Have You Met Mr. Market?

Do you know the allegory of Mr. Market? This useful parable—created by Warren Buffett’s mentor—might change everything you think about the stock market, its daily prices, and the endless news cycle (and blogs?!) built upon it.

The Original Mr. Market

The imaginary investor named “Mr. Market” was created by Benjamin Graham in his 1949 book The Intelligent Investor. Graham, if you’re not familiar, was the guy who taught Warren Buffett about securities analysis and value investing. Not a bad track record.

Graham asks the readers of his book to imagine that they have a business partner: a man named Mr. Market. On some days, Mr. Market arrives at work full of enthusiasm. Business is good and Mr. Market is wildly happy. So happy, in fact, that he wants to buy the reader’s share of the business.

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But on other days, Mr. Market is incredibly depressed. The business has hit a bump in the road. Mr. Market will do anything to sell his own shares of the business to the reader.

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Of course, the reader is always free to decline Mr. Market’s offers. And the reader certainly should feel wary of Mr. Market. After all, he is irrational, emotional, and moody. It seems he does not have good business judgement. Graham describes him as having, “incurable emotional problems.”

How can Mr. Market’s feelings fluctuate so quickly? Rather than taking an even emotional approach to business highs and lows, Mr. Market reacts strongly to the slightest bit of news.

If anything, the reader could probably find a way to take advantage of Mr. Market’s over-reactions. The reader could buy from Mr. Market when he’s feeling overly pessimistic and sell to Mr. Market when he’s feeling unjustifiably euphoric. This is one of the basic principles behind value investing.

But Mr. Market is a metaphor

Of course, Mr. Market is an imaginary investor. Yet countless readers have felt that Mr. Market acts as a perfect metaphor for the market fluctuations in the real stock market.

The stock market will come to you with a different price every day. The market will hear good news from a business and countless investors will look to buy that business’s stock. Will you sell to them? But a negative headline will send the market tumbling. Investors will sell. Please, they plead, will you buy my shares?!

Don’t like today’s price? You’ll get a new one tomorrow.

Is this any way to make rational money decisions? By buying while manic and selling while depressive? Do these daily market fluctuations relate to the true intrinsic value of the businesses they represent?

“Never buy something from someone who is out of breath”

Burton Malkiel

There’s a reason why Benjamin Graham built Mr. Market to resemble an actual manic-depressive. It’s an unfortunate affliction. And sadly, those afflicted are often untethered from reality.

The stock market is nothing more than a collection of individuals. These individuals can fall prey to the same emotional overreactions as any other human. Mr. Market acts as a representation of those people.

“In the short run, the stock market is a voting machine. Yet, in the long run, it is a weighing machine.”

Benjamin Graham

Votes are opinions, and opinions can be wrong. That’s why the market’s daily price fluctuations should not affect your long-term investing decisions. But weight is based on fact, and facts don’t lie. Over the long run, the true weight (or value) of a company will make itself apparent.

Warren Buffett’s Thoughts

Warren Buffett is on the record speaking to Berkshire Hathaway shareholders saying that Mr. Market is his favorite part of Benjamin Graham’s book.

Why? Because:

If you cannot control your emotions, you cannot control your money.

Warren Buffett

Of course, Buffett is famous for skills beyond his emotional control. I mean, the guy is 90 years old and continues his daily habits of eating McDonalds and reading six hours of business briefings. That’s fame-worthy.

Warren Buffett

But Buffett’s point is that ignoring Mr. Market is 1) difficult but 2) vitally important. Your mental behavior is just as important as your investing choices.

For example: perhaps your business instincts suggested that Amazon was a great purchase in 1999—at about $100 per share. It was assuredly overvalued at that point based on intrinsic value, but your crystal ball saw a beautiful future.

But Buffett’s real question for you would be: did you sell Amazon when the Dot Com bubble burst (and the stock fell to less than $10 per share)? Did Mr. Market’s depression affect you? Or did your belief in the company’s long-term future allow to hold on until today—when the stock sits at over $3000 per share.

The Woefully Ignorant Sports Fan

I know about 25 different versions of this guy, so I bet you know at least one of them. I’m talking about the Woefully Ignorant Sports Fan, or WISF for short.

The WISF is a spitting image of Mr. Market.

When Lebron James has a couple bad games, the WISF confidently exclaims,

“The dude is a trash basketball player. He’s been overhyped since Day 1. I’m surprised he’s still in the starting lineup.”

Skip Bayless: ESPN's different rules for me and Stephen Smith
Stephen A. Smith and Skip Bayless: Two Gods of the WISF world

Wow! That’s a pretty outrageous claim. But when Lebron wins the NBA finals and takes home another First-Team All-NBA award, the WISF changes his tune.

“I’m telling you, that’s why he’s the Greatest of All Time. The GOAT. Love him or hate him, you can’t deny he’s the King.”

To the outside observer, this kind of flip-flop removes any shred of the WISF’s credibility. And yet the WISF flip-flops constantly, consistently, and without a hint of irony. It’s simply his nature.

Now think about the WISF alongside Mr. Market. What does the WISF actually tell us about Lebron? Very little! And what does Mr. Market tell us about the true value of the companies on the stock market? Again, very little!

We should not seek truth in the loud pronouncements of an emotional judge. This is another aphorism from The Intelligent Investor book.

But I Want More Money!

Just out of curiosity, I logged into my Fidelity account in late March 2020. The COVID market was at the bottom of its tumble, and my 401(k) and Roth IRA both showed scarring.

Ouch. Tens of thousands of dollars disappeared. Years of saving and investing…poof. This is how investors lose heart. Should I sell now and save myself further losses?

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No! Absolutely not! Selling at the bottom is what Mr. Market does. It’s emotional behavior. It’s not based on rationality, not on the intrinsic values of the underlying businesses.

My pessimism quickly subsided. In fact, I began to feel silver linings. Why?

I’m still in the buying phase of my investing career. I buy via my 401(k) account every two weeks. And I buy via my Roth IRA account every month. I’ve never sold a stock. The red ticks in the image below show my two-week purchasing schedule so far in 2020.

Buy when high, buy when low. That’s the Lazy Portfolio way!

If you’re investing for later in life, then your emotions should typically be the opposite of the market’s emotions. If the market is sad and prices are low and they want to sell…well, great! A low price for you increases your ability to profit later.

And Benjamin Graham agrees. He doesn’t think you should ignore Mr. Market altogether, but instead should do business with him only when it’s in your best interest (ooh yeah!).

“The intelligent investor shouldn’t ignore Mr. Market entirely. Instead, you should do business with him, but only to the extent that it serves your interest.”

Benjamin Graham

If you log into your investment accounts and see that your portfolio value is down, take a step back and consider what it really means. You haven’t lost any money. You don’t lock in any losses unless you sell.

The only two prices that ever matter are the price when you buy and the price when you sell.

Mr. Market in the News

If you pay close attention to the financial news, you’ll realize that it’s a mouthpiece for the emotional whims of Mr. Market. Does that include blogs, too? In some cases, absolutely. But I try to keep the Best Interest out of that fray.

For example, here are two headlines from September 29, 2020:

Just imagine if these two headlines existed in another space. “Bananas—A Healthy Snack That Prevents You From Ever Dying” vs. “Bananas—A Toxic Demon Food That Will Kill Your Family.”

The juxtaposition of these two headlines reminds me of Jason Zweig’s quote:

“The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap).”

Jason Zweig

More often than not, reality sits somewhere between unsustainable optimism and unjustified pessimism. As an investor, your most important job is to not be duped by this emotional rollercoaster.

Investing Based on Recent Performance

Out of all the questions you send me (and please keep sending them!), one of the most common is:

“Jesse – I’m deciding between investment A, investment B, and investment C. I did some research, and B has the best returns over the past three years. So I should pick B, right?”

Wonderful Readers

Great question! I’ve got a few different answers.

What is Mr. Market saying?

Let’s look at the FANG+ index. The index contains Twitter, Tesla, Apple, Facebook, Google, Netflix, Amazon, NVIDIA, and the Chinese companies Baidu and Alibaba. Wow! What an assortment of popular and well-known companies!

The recent price trend of FANG+ certainly represents that these companies are strong. The index has doubled over the past year.

Mr. Market is euphoric!

And what do we think when Mr. Market is euphoric?

How do you make money?

Another one of my favorite quotes from The Intelligent Investor is this:

“Obvious prospects for physical growth in a business do not translate into obvious profits for investors”

Benjamin Graham

You make money when a company’s stock price is undervalued compared to its prospects for physical growth. You buy low (because it’s undervalued), the company grows, the stock price increases, you sell, and boom—you’ve made a profit.

I think most people would agree that the FANG+ companies all share prospects for physical growth. But, are those companies undervalued? Alternatively, have their potentials for future growth already been accounted for in their prices?

It’s just like someone saying, “I want a Ferrari! It’s such a famous car. How could it not be a great purchase?”

The statement is incomplete. How much are you paying for the Ferrari? Is it undervalued, only selling for $10,000? Or is it overvalued, selling at $10 million? The product itself—whether a car or a company—must be judged against the price it is selling for.

Past Results Do Not Guarantee Future Performance

If investing were as simple as, “History always repeats itself,” then writing articles like this wouldn’t be worthwhile. Every investment company in the world includes a disclaimer: “Past results do not guarantee future performance.”

Before making a specific choice like “Investment B,” one should understanding the ideas of results-oriented thinking and random walks.

Farewell, Mr. Market

Mr. Market, like the real stock market, is an emotional reactionary. His daily pronouncements are often untethered from reality. Don’t let him affect you.

Instead, realize that only two of Mr. Market’s thoughts ever matter—when you buy from him and when you sell to him. Do business with him, but make sure it’s in your best interest (oh yeah!). Everything else is just noise.

If the thoughts of Benjamin Graham, Warren Buffett, and the Best Interest haven’t convinced you, just look at the financial news or consider the Woefully Ignorant Sports Fan. Rapidly changing opinions rarely reflect true reality.

Stay rational and happy investing!

If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

Source: bestinterest.blog

A Cozy New Rug Collection

Hello friends! Praise be, the election is over and I just marked my birthday over the weekend – my official holiday season milestone. Whenever the calendar passes November 8, I feel like I can finally turn 100% of my attention to all things holiday. Obviously, the holidays are going to look and feel very different than years past. Perhaps instead of the holiday season, we should start referring to the next few months as the hunker down season. Because that’s what holidays in the time of Covid are going to require of us. But I’m not entirely mad about the idea of holing up at home. I’ll take a very valid excuse to look for ways to make my home as cozy, comforting, and beautiful as possible.

Enter the new rug collection from Beni Rugs, designed by my style soul twin, Colin King.

A Cozy New Rug Collection on Apartment 34A Cozy New Rug Collection on Apartment 34

Called the Shape of Color, this new rug collection offers eleven Moroccan style rugs. Each rug features shocks of color inspired by Tangier and Marrakech. The hues are deeply saturated in simple geometric shapes or big bold stripes.

A Cozy New Rug Collection on Apartment 34A Cozy New Rug Collection on Apartment 34

While I typically eschew color, rugs are a wonderful spot to inject something fresh into a room. I used a bold colored rug in my own living room. The particularly nice thing about a rug – it’s an easy way to reenergize a space without really having to change anything else.

A Cozy New Rug Collection on Apartment 34A Cozy New Rug Collection on Apartment 34 A Cozy New Rug Collection on Apartment 34 A Cozy New Rug Collection on Apartment 34

There are a few secrets to picking out a rug. First, you want to think about size. A common mistake is getting a rug that is too small. You want all (or nearly all) your furniture in a space to sit on your rug. That helps a room feel anchored and like everything is working together. A too-small rug will actually make a small space feel even smaller!

Next, you want to think about foot traffic. If you’re looking to put a rug in a high foot traffic area, you’ll want to ensure any rug you select will withstand an onslaught of dirt and use.

Finally, when adding a colorful rug to your space you don’t need to “match your decor. You just want to keep everything in the same design family. Do you decorate with mostly warm colors or cooler tones? That will help you pick your colors.



 

If you’re looking to upgrade the coziness of your home before the holidays hit, I definitely think one of these rugs would be a great way to do it. I’m already debating which one I might add to our house. I do have a home office refresh in the works! If I pick out one of these rugs – I’ll be sure to share.

How are you planning on sprucing up your spaces for the holidays?

images c/o beni rugs

The post A Cozy New Rug Collection appeared first on Apartment34.

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Source: apartment34.com

Fed reports credit card balances continued to dip in November

Credit card balances slightly dipped in November, as the COVID pandemic fallouts continued, and with the government continuing to wrangle about a second round of fiscal stimulus measures.

Consumer revolving debt – which is mostly based on credit card balances – was down $700 million on a seasonally adjusted basis in November to $978.8 billion, according to the Fed’s G. 19 consumer credit report released Jan. 8.

In November, credit card balances were off 1% on an annualized basis, after October’s 6.7% drop, which came on the heels of September’s 3.2% annualized gain.

Total consumer debt outstanding – which includes student loans and auto loans, as well as revolving debt – continued to grow and rose $15.3 billion to $4.176 trillion in November, a 4.4% annualized gain.

Card balances had touched an all-time high in February 2020 before the coronavirus pandemic started impacting consumer spending and bank lending. They dipped below the $1 trillion mark in May, for the first time since September 2017.

The Fed also reports that interest rates on credit cards were at 14.65% in November, with the rates on cards that are assessed interest (since they carry a balance) at 16.28%.

See related: Paying with credit is getting more expensive in the pandemic

Consumers expect household spending to rise

Consumers expect their household spending at the median to grow 3.7% in the year ahead, the highest in more than four years – even though they don’t anticipate much growth in their income (2.1%) or earnings (2%) – according to the New York Fed’s survey of consumer expectations for November.

Moreover, they are less optimistic about their household financial situation in the year ahead, with more of them expecting it to decline, and fewer consumers expecting an improvement.

Even then, more respondents are optimistic about their ability to access credit in the coming year, expecting it will be easier. However, the mean probability of missing a minimum debt payment in the next three months rose by 1.6 percentage points to 10.9%. Even then, this is still below its 11.5% average for 2019.

Less cheer on labor market front

On the labor market front, more consumers expect that the U.S. unemployment rate will be higher in the year ahead, with the average probability of this outcome rising to 40.1% in November, from October’s 35.4%.

However, they were less pessimistic about the prospects of losing their jobs, with this probability down to 14.6% on average, from October’s 15.5% (but still above the 2019 average of 14.3%).  Those above the age of 60 and those without a college degree were more optimistic about holding on to their jobs.

The respondents were less likely to voluntarily leave their jobs, with the mean probability of this down 1.3 percentage points to 16.6% (a low for the survey). Those 60 and older were at the forefront of this decline. However, respondents on average were more optimistic about the prospects for landing a new job if they lost their current ones.

In the meantime, the government reported that the economy shed 140,000 jobs in December, and the unemployment rate remained at 6.7%. The jobs lost were mostly in the sectors hard hit from the pandemic, with closures impacting the leisure and hospitality sector, as well as private education jobs.

The retail sector added jobs to aid holiday shopping, mostly in warehouses (which benefit from e-commerce) and superstores.

Although average hourly earnings for private sector employees rose $0.23, this is mostly because of the loss of lower-paying jobs in the leisure and hospitality sector, which tilted the average wage for the employed workers to the upside.

In online commentary, Diane Swonk, chief economist at GrantThornton, noted, “The silver lining to a bad overall jobs report is that the losses were concentrated in sectors that are most sensitive to COVID. Many of those jobs will come back once we get to herd immunity. The challenge is getting there, given the slow rollout of vaccines and poor uptake in some areas.”

Given that it will take a while to more fully open the economy, she is in favor of “aid today and another tranche once the new administration takes office.”

See related: Second stimulus deal provides $600 per individual

Application rates for credit cards plunged on pandemic impact

The New York Fed also reported in its credit access survey, which is conducted every four months as part of its survey of consumer expectations, that most credit applications and acceptance rates fell sharply after last February. Mortgage credit was the exception to this.

For credit cards, the application rate was off a steep 10.6 percentage points since February to touch a survey low of 15.7%. This decline impacted all age groups and credit score categories. Applications for credit card limit increases dropped 6.6 percentage points to 7.1% between February and October, another series low since the survey began in October 2013. The decline was spread across all ages and credit score categories.

Consumers applying for credit cards were also subject to steep rejection rates, with this rate rising 11.6 percentage points from February to touch 21.3% in October. Those looking for higher credit limits also were rejected about 37% of the time, from about 25% of the time in February.

No wonder consumers said they were less likely to apply for a credit card or credit limit increase in the next 12 months, with these figures falling 36% and 34% on average since February 2020. Those with credit scores above 680 led this decline.

Source: creditcards.com

5 Great Ways to Increase Remote Working Productivity

5 Great Ways to Increase Remote Working Productivity

Now is the time to review your software and apps and make sure that you have systems that help productivity, not hinder it. 

By

Jeff Broth, Contributor
January 5, 2021

more than half of employees reporting frustrations with their remote work solutions, now is a good time to think about getting the best software and apps in to help your team stay productive.

Remember, too, that many of your people will find working at home a very lonely experience and so things like video conferencing can help alleviate the mental health impact of a lockdown.

Let’s look at some of the products that are available to help you stay in touch and remain effective no matter what 2021 throws at you!

Workflow boards

One of the things that many people have reported is difficulty in keeping motivated and understanding what needs to happen and when.

When you’re in an office, it’s easy to simply lean across the desk and ask what is going on. But what happens when your team is all working remotely?

Using Kanban boards like Trello and Asana allows you to posts jobs, tasks, and subtasks and then allocate them to individual staff members or team so that everyone knows where they are and what still needs doing.

Remote access software

Remote access software can have some real benefits for users across the organisation and doesn’t need to be confined to your IT helpdesk.

Modern remote working can give users a virtual desktop, which is the same wherever they log on. A Virtual Private Network (VPN) can also increase security.

Remote access software can also include functionality that enables video conferencing, chat functions, shared word processing, and file sharing, along with resources for troubleshooting in a pinch.

If you’d like to find out more about what it can do for you, check the best options in this excellent remote access software review by Neil Patel.

Remote shared storage

Many companies rely upon having drives readily available to all staff, and when you’re all working in the same office, this is a simple matter. But when your team is spread out, then you need to think about organizing remote storage.

Google Drive and Dropbox are probably the most well-known offerings, but there are many more. They all provide you with the ability to have shared drives that are accessible based on your own organization’s security protocol.

Remote storage is a very competitive area, so prices have dropped over the last few years. So in many cases, you are better off subscribing to a best-in-class cloud storage solution (especially if it includes remote access desktops as above) rather than upgrading your on-premise servers.

Business-class video conferencing

For many businesses, this is one area where they just had to get a solution in place quickly so everyone could carry on working. But it really is worth choosing a business-class video conferencing system.

Having a better system makes life easier for your staff, but it also portrays a professional image to your customers and suppliers.

Free systems are great, but they will always come with limitations. Zoom, for instance, limits calls to 45 minutes on its free version. Other free solutions reduce video quality.

With paid solutions, the cost for a group subscription is often very reasonable when compared to the cost of losing even one customer.

Collaboration and sharing tools

When you can just pass files and papers across a desk, life is easy. But if you’re miles away from your co-workers, contractors, and customers, how can you possibly collaborate effectively?

Many of the really good systems bundle in storage, video conferencing, Kanban boards and collaboration tools that help your teams act like teams rather than a collection of dispersed individuals.

Obviously, the big player here is Microsoft. But you can get excellent results with apps like Zoho Connect, Winio, and Wire. If you only really want chat capability, then look at Slack.

Take advantage of trials

What works for some people may not work for you and your company. But the good news is that pretty much every system mentioned here has some form of free trial.

The best advice is to take the developers up on their offer and test these solutions out. Get feedback from your employees and take into account how easy the apps are to use, the support available, and of course, the annual cost.

Don’t be swayed by attractive-sounding initial reductions. If the system is good, you’ll be using it for a long time. It is much more important to get the right features for you rather than buying something that isn’t well-suited to the task because the developer was offering a half-price sale.
 


Source: quickanddirtytips.com

What to Do this Weekend: Date Night In Ideas

What to Do this Weekend: Date Night In Ideas

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Date-night-in

We are a month and a half into quarantine and date nights in many households have devolved into, ‘What have we not seen on Netflix yet?’  While we are all ready to get back out and about, there are plenty of fun date night at home options to help you enjoy and appreciate your partner.  This post is partially inspired by the fact that we are celebrating our wedding anniversary tonight and I was already doing so research on what to do this weekend.  I figured if I was already doing the work, I might as well share the wealth with you all!  

Check out a few of our best date night in ideas

Name that Tune

This really is a fun activity that we typically do on road trips, but it works just as well for date night.  Play each other your favorite songs from different eras or events in life.  

What song was popular when you went to your first school dance?  Did you ever learn a choreographed dance to a song?  What was it?  What was your first favorite country/hip hop/punk song?  Did you ever dedicate a song to someone on the radio? Make a mixtape?  First breakup/heartbreak song you listened to 100 times?

Music is such an integral part of our memories.  It is sure to bring out some great stories from your partner that you have never heard before and some great stories from your past that you may have completely forgotten about. All you really need is a Spotify account, your beverage of choice!

Wine Tasting

This is an amusing challenge for the nose and tastebuds.  Taste three (or five–no judgment here) wines and figure out which is which based solely on the tasting notes….you know the ‘hints of pencil lead and cranberry.’  This can be made romantic with dim lights and some candles or you can make this more upbeat with some fun background playlists.

Optional additions to make the night more festive: Cheeses, nuts, olives, crackers, honey

Minute to Win It

Impress each other with feats of strength and balance.  This is an evening bound to be full of laughter.  Check out this video for inspiration! Challenges include…

  • Face the Cookie.
  • Stack Attack.
  • Movin’ On Up.
  • Junk in the Trunk.
  • Suck It Up.
  • Penny Hose.
  • Ping Pong Bounce.

Sweets for Sweethearts

Bake together…even if neither of you is an expert in the kitchen, learning something new together is good for relationships!

Here are some recipes that have videos to go along with them

For easy cooking try these 3 Ingredient Desserts

For all those ripe bananas on your counter

For when you can only be trusted with the microwave

20 Questions

It sounds silly, but this really can be a learning experience. If you’ve been together you may think you know all the answers…but remember people’s tastes and preferences change.  Do you really know that sweet tarts are still his favorite candy? Or is Paris still her number one destination? The answers could surprise you!

Double Date 

Yes! This is actually possible via Netflix Party.  Pick a movie ahead of time, grab the popcorn and candy and chat with your favorite duo.  

Take a trip down memory lane

Look at each other’s pictures from your favorite vacation together.  You’ll be surprised to see the vacation through their eyes and their memories.  You can relive the best times together and appreciate it in a whole new way.  Bring in even more sensory memories by adding a favorite food or drink you discovered during that trip.

Or Take a Virtual Trip

Ever wonder what Venice is like during lockdown?

Join Travel Curious on their next tour with your Venetian born guide, Luca, who will take you on a live virtual walking tour of Venice and will end up in the Venetian mask-maker artisan shop. 

Join for free on their Instagram Live feed on May 15 2020 at 15:00pm BST / 10:00am EST

https://www.instagram.com/travelcurioustours/?hl=en

Amazon and the Amazon logo are trademarks of Amazon.com, Inc, or its affiliates.

What to do this Weekend: Date Night In
Article Name
What to do this Weekend: Date Night In
Description
We’re all beyond bingewatching Netflix…we need something a little more special for date night! Check out a few ideas for a fun date night in
Holli Beckman
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Apartminty
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Source: blog.apartminty.com