I agree with this very well thought out "little" article. These are three BIG falacies when it comes to economics and investing. Just the tip of the iceberg, there are many many investing and economic fallicies, delusions, superstitions, illusions, etc, etc, etc. Three Widely Believed Economic Fallacies https://www.libertarianism.org/colu...EHKqXROXGTDSXxCBo97SjuyLNFX0VHSO27Y4Ny62RE9ao Topics covered are: "The Fallacy of the Zero-Sum Game The first of these fallacies is the belief that market activities, especially exchange, are zero-sum games." "The Fallacy That Order Requires Design The second fallacy is the belief that economies require someone or some group to design and/or control them. Often this belief is linked to an argument from complexity: only a simple economy could be left to its own devices. Complex, advanced economies like those across most of the globe require human monitoring and regulation to function properly." "The Fallacy that Consumption is the Key to Growth The final fallacy is the belief that consumption is the source of economic growth. This belief is widely held by everyone from the citizenry at large up through economic journalists and politicians. We hear it every time the economy enters a recession and begins to recover. Pundits declare that consumers need to start buying things to generate a recovery, and reports about the latest data on consumer spending make the headlines." This is a well written article that goes on in some length and analysis that is rarely seen in the little FLUFF articles that have become the norm in media today. The bottom line in ALL this sort of stuff is LOGIC and clinical ability to see REALITY around you. Financial and economic education also helps. The CONCLUSION of the article is: "Conclusion There are, of course, many more economic fallacies to discuss, but these three are very broad ones that affect the way in which people think about a number of more specific issues. Understanding that markets involve mutually beneficial exchange, that markets are spontaneous orders that require no designer, and that production—not consumption—is the source of wealth can together serve as a useful prophylactic against the more particular fallacies that dominate so much talk about economics. At a time when acceptance of so many of those fallacies is a feature of even the highest levels of the political structure, understanding some of the foundational concepts of economics is more important than ever." MY COMMENT: Good reading. A well thought out and reasoned discussion. NICE open today as has started to become the norm. How we end the day is another story, who knows. I note that the ten year treasury yield is now very nicely below the 3% level. How can that be? We were being told just a few short weeks ago that interest rates were going to be the end of the world........or was it inflation, or the election,or whatever. It is always something, and usually in hindsight that something turns out to have been nothing more than fear mongering hype. I remain fully invested for the LONG TERM as usual.
HERE is the short term EXCUSE of the day for the markets: Dow slides 500 points on global growth fears https://www.cnn.com/2018/12/14/investing/stock-market-today-dow-jones/index.html MY COMMENT: Yes, J&J is an obvious drag on the DOW today and that is reasonable. As to the slowing CHINA economy and the SPECULATION of economic issues in Japan and the EU and the rest of the world.......never mind. The markets should be CHEERING the news out of China today. The more their economy is racked by the current trade stance of our country as part of our negotiation with them the better. Our goal should be to inflict MAXIMUM pain on their economy, the more the better. Weakness on their part will drive them to the bargaining table sooner and will drive a better and better deal for our country. I would NOT anticipate the slightest impact on our economy if China Tanks. In fact with the little we export to them.......so what. The WHINING about China is not too smart in any event. No one negotiates by showing weakness and showing your hand. The more we hammer them and keep them constantly off guard in the negotiations the better the end result will be. In my prior life as a business owner, NEGOTIATION was a BIG BIG part of what I did. In my opinion the steps and negotiating strategy being used by Trump are exactly what we should be doing. They need us and are dependent on us way more than we are on them. Their FRAUD BASED communist economy is the equivalent of the Russia economy when we collapsed their country and drove them to end the cold war. For those not old enough to remember that era, we had the same whining crybaby's complaining just like we do now. As to the EU and other countries, there is nothing we can do about their bureaucratic, semi-socialistic, screwed up economies and there never will be. The lower they sink the higher we will rise as the only place in the world to safely invest money in stocks, funds and treasuries. We ARE and will continue to be the economic safe haven to the world. BUT, of course, the LEMMINGS continue to run off the cliff when it comes to panic and fear based on short term news, especially news like today. TODAY is actually a GOOD day for our country and our markets. If you are experiencing panic and pain and fear over this little correction, you are not properly invested for your risk tolerance. If you recently BAILED, I suggest that you are not suited to be invested in stocks or funds at all. I suspect there are a lot of people that think they are investors that have come into the markets over the last nine years of sustained BULL MARKET conditions. NOW is when they find out is they have been FOOLING THEMSELVES. I continue fully invested for the long term as usual.
This "little" article is a pretty good summary of where we are right now: "Investors Have Nowhere to Hide as Stocks, Bonds and Commodities All Tumble" https://www.nytimes.com/2018/12/15/business/stock-market-decline-commodities-bonds.html "Stocks? Messy. Bonds? Meh. Commodities? Not pretty. Most years, financial markets are a mixed bag. A bad year for risky investments, like stocks, might be a great one for safe bets like government bonds. Or, if worries about inflation are hurting bond investments, commodities like gold tend to do well. Not this year. For the first time in decades, every major type of investment has fared poorly, as the outlook for economic growth and corporate profits is dampened by rising trade tensions and interest rates. Stocks around the world are getting pummeled, while commodities and bonds are tumbling — all of which have left investors with few places to put their money. If this persists, or grows worse, it could create a damaging feedback loop, with doubts about the economy hurting the markets, and trouble in the markets undermining growth. Pessimism emanating from the stock market could leave consumers and businesses scared to spend. The rout in junk bonds makes it more expensive for financially fragile businesses to borrow. The collapse in crude oil prices discourages new investment and hiring in the oil patch, which has been a source of job growth. In that sense, the markets are both a gauge of what investors expect to happen in the economy, and a potential catalyst for their decisions. The mood in the financial markets ultimately feeds into spending by companies and consumers, and if they pull back, based on panicky ups and downs, growth could suffer. “People look to the financial markets as a source of information, as a signal, about what’s going to happen and what’s going to come,” said Itay Goldstein, finance professor at the Wharton School at the University of Pennsylvania. “And when they see markets going down, they start thinking pessimistically about the outlook for the real economy.” There’s scant evidence that the worst-case scenario will play out. The American economy remains strong: Unemployment is near 50-year lows, and growth is steady. And it wasn’t that long ago that financial markets were feeling good about the global economy, shrugging off troublesome issues like the trade war, Britain’s exit from the European Union and the debt levels of developing nations. On Sept. 20, stock investors in the United States were sitting on a nearly 10 percent gain for the year. Benchmark American crude oil prices were up more than 20 percent. The tech-heavy Nasdaq composite index was up more than 15 percent. But those profits are gone. Since October, an index of commodities that includes oil and copper has swung from gains of 20 percent to losses for the year. A similar move took place in risky corporate bonds. So far this year, after another steep drop on Friday, the S&P 500-stock index is down about 2.8 percent. “In a typical year there’s going to be some winners and losers,” said Ed Clissold, chief United States strategist at the equity market research firm Ned Davis Research. “It’s very rare that you get nothing working.” His firm recently looked at eight types of investments going back to 1972. In every year, at least one of these categories generated a return of 5 percent or more. A separate study by JPMorgan Chase analysts found that “2018 has delivered losses on almost every asset class and investing style.” The widespread market jitters have accompanied a tectonic shift in the investing world, as central banks have begun to withdraw the extraordinary support provided to the global economy in response to the financial crisis a decade ago. For nearly seven years, the Federal Reserve kept interest rates near zero and bought trillions of dollars’ worth of government bonds, which pushed interest rates — that move in the opposite direction of prices — sharply lower. Money in the bank earned next to nothing, so investors eagerly bought anything they expected to generate some kind of return: risky debt, real estate, stocks, technology start-ups. The Fed’s support, bolstered by similar efforts from the Bank of Japan and the European Central Bank, proved to be a huge tailwind for global financial markets. Everything seemingly moved up in tandem. Now the opposite appears to be unfolding, as the Fed pulls back. The American central bank has raised interest rates eight times since December 2015, and is expected to do so again this coming week. This year alone, it has shrunk its stockpile of bonds by roughly $370 billion. On Thursday, the European Central Bank said it was ending its crisis intervention, called quantitative easing. “What was once a tailwind is now a headwind for markets,” said Dan Ivascyn, group chief investment officer at Pimco, a bond investment firm with $1.7 trillion under management, in Newport Beach, Calif. At least on the margins, the turmoil in the financial markets is already reverberating in the real economy. For instance, as Treasury bond prices have declined this year, interest rates — which move in the opposite direction — have risen. Those Treasury yields serve as the basis for a range of consumer borrowing rates, such as on mortgages. With the 30-year fixed mortgage rate rising above 5 percent this year, activity in the housing market has slumped, sending the stock prices of homebuilders sharply lower. The S&P 1500 index of home building stocks is down more than 30 percent this year. In recent weeks, the broad investment declines have worsened while anxiety grows over the trade war between the United States and China. This fight, between the world’s two largest economies, may already be dragging on global growth. Economic data this month showed that Chinese trade slowed sharply in November, with imports of key metals such as copper and iron ore declining from the same month last year. On Friday, Chinese officials reported weak growth in monthly retail sales and industrial production. The numbers point to a deepening slowdown for the industrial heart of the world’s No. 2 economy. Weak demand from China has roiled commodities, which are on track for their worst year since 2015. The experience of 2015 could be a useful road map for investors. That year was uncomfortable as the Federal Reserve planned to raise interest rates against a backdrop of soft global growth. Stocks, corporate bonds and commodities all fell, while Treasury bonds eked out a minuscule gain. In the midst of the market turmoil, the Federal Reserve slowed down the pace of its interest rate increases. And the pause from the central bank reinvigorated risk-taking among investors, with the S&P 500 rising 9.5 percent the next year, and the economy continuing to grow. That’s all to say, investors can be quick to jump to conclusions. But they can also be wrong. “They’re like people reading a book,” said Jurrien Timmer, director of global macro at the asset manager Fidelity Investments in Boston. “But they’re going to skip five chapters to see how the book ends.”"
AND.......in the spirit of Christmas: Twas the Night Before Christmas: A Review and Forecast https://www.realclearmarkets.com/ar...e_christmas_a_review_and_forecast_103543.html "Twas the night before Christmas and a nearly full moon Lit the night sky for Santa, who’d be here quite soon. As I waited, I pondered the wondrous past year And all of the things that gave me so much to cheer. Into compartments all the year’s news did I sort So I could form, in my mind, this year-end report, Which would help -- as in so many Christmas eves past -- Provide the backdrop for my year-ahead forecast. I look first to the markets for critical clues Because they are quite good at processing the news. One year ago, for instance, the bull market implied An economy whose vigor could not be denied. But now the markets’ message looks a bit muddled Leaving us all more than a tad bit befuddled. As investors react to news deemed most deserving They’ve wrought wild stock market swings oh so unnerving. Though most data show the economy’s still strong There’s also a growing list of what might go wrong. Topping the list is much slower growth overseas And fears ‘bout a trade war amplify this unease. Trump says “fair” is key to a free-trade world order And he wants a big wall to strengthen our border. While his threats of new tariffs the market despises His tough talk has too brought some welcome surprises. A new Mexico-Canada trade deal’s been done And from China some concessions seem to be won. But some still think these tactics pose too grave a threat When foreigners hold so much of our nation’s debt. ’Bout the Fed, President Trump too tweets his concern But the past teaches lessons he’d do well to learn. The Fed must be free to set its own policy course Without seeming to bow to political force. But now the Fed’s struggling with what words it should use To guide expectations ‘bout its policy views. But there isn’t much worth in these semantic debates ’Cause the Fed must let facts show the right path for rates. So if job growth is strong while inflation stays low A slow rise in rates would let the economy grow. But if the now-flat yield curve begins to invert The Fed would wisely heed this recession alert. But for now it seems that the future we face Is for growth to remain at a moderate pace. And when into my crystal ball I more deeply gaze I see myriad things that are sure to amaze. I see scientists harvesting data from Mars While here on Earth we’re riding in driverless cars. Five-G internet will be the new wireless norm And medical advances will health care transform. Artificial intelligence is such a big thing I can’t even imagine what all it will bring. But like most things past science advances have brought, Improving our welfare is more likely than not. This future world will be here sooner than later To make our future Christmas eves even greater. So with “Joy to the World” I wish all a good night May the New Year bring you joy and endless delight." My Comment: We are in the final weeks and time is running out for a last minute Santa RALLY. Looks like we are in for a "normal" week as defined by recent market short term action. In other words, erratic and volatile action mostly caused by and focused on short term news items, rumor, gossip, and sensationalism.
I find this "little" article very interesting and very telling. It is also confirmation of LONG TERM INVESTING as a wealth building strategy for regular people. Looks like those BIG HEDGE FUNDS are really taking a beating. In fact they have been struggeling since the Madoff scheme was disclosed. In my opinion there is a direct relationship to the two. I was amazed as the Madoff scheme unraveled how many of the Hedge Funds were piggy backed onto Madoff. "Major hedge funds are scrambling to prevent financial wipeout" https://nypost.com/2018/12/16/major-hedge-funds-are-scrambling-to-prevent-financial-wipeout/ "The stars of the biggest hedge funds are losing their shirts as analysts fear a major financial wipeout is imminent. From Ken Griffin’s Citadel, to Israel Englander’s Millennium Management, one big name after another is racking up negative returns lately, amid bad bets in a saturated market........ As hedge funds fall like dominoes (and returns underperform the S&P 500), managers also blame a sharp rise in stock market volatility and low interest rates." MY COMMENT: ABOVE is what I take from this article. Hedge funds with all their resources, industry insider contacts, analysts, research, high powered traders and industry mavens STILL can NOT outperform the SP500 over a substantial time. Of course, they tend to follow an active investor and often a trading model of investing. BIG FEES for LITTLE results over time. LOOKS like they are no better than the average investor when economic conditions are not creating EASY MONEY GAINS for investors.
HERE is an article for ALL those that are starting to give in a little bit to the nagging fear that this sort of SOUL CRUSHING correction can have on investors. AS USUAL, I find it interesting to watch the HUMAN behavior in response to this MINOR event in the scheme of economic things: "Warren Buffett suggests you read this 19th century poem when the market is tanking" https://finance.yahoo.com/news/warren-buffett-suggests-read-19th-204800450.html "The stock market has had a volatile year, and it's not over yet: The Dow Jones Industrial Average lost more than 520 points on Monday and the S&P 500 fell 2.1 percent. Both are in correction and on pace for their worst December performance since the Great Depression in 1931. But for the average person, shifts in the market , even ones as dramatic as the ones we've seen this year, shouldn't be cause for panic. During times of volatility, seasoned investor Warren Buffett says it's best to stay calm and stick to the basics, meaning, buy-and-hold for the long term. So, during downturns, "heed these lines" from the classic 19th century Rudyard Kipling poem "If—" which help illustrate this lesson, Buffett wrote in his 2017 Berkshire Hathaway shareholder letter : If you can keep your head when all about you are losing theirs ... If you can wait and not be tired by waiting ... If you can think – and not make thoughts your aim ... If you can trust yourself when all men doubt you ... Yours is the Earth and everything that's in it.">If you can keep your head when all about you are losing theirs ... If you can wait and not be tired by waiting ... If you can think – and not make thoughts your aim ... If you can trust yourself when all men doubt you ... Yours is the Earth and everything that's in it. Market downturns are inevitable, Buffett pointed out, using his own company as an example: "Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure long-term growth in value. For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic. Year by year, we have moved forward. Yet Berkshire shares have suffered four truly major dips." He went on to cite each of the steep share-price drops, including the most recent one from September 2008 to March 2009, when Berkshire shares plummeted 50.7 percent. Major declines have happened before and are going to happen again, he says: "No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow." Rather than watch the market closely and panic, keep a level head. Market downturns "offer extraordinary opportunities to those who are not handicapped by debt," he says, which brings up another important investing lesson: Never borrow money to buy stocks . "There is simply no telling how far stocks can fall in a short period," writes Buffett. "Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions."" MY COMMENT: BOLD above is my comment on the article. Hang in there people, the year is nearly done.....and soon we move to a new start of a new year. Lets HOPE that the FED is done with this idiotic focus on raising rates to fight IMAGINARY inflation. BUT, I have no doubt that those in the MEDIA will do all they can to talk down or even destroy the economy. Unfortunately we are in a time in history where a significant portion of the population has no concept of what is or is not true and those with the ability to provide that information have lost all semblance of honesty and their role in society. Socialism is being TOUTED by one of our major political parties as an alternative to our capitalistic system with success. Our values, history, morals, social norms, economic system, and culture are being quickly challenged and replaced. Unfortunately what is replacing those things is nothing more than empty slogans and platitudes. The real outcome of these changes is totally opaque and will only become apparent after it is too late to save what used to be the basis and foundation of our culture and society. BUMMER.
HAPPY FED DAY. ALL focus is on the FED today as they do their fortune telling seance for the world. Here is a "little" guide. Fed Seen Making Dovish Hike With 2019 Pause: Decision Day Guide https://www.bloomberg.com/news/arti...th-2019-pause-decision-day-guide?srnd=premium NOW.......on to the really important event of the day......national letter of intent early signing day. For those that are not aware of college football......NEVER MIND.
HERE is one take on 2019.....although really nothing more than an educated GUESS. NO ONE can reasonable predict the markets. As usual I continue to sit and watch the short term market action. We obviously continue with the LINGERING drip drip drip of the now three month correction. At some point we will see capitulation and a bottom and it will end. I, however, DO NOT discount the possibility that the RAMPANT NEGATIVITY being pushed by many will tip us into a recession or bear market IN SPITE of business fundamentals. Time will tell. I continue to be fully invested as a LONG TERM INVESTOR as usual. 2019 Market Outlook: U.S. Stocks and Economy https://www.schwab.com/resource-center/insights/content/outlook-us-stocks-and-economy?cmp=em-QYC
I have recently surveyed a couple of very new, young, investors that I mentor with their investing. They are each invested in a SP500 Index Fund since they do not have the funds needed to invest in individual stocks. They are investing a set amount out of each pay check. I was curious how they were holding up in the current correction and constant MEDIA NEGATIVITY. I was pleasantly surprised that they are holding up well and are not concerned at all. They have a good understanding that the longer the current correction lasts, the better for them, since they are racking up nice LOW COST shares every month that this correction lasts. For both of them this is their first REAL correction and they have been investing for 1-2 years. HERE is the history of the SP500 over the last 40 years. This represents a young investor starting at age 25 and investing till age 65. Perhaps in a 401K or a ROTH IRA. I am posting this for context for the current year which I expect will be negative. HERE you see how often the general markets represented by the SP500 are negative over an investing lifetime. Year Average Closing Price % Change 2018 -6.84% 2017 19.42% 2016 9.54% 2015 -0.73% 2014 11.39% 2013 29.60% 2012 13.41% 2011 0.00% 2010 12.78% 2009 23.45% 2008 -38.49% 2007 3.53% 2006 13.62% 2005 3.00% 2004 8.99% 2003 26.38% 2002 -23.37% 2001 -13.04% 2000 -10.14% 1999 19.53% 1998 26.67% 1997 31.01% 1996 20.26% 1995 34.11% 1994 -1.54% 1993 7.06% 1992 4.46% 1991 26.31% 1990 -6.56% 1989 27.25% 1988 12.40% 1987 2.03% 1986 14.62% 1985 26.33% 1984 1.40% 1983 17.27% 1982 14.76% 1981 -9.73% 1980 25.77% 1979 12.31% 1978 1.06% MY COMMENT ACTUALLY some of the years above that are BARELY NEGATIVE, like 2015 and 2011 were actually positive in terms of TOTAL RETURN when you add in the impact of reinvesting dividends. In 2015 the total return figure is +1.25% and in 2011 it is +1.97%. YOUNG and NEW investors take heart. A down year is NOT the end of the world, in fact two or three down years in a row is not the end of the world. In your lifetime you will experience many many corrections and a good number of BEAR MARKETS lasting a year or more. The KEY is LONG TERM thinking, something that is very difficult for the human brain. In hindsight I would be VERY HAPPY to take the above returns, especially when you add in the reinvesting to capital gains and dividends which increases the figure for each year by a little bit. DO NOT SUCCUMB TO THE MEDIA DRUMBEAT OF NEGATIVITY. There are many many reasons for negative opinion, much of it related to politics and positioning for politics. Remember it could APPEAR TO BE worse. IMAGINE looking at your accounts over the past three months and seeing many days where you have lost $50,000 to $100,000 in ONE DAY. THAT is MY REALITY. But, I have the sense to realize that small percentages can look like BIG losses when there is a lot of money in an account. I have also set up my life and even my retirement income in such a fashion that I am NOT dependent on my stock market money for income and therefore have a LONG TERM HORIZON for the rest of my life. I KNOW there are many people, based on human nature, that have greatly overestimated their investing prowess due to the EASY GAINS of the past nine years. I am sure there are many that have dialed up the risk in their holdings over the past nine years without even being aware of doing so. What is happening now is a good gut check and reality check on individual investor risk tolerance. It is ALWAYS a good thing for investors to get a reality check once in a while and see that the investing plan they have in place and their investing prowess might now be what they thought, at least in a nasty correction or bear market.
HERE is an outstanding article. It is long, too long to post here in its entirety. VERY GOOD summary of the known positives and negatives of the current economy and markets. I dont want to pull excerpts out of the article since it is just too good to isolate paragraphs from the whole. HIGHLY RECOMMENDED READING.... "Swedroe: Putting Panic In Perspective" https://www.etf.com/sections/index-investor-corner/swedroe-putting-panic-perspective/page/0/3 MY COMMENT: OUTSTANDING reasoning and analysis in this article. Recommended for any level of investor struggling with the current situation. A good look into the mind and reasoning of an experienced investor.
A LITTLE BIT of good news going forward for OUR economy. We know that personal and other tax collections continue to hit records every time the numbers are reported. THAT tells you something about employment and the economy. We also know that money is filtering back into THIS country as a result of the recent tax legislation. AND, contrary to some of the blather you see in the MEDIA, the impact of the new tax law will not EXPIRE or lessen after the first year. The reduced corporate rates and ALL other aspects of the tax law WILL continue to impact the AMERICAN economy in POSITIVE ways every year the law applies.........till congress starts to mess with it and slowly raise rates back up, up, up, as they always do. Historic Cash Flows Returning to the U.S. for 3rd Quarter in a Row After Tax Act https://www.breitbart.com/politics/...he-us-for-3rd-quarter-in-a-row-after-tax-act/ "Corporations are infusing money back to the U.S. from abroad in record numbers for the third quarter since passage of the Tax Cuts and Jobs Act to the tune of $92.7 billion dollars. "Third quarter 2018 saw the fifth highest U.S. corporate repatriations, listed as dividends from foreign operations, in recorded U.S. history, according to Bureau of Economic Analysis numbers. The first and second highest were in the first and second quarters of 2018. Total corporate repatriation in the first three months of 2018 hit over $571 billion dollars. Only two quarters in 2005 saw numbers this high. That year saw quarters three and four ranking among the top five highest repatriation numbers in U.S. history. The latter three quarters in 2005 didn’t hit half the boost seen in the first three quarters of 2018. Quarterly direct investment earnings have remained between $114 billion and $133 billion since the beginning of 2017. The ratio between dividends, or repatriations to the U.S., and reinvested earnings, those remaining abroad, dramatically changed after passage of the Tax Cuts and Jobs Act (TCJA). While earnings remaining abroad hovered between $65 and $102 billion dollars in 2017, repatriated funds ranged from just $26 to $55 billion. In just first quarter 2018, funds remaining abroad dove into the negative by over $166 billion dollars while repatriated funds skyrocketed to greater than $294 billion dollars. The Tax Foundation said foreign earnings policy change under the TCJA “improves incentives going forward.” This is due to companies not owing corporate income taxes on future earnings repatriated aside from potential “minimum taxes on global income.” “Deemed repatriation, as enacted by the Tax Cuts and Jobs Act, is a mandatory tax on past earnings held abroad,” the Foundation clarified. “Companies will owe taxes of 15.5 percent on liquid assets like cash and 8 percent on noncash assets earnings made under the old tax law, regardless of whether the cash is repatriated.” The Foundation went on, “Companies face improved incentives for future earnings, because earnings made under the new law will not face U.S. corporate income tax. When evaluating how companies will respond there are several other factors to consider.”
HOPE all had a good Christmas. Should be a very SHALLOW, and yes, probably a very volatile market for the rest of this week with many of the professionals and New York financial people being off on holiday. BUT, at this point, there is no expectation for much good to happen till after the first of the year. REMEMBER, it is only money. And, until you actually sell, the losses are just on paper and not locked in. Those that have been investing over some number of years are still way ahead of the game with last nine years having been the greatest bull market in history. HERE are a couple of short but relevant articles for those that are LONG TERM INVESTORS: "Don't let volatility in the market be a lump of coal in your stocking" https://www.usatoday.com/story/money/columnist/2018/12/23/stock-market/2349986002/ "Oh, the stock market’s drops are frightful ... The fundamentals are so delightful. So as long as there’s fuel for growth ... Let it roll, let it roll, let it roll. Sorry. I’m not Oscar-winning lyricist Sammy Cahn, who wrote the original song. But the message is right on. Staying even-keeled is difficult but crucial when stocks swing hard. Volatility isn’t predictive. “Past performance doesn’t dictate future returns” – isn’t just boilerplate legalese. Stocks aren’t what statisticians call serially correlated – one day’s price movement doesn’t determine the next. So the more volatility we get, the more you should hang on, unless you know bad things others don’t, which is exceptionally hard. It can be hard to fathom stocks recovering while fear reigns. But fear is backward-looking. Everything investors fear today is old news, rehashed repeatedly like cows chewing cud. Growth Stocks are forward-looking. Corrections end before fears fade because markets collectively fathom what fearful investors don’t. Surviving volatility requires remembering your long-term goals and focusing on what others miss: like big corporate earnings growth. Third-quarter profits for Standard & Poor's 500 companies jumped 26 percent year over year. Seventy-seven percent of firms beat prior expectations. Analysts expect 20.6 percent full-year growth, plus 8.6 percent next year. Some say it’s all just a sugar high from tax cuts. No. Revenues rose 9.3 percent from the third quarter of 2017. This is under-appreciated organic growth from a fundamentally growing economy. Adjusted for inflation, global third-quarter GDP rose 2.4 percent year over year. J.P. Morgan’s Global Composite Purchasing Managers’ Index (PMI) hit 53.2 in November, implying growth, and more of it ahead. Yes, European stocks struggle. Yet eurozone GDP has grown 22 consecutive quarters. The U.K., buffeted by continual Brexit uncertainty, has grown 23 consecutive quarters. Meanwhile, despite tariff dread, world trade rose 3.5 percent year over year in September. Growth should continue. Conference Board Leading Economic Indexes, great future predictors, are overwhelmingly high and rising, led by the U.S. and eurozone. Most countries’ PMIs show rising new orders – today’s orders are tomorrow’s production. Businesses are expanding to meet future demand, not contracting. Global lending grew a healthy 6.9 percent year over year in October. "M2" money supply grew 6.4 percent. Global inflation, excluding food and energy, is a tame 1.9 percent. Gridlock helps stocks Yes, political headlines rage ugly. President Donald Trump feuding with Nancy Pelosi and Chuck Schumer! French “Yellow Vest” protests! Italy’s budget battle! Brexit! Yet all these amount to gridlock, which stocks adore. When politicians squabble, they aren’t passing radical legislation that could roil markets. Now we get a split Congress, so traditional gridlock replaces the intraparty gridlock we had for two years with Republicans heavily fighting among themselves. Plus, as I’ll detail next week, the third year of a president’s term is routinely the four-year political cycle’s sweet spot for stocks, with the highest average return and no down years since 1939. This third year should be no different, with Trump and his potential challengers positioning for 2020 instead of passing controversial bills. Across the pond, Britain’s parliament can’t even pass Brexit, never mind anything else. Prime Minister Theresa May is politically wounded after last week’s attempted ouster. France’s protests drained President Emmanuel Macron’s political capital. Passing big changes will be difficult. Voters are starting to turn on Italy’s new populist government, forcing moderation. German Chancellor Angela Merkel, now a lame duck, heads a fragile coalition and faces open rebellion within her party. All across Europe, stocks will benefit from legislative calm. So remain calm. Own stocks. The fire is nice. Don’t get left in the cold." AND "Blame the Federal Reserve for the tanking stock market" https://nypost.com/2018/12/22/blame-the-federal-reserve-for-the-tanking-stock-market/ "Ok, so what in the 21st century could lead a stock market to the worst December since the Great Depression year of 1931? Let’s start by saying I have always liked Fed Chair Jay Powell’s pragmatic image. I only hope I wasn’t fooled. He has the ideal experience mix of Washington finance and private sector, so he ought to be able to tell the forest from the trees. But last week’s Fed meeting was even more disastrous than the one in September. Since the September meeting — when the Fed hiked rates because the economy was displaying “strong labor market conditions and a sustained return to 2 percent inflation” — stocks have sold off. Then came Wednesday’s meeting, when the Fed hiked again despite all being well in the economy. With good growth, good employment and no inflation to speak of, this hike sent the market spinning into a state of disbelief. The market closed down 352 points, and Thursday subtracted 464 more. This correction is now all on the Fed. It over-reached just like virtually every other academic Fed, combating Ghosts of Inflation Past that haven’t appeared in decades. Powell needs to expand his Rolodex to include more than just policy types and start speaking with some real-world practitioners. For example: FedEx CEO Fred Smith. If there’s anyone who would have a read on the pulse of the economy, he’d be it. FedEx’s stock is down 40 percent since September. Or chat with ExxonMobil CEO Darren Woods. His shares are down 22 percent since the end of September. Oil itself is down from $76.41 a barrel on Oct. 3 to $45.88 on Dec. 20. That’s a 40 percent drop. I think it’s time to ask what Powell is thinking. If and when inflation rears its ugly head — which it hasn’t done in 20-some years — a rate raise or two would eradicate it quickly. It’s time for Powell to stop chasing ghosts." MY COMMENT: Twenty years? Actually you would have to go back to the mid to late 1980's to see a time period when inflation was wracking the economy. I have watched the FED chase the inflation ghost for the past thirty years over and over when there was actually NONE. At least NONE over and above that which is normal and actually healthy to the economy. Actually it is not just time for Powell to stop chasing ghosts, it is time that we as a country STOPPED turning our economy over to a bunch of academic economists with the misguided notion that it is their job to try to run and control the economy. BUT, the odds of anything changing with our FED system are ZERO. We in the business world and the investing world will continue to be AT THE MERCY of a bunch of ivory tower economists practicing their pseudo science craft with no real hope to be successful. When the economy is successful it is usually in spite of rather than because of anything the FED is doing or not doing.
The GAPING CHASM between economic REALITY and stock market performance continues to grow. We just had the most significant retail sales increase in years. GDP continues to kick ass. Consumers, wages, business financials, and just about all other aspects of the economy are BOOMING. "U.S. holiday retail sales are strongest in 6 years, by this measure" https://www.marketwatch.com/story/u...rongest-in-6-years-by-this-measure-2018-12-26 "Shoppers delivered the strongest holiday sales increase for U.S. retailers in six years, according to early data. Total U.S. retail sales, excluding automobiles, rose 5.1% between Nov. 1 and Dec. 24 from a year earlier, according to Mastercard SpendingPulse, which tracks both online and in-store spending with all forms of payment. Overall, U.S. consumers spent over $850 billion this holiday season, according to Mastercard MA, -0.31% . ‘Wall Street is running around like a chicken with its head cut off, while Mr. and Mrs. Main Street are happy with their jobs, enjoying their best wage increases in a decade.’ Craig Johnson, president of Customer Growth Partners, a retail research and consulting firm The figures suggest a stock-market swoon and partial government shutdown haven’t curbed consumer confidence and spending. Sales have been generally strong throughout the holiday season, led by increases in online shopping. Retailers entered the holidays with momentum as online sales jumped 26.4% from a year earlier between the Wednesday before Thanksgiving through Black Friday, one sign of an early buying surge, according to Adobe Analytics. Buying slowed in early December in part because an unusually early Thanksgiving made it harder for retailers to sustain sales through the entire holiday shopping period, analysts and consultants said. But shoppers picked up the pace ahead of Christmas. With Christmas Eve falling on a Monday, many retailers geared up to capitalize on a last-minute push from shoppers who were counting on the final weekend to wrap up their gift-buying. Chains including Walmart Inc. WMT, -1.50% and Target Corp. TGT, +0.69% extended deadlines to get online orders delivered before Christmas, while Amazon.com Inc. AMZN, -2.43% in some cities offered Prime members the option of free same-day delivery on Christmas Eve. An expanded version of this report appears on WSJ.com. MY COMMENT: REALITY does not matter at the moment. Stock action is being driven by random news headlines, true or not, pushed by a MEDIA that is determined to drive the economy down as far as possible to further their own political views and wishes. Program trading is out of control while the SEC and other regulatory agencies sit on their thumbs and do nothing to protect the integrity of the markets. Much of this baloney can be dated to the elimination of the up-tick rule. The FED is caught up in their usual delusional theoretical economic dogma, chasing nonexistent inflation. POOR INVESTORS, they are being whip sawed around by current events due to their young age, inexperience, total lack of historical knowledge, dysfunctional politically correct education, and the impact of technology in their lives. NOT much that can be done in this situation other than to just sit and ride it out. The one very bright spot is the end of the year 401K contributions should be entering the markets at a very nice point in time and will produce significant compounding going forward when the markets recover from the current sell off. I continue to be fully invested as a long term investor as usual. My confidence in the markets and individual business holdings continue to be POSITIVE as usual. AS we wait for the open today we are at: DOW year to date: -11.84% SP500 year to date: -12.06%
NICE close today......understatement of the year. Largest one day gain in history. It will be interesting to see how the week closes out over the next couple of days. HERE is another "little" article on the state of the markets and the current situation. Of coursee, since I am posting this article, I tend to agree with the conclusion of the article: "Opinion: This still looks like just a stock-market correction, not something worse" https://www.marketwatch.com/story/t...ket-correction-not-something-worse-2018-12-26 (bold represents my emphasis and comment) "CHAPEL HILL, N.C. — The stock market’s recent correction has been more abrupt than you’d expect if the market were in the early stages of a major decline. I say that because one of the hallmarks of a major market top is that the bear market than ensues is relatively mild at the beginning, only building up a head of steam over several months. Corrections, in contrast, tend to be far sharper and more precipitous. Consider the losses incurred by the Dow Jones Industrial Average over the first three months of all bear markets of the last 80 years. (I used the bear-market calendar maintained by Ned Davis Research.) I focused on this three-month window since that is the length of time since the stock market registered its all-time high in late September. As you can see from this chart, its average loss over these three-month periods was “just” 9.0%. The stock market’s decline since the all-time highs, in contrast, has been nearly twice as large: The Dow DJIA, +4.98% has skidded 18.7% from its Oct. 3 record close, for example, and the S&P 500 SPX, +4.96% 19.8% from its Sept. 20 record close. The Nasdaq Composite Index COMP, +5.84% has plunged even more: 23.6% from its closing peak in Aug. 29. There’s a contrarian-analysis-based explanation for why the declines that follow major market tops tend to be more gradual than this: They are usually met with widespread disbelief. Instead, the typical reaction is that those initial declines are good buying opportunities, and the influx of new cash softens the declines that otherwise would occur. Consider the stock market’s decline over the first three months of the 2007-2009 financial crisis—the worst since the Great Depression. The S&P 500 fell 10.0% over the three months following its top on Oct. 9, 2007, barely even satisfying the semiofficial definition of a correction. The Dow fell 11.1%. Or take the market’s decline over the first three months after the bursting of the internet bubble. The S&P 500 fell just 5.6%, and the Dow 6.4%. Corrections, in contrast, have a different contrarian profile. Their sudden and abrupt nature strikes fear in investors’ hearts, thereby setting up the sentiment preconditions for the market to soon climb a Wall of Worry. This is certainly consistent with what we’ve seen in recent months. As I wrote two weeks ago, rarely over the last 20 years have short-term stock market timers been more bearish than they are currently. Needless to say, however, there are no guarantees. There were two past major declines of the last 80 years on the Ned Davis calendar that did begin with three-month declines as big as what we’ve experienced recently: the 1987 crash and the decline from July through October of 1990. But even these exceptions end up proving the rule: Each lasted just three months or so. Contrarians are betting that something similar will be the fate of these declines." MY COMMENT: YES we live in interesting times. Often, very rewarding times for those that have the guts and ability to invest for the LONG TERM.....with reason and logic. At the close today this is where we NOW are, compare this to where we were at the open as posted in the post above this one. WHISTLING through the graveyard.......... DOW year to date -7.45% SP500 year to date -7.70%
EPISODE THREE...The Stock Market Fights Back. Yes, the past couple of days have been interesting to say the least. After iffy starts to both days, losing a positive open, looking like a chance for a run away down day, and than, a big rally to end the day. POSITIVE for the future months and 2019.....HOPEFULLY. I dont know what the dollar figure is, there are many big corporations that do a YEAR END MATCH to 401K plans, this could produce some significant money coming into the markets the first week or two of January. Seems like much 401K money goes into Index Funds, most of which are required to invest that money. Perhaps not enough money to outright drive the markets, but possibly enough of an extra push to help tip the scale to the positive and help set a positive tone for the start of 2019. ONE THING is sure. The current prices represent a screaming BUY. ANYONE buying now can lock in some great prices going forward once this correction ends. The compounding will be spectacular. If this two day 1200 point bump represents the beginning of the end of the correction it may be that the CRHISTMAS EVE plummet was the bottom. If I had significant money to invest I would probably hope for a down day tomorrow and put it all in. I would probably take the proven odds and put it all in all at once immediately tomorrow. In my mind I would be willing to take a hit, short term, after the investment since there is so much upside gain potential where we are right now over the next year or two. I would GLADLY invest money with a short term possibility for a 5-8% loss and at the same time a 30-60% gain possibility over the next year or two. That is about where I think we are right now in terms of investing probability. HERE are a couple of articles that are good reading to reinforce logical and rational thinking for investors in the current environment: (bold is my comment) "Have no fear of stock market unrest" https://thehill.com/opinion/finance/422911-have-no-fear-of-stock-market-unrest "In the Financial Analysts Journal over 40 years ago, Charley Ellis of Greenwich Associates famously characterized money management as akin to a game of amateur tennis in which success is not due as much to how many points one wins with great shots, but how one avoids losing points by making bad shots. Even at the professional level, unforced errors are the bane of the tennis player. Adherents of passive investing avoid playing the losing game by minimizing fees and trading costs. To a large extent, politics is also a losing game. Donald Trump and his senior administration officials continue to undermine his own presidency with a series of unforced errors occurring at a pace greater than his grammatical errors in his daily tweet storms. The time worn finance adage is that the market “hates uncertainty” and while it is difficult to catalogue all of the missteps of the administration, from the partial government shutdown to the resignation of Defense Secretary James Mattis, and the trade war with China to spats with the Federal Reserve, and Treasury Secretary Steven Mnuchin calling bank executives in an effort to reassure the market that there is no liquidity crisis, the list expands on a daily basis. The market experience in recent weeks reminded investors of the movie “Groundhog Day” in which a weatherman played by Bill Murray finds himself living the same day over and over again. The market opens flat, there is an morning to afternoon rally, and then a rash of selling sends the indexes lower at the close. Lather, rinse, repeat. The nearly 3 percent selloff in the Dow Jones Industrial Average on Monday in a shortened session led to many conversations about the market around holiday dinner tables. Is a recession on the horizon? Is it time to sell stocks? The market bounced back on Wednesday, with the Dow Jones Industrial Average surging almost 5 percent, in yet another whipsaw. It is the season for pundits and prognosticators to share their various expectations for global financial news. What I told my dinner companions this season is that I have no earthly idea what is going to happen in the market in the next day, week, month, quarter, or even year. In 2009 during the height of the financial crisis, Warren Buffett was quoted as saying, “We have long felt that the only value of stock forecasters is to make fortune tellers look good.” He then added, “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 like children.” Benjamin Graham, the father of value investing and mentor to Warren Buffett, explained the concept of value investing by saying, “In the short run, the market is like a voting machine, tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine, assessing the substance of the company.” Sentiment drives the market in the short run, while fundamentals drive the market in the long run. Sentiment has been decidedly negative and understandably so, but the fundamentals tell a much different story. S&P 500 earnings grew at an astounding 27 percent pace in 2018. While earnings growth is expected to slow to 6 percent in 2019, earnings are still expected to grow. Looking further ahead, earnings are expected to grow about 13 percent in 2020. The metric that is most commonly used by investors to ascertain market valuation is the price earnings ratio. The lower the price earnings ratio, with all else equal, the greater the margin of safety for investors. For those who say the market is in a bubble, the current price earnings ratio is actually lower than the historical mean of 15.7. The forward price earnings ratio on the S&P 500 is currently 15.1, compared to 25.3 a year ago. The market has actually gotten about a third less expensive over the past year. For long term investors, the market appears to be attractively priced, particularly when the yield on the 10 year Treasury note is 2.75 percent. Stocks and bonds compete for investors. Essentially, investors can buy the S&P 500, a broad basket of companies with growing earnings and dividends, at a forward price earnings ratio of 15.1, or they can buy the risk free 10 year Treasury note at an implied price earnings ratio of 36.3. I may not have a good feel for what the market is going to do in the near term, but if one has a long term horizon, the S&P 500 is the clear winner. Unsurprisingly, viewership of financial cable news spikes during market turmoil. Nervous investors want to know what moves they should be making, and talking heads on these networks are quick to offer a variety of remedies, generally delivered with a great deal of conviction. The most prudent move is usually to do nothing. When behavioral finance expert Greg Davies was invited on Bloomberg to talk about the market rout in 2008, he was asked what investors should do if they are really worried. He replied, “They should stop watching Bloomberg for a start.” Are the gains on Wednesday the start of a new uptrend or a prelude to more turmoil? Who knows? Investors should listen to Greg Davies and tune it all out." AND "Opinion: No bear market for stocks in 2019 because economy, earnings will keep expanding" https://www.marketwatch.com/story/n...onomy-earnings-will-keep-expanding-2018-12-26 "I will say flat out that I didn’t think December would be a down month, and yet it is shaping up to be the worst December since 1931, possibly ever when the month is over. Needless to say, the economic environment today is very different than during the Great Depression, so parallels are difficult to draw, despite the similarity of the stock market’s performance. Based on the latest consensus estimates from FactSet, growth in earnings per share for the S&P 500 SPX, +0.86% is going to be 20.6% in 2018 with another 7.9% in 2019, along with 5.3% revenue growth. I do not believe this financial panic is only about the expected slowdown in the economy and earnings. It is true that the stock market is forward-looking and that both EPS and GDP growth are expected to slow in 2019. A good example of what happens in a slowdown of EPS and GDP growth is the 2014-2016 stock-market environment, where we had several quarters with negative EPS growth (see chart). The stock market went into a trading range but retested the highs of that trading range multiple times before it “broke out”. While the Sept. 20 record close for the S&P may very well turn out to be the index’s ultimate high of this cycle, there is likely to be a retest of that level, meaning 2,930.75, or a gain of more than 20% from current levels. But I do not believe that the stock market is going straight down from here. If the economy is still growing in the second half of 2019, this will become the longest economic expansion in the history of the United States. The previous record was March 1991-March 2001. I think the economy will continue to expand for all of 2019. This means that with a growing economy and growing earnings, this latest selloff is unlikely to be the start of a bear market. Recessions do not start with unemployment at a 49-year low of 3.7% and the economy growing at around 3%. Before a recession can start, the economy needs to slow, and the unemployment rate needs to stop falling and begin turning higher because of the economic slowdown. That takes time. While a slowdown is likely to begin in 2019, the recession will most likely happen in 2020 or 2021 (see chart). Can the stock market go down in a good economy? Yes, a stock market can go down in a good economy, as it is has been doing recently. For a protracted bear market, we need to see a shrinkage in the S&P’s earnings per share. The more EPS shrinks, the more the index goes down. This happened in the recessions of 2001 and 2008. The most extreme example of the stock market going down in a good economy would be 1987. The 1987 market was the new Fed Chairman Alan Greenspan’s trial by fire, where he felt compelled to jump in with a few interest-rate cuts, the same way he cut interest rates after the market sold off 25% in August and September of 1998 at the tail end of the Asian Crisis and the Russian sovereign debt default (see chart). Regrettably, the fortitude displayed by this Time magazine cover, dubbed “The Committee To Save The World,” is hopelessly missing at this very moment. I think the present volatility of the stock market is not due to the hiking of the fed funds rate alone, but also to the more disruptive overall quantitative tightening, which demonstrates itself via the rising Fed balance sheet runoff rate, which went from $20 billion in January to the present $50 billion/month rate (see chart). Letting bonds mature (and not reinvesting the proceeds) also results in large repurchase agreement activity, which sucks excess reserves out of the financial system. Sucking electronic cash out of the financial system may be the simplest possible explanation as to why the stock market is doing what it is doing. (I urge you to carefully read the paper “The Federal Reserve’s Balance Sheet and Earnings: A Primer and Projections” by Fed economists Seth Carpenter, Jane Ihrig, Elizabeth Klee, Daniel Quinn, and Alexander Boote. There are other similar papers available from the Federal Reserve.) In my experience, sharp selloffs in a good economy tend to reverse themselves as the economy keeps growing and so do earnings per share for major stock market indexes like the S&P 500. Some of those “good economy” sharp selloffs — as in 1987 and 1998 — required active government intervention in order to stabilize the market, while others took care of themselves. I do not believe that the 1987 and 1998 declines are real bear markets. They may have been down more than 20%, but there was no shrinkage in the S&P’s EPS. Still, in the present uncharted territory of quantitative tightening, I would feel a lot better if Gary Cohn were the Fed chairman (he was considered for the job). He ran a large investment management organization (Goldman Sachs Asset Management) and had extensive experience as a trader before becoming an executive and a CEO-in-waiting. One certainly needs a lot of theoretical expertise to be a successful Fed chairman, like Ben Bernanke proved, but in the situation that we have now, practical experience would also count for a lot." MY COMMENT: Curious how the markets will do tomorrow. A positive day and we will be in a "little" three day rally.
HAPPY NEW YEAR STOCKAHOLICS......and all that post or lurk here. So far a positive open and mid day to the markets on the LAST DAY of 2018. After the last three months of erratic correction it will be good to see 2018 over with. We will, no doubt, be locking in a loss for 2018 in the record books. With the general market results over the past five or six trading days, we have hopefully turned the corner and will now start fresh with a little bit of momentum on the UP SIDE of things. As we head to the NEW YEAR......good luck with your investing. Lets MAKE SOME MONEY this new year.
NO REASON to look back at 2018, it is history. HERE is a "little" article that has one take on the new year. I have inserted in BOLD my off the cuff predictions (guesses) as to the markets and economy in 2019. OBVIOUSLY short term predictions are just for fun and meaningless. My PREDICTION for the general markets in 2019.......a gain of 10-12% for the year with many twists and turns over the course of the year. "US economy, markets: What to expect in 2019" https://www.foxbusiness.com/economy/us-economy-markets-what-to-expect-in-2019 "While 2018 was largely characterized as a strengthening U.S. economy – equities are ending the year on a tumultuous note, causing concern among investors for the coming year. The three major U.S. indexes are down more than 9 percent Opens a New Window. each so far this month. In its latest US Economics Analysis, Goldman Sachs outlined its expectations for the coming year, from economic growth to Federal Reserve policy. Economic growth While initially expecting the U.S. economy to expand at a pace of 2.4 percent in the first half of 2019, Goldman Sachs reduced that outlook to 2 percent. In the second half of the year, its outlook is even weaker, at 1.75 percent. On a brighter note, the firm’s experts said they are not overly concerned about the prospects of a recession. In fact, they even believe a slowdown is even necessary to “land the plane.” Other experts share that opinion. During an interview with "Fox News Sunday Opens a New Window. " over the weekend, Allianz Chief Economist Mohamed El-Erian also said he doesn’t believe a recession is likely. “It’s certainly not becoming a reality,” El-Erian said. “You would need either a major policy mistake or a massive market accident to push us into recession. But we will slow down unless we build on the pro-growth policies.” (MY take on growth in the general economy in 2019, about the same as 2018......3% for the year average) Tariffs While Presidents Trump and Xi Jinping signaled that both were eager to advance trade discussions between the world’s two largest economies over the weekend, Goldman foresees the possibility for more escalation in the tit-for-tat tariff battle in 2019. They expect the Trump administration will raise tariffs on imports from China following the March 2 deadline – though a deal could be reached later in the year. China’s economy and stock market are beginning to show signs of wear as trade negotiations have stalled. Chinese markets are on track for their worst annual performance in a decade, while government officials announced on Monday that manufacturing activity in the country fell short of expectations in December. (My take on the so called trade wars and impact on the economy. A NON ISSUE. These events will all be wrapped up in 2019 with general positive impact on stocks and markets. It is CRAZY that we do not routinely push back and negotiate on these sorts of issues. It is about time we took some action on trade after just ROLLING OVER for the rest of the world for the past 30 plus years) Labor market The labor market made healthy strides in 2018, a trend that could continue into the new year. Goldman expects the unemployment rate to fall to 3.25 percent by the end of next year – though paycheck gains could remain muted. The bank says wage growth is likely to hover in the 3.25 percent to 3.5 percent range. Inflation will reach 2.1 percent at the end of 2019. (Labor and wages will mirror what we saw in 2018. Generally a very positive situation, although we will continue to give away American jobs to foreign students, workers, and managers by the importation of hundreds of thousands of foreign workers. Basically SELLING OUT our own young people. No one ever adds up ALL the various programs that import foreign workers into our country every year, but if you did, most people would be SHOCKED at how high the number is EVERY year) Federal Reserve Amid strong criticism from Trump regarding its plan to gradually raise interest rates, the Federal Reserve increased the benchmark federal funds rate earlier this month, for the fourth time in 2018. Following its two-day policy meeting, Fed chair Jerome Powell signaled that two more rate hikes were expected in the coming year, down from previous estimates of three in September. Goldman Sachs forecasts a probability-weighted 1.2 hikes in 2019 – down from 1.6 – which would imply a stable fed funds rate next year. (in 2019, one or two interest rate hikes SHOULD be called for at most. Although do not underestimate the ability of the FED to screw the economy) MY COMMENT: To end the year, at this moment: DOW year to date -5.89% SP500 year to date -6.51% NOT BAD considering the last three months of CRAZY correction action........HAPPY NEW YEAR.
GOOD RIDDANCE 2018. HELLO 2019. A fresh start. WE did not really end up too far down considering. HERE are the final year end figures for the big averages. DOW year end 2018 -5.63% SP500 year end 2018 -6.24% Not too bad considering, that both pay out about 2% to 2.5% in dividends over the year and taking into account reinvesting those and whatever slight compounding may have occurred with those dividends.......we are probably at a net loss of about 3-4% for the year in the big averages. A typical DOWN YEAR. With ALL the flailing around during the SCARY correction of the final three months of the year, this is not a bad ending point going into the new year. AND the NEWS OF THE YEAR.......the yield of the ten year treasury ends the year at 2.683%. Amazing considering the rate increases and all the fear mongering that occurred about interest rates. The FED needs to STFU, sit down, and stop chasing fantasy inflation. If anything we continue to be in a slight deflationary environment in my opinion. Considering the strength of the job market and the wage increases that have occurred over the year, this rate reflects the absence of an inflation problem. This should also bring some stability to the residential housing markets and mortgage rates at least for the short term. If I was a potential home buyer, I would definitely take advantage of the softness in the previously hot markets and the STILL low mortgage rates. I remain fully invested for the long term as usual with no changes in my portfolio model.
HERE is some ALTERNATIVE investing results for 2018. I DO collect some types of art, not as an investment, but gain is always welcome. "The Best Investments of 2018? Art, Wine and Cars Luxury assets have outperformed stocks and bonds this year" https://www.wsj.com/articles/the-best-investments-of-2018-art-wine-and-cars-11546232460 "Cars have been the best-performing luxury investment over the past 10 years, gaining 289%, according to a report published by Knight Frank earlier this year. Coins gained around 182%, wine 147% and jewelry 125% over the same period, while antique furniture and Chinese ceramics lost value." AND The POOR Hedge Funds, they continue to get hammered ever since the Madoff collapse exposed them and the fact that many of them were just "bundlers" that were holding other funds like the Madoff funds. Turns out most of them CAN NOT make money any better than the average lay person. AND....the fees they charge are OUTRAGEOUS. "Hedge funds’ hopes for 2018 dashed amid closures This year was supposed to be when rising volatility and yields brought back the glory days. Instead, returns fell and investors fled" https://www.fnlondon.com/articles/hedge-funds-hopes-for-2018-dashed-amid-fund-closures-20181224 A year ago, the hedge fund industry was full of optimism. After years of performance trailing the stock market, fund managers saw the end of central banks’ quantitative easing — and, by extension, an end to what many perceived as artificial asset valuations pumped up by government intervention — as the chance to return to the glory days of colossal market-moving bets and double-digit returns. With interest rates and volatility on the rise, it would soon be time to crow about record-setting profits. But one record set in 2018 was a landmark few hedge fund luminaries cared to dwell on. Last October, in what industry insiders believe to be a first, three US-based hedge funds shut in the course of the same week. Tourbillon and Criterion were among those to cease operations, following an inability to generate sufficient money and capital. Other hedge funds to have bitten the dust in 2018 include Omega Capital, run by industry veteran Leon Cooperman, and Cerrano Capital, whose backers included activist investor Dan Loeb, but which failed to last a year in operation. In the run-up to Christmas the Decca fund, run out of London-based fund firm City Financial, and New York-based hedge fund Latimer Light Capital also informed investors they were closing. There are many theories but little consensus on why 2018 has been so miserable for many hedge funds. The one thing nearly everyone agrees on is that it has become harder to convince investors that the glory days are returning soon. “It’s a tough environment to navigate,” said Emmanuel Hauptmann, founding partner of RAM Active Investments, which manages hedge funds. He pointed to high asset valuations and unexpected risks, and admitted investors have lowered their expectations. In some ways, he added, “it feels like 2007”. Money is flowing out of the hedge fund industry. EVestment, the data provider, estimates there have been net outflows among European-domiciled hedge funds of $12.8bn this year, compared with inflows of of $28.9bn in 2017. “Investors are probably looking for a safe haven,” said Sean Scott, a partner at MJ Hudson, an asset management consultancy, who specialises in hedge fund practice. “Returns haven’t been great so there has been a flight away from hedge fund strategies towards safer options. There has been quite a lot of talk, even among some of the bigger institutional investors, about going back into gold.” Earlier this year, Australian trader Greg Coffey, one of the hedge fund world’s most renowned figures, was plotting a comeback in London after a six year hiatus. Instead of being met with a flood of the Square Mile’s capital to manage, Financial News reported that Coffey— nicknamed The Wizard of Oz — found it hard to attract investment in London. By the year’s end, Coffey had re-located to New York. Performance for the industry as a whole has given investors little reason to have faith. Eurekahedge’s overall hedge fund index is down 2.36% this year; in 2017 it returned 8.51%. “The hedge fund sector is now like the restaurant business. Few of the new hedge funds that open are still standing two years later” Hedge funds heavyweights in the UK have enjoyed mixed fortunes this year. Marshall Wace’s flagship Eureka Fund, a long/short equity fund with $13.6bn in assets under management, is up 0.03% in the year to date while its $8bn MW Tops Fund, a systematic diversified long/short equity strategy, is down 5.7%, according to data from HSBC. Brevan Howard’s overall performance has rebounded following recent performance struggles after co-founder Alan Howard launched a series of spin-off funds to arrest the decline. The company’s flagship $613m Master Fund is up nearly 5% year-to-date. Lansdowne Partners, another UK hedge fund stalwart, is not finding the going easy. Its flagship Developed Markets Fund is down over 5% year to date. A recent investors’ note for the fund, reviewed by FN, encapsulates the industry’s sweeping uncertainty: “The strategy had a tough quarter, with underperformance of our [investments in companies with large market capitalisations] late in the period offsetting some good gains in some of our domestic positions. [We were] somewhat frustrated by this,” the note stated. Some argue that a key factor in the poor performance is the supplanting of discretionary strategies (investment decisions made by humans) by systematic ones (using computer-driven approaches). “Most of the fund closures in 2018 were discretionary funds,” said Michael Oliver Weinberg, chief investment officer at New York-based fund-of-hedge-funds firm Protege Partners. “We believe systematic managers are increasingly systematising what discretionary managers did,” he said, and added that discretionary managers would continue to see investors pull their money out as their performance suffers. “Those [assets] will likely flow into systematic funds,” he said. The market setbacks this year and decline in global equity markets have hit both types of strategies, however. Systematic funds — while still considered by many to be the future of the hedge fund industry — suffered acutely from the stock market drubbing in March and October, leading to increasing fears that algorithmic and artificial intelligence (AI) investment strategies are not as immune to market fluctuations as some had assumed. Other hedge fund managers blame the slump on the increase in regulatory and compliance hedge fund infrastructure which occurred following the 2008 financial crisis. Oliver Dobbs of Credere Capital launched the Trium Credere Fund last February, which trades in securities and derivatives. Between 2004- and 2014 Dobbs delivered returns above 10% on his funds, and even was up during the recent market turbulence some in the industry dubbed “red October”. But he said recently it took him nine months to even open a bank account due to increased regulation and the outsourcing process. The reputation that hedge funds once enjoyed for waging lucrative contrarian, risk-taking bets has taken a hit recently. This was illustrated by the hedge funds who lost big on their investments in Facebook, which was one of the most widely held US stocks, when the social network’s share price plunged 19% on one day last July. But George Papamarkakis, co-founder of North Asset Management, a global macro hedge fund, reckons contrarianism is key to his $610m North MaxQ Macro fund being up 14.3% in 2018. He cited taking an “unconventional” attitude towards Italy where a sharp rise in the country’s bond rate that has led to fears that its economy will default amid increasing political instability.“I am concerned about Italy but ultimately it will be resolved in an orderly manner,” he said. “It's too important for the EU not to find some type of compromise.” Others to have done well in 2018 include Odey Asset Management- flamboyant founder Crispin Odey's flagship European Fund will end 2018 up over 60% since the start of the year while Tim Bond's global macro fund is up 30% in the year to date. Hedge funds that have invested heavily in Puerto Rican debt in the wake of Hurricane Maria and the country's subsequent price fall have also had a good year. One UK hedge fund manager speaking on condition of anonymity said there are simply too many hedge funds. “The hedge fund sector is now like the restaurant business. Few of the new hedge funds that open are still standing two years later. Older hedge funds stay open but their menus are not so much a la carte as a la correlated,” he said, referring to their tendency to produce very similar results. “There are too many hedge funds making too average returns, so it’s long overdue for there to be a substantial supply cull.” The challenges have not scared off every new entrant. 2018 saw high-profile fund openings such as ExodusPoint and D1 Capital Partners. But the growth is slowing. In 2017, 735 new hedge funds launched, according to Hedge Fund Research. One industry analyst estimates the figure for 2018 hedge fund launches will be around 615.“It has got harder to raise money,” said Dobbs. Research for FN by HFR illustrates the stagnant growth of hedge fund assets in the City. In 2013, 14.8% of global hedge fund assets were located in the UK. In the second quarter of 2018, that proportion was down to 13.6%. Reducing costs has become a priority. Peter Rippon, CEO of OpenGamma, a London-based derivatives analytics company, said he is seeing more hedge funds sign up to OpenGamma’s services in order to optimise trading allocations and thereby improve their profit margins. He estimated his company has achieved cost savings of up to 20% for hedge funds. “Low returns, combined with ever-increasing costs, has created a lot of pain for these funds,” Rippon said. “Our solution under the banner of cost efficiency is compelling for these guys.” For Dobbs, the bottom line is that funds need to start beating basic strategies that charge lower fees. He said: “If hedge fund managers start outperforming simplistic factor models, then maybe we’ll see a renaissance…. It’s up to us to make the returns and outperform.”" MY COMMENT So, the Hedge Funds, with all their models and top talent are a joke. The bottom line is that even with their "professionals" running things with their staff and computer models, they are unable to perform. A telling lesson in the inadequacy of computer models and professional money management. In 2017 the SP500 return was 19.42%, the Hedge Fund Index returned 8.51%. My, how far they have FALLEN, I can remeember years ago when the first Hedge Funds came into being, people were clammering to be let into a Hedge Fund. Of course, they could not get into one since they were ONLY for the ELITES. Be carefull what you want in your investing especially if it is a DARLING of the ELITES since the ELITES are usually IDIOTS when it comes to investing and money. The average person is better off just sticking their money in a broad Index Fund and letting it ride for the LONG TERM........IF......and it is a BIG "IF"......they can keep their emotions in check and avoid selling every time there is fear and panic in the streets. AND, yes, when there is fear and panic, it is usually the so called professionals and the Elites that are leading the charge.
To Start the NEW posting year: Here is my "PORTFOLIO MODEL" for all accounts managed. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 55% of the total portfolio and the fund side at about 45% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing. As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a VALUE style component (Dodge & Cox Stock Fund), a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 12 stock portfolio. STOCKS: Alphabet Inc Amazon Apple Boeing Chevron Costco Home Depot Honeywell Johnson & Johnson Nike Nvidia 3M MUTUAL FUNDS: SP500 Index Fund Fidelity Contra Fund Dodge & Cox Stock Fund CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (65+). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE.
