FYI:
Regards,
Ted
August 29, 2019
Dear WEALTHTRACK Subscriber,
Volatile U.S trade relations with China are immediately reflected in the financial markets but what about the economic impact? Could they push the U.S. into recession? On our website this week we have a podcast on the topic with leading global economist and strategist Nick Sargen.
On the television program this Labor Day weekend we are revisiting a recent Great Investor show with a global value manager. He is a long time holder of Berkshire Hathaway, even though the stock has badly lagged the S&P 500 so far this year. It’s basically flat vs. the market’s around 15% gain. On a total return basis Berkshire’s stock has trailed for the past decade. Berkshire doesn’t pay a dividend. The S&P 500 does which makes a difference. Berkshire’s stock has risen by nearly 260% versus the market’s more than 300% total return advance in the decade ended in 2018.
Despite Berkshire’s stunning record since 1965, 21% compounded annualized gains, this is not the first time that the company’s shares have underperformed the market for a decade. It has happened several times in recent years.
Berkshire has outperformed the market by double digits in every trailing ten year period since 1978, but it hasn’t had a double- digit advantage since 2002, and in recent years it has underperformed the market in three ten-year spans.
Even Warren Buffett himself admitted the company’s glory days of outperformance might be over. In an interview in the Financial Times his response to the question: if Berkshire would be a better investment than the S&P 500 he said “I think the financial result would be very close to the same.” He went on to say “…if you want to join something that may have a tiny expectation of better (performance) than the S&P, I think we may be about the safest.”
At a $507 billion market capitalization and few places to deploy it in enough size to make a discernible difference to the bottom line, is Berkshire just too big?
Over the years Berkshire Hathaway has benefitted from sizable stock buybacks in some of its major holdings. In Berkshire’s 2018 annual report Buffett cited American Express where its holdings “remained unchanged over the past eight years,” but our “ownership increased from 12.6% to 17.9% because of repurchases…”
In the same his 2018 Letter to Shareholders, Buffett said the company itself “will be a significant repurchaser of its shares…at prices… below our estimate of intrinsic value.”
What else does Buffett have up his sleeve to enhance shareholder returns?
The company has never purchased a tech stock. It recently bought Amazon and Buffett heaped praise on CEO Jeff Bezos. Berkshire has also never paid a dividend. Could that be next?
We’ll hear from Tom Russo, an avid student of Buffett’s style of value investing with no intention of changing his approach. Russo is Managing Partner of investment advisory firm, Gardner Russo & Gardner where he oversees around $11 billion including his Semper Vic Partners fund which he launched in 1984 after hearing Buffett address his class at Stanford. Semper Vic has generated 14% compound annual returns since inception, handily outperforming the S&P 500’s 11% returns.
The global value manager focuses on owning a small group of exceptionally well managed brand name firms - 19 at last count - with dominant, almost unassailable positions in their mostly consumer-oriented businesses and then holding them pretty much forever. Berkshire Hathaway has consistently been one of his largest positions.
On this week’s show I asked Russo, given Buffett’s modest expectations for the stock’s future performance, if he is rethinking the position.
Don’t forget, if you are away this weekend, it’s easy to take WEALTHTRACK with you! The WEALTHTRACK podcast is available on TuneIn, Stitcher, and SoundCloud as well as iTunes and Spotify.
Thank you for watching. Have a great Labor Day weekend, and make the week ahead a profitable and a productive one.
Best regards,
Consuelo

Nick Sargen Podcast:
https://wealthtrack.com/trade-war-impact-the-markets-economy/

FWIW saying, I'm receiving noticeably more investment-signal service solicitations these days, including from services I briefly dabbled with over 10 years ago and haven't heard from in AGES. The contrarian in me takes that as a warning sign for equities.

@Old_Joe: You said, "But we held on and came out the other side in decent shape."
My question to you & others that were around in 2007-08. Did you make any buys with ( dry powder ) as the market bled DOWN ?
I believe I made 2 or three small purchases & then held on for dear life !! Today I wished
I had spent , invested, a few more bucks.
With that said ,how many here at MFO were using some of their dry powder as of late Dec. 2018 ? I confess I missed that one also.
Derf

In Oct 2008 I bought a house. Sold it 10 years later for a good profit.

Junkster: DITTO!
John, perhaps you do not recall, or were in a cave during the 2016 election cycle? Hillary carried a substantial lead throughout accordingly to "the polls". EVERY poll. Trump was expected to give his concession speech early on -- after he quickly "lost" Pennsylvania, Florida, and the Dems "Blue Wall". I mean, that is what the polls said would happen...
President Trump may win OR lose 2020. And I am sticking with that prediction. As a political candidate, the President has some undeniable handicaps: He has a massive ego, even compared to other Presidents. (And that is saying something.). He does a spectacularly poor job of broadening his base. In fact, he appears to have no interest in doing so. Most bizarre! And his oratorical style is blunt, brusque, and undiplomatic. If Obama was "eloquent", President Trump is "plain-spoken" and "unfiltered". Of course, that really is an issue of style. Lots of people on the Left are obsessed with style, thinking it more important than substance. While I concede I sometimes find the President's verbal style grating, I am much more focused on the substance of the man.
Candidate Trump has one big advantage though: His opponents. Bernie Sanders honeymooned in Moscow during the height of the Cold War. Talk about "Russian Collusion"! --- And not the kind manufactured by the opposition party... As for Joe Biden, imagine Joe Biden and the President on a debate stage two or 3 times. Think about that image for a while. Then, its pretty easy to see Joe spending the next 4 years anywhere but D.C....

It's not politics but trump will Loose this time for sure -13 points in most polls vs old joe/vp sanders (Dream team) .. 99%chance that Biden will win elections 2020
No need for recession

The accuracy of political polls ( Brexit and Trump) is akin to the accuracy of all the pundits who are forever predicting crashes.

If you want to study and eat and digest and get your head around all the "sadistics," be my guest. I put a lot of weight on past performance, current valuations, PEG, my own ethical filter--- which is well-nigh impossible to implement, and the reputation of the Fund Manager. I try to steer clear of what's "hot" and what's currently most popular. After that, I want to have at least a bit beyond the USA border. Large, small caps. And now, at 65 years of age, I'm heavier in bonds than I am in stocks. Bond funds have been on a big run-up. Valuations are stretched. The time to get in is... already. But don't dismiss some great "balanced" funds, holding both stocks and bonds. Most pay quarterly. My favorite is closed to new investors: PRWCX. Check out T Rowe Price Balanced fund: RPBAX. Check out MAPOX, up in Minnesota.
You're looking for a defensive portfolio. I don't know your age, you didn't tell us. "Defensive" will look different, depending on age. If you just want to minimize volatility, check out VMVFX. Vanguard is famous for low fees. Client service leaves something to be desired. So I hear. I don't own Vanguard. The bond funds I own are PRSNX RPSIX and PTIAX. If "defensive" to you--- in terms of bonds--- means high-quality bonds, go with a gov't bond fund with mostly Treasuries. But the old reliable and stalwart DODIX should not be overlooked.

For screening (ER under 1%, top quartile for 1,3,5 years):
Conservative Equity Allocation Funds
https://screencast.com/t/rPUmyOlq
Moderate Equity Allocation Funds:
https://screencast.com/t/mugBYO4y
Aggressive Equity Allocation Funds:
https://screencast.com/t/QzdxjX9jkV
You might like to back test some of these choices using Portfolio Visualizer
https://portfoliovisualizer.com/backtest-portfolio

Mark, I own a substantial amount of prfds, and have traded them for years -- depending on market conditions. I have begun lightening up, this week. I don't keep a log of these to provide to strangers on the internet. Nor do I have a Bloomberg machine and don't make a habit of doing research for strangers on the internet, when they can do it themselves..
The OP included a link to quantumonline. You can investigate yourself. Dividendinvestor.com also has a preferred link where you can investigate for yourself.
If you have a real interest in preferreds, roll up your sleeves and get to work. Nobody has a right to expect other people to do their research for them. OTOH, we all have a right to express our opinions...

Oh, my apologies. See I tried that along with other methods and found no evidence supporting your statement. I just thought that you might have some inside info or special knowledge no one else could substantiate.

@Mark- Well, it's no surprise that some folks feel free to make any kind of statement whatever these days and expect to have everyone accept it as fact without any question whatever. Leadership from the top, and all that...
I knew that we were in big trouble years ago when DC began talking about "true facts", as if there were some other kind.

I hope there is a correction. A big one. Seasonally, September is often a weak month for equities.
I jumped in a 'tad' on the down 800-point day last Friday -- because I figured there would be follow-through down days, and did not want to go "all in" in a single day. But, despite all the financial bloggers who suffer from Trump Derangement syndrome, the buyers came right back in to bid up stocks. --- Including UP 250 points today, the day after the article provided by the OP). Sigh! --Too much optimism can be very depressing!
Frankly, I like select divd stocks (not quite at these prices, but if/when we see some pricing weakness) with a sub-2% 3-year Treasury. In fact, I like them more, as other investors become more pessimistic.... But I really need to see some follow-through ACTION on the pessimism. "Talking gloomy" is one thing; panic-selling is what we need. But, maybe we will finally get there in September. Hey, I'm a "glass is half full" kinda guy.
In a sustained depressed interest-rate environment, quality enterprises may have an opportunity to refinance even more debt at even lower debt-servicing costs. A more slack employment market would ameliorate wage pressures, and companies might "clean house" on some unnecessary costs that have crept into corporate P/Ls over the past 11 years. I see it every day at my "day job". And my employer is just like a lot of other big companies -- fat, happy, distracted with "stakeholders" & "sustainability" & millenial-friendly "happy talk" media nonsense.
But a crash is coming. It's been coming for 11 years. We've had crashes before. We will have many more. It's just part of the business cycle.

@Derf, Yes, cash becomes a drag during the updraft; but, helps during a downdraft. For me, the income area generates enough income to meet my needs. With this, I have dialed my risk level downward during the past five years, or so. Thinking ... Why take on more risk than is necessary? Perhaps, I should do as Ted did a while back and just cash out. But, then I'd owe the tax man a good sum of money in doing just that from the realized capital gains I'd have. And, besides I'd lose a good bit of income that my portfolio generates. So, I'll just roll along and take what the market gives me (good or bad) and clip my coupons.

Years back when I was in the accumulation phase of investing I rolled with equity allocations, at times, upwards towards the 60% to 70% range along with holding about 10% in cash so when stock market pullbacks came I had some cash that I could put to work to take advantage of the pullback. Then as the stock market recovered I'd trim my equity allocation booking some of the gains made during and after the recovery.
Interestingly, the Vanguard risk questionaire, contained in the article, suggested, for me, a portfolio of 40% bonds and 60% stocks. And, I'm retired.
Now being retired, for the past five years, here is how I now roll with a description of my all weather asset allocation detailed below.
Old_Skeet's All Weather Asset Allocation.
My all weather asset allocation of 20% cash, 40% income and 40% equity affords me everything necessary to meet my needs now being in the distribution phase of investing. The benefit of this asset allocation is that it provides sufficient income, maximizes diversification, minimizes volatility, and provides long-term returns.
The 20% held in cash area provides me ample cash should I need a cash draw over and above what my portfolio generates plus it can provide the capital necessary to fund a special investment position (spiff) should I choose to open one during a stock market pullback. In addition, cash helps stabelize a portfolio during stock market volatility. Example of investments held in this area are cash savings, money market mutual funds and CD's.
The 40% held in the income area provides me ample income generation to meet my income needs in retirement. It is a well diversified area that incorporates a good number of income generating type funds. Some examples of investments held in this area are ISFAX, LBNDX & PONAX.
The 40% held in the equity area provides me some dividend income along with some growth, that equities generally provide, that offsets the effects of inflation over time. Some examples of investments held in this area are NEWFX, SVAAX & SPECX
Generally, for my income distributions, I take no more than a sum equal to what one half of my five year average total return has been. In this way principal grows over time.
I'm thinking that all investors should write out their investment plan which should include how they plan to invest during stock market declines along with both short term and long term goals. Then monitor their results and make adjustments as warranted including rebalancing their portfolio form time to time to maintain their established asset allocation.

Well, nearly two flat years and the media needs something for clicks.

Over five years total return is almost identical to VWINX which has been a lot less volatile
With only 9 % turnover a year, the mangers are not doing much for their 0.7% fee.

@Soupkitchen, I appreciate where you are coming from on IVFIX concerning making money. It consist of mostly foreign holdings and over the past "recent" years foreign stocks have not done as well as domestics. For me, I've been in SVAAX for more than ten years and my average annual returns have been better than ten percent per year. Not too shabby for a dividend fund! I'm now favoring GVDSX because it is 60% foreign and 40% domestic equity allocation plus it has better than a 4% yield. And, for the next few years it just might have a hard time keeping its head above water as other funds might as well. Perhaps, not. But, over the next ten years I'm thinking since it can mix foreign with domestic stocks there is a fit for it within my portfolio as the managers can adjust the equity mix based upon their read on the markets plus I collect a nice monthly dividend.
It is just hard to say with great conviction (since stocks and bonds are currently richly priced) where the best place is to position new money. However, in past years value has worked better, for me, than growth (although I have some growth positions as well). And, do you really want to buy fixed income at the moment due to the little yield bonds now offer investors? With this, I'm thinking that the equity dividend payers are the better place to be.
Currently, GVDSX is looking pretty good to me. I expect by year end it will become a member of my global equity sleeve found in the growth & income area of my portfolio (due to its yield) as I continue to focus on income investing and position new money towards income generating securities.

Old skeet, I invested in IVFIX which had the same managers as SVAAX a few years ago and lost money. Bob C.had recommended this fund, but changed his tune as the fund slowly began to lose money. I wouldn'tinvest with those same managers again.

Fidelity Convertible Securities FCVSX Is the only one I'm vaguely familiar with but I haven't invested in it for years. Vanguard had a similar offering but liquidated it earlier this year.
And just now I found this list from US News.
Best Convertible Security Funds
From ETFdb.com:
This is a list of all Convertible ETFs traded in the USA which are currently tagged by ETF Database. Please note that the list may not contain newly issued ETFs. If you’re looking for a more simplified way to browse and compare ETFs, you may want to visit our ETFdb.com Categories, which categorize every ETF in a single “best fit” category.
Convertible Security ETF's

Yes, I was patient, but finally decided to leave SFGIX. With the China trade-war, and its knock-on effects toward other Asian countries, MAPIX is up by just a tiny fraction, this year, so far. I track both MAPIX and the bond fund, MAINX. The latter is performing quite well, indeed. It's up 8.29% YTD. It's lost a star or two at Morningstar. And M* has changed its peer category once or twice. And I notice that MAINX paid nothing at year-end in 2018. I'd be unhappy with THAT, if I owned the fund. The same thing happened re: an expected dividend a few years ago, with MAPIX.

Andrew Foster is another manager who went out on his own, with a lot of hype, and failed to match the performance of the fund he left. MAPIX is up 56% since March 2012; SFGIX is up 35%. For the last five years, MAPIX is up 18.43 %; SFGIX is up 6.51%. The fund family ,and its resources, may be more important than its famed managers.

Since even in 2019 the Economist never uses author bylines, I am forced to take their commentaries with a grain of salt, interesting (and sometimes accurate) as they are... and is also part of why I cancelled my subscription years ago. Journalistic accountability and all that.

Stipulation:
I do realize that the information referenced above is meaningless, fake, and total propaganda, inasmuch as The Economist is certainly part of the free press and main-stream media.

Looks like he is a winner - 3 hots a cot and $1.45 mil for 4 years of his time at some white collar country club all expenses paid.