NASDAQ 5,000 Again Fifteen Years Later

Fifteen years ago I called up my Merrill Lynch full service broker to tell him to sell Qualcom at $80.00 -- we had bought it for about two bucks. I let him talk me out of it. I eventually sold Qualcom for $40 to $50 a share, and gradually transferred my various accounts to a discount brokerage where I manage investments on behalf of our family free of professional advise or discussion. While we listen to experts on the financial networks and read their articles on the web from time to time, to pull out nuggets of information here and there, we don't do what they tell us to do and we certainly don't waste our money paying them. That recipe doesn't work and it never will. You are much better off learning about markets, paying attention to their shifting sands and calling your own shots. The lodestar principal? Buy low and sell high (yes, do sell). It's not so complicated. Take it from there, I say, and watch your investments take off.

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Glacier Bancorp Annual Shareholders Meeting

Last week we drove up to Kalispell to attend the annual shareholders meeting of Glacier Bancorp (GBCI). Glacier is a holding company of community banks, headquartered up the Flathead Valley, a gateway to Glacier National Park and hence the name.  It is one of our largest stock holdings, a conservatively and well managed company that unlike most all the rest of the banking industry did not accept TARP money from Uncle Sam and never suspended, did not even cut, its dividend during the financial crisis.

We previously blogged on how we came to invest in Glacier in the first place, and commented on some of its stock price meanderings earlier this year.

For some, the most interesting part of the trip likely may be the scenic photos I took on the way up.  I took a less traveled route after cutting up to Helena, from whence I drove on US 12 over the continental divide at McDonald Pass, followed the historic Old Mullan Trail down the valley before cutting north on SRs 141 and 200 before turning off through heavily wooded landscape and scenic lake vistas (many of which were still partially frozen) along SR 83. On the way home, I traversed the southern edge of Glacier NP across to Shelby and then down south through Great Falls and Helena. Here are some of the views.

Pasture and mountains (click to enlarge).

Retired Life

The thing about being retired is that you don't have to be worried in the least about whether you are wasting your time or doing things that might appear weird or out of place. Without the yoke of a 9-to-5 job, or an all-consuming personal business, or a supervisor or a manager to pin you down, choices open up everywhere.

Sometimes on the way home from the golf course (nothing unusual about that for a retired guy) I will just veer off, head down to Cottonwood Road, wind around the bottom of the mountain slopes and then turn up Hyalite Canyon to the reservoir or beyond,

Hyalite Canyon scarp and cliffs.

enjoying the scenery every mile of the way, and taking in the joy of hikers, campers, fisherpeople, hunters and boaters, here and there.

Then there was last January. For a week I picked up stakes and hung out in Bismarck, North Dakota, during its coldest winter in decades. One night I ate at a Red Lobster, because, well, I never had. There were blizzard and blizzard-like conditions daily. I mean, what kind of a whacko nut travels to Bismarck in the middle of the winter except someone whose work compels it? Me! The payoff has been some extraordinary blog posts on family history, with more to come. I actually can't wait to get back to the State Historical Society of North Dakota and dig some more.

Now, I was confident the Bismarck trip would have a substantial payoff. My next journey, I really don't know.

What's Happening With Glacier Bancorp?

Our To Invest in a Bank post from last October has caught fire. It will easily lead our blog in February page views.

In that post, we wrote about one of our Steady Eddie stock picks. Glacier Bancorp (GBCI) is located up the Flathead valley in Kalispell, Montana. Glacier stock had just hit an all time high of $27.82 per share. It continued to rise. I said the market was acting like it expected another increase in Glacier's dividend when the snows came. Sure enough, Glacier announced a dividend increase on November 26, helping to drive the stock to new all-time high closes, peaking at $30.87 on December 23, 2013.

However, the last week of  January and the first week of February were tough on Glacier, dropping its stock price as low as $25.30 a share on February 4.  Part of the drop was a market hit. Glacier tracked the regional bank index down.

2014 YTD stock prices, GBCI redline and KRE (regional banking index) blue line.

But Glacier dropped more than the regional bank stock market overall largely because GBCI's fourth (calendar) quarter earnings were a meet (says Yahoo) or a miss (says Ticker Report). Glacier's three previous quarterly earnings were a beat, which helped to push Glacier's stock price up much faster than the market in 2013. In the weird world of Wall Street, just meeting earnings expectations often drives stock prices down. Further, a director of of the corporation sold about a third of his large stake in the bank in early February, shaking investor confidence.

Earnings per Share in Cents

Glacier Bancorp

Quarters Ending In

Earnings History Mar 2013 Jun 2013 Sep 2013 Dec 2013 EPS Est 0.28 0.30 0.33 0.36 EPS Actual 0.29 0.31 0.35 0.36 Difference 0.01 0.01 0.02 0.00 Surprise % 3.60% 3.30% 6.10% 0.00%

Source: Yahoo Finance

Yesterday, Glacier was updated from a neutral to a buy rating by analysts at one of the firms that tracks the bank.

Glacier Bancorp (NASDAQ:GBCI) was upgraded by stock analysts at DA Davidson from a “neutral” rating to a “buy” rating in a report issued on Wednesday, StockRatingsNetwork reports. The firm currently has a $33.00 price target on the stock, up from their previous price target of $31.00. DA Davidson’s target price points to a potential upside of 25.62% from the company’s current price.

The buy recommendation popped Glacier's stock price on February 26th by $0.98, or 3.7 percent, back to $27.25 a share, which means the stock ticked back to recover some of the of the distance it had recently lost to the regional bank index. So it goes.

How Not to Invest

If you accused me of talking up successes and ignoring failures in my investment posts you would be largely correct. Investing is like golf. You need to think positively. Don't think about not hitting the ball in the water to the right; envision your ball landing safely in the fairway on the left. Don't hit the ball over the gaping sand trap in the front of the green; strike a solid shot to the green's center. 

Forget about what not to do. Sport psychologists say your subconscious focuses on the "to do" and forgets the preceding "not." If you are thinking I don't want to hit the ball in the water you pretty much doom your shot to a watery grave. For that reason, when I write about investing, mostly what I write about is what I've done well. I get better results thinking about making money than about not losing it. You probably will too.

That's not to say there is nothing to learn from the negatives. Get mad for a minute or two if you need to, but get over it. Whether it is investing, relationships, lifestyle, work or sports, when you bottom out, it is best to learn quickly -- think in terms of what could have been done better and different so the lesson can be brought forward. While there is no payoff in dwelling on failure, there is even less payoff in repeating it. But when it comes time to execute, see the shot you want to hit, the swing you want to make, or the return you want to earn, and execute accordingly.

Now let me talk about one of my most bone-headed investment moves, starting with the lame excuse that I had conjured in the beginning, an excuse that pretty much doomed the effort before I even started. The amount was $5,000. It wasn't much money I thought. I mean, $5,000 is a lot to spend.  It is plenty to make.  But not much to invest, right?  Well, I wasn't thinking clearly because that is a lot of money to waste.

It was 2008. My managed IRA money was in old-style tax-deferred IRA accounts that I had first opened in the 1980's. The way the numbers worked out in 2008 I was eligible to contribute $5,000 to an IRA. I contributed whenever I could. And I bought into the conventional thinking that a Roth IRA was the right choice, which doesn't shelter current income but excepts investment proceeds from income for all time. 

To start a Roth I needed to open new account. I realized that I probably would not be able add to the Roth IRA in subsequent years. So this was to be a one-shot deal. At the time, because of the market volatility, I was managing my other accounts day by day. But I convinced myself, under the circumstances, the best and easiest thing to do for this small account was to forget about market volatility. Don't waste my time managing $5K. This would be an invest it and forget it account.

With the aging of the Baby Boomer generation, the assisted living space seemed like a can't miss proposition. I chose Sunrise Senior Living as my primary Roth IRA investment. Sunrise was an industry leader, flooding affluent ZIP Codes with its mansion concept facilities.

McLean VA Sunrise Senior Living "Mansion"

Accounting irregularities had surfaced and beaten down the price of the stock, but it looked like the bad accounting affected timing of revenues and profits more than the ultimate amounts. 

I invested virtually the entire Roth IRA in Sunrise and tried to forget about it. The stock went down I noticed. It will come back I thought. The stock went down further. Oh, it will come back I thought again. The stock dropped further and further. In less than a year my $5,000 plummeted to less than $400, a decline of 93 percent.  It turned out that Sunrise had played the real estate bubble to get itself into a horrible mess in Europe; and in the U.S. it had started several high rise condo developments that became insolvent. Sunrise cratered, it seemed almost overnight, from industry leader to a leading candidate for bankruptcy.

I felt like a fool.  My tax shelter turned into a tax liability because Roth IRA losses were not deductible, and neither could they be used to offset capital gains earned elsewhere.

What were the lessons? I learned to diversify. I learned there is no such thing as invest it and forget it. And I learned to sell a stock in free fall. Then buy it back for less if I think it has a chance.

And I started paying close attention to Sunrise. And what I ultimately learned, most important of all, was that Sunrise was not likely to fold. Sunrise really was everything that I initially thought it was. It was merely a question whether and when Sunrise could get beyond its huge missteps. Over a period of months, reviewing SEC filings and press releases, listening to Sunrise's quarterly conference calls and carefully reviewing its financial statements, I concluded that Sunrise's lenders were in control and were working diligently to help it remain solvent. So I bought thousands of additional shares of Sunrise at a dollar and change in my other brokerage accounts.

The fall and rise of my Roth IRA.

I also held on to Sunrise in my Roth IRA account. The assisted living company's came back to the point that I sold my Roth holdings of Sunrise in the summer of 2012 for close to half their initial purchase price. I promptly used the proceeds to buy Facebook stock near its all time low. Now my Roth account balance is closing in on the initial investment; I may actually benefit from the Roth tax advantaged status some day.  

Effective January 9, 2013 Sunrise sold out to Healthcare REIT for $14.50 a share. We went out to dinner that night and had a nice little celebration. Good luck to all!

  

Breaking up Cartels: Benefiting Indivdual Investors

The Wall Street Journal gives thanks this Thanksgiving holiday on behalf of the individual investor. The Journal says be grateful for legal and regulatory reforms that broke up the U.S. brokerage cartel and for increased transparency, all of which have operated to make it easier and less expensive for individuals to successfully invest. 

Transparency increased by rule in fits and starts, and was facilitated enormously by the internet which makes most firm, industry and financial data and information click-available in real time and casts light which makes it much more difficult for scammers to hide from the truth. The regulatory sea change that curbed the brokerage cartel started during the Ford administration.

On January 23, 1975, the SEC formally adopted rule 19b-3, ending all fixed commission rates charged to non-member investors, effective on May 1st. SEC Chairman Garrett stated, "For the first time in almost 200 years, the rates of commission that brokers charge to public customers …will not be determined by exchange rules. Market forces will operate to set these prices and there may be variances from firm to firm."

Chuck Schwab, to the ever lasting enmity of brokerage industry brethren at Merrill Lynch, Morgan Stanley, EF Hutton and other old line brokerages, understood opportunity when he saw it. 

Wall Street rumbled, and Charles R. "Chuck" Schwab became one of the first to embrace new trading rules that opened the way to discount brokerage, putting him on a path that would eventually make him a household name. 

The new rules abolished fixed commissions that had kept the cost of trading stock in the stratosphere, giving masses of average American investors a potent whiff of freedom.

Before that, investing opportunities for millions of households long had been constrained by a clubby brokerage industry that indulged large institutions at the expense of individuals. 

The game changed substantially on May 1, 1975, when the brokerage industry deregulated commissions, acting on a Securities and Exchange Commission mandate. For the first time in more than 180 years, trading fees were set by market competition. 

Deregulation paved the way for an entire new industry -- discount brokerage -- in which ordinary investors bought and sold securities without a stockbroker, making their decisions themselves.

The Journal interviewed James Cloonan who founded the nonprofit American Association of Individual Investors in 1978. "There's more opportunity to do well, and less opportunity to be cheated, than there was in the past."

If you are pessimistic about investing, Mr. Cloonan says, you need to recognize how far individual investors have come. When AAII began, you had to spend hours in a public library or write away to a company just to see its financial statements. Brokerage costs and mutual-fund fees were outlandish; tax rates were larcenous. 

Had you bought 100 shares of a stock trading at $20, you would have paid a commission of at least $42 in the late 1970s, according to historical data from Theodore Aronson of AJO, a money-management firm in Philadelphia. Research by Charles Jones, a finance professor at Columbia University, shows that you also would have incurred roughly 25 cents a share in "spread," the difference between what the seller was willing to accept and what you had to pay. 

All told, your trading costs probably exceeded 3%—and would have been much higher on less frequently traded stocks. The same trade today could cost you under $10, or 0.5%, at least 80% less than in 1978. 

In 1978, most mutual funds charged "sales loads," or commissions, up to 8.5%. You often had to pay the same to reinvest your dividends back into the fund. Total return—earning not only the change in market price but also the growth of your reinvested dividends, a concept that investors today take for granted—was almost entirely hypothetical. 

If you did make any money, Uncle Sam took roughly half.

As a leading example of how commissions have plummeted, here is Fidelity's current commissions schedule.

Trading Commissions and
Margin Rates 

Whether you trade stocks, options, bonds, or CDs, you'll receive competitive online commission rates—lower than Schwab, TD Ameritrade, and E*Trade.

Online Commissions, Fees, and Concessions

Stocks
All online U.S. equity trades Any number of shares or trades	$7.95 per trade
Options
All online options trades	$7.95 per trade, plus $0.75 per contract
ETFs
Purchase 65 iShares® ETFs online	Free
Purchase 10 Fidelity sector ETFs online	Free
All other ETFs	$7.95 per trade
Bonds2
U.S. Treasury Auctions, incl. TIPS Auctions	Free
U.S. Treasury Bills, Notes, Bonds, incl. TIPS	Free
GSE (Agency Securities), secondary CDs	$1.00 per bond
Municipals	$1.00 per bond
Corporates (BBB– or higher), CATS/TIGRS	$1.00 per bond
Corporates (BB+ or lower)	$1.00 per bond
Primary market CDs	Free
Secondary market CDs	$1.00 per bond
Mutual Funds*
Fidelity and non-Fidelity funds	Free
Most FundsNetwork Transaction Fee funds	$49.95 flat fee**

Current day bid/ask spreads (analagous to the difference between wholesale cost and retail price) for most large cap and other high volume trading stocks are fractions of a cent. For mid and many small cap stocks the spread is typically is no more than a penny or two. Although many mutual funds continue to charge a load when sold in less than a prescribed period of time, their sales charges are increasingly irrelevant because with the advent and enormous growth of ETF's (Exchange Traded Funds) you don't even have to buy a mutual fund to buy a mutual fund.

You pay either the $7.95 stock trading commission or nothing at all. Fidelity offers 75 commission free ETF's, including the following.

iShares ETFs by asset class category

• Domestic Equity

• International Equity

• Fixed Income

• Commodity

	Growth	Blend	Value
Large-Cap	S&P 500 Growth Index (IVW Loading... )	Core S&P Total U.S. Stock Market (ITOT Loading... )* Core S&P 500 (IVV Loading... )* S&P 100 Index (OEF Loading... )	S&P 500 Value Index (IVE Loading... )
Mid-Cap	S&P Mid-Cap 400 Growth Index (IJK Loading... )	Core S&P Mid-Cap ETF(IJH Loading... )*	S&P Mid-Cap 400 Value Index (IJJ Loading... )
Small-Cap	S&P Small-Cap 600 Growth (IJT Loading... )	Core S&P Small-Cap (IJR Loading... )* Russell Micro-Cap Index (IWC Loading... )	S&P Small-Cap 600 Value Index (IJS Loading... )

Specialty

• Dow Jones Select Dividend Index (DVY

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• Dow Jones U.S. Real Estate Index (IYR

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• S&P U.S. Preferred Stock Index (PFF

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• MSCI USA Minimum Volatility Index (USMV

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  )

A dubious pleasure of living in the great state of Montana is being represented by the self described "dirt farmer" from Havre, one Jon Tester. Tester was re-elected with a plurality of the vote after his allies spent heavily in the final weeks before the 2012 election supporting a large-scale advertising push for the Libertarian Party candidate Dan Cox, attacking Tester's Republican opponent Denny Rehberg. Tester has seniority now; he used that to accede as Chairman of "the powerful Senate Banking Subcommittee on Economic Policy" which has "oversight responsibility for the recently created Financial Stability Oversight Council charged with addressing systemic risk to the financial system." Before he was a full time dirt farmer Tester taught music in the public schools.

Senator Jon Tester's United States Senate Financial
Disclosure Report covering 2012

From Senator Tester's financial disclosure statement (filing required by law) we can see what his personal experience is with finance and the financial system. 

The man is 57 years old. Tester has no debts. But his sum total financial assets are in the range of $16K to $65K range. He owns somewhere between $1,000 and $15,000 in stocks, that being AEP, a boring, stodgy electric power utility. On Suze Orman's "How am I doing metric" Jon Tester would score a big fat "F". 

But Jon Tester knows what is good for the individual investor. Jon Tester says he wants the SEC to impose a uniform fiduciary duty on brokers.

A rising leader on the Senate Banking Committee today pushed the Securities and Exchange Commission to advance a regulation that would subject brokers to an investment advice standard. 

“I would encourage the commission to make this a priority because I think there is an absolute benefit to investors,” Sen. Jon Tester, D-Mont., told SEC Chairman Elisse Walter at a hearing on implementation of the Dodd-Frank financial reform law. 

Mr. Tester recently was appointed chairman of the Senate Banking Subcommittee on Securities, Insurance and Investment.

Let me translate how a fiduciary duty operates. It requires that your broker know you, study you, analyze you and make decisions for you. And it would mark a return to the high commission, high regulatory and market obstacle regime that's been chipped away over the last three and one half decades.  

Under uniform fiduciary duty, forget about placing an order through the internet, and expect the cost of trades to increase hundreds of percent.  Or alternatively, face a requirement to turn over a percentage of your assets every year to some faceless MBA who knows and understands you about as well as I do. 

Dudes and dudettes, if you want independent investment advice, you can pay for it, usually by turning over a percent or two of your financial assets every year to a financial adviser.  But I, and millions of others don't need or want it. I wrote the junior senator from Montana a missive, where I said, 

That is a horrible idea.  I maintain brokerage accounts with a discount broker.  I don’t need nor want you or a broker to tell me what financial decisions and investments I should or should not make.  I don’t want to pay for useless advice.  And I most vehemently object to sharing my private financial and personal information, which are necessary to consummate a fiduciary relationship, with crooks that populate the financial sector or with any of your conflicted, hand wringing financially illiterate nanny state interlopers, who are looking for ways to carve continuous fees from my hard earned, saved and invested assets. 

Senator Tester distinguished himself in response by doing something that no other House member or Senator had done to me prior. He ignored my communication. No response nine months later, not even a thank you for your thoughts. Senator Tester, why don't you stick to regulating trucks and leave the investing to us?

Senator Jon Tester blowing his own horn.