“Drivers of higher cost cars were less likely to yield to pedestrians at a midblock crosswalk.”
What are your theories for this?
2. Olympic swimming champion Sun Yang banned for eight years. Long suspected. Eight years though, talk about swimming dirty. How to make amends to the numerous clean swimmers that lost to Yang?
“She’s going to stand out. It’s great for the sport. Stereotypically, it’s associated with the pub, beards and beer bellies. But that’s changing.”
4. iPhone 11 Pro vs. Galaxy S20 Ultra camera comparison: Which phone is best? Damn, kills me to write the conclusion:
“. . . the iPhone can’t compete with Samsung’s zoom king.”
And only $1,400.
5. What’s happening with the stock market these days? A beginner’s guide to investing.
From The Wall Street Journal:
“Andrew Freedman, a 31-year-old finance professional, was in an Uber in Connecticut on Monday morning when he noticed his driver fiddling with his phone. When he asked his driver to pay attention to the road, he was stunned by his response: ‘Do you mind if I pull over for a minute? The market’s open, I have to sell some things.'”
How bad was the Great Depression?
A timely, eye-opening Wall Street Journal article by Jason Zweig.
“The Dow peaked at 381.17 on Sept. 3, 1929. It finally hit bedrock at 41.22 on July 8, 1932, down 89.2%. In less than 35 months, a dollar invested in stocks shriveled into barely more than a dime.”
How wrong were the experts?
“In a newsreel from Oct. 30, 1929 . . . Irving Fisher, the nation’s leading economist and a Yale professor, proclaimed: ‘It now looks as though the bottom of the market had been found.’
The market found the bottom, all right—84% lower and almost three years later.”
How long did it take for the market to rebound?
“The Dow didn’t surpass its 1929 high until Nov. 23, 1954, a quarter-century later.”
How many people held their stock investments long enough to break even? A clue.
“A 1954 survey by the Federal Reserve found that only 7% of middle-class households said they preferred to invest in stocks over savings bonds, bank accounts or real estate.”
How are we still getting the lesson of the Great Depression wrong?
“No one who lived through the crash of 1929 would agree with the view, advanced in the late 1990s, that stocks become riskless if you hold them long enough.”
Zweig’s cogent conclusion:
“To be a long-term investor in stocks, you have to be prepared to lose more money for longer than seems possible. Anyone who takes that risk lightly is likely to sell out, in the next crash, near the bottom.”
The investors first task, know your time horizon. If it’s less than 10-25 years, proceed into equity markets with due caution.
Insightful blog post by Carl Richards titled “You’re No Coward If You’re Keeping Some Money Out of Stocks”.
What should “some” be as a percentage? Conventional investment wisdom is subtract your age from 110 or 100 and invest that much in stocks.
Better yet, think about risk like Richards:
“You see, I hate losing money in investments that are outside my control. It ties me up in knots and distracts me from just about everything. So awhile ago, when I moved some money out of a 401(k) plan into my retirement account after a job change, I left it in cash.
I told myself that I was fine with missing out if the market continued to go up. But I wasn’t fine with investing this pile of cash just in time to get my head taken off in a big, scary market drop. And guess what? That was and still is true. So, I’m fine sitting in cash earning 0.16 percent or whatever the rate might be. I just don’t want to lose.
This decision has cost me in paper gains that I might have achieved, given how well the stock market has done since that decision, but I don’t care. I don’t see it as a real cost. Instead, I see it as an investment in my sanity and my human capital.
The fact that I didn’t have to worry about losing money in that area of my life allowed me to feel comfortable taking risks in other areas. I’ve started two or three new businesses and moved my family to New Zealand. The risks I have taken have provided, and will continue to provide, a much higher return than what I might have received if I remained fully invested in the markets.”
There are two types of investors, active and passive. Active investors are always educating themselves about personal finance; and paradoxically, tend to use passive funds, due to their lower fees and superior performance. In addition, they are purposeful in choosing a particular asset allocation and they monitor their progress regularly. They invest time and energy into increasing their wealth. I’m an active investor.
Passive investors, because they often think they’re not smart enough, often delegate to financial planners upon whom they depend for choosing particular investments and determining an asset allocation. Passive investors tend to end up with active funds with higher fees because they’re not paying very close attention.* They may not open their quarterly statements. Picture them falling asleep at the wheel of a semi-autonomous, financial planner driven car.
The most important thing I’ve learned in thirty years of investing is that there’s an undeniable point of diminishing returns when it comes to business smarts and investing success. Simply put, some of the most well-educated and successful business people I have ever known have made some of the worst investment decisions I have ever seen. And to add insult to injury, they’ve been unable to admit the error of their ways and reverse course. Too smart for their own good.
Personal finance research shows that once active investors master earning more than they spend, wire the difference into specific exchange traded funds monthly, and decide how best to balance bonds and stocks, additional trading detracts from their returns. Think of trading based on possible changes in the market as a “too smart for one’s own good” tax. Here’s one example.
Once you master earning more than you spend, wire the difference into specific exchange traded funds monthly, and decide how best to balance bonds and stocks, your ultimate personal finance challenge is doing nothing. Hence, consider my triumvirate of personal finance resolutions for 2017: 1) I will not be too smart for my own good. 2) I will not try to guess the market’s direction. 3) I will not trade. Or for the sake of additional research, you could guess and trade away and then we can compare returns in 11+ months.
* I hired an advisor in the early 1990s. Learned an expensive, but ultimately, invaluable lesson, no one cares nearly as much about your financial well-being as you do.
From today’s Wall Street Journal.
Investors pulled $12.7 billion from actively managed U.S. stock funds in 2014 through November, and put $244 billion into passive index funds from Vanguard and others, according to Morningstar.
Vanguard is undercutting many rivals on fees. Investors pay 18 cents for every hundred dollars they invest with Vanguard, compared with $1.24 for the average actively managed mutual fund, Morningstar said. The company also is beating its passive rivals, which charge an average of 77 cents for every hundred dollars.
Doomsayer—a person who predicts impending misfortune or disaster. Mike, a good friend and running partner, is a stock market doomsayer. Routinely, like this morning, he tells me to sell. The doomsayers are certain that the mother of all corrections is right around the corner.
What Mike and his ilk get wrong is that when it comes to personal finance, the value of the Dow, the S&P, and the Nasdaq aren’t nearly as important as one’s income, investment income, expenses, and “historical risk return”.
If you asked me to help you with your personal finances, I’d want to know four things. 1) What’s your take home pay? 2) If any, what’s your annual passive income? 3) On average, how much do you spend each month? 4) If any, how much of any stock market-based investments can you accept losing in the next few days?
1) Annual income. This is straight forward. In the new economy, nearly everyone’s challenge is increasing it without working inhumane hours. That’s why people continue their education, work hard for promotions, and sometimes decide to work long hours.
2) Passive income. This is the money your savings generate. Nearly everyone’s challenge is increasing it in our zero interest rate world. Historically, cash has generated 3-5%. Today money markets and certificate of deposits earn pennies, so when adjusted for inflation, they’re slowly losing value. That’s why people invest in stocks, bonds, and real estate. Passive income includes stock and bond dividends, capital gains, and rental income. I also consider company matches a type of passive income. And social security for the 67+ set.
3) Average monthly expenses. Few people know this. Start keeping track of every dollar you spend using MINT or something similar and then read this recent blog post from Mr. Money Mustache, The Principle of Constant Optimization, for a great tutorial on managing spending. In particular, I second this suggestion:
Make a list of your ten biggest monthly expenses and tape it to your fridge, just so you know they are all there, constantly using up your money, so they had darned well be worth the resources they are consuming. If they are worth the expense, continue to enjoy them. If they are not, optimize them away. Look at your daily routine from an outsider’s perspective, and figure out if you are really getting the most value from each one of your hours.
4) Historical risk return. Where I invest, I can see my entire portfolio online. And with one link I can see a detailed analysis of my holdings including the all important “historical risk return (1926-2012)”. Right now it says the worst year an investor with my assest allocation has experienced is -17.2% in 1931. Ironically, it also says investors with my asset allocation have experienced losses in 15 of those 87 years or 17.2% of the time. So if I round up, on average, I have to expect to lose money every fifth year. Also, if I have $100,000 invested, I have to be prepared for that to turn into $82,800 overnight. That’s the price of admission to a historic stock market run up.
Here’s what the stock market doomsayers won’t acknowledge. As of May 15, 2013, the S&P 500 is up 141.5% since March 5, 2009. While they’ve been crying wolf, someone that had $100,000 invested in the S&P 500 on March 5, 2009 now has $241,500. Here’s what you won’t hear the doomsayers say, “We missed a historic rally because we we’re too afraid of the downside.”
Nor will you hear them say this truism, they’re not smart enough to time the market. Despite Mike’s dire warnings, I’m going to stay partially invested in stocks because I can accept a 17.2% historical risk return in exchange for what my portfolio analysis reveals to be my 87 year average rate of return, 7.6%.
Tune out the doomsayers and forget trying to time the market. Instead, control what you can. Most importantly, whether your earned income and passive income regularly exceed your expenses.
A friend, who has made it a point to resist Apple’s takeover of the personal tech world, emailed yesterday. The subject heading was “Time to Sell”. There was a link to an “Apple’s in decline” article and a follow up with an ominous excerpt. Full disclosure: this post doesn’t relate closely enough to the blog’s stated purpose, but I have to do something to stem the tide of anti-Apple email gloating.
Apple investors have to expect blowback when the stock slides. It just comes with the territory. Anti-Apples get more and more annoyed with every $100 rise in its share price. There’s probably just a touch of envy involved.
Late summer Apple hit $705, today it closed at $450. So the haters are slapping themselves on their backs in glee.
My email “friend” got his Masters in Business Administration at the University of Washington, not the Anderson School, so some remediation is in order.
Principle 1) Buy low and sell high. Apple’s on sale. Compared to the recent high, $255 off per share. In the next year or two, is it more likely to fall another $250 to $200 or rise $250 to $700? I’m betting on the later.
Principle 2) Never invest more than 5% of your total portfolio in a single stock. Apple’s sell-off hasn’t bothered me as much as UCLA’s inability to rebound the basketball because it’s 1/20th of the pie. Imagine having 20 children, one who goes off the rails. By the time you notice, she’d be halfway back to the straight and narrow (especially if she produced a less expensive iPhone for China).
Principle 3) When it comes to equities, be sure to take a medium or long-term perspective. If, for any reason, you might need to cash in your stock investments in a few months or years, avoid stocks, especially those of individual companies. I’m not selling because I don’t need to. I can wait on that 5% of my portfolio. Indefinitely really. That’s why I rolled a portion of my AAPL investment into a family charitable fund mid-summer. When it comes to our equity investments, VTI is the apple pie, VEU is the scoop of vanilla ice cream, and AAPL is the whip cream.
Principle 4) Have realistic expectations. In other words, don’t be ahistorical. Understand the “law of large numbers” and don’t get overly excited on run-ups. What did a lot of investors do in Las Vegas, California, and Florida when real estate prices exploded in the early 2000’s? They extrapolated. “Oh, I can easily earn 20% next year too.” After yesterday’s sell-off of $63, Apple is up 8.13% over twelve months. That’s only disappointing if you assumed it would return 30% annually. Maybe it’s turning into a single’s hitter. Which is fine for me because I’m a Mariners fan.
I need a personal motto.
A recent headline from Yahoo Personal Finance (YPF) read, “Apple Rebounds to $600, Time to Buy?” For the love of investing fundamentals, someone please alert the knuckleheads at YPF that the objective is to buy low and sell high. “Apple Plummets to $400, Time to Buy?” would make a hell of a lot more sense.
Unless of course Apple is headed to $1,001. Which leads to another recent YPF headline, “Top Analyst Thinks Apple Could Hit $1,001”. “Top Analyst” is code for really smart dude who knows way more than you and me. So I guess we should believe him. Wait. He’s also referred to as a “market pro” which means we HAVE to believe him. Thank you top analyst market pro. Since each of my APPL shares is about to go up $400, I think I”ll buy that Cervelo R5 bicycle I’ve had my eye on. More evidence of his intelligence—he covers his ass with “Could”. Here are some other “Could” headlines:
• Relative Unknown Ron Byrnes Could Win the British Open
• The Seattle Mariners Could Win the American League West
• Presidential Candidates Could Take the High Road
• Despite Barely Passing High School Chemistry, Ron Byrnes Could Cure Cancer
Then there’s “Dr. Drew” who received $250k to promote Glaxo’s antidepressant drug. Of course Double D never revealed anything about the payments. Most egregious, he repeatedly used his television pulpit to say it helped cure problems that exceeded what the FDA approved it for. Another doc (among many) was paid a cool $2m to promote the drug.
Daily reminders to read between the lines and remember things aren’t always as they may appear. Reminders too to get some splashy adjectives or a personal motto for yourself.
Cable news networks do it. CNN is “The Most Trusted Name in News”. The Supreme Court rejects health care mandate. Opps! Fox News is “Fair and Balanced.” Opps! And regular people who make wild-ass stock predictions do it. Top analyst, market pro. Another recent YPF headline read, “Goldman’s ‘Rock Star’ Gives His Market Outlook”.
Maybe I should follow suit. The examples illustrate an essential element of moniker or motto making. They don’t have to be true. Repeat them enough and create a hypnotic effect. So aim really, really high.
I’m thinking something like “Ron Byrnes, rock star blogger, friend of small animals, a tribute to humanity.” On second thought, it’s probably unwise to alienate large animals. A work in progress.
No doubt, that right there, “a work in progress,” is what my wonderful wife of 25 years (this week) would recommend for my personal motto.