Friday, November 15, 2019

Hello, Hello


Six weeks since my last Rink Rats, can you believe that! Terrible.

Why the break?

Trips to New York, Bellevue Washington, International Space Station, and general laziness.

So, to quote Frank Constanza, “I am back baby!”

1929 - Ninety years ago, the worst stock-market crash in U.S. history began. Almost everything today’s investors think about that pivotal event is wrong—and anyone who believes it’s irrelevant is wrong about that, too.

Everybody “knows” the market collapsed in 1929 because euphoric speculators bingeing on borrowed money drove stocks to absurd heights. That isn’t true.

Didn’t leading forecasters warn that a crash was coming? Not exactly.

Did anyone predict how long it would last and how bad it would get? Not even close.

Doesn’t the 1929 crash prove that if you hold stocks long enough, you’re bound to come out ahead? Only if you have the patience of a tortoise and the emotions of a stone.

On Oct. 23, 1929, the Dow Jones Industrial Average fell 6.3%. Then, with losses of 12.8% and 11.7% on Oct. 28 and 29—“Black Monday” and “Black Tuesday”—stocks crumpled as if they’d been felled by strokes of doom. (To get the idea, picture the Dow diving more than 6,100 points next Monday and Tuesday, or by nearly a quarter.)

The Dow peaked at 381.17 on Sept. 3, 1929. It finally hit bedrock at 41.22 on July 8, 1932, down 89.2%. In less than 35 months, a dollar invested in stocks shriveled into barely more than a dime. Stocks did not surpass their pre-crash highs until 1954.

What caused the collapse? To be sure, some stocks were expensive. According to Barrie Wigmore’s 1985 book “The Crash and Its Aftermath,” National City Bank of New York peaked at 120 times earnings and 13 times book value, a measure of its net worth. (Those multiples are based on a reconstruction by Mr. Wigmore.) This week, Citigroup —the direct descendant of National City Bank—traded at 9.6 times its last 12 months’ earnings and 0.9 times book value, according to FactSet.

And some investors believed fund managers had magical powers. The Magazine of Wall Street argued on Sept. 21, 1929, that it was “reasonable” to pay 150% to 200% more than a fund’s net asset value “if the past record of management indicates that it can average 20 percent or more.”

But most stocks weren’t that overheated. Many major companies traded at 14 to 19 times earnings around the market’s peak in September 1929. Profits were growing far faster than stock prices. Industrial stocks began 1929 priced at about 15 times earnings; by September, they traded at slightly above 13 times, the economist Irving Fisher pointed out in his 1930 book “The Stock Market Crash—and After.”

The hottest stock of 1929, Radio Corp. of America, peaked at 73 times earnings and more than 16 times book value, according to Mr. Wigmore’s reconstruction. How does that compare to today’s technology darlings? Amazon.com Inc. traded earlier this week at 73 times earnings and more than 16 times book value, according to FactSet.

To this day, no one is sure why stocks crashed in 1929. The collapse of a British investment firm? Unlikely. A flood of newly issued stock? Probably not big enough. Speculators on a debt-fueled buying spree? Lending standards on borrowings to buy stock were stricter in 1929 than in earlier years.

The likeliest culprit is tight monetary policy by the Federal Reserve. But why stocks collapsed in late October 1929 when rates had been rising since 1927 nobody can say.

Investors should always regard the stock market as sailors regard the sea—a means to an end, usually benign, but potentially lethal. Catastrophic losses are rare, but their risk never goes away.

To be a long-term investor in stocks, you have to be prepared to lose more money for longer than seems possible. Anyone who takes that risk lightly is likely to sell out, in the next crash, near the bottom.

COLLEGE CHRONICLES - Democrats in the U.S. House of Representatives are expected to unveil their proposal to renew the Higher Education Act, which is years overdue for reauthorization. The 1,200-page bill, would seek, among other things, to reduce student-loan debt by providing more federal aid, including indexing Pell Grants for inflation; to hold colleges more accountable for students’ performance by reviving Obama-era regulations that targeted for-profit colleges; and to simplify the Fafsa and loan-repayment plans. The legislation is likely to pass the Democratic-led House, but its prospects in the Senate are mixed.

YOU PICK - Texas offers "a low-tax, low-regulation place in which government makes little provision for its citizens.

California provides a high-tax, highly regulated one in which it is the government’s role to tackle problems, such as climate change, that might ordinarily be considered the job of the federal government.

LOCATION, LOCATION, LOCATION - Luol Deng (Minesota Timber Wolves) has made $151 million playing basketball during his 15-year NBA career. All the while, he's been investing in real estate, amassing an impressive portfolio worth $125 million.

Real estate might not be as sexy or generate the headlines of athletes pouring money into tech startups, but the potential returns can be much more lucrative.

The new 2017 tax law raises that threshold even higher with the creation of Opportunity Zones ... these allow investors to plow recent capital gains into projects or companies in low-income areas in each state.

There are nearly 9,000 "O-zone" areas across the country, which are required to have a poverty rate of 20% or higher or a median household income that is less than 80% of the surrounding area.

Gains compound tax-free, and there are no limits on how much money you put in and how much tax you can avoid.

Deng and at least a half-dozen NBA stars are part of Our Opportunity, which is a new O-zone fund seeking to raise $300 million this year.

MARKET WEEK - U.S. government debt has returned 7.8% this year counting price changes and interest payments—well above the 2.2% average for the previous 10 years. This year's 13% gain in corporate bonds is more than twice the 6.1% average since 2009, while high-yield debt has appreciated 11%, roughly matching its 12% annual average for the same period. The S&P 500 is up 17% for 2019.

Now, some investors are concerned that bond prices have risen so much that they have little room to increase further. Boosted by an unusual combination of steady economic growth and Federal Reserve rate cuts, the yield on the benchmark 10-year Treasury note—the percentage investors expect to earn annually from buying the bonds—now stands near 1.7%, within 0.4 percentage point of its all-time low. Yields fall when prices rise.

At the same time, the extra yield investors demand to hold both investment- and speculative-grade corporate debt instead of relatively safe Treasury’s stands near multiyear lows.

For Treasury’s to notch further gains, the economy will likely have to show new signs of deceleration. That could hit corporate and junk bonds, which investors tend to sell in times of economic weakness. The reverse is also true: a surge in growth that boosts corporate bonds would likely dent gains in Treasury’s.

Recession worries and interest-rate cuts from the Federal Reserve have boosted bonds of all kinds this year. But worries that the gains can’t go on forever have led some investors to unusual corners of the market. Mr. Doty said he has added taxable bonds sold by states and local governments, which offer more attractive yields and stronger credit quality than most company debt or the tax-exempt bonds typically sold by municipalities.

Investors are also worried about a potential contraction in corporate profits. Analysts expect earnings for companies in the S&P 500 to fall about 4% for the third quarter, according to FactSet data, in what would mark the biggest year-over-year drop since 2016.

On this day in 1867, the first practical stock ticker went “online,” as Thomas Edison’s improved gizmo made continuous nationwide transmission of stock prices possible for the first time.

CHART OF THE WEEK - Fewer jobless Americans tap unemployment benefits. A lower percentage of people out of work is relying on unemployment payments amid tighter state rules on obtaining the benefits and a strong job market.

BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to Ed Asner (90), Bob Dyer …famous voice of University of La Verne athletics, Carrie Lewis ….a remarkable woman, Bonnie Raitt (70)

SUCCESSION FINALE: YAY, KENDALL – One of RR favorite shows is HBO’s SUCCESSION, which just rapped its second season.


When exactly did Kendall (Jeremy Strong) decide to jump ship? After the finale’s twist ending, I went back and rewatched the last 20-30 minutes of “This Is Not of Tears,” partly just to revisit Tom (Matthew MacFadyen) stripping the meat off a chicken bone, partly to scour Jeremy Strong’s performance for its hidden layers. Strong has played Kendall so sensitively all season that even during his cryptic, Shakespearean final conversation with Logan Roy (Brian Cox), his bruised emotional expressions weren’t a tell. Logan delivered a little aphorism about child sacrifice, and Kendall smiled and nodded with near-tears in his eyes, and that seemed to be that—and then suddenly, Kendall Roy had index cards in his breast pocket and Cousin Greg (Nicholas Braun) had the evidence in an envelope. And the Kendall abruptly betraying his father during a live press conference is not the erratic, try-hard Daddy’s boy of this season, but a leaner, tougher model.

Succession draws us into the same thrill of winning and losing that the characters—and their companies—are so susceptible to. It seemed as if the finale press conference was supposed to be Kendall’s moment of triumph. In a way, it was. But as the show reminds us constantly: Choosing to fight Logan, on his terms, is to already lose. (See also: “Boar on the floor.”)

The show’s holding out on us about Kendall’s decision—and without more information, we don’t really know if this is a good move for him. The twist stops the plot from moving forward, with a few days left before the next shareholder meeting—setting up a wild season three, I’m sure, once showrunner (and this episode’s writer) Jesse Armstrong and the rest of the show’s writers get to work on it. Kendall is finally asserting himself, but he’s doing so by engaging his father’s rapacious killer instinct—and matching it with one of his own. It seems as if he’s desperate, still, to impress his father—to once again audition for being Logan’s successor.

Undoubtedly we’re meant to be left with a sense of ambiguity—it is a cliffhanger, after all. But it would be easier to feel optimistic about this ending if Logan, watching from the yacht, had not cracked a wry grin at the end of the conference. Maybe he’s impressed with his second son. And maybe, in turning his abused kid into a traitor, he’s getting exactly what he wanted.
Stay tuned. Billions is next up.


ANOTHER NOVEMBER FOR THE DETROIT SPORTS FAN – Tigers lose 114 games are the worst team in MLB; Lions, Wolverines, Spartan football…enough said; Lions in last place, Michigan will lose to The Ohio State, Michigan State football no offense; Red Wings one point out of last place; Pistons are two games out of last place.

When does it end???

DEAR RINK RATS –

Take it from a 60-year-old guy whose shoes don’t stink despite the fact that I choose to not wear socks! I started going sockless in college and quickly figured out the following:
  •    I wash my feet well (with soap) when I shower.
  •    I don’t wear the same pair of shoes two days in a row. This allows the inside to dry between wearing’s, and it extends the life of the shoes.
  •  If you break these rules and the shoes get funky, wash or clean them thoroughly and let them dry before wearing them again.

No worries,
Dallas, Texas

Dear No worries,

You have made my year. Do you know anything about filling out a time-card for College Instructors?

Rink Rats

SWAMI’S WEEK TOP PICKS

NFL Football Pick of the Week – Sunday 11/17, 1:00 PM (EDT), CBS: Houston Texans (6-3) at Baltimore Ravens (7-2). Ravens by 3.5 points, 2016 Heisman winner Lamar Jackson and 2016 Heisman finalist Deshaun Watson will face off for the first time since Oct. 1, 2016, when Watson and No. 1 Clemson beat Jackson and No. 21 Louisville, 42-36. Ravens win 31 – 27. (Season to Date 6-4)

College Football Pick of the Week – Saturday 11/16, 12:00 PM (EDT), FOX: Though both teams are not major college teams this season we have to pick the battle of the overrated; Michigan State Spartans (4-5) at Michigan Wolverines (7-2). Michigan wins 30 – 17. (Season to Date 8-3)

DIII College Football Pick of the Week – Saturday 11/16 1:00 PM (EDT), HGTV: Ithaca College Bombers (7-2) vs. Cortland State Red Dragons (8-1). The Division III football rivalry between Ithaca College and SUNY Cortland will reach new heights this Saturday, when the annual Cortaca Jug game moves to MetLife Stadium — home to the NFL's New York Giants and New York Jets. Once referred to by Sports Illustrated as "the biggest little game in the nation," the contest will take place at the invitation of the New York City Chapter of the National Football Foundation (NFF). 45,000 tickets have been sold. Cortland wins the 61st game in the rivalry, 28 – 21. (Season to Date 6-4)

SCIAC Pick of the Week (Football) – Saturday 11/16, 1:00 PM (PDT), Hallmark: #13 Chapman University Argyros (8-0) at University of LA Verne Leopards (4-5), a tall order for the Leopards but we smell an upset, La Verne 35 – 30.   (Season to Date 7-3)

College Hockey Pick of the Week – Friday 11/15, 7:00 PM (EDT), NY Sports: #3 Cornell University Big Red (4-0) at #7 Clarkson University Golden Knights (7-2-1). Big game in the North Country, a pre-game pizza at Josie’s is a must. Clarkson wins 4 – 2.

NHL Pick of the Week – Saturday 11/16, 4:00 PM (EDT)), ESPN+: Washington Capitals (14-2-4, 32 points) at Boston Bruins (11-3-4, 26 points). Interesting early season match-up, we like the Caps 5 – 3.

2019 Season to Date (49-31)

BLAKE LINDSAY – Robert “Blake” Lindsay passed away at age 65 after a battle with cancer on Sunday, October 20, 2019.

Blake was born in Detroit, Michigan to the late Ted and Patricia Lindsay on January 23, 1954. He graduated from Detroit Country Day High School. As a youngster, Blake was a tremendous hockey player, however when injuries shortened his career he became well known as an outstanding swim coach and mentor to hundreds of young swimmers.

Blake was a wonderful friend; we all shared his love of sport. I remember the days playing ball hockey and breaking numerous windows. The many hockey trips we went on and sharing many good times with our families. The endless games of Hearts, and of course the ups and downs of being Red Wing fans.

God Bless Blake Lindsay.

Next Blog:  Words of the Month, the dreaded Thanksgiving travel week

Until next time Adios

Claremont, California

November 15, 2019
(Weekend Edition)
#X-11-400
2,643 words, ten minute read

CARTOON OF THE WEEK – Winter is Back



RINK RATS POLL – Thanksgiving will be where this year?

_____     Home
_____     Parents
_____     Kids
_____     Jail
_____     No Clue

QUOTE OF THE MONTH – “A person is smart. People are dumb.”
Atticus Finch, “To Kill a Mockingbird”

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