The Long Term Investor

Siting at our horse stable listening to the markets on Sat radio. Markets are doing just fine without any help from me today. I will do some posting in an hour or two.

 

So far all the averages are green as are all my ten stocks. Amazing market strength when you don’t have the market overhang of the negative media and the FED.

 

Yep....the data always shows that the stock markets are positive at least 70% of the time. Note the data above......proof once again that the MAJORITY of the time....from one month to 20 years.......the PROBABILITY is that the markets will be positive. Would you take those odds in Vegas? I will take them all day long when it comes to investing money.

This is the PRIMARY reason that I am fully invested all the time. This and the FACT that you never know when the BIG GAINS are going to happen and you need to be invested to capture them.

 

I spent the morning out of touch except for sat radio and my phone. so here is the markets today.

Stock market news today: Stocks rally as Wall Street looks to rebound from worst week of 2023

https://finance.yahoo.com/news/stock-market-news-live-updates-february-27-2023-130555308.html

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

"U.S. stocks rallied on Monday as Wall Street looks to rebound from the worst week of the year.

The S&P 500 (^GSPC) rose by 0.4%, while the Dow Jones Industrial Average (^DJI) gained 0.2%. Contracts on the technology-heavy Nasdaq Composite (^IXIC) increased by 0.7% during midday trading.

The yield on the benchmark 10-year U.S. Treasury note ticked down to 3.934% Monday.

On the economic data side, new orders for manufactured durable goods in January plunged to 4.5%, the biggest drop since April 2020, the Census Bureau reported. The drop was more pronounced than economist estimates of 4.0%.

"The manufacturing sector will remain under pressure in the months ahead, but the details of January's report of durable goods orders and shipments suggest factory activity started the year on a better note than the headline figure would suggest," Lydia Boussour, EY Parthenon Senior Economist, wrote in a statement following the release.

Meanwhile, the National Association of Realtors’ index of pending home sales climbed 8.1% to 82.5 in January, higher from the projected estimate of 1.0% by Bloomberg economists, according to data the group released on Monday. On a yearly basis, however, pending transactions plunged by nearly 24%.

"The increase in the Pending Home Sales Index confirms that the US housing market has improved, or better put, has somewhat stabilized over the last several months due to lower mortgage interest rates," Raymond James' Chief Economist Eugenio Aleman, wrote in statement to Yahoo Finance. "However, the recent increase in mortgage rates is probably going to inflict some more pain on the US housing market going forward."

Stocks closed out the worst week of 2023 on Friday after the Federal Reserve’s preferred inflation gauge showed it unexpectedly accelerated in January and consumer spending jumped. The “core” Personal Consumption Expenditures (PCE) price index – which excludes volatile food and energy components – showed prices climbed 0.6% in January and 4.7% from last year.

The Commerce Department also reported consumer spending rose 1.8% last month from December, the largest increase in nearly two years. The survey’s results renewed anxiety among investors that the Fed would continue its aggressive tightening campaign against inflation.

The drop in optimism pressured the major indexes, as the Dow Jones dropped 3% for its fourth consecutive losing week, while the S&P 500 shed 2.7% in its worst week since early December and the tech-heavy Nasdaq sank 3.3%.

Data compiled by 22V Research has found that rising interest rates have increased the correlation between growth and value stocks has jumped to the highest level since at least 2005.

This week, investors will remain keen on the retail sector, with earnings from Target (TGT) on deck before market open on Tuesday after Walmart (WMT) warned of cautious profit guidance for the year ahead. Home improvement retail giant Home Depot (HD) also had disappointing guidance for fiscal 2023.

Elsewhere on the earnings calendar are results from Costco (COST), Macy's (M), Dollar Tree (DLTR), and Kohl's (KSS) to feature the retail side.

Meanwhile, the share of companies topping analysts' expectations in the fourth quarter has been low compared to history. Data from FactSet showed that 68% of S&P 500 companies reported fourth quarter earnings that beat expectations, down from the five-year average of 77% and the 10-year average of 73%.

In single stock moves, Seagen Inc. (SGEN) shares jumped Monday morning after a report from The Wall Street Journal said Pfizer (PFE) is in early-stage talks to acquire cancer drugmaker company in what could be a multi-billion dollar deal.

Berkshire Hathaway Inc. (BRK-B) stock rose following CEO Warren Buffett’s annual letter to shareholders, which offered readers a glimpse into his views on share buybacks, taxes, corporate accounting, and his sense of optimism about the economy.

Shares of Union Pacific (UNP) climbed after the largest freight operator announced its plans to name a new chief executive following pressure from activists to oust Lance Fritz from the job."

MY COMMENT

The constant negativity of the media on view here. The day is nicely UP.....but the emphasis from the headline on is the week last week.....negative of course.

Earnings are continuing to come in very nicely.......far better than all the experts predicted.........the media take negative as usual.

We are on our way to a nice gain to start the week....if the markets dont freak out in the last hour.

 

THIS is the reason that TSLA is UP by over 5% today.

Tesla's German plant hits 4,000 cars per week ahead of schedule

https://www.reuters.com/business/au...4000-cars-per-week-ahead-schedule-2023-02-27/

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

"BERLIN, Feb 27 (Reuters) - Tesla's (TSLA.O) German plant in Brandenburg near Berlin is now producing 4,000 cars per week, the company said on Monday, quadrupling from May when Chief Executive Elon Musk had compared investment in Tesla's new plants to "gigantic money furnaces."

The Berlin plant hit the production target three weeks ahead of a production schedule reviewed by Reuters.

Shares of Tesla were up 4% at $204.93 on Monday.

At its new weekly output, Tesla's plant in Germany would have annual output of over 200,000 vehicles. The maximum capacity planned for the Brandenburg plant is 500,000 cars a year, nearing 10,000 per week, the company has said.

Output from the plant in Germany is now a third of the Model Y output in Shanghai, where Tesla planned to keep an average total output of 13,000 Model Ys per week - around 1,000 below maximum capacity - and a further 7,000 Model 3s in February and March, according to the production plan.

Tesla was planning to ramp up output from Brandenburg to 4,000 in the week of March 13 and to more than 5,000 by the end of June. It hit production of 2,000 units per week in October last year and 3,000 per week in December.

The Brandenburg plant started operations in March but was initially slow to get going. In a May interview, Musk described Tesla's newest plants in Germany and Austin as "gigantic money furnaces" due to the challenges of increasing production.

The ramp up in output in Germany would allow Tesla to use a larger share of its Shanghai production for markets outside Europe, including Thailand, where it has just launched sales.

Tesla has also begun assembling batteries in Germany that will soon be used in vehicles produced at the plant, but said last week it would focus cell production in the U.S. in light of Inflation Reduction Act incentives.

The U.S. electric-vehicle maker is also preparing to produce cell components such as electrodes, some of which will be sent from its site in Gruenheide in the state of Brandenburg to the United States, Tesla said on Wednesday.

Tesla is due to update analysts on its strategy on Wednesday when the company has its investor day."

MY COMMENT

The world should doubt Elon......at it's own risk. The man can produce.......he is simply a winner.

Funny how you dont hear much about the impending failure of Twitter any more. Musk is showing the world how over populated with dead weight employees the tech business is.

"They"........the mysterious "they".....tried to cancel him over Twitter and failed. They tried to claim that he was not paying enough attention to TESLA due to Twitter.......more BS.

News based investing....not for me. Herd behavior investing......not for me.

 

A nice day in the markets today. I was GREEN today. Eight of ten stocks were UP. COST and HD were the two that were down today. No doubt due to the earnings that will come on Thursday for COST.....and.....the emphasis on retail lately for HD.

I got in a beat on the SP500 today by 0.23%.

A nice "normal" market day today for the markets. ONWARD AND UPWARD......TO INFINITY AND BEYOND.

 

I lifted this section from the recent Buffett letter. Some really good advice for investors here. Buffett si quoting his partner Charlie Munger.

•The world is full of foolish gamblers, and they will not do as well as the patient investor.

•If you don’t see the world the way it is, it’s like judging something through a distorted lens.

•All I want to know is where I’m going to die, so I’ll never go there. And a related thought:
Early on, write your desired obituary – and then behave accordingly.

•If you don’t care whether you are rational or not, you won’t work on it. Then you will stay
irrational and get lousy results.

•Patience can be learned. Having a long attention span and the ability to concentrate on one
thing for a long time is a huge advantage.

•You can learn a lot from dead people. Read of the deceased you admire and detest.

•Don’t bail away in a sinking boat if you can swim to one that is seaworthy.

•A great company keeps working after you are not; a mediocre company won’t do that.

•Warren and I don’t focus on the froth of the market. We seek out good long-term
investments and stubbornly hold them for a long time.

•Ben Graham said, “Day to day, the stock market is a voting machine; in the long term it’s
a weighing machine.” If you keep making something more valuable, then some wise person
is going to notice it and start buying.

•There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is
dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count
on getting rich twice.

•You don’t, however, need to own a lot of things in order to get rich.

•You have to keep learning if you want to become a great investor. When the world changes,
youmust change.

•Warren and I hated railroad stocks for decades, but the world changed and finally the
country had four huge railroads of vital importance to the American economy. We were
slow to recognize the change, but better late than never.

If you want to read the entire letter.....here it is:

https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2023/02/25/2022ar.pdf

MY COMMENT

Some key information above for anyone that aspires to be a LONG TERM INVESTOR.

 

Siting here today and ignoring the markets to let them mature into the morning. I have see a few articles so far today that are interesting. Here is the first one......a history of Financial Panic. We tend to think of this topic from the Great Depression on to today. BUT.....world history is full of financial panics over the past hundreds of years. In fact financial panic seems to be farily common.

A History of Market Panics

https://investoramnesia.com/2023/02/26/a-history-of-market-panics/

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

"A History of Market Panics


Happy Sunday, everyone! Today’s newsletter takes a look back at the history of U.S. market panics from 1792 through 1907.

Part I: The Panic of 1792


Summary:
The Panic of 1792 is a fascinating episode in America’s financial history for many reasons. Not only did this period witness the first attempted ‘corner’ in America, the creation of a quasi central bank, and an insider trading scandal involving former Treasury department officials… it also occurred at the very founding of America. This meant that unlike today, where economists can leverage prior experiences and lessons to guide their decision-making process, Alexander Hamilton and his team were navigating crises on the fly. To understand the eventual Panic in 1792, however, we must first understand the conditions that preceded it…

Visualizing History:

Part II: The Panic of 1819
Summary:

The asset class at the heart of the Panic of 1819 was not equities, but real estate. The impetus for America’s first speculative real estate boom had a few culprits, some of which are familiar from the Panic of 1792. You may remember that in 1812, America waged another war with Great Britain (it was in this war that the White House was torched by British soldiers). Well, as with the Revolutionary War, America had borrowed heavily to finance the costs of this conflict, and found herself heavily indebted when the conflict drew to a close. Making matters worse, the large debts Jefferson had issued to execute his famed 1803 Louisiana Purchase from France were coming due to 1818.

In short, the American government needed a substantial revenue stream – and fast – to meet all of its payments associated with the War of 1812 & Louisiana Purchase…

Visualizing History:





Part III: The Panic of 1825

Summary:

If we’ve learned one thing from financial history it is that war is expensive. Like in 1792 and 1819, background for the Panic of 1825 begins with the end of another expensive conflict: The Napoleonic Wars. These wars are not the focus of this article, so to briefly summarize… this conflict was a series of wars lasting roughly 15 years as Napoleon sought to establish French supremacy in Europe. Napoleon was opposed by shifting coalitions of other European powers that were primarily led by the United Kingdom. The Napoleonic Wars were eventually ended by Napoleon’s defeat at the Battle of Waterloo in 1815.

The excerpt and chart below from Pamfili Antipa‘s article in the Journal of Economic History highlights why these wars were relevant to the Panic of 1825:

“Between 1797 and 1821, in order to finance the Napoleonic Wars, Britain suspended convertibility of Bank of England notes into gold… in terms of monetary policy maintaining the suspension of the gold standard for such a long period of time was an innovation.

However, funding of the wars with France meant that the suspension was accompanied by inflation and public debt accumulation. By the time of Napoleon’s final defeat at Waterloo in 1815, the price level exceeded its 1797 level by 22.3 percent and the debt-to-GDP ratio climbed to 226 percent… only WWI would entail a larger increase in the debt-to-GDP ratio.”


Visualizing History:




Part IV: The Panic of 1837

Summary:

“The impact of the bank runs and collapse in credit conditions triggered a brutal panic. Between 1837 and 1843, Banking & Insurance stocks fell 32% and Railroad stocks fell 63% (The Economic Historian). In 1843, 25% of US banks had closed their doors, and “overall prices had fallen by more than 40%”. Even worse, almost 10 states defaulted on their debts in the years following the Panic of 1837.

Jackson had satisfied his dream of ending the national bank, but it came at the cost of a prolonged six year depression in the United States, lasting from 1837 to 1843.”

Visualizing History:



Part V: The Panic of 1857


Summary:

In 1849 there was an explosion in economic growth and westward expansion after gold was discovered at Sutter’s Mill, triggering the California Gold Rush. The scale of this expansion is underscored by the fact that over the next decade California’s population grew from 93,000 to 380,000.

A seemingly endless number of railway lines and companies were launched in this period to meet the transportation demand stemming from westward expansion. According to historian Robert C. Kennedy, more than 20,000 miles of railroad track were laid during the 1850s.

Visualizing History:



Part VI: The Panic of 1866

Summary:

“It was this note posted on Overend & Gurney’s door announcing the suspension of payments that triggered the Panic of 1866. In terms of monetary policy, this panic was pivotal in the evolution of central banking. When Overend & Gurney collapsed, depositors at other banks rushed to withdraw their funds out of fear that their funds were also in danger. In response, the banks went “to the Bank of England discount office in search of funds.”

For the first time, the Bank of England acted as a Lender of Last Resort by injecting liquidity into the system, lending out £4 Million to commercial banks in just two days. The Bank of England’s actions quelled the panic and reduced its impact on the “real” economy.”

Visualizing History:




Part VII: The Panic of 1873

Summary:

One of the main drivers of railway panics in the 19th century stemmed from the nature of their financing. Constructing railway lines was a very costly endeavor, and provided no revenue in the short-term. It is expensive to build a railway, and the railway can’t make money until the railway is built. Not great. From the perspective of an equity investor, railways were not a particularly attractive business model until construction had ceased and revenue started flowing.

For this reason, many railroad companies in the 19th century relied upon loans and bonds for financing their operations. In a survey of 408 railways in 1872, The Commercial & Financial Chronicle found that only 159 of 408 (39%) railroads had issued equity. Within the 159 that had issued equity, only 6% of railways had equity that actively traded on the NYSE.



Railway financing became problematic when railroads became unable to repay their debts or defaulted on their bonds, which was all too common due to the large up-front construction costs and no revenue.

Visualizing History:




Part VIII: The Panic of 1882


Summary:

The root of France’s 1882 Panic was The Union Générale Bank. This financial institution was founded by a former Rothschild railroad engineer in 1878, Paul-Eugène Bontoux. While it is hard to imagine this being anything notable today, a defining feature of Bontoux’s bank was the fact that it was a “catholic” bank founded in a time where banking was dominated by Jewish-German banks. By heavily leaning on this Catholic affiliation, Bontoux was able to generate significant interest (and money) from the catholic establishment and France’s conservative catholic aristocracy.

The downfall of Union Générale stemmed from a few sources. First, Générale was “the bank most heavily involved with this [report] lending” (Winton Capital). As mentioned earlier, publicly traded banks like Union Générale could support their stock price by extending credit to brokers that the bank knew serviced speculators buying their stock. While this supported stock prices in the short-term, it was also incredibly risky. Second, like most financial institutions that failed in this period, the company had made some questionable investments and loans in European railways.

Lastly, and most importantly, however, was the company’s announcement on January 4, 1882 when Bontoux announced that the bank would be opening up a new bank in Trieste with the goal of taking business from its banking rival, The Banque de Lyon. The great irony of this was that Bontoux’s announcement caused the price of Banque de Lyon’s shares to plummet, and investors that owned both Générale and Lyon shares sold Générale stock to cover their losses on Banque de Lyon stock. Due to this heavy selling, Union Générale’s stock price similarly plummeted.


Visualizing History:

Part IX: The Panic of 1907

Summary:

What we now call the Panic of 1907 was the most brutal recession in America until the Great Depression. The Dow Jones Industrial Average fell 37.7% in 1907, and was the final straw for American regulators. This panic directly led to the creation of the Federal Reserve as U.S. leaders looked for a way to reduce the fragility of American financial markets, and frequent ‘panics’ caused by gold shortages or shocks. Again, this all traces back to the San Francisco earthquake. Remarkable, isn’t it?"

MY COMMENT

Some common themes in the above panics........action by government and economic manipulation........greed.....business failure caused by leverage and bad management decisions.....natural disasters (black swans)........and......war.

In other words Human behavior......as usual.

 

Falling in love......a bad move for an investor.

Falling in Love With Investments

https://rationalwalk.com/falling-in-love-with-investments/

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

"Several years ago, I was chased down a trail by a goose because I accidentally ran too close to its goslings.1 I’m sure this seems ridiculous but at the time I had no doubt that the goose meant business. Geese are monogamous birds that pair up for life to raise their young, and they are fiercely protective. Do geese fall in love with each other and love their offspring? I am not sure if geese feel what human beings would call “love”, but there is little doubt that animals are capable of forming attachments with others of their own species and, in the case of pets, with their human owners.

Few humans would want to live in a world devoid of love, and a good case can be made that humans who are incapable of love have sociopathic tendencies. However, love is an emotional attachment that cannot be ruled by rational self-interest and requires significant levels of trust. Granting others any level of trust obviously involves a degree of risk, but without a baseline level of trust in society and in our personal lives, life would be an unpleasant and degraded experience.

Every writer should know their circle of competence, and I am not qualified to provide advice on how to manage personal relationships other than to be alert to unmistakable signs of deceit and other indications of sociopathy. However, I do feel qualified to comment on the subject in the context of business relationships and investments. In a business context, emotional attachments might provide some ballast during adversity, but also present formidable obstacles to rational behavior.


Liking/Loving Tendency

One of the most important speeches that Charlie Munger ever made involved what he refers to as the Psychology of Human Misjudgment. With no formal training in the field of psychology, Mr. Munger nevertheless identified numerous pitfalls in life that we should all be careful to avoid. Over the years, I have written several articles covering the ideas discussed in the speech, but progress has been slow. In many cases, it has taken years for me to internalize the risks of individual misjudgments to the point where I feel qualified to write about them.

Liking/Loving Tendency is the opposite of Disliking/Hating Tendency which I wrote about in The Futility of Hatred last year. Writing about hatred is much easier than writing about liking and loving because hatred is a completely unproductive emotion that cannot lead anywhere but misery. Therefore, hatred is to be avoided at all costs, and discussion of the subject really involves how we can mentally come to terms with the futility of hating people who have given us ample reason to hate them. We avoid hatred not to benefit those who transgress against us but to avoid destroying ourselves. Hatred is stupid, and the prescription is simple even if it is not easy.

In contrast, Liking/Loving Tendency has positive and negative implications. While it is true that we risk impairing rational thought when we permit ourselves to like or love a person, an institution, or even our country, there are real benefits that accrue when we allow this emotion and enormous detriments for those who like or love nothing at all. We must balance the positive aspects of Liking/Loving with the risks.

“One very practical consequence of Liking/ Loving Tendency is that it acts as a conditioning device that makes the liker or lover tend (1) to ignore faults of, and comply with wishes of, the object of his affection, (2) to favor people, products, and actions merely associated with the object of his affection (as we shall see when we get to ‘Influence-from-Mere-Association Tendency,’ and (3) to distort other facts to facilitate love.”

Most of us have encountered situations where we interact with an individual who has annoying characteristics that are seemingly invisible to his or her spouse. We might think, “Why in the world would he tolerate this type of behavior!” But the reality is that ignoring faults is one of the hallmarks of love and why love can be “blind”.

Distorting reality to avoid the cognitive dissonance caused by an object of one’s love failing to behave properly is very common. Making excuses for bad behavior is also par for the course. It is easy to fall from giving a reasonable benefit of the doubt into justifying clearly terrible behavior:

“The phenomenon of liking and loving causing admiration also works in reverse. Admiration also causes or intensifies liking or love. With this ‘feedback mode’ in place, the consequences are often extreme, sometimes even causing deliberate self-destruction to help what is loved.”

Of course, sometimes admiration is deserved and looking up to an exemplar is exactly what we should be doing as a matter of self-interest. It is interesting to note that both Charlie Munger and Warren Buffett found such an exemplar in Fred Buffett:

“This blessing came to both Buffett and myself in large measure, sometimes from the same persons and ideas. One common, beneficial example for us both was Warren’s uncle, Fred Buffett, who cheerfully did the endless grocery-store work that Warren and I ended up admiring from a safe distance. Even now, after I have known so many other people, I doubt if it is possible to be a nicer man than Fred Buffett was, and he changed me for the better.”

The main lesson we should take from studying Liking/Loving Tendency, at least when it comes to business relationships, is to be smart about the individuals or institutions that we admire even when we know that we will lose some objectivity in the process. Obviously, this is easier said than done, but dealing with Liking/Loving Tendency in business is infinitely easier than navigating the pitfalls in personal life.

In business, I think it is fair to say that admiration and respect can be productive when directed in the right way but outright adulation and unquestioned love is dysfunctional. One might need to drop most guardrails in personal life or risk isolation and misery, but in business we should always retain objectivity.

Cults of Personality

We see the most extreme examples of Liking/Loving Tendency in cults where a charismatic leader so mesmerizes his followers that they are willing to consciously take self-destructive actions up to an including mass suicide. All objectivity is lost in such settings where the leader is endowed with God-like infallibility.

In the business world, there are naturally charismatic leaders who inspire much admiration and loyalty, although it rarely gets to the extremes of actual cults. Again, we are faced with a need to approach the charismatic leader with some nuance. There are certainly charismatic leaders in business who act with enthusiasm due to sincere belief in their companies and missions. Natural charisma leads to loyal shareholders.

All of this is fine up to a point, and the charismatic leader can perform a great service to shareholders if he or she inspires owners to act rationally and with a long-term focus during periods of adversity. Just as Charlie Munger saw Fred Buffett’s example at the grocery store and felt inspired to emulate him, we can benefit from picking the right examples in the business world.

Of course, the flip side is picking the wrong charismatic business leader and allowing a business relationship to grow into adulation and credulity. We can see examples of this when it comes to well-known business leaders with large followings. For example, although they are radically different individuals, both Warren Buffett and Elon Musk have enormous numbers of followers, many of whom are anything but rational when their hero is attacked. If you doubt this, try posting a negative (or even mildly critical) comment about either of these men on Twitter and check your replies.

My own sentiments regarding Warren Buffett and Elon Musk are well known to longtime readers and perhaps best explained in A Tale of Three Acquisitions published last year. I’ve owned shares of Berkshire Hathaway for over twenty-three years and have much admiration for Warren Buffett and Charlie Munger. This brings up the question of whether Berkshire Hathaway is a “cult” and if I’m a “member”.

Is Berkshire Hathaway a Cult?

For over a decade after buying shares in 2000, I attended every Berkshire Hathaway annual meeting. For those who have never attended, it is an event that should be experienced at least once to get a sense of the community that gathers in Omaha every year to hear two nonagenarians expound on business and life for five hours.2

I use the word “community” although some might characterize it as a “cult”. I use the word “community” because of all of the public companies in existence today, I think it would be difficult to select a group of more knowledgeable shareholders than those who gather every year in Omaha. Sure, there are plenty of people at the meeting who know little about business and have some personal attachments to the leaders, but by and large, the attendees have internalized the business message conveyed in Mr. Buffett’s letters to shareholders and other communications over the years.

Still, if I was a member of a “cult”, it is reasonable to conclude that I would be the last to admit it. In my defense, I have written critically about certain aspects of Berkshire over the years and I have based my evaluation of the company on facts and figures laboriously collected and analyzed on a quarterly basis. In a cult, I would have been excommunicated long ago because I dared to question certain decisions of the leaders.

I am very thankful for Warren Buffett and Charlie Munger’s stewardship of Berkshire Hathaway over many decades and cognizant of the fact that they have taken far less compensation out of the business than they could have easily taken. Both Mr. Buffett and Mr. Munger could have net worths far greater than they have today if they had taken reasonable compensation over the years rather than essentially working for free.

In what sort of evil cult would the leaders disadvantage themselves to such an extent and essentially make gifts to their followers decade after decade? The fact that the company’s leaders have worked for free is a financial gift to shareholders and I am personally richer as a result. So, of course I am grateful and admire their actions.

I view Mr. Buffett and Mr. Munger as business exemplars and among the best investors of our times, but I do not view them as omniscient deities, especially in areas unrelated to business. I have had strong disagreements with their political views on multiple topics over the years. I often shake my head in dismay during annual meeting Q&As that delve deeply into politics. And don’t get me started when it comes to their advice on a healthy diet and what constitutes a solid fitness regimen!

Ultimately, I am a shareholder of Berkshire Hathaway because my financial analysis over the years led me to believe that long-term ownership would result in attractive returns and because management’s stewardship as fiduciaries was rock solid, a belief not based on faith but on actions over multiple decades.

From Loving to Hating

Human beings are prone to swing from love to hate when events become severe enough to shatter the psychological edifice upon which their love was based. We can see this all the time in personal relationships because the shattering of love often is accompanied by various types of betrayal that appear unforgivable and deserving of scorn and hatred. Hatred is dysfunctional but part of the human condition.

What is true in personal life is also true in business when a leader who enjoys the personal devotion of followers takes an action that shatters the world view of his devotees to the point where they feel personally betrayed.

For years, Elon Musk was a hero of those who viewed themselves as environmentally and socially responsible. Not only was Elon in the process of somehow solving climate change by selling luxury electric automobiles to wealthy people, but he was also committed to making human beings an interplanetary species. He was viewed as a real life Tony Stark, a modern day superhero who literally might be the key to saving the world. All of Elon’s flaws and lapses as a fiduciary were excused or ignored by his followers because he was engaged in such important work for society.

For a significant number of Elon’s followers, this all changed over the past year due to the train wreck known as Twitter. In addition to claiming to espouse “free speech” principles that ran afoul of the censorship many advocated, Elon took several controversial positions and expressed support for a number of political views perceived to be “right wing”. This was too much for many Tesla customers, including some high profile celebrities who went from extreme fandom to extreme scorn in just a few years. The superhero went to the “dark side” and transformed into a “villain”.

A former adherent to a cause who becomes an apostate is often treated with far more scorn than an outsider who was never a member in good standing. This seems to be the case when it comes to Elon Musk and the political left, although it should be noted that many of Elon’s recent troubles were self-inflicted.

Conclusion

Nassim Taleb’s famous “Thanksgiving Turkey” anecdote tells the tale of the unfortunate bird that considered the human who feeds him daily to be his best friend on earth until reality was revealed in November. The turkey’s sense of love and well-being, so well established due to long experience, is shattered in just a few minutes.

We want to avoid being the Thanksgiving turkey in business and personal life. But it is impossible to live fully without opening ourselves up to a certain level of vulnerability. There are certain risks in life that are worth taking. Liking/Loving Tendency is not a bug but a feature of humanity. If we close ourselves off to all risk associated with establishing affinity with other humans, we forfeit much of what makes us human to begin with and resign ourselves to leading a very diminished life.

There is no easy answer when it comes to navigating this minefield in personal life where the longest lasting relationships are built on unconditional love, with all of its dangers and pitfalls. However, in business, we should never approach relationships with the level of vulnerability that is a necessity in our personal lives.

It is fine to deeply admire our business associates as well as managers of public companies that we do not know personally. But ultimately we must always fall back on a sober assessment of reality if we hope to remain rational. Indeed, those of us who are fiduciaries for our own families would be derelict in our duties if we fail to be aware of Liking/Loving Tendency when it comes to business and investing."

MY COMMENT

Too often people invest for emotional reasons. Too often there is worship for some charismatic corporate leader. Too often investors fall in love with a company and can not see reality. Too often investors fool themselves when it comes to the future of a business. YES......we are all human.

As an investor.....I suspect that success......if linked to the ability of the investor to see REALITY in a very clinical fashion.

Awareness.....is the first step to success.

 

Ok....enough philosophy.......here is a little article that I like and agree with.

Weekly Market Pulse: Good News Is Good News

https://alhambrapartners.com/2023/02/26/weekly-market-pulse-good-news-is-good-news/

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

"I think everyone can agree that stocks and bonds sold off last year because interest rates rose. You might get some argument about why rates rose but the fact they did is sufficient to explain the drop in stocks and bonds. It doesn’t matter if you think rates went up because the Fed raised their target rate on Fed funds or if you believe it was because of rising inflation or improving growth, you got the same result. And all investors know this because they saw the result in their portfolios.

The start of this year saw stocks and bonds rise as interest rates fell. Interest rate-sensitive REITs were up over 10% in January while the S&P 500 rose 6.3%. Small cap and international stocks did better, up over 9% to start the year. Investors learned a lesson from last year, namely that if rates are falling you need to embrace risk and if they are rising you need to take cover. Except that’s probably the wrong lesson and it seems it is getting repeated in February.

The fall in rates at the beginning of the year had nothing to do with expectations regarding inflation. The 10-year Treasury yield fell 50 basis points during January and 10-year TIPS yields fell right along with them (44 basis points). What that means is that the change in rates was more about economic growth than inflation. Growth expectations fell in January and stocks, real estate, and commodities rose. That may not be as crazy as it seems if you believe the Fed is having a big impact on growth, but the evidence of any impact from Fed rate hikes is hard to find outside the housing sector.

The 10-year Treasury rate hit its low on February 2nd this year at 3.4% Since then, rates have risen 55 basis points to 3.95%. And most everything an investor can own has gone down over that time, the more interest rate sensitive the greater the loss.



Again, what’s interesting is not that interest rates rose but why. Just as in January, the move in rates this month is more about growth than inflation. 10-year inflation expectations have risen 14 basis points in February so far but the 10-year Treasury yield is up 49 basis points and 10-year TIPS yields are up 35. The bulk of the rise in nominal rates was matched by the rise in real rates. In February, real growth expectations rose and stocks, real estate, and commodities sold off. Again, it doesn’t seem all that logical unless you assume that economic growth causes inflation.

I say that because the market has been quickly pricing in more Fed rate hikes this year and any cuts have been pushed into 2024. Coming into this year the highest probability was for two more 1/4 point rate hikes and then a pause until late in the year when rates were expected to be cut. Rates would peak at 5-5.25% and fall back to 4.75-5% by the end of the year. Now, the highest probability is for three more 1/4 point hikes to 5.25-5% and no cuts in 2023.

Of course, actual inflation data has been somewhat hotter than expected but I haven’t seen anything that makes me think things have changed all that much. Last week we got the most recent reading on the PCE deflator, the Fed’s preferred measure of inflation, and it was a bit higher in January than in December, but the trend is still down. Apparently, there are a lot of investors out there who thought inflation was just going to fall in a straight line. Two or three steps forward and one back seems a more logical expectation but then no one said markets had to be logical.

Last year inflation expectations rose in the first half of the year to just over 3% by April. Once the Fed started hiking rates, expectations fell through the end of the year. As inflation expectations were falling, nominal and real interest rates were rising; real growth expectations were rising. But it was when recession fears arose in June and July – and real rates fell – that stocks hit their first nadir of 2022. We saw a bit of that in December as well. But most of the year stocks were falling because rates were rising – or were anticipated to rise – no matter the reason.

For stocks, there is a tension between higher rates and higher growth. A higher discount rate pretty obviously reduces the present value of a future stream of cash flows (earnings). But higher growth raises those future cash flows. It is the rate of change and uncertainty around those future cash flows that drives prices. Last year, with rates rising a lot and future growth very uncertain, rates won the day and stock prices pushed lower.

But we aren’t in the same situation today. Interest rates, even if they move as far as the market currently expects, don’t have much higher to go. Growth, on the other hand, seems to be rather more robust than expected just a few months ago. If rates calm down, better growth may win this round.

I think what is driving the current selloff is fear that we’re about to get a repeat of last year with the Fed hiking farther and faster – again – than everyone thought at the beginning of the year. That seems more likely to just be recency bias at work than anything else. Investors and generals are always fighting the last battle.

A little perspective seems appropriate here. Interest rates have certainly risen of late but they are still below the peaks of last year and almost unchanged since stocks made their low on October 12, 2022. Investment returns are still positive this year, if a little down from January’s peak and they are very good since the October lows.



It would be hard to guess that is the case based on the rate at which sentiment has soured this month. At the end of January, options market bets were overwhelmingly on the bull side. Meme stocks were in the news again. The VIX was trading below 20 and active money managers were nearly fully invested. The AAII poll turned in a week with more bulls than bears for the first time in over a year. Now? Wall Street’s favorite new trade is buying calls on the VIX, a bet that things are about to get a lot worse and soon. Most of the other sentiment measures we follow show a similar flight of the bulls.

The rise in rates this month is being driven by better economic data, better growth expectations. Last year that meant higher rates faster and stocks didn’t like it one bit. But at current interest rates, the positive of better growth may be more important than the negative of slightly higher rates."

MY COMMENT

At the moment it is all about interest rates.....especially the Ten Year Treasury. It is also about the general economy and the potential for growth....even if no one seems to pay attention to this any more. At the moment the economy is strong.....a good thing for long term investing. AND.....at the moment we are about to see in the coming months the END of interest rate increases.

These two simple FACTS.......are the primary basis for my view that we are in a new BULL MARKET. In addition we have the FACT that stocks in general have been trending UP since July of 2022. The media may not talk about any of this. The day to day news and commentary may be negative......but......I believe we are going to see a very nice year this year for investors. Actually.....after what we have ENDURED for the past three years.....we deserve it.

 

Markets today are still looking for direction. the NASDAQ is bouncing between slightly red and slightly green. The SP500 is siting slightly red. The DOW.....being such a small limited average....is not particularly relevant.

Stock market news today: Stocks fall as volatile month comes to close
Here's what's moving markets on Tuesday, February 28, 2023.

https://finance.yahoo.com/news/stock-market-news-live-updates-february-28-2023-120603661.html

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

"U.S. stocks fell Tuesday at the open, rounding out the last day of a volatile month of February on Wall Street.

The S&P 500 (^GSPC) edged lower by 0.3%, while the Dow Jones Industrial Average (^DJI) declined 0.4%. The technology-heavy Nasdaq Composite (^IXIC) fell 0.2%.

The yield on the benchmark 10-year U.S. Treasury note ticked up to 3.97% Tuesday morning. The U.S. benchmark WTI crude oil moved higher to trade around $77.77 a barrel. The dollar index lower trading at $104.55.

Stocks closed higher on Monday, fueling a temporary rebound from Wall Street's worst week of the year. All three indexes are set to end February in the red after an optimistic start to the year.

Economic data released on Tuesday showed that retail inventories, excluding auto, rose 0.3%, higher than 0.1% expected by economists surveyed by Bloomberg. Meanwhile, wholesale inventories declined 0.4%, below the consensus estimates of 0.1%.

Other data showed that home prices fell 0.5% in December, according to data from S&P Corelogic Case-Shiller Index. On a yearly basis, home prices rose 4.6%, lower than analysts expectations of 4.8%.

As inflation still remains sticky, Federal Reserve Governor Philip Jefferson on Monday shot down arguments for raising the central bank’s 2% inflation target and said he is under "no illusion" that it's going to be easy to get the inflation rate back down.

This week, investors will remain focused on the retail sector. On Tuesday, earnings from Target (TGT) topped analysts expectations as consumer spending continues to move away from discretionary categories. The retailer’s same store sales grew by 0.7%, above estimates of a 1.74% decline. The stock popped more than 2% in early trading.

Data from Bespoke Investment Group showed that over the last week, 420 stocks have reported earnings and the percentage of companies lowering guidance is more than double the percentage raising guidance, signaling "lots of trouble for these smaller-cap companies that report late in the season."

In other single stock moves, Zoom (ZM) shares rose after the company posted better-than-expected fourth quarter earnings, with earnings per share of $1.22 higher than estimates of 80 cents. Revenue came in at $1.12 billion.

Occidental Petroleum (OXY) shares moved higher on Tuesday after the oil and gas producer posted fourth-quarter results that came in below Wall Street expectations on revenue and earnings per share.

Shares of Workday (WDAY) were down after the human-resources software company topped expectations with revenue of $1.65 billion, up 20% year-over-year, against estimates of $1.63 billion.

AMC Entertainment Holdings, Inc. (AMC) shares jumped on Tuesday after a Delaware court said it would hold a hearing on April 27, which will likely delay the date of conversion of convertible units APE to common stock.

Tesla (TSLA) shares increased after the Mexico's president confirmed that EV maker will build a new plant in Monterrey, Mexico. The Mexican president said more details will be released at Tesla's investor day, and he said the plant is expected to be "very big."

MY COMMENT

The last first.....more good news for TSLA shareholders as the company continues to expand manufacturing capacity and thier ability to dominate the EV market going forward.

It is interesting that company guidance is trending lower. This is actually a good thing as management at companies continues to ROPE-A-DOPE the media and analysts by downplaying future expectations. In the near future this will all result in continued earnings BEATS in comparison to the lowered expectations.

As usual today......it is all about interest rates......especially the daily movement of the Ten Year Treasury.

 

I have a nice little gain so far today as I sit right now with.....five stocks UP and five stocks DOWN. I see a lot of potential for today to mature into a very good day for stocks and funds. It is OBVIOUS to me that the current market direction is very much.....positive. At the moment I am a bit over +8% year to date.

SO......I continue to be fully invested for the long term as usual.

 

Here is more info on an item that I mentioned earlier today. BUT.....I do not mean to give outsized emphasis to TSLA....it is only a bit over 1% of my entire portfolio......it is my smallest percentage holding.

Mexican president gives green light to Tesla plant in northern Mexico

https://finance.yahoo.com/news/mexican-president-says-tesla-build-143052963.html

 

This was a big earnings report today.....Target. I am hoping that it is a harbinger for my COSTCO stock on Thursday.

Target Q4 earnings beat estimates, CEO strikes a cautious tone as consumer spending shifts
Target shoppers spent more on essentials like food and beverages and less on discretionary categories like electronics, home and apparel.

https://finance.yahoo.com/news/targ...ne-as-consumer-spending-shifts-113016615.html

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

"Target (TGT) posted fiscal fourth-quarter earnings results before the market open on Tuesday that beat estimates as consumer spending shifts away from discretionary categories.

The Minneapolis-based retailer saw same-store sales increase by 0.7%, higher than Wall Street estimates of -1.74%. Similar to Walmart's (WMT) latest quarterly results, consumer spending at Target seemed to shift to essentials like food and away from categories like electronics, home, and apparel.

Target shares jumped by more than 3.5% in pre-market trading after the report's release.

Target CEO Brian Cornell said the team was pleased with the sales growth in what continues to be a "very challenging environment."

Here's what Target reported, compared to Wall Street estimates, based on Bloomberg consensus data:

• Revenue: $31.40 billion versus $30.46 billion expected
  
• Adjusted earnings per share: $1.89 versus $1.48 expected
  
• Same-store sales: 0.7% versus -1.74% expected
  
  • Brick & mortar same-store sales: up 1.9% versus -2.80% expected
    

Cornell said having multiple category offerings, including food & beverage, in addition to beauty and household items served the retailer well this past quarter, Cornell said.

"Strength in Food & Beverage, Beauty and Household Essentials offset ongoing softness in discretionary categories. This performance highlights the benefit of our multi-category merchandise assortment, which drives relevance with our guests in any environment, and is a key reason we grew traffic every quarter last year."

Same-store sales beat estimates, up 0.7% compared to expectations of a decline of 1.74%. Same-store sales at physical locations also got a boost, up 1.9%, while digital sales dropped 3.6% in Q4.

At the end of Q4, inventory was 3% lower than 2021. Meanwhile, in discretionary categories like electronics, home and apparel, inventory was nearly 13% lower than 2021, "partially offset by higher inventory in frequency categories."

For full-year fiscal 2022 results, revenue grew by $3 billion, to $109 billion. Compared to 2019, revenue is up more than $30 billion. In the full-year, same-store sales increased 2.2%, while traffic was up 2.1%.

'Planning our business cautiously'

Looking ahead to fiscal 2023, Cornell said the retailer is focused on it's long-term strategy and "continued differentiation through affordability, assortment, ease and convenience" as it competes with other retailers for consumers trading down.

"At the same time, we’re planning our business cautiously in the near term to ensure we remain agile and responsive to the current operating environment...as we plan for the year ahead, we will continue to make robust capital investments and pursue efficiency opportunities in support of our long-term growth."

For the first-quarter of 2023, the company expects a wide range for same-store sales, from a low-single digit decline to a low-single increase, and an operating income margin rate of 4-5%. Adjusted EPS is expected to be between $1.50 to $1.90. For fiscal-year 2023, the company expects same-store sales to be the same, from low-single digit to a low-single increase, along with an operating income of more than $1 billion and adjusted EPS to range from $7.75 to $8.75.

In the next 3 years, the company aims to move beyond its pre-pandemic operating income margin rate of 6%, and says it could possibly reach that goal as early as fiscal 2024, "depending on the speed of recovery for the economy and consumer demand."'

MY COMMENT

This is a HUGE earnings beat by Target. It is nice to see this.....what I would call.......a mid-market retailers in terms of customer base. The fact that they had a great quarter.....contrary to many expectations......is a very good sign for the general economy going forward.

 

My view on the FED and rates remains the same........I see at least 2-3 more rate increases which will bring them to a target rate of 5.5% to 6%. I see the increases stopping for the rest of the year after that.

NOTE.....I do see the top potential rate as being as high as 6%. This view is a little different than much of the view out there which has the top of their target rate at about 5.5%. I think they will squeeze a little bit more out of the rate increases.......as they approach the end of their rate increases......and are still seeing a booming economy, stock markets that want to go UP.......and....inflation that is still hanging in there higher than anticipated.

And to all the above......as a long term investor.....I say....SO WHAT.

 

Emmett will understand this post. I am sure he continuously spends time submitting his films to festivals and events around the world. He is also constantly looking for opportunities to get recognition for his work.

Well for me......it is all about getting recognition for the paintings that I happen to be the custodian for during my life span. My primary concern is the recognition and promotion of great art.....and making art available to the public through exhibition. It is also about sharing knowledge. In the art world much is done in private and held close to the vest. The end result is when a collector or dealer dies......much of their knowledge is lost forever.

As a side benefit....the more PR and recognition I can get for an artist that I own and for particular paintings that I own......the more their value can potentially go up.

So......I am happy to see the month of March finally here.

For the past three months, I have been pitching to a number of museums, an Exhibition for one of my Impressionistic artists. This is a very recognized artist.....but for some reason....even though he is very well known and sells strongly.....there has not been an individual Exhibition since 1936.

All of the museums that I pitched the idea to except one turned me down. That one remaining museum was actually my first choice for the Exhibition.

I was able to get one of the Curators there interested in my idea and now in mid March.....I have a meeting with two curators, the museum President, the museum CEO, and museum staff. We will be discussing preliminary....timing, content of an Exhibition, the theme, fund raising, etc, etc, etc.

I have also been able to get the Curator of the largest collection of this particular artist in the world involved and they will be attending the meeting with me to push the idea.

In the museum world....it is all about fund-raising. It is also all about.....TIME.

This particular Exhibition will take 2-3 years to get up on the walls if it happens. I would now put my chances at about 50/50.....which is a huge step forward. I have made huge strides from where I started. This meeting will be critical to lock in the museum and move forward.

I will have lunch with the "large collection" Curator to discuss our strategy, conspire,.......and......than a couple of hours later we will meet with the museum people.

The owner of the "large collection" is a Billionaire collector ( I dont know him personally).........and by involving his Curator as my ally......I have dangled the potential of big fund raising in front of the museum people. Of course.....there is no commitment from that collector to fund anything at this point.

I really dont care if he funds anything. I am interested in working with his Curator and getting to know him better......as well as........having access to the largest collection of works from this particular artist for an Exhibition. In the art world....the interaction you have with others......is as much of the fun as the art itself. It is interesting and fun to be around people that share a passion.....and.....to continue to learn.

I have two very significant paintings from this particular artist that should be great candidates for the Exhibition.

My hope is for the Exhibition to happen in 2-3 years with myself, the "large collection" Curator, and the museum Curator.....as Co-Curators of the Exhibition. I will know more after mid March and will report back.