The Long Term Investor

YES.....the ten year yield is at 1.606% at the moment. Remember a month or two ago all the DRAMA about the ten year yield? Remember all the articles and speculation about the issue? DID any of the doom and gloom situations come true?

IN REALITY....the ten year treasury continues to trade in its little range. The SAME range it has traded in for months now. It is not like the interest rate issue has gone away. It is now CLOAKED in the daily arguments and speculation about the FED and unwinding. SO....the ten year treasury is now in the background and has LOST any ability to control or drive the markets. WHY? Because the media is not PUSHING the issue on a DAILY basis like they were in the past.

A good example of the sort of speculative drama that is now rampant in the financial media and how it ebbs and flows. ALSO a good example of the sort of economic STUFF that is actually IRRELEVANT to......"INVESTORS"....or should be. NOW....traders and speculators...that is a different story.

 

STILL....looking good today....so far.

The markets and many investors are suffering from PPTSD....Post Pandemic Traumatic Stress Disorder. Investors and the markets are suffering panic and other symptoms as the pandemic quickly winds down. NOW.....that people, markets, and investors are starting to return to normal the impact of the past year of fear and panic and restrictions and limitations is coming out. Many people are just......JUMPY.......expecting danger from every corner of the markets. NOT trusting the markets or their investments. The pandemic created a short term MIND SET in many.

BUMMER......time to move on....and....get on with the business of life and making money. FORTUNATELY....many of the people on here...being a self selected group of people....are NOT suffering from PPTSD.

 

For those that are masochists.....here is the Congressional Budget Office analysis of implementing a big spending plan and/or tax increases. This link is to the ACTUAL CBO document....about 30+ pages.

The Economic Effects of Financing a Large and Permanent Increase in Government Spending: Working Paper 2021-03

https://www.cbo.gov/system/files/2021-03/57021-Financing.pdf

MY COMMENT

HERE is their summary of their analysis:

"Abstract

In this working paper,we analyze the long-term economic effects of financing a large and permanent increase in government expenditures of 5percent to10percent of gross domestic product (GDP) annually.This paper does not assess the economic effects of the increased government spending and focuses solely on the effects of their financing.

The first part of the paper reviews the channels through which different financing mechanisms affect the economy. Specifically, the review focuses on how taxes on labor income, capital income, and consumption affect how much people work and save. The general finding is that increasing taxes leads to lower GDP and personal consumption. Of the different tax policies examined, consumption taxes are likely to have the smallest effects on saving and work decisions and hence the smallest negative consequences on future economic growth. Finally, deficit financing leads to higher interest rates, a lower capital stock, lower GDP, and a greater risk of a fiscal crisis.

In practice, the Congressional Budget Office uses a suite of models to assess the economic effects of fiscal policy. The second part of the paper uses one of CBO’s modeling frameworks—the life-cycle growth model—to illustrate the economic and distributional implications of raising revenues to finance a targeted amount of government spending (either 5percent or 10percent of GDP) through three different tax policies:a flat labor tax, a flat income tax, and a progressive income tax.To maintain deficit neutrality, tax rates for all three tax policies must rise over time to offset behavioral responses that result in smaller tax bases. After 10years,the level of GDP by 2030 isbetween3percent and10percentlower than it would be without the increase in expenditures and revenues. In those scenarios, younger households experience greater loss in lifetime consumption and hours worked than older households. Additionally, the fall in lifetime consumption and hours worked is largest for higher-income households and smallest for lower-income households when a progressive income tax is used. A progressive income tax generates the largest decline in total output.It also generates the smallest decline in consumption among the bottom two-thirds of the income distribution."

MY COMMENT

Welcome to the REAL WORLD.....DUH.....not that the CBO analysis means anything. If you are having trouble sleeping tonight this is recommended reading.....you will be asleep in no time.

 

I can see from the amount of my gain today that the market backed off a little bit in the late afternoon. BIT....still a really good gain for the day...perhaps the best gain in a week or two. Of course I was green. And...a good beat of the old SP500 by .56%.

NVIDIA had a good day...driven by the announced stock split they were +$25 per share. I must admit that I bought 30 shares on Friday when the split was in the news....with funds from my SP500 Index Fund. I am seeing this as good potential......with earnings coming out this week.....the split vote at the June shareholder meeting.......and....the actual split happening on July 21. The stock should be very active in the news on a POSITIVE basis for the next 1.5 months. After the actual split in July I will sell enough of the shares to re-coup my initial investment and put that back into the SP500 Index fund. Any profit will remain in Nvidia. I am assuming that I will have a profit.....If not I will just leave those funds in Nvidia for the long term.

 

Looks like Amazon is going to take another step in becoming a general media GIANT.

Amazon Deal to Acquire MGM to Come as Soon as Tuesday

https://finance.yahoo.com/news/amazon-deal-acquire-mgm-come-202308814.html

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

"Amazon.com Inc. is poised to announce an acquisition of the Metro-Goldwyn-Mayer movie studio as soon as Tuesday, according to a person familiar with the matter, marking the e-commerce giant’s biggest push yet into Hollywood.

Amazon is in talks to pay almost $9 billion for the business, said the person, who asked not to be identified because the deliberations are private. The discussions -- first reported last week -- could still fall apart, and it’s possible that the price or timing changes.

The agreement would bring a vast library of movies and shows to Amazon, which operates the Prime Video streaming service. MGM’s catalog includes the James Bond, Pink Panther, RoboCop and Rocky franchises, as well as films such as “The Silence of the Lambs.”

Amazon declined to comment, while MGM didn’t immediately respond to a request for comment.

MGM, currently owned by hedge funds including Anchorage Capital Group, has been seen as a takeover target for years, but was never able to close a sale before. The company made a fresh push last year, when it reportedly hired advisers to seek offers.

What Bloomberg Intelligence says:

“The acquisition could raise Amazon.com’s streaming profile by adding a mountain of proprietary content, strengthening the reach and value of its Prime offering. The deal would be Amazon’s second biggest after Whole Foods.”-- Poonam Goyal, BI retail analystClick here to read the research.

The studio also has sought other ways to wring money from its movies. It held talks with Apple Inc. and Netflix Inc. about taking its new James Bond film directly to streaming, people familiar with the matter said last year. The studio opted to stick with a theatrical release for the film, which debuts in the U.S. on Oct. 8.

The Wall Street Journal previously reported that an MGM-Amazon deal could come as soon as this week.

At roughly $9 billion, the MGM takeover would be Amazon’s biggest acquisition since it agreed to buy Whole Foods in 2017 for $13.7 billion. But it’s not the first sign that the company is willing to spend big on media. The company shelled out about $11 billion on content for its streaming video and music services last year alone. And it agreed to pay about $1 billion a year on NFL rights."

MY COMMENT

Amazon is on its way to becoming a media/entertainment conglomerate in addition to everything else. I must say I dont think the Whole Foods acquisition has been a big hit....at least as to the brick and mortar stores. BUT....I saw Whole Foods as kind of a flash in the pan anyway....now that every store in the world handles organic and natural...they are left ONLY with their most loyal and fanatical customers. At least that is my view. SO....I hope this deal works out a little bit better than that one has so far.

 

The financial news sources CONTINUE to be.....all BITCOIN....all the time. The vast majority of articles are crypto and bitcoin. Fine with me......I would rather have them talk about bitcoin than some other nonsense.

Even the NVIDIA split news seems to be ignored so far. I dont think I have seen anything on it today at all.

 

HERE is the only thing I saw about NVIDIA today....and the focus here is more earnings than the split.

Nvidia Rises as Wall Street Expects Upside in Earnings Report
Graphics-chip giant Nvidia traded higher Monday ahead of its first-quarter earnings report, set for Wednesday.

https://www.thestreet.com/investing...all-street-sees-upside?puc=yahoo&cm_ven=YAHOO

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

"Nvidia (NVDA) - Get Report shares were higher on Monday, with Wall Street analysts expecting a strong earnings report during the worldwide semiconductor shortage.

Shares of the Santa Clara, Calif., company at last check rose 4.3% to $625.41.

Morgan Stanley analysts Joseph Moore, Craig Hettenbach and Ethan Puritz said in a note published Monday that they expect "a strong quarter for NVIDIA especially in gaming; data center strength will be key."

"Expectations are very high, given that the company already preannounced that there will be upside to the April quarter," they said.

"Revenue in gaming is completely supply constrained, with channel inventory remaining very lean. That should point to multiple quarters of strong shipments, as when supply does catch up to demand there will likely be substantial channel fill,"

What could get in the way? The firm said "sustainability risk is somewhat elevated due to the cryptocurrency impact."

"The strength in Ethereum mining is a slightly complicating factor; we have estimated that there is close to $500 million per quarter in revenue from miners in the last quarter, including $150 million or so in crypto specialty product," the analysts wrote.

"This revenue should slow meaningfully if currencies remain at the current price; with sharp decreases in Ethereum pricing, mining is still profitable but the payback on a new graphics card is above two months, so we would expect to see the exuberance fade a bit."

Morgan Stanley expects April quarter sales of $5.3 billion and July quarter sales of $5.48 billion.

Analysts at Credit Suisse said that Nvidia "continues to find new vectors of IP monetization in highly visible, profitable, installed base focused, recurring software which could be about 20% of revenue by 2025, driving multiple expansion."

Credit Suisse analysts John Pitzer and Jerome Darling rate Nvidia outperform with a $700 price target.

On May 21, the semiconductor maker declared a 4-for-1 stock split.

TheStreet Founder Jim Cramer said the fact that Nvidia's stock went up after the split just shows that "there are too many individual investors involved who will eventually realize that I paid up for something that didn't really move the stock, but the stock could finish unchanged.""

MY COMMENT

Earnings versus the split....it will be interesting to see how each one plays out. It should be an exciting month and a half for shareholders.....one way or the other.

 

As to financial news......I assume that anything I read in.......MOST......of the financial news was placed there by someone that is trying to profit in some way. EVERYONE that is any sort of insider...to the point that they are interviewed by most financial media.....has some AXE TO GRIND. Add in all the traders, fund managers, big banks, etc, etc, that make their money in the business......and it is one big INCESTUOUS GROUP.......being interviewed and doing the writing.

Of course....there are STILL some publications that are NOT part of the tabloid group and DO report real news and analysis. I have DEFINITELY noticed the level of the content that I skim every day has gotten MUCH MORE sensationalist lately over the past year or two. The trend does NOT look good.....since it is a rare thing for media to get MORE ERUDITE over time......the opposite is the norm.

 

HERE is a topic that is near and dear to my heart.....stock splits. Of course......like everything lately.....for some unknown reason they are no longer the norm. They were NOT RARE in the recent past.......20 years ago on back.

Investors Love Stock Splits; Ten $1,000 Stocks Should Split Next

https://www.investors.com/etfs-and-...ten-1000-stocks-should-split-next/?src=A00220

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

"Stock splits are still surprisingly rare — but S&P 500 investors applaud when they happen. So it's only natural to guess which high-priced stocks might split next.


Ten stocks in the S&P 1500 trade for nosebleed per-share prices of more than $1,000 a share, including consumer discretionary NVR (NVR), Amazon.com (AMZN) and Chipotle Mexican Grill (CMG), says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. And eight of those $1,000-plus stocks are in the S&P 500.

There's no guarantee any will split. And stock splits don't make any financial difference to the value investors' holdings. But it turns out, investors love splits.

Information technology giant and Leaderboard member Nvidia (NVDA) reminded S&P 500 investors what they're missing on May 21. The computer-chip maker announced plans for a 4-for-1 stock split. Investors celebrated — sending the stock up 2.6% to 599.67 — as the news came just days ahead of the company's quarterly profit release.

And it's just the latest example.

Stock Splits Shrivel Up

Splits are much more rare than they were a decade ago


Year # of S&P 500 splits # of S&P 1500 splits
YTD 3 9
2020 7 18
2019 4 14
2018 5 18
2017 6 24
2016 11 24
2015 16 31
2014 12 41
2013 16 48
2012 18 39
Sources: IBD, S&P Global Market Intelligence

S&P 500 Investors Rejoice Rare Splits

Stock splits are practically unicorns on Wall Street. And that's a surprise — as per-share stock prices are double from a year ago.

Just nine S&P 1500 companies announced splits this year so far, roughly in line with the 18 in all of 2020. And just three S&P 500 stocks split this year. That's only on pace with last year. Splits are a fraction of where they were in 2013. That year, 48 S&P 1500 stocks split their shares.

Not seeing splits is surprising, too. Stock prices are up considerably from this point last year. S&P 1500 stocks now have a median per share price of 62.50. That's up more than 60% from the median per-share price of 37.29 a year ago. Meanwhile, roughly a third of the stocks in the S&P 1500 trade for 100 a share or more.

And splits remain popular with investors.

Shares of the nine S&P 1500 stocks to split this year are up 12% since the split. That's well above the 7.3% average return of the S&P 500 during the same time. Take paint maker Sherwin-Williams (SHW) as an example in the S&P 500. Its shares are up more than 15% since it announced a 3-for-1 split on April 1. That tops the 4.7% gain in the S&P 500 in that time.

Historically, companies split their share prices when they start moving toward 100 a share. Following a split, the per-share stock price falls, but investors get additional shares. The value of the company is unchanged, but a lower per-share price is theoretically more affordable. Splits, though, can make options contracts more affordable.

Hooray For Splits

S&P 1500 stocks that split this year are outperforming


Company Symbol Index Constituents [Primary Listing] % ch. since split S&P 500 % ch. since split Split completed
Amphenol (APH) S&P 500 10.5% 10.2% 3/5/2021
Dime Community Bancshares (DCOM) S&P 600 45.1% 12.1% 2/1/2021
Hawkins (HWKN) S&P 600 2.3% 6.5% 3/2/2021
Life Storage (LSI) S&P 400 18.2% 10.8% 1/28/2021
M.D.C. (MDC) S&P 600 4.3% 6.5% 3/2/2021
National Beverage (FIZZ) S&P 600 -8.7% 6.4% 2/22/2021
SL Green Realty (SLG) S&P 400 19.6% 8.1% 1/21/2021
Sherwin-Williams (SHW) S&P 500 15.1% 4.7% 4/1/2021
Nvidia* (NVDA) S&P 500 2.6% -0.1% 5/21/2021
Average

12.1% 7.3%
Sources: IBD, S&P Global Market Intelligence, * - split announced, not completed

Looking At S&P 500 High-Priced Stocks

Warren Buffett, a long-time critic of stock splits (and Bitcoin), continues to tip the scale on the S&P 1500 when it comes to high-priced stock. But he's far from alone.

His Berkshire Hathaway class A shares trade for more than 432,000 a share. That more than any other stock. In fact, the per-share price is so unusually high, it threatened to short-circuit the Nasdaq's pricing and trade reporting system. But pressure isn't on the company to split as the company's class B shares trade for a much more palatable 287.92 each.

But there's no shortage of other high-priced stocks. Homebuilder NVR closed Friday at 4,655.22 a share. That's the highest per-share price outside of Berkshire. But high per-share prices are also common with a number of high technology stocks. Amazon.com closed at 3,203.08 a share on Friday. And then there's Google parent, Alphabet, which closed at 2,293.38 a share.

The question, though, is will more companies follow? There's plenty of room to do it.

S&P 1500 Stocks With The Highest Per-Share Prices


Company Ticker Index Close on May 21 % stock YTD ch. Sector
Berkshire Hathaway (BRKA) S&P 500 432,469.04 24.3% Financials
NVR (NVR) S&P 500 4,655.22 14.1% Consumer Discretionary
Amazon.com (AMZN) S&P 500 3,203.08 -1.7% Consumer Discretionary
Alphabet (GOOGL) S&P 500 2,294.13 30.9% Communication Services
Booking Holdings (BKNG) S&P 500 2,293.38 3.0% Consumer Discretionary
Cable One (CABO) S&P 400 1,772.34 -20.4% Communication Services
AutoZone (AZO) S&P 500 1,460.26 23.2% Consumer Discretionary
Chipotle Mexican Grill (CMG) S&P 500 1,330 -4.1% Consumer Discretionary
Mettler-Toledo (MTD) S&P 500 1,276.29 12.0% Health Care
Boston Beer (SAM) S&P 400 1,045.39 5.1% Consumer Staples

Sources: IBD, S&P Global Market Intelligence"

MY COMMENT

As the story says....stock splits dont make any difference to the value of an investors holding. OK....well why are the shares of ALL of the nine stocks that split this year up WAY above average? AND....regardless....they do make a stock more affordable. They create a BUZZ around a stock and that USUALLY leads to more news coverage for the company and much positive PR. Good for business and good for investors. AND......they make investing FUN....who does not like to get additional shares. It is like a little bit of positive reinforcement for shareholders.