Category Archives: #BrownleeGlobal

The Wealthy Next Door

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To accumulate wealth, you should start by reading and studying the behaviors of people who have successfully accumulated wealth and achieved financial independence.

In the groundbreaking financial book, “The Millionaire Next Door: Surprising Secrets of America’s Wealthy”, written in 1996 by William Danko and Thomas Stanley, found that people who appear wealthy may not actually be wealthy.

Their findings reveal that people who appear wealthy tend to overspend or live paycheck to paycheck. They often overspend on symbols of wealth like luxury vehicles and large homes — but actually have modest or negative personal net worths. On the other hand, wealthy individuals tend to live modestly in middle-income communities, drive modest vehicles, and shop at Costco Warehouse.

Lessons Learned from “The Millionaire Next Door” are enlightening on how the wealthy actually spend and save. Instead of appearing to be wealthy, they tend to:

Understand that Income Does Not Equal Wealth

It is a fact that higher-income households tend to have more wealth than lower- and middle-income households. But the size of a paycheck explains only approximately 30% of the variation of wealth among households. What really matters is how much of the income is not spent on discretionary things, but is saved and invested. On average, wealthy individuals invest nearly 20% of their income. And, it finds that those in the top quartile of wealth accumulation are prodigious accumulators of wealth (PAWs), according to Danko and Stanley

Work with a Budget

The majority of wealthy individuals have a budget. Of those who don’t, they have what the authors called “an artificial economic environment of scarcity,” more commonly known as “pay yourself first.” In other words, they invest a good chunk of their income before they can spend any of it. As the authors wrote, “It’s much easier to budget if you visualize the long-term benefits of this task.”

Manage their Spend

Nearly two-thirds of the wealthy can answer know how much their family spends each year for food, clothing, and shelter. In contrast, only 35% of high-income non-wealthy answered yes to this question. The wealthy manage and track their spending.

Have Defined Financial Goals

About two-thirds of wealthy have clearly defined short-, intermediate- and long-Term goals. Many of the wealthy are retired and have already reached their goal of financial independence.

Dedicate Time To Financial Planning and Education

Creating a budget, goal setting and financial planning all take time, but the wealthy were willing to spend it. Danko and Stanley found that people they labeled “prodigious accumulators of wealth” (PAW) spend many hours per month planning their investments. In fact, they found “a strong positive correlation” between investment planning and wealth accumulation. Each week, each month, each year, the wealthy plan their investments.

Buy and Hold Smaller Homes

Your purchase of a home — and how often you choose a new one — will determine your ability to accumulate wealth. According to The Millionaire Next Door, that wealthy family has been next door for quite a while. Half of the wealthy have lived in the same house for more than 20 years.

Stay Married

The majority of wealthy people are married and stay married to the same person. Several studies have shown that people who are married accumulate more wealth than those who are single or divorced. Conversely, it’s important to partner with someone who possesses similar healthy financial behavior and habits.

Buy and Hold Pre-Owned Vehicle

The majority of wealthy individuals own their cars, rather than lease. Approximately a quarter have a current-year model, but another quarter drive a car that is four years old or older. More than a third tend to buy used vehicles.

Live Happier Lives

Bottomline, living below your means is the one sure way to accumulate wealth and to live happier. Since, there exist a peace of mind living below your means and saving money. Danko and Stanley’s research indicates that, “financially independent people are happier than those in their same income/age cohort who are not financially secure.”

Essentially, when it comes to financial security and retirement planning, adopting the lifestyle of the wealthy means you can save more toward your financial goals and destination. That’s a formula that can help anyone to accumulate wealth and achieve financial independence.

  • References:
    1. Thomas J. Stanley, and William D. Danko, The Millionaire Next Door: The Surprising Secrets of America’s Wealthy Paperback, November 16, 2010
    2. https://www.getrichslowly.org/nine-lessons-in-wealth-building-from-the-millionaire-next-door/

    Written Financial Plan

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    “Establish a financial plan based on your goals.” 

    Research continue to show that creating a written financial plan is more effective and beneficial than simply thinking or talking about your goals. The research finds that more than two-thirds of people who have a written financial plan say they feel financially stable, whereas just 28% of those without a plan feel the same way, according to Schwab’s 2019 Modern Wealth Survey. Planners generally know what they’re saving for, how much they need to put away, and how long it will take them to reach their goals.

    “Long term thinking and planning enhances short term decision making. Make sure you have a plan of your life in your hand, and that includes the financial plan and your mission.” Manoj Arora, From the Rat Race to Financial Freedom

    Multiple surveys show that less than a third of Americans have a financial plan in writing. And among those without one, 2 in 5 Americans say it’s because they don’t think they have enough money or assets to merit a form and many say simply that it’s too complicated or they don’t have enough time to develop one.

    But in reality, financial planning is not inaccessible, too expensive or too complicated. A written financial plan is simply formalizing a person’s short-term goals and long-term goals and determining a path with saving and investing to achieve them. 

    Planning in small steps doesn’t take large sums of money to start.  In fact, financial planning can have a profound impact on lower-income households, by helping people improve their saving and budgeting habits. A written plan helps savers prioritize their goals and provides a way to measure success.

    Elements of a financial plan:

    • Create short, intermediate and long term goals
    • An emergency fund
    • A budget to determine cash flow and calculating net worth
    • Paying down and avoiding debt
    • Health and disability insurance
    • Start saving and investing early, pay yourself first and put it on automatic
    • Pay yourself first
    • Saving and investing for retirement and/or college
    • Saving and investing for shorter term goals like vacations or a home purchase
    • Trusts, wills and estate planning

    After creating your financial plan, you are bound to have times when you don’t reach your goals or you diverge from your plan. But, just like with a diet, if you make a bad food choice, it doesn’t mean you throw out your new way of healthy eating or exercising. Same thing with financial plan.

    Planners demonstrate better money and investing habits

    For those looking for a way to stay the course, Schwab’s survey shows that more than 60 percent of Americans who have a written financial plan feel financially stable, while only a third of those without a plan feel that same level of comfort. Essentially, those with a financial plan maintain healthier money habits when it comes to saving.

    A financial plan leads to better habits since financial planning isn’t just about investing. Many sound money management habits and financial decisions are more easily explained in quality-of-life terms—such as controlling consumer spending, the security that life insurance offers, or the peace of mind that having an emergency fund can provide. There are healthy money habits and there are good investing habits; a written financial plan can lead to both.

    “Spending is not the enemy, but it’s important to balance saving and spending so we can both enjoy life’s experiences along the way and achieve long-term financial security.”

    Creating financial goals and a financial plan isn’t going to help unless you stick to your plan over time. One good way to do that is to create a detailed quarterly schedule of money-related tasks.

    Successful planning can help propel financial security and net worth for those who stick with their plans.  Research shows that those sticking with their financial plans achieved an average total net worth three times higher than those who didn’t plan.

    References:

    1. https://www.aboutschwab.com/modernwealth2019
    2. https://content.schwab.com/web/retail/public/about-schwab/schwab-modern-wealth-survey-2019-atlanta.pdf
    3. https://www.schwab.com/resource-center/insights/content/does-financial-planning-help
    4. https://www.schwab.com/public/schwab/investing/why_choose_schwab/investing_principles
    5. https://www.schwab.com/resource-center/insights/content/10-steps-to-diy-financial-plan

    10 Money Lessons He Wished Heard — or Listened to — When Younger | MarketWatch

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    Updated: February 23, 2020

    Jonathan Clements, author of “From Here to Financial Happiness” and “How to Think About Money,” and editor of HumbleDollar.com., is the former personal-finance columnist for The Wall Street Journal. He has devoted his entire adult life to learning about money.

    That might sound like cruel-and-unusual punishment, but he has mostly enjoyed it. For more than three decades, he has spent his days perusing the business pages, reading finance books, scanning academic studies and talking to countless folks about their finances.

    Yet, despite this intense financial education, it took him a decade or more to learn many of life’s most important money lessons and, indeed, some key insights have only come to him in recent years.

    Here are 10 things he wished he’d been told in his 20s—or told more loudly, so he actually listened:

    — Read on www.marketwatch.com/story/10-money-lessons-i-wish-id-listened-to-when-i-was-younger-2020-02-12

    1. A small home is the key to a big portfolio. Financially, it turned out to be one of the smartest things he had ever done, because it allowed him to save great gobs of money. That’s clear to him in retrospect. But he wished he’d known it was a smart move at the time, because he wouldn’t have wasted so many hours wondering whether he should have bought a larger place.

    2. Debts are negative bonds. From his first month as a homeowner, he sent in extra money with his mortgage payment, so he could pay off the loan more quickly. But it was only later that he came to view his mortgage as a negative bond—one that was costing him dearly. Indeed, paying off debt almost always garners a higher after-tax return than you can earn by investing in high-quality bonds.

    3. Watching the market and your portfolio doesn’t improve performance. This has been another huge time waster. It’s a bad habit he belatedly trying to break.

    4. Thirty years from now, you’ll wish you’d invested more in stocks. Yes, over five or even 10 years, there’s some chance you’ll lose money in the stock market. But over 30 years? It’s highly likely you’ll notch handsome gains, especially if you’re broadly diversified and regularly adding new money to your portfolio in good times and bad.

    5. Nobody knows squat about short-term investment performance. One of the downsides of following the financial news is that you hear all kinds of smart, articulate experts offering eloquent predictions of plummeting share prices and skyrocketing interest rates that—needless to say—turn out to be hopelessly, pathetically wrong. In his early days as an investor, this was, alas, the sort of garbage that would give him pause.

    6. Put retirement first. Buying a house or sending your kids to college shouldn’t be your top goal. Instead, retirement should be. It’s so expensive to retire that, if you don’t save at least a modest sum in your 20s, the math quickly becomes awfully tough—and you’ll need a huge savings rate to amass the nest egg you need.

    7. You’ll end up treasuring almost nothing you buy. Over the years, he had had fleeting desires for all kinds of material goods. Most of the stuff he purchased has since been thrown away. This is an area where millennials seem far wiser than us baby boomers. They’re much more focused on experiences than possessions—a wise use of money, says happiness research.

    8. Work is so much more enjoyable when you work for yourself. These days, he earn just a fraction of what he made during my six years on Wall Street, but he is having so much more fun. No meetings to attend. No employee reviews. No worries about getting to the office on time or leaving too early. he is working harder today than he ever have. But it doesn’t feel like work—because it’s his choice and it’s work he is passionate about.

    9. Will our future self approve? As we make decisions today, he think this is a hugely powerful question to ask—and yet it’s only in recent years that he had learned to ask it.

    When we opt not to save today, we’re expecting our future self to make up the shortfall. When we take on debt, we’re expecting our future self to repay the money borrowed. When we buy things today of lasting value, we’re expecting our future self to like what we purchase.

    Pondering our future self doesn’t just improve financial decisions. It can also help us to make smarter choices about eating, drinking, exercising and more.

    10. Relax, things will work out. As he watch his son, daughter and son-in-law wrestle with early adult life, he glimpse some of the anxiety that he suffered in my 20s and 30s.

    When you’re starting out, there’s so much uncertainty — what sort of career you’ll have, how financial markets will perform, what misfortunes will befall you. And there will be misfortunes. he’d had my fair share.

    But if you regularly take the right steps—work hard, save part of every paycheck, resist the siren song of get-rich-quick schemes—good things should happen. It isn’t guaranteed. But it’s highly likely. So, for goodness’ sake, fret less about the distant future, and focus more on doing the right things each and every day.

    You can follow Jonathan Clements on Twitter @ClementsMoney and on Facebook at Jonathan Clements Money Guide.

    Schwab Sector Views: New Sector Ratings for the New Year | Charles Schwab

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    By Schwab Center for Financial Research

    Macro environment:  Rising stocks and Treasury yields, fading U.S. dollar

    We [Charles Schwab] continue to see a gap between the health of the manufacturing sector and that of the services sector and consumers. Despite recent U.S.-China trade war de-escalation, manufacturing activity remains under strain from ongoing tariffs, new tariff threats and still-elevated trade policy uncertainty, combined with slow global growth. On the other hand, the services sector continues to thrive amid strong consumer confidence and consumption, in large part due to a strong job market. 

    While economic momentum overall has slowed, we do see signs of stabilization in both the United States and abroad. Accommodative monetary (central bank) and fiscal (tax cuts and government spending) policies have provided a strong tailwind for the global economy.

    The signing of a “phase-one” trade deal between the U.S. and China, combined with congressional passage of the new U.S.-Mexico-Canada (USMCA) trade pact, have eased some trade uncertainty. Amid this apparent global economic revitalization and shrinking trade risk, Treasury bond yields have risen, the value of U.S. dollar has declined and U.S. stocks have advanced to record highs.

    However, geopolitical risks—while reduced somewhat—remain elevated, and equity valuations are high. Given this combination, we think bouts of increased volatility and more frequent pullbacks are possible. This doesn’t necessarily mean the rally won’t keep going—it’s likely the strong momentum in stocks may continue until there is a catalyst sufficient to deflate the current extremely bullish investor sentiment—but the risks need to be considered.

    — Read on www.schwab.com/resource-center/insights/content/sector-views

    Huawei’s Threat to Communications Networks

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    Updated: Saturday, 2/15/2020

    “Most people are starting to realize that there are only two different types of companies in the world: those that have been breached and know it and those that have been breached and don’t know it. Therefore, prevention is not sufficient and you’re going to have to invest in detection because you’re going to want to know what system has been breached as fast as humanly possible so that you can contain and remediate.” Ted Schlein, a venture capitalist with Kleiner Perkins Caufield & Byers.

    To begin the discussion, it is important to understand that communications, such as telecommunications and internet data networks, are vital to national security and are critical infrastructure for every sovereign nation. Since critical electrical grids, 5G technology, autonomous vehicles and even hospitals rely on the communication networks.

    U.S. Intelligence Sharing

    U.S. Defense Secretary Mark Esper warned allies that letting the Chinese firm Huawei build their next-generation, or 5G, network risks their security cooperation and information sharing arrangements with U.S. intelligence and national security agencies. The U.S. SECDEF remarked that, “reliance on Chinese 5G vendors, for example, could render our partners’ critical systems vulnerable to disruption, manipulation and espionage,” in a speech at the high-level Munich Security Conference in early 2020. “It could also jeopardize our communication and intelligence sharing capabilities, and by extension, our alliances.”

    “National security is a serious matter and I do not think it is improper to discuss such details in a public forum.” Narendra Modi

    One recent morning on Yahoo Finance, an on-air guest was dismissive about Huawei 5G technology and the U.S. Administration’s allegations that the Chinese technology giant has built backdoors to communication networks that they installed across the globe. Additionally the on-air guest stated that the Trump Administration needs to provide evidence of Huawei’s complicity to spy for China.

    What the guest commentator omitted from his less than transparent comments was that unlike U.S. technology and telecommunications companies, Huawei has functioned as a tool for surveillance and espionage for the Communist Chinese government. In addition, they have been significantly subsidized for more than a decade by the Chinese authoritarian government. Thus, this is the reason that they can substantially underbid their Western competitors on 5G network projects across the globe.

    Furthermore, despite Huawei’s adamant denials, they have built backdoors into the communications systems that include Huawei technology, equipment and software, or in networks that have been installed by them or their affiliates. Essentially, a backdoor is a method of bypassing a network’s security protocols to access communications or computer network.

    Vodafone in Italy

    U.S. Intelligence agencies have repeatedly warned allies regarding the potential threat posed by Huawei’s technology if installed in 5G networks. Back in April 2019, Yahoo Finance reposted a Bloomberg article that Vodafone Group, Europe’s biggest phone company, discovered hidden backdoors in the software installed by Huawei that could have given Huawei or the Chinese government unauthorized access into the Vodafone’s voice and data network. Although the backdoor was discovered and reportedly removed by Huawei, subsequent investigations by Vodafone discovered the the backdoor remained.

    “We’re talking about the fate of our economy and the questionable resiliency of our Nation’s critical infrastructure. Why are experts so polite, patient, and forgiving when talking about cybercrime, cyber security, and National Security? The drama of each script kiddie botnet attack and Nation State pilfering of our IP has been turned into a soap opera through press releases, sound bites and enforced absurdity of mainstream media. It’s time for a cybersecurity zeitgeist in the West where cyber hygiene is a meme that is aggressively distributed by those who have mastered it and encouraged to be imitated by those who have experienced it.” James Scott.

    Deterring Chinese cyber-espionage

    We must not allow ourselves either to be misled by Chinese repeated denials or to rely solely on U.S. entertainment media’s reporting by omission regarding the cyber security risks posed to U.S. and its allies’ communications networks once Huawei’s equipment is installed. Effectively, Huawei is a Chinese Communist state-controlled enterprise. And, it operates at the behest of the Chinese Communist Party in surveilling their own citizens, and assisting with spying and espionage against foreign nations.

    Bottomline, Huawei, and its affiliates, represent a national security threat to the United States, our allies, and our privacy. If they’re permitted to install their technology, equipment and software in critical communications infrastructure, backdoors and unencumbered access would exist. Their technology does pose a real threat to the economy, the critical communications networks and the critical infrastructure that relies on the communications backbone.

    References:

    1. https://www.defensenews.com/congress/2020/02/15/esper-huawei-5g-could-risk-us-information-and-security-ties/?utm_source=facebook.com&utm_medium=social&utm_campaign=Socialflow+DFN
    2. https://www.c4isrnet.com/battlefield-tech/it-networks/5g/2020/02/12/white-house-claims-huawei-equipment-has-backdoor-for-spying/
    3. https://www.state.gov/huawei-and-its-siblings-the-chinese-tech-giants-national-security-and-foreign-policy-implications/
    4. https://www.forbes.com/sites/haroldfurchtgottroth/2017/05/08/chinese-government-helps-huawei-with-5g/#67ea148b6bae
    5. https://www.rickscott.senate.gov/sen-rick-scott-attorney-general-barr-keep-huawei-out-us-markets
    6. https://securityfirstcorp.com/cyber-security-quotes/

    Schwab Sector Views: New Sector Ratings for the New Year | Charles Schwab

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    Macro environment:  Rising stocks and Treasury yields, fading U.S. dollar

    We continue to see a gap between the health of the manufacturing sector and that of the services sector and consumers. Despite recent U.S.-China trade war de-escalation, manufacturing activity remains under strain from ongoing tariffs, new tariff threats and still-elevated trade policy uncertainty, combined with slow global growth. On the other hand, the services sector continues to thrive amid strong consumer confidence and consumption, in large part due to a strong job market. 

    While economic momentum overall has slowed, we do see signs of stabilization in both the United States and abroad. Accommodative monetary (central bank) and fiscal (tax cuts and government spending) policies have provided a strong tailwind for the global economy. The signing of a “phase-one” trade deal between the U.S. and China, combined with congressional passage of the new U.S.-Mexico-Canada (USMCA) trade pact, have eased some trade uncertainty. Amid this apparent global economic revitalization and shrinking trade risk, Treasury bond yields have risen, the value of U.S. dollar has declined and U.S. stocks have advanced to record highs.

    However, geopolitical risks—while reduced somewhat—remain elevated, and equity valuations are high. Given this combination, we think bouts of increased volatility and more frequent pullbacks are possible. This doesn’t necessarily mean the rally won’t keep going—it’s likely the strong momentum in stocks may continue until there is a catalyst sufficient to deflate the current extremely bullish investor sentiment—but the risks need to be considered.
    — Read on www.schwab.com/resource-center/insights/content/sector-views

    Uncertain Financial Markets

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    “Don’t gamble. Take all your savings and buy some good stock and hold it till it goes up; then sell it. If it don’t go up, don’t buy it.” Will Rogers

    Since the financial crisis of 2008-2009, the U.S. stock market has been on a long-term uptrend. In the crisis’ aftermath, a nearly 11-year bull rally emerged from its ruins becoming the longest-ever uptrend in Wall Street history.

    And, the American economy is equally robust as consumer spending remains strong and as the unemployment rate (3.5%) remains at the lowest in 50 years. Despite low employment, Federal Fund interest rates still sit near historical lows and the 10-year Treasury yields only 1.8%.

    Financial Crisis

    Bringing back painful financial memories for investors, the financial crisis of 2008-2009 wreaked havoc on the stock market. During the crisis, the S&P 500 index (SPX) lost 38.5% of its value in 2008, making it the worst year since the nadir of the Great Recession in 1931.

    Today, many economists and financial industry pundits conclude that global economies will face an increasingly uncertain and potentially volatile future. Those future concerns range a gambit of political, geopolitical, economic and socio-political issues.

    The uncertainties and concerns include the upcoming U.S. presidential elections, potential turmoil in the Middle East, growing fear regarding cross border spread of the Novel Corona virus, and the growth concerns regarding the economies of the rest of the world economies.

    Investing in an Uncertain Environment

    “Never under estimate the man who over estimates himself…he may not be wrong all the time.” Charlie Munger

    When it comes to investing in an uncertain environment, it is difficult to know what actions to take. But, nobody knows with certainty what is going to happen next in the markets or can predict the direction with certainty of the global economy. Despite the many self proclaimed stock picking experts who promote their ability to forecast the markets and abilities to select the next Amazon-like stock, it important to always remember that no one knows what will happen in or can accurately forecast the future.

    Recently, Charlie Munger, Vice Chairman of Berkshire Hathaway, shared his thoughts about investing in general and regarding Elon Musk and Tesla, specifically. He commented that Elon is “peculiar and he may overestimate himself, but he may not be wrong all the time…”.

    Additionally, Munger commented that he “…would never buy it [Tesla stock], and [he] would never sell it short.” Prudent investors would be wise to heed Munger’s advice and be concerned not only about potential rewards but, more importantly, also concerned about potential risks investing in hot, high flying stocks.

    In Munger’s view, there exist too much “wretched excess” in the market and investors are taking on too much unnecessary risk. He worries that that there are dark clouds looming on the horizon. And, he believes markets and investors are ill-prepared to weather the coming market “trouble”.

    References:

    1. https://www.marketwatch.com/story/wretched-excess-means-theres-lots-of-troubles-coming-warns-berkshire-hathaways-charlie-munger-2020-02-12

    Jobs, Coronavirus, and the Budget | First Trust Economics Blog

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    Brian S. Wesbury, Chief Economist

    Date: 2/10/2020

    In January, US payrolls expanded by 225,000, not only beating the consensus forecast, but also forecasts from every single economics group.  Since January 2019 (12 months ago), both payrolls and civilian employment – an alternative measure of jobs that includes small-business start-ups – are up 2.1 million.  The labor force – those who are either working or looking for work – is up 1.5 million, while the jobless rate fell to 3.6% from the 4.0%.

    The labor force participation rate (the share of adults who are either working or looking for work) increased to 63.4% in January, the highest reading since early 2013.  Participation among “prime-age” adults (25 to 54) hit 83.1%, the highest since the Lehman Brothers bankruptcy in 2008.   

    Meanwhile initial claims for unemployment insurance hit 202,000 in the last week of January, and initial claims as a percent of all jobs are at the lowest level ever.  In other words, the job market and the economy look strong.

    Only a few months ago, some analysts were saying that the inversion of the yield curve – with short-term interest rates above long-term rates – was signaling the front edge of a US recession.  Now a recession seems nowhere in sight.

    Lately, financial markets have become very jumpy on any news – good or bad – regarding the coronavirus.  We aren’t immunologists (or doctors) and would never make light of a virus that has killed more than 900 and infected over 40,000, but data released by the World Health Organization (WHO) cautiously suggests a positive turning point has been reached.

    — Read on www.ftportfolios.com/retail/blogs/economics/index.aspx

    AT&T CEO Interview on CNBC Squawk Box

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    Friday morning from the AT&T Pebble Beach National Pro-Am, CNBC Squawk Box co-anchors Joe Kernen and Becky Quick interviewed AT&T CEO and Chairman, Randall Stephenson.

    In this far ranging early morning interview, Randall discussed the current and future outlook of the large cap communications and entertainment company he leads.  Effectively, he stated that he was very bullish on the projected economic output in 2020 for the company.

    He stressed that the top priority for the AT&T was to pay down the massive debt incurred from its acquisition of Time Warner.  He commented that the goal was to bring down debt to a ratio of 2.5X debt-to-EBITDA and this past year, they successfully paid off $30 billion in debt.  Additionally, Randall shared that AT&T realized a 45% total shareholder return in calendar year 2019.

    Media Business

    Overall, he commented that AT&T’s media business, renamed Warner Entertainment, is doing well.  In the short term, they expect to roll-out HBO Max in May 2020 which will feature Warner Bros. extensive inventory of content, including the TV series “Friends” and “The Big Bang Theory”. and content from Turner’s networks.

    Currently, premium HBO streaming has approximately 30 million subscribers.  Those subscribers will automatically convert to HBO Max once the it comes on-line. He expects that HBO Max will grow to 50 million subscribers.

    Financials

    Activist shareholder, Elliot Management, bought a large stake in AT&T back in September 2019 and criticized the management and board leadership, and the direction of the company.  Elliot Management in a letter wrote that AT&T’s stock could potentially surge to above $60 a share by 2021 if the company “increased strategic focus, improved operational efficiency” and “enhanced leadership and oversight.”

    Furthermore, Elliot Management questioned the company’s succession plan of tagging Warner Media’s CEO and AT&T COO, John Stankey, as CEO Randall Stephenson’s heir apparent.  They expressed concerns with Stankey’s decision making. his lack of experience operating and communications and entertainment company, and his ability to manage the conglomerate.

    Bottom line is AT&T’s financial future appears highly dependent on the success of HBO Max growing paid subscriptions, management paying down the high level of corporate debt on its balance sheet, and developing a coherent strategy that can effectively discover and employ the synergies of AT&T’s diverse assets and enterprises.

    Sources:  https://www.cnbc.com/2020/02/07/att-ceo-randall-stephenson-on-promise-to-remain-ceo-through-2020.html?&qsearchterm=randall%20stephenson

    Bill Miller 4Q 2019 Market Letter

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    “Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.” Warren Buffett

    Bill Miller, CFA, is the founder of Miller Value Partners, and currently serves as the Chairman and Chief Investment Officer. His fourth quarter 2019 Market Letter released 13 January 2020, to clients is loaded with useful insights for investors and followers of the financial markets. The letter has been discussed thoroughly by financial pundits and the financial entertainment media.

    Market forecasts delivered by economists and the financial news entertainment media pundits on networks, such as CNBC, are rarely useful or insightful or accurate.  Bill Miller cited in his letter that “…the future is not forecastable with any degree of granularity”. 

    The method most forecasters use is either to follow the consensus or to “believe that tomorrow will look pretty much like yesterday.”  He further mentioned that “one of the 20th century’s greatest economists, was once asked how far into the future a good economist could forecast”. He quipped: “One quarter back.””

    “Short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.” Warren Buffett

    Essentially, no economist or financial guru can accurately or reliability forecast the market’s direction (rise, flat or pullback) or its relative velocity of change. Despite their self proclaimed vast financial experience and inside knowledge of the inner workings of equity stock markets, the sophisticated financial tools available to them, and their early access to market news, they remain unable to reliably forecast the market.

    Miller concluded in his letter that, “stocks will not move in a straight line higher even if the bull market continues in 2020, as I believe it will.”  He stated that,  “setbacks and corrections should be expected, but unless something causes the economy to tip into recession and earnings and cash flows to decline, which I do not expect even if the geopolitical situation gets grimmer, then the path of least resistance for stocks remains as has been for a decade: higher.”

    To read the entire letter, go to:  Bill Miller 4Q 2019 Market Letter

    Sources:

    1. https://millervalue.com/bill-miller-4q-2019-market-letter/
    2. https://www.evidenceinvestor.com/warren-buffetts-advice-investors-25-quotes/