Dow Jones Drops Nearly 700 Points; When Long-Term Apple Holders Should Sell

A big haircut in the quarterly revenue outlook for Apple sent U.S. shares tail-spinning in what has become a common refrain in stocks today for the past few months. The Dow Jones industrial average and the Nasdaq composite acted as co-leaders of the sell-off, each falling 2.8% to 3% and ending practically at the session's low.

The S&P 500, which dropped 6.2% (excluding dividends) in 2018, sank more than 2.4%. Intense buying in defensive areas of the market — think dairy and meat, property REITs, gold mining and telecom services — provided little solace for most investors. The Dow Jones utility average rose nearly 0.1% after falling almost 1.7% on Wednesday.

Dow Jones industrial component Verizon Communications (VZ), formerly on IBD Leaderboard, edged up 0.3%. The stock is trying to reclaim its rising 50-day moving average. Watch for a potential new base to form.

Curiously, small caps performed relatively better but still caved in price. The Russell 2000 fell 1.3%. The S&P SmallCap 600 fell 1.8%, snapping a five-day winning streak.

Volume ran higher vs. the same time Wednesday on both main exchanges, according to early data, signifying heavy institutional profit-taking.

Perhaps institutions are selling shares of multinational corporations much harder, given the clear evidence mounting in China of a growth slowdown. U.S. and China have called a 90-day truce on the trade war and have until March 1 to find a way to end the festering battle on import tariffs.

Apple Leads Dow Jones Lower

Apple gapped down at the open and remained near session lows, falling as much as 10%. The iPhone, iPad, Macbook and digital services giant cut its revenue guidance for the just-ended fiscal first quarter to $84 billion, down from $91 billion. This means Apple's top line is likely to fall nearly 5% on a year-over-year basis.

Such a drop in the top line would be the first since a 9% decline in the fiscal fourth quarter that ended in September 2016.

The Street, before the bombshell news from CEO Tim Cook shared late Wednesday, had been expecting fiscal Q1 profit to rise 20% to $4.65 a share. That comes after adjusted EPS gains of 18%, 24%, 16%, 30%, 40% and 41% in the prior six quarters. The consensus revenue growth forecast for the December-ended holiday quarter prior to the revised forecast came in at $91.49 billion, up 4%.

As the Stock Market Today column had noted frequently in the past, Apple began its impressive run after staging a clean breakout from a first-stage (or early stage) cup with handle on Jan. 6, 2017. The buy point at the time: 118.12. Since that breakout, the megacap tech rallied as much as 97% to its peak of 233.47 on Oct. 3 last year. Along the way, Apple built a series of additional bases, such as the flat base, and gentle pullbacks to the 10-week moving average. These actions presented new buy points along Apple's 21-month price run.

This breakout coincided with a turnaround in Apple's fundamentals. Exactly two years ago, Apple had reported its first quarter of year-over-year gains in both profits (up 2%) and sales (up 3%) in four quarters.

The complexion of Apple's chart action completely changed during the week ended Nov. 2. The stock cleaved through its 10-week moving average near 220.57, falling more than 4% for the week in volume that shot up 51% above its 10-week average. Apple hardly tried to rally back above this key support-and-resistance level; thus, a key IBD sell signal was born.

Apple Stock Strategy Now: Avoid A Full Round Trip Of Profits

Given the strong advance since that breakout, Apple shareholders who bought at the proper breakout point must draw a line in the sand. A solid gain should never be allowed to turn into a loss.

At the day's low of 142.08, Apple has now fallen 39% from a 233.47 peak.

Typical base patterns such as the cup with handle and double bottom generally show a decline of no more than 30% to 33%. But this often is the case in a bull market. With the bears in control, one can expect some corrections in top growth stocks to exceed that range. Breakouts from deep bases do work, but the probabilities are lower.

Warren Buffett lives in a modest house that's worth .001% of his total wealth — here's what it looks like

Located in a quiet neighborhood of Omaha, Nebraska lies the home of billionaire Warren Buffett. He bought the house for $31,500 in 1958 or about $250,000 in today's dollars. It's now worth an estimated $652,619. He calls it the "third-best investment he's ever made." Following is a transcript of the video.

This is the home of billionaire Warren Buffett. Located in a quiet neighborhood of Omaha, Nebraska. He bought the house for $31,500 in 1958, $250,000 in today's dollars. It's now worth an estimated $652,619. He calls it the "third-best investment he's ever made."

It's 6,570 sq. feet and has 5 bedrooms and 2.5 bathrooms. Fences and security cameras guard the property. Why hasn't Buffett moved to a more extravagant home? He told BBC, "I'm happy there. I'd move if I thought I'd be happier someplace else."

Warren Buffett Just Obliterated Bitcoin in Four Words

Warren Buffett Just Obliterated Bitcoin in Four Words

Billionaire investor Warren Buffett is taking his already harsh criticism of Bitcoin to another level.

Buffett, who has previously said that cryptocurrencies like Bitcoin will almost certainly “come to a bad ending,” was asked over the weekend at the Berkshire Hathaway annual meeting about comments made by business partner Charlie Munger—who has called Bitcoin “turds” and compared it to rat poison.

Buffett didn’t mince words. Bitcoin is “probably rat poison squared,” Buffett replied.

On Monday, Buffett appeared on CNBC to explain that he was so down on Bitcoin, and cryptocurrencies in general, because they don’t produce anything—so they’re essentially investments based on pure speculation.

“When you buy non-productive assets, all you’re counting on is that the next person is going to pay you more, because they’re even more excited about another next person coming along,” Buffett said. “The asset itself is creating nothing.”

Buffett has said in the past that he and many investors really don’t understand Bitcoin. On CNBC Monday, he added that cryptocurrencies’ mystique actually entices investors—because it seems like magic when, say, the price of Bitcoin rose 36% in April. (Mind you, that increase came after Bitcoin’s price had fallen to one-third of its all-time high near $20,000, which it hit last December.)

“It’s better if they don’t understand it,” Buffett said Monday. “If you don’t understand it you get much more excited.”

credit:  http://time.com/money/5267647/warren-buffett-bitcoin-invest/

Warren Buffett says bitcoin is 'rat poison'

Warren Buffett says bitcoin is 'rat poison'

Tell us how you really feel, Mr. Buffett.

The price of bitcoin took a dive after Warren Buffett renewed his criticism of the cryptocurrency — even comparing it to rat poison.

Bitcoin had been closing in on $10,000, but it fell nearly 6% Sunday and was down another 2% Monday to just over $9,300.

Buffett, the CEO of Berkshire Hathaway (BRKB), has been a bitcoin bear for years. He has often compared the cryptocurrency to gold, saying that both assets are strictly speculative and don't produce earnings and dividends like stocks do.

Before the Berkshire annual meeting on Saturday, Buffett told CNBC that bitcoin was "probably rat poison squared."

During the meeting itself, Buffett joked that "if you had bought gold at the time of Christ and you figure the compound rate on it, it's a couple tenths of a percent." What Buffett was saying about bitcoin was that you can buy it, but it will never produce anything of value.

He also responded to a question from the audience about bitcoin by saying that it and other crytpocurrencies "will come to bad endings."

Berkshire vice chairman and longtime Buffett confidant Charlie Munger was even more blunt.

Related: Here is what happened at this year's Woodstock of capitalism

"I like cryptocurrencies a lot less than you do," Munger said to Buffett. "To me, it's just dementia. It's like somebody else is trading turds and you decide you can't be left out."

Munger has also referred to bitcoin as poison. At the shareholder meeting of The Daily Journal(DJCO), a newspaper publisher in Los Angeles where Munger serves as chairman, he called it "noxious."

Strong words. But to be fair to bitcoin bulls, both Buffett and Munger have been wrong about the cryptocurrency. Buffett in particular.

He first called bitcoin a "mirage" in 2014 — back when it was trading for about $600. So even with the recent pullback, bitcoin has drastically outperformed the broader market, not to mention Berkshire stock and top Berkshire holdings like Apple (AAPL).

That's why some cryptocurrency experts think that investors should ignore Buffett's and Munger's repeated bitcoin bashing.

"What I do find monumentally baffling is that two of the world's most successful investors cannot see the intrinsic value of some form of cryptocurrency," Nigel Green, CEO of financial consulting firm deVere Group, wrote in a report early Monday.

"Do they honestly believe that there is no place for, and no value of, digital, global currencies in an increasingly digitalized and globalized world?" Green added.

Warren Buffett explains one thing people still don't understand about bitcoin

Warren Buffett explains one thing people still don't understand about bitcoin

When it comes to bitcoin, billionaire investor Warren Buffett wants to make one thing clear: Unlike buying stocks, bonds or real estate, buying bitcoin is not an investment.

That's because it lacks intrinsic value, Buffett says.

"If you buy something like bitcoin or some cryptocurrency, you don't have anything that is producing anything," Buffett says in an interview with Yahoo Finance. "You're just hoping the next guy pays more. And you only feel you'll find the next guy to pay more if he thinks he's going to find someone that's going to pay more.

"You aren't investing when you do that, you're speculating."

Famous for his "buy and hold" investment strategy, the Berkshire Hathaway CEO built his company — and his $82.8 billion net worth — backing companies that have substantive value.

"Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value," Buffett wrote in his 1996 letter to shareholders. "If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes."

To be an investment, what you're buying has to be worth something on its own, Buffett says.

For example, "If you buy something [like] a farm, an apartment house or an interest in a business and look to the asset itself to determine whether you've done something — what the farm produces, what the business earns ... it's a perfectly satisfactory investment," Buffett explains to Yahoo Finance. "You look at the investment itself to deliver the return to you.

"If you ban trading in farms, you could still buy farms, and have a perfectly decent investment," Buffett says.

Bitcoin, however, only increases in value by being bought and sold, he argues. Its value comes from what people are willing to pay.

"[I]f you ban trading in ... bitcoin, which nobody knows exactly what it is, people would say, 'Well why in the world would I buy it?'"

"The idea that it has some huge intrinsic value is just a joke in my view," Buffett said.

In 2017, bitcoin soared from below $1,000 at the start of the year to over $19,000 in December, catching the attention of everyone from J.P. Morgan Chase CEO Jamie Dimon to NFL players. Tuesday, bitcoin traded near $8,900 according to CoinDesk's price index.

Buffett sees a bleak future for the digital currency.

"In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending," Buffett told CNBC in January."When it happens or how or anything else, I don't know."

Of course, Buffett has been wrong about backing new technologiesbefore. He missed opportunities to invest in Google and Amazon, decisions he now calls mistakes.

"I did not think [founder Jeff Bezos] could succeed on the scale he has," Buffett said to shareholders in May 2017.

Crypto-enthusiasts argue that Buffet doesn't understand blockchain-based coins, and he has admitted as much.

Still, many other investing experts like CNBC's Jim Cramer, Kevin O'Leary and Tony Robbins, also call buying cryptocurrencies a gamble. They suggest thinking of it like rolling the dice in Las Vegas.

"As long as you can afford to lose everything you put into it, go with it," O'Leary told CNBC Make It in December, 2017.

That mindset is alright with Buffett.

"There's nothing wrong with it if you want to gamble [that] somebody else will come along and pay you more money tomorrow," Buffett tells Yahoo Finance. "That's one kind of game. That is not investing."

Don't miss: Here's how much grad school cost when Warren Buffett graduated in 1951, compared to today

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credit:  https://www.cnbc.com/2018/05/01/warren-buffett-bitcoin-isnt-an-investment.html

Joel Greenblatt

Joel Greenblatt (born December 13, 1957) is an American academic, hedge fund manager, investor, and writer. He is a value investor, and adjunct professor at the Columbia University Graduate School of Business. He is the former chairman of the board of Alliant Techsystems and founder of the New York Securities Auction Corporation. He is also a director at Pzena Investment Management, a high-end value firm.

Seth Klarman: Wealth and donations

Wealth and donations[edit]

In February 2017, Forbes Magazine listed his personal fortune at US$1.55 billion. In 2015, he was listed as the 15th highest earning hedge fund manager in the world.^[1]

Klarman started The Klarman Family Foundation ($255 million in assets as of 2010) which donates to medical causes, Jewish organizations (such as the American Jewish Committee, Boston’s Combined Jewish Philanthropies and Gann Academy), and Israeli causes. Klarman is the chairman of Facing History and Ourselves which develops classroom programs to combat anti-Semitism and bigotry.^[24] Klarman also is active with the Israel Project, a pro-Israel advocacy group that collects and provides information on Israel for journalists. He donated $4 million to the organization between 2008 and 2010.^[24] He is the key U.S. investor behind The Times of Israel, an online English-language newspaper which reports on Israel, the region and the Jewish world.^[34][35]

In 2013, Klarman donated the lead capital to fund the $61 million building at Cornell University named the Seth ’79 and Beth Klarman Humanities Building, more simply known as Klarman Hall.^[36] A year later, he donated money to Harvard Business School to construct a "conference center/auditorium and performance space," named Klarman Hall. In an official statement he recalled his time at the school as "an important and ongoing role in my life," later noting it an honor "to able to give back to a school that has given us so much."^[37]

Awards[edit]

Klarman has been called a "hedge fund Titan,"^[7] and "quiet giant of investing,"^[38] for his slow accumulation of fund capital over his career (in 2008, his hedge fund was the 6th largest in the world) and low profile.^[7] It was reported by Andrew Ross Sorkin, of The New York Times, that "[Klarman] is the most successful and influential investor you have probably never heard of."^[38] His Investopedia entry has him listed as "an enigma in the investing world."^[39]

He is sometimes called "the Warren Buffett of his generation,"^[3] and the "Oracle of Boston."^[5] It has even been speculated that his investment philosophy is so similar to Buffett's that he is considered a dark horse option to assume Berkshire Hathaway in the event of Buffett's death.^[40][41] According to an article by The New York Times,Buffett has publicly praised Klarman's investing,^[38] and it has been reported that Buffett keeps a copy of his book on his bookshelf.^[13]

In 2008, he was inducted into Institutional Investors Alpha's Hedge Fund Manager Hall of Fame along with David Swensen, Louis Bacon, Steven Cohen, Kenneth Griffin, Paul Tudor Jones, George Soros, Michael Steinhardt, Jack Nash, James Simons, Alfred Jones, Leon Levy, Julian Robertson, and Bruce Kovner.^[4]

Publications and works

Seth Klarman: Investment philosophy

Investment philosophy[edit]

Klarman is a known value investor, and has stated that he has known he was one since junior year of college at age 25. During an interview at Harvard Business School, he stated: "It turns out that value investing is something that is in your blood. There are people who just don’t have the patience and discipline to do it, and there are people who do. So it leads me to think it’s genetic."^[15]

When asked what drives his fund's overall investment strategy and how value investing fits into the hedge fund market he replied:

Firstly, Value investing is intellectually elegant. You’re basically buying bargains. It also appeals because all the studies demonstrate that it works. People who chase growth, who chase high fliers, inevitably lose because they paid a premium price. They lose to the people who have more patience and more discipline. Third, it’s easy to talk in the abstract, but in real life you see situations that are just plain mispriced, where an ignored, neglected, or abhorred company may be just as attractive as others in the same industry. In time, the discount will be corrected, and you will have the wind at your back as a holder of the stock.^[15]

Klarman has been an avid supporter of the teachings of Benjamin Graham, and during the 2008 financial crisis criticized the short-term thinking of other fund managers, he believes that the "this-time-is-different" mindset will give a false sense of security to investors and they ought to look at the bigger picture. He stresses the utility in the economy's business cycles and their predestined and perpetual self-corrective tendency.^[15] Klarman is known to sit on 30% to 50% of his funds in cash as to avoid unfavorable market conditions and only buys stocks he thinks have a suitable mispricing.^[7]

He makes unusual investments, buying unpopular assets while they are undervalued, using complex derivatives, and buying put options. During his first years running Baupost he made it a point to only invest in companies that were not widely accepted by the Wall Street community; he stressed managing risk and using the margin of safety.^[7] He is a very conservative investor, and often holds a significant amount of cash in his investment portfolios, sometimes in excess of 50% of the total.^[18]Despite his unconventional strategies, he has consistently achieved high returns.^[19] Klarman looks for companies that are traded at a discount (so he can assume shares with a margin of safety). Klarman and his fund usually go "bargain hunting," when companies are distressed or face low growth or declining years. It was reported by The Boston Globe in 2015 that when energy stocks were declining, his firm "started looking for deals."^[20] According to Institutional Investor, "[Klarman] has succeeded by deftly exploiting under-valued markets whether they are in equities, junk bonds, bankruptcies, foreign bonds or real estate.

Seth Klarman: Investment philosophy

Investment philosophy[edit]

Klarman is a known value investor, and has stated that he has known he was one since junior year of college at age 25. During an interview at Harvard Business School, he stated: "It turns out that value investing is something that is in your blood. There are people who just don’t have the patience and discipline to do it, and there are people who do. So it leads me to think it’s genetic."^[15]

When asked what drives his fund's overall investment strategy and how value investing fits into the hedge fund market he replied:

Firstly, Value investing is intellectually elegant. You’re basically buying bargains. It also appeals because all the studies demonstrate that it works. People who chase growth, who chase high fliers, inevitably lose because they paid a premium price. They lose to the people who have more patience and more discipline. Third, it’s easy to talk in the abstract, but in real life you see situations that are just plain mispriced, where an ignored, neglected, or abhorred company may be just as attractive as others in the same industry. In time, the discount will be corrected, and you will have the wind at your back as a holder of the stock.^[15]

Klarman has been an avid supporter of the teachings of Benjamin Graham, and during the 2008 financial crisis criticized the short-term thinking of other fund managers, he believes that the "this-time-is-different" mindset will give a false sense of security to investors and they ought to look at the bigger picture. He stresses the utility in the economy's business cycles and their predestined and perpetual self-corrective tendency.^[15] Klarman is known to sit on 30% to 50% of his funds in cash as to avoid unfavorable market conditions and only buys stocks he thinks have a suitable mispricing.^[7]

He makes unusual investments, buying unpopular assets while they are undervalued, using complex derivatives, and buying put options. During his first years running Baupost he made it a point to only invest in companies that were not widely accepted by the Wall Street community; he stressed managing risk and using the margin of safety.^[7] He is a very conservative investor, and often holds a significant amount of cash in his investment portfolios, sometimes in excess of 50% of the total.^[18]Despite his unconventional strategies, he has consistently achieved high returns.^[19] Klarman looks for companies that are traded at a discount (so he can assume shares with a margin of safety). Klarman and his fund usually go "bargain hunting," when companies are distressed or face low growth or declining years. It was reported by The Boston Globe in 2015 that when energy stocks were declining, his firm "started looking for deals."^[20] According to Institutional Investor, "[Klarman] has succeeded by deftly exploiting under-valued markets whether they are in equities, junk bonds, bankruptcies, foreign bonds or real estate."

Seth Klarman: Investment career

Investment career[edit]

Further information on Seth Klarman's leadership of the Baupost Group: Baupost Group

After graduating from business school in 1982, he founded the Baupost Group with Harvard Professor William Poorvu and partners Howard Stevenson, Jordan Baruch and Isaac Auerbach. The name is an acronym based on the founders' names (the name was decided on before Klarman joined the project).^[7] Poorvu asked Klarman and his associates to manage some money he had raised from the selling of his share in a local television station and the fund was started with US$27 million in start up capital.^[7] His starting salary was $35,000 a year, considered low to alternative job offers,^[15] and he later recalled that the other founders "were taking a big risk on a relatively inexperienced person."^[7] Early on in his investment career, he used to badger Goldman Sachs salesmen with questions regarding their options and thoughts on the markets that they were afraid to pick up the phone if they saw that Baupost was calling.^[7]

In February 2008, Klarman was alerted that a London-based hedge fund, Peloton Partners, were forced to liquidate more than a billion dollars worth of their assets, he decided to open up his fund to new investors subsequently raising $4 billion in capital, mainly from large foundations and Ivy League endowments. He believed that there was serious market opportunity for value investors in the coming months and after the collapse of AIG and Lehman Brothers, he invested heavily in the equity markets, sometimes throwing $100 million into stocks a day. While the market was down due to the aftermath of the crisis he purchased many distressed securities and bonds. By early 2009, after J.P. Morgan Chase acquired Washington Mutual as a part of their deal with the U.S. Treasury, and SallieMae's bonds were returning double digit figures he would see serious returns. Overall, Klarman's bond position appreciated 25%, however, during the financial crisis, his fund returned -7% to -13%. Although many hedge funds faced negative returns and low performance during the crisis and its aftermath, Klarman saw increased equity positions and described it as a "fortuitous time" for the fund's capital gains.^[7] The same year he would go on to buy a minority share in the Boston Red Sox, via a stake in Ed Eskandarian.^[7]

In 2009, Klarman began buying distressed credits in the wake of the financial crisis of 2007–2008. He purchased the bonds of CIT Group, a financial holding company based in New York City at 65 cents on the dollar with a yield rate of 15%. After the company went into prepared bankruptcy, as Baupost began lending it money via a loan, Carl Icahn gave a loan of $6 billion to the CIT Group but backed out of the deal a week later. This caused the bonds to speed into prepared bankruptcy and gave the Baupost group securities valued at 80 cents to the dollar for their debt in CIT Group.^[7] Shortly after the CIT deal was finalized, Klarman amassed a stake in a new bio-tech company called FacetBiotech, at an average cost of $9 a share. At the time, FacetBiotech had $17 a share in net cash. Klarman noted that when stocks are spun off of their larger parent companies they become "cheap and ignored."^[7] When Biogen eventually tried a hostile takeover of the company bidding up the price to $14 a share, Abbott Laboratories asked for a $27 per share settlement for acquisition. Klarman's fund finished that year up +27%.^[7]

As of fiscal year 2016, the fund has US$31 billion in assets under management.^[

Seth Klarman: Early life and education

Early life and education[edit]

Seth Andrew Klarman was born on May 21, 1957 in New York City.^[6][2] When he was six he moved to the Mt. Washington area of Baltimore, Maryland near the Pimlico Race Track,^[7] and grew up in a traditional Jewish family.^[8][9][10] His father was a public health economist at Johns Hopkins University and his mother taught high school English.^[11][12] His parents divorced shortly after their moving to Baltimore.^[7]

When he was four years old he redecorated his room to match a retail store putting price tags on all of his belongings and gave an oral presentation to his fifth grade class about the logistics of buying a stock. As he grew older had a variety of small time business ventures including a paper route, a snow cone stand, a snow shoveling business, and sold stamp-coin collections on the weekends.^[6] When he was 10 years old he purchased his first stock, one share of Johnson & Johnson (the stock splitthree-for-one and over time tripled his initial investment). At age 12 he was regularly calling his broker to get stock quotes, his reasoning behind buying a share of Johnson & Johnson was the fact that he has used a lot of band-aids (a product of the company) during his earlier years.^[6]

Klarman attended Cornell University in Ithaca, New York, and was interested in majoring in mathematics but instead chose to pursue economics.^[7] He graduated magna cum laude in economics with a minor in history in 1979.^[13] In the summer of his junior year he interned at the Mutual Shares fund and was introduced to Max Heine and Michael Price. After graduating from college he went back to the company to work for 18 months before deciding to go to business school.^[7] He went on to attend Harvard Business School where he was a Baker Scholar and was classmates with Jeffrey Immelt, Steve Burke, Stephen Mandel, James Long and Jamie Dimon.