The Long Term Investor

Until the government changes this tax rule........this is the greatest gift you can give your heirs.

This Tax Loophole Can Save Your Heirs Big. Here's How T. Rowe Price Says to Use It

https://finance.yahoo.com/news/tax-loophole-save-heirs-big-144143825.html

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

"Deciding which accounts you'll withdraw money from – and when you'll take it – is an important decision in retirement. However, you may want to consider preserving assets held in a taxable brokerage account and passing them down to heirs.

That's because taxable investments benefit from a step-up in basis, which is a tax loophole that resets the cost basis of an investment to its current market value when the original owner dies. As a result, whatever gains the investment made during your lifetime become tax-free. The taxes your heirs eventually pay will only be based on the investment's value when they inherit it.

Those with considerable wealth spread across both Roth and taxable accounts will have to determine which assets to tap to cover their retirement income needs, and which they'd rather bequeath to heirs. Luckily, T. Rowe Price recently took a closer look at the topic and developed break-even points to help you figure out whether you should preserve taxable assets or spend them.


Taxable vs. Roth Assets

Taxable accounts and Roth IRAs both play significant roles in the retirement and estate planning processes.

Roth IRAs are funded with after-tax dollars, so money can be withdrawn tax-free. Unlike a traditional IRA, Roth accounts aren't subject to required minimum distributions (RMDs), making them attractive from an estate planning perspective. Then again, retirement accounts don't benefit from the step-up in basis.

Taxable accounts, on the other hand, are subject to capital gains taxes. When you sell a stock or mutual fund inside a taxable account, your investment gains will be taxed at either 0%, 15% or 20% based on your income.

If you're deciding between selling either Roth assets or taxable investments to meet your retirement income needs, you'll want to consider your future step-up in basis. T. Rowe Price says there are four factors that can help you determine whether preserving taxable assets – and your step-up in basis – makes more sense:

• Investment cost basis. This is how much you originally paid for an investment. The lower your cost basis, the larger your potential investment gain will be and the more valuable the step-up in basis becomes.
  
  
• Capital gains tax rate. The higher your capital gains tax rate is, the more you stand to save by simply holding your assets in a taxable account and preserving the step-up in basis.
  
  
• Dividend rate. If an investment pays a higher dividend (2%), it will carry a larger annual tax liability and may benefit from remaining in a Roth account. If the investment pays a low dividend or none at all, holding it in a taxable account and eventually capitalizing on the step-up in basis may be better.
  
  
• Life expectancy. A shorter life expectancy means you'll pay fewer total taxes on dividends going forward. It also means your heirs will potentially receive their inheritance sooner.
  

How to Decide Between Selling Taxable or Roth Assets

So how do you determine between preserving taxable assets for the eventual step-up in basis or selling those assets to meet your retirement income needs?

First, the company says to calculate the cost basis percentage for your taxable investments. You can do this by simply dividing the cost basis – how much you originally paid for the asset – by its current value. For example, say you bought $10,000 worth of stock that's now worth $14,000. Your cost basis percentage would be about 71%.

Next, compare your cost basis percentage against the break-even points that T. Rowe Price has calculated. If your cost basis percentage is below the break-even point, it's worth holding onto your taxable assets and selling your Roth investments, instead. If it's above the break-even point, selling taxable assets and forfeiting the step-up in basis is the better move.

For example, a person who pays the 20% long-term capital gains tax (and has qualified dividends) should preserve their taxable assets if their cost basis percentage is below 75%, and sell Roth assets to meet their income needs. Above that threshold, the opposite is true.

For someone who's subject to the 15% long-term capital gains tax (and also has qualified dividends), the break-even point drops to around 67%, according to T. Rowe Price.

The calculation gets a bit more complicated if your dividend rate is 2% or higher. As your life expectancy gets shorter and shorter, the break-even points get higher and higher. If these parameters apply to you, you'll want to see where your cost basis percentage falls on T. Rowe Price's break-even cost basis graph, here.

Bottom Line

The step-up in basis is a powerful tax loophole that can allow your heirs to assume the current market value of inherited property, including stocks and other investments. This means they won't owe tax on the investment gains those investments experienced during your lifetime – only the gains that are realized after your death. But the step-up doesn't not apply to retirement accounts, including Roth IRAs. T. Rowe Price has calculated break-even points to help retirees decide when to preserve their taxable assets for the step-up in basis and when to sell them to cover retirement income needs."

MY COMMENT

I am NOT a fan of stringing out tax deferred accounts in retirement. I made the personal choice to exhaust my tax deferred acccounts first. I chose to NOT pay income taxes on that money over my entire lifetime.

Of course with my retirement plan I had more money in my taxable brokerage account than the deferred accounts. My primary deferred account was a regular IRA that contained my KEOGH ACCOUNT.......(a form of pension plan used by many small businesses in the not too distant past that allowed an owner to put away up to $30,000 annually)...... funds that were rolled over when I closed my business.

 

These short term day to day markets are so INSANE. that is why the ONLY way to invest is for the long term. I guess the markets today did not like the RISK or RECESSION. It is always something that the day to day markets are OBSESSING over.

I ended the day in the RED today. I had only 3 stock UP today.....NKE, MSFT, and HON. I also got beat by the SP500 by 0.32%.

Not a bad loss today....moderate/medium.

 

I guess this was what happened in the markets today.

Stocks sink after Fed minutes despite cooler inflation

https://finance.yahoo.com/news/stock-market-news-today-live-updates-april-12-2023-115410661.html

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

"U.S. stocks sank Wednesday, reversing gains from earlier in the session, after inflation data showed that consumer price gains cooled in March and Fed minutes revealed that further rate increases haven't been ruled out.

The S&P 500 (^GSPC) slid by 0.41%, while theDow Jones Industrial Average (^DJI) fell by 0.11%. The technology-heavy Nasdaq Composite (^IXIC) dipped by 0.85%.

Bonds yields tipped lower after the release of Fed minutes from the last policy meeting in March. The yield on the 10-year note ticked down to 3.40%, while rate-sensitive two-year note yields slipped to 3.97% Wednesday.

Some of the key takeaways from the minutes of the Federal Reserve's March meeting — when the central bank raised rates by 0.25% — showed that staff forecast the economy would likely slide into recession later this year. Officials expressed concern about the banking sector problems and scaled back their expectations for rate hikes, while some even considered pausing the rate hikes.

Data earlier in the day provided an improving picture on the state of inflation in the U.S. The March consumer price index showed price gains cooled last month in the slowest rise since May 2021. The consumer price index rose 0.1% in March, a slower pace than the 0.4% gain in February. March's headline inflation rose at an annual clip of 5.0%, below expectations of 5.2%.

Core CPI, which strips out food and energy, grew 5.6%, in line with expectations. Meanwhile, housing costs are still a key driver of inflation, according to the BLS data, even as the residential market stabilizes.

“Today’s CPI takes some heat off the Fed, for now. Moderating price pressures combined with signs of cooling in the labor market will offer a temporary reprieve to markets," Ronald Temple, chief market strategist at Lazard, wrote following the release.

"While this is good news, it does not mean tightening is over. Core inflation remains far above the Fed’s target, and the path to 2% will be bumpy. With core CPI likely to end the year above 3%, the Fed has more work to do before it can declare victory over inflation," Temple added.

Investors will continue to digest Wednesday’s CPI report as it could provide some clues to whether the Fed will continue to raise rates at its next meeting. Markets have priced in a 69% probability that the Federal Reserve will raise interest rates by another 0.25% in May, according to data from the CME Group. That moved down slightly compared to before the CPI report's release.

The latest Fedspeak came from San Francisco Fed President Mary Daly on Wednesday. Daly made remarks for the first time since the collapse of Silicon Valley Bank, an institution that was under the supervision of the San Francisco Fed. Daly said that the "full impact of this policy tightening is still making its way through the system."

Additionally, "the strength of the economy and the elevated readings on inflation suggest that there is more work to do," she said.

On Tuesday, three Fed speakers weighed in on the prospect of another rate hike ahead of the May meeting. New York Fed President John Williams told Yahoo Finance's Jennifer Schonberger that the Federal Reserve has its work cut out for it as the central bank tries to bring down inflation to the Fed's goal of 2% amid a strong labor market and sticky price pressure.

Separately, Philadelphia Fed President Harker said that he wanted to "get rates above 5[%] and then sit there for a while," which would imply at least one more 0.25% move.

Meanwhile, Chicago Fed President Austan Goolsbee struck a more dovish tone, suggesting that the Fed should proceed with caution when raising rates “too aggressively” until it can assess “ how much work the headwinds are doing for us in getting down inflation.”

Elsewhere, the Bank of Canada left interest rates unchanged for the second consecutive meeting, citing that recent data pointed to an easing on inflation.

In single-stock moves, American Airlines Group Inc. (AAL) shares fell 9% after the airline giant said Wednesday that first-quarter profit could come in below expectations as the company faces hurdles with higher costs. Shares of United Airlines Holdings, Inc. (UAL) also dropped over 5%.

Shares of Shopify Inc. (SHOP) climbed Wednesday after JMP Securities upgraded the e-commerce company to market outperform and set a $65 price target.

Triton International Limited (TRTN) shares surged over 30% after Brookfield Infrastructure Partners LP announced it would acquire Triton in a $13.3 billion deal.

Shares of Alibaba Group Holding Limited (BABA) dropped as other U.S.-listed Chinese stocks fell the most in three weeks."

MY COMMENT

You have got to be kidding me......stocks sank because......."Fed minutes revealed that further rate increases haven't been ruled out"

Come on man.....how can there be anyone alive that thinks that the FED is not going to do one more rate hike....perhaps even two?

The total OBSESSION on the part of the markets with the FED is simply insane.

 

THIS is also insanity......in hindsight. It is now clear that the banking "stuff" is done. Put a fork in it. When the FED staff presented this stuff....was in the past....not today. We have now had more time to see how this all played out with the banks. If the take below is true....we have the markets freaking out over OLD NEWS. TYPICAL short term BS.

Fed expects banking crisis to cause a recession this year, minutes show

https://www.cnbc.com/2023/04/12/fed...cause-a-recession-this-year-minutes-show.html

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

"Key Points

• Fallout from the U.S. banking crisis is likely to tilt the economy into recession later this year, according to Federal Reserve documents released Wednesday.
• Federal Reserve staff gave FOMC members a presentation about potential repercussions from the failure of Silicon Valley Bank and other tumult in the financial sector that began in early March.
• Though Vice Chair for Supervision Michael Barr said the banking sector “is sound and resilient,” staff economists said the economy will take a hit.

Fed minutes: Bank turmoil effects will likely lead to recession later in 2023

WASHINGTON – Fallout from the U.S. banking crisis is likely to tilt the economy into recession later this year, according to Federal Reserve documents released Wednesday.

Minutes from the March meeting of the Federal Open Market Committee included a presentation from staff members on potential repercussions from the failure of Silicon Valley Bank
and other tumult in the financial sector that began in early March.

Though Vice Chair for Supervision Michael Barr said the banking sector “is sound and resilient,” staff economists said the economy will take a hit.

“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” the meeting summary said.

Projections following the meeting indicated that Fed officials expect gross domestic product growth of just 0.4% for all of 2023. With the Atlanta Fed tracking a first-quarter gain around 2.2%, that would indicate a pullback later in the year.

That crisis had caused some speculation that the Fed might hold the line on rates, but officials stressed that more needed to be done to tame inflation.

FOMC officials ultimately voted to increase the benchmark borrowing rate by 0.25 percentage point, the ninth increase over the past year. That brought the fed funds rate to a target range of 4.75%-5%, its highest level since late 2007.

Fed should take pause at next meeting, says KPMG’s Swonk

The rate hike came less than two weeks after Silicon Valley Bank, at the time the 17th largest institution in the U.S., collapsed following a run on deposits. The failure of SVB and two others spurred the Fed to create emergency lending facilities to make sure banks could continue operations.

Since the meeting, inflation data has been mostly cooperative with the Fed’s goals. Officials said at the meeting that they see prices falling further.

“Reflecting the effects of less projected tightness in product and labor markets, core inflation was forecast to slow sharply next year,” the minutes said.

But concern over broader economic conditions remained high, particularly in light of the banking problems. Following the collapse of SVB and the other institutions, Fed officials opened a new borrowing facility for banks and eased conditions for emergency loans at the discount window."

MY COMMENT

This is all OLD NEWS.....not relevant at all to the markets today. I see this as a COVER-YOUR-ASS move by the FED staff for....."if".....the economy tanks. It will allow them to BLAME it on the bank collapse....not the FED raising rates NINE TIMES in one year.

BUT.....the CRAZY short term.....one day markets......gotta do what they gotta do.

 

THE....story of the day today.....although CPI did not matter uch in the end yesterday even though it came in nicely.

Stocks rise as another report points to cooling inflation

https://www.cnbc.com/2023/04/12/stock-market-today-live-updates.html

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

"Stocks gained Thursday after another report pointed to cooling inflation.

The March producer prices index, a measure of prices paid by companies and often a leading indicator of consumer inflation, declined by 0.5% month over month versus expectations for prices to be flat. Excluding food and energy, the core wholesale prices reading shed 0.1% month over month, much better than the 0.2% increase expected by economists polled by Dow Jones.

Wednesday’s release of March’s consumer price index report showed headline inflation pressures eased last month. The CPI advanced just 0.1% month over month in March. Consumer prices grew 5% on an annual basis, the smallest increase in nearly two years.

Some optimism about the upcoming earnings reporting season, which begins this week, also gave markets a boost Thursday morning. Delta Air Lines shares climbed 2% in the premarket after the airline issued upbeat second-quarter guidance, projecting “record advance bookings for the summer,” even as it reported a wider-than-expected loss for the first quarter.

However, gains were still pretty muted as investors worry that a recession is on the horizon. Stocks ended Wednesday’s session on a down note. The S&P 500 closed 0.41% lower, while the Nasdaq Composite
dropped 0.85%. The Dow snapped a four-day winning streak, ending the day down 38.29 points, or 0.11%.

Traders’ sentiment turned in the afternoon following the release of minutes from the March Federal Open Market Committee meeting. In particular, the Fed expects the recent banking crisis to cause a mild recession later this year.

“Wall Street went from focusing on a mostly cooler-than-expected inflation report to the Fed Minutes that prompted recession worries as further banking turmoil could be right around the corner as bank earnings near,” said Ed Moya, senior market analyst at Oanda."

MY COMMENT

The "traders" RULED yesterday. they used the FED minutes to drive down the markets in the afternoon. We will see if they can do the same today.

NO doubt this PPI information is a HUGE indicator to the FED. I continue to see the "probability" for May as.......one and done. A single hike of 0.25%.....and than the glorious pause by the FED.




21 Min Ago
Core PPI fell 0.1% in March, its first negative read since April 2020
Excluding food and energy, the core wholesale prices reading showed a 0.1% decline month over month in March, or its lowest level since April 2020 when the core PPI showed a fall of 0.3%.

 

I have seen siting since the above post and letting the markets settle in for the day. We are still UP across the board with the NASDAQ doing best of the averages.

One factor.....at least according to what the media has been telling us for the past years......should be the yield on the Ten Year Treasury. Today it is DOWN to 3.389%.

Looking ahead by a year or two.....we are going to be right back to the DEFLATIONARY environment that has been the norm for the past 15-20 years. In fact......if the FED by luck or whatever means gets inflation down to their 2% target......they will put us into DEFLATION.

 

This is a primary indicator of.....NO RECESSION......the booming jobs market continues.

US jobless claims rise but remain at historically low levels

https://finance.yahoo.com/news/us-jobless-claim-applications-highest-124216880.html

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

"U.S. applications for jobless benefits rose to their highest level in more than a year, but remain at relatively low levels despite efforts by the Federal Reserve to cool the economy and job market in its battle against inflation.

Jobless claims in the U.S. for the week ending April 8 rose by 11,000 to 239,000 from the previous week, the Labor Department said Thursday. That's the most since January of 2022 when 251,000 people filed for unemployment benefits.

The four-week moving average of claims, which evens out some of the week-to-week fluctuations, rose by 2,250 to 240,000. That's the most since November of 2021.

Last week, the Labor Department unveiled revised estimates of the number of weekly applications for jobless benefits under a new formula it is using to reflect seasonal adjustments. The new formula, which led to an increase in its weekly tally, is intended to more accurately capture seasonal patterns in job losses.

Applications for unemployment benefits are broadly seen reflective of the number of layoffs in the U.S.

The job market seems to be finally showing some signs of softening, more than a year after the Federal Reserve began an aggressive campaign to cool inflation by raising its benchmark borrowing rate nine times in about a year.

America’s employers added a solid 236,000 jobs in March, suggesting that the economy remains on solid footing despite the nine interest rate hikes the Federal Reserve has imposed over the past year in its drive to tame inflation. The unemployment rate fell to 3.5%, just above the 53-year low of 3.4% set in January.

In its latest quarterly projections, the Fed predicts that the unemployment rate will rise to 4.5% by year’s end, a sizable increase historically associated with recessions.

Also last week, the Labor Department reported that U.S. job openings slipped to 9.9 million in February, the fewest since May 2021.

Some details from Friday’s Labor Department report raised the possibility that inflationary pressures might be easing and that the Fed might soon decide to pause its rate hikes. Average hourly wages were up 4.2% from 12 months earlier, down sharply from a 4.6% year-over-year increase in February.

Also Thursday, the government reported that wholesale prices fell sharply in March. One day earlier, the government said consumer prices rose just 0.1% from February to March, down from 0.4% from January to February and the smallest increase since December. However, prices are still rising fast enough to keep the Federal Reserve on track to raise interest rates at least once more, beginning in May.

Layoffs have been mounting in the technology sector, where many companies hired aggressively during the pandemic. IBM, Microsoft, Salesforce, Twitter and DoorDash have all announced layoffs in recent months. Amazon and Facebook have each announced two sets of job cuts since November.

About 1.81 million people were receiving jobless aid the week that ended April 1, a decrease of 13,000 from the week before. That number is close to pre-pandemic levels."

MY COMMENT

YEP....if the data is not meeting your expectations......simply revise how the data is calculated. There you go.....it is so easy to get the results you want.

They throw in this little comment......which is generally ignored in the rest of this little article:

"...the Labor Department unveiled revised estimates of the number of weekly applications for jobless benefits under a new formula it is using to reflect seasonal adjustments. The new formula, which led to an increase in its weekly tally, is intended to more accurately capture seasonal patterns in job losses."

 

Agree completely....TomB16. Those people have ZERO ability to predict or control anything in the economy. FOOLS, fools, fools.

This is why anyone that invests based on economic data and the FED.....is wasting their time and money.

 

The markets today.

Stocks rise as investors eye claims data, bank earnings

https://finance.yahoo.com/news/stoc...rnings-stock-market-news-today-134406481.html

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

"Stocks were higher early Thursday as investors braced for a crucial bank earnings season and digested the latest data on initial jobless claims that showed an uptick in unemployment insurance filings.

Shortly after the opening bell on Thursday S&P 500 (^GSPC) was higher by 0.3%, theDow Jones Industrial Average (^DJI) was roughly flat, while the tech-heavy Nasdaq Composite (^IXIC) rose 0.8%.

Labor market data out Thursday morning suggested the job market continues to soften with initial filings for unemployment insurance totaling 239,000 for the week ended April 8, the highest since January 2022, according to the government's latest data.

"Initial jobless claims rose last week, but the labor market stayed tight. We expect claims to trend higher through the rest of the year and peak in Q4 as the economy begins to emerge from a mild recession," wrote Oren Klachkin, lead US economist at Oxford Economics, in a note to clients on Thursday. "The upcoming labor market downturn will be modest since the drop in demand will be fairly modest and the labor pool will stay relatively small."

On the earnings side, investors are bracing for Friday morning's rush of bank earnings with JPMorgan (JPM), Citi (C), and Wells Fargo (WFC) each expected to report results.

Quarterly results from Delta Air Lines (DAL) served as the corporate highlight early Thursday, the these results showing the company missed Wall Street expectations on both the top and bottom lines. Shares of Delta were down less than 1% in early trade.

Delta CEO Ed Bastian told Yahoo Finance on Thursday that, "given all the uncertainty and some of the volatility that we see and what seasonally is our weakest quarter of the year, we were quite pleased and thought it was a real solid performance."

Stocks fell on Wednesday after the minutes from the Federal Reserve's latest policy meeting showed some officials forecasting the economy tipping into recession later in 2023.

"For some time, the forecast for the U.S. economy prepared by the staff had featured subdued real GDP growth for this year and some softening in the labor market," the minutes read.

"Given their assessment of the potential economic effects of the recent banking-sector developments, the staff's projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years."

The minutes ultimately revealed, however, that Fed official were largely convinced the banking system would remain stable after multiple banks failed last month, likely keeping the central bank on track to raise interest rates again next month.

"The March FOMC minutes show that two weeks after the SVB failure, policymakers were still more worried, net, about upside inflation risk than the risk of a much sharper slowing in activity than they previously expected," wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients on Wednesday.

"We doubt that this stance will survive contact with the incoming data over the next couple months.""

MY COMMENT

If we can get past the traders and the INSANITY of the short term day focused markets......we might have a pretty good day today.

If I think back over my investing lifetime there has been an EXPLOSION of obsessive focus on news, gossip, data, fear mongering, etc, etc, etc, on the part of investors, the media, and market experts over the past 50 years. It was so nice to invest in the old days when NONE of this stuff happened on a daily basis.

Back when I was investing in the 1970's and into the 1980's you could not even see a stock ticker unless you went down to the Merrill Lynch office and watched it in the lobby. I knew guys that would go down there at lunch to watch the ticker and see how stocks were doing.

MOST Investors would be far better off if we went back to those days of little to no constant information.

 

To repeat some basic investing knowledge:

1. INVESTING according to Jack Bogle:
   
   "Time is your friend; impulse is your enemy."
   
   "The two greatest enemies of the equity fund investor are expenses and emotions."
   
   "Don't look for the needle in the haystack. Just buy the haystack."
   
   "Don't do something... just stand there!"
   
   "In investing, you get what you don't pay for"
   
   "Develop a long-term plan—and stick with it
   Be a supersaver
   Stick with your plan, despite volatility [even "Stay the course" is used!]
   Be diversified
   Consider low-fee investment products that offer good value
   Focus on generating after-tax returns"
   
   "The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently."
   
   "Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes."
   
   "Time is your friend; impulse is your enemy."
   
   "It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it."
   
   
   “When there are multiple solutions to a problem, choose the simplest one.”
   
   
   “The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently.”
   
   “The true investor . . . will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.”
   
   “Over the short run, however, the fundamentals are often overwhelmed by the deafening noise of speculation—the price at which the stock market values each dollar of earnings.”
   
   “Pressed to identify useful financial innovations created during the past quarter-century, Paul A. Volcker, former Federal Reserve Chairman and recent chairman of President Obama’s Economic Recovery Board, could single out only one: “The ATM.”
   
   “The greatest enemy of a good plan is the dream of a perfect plan.” Stick to the good plan. Traditional”
   
   “Financial markets are far too complex to isolate any single variable with ease, as if conducting a scientific experiment. The record is utterly bereft of evidence that definitive predictions of short-term fluctuations in stock prices can be made with consistent accuracy. The prices of common stocks are evanescent and illusory.”
   
   “The message is clear: in the long run, stock returns depend almost entirely on the reality of the investment returns earned by our corporations. The perception of investors, reflected by the speculative returns, counts for little. It is economics that controls long-term equity returns; emotions, so dominant in the short-term, dissolve.”
   
   “For finally, “you can always count on Americans to do the right thing,” as Churchill pointed out, “but only after they’ve tried everything else.”
   
   “The greatest Enemies of the Equity investor are Expenses and Emotions.”
   
   “Graham’s timeless lesson for the intelligent investor, as valid today as when he prescribed it in his first edition, is clear: “the real money in investment will have to be made—as most of it has been made in the past—not out of buying and selling but of owning and holding securities, receiving interest and dividends and increases in value.”
   
   “A recent study by Morningstar Mutual Funds—to its credit, one of the few publications that systematically tackles issues like this one—concluded essentially that owning more than four randomly chosen equity funds didn’t reduce risk appreciably. Around that number, risk remains fairly constant, all the way out to 30 funds (an unbelievable number!), at which point Morningstar apparently stopped counting.”
   
   “Investors need to understand not only the magic of compounding long-term returns, but the tyranny of compounding costs; costs that ultimately overwhelm that magic.”
   
   “In the short run, the stock market is a voting machine; in the long run it is a weighing machine. —Benjamin Graham, Security Analysis (1934)”
   
   “I would add that I am not persuaded that international funds are a necessary component of an investor’s portfolio. Foreign funds may reduce a portfolio’s volatility, but their economic and currency risks may reduce returns by a still larger amount. The idea that a theoretically optimal portfolio must hold each geographical component at its market weight simply pushes me further than I would dream of being pushed. (I explore the pros and cons of global investing in Chapter 8.) My best judgment is that international holdings should comprise 20 percent of equities at a maximum, and that a zero weight is fully acceptable in most portfolios.”
   
   “When you have identified your long-term objectives, defined your tolerance for risk, and carefully selected an index fund or a small number of actively managed funds that meet your goals, stay the course. Hold tight. Complicating the investment process merely clutters the mind, too often bringing emotion into a financial plan that cries out for rationality. I am absolutely persuaded that investors’ emotions, such as greed and fear, exuberance and hope—if translated into rash actions—can be every bit as destructive to investment performance as inferior market returns. To reiterate what the estimable Mr. Buffett said earlier: “Inactivity strikes us as intelligent behavior.” Never forget it.”
   
   “It will also tell you how easy it is to do just that: simply buy the entire stock market. Then, once you have bought your stocks, get out of the casino and stay out. Just hold the market portfolio forever. And that’s what the index fund does. This investment philosophy is not only simple and elegant. The arithmetic on which it is based is irrefutable. But it is not easy to follow its discipline. So”
   
   While we are on the subject of QUOTATIONS........Warren Buffett, anyone?
   
   “We select such investments on a long-term basis, weighing the same factors as would be involved in the purchase of 100% of an operating business:
   
   (1) favorable long-term economic characteristics;
   (2) competent and honest management;
   (3) purchase price attractive when measured against the yardstick of value to a private owner; and
   (4) an industry with which we are familiar and whose long-term business characteristics we feel competent to judge.”
   
   “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”
   
   "Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
   “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”
   
   "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
   “Time is the friend of the wonderful company, the enemy of the mediocre.”
   
   “Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a fly epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”
   
   "Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.”
   “Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.”
   
   “I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business.”
   
   “What an investor needs is the ability to correctly evaluate selected businesses. Note that word ‘selected’: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”
   
   “What counts for most people in investing is not how much they know, but rather how realistically they define what they don’t know.”
   
   “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”
   
   “Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
   
   “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”
   
   "So smile when you read a headline that says ‘Investors lose as market falls.’ Edit it in your mind to ‘Disinvestors lose as market falls—but investors gain.’ Though writers often forget this truism, there is a buyer for every seller and what hurts one necessarily helps the other.”
   
   “The most common cause of low prices is pessimism—some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.”
   “You shouldn’t own common stocks if a 50% decrease in their value in a short period of time would cause you acute distress.”
   
   “Keep all your eggs in one basket, but watch that basket closely.”
   
   “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”
   
   “We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it. In stating this opinion, we define risk, using dictionary terms, as “the possibility of loss or injury.”
   
   “We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
   
   “In the 54 years (Charlie Munger and I) have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.”
   
   “Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the models. Beware of geeks bearing formulas.”
   
   "You need to divorce your mind from the crowd. The herd mentality causes all these IQ’s to become paralyzed. I don’t think investors are now acting more intelligently, despite the intelligence. Smart doesn’t always equal rational. To be a successful investor you must divorce yourself from the fears and greed of the people around you, although it is almost impossible.”
   
   “The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”
   
   “You’re dealing with a lot of silly people in the marketplace; it’s like a great big casino and everyone else is boozing. If you can stick with Pepsi, you should be O.K.”
   
   "I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”
   
   “There seems to be some perverse human characteristic that likes to make easy things difficult”
   
   “Rationality frequently wilts when the institutional imperative comes into play. For example:
   (1) As if governed by Newton’s First Law of Motion, an institution will resist any change in its current direction;
   (2) Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds;
   (3) Any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops; and
   (4) The behavior of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated.”
   
   MY COMMENT

You can learn a lot from these little bits of investing wisdom. The above is a basic PRIMER for long term investors.

BUT....no matter how often you repeat the above MOST people will ignore the obvious and get caught up in market timing, trading, and trying to guess the next big winner. Human behavior and human nature are investing KILLERS.

 

The FORCE is strong today.....in the markets.

I may as well quote YODA the legendary Jedi master......regarding the short term markets. Makes about as much sense as anything else short term.

 

Yeah Smokie......but I have to admit that I "stole" that post.....from myself. I posted it earlier in this thread on about page 15. I could have avoided the last 755 pages of posts on this thread by just posting that one post every day.

I did however.....look at my account a minute ago. UP strongly so far today......and.....nine of ten stocks UP. My lone stock that was down is.......HD.

 

As usual......SHOW ME THE MONEY.