10 Tuesday AM Reads

March 3, 2015 7:30am by

Good Nasdaq 5,000 morning, a long time coming to say the least. We are not letting any irrational exuberance impact our morning train reads:

• Reasons to worry about US equities (FT) but see Callaway: This time Nasdaq 5000 is different (USAT)
• You Guys Realize The Apple Watch Is Going To Flop, Right? (FastCo Design)
• Buy-and-Hold Fund Prospers With No New Bets in 80 Years (WealthManagement.com) but see Are DFA’s Funds Active or Passive? (Advisor Perspectives)
• Inside The 2015 Forbes Billionaires List: Facts And Figures (Forbes)
• Kudlow: Republicans attacking Janet Yellen should be careful what they wish for (RealClearMarkets)

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  1. farmera1 commented on Mar 3

    A retrospective look at returns in Berkshire Hathaway. It is amazing what $100 would have done if invested say in the 1964: The miracle of compounding. That $100 would now be worth over a million (in current dollars), of course a million isn’t what it used to be aka the time value of money. Just to keep it on the page, semi-log graphs are used.

    http://www.businessinsider.com/warren-buffett-berkshire-hathaway-vs-sp-500-2015-3

    I think the second graph also shows how hard it is to compound at large percentages. The graph for percentage return is definitely down, but it still beats the S and P 500 pretty consistently.

    • VennData commented on Mar 3

      Amazing how The Oracle’s purchase of 21st Cent. Fox NEVER came up over three hours on CNBC, even with Joe Kernan dribbling all over himself with anyway possible to take down Warren Buffett.

  2. farmera1 commented on Mar 3

    From the Forbes list of the world’s richest:

    I see Gates took over the title of no. 1 with some $79 billion, the richest person in the world. Buffett is third and Slim is no. 2. All have seventy billion or so. Two Walton heirs remain in the top ten and the Kock brothers are solidly in sixth place.

  3. VennData commented on Mar 3

    The Cracker Barrel Show on CNBC

    The term “Cracker” is from Cracker barrel. Old white racists standing around the cracker barrel talking unsubstantiated nonsense. Pretending they have facts:

    Joe Kernan: Why do all the kids today in Silicon Valley Favor Net Neutrality?
    Scot McNealy: Because anytime a regulator names something it does the opposite.

    I can’t even follow the conversation! What are these guys talking about? Well, the “regulators” that named Clear Air Act were Republicans. Republican regulators? I don’t know, I guess the were great under Bush’s financial regulation.

    McNealy claims there is no empirical evidence for state planning over capitalism, but that’s a typical right wing straw man not the issue. Where is this Tea Party Paradise they want to live in? Where’s the empirical evidence for that? Because since Teddy Roosevelt’s Trust busting the US regulatory system has worked great.

    Joe Kernan is mad the NASDAQ hit 5,000. He’s angry when stocks do week, was certain they were doomed last January to pick one example. His morning gab show with the uber rich is NOT investible information. If you follow Joe Kernans’ advice you have sat out the Obama Rally.

    Joe Kernan’s SquawkBox is The Cracker Barrel Show.

    • intlacct commented on Mar 4

      “McNealy claims there is no empirical evidence for state planning over capitalism, but that’s a typical right wing straw man not the issue.”

      But it’s not even true. Medicare, Social Security, the military, 16 countries with better health outcomes than the US all of which use socialized medicine, on a per capita basis maybe we are 50th (anyone know)?

      Try this question: name one former iron curtain country that has chosen to go without some form of socialized, universal coverage health care system.

  4. VennData commented on Mar 3

    Kudlow:

    “…Now, if President Obama would agree with the GOP to slash the corporate tax, the economy might grow at 4 or 5 percent with a stronger dollar and even lower commodity prices. Wouldn’t that be ironic? Too bad Obama won’t agree to a serious corporate tax cut…”

    How do we pay for it Larry? Because if we get rid of loopholes and cut everyone’s rate to “no effect” then what is all the fuss about? it’s a waste of time.

    • intlacct commented on Mar 3

      I liked him better when he was a coke head. ;)

  5. WickedGreen commented on Mar 3

    My, my, but isn’t Scary Larry a mendacious, self-sliming, hypocritical piece of work.

    Always railing about all things allegedly economic (but mostly political); I guess he assumes blather and bloviation are part and parcel of that vaunted American productivity? Somebody pays this guy for this?

    After 6+ years of free-form bashing and Teapublican genuflection and inflation predictions, all of a sudden the economy is great, a strong dollar is wonderful and [Obama appointee] Yellen is right and righteous?

    Hilarity. Love the clown parade …

    • rd commented on Mar 3

      I don’t think Todd Harrison was cynical enough. I think Henry Blodget’s personal experiences (becoming the Internet bubble whipping boy) created sufficient self-doubt and cynicism about his industry that he was able to be very flexible in how he approached his Business Insider experiment which has now turned into a major web site.

  7. VennData commented on Mar 3

    So Boehner and the GOP are going to listen to a speech from a foreign politician looking to score points back home while Department of Homeland Security funding runs out in three days.

    I see why you voted for the GOP. Their competence.

    • VennData commented on Mar 3

      What’s the Knesset version of the Hastert rule?

      Build more settlements.

  10. Jojo commented on Mar 3

    “A Brewing Problem: What’s the healthiest way to keep everyone caffeinated?”
    ————–
    Try Guarana instead. It’s a caffeine containing plant from South America. Look on your energy drinks and you’ll usually find it included. It is “smoother” than coffee caffeine in many peoples opinions.

    Look for pills ‘standardized’ to 22% caffeine. Easily found on the net. I buy from here:
    http://www.beyond-a-century.com/Guarana-Extract-22-Caffeine-450mg–250-capsules_p_371.html

    ~~~

    ADMIN: Barry turned me on to Bai — about equal to half a cup of coffee, with no artificial sweeteners — quite delicious too!

    • Jojo commented on Mar 3

      Here’s another South American plant containing caffeine that sounds similar to guarana. Read an article in recent issue of Outside mag on it. Supposed to be available as a drink in Whole Foods and elsewhere.

      Personally I’d rather take a cheap capsule with cheap tap water rather than an expensive caffeine containing drink.

      http://runa.org/

  12. constantnormal commented on Mar 3

    re: “Buy-and-Hold Fund Prospers With No New Bets in 80 Years”

    If a mere unwashed mortal individual investor applied this same simple scheme, and lost almost a third of the original holdings along the way, would professionals describe this hypothetical person as “merely lucky” or “incredibly long-lived”?

    This is a tale of the miracle of compound interest, nothing more. Over a sufficiently long time, even a 1% average annual return will yield fabulous rewards, but most investors do not possess investing lifetimes of eight decades, during which they abstain from tasting the cake they are baking.

    If George Washington were alive today, can you imagine what his bank balance would be? Kind of a meaningless bit of fancy, is it not? The main things to derive from this piece are:

    1) When investing, choose wisely.
    2) Ignore the intervening ups and downs in your holdings, even if some of them go to zero.
    3) Never, ever touch your savings — leave it for your heirs.

    Show me a fund that returns gains that exceed its peers (and the market) decade after decade.

    I guess that would be Berkshire Hathaway. I don’t think anyone ascribes the good fortunes of Buffett and Munger to “luck”.

    I suppose the real lesson here (perhaps the only lesson) is that trading/changing horses in midstream detracts from the performance of the fund. It may sometimes be necessary, but it WILL detract from the performance. One had better be very sure that the asset one is selling will not recover in a reasonable time.

    Ideally, one should spend a LOT of time and effort in selection, and not bail on the stock because the company has had a bad quarter (not without some additional justification, such as the CFO was found to be cooking the books, or management was lying to the stockholders about sales), but rather monitor the progress of one’s holdings, and not just by watching the stock price, because the Market is a fickle scale when it comes to assessing value. One must watch and understand the company’s business prospects and the prospects of the industry it operates in, and if one cannot comprehend them (e.g. a complex TBTF bank), then perhaps one should never have bought the shares in the first place.

    • constantnormal commented on Mar 3

      … the chart of the NASDAQ since 2000 is one of the best arguments against blindly buying and holding … of course, it is difficult to say where the NASDAQ index will be in another 65 years — where will you be in 65 years?

  13. farmera1 commented on Mar 3

    I feel good about this. I’ve always wondered about equating volatility with risk, this just never made sense to me.

    http://thereformedbroker.com/2015/03/02/the-greatest-trick-the-devil-ever-pulled/

    The concept of variation (as quantified by standard deviation and called risk by the smooth tongued sales people/brokers) is not the same as risk. Never has been and never will be. I had a local foundation head start lecturing me on how to invest and accept more risk. When I asked her how she defined risk, she finally started mumbling about variation and risk, parroting the buzz words she had picked up. She had no clue what she was talking about but she had been sold, exactly what she’d been sold I have no idea but I’m sure it involved lots of commissions for the smooth tongued young fellow that sold her.

    • RW commented on Mar 3

      Very difficult not to go schadenfreude full monte on this one.

  16. kaleberg commented on Mar 3

    $30T / 76M baby boomers is about $400K for each heir. If we skew this with a power curve, expect a median inheritance of maybe $50K-$100K per millennial. [1] (This may be a bit high given the way Medicaid pay downs and final medical expenses work.) The baby boom birth mode was in 1960, so the big turnover will peak in the late 2030s, 15-25 years from now. [2] I suppose being able to pay off their student loans or afford a down payment on a condo, at long last, will feel like a real emancipation. They’ll be in their forties then and finally able to feel like grownups. God bless them. A friend of mine always said that we baby boomers would eat our young.

    [1] Is this 2015 dollars or 2035 dollars? We should be thinking in terms of the latter.
    [2] I expect that the wealthier boomers will live longer than the poorer ones, so late 2030s or even 2040s will see the peak wealth transfer.

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