The Long Term Investor

WELL....another day in the can. Red of course....but plenty of gains left from yesterday. got beat by the SP500 by .26%. I am now about 4% from my all time high. I will take it in light of the past 2-4 weeks of erratic action in the short term markets.

 

OK....seems about right to me.......another little article:

TREASURIES-Benchmark U.S. yields dip for third straight day

https://finance.yahoo.com/news/treasuries-benchmark-u-yields-dip-154948713.html

(BOLD is my opinion OR what I consider important content)

"Benchmark U.S. yields dipped on Tuesday for a third straight session after jumping to a one-year high last week, ahead of comments from two Federal Reserve officials as investors look for data to pick up later this week, highlighted by Friday's payrolls report.

Federal Reserve Board Governor Lael Brainard speaks on the U.S. economic outlook and monetary policy before virtual Council of Foreign Relations at 1 p.m. EST (1800 GMT) while Federal Reserve Bank of San Francisco President Mary Daly speaks to a virtual event of the Economic Club of New York at 2 p.m. (1900 GMT). Fed officials in recent days have largely been in sync in their comments that they do not see inflation becoming problematic, after Chair Jerome Powell indicated last week the central bank will remain accommodative until inflation has exceeded 2%.

"Back in August they made a major transitional shift in the nature of monetary policy and it wasn’t fully appreciated at the time, and people are slowly coming around to understanding this Fed is really, really focused on this concept of maximum employment because they sense the global deflationary pressures," said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York. "And they have opted to go the route that the best defense against global deflation is a little more domestic inflation, therefore they are going to allow it to run hot."

The yield on 10-year Treasury notes was down 1.9 basis points to 1.427%. The yield is down nearly 20 basis points since jumping to 1.614% last week in the wake of a poor 7-year auction and as expectations increased that the economy was improving, sparking inflation concerns.

Investors will also have a raft of economic data to digest shortly, with reports on the labor market in each of the next three days, culminating in Friday's payrolls report for February. Also expected is a report on the health of the services sector for February and January factory orders.

Stronger than anticipated data could once again fuel inflation worries, which could lead to another test of the 1.50% level on the 10-year. The yield on 30-year Treasury bond was down 0.3 basis points to 2.218%. March 2 Tuesday 10:42AM New York / 1542 GMT Price US T BONDS JUN1 159-9/32 0-3/32 10YR TNotes JUN1 133-104/256 0-56/256 Price Current Net Yield % Change (bps) Three-month bills 0.04 0.0406 0.000 Six-month bills 0.06 0.0609 0.000 Two-year note 100 0.125 0.002 Three-year note 99-154/256 0.2604 -0.008 Five-year note 99-16/256 0.6914 -0.020 Seven-year note 100-48/256 1.0971 -0.026 10-year note 97-52/256 1.4273 -0.019 30-year bond 92-136/256 2.2175 -0.003 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 9.50 -0.50 spread U.S. 3-year dollar swap 11.75 -0.25 spread U.S. 5-year dollar swap 11.25 0.00 spread U.S. 10-year dollar swap 6.50 -0.75 spread U.S. 30-year dollar swap -27.50 -1.25 spread."

MY COMMENT

The old saying is usually true....."the market climbs a wall of worry". AND....it often pauses along the way. We are already seeing investors...people....getting immune to the old interest rates and inflation story line. Even if true....after a short while it becomes old news and everyone moves on.

 

We ALL love company.....even investors. Here is confirmation of....."something".

Investors Put Record $86 Billion Into Stock ETFs in February

https://finance.yahoo.com/news/investors-poured-record-86-billion-155646898.html

(BOLD is my opinion OR what I consider important content)
"

(Bloomberg) -- When faced with a spike in Treasury yields and a tech sector pullback that erased $1 trillion from stock prices, exchange-traded fund investors decided to pour more money into equities.

Despite the recent turmoil in the bond market, the S&P 500 Index extended a rally from its March 2020 lows to more than 70% and ETFs tracking stocks notched their best month of inflows on record, according to data compiled by Bloomberg. Traders added almost $86 billion to those funds in February. Equities climbed Monday, led by companies tied to economic reopenings and faster growth.

The striking figure underscores investors’ unflinching bullishness amid prospects for additional fiscal stimulus and the Covid-19 vaccine rollout, alongside continued support from the Federal Reserve. At least for now, that’s overshadowing any concerns about the recent surge in Treasury yields and the pressure that puts on already elevated equity valuations, especially in the tech industry.

“Investor psychology has shown a bias toward optimism,” said Keith Buchanan, portfolio manager for GLOBALT Investments in Atlanta. “The animal spirits, if you will, are and have been at play in the past 11 months in this rally. There’s a lot of liquidity still out there, and it has found a home.”

The February intake beats even November’s haul after vaccine breakthroughs ignited a massive cash infusion into equities, with about 95% of stock funds posting gains. Vanguard Group’s S&P 500 ETF (VOO) led the way in February, luring over $11 billion -- the most on record -- although much came through a single-day $8.7 billion inflow early in the month.

BlackRock Inc.’s iShares Core S&P 500 ETF (IVV) also experienced a record month after an intake of $8.4 billion, while Invesco QQQ Trust Series 1 (QQQ) came in third place, with $3.5 billion.

“Despite the volatility, where else can investors park money?” said Mohit Bajaj, director of ETFs for WallachBeth Capital. “Bond yields have rallied so much, investors would shy away from fixed income because of the price depreciation. Equities ETFs would be the only possible substitute.”

Meanwhile, flows to fixed-income funds paled in comparison to their equity peers, taking in only $10.4 billion -- the lowest since March. The $46 billion iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) had its worth month of outflows ever, losing $3.5 billion as short interest spiked.

Another fund that was recently under pressure was Cathie Wood’s popular ARK Innovation ETF (ARKK), whose biggest holding is electric-car maker Tesla Inc. The product, which surged almost 150% last year, had its worst week of outflows ever. Still, it took in a net $2.4 billion in February.

“They have a really fervent investor base and people who believe in these companies and this big future growth style,” said Ross Mayfield, investment strategy analyst at Baird. “A week of underperformance is not going to break the back of these investors. It would take a lot more than that to discourage flows from going in.”"

MY COMMENT

RIGHT....where else are people going to put their money. Treasuries? Bonds? Gold? Peanuts? Bitcoin? Baseball cards?

NO although baseball cards are CRAZY HOT right now. I got the latest publication from Heritage Auctions today and the prices of sports cards and memorabilia is INSANE. Even living players that are STILL playing are drawing hundreds of thousands of dollars for cards, game worn clothing, shoes, and other items.

The simple answer....like usual....is that people are going to invest in AMERICAN companies and funds and ETF's....just lke the numbers show they are ACTUALLY doing. AND....the rest of the world is STILL going to see THIS country as the safe haven for their money....whether that means buying a house here or opening accounts here or investing in our companies and markets.

MONEY going into funds and ETF's IS.....YES.....IS....going to go into the stock markets. AND....money going into the stock markets is a good thing for the long term investor. this new money will support and eventually drive up prices and....THAT....will benefit those that are already invested.

 

Exactly.

Perhaps someone should start a companion thread in this forum....."The Short Term Investor". It would be interesting.....BUT only if the person posted....... ALL...... buys and sells and the dollar amounts....as they happen....so others could follow how it all does over time. Since everything would be short term gain or loss....it would be easy for readers to deduct the income taxes from the result...according to their OWN tax bracket. It would be an interesting thread...but it would take at least 5-10 years of posting to get somewhat of an accurate idea of how it all works out.

 

I saw one of those books on a book site for $6000......first edition with dust jacket. In 6-12 months you will be able to buy them for next to nothing. There are millions of copies. I would not be surprised to see a new publisher pick them up and re-publish.

 

So here is an article on the Treasury yield issue last week. I think the key part of this little article is the fact that the banks want the Fed to extend the easing of their capital requirements....set to expire at the end of March......and to eliminate or relax other heightened bank regulation that was put in place in 2008/2009. Am I smelling a RAT?

A $21 Trillion Treasuries Mystery Is Bedeviling Global Markets

https://finance.yahoo.com/news/21-trillion-treasuries-mystery-bedeviling-214109520.html

(BOLD is my opinion OR what I consider important content)

"Bond traders have been saying for years that liquidity is there in the world’s biggest bond market, except when you really need it.

Last week’s startling gyrations in U.S. Treasury yields may offer fresh backing for that mantra, and prompt another bout of soul-searching in a $21 trillion market that forms the bedrock of global finance. While stocks are prone to sudden swings, such episodes are supposed to be few and far between in a government-debt market that sets the benchmark risk-free rate for much of the world.

Yet jarring moves keep occurring periodically in Treasuries, with some market participants pointing to heightened bank regulations in the wake of the 2008 financial crisis. Scrutiny over liquidity shortfalls intensified in October 2014 when a 12-minute crash and rebound in yields happened with no apparent trigger. Panic selling during the pandemic-fueled chaos a year ago, exacerbated when hedge funds’ leveraged wagers blew up, brought the issue to the fore again. And then came last week, when the gap between bid and offer prices for 30-year bonds hit the widest since the panic of March 2020.

The latest events “are a stark reminder what happens when liquidity suddenly vanishes in the deepest, largest bond market,” said Ben Emons, managing director of global macro strategy at Medley Global Advisors.

At issue is whether this vast market is more vulnerable to sudden bouts of turbulence thanks to measures that have made it more difficult for banks to hold Treasuries. Some analysts say the tumult last week was magnified by questions over whether the Federal Reserve will extend an easing of bank capital requirements, which is set to end March 31. Put in place early on in the pandemic, the measure is seen as making it easier for banks to add Treasuries to their balance sheets.

The 2014 episode triggered a deep dive into the market structure, and regulators have pushed through some changes -- such as increased transparency -- and speculation has grown that more steps to bolster the market’s structure may be ahead.

“While the scale and speed of flows associated with the COVID shock are likely pretty far out in the tail of the probability distribution, the crisis highlighted vulnerabilities in the critically important Treasury market that warrant careful analysis,” Fed Governor Lael Brainard said Monday in prepared remarks to the Institute of International Bankers.

There are plenty of potential culprits in last week’s bond-market tumble -- which has since mostly reversed -- from improving economic readings to more technical drivers. Ultra-loose Fed policy and the prospect of fresh U.S. fiscal stimulus have investors betting on quicker growth and inflation. Add to that a wave of convexity hedgers, and unwinding by big trend-following investors -- such as commodity trading advisers.

For Zoltan Pozsar, a strategist at Credit Suisse, the action began in Asia with bond investors reacting to perceived hawkish signs from the central banks of Australia and New Zealand. That sentiment then carried over into the U.S. as carry trades and other levered positions in the bond market were wiped out. A disastrous auction of seven-year notes on Thursday added fuel to the unraveling.

Last week’s drama “brings to mind other notable episodes in recent years in which a deterioration in the Treasury market microstructure was primarily to blame,” JPMorgan & Chase Co. strategist Henry St John wrote in a note with colleagues.

One key gauge of Treasury liquidity -- market depth, or the ability to trade without substantially moving prices -- plunged in March 2020 to levels not seen since the 2008 crisis, according to data compiled by JPMorgan. That severe degree of liquidity shortfall didn’t resurface last week.

The bond-market rout only briefly took a toll on share prices last week, with equities surging to start this week, following a sharp retreat in Treasury yields amid month-end buying.

The Fed cut rates to nearly zero in March 2020, launched a raft of emergency lending facilities and ramped up bond buying to ensure low borrowing costs and smooth market functioning. That breakdown in functioning has sparked calls for change from regulators and market participants alike.

For now, Treasuries have settled down. Pozsar notes that the jump in yields has provided an opportunity for some value investors to swoop in and pick up extra yield, effectively helping offset the impact of the leveraged investors who scrambled for the exits last week.

“Some levered players were shaken out of their positions,” Pozsar said in a forthcoming episode of Bloomberg’s Odd Lots podcast. “It’s not comfortable -- especially if you’re on the wrong side of the trade -- but I don’t think that we should be going down a path where we should redesign the Treasury market.”"

MY COMMENT

MY opinion......the guts of this article is the portion about bank regulation and the expiration of the easing of bank reserve policies. Was last weeks little bond yield adventure.....which was so unusual.......a warning to the FED from the banks. It would not surprise me in the least.

 

Greatly looking forward to the SNOW earnings tomorrow. I have no clue what they will be...good or bad. But it will give me something to look forward to in the markets.

FUTURES....are up very nicely at the moment.