The Long Term Investor

I will say, if they get close to their prior high......you should make a ton of money. That would be a BIG gain.

 

A weekend real property post.

Homebuyer conundrum: If mortgage rates fall, bidding wars will follow, expert says

https://finance.yahoo.com/news/home...g-wars-will-follow-expert-says-140737858.html

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

"Mortgage rates are pulling back from 8%, a seemingly promising sign for sidelined buyers. But further declines could unleash pent-up demand.

"If rates fall below 7%, I think we're going have a surprisingly strong year," Daryl Fairweather, chief economist at Redfin, told Yahoo Finance Live (video above). "That's when I think we're going to see more people out there with bidding wars."

The average 30-year home fixed-rate mortgage fell to 7.22% this week, according to Freddie Mac, and rates seem to be on course to drop further by the year-end. Overall, rates have scaled back more than a half-point in the last five weeks.

That's prompted some buyers to get back in. The volume of mortgage applications for a purchase increased 5% for the week ending Nov. 24 versus the previous week, according to the Mortgage Bankers Association (MBA).

At the same time, the median monthly mortgage payment shrank over $100 during the last month as rates edged away from 8%.

That means a buyer purchasing a home at last week’s average rate of 7.29% would face a median monthly mortgage payment of $2,575. That’s down $164 from the all-time high of $2,739 set a month earlier, according to Redfin, but 13% higher than a year ago.

"Rates going up to nearly 8% has reset the threshold for buyers wanting to get back into the market," Fairweather said.

Still, purchase activity remains 20% lower than one year ago, MBA found.

"The purchase market remains depressed because of the ongoing, low supply of existing homes on the market," Joel Kan, MBA’s deputy chief economist, said in a press statement.

However, there may be a glimmer of hope for those still on the hunt.

New listings posted their biggest year-over-year increase since 2021 during the four weeks leading up to Nov. 26, Redfin found.

Those purchasing may also benefit from new listings on the market, which have climbed 5.8% year-over-year, Redfin data found – the biggest uptick in over two years. Overall, the share of new listings amounted to 64,576. By comparison, new listings were falling at this time of the year, Redfin analysts noted.

"They're going to be more people who are wanting to move because they have a new job or they're getting married or they're having kids, so people's lives go on and that creates demand," Fairweather said. "And if we have a strong stock market, people may feel good about spending money, but those high rates are the biggest drag on the housing market right now."

Though some homeowners have put their listings on the market, most are still reluctant to list.

Some 37% of homeowners believe it’s a bad time to sell a home, according to Fannie Mae’s latest housing sentiment index. Overall, 78% of respondents also said they thought the economy was on the wrong track in October, up 7 percentage points from the month prior.

The problem is that rates may fall enough next year to convince buyers to come back, but not enough to persuade enough homeowners to sell.

"If rates fall, we will see more buyers come back to the market and with limited inventory that will create bidding wars that push up prices," Fairweather said. "We're seeing a bit of relief on new listings right now with more sellers deciding now is the best time to sell and maybe that will continue into next year. So hopefully, we'll have a bit of a balanced situation even if rates do decline."

According to Redfin, available inventory of homes on the market amounted to 4.2 months of supply as of Nov. 26. At least 4 to 5 months is considered a balanced market, per Redfin.

Fairweather added: "But I don't think that balance is going to last. The overall story for the housing market is that there are fewer homes available compared to the number of people who want to buy a home… The fact [rates] have come down a little bit makes me more optimistic, but I think it's gonna be another slow year at least when we look back historically.""

MY COMMENT

Any good news for those looking to buy a home....is always....tempered by bad news at the same time.

I see the threshold for a property boom as rates dropping back to 6%. In the 5% to 6% range the pent up demand will explode. It is now all relative......after seeing rates at 8% if they go back to 6% or even 6.5% it is going to seem like GREAT rates to buyers on the sidelines.

Yes...in that case there will be bidding wars and pretty good price increases as a result.

 

The week that will be.

Investors look to labor market for more soft landing evidence: What to know this week

https://finance.yahoo.com/news/inve...vidence-what-to-know-this-week-163033086.html

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

"Stocks just had their best month of the year, but the rally could lose steam depending on what a crucial labor market report shows.

The November jobs report, scheduled for release Friday, highlights a week of economic data that includes key updates on activity in the services sector as well as the latest readings on job openings and consumer sentiment.

The Federal Reserve will enter its quiet period ahead of its next meeting, which begins on December 12.

On the earnings front, results from J.M. Smucker (SJM), GameStop (GME), Lululemon (LULU), Dollar General (DG), and Broadcom (AVGO) will highlight a week of quarterly reports.

Stocks entered the first full week of December after closing out their first winning month since July. In November, the Nasdaq Composite (^IXIC) soared 10.7%, while the S&P 500 (^GSPC) added 8.9% and the Dow Jones Industrial Average (^DJI) rose about 8.8%.

Investors will look for further signs of cooling in the labor market when the jobs report is released on Friday. A report that shows job growth, but not excessively above expectations add to the increasing sentiment that the Fed's rate hiking campaign could end in a "soft landing," where inflation returns to 2% without a major downturn in economic activity.

After a weaker than expected print in October, largely driven by the United Auto Workers strikes, economists project an increase in job additions in November.

The November jobs report is expected to show 200,000 nonfarm payroll jobs were added to the US economy last month with unemploymentremaining flat at 3.9%, according to data from Bloomberg. In October, the US economy added 150,000 jobs while the unemployment rate hit its highest level since January 2022.

"We anticipate softening labor demand will remain a theme moving forward," Wells Fargo's team of economists led by Jay Bryson wrote in a note on Friday. "That said, the end to UAW and Hollywood actors' strikes looks apt to boost November’s payroll print by close to 45K. Furthermore, a relatively late survey week should help capture more holiday hiring than in prior years, supporting seasonally-adjusted gains. We estimate that employers added 230K payrolls over the month."

For investors, the print will be key in either bolstering or contradicting recent market sentiment that the Fed is done hiking interest rates and could even cut rates sooner than many expected.

The Fed attempted to temper those expectations on Friday.

"It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease," Fed Chair Jerome Powell said Friday in prepared remarks at Spelman College in Atlanta.

The comments initially shocked markets with stocks falling in the minutes after the speech began, but all three of the major averages eventually finished Friday's trading day in the green. Market expectations for Fed policy didn't budge much either.

As of Friday afternoon, markets had priced in about a 64% chance the Fed cuts rates by the end of its March meeting, up from a 21% chance just a week prior, per the CME FedWatch Tool.

"The jobs reports is very important, that's probably the most important thing we have on our calendar into the end of the year," eToro US investment analyst Callie Cox told Yahoo Finance. "And a continuation of the trends we've seen in the job market would be a good thing because that would show that the Fed is maintaining a healthy job market while getting inflation down.

"What you don't want to see is unemployment rising quickly and hiring slowing down quickly. You don't want to see any sudden moves."

With the Fed in its quiet period, economic data will likely be the key driver for stocks next week as corporate earnings season winds down. But a few reports could help investors gauge investor's appetite for risk in certain areas of the market.

On Wednesday, GameStop and C3.ai (AI) will report earnings. The two stocks have been popular momentum trades this year. GameStop recently rose over 20% in a single trading session. Meanwhile, C3.ai has ridden the tailwinds of AI hype and seen its stock rise roughly 175% this year.

Both of the unprofitable companies saw their stocks soar November as investors shifted back to a risk-on mantra, buying up some of the names hit hardest during the fall selloff.

Broadly, many strategists haven't sounded the alarm that the current market melt-up has been overbought.

"Despite growing expectations for a soft landing, we are still far from a market environment dominated by high conviction and euphoria," Bank of America's head of US equity & quantitative strategy Savita Subramanian wrote."

MY COMMENT

This week will be another week of absolutely.......NORMAL......market action. Nothing out of the ordinary, nothing weird or strange going on. Just some minor and mostly irrelevant economic reports.

So......there should be a significant......probability....of another UP week for the major averages.

 

A very important court case being argued soon in the US Supreme Court. The ruling will have a major impact on future "Wealth Taxes" or taxes based on "net Worth".

The Supreme Court Case That Could Upend a Century of Tax Law

https://www.motherjones.com/politic...ealized-capital-gains-billionaire-wealth-tax/

I picked this article because I think it has the best discussion and description of the issues in the case....not....because I agree with the opinions of the writer and person being interviewed about such taxes.

 

A new neighborhood LOW going back more than a year....probably more than 3-4 years. We now....out of 4200 homes....in our area have ONLY 28 homes actively for sale. That is extreme low inventory even for this time of the year.

If you want to get into our nice area and great public schools there is a high price to pay. Only seven homes below $800,000......and.....the lowest home in the entire area of 4200 homes is $640,000.

We bought a home for my mom and sibling here for $289,000 (2500 sq ft).....13 years ago......and....it was nowhere near the lowest. At that time the lowest neighborhood had homes for as low as $225,000. Amazing price increases since that time.

The POWER of long term home ownership in a good neighborhood with great schools.

 

I love it today with the futures......LOL. The market is throwing a HISSY-FIT. Crying and whining and stomping its feet, red in the face, crying....."I want my rate cut". Wah...wah....wah.

This has got the be one of the most idiotic short term events I have seen in a long time. the media and some in the investment community.....well make that the trading community.....somehow got it in their mind that the FED would cut rates some time over the next 6 months.

There is absolutely no justification for this fantasy. No one has given any indication of rate cuts....especially in the first half of 2024....at all. In fact EVERYONE has said the opposite. I expect rates to hold where they are right now for at least 6-12 months.

Of course the media is fanning the flames of this DELUSION with constant comments in articles.....talking about a rate cut expectation.......and quoting people that want one.

This is a perfect example of the IDIOCY of the short term and short term markets. The Ten Year Treasury has gone down significantly over the past couple of weeks. Today it is at 4.251%...just a few weeks ago it was at 5%.

AND......as usual.....the constant BS about the big cap tech companies and other BIG companies being interest rate sensitive....is nothing more than a ridiculous self fulfilling fantasy. It is a story line with absolutely no connection to reality,.....but...it has been said so many times in print that it is thought of as fact.

Of course these companies are not stupid.....if they can finance and borrow at extreme rates near zero...they will do so. BUT...that does not change the fact that they are siting on a mountain of cash and have no need to borrow to finance their growth.

 

A few random stories today.

Bitcoin tops $41,000 to hit 19-month high on ETF hopes, bets on Fed cuts

https://www.cnbc.com/2023/12/04/bit...me-in-2023-on-etf-hopes-bets-on-fed-cuts.html

Gold soars past $2,100 to new record — and analysts don’t expect it to stop there

https://www.cnbc.com/2023/12/04/gol...s-amid-economic-geopolitical-uncertainty.html

Stock market news today: US futures retreat from rally as Fed doubts swirl

https://finance.yahoo.com/news/stoc...from-rally-as-fed-doubts-swirl-122601671.html

 

All of the above is related to the rate cut.....DELUSION.

All I can say is.....you have got to be kidding. As a long term investor it is my job to avoid getting sucked into the short term drama like this baloney. So I will ignore it all.....as usual.

 

Today was one of those days when you look at the markets and say.......WHATEVER.

I lost some good money today in my account. Five of seven stocks down today for me. My two that were UP....COST and HD. HD has been on a little run lately. I also got beat by the SP500 by 0.70%.

 

I like this little article.

Overcoming a Cash Addiction in Your Portfolio

https://awealthofcommonsense.com/2023/11/overcoming-a-cash-addiction-in-your-portfolio/

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

"A reader asks:

I’m finding it incredibly hard to invest my excess cash, even in my kids’ college funds, with the S&P 500 closing in on new highs. Objectively, I know I’m supposed to just grit my teeth and invest, not try to predict the market, take comfort in knowing that time-in-the-market is biggest factor in my long-term investment success…but IT IS SO DAMN HARD for me to do it psychologically in these seemingly overbought conditions. I’m not an idiot: I do automatically max out my 401k. I’ve swallowed hard and contributed a fair amount to 529s, and even a bit to my brokerage account. But I have money building up on the sidelines that I know I should do something with, and every day the market hits a new high, I feel more paralyzed. Would love to see you tackle this “problem” because I know I’m not the only one suffering from this strange — and yes, enviably — malady.

For some investors this will always be a problem.

Market timing is hard. And once you do it, market timing can lead to a cash addiction.

When markets are falling you assume they will fall even further. Cash becomes a safety blanket.

When markets are rising you assume they are too expensive and will correct at some point. Again, cash becomes a safety blanket.

I heard from an investor a number of years ago who went to cash in 1999. That was pretty good timing, considering it was the height of the tech bubble, which was the most expensive the U.S. stock market has ever been.

Unfortunately, he was still sitting in cash 15 years later.

He told me it was some combination of fear, arrogance and macro doom and gloom that kept him in the investment fetal position for a decade-and-a-half.

Market timing is hard not just because you need to be right twice for it to work — when you get out and when you get back in. It also requires the courage to get back in when you don’t want to.

There are a few ways around these fears.

I’ll start with the spreadsheet strategies and then move on to the behavioral approaches.

Diversification and asset allocation are risk mitigation strategies. You wouldn’t have to spread your bets if the future was known with certainty.

The whole idea behind setting an asset allocation in the first place is that it helps you balance your various risks and time horizons as an investor. You don’t have one asset allocation for bull markets and another for bear market or one for inflationary environments and another for deflation and so on.

You should have a mix of stocks, bonds, cash and other assets that is durable enough for you to hold during any market environment. That should be true of both current assets in your portfolio and any future contributions.

And if you’re that worried about valuations for large cap U.S. stocks you should look into diversifying into other asset classes — bonds (which finally have some yield), international stocks (much cheaper), value stocks (same), small cap stocks (also inexpensive), high quality stocks, dividend stocks, REITs, etc.

There are so many different strategies available today for you to diversify into.

It’s also worth pointing out new highs in the stock market are nothing to be afraid of. They happen a lot:



A handful of these new highs will occur at a peak right before a bear market. But most of them simply lead to more new highs down the road.

The other big piece here is defining your goals. Why are you investing this cash in the first place?

Retirement? A trip to Hawaii? Renovations? Kid’s wedding? Beach house? Healthcare needs? General rainy day savings?

The sole goal of investing is not finding the highest returns you can or creating the most optimized Sharpe ratio portfolio or outperforming some benchmark. You invest money now in the hopes that it grows to a larger amount for future use.

You just have to define those future uses and when they will occur.

Your money is all in one big bucket but you can separate your portfolio into different buckets if that helps. One bucket can be for growth. Another can be for income or volatility reduction. Another bucket could be for capital preservation or safety.

That safety bucket can and probably should include cash (short-term bonds, CDs, money market funds, online savings accounts, etc.). But I like the idea of putting a limit on the cash piece of your portfolio.

That could be a percentage of the overall allocation or an absolute level.

My cash bucket has a ceiling on it. Once a pre-defined level is breached, I move anything over and above that amount into my investment accounts. It doesn’t have to be set in stone but you should set that number in advance so you’re not guessing all the time or slowly becoming addicted to a growing cash position.

The point is every piece of your portfolio should have a job. And those jobs should be defined in advance along with the resources necessary to complete them.

Of course, the plan is the easy part. Anyone can do that.

The hard part is implementing your plan.

Your only choice here is automation.

Automate your contributions. Automate your asset allocation. Automate your rebalancing schedule.

And then stop looking at your portfolio so much.

The best way to avoid mistakes in your portfolio is to make a handful of good decisions ahead of time and get out of your own way."

MY COMMENT

Personally I dont hold any cash in my brokerage account. If I sell something it goes right back into another investment immediately.

I consider it bad investor form....to have a bunch of cash siting around in a brokerage account. Usually it means you are market timing.....a losing game to play.

I do like the idea of either physically or mentally having "buckets".

In retirement, for example, your immediate needs or safe money bucket might be the amount of money you need to live on for 2-3 years minimum. Enough to weather a nasty bull market.

The rest of your money might be in your stock bucket.

It is all a question of your needs, your risk tolerance, and the type of money involved.

My view....if it is stock market money...it should be invested not siting in cash.

 

I did not watch this and usually dont consider this person as anyone that I wish to follow when it comes to money or investing.....but....I certainly agree on this topic.

My hope is the Fed targets a 3% inflation instead of 2%, says Mohamed El-Erian

https://www.cnbc.com/video/2023/12/...stead-of-2-percent-says-mohamed-el-erian.html

 

We think that this stuff can never happen to anyone we know.......but...it does. I have some people that I am indirectly related to that recently lost over $500,000 in a scam.

I dont know the details....but it was a Crypto trading scam. Two of them put up $250,000 each. They sent the money to a Crypto account where their new trader friend would day-trade Crypto for them and they would share in the profits.....50/50. They would provide the cash and he would do the trading with his expertise.

I heard about it when they were telling people......that are in my family.....how they had made a profit of $300,000 in only a few weeks. I told my family member that it had all the hallmarks of a scam and that I did not believe it.

And......when they went to cash in some of their money they had to pay more for all sorts of fees and tax withholding....first. So they put even more in. Ultimately they were never able to get their money out and it was all lost. It was a scam.

These are not dumb people....one has a law degree and one is a long time business person. They got sucked in by the number one cause of this sort of disaster......GREED.

 

You know my stock criteria......BIG CAP......GREAT MANAGEMENT.....ICONIC PRODUCTS WITH WORLD WIDE MARKETING......MARKET DOMINANCE......DIVIDEND (hopefully).....CREAM OF THE CROP.....AMERICAN.....companies. I have followed this set of criteria for at least 35-40 years now.

I got started with this sort of investing by seeing my Mom's inherited portfolio of about 15 stocks. They all fit this criteria...stocks like Phillip Morris, Proctor & Gamble, IBM, Colgate, Coke, Pepsi, etc, etc, etc.

Charlie Munger’s Most Important Investing Lesson

https://www.forbes.com/sites/michae...t-important-investing-lesson/?sh=3977d700529b

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

Charlie Munger, one of the greatest investors of all-time, died this week. He was 99.

Munger was a successful attorney and Warren Buffett’s most trusted partner at Berkshire Hathaway. Munger was able to wisely opine on many subjects. This article is about the most important investing lesson I learned from Charlie Munger: only invest in high-quality businesses.

High-Quality Stocks Compound Best

When Warren Buffett first met Charlie Munger at a dinner party in 1959, Buffett was more of a classic value investor who focused on investing in companies at cheap prices. Munger helped Buffett transform Berkshire Hathaway into the Mona Lisa of corporate conglomerates by convincing Buffett to only invest in wonderful businessesat a fair price.

Munger has long advocated for investing in high-quality businesses with strong brands, competitive advantages, and the ability to raise prices over time.

One of Berkshire’s best investments of all time, See’s Candies, fit these criteria. When Berkshire bought the company in 1972, it was a well-established confectionary company based in California. As a California native, Munger was familiar with the brand and its sterling reputation. He convinced Buffett to deviate from his traditional approach of buying cheap, undervalued companies and instead pay a premium for a company Munger considered a high-quality compounder.

Turns out, Munger was right. See’s Candies, originally purchased for $25 million, has since generated over $2 billion in pre-tax earnings. This investment not only provided substantial returns, but also taught Buffett valuable lessons about the power of brands and quality, shaping future investment decisions. For example, Berkshire later bought large stakes in Coca-Cola and Apple, based on a similar premise.
Munger had a unique ability to simplify complex topics down to their essential truths. He said, "Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6% return—even if you originally buy it at a huge discount.”

There is so much wisdom wrapped up in those sentences. I encourage you to read them again.

The point Munger was making is that the value of common equity follows a company’s profit trajectory over the long-term. Highly profitable companies with durable competitive advantages earn above average returns on capital, which reflects the fundamental quality of a company. Sometimes the market assigns an above-average or below-average valuation to those fundamentals. However, if a company is fundamentally strong and steadily grows, the market will eventually reward shareholders for that value creation. This is why Munger favored very long holding periods, once he found something worth investing in.

For example, if you backtest the top 20% of the Russell 3000 Index based on 5-year average return on capital (to normalize for cyclical fluctuations), and assume annual rebalancing every year on December 31st, a hypothetical investor would have earned more than double the long-term compounded return of the index (770% cumulative return vs. 323%) from 2000 - 2022.


Top 20% of the Russell 3000 Index, annually rebalanced and ranked by 5-year average return on ... [+]

Silverlight Asset Management, LLC
How To Find Wonderful Companies

The type of companies Munger considered high-quality compounders rarely go on sale. But when they do, it generally pays to buy.

To screen for high-quality companies, you can use stock screeners available from your online broker, or via a website that tracks fundamental data. You can also use the criteria in the backtest above, or focus on other profitability metrics and indicators of balance sheet strength.

Another option is to subscribe to a service like Morningstar. They have analysts who specialize in different sectors and assign Economic Moat scores to individual companies. Generally speaking, ‘wide moat’ firms are the type of high-quality franchises that Munger favored. These are companies that consistently earn above average returns on capital due to their enduring strategic attributes.

Sometimes a wide-moat businesses misses a quarterly earnings number, or encounters some other friction that temporarily sours Wall Street sentiment toward the company. When a great company faces a short-term uncertainty (and all of them do eventually), Wall Street frequently misinterprets it as a signal of longer-term risk. This can cause great companies to get marked down to valuations that may still exceed the broader index, but represent a below-average premium. When I spot situations like this, I often think of Munger and pounce.

Why Fundamental Investing Will Never Go Out of Style

Early in Charlie Munger’s career, one could argue that investing was simpler. There weren’t as many algorithms or clever analysts dissecting every tick by tick move. Yet, his mental model of favoring high-quality companies still very much applies today.

In my experience, one of the most common ways equity investors get into trouble is when they forget or ignore Munger’s point about business fundamentals.

For example, remember the meme stock mania from a few years ago? AMC Entertainment (AMC) got bid up aggressively by retail investors to an enormous valuation well beyond its intrinsic value. That price action temporarily minted a lot of millionaires. The CEO of AMC, for instance, did very well thanks to the Reddit crowd. He earned $25.2 million in total compensation in 2021, and another $48.2 million in 2022. However, AMC shares have fallen 98% since peaking on June 2, 2021!

AMC has cratered because it is the antithesis of a high return on capital company. The company has lost money every year since 2020, while reducing its workforce and closing theaters. In retrospect, the meme stock phase represented a gargantuan misallocation of capital into a few low-quality companies that were incapable of recycling that capital in profitable ways for the betterment of shareholders.

In 2023, many investors have been commenting about how small-cap stocks have lagged large-caps. Whereas the Russell 1000 large-cap index is up 21.5% year-to-date, the Russell 2000 small-cap index is only up 7.2%. A big reason for the dramatic disparity: 41% of Russell 2000 firms are unprofitable, compared to only 17% in the Russell 1000.

Charlie Munger taught many great lessons in his life. Even though life may be finite, his teachings can still serve investors long into the future."

MY COMMENT

Sounds about right to me. Of course....this is exactly what I try to do in investing.

One of my favorite ways to look for a new stock is to simply skim the top 100 holdings of the SP500. I see these companies as the top of the line when it comes to AMERICAN business. After all they have been successful enough to rise to the top 100 companies in the greatest economy in the world based on market cap. In other words....I let the SP500 serve as a screening tool.

Once I put together a short list of stocks that way......I than go into the past five years of financials, look at analysis online, look at positive and negative analysis and projections that are easy to find online find online, etc, etc, etc. In the end it all becomes the basis for an educated and informed instinctual decision to either buy or not buy.

The most common result when I look at a new stock....I dont buy. I might buy one or two of every 20-40 that I might look at. In fact currently....I am down to seven stocks and dont have anything that I care to add. Although....I am not looking too hard at the moment.

If I dont have individual stocks that I wish to buy......the money is in the SP500 anyway so I am exposed to the cream of the crop of American stocks all the time anyway.

 

NO.....I am not into a Munger theme today.....this is just random chance.

Successful Investing is Hard

https://awealthofcommonsense.com/2023/12/successful-investing-is-hard/

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

"After Charlie Munger passed away this week, I went looking through an old post I wrote about his investing principles from a decade ago.

There was a table I recreated that showed the annual returns from the Munger Partnership, which was the fund he ran before joining Buffett at Berkshire Hathaway for good:


The results are spectacular but look at how volatile his returns were. Munger was down more than 53% during the 1973-1974 bear market.

The losses didn’t matter, of course, because the gains more than made up for them.

The same dynamic applies to Berkshire Hathaway.

Munger joined Buffett full-time at the former textile company-turned-investment-arm in 1978. Since then Berkshire Hathaway has compounded capital at nearly 19% per year, an incredible return.

But there were plenty of drawdowns along the way to those unbelievable returns:



Over the past 40+ years Berkshire Hathaway has experienced drawdowns of -20%, -32%, -34%, -46%, -51%, -22% and -25%. That’s plenty of bear markets and crashes.

Which brings us to one of my favorite Munger quotes:

If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations.

Of course, being more philosophical about market fluctuations is not easy.

Losing money is no fun. Making money is hard. Investing is HARD.

It can be grueling for mere mortals like you and I but it’s even hard for legends like Munger and Buffett.

A few weeks ago I listened to one of Munger’s final interviews on The Acquired Podcast.

Even at 99 years old he was still cagey and sharp.

The overarching theme of Munger’s message in this interview was how difficult it was to produce such an enviable track record.

I loved his answer when asked if Buffett and Munger could replicate Berkshire Hathaway’s success if both we in their 30s starting out today:

The answer to that is no, we wouldn’t. We had… everybody that had unusually good results… almost everything has three things: They’re very intelligent, they worked very hard, and they were very lucky. It takes all three to get them on this list of the super successful. How can you arrange to have just […] good luck? The answer is you can start early and keep trying for a long time, and maybe you’ll get one or two.

Refreshingly humble.

Munger mentioned how hard it is to achieve investment success on multiple occasions:

Why shouldn’t it be hard to make money? Why should it be easy?

It was never easy. It’s thoroughly understood it was never easy, and it’s harder now. Those are the two. But it takes time.

I knew when I was 70 that it was hard. It’s just so hard. I know how hard it is now. Always, people who are getting this 2 and 20, or 3 and 30, or whatever, they all talk because oh, it was easy. And they get to believing their own bullshit. And of course, it’s not very easy. It’s very hard.

I love it.

There are so many successful people today who try to make it seem like it should be easy to replicate their success.

If you just follow these 10 simple steps or read this one book or live by these inspirational quotes, blah, blah, blah.

Finding success can be simple but it’s never easy.

It’s even harder to recreate the success of someone else considering how much luck is involved in the process.

I’ll leave you with a Munger quote from Damn Right by Janet Lowe:

Each person has to play the game given his own marginal utility considerations and in a way that takes into account his own psychology. If losses are going to make you miserable – and some losses are inevitable – you might be wise to utilize a very conservative patterns of investment and saving all your life. So you have to adapt your strategy to your own nature and your own talents. I don’t think there’s a one-size-fits-all investment strategy that I can give you.

Amen."

MY COMMENT

The above is one reason for this thread. it is a constant day by day report of one long term ivnestors life as an investor. Often I am doing nothing...even though I am posting on here constantly.

It is extremely difficult to sit and do nothing while fully invested. As a fully invested long term investor I am going to ride down every single correction and bear market. I have to have the GUTS and the CONFIDENCE to sit through those dismal times. It takes guts to simply ignore all your human emotions and psychological reactions that come with investing and life.

It also takes LUCK. As I said about business success....and also investing success.....I often think back as a 74 year old.....how did we do what we did? Could we do it again? I dont know.....of course....every decision that I made over the years was a turning point with multiple possible paths that were not taken.

I do know that there is one key thing that I somehow recognized at an early age......."probability". I try to make all investing, business and other financial decisions based on ....PROBABILITY. I also learned the POWER of visualization.....positive thinking..... and focus at an early age. Goal setting....basically and visualizing the achieving of those goals.

Of course the above requires the ability to see the truth and rational reality. I was lucky to be born with those abilities due to my personality.

AND....dont forget a big criteria for success.....LUCK.

 

You know as I was typing the above I hear Varney on business TV in the background...... ask someone.....is the stock market all about interest rates and not much else?

WELL.....DUH. At least for the current and near term, short term. That is why we see the obsessive coverage of the FED every day. This is why we see the constant delusional coverage of future rate cuts every day. This is why the GREAT earnings that we just put up.....historic really in some ways.....are being totally ignored.

I see this as the reason for the erratic markets we have had this week so far......the short term is obsessed with the FED meeting next week.

This is why the obsession with the jobs data today.

Fortunately.......this is the stuff of the short term. Long term it does not matter in the slightest. AND....you know what I say about the FED......they are done. The markets will not admit it yet, but they are finished. I dont care if they might have a random rate hike left at some time. I dont care if or when they cut rates. They are old news......and.....some day the markets in general will realize this and move on.

 

Speaking of the jobs report.

Job openings slide to 8.7 million in October, well below estimate, to lowest level since March 2021

https://www.cnbc.com/2023/12/05/job...7-million-in-october-well-below-estimate.html

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

"Job openings tumbled in October to their lowest in 2½ years, a sign that the historically tight labor market could be loosening.

Employment openings totaled 8.73 million for the month, a decline of 617,000, or 6.6%, the Labor Department reported Tuesday. The number was well below the 9.4 million estimate from Dow Jones and the lowest since March 2021.

The decline in vacancies brought the ratio of openings to available workers down to 1.3 to 1, a level that only a few months ago was around 2 to 1.

Federal Reserve policymakers watch the report, known as the Job Openings and Labor Turnover Survey, closely for signs of labor slack. The Fed has boosted interest rates dramatically since March 2022 in an effort to slow the labor market and cool inflation, and is contemplating its next policy move.

While job openings fell dramatically, total hires only nudged lower while layoffs and separations were modestly higher. Quits, which are seen as a measure of worker confidence in the ability to change jobs and find another one easily, also were little changed."

AND

Stock market news today: US stocks mixed as fresh jobs data shows slowing labor market demand

https://finance.yahoo.com/news/stoc...ws-slowing-labor-market-demand-150816829.html

"US stocks were mixed on Tuesday on the heels of fresh jobs data released by the U.S. Bureau of Labor Statistics.

Tech stocks reversed earlier losses to lead the morning session, with the Nasdaq Composite (^IXIC) up about 0.4%. The benchmark S&P 500 (^GSPC) hugged the flatline while the Dow Jones Industrial Average (^DJI) fell roughly 0.4%.

A losing start to December is putting November's roaring rally in the rear-view mirror. Doubts are surfacing about the notion the Federal Reserve will soon call an end to rate hikes, sapping enthusiasm. Investors are now looking to upcoming labor market data for evidence the US economy is headed for a so-called soft landing.

Tuesday's reading on job openings in October showed slowing demand in the labor market with job openings sliding to 8.73 million last month, down from 9.35 million openings in September and 10.47 million in the prior-year.

Over the month, the number of hires and total separations changed little at 5.9 million and 5.6 million, respectively, according to the U.S. Bureau of Labor Statistics. Within separations, quits (3.6 million) and layoffs and discharges (1.6 million) were changed little.

ADP private payrolls numbers will be released on Wednesday while Friday's crucial monthly jobs report will be scoured for catalysts for the Fed to change policy course."

MY COMMENT

Yet another good economic report for the FED. Lately most of the economic reports have been lining up....one after another....in favor of NO MORE rate hikes.

So much for all the recent FEAR MONGERING regarding the FED.

I love the last sentence above......an immediate pivot.....to the next fear mongering topic....."Friday's 'CRUCIAL' monthly jobs report...... for the short term future.

 

Well at least the jobs report took a lot of steam out of the negativity today in the markets. We now see the NASDAQ up for the day.

The SP500 is still in the red but it now will have a good.....probability....to go positive at some time in the day.

I also note....the Ten Year Yield is now down to......4.188%. AMAZING....just a few short weeks ago we were at 5%.

The BULL MARKET continues.....and....is alive and well.

 

At this moment my gain today is a....mirror image (reversed).....of my loss yesterday in terms of the amount. I have a single stock down today at this moment.....HD. although....Hd has been on a good run lately.

Now...all I have to do is have these gains hold till the close.