The Long Term Investor

Yes.....the markets "feel" more normal now that we are near the end of the FED.

I just looked at my account. I was tied up with some workers for the past hour so have not been following anything. I expected to see a gain....but....the size of the gain was a pleasant surprise. EVERY....one of my stocks was UP nicely and I have a BIG gain for this early in the day. Lets hope we grow into the day from here.

Some of the very nice things I am seeing in my account today:

AMZN +4.72%
COST +2.81%
TSLA +3.51%
NVDA +1.03%

The nice gain in COST in yet another indicator that some of the content that I was seeing yesterday was NOT telling the real story. obviously the markets and investors.......LIKED.....the earnings report yesterday.

 

We are OBVIOUSLY seeing a nice BUMP UP in the markets today based on the rumors of a Debt deal. I have no doubt we will see a deal soon. this is not based on anything other than my lifetime experience of seeing this sort of political gamesmanship many times in the past.

I really dont know why anyone takes any of the fear mongering on this issue seriously.

The markets are really showing a nice BROAD GAIN today. After yesterday when tech investors struck gold.....the broad rally today is a nice end to the week...for ALL investors.

It is nice to see people getting excited about investing again.....a bull market tends to do that. As a long term investor you simply have to sit through the bad times....but....they still wear on you subconsciously. SO....when good things are happening...there is no reason not to CELEBRATE.

It is OK to have some fun as an investor.

 

I like this little article, it is all about......perspective.

You are – What you think about (Recession, Economy, Stock Market)

https://contrarianedge.com/control-your-thoughts-on-the-economy/

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

"I’ve been asked by many readers and some clients for my thoughts on the economy and recession.

As I am typing this, I’m thinking about how much ink I should be spilling on writing about the recession and how much time we, as investors, should be allocating to thinking and worrying about it.

Firstly, our ability to predict it is very limited – the economy is a complex system and thus incredibly difficult to forecast. Don’t believe me? The Federal Reserve employs a few hundred PhDs who stare at economic data 24/7 and they have yet to get it right, even once.

Secondly, recessions are not a death sentence to the economy but a natural, transitory phase.

This brings me to the third and most important observation: Time is the currency of life, and attention is how we choose to allocate this currency. As an investor, I can spend most of my day fidgeting, spending my time trying to predict the unpredictable and invest as if, at some point (I don’t know when), our portfolio will encounter a recession. Yes, earnings of some businesses will temporarily decline and then come back. Their stock prices may decline as well. But the value of the businesses, if we have done our analysis right, will not really change much. Recession – a temporary decline of cash flows – is a tiny blip in the stream of discounted cash flows.

There are three versions of ourselves: what people think of us, what we think of ourselves, and who we actually are. There is a saying, “Don’t tell me what you care about, show me how you spend your time.” We are at peace when who we think we are and who we actually are largely overlap. We are even more at peace if the two overlap in the version we’d like to be. We cannot really control what others think of us. The only thing we can do is to behave according to our values; but again, we should not tie our happiness to something we cannot control."

MY COMMENT

When I was in business....some of my best years were when the economy was bad. there is no reason that a recession has to be a bad thing for a stock investor.....even over the short term.

Much of the content out there in the media makes it sound like a death sentence......in reality it is simply NORMAL....bust like bull and bear markets, corrections, etc, etc. it is an inherent part of being an investor and depending on what you own and your entire portfolio mix....it might even be a good thing.

 

To continue with the POSITIVE ATTITUDE today:

The Stock Market is Not a Casino

https://awealthofcommonsense.com/2023/05/the-stock-market-is-not-a-casino/

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

"A reader asks:

Ben showed the numbers for U.S. stock positive returns over the long-term. How does the data look for global ex-U.S. performance?

Fair question.

Here is the data I showed in a recent blog post:

Since 1926, the U.S. stock market has experienced positive returns:

• • 56% of the time on a daily basis
  • 63% of the time on a monthly basis
  • 75% of the time on a yearly basis
  • 88% of the time on a 5 year basis
  • 95% of the time on a 10 year basis
  • 100% of the time on a 20 year basis

My least favorite description of the stock market is that it’s just a casino where the house always wins.

Maybe this is true if you are a day trader. But in a casino the longer you play, the higher your chances of walking away a loser since the house has the edge.

The stock market is the opposite of a casino. The longer you play, the higher your odds of success in terms of experiencing positive returns on your capital.

The ability to think and act for the long-term is your edge as an individual investor. Patience is the ultimate equalizer.

Now back to the original question — is this a U.S. phenomenon only?

We only have data on foreign stocks going back to 1970 but that’s more than 50 years of returns so that’s good enough for me.

Here are the results over various time frames for positive returns going back to 1970 for the S&P 500 and MSCI World ex-U.S. Index:


Not bad.

Since 1970 the win percentages over rolling monthly and 12 month time frames have been better for the S&P 500.

But looking out 5, 10, 15 and 20 years it’s basically the same. And international stocks actually have a higher win percentage than US stocks over 5 and 10 year periods.

I think these numbers might surprise some people because the United States has outperformed international stocks by a hefty margin over the past 15 years or so.

Here is a look at the rolling 5 year returns for both international and U.S. stocks:


These return streams are generally moving in the same direction over time but there are points in the cycles where one geography takes a clear lead and the other a back seat.

There are even larger divergences over 10 year rolling returns:


I was surprised by the fact that international stocks actually have a higher winning percentage than U.S. stocks over 10 year windows.

It is worth pointing out that the magnitude of the gains probably matters more than the winning percentage but this is surprising nonetheless.

The U.S. stock market has been the clear winner over the past 15 years and the past 100+ years. As they say, the winners write the history books so that’s why there is so much focus on the U.S. stock market.

But the risk profile for international stocks isn’t all that much different. Patience and diversification are rewarded around the globe. We don’t have a monopoly on that.

Long-term investing works just fine outside of the United States."

MY COMMENT

YES......long term investing works. Actually....the longer you invest the better you do.

I do not do International investing because I prefer to stick with the companies that I know and see every day. I also prefer to stick with companies that are WORLD WIDE DOMINANT LEADERS and these tend to be AMERICAN businesses.

BUT you can see from the above that long term investing is a world wide success. This assumes one vital criteria.....that you select GREAT companies based on reason and rational analysis.

When it comes to my money.....I will take the odds set out above....all day long.

 

Fun day today....Zukodany. I think the BOOM that is going on today is going to stick.....due to the DEBT CEILING rumors. Investors should be having a good three day weekend.

HERE is yet another little indication of......yes you guesses it......NO RECESSION. Of course the flip side of this sort of news is the reaction of the FED. If things get too good the FED will come break into the party......and yank away the punch bowl. A bunch of party poopers.

Strong US consumer spending, inflation readings put Fed in tough spot

https://finance.yahoo.com/news/us-consumer-spending-beats-expectations-124730228.html

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

"WASHINGTON (Reuters) - U.S. consumer spending increased more than expected in April, boosting the economy's growth prospects for the second quarter, and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month.

The growth picture was further brightened by other data from the Commerce Department on Friday showing a surprise rebound last month in orders of manufactured non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans.

The reports added to labor market resilience, a rebound in factory production and a pickup in business activity in suggesting the economy was experiencing a spring revival after hitting a speed bump in the first quarter. They also increased the chances that the U.S. central bank would hike rates in June.

Minutes of the Fed's May 2-3 policy meeting, which were published on Wednesday, showed policymakers "generally agreed" the need for further rate hikes "had become less certain."

"Companies and consumers are in agreement that there are plenty of green shoots to like at the start of springtime and right now the economy is miles and miles away from the cliffs of recession," said Christopher Rupkey, chief economist at FWDBONDS in New York. "Fed officials won't be able to pause their rate hikes, it looks like demand is picking up, not slowing down as it is supposed to do when the Fed hikes rates."

Consumer spending jumped 0.8% last month after gaining 0.1% in March. Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, would rise 0.4%.

Consumers stepped up purchases of new light trucks and spent more on pharmaceutical products. Spending on goods rebounded 1.1% after two straight monthly declines.

Services outlays increased 0.7%, lifted by gains in financial services and insurance, healthcare, recreation, and housing and utilities.

Adjusting for inflation, consumer spending shot up 0.5% after being unchanged in March.

Last month's surge in consumer spending tempered economists' expectations for a sharp slowdown this quarter. Though consumer spending accelerated at its fastest pace in nearly two years in the first quarter, much of the growth was in January. Sluggishness in February and March set consumer spending on a slower growth trajectory heading into the second quarter.

Consumer spending is being supported by strong wage gains in a tight labor market. Wages increased 0.5% after rising 0.3% in March. That helped lift personal income 0.4% after a gain of 0.3% in March. Growth estimates for the second quarter are currently as high as a 2.9% annualized rate. The economy grew at a 1.3% pace in the first quarter.

Stocks on Wall Street were trading higher. The dollar edged up against a basket of currencies. U.S. Treasury prices were mixed.

IMPORTS SURGE

Strong demand was underscored by another report from the Commerce Department showing imports of goods climbed 1.8% in April, mostly reflecting motor vehicles and consumer goods. But the rising imports and a 5.5% drop in exports caused the goods trade deficit to widen 17.0% to $96.8 billion, a development that could subtract from growth this quarter.

The current pace of consumer spending is, however, unlikely to be sustained as Americans grow weary of inflation.

Government social benefits are also dwindling and most lower-income households have depleted the savings accumulated during the COVID-19 pandemic. The saving rate fell to 4.1% in April from 4.5% in March.

Credit has also become more expensive following 500 basis points worth of rate increases from the Fed since March 2022, when it embarked on its fastest monetary policy tightening campaign since the 1980s to tame inflation.

Banks are also tightening lending following recent financial market turmoil spurred by the collapse of several U.S. lenders.

The personal consumption expenditures (PCE) price index increased 0.4% in April after rising 0.1% in March. In the 12 months through April, the PCE price index increased 4.4% after advancing 4.2% in March. Food prices were unchanged, while the cost of energy goods and services jumped 0.7%.

Excluding the volatile food and energy components, the PCE price index was up 0.4% after a 0.3% rise in March. The so-called core PCE price index jumped 4.7% on a year-on-year basis in April after gaining 4.6% in the 12 months through March. The Fed tracks the PCE price indexes for its 2% inflation target.

Economists estimated that core services excluding housing, closely watched by policymakers, increased 0.4% after rising 0.3% in March.

There was, however, some encouraging news for Fed officials. Consumers' inflation expectations over the next 12 months dropped to a final reading of 4.2% in May after spiking to 4.5% earlier in the month, a survey from the University of Michigan showed. The five-year inflation outlook eased to 3.1% from 3.2% in early May.

Financial markets saw a nearly 60% chance of the Fed raising its policy rate by another 25 basis points at its June 13-14 meeting, according to CME Group's FedWatch Tool. Much will, however, depend on whether an agreement is reached to raise the government borrowing cap. April's employment report next Friday as well as consumer price data will also be crucial.

"If the debt ceiling is resolved without too much damage to sentiment, and banking troubles don't resurface, then the broad sweep of data so far could make for an interesting debate at next month's meeting, though we still believe the Fed will leave rates unchanged," said Michael Feroli, chief U.S. economist at JPMorgan in New York.

In another report, the Commerce Department said orders for non-defense capital goods excluding aircraft surged 1.4% last month after falling 0.6% in March, confounding economists who had expected a 0.2% drop. Shipments of these so-called core capital goods rebounded 0.5% after slipping 0.2% in March.

"This supports a pickup in business investment," said Kathy Bostjancic, chief economist at Nationwide in New York."

MY COMMENT

OK.....sounds like a great economy to me considering all that we have gone through for the past three years. This is actually what the AMERICAN economy should be like.

Of course....I am sure the FED will be out in force to TRASH everything they can. It now appears that their mandate is to simply TRASH and KILL the economy. They need to go away for a while and let things simmer. People.....and investors....need to be allowed to enjoy things after the past DISMAL three years.

 

LOL.....I saw this headline and thought....WTF does a comic book company have to do with AI. This is crazy to see a comic book company claiming that they are using AI. This AI stuff is getting out of control.

When I clicked on it I realized it is a different....Marvel......DUH. One with two......LL's

Marvell shares rocket 25% on beat and ‘tremendous’ business potential for A.I.

https://www.cnbc.com/2023/05/26/mar...ter-semiconductor-firm-beats-on-earnings.html

 

I agree Zukodany.....it is a little late to jump on much of the AI and other tech bandwagon. The exception would be if you are going to be at least a 7-10......or more..... year investor.

TireSmoke:

Good to see you posting. You seem to have the same "good" problem as many of us.....NVDA is now the largest holding we own. if half of what that company is predicting happens....we could all be in for a BIG RIDE over the next 5-10 years. It is starting to remind me of when I bought MSFT in 1990. The gains were life changing money over the next 10-12 years.

Now the question is.....when will we see a stock split with NVDA. Probably somewhere north of $500 per share. At this rate that could be just a couple of days......(a joke....perhaps)

 

I had another BIG DAY today. A nice gain in ALL ten of my stocks. Plus another nice beat of the SP500 by 0.93%.

Highlights for me today.....COST (in spite....or....because of earnings) +4.26%.....AMZN +4.44%.....NVDA up by another $10 per share.....TSLA +4.72%

 

BUMMER for the DOW and RUSSELL. Otherwise.....full speed ahead.

DOW year to date (-016%)
DOW for the week (-1.00%)

SP500 year to date +9.53%
SP500 for the week +0.32%

NASDAQ 100 year to date +30.84%
NASDAQ 100 for the week +3.53%

NASDAQ year to date +23.97%
NASDAQ for the week +2.51%

RUSSELL year to date +0.67%
RUSSELL for the week (-0.04%)

As to......"ME".....As of the close today my entire account, stocks and funds, is UP year to date.....+25.93%. This time last Friday it was +22.21%. That is a significant gain for the week.

Two weeks ago I was at +19.32%.....so a gain of 6.61% in two weeks. I guess......I will take it.

 

Have a great three day weekend EVERYONE.

We made some money this week.....next week could also be a BIG ONE when the Debt Ceiling stuff is over and the markets do a little happy dance.

 

OK....here you go right on schedule......but....the drama is not over yet. Now we have to go through the games of getting the House and the Senate to sign off. No doubt some will hold out to get some goodie included in the package.

BUT....we are close and the most important step is done. The markets should like this next week. BUT....things like this have a PERVERSE way of having the opposite impact compared to expectations when it comes to the markets. So....dont let your short term expectations get too high.

UPDATE 10-Biden, McCarthy have tentative US debt ceiling deal

https://finance.yahoo.com/news/1-thorny-issues-remain-us-124217141.html

 

Poor home buyers......you are lucky you were able to buy TireSmoke.

Homebuyers frustrated in April as inventory problems remain 'critical'

https://finance.yahoo.com/news/home...ntory-problems-remain-critical-140104459.html

MY COMMENT

This is a very disheartening issue for people trying to buy a home. Inventory is in the toilet......way down. There is a a HUGE number of homeowners that bought over the 3-5 years that mortgage rates were GOLDEN....in the 2.7% to 4% range. These people are NOT going to have much interest in trading up or selling their home for a good length of time. They want to hang onto those low rate mortgages.....they are spoiled.

We are seeing this in my little area of 4200 homes. The final area of about 100 homes that was being built out is now done.....if you want to buy in my area you have to buy a used home.....that means someone has to decide to list and sell. So far.....the number of listings is WAY DOWN this year. We currently....at peak selling season...have about 45 homes for sale out of 4200.

 

Markets will be CLOSED tomorrow....Monday......for Memorial Day. An extra day for us all to rest up for what could be another BIG week.

 

CLASSIC long term investing advice.

Losing Value

https://humbledollar.com/2023/05/losing-value/

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

"PERHAPS YOU’VE SEEN charts like the one below, which comes from Dimensional Fund Advisors. The message: Investors who try to time the market in search of better returns often end up damaging their results. To many investors, this seems intuitive, because trading isn’t easy.

But to others, market timing appears to make a lot of sense. For instance, for years, Yale University professor Robert Shiller has been maintaining a measure of market valuation known as the cyclically adjusted price-earnings (CAPE) ratio. It’s a way of measuring how expensive the market is, and it has an intuitive appeal of its own.

In 2000, for example, the dot-com bubble was clearly visible on a chart of the CAPE ratio. Sure enough, the market experienced a steep decline from that peak, falling nearly 60%. Similar patterns are visible around the market tops in 1929 and in the late 1960s.

It’s data like this that makes many folks believe in market timing. For them, it’s just plain common sense to sell stocks when they’re overpriced and to buy them when they’re underpriced. For those who believe in market timing, it would appear borderline reckless to take a buy-and-hold approach, given how clear a guide the CAPE ratio appears to be.

Who’s right in this debate? In a recent study, Derek Horstmeyer, a professor at George Mason University, looked at this question. Together with colleagues, he used 100 years of market data to compare the returns of two hypothetical portfolios: a static 50% stock-50% bond portfolio and an actively traded portfolio that adjusted its holdings in response to market valuation.

The actively traded portfolio used what Horstmeyer called a “20-12” trading rule. During periods when the CAPE ratio was between 12 and 20—meaning the market was neither particularly expensive nor particularly cheap—the active portfolio held the same 50% stock-50% bond allocation as the buy-and-hold portfolio. But when the market got expensive, with the CAPE over 20, the active portfolio shifted to a more defensive stance, with just 30% in stocks and 70% in bonds. Meanwhile, when the market fell into bargain territory, with the CAPE under 12, the active portfolio became more aggressive, shifting to a 70% stock-30% bond allocation.

What did Horstmeyer’s team find? Historically, the 20-12 trading strategy would have worked well, delivering outperformance of about 0.4 percentage point a year. That’s not enormous. But compounded over many years, it would have been meaningful. There’s one problem, though: Horstmeyer found that this outperformance was short-lived. Initially, the outperformance was there. But in 1950, the results reversed. Between 1950 and 2000, the buy-and-hold approach outperformed the active strategy by about 0.8 percentage point a year. And since 2000, the buy-and-hold strategy’s advantage widened further, to 1.9 percentage points a year.

These results make sense. Over time, and especially since the advent of the internet, it’s become much easier for everyday investors to access market information. This has made it much harder for professional investors to beat the market by having access to more information. There’s a famous story, for example, about Benjamin Graham. He’s regarded as the father of modern investment analysis and was an early hedge fund manager.

In 1926, he was studying the railroad industry, when he got an idea. The next day, he traveled to Washington, D.C., to get a look at industry data that was available only on paper, in the office of the Interstate Commerce Commission. Sure enough, Graham found what he was looking for, and that led to a 50% gain on the stock he identified. This opportunity, though, was one that was only obvious to someone willing and able to sift through files in a government office. Today, anyone with an internet connection could do the same thing—and that, I think, helps explain Horstmeyer’s findings.

Things began to change even before the internet. In 1976, near the end of his life, Graham made these comments in an interview: “I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago…. I doubt whether such extensive efforts will generate sufficiently superior selections to justify their costs.”

The lesson for investors: There’s no question that market timing seems intuitive. It feels like the right thing to do. So, why does the data so clearly point in the other direction? In addition to greater data availability, I see two other factors.

First, the market isn’t always rational. Often, when valuations are high, they end up going higher still. Look at the CAPE ratio during the 1990s to see a clear example. A rational investor might have concluded that the market was overpriced as early as 1993, when the CAPE crossed 20. But then it kept going. By 1995, it had topped 25 and, in the end, it went as high as 44. To be sure, an investor who had sold back in 1993 would have avoided the meltdown that occurred in 2000, but he also would have missed out on seven years of gains, which would have far outweighed those later losses.

The second reason a valuation-based approach to trading doesn’t work in practice is that the market is unpredictable, making it impossible to know when it might move higher. We saw this as recently as 2020. In the spring, the economy had largely come to a stop, the market had dropped more than 30% and most people had no idea how long the crisis would last. But on March 23, the Federal Reserve stepped in to contain the damage, and the market immediately turned higher. The market gained 9% the next day and 14% by the end of that week. A month later, the S&P 500 had gained 28%. By year-end, it was up 68% from its low point.

What Horstmeyer’s study makes clear, in other words, is that valuation ratios are just one factor in determining the direction of the market. World events are at least as important, and there’s no chart that can tell us what might be around the corner. A ceasefire in Ukraine, for example, would likely spark a market rally, but no one knows when or if something like that might happen. The bottom line: Difficult as it might be sometimes, investors’ best bet is to choose an asset allocation—and then to stick with it."

MY COMMENT

It is not hard to find how to invest. Long term....is the winner style....by a long shot when you look at actual investor results.

As usual.....what is so easy and simple...is so difficult for humans to achieve.

 

This year is the perfect example of the POWER of long term investing and being exposed to the markets ALL the time.

Last year was DISMAL.......most investors had a medium to big loss by year end last year. I am sure many people got to the point last year where they just could not stand the heat and the overwhelming negative market opinion and just decided to time the market and get out.

It is the SIREN CALL of market timing. It sounds so easy....I will get out now and avoid the dropping market and get back in later when it starts back up.

BUT.....the opinion and news this year has been generally to the negative side.......so.....how many of those people are back in the markets? We are ONLY five months past the big losses of last year.

Over that five months we have been generally moving UP in the markets. In fact we have been moving up in the markets for the past eleven months. Unfortunately....there is no way to time the markets. Those that bailed out are probably still out and have missed out on the potential 20-30% gains of the past eleven months. How long will it take them to make up those missed gains......probably forever.

There is ONLY ONE WAY to capture all the market gains. Pick rational and reasonable stocks and funds.....and....stay fully invested all the time for the long term. The past five months this year and the final six months of last year are instructive.....it is IMPOSSIBLE to anticipate or see the big explosive market gains that always seem to come out of nowhere. AND....once you sell out of the markets....it is impossible to know when to get back in and time the entry point.