The next big thing… It’s the holy grail for investors. I mean how many investors wish they had bought Microsoft in 1986? Or Apple in the 1990s?    If you were prudent enough to take a chance on either of these companies, a relatively small investment a few years back would have made any investor fabulously wealthy today. And it’s that kind of wealth creation that drives investors to seek the next big thing.   But too many investors make the process of finding the next big thing too complicated. After all, if it’s the next big thing, it shouldn’t… Read More

The next big thing… It’s the holy grail for investors. I mean how many investors wish they had bought Microsoft in 1986? Or Apple in the 1990s?    If you were prudent enough to take a chance on either of these companies, a relatively small investment a few years back would have made any investor fabulously wealthy today. And it’s that kind of wealth creation that drives investors to seek the next big thing.   But too many investors make the process of finding the next big thing too complicated. After all, if it’s the next big thing, it shouldn’t be impossibly hard to identify early on, right?   So what if you were told that more than 500,000 cars, capable of driving themselves, are going to come off the assembly line in 2018? Better yet, these cars will come off the assembly line at a cost of $35,000 — about the average price of a new car in America.   #-ad_banner-#But that’s not even the remarkable part…   You see, experience tells me that self-driving technology will not just drive itself — it will also be electric.    Even The Wall Street Journal agrees, saying, “The electric powertrain, unlike… Read More

It’s amazing to think that most investors fight major trends in the markets. Despite countless volumes of academic and professional research extolling the virtues of a long-term investment outlook, most investors still attempt to grow their portfolios by betting on short- and medium-term shifts in the markets. This is reinforced by the preoccupation of the talking heads on the financial networks. I mean, why would anyone buy or sell a stock based on the quarterly performance of any company? It doesn’t make any sense. #-ad_banner-#If an investor bought a stock correctly, the shares were purchased based on some basic investment… Read More

It’s amazing to think that most investors fight major trends in the markets. Despite countless volumes of academic and professional research extolling the virtues of a long-term investment outlook, most investors still attempt to grow their portfolios by betting on short- and medium-term shifts in the markets. This is reinforced by the preoccupation of the talking heads on the financial networks. I mean, why would anyone buy or sell a stock based on the quarterly performance of any company? It doesn’t make any sense. #-ad_banner-#If an investor bought a stock correctly, the shares were purchased based on some basic investment thesis. And as long as that thesis holds true, the stock should be held. On the other hand, once an investment thesis no longer holds true, the stock should go away faster than Venezuelan prosperity.   But a long-term outlook isn’t to be used in isolation… Real wealth is created when investors anticipate long-term trends in combination with long-term outlooks. You see, large capital gains occur when investors follow the long-term social, political, and technological trends that are changing the world.  These trends, by default, significantly increase the likelihood of capital gains. That’s why it’s almost axiomatic that investors looking… Read More

By just about any measure, one of the hardest things for an investor to do is decide when the time is ripe to start selling some, or all, of a portfolio. For me, that time has arrived. Now, don’t get me wrong. I’m not selling my entire portfolio and moving to cash. But it is time to sell some of my holdings because, for me, the market is getting into dangerous territory.  And I’m becoming more convinced a correction is coming. Here’s why… #-ad_banner-#The Federal Reserve has acted stupidly in keeping interest rates at artificially low levels for such a… Read More

By just about any measure, one of the hardest things for an investor to do is decide when the time is ripe to start selling some, or all, of a portfolio. For me, that time has arrived. Now, don’t get me wrong. I’m not selling my entire portfolio and moving to cash. But it is time to sell some of my holdings because, for me, the market is getting into dangerous territory.  And I’m becoming more convinced a correction is coming. Here’s why… #-ad_banner-#The Federal Reserve has acted stupidly in keeping interest rates at artificially low levels for such a long time. And because real long-term interest rates remain artificially low, any sudden bond market sneeze could blow the lid off the stock market. You see, should the bubble burst in the bond market, rates are likely to rocket higher over a relatively short time. Now, you may ask what might precipitate such an event? Janet Yellen has made known her desire to unwind the Fed’s balance sheet. I say “amen” to that. But doing so at a time when interest rates are rising is fraught with danger. That’s because when the central bank withdraws liquidity by selling its bond… Read More

The classic buy-and-hold strategy is in decline. That’s too bad, because the strategy is a good one. So what explains the lack of support from investors and financial writers for the strategy that arguably set Warren Buffet apart from almost every other investor in history? Personally, I think it owes to a fundamental misunderstanding of the strategy. You see, buy and hold is a strategy that still works for stocks purchased at a discount to their intrinsic values. That means an investor must buy the stock at the right price. And if the investor does this correctly, a portfolio will… Read More

The classic buy-and-hold strategy is in decline. That’s too bad, because the strategy is a good one. So what explains the lack of support from investors and financial writers for the strategy that arguably set Warren Buffet apart from almost every other investor in history? Personally, I think it owes to a fundamental misunderstanding of the strategy. You see, buy and hold is a strategy that still works for stocks purchased at a discount to their intrinsic values. That means an investor must buy the stock at the right price. And if the investor does this correctly, a portfolio will contain stocks that will be held for a very long time.  You see, a long holding period is just a natural result of prudent stock picking.  For sure, the hardest part of this process is resisting the temptation to sell — especially in times of economic distress. But significant gains can be had when investors hold stocks for the long term.  And this isn’t just an academic exercise, either… Below is a brief overview of three stocks I own which I will likely never sell. The High-Tech Darling The first is Nvidia (Nasdaq: NVDA). For readers familiar with… Read More

The Republican Party’s attempts to “fix” the Affordable Care Act (Obamacare) have been nothing short of disastrous. And if it weren’t for the seriousness of the issue, it would be downright hilarious. Whether you agree the government has a role in healthcare or not, it should be clear to everyone that the federal government has no idea how to solve the myriad problems they themselves create. Incompetent Washington bureaucrats have only made health care worse in America. And sadly, these same bureaucrats will do everything in their power to maintain the status quo. But their incompetence isn’t just relegated to… Read More

The Republican Party’s attempts to “fix” the Affordable Care Act (Obamacare) have been nothing short of disastrous. And if it weren’t for the seriousness of the issue, it would be downright hilarious. Whether you agree the government has a role in healthcare or not, it should be clear to everyone that the federal government has no idea how to solve the myriad problems they themselves create. Incompetent Washington bureaucrats have only made health care worse in America. And sadly, these same bureaucrats will do everything in their power to maintain the status quo. But their incompetence isn’t just relegated to the healthcare debate.  The problems in healthcare mirror the problems of Social Security (OASDI) — although social security’s unfunded liabilities are orders of magnitude the size and scope of healthcare. Unfortunately, the end-result will be the same. —Sponsored Link— Big Tobacco’s Punishment: A Long Time Coming In November of 1998, the “Big Four of Big Tobacco” were sued for using misleading advertisements and manipulating scientific research. And in a landmark settlement they agreed to pay a historic sum of money in perpetuity to those affected. We estimate they’ve been paying out about $686 million a… Read More

One of my first lessons in investing came from a physician who lived in the building where I worked as a doorman while in college. The year was 1981 and I was just finishing my sophomore year.  The job didn’t pay much, but it offered plenty of solitude to study during the week. But the weekends were a different story.  Saturdays brought lots of unsolicited advice from the residents — mostly about how to be successful in life. Years later I came to believe those Saturday afternoons were just as valuable as my formal education. One weekend, a doctor who… Read More

One of my first lessons in investing came from a physician who lived in the building where I worked as a doorman while in college. The year was 1981 and I was just finishing my sophomore year.  The job didn’t pay much, but it offered plenty of solitude to study during the week. But the weekends were a different story.  Saturdays brought lots of unsolicited advice from the residents — mostly about how to be successful in life. Years later I came to believe those Saturday afternoons were just as valuable as my formal education. One weekend, a doctor who lived in the building told me to buy stock in Chrysler. He said it was a great stock at its current price of $3 per share. I didn’t know much about investing, so I did my homework. I quickly learned that most analysts thought the company was heading to liquidation. In fact, just about everything I read told me to avoid the stock at all costs. But the doctor told me they were wrong… Trusting the doctor, I combined my next paycheck with a small loan from my dad. I bought 100 shares of Chrysler — my entire life’s savings… Read More

At a recent conference, a question was asked about whether it’s still possible to get rich from the stock market. My reply… It has never been easier to get rich from stock investing. Now, that’s a bold statement. But it’s absolutely true. You see, humanity will change more in the next 20 years than in all of recorded history! In fact, the changes coming over the next two decades will dwarf the introduction of the automobile, the airplane, the computer, and even the internet. The average American will soon be receiving four or five packages every week by drone —… Read More

At a recent conference, a question was asked about whether it’s still possible to get rich from the stock market. My reply… It has never been easier to get rich from stock investing. Now, that’s a bold statement. But it’s absolutely true. You see, humanity will change more in the next 20 years than in all of recorded history! In fact, the changes coming over the next two decades will dwarf the introduction of the automobile, the airplane, the computer, and even the internet. The average American will soon be receiving four or five packages every week by drone — everything from groceries and prescriptions to building supplies. Americans will spend 40% of their commuting time in driverless cars, use 3D printers to “print” custom meals, and spend most of their leisure time on activities not yet invented. #-ad_banner-#We will see nearly 2 billion jobs disappear, everything from physicians and lawyers to grocery clerks. Now, the vast majority of those jobs will come back in a different form, with more than 50% of them being self-employed freelance jobs.  In the next 20 years, half of the companies that currently make up the S&P 500 index will be gone. The same… Read More

Fears are growing that the U.S. stock market is in dangerous territory.  The chart below illustrates the return on each of the three major stock indices since the 2008 Financial Crisis.  As you can see, the Nasdaq Composite, up more than 243% since 2009, is leading the way higher. But lest you think the run-up is reminiscent of the tech bubble of 1999, both the S&P 500 and Dow Jones are also gunning higher — up more than 157% and 142% respectively.  All three indices are solidly at record high levels. Now, such a chart would… Read More

Fears are growing that the U.S. stock market is in dangerous territory.  The chart below illustrates the return on each of the three major stock indices since the 2008 Financial Crisis.  As you can see, the Nasdaq Composite, up more than 243% since 2009, is leading the way higher. But lest you think the run-up is reminiscent of the tech bubble of 1999, both the S&P 500 and Dow Jones are also gunning higher — up more than 157% and 142% respectively.  All three indices are solidly at record high levels. Now, such a chart would normally be interpreted as bullish — and rightly so. But we’re not in normal times. Currently, the S&P 500 is trading at 25.8 times earnings (on a GAAP basis) and at almost 30 times by the cyclically-adjusted price-to-earnings ratio (CAPE). That’s a whopping 78% higher than the historic CAPE average of 16.7.  #-ad_banner-#Even the “Buffet Valuation” metric, found by dividing the value of the stock market by GDP, sits at 1.2 ($23 trillion/$19 trillion), indicating the market is roughly 20% overvalued. In fact, there is really only one widely used financial metric that isn’t screaming about stock market valuations: The… Read More

On a recent trip to Des Moines to teach a class for financial professionals, the weather didn’t cooperate. This kept me from flying.  So a road trip was in order. Now, it’s a 20-hour trip by car from Florida. While the plan wasn’t to drive straight through, tunnel vision kept… Read More

On January 1, 2018, a new law goes into effect that has the potential to wipe out a large portion of the 6,000 medical testing labs in the United States. And as smaller labs give up the ghost, large, publicly traded lab-testing companies will take much of the business of those smaller labs. That’s because changes to Section 216 of the Protecting Access to Medicare Act of 2014 (PAMA) will result in the single most disruptive event to hit the clinical laboratory industry in the past quarter-century. Medicare currently pays roughly $7 billion a year to laboratories performing more than… Read More

On January 1, 2018, a new law goes into effect that has the potential to wipe out a large portion of the 6,000 medical testing labs in the United States. And as smaller labs give up the ghost, large, publicly traded lab-testing companies will take much of the business of those smaller labs. That’s because changes to Section 216 of the Protecting Access to Medicare Act of 2014 (PAMA) will result in the single most disruptive event to hit the clinical laboratory industry in the past quarter-century. Medicare currently pays roughly $7 billion a year to laboratories performing more than 1,300 different lab tests. And the majority of those tests haven’t seen updated fee schedules since the last major change in 1984.  #-ad_banner-#But that’s about to change.  The PAMA update will cut the testing fees payable under Medicare’s Clinical Laboratory Fee Schedule (CLFS) by more than $5.4 billion over the next decade. This will significantly reduce the revenues of most of the small independent labs.  And since 40%-60% of lab-testing volumes at small labs are exclusively Medicare patients, these labs will struggle to stay in business with the lower fee schedules. That’s because they have fewer customers and relatively high… Read More