This is a Bob Brinker Fan Club and Critic Club. We join the Starship Moneytalk each Sunday on our way to Marketimer's Land of Critical Mass. We will post brief commentary about Bob Brinker's Moneytalk.
Sunday, November 26, 2017
November 26, 2017, Bob Brinker's Moneytalk: Reruns Today
November 26, 2017....Bob Brinker is NOT live today. Moneytalk is re-runs of old monologues and callers.
Caller Michael from Hawaii at about 1:30 mentioned David Fish's Dividend Champions spreadsheet. If anyone is interested in taking a look at David Fish's work, here is a link:
http://www.dripinvesting.org/Tools/Tools.asp
Under the rectangular box headed "Information" click on "Excel Spreadsheet." The spreadsheet will open up showing the list of Champions.
I renewed my subscription to Marketimer over the Thanksgiving holiday after missing several months. Would someone mind letting me know if there was anything urgent in the most recent newsletter. I assume there was not because Bob hasn't even bothered to show up for the radio broadcast for at least a couple of weeks or maybe he show up just briefly. I'm going into long etf's soon and feel the markets are going to continue to the upside--as long as Pres. Trump continues to follow through on tax reform. Any comments from Flyover Country--I'm in Los Angeles. Honey seems fairly optimistic, too. Would love to hear from people. Herb. h.slojewski@gmail.com
Thanks for the exciting [?] history, Jester. With Trump likely to be in office through another seven years, do you see any sort of threat on the horizon? I don't quite get the exciting feeling I had in '82 when Pres. Reagan told us to get out there and buy stocks and get rich. I recall a broker telling a group of us how he would buy 1000 options on this and that, etc., and there was lots of optimism. With democrats and liberals and progressives in control of so much of the country now I'm just not feeling the same sense of optimism. But again thanks for your comments, and you do seem quietly [sensibly] optimistic, J.
Herb: I hope we get some tax reform done but I'm not counting on it happening. I think it will be less "reform" and more "tinkering" when it comes to individuals.
I think it is good to lower corporate rates since these are costs that are passed to customers in the end. For the large percentage of people who end up paying no federal income tax -- their tax cannot be lowered any further, but it appears some will get an increase in their refund, via the child tax credit.
. Mark Hulbert has designed a whole new business model that probably is making him much bigger bucks than his former newsletter - which he also called Hulbert's Financial Digest.
If you go to the link that SuzyPie posted, you will see that he now charges $50 a month for EACH of his email notifications.
. SuzyPie...Mark Hulbert is a dishonest crook. Now do you want to know what I really think about him?
I have emails from him that prove he has lied about Bob Brinker's performance record for almost two decades.
Brinker is equally crooked because he knows that Hulbert lied - and he knows that this so-called "honor roll" is a made up gimmick designed to promote Bob Brinker's Marketimer.
One hand washes the other. Brinker's name helped build Hulbert's newsletter and Hulbert's newsletter has sold a lot of Marketimers.
. And another thing about Mark Hulbert. He claimed that Brinker did well during bear markets. I guess Hulbert wasn't paying any attention to the megabear of 2008-2009. Brinker's Marketimer portfolios dropped more than the market in general.
And notice that even Hulbert has to admit that Brinker did NOT beat the indexes:
"With that said, I should note that while the Honor Roll newsletters have outperformed the typical service not on the Honor Roll, they on average have not outperformed a broad stock-market index fund. But that may not be a reason to shun them. It’s only when these managers’ returns are analyzed in light of their reduced risk that their value is appreciated."
November 27, 2017 7:00 AM PST Updated on November 27, 2017 7:09 AM PST U.S. purchases of new homes unexpectedly advanced in broad fashion last month, reaching the strongest pace in a decade and offering an encouraging signal for residential construction, according to government data released Monday.
"With that said, I should note that while the Honor Roll newsletters have outperformed the typical service not on the Honor Roll, they on average have not outperformed a broad stock-market index fund. But that may not be a reason to shun them. It’s only when these managers’ returns are analyzed in light of their reduced risk that their value is appreciated."
Ah yes, the old "risk adjusted return" fan dance, where the risk/return is determined in hindsight. I like John Bogle's forward looking outlook. When asked which mutual fund one should invest in for the best long-term results, he said, "The one with the lowest fees."
Here's a chart of quarterly growth of the US economy (annualized GDP) for the last four years. What is remarkable is the variability from quarter to quarter.
It might be more meaningful if the moving average of the trailing four quarters was reported. This would help to smooth out short-term fluctuations; any trend, up or down, might be more likely to show up in such a chart.
Is it time to place our bets on whether Bob Brinker will be "live" during Honey's bell-ringing Sunday this Holiday season? Seems like he might do that just to spite Honey. But does he keep track of things like that seasonal pattern?
The prior posts regarding market timers and money handlers brought to mind the ”A Parable” from John Bogle’s latest read, The Little Book of Common Sense Investing 10th Anniversary Edition.
I will summarize, (and somewhat embellish), the folksy parable as follows.
Once upon a Time . . . a wealthy family named the Gotrocks, owned 100% of every stock in the U.S.A. They reaped the rewards of investing: all the earnings growth and all the dividends that all those corporations generated. All was well.
Along came a few fast-talking Helpers and convinced some of the “smart” Gotrocks to allow the Helpers to “outperform” the other Gotrocks by “managing” their financial affairs. Since the Helpers didn’t “help” for free, some of this supposed “outperformance” began to vanish in the form of brokerage commissions and transaction fees, including “churn” and “revenue sharing” arrangements. To add insult to injury, new taxes were generated in the form of capital gains as a consequence of all this “churn” of buying and selling of securities.
These “smart” Gotrocks soon realized that they needed additional “help” from “expert financial planners” to better “manage” their shrinking winnings. The new “money managers” felt compelled to earn their keep by trading (“churning”) at an even more feverish pace resulting in even higher brokerage commissions and higher taxes to boot! In addition, they noticed that there always was a huge amount of cash sitting on the sidelines resulting in “opportunity cost” loss!
These “smart” Gotrocks soon realized that they were playing the loser’s game of trying to beat the market.
Long story short -- Get rid of all your brokers. Get rid of all your money managers. Get rid of all your consultants.
Return to owning the total market in passive ultra low-cost index holdings!
. . . and the Gotrocks Family Lived Happily Ever After
. John from SF....Imagine my surprise that you remembered that there are two Sundays per year when I am doing bell-choir performances. One of them is Christmas time.
This year that Sunday is December 10th, so place your bets. :)
And maybe it would be a good idea to put in a good word to Frankj that he will do the summary if Brinker is live that Sunday. :)
Not sure what other see, Biker, but I see a falling GDP during the closing quarters of the Obamagang and a rising one during the start-up of the Trumpgang, and I prefer the rising one. I think everyone knows how that pattern will look in another year and/or 18 months.
Would someone mind letting me know if there was anything urgent in the most recent newsletter.
A better question is why would anyone care? Da Brink’s actual record sucks. Let me see, was it to anyone’s benefit to act on his get 100% out of the market after a massive decline in 1987 and not to get back to fully invested till years after the market rally? There is no way those folks ever recovered if they actually followed his advice for they essentially sold low and bought high. Thus the reason his track record, conveniently starts after that point in time, he just expunges the record. Oh and how about that buy the QQQ thing…yeah that worked so well. Hey, how has NASDAQ done since Brinker bailed on it? The secret to Brinker’s so called success is very simple, the market has an upward bias and Brinker’s portfolio have a beta greater than 1.0. If you did a risk adjusted benchmark I sincerely doubt Da Brink could beat the benchmarks. So he issues a bulletin who cares? You would have to be cognitively impaired to believe his market timing mumbo-jumbo.
If Da Brink personally called me and said "fluffy my friend, the market is going to crash tomorrow" about the only thing I would do is whimsically look at the market the next day and see if his prognostic coin toss was correct this time.
Few investors will buy an index and hold. Bogle even mentioned the problem with ETFs per the higher turnover and loss of return. So, if there is a higher trading cost investors on average lower their turnover and enjoy a better return.
When investors are in the accumulating stage buy & hold is a good way forward since most utilize monthly investing plans. If you are out seven years no need for bonds either. I do think this all changes when investors need to depend on investments. Isn't that why we read stats of employment, housing, GNP, yield curve, interest rate, and hang on every word of fed reserve? You see, I believe we are utilizing whether we know it or not quantitative data for investments. Most have no written systematic method of decision making, Instead we rely on gut instincts to push more to bonds, cash, Amazon, or financial sector. Yes, we are bombarded with newsletters, advisers, and insurance salesmen that want to manage our money for a fee. Yes, The active mutual funds are loaded with unethical and costly practices.
What to do? We know most of stock market gains are in long stretches of bull markets that greatly improve historical return averages. We know just about every ship rises within this tide. Same with the sudden, more powerful and shorter time period of bear markets. Some investors that have need of steady income will supplant this high risk, with lower return investments, but safer and do so at various percentages. We do know returns will be lower and risk higher with with high stock evaluations, but this period of bull market makes us money. We want to be in, but realize the increase risk of loss with high stock prices.
I have came to the conclusion that indeed everyone practices market timing by asset allocations, usually by the bond vs stock holdings. Also, everyone utilizes data for decisions. So, the average investors is hammered with poor advice/financial news i.e. selling the Brexit.
We need to optimize or vet the financial info to distill to a hand full of most important items. To test their combination and usefulness within actionable signals to buy or sell. It will not be 100% accurate, just a nudge in better. Think about it this way. The S&P 500 represents the best of best with lower risk of losing value if priced reasonable. If you can wait long enough to avoid spending in slumps, simply investing in this index will be very rewarding. But, if you need an reliable income, you also need a portion of your investments in lower return financial income devices. This is safer, but at this time will greatly lower returns. Most will succumb to pushing more to high return stocks and keep it there if financial data is positive. Just a fact.
Might I suggest since we are already practicing TAA with Quants per the paragraphs above, that we bone up on the value, usefulness, and best practices. Just a simple method such as biker mentions the simple moving average that will trigger a sell or buy will improve your return. The value is to have a data driven decisions to avoid pitfalls of hype. As your know we are deluged in bad advice hype. The big biggest threat is over reacting. We need to develop action plans and simply work on improving this. Then the decision making process is less emotional. This will move one to the smarter side of the money camp. All of the investment agencies utilize this practice, but unlike you they can't simply sell their equities and avoid the market for a couple years. If they did this they would go bankrupt.
Average returns can be misleading, for example, the stock market will return 7%-8% over time. This is true, but if one were to parse the losses and gains it is a different story. Meaning the gains are slow and losses quick with much flat land in between. So, you could be within a cycle of downturn and experience and long dry spell of years with low gain. Eventually, you will regain what you loss, but do you have the time to wait? Also, your return average will be low for some time. Only within a steady bull market do your recoup losses and then gain. After the gains you will read, again, of good historic averages. IOWs the average doesn't help much in real life. Bonds for example have lower returns, but for most of your investment life with them they will out preform equities. How? By avoiding huge losses they have less to regain to recover.
This is the key to better returns. Clip the period of high risk and avoid a portion of the eventual recession or maybe a portion of a correction. Data suggests you could be quite conservative in your decision making and beat or at least match the average. It's just better sometimes to own more bonds or stock. Also, if a bit more refined in your decision making, periods of 100% stock and 100% bonds are not that risky. Remember, being 100% S&P isn't such a risky move. Neither is 100% bonds. Just utilize better quants to improve decision making. This should improve your return odds. Why is this not common sense?
I read a free Newsletter that addressed fund mangers and average investor's poor record of attempting to predict investments. His data per my scrutiny does indicate the pros get it right more often. They hit 75% quite often. So, why are the overall fund managers returns so poor as compared to just S&P holdings? Well, Bogle gets asked a similar question of ETFs. His additional complaint on ETFs is the sheer variety of offerings. You see these investment companies are serving the public and wish to entice them with unique products. Just plain old marketing. So, we have Democrat, Republican, environmental, health, and gun free ETFs. All of these offerings do bring down the average returns including the heavier loads to make it so. The fund managers are just attempting to make the best of what is handed to them.
Financial advisers, also, attempt to manipulate or market their expertise. Problem is their offerings are naturally chosen to earn themselves a higher commission or protect their image. So, they have to spin or season the truth to maximize and reflect this image. Brinker does this. This self interest lowers their value. IOWs they will distort information at some degree to make themselves look better.
It does look to me, that an ETF S&P 500 many be the one best all time return fund or at least over time the top of the heap performer. Past that one simple advice is to employ some quantitative measuring stick to evaluate economic conditions. We do know much value in limiting risk and draw down. You may be able to purchase some type of market timing info, but not per the above paragraph. You could probably do as well with your own set of guidelines. After all staying in the index still good and getting out upon risky environment is not so bad with bonds. The claim is bonds protect against draw down and the value is to avoid the large climb back to parity. Seems to me common sense to play with these two. Not so dangerous if you pick a good bond fund such as Wellesley.
My wife has been invested in Fidelity Contra 403b at work. I thought is was a remarkable fund. Also, I had a Dodge & /Cox stock fund that was rated high and well respected in the financial community. These are active managed funds and chosen before the day we had cheap index or ETFs options. I will say the Contra fund was way superior as compared to Dodge and Cox for returns and minimizes draw downs. But if one looks at the graphs and comparisons to indexes you would walk away with smug smile that this funds beats the S&P 500 by a mile. Problem is the graph is only mapping the published price. Meaning the graph does not subtract the gross expense. One has to look at load adjusted returns to determine true worth. Sure enough, Contra is employing all the junk that Bogle warns of. All the underhanded tricks upon trade spreads, turnover, and the rest. Turnover must be the bellwether of shenanigans. Notice that Vanguard funds typically have low turn over. I also notice how Contra fund has extremely high turnover when they are on a tear. Funny how the actual performance is no better than S&P. Over longer periods S&P does better. This manager appears capable of pulling income from the fund and is achieving acclaim by publishing non adjusted returns. This is industry standard stuff and works to fool a lot of investors. I will say the fund did not sink as much during the Obama's Great recession, but that is zero grantee of future capability.
I did read a Forbes article of research on active fund managers and how the system is rigged both passive and active to extract wealth, insert bias, or cronyism. It was a college professor analysis of historical records. It looked to me the Vanguard investor owned and Schwab would be the investment house of choice. With both the index funds or ETFs would be fine. However, ETFs had the most ability to avoid pitfalls. I'm moving the account to IRA VOO.
I think if you're going to compare funds with graphs it is better to use the total return option because it incorporates re-invested capital gains and dividends.
Bogle recent comments on the Moral Abomination of tax cuts. What is this emotional jealously smear? As if corps were some neighboring entity that was selfish and hording wealth. The comment would lead one to think of Sultans basking in caviar. First business earnings and tax relief is morally irrelevant. It's not a zero sum gain or loss. True if Amazon wins less attractive retail businesses will lose, but Amazon is a public investor owned company. You can own Amazon unlike most private businesses. Wouldn't a private company be more immoral? Most employees have access to very good benefits that in modern day far superior for savings and before tax expenses that make up a portion of earning growth.
The immorality of stagnant wages must lie on the doorstep of federal reserve and the politics of government deficit spending. The economic justification for such was long debunked per the ineffectiveness of such action during the Great Depression. Cheap money and inefficient spending has low effect on economic growth and job wage growth, but does amp up all equities. Of course business will help themselves as well as borrowers to fill up on cheap money. The net effect is to steal income from savers and make their savings worth less. Rents and housing went up as well as stocks. Consumers didn't really splurge on cheap money, but instead invested in more houses and stocks. Budgets for the lower and middle class took a hit while the rich get richer and the divide spreads. Business and consumers didn't feel very positive of economic future and just stood still and attempted to shore up. Nothing really changed within the foundation of economics to foster growth. It was still the over regulated central control system of stagnation.
A tax cut and regulation reform do impact the economy overall. Regulation reform including the IRS is a wonderful way to improve economic efficiency. Business needs less shackles to improve, expand, and hire. Regulations are dead overhead or wet blanket to growth including wage growth. Good regulations and standardizing have the opposite effect. The IRS is a monstrosity and wholly inefficient. They should look for other ways to fund government operations. I remember the discussion on how best to help the economy. Someone suggested to eliminate payroll tax deductions as a sure fire way to move money into hands of consumers. Of course the DC crowd really hated the idea of losing control of money, so they excused themselves from that option and handed the journalist a note stating the public would not spend the money, but pay off debt or hoard. You see we need DC to spend our money as you can't be trusted. Someone out their will make a mistake.
Also, I don't understand why having the highest corp tax rate in international economics is so morally superior if it just works to drive our businesses investments and tax base offshore. We are penalizing corporations for working within U.S. borders with max tax rates.
One must also understanding that lower tax rates on international scale will bring more spending to our shores. Meaning the $2T and increase tax base will flow through out the economy at every level. It doesn't end at the corp or investors. What is the use of increased wealth? It will be turned multiple times for GNP growth at all economic sectors which does spur wage and job growth.
BTW, we see every day how the politics of DC not only spend our money, but that of our Grandchildren. This sways to rob the future choice and brightness from their inheritance. Granted a percentage of population doesn't care of future, only what they can get a present. Increasing tax rate is a popular political ploy to fool citizens into thinking they can get more for free. The problem is always the killing the golden goose or eating the seed corn for immediate satisfaction. Politicians can sell immediate gratification for votes. So, this will put reformers into the box of having few real tools to push the country to better future if any delayed gratification is needed. Most believe the easiest path forward given the political climate would be to increase GNP for tax base, revenue, and job growth. The increased revenue and inflation, over time, will gradually temper the enormous national debt.
Also, the high P/E could temper and gradually lower over time without much volatility. Stocks could just sink returns for extended time period.
I do think some should bet on bitcoin. Some should have invested in the dotcom bubble, Chrysler, and Tesla. Those that are single, young, and in good careers. Just starting out on investing with some money. They have a long time period to make up losses and probably understand the new technology better than anyone. They are a point in life with max intellectual asset and peer advice to make such a move less risky. I will say at this point they should act and be very high risk. This group should not buy a new car, house, or go on expensive trips. They can get their kicks out of betting on something they might just be the most capable to discern. I was in that camp once and chickened out. I had about three golden opportunities wherein my gut instinct was to bet it all.
At this stage of life I only need security and low risk. I have the life style that I desire and that is a simple one. I remember listening to Michael Savage explain that in younger years he spent and needed the best of everything. Now, being older, he likes his old inexpensive stuff. That is a concern of the economy as so many Baby Boomers in retirement. This group historically doesn't spend much. I haven't observed that and only see crazy spending in things as simple as camping and RV equipment. This groups spends a fortune on ultimate convenience and high teck. For example spending $20k for solar to charge batteries without generator or grid hookup. They spend $100k for motor home then $65-$100 per camp night. Then stay inside and just watch TV?
For all the bloggers who love the minutia of meaningless historical data, especially as it relates to the pure chance of stock market prices in the short term, Dish Network accepts monthly payments in Bitcoin.
Yes, the fabled satellite TV pioneer out of Colorado, Charlie Ergren, has accepted your Bitcoins for years now. I know, I'm a subscriber.
Looks like a smart move. You might chuckle, but he's ahead at this point (depending upon his ability to convert them to cash, or other goods and services.)
Learned all about Charlie when Bloomberg Business Week ran a feature story about his company about 5 years ago, titled (similar to) The Worst Company In America To Work For.
Anyway, I feel that my 'G-D-P' ain't what it was when I was a young sprout. Gosh, those were the days. Rex Renoso, Austin TX
"I do think some should bet on bitcoin. Some should have invested in the dotcom bubble, Chrysler, and Tesla. Those that are single, young, and in good careers. Just starting out on investing with some money. They have a long time period to make up losses and probably understand the new technology better than anyone. They are a point in life with max intellectual asset and peer advice to make such a move less risky. I will say at this point they should act and be very high risk. This group should not buy a new car, house, or go on expensive trips. They can get their kicks out of betting on something they might just be the most capable to discern."
Trees: I won't mince words. I think this is terrible advice to give to young people.
In effect it is encouragement to gamble in the Wall Street casino. The only part I agree with is that they do have a long time to make up losses. But how many will swear off investing for a long time if the "peer advice" doesn't work out as planned? Then they LOSE the advantage that "time in the market" grants.
Some young people may have intellectual assets as you say, but such assets do not automatically extend to investments in individual, risky stocks that you seem to be recommending. How many have the ability to understand a balance sheet, an income statement and cash flow numbers? How many even know where to look to find such information?
Without disciplined study of a company the newbie "investor" will end up chasing after the overhyped shiny new object. Yeah, if that turns out to be a Facebook, Amazon, Netflix or Google then it is Jackpot City. But what if it doesn't? If someone wants to put 5 or 10% of their investible income at extreme risk, fine. Maybe they'll hit it big or maybe they'll just be paying tuition to the School of Hard Knocks.
It looks to me the risk of being in the stock market is less then sitting in bonds. If you had 30% to 60% in bonds for the last several years you have already lost 30%-50%. I know everyone really hates to lose money or actually fears losing money, but within the shadow of great market returns we could lose half and still be better than bonds or cash. It looks like when economic conditions shine we absolutely should be in equities. High P/E ratio is often referred to as risk factor for investments, but the benchmark has a poor record of predicting future risk/return.
In light of this maybe the common advice to hold reserves for needed expenses is not so great. Meaning in worst case scenario we would have to dip into cheap stocks for expenses. O.k. stocks are cheaper, maybe 50% from peak, but still a good deal as compared to tidewater of bonds and cash that haven't appreciated or provide income for an extended time.
Most would reel in expenses during this period of need. Some will even increase income for stock buyback or purchase. The stock market defensive strategy for down turns needn't always be cash or bonds. Some have a line of credit, part time job capability, or have set themselves up for ability to minimize spending.
We know investors live for bull markets. Does it make better sense for even retirees to be 100% stocks when conditions present themselves? An all in or all out investor. Sure, always good to monitor economic conditions and have systematic decision making benchmark, but the biggest concern would be to leave stocks. It would be pleasant to avoid buzz, hype, fluff, and the ever present warnings. To get a good snap shot of economic health and risk. However, the risk may be overblown. Meaning if you made a poor timing decision it wouldn't be that bad. There is risk even upon attempting to minimize risk. There is risk in letting insurance salesmen, advisers, and high priced investment managers make decisions for you. Seems the lowest risk is U.S. S&P 500 ETF and occasional use of a 10 year treasury when economy is sinking. Ten year bonds do better during fading economic times as interest rates will lower.
. To repeat: The Second Estimate for Q3 GDP, to one decimal, came in at 3.3% (3.30% to two decimal places), an increase over 3.1% for the Q2 Third Estimate. Investing.com had a consensus of 3.2%.
Did you catch Ben Carlson article on "The Curse of Young Millionaires"? Very interesting. He starts out with a study done of Midwest vs California residents and if weather impacts happiness. Midwest people complain of their weather and California people brag of theirs, but no change in happiness, satisfaction or well being between the two groups. Psychologists claim people get used to their surroundings. That initially the move to better climate did kick in the endorphin for euphoric feelings, but after being commonplace no such bump. I do know this to be true. Up north we had and have a incredible real estate market due to the Northern Wisconsin landscape and abundant rivers and lakes. They are easier to sell at higher prices as Minneapolis vacationers or retirees fall in love with the more rural lake property. However, I do notice after a few years they move on. What has changed?
Bit coin appreciation is now rated above the IPO sale of Google or Facebook. In this year 2017, there probably 10,000 new millionaires out their per Bitcoin riches. To be fair a large portion of these people probably already had wealth and enough money to not worry so much if losing it all.
So, you see my point of making such a gamble early in life? A point in life wherein of a young professional could afford to lose it all. I do think sometimes it is worth the gamble. I don't think Bogel knows much about Bitcoin, therefore he acts wisely to avoid risk upon something having no competence in. This may not be the case within some young professions making $100k/year. I listened to a talk show of a financial reporter who had about the best info on the currency. It was hard to understand, but this guy was on board with the currency and expected it to do very well. That was a few years back. My guess it is in a bubble now, but I don't have an understanding of the risk. Nor would I ever invest in it or gold. It is pure speculation.
Ben Carlson referred to research in which new wealth if attained at young age and quickly has 70% of them losing the riches after two years. Yikes. Doesn't that make these state lotto jack pots even more evil. I can't believe government is willfully contributing to the poor's troubles. I don't think private enterprise would ever be allowed this poison. Some claim states or feds want to take over the selling of pot, because private enterprise can't be trusted. Right? Were all suffering because of private enterprise and not enough government central control.
This Saudi story is not looking good. Who are “we” backing here and are we turning a blind eye to how this new prince goes about his “purge”? Maybe I just want to know if I should sell my XLE.
I remember reading a article from Lance Roberts that had the stock market melting up for the first quarter of '18. There would be money coming in from those that finally believe the market can and will gain, year end IRA type investments for tax savings, and the passing of fed tax reform. He predicted a good bump, but with the warning that after this honeymoon phase some real fear and correction could ensue. All bets were off after this phase.
So, we could have a good economy and financials, but investors just get shaky and desire to take earnings. This correction may be the best opportunity to reinvest if one has money on the sidelines? Hard to wait that long, so probably a wash on gain vs loss. With steady outlook for better GNP growth I'm more on the side of going in then holding. Probably split the difference. What will Bob say?
Regulation is a direct drag on GNP growth. That is a economic theory of government interference of marketplace. In general the cost we inflict on ourselves for mutual benefit of intangibles that are free, but ever so valuable to our health and well being. That laudable ideal is turning into a industry of political opportunist, lawyers, and bureaucrats. We all agree on the ideals, just diverge on the merit of the heavy hand of government unlimited power useage to ever push higher conformance cost with ever decreasing benefit. Politics pushes the "science" into emotional arena. When this stuff gets pushed into politics the truth is the first victim. We should let competing scientist work out the threat and best solutions. We should assail every politician attempting to distort the regulatory working process since the political process is such a pox on the truth.
We do need sunshine and accurate data on the true threat and conformance cost. Also, data on the regulation benefit. This is dynamic environment working with all sectors of nation and globe. We know regs are a expensive poor path forward for global impact. Meaning it probably the worst tool in our basket for improvement. It's not a simple solution with a direct correlation of government power. For example the U.S. now has the best record for lowering carbon emissions. Did we build the most alternative energy? No, we utilized cheaper low carbon alternatives of natural gas as compared to coal. We improved our efficiencies of cars, power generation, and devices. Basically, this approach may have been impacted by regulations, but only on fringe. Meaning it was more of regulations running ahead of the already marching band to claim credit.
Cost of regulation is hard to determine to overall cost to economy, but they're getting better estimates. The science is improving by comparison of state economies that suffer. Michigan had a horrible economy until a movie star left the governor's house. We were rated worst place to do business. Now, we're on the top end due to lightening the regulatory cost burden. Best estimates to GNP by fed regulatory cost is $4 trillion since 1980 or $13,000 per subject.
Rumor going around that Brinker said "sell everything and buy Holland tulip bulbs." Just put my dough into a quarter million dollar Tulip Bulb account, and I am sittin' pretty.
55 comments:
Caller Michael from Hawaii at about 1:30 mentioned David Fish's Dividend Champions spreadsheet. If anyone is interested in taking a look at David Fish's work, here is a link:
http://www.dripinvesting.org/Tools/Tools.asp
Under the rectangular box headed "Information" click on "Excel Spreadsheet." The spreadsheet will open up showing the list of Champions.
I renewed my subscription to Marketimer over the Thanksgiving holiday after missing several months. Would someone mind letting me know if there was anything urgent in the most recent newsletter. I assume there was not because Bob hasn't even bothered to show up for the radio broadcast for at least a couple of weeks or maybe he show up just briefly. I'm going into long etf's soon and feel the markets are going to continue to the upside--as long as Pres. Trump continues to follow through on tax reform. Any comments from Flyover Country--I'm in Los Angeles. Honey seems fairly optimistic, too. Would love to hear from people. Herb.
h.slojewski@gmail.com
Thanks for the exciting [?] history, Jester. With Trump likely to be in office through another seven years, do you see any sort of threat on the horizon? I don't quite get the exciting feeling I had in '82 when Pres. Reagan told us to get out there and buy stocks and get rich. I recall a broker telling a group of us how he would buy 1000 options on this and that, etc., and there was lots of optimism. With democrats and liberals and progressives in control of so much of the country now I'm just not feeling the same sense of optimism. But again thanks for your comments, and you do seem quietly [sensibly] optimistic, J.
Sellers strike. How long until we see a correction? (3-5%)
Pavlov’s Cat
$72,000 in twenty dollar bills cash accumulated over 40 years?
Herb: I hope we get some tax reform done but I'm not counting on it happening. I think it will be less "reform" and more "tinkering" when it comes to individuals.
I think it is good to lower corporate rates since these are costs that are passed to customers in the end. For the large percentage of people who end up paying no federal income tax -- their tax cannot be lowered any further, but it appears some will get an increase in their refund, via the child tax credit.
Thanks to Frank, Jester, Tom and Anon for making it an interesting Sunday. Here's to Capital Gains!
Mark Hulbert has Mr Brinker at the top of his honor roll list of:
"Investment Newsletters Have Delivered Top Returns In Good Stock Markets And Bad"
https://www.marketwatch.com/story/these-6-investment-newsletters-have-delivered-top-returns-in-good-stock-markets-and-bad-2017-11-27/print
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Mark Hulbert has designed a whole new business model that probably is making him much bigger bucks than his former newsletter - which he also called Hulbert's Financial Digest.
If you go to the link that SuzyPie posted, you will see that he now charges $50 a month for EACH of his email notifications.
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SuzyPie...Mark Hulbert is a dishonest crook. Now do you want to know what I really think about him?
I have emails from him that prove he has lied about Bob Brinker's performance record for almost two decades.
Brinker is equally crooked because he knows that Hulbert lied - and he knows that this so-called "honor roll" is a made up gimmick designed to promote Bob Brinker's Marketimer.
One hand washes the other. Brinker's name helped build Hulbert's newsletter and Hulbert's newsletter has sold a lot of Marketimers.
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And another thing about Mark Hulbert. He claimed that Brinker did well during bear markets. I guess Hulbert wasn't paying any attention to the megabear of 2008-2009. Brinker's Marketimer portfolios dropped more than the market in general.
And notice that even Hulbert has to admit that Brinker did NOT beat the indexes:
"With that said, I should note that while the Honor Roll newsletters have outperformed the typical service not on the Honor Roll, they on average have not outperformed a broad stock-market index fund. But that may not be a reason to shun them. It’s only when these managers’ returns are analyzed in light of their reduced risk that their value is appreciated."
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Home sales highest in a decade:
Unexpectedly Rise to Highest in a Decade
By Sho Chandra
November 27, 2017 7:00 AM PST Updated on November 27, 2017 7:09 AM PST
U.S. purchases of new homes unexpectedly advanced in broad fashion last month, reaching the strongest pace in a decade and offering an encouraging signal for residential construction, according to government data released Monday.
I was sure that Bob Brinker was downplaying and spinning economic growth last week.
Yo, Bob....better get your facts right before next weeks show (if you are live on air):
Mick Mulvaney
Verified account
@MickMulvaneyOMB
Following @MickMulvaneyOMB
We've had two consecutive quarters of 3% GDP growth or higher.
"With that said, I should note that while the Honor Roll newsletters have outperformed the typical service not on the Honor Roll, they on average have not outperformed a broad stock-market index fund. But that may not be a reason to shun them. It’s only when these managers’ returns are analyzed in light of their reduced risk that their value is appreciated."
Ah yes, the old "risk adjusted return" fan dance, where the risk/return is determined in hindsight. I like John Bogle's forward looking outlook. When asked which mutual fund one should invest in for the best long-term results, he said, "The one with the lowest fees."
So, is Hulbert a shark?
Here's a chart of quarterly growth of the US economy (annualized GDP) for the last four years. What is remarkable is the variability from quarter to quarter.
https://www.bea.gov/newsreleases/national/gdp/gdp_glance.htm
It might be more meaningful if the moving average of the trailing four quarters was reported. This would help to smooth out short-term fluctuations; any trend, up or down, might be more likely to show up in such a chart.
John from SF said:
Is it time to place our bets on whether Bob Brinker will be "live" during Honey's bell-ringing Sunday this Holiday season? Seems like he might do that just to spite Honey. But does he keep track of things like that seasonal pattern?
The prior posts regarding market timers and money handlers brought to mind the ”A Parable” from John Bogle’s latest read, The Little Book of Common Sense Investing 10th Anniversary Edition.
I will summarize, (and somewhat embellish), the folksy parable as follows.
Once upon a Time . . . a wealthy family named the Gotrocks, owned 100% of every stock in the U.S.A. They reaped the rewards of investing: all the earnings growth and all the dividends that all those corporations generated. All was well.
Along came a few fast-talking Helpers and convinced some of the “smart” Gotrocks to allow the Helpers to “outperform” the other Gotrocks by “managing” their financial affairs. Since the Helpers didn’t “help” for free, some of this supposed “outperformance” began to vanish in the form of brokerage commissions and transaction fees, including “churn” and “revenue sharing” arrangements. To add insult to injury, new taxes were generated in the form of capital gains as a consequence of all this “churn” of buying and selling of securities.
These “smart” Gotrocks soon realized that they needed additional “help” from “expert financial planners” to better “manage” their shrinking winnings. The new “money managers” felt compelled to earn their keep by trading (“churning”) at an even more feverish pace resulting in even higher brokerage commissions and higher taxes to boot! In addition, they noticed that there always was a huge amount of cash sitting on the sidelines resulting in “opportunity cost” loss!
These “smart” Gotrocks soon realized that they were playing the loser’s game of trying to beat the market.
Long story short -- Get rid of all your brokers. Get rid of all your money managers. Get rid of all your consultants.
Return to owning the total market in passive ultra low-cost index holdings!
. . . and the Gotrocks Family Lived Happily Ever After
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John from SF....Imagine my surprise that you remembered that there are two Sundays per year when I am doing bell-choir performances. One of them is Christmas time.
This year that Sunday is December 10th, so place your bets. :)
And maybe it would be a good idea to put in a good word to Frankj that he will do the summary if Brinker is live that Sunday. :)
Not sure what other see, Biker, but I see a falling GDP during the closing quarters of the Obamagang and a rising one during the start-up of the Trumpgang, and I prefer the rising one. I think everyone knows how that pattern will look in another year and/or 18 months.
Would someone mind letting me know if there was anything urgent in the most recent newsletter.
A better question is why would anyone care? Da Brink’s actual record sucks. Let me see, was it to anyone’s benefit to act on his get 100% out of the market after a massive decline in 1987 and not to get back to fully invested till years after the market rally? There is no way those folks ever recovered if they actually followed his advice for they essentially sold low and bought high. Thus the reason his track record, conveniently starts after that point in time, he just expunges the record. Oh and how about that buy the QQQ thing…yeah that worked so well. Hey, how has NASDAQ done since Brinker bailed on it? The secret to Brinker’s so called success is very simple, the market has an upward bias and Brinker’s portfolio have a beta greater than 1.0. If you did a risk adjusted benchmark I sincerely doubt Da Brink could beat the benchmarks. So he issues a bulletin who cares? You would have to be cognitively impaired to believe his market timing mumbo-jumbo.
If Da Brink personally called me and said "fluffy my friend, the market is going to crash tomorrow" about the only thing I would do is whimsically look at the market the next day and see if his prognostic coin toss was correct this time.
tfb
Here's the best I could do based on trying to read the bar chart linked in my previous post.
12-month moving-average GDP (seasonally adjusted annual growth)
2014 Q3 3.23%
2014 Q4 2.73%
2015 Q1 3.75%
2015 Q2 3.28%
2015 Q3 2.38%
2015 Q4 2.00%
2016 Q1 1.35%
2016 Q2 1.23%
2016 Q3 1.53%
2016 Q4 1.85%
2017 Q1 2.00%
2017 Q2 2.23%
2017 Q3 2.28%
Few investors will buy an index and hold. Bogle even mentioned the problem with ETFs per the higher turnover and loss of return. So, if there is a higher trading cost investors on average lower their turnover and enjoy a better return.
When investors are in the accumulating stage buy & hold is a good way forward since most utilize monthly investing plans. If you are out seven years no need for bonds either. I do think this all changes when investors need to depend on investments. Isn't that why we read stats of employment, housing, GNP, yield curve, interest rate, and hang on every word of fed reserve? You see, I believe we are utilizing whether we know it or not quantitative data for investments. Most have no written systematic method of decision making, Instead we rely on gut instincts to push more to bonds, cash, Amazon, or financial sector. Yes, we are bombarded with newsletters, advisers, and insurance salesmen that want to manage our money for a fee. Yes, The active mutual funds are loaded with unethical and costly practices.
What to do? We know most of stock market gains are in long stretches of bull markets that greatly improve historical return averages. We know just about every ship rises within this tide. Same with the sudden, more powerful and shorter time period of bear markets. Some investors that have need of steady income will supplant this high risk, with lower return investments, but safer and do so at various percentages. We do know returns will be lower and risk higher with with high stock evaluations, but this period of bull market makes us money. We want to be in, but realize the increase risk of loss with high stock prices.
I have came to the conclusion that indeed everyone practices market timing by asset allocations, usually by the bond vs stock holdings. Also, everyone utilizes data for decisions. So, the average investors is hammered with poor advice/financial news i.e. selling the Brexit.
We need to optimize or vet the financial info to distill to a hand full of most important items. To test their combination and usefulness within actionable signals to buy or sell. It will not be 100% accurate, just a nudge in better. Think about it this way. The S&P 500 represents the best of best with lower risk of losing value if priced reasonable. If you can wait long enough to avoid spending in slumps, simply investing in this index will be very rewarding. But, if you need an reliable income, you also need a portion of your investments in lower return financial income devices. This is safer, but at this time will greatly lower returns. Most will succumb to pushing more to high return stocks and keep it there if financial data is positive. Just a fact.
Might I suggest since we are already practicing TAA with Quants per the paragraphs above, that we bone up on the value, usefulness, and best practices. Just a simple method such as biker mentions the simple moving average that will trigger a sell or buy will improve your return. The value is to have a data driven decisions to avoid pitfalls of hype. As your know we are deluged in bad advice hype. The big biggest threat is over reacting. We need to develop action plans and simply work on improving this. Then the decision making process is less emotional. This will move one to the smarter side of the money camp. All of the investment agencies utilize this practice, but unlike you they can't simply sell their equities and avoid the market for a couple years. If they did this they would go bankrupt.
Average returns can be misleading, for example, the stock market will return 7%-8% over time. This is true, but if one were to parse the losses and gains it is a different story. Meaning the gains are slow and losses quick with much flat land in between. So, you could be within a cycle of downturn and experience and long dry spell of years with low gain. Eventually, you will regain what you loss, but do you have the time to wait? Also, your return average will be low for some time. Only within a steady bull market do your recoup losses and then gain. After the gains you will read, again, of good historic averages. IOWs the average doesn't help much in real life. Bonds for example have lower returns, but for most of your investment life with them they will out preform equities. How? By avoiding huge losses they have less to regain to recover.
This is the key to better returns. Clip the period of high risk and avoid a portion of the eventual recession or maybe a portion of a correction. Data suggests you could be quite conservative in your decision making and beat or at least match the average. It's just better sometimes to own more bonds or stock. Also, if a bit more refined in your decision making, periods of 100% stock and 100% bonds are not that risky. Remember, being 100% S&P isn't such a risky move. Neither is 100% bonds. Just utilize better quants to improve decision making. This should improve your return odds. Why is this not common sense?
I read a free Newsletter that addressed fund mangers and average investor's poor record of attempting to predict investments. His data per my scrutiny does indicate the pros get it right more often. They hit 75% quite often. So, why are the overall fund managers returns so poor as compared to just S&P holdings? Well, Bogle gets asked a similar question of ETFs. His additional complaint on ETFs is the sheer variety of offerings. You see these investment companies are serving the public and wish to entice them with unique products. Just plain old marketing. So, we have Democrat, Republican, environmental, health, and gun free ETFs. All of these offerings do bring down the average returns including the heavier loads to make it so. The fund managers are just attempting to make the best of what is handed to them.
Financial advisers, also, attempt to manipulate or market their expertise. Problem is their offerings are naturally chosen to earn themselves a higher commission or protect their image. So, they have to spin or season the truth to maximize and reflect this image. Brinker does this. This self interest lowers their value. IOWs they will distort information at some degree to make themselves look better.
It does look to me, that an ETF S&P 500 many be the one best all time return fund or at least over time the top of the heap performer. Past that one simple advice is to employ some quantitative measuring stick to evaluate economic conditions. We do know much value in limiting risk and draw down. You may be able to purchase some type of market timing info, but not per the above paragraph. You could probably do as well with your own set of guidelines. After all staying in the index still good and getting out upon risky environment is not so bad with bonds. The claim is bonds protect against draw down and the value is to avoid the large climb back to parity. Seems to me common sense to play with these two. Not so dangerous if you pick a good bond fund such as Wellesley.
My wife has been invested in Fidelity Contra 403b at work. I thought is was a remarkable fund. Also, I had a Dodge & /Cox stock fund that was rated high and well respected in the financial community. These are active managed funds and chosen before the day we had cheap index or ETFs options. I will say the Contra fund was way superior as compared to Dodge and Cox for returns and minimizes draw downs. But if one looks at the graphs and comparisons to indexes you would walk away with smug smile that this funds beats the S&P 500 by a mile. Problem is the graph is only mapping the published price. Meaning the graph does not subtract the gross expense. One has to look at load adjusted returns to determine true worth. Sure enough, Contra is employing all the junk that Bogle warns of. All the underhanded tricks upon trade spreads, turnover, and the rest. Turnover must be the bellwether of shenanigans. Notice that Vanguard funds typically have low turn over. I also notice how Contra fund has extremely high turnover when they are on a tear. Funny how the actual performance is no better than S&P. Over longer periods S&P does better. This manager appears capable of pulling income from the fund and is achieving acclaim by publishing non adjusted returns. This is industry standard stuff and works to fool a lot of investors. I will say the fund did not sink as much during the Obama's Great recession, but that is zero grantee of future capability.
I did read a Forbes article of research on active fund managers and how the system is rigged both passive and active to extract wealth, insert bias, or cronyism. It was a college professor analysis of historical records. It looked to me the Vanguard investor owned and Schwab would be the investment house of choice. With both the index funds or ETFs would be fine. However, ETFs had the most ability to avoid pitfalls. I'm moving the account to IRA VOO.
I think if you're going to compare funds with graphs it is better to use the total return option because it incorporates re-invested capital gains and dividends.
Thanks, frankj I will check graphing options.
Bogle recent comments on the Moral Abomination of tax cuts. What is this emotional jealously smear? As if corps were some neighboring entity that was selfish and hording wealth. The comment would lead one to think of Sultans basking in caviar. First business earnings and tax relief is morally irrelevant. It's not a zero sum gain or loss. True if Amazon wins less attractive retail businesses will lose, but Amazon is a public investor owned company. You can own Amazon unlike most private businesses. Wouldn't a private company be more immoral? Most employees have access to very good benefits that in modern day far superior for savings and before tax expenses that make up a portion of earning growth.
The immorality of stagnant wages must lie on the doorstep of federal reserve and the politics of government deficit spending. The economic justification for such was long debunked per the ineffectiveness of such action during the Great Depression. Cheap money and inefficient spending has low effect on economic growth and job wage growth, but does amp up all equities. Of course business will help themselves as well as borrowers to fill up on cheap money. The net effect is to steal income from savers and make their savings worth less. Rents and housing went up as well as stocks. Consumers didn't really splurge on cheap money, but instead invested in more houses and stocks. Budgets for the lower and middle class took a hit while the rich get richer and the divide spreads. Business and consumers didn't feel very positive of economic future and just stood still and attempted to shore up. Nothing really changed within the foundation of economics to foster growth. It was still the over regulated central control system of stagnation.
A tax cut and regulation reform do impact the economy overall. Regulation reform including the IRS is a wonderful way to improve economic efficiency. Business needs less shackles to improve, expand, and hire. Regulations are dead overhead or wet blanket to growth including wage growth. Good regulations and standardizing have the opposite effect. The IRS is a monstrosity and wholly inefficient. They should look for other ways to fund government operations. I remember the discussion on how best to help the economy. Someone suggested to eliminate payroll tax deductions as a sure fire way to move money into hands of consumers. Of course the DC crowd really hated the idea of losing control of money, so they excused themselves from that option and handed the journalist a note stating the public would not spend the money, but pay off debt or hoard. You see we need DC to spend our money as you can't be trusted. Someone out their will make a mistake.
Also, I don't understand why having the highest corp tax rate in international economics is so morally superior if it just works to drive our businesses investments and tax base offshore. We are penalizing corporations for working within U.S. borders with max tax rates.
One must also understanding that lower tax rates on international scale will bring more spending to our shores. Meaning the $2T and increase tax base will flow through out the economy at every level. It doesn't end at the corp or investors. What is the use of increased wealth? It will be turned multiple times for GNP growth at all economic sectors which does spur wage and job growth.
BTW, we see every day how the politics of DC not only spend our money, but that of our Grandchildren. This sways to rob the future choice and brightness from their inheritance. Granted a percentage of population doesn't care of future, only what they can get a present. Increasing tax rate is a popular political ploy to fool citizens into thinking they can get more for free. The problem is always the killing the golden goose or eating the seed corn for immediate satisfaction. Politicians can sell immediate gratification for votes. So, this will put reformers into the box of having few real tools to push the country to better future if any delayed gratification is needed. Most believe the easiest path forward given the political climate would be to increase GNP for tax base, revenue, and job growth. The increased revenue and inflation, over time, will gradually temper the enormous national debt.
Also, the high P/E could temper and gradually lower over time without much volatility. Stocks could just sink returns for extended time period.
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Bob Brinker has been very negative on Bitcoin since the beginning.
Looks like some fortunes have been made on it. It has gone parabolic - now about $1100!
Bitcoinaverage
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According to Bloomberg, the economy has been revised up to 3.3%
12-month moving-average GDP revised up to 2.35%. Definitely in a nice up-trend since the 2016 2nd quarter low.
2016 Q2 1.23%
2016 Q3 1.53%
2016 Q4 1.85%
2017 Q1 2.00%
2017 Q2 2.23%
2017 Q3 2.35%
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Biker...Please include links to your data if you want it published here in the future.
Sure, my data source and methodology was already explained in prior posts:
Biker November 27, 2017 at 6:56 PM
Biker November 27, 2017 at 9:37 PM
For accuracy and completeness the 2017 Q3 data needed to be revised upward based on the post by Honeybee November 29, 2017 at 7:57 AM.
bitcoin is new tulip mania IMO fools gold or maybe the greater fool theory in play
one more sign post of excess greed
smile
I do think some should bet on bitcoin. Some should have invested in the dotcom bubble, Chrysler, and Tesla. Those that are single, young, and in good careers. Just starting out on investing with some money. They have a long time period to make up losses and probably understand the new technology better than anyone. They are a point in life with max intellectual asset and peer advice to make such a move less risky. I will say at this point they should act and be very high risk. This group should not buy a new car, house, or go on expensive trips. They can get their kicks out of betting on something they might just be the most capable to discern. I was in that camp once and chickened out. I had about three golden opportunities wherein my gut instinct was to bet it all.
At this stage of life I only need security and low risk. I have the life style that I desire and that is a simple one. I remember listening to Michael Savage explain that in younger years he spent and needed the best of everything. Now, being older, he likes his old inexpensive stuff. That is a concern of the economy as so many Baby Boomers in retirement. This group historically doesn't spend much. I haven't observed that and only see crazy spending in things as simple as camping and RV equipment. This groups spends a fortune on ultimate convenience and high teck. For example spending $20k for solar to charge batteries without generator or grid hookup. They spend $100k for motor home then $65-$100 per camp night. Then stay inside and just watch TV?
Hi,
Does Bob recommend we invest directly in funds or is through Schwab ok (it's certainly easier)
Thanks
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rdm1000....Bob Brinker is fine with using the big brokerage houses for buying your investments. He has mentioned Schwab, Vanguard and Fidelity....
I certainly agree with him on that, and I'm sure most investors would too.
Got it. Thanks!
For all the bloggers who love the minutia of meaningless historical data, especially as it relates to the pure chance of stock market prices in the short term, Dish Network accepts monthly payments in Bitcoin.
Yes, the fabled satellite TV pioneer out of Colorado, Charlie Ergren, has accepted your Bitcoins for years now. I know, I'm a subscriber.
Looks like a smart move. You might chuckle, but he's ahead at this point (depending upon his ability to convert them to cash, or other goods and services.)
Learned all about Charlie when Bloomberg Business Week ran a feature story about his company about 5 years ago, titled (similar to) The Worst Company In America To Work For.
Anyway, I feel that my 'G-D-P' ain't what it was when I was a young sprout. Gosh, those were the days.
Rex Renoso, Austin TX
"I do think some should bet on bitcoin. Some should have invested in the dotcom bubble, Chrysler, and Tesla. Those that are single, young, and in good careers. Just starting out on investing with some money. They have a long time period to make up losses and probably understand the new technology better than anyone. They are a point in life with max intellectual asset and peer advice to make such a move less risky. I will say at this point they should act and be very high risk. This group should not buy a new car, house, or go on expensive trips. They can get their kicks out of betting on something they might just be the most capable to discern."
Trees: I won't mince words. I think this is terrible advice to give to young people.
In effect it is encouragement to gamble in the Wall Street casino. The only part I agree with is that they do have a long time to make up losses. But how many will swear off investing for a long time if the "peer advice" doesn't work out as planned? Then they LOSE the advantage that "time in the market" grants.
Some young people may have intellectual assets as you say, but such assets do not automatically extend to investments in individual, risky stocks that you seem to be recommending. How many have the ability to understand a balance sheet, an income statement and cash flow numbers? How many even know where to look to find such information?
Without disciplined study of a company the newbie "investor" will end up chasing after the overhyped shiny new object. Yeah, if that turns out to be a Facebook, Amazon, Netflix or Google then it is Jackpot City. But what if it doesn't? If someone wants to put 5 or 10% of their investible income at extreme risk, fine. Maybe they'll hit it big or maybe they'll just be paying tuition to the School of Hard Knocks.
Pimco via Bloomberg had an interesting 11/30 article on bonds as hedge.
https://www.bloomberg.com/news/articles/2017-10-30/pimco-quants-say-beware-of-bond-hedges-for-high-flying-stocks
It looks to me the risk of being in the stock market is less then sitting in bonds. If you had 30% to 60% in bonds for the last several years you have already lost 30%-50%. I know everyone really hates to lose money or actually fears losing money, but within the shadow of great market returns we could lose half and still be better than bonds or cash. It looks like when economic conditions shine we absolutely should be in equities. High P/E ratio is often referred to as risk factor for investments, but the benchmark has a poor record of predicting future risk/return.
In light of this maybe the common advice to hold reserves for needed expenses is not so great. Meaning in worst case scenario we would have to dip into cheap stocks for expenses. O.k. stocks are cheaper, maybe 50% from peak, but still a good deal as compared to tidewater of bonds and cash that haven't appreciated or provide income for an extended time.
Most would reel in expenses during this period of need. Some will even increase income for stock buyback or purchase. The stock market defensive strategy for down turns needn't always be cash or bonds. Some have a line of credit, part time job capability, or have set themselves up for ability to minimize spending.
We know investors live for bull markets. Does it make better sense for even retirees to be 100% stocks when conditions present themselves? An all in or all out investor. Sure, always good to monitor economic conditions and have systematic decision making benchmark, but the biggest concern would be to leave stocks. It would be pleasant to avoid buzz, hype, fluff, and the ever present warnings. To get a good snap shot of economic health and risk. However, the risk may be overblown. Meaning if you made a poor timing decision it wouldn't be that bad. There is risk even upon attempting to minimize risk. There is risk in letting insurance salesmen, advisers, and high priced investment managers make decisions for you. Seems the lowest risk is U.S. S&P 500 ETF and occasional use of a 10 year treasury when economy is sinking. Ten year bonds do better during fading economic times as interest rates will lower.
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To repeat: The Second Estimate for Q3 GDP, to one decimal, came in at 3.3% (3.30% to two decimal places), an increase over 3.1% for the Q2 Third Estimate. Investing.com had a consensus of 3.2%.
Q3 GDP Came in at 3.3%
Trees, I really enjoy reading your very thoughtful comments.
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John Bogle weighs in on Bitcoin:
Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’
Did you catch Ben Carlson article on "The Curse of Young Millionaires"? Very interesting. He starts out with a study done of Midwest vs California residents and if weather impacts happiness. Midwest people complain of their weather and California people brag of theirs, but no change in happiness, satisfaction or well being between the two groups. Psychologists claim people get used to their surroundings. That initially the move to better climate did kick in the endorphin for euphoric feelings, but after being commonplace no such bump. I do know this to be true. Up north we had and have a incredible real estate market due to the Northern Wisconsin landscape and abundant rivers and lakes. They are easier to sell at higher prices as Minneapolis vacationers or retirees fall in love with the more rural lake property. However, I do notice after a few years they move on. What has changed?
Bit coin appreciation is now rated above the IPO sale of Google or Facebook. In this year 2017, there probably 10,000 new millionaires out their per Bitcoin riches. To be fair a large portion of these people probably already had wealth and enough money to not worry so much if losing it all.
So, you see my point of making such a gamble early in life? A point in life wherein of a young professional could afford to lose it all. I do think sometimes it is worth the gamble. I don't think Bogel knows much about Bitcoin, therefore he acts wisely to avoid risk upon something having no competence in. This may not be the case within some young professions making $100k/year. I listened to a talk show of a financial reporter who had about the best info on the currency. It was hard to understand, but this guy was on board with the currency and expected it to do very well. That was a few years back. My guess it is in a bubble now, but I don't have an understanding of the risk. Nor would I ever invest in it or gold. It is pure speculation.
Ben Carlson referred to research in which new wealth if attained at young age and quickly has 70% of them losing the riches after two years. Yikes. Doesn't that make these state lotto jack pots even more evil. I can't believe government is willfully contributing to the poor's troubles. I don't think private enterprise would ever be allowed this poison. Some claim states or feds want to take over the selling of pot, because private enterprise can't be trusted. Right? Were all suffering because of private enterprise and not enough government central control.
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Wow:
Dow Jones Industrial Average
Nov 2017: 24,300
Nov 2016: 17,900
Nov 2014: 17,900
Today: Dow = 24,231
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Note to --Dr. Ozzy Twain, Knoxville
Dear Mr Twain....I'm sure Mark would be proud of your apparent writing skills, but this is not the place for giving lessons.
But thanks for your good intentions - and mostly I agree with you.
This Saudi story is not looking good. Who are “we” backing here and are we turning a blind eye to how this new prince goes about his “purge”? Maybe I just want to know if I should sell my XLE.
Pavlov’s Cat
HB, yes the gains are good for those who are still riding the wave...
a bit of historical perspective:
Dow:
1/19/2017 19732.4
3/9/09 6547.05
Triple wow... even if you use 1/20/09 as start point you are looking at a 2.5x Wow
As Bogle says stay the course...
smile
I remember reading a article from Lance Roberts that had the stock market melting up for the first quarter of '18. There would be money coming in from those that finally believe the market can and will gain, year end IRA type investments for tax savings, and the passing of fed tax reform. He predicted a good bump, but with the warning that after this honeymoon phase some real fear and correction could ensue. All bets were off after this phase.
So, we could have a good economy and financials, but investors just get shaky and desire to take earnings. This correction may be the best opportunity to reinvest if one has money on the sidelines? Hard to wait that long, so probably a wash on gain vs loss. With steady outlook for better GNP growth I'm more on the side of going in then holding. Probably split the difference. What will Bob say?
Regulation is a direct drag on GNP growth. That is a economic theory of government interference of marketplace. In general the cost we inflict on ourselves for mutual benefit of intangibles that are free, but ever so valuable to our health and well being. That laudable ideal is turning into a industry of political opportunist, lawyers, and bureaucrats. We all agree on the ideals, just diverge on the merit of the heavy hand of government unlimited power useage to ever push higher conformance cost with ever decreasing benefit. Politics pushes the "science" into emotional arena. When this stuff gets pushed into politics the truth is the first victim. We should let competing scientist work out the threat and best solutions. We should assail every politician attempting to distort the regulatory working process since the political process is such a pox on the truth.
We do need sunshine and accurate data on the true threat and conformance cost. Also, data on the regulation benefit. This is dynamic environment working with all sectors of nation and globe. We know regs are a expensive poor path forward for global impact. Meaning it probably the worst tool in our basket for improvement. It's not a simple solution with a direct correlation of government power. For example the U.S. now has the best record for lowering carbon emissions. Did we build the most alternative energy? No, we utilized cheaper low carbon alternatives of natural gas as compared to coal. We improved our efficiencies of cars, power generation, and devices. Basically, this approach may have been impacted by regulations, but only on fringe. Meaning it was more of regulations running ahead of the already marching band to claim credit.
Cost of regulation is hard to determine to overall cost to economy, but they're getting better estimates. The science is improving by comparison of state economies that suffer. Michigan had a horrible economy until a movie star left the governor's house. We were rated worst place to do business. Now, we're on the top end due to lightening the regulatory cost burden. Best estimates to GNP by fed regulatory cost is $4 trillion since 1980 or $13,000 per subject.
Rumor going around that Brinker said "sell everything and buy Holland tulip bulbs." Just put my dough into a quarter million dollar Tulip Bulb account, and I am sittin' pretty.
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