The Long Term Investor

I just got in from running around today. I knew the averages were down for the day so I had no expectations. I was RED today. I also got beat by the SP500 by 0.66%. Only my "H" stocks were UP today.....HON and HD were both green today.

I assume today was another day that was a victim of the Ten Year yield. I am very much looking forward to about six months from now when the FED is done with the rate increases.

 

The markets today.

Stock market news today: S&P 500, Nasdaq fall, yields rise after hawkish Fedspeak

https://finance.yahoo.com/news/stock-market-news-live-updates-march-1-2023-124448484.html

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

"U.S. stocks finished mostly lower Wednesday to start March as key manufacturing data offered mixed results and two Federal Reserve officials suggested a more aggressive rate-hiking campaign in the coming months.

The S&P 500 (^GSPC) declined by 0.5%, while the Dow Jones Industrial Average (^DJI) was flat. Contracts on the technology-heavy Nasdaq Composite (^IXIC) fell by 0.6%.

The yield on the benchmark 10-year U.S. Treasury note moved upward and briefly touched 4% Wednesday. Crude oil traded higher, with U.S. benchmark WTI up at $77.73 a barrel.

On the economic data side, U.S. manufacturing firms signaled a grim outlook for the sector, according to the latest PMI data from S&P Global. The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index was revised lower to 47.3 in February, up from 46.9 in January. The reading indicates "a solid deterioration in the health of the goods-producing sector, despite the pace of decline softening to the slowest for three months."

Separately, economic activity in the manufacturing sector diminished in February for the fourth consecutive month following a 28-month period of growth, according to the Institute for Supply Management report on business. The data offered a mixed bag. Employment in manufacturing decreased to 49.10 in February from 50.60 in January. New orders rose to 47.0 compared to January's figure of 42.5. Prices paid jumped to 51.3 from January's reading of 44.5.

Stocks fell Tuesday, rounding out the last day of a volatile month of February on Wall Street. According to JP Morgan’s trading desk, February’s month-end rebalance drove some weakness in equities and strength in bonds Tuesday afternoon.

With February in the rearview, the S&P 500 remains up more than 3% this year, according to data from Bespoke Investment Group. Mega-caps have been a massive driver of the index moves. That said, 20 of the largest stocks in the S&P 500 have accounted for most of the index’s gains.

Now, as the calendar turns, March historically sees the S&P 500’s gains in the second half of the month, Bespoke Investment Group noted.

The path of the Federal Reserve's rate hikes remains in focus for investors. Two Federal Reserve officials spoke on Wednesday leaned in the move that aggressive interest rate hikes are the path forward to ease inflation.

They followed Chicago Fed President Austan Goolsbee, who said on Tuesday it would be a “danger and a mistake for policy makers to rely too heavily on market reactions” and emphasized the importance to “supplement these traditional data with observations on the ground from the real economy.”

However, Goolsbee, who will be a voter at this year’s policy-setting Federal Open Market Committee meeting, didn’t comment on monetary policy.

Since last year, the Fed has sharply raised rates in an effort to cool inflation. But inflation remains sticky. Policymakers will be releasing new projections after the central bank’s March 21-22 meeting.

On the housing front, mortgage rates continue to move upward, pushing buyers to the sidelines as the spring housing market is underway. Both purchase and refinance applications slumped last week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume of purchase applications hit a 28-year low, down 44% from a year ago."

MY COMMENT

For the VAST majority of the past....FIFTY FOUR.....years the Ten Year Treasury has been above 4%. It was not till the DEFLATIONARY atmosphere of 2009 to 2023 that it was consistently BELOW 4%. Even in the inflation of 2021 to 2023 it has never really breached 4% excerpt for brief moments here and there. At 4% on the Ten Year......we are STILL at the historic low end of the bell curve.

BUT.....I have learned that talking about REALITY is simply a waste of time. There is no way to cut through the constant media chatter....even if it is flat out wrong. The ONLY way to be able to invest in REALITY is to hold for the long term.

In addition the manufacturing data released today should have been a strong positive......yet another indicator of a slowing economy and the process of inflation......"supposedly".....going down.

 

Send out the CLOWNS.

Fed’s Bostic, Kashkari call for higher rates after 'concerning' inflation, jobs data

https://finance.yahoo.com/news/feds...concerning-inflation-jobs-data-150224928.html

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

"Two Federal Reserve officials speaking Wednesday said more aggressive interest rate hikes are likely necessary to slow inflation, as is the central bank keeping rates at elevated levels for some time.

Minneapolis Fed President Neel Kashkari said Wednesday he is remaining "open-minded" about whether the Fed should raise rates by 25 or 50 basis points at its next policy meeting on March 21-22. Markets currently expect a 25 basis point, or 0.25%, rate increase from the central bank.

"I’m open-minded about whether it's 25 or 50 basis points [at the next meeting]," Kashkari said during a Q&A at a Sioux Falls Business CEO event. "What's more important is what we signal in the dot plot." The Fed will release a new set of economic forecasts and interest rate expectations alongside its March 22 policy statement.

Kashkari said in December, he jotted down raising interest rates up to 5.4% and holding rates at that level for an extended period. "At this point I haven't decided what my dot is, but I would lean towards continuing to raise further that I would continue to push up my policy path."

"Given the data in the last month — higher inflation than we expected and a strong jobs report — these are concerning data points suggesting we're not making progress as quickly as we'd like," Kashkari said. "At the same time shouldn't overreact to one month of data even if the data is troubling."

Kashkari is a voting member of the FOMC, the Fed committee that sets monetary policy, in 2023.

Elsewhere, Atlanta Fed President Raphael Bostic said Wednesday he believes the Fed needs to raise its policy rate by 50 basis points, to a range of 5%-5.25%, and hold it at that level until well into 2024.

"We must determine when inflation is irrevocably moving lower," Bostic wrote in an essay published Wednesday. "We're not there yet. That's why I think we need to raise the federal funds rate to between 5-5.25% and leave it there well into 2024. This will allow tighter policy to filter through the economy and ultimately bring aggregate supply and aggregate demand into better balance and thus lower inflation."

Bostic is not a voting member of the FOMC in 2023, but will be a voting member in 2024.

Bostic said in order to consider reversing the course of monetary policy, he needs to see a better balance in the job market between labor supply and demand and see broad-based inflation narrow. Bostic noted about half of the goods in the CPI market basket still show inflation rates of 6% or higher. The Fed targets inflation that averages 2%.

"If we are going to get inflation back in the range of our target, the breadth of inflation will have to narrow considerably," Bostic wrote. "When inflation is no longer top of mind, our mission will largely be accomplished. We are clearly not there yet. But I—and the Committee—are committed to doing all we can to ensure that we get there as soon as possible."

Both Bostic and Kashkari noted that while the increase in interest rates has slowed the housing and real estate sectors, they aren’t seeing many signs higher rates are really slowing down the rest of the economy.

"Business contacts tell us activity may well soften, but they don't anticipate a severe deterioration," Bostic wrote. "When businesses think customers will buy less of their product or service in the near and medium term, then they will adjust hiring and investment plans accordingly."

Kashkari said the U.S is not in recession right now pointing to strong job growth, but said whether the Fed can avoid causing a recession with its interest rate hikes to fight inflation — a so-called soft-landing —remains an open question.

"The track record is not good at being able to slow down the economy this much without going a little too far and heading into recession," he said. "[But] typically, when the central bank has caused a recession by raising interest rates, the bounce back can be very fast."

Kashkari said the dynamics in this economic cycle are different given families and states have strong balance sheets and supply chains are getting better.

Both Fed officials said the cost of raising rates too much outweighs the costs of raising rates too little, adding the Fed must avoid a 1970s scenario in which the central bank cut rates too soon, causing inflation to re-surge and forcing the Volcker-led Fed to hike rates much higher to ultimately bring down inflation."

MY COMMENT

Sorry....Emmett. BUT...these clowns have no clue what is going to happen or why. The economy is booming....in spite of the fact that the distortions of the shut-down are still all through the business world.

They are determined to CRASH the stock markets and the housing markets......even though they can not see much impact on the economy from their actions. This is why they were out talking today......to TRASH the stock markets.

The entity that they should be constantly TRASHING.....is government.....their masters who are hanging them out to dry........and undermining......their attempts. Regardless of politics.......they should be TRASHING the spending binge by government....as they continue to run up huge, historic deficits even as they collect record taxes. BUT......that will never happen.

 

I will say it......when ESG and DEI......and social policies,stakeholder capitalism, etc, etc, become the norm for investment managers to consider and follow rather than the pursuit of the best returns for the actual owners of a company, the shareholders.......the markets will simply be screwed. Any connection to the results of the past will be broken for good.

Senate overturns federal rule on ESG investments, Biden vows to veto

https://www.cnbc.com/2023/03/01/esg...rturning-federal-rule-on-esg-investments.html

MY COMMENT

Read it if you wish. My focus on this "stuff" is NOT political. My focus is on the continued viability of the markets and maintaining the historic return levels for investors. Once we go fully down this road.......the markets are DOOMED......there will no longer be any connection to FUNDAMENTAL BUSINESS RESULTS.

I PITY younger investors that will have to navigate this new environment.......and all the unknown consequences that will come as a result......over the rest of their lives.

 

I agree Rayak.

I also noticed that the market focus has been very different over the past ten years. I attribute much of this to the HUGE rise of the click based financial media. What and how financial media reports has changed massively over that ten years. In addition the type and quality of coverage has changed massively to a......."National Inquirer"......style of sensationalism. The level of knowledge in the financial media is in the toilet compared to the past. Much of this is obviously a result of our.....now.....internet and social media society.

In addition......the focus on short term trading and the short term day to day market events and AI based trading......which happens across the big companies in concert and basically manipulates the day to day markets.....has escalated beyond anything I have ever seen. Etc, etc, etc.

If this trend continues and escalates.......the typical norm with "change".....at some future point, assuming it has not already happened.......the markets will no longer provide the short or long term returns that are the historical norms. They will simply be a rigged casino.

As I said.....makes me very glad that I am not a young person starting out right now. For investors these events make.....stock selection, Index investing, portfolio construction, risk tolerance, etc, etc......more critical than ever.

 

We are seeking a typical and expected open from the market that.......cant chew gum and walk at the same time. We have a single focus market.......the Ten Year Treasury.

It is not a surprise to see the open today with the Ten Year Treasury yield UP to.....4.058%

I am NOT saying that this is justified.....it is not when you look at historic norms......but it is simply the current reality of a market that has a single obsessive focus. This is NOT high historic yield......but who cares about FACTS or HISTORY.

All you can do is.....LAUGH IT OFF......and ignore it.

 

Vaguely on the topic above.

Torturing Valuations Doesn’t Yield Actionable Insights

https://www.fisherinvestments.com/e...g-valuations-doesnt-yield-actionable-insights

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

"P/E ratios still aren’t predictive.

What a difference a month makes. After a hot January seemingly sparked some very cautious optimism that stocks’ worst times were behind them, a mildly negative February seems to have restored pessimism. Rate hikes, lingering inflation and geopolitics took turns weighing on sentiment, echoing last year, but they got a new friend: valuations. The latest example? A Wall Street Journal article this week arguing bonds will outperform as stocks take years to crawl back to breakeven—all because the S&P 500 and MSCI World Index’s above-average price-to-earnings (P/E) ratios imply returns will be weak from here. But valuations aren’t predictive, especially early in a bull market.

We touched on the folly of emphasizing valuations early in a bull market a couple of weeks ago when we dove into concerns about stocks’ earnings yield (the P/E’s inverse) falling near and, depending on maturities, below bond yields. We think it is still too early to know for sure if October 12 marked the bear market’s low and a new bull market has indeed begun, but it is worth reiterating that stock valuations are behaving as we would expect early in a bull market. That is to say, they are up. A lot. Late in a bull market, a fast increase like this might indeed signal sentiment got too hot too quickly. But early in a bull market, it is mostly math.

Stocks are leading indicators. They move ahead of earnings, usually pre-pricing expected profitability about 3 – 30 months out. As a result, stocks usually start recovering from a bear market before the earnings decline has run its course. This happened in 2009 and 2020. And it may explain what is happening now. With 484 S&P 500 companies reporting as we write, Q4 2022 earnings are down -4.9% y/y.[ii] Analysts project another small decline for Q1 and Q2. This means that while the P is up, the E is dropping. A larger numerator divided by a smaller denominator yields a larger quotient—a larger P/E ratio.

We saw this in 2002, 2009 and 2020—the early stages of the previous three bull markets. The effect was most apparent in trailing P/Es, which compare prices to the past 12 months’ earnings. But it also showed up in forward P/Es (price divided by expected earnings over the next 12 months), as recent earnings tend to influence expectations. Exhibits 1 – 3 show S&P 500 and MSCI World Index forward P/Es and returns in these young bull markets—note the immediate spike in P/Es, followed by a long drift lower—despite rising stock prices. Contrary to popular belief, stocks don’t need to fall for valuations to come down. Sometimes, it is just a matter of the E catching up to what the P already priced in.

Exhibit 1: Stocks and P/Es After the 2000 – 2002 Bear Market


Source: FactSet, as of 2/28/2023. MSCI World Index return with net dividends, S&P 500 total return, and S&P 500 and MSCI World forward P/E ratios, 12/31/2001 – 12/31/2003.

Exhibit 2: Stocks and P/Es After the 2007 – 2009 Bear Market


Source: FactSet, as of 2/28/2023. MSCI World Index return with net dividends, S&P 500 total return, and S&P 500 and MSCI World forward P/E ratios, 12/31/2008 – 12/31/2010.

Exhibit 3: Stocks and P/Es After the 2020 Bear Market


Source: FactSet, as of 2/28/2023. MSCI World Index return with net dividends, S&P 500 total return, and S&P 500 and MSCI World forward P/E ratios, 12/31/2019 – 12/31/2021.

So suffice it to say, we don’t view valuations today as a sign stocks will crawl over the foreseeable future, never mind take eons to recapture their January 2022 peak. Even in the Wall Street Journal piece, the main evidence for a long slog was inflation-adjusted returns, which are a meaningless construct. If inflation is a factor influencing returns, then we don’t think it makes sense to adjust returns for inflation—it isn’t even clear what you would use. CPI? PPI? The PCE price index? GDP deflator? Then too, stocks are a reflection of corporate earnings, which are also nominal. We all earn nominal returns, take nominal cash flows, pay taxes on nominal capital gains and pay nominal expenses. Inflation-adjusting historical returns anchors them to the past and distorts the present. In our view, it is an academic exercise with no real-world relevance.

So if your basis to shift out of stocks now is valuations and a forecast for low inflation-adjusted returns looking forward, we don’t think that is rock-solid. And, mind you, we say this having nothing against bonds—particularly for investors who have shorter time horizons, higher cash flow needs and/or less comfort with short-term volatility. But that is a long-term asset allocation decision and, in our view, shouldn’t hinge on a market outlook. Rather, your asset allocation should be designed to reach your goals regardless of the market’s wobbles along the way. And, to us, the main reason to own bonds is to mitigate expected short-term volatility, not to maximize returns.

Rather than get hung up on valuations and the near-term outlook, we think it is best to ask and answer a simple question: If you need equity-like returns to reach your long-term goals, does it make sense to sit out of stocks during a bull market? To earn stocks’ returns, you must actually own stocks, particularly when they are going up. Dialing down stock exposure now—and raising bond exposure—could mean reducing long-term return potential for that pool of money. If your goals haven’t changed, we doubt that is a beneficial move."

MY COMMENT

YES......to the last paragraph above. With much of society now depending on stock market like returns for retirement.....compliments of the elimination of pensions outside government jobs.....it is INSANITY for people to NOT be in the markets for the long term.

Trading in and our.....market timing......switching to various other assets.....is not a productive strategy.

 

I like this little....general....article.

The world’s most common forecasting mistake

https://klementoninvesting.substack.com/p/the-worlds-most-common-forecasting

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

"Forecasting is hard (especially about the future, one might add), but it is made harder when people use inadequate forecasting techniques. If you want to know how to make forecasts, I think there is no better place to start than to read Philip Tetlock’s Superforecasting: The Art and Science of Prediction. Obviously, I don’t have the space here to fully discuss this book, but I want to focus on one forecasting error that irks me time and again: linear extrapolation.

In my view, extrapolating recent trends into the future is the most common mistake forecasters make in any field. In sports, pundits extrapolate the last three to five matches of a team to talk them into title contenders. In politics, I hear cries of ‘socialism’ every time a government increases regulation in some area or tries to change rules about the environment. And in business and finance, there are so many forecasts that predict that some technology or trend will grow into a trillion-dollar business in the next decade, etc.

But a winning streak doesn’t mean a team will win a championship. Government regulation in one area does not lead to a slide into socialism and AI isn’t going to be a $15.7 trillion industry by 2030, as this report claims.

Typically, the mistake starts by using recent growth rates, then adapting them a little bit to reflect the opinion of the pundit about the future (if the pundit expects growth to slow down, the growth rate is adjusted downward, for example) and then extrapolating that growth rate many years into the future. The result is a projection that looks like the chart below.

How people forecast growth


Source: Liberum

Normally, pundits are careful not to show the chart as I did because it clearly shows the ridiculousness of the forecast. It predicts literally that trees grow into the sky. Instead, pundits often just truncate the forecast period so as to make the forecast look reasonable. Something like this:

A typical pundit forecast


Source: Liberum

I recently came across a nice cartoon illustration of the mistake made here:

The problem with extrapolating recent trends


Source: Jessie Robinson

But of course, trees don’t grow into the sky and dogs don’t look like prehistoric monsters. For every trend there is a countertrend and resources are limited. Both countertrends and a lack of resources limit how long a trend can continue. In effect, growth in the real world is always, ALWAYS constrained and should be modelled using the logistic function instead of a simple exponential growth function.

How growth really works


Source: Liberum

Again, the chart above makes it look obvious, but as I said above, pundits don’t use these kinds of charts. Instead, they reduce the time frame they show to make their forecasts look more reasonable. Well, if we do that with the last chart, you can see how poor the forecasts of pundits are even on shorter time horizons.

The error inherent in pundit forecasts


Source: Liberum

This is why I react so allergic to pundits. It’s not just that these forecasts are based on a lack of mathematical understanding and (quite frankly) basic maths training. It is that they are incredibly misleading and lead decision-makers to make harmful decisions. Business leaders who believe that AI will be a $15 trillion business in the next decade are inclined to invest heavily in this technology, thus draining resources from other technologies that may be more promising, cheaper or simply better suited for the job at hand (just think of all the businesses that invested in blockchain technology even though it wasn’t fit for the purpose it was used for). Meanwhile, sports teams may decide to buy players for large fees because they had one good season. And investors may decide to buy stocks of companies that have gone up in the last couple of years.

Always remember, trees don’t grow into the sky and all growth comes to an end. The trick to a good forecast is to know where the limit to growth is and how close we are to this limit not how fast growth is going to be in the next couple of years."

MY COMMENT

I try to NOT invest according to......predictions or forecasts. I prefer to invest according to reality and a clear view of the business world. This is one reason why I focus on.....BIG CAP ICONIC COMPANIES......in my investing. I dont care what company is predicted to be the next great thing. I want to invest in companies that have PROVEN.......that they are on track to be or become.......the next great thing.

I dont have to get into these companies when they are babies......i try to get into them when they are adolescents.....and the handwriting is on the wall. At that point there is STILL plenty of meat on the bone. In other words.......EVERYTHING......I try to do when investing is all about....."PROBABILITY.

 

Here is the short term.....today...take on the markets.

Stock market news today: Stocks mixed as Salesforce lifts Dow, Treasury slide continues

https://finance.yahoo.com/news/stock-market-news-today-march-2-2023-135533324.html

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

"Stocks were mixed early Thursday as investors digested more big tech earnings and continued to weigh the implications of a recent backup in Treasury yields.

Shortly after the opening bell on Wall Street the S&P 500 was down about 0.5%, the Nasdaq was off 0.8%, and the Dow was higher by just under 0.2%.

Rates remained a key focus for investors, with the yield on the 10-year Treasury note standing north of 4% after hitting this level on Wednesday for the first time since November. The rise in yields has come as investors brace for more aggressive action from the Federal Reserve in the coming months as inflation stays elevated and the economy remains strong.

On the front end of the Treasury curve the yield on 2-year notes continued to trade near its highest level since 2007. The 2-year yield, which stood near 4.8% on Thursday morning, is seen as the best proxy for investor expectations of the Fed's near-term path for interest rates.

In single-stock moves, shares of Salesforce (CRM) rose 16% at the market open on Thursday as investors cheered the company's latest quarterly report, which saw the embattled Dow member double down on cost-cutting initiatives and shareholder return plans.

The stock's opening gap higher was its largest since Aug. 2020, according to data from Bloomberg.

In an interview with Yahoo Finance's Brian Sozzi late Wednesday, Salesforce CEO Marc Benioff said in reference to the company's efficiency initiatives: "We have hit the hyper-space button."

The company announced in its quarterly report an increase in its share repurchase authorization to $20 billion, with COO Brian Millham telling investors on a call, "We're inspecting every part of our business to find opportunities to drive efficiencies and reduce cost of sales, marketing, and G&A."

Salesforce's 16% jump, good for a roughly $26 per share increase in the stock price, was adding roughly 170 points to the price-weighted Dow index.

Elsewhere in single-stock moves, shares of troubled bank Silvergate (SI) were down as much as 45% early Thursday after the company delayed the filing of its annual report and said it would likely report losses larger than those previously disclosed.

The bank took on several high-profile crypto clients in recent years and has seen its share price collapse by more than 90% in the wake of the failure of FTX, among other crypto bankruptcies.

Tesla (TSLA) shares were also in focus early Thursday, falling as much as 6.9% after the opening bell as the electric carmaker held its latest investor day on Wednesday, which revealed few new product details but emphasized the company's push to unlock new efficiencies in its manufacturing and design processes.

On the economic data side, the weekly report on initial jobless claims showed 190,000 new filings for unemployment insurance were made last week, the latest sign the labor market remains robust. Though tomorrow marks the first Friday of the month, the February jobs report will not be released until March 10."

MY COMMENT

YEP.....as expected above.

The TSLA blurb above and stock action today.....is the perfect example of the tail wagging the dog. This is rampant in the markets and investing today. It does not matter what the actual business says or does.....all that matters is what those outside the business.....analysts, journalists, forecasters, etc, etc.....say.

FORTUNATELY.....over the longer term.....how a stock or a business does is not related to whether or not some analyst or reporter is happy with how the company said something or if the company choose to not say something.

 

Today is my COSTCO earnings report day. I am sure the analysts and reporters have all decided.....ahead of time..... where the company should be and what they should say. As a result.....earnings will really not matter much.......unless they meet the pre-approved opinions......the stock will be down tomorrow.

One thing I have learned is to VERY RARELY read or care what the analyst expectations are for earnings for any of the businesses that I own.

 

Here is a little forgotten blast from the past. Well....from my memory of the old days of investing.

It used to be that April would see a big boost in money coming into the markets and being invested due to the April 15 date deadline for IRA contributions. Back in those....old days.....there was not the 401K accounts.........dominating like you see now. The IRA was the option for people that wanted to save toward retirement.

Now we dont see much of a bump at all.....since 401K contributions and matches are continuous over 12 months or oriented to year end.

People used to expect and look for that market bump that was caused by all the IRA money coming into the markets and being invested in April......now you never hear about this past phenomenon.

 

Some great lessons here.

3 of Warren Buffett’s biggest investing mistakes—and what every investor can learn from them

https://www.cnbc.com/2023/03/02/warren-buffetts-investing-mistakes.html

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

"Each year, in a widely read annual letter to shareholders, Berkshire Hathaway chairman Warren Buffett shares financial highlights at the firm, explanations of his investment philosophies and pearls of wisdom accumulated over his 92 years.

Each year, investors come back hoping to glean something from the “Oracle of Omaha” and his massively successful career as a money manager. There was plenty of that to be had in the 2022 version of the letter, which published on Saturday. But Buffett was quick to point out his shortcomings as well.

“Over the years, I have made many mistakes. Consequently, our extensive collection of businesses currently consists of a few enterprises that have truly extraordinary economics, many that enjoy very good economic characteristics, and a large group that are marginal,” Buffett wrote. “Along the way, other businesses in which I have invested have died, their products unwanted by the public.”

Buffett goes on to write that Berkshire’s results “have been the product of about a dozen truly good decisions” over the course of 58 years.

With respect, it’s likely quite a few more than that. But in the spirit of humility, let’s take a look at three of Buffett’s worst decisions, and what investors can learn from them.

During a 2010 appearance on CNBC, Buffett called Berkshire Hathaway “the dumbest stock I ever bought.”

In 1962 Buffett had built a stake in what was then a failing textiles firm, but agreed to sell his stock back to owner Seabury Stanton at $11.50 per share. But when Buffett received the offer letter from Berkshire, the price had changed to $11 3/8.

Feeling chiseled, Buffett sought payback. Instead of selling, he began buying the stock, took control of the company and fired Stanton.

Had he sold, he may have taken the money and invested in the insurance business — a move that he’d eventually make anyway, and one that would launch is business empire. Instead, he had to spend years and resources trying to revive his textile holding.

“I had now committed a major amount of money to a terrible business,” Buffett later said of the purchase. He calculated that the mistake was worth $200 billion.

It’s unlikely you’ll be in position to buy a company out of spite, but you may find yourself making investing decisions based on emotions, whether it’s exuberance over a risky investment you think could make you rich or fear that a falling market could ruin your portfolio.

In each case, it’s important to take a step back and realize that investing is a long-term game, not one that’s played in the day-to-day fluctuations of the market.

Being a good investor “is about teaching yourself not to let your emotions become your portfolio’s worst enemy,” says Sam Stovall, chief investment strategist at CFRA.

A ‘world record’ mistake: Buying Dexter Shoe

Buffett bought American shoe company Dexter Shoe in 1993, overlooking that the firm was facing heat from foreign manufacturers. “What I had assessed as a durable competitive advantage vanished within a few years,” Buffett wrote in his 2007 letter to shareholders.

Compounding the mistake, Buffett paid $443 million for the company in Berkshire stock rather than cash. Today, the shares would be worth north of $12 billion.

“As a financial disaster, this one deserves a spot in the Guinness Book of World Records,” Buffett wrote in his 2014 shareholder letter.

You may not have stock in your own lucrative company to trade, but you do likely have a core portfolio of low-cost, well-diversified funds. Diverting a major portion of your assets from your core investments to take a chance on an unknown quantity can be a dangerous move, investing pros say.

If your bet goes south, you’ll not only lose money on your investment, but you’ll miss out on the gains you would have enjoyed by sticking to the plan.

That’s not to say you can never take a chance on an investment you like. But such a holding “should never be a dominant force in your portfolio,” says Kenneth Lamont, senior manager research analyst for passive strategies at Morningstar. If you’re going to invest in something like, say, a trendy thematic ETF, “you shouldn’t be putting in money you couldn’t essentially afford to lose.”

3. ‘Dawdling’ before selling Tesco

By the end of 2012, Berkshire owned 415 million shares of UK grocer Tesco — an investment of $2.3 billion. Over the next year, Buffett wrote in his 2014 shareholder letter, he began to “sour” on the firm and sold 114 million shares.

Buffett has made his reputation (and billions of dollars) as an investor by buying great companies and holding on over the long term. The problem was, Tesco was slowly revealing itself to be a not-so-great company.

“During 2014, Tesco’s problems worsened by the month. The company’s market share fell, its margins contracted and accounting problems surfaced,” Buffett wrote. “In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives.”

Berkshire eventually sold its remaining interest in the firm and took a $444 million loss.

“An attentive investor, I’m embarrassed to report, would have sold Tesco shares earlier. I made a big mistake with this investment by dawdling,” says Buffett.

But even attentive investors can find it difficult to sell struggling stocks they once liked. A cognitive bias known as “anchoring” is one that just about every investor struggles with, says Scott Nations, president of investment volatility analytics firm NationsShares and author of “The Anxious Investor.”

“If you bought an investment at X price, and now it’s worth 20% less, it’s tough to disabuse yourself of the notion that it’s worth X,” he says.

Instead of reevaluating the investment and possibly selling, you tend to hang on and, well, dawdle. What Nations suggests doing if you hold such an investment is actually exactly what Buffett did: Sell a chunk of your holding and “see if that doesn’t help you think more clearly.”

By mentally resetting the value of your failing investment, you can take a more clear-eyed view of its long-term prospects. In other words, Buffett made the right move here. Just not fast enough for his liking."

MY COMMENT

It is extremely difficult for most investors to bite the bullet and sell out of a stock or fund. After all......you had high expectations or you would not have bought that investment to begin with. It is very difficult to erase those initial high expectations and simply move on.

I find it much easier to sell a failing or lingering holding.....if I think of it as a LATERAL MOVE. I am NOT admitting failure or selling off a former golden child company.....I am simply making a lateral move with my money into another investment. I RARELY sell something and than just hold the money as cash.

When I sell a stock or a fund.....I always have another use for that money in mind. I am a fully invested.....all the time...investor. I dont like to have money siting in cash. This is not in accordance with the PROBABILITIES of investing that I follow. If I dont have some other stock in mind to put that money into.....I simply put it into the SP500 Index fund. I use the SP500 as my holding vehicle for money that is not allocated to go into some particular stock. I want to always keep that money exposed to the markets. So for me......any time I sell something....it is ALWAYS......a lateral move since that money remains in the markets.

 

After looking at my portfolio a minute ago.

The short term:

I am just a TINY SMIDGE from being positive for today. I was very surprised to see this. I actually have SIX stocks UP today at the moment and if what I am seeing continues I will have a great shot to end the day in the green. My UP stocks at this moment.....NKE, MSFT, COST, NVDA, HD, and HON.

EDIT: I edited the original post due to some faulty data that was on the Schwab site.

 

I am kicking ass today.....with about 40 minutes left in the day.

We can see the POWER and STRENGTH inherent in the markets right now.........based on the UP move today......in spite of the Ten Year Treasury being at 4.075%.

 

To continue the above.

Dow, S&P 500 and Nasdaq push higher as stocks look past rising Treasury yields

https://www.marketwatch.com/story/u...-yield-further-above-4-d51ba518?siteid=yhoof2

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

"U.S. stocks turned higher Thursday afternoon, with the S&P 500 and Nasdaq Composite joining the Dow Jones Industrial Average in positive territory, despite the 10-year Treasury yield’s rise above 4% and concerns about additional Federal Reserve rate hikes.

The Dow was leading gains, finding support as investors cheered results from component Salesforce Inc. CRM, +11.27%

What’s happening

• The Dow DJIA, 1.01% was up 279 points, or 0.9%, at 32,943.
• The S&P 500 SPX, 0.68% rose 19 points, or 0.5%, to 3,970.
• The Nasdaq Composite COMP, 0.61% was up 50 points, or 0.4%, at 11,428.

On Wednesday, the Dow eked out a tiny gain, while the S&P 500 fell 0.5% and the Nasdaq dropped 0.7%.

What’s driving markets

Stocks were attempting to bounce on Thursday afternoon despite rising bond yields that initially weighed on equities.

“Some of the Dow components performed well in terms of earnings,” said Don Townswick, director of equity strategies at Conning, in a phone interview. “It’s a classic case where we have earnings come in better than expected, on their face, and that tends to spur some positive market moves.”

Bond yields extended their rise after a round of U.S. labor data Thursday. First-time claims for unemployment benefits fell to 190,000 last week from 192,000 the previous week. Fourth-quarter labor productivity was revised lower and unit labor costs were revised higher.

Atlanta Fed President Raphael Bostic on Thursday said he was firmly in support of a 25 basis point rate increase at the central bank’s late-March policy meeting, while saying a case also can be made for revising up the Fed’s current 5%-5.25% terminal rate projection. Speculation that a recent run of hot labor and inflation data has seen fed-funds futures traders price in the possibility of a 50 basis point hike in March.

Bostic’s remarks “may have helped, but it’s more of the fact that while yields skyrocketed, stocks pretty much held their own despite their early decline,” said Peter Cardillo, chief market economist at Spartan Capital Securities, in a phone interview. He also said earlier declines for stocks may have attracted bargain hunting.

Recent data indicated that the Federal Reserve’s campaign of interest-rate hikes has yet to significantly slow the U.S. economy and suppress inflation, which has pushed benchmark borrowing costs TMUBMUSD10Y, 4.076% back above 4% as traders bet the central bank will have to tighten monetary policy further.

Data on weekly jobless claims and labor productivity released Thursday morning pointed to continued tightness in the jobs market and rising labor costs.

“Data releases like this are why policy makers continue to reiterate their intention to raise rates higher before pausing, and then [to leave] rates in a restrictive territory for quite a while,” said Thomas Simons, money market economist at Jefferies, in a note."

MY COMMENT

WOW......I agree with this article.

YES.....earnings are coming in better than expected by all the NEGATIVE Nancy's. That is driving the markets as they insist on going up.......plus......today shows that the STRONG trend is POSITIVE. Strength begets Strength.

YES.....we are seeing bargain hunting on down days like this morning.

AND.....no matter how much the "shorts" push their narrative.....stocks just want to go up. I dont know how long they can push these Ten Year rates higher or maintain the current level.....probably not much longer. When the rates come back into the 3% range we could be in for a very nice rally. My view is that these rates in the 4% range are manipulation by short term traders.