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.

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.

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

Trying to parse through a lot of new data and ratios and have quickly learned that I my mathematical grasp of some of the ratios and how useful they are in different scenarios is far below many of you that post here. I am looking to build a portfolio of defensive equity funds that are primarily large cap domestic but adding in a 20% or so weight to international strategies and I'm trying to decide which ratios might be most useful in analyzing potential investments. right now I am leaning towards the following listed in order of importance:
1) Martin Ratio
2) Downside Deviation - chose this over bear market deviation as it seems easier to compare funds of different categories
3) Ulcer Index
4) Sortino
I realize that Martin and Sortino are best used to compare funds that fall into similar categories so I'm not sure how appropriate they are in comparing the domestic to the international strategies. Any help or insights you can give to a newbie would be greatly appreciated.

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

@Old_Joe: I delayed my retirement until 2012 because of the crash. In 2008, we had our house for sale and the day it was to be appraised for the prospective buyer, Bernanke said something to the effect that “we may not have an economy left.” Fortunately, the appraiser did not low-ball the property and the buyer’s loan was approved. It was more than stressful.

FYI: It's tough when a fund's top selling point is we lost less money than the index.
But that's the strategy one buys into with a defensive mutual fund like a balanced fund. The balanced fund is a portfolio that holds both stocks and bonds so that investors can get both growth and income in one vehicle.
Most financial advisors recommend a portfolio of both stocks and bonds for diversification. That's because stocks and bonds typically moved in opposite directions. When stocks rise, bonds fall in price, and when stocks fall, bonds rise in price. The theory is one asset should temper the losses in the other, resulting in lower risk and volatility.
So, if you want diversification, but don't feel like researching a whole bunch of funds to make sure you have the appropriate asset allocation, you can buy a balanced fund and get the whole thing in one package, such as the Hennessy Equity and Income Fund (HEIFX).
Regards,
Ted
https://www.forbes.com/sites/lcarrel/2019/08/29/hennessey-fund-is-well-positioned-for-choppy-market-offering-lower-risk-and-volatility/#956d3da7accc
M* Snapshot HEIFX:
https://www.morningstar.com/funds/xnas/heifx/quote

I bought in Dec '18 yeah. Should have bought more, in hindsight. :) I'm buying into most major down days this year to put more cash into the markets across my accounts.

@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

@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

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.

https://www.thestreet.com/video/investors-wary-of-stocks-15067825
Investors Are Getting Wary of U.S. Stocks -- Here's How to Act Now
The second large wealth manager in less than a month reduced U.S. corporate earnings expectations, highlighting risks that the global economy is decelerating at a rapid pace.

We have pff of and boa preferred since 2012..very happy w outcomes so far... If market tank that another story

Ah, ya @Old_Joe Agreement to the max.
How many of this type of write might one expect to find on any given day????
10, 20, 50, 100........???????????????????

FYI: “Preferreds” are one of the best performing investments, yet many investors still avoid them.
While it’s no surprise that US stocks are the highest performing stocks in the world in 2019, who would have ever thought that those boring, old preferred stocks would have outperformed small & medium capitalized stocks before dividends?
In fact, to students of financial history, the success of these stocks is not a big surprise.
Since over a century ago, beginning in the year 1900, preferred stocks have been by far the best performing income investment. As the following chart & table shows, there has rarely been a timeframe when preferreds have not outperformed corporate or treasury bonds.
Regards,
Ted
https://www.forbes.com/sites/kennethwinans/2019/08/27/how-does-a-6-yield-with-a-tax-break-sound-try-preferred-stocks/#28ab22ad6f0d
Quantum Online Com:
http://www.quantumonline.com/QuickStart.cfm

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.

Maybe just speculations but we never know
Few months ago many pundits state DOWS would reach 30000s by yr end
Hopefully DT wil change all that
Https://www-marketwatch-com.cdn.ampproject.org/v/s/www.marketwatch.com/amp/story/guid/6D95C82E-C8D9-11E9-8560-96BBE75E629A?amp_js_v=a2&amp_gsa=1&usqp=mq331AQEKAFwAQ==#aoh=15669545934772&referrer=https://www.google.com&amp_tf=From %1$s&ampshare=https://www.marketwatch.com/story/a-lehman-like-market-disaster-could-happen-this-week-analyst-warns-2019-08-27
A ‘Lehman-like’ market disaster could happen this week, analyst warns

Hi sma3: Not taking issue with your comment. Though, I'm finding that GVDSX's inception date being 1/30/2017. So not sure where you came up with a five year retrun for it. Also, VWINX is a hybrid fund consisting mostly of stocks and bonds along with some cash. While SVAAX and GVDSX are all equity funds. As such ... you'd think that VWINX would have the higher yield? But, not so as VWINX has a yield of 2.91% while SVAAX and GVDSX have a yield of 3.52% and 4.02% respectively as per M*.
VWINX has been a good performer with a ten year average return of about 8.1% as compaired to SVAAX's ten year return of 10.25%. Again, GVDSX is a relative new fund that does not yet have a three year history. But, from my perspective, this goes to show that over the long run most equity income stock funds will out perform most hybrid income funds such as VWINX. What they seem to have in common is that they are advertised as income generating funds.
Kind'a like compairing apples to oranges and even to tomatoes even though two are of the fruit family and one is a vegtable.
From my perspective, to have a good diversified portfolio you need some of each.