Investment Newsletter for the End of July, 2020

The stock market is moderately higher this month. The Dow is up about 650 dollars or 2.5%. Other indexes are up different amounts, some more and some less. More on this topic in a moment as we go over a few definitions.

A stock is an ownership stake in a company. If a company was split into 100 shares of stock and you bought 1 share, then you own 1% of the company. The value of that share on the stock market is based on how much investors think that company will be worth in the future.

Investors essentially take all the money that they think the company will make in the future and discount that value to the present (time value of money). If the value they calculate is larger than the current cost of the stock then then they will bid the price of the stock up by buying it. If the value they calculate is smaller than the current cost of the stock then then they will drive the price of the stock down by selling it.

The price is NOT based on the current economy. The economy right now sucks. The market is doing quite nicely. The reason is that the price is a prediction of next year’s profits.

The stock market is the aggregate of all stocks. Since there are many thousands of stocks in the US markets and many thousands more in foreign markets, what do we look at to see a summary of what is going on? The market is summarized into indexes. The Dow is one example. There are many others. Each measures a different aspect of the market. S&P 500 (Standard Poor), Russell 2000, etc. are additional examples. Since they measure different things, none is better than another. On your reports every quarter, we list several.

Generally, when people talk about the stock market being up or down a particular number of points, they are referring to the Dow Jones Industrial Average. The index is composed of 30 large cap stocks. Large cap means its market capitalization is in excess of 10 billion dollars. As a result of the 30 companies chosen being so large, people often use the index as a short hand representation of the overall US stock market. That idea is problematic owing to multiple factors such as how the index is weighted and calculated, and the comparatively small number of stocks examined (30 stocks) relative to the number of stocks out there (about 5000 stocks). It is, however, quick and easy to look at.

If you have any questions about these definitions or any others that you encounter, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.

Thank-You,

Daniel and Eli


As we’re writing these to help our readers, we would be very appreciative of any input in regards to what we should write next. If you want us to write about a particular topic, please contact me. Please contact me if you would like to submit a post to our blog.

If anything that we mentioned above interests you, please consider downloading my free e-book. The book contains our thoughts on investment management and some information that we think everyone should know. You can also download it below.

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Investment Newsletter for the End of June, 2020

The market continued its recovery this month. The Dow had its best quarter in many years.

The topic of this newsletter will be definitions of several words and concepts that you are likely to hear in relation to the investment industry.

Market capitalization refers to the market value of the company. It is simply the price of one share of stock multiplied by the number of shares that exist. People used the terms small cap, mid cap, and large cap (cap is short for capitalization) to refer to different size categories of market capitalization. A common idea is that small cap companies (between $300 million and $2 billion) will over time yield greater return than mid cap (between $2 billion and $10 billion) and large cap (over $10 billion) companies.

Value stocks and growth stocks refer to how expensive the stock is relative to some measure of value. Usually the measure of value used is earnings or book value (assets-liabilities). A high Price/Earnings or high Price/Book ratio means that the buyer is paying a higher price for the underlying worth of the stock. While the exact cutoffs are very subjective the basic idea is that a high ratio is referred to as a growth stock and a low ratio is referred to as a value stock.

Return on Equity is how much income is earned per unit of equity. Equity is the same thing as book value. Return on Equity (ROE) is often looked towards as a measure of company efficiency. How effectively did the company utilize its financial resources to create a profit? If everything else is equal, investors will prefer a company with high ROE over a company with low ROE.

Capital gain/losses are the result of taking the proceeds from the sale and subtracting off the purchase price. Capital gains are taxed differently whether they are short term (the asset was owned for less than a year) or long term (the asset was owned longer than a year). Long term capital gains are taxed much lower than short term. As a result, we firmly recommend that unless you have very compelling reason to sell early, you should keep your capital gains long term.

If you have any questions about these definitions or any others that you encounter, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.

Thank-You,

Daniel and Eli


As we’re writing these to help our readers, we would be very appreciative of any input in regards to what we should write next. If you want us to write about a particular topic, please contact me. Please contact me if you would like to submit a post to our blog.

If anything that we mentioned above interests you, please consider downloading my free e-book. The book contains our thoughts on investment management and some information that we think everyone should know. You can also download it below.

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Investment Newsletter for the End of May, 2020

The market recovered by over 1,100 points in May. While the Dow is still 4,000 points off the peak, we have gained back about 7,000 points from the low in March. Almost all of you made money this month and that recovery leads us to the topic of this newsletter.

The topic of this newsletter will be contrarianism. In short, it refers to the idea that the crowd that makes up stock market investors are often irrational. They are foolish when the news is dramatic and then overreact to news which drives stock prices too low or too high. Eventually, the stock prices will snap back to a normal level. The normal level is very subjective but can be approximated via valuation metrics, GDP growth, inflation, etc. Pop quiz, if the market plunges 50%, is that a time to buy to sell? We assert that it is a time to buy.

If you’re invested in a well-diversified domestic collection of stocks, then you are in essence invested in the US economy. Unless you think that COVID is going to permanently lower the US economy, eventually the US economy and the stock market will recover to its previous peak and exceed it. If you are concerned that COVID will permanently lower the economy, you shouldn’t be, we have recovered from many disasters in the past and this situation shouldn’t be any different. As we said in a previous newsletter, some industries will die, some industries will adapt, and some new industries will be created in the new world we are entering. Overall, we will be fine.

When the market started to plunge in February, our contrarianism made us think that eventually stock prices would snap back to normal. Of course, we did not know how long it would take to snap back. As long-term investors, we are willing to wait for our profits. Instead of seeing the plunge as a reason to panic, we saw it as an opportunity to grab a bargain. We rebalanced client portfolios during the plunge. We bought more mutual funds and stocks. Also, for their own portfolios, both Daniel and Eli invested heavily during this time. In the long run, we assert that the plunge is temporary, and the recovery supports our assertion. It is also very nice that this recovery is happening so quickly.

If you have any questions for us, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.

Thank-You,

Daniel and Eli


As we’re writing these to help our readers, we would be very appreciative of any input in regards to what we should write next. If you want us to write about a particular topic, please contact me. Please contact me if you would like to submit a post to our blog.

If anything that we mentioned above interests you, please consider downloading my free e-book. The book contains our thoughts on investment management and some information that we think everyone should know. You can also download it below.

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Investment Newsletter for the End of April, 2020

The market for the month of April is up about 2,400 points. That gain is about 11%. It is the best one month gain for the market in many years. While the gain is very welcome due to its partial restoration of our account balances, it may appear to some people to not make sense considering the current economic times.

The topic of today’s newsletter will be the stock market. Why does it go up and down? Why did it go up when the economy is currently declining? In short, the reason is that the stock market is a prediction of the state of the economy in the future. The stock market price is not about the current economy. It is about expectations of the future economy. In a month/year/decade etc. what will the economy be like then? If people think the future will be bright, then they will buy more stock now (so they can profit from that future) and that buying will drive the price up. If people think the future will be dire, then people will sell more stock (to avoid being hurt by a market crash) and that selling will drive the price down. The people who bought stock in the last month believe that the pandemic will be over reasonably soon and when it does the economy will roar back. Those people think they would thus make a lot of money from buying at a bargain low price and selling in the future at a high price.

People’s memories tend to be very short. They place more mental weight on recent experiences than older experiences. Current bad news is more important than past good news and current good news is more important than past bad news. It is that overreaction to current news events that causes wild swings in market prices and provides some people the opportunity to profit if they have the ability to go against the crowd. Some of the biggest fortunes in history have been made by buying in times of crisis, when everyone is running screaming to the door. We have both made purchases during this crisis of stocks that we believe have been excessively beaten down by COVID 19 and will recover strongly when the economy does. We know that the stock market will recover, but it might recover sooner than the economy does.

If you have any questions for us, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.

Thank-You,

Daniel and Eli


As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

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Investment Newsletter for the End of March 2020

The market continued being sick with the coronavirus this month. The market continued its sharp downturn. Essentially, people are afraid that the economy will collapse. In some respects, stock prices are a forecast of what people believe the economy will look like.

Obviously, we are now entering a recession. Unemployment is incredibly high because of all the mandatory business closings. Daniel does accounting for several large restaurants, dentists, etc., all of whom have closed and laid off all their employees. As well as manufacturing businesses who laid off part of their workforce because of lack of business. That’s about 250 employees. The real question, however, is how long?

Over the last three days, Daniel has received over 20 phone calls and emails about the federal stimulus programs for businesses just signed last week. Every one of the closed businesses we just mentioned asked Daniel for advice. They ALL were planning on reopening as soon as they were allowed and wanted some federal assistance. All but one or two had strong qualifications and will probably be approved for the various SBA programs. We sent them to their bankers to complete the applications. Some of the money will be available in a few days, the big money in four to six weeks. The government will be loaning the money to cover payroll, rent, utilities, and some other things. The loan would then be forgiven if the money was used for those things.

So, is this stimulus going to juice the economy? Is it enough? There really is no way to know. But our feeling is yes, it is enough to fix the economy. It, of course, depends on how long the mandatory close orders last. Many of the mandatory closed industries have been hearing 30 days from their professional associations. In some parts of the country (such as Oregon), new cases are dropping. Other parts of the country are still out of control. The news is saying the peak will be in the next two weeks. After these businesses reopen, it will take time before everything is normal business amounts, maybe months. As people return to work, the fears of a collapsing future economy will recede.

We have been criticized in good times for our heavy bond allocation on portfolios, that we are too conservative. But, as you can see, risk is real and painful. Our portfolios did not lose as much as the market during the downturn.

The market will recover.

Thank-You,

Daniel and Eli


As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

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Investment Newsletter for the End of February 2020

February has not been a good month on the stock market. The Dow is down over 2800 points. The reason is fear regarding the Coronavirus. Therefore, the Coronavirus will be the topic of this newsletter. While we have already talked about this topic in a previous newsletter, we feel it is pertinent to discuss it further.

Due to the various quarantines, a lot of people are unable to go to work or go outside. Due to a general aura of fear, people are scared to go out and shop. All of these things are terrible for the word’s economy. However, it is temporary. Can you honestly tell us that you think this disease will be the end of the world? The world has dealt with massive disease outbreaks before. Coronavirus is a category of virus. The current Coronavirus that the world is facing is named COVID-19. The world has already dealt with another type of Coronavirus. In November 2002, the world faced a Coronavirus named SARS. By 2004, the problem had been dealt with and there were no more cases of SARS. The world did not end. Since the first SARS infection the DOW has nearly tripled. We don’t see any reason to believe that this Coronavirus outbreak will affect the world any differently than the last one did.

While it’s scary, it’s important to have the discipline to stay invested. Despite the volatility and the price drops, over the long run, the stock market is one of the most potent way to create personal wealth that exists. If you have the discipline to invest every month into the stock market (despite the volatility), then due to compound interest, when you retire you will likely have a sizable nest egg built up. Sure, there’s risk that the markets will be depressed when you need the money, but everything in life that’s rewarding entails risk. Obviously, you have to judge your needs and risk tolerance but we believe that is worth the risk. In our personal portfolios, we have invested more during these tumultuous times.

If you have any questions about your investments, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.

Dan and Eli


As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

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Investment Newsletter for the End of January 2020

January has been a very volatile month on the stock market. For this conversation, we are using the Dow as the market, as most of you do. In the end, the month is down only about 280 points, which is insignificant. However, from January 17 to January 31, the market has lost about 1100 points. That drop is due to the fear regarding the Coronavirus. That will be the topic of this newsletter.

A very big event happening in the world today is the Coronavirus outbreak in Wuhan China. The stock markets, due to fear about its effects on business and commerce, are very spooked. Businesses in China or businesses exposed to China are certainly feeling the stress. Travel industries would be an example. While we are not scientists that can comment on the virus itself, we know enough about financial/economic history to know that the effect on the stock markets will likely be temporary. The stock markets have survived a lot of bad things. They have survived wars, depressions, terrorist attacks, various diseases, etc. Historically, after every disaster, markets eventually recover. There is absolutely no reason to believe that this time is different, so that pattern will likely continue. Eventually, the marketplace will adapt. New companies will form, old companies will go out of business, and life will move on. And, the travel industry will recover also.

If you have been reading the newsletters for a while, you have probably seen us write about the importance of sticking to a plan. The markets are volatile, they always have and likely always will be. The future is unknowable. All you can do is have the discipline to adhere to the plan that you agreed to when you hired us. That plan is designed to achieve the objectives you want. If your risk tolerance or objectives change, then we can all collaborate on designing a new plan for you. However, fretting about the markets does nobody (especially you) any good.

If you have any questions about your plan, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.

Dan and Eli


As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

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Investment Newsletter for the End of December 2019

This newsletter is a very exciting one. It marks an end of month, end of year, and end of decade. The results of all 3 markers are overwhelmingly positive. The month is up 2.22%. The year is up 21.28%. The decade is up 283.48%. Those numbers are very nice. Despite the chaos in the world, if you had held on to an investment for the entire time, your patience would have been extremely lucrative.

The 1st topic of this newsletter will be the power of Compound Interest. If you were to deposit 100 dollars each month under your mattress, after 50 years, you would have $60,000. If you were to deposit that money each month into a bank, then assuming you earn 2% on your interest you would have $102,961.20 after 50 years. The Dow over the last 35 years has returned 9.3% per year. Assuming that level of growth continues, if you invest 100 dollars per month into the Dow, after 50 years you would have $1,312,604.89. The difference in wealth created due to a few percentage points is massive. Regardless of how much money you have now, proper and diligent investing can set you up for a very comfortable retirement.

The 2nd topic of this newsletter will be how to use the information we discussed above to give you a good retirement. The first thing that should be understood is that money that is not invested is not helping you build wealth. You may need it for liquidity reasons or peace of mind, but non invested funds will not bring you wealth. It does not have to be invested in stocks. You can invest in bonds, real estate, etc. The point is that in order to win the game, you need to play it. The second thing that must be understood is that a small amount of money can accumulate into a large fortune if given enough time. We want you to think very carefully about your monthly expenses. If you are able to trim your monthly expenses even by a little bit, that could be the difference between a financially secure and financially insecure retirement. We, of course, are not telling you to live a life of joyless austerity and frugality, but it is to your benefit to be careful with your funds and think twice before spending once.

If you have any questions about your investments, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.

Dan and Eli


As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

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Investment Newsletter for the End of November, 2019

The market this month is up about 1,000 points. Most of you made a lot of money this month. If you had sold out of your positions when the stock market had one of its many volatility swings due to various domestic and foreign news items, you would have missed out on that gain. In today’s newsletter, we are going to talk about discipline.

One thing that must be understood about the stock market is that in the long run, the vast majority of news items do not matter. The market swings back and forth with the news cycle, people’s fears and greed, and often just random noise. Unless it permanently affects a country’s economy or company’s profitability, the effect will eventually wash out. For example, when Brexit was announced, the stock market temporarily took a steep dive, but why? While Brexit would affect things in the short term, companies will adapt just fine in the long run. There are companies that survive in times of war. Human ingenuity is very resilient. A couple days after Brexit was announced, the market realized it had overreacted and the market surged back up.

If you had the discipline to hold on to your positions when things are bad, you would have profited. Discipline in the context of financial planning means you are able to stick to a plan. It might mean buying when the market is bad, which is very scary, but it is the ability to stick to what you had agreed to. Often the biggest enemy for an investor is themselves as their fear can overwhelm their better judgement. The market has many swings. However, in the long run it trends up. Our advice at Dollinger Management is to disregard the financial news when it comes to your portfolio. Create a plan you are able to stick to and stick to it.

If you have any questions about how you are invested or would like to talk about your plan, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust. We hope you all had a good Thanksgiving.

On a separate topic. It looks like the tax preparation software will be available in our office early this filing season. There were almost no changes in the tax rules this time. Please call with tax questions or if you wish to do some tax planning. Taxes are a very important part of your financial plan.

Dan and Eli


As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

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Investment Newsletter for the End of October, 2019

The market this month is up about 130 points. Added to the upward movements that we have already experienced this year means the Dow is up about 3500 points. Despite the volatility, if you had invested at the beginning of the year and endured the volatility, you would have made a lot of money. In today’s newsletter, we are going to talk about two topics.

The first topic is diversification. Diversification is essentially the expression “do not put all your eggs in one basket”. Unfortunately, no asset goes up in value forever. No matter what it is, for every rise there will eventually be a crash. Thankfully, not everything rises and crashes at the same time. That is the value of investing in multiple things. Ideally when one thing crashes, another thing rises and the roller coaster is much smoother. No matter how carefully you invest, chances are you will invest money into something that will lose value. If you are invested in many things, that one thing losing value won’t hurt your portfolio by much. Diversification can be done across asset classes (stocks, real estate, etc.), across countries (United States, England, etc.) across industries (healthcare, defense, etc.) etc.

The second topic will be real estate. The usage of real estate can be a valuable addition to a portfolio for it rises and falls in a different way from traditional stocks. There are multiple ways to invest it. The classic way of investing is by buying a property. The advantage of this approach is that you can directly affect the value of the property via your own actions (painting it, repairing things, etc.) and there could be some tax advantages. The disadvantages are twofold. First, is that it is very capital intensive. As a result of being so expensive, it is unlikely you can achieve diversification in your real estate portfolio. You likely can only afford a few properties. Those properties you do have are likely to be in one geographic area. Second, property is not liquid. It takes weeks or months to turn the property into cash. There will be a 6% or 7% sales commission plus other closing costs. Finally, you cannot tell exactly what the property is worth at any time.

Another way of investing in real estate is by investing in a REIT. A REIT is like an ETF or traditional mutual fund. It is a collection of properties, managed by someone else, that you can buy and sell shares of. The main advantage of a REIT is that you get diversification due to many properties being owned and it is much cheaper to get started. The commissions in or out are minimal. I can tell you at 11:15 am, for example, to the penny what your REIT is worth.

If you have any questions about how you are invested, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.

Dan and Eli


As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

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