Thursday, February 28, 2019

Why you're looking at money the wrong way


GDP better than expected; jobless claims up slightly

A very valuable resource -- and free -- I use is called Econoday. It has the latest in economic news, both upcoming and recent. Want to know the lastest EIA oil numbers. You'll have it as soon as it's posted. (One note: sometimes the market anticipates, and prices in news, or just yawns. But sometimes the news can cause some big price swings). Today, it seems the market doesn't care much.

From just this morning after the GDP numbers:

At 2.6 percent, fourth-quarter GDP proved very solid and at the high end of expectations. Consumer spending, despite the sharp drop in December retail sales, leads the report, rising at a 2.8 percent annualized rate which is down from outsized rates of 3.5 and 3.8 percent in the prior two quarters but still more than respectable. 
Business investment is a positive surprise, rising 6.2 percent for nonresidential fixed investment and back near the high single-digit increases of the first half of last year when the corporate tax cut was driving spending. Residential investment, however, did prove weak, down 3.5 percent for the fourth straight quarterly decline that offers definitive evidence of how weak the housing sector has become.
Turning from rates of growth to contributions, consumer spending leads the way as it should at 1.92 percentage points with services making up more than half this gain. Business investment added 0.82 points with the intellectual property subcomponent showing the most strength. Inventories contributed 0.13 points in what, given the general strength in demand, looks like a favorable build. Trade, as usual, pulled down GDP but only by 0.22 points in the quarter. Government purchases were a fractional plus in the quarter. 
Last year was a very favorable one for the economy, posting four quarters of respectable to very strong growth led by a 4.2 percent second-quarter surge. Overall, GDP last year grew 2.9 percent. But the outlook for the first quarter is up in the air given the year-end slump in retail sales. Yet the unusual demand in the labor market, reflected again in this morning's jobless claims report, is the economy's bedrock of strength. Price data in today's report were also steady and favorable, at an as-expected 1.8 percent for the GDP price index and 2.0 percent for the core.

Wall Street Update

Boring is what I'd call it. While this morning's news points to a slightly lower opening on most markets (Asian markets were down after Trump walked out on talks with Korea), it's another wait and see. The QQQ has been quiet the last few days, and there is no indication of a major move. 

From Seeking Alpha
Wall Street is pointing to modest declines, with U.S. stock index futures down 0.3%, amid shaky trade talks, the collapse of the North Korea summit and escalating tensions between India and Pakistan. Traders are now eyeing this morning's release of Q4 GDP, which is expected to show a growth rate of around 2.3%, marking a figure that might leave 2018 growth just shy of the Trump administration's 3% annual target. "The key issue is the reported plunge in December retail sales," said Ian Shepherdson of Pantheon Macroeconomics. "Retail sales account for about 30% of GDP, so a big miss even in just one month of the quarter is enough to make a material difference."

Tuesday, February 26, 2019

Crazy is as crazy does

It seems that the Democrat party of JFK has long died. I used to vote for Democratic candidates if I thought they were the better choice. I was once recently told that politics and economics are different and to keep them separate. But, and here's a big but: Politics affect economics, and economics affect politics. Everything affects everything. I even have a text-book at home titled: "The Political Economics of the United States." 

I think this person in question, during an discussion on a local discussion board on the economic policies of running our local city, wanted to avoid politics because he was the president of the neighborhood democrat party. But the two are related.

Don't get me wrong. The Republicans have their own troubles, like being just plain old wimps. That's why I'm glad I live in Texas and don't have to register with either party to vote. 

So I get a lot of newsletters, and here's some samplings from the last day or so. In my mind, anyone who is thinking of voting for a democrat these days is either delusion, ignorant, or thinks they are going to get a lot of free stuff that the rest of us who actually work will have to pay for. Until we run out of money and we're all poor. 

Bill De Blasio Has Figured Out Who To Blame For The Amazon Debacle

If You Liked The Green New Deal – You’ll Love The Internet New Deal

Kamala on How She'd Pay For Her Big Government Agenda: 'It's Not About a Cost'

Are Billionaires Good Or Bad?

That’s A Hard Pass On Socialism, Millennial Suckers



NASDAQ crosses key line, but not so fast yet

Tread lightly. Have patience. While the NASDAQ, as represented by the ETF QQQ (bottom chart), opened above a key line of 173.40, it did not go travel higher, and closed below its daily high. I take this as a sign of "well, it's trying to confirm a new rally, but just wasn't strong enough." Yesterday. the futures hit a key supply zone, and within a few hours fell from that zone, another key signal for me of market weakness.  




The NADAQ futures (chart above), as of 7:30 AM CST this morning, are indicating a lower open. This may -- but not always -- indicate a sightly lower open in the gneral market, below my key price for the QQQ. 

Key point here is to see what happens before going all in. Forget what the talking heads on TV say. Only the market action will tell us what will happen as the day goes on. 



Mr. Market will tell the true story. 

In other news:

Markets await Powell's Senate testimony


The Beginning is the End is the Beginning: A Look at Recessions

Sunday, February 24, 2019

Stocks are still expensive, though not at all time highs

According to price-to-earnings or “PE” data tracked by Yale University finance professor and Nobel Prize winner Robert Shiller, the S&P 500 is about 75% above its historic average valuation. Ten-year forward average returns fall nearly monotonically as starting Shiller P/E’s increase,” warned hedge fund manager Cliff Asness of AQR in a 2012 research paper, as he studied the S&P 500 going back to the 1920s. Also, he added, “as starting Shiller P/E’s go up, worst cases get worse and best cases get weaker.

Today’s level? Compared to history, we’re in the most expensive 10% of starting valuations, according to Asness’ data. “Average” 10-year returns from here? Based on history it’s about 0.5% a year after inflation, he calculated.





Current Shiller PE Ratio: 30.56 +0.19 (0.62%)
4:00 PM EST, Fri Feb 22
Mean:16.61
Median:15.70
Min:4.78(Dec 1920)
Max:44.19(Dec 1999)

Wall Street Wrap: The good and the bad

The Trump economy is failing. The sky is falling!
First of all, let's debunk a myth promoted by the mainstream media, which usually gets anything to do with the economy -- or anything else -- wrong. You've probably heard that 7 percent of car owners are three months behind on their payments. The fine print: These are high-risk borrowers. Those with good credit and borrow through credit loans: Only 0.7 percent are late. Jared Dillian, one of my favorite writers, puts it straight in The Good News About Consumer Debt, which is still at a all-time unsustainable high, but not the gloom and doom the media are promoting (who are just finding ways to denigrate Trump's economy, or anything Trump.)

Besides, the Trump coup has failed

5 Big Reasons to Sell Your Home This Year (Because It Could Get Tougher)

Since the start of the year, rates on a 30-year fixed mortgage (the most popular home loan) have been falling, sliding last week to a new 12-month low of 4.37%.


The three major stock benchmark indexes finished at their highest levels since November 8, lifted by growing optimism over U.S.-China trade negotiations. 

Stupid Is as Stupid Does
Somewhere in the last 30-40 years, we have become economically illiterate.
Elizabeth Warren wants wealth taxes that will impose asset forfeitures of 2-3% on households with more than $50 million in assets. There are practical and legal problems with the implementation of these “taxes,” but she wants to implement them anyway.
Alexandria Ocasio-Cortez wants a 70% income tax rate on incomes over $10 million. People sympathetic to the idea point out that this affects only 16,000 households and that it only returns marginal rates to historical levels, anyway. 
Rally continues, but is weaker than it looks
Yes, equities’ quick recovery from the October swoon was impressive. But stocks today still face many of the same stiff headwinds that were present at the September market top. So the last thing we should do is become too cocky.

Thursday, February 21, 2019

Market Update

The market has still not confirmed the January rally. I believe the positive news about trade deals with China, if they actually do happen, are already priced in. The FOMC -- according to yesterday's minutes -- remains dovish, which to me means that they are seeing some beginning signs of weakness in the economy. Some of the disappointing news today included December durable goods orders, Leading Economic Indicators, existing-home sales, and the US Manufacturing PMI. Not all were horrible, but showed weakness. Sometimes Mr. Market has a mind of its own.





The best 10 minutes of your life

Listen to this every day. For as long as it takes, even if it's the rest of your life.

"We have a serious matter here to discuss. Take your own future serious." 



Dow Jones likely to break 26,000. Really? Flip a coin

From Seeking Alpha:

The Dow Jones Industrial Average is likely to break through the 26,000 level today, marking the next comeback for the stock market since the beginning of 2019. The latest boost comes amid the most significant progress yet toward ending the seven-month U.S.-China trade war, with negotiators drawing up six memorandums of understanding on structural issues: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.

Note: These trade negotiations have already been priced into the market. 

However, in the meantime, the DJIA futures have dropped below 26,000. Read the markets, not the commentary. As of 8:10 AM CST, the blue line is 26,000 on the Dow futures (YM). (The horizontal line is 5 pm CST yesterday). While not conclusive, they do point to a market which will open below 26,000. Caveat Emptor.



Tuesday, February 19, 2019

Let's all try Socialism


Is college a good investment? Probably not

The fifth step (Baby Step 5 – College funding for childrento Dave Ramsey's Total Money Make Over is to save to pay for your children's college education. Is this a worthwhile goal? 

Our universities (and high schools) are quickly becoming bastions of censorship. It's unfortunate and a threat to our "way of life," whatever that may be. But the first amendment does not seem to rule supreme any more. Our true history is being over-written. 
---
Man on the street interviews done during the last election asked the question that Hillary Clinton wants to do away with the first amendment. The majority of students THOUGHT THAT WAS A GOOD IDEA.
---
More than one in three people (37%) could not name a single right protected by the First Amendment. THE FIRST AMENDMENT.
---
Only one in four [college students] (26%) can name all three branches of the government. (In 2011, 38% could name all three branches.)
---
Students at the University of Maryland, who pay up to a whopping $44,645 per year to attend, couldn’t identify Ronald Reagan after being shown a photo of him. 
---
At the University of California-Irvine, their legislative council voted to ban the American flag in their student government lobby, calling it “a weapon of imperialism” that doesn’t belong in an “inclusive space.”
---
A professor at Polk State College in Florida gave a student four zeroes in a row on essays – because she refused to write them in a way that would deny her Christian faith.
---
What do you value more—the economy or social justice?,” I asked a couple dozen students in my journalism class at Columbia College Chicago. “Social justice!” they collectively responsed like robots. There are no College Republicans here. There is no Turning Point USA. No one is inviting conservative speakers. (My note: while I know of no conservatives who are against "social justice," most people, liberal and conservative, had trouble defining it.")
---
Loyola University Chicago’s “Mission and Vision” is to be a “world-renowned urban center … that values freedom of inquiry.” In order to “protect and enhance” that “brand and reputation,” all faculty and staff are required to have any statements to any journalist — expressly including the student newspaper — pre-approved by a member of the university’s public relations staff.
---
The poll of 3,000 U.S. college students found that they generally endorse the ideals of free speech and campuses that encourage the discussion of a variety of ideas. But once that speech begins to infringe on their values, they’re likely to support policies that place limits on speech. Those include free-speech zones, speech codes and prohibitions on hate speech.

Other headlines:

Safe Spaces On College Campuses Are Creating Intolerant Students


Why ‘safe spaces’ at universities are a threat to free speech


One of the tenets for the communist manifesto was to take over the educational system. Seems they are on their way to success.  

What's happening today?

(Update at 9:30 AM CDT. OK. My hour is up. What happened? The QQQ is up 0.04 percent. Still no direction, in my mind.)

Well, if I knew the answer to that question, I'd be a billionaire. 

But in all seriously, we can look at certain things and maybe make an educated guess. My guess the market will open lower today. 

Market futures in the S&P 500 (ES), the NASDAQ (NQ) and the Dow (YM) are all showing weaker openings to the underlying indexes. The blue line represents the last close. So you will how ask me how much lower? How in the he frak should I know? 

I don't normally trade until after about the first hour anyway unless something just jumps right off the page, and that doesn't happen often. Let the crazies have their fun first.

Here's the NASDAQ (as represented by the QQQ) AT 8:03 AM CST. Note that all this can turn faster, one way other the other, at a moment's notice. That's what makes it fun. Unless it doesn't for you, then I have another, more sedate way for you to invest. 

Buy ETFs on the broad market and wait 30 years and then have your money run out in before you die. Or turn your money over to an advisor, who will collect frees and do no better. I haven't found one yet who can claim to beat the market.  The last one "guaranteed six percent". A monkey could do better. Read a "Random Walk Down Wall Street" if you don't believe me. SIX PERCENT!!!! Even my wife, who doesn't know anything about money, rolled her eyes. 

Any way, back to the chart as of 8:03.



Yesterday I wrote about using trends as your friend, until there are not. Today I'll start of the rest of the steps that might make you a better investor. Maybe 10 percent of you. The other probably won't follow the rules, based onstatistical studies.

Armed with a little knowledge and the right behavior, you can beat 90 percent of financial advisors all on your own. 

Be that guy.

Monday, February 18, 2019

Makets closed today: Seeking a trend

If you're one of the lucky people to get a day off for President's day, read a book. (Most people won't read a book). Of course, the great majority of people don't get the day off. Only if you're a government worker or banker. So read book. All, and I mean ALL, successful people are voracious readers. In fact, your goal should be one book a month, on your way to reaching Bill Gates' goal of one per week.

But I digress. It's now a good time to prep for tomorrow's market opening. I predict -- well there is nothing I can predict with any certainty. Markets will be up, down, or sideways. However, we can look at some recent activity, and travel into the past and ferret out some intelligent approaches (and one intelligent approach is to do nothing).

First, let's look at the trend of the market. There's an old saying that the "trend is your friend, until it's not." Let's look a the daily trend of the S&P 500, which represents 500 stocks. I'll use the SPY EFT, which is an index of those 500 stocks.

That's a pretty good trend since late in 2018. That's a nice eight-week trend. If you missed that trend, don't fall into the "should have" trap. There will be plenty more. Patience is the key to successful investing. 

But how do you know when the right time to invest would be? There is no hard and fast rule. Most of it is based on experience, and even the most experience investors are wrong some times. But they use tools in improve their probability of success. 

Let's go back in time to the market downturn in December 2018. 


Here's a down trend that was broken with higher prices. Looks good on paper, right? And in this case you'd be right. However, not all trends are so clear cut. 

Identifying the trend of a market or stock is vitally important in choosing when to invest, or when to sell. Only the most risk adverse investors or traders can stomach a contra-trend trade (trading against the trend). 

There are other important indicators, which I'll go into future articles this week. But keep in mind: 1) is the stock selling at retail prices? 2) are the moving averages moving in your desired direction? and 3) can you identify supply and demand on the chart, which indicates whether the big boys, such as banks and institutions. are buying or selling. 

But most importantly, have you done your homework? Is the stock (or market) worth investing in. Don't invest in in something you don't understand, a stock that is not making money (and growing that money) and don't buy at retail. Buy it on sale. 

Just like buying a car (or a pair of shoes) get the best price you can.

My focus this week will on these concepts, so subscribe to get updates. 

Sunday, February 17, 2019

Is college for everyone?

I was going to write an article on the pros and cons of a college education. I have a degree. Not that it really helped me financially (though I did get well-rounded education even if I didn't take gender studies or social justice courses) except when I had to interview for a job after retiring from the Air Force that "required" a college degree. I have a B.S. in Liberal Arts with a major in psychology and a minor in business). I interviewed for IT positions. No one cared what my degree was in; they didn't even ask. What paid off for me were skills. Skills I gained in tech schools (after I got my degree, six months of networking and six months of programming equaled a six figure income, plus a lot of skills I gained, some through self-study at home.) 

Of course, this should be personal decision, but one that is based on your goals. What do you want to do? It's important to know that first. The three videos took my thunder, but make a lot of sense. Consider carefully before spending many thousand of dollars on what has become a national embarrassment, in my opinion. (College Graduates Don’t Know Basic Facts About the Constitution)







In all fairness, I'm glad I went to college, but I did it in my 30s, when I actually new some things and could build on that. And I took an eclectic number of subjects, one reason I graduated with 150 semester hours instead of the usual 120. It was more for me, rather than a paycheck, which is the way is should be.


Saturday, February 16, 2019

Wall Street Wrap

Markets were up for the week. Stocks rallied as investors embraced signs of progress in the U.S.-China trade negotiations, with Pres. Trump saying a deal is close even as structural issues such as forced technology transfers and enforcement oversight remain unresolved.

The NASDAQ, represented by the EFT QQQ, did not form a new high. However, if you're invested, the trend indicates a hold. If you're in cash, I think that this is not the time to buy -- yet. Or if you are invested or are looking for opportunties, remember your risk management rules, and use stops. I added to my stock positions this month, buying Spark Energy (SPKE) and HollyFrontier (HFC).  SPKE is up 11.2 percent, while HFC is up 3.6 percent. I'm still 65 percent in cash and money markets.




The rally came despite data this week showing the first decline in U.S. industrial production in eight months and the largest monthly drop in U.S. retail sales in nearly a decade. Also showing weakness is the housing market. 

Other interesting articles: 



Texas crude production shatters record

Friday, February 15, 2019

Wall Street Update

NASDAQ futures (NQ) are up this morning before market opening in about 30 minutes. Enough to confirm a new rally? 


Thursday, February 14, 2019

"The Middle Class is Under Attack." Really? No.

When Elizabeth Warren announced her run for President, she stated that the middle class was under attack. She has also said that ""The president and his administration have not just been indifferent to workers, they have launched an all-out attack on workers." Is this true?

Simply, no. And the media made no attempt to set the record straight, until USA Today ran a story headlined "Can the middle-class revival under Trump last?"

Nor did the army of media fact checkers bother to correct Stacey Abrams, who in her response to Trump's State of the Union" painted a grim picture of the middle class under Trump.

It that speech, she declared that "families' hopes are being crushed by Republican leadership that ignores real life or just doesn't understand it." That "far too many hardworking Americans are falling behind, living paycheck to paycheck." She said the GOP tax cuts "rigged the system against working people." She said "plants are closing, layoffs are looming, and wages struggle to keep pace with the actual cost of living."

None of it is true.


USA Today reported: 


  • Median U.S. household income … rose 1.8% to an all-time high of $61,372 in 2017."
  • "Employers added an average 223,000 jobs a month last year, up from 179,000 in 2017. And unemployment sank to a near 50-year low."
  • "Average U.S. wages climbed 3.3% in 2018, after being stuck at 2.5% to 2.7% (growth) for several years."
  • "Industries that employ middle-class workers in particular are benefiting. Manufacturers have added about 450,000 jobs 
  • since Trump took office, the largest two-year total in decades."
  • "The number of factory jobs 'reshored,' or shifted to the U.S. from overseas … hit a record 170,00 in 2017." 


In general, the Democrats have been lying on several issues, including health care, the state of the middle class, and border (national) security. While the Republicans have been criticized (by me to my Congressman) for the lack of initiative on border security, the open-border-and-abolish-ICE Democrats have put their irrational hatred of Trump over the need to secure our borders.

Here in Texas, the Democrats have doubled down on their blatant lies. 

“Trump has repeatedly and blatantly lied to the American people and has failed to deliver on his promises or meaningfully improve the well-being of American families...


And the usual talking points: "...continuing to sabotage the Affordable Care Act and make health care less accessible to massive tax breaks for billionaires to tearing children away from their parents and locking them in cages, Trump has completely abandoned Americans and his presidency is a failure."


Such bullshit. If you believe this tripe, shame on you. 


For more information, see these stories:

Democrats are lying on health care


As The Russia Hoax Begins To Unravel, The Gaslighting Begins

By Scuttling The Amazon Deal, AOC Just Opened Herself Up To A Primary Challenge

Dumb and Dumber

Breaking news: Tonight (Feb 14, 2019), Nancy Pelosi claimed that the problems at our southern border were a crisis created by President Trump, an illusion of his own making. She needs to retire. She's 78 and has been in Congress for 32 years. 

I generally don't write about politics, but recent events need addressing, because they affect our economic well-being. 

I've come to the conclusion that many -- or most -- politicians do not understand even the basic principles of economics. Or if they do, they don't care and have decided just to push an ideology that has nothing to do with sound economics. Some are just dishonest. 

I won't try to educate you on economics here. If you don't know, get some education. It's vitally important, both for your personal finances and who to vote for. 

Being dumb is not a partisan issue. Both Democrats and Republicans suffer from the problem. 

But I'm going to pick on Democrats right now, because some have just proven how dumb -- or dishonest -- they can be. 

For example, from presidential hopeful Kamala Harris:



What wrong with this tweet? Basically everything. First of all, and least importantly, the sample size on which she's basing her assertion is very small, coming from a tiny sliver of filings from the very beginning of tax season. More importantly, the size of someone's tax refund is not at all reflective of whether they paid more or less in taxes than the previous year. While this was reported by the MSM, Barron's has debunked it. 

Harris' lie earns Four Pinocchios from the Washington Post. It's ham-fisted garbage specifically designed to confuse people into thinking they're in worse financial shape than they are.

Then there is the New Green Deal. Anyone who supports this has to be either mentally ill, or just plain stupid. In my opinion. While liberal-slanted CNN spins it in a more positive light, and the New York Times says "The Green New Deal is What Realistic Environmental Policy Looks Like," it's really a massive increase in government size and control. 

By any measure, the resolution is preposterously extravagant. On one estimate the proposed new entitlements and public works would cost $6.6 trillion a year, which is two-thirds larger again than out $4 trillion federal budget. No one has said yet how we would pay for this, other than "taxing the rich." They don't have enough money. 

Some say the bill would be self-funding because it would stimulate the economy. Others are punting on cost-free debt. According to modern monetary theory (MMT), governments can simply create new money without causing inflation. MMT is wrong.

If these programs were passed into law, the federal government would take over our health care system (more than it is now; there would be no private insurance), our wages, our energy, our housing, and our transportation sectors. 

The United States would no longer be a free-market country, based on capitalism, a economic system which has created more prosperity than humans have ever known. 




People supporting ideas like this, or socialism in general, are either in denial or just plain ignorant. Socialism has never worked, except to create shortages and poverty. 

The number of people who do support these ideas scares the crap out of me. I am truly afraid for future generations. 

Psychological Traps for Investors

By recognizing how emotions can lead them astray, investors can take steps to protect themselves from their worst impulses. Here are some traps to avoid.

1. Holding losers too long
Cut your losses early. Love the company, but not the stock. No one is ever right 100 percent of the time. Use risk management before you buy a stock. Decide how much you're willing to risk on any investment or trade and scale your position size accordingly. Never risk more than two percent of your portfolio. Use stop losses to protect yourself.

For example, if your portfolio is $10,000, then a $200 loss would be acceptable. If you buy a stock at $20, then place your stop at $18 for 100 shares, $19 for 200 shares. 

2. Selling winners too soon
If the reason you bought the stock has not changed, do not sell too soon. There are different strategies for managing a trade that has turned profitable on paper. You can sell half your position and let the rest ride. Or you can use trailing stops, moving the stop in line with the price of the stock. For example, if you bought 100 shares at $20 with a stop at $18, if the stock moves to $22, move the stop to $20. 

3. You're overconfident and take excessive risks
Many investors overestimate their skills and underestimate external risks, says Cornell University behavioral economist Vicki Bogan. Investors may believe that they can outsmart the market by picking individual stocks (most studies say that’s unlikely). They may also be overly optimistic about the prospects for stock returns, resulting in too much equity exposure in a retirement account.

How much equity exposure depends on many things. I recommend you read Rule #1 Investing by Phil Town. 

Sunday, February 10, 2019

Wall Street Wrap: Is a bear market resuming?

In following up on my article from earlier in the week about the weakness showing in the market, I update market action here in a new chart. While we only have two more days of data, note that a new high may be forming which is lower than the previous high. 



Note that on Friday, the rally in the market came in the last 15 minutes. Futures, which open this evening at 5 pm CST, may indicate which way the market will open on Monday morning. 

There would be nothing wrong in moving to cash at this point, especially if the market trends lower on Monday, Feb. 11. Or one could wait until the moving averages cross over. This would be the blue line crossing below the purple line. 

This type of market action going into a bear market has happened twice before: in 1987 and 2007. After the market losses about 20 percent, a short rally ensues, only to be followed by a resumption of the bear market. Note what happened in late 2007 and early 2008. While past market action cannot predict future market action, I would not be surprised if the market resumes a downward trend. (But I would also not be surprised if it went higher, either. Never be surprised, just observant). 

Note the short rally in early 2008 before the market drops. Look familiar? After the bear market in 2008, it took six years to regain all of its losses. 

Protect yourself. Be observant and ready to change your investments. Ask yourself: Can I wait six years for my portfolio to recover? Moving to cash, if you haven't already, may be the smart move. 

Don't fall prey to the myth that you can't time the market. While prediction is futile, you can adjust to go with the trends. You won't get the high or low, but you'll protect yourself from major losses. Most advisors and brokers at this point -- and have been for the last several months -- been coming on heavy with advice to stay the course. Diversify they say. Problem is that a market on a down trend will pull most everything with it...

In full disclosure, I am about 70 percent in cash and money markets. I own AT&T (telecommunications), Caterpillar (industrial), and HollyFontier Corp (energy refining). These three stocks constitute about 15 percent of my portfolio. I also own the following ETFs: AMLP (energy delivery), ERX (leveraged energy), SRET (real estate), and PFF (preferred stocks). These four also constitute about 15 percent of my portfolio. These investments are mostly dividend plays for the income stream. With dividends from my money markets (yield is currently about 2.4%), I collect about $650 per month in dividends on average. 

Saturday, February 9, 2019

Tax the rich, or not

Higher tax-rates on the "rich" really don't work as expected. From the American Enterprise Institute, a very telling chart. The rich -- which I  guess is defined as the top 1 percent of income -- pay a higher share of taxes when tax rates are lower. 


Wednesday, February 6, 2019

Bull Market or Bull Trap?

Market weakness is shown by lower highs and lower lows, which the chart here of the QQQ, which tracks the NASDAQ 100, indicates has been happening since Oct of last year. The latest rally in January is approaching the last high set in late November. If the market breaks through this, you could anticipate a further rally. If not, then we could get a correction or more. Time will tell. 



Advice from Warren Buffett

It's always good to know what successful people are thinking and doing. Copying success is no crime; actually, it's a good idea. 

One excellent source is the letters that Warren Buffet has been writing each year to his shareholders. You can access these at: http://www.berkshirehathaway.com/

From his latest, I found this tidbit, which was sound advice:
Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.
By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a longterm investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would have decreased the purchasing-power of the government bond that Protégé and I sold.
I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.
It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk. (Emphasis mine)

Sunday, February 3, 2019

Wall Street Wrap

The strong January jobs report in spite of the U.S. partial government shutdown helped sentiment and eased worries about a potential economic slowdown. Alongside January's 304K job gain, November's print was revised higher by 20K to 196K, but December's was trimmed by a whopping 90K to 222K. 

The last three months have now seen an average job gain of 241K. The unemployment rate unexpectedly ticked higher to 4.0% thanks to a jump in the labor force participation rate to 63.2% from 63.1%, while the broader U6 unemployment rate rose to 8.1% from 7.6%. 

On Friday, the S&P 500 and Nasdaq were weighed by a 5%-plus drop in Amazon after the company issued cautious Q1 revenue guidance amid an anticipated increase in spending. For the week, the Dow gained 1.3%, the Nasdaq climbed 1.4% and the S&P advanced 1.6%.

More details at Seeking Alpha.

Is the market over-valued? One indicator, called the Shiller PE Ratio, indicates that the S&P 500 is high on the valuation curve. 















Speaking employment data, if you'd like to do your own research, visit the Bureau of Labor Statistics. Your tax dollars are paying for this service. Why not use it? There is enough data there to keep you busy for a very long time. And most of the data is downloadable. For example, try the data for Labor Force Statistics from the Current Population Survey. The cart below, which I created in just a few minutes, shows total employment, which has grown from about 125 million in 1990 to 163.229 million in Jan. 2019. You can also download the data in Excel format and create your own analysis and charts. 




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