page and Ian Mortimer use a much more nuanced approach to get high-achieving results. Over the past three years, they have beaten both their Morningstar World Large-Stock category and the MSCI ACWI Index by 1.9 and 1.4 percentage points, respectively, on an annualized basis.

That’s a solid record given that most stock-fund managers lag their categories. So it’s worth learning how Page and Mortimer operate to help you improve your own income-investing strategy.

Their system starts by identifying companies with the characteristics that exemplify long-term outperformance. Then they fish in this pond, since these businesses are likely to continue doing well. “It stacks the odds in our favor,” says Page. Here are the qualities they favor, and other tips on how to succeed in dividend investing:

1. Go with dividend growers: Dividend stocks outperform, as a group, but companies with a history of increasing dividends do better, whereas companies with flat dividends tend to be more average. You want to own shares in companies that are likely to continue hiking dividends. To find those, look for these next four qualities.

2. Favor companies with a high return on capital: Companies with a long history of investing smartly in their business will probably continue to spend wisely. This means they’ll have more sustainable cash flow, so they’re more likely to keep hiking dividends. A good long-term investment record is key. Studies show companies with a great investment track record over 10 years have a 95% chance of repeating their success over one year, and an 80% chance of doing so over four years.

There are many ways to measure corporate investment prowess, but Page and Mortimer use a gauge called cash-flow return on investment . They favor companies with a cash-flow return on investment greater than 10% for 10 consecutive years.

3. Go with moderate dividend yields: This sounds counterintuitive, but it makes sense if you think it through. First, having a moderate dividend makes it easier for a company to hike its dividend, simply because there is more room to grow. “It’s the law of large numbers,” Mortimer says. Meanwhile, a high dividend is not always attractive. It means a company is less likely to hike payouts.

Moreover, excessively high dividend yield due to a steep stock decline can be a sign of trouble. To identify promising companies in selloffs, the fund managers analyze the issue that’s distressing investors, and favor companies with great investment track records. “If a stock falls but it has high return on capital, you can make the argument there is a short-term issue,” Page says.

4. Look for strong balance sheets: When a company is stretched, it is more likely to be forced by the market to cut its dividend to pay its debt, Mortimer says. This can hurt a stock. A strong balance sheet means a company is less likely to cut its dividend.

5. Go with cheap stocks: Page and Mortimer use valuation gauges such as price-earnings and free cash-flow yield. Be sure to compare a company’s valuation to its peers or its own history, and not the market overall.

Two of the fund’s holdings that look reasonably cheap right now are ANTA Sports Products ANPDF, +0.77% and British American Tobacco BTI, +0.64% . ANTA Sports Products sells sports apparel in China, and the stock has been hit by coronavirus fears. (My take is the coronavirus is a temporary setback for companies.) British American Tobacco has been a weak stock because of health concerns about vaping, and increased Food & Drug Administration regulation of tobacco. “We think they are being punished too much,” Mortimer says of the stock.

6. Make concentrated bets: This is a tactic that many outperforming managers use successfully. It’s better to know a short list of names and invest only in them. These two managers like a portfolio of 35 stocks, with each representing about 3% of the portfolio. In contrast, many actively managed funds stick to 1% positions to get the “benefits” of wide diversification, which can actually hurt performance.

7. Shop the world: Don’t limit yourself to U.S. stocks. There are rich dividend payers around the world. The Guinness Atkinson managers aim for a 50-50 portfolio mix. The names singled out for this column are all non-U.S. companies, which makes sense from a valuation perspective because many international markets are lagging both the S&P 500 SPX, +0.58% and the Dow Jones Industrial Average DJIA, +0.46% .

Also, the fund managers recommend industrial conglomerate ABB ABB, +0.85% , whose shareholders may benefit from the sale of its power grid business, and Henkel HENKY, +1.72% , a consumer goods and chemicals business whose stock has been lagging in part because of automobile-sector weakness.

8. Hold for the long term: The Guinness Atkinson portfolio has a relatively low 24% turnover rate, and has kept a third of its positions since its 2012 inception, including Microsoft MSFT, +0.28% , Procter & Gamble PG, +1.06% , Johnson & Johnson JNJ, -0.16% , Aflac AFL, +0.07% , and Royal Dutch Shell RDS.A, +0.25% .

9. Get good at math: Page and Mortimer never went to business school, but they both have advanced degrees in physics from the University of Oxford. This is unusual in investing, but the experience has made them better investors because it helped turn them into quantitative analysts, influenced by numbers rather than “stories.” In this way, the fund managers are less likely to follow the crowd or focus on the size of dividend payouts.

Says Mortimer: “Rule number one: To get good dividend stocks, don’t look at the dividend.”

MY COMMENT

The above little article touches on value investing, long term investing, dividend investing, growth stock investing, portfolio diversification, fundamental investing, and international investing. ALL in one simple little article. These items are the bread and butter of long term investors. I will pull them out to EMPHASIZE them as a list:

Value Investing
Long Term Investing
Dividend Investing
Growth Stock Investing
Less Portfolio Diversification
Fundamental Investing
Companies that reinvest in their business ( compared to fads like stock buybacks)

As a LONG TERM INVESTOR I tend to practice ALL the above EXCEPT for international investing. I see NO BENEFIT investing around the world when my dominant AMERICAN companies do business and dominate around the world. The above list is a basic investing primer for long term investors. If you look for exceptional stocks and funds that practice what is in the above list you will be way ahead of the game. ALL of these items REINFORCE and COMPLIMENT each other.

 

SHORT ANSWER.......to the article below.......NO. I dont believe it is time to think about selling out your stocks and funds. BUT....I dont do Market Timing. In fact I dont believe in Market Timing as a viable theory or tool for ANY investor. I BELIEVE the massive amount of research that is does NOT work.

The Dow and Nasdaq are approaching big milestones. Is it too late to invest?

https://www.cnn.com/2020/02/19/investing/dow-nasdaq-stock-market/index.html

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

This stunning bull run appears to have no end in sight.

"The Dow and Nasdaq are both approaching splashy numerical milestones. The Dow is about 2% away from topping 30,000 while the Nasdaq is less than 2% from 10,000 after hitting a new record high on Wednesday.

So is it finally time for investors to bail on stocks? It's only natural for people to start worrying about a top and a looming correction (or even a bear market.)

But selling stocks just because indexes hit splashy new highs is silly. Long-term investors know that even if the market has occasional hiccups, stocks tend to keep climbing over the long haul.

"In general, round numbers are noise that don't mean much for investors, even if it sometimes takes a few trading sessions to get past those milestones," said Doug Peta, chief US investment strategist with BCA Research.

Peta said he thinks the market could keep rising if the coronavirus outbreak doesn't wind up hurting American companies beyond the first quarter. Apple (AAPL) has already warned of supply chain disruptions in China and a hit to sales in Asia.

But central banks around the globe, including the Federal Reserve, might cut rates further and inject more stimulus into the global economy because of coronavirus concerns, Peta believes.

The net result could be a boom later this year for profits and the economy.

Coronavirus may not end the bull market
"A potential silver lining for stocks is that we will get a vigorous enough policy response around the world that offsets the coronavirus," Peta said. "If that happens, there is a clear runway for the next three quarters to be pretty darn good for global growth."

In such a scenario, investors will be more willing to pay higher prices for US stocks -- particularly companies in the economically cyclical tech, financials and energy sectors, says Brian Bannister, head of institutional equity strategy for Stifel.
Bannister wrote in a report last week that he was raising his official price target for the S&P 500 to 3,450 from a previous level of 3,260. He added that in a perfect scenario where a "recession wall of worry is hurdled," the S&P 500 could hit 3,800 -- a nice round number that is 12% higher than then its current price.

But some experts are worried that investors are too quick to dismiss the coronavirus threat and other potential market concerns, such as risks tied to the US presidential election and surging valuations for momentum stocks like Tesla (TSLA).
Bullishness has "morphed into complacency" according to Julian Emanuel, managing director and chief equity and derivatives strategist with BTIG Research. Emanuel said in a recent report that this "frenetic" rally could be a "dress rehearsal" for an imminent correction or even a market bubble bursting as it did in 2000.

Bond rally is a sign investors aren't complacent or irrational
Still, others maintain that the market's relentless march higher is rational. Even as stocks climb, investors are still plowing money into safer bond funds, pushing yields even lower in the process. That's partly because of hopes that the Fed will cut rates but it's also a sign of a flight to safety as investors hedge their bets.

"Bond investors aren't necessarily expecting slower growth, but they are expecting the Fed to cut rates and help stem further weakness," said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management, in a report.
"Inflows into bonds has been strong all year. Thus, there's little sign that retail investors are chasing the rally," Draho said. "This is not at all indicative of irrational sentiment."

As long as companies post decent gains in earnings and revenue and the Fed and other central bankers keep rates relatively low, the bull market may have more room to run.

And as the market climbs, each new 1,000 point barrier is actually a bit easier to top. For example, the Dow only has to go up 3.4% to get from 29,000 to 30,000. But the climb from 19,000 to 20,000 back in January 2017 required a 5.3 % increase.
Sure, a lot of people still snicker about the Dow 36,000 book from 1999 and point to it as Exhibit A for the market mania two decades ago. Now the Dow is only about 23% away from hitting that once seemingly unthinkable target."

MY COMMENT

I have posted often in here about bond yields and deflation and world economic stagnation. These factors as well as the comments in the article above tip the scales in favor of a continued bull market. On the bear side is short term events like the virus and the BIG ONE.......the election. As a LONG TERM INVESTOR, I dont care when or if we have a correction, recession or bear market. ALL are INEVITABLE. NONE of these events will impact the fact that I will continue to be fully invested for the long term. There is simply no other RATIONAL or REASONABLE alternative when it comes to making and compounding money.

BUT.....make no mistake....over a lifetime of investing you will go through many many corrections and a handful of bear markets. Understanding and expecting such events will strengthen your resolve to NOT panic in these events. BUT......a nasty bear market has a way of wearing down even the TOUGHEST investor. It is the unyielding drip, drip, drip, as your account goes down for one, or two, or three years, with no end in sight, that is SOUL SUCKING. BUT.....even in that sort of situation, I simply stop looking at the daily results and take solace in the fact that everything I am reinvesting is going in at a good price.......and.......some day the SUN will come back out. For the moment I will continue to enjoy a HISTORIC BULL MARKET.

 

I find it interesting.....probably RANDOM.....and....probably not necessarily applicable to others.....that every time we have one of these little dips like we have seen a few times over the past few weeks, when we get back to where we started my portfolio is at a higher value than just before the little dip. WORKS FOR ME.

 

Well...SomeDude. It might be a good time to clear your mind of ALL preconceived notions of this company and do a fresh evaluation of it. It will be difficult because you have now bonded with this business holding and have a bias. But, a fresh look from scratch might be good. I am not recommending anything......but....I have had stocks in the past that I liked, and had confidence in the company, yet after an extended time I just had to sell. And....at times sell at a loss. My reasoning is usually that I am losing opportunity gains that might be made with that money elsewhere. So I would comment that if it was me i might:

Try to do a fresh reevaluation
and/or
Consider selling now and buying back later when things are more clear

I will also note that at times there are companies that I like, think have a bright future, I have confidence in the company, and over time the action of the stock just does not ever support my thinking. At times we all have stocks that we are just wrong, or even if we are right we are just out of step with the rest of the investing world.

I appreciate your post....it made me think about the above. Please you and anyone else feel free to post anything any time.

 

BLAH markets today...NOTHING too exciting one way or the other. SO.....going to go back to a topic that I did a few posts on a little ways up the thread.......having assets in a taxable account (in retirement or otherwise). This little article hits on that topic a bit. When I first started reading it, I thought........."too basic of an article". But....as I read on I begun to like the content and elegant simplicity of the writing and article. A GOOD little summary of taxable versus tax deferred investing.

Not All Retirement Accounts Should Be Tax-Deferred

https://www.investopedia.com/articl...m_source=yahoo&utm_medium=referral&yptr=yahoo

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

"Millions of Americans nationwide are socking away money in all forms of investment retirement accounts (IRAs), annuities and employer-sponsored retirement plans, both qualified and non-qualified. The tax deferral that these plans and accounts offer is hard to beat in many cases, and the Roth IRAs and Roth 401(k)s that are now available can be particularly effective in sheltering after-tax income.


However, there are times when the taxes due on retirement-plan distributions can be greater than the tax that you would owe on [would be realized from] un-sheltered taxable investments. In this article, we'll explore when it may be better to leave your assets exposed to the tax man when you're saving for retirement.


Key Takeaways

• Taxable mutual funds and bonds are best for tax-deferred accounts.
• For accounts that are taxed, such as an investment account, consider bonds, unit investment trusts.
• Annuities can be a good solution for high-income investors who have maxed out their other options for tax-sheltered retirement savings.
• Roth accounts shield investment earnings from immediate taxation, and the earnings can even be tax-free upon withdrawal if certain requirements are satisfied.

Best Investments for Tax-Deferred Accounts
The first question most people ask, is "Which types of investments should be placed inside tax-deferred accounts?" Because of their nature, tax-deferred accounts will provide the greatest benefit when they shelter investments that generate frequent cash flow, or distributions, that would otherwise be taxable, which allows these payments to remain whole and be reinvested most efficiently. Therefore, there are two types of investments in particular that are best suited for tax-deferred growth: taxable mutual funds and bonds. These two produce the most frequent taxable distributions, such as interest, dividends and capital gains.


Mutual funds distribute capital gains annually to all shareholders, regardless of whether those investors have actually liquidated any of their shares or not. Government and corporate bonds pay regular interest that is either fully—or at least federally—taxable, unless it is paid into a tax-deferred account of some sort. Of course, this is only an issue if the investor does not intend to draw upon the income generated from these investments.


Taxable bonds and mutual funds may be a good idea for those who need to live on the income generated by these investments. Most interest and dividend income is usually taxed at the same rate as IRA and retirement-plan distributions, but in some cases it can actually be taxed at a lower rate.


Taxable Investments
There are several types of investments that can grow with reasonable efficiency even though they are taxable. In general, any investment or security that qualifies for capital gains treatment is a good candidate for a taxable savings account. This category includes individual equities, hard assets (such as real estate and precious metals), and certain types of mutual funds (such as exchange-traded funds and index funds). When capital gains rates decrease, taxable investments are more appealing for investors in certain situations, such as those who own long-term rental properties.


Stocks
Many real estate transactions can be structured as installment sales, thus allowing the seller to further defer capital gains and realize less income per year than is possible with a lump-sum settlement. Stocks, particularly stocks that pay little or nothing in the way of dividends, are better left to grow in a taxable account, as long as they are held for more than a year. Individual stocks that are held in a tax-deferred account can often be taxed at a higher rate than taxable stocks, because stock-sale proceeds that are taken as retirement-plan distributions are always taxed as ordinary income, regardless of their holding period.

Therefore, investors in all but the lowest tax bracket will usually pay less tax on the sale of taxable stock. The same is true for certain types of exchange-traded funds, such as Standard and Poor's Depository Receipts (SPDRs) which allow investors to invest directly in the S&P 500 index, and other index funds that do not pay dividend income of any kind. Utility stocks and preferred stocks are also held in retail accounts because the dividend income is often used by investors to pay monthly bills or other expenses. However, these stocks can be appropriate for tax-deferred investors seeking diversification as well.

Unit Investment Trusts
Unit investment trusts (UITs) can be useful taxable instruments, because when the trust resets at the end of its term, any stocks that have lost value can provide deductible capital losses when they are sold. However, investors that actually cash out of their UITs instead of allowing them to reset can conceivably face large capital gains distributions.

Ultimately, any type of investment that grows in value over time without distributing taxable income is probably better left in a taxable account, so that monies that are allocated to tax-deferred vehicles can be used for less tax-efficient instruments. As stated previously, this is especially true for investors who may need any income that is distributed to cover living expenses.

A Special Case: Annuities
Because annuities are inherently tax-deferred by nature, whether they should be used inside a retirement account or IRA has been the subject of much debate among financial professionals. This debate heated up when the SECURE Act, passed in Dec. 2019, gave employers greater leeway about putting annuities in 401(k) plans by reducing their risk of being sued if these products subsequently went bankrupt.

Anyone considering the purchase of an annuity should do detailed research about the stability of the company sponsoring it, as well as the fees involved. All the same, some of these plans can be ideal vehicles for high-income investors who are seeking to reduce their taxable investment income and have maxed out their other retirement savings options.

The Bottom Line
Although tax-deferred retirement accounts are very beneficial for millions of savers, it is unwise to assume that all types of investments should be shielded from taxation. Roth accounts may be an exception, as they shield investment earnings from immediate taxation, and the earnings can even be tax-free upon withdrawal if certain requirements are satisfied. A careful review of the current and possible future capital gains tax rates versus the tax that will be paid on retirement-plan distributions should be made to determine the best possible allocation of your retirement assets."

MY COMMENT

I do agree with the suggestion that stocks and Index Funds are ideal for taxable accounts for retirement or otherwise. Most people that I know that are retired would definately be better off paying capital gains tax compared to regular income tax. As to mutual funds, the article suggests that mutual funds.......with the exception of Index Funds.....are ideal for a tax deferred account. I agree, mainly for the reason that funds (stocks) will produce the best long term return by far of any potential investment. BUT....I dont see much if any negatives to holding mutual funds in a taxable account. Any mutual fund that I want to own will produce large amounts of unrealized capital gains in a taxable account and will be very suitable as a holding in such an account.

On the issue of annuities. Personally, there is absolutely NO WAY I would ever hold an annuity in a tax deferred account.

Anyway.........

 

NICE to have a few positives in the old portfolio this past week. At least I ended the week beating the SP500. ALTHOUGH......beating.....is a relative term since I am talking about LOSING less money than the SP500.

Best Stocks in Dow Jones: Is Home Depot a Buy or Sell?

https://www.thestreet.com/investing...sell-feb-21?puc=yahoo&cm_ven=YAHOO&yptr=yahoo

"1. Procter & Gamble | Percentage Increase: +1.39% | Friday Closing Price: $126.70
The CFO at Procter & Gamble (PG) - Get Report warned Thursday that the coronavirus outbreak will have an impact on the company's results in China. There are 387 suppliers in China for Procter & Gamble and face their own challenges.

Procter & Gamble Quantitative Analysis by TheStreet Quant Ratings
TheStreet Quant Ratings rates Procter & Gamble as a Buy with a rating score of B+.

2. Home Depot HD | Percentage Increase: +1.23% | Friday Closing Price: $245.34
Jim Cramer liked what he is seeing from Home Depot (HD) - Get Report on Mad Money this week. Home Depot fell on Friday but still remains a buy.

It was announced this week that Home Depot Canada will hire 5,500 workers to support its busy spring season.

Home Depot Quantitative Analysis by TheStreet Quant Ratings
TheStreet Quant Ratings rates Home Depot as a Buy with a rating score of B-."

MY COMMENT

Good enough. I will take whatever I can get whenever and wherever I can get it.

 

I dont follow Warren Buffett. BUT I do agree with MANY of his investing TRUISMS. Here is his latest letter to shareholders. I have taken excerpts from the letter (see below) that I consider important for LONG TERM INVESTORS to keep in mind:

https://www.berkshirehathaway.com/letters/2019ltr.pdf

"In 1924, Edgar Lawrence Smith, an obscure economist and financial advisor, wrote Common Stocks as Long Term Investments, a slim book that changed the investment world. Indeed, writing the book changed Smith himself, forcing him to reassess his own investment beliefs. Going in, he planned to argue that stocks would perform better than bonds during inflationary periods and that bonds would deliver superior returns during deflationary times.

That seemed sensible enough. But Smith was in for a shock. His book began, therefore, with a confession: “These studies are the record of a failure – the failure of facts to sustain a preconceived theory.” Luckily for investors, that failure led Smith to think more deeply about how stocks should be evaluated.

For the crux of Smith’s insight, I will quote an early reviewer of his book, none other than John Maynard Keynes: “I have kept until last what is perhaps Mr. Smith’s most important, and is certainly his most novel, point.Well-managed industrial companies do not, as a rule, distribute to the shareholders the whole of their earned profits. In good years, if not in all years, they retain a part of their profits and put them back into the business.

Thus there is an element of compound interest(Keynes’ italics) operating in favour of a sound industrial investment. Over a period of years, the real value of the property of a sound industrial is increasing at compound interest, quite apart from the dividends paid out to the shareholders.”

it was no secret that mind-boggling wealth had earlier been amassed by such titans as Carnegie,Rockefeller and Ford, all of whom had retained a huge portion of their business earnings to fund growth and produce ever-greater profits. Throughout America, also, there had long been small-time capitalists who became rich following the same playbook.

We constantly seek to buy new businesses that meet three criteria. First, they must earn good returns on the net tangible capital required in their operation. Second, they must be run by able and honest managers. Finally, they must be available at a sensible price.

Charlie and I do not view......(our stock portfolio).......as a collection of stock market wagers – dalliances to be terminated because of downgrades by “the Street,” an earnings “miss,” expected Federal Reserve actions, possible political developments, forecasts by economists or whatever else might be the subject du jour. What we see in our holdings, rather, is an assembly of companies that we partly own and that, on a weighted basis, are earning more than 20% on the net tangible equity capital required to run their businesses.

These companies, also, earn their profits without employing excessive levels of debt. Returns of that order by large, established and understandable businesses are remarkable under any circumstances. They are truly mind-blowing when compared to the returns that many investors have accepted on bonds over the last decade – 21⁄2% or even less on 30-year U.S. Treasury bonds, for example.

Forecasting interest rates has never been our game, and Charlie and I have no idea what rates will average over the next year, or ten or thirty years. Our perhaps jaundiced view is that the pundits who opine on these subjects reveal, by that very behavior, far more about themselves than they reveal about the future.

What we can say is that if something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments.

That rosy prediction comes with a warning: Anything can happen to stock prices tomorrow. Occasionally,there will be major drops in the market, perhaps of 50% magnitude or even greater. But the combination of The American Tailwind, about which I wrote last year, and the compounding wonders described by Mr. Smith, will make equities the much better long-term choice for the individual who does not use borrowed money and who can control his or her emotions. Others? Beware!"

MY COMMENT

The above is the CRUX of the letter in my opinion. The information above is important information for any long term investor to keep in mind as companies are selected for purchase and long term holding. The above sounds fairly cohesive, but as I said, these are excerpts from the letter and represent what I consider the GUTS of the letter. I remain fully invested for the long term as usual.

 

Well in a nutshell.....they are erratic, they flail around, they go bankrupt, they often have crappy management, they are rarely dominant businesses, they often have poor customer and other service issues, my own personal bias, etc, etc. The few times over the past 45+ years that I have owned any of these categories they have not done well enough compared to the averages and I have soured on them.