The Long Term Investor

I have been busy running around every day....it seems like. I am out of touch with the markets for most of the day lately till late afternoon or early evening.

SO....having just had a chance to look.....I was in the RED today......not real shocking. I ALSO got beat by the SP500 by 0.64%. My.....LOSERS.....today were AMZN, MSFT, NVDA, and GOOGL.....see a trend there? All are the MAJOR BIG CAP tech stocks that just reported AMAZING earnings. My other 6 holdings were all GREEN.

Just the way it is....over the short term....when things are MEDIA driven.....which....causes short term people to react.

OFF...running again....this time to pick up a car.

 

Moving on from here......this is how we ended for the week.

DOW year to date +14.14%
DOW for the week (-0.36%)

SP500 year to date +17.02%
SP500 for the week (-0.37%)

NASDAQ 100 year to date +16.07%
NASDAQ 100 for the week (-1.01%)

NASDAQ year to date +13.85%
NASDAQ for the week (-1.11%)

RUSSELL year to date +12.73%
RUSSELL for the week (-0.75%)

Not too bad for the DOW and the SP500. Both ONLY slightly negative for the week......and.....the SP500 is the KING of the averages so far this year with a return year to date of +17.02%.

 

AND....here is the POSITIVE news of the day to end the month.

US STOCKS-Wall Street falls with Amazon; S&P 500 posts sixth straight month of gains

https://finance.yahoo.com/news/us-stocks-wall-street-falls-203906340.html

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

"NEW YORK, July 30 (Reuters) - U.S. stocks fell on Friday and registered losses for the week as Amazon.com shares dropped after the company forecast lower sales growth, but the S&P 500 still notched a sixth straight month of gains.

Amazon.com Inc shares sank 7.6% - their biggest daily percentage drop since May 2020 - after the company reported late on Thursday revenue for the second quarter that was shy of analysts' average estimate and said sales growth would ease in the next few quarters as customers ventured more outside the home.

Shares of other internet and tech giants that did well during the lockdowns of last year, including Google parent Alphabet Inc and Facebook Inc, were mostly lower as well.

"Overall earnings have been good. But Amazon ... and some of last year's winners are taking some of the air out of the market today," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. "This market has been driven by big tech and when tech does well, the market seems to go right along with it, and when it doesn't," it falls.

Data on Friday showed U.S. consumer spending rose more than expected in June, although annual inflation accelerated further above the Federal Reserve's 2% target.

The Dow Jones Industrial Average fell 149.06 points, or 0.42%, to 34,935.47, the S&P 500 lost 23.89 points, or 0.54%, to 4,395.26 and the Nasdaq Composite dropped 105.59 points, or 0.71%, to 14,672.68.

For the month, the S&P 500 rose 2.3%, the Dow gained 1.3% and the Nasdaq added 1.2%, while for the week all three of the major indexes posted declines.

Strong earnings and the continued rebound in the U.S. economy have helped to support stocks this month, but the rapid spread of the Delta variant of the coronavirus and rising inflation have been concerns.

"There are still some distant jitters, whispers about the Delta variant, about cases rising, and I think some underlying worries about a slowdown of the reopenings and possible reversal," Dollarhide said.

Also on the earnings front, Pampers maker Procter & Gamble Co rose 2% as it forecast higher core earnings for this year, and U.S.-listed shares of Canada's Restaurant Brands International Inc jumped 5.1% after the Burger King owner beat estimates for quarterly profit.

Pinterest Inc, however, plunged 18.2% after saying U.S. user growth was decelerating as people who used the platform for crafts and DIY projects during the height of the pandemic were stepping out more.

Caterpillar Inc shares also fell, ending down 2.7%, even though the company posted a rise in second-quarter adjusted profit on the back of a recovery in global economic activity.

S&P 500 company results on the quarter overall have been much stronger than expected, with about 89% of the nearly 300 reports so far beating analysts' profit estimates, according to IBES data from Refinitiv. Earnings are now expected to have climbed 89.8% in the second quarter versus forecasts of 65.4% at the start of July.

Volume on U.S. exchanges was 8.86 billion shares, compared with the 9.74 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 1.43-to-1 ratio; on Nasdaq, a 1.58-to-1 ratio favored decliners.

The S&P 500 posted 65 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 84 new highs and 98 new lows."

MY COMMENT

The positive news and data which I highlighted above is simply AMAZING. SIX MONTHS......in a row for the SP500 of GAINS. We are on track for 89% of the SP500 to......BEAT....earnings estimates......and......earnings expected to CLIMB 89.8% in the second quarter.

TODAY.....extremely low trading volume.....contributed to a negative day.

ALL the big averages were UP for the month of JULY.......with the SP500 leading the way.

This is one of those time periods where the........FEEL of the markets......seems negative but, we are actually continuing with a STRONG month after month RALLY. We are now set up nicely for the final five months of the year.

 

This is a STRANGE story....I had no idea that they were building these HUGE lithium-Ion batteries....I guess they have the same issue as the little tiny ones.

Tesla's Giant Australian Battery Bursts Into Flames

https://finance.yahoo.com/news/teslas-giant-australian-battery-bursts-143000256.html

"The giant Tesla lithium-ion battery that French Neoen is building in the Australian province of Victoria is burning, according to the fire and rescue service of the province.

"A 13 tonne lithium battery in a shipping container is fully involved with crews wearing breathing apparatus working to contain the fire and stop it spreading to nearby batteries," Fire and Rescue Victoria reported earlier today, adding that there was no threat to local residents or drivers despite the release of smoke at the sight.

The battery installation, with a capacity of 300 MW/450 MWh, is due to be completed later this year and is expected to provide about half of the storage capacity Victoria needs to replace the Lorne power plant, which is due for retirement. The megabattery was also planned to reduce electricity bills for Victorians and increase grid reliability.

"By securing one of the biggest batteries in the world, Victoria is taking a decisive step away from coal-fired power and embracing new technologies that will unlock more renewable energy than ever before," Victoria environment minister Lily D'Ambrosio said last November when the project was made public.

Currently, firefighters are on site trying to contain the fire to the container where it first started, 7NEWS Melbourne reported. Other Australian media noted that the battery installation had been approved for partial operation earlier this month. The companies involved in the project—Tesla and French Neoen—have not responded to media requests for comment on the cause of the fire.

This is the second megabattery that Tesla is building in Australia.

The first one, in South Australia, has a capacity of 100 MW/129 MWh and, according to Tesla's Elon Musk, is able to supply some 30,000 households with power from a local wind farm and reduce the risk of blackouts. The installation, Musk said three years ago, would "manage summertime peak load to improve the reliability of South Australia's electrical infrastructure.""

MY COMMENT

WEIRD story......I had no idea.

 

YES......I know it is technically now the weekend......but if you want a little preview of AUGUST....here you go.

August Outlook: Month's Highlights Include Key Earnings Reports, Fed's Jackson Hole Trip

https://finance.yahoo.com/news/august-outlook-months-highlights-key-143119739.html

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

"Sometimes it seems like the Fed’s the centerpiece for investors every month, like a big turkey on Thanksgiving. Everything else tends to get a bit overlooked, like the candied yams your aunt brings every year that just receive a polite taste.

That’s not necessarily the case going into August. The Fed takes its show on the road to Wyoming at the end of the month, but before then investors have a lot of flavorful side dishes to try out. Earnings season isn’t even half over as August begins, but it’s off to a strong start and the question is whether things keep rolling along smoothly. Then there’s the political show on Capitol Hill, where Congress and the White House appear to be slowly creaking along toward what finally may be an infrastructure bill. Back-to-school season is another August trend to watch.

August often brings a slower trading pace, especially by mid-month once the biggest chunk of earnings fly by. That could mean a “dog days” type of atmosphere with less volatility. Still, there’s some seasonal tendency toward weaker stock markets, at least from a historical perspective, heading into September. That’s something to keep an eye on, especially when you consider that inflation and stock valuations both remain concerns.

Lately, every month seems to feature one or two shaky days where the long post-pandemic rally briefly stumbles. The S&P 500 Index (SPX) then falls below the 50-day moving average before getting on track again and making new highs.

While past isn’t precedent, investors need to be wary about letting emotions associated with a quick drop get in the way of their long-term plans. Because at least year-to-date, people who sold on these downturns possibly lived to regret it. The key is whether that 50-day moving average for the SPX, now near 4255, can continue acting like a net on any plunge. If the SPX does fall below that and remain on the mat for a few days, maybe the upward momentum could suffer a blow.


FIGURE 1: WORKING WITH A NET? The S&P 500 Index (SPX—candlestick) has tested and then bounced off its 50-day moving average (blue line) a number of times this year. Can the trend continue in August? Data Source: S&P Dow Jones Indices. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Earnings Extravaganza Extended Into Another Month

Following the Fed’s end-of-July meeting, investors can get back to earnings. The Fed is a key component, but in the long run, earnings drive the markets. As of late July, the Q2 earnings season has been everything analysts said it would be and more.

A sizzling start to earnings season basically helped lift all boats in late July after a slight hiccup on July 19 when the SPX fell 2%, apparently sparked by fears of the Delta variant of COVID-19. Delta remains a concern heading into August, and signs of it spreading further or more states and countries reimposing restrictions on the things that get people out and about should be eyed carefully.

The market has no control over this, of course, but it’s possible if the situation worsens it could mean people heading back toward the supposed “defensive” realm of fixed income, mega-cap Tech stocks, and the dollar. No guarantees, but that’s how things have generally gone so far during COVID-19.

Getting back to earnings, a broad range of firms from the big banks to Snap (NYSE: SNAP) to IBM (NYSE: IBM) to Honeywell (NASDAQ: HON), AT&T (NYSE: T), and American Express (NYSE: AXP) reporting in July appeared to be in pretty good shape, and so did the airlines and railroads. There’s a school of thought that suggests if railroads are doing well, so is the broader economy. Transports can often be a good barometer of overall demand.

Through July 23, 24% of the companies in the S&P 500 had reported results for Q2. Of these, 88% reported EPS above consensus estimates, FactSet said. That compares to the five-year average of 75%.

Earnings estimates for the quarter as a whole are on their way up, too, with FactSet now estimating Q2 earnings growth of 74.2%, compared with its previous estimate of 69.4%. Positive earnings surprises reported by companies in multiple sectors (led by the Financials, Health Care, Information Technology, and Communication Services sectors) led to improvement in the overall earnings estimate over the past week, FactSet said.

If there’s a soft spot so far, it’s arguably in the semiconductor area. Both Intel (NASDAQ: INTC) and Texas Instruments (NASDAQ: TXN) failed to impress investors with their outlooks, and shares of both are playing defense.

As earnings roll along, keep in mind that with earnings expectations so high in general, it probably takes a really big beat for a company to impress. That could help explain why the bank stocks didn’t initially get a huge bump from strong results in mid-July. Investors had arguably built strong earnings into prices, and some may have taken profit when the news actually hit. We could see more of this going forward, especially with the mega-cap Tech companies having recently reached new all-time highs. Guidance, more than what happened in Q2, continues to be the focus.

Having said all that, a look at S&P 500 earnings to date shows the vast majority of companies not just matching high expectations, but exceeding them. For instance, of the 23 companies that reported one morning in late July, 20 came in with earnings per share that beat the Street’s average estimate, and 19 surpassed analysts’ revenue projections.

All this probably helped play into the recovery from that July 19 selloff. It’s been a pretty amazing rebound, really. That “buy-the-dip” mentality has played well. It’s like a football coach that runs the same play that keeps working. You might argue there’s no reason to change that play. It’s certainly working again.

The “Fed put” also seems to remain in place. That’s a term coined decades ago by traders who got the idea that the Fed would step in to support stocks in any downturn. Fed Chairman Jerome Powell said nothing immediately after the July 19 plunge, but perhaps he didn’t have to. Earlier this month he told Congress the Fed remains committed to its easy money policy, and that elevated inflation is likely to cool off.

None of that sounds particularly hawkish, and may have contributed to the decline in bond yields since he spoke. Will yields get back on an upward path in August or head down for another test of recent five-month lows under 1.2%? That’s a key question for the month ahead. Lower yields tend to help the so-called “growth” sectors like Technology, while rising yields can often assist “cyclical” sectors like Financials and Energy. The growth vs. value tug-of-war that’s continued all year doesn’t show signs of vanishing.

Westward Ho For The Fed

After the late-July Fed meeting, central bank watchers start to turn their attention west in August. Not necessarily to the Sturgis Motorcycle Rally, but a little farther west out toward the Grand Tetons where the Fed holds its annual symposium (Covid-permitting) Aug. 26-28.

Earlier this year, a lot of thought on Wall Street centered on Jackson Hole maybe being the time and place for the Fed to announce its long-awaited stimulus tapering. That’s not necessarily the case now. A steady drop in Treasury yields since late March appears to give the Fed a little more room to maneuver as far as keeping its $120 billion a month bond purchase program going. That’s a tactic the Fed uses to inject liquidity and keep rates low, and it seems to have worked. The economy grew more than 6% in Q1 (though you can’t give the Fed all the credit, obviously) and the 10-year Treasury yield stood near 1.3% as of late July. That’s an amazingly low yield considering the economic growth and the steady specter of high inflation readings month after month.

Both Powell and President Biden said in late July that the current elevated inflation won’t last, and the market seems to be buying what they’re selling. For now, anyway. It’s pretty certain most people in the markets will keep a close eye on July consumer and producer prices when they get released in August, and also on the July payrolls report due Aug. 6. Job growth popped back in June after a couple of weaker than expected months. Now the focus might turn more toward wage growth. If employers have to start raising wages sharply to attract reluctant workers, that could also work itself into inflation fears.

By the time Jackson Hole approaches, investors could have a better sense of whether the Fed is ready to move, or at least forecast a move regarding stimulus. Some economists and politicians (and Fed officials themselves) have pointed toward the Fed’s continued purchase of mortgage-backed securities, saying this provides unnecessary ammunition to an already hot housing market. We’ll have to see what the Fed has to say from up in the peaks.

Around the same time the Fed meditates in the mountains, kids all over the country will swing backpacks over their shoulders and head back to school for what’s hopefully a full year of normal classes. That means it’s time to think of the retail sector and how “back-to-school” shopping might shape up. A recent Deloitte report said back-to-school sales will hit $32.5 billion, the highest in at least five years. Part of that could represent pent-up-demand after many kids were home last year due to the pandemic.

While “back-to-school” may conjure up visions of kids and their parents combing through Walmarts (NYSE: WMT) and Targets (NYSE: TGT) seeking Trapper Keepers, there’s also electronic equipment to consider. Schools and families could be in the market for up-to-date technology as the school year approaches, so that trail may lead to some key Tech companies providing hardware including Apple (NASDAQ: AAPL), Lenovo (OTCMKTS: LNVGY), Dell Technologies (NYSE: DELL), and HP (NYSE: HPQ).

Boxed In: Major Retailers Get Ready to Report

Before school starts, the second half of earnings season looms. Some of that includes the retail sector, including expected reports from WMT and TGT along with additional big-box stores like Lowe’s (NYSE: LOW) and Home Depot (NYSE: HD). Other key August earnings reports to watch include Clorox (NYSE: CLX), Lyft (NASDAQ: LYFT), Uber (NYSE: UBER), Walt Disney (NYSE: DIS), Kohl’s (NYSE: KSS), Cisco (NASDAQ: CSCO), Nvidia (NASDAQ: NVDA), and Deere (NYSE: DE), among many others. Try to say that all without stopping for breath.

Maybe August could offer investors time for a breath, if you will, after all the craziness so far this year and last. Traditionally, it’s when volatility and trading tend to decline as many participants head for vacation. That flow got interrupted a bit last year, but perhaps if COVID-19 fears don’t keep growing, there could be a more normal vacation schedule. If that happens and the news flow quiets, the Cboe Volatility Index (VIX) might receive more attention. It popped above 20 briefly in mid-July and then settled back toward 17 again, where it was earlier in the month. VIX has historically averaged around 20, but levels well below that tend to show people expect less turbulence ahead.

If there’s anything that could potentially bring August turbulence besides possible weak earnings or higher inflation, it might be worries about China’s continued regulatory crackdown. The latest regulatory action from Beijing targeted the education field as the country tried to clamp down on tutoring programs. Some of the biggest Tech firms there have a hand in this area, so stay tuned.

Another potential source of outside stress (or strength) is the long-awaited infrastructure deal in Congress. Something appeared to be brewing in late July, perhaps helping the Industrial sector. An unhappy ending to any bipartisan cooperation there could lead to “infrastructure weak” instead of “infrastructure week” on Wall Street. Let’s hope for the best, and perhaps investors won’t be stuck with the yams instead of the turkey."

MY COMMENT

Sounds like a DULL and BORING month......punctuated by......a few little periods of ginned up excitement. Kind of like the past SIX months. Lets hope that much of the financial professionals and media take time off and go away on vacation for the month.

 

I was thinking that the.....LOCAL....real estate market was slowing a bit lately. In my little neighborhood of 4200 homes....we jumped up to a high of about 23 listings lately. ALAS......we are now back down to ONLY 14 listings. BUMMER....for those looking to buy a house before school starts.....the inventory is back to low levels. The CHEAPEST house in my area is now $600,000.

I think we will follow the same path as the past couple of years......the market WILL continue strong through the Fall and holiday season and right into the new year. The traditional drop off in listings and sales activity between about October and February.....is a thing of the past. Listings will probably drop even more due to the continued STRONG demand......and......the time of the year.....really putting the SQUEEZE on buyers......and....setting up ANOTHER strong SPRING and summer selling season with low inventory next year.

 

You are up early today oldmanram.

Just wanted to put up the Ten Year Treasury Yield......1.226%. We continue with the LOW yields.......which DEFY all the so called experts.

 

Talking about Treasuries.

Is the recent dip in Treasury yields a cause for concern?

https://thehill.com/opinion/finance/565660-is-the-recent-dip-in-treasury-yields-a-cause-for-concern

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

"The world’s most important bond market is relaying somewhat confusing signals. After reaching a pandemic-era peak of 1.74 percent at the end of March, the yield on the benchmark 10-year U.S. Treasury note has fallen sharply (it has been stuck below 1.3 percent in recent weeks). Given the surge in reported inflation in recent months and forecasts of above-trend U.S. GDP growth in 2021 and 2022, the decline in bond yields poses a bit of a conundrum.

Prior to an examination of recent bond market volatility, it is necessary to grasp the broader significance of the U.S. Treasury securities market. It plays an outsized role in domestic and international financial markets. As Treasury securities are backed by the full faith and credit of the U.S. government, they are typically viewed by financial market participants as (default) risk-free assets. Furthermore, the U.S. Treasury securities market is the most liquid and most active bond market in the world. Given these inherent qualities, the yield-to-maturity offered by a comparable maturity Treasury security is often used by investors as the benchmark interest rate for comparing returns on more risky assets.

Recent behavior of the government bond market has puzzled many and created considerable uncertainty regarding the near-to-medium term outlook. After rising sharply during the first quarter of 2021, the yield on the benchmark 10-year U.S. Treasury note has tumbled of late, briefly dipping below 1.2 percent on July 19. Current expected real return on a 10-year U.S. Treasury note is substantially negative.

Does the decline in long-dated Treasury yields and significantly negative real interest rates portend an early end to the so-far promising pandemic recovery growth story? Is the bond market right in its conviction that ongoing inflationary pressures are mostly transitory?

A slew of less-than-convincing explanations offered up by market participants and economic commentators has only added to the puzzle. The rapid spread of the delta variant of the COVID-19 virus has led some to fear a possible slowdown in economic activity as some restrictions are reimposed and others are maintained for longer than previously anticipated. While the resurgence of the virus may pose some temporary challenges, it is quite unlikely to derail the economy or even significantly slow down the pace of the U.S. economic recovery. Widespread availability of effective vaccines and the slow but inevitable shift towards vaccine mandates imply that a replay of the events of 2020 is unlikely.

A more intriguing explanation revolves around evolving expectations regarding the Federal Reserve’s future behavior. Some bond traders are now assuming that the Federal Reserve (the Fed) will be more aggressive than previously thought as pressure mounts on the central bank to act on rising inflationary concerns. This frankly appears to be a somewhat misguided concern — the plodding approach of the Fed led by Chairman Jerome Powell suggests that the U.S. central bank is more likely to be behind the curve in its battle against inflation. Tapering of bond purchases and eventual interest rate hikes are likely to be carried out in a very gradual manner, especially given the recent adoption of an average inflation targeting framework by the Fed.

There is also a distinct possibility that the bond market is misreading the inflation signals. The ongoing buildup in pricing pressure is likely to persist into 2022 and beyond as widespread supply constraints crimp productive capacity worldwide even as global demand remains robust. Furthermore, many of the structural forces (globalization and the emergence of international supply chains centered around China; technological changes that led to the growth of e-commerce and increased price competition; and demographic shifts that saw a dramatic rise in the global working-age population) that kept a lid on inflation over the past three decades may now be starting to work in the opposite direction and leading us into an era of higher trend inflation.

In this environment, bond yields that are so low as to guarantee a negative real return if the securities are held until maturity may appear puzzling or downright odd. Furthermore, with budget deficits expected to remain high for the foreseeable future, can demand for U.S. Treasuries remain strong even as supply surges?

Treasury bond market dynamics are complicated by several factors. First and foremost, the Fed is a sizable actor in the Treasury market (the value of its government bond holdings now exceeds $5 trillion dollars), and its role is growing as it continues to add to its portfolio. Japanese and European investors, facing negative nominal yields at home, continue to find the meager yet positive yields offered by U.S. Treasury securities relatively attractive. The U.S. dollar’s status as the pre-eminent global reserve currency also generates demand for U.S. Treasuries from foreign central banks seeking to replenish their foreign reserve holdings.

Still, for domestic bond investors, current yields may not offer sufficient compensation for future inflation risks. Many bond traders may in fact be engaged in short-term speculation motivated by some version of the “Greater Fool Theory.” Essentially, investors are willing to pay a high price (the price of a bond and its yield are inversely related) at present in the hope that someone else will come along shortly and offer an even higher price for the bond.

It is hard to justify today’s ultra-low yields on long-dated Treasuries based on fundamentals unless we are headed for a period of dramatically weaker growth that is accompanied by extremely low inflation, an outcome that appears unlikely. Rationally, we should expect yields to rise going forward."

MY COMMENT

HERE is the bottom line of the article. One explanation that is not mentioned is that the Rise in rates in MARCH was trader MANIPULATION. That is my opinion.

As to the current rates....they represent the REAL...non-manipulated market rate......and......are an indicator of what the article says this would indicate:

"It is hard to justify today’s ultra-low yields on long-dated Treasuries based on fundamentals unless we are headed for a period of dramatically weaker growth that is accompanied by extremely low inflation, an outcome that appears unlikely. Rationally, we should expect yields to rise going forward."

 

Good to see you posting davebacker.

Talking about posters and......REGULAR....investors. "WE"......should feel very good about ourselves....and....CONGRATULATE ourselves. "WE" are the GUTS of the markets and the USA investing world. There is way more of "US".....than the so called professionals, economists and "experts". The......so called Professionals....play their little games.....while "WE" actually invest for the longer term and for our future. They are speculators and traders....while...."WE" are investors. In FACT.......they are just about always WRONG.....over the longer term.....and "WE" are usually RIGHT in what we do and how we do it. it is ABSOLUTELY TYPICAL of our modern society.

HERE is the perfect example.....along with all the interest rate commentary where they were TOTALLY WRONG. I am sure you remember ALL the articles and economists and EXPERTS telling us how the second quarter would be the re-opening PEAK......and...all the BALONEY that went with that story-line. WELL.....here is the truth......and....."THEY" were WRONG AS USUAL.

Halfway through earnings season, the ‘peak everything’ story may need to be put on hold

https://www.cnbc.com/2021/07/29/hal...rything-story-may-need-to-be-put-on-hold.html

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

"We’re halfway through second-quarter earnings. The results not only continue to beat forecasts by a wide margin, but estimates for the third and fourth quarter — and now even for 2022 — are rising and rising.

And most say estimates are still too low.

Q2 earnings and revenues: A blowout
(Year over year)

Earnings: up 86% (highest since Q4 2009)
Revenues: up 21% (a record)

Source: Refinitiv

As has been the case for the last several quarters, analysts have substantially underestimated the extent of the economic recovery. Earnings are coming in 18% above expectations, well above the historic norms of 3% to 5% above expectations.

Why can’t the analysts get it right?
Why does this keep happening?

“The analysts cover individual companies; they’re not economists,” said Nick Raich of The Earnings Scout. “They have been looking to the companies for guidance, and the company guidance overall has been far too conservative. The expectations for the economy keep getting better, not worse.”

Those higher expectations are being reflected in the revenue numbers as well. Revenues are coming in 4.6% above expectations, four times the historical average of 1.1% above estimates, as CNBC’s Robert Hum reports.

That revenue beat is very important. Raich explains why: “To beat a revenue estimate, you are dealing with an aggregate number that is in dollars, and those dollars are in the billions. When you are in the billions, a 5% beat is huge.”

The much higher revenues also are supportive of the idea that the economic recovery is stronger than expected.

It may be peak everything, but the earnings keep rising
Peak everything — the belief that economic activity and earnings growth would peak in the second quarter — has been the dominant market narrative for months. However, indications of economic activity in the second half remain strong, and while earnings growth is not accelerating as much in the second half, analysts again appear to be underestimating the recovery, including into 2022.

“The growth estimates for the second half are rising on a daily basis, and the 2022 numbers will likely go up as well. So the estimates are still too low,” Raich said.

S&P 500 earnings
Q3 estimates
Today: up 28.3%
July 1: up 24.7%

Q4 estimates
Today: up 20.3%
July 1: up 17.3%

Source: Refinitiv

Even 2022 estimates may be too low
2022 is still months away, but the magnitude of the recovery is so great that some strategists are already saying the analysts will be wrong again.

“We think that 2022 estimates ... might be too low,” Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America, said in a recent note to clients. “Why? Three reasons: readings from leading indicators, supportive policy, and vaccination push in Australia, Japan and the developing world.”

Biggest risk to stocks may not be the Fed
The continuing rise in earnings estimates is removing one risk to markets in the second half, but there are others:

Margin erosion. Many companies have reported substantially higher commodity — and in some cases labor — costs, but most have been able to pass the higher costs on because consumers are flush with cash. S&P profit margins were at a record 13% in the first quarter. They remain just below 13% for the second quarter.

A delta variant outbreak that results in a significant change in economic activity. Traders have been working on the assumption that the delta variant outbreak may slow the recovery but not derail it. In his press conference Wednesday, Federal Reserve Chair Jerome Powell supported this narrative, noting that the delta variant will have health consequences, but that recent waves have shown less economic impact. “It may be that the effect is to slow the economy down just for a period of months, or not,” he said. “There are many parts of the country where it might not have an effect and we’re just going to have to see what the economic effects are.”

An acceleration in Fed policy around tapering and rate hikes. Powell again insisted that inflation would be “transitory” and pushed back on the notion that a decision had been made on the timing of tapering the Fed’s bond buying program. “We will provide clarity as appropriate on timing, pace and composition. ... No decisions have been made, and I am not in a position to give you any guidance on timing,” he said.

The near-term worry: High valuations and seasonal weakness
Many traders are concerned that the stratospheric valuation of the market (more than 20 times 2022 estimates), when combined with typical August to October seasonal weakness, may be the greatest near-term risk to the market.

Some pointed to Apple’s earnings report, which was a blowout by every metric, yet the stock ended down 1.7% on heavy volume. Apple is trading at 25 times 2022 earnings, above the 15 to 20 times forward numbers for the past several years.

Facebook, in its earnings report, also noted decelerating revenue growth.

Tactical Alpha’s Alec Young admits that valuations are high, but he isn’t buying an imminent downturn. “Peak everything is a big deal, but the peak may be a little farther out than we thought,” he said.

“Apple can still grind higher, and so can all of these megacap tech names,” he added. “The valuations are high, but they are not outrageous.”"

MY COMMENT

YES......"WE" are the people that maintain and drive he REAL markets. CONGRATULATIONS to "US". "WE" are usually right in how we invest and where the markets are headed.

HERE is the....latest......trader/speculator/professional......line on the markets.

"Many traders are concerned that the stratospheric valuation of the market (more than 20 times 2022 estimates), when combined with typical August to October seasonal weakness, may be the greatest near-term risk to the market."

THEY will be WRONG as usual. WHY....because they NEVER.....in spite of what they say.....take into account ANY specific company fundamentals. They are concerned about mythical MONTHS that tend to be bad.....or other......BS......like general valuations. They are typical HERD BEHAVIOR on steroids. THEY are totally short term oriented......and we KNOW from FACT that they can not even beat the un-managed SP500. THEY live in a big bubble...."WE" live in the REAL WORLD. It is ALL one big self perpetuated ILLUSION......the investing ELITES.

In REALITY......"WE".....are the REAL investing ELITES......the people that have the logic and ability to invest month after month and build wealth for ourselves.......the GREAT BIG SILENT MAJORITY of investing.

I continue to be fully invested for the long term as usual.

 

As I was saying....about how REAL investors look to the future.

Can’t Be Bearish

https://theirrelevantinvestor.com/2021/07/27/cant-be-bearish/

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

"You can’t be bearish on the stock market unless you’re bearish on the biggest group of stocks in said market. And it’s hard to be bearish when you see the type of numbers they’re putting up.

We’ll get to big tech’s results in a minute, but first, I want to look at how they’ve been acting before their earnings, which are coming out right now.

The big 5 are all at or near all-time highs (red dots), with a combined market cap approaching $10 trillion.


They’re now 25% of the S&P 500. It’s difficult to make a bearish case on the market without making a bearish case on this 25%.


Revenue at Google jumped 62% to $61.88 billion, the largest quarterly sales jump in 14 years. Lest you think this comp is coming off a covid pullback, check the chart. That’s 12% sequential growth, and that last print of $55 billion was an all-time high. YouTube’s ad business is doing okay, ringing in $7 billion in revenue, a gain of 84% from a year ago.


Revenue from Apple rose 36% from a year earlier to $81.4 billion. Earnings came in at $21.7 billion, their best fiscal third quarter that they’ve ever had. That was driven largely by the iPhone 12, driving iPhone sales to $39.57 billion, up from $26.42 billion.


Same story at Microsoft, whose revenue jumped 21% to $46.15 billion, its highest quarterly revenue ever.

Maybe all the good news is baked in. This type of thinking hasn’t been a profitable strategy very much over the last decade, but you can’t dismiss it out of hand. The bottom line is it’s hard to be bearish on these stocks right now, and therefore, it’s hard to be bearish on the market."

MY COMMENT

YES.....we are BARELY into the re-opening. We have AT LEAST another 1-2 years to go for the USA and the world to re-open.

PLUS.....take the TOP TEN companies in the SP500......or the TOP TWENTY FIVE.....or....even the TOP FIFTY.....guess what.......NONE of them closed down for the pandemic. They ALL have a HUGE head start on the re-opening. It was the little businesses that got FORCED to close....nearly EVERY BIG BUSINESS.....was allowed to stay open. THEY are all WAY AHEAD of the re-opening and that will be a MASSIVE advantage for them over the next year or two.

 

ACTIVE and PASSIVE ETF's BOOM as money pours into the markets.

Cathie Wood Is Just a Start as Stock Pickers Storm the ETF World

https://finance.yahoo.com/news/cathie-wood-just-start-stock-120000320.html

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

Cathie Wood Is Just a Start as Stock Pickers Storm the ETF World"
"(Bloomberg) -- Record inflows. Record fund launches. Record assets. If active money management is in decline, someone forgot to tell the ETF industry.

Amped up by a meme-crazed market and emboldened by the success of Cathie Wood’s Ark Investment Management, stock pickers are storming the $6.6 trillion U.S. exchange-traded fund universe like never before -- adding a new twist in the 50-year invasion from passive investing.

Passive funds still dominate the industry, but actively managed products have cut into that lead, scooping up three-times their share of the unprecedented $500 billion plowed into ETFs in 2021, according to data compiled by Bloomberg. New active funds are arriving at double the rate of passive rivals, and the cohort has boosted its market share by a third in a year.

“Historically, people have thought about ETFs as being indexed-based,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research. “Then Ark became a household name, and then investors came to realize that not only were those products worth looking at, but so were others.”

None of this is supposed to happen in an industry built on the magic of indexing. Yet a market roller coaster brought on by the pandemic is helping discretionary asset managers turn ETFs to their own advantage.

Equity conditions in general have become conducive to an active approach, leadership shifting in a stop-start economy, an unpredictable macro backdrop, and increased market breadth.

At the same time, investors are showing an unusual willingness to make concentrated bets, from riding the meme-stock madness to following the kind of thematic vision laid out by Wood.

They’ve poured $62 billion into active ETFs year-to-date. That’s 12% of total flows going to a slice of the market with only 4% of assets. In the rush to tap the burgeoning demand, issuers have now launched 156 actively managed products in 2021, compared with 77 passive funds.

“At the end of day, the ETF is just a wrapper, it’s just a way to package and distribute an investment strategy,” said Ben Johnson, director of global ETF research at Morningstar. “More investors are getting hip to the fact that the notion of an actively-managed ETF is not an oxymoron.”

Fifty-Year Battle

The active surge is the latest development in a money-management battle that’s been raging since July 1971, when a team at Wells Fargo & Co. created the original index fund.

Today, the passive juggernaut is slashing industry costs, opening up investing to the masses and forcing discretionary traders to adapt or die. Active launches may be booming, but the bulk of cash flooding U.S. stocks is still destined for big, cheap funds that do nothing but track the market.

“Active ETFs are doing better than they have in past, but passive is still king,” said James Seyffart, an ETF analyst for Bloomberg Intelligence. “A lot of that active flow in the big months from late 2020 to early 2021 is to Cathie’s funds.”

Wood has become the poster child for active management in ETFs. The flagship fund at Ark was one of the best-performing in America last year with a 149% return.

Inspired by this and her enticing thematic approach -- which focuses on trends like robotics or space travel rather than market segments -- investors have sunk $14.5 billion into Ark funds in 2021.

Passive Attack

The mini boom for active ETFs comes not a moment too soon for the stock-picking industry.

Passive funds -- mutual and exchange-traded -- now manage $11 trillion and are on course to hold 50% of all registered U.S. fund assets within five years, according to BI calculations.

Critics say the rapidly swelling index industry is blowing bubbles in stock markets, weakening corporate governance and more. And in some ways, it can also hit returns.

Take Tesla Inc.’s entry into the S&P 500 in December. While discretionary managers could buy Elon Musk’s firm in advance, index funds ended up adding it at an inflated valuation -- and were forced to offload billions of dollars in other stocks to make space in portfolios.

“Index funds systematically buy high and sell low,” wrote Rob Arnott of Research Affiliates and his colleagues in a June paper. They argued investors would have been better off holding the company pushed out of the index to make way for Tesla.

The main advantage stock pickers enjoy over their passive peers is more flexibility in deploying their cash. That’s something they’ve been able to bring to ETFs for years -- Wood’s first fund launched in 2014 -- but it was a rule change in 2019 that paved the way for the current jump in activity.

It made launching ETFs easier, and enabled new structures that could hide the strategy underpinning a fund. That helped lure multiple major Wall Street players to the industry after years of holding out, including the likes of Wells Fargo and T. Rowe Price.

Talk of discretionary management’s decline is still rampant, but the woes aren’t as bad as they may seem. Even as U.S. active funds -- mutual and ETF -- saw $209 billion exit last year, they closed 2020 with about $13.3 trillion under management. That was a 13% gain from 2019.

The increase was largely thanks to rising markets, but if the current trend continues, before long it could just as easily be down to ETF growth.

“We’re going to see the percentage of assets in actively-managed ETFs continue to climb higher,” said Rosenbluth at CFRA. “They’re going to continue to have the opportunity to punch above their weight.”"

MY COMMENT

In spite of the GLOWING report above....PASSIVE ETF's are STILL the holder of a HUGE majority of investor money. the move to active ETF's reflects the current SPECULATIVE mood. BUT.....I have severe doubts that the typical active ETF can beat the averages. At least people are investing......and ......will get a return......even if it is not as high as the PASSIVE products.

ALL in ALL....this is very good news for the continuation of the current BULL MARKET.

 

I am caught up in a......BRUTAL hand to hand knife fight......right now with the SP500. As of this weekend....my return for the year to date is +17.82%. My opposing combatant....the SP500 is at +17.02%. WAY too close to call with five months left in the year.

Of course it is a very PASSIVE fight....since my portfolio just sits there....for the long term......and....the SP500 is also PASSIVE. A very DULL and BORING knife fight. We both just stand there and dont do anything.

Trying to BEAT the SP500 each year is my secondary goal....a fun diversion. My REAL goal is to achieve a total return averaging 10% or more over the long term.

 

HERE is a little preview of the coming week.

July jobs report, Etsy and Square earnings: What to know this week

https://finance.yahoo.com/news/july...arnings-what-to-know-this-week-165633285.html

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

"The July jobs report and another packed schedule of second-quarter corporate earnings results await investors this week, offering a host of potentially market-moving events.

The U.S. Labor Department's July payrolls report will be one of the most closely watched economic prints this week. Consensus economists are looking for non-farm payrolls to have increased by 900,000 in July, according to Bloomberg data, marking the biggest monthly job gain since August 2020. In June, payrolls rose by 850,000. The unemployment rate is also expected to have improved further last month, dipping to 5.7% from May's 5.9%.

The U.S. economy remains in a deep hole for employment, even over a year into the pandemic period in the country. The service sector has especially borne the brunt of the deficit. Leisure and hospitality payrolls have fallen by a net 2.4 million since March 2020, though these industries have seen the biggest monthly gains so far in 2021 as employers try to re-fill open positions.

Labor shortages in both the services and manufacturing sectors have weighed heavily on the pace of the overall economic recovery. Companies including manufacturing bellwether Caterpillar (CAT) have recently cited higher compensation costs and labor-related issues as a factor weighing on their businesses. And according to data from Bank of America last week, labor- and wage-related inflation references have been up by 107% year-over-year so far in second-quarter corporate earnings calls, further underscoring employers' moves to increase incentives to bring back workers.

Economists have attributed these labor scarcities to a host of factors, including the lingering impacts of enhanced unemployment benefits, fears over going back to work and becoming sick, and difficulties finding child care before schools reopen in person.

"Despite stronger employment growth, the labor force rose by only 151,000 last month, leaving it 3.4 million below its pre-pandemic level," Andrew Hunter, senior U.S. economist for Capital Economics, wrote in a note. "We suspect the shortages partly reflect longer-lasting factors, including a wave of early retirements, muted international migration and an emerging skills mismatch between job vacancies and the unemployed, which could all take years to unwind."

As of the survey period for the July payrolls report, about half of U.S. states had ended federal enhanced unemployment benefits early to try and incentivize workers to re-enter the labor market. At the national level, these augmented benefits are slated to expire in early September, suggesting more individuals might return to work after this date. However, renewed concerns over the Delta variant have also created more uncertainty for workers and employers, and could also pose a risk to the labor market in the fall.

The July employment report is also going to be a significant data point for market participants as they try to ascertain the timing of a monetary policy move by the Federal Reserve. Last week, the Federal Open Market Committee signaled in its July policy statement that discussions over tapering its crisis-era asset purchase program were continuing. However, Federal Reserve Chair Jerome Powell also noted during the post-FOMC meeting press conference that the economy still remained a ways off from meeting the central bank's goals, especially with the labor market still struggling to claw back its pandemic-era job losses.

"The decision of when to taper will largely be a function of the incoming labor market data. As Chair Powell stated there is extraordinary demand for workers but there might be a 'speed limit' on how quickly these jobs are filled," Bank of America economist Michelle Meyer wrote in a note. "This is because people are not necessarily returning to the jobs they had prior to the pandemic but are finding new employment; that search process takes time."

"This idea of a speed limit might lower the Fed's target for monthly job growth but we still believe the Fed would like to see an average of 750,000 to 1 million jobs a month to feel comfortable progressing toward tapering," she added.

Etsy and Square earnings
Two key beneficiaries of the pandemic-era stay-at-home trade are set to report earnings results this week, offering an updated look at how well some of 2020's best performers held up growth during the early phases of the reopening.

E-commerce platform Etsy (ETSY) is poised to report second-quarter earnings on Wednesday. Top-line growth trends and buyer and seller retention after a blowout 2020 are poised to be the key themes for this earnings report, especially as other, bigger players already reported slowing momentum.

Shares of Etsy slid nearly 8% on Friday, falling in sympathy with Amazon (AMZN). The e-commerce juggernaut posted quarterly results last week that missed Wall Street's estimates on sales, and it offered a revenue outlook for the current quarter that also came in light. The results appeared to vindicate investors' concerns that a wave of virus-era e-commerce spending would begin to wane as vaccinations took place and consumers returned to going out and spending on more services rather than goods.

These similar decelerating dynamics may also be at play for Etsy, though it has still picked up considerable business on both the buyer and seller sides of its platform over the course of the pandemic. Etsy's ongoing results will depend in large part on the company's ability to retain and add to these elevated user numbers, especially as the effects of government stimulus checks and pent-up demand fade.

For the second quarter, consensus analysts are expecting Etsy to deliver adjusted earnings of 69 cents per share on revenue of $525.5 million, according to Bloomberg data. On the top line, that would be good for revenue growth of 23% — a marked slowdown from the 141% sales growth posted for the first quarter of 2021. However, the deceleration would mostly reflect especially difficult comparisons from the height of the pandemic last year: In the comparable quarter last year, Etsy's revenue surged by 137% as consumers around the world went into lockdown.

Second-quarter gross merchandise sales, or the total value of merchandise sold on the platform, are expected to grow to $3.02 billion. This would represent growth of about 12.5% over last year, but nearly 180% compared to the same quarter of 2019.

Meanwhile, payments company Square (SQ) is also set to report results this week on Thursday. Like Etsy, Square was also a major winner of the pandemic-accelerated shift to digital platforms. The stock grew 253% in 2020.

So far this year, however, Square has underperformed the broader market, rising by a more muted 13.6%. That's come even as the company posted blowout first-quarter results for the start of 2021, with revenue surging 266%.

Wall Street analysts are expecting to see these growth rates come down, however, even as business on Square's key Cash App platform remains robust. Last week, peer payments company PayPal (PYPL) posted second-quarter sales and delivered a third-quarter revenue forecast that missed Wall Street's estimates, though some of this miss was due to company-specific factors related to eBay's migration away from the PayPal payments platform.

Second-quarter revenue for Square is expected to rise by a still-solid 165% in the second quarter before slowing to 66% in the third. Much of this expansion is expected to continue coming from Cash App, a payments platform that brought in $4.04 billion in revenue in the first quarter, or $529 million when excluding bitcoin-related revenues. The company's bitcoin-related revenues will also be closely watched for the second quarter, given a cryptocurrency price rout that began in May and that may have deterred some users from making crypto transactions on the platform.

Earnings Calendar

• Monday: Diamondback Energy (FANG), Take-Two Interactive Software (TTWO), The Simon Property Group (SPG), ZoomInfo Technologies (ZI) after market close
  
• Tuesday: Under Armour (UAA), Clorox (CLX), ConocoPhillips (COP), Nikola (NKLA), Discovery (DISCA), Warner Music Group (WMG), Eli Lilly (LLY), KKR & Co. (KKR), Marriott International (MAR), Ralph Lauren (RL), SolarWinds Corp. (SWI) before market open; Akamai (AKAM), Devon Energy Corp (DVN), Caesars Entertainment (CZR), Prudential Financial (PRU), Occidental Petroleum (OXY), Activision Blizzard (ATVI), Avis Budget Group (CAR), Live Nation Entertainment (LYV), Coursera (COUR), Lyft (LYFT), Match Group (MTCH), Amgen (AMGN) after market close
  
• Wednesday: CVS Health Corp. (CVS), AmerisourceBergen Corp. (ABC), Marathon Petroleum Corp. (MRO), Apollo Global Management (APO), Vulcan Materials (VMC), The Kraft Heinz Co. (KHC), The New York Times Co. (NYT), Royal Caribbean Cruises (RCL), General Motors (GM) before market open; Booking Holdings (BKNG), Qorvo (QRVO), The Allstate Corp. (ALL), McKesson Corp. (MCK), MGM Resort International (MGM), Etsy (ETSY), Electronic Arts (EA), IAC Interactive Corp. (IAC), Lemonade Inc. (LMND), Roku (ROKU), Uber (UBER), Western Digital (WDC), Wynn Resorts (WYNN) after market close
  
• Thursday: Cigna Corp. (CI), Wayfair (W), Regeneron Pharmaceuticals (REGN), ViacomCBS Inc. (VIAC), Plug Power (PLUG), Duke Energy Corp. (DUK), Datadog (DDOG), SeaWorld Entertainment (SEAS), Moderna (MRNA), Yeti Holdings (YETI), Kellogg (K) before market open; Square (SQ), Novavax (NVAX), Cloudflare Inc. (NET), TripAdvisor (TRIP), FireEye (FEYE), Vimeo Inc. (VMEO), Virgin Galactic Holdings (SPCE), Zillow Group (ZG), Shake Shack (SHAK), Dropbox Inc. (DBX), Beyond Meat (BYND), Expedia Group (EXPE), Stamps.com (STMP) after market close
  
• Friday: AMC Entertainment (AMC), Dish Network Group (DISH), DraftKings (DKNG), Dominion Energy (D), Norwegian Cruise Line Holdings (NCLH), The Goodyear Tire & Rubber Co. (GT), Cinemark Holdings (CNK) before market open
  

Economic Calendar

• Monday: Markit U.S. manufacturing PMI, July final (63.1 expected, 63.1 in prior print); Construction Spending month-on-month, July (0.4% expected, -0.3% in June); ISM Manufacturing, July (60.8 expected, 60.6 in June)
  
• Tuesday: Factory orders, June (1.0% expected, 1.7% in May); Durable goods orders, June final (0.8% expected, 0.8% in prior print); Non-defense capital goods orders excluding aircraft, June final (0.5% in prior print); Non-defense capital shipments excluding aircraft, June final (0.6% in prior print)
  
• Wednesday: MBA Mortgage Applications, week ended July 30 (5.7% during prior week); ADP employment change, July (650,000 expected, 692,000 in June); Markit U.S. Services PMI, July final (59.8 expected, 59.8 in prior print); ISM Services Index, July (60.5 expected, 60.1 in June)
  
• Thursday: Challenger job cuts, year-over-year, July (-88.0% in June); Trade balance, June (-$74.0 billion expected, -$71.2 billion in May); Initial jobless claims, week ended July 31 (380,000 expected, 400,000 during prior week); Continuing claims, week ended July 24 (3.26 million expected, 3.269 million during prior week)
  
• Friday: Change in non-farm payrolls, July (900,000 expected, 850,000 in June); Unemployment rate, July (5.7% expected, 5.9% in June); Average hourly earnings, month-on-month, July (0.3% expected, 0.3% in June); Average hourly earnings, year-on-year, July (3.9% expected, 3.6% in June); Labor force participation rate, July (61.7% expected, 61.6% in June); Wholesale trade inventories, month-on-month, June final (0.8% expected, 0.8% in prior print); Consumer credit, June ($22.000 billion expected, $35.281 billion in May_"
  

MY COMMENT

THIS week will be like the movie Groundhog Day for stock investors......more of the same STUFF that we see EVERY week. Some earnings........the usual economic reports.....and the usual speculation about the FED and inflation.

I am sure the result will be about the same also......two or three days UP and a couple of days down.

In the REAL WORLD....at least the little bit that I occupy....I dont see a lot of people rushing out to get jobs. I think the JULY JOBS numbers with DISAPPOINT and the unemployment rate will NOT fall. BUT...that is not a bad thing....just the reality of re-opening and the continued FREE MONEY. No one cares.....anyway.

Looking forward to starting another month for investors......and.....a chance to move forward a little bit in the annual gains that we are seeing to date.