Skip to main content

Posts

Showing posts from 2019

It Really Should Be a Happy New Year!

First, forget about resolutions. A year ago I posted this article that provides insight on what you should be doing, not just at the beginning of the year, but all year long.

10 Life-Changing New Year's Habits

Other reasons to celebrate, especially if you live in the United States.
Democrats peddle doom, but the middle class never had it so good
These days when you listen to the gloom of the media and many of the presidential candidates you have to wonder what country these Debbie Downers are talking about.

Former Vice President Joe Biden recently declared “the middle class is getting crushed … and the working class has no way up.”

Sen. Bernie Sanders stews that President Trump’s policies have brought “handouts for billionaires and hunger for the poor.”

Mayor Pete Buttigieg claims that many working families are struggling so much financially they don’t have enough income to be able to “afford a two-bedroom apartment.”

The Washington Post says that Americans are awash in debt that …

U.S. Economy Better than Ever

We're being told on a daily basis by Democratic candidates how bad things are, how the middle class is disappearing, how capitalism has failed, and we should embrace socialism. 
But that is not what's really happening. 
From the Washington Times: 2019 was a very good year, despite a dysfunctional Congress. A few weeks ago, a friend said she had noticed that clothing was getting less and less expensive and, in fact, many items seemed to be getting less expensive... In the United States, there are more jobs than workers. Wages for all groups are rising faster than prices. What is particularly remarkable — and a very good sign — is that wages for the lowest income and least skilled are rising faster than other groups... Medical advances are accelerating, with people not only surviving from many ailments that would have killed them a few years ago, but living relatively normal lives after serious cancers, heart operations and accidents. Recovering quicker and better after a medic…

Quotes of the Day

From Justin Haskins at FoxNews and Stopping Socialism:
If you asked our foreign enemies to come up with a plan to destroy the American economy and plunge our country into another Great Depression, they couldn’t come up with anything that would do the job as well as the Green New Deal.Read more.

From Derrick Wlodarz at betanews:
So what has censorship in the modern age for the Facebooks and Twitters of the world devolved into? Siloed decision making by secretive "boards" that have limited diversification of background and worldview, all pushing ever-changing directives out to technical teams which must implement these wishes into algorithms for their respective platforms.  Yes, at a 10k foot view, that's the most common protocol for how censorship is implemented as a matter of policy for the tech giants. If this shadowy process doesn't raise an eyebrow, it darn well should.Read more.
Worst of the Decade: Celebrity Freak-Outs: “One of the things I stopped doing is do no…

Markets Hit Record Highs: Now What?

So, how did the markets do on Friday (Dec 27, 2019)?

Well, the Dow was up about 23.87 points (0.08%) to 28,645.26. The S&P 500 was unchanged at 3,240.02, but it still managed to lock down a fifth straight week of gains. The Nasdaq slipped 0.17% to 9,006.62. All three averages hit new intraday highs in yesterday's session.

The S&P 500 is set to break a historic record. Right now, it's gained 29.3% this year. If it can achieve the 29.6% (or better) mark, it will be the best year - ever. The last time it hit that benchmark was in 1997.

So now what? If you're invested in equities, do you sell? Or do you continue to hold? Or if you're not invested, do you buy? If you think the answer is to just buy and hold, you're in the wrong place. My philosophy is buy, hold, and sell. See my article Beware Your Broker to get started. The last bear market was a 57% decline and took 6 years to break even. I can't handle that for my retirement, can you?

So we will sell, whe…

A Christmas Gift for U.S. Taxpayers: Government Waste

Absurd things the U.S. government spends money on. Your money on. And we're more than $23,000,000,000,000 in debt.
The NIH and NSF are spending $1.2 million to study online dating habitsThe State Department is spending $15.825 million on free college for international studentsUSAID is spending $20 million to teach Lao to Laotians.The State Department is spending $2 million to improve TV programming in MoldovThe U.S. gave the Asia Foundation, which is "committed to improving lives across Asia" about $17 million. And $16.7 for international fisheries commissions.The National Science Foundation spent $103,777 to teach social scientists how to apply for grants. The Pentagon sent $2,7 million in surplus military gear to police in Thetford Township, Michigan, population 7,000. The National Science Foundation spend $650,000 to see if STEM majors benefit from a college program based on social justice
The Federal Government also wasted American's tax dollars as it:  Attempted t…

Interesting Reads

Recalling the Battle of the Bulge
Seventy-five years ago, at the Battle of the Bulge (fought from Dec. 16, 1944, to Jan. 25, 1945), the United States suffered more casualties than in any other battle in its history. Some 19,000 Americans were killed, 47,500 wounded and 23,000 reported missing.

Stock Picking is Hard. Deciding What Kind of Investor You Are is the First Step
For new investors, the universe of investing can feel a little like the ancient terracentric paradigm. Daily stock prices are quoted. Big movers are highlighted on television. But why stocks are moving remains mysterious.

Government Mandates and Crummy Dishwashers
American dishwashers used to work. They were wonderful labor-saving devices. They kept our kitchens cleaner. They sanitized the dishes, helping to stop cross-contamination and generally improving health over the iffy process of handwashing. …Then one day they just stopped doing the work. What happened?

In 2020 Climate Science Needs To Hit the Reset Button In a…

The Week Ahead; Dividend Update

Investors are due for a light period of action with Christmas landing right smack in the middle of the week. The markets close at 1:00 p.m on December 24 before taking a day off on Christmas. Despite the holiday vibe, intriguing economic reports will come in this week on new home sales and durable goods, although the earnings calendar and corporate events schedule are both bare.

Across the Pacific, the latest update on China trade data could be interesting, while Chinese, Japanese and South Korean leaders are gathering in southern China to work on a potential free trade deal. Finally, even if you don't believe in Santa Claus, you can believe in the Santa Clause rally. The S&P 500 Index has posted an average gain of 1.3% during the final five trading days of the year and the first two tradings days of the new year over the last 70 years. 
However, markets in general are overvalued based on the Shiller PE Ratio (chart below), but are no where like it was during the dot.com boom …

The Santa Clause Rally

While spending an interesting week in an advanced futures trading class, we noticed an uptrend in the market (indexes).  The markets frequently rally at this time of year, or the so-called Santa Clause Rally. This week was no different.

U.S. stocks notched another record setting day, as the Santa Claus rally continues. It was more mixed internationally in equity markets. U.S. Treasury yields fell slightly, but the Dollar Index was higher, courtesy of a larger drop in European yields and continued uncertainty surrounding Brexit. Gold and oil were lower. Personal Income topped estimates with Personal Spending matching expectations. University of Michigan Consumer Sentiment hit a one and a half year high. Nike posted upbeat quarterly results, but disappointing margins pressured shares of the athletic and apparel maker, while shares CarMax fell after results fell short of estimates. For the week, the major indexes advanced solidly led by the Nasdaq’s 2.2% gain.

State Tax Changes as of Jan …

U.S. News & World Report Recommendations: Here's My Take

In a recent article U.S. News and World Report recommended 11 stocks that pay "great" dividends.

Here's my take. The whole purpose of this exercise is to illustrate that while a lot of people are making recommendations, only you can do the research and exercise due diligence before investing your own money. My recommendation if you're looking for yield is to search for an ETF that offers decent yield, and can spread the risk among dozens of companies. While you might get a little less yield, you get less risk.

Altria Group (MO)
Current Yield: 6.7%
Besides investing in cigarette brands, its PE is twice the sector average, earning are not growing and its dividend payout ratio is high. Sales and earnings growth is anemic. I would avoid.

Macherich Co. (MAC)
Current Yield: 11%
This is a REIT that invests in malls. That for me says no. There are better REITS out there.

Macy's (M)
Current Yield: 9.9%
At one time, Barron's recommended Macy's when it sold for $35 per…

Most Americans Do Not Trust the News Media

Most Americans Do Not Trust the News Media A poll by MSN.com. While not statistically valid (the sample was not selected according to survey principles), it is interested that 65 percent out of more than 600,000 responses say the mainstream news reports false or misleading information. 

Asked differently, How much do you trust the news media? 58% out of 250,000 people said not much or not at all. 


Retails Sales Disappoint

Retail sales rose 0.2% in November, below the consensus of 0.5%. Vehicle and gas station sales accounted for most it, up 0.5% and 0.7%, respectively. Excluding these two categories, retail sales were flat.

Part of the disappointing performance was likely due to seasonality. The late Thanksgiving holiday this year left six fewer days in the holiday shopping season than last year. Several retail categories posted notable declines, including apparel, sporting good and hobby stores, and health and personal care stores. Restaurant sales fell for the second straight month and by the most in a year. Those were offset mostly by gains in electronics and online shopping. Measures of discretionary retail sales and its core picked up 0.2% and 0.3%, respectively, both below their historical means.

On a y/y trend basis, retail sales were up 3.5%, which is better than the pace early this year, but worse than the average in 2018. Discretionary retail sales y/y growth and its core have also improved o…

Dividend Safety

I don't normally invest in individual companies -- though I will make exceptions. I'm retired so my days of high-growth investing are mostly over; having said that, I still want some growth in my portfolio. But I want income, and besides bonds, which are pretty boring, I like dividends. 
 But if you're investing for dividends and you're investing in a company, you must insure dividend sustainability. When a company reduces or suspends its dividend, the normal result is the stock will tank, erasing all your gains and creating a loss. 
(This is why I'll invest in an ETF that focuses on dividends, especially if they pay out monthly, which individual companies don't do. This spreads the risk around).
The most important factor is a company’s payout ratio. This is the percentage of net income a company pays its shareholders as dividends. The lower the payout ratio, the safer the dividend payment.
The second factor is the company’s debt-to-equity ratio. The more debt…

Investing Advice and the Four Most Dangerous Words in the English Language

I took Chris Haroun's finance course at Udemy and found him fun to watch. Here, he provides some insight to investing. Owning stock is like owning a business. Investing is long-term. Day trading is not a sustainable business model.


What's Holding You Back? You Are

The end of 2019 nears. This is always a good time of year to review your goals and plans and update them for the next year.

It's also a good time to review the basic principals for sound financial planning and maintaining your financial freedom -- and if you've not gained financial freedom yet, continue with your striving for that goal. It's a life changer.

So what has been holding you back? Still living paycheck to paycheck? Or do you have too much debt and maybe having difficulty paying it down? Here are some of the most common ways people are subconsciously (or even consciously) sabotaging their own financial well-being.

1. You don't follow a budget

Following a budget is important for anyone, regardless of their net worth. Without one, you might do more spending than saving. That could lead to debt and it will certainly hamper your ability to prepare for your future.
Study this article on How Do I Create A Budget. Then do it. 
2. You don't set clear financial goal…

Weekend Reads

Quantum EconomicsToday’s economists may think that’s [inductive reasoning] what they are doing, but they often aren’t. They begin with models that purport to include all the important variables, then fit facts into the model. When the facts don’t fit, they look for new ones, never considering that the model itself may be flawed.

Furthermore, as I have shown time and time again, they assume away reality in order to construct models that are in “equilibrium” with themselves. This is supposed to give us insight into the reality that has been assumed away. 
Comparing Capital Gains Tax Proposals by 2020 Presidential Candidates In less than two months, voters will cast their choice in the Iowa caucus to begin the process of selecting the next Democratic presidential candidate. The candidates currently in the top 3 polling positions—former Vice President Joe Biden, Senator Elizabeth Warren (D-MA), and Senator Bernie Sanders (I-VT)—have all proposed sweeping changes to the tax code, especially …

Job Numbers Higher, Unemployment Rate 3.5 Percent

Nonfarm payrolls (chart) jumped by 266,000 jobs month-over-month (m/m) in November, compared to the Bloomberg forecast of an 180,000 increase. The rise of 128,000 seen in October was revised to a gain of 156,000 jobs. Excluding government hiring and firing, private sector payrolls increased by 254,000, versus the forecasted gain of 178,000, after rising by 163,000 in October, revised from the 131,000 increase that was initially reported.

Note: Job numbers include 50,000 GM workers who returned to work. 

The unemployment rate dipped to 3.5% from October's 3.6% rate, where it was expected to remain, while average hourly earnings were up 0.2% m/m, below projections of a 0.3% increase, but October's initially-reported 0.2% rise was adjusted upward to a 0.4% gain. Y/Y, wage gains were 3.1% higher, versus estimates of a 3.0% pace, and versus October's upwardly-revised 3.2% increase. Finally, average weekly hours remained at 34.4, matching estimates. 
Today's upbeat Labor Repo…

Markets Turn as December Opens

As I write this, the market is down (DJIA) about 325 points, or 1.2 percent. After a loss of 268 yesterday, this is the largest decline in more than two months. The decline is reportedly a reaction to weaker manufacturing data and Trump's remarks on a trade deal.

I've been talking about this possibility for longer than that. See What Do I Do Now, from Sept 24; This Pattern Is Another Warning Sign, Nov 2;  and of course, some advice in general portfolio management for any market: What should my investment strategy be right now if a recession is imminent? or Have a Smart Trade Plan Before You Invest.

Many brokers and advisors and other "experts" on portfolio management prescribe the buy and hold, yet reallocate, method. This involves deciding on a mix of investments, for example 60 percent stocks and 40 percent bonds (or fixed income). Then on a regular basis, you re-balance the portfolio to maintain that ratio.

There are studies that show this is a valid method that c…

Have a Smart Trade Plan Before You Invest

When you buy a stock, it’s likely because you sense an opportunity. But how often do you establish the parameters for making profits? How will you know when to get in or out of a trade?

These are questions you should ask yourself before entering a trade. Creating a step-by-step trade plan—a blueprint for how to build positions and reshape them as conditions warrant—can help you develop a disciplined approach to your trading.

Before beginning any trade plan, perform a quick self-evaluation:
Are you buying a stock for fundamental or technical reasons?Which investing style do you prefer (e.g., growth or value, trend or countertrend)?Determine your view of market sentiment: Is momentum generally tilted up or down? Once you have your bearings, and you’ve identified a list of stocks or exchange traded funds (ETFs) based on your research analysis method—fundamental, technical or both—you’re ready to embark on the actual planning. Here are five key steps to help you create a smart trade plan:

K…

Advice Worth Taking

Year-end is rapidly approaching, which means it's time to review your investing or trading rules. Below, I have some time-honored advice that may help. Both Dennis Gartman and Bob Farrell are legendary traders, and they kindly shared the rules they’ve found most helpful.

Both these guys are traders, rather than investors, but a lot of the advice is helpful regardless of the long-term strategy you use.

NEVER, EVER, EVER ADD TO A LOSING POSITION: Adding to a losing position eventually leads to ruin, remembering Enron, Long Term Capital Management, Nick Leeson and myriad others.
TRADE LIKE A MERCENARY SOLDIER: As traders/investors we are to fight on the winning side of the trade, not on the side of the trade we may believe to be economically correct. We are pragmatists first, foremost and always.
MENTAL CAPITAL TRUMPS REAL CAPITAL: Capital comes in two forms... mental and real... and defending losing positions diminishes one’s finite and measurable real capital and one’s infinite and…

Week in Review

I don't always do a week in review, but I thought it would be helpful to take a look at what's going on. (It's easy for individual investors to create their own week in review. Use the Economic Calendar, sign up for market reviews with your broker, and visit web sites such as CNBC, Yahoo Finance, Forbes, Seeking Alpha, Market Watch, etc.)

Markets Finish Session Higher, Fail to Post Weekly Advance

The U.S. equity markets finished the last trading session of the week modestly higher, but failed to post gains for the week, as the omnipresent uncertainty swirling around a U.S.-China "phase one" trade deal that has hampered conviction all week tempered some upbeat news on the manufacturing front and some mixed retail sector earnings reports. Markit's manufacturing and services sector reports came in stronger than expected, and the University of Michigan's Consumer Sentiment Index was unexpectedly revised higher.

Jobless Claims Indicate Slower Growth

The risks of …

Seven Facts (or Myths) About Investing

Putting money in the market and hoping for the best. Most advisors will tell you that. I have actually been told that by a financial advisor, that I should always be fully invested. I did not hire him. I actually don't need a financial advisor. Neither do you if you learn the principles.

Phil Town presents the following video on facts and myths about investing.

He asks the following questions, and provides some insight. Well worth the 12 minutes.

1. True or False? The stock market always goes up in the long run.

2. True or False? Those few people who beat the market in the long run only do so because they have either studied hard or have above-average IQs.

3. True or False? Real estate does not need to be part of everyone's portfolio.

4. True or False? Risk and reward in the stock market are related. If you want a higher return, then you must be willing to take more risks.

5. True or False? The best way to offset the risk of investing in the stock market is to diversify across…

Notable Quote

Jim Geraghty, writing for National Review:
Marco Rubio’s “Common Good Conservatism” and other conservatives expressing more skepticism of the free market are all fascinating, but I remain unconvinced that you’ll have a lot of success trying to fix cultural problems with federal government policy solutions. We’ve got serious and worsening troubles: addiction, suicide, cycles of despair, forgotten communities, isolation, and alienation. But if your plan is to turn to government to fix it, you’re ultimately trusting the same institution we trusted to provide medical care to veterans. The federal government has a lot of good people working for it, but they’re mostly stuck in structures and cultures that incentivize the status quo, punish risk-takers, minimize accountability and disregard efficiency. Could we change that? Maybe, but it won’t be easy, and it won’t happen quickly. The problems we face weren’t created in a small office in a federal building Washington, and they won’t be fixed…

Become a Better Money Manager

From my point of view -- or as they say, IMHO -- none of the above "reasons" -- I'd like to call them "excuses" -- are valid for not having retirement savings. All of them can be overcome by following basic financial principles. The following are time-tested principles, which have been repeated over and over again. What most people lack is the willingness to actually do them, rather than just think about them. 
1. Set SMART financial goals
The first step toward achieving your financial goals is to set parameters against which you can measure your progress. That means ensuring your goals are Specific, Measurable, Achievable, Relevant and Time-bound, or SMART.

Using the SMART approach will force you to be more precise about what you want to achieve and give you less room to make excuses should you fall short. Here’s an example to get you started:

Vague goal: Contribute to my 401(k) each month.

SMART goal: Contribute 5% of my salary to my 401(k) each month in orde…

Just for Fun: Most Popular Grocery Stores

There are some 36,000 grocery stores in the United States. (Thanks to free market capitalism). While some are smaller, independent stores or specialty outlets that focus on groceries from a certain area, Americans tend to buy the bulk of their food at large regional or national chains. Regional chains like Hy-Vee, Albertsons, or Publix may be a staple in some parts of the country, but they are completely unknown in others.

I live in Texas, so I wasn't surprised that H-E-B was listed by WallStreet 24/7 as the most popular. H-E-B started around the turn of the 20th century and is based out of San Antonio. I would probably vote for Albertsons, but they are a tad more expensive.

On my recent trip to Michigan, I did shop at a Meijers, which is supposedly the most popular grocer in that state. Meijers is like a WalMart supercenter. I found it interesting that when checking out, the person ringing up your groceries also had to bag them. I made the comment that she didn't have any he…

New Retirement Legislation Stuck in the Senate

From Gary Halbert:
A sweeping new retirement bill is working its way through Congress that is aimed at helping the country overcome its retirement savings crisis. That’s what many lawmakers in Washington envision with the Setting Every Community Up for Retirement Enhancement Act of 2019 – better known as the “SECURE Act.” The far-reaching bill includes 29 provisions aimed at increasing access to tax-advantaged retirement accounts and preventing older Americans from outliving their assets.

The SECURE Act includes numerous new retirement account benefits including making it easier for small businesses to set up retirement plans such as 401(k)s that will be less expensive and easier to administer. Many part-time workers would be eligible to participate in employer retirement plans under the bill. And the SECURE Act would also push back the age at which retirement plan participants must take “required minimum distributions” (RMDs) from 70½ to 72. These are just a few of the new benefits …

Economic Perspectives Update

Retail sales increase modestly

Retail sales increased 0.3% in October, nearly reversing a similar drop in the prior month, and above the consensus of 0.2%. Individual categories were mixed. Vehicle and gas station sales increased 0.5% and 1.1%, respectively. Excluding these two categories, sales were up a modest 0.1%. While online sales continued to advance, up 0.9%, apparel dropped 1.0% and restaurant sales fell 0.3%, down for the first time this year. The two home-related categories (building materials and furniture) also pulled back, suggesting some potential weakness in housing demand.

On a y/y trend basis, retail sales were up 3.8%, which is weaker than where they were in mid-2018, but better than earlier this year. Our measure of discretionary retail sales and its core increased 4.9% y/y and 5.5% y/y, respectively, also stronger than earlier this year. This suggests that the pullback in consumer comfort over the past several weeks has not impacted consumer demand. The trends in …

Laughter Is the Best Medicine

Dan Mitchell, from his blog International Liberty, pointed me to Babylon Bee, a site for political satire.
Laying their cards on the table with the midterms approaching, the nation’s Democrats have united to send a clear message: socialism is America’s only hope of ending the current nightmare of economic prosperity. “We’re living in a hellscape—but there is an escape,” 2020 presidential hopeful Joe Biden said... "democratic socialism is what’s going to free us from our horrific, flourishing, present conditions. You do the math.” ...“Kill anyone who disagrees!” Maxine Waters bellowed from the background. OK. That's funny. And the site spares no one, poking fun at Libertarians:
The U.S. government announced Monday it will be adopting more libertarian policies going forward, including lower taxes, greater support for civil liberties, and a drastically decentralized federal government, “if all the libertarians will agree to just shut up and stop complaining for like one freaking s…