In Search of the Perfect Investment

Upside down trading in September — traditionally a weak month in stockmarkets.

This story comes from Business Insider

The stock market has been flipped completely upside down

Take everything you thought you knew about the stock market this year and throw it out the window.

After eight months of tech and healthcare dominance, the record-breaking S&P 500 has assumed a fresh new face in September, being instead led higher by energy and telecom shares.

Digging deeper, as the scorching-hot FANG stocks – Facebook, Amazon, Netflix and Google — have headed toward correction territory this month, energy producers have stepped up and largely filled the void, aided by a surge in crude oil prices.

This resilience shown by the S&P 500, which just last week hit a series of new record highs, goes a long way towards disproving the notion that the stock market is trading at the whim of the tech industry. That’s good news for bullish traders, and a comeuppance of sorts for skeptics that warned against a market reckoning in the event of tech weakness.

The rotation occurring underneath the surface of the S&P 500 this month — out of tech and into other more attractively-priced areas — has played out on a smaller scale a few times in the past several months. On multiple occasions, exchange-traded fund data has supported the idea that money pulled from tech has simply been reallocated elsewhere in the stock market, keeping indexes afloat.

“Sector rotation has been a defining characteristic of equity markets throughout the spring and summer,” Fundstrat Global Advisors technical strategist Robert Sluymer wrote in a recent client note.

This dynamic has also been in play outside the confines of sectors. Looking strictly on a return basis, the top 20% of stocks in the S&P 500 in 2017 through August have evolved into the worst-performing quintile in September. On the flip side, the bottom 20% from the first eight months of the year is now the top quintile this month.

And records are being hit all the while – just the latest impressive sign of resilience for the 8 1/2-year bull market that refuses to die.

This is Harry speaking now: I don’t know what all this means for us investors — except don’t go crazy messing with the “latest trends.” And don’t believe every reporter’s story — after all they gotta fill space (me, too).

I’m eying today’s early markets. My strongest performers are — once again — Square, Amazon, Facebook, Netflix, Alibaba, TakeTwo, Google, Apple, Nvidia, Microsoft and Expedia.

Last night Cramer pushed Red Hat and VMware.

This is Red Hat year to date:

P/E is only 75.

VMware’s P/E is only 39. It’s also done well this year:

Meanwhile, at the White House

President Trump expressed his displeasure. “We are disappointed in certain so-called Republicans (in not repealing Obamacare),” he said. Mr. McConnell said Republicans would move on to their next big legislative priority: overhauling the tax code, a feat that has not been accomplished since 1986.

Don’t get your hopes up. The Republicans haven’t figured out where to replace revenues lost to lower taxes. Under the plan, everyone will get lower taxes, except the poorest who will see their rates go from 10% to 12%. Go figure.

I am hopeful for a holiday on bringing back corporate funds now overseas. If that happens, Apple will boost its dividend.

There goes the neighborhood. From the Wall Street Journal:

Saudi Arabia Lifts Ban on Women Driving
Saudi Arabia lifted the ban on women driving, removing a restriction that had become a symbol of women’s oppression in the deeply conservative kingdom.

The announcement, made by King Salman through a royal decree, says women will be officially allowed to obtain driving licenses in Saudi Arabia, the only country in the world where women weren’t allowed to drive.

Saudi woman driving in 2011. If they have to wear this garb while driving, they’ll be the world’s most dangerous drivers. You can’t see diddly out of these things.

The decree will go into effect in June, and after that a government committee will study how to begin allowing women onto the roads driving their own vehicles. …

The driving ban was just one of many such limitations. Women are still legally obliged to have a male guardian — typically a father, husband or son—whose permission is required for them to travel abroad or marry, for instance.

Today, if you’re a woman and drive, you can be jailed. Saudi Arabia is an absolute monarchy, with all decisions resting absolutely with King Salman.

Lake Bluff is a wealthy bucolic Illinois town, on the lake north of Chicago

It is home to around 7500 wealthy people and a thriving local newspaper scene. The local Daily NOrth Shore just published this wonderful Letter to The Editor:

Save Lake Bluff!
Lake Bluff Citizen Alert: Hoards of short-term renters are preparing to penetrate our lovely community.

We don’t fully know their plans, but likely these transient trash are here to molest our children, frighten our stay-at-home mothers, trip our grandparents, and let their dogs run our parks-off of a 6-foot leash. (It is even possible some of them are Gypsies.) It is unlikely our Police Department will be able to protect us from this threat, as several of them are out for the next two months participating on an Open Garage Door Task Force.

Some of our brave Lake Bluff Neighbors (LBNeighbors.com) have identified the scum’s key invasion tool, Airbnb. And they’ve proposed we cut off the rabbles use of it to access any of our charming homes, or more precisely prevent the traitors among us from prostituting their homes for a few, filthy dollars. This is obviously a good first step, but it is not enough. Even if we keep them out of our great rooms and bedrooms; they’ll still be roaming our streets, lurking in our playgrounds, ransacking our stores, desecrating our churches, clogging our traffic, consuming our parking, and yes, committing unspeakable acts in our gazebo.

No, the only solution is a Wall. We must begin construction of the Lake Bluff Wall. Many of you might object to this as impractical. But we have certain geographic advantages that make this a viable solution. Obviously, we are protected to the east by Lake Michigan. We may need to mine a strip of the Lake, just beyond the swimming buoys. Thankfully, mines are now available to police forces as surplus military equipment left over from Afghanistan. To the south, we have the benign giant Lake Forest, which seems mainly to be populated by our kind of people, so perhaps some decorative fencing will suffice. To the north, however, we need a full Berlin job-concrete, spotlights, gun turrets, a demilitarized zone. (Though perhaps part of the manpower for that can be tasked as a permanent training exercise at the Navy Base.)

To the west, I’m afraid we have a problem. I like West Lake Bluff; some of my best friends are from West Lake Bluff; and most of them, I assume, are good people. But let’s face it, the west is not the best of Lake Bluff. In fact, I don’t see much LB Neighbors propaganda in West Lake Bluff, raising questions regarding their true allegiance. And most importantly West Lake Bluff is near even more questionable dens: Knollwood, Green Oaks, and unincorporated Lake Bluff. Who even knows what that is? I doubt fine people would willingly reside in an area without at least some corporating. No, I’m afraid we must sacrifice West Lake Bluff to the threat of the unclean travelers, and we can hope that our western neighbors’ sacrifices will sate the appetites of the depraved. East Lake Bluff has a natural defensible border to the west along Sheridan Road, and we need only put a security checkpoint under the viaduct to control vehicular access.

Now, this will not be cheap. But once we have East Lake Bluff’s borders secure, we can charge admission to many of the events that make Lake Bluff special: Halloween, $5 per child; Fourth of July, $10 per flagged apparel item; Bluffinia, $3 per lawn chair.

Of course, we can’t just charge money. That would make us no different than the real estate pimps who started this problem. No, the Wall must be accompanied by extreme vetting. And I’m hopeful many of our West Lake Bluff neighbors will pass these tests, perhaps easing the sting of landing on the wrong side of the Wall. Anyone who has the good taste to currently reside in East Lake Bluff or be born there will naturally satisfy all current and future vetting requirements.

To manage the vetting process, I propose we form a new community board. The Worthy Occupant Board (W.O.B.) should be authorized to decide who is allowed within the sacred land and structures of Lake Bluff. Just as we have the PCZBA (Plan Commission & Zoning Board of Appeals) to judge what buildings are worthy of our community, what they should look like, and what buildings should be allowed near other buildings; the W.O.B. can and must do the same for people: judge what people are worthy of our community, what they should look like, and what people should be allowed near us.

Together the Wall and the W.O.B. will fully and comprehensively protect us from all risk and change. Until now, many of us, me included, have relied on the Lake Bluff Bubble to protect us. But we are now in the days of shoe bombs and underwear bombs; how do we know that there’s not an Airbnber, at this moment, planning hula-hoop bombs for a quaint Midwestern town? The days of hiding behind a thin film of soap are over, my friends. Now, we need concrete, structural steel and the rigid judgment of our righteous Lake Bluff Neighbors to protect us.

Harry Newton, who continues to hate Windows 10 with a passion. He’s scheduled a nice tennis game this afternoon. That will make his feel good. I am constantly surprised at how many of my friends have given up physical activity. Their knee hurts. Their back hurts. What they fail to understand is that exercise makes “hurts” better. Please find something more intellectually stimulating than going to the gym. Tennis more intellectually stimulating.

The Vietnam War continues this evening at 8 PM. This is an engrossing series with two lessons:

+ People (and leaders especially) can make egregious mistakes.

+ People often find it impossible to close it down and get out. This applies to your and my investments. What counts is not what you invested so far. That’s called sunk cost. It’s what you can make going forward. If the answer is zilch (and more pain), get out. LBJ had “hopes” that his bombing would work. The US dropped more bombs on Vietnam than during the entire Second World War on Germany. Hope is not a good investment philosophy. Many money managers suffer also. Hope is not an investment strategy.