The Long Term Investor

A SOLID RED day today. Luckily I did not waste any time market watching today. Every one of my ten stocks were down.....and.....the majority of them were down by 2% or more. I got beat by the SP500 by 0.37%. I actually expected to do worse than I did......so that is my one positive for the day.

All in all.....a low volume day when market action was amplified by the August, vacation, volume. Just one of those times when the market talks itself into a little HISSY-FIT......over the FED, the phantom recession, and Nvidia.

I dont have much of an expectation for this week.....so any green at all will be a PLUS for me.

 

So true.....so simple.....yet so difficult.

Weekly Market Pulse: Same As It Ever Was

https://alhambrapartners.com/2022/08/21/weekly-market-pulse-same-as-it-ever-was/

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


"History never repeats itself. Man always does.


Voltaire

Mark Twain is credited with a similar saying, that history doesn’t repeat but it rhymes. Of course, there is scant evidence that Clemens said anything of the sort just as Voltaire may or may not have penned the quote above. But both men were much wittier than I – than most – so I’ll take them both as being representative, if not genuine.

I have been a professional investor for now over 30 years and I have seen investors make the same mistakes over and over, as if they are ruled by some mysterious force that prevents them from learning from their past. And that may well be true. Reality is, as Einstein may have said, an illusion, albeit a very persistent one. What we see as reality is in actuality merely an approximation, a prediction of our brains. We can’t actually see the present because there is a lag between the information being captured by our eyes and processed by our brains. To make our life easier, our brains essentially predict the future, based on past experience, and present us with reality as it believes it should be based on what it was a few milliseconds ago.

In a sense then, our brains use our past experiences to predict the future (which we call “the present”). See where I’m going with this now? There are a multitude of psychological barriers, cognitive biases, that effectively prevent us from being good investors. Today, in an age of instant information, we are bombarded by seemingly convincing evidence that continually reinforces our existing biases and prevents us from breaking free of our past experiences. Investors today see all economic slowdowns and all bear markets in the context of 2008 and 2020. And if they’re a bit older, maybe 2000-2002.

And so, the bear case today is not that we will have a mild economic slowdown and an average bear market but that the economy will implode and stocks must fall, as they did in those bear markets, by a lot more than they already have. For those who discount 2020 as atypical, so much the better since both the 2000-2002 and the 2008 bear markets fell by 50%. Now that’s a bear market.

I have said many times that it isn’t my job to predict the future but merely to accurately observe the present. I’m human too so it isn’t easy but after 4 decades as an investor, I have learned to recognize my own biases and shortcomings – most of the time. I spend a lot of time trying to figure out the consensus and how it will be wrong. How do you figure out the consensus? That’s another one that isn’t easy because what you see as the consensus is biased by your sources. That’s why I put a lot of emphasis on what people are doing rather than what they are saying. I also try to avoid sources with an agenda whether Zero Hedge or the average Wall Street strategist.

I’d say the consensus today is undoubtedly negative about the economy and markets. Sentiment has certainly improved from where it was at the lows but overall, I think most investors are still quite negative about the future. The pessimism isn’t surprising really because there does seem to be a lot of things about which to worry. Recession seems inevitable as yield curves invert. Inflation is coming down but not fast enough and wages aren’t keeping up. Europe is in a natural gas noose of its own making. Inventories are rising and real retail sales peaked 16 months ago in March of 2021. Consumer sentiment is awful and the leading economic indicators are down for 5 consecutive months.

You have to ask yourself though, with all that bad news, why is the S&P 500 up 17% from its lows? How, in the face of all that bad news about the economy, can anyone have the confidence to buy stocks? The answer is that there are some people who can do what Warren Buffett says you should do in these situations (and what he is actually doing by the way), namely buy when everyone else is fearful. It’s hard to do because the bad news is obvious while the good news is not.

I could tell you that bank balance sheets look nothing like they did in 2008 and an outcome that bad is highly improbable. I could tell you that household balance sheets have never looked this good prior to a recession. I could tell you that inflation is fading rapidly, that commodity prices – including agriculture – are back to where they were prior to Russia’s invasion of Ukraine. I could tell you that China’s problems are not new or unknown to the market. I could tell you that the semiconductor chip shortage is ending and a glut of chips is developing right now.

I could also tell you that banks are lending, with C&I loans (corporate) up at a nearly 20% annual rate in July. That, despite all the doom and gloom around real estate, real estate loans were up at a double digit pace in July and banks holdings of Treasury securities are down every month since March. And that while inventories are up, the total business inventory/sales ratio is lower today than in every month from August of 2014 to March of 2021. I could tell you that core capital goods orders are up 24 of the last 26 months and that in rejiggering their supply chains, US companies will reshore 350,000 jobs this year.

I could tell you that the stock market usually bottoms with consumer sentiment and that may have already happened. I could tell you that the number of stocks in the S&P 500 trading above their 200-day moving average hit its low of 11.8 in June and that readings under 15 tend to be fleeting and almost always consistent with bottoms. I could tell you all those things and if you think we’re headed for some 2008-style crack up, you won’t care.

Investing is not easy and anyone who tells you otherwise is lying. It is hard to buy when every bone in your body is screaming no. It is hard to be greedy when everyone else is fearful. It is easy to find the bad news because it is in your face all the time. Bad news gets clicks and readers. Good news is hard to find and gets ignored when it is.

I don’t know where the economy or the markets are headed from here. But I am absolutely certain that whatever the outcome, it will be different than 2000 or 2008 or 2020. Because it is always different this time but investors are not. They will always be fearful at the bottom and ecstatic at the top. They will always be ruled by their emotions rather than logic. And it will always be tempting to embrace the bosom of the consensus.

In Candide, Voltaire said that “life is bristling with thorns, and I know no other remedy than to cultivate one’s own garden”. I can think of no better advice for today’s investor."

MY COMMENT

I certainly believe that we have either seen the LOWS from this recession......or at worst......are within 10% or less of the bottom. Many investors built up a nice cushion over the last couple of months that will....."likely"....protect them from revisiting the prior lows. If I personally had money to invest.....I wold consider NOW a high probability time to do so. I would consider that over the next year or two any money invested NOW will show a very nice profit.

I would certainly be willing to take that gamble.....if I was wrong....it would still simply be a matter of a little bit more time until I was right and had a BIG FAT PROFIT.

Of course.....I dont have any money to invest right now because I am ALL IN as usual. I will have some free money to invest around the end of the year,......and.....I will do so. The best thing for me would be that the markets linger till than and I am able to get that money working at good prices.

I see LOTS of IRRATIONAL behavior out there right now. The market drops that we still experience once in a while....like today.....are simply IRRATIONAL.....over the long term. They do however represent the current REALITY for whatever it is worth. That reality is....of course....short term. And short term means......emotion, drama, fear, panic, greed, etc, etc, etc, when it comes to the markets and the DOWN SIDE.

Two words for long term investors......ENDURE.....THRIVE.

 

That is an interesting article Duckleberry......but......I am not sure that the academic approach and formula that he uses is really tied to the real world in any way. And....even if it is I dont see anything in there that is usable or translates to the real world. Looks like IVORY TOWER stuff to me. My lifetime of investing over 55 years has certainly NOT followed what the author is trying to do.

 

I am DEAD EVEN right now. Not bad considering the day we had yesterday. Six stocks UP and four stocks DOWN. For me the day starts NOW.

 

This little article about the markets today is just another way of saying that......the short term markets are OPAQUE.

There's no simple story to tell about the current market moment: Morning Brief

https://finance.yahoo.com/news/stock-market-moment-morning-brief-093055362.html

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

"There's a ton going on in markets right now.

Stocks got smoked to start the week, with the summer rally appearing to have stalled.

The tech-heavy Nasdaq is now down a quick 5% in just a few trading days after rallying about 25% from mid-June to mid-August.

On Monday, the S&P 500 endured its worst day since June 16, a date that probably sounds familiar to market enthusiasts — it's the same day the S&P 500 hit its most recent bottom.

Treasury yields are rising as investors ratchet up bets the Fed won't change course imminently. Still, the yield curve remains deeply inverted, a situation that has typically preceded recession.

The dollar is back near 20-year highs against the euro as the euro once again traded below parity with the dollar on Monday as concerns grow about the economic outlook in Europe.

And the economic situation in China, which is always a challenge to completely suss out, appears to be deteriorating amid historic droughts, COVID lockdowns, and persistent risks from its real estate sector.

The recent resurgence of the meme trade continued to fall apart on Monday, with shares of AMC (AMC) falling 42% after the company's new preferred stock units — ticker: $APE — started trading. Those units also fell 12% to start the week.

Bed Bath & Beyond (BBBY) also continued its recent collapse, falling another 16% to close at $9.24. Last Wednesday, shares closed at $23.08. By then, Ryan Cohen had already bailed on the stock.

Put it all together, and things don't look so great: Indices are going down, individual stocks are blowing up, and recession is increasingly being priced in.

Go back in time about two weeks and the opposite was true: Investors were buying, meme trades were roaring, and recession fears were fading.

For some time now, a common refrain we've heard from investors and strategists is that if you have a simple view of what's happening in markets and the economy right now, you are mistaken.

Go down the list of negatives in today's market and you're likely to find an equal, opposite, and positive indicator on the health of this market rally and economic expansion.

Inverted yield curve? Go look at the strong labor market.

Two quarters of negative GDP growth? It was just an inventory drawdown.

Gas prices falling on a lack of demand? Savings for consumers to spend money elsewhere.

Of course, to say today's market is full of diverging views arguably describes any market on any day.

But oftentimes disagreements among investors center on the path as opposed to the destination for markets and the economy. Market history tells us stocks usually go up — betting on how much and which names lead the way is where careers are made and lost.

Today, it seems, something much bigger is at stake."

MY COMMENT

Talk about short term thinking. The events talked about in this little DAILY article are all a day to a couple of weeks. AND....most of the events and data talked about in here have NOTHING to do with actual business fundamentals. NOTHING....bigger is at stake. This is simply obscure, unintelligible, short term BLATHER. Basically.....an article about nothing.....at least nothing that any sort of actual investor should be concerned about.

 

TESLA split this week. Now there is something for investors to like at this moment.

 

What we are seeing again today is a total LACK of any sort of new news. EVERYTHING that is being talked about as impacting the amrkets is simply the same old issues that have been around for the past 6 months.

 

The markets continue to be DEAD EVEN for me today.......since I am UP by $300. At least it is better than yesterday.

 

I never even got a chance to look at my account end yesterday.....due to company. BUT....I have to post this very important article.

Personal Finance: It Isn’t an Elective Anymore
As more high schools require personal finance classes, my humble lesson-plan suggestions.

https://www.fisherinvestments.com/en-us/marketminder/personal-finance-it-isnt-an-elective-anymore

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

"Remember checkbooks? Back in the day, I learned how to balance one (by hand, trudging miles uphill barefoot through the snow, etc.) in my high school’s personal finance class given by one of our PE teachers. It was an elective, but not one many kids took—perhaps understandably. The subject matter wasn’t exactly scintillating. Also, I can’t say it was very useful, either, especially nowadays, what with banking on your phone and all. Still, financial literacy is vital and under-taught in America today. However, it may be making a comeback in high school, as more state legislatures are requiring a personal finance class to graduate. Georgia and Michigan became the 13th and 14th states in April and June, respectively, and now more than a third of US students have to take such courses as back-to-school season gets in full swing. I doubt the curriculum features checkbook balancing, but that got me to thinking: What would be some good topics to cover? Here are a few I think kids—of any age—might appreciate.


First: Compounding!

If there is one lesson to impress on young (and young-at-heart) folks, it is the magic of compound growth—earning a return on returns. In my view, finding ways to let your money compound is the surest of the roads to riches humanity has discovered (although decidedly not the quickest). Stock-picking contests like many experienced in school may be exciting, but instilling an appreciation of compounding’s power is way more impactful, not to mention practical.

Say you saved $10,000 and invested it, earning 10% after one year—$1000. If you invest it all again, earning the same return (unrealistic, I know, just going for the basic concept here), you would get $12,100 for a gain of $1100. The $100 bump up is the return from reinvesting your return. This may seem modest at first, but it can add up over time, multiplying your principal—if you let it. Over 30 years letting compounding work at a constant 10% annual rate would net you almost $175,000 on that $10,000 investment.

Knowing how compound growth works also provides the basis to build other lifelong lessons helping you further along in the journey to financial success. Why should you budget and save? Why does time in the market trump timing it? Answer: To put compounding’s long-term power on your side. As Charlie Munger—Warren Buffett’s less famous, but no less legendary business partner—once put it: “The first rule of compounding is to never interrupt it unnecessarily.” Easy to say, harder to put into practice—especially when it isn’t front of mind. Even more so if no one ever brought it to your attention.

Note, too, compounding can work in reverse if you owe money. Ratcheting up high-interest debt, say from a credit card, and letting that compound by making only the minimum payment pits this legendary force against you. The difficulty of digging out from under a heavy debt load—as your borrowing costs continually snowball—is way better to learn about in class than by experiencing the crushing financial weight firsthand.

Next up: Opportunity costs.

Not to be that guy, but choices have consequences—particularly financial ones. Deciding to do one thing (say, going with the extra trim on a new car) means forgoing others (more of your paycheck going to car payments instead of your investment account). No judgment! Do what makes sense for you.

The point, though, is to consider the tradeoffs from a “current you” and a “future you” sense. Money spent now isn’t only money you can’t spend later, but also all the money you could have made investing it—potentially affording you more later. Now, of course money is for spending—says current you!—but keep in mind future you (and future people who might depend on you), who also reminds current you it takes money to make money.

Understanding the opportunity costs in front of you from a financial perspective allows you to be more deliberate about balancing current you and future you’s wants and needs. Future you will thank current you. That, ultimately, may be the most rewarding part of a financial education.


Adventures in financial planning for fun and profit.

How can you make what future you wants more concrete? That brings us to lesson three: Make a financial plan—for yourself or your family. Go through your income and expenses. Then think about your financial goals. How do you see yourself in the future—where would you like to be? Then chart a course from here to there. In all likelihood, though, it won’t be a straight line. Try different scenarios, stress testing your assumptions along the way. This isn’t easy! But it doesn’t have to be exact. These are just basic steps, which you can get more or less into detail over, to help you think about—and through—life’s challenges ahead.

To not lose heart? Don’t lose your head.

Speaking of challenges, I don’t think a personal finance curriculum would be complete without a section on critical thinking. From possible scams to less pernicious—but potentially no less damaging—economic theories and forecasts that proliferate every time you watch a financial show or open up an investment publication. So, how do you go about evaluating supposed experts’ claims? In my experience, when it comes to money, don’t take their word for it. Try verifying theories or claims for yourself. Be skeptical! For crucial decisions, if you don’t understand something, ask until you do. It also helps to check history—not that it ever repeats exactly, but a grounding in reality provides a good place to start assessing probabilities, if not the best and only one.

Financial and economic matters often seem complex, too complicated or just plain confusing. But that doesn’t exonerate experts’ claims—particularly when they don’t hold up. It also doesn’t disqualify anyone from comprehending the issues involved—with a little time and effort, and perhaps a bit of help from trusted sources. Indeed, I think it behooves everyone to do so.

In my view, this is what a personal finance education should be about—learning how money works and the practical solutions to make that work for you. It is a way to identify what is important and how to put those forces on your side while avoiding common pitfalls along the way. That is something I find endlessly interesting and I think kids—of every persuasion—might, too, when given the chance."

MY COMMENT

This is good stuff for kids.....and.....adults. Critical education for.....EVERYONE.