The Long Term Investor

Discussion in 'Investing' started by WXYZ, Oct 2, 2018.

  1. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    Ok....I got an email that my NVDA buy went through at about $131.64. Thank you Mr Market for the drop today. I dont do market timing....but if the market gives it to me I will take it. I see that the stock is NOW back up above $133.

    Perhaps I should quickly SELL and take my profit.......NAH.....this is a long term hold.
     
  2. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    FED FEAR....day in the markets today. Add in the rate on the Ten Year Treasury and that is about all you need to know about the markets today.

    Stock market news live updates: Stocks sink, Treasury yields surge as Fed meeting gets underway

    https://finance.yahoo.com/news/stock-market-news-live-updates-september-20-2022-112319691.html

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

    "U.S. stocks barreled lower Tuesday as investors prepared for Federal Reserve officials to deliver another jumbo rate hike in their fight against persistent inflation.

    The benchmark S&P 500 slid 1.2% early into trading, while the Dow Jones Industrial Average tumbled by roughly the same percentage, or nearly 400 points. The technology-heavy Nasdaq Composite erased about 0.9%.

    As Wall Street awaits the meeting outcome, the benchmark U.S. 10-year Treasury remains well above 3.5%, its highest level since 2011, while the 2-year Treasury note is racing toward 4%.

    The policy-setting Federal Open Market Committee kicks off its September meeting today and is expected to deal a third-straight 75-basis-point increase to its benchmark interest rate at the conclusion of discussions Wednesday. After officials convene, investors will tune in for a speech by Fed Chair Jerome Powell for further clues around the pace and magnitude of future hikes.

    A third ‘unusually large’ hike would be a reversal from the plan Chair Powell laid out in July to slow the pace of tightening, despite little surprise on net in the data,” economists at Goldman Sachs led by Jan Hatzius wrote in a note.

    We see several reasons for the change in plan: the equity market threatened to undo some of the tightening in financial conditions that the Fed had engineered, labor market strength reduced fears of overtightening at this stage, Fed officials now appear to want somewhat quicker and more consistent progress toward reversing overheating, and some might have reevaluated the short-term neutral rate.”

    Bank of America expects the Fed’s dot plot – each official’s forecast for the central bank's key short-term interest rate – to show an “implicit slowing” in the tempo of hikes at its November meeting. But analysts suggest Powell is likely to discount this signal and continue to emphasize that increases will be data dependent to maintain optionality for the Fed.

    “In other words, if the data were to justify another 75-basis-point rate hike in November, we do not think the committee would be constrained by its prior projection,” BofA analysts led by Michael Gapen said in a note. “We suspect the Fed will rely less on forward guidance and more on data dependence as the policy rate moves further into restrictive territory.”

    On the corporate front, shares of Ford (F) fell more than 7% at the start of trading after the company warned of larger costs due to inflation and supply chain challenges, making it the latest company to outline its struggle with macroeconomic challenges.

    The Detroit-based legacy carmaker now projects supply costs to total $1 billion more during the quarter than its previous estimate and supply shortages to affect about 40,000 to 45,000 vehicles, shifting some revenue to the fourth quarter."

    My COMMENT

    The rates on the shorter term treasuries are very nice for those that need to park cash somewhere for a year or two. AND.....they will go higher over the near term.

    With the continued speculation about the FED and some STILL trying to push the narrative of a 1% increase......we "might".....emphasis on "might".....be set up for somewhat of a relief rally after the FED is done on Wednesday.

    Any selling going on right now is simply IRRATIONAL. There is not a single person in the entire world that is not aware of all the above information and what the FED is going to do tomorrow. THUS.....this is all totally baked into stock pricing. The market drop today is simply.....computer program trading....based on the headlines and drama.
     
  3. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    Here is the story of the markets.....a tale of two ships passing in the night.

    Institutional Investors
    and Hedge Funds Are
    Selling Their Stocks.
    Retail Is Buying.

    Institutional investors rotated out of stocks in all sectors, including energy, financials, healthcare, technology, basic materials, consumer goods, and real estate.

    https://www.institutionalinvestor.c...nds-Are-Selling-Their-Stocks-Retail-Is-Buying

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

    "Amid rising inflation, institutional investors are selling stocks at the highest levels seen this year. Not surprisingly, retail investors have generally been left holding the bag.

    According to an S&P Global Market Intelligence analysis, in the five weeks ending September 7, long-only investors sold $51 billion worth of equities, offloading nearly 25 percent of the total they’ve sold year-to-date. Meanwhile, compared to both institutional investors and hedge funds, retail investors continued to scoop up stocks in select sectors and remained the biggest buyers during that period.

    Christopher Blake, executive director of issuer solutions at S&P Global Market Intelligence, said that while large-scale selling of equities by institutional investors isn’t anything new (they’ve been selling en masse throughout 2022, although the actual amount sold has fluctuated throughout the year), the five-week period ending September 7 has seen the most aggressive selling so far.

    “[There’s been a lot of] concern about whether or not we were going to be able to get inflation under control, what type of action the Federal Reserve was going to take, and whether or not those things would actually make a difference or not,” Blake told Institutional Investor.

    The trend is consistent across most sectors. From the end of 2021 to the beginning of this September, institutional investors rotated out of stocks of all sectors (energy, financials, healthcare, consumer services, technology, basic materials, consumer goods, real estate, and industrials), remaining flat only in utilities. According to the analysis, the group’s “aggressive” move out of equities likely led to more “indiscriminate selling,” rather than selling out of specific industries.

    In contrast, retail investors bought up stocks in basic materials, energy, consumer goods, consumer services, and healthcare over the same period. Nevertheless, retail investors weren’t immune to market factors, and this period was one of the very few this year in which retail investors were overall net sellers, the report said.

    Blake said that the difference between institutional and retail investors generally lies in their willingness to take on risk. Because institutional investors are responsible for large amounts of money and are answerable to a board and beneficiaries, they’re generally more risk-averse. When markets begin to trend downward, as they have in 2022, institutional investors are more likely to dump risky assets.

    Retail investors, on the other hand, are beholden only to themselves. As a result, Blake said that they’re more likely to follow riskier investment strategies, such as buying dips or keeping their equities in particularly volatile sectors.

    Heading into the last three months of 2022, Blake said he doesn’t think institutional investors will return to buying. But he does believe that they’ll need to stop selling at such an aggressive rate if the market has any chance of bouncing back. “It’s really hard for a market to recover in the face of over $50 billion worth of net selling from the largest group in the market over that time frame,” he said, adding that whatever the institutional community does “from a net basis in equities” will be a strong indicator of how the market closes out the year."

    MY COMMENT

    LOL.....screw the institutional speculators and their computer program trading. As usual the REAL guts of the actual stock markets is the retail investor.

    As to retail investors being left...."holding the bag". I will take that bag and hold it all day long. The long term returns that retail investors.....that are RATIONAL......achieve kick the institutional ass.

    You cant really compare the two sorts of "investors". PRIMARILY......the institutions are NOT "investors". They are short term market manipulators (legal) with their micro second herd behavior computer program trading. Nothing wrong with that.....it is what they do.....they are SPECULATORS looking for extremely short term profit.

    On the other hand MOST retail investors tend to be long term.....real investors.....content to capture the gains and compounding that the markets give long term.

    Unfortunately this year.....it is the institutions that are driving the markets based on the current world wide economic conditions.
     
    Smokie likes this.
  4. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    WOW.....I am a stock trading GENIUS.

    I bought NVDA this morning at $131.64. It is now trading at $134.05. Why am I bothering to be a long term investor when I can make this kind of money as a short term trader. SELL, SELL, SELL.......I am UP by 1.8% in only a few hours.

    Whoops....never mind.....I did nothing. I put in an order late last night to buy "at the market" today. I had NO CLUE if the markets would be up or down. I did not care one way or the other. All I knew is my view of the company NVDA and their supremely exceptional management and the fact that they are down by 55% in their stock price. So....being a long term investor I added to the position in one of the accounts that I manage.

    Will I make money in the short term? Probably not.....it is likely they will dip below what I paid some time in the near future.....perhaps as a result of 3rd or 4th quarter earnings. But....I dont try to aim for the absolute bottom. After all.....market timing does not work....something always screws up the plan. I am content to buy a great company with good forward prospects on sale at a discount of 55%.
     
    Lori Myers and Spud like this.
  5. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    HEY.....I just noticed.....the markets are staging a come-back of sorts. We are now way off the lows of the day. We are seeing the markets recovering from the Nervous Nellie's and the traders.

    COURAGE....the day is not lost yet. Not that any retail investor that is long term should be focused on......today. The focus should be putting as much money to work as you can for as long as this bear market lasts. We WILL see a BULL MARKET again....even if it takes 2 years to get there.

    Smart investors are RACKING UP.......FUTURE GAINS.....through what they are buying right now as well as dividend and capital gain reinvesting right now.

    I tell my kids all the time......the best thing for you will be if this bear market lasts for years. The more money you can put away at these prices the better. At your ages......the golden era of investing is the bear markets.....not the bull markets. Fortunately they have learned to focus on the LONG TERM......they are both.....along with their spouses.....piling money into the markets every month.
     
    Spud likes this.
  6. Spud

    Spud Active Member

    Joined:
    May 6, 2022
    Messages:
    197
    Likes Received:
    151
    NVDA is at a steep discount. Excellent choice or should I say. Great timing. :D
     
    WXYZ likes this.
  7. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    Thank you Spud.

    In fact I was away from the boards over the past couple of minutes buying another.....THREE SHARES.....of NVDA. Since I had about $20,000 to play with in that account......and.....I got a good price at the open.....I had enough money left over to get another THREE SHARES. So I did. I hate to leave money siting in cash or money market.
     
    Spud likes this.
  8. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    Here is the story that everyone is ignoring today.

    Housing starts: 'Collapse in single-family permits is the real story'

    https://finance.yahoo.com/news/housing-starts-permits-152522177.html

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

    "A steep drop in building permits in August overshadowed the better-than-expected rise in new residential construction and offered fresh evidence of a housing slowdown.

    “In short, ignore the headline starts numbers," Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote. "The collapse in single-family permits is the real story, and it has much further to go."

    Residential starts — including both single- and multi-family units — increased 12.2% last month to a 1.575 million annualized rate from 1.404 million in July, according to government data released Tuesday. The consensus expectation by Econoday was 1.440 million.

    But applications to build declined 10% to an annualized rate of 1.517 million units in August from 1.685 million in July. The consensus expectation by Econoday was 1.621 million.

    “As a general rule, when starts and permits move in opposite directions, trust the permits numbers, which lead and usually are less noisy," Shepherdson added. "The surge in headline starts was concentrated in a 31% leap in the multi-family component, lagging prior gains in permits."

    The construction for multi-family units jumped to a 621,000-unit pace in August, up from 483,000 in July.

    The jump in construction of multifamily dwellings was due in part to the soaring demand for rental property,
    which as pushed vacancy rates down to a 38-year low, prompting developers to add more multi-family supply to the market.

    Still, permits for multi-family dropped 18.5% to 571,000 pace in August, down from 701,000 in July.

    “Multi-family starts likely will be little changed in September ,but will then probably drop sharply in October," Shepherdson said. "They account for about one-third of total starts, but they can dominate the m/m [month-over-month] numbers because they are so volatile.”

    The government report also showed the construction pace of single-family housing rose 3.4% to an annualized 935,000 rate, marking the first increase in six months. Permits for single-family homes, on the other hand, fell 3.5% in August to 899,000, down from 932,000 in July.

    [​IMG]
    Falling Mortgage demand is crushing construction
    "Despite the small rise [in starts] in August, we are still downbeat on the outlook for starts over the remainder of the year," Sam Hall, property economist at Capital Economics wrote in a note. "Rising mortgage rates and a surge in house prices have stretched affordability, which is weighing on demand for new homes."

    Construction activity lags sales, and home sales lag mortgage demand, which has come under pressure as higher costs and elevated prices compound affordability for would-be home-buyers, according to Shepherdson. The average 30-year fixed mortgage rate last week topped 6% for the first time since 2008.

    This would be consistent with single-family building permits falling by a further 20%-plus from their July level. Activity appears set to drop well into the fall. We cannot call the bottom of the housing market cycle yet, and even when sales and construction stop falling, prices likely will continue to correct for some time afterwards,” Shepherdson wrote in a note."

    MY COMMENT

    A HUGE factor in the financial psychology of regular people is the worth of their largest single asset.....their home. We are now in a very dangerous time for house values in many parts of the country.....due to mortgage rates, the FED, and government policy. Add in the epidemic crime that is sweeping nearly all the big cities.....and you have a dangerous time for house values.

    If housing permits continue to collapse.....you have the basis for the NEXT housing run up. In many areas even though the market is soft.....the number of listings is still way down. Owners are choosing to NOT sell or list. It is currently a stand-off between buyers, sellers, and owners that refuse to list in the current market.

    If I had to guess......I would say that in many areas we are headed for a crazy market with slowing sales....but not necessarily much drop in prices.....or increase in listings. Over time we will see who wins the game of chicken between would be buyers and owners that refuse to list their home.

    B
    UT......we all know this stuff is all.....local, local, local. I am happy to live in one of the most desirable markets in the country as companies and workers continue to FLOOD into my area.
     
  9. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    I was out in the area of the TESLA plant here in Austin the other day. I got a closer look at the site and was surprised to see that they are building ANOTHER huge building on the site. It is under construction right now on the same site as the Asutin factory they just completed.

    Tesla files to expand Gigafactory Texas with giant new building

    https://electrek.co/2022/07/01/tesla-files-expand-gigafactory-texas-giant-new-building/

    [​IMG]

    "Tesla has filed with the city of Austin to expand Gigafactory Texas with a giant new 500,000-square-foot building at the site.

    Now Gigafactory Texas is already giant. It’s already one of the biggest buildings on Earth.

    The current building is equivalent to about 15 city blocks or three Pentagons as CEO Elon Musk said earlier this year.

    It offers just over 4 million square feet of space and fits about 338 million cubic feet of volume.

    But regardless of how big it is, Tesla still has plenty of room to expand at the location since the project currently sits on a 3.3-square-mile piece of land.

    This week, Tesla has filed a building permit to expand on that land with another extremely big building:

    In the description for the permit application, Tesla writes:

    “All above ground piping and underground plumbing, GA 2 and 3 expansion, 500,000 square foot.”

    A 500,000-square-foot new expansion would be a significant new building at the factory.

    GA” normally refers to general assembly – meaning that Tesla plans to build two new assembly lines in that new building.

    It’s not clear if it would be to increase production of the Model Ys currently being built at the factory or if Tesla plans to use the space to build new models that are supposed to come to Gigafactory Texas next year, like Cybertruck and Tesla Semi.

    Tesla is not revealing much about the production ramp-up of Model Y at Gigafactory Texas, but Electrek recently reported that insider information puts production at a few thousand units in a week for the first time.

    However, it is unclear if this is sustainable as Tesla has complained about its new 4680 battery cells and its structural battery pack being a bottleneck. We also have indications that Tesla is now building Model Y Long Range vehicles with 2170 cells in order to get around that bottleneck.

    Gigafactory Texas is one of the world’s biggest factories not only because Tesla wants high volume production at the plant but also because the automaker wants to be vertically integrated down to battery cell production on site.


    Tesla has been ramping up production of 4680 cells at the factory, and it is even adding a cathode processing plant on the same piece of land.""

    MY COMMENT

    The above article is from July. From what I saw the other day the cranes are there and it looks like this building is now under construction.
     
    Spud likes this.
  10. Smokie

    Smokie Active Member

    Joined:
    May 24, 2022
    Messages:
    290
    Likes Received:
    219
    And to keep with the "theme" of expert predictions and knowing the future of all things economy/and market related....Oddly enough I was reading a little market related news letter about "market forecasts" and the many things we are constantly told about "what this means or what is going to happen."

    An example of professional macro hedge fund vs SP500 as conducted by the Hedge Fund Research (HFR). Performance based through 07-31-22.

    HFRI Hedge Fund Index* 5.2% HFRI Macro (Total) Index 5.0% S&P 500 Index 12.8% *(5yr annualized return)
    HFRI Hedge Fund Index 5.1% HFRI Macro (Total) Index 2.8% S&P 500 Index 13.8% *(10yr annualized return)

    Of course one would think these macro funds would have the exclusive ability to have all sorts of forecasts, insights, and other sorts of wizardry to out perform and hedge the returns in their favor as designed. With 4.5 trillion invested surely they can beat a lazy passive index, but apparently not so.

    "The Illusion of Knowledge" it was titled and appropriately so. A few of the quotes within the letter I found most applicable to our noise of the past several months.

    “It’s frightening to think that you might not know something, but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what’s going on.” Amos Tversky.

    "It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so." Mark Twain.

    "Forecasts create the mirage that the future is knowable." Peter Bernstein.
     
  11. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    "An example of professional macro hedge fund vs SP500 as conducted by the Hedge Fund Research (HFR). Performance based through 07-31-22.

    HFRI Hedge Fund Index* 5.2% HFRI Macro (Total) Index 5.0% S&P 500 Index 12.8%
    *(5yr annualized return)
    HFRI Hedge Fund Index 5.1% HFRI Macro (Total) Index 2.8% S&P 500 Index 13.8% *(10yr annualized return)"


    A beautiful example Smokie. You would think that with all their resources the Hedge Fund professionals would kick ass on the SP500. I guess since the Bernie Madoff returns are no longer included.....they have had a significant drop.

    This is so EMBARRASSING......they are getting destroyed by the simple SP500.
     
  12. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    Happy FED DAY EVE....everyone. The markets in celebration gave me a RED gift today. I had one stock up today Apple. I also got beat by the SP500 by 0.15% today.

    At least my NVDA trade in the account of a family member made a few cents per share.

    Tomorrow is FED DAY. The FED FAIRIES will be visiting the portfolios of all the good investors. Unfortunately they tend to take more than they leave behind.
     
  13. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    HERE is the expectation for tomorrow.

    Federal Reserve eyes another historic rate hike on Wednesday

    https://finance.yahoo.com/news/federal-reserve-eyes-historic-rate-hike-wednesday-192026594.html

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

    "All eyes are on the Federal Reserve as the central bank kicks off a two-day policy meeting Tuesday, as officials are widely expected to raise short-term interest rates by three-quarters of a percentage point at the conclusion of their meeting Wednesday.

    In the face of stubborn inflation, officials are expected to raise the central bank’s benchmark interest rate — the federal funds rate — to a new range of 3.0% to 3.25% from a current range of 2.25 to 2.50%. This would mark the third-straight 75-basis-point rate hike since June, bringing rates to their highest level since 2008.

    The Fed is likely to signal that it will raise interest rates more aggressively and expect rates to be higher for longer when it releases a summary of each official’s interest rate expectations known as the “dot plot.”

    With inflation rampant, Powell will try hard to not change the perception of a hawkish Fed and will emphasize the FOMC’s determination to act to bring inflation down to more acceptable levels,” Roberto Perli, head of global policy for Piper Sandler macro research, wrote in a note to clients. “He will also probably continue to talk about 'pain' being required to achieve that objective, which is a polite way of saying that the Fed is willing to tolerate a recession in order to achieve its inflation objective.”

    Markets expect the benchmark interest rate to rise above 4% by year end, according to CME Group. However, how high and how quickly interest rates go from there and how long they remain at high levels remain open questions.

    "They've acknowledged for a while this will be a bumpy ride as they continue to bring inflation down," Vanguard Group Senior International Economist Andrew Patterson told Yahoo Finance Live. "But [Wednesday] we'd expect them to really emphasize not necessarily the terminal rate — they're not going to give you much clarity on that, they may hint at it — but really how long they're going to keep rates at that terminal rate."

    Federal Reserve Chair Jerome Powell has emphasized keeping rates high to fight inflation, noting that the Fed doesn’t want to risk Americans’ expectations of inflation to keep rising and that history cautions against prematurely loosening policy. Meanwhile, Fed Vice Chair Lael Brainard has said monetary policy will need to be restrictive for some time and that the Fed is in it for as long as it takes to get inflation down.

    Perli expects the Fed's interest rate projections to be “significantly” higher than in June — when officials projected the Fed funds rate would end the year around 3.4% and 3.8% in 2023 — and also predicts the Fed will bring the funds rate up to between 4% and 4.25% by year end.

    The Fed will also release a summary of its quarterly economic projections, which will include Fed officials’ outlook for inflation, unemployment, and the overall economy. Given expectations for higher interest rates, many economists expect officials to lower their forecasts for GDP growth this year, while raising their estimates for unemployment and inflation.

    We do see a risk of recession, especially if the Fed continues to get aggressive,” Luke Tilley, chief economist for Wilmington Trust, wrote in a note to clients. “They could overdo it and overcorrect. And that poses a risk to the outlook and could send us into recession.”"

    MY COMMENT

    What if we had a recession.....but....everyone refused to say it was? Did it really happen? No one in the media at any source is saying this is a recession. A NEW LOW for the financial media.

    As to the FED......as usual....nothing new to see. Same old "STUFF" as has been happening all year. It will be so nice to get past tomorrow. UNFORTUNATELY....we are doomed to have to listen to them all out there in the media having their ego's stroked for the next week or two.

    If it was not screwing with people's lives it would be so.....PATHETIC to watch.
     
    Smokie likes this.
  14. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    I have to distract myself from the market somehow......so why not try to buy a new painting. I am all set to bid by phone in an auction tomorrow to try to buy a painting that my wife likes. We should have a good chance to get it with what we are willing to pay and the normal auction range for this artist.

    Unfortunately the last few times we have tried to buy at auction....the paintings have gone way above estimate....and way above what would be reasonable for the artist. Hopefully we will break our bad luck streak tomorrow.

    We are now going.....UP.....on our walls to hang art. We have basically run out of wall space so have startted going up higher and stacking paintings on top of each other....over the last couple of years. There is a name for this......and, no....it is not "CRAZY COLLECTOR SYNDROME". It is called "SALON STYLE".

    "What does salon style mean?

    [​IMG]

    If you have spent time in museums or galleries lately, there's a good chance that you will have seen an exhibition hung “salon-style,” a term that refers to
    large groupings of art that extend higher and lower than the traditional eye-level single row or “museum-style” hanging."

    Many of the art collectors in Europe pre-WWII would hang art in this style in their grand homes. You see this portrayed often in movies about the WWII era.
     
    #12434 WXYZ, Sep 20, 2022
    Last edited: Sep 20, 2022
    Smokie likes this.
  15. Smokie

    Smokie Active Member

    Joined:
    May 24, 2022
    Messages:
    290
    Likes Received:
    219
    At least we are consistent here lately right? We add another red day to the tally. However, we just have to endure and survive through it. Keep sight of your financial goals, keep anchored to your plan by continuing your contributions, and sit tight. Being a long term investor requires a good amount of optimism and reality at the same time. Keeping a healthy balance of those two things in tandem with a sound, reasonable investment plan has worked for me.
     
  16. zukodany

    zukodany Well-Known Member

    Joined:
    Aug 4, 2019
    Messages:
    1,214
    Likes Received:
    749
    I’m on vacation till next week now so haven’t been following the market much, but… both NVDA & FedEx seem like really good buys at the moment.
    If only I had some cash laying around instead of spending it on drinks and luxury hotels :-/
    Happy investing everyone and keep your spirits high… This too shall pass!
     
    Smokie and WXYZ like this.
  17. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    GOOD to see Zukodany posting.....missed you and your comments.
     
    zukodany likes this.
  18. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    WTF is going on with GOLD? I dont follow it. I do own some....just for fun...I dont consider it an investment.

    I just saw that it is at $1681. That is a huge drop from where it has been over the past year or so. One of the ONLY reasons that people used to buy gold was as a hedge for when stocks are sinking. A hedge against inflation...too.

    NONE of the theories as to why people should own or hold gold are turning out to be true anymore. I guess now the ONLY reason to have any gold is in case of an Apocalypse. AND....even it that situation it will not do you much good.....someone bigger and tougher than you will simply take it away from you.
     
  19. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    Nice open today. It reflects the overwhelming view that the FED WILL raise rates by 0.75%.

    There is nothing going on today to kill stocks....except.....for when the FED members begin to BLAB to the media. Than.....all bets are off......as the media begins to search for any perceived little bit of language that they can twist into confusion....and speculation.
     
  20. WXYZ

    WXYZ Well-Known Member

    Joined:
    Oct 2, 2018
    Messages:
    7,582
    Likes Received:
    2,922
    I am posting this little article....needless to say I do NOT agree with their thesis.

    Why Index Funds Could Fade

    https://www.barrons.com/articles/stock-index-funds-bear-market-51660249958?tesla=y

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

    "Index funds have had a spectacular run. They collected $8.5 trillion in retail investment dollars by the end of the first quarter of this year, according to Morningstar, more than all active strategies together. Along the way, they became the dominant investment idea.

    Yet the stock market’s recent dip into bear-market territory raises new questions for these popular funds. Will indexing recover and go on to scale new heights? Or has the time come to consider its defects as well as its virtues?

    The virtues are easily understood. It is a simple strategy to adopt, and usually comes with low fees. Both legendary Yale University investment head David Swensen and Berkshire Hathaway’s Warren Buffett endorsed index funds for these reasons.

    You’re guaranteed to be in the top quartile if you use indexing” over 10 to 30 years, celebrated investor Charles Ellis argued last year. “You are guaranteed to be a winner.”

    Could Swensen, Buffett, and Ellis all be wrong? Yes. Especially Ellis. Why?

    In theory, index funds are highly diversified. In practice, they are capitalization weighted, which means new money flows into the most popular stocks of the moment. The combination of index fund popularity together with index construction favoring the most popular stocks means that more money has flowed into fewer and fewer stocks.

    Over the past year, as much as 25% of S&P 500 index fund money has been invested in only five stocks: Apple , Microsoft , Amazon.com , Tesla , and Alphabet . At the end of this past quarter, 7.1% of the index was invested in Apple alone.

    The purveyors of indexes, being human, tend to make the concentration in a few expensive stocks even worse. The committee charged with overseeing the S&P 500 has changed the constituents often, and in the process tended to add stocks with price/earnings ratios more than twice that of those deleted.

    Capitalization-weighted equity indexing is also “momentum” investing, in that more new money flows into what has gone up and less into what has gone down. There is an irony here. The idea of indexing is supposed to reflect “efficient markets,” where prices reflect all available information. A momentum approach isn’t supposed to work within such markets. Academic supporters of some version of market efficiency treat successful momentum investors either as an unexplained anomaly or as an example of luck.

    There are other seeming contradictions embedded within index fund construction. In addition to ignoring the unarguable principle that price paid represents a key determinant of long-term return, indexing ignores much else besides.

    James Grant, founder and editor of Grant’s Interest Rate Observer, pointed out in 2018 how all of the big index funds bought 23% of healthcare firm MiMedx and went right on buying after executives resigned or were fired and past financials were withdrawn. As Grant observed sardonically, “Now this is passive.”

    The little-understood and symbiotic relationship of index funds, corporate executive stock options, and corporate stock buybacks is another important negative.

    The large companies that, because of capitalization weighting, dominate index funds also tend to be highly reliant on stock options as a way of rewarding top executives. In the past, this has reduced reported expenses relative to cash compensation and thus increased reported profits and share prices.

    The origins of this system can be dated to the 1990s, when Congress made cash compensation potentially more expensive, and also discouraged the U.S. accounting board from expensing and then fully expensing options.

    Corporate stock buybacks are an important part of the options compensation system. They not only add demand for the company stock—thereby helping to move options “into the money”—but also obscure the earnings dilution that usually accompanies options exercise. Earnings per share increase rather than decrease with the exercise of options, so long as the amount of buybacks exceeds the amount of exercise. The icing on the cake is that higher earnings per share and share prices trigger even more purchases by capitalization-weighted index funds.

    With a falling market, U.S. companies relying on options compensation face a dilemma. They either issue replacement options, which may flip options compensation into being more expensive, or they lose key employees.

    Further complications include a new, 1% federal tax on corporate share buybacks that aren’t directly linked to options exercise and the increasing pressure of activist-shareholder resolutions targeting massive grants to CEOs and others.

    Smaller U.S. tech companies are most obviously caught on the horns of underexpensed and now underwater options. But the large growth companies—the ones dominating the indexes—are just as thoroughly entangled.

    With respect to these stocks and the indexes they dominate, one can only say: watch out."

    MY COMMENT

    I simply say.....so what. I see NOTHING above that would stop me from investing in a SP500 Index. Whether Index funds exist or dont exist....does not change the FACT that the SP500 has returned 10-11% over the extreme long term.

    The SUCCESS as long term vehicles of all the big indexes is ONLY due to the businesses that they include. It has NOTHING to do with whether or not there are index funds or index investors. The success of these baskets of stocks is due to the performance of the companies that are included.

    During the majority of the lifetime of the big indexes there were NO Index funds....the performance was and is the same regardless.

    Any BADMOUTHING or FEAR MONGERING about Index funds is for the most part the financial media and elites exercising SOUR GRAPES. After all....THEY cant beat the Index returns as shown a few posts above. Plus this sort of investing opened up....their little private club/world.....to the great unwashed masses.
     
    Smokie likes this.

Share This Page