tag:blogger.com,1999:blog-59195310062034136242024-03-27T16:16:37.305-07:00 Zaga Investment Co: Drifting to FiftyRobin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comBlogger58125tag:blogger.com,1999:blog-5919531006203413624.post-36821675828343114852024-03-21T17:18:00.000-07:002024-03-21T17:18:50.654-07:00We're All Biased. Don't Let it Impact Performance<p>We all make judgments, big and small, on a constant basis: </p><blockquote style="border: none; margin: 0 0 0 40px; padding: 0px;"><p style="text-align: left;"><i>I'm pretty sure my car can fit in that space.</i> <i>$40 should be more than </i><i>enough to spend on a gift for my nephew. Acid rock has no musical value. Neither of these presidential candidates is truly fit for office.</i></p></blockquote><p>All the time, every day, we have to gauge our options and make a choice. And we believe we are generally being rational, that we have given consideration where appropriate. That we've assessed the available data and decided using sound, rational analysis.<br /><br />But we haven't. More often than not, our emotions and our patterns are guiding those judgments from the shadows. This is as true in investing decisions as it is in ordering dinner. But for most of us it turns out to be much more expensive.<br /><br /><b>Recency Bias </b>occurs when a memorable event in the immediate past colors thinking and decision-making: shark attacks have always been quite rare, but heavily publicized recent shark encounters around Cape Cod sway beach-goers to stay out of the water. For investors, a long bull market irrationally affects thinking about future market performance, making success seem inevitable. Or devastating losses after a market crash in the near past keep otherwise sensible investors from buying in.<br /><br />To ensure you are not falling victim to recency bias, look further back than your own experience. Investigate a stock's history going back 5, 10, 20 years. Look at its industry and even the broader market over a longer span. In the longer view, any recent event seems relatively insignificant.<br /></p><p><b></b></p><div class="separator" style="clear: both; text-align: center;"><b><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigXpUN6WMFTxrNj3EB9WXNeELsLekJkNPgA3JQeETnZHa9BbXmT5RQKSrrjCONEzB4tipvi-7w6LyIC5gEArK24ZMG0mSsDfUlbEs8H_9yALHWyB7aZZdbKmYzf9CB8AGfGU21V_CnKZzIh-mmhRvwvGVc4AG-W9tb9oum76DMaG3LYgaldWvzltdfbYs/s1400/im-937327.jpeg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="932" data-original-width="1400" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigXpUN6WMFTxrNj3EB9WXNeELsLekJkNPgA3JQeETnZHa9BbXmT5RQKSrrjCONEzB4tipvi-7w6LyIC5gEArK24ZMG0mSsDfUlbEs8H_9yALHWyB7aZZdbKmYzf9CB8AGfGU21V_CnKZzIh-mmhRvwvGVc4AG-W9tb9oum76DMaG3LYgaldWvzltdfbYs/s320/im-937327.jpeg" width="320" /></a></b></div><blockquote style="border: medium; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><b>Loss-Aversion Bias </b>is the idea that a stock in your portfolio which has declined since purchase should not be sold, because it "will come back up." Perhaps it will. Perhaps, in fact, it will return to and rise even higher than your purchase price. However, converting what is currently a "paper loss"— the lost value exists only on your brokerage statement— to a <i>real</i> loss by selling the stock at a lower price is fundamentally repellant; the human psyche often rejects as impossible those things which appear uncomfortable or painful, or dangerous. (see: <a href="https://www.msn.com/en-us/money/other/kevin-plank-returns-as-ceo-under-armour-s-original-visionary-takes-charge-again/ar-BB1jSIZp" target="_blank">Under Armour 2017-present</a>.)</blockquote><br />Getting around loss-aversion bias is tricky. Typically we must first disassociate our emotions from our stock holdings, not easy. (Do you own Microsoft? Netflix? Have you held them a few of years? Do you love them? There you go.) If you are successful in divorcing emotion, you need to get into the reeds on that devalued stock you own: <div><ul style="text-align: left;"><li>Are all the reasons you bought it still true? </li><li>Does it still have a strong competitive position? </li><li>Products solid, customer loyalty strong, management seems to know what it's doing? </li><li>Inventory levels look historically average? </li><li>Does the business still have more than enough cash for operations? </li></ul></div><div><div class="separator" style="clear: both; text-align: left;">If these are all true, then perhaps you are correct, and the stock will rebound and maybe you should pick up some more of it. If not, however, you'll need to do some more digging: the market clearly disagrees with your assessment.</div></div><div><b><br /></b></div><div><b>Confirmation Bias</b> is very common but virtually impossible to self-detect. It is the tendency to subconsciously run incoming information through a preexisting preference filter, such that we <i>confirm</i> what agrees with our beliefs and <i>reject</i> what does not. This can lead to ignoring important material events, such as the rise of a worthy competitor, the deterioration of the business's product pipeline, or a degrading of the company's executive decision-making. Or the business makes a sizable acquisition in a seemingly-unrelated field (why did <a href="https://www.cnn.com/2022/03/15/investing/amc-hycroft-mining-gold-silver/index.html" target="_blank">AMC theaters buy a gold mine</a>??). All these should be cause for concern.</div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqCP-om4KxHwFbaofSyODjPHBZt1jdpotMzpPaqu4GiBvsbw6Eih8Bc38-UoeTO59avt3lFVDaSJ5VUjFTGjrXAm-xnOGXjscRr1vIrsxZAbGKMWxjcDoxxPCXTsyjzrQfP6gBiI7AD9d8vuF89Z7qWCWojTRGxvo5j8bCI-hlI_5bW2ciin0EOyiU1Xk/s1484/Screenshot%202024-03-21%20at%204.43.50%E2%80%AFPM.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><br /></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqCP-om4KxHwFbaofSyODjPHBZt1jdpotMzpPaqu4GiBvsbw6Eih8Bc38-UoeTO59avt3lFVDaSJ5VUjFTGjrXAm-xnOGXjscRr1vIrsxZAbGKMWxjcDoxxPCXTsyjzrQfP6gBiI7AD9d8vuF89Z7qWCWojTRGxvo5j8bCI-hlI_5bW2ciin0EOyiU1Xk/s1484/Screenshot%202024-03-21%20at%204.43.50%E2%80%AFPM.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><br /></a></div></div><div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqCP-om4KxHwFbaofSyODjPHBZt1jdpotMzpPaqu4GiBvsbw6Eih8Bc38-UoeTO59avt3lFVDaSJ5VUjFTGjrXAm-xnOGXjscRr1vIrsxZAbGKMWxjcDoxxPCXTsyjzrQfP6gBiI7AD9d8vuF89Z7qWCWojTRGxvo5j8bCI-hlI_5bW2ciin0EOyiU1Xk/s1484/Screenshot%202024-03-21%20at%204.43.50%E2%80%AFPM.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1104" data-original-width="1484" height="238" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqCP-om4KxHwFbaofSyODjPHBZt1jdpotMzpPaqu4GiBvsbw6Eih8Bc38-UoeTO59avt3lFVDaSJ5VUjFTGjrXAm-xnOGXjscRr1vIrsxZAbGKMWxjcDoxxPCXTsyjzrQfP6gBiI7AD9d8vuF89Z7qWCWojTRGxvo5j8bCI-hlI_5bW2ciin0EOyiU1Xk/s320/Screenshot%202024-03-21%20at%204.43.50%E2%80%AFPM.jpg" width="320" /></a><br /></div><div>This is not to say that no corporation can adjust to or recover from such events, as these things occur all the time even in very strong companies with fast-rising stocks. However, to counteract confirmation bias we must do an objective, detached examination of any developments which materially affect stock value. Sometimes a down stock doesn't come back up, it just goes down, and down ... (<a href="https://www.msn.com/en-us/money/topstocks/here-s-why-zoom-video-stock-looks-like-a-cheap-value-play-in-2024/ar-BB1jur4O" target="_blank">Zoom Video, a pandemic staple, just can't get its act together</a>.)<p></p><p><b>Overconfidence Bias,</b> just as it sounds, is the misperception that we have an edge where others do not. It stems from success, sometimes from success in completely unrelated areas. (The fact that you were a 300-level philosophy T.A. in college does not generally indicate you will be able to competently replace your own iPhone screen.) Do you know someone who felt super smart about their getting in on the run-up in GameStop or AMC stock during Covid? How do they feel about it now?<b> </b><br /><br />The only way to overcome overconfidence bias is by questioning yourself and your data on a constant basis. Also, getting your butt handed to you a few times will also get the job done. Nothing to be ashamed of: no one who's been stock investing long enough can honestly say they've been burned from sheer hubris.<br /><br /><b>Action Bias </b>is the most troublesome of all. Put simply, action bias is the tendency— the <i>need—</i> to do something, really <i>anything</i>, to fix your portfolio and goose your returns. But nearly always the most appropriate response, when earnings are reported or when news comes in, is to do <i>nothing</i>. No doubt you know all about this: ever thought about getting off a clogged freeway in favor of surface streets? Probably won't save you time, but at least you'll be <i>moving</i>, right?<br /><br />Action bias gets everyone eventually. Russia is making gains in Ukraine, China's economy is sliding, Apple is being by the US Justice Dept, the election will disrupt the market ... Time to sell everything and cash in before it all goes to hell? <b>No, time to sit on your hands. </b>Or, <a href="https://www.msn.com/en-us/money/topstocks/as-ai-bubble-chatter-grows-is-nvidia-stock-overvalued/ar-BB1jmQXf" target="_blank">Nvidia just keeps climbing, so obviously it's overvalued</a> and we should sell and take the profits, right? Wrong, looks like the <b>business is cheaper now </b>(based on revenues and profits) than a year ago.</p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRjgiTlz_8v8ydIYawlj3FVg9noOJDtKtnl0VO0KQewT-K-_OkubaMi0VYPfo5sQJYChCULXpgNCfgtHr4rbUHHXoyhxs-mXBJBA84Aj5GZgMbwpIseFauU4AjNfTg_vVhhOd4MAKBr-ayOGJ9QDAKVsjK94tD_1md_hvtJ84lUg8sn8Dp7_kWI3Wvk8I/s531/BB1jn271.img.jpeg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="474" data-original-width="531" height="216" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRjgiTlz_8v8ydIYawlj3FVg9noOJDtKtnl0VO0KQewT-K-_OkubaMi0VYPfo5sQJYChCULXpgNCfgtHr4rbUHHXoyhxs-mXBJBA84Aj5GZgMbwpIseFauU4AjNfTg_vVhhOd4MAKBr-ayOGJ9QDAKVsjK94tD_1md_hvtJ84lUg8sn8Dp7_kWI3Wvk8I/w238-h216/BB1jn271.img.jpeg" width="238" /></a></div>About 95% of the time, the correct reaction in these moments is to do nothing at all. You did your research early on, before you bought each of these stocks. You say you're in for the long haul, meaning 5-10 years or even more— this is your first home, or your kids' college tuition, or retirement funding. As a rule, <i>don't make</i><i> long term </i><i>decisions on short-term news.</i> If you are indeed doing careful analysis at the beginning, then once you own the company you must trust the managers that work for you, and trust your own earlier judgment.<p></p><p>And really, it's all judgment. Stock picking and stock investing is more art than science, no matter what you read about uptick volumes and Fibonacci retracement and resistance levels. No one knows what an individual stock is going to do, never mind the entire market. So do your homework, make your play, pay attention, guard against your own biases. Then do it again. And again. You'll do fine.</p><br /></div>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-61704724447434039202024-02-16T10:14:00.000-08:002024-02-16T10:14:06.798-08:00Portfolio Don'ts<p style="text-align: left;"><span face="Arial, sans-serif" style="font-family: arial;">Warren Buffet's 60-year investing partner, Charlie Munger— who died late last year one month shy of his 100th birthday— famously said about the astonishing success of Berkshire Hathaway since the early 1960s:<i> </i></span></p><p style="text-align: center;"><span face="Arial, sans-serif" style="font-family: arial; font-size: medium;"><i>"It's not brilliance. It's just avoiding stupidity."</i> </span></p><p style="text-align: left;"><span face="Arial, sans-serif" style="background: repeat white; color: #111111; font-family: arial;">But what comprises stupidity? Is it one-time foolishness or a pattern of dumb? A reckless mistake? A poorly devised strategy? Can someone of average intelligence achieve truly impressive investment returns? (<i>I</i> did.)</span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;">The reality is the list of <i>don’ts</i> in investing is probably longer than the list of <i>do’s</i>. But they're pretty much all quite intuitive. Which means they’re more accessible to regular folks who have never studied finance or who have crazy schedules and simply can’t put in the time to nail the details. Which is to say, if you can just avoid touching the third rail, you’ll probably do fine. <o:p></o:p></span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVoGwCkCzkiNrymGpaneHiJGfvlktlXhhgFRjaFSKT4-XTUyqqlU_jLfUivohn5cA-TDOit_O3_tK3ewpEgW3ABfN4A9fdrmzy5VtrEzkNFvD27RYHppdpZzEh3iXaipv0BsL4cfu50HSxAU_JUC1R4zotybIdHKdhYvKVWOMaMKj4wyxBICyMNLw12F4/s800/ETrade.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-family: arial;"><img border="0" data-original-height="393" data-original-width="800" height="157" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVoGwCkCzkiNrymGpaneHiJGfvlktlXhhgFRjaFSKT4-XTUyqqlU_jLfUivohn5cA-TDOit_O3_tK3ewpEgW3ABfN4A9fdrmzy5VtrEzkNFvD27RYHppdpZzEh3iXaipv0BsL4cfu50HSxAU_JUC1R4zotybIdHKdhYvKVWOMaMKj4wyxBICyMNLw12F4/s320/ETrade.jpg" width="320" /></span></a></div><b><span face="Arial, sans-serif" style="font-family: arial;">Don’t invest in mutual funds.</span></b><div><span style="font-family: arial;"><span face="Arial, sans-serif">I have previously expounded on this subject but I’ll nutshell it here: if you feel you aren’t ready to pick your own stocks, get yourself an online brokerage account at <a href="https://express.etrade.com/etx/rtao/ma/account-category">Morgan Stanley/E</a></span><a href="https://express.etrade.com/etx/rtao/ma/account-category">*Trade</a><span face="Arial, sans-serif"> or </span><a href="https://www.schwab.com/open-an-account?showp=Y&icid=TDAHPHPOAA1023">Schwab/TD Ameritrade</a><span face="Arial, sans-serif"> and pick up a couple of exchange traded funds (ETFs), which hold a basket of companies but trade as a single stock. The easiest are the large-basket ETFs like </span><a href="https://finance.yahoo.com/quote/SPY?.tsrc=fin-srch">SPY</a><span face="Arial, sans-serif"> and </span><a href="https://finance.yahoo.com/quote/VOO?.tsrc=fin-srch">VOO</a><span face="Arial, sans-serif"> which mimic the movement of the largest market index of 500 different stocks. </span></span><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;">If instead you insist on buying into a mutual fund, you’ll pay 1.25% of your assets <i>per year</i> for that fund manager’s ‘expertise.’ 1: something like 90% of those managers do not even keep up with the growth of the S&P 500 index, which you can have for a fraction of the cost (see SPY, above); 2: that cost becomes absolutely massive over time as your portfolio grows and that rate compounds; 3: your money will be much less liquid should you need to access it. It's like paying someone for the privilege of being robbed— you lose twice. Don’t believe me? Read <a href="https://financialpost.com/investing/5-more-reasons-mutual-funds-stink">this</a>. <o:p></o:p></span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"><span style="font-family: arial;"><b><span face="Arial, sans-serif">Don’t worry about the price of a share unless you’re spreading your investment around.</span></b><span face="Arial, sans-serif"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;">Lots of people get weirded out by the cost per share. They think that if they only have $100 to invest in a particular stock and one share is $100, better to find a different business for $20 per share and buy 5 shares. Which is ridiculous: if you’re going to put to work the same dollar amount, then 10% of share appreciation is 10% wealthier either way. Go with the company which best fits your investment model and your interests. Where share price matters is if you want to spend your limited investment budget on several businesses or ETFs to diversify. </span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEie8AHEBI6ElfAVurz0lufziWMi1ueujx2SEelmBCHQV9S8Iaewxey4_LhvQK7Ry4mCVtavT42148mcky_mjzVBR1CSt4bd__naHWcswPGF5XYwDu9ieVAowo89L-77vYSSiiNDOB0CX7OttJ04-y-a0BTg0q-SeVIxRnZDiJmeIA3_V9YmBarB4Bij0CI/s1600/l-intro-1652300765-2034311711.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><span style="font-family: arial;"><img border="0" data-original-height="901" data-original-width="1600" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEie8AHEBI6ElfAVurz0lufziWMi1ueujx2SEelmBCHQV9S8Iaewxey4_LhvQK7Ry4mCVtavT42148mcky_mjzVBR1CSt4bd__naHWcswPGF5XYwDu9ieVAowo89L-77vYSSiiNDOB0CX7OttJ04-y-a0BTg0q-SeVIxRnZDiJmeIA3_V9YmBarB4Bij0CI/s320/l-intro-1652300765-2034311711.jpg" width="320" /></span></a></div><span style="font-family: arial;">The other thing that happens is that people avoid companies analysts describe as “overvalued,” whose shares have risen substantially over recent months or which are pushing higher <a href="https://www.investopedia.com/terms/p/price-earningsratio.asp">PE ratios</a>. The thinking is that if it’s gone up that much it’s probably close to tapped out, and the price will flatten or even fall. But no matter what analysts say, that stock’s price has risen because investors overall have decided it’s worth a lot more than previously thought. Perhaps the company acquired a competitor, or announced an international expansion, justifying the rise. If instead you only buy stocks “on a dip” or that you think are cheap, you miss out on some amazing opportunities (think Apple, Microsoft, Netflix, Nvidia—no one accuses their stocks of being bargains). Companies with rising valuations tend to keep rising until something changes: a new competitor, a corporate scandal, an economic shock. If you stop worrying about how high the price looks <i>today</i>, and measure it instead against what you believe to be its growth potential <i>tomorrow</i>, you’ll have a much clearer understanding of the real value. That's why you want to own it in the first place.<o:p></o:p></span><p></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"><span style="font-family: arial;"><b><span face="Arial, sans-serif">Don’t buy blind.</span></b><span face="Arial, sans-serif"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin: 0in;"><span style="font-family: arial;"><span face="Arial, sans-serif">When we hear from a gym pal or the deli guy about a great value stock, a sudden opportunity that "</span><i>won’t last long</i><span face="Arial, sans-serif">," our inclination is to believe they know something we don’t and therefore we should hop to it. But it ought to be a red flag: if you’re hearing about it from someone else, then you’re not following that business or you would already know this information. Which means you're buying something you likely know nothing about. Plus, if word has gotten around, then any amazing value price is likely already over. Don’t succumb to the temptation to go in with your friend just </span><i>because</i><span face="Arial, sans-serif">. Learn about that business. Do a little research. Understand what the company does, how they stack up against competitors, what sort of leadership they have, how their growth trajectory looks. Get a feel for things. If you don’t understand how the company makes money today, then you can't see how big the opportunity is in the future and you can't possibly assess it as an investment. Never forget: </span><i>you’re buying an ownership stake in an ongoing business</i><span face="Arial, sans-serif">. Where is it headed? How will it achieve that? What obstacles will it face? Look before you leap.<o:p></o:p></span></span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNoTLyFJoMIe_AmQB4HQko5qvac3Sh4FW1Os1HhxAI24JL8Y76FfvKm1dMp5xVhTHJFqpUkkppx1qBXNHnYn5rZ5SJyvK1WFxJZdRHc676gqePrsih2TViy670cbSIkE1BP3XU0RINAApFYaHY6lwq_FOCb4sz0QXaOhntzjQhptNdbZkfw3gIIhcVbvk/s1600/MV5BYTEzMjBiMzktMjQyMS00YzBhLTgzNWQtNzA0NmEwMTNmMDQ2XkEyXkFqcGdeQXVyNDk3NzU2MTQ@._V1_-1468405153.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-family: arial;"><img border="0" data-original-height="1600" data-original-width="1080" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNoTLyFJoMIe_AmQB4HQko5qvac3Sh4FW1Os1HhxAI24JL8Y76FfvKm1dMp5xVhTHJFqpUkkppx1qBXNHnYn5rZ5SJyvK1WFxJZdRHc676gqePrsih2TViy670cbSIkE1BP3XU0RINAApFYaHY6lwq_FOCb4sz0QXaOhntzjQhptNdbZkfw3gIIhcVbvk/w135-h200/MV5BYTEzMjBiMzktMjQyMS00YzBhLTgzNWQtNzA0NmEwMTNmMDQ2XkEyXkFqcGdeQXVyNDk3NzU2MTQ@._V1_-1468405153.jpg" width="135" /></span></a></div><b><span face="Arial, sans-serif" style="font-family: arial;">Don’t be in a hurry. </span></b></div><div><span style="font-family: arial;">Unlike in the movies, investing is not shorting orange juice futures one time and then finding yourself living on a yacht in the Bahamas. Investing is a lifelong process. It requires an understanding that the value of your assets will rise and fall in in the near term but, with dedication and patience, will almost certainly increase substantially over time. </span><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;">Many people succumb to <a href="https://en.wikipedia.org/wiki/Action_bias">action bias</a>, which is just the need to <i>do</i> <i>something</i> with your investment portfolio beyond just watching it grow. Because most folks don’t have an endless supply of incoming cash with which to buy more or different stocks, they instead move the money they have from one investment to another, looking for higher or faster returns. But that eliminates any one company's ability to earn them a substantial return over time, it kills the stunning advantage brought by <a href="https://www.investopedia.com/terms/c/compoundinterest.asp">compounding interest</a>, it generates capital gains taxes, it takes time and energy and increases frustration. Instead, buy smart and sit tight: <i>investing</i>, not trading. Your returns will demonstrate the difference. <o:p></o:p></span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"><span style="font-family: arial;"><b><span face="Arial, sans-serif">Don’t sell on movement.</span></b><span face="Arial, sans-serif"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;">Everyone sets out to buy low and sell high. But the reality is often very different: we buy high and sell when it drops because we fear it will keep dropping. For obvious reasons, this is a terrible investing strategy.<o:p></o:p></span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"><span style="font-family: arial;"><span face="Arial, sans-serif">Once you own shares, don’t sell unless you must. I go into greater detail in previous posts </span><a href="https://driftingtofifty.blogspot.com/2023/12/year-end-portfolio-management.html">here</a><span face="Arial, sans-serif"> and </span><a href="https://driftingtofifty.blogspot.com/2015/07/stock-investing-109-when-to-sell.html">here</a><span face="Arial, sans-serif">, but the basic idea is that if you did at least a little due diligence prior to purchase, and you still like the company and believe in their capacity to grow, then you shouldn’t sell just because it has moved up or down. Stocks swing, sometimes a lot, and sometimes very quickly. When a stock you own drops substantially following a missed quarterly earnings report, that is a Wall Street analyst’s problem, not the company’s or the shareholder’s problem. If you still believe in the company, </span><i>Hey its shares are now on sale!</i><span face="Arial, sans-serif"> If the shares rise, maybe even more than you expected, </span><i><span face="Arial, sans-serif">Wonderful, you've made more than you thought! </span></i><span face="Arial, sans-serif">You bought it to hold it, expecting it would go up— now let it do that. The money is supposed to work for you, not the other way round. Sell only when something really bad has happened at the company or when you need the money for something else. Trust your purchase, trust your judgment. Patience is rewarded.<o:p></o:p></span></span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"><span style="font-family: arial;"><b><span face="Arial, sans-serif">Don’t let your emotions take over.</span></b><span face="Arial, sans-serif"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin: 0in;"><span style="font-family: arial;"><span face="Arial, sans-serif">Investing well, and I’ve said this before <a href="https://driftingtofifty.blogspot.com/2015/09/market-swings-are-making-me-nauseous.html">here</a>, requires a steady hand on the wheel and your eyes on the horizon. There’s just no way around it. Stocks rise in the long term, but they gyrate all over the place in the shorter term. Some of it is nauseating. This is especially true of young companies, technology companies, and of <i>fad</i> companies, whose products or services might turn out to be just a momentary cultural obsession </span><span face="Arial, sans-serif">and will fall as fast as they rose—</span><span face="Arial, sans-serif">think </span><span face="Arial, sans-serif">GoPro cameras, 3D printers, </span><span face="Arial, sans-serif">Zoom video-conferencing, Peloton bikes. If you act on your emotions, you might save yourself a headache or a sleepless night but over time you will have terrible returns. Never buy on a whim of fancy, and never sell in a panic. Buy with some vision, some thought and analysis, and then then sit on your assets for years if you can. That’s it. Containing yourself is extremely hard, but it’s certainly not complicated.</span></span></p><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"> </span></p><p class="MsoNormal" style="margin: 0in;"></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpNvzNx8R8rC5GJBNbnywRqxZv5-ogbq9tjehKPnG3TCXtARKL8A2lq0NRZrOru19SPpckMtSgMkwVGCMsPHakQ8RwlX8CHOgLcjIsBHcdKg7ic9BTmEmXWQeM07i79r522voRrrs1_E4TKej3k6pcIXZb_tjB3MWPpiJHhNVyu8mt4eTmf6Ob68MM4aU/s637/warren-buffett-net-worth-over-time-766177976.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><span style="font-family: arial;"><img border="0" data-original-height="635" data-original-width="637" height="247" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpNvzNx8R8rC5GJBNbnywRqxZv5-ogbq9tjehKPnG3TCXtARKL8A2lq0NRZrOru19SPpckMtSgMkwVGCMsPHakQ8RwlX8CHOgLcjIsBHcdKg7ic9BTmEmXWQeM07i79r522voRrrs1_E4TKej3k6pcIXZb_tjB3MWPpiJHhNVyu8mt4eTmf6Ob68MM4aU/w249-h247/warren-buffett-net-worth-over-time-766177976.jpg" width="249" /></span></a></td></tr><tr><td class="tr-caption" style="text-align: center;"></td></tr></tbody></table><b><span face="Arial, sans-serif" style="font-family: arial;">Don’t wait.</span></b></div><div><span style="font-family: arial;">You’ve been hearing it since you landed your first job, if not earlier: the longer you put off the start of your investing career, the less time you’ll have to earn enough to stop working. </span><p class="MsoNormal" style="margin: 0in;"><span face="Arial, sans-serif" style="font-family: arial;"><br /></span></p><p class="MsoNormal" style="margin: 0in;"><span style="font-family: arial;"><span face="Arial, sans-serif">Take a look at this chart of Warren Buffett’s personal wealth. Can you see the huge hockey-stick shape to the right? His net worth grows steadily enough over time but really accelerates in the last decade or so. That’s compounding interest. I keep saying it: the longer you do it, the faster you’ll earn and the more you’ll have. Investing is the slow boat, so get on now. For more on the subject of waiting to get started, have a look </span><a href="https://driftingtofifty.blogspot.com/2015/07/stock-investing-3-lies-youve-been.html">at this</a><span face="Arial, sans-serif">.</span></span></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><span face="Arial, sans-serif"> </span></p></div>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-62288514810366032552024-01-09T16:21:00.000-08:002024-01-18T13:34:04.105-08:00The Math-less Rules of Finance<p><span style="font-family: Arial, sans-serif; font-size: 11pt;">Happy New Year! I hope you were an investor in 2023 and that you owned one of more of the Magnificent Seven (the band names change, but many of the members don’t): Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla. Averaged, these massive wealthy businesses more than doubled in 2023 and their stellar performance was responsible for the value increase of nearly the entire US stock market. For those of you keeping score, I was fortunate to own 5 of the 7, so I managed a pretty wonderful return in 2023.</span></p><p><span style="font-family: Arial, sans-serif; font-size: 11pt;">So, on to 2024. Today I want to tell you about some mathematics-free rules of finance. Lots of people think that to do well in the market, you need to love the numbers. Spreadsheets, charts, formulas… Nonsense. Of course it helps to be able to know basic arithmetic, but in fairness you need that for cooking, laundry, even golf. That is </span><i style="font-family: Arial, sans-serif; font-size: 11pt;">not</i><span style="font-family: Arial, sans-serif; font-size: 11pt;"> the key to financial success. I will give you a handful of concepts you can easily grasp without an MBA or even a calculator. </span></p><p class="MsoNormal" style="text-align: left;"></p><div style="text-indent: 0px;"><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">1.<span style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; font-weight: normal; line-height: normal;"> </span></span></b><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">A</span></b><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">lways pay your full credit card balance</span></b></div><div style="text-indent: 0px;"><span style="font-family: Arial, sans-serif; font-size: 11pt;">We’ve all heard this before. Yet most Americans carry a debt balance on at least one credit card, and often two or more. Many pay only the ‘Minimum Due’ every month, which only compounds the problem (sorry, couldn’t help myself). Just so we’re clear: this is a sucker’s game. Paying only Minimum Due will put you</span><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><i style="font-family: Arial, sans-serif; font-size: 11pt;">deeper</i><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><span style="font-family: Arial, sans-serif; font-size: 11pt;">into the hole over time. Credit cards charge you nothing at all if you pay them off every month. But if you carry a card balance— one card I use demands up to 30% annual interest if I’m foolish enough not to pay it down. That’s absolutely bananas, nearly 5x the going lending rate in any other context.</span><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><i style="font-family: Arial, sans-serif; font-size: 11pt;">Pay that card off, and do it now.</i><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><span style="font-family: Arial, sans-serif; font-size: 11pt;">You should be living below your means— see “Do Without,” below. If you come even quickly, get a proper loan from a bank or a credit union or even a parent, and use that to pay off your cards. You’ll be charged a fair interest rate and you’ll have an easier time working down the balance.</span></div><p class="MsoNormal" style="text-align: left;"><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span></p><b style="font-family: Calibri, sans-serif; font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">2.</span></b><b style="font-family: Calibri, sans-serif; font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;"><span style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variant-position: normal; font-variation-settings: normal; font-weight: normal; line-height: normal;"> </span></span></b><b style="font-family: Calibri, sans-serif; font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">Play only your own game</span></b><br style="font-family: Calibri, sans-serif; font-size: 14.666667px;" /><span style="font-family: Arial, sans-serif; font-size: 11pt;">We all get distracted and outright enraged when a celebrity or a sports star or even someone we know starts touting some amazing business they bought into and now they’re up 1,000%. How much they’ve made, how it’s only the beginning, how you can get in too. Or we read about a company like Amazon which is up nearly 80% in 2023 alone and we shoulda-woulda-coulda. But in reality we all have different financial goals, different timelines till retirement, different risk tolerances. Trying to match someone else’s investments assumes we are the same. That person might be more way knowledgeable about bio-tech or the banking sector, or be half your age and so can afford to take more big swings. Your portfolio will develop and diversify naturally over time to reflect your interests, your experience, your ability to handle risk and volatility and so on. Get comfortable with that.<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVdYTTehkn0YZRwbpPrsi87zJIl6R9yfSbSW2pUBmrmJXhXWI9SJEvbcgi8F1lSRvdSc9SqsL3OzyvsklEIhdxf01Otz9xk4n7340bKMkaUQ7wplaJ4Bs_ZeywagLsMDsm5SS46dr7cOlAIjSZSwgL3e34HOhU3OOvtJqMISGeOwu2JB8WIMgjQ0WPRDg/s1023/Stocks%201775-present.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="765" data-original-width="1023" height="238" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVdYTTehkn0YZRwbpPrsi87zJIl6R9yfSbSW2pUBmrmJXhXWI9SJEvbcgi8F1lSRvdSc9SqsL3OzyvsklEIhdxf01Otz9xk4n7340bKMkaUQ7wplaJ4Bs_ZeywagLsMDsm5SS46dr7cOlAIjSZSwgL3e34HOhU3OOvtJqMISGeOwu2JB8WIMgjQ0WPRDg/w320-h238/Stocks%201775-present.jpg" title="Entire stock market, 1775-2014" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Entire stock market, 1775-2014<br /></span></td></tr></tbody></table></span><br style="font-family: Calibri, sans-serif; font-size: 14.666667px;" /><p class="MsoNormal" style="text-align: left;"><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: "Arial",sans-serif; mso-fareast-font-family: Arial;"><br /></span></b></p><p class="MsoNormal" style="text-align: left;"><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: "Arial",sans-serif; mso-fareast-font-family: Arial;">3.<span style="font: 7.0pt "Times New Roman";"> </span></span></b><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">Always be a buyer</span></b><br /><span style="font-family: Arial, sans-serif; font-size: 11pt;">I get asked all the time what I think the market will do next month, or next year.</span><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><i style="font-family: Arial, sans-serif; font-size: 11pt;">When do you think the Fed will cut interest rates? Are we heading into a recession? </i><span style="font-family: Arial, sans-serif; font-size: 11pt;">I respond with the truth (</span><i style="font-family: Arial, sans-serif; font-size: 11pt;">I have absolutely no idea</i><span style="font-family: Arial, sans-serif; font-size: 11pt;">) and then by asking why they want to know. It’s nearly always because they want to buy shares of something and don’t know if it’s the right time. But here’s the trick:</span><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><i style="font-family: Arial, sans-serif; font-size: 11pt;">it’s always the right time</i><span style="font-family: Arial, sans-serif; font-size: 11pt;">. Sure, don’t buy shares of a business that the financial news says is in dire straits— such as Boeing, AMC Theaters, Rivian at the time I write this. But in general, if you don’t need the cash for a few years, be a buyer. Whatever happens next quarter or next year, the long term trend in the markets is always upward.<br /></span><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><br /><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: "Arial",sans-serif; mso-fareast-font-family: Arial;">4.<span style="font: 7.0pt "Times New Roman";"> </span></span></b><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">Do without</span></b><br /><span style="font-family: Arial, sans-serif; font-size: 11pt;"><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyXOmxwCBVcRWFaCzg98nVfbdUxcblhkmxdotPVTZRQKM6s4BlcgW_1-Uat3Coz_ZZRsw7V-UNnVeWWxxqEEpfQZ0zg116jSp1mC8qsPxhdWiUooGuIVW6_spOG40QMsFk18dQIYjWPoMUXntJ-L9BKxZE0QUpshFY4T0u82pD_Fd6BQwf4kVAOkcDpFs/s318/no+BMW+Logo-1846773441.JPG" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="318" data-original-width="318" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyXOmxwCBVcRWFaCzg98nVfbdUxcblhkmxdotPVTZRQKM6s4BlcgW_1-Uat3Coz_ZZRsw7V-UNnVeWWxxqEEpfQZ0zg116jSp1mC8qsPxhdWiUooGuIVW6_spOG40QMsFk18dQIYjWPoMUXntJ-L9BKxZE0QUpshFY4T0u82pD_Fd6BQwf4kVAOkcDpFs/w200-h200/no+BMW+Logo-1846773441.JPG" width="200" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"></td></tr></tbody></table>In order to invest successfully over the long haul, you need first to have the capital with which to buy those investments. You need to cut up that third credit card, stay away from the outlet mall or the electronics sale. Focus on what you want your life to be like in the future. Don’t fret too much about that daily cappuccino habit, but no, you really don’t need a BMW or a Rolex when you’re 25. What you invest thoughtfully today instead of spending on yourself will grow and compound over the years and the decades and be worth 10x, 100x, 1000x in your middle age. Those investments made when you’re young could one day enable you to fund a college education for your niece or to retire and travel in your 50s. Admittedly, this is blue-square intermediate difficulty.</span><br /><br /><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: "Arial",sans-serif; mso-fareast-font-family: Arial;">5.<span style="font: 7.0pt "Times New Roman";"> </span></span></b><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">Be patient</span></b><br /><span style="font-family: Arial, sans-serif; font-size: 11pt;">Corollary to the above: this all takes time. A tiny percentage of people get rich quick— tech entrepreneurs, basketball phenoms, pop stars (harder to</span><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><i style="font-family: Arial, sans-serif; font-size: 11pt;">stay</i><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><span style="font-family: Arial, sans-serif; font-size: 11pt;">rich). The rest of us have to take the slow train. But the slow train is available to anyone, requires only a little understanding and preparation, doesn’t require Lebron’s jump shot or Van Halen’s guitar skills. It’s just slow. So be patient. Make investing a habit— if your work offers automatic paycheck-subtracted IRA investing or better yet, matching deposits, grab that with both hands at least until you can do it without prompting. This is a long process that will absolutely pay off decades from now. Difficulty: black-diamond.</span><br /><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><br /><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: "Arial",sans-serif; mso-fareast-font-family: Arial;">6.<span style="font: 7.0pt "Times New Roman";"> </span></span></b><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">Manage panic</span></b><br /><span style="font-family: Arial, sans-serif; font-size: 11pt;"></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjip6JgjWkFMUgIwCXLRs8cSDZzRiIRj-6L3hwc0j1T4kCWPPuYmZLbt4UjUFv4FDaTZGfm-t5ujq8ZBM9yshGpcTUVRVVMFbirrKpfhAAxOoqwMSNfnYmmNQkcqn5YDkz0KOWK5E2XoE6yrOdYqfUXCsqrlXNK_yrtHKaaXEBQKoPVSUiZtoUZND4aBmU/s683/netflix-office.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="574" data-original-width="683" height="231" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjip6JgjWkFMUgIwCXLRs8cSDZzRiIRj-6L3hwc0j1T4kCWPPuYmZLbt4UjUFv4FDaTZGfm-t5ujq8ZBM9yshGpcTUVRVVMFbirrKpfhAAxOoqwMSNfnYmmNQkcqn5YDkz0KOWK5E2XoE6yrOdYqfUXCsqrlXNK_yrtHKaaXEBQKoPVSUiZtoUZND4aBmU/w275-h231/netflix-office.jpg" width="275" /></a></div><span style="font-family: arial;">What happens often is someone has developed a strong investing habit, starts putting the money to work early and continues to build the portfolio as their income grows. But then there’s a recession and the accompanying market pullback. Stocks do fall, and sometimes they fall hard. Your job is to<span style="font-size: 11pt;"> </span><i style="font-size: 11pt;">not cave to fear</i><span style="font-size: 11pt;">. The reason stocks grow faster than most other asset classes is because they are more volatile. A successful investor has to absorb those inevitable drops and not sell out. Look at Netflix in late 2021 when we were still in the throes of the pandemic and many of us were watching too much TV. The stock hit $690 on October 25. But exactly six months later, on April 25 2022, the stock was trading at $190, a nearly 75% drop. It wasn’t just Netflix, it was most of the tech sector. Millions of investors were bailing out as it got worse and worse. Now, a little over a year and a half later, Netflix hasn’t recovered those delirious highs but it’s back up to $474 a share— 2.5x from the 2022 bottom. Investors who refused to sell didn’t have to do anything to get out of that hole except hang on! Difficulty: double black-diamond/experts only, at times even for the most seasoned of us. You have to have ice in your veins but this is a skill worth learning.</span></span><br /><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><div><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: "Arial",sans-serif; mso-fareast-font-family: Arial;">7.<span style="font: 7.0pt "Times New Roman";"> </span></span></b><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">Don’t be stupid</span></b><div><span style="font-family: Arial, sans-serif; font-size: 11pt;">So much of successful investing comes down to just not making dumb mistakes. Many of these you already know: Don’t wait to start putting money away. Don’t put all your eggs in one basket. Don’t lend to friends and family (</span><i style="font-family: Arial, sans-serif; font-size: 11pt;">Give </i><span style="font-family: Arial, sans-serif; font-size: 11pt;">money, if you want to help. Better for your relationships not to expect if back). Don’t buy a lot of stuff which depreciates— cars, TVs, furniture, clothing. Don’t be in a big hurry, and don’t fall for the pressure tactics. Don’t sell into a market panic. And if it sounds too good to be true ...</span><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><br /><b style="font-size: 11pt;"><span style="font-family: Arial, sans-serif;"> </span></b><div><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: "Arial",sans-serif; mso-fareast-font-family: Arial;">8.<span style="font: 7.0pt "Times New Roman";"> </span></span></b><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">Buy what you know</span></b></div><div><span style="font-family: Arial, sans-serif; font-size: 11pt;">This is the same advice they give to aspiring writers. Start with your own experience, your own interests. Computer nerd? Look at software companies and network security and hardware manufacturers. Sports fan? Look at the betting businesses, makers of fan apparel, broadcasters. It is much easier to know and understand what matters in the news about your investment if you fully understand that business. You’ll know what it means to the company if they can’t find enough good new hires, or if there’s a competitor with a new technology or they’re facing regulation overseas. With enough exposure to reports about the business and the ups and downs of that business, you’ll grasp what should constitute real concern for you and what shouldn’t.</span><br /><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><br /><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: "Arial",sans-serif; mso-fareast-font-family: Arial;">9.<span style="font: 7.0pt "Times New Roman";"> </span></span></b><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: Arial, sans-serif;">Separate news from noise</span></b><div><span style="font-family: Arial, sans-serif; font-size: 11pt;">When you own shares of a company, the overwhelming majority of what’s happening in the market, or on TV, or in the newspaper, or with quarterly earnings reports …</span><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><i style="font-family: Arial, sans-serif; font-size: 11pt;">does not matter.</i><span style="font-family: Arial, sans-serif; font-size: 11pt;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgf1P0k-FPfMv7RQ28V2wXRy4FuMYZ8qUSqdjpmqp8jdqVeawhEg_SVp99kmos8_l8QLHzihLSDf9w0BGGc2338Y1v0crJYhltrx3uTczeVOhIlaVpFV91pItD8ursSDhaVtMMPjGVlzpKNvrK5LXpIdLdv6663vqVYbwi4c-MpBKbtXmj5EquSad6nMpQ/s638/MadMoney.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="484" data-original-width="638" height="172" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgf1P0k-FPfMv7RQ28V2wXRy4FuMYZ8qUSqdjpmqp8jdqVeawhEg_SVp99kmos8_l8QLHzihLSDf9w0BGGc2338Y1v0crJYhltrx3uTczeVOhIlaVpFV91pItD8ursSDhaVtMMPjGVlzpKNvrK5LXpIdLdv6663vqVYbwi4c-MpBKbtXmj5EquSad6nMpQ/w226-h172/MadMoney.jpg" width="226" /></a></div>You don’t care that the Wall Street Journal is predicting a market decline. You don’t care that Barclay’s just ‘downgraded’ the stock. You don’t care that Mad Money’s Jim Cramer says to sell. You don’t care that a big, wealthy business is expanding into the same industry. You don’t care that earnings came in a little under analyst expectations. All you care about is that your business is healthy and well-run. That it offers great products and has a deep competitive moat. 98% or more of the stuff you read or hear about every day is just noise and will not affect your shares in the long run. Maybe a piece of news creates a little bump your company will have to endure, but it will likely pass. The media makes money by getting and holding your attention. They do that with shock, danger, fear, hand-wringing, and warnings. Stay focused on your invested businesses. Forget what that yo-yo said, and think for yourself: will it affect the success of the company a year or two from now? Probably not.</span><b style="font-size: 11pt;"><span style="font-family: Arial, sans-serif;"> </span></b></div><div><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: "Arial",sans-serif; mso-fareast-font-family: Arial;"><br /></span></b></div><div><b style="font-size: 11pt; text-indent: -0.25in;"><span style="font-family: "Arial",sans-serif; mso-fareast-font-family: Arial;">10.<span style="font: 7.0pt "Times New Roman";"> </span></span></b><b style="text-indent: -0.25in;"><span style="font-family: Arial, sans-serif; font-size: 11pt;">Sell only for one of the Four Reasons</span></b><div><span style="font-family: Arial, sans-serif; font-size: 11pt;">I’ve covered this at length in a recent post, so I won’t belabor it here. Just know that when you’re a buy-and-hold investor, there’s no such thing as ‘the top.’ Who imagined 20 years ago that Apple, in 2003 a maker of unpopular computers and a clever new MP3 player, would be the most valuable company on the planet? How many people sold after a few years of stellar growth thinking,</span><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><i style="font-family: Arial, sans-serif; font-size: 11pt;">How much higher can it go?</i><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><span style="font-family: Arial, sans-serif; font-size: 11pt;">How many sold in 2011 when Apple founder and tech icon Steve Jobs died, thinking,</span><span style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><i style="font-family: Arial, sans-serif; font-size: 11pt;">That’s the end of an era, it can only drop from here. </i><span style="font-family: Arial, sans-serif; font-size: 11pt;">(Since 2011 by the way, Apple is up over 1,200%). If you’re going to sell, have a very very good reason. Read more about my Four Reasons</span><a href="https://driftingtofifty.blogspot.com/2023/12/year-end-portfolio-management.html" style="font-family: Arial, sans-serif; font-size: 11pt;"> here</a><span style="font-family: Arial, sans-serif; font-size: 11pt;">.</span><p></p><style class="WebKit-mso-list-quirks-style">
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</style></div></div></div></div></div>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-41691973781670418672023-12-19T15:05:00.000-08:002023-12-20T14:00:39.199-08:00Wintry Efficiency<div><span style="font-family: arial; font-size: medium;">Every year about this time, my family and I sit down and decide our annual giving plan: how much can we afford to donate this year, and to which charities will we give? When the kids were small we told them what we were doing so they’d appreciate their good fortune, that most people don’t have what we have and many simply don’t have enough, and that these folks depend in part on people like us to help. As the kids got older they found causes of their own— spinal injury research, protecting dolphins and tigers, addressing climate change— and we encouraged them by donating in their names to those as well. </span></div><div><span style="font-family: arial; font-size: medium;"><br /></span><span style="clear: left; float: left; font-size: medium; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1302" data-original-width="1154" height="293" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6GnepP4NiS0KtJg3UTn78ipon5kYug09h0tLhgBRZ8ZVsU2Rt1O3H3M0jAEJsF5US1bM4ltrTYSdSC60mqwT9LitfKTKx0M0jv7PVN5lhb2fDo5gXqWaWuGoTElJjgszVypTpcrYJcFzHygZf55Z4AO5iUyNyfRvnsCsnq9T5OHJCealltYRquwFhTEs/w260-h293/Screenshot%202023-12-19%20at%202.46.15%20PM.jpg" width="260" /></span></div><div><span style="font-size: medium;"><span style="font-family: arial;">When most people give to a non-profit, for the sake of simplicity they write a check or just put the donation on a credit card. But did you know that many non-profits, particularly larger ones with more healthy and updated infrastructure, accept gifts of stock directly? </span></span></div><div><span style="font-family: arial; font-size: medium;"><br /></span><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6GnepP4NiS0KtJg3UTn78ipon5kYug09h0tLhgBRZ8ZVsU2Rt1O3H3M0jAEJsF5US1bM4ltrTYSdSC60mqwT9LitfKTKx0M0jv7PVN5lhb2fDo5gXqWaWuGoTElJjgszVypTpcrYJcFzHygZf55Z4AO5iUyNyfRvnsCsnq9T5OHJCealltYRquwFhTEs/s1302/Screenshot%202023-12-19%20at%202.46.15%20PM.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"></a></div><div><span style="font-size: medium;"><span style="font-family: arial;">Sounds weird and </span><span style="font-family: arial;">complicated; what's the point? If you sell a stock during the year which is worth more than you paid, you’ll be on the hook for capital gains taxes on that sale. Sure, you can then use the proceeds from that sale for charitable giving. But you will have paid capital gains tax on investment dollars to be given away, making your gift </span><a href="https://www.investopedia.com/articles/personal-finance/041315/tips-charitable-contributions-limits-and-taxes.asp" style="color: #954f72; font-family: arial;">that much more costly</a><span style="font-family: arial;">. And you can write off the dollar value of the charitable gift itself, but not for the difference between that and the value of the sold shares.</span></span></div><div><span style="font-size: medium;"><span style="font-family: arial;"> <br /></span><span style="font-family: arial;">If instead you donate appreciated stock shares directly, you’ll pay no gains tax (you didn’t sell it, so you never realized the gain) and you can deduct the entire value of that stock gift at the time you gave it from your taxable income. In other words, depending on your gains tax rate, most of us would save 15-20% right there, <i>plus</i> the charity gets a gift of larger total value. Then the non-profit can choose to hold those stock shares for future gains, or sell it themselves for the cash. Read more details <a href="https://www.charitynavigator.org/donor-basics/other-ways-to-give/donating-stocks/" style="color: #954f72;">here</a>.<br /></span><span style="font-family: arial;"> <br /></span><span style="font-family: arial;">So when you are researching the charities you like online, look for those that can accept donations of stock.. sometimes that option requires a little digging. Or locate a live chat or donation hotline and ask. <br /></span><span style="font-family: arial;"> <br /></span><span style="font-family: arial;">Give as much as you can. Do it efficiently for them as well as for you. And do it every year. </span></span></div><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><span face="-webkit-standard, serif"><span style="font-size: medium;"> </span></span></p>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-39083212893981110752023-12-03T17:19:00.000-08:002023-12-12T08:43:30.733-08:00Your Portfolio's Year-End Needs<h3 style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgF0Pn5pJh0uXbrG8lz3xxCN8rQCoD74c8_qXrUCwWEahn-qxuTWeRfTyKxoD0UtH1V83RIDcj4Mys9tfRMP_K8-bgh77eCKxEtYxnvxvc2fOUMkTPjjMmUTOodETsekKksrP1yX4949vgGKTIgFiCaIDnbmGehVCaK7EHYGcbYP7B0C-KFIe16EOvEq8o/s2309/GettyImages-801479766-4fa7b4a1dd1d49b799565a733c9fb29d-740131480.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1299" data-original-width="2309" height="281" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgF0Pn5pJh0uXbrG8lz3xxCN8rQCoD74c8_qXrUCwWEahn-qxuTWeRfTyKxoD0UtH1V83RIDcj4Mys9tfRMP_K8-bgh77eCKxEtYxnvxvc2fOUMkTPjjMmUTOodETsekKksrP1yX4949vgGKTIgFiCaIDnbmGehVCaK7EHYGcbYP7B0C-KFIe16EOvEq8o/w499-h281/GettyImages-801479766-4fa7b4a1dd1d49b799565a733c9fb29d-740131480.jpg" width="499" /></a></div><br /><br /></h3><h3 style="text-align: left;">Your Portfolio's Year-End Needs</h3><div><span style="font-family: helvetica;"><style class="WebKit-mso-list-quirks-style">
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</style></span><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="color: black;"><span style="font-family: helvetica;"><br /></span></span></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="color: black;"><span style="font-family: helvetica;">Today I want to discuss some of the things you want to do as the year comes to a close: specifically, cleaning up your portfolio.<br /><o:p> <br /></o:p>In the life of a patient and talented investor, a year is a short time. I say here repeatedly that you should be thinking at least 3-5 years out when adding a business (or an ETF, or a fund) to your portfolio. It often takes that long to see how that investment will turn out. <br /><o:p> <br /></o:p>But life moves faster than that. Things pan out differently than you expect. Sometimes your expenses rise rapidly— graduate school, medical bills, a dying car. Sometimes the market goes your way quickly, and suddenly you’re worried about having more dollars than you planned invested in a single business. And sometimes you own a stock which is not showing the value growth you’d expected, so you want to move some of your money around. The end of the year is a good time to comb through your portfolio looking for the obvious winners and losers, taking note of your performance and perhaps making some adjustments.<br /><o:p> <br /></o:p>As I’ve written about in a <a href="https://driftingtofifty.blogspot.com/2015/07/stock-investing-109-when-to-sell.html" style="color: #954f72; text-decoration: underline;"><span style="color: #954f72;">previous post</span></a>, there are exactly 4 reasons to sell a stock. </span></span></p><div class="separator" style="clear: both; text-align: center;"><span style="color: black;"></span></div><p></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><b style="font-family: helvetica; text-indent: -0.25in;"><span style="color: black;"><br /></span></b></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"></p><ol style="text-align: left;"><li><b style="font-family: helvetica; text-indent: -0.25in;"><span style="color: black;">Thesis incorrect</span></b><span style="font-family: helvetica; text-indent: -0.25in;">: you bought stock in a business expecting it to rise in the near future but even after a year or more, the investment has done poorly and now you want out.</span></li><li><b style="font-family: helvetica; text-indent: -0.25in;"><span style="color: black;">Rebalancing</span></b><span style="font-family: helvetica; text-indent: -0.25in;">: when one business in your portfolio has increased in value far more than others you hold and is now a larger share of your total investments than you’re comfortable with.</span></li><li><b style="font-family: helvetica; text-indent: -0.25in;"><span style="color: black;">Opportunity Cost</span></b><span style="font-family: helvetica; text-indent: -0.25in;">: the stock you own did well for a time but now has stopped growing, and you’d frankly like to place the money somewhere else: into a different stock, towards a child's tuition, on Taylor Swift tickets ..</span></li><li><b style="font-family: helvetica; text-indent: -0.25in;"><span style="color: black;">Loss Harvesting</span></b><span style="font-family: helvetica; text-indent: -0.25in;">: you have taxable income elsewhere— your paycheck, profits on stock sales, you sold your house, etc— and you want to unload a loser stock to offset those gains.</span></li></ol><span style="font-family: helvetica;">I’d like to spend a few minutes going through these one at a time and personalize them for you with my own recent experience.</span><p></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="color: black;"><o:p><span style="font-family: helvetica;"> </span></o:p></span></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><b style="font-family: helvetica;"><span style="color: black;">Thesis incorrect:</span></b><span style="font-family: helvetica;"> Personally I have always got one thesis or another that has proved or is proving wrong. Earlier this year I bought <a href="https://finance.yahoo.com/quote/PTON?p=PTON&.tsrc=fin-src" style="color: #954f72;">Peloton </a>because it was so beat up since the end of the pandemic— down 95% from its high— that I thought, with a high quality and addictive product, they’d find a way to recover. Or at least they’d get bought by Apple, Nike or some other giant. Instead, as of last week Peloton was down another 20% from my purchase. It was a small, “play money” position I held, so I simply gave up and dumped it. Some of the best things just make bad businesses.</span></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="color: black;"><o:p><span style="font-family: helvetica;"> </span></o:p></span></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfCgDDbI4tf7JYmpnFXNKp51j2mX2HVubbqx1EMs1XBfy-wge0xdVQjjQLP1vRyCcWKIVhxYmQVJhr7ymt51JmMzxtVPxH1VS0mrjRWBFzRnYmDJt9wzsVeKlx2-62rv3jXdw-YGk0zL_gWEic-_sEjvL6D_TsnXEeawhaNqBApx5iCoWWFicZFTprW4c/s960/2021-05-26T214315Z_2079011550_RC2XNN9RJRX5_RTRMADP_3_NVIDIA-RESULTS_1622622073211_1622622103599-4259693077.JPG" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="540" data-original-width="960" height="151" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfCgDDbI4tf7JYmpnFXNKp51j2mX2HVubbqx1EMs1XBfy-wge0xdVQjjQLP1vRyCcWKIVhxYmQVJhr7ymt51JmMzxtVPxH1VS0mrjRWBFzRnYmDJt9wzsVeKlx2-62rv3jXdw-YGk0zL_gWEic-_sEjvL6D_TsnXEeawhaNqBApx5iCoWWFicZFTprW4c/w269-h151/2021-05-26T214315Z_2079011550_RC2XNN9RJRX5_RTRMADP_3_NVIDIA-RESULTS_1622622073211_1622622103599-4259693077.JPG" width="269" /></a></div><span style="font-family: helvetica;"><b><span style="color: black;">Rebalancing:</span></b><span style="color: black;"> Once you been managing even a modest portfolio for a while, you will at some point own a business which, in a given year or two, wildly exceeds your expectations and certainly beats all your other holdings. Since January 1<sup>st</sup> of 2023, <a href="https://finance.yahoo.com/quote/NVDA?p=NVDA&.tsrc=fin-srch" style="color: #954f72; text-decoration: underline;">Nvidia </a>has climbed 220% as of this writing. That staggeringly fast growth is a bonanza for investors, of course. But it means <br />now I hold considerable risk that I was not exposed to at the start of the year. Just one critical employee departure, or a flawed high-value product, or a particularly stringent ban of one of their more advanced chips … then the stock drops and my portfolio takes a sizable hit. So I sold about 20% of my holdings in Nvidia (like Buffett says, “Be fearful when others are greedy”) and put that money to work elsewhere, keeping my upside— minus taxes— and diversifying towards safety.<o:p></o:p></span></span><p></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="color: black;"><o:p><span style="font-family: helvetica;"> </span></o:p></span></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="font-family: helvetica;"><b><span style="color: black;">Opportunity Cost: </span></b><span style="color: black;">I’ve owned <a href="https://finance.yahoo.com/quote/SBUX?p=SBUX&.tsrc=fin-src" style="color: #954f72; text-decoration: underline;">Starbucks</a> for years. In fact Starbucks was one of the first companies I ever invested in, the day it went public in 1992. I sold it 6 months later for a huge 90% gain— huge mistake is more like it as today it’s worth 30,000 times more than my 1992 purchase price. I got over it, buying again in the late 90s, and have held it since. But Starbucks’ growth has slowed as others in the US copied the business model, as the company has tried and failed at adjacent lines of revenue, as the CEO chair has rotated out of, and into, and back out of Howard Schultz’s hands. Today the company faces union issues in the US and Chinese competitors are coming fast. So I decided it was time to scale back my holdings and put those dollars into younger, more energized businesses. I sold down about 70% of my Starbucks stock over the past year. <o:p></o:p></span></span></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="color: black;"><o:p><span style="font-family: helvetica;"> </span></o:p></span></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="font-family: helvetica;"><b><span style="color: black;">Loss Harvesting</span></b><span style="color: black;">: As you know, of course, you are taxed on money you make. In the US federal tax code, the converse is also true: generally speaking, when you lose money trying to <i>make</i> money through investment, a portion of those losses can come back to you in the form of what are basically tax credits. <br /><o:p> <br /></o:p>Stay with me. Let’s say that you bought Stock A two years ago. It’s been climbing, and you’d like to pocket your initial investment to reduce single-company risk and reinvest elsewhere to diversify— no different than taking some winnings off the blackjack table. In our example let’s say you bought Stock A for $5,000 (your ‘<a href="https://www.investopedia.com/terms/c/costbasis.asp" style="color: #954f72; text-decoration: underline;">cost basis</a>’) and now it’s worth $10,000, a <a href="https://www.investopedia.com/articles/personal-finance/101515/comparing-longterm-vs-shortterm-capital-gain-tax-rates.asp" style="color: #954f72; text-decoration: underline;"><span style="color: #954f72;">‘capital gain’</span></a> of $5,000 if you sold all of it. If you sold $5,000 worth of Stock A, pocketing $2,500 profit in the process, the IRS would ultimately expect you to pay a 20% tax on your gain, or $500. <br /><o:p> </o:p></span></span><br /><span style="font-family: helvetica;"><span style="color: black;"></span></span></p><div style="text-align: left;"><span style="font-family: helvetica;"><span style="color: black;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2Ppz6M-EVG2NRWfIQO9ml3W5DeoEtRVXjr_djuYYaQLdecHm-kdl8WU361YCmglcIBtImNptePZwyKXr7AQY9v8T1L5tNMOx1b-X0ygRy6qAwcuCH0jMkHHfX7vEsLxL6pUuZ5yVs4p3ze1ncusXLGTYDgz-urT016F_tq6OGQvOBku35afCm3pygkOo/s2400/russia-zoom-call-sean-madden-924148111.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1600" data-original-width="2400" height="219" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2Ppz6M-EVG2NRWfIQO9ml3W5DeoEtRVXjr_djuYYaQLdecHm-kdl8WU361YCmglcIBtImNptePZwyKXr7AQY9v8T1L5tNMOx1b-X0ygRy6qAwcuCH0jMkHHfX7vEsLxL6pUuZ5yVs4p3ze1ncusXLGTYDgz-urT016F_tq6OGQvOBku35afCm3pygkOo/w330-h219/russia-zoom-call-sean-madden-924148111.jpg" width="330" /></a></span></span></div><span style="font-family: helvetica;"><span style="color: black;"><o:p></o:p>But let’s also say you additionally had Stock B, which since your purchase has dropped in value. Assume you purchased Stock B for $5,000 and now it’s worth $2,500. If you sell Stock B, your $2,500 <a href="https://www.investopedia.com/articles/investing/062713/capital-losses-and-tax.asp" style="color: #954f72; text-decoration: underline;"><span style="color: #954f72;">‘capital loss’</span></a> on Stock B will offset the $2,500 capital gain from Stock A. So, no tax due. And if your capital losses <i>exceed</i> your capital gains in a particular tax year, you can carry those losses forward into future years to offset gains there. <br /><o:p> <br /></o:p>In my case, I owned <a href="https://finance.yahoo.com/quote/ZM?p=ZM&.tsrc=fin-srch" style="color: #954f72; text-decoration: underline;">Zoom Video</a> which I bought in late 2021. For two years I watched as this capable business failed again and again to capitalize on its obvious popularity through the pandemic. They released fancy new products and features, but they had no obvious response to competition from heavyweights entering their business, and they ultimately lost value steadily. So late in 2023, in light of my Nvidia sale (a substantial taxable gain) I opted to harvest the Zoom loss by selling out completely. Those losses will largely offset my Nvidia gains this year. <o:p></o:p></span></span><p></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="color: black;"><o:p><span style="font-family: helvetica;"> </span></o:p></span></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="color: black;"><span style="font-family: helvetica;">Naturally there are several particulars involved in nailing this strategy, such has how long you owned Stock A (a year or more is optimal), how much you can offset in a given year, and a rule which says you can’t repurchase Stock B for at least 30 days or face a <a href="https://www.kiplinger.com/taxes/604947/stocks-and-wash-sale-rule" style="color: #954f72; text-decoration: underline;"><span style="color: #954f72;">wash sale</span></a> violation. But by and large, loss harvesting is a handy cost saver to ease your investing mishaps.<o:p></o:p><span style="font-family: helvetica;"></span></span></span></p><p class="MsoNormal" style="-webkit-text-stroke-width: 0px; caret-color: rgb(0, 0, 0); color: black; font-style: normal; font-variant-caps: normal; font-weight: 400; letter-spacing: normal; margin: 0in; text-align: start; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><span style="font-family: helvetica;"><span style="color: black;"><br />As always, </span><span style="background: repeat rgb(250, 251, 254); color: #3c3b3b;">reach out with questions. I'm always available at <a href="mailto:robin@zagaco.com">robin@zagaco.com</a>,<br /></span></span><span style="color: black; font-family: "Calisto MT", serif;"><br /></span></p></div><p style="text-align: left;"><style class="WebKit-mso-list-quirks-style">
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</style>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-56934420294012116032023-11-16T13:59:00.000-08:002023-11-16T13:59:41.865-08:00"Investing Behavioral Hacks" by Barry Ritholtz<p style="text-align: left;"><span style="font-family: inherit; font-size: medium;"><span style="caret-color: rgb(176, 176, 176);"><br /></span></span></p><p style="text-align: left;"><span style="background-color: white; box-sizing: border-box; caret-color: rgb(68, 68, 68); color: #444444; font-family: "Droid Serif", Georgia, serif; font-size: 16px;">I wanted to show you all a recent blog post from Barry Ritholtz. Barry is the co-founder and chief investment officer of Ritholtz Wealth Management. He is a profoundly sane and reasonable money manager, a trusted financial journalist and blogger, and respected financial expert. He also manages to explain modern investing and business in understandable terms. </span></p><p style="text-align: left;"><span style="background-color: white; box-sizing: border-box; caret-color: rgb(68, 68, 68); color: #444444; font-family: "Droid Serif", Georgia, serif; font-size: 16px;">I don't agree with everything he says here (I do love to pick stocks and have more of my assets in those individual businesses than I do in ETFs— but that's not the best strategy for most folks), but I do agree with the following: <b>Behavioral management may be the single most important aspect of successful investing</b>. No matter what assets you hold, if you can avoid selling in a panic each time you see your holdings drop beyond a comfortable level, you'll likely be okay over time. </span></p><p style="text-align: left;"><span style="background-color: white; box-sizing: border-box; caret-color: rgb(68, 68, 68); color: #444444; font-family: "Droid Serif", Georgia, serif; font-size: 16px;">a link to his post is here, and I've reprinted the text below.</span></p><p style="text-align: left;"><a href="https://ritholtz.com/2023/11/investing-behavioral-hacks/">https://ritholtz.com/2023/11/investing-behavioral-hacks/</a></p><p style="text-align: left;"><br /></p><span><a name='more'></a></span><h2 style="text-align: left;">Investing Behavioral Hacks </h2><p style="text-align: left;">by Barry Ritholtz</p><p style="text-align: left;"><span style="font-family: inherit; font-size: medium;"><span style="caret-color: rgb(176, 176, 176);">Markets screamed higher yesterday after a benign</span><span style="caret-color: rgb(176, 176, 176);"> </span><a data-reader-unique-id="7" href="https://www.bls.gov/cpi/" rel="noopener" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-decoration: none;" target="_blank">CPI report</a><span style="caret-color: rgb(176, 176, 176);"> showed a 0.0% monthly price increase and inflation falling to 3.2% year over year. After a big gap opening, latecomers piled in; many had been sitting on the sidelines following a challenging 2022, while others got panicked out during the 10% October drawdown. It was a classic fear-driven error, a combination of bad market timing and poor impulse control.</span></span></p><p data-reader-unique-id="8" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">Following the <a data-reader-unique-id="9" href="https://ritholtz.com/2023/11/navigating-financial-disasters-2/" rel="noopener" style="max-width: 100%; text-decoration: none;" target="_blank">presentation I gave</a> on <a data-reader-unique-id="10" href="https://ritholtz.com/2023/10/presentation-navigating-financial-disasters/" rel="noopener" style="max-width: 100%; text-decoration: none;" target="_blank">navigating financial disasters</a>, I spoke with Jeff Hirsch of Stock Traders Almanac (<a data-reader-unique-id="11" href="https://youtu.be/38H4ehTxCVM?feature=shared&t=495" rel="noopener" style="max-width: 100%; text-decoration: none;" target="_blank">video here</a>). During our Q&A, he asked if I hated market timing and speculation. My answer surprised him: “<em data-reader-unique-id="12" style="max-width: 100%;">I love speculation, adore market timing, and enjoy stock picking</em>.”</span></p><p data-reader-unique-id="13" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">The problem is those behaviors are so destructive to a portfolio. Merely telling people NOT to do those things is ineffective.<sup data-reader-unique-id="14" style="line-height: 1; max-width: 100%;">1</sup> We ignore the reality of human behavior, including the need for some thrills and excitement, at the peril of our portfolios.</span></p><p data-reader-unique-id="15" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">Instead, we can deploy small hacks to thwart our own <a data-reader-unique-id="16" href="https://ritholtz.com/category/behavioral-finance-psychology/" rel="noopener" style="max-width: 100%; text-decoration: none;" target="_blank">worst instincts and behaviors</a>; by making small changes in your outlook and investment process, you can channel these behaviors into less destructive outlets. (Note: We deploy many of these solutions at <a data-reader-unique-id="17" href="http://ritholtzwealth.com/" rel="noopener" style="max-width: 100%; text-decoration: none;" target="_blank">RWM</a> that take advantage of well-established principles of behavioral economics.)</span></p><p data-reader-unique-id="18" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">Here are a few small but effective hacks you can try at home:</span></p><p data-reader-unique-id="19" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">–<strong data-reader-unique-id="20" style="max-width: 100%;"><u data-reader-unique-id="21" style="max-width: 100%;">Recognize Your Behavioral Risks</u></strong>: Start with the basic understanding that almost no one consistently beats the market net of costs and expenses; that compounding works best when it’s left uninterrupted; and that nobody knows what the future will bring. Last, recognize that markets go up and down.</span></p><p data-reader-unique-id="22" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">Understanding these basics will at least give you some guidance as to when your behavior is putting your assets at risk.</span></p><p data-reader-unique-id="23" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">–<strong data-reader-unique-id="24" style="max-width: 100%;"><u data-reader-unique-id="25" style="max-width: 100%;">Understand</u></strong><strong data-reader-unique-id="26" style="max-width: 100%;"><u data-reader-unique-id="27" style="max-width: 100%;"> the Basics</u></strong>: Investing is simple but hard: Build a core portfolio of low-cost index ETFs; diversify globally; rebalance once a year. Manage all of the above toward your financial goals and plan.</span></p><p data-reader-unique-id="28" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">That’s the simple part; the hard part is sticking with it. (Hopefully, these hacks will help).</span></p><p data-reader-unique-id="29" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">–<strong data-reader-unique-id="30" style="max-width: 100%;"><u data-reader-unique-id="31" style="max-width: 100%;">Use a Core & Satellite Approach</u></strong>: Think of your core portfolio as a Christmas tree and any non-core satellite investments as the ornaments you hang on that tree. Meaning, the core of your portfolio should be 70 to 80% of that simple ETF portfolio described above.</span></p><p data-reader-unique-id="32" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">The Satellites are whatever <em data-reader-unique-id="33" style="max-width: 100%;">personal stink</em> you wanna decorate that tree with: Maybe you’re a fan of venture capital or private equity; perhaps you think India is the next great economic powerhouse; AI? Sure, whatever, why not…</span></p><p data-reader-unique-id="34" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">It really doesn’t matter what the satellites are so long as it forces you to leave your core alone long-term.<sup data-reader-unique-id="35" style="line-height: 1; max-width: 100%;">2</sup></span></p><p data-reader-unique-id="36" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">–<strong data-reader-unique-id="37" style="max-width: 100%;"><u data-reader-unique-id="38" style="max-width: 100%;">Cowboy Account</u></strong>: Set up a separate trading account with a few percent of your liquid net worth (no more than 5%). Use it for <em data-reader-unique-id="39" style="max-width: 100%;">whatever degenerate speculation</em> you want: Market timing, stock picking, option trading, Crypto, whatever. If it works out — <em data-reader-unique-id="40" style="max-width: 100%;">great</em>! If it goes to $0, <em data-reader-unique-id="41" style="max-width: 100%;">oh, well</em>! It’s only a few percent and doesn’t affect your financial plan or your standard of living.</span></p><p data-reader-unique-id="42" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">Just so long as it scratches your junkie itch (<em data-reader-unique-id="43" style="max-width: 100%;">you know you are a degenerate junkie gambler, right? We all are!</em>) and it stops you from messing with your primary portfolio.</span></p><p data-reader-unique-id="44" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">--</span></p><p data-reader-unique-id="45" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: large;">To learn more about managing behavior in the markets, listen to </span><a data-reader-unique-id="48" href="https://ritholtz.com/2019/09/mib-psychologists-behavioral-economists/" rel="noopener" style="font-family: inherit; max-width: 100%; text-decoration: none;" target="_blank">these podcasts</a><span style="font-family: inherit; font-size: large;"> with various Behavioral Economics & Psychology professors and/or read all of these discussions on </span><a data-reader-unique-id="49" href="https://ritholtz.com/category/behavioral-finance-psychology/" rel="noopener" style="font-family: inherit; max-width: 100%; text-decoration: none;" target="_blank">behavioral finance</a><span style="font-family: inherit; font-size: large;"> and </span><a data-reader-unique-id="50" href="https://ritholtz.com/category/cognitive-foibles/" rel="noopener" style="font-family: inherit; max-width: 100%; text-decoration: none;" target="_blank">cognitive errors</a><span style="font-family: inherit; font-size: large;">.</span></p><p data-reader-unique-id="53" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;"><em data-reader-unique-id="54" style="max-width: 100%;">Previously</em>:<br data-reader-unique-id="55" style="max-width: 100%;" /></span></p><p><span style="font-family: inherit; font-size: medium;"><a data-reader-unique-id="56" href="https://ritholtz.com/2023/07/how-to-get-rich-in-the-markets/" style="max-width: 100%; text-decoration: none;">How to Get Rich in the Markets</a> (July 17, 2023)</span></p><p></p><p data-reader-unique-id="57" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="color: black; font-family: inherit; font-size: medium;"><a data-reader-unique-id="58" href="https://ritholtz.com/2023/01/simple-but-hard/" style="max-width: 100%; text-decoration: none;">Simple, But Hard</a> (January 30, 2023)</span></p><p data-reader-unique-id="59" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="color: black; font-family: inherit; font-size: medium;"><a data-reader-unique-id="60" href="https://ritholtz.com/2023/03/how-many-bear-markets-have-you-lived-through/" style="max-width: 100%; text-decoration: none;">How Many Bear Markets Have You Lived Through?</a> (March 3, 2023)</span></p><p data-reader-unique-id="61" style="caret-color: rgb(176, 176, 176); max-width: 100%; text-align: left;"><span style="font-family: inherit; font-size: medium;">How to Use Behavioral Finance in Asset Management: <a data-reader-unique-id="62" href="https://ritholtz.com/2018/12/how-to-use-behavioral-finance-in-asset-management-part-i/" style="max-width: 100%; text-decoration: none;">Part I</a>, <a data-reader-unique-id="63" href="https://ritholtz.com/2018/12/how-to-use-behavioral-finance-in-asset-management-part-ii" style="max-width: 100%; text-decoration: none;">Part II</a>, <a data-reader-unique-id="64" href="https://ritholtz.com/2018/12/how-to-use-behavioral-finance-in-asset-management-part-iii" style="max-width: 100%; text-decoration: none;">Part III</a></span></p><br class="Apple-interchange-newline" />Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-74168066583372377972023-10-11T16:30:00.003-07:002023-10-11T17:32:25.495-07:00Like Banging Your Head Against the Wall<h3 style="text-align: left;"><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><b style="font-size: 11pt;"><span face="Arial, sans-serif" style="font-size: 12pt;">If you’re wondering why the stock market seems a little stuck</span></b></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span face="Arial, sans-serif" style="font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">Stocks are a mess. if you’re invested right now and you have been for months or years, you’re aware it’s been a time of stomach-churning volatility and lack of forward progress since July, what Wall Street calls ‘trading sideways.’ There is not one cause for all the market chaos, there are many. We are in an unprecedented time. <o:p></o:p></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">Foremost in the minds of US investors, we have yet to crush inflation. The primary tool used to tame inflation is interest rates, currently higher than they’ve been for over two decades. The Federal Reserve bank is considering yet another rate hike at the end of this year, increasing the likelihood of a recession next year (though clearly there’s been talk of a recession for over 18 months now). All of which will decrease corporate profits, which reduces the forward-looking value of stocks. <o:p></o:p></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">Then there’s the political and sociological polarization which has gripped the country. Liberals versus Conservatives versus MAGA Republicans (<i>not </i>the same as Conservatives!). Though most Americans have far more which unites them than which divides them, we are in a critical moment where that commonality seems astonishingly difficult to find.<o:p></o:p></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">Add to that the debt ceiling fight in Congress early last summer, which spooked investors both in and <i>out</i> of the US, as much of America’s debt is held overseas. Then there was the budget fight early this month among Congressional Republicans, nearly shuttering the US government, which even the Wall Street Journal commented was “part of a clever plan .. to cut off their own heads.” Add a Supreme Court with some clear ethical issues and vastly reduced public respect and trust. Add full-on corruption charges on the left for Senator Bob Menendez, on the right for Congressman George Santos, and on former president and likely Republican nominee Donald Trump. Add President Biden’s family practice of trading on the family name for favors and access. Americans right now are thoroughly disgusted by their government. <o:p></o:p></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">All of these events affect confidence, which affect the public markets. When things look sunny and positive, stock prices rise; when they look grim or scary, prices fall. <o:p></o:p></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">But we’re far from finished. Covid-19 deaths among the elderly and the unvaccinated continue. Auto workers, health care workers and half of Hollywood went on strike to demand better wages and more secure working conditions now and into the future (yay unions!), but at the cost of a work stoppage making TV and movies, reduced access to necessary medical services, and reduced car inventories and higher prices (boo unions!). Three of the world’s most powerful tech companies, the very <i>source</i> of what market growth we’ve seen this year, are being sued by the US government for anticompetitive behavior. AI recently got genuinely smart and a number of individuals we consider tech geniuses are now genuinely worried. The planet’s climate is warming, and even if you deny human causation, it’s hard to argue with the results: more global weather disasters of greater severity, warming oceans and dying coral, massive deadly fires, drought and searing temperatures with no clear solution.<o:p></o:p></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">You can just begin to see the fear investors have of stock values over the next couple of years. <o:p></o:p></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">Oh wait, I nearly forgot: in 2022, Russia moved to capture Ukraine, and after thousands dead and probably a hundred billion dollars in damage, that fight continues. China is threatening Taiwan and much of the South China Sea— most of which does <i>not</i> belong to them. India, the most populous country in the world, has gone full nationalist. Israel’s government went extreme right. Then last week Israel was brutally and mercilessly attacked by terrorist group Hamas, with backing from the government of Iran, and is now embroiled in a huge military conflict along the Gaza Strip.<o:p></o:p></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">The new world order is no longer America on top and everyone else in sliding order of importance. We are now a multipolar global ‘community,’ in which several heavy hitters vie for economic, technological and military dominance. Markets definitely do not like wars involving US allies or raging global fear.</span><span face="Arial, sans-serif" style="font-size: 12pt;"><o:p></o:p></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span face="Arial, sans-serif" style="font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">So investors are </span><span style="background: repeat white; color: #363636; font-family: "Amasis MT Pro", serif; font-size: 12pt;">wrestling with increasing economic pressures, worsening climate crises, incompetent government, a global trend toward bigotry and fascism and dysfunction, and full scale war on two continents. Serenity is down, sleeplessness is up.</span><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"><o:p></o:p></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">I told you all that to tell you this: the markets are a train wreck. There is no certainty. No predictability. No trust, no real comprehension. We watch or read the news to understand what’s going on, and to learn what to expect in the economy, in the housing market, in our schools, in our leadership, on the battlefield, on our streets, in our stock market. But still we can’t. If anything, given what’s going on we should be pleased with ‘trading sideways’ instead of panic selling across the board. We should be happy to have a few weeks of economic confidence and share buying, followed by a few weeks of fear and share selling. It’s Groundhog Day for investors. But it could be a lot worse.</span><span style="font-size: 12pt;"> </span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"><br /></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;"><br /></span></p><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">Remember that the fundamentals of investing haven’t changed. The American economy over the long term will grow. Successful businesses over the long term will appreciate. If you’re invested, stay the course. When you get a little cash, buy shares. Don’t know what to buy? Bet on the S&P. This might take a while, but all the weirdness eventually peters out. There is a lot of investor money right now in savings, in bonds, in homes which owners are not ready to sell. Eventually it gets freed up and it heads back into stocks. All those great businesses you own will bounce back. Investing is the slow, slow, s—l—o—w way to build wealth. Be patient. </span></p></h3><div><span style="color: white; font-family: "Amasis MT Pro", serif; font-size: 12pt;"> </span><p class="MsoNormal" style="-webkit-text-size-adjust: auto; font-family: Calibri, sans-serif; font-size: 11pt; font-weight: 400; margin: 0in;"><span style="font-family: "Amasis MT Pro", serif; font-size: 12pt;">Call me with questions or concerns. I love to talk shop.</span></p><p class="MsoNormal" style="margin: 0in;"></p><p></p></div>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-2481778863526897652023-06-14T13:17:00.000-07:002023-06-14T13:17:02.002-07:00"This is Why You Stay the Course" -Ben Carlson<p><span style="font-family: arial;">I am always talking in here about why it's so important to think <i>long</i>-long term, and to avoid selling into fear or panic. About holding your positions through the inevitable down cycles. About having the stomach for the nausea-inducing roller coaster of modern stock investing.</span></p><p><span style="font-family: arial;">So here, speaking clearly to that point, is a wonderful blog post by one of my favorite go-to analyst/advisors, Ben Carlson of Ritholz Wealth Management. Enjoy.</span></p><p><span style="font-family: arial;">Robin</span></p><p><span style="font-family: arial;"><br /></span></p><p><a href="https://awealthofcommonsense.com/2023/06/this-is-why-you-stay-the-course/"><span style="font-family: arial;">https://awealthofcommonsense.com/2023/06/this-is-why-you-stay-the-course/</span></a></p><p><span style="color: #4c4d50;"><span style="font-family: arial; font-size: large;">This is Why You Stay the Course</span></span></p><p><span style="color: #4c4d50; font-family: arial; font-size: 15px;">Posted</span><span style="color: #4c4d50; font-family: arial; font-size: 15px;"> </span><time class="updated" datetime="2023-06-13" pubdate="" style="box-sizing: border-box; color: #4c4d50; font-family: arial; font-size: 15px;">June 13, 2023</time><span style="color: #4c4d50; font-family: arial; font-size: 15px;"> </span><span style="color: #4c4d50; font-family: arial; font-size: 15px;">by</span><span style="color: #4c4d50; font-family: arial; font-size: 15px;"> </span><span class="author" style="box-sizing: border-box; color: #4c4d50; font-family: arial; font-size: 15px;"><a href="https://awealthofcommonsense.com/author/sodoi7/" rel="author" style="box-sizing: border-box; color: #d02330; text-decoration: none;" title="Posts by Ben Carlson">Ben Carlson</a></span></p><section class="entry-content clearfix" itemprop="articleBody" style="box-sizing: border-box; zoom: 1;"><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 0px;"><span style="font-family: arial;"><br /></span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 0px;"><span style="font-family: arial;">Last year was one of <a href="https://awealthofcommonsense.com/2023/01/2022-was-one-of-the-worst-years-ever-for-markets/" rel="noopener" style="box-sizing: border-box; color: #d02330; text-decoration: none;" target="_blank">the worst years ever for financial markets</a>.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Call it recency or loss aversion or some other <a href="https://awealthofcommonsense.com/2013/05/lessons-from-thinking-fast-and-slow/" rel="noopener" style="box-sizing: border-box; color: #d02330; text-decoration: none;" target="_blank">Daniel Kahneman</a> bias but for some reason, our brains are hard-wired to assume big losses will be followed by additional losses (just like we assume big gains will be followed by additional gains).<span style="box-sizing: border-box; font-size: 14px; line-height: 0; position: relative; top: -0.5em; vertical-align: baseline;">1</span></span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">The thing about big losses in the stock market is sometimes they <em style="box-sizing: border-box;">are </em>followed by big losses…but sometimes they’re followed by big gains.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Just look at every double-digit down year for the S&P 500 going back to 1928 along with the ensuing returns in the following year:</span></p><img alt="" class="aligncenter size-full wp-image-50041" decoding="async" height="393" sizes="(max-width: 358px) 100vw, 358px" src="https://awealthofcommonsense.com/wp-content/uploads/2023/06/Screenshot-2023-06-13-121039.png" srcset="https://awealthofcommonsense.com/wp-content/uploads/2023/06/Screenshot-2023-06-13-121039.png 358w, https://awealthofcommonsense.com/wp-content/uploads/2023/06/Screenshot-2023-06-13-121039-273x300.png 273w" style="border: 0px; box-sizing: border-box; clear: both; display: block; float: none; height: auto; margin: 0.75em auto; max-width: 100%;" width="358" /><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 0px;"><span style="font-family: arial;">Historically after a bad year you’re looking at feast or famine. You either got a huge rally or further soul-crushing losses.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">It was not a foregone conclusion that stocks would rally this year as much as they have — the S&P 500 is up almost 14% while the Nasdaq 100 has gained nearly 27% this year. It could have gotten worse if inflation stayed high or the Fed broke something or we went into a recession or some other risk came out of left field.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Regardless of the outcome, this is a good lesson in the power of staying the course as an investor. And I believe staying the course was the right move whether stocks cratered even more or took off like a rocket ship.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Why?</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">What’s the alternative? Guess what will happen next? Good luck with that.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Even the pros have no idea what will happen next in the market.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Heading into the year, <a href="https://www.tker.co/p/wall-street-2023-stock-market-outlook" rel="noopener" style="box-sizing: border-box; color: #d02330; text-decoration: none;" target="_blank">Sam Ro</a> published a list of S&P 500 year-end price targets from 16 of the biggest Wall Street firms:</span></p><img alt="" class="aligncenter size-full wp-image-50045" decoding="async" height="468" loading="lazy" sizes="(max-width: 300px) 100vw, 300px" src="https://awealthofcommonsense.com/wp-content/uploads/2023/06/Screenshot-2023-06-13-123414.png" srcset="https://awealthofcommonsense.com/wp-content/uploads/2023/06/Screenshot-2023-06-13-123414.png 300w, https://awealthofcommonsense.com/wp-content/uploads/2023/06/Screenshot-2023-06-13-123414-192x300.png 192w" style="border: 0px; box-sizing: border-box; clear: both; display: block; float: none; height: auto; margin: 0.75em auto; max-width: 100%;" width="300" /><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 0px;"><span style="font-family: arial;">The S&P 500 ended 2022 at around 3,840 so there were a handful of strategists who expected mild losses in 2023 while most were expecting mild gains.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">It makes sense that Wall Street was tepid coming into the year considering the stock market fell almost 20% in 2022.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">We’re only halfway through the year so it’s still a little early to offer a full report card for these predictions but the stock market has outperformed expectations based on where we sit today.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">As of this writing the S&P 500 is trading at roughly 4,370.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">So the stock market has already gone up more than any of these strategists, save for Deutsche Bank, predicted for the whole year.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">But they’re not waiting around to see if those original forecasts could come true. Now that stocks are up double-digits for the year many Wall Street strategists are revising their forecasts higher.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Wall Street strategists get pessimistic when stocks are falling and optimistic when stocks are rising. I don’t share this with you to poke fun at Wall Street.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">The point of this exercise is to prove how difficult it is to make predictions about the future, especially as it relates to short-term movements in the stock market.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">When stocks fall, our emotions make us think they will fall even further. And when stock rise, our emotions make us believe they are going to rise even more.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">This is why I’m such a big proponent of having an investment plan that you can stick with through a wide range of market and economic environments.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;"><strong style="box-sizing: border-box;">Staying the course</strong> <strong style="box-sizing: border-box;">means</strong> going against your own emotions at times.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;"><strong style="box-sizing: border-box;">Staying the course</strong> <strong style="box-sizing: border-box;">means</strong> thinking and acting for the long term even when it doesn’t feel right in the short-term.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;"><strong style="box-sizing: border-box;">Staying the course means</strong> preparing not predicting.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;"><strong style="box-sizing: border-box;">Staying the course means</strong> doing nothing when that’s what your plan calls for.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Unfortunately, doing nothing is hard work because markets are constantly tempting you to make changes to your portfolio.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">There’s an old parable about a locksmith who had a tough time picking locks when he was just a lowly apprentice learning on the job. He would have to use all sorts of tools and it took him a long time to open doors when people locked themselves out of their cars or homes. But people saw him sweating it out and the effort was evident so they tipped him quite well.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">But as he slowly but surely learned the tricks of the trade he was able to pick locks quicker which much less effort. The problem is his tips went down because he got people into their vehicles or houses much faster. He made it look too easy.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">There is a good investing lesson in this story.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Intelligent investors realize effort is often inversely related to results in the market. Just because you do more or try harder doesn’t guarantee better results. In fact, doing more is more often than not damaging to your investment performance.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Doing less or doing nothing at all most of the time is the right way forward for the majority of investors.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">This is why you stay the course.</span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;">Further Reading:<br style="box-sizing: border-box;" /><a href="https://awealthofcommonsense.com/2023/01/2022-was-one-of-the-worst-years-ever-for-markets/" rel="noopener" style="box-sizing: border-box; color: #d02330; text-decoration: none;" target="_blank">2022 Was One of the Worst Years Ever For Markets</a></span></p><p style="-webkit-hyphens: auto; box-sizing: border-box; margin: 1em 0px 0px;"><span style="font-family: arial;"><span style="box-sizing: border-box; font-size: 14px; line-height: 0; position: relative; top: -0.5em; vertical-align: baseline;">1</span>This is not all of us, of course. There are always going to be contrarians who go against the grain.</span></p><span style="font-family: arial;"> </span></section><footer class="article-footer" style="border-top-color: rgb(232, 236, 237); border-top-style: solid; border-top-width: 5px; box-sizing: border-box; margin-top: 2.5em; padding-top: 0.5em;"><div class="disclaimer" style="box-sizing: border-box; color: #bdc9cb; font-size: 0.9rem; line-height: 1.4em; margin-top: 2em;"><p></p></div><br class="Apple-interchange-newline" /></footer>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-25969097074309955472023-06-06T13:18:00.001-07:002023-06-09T13:19:13.260-07:00A Strange Time to Be an Investor<p><span style="font-family: arial;"><br /></span><span style="font-family: arial;">It certainly is a strange time to be an investor in the public markets. There is a lot going on, and much of that is fairly unprecedented, so its impact on the market is likewise difficult to predict.<br /> </span><span style="font-family: arial;"><br /></span><span style="font-family: arial;"><u>What I Know</u></span></p><p><span style="font-family: arial;">We are probably already in a recession, though it’s a strange one. We’re seeing strong corporate profits and a tight labor market. We have unusually flush consumers— thanks to pandemic economic stimulus— but they’re spending more on experiences like travel and dining out than they are on cars and clothing, and their collective debt is breaking records. We’ve got inflation, rising interest rates, collapsing banks. We are fighting a proxy war against Russia via Ukraine. We have ongoing diplomatic mayhem with China. There are the culture wars and the now normal political division and resulting semi-paralysis of Congress. Plus a Supreme Court potentially in moral decline, raging climate change, the long tail of Covid-19, and an impending election contest shaping up to be between the two oldest and whitest men ever to run for the job. Net result: a lot more uncertainty and huge volatility.</span></p><p><span style="font-family: arial;">The stock market is having a better time in 2023 than it did in 2022, but that’s mostly a result of massive AI (or AI-adjacent) companies and their collective impact on the markets. Many of those businesses are the ‘big tech’ firms you always hear about, so their performance has outsize impact on the returns of the broader market— the Nasdaq, the S&P 500, Russell 2000, etc. They’re carrying everyone’s water. If your portfolio is up this year, it’s likely because you own a couple of those individual companies, or you own comprehensive stock indexes.<br /> </span><span style="font-family: arial;"><br /></span><span style="font-family: arial;">All of which means that a huge number of the individual businesses you or I might own stock in are still seeing their share prices down from 2020 as a result of the big pullbacks in late 2021 and throughout 2022.<br /> </span><span style="font-family: arial;"><br /></span><span style="font-family: arial;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNMHr8XgBkk4n3AKDTDBmriKuYgb7wpFYPmQbKtPnofzqmUbwgUXY08G4fAZgo8qAFq2cvnOgNOA12usiYAwJ3c1DHBC3FN6BhBYw58VGHMyDSyO0lZ_R4tx3AY5rEWgBu_FJy0rLilsrKINJd3yLNBO6scUz6EiLMlV1fMyrgVvF-nS-odtMc9ZOC/s1280/1280-498832710-busy-man-working-at-home-1958447371.jpeg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNMHr8XgBkk4n3AKDTDBmriKuYgb7wpFYPmQbKtPnofzqmUbwgUXY08G4fAZgo8qAFq2cvnOgNOA12usiYAwJ3c1DHBC3FN6BhBYw58VGHMyDSyO0lZ_R4tx3AY5rEWgBu_FJy0rLilsrKINJd3yLNBO6scUz6EiLMlV1fMyrgVvF-nS-odtMc9ZOC/w266-h178/1280-498832710-busy-man-working-at-home-1958447371.jpeg" width="266" /></a>It also means that if you’re a stock picker like I am, your job is harder. You can’t simply choose businesses that have enormous market share or are promising an exciting new product or are flush with cash or have brought in talented new management. The businesses you choose also have to be able to thrive and grow in this market, and I for one have no idea how to see what’s coming next— never mind how that thing will affect my companies.</span></p><p><span style="font-family: arial;">Things may not get better from here; it is entirely possible we have not seen the bottom of the stock market yet. The 2020 stock market launched a scary and speedy fall at the same moment that Covid froze the economy. Everything stopped— work, school, bars and restaurants, travel, gyms, shopping. But in spite of the pandemic, markets bounced back quickly and went on to have a shockingly good year, showing sizable gains in many areas. Manufacturing and fulfillment (packaging and shipping millions upon millions of orders around the world) began to sputter late in 2020, and 2021 was a mixed bag. And as I said previously, 2022 was pretty awful for investors. Then 2023 opened with big spikes in oversold tech stocks, then spiked again, with ugly volatility, around AI. But with all the economic, political, legal and climate uncertainty, no one knows for sure what comes next. Ten minutes on the internet will introduce you to dozens of theories and warnings. Believe none of them.</span></p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtZiOWyXvZA7Wmhbhm0Q6dBFYXdhp53lNwnTRfGnRoErUrg-7iWOZkKTJABGlHyTCOeZFtYzh-Zkvrr7oHZJKZXkH-jx_RHI9tkVkM_1uATGpWIG_Rp_SAofYa_XkL64rzBgvHapEDD38CtFbXXEaT8qvx58l7G5592wSPbu2x_8L1hwoQaph6DgZW/s1000/panic-selling-3680720421.jpeg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtZiOWyXvZA7Wmhbhm0Q6dBFYXdhp53lNwnTRfGnRoErUrg-7iWOZkKTJABGlHyTCOeZFtYzh-Zkvrr7oHZJKZXkH-jx_RHI9tkVkM_1uATGpWIG_Rp_SAofYa_XkL64rzBgvHapEDD38CtFbXXEaT8qvx58l7G5592wSPbu2x_8L1hwoQaph6DgZW/w263-h174/panic-selling-3680720421.jpeg" /></a><span style="font-family: arial;">Nevertheless, there are also glimmers of light in the markets. As I mentioned above, the shares of a great number of excellent businesses remain below their 2-year high water mark. Even if we assume things got a little heady in those mid-2020 pandemic days and knock 20% off their then-value, plenty of companies look ready to climb again. Recession or no, there doesn’t appear to be anything structurally wrong with these businesses. So even if the overall market falls in the next 12 months, in theory these will do well in the longer term.<br /> </span><span style="font-family: arial;"><br /></span><span style="font-family: arial;"><u>What I Don’t Know</u></span></p><p><span style="font-family: arial;"><b>Where are those glimmers?</b> 100 stock analysts will give you 85 answers to what’s the next big growth story, or where the value is now. (10 will say <i>It’s all about AI now</i> and 5 will say <i>The whole thing’s going to crap! Sell!</i>)</span></p><p><span style="font-family: arial;"><b>How long will it take for the market overall to recover?</b> The short and unhelpful answer is, I don’t make projections of duration or price at all, ever— I’m terrible at it. The only slightly more helpful answer is it will depend on which corner of the market you’re talking about, what will happen with all those external-event unknowns. Some industries and businesses are already returning to normal, or better than normal, like travel, but many of those companies’ stock prices do not yet reflect that resurgence— most likely because investors are cautious and what they expect from the companies they buy has changed.</span></p><p><span style="font-family: arial;"><b>How impactful will the pandemic-era ‘meme-stock’ trend be going forward?</b> If you’ve been paying attention, you’ll know that multiple unlikely companies saw shocking share price rallies in the middle of the pandemic shutdowns. AMC Entertainment theaters, GameStop video game stores, Bed Bath and Beyond homewares stores (now in bankruptcy) and others all saw crazy price gains over the span of a few days for no obvious reason. Hertz car rental declared bankruptcy during the travel stoppage, and then its share price surged wildly. Ultimately it was a social-media driven movement of individuals who coordinated efforts to move a stock price. Gambling resulting from pandemic boredom? My hope is that the trend will wither as our lives re-normalize. However, multiple analyses now suggest that the recent collapses of Silicon Valley Bank and First Republic Bank, among others, is a result of a related— if reversed—dynamic. The possibility exists that the potential virality of social media has fundamentally changed some of the reasons markets move, and the suddenness with which they do it.</span></p><p><span style="font-family: arial;">What I want to end with is some specific takes on my own investing direction of late. I won’t call them recommendations because I lack the official certification to do that and stay out of hot water. But here are some things I’m thinking about:</span></p><p><span style="font-family: arial;"><b>Nvidia is too hot</b>. While I ‘m a fan of this chipmaker and have very much enjoyed its recent success, I also believe AI has become its own sort of mini-bubble. Nvidia is the poster child of the movement and is now way too expensive. I have already sold down about 15% of my holdings and will likely do so again if it continues its rampage.</span><span style="font-family: arial;"><br /></span><span style="font-family: arial;"></span></p><p><span style="font-family: arial;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhkrsM5liPnCIp11tCMTFZUN3UCnFaDau7NIqosIHWOJe-aUViy4ZhAtjHf7p0ttYX0JOVx3EIpmL5LsDY5wgg1CTMeKM4GeHmjWdezBnMETGxobOlotQxN-0vNMxmppbGkK_aKFSyhoRwmg3RZ5gkdVYzlUu0Y7XU1yKP6sA-9qNiAbHX_M0_vgZM3/s800/9a-tiny-house-airbnb-for-rent-in-washington-207971652.jpeg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhkrsM5liPnCIp11tCMTFZUN3UCnFaDau7NIqosIHWOJe-aUViy4ZhAtjHf7p0ttYX0JOVx3EIpmL5LsDY5wgg1CTMeKM4GeHmjWdezBnMETGxobOlotQxN-0vNMxmppbGkK_aKFSyhoRwmg3RZ5gkdVYzlUu0Y7XU1yKP6sA-9qNiAbHX_M0_vgZM3/w257-h192/9a-tiny-house-airbnb-for-rent-in-washington-207971652.jpeg" width="257" /></a><b>AirBnb will begin to surge post-summer</b>. Above I mentioned companies that are seeing a lot of business but whose share prices do not reflect that; AirBnb is a perfect example. I can’t see the growth of the travel industry taking place without this rental platform front and center. AirBnb now has more available rentals worldwide than all the rooms of several of the major hoteliers combined, with homier feel (Kitchens! Sitting rooms!), a lower consumer cost per square foot and— as they do not own their properties— a vastly less expensive business model.<br /> </span><span style="font-family: arial;"><br /></span><span style="font-family: arial;"><b>Shopify is the biggest online selling platform after Amazon</b>. But again the stock price does not reflect the size or scope of this business. If you’ve ever bought something online from a ‘direct-to-consumer‘ (D2C) business, based on a recommendation from a friend or resulting from an ad on social media, you’ve probably done it through a website and payment process provided via Shopify. And if you’re a new business owner looking for a place to host your goods on the internet, Shopify is your first stop.<br /> </span><span style="font-family: arial;"><br /></span><span style="font-family: arial;"><b>Moderna will change the way we treat disease</b>. This pandemic darling has seen wild share price swings in sync with the up and down level of demand (presold) for vaccinations. It might take time for markets to realize the potential of the company’s patented mRNA based vaccines, maybe even several years. But it will change medicine and that will ultimately be reflected in the price.<br /> </span><span style="font-family: arial;"><br /></span><span style="font-family: arial;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisqVEL7xls0TMOdnp9S3ABoX1zzAeck3lyXpkg5YF6aJ_KE5gWskHugJE8z8P2vVZA8G2Nr4I5IDlZA186MtP2-_QV7ynKnCfcJpLvuEUG0KaWjGtixbO08Wgbdb6Xf4Lep02ot6PPgMzVUi0nXFciiGrl44dPvC7ISk2kDc4lFOMcMfqxOF8TsUqT/s668/Capture-4-2561215973.png" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisqVEL7xls0TMOdnp9S3ABoX1zzAeck3lyXpkg5YF6aJ_KE5gWskHugJE8z8P2vVZA8G2Nr4I5IDlZA186MtP2-_QV7ynKnCfcJpLvuEUG0KaWjGtixbO08Wgbdb6Xf4Lep02ot6PPgMzVUi0nXFciiGrl44dPvC7ISk2kDc4lFOMcMfqxOF8TsUqT/w185-h143/Capture-4-2561215973.png" /></a><b>JP Morgan Chase will continue to grow</b> as it cleans up the mess that’s become of regional banking. The company is led by Jamie Dimon, a man so expert and so respected in financial circles that he’s often the first call for CEOs, members of Congress, Treasury officials, and presidents. JP Morgan is the literal definition of ‘too big to fail’, and it’s going to keep getting bigger— and richer.<br /> </span><span style="font-family: arial;"><br /></span><span style="font-family: arial;"><b>Disney is totally mispriced</b>. Disney’s share price has become too much a factor of its unprofitable streaming service, rather than its much larger sister businesses. Investors mistakenly believe Disney’s primary corporate competition comes from Netflix and Warner-Discovery, who operate entirely in a much narrower industry. It may be some time before the market remembers that the future of this company is not about its losses from streaming but about profits from Disney World guests, Disney (+ Marvel + Star Wars) movie fans and Disney Cruise passengers.<br /></span><span style="font-family: arial;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPRBz8jvbNZXqFdUPQsLAX32dAp_D3GNp327JoeNCt5Y0rKc0U7Rej6WoZGGxmtxFQrJMweKxYWPowvyMVBYNqmtqxIjjKVh_mv6R_dptmkqWi1Fs_obeGA1PZOwVoSITm7ex-LhbyzXbi-lzHUpTQwOaMbrDx3LB9CJIH8BEVjQ0O08bnlOA81W__/s1140/our-services-peloton-img-01-280521-2281235982.jpeg"><br /></a></span><span style="font-family: arial;"></span></p><div class="separator" style="clear: both; text-align: center;"><span style="font-family: arial;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiawjJDdH33gyfuDfdNF4GdlrM15YDNgLaEG9nKS5rZ4Er79w3fVzWqZqN9ksYfOZksrJW6W6pQUU6XlSrZlmWo0ZYjxEkrYw9uO0qnL0muU6qzWhqFpsEEyMA2wsauc8jPF36-a_wGMQtO7TH4TrWlr5RqeHPjm8jaV54jqlnonaa1vsNfwLAQQ0j2/s1140/our-services-peloton-img-01-280521-2281235982.jpeg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="1140" data-original-width="896" height="154" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiawjJDdH33gyfuDfdNF4GdlrM15YDNgLaEG9nKS5rZ4Er79w3fVzWqZqN9ksYfOZksrJW6W6pQUU6XlSrZlmWo0ZYjxEkrYw9uO0qnL0muU6qzWhqFpsEEyMA2wsauc8jPF36-a_wGMQtO7TH4TrWlr5RqeHPjm8jaV54jqlnonaa1vsNfwLAQQ0j2/w135-h154/our-services-peloton-img-01-280521-2281235982.jpeg" width="135" /></a></span></div><span style="font-family: arial;"><b>Peloton at this price is a long shot success story.</b> The fitness platform has been flailing since their mid-pandemic overexpansion, and the stock price is down about 95% from its December 2020 high. Yet most users still love the products and wouldn’t dream of giving up their bike and going back to some other workout. The bikes are good, the onscreen workout classes are first rate and the whole thing might actually be addictive. There is value here: either the company will turn it around or a buyer will step in… then again I’ve been saying that for quite a while.<br /></span><span style="font-family: arial;"><br /></span><p></p><p><span style="font-family: arial;">Thanks for reading! Also thank you for your belief that I’m worthy of your valuable time.</span></p><p><span style="font-family: arial;">As always, email with questions or ideas you want to kick around. I never tire of examining this stuff from different angles. And share this article with a friend. <br /> </span><span style="font-family: arial;"><br /></span><span style="font-family: arial;">Robin Rifkin<br /></span><span style="font-family: arial;">Zaga Investment Co<br /></span><span style="font-family: arial;">June 2023</span></p><div><br /><style class="WebKit-mso-list-quirks-style">
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</style></div>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-56351135371344672172022-09-07T08:42:00.044-07:002023-06-09T12:13:28.521-07:00The Best Sources of Investor Information<p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-family: arial; font-size: 11pt;">Markets are, as yet, unhealed from the devasting rout of 2022. News continues to be frustrating regarding inflation, the Russia-Ukraine war, computer chips and covid in China,</span><span style="font-family: arial; font-size: 11pt;"> </span><span style="font-family: arial; font-size: 11pt;">uncertain November elections, and the likelihood of recession. But rather than double-down (triple?) on my dreary prattle, I thought I would freshen the feed and give you something you might actually be able to use:</span><span style="font-family: arial; font-size: 11pt;"> </span><i style="font-family: arial; font-size: 11pt;">Homework! </i><span style="font-family: arial; font-size: 11pt;">Who doesn’t love homework?</span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;">Most folks who think they know what I do for a living assume I’m a financial analyst of some kind, as most stock market types we read about or see on TV are numbers people. They pore over balance sheets and income statements, they study charts and generate multi-page spreadsheets and create pivot tables (<i>still</i> don’t know what those are) to discern whether a particular stock will continue on the downslope or rise in the coming months. </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;">I do precious little of that. I really don’t study the numbers and I almost never create spreadsheets; if I looked primarily at the numbers I’d see only what happened last quarter, and what they hope will happen next quarter. Instead, I study the businesses: their brands, their product lines, their executives, their regulators, their challenges, their competitors. Are they coming out with a brilliant new service? Do they possess a significant competitive advantage— a wide ‘moat’? How loyal are their customers? Are they working through a reciprocal deal with another business? Are there more or less of their products on the street, or in the store? I’m trying to see around the corner and down the next block. I want to what will happen over the next 10 years. </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;">To do that I read a huge volume of business news, market news, economic news, political news, even pop culture news. I read reports and articles from analysts, the opinions of seasoned investor-columnists and the recommendations of financial consultants. I read business origin and growth stories, and profiles of founders and executives. I want to see that a business is thinking long term, as I am, and is increasingly dominant in its industry and against its competitors. </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;">But where do I find all this information? Here are my sources:</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"><br /></span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span><span style="font-family: arial; font-size: 11pt;"> </span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRdTfou1EX4nMXlvBKu9AbxAIGSai1HYjhwUuaYZ69X1d-Hj0YJuTU4orvdF0QYeISLtLM-IWewDDF4R0qRpbW9kXV6iyaM8u_1sG18lAGbQzeHSjO9X0CNtOJny72R15njEnnqwKJQkkb9DSOeQLgFneaw6FfugJIhq2bxSAyceSnvHvRBDxJjJzn/s500/The-Motley-Fool-3192816018.png" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="500" data-original-width="500" height="172" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRdTfou1EX4nMXlvBKu9AbxAIGSai1HYjhwUuaYZ69X1d-Hj0YJuTU4orvdF0QYeISLtLM-IWewDDF4R0qRpbW9kXV6iyaM8u_1sG18lAGbQzeHSjO9X0CNtOJny72R15njEnnqwKJQkkb9DSOeQLgFneaw6FfugJIhq2bxSAyceSnvHvRBDxJjJzn/w172-h172/The-Motley-Fool-3192816018.png" width="172" /></a></div><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"><a data-ogsc="" href="https://www.fool.com/" style="color: #0058b9;" title="https://www.fool.com/"><b>The Motley Fool</b></a> is a stock and financial advisory based in Alexandria, VA. They are not a brokerage or money manager; instead they will guide <i>your</i> investing with an eye towards the longest of long terms— which is the only kind of financial advice you want. Despite the goofball name, they are very serious and extremely talented. Their analysts provide in-depth reporting via detailed business stories and company updates, and they will routinely recommend specific courses of action. I am a particular proponent of the brief daily podcasts, such as<i><a data-ogsc="" href="https://www.fool.com/podcasts/motley-fool-money/" style="color: #0058b9;" title="https://www.fool.com/podcasts/motley-fool-money/">Motley Fool Money</a></i>. Much of their content is free with ads, but subscribing to just one of their more <a data-ogsc="" href="https://www.fool.com/services/" style="color: #0058b9;" title="https://www.fool.com/services/">specialized investor services</a> will kick open their doors to you for nearly all the rest of their content.</span></span><p></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-family: arial;"><span style="font-size: 11pt; line-height: 1.2;"></span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><span style="font-family: arial;"><span style="font-size: 11pt; line-height: 1.2;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhvTlfFLr-og-YsoX2CcuDCMsnhojhFd8gWsl6oHmcVu4uFZLhruVzRRXSQ6aral5eYKPEsuEo2dSGhoYM44BUNAXLn19J_KuahF1YlizwbzXcrFjvpbHcGzhlOjhsMopt9dWg5UvdC7wenhWsUfGd38ulLrEyYBe5eaHTXMniLCtqJv3QTOlKT3KIC/s5880/The-Wall-Street-Journal-Logo-2518055564.jpeg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="816" data-original-width="5880" height="44" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhvTlfFLr-og-YsoX2CcuDCMsnhojhFd8gWsl6oHmcVu4uFZLhruVzRRXSQ6aral5eYKPEsuEo2dSGhoYM44BUNAXLn19J_KuahF1YlizwbzXcrFjvpbHcGzhlOjhsMopt9dWg5UvdC7wenhWsUfGd38ulLrEyYBe5eaHTXMniLCtqJv3QTOlKT3KIC/s320/The-Wall-Street-Journal-Logo-2518055564.jpeg" width="320" /></a></span></span></div><p></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-family: arial;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-size: 11pt; line-height: 1.2;"><b style="color: #0058b9;"><a data-ogsc="" href="https://www.wsj.com/" style="color: #0058b9;" title="https://www.wsj.com/">The Wall Street Journal</a></b>. The gold standard for financial news, economic news and in-depth investigative journalism around businesses and business leaders. Most of their content is behind a paywall, but there are always 1- or 2-year specials available to new subscribers. WSJ also has a free daily morning briefing email,</span><span class="apple-converted-space"><i><span data-ogsc="rgb(51, 51, 51)" style="color: #2e2e2e; font-size: 10.5pt; line-height: 1.2;"> </span></i></span><span data-ogsc="rgb(51, 51, 51)" style="color: #2e2e2e; font-size: 10.5pt; line-height: 1.2;"><a data-ogsc="" href="https://10point.cmail19.com/t/d-l-furjitl-thkhiubhy-hl/" style="color: #0058b9;" title="https://10point.cmail19.com/t/d-l-furjitl-thkhiubhy-hl/"><span data-ogsc="rgb(2, 116, 182)" style="color: #1a66ac;">The 10-Point</span></a></span><span style="font-size: 11pt; line-height: 1.2;">, in which you can read the headlines for an overview, or click through to stories (usually behind the paywall)</span><i><span data-ogsc="rgb(51, 51, 51)" style="color: #2e2e2e; font-size: 10.5pt; line-height: 1.2;">.</span></i></span></span></p><p></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiWnPKTMQv8BETCpy--uw3d_sEIfZ-X_Aq-1BrXWntjCajcjBH5m5S2xB5URstP40iHgBiKJOYfqMAAPm2bQXIH2giCuFgYU-OZWeRKq90ySQpS2IAE_sVLbQlyuYSaiVjMbsi5-sR4FN-9cGNBKG5ygYzqBEQ8vWzHgrQIwIuhYhCqdN0u8LVi1T8W/s1935/Symbol-New-York-Times-3730881210.png" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1935" data-original-width="1498" height="124" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiWnPKTMQv8BETCpy--uw3d_sEIfZ-X_Aq-1BrXWntjCajcjBH5m5S2xB5URstP40iHgBiKJOYfqMAAPm2bQXIH2giCuFgYU-OZWeRKq90ySQpS2IAE_sVLbQlyuYSaiVjMbsi5-sR4FN-9cGNBKG5ygYzqBEQ8vWzHgrQIwIuhYhCqdN0u8LVi1T8W/w95-h124/Symbol-New-York-Times-3730881210.png" width="95" /></a></div><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"><a data-ogsc="" href="https://www.nytimes.com/?campaignId=6J4JR" style="color: #0058b9;" title="https://www.nytimes.com/?campaignId=6J4JR"><b>The New York Times</b></a>. While business and finance are not the Times’ first concern, there is simply so much useful content, not <i>only</i> about the markets, that it’s simply indispensible. Again, much is behind the paywall. But the NYT is the first stop for prime ministers, presidents, queens and despots, as well as the leaders every field of private and public enterprise. The Times also offers several daily emails of curated headlines and story summaries which I find invaluable; check out Andrew Ross Sorkin’s <a data-ogsc="" href="https://static.nytimes.com/email-content/DK_sample.html" style="color: #0058b9;" title="https://static.nytimes.com/email-content/DK_sample.html">DealBook</a>, and <a data-ogsc="" href="https://www.nytimes.com/newsletters/signup/DK?te=1&nl=dealbook&emc=edit_dk_20220906" style="color: #0058b9;" title="https://www.nytimes.com/newsletters/signup/DK?te=1&nl=dealbook&emc=edit_dk_20220906">sign up here</a>.</span></span><p></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0BCqsmLb3H6qN7FuEpUfhMKKYv0o0U-d3xxH72Ce2ffvZSxLbdzdftT5irfNFvxove1W0j7V9nq5fsgsI4d8IdfRU61Id-EpTq6SFvEDW87bzodkwFI-LeWd0EQ_jf-hjlfkPjJkXBO8S26M-yEJRmcGsbQU7tI8rNHfjYzKYU90J0nuE17j_3BOJ/s1200/bloomberg-logo-3756568179.png" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="630" data-original-width="1200" height="105" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0BCqsmLb3H6qN7FuEpUfhMKKYv0o0U-d3xxH72Ce2ffvZSxLbdzdftT5irfNFvxove1W0j7V9nq5fsgsI4d8IdfRU61Id-EpTq6SFvEDW87bzodkwFI-LeWd0EQ_jf-hjlfkPjJkXBO8S26M-yEJRmcGsbQU7tI8rNHfjYzKYU90J0nuE17j_3BOJ/w200-h105/bloomberg-logo-3756568179.png" width="200" /></a></div><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"><a data-ogsc="" href="https://www.bloomberg.com/" style="color: #0058b9;" title="https://www.bloomberg.com/"><b>Bloomberg</b></a> is another news source I can’t praise highly enough. Sure it’s aimed at Wall Streeters— but with to-the-point news updates, profiles, merger explanations, financial opinion columns, global business perspective and broader market news divisions provide a succinct and relevant perspective on what’s happening and what it means. Like the publications above, Bloomberg also has several highly readable and digestable daily and weekly email overviews. Again, much content is behind the paywall. But if you asked which financial media outlet was more critical to my work, Bloomberg or the WSJ, I’d have a tough time answering.<u><span data-ogsc="rgb(5, 99, 193)" style="color: #003391;"></span></u></span></span><p></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjMmDyioL4YaaMWd25oZxxlTmLKdwT5OGishP0zPipzW6FEOdsuInRqcvj1vPyWQZ3pYAa-KjYHbo0VK2GSQMe3iOkg_hhqICPOOafNWJOAWAOiiI9ivxyeA9WI4v1HcColMJ7YJOoYrHFNI1IWLMqwnAP2tY0Nq1lK_WRYs-EK66VCa21fnxL59Fp/s2544/Yahoo-Finance-2264682291.png" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="932" data-original-width="2544" height="74" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjMmDyioL4YaaMWd25oZxxlTmLKdwT5OGishP0zPipzW6FEOdsuInRqcvj1vPyWQZ3pYAa-KjYHbo0VK2GSQMe3iOkg_hhqICPOOafNWJOAWAOiiI9ivxyeA9WI4v1HcColMJ7YJOoYrHFNI1IWLMqwnAP2tY0Nq1lK_WRYs-EK66VCa21fnxL59Fp/w200-h74/Yahoo-Finance-2264682291.png" width="200" /></a></div><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"><a data-ogsc="" href="https://finance.yahoo.com/" style="color: #0058b9;" title="https://finance.yahoo.com/"><b>Yahoo! Finance</b></a> offers bar none the best compilation of financial news available at any price. Yahoo offers broad stories about the global economy and tiny news items featuring small-cap public companies, and everything between. You can find real-time stock quotes, click through to full articles across dozens of source publications, examine millions of customizable charts and tables, even find up to date balance sheets and cash flow statements from any public company. It’s all here— and it’s free (advertising-supported, so be ready). <br /></span></span><p></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-family: arial; font-size: 11pt;"> </span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;">On top of those sites I check regularly, I get about 10 daily emails with business news and market updates. I mentioned some above, but I also subscribe to a handful of blogs— some of which have their own daily email updates— written and curated by some of the best (and most conscientious) minds in finance today:</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"><a data-ogsc="" href="https://abnormalreturns.com/" style="color: #0058b9;" title="https://abnormalreturns.com/"><b>Abnormal Returns</b></a>, by Tadas Vinskata, the primary function of which is to collect and disseminate links to smart, interesting financial articles from across the web every day. There is <i>always </i>something here I want to read that I wouldn’t have found otherwise.</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"><b style="color: #0058b9;">The <a data-ogsc="" href="https://theirrelevantinvestor.com/" style="color: #0058b9;" title="https://theirrelevantinvestor.com/">Irrelevant Investor</a></b> is written by Michael Batnick of Ritholtz Wealth Management. Intelligent short takes and occasional deep dives on the economic and market news of the day. Michael loves dissecting charts.</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"><a data-ogsc="" href="https://thereformedbroker.com/" style="color: #0058b9;" title="https://thereformedbroker.com/"><b>The Reformed Broker</b></a>, penned by Batnick’s colleague at Ritholtz, Josh Brown, is a real-world perspective on business news, the economy, investing habits and sometimes his own shortcomings. It’s on-point, relatable, sharp and eyes-open.</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"><a data-ogsc="" href="https://www.collaborativefund.com/blog/" style="color: #0058b9;" title="https://www.collaborativefund.com/blog/"><b>Morgan Housel</b></a>, at the Collaborative Fund, writes a weekly blog post to interpret investing and economics in light of human psychology. It’s like nothing I’ve ever seen. Morgan is simply one of the finest financial writers working today, taking complex subjects and boiling them down for readability and comprehension. I’ve also found his book, <a data-ogsc="" href="https://smile.amazon.com/Psychology-Money-Timeless-lessons-happiness-ebook/dp/B084HJSJJ2/ref=sr_1_1?crid=2CUSKHW2WRHV1&keywords=psychology+of+money&qid=1662508395&sprefix=psychology%2Caps%2C169&sr=8-1" style="color: #0058b9;" title="https://smile.amazon.com/Psychology-Money-Timeless-lessons-happiness-ebook/dp/B084HJSJJ2/ref=sr_1_1?crid=2CUSKHW2WRHV1&keywords=psychology+of+money&qid=1662508395&sprefix=psychology%2Caps%2C169&sr=8-1">The Psychology of Money</a>, to be an addictive read. You want to be a better investor, you want to understand your own habits and patterns around money? Read Morgan’s book.</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;">Yes, that’s a lot to read. Don’t try to tackle it all; maybe every day pick one source, or even one story, which piques your interest. Investing is a marathon, a habit developed across a lifetime. Learning and growing is a part of that, but there is no rush. Develop good practices and keep them up. Stretch yourself, slowly.</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"><span style="font-family: arial;">As always, reach out to chat about reactions, thoughts, ideas, questions. I’m around and love to talk shop.</span></span></p><span style="font-family: arial;"><br class="Apple-interchange-newline" /></span><p><span style="font-family: arial;"> </span></p><br /><br /><br /><br />Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-48101270708010386542022-07-19T11:49:00.005-07:002023-06-09T11:53:19.120-07:00A Dreary and Fearful Down Market Stumbles On<span style="font-family: arial;">Last I wrote you, all our favorite stocks were way, way down since late 2021. Russia was tearing down Ukraine and its people. China was on the rise, but Covid was still wreaking havoc on supply chains. Inflation was coming fast, and Americans seemed anxious about … well, everything.</span><br /><span style="color: #1d1d1d; font-family: Arial;"><span style="caret-color: rgb(29, 29, 29);"><br /></span></span><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">Little has changed.</span><br /><span style="color: #1d1d1d; font-family: Arial;"><span style="caret-color: rgb(29, 29, 29);"><br /></span></span><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">By and large, the major indecies haven’t declined much further. The S&P500 is still down about 20% year-to-date, and the Nasdaq is -27%. I’m down quite a bit more because I generally have a tech-heavy portfolio and am overweighted on a number of businesses, a few of which have dropped as much as 70% since last fall. </span><br /><span style="color: #1d1d1d; font-family: Arial;"><span style="caret-color: rgb(29, 29, 29);"><br /></span></span><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">Inflation has arrived and now dominates our news cycles— at least until New York tops 100º for several days, as is happening right now in the UK. Then we’ll swing back to talking about global warming and, predictably, why Congress hasn’t done anything about it. (Spoiler: because Congress can’t do </span><i style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">anything</i><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">).</span><br /><span style="color: #1d1d1d; font-family: Arial;"><span style="caret-color: rgb(29, 29, 29);"><br /></span></span><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">It appears investors are waiting to see what will come next. A number of economists and market analysts would say we are in fact already in a recession, albeit a relatively mild one featuring strong employment and surging corporate profits. Consumers are still buying, but real estate may have peaked, many companies are carrying too much costly inventory, and a number of critical industrial and manufacturing components remain in short supply. Add in constantly retreating and resurging coronavirus variants, and </span><span data-ogsc="rgb(0, 0, 0)" style="caret-color: rgb(255, 255, 255); font-family: Arial;">where it all goes from here becomes anyone’s guess.</span><span data-ogsc="rgb(0, 0, 0)" style="caret-color: rgb(255, 255, 255); font-family: Arial;"> </span><br /><span style="color: #1d1d1d; font-family: Arial;"><span style="caret-color: rgb(29, 29, 29);"><br /></span></span><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">So as before, I urge you to largely stand still on your portfolio. Don’t sell now, you’ll be locking in big losses. Should you have cash you don’t need for the next couple of years, stock prices remain low overall and opportunities abound. Picking up a few shares of a big index like an S&P500 ETF would be even safer. But be conservative if you’re buying: accelerating into recession would mean markets continue to fall— though considering how far many stocks have dropped in the last 10 months, I suspect we won’t see huge additional declines. Could happen, but at current prices you’d still be getting a decent deal over the long long term. If, like me, you do </span><i style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">not</i><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;"> have excess cash, try to just wait all this out. Eventually we’ll know more and some Wall Street types will decide the deals are just too good to ignore, they’ll start buying strong businesses with beat-down valuations, and markets will begin to climb back up. Eventually. </span><br /><span style="color: #1d1d1d; font-family: Arial;"><span style="caret-color: rgb(29, 29, 29);"><br /></span></span><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">In the meantime go outside enjoy your summer. Don’t sweat the red in your portfolio— remember, you weren’t planning to use that money for years. Markets have to go down (risk) to justify those big gains we’ve become accustomed to. This is all a part of it.</span><br /><span style="color: #1d1d1d; font-family: Arial;"><span style="caret-color: rgb(29, 29, 29);"><br /></span></span><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">B</span><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">elow I’ve copied an excellent recent piece from the </span><i style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">Wall Street Journal</i><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;">. Sound advice we all need to hear from time to time.</span><br /><span style="color: #1d1d1d; font-family: Arial;"><br /><span style="caret-color: rgb(29, 29, 29);">————————————————————————————————————————</span></span><div><span style="color: #1d1d1d; font-family: Arial;"><span style="caret-color: rgb(29, 29, 29);"><br /></span></span></div><div><span style="color: #1d1d1d; font-family: Arial;"><span style="caret-color: rgb(29, 29, 29);"><br /></span></span><h1 class="title" style="caret-color: rgb(156, 156, 156); color: #1d1d1d; line-height: 1.2141em; margin-bottom: 0.5em; margin-top: 0px; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: times; font-size: x-large; line-height: 1.2;">What Smart Investors Do in Bear Markets</span></h1><h2 class="subhead" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial; line-height: 1.27275em; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; font-size: small; font-weight: normal; line-height: 1.2;"><i>Since you can’t predict the unpredictable, try to control the controllable</i></span></h2></div><blockquote style="border: medium; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div><div class="metadata singleline" style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; margin-bottom: 1.45em; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;"><a class="byline" data-ogsc="" href="https://www.wsj.com/news/author/jason-zweig" role="menuitem" style="color: #410071; display: inline !important; margin: 0px; max-width: 100%; text-decoration: none;" title="https://www.wsj.com/news/author/jason-zweig">Jason Zweig</a><span class="delimiter" style="display: inline !important; margin: 0.07em 0.45em 0px; max-width: 100%; padding: 0px;"></span><time class="date" datetime="2022-07-08T15:00:00Z" style="display: inline !important; margin: 0px; max-width: 100%;">July 8, 2022 11:00 am ET</time></span></div></div><div><p data-ogsc="rgb(99, 99, 99)" style="caret-color: rgb(156, 156, 156); color: #5b5b5b; font-family: Arial; max-width: 100%;"><span data-ogsb="rgb(255, 255, 255)" data-ogsc="rgb(34, 34, 34)" style="background-color: white; caret-color: rgb(221, 221, 221); color: #1c1c1c; line-height: 1.2;"><span style="font-family: Georgia; line-height: 1.2;">Part of what makes bear markets so unbearable is that nobody—and I mean nobody—knows when or how they will end. </span></span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">That doesn’t stop everyone on Wall Street from flogging measures, hunches and folklore purporting to foretell when stocks will finally stop falling.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">However, intelligent investors don’t bother trying to predict the unpredictable; they focus on <a data-ogsc="" href="https://www.wsj.com/articles/SB123612913479324703?mod=article_inline" rel="noopener noreferer" style="color: #0058b9; max-width: 100%; text-decoration: none;" title="https://www.wsj.com/articles/SB123612913479324703?mod=article_inline">controlling the controllable</a>. That’s the psychological key to surviving this—and any—bear market, no matter how long it lasts.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">To see clearly why it’s so important to get your priorities straight, let’s look quickly at three beliefs about when bear markets end. </span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">Ask any market veteran when stocks will start to recover, and you’re likely to hear something like this: Bear markets don’t end until individual investors throw in the towel, fear hits new heights or stocks finally get cheap again.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">Taking each in turn, here’s why they’re myths. </span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;"><span style="max-width: 100%;">Retail investors have to capitulate</span>. Financial professionals love to argue that bear markets hit bottom when individual investors give up on stocks in a crescendo or “<a data-ogsc="" href="https://www.wsj.com/articles/SB122488709542968173?mod=article_inline" rel="noopener noreferer" style="color: #0058b9; max-width: 100%; text-decoration: none;" title="https://www.wsj.com/articles/SB122488709542968173?mod=article_inline">capitulation</a>” of panic selling. </span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">Only trouble is, that isn’t what happened in 1932, 1974, 1982 or 2002, among many examples. Bear markets sometimes end in a selling frenzy, but they often end in an indifferent stupor. </span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;"><span style="max-width: 100%;">Fear has to spike</span>. Many professionals contend that the Cboe Volatility Index, or VIX, is “too low” right now, says Nicholas Colas, co-founder of DataTrek Research, an investment newsletter in New York. </span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">The VIX, commonly called Wall Street’s “<a data-ogsc="" href="https://www.wsj.com/articles/vix-101-how-the-volatility-gauge-works-1524398401?mod=article_inline" rel="noopener noreferer" style="color: #0058b9; max-width: 100%; text-decoration: none;" title="https://www.wsj.com/articles/vix-101-how-the-volatility-gauge-works-1524398401?mod=article_inline">fear gauge</a>,” spiked to then-record highs in October 2008, during the global financial crisis—but stocks still fell more than 19% before the bear market finally ended in March 2009.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">“When markets are trying to reprice their expectations of the future, they only nibble away at that truth,” says Mr. Colas. No single indicator like the VIX can capture the moment when those expectations are about to shift.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;"><span style="max-width: 100%;">Stocks have to get a lot cheaper</span>. Many investors believe bear markets end only after formerly overvalued stocks finally become bargains again. </span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">It just isn’t so.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">In March 2009, in the pit of the global financial crisis, stocks traded at more than 13 times their longer-term earnings, adjusted for inflation, according to data from Yale University finance professor Robert Shiller. That was only about 20% cheaper than the average all the way back to 1881. </span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">Although stocks <a data-ogsc="" href="https://www.wsj.com/articles/SB124302634866648217?mod=article_inline" rel="noopener noreferer" style="color: #0058b9; max-width: 100%; text-decoration: none;" title="https://www.wsj.com/articles/SB124302634866648217?mod=article_inline">didn’t seem like a statistical bargain at the time</a>, they went on to gain roughly 15% annually over the next decade.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">All this shows the folly of trying to figure out when stocks have hit bottom.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">So you should <a data-ogsc="" href="https://www.nybooks.com/articles/2015/08/13/ironic-wisdom-reinhold-niebuhr/" rel="noopener noreferer" style="color: #0058b9; max-width: 100%; text-decoration: none;" title="https://www.nybooks.com/articles/2015/08/13/ironic-wisdom-reinhold-niebuhr/">distinguish what you can control from what you can’t</a>. Instead of wasting your time trying to read the market’s tea leaves, take charge of the risks you run, the taxes you incur and your investing time horizon.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">Being a buy-and-hold investor doesn’t obligate you to <a data-ogsc="" href="https://www.wsj.com/articles/SB121944445208164839?mod=article_inline" rel="noopener noreferer" style="color: #0058b9; max-width: 100%; text-decoration: none;" title="https://www.wsj.com/articles/SB121944445208164839?mod=article_inline">use a death grip</a>. If some of your stocks or funds have performed abysmally in this downturn, you can sell them and reap significant benefits.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">First, selling extreme losers will reduce your risk—and your anxiety about further losses in the future.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">You probably regard your losers as liabilities because they can be so painful and embarrassing. In fact, you can readily turn them into assets.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">Dumping your most dismal investments should enable you to <a data-ogsc="" href="https://www.wsj.com/articles/tax-loss-harvesting-rules-stocks-bonds-crypto-bitcoin-11654826590?mod=article_inline" rel="noopener noreferer" style="color: #0058b9; max-width: 100%; text-decoration: none;" title="https://www.wsj.com/articles/tax-loss-harvesting-rules-stocks-bonds-crypto-bitcoin-11654826590?mod=article_inline">book a loss</a>. You typically can use this to offset capital-gains taxes on investments you sell at a profit, either this year or in later years. </span></p></div><div><div class="clear" style="caret-color: rgb(156, 156, 156); clear: both; color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">As markets react to interest-rate hikes and the threat of a recession, stocks are dropping closer to bear-market territory. WSJ’s Gunjan Banerji explains what it takes to push stocks back into a bull market and why it’s hard to predict when they’ll turn around. Illustration: Jacob Reynolds</span></div></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">You can also deduct up to $3,000 of those losses each year against your ordinary income, carrying any losses in excess of $3,000 forward to use as offsets against your taxable income in future years.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">Another decisive step investors can take in a bear market is to consider converting a traditional individual retirement account into a Roth IRA.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">In a Roth, your assets can grow without being currently taxed, just as in a traditional IRA. But withdrawals from a Roth are also tax-free, unlike in the traditional account, where your payouts are typically taxed at your ordinary-income rate.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">That means a Roth could make sense for you if you expect your tax rates to be higher in the future. </span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">The value of an IRA converted to a Roth “can blossom over time without any tax liability,” says Amy Barrett of Barrett Wealth Connection LLC, an investment adviser in Spring Grove, Ill.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">You can also pass a Roth IRA to your heirs, who will be able to own and withdraw from it tax-free, effectively extending your investment lifetime for some years beyond your own.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">Normally, the deterrent to converting a traditional IRA to a Roth is that the conversion is taxable at your ordinary-income rate. </span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">Now that so many investments are down 10% to 20% or more, however, the amount on which you will be taxed is significantly lower, points out Melissa Labant, a tax principal at CLA LLP, an accounting and professional-services firm in Arlington, Va.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">A Roth conversion is definitely <a data-ogsc="" href="https://www.wsj.com/articles/when-to-ignore-the-crowd-and-shun-a-roth-ira-1534498202?mod=article_inline" rel="noopener noreferer" style="color: #0058b9; max-width: 100%; text-decoration: none;" title="https://www.wsj.com/articles/when-to-ignore-the-crowd-and-shun-a-roth-ira-1534498202?mod=article_inline">not for everyone</a>, though, and it can raise complicated tax technicalities. Make sure you walk carefully through all the implications with your accountant, tax adviser or financial planner before you pull the trigger.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;">So forget about squinting into a crystal ball to try figuring out when the bear market will end. Instead, control what you can.</span></p></div><div><p style="caret-color: rgb(156, 156, 156); color: #1d1d1d; font-family: Arial; max-width: 100%;"><span data-ogac="#000000" data-ogsc="" style="color: black; font-family: Georgia; line-height: 1.2;"><span style="max-width: 100%;">Write to </span>Jason Zweig at <a data-ogsc="" href="mailto:intelligentinvestor@wsj.com" rel="noopener noreferer" style="color: #0058b9; max-width: 100%; text-decoration: none;" title="mailto:intelligentinvestor@wsj.com">intelligentinvestor@wsj.com</a></span></p></div></blockquote><div><blockquote style="border: medium; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div><div style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;"><div><div><div><div><div><div><span style="line-height: 1.2;"><br /></span></div></div></div></div></div></div></div></div></blockquote><div dir="ltr"><div dir="ltr" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial;"><div dir="ltr"><div dir="ltr"><div dir="ltr"><div dir="ltr"><div dir="ltr"><div><div dir="ltr"><p></p></div></div></div></div></div></div></div></div><br class="Apple-interchange-newline" /></div></div>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-30237489970299419012022-06-28T06:00:00.009-07:002023-06-09T11:48:43.807-07:00"Average Investors Should Try and Time Markets. Just a Little."<p><span style="font-family: arial;"><i><span style="font-variant-caps: inherit;"><br /></span></i></span></p><p><span face="BWHaasGrotesk-55Roman-Web, Helvetica, Arial, sans-serif" style="background-color: white; caret-color: rgb(255, 255, 255); font-family: arial; font-size: medium;">It doesn’t mean going all in or out but rather tweaking allocations in response to telltale signals. </span></p><p><span style="font-family: arial;"><img alt="headshot of Jared Dillian" src="https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i9czdBrwyk2c/v2/80x80.jpg" style="border-radius: 50%; border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; height: 95px; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;" tabindex="0" /><i><button class="follow-button__0ae88608 opinion__e4d8ca4c" data-ogsc="rgb(0, 104, 255)" style="background-color: rgba(255, 255, 255, 0); border-width: 0px; caret-color: rgb(255, 255, 255); color: #0031a4; font-size: inherit; font-stretch: inherit; font-variant-caps: inherit; line-height: inherit; margin: 0px; overflow: visible; text-align: left;"><i><a href="https://www.bloomberg.com/opinion/authors/AEeo12cYoIA/jared-dillian" target="_blank">Jared Dillian</a></i></button></i></span></p><p><span style="caret-color: rgb(255, 255, 255); font-variant-caps: inherit;"><span style="font-family: arial;">Novice investors are constantly told to never – never! - time the market. Just buy and hold stocks, dollar-cost averaging over time. That is good advice. I know some novice investors who have done very well through various economic cycles, buying stocks in both good and bad times – especially the bad times. They have unshakable faith that the market will always come back. If you didn’t have such faith, you wouldn’t be able to invest in this fashion. </span></span></p><p style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 23px 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;">I am a professional investor and have timed the market with some success, but not too much because it is very hard to do. But I think novice investors should attempt to time the market once or twice in their investing careers. Sacrilege, I know. I’m not talking about getting totally in or out of the market, but rather about making changes in asset allocation that have the potential to boost returns substantially over time.</span></p><p class="paywall" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 23px 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;">Here is how it works. Imagine you have your money in index funds in a <a data-ogsc="rgb(0, 0, 0)" href="https://www.investopedia.com/articles/financial-advisors/011916/why-6040-portfolio-no-longer-good-enough.asp" rel="noopener" style="border-bottom-color: rgb(255, 255, 255); border-bottom-style: dotted; border-width: 0px 0px 0.5px; color: black; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; overflow-wrap: break-word; padding: 0px; text-decoration: none; vertical-align: baseline;" title="https://www.investopedia.com/articles/financial-advisors/011916/why-6040-portfolio-no-longer-good-enough.asp">traditional 60/40 portfolio</a>. That means 60% in a stock index fund and 40% in a bond index fund. The moment when you are feeling the most ebullient about your portfolio, when it seems like it’s going up most every day and you can’t believe how much you are making, that is the point at which you want to adjust your stock allocation down to 50%.</span></p><p class="paywall" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 23px 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;">A friend of mine, Brent Donnelly, president of Spectra Markets, calls this “The Cheer Hedge.” It was from his days working on a foreign-exchange trading desk where he observed that the moment someone made a lot of money and started high-fiving others was the moment at which the position stopped working. If at the moment you were happiest about your investments you reduced risk, you would probably come pretty close to getting out of the market at the highs. When you feel the urge to tell everyone how much you are making is usually when the piano is about to fall on your head. This would have worked exceptionally well during the dot-com bubble and 2021.</span></p><p class="paywall" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 23px 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;">Likewise, when you are feeling the worst about your portfolio, when you have abandoned all hope and are considering just liquidating everything to stop the pain, it is probably time to be taking more risk. If you increased your allocation to stocks from 60% to 70%, you would have more exposure when the market inevitably rallied. During the depths of the financial crisis, if people increased risk rather than liquidated, they would have been much better off today.</span></p><p class="paywall" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 23px 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;">For example, in a year when stocks return 15% and bonds return 5% in a 60/40 portfolio, the blended return would be 11%. By adjusting the stock portion up to 70% and bonds down to 30%, the return rises to 12%. A small, but noticeable difference. Of course, in the early days of the post-financial crisis market, equity returns were much higher, with the S&P 500 Index gaining 23.5% in 2009. Alas, many missed out on such gains. Surveys by the American Association of Individual Investors showed that most novices only had 41% allocated to stocks at the time.</span></p><p class="paywall" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 23px 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;">Financial advisers say it’s impossible to time the market, but it really isn’t. If you can sense big turning points in sentiment, you can make subtle changes to your asset allocation and increase returns over time. But it requires people to go against their intuition, which is hard because when people feel good about their portfolio, they usually want to buy more stocks, and sell when they feel terrible. Humans are hardwired to be terrible investors. So, if you were to do the opposite of what your instincts told you, you would probably be better off. This is not heretical advice. The legendary Warren Buffett has often said to be a successful investor once must be fearful when others are greedy, and greedy when others are fearful.</span></p><div class="for-you__wrapper paywall" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"></div><p class="paywall" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 23px 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;">Some people might interpret this advice as a license to trade actively, but it’s not. I’m talking about extremes in sentiment that happen only about once every 10 or 15 years. One of those came in the first half of last year, when meme stocks were spinning off into space and crypto millionaires were being minted by the thousands. You can monitor magazine covers and the like, but the best way to gauge sentiment is to talk to your neighbors. If they tell you they’re making or losing haystacks of cash in the market, it’s probably time to tweak your portfolio.</span></p><p class="paywall" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 23px 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;">This latest downturn in the stock market would not qualify as an extreme in sentiment - at least not yet. We need to get to the point where people believe that the economy is going into a depression and the stock market will go to zero, and it doesn’t feel like there is any sort of mass capitulation happening. Sure, the <a class="terminal-news-story" data-ogsc="rgb(0, 0, 0)" href="https://www.bloomberg.com/news/terminal/RDX200GQITJ4" style="border-bottom-color: rgb(255, 255, 255); border-bottom-style: dotted; border-width: 0px 0px 0.5px; color: black; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; overflow-wrap: break-word; padding: 0px; text-decoration: none; vertical-align: baseline;" title="https://www.bloomberg.com/news/terminal/RDX200GQITJ4">latest AAII data</a> shows the percentage of bulls hanging right around the lowest levels of the last 30 years, but it’s also notable that Cathie Wood’s flagship ARK Innovation ETF – seen as the pandemic era’s ultimate barometer of investor exuberance - has posted its <a data-ogsc="rgb(0, 0, 0)" href="https://www.bloomberg.com/news/articles/2022-06-27/cathie-wood-s-arkk-posts-longest-inflow-streak-in-over-a-year" style="border-bottom-color: rgb(255, 255, 255); border-bottom-style: dotted; border-width: 0px 0px 0.5px; color: black; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; overflow-wrap: break-word; padding: 0px; text-decoration: none; vertical-align: baseline;" title="https://www.bloomberg.com/news/articles/2022-06-27/cathie-wood-s-arkk-posts-longest-inflow-streak-in-over-a-year">longest streak of weekly inflows</a> in over a year.</span></p><div class="inline-newsletter-middle paywall" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div class="tnte_-qn2IRpfZ36iYCBs_9" style="-webkit-box-direction: initial; -webkit-cursor-visibility: initial; -webkit-font-smoothing: initial; -webkit-hyphenate-character: initial; -webkit-hyphenate-limit-after: initial; -webkit-hyphenate-limit-before: initial; -webkit-hyphenate-limit-lines: initial; -webkit-hyphens: initial; -webkit-line-align: initial; -webkit-line-box-contain: initial; -webkit-line-grid: initial; -webkit-line-snap: initial; -webkit-locale: initial; -webkit-nbsp-mode: initial; -webkit-rtl-ordering: initial; -webkit-ruby-position: initial; -webkit-text-combine: initial; -webkit-text-decorations-in-effect: initial; -webkit-text-fill-color: rgba(255, 255, 255, 0); -webkit-text-security: initial; -webkit-text-stroke-color: rgba(255, 255, 255, 0); -webkit-text-stroke-width: initial; -webkit-text-zoom: initial; -webkit-user-modify: initial; -webkit-user-select: initial; border-collapse: initial; border-spacing: initial; caption-side: initial; empty-cells: initial; font-feature-settings: initial; font-kerning: initial; font-stretch: initial; font-style: initial; font-variant-alternates: initial; font-variant-caps: initial; font-variant-east-asian: initial; font-variant-ligatures: initial; font-variant-numeric: initial; hanging-punctuation: initial; image-orientation: initial; letter-spacing: initial; line-break: initial; line-height: initial; list-style: initial; orphans: initial; overflow-wrap: initial; quotes: initial; resize: initial; tab-size: initial; text-align: initial; text-combine-upright: initial; text-emphasis-color: rgba(255, 255, 255, 0); text-emphasis-style: initial; text-indent: initial; text-orientation: initial; text-transform: initial; text-underline-position: initial; visibility: initial; white-space: initial; widows: initial; word-break: initial; word-spacing: initial; writing-mode: initial;"><div class="_1IpYKPeQzuQhogkef-jzRV_9" style="animation: 0.5s _2Kz2NWQKJDzR3UvD0LpItC_9; border: 0px; font-family: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"></div></div></div><p class="paywall" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 23px 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;">The point isn’t to pick tops or bottoms with precision; the point is to take a little less risk when others are taking more, and vice versa. People try to accomplish this in different ways, such as by studying things like valuations or charts, but the best method is by using sentiment. Novice investors have a voice in their heads that tells them to do the exact wrong thing at the exact wrong time. If you can step back and have some self-awareness of your own emotions, that is what produces outperformance in the long run.</span></p><span style="font-family: arial;"><p class="author__619cf27c" style="border: 0px; caret-color: rgb(255, 255, 255); display: inline-block; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: 1.2; margin: 0px; padding: 0px; vertical-align: baseline; white-space: pre;">J<span style="border-bottom-color: rgb(255, 255, 255); border-bottom-style: dotted; border-width: 0px 0px 0.5px; color: black; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: 1.2; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><span style="border-bottom-style: dotted; border-bottom-width: 0.5px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit;"><a class="byline__258e32fe" data-ogsc="rgb(0, 0, 0)" href="https://www.bloomberg.com/opinion/authors/AEeo12cYoIA/jared-dillian" rel="author" style="border-bottom-color: rgb(255, 255, 255); border-bottom-style: dotted; border-width: 0px 0px 0.5px; color: black; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;" title="https://www.bloomberg.com/opinion/authors/AEeo12cYoIA/jared-dillian">ared Dillian</a>, </span></span></p><span style="caret-color: rgb(255, 255, 255); font-variant-caps: inherit;">June 28, 2022</span></span><div class="text-to-speech__9eb44789" style="border: 0px; caret-color: rgb(255, 255, 255); font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px 0px 30px; padding: 0px; vertical-align: baseline;"><h2 class="label__cb527c49" style="border: 0px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial; font-size: small;"><br /></span></h2><div class="authors__c2ab2770" style="border: 0px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px 0px 30px; padding: 0px; vertical-align: baseline;"><div class="author-data__a75a3bb7" style="border-bottom-color: rgb(137, 137, 137); border-bottom-style: solid; border-width: 0px 0px 1px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px 0px 10px; padding: 0px 0px 10px; vertical-align: baseline;"><div class="headshot__20ac643f opinion-headshot__e3718cda" style="border: 0px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; height: 95px; line-height: inherit; margin: 0px 10px 10px 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;"><img alt="headshot of Jared Dillian" src="https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i9czdBrwyk2c/v2/80x80.jpg" style="border-radius: 50%; border: 0px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; height: 95px; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;" tabindex="0" /></span></div><div style="border: 0px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div class="summary__b5fae956" style="border: 0px; display: inline; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: 1.29; margin: 0px; padding: 0px; vertical-align: baseline;"><div class="bio__e9ea0742" style="border: 0px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px 0px 5px; padding: 0px; vertical-align: baseline;"><span style="font-family: arial;"><span class="name__3bebf3de" style="border: 0px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Jared Dillian</span> is the editor and publisher of the Daily Dirtnap. An investment strategist at Mauldin Economics, he is author of "All the Evil of This World." He may have a stake in the areas he writes about. <a aria-label="Navigate to twitter account" class="twitter-link__de22eacc" data-ogsc="rgb(0, 0, 0)" href="https://www.twitter.com/dailydirtnap" rel="noreferrer" style="border: 0px; color: black; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: 1.14; margin: 0px; padding: 0px; vertical-align: baseline;" title="https://www.twitter.com/dailydirtnap">@dailydirtnap</a></span></div></div></div></div></div></div>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-36525555560789751232022-06-20T13:04:00.003-07:002023-06-09T13:06:57.871-07:00Are you more like Warren Buffet or Cathie Wood? Or neither?<p> </p><table border="0" cellpadding="0" cellspacing="0" style="caret-color: rgb(225, 225, 225); font-family: Arial; font-size: 0px; font-variant-caps: normal; width: 100%;"><tbody><tr><td style="border-bottom-color: rgb(244, 211, 94); border-bottom-style: solid; border-bottom-width: 3px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="pt-20" style="padding-top: 20px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="pb-8" style="padding-bottom: 8px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody></tbody></table></td></tr><tr><td class="img-center" style="font-size: 0pt; line-height: 0pt; text-align: center;"><a data-ogsc="rgb(34, 34, 34)" href="https://thedailyupside.cmail19.com/t/t-l-qktlltt-jlkhiyjydl-y/" style="text-decoration-color: rgb(6, 167, 125);" target="_blank" title="https://thedailyupside.cmail19.com/t/t-l-qktlltt-jlkhiyjydl-y/"><span style="color: black;"><img alt="Image" border="0" src="http://i4.cmail19.com/ti/t/50/404/ECE/181918/images/logo.png" style="border: medium; margin: 0px !important;" tabindex="0" width="270" /></span></a></td></tr></tbody></table></td></tr><tr><td class="pb-20" style="padding-bottom: 20px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="text-12 a-center pb-8" data-ogsc="rgb(102, 102, 102)" style="color: rgb(162, 162, 162) !important; font-family: "Open Sans", Arial, sans-serif; font-size: 12px; line-height: 16px; min-width: auto !important; padding-bottom: 8px; text-align: center;"><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"><br /></span></p></td></tr><tr><td class="img-center pb-5" style="font-size: 0pt; line-height: 0pt; padding-bottom: 5px; text-align: center;"><br /></td></tr></tbody></table></td></tr></tbody></table></td></tr><tr><td><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="py-30" style="padding-bottom: 30px; padding-top: 30px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="text-16 px-18" data-ogsc="rgb(68, 68, 68)" style="color: rgb(192, 192, 192) !important; font-family: "Open Sans", Arial, sans-serif; font-size: 16px; line-height: 22px; min-width: auto !important; padding-left: 18px; padding-right: 18px;"><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Happy Sunday and Happy Father's Day.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"><br /></span></p></td></tr></tbody></table></td></tr></tbody></table><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="img pb-18" style="border-left-color: rgb(231, 231, 231); border-left-style: solid; border-left-width: 2px; border-right-color: rgb(231, 231, 231); border-right-style: solid; border-right-width: 2px; border-top-color: rgb(244, 211, 95); border-top-style: solid; border-top-width: 3px; font-size: 0pt; line-height: 0pt; padding-bottom: 18px;"></td></tr></tbody></table><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="pb-5 px-18" style="border-left-color: rgb(231, 231, 231); border-left-style: solid; border-left-width: 2px; border-right-color: rgb(231, 231, 231); border-right-style: solid; border-right-width: 2px; padding-bottom: 5px; padding-left: 18px; padding-right: 18px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="text-16 pb-20" data-ogsc="rgb(68, 68, 68)" style="color: rgb(192, 192, 192) !important; font-family: "Open Sans", Arial, sans-serif; font-size: 16px; line-height: 22px; min-width: auto !important; padding-bottom: 20px;"><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"><strong>Tale of the Tape: Warren Buffett and Cathie Wood</strong><br />Last Monday, the S&P 500 nearly took the rarest of tumbles. Every single one of the 504 stocks on the index was trading in the red. Only once since 1990 had such a uniform drop lasted to the end of a trading day.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">The painful trading session acted as a microcosm of markets in 2022 — just about everything is down.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Stock picking can be a nightmarishly tough game, even in the best of markets. This year, scrutiny on the financial world’s most famous quasi-celebrity stock pickers has reached a fever pitch. Perhaps no two names are bandied about more than Warren Buffett and Cathie Wood.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">They are two wildly different and uniquely successful investors. One is an old-school stock-picking legend, a sage Nebraskan who still lives in the modest Omaha house he bought in 1958 and has a fondness for railroads, utilities, and his beloved Dairy Queen. The other is a tech-savvy Californian, an investor in bleeding-edge innovation who uprooted her Wall Street fund from its Manhattan digs to sunny Florida last year.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Many place them on opposite poles of the investing spectrum, but their influence is so profound that analysts often cite their portfolios as economic indicators. And that’s what we’re looking at today — a tale of the tape between two heavyweights, why they inspire dedication from fans on par with Justin Bieber, and how their investing strategies led them to fame.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><strong><span style="color: black;">A Trip to the Buffett</span></strong></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Warren Buffett, as you probably know, is considered by many to be an investing genius. Tens of thousands of people — <em>fans</em> — flock to Nebraska to attend the annual general meeting of his company Berkshire Hathaway for the chance to hear Buffett, and his straight-talking lieutenant Charlie Munger, pontificate on the state of markets. One fan, in particular, agreed to pay $19 million this past weekend just to have lunch with Buffett, a record for a charity auction he has held since 2000.</span></p></td></tr></tbody></table></td></tr></tbody></table><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="pb-20" style="border-left-color: rgb(231, 231, 231); border-left-style: solid; border-left-width: 2px; border-right-color: rgb(231, 231, 231); border-right-style: solid; border-right-width: 2px; padding-bottom: 20px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="fluid-img img-center pb-20" style="font-size: 0pt; line-height: 0pt; padding-bottom: 20px; text-align: center;"><img alt="Image" border="0" height="314" src="http://i2.cmail19.com/ei/t/31/8B4/890/csimport/deepdiveimage1.065944.png" style="border: medium; margin: 0px !important;" tabindex="0" width="512" /></td></tr></tbody></table></td></tr></tbody></table><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="pb-5 px-18" style="border-left-color: rgb(231, 231, 231); border-left-style: solid; border-left-width: 2px; border-right-color: rgb(231, 231, 231); border-right-style: solid; border-right-width: 2px; padding-bottom: 5px; padding-left: 18px; padding-right: 18px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="text-16 pb-20" data-ogsc="rgb(68, 68, 68)" style="color: rgb(192, 192, 192) !important; font-family: "Open Sans", Arial, sans-serif; font-size: 16px; line-height: 22px; min-width: auto !important; padding-bottom: 20px;"><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Buffett, whose high school yearbook entry presciently called him “a future stock broker,” was born in Omaha in 1930 into relative privilege — his father was a four-term US congressman. But he built his business empire through sheer hard work. After selling chewing gum and magazines door-to-door as a kid in the 1940s, he and a friend in high school bought a used pinball machine and put it in a barbershop. They used the earnings to buy more machines, put them in other salons, and then sold the business for $1,200 in 1947.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">By 1962, after graduating from the University of Nebraska and Columbia Business School and forming three investment partnerships, he was a millionaire. Over the next few years, Buffett used his various investment vehicles to take out soon-to-be-lucrative stakes in American Express and Disney, the latter after a personal meeting with Walt himself. He also built up a 29% stake in a floundering textile business called Berkshire Hathaway, which he advised to start taking out positions in the insurance industry. In 1970, he became the company’s chair and CEO. The rest, of course, is history:</span></p><ul style="margin: 0px;"><li style="margin: 0px;"><span style="color: black;">With holdings in everything from batteries to undershirts to diamonds and private aviation, Buffett’s empire is a $600 billion behemoth that serves as a barometer for the overall US economy.</span></li><li style="margin: 0px;"><span style="color: black;">And he keeps finding success: In the twelve months ending in March 2022, Berkshire generated $276 billion in revenue, marking the second consecutive year of 12% or better year-over-year growth from the company’s core business — plus $78.5 billion of additional investment gains from Buffett and Munger’s steady bets like Bank of America, American Express, and Apple.</span></li></ul></td></tr></tbody></table></td></tr></tbody></table><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="pb-20" style="border-left-color: rgb(231, 231, 231); border-left-style: solid; border-left-width: 2px; border-right-color: rgb(231, 231, 231); border-right-style: solid; border-right-width: 2px; padding-bottom: 20px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="fluid-img img-center pb-20" style="font-size: 0pt; line-height: 0pt; padding-bottom: 20px; text-align: center;"><img alt="Image" border="0" height="512" src="http://i3.cmail19.com/ei/t/31/8B4/890/csimport/deepdiveimage2.070544.png" style="border: medium; margin: 0px !important;" tabindex="0" width="512" /></td></tr></tbody></table></td></tr></tbody></table><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="pb-5 px-18" style="border-left-color: rgb(231, 231, 231); border-left-style: solid; border-left-width: 2px; border-right-color: rgb(231, 231, 231); border-right-style: solid; border-right-width: 2px; padding-bottom: 5px; padding-left: 18px; padding-right: 18px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="text-16 pb-20" data-ogsc="rgb(68, 68, 68)" style="color: rgb(192, 192, 192) !important; font-family: "Open Sans", Arial, sans-serif; font-size: 16px; line-height: 22px; min-width: auto !important; padding-bottom: 20px;"><p style="margin: 0px !important; padding: 0px !important;"><span style="line-height: 1.2;"><strong><span style="color: black;">Knock on Wood</span></strong></span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Like Warren Buffett, Cathie Wood has superfans, but rather than flocking to rockstar-style AGMs they express their love at a different venue: Reddit, Twitter, and TikTok. The CEO of Ark Investment is one of the most popular investors among retail traders on social media, and her strategies have probably launched more memes than the Marvel Cinematic Universe. But Wood’s path to being at the vanguard of online, tech-savvy investors followed a conventional Wall Street pattern… until it didn’t.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Born a generation after Buffett in Los Angeles, Wood graduated from the University of Southern California in 1981 after studying economics. By age 25, she moved to New York to join the investment shop Jennison Associates as chief economist.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">In 1998, Wood took on the role of active investor, co-founding the hedge fund Tupelo Capital. In 2001, global asset firm AllianceBernstein named her chief investment officer of global thematic strategies, and she oversaw $5 billion in assets. And then, in 2012, the epiphany came.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Wood was inspired to start a firm of actively managed exchange-traded funds (ETFs) focused on disruptive innovation. The idea was to create an investment vehicle that harnessed the potential of high-growth companies and use ETFs — which anyone can buy like a stock — to make it accessible to everyday investors. AllianceBernstein thought it was too risky, so Wood left, put $5 million of her own savings into the venture, and Ark Invest was born.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">The rest, of course, is (recent) history:</span></p><ul style="margin: 0px;"><li style="margin: 0px;"><span style="color: black;">By 2020, a Bloomberg News headline dubbed Wood the "best investor you've never heard of," with Ark taking significant stakes in growth-focused stocks like Zoom, Roku, Square, and Shopify. The ETF share price increased over 300% in the 11 months from March 2020 to February 2021, peaking at $152 per share.</span></li><li style="margin: 0px;"><span style="color: black;">As of May, Wood’s flagship ARK Innovation ETF had $14 billion in assets under management and has become a barometer for high-growth sectors of the economy after Wood placed smart early bets on firms like Tesla.</span></li></ul><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">But 2022 has been a different beast entirely for the growth-focused tech firms populating Wood’s funds, testing the faith of die-hard Ark believers.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"><span style="line-height: 1.2;"><strong>Fork in the Road</strong></span><br />In the two years leading up to this year’s market downturn, Buffett’s Berkshire and Wood’s Ark ETF performed surprisingly similarly, despite their radically different investment approaches. Both delivered returns of roughly 35% in the 24 months leading to January.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">But then the economic picture flipped. Interest rates started to go up, inflation crept up (more like shot up), and the global economy was done no favors by the war in Ukraine and a new round of Covid lockdowns in China.</span></p></td></tr></tbody></table></td></tr></tbody></table><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="pb-20" style="border-left-color: rgb(231, 231, 231); border-left-style: solid; border-left-width: 2px; border-right-color: rgb(231, 231, 231); border-right-style: solid; border-right-width: 2px; padding-bottom: 20px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="fluid-img img-center pb-20" style="font-size: 0pt; line-height: 0pt; padding-bottom: 20px; text-align: center;"><img alt="Image" border="0" height="288" src="http://i4.cmail19.com/ei/t/31/8B4/890/csimport/deepdiveimage3.071747.png" style="border: medium; margin: 0px !important;" tabindex="0" width="512" /></td></tr></tbody></table></td></tr></tbody></table><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="pb-5 px-18" style="border-left-color: rgb(231, 231, 231); border-left-style: solid; border-left-width: 2px; border-right-color: rgb(231, 231, 231); border-right-style: solid; border-right-width: 2px; padding-bottom: 5px; padding-left: 18px; padding-right: 18px;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody><tr><td class="text-16 pb-20" data-ogsc="rgb(68, 68, 68)" style="color: rgb(192, 192, 192) !important; font-family: "Open Sans", Arial, sans-serif; font-size: 16px; line-height: 22px; min-width: auto !important; padding-bottom: 20px;"><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Suddenly, Buffett’s value investing approach, where a company’s fundamentals and a solid margin of safety matter above all else, was in vogue once again. Meanwhile, Wood’s strategy of concentrating on innovative tech firms focused on growth at the expense of profits — which thrived during the era of ultra-low interest rates — was exposed to an economic storm:</span></p><ul style="margin: 0px;"><li style="margin: 0px;"><span style="color: black;">Berkshire Hathaway, down just 6% this year, has weathered that storm. The S&P 500, down 21% on the year, has flirted with bear market territory in recent weeks. The Ark Innovation Fund is down 57%.</span></li><li style="margin: 0px;"><span style="color: black;">Arks’ $14 billion may be a fraction of the $40 billion it had in March, but Wood’s war chest is still on par with major hedge funds like Bill Ackman’s Pershing Square. Investors are also keeping the faith: Wood's nine ETFs at Ark brought in $167 million worth of capital inflows this year, according to Bloomberg.</span></li></ul><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"><strong>Can History Repeat?</strong> Wood, for one, sure hopes so. In the early 1980s, while still at Jennison, her bosses would bring in leading economists like Henry Kaufman — who believed the double-digit interest rates and inflation of the time were there to stay — to debate Wood, who thought interest rates had peaked.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Flash forward to earlier this month, when Wood said huge inventories now piling up at US companies after months of supply chain disruptions suggest inflation is ready to die down (retail giant Target cut its profit outlook twice recently, citing too much inventory). She’s also doubled down on the pandemic tech darlings that helped burnish her reputation as an investor — in April, Wood bought over 100,000 shares of e-commerce firm Shopify, 330,000 of Zoom, 740,000 of gaming site Roblox, and 575,000 of streaming device maker Roku after the stocks plummeted.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"><strong>So Who’s Right? </strong>Whether Wood can recapture the spark of the last few years remains to be seen, but her commitment to innovation remains admirable (or admirably stubborn, depending on your view).</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Take earlier this year, when Buffett said he believes Berkshire’s railway investments, namely its ownership of BNSF Railway, the largest US railroad by revenue, “will be a key asset for Berkshire and our country a century from now.”</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">But Wood's Ark Invest sees the railroad business differently. Ark published a “Bad Ideas Report” which included freight rail investment — and argued autonomous electric driving trucks were the future of shipping goods.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">And, while it may be Wood who is down now, Buffett has been there before. Berkshire has taken its fair share of <em>bitcoin-sized</em> tumbles over the years. In 1999 just as the internet economy was emerging in full force, Berkshire’s stock was down 20% and the Oracle of Omaha’s beloved S&P 500 up the same amount. A Barron’s article famously asked “What’s Wrong, Warren?” and quoted an internet forum user who called Berkshire a "middlebrow insurance company studded with a bizarre melange of assets, including candy stores, hamburger stands, jewelry shops, a shoemaker and a third-rate encyclopedia company the World Book."</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Buffett had the last laugh in that case, but it wouldn’t be his last tumble. Nor, would a reasonable market watcher say, that Cathie Wood’s current setback is likely to be her last.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"> </span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;">Who will be right? In their own way, both investors are playing the long game. We’ll just have to check back in 100 years.</span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="color: black;"><br /></span></p><p style="margin: 0px !important; padding: 0px !important;"><span style="background-color: white; caret-color: rgb(62, 62, 62); color: #3e3e3e; font-size: 14px;">Written by Sean Craig</span></p></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-31109501800586148622022-06-13T13:02:00.001-07:002023-06-09T13:03:54.546-07:00Market Rout 2022<p><span style="font-family: arial;"><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 11pt;">Well, I’m certainly not enjoying this. Today my portfolio fell another 6%. That means I’m down about 40% for this year so far, nearly twice as bad as the S&P 500. Is that worse than yours?</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 11pt; margin: 0in;"></p><div style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-size: 16px;"><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;"> </span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;">Hey folks. An update on market conditions, investment status, and general support.</span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;"> </span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;">This has been a terrible year for nearly every investor. Speaking for myself, my portfolio is now beaten down to a place I last saw in early April 2020. Two years of research, of analysis, of frugality to make funds available for investment, and of difficult decision making— all wiped out in a few months. This is a brutal experience requiring both grit to stay the course and self-care to soothe the pain. </span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;"> </span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;">2022 is why we invest for the long term. It is why we only put money into stocks (or ETFs or bonds or funds) which we can live without for as much as 5 years: sometimes it falls and has to claw its way back. Remember that money in the market is meant to someday pay for your children’s college, or a far-off dream vacation, or seed a second career, or for your retirement.</span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;"> </span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;">But I expect that right now you have serious doubts. You’re reconsidering your decision to have ever invested at all. You want to ‘rescue’ your money, to salvage what’s left of your portfolio. I know, because I feel that pull too.</span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;"> </span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;">As fearful and frustrated as we are, however, we don’t know what’s coming. We can only suspect, with history as our guide. I suspect that 2022 is the forest fire which clears the deadwood and creates fertile soil for new growth. If you sell now, all that ugly red in your portfolio, which represents lost value, becomes actual realized losses. You take a big hit, but then you’re out and you think you’re safe. But with inflation nearing 9% annually (the worst since the early 1970s!) you obviously can’t just put your cash into savings; if you just piggy-bank your money today you would literally be losing nearly 9% of value every year. So investing is necessary to even try to stay even, never mind build a future.</span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;"> </span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;">And what if the market doesn’t continue to fall? What if things level out next week, if we begin a long slow climb back? If you’ve sold your stocks, when will you feel confident enough to buy back in? How much of that eventual market rise will you miss because you’re on the sidelines waiting to be certain?</span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;"> </span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;">Timing the market is throwing darts at a moving target. You better have perfect aim because you’ll have to be right twice: Right about when to sell, and right a second time about when to buy back in.</span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;"> </span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;">Instead, reassess your holdings: remember that the stock price is merely a momentary measure of the resale value of one share of a company. Is there something fundamentally wrong with that business? Are sales falling? Is your business being outmaneuvered by a competitor? Losing executives left and right? In legal or regulatory trouble? Making seemingly bad strategic decisions? Or is it just that the value has dropped for no clear reason specific to the company?</span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;"> </span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;">Staying put requires serious fortitude, no question. But do you know what’s even harder? Being greedy when others are fearful: recognizing that if the stock is down, it might represent a tremendous value looking forward. Deciding to buy deeper into the company at a time like this— now that’s hard. What would a truly great investor do?</span></p><p class="MsoNormal" style="font-size: 11pt; margin: 0in;"><span style="font-family: arial;"> </span></p></div>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-498695274045035432022-05-10T13:13:00.001-07:002023-06-09T13:14:04.295-07:00It's Worse Still<p> <span style="background-color: white; caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial; font-size: 16px;">What a year 2022 has been so far. </span></p><div dir="ltr" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Arial; font-size: 16px;"><div dir="ltr">To be clear: I of course do not know if we’ve hit market bottom. But after the last several days of very harsh, near-panic selling across nearly all industries, today was a small bounce the other way. I really don’t think these conditions will last much longer. </div><div dir="ltr"><br /></div><div dir="ltr">“Be fearful when others are greedy, and be greedy when others are fearful,” Buffett says. So I’m getting greedy and doing some bargain shopping. </div><div dir="ltr"><br /><div dir="ltr">Shopify, DocuSign, PayPal, Moderna, Block (Square). What do these businesses have in common? Each is a hot tech business which leads or co-leads its industry; each offers a low-cost/low-debt operating structure; each is highly profitable. Most are household names, established brands with loyal customers. And as of end-of market today, May 10, they’re all over 70% below their 52-week high price. Shopify is 80% down. So even if these names were overpriced before— even if they were priced at <i>double </i>their ‘real’ value last year— then they’re still at a substantial discount today.<br /><br />Moving down the list a little, there are more excellent businesses at clearance prices. Match.com, Nvidia, Ford, Volkswagen, Salesforce, Adobe, and AirBnB are known, firmly-entrenched market leaders. They are all profitable, growing, and capably run. And they’re all priced at 40-60% off their <span data-ogsc="rgb(0, 0, 0)" style="caret-color: rgb(255, 255, 255); color: black;">2021 market highs</span>. </div><div dir="ltr"><br /></div><div dir="ltr">Have a taste for more risk? Netflix is off 75%, and Zoom is off 78%. I’m not a huge advocate of either at the moment, but neither do I think there’s anything fundamentally wrong with them and I don’t think they’re going anywhere.<br /><div><br /></div><div>Given what’s happening, buying shares in almost any business right now feels very very scary. What if the price continues to fall? What if these companies don’t turn it around? What if, because they’re so cheap, they get absorbed by another, larger business? The process of stock investing is never smooth, never easy. But if we lean into value when things look grimmest, facing down our fear of loss, and we are patient— the hardest thing to be— then we are rewarded handsomely.</div><div><div><br /></div><div><div data-ogsc="rgb(0, 0, 0)" style="caret-color: rgb(255, 255, 255); color: black;">As always, we’re talking about investment of cash you can’t imagine needing for 5 years. Because while the current market free fall can’t continue forever, we don’t know when it will reverse direction,or how bumpy the path back up might be.</div><div data-ogsc="rgb(0, 0, 0)" style="caret-color: rgb(255, 255, 255); color: black;"><br /></div><div data-ogsc="rgb(0, 0, 0)" style="caret-color: rgb(255, 255, 255); color: black;">I’m trying to be bold. And I am steadfast.</div><div data-ogsc="rgb(0, 0, 0)" style="caret-color: rgb(255, 255, 255); color: black;"><br /></div><div dir="ltr"><div class="WordSection1" style="page: WordSection1;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 12pt; margin: 0in;"> </p><p class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 12pt; margin: 0in;"> </p><p class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 12pt; margin: 0in;"><span style="font-size: 11pt; line-height: 1.2;"> </span></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 12pt; margin: 0in;"> </p></div></div></div></div></div></div></div>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-64825100455486921042022-05-05T13:07:00.003-07:002023-06-09T13:11:55.993-07:00Terrible Day in the Market<p><span style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: arial;">Today was a doozy. I’m sure those of you who watch the markets closely are aware of today’s rout, and some of you might be panicking. For those who don’t check their portfolio regularly: good for you, you missed a harrowing experience.</span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><b><span style="line-height: 1.2;"><span style="font-family: arial;">Hideous Day</span></span></b></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="line-height: 1.2;"><span style="font-family: arial;">Today the S&P 500 index lost 3.56%, and the Nasdaq fell 4.99%. Personally, I’m down 6.02% for the day, as I hold substantial exposure to several businesses which were beat up even worse: Shopify (<a data-ogsc="" href="https://finance.yahoo.com/quote/SHOP?p=SHOP&.tsrc=fin-srch" style="color: #0058b9;" title="https://finance.yahoo.com/quote/SHOP?p=SHOP&.tsrc=fin-srch">SHOP</a>) in particular dropped nearly 15% today on a bad quarterly earnings report on top of the broader ugliness.</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><b><span style="line-height: 1.2;"><span style="font-family: arial;">Not the Worst</span></span></b></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="font-family: arial;"><span style="line-height: 1.2;">But in fact, today was far from one of the worst. </span><span data-ogsb="white" data-ogsc="rgb(34, 34, 34)" style="background: 0% repeat rgb(255, 255, 255); color: #1c1c1c; line-height: 1.2;">On October 19th, 1987— the infamous “Black Monday” crash— the S&P 500 index fell 20.47%.</span><span style="line-height: 1.2;"> </span><span style="line-height: 1.2;">And as recently as March 16, 2020, it fell 12%. I was in the red that day by 12.45%, absolutely brutal and the sort of day that scares every investor. I was shaken. But I didn’t sell. I gatheredmy courage (there may have been whiskey), and leaned into my experience and my investing heroes. By the end of 2020, my portfolio had rocketed back up, and I had by far the best year of my career. If— like most ‘mom-and-pop’ investors who watch the market too closely— if I had sold that day in a panic, I wouldn’t have known when to start buying again, and I would have missed out entirely.</span><span style="line-height: 1.2;"></span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><b><span style="line-height: 1.2;"><span style="font-family: arial;"> </span></span></b></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><b><span style="line-height: 1.2;"><span style="font-family: arial;">What Matters</span></span></b></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="line-height: 1.2;"><span style="font-family: arial;">Because really, it’s not what happens in the market day to day that matters. It’s how you respond. An investor who panic-sells into a falling market is no different than one who FOMO buys into a rising market: that is <i>market timing</i>. And as I’ve said here before, over the long run a market timer will always lose.</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><b><span style="line-height: 1.2;"><span style="font-family: arial;">Be Like Buffett</span></span></b></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><b><span style="line-height: 1.2;"><span style="font-family: arial;"> </span></span></b></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="font-family: arial;"><i><span style="line-height: 1.2;"> “Be fearful when others are greedy. Be greedy when others are fearful.” </span></i><span style="line-height: 1.2;">— Warren Buffett<i></i></span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="line-height: 1.2;"><span style="font-family: arial;">Today was a day of fear. Today Wall Street feared raging inflation, a Federal Reserve crackdown which could launch a recession, Covid factory closures in China, a supply chain still not close to normalized, oil supply constraints due to Russia’s invasion and even the possibility of a nuclear. Yesterday I read the argument that a Supreme Court repeal of <i>Roe v Wade</i> will over time reduce women in the workforce, thereby constraining US productivity and economic growth. A lot to be afraid of, so not a surprise when we see a rout like we did today. What to do? Be greedy: <i>Buy</i>. Prices for many outstanding businesses are at a 2- year low point, and values are everywhere. This can’t go on forever. Soon some big-deal pension fund or mutual fund manager will decide it’s time to get back in, and that will drive a surge which will catch on. There will be a single day not long from now when the markets will rise 5%. And even if you buy into a business which falls some more before it turns, at these prices you probably still got a steal.</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="line-height: 1.2;"><span style="font-family: arial;"> </span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="line-height: 1.2;"><span style="font-family: arial;">Days like today are a test. It’s the big roller coaster plummet: are you sure you have the stomach for this? Do you believe in capitalism, and in the American economy over the long haul? Here’s a proxy for the stock market, 1789-2014:</span></span></p><br /><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Calibri, sans-serif; font-size: 16px; margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDxDdosrW9eARG013ub8cs43kfEGTdUPNe49ke18OsKo-P0ZHR1dsohVPtmrkdg6LQ9sX3gWVevCalLHyDBMGHEGa-2g75FQlmpislwZpJ0YE-zg7Nm5egDd0v9YS2DOUPKW6FBMYjNjAOC2jOkbHbjwr5DYALTOS3-yvAoqBtzGD_NfbO29GL8yxG/s1023/Stocks%201775-present.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="765" data-original-width="1023" height="480" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDxDdosrW9eARG013ub8cs43kfEGTdUPNe49ke18OsKo-P0ZHR1dsohVPtmrkdg6LQ9sX3gWVevCalLHyDBMGHEGa-2g75FQlmpislwZpJ0YE-zg7Nm5egDd0v9YS2DOUPKW6FBMYjNjAOC2jOkbHbjwr5DYALTOS3-yvAoqBtzGD_NfbO29GL8yxG/w640-h480/Stocks%201775-present.jpg" width="640" /></a></div><span style="font-family: "Calisto MT", serif; font-size: 11pt; line-height: 1.2;"> </span><p></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Calibri, sans-serif; margin: 0in;"><span style="font-family: "Calisto MT", serif; line-height: 1.2;"><br /></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; margin: 0in;"><span style="line-height: 1.2;"><span style="font-family: arial;">That massive long-term upward trajectory, with all its brief jags and drops— that’s the path we’re on. Stay on the path.</span></span></p><p class="MsoNormal" style="caret-color: rgb(29, 29, 29); color: #1d1d1d; font-family: Calibri, sans-serif; margin: 0in;"><span style="font-family: "Calisto MT", serif; line-height: 1.2;"> </span></p><p></p><br />Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-6476669657102030992020-05-14T16:15:00.000-07:002020-05-15T12:11:31.718-07:00Why Aren't You Back in the Market?<div class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in 0in 0.0001pt;">
The last week of February and the first three weeks of March were, inarguably, hideous for the stock market. Terrified investors selling equities for whatever they could get and running for the hills (okay, stuffing the money under the living room rug). Uncertainty. Worry. Job losses. School closures. Office closures. No eating out/sports/ parties/parks. <i>Plague</i>became a term not from history or science fiction, but an everyday reality. Stocks plummeted, seeing drops of 30-35% almost across the board. <o:p></o:p></div>
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And then, as though someone flicked a switch, on March 24 the market bounced. With a few hiccups, it’s been climbing since. The Standard & Poors 500 index is up about 22% today from its March low, recovering 2/3 of its pandemic recession/depression drop. So if you had bought for the first time at the market bottom, your assets would be worth 22% more today than just two months ago, which is an insanely fast rise.<o:p></o:p></div>
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So why are you still sitting on the sidelines?<o:p></o:p></div>
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Likely it has to do with continued fear. You are afraid the market is going to drop again. Afraid that the market is disconnected from the actual US economy, given our horrific economic state, soaring unemployment, continued lockdowns and ongoing social distancing. Afraid that other investors must be nuts driving up stock prices in the teeth of the pandemic and impending business ruin. Afraid you’ll soon need the money you have stashed away, as your personal employment status suddenly got a lot less stable. <o:p></o:p></div>
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To the last one of these, I say good for you. You should always have enough savings to see you through for a while— if you can afford it, you should have stable savings sufficient for three years or so: cash, money market funds, corporate and municipal bonds whose prices fluctuate relatively little and can be sold for cash to pay living expenses. <o:p></o:p></div>
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And, it bears reminding that the stock market is <i>not</i> the actual economy. In fact they’re only distantly related, regardless what the current occupant of the White House believes. The economy is the state of earnings and expenditures and capital investments <i>right now</i>, whereas the stock market is forward-looking, concerned with what will be happening next quarter, next year, next 5 years. <o:p></o:p></div>
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But if we’re talking about your nest egg, your 20-year retirement savings or your 5<sup>th</sup> grader’s college fund or something similar, <b>money you don’t plan to need for at least 5 years</b>, you should be jumping back into the stock market with both feet. Because it’s moving without you. <o:p></o:p></div>
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Let’s be clear, however: the market is not moving together, of a piece. Entire industries are suffering and remain in great danger due to poor economic conditions and a bleak outlook. This is not a time to be buying index funds and other broader-market, diversified assets. This is a moment for microtargeting. This is a moment for the tactical stock-picker. <o:p></o:p></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjD8yHGfHofAZ-ah0E6p0m5xlBf11PjH_OLrsSzZ0KPrKUZqy4Ug0PNSljQ14FDu0RfPFay6CZJ8n-65zVgF5F83Nc4Ko6teZ3QCHRFB-nHOUcxiB0urXGF0Q_aN26FwhszRk-Ymy61WZ8/s1600/20200514-123356_1589459636444.jpg.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="314" data-original-width="480" height="261" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjD8yHGfHofAZ-ah0E6p0m5xlBf11PjH_OLrsSzZ0KPrKUZqy4Ug0PNSljQ14FDu0RfPFay6CZJ8n-65zVgF5F83Nc4Ko6teZ3QCHRFB-nHOUcxiB0urXGF0Q_aN26FwhszRk-Ymy61WZ8/s400/20200514-123356_1589459636444.jpg.png" width="400" /></a>In this environment, certain types of businesses will be absolutely crushed. Many of us can’t go out, and even more of us are choosing not to. Which means a company that depends on customers physically showing up is not likely to recover soon. Live sports and concerts, theaters, theme parks, restaurants and bars, ride sharing and home sharing, shopping malls, airlines, cruises, hotels, gym chains— all are tightening their belts, cutting hours and staff, accepting help from government or private equity to flesh out their cash positions, figuring out how to ride this thing till the moment changes. So immediately we can rule out these businesses as viable investments in the near term. <o:p></o:p></div>
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But on the other side of that coin are all the companies which are likely to do <i>well</i> in exactly this environment, or which are already succeeding: Online shopping. Software as a service (SAAS). Social media. Video conferencing. Remote documentation. Cloud storage. Streaming video. Digital/mobile payment processing. Gaming. None of these requires customers— or in many cases, even <i>employees— </i>to be present in person to conduct business. And some are actually designed to be distance-based businesses, down the their formative DNA. <o:p></o:p></div>
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Not surprisingly, many companies in this category have done well since the start of the current crisis. Several larger businesses have actually become <i>more</i> valuable in 2020, suffering no stock price drop whatsoever as they are able to leverage an environment where many people are stuck at home most or all of the time. Amazon (<a href="https://finance.yahoo.com/quote/AMZN" style="color: #954f72;">AMZN</a>), Microsoft (<a href="https://finance.yahoo.com/quote/MSFT" style="color: #954f72;">MSFT</a>), Facebook (<a href="https://finance.yahoo.com/quote/FB" style="color: #954f72;">FB</a>), Google (<a href="https://finance.yahoo.com/quote/GOOG" style="color: #954f72;">GOOG</a>), and Apple (<a href="https://finance.yahoo.com/quote/AAPL" style="color: #954f72;">AAPL</a>)— often referred to collectively as<i> FAGA or FAMGA </i>(though Google is technically now a subsidiary of Alphabet)—<i> </i>have all seen their stock prices rise so far this year. In fact, these five are now so massive, worth roundly $1 trillion each, that they together make up 20% of the value of the entire S&P 500. And they’re still growing.<br />
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<span style="font-family: "helvetica"; font-size: 8pt;">The big 5 held up against the smallest 350 companies in the S&P500. </span></div>
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<span style="font-family: "helvetica"; font-size: 8pt;">They </span><span style="font-family: "helvetica"; font-size: 8pt;">represent </span><span style="font-family: "helvetica"; font-size: 8pt;">20% of the entire index – </span><i style="font-family: Helvetica; font-size: 8pt;">Y Charts</i></div>
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So that’s one way to invest: only buy the giants, the companies not just strong enough and rich enough to weather the downturn but whose very structure and product offerings make them uniquely viable in a time of dire economic stress.<o:p></o:p></div>
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Yet if we pull back further and look at a larger number of businesses likely to benefit from this trying time, there are many more to choose from. Zoom (<a href="https://finance.yahoo.com/quote/ZM?p=ZM" style="color: #954f72;">ZM</a>) and Docusign (<a href="https://finance.yahoo.com/quote/DOCU" style="color: #954f72;">DOCU</a>; online document editing, secure signature and storage). PayPal (<a href="https://finance.yahoo.com/quote/PYPL" style="color: #954f72;">PYPL</a>) and Twitter (<a href="https://finance.yahoo.com/quote/TWTR" style="color: #954f72;">TWTR</a>). Salesforce (<a href="https://finance.yahoo.com/quote/CRM" style="color: #954f72;">CRM</a>; cloud-based customer relationship software) and Shopify (<a href="https://finance.yahoo.com/quote/SHOP" style="color: #954f72;">SHOP</a>; online retail storefront software, hosting, payment processing). Wayfair (<a href="https://finance.yahoo.com/quote/W" style="color: #954f72;">W</a>; internet furniture market) and Activision Blizzard (<a href="https://finance.yahoo.com/quote/ATVI" style="color: #954f72;">ATVI</a>; downloadable and online gaming). Netflix (<a href="https://finance.yahoo.com/quote/NFLX" style="color: #954f72;">NFLX</a>) and Home Depot (<a href="https://finance.yahoo.com/quote/HD" style="color: #954f72;">HD</a>). A number of these businesses have seen a surge in customers and sales since the start of the pandemic; some are runaway hits. All are well-run long term businesses with quality products, strong competitive positioning, a healthy balance sheet and a viable plan for the future. Their impressive results are in defiance of a moment when the rest of the economy is doing so poorly, and they are largely responsible for the stock market’s substantial rise since late March. <o:p></o:p></div>
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America’s favorite career investor, Warren Buffet, has often said that one of the keys to his success has been “to be fearful when others are greedy, and greedy when others are fearful.” In other words, when many investors are jumping into a fast rising stock market, it might be time to pull back... But when other investors are apprehensive and worried about falling prices, it’s probably a good time to buy.<o:p></o:p></div>
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Right now, I choose to be greedy.<br />
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By all means, reach out and ask me a question, or pick my brain a little. I love chatting strategy, and I'm always happy to talk stocks. </div>
<br />Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-26350269766933287222020-04-13T15:58:00.001-07:002020-04-13T16:01:35.920-07:00The Stocks I’m Buying Right Now<br />
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Hello readers! I hope your families are safe and healthy. It’s been quite a while since I wrote in this space, so I appreciate you stopping by. I’ve been talking to and exchanging messages with a number of you about the crazy stock market lately and figured maybe it was time to just put my thoughts up on my old blog. I you find this helpful. <o:p></o:p></div>
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The 4-½ trading weeks from February 20 to March 23, 2020, the time most people realized the scope of the Coronavirus pandemic, were hideous. We saw astonishing price drops in record time: the Standard & Poor’s 500 Index fell 35% from its highs on February 19. <o:p></o:p></div>
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But since then it’s been on another tear, rising fast from the depths to recapture some of the value lost in the teeth of the outbreak. The gains seem to be almost everywhere, but in particular within certain sectors and even in specific businesses. Today I’ll try to describe what I’ve been buying and why. <o:p></o:p></div>
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Many of you, I’m sure, did not sell any of your holdings as things began to really fall at the end of Feburary. You thought it would get better soon, or you were working and never had a chance to get into your portfolios to make a move. Your inactions have generally been rewarded now, with substantial gains from the low point. The S&P is now just down only 14% for 2020, a much more tolerable scenario than what we saw a few weeks ago. But equally some of you probably sold everything within a few days of the top, unwilling to risk that your nest eggs might whither to zero. Hopefully now you’ve started to buy back in and haven’t missed too much of the current rally.<o:p></o:p></div>
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That’s the trick when you sell into a sliding market; you have to time it exactly right, not once, but twice: identifying the start of a long drop to sell, and then choosing just the right moment, the true bottom, to buy back in. <o:p></o:p></div>
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It's a difficult thing. As the saying goes, you don't want to 'try and fail to catch a falling knife.' I look at it like this: imagine you have your eye on a pair of pricey headphones. You want them, but they're just too much and you can't quite justify the purchase. Then one day they're on sale for 20% off. Do you grab them? Or do you roll the dice, hoping they drop further to 30% or 40% off? Does it change the calculus to consider that these headphones will likely increase in value the longer you own them?</div>
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I find I'm happy with a 20% discount, more or less where much of the stock market is right now. But the truth is, you can have it both ways; just don’t move all at once. Stocks are not a purchase you need only 1 of, they are something you can invest in anytime, in any quantity. Something which over time generally increase in value. </div>
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So here's how it went for me. When things first turned south I didn’t act. At the time the virus was only beginning to get reported within the US and I wasn’t sure how much impact it would have. Then when the market started falling, and kept falling, and <i>kept</i> falling, it became clear that just sitting on my hands was not the appropriate reaction. I was as fearful as anyone. But I knew that what I ought to be (opportunistic as it sounds), was <i>greedy</i>. Prices were dropping, so my opportunities were growing. <o:p></o:p></div>
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First I sold my losers: any stocks I owned which were in the red overall (which were below my purchase price) I sold immediately to recover what cash I could, and later to use those losses on my taxes to offset capital gains elsewhere. This is called ‘tax-loss harvesting’ and is a technique I use routinely on holdings that have not performed as I predicted when I purchased them. In a falling market, no sense letting good red ink go to waste. Hanging on in a time of volatility and uncertainty because “you just want to get back to even” is a bad plan. You can still take advantage now, selling your less successful stocks to recapture the cash and leverage the losses.<o:p></o:p></div>
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As I continued to watch the fall, I (slowly) began to think tactically. Which industries/businesses were going to be hit hardest? What are consumers avoiding, and what is getting forcibly closed by government order? Those would have the worst of it. I looked at airlines, cruise companies, gymnasium chains, restaurant businesses, sports arenas and concert venues. I sold what I owned in those areas—though I didn’t act fast enough on my gyms. Even if my investment was still net positive, I wanted out before and in case things got really ugly. I was beginning to build a small pile of cash for eventual purchasing. </div>
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Then it was a waiting game. What industries would come back first? What would do particularly well in an economic shutdown? What would consumers actually <i>do</i> in lockdown? Which businesses would have enough cash on hand (or a lack of crushing debt) to enable absorption of a prolonged shutdown? Which industries will be considered “essential” and be bailed out by the government? What kinds of things will suffer a sort of pent-up demand, and then blast off when restrictions lift? I bided my time poking around for ideas and supportive analysis.<o:p></o:p></div>
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By March 26 things looked like they had turned. I was still suspicious that it was a false bottom in the market, but I was also concerned that government bailout funds would come fast and would trigger huge gains in certain areas. I actually moved too soon with my first purchase: <a href="https://finance.yahoo.com/quote/JETS" style="color: #954f72;">JETS</a>, the only airline-focused US exchange-traded fund (a grouping of companies that can be bought or sold as a block, like a stock). I knew airlines are viewed as critical national infrastructure by most economists, so I was certain the Feds would either give or loan many billions of dollars to prop up this sector. Turns out that <i>is</i> happening as I predicted, but it’s coming about more slowly and with lots of pushback and questions regarding what sort of funding they’ll receive. So while I remain confident about airlines in general, that purchase is currently yielding no gains.<o:p></o:p></div>
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Next I thought about a streaming service, like <a href="https://finance.yahoo.com/quote/NFLX" style="color: #954f72;">Netflix</a>. (show me someone who’s not watching more TV these days). Turns out Netflix didn’t take it on the chin like most of the market, and in fact seems to have bottomed nearly a week before everything else. Probably for exactly the reason I was considering it myself. I was late on that buy, but still it’s been a winner.<o:p></o:p></div>
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Clearly, <a href="https://finance.yahoo.com/quote/AMZN" style="color: #954f72;">Amazon </a>is going to do well in an environment where we can't really leave the house. Their businesses are tailor-made for this moment: speedy shopping and delivery of just about anything, groceries included. Home electronics and smart speakers. Streaming video. The video-game spectating platform Twitch. And, behind the scenes, Amazon is also <i>by far</i> the largest and most profitable provider of cloud-storage services for other companies (Netflix among them). Even in the face of millions of layoffs in the US, Amazon is <i>hiring</i> like crazy right now, attempting to keep up with demand. I can’t see a downside to buying more Amazon… other than that a single share is currently over $2100. So that’s a limitation for most of us.<o:p></o:p></div>
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<a href="https://finance.yahoo.com/quote/SHOP" style="color: #954f72;">Shopify</a>, too, has surged in the last few weeks, though it had a bumpier bounce. Shopify provides online storefronts and back-office order processing for hundreds of thousands of online businesses, and has become one of the default go-tos for many mom-and-pop retailers and startups. They’ve been a fast grower over several years and likely will get a shot of adrenaline in a moment like this. <o:p></o:p></div>
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I kept looking. What other companies are having a once-in-a-century moment? I doubled down on <a href="https://finance.yahoo.com/quote/COST" style="color: #954f72;">Costo</a>, for which shoppers are lined up at the front doors every morning looking for toilet paper, wine, beef, sweatpants and canned tuna. I opened a small position in <a href="https://finance.yahoo.com/quote/PTON" style="color: #954f72;">Peloton</a>, which makes expensive stationary bikes with built-in video to connect to streaming spin classes run by its own coaches— and a separate app available for anyone even without their equipment. <a href="https://finance.yahoo.com/quote/FB" style="color: #954f72;">Facebook</a>, because our relationships all exist exclusively online for the moment and because in the runup to the 2020 election Facebook has <i>finally</i> been taking action on limiting misinformation on their platform, as well as to begin properly protecting users’ data. Not to mention they’ve got a ton of cash on hand to fund their way through a slump. <a href="https://finance.yahoo.com/quote/MSFT" style="color: #954f72;">Microsoft </a>has been just killing it the last few years, and while we all know their personal and business software products, the fast-growing Azure cloud platform for business has seen a surge recently... not to mention they’re loaded, too. As I mentioned above, after I didn't sell my gym chain stock in time, I actually bought more in the form of <a href="https://finance.yahoo.com/quote/PLNT" style="color: #954f72;">Planet Fitness</a>. Planet Fitness is known for its uniquely memorable ‘no lunkheads’ ads and for valuing members’ comfort and sense of no judgment more than most competitors. Planet Fitness also has a strong balance sheet, a high cash-to-value for its recurring monthly members: generally an industry-low $10/month.</div>
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Finally, I looked at one of my perennial favorites, <a href="https://finance.yahoo.com/quote/DIS" style="color: #954f72;">Disney</a>, despite a decade of underperformance. Disney has been indisputably devastated by the outbreak as they’ve taken body blows from no less than 4 directions: the entire Disney cruise line is currently docked; ESPN, its wholly-owned sports network, has nothing to broadcast; cinemas are closed, so all the usual blockbuster summer movies have been pushed back indefinitely; and of course Disney’s ubiquitous theme parks around the world are shuttered. Disney stock is actually at the same price today that it was in February 2015, around $105. But their new streaming platform, Disney+, is in high demand. And I am confident that cruises, movies, global Disneyland visits, will return soon enough, never mind that our ravenous appetites for sports viewing will provide another big boost. Now <i>that’s</i> pent-up demand.</div>
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But to be clear, I do not know that the market won’t fall again soon. Earnings season is upon us, and most business analysts and economists are expecting horrifically bad news to at least put the brakes on our current rally. Unemployment has gone ballistic, and all those jobless people will not be shopping, traveling, or aiding the overall economy for a while. Even as some parts of the country have seen the top of a flattened pandemic curve, rural communities are still weeks away from peaking on outbreaks and deaths, and we don’t know if hospitals in those areas will be able to handle the coming surge. All these things make me worry, and make me cautious. <o:p></o:p></div>
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So I’m buying stocks now, yes. But also I’m only buying a little here and there, a few shares at a time. I’ll pick up a few shares on Monday, a few more on Thursday, still more in a week and then in a month. Instead of timing the market, I’m cost-averaging over a longer period. That way, in case the market continues to fall, I can keep buying as prices improve, remaining confident in my overall investment thesis and in the US economy’s ability to just keep chugging along. Eventually we’ll be on the other side of this moment, and the market will regain both stability and strength as job numbers improve and consumer sentiment— and spending— grows along with it. <o:p></o:p></div>
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So stay the course, friends. Do your research. Act slowly, act with baby steps, but act with conviction. And as always, never invest money you need in the next 3 years. This is <i>long-term</i> investing. This is for your child’s eventual wedding, for your parents’ late-life care, for your retirement.<o:p></o:p></div>
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Feel free to <a href="mailto:robin@zagaco.com">reach out to me</a> with questions. I may not communicate often, but I’m not going anywhere.<o:p></o:p></div>
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<br />Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-65492826303545321422016-10-05T16:58:00.001-07:002016-10-13T10:39:21.028-07:00Assembling a Portfolio in Weird Times<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEikoaqs3rdDGpFHKuGqH8UWBx9vqDbrx5eEd7YtOGVPpYca97FbXdyATY_Ijjx60L1Xwk9SaA8rGiUDhICsM28hcScRdV35R5uNEMBTSRZ0RxsWIPKMMbk75khllQe2JfXhwJdRJn5bY5o/s1600/378a1740-17d1-4ac2-be76-5c9cd8337c21.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="144" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEikoaqs3rdDGpFHKuGqH8UWBx9vqDbrx5eEd7YtOGVPpYca97FbXdyATY_Ijjx60L1Xwk9SaA8rGiUDhICsM28hcScRdV35R5uNEMBTSRZ0RxsWIPKMMbk75khllQe2JfXhwJdRJn5bY5o/s200/378a1740-17d1-4ac2-be76-5c9cd8337c21.jpg" width="200" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Match.com</td></tr>
</tbody></table>
It may not seem the case, but not everything is really about the election— even five weeks out from November 8.<br />
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In fact, I've found what I do to be a stark relief from the endless round-and-round of posts and tweets, candidates and spin doctors, journalists and pundits, all trying to sell me on a reaction or a policy or a vote. Stock investing is frequently made out to be vulnerable to political outcomes, but it isn't really. Not usually.<br />
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I may be in the minority on this. There seem to be gobs of articles on how one industry or another will suffer if Clinton is elected, or what horrors will befall the broader markets if Trump gets the job. Most of it is hogwash. Truth be told, during each of the most recent four big-growth periods for the US stock market, the political affiliation of the American president has shown no favoritism: Eisenhower (R) in the 1950s, Reagan (R) in the 1980s, Bill Clinton (D) in the 1990s, and Obama (D) in the 2010s. Despite popular arguments, economic expansion or contraction during any given administration actually has more to do with the <i>previous </i>presidential administration's impact than with that of the current one.<br />
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhnTCV8kdSnEvhbDygBLto0K7khRCxYDAzJIoSK98Edd1xi3NldAj-PeEZdpa4JSCQQVg9Qd7lERM6nGvkSXEqAZxi9oxQy6lBe37Nh95JaxaHPPKylop8FrBb0M-Zi3JRQT_IKft6buqI/s1600/20160224041752-under-armour-soccer-ad-3.jpg" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhnTCV8kdSnEvhbDygBLto0K7khRCxYDAzJIoSK98Edd1xi3NldAj-PeEZdpa4JSCQQVg9Qd7lERM6nGvkSXEqAZxi9oxQy6lBe37Nh95JaxaHPPKylop8FrBb0M-Zi3JRQT_IKft6buqI/s320/20160224041752-under-armour-soccer-ad-3.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Under Armour</td></tr>
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Which is not to say that an election doesn't sway markets: it certainly does, but not in a way which matters to you and me. Right now, we're seeing big market swings day to day, in large part a reaction to daily news about who's in front, what was said at the debate last night and so on (as well as many factors totally unrelated: interest rates, China, Brexit ...). Not to mention that in 2016 there is one uniquely ill-informed and volatile candidate. All of which creates tremendous uncertainty about world order in general and the resulting business climate. But the difference is this: <i>all the uncertainty and fear is short-term, and we invest long-term. </i>What the S&P 500 does from one day to the next is immaterial if we are buying stocks to hold for a minimum of 3 years. Stocks overall rise over 60% of the time. That's 2 years out of every 3. Financially speaking, who cares what happens just between 9:30 and 4 tomorrow, or even for the next couple of months?<br />
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When investing in a business for years to come, it is essential to focus on the <i>business</i>. Don't try to time purchases to when "things calm down" or "the election is behind us" or "prices cool." That's an impossible task to carry out correctly, and amounts largely to guesswork. Who's to say that the election won't give stocks a huge push, increasing prices? Or that some international event doesn't keep things stirred up?<br />
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjI3PFxMHg5kYtr_49S7nT5RGgwz5dpn4JQ12xFXflT0ewywgNd4X7KNjQVwAQW__A_VdFu_8b3MLj3AvSY3ySq5oidGi58y4wRmzvyEH_XfFwdsgBzcn1SppIioxkpGt17WbKJewm5BX0/s1600/1412463371744_wps_3_AP8W7A_Humberside_police_.jpg" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="132" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjI3PFxMHg5kYtr_49S7nT5RGgwz5dpn4JQ12xFXflT0ewywgNd4X7KNjQVwAQW__A_VdFu_8b3MLj3AvSY3ySq5oidGi58y4wRmzvyEH_XfFwdsgBzcn1SppIioxkpGt17WbKJewm5BX0/s200/1412463371744_wps_3_AP8W7A_Humberside_police_.jpg" width="200" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Taser</td></tr>
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The better bet is to continue doggedly, season in and season out, to choose businesses led by bright, motivated, transparent people who care more about customers than about the stock price. Businesses with little debt and strong growth. Recognizable and respected brands with excellent products or services, whose competition is way behind. (Read last year's column, <a href="http://driftingtofifty.blogspot.com/2015/06/6-critical-criteria-for-investing.html">6 Critical Criteria for Investing</a>).<br />
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These businesses are not particularly concerned with who currently runs the government, as they are looking further out than four or six years. They shift the dynamic, and change the conversation. Do you not 'Google' the answer to every imaginable question? Shop first for a tricky item at Amazon? Drink Starbucks lattes, depend on an Apple or Samsung smartphone, communicate with friends via Facebook, put most every purchase on a Visa card? These companies change consumer buying patterns, reshape industries, sometimes even alter our very lives. They measure success in millions— or billions— of customers over decades.<br />
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipMSR0kVosrKilqeudquTGUhuI-aOnIoXw01XVJ_2QC6V1xH3HmhZ2pVujV2Wa4JnDceTvkKwKpWKolJZcjuQeMNsJz5lxuWxPjPlG3L8p5Er9xKU8u4MCW2XcTerNr7O6NuFi_LUgt5o/s1600/5027811316_072a1dd54d.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="102" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipMSR0kVosrKilqeudquTGUhuI-aOnIoXw01XVJ_2QC6V1xH3HmhZ2pVujV2Wa4JnDceTvkKwKpWKolJZcjuQeMNsJz5lxuWxPjPlG3L8p5Er9xKU8u4MCW2XcTerNr7O6NuFi_LUgt5o/s200/5027811316_072a1dd54d.jpg" width="200" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Planet Fitness</td></tr>
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They are visionary companies. They will dream up journeys to Mars (Tesla), demilitarize the police (Taser), and introduce us to our future loved ones (Match Group). They protect us from hackers (FireEye), keep us healthy on a budget (Planet Fitness), and take on international conglomerates (Under Armour). They will continue to perform and innovate and delight customers everywhere.<br />
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Even a frustrating and consuming election season is nothing but a blip. Don't let it impact your investment plan.<br />
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<span style="font-family: inherit;"><span style="font-family: inherit;"><i style="color: blue; font-family: inherit;"><b><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;">Drifting to Fifty</span></span></b></i><span style="color: blue; font-family: inherit; font-size: small;"><span style="font-family: "georgia" , "times new roman" , serif;"> </span>| Random unrelated nugget</span></span></span><br />
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;">An asset is
something which puts more money <i>into</i>
your pocket every year, and a liability is something which takes more money <i>out</i> of your pocket every year. Which one
is your house?</span>Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-11619833536110609772016-07-17T12:37:00.002-07:002016-07-18T14:18:06.827-07:00The Buy Now List - Updated for Summer 2016<span style="font-family: inherit;"><span style="font-family: inherit;">Just a few weeks ago I wrote a post about the no-movement stock market, the forces holding it back, what I thought would happen next and what not to do (<i>don't</i> sell and buy a boat). You can find <a href="http://driftingtofifty.blogspot.com/2016/06/gracefully-navigating-frustrating-go.html">that article here</a>. </span></span><br />
<span style="font-family: inherit;"><span style="font-family: inherit;"><br /></span><span style="font-family: inherit;">Since then, the market has finally begun to move upwards. Brexit's immediate negative impact on US stocks was reversed and forgotten within about a week. The S&P 500 reached a new high a few days ago, topping its best from mid-2015. If you're not fully invested in stocks right now, you're missing out.</span></span><br />
<span style="font-family: inherit;"><span style="font-family: inherit;"><br /></span><span style="font-family: inherit;">But also since then there have been some news items worth considering when it comes to choosing specific stocks to get into today. So for those of you who can <i>truly</i> buy and hold— aiming for a 3-5 year window— here is my revised <b>Buy</b> list:</span></span><br />
<span style="font-family: inherit;"><span style="font-family: inherit;"><br /></span><span style="font-family: inherit;">Apple (<a href="http://finance.yahoo.com/q?s=aapl">AAPL</a>): No longer the astonishing growth story it's been for the last 15 years, Apple is still one of the most powerful money machines in the world, yet the stock is clearly on sale. Even if Apple is selling fewer iPhones than it was, the company is massively profitable and will continue to be so. In the next few months they will release the iPhone 7, which holds promise as many buyers of the iPhones 5 and 6 still have not upgraded, potentially waiting for the 7 to arrive. In addition, Apple Music will be revamped and easier to use, for release in October; Apple Watch II will be faster and more useful; AppleTV is expanding its reach into the smart home, and on the horizon lies the Apple car, sure to make a dent on an old and stagnating industry.</span></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghVqQBGWhEuvkF8pGn7ROFD9hZhlZFDFeKBGosqF-JU75rzcaGZIBNllxSsx3FqKaYV6hKej-7Z1emaEkCJhz9fD5oViLirOlPxrOqqGve2J_3I5vs7ECdKGJyHfyTZhRo7cdiR09v4yU/s1600/disney-frozen-2-poster-fzn2poster2+%25281%2529.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-family: inherit;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghVqQBGWhEuvkF8pGn7ROFD9hZhlZFDFeKBGosqF-JU75rzcaGZIBNllxSsx3FqKaYV6hKej-7Z1emaEkCJhz9fD5oViLirOlPxrOqqGve2J_3I5vs7ECdKGJyHfyTZhRo7cdiR09v4yU/s320/disney-frozen-2-poster-fzn2poster2+%25281%2529.jpg" width="217" /></span></a><span style="font-family: inherit;"><span style="font-family: inherit;">Disney (</span><a href="http://finance.yahoo.com/quote/DIS?ltr=1" style="font-family: inherit;">DIS</a><span style="font-family: inherit;">): Disney is on a roll. Its theme parks bring in more visitors spending more dollars every year, and the new Shanghai Disneyland will only increase the company's growing brand strength in China. The movie studio's animated, superhero, and Star Wars films continue to dominate at the box office, making huge gains year over year: in 2016 Disney films have vacuumed up 32% of all US box office revenue to date, double the company's market share of just three years ago. And then there are the billions in licensing deals related to hundreds of characters and stories, its Marvel comics and Star Wars universes, and its Frozen juggernaut. Plus they've got ESPN, their children's television networks, their subscription web services, games and so on... Disney is what I like to call a "forever" stock: buy it, tuck it away, forget it, will it to your children. It's an astonishing business.</span></span><br />
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<span style="font-family: inherit;">Facebook (</span><a href="http://finance.yahoo.com/q?s=fb" style="font-family: inherit;">FB</a><span style="font-family: inherit;">): Hard to believe there's anyplace to go with Facebook, now at 1.6 billion members, but here it is: Facebook is massively profitable, yet it's stock price has yet to catch up to it's rocketing revenue growth. While it was once a worry that Facebook would lose its cache once Grandma signed up, it now looks like the very future of digital social connection. </span><br />
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<span style="font-family: inherit;">Under Armour (</span><a href="http://finance.yahoo.com/q?s=UA" style="font-family: inherit;">UA</a><span style="font-family: inherit;">): Under Armour's stock has been beaten down severely from its highs last fall, largely on the departure of two senior executives and a rare earnings miss in Q4. Neither of these will impact the business in the long term. UA has been doing an excellent job growing its core business with exploding sales particularly of basketball shoes and other athletic clothing (partly thanks largely to prescient contracts with basketball phenom Steph Curry and world #3 golfer Jordan Speith— and now newly crowned Wimbledon prince Andy Murray), as well as a fast-growing women's apparel business. Meanwhile the company has invested $1 billion in connected-fitness technology and "wearables", competing with FitBit and the AppleWatch, among others. UA is is <i>still</i> the only company with a chance to actually challenge Nike's worldwide sports and fitness dominance. In fact, nearly all of their success has been in the stateside: UA's penetration of the global market has just begun.</span><br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijqI4e5rz7rbbfTCKx1ymrJnrcm7NKQ2-DS8V-byl4vbENmPKTNPxVJ4ZvciPfl08k9zemIPQ79lg4CPOqrm5OxNECPvaSp2WN77br7yjSD52aGnTmbmCnBUt-rJFoRbwwGJ3sH2eM6qc/s1600/paypal-mobile.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><span style="font-family: inherit;"></span></a><span style="font-family: inherit;"><span style="font-family: inherit;"></span></span><br />
<span style="font-family: inherit;"><span style="font-family: inherit;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijqI4e5rz7rbbfTCKx1ymrJnrcm7NKQ2-DS8V-byl4vbENmPKTNPxVJ4ZvciPfl08k9zemIPQ79lg4CPOqrm5OxNECPvaSp2WN77br7yjSD52aGnTmbmCnBUt-rJFoRbwwGJ3sH2eM6qc/s1600/paypal-mobile.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="210" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijqI4e5rz7rbbfTCKx1ymrJnrcm7NKQ2-DS8V-byl4vbENmPKTNPxVJ4ZvciPfl08k9zemIPQ79lg4CPOqrm5OxNECPvaSp2WN77br7yjSD52aGnTmbmCnBUt-rJFoRbwwGJ3sH2eM6qc/s320/paypal-mobile.jpg" width="320" /></a></span></span><br />
<span style="font-family: inherit;"><span style="font-family: inherit;">PayPal (<a href="http://finance.yahoo.com/q?s=PYPL">PYPL</a>): Recently spun off from eBay, PayPal is rising fast in a newly wild-West payment environment. Scores of companies are now competing to process your spending, from Square to ApplePay to plain old handwritten checks. But trusted stalwart PayPal recently rolled up Venmo (the millennial's favorite cash-exchange system) and is now a major payment processor, putting real fear into the banks and the credit card companies. Digital payments are here to stay and PayPal is one of the frontrunners.</span></span><br />
<span style="font-family: inherit;"><span style="font-family: inherit;"><br /></span><span style="font-family: inherit;">Chipotle (<a href="http://finance.yahoo.com/quote/CMG?ltr=1">CMG</a>): This fast-casual restaurant chain was one of the fastest-rising stocks of the 2010s until a short but brutal e-coli outbreak hit a number of locations last fall and winter. Stores emptied while management scrambled to contain the damage to Chipotle's locally-sourced healthy image. New nationwide safety processes are now in place to prevent another outbreak and free burrito promotions have put business on the upswing again. Loyalty programs and a renewed focus on quality will propel continued company expansion and stock price increases for the future. Pick it up while it's still underpriced.</span></span><br />
<span style="font-family: inherit;"><span style="font-family: inherit;"><br /></span><span style="font-family: inherit; font-size: small;">I also offer a few higher-risk picks for you adrenaline junkies looking for bigger returns:</span></span><br />
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<span style="font-family: inherit;"><span style="font-family: inherit; font-size: small;">Twitter (<a href="http://finance.yahoo.com/q?s=twtr">TWTR</a>): The financial press is all about how user growth is flat at Twitter. True enough, for now. But hundreds of millions of loyal Twitter users around the world continue to count on the service for news, sports updates, and celebrity worship. Twitter has been helpfully evolving its user interface and has recently reinvented its platform for advertisers: it's revenues have never been higher. The company has been rapidly adding live sports-streaming deals to its content coffers. And whether the business continues to go it alone or gets rolled up by Google/Verizon/Amazon, it's not going anywhere and is improving steadily.</span></span><br />
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<span style="font-family: inherit;"><span style="font-family: inherit;"><span style="font-weight: normal;"><span style="font-size: small;">Netlix (<a href="http://finance.yahoo.com/quote/NFLX?ltr=1">NFLX</a>): Netflix continues to grow both inside the US market and, more notably, overseas. With services now available in 15 languages across 190 countries, the company is picking up speed with customers around the globe. Netflix defies critics again and again with the breadth and depth of its offerings and its stubbornly-low customer attrition rates, yet prices and revenues are up year after year. The long-held worry that profits will be squeezed as the company pays more for content over time has begun to give way as Netflix i</span></span><span style="font-size: small; font-weight: normal;">ncreasingly relies on its own in-house production of both TV shows and movies, easing margins and increasing content control. The legacy TV networks look stale and unimaginative in comparison; it may be that Netflix is just hitting its stride. (Day of this post, NFLX missed its expected subscriber growth numbers for Q2; the stock immediately fell off 15%, verifying my expectation of volatility. Plus now it's a bargain!!)</span></span></span><br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieRpk_hDoLuotYIzPiJ7IhyILKwK2lieh5MzFwfG1SJWZgqhjUMzwHIIjkia_gjziju_-aJ-iWpYS0ftEaSYcyyDhOolXzzPXHM6HN7X-U2DzUo-2yJpy48ljpJ4LuGHXn_WC-SAZzZ6Y/s1600/teslamodeliii.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-family: inherit;"></span></a><span style="font-family: inherit;"><span style="font-size: small; font-weight: normal;"></span></span>
<span style="font-family: inherit;"><span style="font-size: small; font-weight: normal;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieRpk_hDoLuotYIzPiJ7IhyILKwK2lieh5MzFwfG1SJWZgqhjUMzwHIIjkia_gjziju_-aJ-iWpYS0ftEaSYcyyDhOolXzzPXHM6HN7X-U2DzUo-2yJpy48ljpJ4LuGHXn_WC-SAZzZ6Y/s1600/teslamodeliii.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieRpk_hDoLuotYIzPiJ7IhyILKwK2lieh5MzFwfG1SJWZgqhjUMzwHIIjkia_gjziju_-aJ-iWpYS0ftEaSYcyyDhOolXzzPXHM6HN7X-U2DzUo-2yJpy48ljpJ4LuGHXn_WC-SAZzZ6Y/s320/teslamodeliii.jpg" width="320" /></a></span></span><br />
<span style="font-family: inherit; font-size: small;">Tesla (</span><a href="http://finance.yahoo.com/quote/TSLA?ltr=1" style="font-family: inherit;">TSLA</a><span style="font-family: inherit; font-size: small;">): On the forefront of the electrical transport revolution, Tesla, as well as its real-life Tony Stark founder Elon Musk, is always in the news. The current fervor surrounds the company's singular vehicular "autopilot" software, implicated in the highway death of a Florida driver who was apparently watching a movie while barreling down the freeway in his Model S sedan. It's a momentary headline. Last month the story was Tesla's offer to buy out its cousin business, Solar City, with the idea to vertically integrate solar panels with batteries and electric vehicles. As a stock Tesla will be a seriously volatile ride, but this company is routinely compared to Apple for its market-making vision, brilliantly conceived (if expensive) products, and its determination to change the world.</span><br />
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<span style="font-family: inherit;"><span style="font-family: inherit;"><span style="font-size: small; font-weight: normal;">Finally, </span><i style="font-weight: normal;"><b>Sell</b></i><span style="font-size: small; font-weight: normal;">: General Motors (</span><a href="http://finance.yahoo.com/q?s=GM" style="font-weight: normal;">GM</a><span style="font-size: small; font-weight: normal;">): While GM has recently grown both leaner and meaner, making and selling better automobiles than they have in 50 years, and likely will see a small earnings pop this week, nonetheless the company suddenly faces a new and substantial risk. On Tuesday last week a federal appeals court opened the door for billions of dollars in wrongful-death lawsuits stemming from GM's faulty ignition switches, a profit-scorcher from which GM's 2009 bankruptcy would otherwise have shielded it. In light of the potential for those lawsuits now to proceed (124 people died in ignition-related accidents), I am recommending a sell for GM. Details on that story can be found </span><a href="http://www.wsj.com/articles/appeals-court-deals-blow-to-gm-on-ignition-switch-suits-1468425439" style="font-weight: normal;">here</a><span style="font-size: small;"><span style="font-weight: normal;">.</span></span></span></span><br />
<span style="font-family: inherit;"><span style="font-family: inherit;"><i style="color: blue; font-family: inherit;"><b><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><br /></span></span></b></i></span></span>
<span style="font-family: inherit;"><span style="font-family: inherit;"><i style="color: blue; font-family: inherit;"><b><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><br /></span></span></b></i></span></span>
<span style="font-family: inherit;"><span style="font-family: inherit;"><i style="color: blue; font-family: inherit;"><b><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;">Drifting to Fifty</span></span></b></i><span style="color: blue; font-family: inherit; font-size: small;"><span style="font-family: "georgia" , "times new roman" , serif;"> </span>| Random unrelated nugget of the week</span></span></span><br />
<span style="font-family: inherit;">Your relationship is a box. It is separate from you and your partner, it's a third thing. It must be made strong. It will contain nothing until you fill it up. If you take out more than you put in, it will be empty. </span><br />
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Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-79547798627378595522016-06-16T17:07:00.000-07:002016-07-13T17:57:58.335-07:00Gracefully Navigating a Frustrating, Go-Nowhere Market<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiTz8NDw3yjTMcecVDhGtdzO5dKZZ04G54-1t4-WstzO7XLObP86emWzp7IAKkGbJ7v_gmuEpNxaOEsHoRKElNLzM7eTUfCV81R7d-sDnj9UEmuOl08z61KuqUrlR_pSiz4JomevVXd8g/s1600/Opk6OLb.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="244" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiTz8NDw3yjTMcecVDhGtdzO5dKZZ04G54-1t4-WstzO7XLObP86emWzp7IAKkGbJ7v_gmuEpNxaOEsHoRKElNLzM7eTUfCV81R7d-sDnj9UEmuOl08z61KuqUrlR_pSiz4JomevVXd8g/s320/Opk6OLb.jpg" width="320" /></a></div>
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The last 18 months have been a terrible time for market investors. We've seen historic high volatility and, at the same time, virtually zero price appreciation in the S&P 500 or the Dow, which is like getting seasick without even leaving the dock. As a result, many investors are pulling money out of stocks and putting it into Treasury bills (yielding under 2% in most cases), bonds (as much as 4%), and worst of all, spending it.<br />
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Don't give up.<br />
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Look at what's been happening lately: s Syrian civil war and the resulting refugee crisis threaten to overwhelm western Europe; Brazil is facing crime, corruption, political collapse, and the Zika virus, all set against the coming Summer Olympic games; China's formerly ripping economy, driving much of the world's production of goods, is slowing down; a mass shooting occurs every few months in the US; Great Britain teeters on the verge of exiting the European Union; and a polarizing, confusing, destructive US presidential campaign season is in full swing. The stock market is largely a national thermometer of stability and confidence. Is it any wonder it's in turmoil?<br />
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The vast majority of investors feel more comfortable getting out of a market that is stagnant, erratic or falling. They wait until their own confidence returns— when stocks are clearly rising— and then they reenter the market, only to sell again when things again look bleak. That's the same as selling low and buying high. Then they repeat the cycle.<br />
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The appropriate response, of course, is the most logical but also the least comfortable: it is to stand pat. Don't sell your holdings. Wait it out. Because typically, in two years' time, not a single one of the disturbances mentioned above will matter. None will impact your long-term returns.<br />
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Soon enough, the market will begin to move again. It might take until after the election in November, or it may be as soon as next week's "Brexit" vote. But it will happen. Consumer spending is relatively strong, in spite everything. That will be reflected in companies' earnings, and that will impact market prices. Given what's been going on, there is a fair amount of pent-up stock price appreciation looking for release. But if you sell, you'll be on the sidelines when the turn comes.<br />
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Certainly, not selling doesn't mean you have to do nothing. There are plenty of interesting businesses currently available at great prices. And when things do turn, you'll look brilliant. (I doubled down on LinkedIn late last Friday because it looked underpriced. On Monday news came that Microsoft was buying LinkedIn for a 50% premium over Friday's closing price. I didn't know that would happen, but I'd be lying if I said I didn't love the feeling. And it confirmed my entire investing philosophy.)<br />
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With or without market movement, it's a good time to buy<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqX1_gYOY6Mr83lngRq3NsbqTc_wfYdJtHELt3OQhKOgP99FtWNPJCR2D_WPNOw6VZ5mekZydgBJn077m2Ch83fPJGLCQTaBWrdkZlBGqgftSds0okICDgHclyfBot6RmY-ye92Hkwreg/s1600/image-Apple-Car-artist-concept.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqX1_gYOY6Mr83lngRq3NsbqTc_wfYdJtHELt3OQhKOgP99FtWNPJCR2D_WPNOw6VZ5mekZydgBJn077m2Ch83fPJGLCQTaBWrdkZlBGqgftSds0okICDgHclyfBot6RmY-ye92Hkwreg/s320/image-Apple-Car-artist-concept.jpg" width="320" /></a>Apple (<a href="http://finance.yahoo.com/q?s=aapl">AAPL</a>): No longer the astonishing growth story it's been for the last 15 years, Apple is still one of the greatest money-makers in the world— yet the stock price reflects only the former. Even if Apple is selling fewer iPhones than it was, the company is massively profitable and will continue to be so. In the next few months they will release the iPhone 7, which holds promise as many buyers of the iPhones 5 and 6 still have not upgraded, potentially waiting for the 7 to arrive. In addition, Apple Music has been revamped, the Apple Watch will be faster and more useful, AppleTV is expanding its reach into the smart home, and on the horizon lies the Apple car, sure to make a dent on an old and stagnating industry.<br />
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Facebook (<a href="http://finance.yahoo.com/q?s=fb">FB</a>): Hard to believe there's anyplace to go with Facebook, but here it is: Facebook is massively profitable, yet it's stock price has yet to catch up to it's rocketing advertising revenues.<br />
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Twitter (<a href="http://finance.yahoo.com/q?s=twtr">TWTR</a>): True, user growth is flat at Twitter. But hundreds of millions of loyal Twitter users around the world continue to count on the service for news, sports updates, and celebrity worship. The service has been helpfully evolving its user interface and has recently reinvented its platform for advertisers: it's revenues have never been higher. And whether the company continues to go it alone or gets rolled up by Google/Verizon/Amazon, it's not going anywhere.<br />
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General Motors (<a href="http://finance.yahoo.com/q?s=GM">GM</a>): A leaner, meaner GM is making better automobiles than they have in 50 years. Down to 4 brands (Chevrolet, Buick, Cadillac and GMC Trucks), the company has been on a tear with critics and analysts both. The higher quality, more competitive products have allowed dealers to decrease buyer incentives, which has improved GM's profitability, and the strongest balance sheet in decades hasn't hurt either. The market hasn't recognized the company's achievement yet, but it's coming.<br />
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PayPal (<a href="http://finance.yahoo.com/q?s=PYPL">PYPL</a>): Recently spun off from eBay, PayPal is rising fast in a newly wild-West payment environment. Scores of companies are now competing to process your spending, from Square to ApplePay to plain old handwritten checks. PayPal recently rolled up Venmo (the millennial's favorite cash-exchange system) and is now a major payment processor, putting real fear into the banks and the credit card companies. Digital payments are here to stay and PayPal is one of the frontrunners.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUb7mjwjI29KV4AZGgyqdwZst0JVyzxn0jlxjwss0uKJSi2jywaMyV82nU-UXFYo6Cf93SZdv6QwkT3bOqfUh-77qfPEUU4AR9QB0LGL8UpTT8qjpIaUrgQv1JL9TNeK7nGE2YfyBUwrM/s1600/under-armour-curry-2-5-2.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUb7mjwjI29KV4AZGgyqdwZst0JVyzxn0jlxjwss0uKJSi2jywaMyV82nU-UXFYo6Cf93SZdv6QwkT3bOqfUh-77qfPEUU4AR9QB0LGL8UpTT8qjpIaUrgQv1JL9TNeK7nGE2YfyBUwrM/s320/under-armour-curry-2-5-2.jpg" width="320" /></a>Under Armour (<a href="http://finance.yahoo.com/q?s=UA">UA</a>): Under Armour's stock has been beaten down severely from its highs last fall, largely on the departure of two senior executives and a rare earnings miss in Q4. Neither of these is likely to impact the business in the long term. UA has been doing an excellent job growing its core business with exploding sales of basketball shoes and golf clothing (thanks largely to prescient contracts with Steph Curry and Jordan Speith), as well as a fast-growing women's apparel business. Meanwhile the company has invested over $1 billion in connected-fitness technology and "wearables", competing with FitBit and the AppleWatch, among others. And to date, UA is is still the only company with the ability to actually challenge Nike's worldwide sports and fitness dominance.<br />
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<br />Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-10854839401594436732016-04-29T12:57:00.001-07:002016-04-29T16:25:28.909-07:00Are You Certain You Understand Stock Market Risk?Many investors will tell you the reason they are not currently invested in the stock market is because it's too risky. If you press, they'll describe their fear that, at any time, the market could drop and they'll lose their money.<br />
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Sadly, most look no further. Instead they'll leave their money in a savings account earning nothing, which is equivalent to losing 3% or so a year due to inflation. Or they'll put in a coffee can. Or worse, they'll spend it on a depreciating asset, like a car or a living room set.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyWPSm-0mKRM95_7dYAZFMld21cEG0XZ7Reux8XMaA9DhohYWTGtud7eKVJORTVxPz4rFewVEqb_QhpDj1d4jqO2Mc9m83tuv6QD3LZIWz5nmgn6YJpmabxPcz1DaOBjvB9iY5ob6ZLi4/s1600/13213730318953.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="296" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyWPSm-0mKRM95_7dYAZFMld21cEG0XZ7Reux8XMaA9DhohYWTGtud7eKVJORTVxPz4rFewVEqb_QhpDj1d4jqO2Mc9m83tuv6QD3LZIWz5nmgn6YJpmabxPcz1DaOBjvB9iY5ob6ZLi4/s320/13213730318953.jpg" width="320" /></a>Most people misunderstand stock market risk. They confuse the risk of owning stock in a particular business with the risk of owning a diversified basket of market stocks— or a broad-market exchange-traded fund. They rightly fear that, without proper education or a willingness to get deep into the weeds of investing, their hard-earned dollars will disappear, even if they do everything "correctly," due to bad luck. So they do nothing.<br />
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I can't blame them. There is no formal education in American high schools, and precious little in college, to familiarize them with basic investing concepts such as the power of compounded interest, managing risk and expectations, or opportunity cost. They are left to sift through the gazillion messages thrust upon them from financial TV, newspapers, social media, billboard advertising, and the painful personal anecdotes of their friends and colleagues. The takeaway is that investing is difficult, complicated, frustrating, hazardous.<br />
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In fact, it is doesn't have to be any of those things, at least not permanently. Yes, the market swings wildly day to day (and some individual stocks will make you absolutely sick: have a look at <a href="http://finance.yahoo.com/echarts?s=MNST+Interactive#{"allowChartStacking":true}">Monster</a>, and <a href="http://finance.yahoo.com/echarts?s=NFLX+Interactive#{"allowChartStacking":true}">Netflix</a>). Some years, like 2015, the broader market goes nowhere. And some years, like 2008, it drops precipitously. If you're in the stock market, you will lose money again and again, on paper. It is unavoidable. But smart investors know that over time, the market rises. Absolutely always, no matter what. However bad it looks up close, step back a couple of years and things smooth out. Hold that in your head, endure the short-term drops and stay with it, and you'll find that investing can be actually quite simple and extremely profitable.<br />
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Of course, it is in the interests of Wall Street brokers and financial managers everywhere to hide that information, so they will be paid to sort, advise, and manage your money. I expect that the democratization of information will ultimately come to finance, as it has to automobile sales, taxi service, travel booking, and other industries. But until then most folks will be left in the dark. So let's be very clear.<br />
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Owning a few shares, or a few hundred shares, of any one business <i>is</i> risky. There are no two ways about it: an individual shareholder has effectively zero power to sway the outcome of that investment, so whatever happens to that company will affect the investor. The business could outspend its sales (<a href="http://money.cnn.com/2016/03/21/technology/twitter-10th-anniversary/">Twitter</a>). It could be targeted for legal action (<a href="http://www.bloomberg.com/news/articles/2016-04-20/google-s-curbs-on-phone-makers-choke-app-competition-eu-says">Google</a>). Its products or services could change or be upended by those of a competitor (<a href="http://www.theatlantic.com/business/archive/2012/03/from-walkman-to-ipod-what-music-tech-teaches-us-about-innovation/253158/">Apple vs Sony</a>). Or it's entire business model could simply cease to be relevant in a fast-changing environment (<a href="http://www.treehugger.com/corporate-responsibility/why-radio-shack-dying-nobody-needs-what-it-sells-anymore.html">Radio Shack</a>). Those risks are real and they are substantial. When you buy that stock, you are placing your faith in the management of that company to shepherd their company, and your investment, to ever greater heights. But no one can see the future and things go wrong all the time.<br />
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By contrast, however, owning a few shares each of <i>10 or 20 businesses</i> is less risky. Things that go wrong at one business are unlikely to affect the other businesses whose stock you hold. One company could hire a new CEO with completely the wrong ideas for the future, and that company could tank. But your other businesses will be fine, so the overall financial risk of ownership is reduced. (Assuming, of course, that the companies are not all in the same or related industries.)<br />
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And by the same token, owning shares of <i>500 businesses</i>, as one would when buying shares in a low-cost S&P 500 index fund like the <a href="http://finance.yahoo.com/q?s=VOO">Vanguard 500 ETF</a> (which I've discussed before, in <a href="http://driftingtofifty.blogspot.com/2015/11/avoiding-stupidity.html">this post</a>), is nearly risk-free.<br />
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<i>WHAT!? Of course it's not risk-free! </i>you shout. <i>What if the market falls, like in 2008? Or 2000? Or for that matter, like in 1929?</i><br />
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In previous blog posts I've talked about only investing money you don't need for a minimum of 5 years, but preferably for 10 years or longer. We're talking about your toddler's college fund, or your retirement. This is a long, long game. And here's the thing: over time, the S&P 500 <i>always</i> goes up. If you buy an S&P 500 ETF and it goes down, just wait. It will come back up and go on to huge gains. It simply <i>will:</i> I know this because it's been rising in the long term since George Washington won the presidential election in 1789 (unanimous, by the way).<br />
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But that's the difference between real stock risk— that any one company's shares will fall and not come back— and <i>perceived</i> market risk. Advisors everywhere describe the stock market as dangerous to asset preservation. They tell their clients not to have too much in the market. They urge diversification. Ok, that's smart. But nowhere else can a typical disinterested and passive investor earn a long-term average return of 10% per year (over the past 100 years) for doing nothing. Because the broader market never stays down. If you own a big basket of stocks, or a broad indexed ETF and things go down, <i>just don't sell</i>. It's long money. Reign in your fear. Stay the course. The market will come back up.</div>
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Understand what is, and what is not a risk. Buy that ETF and sit tight. Couldn't be easier.</div>
Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-79935640407707504362016-03-21T11:48:00.004-07:002020-08-14T12:18:34.075-07:00Winners WantedIn <a href="http://driftingtofifty.blogspot.com/2016/03/doldrums.html">my last post</a>, I discussed the market 'doldrums' and how I'm preparing during this achingly slow period to ready myself for some buying in the next few months. But what does that mean in real terms? What exactly should I be looking for? I'll need a checklist of attributes I want my businesses to have as well as resources with which to research the companies in question.<br />
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First, I'll need a place to start. For that, I often turn to The Motley Fool's free podcasts, of which my favorites are <a href="http://www.fool.com/podcasts/rule-breaker-investing">Rule Breaker Investing</a> and <a href="http://www.fool.com/podcasts/marketfoolery">MarketFoolery</a>. Respective hosts David Gardner and Chris Hill break down simple stock selection methodology and their favorite companies in brief understandable segments, providing a perfect jumping-off point for beginning investors looking to get the basics, as well as for the more experienced who want fresh ideas.<br />
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Next: data and other information. I've <a href="http://driftingtofifty.blogspot.com/2015/06/stock-picking-105-yahoo-finance-is.html">said previously</a> that my favorite starting point is <a href="https://finance.yahoo.com/">Yahoo!Finance</a>. Online today you can't find a more comprehensive, up-to-date, easier-to-navigate stockpile of free public company info. You'll discover recent financial statements, basic criterial calculations, insider (executive) histories and stock positions, and a broad-reaching searchable database of articles on every American public company, plus hundreds of internationals.<br />
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<span style="font-size: small;">(A portion of what follows <a href="http://driftingtofifty.blogspot.com/2015/06/stock-picking-103-screening.html">was originally published last summer</a>.</span> <span style="font-size: small;">It's been edited and updated</span>.)</blockquote>
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Hopefully by now a few specific businesses look promising. When I'm thinking of investing my hard-earned money to buy into one of these businesses, I want to be able to<br />
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<li>Describe in one sentence exactly what the company does</li>
<li>Identify the CEO by name, and whether she or he is a founder of the business</li>
<li>Identify primary marketplace competitors </li>
<li>Recall how the stock has done over the past 12 months</li>
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The next step is to start examining specific criteria— contrary to a lot of what we read, I generally find it more helpful to search qualitatively than quantitatively— that will help me decide if this company is one I want to own. Here's what I look for:<br />
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<b style="font-weight: bold;">1. Sustainable Advantage, or 'Wide moat'.</b><i> </i>What kind of a gap exists between the business I'm looking at and other players on that field? For example, Amazon has a huge moat against every other internet retailer— even every bricks and mortar retailer— due to its sheer scale, which lends it buying power, shipping efficiencies, and brand recognition. Which means in every theoretical matchup between Amazon and Walmart, or Chinese e-tailer Alibaba, Amazon is the odds-on winner. The moat generally makes it a safer investment. </div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2FLi0cu8yVXp2kwet6aMYt9tG4UAZ0N6Iy86iqgADeHvUnS5pA_aoV9rly8xVXAYXnwfWLQiqIUKFUb-9X8lX-mgeW3r8-h5a43bX1xRjfYyj2oQoTePAvp78ZCeaCsQ9XbkmypSsOIM/s1600/Netflix-House-of-Cards.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2FLi0cu8yVXp2kwet6aMYt9tG4UAZ0N6Iy86iqgADeHvUnS5pA_aoV9rly8xVXAYXnwfWLQiqIUKFUb-9X8lX-mgeW3r8-h5a43bX1xRjfYyj2oQoTePAvp78ZCeaCsQ9XbkmypSsOIM/s200/Netflix-House-of-Cards.jpg" width="200" /></a>But a competitive advantage could be anything difficult to replicate, whether another company is currently competing or just thinking of getting into that market. Proprietary technology for example— or actual patents— can keep competition at bay for years. Think of what happened to the Sony Walkman line when Apple introduced the iPod. Plain old momentum, too, provides a hell of an advantage: look at the the uphill battle faced by anyone— including deep-pocketed Amazon— who tries to challenge Netflix in streaming TV.</div>
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<b>2: Smart, transparent leadership.</b> I also want to learn about the executive team. Every company's 10K (annual report, written by the execs) is available for free, and many execs routinely make themselves available for interviews with the financial press. Are they smart? Does what they say make sense? Do they seem genuine, or phony? Are they likable, or trustworthy? Confident? Slimy? Egotistical? Do they talk about their customers and their employees— or just about their board members and stock price? I'm looking for how they think, whether they duck hard questions or obfuscate their answers. I want to get to know them because ultimately they run the businesses I'm buying into, so largely they will decide the success of my investments.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaoaErQJdkDn3ei8o1gXLmEwwstFUXH285s5bilzGjy4bgZAfnh0cKEeuNna9-4XLeigcrUpB96FXjAoenb4EAZocnDq3B1zGmmfaXe3vhcCqjElxYA0tbwaErBq1bbA1kP2YDQY96V6I/s1600/United.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="112" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaoaErQJdkDn3ei8o1gXLmEwwstFUXH285s5bilzGjy4bgZAfnh0cKEeuNna9-4XLeigcrUpB96FXjAoenb4EAZocnDq3B1zGmmfaXe3vhcCqjElxYA0tbwaErBq1bbA1kP2YDQY96V6I/s200/United.jpg" width="200" /></a><span style="font-family: inherit;"><b>3: Low
debt.</b><i style="color: #990000;"> </i>I
generally don't like businesses which are capital-intensive: they require a
lot of expensive equipment or facilities which drag on their cash reserves and
profitability. As an example let's look at airlines. An airline has
extremely high fixed costs for equipment, fuel contracts, parts, logistics systems,
and lots of trained personnel and retirement/pension expense. An airline has to take on huge debt to finance these
costs, and the payments on that debt take a fat chunk out of profits. Because airlines
sell a commodity (a seat on this plane is largely no better than a seat on that
plane) they face brutal price competition, and when the economy dips, customers
travel less, and the airlines and their stocks frequently take a pounding.<o:p></o:p></span></div>
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<span style="font-family: inherit;">So I look
for the line item <i>Long Term Debt</i> on any business's most recent
balance sheet, and what I want to see is total debt around 25% or less of the
company's annual revenues (this information is on the Balance Sheet of any
public company and is easy to find). I want to know is how much the company is
borrowing compared to how much they're selling, so I can get
a napkin-sketch idea how much the debt payments (usually 5-10% per year) drag on profitability. <o:p></o:p></span></div>
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<tr><td class="tr-caption" style="text-align: center;">It's everywhere</td></tr>
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<span style="font-family: inherit;"><b>4: Be a customer. </b></span>Many investors are interested only in what they can learn from financial statements, leadership 'guidance', or from technical analysis of charts and graphs. All of which is useful. But u<span style="font-family: inherit;">nlike them, I believe the customer experience is perhaps the most fundamental measure of a company's values and future opportunity. I'm pretty normal. So when my customer experience is substantially flawed (bad restaurant service</span>, a crappy or crashing website<span style="font-family: inherit;">, cheap fabrics, a lousy return policy) I am unlikely to come away feeling good about the company's prospects; that company's values would seem misaligned with mine. But when the customer experience is stellar, I imagine other customers will be as delighted as I was. I start to see possible future trajectories for that business, and I get interested in owning a piece. So w</span><span style="font-family: inherit;">henever possible I</span><span style="font-family: inherit;"> prefer to buy companies I do business with directly (Amazon,
Netflix, Apple, Starbucks, Chipotle, Twitter) or whose products I've used extensively (Under Armour, Visa,
Disney, Imax). While I can research the financials and leadership and competition and</span> operational<span style="font-family: inherit;"> efficiency, only being a customer gives me the ability to properly judge its products or its value proposition to other customers. </span><span style="font-family: inherit;">Without that piece I have a lot less to
go on.</span></div>
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<b>5. Climbing stock price.</b> We've all heard 'buy low, sell high,' so it's counter-intuitive that you'd want to buy a business whose price is climbing. The truth is that buying low often means buying a company which has lost value and might never regain it. There are usually very good reasons why a stock gets hammered down, and the market is brutally efficient. The odds that you'll buy a company whose price is unjustly low— one which has been oversold by unnecessarily fearful investors, so its price is currently below its 'real' value— are slim. Instead, look for businesses with rising prices: these are companies the market has decided are winners, and in the words of David Gardner, "Winners tend to keep on winning<i>."</i> It's more difficult to go wrong with fast-growing businesses, for which revenues are increasing year-on-year and profitability is improving with them.<br />
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<b style="font-family: inherit;">6. A great brand.</b><span style="font-family: inherit;"> This qualitative assessment is more art than science, and it requires me to look around at my community, at the news, current music, at my family, at teenagers in our circle, at colleagues, friends and neighbors. Is this brand popping up more? Are celebrities photographed using their products? Do my kids want me to buy something they make, or does it seem like their prices are rising a little faster than competitors? Am I noticing their stuff product-placed on TV? Does the company ever come up in general conversation? These are all signs that the business in question is hot or heating up, that it's coming of age. Good signs. </span></div>
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<span style="font-family: inherit;">The important thing to bear in mind through this process is that I'm not simply buying something which represents the future success (or failure) of a company. It's not a bet. <i>I'm becoming an owner</i> of this business. Which means the business itself should be fun, exciting, and compelling for me. Otherwise I'll tire of it in a couple of years when it hits a rough patch, and that will make me want to sell. But real investing gains come only over the long term. So buy smart.</span></div>
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Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-31376989421822688642016-03-10T18:08:00.000-08:002016-03-10T18:08:20.648-08:00Doldrums<br />
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My dad was a sailor. When I was young I had to take sailing lessons first thing in the morning every summer, then on weekends sit with the family, bored out of my mind, on his tiny sloop as we tacked back and forth across Boston Harbor. A typical boy, I wanted speed: speedboat, ski boat, jet-ski, really anything that made a wake. But he was never more content than he was in that open little boat, mainsheet in one hand and steering with the other, sun on his face, a Heineken between his fingers on the tiller. <br />
<br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWKK73dd13xxSjoT-qiEI9mjT1xhGlA9UeNReoLqAh1ECp-yyUwWnTwFL6QFnU03AGaeP2irL5App4t1iTNiD2aJ9hnJEYjNFSbniBj7uXc1TMlNuAYckh3UjYaVbB9r1BbnafDU8V-j4/s1600/300px-Winch.PNG" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWKK73dd13xxSjoT-qiEI9mjT1xhGlA9UeNReoLqAh1ECp-yyUwWnTwFL6QFnU03AGaeP2irL5App4t1iTNiD2aJ9hnJEYjNFSbniBj7uXc1TMlNuAYckh3UjYaVbB9r1BbnafDU8V-j4/s200/300px-Winch.PNG" width="200" /></a>The worst for me, however, was when the wind died completely. He called it the doldrums, which was technically inaccurate (the doldrums are an actual location near the equator, sitting between trade winds) but he nailed the spirit. As does the word itself: it sounds tired, slow, dreary, which of course it is. When you hit the doldrums, there's nothing much to do. It's a sailboat, after all, and-- ever the purist-- Dad didn't have a motor. So we sat.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEn4X1tUeXH8p6aps5Vmeg9v-tcuqjZsIIUtAAON-tgsV6q0Rh3z8HFTwCZ763CtUSFqZjQjxLCY-G2JvbpoVdlV4w8gEO3AGsJ7L_f66AerOth33gM7grA9Ss7m6o5bnd2bK6caMpjls/s1600/IMG_6695.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEn4X1tUeXH8p6aps5Vmeg9v-tcuqjZsIIUtAAON-tgsV6q0Rh3z8HFTwCZ763CtUSFqZjQjxLCY-G2JvbpoVdlV4w8gEO3AGsJ7L_f66AerOth33gM7grA9Ss7m6o5bnd2bK6caMpjls/s200/IMG_6695.jpg" width="200" /></a>After a few dull minutes, Dad would start getting busy with all the nothing. He'd put one of us on Scout duty, scanning the distant surface for any sign of an incoming breeze. He'd have someone else coiling lines and sheets, putting away winch handles and empty soda cans and hats left around the cockpit. Eventually he'd pull out nautical charts of the area and ask Mom to fix a snack or something. It could be a while, he'd tell us. He'd teach us again about the sails and the wind indicators, called telltales. He'd quiz us on terminology. It was all just filler, trying to keep us engaged and interested until the wind returned.<br />
<br />
But really he was preparing us, himself, the boat. Because on the water, weather can change suddenly and violently, and then things often happen fast. A sudden a squall, a rogue wave, even just an unexpected gust, and your little boat is rolled and you're in the water.<br />
<br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgik6u7D2vSN47_UoMkTkt_5SiAWMW88RNUxvhZY_QHiye2cnxPKFlBBZ6xVqchfdzjC2toQnKm4A9ziBT_S8p9K6UrhLyWvkIuNQkTe2v3XqcS7mwSJxCkhxAG7wYa7pvnaOz24C7q-Kw/s1600/doldrums-400-300x250.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="166" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgik6u7D2vSN47_UoMkTkt_5SiAWMW88RNUxvhZY_QHiye2cnxPKFlBBZ6xVqchfdzjC2toQnKm4A9ziBT_S8p9K6UrhLyWvkIuNQkTe2v3XqcS7mwSJxCkhxAG7wYa7pvnaOz24C7q-Kw/s200/doldrums-400-300x250.jpg" width="200" /></a>Welcome to the US stock market doldrums. A real banner year, with all major indices down so far in 2016 after a flat 2015. If you're one of those who finally pulled the trigger and started investing in the last couple of years, take heart.<br />
<br />
Technically, of course, we're in year 7 of a <i>bull</i> (rising) market. This is true because, while 2016 to date has seen a <i>correction</i> (short drop), it's not enough to knock the market out of bull status. But that's pointless advisor-driven wordplay. Here on the ground in real time, nothing seems to really be moving much. We got whipped at the start of the year, and now it's up a little on Tuesday, down on Wednesday and Thursday, up again Friday through Wednesday, then down again. No celebration, no panic, no excitement at all.<br />
<br />
Sadly, this is the stuff of successful modern investing. It's tremendously tedious, punctuated by tiny moments of action when you buy or sell something. Nearly all of the rest of the time, it's this. Just nothing.<br />
<br />
From all that sailing training I know to use the time. And I am. I've been on Scout duty. Of course I'm not just looking for signs of a market wind, but for specific opportunities: businesses that have been repriced by the market correction in January and early February which haven't recovered yet and so represent good values going forward. I'm also inspecting my holdings for signs of weakness: businesses which-- if ultimately a sudden gust comes over my gunwale-- I'll need to sell because they don't necessarily have the products or the distribution or the branding or the management experience to weather a real storm. I've been moving money around, selling some older investments which I believe have had their run, and socking away cash with which to buy when I identify new targets. I've been doing a lot of reading about business, economics, investing practices, media, and the hot mess we're calling a political campaign season. I'm coiling my lines, bagging my empties, readying my winch handles.<br />
<br />
Dad would be proud.<br />
<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOzgZkaFFxNjatMeMyXlQyV95D8OVXid_f4CDc0UE50NRWqZNt5rD_-9I7hnonOR9NyNm-SUue7SR3h4uEra2CfMlWZqKJb3jsnE1c2HUmJBSvv29jDpo7Nw2EcWgLDxFWrsCc1h442XA/s1600/chuck-best-windward-portrait.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOzgZkaFFxNjatMeMyXlQyV95D8OVXid_f4CDc0UE50NRWqZNt5rD_-9I7hnonOR9NyNm-SUue7SR3h4uEra2CfMlWZqKJb3jsnE1c2HUmJBSvv29jDpo7Nw2EcWgLDxFWrsCc1h442XA/s1600/chuck-best-windward-portrait.jpg" /></a></div>
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<br />Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.comtag:blogger.com,1999:blog-5919531006203413624.post-798683926213999102016-02-11T11:22:00.000-08:002016-02-11T11:28:28.183-08:00I'm getting killed in 2016-- and that's OK<div class="MsoNormal">
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I don’t know about you, but my portfolio is taking a beating so far in 2016.<o:p></o:p></div>
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<div class="MsoNormal">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiswvHQKelVn7-KdeTVMRgkn3SB24IRuYNIGTbyOFYv9oakVh8SSWnMlMOxDalOQSRkkQXBc2Gf4VcRayzChbfa_rALAxPO-GL3q8tlkpw-9PIlGyzx8J1e0pKtXLtGKWGNvfFOwLy0AWs/s1600/drain.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiswvHQKelVn7-KdeTVMRgkn3SB24IRuYNIGTbyOFYv9oakVh8SSWnMlMOxDalOQSRkkQXBc2Gf4VcRayzChbfa_rALAxPO-GL3q8tlkpw-9PIlGyzx8J1e0pKtXLtGKWGNvfFOwLy0AWs/s320/drain.jpg" width="320" /></a>As of this writing, I am down more than 20% in the last 6
weeks. That wipes out my +15% for all of 2015 and puts me at about at the level
I was in September of 2014 (net of any additional purchases made since then).
Which, I think, is better than most … but it sure feels lousy. I think about my
kids’ college money burning like a pile of leaves. The plan to pay for my
elderly mom’s future medical bills, circling the drain. My own retirement,
receding into the distance. <o:p></o:p></div>
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<br /></div>
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So this is it. We in the investing community—and that’s by
definition with a long-term bias, as opposed to the <i style="mso-bidi-font-style: normal;">trading</i> community—we often talk about withstanding the downturns in
order to realize the big gains which follow. We talk about adding to our
existing positions on the dips, to lower our average per-share cost and
position us for future rises. We talk about the grit and strong stomach
required to hold, even to buy, in times exactly like this.<span style="color: maroon;"> </span>All the practice, all the articles, the books,
mentors, the courage we’ve mustered to get into this crazy sandbox in the first
place, it all comes to this moment. Right now is why most people can’t invest
for themselves. Right now is what they are afraid of. Right now is the origin
of the horror stories. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="background: white; line-height: 13.65pt;">
But here’s the
truth of it: <b style="mso-bidi-font-weight: normal;">we are stronger than they
are. </b>We can overlook today and focus on tomorrow. My all-time favorite
Warren Buffet quotation isn’t the one about fear and greed. It’s <span style="color: #333333; mso-bidi-font-family: Arial; mso-bidi-font-style: italic; mso-fareast-font-family: "Times New Roman";">“<i>the stock market is a device for
transferring money from the impatient to the patient.</i><span style="background: white;">” Right now is the moment the impatient are fleeing,
and the patient get to keep the money behind.</span></span><span style="color: #333333; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span><br />
<span style="color: #333333; mso-bidi-font-family: Arial; mso-bidi-font-style: italic; mso-fareast-font-family: "Times New Roman";"><span style="background: white;"><br /></span></span></div>
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<br /></div>
<div class="MsoNormal">
The irony is that, awful as it is, we knew it was coming. We
didn’t know when, or how bad or how long, but we knew it was coming because it <i style="mso-bidi-font-style: normal;">always</i> comes. That’s what it is to be an
investor: a series of downs and ups, heartbreaks and triumphs. Following the
stock market run that began in 2009, we’ve had a helluva ride, turning victory
laps as the broader market more than doubled in 7 years (really only 5 years
since we’ve now erased any gains made since 2014). So of course this would
happen. And in fact it <i style="mso-bidi-font-style: normal;">needed</i> to
happen to reset the overpriced businesses, to clear out the high-trading
speculators and gamblers, to make prices attractive enough again for the rest
of us to buy—which sets up the market to rise again to a higher level.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
My friend Morgan Housel just <a href="http://newsletters.fool.com/1069/coverage/updates/2016/02/08/a-simple-explanation-of-how-markets-work.aspx?source=ipeemleml0000004"><span style="color: blue;">wrote
a piece</span></a> this week about how it is that the markets gyrate as they do, and
why that is not only normal but necessary. And my friend Ben Carlson just <a href="http://awealthofcommonsense.com/2016/02/bull-markets-vs-bear-markets/"><span style="color: blue;">posted
an article</span></a> about how we view bull and bear markets differently, despite our
commitments on each cycle not to do exactly that. Finally, if you’re still
panicky, re-read my post from last July about <a href="http://driftingtofifty.blogspot.ca/2015/07/stock-investing-109-when-to-sell.html"><span style="color: blue;">when
to sell</span></a>—and when not to sell.<br />
<br />
And get your clicker finger ready to hit the <i style="mso-bidi-font-style: normal;">Buy</i> button. Because this won’t last
forever, and prices are getting more attractive every day.</div>
<div class="MsoNormal">
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<br />
<span style="background-color: white; color: blue; font-family: "georgia" , "times new roman" , serif; line-height: 16.5455px;"><i><b>Drifting to Fifty</b></i></span><span style="background-color: white; color: blue; font-family: "arial" , "tahoma" , "helvetica" , "freesans" , sans-serif; line-height: 16.5455px;"> </span><span style="background-color: white; color: blue; font-family: "arial" , "helvetica" , sans-serif; line-height: 16.5455px;">| Random unrelated nugget of the week</span><br />
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<!--[if gte mso 10]>
<style>
/* Style Definitions */
table.MsoNormalTable
{mso-style-name:"Table Normal";
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-parent:"";
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin:0in;
mso-para-margin-bottom:.0001pt;
mso-pagination:widow-orphan;
font-size:12.0pt;
font-family:Cambria;
mso-ascii-font-family:Cambria;
mso-ascii-theme-font:minor-latin;
mso-hansi-font-family:Cambria;
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<![endif]-->
<!--StartFragment-->
<!--EndFragment--><br />
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.25in; text-align: left;">
<span style="font-family: inherit;">If inside your suitcase you roll your carefully-folded slacks
and shirts around a pile of underwear, socks, pajamas, and shaving kit, the
folded clothing will be less wrinkled when you arrive.</span><span style="font-family: "times new roman";"><o:p></o:p></span></div>
<o:p></o:p></div>
Robin Rifkinhttp://www.blogger.com/profile/00763200978575044623noreply@blogger.com