Jan 7++++++++++++++++++++++++++++++++++++++++++++++++++++
2)Character Counts, But So Do ResultsBy Cal Thomas
I do not make it a practice to comment on the work of fellow columnists, though occasionally some care to comment on mine, which is fine. I'm happy to help them make a living.
An exception will be made here because of New York Times "conservative" columnist, Bret Stephens.
In an end-of-year column titled "Why I'm Still a Never Trumper," Stephens lists the accomplishments of the Trump administration: Tax cuts, deregulation, more military spending, cuts for the United Nations, defeat of the Islamic State in Syria, more troops to Afghanistan, arms for Ukraine, getting tough with North Korea, recognizing Jerusalem as Israel's capital, decertifying the terrible Iran deal, yes to Keystone, no to Paris, huge gains on Wall Street and higher consumer confidence, plus more conservative judges on federal benches, including Neil Gorsuch on the Supreme Court.
It is a record that should delight any conservative voter, but despite it all and with promises of more to come this year, Stephens still wishes Hillary Clinton were president. Does he not realize that none of the accomplishments he lists would have been achieved had she won the election? To him and to some other Establishment conservatives, deportment trumps victory.
Character, he says, is supreme. Really? I'd like to see him as a character witness at a trial for Hillary Clinton, who criminally mishandled classified emails, but escaped indictment, not because of a change in the law, but because of a change in the wording describing her actions. Then there's the issue of enabling her husband's numerous infidelities and smearing his accusers. Does someone of good character do that?
Stephens' emphasis on character apparently doesn't apply in equal measure to presidents like Franklin D. Roosevelt, who had a mistress, and John F. Kennedy, who had a series of paramours. Then there are the lies Kennedy and LBJ told about Vietnam, lies that needlessly led to the deaths of more than 58,000 Americans. Were these people known for their good character?
Stephens quotes the late Sen. Daniel Patrick Moynihan (D-NY):
"The central conservative truth is that it is culture, not politics that determines the success of a society."
How's that working out in the culture of sexual harassment, Opioid addiction, a decline in educational achievement, especially among poor minorities trapped in underperforming schools, and in "entertainment," which often borders on soft porn, not to mention the frequent use of words that generations ago would have gotten your mouth washed out with soap?
Stephens then lists some of the president's less appealing character qualities. For argument's sake, let's concede he's right about all of them. Now what? Would he feel better if a well-spoken liberal were president, populating the courts with lefties who would finish shredding the Constitution, and continue abortions on demand?
What about the character of liberal politicians in cities like Chicago and Baltimore where murders have become commonplace and many of those not personally affected by the carnage simply shrug and turn away? The Baltimore Sun reports there were 342 homicides in that city in 2017 -- a new per capita record. Maybe the mayor has good table manners and that is enough for Stephens.
3)
Hopefully
you are fully invested in equities, and are enjoying the ride. All I
can say is Wow. Who knows how long this lasts, but it is great as long
as it does. All the so called pundits were way wrong about the market.
The shorts got crushed, and maybe some of the buying is short covering.
While the jobs report was a bit less than expected, it was still solid.
Even U6 is down to 8.1%, which is good by historic terms, and 1% better
than a year ago. There is still a ways to go to get more people off the
dole and off drugs and into work, but from here it is a slog since these
are the basically unemployable. Welfare reform would help by ending
some of the excessive entitlement payouts that make it economically a
tossup for some whether to work or not. My assumption is there is
nothing in the near term to stop the markets and have a material
reversal other than investors deciding to take profits, or just feeling
things are going too well. We are beyond year end selling to book
profits for fund managers, so now they need to redeploy cash back into
the market. There is a great debate whether the 50% reduction in the
number of tradable stocks is partly contributing to the upside.
Depending on whose data you look at, it is possible, but unclear. Logic
would suggest that 50% less stocks being chased by trillions more
dollars would result in higher prices, but it could just as easily
result in huge losses if those trillions suddenly went out. What is
clear from much of the data is that stock buybacks contribute little to
share price increases over time, so don’t chase stocks just based on a
buyback.
Much
is made of managing risk in portfolio management. We all invest based
on the level of risk we are willing to take. I have an unusual view on
this. I believe the risk to the upside can be more expensive than the
risk to the downside when the economy is growing so well. Meaning, the
risk of missing large profit opportunities is greater than the risk the
market will decline, and greater than potential losses you might incur
if the market suddenly declines. Timing is key. Understanding the
situation in the world objectively, and not based on mainstream media
talking heads, and Wall St pundits is also key. There is real risk on
the upside as well as downside. The upside risk is opportunity risk.
None of us really knows what the real risks are, so you need to make
your own assessment of where on the risk curve we really are. Risk is
only what a person perceives it to be, based on all the factors of what
the person forecasts, and what he decides to do, since the future is a
large number of unknowns. Black swans are always circling. 9-11 came out
of nowhere. We know there are giant geopolitical risks now, any one of
which could explode at any moment. Despite the media and Adam Schiff,
there is no chance Trump is in legal trouble. So then you need to ask
yourself, do I really think one of these black swans will crash down
soon. If so, stay safe. If not, invest in stocks. The commitment to
stocks depends on your comfort with your ability to judge risk, both up
and downside, and the stocks you select. Different stocks carry greatly
differing levels of risk. Just saying being invested in equities is
risky does not simply mean more risk exists. It depends on which stocks
you own. It ignores the real risk that bond prices will decline as the
Fed increases rates. Do you think the economy will now move ahead
strongly with the tax reform and the huge reduction in regulations,
combined with low cost of capital. Keep in mind the cost of capital for a
public company is a combination of the multiple of its stock price and
its cost of borrowing. If the shares are at a high PE, and the company
issues some new shares to raise money or to acquire another company,
then its cost of capital is low. With share prices at high PE’s, and
interest rates still very low, the cost of capital is extremely low for
most corporations, which means it pays to make new capital investments
if they believe the economy will continue to grow well for a long
period. The hurdle rate for the investment is lower now than if the PE
is very low. So now we have a low cost of capital, low taxes, a strong
economy, an administration working hard to help business, and a world
economy that is unusually strong, and low inflation. So to me the short
term risk of loss is well worth taking, and is a lot lower than the
opportunity to make unusually large stock market gains. In short, the
upside risk of missing the opportunity to make unusually large gains is
much greater than the risk of a big downturn in stocks for the next
several months. I could be wrong, but so far I am right.
To
me, the usual portfolio mantra of 40-60 makes no sense at any time, as
it ignores the reality of what is actually happening, and the specific
stocks or bonds one chooses. It foregoes the opportunity to create real
wealth enhancement when the opportunity presents itself, as it has for
the past 8 1/2 years, and to avoid losses when things are going bad. If
things are really going bad, then you should be 100% in bonds and cash,
not 40%, since rates will go down and bond prices up while stock prices
decline. If you did the “safe” thing, and invested 40% in bonds or
annuities since 2009, you made a bad, uninformed choice, and left large
possible increments to your net worth on the table. You may have been
“safe”, but in my view, you would have been ignoring the reality of what
has been happening, or you bought into the sales pitch of the annuity
and portfolio managers which is geared to their agenda of making sales
and commissions, and not to the reality of the markets. By March, 2009,
there was only one way the stock market was going, and that was up, and
the data prove that. Almost all wealth and portfolio managers think I
am way out on the risk curve being all in equities, but so far over 7
years it has proven to be exceptionally rewarding. If you stay with
solid, well managed companies, with good balance sheets, on major
exchanges, your risk is greatly mitigated in a recovering and growing
economy. Data over decades proves this to be the case as returns on
equities over the long term exceed returns on mixed portfolios and fixed
income. Your diversity needs to be in differing industries and over
weighted these past few years to the tech giants through an ETF like
QQQ. Not into bonds and annuities which are going to lose value, or are
locked up and illiquid for years. Risk is further mitigated by the
ability to hit the sell button, and get out in moments, as I did in May,
2007. That is called ability to manage risk. The ability to liquidate
positions at a moment’s notice. Owning bonds and annuities is not
managing risk. It is missing opportunity that, to me, was plainly
staring you in the face in spring 2009. Wealth managers think that by
making a portfolio of 60-40 they cannot be criticized, but in fact they
have been misallocating your assets and denying you the ability to earn
big capital gains in exchange for them and their lawyers being able to
say, “we did the standard of care”. And for screwing you like this,
they charged you 75-100 basis points per year management fees. The fact
is, they cost you a lot of money, but claim they are doing the right
thing.
This
is purely my personal view, and it is rejected by most money managers,
and many investors. Many of you will likely reject this as well, which
is fine. I sleep very well at night with my all equities position, but
most of you will likely feel you do not want what your money manager, or
you personally, see as the downside risk. Over the past 7 years it has
worked great for me, but there is no way to know if it still will prove
to be good over the next week, or year. I believe it will, and that I
will recognize and foresee the time to bail, and sell out when that
happens. That is probably not what works for most of you. The wealth
managers I work with almost never allow anyone to manage their own
portfolio the way I do, but they make an exception for me because those
are the rules I insist on.
Now
we have a book co-authored by an angry man who everyone says is only
out for himself and is out for revenge, and an author who most who know
him say is very loose with facts and long on inserting his personal
view. He is now saying he will bring down the president with the book.
Kind of tells you about his ego and where his head is at, and his
impetus for writing it. How much of the book is true is impossible to
know, and I am sure some of the bad stuff is. But nothing is new. We all
know Trump is a narcissist in the extreme, he has some real personality
issues, and he has a short attention span. We know he attacks people in
ways that are sometimes quite bad and destructive to himself, and his
tweets are very unhelpful at times. And we know he has always lived in
the chaos and dirty dealing that goes with trying to develop real estate
in NY. We also knew he is a womanizer just like Bill Clinton and
Kennedy. Yet he won the election. Reality is, some things in the book
are true, and some things in the book are not true. People like Maria
Barteromo say they are mentioned, but the mention is 100% false. Many
others say they never said what is quoted, and they were misquoted. The
editors never fact checked anything. We all knew Bannon felt Jared was
partly responsible for his undoing, so now he attacks Jared. So life
goes on. Most people just care how their own lives are dong, not all
this crap out of DC. Trump is, and will remain president. The mainstream
media will use it to further their narrative against Trump, and the
economy and stock market, and most others continue to ignore all of it.
The real issue is, these sorts of books only harm the country as
foreigners do not understand how America allows such books to be
published, so it harms the president’s image abroad. Is this any worse
than the Donna Brazille book exposing the corruption and illegal acts
inside the DNC and Hilary’s campaign. Life goes on in the real world.
If
it makes you feel better it is too cold in FL to play tennis or go on
the boat, and I have to head to NY today for the rest of January. I am
still waiting for global warming to happen -feels like the ice age is
returning
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