The Long Term Investor

Here is a little opinion article on the....."chance".....of a summer correction. You know that I believe the next 1-2 years will be GOLDEN for stocks and funds. BUT....that does not mean there will not be a correction or two or three along the way. With the....lack of....positive reaction to the GREAT earnings....so far.....I do believe there is a......."chance"....for a summer correction. Like this little article......."if"....it happens it WILL be news and short term event driven. Will it happen....who knows. If it happens......who cares.....simply part of the short term market process and something that investors are very used to.

Why the stock market might give back its April gains

https://finance.yahoo.com/news/why-the-stock-market-might-give-back-april-gains-211605122.html

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

"In my recent article from early April, I said that “Over the next four to six weeks, we could see a rally in stocks that takes the Nasdaq Composite back to new highs and the S&P 500 to 4200.”

The good news is that the indexes reached those targets. The bad news is that April was a difficult month for many growth stocks. From here, one of two things should happen. Either growth stocks stabilize, resume higher, and lift the rest of the market with it, or the recent weakness beneath the surface will bring down the overall market. I’m leaning towards the latter. The market will give back its April gains over the next two months for the following reasons.

1) I’ve always believed that it’s not the news, but the market’s reaction to the news that is more important. Over the last two weeks, many Mega Cap growth stocks announced outstanding earnings and still sold off after their reports. If you hypothetically had the earnings reports of Amazon (AMZN), Apple (AAPL), and Microsoft (MSFT) in advance, you never would have imagined that they would all close negative the next day. This reaction showed me that big institutions are currently selling into strength.

2) May and June (especially the second half of June) tend to be challenging months for the market. After the first week of May, approximately 80% of S&P 500 companies will have reported their earnings. The news cycle will then shift away from fundamentals to politics, interest rates, and any geopolitical concerns. Speaking of interest rates, as the economy slowly gets back to normal, it wouldn’t surprise me to see the 10-year yield return to its levels from January 2020 (around 1.8%-2.0%). If this happens, it will lead to further compression in the multiples of growth stocks.

3) The IRS deadline for filing tax returns was extended this year to May 17. We will likely see tax selling prior to this because 2020 was a strong year for the markets, and many people will have capital gains taxes to pay by this date. On a related note, the new administration seems determined to raise taxes, specifically capital gains taxes. I don’t believe they will get any of these new proposals approved, but the continuous headlines could keep some pressure on the market over the near-term.

4) The S&P 500 (^GSPC) historically averages a 10% return per year. So far this year, it is up over 11%. It wouldn’t be unreasonable to see a normal correction or some technical digestion before heading higher later in the year. Also, since 1980, the average intra-year correction is -14.3%.


S&P 500 intra-year declines v. calendar year returns
5) A few sentiment measures are showing high levels of bullishness. For example, the latest NAAIM Exposure Index, which measures exposure by active investment managers, is at its highest level in over two months. Any minor pullback would shake out some of this excess bullishness, as investors are still quick to rush out the door when the market starts to drop.

I would like to stress that I am not turning bearish, just cautious over the near-term. There are many strong factors in the market’s favor from now until year-end. The economy continues to return to normal, earnings are improving, and the Fed is still providing a tremendous backdrop for the market. They are not raising rates anytime soon, nor are they slowing down or “tapering” their bond purchases. This will continue to provide an equity friendly environment into year-end. I simply think over the next two months, a 4%-6% pullback would be normal and nothing out of the ordinary. The best way to describe my current stance is short-term cautious but still longer-term bullish.


Chart provided by MarketSmith.
This is where market participants need to make decisions based on their own timeframe and investment objectives. If you have a longer-term horizon, stick with the trend, and accept some normal corrections along the way. If you are a shorter-term trader, using lighter positions could help reduce volatility, especially if growth stocks correct greater than the market. Either way, if we see a pullback over the next two months, it will set up some strong opportunities into year-end. Good luck!

MY COMMENT

I tend to agree COMPLETELY with this little article. ALTHOUGH......there is no way to call or predict a correction. A bit of summer weakness would be a normal event.

I ALSO agree with this little article regarding the markets to year end being POSITIVE.

In some ways it would be nice to get a little correction out of the way before the fall. AS USUAL......it is the big institutions that dont have confidence.......it is the run of the mill.......little investors........that are the REAL bulwark of the markets.......as well as the American economy.

"IF"....it happens....dont get sucked into the hysteria and hype and fear mongering. It will pass.....as usual.

 

Today is the perfect market day for this little article. YES....it really is this simple. BUT....it is extremely difficult for humans to accept and actually do.....SIMPLE.

Want to Get Rich? Be Boring.

https://www.kiteandkeymedia.com/vid...d-read-wealthy-compounding-growth-investment/

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


"Warren Buffett is one of the richest men in America with a net worth estimated at 84.5 billion dollars. You probably know that.

Here’s what you might now know: He earned over 96% of that fortune after the age of 65. That’s right: 96% after he hit 65.

And here’s the crazy thing...the method by which he did it is so simple that almost anyone—no matter their income—could become wealthy by using it.

I mean...not necessarily Warren Buffett wealthy. But do you really need that much money? God, show some restraint, you greedy son of a...

Admit it. You’ve fantasized about being rich. We all have. No matter how grounded you are, there’s been a moment when you’ve seen something on TV or in a magazine—a beautiful mansion; a high-end sports car; someone who, probably in violation of both state and federal laws, owns a Komodo dragon—and pictured yourself in their shoes.

But then reality sets in. You may never be a professional athlete. Or a tech CEO. Or a movie star. But what if you don’t have to get one of those high-paying jobs to be wealthy? In fact, what if having one of those jobs actually makes it harder? What if...the secret to getting wealthy is to be really, really boring?

We humans have been obsessing over money since probably around 600 BC when coins were first introduced by the Lydian King Alyattes. But despite the fact that we’ve had about 2,500 years to work this out, most of us still have a very basic misunderstanding about money: We don’t understand the difference between being rich and being wealthy.

One guy who does is the investor and columnist Morgan Housel, who explains the distinction in his 2020 book: The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness. “When most people say they want to be a millionaire, what they might actually mean is: ‘I’d like to spend a million dollars.’ And that is literally the opposite of being a millionaire.”

While we all fantasize about the millionaire lifestyle, living large often leads to living broke.

A 2009 story in Sports Illustrated revealed that within five years of retirement, around 60% of players in the NBA had run out of money. In the NFL, 78% were either bankrupt or under financial stress only two years after retirement. And it’s not limited to athletes. From Mark Twain to 50 Cent, from Teresa Giudice to Thomas Jefferson, there’s no shortage of examples that prove that living like you’ve got a lot of money is one of the best ways to end up...not having a lot of money.

But here’s where things get interesting. The same principle that can leave rich people in the poor house can also transform people of modest means into millionaires.

Here’s the key to personal wealth: It’s not a high-paying job. It’s not a secret investment trick. It’s...patience.

Yeah, I know. We were surprised too! Always figured it was some weird ceremony where Elon Musk makes you drink ayahuasca.

If you want to know just how important patience is, look no further than Ronald Read. Odds are you’ve never heard of him, unless you visited the Vermont gas station where he worked as an attendant for 25 years...or the JCPenney where he spent 17 years as a janitor. Or maybe you read about him when he died in 2014...and left behind a fortune of over $8 million.

There’s no missing detail there. Ronald Read didn’t win the lottery. He didn’t inherit a pile of cash. He just saved his money. And invested it. And waited.

It turns out that if you continually invest your money, you’re tapping into the most powerful financial force known to man: compounding growth. Your returns—whether it’s interest paid on savings or dividends paid on stocks—just give you more money to invest. And that money generates even more returns. And on and on the cycle goes.

Think of it this way: If someone offered you a million dollars today or a single penny that would double every day for a month, which one would you take? We’re immediately drawn to that large number, but the correct answer—at least if you want to maximize your money—is the penny. One cent doubled every day for 30 days comes out to over 5 million dollars. That’s the power of compounding.

And that’s the trick Warren Buffett used. He started investing at the age of 10—which is helpful, because the longer you’re invested, the more powerful the compounding effect is. And he’s kept his money in investment assets ever since.

Now, he’s a brilliant investor, so he got extraordinary returns, but he’s lived by the same rules Ronald Read lived by: Don’t spend too much of your money, invest what you save, and be patient.

And when you start to get wealthy, don’t start splurging. Despite his enormous net worth, Buffett doesn’t have mansions all over the globe. He still lives in the Omaha home that he bought for $32,000 in 1958. And though he could certainly afford a personal chef—in fact he could afford a personal chef for his personal chef—he gets his breakfast every morning from McDonald’s...where he never spends more than $3.17.iv

You don’t have to be that thrifty to bulk up your bank account—but you’ll be wealthier if you do.

Building wealth is easier than you’d think. Spend less than you make, invest what you save, and be patient enough to know that acquiring real money usually requires decades. The hard part isn’t skill; it’s self-control. But think about the rewards if you stick it out: Someday, when you’re comfortably retired with millions to your name...you’ll be able to buy two Komodo dragons."

MY COMMENT

YES....it is all about FOCUS and self control. It is all about investing to take advantage of time and compounding. THIS is exactly why a day like today....at least the open....dont matter at all in the long term scheme of things.

 

I am sure we will see some of the OBLIGATORY articles about....sell in May. I agree with this little article on this MYTH......and investing by PLATITUDE......or SUPERSTITION.

Old Wall Street wisdom about selling in May no longer makes sense

https://www.cnn.com/2021/05/03/investing/investing-stocks-may-strategy/index.html

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

"It's the first trading day of May for the stock market. And guess what? Investors should ignore the dumb, antiquated saying about selling in May and going away.

The anachronistic idea goes something like this: An investor should lock in gains now and then mostly ignore the markets for the summer while sitting on a beach somewhere. And in 2021, it makes absolutely no sense.

For one, it's not as if Corporate America and the economy go on summer break.

Companies still announce earnings, make acquisitions and go public. The Federal Reserve continues to meet and the government puts out data on the job market, retail sales, inflation and plenty of other things.
With that in mind, investors need to pay attention to the headlines — not what month it is.

"There is no proof of any kind that selling in May and going away will add value," said Paul Zemsky, chief investment officer of multi-asset strategies and solutions at Voya Investment Management.

"First of all, market timing is very hard. And we like stocks and are not going to change that opinion just because the calender says May," Zemsky said. "The fundamentals remain strong and that's what we look at. The economy is on great footing."
Corporate earnings for the first quarter have been solid across the board, and the outlooks from companies for the rest of the year have been healthy too.

"The strength of the current economic recovery and rebound in corporate earnings suggest it may be premature to expect a near-term seasonal peak in equities," said strategists at UBS Global Wealth Management in a recent report. "We recommend investors stay invested, diversify exposure, and keep control of their wealth plan."

It's also worth pointing out that selling in May and going away has been a good way to lose money for the past few years. The S&P 500 rose 12% between the start of May and end of October last year.

And according to data compiled by LPL Financial, the S&P 500 has averaged a 3.8% gain between May and October over the past 10 years. The only times the market went down in that period was in 2011 (an 8.1% drop) and in 2015, when the index fell a mere 0.3%.

With that in mind, LPL Financial chief market strategist Ryan Detrick isn't advising that investors follow a "sell in May" strategy.
"With an accommodative Fed, fiscal and monetary policy, along with an economy that is opening faster than nearly anyone expected, we'd use any weakness as an opportunity to add to positions," Detrick said in a report.

Still, one investing strategist is worried that the market's strong start to the year could lead to a summer swoon. After all, the S&P 500 is now up nearly 12% in 2021 and is not far from a record high.

"The catalysts are strong for a sell in May strategy with the hot start to 2021," said Jeff Carbone, managing partner for Cornerstone Wealth, in an email. "It may be time to take some profits from the strong growth sectors that have had big runs in 2021."

"There looks to be some runway left for growth and room for the markets to run but it may be a shorter runway and we are landing in LaGuardia, not Denver," he added, referring to two US airports known for their short and long landing strips."

MY COMMENT

Investing according to SUPERSTITION is simply dumb investing. It is market timing by PLATITUDE. It is hard enough to time the markets based on actual data.....but doing so based on something like.....sell in May.....not too smart.

The markets are NOT going to take a breather in the summer. The same sort of events that drive stocks.....up or down....are going to happen all summer just like the rest of the year. The rules are not somehow suspended in the summer.

I would be interested in seeing the results of a portfolio that follows ALL the superstitions.....sell in May....buy or sell according to the Super bowl....the October effect.....women's hemlines.....the tallest skyscraper.....the Monday effect.....the FULL MOON.....the September slump....etc, etc, etc.

Follow all the various superstitions that are out there in the investing world and you will be buying and selling monthly......with ABSOLUTELY NO reason or relationship to what is actually happening in the world and business.

 

I tend to agree with this little article......I dont think the BOOM in business that we are experiencing and will experience going forward will....necessarily.....happen for small business. there is a good likelihood that we are going to see a split economy....big versus small business.

US Q1 GDP Great, but Watch Expectations
As expectations for fast growth proliferate, investors should focus on whether reality is likely to follow through.

https://www.fisherinvestments.com/en-us/marketminder/us-q1-gdp-great-but-watch-expectations

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

"GDP is within spitting distance of its pre-pandemic level after the Bureau of Economic Analysis reported initial Q1 growth estimates yesterday. With economic activity now a hair’s breadth from its high, what should investors expect going forward? In our view, a likely return to more normal growth rates.

With GDP’s 6.4% annualized Q1 surge, it is now just -0.9% below its Q4 2019 peak. Since Q2 2020’s lockdown-driven depths, when GDP stood -10.1% below that peak after two successive declines, consumer spending has unsurprisingly led growth as America reopens. This remained true in Q1, with overall personal consumption expenditures (PCE) up 10.7% annualized, leading all major categories.[ii]

But growth in PCE—the lion’s share of GDP—hasn’t been uniform. Services PCE growth, notably, continues to lag. It grew only 4.6% annualized in Q1 versus goods PCE’s 23.6%.[iii] This is because demand for services is generally more “inelastic” than demand for goods, which is econo-jargon for less sensitive to economic trends. While some services—say travel and entertainment—are discretionary, most aren’t. Think: many healthcare expenditures, insurance payments, monthly utilities and rent. As Exhibit 1 shows, whereas goods PCE is now 12.5% above its pre-pandemic high, services PCE remains -5.7% below.

Exhibit 1: Services PCE Still Below Pre-Pandemic Level




Source: Federal Reserve Bank of St. Louis, as of 4/29/2021. Services and goods PCE, Q4 2019 – Q1 2021.

As the economy fully reopens, many expect services will surge as gangbusters goods spending eventually wanes. But we suspect services’ relatively slow growth is probably a better preview of what is to come than the goods boom. We may see a small pop when more entertainment comes back online, but that probably proves short-lived if last summer’s brief bounce is any indication.

That means all those who are extrapolating galloping growth from goods’ advance are probably in for some disappointment. Just like there is only so much exercise equipment you can buy in lieu of a gym membership, there are (probably) limited amounts of vacations you can schedule over the next year.[iv] Then, back to your normal day-to-day grind, paying the bills—business as usual. After pent-up demand is spent, consumption patterns should revert toward normal. This isn’t a bad thing. But it is important for investors to keep measured expectations. We think regular, pre-pandemic growth rates will resume before too long—perhaps before many, particularly those championing the “Roaring Twenties” theme, seem to think.

With this economic backdrop in mind, it will be critical for investors to monitor whether broad expectations diverge from the likely growth slowdown. It seems many expect a big, sustained boost from the Biden administration’s economic agenda. This stems from the recently passed $1.9 trillion American Rescue Plan to proposals like the $2.3 trillion American Jobs Plan and just-announced $1.8 trillion American Families Plan. A common sentiment we encountered among pundits reacting to the GDP report: ‘’In early 2021, the economy was served a strong cocktail of improving health conditions and rapid vaccinations along with a fizzy dose of fiscal stimulus and a steady flow of monetary policy support. Looking ahead, we foresee the economy’s spring bloom turning into a summer boom.”[v]

Others think America’s amassed stimulus checks over the last year will add fuel to the fire: “Economic growth accelerated in early 2021 as federal stimulus checks and fast-growing COVID-19 vaccinations left consumers flush with cash and ready to spend it just as more states lifted business constraints. The developments pushed up a recovery that wasn’t supposed to gather force until midyear.”[vi] Supposedly, with trillions in excess savings waiting in the wings, a second-stage services boom is about to ignite, which will launch the economy to the moon.[vii] A reality check could be in store.

If economic growth does end up disappointing, that isn’t necessarily bearish, in our view, but it likely would favor growth stocks over value. With their own growth drivers (hence the name), growth stocks don’t need the wider economy heating up to propel earnings. As expectations ramp up, we think focusing on stocks that aren’t dependent on the economy meeting them—those with diverse revenue streams, product pipelines others can’t match, proven management and fortress balance sheets—better serves investors."

MY COMMENT

My view...the last paragraph of this little article says it all. The expectations.......and results...... are NOT going to be uniform .......and......the service businesses and the small businesses are going to have a difficult time. AND.....for the most part....no one is going to care or even notice.

 

HERE is where we are today.....but.....in reading this little article you should substitute "stock speculators"...."traders".....and...."big institutions"....for the word......."investor".

US STOCKS-Nasdaq tumbles as investors dump tech megacaps

https://finance.yahoo.com/news/us-stocks-nasdaq-tumbles-investors-142411421.html

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

"The Nasdaq index fell more than 2% on Tuesday as steep declines in megacap growth stocks led Wall Street below record trading levels, with investors seeking shelter in more defensive parts of the market.

Highly valued technology companies including Microsoft Corp , Alphabet Inc, Apple Inc, Amazon.com Inc and Facebook Inc fell between 0.6% and 2.4%.

All of the 11 major S&P 500 sectors fell in early trading, with technology, communication services and consumer discretionary falling more than 1.5% each.

The defensive consumer staples, utilities and real estate sectors fell the least.

"When you're at all-time highs and the market pulls back, the ones that tend to lead to the downside are often the high-beta stocks such as technology," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

"When we have pauses or pull backs people tend to move out of growth stocks into more defensive names."

Copious stimulus measures, speedy vaccination drives and the Federal Reserve's accommodative policy stance have spurred a strong rebound in the U.S. economy and pushed Wall Street to record highs this year. The so-called "pandemic winners", however, have recently started to fall out of favor.

U.S. and European stock markets also saw a sudden 0.5% drop in hefty volumes around 7:30 a.m. ET on Tuesday, leaving traders scratching their heads and one calling it a "micro flash crash".

At 10:03 a.m. ET the Dow Jones Industrial Average was down 256.42 points, or 0.75%, at 33,856.81, the S&P 500 was down 45.00 points, or 1.07%, at 4,147.66, and the Nasdaq Composite was down 280.58 points, or 2.02%, at 13,614.54.

Among other stocks, CVS Health Corp gained 2.8% on reporting a first-quarter profit above analysts' estimates and raising its 2021 profit forecast.

First-quarter earnings have been largely upbeat. Average profits at S&P 500 companies are expected to have risen 46% in the quarter, compared with forecasts of a 24% growth at the start of April, according to IBES data from Refinitiv.

Investors also waiting for data through the week, including the Labor Department's non-farm payrolls data, slated to be released on Friday. The report is expected to show a rise in job additions in April.

Declining issues outnumbered advancers for a 3.19-to-1 ratio on the NYSE and a 5.83-to-1 ratio on the Nasdaq.

The S&P index recorded 42 new 52-week highs and no new low, while the Nasdaq recorded 45 new highs and 59 new lows."

MY COMMENT

EARNINGS....are now irrelevant. FUNDAMENTALS.....are irrelevant. What we are seeing today and often is simply....trading.

The short term traders that drive the day to day markets dont care in the slightest what the fundamentals show. They are simply looking for ways to make small trading profits.....often by trading the daily sensationalist news items.

The line below in the article above....says it all:

"When we have pauses or pull backs people tend to move out of growth stocks into more defensive names."

NO......people dont tend to do this....speculators and traders tend to do this. The big institutions tend to do this through their trading programs. This is NOT normal investor behavior. THIS....is actually....what the normal investor has to simply.........PUT UP WITH.......while they are compounding their money over the long term in accordance with business earnings and fundamentals. The "normal investors"......translation "the little people".........have to put up with this short term "stuff" as the price of being allowed to invest in the markets. There are ACTUALLY two markets.....the short term markets with the speculators, traders, and big investment houses......and......the long term markets for the REAL INVESTORS.

This brings me to another topic......for another day....the CORRUPTION of the word "INVESTOR". NOW....that word is used to describe speculators, traders, gamblers, the BIG institutions..........rarely....the ACTUAL people that are ACTUAL investors.

Days like today....."we".....sit and wait.

 

ALL....of the above posts are good commentary. We may be at the start of a correction....it could be a lingering market all year.....we might be in a little bit of weakness than turn UP. Evaluating this type of short term period is just not possible.....that is why market timing does not work. We will just have to wait and see......it will be a SURPRISE.

As for me....like many today......a red day. I had two stocks that were in the green today......Home Depot and Honeywell. Everything else was red. that is why the SP500 beat me today by .82%. At least it looks like we had a bit of a come-back at some time today. I dont know when since I was not watching the markets during the middle of the day today.

I have seen many years like this in the past where the markets look WEAK in the early or late summer and the gains dissipate. YET....from the early fall till year end the markets do well and we end up with a nice gain by year end. It is WAY too early to give up on this year......plenty of time for some nice results.

AFTER ALL......the SP500 is STILL up by 10.88% year to date......after JUST 4 months. This is the average gain for the SP500 for a YEAR. SO.....no need for negativity. We are still seeing historic gains......in the SP500....at this moment.

WHERE IS EMMETT? This has got to be his fault.........he leaves for a while and the markets drop.

 

I am seeing more and more stories like this one. Companies are re-opening their offices......and....they are encouraging employees to come into the office....in person. I have to say if I was a CEO....I would DEFINITELY want my key employees and managers in the office.....in person. There is NO substitute for working among your fellow employees to learn the business, learn management skills, learn about those you are managing, reinforce company culture and values, and evaluate up and coming leadership.

Goldman Sachs wants its US workers back in the office next month

https://www.cnn.com/2021/05/04/business/goldman-sachs-return-to-office/index.html

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

"It looks like most Goldman Sachs workers will be back in Lower Manhattan by mid-June, marking another milestone in the reopening of New York City and the broader economy from the Covid-19 pandemic.

Goldman Sachs (GS) is asking US employees who have not already returned to the office to be prepared to do so by June 14, according to a memo obtained by CNN Business that was sent to staff Tuesday.
"We are focused on progressing on our journey to gradually bring our people back together again, where it is safe to do so, and are now in a position to activate the next steps in our return to office strategy," CEO David Solomon, president John Waldron and CFO Stephen Scherr wrote in the memo.

The memo also asks employees in the United Kingdom to make plans to return to the office by June 21.
The Goldman Sachs executives said they "continue to be encouraged by the rollout of vaccines" in many areas and the "effectiveness of the health and safety protocols we have put in place across Goldman Sachs campuses to protect our people."
Goldman Sachs, whose headquarters is located near Wall Street in Lower Manhattan, expects to welcome nearly 5,400 interns and newly hired analysts and associates to its offices this summer in addition to the returning employees. News of the return to the office was previously reported by Bloomberg News.

JPMorgan workers expected back at the office by July

Working from the office does not appear to be mandatory. Goldman Sachs executives said they "remain committed to giving our people the flexibility they need to manage both their personal and professional lives." Employees who are unable return to the office can discuss working arrangements with their manager.

Last week, JPMorgan Chase (JPM) announced it will open its US offices to all employees on May 17, subject to a 50% occupancy cap. JPMorgan executives told employees in a memo that by early July they expect all US-based employees will be in the office on a consistent rotational schedule subject to that same 50% cap.

As in other industries, Wall Street is grappling with high stress among employees brought on by the pandemic.

In March, a dozen junior analysts at Goldman Sachs detailed horror stories of sleeping five hours a night and enduring workplace abuse. CEO Solomon pledged to speed up the hiring of junior bankers and strengthen enforcement of the "Saturday rule" which says that junior staff shouldn't be expected to be in the office between 9 pm Friday and 9 am Sunday.

Goldman Sachs says it gives employees a half-day of paid time off for each dose of Covid-19 vaccine they receive as well as family leave to accompany dependents who are getting vaccinated.

Although some employees may prefer to work remotely, many business leaders have emphasized the importance of in-person work. "We know from experience that our culture of collaboration, innovation and apprenticeship thrives when our people come together," the Goldman Sachs executives wrote.
Similarly, JPMorgan executives said: "We firmly believe that working together in person is important for our culture, clients, businesses and teams.""

MY COMMENT

If you have any DESIRE to advance in management or leadership of a company.....you better be in the office....in person.

If you have ZERO drive or desire to advance....go ahead....work from home and dont have any face to face contact thwi the company leaders. I dont care how good your work is.....a person in daily contact with leaders and management WILL beat you out for advancement.....most of the time.

 

This seems like a relevant article for the current market moment......at least the headline.

Big Tech Doesn’t Mean Slam-Dunk Investing

https://americanconsequences.com/corey-mclaughlin-big-tech-doesnt-mean-slam-dunk-investing/

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

"Someone could easily write a daily newsletter on the “FAANG” stocks alone…

You could cover the good and the bad of the entire Big Tech sector… or simply focus on one of the monster individual FAANG companies – Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), or Alphabet/Google (GOOGL).

That’s because these companies touch more areas of life than most folks can imagine…

And it’s also why whispers of increased “regulation” of these companies are never far away. The idea has been in the air for years, yet it hasn’t materialized in a Standard Oil or AT&T sort of way. But we keep hearing the calls…

Most recently and significantly, Supreme Court Justice Clarence Thomas made his view loud and clear in a public opinion… Thomas said that companies like Amazon should be treated as public utilities – like telecom companies, for example.

Now, this is not a new argument…

But the whole “these are essential businesses and should be treated as such” part of the story was renewed amid the COVID-19 pandemic. Plus, the story also hit Thomas personally earlier this year…

In early February, Amazon pulled a documentary film about Thomas, which first aired on PBS, from its streaming service. And the documentary’s producers said it did so quietly, without giving any explanation.

Perhaps this isn’t a coincidence then… But about two months later, Thomas wrote in an opinion (on another case, where the Supreme Court said former President Donald Trump had the right to block people on Twitter)…

Today’s digital platforms provide avenues for historically unprecedented amounts of speech, including speech by government actors. Also unprecedented, however, is the concentrated control of so much speech in the hands of a few private parties…

Thomas went on to argue that the market share of these companies is too big today. He mentioned Amazon, Facebook (roughly 3 billion users), and Alphabet (90% of global Internet searchers) by name and said…

A person always could choose to avoid the toll bridge or train and instead swim the Charles River or hike the Oregon Trail, but in assessing whether a company exercises substantial market power, what matters is whether the alternatives are comparable. For many of today’s digital platforms, nothing is.

To this, we say the alternative is to just not use them. But he’s right… It is hard these days to quit Twitter, Facebook, or anything else related to the ubiquitous Internet platforms.

Behemoth Amazon
What would life be like without the company, which seemingly offers everything a person would want to buy and reliable delivery to boot?

It would be a lot different… The country nearly turned into the “United States of Amazon” when COVID-19 had folks crazed with lockdown cyber shopping.

In Jeff Bezos’ final letter to shareholders as Amazon CEO in April, he said the company added 50 million Prime subscribers worldwide since January 2020. In the U.S. alone, the number of Amazon Prime members is now nearly 150 million… That’s 45% of the entire U.S. population.

Many Americans keep asking more and more from our government with a seemingly never-ending litany of demands. That’s why today, it’s critical to understand how these changes will affect you and your money.

And that’s also pretty close to the record number of people who voted in last November’s presidential election (roughly 159 million). In fact, “Amazon subscribers” would’ve easily won if the election were decided by the amount of the company’s paying customers versus the Electoral College or the popular vote.

This is all to say the drumbeats for regulation will probably continue… But we don’t see any immediate signs – in the U.S., at least – that there will be any serious, meaningful legislation that will break these companies into pieces in the near future.

Big Tech Raked In Tons of Cash So Far in 2021
This was a big takeaway from a round of quarterly earnings reports that came out this week…

With more people working from home, perhaps needing new or updated equipment and spending more time on their devices than they likely imagined, the revenues of companies like Apple, Alphabet, Facebook, and Microsoft (MSFT) were phenomenal – and record-setting, in some cases.

Apple reported record revenue of $89.6 billion (or roughly 10% of a small federal stimulus plan) for its fiscal 2021 second quarter, which ended in March. Roughly half of that ($47.9 billion) came from iPhone sales, particularly the company’s new 5G-capable phones. Apple also announced a $90 billion share-buyback program… and said that it would hike its dividend again.

CEO Tim Cook said Apple was able to avoid disruption from the global chip shortage, mainly because it started making its own new chips last year. But he acknowledged that the company might take a $3 billion to $4 billion hit this quarter from disruptions in its “legacy” semiconductors supply chain, which mainly relates to its iPads and Mac computers.

Alphabet reported record first-quarter revenue, too…

The Internet search and, well, everything giant made more than $55 billion, a 34% year-over-year increase, with strength across many of its business lines. As Stansberry Research’s NewsWire reported last week…

CFO Ruth Porat said the strong quarter reflected ‘elevated consumer activity online and broad-based growth in advertiser revenue.’ As we’ve noted in recent months, the pandemic has forced an acceleration in online services – in everything from shopping to advertising. That has been a tailwind for GOOGL’s business.

GOOGL’s cloud business continued to grow rapidly, as well. Google Cloud revenue was $4 billion in the quarter, up 46% from the same quarter a year ago. Like the advertising business, this area has also been boosted by the pandemic. With workers out of the office and working remotely, businesses needed to store all their data in the cloud.

In another part of the Alphabet story, we continue to be amazed by how great of a move its purchase of YouTube for $1.65 billion back in 2006 has proven to be…

Last quarter alone, YouTube brought in $6 billion in advertising revenue. That’s up 49% from a year ago. So as you can see, the deal long ago started paying for itself.

Like Apple, Alphabet announced a stock-buyback plan – for $50 billion in shares, or about 6.6% of its shares outstanding – boosting value for existing shareholders.

People are buying a lot more (expensive) Facebook ads as well…

Facebook generated more than $26 billion in revenue, beating the consensus expectations of Wall Street analysts. Its advertising business led the way…

CFO David Whener said FB’s strong earnings and revenue were fueled by a 30% year-over-year rise in the average price per advertisement. He also said a 12% increase in the number of advertisements that the company delivered played a major role as well.

That’s the good news for Facebook. Given its user size and network effect, the company is able to charge higher prices for ads, and it’s selling even more of them… Inflation hits the digital world, too, it seems.

Here’s a taste of regulation-related concern, though…

Daniel also reported that Facebook is worried about a new update in Apple’s recently launched iOS 14.5 mobile operating system, which will first ask users to “opt in” to having personal information, location data, and more collected… rather than the go-try-to-find-your-privacy-settings and “opt out” status quo.

We don’t know what the outcome of this change will be. But we suspect it won’t stop advertisers from spending money on Facebook ads, which are making cash for the company today.

And don’t forget the cloud…

That was the biggest boom for Microsoft, which brought in $41 billion in revenue last quarter. Revenue from its Azure cloud division grew 50% year over year, a pre-pandemic comparison.

This is all to say… from a cash-flow perspective – which is what we care about when evaluating companies – times might have never been better for Big Tech than they were in the first three months of 2021.

But on the other hand, the risk-reward balance for buying new shares of these stocks isn’t the best in the world right now…

Use Caution When Buying Big Tech Today

We’ve talked about “frothy” valuations for a while, and tech stocks are a shining example. A number of indicators can lead you to that conclusion.

Sure, shares of Amazon or Apple could still double from here. But they’re the longtime “knowns” to everyone who does a sniff of research. Plus they carry near-term risks…

Despite the Big Tech companies having record quarters, you might remember the shares of these companies sold off earlier this year… at the same time that Wall Street became worried about the Fed potentially easing up on its “easy money” policies in the face of inflation.

We’re still in a “Melt Up,” of course… And the Fed is promising to do its thing for another year. But there’s always a chance that the tide could turn earlier than people might think.

Inflation fears and reality could reach the point where the Fed switches its current course and hikes rates… or more likely, a new higher-tax policy becomes closer to a reality.

If either scenario were to happen, the Big Tech powers – though flush with cash – could be among the first stocks to sell off again… or rise less, at the very least.

Financial expert Dr. Steve Sjuggerud thinks you might be better off looking at smaller tech companies today…

We know this might sound counterintuitive given all the glowing reports we shared about Big Tech today… But that’s exactly the point.

A year ago, many folks believed the FAANGs would be doing well today given the “at home” tailwinds in play. They bought shares and pushed prices higher. But in recent months, these stocks haven’t surged nearly as much as some predicted…

In the late stages of a Melt Up – where the rich have already gotten richer and everyone is high on higher prices – it pays to look past the big names…

For example, dot-com-era darling Qualcomm (QCOM) – today known for making chips, ironically – was up more than 2,000% during the final 12 months of the Melt Up in the late 1990s.

However, most of those gains came early… The stock rose “only” about 230% in the final six months of the bull market.

In comparison, the biggest gains of five to 10 times were really made in some of the lesser-known names as investors hit peak euphoria. DISH Network (DISH), for example, went up more than 700% during the whole dot-com boom… and 500% of that gain came in the final eight months.

Of course, to make those gains, you want to be aware of the environment you’re in and sell before the “Melt Down” as well. Again using Qualcomm as an example, it crashed hard from its early 2000 high… and didn’t reach that level again until the past few years."

MY COMMENT

YES....there are NO guarantees. We may very well see a time period of 3-6 months of the BIG CAP DARLINGS not keeping up with the markets.....or....being responsible for the markets being down. BUT......I dont see any substitute for these companies now or in the future. THEY....are the future of the world.....till they are not.

 

I will check it out Emmett.

I post the article below for the content....NOT....politics. Are there REALLY that many high income and high net worth people cheating on their taxes? Is the IRS REALLY that incompetent?

Treasury Secretary Janet Yellen calls estimated $7 trillion tax gap 'shocking and distressing'

https://finance.yahoo.com/news/janet-yellen-calls-tax-gap-shocking-and-distressing-163831958.html

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

"Treasury Secretary Janet Yellen is calling on the wealthy to pay their fair share of taxes and to close the tax gap by improving tax compliance and audits.

“It's really shocking and distressing to see estimates suggesting that the gap between what we're collecting in taxes on current tax and what we should be collecting — if everybody were paying for taxes that are due — that amounts to over $7 trillion over a decade,” Yellen said during the Atlantic’s Future Economy on Tuesday. “We're trying to make meaningful steps to close that gap.”

The tax gap that would accumulate between 2020 and 2029 is estimated to be $7.5 trillion, according to a 2019 paper by former Treasury Secretary Larry Summers and economist Natasha Sarin. The study found that the IRS could shrink the tax gap by around 15% in the next decade and generate over $1 trillion in additional revenue by conducting more audits that specifically target those at the top.

Recently, the Internal Revenue Service Commissioner Charles Rettig put an even bigger price tag on it, saying that the tax gap "could approach and possibly exceed $1 trillion per year," Rettig added.

In his American Families Plan, Biden allocates $80 billion to the IRS for enforcement with the aim to raise $700 billion in revenue over 10 years by minimizing the tax gap. The increased revenue would come on top of raising taxes for corporations and wealthy individuals in an effort to make them “contribute their fair share,” Yellen said.

‘A fairer tax code in exchange for a higher quality of life’
Biden’s call for IRS funding comes after years of budget and staff cuts for the agency. Since 2010, the IRS has lost 21,000 employees and its budget has declined around 20% when taking inflation into account. The audit staff has declined by a third during that same period, to the point that the 2019 audit rate for individuals was the lowest in over 20 years.

The $80 billion in funding would be used to overhaul technology to improve compliance as well as hire and train auditors on complex investigations of corporations, partnerships, and wealthy individuals. Banks would also have to report inflows and outflows from taxpayers’ accounts, giving the IRS additional information about business revenue and expenses to better target audits

“A well-functioning tax system requires that all taxpayers pay what they owe,” the Treasury Department said when the plan was unveiled. “An unfortunate characteristic of the current system, however, is an asymmetric adherence to tax law by the nature of income received…Noncompliance is concentrated at the top.”

The wealthiest Americans fail to report more than a fifth of their taxable income by using sophisticated forms of tax evasion, a recent study by the National Bureau of Economic Research (NBER) found.

“A fairer tax code in exchange for a higher quality of life for most American families?” Yellen said in a statement when Biden’s tax plan was unveiled. “There are some economic trade-offs that are tough calls. This is not one of them.”"

MY COMMENT

First......is using tax loopholes that are legal.......sophisticated forms of tax evasion? I find it interesting that we want people to "contribute" their fair share......as in.....MAKE THEM DO IT.

YES.....the IRS is incompetent. Their ANCIENT computer systems are a JOKE.

What I find really interesting in this little article is the comment that:

"Banks would also have to report inflows and outflows from taxpayers’ accounts, giving the IRS additional information about business revenue and expenses to better target audits"

This is a NEW escalation of the typical government HUNGER for more and more information on companies and citizens. The good thing.....this is MORE information that will OVERWHELM the incompetent IRS and their ancient computer systems. The end result of this will no doubt be......even less taxes collected.....but.....more paperwork.

I suspect that the current.....tens of millions of returns that are the BACKLOG at the IRS......will become the NORM going forward. In a few years the IRS will be on the verge of collapse due to the ever growing backlog of unprocessed returns.

 

Speaking of Janet Yellen...looks like she played a BIG ROLE in the markets today. These people just need to learn to STFU.

Dow Jones Slips, Nasdaq Dives As Yellen Makes This Warning; Apple Falls As iRobot Craters

https://www.investors.com/market-tr...ple-stock-falls-as-irobot-craters/?src=A00220

BOLD is my opinion OR what I consider important content)

"The Dow Jones Industrial dipped, but the Nasdaq fell hardest, after Treasury Secretary Janet Yellen issued a warning about the economy overheating. Apple (AAPL) stock tumbled to a key support level, while automated vacuum cleaner leader iRobot (IRBT) sunk amid concerns about costs.


Technology stocks were getting hit hard, but some names were managing to make progress despite the tricky conditions. Caterpillar (CAT) and Dow Inc. (DOW) were the leading blue chips, while MarineMax (HZO) sailed closer to a buy point.

Treasury Secretary Yellen Warns On Economy
Yellen caused market jitters after she warned interest rates may have to be raised to protect the economy from overheating. She said care had to be taken due to the trillions in stimulus spending under President Biden.

"It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat." she said at the Atlantic's Future Economy Summit. "Even though the additional spending is relatively small relative to the size of the economy, it could cause some very modest increases in interest rates."

In addition to $5.3 trillion in stimulus spending, the Biden Administration wants to spend $2.3 trillion on infrastructure, as well as a $1.8 trillion on child care and education.

Despite her warning, she also said she believes the government spending will ultimately be a good thing as the "economy will grow faster because of them."

The 10-year Treasury yield fell about 3 basis points to around the 1.58% mark. The 30-year Treasury yield also fell."

MY COMMENT

As I said.....STFU.....that is all.