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Saturday, January 28, 2023

Investing In The Last Life Cycles: Can It Stimulate The Brain Function?

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“Three virtues – Patience, Optimism, and Diligence – make investing successful as life is fulfilled eventually.” (From “Investing…Vs. Trading…: Here Is A Way To Enjoy Both” )

Portland/Hillsboro, Oregon

In Portland and Hillsboro, Oregon, we have many millionaires, who were ordinary office or labor workers, just like you, by investing every month for their retirement in the long run. According to an investing book, a famous investment adviser wisely advised them to do so.

I, as an unsuccessful RIA (registered investment adviser) for about 10 years in the mid-1990s in the New York/New Jersey area, however, I had no single client who was willing to follow my advice.

To fill the vacuum of no millionaires from my advisory services, I have published 27 articles since 2012. Most of them contained well-diversified portfolios for self-directed investors. No feedback is available so far. As a consequence, I still wonder whether I helped investors with one of the most productive and efficient ways.

The Case of Lucky Investors

The numerous investors, in all parts of the U.S. in general, in the upper-and-west corner of Oregon in particular, followed their RIA’s advice, by putting more money in their accounts, month to month, year after year, in a couple of decades, and finally became an enormously rich person who never dreamed of.

Their enormous success in their nest egg depends on three pillars: 1) An influential and trustful local adviser, 2) a decent payroll, and 3) an early start.

On top of the above case, some fortunate investors have advanced toward their sufficient retirement resources through well-paid jobs or successful own business. Some other investors have inherited their sufficient retirement money.

The Focus

No matter what route you took to become very rich, the focus is not the various processes of being rich, but how to fulfill your retirement life with your financial affluence.

Life Cycles

Our life cycles have the starting year which is known, but the last year which is unknown. In a sense, Life Cycles are similar to Market Cycles, Business Cycles, or Inflation Cycles in my opinion, (albeit, the starting time of the three later cycles also, quite often, is unknown.) The common feature of all Cycles is uncertainty.

Can we mark a starting year of “retirement”? The right answer is No, because our life is a continuation of our physical and mental function without any single lapse. We have three ending-life choices: 1) A continuously-working mode, 2) a comfortable-last-breath arrangement, and 3) both. What is your choice if you think about it anyway?

Two years ago, I selected Option 1, and hopefully Option 3, if possible, while my wife chose Option 2. Both my wife and I are very healthy. We haven’t had medical doctors for longer than three decades. Last week, a doctor checked my physical condition for free, to find no single problem at all.

My wife will enjoy her last life, by listing classic, and by watching old classic movies on her small tablet, while I will continue writing articles to help my fellow investors, and continuing an extremely short-term (from a few seconds to a few sessions) trading to make living, without interrupting her sound sleep at 7:00 a.m. ET.

Munger, Midang, and Me

Berkshire Hathaway’s Charlie Munger is less well known than his lifelong friend and partner, Warren Buffett, but he’s a genius in his own right…At age 96, he’s slowing down physically, but mentally he’s still getting better with age, amazingly enough.” (From Whitney Tilson Liveblogs Charlie Munger’s 2020 Daily Journal Meeting)

My favorite Korean Great Poet, “Seo Jeong-ju (May 18, 1915 – December 24, 2000) was a Korean poet and university professor who wrote under the pen name Midang (lit. “not yet fully grown”).” (Wikipedia) In 1957, Midang selected me as a finalist at “The First Hwa-Dong Poet Contest” at Kyung-ki High School (which was the top high school in Korea).

Munger continues managing BH with Buffett in their mid-90s while I continue writing articles and trading. On the other hand, Midang’s one essay said he memorized every morning in the late 1990s the names of about 1,000 global mountains. The purpose of all activities of Munger, Midang, and Me (or 3M) is to stimulate our brain function.

A Special Note

The Three Weekly Updates as of Dec. 9, which are a) The Current Seven-Week Uptrend in this Article “Investing In..” b) The Six-Week Uptrend as of Dec.2 in 5 Years as of Dec. 2, and c) The C/C Ratio And The Shadow A-A Decision are the continuation of the weekly updates (which were made in A Single System... five times, and How to Manage…in the week ending Nov. 25, respectively).

A Weekly Update of the Seven-Week Uptrend as of Dec. 09, 2022

A Friday gain in the equity market was very rare in recent years. We, however, had the Friday rally five times in a row:

  • A Jumbo +2.4% on Oct. 21.
  • A Whopping +2.5% on Oct. 28.
  • A Very Unusual Dramatic + 1.4% Gain in the Last Minute after fluctuations on Nov. 4.
  • A Decent +0.92 Again on Nov. 11.
  • A Weak +0.48% on Nov. 18, but the inching was very special because it was a really last-minute U-turn of the S&P 500 which moved up and down persistently, after Nasdaq joined the DOW which was in the plus column all session. The market weakened in the last three weeks.
  • On Nov. 25, the S&P 500 was in A Pause (or Virtually No-Change, registered -0.03%, as shown in Table 1).
  • In the week (Nov. 28 through Dec. 2), a Big Shoot +3.09% on Wednesday (Nov. 30) was easily offset -1.91%, combining four negligent downs: a) -1.5% on Monday (Nov. 28), -0.16% on Tuesday (Nov. 29), Thursday (Dec. 1), and Friday (Dec.2) -0.12. Actually, it was flat or no change because S&P 500 fluctuated along the 0% line in the last minutes.
  • In the last week (Dec. 5 through Dec. 9) S&P 500 on Friday slumped to its worst weekly performance since late September, slipping 3.37% to end at 3,934.38 points. The benchmark index posted losses in four out of five sessions, ahead of final Fed meeting of the year. A 5 MS (Dec. 01 thru Dec. 07, consisted of a) three negligent m – -0.09% on 12/01, -0.12% on 12/02, and -0.19 on 12/07, and b) two significant m – -1.79% on 12/05 and -1.44% on 12/06) was registered, but it was snapped by a decent +0.75% on Thursday (Dec. 08).
  • “Today [{Dec. 09, 2022)]’s session started on a weaker note as market participants digested the hotter-than-expected Producer Price Index (PPI) for November. For most of the session the main indices clung to narrow trading ranges near their flat lines with both buyers and sellers lacking conviction. Things deteriorated noticeably, however, with about 30 minutes left in the session when the S&P 500 cracked an intraday support zone in the 3955 area. The selling pinned the indices deeper in negative territory and left them at their lows for the day when the closing bell rang.” (Charles Schwab) As a result, the seven-week Uptrend was intact.
  • For five weeks, 4 withdrawals ($19,400) to GS and 8 deposits ($30,400) from GS. Notice some countercyclical or contrarian transfers which made withdrawals when getting gains, and deposits when having losses. During weeks (12/02-12/09) $11,000 (= $30,400 – $19,400) transferred to Charles Schwab Checking account which needed more money to buy some mispriced equities in the temporarily weakened market from Savings (which earns 3.0% APR at Marcus: Goldman Sachs Bank).
  • You can reconcile the fearless holding of the seven-week Uptrend with the support of an almost 14 years old Bull, which should move higher in the coming weeks.
  • You can view more details about the tracking of the current Uptrend in the previous three Articles which are closely related, as advised by the above “A Special Note”.

Table 1: ACH TRANSFER BETWEEN CHECKING & SAVINGS

CS CHECKING

DATE

CLOSE

%CH

m/P

DEBIT

CREDIT

11/04/22

3,770.55

#VALUE!

P

11/07/22

3,806.80

0.96%

P

11/08/22

3,828.11

0.56%

P

$500

$2,500

11/09/22

3,748.57

-2.08%

m

11/10/22

3,956.37

5.54%

P

11/11/22

3,992.93

0.92%

P

$4,000

11/14/22

3,957.25

-0.89%

m

11/15/22

3,991.73

0.87%

P

$10,000

11/16/22

3,958.79

-0.83%

m

$5,900

11/17/22

3,946.56

-0.31%

m

11/18/22

3,965.34

0.48%

P

$4,200

11/21/22

3,949.94

-0.39%

m

11/22/22

4,003.58

1.36%

P

11/23/22

4,027.26

0.59%

P

11/25/22

4,026.12

-0.03%

*

11/28/22

3,963.94

-1.54%

m

$3,900

11/29/22

3,957.63

-0.16%

m

$4,800

11/30/22

4,080.11

3.09%

P

$3,000

12/01/22

4,076.57

-0.09%

m

12/02/22

4,071.70

-0.12%

m

$3,000

12/05/22

3,998.84

-1.79%

m

12/06/22

3,941.26

-1.44%

m

$5,000

12/07/22

3,933.92

-0.19%

m

12/08/22

3,963.51

0.75%

P

$3,000

12/09/22

3,934.38

-0.73%

m

SUM

$19,400

$30,400

NOTE

1. CLOSE: The S&P 500 Index’s Closing

2. %CH: The Percent Change.

3. m/P: minus/Plus.

4. * : No Change (between +0.05 and -0.05)

5. DEBIT: Withdrawal to Savings.

6. CREDIT: Deposit from Savings

7. Data Source: Yahoo Finance

Table 2: The C/C Ratio, The Shadow A-A Decision, S&P 500

“A-A D”

S&P 500

DATE

TRD

SAV

C/C R

“STOCK”

“BOND”

CLOSE

%ch

11/04/22

100

79.7

44.4%

55.6%

44.4%

3,901.06

1.36%

11/07/22

97.1

85.7

46.9%

53.1%

46.9%

3,871.98

-0.75%

11/08/22

97.3

85.5

46.8%

53.2%

46.8%

3,856.10

-0.41%

11/09/22

102.6

81.0

44.1%

55.9%

44.1%

3,759.69

-2.50%

11/10/22

109.4

74.6

40.5%

59.5%

40.5%

3,719.89

-1.06%

11/11/22

101.0

86.3

46.1%

53.9%

46.1%

3,770.55

1.36%

11/14/22

100.1

87.1

46.5%

53.5%

46.5%

3,806.80

0.96%

11/15/22

90.8

108.5

54.4%

45.6%

54.4%

3,828.11

0.56%

11/16/22

85.9

117.2

57.7%

42.3%

57.7%

3,748.57

-2.08%

11/17/22

83.7

120.4

59.0%

41.0%

59.0%

3,956.37

5.54%

11/18/22

83.0

121.4

59.4%

40.6%

59.4%

3,992.93

0.92%

11/21/22

81.0

124.4

60.6%

39.4%

60.6%

3,957.25

-0.89%

11/22/22

87.0

110.3

55.9%

44.1%

55.9%

3,991.73

0.87%

11/23/22

88.5

108.3

55.0%

45.0%

55.0%

3,958.79

-0.83%

11/25/22

83.0

121.4

59.4%

40.6%

59.4%

3,946.56

-0.31%

11/28/22

81.8

122.4

60.0%

40.0%

60.0%

3,963.94

0.44%

11/29/22

84.5

117.7

58.2%

41.8%

58.2%

3,957.63

-0.16%

11/30/22

93.8

100.2

51.7%

48.3%

51.7%

4,080.11

3.09%

12/01/22

88.5

110.2

55.5%

44.5%

55.5%

4,076.57

-0.09%

12/02/22

92.4

102.0

52.5%

47.5%

52.5%

4,071.70

-0.12%

12/05/22

92.4

96.7

51.1%

48.9%

51.1%

3,998.84

-1.79%

12/06/22

92.4

100.4

52.1%

47.9%

52.1%

3,941.26

-1.44%

12/07/22

92.4

99.9

51.9%

48.1%

51.9%

3,933.92

-0.19%

12/08/22

92.4

105.5

53.3%

46.7%

53.3%

3,963.51

0.75%

12/09/22

92.4

103.4

52.8%

47.2%

52.8%

3,934.38

-0.73%

MEAN

52.6%

47.4%

52.6%

3128.65

0.10%

NOTE

1. TRD: Two Trading A/Cs. SAV: Two Savings A/C.

2. The figures are index, based on the $ value of TRD on Oct. 21 (100).

3. C/C R: The C/C Ratio. “A-A D”: The Shadow A-A Decision.

4. “STOCK”: The Shadow Stock Component.

5. “BOND”: The Shadow Bond (actually, C/C R) Component.

7. CLOSE: The S&P 500 Index’s Closing

8. %CH: The Percent Change.

9. Data Source: Yahoo Finance

A Weekly Update of the C/C Ratio and the Shadow A-A Decision as of Dec. 09, 2022

As shown in Table 2, the new system:

Consists of two components: a) The C/C Ratio that is a single real component, and b) The shadow “A-A Decision” that has the shadow “Stock” and the shadow “Bond”: The former is the residual of the C/C ratio, and the latter is a duplicate of the C/C Ratio which is the only fixed income or bond category.

The single control (the C/C Ratio) has a range (i.e., 45% to 55%), which gives a room to move toward to either the target of the C/C Ratio (i.e., 55%) or the target of the shadow “A-A Decision” (i.e., “Stock”: “Bond” is 50%:50%).

During between Nov. 04 and Dec. 09, the C/C Ratio has moved along 52.6% (average), recording a peak (60.6%) on Nov. 21, and a trough (40.5 %) on Nov. 10). It started at 44.4% on Nov. 04, and ended at 52.8% on Dec. 09 (Friday).

You can clearly see my contrarian strategy which is a pillar on top of two pillars in the System (C/C Ratio and the Shadow A-A Decision). When the S&P 500 was in a lower range between 3,750-3,800 on Nov. 04 and Nov. 14, the C/C Ratio was smaller (e.g., 44.1% – 46.9%, respectively). When the S&P was higher (e.g., around the 4,000 level) in 11/17 – 12/09, the C/C Ratios were boosted to be higher than 51.1% (e.g., 51.1% – 60.6%).

The Concluding Remark

The Life Cycles have the common thread with our well-known Cycles on the Economy, on the Market, and the Inflation which are the major topics in macroeconomic and monetary policy. Clearly, investing activity in the last years in the life cycles does stimulate our mental health, as shown in the article.

Market cycles, business cycles, and inflation seem not to be well-analyzed by any heavy software: They are still analyzed mainly with a pencil-and-paper approach, (as Burns and Mitchell did), with a minimum help from computers, as is investing. So does in life cycles.

My simple approach surely yields some fruits on the highly complex topic to monitor the trend of market cycles. The incoming data in a few weeks are crucial for the fate of the current upswing of the market.

SPY (which is the S&P ETF) is trading globally all the time so SPY movement is crucial for the current Uptrend in the coming weeks.

Investment Advice for Self-Directed Investors

Vanguard Total Bond Market ETF(BND) (25%)

Vanguard Corporate Bond ETF (VCIT) (20%)

Vanguard Total Int’l Bond ETF (BNDX) (5%)

Vanguard Total Stock Market ETF (VTI) (25%)

Vanguard Extended Market ETF (VXF) (20%)

Vanguard All Except U.S. ETF (VXUS) (5%)

You can set in the four ways:

1)These ETFs at Vanguard Brokerage, 2) Counterpart Vanguard Mutual Funds, 3) These ETFs at TD Ameritrade, and 4) Counterpart Schwab ETFs at Charles Schwab.

It’s very simple but is no doubt one of the most efficient and outstandingly performing portfolios.



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